Live Nation Entertainment Annual report pursuant to Section 13 and 15(d)

Annual report pursuant to Section 13 and 15(d)

LONG-LIVED ASSETS

LONG-LIVED ASSETS

12 Months Ended

Dec. 31, 2021

LONG-LIVED ASSETSWe reviewed our long-lived assets for potential impairment indicators due to the suspension of our live events resulting from the global COVID-19 pandemic. Our venues are either owned or we have long-term operating rights under lease or management agreements with terms ranging from 5 to 25 years. Many of our definite-lived intangible assets are based on revenue-generating contracts, and client or vendor relationships associated with live events and have useful lives, established at the time of acquisition, typically ranging from 3 to 10 years. Our more significant investments in nonconsolidated affiliates are in the concert event promotion, venue operation or ticketing businesses, and these businesses have been experiencing similar impacts to their operations, in line with what we are experiencing as a result of the pandemic. Based on our assessments, we recorded impairment charges on certain of our definite-lived intangible assets, which are discussed below.

Late in the second quarter of 2021 we began to see the positive impacts of successful vaccination rollouts in many of our key markets, mainly the United States and United Kingdom, with social distancing restrictions easing and live events resuming. In the third quarter of 2021, we saw a meaningful restart of our operations with outdoor amphitheater events and festivals taking place in both the United States and United Kingdom. We expect the same to happen in other parts of the world as vaccination efforts gain momentum in mainland Europe, Asia-Pacific and Latin America. The reduction in live events due to the pandemic has had a negative impact on our operating results for 2021 and we expect certain markets to continue to be impacted in the first quarter of 2022 as there is still uncertainty on the exact timing and pace of the recovery in certain markets where vaccination efforts are still underway. As our larger venues have reopened and tours have resumed in the United States and United Kingdom and we expect other markets to reopen throughout 2022, we believe the underlying business supporting all of our long-lived assets will begin generating operating income once again.

Property, Plant and Equipment, Net

Property, plant and equipment includes expenditures for the construction of new venues, major renovations to existing buildings or buildings that are being added to our venue network, the development of new ticketing tools and technology enhancements along with the renewal and improvement of existing venues and technology systems, web development and administrative offices.

Property, plant and equipment consisted of the following:


	December 31,
	2021		2020
	(in thousands)
Land, buildings and improvements	$	1,324,278	$	1,239,696
Computer equipment and capitalized software	910,581		887,637
Furniture and other equipment	411,403		424,363
Construction in progress	173,865		151,830
	2,820,127		2,703,526
Less: accumulated depreciation	1,728,198		1,602,112
	$	1,091,929	$	1,101,414

Definite-lived Intangible Assets

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, 2021 and 2020:


	Client / vendor relationships		Revenue- generating contracts		Venue management & leaseholds		Trademarks and naming rights		Technology		Other (1)		Total
	(in thousands)
Balance as of December 31, 2019:
Gross carrying amount	$	527,490	$	700,557	$	149,586	$	152,935	$	87,338	$	25,219	$	1,643,125
Accumulated amortization	(203,361)		(402,022)		(42,699)		(56,416)		(54,220)		(14,266)		(772,984)
Net	324,129		298,535		106,887		96,519		33,118		10,953		870,141
Gross carrying amount:
Acquisitions—current year	129,015		69,766		8,695		12		19,712		94		227,294
Acquisitions—prior year	(33,118)		22,821		2,093		—		1,000		—		(7,204)

Foreign exchange	8,391		7,720		2,923		(2,462)		411		12		16,995
Other (2)	(135,704)		(222,200)		(15,341)		(141)		(36,178)		(7,912)		(417,476)
Net change	(31,416)		(121,893)		(1,630)		(2,591)		(15,055)		(7,806)		(180,391)
Accumulated amortization:
Amortization	(77,389)		(88,640)		(23,532)		(16,737)		(27,646)		(5,368)		(239,312)

