Annual report pursuant to Section 13 and 15(d)

LONG-LIVED ASSETS

v3.3.1.900
LONG-LIVED ASSETS
 12 Months Ended
Dec. 31, 2015
LONG-LIVED ASSETS [Abstract]  
LONG-LIVED ASSETS
LONG-LIVED ASSETS
Property, Plant and Equipment
In the fourth quarter of 2012, an amphitheater in New York that is operated by the Company sustained substantial damage during Hurricane Sandy. During 2014 and 2013, the Company received insurance recoveries and recorded gains of $3.8 million and $14.1 million for the years ended December 31, 2014 and 2013, respectively, as a component of loss (gain) on disposal of operating assets in the Concerts segment representing the proceeds received in excess of the carrying value of the assets. The Company received the final insurance recovery in the second quarter of 2014.
Definite-lived Intangible Assets
The Company has definite-lived intangible assets which are amortized over the shorter of either the lives of the respective agreements or the period of time the assets are expected to contribute to the Company’s future cash flows. The amortization is recognized on either a straight-line or expected cash flows basis.
The following table presents the changes in the gross carrying amount and accumulated amortization of definite-lived intangible assets for the years ended December 31, 2015 and 2014:
 
Revenue-
generating
contracts
 
Client /
vendor
relationships
 
Trademarks
and
naming
rights
 
Non-compete
agreements
 
Venue
management
and
leaseholds
 
Technology
 
Other
 
Total
 
(in thousands)
Balance as of December 31, 2013:
 
 
 
 
 
 
 
 
 
 
 
 
Gross carrying amount
$
585,094

 
$
277,937

 
$
28,524

 
$
137,199

 
$
85,642

 
$
100,664

 
$
2,375

 
$
1,217,435

Accumulated amortization
(231,053
)
 
(81,809
)
 
(9,092
)
 
(101,128
)
 
(43,687
)
 
(73,110
)
 
(992
)
 
(540,871
)
Net
354,041

 
196,128

 
19,432

 
36,071

 
41,955

 
27,554

 
1,383

 
676,564

Gross carrying amount:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Acquisitions—current year
75,304

 
92,974

 
—

 
—

 
—

 
8,415

 
1,100

 
177,793

Acquisitions— prior year
(1,851
)
 
2,857

 
—

 
1,500

 
—

 
407

 
—

 
2,913

Dispositions
(1,600
)
 
—

 
—

 
—

 
—

 
—

 
—

 
(1,600
)
Foreign exchange
(19,056
)
 
(8,508
)
 
(1,176
)
 
—

 
(2,324
)
 
(1,608
)
 
(5
)
 
(32,677
)
Other (1)
(2,764
)
 
(9,268
)
 
(3,082
)
 
(15,147
)
 
4

 
(92,548
)
 
111

 
(122,694
)
Net change
50,033

 
78,055

 
(4,258
)
 
(13,647
)
 
(2,320
)
 
(85,334
)
 
1,206

 
23,735

Accumulated amortization:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Amortization
(52,664
)
 
(52,389
)
 
(3,458
)
 
(12,531
)
 
(7,960
)
 
(24,946
)
 
(713
)
 
(154,661
)
Dispositions
605

 
—

 
—

 
—

 
—

 
—

 
—

 
605

Foreign exchange
8,277

 
1,735

 
767

 
—

 
1,161

 
1,262

 
3

 
13,205

Other (1)
2,764

 
9,268

 
3,082

 
15,147

 
(4
)
 
92,548

 
460

 
123,265

Net change
(41,018
)
 
(41,386
)
 
391

 
2,616

 
(6,803
)
 
68,864

 
(250
)
 
(17,586
)
Balance as of December 31, 2014:
 
 
 
 
 
 
 
 
 
 
 
 
Gross carrying amount
635,127

 
355,992

 
24,266

 
123,552

 
83,322

 
15,330

 
3,581

 
1,241,170

Accumulated amortization
(272,071
)
 
(123,195
)
 
(8,701
)
 
(98,512
)
 
(50,490
)
 
(4,246
)
 
(1,242
)
 
(558,457
)
Net
363,056

 
232,797

 
15,565

 
25,040

 
32,832

 
11,084

 
2,339

 
682,713

Gross carrying amount:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Acquisitions—current year
119,482

 
39,113

 
62,953

 
5,110

 
10,574

 
16,230

 
17

 
253,479

Acquisitions— prior year
(8,366
)
 
(4,694
)
 
—

 
49,851

 
—

 
11

 
—

 
36,802

Foreign exchange
(15,332
)
 
(8,474
)
 
(664
)
 
