NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1—THE COMPANY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
History
Live Nation was incorporated in Delaware on August 2, 2005 in preparation for the contribution and transfer by Clear Channel Communications, Inc. of substantially all of its entertainment assets and liabilities to us. We completed this separation on December 21, 2005 and became a publicly traded company on the New York Stock Exchange trading under the symbol “LYV.”
On January 25, 2010, we merged with Ticketmaster Entertainment LLC and it became a wholly-owned subsidiary of Live Nation. Effective with the merger, Live Nation, Inc. changed its name to Live Nation Entertainment, Inc.
Seasonality
Our Concerts and Sponsorship & Advertising segments typically experience higher revenue and operating income in the second and third quarters as our outdoor venues and festivals are primarily used in or occur from May through October. In addition, the timing of when tickets are sold and the tours of top-grossing acts can impact comparability of quarterly results year over year, although annual results may not be impacted. Our Ticketing segment revenue is impacted by fluctuations in the availability of events for sale to the public, which vary depending upon scheduling by our clients.
Cash flows from our Concerts segment typically have a slightly different seasonality as payments are often made for artist performance fees and production costs for tours in advance of the date the related event tickets go on sale. These artist fees and production costs are expensed when the event occurs. Once tickets for an event go on sale, we generally begin to receive payments from ticket sales at our owned or operated venues and festivals in advance of when the event occurs. We record these ticket sales as revenue when the event occurs. 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.
Due to the unprecedented stoppage of our concert and other events globally beginning in mid-March resulting from the global COVID-19 pandemic, we did not experience our typical seasonality trends in 2020. We cannot predict when these trends will recommence in the future.
Basis of Presentation and Principles of Consolidation
Our consolidated financial statements include all of our accounts, including our majority owned and controlled subsidiaries and VIEs for which we are the primary beneficiary. Intercompany accounts among the consolidated businesses have been eliminated in consolidation. Net income (loss) attributable to noncontrolling interests is reflected in the statements of operations.
Typically, we consolidate entities in which we own more than 50% of the voting common stock and control operations and also VIEs for which we are the primary beneficiary. Investments in nonconsolidated affiliates in which we own more than 20% of the voting common stock or otherwise exercise significant influence over operating and financial policies but not control of the nonconsolidated affiliate are accounted for using the equity method of accounting. Investments in nonconsolidated affiliates in which we own less than 20% of the voting common stock and do not exercise significant influence over operating and financial policies are accounted for at fair value unless the investment does not have a readily determinable fair value in which case the investment is accounted for at cost less any impairment.
All of our cash flow activity reflected on the consolidated statements of cash flows is presented net of any non-cash transactions so the amounts reflected may be different than amounts shown in other places in our consolidated financial statements that are based on accrual accounting and therefore include non-cash amounts. For example, purchases of property, plant and equipment reflected on the consolidated statements of cash flows reflect the amount of cash paid during the year for these purchases and does not include the impact of the changes in accrued expenses related to capital expenditures during the year.
Variable Interest Entities
In the normal course of business, we enter into joint ventures or make investments in companies that will allow us to expand our core business and enter new markets. In certain instances, such ventures or investments may be considered a VIE because the equity at risk is insufficient to permit it to carry on its activities without additional financial support from its equity owners. In determining whether we are the primary beneficiary of a VIE, we assess whether we have the power to direct activities that most significantly impact the economic performance of the entity and have the obligation to absorb losses or the right to receive benefits from the entity that could potentially be significant to the VIE. The activities we believe most significantly impact the economic performance of our VIEs include the unilateral ability to approve the annual budget, to terminate key management and to approve entering into agreements with artists, among others. We have certain rights and obligations related to our involvement in the VIEs, including the requirement to provide operational cash flow funding. As of December 31, 2020 and 2019, excluding intercompany balances and allocated goodwill and intangible assets, there were approximately $302 million and $410 million of assets and $270 million and $260 million of liabilities, respectively, related to VIEs included in our balance sheets. None of our VIEs are significant on an individual basis.
Nonconsolidated Affiliates
In general, nonconsolidated investments in which we own more than 20% of the common stock or otherwise exercise significant influence over an affiliate are accounted for under the equity method. We review the value of equity method investments and record impairment charges in the statements of operations for any decline in value that is determined to be other-than-temporary. If we obtain control of a nonconsolidated affiliate through the purchase of additional ownership interest or changes in the governing agreements, we remeasure our investment to fair value first and then apply the accounting guidance for business combinations. Any gain or loss resulting from the remeasurement to fair value is recorded as a component of other expense (income), net in the statements of operations.
Cash, Cash Equivalents and Restricted Cash
Cash and cash equivalents include all highly liquid investments with an original maturity of three months or less. Our cash and cash equivalents include domestic and foreign bank accounts as well as interest-bearing accounts consisting primarily of bank deposits and money market accounts managed by third-party financial institutions. These balances are stated at cost, which approximates fair value.
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.
Included in the December 31, 2020 and 2019 cash and cash equivalents balance is $673.5 million and $837.7 million, respectively, of cash received that includes the face value of tickets sold on behalf of our ticketing clients and their share of service charges (“client cash”), which amounts are to be remitted to these clients. We generally do not utilize client cash for our own financing or investing activities as the amounts are payable to our clients on a regular basis. These amounts due to our clients are included in accounts payable, client accounts.
Cash held in interest-bearing operating accounts in many cases exceeds the Federal Deposit Insurance Corporation insurance limits. To reduce our credit risk, we monitor the credit standing of the financial institutions that hold our cash and cash equivalents; however, these balances could be impacted in the future if the underlying financial institutions fail. To date, we have experienced no loss of or lack of access to our cash or cash equivalents; however, we can provide no assurances that access to our cash and cash equivalents will not be impacted in the future by adverse conditions in the financial markets, including those resulting from the global COVID-19 pandemic.
Allowance for Doubtful Accounts
We evaluate the collectability of our accounts receivable based on a combination of factors. Generally, we record reserves based on the amount of cash we expect to receive when an account receivable balance is established. Our reserve estimate is primarily based on our historical accounts receivable write-offs. We adjust the historical reserve estimate applied to current accounts receivable when events or circumstances change, such as changes in current economic conditions or there is a significant deterioration in our accounts receivable aging, indicating that the reserve estimate may be insufficient to cover the expected loss. We generally apply a portfolio approach to all of our accounts receivable based on reporting unit unless there are facts and circumstances that indicate a specific group of customers is at greater risk of nonpayment.
We believe that the credit risk with respect to trade receivables is limited due to the large number and the geographic diversification of our customers.
Prepaid Expenses
The majority of our prepaid expenses relate to event expenses including show advances and deposits and other costs directly related to future concert events. For advances that are expected to be recouped over a period of more than twelve months, the long-term portion of the advance is classified as long-term advances. These prepaid costs are charged to operations upon completion of the related events.
Ticketing contract advances, which can be either recoupable or non-recoupable, represent amounts paid in advance to our clients pursuant to ticketing agreements and are reflected in prepaid expenses or in long-term advances if the amount is expected to be recouped or recognized over a period of more than twelve months. Recoupable ticketing contract advances are generally recoupable against future royalties earned by our clients, based on the contract terms, over the life of the contract. Non-recoupable ticketing contract advances, excluding those amounts paid to support clients’ advertising costs, are fixed additional incentives occasionally paid by us to secure the contract with certain clients and are typically amortized over the life of the contract on a straight-line basis.
Business Combinations
During 2020, 2019 and 2018, we completed several acquisitions that were accounted for as business combinations under the acquisition method of accounting. When we make these acquisitions, we often acquire a controlling interest without buying 100% of the business. These acquisitions and the related results of operations were not significant on either an individual basis or in the aggregate.
During 2020, we acquired the remaining redeemable noncontrolling interests of certain subsidiaries and settled certain contingent consideration obligations in exchange for debt obligations totaling $11.8 million which are reflected in current portion of long-term debt, net on our consolidated balance sheets. These non-cash transactions have not been reflected as cash flows from financing activities within our consolidated statements of cash flows.
We account for our business combinations under the acquisition method of accounting. Identifiable assets acquired, liabilities assumed and any noncontrolling interest in the acquiree are recognized and measured as of the acquisition date at fair value. Additionally, any contingent consideration is recorded at fair value on the acquisition date and classified as a liability. Goodwill is recognized to the extent by which the aggregate of the acquisition-date fair value of the consideration transferred and any noncontrolling interest in the acquiree exceeds the recognized basis of the identifiable assets acquired, net of assumed liabilities. Determining the fair value of assets acquired, liabilities assumed and noncontrolling interests requires management’s judgment and often involves the use of significant estimates and assumptions, including assumptions with respect to future cash flows, discount rates and asset lives among other items.
Property, Plant and Equipment
Property, plant and equipment are stated at cost or fair value at the date of acquisition. Depreciation is computed using the straight-line method over their estimated useful lives, which are typically as follows:
Buildings and improvements - 10 to 50 years
Computer equipment and capitalized software - 3 to 10 years
Furniture and other equipment - 3 to 10 years
Leasehold improvements are depreciated over the shorter of the economic life or associated lease term. Expenditures for maintenance and repairs are charged to operations as incurred, whereas expenditures for asset renewal and improvements are capitalized.
We test for possible impairment of property, plant and equipment whenever events or circumstances change, such as a current period operating cash flow loss combined with a history of, or projections of, operating cash flow losses or a significant adverse change in the manner in which the asset is intended to be used, which could indicate that the carrying amount of the asset may not be recoverable. If indicators exist, we compare the estimated undiscounted future cash flows related to the asset to the carrying value of the asset. If the carrying value is greater than the estimated undiscounted future cash flow amount, an impairment charge is recorded based on the difference between the fair value and the carrying value. Any such impairment charge is recorded in depreciation and amortization in the statements of operations. The impairment loss calculations require management to apply judgment in estimating future cash flows and the discount rates that reflect the risk inherent in future cash flows.
Intangible Assets
We classify intangible assets as definite-lived or indefinite-lived. Definite-lived intangibles include revenue-generating contracts, client/vendor relationships, trademarks and naming rights, technology, non-compete agreements, and venue management and leasehold agreements, all of which are amortized either on a straight-line basis over the respective lives of the agreements, typically 3 to 10 years, or on a basis more representative of the time pattern over which the benefit is derived. We periodically review the appropriateness of the amortization periods related to our definite-lived intangible assets. These assets are stated at cost or fair value at the date of acquisition. Indefinite-lived intangibles consist of trade names which are not subject to amortization.
We test for possible impairment of definite-lived intangible assets whenever events or circumstances change, such as a current period operating cash flow loss combined with a history of, or projections of, operating cash flow losses or a significant adverse change in the manner in which the asset is intended to be used, which could indicate that the carrying amount of the asset may not be recoverable. If indicators exist, we compare the estimated undiscounted future cash flows related to the asset to the carrying value of the asset. If the carrying value is greater than the estimated undiscounted future cash flow amount, an impairment charge is recorded based on the difference between the fair value and the carrying value. Any such impairment charge is recorded in depreciation and amortization in the statements of operations.
We test for possible impairment of indefinite-lived intangible assets at least annually. Depending on facts and circumstances, qualitative factors may first be assessed to determine whether the existence of events and circumstances indicate that it is more likely than not that an indefinite-lived intangible asset is impaired. If it is concluded that it is more likely than not impaired, we perform a quantitative impairment test by comparing the fair value with the carrying amount. When specific assets are determined to be impaired, the cost basis of the asset is reduced to reflect the current fair value. Any such impairment charge is recorded in depreciation and amortization in the statements of operations. The impairment loss calculations require management to apply judgment in estimating future cash flows, expected future revenue, discount rates and royalty rates that reflect the risk inherent in future cash flows.
Goodwill
We review goodwill for impairment annually, as of October 1, using a two-step process. We also test goodwill for impairment in other periods if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying amount or when we change our reporting units.
The first step is a qualitative evaluation as to whether it is more likely than not that the fair value of any of our reporting units is less than its carrying value using an assessment of relevant events and circumstances. Examples of such events and circumstances include historical financial performance, industry and market conditions, macroeconomic conditions, reporting unit-specific events, historical results of goodwill impairment testing and the timing of the last performance of a quantitative assessment.
If any reporting units are concluded to be more likely than not impaired, or if that conclusion cannot be determined qualitatively, a second step is performed for that reporting unit. Regardless, all reporting units undergo a second step at least once every five years to support our annual qualitative first step. This second step, used to quantitatively screen for potential impairment and measure the impairment, if any, compares the fair value of the reporting unit with its carrying amount, including goodwill. Inherent in such fair value determinations are certain judgments and estimates relating to future cash flows, including our interpretation of current economic indicators and market valuations, and assumptions about our strategic plans with regard to our operations. Due to the uncertainties associated with such estimates, actual results could differ from such estimates. If the reporting unit’s carrying value exceeds its fair value, the excess of the carrying value over the fair value is recorded as an impairment to goodwill. If a reporting unit’s carrying value is negative, the reporting unit passes the impairment test. In both steps, discount rates, market multiples, and sensitivity tests are derived and/or computed with the assistance of external valuation consultants.
In developing fair values for our reporting units, we employ a discounted cash flow or a market multiple methodology, or a combination thereof. The discounted cash flow methodology establishes fair value by estimating the present value of the projected future cash flows to be generated from the reporting unit. The discount rate applied to the projected future cash flows to arrive at the present value is intended to reflect all risks of ownership and the associated risks of realizing the stream of projected future cash flows. The discounted cash flow methodology uses our estimates of future financial performance. The most significant assumptions used in the discounted cash flow methodology are the discount rate and expected future revenue, which vary among reporting units.
The market multiple methodology compares us to similar companies on the basis of risk characteristics to determine our risk profile relative to those companies as a group. This analysis generally focuses on both quantitative considerations, which include financial performance and other quantifiable data, and qualitative considerations, which include any factors which are expected to impact future financial performance. The most significant assumptions affecting the market multiple methodology are the market multiples used on projected future cash flows and market participant acquisition premium. A market participant acquisition premium represents the additional value a buyer would pay to obtain control of the respective reporting unit because having control would lead to higher cash flows, lower cost of capital or both.
Leases
We lease office space, many of our concert venues, festival sites and certain equipment. We record a lease asset and liability on our consolidated balance sheets at the inception of the lease or when we take possession of the leased space or equipment, if later, based on the required payments over the term of the lease. We do not recognize a lease asset or liability for leases with an initial term of twelve months or less, including multi-year festival site leases where the sum of the non-consecutive periods of rental time is less than twelve months. Rent expense for these short-term leases is generally recognized on a straight-line basis over the lease term.
Some of our lease agreements contain annual rental escalation clauses, as well as provisions for us to pay the related utilities and maintenance. We have elected to account for the lease components (i.e., fixed payments including rent, parking and real estate taxes) and non-lease components (i.e., common-area maintenance costs) as a single lease component.
Many of our lease agreements contain renewal options that can extend the lease for additional terms typically ranging from one to ten years. Renewal options at the discretion of the lessor are included in the lease term while renewal options at our discretion are generally not included in the lease term unless they are reasonably certain to be exercised.
In addition to fixed rental payments, many of our leases contain contingent rental payments based on a percentage of revenue, tickets sold or other variables, while others include periodic adjustments to rental payments based on the prevailing inflationary index or market rental rates. Contingent rent obligations are not included in the initial measurement of the lease asset or liability and are recognized as rent expense in the period that the contingency is resolved. Our leases do not contain any material residual value guarantees or restrictive covenants.
We measure our lease assets and liabilities using an incremental borrowing rate which varies from lease to lease depending on geographical location and length of the lease.
Accounts Payable, Client Accounts
Accounts payable, client accounts consists of contractual amounts due to our ticketing clients which includes the face value of tickets sold and the clients’ share of service charges.
Income Taxes
We account for income taxes using the liability method which results in deferred tax assets and liabilities based on differences between financial reporting bases and tax bases of assets and liabilities and are measured using the enacted tax rates expected to apply to taxable income in the periods in which the deferred tax asset or liability is expected to be realized or settled. Deferred tax assets are reduced by valuation allowances if we believe it is more likely than not that some portion of or the entire asset will not be realized. As almost all earnings from our continuing foreign operations are permanently reinvested and not distributed, our income tax provision does not include additional United States state and foreign withholding or transaction taxes on those foreign earnings that would be incurred if they were distributed. It is not practicable to determine the amount of state and foreign income taxes, if any, that might become due in the event that any remaining available cash associated with these earnings were distributed.
The FASB guidance for income taxes prescribes a recognition threshold and a measurement attribute for the financial statement recognition and measurement of tax positions taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more likely than not to be sustained upon examination by taxing authorities. The amount recognized is measured as the largest amount of benefit that is more likely than not to be realized upon ultimate settlement.
We have established a policy of including interest related to tax loss contingencies in income tax expense (benefit) in the statements of operations.
The Tax Cuts and Jobs Act (“TCJA”) enacted in December 2017 subjects a United States corporation to tax on its Global Intangible Low-Taxed Income (“GILTI”). We have established a policy of treating the taxes due on future GILTI inclusions in United States taxable income as a current-period expense when incurred.
