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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
____________________________________
Form 10-Q
____________________________________
|
| |
☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended June 30, 2019or
|
| |
☐ | 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)
______________________________________________________________
|
| | | | |
Securities registered pursuant to Section 12(b) of the Act: |
Title of each class | | Trading Symbol(s) | | Name of each exchange on which registered |
Common stock, $.01 Par Value Per Share | | LYV | | New York Stock Exchange |
(Includes Preferred Stock Purchase Rights) | | | | |
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 every Interactive Data File required to be submitted 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 such files). Yes x No ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
|
| | | | | |
Large Accelerated Filer | x | | Accelerated Filer | | ¨ |
| | | | | |
Non-accelerated Filer | ¨ | | Smaller Reporting Company | | ☐ |
| | | Emerging Growth Company | | ☐ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. | | ¨ |
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 July 18, 2019, there were 213,147,303 outstanding shares of the registrant’s common stock, $0.01 par value per share, including 2,642,564 shares of unvested restricted stock awards and excluding 408,024 shares held in treasury.
LIVE NATION ENTERTAINMENT, INC.
INDEX TO FORM 10-Q
|
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| | Page |
PART I—FINANCIAL INFORMATION | |
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| | |
| | |
| | |
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| | |
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| | |
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PART II—OTHER INFORMATION | |
| | |
| | |
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| | |
|
| |
GLOSSARY OF KEY TERMS |
AOCI | Accumulated other comprehensive income (loss) |
AOI | Adjusted operating income (loss) |
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 | Our ticketing business |
PART I—FINANCIAL INFORMATION
Item 1. Financial Statements
LIVE NATION ENTERTAINMENT, INC.
CONSOLIDATED BALANCE SHEETS (UNAUDITED) |
| | | | | | | |
| June 30, 2019 | | December 31, 2018 |
| (in thousands) |
ASSETS | | | |
Current assets | | | |
Cash and cash equivalents | $ | 2,270,341 |
| | $ | 2,371,540 |
|
Accounts receivable, less allowance of $35,215 and $34,225, respectively | 1,096,754 |
| | 829,320 |
|
Prepaid expenses | 858,469 |
| | 597,866 |
|
Restricted cash | 14,638 |
| | 6,663 |
|
Other current assets | 44,685 |
| | 42,685 |
|
Total current assets | 4,284,887 |
| | 3,848,074 |
|
Property, plant and equipment | | | |
Land, buildings and improvements | 1,101,316 |
| | 984,558 |
|
Computer equipment and capitalized software | 782,994 |
| | 742,737 |
|
Furniture and other equipment | 356,597 |
| | 329,607 |
|
Construction in progress | 129,418 |
| | 160,028 |
|
| 2,370,325 |
| | 2,216,930 |
|
Less accumulated depreciation | 1,344,857 |
| | 1,270,337 |
|
| 1,025,468 |
| | 946,593 |
|
Operating lease assets | 1,186,909 |
| | — |
|
Intangible assets | | | |
Definite-lived intangible assets, net | 753,490 |
| | 661,451 |
|
Indefinite-lived intangible assets | 368,846 |
| | 368,854 |
|
Goodwill | 1,925,725 |
| | 1,822,943 |
|
Long-term advances | 575,787 |
| | 420,891 |
|
Other long-term assets | 408,275 |
| | 428,080 |
|
Total assets | $ | 10,529,387 |
| | $ | 8,496,886 |
|
LIABILITIES AND EQUITY | | | |
Current liabilities | | | |
Accounts payable, client accounts | $ | 989,570 |
