LYV-2014.6.30-10Q

 
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 June 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 July 28, 2014, there were 200,511,675 outstanding shares of the registrant’s common stock, $0.01 par value per share, including 1,301,489 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)
 
June 30,
2014
 
December 31,
2013
 
(in thousands)
ASSETS
 
 
 
Current assets
 
 
 
Cash and cash equivalents
$
2,041,686

 
$
1,299,184

Accounts receivable, less allowance of $18,065 and $19,850, respectively
563,394

 
439,151

Prepaid expenses
647,087

 
378,342

Other current assets
59,179

 
43,427

Total current assets
3,311,346

 
2,160,104

Property, plant and equipment
 
 
 
Land, buildings and improvements
815,728

 
816,931

Computer equipment and capitalized software
450,447

 
421,846

Furniture and other equipment
210,331

 
210,866

Construction in progress
64,514

 
52,883

 
1,541,020

 
1,502,526

Less accumulated depreciation
831,678

 
795,726

 
709,342

 
706,800

Intangible assets
 
 
 
Definite-lived intangible assets, net
647,645

 
676,564

Indefinite-lived intangible assets
376,235

 
376,736

Goodwill
1,502,707

 
1,466,983

Other long-term assets
324,845

 
296,334

Total assets
$
6,872,120

 
$
5,683,521

LIABILITIES AND EQUITY
 
 
 
Current liabilities
 
 
 
Accounts payable, client accounts
$
700,524

 
$
656,253

Accounts payable
150,228

 
111,320

Accrued expenses
709,490

 
668,799

Deferred revenue
1,001,097

 
486,433

Current portion of long-term debt
269,628

 
278,403

Other current liabilities
41,851

 
54,310

Total current liabilities
2,872,818

 
2,255,518

Long-term debt, net
2,038,845

 
1,530,484

Long-term deferred income taxes
167,179

 
161,637

Other long-term liabilities
105,673

 
85,035

Commitments and contingent liabilities


 


Redeemable noncontrolling interests
56,171

 
61,041

Stockholders’ equity
 
 
 
Common stock
1,993

 
1,978

Additional paid-in capital
2,411,138

 
2,368,281

Accumulated deficit
(961,310
)
 
(951,796
)
Cost of shares held in treasury
(6,865
)
 
(6,865
)
Accumulated other comprehensive income (loss)
16,828

 
(2,370
)
Total Live Nation Entertainment, Inc. stockholders’ equity
1,461,784

 
1,409,228

Noncontrolling interests
169,650

 
180,578

Total equity
1,631,434

 
1,589,806

Total liabilities and equity
$
6,872,120

 
$
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 
 June 30,
 
Six Months Ended 
 June 30,
 
2014
 
2013
 
2014
 
2013
 
(in thousands except share and per share data)
Revenue
$
1,665,785

 
$
1,679,513

 
$
2,793,101

 
$
2,603,211

Operating expenses:
 
 
 
 
 
 
 
Direct operating expenses
1,184,696

 
1,209,918

 
1,915,847

 
1,786,852

Selling, general and administrative expenses
325,925

 
295,719

 
628,330

 
575,241

Depreciation and amortization
76,219

 
82,688

 
158,807

 
164,853

Gain on disposal of operating assets
(3,787
)
 
(30,199
)
 
(3,281
)
 
(33,796
)
Corporate expenses
25,717

 
21,812

 
46,891

 
42,467

Acquisition transaction expenses
1,329

 
1,769

 
3,129

 
2,977

Operating income
55,686

 
97,806

 
43,378

 
64,617

Interest expense
27,590

 
30,041

 
52,082

 
58,192

Interest income
(1,146
)
 
(890
)
 
(1,812
)
 
(2,658
)
Equity in earnings of nonconsolidated affiliates
(960
)
 
(2,629
)
 
(3,766
)
 
(5,211
)
Other expense (income), net
(330
)
 
3,868

 
(1,506
)
 
7,506

Income (loss) before income taxes
30,532

 
67,416

 
(1,620
)
 
6,788

Income tax expense
4,710

 
8,401

 
2,655

 
11,960

Net income (loss)
25,822

 
59,015

 
(4,275
)
 
(5,172
)
Net income (loss) attributable to noncontrolling interests
2,888

 
885

 
5,239

 
(63
)
Net income (loss) attributable to common stockholders of Live Nation Entertainment, Inc.
$
22,934

 
$
58,130

 
$
(9,514
)
 
$
(5,109
)
 
 
 
 
 
 
 
 
Basic and diluted net income (loss) per common share attributable to common stockholders of Live Nation Entertainment, Inc.
$
0.11

 
$
0.30

 
$
(0.06
)
 
$
(0.03
)
 
 
 
 
 
 
 
 
Weighted average common shares outstanding:
 
 
 
 
 
 
 
Basic
198,701,762

 
193,069,783

 
198,282,044

 
190,960,206

Diluted
205,989,271

 
196,770,405

 
198,282,044

 
190,960,206


See Notes to Consolidated Financial Statements
3
Table of Contents

LIVE NATION ENTERTAINMENT, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(UNAUDITED)
 
Three Months Ended 
 June 30,
 
Six Months Ended 
 June 30,
 
2014
 
2013
 
2014
 
2013
 
(in thousands)
Net income (loss)
$
25,822

 
$
59,015

 
$
(4,275
)
 
$
(5,172
)
Other comprehensive income (loss), net of tax:
 
 
 
 
 
 
 
Unrealized gain (loss) on cash flow hedges
(5
)
 
(45
)
 
(8
)
 
25

Realized loss on cash flow hedges
16

 
449

 
33

 
457

Change in funded status of defined benefit pension plan
—

 
—

 
30

 
—

Foreign currency translation adjustments
9,324

 
(7,261
)
 
19,143

 
(41,518
)
Comprehensive income (loss)
35,157

 
52,158

 
14,923

 
(46,208
)
Comprehensive income (loss) attributable to noncontrolling interests
2,888

 
885

 
5,239

 
(63
)
Comprehensive income (loss) attributable to common stockholders of Live Nation Entertainment, Inc.
$
32,269

 
$
51,273

 
$
9,684

 
$
(46,145
)


See Notes to Consolidated Financial Statements
4
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LIVE NATION ENTERTAINMENT, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
 
Six Months Ended 
 June 30,
 
2014
 
2013
 
(in thousands)
CASH FLOWS FROM OPERATING ACTIVITIES
 
 
 
Net loss
$
(4,275
)
 
$
(5,172
)
Reconciling items:
 
 
 
Depreciation
61,906

 
59,410

Amortization
96,901

 
105,443

Deferred income tax benefit
(12,064
)
 
(6,305
)
Amortization of debt issuance costs and discount/premium, net
10,101

 
10,421

Non-cash compensation expense
22,568

 
14,119

Gain on disposal of operating assets
(3,281
)
 
(33,796
)
Equity in earnings of nonconsolidated affiliates
(3,766
)
 
(5,211
)
Other, net
947

 
(2,356
)
Changes in operating assets and liabilities, net of effects of acquisitions and dispositions:
 
 
 
Increase in accounts receivable
(126,528
)
 
(182,561
)
Increase in prepaid expenses
(265,927
)
 
(230,247
)
Increase in other assets
(60,500
)
 
(62,053
)
Increase in accounts payable, accrued expenses and other liabilities
114,065

 
130,209

Increase in deferred revenue
508,323

 
588,446

Net cash provided by operating activities
338,470

 
380,347

CASH FLOWS FROM INVESTING ACTIVITIES
 
 
 
Distributions from nonconsolidated affiliates
1,836

 
2,740

Investments made in nonconsolidated affiliates
(1,512
)
 
(3,032
)
Purchases of property, plant and equipment
(66,388
)
 
(76,685
)
Proceeds from disposal of operating assets, net of cash divested
3,631

 
81,070

Cash paid for acquisitions, net of cash acquired
(24,518
)
 
(23,766
)
Purchases of intangible assets
(2,675
)
 
(17
)
Other, net
(4,019
)
 
(1,052
)
Net cash used in investing activities
(93,645
)
 
(20,742
)
CASH FLOWS FROM FINANCING ACTIVITIES
 
 
 
Proceeds from long-term debt, net of debt issuance costs
514,612

 
89,369

Payments on long-term debt
(15,126
)
 
(106,388
)
Contributions from noncontrolling interests
81

 
267

Distributions to noncontrolling interests
(18,036
)
 
(1,936
)
Purchases and sales of noncontrolling interests, net
(3,528
)
 
—

Proceeds from exercise of stock options
11,737

 
73,449

Payments for deferred and contingent consideration
(5,541
)
 
(750
)
Net cash provided by financing activities
484,199

 
54,011

Effect of exchange rate changes on cash and cash equivalents
13,478

 
(29,411
)
Net increase in cash and cash equivalents
742,502

 
384,205

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

 
1,001,055

Cash and cash equivalents at end of period
$
2,041,686

 
$
1,385,260


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 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 June 30, 2014 and December 31, 2013 cash and cash equivalents balance is $577.4 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 six months of 2014, the Company completed its acquisition of two artist management businesses located in California 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

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effective for annual periods beginning after December 15, 2015 and interim periods within that year, and early adoption is 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 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 six months ended June 30, 2013, the Company received partial insurance recoveries and recorded gains of $9.4 million and $12.6 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 gains of $3.6 million and $3.2 million during the three and six months ended June 30, 2014, respectively, 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.

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The following table presents the changes in the gross carrying amount and accumulated amortization of definite-lived intangible assets for the six months ended June 30, 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
—

 
27,771

 
1,500

 
—

 
1,231

 
—

 
1,100

 
31,602

Acquisitions— prior year
(3,994
)
 
5,098

 
—

 
—

 
—

 
—

 
—

 
1,104

Foreign exchange
4,140

 
2,832

 
—

 
872

 
(591
)
 
146

 
—

 
7,399

Other (1)
(479
)
 
(800
)
 
(14,800
)
 
—

 
—

 
—

 
570

 
(15,509
)
Net change
(333
)
 
34,901

 
(13,300
)
 
872

 
640

 
146

 
1,670

 
24,596

Accumulated amortization:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Amortization
(24,466
)
 
(19,784
)
 
(7,044
)
 
(3,417
)
 
(10,996
)
 
(2,003
)
 
(189
)
 
(67,899
)
Foreign exchange
(1,316
)
 
(744
)
 
—

 
(311
)
 
95

 
4

 
—

 
(2,272
)
Other (1)
478

 
878

 
15,300

 
—

 
—

 
—

 
—

 
16,656

Net change
(25,304
)
 
(19,650
)
 
8,256

 
(3,728
)
 
(10,901
)
 
(1,999
)
 
(189
)
 
(53,515
)
Balance as of June 30, 2014:
 
 
 
 
 
 
 
 
 
 
 
 
Gross carrying amount
584,761

 
312,838

 
123,899

 
86,514

 
101,304

 
28,670

 
4,045

 
1,242,031

Accumulated amortization
(256,357
)
 
(101,459
)
 
(92,872
)
 
(47,415
)
 
(84,011
)
 
(11,091
)
 
(1,181
)
 
(594,386
)
Net
$
328,404

 
$
211,379

 
$
31,027

 
$
39,099

 
$
17,293

 
$
17,579

 
$
2,864

 
$
647,645

_________
(1) 
Other includes net downs of fully amortized assets and $0.6 million of reclassifications of certain assets from indefinite-lived intangible assets.
Included in the current year acquisitions amount above of $31.6 million are client/vendor relationships primarily associated with the acquisitions of two artist management businesses during the first half of 2014 that are located in California.
The 2014 additions to definite-lived intangible assets from acquisitions have weighted-average lives as follows:
  
Weighted-
Average
Life (years)
 
 
Client/vendor relationships
7
Non-compete agreements
3
Technology
3
Other
10
All categories
6
Amortization of definite-lived intangible assets for the three months ended June 30, 2014 and 2013 was $33.3 million and $43.3 million, respectively, and for the six months ended June 30, 2014 and 2013 was $67.9 million and $81.5 million, respectively. In addition, amortization related to nonrecoupable ticketing contract advances for the three months ended June 30,

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2014 and 2013 was $11.6 million and $10.3 million, respectively, and for the six months ended June 30, 2014 and 2013 was $29.0 million and $23.9 million, respectively.
As acquisitions and dispositions occur in the future and the valuations of intangible assets for recent acquisitions are completed, amortization may vary. Therefore, the expense to date is not necessarily indicative of the expense expected for the full year.
Goodwill
The following table presents the changes in the carrying amount of goodwill in each of the Company’s reportable segments for the six months ended June 30, 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

 
—

 
17,539

 
—

 
18,668

Acquisitions—prior year
(1,786
)
 
—

 
(927
)
 
5,426

 
2,713

Foreign exchange
8,895

 
(629
)
 
221

 
5,856

 
14,343

 
 
 
 
 
 
 
 
 
 
Balance as of June 30, 2014:
 
 
 
 
 
 
 
 
Goodwill
513,710

 
641,620

 
295,756

 
321,523

 
1,772,609

Accumulated impairment losses
(269,902
)
 
—

 
—

 
—

 
(269,902
)
                 Net
$
243,808

 
$
641,620

 
$
295,756

 
$
321,523

 
$
1,502,707

_________
(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 $18.7 million is goodwill primarily associated with the March 2014 acquisition of an artist management business located in California.
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 and its allocation between segments.

