LYV-2014.9.30-10Q

 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
____________________________________ 
Form 10-Q
____________________________________ 
x
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2014
or
¨
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from                  to                
Commission File Number 001-32601
____________________________________ 
LIVE NATION ENTERTAINMENT, INC.
(Exact name of registrant as specified in its charter)
____________________________________ 
Delaware
 
20-3247759
(State of Incorporation)
 
(I.R.S. Employer Identification No.)
9348 Civic Center Drive
Beverly Hills, CA 90210
(Address of principal executive offices, including zip code)
(310) 867-7000
(Registrant’s telephone number, including area code)
____________________________________ 
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    x  Yes    ¨  No
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  x    No  ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
 
x
Accelerated filer
 
¨
 
 
 
 
 
 
Non-accelerated filer
 
¨  (Do not check if a smaller reporting company)
Smaller reporting company
 
¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    ¨  Yes    x  No
On October 24, 2014, there were 200,659,004 outstanding shares of the registrant’s common stock, $0.01 par value per share, including 1,224,678 shares of unvested restricted stock awards and excluding 408,024 shares held in treasury.
 


Table of Contents

LIVE NATION ENTERTAINMENT, INC.
INDEX TO FORM 10-Q

 
 
Page
PART I—FINANCIAL INFORMATION
 
 
 
 
 
 
PART II—OTHER INFORMATION
 


Table of Contents

LIVE NATION ENTERTAINMENT, INC.
GLOSSARY OF KEY TERMS
 
AOCI
Accumulated other comprehensive income (loss)
AOI
Adjusted operating income (loss)
Clear Channel
Clear Channel Communications, Inc.
Company
Live Nation Entertainment, Inc. and subsidiaries
FASB
Financial Accounting Standards Board
GAAP
United States Generally Accepted Accounting Principles
Live Nation
Live Nation Entertainment, Inc. and subsidiaries
SEC
United States Securities and Exchange Commission
Ticketmaster
For periods prior to May 6, 2010, Ticketmaster means Ticketmaster Entertainment LLC and its predecessor companies (including without limitation Ticketmaster Entertainment, Inc.); for periods on and after May 6, 2010, Ticketmaster means the Ticketmaster ticketing business of the Company

1

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PART I—FINANCIAL INFORMATION
Item 1. Financial Statements
LIVE NATION ENTERTAINMENT, INC.
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
 
September 30,
2014
 
December 31,
2013
 
(in thousands)
ASSETS
 
 
 
Current assets
 
 
 
Cash and cash equivalents
$
1,358,300

 
$
1,299,184

Accounts receivable, less allowance of $17,385 and $19,850, respectively
607,150

 
439,151

Prepaid expenses
484,603

 
378,342

Other current assets
47,882

 
43,427

Total current assets
2,497,935

 
2,160,104

Property, plant and equipment
 
 
 
Land, buildings and improvements
811,059

 
816,931

Computer equipment and capitalized software
430,443

 
421,846

Furniture and other equipment
208,679

 
210,866

Construction in progress
80,210

 
52,883

 
1,530,391

 
1,502,526

Less accumulated depreciation
834,450

 
795,726

 
695,941

 
706,800

Intangible assets
 
 
 
Definite-lived intangible assets, net
619,671

 
676,564

Indefinite-lived intangible assets
369,640

 
376,736

Goodwill
1,484,677

 
1,466,983

Other long-term assets
379,867

 
296,334

Total assets
$
6,047,731

 
$
5,683,521

LIABILITIES AND EQUITY
 
 
 
Current liabilities
 
 
 
Accounts payable, client accounts
$
646,814

 
$
656,253

Accounts payable
96,104

 
111,320

Accrued expenses
763,800

 
668,799

Deferred revenue
399,534

 
486,433

Current portion of long-term debt
47,947

 
278,403

Other current liabilities
37,734

 
54,310

Total current liabilities
1,991,933

 
2,255,518

Long-term debt, net
2,027,209

 
1,530,484

Long-term deferred income taxes
165,224

 
161,637

Other long-term liabilities
107,684

 
85,035

Commitments and contingent liabilities


 


Redeemable noncontrolling interests
74,436

 
61,041

Stockholders’ equity
 
 
 
Common stock
1,998

 
1,978

Additional paid-in capital
2,403,316

 
2,368,281

Accumulated deficit
(856,147
)
 
(951,796
)
Cost of shares held in treasury
(6,865
)
 
(6,865
)
Accumulated other comprehensive income (loss)
(37,577
)
 
(2,370
)
Total Live Nation Entertainment, Inc. stockholders’ equity
1,504,725

 
1,409,228

Noncontrolling interests
176,520

 
180,578

Total equity
1,681,245

 
1,589,806

Total liabilities and equity
$
6,047,731

 
$
5,683,521


See Notes to Consolidated Financial Statements
2

Table of Contents

LIVE NATION ENTERTAINMENT, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)

 
Three Months Ended 
 September 30,
 
Nine Months Ended 
 September 30,
 
2014
 
2013
 
2014
 
2013
 
(in thousands except share and per share data)
Revenue
$
2,502,008

 
$
2,262,236

 
$
5,295,109

 
$
4,865,447

Operating expenses:
 
 
 
 
 
 
 
Direct operating expenses
1,876,519

 
1,698,731

 
3,792,366

 
3,485,583

Selling, general and administrative expenses
349,676

 
325,005

 
978,006

 
900,246

Depreciation and amortization
97,925

 
92,729

 
256,732

 
257,582

Gain on disposal of operating assets
(1,696
)
 
(9,060
)
 
(4,977
)
 
(42,856
)
Corporate expenses
26,647

 
26,442

 
73,538

 
68,909

Acquisition transaction expenses
2,333

 
2,352

 
5,462

 
5,329

Operating income
150,604

 
126,037

 
193,982

 
190,654

Interest expense
28,113

 
29,393

 
80,195

 
87,585

Loss on extinguishment of debt
233

 
36,269

 
233

 
36,269

Interest income
(864
)
 
(1,547
)
 
(2,676
)
 
(4,205
)
Equity in losses (earnings) of nonconsolidated affiliates
(2,155
)
 
2,363

 
(5,921
)
 
(2,848
)
Other expense (income), net
12,587

 
(5,269
)
 
11,081

 
2,237

Income before income taxes
112,690

 
64,828

 
111,070

 
71,616

Income tax expense (benefit)
(3,137
)
 
14,410

 
(482
)
 
26,370

Net income
115,827

 
50,418

 
111,552

 
45,246

Net income attributable to noncontrolling interests
10,664

 
6,644

 
15,903

 
6,581

Net income attributable to common stockholders of Live Nation Entertainment, Inc.
$
105,163

 
$
43,774

 
$
95,649

 
$
38,665

 
 
 
 
 
 
 
 
Basic net income per common share attributable to common stockholders of Live Nation Entertainment, Inc.
$
0.52

