IMPORTANT NOTICE
THIS OFFERING IS AVAILABLE ONLY TO INVESTORS WHO ARE EITHER (1)
QUALIFIED INSTITUTIONAL BUYERS (“QIBs”) UNDER RULE 144A OR (2)
NON-U.S. PERSONS OUTSIDE OF THE U.S. (AND, IF INVESTORS ARE
RESIDENT IN A MEMBER STATE OF THE EUROPEAN ECONOMIC AREA, A
QUALIFIED INVESTOR)
IMPORTANT: You must read the following before continuing.
The following
applies to the Preliminary Offering Memorandum following this page, and you are
therefore advised to read this carefully before reading, accessing or making any other use
of the Preliminary Offering Memorandum. In accessing the Preliminary Offering
Memorandum, you agree to be bound by the following terms and conditions, including
any modifications to them any time you receive any information from us as a result of
such access.
NOTHING IN THIS ELECTRONIC TRANSMISSION CONSTITUTES AN OFFER
OF SECURITIES FOR SALE IN ANY JURISDICTION WHERE IT IS UNLAWFUL
TO DO SO. THE SECURITIES HAVE NOT BEEN, AND WILL NOT BE,
REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933 (THE “SECURITIES
ACT”), OR THE SECURITIES LAWS OF ANY STATE OF THE U.S. OR OTHER
JURISDICTION AND THE SECURITIES MAY NOT BE OFFERED OR SOLD
WITHIN THE U.S. OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S.
PERSONS (AS DEFINED IN REGULATION S UNDER THE SECURITIES ACT),
EXCEPT PURSUANT TO AN EXEMPTION FROM, OR IN A TRANSACTION NOT
SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT
AND ANY APPLICABLE LAWS OF OTHER JURISDICTIONS.
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Confirmation of your Representation:
In order to be eligible to view this Preliminary
Offering Memorandum or make an investment decision with respect to the securities,
investors must be either (1) Qualified Institutional Buyers (“QIBs”) (within the meaning
of Rule 144A under the Securities Act) or (2) non-U.S. persons (within the meaning of
Regulation S under the Securities Act) outside the U.S.; provided that investors resident
in a Member State of the European Economic Area must be a qualified investor (within
the meaning of Article 2(1)(e) of Directive 2003/71/EC and any relevant implementing
measure in each Member State of the European Economic Area). This Preliminary
Offering Memorandum is being sent at your request and by accepting the e-mail and
accessing this Preliminary Offering Memorandum, you shall be deemed to have
represented to us that (1) you and any customer you represent are (a) QIBs or (b) not a
U.S. person and that the electronic mail address that you gave us and to which this
Preliminary Offering Memorandum has been delivered is not located in the U.S. (and if
you are resident in a Member State of the European Economic Area, you are a qualified
investor) and (2) that you consent to delivery of such Preliminary Offering Memorandum
by electronic transmission.
You are reminded that this Preliminary Offering Memorandum has been delivered to you
on the basis that you are a person into whose possession this Preliminary Offering
Memorandum may be lawfully delivered in accordance with the laws of the jurisdiction
in which you are located and you may not, nor are you authorized to, deliver this
Preliminary Offering Memorandum to any other person.
The materials relating to the offering do not constitute, and may not be used in
connection with, an offer or solicitation in any place where offers or solicitations are not
permitted by law. If a jurisdiction requires that the offering be made by a licensed broker
or dealer and the initial purchasers or any affiliate of the initial purchasers is a licensed
broker or dealer in that jurisdiction, the offering shall be deemed to be made by the initial
purchasers or such affiliate on behalf of the Issuer in such jurisdiction.
This Preliminary Offering Memorandum has been sent to you in an electronic form. You
are reminded that documents transmitted via this medium may be altered or changed
during the process of electronic transmission and consequently neither J.P. Morgan
Securities Inc. (“JPMorgan”) nor any person who controls it nor any director, officer,
employee nor agent of it or affiliate of any such person accepts any liability or
responsibility whatsoever in respect of any difference between the Preliminary Offering
Memorandum distributed to you in electronic format and the hard copy version available
to you on request from JPMorgan.
The
information
in
this
preliminary
offering
memorandum
is
not
complete
and
may
be
changed.
Subject to completion, dated April 19, 2010
Preliminary offering memorandum Strictly confidential
Live Nation Entertainment, Inc.
$250,000,000
% Senior Notes due 2018
Interest payable and
Issue Price:
%
The notes will mature on , 2018. Interest will accrue on the notes from , 2010, and the first interest payment date will be , 2010.
We may redeem some or all of the notes at any time on or after , 2014 at the redemption prices set forth in this offering memorandum. Prior to , 2014, we may also redeem some or all of the notes at a redemption price equal to 100% of the principal amount thereof plus accrued and unpaid interest to, but excluding, the redemption date and a “make-whole” premium. We may also redeem up to 35% of the aggregate principal amount of the notes using the proceeds of certain equity offerings completed before , 2013 at the redemption price set forth herein. We must offer to purchase the notes if we experience specific kinds of changes of control or sell assets under certain circumstances.
The notes will be our senior unsecured obligations and will rank equally to all of our existing and future senior debt and will rank senior to all of our future subordinated debt. The notes will be
effectively subordinated to all of our secured debt (to the extent of the value of the collateral securing such debt), including our new senior secured credit facility being entered into concurrently with the closing of the offering of the notes, and will be structurally subordinated to all of the liabilities of any of our subsidiaries that do not guarantee the notes.
The notes will be guaranteed by certain of our existing and future domestic subsidiaries. The
guarantees will be senior unsecured obligations of such guarantors and will rank senior to all of their existing and future subordinated debt. The guarantees will rank equally with all existing and future liabilities of such guarantors that are not so subordinated and will be effectively subordinated to all of such guarantors’ secured debt (to the extent of the collateral securing such debt), including their guarantees of our new senior secured credit facility.
See “Risk factors” beginning on page 15 for a discussion of certain risks that you should consider in connection with an investment in the notes.
The notes have not been registered under the Securities Act of 1933, as amended (the “Securities Act”) or the securities laws of any other state or jurisdiction, and may not be offered or sold within the United States or to, or for the account or benefit of, U.S. persons except pursuant to an exemption from, or in a transaction not subject to the registration requirements of, the Securities Act.