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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 in the balance sheet as investments in nonconsolidated affiliates reported as part of other long-term assets. The Company’s interests in these operations are recorded in the statement of operations as equity in earnings of nonconsolidated affiliates. For the six months ended June 30, 2014, the Company’s investment in Venta de Boletos por Computadora S.A. de C.V., a 33% owned ticketing distribution services company in Mexico, is considered significant on an individual basis and certain other investments are considered significant on an aggregate basis.
Summarized unaudited income statement information for the Company’s nonconsolidated affiliates noted above is as follows (at 100%):
 
 
Six Months Ended 
 June 30,
 
 
2014
 
2013
 
 
(in thousands)
Revenue
 
$
24,278

 
$
28,203

Operating income
 
$
9,912

 
$
14,956

Net income
 
$
8,044

 
$
11,894

Net income attributable to the common stockholders of the equity investee
 
$
8,010

 
$
11,863


Long-lived Asset Disposals
In May 2013, the Company completed the sale of a theatrical theater in New York.
The table below summarizes the asset and liability values for the six months ended June 30, 2013 for significant disposals and the resulting gain or loss recorded. There were no significant disposals of long-lived assets in the six months ended June 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
 
$
(21,887
)
 
$
—

 
$
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. Proceeds from these borrowings, net of related fees and expenses of $10.4 million, was $514.6 million. The Company intends to use the proceeds to redeem all of its outstanding 2.875% convertible senior notes plus accrued interest, if any, and for general corporate purposes.

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Long-term debt, which includes capital leases, at June 30, 2014 and December 31, 2013, consisted of the following:
 
 
 
 
 
June 30, 2014
 
December 31, 2013
 
 
 
 
 
(in thousands)
Senior Secured Credit Facility:
 
 
 
 
 
Term loan A, net of unamortized discount of $1.7 million and $2.0 million
 
 
 
 
 
 
at June 30, 2014 and December 31, 2013, respectively
 
$
108,987

 
$
111,578

 
Term loan B, net of unamortized discount of $13.3 million and
 
 
 
 
 
 
$14.4 million at June 30, 2014 and December 31, 2013, respectively
 
929,587

 
933,226

 
Revolving credit facility
 
—

 
—

7% Senior Notes due 2020, plus unamortized premium of $7.9 million
 
 
 
 
 
and $8.6 million at June 30, 2014 and December 31, 2013, respectively
 
432,929

 
433,571

5.375% Senior Notes due 2022
 
250,000

 
—

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

 
$0.6 million and $7.6 million at June 30, 2014 and December 31, 2013, respectively
 
219,401

 
212,415

2.5% Convertible Senior Notes due 2019, net of unamortized discount of
 
 
 
 
 
$21.6 million at June 30, 2014
 
253,401

 
—

Other long-term debt
 
114,168

 
118,097

 
 
 
 
 
2,308,473

 
1,808,887

Less: current portion
 
269,628

 
278,403

 
 
 
 
 
 
 
 
Total long-term debt, net
 
$
2,038,845

 
$
1,530,484


Future maturities of long-term debt at June 30, 2014 are as follow:
 
(in thousands)
2014
$
240,848

2015
48,174

2016
51,480

2017
49,027

2018
330,712

Thereafter
1,617,489

Total
2,337,730

Debt discount
(37,186
)
Debt premium
7,929

Total, including premium and discount
$
2,308,473

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 settled 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.
As of June 30, 2014, the carrying amount of the equity component of the notes was $22.0 million and the principal amount of the liability component (face value of the notes) was $275 million. As of June 30, 2014, the remaining period over which the discount will be amortized is approximately 4.5 years and the value of the notes, if converted and fully settled in shares, did not exceed the principal amount of the notes. For the three and six months ended June 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 and Six Months Ended 
 June 30, 2014
 
(in thousands)
Interest cost recognized relating to:
 
  Contractual interest coupon
$
726

  Amortization of debt discount
376

  Amortization of debt issuance costs
118

Total interest cost recognized on the notes
$
1,220


2.875% Convertible Senior Notes
In late July 2014, pursuant to the Company’s option under the indenture governing the 2.875% convertible senior notes, the Company notified the holders of these notes that it intends to redeem all outstanding notes in late September at a redemption price of 100% of the principal amount of the notes, plus accrued and unpaid interest.
NOTE 4—FAIR VALUE MEASUREMENTS
The following table shows the fair value of the Company’s significant financial assets 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:
 
Fair Value Measurements 
 at June 30, 2014
Fair Value Measurements 
 at December 31, 2013
 
Level 1
 
Level 1
 
(in thousands)
Assets:
 
 
 
Cash equivalents
$
257,548

 
$
26,627

The Company has cash equivalents which consist of money market funds. Fair values for cash equivalents are based on quoted prices in an active market which are considered to be Level 1 inputs as defined in the FASB guidance.
The Company’s outstanding debt held by third-party financial institutions is carried at cost, adjusted for premium or discounts. 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 notes, the 2.875% convertible senior notes and the 2.5% convertible senior notes were $467.5 million, $254.4 million, $220.0 million and $289.2 million, respectively, at June 30, 2014. The estimated fair values of the 7% senior notes and the 2.875%

12
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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 has fixed rate debt held by noncontrolling interest partners with a face value of $34.9 million and $34.6 million at June 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 approved preliminarily, 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 June 30, 2014, the Company has accrued $35.4 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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Table of Contents

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 and 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
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. As of June 30, 2014 and December 31, 2013, the Company had a receivable balance of $8.5 million and $13.5 million, respectively, from certain of these companies.
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 
 June 30,
 
Six Months Ended 
 June 30,
  
2014
 
2013
 
2014
 
2013
 
(in thousands)
Other related-parties revenue
$
1,946

 
$
1,627

 
$
3,193

 
$
2,954

Other related-parties expenses
$
5,142

 
$
2,677

 
$
9,651

 
$
7,827

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 (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 20% for 2014 (as compared to 19% 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 tax effects of significant, unusual or extraordinary items in income tax expense (benefit) in the interim period in which they occur.
Income tax expense was $2.7 million for the six months ended June 30, 2014. Tax expense primarily consisted of income tax expense of $7.0 million based on the expected annual rate pertaining to ordinary income, $1.9 million of state and local tax expense and $0.4 million of adjustments for taxes related to prior periods. These expenses were partially offset by $6.1 million attributable to the release of valuation allowances primarily related to deferred tax liabilities associated with the March 2014 acquisition of an artist management business located in California.
Historically, the Company has reinvested all foreign earnings in its continuing foreign operations. The Company currently believes all 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.

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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 six months ended June 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
22,568

 
—

 
22,568

 
—

Common stock issued under stock plans, net of shares withheld for employee taxes
(8,115
)
 
—

 
(8,115
)
 
—

Exercise of stock options
11,737

 
—

 
11,737

 
—

Fair value of convertible debt conversion feature, net of issuance costs
21,418

 
—

 
21,418

 
—

Acquisitions
—

 
3,343

 
3,343

 
—

Purchases of noncontrolling interests
(2,232
)
 
6

 
(2,226
)
 
(4,755
)
Sales of noncontrolling interests
—

 
(158
)
 
(158
)
 
—

Redeemable noncontrolling interests fair value adjustments
(2,504
)
 
—

 
(2,504
)
 
2,504

Noncontrolling interests contributions
—

 
106

 
106

 
—

Cash distributions
—

 
(16,043
)
 
(16,043
)
 
(1,993
)
Other
—

 
(4,511
)
 
(4,511
)
 
464

Comprehensive income (loss):
 
 
 
 

 
 
Net income (loss)
(9,514
)
 
6,329

 
(3,185
)
 
(1,090
)
Unrealized loss on cash flow hedges
(8
)
 
—

 
(8
)
 
—

Realized loss on cash flow hedges
33

 
—

 
33

 
—

Change in funded status of defined benefit pension plan
30

 
—

 
30

 
—

Foreign currency translation adjustments
19,143

 
—

 
19,143

 
—

Balance at June 30, 2014
$
1,461,784

 
$
169,650

 
$
1,631,434

 
$
56,171

Common Stock
During the first half of 2014, the Company issued 1.6 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 2018. 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 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 using projected cash flows each reporting period which take into account the current expectations regarding profitability and the timing of revenue-generating events.

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Table of Contents

Accumulated Other Comprehensive Income (Loss)
The following table presents changes in the components of AOCI, net of taxes, for the six months ended June 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
 
(8
)
 
30

 
19,143

 
19,165

Amount reclassified from AOCI
 
33

 
—

 
—

 
33

Net other comprehensive income
 
25

 
30

 
19,143

 
19,198

Balance at June 30, 2014
 
$
(54
)
 
$
(581
)
 
$
17,463

 
$
16,828

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 (loss) per common share:
 
Three Months Ended 
 June 30,
 
Six Months Ended 
 June 30,
 
2014
 
2013
 
2014
 
2013
 
(in thousands except share and per share data)
Net income (loss) attributable to common stockholders of Live Nation Entertainment, Inc. —basic and diluted
$
22,934

 
$
58,130

 
$
(9,514
)
 
$
(5,109
)
Accretion of redeemable noncontrolling interests
(460
)
 
68

 
(2,504
)
 
(160
)
Net income (loss) available to common stockholders of Live Nation Entertainment, Inc.—basic and diluted
$
22,474

 
$
58,198

 
$
(12,018
)
 
$
(5,269
)
 
 
 
 
 
 
 
 
Weighted average common shares—basic
198,701,762

 
193,069,783

 
198,282,044

 
190,960,206

Effect of dilutive securities:
 
 
 
 
 
 
 
        Stock options, restricted stock and warrants
7,287,509

 
3,700,622

 
—

 
—

Weighted average common shares—diluted
205,989,271

 
196,770,405

 
198,282,044

 
190,960,206

 
 
 
 
 
 
 
 
Basic and diluted net income (loss) per common share
$
0.11

 
$
0.30

 
$
(0.06
)
 
$
(0.03
)
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 
 June 30,
 
Six Months Ended 
 June 30,
  
2014
 
2013
 
2014
 
2013
 
(in thousands)
Options to purchase shares of common stock
5,108

 
6,734

 
17,755

 
17,695

Restricted stock awards—unvested
715

 
917

 
1,770

 
2,594

Warrants
—

 
500

 
—

 
500

Conversion shares related to the convertible senior notes
16,035

 
8,105

 
16,035

 
8,105

Number of anti-dilutive potentially issuable shares excluded from diluted common shares outstanding
21,858

 
16,256

 
35,560

 
28,894


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Table of Contents

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 
 June 30,
 
Six Months Ended 
 June 30,
 
2014
 
2013
 
2014
 
2013
 
(in thousands)
Selling, general and administrative expenses
$
8,255

 
$
3,601

 
$
13,175

 
$
6,251

Corporate expenses
4,295

 
4,213

 
9,393

 
7,868

Total
$
12,550

 
$
7,814

 
$
22,568

 
$
14,119

The increase in stock-based compensation expense for the six months ended June 30, 2014 as compared to the same period of 2013 is due primarily to 2.2 million options and 0.7 million shares of restricted stock granted to management and directors during the first half of 2014, which will generally vest over one to four years. In addition, the Company granted other equity awards to employees during 2014, with the grant in the first quarter vesting over four years and the grant in the second quarter vesting at issuance. During the three and six months ended June 30, 2014, the Company recorded stock-based compensation expense for these other awards of $5.2 million and $5.5 million, respectively, as a component of selling, general and administrative expenses.
As of June 30, 2014, there was $60.1 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 2.7 years.
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 six months ended June 30, 2013, the previously reported capital expenditures amount in the Concerts segment has been increased by $19.6 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 six months ended June 30, 2014 and 2013:
 
