Annual report pursuant to Section 13 and 15(d)

LONG-LIVED ASSETS

v2.4.0.8
LONG-LIVED ASSETS
 12 Months Ended
Dec. 31, 2013
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 2013, the Company received insurance recoveries and recorded a gain of $14.1 million for the year ended December 31, 2013 as a component of (gain) loss on disposal of operating assets in the Concerts segment representing the proceeds received in excess of the carrying value of the assets.
During each year presented, the Company reviewed the carrying value of certain property, plant and equipment that management determined would, more likely than not, be disposed of before the end of their previously estimated useful lives or had an indicator that future operating cash flows may not support their carrying value. It was determined that certain assets were impaired since the estimated undiscounted cash flows associated with the respective asset were less than its carrying value. For the years ended December 31, 2012 and 2011, the Company recorded impairment charges of $4.3 million and $10.0 million, respectively, as a component of depreciation and amortization. There were no significant impairment charges recorded during 2013.
The 2012 impairment charges were primarily related to certain leasehold improvements and office furniture and equipment in the Artist Nation segment, an amphitheater in the Concerts segment and a theater in other operations. The 2011 impairment charges related to two amphitheaters, a music theater and a club in the Concerts segment. See Note 6—Fair Value Measurements for further discussion of the inputs used to determine the fair values.
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, 2013 and 2012:
 
Revenue-
generating
contracts
 
Client /
vendor
relationships
 
Non-compete
agreements
 
Venue
management
and
leaseholds
 
Technology
 
Trademarks
and
naming
rights
 
Other
 
Total
 
(in thousands)
Balance as of December 31, 2011:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Gross carrying amount
$
542,426

 
$
330,575

 
$
171,765

 
$
116,772

 
$
103,337

 
$
24,517

 
$
6,426

 
$
1,295,818

Accumulated amortization
(170,889
)
 
(66,548
)
 
(93,464
)
 
(39,017
)
 
(31,812
)
 
(16,202
)
 
(4,174
)
 
(422,106
)
Net
371,537

 
264,027

 
78,301

 
77,755

 
71,525

 
8,315

 
2,252

 
873,712

Gross carrying amount:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Acquisitions—current year
23,428

 
58,662

 
3,000

 
—

 
1,564

 
5,764

 
—

 
92,418

Acquisitions— prior year
—

 
14,194

 
—

 
—

 
(3,900
)
 
—

 
—

 
10,294

Foreign exchange
5,443

 
(428
)
 
98

 
1,487

 
423

 
498

 
26

 
7,547

Other (1)
(56,226
)
 
(141,348
)
 
(6,445
)
 
—

 
—

 
(12,356
)
 
—

 
(216,375
)
Net change
(27,355
)
 
(68,920
)
 
(3,347
)
 
1,487

 
(1,913
)
 
(6,094
)
 
26

 
(106,116
)
Accumulated amortization:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Amortization
(80,220
)
 
(114,611
)
 
(25,276
)
 
(12,482
)
 
(21,244
)
 
(2,620
)
 
(459
)
 
(256,912
)
Foreign exchange
(2,748
)
 
4

 
(77
)
 
(392
)
 
(239
)
 
(211
)
 
(17
)
 
(3,680
)
Other (1)
56,308

 
141,348

 
7,448

 
—

 
—

 
12,355

 
—

 
217,459

Net change
(26,660
)
 
26,741

 
(17,905
)
 
(12,874
)
 
(21,483
)
 
9,524

 
(476
)
 
(43,133
)
Balance as of December 31, 2012:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Gross carrying amount
515,071

 
261,655

 
168,418

 
118,259

 
101,424

 
18,423

 
6,452

 
1,189,702

Accumulated amortization
(197,549
)
 
(39,807
)
 
(111,369
)
 
(51,891
)
 
(53,295
)
 
(6,678
)
 
(4,650
)
 
(465,239
)
Net
317,522

 
221,848

 
57,049

 
66,368

 
48,129

 
11,745

 
1,802

 
724,463

Gross carrying amount:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Acquisitions—current year
85,927