Accordingly, we are offering the notes only to qualified institutional buyers, as such term is defined in Rule 144A of the Securities Act, and to persons outside the United States under Regulation S of the Securities Act.
The notes will not be listed on any securities exchange.
We expect that delivery of the notes will be made to investors in book-entry form through the facilities of The Depository Trust Company on or about , 2010.
Joint Book-Running Managers
J.P. Morgan
Goldman, Sachs & Co.
Deutsche Bank Securities
Senior Co-Managers
In making your investment decision, you should rely only on the information contained in this offering memorandum. Neither we nor the initial purchasers have authorized anyone to provide you with any other information. If you receive any other information, you should not rely on it. We and the initial purchasers are offering to sell the notes only in places where offers and sales are permitted.
You should not assume that the information contained in this offering memorandum is accurate as of any date other than the date on the front cover of this offering memorandum.
Table of contents
Page
Summary . . . 1
Risk factors . . . 15
Use of proceeds . . . 51
Capitalization . . . 52
Selected financial data for Live Nation . . . 53
Unaudited pro forma condensed combined financial statements . . . 54
Management’s discussion and analysis of financial condition and results of operations of Live Nation . . . 71
Management’s discussion and analysis of financial condition and results of operations of Ticketmaster Entertainment . . . 106
Live Nation’s business . . . 129
Page Ticketmaster Entertainment’s business . . . 148
Management . . . 154
Description of certain indebtedness . . . . 156
Description of notes . . . 159
Book-entry settlement and clearance . . . 205
Certain United States federal income tax considerations . . . 208
Certain ERISA considerations . . . 214
Transfer restrictions . . . 216
Plan of distribution . . . 219
Legal matters . . . 222
Independent registered public accounting firm . . . 222
Where you can find additional information . . . 222
This offering memorandum is a confidential document that we are providing only to prospective purchasers of the notes. You should read this offering memorandum before making a decision whether to purchase any notes. You must not:
• use this offering memorandum, or the information it contains, for any other purpose;
• make copies of any part of this offering memorandum or give a copy of it to any other person; or • disclose any information in this offering memorandum to any other person.
We have prepared this offering memorandum and we are solely responsible for its contents. You are responsible for making your own examination of us and your own assessment of the merits and risks of investing in the notes. You may contact us if you need any additional information. By purchasing any notes, you will be deemed to have acknowledged that: • you have reviewed this offering memorandum;
• you have had an opportunity to request any additional information that you need from us; and
• the initial purchasers are not responsible for, and are not making any representation to you concerning, our future performance or the accuracy or completeness of this offering
memorandum.
We are not providing you with any legal, business, tax or other advice in this offering
memorandum. You should consult with your own advisors as needed to assist you in making your investment decision and to advise you whether you are legally permitted to purchase notes in this offering.
You must comply with all laws that apply to you in any place in which you buy, offer or sell any notes or possess this offering memorandum. You must also obtain any consents or approvals that you need in order to purchase any notes. We and the initial purchasers are not responsible for your compliance with these legal requirements.
We are offering the notes in reliance on exemptions from the registration requirements of the Securities Act. These exemptions apply to offers and sales of securities that do not involve a public offering. The notes have not been recommended by any federal, state or foreign securities authorities and no such authority has determined that this offering memorandum is accurate or complete. Any representation to the contrary is a criminal offense.
The notes are subject to restrictions on resale and transfer as described under “Transfer
restrictions.” By purchasing any notes, you will be deemed to have represented, acknowledged and agreed to all the provisions contained in that section of this offering memorandum. You may be required to bear the financial risks of investing in the notes for an indefinite period of time.
Notice to New Hampshire residents
NEITHER THE FACT THAT A REGISTRATION STATEMENT OR AN APPLICATION FOR
A LICENSE HAS BEEN FILED UNDER CHAPTER 421-B OF THE NEW HAMPSHIRE
REVISED STATUTES ANNOTATED, 1955, AS AMENDED (“RSA 421-B”), WITH THE
STATE OF NEW HAMPSHIRE NOR THE FACT THAT A SECURITY IS EFFECTIVELY
REGISTERED OR A PERSON IS LICENSED IN THE STATE OF NEW HAMPSHIRE
CONSTITUTES A FINDING BY THE SECRETARY OF STATE THAT ANY DOCUMENT
FILED UNDER RSA 421-B IS TRUE, COMPLETE AND NOT MISLEADING. NEITHER
ANY SUCH FACT NOR THE FACT THAT AN EXEMPTION OR EXCEPTION IS
AVAILABLE FOR A SECURITY OR A TRANSACTION MEANS THAT THE SECRETARY
OF STATE HAS PASSED IN ANY WAY UPON THE MERITS OR QUALIFICATIONS OF,
OR RECOMMENDED OR GIVEN APPROVAL TO, ANY PERSON, SECURITY, OR
TRANSACTION. IT IS UNLAWFUL TO MAKE, OR CAUSE TO BE MADE, TO ANY
PROSPECTIVE PURCHASER, CUSTOMER OR CLIENT ANY REPRESENTATION
INCONSISTENT WITH THE PROVISIONS OF THIS PARAGRAPH.
Non-GAAP financial measures
This offering memorandum contains certain non-GAAP financial measures as defined by SEC Regulation G. A definition of each such measure, together with an explanation of why we believe that these non-GAAP financial measures provide useful information to investors, is provided below. For a reconciliation of each measure to its most directly comparable GAAP financial measure, see “Summary—Summary financial data for Live Nation” and “Summary— Summary financial data for Ticketmaster Entertainment.”
Non-GAAP financial measures related to Live Nation Entertainment, Inc.
Adjusted Operating Income (Loss) is a non-GAAP financial measure that we define as operating income (loss) before acquisition transaction expenses, depreciation and amortization (including goodwill impairment), loss (gain) on sale of operating assets and non-cash compensation
expense. We use Adjusted Operating Income (Loss) to evaluate the performance of our operating segments. We believe that information about Adjusted Operating Income (Loss) 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. Adjusted Operating Income (Loss) is not calculated or presented in accordance with GAAP. A limitation of the use of Adjusted
Operating Income (Loss) as a performance measure is that it does not reflect the periodic costs of certain capitalized tangible and intangible assets used in generating revenue in our business. Accordingly, Adjusted Operating Income (Loss) 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, Adjusted Operating Income (Loss) as presented herein may not be comparable to similarly titled measures of other companies.