Concerts
 
Ticketing
 
Artist
Nation
 
Sponsorship
& Advertising
 
Other
 
Corporate
 
Eliminations
 
Consolidated
 
 
 
 
 
 
 
(in thousands)
 
 
 
 
 
 
Three Months Ended June 30, 2014
 
 
 
 
 
 
 
 
 
 
 
 
Revenue
$
1,172,166

 
$
371,000

 
$
79,162

 
$
70,903

 
$
839

 
$
—

 
$
(28,285
)
 
$
1,665,785

Direct operating expenses
969,991

 
183,269

 
47,242

 
9,995

 
1,590

 
—

 
(27,391
)
 
1,184,696


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Table of Contents

 
Concerts
 
Ticketing
 
Artist
Nation
 
Sponsorship
& Advertising
 
Other
 
Corporate
 
Eliminations
 
Consolidated
 
 
 
 
 
 
 
(in thousands)
 
 
 
 
 
 
Selling, general and administrative expenses
166,890

 
111,882

 
34,029

 
12,244

 
880

 
—

 
—

 
325,925

Depreciation and amortization
26,189

 
40,968

 
7,665

 
1,739

 
10

 
542

 
(894
)
 
76,219

Loss (gain) on disposal of operating assets
(3,745
)
 
(43
)
 
1

 
—

 
—

 
—

 
—

 
(3,787
)
Corporate expenses
—

 
—

 
—

 
—

 
—

 
25,717

 
—

 
25,717

Acquisition transaction expenses
456

 
58

 
(265
)
 
—

 
—

 
1,080

 
—

 
1,329

Operating income (loss)
$
12,385

 
$
34,866

 
$
(9,510
)
 
$
46,925

 
$
(1,641
)
 
$
(27,339
)
 
$
—

 
$
55,686

Intersegment revenue
$
25,604

 
$
187

 
$
2,494

 
$
—

 
$
—

 
$
—

 
$
(28,285
)
 
$
—

Three Months Ended June 30, 2013
 
 
 
 
 
 
 
 
 
 
 
 
Revenue
$
1,193,006

 
$
337,827

 
$
99,739

 
$
71,240

 
$
791

 
$
—

 
$
(23,090
)
 
$
1,679,513

Direct operating expenses
992,476

 
160,021

 
68,920

 
13,311

 
(2,206
)
 
—

 
(22,604
)
 
1,209,918

Selling, general and administrative expenses
159,517

 
101,919

 
22,476

 
10,959

 
848

 
—

 
—

 
295,719

Depreciation and amortization
35,068

 
36,685

 
10,136

 
596

 
11

 
678

 
(486
)
 
82,688

Loss (gain) on disposal of operating assets
(31,332
)
 
42

 
1,091

 
—

 
—

 
—

 
—

 
(30,199
)
Corporate expenses
—

 
—

 
—

 
—

 
—

 
21,812

 
—

 
21,812

Acquisition transaction expenses
313

 
—

 
17

 
—

 
—

 
1,439

 
—

 
1,769

Operating income (loss)
$
36,964

 
$
39,160

 
$
(2,901
)
 
$
46,374

 
$
2,138

 
$
(23,929
)
 
$
—

 
$
97,806

Intersegment revenue
$
21,254

 
$
714

 
$
1,122

 
$
—

 
$
—

 
$
—

 
$
(23,090
)
 
$
—

Six Months Ended June 30, 2014
 
 
 
 
 
 
 
 
 
 
 
 
Revenue
$
1,834,656

 
$
725,461

 
$
151,718

 
$
116,291

 
$
1,585

 
$
—

 
$
(36,610
)
 
$
2,793,101

Direct operating expenses
1,487,146

 
355,860

 
89,318

 
18,059

 
681

 
—

 
(35,217
)
 
1,915,847

Selling, general and administrative expenses
316,806

 
225,902

 
59,822

 
24,165

 
1,635

 
—

 
—

 
628,330

Depreciation and amortization
54,709

 
86,951

 
15,436

 
1,943

 
20

 
1,141

 
(1,393
)
 
158,807


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Table of Contents

 
Concerts
 
Ticketing
 
Artist
Nation
 
Sponsorship
& Advertising
 
Other
 
Corporate
 
Eliminations
 
Consolidated
 
 
 
 
 
 
 
(in thousands)
 
 
 
 
 
 
Loss (gain) on disposal of operating assets
(3,235
)
 
(117
)
 
34

 
—

 
—

 
37

 
—

 
(3,281
)
Corporate expenses
—

 
—

 
—

 
—

 
—

 
46,891

 
—

 
46,891

Acquisition transaction expenses
783

 
63

 
188

 
—

 
—

 
2,095

 
—

 
3,129

Operating income (loss)
$
(21,553
)
 
$
56,802

 
$
(13,080
)
 
$
72,124

 
$
(751
)
 
$
(50,164
)
 
$
—

 
$
43,378

Intersegment revenue
$
33,034

 
$
460

 
$
3,116

 
$
—

 
$
—

 
$
—

 
$
(36,610
)
 
$
—

Capital expenditures
$
18,306

 
$
37,438

 
$
943

 
$
449

 
$
—

 
$
5,271

 
$
—

 
$
62,407

Six Months Ended June 30, 2013
 
 
 
 
 
 
 
 
 
 
 
 
Revenue
$
1,706,541

 
$
662,962

 
$
150,010

 
$
111,387

 
$
1,584

 
$
—

 
$
(29,273
)
 
$
2,603,211

Direct operating expenses
1,382,728

 
315,083

 
100,332

 
20,175

 
(3,171
)
 
—

 
(28,295
)
 
1,786,852

Selling, general and administrative expenses
296,835

 
213,859

 
42,514

 
20,647

 
1,386

 
—

 
—

 
575,241

Depreciation and amortization
63,770

 
79,498

 
20,170

 
738

 
185

 
1,470

 
(978
)
 
164,853

Loss (gain) on disposal of operating assets
(34,462
)
 
(20
)
 
679

 
—

 
7

 
—

 
—

 
(33,796
)
Corporate expenses
—

 
—

 
—

 
—

 
—

 
42,467

 
—

 
42,467

Acquisition transaction expenses
547

 
24

 
145

 
—

 
—

 
2,261

 
—

 
2,977

Operating income (loss)
$
(2,877
)
 
$
54,518

 
$
(13,830
)
 
$
69,827

 
$
3,177

 
$
(46,198
)
 
$
—

 
$
64,617

Intersegment revenue
$
26,967

 
$
981

 
$
1,325

 
$
—

 
$
—

 
$
—

 
$
(29,273
)
 
$
—

Capital expenditures
$
31,444

 
$
42,993

 
$
282

 
$
300

 
$
—

 
$
(171
)
 
$
—

 
$
74,848

 

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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 financial condition and results of operations together with the unaudited consolidated financial statements and notes to the financial statements included elsewhere in this quarterly report.
Special Note About Forward-Looking Statements
Certain statements contained in this quarterly report (or otherwise made by us or on our behalf from time to time in other reports, filings with the SEC, news releases, conferences, internet postings or otherwise) that are not statements of historical fact constitute “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Exchange Act of 1934, as amended, notwithstanding that such statements are not specifically identified. Forward-looking statements include, but are not limited to, statements about our financial position, business strategy, competitive position, potential growth opportunities, potential operating performance improvements, the effects of competition, the effects of future legislation or regulations and plans and objectives of our management for future operations. We have based our forward-looking statements on our beliefs and assumptions based on information available to us at the time the statements are made. Use of the words “may,” “should,” “continue,” “plan,” “potential,” “anticipate,” “believe,” “estimate,” “expect,” “intend,” “outlook,” “could,” “target,” “project,” “seek,” “predict,” or variations of such words and similar expressions are intended to identify forward-looking statements but are not the exclusive means of identifying such statements.
Forward-looking statements are not guarantees of future performance and are subject to risks and uncertainties that could cause actual results to differ materially from those in such statements. Factors that could cause actual results to differ from those discussed in the forward-looking statements include, but are not limited to, those set forth below under Part II Item 1A.—Risk Factors, in Part I Item IA.—Risk Factors of our 2013 Annual Report on Form 10-K, as well as other factors described herein or in our annual, quarterly and other reports we file with the SEC (collectively, “cautionary statements”). Based upon changing conditions, should any one or more of these risks or uncertainties materialize, or should any underlying assumptions prove incorrect, actual results may vary materially from those described in any forward-looking statements. All subsequent written and oral forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by the applicable cautionary statements. We do not intend to update these forward-looking statements, except as required by applicable law.
Executive Overview
In the second quarter of 2014, our overall revenue decreased slightly compared to last year driven by a reduction in the number of concert events and fans due to fewer stadium and arena tours. However, Ticketing’s ticket sales increased by 2% overall for the quarter and, combined with strong growth in our resale business, resulted in a 10% improvement in Ticketing revenue for the quarter. For the first six months, our overall revenue is up 7% due to an increase in Ticketing ticket sales globally as well as growth in our resale business and strong first quarter results in our Concerts segment. We believe by leveraging our leadership position in the entertainment industry to reach fans through the live concert experience, we will sell more tickets which will then grow our sponsorship and advertising revenue. As the leading global live event and ticketing company, we believe that we are well-positioned to provide the best service to artists, teams, fans and venues and therefore drive growth across all our businesses.
Our Concerts segment revenue for the quarter decreased 2% compared to last year largely due to a reduction in the number of stadium shows as well as fewer arena events. The number of fans was down 5% as a result of these drivers. We delivered increased revenue in North America for the quarter from higher attendance at our amphitheaters as well as improved results for the Electric Daisy Carnival in Las Vegas at the end of June. As we noted in the last quarter, we had a significantly higher volume of arena shows and attendance in the first quarter this year than we have historically seen. This shift in timing drove higher revenue and higher operating income for Concerts in the first quarter. For the first six months, our Concerts revenue has improved 8% over last year. Our overall Concerts operating results declined for the quarter due to this timing of events as well as the gains recognized in the second quarter of 2013 from the sale of a theatrical theater in New York and higher insurance recoveries for storm damage sustained to an amphitheater in New York. We will continue to look for expansion opportunities, both domestically and internationally, as well as ways to market our events more effectively in order to continue to expand our fan base and geographic reach and to sell more tickets.
Our Ticketing segment revenue for the quarter increased 10% compared to last year largely due to higher primary ticket sales and growth of our resale business in North America. Overall, the total number of tickets sold during the quarter increased 2%. In our resale business, gross transaction value of tickets sold increased in the second quarter of 2014 due in large part to the success of our new TM+ product which drove significant growth in concert and professional sports ticket sales. For the first six months, our gross transaction value of resale tickets sold increased by over 30%, driven by concert and sports ticket sales on TM+ as well as increased results in our international markets. For the first six months, 17% of our total tickets were sold via mobile and tablet devices as we continue to implement new features that are driving further expansion of mobile ticket

