UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
____________________________________ 
Form 10-Q
____________________________________ 
x
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2016
or
¨
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from                  to                
Commission File Number 001-32601
____________________________________ 
LIVE NATION ENTERTAINMENT, INC.
(Exact name of registrant as specified in its charter)
____________________________________ 
Delaware
 
20-3247759
(State of Incorporation)
 
(I.R.S. Employer Identification No.)
9348 Civic Center Drive
Beverly Hills, CA 90210
(Address of principal executive offices, including zip code)
(310) 867-7000
(Registrant’s telephone number, including area code)
____________________________________ 
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    x  Yes    ¨  No
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  x    No  ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
 
x
Accelerated filer
 
¨
 
 
 
 
 
 
Non-accelerated filer
 
¨  (Do not check if a smaller reporting company)
Smaller reporting company
 
¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    ¨  Yes    x  No
On November 1, 2016, there were 203,436,945 outstanding shares of the registrant’s common stock, $0.01 par value per share, including 1,082,833 shares of unvested restricted stock awards and excluding 408,024 shares held in treasury.
 


Table of Contents

LIVE NATION ENTERTAINMENT, INC.
INDEX TO FORM 10-Q

 
 
Page
PART I—FINANCIAL INFORMATION
 
 
 
 
 
 
PART II—OTHER INFORMATION
 


Table of Contents

LIVE NATION ENTERTAINMENT, INC.
GLOSSARY OF KEY TERMS 
    
AOCI
Accumulated other comprehensive income (loss)
AOI
Adjusted operating income (loss)
Company
Live Nation Entertainment, Inc. and subsidiaries
FASB
Financial Accounting Standards Board
GAAP
United States Generally Accepted Accounting Principles
Live Nation
Live Nation Entertainment, Inc. and subsidiaries
SEC
United States Securities and Exchange Commission
Ticketmaster
For periods prior to May 6, 2010, Ticketmaster means Ticketmaster Entertainment LLC and its predecessor companies (including without limitation Ticketmaster Entertainment, Inc.); for periods on and after May 6, 2010, Ticketmaster means the ticketing business of the Company.

1

Table of Contents

PART I—FINANCIAL INFORMATION
Item 1. Financial Statements
LIVE NATION ENTERTAINMENT, INC.
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
 
September 30,
2016
 
December 31,
2015
 
(in thousands)
ASSETS
 
 
 
Current assets
 
 
 
Cash and cash equivalents
$
1,039,706

 
$
1,303,125

Accounts receivable, less allowance of $26,620 and $17,168, respectively
785,418

 
452,600

Prepaid expenses
533,283

 
496,226

Other current assets
48,798

 
36,364

Total current assets
2,407,205

 
2,288,315

Property, plant and equipment
 
 
 
Land, buildings and improvements
827,960

 
840,032

Computer equipment and capitalized software
520,100

 
505,233

Furniture and other equipment
251,419

 
233,271

Construction in progress
95,398

 
47,684

 
1,694,877

 
1,626,220

Less accumulated depreciation
974,287

 
894,938

 
720,590

 
731,282

Intangible assets
 
 
 
Definite-lived intangible assets, net
759,210

 
777,763

Indefinite-lived intangible assets
368,906

 
369,317

Goodwill
1,671,629

 
1,604,315

Other long-term assets
489,489

 
385,249

Total assets
$
6,417,029

 
$
6,156,241

LIABILITIES AND EQUITY
 
 
 
Current liabilities
 
 
 
Accounts payable, client accounts
$
709,236

 
$
662,941

Accounts payable
66,347

 
58,607

Accrued expenses
905,729

 
686,664

Deferred revenue
518,678

 
618,640

Current portion of long-term debt, net
46,693

 
42,352

Other current liabilities
34,314

 
32,002

Total current liabilities
2,280,997

 
2,101,206

Long-term debt, net
1,984,511

 
2,002,662

Deferred income taxes
198,660

 
199,472

Other long-term liabilities
125,040

 
142,267

Commitments and contingent liabilities


 


Redeemable noncontrolling interests
308,773

 
263,715

Stockholders’ equity
 
 
 
Common stock
2,027

 
2,020

Additional paid-in capital
2,401,969

 
2,428,566

Accumulated deficit
(972,100
)
 
(1,075,111
)
Cost of shares held in treasury
(6,865
)
 
(6,865
)
Accumulated other comprehensive loss
(144,273
)
 
(111,657
)
Total Live Nation stockholders’ equity
1,280,758

 
1,236,953

Noncontrolling interests
238,290

 
209,966

Total equity
1,519,048

 
1,446,919

Total liabilities and equity
$
6,417,029

 
$
6,156,241


See Notes to Consolidated Financial Statements
2

Table of Contents

LIVE NATION ENTERTAINMENT, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)

 
Three Months Ended 
 September 30,
 
Nine Months Ended 
 September 30,
 
2016
 
2015
 
2016
 
2015
 
(in thousands except share and per share data)
Revenue
$
3,170,416

 
$
2,622,917

 
$
6,557,390

 
$
5,509,006

Operating expenses:
 
 
 
 
 
 
 
Direct operating expenses
2,428,003

 
1,974,322

 
4,817,894

 
3,974,710

Selling, general and administrative expenses
414,412

 
365,220

 
1,126,452

 
1,008,922

Depreciation and amortization
104,862

 
99,054

 
295,241

 
272,166

Loss (gain) on disposal of operating assets
253

 
625

 
(1
)
 
588

Corporate expenses
31,600

 
30,186

 
85,649

 
80,800

Operating income
191,286

 
153,510

 
232,155

 
171,820

Interest expense
25,249

 
25,844

 
75,965

 
76,857

Interest income
(625
)
 
(460
)
 
(1,831
)
 
(2,419
)
Equity in losses (earnings) of nonconsolidated affiliates
17,471

 
2,040

 
17,184

 
(573
)
Other expense, net
2,606

 
8,127

 
1,412

 
20,655

Income before income taxes
146,585

 
117,959

 
139,425

 
77,300

Income tax expense
13,824

 
13,577

 
26,157

 
19,232

Net income
132,761

 
104,382

 
113,268

 
58,068

Net income attributable to noncontrolling interests
21,682

 
15,333

 
8,966

 
12,242

Net income attributable to common stockholders of Live Nation
$
111,079

 
$
89,049

 
$
104,302

 
$
45,826

 
 
 
 
 
 
 
 
Basic net income per common share available to common stockholders of Live Nation
$
0.51

 
$
0.39

 
$
0.35

 
$
0.14

Diluted net income per common share available to common stockholders of Live Nation
$
0.49

 
$
0.38

 
$
0.34

 
$
0.14

 
 
 
 
 
 
 
 
Weighted average common shares outstanding:
 
 
 
 
 
 
 
Basic
202,118,412

 
201,392,591

 
201,904,305

 
200,776,477

Diluted
217,690,217

 
208,738,780

 
208,855,401

 
208,493,651

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Reconciliation to net income available to common stockholders of Live Nation:
 
 
 
 
 
 
 
Net income attributable to common stockholders of Live Nation
$
111,079

 
$
89,049

 
$
104,302

 
$
45,826

Accretion of redeemable noncontrolling interests
(8,576
)
 
(10,118
)
 
(33,204
)
 
(17,111
)
Net income available to common stockholders of Live Nation—basic
102,503

 
78,931

 
71,098

 
28,715

Convertible debt interest, net of tax
3,274

 

 

 

Net income available to common stockholders of Live Nation—diluted
$
105,777

 
$
78,931

 
$
71,098

 
$
28,715

 
 
 
 
 
 
 
 

See Notes to Consolidated Financial Statements
3

Table of Contents

LIVE NATION ENTERTAINMENT, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(UNAUDITED)

 
Three Months Ended 
 September 30,
 
Nine Months Ended 
 September 30,
 
2016
 
2015
 
2016
 
2015
 
(in thousands)
Net income
$
132,761

 
$
104,382

 
$
113,268

 
$
58,068

Other comprehensive income (loss), net of tax:
 
 
 
 
 