Revenue Recognition
Revenue from the promotion or production of an event in our Concerts segment is recognized when the show occurs. Revenue collected in advance of the event is recorded as deferred revenue until the event occurs. Revenue collected from sponsorship agreements, which is not related to a single event, is classified as deferred revenue and recognized over the term of the agreement or operating season as the benefits are provided to the sponsor.
Revenue from our ticketing operations primarily consists of service fees charged at the time a ticket for an event is sold in either the primary or secondary markets. For primary tickets sold to our concert and festival events, where our concert promoters control ticketing, the revenue for the associated ticket service charges collected in advance of the event is recorded as deferred revenue until the event occurs and these service charges are shared between our Ticketing and Concerts segments. For primary tickets sold for events of third-party clients and secondary market sales, the revenue is recognized at the time of the sale and is recorded by our Ticketing segment.
We account for taxes that are externally imposed on revenue producing transactions on a net basis.
Gross versus Net Revenue Recognition
We report revenue on a gross or net basis based on management’s assessment of whether we act as a principal or agent in the transaction. To the extent we act as the principal, revenue is reported on a gross basis. The determination of whether we act as a principal or an agent in a transaction is based on an evaluation of whether we have control of the good or service before it is transferred to the customer. Our Ticketing segment’s revenue, which primarily consists of service fees from its ticketing operations, is recorded net of the face value of the ticket as we generally act as an agent in these transactions.
Business Interruption Insurance Recovery
We record revenue or offset expense for covered business interruptions in the period we determine it is probable we will be compensated for the costs incurred or the applicable contingencies with the insurance company are resolved for lost revenue. This may result in business interruption insurance recoveries being recorded in a period subsequent to the period the Company experiences lost revenue and/or incurred the expenses from a covered event that are being reimbursed. For the year ended December 31, 2020, we recorded business interruption insurance recoveries of $125.7 million, primarily due to the global COVID-19 pandemic, with roughly half recorded as revenue and half as a reduction to our direct operating and selling, general and administrative expenses. For the years ended December 31, 2019 and December 31, 2018, business interruption insurance recoveries were not significant.
Foreign Currency
Results of operations for foreign subsidiaries and foreign equity investees are translated into United States dollars using the average exchange rates during the year. The assets and liabilities of those subsidiaries and investees are translated into United States dollars using the exchange rates at the balance sheet date. The related translation adjustments are recorded in a separate component of stockholders’ equity in AOCI. Foreign currency transaction gains and losses are included in the statements of operations and include the impact of revaluation of certain foreign currency denominated net assets or liabilities held internationally. For the years ended December 31, 2020 and December 31, 2019, we recorded net foreign currency transaction gains of $9.0 million and $3.2 million, respectively. For the year ended December 31, 2018, we recorded net foreign currency transaction losses of $11.6 million. We do not currently have significant operations in highly inflationary countries.
Advertising Expense
We record advertising expense in the year that it is incurred. Throughout the year, general advertising expenses are recognized as they are incurred, but event-related advertising for concerts is recognized once the show occurs. If an event is rescheduled into the following year, the advertising costs are expensed in the period the event is rescheduled. However, all advertising costs incurred during the year and not previously recognized are expensed at the end of the year. Advertising expenses of $103.3 million, $452.7 million and $443.2 million for the years ended December 31, 2020, 2019 and 2018, respectively, were recorded as a component of direct operating expenses. Advertising expenses of $14.8 million, $27.8 million and $30.9 million for the years ended December 31, 2020, 2019 and 2018, respectively, were recorded as a component of selling, general and administrative expenses.
Direct Operating Expenses
Direct operating expenses include artist fees, show-related marketing and advertising expenses, rent expense for events in third-party venues, credit card fees, telecommunication and data communication costs associated with our call centers, commissions paid on tickets distributed through independent sales outlets away from the box office, and salaries and wages related to seasonal employees at our venues along with other costs, including ticket stock and shipping. These costs are primarily variable in nature.
Selling, General and Administrative Expenses
Selling, general and administrative expenses include salaries and other compensation costs related to full-time employees, fixed rent, travel and entertainment, legal expenses and consulting along with other costs.
Depreciation and Amortization
Our depreciation and amortization is presented as a separate line item in the statements of operations. There is no depreciation or amortization included in direct operating expenses, selling, general and administrative expenses or corporate expenses. Amortization of nonrecoupable ticketing contract advances is recorded as a reduction to revenue.
Non-cash and Stock-based Compensation
We follow the fair value recognition provisions in the FASB guidance for stock compensation. Stock-based compensation expense includes compensation expense for all share-based payments using the estimated grant date fair value. Stock-based compensation expense is adjusted for forfeitures as they occur.
The fair value for options in Live Nation stock is estimated on the date of grant using the Black-Scholes option-pricing model. The fair value of the options is amortized to expense on a straight-line basis over the options’ vesting period. We use an expected volatility based on an even weighting of our own traded options and historical volatility. We use a weighted-average expected life based on historical experience calculated with the assistance of outside consultants. The risk-free rate for periods within the expected life of the option is based on the United States Treasury note rate.
The fair value of restricted stock awards and deferred stock awards, which is generally the stock price on the date of grant, is amortized to expense on a straight-line basis over the vesting period except for restricted stock awards and deferred stock awards with minimum performance or market targets as their vesting condition. The performance-based awards are amortized to expense on a graded basis over the vesting period to the extent that it is probable that the performance criteria will be met. Market-based award fair values are estimated using a Monte Carlo simulation model and are then amortized to expense on a graded basis over the derived service period, which is estimated as the median weighted average vesting period from the Monte Carlo simulation models. However, unlike awards with a service or performance condition, the expense for market-based awards will not be reversed solely because the market condition is not satisfied.
Use of Estimates
The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates, judgments, and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes including, but not limited to, legal, tax and insurance accruals, acquisition accounting and impairments. We base our estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances. Actual results could differ from those estimates.
Accounting Pronouncements - Recently Adopted
In June 2016, the FASB issued guidance that replaces the current incurred loss impairment model of recognizing credit losses with an expected loss model for financial assets measured at amortized cost. We adopted this standard on January 1, 2020, and recorded a $3.0 million cumulative-effect adjustment to accumulated deficit in the consolidated balance sheets. The adoption is not expected to have a material effect on our future financial position or results of operations.
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 consolidated financial statement line item as the hosting fees. We adopted this guidance prospectively on January 1, 2020. Adoption of this guidance resulted in expense that would have previously been reported as depreciation and amortization to be reported as selling, general and administrative expenses or corporate expenses within our statements of operations going forward. In addition, implementation costs previously recorded as property, plant and equipment, net will now be reported as prepaid expenses and other long-term assets on our balance sheets, prospectively.
Accounting Pronouncements - Not Yet Adopted
In August 2020, the FASB issued guidance that simplifies the accounting for convertible instruments and its application of the derivatives scope exception for contracts in an entity’s own equity. The new guidance reduces the number of accounting models that require separating embedded conversion features from convertible instruments. As a result, only conversion features accounted for under the substantial premium model and those that require bifurcation will be accounted for separately. For contracts in an entity’s own equity, the new guidance eliminates some of the current requirements for equity classification. The guidance also addresses how convertible instruments are accounted for in the diluted earnings per share calculation and requires enhanced disclosures about the terms of convertible instruments and contracts in an entity’s own equity. The guidance is effective for annual periods beginning after December 15, 2021 and interim periods within that year. Early adoption is permitted for annual periods beginning after December 15, 2020 and interim periods within that year. The guidance should be applied using either a modified retrospective method or a full retrospective method. We will adopt this guidance on January 1, 2022, 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—IMPACT OF THE GLOBAL COVID-19 PANDEMIC
The unprecedented and rapid spread of COVID-19 and the related government restrictions and social distancing measures implemented throughout the world have significantly impacted our live event business. We initially saw event restrictions in Asia and parts of Europe. Beginning in March 2020, large public events were cancelled, governmental authorities began imposing restrictions on non-essential activities, and businesses suspended activities around the world. As the impact of the global COVID-19 pandemic became clearer, we ceased all Live Nation tours and closed our venues in mid-March 2020 to support global efforts at social distancing and mitigating the virus, and to comply with restrictions put in place by various governmental entities, which has had a materially negative impact on our revenue and financial position.
Operating Results
Our annual results were materially impacted by these necessary actions. Our overall revenue for the year decreased by 84% to $1.9 billion. The revenue reduction was across all of our segments as a result of few shows occurring globally beginning in the last half of March 2020 and low ticket sales for future shows during the same period, along with the impact of ticket refunds and show cancellations.
The revenue recognized in our Concerts segment in 2020 included the results of all the shows that occurred prior to the stoppage of events in mid-March. Our event-related deferred revenue for Concerts, which is reported as part of deferred revenue on our consolidated balance sheets, includes the face value and Concerts’ share of service charges for all tickets sold by December 31, 2020, for shows expected to occur in the next 12 months. Any refunds committed to for shows cancelled or rescheduled during the year have either been returned to fans or are reflected in accrued expenses on the consolidated balance sheets. In addition, we have recorded an estimate of $102.0 million in Concerts for refunds that may occur in the future for shows we believe may be cancelled or rescheduled based on the limited amount of data available on refunds resulting from the global shutdown of our live events. This estimate only impacts our financial position as a reclassification from deferred revenue or other long-term liabilities to accrued expenses. We expect that the majority of our shows postponed due to the pandemic will be rescheduled. Event-related deferred revenue for tickets sold for shows expected to occur after December 31, 2021 totaled $35.1 million and is reflected in other long-term liabilities on our consolidated balance sheets.
The revenue recognized in our Ticketing segment in 2020 includes our share of ticket service charges for tickets sold during the period for third-party clients and for shows that occurred in the period for our Concerts business where our promoters control the ticketing. Revenue in the period has been reduced by refunds given during the period. In addition, revenue has been reduced for any shows that were cancelled and for refunds requested on rescheduled shows up to the time of the filing of these consolidated financial statements, and funds have either been returned to the customer or are reflected in accrued expenses on the consolidated balance sheets. Our ticketing clients determine if shows will be rescheduled or cancelled and what the refund policy will be for those shows. We have not recorded an estimate for refunds that may occur in the future since our clients, not Ticketmaster, determine when shows are cancelled or rescheduled and we have a limited amount of historical data of refunds resulting from a global shutdown of live events on which to reliably determine an estimate.
NOTE 3—LONG-LIVED ASSETS
We reviewed our long-lived assets for potential impairment indicators due to the suspension of our concert 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 seeing from 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. We expect that most global tours will resume and larger venues will reopen 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
Property, plant and equipment includes expenditures for the construction of new venues, major renovations to existing buildings or buildings that are being added to our venue network, the development of new ticketing tools and technology enhancements along with the renewal and improvement of existing venues and technology systems, web development and administrative offices.
Property, plant and equipment consisted of the following:
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December 31,
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2020
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2019
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(in thousands)
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Land, buildings and improvements
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$
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1,239,696
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$
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1,181,876
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Computer equipment and capitalized software
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887,637
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800,990
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Furniture and other equipment
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424,363
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380,174
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Construction in progress
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151,830
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176,275
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2,703,526
|
|
2,539,315
|
|
|
Less: accumulated depreciation
|
1,602,112
|
|
1,421,383
|
|
|
|
$
|
1,101,414
|
|
|
$
|
1,117,932
|
|
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 years ended December 31, 2020 and 2019:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Client /
vendor
relationships
|
|
Revenue-
generating
contracts
|
|
Venue management & leaseholds
|
|
Trademarks
and
naming
rights
|
|
Technology
|
|
|
|
|
|
Other (1)
|
|
Total
|
|
|
(in thousands)
|
|
Balance as of December 31, 2018:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross carrying amount
|
$
|
393,772
|
|
|
$
|
692,963
|
|
|
$
|
70,048
|
|
|
$
|
123,707
|
|
|
$
|
85,411
|
|
|
|
|
|
|
$
|
50,115
|
|
|
$
|
1,416,016
|
|
|
Accumulated amortization
|
(213,599)
|
|
|
(391,002)
|
|
|
(33,507)
|
|
|
(41,808)
|
|
|
(38,826)
|
|
|
|
|
|
|
(35,823)
|
|
|
(754,565)
|
|
|
Net
|
180,173
|
|
|
301,961
|
|
|
36,541
|
|
|
81,899
|
|
|
46,585
|
|
|
|
|
|
|
14,292
|
|
|
661,451
|
|
|
Gross carrying amount:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Acquisitions—current year
|
209,398
|
|
|
94,464
|
|
|
80,643
|
|
|
29,061
|
|
|
13,839
|
|
|
|
|
|
|
8,075
|
|
|
435,480
|
|
|
Acquisitions—prior year
|
—
|
|
|
—
|
|
|
43
|
|
|
—
|
|
|
—
|
|
|
|
|
|
|
—
|
|
|
43
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign exchange
|
90
|
|
|
(4,713)
|
|
|
896
|
|
|
91
|
|
|
356
|
|
|
|
|
|
|
(208)
|
|
|
(3,488)
|
|
|
Other (2)
|
(75,770)
|
|
|
(82,157)
|
|
|
(2,044)
|
|
|
76
|
|
|
(12,268)
|
|
|
|
|
|
|
(32,763)
|
|
|
(204,926)
|
|
|
Net change
|
133,718
|
|
|
7,594
|
|
|
79,538
|
|
|
29,228
|
|
|
1,927
|
|
|
|
|
|
|
(24,896)
|
|
|
227,109
|
|
|
Accumulated amortization:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization
|
(65,059)
|
|
|
(94,439)
|
|
|
(10,683)
|
|
|
(14,513)
|
|
|
(27,512)
|
|
|
|
|
|
|
(11,326)
|
|
|
(223,532)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign exchange
|
(473)
|
|
|
1,331
|
|
|
(553)
|
|
|
(96)
|
|
|
(152)
|
|
|
|
|
|
|
122
|
|
|
179
|
|
|
Other (2)
|
75,770
|
|
|
82,088
|
|
|
2,044
|
|
|
1
|
|
|
12,270
|
|
|
|
|
|
|
32,761
|
|
|
204,934
|
|
|
Net change
|
10,238
|
|
|
(11,020)
|
|
|
(9,192)
|
|
|
(14,608)
|
|
|
(15,394)
|
|
|
|
|
|
|
21,557
|
|
|
(18,419)
|
|
|
Balance as of December 31, 2019:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross carrying amount
|
527,490
|
|
|
700,557
|
|
|
149,586
|
|
|
152,935
|
|
|
87,338
|
|
|
|
|
|
|
25,219
|
|
|
1,643,125
|
|
|
Accumulated amortization
|
(203,361)
|
|
|
(402,022)
|
|
|
(42,699)
|
|
|
(56,416)
|
|
|
(54,220)
|
|
|
|
|
|
|
(14,266)
|
|
|
(772,984)
|
|
|
Net
|
324,129
|
|
|
298,535
|
|
|
106,887
|
|
|
96,519
|
|
|
33,118
|
|
|
|
|
|
|
10,953
|
|
|
870,141
|
|
|
Gross carrying amount:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Acquisitions—current year
|
129,015
|
|
|
69,766
|
|
|
8,695
|
|
|
12
|
|
|
19,712
|
|
|
|
|
|
|
94
|
|
|
227,294
|
|
|
Acquisitions—prior year
|
(33,118)
|
|
|
22,821
|
|
|
2,093
|
|
|
—
|
|
|
1,000
|
|
|
|
|
|
|
—
|
|
|
(7,204)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign exchange
|
8,391
|
|
|
7,720
|
|
|
2,923
|
|
|
(2,462)
|
|
|
411
|
|
|
|
|
|
|
12
|
|
|
16,995
|
|
|
Other (2)
|
(135,704)
|
|
|
(222,200)
|
|
|
(15,341)
|
|
|
(141)
|
|
|
(36,178)
|
|
|
|
|
|
|
(7,912)
|
|
|
(417,476)
|
|
|
Net change
|
(31,416)
|
|
|
(121,893)
|
|
|
(1,630)
|
|
|
(2,591)
|
|
|
(15,055)
|
|
|
|
|
|
|
(7,806)
|
|
|
(180,391)
|
|
|
Accumulated amortization:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization
|
(77,389)
|
|
|
(88,640)
|
|
|
(23,532)
|
|
|
(16,737)
|
|
|
(27,646)
|
|
|
|
|
|
|
(5,368)
|
|
|
(239,312)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign exchange
|
(1,351)
|
|
|
(9,239)
|
|
|
(1,034)
|
|
|
(613)
|
|
|
(433)
|
|
|
|
|
|
|
(49)
|
|
|
(12,719)
|
|
|
Other (2)
|
135,704
|
|
|
222,191
|
|
|
15,341
|
|
|
162
|
|
|
36,500
|
|
|
|
|
|
|
7,983
|
|
|
417,881
|
|
|
Net change
|
56,964
|
|
|
124,312
|
|
|
(9,225)
|
|
|
(17,188)
|
|
|
8,421
|
|
|
|
|
|
|
2,566
|
|
|
165,850
|
|
|
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
|
|
___________________
(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 for 2020 are definite-lived intangible assets primarily associated with the acquisitions of a festival and concert promotion business located in Ireland, a merchandise business, a festival promotion business and ticketing relationships, all located in the United States.
Included in the current year acquisitions amount above for 2019 are definite-lived intangible assets primarily associated with the acquisitions of concert promotion businesses located in Canada and Chile, venue management businesses located in the United States and Belgium and a festival promotion business located in Brazil that had been accounted for as an equity investment.