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transactions. Ticketing operating results for the quarter were down due to higher investments in our technology products and higher depreciation and amortization expenses. We continue to invest in a variety of initiatives aimed at improving the ticket buying process and the overall fan and venue client experience.
Our Artist Nation segment revenue decreased 21% for the quarter as compared to last year primarily due to the decision in July of last year by the Concerts segment to no longer outsource VIP ticket sales to Artist Nation. Operating results for Artist Nation decreased in the quarter largely as a result of higher compensation costs and lower management commissions and merchandise sales. Our Artist Nation segment is focused on serving its existing artists as well as developing new relationships with top artists and extending the various services it provides.
Our Sponsorship & Advertising segment revenue was flat for the quarter as compared to the same period of the prior year with higher sponsorship revenue generated from new clients and our electronic music festivals offset by a decline in specialized campaigns that occurred in the second quarter of 2013. We are incurring higher compensation costs to expand our sales team which we expect to drive additional sales in our online group, in new markets, such as Australia, and new business lines, such as electronic dance music. We anticipate this investment in our sales force will generate revenue growth in the future. Overall, operating income increased slightly due to improved results on certain sponsorship programs partially offset by this growth in our sales staff as well as higher depreciation and amortization expenses. Our extensive on-site and online reach, global venue distribution network, artist relationships and ticketing operations are the key to securing long-term sponsorship agreements with major brands and we plan to expand these assets while extending further into new markets internationally.
We continue to be optimistic about the long-term potential of our company and are focused on the key elements of our business model — expand our concert platform, drive conversion of ticket sales through social and mobile channels, grow our sponsorship and online revenue, sell more tickets for our Ticketmaster clients, deliver fans a fully integrated offering of primary and secondary tickets together, drive cost efficiencies and continue to align our artist management group with our other core businesses.
Our History
We were incorporated in Delaware on August 2, 2005 in preparation for the contribution and transfer by Clear Channel of substantially all of its entertainment assets and liabilities to us. We completed our separation from Clear Channel 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. Effective on the date of the merger, Ticketmaster became a wholly-owned subsidiary of Live Nation and Live Nation, Inc. changed its name to Live Nation Entertainment, Inc.
Segment Overview
Our reportable segments are Concerts, Ticketing, Artist Nation and Sponsorship & Advertising.
Concerts
Our Concerts segment principally involves the global promotion of live music events in our owned or operated venues and in rented third-party venues, the operation and management of music venues and the production of music festivals across the world. While our Concerts segment operates year-round, we generally experience higher revenue during the second and third quarters due to the seasonal nature of shows at our outdoor amphitheaters and festivals, which primarily occur May through September. Revenue and related costs for events are generally deferred and recognized when the event occurs. All advertising costs for shows are expensed at the end of the year for any future events.
To judge the health of our Concerts segment, we primarily monitor the number of confirmed events in our network of owned or operated and third-party venues, talent fees, average paid attendance and advance ticket sales. In addition, at our owned or operated venues, we monitor attendance, ancillary revenue per fan and premium ticket sales. For business that is conducted in foreign markets, we also compare the operating results from our foreign operations to prior periods on a constant currency basis.

21
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Ticketing
Our Ticketing segment is primarily an agency business that sells tickets for events on behalf of its clients and retains a fixed fee or a percentage of the total convenience charge and order processing fee for its services. We sell tickets through websites, telephone, mobile apps and ticket outlets. Our ticketing sales are impacted by fluctuations in the availability of events for sale to the public, which may vary depending upon scheduling by our clients. Our Ticketing segment also manages our online activities including enhancements to our websites and bundled product offerings. Through our websites, we sell tickets to our own events as well as tickets for our ticketing clients and provide event information. Revenue related to ticketing service charges for our events where we control ticketing is deferred and recognized as the event occurs.
To judge the health of our Ticketing segment, we primarily review the gross transaction value and the number of tickets sold through our ticketing operations, average convenience charges and order processing fees, the number of clients renewed or added and the average royalty rate paid to clients who use our ticketing services. In addition, we review the number of visits to our websites, the overall number of customers in our database, the number of tickets sold via mobile apps and websites and the revenue related to the sale of other products on our websites. For business that is conducted in foreign markets, we also compare the operating results from our foreign operations to prior periods on a constant currency basis.
Artist Nation
Our Artist Nation segment primarily provides management services to music artists in exchange for a commission on the earnings of these artists. Our Artist Nation segment also sells merchandise associated with music artists at live performances, to retailers and directly to consumers via the internet. Revenue earned from our Artist Nation segment is impacted to a large degree by the touring schedules of the artists we represent and generally we experience higher revenue during the second and third quarters as the period from May through September tends to be a popular time for touring events.
To judge the health of our Artist Nation segment, we primarily review the annual commissions earned for each artist represented and the percentage of top artists on tour or with planned album releases as these activities tend to drive higher revenue. For business that is conducted in foreign markets, we also compare the operating results from our foreign operations to prior periods on a constant currency basis.
Sponsorship & Advertising
Our Sponsorship & Advertising segment employs a sales force that creates and maintains relationships with sponsors, through a combination of strategic, international, national and local opportunities that allow businesses to reach customers through our concert, venue, artist relationship and ticketing assets, including advertising on our websites. We work with our corporate clients to help create marketing programs that drive their business goals and connects their brands directly with fans and artists. We also develop, book and produce custom events or programs for our clients’ specific brands which are typically experienced exclusively by the clients’ consumers. These custom events can involve live music events with talent and media, using both online and traditional outlets. We typically experience higher revenue in the second and third quarters as a large portion of sponsorships are typically associated with our outdoor venues and festivals which are primarily used in or occur during May through September.
To judge the health of our Sponsorship & Advertising segment, we primarily review the average revenue per sponsor, the total revenue generated through sponsorship arrangements, the percentage of expected revenue under contract and the online revenue received from sponsors advertising on our websites. For business that is conducted in foreign markets, we also compare the operating results from our foreign operations to prior periods on a constant currency basis.

22
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Consolidated Results of Operations
 
 
Three Months Ended 
 June 30,
 
%
Change
 
Six Months Ended 
 June 30,
 
%
Change
 
2014
 
2013
 
2014
 
2013
 
 
(in thousands)
 
 
 
(in thousands)
 
 
Revenue
$
1,665,785

 
$
1,679,513

 
(1)%
 
$
2,793,101

 
$
2,603,211

 
7%
Operating expenses:
 
 
 
 
 
 
 
 
 
 
 
Direct operating expenses
1,184,696

 
1,209,918

 
(2)%
 
1,915,847

 
1,786,852

 
7%
Selling, general and administrative expenses
325,925

 
295,719

 
10%
 
628,330

 
575,241

 
9%
Depreciation and amortization
76,219

 
82,688

 
(8)%
 
158,807

 
164,853

 
(4)%
Gain on disposal of operating assets
(3,787
)
 
(30,199
)
 
*
 
(3,281
)
 
(33,796
)
 
*
Corporate expenses
25,717

 
21,812

 
18%
 
46,891

 
42,467

 
10%
Acquisition transaction expenses
1,329

 
1,769

 
*
 
3,129

 
2,977

 
*
Operating income
55,686

 
97,806

 
(43)%
 
43,378

 
64,617

 
(33)%
Operating margin
3.3
%
 
5.8
%
 
 
 
1.6
%
 
2.5
%
 
 
Interest expense
27,590

 
30,041

 
 
 
52,082

 
58,192

 
 
Interest income
(1,146
)
 
(890
)
 
 
 
(1,812
)
 
(2,658
)
 
 
Equity in earnings of nonconsolidated affiliates
(960
)
 
(2,629
)
 
 
 
(3,766
)
 
(5,211
)
 
 
Other expense (income), net
(330
)
 
3,868

 
 
 
(1,506
)
 
7,506

 
 
Income (loss) before income taxes
30,532

 
67,416

 
 
 
(1,620
)
 
6,788

 
 
Income tax expense
4,710

 
8,401

 
 
 
2,655

 
11,960

 
 
Net income (loss)
25,822

 
59,015

 
 
 
(4,275
)
 
(5,172
)
 
 
Net income (loss) attributable to noncontrolling interests
2,888

 
885

 
 
 
5,239

 
(63
)
 
 
Net income (loss) attributable to common stockholders of Live Nation Entertainment, Inc.
$
22,934

 
$
58,130

 
 
 
$
(9,514
)
 
$
(5,109
)
 
 
_________
*
Percentages are not meaningful.

23
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Key Operating Metrics
 
 
Three Months Ended 
 June 30,
 
Six Months Ended 
 June 30,
 
2014
 
2013
 
2014
 
2013
Concerts (1)
 
 
 
 
 
 
 
Total estimated events:
 
 
 
 
 
 
 
North America
4,027

 
4,074

 
7,269

 
7,354

International
1,639

 
1,841

 
3,198

 
3,463

Total estimated events
5,666

 
5,915

 
10,467

 
10,817

Total estimated fans (rounded):
 
 
 
 
 
 
 
North America
9,268,000

 
9,283,000

 
14,981,000

 
14,343,000

International
5,221,000

 
6,021,000

 
8,518,000

 
9,071,000

Total estimated fans
14,489,000

 
15,304,000

 
23,499,000

 
23,414,000

Ticketing 
 
 
 
 
 
 
 
Number of tickets sold (in thousands) (2)
36,910

 
36,268

 
73,563

 
72,016

 _________

(1) 
Events generally represent a single performance by an artist. Fans generally represent the number of people who attend an event. Festivals are counted as one event in the quarter in which the festival begins, but number of fans is based on the days the fan was present at the festival and thus can be reported across multiple quarters. Events and fan attendance metrics are estimated each quarter.
(2) 
The number of tickets sold includes primary tickets only. This metric includes tickets sold during the period regardless of event timing except for our promoted events in our owned or operated venues and in certain European territories where these tickets are reported as the events occur. The total number of tickets sold reported above for the three months ended June 30, 2014 and 2013 excludes approximately 61 million and 65 million, respectively, and for the six months ended June 30, 2014 and 2013 excludes approximately 135 million and 138 million, respectively, of tickets sold using our Ticketmaster systems, through season seat packages and our venue clients’ box offices, for which we do not receive a fee.


24
Table of Contents


Revenue
Our revenue decreased $13.7 million, or 1%, during the three months ended June 30, 2014 as compared to the same period of the prior year. The overall decrease in revenue was primarily due to decreases in our Concerts and Artist Nation segments of $20.8 million and $20.6 million, respectively, partially offset by an increase in our Ticketing segment of $33.2 million. Excluding the increase of approximately $20.7 million related to the impact of changes in foreign exchange rates, revenue decreased $34.4 million, or 2%. The impact of foreign exchange rates was significant only to the Concerts segment.
Our revenue increased $189.9 million, or 7%, during the six months ended June 30, 2014 as compared to the same period of the prior year. The overall increase in revenue was primarily due to increases in our Concerts and Ticketing segments of $128.1 million and $62.5 million, respectively. Excluding the increase of approximately $16.7 million related to the impact of changes in foreign exchange rates, revenue increased $173.2 million, or 7%. The impact of foreign exchange rates was significant only to the Concerts segment.
More detailed explanations of these changes are included in the applicable segment discussions below.
Direct operating expenses
Our direct operating expenses decreased $25.2 million, or 2%, during the three months ended June 30, 2014 as compared to the same period of the prior year. The overall decrease in direct operating expenses was primarily due to decreases in our Concerts and Artist Nation segments of $22.5 million and $21.7 million, respectively, partially offset by an increase in our Ticketing segment of $23.2 million. Excluding the increase of approximately $16.7 million related to the impact of changes in foreign exchange rates, direct operating expenses decreased $41.9 million, or 3%. The impact of foreign exchange rates was significant only to the Concerts segment.
Our direct operating expenses increased $129.0 million, or 7%, during the six months ended June 30, 2014 as compared to the same period of the prior year. The overall increase in direct operating expenses was primarily due to increases in our Concerts and Ticketing segments of $104.4 million and $40.8 million, respectively, partially offset by a decrease in our Artist Nation segment of $11.0 million. Excluding the increase of approximately $12.6 million related to the impact of changes in foreign exchange rates, direct operating expenses increased $116.4 million, or 7%. The impact of foreign exchange rates was significant only to the Concerts segment.
Direct operating expenses include artist fees, event production costs, ticketing client royalties, show-related marketing and advertising expenses, along with other costs.
More detailed explanations of these changes are included in the applicable segment discussions below.
Selling, general and administrative expenses
Our selling, general and administrative expenses increased $30.2 million, or 10%, during the three months ended June 30, 2014 as compared to the same period of the prior year. The overall increase in selling, general and administrative expenses was primarily due to increases in our Concerts, Ticketing and Artist Nation segments of $7.4 million, $10.0 million and $11.6 million, respectively. Excluding the increase of approximately $4.7 million related to the impact of changes in foreign exchange rates, direct operating expenses increased $25.5 million, or 9%. The impact of foreign exchange rates was significant only to the Concerts segment.
Our selling, general and administrative expenses increased $53.1 million, or 9%, during the six months ended June 30, 2014 as compared to the same period of the prior year. The overall increase in selling, general and administrative expenses was primarily due to increases in our Concerts, Ticketing and Artist Nation segments of $20.0 million, $12.0 million and $17.3 million, respectively. Excluding the increase of approximately $6.2 million related to the impact of changes in foreign exchange rates, direct operating expenses increased $46.9 million, or 8%. The impact of foreign exchange rates was significant only to the Concerts segment.
More detailed explanations of these changes are included in the applicable segment discussions below.
Depreciation and amortization
Our depreciation and amortization expenses decreased $6.5 million, or 8%, during the three months ended June 30, 2014 as compared to the same period of the prior year. The overall decrease in depreciation and amortization was primarily due to a decrease in our Concerts segment of $8.9 million partially offset by an increase in our Ticketing segment of $4.3 million. Excluding the increase of approximately $1.0 million related to the impact of changes in foreign exchange rates, depreciation and amortization decreased $7.5 million, or 9%. The impact of foreign exchange rates was not significant to the segments individually.