 
 
Foreign currency translation adjustments
(7,869
)
 
(6,196
)
 
(32,616
)
 
(24,255
)
Other

 
(107
)
 

 
31

Comprehensive income
124,892

 
98,079

 
80,652

 
33,844

Comprehensive income attributable to noncontrolling interests
21,682

 
15,333

 
8,966

 
12,242

Comprehensive income attributable to common stockholders of Live Nation
$
103,210

 
$
82,746

 
$
71,686

 
$
21,602


See Notes to Consolidated Financial Statements
4

Table of Contents

LIVE NATION ENTERTAINMENT, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)

 
Nine Months Ended 
 September 30,
 
2016
 
2015
 
(in thousands)
CASH FLOWS FROM OPERATING ACTIVITIES
 
 
 
Net income
$
113,268

 
$
58,068

Reconciling items:
 
 
 
Depreciation
104,100

 
97,845

Amortization
191,141

 
174,321

Deferred income tax benefit
(14,096
)
 
(7,181
)
Amortization of debt issuance costs, discounts and premium, net
7,823

 
7,974

Non-cash compensation expense
25,237

 
25,594

Equity in losses (earnings) of nonconsolidated affiliates, net of distributions
25,742

 
6,040

Provision for uncollectible receivables and advances
12,743

 
7,339

Other, net
(6,094
)
 
(12,091
)
Changes in operating assets and liabilities, net of effects of acquisitions and dispositions:
 
 
 
Increase in accounts receivable
(345,343
)
 
(232,106
)
Increase in prepaid expenses and other assets
(173,683
)
 
(215,009
)
Increase in accounts payable, accrued expenses and other liabilities
295,025

 
120,812

Decrease in deferred revenue
(116,347
)
 
(46,530
)
Net cash provided by (used in) operating activities
119,516

 
(14,924
)
CASH FLOWS FROM INVESTING ACTIVITIES
 
 
 
Advances and collections of notes receivable, net
(7,971
)
 
(22,827
)
Investments made in nonconsolidated affiliates
(18,628
)
 
(17,130
)
Purchases of property, plant and equipment
(119,740
)
 
(97,506
)
Cash paid for acquisitions, net of cash acquired
(113,065
)
 
(87,371
)
Other, net
(770
)
 
(2,290
)
Net cash used in investing activities
(260,174
)
 
(227,124
)
CASH FLOWS FROM FINANCING ACTIVITIES
 
 
 
Payments on long-term debt
(28,795
)
 
(22,910
)
Distributions to noncontrolling interests
(25,279
)
 
(13,834
)
Purchases and sales of noncontrolling interests, net
(32,266
)
 
(9,491
)
Proceeds from exercise of stock options
5,676

 
14,685

Payments for deferred and contingent consideration
(21,809
)
 
(4,450
)
Other, net
(7,227
)
 
2,552

Net cash used in financing activities
(109,700
)
 
(33,448
)
Effect of exchange rate changes on cash and cash equivalents
(13,061
)
 
(45,150
)
Net decrease in cash and cash equivalents
(263,419
)
 
(320,646
)
Cash and cash equivalents at beginning of period
1,303,125

 
1,382,029

Cash and cash equivalents at end of period
$
1,039,706

 
$
1,061,383




See Notes to Consolidated Financial Statements
5

Table of Contents

LIVE NATION ENTERTAINMENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

NOTE 1—BASIS OF PRESENTATION AND OTHER INFORMATION
Preparation of Interim Financial Statements
The accompanying unaudited consolidated financial statements have been prepared in accordance with GAAP for interim financial information and the instructions to Form 10-Q and Article 10 of Regulation S-X issued by the SEC. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, they include all normal and recurring accruals and adjustments necessary to present fairly the results of the interim periods shown.
The financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s 2015 Annual Report on Form 10-K filed with the SEC on February 25, 2016, as amended by the Form 10-K/A filed with the SEC on June 29, 2016.
Seasonality
Due to the seasonal nature of shows at outdoor amphitheaters and festivals, which primarily occur from May through October, the Concerts and Sponsorship & Advertising segments experience higher revenue during the second and third quarters. The Artist Nation segment’s revenue is impacted, to a large degree, by the touring schedules of artists it represents and generally experiences higher revenue during the second and third quarters as the period from May through October tends to be a popular time for touring events. The Ticketing segment’s revenue is impacted by fluctuations in the availability of events for sale to the public, which vary depending upon scheduling by its clients. The Company’s seasonality also results in higher balances in cash and cash equivalents, accounts receivable, prepaid expenses, accrued expenses and deferred revenue at different times in the year. Therefore, the results to date are not necessarily indicative of the results expected for the full year.
Cash and Cash Equivalents
Included in the September 30, 2016 and December 31, 2015 cash and cash equivalents balance is $547.4 million and $549.0 million, respectively, of cash received that includes the face value of tickets sold on behalf of ticketing clients and their share of service charges, which amounts are to be remitted to the clients.
Acquisitions
During the first nine months of 2016, the Company completed several acquisitions that were accounted for as business combinations under the acquisition method of accounting and were not significant either on an individual basis or in the aggregate.
Income Taxes
Each reporting period, the Company evaluates the realizability of all of its deferred tax assets in each tax jurisdiction. As of September 30, 2016, the Company continued to maintain a full valuation allowance against its net deferred tax assets in certain jurisdictions due to sustained pre-tax losses. As a result of the valuation allowances, no tax benefits have been recognized for losses incurred in those tax jurisdictions for the first nine months of 2016 and 2015.
Reclassifications
In connection with the modified retrospective application of new accounting guidance for employee share-based payment transactions as discussed below, the Company has reclassified $7.7 million of payments for employee taxes, where shares were withheld upon the vesting or exercise of equity awards in order to satisfy the withholding obligation, from operating activities to financing activities within the consolidated statements of cash flows for the nine months ended September 30, 2015.
Recent Accounting Pronouncements
Recently Adopted Pronouncements
In April 2015, the FASB amended its guidance on internal-use software providing clarification to customers about whether a cloud computing arrangement includes a software license. If a cloud computing arrangement includes a software license, then the customer should account for the software license element of the arrangement consistent with the acquisition of other software licenses. If a cloud computing arrangement does not include a software license, the customer should account for the arrangement as a service contract. The Company adopted this guidance prospectively on January 1, 2016 and it did not have a material effect on the Company’s financial position or results of operations.