(2,159
)
 
(3,784
)
 
(1,306
)
 
—

 
(31,719
)
Other (1)
(30,116
)
 
(2,655
)
 
1

 
—

 
(24,061
)
 
—

 
—

 
(56,831
)
Net change
65,668

 
23,290

 
62,290

 
52,802

 
(17,271
)
 
14,935

 
17

 
201,731

Accumulated amortization:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Amortization
(78,281
)
 
(51,116
)
 
(6,218
)
 
(22,869
)
 
(10,684
)
 
(4,402
)
 
(389
)
 
(173,959
)
Foreign exchange
6,494

 
2,036

 
340

 
62

 
1,468

 
46

 
—

 
10,446

Other (1)
30,115

 
2,655

 
1

 
—

 
24,061

 
—

 
—

 
56,832

Net change
(41,672
)
 
(46,425
)
 
(5,877
)
 
(22,807
)
 
14,845

 
(4,356
)
 
(389
)
 
(106,681
)
Balance as of December 31, 2015:
 
 
 
 
 
 
 
 
 
 
 
 
Gross carrying amount
700,795

 
379,282

 
86,556

 
176,354

 
66,051

 
30,265

 
3,598

 
1,442,901

Accumulated amortization
(313,743
)
 
(169,620
)
 
(14,578
)
 
(121,319
)
 
(35,645
)
 
(8,602
)
 
(1,631
)
 
(665,138
)
Net
$
387,052

 
$
209,662

 
$
71,978

 
$
55,035

 
$
30,406

 
$
21,663

 
$
1,967

 
$
777,763

(1) 
Other includes netdowns of fully amortized or impaired assets.
___________
Included in the current year acquisitions amount above for 2015 is $253.5 million of definite-lived intangible assets primarily associated with the acquisitions of all or part of festival promoters, a venue management business, an artist management business, and a ticketing business all located in the United States and the United Kingdom.
Included in the prior year acquisitions amount above for 2015 is $36.8 million of definite-lived intangible assets primarily associated with the prospective consolidation of an artist management business located in the United Kingdom.
Included in the current year acquisitions amount above for 2014 is $177.8 million of definite-lived intangible assets primarily associated with the acquisitions of a controlling interest in a festival and concert promoter and five artist management businesses located in the United States and the United Kingdom.
The 2015 and 2014 additions to definite-lived intangible assets from acquisitions have weighted-average lives as follows:
  
Weighted-
Average
Life (years)
 
2015
 
2014
 
 
 
 
Revenue-generating contracts
8

 
9

Client/vendor relationships
7

 
7

Trademarks and naming rights
10

 
—

Non-compete agreements
6

 
5

Venue management and leaseholds
7

 
—

Technology
6

 
5

Other
—

 
10

All categories
8

 
7


During all years presented, the Company reviewed the carrying value of certain definite-lived intangible assets that management determined would not be renewed or that had an indicator that future operating cash flows may not support its carrying value. It was determined that certain assets were impaired since the estimated undiscounted future cash flows associated with those assets were less than their carrying value. For the years ended December 31, 2014 and 2013, the Company recorded impairment charges related to definite-lived intangible assets of $11.1 million and $10.6 million, respectively, as a component of depreciation and amortization. The 2014 impairment charges primarily related to client/vendor relationship intangible assets in the Artist Nation segment and technology intangible assets in the Ticketing segment. The 2013 impairment charges primarily related to venue management and leasehold intangible assets in the Concerts segment and client/vendor relationship intangible assets in the Artist Nation segment. See Note 5—Fair Value Measurements for further discussion of the inputs used to determine the fair values. There were no significant impairment charges recorded in 2015.
Amortization of definite-lived intangible assets for the years ended December 31, 2015, 2014 and 2013 was $174.0 million, $154.7 million and $173.2 million, respectively.
The following table presents the Company’s estimate of amortization expense for each of the five succeeding fiscal years for definite-lived intangible assets that exist at December 31, 2015:
 
