Annual report pursuant to Section 13 and 15(d)

LONG-LIVED ASSETS

v2.4.1.9
LONG-LIVED ASSETS
 12 Months Ended
Dec. 31, 2014
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 2014 and 2013, the Company received insurance recoveries and recorded gains of $3.8 million and $14.1 million for the years ended December 31, 2014 and 2013, respectively, as a component of gain on disposal of operating assets in the Concerts segment representing the proceeds received in excess of the carrying value of the assets. The Company received the final insurance recovery in the second quarter of 2014.
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. For the year ended December 31, 2012, the Company recorded impairment charges of $4.3 million as a component of depreciation and amortization. It was determined that certain assets were impaired since the estimated undiscounted cash flows associated with the respective assets were less than their carrying value. 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. 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 during 2014 and 2013.
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, 2014 and 2013:
 
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, 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

Gross carrying amount:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Acquisitions—current year
75,304

 
92,974

 
—

 
—

 
8,415

 
—

 
1,100

 
177,793

Acquisitions— prior year
(1,851
)
 
2,857

 
1,500

 
—

 
407

 
—

 
—

 
2,913

Dispositions
(1,600
)
 
—

 
—

 
—

 
—

 
—

 
—

 
(1,600
)
Foreign exchange
(19,056
)
 
(8,508
)
 
—

 
(2,324
)
 
(1,608
)
 
(1,176
)
 
(5
)
 
(32,677
)
Other (1)
(2,764
)
 
(9,268
)
 
(15,147
)
 
4

 
(92,548
)
 
(3,082
)
 
111

 
(122,694
)
Net change
50,033

 
78,055

 
(13,647
)
 
(2,320
)
 
(85,334
)
 
(4,258
)
 
1,206

 
23,735

Accumulated amortization:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Amortization
(52,664
)
 
(52,389
)
 
(12,531
)
 
(7,960
)
 
(24,946
)
 
(3,458
)
 
(713
)
 
(154,661
)
Dispositions
605

 
—

 
—

 
—

 
—

 
—

 
—

 
605

Foreign exchange
8,277

 
1,735

 
—

 
1,161

 
1,262

 
767

 
3

 
13,205

Other (1)
2,764

 
9,268

 
15,147

 
(4
)
 
92,548

 
3,082

 
460

 
123,265

Net change
(41,018
)
 
(41,386
)
 
2,616

 
(6,803
)
 
68,864

 
391

 
(250
)
 
(17,586
)
Balance as of December 31, 2014:
 
 
 
 
 
 
 
 
 
 
 
 
Gross carrying amount
635,127

 
355,992

 
123,552

 
83,322

 
15,330

 
24,266

 
3,581

 
1,241,170

Accumulated amortization
(272,071
)
 
(123,195
)
 
(98,512
)
 
(50,490
)
 
(4,246
)
 
(8,701
)
 
(1,242
)
 
(558,457
)
Net
$
363,056

 
$
232,797

 
$
25,040

 
$
32,832

 
$
11,084

 
$
15,565

 
$
2,339

 
$
682,713

(1) 
Other includes netdowns of fully amortized or impaired assets and, for 2013, a $1.2 million 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 2014 is $177.8 million of definite-lived intangible assets primarily related to revenue-generating contracts and client/vendor relationships. These additions are primarily associated with the acquisitions of a controlling interest in a festival and concert promoter and five artist management businesses located in the United States and the United Kingdom.
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 acquisitions of controlling interests in festival promoters located in the United States and the United Kingdom along with an artist management business located in the United Kingdom.
The 2014 and 2013 additions to definite-lived intangible assets from acquisitions have weighted-average lives as follows:
  
Weighted-
Average
Life (years)
 
2014
 
2013
 
 
 
 
Revenue-generating contracts
9

 
9

Client/vendor relationships
7

 
8

Technology
5

 
5

Trademarks and naming rights
—

 
10

Other
10

 
—

All categories
8

 
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 their carrying value. For the years ended December 31, 2014, 2013 and 2012, the Company recorded impairment charges related to definite-lived intangible assets of $11.1 million, $10.6 million and $89.6 million, respectively, as a component of depreciation and amortization. The 2014 impairment charges primarily related to client/vendor relationship intangible assets in the Artist Nation segment and technology intangible assets in the Ticketing segment. 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. 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, 2014, 2013 and 2012 was $154.7 million, $173.2 million and $256.9 million, respectively.
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, 2014:
 
