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

6 Months Ended

Jun. 30, 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 typically with terms ranging from 5 to 25 years at inception. 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.

We are beginning to see the positive impacts of successful vaccination rollouts in many of our key markets with social distancing restrictions easing and live events resuming late in the second quarter. While we are optimistic, the length and severity of the impact to live events and our related sponsorship and ticketing businesses is still uncertain. Activity levels are beginning to increase 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 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:


	June 30,		December 31,
	2021		2020
	(in thousands)
Land, buildings and improvements	$	1,261,289	$	1,239,696
Computer equipment and capitalized software	912,608		887,637
Furniture and other equipment	421,932		424,363
Construction in progress	146,013		151,830
	2,741,842		2,703,526
Less: accumulated depreciation	1,695,364		1,602,112
	$	1,046,478	$	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 six months ended June 30, 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	2,086		—		—		—		10,296		2,650		15,032
Acquisitions—prior year	5,557		—		—		—		—		—		5,557

Foreign exchange	1,613		(1,817)		(440)		399		173		(4)		(76)
Other (2)	(29,276)		(24,497)		(631)		(2,166)		(24,477)		(8,234)		(89,281)
Net change	(20,020)		(26,314)		(1,071)		(1,767)		(14,008)		(5,588)		(68,768)
Accumulated amortization:
Amortization	(39,051)		(33,546)		(7,433)		(6,968)		(10,988)		(2,471)		(100,457)

Foreign exchange	536		1,247		(7)		(110)		(193)		—		1,473
Other (2)	29,276		24,487		642		2,214		24,579		8,456		89,654
Net change	(9,239)		(7,812)		(6,798)		(4,864)		13,398		5,985		(9,330)
Balance as of June 30, 2021:
Gross carrying amount	476,054		552,350		146,885		148,577		58,275		11,825		1,393,966
Accumulated amortization	(155,636)		(285,522)		(58,722)		(78,468)		(32,401)		(5,715)		(616,464)
Net	$	320,418	$	266,828	$	88,163	$	70,109	$	25,874	$	6,110	$	777,502

______________

(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			4

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 six months ended June 30, 2021 and 2020, we reviewed definite-lived intangible assets that management determined had an indicator that remaining future operating cash flows over the acquisition-date estimated useful life 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 six months ended June 30, 2021, there were no significant impairment charges. For the six months ended June 30, 2020, we recorded impairment charges related to definite-lived intangible assets of $12.1 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 June 30, 2021 and 2020 was $48.6 million and $57.8 million, respectively, and for the six months ended June 30, 2021 and 2020 was $100.5 million and $122.0 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. There were no indicators of impairment during the interim periods of 2021.

The following table presents the changes in the carrying amount of goodwill in each of our reportable segments for the six months ended June 30, 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	1,336		—		—		1,336
Acquisitions—prior year	(1,815)		(3,740)		419		(5,136)


Foreign exchange	369		(2,433)		(635)		(2,699)

Balance as of June 30, 2021:
Goodwill	1,318,163		776,386		463,518		2,558,067
Accumulated impairment losses	(435,363)		—		—		(435,363)
Net	$	882,800	$	776,386	$	463,518	$	2,122,704

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 six months ended June 30, 2021, we sold certain investments in nonconsolidated affiliates for $61.6 million in cash plus $6.2 million in deferred purchase price consideration resulting in a gain on sale of investments in nonconsolidated affiliates of $52.9 million.

During the six months ended June 30, 2021, we entered into certain agreements whereby we received equity in the counterparty to those agreements primarily in exchange for providing sponsorship and marketing programs and support. We recognized $25.0 million of noncash additions to investments in nonconsolidated affiliates which are included in other long-term assets on our consolidated balance sheets associated with these agreements.