| | $ | 1,037,162 |
|
Accounts payable | 170,274 |
| | 90,253 |
|
Accrued expenses | 1,339,881 |
| | 1,245,465 |
|
Deferred revenue | 1,890,997 |
| | 1,227,797 |
|
Current portion of long-term debt, net | 55,409 |
| | 82,142 |
|
Current portion of operating lease liabilities | 120,065 |
| | — |
|
Other current liabilities | 39,527 |
| | 67,047 |
|
Total current liabilities | 4,605,723 |
| | 3,749,866 |
|
Long-term debt, net | 2,708,642 |
| | 2,732,878 |
|
Long-term operating lease liabilities | 1,138,893 |
| | — |
|
Deferred income taxes | 169,985 |
| | 137,067 |
|
Other long-term liabilities | 113,060 |
| | 204,977 |
|
Commitments and contingent liabilities |
|
| |
|
|
Redeemable noncontrolling interests | 385,328 |
| | 329,355 |
|
Stockholders’ equity | | | |
Common stock | 2,101 |
| | 2,091 |
|
Additional paid-in capital | 2,296,010 |
| | 2,268,209 |
|
Accumulated deficit | (968,312 | ) | | (1,019,223 | ) |
Cost of shares held in treasury | (6,865 | ) | | (6,865 | ) |
Accumulated other comprehensive loss | (148,791 | ) | | (145,231 | ) |
Total Live Nation stockholders’ equity | 1,174,143 |
| | 1,098,981 |
|
Noncontrolling interests | 233,613 |
| | 243,762 |
|
Total equity | 1,407,756 |
| | 1,342,743 |
|
Total liabilities and equity | $ | 10,529,387 |
| | $ | 8,496,886 |
|
See Notes to Consolidated Financial Statements
2
LIVE NATION ENTERTAINMENT, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
|
| | | | | | | | | | | | | | | | |
| Three Months Ended June 30, | | Six Months Ended June 30, | |
| 2019 | | 2018 | | 2019 | | 2018 | |
| (in thousands except share and per share data) | |
Revenue | $ | 3,157,009 |
| | $ | 2,868,315 |
| | $ | 4,884,837 |
| | $ | 4,350,699 |
| |
Operating expenses: | | | | | | | | |
Direct operating expenses | 2,327,414 |
| | 2,135,107 |
| | 3,479,018 |
| | 3,067,191 |
| |
Selling, general and administrative expenses | 513,497 |
| | 476,438 |
| | 978,363 |
| | 911,049 |
| |
Depreciation and amortization | 103,826 |
| | 89,785 |
| | 202,738 |
| | 177,656 |
| |
Loss (gain) on disposal of operating assets | (101 | ) | | 108 |
| | (248 | ) | | 146 |
| |
Corporate expenses | 40,787 |
| | 32,152 |
| | 77,243 |
| | 65,962 |
| |
Operating income | 171,586 |
| | 134,725 |
| | 147,723 |
| | 128,695 |
| |
Interest expense | 36,792 |
| | 35,519 |
| | 73,307 |
| | 68,203 |
| |
Interest income | (3,818 | ) | | (2,705 | ) | | (6,366 | ) | | (3,888 | ) | |
Equity in loss (earnings) of nonconsolidated affiliates | (5,828 | ) | | 313 |
| | (8,972 | ) | | (3,402 | ) | |
Other expense (income), net | (430 | ) | | 6,443 |
| | (3,833 | ) | | 6,771 |
| |
Income before income taxes | 144,870 |
| | 95,155 |
| | 93,587 |
| | 61,011 |
| |
Income tax expense | 28,750 |
| | 11,799 |
| | 32,708 |
| | 18,683 |
| |
Net income | 116,120 |
| | 83,356 |
| | 60,879 |
| | 42,328 |
| |
Net income attributable to noncontrolling interests | 12,765 |
| | 13,997 |
| | 9,968 |
| | 6,875 |
| |
Net income attributable to common stockholders of Live Nation | $ | 103,355 |
| | $ | 69,359 |
| | $ | 50,911 |
| | $ | 35,453 |
| |
| | | | | | | | |
Basic net income per common share available to common stockholders of Live Nation | $ | 0.43 |
| | $ | 0.25 |
| | $ | 0.12 |
| | $ | 0.01 |
| |
Diluted net income per common share available to common stockholders of Live Nation | $ | 0.41 |
| | $ | 0.24 |
| | $ | 0.11 |
| | $ | 0.01 |
| |
| | | | | | | | |
Weighted average common shares outstanding: | | | | | | | | |
Basic | 209,998,048 |
| | 207,331,781 |
| | 209,456,196 |
| | 207,031,642 |
| |
Diluted | 219,977,612 |
| | 215,105,119 |
| | 219,107,351 |
| | 215,075,203 |
| |
| | | | | | | | |
| | | | | | | | |