The 2020 and 2019 additions to definite-lived intangible assets from acquisitions have weighted-average lives as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-
Average
Life (1)
|
|
|
2020
|
|
2019
|
|
|
(in years)
|
|
Revenue-generating contracts
|
8
|
|
8
|
|
Client/vendor relationships
|
7
|
|
9
|
|
Trademarks and naming rights
|
1
|
|
10
|
|
Technology (1)
|
5
|
|
3
|
|
|
|
|
|
|
Venue management and leaseholds
|
7
|
|
10
|
|
Other
|
1
|
|
5
|
|
All categories
|
7
|
|
9
|
_____________________
(1) The weighted average life of technology intangibles does not include purchased software licenses that are typically amortized over 1 to 3 years.
For the year ended December 31, 2020, we recorded impairment charges of $23.6 million as a component of depreciation and amortization primarily related to intangible assets for revenue-generating contracts, venue management and leaseholds and client/vendor relationships in the Concerts segment primarily as a result of the expected impacts from the global COVID-19 pandemic where the useful life of the definite-lived intangible asset was expiring within the near term. For the year ended December 31, 2019, we recorded impairment charges of $26.8 million as a component of depreciation and amortization primarily related to intangible assets for revenue-generating contracts in the Concerts and Sponsorship & Advertising segments. There were no significant impairment charges recorded in 2018. See Note 7—Fair Value Measurements for further discussion of the inputs used to determine the fair values.
Amortization of definite-lived intangible assets for the years ended December 31, 2020, 2019 and 2018 was $239.3 million, $223.5 million and $190.7 million, respectively.
The following table presents our estimate of amortization expense for each of the five succeeding fiscal years for definite-lived intangible assets that exist at December 31, 2020:
|
|
|
|
|
|
|
|
|
(in thousands)
|
|
2021
|
$
|
181,078
|
|
|
2022
|
$
|
151,716
|
|
|
2023
|
$
|
131,875
|
|
|
2024
|
$
|
113,525
|
|
|
2025
|
$
|
86,086
|
|
As acquisitions and dispositions occur in the future and the valuations of intangible assets for recent acquisitions are completed, amortization expense may vary.
Indefinite-lived Intangibles
We have indefinite-lived intangible assets which consist of trade names. These indefinite-lived intangible assets had a carrying value of $369.1 million and $369.0 million as of December 31, 2020 and 2019, respectively.
Goodwill
We currently have seven reporting units with goodwill balances: International Concerts, North America Concerts, Artist Management and Artist Services (non-management) within the Concerts segment; Sponsorship & Advertising; and International Ticketing and North America Ticketing within the Ticketing segment. We review goodwill for impairment annually, as of October 1, using a two-step process: a qualitative review and a quantitative analysis.
In 2020, both in the interim qualitative reviews and as part of the October 1 annual review, market multiples were not incorporated into our assessments as our current financial metrics do not support use of the market approach as a corroborating approach. When our business resumes and stabilizes, we will reincorporate the market approach into our fair value methodology.
In 2020, as part of our annual test for impairment, four of our reporting units with goodwill were assessed under the initial qualitative evaluation. Three of these four reporting units, accounting for approximately 28% of our goodwill at December 31, 2020, did not advance to the second step. Considerations included (a) excess of fair values over carrying values in the most recent quantitative analysis performed, (b) discount rates, (c) financial results and (d) sensitivity analyses.
For one of these four reporting units, that accounts for approximately 13% of our goodwill at December 31, 2020, the qualitative analysis was inconclusive primarily due to the loss of revenue resulting from the current cessation of concerts and an increase in its carrying value. As such, a quantitative analysis was performed for this reporting unit. We performed the quantitative analysis using a discounted cash flows methodology, which uses both market-based inputs and internal assumptions. The remaining three of our reporting units, accounting for approximately 59% of our goodwill at December 31, 2020, went straight to the second step as part of our policy to perform a quantitative test at least every five years to support future first step qualitative reviews.
No impairment charges were recorded in 2020 and 2019 as a result of our annual test or interim tests when performed. Based upon the results of the annual test in 2018, we recorded impairment charges of $10.5 million related to our Artist Services (non-management) reporting unit. See Note 7—Fair Value Measurements for discussion of the impairment calculation.
The following table presents the changes in the carrying amount of goodwill in each of our reportable segments for the years ended December 31, 2020 and 2019:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Concerts
|
|
Ticketing
|
|
Sponsorship
& Advertising
|
|
Total
|
|
|
(in thousands)
|
|
Balance as of December 31, 2018:
|
|
|
|
|
|
|
|
|
Goodwill
|
$
|
1,094,604
|
|
|
$
|
762,953
|
|
|
$
|
400,749
|
|
|
$
|
2,258,306
|
|
|
Accumulated impairment losses
|
(435,363)
|
|
|
—
|
|
|
—
|
|
|
(435,363)
|
|
|
Net
|
659,241
|
|
|
762,953
|
|
|
400,749
|
|
|
1,822,943
|
|
|
|
|
|
|
|
|
|
|
|
Acquisitions—current year
|
121,355
|
|
|
4,017
|
|
|
38,421
|
|
|
163,793
|
|
|
Acquisitions—prior year
|
8,428
|
|
|
—
|
|
|
—
|
|
|
8,428
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign exchange
|
1,670
|
|
|
(707)
|
|
|
2,371
|
|
|
3,334
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of December 31, 2019:
|
|
|
|
|
|
|
|
|
Goodwill
|
1,226,057
|
|
|
766,263
|
|
|
441,541
|
|
|
2,433,861
|
|
|
Accumulated impairment losses
|
(435,363)
|
|
|
—
|
|
|
—
|
|
|
(435,363)
|
|
|
Net
|
790,694
|
|
|
766,263
|
|
|
441,541
|
|
|
1,998,498
|
|
|
|
|
|
|
|
|
|
|
|
Acquisitions—current year
|
66,810
|
|
|
8,778
|
|
|
13,847
|
|
|
89,435
|
|
|
Acquisitions—prior year
|
9,033
|
|
|
—
|
|
|
7,165
|
|
|
16,198
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign exchange
|
16,373
|
|
|
7,518
|
|
|
1,181
|
|
|
25,072
|
|
|
|
|
|
|
|
|
|
|
|
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
|
|
Included in the current year acquisitions amounts above for 2020 are goodwill primarily associated with the acquisitions of a festival and concert promotion business located in Ireland as well as a merchandise business, a festival promotion business and a concerts streaming business located in the United States.
Included in the prior year acquisitions amount above for 2020 are changes primarily associated with the acquisition of a venue management business located in the United States.
Included in the current year acquisitions amount above for 2019 are goodwill associated with the acquisitions of a concert promotion business located in Canada, venue management businesses located in Belgium and the United States and a festival promotion business located in Brazil that had been accounted for as an equity method investment.
We are in various stages of finalizing our acquisition accounting for recent acquisitions, which 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 the allocation between segments.
NOTE 4—LEASES
The significant components of operating lease expense are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended
December 31, 2020
|
Year Ended
December 31, 2019
|
|
|
(in thousands)
|
|
Operating lease cost
|
$
|
241,819
|
|
$
|
201,344
|
|
|
Variable and short-term lease cost
|
35,202
|
|
133,526
|
|
|
Sublease income
|
(13,270)
|
|
(17,235)
|
|
|
Net lease cost
|
$
|
263,751
|
|
$
|
317,635
|
|
Many of our leases contain contingent rent obligations based on revenue, tickets sold or other variables, while others include periodic adjustments to rent obligations based on the prevailing inflationary index or market rental rates. Contingent rent obligations are not included in the initial measurement of the lease asset or liability and are recorded as rent expense in the period that the contingency is resolved. In response to the global COVID-19 pandemic, we closed our venues in mid-March 2020 and the majority of those venues have remained closed through December 31, 2020. As a result, our variable and short-term lease cost has declined during the year ended December 31, 2020 as compared to the previous year.
Supplemental cash flow information for our operating leases is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended
December 31, 2020
|
Year Ended
December 31, 2019
|
|
|
(in thousands)
|
|
Cash paid for amounts included in the measurement of lease liabilities
|
$
|
203,419
|
|
$
|
183,723
|
|
|
Lease assets obtained in exchange for lease obligations, net of terminations
|
$
|
129,174
|
|
$
|
417,394
|
|
Future maturities of our operating lease liabilities at December 31, 2020 are as follows:
|
|
|
|
|
|
|
|
|
(in thousands)
|
|
2021
|
$
|
192,413
|
|
|
2022
|
195,983
|
|
|
2023
|
200,444
|
|
|
2024
|
183,162
|
|
|
2025
|
171,708
|
|
|
Thereafter
|
1,456,969
|
|
|
Total lease payments
|
2,400,679
|
|
|
Less: Interest
|
847,858
|
|
|
Present value of lease liabilities
|
$
|
1,552,821
|
|
The weighted average remaining lease term and weighted average discount rate for our operating leases are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended
December 31, 2020
|
Year Ended
December 31, 2019
|
|
Weighted average remaining lease term (in years)
|
13.9
|
13.9
|
|
Weighted average discount rate
|
6.31
|
%
|
5.88
|
%
|
As of December 31, 2020, we have additional operating leases that have not yet commenced with total lease payments of $181.0 million. These operating leases, which are not included on our consolidated balance sheets, have commencement dates ranging from January 2021 to June 2030 with lease terms ranging from 1 to 20 years.
In response to the impacts we are experiencing from the global COVID-19 pandemic, we have amended certain of our lease agreements and are continuing negotiations with certain of our landlords for deferral or abatement of fixed rent payments. These lease concessions are not expected to substantially increase our obligations under the respective lease agreements. Therefore, we have elected to account for these lease concessions as though enforceable rights and obligations for those concessions existed in our lease agreements rather than applying the lease modification guidance as clarified by the FASB.
NOTE 5—LONG-TERM DEBT
Long-term debt, which includes finance leases, consisted of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
|
|
|
2020
|
|
2019
|
|
|
|
|
|
|
(in thousands)
|
|
Senior Secured Credit Facility:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Term loan B
|
|
$
|
938,125
|
|
|
$
|
947,625
|
|
|
|
|
|
|
|
|
|
6.5% Senior Secured Notes due 2027
|
|
1,200,000
|
|
|
—
|
|
|
4.75% Senior Notes due 2027
|
|
950,000
|
|
|
950,000
|
|
|
4.875% Senior Notes due 2024
|
|
575,000
|
|
|
575,000
|
|
|
5.625% Senior Notes due 2026
|
|
300,000
|
|
|
300,000
|
|
|
|
|
|
|
|
|
2.5% Convertible Senior Notes due 2023
|
|
550,000
|
|
|
550,000
|
|
|
2.0% Convertible Senior Notes due 2025
|
|
400,000
|
|
|
—
|
|
|
|
|
|
|
|
|
Other long-term debt
|
|
125,226
|
|
|
80,642
|
|
|
Total principal amount
|
|
5,038,351
|
|
|
3,403,267
|
|
|
Less unamortized discounts and debt issuance costs
|
|
(129,840)
|
|
|
(94,210)
|
|
|
|
|
|
|
|
|
Total long-term debt, net of unamortized discounts and debt issuance costs
|
|
4,908,511
|
|
|
3,309,057
|
|
|
Less: current portion
|
|
53,415
|
|
|
37,795
|
|
|
Total long-term debt, net
|
|
$
|
4,855,096
|
|
|
$
|
3,271,262
|
|
Future maturities of long-term debt at December 31, 2020 are as follows:
|
|
|
|
|
|
|
|
|
(in thousands)
|
|
2021
|
$
|
53,415
|
|
|
2022
|
573,897
|
|
|
2023
|
38,604
|
|
|
2024
|
989,824
|
|
|
2025
|
36,359
|
|
|
Thereafter
|
3,346,252
|
|
|
Total
|
$
|
5,038,351
|
|
All long-term debt without a stated maturity date is considered current and is reflected as maturing in the earliest period shown in the table above. See Note 7—Fair Value Measurements for discussion of the fair value measurement of our long-term debt.
Amended Senior Secured Credit Facility
In April and July 2020, we amended our senior secured credit facility and now have (i) a $400 million delayed draw term loan A facility, (ii) a $950 million term loan B facility, (iii) a $500 million revolving credit facility and (iv) a $130 million incremental revolving credit facility. The delayed draw term loan A facility is available to be drawn until October 2021. In addition, subject to certain conditions, we have the right to increase such facilities by an amount equal to the sum of (x) $425 million during the Restricted Period and $855 million after the Restricted Period, (y) the aggregate principal amount of voluntary prepayments of the delayed draw term loan A and term loan B and permanent reductions of the revolving credit facility commitments, in each case, other than from proceeds of long-term indebtedness, and (z) except during the Restricted Period, additional amounts so long as the senior secured leverage ratio calculated on a pro-forma basis (as defined in the agreement) is no greater than 3.75x. The combined revolving credit facilities provide for borrowings up to $630 million with sublimits of up to (i) $150 million for the issuance of letters of credit, (ii) $50 million for swingline loans, (iii) $300 million for borrowings in Dollars, Euros or British Pounds and (iv) $100 million for borrowings in those or one or more other approved currencies. The amended senior secured credit facility is secured by a first priority lien on substantially all of the tangible and intangible personal property of LNE and LNE’s domestic subsidiaries that are guarantors, and by a pledge of substantially all of the shares of stock, partnership interests and limited liability company interests of our direct and indirect domestic subsidiaries and 65% of each class of capital stock of any first-tier foreign subsidiaries, subject to certain exceptions.
The interest rates per annum applicable to revolving credit facility loans and the delayed draw term loan A under the amended senior secured credit facility are, at our option, equal to either Eurodollar plus 2.25% or a base rate plus 1.25%. The interest rates per annum applicable to the term loan B are, at our option, equal to either Eurodollar plus 1.75% or a base rate plus 0.75%. The interest rates per annum applicable to the incremental revolving credit facility are, at our option, equal to either Eurodollar plus 2.5% or a base rate plus 1.5%. We are required to pay a commitment fee of 0.5% per year on the undrawn portion available under the revolving credit facility and delayed draw term loan A, 1.75% per year on the undrawn portion available under the incremental revolving credit facility and variable fees on outstanding letters of credit.
For the delayed draw term loan A, we are required to make quarterly payments at a rate ranging from 0.625% of the original principal amount during the first three years to 1.25% during the last two years, with the balance due at maturity in October 2024. For the term loan B, we are required to make quarterly payments of $2.4 million with the balance due at maturity in October 2026. Both the existing and incremental revolving credit facilities mature in October 2024. We are also required to make mandatory prepayments of the loans under the amended credit agreement, subject to specified exceptions, from excess cash flow and with the proceeds of asset sales, debt issuances and specified other events.
There were no borrowings under the revolving credit facilities as of December 31, 2020 and we have not drawn down on the delayed draw term loan A. Based on our outstanding letters of credit of $68.3 million, $961.7 million was available for future borrowings from our delayed draw term loan A and revolving credit facilities.
6.5% Senior Secured Notes Due 2027
In May 2020, we issued $1.2 billion principal amount of 6.5% senior secured notes due 2027. Interest on the notes is payable semi-annually in cash in arrears on May 15 and November 15 of each year beginning on November 15, 2020, and will mature on May 15, 2027. We may redeem some or all of the notes, at any time prior to May 15, 2023, at a price equal to 100% of the aggregate principal amount, plus any accrued and unpaid interest to the date of redemption, plus a “make-whole” premium. We may redeem up to 35% of the aggregate principal amount of the notes from the proceeds of certain equity offerings prior to May 15, 2023, at a price equal to 106.5% of the aggregate principal amount, plus accrued and unpaid interest thereon, if any, to the date of redemption. In addition, on or after May 15, 2023 we may redeem some or all of the notes at any time at redemption prices starting at 104.875% of their principal amount, plus any accrued and unpaid interest to the date of redemption. We must make an offer to redeem the notes at 101% of their aggregate principal amount, plus accrued and unpaid interest to the repurchase date, if we experience certain defined changes of control. The notes are secured by a first priority lien on substantially all of the tangible and intangible personal property of LNE and LNE’s domestic subsidiaries that are guarantors, and by a pledge of substantially all of the shares of stock, partnership interests and limited liability company interests of our direct and indirect domestic subsidiaries and 65% of each class of capital stock of any first-tier foreign subsidiaries, subject to certain exceptions.
4.75% Senior Notes Due 2027
In October 2019, we issued $950 million principal amount of 4.75% senior notes due 2027. Interest on the notes is payable semi-annually in cash in arrears on April 15 and October 15 of each year, and will mature on October 15, 2027. We may redeem some or all of the notes, at any time prior to October 15, 2022, at a price equal to 100% of the aggregate principal amount, plus any accrued and unpaid interest to the date of redemption, plus a ‘make-whole’ premium. We may redeem up to 35% of the aggregate principal amount of the notes from the proceeds of certain equity offerings prior to October 15, 2022, at a price equal to 104.750% of the aggregate principal amount, plus accrued and unpaid interest thereon, if any, to the date of redemption. In addition, on or after October 15, 2022, we may redeem some or all of the notes at any time at redemption prices starting at 103.563% of their principal amount, plus any accrued and unpaid interest to the date of redemption. We must make an offer to redeem the notes at 101% of their aggregate principal amount, plus accrued and unpaid interest to the repurchase date, if we experience certain defined changes of control.