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Our depreciation and amortization expense decreased $6.0 million, or 4%, during the six months ended June 30, 2014 as compared to the same period of the prior year. The overall decrease in depreciation and amortization was primarily due to decreases in our Concerts and Artist Nation segments of $9.1 million and $4.7 million, respectively, partially offset by an increase in our Ticketing segment of $7.5 million. Excluding the increase of approximately $1.0 million related to the impact of changes in foreign exchange rates, depreciation and amortization decreased $7.0 million, or 4%. The impact of foreign exchange rates was not significant to the segments individually.
More detailed explanations of these changes are included in the applicable segment discussions below.
Gain on disposal of operating assets
Gain on disposal of operating assets for the three and six months ended June 30, 2014 was $3.8 million and $3.3 million, respectively, consisting primarily of a $3.2 million gain recognized during the second quarter of 2014 in our Concerts segment in connection with a final insurance recovery for storm damage sustained to an amphitheater in New York during Hurricane Sandy in 2012.
Gain on disposal of operating assets for the three and six months ended June 30, 2013 was $30.2 million and $33.8 million, respectively, consisting primarily of a $21.9 million gain recognized from the May 2013 sale of a theatrical theater in New York in our Concerts segment. In addition, we recognized gains of $9.4 million and $12.6 million for the three and six months ended June 30, 2013, respectively, in connection with partial insurance recoveries for the storm damage discussed above.
Corporate expenses
Corporate expenses increased $3.9 million, or 18%, during the three months ended June 30, 2014 as compared to the same period of the prior year primarily due to the timing of results that impact certain contractual bonuses, annual salary increases and higher consulting expenses.
Corporate expenses increased $4.4 million, or 10%, during the six months ended June 30, 2014 as compared to the same period of the prior year primarily due to higher compensation costs driven by annual salary increases and higher headcount along with additional consulting expenses.
Interest expense
Interest expense decreased $2.5 million, or 8%, and $6.1 million, or 10%, during the three and six months ended June 30, 2014, respectively, as compared to the same periods of the prior year primarily due to the interest cost reduction realized from the August 2013 redemption of the 8.125% senior notes and a lower average interest rate on certain floating rate debt partially offset by the interest costs from the additional 7% senior notes issued in August 2013 and the 5.375% senior notes and the 2.5% convertible senior notes issued in May 2014.
Our debt balances and weighted-average cost of debt, excluding unamortized debt discounts of $37.2 million and including debt premium of $7.9 million, were $2.3 billion and 4.2%, respectively, at June 30, 2014.
Other expense (income), net
Other expense (income), net was income of $0.3 million and $1.5 million for the three and six months ended June 30, 2014, respectively, and includes the impact of foreign exchange rate gains of $0.5 million and foreign exchange rate losses of $2.3 million, respectively. In addition, the six-month period includes $4.7 million of income primarily from the dissolution of two artist management businesses.
Other expense (income), net was expense of $3.9 million and $7.5 million for the three and six months ended June 30, 2013, respectively, and includes the impact of foreign exchange rate losses of $4.4 million and $7.8 million, respectively.
Income taxes
Income tax expense for the six months ended June 30, 2014 and 2013 was $2.7 million and $12.0 million, respectively. The decrease in income tax expense results primarily from deferred tax benefits of $6.1 million attributable to the release of valuation allowances primarily due to deferred tax liabilities associated with the March 2014 acquisition of an artist management business located in California. These benefits were partially offset by increased foreign taxes of $1.7 million based on the expected annual rate and $1.1 million for prior period taxes.


26
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Net income (loss) attributable to noncontrolling interests
Net income (loss) attributable to noncontrolling interests increased to income of $5.2 million for the six months ended June 30, 2014 compared to a loss of $0.1 million for the comparable period of the prior year. The increase is primarily due to improved operating results from certain artist management businesses partially offset by lower operating results from certain international concert businesses.
Concerts Results of Operations
Our Concerts segment operating results were, and discussions of significant variances are, as follows:
 
Three Months Ended 
 June 30,
 
%
Change
 
Six Months Ended 
 June 30,
 
%
Change
 
2014
 
2013
 
 
 
2014
 
2013
 
 
 
(in thousands)
 
 
 
(in thousands)
 
 
Revenue
$
1,172,166

 
$
1,193,006

 
(2)%
 
$
1,834,656

 
$
1,706,541

 
8%
Direct operating expenses
969,991

 
992,476

 
(2)%
 
1,487,146

 
1,382,728

 
8%
Selling, general and administrative expenses
166,890

 
159,517

 
5%
 
316,806

 
296,835

 
7%
Depreciation and amortization
26,189

 
35,068

 
(25)%
 
54,709

 
63,770

 
(14)%
Gain on disposal of operating assets
(3,745
)
 
(31,332
)
 
*
 
(3,235
)
 
(34,462
)
 
*
Acquisition transaction expenses
456

 
313

 
*
 
783

 
547

 
*
Operating income (loss)
$
12,385

 
$
36,964

 
(66)%
 
$
(21,553
)
 
$
(2,877
)
 
*
Operating margin
1.1
%
 
3.1
%
 
 
 
(1.2
)%
 
(0.2
)%
 
 
Adjusted operating income **
$
37,143

 
$
42,588

 
(13)%
 
$
34,506

 
$
29,446

 
17%
_______
*
Percentages are not meaningful.
**
AOI is defined and reconciled to operating income (loss) below.
Three Months
Concerts revenue decreased $20.8 million, or 2%, during the three months ended June 30, 2014 as compared to the same period of the prior year. Excluding the increase of $16.9 million related to the impact of changes in foreign exchange rates, revenue decreased $37.7 million, or 3%, primarily due to fewer arena shows and decreased global touring activity due to the timing of tours. These decreases were partially offset by more shows in our North America owned or operated amphitheaters.
Concerts direct operating expenses decreased $22.5 million, or 2%, during the three months ended June 30, 2014 as compared to the same period of the prior year. Excluding the increase of $14.8 million related to the impact of changes in foreign exchange rates, direct operating expenses decreased $37.3 million, or 4%, primarily related to the changes in show activity discussed above and due to lower costs in North America festivals.
Concerts selling, general and administrative expenses increased $7.4 million, or 5%, during the three months ended June 30, 2014 as compared to the same period of the prior year. Excluding the increase of $2.9 million related to the impact of changes in foreign exchange rates, selling, general and administrative expenses increased $4.5 million, or 3%, primarily due to higher compensation costs resulting from annual salary increases and additional headcount along with additional costs for venue enhancements. In addition, we had incremental expenses of $2.9 million from the acquisition of various festival promotion businesses.
Concerts depreciation and amortization decreased $8.9 million, or 25%, during the three months ended June 30, 2014 as compared to the same period of the prior year resulting primarily from lower amortization driven by the acceleration of amortization in 2013 associated with a change in the estimated life of certain venue management and leasehold intangible assets.
Concerts gain on disposal of operating assets of $3.7 million for the three months ended June 30, 2014 consists primarily of the final insurance recovery for storm damage to an amphitheater in New York during Hurricane Sandy in 2012. Concerts gain on disposal of operating assets of $31.3 million for the three months ended June 30, 2013 was primarily due to a $21.9 million gain on the sale of a theatrical theater in New York and $9.4 million related to the insurance recovery discussed above.
The decreased operating income for Concerts for the three months ended June 30, 2014 was primarily driven by the lower gain on disposal of operating assets.

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Six Months
Concerts revenue increased $128.1 million, or 8%, during the six months ended June 30, 2014 as compared to the same period of the prior year. Excluding the increase of $14.2 million related to the impact of changes in foreign exchange rates, revenue increased $113.9 million, or 7%, primarily due to higher average attendance at our international arena shows and more North America amphitheater, arena and third-party stadium events along with higher global touring activity.
Concerts direct operating expenses increased $104.4 million, or 8%, during the six months ended June 30, 2014 as compared to the same period of the prior year. Excluding the increase of $11.3 million related to the impact of changes in foreign exchange rates, direct operating expenses increased $93.1 million, or 7%, primarily due to higher expenses associated with the increased show activity discussed above.
Concerts selling, general and administrative expenses increased $20.0 million, or 7%, during the six months ended June 30, 2014 as compared to the same period of the prior year. Excluding the increase of $4.3 million related to the impact of changes in foreign exchange rates, selling, general and administrative expenses increased $15.7 million, or 5%, primarily due to higher compensation costs driven by annual salary increases and additional headcount along with additional costs for venue enhancements. In addition, we had incremental expenses of $7.8 million from the acquisition of various festival and concert promotion businesses.
Concerts depreciation and amortization decreased $9.1 million, or 14%, during the six months ended June 30, 2014 as compared to the same period of the prior year resulting primarily from lower amortization driven by the acceleration of amortization recorded in 2013 associated with a change in the estimated life of certain venue management and leasehold intangible assets.
Concerts gain on disposal of operating assets of $3.2 million for the six months ended June 30, 2014 consists primarily of the final insurance recovery for storm damage to an amphitheater in New York during Hurricane Sandy in 2012. Concerts gain on disposal of operating assets of $34.5 million for the six months ended June 30, 2013 was primarily due to a $21.9 million gain on the sale of a theatrical theater in New York and $12.6 million related to the insurance recovery discussed above.
The increased operating loss for Concerts for the six months ended June 30, 2014 was primarily driven by the lower gain on disposal of operating assets partially offset by increased show results and the lower amortization discussed above.
Ticketing Results of Operations
Our Ticketing segment operating results were, and discussions of significant variances are, as follows:
 
Three Months Ended 
 June 30,
 
%
Change
 
Six Months Ended 
 June 30,
 
%
Change
 
2014
 
2013
 
 
 
2014
 
2013
 
 
 
(in thousands)
 
 
 
(in thousands)
 
 
Revenue
$
371,000

 
$
337,827

 
10%
 
$
725,461

 
$
662,962

 
9%
Direct operating expenses
183,269

 
160,021

 
15%
 
355,860

 
315,083

 
13%
Selling, general and administrative expenses
111,882

 
101,919

 
10%
 
225,902

 
213,859

 
6%
Depreciation and amortization
40,968

 
36,685

 
12%
 
86,951

 
79,498

 
9%
Loss (gain) on disposal of operating assets
(43
)
 
42

 
*
 
(117
)
 
(20
)
 
*
Acquisition transaction expenses
58

 
—

 
*
 
63

 
24

 
*
Operating income
$
34,866

 
$
39,160

 
(11)%
 
$
56,802

 
$
54,518

 
4%
Operating margin
9.4
%
 
11.6
%
 
 
 
7.8
%
 
8.2
%
 
 
Adjusted operating income **
$
76,554

 
$
77,569

 
(1)%
 
$
146,571

 
$
137,158

 
7%
_______
*
Percentages are not meaningful.
**
AOI is defined and reconciled to operating income (loss) below.

