NOTE 2—LONG-LIVED ASSETS

 

Property, Plant and Equipment

 

The Company tests for possible impairment of property, plant and equipment whenever events or circumstances change, such as a significant reduction in operating cash flow or a dramatic change in the manner that the asset is intended to be used indicate that the carrying amount of the asset may not be recoverable.

 

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, 2011 and 2010, the Company recorded an impairment charge of $4.3 million, $10.0 million and $16.4 million, respectively, as a component of depreciation and amortization. The 2012 impairment charge was primarily related to certain leasehold improvements and office furniture and equipment in the Artist Nation segment, an amphitheater in the Concerts segment and a theatrical theater in other operations. The 2010 impairment charge was primarily related to a House of Blues club in the Concerts segment and a theatrical theater in other operations. See Note 6—Fair Value Measurements for further discussion of the inputs used to determine the fair value.

 

Also during 2010, the Company recorded $4.5 million for acceleration of depreciation expense related to a change in estimate for the CTS ticketing platform assets that are no longer in use.

 

 Definite-lived Intangibles

 

 

During 2012, the Company recorded definite-lived intangible assets totaling $102.7 million, primarily related to client/vendor relationships and revenue-generating contracts associated with the April 2012 acquisition of Coppel, a concert promotion business in Australia and New Zealand, the May 2012 acquisition of Cream, an electronic dance music festival promoter based in the United Kingdom and the purchase of rights to a festival held in Europe.

 

During 2011, the Company recorded definite-lived intangible assets totaling $57.4 million, primarily related to revenue-generating contracts and technology. Additions primarily related to the January 2011 acquisition of TGLP, a primary ticketing business in the Washington D.C. metro area, the April 2011 acquisition of Serviticket, a Spanish ticketing company, the October 2011 acquisition of LN-HS Concerts, a promoter in Southern California and the December 2011 acquisition of BigChampagne, a developer of technologies for collecting, analyzing and distributing media metrics.

 

 During 2011, the Company recorded a divestiture of $4.4 million primarily relating to the sale of an artist management company.

 

The Company tests for possible impairment of definite-lived intangible assets whenever events or circumstances change, such as a significant reduction in operating cash flow or a dramatic 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. 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 their carrying value. It was determined that certain assets were impaired since the estimated undiscounted cash flows associated with those assets were less than their carrying value. For the years ended December 31, 2012, 2011 and 2010, the Company recorded an impairment charge related to definite-lived intangible assets of $89.6 million, $14.1 million and $17.2 million, respectively, as a component of depreciation and amortization. The 2012 impairment charge primarily related to client/vendor relationship intangible assets in the Artist Nation segment and revenue-generating contracts and client/vendor relationships in the Concerts segment. The 2011 impairment charge related to intangible assets for client/vendor relationships, revenue-generating contracts and venue management and leaseholds in the Concerts segment. The 2010 impairment charge was primarily related to intangible assets for revenue-generating contracts and trademarks and naming rights in the Concerts segment. See Note 6—Fair Value Measurements for further discussion of these impairments and the inputs used to determine the fair value.

 

Total amortization expense from definite-lived intangible assets for the years ended December 31, 2012, 2011 and 2010 was $256.9 million, $175.2 million and $151.9 million, respectively. The increase in amortization expense for the year ended December 31, 2012 as compared to the prior year is primarily driven by amortization related to the impairment of intangible assets for client/vendor relationships and revenue-generating contracts, additional definite-lived intangibles acquired in the acquisitions noted above and $3.7 million related to the acceleration of amortization expense resulting from a change in the estimated useful life of a venue management and leaseholds intangible in the Concerts segment. The increase in amortization expense for the year ended December 31, 2011 as compared to the prior year is primarily driven by the additional definite-lived intangible assets obtained in the Merger, the acquisition of the remaining 49% interest in, and control of, LN-Haymon and the acquisitions of Ticketnet and Serviticket. Also adding to the increase in amortization expense for the year ended December 31, 2011 as compared to the prior year was a $6.1 million reduction to amortization expense in 2010 related to a non-cash gain on the settlement of a pre-existing relationship with LN-Haymon.

 

 

 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 $377.5 million and $377.2 million as of December 31, 2012 and 2011, respectively.

 

The Company tests for possible impairment of indefinite-lived intangible assets on at least an annual basis. During 2010, the Company determined that certain indefinite-lived intangible assets were impaired since the estimated fair value associated with those assets was less than its carrying value. For the year ended December 31, 2010, the Company recorded an impairment related to indefinite-lived intangible assets of $10.0 million, which is included in depreciation and amortization in the Ticketing segment. See Note 6—Fair Value Measurements for further discussion of the inputs used to determine the fair value. There were no impairment charges recorded for the years ended December 31, 2012 and 2011.

 

Goodwill

 

 

Included in the current year acquisitions amount above for 2011 is $44.5 million of goodwill primarily related to the acquisitions of Serviticket, LN-HS Concerts and BigChampagne.

 

Of the total amount of goodwill recognized in connection with the 2012 and 2011 acquisitions, none is expected to be deductible for tax purposes.

 

The Company reviews for possible impairment of goodwill annually. There was no impairment charge recorded for the years ended December 31, 2012, 2011 and 2010.

 

The Company is in the process of finalizing its acquisition accounting for recent smaller acquisitions which could result in a change to the relevant purchase price allocations including goodwill.

 

 

Long-Lived Asset Disposals

 

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 the Selma amphitheater in Texas.

 

In connection with the Merger, the Company reached an agreement with the DOJ that Ticketmaster would divest its Paciolan ticketing business and, in March 2010, the Company completed this sale to Comcast-Spectacor, L.P. In December 2010, the Company also sold a music theater in Sweden and an indoor Latin/salsa event in the Netherlands.

 

 

For the year ended December 31, 2010, the Company reported $4.2 million of expense, net of tax, related to the 2009 sale of its remaining theatrical venues and operations in the United Kingdom.

 

 Certain agreements relating to disposals of businesses provide for future contingent consideration to be paid to the Company based on the financial performance of the businesses sold. The Company will record additional amounts related to such contingent consideration, with a corresponding adjustment to gain (loss) on sale of operating assets, if and when it is determinable that the applicable financial performance targets will be met. The aggregate of these contingent considerations, if all existing performance targets are met, would not significantly impact the results of operations of the Company. The last contingency period for which the Company has outstanding contingent consideration is for the year ended December 31, 2013.