4.875% Senior Notes Due 2024
At December 31, 2020, we had $575 million principal amount of 4.875% senior notes due 2024. Interest on the notes is payable semiannually in cash in arrears on May 1 and November 1 of each year, and the notes will mature on November 1, 2024. In addition, on or after November 1, 2019, we may redeem some or all of the notes at any time at the redemption prices that start at 103.656% of their principal amount, plus any accrued and unpaid interest to the date of redemption. We must make an offer to redeem the notes at 101% of their aggregate principal amount, plus accrued and unpaid interest to the repurchase date, if we experience certain defined changes of control.
5.625% Senior Notes Due 2026
At December 31, 2020, we had $300 million principal amount of 5.625% senior notes due 2026. Interest on the notes is payable semiannually in cash in arrears on March 15 and September 15 of each year, and the notes will mature on March 15, 2026. We may redeem some or all of the notes at any time prior to March 15, 2021 at a price equal to 100% of the principal amount, plus any accrued and unpaid interest to the date of redemption, plus a ‘make-whole’ premium. We may redeem up to 35% of the aggregate principal amount of the notes from proceeds of certain equity offerings prior to March 15, 2021, at a price equal to 105.625% of the aggregate principal amount being redeemed, plus any accrued and unpaid interest thereon to the date of redemption. In addition, on or after March 15, 2021, we may redeem some or all of the notes at any time at redemption prices that start at 104.219% of their principal amount, plus any accrued and unpaid interest to the date of redemption. We must make an offer to redeem the notes at 101% of their aggregate principal amount, plus any accrued and unpaid interest to the repurchase date, if we experience certain defined changes of control.
2.5% Convertible Senior Notes Due 2023
At December 31, 2020, we had $550 million principal amount of 2.5% convertible senior notes due 2023. The notes pay interest semiannually in arrears on March 15 and September 15 of each year, at a rate of 2.5% per annum. The notes will mature on March 15, 2023, and may not be redeemed by us prior to the maturity date. The notes will be convertible, under certain circumstances, until December 15, 2022, and on or after such date without condition, at an initial conversion rate of 14.7005 shares of our common stock per $1,000 principal amount of notes, subject to adjustment, which represents a 54.4% conversion premium based on the last reported sale price for our common stock of $44.05 on March 19, 2018 prior to issuing the debt. Upon conversion, the notes may be settled in shares of common stock or, at our election, cash or a combination of cash and shares of common stock. Assuming we fully settled the notes in shares, the maximum number of shares that could be issued to satisfy the conversion is currently 8.1 million.
If we experience a fundamental change, as defined in the indenture governing the notes, the holders of the notes may require us to purchase for cash all or a portion of their notes, subject to specified exceptions, at a price equal to 100% of the principal amount of the notes plus any accrued and unpaid interest.
The carrying amount of the equity component of the notes is $64.0 million, which is treated as a debt discount and the principal amount of the liability component (face value of the notes) is $550 million. As of December 31, 2020, the remaining period for the unamortized debt discount balance of $29.1 million was approximately two years and the value of the notes, if converted and fully settled in shares, exceeds the principal amount of the notes by $44.1 million. As of December 31, 2020, the effective interest rate on the liability component of the notes was 5.7%.
2.0% Convertible Senior Notes Due 2025
In February 2020, we issued $400 million principal amount of 2.0% convertible senior notes due 2025. Interest on the notes is payable semiannually in arrears on February 15 and August 15, at a rate of 2.0% per annum. The notes will mature on February 15, 2025. The notes will be convertible, under certain circumstances, until November 15, 2024, and on or after such date without condition, at an initial conversion rate of 9.4469 shares of our common stock per $1,000 principal amount of notes, subject to adjustment, which represents a 50.0% conversion premium based on the last reported sale price for our common stock of $70.57 on January 29, 2020 prior to issuing the notes. Upon conversion, the notes may be settled in shares of common stock or, at our election, cash or a combination of cash and shares of common stock. Assuming we fully settled the notes in shares, the maximum number of shares that could be issued to satisfy the conversion is currently 3.8 million.
We may redeem for cash all or a portion of the notes, at our option, on or after February 21, 2023 and before the 41st scheduled trading day before the maturity date, if the sales price of our common stock reaches specified targets as defined in the indenture. The redemption price will equal 100% of the principal amount of the notes plus accrued interest, if any.
If we experience a fundamental change, as defined in the indenture governing the notes, the holders of the notes may require us to purchase for cash all or a portion of their notes, subject to specified exceptions, at a price equal to 100% of the principal amount of the notes plus any accrued and unpaid interest.
The carrying amount of the equity component of the notes is $33.9 million, which is treated as a debt discount, and the principal amount of the liability component (face value of the notes) is $400 million. As of December 31, 2020, the remaining period for the unamortized debt discount balance of $27.9 million was approximately four years and the value of the notes, if converted and fully settled in shares, did not exceed the principal amount of the notes. As of December 31, 2020, the effective interest rate on the liability component of the notes was 4.3%.
The following table summarizes the amount of pre-tax interest cost recognized on the convertible senior notes:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
2020
|
|
2019
|
|
2018
|
|
|
|
|
|
|
(in thousands)
|
|
Interest cost recognized relating to:
|
|
|
|
|
|
|
|
|
|
|
Contractual interest coupon
|
$
|
21,011
|
|
|
$
|
14,015
|
|
|
$
|
12,894
|
|
|
|
|
|
|
Amortization of debt discount
|
19,260
|
|
|
12,599
|
|
|
10,746
|
|
|
|
|
|
|
Amortization of debt issuance costs
|
3,230
|
|
|
2,134
|
|
|
1,940
|
|
|
|
|
|
|
Total interest cost recognized on the notes
|
$
|
43,501
|
|
|
$
|
28,748
|
|
|
$
|
25,580
|
|
|
|
|
|
Other Long-term Debt
As of December 31, 2020, other long-term debt includes capital leases of $4.2 million, debt to noncontrolling interest partners of $73.9 million and $30.3 million of a subsidiary’s term loan and revolving credit facility. Our other long-term debt has a weighted average cost of debt of 4.2% and maturities at various dates through September 2050.
Extinguishment of Debt
In October 2019, we issued $950 million principal amount of 4.75% senior notes due 2027 and further amended our senior secured credit facility, including the draw down of $950 million principal amount under the new term loan B facility. The proceeds were used to repay the $1.1 billion principal balance outstanding on the term loans A and B under our then existing senior secured credit facility, to repay the entire $250 million principal amount of the 5.375% senior notes due 2022, to repay the related redemption premium of $3.4 million on the senior notes and accrued interest and fees of $30.8 million, leaving $527.5 million for general corporate purposes, including acquisitions. We recorded a $4.5 million loss on extinguishment of debt related to this refinancing.
In March 2018, we issued $300 million principal amount of 5.625% senior notes due 2026, issued $550 million principal amount of 2.5% convertible senior notes due 2023 and amended our senior secured credit facility to reduce the applicable interest rate for the term loan B. Total gross proceeds of $850.0 million from the issuance of the notes were used to repay $246.3 million of the outstanding principal amount of our 2.5% convertible senior notes due 2019, the related repurchase premium of $90.4 million on those convertible senior notes and accrued interest and fees of $20.8 million, leaving $492.5 million in additional cash available for general corporate purposes. We recorded a $2.5 million loss on extinguishment of debt related to this refinancing.
Debt Covenants
Our amended senior secured credit facility contains a number of restrictions that, among other things, require us to satisfy a financial covenant and restrict our and our subsidiaries’ ability to incur additional debt, make certain investments and acquisitions, repurchase our stock and prepay certain indebtedness, create liens, enter into agreements with affiliates, modify the nature of our business, enter into sale-leaseback transactions, transfer and sell material assets, merge or consolidate, and pay dividends and make distributions (with the exception of subsidiary dividends or distributions to the parent company or other subsidiaries on at least a pro-rata basis with any noncontrolling interest partners). Certain of these restrictions are further limited temporarily by the July 2020 amendment. Non-compliance with one or more of the covenants and restrictions could result in the full or partial principal balance of the credit facility becoming immediately due and payable. The amended senior secured credit facility agreement has one covenant, measured quarterly, that relates to net leverage. The July 2020 amendment substitutes the consolidated net leverage ratio covenant with a liquidity covenant (as defined in the agreement) that requires our consolidated liquidity be at least $500 million until the earlier of (a) December 31, 2021 and (b) at our election, any fiscal quarter ending prior to December 31, 2021 so long as such election is made during the last month of such fiscal quarter or within 30 days following the end of such fiscal quarter. The July 2020 amendment also requires the liquidity covenant to be measured monthly beginning January 31, 2021 until the earlier of (x) November 30, 2021 and (y) the last day of the month before the consolidated net leverage ratio covenant applies. For fiscal quarters after resumption of the consolidated net leverage covenant, we will be required to maintain a ratio of consolidated total net debt to consolidated EBITDA (both as defined in the amended credit agreement) for the trailing four consecutive quarters of 6.75x with step downs to 6.25x after four quarters, 5.75x after eight quarters, 5.50x after twelve quarters and 5.25x after fourteen quarters through maturity, except that calculations of consolidated EBITDA (as defined in the agreement) for the first three fiscal quarters after resumption of the covenant will be substituted with an annualized consolidated EBITDA (as defined in the agreement). For the avoidance of doubt, the consolidated net leverage covenant will resume for the quarter ended December 31, 2021 at the latest.
The indentures governing our 6.5% senior secured notes, 4.75% senior notes, 4.875% senior notes and 5.625% senior notes contain covenants that limit, among other things, our ability and the ability of our restricted subsidiaries to incur certain additional indebtedness and issue preferred stock, make certain distributions, investments and other restricted payments, sell certain assets, agree to any restrictions on the ability of restricted subsidiaries to make payments to us, merge, consolidate or sell all of our assets, create certain liens, and engage in transactions with affiliates on terms that are not on an arms-length basis. Certain covenants, including those pertaining to incurrence of indebtedness, restricted payments, asset sales, mergers, and transactions with affiliates will be suspended during any period in which the notes are rated investment grade by both rating agencies and no default or event of default under the indenture has occurred and is continuing. All of these notes contain two incurrence-based financial covenants, as defined, requiring a minimum fixed charge coverage ratio of 2.0x and a maximum secured indebtedness leverage ratio of 3.5x.
Some of our other subsidiary indebtedness includes restrictions on entering into various transactions, such as acquisitions and disposals, and prohibits payment of ordinary dividends. They also have financial covenants including minimum consolidated EBITDA to consolidated net interest payable, minimum consolidated cash flow to consolidated debt service, maximum consolidated debt to consolidated EBITDA and minimum liquidity, all as defined in the applicable debt agreements.
As of December 31, 2020, we believe we were in compliance with all of our debt covenants related to our senior secured credit facility and our corporate senior secured notes, senior notes and convertible senior notes. We expect to remain in compliance with all of these covenants throughout 2021.
NOTE 6—DERIVATIVE INSTRUMENTS
We primarily use forward currency contracts and options to reduce our exposure to foreign currency risk associated with short-term artist fee commitments. We may also enter into forward currency contracts to minimize the risks and/or costs associated with changes in foreign currency rates on forecasted operating income. At December 31, 2020 and 2019, we had forward currency contracts and options outstanding with notional amounts of $42.0 million and $66.3 million, respectively. These instruments have not been designated as hedging instruments and any change in fair value is reported in earnings during the period of the change. Our foreign currency derivative activity, including the related fair values, are not material to any period presented.
In January 2020, we entered into an interest rate swap agreement that is designated as a cash flow hedge for accounting purposes to effectively convert a portion of our floating-rate debt to a fixed-rate basis. The swap agreement expires in October 2026, has a notional amount of $500 million and ensures that a portion of our floating-rate debt does not exceed 3.397%. The principal objective of this contract is to reduce the variability of the cash flow in our variable rate interest payments associated with our senior secured credit facility term loan B, thus reducing the impact of interest rate changes on future interest expense. Cash flows associated with the interest rate swap agreement are reflected as cash flows from operating activities within our consolidated statements of cash flows. As of December 31, 2020, there is no ineffective portion or amount excluded from effectiveness testing.
As a cash flow hedge, the effective portion of the loss on the derivative instrument was reported as a component of other comprehensive loss. Amounts are deferred in other comprehensive loss and reclassified into earnings in the same line item associated with the forecasted transaction in the period or periods during which the hedged transaction affects earnings.
During the year ended December 31, 2020, we recorded unrealized losses of $36.7 million, as a component of other comprehensive loss related to this hedge. Based on the current interest rate expectations, we estimate that approximately $7.7 million of this loss in other comprehensive loss will be reclassified into earnings in the next 12 months as an adjustment to interest expense. See Note 7—Fair Value Measurements for further discussion and disclosure of the fair values for this interest rate swap derivative.
We do not enter into derivative instruments for speculative or trading purposes and do not anticipate any significant recognition of derivative activity through the income statement in the future related to the instruments currently held. See Note 7—Fair Value Measurements for further discussion and disclosure of the fair values for our derivative instruments.
NOTE 7—FAIR VALUE MEASUREMENTS
Recurring
We currently have various financial instruments carried at fair value, such as marketable securities, derivatives and contingent consideration, but do not currently have nonfinancial assets and liabilities that are required to be measured at fair value on a recurring basis. Our financial assets and liabilities are measured using inputs from all levels of the fair value hierarchy as defined in the FASB guidance for fair value. For this categorization, only inputs that are significant to the fair value are considered. The three levels are defined as follows:
Level 1—Inputs are unadjusted quoted prices in active markets for identical assets or liabilities that can be accessed at the measurement date.
Level 2—Inputs include quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the asset or liability (i.e., interest rates, yield curves, etc.) and inputs that are derived principally from or corroborated by observable market data by correlation or other means (i.e., market corroborated inputs).
Level 3—Unobservable inputs that reflect assumptions about what market participants would use in pricing the asset or liability. These inputs would be based on the best information available, including our own data.
In accordance with the fair value hierarchy described above, the following table shows the fair value of our financial assets and liabilities that are required to be measured at fair value on a recurring basis, which are classified on the balance sheets as cash and cash equivalents, other current assets, other current liabilities and other long-term liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value Measurements
at December 31, 2020
|
|
Fair Value Measurements
at December 31, 2019
|
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total
|
|
|
|
|
(in thousands)
|
|
|
|
|
|
(in thousands)
|
|
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash equivalents
|
$
|
282,696
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
282,696
|
|
|
$
|
215,674
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
215,674
|
|
|
Forward currency contracts
|
—
|
|
|
118
|
|
|
—
|
|
|
118
|
|
|
—
|
|
|
11
|
|
|
—
|
|
|
11
|
|
|
Total
|
$
|
282,696
|
|
|
$
|
118
|
|
|
$
|
—
|
|
|
$
|
282,814
|
|
|
$
|
215,674
|
|
|
$
|
11
|
|
|
$
|
—
|
|
|
$
|
215,685
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate swap
|
$
|
—
|
|
|
$
|
31,587
|
|
|
$
|
—
|
|
|
$
|
31,587
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
Forward currency contracts
|
—
|
|
|
1,423
|
|
|
—
|
|
|
1,423
|
|
|
—
|
|
|
1,159
|
|
|
—
|
|
|
1,159
|
|
|
Put option
|
—
|
|
|
—
|
|
|
8,183
|
|
|
8,183
|
|
|
—
|
|
|
—
|
|
|
8,006
|
|
|
8,006
|
|
|
Subsidiary equity awards
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
7,661
|
|
|
7,661
|
|
|
Contingent consideration
|
—
|
|
|
—
|
|
|
46,574
|
|
|
46,574
|
|
|
—
|
|
|
—
|
|
|
64,892
|
|
|
64,892
|
|
|
Total
|
$
|
—
|
|
|
$
|
33,010
|
|
|
$
|
54,757
|
|
|
$
|
87,767
|
|
|
$
|
—
|
|
|
$
|
1,159
|
|
|
$
|
80,559
|
|
|
$
|
81,718
|
|
Cash equivalents consist of money market funds. Fair values for cash equivalents are based on quoted prices in an active market. Fair values for forward currency contracts are based on observable market transactions of spot and forward rates. The fair value for our interest rate swap is based upon inputs corroborated by observable market data with similar tenors.
Certain third parties have a put option or a subsidiary equity award to sell to us their noncontrolling interest in certain of our subsidiaries and such put option or subsidiary equity award is carried at fair value using Level 3 inputs. The put option is triggered by the occurrence of specific events, one of which is certain to occur, that requires us to buy the noncontrolling interest. The redemption price for the subsidiary equity award is not at fair value and the equity holder does not bear the risk and rewards of ownership. The redemption price for both the put option and subsidiary equity award is a variable amount based on a formula linked to historical earnings. We have recorded a current liability for the put option and subsidiary equity award which are valued based on the historic results of that subsidiary. Changes in the fair value are recorded in selling, general and administrative expenses.