 
$
0.22

 
$
0.46

 
$
0.20

Diluted net income per common share attributable to common stockholders of Live Nation Entertainment, Inc.
$
0.49

 
$
0.22

 
$
0.45

 
$
0.19

 
 
 
 
 
 
 
 
Weighted average common shares outstanding:
 
 
 
 
 
 
 
Basic
199,261,810

 
196,396,704

 
198,612,221

 
192,792,286

Diluted
221,581,583

 
202,109,783

 
206,233,574

 
197,266,289


See Notes to Consolidated Financial Statements
3

Table of Contents

LIVE NATION ENTERTAINMENT, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(UNAUDITED)

 
Three Months Ended 
 September 30,
 
Nine Months Ended 
 September 30,
 
2014
 
2013
 
2014
 
2013
 
(in thousands)
Net income
$
115,827

 
$
50,418

 
$
111,552

 
$
45,246

Other comprehensive income (loss), net of tax:
 
 
 
 
 
 
 
Unrealized gain (loss) on cash flow hedges
6

 
(22
)
 
(2
)
 
3

Realized loss on cash flow hedges
15

 
19

 
48

 
476

Change in funded status of defined benefit pension plan

 

 
30

 

Foreign currency translation adjustments
(54,426
)
 
40,701

 
(35,283
)
 
(817
)
Comprehensive income
61,422

 
91,116

 
76,345

 
44,908

Comprehensive income attributable to noncontrolling interests
10,664

 
6,644

 
15,903

 
6,581

Comprehensive income attributable to common stockholders of Live Nation Entertainment, Inc.
$
50,758

 
$
84,472

 
$
60,442

 
$
38,327



See Notes to Consolidated Financial Statements
4

Table of Contents

LIVE NATION ENTERTAINMENT, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)

 
Nine Months Ended 
 September 30,
 
2014
 
2013
 
(in thousands)
CASH FLOWS FROM OPERATING ACTIVITIES
 
 
 
Net income
$
111,552

 
$
45,246

Reconciling items:
 
 
 
Depreciation
93,140

 
90,443

Amortization
163,592

 
167,139

Deferred income tax benefit
(21,463
)
 
(8,230
)
Amortization of debt issuance costs and discount/premium, net
13,375

 
15,409

Loss on extinguishment of debt
233

 
36,269

Non-cash compensation expense
31,531

 
23,224

Gain on disposal of operating assets
(4,977
)
 
(42,856
)
Equity in earnings of nonconsolidated affiliates
(5,921
)
 
(2,848
)
Other, net
(2,679
)
 
221

Changes in operating assets and liabilities, net of effects of acquisitions and dispositions:
 
 
 
Increase in accounts receivable
(193,705
)
 
(106,561
)
Increase in prepaid expenses
(125,525
)
 
(50,432
)
Increase in other assets
(105,228
)
 
(94,421
)
Increase in accounts payable, accrued expenses and other liabilities
108,716

 
237,718

Decrease in deferred revenue
(76,473
)
 
(45,783
)
Net cash provided by (used in) operating activities
(13,832
)
 
264,538

CASH FLOWS FROM INVESTING ACTIVITIES
 
 
 
Distributions from nonconsolidated affiliates
7,303

 
13,104

Investments made in nonconsolidated affiliates
(11,324
)
 
(7,505
)
Purchases of property, plant and equipment
(98,248
)
 
(103,577
)
Proceeds from disposal of operating assets, net of cash divested
2,058

 
83,086

Cash paid for acquisitions, net of cash acquired
(48,527
)
 
(26,418
)
Purchases of intangible assets
(2,675
)
 
(17
)
Other, net
(8,279
)
 
(1,163
)
Net cash used in investing activities
(159,692
)
 
(42,490
)
CASH FLOWS FROM FINANCING ACTIVITIES
 
 
 
Proceeds from long-term debt, net of debt issuance costs
515,258

 
870,324

Payments on long-term debt, including redemption costs
(245,014
)
 
(854,277
)
Contributions from noncontrolling interests
81

 
267

Distributions to noncontrolling interests
(23,964
)
 
(12,382
)
Purchases and sales of noncontrolling interests, net
(3,528
)
 
(75
)
Proceeds from exercise of stock options
14,142

 
80,593

Payments for deferred and contingent consideration
(5,722
)
 
(750
)
Net cash provided by financing activities
251,253

 
83,700

Effect of exchange rate changes on cash and cash equivalents
(18,613
)
 
(4,225
)
Net increase in cash and cash equivalents
59,116

 
301,523

Cash and cash equivalents at beginning of period
1,299,184

 
1,001,055

Cash and cash equivalents at end of period
$
1,358,300

 
$
1,302,578


See Notes to Consolidated Financial Statements
5

Table of Contents

LIVE NATION ENTERTAINMENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

NOTE 1—BASIS OF PRESENTATION AND OTHER INFORMATION
Preparation of Interim Financial Statements
The accompanying unaudited consolidated financial statements have been prepared in accordance with GAAP for interim financial information and the instructions to Form 10-Q and Article 10 of Regulation S-X issued by the SEC. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, they include all normal and recurring accruals and adjustments necessary to present fairly the results of the interim periods shown.
The financial statements contained herein should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s 2013 Annual Report on Form 10-K filed with the SEC on February 24, 2014, as amended by the Form 10-K/A filed with the SEC on June 30, 2014.
Seasonality
Due to the seasonal nature of shows at outdoor amphitheaters and festivals, which primarily occur from May through September, the Company experiences higher revenue for the Concerts and Sponsorship & Advertising segments during the second and third quarters. The Artist Nation segment’s revenue is impacted, to a large degree, by the touring schedules of artists it represents and generally the Company experiences higher revenue in this segment during the second and third quarters as the period from May through September tends to be a popular time for touring events. The Ticketing segment’s sales are impacted by fluctuations in the availability of events for sale to the public, which vary depending upon scheduling by its clients. The Company’s 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. Therefore, the results to date are not necessarily indicative of the results expected for the full year.
Cash and Cash Equivalents
Included in the September 30, 2014 and December 31, 2013 cash and cash equivalents balance is $531.7 million and $538.4 million, respectively, of cash received that includes the face value of tickets sold on behalf of ticketing clients and the clients’ share of convenience and order processing charges.
Acquisitions
During the first nine months of 2014, the Company completed its acquisition of three California-based artist management businesses and several other smaller acquisitions. These acquisitions were accounted for as business combinations under the acquisition method of accounting and were not significant either on an individual basis or in the aggregate.
Recently Issued Pronouncements
In April 2014, the FASB issued guidance that raises the threshold for a disposal to qualify as a discontinued operation and requires new disclosures of both discontinued operations and certain other disposals that do not meet the definition of a discontinued operation. The guidance is effective for disposals (or classifications as held for sale) of components of an entity that occur within annual periods beginning on or after December 15, 2014 and interim periods within that year. This guidance is applied prospectively and early adoption is permitted. The Company will adopt this guidance on January 1, 2015 and will apply it prospectively to disposals occurring on or after January 1, 2015.
In May 2014, the FASB issued a comprehensive new revenue recognition standard that will supersede nearly all existing revenue recognition guidance under GAAP. The new standard provides a five-step analysis of transactions to determine when and how revenue is recognized. The core principle of the guidance is that a company should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The standard is effective for annual and interim periods beginning after December 15, 2016, and early adoption of the standard is not permitted. The guidance should be applied retrospectively, either to each prior period presented in the financial statements, or only to the most current reporting period presented in the financial statements with a cumulative-effect adjustment as of the date of adoption. The Company will adopt this standard on January 1, 2017, and is currently assessing which implementation method it will apply and the impact its adoption will have on its financial position and results of operations.
In June 2014, the FASB issued guidance that requires a performance target in a share-based payment that affects vesting, and that could be achieved after the requisite service period, be accounted for as a performance condition. The guidance is effective for annual periods beginning after December 15, 2015 and interim periods within that year, and early adoption is

