Annual report pursuant to Section 13 and 15(d)

FAIR VALUE MEASUREMENTS

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FAIR VALUE MEASUREMENTS
 12 Months Ended
Dec. 31, 2021
Fair Value Disclosures [Abstract]  
FAIR VALUE MEASUREMENTS FAIR VALUE MEASUREMENTS
Recurring
We currently have various financial instruments carried at fair value, such as marketable securities, derivatives and contingent consideration, but do not currently have nonfinancial assets and liabilities that are required to be measured at fair value on a recurring basis. Our financial assets and liabilities are measured using inputs from all levels of the fair value hierarchy as defined in the FASB guidance for fair value. For this categorization, only inputs that are significant to the fair value are considered. The three levels are defined as follows:
Level 1—Inputs are unadjusted quoted prices in active markets for identical assets or liabilities that can be accessed at the measurement date.
Level 2—Inputs include quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the asset or liability (i.e., interest rates, yield curves, etc.) and inputs that are derived principally from or corroborated by observable market data by correlation or other means (i.e., market corroborated inputs).
Level 3—Unobservable inputs that reflect assumptions about what market participants would use in pricing the asset or liability. These inputs would be based on the best information available, including our own data.
In accordance with the fair value hierarchy described above, the following table shows the fair value of our financial assets and liabilities that are required to be measured at fair value on a recurring basis, which are classified on the balance sheets as cash and cash equivalents, other current assets, other long-term assets, other current liabilities and other long-term liabilities:
  Fair Value Measurements 
 
at December 31, 2021		 Fair Value Measurements 
 
at December 31, 2020
  Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3 Total
    (in thousands)     (in thousands)  
Assets:
Cash equivalents $ 620,980  $ —  $ —  $ 620,980  $ 282,696  $ —  $ —  $ 282,696 
Forward currency contracts
 —  428  —  428  —  118  —  118 
Investments in nonconsolidated affiliates 6,835  —  —  6,835  12,688  —  —  12,688 
Total $ 627,815  $ 428  $ —  $ 628,243  $ 295,384  $ 118  $ —  $ 295,502 
Liabilities:
Interest rate swap
 $ —  $ 8,558  $ —  $ 8,558  $ —  $ 31,587  $ —  $ 31,587 
Forward currency contracts
 —  120  —  120  —  1,423  —  1,423 
Put option
 —  —  5,679  5,679  —  —  8,183  8,183 
Contingent consideration
 —  —  20,936  20,936  —  —  46,574  46,574 
Total $ —  $ 8,678  $ 26,615  $ 35,293  $ —  $ 33,010  $ 54,757  $ 87,767 