 
31,582

 
—

 
—

 
3,370

 
10,500

 
—

 
131,379

Acquisitions— prior year
(1,028
)
 
(2,833
)
 
—

 
—

 
—

 
—

 
—

 
(3,861
)
Dispositions
—

 
(1,354
)
 
—

 
—

 
—

 
—

 
—

 
(1,354
)
Foreign exchange
2,476

 
(6,525
)
 
98

 
(17
)
 
826

 
376

 
(34
)
 
(2,800
)
Other (1)
(17,352
)
 
(4,588
)
 
(31,317
)
 
(32,600
)
 
(4,956
)
 
(775
)
 
(4,043
)
 
(95,631
)
Net change
70,023

 
16,282

 
(31,219
)
 
(32,617
)
 
(760
)
 
10,101

 
(4,077
)
 
27,733

Accumulated amortization:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Amortization
(49,972
)
 
(47,918
)
 
(21,984
)
 
(24,615
)
 
(24,116
)
 
(4,160
)
 
(416
)
 
(173,181
)
Dispositions
—

 
61

 
—

 
—

 
—

 
—

 
—

 
61

Foreign exchange
(884
)
 
1,412

 
(92
)
 
219

 
(655
)
 
(209
)
 
31

 
(178
)
Other (1)
17,352

 
4,443

 
32,317

 
32,600

 
4,956

 
1,955

 
4,043

 
97,666

Net change
(33,504
)
 
(42,002
)
 
10,241

 
8,204

 
(19,815
)
 
(2,414
)
 
3,658

 
(75,632
)
Balance as of December 31, 2013:
 
 
 
 
 
 
 
 
 
 
 
 
Gross carrying amount
585,094

 
277,937

 
137,199

 
85,642

 
100,664

 
28,524

 
2,375

 
1,217,435

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

 
$
196,128

 
$
36,071

 
$
41,955

 
$
27,554

 
$
19,432

 
$
1,383

 
$
676,564

_________
(1) 
Other includes netdowns of fully amortized or impaired assets and for 2013 a reclassification from indefinite-lived intangible assets due to a change in the asset’s estimated useful life.
Included in the current year acquisitions amount above for 2013 is $131.4 million of definite-lived intangible assets primarily related to revenue-generating contracts, client/vendor relationships and trademarks and naming rights. These additions are primarily associated with the May 2013 acquisition of a controlling interest in a festival promoter based in Los Angeles and the December 2013 acquisitions of a controlling interest in a festival promoter in the United Kingdom and an artist management business based in Ireland.
Included in the current year acquisitions amount above for 2012 is $92.4 million of definite-lived intangible assets primarily related to client/vendor relationships and revenue-generating contracts associated with the April 2012 acquisition of a concert promotion business in Australia and New Zealand, the May 2012 acquisition of a festival promoter based in the United Kingdom and the purchase of rights to a festival held in Europe.
Included in the prior year acquisitions amount above for 2012 is $10.3 million of definite-lived intangible assets primarily related to client/vendor relationships associated with the consolidation of certain artist management businesses that had been previously accounted for as equity investments due to a change in the governing agreements.
The 2013 and 2012 additions to definite-lived intangible assets from acquisitions have weighted-average lives as follows:
  
Weighted-
Average
Life (years)
 
2013
 
2012
 
 
 