 
(in thousands)
2015
$
130,262

2016
$
125,166

2017
$
104,932

2018
$
86,048

2019
$
73,680


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 trade names. These indefinite-lived intangible assets had a carrying value of $369.5 million and $376.7 million as of December 31, 2014 and 2013, respectively.
The Company tests for possible impairment of indefinite-lived intangible assets on at least an annual basis. For the year ended December 31, 2014, the Company recorded an impairment charge of $6.0 million as a component of depreciation and amortization in the Ticketing segment. During 2014, the Company made a decision to rebrand certain of its markets that were not using the Ticketmaster trade name. In connection with the rebranding, it was determined that an indefinite-lived intangible asset for a certain market was fully impaired since the transition to the Ticketmaster trade name was substantially completed for that market during the year. See Note 6—Fair Value Measurements for further discussion of the inputs used to determine the fair value. There were no impairment charges of indefinite-lived intangible assets recorded for the years ended December 31, 2013 and 2012.
Goodwill
The Company currently has seven reporting units with goodwill balances: International Concerts and North American Concerts within the Concerts segment; Artist Management and Artist Services (non-management) within the Artist Nation segment; International Ticketing and North American Ticketing within the Ticketing segment; and Sponsorship & Advertising. The Company reviews goodwill for impairment annually, as of October 1, using a three-step process: a qualitative review, a quantitative analysis and a measurement of implied goodwill. The Company also tests goodwill for impairment in other periods if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying amount or when the Company changes its operating segments or reporting units. As part of the Company’s annual test for impairment of goodwill, three reporting units were assessed under the initial qualitative evaluation and did not require a quantitative analysis. These reporting units account for approximately 65% of the Company’s goodwill at December 31, 2014. 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.
For two reporting units that account for approximately 26% of the Company’s goodwill at December 31, 2014, although these reporting units outperformed financial expectations and showed improved discount rates, the qualitative analysis was inconclusive. As such, quantitative analysis was also performed for these reporting units, but did not require advancing to the final step to measure impairment.
Finally, an assessment of the implied fair value of goodwill was performed for the International Concerts and Artist Services (non-management) reporting units that account for approximately 9% of the Company’s goodwill at December 31, 2014. Although some of their key assumptions had improved, due to recent financial performance against prior year expectations driven from reduced touring content internationally in the year, foreign exchange impacts to results, further expansion and related investment in emerging markets along with reduced merchandise results, a qualitative assessment was inconclusive and these reporting units did not pass the subsequent quantitative test. An excess of the carrying value of goodwill over the implied fair value of goodwill was calculated for these reporting units and impairments were recorded. The Company calculated the impairments 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. The impairment resulted principally from the recent financial performance ending with the conclusion of the concert season in the fourth quarter of 2014, an increase in the carrying value of goodwill and the fair value of intangibles over carrying value. Based upon the results of the annual test for 2014, the Company recorded impairment charges of $117.0 million and $17.9 million related to its International Concerts and Artist Services (non-management) reporting units, respectively. There were no impairment charges in 2013 and 2012.

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, 2014 and 2013:
 
Concerts
 
Ticketing
 
Artist
Nation
 
Sponsorship
&  Advertising
 
Total
 
(in thousands)
Balance as of December 31, 2012:
 
 
 
 
 
 
 
 
 
Goodwill (1)
$
468,891

 
$
637,642

 
$
266,820

 
$
254,376

 
$
1,627,729

Accumulated impairment losses (1)
(269,902
)
 
—

 
—

 
—

 
(269,902
)
                 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

 
1,736,885

Accumulated impairment losses
(269,902
)
 
—

 
—

 
—

 
(269,902
)
                 Net
235,570

 
642,249

 
278,923

 
310,241

 
1,466,983

 
 
 
 
 
 
 
 
 
 
Acquisitions—current year
92,393

 
27,943

 
68,107

 
15,774

 
204,217

Acquisitions—prior year
1,997

 
—

 
(2,304
)
 
(625
)
 
(932
)
Dispositions
—

 
(4,434
)
 
—

 
—

 
(4,434
)
Impairment
(117,013
)
 
—

 
(17,948
)
 
—

 
(134,961
)
Foreign exchange
(21,971
)
 
(8,127
)
 
787

 
(22,525
)
 
(51,836
)
 
 
 
 
 
 
 
 
 
 
Balance as of December 31, 2014:
 
 
 
 
 
 
 
 
Goodwill
577,891

 
657,631

 
345,513

 
302,865

 
1,883,900

Accumulated impairment losses
(386,915
)
 
—

 
(17,948
)
 
—

 
(404,863
)
                 Net
$
190,976

 
$
657,631

 
$
327,565

 
$
302,865

 
$
1,479,037


(1) 
The previously reported total balance has been reduced by $13.0 million due to the net down of fully impaired goodwill related to the Company’s non-core events business which was sold in 2008.
_______________
Included in the current year acquisitions amount above for 2014 is $204.2 million of goodwill primarily associated with the acquisitions of a controlling interest in a festival and concert promoter and three artist management businesses located in the United States and the United Kingdom.
Included in the current year acquisitions amount above for 2013 is $97.5 million of goodwill primarily associated with the acquisitions of controlling interests in festival promoters located in the United States and the United Kingdom.
Of the total amount of goodwill recognized in connection with the 2014 and 2013 acquisitions, $76.4 million and $30.3 million, respectively, is expected to be deductible for tax purposes.
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 reported as part of other long-term assets. 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, 2014, the Company’s investment in Venta de Boletos por Computadora S.A. de C.V (“VBC”), a 33% owned ticketing distribution services company, is considered significant. Summarized balance sheet and income statement information for VBC is as follows (at 100%):
 
 
December 31,
 
 
2014
 
2013
 
 
(in thousands)
Current assets
 
$
37,239

 
$
38,387

Noncurrent assets
 
$
6,340

 
$
6,545

Current liabilities
 
$
21,729

 
$
21,031

Noncontrolling interests
 
$
391

 
$
296

 
 
Year Ended December 31,
 
 
2014
 
2013
 
2012
 
 
(in thousands)
Revenue
 
$
43,490

 
$
51,940

 
$
49,306

Operating income
 
$
20,092

 
$
27,027

 
$
26,427

Net income
 
$
14,641

 
$
20,574

 
$
20,340

Net income attributable to the common stockholders of the equity investees
 
$
14,500

 
$
20,515

 
$
20,309


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. There were no significant impairments of investments in nonconsolidated affiliates during 2014 and 2012.
Long-lived Asset Disposals
In May 2013, the Company completed the sale of a theater in New York. There were no significant disposals of long-lived assets during 2014 and 2012. 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
 
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