6

Table of Contents

In March 2016, the FASB issued guidance that simplifies several aspects of the accounting for employee share-based payment transactions, including the accounting for forfeitures, employer tax withholding on share-based compensation and the financial statement presentation of excess tax benefits or deficiencies, as well as classification in the statement of cash flows. The Company adopted this guidance effective January 1, 2016 using a modified retrospective transition method with a cumulative-effect adjustment to retained earnings for the changes to the accounting for forfeitures and excess tax benefits or deficiencies. Upon adoption of this guidance, the Company no longer estimates forfeitures in advance and now recognizes forfeitures as they occur and has reflected a cumulative effect adjustment to accumulated deficit in the consolidated balance sheets of $1.3 million.
Recently Issued Pronouncements
In May 2014, the FASB issued a comprehensive new revenue recognition standard that will supersede nearly all existing revenue recognition guidance under GAAP. The new standard provides a five-step analysis of transactions to determine when and how revenue is recognized. The core principle of the guidance is that a company should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The FASB continues to issue guidance clarifying certain guidelines of the standard including reframing the indicators in the principal versus agent guidance to focus on evidence that a company is acting as a principal rather than agent. The standard is effective for annual periods beginning after December 15, 2017 and interim periods within that year. Early adoption of the standard is only permitted for annual periods beginning after December 15, 2016 and interim periods within that year. The guidance should be applied retrospectively, either to each prior period presented in the financial statements, or only to the most current reporting period presented in the financial statements with a cumulative-effect adjustment as of the date of adoption. The Company will adopt this standard on January 1, 2018, and is currently assessing which implementation method it will apply and the impact that adoption will have on its financial position and results of operations.
In January 2016, the FASB issued amendments for the recognition, measurement, presentation, and disclosure of financial instruments. Among other things, the guidance requires equity investments that do not result in consolidation and are not accounted for under the equity method to be measured at fair value with any change in fair value recognized in net income unless the investments do not have readily determinable fair values. The amendments are effective for annual periods beginning after December 15, 2017 and interim periods within that year. Early adoption is not permitted for most of the amendments. The amendments are to be applied through a cumulative-effect adjustment to the balance sheet as of the beginning of the fiscal year of adoption with the exception of equity investments without readily determinable fair values, which will be applied prospectively. The Company will adopt this standard on January 1, 2018, and currently expects that adoption of this guidance will not have a material impact on its financial position or results of operations.
In February 2016, the FASB issued guidance that requires lessees to recognize most leases on their balance sheet as a lease liability and a right-of-use asset, and to disclose key information about leasing arrangements. The guidance is effective for annual periods beginning after December 15, 2018 and interim periods within that year, and early adoption is permitted. The guidance should be applied on a modified retrospective basis. The Company expects to adopt this standard on January 1, 2019, and is currently evaluating the impact that the standard will have on its financial position and results of operations.
In March 2016, the FASB issued guidance clarifying that the assessment of whether an embedded contingent put or call option is clearly and closely related to the debt instrument only requires an analysis pursuant to the four-step decision sequence outlined in the guidance for embedded derivatives. The guidance is effective for fiscal years beginning after December 15, 2016 and interim periods within that year. The guidance should be applied to existing debt instruments using a modified retrospective method as of the beginning of the period of adoption. The Company will adopt this standard on January 1, 2017, and currently expects that adoption of this guidance will not impact its financial position or results of operations.
NOTE 2—LONG-LIVED ASSETS
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 basis or in proportion to the asset’s expected cash flows.

7

Table of Contents

The following table presents the changes in the gross carrying amount and accumulated amortization of definite-lived intangible assets for the nine months ended September 30, 2016:
 
Revenue-
generating
contracts
 
Client /
vendor
relationships
 
Trademarks
and
naming
rights
 
Non-compete
agreements
 
Venue
management
and
leaseholds
 
Technology
 
Other
 
Total
 
(in thousands)
Balance as of December 31, 2015:
 
 
 
 
 
 
 
 
 
 
 
 
Gross carrying amount
$
700,795

 
$
379,282

 
$
86,556

 
$
176,354

 
$
66,051

 
$
30,265

 
$
3,598

 
$
1,442,901

Accumulated amortization
(313,743
)
 
(169,620
)
 
(14,578
)
 
(121,319
)
 
(35,645
)
 
(8,602
)
 
(1,631
)
 
(665,138
)
Net
387,052

 
209,662

 
71,978

 
55,035

 
30,406

 
21,663

 
1,967

 
777,763

Gross carrying amount:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Acquisitions— current year
48,912

 
51,211

 

 

 
1,449

 
8,604

 
413

 
110,589

Acquisitions— prior year
11,404

 
782

 
3,618

 
1,500

 
1,174

 

 

 
18,478

Dispositions

 
(2,299
)
 

 

 
(1,225
)
 

 

 
(3,524
)
Foreign exchange
(12,950
)
 
(1
)
 
(522
)
 
(2,998
)
 
(2,345
)
 
(340
)
 
2

 
(19,154
)
Other(1)
(10,717
)
 
(3,089
)
 
(6
)
 
(117,152
)
 
(9,600
)
 
(627
)
 
53

 
(141,138
)
Net change
36,649

 
46,604

 
3,090

 
(118,650
)
 
(10,547
)
 
7,637

 
468

 
(34,749
)
Accumulated amortization:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Amortization
(54,787
)
 
(47,129
)
 
(7,018
)
 
(15,190
)
 
(4,260
)
 
(4,276
)
 
(332
)
 
(132,992
)
Dispositions

 
599

 

 

 
22

 

 

 
621

Foreign exchange
4,991

 
(118
)
 
220

 
772

 
1,110

 
277

 
(22
)
 
7,230

Other(1)
10,772

 
3,089

 

 
117,227

 
9,600

 
627

 
22

 
141,337

Net change
(39,024
)
 
(43,559
)
 
(6,798
)
 
102,809

 
6,472

 
(3,372
)
 
(332
)
 
16,196

Balance as of September 30, 2016:
 
 
 
 
 
 
 
 
 
 
 
 
Gross carrying amount
737,444

 
425,886

 
89,646

 
57,704

 
55,504

 
37,902

 
4,066

 
1,408,152

Accumulated amortization
(352,767
)
 
(213,179
)
 
(21,376
)
 
(18,510
)
 
(29,173
)
 
(11,974
)
 
(1,963
)
 
(648,942
)
Net
$
384,677

 
$
212,707

 
$
68,270

 
$
39,194

 
$
26,331

 
$
25,928

 
$
2,103

 
$
759,210

______________
(1) Other includes netdowns of fully amortized or impaired assets.

Included in the current year acquisitions amounts above are definite-lived intangible assets primarily associated with the acquisition of a controlling interest in an artist management business with locations in the United States and Canada, controlling interests in festival and concert promoters located in the United Kingdom and the United States, and a digital content company located in the United States.
Included in the prior year acquisitions amounts above are definite-lived intangible assets primarily associated with the acquisition of a controlling interest in a festival promoter located in the United States.

8

Table of Contents

The 2016 additions to definite-lived intangible assets from acquisitions have weighted-average lives as follows:
 
Weighted-
Average
Life (years)
Revenue-generating contracts
7
Client/vendor relationships
5
Venue management and leaseholds
5
Technology
5
All categories
6
Amortization of definite-lived intangible assets for the three months ended September 30, 2016 and 2015 was $47.8 million and $42.3 million, respectively, and for the nine months ended September 30, 2016 and 2015 was $133.0 million and $118.4 million, respectively. Amortization related to nonrecoupable ticketing contract advances for the three months ended September 30, 2016 and 2015 was $20.5 million and $22.4 million, respectively, and for the nine months ended September 30, 2016 and 2015 was $57.0 million and $55.2 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 September 30, 2016:
 
(in thousands)
October 1 - December 31, 2016
$
46,174

2017
$
163,937

2018
$
142,989

2019
$
119,495

2020
$
99,868

As acquisitions and dispositions occur in the future and the valuations of intangible assets for recent acquisitions are completed, amortization may vary.
Goodwill
The following table presents the changes in the carrying amount of goodwill in each of the Company’s reportable segments for the nine months ended September 30, 2016:
 
Concerts
 
Sponsorship
& Advertising
 
Ticketing
 
Artist
Nation
 
Total
 
(in thousands)
Balance as of December 31, 2015:
 
 
 
 
 
 
 
 
 
Goodwill
$
602,771

 
$
332,081

 
$
733,825

 
$
340,501

 
$
2,009,178

Accumulated impairment losses
(386,915
)
 

 

 
(17,948
)
 
(404,863
)
                 Net
215,856

 
332,081

 
733,825

 
322,553

 
1,604,315

 
 
 
 
 
 
 
 
 
 
Acquisitions—current year
32,562

 
27,254

 
3,862

 
24,036

 
87,714

Acquisitions—prior year
(18,906
)
 
18,302

 
(108
)
 
449

 
(263
)
Dispositions

 

 

 
(323
)
 
(323
)
Foreign exchange
(25,067
)
 
5,468

 
1,475

 
(1,690
)
 
(19,814
)
 
 
 
 
 
 
 
 
 
 
Balance as of September 30, 2016:
 
 
 
 
 
 
 
 
 
Goodwill
591,360

 
383,105

 
739,054

 
362,973

 
2,076,492

Accumulated impairment losses
(386,915
)
 

 

 
(17,948
)
 
(404,863
)
                 Net
$
204,445

 
$
383,105

 
$
739,054

 
$
345,025

 
$
1,671,629

Included in the current year acquisitions amounts above is goodwill primarily associated with the acquisition of controlling interests in festival and concert promoters located in the United Kingdom and the United States, an artist

