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, 2020

We reviewed our long-lived assets for potential impairment indicators due to the suspension of our concert 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 are experiencing similar impacts to their operations, in line with what we are seeing from the pandemic. Based on our assessments, we have recorded impairment charges on certain of our definite-lived intangible assets which are discussed below.

The length and severity of the impact to live events and our related sponsorship and ticketing businesses is still uncertain. We currently do not anticipate a significant change in activity levels until early in the second half of 2021. We expect that most global tours will resume and larger venues will reopen in the second half of 2021 and that the underlying business supporting all of our long-lived assets will begin generating operating income once again. However, we have never previously experienced a complete cessation of our live events or a large-scale reduction in the number of events selling tickets, and as a consequence, our ability to be predictive regarding the impact of these circumstances is uncertain. As a result, the underlying assumptions used in our impairment assessments could change resulting in future impairment charges.

Property, Plant and Equipment

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,
	2020		2019
	(in thousands)
Land, buildings and improvements	$	1,239,696	$	1,181,876
Computer equipment and capitalized software	887,637		800,990
Furniture and other equipment	424,363		380,174
Construction in progress	151,830		176,275
	2,703,526		2,539,315
Less: accumulated depreciation	1,602,112		1,421,383
	$	1,101,414	$	1,117,932

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, 2020 and 2019:


	Client / vendor relationships		Revenue- generating contracts		Venue management & leaseholds		Trademarks and naming rights		Technology		Other (1)		Total
	(in thousands)
Balance as of December 31, 2018:
Gross carrying amount	$	393,772	$	692,963	$	70,048	$	123,707	$	85,411	$	50,115	$	1,416,016
Accumulated amortization	(213,599)		(391,002)		(33,507)		(41,808)		(38,826)		(35,823)		(754,565)
Net	180,173		301,961		36,541		81,899		46,585		14,292		661,451
Gross carrying amount:
Acquisitions—current year	209,398		94,464		80,643		29,061		13,839		8,075		435,480
Acquisitions—prior year	—		—		43		—		—		—		43

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

Foreign exchange	(473)		1,331		(553)		(96)		(152)		122		179
Other (2)	75,770		82,088		2,044		1		12,270		32,761		204,934
Net change	10,238		(11,020)		(9,192)		(14,608)		(15,394)		21,557		(18,419)
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

___________________

(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 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.

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.

The 2020 and 2019 additions to definite-lived intangible assets from acquisitions have weighted-average lives as follows:


	Weighted- Average Life (1)
	2020	2019
	(in years)
Revenue-generating contracts	8	8
Client/vendor relationships	7	9
Trademarks and naming rights	1	10
Technology (1)	5	3

Venue management and leaseholds	7	10
Other	1	5
All categories	7	9

_____________________

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

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. There were no significant impairment charges recorded in 2018. See Note 7—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, 2020, 2019 and 2018 was $239.3 million, $223.5 million and $190.7 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, 2020:


	(in thousands)
2021	$	181,078
2022	$	151,716
2023	$	131,875
2024	$	113,525
2025	$	86,086

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 $369.1 million and $369.0 million as of December 31, 2020 and 2019, 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 2020, both in the interim qualitative reviews and as part of the October 1 annual review, market multiples were not incorporated into our assessments as our current financial metrics do not support use of the market approach as a corroborating approach. When our business resumes and stabilizes, we will reincorporate the market approach into our fair value methodology.

In 2020, as part of our annual test for impairment, four of our reporting units with goodwill were assessed under the initial qualitative evaluation. Three of these four reporting units, accounting for approximately 28% of our goodwill at December 31, 2020, did not advance to the second step. Considerations included (a) excess of fair values over carrying values in the most recent quantitative analysis performed, (b) discount rates, (c) financial results and (d) sensitivity analyses.

For one of these four reporting units, that accounts for approximately 13% of our goodwill at December 31, 2020, the qualitative analysis was inconclusive primarily due to the loss of revenue resulting from the current cessation of concerts and an increase in its carrying value. As such, a quantitative analysis was performed for this reporting unit. We performed the quantitative analysis using a discounted cash flows methodology, which uses both market-based inputs and internal assumptions. The remaining three of our reporting units, accounting for approximately 59% of our goodwill at December 31, 2020, went straight to the second step as part of our policy to perform a quantitative test at least every five years to support future first step qualitative reviews.

No impairment charges were recorded in 2020 and 2019 as a result of our annual test or interim tests when performed. Based upon the results of the annual test in 2018, we recorded impairment charges of $10.5 million related to our Artist Services (non-management) reporting unit. See Note 7—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, 2020 and 2019:


	Concerts		Ticketing		Sponsorship & Advertising		Total
	(in thousands)
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

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

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.

Included in the prior year acquisitions amount above for 2020 are changes primarily associated with the acquisition of a venue management business located in the United States.

Included in the current year acquisitions amount above for 2019 are 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.

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.