Non-GAAP financial measures related to Ticketmaster Entertainment LLC
Adjusted EBITDA is defined as operating income (loss) excluding, if applicable: (1) depreciation expense, (2) non-cash and stock-based compensation expense, (3) amortization and impairment of intangibles, (4) goodwill impairment, (5) pro forma adjustments for significant acquisitions, fair value adjustments to contingent consideration and compensation expense associated with significant acquisitions or the merger of Ticketmaster Entertainment with Live Nation and (6) one-time items. Adjusted EBITDA is one of the primary metrics by which Ticketmaster
Entertainment LLC evaluates the performance of its businesses, on which its internal budgets are based and by which management is compensated. Ticketmaster Entertainment LLC believes that investors should have access to the same set of tools that it uses in analyzing its results. This supplemental measure should be considered in addition to results prepared in accordance with GAAP, but should not be considered a substitute for or superior to GAAP results. Ticketmaster Entertainment LLC believes this measure is useful to investors because it represents the operating results from Ticketmaster Entertainment LLC’s businesses excluding the effects of any other non cash expenses. Adjusted EBITDA has certain limitations in that it does not take into account the impact to Ticketmaster Entertainment LLC’s statement of operations of certain expenses, including acquisition-related accounting. Ticketmaster Entertainment LLC endeavors to compensate for the limitations of the supplemental measure presented by also providing the comparable GAAP measure with equal or greater prominence and descriptions of the reconciling items, including quantifying such items, to derive the supplemental measure.
Forward-looking statements
This offering memorandum includes “forward-looking statements,” within the meaning of Section 27A of the Securities Act and Section 21E of the Securities Exchange Act of 1934 (the “Exchange Act”), with respect to our financial condition, results of operations and business and our expectations or beliefs concerning future events. Such forward-looking statements include, but are not limited to, statements regarding the potential health and growth of the business of Live Nation Entertainment, Inc., including our prospects for delivering increased annual cash flows, reducing our long-term debt and strengthening our balance sheet; our anticipated achievement of our strategic objectives; and the amount of anticipated synergies and other benefits associated with both the offering and related transactions described in this offering memorandum and our merger with Ticketmaster Entertainment. We wish to caution you that there are some known and unknown factors that could cause actual results to differ materially from any future results, performance or achievements expressed or implied by such forward-looking statements, including but not limited to operational challenges in achieving strategic objectives and executing on our plans, the risk that our markets do not evolve as anticipated, the potential impact of the economic slowdown and operational challenges associated with selling tickets and staging events. 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 herein or in our annual, quarterly and other reports we file with the SEC. 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. In light of these risks, uncertainties and assumptions, the forward-looking events discussed in this prospectus might not occur.
Market and industry data
Market and industry data and forecasts used in this offering memorandum have been obtained from independent industry sources as well as from research reports prepared for other purposes. Although we believe these third-party sources to be reliable, we have not independently verified the data obtained from these sources and we cannot assure you of the accuracy or completeness of the data. Forecasts and other forward-looking information obtained from these sources are subject to the same qualifications and uncertainties as the other forward-looking statements in this offering memorandum.
Incorporation by reference
This offering memorandum “incorporates by reference” certain information we file with the SEC under the Exchange Act. This means that we are disclosing important information to you by referring you to these filings. The information we incorporate by reference is considered a part of this offering memorandum, and subsequent information that we file with the SEC will automatically update and supersede this information.
Any statement contained in a document incorporated or considered to be incorporated by reference in this offering memorandum shall be considered to be modified or superseded for purposes of this offering memorandum to the extent a statement contained in this offering memorandum or in any other subsequently filed document that is or is considered to be
incorporated by reference in this offering memorandum modifies or supersedes such statement. We incorporate by reference the following documents that we have filed with the SEC:
• our Annual Report on Form 10-K for the fiscal year ended December 31, 2009;
• Item 8. Consolidated Financial Statements and Supplementary Data included in Ticketmaster Entertainment LLC’s Annual Report on Form 10-K for the year ended December 31, 2009; and • Our Current Reports on Form 8-K filed with the SEC on January 8, 2010, January 25, 2010 (three
filings), January 26, 2010 and January 29, 2010 and our Current Report on Form 8-K/A filed with the SEC on March 29, 2010.
In addition, we incorporate by reference any future filings we make with the SEC pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act (other than any information “furnished” pursuant to Item 2.02 or 7.01 of any Current Report on Form 8-K) between the date of this offering memorandum and before we have sold all of the notes to which this offering
memorandum relates or the offering is otherwise terminated. You may request copies of any of those documents or the indenture at no cost, by writing or telephoning us at the following address:
Investor Relations
Live Nation Entertainment, Inc. 9348 Civic Center Drive
Beverly Hills, California, 90210 (310) 867-7000
You may also obtain copies of these filings, at no cost, by accessing our website at
http://www.livenation.com; however, the information found on our website is not considered part of this offering memorandum.
Summary
This offering memorandum summary highlights selected information contained elsewhere or incorporated by reference in this offering memorandum. This summary is not complete and does not contain all the important information you should consider. Except as noted or where context suggests otherwise, references in this offering memorandum to “we,” “our,” “us,” “Live Nation” and “our company” are to Live Nation Entertainment, Inc. and its consolidated subsidiaries, which, unless otherwise indicated, include Ticketmaster Entertainment LLC (“Ticketmaster Entertainment”). We urge you to carefully read all of this offering memorandum and the
documents incorporated by reference, including our consolidated financial statements (which do not give effect to the results of Ticketmaster Entertainment) and accompanying notes and the consolidated financial statements of Ticketmaster Entertainment and accompanying notes, to gain a fuller understanding of our business and the terms of the notes, as well as some of the other considerations that may be important to you, before making your investment decision. You should pay special attention to the “Risk Factors” section of this offering memorandum to
determine whether an investment in the notes is appropriate for you.