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permitted. The guidance should be applied on a prospective basis to awards that are granted or modified on or after the effective date. The guidance may be applied on a modified retrospective basis for performance targets outstanding on or after the beginning of the first annual period presented as of the date of adoption. The Company does not currently expect to grant these type of awards, but will adopt this guidance on January 1, 2016 and will apply it prospectively to any awards granted on or after January 1, 2016 that include these terms.
NOTE 2—LONG-LIVED ASSETS
Property, Plant and Equipment
In the fourth quarter of 2012, an amphitheater in New York that is operated by the Company sustained substantial damage during Hurricane Sandy. During the three and nine months ended September 30, 2013, the Company received partial insurance recoveries and recorded gains of $2.0 million and $14.6 million, respectively, as a component of gain on disposal of operating assets in the Concerts segment representing the proceeds received in excess of the carrying value of the assets. The Company received the final insurance recovery in the second quarter of 2014 and recorded a gain of $3.2 million during the nine months ended September 30, 2014, as a component of gain on disposal of operating assets in the Concerts segment.
Definite-lived Intangible Assets
The Company has definite-lived intangible assets which are amortized over the shorter of either the lives of the respective agreements or the period of time the assets are expected to contribute to the Company’s future cash flows. The amortization is recognized on either a straight-line or expected cash flows basis.

7

Table of Contents

The following table presents the changes in the gross carrying amount and accumulated amortization of definite-lived intangible assets for the nine months ended September 30, 2014:
 
Revenue-
generating
contracts
 
Client /
vendor
relationships
 
Non-compete
agreements
 
Venue
management
and
leaseholds
 
Technology
 
Trademarks
and
naming
rights
 
Other
 
Total
 
(in thousands)
Balance as of December 31, 2013:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Gross carrying amount
$
585,094

 
$
277,937

 
$
137,199

 
$
85,642

 
$
100,664

 
$
28,524

 
$
2,375

 
$
1,217,435

Accumulated amortization
(231,053
)
 
(81,809
)
 
(101,128
)
 
(43,687
)
 
(73,110
)
 
(9,092
)
 
(992
)
 
(540,871
)
Net
354,041

 
196,128

 
36,071

 
41,955

 
27,554

 
19,432

 
1,383

 
676,564

Gross carrying amount:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Acquisitions— current year
3,194

 
45,271

 

 

 
4,000

 

 
1,100

 
53,565

Acquisitions— prior year
(1,851
)
 
5,456

 
1,500

 

 

 

 

 
5,105

Dispositions
(1,600
)
 

 

 

 

 

 

 
(1,600
)
Foreign exchange
(9,241
)
 
(3,237
)
 

 
(833
)
 
(1,220
)
 
(645
)
 
(3
)
 
(15,179
)
Other (1)
(2,682
)
 
(800
)
 
(14,800
)
 

 

 

 
570

 
(17,712
)
Net change
(12,180
)
 
46,690

 
(13,300
)
 
(833
)
 
2,780

 
(645
)
 
1,667

 
24,179

Accumulated amortization:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Amortization
(40,063
)
 
(32,718
)
 
(10,263
)
 
(5,128
)
 
(16,573
)
 
(2,508
)
 
(315
)
 
(107,568
)
Dispositions
605

 

 

 

 

 

 

 
605

Foreign exchange
4,192

 
590

 

 
453

 
1,152

 
471

 
1

 
6,859

Other (1)
2,682

 
800

 
15,550

 

 

 

 

 
19,032

Net change
(32,584
)
 
(31,328
)
 
5,287

 
(4,675
)
 
(15,421
)
 
(2,037
)
 
(314
)
 
(81,072
)
Balance as of September 30, 2014:
 
 
 
 
 
 
 
 
 
 
 
 
Gross carrying amount
572,914

 
324,627

 
123,899

 
84,809

 
103,444

 
27,879

 
4,042

 
1,241,614

Accumulated amortization
(263,637
)
 
(113,137
)
 
(95,841
)
 
(48,362
)
 
(88,531
)
 
(11,129
)
 
(1,306
)
 
(621,943
)
Net
$
309,277

 
$
211,490

 
$
28,058

 
$
36,447

 
$
14,913

 
$
16,750

 
$
2,736

 
$
619,671

_________
(1) 
Other includes net downs of fully amortized or impaired assets and $0.6 million of reclassifications of certain assets from indefinite-lived intangible assets.
Included in the current year acquisitions amount above of $53.6 million are client/vendor relationships primarily associated with the acquisitions of three California-based artist management businesses during the first nine months of 2014.

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The 2014 additions to definite-lived intangible assets from acquisitions have weighted-average lives as follows:
  
Weighted-
Average
Life (years)
 
 
Revenue-generating contracts
5
Client/vendor relationships
8
Technology
3
Other
10
All categories
7
Amortization of definite-lived intangible assets for the three months ended September 30, 2014 and 2013 was $39.7 million and $42.9 million, respectively, and for the nine months ended September 30, 2014 and 2013 was $107.6 million and $124.5 million, respectively. For the three and nine months ended September 30, 2013, the Company recorded $3.8 million and $9.0 million, respectively, for acceleration of amortization primarily related to changes in estimates of certain venue management and leasehold intangible assets in the Concerts segment due to the reduction in the lease term of a theater.
Amortization related to nonrecoupable ticketing contract advances for the three months ended September 30, 2014 and 2013 was $21.1 million and $18.8 million, respectively, and for the nine months ended September 30, 2014 and 2013 was $50.1 million and $42.7 million, respectively.
As acquisitions and dispositions occur in the future and the valuations of intangible assets for recent acquisitions are completed, amortization may vary. Therefore, the expense to date is not necessarily indicative of the expense expected for the full year.
Indefinite-lived Intangibles
The Company has indefinite-lived intangible assets which consist primarily of trade names. During 2014, the Company made a decision to rebrand certain of its markets that were not using the Ticketmaster trade name. In connection with the rebranding, it was determined that an indefinite-lived intangible asset for a certain market was fully impaired since the transition to the Ticketmaster trade name was substantially completed for that market during the third quarter. The fair value of the asset was calculated using a relief-from royalty method. For the nine months ended September 30, 2014, the Company recorded an impairment charge of $6.0 million as a component of depreciation and amortization in the Ticketing segment. See Note 4—Fair Value Measurements for further discussion of the inputs used to determine the fair value. There were no impairment charges recorded for the nine months ended September 30, 2013.