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management business with locations in the United States and Canada and a digital content company located in the United States.
Included in the prior year acquisitions amounts above are net reductions in goodwill resulting from changes in purchase price allocations of prior year acquisitions primarily related to the acquisition of a controlling interest in a festival promoter located in the United States and a venue management business in New Zealand.
The Company is in various stages of finalizing its 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 its allocation between segments.
Investments in Nonconsolidated Affiliates
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 nine months ended September 30, 2016, the Company recorded impairment charges related to these investments of $15.1 million as equity in losses (earnings) of nonconsolidated affiliates, primarily related to investments in a digital content company and an online merchandise company that are located in the United States. See Note 3—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 for the comparable period of 2015.
NOTE 3—FAIR VALUE MEASUREMENTS
The Company’s outstanding debt held by third-party financial institutions is carried at cost, adjusted for any premium, discounts or debt issuance costs. The Company’s 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 estimated fair values of the Company’s 7% senior notes, 5.375% senior notes and 2.5% convertible senior notes were $441.2 million, $259.0 million and $297.8 million, respectively, at September 30, 2016. The estimated fair values of the 7% senior notes, 5.375% senior notes and 2.5% convertible senior notes were $443.1 million, $249.4 million and $280.2 million, respectively, at December 31, 2015. See Note 7—Subsequent Events for discussion of the October 2016 repayment of the 7% senior notes. The estimated fair value of the Company’s 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. The Company had fixed-rate debt held by noncontrolling interest partners with a face value of $36.8 million and $32.9 million at September 30, 2016 and December 31, 2015, respectively. The Company is unable to determine the fair value of this debt.
The following table shows the fair value of the Company’s financial assets that have been adjusted to fair value on a non-recurring basis which had a significant impact on the Company’s results of operations for the nine months ended September 30, 2016:
 
 
Fair Value
 
Fair Value Measurements Using
 
Loss
Description
 
Measurements
 
Level 1
 
Level 2
 
Level 3
 
(Gain)
 
 
(in thousands)
2016
 
 
 
 
 
 
 
 
 
 
   Investments in nonconsolidated affiliates
 
$

 
$

 
$

 
$

 
$
15,088

As discussed in Note 2—Long-Lived Assets, the Company believed certain of its investment balances were impaired based on financial information received regarding the bankruptcy or dissolution of two nonconsolidated affiliates, which are considered Level 3 inputs.
NOTE 4—COMMITMENTS AND CONTINGENT LIABILITIES
Ticketing Fees Consumer Class Action Litigation
On March 18, 2016, all appeals relating to a settlement agreement reached by the plaintiffs and Ticketmaster in respect of a ticketing fees consumer class action litigation matter originally filed in October 2003 against Ticketmaster were dismissed, thus resolving this matter and allowing the implementation of the terms of the settlement. The Company has funded a portion of the settlement primarily related to the plaintiffs’ attorney fees. Ticketmaster and its parent, Live Nation, have not acknowledged any violations of law or liability in connection with the matter.
As of September 30, 2016, the Company had accrued $14.8 million, its best estimate of the probable remaining costs associated with the settlement referred to above, which was recorded in prior years. The calculation of this liability is based in part upon an estimated redemption rate. Any difference between the Company’s estimated redemption rate and the actual

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redemption rate it experiences will impact the final settlement amount; however, the Company does not expect this difference to be material.
NOTE 5—EQUITY
The following table shows the reconciliation of the carrying amount of stockholders’ equity attributable to Live Nation, equity attributable to noncontrolling interests, total equity and also redeemable noncontrolling interests for the nine months ended September 30, 2016:
 
Live Nation
Stockholders’ Equity
 
Noncontrolling
Interests
 
Total
Equity
 
Redeemable
Noncontrolling
Interests
 
(in thousands)
 
(in thousands)
Balance at December 31, 2015
$
1,236,953

 
$
209,966

 
$
1,446,919

 
$
263,715

Non-cash compensation expense
25,237

 

 
25,237

 

Common stock issued under stock plans, net of shares withheld for employee taxes
(4,110
)
 

 
(4,110
)
 

Exercise of stock options
5,676

 

 
5,676

 

Acquisitions

 
40,705

 
40,705

 
26,183

Divestitures

 
(1,856
)
 
(1,856
)
 

Purchases of noncontrolling interests
(21,480
)
 
(9,663
)
 
(31,143
)
 
623

Redeemable noncontrolling interests fair value adjustments
(33,204
)
 

 
(33,204
)
 
33,204

Cash distributions

 
(15,982
)
 
(15,982
)
 
(9,297
)
Other

 
759

 
759

 
(260
)
Comprehensive income (loss):
 
 
 
 

 
 
Net income (loss)
104,302

 
14,361

 
118,663

 
(5,395
)
Foreign currency translation adjustments
(32,616
)
 

 
(32,616
)
 

Balance at September 30, 2016
$
1,280,758

 
$
238,290

 
$
1,519,048

 
$
308,773

Accumulated Other Comprehensive Loss
The following table presents changes in the components of AOCI, net of taxes, for the nine months ended September 30, 2016:
 
Defined Benefit Pension Items
 
Foreign Currency Items
 
Total
 
(in thousands)
Balance at December 31, 2015
$
(358
)
 
$
(111,299
)
 
$
(111,657
)
Other comprehensive loss before reclassifications

 
(32,616
)
 
(32,616
)
Balance at September 30, 2016
$
(358
)
 
$
(143,915
)
 
$
(144,273
)
Earnings Per Share
The following table sets forth the computation of weighted average common shares outstanding:
 
Three Months Ended 
 September 30,
 
Nine Months Ended 
 September 30,
 
2016
 
2015
 
2016
 
2015
Weighted average common shares—basic
202,118,412

 
201,392,591

 
201,904,305

 
200,776,477

Effect of dilutive securities:
 
 
 
 
 
 
 
Stock options and restricted stock
7,641,823

 
7,346,189

 
6,951,096

 
7,717,174

Convertible senior notes
7,929,982

 

 

 

Weighted average common shares—diluted
217,690,217

 
208,738,780

 
208,855,401

 
208,493,651

Basic net income (loss) per common share is computed by dividing the net income (loss) available to common

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stockholders by the weighted average number of common shares outstanding during the period. The calculation of diluted net income (loss) per common share includes the effects of the assumed exercise of any outstanding stock options, the assumed vesting of shares of restricted stock awards and the assumed conversion of the convertible senior notes where dilutive.
The following table shows securities excluded from the calculation of diluted net income (loss) per common share because such securities are anti-dilutive:
 
Three Months Ended 
 September 30,
 
Nine Months Ended 
 September 30,
 
2016
 
2015
 
2016
 
2015
 
 
 
 
 
 
 
 
Options to purchase shares of common stock
1,726,732

 
3,177,293

 
5,309,138

 
3,153,930

Restricted stock awards—unvested
316,810

 
164,536

 
319,310

 
164,536

Conversion shares related to the convertible senior notes

 
7,929,982

 
7,929,982

 
7,929,982

Number of anti-dilutive potentially issuable shares excluded from diluted common shares outstanding
2,043,542

 
11,271,811

 
13,558,430

 
11,248,448

NOTE 6—SEGMENT DATA
The Company’s reportable segments are Concerts, Sponsorship & Advertising, Ticketing and Artist Nation. The Concerts segment involves the promotion of live music events globally in the Company’s owned or operated venues and in rented third-party venues, the production of music festivals, the operation and management of music venues and the creation of associated content. The Sponsorship & Advertising segment manages the development of strategic sponsorship programs in addition to the sale of international, national and local sponsorships and placement of advertising such as signage, promotional programs, rich media offerings, including advertising associated with live streaming and music-related original content, and ads across the Company’s distribution network of venues, events and websites. The Ticketing segment involves the management of the Company’s global ticketing operations, including providing ticketing software and services to clients, ticket resale services and online access for customers relating to ticket and event information, and is responsible for the Company’s primary websites, www.livenation.com and www.ticketmaster.com. The Artist Nation segment provides management services to artists and other services including event production services and merchandise sales.
Revenue and expenses earned and charged between segments are eliminated in consolidation. The Company’s capital expenditures below include accruals and expenditures funded by outside parties such as landlords or replacements funded by insurance proceeds.
The Company manages its working capital on a consolidated basis. Accordingly, segment assets are not reported to, or used by, the Company’s management to allocate resources to or assess performance of the segments, and therefore, total segment assets have not been presented.
The following table presents the results of operations for the Company’s reportable segments for the three and nine months ended September 30, 2016 and 2015:
 