Merger
In January 2010, Live Nation completed the merger with Ticketmaster Entertainment (the “Merger”), which we believe will allow the combined company to capitalize on strategic advantages and other opportunities created by combining a global concert business, global ticketing operations and an artist management company, including lowering costs and developing new distribution platforms and new revenue streams (through sponsorships and increased sales and distribution opportunities), based on our belief that the Merger will produce a vertically integrated combined company that will be positioned to address the challenges of serving artists and fans better through improved ticketing options, dynamic promotion arrangements and greater transparency with respect to ticket pricing.
Live Nation overview
We believe that we are the largest producer of live music concerts in the world, based on total attendance at Live Nation events as compared to events of other promoters, producing nearly 22,000 concerts for 2,000 artists in 42 countries during 2009. In 2009, over 52 million fans attended Live Nation concerts and Live Nation drove over 70 million unique visitors to
www.livenation.com and our other online properties. Globally, Live Nation owns, operates, has booking rights for and/or has an equity interest in 142 venues, including House of Blues®music
venues and prestigious locations such as The Fillmore in San Francisco, the Hollywood Palladium, the Heineken Music Hall in Amsterdam and the O2Dublin.
Our principal executive offices are located at 9348 Civic Center Drive, Beverly Hills, California 90210 (telephone: 310-867-7000). Our principal website is www.livenation.com. Live Nation is listed on the New York Stock Exchange, trading under the symbol “LYV”.
Ticketmaster Entertainment overview
As the world’s leading live entertainment ticketing and marketing company based on the number of tickets sold, Ticketmaster Entertainment connects the world to live entertainment.
Ticketmaster Entertainment currently operates in approximately 19 countries worldwide, providing ticket sales, ticket resale services, marketing and distribution through
www.ticketmaster.com, one of the largest e-commerce sites on the internet, and related
proprietary internet and mobile channels, approximately 6,700 independent sales outlets and 17 call centers worldwide. Established in 1976, Ticketmaster Entertainment sold tickets on behalf of more than 10,000 clients worldwide during 2009, including venues, promoters, sports leagues and teams, and museum and cultural institutions, among other clients, across multiple live event categories, providing exclusive ticketing services for leading arenas, stadiums, amphitheaters, music clubs, concert promoters, professional sports franchises and leagues, college sports teams, performing arts venues, museums and theaters. Ticketmaster Entertainment’s distribution channels and client base provide it with significant scale—for example, in 2009, Ticketmaster Entertainment brands and businesses sold more than 130 million tickets valued at $8.0 billion. Ticketmaster Entertainment’s business also includes the operations of Front Line Management Group, Inc. (“Front Line”), one of the world’s leading artist management companies. Front Line manages musical artists and acts primarily in rock, classic rock, pop and country music. As of December 31, 2009, Front Line had over 200 artists on its rosters and approximately 75 managers performing services to artists.
From its spin-off from IAC/InterActiveCorp (“IAC”) in August 2008 until the Merger in January 2010, Ticketmaster Entertainment operated as a stand-alone, publicly-traded company with its common stock trading on The Nasdaq Stock Market. Ticketmaster Entertainment is now an indirect, wholly-owned subsidiary of Live Nation.
Live Nation’s business strategy
Our strategy is to connect the artist to the fan. We believe that this focus will enable us to increase stockholder value by developing new ancillary revenue streams around the live music event and the artist themselves. We will continue to focus on our live music assets and we plan to expand our business through building a stronger connection with the fan through the live event and our online ticketing activities. We will seek to connect corporate sponsors with this fan through the live music experience. We will continue to execute on this strategy through pursuing the objectives listed below.
• Improve the profitability of our existing core business. We continue to focus on improving the profitability of our existing core live music operations by implementing strategies to increase ancillary sales per fan at all events and at all venues we operate in, as well as continually striving to reduce the marketing and operating costs of an event.
• Extend relationships with artists and sponsors. Our goal is to develop deeper relationships with touring artists centered on the live music event. We are able to expand and broaden our relationship with the artist by providing more services and partnering with the artist to grow their music properties. We believe that we can expand the business lines related to the live music event, such as the sale of tour merchandise and live concert DVDs or downloads, as well as providing other products and services to fans and artists both before and after the concert, including the development of artist fan clubs and websites. We also believe that we have an opportunity to expand our relationship with corporate sponsors by providing strategic
programs that deliver more value to the sponsor through our unique relationship to the music fan and to the artist and by utilizing our distribution network of venues and our extensive online presence.
• Expand ticketing and online services. Our goal is to have a direct relationship with the music fan through ticketing and to be the leading online live music destination website through www.livenation.com. Our website offers comprehensive information about live concerts, including shows that are not Live Nation promoted events, and access to tickets and artist merchandise. We seek to continue to drive the growth of our website by expanding our online offering to increase traffic and generate incremental revenue from additional ticket sales, merchandise sales, online advertising and other goods and services.
• Increase our global live music platform. We plan to selectively expand our promoter presence to include the top music markets and population centers around the world. As of December 31, 2009, we operated in 19 countries. Our focus internationally is on increasing our promoter presence. We intend to expand our North American platform in key larger markets through ownership or operation of key venues and by growing our festival presence.
• Divest non-core assets. We are focused on building our live music business and ancillary services in major music markets around the world. As a result, we expect, where it is economically justifiable, to continue to divest non-live music related assets and/or
underperforming live music assets and use the net proceeds to re-invest in our core live music business, repay outstanding indebtedness or for general corporate purposes.
In order to achieve our objectives and successfully implement our strategies, we have made, and expect to continue to pursue, investments, acquisitions and divestitures that contribute to the above goals where the valuations, returns and growth potential are consistent with our long-term goal of increasing stockholder value.