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Goodwill
The following table presents the changes in the carrying amount of goodwill in each of the Company’s reportable segments for the nine months ended September 30, 2014:
 
Concerts
 
Ticketing
 
Artist
Nation
 
Sponsorship
&  Advertising
 
Total
 
(in thousands)
Balance as of December 31, 2013:
 
 
 
 
 
 
 
 
 
Goodwill (1)
$
505,472

 
$
642,249

 
$
278,923

 
$
310,241

 
$
1,736,885

Accumulated impairment losses (1)
(269,902
)
 

 

 

 
(269,902
)
                 Net
235,570

 
642,249

 
278,923

 
310,241

 
1,466,983

 
 
 
 
 
 
 
 
 
 
Acquisitions—current year
1,129

 
7,895

 
37,655

 

 
46,679

Acquisitions—prior year
2,549

 

 
(927
)
 
(624
)
 
998

Dispositions

 
(4,434
)
 

 

 
(4,434
)
Foreign exchange
(10,400
)
 
(5,813
)
 
(91
)
 
(9,245
)
 
(25,549
)
 
 
 
 
 
 
 
 
 
 
Balance as of September 30, 2014:
 
 
 
 
 
 
 
 
Goodwill
498,750

 
639,897

 
315,560

 
300,372

 
1,754,579

Accumulated impairment losses
(269,902
)
 

 

 

 
(269,902
)
                 Net
$
228,848

 
$
639,897

 
$
315,560

 
$
300,372

 
$
1,484,677

_________
(1) 
The previously reported total balance has been reduced by $13.0 million due to the net down of fully impaired goodwill related to the Company’s non-core events business which was sold in 2008.

Included in the current year acquisitions amount above of $46.7 million is goodwill primarily associated with the acquisition of two California-based artist management businesses.
The Company is in the process of finalizing its acquisition accounting for recent acquisitions which could result in a change to the associated purchase price allocations, including goodwill.

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Investments in Nonconsolidated Affiliates
The Company has investments in various affiliates which are not consolidated and are accounted for under the equity method of accounting. The Company records its investments in these entities on the balance sheets as investments in nonconsolidated affiliates reported as part of other long-term assets. The Company’s interests in these operations are recorded in the statements of operations as equity in earnings of nonconsolidated affiliates. The Company’s investment in Venta de Boletos por Computadora S.A. de C.V., a 33% owned ticketing distribution services company in Mexico, was considered significant on an individual basis at December 31, 2013.
Summarized unaudited income statement information for the Company’s nonconsolidated affiliate noted above is as follows (at 100%):
 
 
Nine Months Ended 
 September 30,
 
 
2014
 
2013
 
 
(in thousands)
Revenue
 
$
30,924

 
$
38,155

Operating income
 
$
12,892

 
$
19,449

Net income
 
$
10,133

 
$
15,108

Net income attributable to the common stockholders of the equity investee
 
$
10,081

 
$
15,050


Long-lived Asset Disposals
In May 2013, the Company completed the sale of a theatrical theater in New York. During the third quarter of 2013, a contingent liability related to the sale was resolved resulting in an additional $7.0 million gain on disposal of operating assets.
The table below summarizes the asset and liability values at the time of sale for the nine months ended September 30, 2013 for significant disposals and the resulting gain recorded. There were no significant disposals of long-lived assets in the nine months ended September 30, 2014.
Divested Asset
 
Segment
 
Gain
on Disposal of
Operating
Assets
 
Current
Assets
 
Noncurrent
Assets
 
Current
Liabilities
 
Noncurrent
Liabilities
 
 
(in thousands)
2013 Divestiture
 
 
 
 
 
 
 
 
 
 
 
 
New York theatrical theater
 
Concerts
 
$
(28,880
)
 
$

 
$
35,785

 
$

 
$
3,636

NOTE 3—LONG-TERM DEBT
In May 2014, the Company issued $250 million of 5.375% senior notes due 2022 and $275 million of 2.5% convertible senior notes due 2019 and paid related fees and expenses of $9.9 million. In July 2014, the holders of $29.3 million of aggregate outstanding principal of the 2.875% convertible senior notes exercised their right to redeem their notes for cash and in late September 2014, pursuant to the Company’s option under the indenture governing the notes, the Company redeemed the remainder of these notes using the net proceeds noted above. In addition to redeeming the $220 million principal amount of these notes, the Company paid total accrued interest of $1.1 million and related fees and expenses of $0.2 million for the redemption, leaving $293.8 million in additional cash available for general corporate purposes. The loss on extinguishment of debt related to the redemption of the 2.875% convertible senior notes was not significant.

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Long-term debt, which includes capital leases, at September 30, 2014 and December 31, 2013, consists of the following:
 
 
 
 
 
September 30, 2014
 
December 31, 2013
 
 
 
 
 
(in thousands)
Senior Secured Credit Facility:
 
 
 
 
 
Term loan A, net of unamortized discount of $1.6 million and $2.0 million
 
 
 
 
 
 
at September 30, 2014 and December 31, 2013, respectively
 
$
106,254

 
$
111,578

 
Term loan B, net of unamortized discount of $12.7 million and
 
 
 
 
 
 
$14.4 million at September 30, 2014 and December 31, 2013, respectively
 
927,775

 
933,226

 
Revolving credit facility
 

 

7% Senior Notes due 2020, plus unamortized premium of $7.6 million
 
 
 
 
 
and $8.6 million at September 30, 2014 and December 31, 2013, respectively
 
432,607

 
433,571

5.375% Senior Notes due 2022
 
250,000

 

2.875% Convertible Senior Notes due 2027, net of unamortized discount of
 
 
 

 
$7.6 million at December 31, 2013
 

 
212,415

2.5% Convertible Senior Notes due 2019, net of unamortized discount of
 
 
 
 
 
$20.5 million at September 30, 2014
 
254,490

 

Other long-term debt
 
104,030

 
118,097

 
 
 
 
 
2,075,156

 
1,808,887

Less: current portion
 
47,947

 
278,403

 
 
 
 
 
 
 
 
Total long-term debt, net
 
$
2,027,209

 
$
1,530,484


Future maturities of long-term debt at September 30, 2014 are as follow:
 
(in thousands)
2014
$
11,330

2015
46,312

2016
50,187

2017
48,886

2018
330,567

Thereafter
1,615,060

Total
2,102,342

Debt discount
(34,793
)
Debt premium
7,607

Total, including premium and discount
$
2,075,156

5.375% Senior Notes
In May 2014, the Company issued $250 million of 5.375% senior notes due 2022. Interest on the notes is payable semi-annually in cash in arrears on June 15 and December 15, beginning December 15, 2014, and the notes will mature on June 15, 2022. The Company may redeem some or all of the notes at any time prior to June 15, 2017 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. The Company may also redeem up to 35% of the aggregate principal amount of the notes from the proceeds of certain equity offerings prior to June 15, 2017, at a price equal to 105.375% of the principal amount, plus any accrued and unpaid interest. In addition, on or after June 15, 2017, the Company may redeem at its option some or all of the notes at redemption prices that start at 104.0313% of their principal amount, plus any accrued and unpaid interest to the date of redemption. The Company must make an offer to redeem the notes at 101% of the aggregate principal amount, plus any accrued and unpaid interest to the repurchase date, if it experiences certain defined changes of control.