Foreign exchange	(1,351)		(9,239)		(1,034)		(613)		(433)		(49)		(12,719)
Other (2)	135,704		222,191		15,341		162		36,500		7,983		417,881
Net change	56,964		124,312		(9,225)		(17,188)		8,421		2,566		165,850
Balance as of December 31, 2020:
Gross carrying amount	496,074		578,664		147,956		150,344		72,283		17,413		1,462,734
Accumulated amortization	(146,397)		(277,710)		(51,924)		(73,604)		(45,799)		(11,700)		(607,134)
Net	349,677		300,954		96,032		76,740		26,484		5,713		855,600
Gross carrying amount:
Acquisitions—current year	117,817		93,102		107,000		41,033		10,419		2,650		372,021
Acquisitions—prior year	5,558		—		—		—		—		—		5,558
Dispositions	—		(1,932)		—		—		—		—		(1,932)
Foreign exchange	(5,922)		(13,430)		(2,146)		(1,689)		160		4		(23,023)
Other (2)	(36,597)		(63,146)		(19,954)		(8,823)		(45,527)		(9,653)		(183,700)
Net change	80,856		14,594		84,900		30,521		(34,948)		(6,999)		168,924
Accumulated amortization:
Amortization	(72,066)		(67,918)		(15,599)		(14,944)		(18,758)		(4,152)		(193,437)
Dispositions	—		751		—		—		—		—		751
Foreign exchange	3,141		5,779		622		554		(190)		(1)		9,905
Other (2)	36,597		63,189		19,972		8,645		46,372		9,820		184,595
Net change	(32,328)		1,801		4,995		(5,745)		27,424		5,667		1,814
Balance as of December 31, 2021:
Gross carrying amount	576,930		593,258		232,856		180,865		37,335		10,414		1,631,658
Accumulated amortization	(178,725)		(275,909)		(46,929)		(79,349)		(18,375)		(6,033)		(605,320)
Net	$	398,205	$	317,349	$	185,927	$	101,516	$	18,960	$	4,381	$	1,026,338

___________________

(1) Other primarily includes intangible assets for non-compete agreements.

(2) Other primarily includes netdowns of fully amortized or impaired assets.

Included in the current year acquisition amounts above for 2021 are definite-lived intangible assets primarily associated with the acquisition of OCESA. Information regarding the preliminary estimated fair value of the acquired OCESA intangible assets can be found in Note 3—Business Acquisitions.

Included in the current year acquisitions amounts above for 2020 are definite-lived intangible assets primarily associated with the acquisitions of a festival and concert promotion business located in Ireland, a merchandise business, a festival promotion business and ticketing relationships, all located in the United States.

The 2021 and 2020 additions to definite-lived intangible assets from acquisitions have weighted-average lives as follows:


	Weighted- Average Life (1)
	2021	2020
	(in years)
Revenue-generating contracts	9	9
Client/vendor relationships	9	8
Trademarks and naming rights	10	1
Technology (1)	0	5

Venue management and leaseholds	10	7
Other	2	1
All categories	10	8

_____________________

(1) The weighted average life of technology intangibles does not include purchased software licenses that are typically amortized over 1 to 3 years.

We test for possible impairment of definite-lived intangible assets whenever events or circumstances change, such as a significant reduction in operating cash flow or a change in the manner in which the asset is intended to be used, which may indicate that the carrying amount of the asset may not be recoverable. For the years ended December 31, 2021 and 2020, we reviewed definite-lived intangible assets that management determined had an indicator that remaining future operating cash flows over the acquisition-date estimated useful life may not support their carrying value, as a result of the expected impacts from the global COVID-19 pandemic, and it was determined that certain of those assets were impaired since the estimated undiscounted operating cash flows associated with those assets were less than their carrying value.

For the year ended December 31, 2021, there were no significant impairment charges. For the year ended December 31, 2020, we recorded impairment charges of $23.6 million as a component of depreciation and amortization primarily related to intangible assets for revenue-generating contracts, venue management and leaseholds and client/vendor relationships in the Concerts segment primarily as a result of the expected impacts from the global COVID-19 pandemic where the useful life of the definite-lived intangible asset was expiring within the near term. For the year ended December 31, 2019, we recorded impairment charges of $26.8 million as a component of depreciation and amortization primarily related to intangible assets for revenue-generating contracts in the Concerts and Sponsorship & Advertising segments. See Note 8—Fair Value Measurements for further discussion of the inputs used to determine the fair values.

Amortization of definite-lived intangible assets for the years ended December 31, 2021, 2020 and 2019 was $193.4 million, $239.3 million and $223.5 million, respectively.