 
(in thousands)
2016
$
157,750

2017
$
145,440

2018
$
120,840

2019
$
103,549

2020
$
89,714


As acquisitions and dispositions occur in the future and the valuations of intangible assets for recent acquisitions are completed, amortization may vary.
Indefinite-lived Intangibles
The Company has indefinite-lived intangible assets which consists of trade names. These indefinite-lived intangible assets had a carrying value of $369.3 million and $369.5 million as of December 31, 2015 and 2014, respectively.
The Company tests for possible impairment of indefinite-lived intangible assets on at least an annual basis. For the year ended December 31, 2014, the Company recorded an impairment charge of $6.0 million as a component of depreciation and amortization in the Ticketing segment. During 2014, the Company made a decision to rebrand certain of its markets that were not using the Ticketmaster trade name. In connection with the rebranding, it was determined that an indefinite-lived intangible asset for a certain market was fully impaired since the transition to the Ticketmaster trade name was substantially completed for that market during the year. See Note 5—Fair Value Measurements for further discussion of the inputs used to determine the fair value. There were no impairment charges of indefinite-lived intangible assets recorded for the years ended December 31, 2015 and 2013.
Goodwill
The Company currently has seven reporting units with goodwill balances: International Concerts and North American Concerts within the Concerts segment; Artist Management and Artist Services (non-management) within the Artist Nation segment; International Ticketing and North American Ticketing within the Ticketing segment; and Sponsorship & Advertising. The Company reviews goodwill for impairment annually, as of October 1, using a three-step process: a qualitative review, a quantitative analysis, and a measurement of implied goodwill. In 2015, as part of the Company’s annual test for impairment of goodwill, two reporting units were assessed under the initial qualitative evaluation and did not require a quantitative analysis. These reporting units account for approximately 13% of the Company’s goodwill at December 31, 2015. Considerations included the considerable excess of fair values over carrying values in the most recent quantitative analysis performed together with the following comparison of current information to the most recent quantitative analysis: (a) declining discount rates, (b) consistent market multiples and (c) for one of the reporting units, financial results outperforming prior expectations and for the other reporting unit, financial results that did not meet prior expectations.
Three reporting units that account for approximately 67% of the Company’s goodwill at December 31, 2015 advanced directly to a quantitative analysis without performing a qualitative analysis, in accordance with the Company’s policy, as these reporting units have not had quantitative analysis performed in 5 years. These reporting units did not require the final step to measure potential impairment.
Finally, for two reporting units that account for approximately 20% of the Company’s goodwill at December 31, 2015, although these reporting units showed improved or consistent discount rates and increased market multiples, the qualitative analysis was inconclusive due to declines in recent financial performance against prior expectations. As such, quantitative analysis was performed for these reporting units, but did not require the final step to measure potential impairment.
The Company performed the quantitative analysis using a combination of a discounted cash flows methodology, which uses both market-based and internal assumptions, and a market multiple methodology, which uses primarily market-based assumptions.
Based upon the results of the annual tests there were no impairment charges recorded in 2015 and 2013. In 2014, the Company recorded impairment charges of $117.0 million and $17.9 million related to its International Concerts and Artist Services (non-management) reporting units, respectively.

The following table presents the changes in the carrying amount of goodwill in each of the Company’s reportable segments for the years ended December 31, 2015 and 2014:
 
Concerts
 
Ticketing
 
Artist
Nation
 
Sponsorship
&  Advertising
 
Total
 
(in thousands)
Balance as of December 31, 2013:
 
 
 
 
 
 
 
 
 
Goodwill
$
505,472

 
$
642,249

 
$
278,923

 
$
310,241

 
$
1,736,885

Accumulated impairment losses
(269,902
)
 
—

 
—

 
—

 
(269,902
)
                 Net
235,570

 
642,249

 
278,923

 
310,241

 
1,466,983

 
 
 
 
 
 
 
 
 
 
Acquisitions—current year
92,393

 
27,943

 
68,107

 
15,774

 
204,217

Acquisitions—prior year
1,997

 
—

 
(2,304
)
 
(625
)
 
(932
)
Dispositions
—

 
(4,434
)
 
—

 
—

 
(4,434
)
Impairment
(117,013
)
 
—

 
(17,948
)
 
—

 
(134,961
)
Foreign exchange
(21,971
)
 
(8,127
)
 
787

 
(22,525
)
 
(51,836
)
 
 
 
 
 
 
 
 
 
 
Balance as of December 31, 2014:
 
 
 
 
 
 
 
 
 
Goodwill
577,891

 
657,631

 
345,513

 
302,865

 
1,883,900

Accumulated impairment losses
(386,915
)
 
—

 
(17,948
)
 
—

 
(404,863
)
                 Net
190,976

 
657,631

 
327,565

 
302,865

 
1,479,037

 
 
 
 
 
 
 
 
 
 
Acquisitions—current year
57,792

 
77,951

 
15,051

 
43,248

 
194,042

Acquisitions—prior year
(28,472
)
 
10,341

 
(17,968
)
 
(3,274
)
 
(39,373
)
Foreign exchange
(4,440
)
 
(12,098
)
 
(2,095
)
 
(10,758
)
 
(29,391
)
 
 
 
 
 
 
 
 
 