Cash equivalents consist of money market funds. Fair values for cash equivalents are based on quoted prices in an active market. Fair values for forward currency contracts are based on observable market transactions of spot and forward rates. The fair value of our investments in nonconsolidated affiliates are based quoted prices in an active market. The fair value for our interest rate swap is based upon inputs corroborated by observable market data with similar tenors.
Certain third parties have a put option to sell to us their noncontrolling interest in one of our subsidiaries and such put option is carried at fair value using Level 3 inputs. The put option is triggered by the occurrence of specific events, one of which is certain to occur, that requires us to buy the noncontrolling interest. The redemption price for the put option is a variable amount based on a formula linked to historical earnings. We have recorded a current liability for the put option which is valued based on the historic results of that subsidiary. Changes in the fair value are recorded in selling, general and administrative expenses.
We have certain contingent consideration obligations related to acquisitions which are measured at fair value using Level 3 inputs. The amounts due to the sellers are based on the achievement of agreed-upon financial performance metrics by the acquired companies where the contingent obligation is either earned or not earned. We record the liability at the time of the acquisition based on the present value of management’s best estimates of the future results of the acquired companies compared to the agreed-upon metrics. Subsequent to the date of acquisition, we update the original valuation to reflect current projections of future results of the acquired companies and the passage of time. Accretion of, and changes in the valuations of, contingent consideration are reported in selling, general and administrative expenses. See Note 9—Commitments and Contingent Liabilities for additional information related to the contingent payments.
Due to their short maturity, the carrying amounts of accounts receivable, accounts payable and accrued expenses approximated their fair values at December 31, 2021 and 2020.
Our outstanding debt held by third-party financial institutions is carried at cost, adjusted for discounts or debt issuance costs. Our debt is not publicly traded and the carrying amounts typically approximate fair value for debt that accrues interest at a variable rate, which are considered to be Level 2 inputs as defined in the FASB guidance.
The following table presents the estimated fair values of our senior secured notes, senior notes and convertible senior notes at December 31, 2021 and 2020:
Estimated Fair Value at:
December 31, 2021 December 31, 2020
Level 2
(in thousands)
6.5% Senior Secured Notes Due 2027 $ 1,315,284  $ 1,340,688 
3.75% Senior Secured Notes Due 2028 $ 498,380  $ — 
4.75% Senior Notes Due 2027 $ 978,358  $ 970,872 
4.875% Senior Notes due 2024 $ 582,952  $ 581,480 
5.625% Senior Notes due 2026 $ 310,284  $ 307,785 
2.5% Convertible Senior Notes due 2023 $ 996,369  $ 720,764 
2.0% Convertible Senior Notes due 2025 $ 531,040  $ 425,172 
The estimated fair value of our third-party fixed-rate debt is based on quoted market prices in active markets for the same or similar debt, which are considered to be Level 2 inputs.
Non-recurring
The following table shows the fair value of our assets that have been adjusted to fair value on a non-recurring basis which had a significant impact on our results of operations for the years ended December 31, 2021 and 2020:
  Fair Value Fair Value Measurements Using Loss
Description Measurement Level 1 Level 2 Level 3 (Gain)
  (in thousands)
2021
Investments in nonconsolidated affiliates 50,000  —  —  50,000  (23,711)
2020
Definite-lived intangible assets, net $ 7,963  $ —  $ —  $ 7,963  $ 23,630 
During 2021, we recorded a gain related to investments in nonconsolidated affiliates of $23.7 million, as a component of other expense, net. The gain was related to the acquisition of a controlling interest in the ticketing business of OCESA on December 6 2021, which was previously accounted for under the equity method. To calculate the gain, we remeasured this investment to fair value using a market multiple methodology. The key inputs in the fair value measurement include a future cash flow projection, including revenue, profit margins, market multiples and adjustment related to discount for lack of marketability. The key inputs used for this non-recurring fair value measurement are considered Level 3 inputs.
During 2021, there were no significant impairment charges. During 2020, we recorded impairment charges related to definite-lived intangible assets of $23.6 million as a component of depreciation and amortization. The impairment charges are primarily related to intangible assets for revenue-generating contracts, venue management and leaseholds and client/vendor relationships in the Concerts segment. It was determined that these assets were impaired since the most recent estimated undiscounted future cash flows associated with these assets were less than their carrying value, primarily as a result of the expected impacts from the global COVID-19 pandemic for the 2020 period. These impairments were calculated using operating cash flows, which were discounted to approximate fair value. The key inputs in these calculations include future cash flow projections, including revenue profit margins, and, for the fair value computation, a discount rate. The key inputs used for these non-recurring fair value measurements are considered Level 3 inputs.
During 2019, we recorded impairment charges related to definite-lived intangible assets of $26.8 million as a component of depreciation and amortization. The impairment charges are primarily related to intangible assets for revenue-generating contracts in the Concerts and Sponsorship & Advertising segments. It was determined that these assets were impaired since the most recent estimated undiscounted future cash flows associated with these assets were less than their carrying value. These impairments were calculated using operating cash flows, which were discounted to approximate fair value. The key inputs in these calculations include future cash flow projections, including revenue profit margins, and, for the fair value computation, a discount rate. The key inputs used for these non-recurring fair value measurements are considered Level 3 inputs.