Reconciliation to net loss available to common stockholders of Live Nation: | | | |
Net income attributable to common stockholders of Live Nation | $ | 103,355 |
| | $ | 69,359 |
| | $ | 50,911 |
| | $ | 35,453 |
| |
Accretion of redeemable noncontrolling interests | (13,515 | ) | | (17,172 | ) | | (25,827 | ) | | (33,557 | ) | |
Net income available to common stockholders of Live Nation—basic | 89,840 |
| | 52,187 |
| | 25,084 |
| | 1,896 |
| |
Convertible debt interest, net of tax | 86 |
| | — |
| | — |
| | — |
| |
Net income available to common stockholders of Live Nation—diluted | $ | 89,926 |
| | $ | 52,187 |
| | $ | 25,084 |
| | $ | 1,896 |
| |
| | | | | | | | |
See Notes to Consolidated Financial Statements
3
LIVE NATION ENTERTAINMENT, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(UNAUDITED)
|
| | | | | | | | | | | | | | | |
| Three Months Ended June 30, | | Six Months Ended June 30, |
| 2019 | | 2018 | | 2019 | | 2018 |
| (in thousands) |
Net income | $ | 116,120 |
| | $ | 83,356 |
| | $ | 60,879 |
| | $ | 42,328 |
|
Other comprehensive loss, net of tax: | | | | | | | |
Foreign currency translation adjustments | (671 | ) | | (33,557 | ) | | (3,560 | ) | | (17,295 | ) |
Comprehensive income | 115,449 |
| | 49,799 |
| | 57,319 |
| | 25,033 |
|
Comprehensive income attributable to noncontrolling interests | 12,765 |
| | 13,997 |
| | 9,968 |
| | 6,875 |
|
Comprehensive income attributable to common stockholders of Live Nation | $ | 102,684 |
| | $ | 35,802 |
| | $ | 47,351 |
| | $ | 18,158 |
|
See Notes to Consolidated Financial Statements
4
LIVE NATION ENTERTAINMENT, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
(UNAUDITED)
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Live Nation Stockholders’ Equity | | | | | | |
| | Common Shares Issued | | Common Stock | | Additional Paid-In Capital | | Accumulated Deficit | | Cost of Shares Held in Treasury | | Accumulated Other Comprehensive Income (Loss) | | Noncontrolling Interests | | Total Equity | | Redeemable Noncontrolling Interests |
| | (in thousands, except share data) | | (in thousands) |
Balances at March 31, 2019 | | 209,857,816 |
| | $ | 2,099 |
| | $ | 2,267,761 |
| | $ | (1,071,667 | ) | | $ | (6,865 | ) | | $ | (148,120 | ) | | $ | 197,186 |
| | $ | 1,240,394 |
| | $ | 343,029 |
|
Non-cash and stock-based compensation | | — |
| | — |
| | 11,754 |
| | — |
| | — |
| | — |
| | — |
| | 11,754 |
| | — |
|
Common stock issued under stock plans, net of shares withheld for employee taxes | | 60,223 |
| | — |
| | (959 | ) | | — |
| | — |
| | — |
| | — |
| | (959 | ) | | — |
|
Exercise of stock options, net of shares withheld for option cost and employee taxes | | 167,776 |
| | 2 |
| | 2,525 |
| | — |
| | — |
| | — |
| | — |
| | 2,527 |
| | — |
|
Conversion of convertible debt | | 824,328 |
| | — |
| | 28,586 |
| | — |
| | — |
| | — |
| | — |
| | 28,586 |
| | — |
|
Acquisitions | | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | 25,194 |
| | 25,194 |
| | 32,322 |
|
Purchases of noncontrolling interests | | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
|
Redeemable noncontrolling interests fair value adjustments | | — |
| | — |
| | (13,515 | ) | | — |
| | — |
| | — |
| | — |
| | (13,515 | ) | | 13,515 |
|
Contributions received | | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | 8,324 |
| | 8,324 |
| | — |
|
Cash distributions | | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | (6,172 | ) | | (6,172 | ) | | (7,317 | ) |
Other | | — |
| | — |
| | (142 | ) | | — |
| | — |
| | — |
| | (77 | ) | | (219 | ) | | 172 |
|
Comprehensive income (loss): | | | | | | | | | | | | | | | | | | |
Net income | | — |
| | — |
| | — |