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2.5% Convertible Senior Notes
In May 2014, the Company issued $275 million of convertible senior notes due 2019. The notes pay interest semiannually in arrears on May 15 and November 15 at a rate of 2.5% per annum, beginning on November 15, 2014. The notes will mature on May 15, 2019, and may not be redeemed by the Company prior to the maturity date. The notes will be convertible, under certain circumstances, until November 15, 2018, and on or after such date without condition, at an initial conversion rate of 28.8363 shares of the Company’s common stock per $1,000 principal amount of notes, subject to adjustment, which represents a 52.5% conversion premium based on the last reported sale price for the Company’s common stock of $22.74 on May 19, 2014. Upon conversion, the notes may be settled in shares of common stock or, at the Company’s election, cash or a combination of cash and shares of common stock. Assuming the Company fully settles the notes in shares, the maximum number of shares that could be issued to satisfy the conversion is currently 7.9 million.
If the Company experiences a fundamental change, as defined in the indenture governing the notes, the holders of the 2.5% convertible senior notes may require the Company 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 accrued and unpaid interest, if any.
The carrying amount of the equity component of the notes is $22.0 million and the principal amount of the liability component (face value of the notes) is $275 million. As of September 30, 2014, the remaining amortization period for the debt discount was approximately 4.3 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 September 30, 2014, the effective interest rate on the liability component of the notes was 5.0%. The following table summarizes the amount of pre-tax interest cost recognized on the notes:
 
Three Months Ended 
 September 30, 2014
 
Nine Months Ended 
 September 30, 2014
 
(in thousands)
Interest cost recognized relating to:
 
 
 
  Contractual interest coupon
$
1,719

 
$
2,444

  Amortization of debt discount
1,089

 
1,465

  Amortization of debt issuance costs
334

 
453

Total interest cost recognized on the notes
$
3,142

 
$
4,362

NOTE 4—FAIR VALUE MEASUREMENTS
The following table shows the fair value of the Company’s financial assets that have been adjusted to fair value on a non-recurring basis which had a significant impact on the Company’s results of operations for the nine months ended September 30, 2014:
 
 
Fair Value
Measurement
 
 
 
 
 
 
 
 
 
 
at
 
Fair Value Measurements Using 
 
 
Total 
 
Description
 
 
September 30
 
Level 1 
 
 
Level 2 
 
 
Level 3 
 
 
Losses 
 
 
 
(in thousands)
2014 Impairments
 
 
 
 
 
 
 
 
 
 
Indefinite-lived intangible assets, net
 
$

 
$

 
$

 
$

 
$
5,963

2014 Total
 
 

 
 

 
 

 
 

 
$
5,963

For the nine months ended September 30, 2014, the Company recorded an impairment charge related to indefinite-lived intangible assets of $6.0 million as a component of depreciation and amortization. The Company made a decision to rebrand certain of its markets that were not using the Ticketmaster trade name. In connection with the rebranding, it was determined that an indefinite-lived intangible asset for a certain market was fully impaired since the transition to the Ticketmaster trade name was substantially completed for that market during the third quarter. The fair value of this asset was calculated using a relief-from royalty method. The relief-from royalty method applied a royalty rate to the projected earnings attributable to the indefinite-lived intangible asset. The projected earnings for this non-recurring fair value measurement are considered Level 3 inputs as defined in the FASB guidance.
The Company’s outstanding debt held by third-party financial institutions is carried at cost, adjusted for any premium or discount. The Company’s debt is not publicly traded and the carrying amounts typically approximate fair value for the Company’s debt that accrues interest at a variable rate. The estimated fair values of the 7% senior notes, the 5.375% senior

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notes and the 2.5% convertible senior notes were $452.9 million, $249.4 million and $283.9 million, respectively, at September 30, 2014. The estimated fair values of the 7% senior notes and the 2.875% convertible senior notes were $461.9 million and $223.0 million, respectively, at December 31, 2013. The estimated fair value of the Company’s 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 as defined in the FASB guidance. The Company had fixed-rate debt held by noncontrolling interest partners with a face value of $31.3 million and $34.6 million at September 30, 2014 and December 31, 2013, respectively. The Company is unable to determine the fair value of this debt.
NOTE 5—COMMITMENTS AND CONTINGENT LIABILITIES
Ticketing Fees Consumer Class Action Litigation
In October 2003, a putative representative action was filed in the Superior Court of California challenging Ticketmaster’s charges to online customers for shipping fees and alleging that its failure to disclose on its website that the charges contain a profit component is unlawful. The complaint asserted a claim for violation of California’s Unfair Competition Law (“UCL”) and sought restitution or disgorgement of the difference between (i) the total shipping fees charged by Ticketmaster in connection with online ticket sales during the applicable period, and (ii) the amount that Ticketmaster actually paid to the shipper for delivery of those tickets. In August 2005, the plaintiffs filed a first amended complaint, then pleading the case as a putative class action and adding the claim that Ticketmaster’s website disclosures in respect of its ticket order processing fees constitute false advertising in violation of California’s False Advertising Law. On this new claim, the amended complaint seeks restitution or disgorgement of the entire amount of order processing fees charged by Ticketmaster during the applicable period. In April 2009, the Court granted the plaintiffs’ motion for leave to file a second amended complaint adding new claims that (a) Ticketmaster’s order processing fees are unconscionable under the UCL, and (b) Ticketmaster’s alleged business practices further violate the California Consumer Legal Remedies Act. Plaintiffs later filed a third amended complaint, to which Ticketmaster filed a demurrer in July 2009. The Court overruled Ticketmaster’s demurrer in October 2009.
The plaintiffs filed a class certification motion in August 2009, which Ticketmaster opposed. In February 2010, the Court granted certification of a class on the first and second causes of action, which allege that Ticketmaster misrepresents/omits the fact of a profit component in Ticketmaster’s shipping and order processing fees. The class would consist of California consumers who purchased tickets through Ticketmaster’s website from 1999 to present. The Court denied certification of a class on the third and fourth causes of action, which allege that Ticketmaster’s shipping and order processing fees are unconscionably high. In March 2010, Ticketmaster filed a Petition for Writ of Mandate with the California Court of Appeal, and plaintiffs also filed a Motion for Reconsideration of the Superior Court’s class certification order. In April 2010, the Superior Court denied plaintiffs’ Motion for Reconsideration of the Court’s class certification order, and the Court of Appeal denied Ticketmaster’s Petition for Writ of Mandate. In June 2010, the Court of Appeal granted the plaintiffs’ Petition for Writ of Mandate and ordered the Superior Court to vacate its February 2010 order denying plaintiffs’ motion to certify a national class and enter a new order granting plaintiffs’ motion to certify a nationwide class on the first and second claims. In September 2010, Ticketmaster filed its Motion for Summary Judgment on all causes of action in the Superior Court, and that same month plaintiffs filed their Motion for Summary Adjudication of various affirmative defenses asserted by Ticketmaster. In November 2010, Ticketmaster filed its Motion to Decertify Class.
In December 2010, the parties entered into a binding agreement providing for the settlement of the litigation and the resolution of all claims therein. In September 2011, the Court declined to approve the settlement in its then-current form. Litigation continued, and in September 2011, the Court granted in part and denied in part Ticketmaster’s Motion for Summary Judgment. The parties reached a new settlement in September 2011, which was preliminarily approved, but in September 2012 the Court declined to grant final approval. In June 2013, the parties reached a revised settlement, which was preliminarily approved by the Court in April 2014. Ticketmaster and its parent, Live Nation, have not acknowledged any violations of law or liability in connection with the matter.
As of September 30, 2014, the Company had accrued $35.1 million, its best estimate of the probable costs associated with the settlement referred to above. This liability includes an estimated redemption rate. Any difference between the Company’s estimated redemption rate and the actual redemption rate it experiences will impact the final settlement amount; however, the Company does not expect this difference to be material.