Related transactions
The issuance of the notes by Live Nation in this offering is part of a series of refinancing transactions (the “Related Transactions”), which include:
• the entry by Live Nation into a new senior secured credit facility providing for $900.0 million of term loans and a $300.0 million revolving credit facility to replace its and Ticketmaster
Entertainment’s existing credit agreements, the entry into which is a condition to the completion of this offering;
• Live Nation’s assumption of all obligations under Ticketmaster Entertainment’s $287.0 million of outstanding 10.75% Senior Notes due 2016 (the “10.75% Notes”) through a series of subsidiary mergers;
• the conversion of the outstanding preferred stock of a Live Nation subsidiary, having a liquidation preference of $40 million, into the right to receive a cash payment through a subsidiary merger transaction; and
Organizational structure
The following chart represents our corporate organizational structure prior to the consummation of this offering and the Related Transactions. Unless otherwise noted, existing debt amounts are as of December 31, 2009.
Live Nation Entertainment, Inc.
Live Nation Holdco #1, Inc.
Live Nation Holdco #2, Inc.
Live Nation Worldwide, Inc.
Ticketmaster Entertainment LLC
$200 million revolving credit facility
$440 million term loans $287 million 10.75% senior notes due 2016
$16 million preferred stock(2) $40 million preferred
stock
$285 million revolving credit facility $343 million term loans
$220 million 2.875% convertible notes due 2027(1)
Various:
US: $15 million International: $113 million
LN-TM Holdco #1, LLC
LN-TM Holdco #2, LLC
US Subsidiaries
Foreign Subsidiaries
US Subsidiaries
Foreign Subsidiaries
(1) Represents principal amount of convertible notes outstanding. At December 31, 2009, the book value of such notes was $167.2 million.
(2) In connection with the Merger, the preferred stock was redeemed in exchange for a subordinated note. As of February 1, 2010, the principal amount outstanding on the note was approximately $34.7 million.
The following chart represents our corporate organizational structure as it would appear upon consummation of this offering and the Related Transactions. Unless otherwise noted, existing debt amounts are as of December 31, 2009.
$300 million new revolving credit facility $900 million new term loans $250 million senior notes offered hereby
$220 million 2.875% convertible notes due 2027(1)
$287 million 10.75% senior notes due 2016
$16 million preferred stock(2)
US Subsidiaries
Foreign Subsidiaries Live Nation
Entertainment, Inc.
New York Theater, LLC
US Subsidiaries
Foreign Subsidiaries
Former Live Nation Subsidiaries
Former Ticketmaster Entertainment Subsidiaries
Live Nation Holdco #2, Inc.
Various: US: $15 million International: $113 million
Live Nation Worldwide, Inc.
(1) Represents principal amount of convertible notes outstanding. At December 31, 2009 the book value of such notes was $167.2 million.
(2) In connection with the Merger, the preferred stock was redeemed in exchange for a subordinated note. As of February 1, 2010, the principal amount outstanding on the note was approximately $34.7 million.
The offering
The following summary contains basic information about the notes and is not intended to be complete. It does not contain all the information that is important to you. For a more complete understanding of the notes, please refer to the section of this offering memorandum entitled “Description of notes.”
Issuer . . . Live Nation Entertainment, Inc.
Securities offered . . . $250.0 million aggregate principal amount of % Senior Notes due 2018.
Maturity . . . The notes will mature on , 2018.
Interest . . . Interest on the notes will be payable in cash and will accrue at a rate of % per annum.
Interest payment
dates . . . and of each year, beginning , 2010. Interest will accrue from , 2010.
Guarantees . . . The notes will be guaranteed by certain of our existing and future domestic restricted subsidiaries.
Ranking . . . The notes will be our senior unsecured obligations and will rank equally to all of our existing and future senior debt and will rank senior to all of our future subordinated debt. The notes will be effectively subordinated to all of our secured debt (to the extent of the value of the collateral securing such debt), including our new senior secured credit facility, and will be structurally subordinated to all of the liabilities of any of our subsidiaries that do not guarantee the notes.
The guarantees will be senior unsecured obligations of the guarantors and will rank senior to all their existing and future subordinated debt. The guarantees will rank equally with all existing and future liabilities of such guarantors that are not so subordinated and will be effectively subordinated to all of such guarantors’ secured debt (to the extent of the collateral securing such debt), including their guarantees of our new senior secured credit facility.
On a pro forma basis after giving effect to this offering and the Related Transactions, as of December 31, 2009 we would have had $1,748 million of outstanding debt on a consolidated basis, of which $987 million would have been secured debt (excluding $257 million of unused revolving commitments under our new senior secured credit facility).
As of and for the year ended December 31, 2009 (i) Live Nation’s (excluding Ticketmaster Entertainment and its subsidiaries) non-guarantor subsidiaries represented approximately 47% of Live
Nation’s total revenues, held approximately 29% of Live Nation’s total assets and approximately 33% of Live Nation’s total liabilities and (ii) Ticketmaster Entertainment’s non-guarantor subsidiaries represented approximately 30% of Ticketmaster Entertainment’s total revenues, held approximately 43% of Ticketmaster Entertainment’s total assets and approximately 27% of Ticketmaster Entertainment’s total liabilities, in each case to which the Notes would have been
structurally subordinated. As of and for the year ended December 31, 2009, on a pro forma basis after giving effect to this offering and the Related Transactions, our non-guarantor subsidiaries represented approximately 43% of our total revenues, held approximately 34% of our total assets and approximately 29% of our total liabilities, to which the Notes would have been structurally subordinated. Optional redemption . . . We may redeem some or all of the notes at any time on or after
, 2014 at the redemption prices set forth in this offering memorandum. Prior to , 2014, we may also redeem some or all of the notes at a redemption price equal to 100% of the principal amount thereof plus accrued and unpaid interest to, but excluding, the redemption date and a “make-whole” premium. We may also redeem up to 35% of the aggregate principal amount of the notes using the proceeds of certain equity offerings completed before
, 2013 at the redemption price set forth herein. See “Description of notes—Optional redemption.”
Change of control; and
asset sales . . . If we experience specific kinds of changes of control, we will be required to make an offer to purchase the notes at a purchase price of 101% of the principal amount thereof, plus accrued but unpaid interest to the purchase date. See “Description of notes—Change of control.”
If we or our restricted subsidiaries sell assets under certain circum-stances, we will be required to make an offer to purchase the notes at their face amount, plus accrued and unpaid interest to the purchase date. See “Description of notes—Certain covenants—Limitation on asset sales.”