We have certain contingent consideration obligations related to acquisitions which are measured at fair value using Level 3 inputs. The amounts due to the sellers are based on the achievement of agreed-upon financial performance metrics by the acquired companies where the contingent obligation is either earned or not earned. We record the liability at the time of the acquisition based on the present value of management’s best estimates of the future results of the acquired companies compared to the agreed-upon metrics. Subsequent to the date of acquisition, we update the original valuation to reflect current projections of future results of the acquired companies and the passage of time. Accretion of, and changes in the valuations of, contingent consideration are reported in selling, general and administrative expenses. See Note 8—Commitments and Contingent Liabilities for additional information related to the contingent payments.
Due to their short maturity, the carrying amounts of accounts receivable, accounts payable and accrued expenses approximated their fair values at December 31, 2020 and 2019.
Our outstanding debt held by third-party financial institutions is carried at cost, adjusted for discounts or debt issuance costs. Our debt is not publicly traded and the carrying amounts typically approximate fair value for debt that accrues interest at a variable rate, which are considered to be Level 2 inputs as defined in the FASB guidance.
The following table presents the estimated fair values of our senior secured notes, senior notes and convertible senior notes at December 31, 2020 and 2019:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Estimated Fair Value at:
|
|
|
December 31, 2020
|
|
December 31, 2019
|
|
|
Level 2
|
|
|
(in thousands)
|
|
6.5% Senior Secured Notes Due 2027
|
$
|
1,340,688
|
|
|
$
|
—
|
|
|
4.75% Senior Notes Due 2027
|
$
|
970,872
|
|
|
$
|
983,735
|
|
|
4.875% Senior Notes due 2024
|
$
|
581,480
|
|
|
$
|
596,137
|
|
|
5.625% Senior Notes due 2026
|
$
|
307,785
|
|
|
$
|
320,553
|
|
|
|
|
|
|
|
2.5% Convertible Senior Notes due 2023
|
$
|
720,764
|
|
|
$
|
675,664
|
|
|
2.0% Convertible Senior Notes due 2025
|
$
|
425,172
|
|
|
$
|
—
|
|
The estimated fair value of our third-party fixed-rate debt is based on quoted market prices in active markets for the same or similar debt, which are considered to be Level 2 inputs.
Non-recurring
The following table shows the fair value of our financial assets that have been adjusted to fair value on a non-recurring basis which had a significant impact on our results of operations for the years ended December 31, 2020 and 2019:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value
|
|
Fair Value Measurements Using
|
|
Loss
|
|
Description
|
|
Measurement
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
(Gain)
|
|
|
|
(in thousands)
|
|
2020
|
|
|
|
|
|
|
|
|
|
|
|
Definite-lived intangible assets, net
|
|
$
|
7,963
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
7,963
|
|
|
$
|
23,630
|
|
|
2019
|
|
|
|
|
|
|
|
|
|
|
|
Definite-lived intangible assets, net
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
26,751
|
|
During 2020, we recorded impairment charges related to definite-lived intangible assets of $23.6 million as a component of depreciation and amortization. The impairment charges are primarily related to intangible assets for revenue-generating contracts, venue management and leaseholds and client/vendor relationships in the Concerts segment. It was determined that these assets were impaired since the most recent estimated undiscounted future cash flows associated with these assets were less than their carrying value, primarily as a result of the expected impacts from the global COVID-19 pandemic for the 2020 period. These impairments were calculated using operating cash flows, which were discounted to approximate fair value. The key inputs in these calculations include future cash flow projections, including revenue profit margins, and, for the fair value computation, a discount rate. The key inputs used for these non-recurring fair value measurements are considered Level 3 inputs.
During 2019, we recorded impairment charges related to definite-lived intangible assets of $26.8 million as a component of depreciation and amortization. The impairment charges are primarily related to intangible assets for revenue-generating contracts in the Concerts and Sponsorship & Advertising segments. It was determined that these assets were impaired since the most recent estimated undiscounted future cash flows associated with these assets were less than their carrying value. These impairments were calculated using operating cash flows, which were discounted to approximate fair value. The key inputs in these calculations include future cash flow projections, including revenue profit margins, and, for the fair value computation, a discount rate. The key inputs used for these non-recurring fair value measurements are considered Level 3 inputs.
During 2018, in conjunction with our annual impairment test, a goodwill impairment was recorded for the Artist Services (non-management) reporting unit in the Concerts segment in the amount of $10.5 million as a component of depreciation and amortization. We calculated this impairment using a combination of a discounted cash flow methodology, which uses both Level 2 and Level 3 inputs, and a market multiple methodology, which uses primarily Level 2 inputs. The key inputs include discount rates, market multiples, control premiums, revenue growth and estimates of future financial performance. See Note 1—The Company and Summary of Significant Accounting Policies and Note 3—Long-Lived Assets for further discussion of our methodology and this impairment.
NOTE 8—COMMITMENTS AND CONTINGENT LIABILITIES
We have non-cancelable contracts related to minimum performance payments with various artists, other event-related costs and nonrecoupable ticketing contract advances. We also have commitments relating to additions to property, plant, and equipment under certain construction commitments for facilities and venues.
As of December 31, 2020, our future minimum payments under non-cancelable contracts and capital expenditure commitments consist of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-cancelable
Contracts
|
|
Capital
Expenditures
|
|
|
|
(in thousands)
|
|
2021
|
|
|
$
|
1,456,136
|
|
|
$
|
11,005
|
|
|
2022
|
|
|
481,238
|
|
|
1,048
|
|
|
2023
|
|
|
191,263
|
|
|
1,009
|
|
|
2024
|
|
|
77,315
|
|
|
1,009
|
|
|
2025
|
|
|
51,139
|
|
|
1,039
|
|
|
Thereafter
|
|
|
150,174
|
|
|
27,104
|
|
|
Total
|
|
|
$
|
2,407,265
|
|
|
$
|
42,214
|
|
Certain agreements relating to acquisitions provide for deferred purchase consideration payments at future dates. A liability is established at the time of the acquisition for these fixed payments. For obligations payable at a date greater than twelve months from the acquisition date, we apply a discount rate to calculate the present value of the obligations. As of December 31, 2020, we have accrued $11.7 million in other current liabilities and $7.3 million in other long-term liabilities and, as of December 31, 2019, we had accrued $7.1 million in other current liabilities and $9.1 million in other long-term liabilities, related to these deferred purchase consideration payments.
We have contingent obligations related to acquisitions which are accounted for as business combinations. Contingent consideration associated with business combinations is recorded at fair value at the time of the acquisition and reflected at current fair value for each subsequent reporting period thereafter until settled. We record these fair value changes in our statements of operations as selling, general and administrative expenses. The contingent consideration is generally subject to payout following the achievement of future performance targets and a portion is expected to be payable in the next twelve months. As of December 31, 2020, we have accrued $27.5 million in other current liabilities and $19.1 million in other long-term liabilities and, as of December 31, 2019, we had accrued $6.0 million in other current liabilities and $58.9 million in other long-term liabilities, representing the fair value of these estimated payments. The last contingency period for which we have an outstanding contingent payment is for the period ending June 2025. See Note 7—Fair Value Measurements for further discussion related to the valuation of these contingent payments.
As of December 31, 2020 and 2019, we guaranteed the debt of third parties of approximately $12.1 million and $16.5 million, respectively, primarily related to maximum credit limits on employee and tour-related credit cards, obligations of a nonconsolidated affiliate and obligations under a venue management agreement.
Litigation
Consumer Class Actions
The following putative class action lawsuits were filed against Live Nation and/or Ticketmaster in the United States and Canada: Vaccaro v. Ticketmaster LLC (Northern District of Illinois, filed September 2018); Ameri v. Ticketmaster LLC (Northern District of California, filed September 2018); Lee v. Ticketmaster LLC, et al. (Northern District of California, filed September 2018); Thompson-Marcial v. Ticketmaster Canada Holdings ULC (Ontario Superior Court of Justice, filed September 2018); McPhee v. Live Nation Entertainment, Inc., et al. (Superior Court of Quebec, District of Montreal, filed September 2018); Crystal Watch v. Live Nation Entertainment, Inc., et al. (Court of Queen’s Bench for Saskatchewan, by amendments filed September 2018); Gaetano v. Live Nation Entertainment, Inc., et al. (Northern District of New York, filed October 2018); Dickey v. Ticketmaster LLC, et al. (Central District of California, filed October 2018); Gomel v. Live Nation Entertainment, Inc., et al. (Supreme Court of British Columbia, Vancouver Registry, filed October 2018); Smith v. Live Nation Entertainment, Inc., et al. (Ontario Superior Court of Justice, filed October 2018); Messing v. Ticketmaster LLC, et al. (Central District of California, filed November 2018); and Niedbalski v. Ticketmaster LLC, et al. (Central District of California, filed December 2018).
As of November 2020, each of the consumer class actions filed in the United States had been dismissed with prejudice. In March 2019, the Dickey lawsuit was dismissed, and the Gaetano lawsuit was voluntarily dismissed with prejudice by the plaintiff in April 2019. The Ameri lawsuit was dismissed in May 2019, and the Vaccaro lawsuit was dismissed in June 2019. In June 2020, the Ninth Circuit Court of Appeals affirmed the District Court’s ruling in the Lee lawsuit, compelling arbitration and dismissing the case. In November 2020, the Messing and Niedbalski lawsuits were dismissed with prejudice.
The remaining Canadian lawsuits make similar factual allegations that Live Nation and/or Ticketmaster LLC engage in conduct that is intended to encourage the resale of tickets on secondary ticket exchanges at elevated prices. Based on these allegations, each plaintiff asserts violations of different provincial and federal laws. Each plaintiff also seeks to represent a class of individuals who purchased tickets on a secondary ticket exchange, as defined in each plaintiff’s complaint. The complaints seek a variety of remedies, including unspecified compensatory damages, punitive damages, restitution, injunctive relief and attorneys’ fees and costs. Based on information presently known to management, we do not believe that a loss is probable of occurring at this time, and believe that the potential liability, if any, will not have a material adverse effect on our financial position, cash flows or results of operations. Further, we do not currently believe that the claims asserted in these lawsuits have merit, and considerable uncertainty exists regarding any monetary damages that will be asserted against us. We continue to vigorously defend these actions.
CIE Arbitration
In July 2019, Ticketmaster New Ventures, S. de R.L. de C.V. (“TNV”), an indirect wholly-owned subsidiary of LNE, entered into agreements with Corporación Interamericana de Entretenimiento, S.A.B. de C.V. (“CIE”) and Grupo Televisa, S.A.B. (“TV”) to acquire an aggregate 51% interest in OCESA Entretenimiento, S.A. de C.V. (“OCESA”) and certain other related subsidiaries of CIE. We made our initial concentration notice filings with the regulatory authorities in Mexico in late August 2019 and received approval for the transaction in mid-April 2020. CIE shareholders approved the acquisition in September 2019. In May 2020, we notified CIE that we were terminating our agreement with it as a result of CIE’s failure to comply with its contractual obligation to continue operating the target companies in the ordinary course of business and the occurrence of a material adverse effect (as that term is defined in the CIE purchase agreement). We simultaneously notified TV that we were terminating our agreement with it, which agreement may be terminated if the agreement with CIE is terminated for any reason. On May 25, 2020, TNV commenced binding arbitration proceedings, seated in New York, New York, before the International Court of Arbitration of the International Chamber of Commerce, seeking a declaratory judgment that it properly terminated the CIE purchase agreement and that any obligations thereunder are excused on the grounds set forth above, among others. On July 30, 2020, CIE filed its response to TNV’s claims, asserting, among other things, that CIE did not breach its obligation to continue operating the target companies in the ordinary course of business and that no material adverse effect (as that term is defined in the CIE purchase agreement) has occurred, and CIE joined LNE as a party to the arbitration proceedings as a joint obligor under the CIE purchase agreement. CIE is seeking specific performance to require us to proceed with closing under the CIE purchase agreement and damages in an unspecified amount arising from our alleged failure to timely close. The matter has been assigned to a panel of arbitrators and a hearing has been scheduled to commence in March 2022. We intend to vigorously defend these claims.
Other Litigation
From time to time, we are involved in other legal proceedings arising in the ordinary course of our business, including proceedings and claims based upon purported violations of antitrust laws, intellectual property rights and tortious interference, which could cause us to incur significant expenses. We have also been the subject of personal injury and wrongful death claims relating to accidents at our venues in connection with our operations. As required, we have accrued our estimate of the probable settlement or other losses for the resolution of any outstanding claims. These estimates have been developed in consultation with counsel and are based upon an analysis of potential results, including, in some cases, estimated redemption rates for the settlement offered, assuming a combination of litigation and settlement strategies. It is possible, however, that future results of operations for any particular period could be materially affected by changes in our assumptions or the effectiveness of our strategies related to these proceedings.
NOTE 9—CERTAIN RELATIONSHIPS AND RELATED-PARTY TRANSACTIONS
Transactions Involving Related Parties
The following table provides details of the total revenue earned and expenses incurred from all related-party transactions:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
|
|
|
2020
|
|
2019
|
|
2018
|
|
|
|
|
|
|
(in thousands)
|
|
Related-party revenue
|
|
|
|
|
$
|
482
|
|
|
$
|
131,909
|
|
|
$
|
157,834
|
|
|
Related-party expenses
|
|
|
|
|
$
|
1,009
|
|
|
$
|
1,711
|
|
|
$
|
4,300
|
|
|
Related-party acquisition related
|
|
|
|
|
$
|
—
|
|
|
$
|
3,000
|
|
|
$
|
—
|
|
The significant related-party transactions included in the table above are detailed below.
Liberty Media
Two current members of our board of directors were originally nominated by Liberty Media pursuant to a stockholder agreement. These directors receive directors’ fees and stock-based awards on the same basis as other non-employee members of our board of directors.
We lease a venue from, and provide ticketing services to, a sports franchise owned by Liberty Media and pay royalty fees and non-recoupable ticketing contract advances to the sports franchise. We also receive transaction fees from the sports franchise for tickets the sports franchise sells using our ticketing software.
Legends
Our Chief Executive Officer became a member of the board of directors of Legends Hospitality Holding Company, LLC (“Legends”) in February 2015. In 2017, our President assumed this role from the Chief Executive Officer. Legends provides concession services to certain of our owned or operated amphitheaters. We receive fees based on concession sales at each of the amphitheaters.
Sirius XM
In January 2018, our Chief Executive Officer became a member of the board of directors of Sirius XM Holdings Inc. (“Sirius XM”), a satellite radio company that is a subsidiary of Liberty Media. From time to time, we purchase advertising from Sirius XM.
Transactions Involving Equity Method Investees
We conduct business with certain of our equity method investees in the ordinary course of business. Transactions primarily relate to venue rentals and ticketing services. Revenue of $0.5 million, $2.7 million and $2.7 million were earned in 2020, 2019 and 2018, respectively, and expenses of $1.3 million, $1.0 million and $1.1 million were incurred in 2020, 2019 and 2018, respectively, from these equity investees for services rendered or provided in relation to these business ventures.
As of December 31, 2020 and 2019, we had accounts receivable and notes receivable balances of $12.6 million and $21.1 million, respectively, due from certain of our equity investees.
NOTE 10—INCOME TAXES
Significant components of the provision for income tax expense (benefit) are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2020
|
|
2019
|
|
2018
|
|
|
|
(in thousands)
|
|
Current:
|
|
|
|
|
|
|
|
Federal
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
(55)
|
|
|
Foreign
|
|
7,978
|
|
|
61,834
|
|
|
40,239
|
|
|
State
|
|
1,024
|
|
|
5,523
|
|
|
6,828
|
|
|
Total current
|
|
9,002
|
|
|
67,357
|
|
|
47,012
|
|
|
Deferred:
|
|
|
|
|
|
|
|
Federal
|
|
(16,366)
|
|
|
5,314
|
|
|
2,246
|
|
|
Foreign
|
|
(20,772)
|
|
|
(6,345)
|
|
|
(8,697)
|
|
|
State
|
|
(739)
|
|
|
566
|
|
|
204
|
|
|
Total deferred
|
|
(37,877)
|
|
|
(465)
|
|
|
(6,247)
|
|
|
Income tax expense (benefit)
|
|
$
|
(28,875)
|
|
|
$
|
66,892
|
|
|
$
|
40,765
|
|
|
|
|
|
|
|
|
|
The domestic income (loss) before income taxes was $(1.5) billion, $36.1 million and $43.5 million for 2020, 2019 and 2018, respectively. Foreign income (loss) before income taxes was $(374.5) million, $149.0 million and $87.6 million for 2020, 2019 and 2018, respectively.