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Other Litigation
From time to time, the Company is involved in other legal proceedings arising in the ordinary course of its business, including proceedings and claims based upon violations of antitrust laws, intellectual property rights and tortious interference, which could cause the Company to incur significant expenses. The Company has also been the subject of personal injury and wrongful death claims relating to accidents at its venues in connection with its operations. As required, the Company has accrued its 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 the Company’s assumptions or the effectiveness of its strategies related to these proceedings.
NOTE 6—CERTAIN RELATIONSHIPS AND RELATED-PARTY TRANSACTIONS
Transactions Involving Directors
Relationship with Microsoft
The Company has a non-employee director who became an executive officer of Microsoft Corporation as of September 2, 2014. The director receives directors’ fees, stock options and restricted stock awards on the same basis as other non-employee members of the Company’s board of directors. From time to time, the Company purchases software licenses, advertising and other products from and provides sponsorship and advertising opportunities to Microsoft and its subsidiaries in the ordinary course of business on an arm’s-length basis. The Company did not have any material transactions with Microsoft during September 2014.
Other Related Parties
The Company conducts certain transactions in the ordinary course of business with companies that are owned, in part or in total, by various members of management of the Company’s subsidiaries or companies over which it has significant influence. These transactions primarily relate to venue rentals, concession services, equipment rentals, ticketing, marketing and other services.
The following table sets forth expenses incurred and revenue earned from these companies for services rendered or provided in relation to these business ventures. None of these transactions were with directors or executive officers of the Company.
  
Three Months Ended 
 September 30,
 
Nine Months Ended 
 September 30,
  
2014
 
2013
 
2014
 
2013
 
(in thousands)
Other related-parties revenue
$
558

 
$
2,166

 
$
3,709

 
$
4,684

Other related-parties expenses
$
3,724

 
$
7,913

 
$
12,704

 
$
15,359

NOTE 7—INCOME TAXES
The Company calculates interim effective tax rates in accordance with the FASB guidance for income taxes and applies the estimated annual effective tax rate to year-to-date pretax income (or loss) at the end of each interim period to compute a year-to-date tax expense (or benefit). This guidance requires departure from effective tax rate computations when losses incurred within tax jurisdictions cannot be carried back and future profits associated with operations in those tax jurisdictions cannot be assured beyond any reasonable doubt. Accordingly, the Company has calculated and applied an expected annual effective tax rate of approximately 19% for 2014 (as compared to 20% in the prior year), excluding significant, unusual or extraordinary items, for ordinary income associated with operations for which the Company currently expects to have annual taxable income, which are principally outside of the United States. The Company has not recorded tax benefits associated with losses from operations for which future taxable income cannot be reasonably assured. As required by this guidance, the Company also includes the tax effects of significant, unusual or extraordinary items in income tax expense (benefit) in the interim period in which they occur.
Income tax benefit was $0.5 million for the nine months ended September 30, 2014. The components that contributed to this income tax benefit primarily consisted of $14.5 million attributable to the release of valuation allowances related to deferred tax liabilities associated with acquisitions during 2014. This benefit is partially offset by income tax expense of $9.6 million based on the expected annual rate pertaining to ordinary income and $4.5 million of state and local tax expense.

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Historically, the Company has reinvested all foreign earnings in its continuing foreign operations. The Company currently believes that the majority of its undistributed foreign earnings that are not currently subject to United States federal income tax will be indefinitely reinvested in its foreign operations.
The tax years 2005 through 2013 remain open to examination by the major tax jurisdictions to which the Company is subject.
NOTE 8—EQUITY
The following table shows the reconciliation of the carrying amount of stockholders’ equity attributable to Live Nation Entertainment, Inc., equity attributable to noncontrolling interests, total equity and also redeemable noncontrolling interests for the nine months ended September 30, 2014:
 
Live Nation
Entertainment, Inc.
Stockholders’  Equity
 
Noncontrolling
Interests
 
Total
Equity
 
Redeemable
Noncontrolling
Interests
 
(in thousands)
 
(in thousands)
Balance at December 31, 2013
$
1,409,228

 
$
180,578

 
$
1,589,806

 
$
61,041

Non-cash and stock-based compensation
31,531

 

 
31,531

 

Common stock issued under stock plans, net of shares withheld for employee taxes
(14,891
)
 

 
(14,891
)
 

Exercise of stock options
14,142

 

 
14,142

 

Fair value of convertible debt conversion feature, net of issuance costs
21,444

 

 
21,444

 

Acquisitions

 
3,343

 
3,343

 

Purchases of noncontrolling interests
(1,721
)
 
6

 
(1,715
)
 
(4,291
)
Sales of noncontrolling interests
(11,748
)
 
(158
)
 
(11,906
)
 
19,249

Redeemable noncontrolling interests fair value adjustments
(3,702
)
 

 
(3,702
)
 
3,702

Noncontrolling interests contributions

 
106

 
106

 

Cash distributions

 
(21,971
)
 
(21,971
)
 
(1,993
)
Other

 
(4,559
)
 
(4,559
)
 

Comprehensive income (loss):
 
 
 
 

 
 
Net income (loss)
95,649

 
19,175

 
114,824

 
(3,272
)
Unrealized loss on cash flow hedges
(2
)
 

 
(2
)
 

Realized loss on cash flow hedges
48

 