| | 103,355 |
| | — |
| | — |
| | 9,158 |
| | 112,513 |
| | 3,607 |
|
Foreign currency translation adjustments | | — |
| | — |
| | — |
| | — |
| | — |
| | (671 | ) | | — |
| | (671 | ) | | — |
|
Balances at June 30, 2019 | | 210,910,143 |
| | $ | 2,101 |
| | $ | 2,296,010 |
| | $ | (968,312 | ) | | $ | (6,865 | ) | | $ | (148,791 | ) | | $ | 233,613 |
| | $ | 1,407,756 |
| | $ | 385,328 |
|
See Notes to Consolidated Financial Statements
5
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Live Nation Stockholders’ Equity | | | | | | |
| | Common Shares Issued | | Common Stock | | Additional Paid-In Capital | | Accumulated Deficit | | Cost of Shares Held in Treasury | | Accumulated Other Comprehensive Income (Loss) | | Noncontrolling Interests | | Total Equity | | Redeemable Noncontrolling Interests |
| | (in thousands, except share data) | | (in thousands) |
Balances at December 31, 2018 | | 209,135,581 |
| | $ | 2,091 |
| | $ | 2,268,209 |
| | $ | (1,019,223 | ) | | $ | (6,865 | ) | | $ | (145,231 | ) | | $ | 243,762 |
| | $ | 1,342,743 |
| | $ | 329,355 |
|
Non-cash and stock-based compensation | | — |
| | — |
| | 24,992 |
| | — |
| | — |
| | — |
| | — |
| | 24,992 |
| | — |
|
Common stock issued under stock plans, net of shares withheld for employee taxes | | 312,857 |
| | 3 |
| | (10,262 | ) | | — |
| | — |
| | — |
| | — |
| | (10,259 | ) | | — |
|
Exercise of stock options, net of shares withheld for option cost and employee taxes | | 637,377 |
| | 7 |
| | 10,192 |
| | — |
| | — |
| | — |
| | — |
| | 10,199 |
| | — |
|
Conversion of convertible debt | | 824,328 |
| | — |
| | 28,586 |
| | — |
| | — |
| | — |
| | — |
| | 28,586 |
| | — |
|
Acquisitions | | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | 26,168 |
| | 26,168 |
| | 39,303 |
|
Purchases of noncontrolling interests | | — |
| | — |
| | 270 |
| | — |
| | — |
| | — |
| | (270 | ) | | — |
| | (1,459 | ) |
Redeemable noncontrolling interests fair value adjustments | | — |
| | — |
| | (25,827 | ) | | — |
| | — |
| | — |
| | — |
| | (25,827 | ) | | 25,827 |
|
Contributions received | | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | 8,324 |
| | 8,324 |
| | — |
|
Cash distributions | | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | (52,115 | ) | | (52,115 | ) | | (11,258 | ) |
Other | | — |
| | — |
| | (150 | ) | | — |
| | — |
| | — |
| | (1,261 | ) | | (1,411 | ) | | 2,597 |
|
Comprehensive income (loss): | | | | | | | | | | | | | | | | | | |
Net income | | — |
| | — |
| | — |
| | 50,911 |
| | — |
| | — |
| | 9,005 |
| | 59,916 |
| | 963 |
|
Foreign currency translation adjustments | | — |
| | — |
| | — |
| | — |
| | — |
| | (3,560 | ) | | — |
| | (3,560 | ) | | — |
|
Balances at June 30, 2019 | | 210,910,143 |
| | $ | 2,101 |
| | $ | 2,296,010 |
| | $ | (968,312 | ) | | $ | (6,865 | ) | | $ | (148,791 | ) | | $ | 233,613 |
| | $ | 1,407,756 |
| | $ | 385,328 |
|
See Notes to Consolidated Financial Statements
6
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Live Nation Stockholders’ Equity | | | | | | |
| | Common Shares Issued | | Common Stock | | Additional Paid-In Capital | | Accumulated Deficit | | Cost of Shares Held in Treasury | | Accumulated Other Comprehensive Income (Loss) | | Noncontrolling Interests | | Total Equity | | Redeemable Noncontrolling Interests |
| | (in thousands, except share data) | | (in thousands) |
Balance at March 31, 2018 | | 207,634,062 |
| | $ | 2,076 |
| | $ | 2,348,118 |
| | $ | (1,113,378 | ) | | $ | (6,865 | ) | | $ | (92,280 | ) | | $ | 234,550 |
| | $ | 1,372,221 |
| | $ | 264,700 |
|
Non-cash and stock-based compensation | | — |
| | — |
| | 12,450 |
| | — |
| | — |
| | — |
| | — |