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Table of Contents

Three Months
Ticketing revenue increased $33.2 million, or 10%, during the three months ended June 30, 2014 as compared to the same period of the prior year primarily due to increased domestic primary and resale ticket volumes and higher domestic primary ticket fees driven by an increase in concert ticket sales.
Ticketing direct operating expenses increased $23.2 million, or 15%, during the three months ended June 30, 2014 as compared to the same period of the prior year primarily due to higher costs associated with the increased ticket sales discussed above.
Ticketing selling, general and administrative expenses increased $10.0 million, or 10%, for the three months ended June 30, 2014 as compared to the same period of the prior year. Excluding the increase of $1.4 million related to the impact of changes in foreign exchange rates, selling, general and administrative expenses increased $8.6 million, or 8%, primarily due to legal settlements from certain of our insurance carriers and law firms received during the first half of 2013 and higher compensation costs associated with annual salary increases and increased headcount.
Ticketing depreciation and amortization increased $4.3 million, or 12%, during the three months ended June 30, 2014 as compared to the same period of the prior year primarily due to higher depreciation from our investment in our technology platform.
The decrease in Ticketing operating income for the three months ended June 30, 2014 is primarily due to increased selling, general and administrative expenses and depreciation associated with our investment in our technology platform. These increases were partially offset by higher domestic ticket volumes discussed above.
Six Months
Ticketing revenue increased $62.5 million, or 9%, during the six months ended June 30, 2014 as compared to the same period of the prior year primarily due to increased domestic primary and resale ticket volumes and higher domestic primary ticket fees driven by an increase in concert ticket sales.
Ticketing direct operating expenses increased $40.8 million, or 13%, during the six months ended June 30, 2014 as compared to the same period of the prior year primarily due to higher costs associated with the increased ticket sales discussed above.
Ticketing selling, general and administrative expenses increased $12.0 million, or 6%, during the six months ended June 30, 2014 as compared to the same period of the prior year. Excluding the increase of $1.4 million related to the impact of changes in foreign exchange rates, selling, general and administrative expenses increased $10.6 million, or 5%, primarily due to higher compensation costs associated with annual salary increases and higher headcount along with the impact of legal settlements received in 2013.
Ticketing depreciation and amortization increased $7.5 million, or 9%, during the six months ended June 30, 2014 as compared to the same period of the prior year primarily due to higher depreciation from our investment in our technology platform.
The increase in Ticketing operating income for the six months ended June 30, 2014 is primarily due to increased domestic ticket sales discussed above partially offset by higher compensation costs and increased depreciation.

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Table of Contents

Artist Nation Results of Operations
Our Artist Nation segment operating results were, and discussions of significant variances are, as follows:
 
Three Months Ended 
 June 30,
 
%
Change
 
Six Months Ended 
 June 30,
 
%
Change
 
2014
 
2013
 
 
 
2014
 
2013
 
 
 
(in thousands)
 
 
 
(in thousands)
 
 
Revenue
$
79,162

 
$
99,739

 
(21)%
 
$
151,718

 
$
150,010

 
1%
Direct operating expenses
47,242

 
68,920

 
(31)%
 
89,318

 
100,332

 
(11)%
Selling, general and administrative expenses
34,029

 
22,476

 
51%
 
59,822

 
42,514

 
41%
Depreciation and amortization
7,665

 
10,136

 
(24)%
 
15,436

 
20,170

 
(23)%
Loss on disposal of operating assets
1

 
1,091

 
*
 
34

 
679

 
*
Acquisition transaction expenses
(265
)
 
17

 
*
 
188

 
145

 
*
Operating loss
$
(9,510
)
 
$
(2,901
)
 
*
 
$
(13,080
)
 
$
(13,830
)
 
*
Operating margin
(12.0
)%
 
(2.9
)%
 
 
 
(8.6
)%
 
(9.2
)%
 
 
Adjusted operating income **
$
3,218

 
$
8,498

 
(62)%
 
$
8,362

 
$
7,455

 
12%
 
_______
*
Percentages are not meaningful.
**
AOI is defined and reconciled to operating income (loss) below.
Three Months
Artist Nation revenue decreased $20.6 million, or 21%, during the three months ended June 30, 2014 as compared to the same period of the prior year primarily due to reductions in VIP ticket sales, from the decision in July 2013 by the Concerts segment to expand their premium ticket packages and no longer outsource VIP ticket sales to Artist Nation, along with a reduction in tour merchandise driven by the timing of certain artist tours. These decreases were partially offset by incremental revenue of $6.7 million resulting from the recent acquisitions or prospective consolidation of various artist management companies.
Artist Nation direct operating expenses decreased $21.7 million, or 31%, during the three months ended June 30, 2014 as compared to the same period of the prior year primarily due to a reduction in costs associated with the VIP ticket sales reduction and lower tour merchandise sales discussed above.
Artist Nation selling, general and administrative expenses increased $11.6 million, or 51%, during the three months ended June 30, 2014 as compared to the same period of the prior year primarily due to incremental selling, general and administrative expenses of $2.6 million resulting from the acquisitions noted above along with higher compensation cost driven by increased headcount and higher non-cash compensation expense in the management business.
Artist Nation depreciation and amortization decreased $2.5 million, or 24%, during the three months ended June 30, 2014 as compared to the same period of the prior year resulting from lower amortization driven by certain intangible assets in the management business that became fully amortized in 2013.
The increased operating loss for Artist Nation for the three months ended June 30, 2014 was primarily driven by lower merchandise results and increased non-cash compensation expense.
Six Months
Artist Nation revenue increased $1.7 million, or 1%, during the six months ended June 30, 2014 as compared to the same period of the prior year partially due to incremental revenue of $9.6 million resulting from the acquisition or prospective consolidation of various artist management companies. In addition, revenue increased due to higher management revenue driven by the timing of certain artist commissions and higher tour merchandise sales. These increases were partially offset by reductions in VIP ticket sales due to the decision by the Concerts segment to no longer outsource this service to Artist Nation.
Artist Nation direct operating expenses decreased $11.0 million, or 11%, during the six months ended June 30, 2014 as compared to the same period of the prior year primarily due to a reduction in costs associated with the VIP ticket sales reduction discussed above partially offset by higher costs associated with the increase in tour merchandise sales.

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Table of Contents

Artist Nation selling, general and administrative expenses increased $17.3 million, or 41%, during the six months ended June 30, 2014 as compared to the same period of the prior year primarily due to higher compensation and non-cash compensation expenses in the management business along with incremental expenses of $3.9 million resulting from the acquisitions noted above.
Artist Nation depreciation and amortization decreased $4.7 million, or 23%, during the six months ended June 30, 2014 as compared to the same period of the prior year resulting from lower amortization driven by certain intangible assets in the management business that became fully amortized in 2013.
The operating loss for Artist Nation for the six months ended June 30, 2014 was relatively unchanged as higher commissions were offset by higher compensation costs in the management business.
Sponsorship & Advertising Results of Operations
Our Sponsorship & Advertising segment operating results were, and discussions of significant variances are, as follows:
 
Three Months Ended 
 June 30,
 
%
Change
 
Six Months Ended 
 June 30,
 
%
Change
 
2014
 
2013
 
 
 
2014
 
2013
 
 
 
(in thousands)
 
 
 
(in thousands)
 
 
Revenue
$
70,903

 
$
71,240

 
—
 
$
116,291

 
$
111,387

 
4%
Direct operating expenses
9,995

 
13,311

 
(25)%
 
18,059

 
20,175

 
(10)%
Selling, general and administrative expenses
12,244

 
10,959

 
12%
 
24,165

 
20,647

 
17%
Depreciation and amortization
1,739

 
596

 
*
 
1,943

 
738

 
*
Operating income
$
46,925

 
$
46,374

 
1%
 
$
72,124

 
$
69,827

 
3%
Operating margin
66.2
%
 
65.1
%
 
 
 
62.0
%
 
62.7
%
 
 
Adjusted operating income **
$
49,029

 
$
47,159

 
4%
 
$
74,784

 
$
70,919

 
5%
_______
*
Percentages are not meaningful.
**
AOI is defined and reconciled to operating income (loss) below.

Three Months
Sponsorship & Advertising revenue was relatively unchanged decreasing $0.3 million during the three months ended June 30, 2014 as compared to the same period of the prior year.
Sponsorship & Advertising direct operating expenses decreased $3.3 million, or 25%, during the three months ended June 30, 2014 as compared to the same period of the prior year driven by lower fulfillment costs on certain sponsorship and online programs.
Sponsorship & Advertising selling, general and administrative expenses increased $1.3 million, or 12%, during the three months ended June 30, 2014 as compared to the same period of the prior year primarily from higher compensation costs from the timing of increased headcount to drive additional online sales in future periods along with annual salary increases.
Overall, operating income for the three months ended June 30, 2014 was relatively unchanged as compared to last year.
Six Months
Sponsorship & Advertising revenue increased $4.9 million, or 4%, during the six months ended June 30, 2014 as compared to the same period of the prior year primarily due to new, or expansion of existing, sponsorship agreements.
Sponsorship & Advertising direct operating expenses decreased $2.1 million, or 10%, during the six months ended June 30, 2014 as compared to the same period of the prior year driven by lower fulfillment costs on certain sponsorship and online programs.
Sponsorship & Advertising selling, general and administrative expenses increased $3.5 million, or 17%, during the six months ended June 30, 2014 as compared to the same period of the prior year primarily related to higher compensation costs from the timing of increased headcount to drive additional online sales in future periods.

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The increased operating income for the six months ended June 30, 2014 was primarily due to improved results on certain sponsorship programs.
Reconciliation of Segment Adjusted Operating Income (Loss)
AOI is a non-GAAP financial measure that we define as operating income (loss) before acquisition expenses (including transaction costs, changes in the fair value of accrued acquisition-related contingent consideration arrangements and acquisition-related severance), depreciation and amortization (including goodwill impairment), loss (gain) on disposal of operating assets and non-cash and certain stock-based compensation expense. We use AOI to evaluate the performance of our operating segments. We believe that information about AOI assists investors by allowing them to evaluate changes in the operating results of our portfolio of businesses separate from non-operational factors that affect net income, thus providing insights into both operations and the other factors that affect reported results. AOI is not calculated or presented in accordance with GAAP. A limitation of the use of AOI as a performance measure is that it does not reflect the periodic costs of certain amortizing assets used in generating revenue in our business. Accordingly, AOI should be considered in addition to, and not as a substitute for, operating income (loss), net income (loss), and other measures of financial performance reported in accordance with GAAP. Furthermore, this measure may vary among other companies; thus, AOI as presented herein may not be comparable to similarly titled measures of other companies.

32
Table of Contents

The following table sets forth the reconciliation of adjusted operating income (loss) to operating income (loss):
 
Adjusted
operating
income
(loss)
 
Non-cash
and stock-
based
compensation
expense
 
Loss (gain)
on disposal of
operating
assets
 
Depreciation
and
amortization
 
Acquisition
expenses
 
Operating
income
(loss)
 
 
 
(in thousands)
 
 
 
 
Three Months Ended June 30, 2014
 
 
 
 
 
 
 
 
Concerts
$
37,143

 
$
1,858

 
$
(3,745
)
 
$
26,189

 
$
456

 
$
12,385

Ticketing
76,554

 
705

 
(43
)
 
40,968

 
58

 
34,866

Artist Nation
3,218

 
5,327

 
1

 
7,665

 
(265
)
 
(9,510
)
Sponsorship & Advertising
49,029

 
365

 
—

 
1,739

 
—

 
46,925

Other and Eliminations
(2,525
)
 
—

 
—

 
(884
)
 
—

 
(1,641
)
Corporate
(21,422
)
 
4,295

 
—

 
542

 
1,080

 
(27,339
)
Total
$
141,997

 
$
12,550

 
$
(3,787
)
 
$
76,219

 
$
1,329

 
$
55,686

Three Months Ended June 30, 2013
 
 
 
 
 
 
 
 
 
 
Concerts
$
42,588

 
$
1,575

 
$
(31,332
)
 
$
35,068

 
$
313

 
$
36,964

Ticketing
77,569

 
1,682

 
42

 
36,685

 
—

 
39,160

Artist Nation
8,498

 
155

 
1,091

 
10,136

 
17

 
(2,901
)
Sponsorship & Advertising
47,159

 
189

 
—

 
596

 
—

 
46,374

Other and Eliminations
1,663

 
—

 
—

 
(475
)
 
—

 
2,138

Corporate
(17,599
)
 
4,213

 
—

 
678

 
1,439

 
(23,929
)
Total
$
159,878

 
$
7,814

 
$
(30,199
)
 
$
82,688

 
$
1,769

 
$
97,806

Six Months Ended June 30, 2014
 
 
 
 
 
 
 
 
 
 
Concerts
$
34,506

 
$
3,802

 
$
(3,235
)
 