The following table presents our estimate of amortization expense for each of the five succeeding fiscal years for definite-lived intangible assets that exist at December 31, 2021:


	(in thousands)
2022	$	194,045
2023	$	168,195
2024	$	148,994
2025	$	120,926
2026	$	102,083

As acquisitions and dispositions occur in the future and the valuations of intangible assets for recent acquisitions are completed, amortization expense may vary.

Indefinite-lived Intangibles

We have indefinite-lived intangible assets which consist of trade names. These indefinite-lived intangible assets had a carrying value of $369.0 million and $369.1 million as of December 31, 2021 and 2020, respectively.

Goodwill

We currently have six reporting units with goodwill balances: International Concerts, North America Concerts, Artist Management and Artist Services (non-management) within the Concerts segment; Sponsorship & Advertising; and Global Ticketing. We review goodwill for impairment annually, as of October 1, using a two-step process: a qualitative review and a quantitative analysis.

In 2021, as part of the October 1 annual review, market multiples were not incorporated into our assessments for some reporting units where its current financial metrics do not support use of the market approach as a corroborating approach. When those businesses stabilizes, we will reincorporate the market approach into their fair value methodology.

In 2021, as part of our annual test for impairment, all of our reporting units with goodwill were assessed under the initial qualitative evaluation and did not advance to the quantitative analysis. Considerations included excess of fair values over carrying values in the most recent quantitative analysis performed, discount rates, financial results and sensitivity analyses. We also considered changes in discount rates, market multiples if applicable, carrying value and forecasts since the last time a quantitative test was performed. One of our reporting units, International Concerts, which accounts for $265.9 million of goodwill had a negative carrying value.

No impairment charges were recorded for the years ended December 31, 2021, 2020 and 2019 as a result of our annual test or interim tests when performed. See Note 8—Fair Value Measurements for discussion of the impairment calculation.

The following table presents the changes in the carrying amount of goodwill in each of our reportable segments for the years ended December 31, 2021 and 2020:


	Concerts		Ticketing		Sponsorship & Advertising		Total
	(in thousands)
Balance as of December 31, 2019:
Goodwill	$	1,226,057	$	766,263	$	441,541	$	2,433,861
Accumulated impairment losses	(435,363)		—		—		(435,363)
Net	790,694		766,263		441,541		1,998,498

Acquisitions—current year	66,810		8,778		13,847		89,435
Acquisitions—prior year	9,033		—		7,165		16,198


Foreign exchange	16,373		7,518		1,181		25,072

Balance as of December 31, 2020:
Goodwill	1,318,273		782,559		463,734		2,564,566
Accumulated impairment losses	(435,363)		—		—		(435,363)
Net	882,910		782,559		463,734		2,129,203

Acquisitions—current year	84,592		157,519		248,295		490,406
Acquisitions—prior year	(1,275)		(3,888)		418		(4,745)
Dispositions	(150)		—		—		(150)

Foreign exchange	(10,989)		(6,126)		(6,730)		(23,845)

Balance as of December 31, 2021:
Goodwill	1,390,451		930,064		705,717		3,026,232
Accumulated impairment losses	(435,363)		—		—		(435,363)
Net	$	955,088	$	930,064	$	705,717	$	2,590,869

Included in the current year acquisitions amounts above for 2021 is goodwill primarily associated with the acquisition of OCESA. See Note 3—Business Acquisitions for further discussion.

Included in the current year acquisitions amounts above for 2020 are goodwill primarily associated with the acquisitions of a festival and concert promotion business located in Ireland as well as a merchandise business, a festival promotion business and a concerts streaming business located in the United States.

We are in various stages of finalizing our 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 the allocation between segments.

Investments in Nonconsolidated Affiliates

During the year ended December 31, 2021, we sold certain investments in nonconsolidated affiliates for $110.2 million in cash and noncash consideration resulting in a gain on sale of investments in nonconsolidated affiliates of $83.6 million.

During the year ended December 31, 2021, we entered into certain agreements whereby we received equity in the counterparty to those agreements primarily in exchange for providing sponsorship and marketing programs and support and recognized $25.0 million in noncash additions to investments in nonconsolidated affiliates which are included in other long term assets on our consolidated balance sheets associated with these agreements.