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, 2019

Property, Plant and Equipment, Net

Property, plant and equipment, net 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, net, consisted of the following:


	December 31,
	2019		2018
	(in thousands)
Land, buildings and improvements	$	1,181,876	$	984,558
Computer equipment and capitalized software	800,990		742,737
Furniture and other equipment	380,174		329,607
Construction in progress	176,275		160,028
	2,539,315		2,216,930
Less accumulated depreciation	1,421,383		1,270,337
	$	1,117,932	$	946,593

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, 2019 and 2018:


	Revenue- generating contracts		Client / vendor relationships		Trademarks and naming rights		Venue management & Leaseholds		Technology		Other ⁽¹⁾		Total
	(in thousands)
Balance as of December 31, 2017:
Gross carrying amount	$	789,363	$	341,449	$	126,331	$	63,135	$	63,666	$	72,096	$	1,456,040
Accumulated amortization	(410,011)		(186,357)		(32,681)		(35,953)		(22,745)		(39,028)		(726,775)
Net	379,352		155,092		93,650		27,182		40,921		33,068		729,265
Gross carrying amount:
Acquisitions—current year	6,128		84,146		2,067		15,402		30,029		—		137,772
Acquisitions—prior year	4,447		—		—		1,900		—		—		6,347
Dispositions	—		(11,812)		—		—		—		(18,754)		(30,566)
Foreign exchange	(14,426)		(7,378)		(1,756)		(1,989)		(1,626)		(1,220)		(28,395)
Other ⁽²⁾	(92,549)		(12,633)		(2,935)		(8,400)		(6,658)		(2,007)		(125,182)
Net change	(96,400)		52,323		(2,624)		6,913		21,745		(21,981)		(40,024)
Accumulated amortization:
Amortization	(81,291)		(52,879)		(12,633)		(7,185)		(23,727)		(12,938)		(190,653)
Dispositions	—		8,146		—		—		—		13,238		21,384
Foreign exchange	7,526		4,813		536		1,235		973		744		15,827
Other ⁽²⁾	92,774		12,678		2,970		8,396		6,673		2,161		125,652
Net change	19,009		(27,242)		(9,127)		2,446		(16,081)		3,205		(27,790)
Balance as of December 31, 2018:
Gross carrying amount	692,963		393,772		123,707		70,048		85,411		50,115		1,416,016
Accumulated amortization	(391,002)		(213,599)		(41,808)		(33,507)		(38,826)		(35,823)		(754,565)
Net	301,961		180,173		81,899		36,541		46,585		14,292		661,451
Gross carrying amount:
Acquisitions—current year	94,464		209,398		29,061		80,643		13,839		8,075		435,480
Acquisitions—prior year	—		—		—		43		—		—		43

Foreign exchange	(4,713)		90		91		896		356		(208)		(3,488)
Other ⁽²⁾	(82,157)		(75,770)		76		(2,044)		(12,268)		(32,763)		(204,926)
Net change	7,594		133,718		29,228		79,538		1,927		(24,896)		227,109
Accumulated amortization:
Amortization	(94,439)		(65,059)		(14,513)		(10,683)		(27,512)		(11,326)		(223,532)

Foreign exchange	1,331		(473)		(96)		(553)		(152)		122		179
Other ⁽²⁾	82,088		75,770		1		2,044		12,270		32,761		204,934
Net change	(11,020)		10,238		(14,608)		(9,192)		(15,394)		21,557		(18,419)
Balance as of December 31, 2019:
Gross carrying amount	700,557		527,490		152,935		149,586		87,338		25,219		1,643,125
Accumulated amortization	(402,022)		(203,361)		(56,416)		(42,699)		(54,220)		(14,266)		(772,984)
Net	$	298,535	$	324,129	$	96,519	$	106,887	$	33,118	$	10,953	$	870,141

^{___________________}

⁽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 acquisitions amount above for 2019 are definite-lived intangible assets primarily associated with the acquisitions of concert promotion businesses located in Canada and Chile, venue management businesses located in the United States and Belgium and a festival promotion business located in Brazil that had been accounted for as an equity investment.

Included in the current year acquisitions amount above for 2018 are definite-lived intangible assets primarily associated with the acquisitions of various concert and festival promotion business and artist management businesses that are all located in the United States, and the acquisition of certain software assets from a business located in the United States.

The 2019 and 2018 additions to definite-lived intangible assets from acquisitions have weighted-average lives as follows:


	Weighted- Average Life
	2019	2018
	(in years)
Revenue-generating contracts	8	7
Client/vendor relationships	9	7
Trademarks and naming rights	8	3
Technology	2	3

Venue management and leaseholds	10	12
Other	5	—
All categories	8	7

During all years presented, we 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 their 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 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 6—Fair Value Measurements for further discussion of the inputs used to determine the fair values. There were no significant impairment charges recorded in 2018 and 2017.