$
54,709

 
$
783

 
$
(21,553
)
Ticketing
146,571

 
2,872

 
(117
)
 
86,951

 
63

 
56,802

Artist Nation
8,362

 
5,784

 
34

 
15,436

 
188

 
(13,080
)
Sponsorship & Advertising
74,784

 
717

 
—

 
1,943

 
—

 
72,124

Other and Eliminations
(2,124
)
 
—

 
—

 
(1,373
)
 
—

 
(751
)
Corporate
(37,498
)
 
9,393

 
37

 
1,141

 
2,095

 
(50,164
)
Total
$
224,601

 
$
22,568

 
$
(3,281
)
 
$
158,807

 
$
3,129

 
$
43,378

Six Months Ended June 30, 2013
 
 
 
 
 
 
 
 
 
 
Concerts
$
29,446

 
$
2,468

 
$
(34,462
)
 
$
63,770

 
$
547

 
$
(2,877
)
Ticketing
137,158

 
3,138

 
(20
)
 
79,498

 
24

 
54,518

Artist Nation
7,455

 
291

 
679

 
20,170

 
145

 
(13,830
)
Sponsorship & Advertising
70,919

 
354

 
—

 
738

 
—

 
69,827

Other and Eliminations
2,391

 
—

 
7

 
(793
)
 
—

 
3,177

Corporate
(34,599
)
 
7,868

 
—

 
1,470

 
2,261

 
(46,198
)
Total
$
212,770

 
$
14,119

 
$
(33,796
)
 
$
164,853

 
$
2,977

 
$
64,617


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Table of Contents

Liquidity and Capital Resources
Our working capital requirements and capital for our general corporate purposes, including acquisitions and capital expenditures, are funded from operations or from borrowings under our senior secured credit facility described below. Our cash is centrally managed on a worldwide basis. Our primary short-term liquidity needs are to fund general working capital requirements, capital expenditures and debt service requirements while our long-term liquidity needs are primarily related to acquisitions and debt repayment. Our primary sources of funds for our short-term liquidity needs will be cash flows from operations and borrowings under our senior secured credit facility, while our long-term sources of funds will be from cash flows from operations, long-term bank borrowings and other debt or equity financings. We may from time to time engage in open market purchases of our outstanding debt securities or redeem or otherwise repay such debt.
Our balance sheet reflects cash and cash equivalents of $2.0 billion at June 30, 2014 and $1.3 billion at December 31, 2013. Included in the June 30, 2014 and December 31, 2013 cash and cash equivalents balances are $577.4 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, or client cash. We generally do not utilize client cash for our own financing or investing activities as the amounts are payable to clients on a regular basis. Our foreign subsidiaries held approximately $502.3 million in cash and cash equivalents, excluding client cash, at June 30, 2014. We do not intend to repatriate these funds, but if we did, we would need to accrue and pay United States federal and state income taxes on any future repatriations, net of applicable foreign tax credits. We may from time to time enter into borrowings under our revolving credit facility. If the original maturity of these borrowings is 90 days or less, we present the borrowings and subsequent repayments on a net basis in the statement of cash flows to better represent our financing activities. Our balance sheet reflects total debt of $2.3 billion and $1.8 billion at June 30, 2014 and December 31, 2013, respectively. Our weighted-average cost of debt, excluding the debt discounts and including the debt premium on our term loans and notes, was 4.2% at June 30, 2014.
Our cash and cash equivalents are held in accounts managed by third-party financial institutions and consist of cash in our operating accounts and invested cash. Cash held in interest-bearing operating accounts in many cases exceeds the Federal Deposit Insurance Corporation insurance limits. The invested cash is in interest-bearing funds consisting primarily of bank deposits and money market funds. While we monitor cash and cash equivalent balances in our operating accounts on a regular basis and adjust the balances as appropriate, these balances could be impacted if the underlying financial institutions fail. To date, we have experienced no loss or lack of access to our cash and cash equivalents; however, we can provide no assurances that access to our cash and cash equivalents will not be impacted by adverse conditions in the financial markets.
For our Concerts segment, we generally receive cash related to ticket revenue at our owned or operated venues in advance of the event, which is recorded in deferred revenue until the event occurs. With the exception of some upfront costs and artist deposits, which are recorded in prepaid expenses until the event occurs, we pay the majority of event-related expenses at or after the event.
We view our available cash as cash and cash equivalents, less ticketing-related client cash, less event-related deferred revenue, less accrued expenses due to artists and cash collected on behalf of others for ticket sales, plus event-related prepaids. This is essentially our cash available to, among other things, repay debt balances, make acquisitions and finance capital expenditures.
Our intra-year cash fluctuations are impacted by the seasonality of our various businesses. Examples of seasonal effects include our Concerts and Artist Nation segments, which report the majority of their revenue in the second and third quarters. Cash inflows and outflows depend on the timing of event-related payments but the majority of the inflows generally occur prior to the event. See “—Seasonality” below. We believe that we have sufficient financial flexibility to fund these fluctuations and to access the global capital markets on satisfactory terms and in adequate amounts, although there can be no assurance that this will be the case, and capital could be less accessible and/or more costly given current economic conditions. We expect cash flows from operations and borrowings under our senior secured credit facility, along with other financing alternatives, to satisfy working capital requirements, capital expenditures and debt service requirements for at least the succeeding year.
On July 15, 2014, pursuant to the terms of the indenture governing our 2.875% convertible senior notes, holders of $29.3 million in aggregate outstanding principal exercised their right to redeem their notes for cash and were subsequently paid and that portion of the notes retired. In late July 2014, pursuant to our option under the indenture governing the 2.875% convertible senior notes, we notified the holders of the remaining notes that we intend to redeem all outstanding notes in late September at a redemption price of 100% of the principal amount of the notes, plus accrued and unpaid interest.
We may need to incur additional debt or issue equity to make other strategic acquisitions or investments. There can be no assurance that such financing will be available to us on acceptable terms or at all. We may make significant acquisitions in the near term, subject to limitations imposed by our financing agreements and market conditions.
The lenders under our revolving loans and counterparties to our interest rate hedge agreements consist of banks and other third-party financial institutions. While we currently have no indications or expectations that such lenders and counterparties

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will be unable to fund their commitments as required, we can provide no assurances that future funding availability will not be impacted by adverse conditions in the financial markets. Should an individual lender default on its obligations, the remaining lenders would not be required to fund the shortfall, resulting in a reduction in the total amount available to us for future borrowings, but would remain obligated to fund their own commitments. Should any counterparty to our interest rate hedge agreements default on its obligations, we could experience higher interest rate volatility during the period of any such default.
Sources of Cash
Senior Secured Credit Facility
At June 30, 2014, our senior secured credit facility consists of (i) a $115 million term loan A, (ii) a $950 million term loan B and (iii) a $335 million revolving credit facility. In addition, subject to certain conditions, we have the right to increase such facilities by at least $450 million or a greater amount so long as the senior secured leverage ratio calculated on a pro-forma basis (as defined in the credit agreement) is no greater than 3.25x. The revolving credit facility provides for borrowings up to the amount of the facility with sublimits of up to (i) $150 million to be available for the issuance of letters of credit, (ii) $50 million to be available for swingline loans and (iii) $150 million to be available for borrowings in Euros or British Pounds and (iv) $50 million to be available for borrowings in one or more other approved currencies. The senior secured credit facility is secured by a first priority lien on substantially all of our tangible and intangible personal property and the 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.
The interest rates per annum applicable to revolving credit facility loans and term loan A under the senior secured credit facility are, at our option, equal to either LIBOR plus 2.25% or a base rate plus 1.25%, subject to stepdowns based on our net leverage ratio. The interest rates per annum applicable to term loan B are, at our option, equal to either LIBOR plus 2.75% or a base rate plus 1.75%, subject to a LIBOR floor of 0.75% and a base rate floor of 1.75%. We are required to pay a commitment fee of 0.5% per year on the undrawn portion available under the revolving credit facility, subject to stepdowns based on our net leverage ratio, and variable fees on outstanding letters of credit.
For the term loan A, we are required to make quarterly payments ranging from $1.4 million to $13.8 million with the balance due at maturity in August 2018. For the term loan B, we are required to make quarterly payments of $2.4 million with the balance due at maturity in August 2020. The revolving credit facility matures in August 2018. We are also required to make mandatory prepayments of the loans under the credit agreement, subject to specified exceptions, from excess cash flow, and with the proceeds of asset sales, debt issuances and specified other events.
During the six months ended June 30, 2014, we made principal payments totaling $7.6 million on these term loans. At June 30, 2014, the outstanding balances on these term loans, net of discounts, were $1.0 billion. There were no borrowings under the revolving credit facility as of June 30, 2014. Based on our letters of credit of $74.8 million, $260.2 million was available for future borrowings.
5.375% Senior Notes
In May 2014, we 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 in June 2022. We 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. We 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, we may redeem at our 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. We 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 we experiences certain defined changes of control.
2.5% Convertible Senior Notes
In May 2014, we 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 in May 2019 and may not be redeemed by us 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 our 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 our common stock of $22.74 on May 19, 2014. 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 7.9 million.

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If we experience a fundamental change, as defined in the indenture governing the notes, the holders of the 2.5% convertible senior 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 accrued and unpaid interest, if any.
Debt Covenants
Our senior secured credit facility contains a number of covenants and restrictions that, among other things, requires us to satisfy certain financial covenants and restricts 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). 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 senior secured credit facility agreement has one covenant, measured quarterly, that relates to total leverage. The consolidated total leverage covenant requires us to maintain a ratio of consolidated total funded debt to consolidated EBITDA (both as defined in the credit agreement) of 5.25x over the trailing four consecutive quarters through September 30, 2014. The consolidated total leverage ratio will reduce to 5.0x on December 31, 2014, 4.75x on December 31, 2015 and 4.50x on December 31, 2016.
The indentures governing our 7% senior notes and 5.375% 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 arms-length. 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. The 7% senior 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 3.25x. The 5.375% senior notes contain three incurrence-based financial covenants, as defined, requiring a minimum fixed charge coverage ratio of 2.0x, a maximum secured indebtedness leverage ratio of 3.50x and a minimum leverage ratio of 2.75x.
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 and maximum consolidated debt to consolidated EBITDA, all as defined in the applicable debt agreements.
As of June 30, 2014, we believe we were in compliance with all of our debt covenants. We expect to remain in compliance with all of our debt covenants throughout 2014.
Disposals of Assets
During the six months ended June 30, 2013, we received $81.1 million of proceeds primarily related to the sale of a theatrical theater in New York and a partial insurance recovery for storm damage sustained to an amphitheater located in New York. There were no significant disposals of operating assets for the six months ended June 30, 2014.
Stock Option Exercises
During the six months ended June 30, 2014 and 2013, we received $11.7 million and $73.4 million, respectively, of proceeds from the exercise of stock options.
Uses of Cash
Acquisitions
When we make acquisitions, the acquired entity may have cash on its balance sheet at the time of acquisition. All amounts discussed in this section are presented net of any cash acquired. During the six months ended June 30, 2014, we used $24.5 million of cash primarily for two acquisitions of artist management businesses in our Artist Nation segment. During the six months ended June 30, 2013, we used $23.8 million of cash primarily for the acquisition in our Concerts segment of a controlling interest in a company that promotes festivals in May 2013.