 
48

 

Change in funded status of defined benefit pension plan
30

 

 
30

 

Foreign currency translation adjustments
(35,283
)
 

 
(35,283
)
 

Balance at September 30, 2014
$
1,504,725

 
$
176,520

 
$
1,681,245

 
$
74,436

Common Stock
During the first nine months of 2014, the Company issued 2.0 million shares of common stock in connection with stock option exercises and vestings of restricted stock awards, net of shares withheld for taxes.
Redeemable Noncontrolling Interests
The Company is subject to put arrangements arising from business combinations where the holders of the noncontrolling interests can require the Company 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 exercise dates for these puts range from January 2015 to December 2019. The redemption amounts for these puts are either 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. As these put arrangements are not currently redeemable, the Company accretes up 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

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estimated redemption values that are based on a formula linked to future earnings are computed using projected cash flows each reporting period which take into account the current expectations regarding profitability and the timing of revenue-generating events.
Accumulated Other Comprehensive Income (Loss)
The following table presents changes in the components of AOCI, net of taxes, for the nine months ended September 30, 2014:
 
 
Gains and Losses On Cash Flow Hedges
 
Defined Benefit Pension Items
 
Foreign Currency Items
 
Total
 
 
(in thousands)
Balance at December 31, 2013
 
$
(79
)
 
$
(611
)
 
$
(1,680
)
 
$
(2,370
)
Other comprehensive income (loss) before reclassifications
 
(2
)
 
30

 
(35,283
)
 
(35,255
)
Amount reclassified from AOCI
 
48

 

 

 
48

Net other comprehensive income (loss)
 
46

 
30

 
(35,283
)
 
(35,207
)
Balance at September 30, 2014
 
$
(33
)
 
$
(581
)
 
$
(36,963
)
 
$
(37,577
)
The realized loss on cash flow hedges reclassified from AOCI consists of one interest rate swap agreement.
Earnings Per Share
The following table sets forth the computation of basic and diluted net income per common share:
 
Three Months Ended 
 September 30,
 
Nine Months Ended 
 September 30,
 
2014
 
2013
 
2014
 
2013
 
(in thousands except share and per share data)
Net income attributable to common stockholders of Live Nation Entertainment, Inc.
$
105,163

 
$
43,774

 
$
95,649

 
$
38,665

Accretion of redeemable noncontrolling interests
(1,198
)
 
(265
)
 
(3,702
)
 
(424
)
Net income available to common stockholders of Live Nation Entertainment, Inc.—basic
$
103,965

 
$
43,509

 
$
91,947

 
$
38,241

Convertible debt interest, net of tax
4,813

 

 

 

Net income available to common stockholders of Live Nation Entertainment, Inc.—diluted
108,778

 
43,509

 
91,947

 
38,241

 
 
 
 
 
 
 
 
Weighted average common shares—basic
199,261,810

 
196,396,704

 
198,612,221

 
192,792,286

Effect of dilutive securities:
 
 
 
 
 
 
 
        Stock options, restricted stock and warrants
7,340,484

 
5,713,079

 
7,621,353

 
4,474,003

        Convertible senior notes
14,979,289

 

 

 

Weighted average common shares—diluted
221,581,583

 
202,109,783

 
206,233,574

 
197,266,289

 
 
 
 
 
 
 
 
Basic net income available to common stockholders of Live Nation Entertainment, Inc.
$
0.52

 
$
0.22

 
$
0.46

 
$
0.20

Diluted net income available to common stockholders of Live Nation Entertainment, Inc.
$
0.49

 
$
0.22

 
$
0.45

 
$
0.19


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Table of Contents

The calculation of diluted net income per common share includes the effects of the assumed exercise of any outstanding stock options and warrants, the assumed vesting of shares of restricted stock awards and the assumed conversion of the 2.5% convertible senior notes and the 2.875% convertible senior notes where dilutive. The following table shows securities excluded from the calculation of diluted net income per common share because such securities are anti-dilutive:
  
Three Months Ended 
 September 30,
 
Nine Months Ended 
 September 30,
  
2014
 
2013
 
2014
 
2013
 
(in thousands)
Options to purchase shares of common stock
5,116

 
3,703

 
5,243

 
6,386

Restricted stock awards—unvested
313

 
765

 
344

 
786

Conversion shares related to the convertible senior notes

 
8,105

 
7,930

 
8,105

Number of anti-dilutive potentially issuable shares excluded from diluted common shares outstanding
5,429

 
12,573

 
13,517

 
15,277

NOTE 9—STOCK-BASED COMPENSATION
The following is a summary of stock-based compensation expense recorded by the Company during the respective periods:
  
Three Months Ended 
 September 30,
 
Nine Months Ended 
 September 30,
 
2014
 
2013
 
2014
 
2013
 
(in thousands)
Selling, general and administrative expenses
$
4,818

 
$
4,915

 
$
17,993

 
$
11,166

Corporate expenses
4,145

 
4,190

 
13,538

 
12,058

Total
$
8,963

 
$
9,105

 
$
31,531

 
$
23,224

The increase in stock-based compensation expense for the nine months ended September 30, 2014 as compared to the same period of 2013 is due primarily to 2.3 million options and 0.7 million shares of restricted stock granted to management and directors during the first nine months of 2014, which will generally vest over one to four years. In addition, the Company granted other equity awards to employees during 2014, with a grant in the first quarter vesting over four years and a grant in the second quarter vesting at issuance. During the three and nine months ended September 30, 2014, the Company recorded stock-based compensation expense for these other awards of $1.7 million and $7.1 million, respectively, as a component of selling, general and administrative expenses.
As of September 30, 2014, there was $60.4 million of total unrecognized compensation cost related to stock-based compensation arrangements for stock options, restricted stock awards and other equity awards. This cost is expected to be recognized over a weighted-average period of 2.6 years.

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NOTE 10—SEGMENT DATA
The Company’s reportable segments are Concerts, Ticketing, Artist Nation and Sponsorship & Advertising. The Concerts segment involves the promotion of live music events globally in the Company’s owned or operated venues and in rented third-party venues, the production of music festivals and the operation and management of music venues. The Ticketing segment involves the management of the Company’s global ticketing operations including providing ticketing software and services to clients and online access for customers relating to ticket and event information and is responsible for the Company’s primary websites, www.livenation.com and www.ticketmaster.com. The Artist Nation segment provides management services to artists and other services including merchandise sales. The 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 including signage, promotional programs and banner ads in the Company’s owned or operated venues and on its primary websites.
Revenue and expenses earned and charged between segments are eliminated in consolidation. Corporate expenses and all line items below operating income are managed on a total company basis. The Company’s capital expenditures include accruals and expenditures funded by outside parties such as landlords or replacements funded by insurance companies.
The Company manages its working capital on a consolidated basis. Accordingly, segment assets are not reported to, or used by, the Company’s management to allocate resources to or assess performance of the segments, and therefore, total segment assets have not been presented.
For the nine months ended September 30, 2013, the previously reported capital expenditures amount in the Concerts segment has been increased by $21.9 million to include partial insurance recoveries received in connection with storm damage to an amphitheater in New York during Hurricane Sandy. The expenditures had previously been reported net of these recoveries.
The following table presents the results of operations for the Company’s reportable segments for the three and nine months ended September 30, 2014 and 2013:
 