 
Revenue-generating contracts
9

 
11
Client/vendor relationships
8

 
9
Non-compete agreements
—

 
3
Technology
5

 
6
Trademarks and naming rights
10

 
10
All categories
9

 
9

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 its carrying value. For the years ended December 31, 2013, 2012 and 2011, the Company recorded impairment charges related to definite-lived intangible assets of $10.6 million, $89.6 million and $14.1 million, respectively, as a component of depreciation and amortization. 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. The 2012 impairment charges primarily related to client/vendor relationship intangible assets in the Artist Nation segment and revenue-generating contracts and client/vendor relationship intangible assets in the Concerts segment. The 2011 impairment charges related to intangible assets for client/vendor relationships, revenue-generating contracts and venue management and leaseholds in the Concerts segment. See Note 6—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, 2013, 2012 and 2011 was $173.2 million, $256.9 million and $175.2 million, respectively. The decrease in amortization for the year ended December 31, 2013 as compared to the prior year is primarily driven by lower amortization related to the impairment of intangible assets discussed above. This decrease was partially offset by $10.9 million for acceleration of amortization primarily related to changes in estimates of certain venue management and leasehold intangible assets in the Concerts segment due to the reduction in the lease term of a theater along with additional amortization of intangibles for the acquisitions noted above. The increase in amortization for the year ended December 31, 2012 as compared to the prior year is primarily driven by higher amortization related to the impairment of intangible assets discussed above, additional definite-lived intangibles acquired in the acquisitions noted above and $3.7 million related to the acceleration of amortization resulting from a change in the estimated useful life of a venue management and leaseholds intangible asset in the Concerts segment.
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, 2013:
 
 
(in thousands)
2014
$
135,109

2015
$
116,995

2016
$
103,347

2017
$
86,391

2018
$
69,981


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 consist primarily of the intangible value related to trade names. These indefinite-lived intangible assets had a carrying value of $376.7 million and $377.5 million as of December 31, 2013 and 2012, respectively.
The Company tests for possible impairment of indefinite-lived intangible assets on at least an annual basis. There was no impairment charge on these assets recorded for the years ended December 31, 2013, 2012 and 2011.
Goodwill
The Company reviews goodwill for impairment at least annually, as of October 1, using a three-step process: a qualitative review, a quantitative analysis and a measurement of implied goodwill. As part of the Company’s annual test for impairment of goodwill, four reporting units were assessed under the initial qualitative evaluation and did not require a quantitative analysis. These reporting units account for approximately 66% of the Company’s goodwill. 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) financial results outperforming prior expectations, (b) a flat or declining discount rate and (c) a large increase in market multiples.
A quantitative analysis was also performed for two reporting units that account for approximately 19% of the Company’s goodwill. The quantitative analysis was performed for these reporting units primarily due to a slight to moderate decline in financial performance as compared to that projected in the most recent quantitative analysis. These reporting units did, however, also experience a decline in discount rates and an increase in market multiples as compared to their most recent quantitative analysis. The Company performed sensitivity analyses as part of these quantitative tests and noted that the growth rate or discount rate would have to change by more than one percentage point or that market multiples would have to decline by 19% to change the conclusion.
Finally, an assessment of the implied fair value of goodwill was performed for one reporting unit that accounts for approximately 15% of the Company’s goodwill due to a negative carrying value which requires a measurement to be performed since a qualitative analysis was not conclusive. The reporting unit’s financial performance was slightly below that anticipated in the most recent impairment test, however, the discount rate remained constant and its market multiples experienced a large increase. The measurement resulted in no impairment.
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, 2013 and 2012:
 
Concerts
 
Ticketing
 
Artist
Nation
 
Sponsorship
&  Advertising
 
Other
 
Total
 
(in thousands)
Balance as of December 31, 2011:
 
 
 
 
 
 
 
 
 
 
 
Goodwill
$
387,188

 
$
633,852

 
$
262,158

 
$
244,348

 
$
13,037

 
$
1,540,583

Accumulated impairment losses
(269,902
)
 
—

 
—

 
—

 
(13,037
)
 
(282,939
)
                 Net
117,286

 
633,852

 
262,158

 
244,348

 
—

 
1,257,644

 
 
 
 
 
 
 
 
 
 
 
 
Acquisitions—current year
71,942

 
—

 
—

 
—

 
—

 
71,942

Acquisitions—prior year
—

 
2,380

 
4,542

 
—

 
—

 
6,922

Foreign exchange
9,761

 
1,410

 
120

 
10,028

 
—

 
21,319

 
 
 
 
 
 
 
 
 
 
 
 
Balance as of December 31, 2012:
 
 
 
 
 
 
 
 
 
 
 
Goodwill
468,891

 
637,642

 
266,820

 
254,376

 
13,037

 
1,640,766

Accumulated impairment losses
(269,902
)
 
—

 
—

 
—

 
(13,037
)
 
(282,939
)
                 Net
198,989

 
637,642

 
266,820

 
254,376

 
—

 
1,357,827

 
 