Significant components of our deferred tax liabilities and assets are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
2020
|
|
2019
|
|
|
|
(in thousands)
|
|
Deferred tax liabilities:
|
|
|
|
|
|
Leases
|
|
$
|
206,701
|
|
|
$
|
192,870
|
|
|
Intangible assets
|
|
170,517
|
|
|
161,843
|
|
|
Prepaid expenses
|
|
17,786
|
|
|
5,876
|
|
|
|
|
|
|
|
|
Other
|
|
31,835
|
|
|
19,186
|
|
|
Total deferred tax liabilities
|
|
426,839
|
|
|
379,775
|
|
|
Deferred tax assets:
|
|
|
|
|
|
Intangible assets
|
|
38,846
|
|
|
40,926
|
|
|
Accrued expenses
|
|
40,843
|
|
|
60,479
|
|
|
Net operating loss carryforwards
|
|
955,160
|
|
|
488,081
|
|
|
Foreign tax and other credit carryforwards
|
|
51,119
|
|
|
47,215
|
|
|
Equity compensation
|
|
25,209
|
|
|
22,503
|
|
|
Leases
|
|
224,776
|
|
|
211,206
|
|
|
Other
|
|
34,171
|
|
|
12,751
|
|
|
Total gross deferred tax assets
|
|
1,370,124
|
|
|
883,161
|
|
|
Valuation allowance
|
|
1,100,407
|
|
|
667,242
|
|
|
Total net deferred tax assets
|
|
269,717
|
|
|
215,919
|
|
|
Net deferred tax liabilities
|
|
$
|
(157,122)
|
|
|
$
|
(163,856)
|
|
Each reporting period, we evaluate the realizability of all of our deferred tax assets in each tax jurisdiction. As of December 31, 2020, 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 in those tax jurisdictions in 2020, 2019 and 2018.
During 2020 and 2019, we recorded net deferred tax liabilities of $35.3 million and $43.3 million, respectively, due principally to differences in financial reporting and tax bases in assets acquired in business combinations.
As of December 31, 2020, we have United States federal, state and foreign deferred tax assets related to net operating loss carryforwards of $393.9 million, $148.2 million and $413.1 million, respectively. The increase in net operating loss carryforwards is primarily attributed to increases in loss carryforwards during 2020. The majority of the increase in net operating loss carryforwards are in jurisdictions for which we maintain a full valuation allowance against net deferred tax assets. Based on current statutory carryforward periods, the operating loss carryforwards will expire on various dates beginning in 2025. Our federal net operating loss may be subject to statutory limitations on the amount that can be used in any given year.
The reconciliation of income tax computed at the United States federal statutory rates to income tax expense (benefit) is:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2020
|
|
2019
|
|
2018
|
|
|
|
(in thousands)
|
|
Income tax expense (benefit) at United States statutory rate of 21%
|
|
$
|
(389,900)
|
|
|
$
|
38,872
|
|
|
$
|
27,532
|
|
|
State income taxes, net of federal tax benefits
|
|
713
|
|
|
3,137
|
|
|
4,860
|
|
|
Differences between foreign and United States statutory rates
|
|
(12,794)
|
|
|
6,384
|
|
|
2,650
|
|
|
|
|
|
|
|
|
|
|
Non-United States income inclusions and exclusions
|
|
1,809
|
|
|
(3,222)
|
|
|
(3,425)
|
|
|
United States income inclusions and exclusions
|
|
(16,495)
|
|
|
(2,582)
|
|
|
(13,790)
|
|
|
Nondeductible items
|
|
39,861
|
|
|
10,118
|
|
|
26,376
|
|
|
Tax contingencies
|
|
(1,302)
|
|
|
(1,340)
|
|
|
389
|
|
|
Tax expense from acquired goodwill
|
|
6,950
|
|
|
6,107
|
|
|
4,353
|
|
|
|
|
|
|
|
|
|
|
Change in valuation allowance
|
|
344,161
|
|
|
8,536
|
|
|
(8,845)
|
|
|
Other, net
|
|
(1,878)
|
|
|
882
|
|
|
665
|
|
|
|
|
$
|
(28,875)
|
|
|
$
|
66,892
|
|
|
$
|
40,765
|
|
|
|
|
|
|
|
|
|
Income tax expense (benefit) is principally attributable to our earnings in foreign tax jurisdictions along with state income taxes.
Amounts included in differences between foreign and United States statutory rates are impacted by changes in the mix of international earnings subject to various tax rates which can differ greatly in their proximity to the United States statutory rate. The differences between statutory rates is also impacted by our Luxembourg affiliates and tax rulings which include the application of a reduced Luxembourg effective rate to the net income before tax resulting from our financing activities in Luxembourg.
Amounts included in United States income inclusions and exclusions include the favorable impact of tax deductions for vesting of restricted stock awards and exercises of stock options partially offset in 2019 and 2018 by unfavorable inclusions for GILTI under the provisions associated with the TCJA.
Nondeductible items for all years presented include the impact of increased nondeductible expenses pursuant to the provisions of the TCJA including nondeductible executive compensation. The 2020 nondeductible expenses also include adjustments for nondeductible noncontrolling interest.
Nondeductible items in 2018 includes our goodwill impairment for Artist Services (non-management) which was not deductible for income tax purposes.
The change in valuation allowance for each period presented resulted primarily from changes in the income (loss) within jurisdictions with full valuation allowances, including the United States.
The following table summarizes the activity related to the Company’s unrecognized tax benefits:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2020
|
|
2019
|
|
2018
|
|
|
|
(in thousands)
|
|
Balance at January 1
|
|
$
|
21,723
|
|
|
$
|
34,071
|
|
|
$
|
30,630
|
|
|
Additions:
|
|
|
|
|
|
|
|
Increase for current year positions
|
|
1,689
|
|
|
2,215
|
|
|
1,531
|
|
|
Increase for prior year positions
|
|
—
|
|
|
1,898
|
|
|
2,995
|
|
|
|
|
|
|
|
|
|
|
Interest and penalties for prior years
|
|
352
|
|
|
458
|
|
|
106
|
|
|
Reductions:
|
|
|
|
|
|
|
|
Decrease for prior year positions
|
|
(2,109)
|
|
|
(3,272)
|
|
|
—
|
|
|
Expiration of applicable statute of limitations
|
|
—
|
|
|
—
|
|
|
(730)
|
|
|
Settlements for prior year positions
|
|
(17)
|
|
|
(13,852)
|
|
|
(9)
|
|
|
Foreign exchange
|
|
94
|
|
|
205
|
|
|
(452)
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31
|
|
$
|
21,732
|
|
|
$
|
21,723
|
|
|
$
|
34,071
|
|
|
|
|
|
|
|
|
|
In February 2019, the Company reached a settlement agreement with the Canadian taxing authority regarding existing uncertain tax positions. The gross liability for unrecognized tax benefits primarily decreased in 2019 due to this settlement.
If we were to prevail on all uncertain tax positions, the net effect would be a decrease to our income tax provision of approximately $0.5 million. The remaining $21.2 million is offset by deferred tax assets that represent tax benefits that would be received in the event that we did not prevail on all uncertain tax positions. As of December 31, 2020, it is not expected that the total amounts of unrecognized tax benefits will increase or decrease materially within the next year.
We regularly assess the likelihood of additional assessments in each taxing jurisdiction resulting from current and subsequent years’ examinations. Liabilities for income taxes are established for future income tax assessments when it is probable there will be future assessments and the amount can be reasonably estimated. Once established, liabilities for uncertain tax positions are adjusted only when there is more information available or when an event occurs necessitating a change to the liabilities. As of December 31, 2020, we believe that the resolution of income tax matters for open years will not have a material effect on our consolidated financial statements although the resolution of income tax matters could impact our effective tax rate for a particular future period.
The tax years 2009 through 2020 remain open to examination by the primary tax jurisdictions to which we are subject.
NOTE 11—EQUITY
Dividends
From inception and through December 31, 2020, we have not declared or paid any dividends. We currently intend to retain future earnings, if any, to finance the expansion of our business. Therefore, we do not expect to pay any cash dividends in the foreseeable future. Moreover, the terms of our senior secured credit facility limit the amount of funds that we will have available to declare and distribute as dividends on our common stock. Payment of future cash dividends, if any, will be at the discretion of our board of directors in accordance with applicable laws after taking into account various factors, including the financial condition, operating results, current and anticipated cash needs, plans for expansion and contractual restrictions with respect to the payment of dividends.
Common Stock
The following table reconciles common stock reported in the consolidated statements of changes in equity to the consolidated balance sheets.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
2020
|
|
2019
|
|
Common shares issued as reported in the consolidated statement of changes in equity
|
|
214,466,988
|
|
|
211,262,062
|
|
|
Unvested restricted stock awards
|
|
1,589,073
|
|
|
1,169,582
|
|
|
Unvested deferred stock awards issued
|
|
2,367,000
|
|
|
1,686,000
|
|
|
Common shares issued as reported in the consolidated balance sheets
|
|
218,423,061
|
|
|
214,117,644
|
|
Unvested restricted stock awards and unvested deferred stock awards issued will be reflected in the statements of changes in equity at the time of vesting.
During 2020, 2019 and 2018, we issued 3.2 million, 1.3 million and 2.3 million shares, respectively, of common stock in connection with stock option exercises and vesting of restricted stock awards.
During 2019, we issued 0.8 million shares of common stock to holders of our 2.5% convertible senior notes due 2019 upon conversion of $28.6 million of the principal amount of the notes.
Common Stock Reserved for Future Issuance
Common stock of approximately 19.0 million shares as of December 31, 2020 is reserved for future issuances under the stock incentive plan (including 9.3 million options, 1.6 million restricted stock awards and 2.4 million deferred stock awards currently granted).
Noncontrolling Interests
Common securities held by the noncontrolling interests that do not include put arrangements exercisable outside of our control are recorded in equity, separate from our stockholders’ equity.
The purchase or sale of additional ownership in an already controlled subsidiary is recorded as an equity transaction with no gain or loss recognized in net income (loss) or comprehensive income (loss) as long as the subsidiary remains a controlled subsidiary. In 2020, 2019 and 2018, we acquired all or additional equity interests in several companies that did not have a significant impact to equity either on an individual basis or in the aggregate. The following schedule reflects the change in ownership interests for these transactions:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
2020
|
|
2019
|
|
2018
|
|
|
(in thousands)
|
|
Net income (loss) attributable to common stockholders of Live Nation
|
$
|
(1,724,535)
|
|
|
$
|
69,889
|
|
|
$
|
60,249
|
|
|
Transfers of noncontrolling interests:
|
|
|
|
|
|
|
Changes in Live Nation’s additional paid-in capital for purchases of noncontrolling interests, net of transaction costs
|
14,336
|
|
|
(23,878)
|
|
|
(8,210)
|
|
|
Changes in Live Nation’s additional paid-in capital for sales of noncontrolling interests, net of transaction costs
|
(7,667)
|
|
|
—
|
|
|
1,410
|
|
|
Net transfers of noncontrolling interests
|
6,669
|
|
|
(23,878)
|
|
|
(6,800)
|
|
|
Change from net income (loss) attributable to common stockholders of Live Nation and net transfers of noncontrolling interests
|
$
|
(1,717,866)
|
|
|
$
|
46,011
|
|
|
$
|
53,449
|
|
Redeemable Noncontrolling Interests
We are subject to put arrangements where the holders of the noncontrolling interests can require us to repurchase their shares at specified dates in the future or within specified periods in the future. Certain of these puts can be exercised earlier upon the occurrence of triggering events as specified in the agreements. The redemption amounts for these puts are either at a fixed amount, at fair value at the time of exercise or a variable amount based on a formula linked to earnings. In accordance with the FASB guidance for business combinations, the redeemable noncontrolling interests are recorded at their fair value at acquisition date. For put arrangements that are not currently redeemable, we accrete to the estimated redemption value over the period from the date of issuance to the earliest redemption date of the individual puts, with the offset recorded to additional paid-in capital. Decreases in accretion are only recognized to the extent that increases had been previously recognized. The estimated redemption values that are based on a formula linked to future earnings are computed each reporting period using projected cash flows, and the estimated redemption values that are based on fair value at the time of exercise are computed each reporting period by applying a multiple to projected earnings, both of which take into account the current expectations regarding profitability and the timing of revenue-generating events. The balances are reflected in our balance sheets as redeemable noncontrolling interests outside of permanent equity.
Our estimate of redemption amounts for puts that are redeemable at fixed or determinable prices on fixed or determinable dates for the years ended December 31, 2021, 2022, 2023, 2024 and 2025 are $47.7 million, $79.9 million, $54.8 million, $30.1 million and $59.8 million, respectively.
Transactions with Noncontrolling Interest Partners
We have loaned or advanced money to noncontrolling interest partners under the terms of the partnership operating agreements, promissory notes or other arrangements. As of December 31, 2020, we had outstanding notes receivable and prepayments of $3.0 million in other current assets and $84.1 million in other long-term assets, and as of December 31, 2019, we had outstanding notes receivable and prepayments of $6.5 million in other current assets and $97.5 million in other long-term assets.
Accumulated Other Comprehensive Income (Loss)
The following table presents changes in the components of AOCI, net of taxes, for the years ended December 31, 2020, 2019 and 2018:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss on Cash Flow Hedges
|
|
|
|
Foreign Currency Items
|
|
|
|
Total
|
|
|
|
(in thousands)
|
|
Balance at December 31, 2017
|
|
$
|
—
|
|
|
|
|
$
|
(108,542)
|
|
|
|
|
$
|
(108,542)
|
|
|
Other comprehensive income before reclassifications
|
|
—
|
|
|
|
|
(36,689)
|
|
|
|
|
(36,689)
|
|
|
Amount reclassified from AOCI
|
|
—
|
|
|
|
|
—
|
|
|
|
|
—
|
|
|
Net other comprehensive income
|
|
—
|
|
|
|
|
(36,689)
|
|
|
|
|
(36,689)
|
|
|
Balance at December 31, 2018
|
|
—
|
|
|
|
|
(145,231)
|
|
|
|
|
(145,231)
|
|
|
Other comprehensive loss before reclassifications
|
|
—
|
|
|
|
|
(482)
|
|
|
|
|
(482)
|
|
|
Amount reclassified from AOCI
|
|
—
|
|
|
|
|
—
|
|
|
|
|
—
|
|
|
Net other comprehensive loss
|
|
—
|
|
|
|
|
(482)
|
|
|
|
|
(482)
|
|
|
Balance at December 31, 2019
|
|
—
|
|
|
|
|
(145,713)
|
|
|
|
|
(145,713)
|
|
|
Other comprehensive income (loss) before reclassifications
|
|
(36,689)
|
|
|
|
|
291
|
|
|
|
|
(36,398)
|
|
|
Amount reclassified from AOCI
|
|
5,102
|
|
|
|
|
—
|
|
|
|
|
5,102
|
|
|
Net other comprehensive income (loss)
|
|
(31,587)
|
|
|
|
|
291
|
|
|
|
|
(31,296)
|
|
|
Balance at December 31, 2020
|
|
$
|
(31,587)
|
|
|
|
|
$
|
(145,422)
|
|
|
|
|
$
|
(177,009)
|
|
See Note 7—Fair Value Measurements for further discussion and disclosure of the fair value of our interest rate swap that has been designated as a cash flow hedge.
Earnings per Share
Basic net income (loss) per common share is computed by dividing the net income (loss) available to common stockholders by the weighted average number of common shares outstanding during the period. Diluted net income per common share adjusts basic net income per common share for the effects of stock options, restricted and deferred stock awards and other potentially dilutive financial instruments only in the periods in which such effect is dilutive. Our convertible senior notes are considered in the calculation of diluted net income per common share, if dilutive.
The calculation of diluted net income per common share includes the effects of the assumed exercise of any outstanding stock options, the assumed vesting of shares of restricted and deferred stock awards and the assumed conversion of the convertible senior notes where dilutive. For the years ended December 31, 2020, 2019 and 2018 there were no reconciling items to the weighted average common shares outstanding in the calculation of diluted net income per common share. The following table shows securities excluded from the calculation of diluted net income per common share because such securities were anti-dilutive:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2020
|
|
2019
|
|
2018
|
|
Options to purchase shares of common stock
|
|
9,323,323
|
|
|
11,347,305
|
|
|
11,784,023
|
|
|
Restricted and deferred stock awards—unvested
|
|
3,956,073
|
|
|
3,655,582
|
|
|
3,899,181
|
|
|
|
|
|
|
|
|
|
|
Conversion shares related to convertible senior notes
|
|
11,014,846
|
|
|
8,374,536
|
|
|
8,912,099
|
|
|
Number of anti-dilutive potentially issuable shares excluded from diluted common shares outstanding
|
|
24,294,242
|
|
|
23,377,423
|
|
|
24,595,303
|
|
NOTE 12—REVENUE RECOGNITION
The global COVID-19 pandemic has significantly impacted the recognition of revenue for our Concerts, Ticketing and Sponsorship & Advertising segments. Beginning in mid-March, we ceased all of our tours and closed our venues to support global efforts at social distancing to mitigate the spread of the virus, and to comply with restrictions put in place by various governmental entities.
For our Concerts segment, the impact is partially a delay in the timing of revenue recognition as many events are being rescheduled to dates in 2021. For events that have been cancelled as of December 31, 2020, the deferred revenue has been reclassified to accrued expenses on our consolidated balance sheets where not already refunded to the fan. In certain markets, we are offering fans an incentive to receive a voucher for a future ticket purchase to one of our events in lieu of receiving a refund for the cancelled event. Where a fan has elected to receive the incentive voucher, the cash from the original ticket purchase remains in deferred revenue. For certain of our rescheduled events, we are offering a limited refund window for fans to request a refund. Where a fan has elected to receive a refund for a rescheduled event and where we have estimated future refunds, the deferred revenue has been reclassified to accrued expenses if not already refunded. The estimate of future refunds was developed by allocating our event-related deferred revenue based on where we estimated that the affected events were in the refund process as of December 31, 2020, and applying a venue-specific refund take rate. The venue-specific refund take rates were based on the refunds we have issued since we ceased all our tours and closed our venues in mid-March 2020 through the end of the current reporting period.