Concerts
 
Sponsorship
& Advertising
 
Ticketing
 
Artist
Nation
 
Other
 
Corporate
 
Eliminations
 
Consolidated
 
(in thousands)
Three Months Ended September 30, 2016
 
 
 
 
 
 
 
 
Revenue
$
2,497,136

 
$
136,087

 
$
456,443

 
$
150,823

 
$
2,138

 
$

 
$
(72,211
)
 
$
3,170,416

Direct operating expenses
2,160,233

 
15,510

 
231,979

 
91,550

 
149

 

 
(71,418
)
 
2,428,003

Selling, general and administrative expenses
216,255

 
20,667

 
124,007

 
49,383

 
4,100

 

 

 
414,412

Depreciation and amortization
34,002

 
4,448

 
47,113

 
18,187

 
1,153

 
752

 
(793
)
 
104,862

Loss (gain) on disposal of operating assets
176

 

 
13

 
65

 

 
(1
)
 

 
253


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Concerts
 
Sponsorship
& Advertising
 
Ticketing
 
Artist
Nation
 
Other
 
Corporate
 
Eliminations
 
Consolidated
 
(in thousands)
Corporate expenses

 

 

 

 

 
31,600

 

 
31,600

Operating income (loss)
$
86,470

 
$
95,462

 
$
53,331

 
$
(8,362
)
 
$
(3,264
)
 
$
(32,351
)
 
$

 
$
191,286

Intersegment revenue
$
66,139

 
$

 
$
4,415

 
$
1,657

 
$

 
$

 
$
(72,211
)
 
$

Three Months Ended September 30, 2015
 
 
 
 
 
 
 
 
Revenue
$
1,991,909

 
$
126,576

 
$
426,177

 
$
136,675

 
$
793

 
$

 
$
(59,213
)
 
$
2,622,917

Direct operating expenses
1,722,880

 
16,978

 
210,022

 
83,171

 

 

 
(58,729
)
 
1,974,322

Selling, general and administrative expenses
188,063

 
14,190

 
120,429

 
42,138

 
400

 

 

 
365,220

Depreciation and amortization
36,075

 
2,525

 
46,533

 
13,152

 
12

 
1,241

 
(484
)
 
99,054

Loss (gain) on disposal of operating assets
250

 

 
188

 
187

 

 

 

 
625

Corporate expenses

 

 

 

 

 
30,186

 

 
30,186

Operating income (loss)
$
44,641

 
$
92,883

 
$
49,005

 
$
(1,973
)
 
$
381

 
$
(31,427
)
 
$

 
$
153,510

Intersegment revenue
$
50,635

 
$

 
$
7,921

 
$
657

 
$

 
$

 
$
(59,213
)
 
$

Nine Months Ended September 30, 2016
 
 
 
 
 
 
 
 
 
 
Revenue
$
4,775,970

 
$
288,923

 
$
1,305,577

 
$
312,608

 
$
4,485

 
$

 
$
(130,173
)
 
$
6,557,390

Direct operating expenses
4,047,664

 
44,711

 
673,990

 
179,636

 
149

 

 
(128,256
)
 
4,817,894

Selling, general and administrative expenses
571,252

 
50,540

 
363,336

 
129,841

 
11,483

 

 

 
1,126,452

Depreciation and amortization
101,122

 
13,777

 
132,789

 
44,891

 
2,053

 
2,526

 
(1,917
)
 
295,241

Loss (gain) on disposal of operating assets
(182
)
 

 
44

 
20

 

 
117

 

 
(1
)
Corporate expenses

 

 

 

 

 
85,649

 

 
85,649

Operating income (loss)
$
56,114

 
$
179,895

 
$
135,418

 
$
(41,780
)
 
$
(9,200
)
 
$
(88,292
)
 
$

 
$
232,155

Intersegment revenue
$
119,027

 
$

 
$
8,552

 
$
2,594

 
$

 
$

 
$
(130,173
)
 
$

Capital expenditures
$
50,294

 
$
1,318

 
$
64,513

 
$
1,059

 
$
777

 
$
5,454

 
$

 
$
123,415


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Concerts
 
Sponsorship
& Advertising
 
Ticketing
 
Artist
Nation
 
Other
 
Corporate
 
Eliminations
 
Consolidated
 
(in thousands)
Nine Months Ended September 30, 2015
 
 
 
 
 
 
 
 
 
 
Revenue
$
3,883,525

 
$
259,744

 
$
1,162,004

 
$
302,455

 
$
2,377

 
$

 
$
(101,099
)
 
$
5,509,006

Direct operating expenses
3,284,359

 
38,323

 
566,759

 
183,807

 
1,068

 

 
(99,606
)
 
3,974,710

Selling, general and administrative expenses
497,176

 
41,140

 
350,016

 
118,940

 
1,650

 

 

 
1,008,922

Depreciation and amortization
105,289

 
6,738

 
125,390

 
33,943

 
36

 
2,263

 
(1,493
)
 
272,166

Loss (gain) on disposal of operating assets
421

 

 
9

 
187

 

 
(29
)
 

 
588

Corporate expenses

 

 

 

 

 
80,800

 

 
80,800

Operating income (loss)
$
(3,720
)
 
$
173,543

 
$
119,830

 
$
(34,422
)
 
$
(377
)
 
$
(83,034
)
 
$

 
$
171,820

Intersegment revenue
$
90,410

 
$

 
$
9,499

 
$
1,190

 
$

 
$

 
$
(101,099
)
 