| | 12,450 |
| | — |
|
Common stock issued under stock plans, net of shares withheld for employee taxes | | 72,008 |
| | 1 |
| | (657 | ) | | — |
| | — |
| | — |
| | — |
| | (656 | ) | | — |
|
Exercise of stock options, net of shares withheld for option cost and employee taxes | | 163,765 |
| | 2 |
| | 2,930 |
| | — |
| | — |
| | — |
| | — |
| | 2,932 |
| | — |
|
Repurchase of convertible debt conversion feature | | — |
| | — |
| | (9,225 | ) | | — |
| | — |
| | — |
| | — |
| | (9,225 | ) | | — |
|
Acquisitions | | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | 8,955 |
| | 8,955 |
| | 11,689 |
|
Purchases of noncontrolling interests | | — |
| | — |
| | 1,143 |
| | — |
| | — |
| | — |
| | (1,143 | ) | | — |
| | 2 |
|
Redeemable noncontrolling interests fair value adjustments | | — |
| | — |
| | (16,924 | ) | | — |
| | — |
| | — |
| | — |
| | (16,924 | ) | | 16,924 |
|
Cash distributions | | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | (6,992 | ) | | (6,992 | ) | | (4,628 | ) |
Other | | — |
| | — |
| | (144 | ) | | — |
| | — |
| | — |
| | (2,467 | ) | | (2,611 | ) | | 78 |
|
Comprehensive income (loss): | | | | | | | | | | | | | | | | | | |
Net income | | — |
| | — |
| | — |
| | 69,359 |
| | — |
| | — |
| | 9,568 |
| | 78,927 |
| | 4,429 |
|
Foreign currency translation adjustments | | — |
| | — |
| | — |
| | — |
| | — |
| | (33,557 | ) | | — |
| | (33,557 | ) | | — |
|
Balance at June 30, 2018 | | 207,869,835 |
| | $ | 2,079 |
| | $ | 2,337,691 |
| | $ | (1,044,019 | ) | | $ | (6,865 | ) | | $ | (125,837 | ) | | $ | 242,471 |
| | $ | 1,405,520 |
| | $ | 293,194 |
|
See Notes to Consolidated Financial Statements
7
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Live Nation Stockholders’ Equity | | | | | | |
| | Common Shares Issued | | Common Stock | | Additional Paid-In Capital | | Accumulated Deficit | | Cost of Shares Held in Treasury | | Accumulated Other Comprehensive Income (Loss) | | Noncontrolling Interests | | Total Equity | | Redeemable Noncontrolling Interests |
| | (in thousands, except share data) | | (in thousands) |
Balance at December 31, 2017 | | 206,877,037 |
| | $ | 2,069 |
| | $ | 2,374,006 |
| | $ | (1,079,472 | ) | | $ | (6,865 | ) | | $ | (108,542 | ) | | $ | 236,948 |
| | $ | 1,418,144 |
| | $ | 244,727 |
|
Non-cash and stock-based compensation | | — |
| | — |
| | 23,320 |
| | — |
| | — |
| | — |
| | — |
| | 23,320 |
| | — |
|
Common stock issued under stock plans, net of shares withheld for employee taxes | | 359,817 |
| | 4 |
| | (8,606 | ) | | — |
| | — |
| | — |
| | — |
| | (8,602 | ) | | — |
|
Exercise of stock options, net of shares withheld for option cost and employee taxes | | 632,981 |
| | 6 |
| | 10,848 |
| | — |
| | — |
| | — |
| | — |
| | 10,854 |
| | — |
|
Fair value of convertible debt conversion feature, net of issuance costs | | — |
| | — |
| | 62,624 |
| | — |
| | — |
| | — |
| | — |
| | 62,624 |
| | — |
|
Repurchase of convertible debt conversion feature | | — |
| | — |
| | (92,641 | ) | | — |
| | — |
| | — |
| | — |
| | (92,641 | ) | | — |
|
Acquisitions | | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | 22,404 |
| | 22,404 |
| | 21,870 |
|
Purchases of noncontrolling interests | | — |
| | — |
| | 1,709 |
| | — |
| | — |
| | — |
| | (1,636 | ) | | 73 |
| | (356 | ) |
Redeemable noncontrolling interests fair value adjustments | | — |
| | — |
| | (33,456 | ) | | — |
| | — |
| | — |
| | — |
| | (33,456 | ) | | 33,456 |
|
Contributions received | | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | 4,900 |
| | 4,900 |
| | — |
|
Cash distributions | | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | (23,269 | ) | | (23,269 | ) | | (7,874 | ) |