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Capital Expenditures
Venue and ticketing operations are capital intensive businesses, requiring continual investment in our existing venues and ticketing systems in order to address audience and artist expectations, technological industry advances and various federal, state and/or local regulations.
We categorize capital outlays between maintenance capital expenditures and revenue generating capital expenditures. Maintenance capital expenditures are associated with the renewal and improvement of existing venues and technology systems, web development and administrative offices. Revenue generating capital expenditures generally relate to the construction of new venues, major renovations to existing buildings or buildings that are being added to our venue network, the development of new online or ticketing tools and technology enhancements. Revenue generating capital expenditures can also include smaller projects whose purpose is to increase revenue and/or improve operating income. Capital expenditures typically increase during periods when venues are not in operation since that is the time that such improvements can be completed.
Our capital expenditures, including accruals but excluding expenditures funded by outside parties such as landlords or replacements funded by insurance companies, consisted of the following:
 
Six Months Ended 
 June 30,
 
2014
 
2013
 
(in thousands)
Maintenance capital expenditures
$
32,319

 
$
26,523

Revenue generating capital expenditures
28,568

 
28,772

Total capital expenditures
$
60,887

 
$
55,295

Maintenance capital expenditures during the first six months of 2014 increased from the same period of the prior year primarily due to the timing of venue-related projects.
We currently expect capital expenditures to be approximately $135 million for the full year 2014.
Cash Flows
 
Six Months Ended 
 June 30,
 
2014
 
2013
 
(in thousands)
Cash provided by (used in):
 
 
 
Operating activities
$
338,470

 
$
380,347

Investing activities
$
(93,645
)
 
$
(20,742
)
Financing activities
$
484,199

 
$
54,011

Operating Activities
Cash provided by operating activities was $338.5 million for the six months ended June 30, 2014, compared to $380.3 million for the six months ended June 30, 2013. The $41.9 million decrease in cash provided by operating activities resulted primarily from net changes in the event-related operating accounts which are dependent on the timing of ticket sales along with the size and number of events for upcoming periods partially offset by an increase in the cash-related portion of net income. During the first six months of 2014, we made higher payments for event-related expenses and received less advanced ticket sales, partially offset by higher collections of accounts receivable as compared to the same period of the prior year.
Investing Activities
Cash used in investing activities was $93.6 million for the six months ended June 30, 2014, compared to $20.7 million for the six months ended June 30, 2013. The $72.9 million increase in cash used in investing activities is primarily due to lower proceeds received from the disposal of operating assets as compared to the same period of the prior year. See “—Sources of Cash ” and “—Uses of Cash ” above for further discussion.
Financing Activities
Cash provided by financing activities was $484.2 million for the six months ended June 30, 2014, compared to $54.0 million for the six months ended June 30, 2013. The $430.2 million increase in cash provided by financing activities is primarily a result of net proceeds from the issuance of the 5.375% senior notes and 2.5% convertible senior notes, partially offset by lower proceeds from the exercise of stock options in 2014 as compared to the same period of the prior year.

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Seasonality
Our Concerts, Artist Nation and Sponsorship & Advertising segments typically experience higher operating income in the second and third quarters as our outdoor venues and festivals are primarily used in or occur during May through September, and our artist touring activity is higher. In addition, the timing of the on-sale of tickets 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 sales are 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 global 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 in advance of when the event occurs. We record these ticket sales as revenue when the event occurs.
Market Risk
We are exposed to market risks arising from changes in market rates and prices, including movements in foreign currency exchange rates and interest rates.
Foreign Currency Risk
We have operations in countries throughout the world. The financial results of our foreign operations are measured in their local currencies. As a result, our financial results could be affected by factors such as changes in foreign currency exchange rates or weak economic conditions in the foreign markets in which we have operations. Currently, we do not operate in any hyper-inflationary countries. Our foreign operations reported operating income of $32.3 million for the six months ended June 30, 2014. We estimate that a 10% change in the value of the United States dollar relative to foreign currencies would change our operating income for the six months ended June 30, 2014 by $3.2 million. As of June 30, 2014, our primary foreign exchange exposure included the Euro, British Pound, Australian Dollar and Canadian Dollar. This analysis does not consider the implication such currency fluctuations could have on the overall economic conditions of the United States or other foreign countries in which we operate or on the results of operations of our foreign entities.
We primarily use forward currency contracts in addition to options to reduce our exposure to foreign currency risk associated with short-term artist fee commitments. We also may enter into forward currency contracts to minimize the risks and/or costs associated with changes in foreign currency rates on forecasted operating income. At June 30, 2014, we had forward currency contracts and options outstanding with a notional amount of $103.9 million.
Interest Rate Risk
Our market risk is also affected by changes in interest rates. We had $2.3 billion of total debt, net of unamortized discounts and premiums, outstanding as of June 30, 2014. Of the total amount, taking into consideration existing interest rate hedges, we had $1.3 billion of fixed-rate debt and $1.0 billion of floating-rate debt.
Based on the amount of our floating-rate debt as of June 30, 2014, each 25 basis point increase or decrease in interest rates would increase or decrease our annual interest expense and cash outlay by approximately $2.7 million when the floor rate is not applicable. This potential increase or decrease is based on the simplified assumption that the level of floating-rate debt remains constant with an immediate across-the-board increase or decrease as of June 30, 2014 with no subsequent change in rates for the remainder of the period.
At June 30, 2014, we have an interest rate swap agreement that is designated as a cash flow hedge for accounting purposes. The interest rate swap had a notional amount of $9.4 million at June 30, 2014, to effectively convert a portion of our floating-rate debt to a fixed-rate basis, and expires in May 2015. The fair value of this agreement at June 30, 2014 was a liability of $0.1 million. This agreement was put into place to reduce the variability of the cash flows from the interest payments related to certain financing.
We have two interest rate swap agreements with a $27.7 million aggregate notional amount at June 30, 2014, that effectively convert a portion of our floating-rate debt to a fixed-rate basis. Both agreements expire in December 2015. These interest rate swap agreements have not been designated as hedging instruments. Therefore, any change in fair value is recorded in earnings during the period of change.
We currently have 2.875% convertible senior notes due 2027 with a principal amount of $220 million at June 30, 2014. Beginning with the period commencing on July 20, 2014 and ending on January 14, 2015, and for each of the interest periods commencing thereafter, we will pay contingent interest on the notes if the average trading price of the notes during the five consecutive trading days ending on the second trading day immediately preceding the first day of the applicable interest period

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equals or exceeds 120% of the principal amount of the notes. The contingent interest payable per note will equal 0.25% per year of the average trading price of such note during the applicable five trading-day reference period, payable in arrears.
Ratio of Earnings to Fixed Charges
The ratio of earnings to fixed charges is as follows:
Six Months Ended 
 June 30,
 
Year Ended December 31,
2014
 
2013
 
2013
 
2012
 
2011
 
2010
*
 
1.02
 
*
 
*
 
*
 
*
*
For the six months ended June 30, 2014, fixed charges exceeded earnings before income taxes and fixed charges by $5.4 million. For the years ended December 31, 2013, 2012, 2011 and 2010, fixed charges exceeded earnings from continuing operations before income taxes and fixed charges by $6.0 million, $142.1 million, $104.4 million and $193.6 million, respectively.
The ratio of earnings to fixed charges was computed on a total company basis. Earnings represent income before income taxes less equity in undistributed net income (loss) of nonconsolidated affiliates plus fixed charges. Fixed charges represent interest, amortization of debt discount, premium and expense and the estimated interest portion of rental charges. Rental charges exclude variable rent expense for events in third-party venues.
Recent Accounting Pronouncements
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. We 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. We will adopt this standard on January 1, 2017, and are currently assessing which implementation method we will apply and the impact its adoption will have on our 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 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. We do not 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.

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Critical Accounting Policies and Estimates
The preparation of our financial statements in conformity with GAAP requires management to make estimates, judgments and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements and the reported amount of revenue and expenses during the reporting period. On an ongoing basis, we evaluate our estimates that are based on historical experience and on various other assumptions that are believed to be reasonable under the circumstances. The result of these evaluations forms the basis for making judgments about the carrying values of assets and liabilities and the reported amount of revenue and expenses that are not readily apparent from other sources. Because future events and their effects cannot be determined with certainty, actual results could differ from our assumptions and estimates, and such difference could be material.
Management believes that the accounting estimates involved in business combinations, impairment of long-lived assets and goodwill, revenue recognition, litigation accruals and income taxes are the most critical to aid in fully understanding and evaluating our reported financial results, and they require management’s most difficult, subjective or complex judgments, resulting from the need to make estimates about the effect of matters that are inherently uncertain. These critical accounting estimates, the judgments and assumptions and the effect if actual results differ from these assumptions are described in Part II, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations of our Annual Report on Form 10-K filed with the SEC on February 24, 2014.
There have been no changes to our critical accounting policies during the six months ended June 30, 2014.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Required information is within Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations—Market Risk.
 
Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures
We have established disclosure controls and procedures to ensure that material information relating to our company, including our consolidated subsidiaries, is made known to the officers who certify our financial reports and to other members of senior management and our board of directors.
Based on their evaluation as of June 30, 2014, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended) are effective to ensure that (1) the information required to be disclosed by us in the reports that we file or submit under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms, and (2) the information we are required to disclose in such reports is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.
Our management, including our Chief Executive Officer and Chief Financial Officer, does not expect that our disclosure controls and procedures or internal controls will prevent all possible errors and fraud. Our disclosure controls and procedures are, however, designed to provide reasonable assurance of achieving their objectives, and our Chief Executive Officer and Chief Financial Officer have concluded that our financial controls and procedures are effective at that reasonable assurance level.
Changes in Internal Control Over Financial Reporting
There has been no change in our internal control over financial reporting during the period covered by this report that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

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PART II—OTHER INFORMATION
Item 1. Legal Proceedings
Information regarding our legal proceedings can be found in Part I Financial Information—Item 1. Financial Statements—Note 5—Commitments and Contingent Liabilities.
Item 1A. Risk Factors
While we attempt to identify, manage and mitigate risks and uncertainties associated with our business to the extent practical under the circumstances, some level of risk and uncertainty will always be present. Part 1, Item 1A of our 2013 Annual Report on Form 10-K filed with the SEC on February 24, 2014, describes some of the risks and uncertainties associated with our business which have the potential to materially affect our business, financial condition or results of operations. We do not believe that there have been any material changes to the risk factors previously disclosed in our 2013 Annual Report on Form 10-K.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
None.
Item 3. Defaults Upon Senior Securities
None.
Item 5. Other Information
None.
Item 6. Exhibits
The information in the Exhibit Index of this Quarterly Report on Form 10-Q is incorporated into this Item 6 by reference.

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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, on July 31, 2014.
 
LIVE NATION ENTERTAINMENT, INC.
 
 
By:
/s/ Brian Capo
 
Brian Capo
 
Chief Accounting Officer (Duly Authorized Officer)

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EXHIBIT INDEX
 
 
Exhibit Description
 
Incorporated by Reference
Filed
Here
with
Exhibit
No.
 
Form
 
File No.
 
Exhibit No.
 
Filing Date
 
3.1
 
Certificate of Amendment to the Amended and Restated Certificate of Incorporation of Live Nation Entertainment, Inc.
 
8-K
 
001-32601
 
3.1
 
6/7/2013
 
 
3.2
 
Fifth Amended and Restated Bylaws of Live Nation Entertainment, Inc.
 
8-K
 
001-32601
 
3.2
 
6/7/2013
 
 
10.1
 
Indenture, dated as of May 23, 2014, among Live Nation Entertainment, Inc., the Guarantors and The Bank of New York Mellon Trust Company, N.A., as trustee
 
 
 
 
 
 
 
 
 
X
10.2
 
Indenture, dated as of May 23, 2014, between Live Nation Entertainment, Inc., and HSBC Bank USA, National Association, as trustee
 
 
 
 
 
 
 
 
 
X
10.3
 
Fourth Supplemental Indenture, dated as of May 27, 2014, among Live Nation Entertainment, Inc., Reigndeer Entertainment Corp., the Existing Guarantors party thereto and The Bank of New York Mellon Trust Company, N.A., as trustee
 
 
 
 
 
 
 
 
 
X
31.1
 
Certification of Chief Executive Officer
 
 
 
 
 
 
 
 
 
X
31.2
 
Certification of Chief Financial Officer
 
 
 
 
 
 
 
 
 
X
32.1
 
Section 1350 Certification of Chief Executive Officer
 
 
 
 
 
 
 
 
 
X
32.2
 
Section 1350 Certification of Chief Financial Officer
 
 
 
 
 
 
 
 
 
X
101.INS
 
XBRL Instance Document
 
 
 
 
 
 
 
 
 
X
101.SCH
 
XBRL Taxonomy Schema Document
 
 
 
 
 
 
 
 
 
X
101.CAL
 
XBRL Taxonomy Calculation Linkbase Document
 
 
 
 
 
 
 
 
 
X
101.DEF
 
XBRL Taxonomy Definition Linkbase Document
 
 
 
 
 
 
 
 
 
X
101.LAB
 
XBRL Taxonomy Label Linkbase Document
 
 
 
 
 
 
 
 
 
X
101.PRE
 
XBRL Taxonomy Presentation Linkbase Document
 
 
 
 
 
 
 
 
 
X

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