$

Capital expenditures
$
27,042

 
$
4,138

 
$
60,413

 
$
1,538

 
$

 
$
1,715

 
$

 
$
94,846


14

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NOTE 7—SUBSEQUENT EVENTS
In October 2016, the Company issued $575 million of 4.875% senior notes due 2024 and amended its senior secured credit facility to provide for (i) a new $190 million term loan A facility, (ii) a new $975 million term loan B facility and (iii) a new $365 million revolving credit facility. The proceeds will be used to repay the $1.005 billion principal balance outstanding on the term loan A and term loan B under the existing senior secured credit facility, to repay the entire $425 million principal amount of the Company’s 7% senior notes due 2020 and to pay the related redemption premium of $14.9 million on the senior notes and estimated accrued interest and fees of $38.1 million, leaving approximately $257.0 million for general corporate purposes. The Company expects the loss on extinguishment of debt related to this refinancing to be between $14 million and $17 million. The Company estimates that its cash interest expense will be reduced initially by approximately $2.0 million annually due to the lower interest rate on the 4.875% senior notes due 2024 and the reduction of the interest rate on the term loan B facility from LIBOR plus 2.75% per annum subject to a LIBOR floor of 0.75% to LIBOR plus 2.5% with no LIBOR floor.
Amended Senior Secured Credit Facility
The amended senior secured credit facility provides for (i) a $190 million term loan A facility with a maturity of five years, (ii) a $975 million term loan B facility with a maturity of seven years and (iii) a $365 million revolving credit facility with a maturity of five years. In addition, subject to certain conditions, the Company has the right to increase such facilities by an amount equal to the sum of $625 million and the aggregate principal amount of voluntary prepayments of the term B loans and permanent reductions of the revolving credit facility commitments, in each case, other than from proceeds of long-term indebtedness, and additional amounts so long as the senior secured leverage ratio calculated on a pro-forma basis (as defined in the agreement) is no greater than 3.25x. The revolving credit facility provides for borrowing up to $365 million with sublimits of up to (i) $150 million for the issuance of letters of credit, (ii) $50 million for swingline loans, (iii) $200 million for borrowings in Euros and British Pounds and (iv) $50 million for borrowings in one or more other approved currencies. The amended senior secured credit facility is secured by a first priority lien on substantially all of the tangible and intangible personal property of the Company and the domestic subsidiaries that are guarantors, and by a pledge of substantially all of the shares of stock, partnership interests and limited liability company interests of the Company’s direct and indirect domestic subsidiaries and 65% of each class of capital stock of any first-tier foreign subsidiaries, subject to certain exceptions.
The interest rates per annum applicable to revolving credit facility loans and the term loan A under the amended senior secured credit facility are, at the Company’s option, equal to either LIBOR plus 2.25% or a base rate plus 1.25%, subject to stepdowns based on the Company’s net leverage ratio. The interest rates per annum applicable to the term loan B are, at the Company’s option, equal to either LIBOR plus 2.50% or a base rate plus 1.50%. The Company is required to pay a commitment fee of 0.5% per year on the undrawn portion available under the revolving credit facility, subject to a stepdown based on the Company’s net leverage ratio, and variable fees on outstanding letters of credit.
For the term loan A, the Company is required to make quarterly payments ranging from $2.4 million to $28.5 million with the balance due at maturity in October 2021. For the term loan B, the Company is required to make quarterly payments of $2.4 million with the balance due at maturity in October 2023. The Company is also required to make mandatory prepayments of the loans under the credit agreement, subject to specified exceptions, from excess cash flow and with the proceeds of asset sales, debt issuances and specified other events.
4.875% Senior Notes
The $575 million senior notes due 2024 bear interest at 4.875%, which is payable semi-annually in cash in arrears on May 1 and November 1 of each year beginning on May 1, 2017, and will mature on November 1, 2024. The Company may redeem some or all of the notes, at any time prior to November 1, 2019, at a price equal to 100% of the aggregate principal amount, plus any accrued and unpaid interest to the date of redemption, plus a ‘make-whole’ premium. The Company may redeem up to 35% of the aggregate principal amount of the notes from the proceeds of certain equity offerings prior to November 1, 2019, at a price equal to 104.875% of the aggregate principal amount, plus accrued and unpaid interest thereon, if any, to the date of redemption. In addition, on or after November 1, 2019, the Company may redeem some or all of the notes at any time at the redemption prices specified in the indenture governing the notes, plus any accrued and unpaid interest to the date of redemption. The Company must make an offer to redeem the notes at 101% of their aggregate principal amount, plus accrued and unpaid interest to the repurchase date, if it experiences certain defined changes of control.

   



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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
“Live Nation” (which may be referred to as the “Company,” “we,” “us” or “our”) means Live Nation Entertainment, Inc. and its subsidiaries, or one of our segments or subsidiaries, as the context requires. You should read the following discussion of our financial condition and results of operations together with the unaudited consolidated financial statements and notes to the financial statements included elsewhere in this quarterly report.
Special Note About Forward-Looking Statements
Certain statements contained in this quarterly report (or otherwise made by us or on our behalf from time to time in other reports, filings with the SEC, news releases, conferences, internet postings or otherwise) that are not statements of historical fact constitute “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Exchange Act of 1934, as amended, notwithstanding that such statements are not specifically identified. Forward-looking statements include, but are not limited to, statements about our financial position, business strategy, competitive position, potential growth opportunities, potential operating performance improvements, the effects of competition, the effects of future legislation or regulations and plans and objectives of our management for future operations. We have based our forward-looking statements on our beliefs and assumptions considering the information available to us at the time the statements are made. Use of the words “may,” “should,” “continue,” “plan,” “potential,” “anticipate,” “believe,” “estimate,” “expect,” “intend,” “outlook,” “could,” “target,” “project,” “seek,” “predict,” or variations of such words and similar expressions are intended to identify forward-looking statements but are not the exclusive means of identifying such statements.
Forward-looking statements are not guarantees of future performance and are subject to risks and uncertainties that could cause actual results to differ materially from those in such statements. Factors that could cause actual results to differ from those discussed in the forward-looking statements include, but are not limited to, those set forth below under Part II Item 1A.—Risk Factors, in Part I Item IA.—Risk Factors of our 2015 Annual Report on Form 10-K, as well as other factors described herein or in our annual, quarterly and other reports we file with the SEC (collectively, “cautionary statements”). Based upon changing conditions, should any one or more of these risks or uncertainties materialize, or should any underlying assumptions prove incorrect, actual results may vary materially from those described in any forward-looking statements. All subsequent written and oral forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by the applicable cautionary statements. We do not intend to update these forward-looking statements, except as required by applicable law.
Executive Overview
In the third quarter of 2016, our total revenue increased by $547 million, or 21%, on a reported basis as compared to last year, or $593 million, a 23% increase, without the impact of changes in foreign exchange rates. The revenue increase was largely driven by growth in our Concerts segment due to the increase in the number of events and fans. All of our segments reported revenue growth in the quarter as a result of our highest third quarter concerts attendance ever, higher primary and secondary ticket sales in our Ticketing business and continued growth of our Sponsorship & Advertising business. For the first nine months of 2016, our total revenue grew $1,048 million, or 19%, on a reported basis as compared to last year, or $1,139 million, a 21% increase, without the impact of changes in foreign exchange rates. Our three largest segments also delivered revenue increases in the first nine months of the year, underscoring the continued success of our strategic initiatives and the underlying health of the live event and ticketing businesses. Further indicative of our success in executing our growth plan, operating income has improved by 35% year-over-year. As the leading global live event and ticketing company, we believe that we are well-positioned to provide the best service to artists, teams, fans and venues and therefore drive growth across all our businesses and that by leveraging our leadership position in the entertainment industry to reach fans through the live concert experience, we will sell more tickets and grow our Sponsorship & Advertising segment revenue.
Our Concerts segment revenue for the quarter increased by $505 million, or 25%, on a reported basis as compared to last year, or $542 million, a 27% increase, without the impact of changes in foreign exchange rates. Overall, attendance at our shows increased by 16% in the third quarter of 2016 as compared to last year. This increase was partly due to significant stadium activity in both North America and Europe with shows by artists including Beyoncé, Coldplay, and Guns N’ Roses. Our amphitheater business in North America had a very strong quarter, growing year-over-year attendance by 13% to almost 11.5 million fans in the quarter. There was an 8% increase in our North America amphitheater ancillary revenue per fan in the quarter as we continued to see the various food and beverage initiatives we began rolling out at our venues this year gain popularity and traction. These include “Grab and Go” options, focused wine programs, and specialty branded restaurants. Attendance at our festivals was up 18% in the quarter, partly due to the shift of some of our biggest events, such as the Rock Werchter festival in Belgium, from the second quarter in 2015 to the third quarter in 2016. However, we also had significant increases in attendance and operating results at festivals in North America as well as our Leeds and V festivals in the United Kingdom. Our Concerts segment operating results for the quarter exceeded last year and this was again largely driven by the high volume of stadium, amphitheater, and festival activity as well as our new onsite initiatives.