Amortization of definite-lived intangible assets for the years ended December 31, 2019, 2018 and 2017 was $223.5 million, $190.7 million and $202.6 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, 2019:


	(in thousands)
2020	$	219,927
2021	$	153,233
2022	$	122,808
2023	$	103,253
2024	$	85,218

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 $368.9 million as of December 31, 2019 and 2018, respectively.

Goodwill

We currently have seven reporting units with goodwill balances: International Concerts, North America Concerts, Artist Management and Artist Services (non-management) within the Concerts segment; Sponsorship & Advertising; and International Ticketing and North America Ticketing within the Ticketing segment. We review goodwill for impairment annually, as of October 1, using a two-step process: a qualitative review and a quantitative analysis. In 2019, as part of our annual test for impairment of goodwill, five reporting units were assessed under the initial qualitative evaluation and did not require a quantitative analysis. These reporting units account for approximately 85% of our goodwill at December 31, 2019. Considerations included (a) excess of fair values over carrying values in the most recent quantitative analysis performed, (b) market multiples, (c) discount rates, (d) financial results and (e) sensitivity analyses.

Finally, for two reporting units that account for approximately 15% of our goodwill at December 31, 2019, the qualitative analysis was inconclusive due to varied factors such as lower than expected financial results in the current year, mixed changes in market multiples, and a decrease in discount rate. As such, quantitative analysis was performed for these reporting units.

We 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 applied to our projections of future cash flows.

No impairment charges were recorded in 2019 as a result of our annual test. Based upon the results of the annual tests for 2018 and 2017, we recorded impairment charges of $10.5 million and $20.0 million, respectively, related to our Artist Services (non-management) reporting unit. See Note 6—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, 2019 and 2018:


	Concerts		Ticketing		Sponsorship & Advertising		Total
	(in thousands)
Balance as of December 31, 2017:
Goodwill	$	1,015,913	$	761,786	$	401,753	$	2,179,452
Accumulated impairment losses	(424,863)		—		—		(424,863)
Net	591,050		761,786		401,753		1,754,589

Acquisitions—current year	42,841		5,875		3,902		52,618
Acquisitions—prior year	53,541		—		1,697		55,238
Dispositions	(7,053)		—		—		(7,053)
Impairment	(10,500)		—		—		(10,500)
Foreign exchange	(10,638)		(4,708)		(6,603)		(21,949)

Balance as of December 31, 2018:
Goodwill	1,094,604		762,953		400,749		2,258,306
Accumulated impairment losses	(435,363)		—		—		(435,363)
Net	659,241		762,953		400,749		1,822,943

Acquisitions—current year	121,355		4,017		38,421		163,793
Acquisitions—prior year	8,428		—		—		8,428


Foreign exchange	1,670		(707)		2,371		3,334

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

Included in the current year acquisitions amount above for 2019 is goodwill associated with the acquisitions of a concert promotion business located in Canada, venue management businesses located in Belgium and the United States and a festival promotion business located in Brazil that had been accounted for as an equity method investment.

Included in the current year acquisitions amount above for 2018 is goodwill associated with the acquisitions of various concert and festival promotion businesses and various artist management businesses that are all located in the United States.

Included in the prior year acquisitions amount above for 2018 is a purchase price adjustment recognized in connection with contingent consideration paid during 2018 related to an acquisition that occurred prior to our adoption of the current FASB guidance for business combinations. Under the previous guidance, which was in place at the time of this acquisition, such contingent payments were recognized when it was determinable that the applicable financial targets were met.

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

We have investments in various affiliates which are not consolidated and are accounted for under the equity method of accounting. We record our investments in these entities in the balance sheet as investments in nonconsolidated affiliates reported as part of other long-term assets. Our interests in these operations are recorded in the statements of operations as equity in losses (earnings) of nonconsolidated affiliates. For the year ended December 31, 2019, certain of our investments are considered significant on an aggregate basis. Summarized balance sheet and income statement information for these entities is as follows (at 100%):


	December 31,
	2019		2018
	(in thousands)
Current assets	$	40,937	$	71,685
Noncurrent assets	$	6,845	$	4,074
Current liabilities	$	35,662	$	42,470

Noncontrolling interests	$	1,624	$	1,095


	Year Ended December 31,
	2019		2018		2017
	(in thousands)
Revenue	$	54,173	$	56,857	$	56,078
Operating income	$	30,262	$	34,841	$	29,684
Net income	$	23,969	$	28,554	$	24,116
Net income attributable to the common stockholders of the equity investees	$	23,440	$	27,935	$	23,995