 
Balance as of December 31, 2015:
 
 
 
 
 
 
 
 
Goodwill
602,771

 
733,825

 
340,501

 
332,081

 
2,009,178

Accumulated impairment losses
(386,915
)
 
—

 
(17,948
)
 
—

 
(404,863
)
                 Net
$
215,856

 
$
733,825

 
$
322,553

 
$
332,081

 
$
1,604,315


Included in the current year acquisitions amount above for 2015 is $194.0 million of goodwill primarily associated with the acquisitions of all or part of festival promoters and a ticketing business, all located in the United States.
Included in the prior year acquisitions amount above for 2015 is a decrease of $39.4 million of goodwill primarily associated with the finalization of accounting for the acquisition of a controlling interest in a festival and concert promoter in the United States and prospective consolidation of an artist management business located in the United Kingdom.
Included in the current year acquisitions amount above for 2014 is $204.2 million of goodwill primarily associated with the acquisitions of a controlling interest in a festival and concert promoter and three artist management businesses located in the United States and the United Kingdom.
For the goodwill recognized in connection with the 2015 and 2014 acquisitions, $107.9 million and $76.4 million, respectively, is expected to be deductible for tax purposes.
The Company is in various stages of finalizing its acquisition accounting for recent acquisitions, which include the use of external valuation consultants, and the completion of this accounting could result in a change to the associated purchase price allocations, including goodwill and its allocation between segments.
Investments in Nonconsolidated Affiliates
The Company has investments in various affiliates which are not consolidated and are accounted for under the equity method of accounting. The Company records its investments in these entities in the balance sheet as investments in nonconsolidated affiliates reported as part of other long-term assets. The Company’s interests in these operations are recorded in the statements of operations as equity in earnings of nonconsolidated affiliates. For the year ended December 31, 2015, the Company’s investments in Venta de Boletos por Computadora S.A. de C.V, a 33% owned ticketing distribution services company, Vice Nation, LLC, a 60% owned digital content company, Front Gate Holdings, LLC (“Front Gate”), a 50% owned ticketing business for part of 2015 and Caring & Daring, LLC (“C&D”), a 50% owned festival promotion business for part of 2015 are considered significant on an individual basis and certain other investments are considered significant on an aggregate basis. In June 2015, the Company acquired the remaining or additional interests in Front Gate and C&D, which are both reported on a consolidated basis from the date of acquisition and therefore, the amounts below include Front Gate and C&D only through the date of acquisition and do not include any balance sheet amounts as of December 31, 2015. Summarized balance sheet and income statement information for these entities is as follows (at 100%):
 
 
December 31,
 
 
2015
 
2014
 
 
(in thousands)
Current assets
 
$
74,686

 
$
90,218

Noncurrent assets
 
$
7,979

 
$
19,255

Current liabilities
 
$
48,581

 
$
63,007

Noncurrent liabilities
 
$
—

 
$
—

Noncontrolling interests
 
$
403

 
$
391

 
 
Year Ended December 31,
 
 
2015
 
2014
 
2013
 
 
(in thousands)
Revenue
 
$
92,801

 
$
68,828

 
$
71,574

Operating income
 
$
21,022

 
$
22,639

 
$
26,936

Net income
 
$
13,986

 
$
16,996

 
$
21,167

Net income attributable to the common stockholders of the equity investees
 
$
13,905

 
$
16,855

 
$
21,105


The Company reviews its investments in nonconsolidated affiliates for impairment whenever events or changes in circumstances indicate that the carrying amount of the asset may not be recoverable. For the year ended December 31, 2013, the Company recorded impairment charges related to these investments of $9.2 million as equity in earnings of nonconsolidated affiliates. The impairments primarily related to an investment in a concert promoter located in Europe and an investment in an ecommerce business. See Note 5—Fair Value Measurements for further discussion of the inputs used to determine the fair values. There were no significant impairments of investments in nonconsolidated affiliates during 2015 and 2014.
Long-lived Asset Disposals
In May 2013, the Company completed the sale of a theater in New York. There were no significant disposals of long-lived assets during 2015 and 2014. The table below summarizes the asset and liability values at the time of sale for significant disposals and the resulting gain or loss recorded.
Divested Asset
 
Segment
 
Gain on
Disposal of
Operating
Assets
 
Current
Assets
 
Noncurrent
Assets
 
Current
Liabilities
 
Noncurrent
Liabilities
 
 
(in thousands)
2013 Divestiture
 
 
 
 
 
 
 
 
 
 
 
 
New York theater
 
Concerts
 
$
(24,845
)
 
$
—

 
$
35,785

 
$
—

 
$
3,636