For our Ticketing segment, the impact is similar to the Concerts segment if the tickets sold for an event are controlled by our concert promoters. For the Ticketing segment’s third-party clients, previously recognized service charges are reversed from revenue when the event is cancelled or a refund is issued for a rescheduled event, including refunds issued after the balance sheet date but prior to the filing of our consolidated financial statements. The revenue reversal is reflected as accrued expenses on our consolidated balance sheets where not already refunded to the fan. The timing of our third-party clients’ event cancellations and rescheduling of postponed events versus new events available for sale can result in refunds of service charges exceeding current quarter sales resulting in negative revenue for that period.
For our Sponsorship & Advertising segment, the impact is partially a delay in the timing of revenue recognition due to our concert events being rescheduled, our venues being closed and the limited number of events currently available for sale on our websites. In response to the impacts we are experiencing from the global COVID-19 pandemic, we have amended or are continuing negotiations with certain of our sponsors to either provide additional benefits when our venues reopen and our concert events resume or extend the term of the agreement with no additional benefits to the sponsor.
Concerts
Concerts revenue, including intersegment revenue, for the years ended December 31, 2020, 2019 and 2018 are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
|
|
|
2020
|
|
2019
|
|
2018
|
|
|
|
|
|
|
(in thousands)
|
|
Total Concert Revenue
|
|
|
|
|
$
|
1,468,433
|
|
|
$
|
9,428,094
|
|
|
$
|
8,770,031
|
|
|
Percentage of consolidated revenue
|
|
|
|
|
78.9
|
%
|
|
81.6
|
%
|
|
81.3
|
%
|
Our Concerts segment generates revenue from the promotion or production of live music events and festivals in our owned or operated venues and in rented third-party venues, artist management commissions and the sale of merchandise for music artists at events. As a promoter and venue operator, we earn revenue primarily from the sale of tickets, concessions, merchandise, parking, ticket rebates or service charges on tickets sold by Ticketmaster or third-party ticketing agreements, and rental of our owned or operated venues. As an artist manager, we earn commissions on the earnings of the artists and other clients we represent, primarily derived from clients’ earnings for concert tours. Over 95% of Concerts’ revenue, whether related to promotion, venue operations, artist management or artist event merchandising, is recognized on the day of the related event. The majority of consideration for our Concerts segment is collected in advance of or on the day of the event. Consideration received in advance of the event is recorded as deferred revenue or in long-term liabilities if the event is more than twelve months from the balance sheet date. Any consideration not collected by the day of the event is typically received within three months after the event date.
Ticketing
Ticketing revenue, including intersegment revenue, for the years ended December 31, 2020, 2019 and 2018 are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
|
|
|
2020
|
|
2019
|
|
2018
|
|
|
|
|
|
|
(in thousands)
|
|
Total Ticketing Revenue
|
|
|
|
|
$
|
188,383
|
|
|
$
|
1,545,189
|
|
|
$
|
1,529,566
|
|
|
Percentage of consolidated revenue
|
|
|
|
|
10.1
|
%
|
|
13.4
|
%
|
|
14.2
|
%
|
Ticket fee revenue is generated from convenience and order processing fees, or service charges, charged at the time a ticket for an event is sold in either the primary or secondary markets. Our Ticketing segment is primarily an agency business that sells tickets for events on behalf of its clients, which include venues, concert promoters, professional sports franchises and leagues, college sports teams, theater producers and museums. Our Ticketing segment records revenue arising from convenience and order processing fees, regardless of whether these fees are related to tickets sold in the primary or secondary market, and regardless of whether these fees are associated with our concert events or third-party clients’ concert events. Our Ticketing segment does not record the face value of the tickets as revenue. Ticket fee revenue is recognized when the ticket is sold for third-party clients and secondary market sales, as we have no further obligation to our client’s customers following the sale of the ticket. For our concert events where our concert promoters control ticketing, ticket fee revenue is recognized when the event occurs because we also have the obligation to deliver the event to the fan. The delivery of the ticket to the fan is not considered a distinct performance obligation for our concert events because the fan cannot receive the benefits of the ticket unless we also fulfill our obligation to deliver the event. The majority of ticket fee revenue is collected within the month of the ticket sale. Revenue received from the sale of tickets in advance of our concert events is recorded as deferred revenue or in other long-term liabilities if the date of the event is more than twelve months from the balance sheet date. Reported revenue is net of any refunds made or committed to and also the impact of any cancellations of events that occurred during the period and up to the time of filing these consolidated financial statements.
Ticketing contract advances, which can be either recoupable or non-recoupable, represent amounts paid in advance to our clients pursuant to ticketing agreements and are reflected in prepaid expenses or in long-term advances if the amount is expected to be recouped or recognized over a period of more than twelve months. Recoupable ticketing contract advances are generally recoupable against future royalties earned by the client, based on the contract terms, over the life of the contract. Royalties are typically earned by the client when tickets are sold. Royalties paid to clients are recorded as a reduction to revenue when the tickets are sold and the corresponding service charge revenue is recognized. Non-recoupable ticketing contract advances, excluding those amounts paid to support clients’ advertising costs, are fixed additional incentives occasionally paid by us to certain clients to secure the contract and are typically amortized over the life of the contract on a straight-line basis as a reduction to revenue. At December 31, 2020 and 2019, we had ticketing contract advances of $63.5 million and $100.9 million, respectively, in prepaid expenses and $87.0 million and $105.7 million, respectively, in long-term advances. We amortized $48.0 million, $80.3 million and $80.1 million for the years ended December 31, 2020, 2019 and 2018 respectively, related to non-recoupable ticketing contract advances.
Sponsorship & Advertising
Sponsorship & Advertising revenue, including intersegment revenue, for the years ended December 31, 2020, 2019 and 2018 are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
|
|
|
2020
|
|
2019
|
|
2018
|
|
|
|
|
|
|
(in thousands)
|
|
Total Sponsorship & Advertising Revenue
|
|
|
|
|
$
|
203,676
|
|
|
$
|
590,274
|
|
|
$
|
503,968
|
|
|
Percentage of consolidated revenue
|
|
|
|
|
10.9
|
%
|
|
5.1
|
%
|
|
4.7
|
%
|
Our Sponsorship & Advertising segment generates revenue from sponsorship and marketing programs that provide its sponsors with strategic, international, national and local opportunities to reach customers through our venue, concert and ticketing assets, including advertising on our websites. These programs can also include custom events or programs for the sponsors’ specific brands, which are typically experienced exclusively by the sponsors’ customers. Sponsorship agreements may contain multiple elements, which provide several distinct benefits to the sponsor over the term of the agreement, and can be for a single or multi-year term. We also earn revenue from exclusive access rights provided to sponsors in various categories such as ticket pre-sales, beverage pouring rights, venue naming rights, media campaigns, signage within our venues, and advertising on our websites. Revenue from sponsorship agreements is allocated to the multiple elements based on the relative stand-alone selling price of each separate element, which are determined using vendor-specific evidence, third-party evidence or our best estimate of the fair value. Revenue is recognized over the term of the agreement or operating season as the benefits are provided to the sponsor unless the revenue is associated with a specific event, in which case it is recognized when the event occurs. Revenue is collected in installment payments during the year, typically in advance of providing the benefit or the event. Revenue received in advance of the event or the sponsor receiving the benefit is recorded as deferred revenue or in other long-term liabilities if the date of the event is more than twelve months from the balance sheet date.
At December 31, 2020, we had contracted sponsorship agreements with terms greater than one year that had approximately $1.0 billion of revenue related to future benefits to be provided by us. We expect to recognize, based on current projections, approximately 33%, 26%, 15% and 26% of this revenue in 2021, 2022, 2023 and thereafter, respectively.
Deferred Revenue
The majority of our deferred revenue is typically classified as current and is shown as a separate line item on the consolidated balance sheets. Deferred revenue that is not expected to be recognized within the next twelve months is classified as long-term and reflected in other long-term liabilities on the consolidated balance sheets. At December 31, 2020, 2019 and 2018, we had current deferred revenue of $1.8 billion, $1.4 billion and $1.2 billion, respectively.
The table below summarizes the amount of prior year current deferred revenue recognized during the years ended December 31, 2020 and 2019:
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
2020
|
|
2019
|
|
|
|
|
|
(in thousands)
|
|
Concerts
|
$
|
273,734
|
|
|
$
|
1,121,945
|
|
|
Ticketing
|
26,471
|
|
|
62,088
|
|
|
Sponsorship & Advertising
|
18,010
|
|
|
20,220
|
|
|
Other & Corporate
|
3,402
|
|
|
3,069
|
|
|
|
$
|
321,617
|
|
|
$
|
1,207,322
|
|
As of December 31, 2020, approximately 40.6% of the current deferred revenue balance from December 31, 2019 is expected to be recognized in 2021 and thus such amounts remain in current deferred revenue. In addition, as of December 31, 2020, approximately 32.7% of the current deferred revenue balance from December 31, 2019 has been or is expected to be refunded to fans as the corresponding events have cancelled or refunds were or are expected to be requested for rescheduled events, and thus such amounts have been reclassified to accrued expenses if not already refunded. As the global COVID-19 pandemic continues to further delay our ability to resume our concert events and reopen our venues, our long-term deferred revenue balance has increased. We had long-term deferred revenue of $88.6 million, $34.4 million and $27.5 million at December 31, 2020, 2019 and 2018, respectively, which is reflected in other long-term liabilities on the consolidated balance sheets.
NOTE 13—STOCK-BASED COMPENSATION
In December 2005, we adopted our 2005 Stock Incentive Plan, which has been amended and/or restated on several occasions. In connection with our merger with Ticketmaster Entertainment LLC, we adopted the Amended and Restated Ticketmaster 2008 Stock & Annual Incentive Plan. The plans authorize us to grant stock option awards, director shares, stock appreciation rights, restricted stock and deferred stock awards, other equity-based awards and performance awards. We have granted restricted stock awards, options to purchase our common stock and deferred stock awards to employees, directors, consultants, and our affiliates under the stock incentive plans at no less than the fair market value of the underlying stock on the date of grant. The stock incentive plans contain anti-dilutive provisions that require the adjustment of the number of shares of our common stock represented by, and the exercise price of, each option for any stock splits or stock dividends. The ten-year term of the Ticketmaster plan expired in August 2018; accordingly, no new awards may be granted under that plan but outstanding awards shall continue in full force and effect in accordance with their terms.
The following is a summary of stock-based compensation expense we recorded during the respective periods:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
|
|
|
2020
|
|
2019
|
|
2018
|
|
|
|
|
|
|
(in thousands)
|
|
Selling, general and administrative expenses
|
|
|
|
|
$
|
88,620
|
|
|
$
|
21,947
|
|
|
$
|
18,621
|
|
|
Corporate expenses
|
|
|
|
|
28,269
|
|
|
26,838
|
|
|
26,961
|
|
|
Total
|
|
|
|
|
$
|
116,889
|
|
|
$
|
48,785
|
|
|
$
|
45,582
|
|
The increase in stock-based compensation expense for the year ended December 31, 2020 is primarily due to the issuance of restricted stock awards in 2020 in lieu of cash payments due for bonuses earned in 2019 owed to certain employees, as part of our cash savings initiative in connection with the global COVID-19 pandemic.
As of December 31, 2020, there was $84.3 million of total unrecognized compensation cost related to stock-based compensation arrangements for stock options, restricted stock and deferred stock awards. This cost is expected to be recognized over a weighted-average period of 1.6 years.
Stock Options
Stock options are granted for a term not exceeding ten years and the non-vested options are generally forfeited in the event the employee, director or consultant terminates his or her employment or relationship with us or one of our affiliates. Any options that have vested at the time of termination are forfeited to the extent they are not exercised within the applicable post-employment exercise period provided in their option agreements. These options typically vest over one to four years.
The following assumptions were used to calculate the fair value of our options on the date of grant:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
2020
|
|
2019
|
|
2018
|
|
Risk-free interest rate
|
0.09% - 1.19%
|
|
1.89% - 2.53%
|
|
2.68% - 2.70%
|
|
Dividend yield
|
0.0
|
%
|
|
0.0
|
%
|
|
0.0
|
%
|
|
Volatility factors
|
32.37% - 51.83%
|
|
27.63% - 28.12%
|
|
27.66% - 28.00%
|
|
Weighted average expected life (in years)
|
2.51
|
|
6.08
|
|
5.74
|
The following table presents a summary of our stock options outstanding at the dates given, and stock option activity for the period between such dates (“Price” reflects the weighted average exercise price per share):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
2020
|
|
2019
|
|
2018
|
|
|
Options
|
|
Price
|
|
Options
|
|
Price
|
|
Options
|
|
Price
|
|
|
(in thousands, except per share data)
|
|
Outstanding January 1
|
11,347
|
|
|
$
|
18.36
|
|
|
11,784
|
|
|
$
|
16.55
|
|
|
14,239
|
|
|
$
|
14.52
|
|
|
Granted
|
51
|
|
|
66.27
|
|
|
487
|
|
|
57.00
|
|
|
255
|
|
|
44.05
|
|
|
Exercised
|
(2,071)
|
|
|
16.96
|
|
|
(910)
|
|
|
15.50
|
|
|
(2,694)
|
|
|
8.38
|
|
|
Forfeited or expired
|
(4)
|
|
|
41.71
|
|
|
(14)
|
|
|
10.82
|
|
|
(16)
|
|
|
28.57
|
|
|
Outstanding December 31
|
9,323
|
|
|
$
|
18.93
|
|
|
11,347
|
|
|
$
|
18.36
|
|
|
11,784
|
|
|
$
|
16.55
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable December 31
|
8,827
|
|
|
$
|
16.98
|
|
|
10,493
|
|
|
$
|
15.77
|
|
|
10,693
|
|
|
$
|
14.61
|
|
|
Weighted average fair value per option granted
|
|
|
$
|
13.62
|
|
|
|
|
$
|
18.50
|
|
|
|
|
$
|
14.05
|
|
The total intrinsic value of stock options exercised during the years ended December 31, 2020, 2019 and 2018 was $87.9 million, $39.6 million and $28.1 million, respectively. Cash received from stock option exercises for the years ended December 31, 2020, 2019 and 2018 was $30.6 million, $14.1 million and $22.6 million, respectively.
There were 5.6 million shares available for future grants under the stock incentive plan at December 31, 2020. Upon share option exercise or vesting of restricted or deferred stock, we issue new shares or treasury shares to fulfill these grants. Vesting dates on the stock options range from February 2021 to May 2024, and expiration dates range from July 2021 to December 2030 at exercise prices and average contractual lives as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Range of
Exercise
Prices
|
|
Outstanding
as of
12/31/20
|
|
Weighted
Average
Remaining
Contractual
Life
|
|
Weighted
Average
Exercise
Price
|
|
Exercisable
as of
12/31/20
|
|
Weighted
Average
Remaining
Contractual
Life
|
|
Weighted
Average
Exercise
Price
|
|
|
|
(in thousands)
|
|
(in years)
|
|
|
|
(in thousands)
|
|
(in years)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$5.00 - $9.99
|
|
4,112
|
|
|
1.9
|
|
$
|
8.76
|
|
|
4,112
|
|
|
1.9
|
|
$
|
8.76
|
|
|
$10.00 - $14.99
|
|
863
|
|
|
1.1
|
|
$
|
11.52
|
|
|
863
|
|
|
1.1
|
|
$
|
11.52
|
|
|
$15.00 - $19.99
|
|
731
|
|
|
5.0
|
|
$
|
19.30
|
|
|
731
|
|
|
5.0
|
|
$
|
19.30
|
|
|
$20.00 - $24.99
|
|
1,301
|
|
|
3.1
|
|
$
|
21.03
|
|
|
1,301
|
|
|
3.1
|
|
$
|
21.03
|
|
|
$25.00 - $29.99
|
|
1,200
|
|
|
5.2
|
|
$
|
27.36
|
|
|
1,174
|
|
|
5.2
|
|
$
|
27.32
|
|
|
$30.00 - $44.99
|
|
592
|
|
|
7.1
|
|
$
|
43.82
|
|
|
492
|
|
|
7.1
|
|
$
|
43.84
|
|
|
$45.00 - $60.99
|
|
491
|
|
|
8.2
|
|
$
|
56.82
|
|
|
154
|
|
|
8.2
|
|
$
|
56.77
|
|
|
$61.00 - $70.99
|
|
33
|
|
|
9.9
|
|
$
|
70.26
|
|
|
—
|
|
|
0.0
|
|
$
|
—
|
|
The total intrinsic value of options outstanding and options exercisable as of December 31, 2020 was $508.6 million and $498.7 million, respectively.
Restricted Stock
We have granted restricted stock awards to our employees, directors and consultants under our stock incentive plan. These common shares carry a legend which typically restricts their transferability for a term of one to five years and are forfeited in the event the recipient’s employment or relationship with us is terminated prior to the lapse of the restriction. In addition, certain restricted stock awards require us or the recipient to achieve minimum performance targets in order for these awards to vest.
In 2020, we granted 2.1 million shares of restricted stock and 0.3 million shares of performance-based awards, respectively, under our stock incentive plan. These awards will all vest over 3 months to four years with the exception of the performance-based awards which will vest within two years if the performance criteria are met. As of December 31, 2020, we determined that the performance-based criteria for these awards were not probable of being met and such awards will be forfeited in 2021.