Other | | — |
| | — |
| | (113 | ) | | — |
| | — |
| | — |
| | (2,458 | ) | | (2,571 | ) | | 78 |
|
Comprehensive income (loss): | | | | | | | | | | | | | | | | | | |
Net income | | — |
| | — |
| | — |
| | 35,453 |
| | — |
| | — |
| | 5,582 |
| | 41,035 |
| | 1,293 |
|
Foreign currency translation adjustments | | — |
| | — |
| | — |
| | — |
| | — |
| | (17,295 | ) | | — |
| | (17,295 | ) | | — |
|
Balance at June 30, 2018 | | 207,869,835 |
| | $ | 2,079 |
| | $ | 2,337,691 |
| | $ | (1,044,019 | ) | | $ | (6,865 | ) | | $ | (125,837 | ) | | $ | 242,471 |
| | $ | 1,405,520 |
| | $ | 293,194 |
|
See Notes to Consolidated Financial Statements
8
LIVE NATION ENTERTAINMENT, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
|
| | | | | | | |
| Six Months Ended June 30, |
| 2019 | | 2018 |
| (in thousands) |
CASH FLOWS FROM OPERATING ACTIVITIES | | | |
Net income | $ | 60,879 |
| | $ | 42,328 |
|
Reconciling items: | | | |
Depreciation | 106,015 |
| | 85,493 |
|
Amortization | 96,723 |
| | 92,163 |
|
Amortization of non-recoupable ticketing contract advances | 34,267 |
| | 36,285 |
|
Amortization of debt issuance costs and discounts, net | 10,828 |
| | 9,298 |
|
Non-cash compensation expense | 24,926 |
| | 22,946 |
|
Other, net | 11,902 |
| | 5,694 |
|
Changes in operating assets and liabilities, net of effects of acquisitions and dispositions: | | | |
Increase in accounts receivable | (256,575 | ) | | (229,016 | ) |
Increase in prepaid expenses and other assets | (380,285 | ) | | (604,699 | ) |
Increase in accounts payable, accrued expenses and other liabilities | 5,880 |
| | 112,065 |
|
Increase in deferred revenue | 578,763 |
| | 947,269 |
|
Net cash provided by operating activities | 293,323 |
| | 519,826 |
|
CASH FLOWS FROM INVESTING ACTIVITIES | | | |
Advances of notes receivable | (13,931 | ) | | (69,346 | ) |
Collection of notes receivable | 5,337 |
| | 14,481 |
|
Investments made in nonconsolidated affiliates | (28,931 | ) | | (38,201 | ) |
Purchases of property, plant and equipment | (135,940 | ) | | (100,641 | ) |
Cash paid for acquisitions, net of cash acquired | (87,595 | ) | | (93,256 | ) |
Purchases of intangible assets | (20,614 | ) | | (27,620 | ) |
Other, net | 20 |
| | 188 |
|
Net cash used in investing activities | (281,654 | ) | | (314,395 | ) |
CASH FLOWS FROM FINANCING ACTIVITIES | | | |
Proceeds from long-term debt, net of debt issuance costs | 558 |
| | 857,121 |
|
Payments on long-term debt | (21,933 | ) | | (372,650 | ) |
Distributions to noncontrolling interests | (63,373 | ) | | (31,143 | ) |
Purchases and sales of noncontrolling interests, net | (1,463 | ) | | (131,093 | ) |
Proceeds from exercise of stock options | 10,199 |
| | 10,854 |
|
Taxes paid for net share settlement of equity awards | (10,259 | ) | | (8,602 | ) |
Payments for deferred and contingent consideration | (19,962 | ) | | (14,655 | ) |
Other, net | 8,323 |
| | 4,899 |
|
Net cash provided by (used in) financing activities | (97,910 | ) | | 314,731 |
|
Effect of exchange rate changes on cash, cash equivalents and restricted cash | (6,983 | ) | | (48,671 | ) |
Net increase (decrease) in cash, cash equivalents and restricted cash | (93,224 | ) | | 471,491 |
|
Cash, cash equivalents and restricted cash at beginning of period | 2,378,203 |
| | 1,828,822 |
|
Cash, cash equivalents and restricted cash at end of period | $ | 2,284,979 |
| | $ | 2,300,313 |
|
See Notes to Consolidated Financial Statements
9
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 our 2018 Annual Report on Form 10-K filed with the SEC on February 28, 2019, as amended by the Form 10-K/A filed with the SEC on June 28, 2019.
