Live Nation Entertainment Quarterly report pursuant to Section 13 or 15(d)

Quarterly report pursuant to Section 13 or 15(d)

LONG-LIVED ASSETS

LONG-LIVED ASSETS

3 Months Ended

Mar. 31, 2021

We reviewed our long-lived assets for potential impairment indicators due to the suspension of our live events resulting from the global COVID-19 pandemic. Our venues are either owned or we have long-term operating rights under lease or management agreements with terms ranging from 5 to 25 years. Many of our definite-lived intangible assets are based on revenue-generating contracts, and client or vendor relationships associated with live events and have useful lives, established at the time of acquisition, typically ranging from 3 to 10 years. Our more significant investments in nonconsolidated affiliates are in the concert event promotion, venue operation or ticketing businesses, and these businesses are experiencing similar impacts to their operations, in line with what we are experiencing as a result of the pandemic. Based on our assessments, we have recorded impairment charges on certain of our definite-lived intangible assets, which are discussed below.

The length and severity of the impact to live events and our related sponsorship and ticketing businesses is still uncertain. We currently do not anticipate a significant change in activity levels until early in the second half of 2021 led by outdoor events and festivals in the United States and United Kingdom. We expect that most larger venues will reopen and global tours will resume in the second half of 2021 and that the underlying business supporting all of our long-lived assets will begin generating operating income once again. However, we have never previously experienced a complete cessation of our live events or a large-scale reduction in the number of events selling tickets and, as a consequence, our ability to be predictive regarding the impact of these circumstances is uncertain. As a result, the underlying assumptions used in our impairment assessments could change, resulting in future impairment charges.

Property, Plant and Equipment, Net

Property, plant and equipment, net, consisted of the following:


	March 31,		December 31,
	2021		2020
	(in thousands)
Land, buildings and improvements	$	1,246,345	$	1,239,696
Computer equipment and capitalized software	904,791		887,637
Furniture and other equipment	425,888		424,363
Construction in progress	134,829		151,830
	2,711,853		2,703,526
Less: accumulated depreciation	1,647,682		1,602,112
	$	1,064,171	$	1,101,414

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 three months ended March 31, 2021:


	Client / vendor relationships		Revenue- generating contracts		Venue management and leaseholds		Trademarks and naming rights		Technology		Other (1)		Total
	(in thousands)
Balance as of December 31, 2020:
Gross carrying amount	$	496,074	$	578,664	$	147,956	$	150,344	$	72,283	$	17,413	$	1,462,734
Accumulated amortization	(146,397)		(277,710)		(51,924)		(73,604)		(45,799)		(11,700)		(607,134)
Net	349,677		300,954		96,032		76,740		26,484		5,713		855,600
Gross carrying amount:
Acquisitions—current year	520		—		—		—		9,782		2,477		12,779
Acquisitions—prior year	5,366		—		—		—		—		—		5,366

Foreign exchange	(1,579)		(9,166)		(945)		(1,356)		(98)		(8)		(13,152)
Other (2)	(15,360)		(1,250)		—		(7)		(7,618)		320		(23,915)
Net change	(11,053)		(10,416)		(945)		(1,363)		2,066		2,789		(18,922)
Accumulated amortization:
Amortization	(21,669)		(16,043)		(3,618)		(4,180)		(5,231)		(1,160)		(51,901)

Foreign exchange	1,330		3,130		120		228		70		1		4,879
Other (2)	15,360		1,239		3		50		7,589		(91)		24,150
Net change	(4,979)		(11,674)		(3,495)		(3,902)		2,428		(1,250)		(22,872)
Balance as of March 31, 2021:
Gross carrying amount	485,021		568,248		147,011		148,981		74,349		20,202		1,443,812
Accumulated amortization	(151,376)		(289,384)		(55,419)		(77,506)		(43,371)		(12,950)		(630,006)
Net	$	333,645	$	278,864	$	91,592	$	71,475	$	30,978	$	7,252	$	813,806

______________

(1) Other primarily includes intangible assets for non-compete agreements.