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For the first nine months, our Concerts segment was the largest contributor to our overall revenue growth, with an increase of $892 million, or 23%, on a reported basis as compared to last year, or $960 million, a 25% increase, without the impact of changes in foreign exchange rates. This higher revenue was partly due to our stadium activity doubling on a global basis year-over-year, both in terms of the number of events and fans. Our amphitheater business also had strong revenue growth in 2016, driven by higher attendance and ancillary products. We are particularly encouraged by the response to our concessions initiatives and plan to continue rolling out new technology to enhance speed of service and customer convenience as well as elevated food and beverage offerings. For the first nine months of the year, our ancillary revenue per fan increased by 9% over last year in our North America amphitheaters. Year-to-date, there has also been a 16% increase in the overall number of fans attending our shows as compared to 2015. Operating income for the first nine months of the year was up due to the higher number of shows and fans in stadiums, improved results for our North America festivals, and strong growth in our amphitheaters. Internationally, our new Germany promotion business has delivered strong results during the first three quarters, increasing Concerts revenue and also creating opportunities elsewhere in our business. We will continue to look for expansion opportunities, both domestically and internationally, as well as ways to market our events more effectively, in order to continue to expand our fan base and geographic reach and to sell more tickets and advertising.
Our Sponsorship & Advertising segment revenue for the third quarter was up $10 million, or 8%, on a reported basis as compared to last year, or $12 million, a 10% increase, without the impact of changes in foreign exchange rates. Higher revenue resulted from new clients, growth in our online business and increased festival sponsorship, which also improved our operating income. For the first nine months, Sponsorship & Advertising revenue was up $29 million, or 11%, on a reported basis as compared to last year, or $34 million, a 13% increase, without the impact of changes in foreign exchange rates, which also drove improved operating income. Our focus on expanding our amphitheater and festival products with new VIP, mobile app, and social media offerings in North America as well as adding new sales categories has contributed to this growth. We believe that our extensive on-site and online reach, global venue distribution network, artist relationships and ticketing operations are the key to securing long-term sponsorship agreements with major brands, and we plan to expand these assets while extending further into new markets internationally.
Our Ticketing segment revenue for the third quarter increased by $30 million, or 7%, on a reported basis as compared to last year, or $34 million, an 8% increase, without the impact of changes in foreign exchange rates. This increase was due to a 3% growth in primary ticket sales as well as a 12% increase in gross transaction value, or GTV, from our resale ticketing business globally, driven by both concerts and arts tickets. We delivered historically high revenue and ticket sales for our Ticketing segment in the third quarter, driven by high demand for concert tickets and continued positive fan response to our integrated ticketing platform of primary and resale tickets which drove higher operating results for the quarter.
For the first nine months, Ticketing revenue was up $144 million, or 12%, on a reported basis as compared to last year, or $158 million, a 14% increase, without the impact of changes in foreign exchange rates, driven by both higher primary ticket sales and our expanding resale business which also led to increased operating results and a 13% increase in our global GTV. In our primary business, we have sold 123 million tickets worldwide for the first nine months, a 6% increase over last year. Resale GTV grew by 32% in the same period, with increases in both our North America and Europe sales as the number of events activated on our TM+ product increased by 13%. In addition, we launched our secondary business in Sweden, Finland and South Africa as we continue to expand our resale business. In the first nine months of the year, we made several improvements to our apps which drove a 44% increase in app installs. We also continued to see growth in our mobile ticket sales with an increase of 38% in the first nine months of the year and they now represent 27% of our total ticket sales. Internationally, we have seen strong growth in ticket sales in Germany as a result of the launch of our concert promotion business in that country. As we roll out new tools via our TM One platform, we are seeing encouraging rates of adoption and positive feedback, helping to keep our client net retention over 100%. We will continue to implement new features to drive further expansion of mobile ticket transactions and invest in initiatives aimed at improving the ticket search, purchase and transfer process which we expect will attract more ticket buyers and enhance the overall fan and venue client experience.
Our Artist Nation segment revenue for the third quarter increased $14 million, or 10%, on a reported basis as compared to last year, or $16 million, a 12% increase, without the impact of changes in foreign exchange rates, due largely to the acquisition of artist management businesses as well as event production services. For the first nine months of the year, Artist Nation revenue increased $10 million, or 3%, on a reported basis as compared to last year, or $14 million, a 5% increase, without the impact of changes in foreign exchange rates, with changes in timing of management clients’ activity and events. For the first nine months, Artist Nation’s operating results were down primarily due to increased amortization expense in the period from acquisitions. Our Artist Nation segment is focused on providing best-in-class service to its existing clients as well as developing new relationships with top artists and extending the various services it provides to its clients.
We continue to be optimistic about the long-term potential of our company and are focused on the key elements of our business model - expand our concert platform, drive conversion of ticket sales, including through social and mobile channels, sell more tickets for our Ticketmaster clients, deliver to our fans an integrated offering of primary and secondary tickets, grow

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our sponsorship and online revenue, drive cost efficiencies and continue to align our artist management group with our other core businesses.
Our History
We were incorporated in Delaware on August 2, 2005 in preparation for the contribution and transfer by Clear Channel Communications, Inc. of substantially all of its entertainment assets and liabilities to us. We completed the separation on December 21, 2005, and became a publicly traded company on the New York Stock Exchange trading under the symbol “LYV.”
On January 25, 2010, we merged with Ticketmaster Entertainment LLC and it became a wholly-owned subsidiary of Live Nation. Effective with the merger, Live Nation, Inc. changed its name to Live Nation Entertainment, Inc.
Segment Overview
Our reportable segments are Concerts, Sponsorship & Advertising, Ticketing, and Artist Nation.
Concerts
Our Concerts segment principally involves the global promotion of live music events in our owned or operated venues and in rented third-party venues, the operation and management of music venues, the production of music festivals across the world and the creation of associated content. While our Concerts segment operates year-round, we experience higher revenue during the second and third quarters due to the seasonal nature of shows at our outdoor amphitheaters and festivals, which primarily occur from May through October. Revenue and related costs for events are generally deferred and recognized when the event occurs. All advertising costs incurred during the year for shows in future years are expensed at the end of the year.
Concerts direct operating expenses include artist fees, event production costs, show-related marketing and advertising expenses, along with other costs.
To judge the health of our Concerts segment, we primarily monitor the number of confirmed events in our network of owned or operated and third-party venues, talent fees, average paid attendance and advance ticket sales. In addition, at our owned or operated venues and festivals, we monitor ancillary revenue per fan and premium ticket sales. For business that is conducted in foreign markets, we also compare the operating results from our foreign operations to prior periods without the impact of changes in foreign exchange rates.
Sponsorship & Advertising
Our Sponsorship & Advertising segment employs a sales force that creates and maintains relationships with sponsors through a combination of strategic, international, national and local opportunities that allow businesses to reach customers through our concerts, venue, artist relationship and ticketing assets, including advertising on our websites. We drive increased advertising scale to further monetize our concerts platform through rich media offerings including advertising associated with live streaming and music-related original content. We work with our corporate clients to help create marketing programs that drive their business goals and connect their brands directly with fans and artists. We also develop, book and produce custom events or programs for our clients’ specific brands which are typically experienced exclusively by the clients’ consumers. These custom events can involve live music events with talent and media, using both online and traditional outlets. We typically experience higher revenue in the second and third quarters, as a large portion of sponsorships are associated with shows at our outdoor amphitheaters and festivals, which primarily occur from May through October.
Direct operating expenses include fulfillment costs related to our sponsorship programs, along with other costs.
To judge the health of our Sponsorship & Advertising segment, we primarily review the revenue generated through sponsorship arrangements, the percentage of expected revenue under contract and online advertising revenue through our websites. For business that is conducted in foreign markets, we also compare the operating results from our foreign operations to prior periods without the impact of changes in foreign exchange rates.

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Ticketing
Our Ticketing segment is primarily an agency business that sells tickets for events on behalf of our clients and retains a service charge for these services. Gross Transaction Value, or GTV, represents the total amount of the transaction related to a ticket sale and includes the face value of the ticket as well as the service charge. Service charges are generally based on a percentage of the face value or a fixed fee. We sell tickets through websites, mobile apps, ticket outlets and telephone call centers. Our ticketing sales are impacted by fluctuations in the availability of events for sale to the public, which may vary depending upon scheduling by our clients. We also offer ticket resale services, sometimes referred to as secondary ticketing, primarily through our integrated inventory platform, league/team platforms and other platforms internationally. Our Ticketing segment also manages our online activities including enhancements to our websites and product offerings. Through our websites, we sell tickets to our own events as well as tickets for our clients and provide event information. Revenue related to ticketing service charges is recognized when the ticket is sold except for our own events where our concert promoters control ticketing and then the revenue is deferred and recognized as the event occurs.
Ticketing direct operating expenses include ticketing client royalties and credit card fees, along with other costs.
To judge the health of our Ticketing segment, we primarily review the gross transaction value and the number of tickets sold through our primary and secondary ticketing operations, the number of clients renewed or added and the average royalty rate paid to clients who use our ticketing services. In addition, we review the number of visits to our websites, the overall number of customers in our database, the number of tickets sold via mobile and the number of app installs. For business that is conducted in foreign markets, we also compare the operating results from our foreign operations to prior periods without the impact of changes in foreign exchange rates.
Artist Nation
Our Artist Nation segment primarily provides management services to music artists and other clients in exchange for a commission on the earnings of these artists. Our Artist Nation segment also provides event production services and creates and sells merchandise for music artists at live performances, to retailers and directly to consumers via the internet. Revenue earned from our Artist Nation segment is impacted to a large degree by the touring schedules of the artists we represent and generally we experience higher revenue during the second and third quarters as the period from May through October tends to be a popular time for touring events.
Artist Nation direct operating expenses include merchandise royalties and event production costs, along with other costs.
To judge the health of our Artist Nation segment, we primarily review the number of major clients represented. For business that is conducted in foreign markets, we also compare the operating results from our foreign operations to prior periods without the impact of changes in foreign exchange rates.