Seasonality
Due to the seasonal nature of shows at outdoor amphitheaters and festivals, which primarily occur from May through October, our Concerts and Sponsorship & Advertising segments experience higher revenue during the second and third quarters. Our 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. Our 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, Cash Equivalents and Restricted Cash
Included in the June 30, 2019 and December 31, 2018 cash and cash equivalents balance is $777.2 million and $859.1 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 these clients.
Restricted cash primarily consists of cash held in escrow accounts to fund capital improvements of certain leased or operated venues. The cash is held in these accounts pursuant to the related lease or operating agreement.
Acquisitions
During the first six months of 2019, we completed several acquisitions that were accounted for as business combinations under the acquisition method of accounting. These acquisitions were not significant either on an individual basis or in the aggregate.
Income Taxes
Each reporting period, we evaluate the realizability of all of our deferred tax assets in each tax jurisdiction. As of June 30, 2019, we continued to maintain a full valuation allowance against our net deferred tax assets in certain jurisdictions due to cumulative pre-tax losses. As a result of the valuation allowances, no tax benefits have been recognized for losses incurred, if any, in those tax jurisdictions for the first six months of 2019 and 2018.
Accounting Pronouncements - Recently Adopted
Lease Accounting
In February 2016, the FASB issued guidance that requires lessees to recognize most leases on their balance sheet as a lease liability and asset, and to disclose key information about leasing arrangements. The guidance should be applied on a modified retrospective basis.
We adopted this standard on January 1, 2019, applying the transitional provisions of the standard to the beginning of the period of adoption and elected the package of practical expedients available under the transition guidance within the new guidance which, among other things, allowed us to carry forward the historical lease classification. We also made an accounting policy election to keep leases with an initial term of twelve months or less off the balance sheet, recognizing those lease payments in our statements of operations generally on a straight-line basis over the term of the lease. We have implemented third-party lease software, and corresponding internal controls, to account for our leases and facilitate compliance with the new guidance.
The new guidance had a material impact on our balance sheet, but did not have a material impact on our statements of operations. The new guidance did not have an impact on our compliance with the debt covenant requirements under our senior
secured credit facility and other debt arrangements. Upon adoption, we recognized operating lease assets and liabilities of $1.1 billion and $1.2 billion, respectively. The initial operating lease assets and liabilities were based on the present value of the remaining minimum lease payments, discounted using our secured incremental borrowing rate which varies based on geographical region and term of the underlying lease. The operating lease assets were also reduced by $85.3 million for prepaid rent, straight-line rent accruals and lease incentives.
Accounting Pronouncements - Not Yet Adopted
In August 2018, the FASB issued guidance that aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software. The amortization period of these implementation costs would include periods covered under renewal options that are reasonably certain to be exercised. The expense related to the capitalized implementation costs also would be presented in the same financial statement line item as the hosting fees. The guidance is effective for annual periods beginning after December 15, 2019 and interim periods within that year, and early adoption is permitted. The guidance should be applied either retrospectively or prospectively to all implementation costs incurred after the date of adoption. We expect to adopt this guidance on January 1, 2020, and are currently assessing which implementation method we will apply and the impact that adoption will have on our financial position and results of operations.
NOTE 2—LONG-LIVED ASSETS
Definite-lived Intangible Assets
The following table presents the changes in the gross carrying amount and accumulated amortization of definite-lived intangible assets for the six months ended June 30, 2019:
|
| | | | | | | | | | | | | | | | | | | | | | | |
| Revenue- generating contracts | | Client / vendor relationships | | Trademarks and naming rights | | Technology | | Other (1) | | Total |
| (in thousands) |
Balance as of December 31, 2018: | | | | | | | | |
Gross carrying amount | $ | 692,963 |
| | $ | 393,772 |
| | $ | 123,707 |
| | $ | 85,411 |
| | $ | 120,163 |
| | $ | 1,416,016 |
|
Accumulated amortization | (391,002 | ) | | (213,599 | ) | | (41,808 | ) | | (38,826 | ) | | (69,330 | ) | | (754,565 | ) |
Net | 301,961 |
| | 180,173 |
| | 81,899 |
| | 46,585 |
| | 50,833 |
| | 661,451 |
|
Gross carrying amount: | | | | | | | | | | |
Acquisitions—current year | 103,389 |
| | 22,385 |
| | 1,632 |
| | 7,216 |
| | 54,964 |
| | 189,586 |
|
Acquisitions—prior year | |