Quarterly report pursuant to Section 13 or 15(d)

LONG-LIVED ASSETS

v2.4.0.8
LONG-LIVED ASSETS
 6 Months Ended
Jun. 30, 2013
LONG-LIVED ASSETS [Abstract]  
LONG-LIVED ASSETS
NOTE 2—LONG-LIVED ASSETS
Property, Plant and Equipment
In the fourth quarter of 2012, an amphitheater located in New York that is operated by the Company sustained substantial damage during Hurricane Sandy. During 2013, the Company received an insurance recovery and recorded a gain of $9.4 million and $12.6 million for the three and six months ended June 30, 2013, respectively, as a component of loss (gain) on disposal of operating assets in the Concerts segment representing the proceeds received in excess of the carrying value of the 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 or expected cash flows basis.
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, 2013:
 
Revenue-
generating
contracts
 
Client /
vendor
relationships
 
Non-compete
agreements
 
Venue
management
and
leaseholds
 
Technology
 
Trademarks
and
naming
rights
 
Other
 
Total
 
(in thousands)
Balance as of December 31, 2012:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Gross carrying amount
$
515,071

 
$
261,655

 
$
168,418

 
$
118,259

 
$
101,424

 
$
18,423

 
$
6,452

 
$
1,189,702

Accumulated amortization
(197,549
)
 
(39,807
)
 
(111,369
)
 
(51,891
)
 
(53,295
)
 
(6,678
)
 
(4,650
)
 
(465,239
)
Net
317,522

 
221,848

 
57,049

 
66,368

 
48,129

 
11,745

 
1,802

 
724,463

Gross carrying amount:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Acquisitions—current year
10,892

 
4,540

 
—

 
—

 
—

 
22,947

 
—

 
38,379

Acquisitions—prior year
(1,028
)
 
—

 
—

 
—

 
—

 
—

 
—

 
(1,028
)
Dispositions
—

 
(1,354
)
 
—

 
—

 
—

 
—

 
—

 
(1,354
)
Foreign exchange
(7,537
)
 
(7,359
)
 
(104
)
 
(2,163
)
 
(339
)
 
(481
)
 
(56
)
 
(18,039
)
Other (1)
(14,769
)
 
—

 
(14,257
)
 
—

 
—

 
405

 
(3,031
)
 
(31,652
)
 
(12,442
)
 
(4,173
)
 
(14,361
)
 
(2,163
)
 
(339
)
 
22,871

 
(3,087
)
 
(13,694
)
Accumulated amortization:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Amortization
(23,251
)
 
(22,781
)
 
(10,896
)
 
(10,803
)
 
(11,438
)
 
(2,131
)
 
(244
)
 
(81,544
)
Dispositions
—

 
61

 
—

 
—

 
—

 
—

 
—

 
61

Foreign exchange
3,593

 
968

 
91

 
754

 
202

 
114

 
51

 
5,773

Other (1)
14,745

 
—

 
14,757

 
—

 
—

 
775

 
3,031

 
33,308

 
(4,913
)
 
(21,752
)
 
3,952

 
(10,049
)
 
(11,236
)
 
(1,242
)
 
2,838

 
(42,402
)
Balance as of June 30, 2013:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Gross carrying amount
502,629

 
257,482

 
154,057

 
116,096

 
101,085

 
41,294

 
3,365

 
1,176,008

Accumulated amortization
(202,462
)
 
(61,559
)
 
(107,417
)
 
(61,940
)
 
(64,531
)
 
(7,920
)
 
(1,812
)
 
(507,641
)
Net
$
300,167

 
$
195,923

 
$
46,640

 
$
54,156

 
$
36,554

 
$
33,374

 
$
1,553

 
$
668,367

_________
(1)
Other includes a reclassification from indefinite-lived intangible assets due to a change in the asset’s estimated useful life and netdowns of fully amortized assets.
Included in the current year acquisitions amount above of $38.4 million are trademarks and naming rights and revenue-generating contracts primarily associated with the May 2013 acquisition of a controlling interest in a company that promotes festivals.
The 2013 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
7
Trademarks and naming rights
10
All categories
9

The Company tests 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, 2012, the Company 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, 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. During the second quarter of 2012, the Company recorded an impairment charge related to definite-lived intangible assets of $13.9 million as a component of depreciation and amortization. The impairment charge primarily related to intangible assets for revenue-generating contracts and client/vendor relationships in the Concerts segment. See Note 4—Fair Value Measurements for further discussion of the inputs used to determine the fair value. There were no impairment charges recorded during the six months ended June 30, 2013.
Amortization from definite-lived intangible assets for the three months ended June 30, 2013 and 2012 was $43.3 million and $55.7 million, respectively, and for the six months ended June 30, 2013 and 2012 was $81.5 million and $95.6 million, respectively. The decrease in amortization for the three and six months ended June 30, 2013 is primarily driven by the impairment charge recorded during the second quarter of 2012 discussed above. During the second quarter of 2013, the Company recorded $4.9 million for acceleration of amortization primarily related to a change in estimate of certain venue management and leasehold intangible assets in the Concerts segment due to the reduction in the lease term of a music theater.
Amortization related to nonrecoupable ticketing contract advances for the three months ended June 30, 2013 and 2012 was $10.3 million and $7.9 million, respectively, and for the six months ended June 30, 2013 and 2012 was $23.9 million and $18.7 million, respectively.
As acquisitions and dispositions occur in the future and the valuations of intangible assets for recent acquisitions are completed, amortization may vary. Therefore, the expense to date is not necessarily indicative of the expense expected for the full year.
Goodwill
The following table presents the changes in the carrying amount of goodwill in each of the Company’s reportable segments for the six months ended June 30, 2013:
 
