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

9 Months Ended

Sep. 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 have been 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.

Late in the second quarter we began to see the positive impacts of successful vaccination rollouts in many of our key markets, mainly the United States and United Kingdom, with social distancing restrictions easing and live events resuming. In the third quarter, we saw a meaningful restart of our operations with outdoor amphitheater events and festivals taking place in both the United States and United Kingdom. We expect the same to happen in other parts of the world as vaccination efforts gain momentum in mainland Europe, Asia-Pacific and Latin America. The reduction in live events due to the pandemic has had a negative impact on our operating results for the first nine months of 2021 and we expect certain markets to continue to be impacted in the fourth quarter as there is still uncertainty on the exact timing and pace of the recovery in certain markets where vaccination efforts are still underway. As our larger venues have reopened and tours have resumed in the United States and United Kingdom and we expect other markets to reopen in the last quarter of 2021 and throughout 2022, we believe the underlying business supporting all of our long-lived assets will begin generating operating income once again.

Property, Plant and Equipment, Net

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


	September 30, 2021		December 31, 2020
	(in thousands)
Land, buildings and improvements	$	1,292,025	$	1,239,696
Computer equipment and capitalized software	901,725		887,637
Furniture and other equipment	423,517		424,363
Construction in progress	149,184		151,830
	2,766,451		2,703,526
Less: accumulated depreciation	1,724,597		1,602,112
	$	1,041,854	$	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 nine months ended September 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	15,308		—		—		—		10,407		2,650		28,365
Acquisitions—prior year	5,558		—		—		—		—		—		5,558

Foreign exchange	(4,658)		(10,249)		(1,716)		(1,448)		158		2		(17,911)
Other (2)	(31,454)		(35,846)		(19,954)		(8,790)		(29,272)		(9,335)		(134,651)
Net change	(15,246)		(46,095)		(21,670)		(10,238)		(18,707)		(6,683)		(118,639)
Accumulated amortization:
Amortization	(55,420)		(49,813)		(11,444)		(11,106)		(15,357)		(3,448)		(146,588)

Foreign exchange	2,396		4,427		556		521		(189)		(4)		7,707
Other (2)	31,454		34,709		19,969		8,632		29,936		9,496		134,196
Net change	(21,570)		(10,677)		9,081		(1,953)		14,390		6,044		(4,685)
Balance as of September 30, 2021:
Gross carrying amount	480,828		532,569		126,286		140,106		53,576		10,730		1,344,095
Accumulated amortization	(167,967)		(288,387)		(42,843)		(75,557)		(31,409)		(5,656)		(611,819)
Net	$	312,861	$	244,182	$	83,443	$	64,549	$	22,167	$	5,074	$	732,276

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

(2) Other primarily 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 an artist management business in the United States and certain purchased software licenses.

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			4

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 nine months ended September 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 certain of those assets were impaired since the estimated undiscounted operating cash flows associated with those assets were less than their carrying value.

For the nine months ended September 30, 2021, there were no significant impairment charges. For the nine months ended September 30, 2020, we recorded impairment charges related to definite-lived intangible assets of $15.3 million as a component of depreciation and amortization primarily related to intangible assets for revenue-generating contracts and client/vendor relationships 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 September 30, 2021 and 2020 was $46.1 million and $58.4 million, respectively, and for the nine months ended September 30, 2021 and 2020 was $146.6 million and $180.4 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 nine months ended September 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	5,947		—		—		5,947
Acquisitions—prior year	(1,817)		(3,888)		419		(5,286)

Dispositions	(150)		—		—		(150)
Foreign exchange	(9,541)		(4,791)		(5,663)		(19,995)

Balance as of September 30, 2021:
Goodwill	1,312,712		773,880		458,490		2,545,082
Accumulated impairment losses	(435,363)		—		—		(435,363)
Net	$	877,349	$	773,880	$	458,490	$	2,109,719

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 nine months ended September 30, 2021, we sold certain investments in nonconsolidated affiliates for $101.1 million in cash and noncash consideration resulting in a gain on sale of investments in nonconsolidated affiliates of $83.6 million.

During the nine months ended September 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.