 
 
 
 
 
 
 
 
 
 
Acquisitions—current year
42,826

 
1,715

 
3,253

 
49,748

 
—

 
97,542

Acquisitions—prior year
(2,811
)
 
—

 
9,203

 
—

 
—

 
6,392

Dispositions
(3,691
)
 
—

 
(251
)
 
—

 
—

 
(3,942
)
Foreign exchange
257

 
2,892

 
(102
)
 
6,117

 
—

 
9,164

 
 
 
 
 
 
 
 
 
 
 
 
Balance as of December 31, 2013:
 
 
 
 
 
 
 
 
 
 
Goodwill
505,472

 
642,249

 
278,923

 
310,241

 
13,037

 
1,749,922

Accumulated impairment losses
(269,902
)
 
—

 
—

 
—

 
(13,037
)
 
(282,939
)
                 Net
$
235,570

 
$
642,249

 
$
278,923

 
$
310,241

 
$
—

 
$
1,466,983


Included in the current year acquisitions amount above for 2013 is $97.5 million of goodwill primarily associated with the May 2013 acquisition of a controlling interest in a festival promoter based in Los Angeles and the December 2013 acquisition of a controlling interest in a festival promoter in the United Kingdom.
Included in the current year acquisitions amount above for 2012 is $71.9 million of goodwill primarily related to the acquisition of a concert promotion business located in Australia and New Zealand and the acquisition of a festival promoter in the United Kingdom.
Of the total amount of goodwill recognized in connection with the 2013 and 2012 acquisitions, $30.3 million and $9.6 million, respectively, is expected to be deductible for tax purposes.
The Company reviews for possible impairment of goodwill annually. There was no impairment charge related to goodwill recorded for the years ended December 31, 2013, 2012 and 2011.
The Company is in the process of finalizing its acquisition accounting for recent acquisitions which 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. The Company’s interests in these operations are recorded in the statement of operations as equity in earnings of nonconsolidated affiliates. For the year ended December 31, 2013, the Company’s investments in Venta de Boletos por Computadora S.A. de C.V, a 33% owned ticketing distribution services company, and Three Six Zero Grp Limited, a 50% owned artist management company, are considered significant on an individual basis and certain other investments are considered significant on an aggregate basis. Summarized balance sheet and income statement information for the Company’s significant nonconsolidated affiliates is as follows (at 100%):
 
 
December 31,
 
 
2013
 
2012
 
 
(in thousands)
Current assets
 
$
41,083

 
$
58,594

Noncurrent assets
 
$
12,357

 
$
7,642

Current liabilities
 
$
22,167

 
$
33,319

Noncurrent liabilities
 
$
195

 
$
61

Noncontrolling interests
 
$
296

 
$
238

 
 
Year Ended December 31,
 
 
2013
 
2012
 
2011
 
 
(in thousands)
 Revenue
 
$
79,264

 
$
66,180

 
$
64,492

Operating income
 
$
33,151

 
$
31,973

 
$
29,658

 Net income
 
$
26,150

 
$
24,839

 
$
22,729

Net income attributable to the common stockholders of the equity investees
 
$
26,088

 
$
24,808

 
$
22,729


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 6—Fair Value Measurements for further discussion of the inputs used to determine the fair values.
Long-lived Asset Disposals
In May 2013, the Company completed the sale of a theater in New York. In January 2012, the Company completed the sale of an amphitheater in Ohio. In January 2011, the Company sold its 50% controlling interest in an artist management company. In May 2011, the Company completed the sale of an amphitheater in Texas.
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
 
Loss (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

2012 Divestiture
 
 
 
 
 
 
 
 
 
 
 
 
Ohio amphitheater
 
Concerts
 
$
(444
)
 
$
—

 
$
5,400

 
$
444

 
$
—

2011 Divestiture
 
 
 
 
 
 
 
 
 
 
 
 
Texas amphitheater
 
Concerts
 
$
798

 
$
—

 
$
3,206

 
$
—

 
$
—

Artist management company
 
Artist Nation
 
$
(1,264
)
 
$
3

 
$
4,153

 
$
119

 
$
—