Certain covenants . . . The indenture governing the notes will restrict our ability and the ability of our restricted subsidiaries to, among other things: • 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 Live Nation;
• create certain liens;
• merge, consolidate or sell substantially all of Live Nation’s assets; and
• enter into certain transactions with affiliates.
These covenants are subject to important exceptions and
qualifications and many of these covenants will not be applicable during any period of time when the notes have an investment grade rating. See “Description of notes—Suspension of covenants.”
Exchange offer and
registration rights . . . None.
Transfer restrictions . . . . The notes have not been registered under the Securities Act or any state securities laws. The notes may not be offered or sold except under an exemption from, or in a transaction not subject to, the Securities Act and applicable state securities laws. For more details, see “Transfer restrictions.”
Original issue
discount . . . The notes may be issued with original issue discount. U.S. Holders of notes should be aware that they generally must include original issue discount in gross income (as ordinary income) in advance of receipt of cash attributable to that income. See “Certain United States federal income tax considerations.”
Use of proceeds . . . We will use the net proceeds from the offering together with borrowings under our new credit facility to consummate the Related Transactions and to pay fees and expenses in connection therewith. See “Use of proceeds.”
Risk Factors . . . See “Risk factors” and other information included in this offering memorandum for a discussion of factors you should consider carefully before investing in the notes.
Summary financial data for Live Nation
The summary financial data contained in the following table should be read together with, and are qualified in their entirety by reference to, “Management’s discussion and analysis of financial condition and results of operation of Live Nation” and the “Unaudited pro forma combined condensed financial statements” included, and our historical consolidated financial statements incorporated by reference, in this offering memorandum.
(in thousands) 2009 2008 2007 2006 2005
Results of Operations Data(1)(2):
Revenue . . . $4,181,021 $4,085,306 $3,635,389 $3,200,929 $2,486,549 Operating Expenses:
Direct operating expenses . . . . 3,357,245 3,299,444 2,943,311 2,636,425 1,993,053 Selling, general and
administrative expenses . . . . 618,980 619,585 553,259 430,548 396,238 Depreciation and
amortization . . . 158,118 140,039 107,428 113,656 50,929 Goodwill impairment . . . 9,085 269,902 — — — Loss (gain) on sale of
operating assets . . . (2,983) 1,131 (20,735) (9,873) 5,002 Corporate expenses . . . 56,889 52,498 45,854 33,863 50,715 Acquisition transaction
expenses . . . 36,043 — — — — Operating income (loss) . . . (52,356) (297,293) 6,272 (3,690) (9,388) Interest expense . . . 66,365 70,104 64,297 36,790 5,444 Interest expense with Clear
Channel Communications . . . — — — — 46,437
Interest income . . . (2,193) (8,575) (12,115) (10,024) (703) Equity in (earnings) losses of
nonconsolidated affiliates . . . . (1,851) (842) 7,737 1,330 3,437 Other expense (income)—net . . . 1 (245) (66) (500) 151 Loss from continuing operations
before income taxes . . . (114,678) (357,735) (53,581) (31,286) (64,154) Income tax expense (benefit) . . . 11,333 (24,257) 8,729 18,003 29,841 Loss from continuing
operations . . . (126,011) (333,478) (62,310) (49,289) (93,995) Income (loss) from discontinued
operations, net of tax . . . 76,277 95,653 54,990 30,056 (31,388) Net loss . . . (49,734) (237,825) (7,320) (19,233) (125,383) Net income attributable to
noncontrolling interests . . . 10,445 1,587 7,869 12,209 5,236 Net loss attributable to Live
As of December 31,
(in thousands) 2009 2008 2007 2006 2005
Balance Sheet Data(1):
Total assets . . . $2,341,759 $2,476,723 $2,749,820 $2,225,002 $1,776,584 Long-term debt, net of discount
(including current
maturities) . . . $ 740,069 $ 824,120 $ 753,017 $ 639,146 $ 366,841 Redeemable preferred stock . . . . $ 40,000 $ 40,000 $ 40,000 $ 40,000 $ 40,000 Live Nation Entertainment, Inc.
stockholders’ equity . . . $ 652,317 $ 677,853 $ 942,097 $ 642,269 $ 636,700 Years Ended December 31,
(dollars in thousands) 2009 2008 2007
Cash flow statement data:
Cash flow from operating activities . . . $ 57,275 $ (62,633) $ 36,433 Cash flow from investing activities . . . 70,089 (66,893) (129,570) Cash flow from financing activities . . . (116,964) 33,984 110,188 Effect of exchange rate changes on cash and cash
equivalents . . . 26,895 (43,789) 8,060 Change in cash and cash equivalents . . . $ 37,295 $(139,331) $ 25,111 Selected financial data:
Adjusted operating income(3) . . . $ 164,582 $ 149,035 $ 121,156 Ratio of total debt to adjusted operating income . . . 4.50x 5.53x 6.21x Ratio of total debt (including redeemable preferred stock) to
adjusted operating income . . . 4.74x 5.80x 6.54x
(1) Acquisitions and dispositions significantly impact the comparability of the historical consolidated financial data reflected in this data.
(2) For 2005, the combined financial statements include amounts that are comprised of businesses included in the consolidated financial statements and accounting records of Clear Channel Communications, Inc. (“Clear Channel”), using the historical bases of assets and liabilities of the entertainment business. As a result of the contribution and transfer by Clear Channel of substantially all of its entertainment assets and liabilities to Live Nation (the “Separation”), we recognized the par value and additional paid-in capital in connection with the issuance of our common stock in exchange for the net assets contributed at that time.
(3) Adjusted operating income (loss) is a non-GAAP financial measure that we define as operating income (loss) before acquisition transaction expenses, depreciation and amortization (including goodwill impairment), loss (gain) on sale of operating assets and non-cash compensation expense.
The table below presents the components of adjusted operating income (loss) and a reconciliation to operating income (loss) for Live Nation.