In 2019, we granted 0.2 million shares of restricted stock and 0.2 million shares of performance-based awards, respectively, under our stock incentive plan. These awards will all vest over one or four years with the exception of the performance-based awards which will vest within two years if the performance criteria are met. As of December 31, 2020, the performance-based criteria for these awards have been met unless otherwise forfeited.
In 2018, we granted 0.3 million shares of restricted stock and 0.2 million shares of performance-based awards, respectively, under our stock incentive plans. These awards will all vest over one or four years with the exception of the performance-based awards which will vest within one to two years if the performance criteria are met. As of December 31, 2020, the performance-based criteria for these awards have been met unless otherwise forfeited.
The following table presents a summary of our unvested restricted stock awards outstanding at December 31, 2020, 2019 and 2018 (“Price” reflects the weighted average share price at the date of grant):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Restricted Stock
|
|
|
Awards
|
|
Price
|
|
|
(in thousands, except per share data)
|
|
Unvested at December 31, 2017
|
1,607
|
|
|
$
|
31.79
|
|
|
Granted
|
535
|
|
|
44.54
|
|
|
Forfeited
|
(37)
|
|
|
30.38
|
|
|
Vested
|
(706)
|
|
|
28.35
|
|
|
Unvested at December 31, 2018
|
1,399
|
|
|
$
|
38.13
|
|
|
Granted
|
415
|
|
|
57.58
|
|
|
Forfeited
|
(26)
|
|
|
38.45
|
|
|
Vested
|
(618)
|
|
|
36.54
|
|
|
Unvested at December 31, 2019
|
1,170
|
|
|
$
|
45.80
|
|
|
Granted
|
2,454
|
|
|
55.52
|
|
|
Forfeited
|
(106)
|
|
|
53.26
|
|
|
Vested
|
(1,929)
|
|
|
47.48
|
|
|
Unvested at December 31, 2020
|
1,589
|
|
|
$
|
58.19
|
|
The total grant date fair market value of the shares issued upon the vesting of restricted stock awards during the years ended December 31, 2020, 2019 and 2018 was $91.6 million, $22.6 million and $20.0 million, respectively.
Deferred Stock
We have granted deferred stock awards to our employees where the employees are entitled to receive shares of common stock in the future. Deferred stock can only be settled in stock as determined at the time of the grant. All of the deferred stock awards require us to achieve minimum market conditions in order for these awards to issue and vest.
In 2017, we granted 2.5 million shares of deferred stock awards with market conditions under our incentive plan. These awards will all vest over one to five years if specified stock prices are achieved over a specific number of days during the five years.
In 2020, 2019 and 2018, we achieved minimum market conditions resulting in the issuance of 0.8 million shares, 1.5 million shares and 0.2 million shares of restricted stock, respectively, subject to vesting over one to four years. As of December 31, 2020, there were no deferred stock awards outstanding for which the minimum market conditions have not been met.
The following table presents a summary of the Company’s unvested deferred stock awards outstanding at December 31, 2020, 2019 and 2018 (“Price” reflects the weighted average grant date fair value):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred Stock
|
|
|
Awards
|
|
Price
|
|
|
(in thousands, except per share data)
|
|
Unvested at December 31, 2017
|
—
|
|
|
$
|
—
|
|
|
Awarded
|
2,500
|
|
|
26.69
|
|
Forfeited
|
—
|
|
|
0.00
|
|
Vested
|
—
|
|
|
0.00
|
|
Unvested at December 31, 2018
|
2,500
|
|
|
$
|
26.69
|
|
|
Awarded
|
—
|
|
|
0.00
|
|
Forfeited
|
—
|
|
|
0.00
|
|
Vested
|
(14)
|
|
|
36.08
|
|
Unvested at December 31, 2019
|
2,486
|
|
|
$
|
26.63
|
|
|
Awarded
|
—
|
|
|
0.00
|
|
Forfeited
|
—
|
|
|
0.00
|
|
Vested
|
(119)
|
|
|
28.80
|
|
Unvested at December 31, 2020
|
2,367
|
|
|
$
|
26.53
|
|
NOTE 14—OTHER INFORMATION
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
2020
|
|
2019
|
|
|
(in thousands)
|
|
The following details the components of “Other current assets”:
|
|
|
|
|
|
|
|
|
|
Inventory
|
$
|
22,000
|
|
|
$
|
16,106
|
|
|
Notes receivable
|
14,556
|
|
|
34,842
|
|
|
Other
|
2,909
|
|
|
6,059
|
|
|
Total other current assets
|
$
|
39,465
|
|
|
$
|
57,007
|
|
|
|
|
|
|
|
The following details the components of “Other long-term assets”:
|
|
|
|
|
|
|
|
|
|
Investments in nonconsolidated affiliates
|
$
|
170,494
|
|
|
$
|
167,603
|
|
|
Notes receivable
|
88,889
|
|
|
128,725
|
|
|
Other
|
131,898
|
|
|
135,145
|
|
|
Total other long-term assets
|
$
|
391,281
|
|
|
$
|
431,473
|
|
|
|
|
|
|
|
The following details the components of “Accrued expenses”:
|
|
|
|
|
Accrued compensation and benefits
|
$
|
90,070
|
|
|
$
|
276,417
|
|
|
Accrued event expenses
|
127,004
|
|
|
394,257
|
|
|
Accrued insurance
|
128,348
|
|
|
165,071
|
|
|
Accrued legal
|
23,596
|
|
|
16,978
|
|
|
Collections on behalf of others
|
51,127
|
|
|
48,467
|
|
|
Accrued ticket refunds
|
143,827
|
|
|
4,432
|
|
|
Other
|
330,177
|
|
|
485,864
|
|
|
Total accrued expenses
|
$
|
894,149
|
|
|
$
|
1,391,486
|
|
|
|
|
|
|
|
The following details the components of “Other current liabilities”:
|
|
|
|
|
Contingent and deferred purchase consideration
|
$
|
39,207
|
|
|
$
|
13,165
|
|
|
Other
|
32,876
|
|
|
46,046
|
|
|
Total other current liabilities
|
$
|
72,083
|
|
|
$
|
59,211
|
|
|
|
|
|
|
|
The following details the components of “Other long-term liabilities”:
|
|
|
|
|
Deferred revenue
|
$
|
88,641
|
|
|
$
|
34,390
|
|
|
Contingent and deferred purchase consideration
|
26,401
|
|
|
67,979
|
|
|
Other
|
67,466
|
|
|
28,279
|
|
|
Total other long-term liabilities
|
$
|
182,508
|
|
|
$
|
130,648
|
|
NOTE 15—SEGMENT DATA
Our reportable segments are Concerts, Ticketing and Sponsorship & Advertising. Our Concerts segment involves the promotion of live music events globally in our owned or operated venues and in rented third-party venues, the production of music festivals, the operation and management of music venues, the creation of associated content and the provision of management and other services to artists. Our Ticketing segment involves the management of our global ticketing operations, including providing ticketing software and services to clients, and consumers with a marketplace, both online and mobile, for tickets and event information, and is responsible for our primary ticketing website, www.ticketmaster.com. Our Sponsorship & Advertising segment manages the development of strategic sponsorship programs in addition to the sale of international, national and local sponsorships and placement of advertising such as signage, promotional programs, rich media offerings, including advertising associated with live streaming and music-related content, and ads across our distribution network of venues, events and websites.
Revenue and expenses earned and charged between segments are eliminated in consolidation. Our capital expenditures below include accruals for amounts incurred but not yet paid for, but are not reduced by reimbursements received from outside parties such as landlords and noncontrolling interest partners or replacements funded by insurance proceeds.
We manage our working capital on a consolidated basis. Accordingly, segment assets are not reported to, or used by, our management to allocate resources to or assess performance of our segments, and therefore, total segment assets have not been presented.
There were no customers that individually accounted for more than 10% of our consolidated revenue in any year.
The following table presents the results of operations for our reportable segments for the years ending December 31, 2020, 2019 and 2018:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Concerts
|
|
Ticketing
|
|
Sponsorship
& Advertising
|
|
|
|
Other
|
|
Corporate
|
|
Eliminations
|
|
Consolidated
|
|
|
(in thousands)
|
|
2020
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
$
|
1,468,433
|
|
|
$
|
188,383
|
|
|
$
|
203,676
|
|
|
|
|
$
|
3,233
|
|
|
$
|
—
|
|
|
$
|
(2,547)
|
|
|
$
|
1,861,178
|
|
|
Direct operating expenses
|
1,222,997
|
|
|
129,433
|
|
|
52,517
|
|
|
|
|
—
|
|
|
—
|
|
|
(2,547)
|
|
|
1,402,400
|
|
|
Selling, general and administrative expenses
|
937,651
|
|
|
501,032
|
|
|
75,669
|
|
|
|
|
9,990
|
|
|
—
|
|
|
—
|
|
|
1,524,342
|
|
|
Depreciation and amortization
|
266,255
|
|
|
169,921
|
|
|
30,617
|
|
|
|
|
6,684
|
|
|
11,548
|
|
|
—
|
|
|
485,025
|
|
|
Loss (gain) on disposal of operating assets
|
505
|
|
|
(1)
|
|
|
—
|
|
|
|
|
(1)
|
|
|
—
|
|
|
—
|
|
|
503
|
|
|
Corporate expenses
|
—
|
|
|
—
|
|
|
—
|
|
|
|
|
—
|
|
|
102,100
|
|
|
—
|
|
|
102,100
|
|
|
Operating income (loss)
|
$
|
(958,975)
|
|
|
$
|
(612,002)
|
|
|
$
|
44,873
|
|
|
|
|
$
|
(13,440)
|
|
|
$
|
(113,648)
|
|
|
$
|
—
|
|
|
$
|
(1,653,192)
|
|
|
Intersegment revenue
|
$
|
712
|
|
|
$
|
1,835
|
|
|
$
|
—
|
|
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
(2,547)
|
|
|
$
|
—
|
|
|
Capital expenditures
|
$
|
119,730
|
|
|
$
|
77,018
|
|
|
$
|
5,781
|
|
|
|
|
$
|
—
|
|
|
$
|
6,886
|
|
|
$
|
—
|
|
|
$
|
209,415
|
|
|
2019
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
$
|
9,428,094
|
|
|
$
|
1,545,189
|
|
|
$
|
590,274
|
|
|
|
|
$
|
3,162
|
|
|
$
|
—
|
|
|
$
|
(18,750)
|
|
|
$
|
11,547,969
|
|
|
Direct operating expenses
|
7,857,437
|
|
|
514,169
|
|
|
114,326
|
|
|
|
|
—
|
|
|
—
|
|
|
(18,750)
|
|
|
8,467,182
|
|
|
Selling, general and administrative expenses
|
1,386,928
|
|
|
642,052
|
|
|
112,594
|
|
|
|
|
3,912
|
|
|
—
|
|
|
—
|
|
|
2,145,486
|
|
|
Depreciation and amortization
|
239,682
|
|
|
156,894
|
|
|
33,084
|
|
|
|
|
364
|
|
|
13,967
|
|
|
—
|
|
|
443,991
|
|
|
Loss (gain) on disposal of operating assets
|
(2,490)
|
|
|
116
|
|
|
—
|
|
|
|
|
—
|
|
|
1
|
|
|
—
|
|
|
(2,373)
|
|
|
Corporate expenses
|
—
|
|
|
—
|
|
|
—
|
|
|
|
|
—
|
|
|
168,839
|
|
|
—
|
|
|
168,839
|
|
|
Operating income (loss)
|
$
|
(53,463)
|
|
|
$
|
231,958
|
|
|
$
|
330,270
|
|
|
|
|
$
|
(1,114)
|
|
|
$
|
(182,807)
|
|
|
$
|
—
|
|
|
$
|
324,844
|
|
|
Intersegment revenue
|
$
|
6,672
|
|
|
$
|
12,078
|
|
|
$
|
—
|
|
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
(18,750)
|
|
|
$
|
—
|
|
|
Capital expenditures
|
$
|
186,819
|
|
|
$
|
105,246
|
|
|
$
|
10,261
|
|
|
|
|
$
|
—
|
|
|
$
|
35,252
|
|
|
$
|
—
|
|
|
$
|
337,578
|
|
|
2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
$
|
8,770,031
|
|
|
$
|
1,529,566
|
|
|
$
|
503,968
|
|
|
|
|
$
|
3,724
|
|
|
$
|
—
|
|
|
$
|
(19,489)
|
|
|
$
|
10,787,800
|
|
|
Direct operating expenses
|
7,340,757
|
|
|
549,265
|
|
|
92,494
|
|
|
|
|
4,905
|
|
|
—
|
|
|
(19,489)
|
|
|
7,967,932
|
|
|
Selling, general and administrative expenses
|
1,248,346
|
|
|
634,829
|
|
|
97,540
|
|
|
|
|
16,313
|
|
|
—
|
|
|
—
|
|
|
1,997,028
|
|
|
Depreciation and amortization
|
206,772
|
|
|
143,551
|
|
|
30,779
|
|
|
|
|
817
|
|
|
4,610
|
|
|
—
|
|
|
386,529
|
|
|
Loss (gain) on disposal of operating assets
|
10,361
|
|
|
7
|
|
|
2
|
|
|
|
|
—
|
|
|
(1)
|
|
|
—
|
|
|
10,369
|
|
|
Corporate expenses
|
—
|
|
|
—
|
|
|
—
|
|
|
|
|
—
|
|
|
153,406
|
|
|
—
|
|
|
153,406
|
|
|
Operating income (loss)
|
$
|
(36,205)
|
|
|
$
|
201,914
|
|
|
$
|
283,153
|
|
|
|
|
$
|
(18,311)
|
|
|
$
|
(158,015)
|
|
|
$
|
—
|
|
|
$
|
272,536
|
|
|
Intersegment revenue
|
$
|
5,193
|
|
|
$
|
14,296
|
|
|
$
|
—
|
|
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
(19,489)
|
|
|
$
|
—
|
|
|
Capital expenditures
|
$
|
129,129
|
|
|
$
|
110,202
|
|
|
$
|
7,541
|
|
|
|
|
$
|
169
|
|
|
$
|
15,273
|
|
|
$
|
—
|
|
|
$
|
262,314
|
|
The following table provides revenue and long-lived assets for our foreign operations included in the consolidated financial statements:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
United Kingdom Operations
|
|
Other Foreign Operations
|
|
Total Foreign Operations
|
|
Total Domestic Operations
|
|
Consolidated Total
|
|
|
(in thousands)
|
|
2020
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
$
|
194,177
|
|
|
$
|
472,364
|
|
|
$
|
666,541
|
|
|
$
|
1,194,637
|
|
|
$
|
1,861,178
|
|
|
Long-lived assets
|
$
|
91,192
|
|
|
$
|
184,679
|
|
|
$
|
275,871
|
|
|
$
|
825,543
|
|
|
$
|
1,101,414
|
|
|
2019
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
$
|
838,940
|
|
|
$
|
3,076,486
|
|
|
$
|
3,915,426
|
|
|
$
|
7,632,543
|
|
|
$
|
11,547,969
|
|
|
Long-lived assets
|
$
|
77,084
|
|
|
$
|
186,265
|
|
|
$
|
263,349
|
|
|
$
|
854,583
|
|
|
$
|
1,117,932
|
|
|
2018
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
$
|
793,596
|
|
|
$
|
2,867,626
|
|
|
$
|
3,661,222
|
|
|
$
|
7,126,578
|
|
|
$
|
10,787,800
|
|
|
Long-lived assets
|
$
|
71,298
|
|
|
$
|
128,001
|
|
|
$
|
199,299
|
|
|
$
|
747,294
|
|
|
$
|
946,593
|
|
NOTE 16—SUBSEQUENT EVENT
In January 2021, we issued $500 million principal amount of 3.75% senior secured notes due 2028. Interest on the notes is payable semi-annually in cash in arrears on January 15 and July 15 of each year beginning on July 15, 2021, and will mature on January 15, 2028. The proceeds were used to pay estimated fees of $8.0 million and repay $75.0 million aggregate principal amount of the Company’s senior secured term loan B facility, leaving approximately $417.0 million for general corporate purposes, including acquisitions and organic investment opportunities.
We may redeem some or all of the notes, at any time prior to January 15, 2024, at a price equal to 100% of the aggregate principal amount, plus any accrued and unpaid interest to the date of redemption, plus a ‘make-whole’ premium. We may redeem up to 35% of the aggregate principal amount of the notes from the proceeds of certain equity offerings prior to January 15, 2024, at a price equal to 103.75% of the aggregate principal amount, plus accrued and unpaid interest thereon, if any, to the date of redemption. In addition, on or after January 15, 2024 we may redeem some or all of the notes at any time at redemption prices specified in the Notes Indenture, plus any accrued and unpaid interest to the date of redemption.
We must make an offer to redeem the notes at 101% of their aggregate principal amount, plus accrued and unpaid interest to the repurchase date, if we experience certain defined changes of control. The notes are secured by a first priority lien on substantially all of the tangible and intangible personal property of LNE and LNE’s domestic subsidiaries that are guarantors, and by a pledge of substantially all of the shares of stock, partnership interests and limited liability company interests of our direct and indirect domestic subsidiaries.