(2) Other primarily includes netdowns of fully amortized or impaired assets.

The 2021 additions to definite-lived intangible assets from acquisitions have weighted-average lives as follows:


			Weighted- Average Life (years)

Client/vendor relationships			5

Non-compete agreements			2



All categories			3

The current year acquisitions amount above for technology intangibles includes software licenses acquired in the normal course of business.

We test for possible impairment of definite-lived intangible assets whenever events or circumstances change, such as a significant reduction in operating cash flow or a change in the manner in which the asset is intended to be used, which may indicate that the carrying amount of the asset may not be recoverable. During the three months ended March 31, 2021 and 2020, we reviewed the carrying value of certain definite-lived intangible assets that management determined had an indicator that future operating cash flows may not support their carrying value, as a result of the expected impacts from the global COVID-19 pandemic, and it was determined that those assets were impaired since the estimated undiscounted operating cash flows associated with those assets were less than their carrying value.

For the three months ended March 31, 2021, there were no significant impairment charges. For the three months ended March 31, 2020, we recorded impairment charges related to definite-lived intangible assets of $10.1 million as a component of depreciation and amortization primarily related to intangible assets for revenue-generating contracts in the Concerts segment. See Note 6—Fair Value Measurements for further discussion of the inputs used to determine the fair value.

Amortization of definite-lived intangible assets for the three months ended March 31, 2021 and 2020 was $51.9 million and $64.2 million, respectively. As acquisitions and dispositions occur in the future and the valuations of intangible assets for recent acquisitions are completed, amortization will vary.

Goodwill

We review goodwill for impairment annually, as of October 1. As such, we completed our annual review in the fourth quarter of 2020 and, as reported in our December 31, 2020 Form 10-K, no impairments were recorded as the fair value of each reporting unit was determined to be in excess of its carrying value for all reporting units.

The rapid and severe impacts of the global COVID-19 pandemic, and more specifically the need to support global social distancing efforts, mitigate the spread of the virus and comply with restrictions put in place by various governmental entities, led to our decision to stop all tours and close our venues beginning in mid-March 2020. As such actions will continue to have a material impact on our cash flows during the suspension of operations, we have performed qualitative and sensitivity reviews to assess as of March 31, 2021 whether we believed these actions caused the fair value of any of our reporting units to fall below its carrying value. These qualitative and sensitivity reviews included discounted cash flow model sensitivity analyses, and a consideration of the impact from changes in financial forecasts, discount rates and carrying values. The conclusion for all reporting units was that no impairment trigger existed that would require a further quantitative analysis during the three months ended March 31, 2021. We are unable to predict how long the impacts from the global COVID-19 pandemic will impact our operations or what additional restrictions may be imposed by governments. Significant variations from current expectations could impact future assessments, resulting in future impairment charges.

The following table presents the changes in the carrying amount of goodwill in each of our reportable segments for the three months ended March 31, 2021:


	Concerts		Ticketing		Sponsorship & Advertising		Total
	(in thousands)
Balance as of December 31, 2020:
Goodwill	$	1,318,273	$	782,559	$	463,734	$	2,564,566
Accumulated impairment losses	(435,363)		—		—		(435,363)
Net	882,910		782,559		463,734		2,129,203

Acquisitions—current year	532		—		—		532
Acquisitions—prior year	(1,815)		(3,740)		419		(5,136)


Foreign exchange	(2,980)		(3,673)		(4,252)		(10,905)

Balance as of March 31, 2021:
Goodwill	1,314,010		775,146		459,901		2,549,057
Accumulated impairment losses	(435,363)		—		—		(435,363)
Net	$	878,647	$	775,146	$	459,901	$	2,113,694

We are in various stages of finalizing our acquisition accounting for recent acquisitions, which may 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 our allocation between segments.

Investments in Nonconsolidated Affiliates

During the three months ended March 31, 2021, we sold certain investments in nonconsolidated affiliates for $60.3 million in cash plus $6.8 million in deferred purchase price consideration resulting in a gain on sale of investments in nonconsolidated affiliates of $55.9 million.