Years Ended December 31, (in thousands) 2009 2008 2007 Adjusted operating income (loss) reconciliation:
Operating income (loss) . . . $ (52,356) $(297,293) $ 6,272 Plus: Goodwill impairment . . . 9,085 269,902 — Plus: Acquisition transaction expenses . . . 36,043 — — Plus: Depreciation and amortization . . . 158,118 140,039 107,428 Plus/Minus: Loss (gain) on sale of operating assets . . . (2,983) 1,131 (20,735) Plus: Non-cash compensation expense . . . 16,675 35,256 28,191 Adjusted operating income . . . $164,582 $ 149,035 $121,156
Summary financial data for Ticketmaster Entertainment
The summary financial data contained in the following table should be read together with, and are qualified in their entirety by reference to, “Management’s discussion and analysis of financial condition and results of operation of Ticketmaster Entertainment” and the “Unaudited pro forma combined condensed financial statements” included, and Ticketmaster Entertainment’s consolidated financial statements incorporated by reference, in this offering memorandum.
Years ended December 31,
(in thousands) 2009 2008 2007
Results of Operations Data:
Revenue . . . $1,482,997 $ 1,438,282 $1,221,798 Interest on funds held for clients . . . 3,170 16,243 18,679 Total revenue . . . 1,486,167 1,454,525 1,240,477 Cost of sales (exclusive of depreciation shown separately
below) . . . 896,152 927,889 766,538 Gross profit . . . 590,015 526,636 473,939 Selling and marketing expense . . . 94,657 102,631 43,487 General and administrative expense . . . 271,337 190,054 149,478 Amortization of intangibles . . . 71,608 44,109 26,200 Depreciation . . . 56,293 49,894 38,458 Goodwill impairment . . . — 1,094,091 — Operating income (loss) . . . 96,120 (954,143) 216,316 Other (expense) income, net:
Interest income . . . 2,392 13,926 33,065 Interest expense . . . (63,518) (39,216) (1,003) Equity in income of unconsolidated affiliates . . . 3,872 2,659 6,301 Impairment of long-term investments . . . (9,914) (12,334) — Other income . . . 9,172 4,914 1,120 Total other (expense) income, net . . . (57,996) (30,051) 39,483 Earnings (loss) before income taxes and noncontrolling
interests . . . 38,124 (984,194) 255,799 Income tax provision . . . (19,096) (25,627) (89,007) Net income (loss). . . 19,028 (1,009,821) 166,792 Loss attributable to noncontrolling interests, net . . . 11,226 4,322 2,559 Net income (loss) attributable to Ticketmaster
Entertainment, Inc. . . . $ 30,254 $(1,005,499) $ 169,351
(in thousands)
December 31, 2009
December 31, 2008 Balance Sheet Data:
Total assets . . . $1,789,758 $1,706,567 Long-term debt . . . $ 811,980 $ 865,000 Total Ticketmaster Entertainment, Inc. stockholders’ equity . . . $ 198,893 $ 165,459
Years Ended December 31,
(dollars in thousands) 2009 2008 2007
Cash flow statement data:
Cash flow from operating activities . . . $181,825 $ 195,188 $211,967 Cash flow from investing activities . . . (65,198) (1,475,949) (13,026) Cash flow from financing activities . . . (63,620) 1,232,739 30,277 Effect of exchange rate changes on cash and cash
equivalents . . . 36,857 (55,777) 21,622 Change in cash and cash equivalents . . . $ 89,864 $ (103,799) $250,840 Selected financial data:
Adjusted EBITDA(1) . . . $280,078 $ 257,682 $293,546 Ratio of total debt to adjusted EBITDA . . . 2.90x 3.36x N/A
(1) Adjusted EBITDA is a non-GAAP financial measure defined as operating income (loss) excluding, if applicable: (1) depreciation expense, (2) non-cash and stock-based compensation expense, (3) amortization and impairment of intangibles, (4) goodwill impairment, (5) pro forma adjustments for significant acquisitions, fair value adjustments to contingent consideration and compensation expense associated with significant acquisitions or the Merger and (6) one-time items.
The table below presents the components of adjusted EBITDA and a reconciliation to net income (loss) attributable to Ticketmaster Entertainment, Inc.
Years Ended December 31, (in thousands) 2009 2008 2007 Adjusted EBITDA reconciliation:
Net income (loss) attributable to Ticketmaster Entertainment, Inc. . . $ 30,254 $(1,005,499) $169,351 Minus: Loss attributable to noncontrolling interests, net . . . 11,226 4,322 2,559 Net income (loss) . . . 19,028 (1,009,821) 166,792 Plus: Income tax provision . . . 19,096 25,627 89,007 Earnings (loss) before income taxes and noncontrolling interests . . . 38,124 (984,194) 255,799 Plus: Other expense (income), net . . . 57,996 30,051 (39,483) Operating income (loss) . . . 96,120 (954,143) 216,316 Plus: Goodwill impairment . . . — 1,094,091 — Plus: Depreciation . . . 56,293 49,894 38,458 Plus: Amortization of intangibles . . . 71,608 44,109 26,200 Plus: Non-cash and stock-based compensation expense . . . 23,816 23,731 12,572 Plus: Acquisition transaction expenses . . . 32,241 — — Adjusted EBITDA . . . $280,078 $ 257,682 $293,546
Pro forma summary financial data
The summary financial data contained in the following table should be read together with, and are qualified in their entirety by reference to our Form 8-K/A filed on March 29, 2010, which is incorporated by reference herein, and the “Unaudited pro forma condensed combined financial statements” included in this offering memorandum.