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Key Operating Metrics

 
Three Months Ended 
 September 30,
 
Nine Months Ended 
 September 30,
 
2016
 
2015
 
2016
 
2015
 
(in thousands except estimated events)
Concerts (1)
 
 
 
 
 
 
 
Estimated events:
 
 
 
 
 
 
 
North America
4,955

 
4,438

 
12,848

 
12,257

International
1,207

 
1,467

 
5,800

 
5,135

Total estimated events
6,162

 
5,905

 
18,648

 
17,392

Estimated fans:
 
 
 
 
 
 
 
North America
22,161

 
18,674

 
39,296

 
34,896

International
5,808

 
5,533

 
16,724

 
13,425

Total estimated fans
27,969

 
24,207

 
56,020

 
48,321

Ticketing (2)
 
 
 
 
 
 
 
Number of tickets sold
42,579

 
41,473

 
123,489

 
116,206

 _________

(1) 
Events generally represent a single performance by an artist. Fans generally represent the number of people who attend an event. Festivals are counted as one event in the quarter in which the festival begins, but the number of fans is based on the days the fans were present at the festival and thus can be reported across multiple quarters. Events and fan attendance metrics are estimated each quarter.
(2) 
The number of tickets sold includes primary tickets only. This metric includes tickets sold during the period regardless of event timing except for our own events where our concert promoters control ticketing which are reported as the events occur. The total number of tickets sold reported above for the three months ended September 30, 2016 and 2015 excludes approximately 68 million and 69 million, respectively, and for the nine months ended September 30, 2016 and 2015 excludes approximately 205 million and 202 million, respectively, of tickets sold using our Ticketmaster systems, through season seat packages and our venue clients’ box offices, for which we do not receive a fee.
Non-GAAP Measures
Reconciliation of Segment Adjusted Operating Income (Loss)
AOI is a non-GAAP financial measure that we define as operating income (loss) before acquisition expenses (including transaction costs, changes in the fair value of acquisition-related contingent consideration obligations, acquisition-related severance and compensation), depreciation and amortization (including goodwill impairment), loss (gain) on disposal of operating assets and certain stock-based compensation expense. We use AOI to evaluate the performance of our operating segments. We believe that information about AOI assists investors by allowing them to evaluate changes in the operating results of our portfolio of businesses separate from non-operational factors that affect net income, thus providing insights into both operations and the other factors that affect reported results. AOI is not calculated or presented in accordance with GAAP. A limitation of the use of AOI as a performance measure is that it does not reflect the periodic costs of certain amortizing assets used in generating revenue in our business. Accordingly, AOI should be considered in addition to, and not as a substitute for, operating income (loss), net income (loss), and other measures of financial performance reported in accordance with GAAP. Furthermore, this measure may vary among other companies; thus, AOI as presented herein may not be comparable to similarly titled measures of other companies.
AOI Margin
AOI margin is a non-GAAP financial measure that we calculate by dividing AOI by revenue. We use AOI margin to evaluate the performance of our operating segments. We believe that information about the AOI margin assists investors by allowing them to evaluate changes in the operating results of our portfolio of businesses separate from non-operational factors that affect net income, thus providing insights into both operations and the other factors that affect reported results. AOI margin is not calculated or presented in accordance with GAAP. A limitation of the use of AOI margin as a performance measure is that it does not reflect the periodic costs of certain amortizing assets used in generating revenue in our business. Accordingly, the AOI margin should be considered in addition to, and not as a substitute for, operating income (loss) margin, net income (loss) margin, and other measures of financial performance reported in accordance with GAAP. Furthermore, this measure may vary

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among other companies; thus, AOI margin as presented herein may not be comparable to similarly titled measures of other companies.
The following table sets forth the reconciliation of adjusted operating income (loss) to operating income (loss):
 
Adjusted
operating
income
(loss)
 
Stock-
based
compensation
expense
 
Loss (gain)
on disposal of
operating
assets
 
Depreciation
and
amortization
 
Acquisition
expenses
 
Operating
income
(loss)
 
 (in thousands)
Three Months Ended September 30, 2016
 
 
 
 
 
 
 
 
Concerts
$
119,483

 
$
1,781

 
$
176

 
$
34,002

 
$
(2,946
)
 
$
86,470

Sponsorship & Advertising
100,215

 
305

 

 
4,448

 

 
95,462

Ticketing
101,701

 
744

 
13

 
47,113

 
500

 
53,331

Artist Nation
11,435

 
880

 
65

 
18,187

 
665

 
(8,362
)
Other and Eliminations
(2,862
)
 
17

 

 
360

 
25

 
(3,264
)
Corporate
(27,216
)
 
4,366

 
(1
)
 
752

 
18

 
(32,351
)
Total
$
302,756

 
$
8,093

 
$
253

 
$
104,862

 
$
(1,738
)
 
$
191,286

Three Months Ended September 30, 2015
 
 
 
 
 
 
 
 
 
 
Concerts
$
85,842

 
$
1,633

 
$
250

 
$
36,075

 
$
3,243

 
$
44,641

Sponsorship & Advertising
95,783

 
375

 

 
2,525

 

 
92,883

Ticketing
97,063

 
681

 
188

 
46,533

 
656

 
49,005

Artist Nation
12,885

 
1,195

 
187

 
13,152

 
324

 
(1,973
)
Other and Eliminations
(91
)
 

 

 
(472
)
 

 
381

Corporate
(25,840
)
 
4,148

 

 
1,241

 
198

 
(31,427
)
Total
$
265,642

 
$
8,032

 
$
625

 
$
99,054

 
$
4,421

 
$
153,510

Nine Months Ended September 30, 2016
 
 
 
 
 
 
 
 
 
 
Concerts
$
166,404

 
$
5,522

 
$
(182
)
 
$
101,122

 
$
3,828

 
$
56,114

Sponsorship & Advertising
194,667

 
995

 

 
13,777

 

 
179,895

Ticketing
271,298

 
2,327

 
44

 
132,789

 
720

 
135,418

Artist Nation
5,958

 
3,082

 
20

 
44,891

 
(255
)
 
(41,780
)
Other and Eliminations
(8,828
)
 
29

 

 
136

 
207

 
(9,200
)
Corporate
(72,303
)
 
13,282

 
117

 
2,526

 
64

 
(88,292
)
Total
$
557,196

 
$
25,237

 
$
(1
)
 
$
295,241

 
$
4,564

 
$
232,155

Nine Months Ended September 30, 2015
 
 
 
 
 
 
 
 
 
 
Concerts
$
111,479

 
$
5,471

 
$
421

 
$
105,289

 
$
4,018

 
$
(3,720
)
Sponsorship & Advertising
181,525

 
1,244

 

 
6,738

 

 
173,543

Ticketing
248,666

 
2,186

 
9

 
125,390

 
1,251

 
119,830

Artist Nation
4,895

 
3,753

 
187

 
33,943

 
1,434

 
(34,422
)
Other and Eliminations
(1,834
)
 

 

 
(1,457
)
 

 
(377
)
Corporate
(67,750
)
 
12,940

 
(29
)
 
2,263

 
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