Concerts
 
Ticketing
 
Artist
Nation
 
Sponsorship
& Advertising
 
Other
 
Corporate
 
Eliminations
 
Consolidated
 
 
 
 
 
 
 
(in thousands)
 
 
 
 
 
 
Three Months Ended September 30, 2014
 
 
 
 
 
 
 
 
 
 
Revenue
$
1,925,462

 
$
386,131

 
$
130,935

 
$
114,614

 
$
792

 
$

 
$
(55,926
)
 
$
2,502,008

Direct operating expenses
1,658,028

 
187,548

 
75,642

 
13,534

 
(2,473
)
 

 
(55,760
)
 
1,876,519

Selling, general and administrative expenses
186,415

 
113,483

 
35,400

 
13,098

 
1,280

 

 

 
349,676

Depreciation and amortization
30,155

 
55,521

 
10,498

 
1,264

 
11

 
642

 
(166
)
 
97,925

Loss (gain) on disposal of operating assets
(112
)
 
(1,584
)
 

 

 

 

 

 
(1,696
)
Corporate expenses

 

 

 

 

 
26,647

 

 
26,647

Acquisition transaction expenses
1,109

 
695

 
247

 

 

 
282

 

 
2,333

Operating income (loss)
$
49,867

 
$
30,468

 
$
9,148

 
$
86,718

 
$
1,974

 
$
(27,571
)
 
$

 
$
150,604

Intersegment revenue
$
48,737

 
$
690

 
$
6,499

 
$

 
$

 
$

 
$
(55,926
)
 
$

Three Months Ended September 30, 2013
 
 
 
 
 
 
 
 
 
 
Revenue
$
1,726,986

 
$
356,809

 
$
111,060

 
$
110,217

 
$
793

 
$

 
$
(43,629
)
 
$
2,262,236

Direct operating expenses
1,487,856

 
166,509

 
69,231

 
15,112

 
3,109

 

 
(43,086
)
 
1,698,731


19

Table of Contents

 
Concerts
 
Ticketing
 
Artist
Nation
 
Sponsorship
& Advertising
 
Other
 
Corporate
 
Eliminations
 
Consolidated
 
 
 
 
 
 
 
(in thousands)
 
 
 
 
 
 
Selling, general and administrative expenses
170,005

 
112,940

 
29,348

 
11,979

 
733

 

 

 
325,005

Depreciation and amortization
32,821

 
49,150

 
10,736

 
(56
)
 
11

 
610

 
(543
)
 
92,729

Loss (gain) on disposal of operating assets
(9,035
)
 
(27
)
 
2

 

 

 

 

 
(9,060
)
Corporate expenses

 

 

 

 

 
26,442

 

 
26,442

Acquisition transaction expenses
745

 
221

 
(57
)
 

 

 
1,443

 

 
2,352

Operating income (loss)
$
44,594

 
$
28,016

 
$
1,800

 
$
83,182

 
$
(3,060
)
 
$
(28,495
)
 
$

 
$
126,037

Intersegment revenue
$
36,535

 
$
861

 
$
6,233

 
$

 
$

 
$

 
$
(43,629
)
 
$

Nine Months Ended September 30, 2014
 
 
 
 
 
 
 
 
 
 
 
 
Revenue
$
3,760,118

 
$
1,111,592

 
$
282,653

 
$
230,905

 
$
2,377

 
$

 
$
(92,536
)
 
$
5,295,109

Direct operating expenses
3,145,174

 
543,408

 
164,960

 
31,593

 
(1,792
)
 

 
(90,977
)
 
3,792,366

Selling, general and administrative expenses
503,221

 
339,385

 
95,222

 
37,263

 
2,915

 

 

 
978,006

Depreciation and amortization
84,864

 
142,472

 
25,934

 
3,207

 
31

 
1,783

 
(1,559
)
 
256,732

Loss (gain) on disposal of operating assets
(3,347
)
 
(1,701
)
 
34

 

 

 
37

 

 
(4,977
)
Corporate expenses

 

 

 

 

 
73,538

 

 
73,538

Acquisition transaction expenses
1,892

 
758

 
435

 

 

 
2,377

 

 
5,462

Operating income (loss)
$
28,314

 
$
87,270

 
$
(3,932
)
 
$
158,842

 
$
1,223

 
$
(77,735
)
 
$

 
$
193,982

Intersegment revenue
$
81,771

 
$
1,150

 
$
9,615

 
$

 
$

 
$

 
$
(92,536
)
 
$

Capital expenditures
$
24,647

 
$
59,791

 
$
1,503

 
$
579

 
$
6

 
$
5,464

 
$

 
$
91,990


20

Table of Contents

 
Concerts
 
Ticketing
 
Artist
Nation
 
Sponsorship
& Advertising
 
Other
 
Corporate
 
Eliminations
 
Consolidated
 
 
 
 
 
 
 
(in thousands)
 
 
 
 
 
 
Nine Months Ended September 30, 2013
 
 
 
 
 
 
 
 
 
 
 
 
Revenue
$
3,433,527

 
$
1,019,771

 
$
261,070

 
$
221,604

 
$
2,377

 
$

 
$
(72,902
)
 
$
4,865,447

Direct operating expenses
2,870,584

 
481,592

 
169,563

 
35,287

 
(62
)
 

 
(71,381
)
 
3,485,583

Selling, general and administrative expenses
466,840

 
326,799

 
71,862

 
32,626

 
2,119

 

 

 
900,246

Depreciation and amortization
96,591

 
128,648

 
30,906

 
682

 
196

 
2,080

 
(1,521
)
 
257,582

Loss (gain) on disposal of operating assets
(43,497
)
 
(47
)
 
681

 

 
7

 

 

 
(42,856
)
Corporate expenses

 

 

 

 

 
68,909

 

 
68,909

Acquisition transaction expenses
1,292

 
245

 
88

 

 

 
3,704

 

 
5,329

Operating income (loss)
$
41,717

 
$
82,534

 
$
(12,030
)
 
$
153,009

 
$
117

 
$
(74,693
)
 
$

 
$
190,654

Intersegment revenue
$
63,502

 
$
1,842

 
$
7,558

 
$

 
$

 
$

 
$
(72,902
)
 
$

Capital expenditures
$
38,517

 
$
62,145

 
$
483

 
$
653

 
$

 
$
182

 
$

 
$
101,980

 

21

Table of Contents

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
“Live Nation” (which may be referred to as the “Company,” “we,” “us” or “our”) means Live Nation Entertainment, Inc. and its subsidiaries, or one of our segments or subsidiaries, as the context requires. You should read the following discussion of our financi