Concerts
 
Ticketing
 
Artist
Nation
 
Sponsorship
&  Advertising
 
Other
 
Total
 
(in thousands)
Balance as of December 31, 2012:
 
 
 
 
 
 
 
 
 
 
 
Goodwill
$
468,891

 
$
637,642

 
$
266,820

 
$
254,376

 
$
13,037

 
$
1,640,766

Accumulated impairment losses
(269,902
)
 
—

 
—

 
—

 
(13,037
)
 
(282,939
)
 
198,989

 
637,642

 
266,820

 
254,376

 
—

 
1,357,827

 
 
 
 
 
 
 
 
 
 
 
 
Acquisitions—current year
47,189

 
—

 
—

 
866

 
—

 
48,055

Acquisitions—prior year
(9,999
)
 
—

 
6,849

 
—

 
—

 
(3,150
)
Dispositions
(3,691
)
 
—

 
(251
)
 
—

 
—

 
(3,942
)
Foreign exchange
(16,763
)
 
(1,076
)
 
(275
)
 
(11,614
)
 
—

 
(29,728
)
 
 
 
 
 
 
 
 
 
 
 
 
Balance as of June 30, 2013:
 
 
 
 
 
 
 
 
 
 
Goodwill
485,627

 
636,566

 
273,143

 
243,628

 
13,037

 
1,652,001

Accumulated impairment losses
(269,902
)
 
—

 
—

 
—

 
(13,037
)
 
(282,939
)
 
$
215,725

 
$
636,566

 
$
273,143

 
$
243,628

 
$
—

 
$
1,369,062


Included in the current year acquisitions amount above of $48.1 million is goodwill primarily associated with the May 2013 acquisition of a controlling interest in a company that promotes festivals.
The Company is in the process of finalizing its acquisition accounting for recent acquisitions which could result in a change to the associated purchase price allocations, including goodwill.
Investments in nonconsolidated affiliates
The Company has investments in various affiliates which are not consolidated and are accounted for under the equity method of accounting. The Company records its investments in these entities in the balance sheet as investments in nonconsolidated affiliates. The Company’s interests in these operations are recorded in the statement of operations as equity in earnings of nonconsolidated affiliates. For the six months ended June 30, 2013, two of the Company’s investments, which include a 33% owned ticketing distribution services company and a 50% owned artist management company, are considered significant.
Summarized unaudited income statement information for the Company’s significant nonconsolidated affiliates is as follows (at 100%):
 
Six Months Ended 
 June 30,
 
2013
 
2012
 
 (in thousands)
 Revenue
$
28,203

 
$
28,929

 Operating income
$
14,956

 
$
15,399

 Net income
$
11,693

 
$
12,720



Long-lived Asset Disposals
In May 2013, the Company completed the sale of a theatrical theater in New York. In January 2012, the Company completed the sale of an amphitheater in Ohio.
The table below summarizes the asset and liability values at the time of sale for significant disposals and the resulting gain or loss recorded.
Divested Asset
 
Segment
 
Loss (Gain)
on Disposal of
Operating
Assets
 
Current
Assets
 
Noncurrent
Assets
 
Current
Liabilities
 
Noncurrent
Liabilities
 
 
(in thousands)
2013 Divestiture
 
 
 
 
 
 
 
 
 
 
 
 
New York theatrical theater
 
Concerts
 
$
(21,887
)
 
$
—

 
$
35,785

 
$
—

 
$
3,636

2012 Divestiture
 
 
 
 
 
 
 
 
 
 
 
 
Ohio amphitheater
 
Concerts
 
$
(444
)
 
$
—

 
$
5,400

 
$
444

 
$
—



Certain agreements relating to disposals of businesses provide for future contingent consideration to be paid to the Company based on the financial performance of the businesses sold. The Company will record additional amounts related to such contingent consideration, with a corresponding adjustment to loss (gain) on disposal of operating assets, if and when it is determinable that the applicable financial performance targets will be met. The aggregate of these contingent considerations, if all existing performance targets are met, would not significantly impact the results of operations of the Company. The last contingency period for which the Company has outstanding contingent consideration is for the period ending December 2013.