As of December 31, 2009 Historical
Pro forma adjustments
Pro forma combined
(in thousands) Live Nation
Ticketmaster Entertainment Results of Operations
Revenue . . . $4,181,021 $1,486,167 $(150,636) $5,516,552 Operating expenses:
Direct operating expenses . . . 3,357,245 896,152 (147,557) 4,105,840 Selling, marketing, general and
administrative expenses . . . 711,912 365,994 (65,700) 1,012,206 Depreciation and amortization . . . 158,118 127,901 68,166 354,185 Goodwill impairment . . . 9,085 — — 9,085 Gain on sale of operating assets . . . (2,983) — — (2,983) Operating income (loss) . . . (52,356) 96,120 (5,545) 38,219 Interest expense . . . 66,365 63,518 7,280 137,163 Interest income . . . (2,193) (2,392) (759) (5,344) Equity in earnings of nonconsolidated
affiliates . . . (1,851) (3,872) — (5,723) Impairment of long-term investments . . . . — 9,914 — 9,914 Other expense (income)—net . . . 1 (9,172) (12) (9,183) Income (loss) from continuing operations
before income taxes . . . (114,678) 38,124 (12,054) (88,608) Income tax expense . . . 11,333 19,096 (12,264) 18,165 Income (loss) from continuing
operations . . . (126,011) 19,028 210 (106,773) Net income (loss) from continuing
operations attributable to noncontolling
interests . . . 10,445 (11,226) (1,595) (2,376) Net income (loss) from continuing
operations attributable to Live Nation
and Ticketmaster Entertainment . . . $ (136,456) $ 30,254 $ 1,805 $ (104,397) Historical
Pro forma
adjustments Pro formacombined (in thousands) Live Nation EntertainmentTicketmaster
Balance Sheet Data:
Total assets . . . $2,341,759 $1,789,758 $960,352 $5,091,869 Long-term debt, net of discount . . . $ 699,037 $ 811,980 $ 28,875 $1,539,892(1) Redeemable preferred stock . . . $ 40,000 $ — $ — $ 40,000 Redeemable preferred stock . . . $ — $ 16,130 $ (16,130) $ — Total Live Nation and Ticketmaster
Entertainment stockholders’ equity . . . . $ 652,317 $ 198,893 $703,957 $1,555,167
As of December 31, 2009 Historical
Pro forma combined
(dollars in thousands) Live Nation
Ticketmaster Entertainment Selected financial data:
Adjusted operating income (loss) / adjusted EBITDA(1) . . . $164,582 $280,078 $444,660(2) Ratio of total pro forma debt to total adjusted operating
income / adjusted EBITDA . . . 4.74x 2.90x 3.93x
(1) Adjusted operating income (loss) is a non-GAAP financial measure used by Live Nation and defined as operating income (loss) before acquisition transaction expenses, depreciation and amortization (including goodwill impairment), loss (gain) on sale of operating assets and non-cash compensation expense. For a reconciliation of adjusted operating income (loss) to operating income for Live Nation, see footnote (3) under “—Summary of financial data for Live Nation.”
Adjusted EBITDA is a non-GAAP financial measure used by Ticketmaster Entertainment and defined as operating income (loss) excluding, if applicable: (1) depreciation expense, (2) non-cash and stock-based compensation expense, (3) amortization and impairment of intangibles, (4) goodwill impairment, (5) pro forma adjustments for significant acquisitions, fair value adjustments to contingent consideration and compensation expense associated with significant acquisitions or the merger of Ticketmaster Entertainment with Live Nation and (6) one-time items. For a reconciliation of adjusted EBITDA to net income attributable to Ticketmaster Entertainment, see footnote (1) under “—Summary financial data for Ticketmaster
Entertainment.”
(2) Does not include any cost savings, elimination of redundancies or other synergies that Live Nation expects to realize from the Merger with Ticketmaster Entertainment.
Risk factors
You should carefully consider each of the following risks and all of the other information set forth in this offering memorandum and the documents incorporated by reference herein. These risks and uncertainties are not the only ones facing our company. Additional risks and
uncertainties not presently known to us or that we currently believe to be immaterial may also adversely affect our business. If any of the risks and uncertainties develop into actual events, this could have a material adverse effect on our business, financial condition or results of operations. In that case, the trading price of our common stock could decline.
Risk factors related to Live Nation
Risks relating to our business
Our live music business is highly sensitive to public tastes and dependent on our ability to secure popular artists and other live music events, and we may be unable to anticipate or respond to changes in consumer preferences, which may result in decreased demand for our services.
Our ability to generate revenue from our music operations is highly sensitive to rapidly changing public tastes and dependent on the availability of popular artists and events. Our success depends in part on our ability to anticipate the tastes of consumers and to offer events that appeal to them. Since we rely on unrelated parties to create and perform live music content, any
unwillingness to tour or lack of availability of popular artists could limit our ability to generate revenue. In particular, there are a limited number of artists that can headline a major North American or global tour or who can sell out larger venues, including many of our amphitheaters. If those key artists do not continue to tour, or if we are unable to secure the rights to their future tours, then our business would be adversely affected.
In addition, we typically book our live music tours one to four months in advance of the beginning of the tour and often agree to pay an artist a fixed guaranteed amount prior to our receiving any operating income. Therefore, if the public is not receptive to the tour, or we or a performer cancel the tour, we may incur a loss for the tour depending on the amount of the fixed guarantee or incurred costs relative to any revenue earned, as well as foregone revenue we could have earned at booked venues. We have cancellation insurance policies in place to cover a portion of our losses if a performer cancels a tour but it may not be sufficient and is subject to deductibles. Furthermore, consumer preferences change from time to time, and our failure to anticipate, identify or react to these changes could result in reduced demand for our services, which would adversely affect our operating results and profitability.
We have incurred net losses and may experience future net losses.
Our operating results from continuing operations have been adversely affected by, among other things, event profitability and overhead costs. Live Nation incurred net losses of approximately $126.0 million, $333.5 million and $62.3 million in 2009, 2008 and 2007, respectively. We may face reduced demand for our live music events and other factors that could adversely affect our results of operations in the future. We cannot predict whether we will achieve profitability in future periods.
Our operations are seasonal and our results of operations vary from quarter to quarter and year over year, so our financial performance in certain financial quarters or years may not be indicative of, or comparable to, our financial performance in subsequent financial quarters or years.
We believe our financial results and cash needs will vary greatly from quarter to quarter and year to year depending on, among other things, the timing of tours, tour cancellations, capital
expenditures, seasonal and other fluctuations in our operating results, the timing of guaranteed payments and receipt of ticket sales, financing activities, acquisitions and investments and receivables management. Because our results may vary significantly from quarter to quarter and year to year, our financial results for one quarter or year cannot necessarily be compared to another quarter or year and may not be indicative of our future financial performance in
subsequent quarters or years. Typically, we experience our lowest financial performance in the first and fourth quarters of the calendar year as our outdoor venues are primarily used, and our festivals primarily occur, during May through September. In addition, the timing of tours of top grossing acts can impact comparability of quarterly results year over year and potentially annual results. The following table sets forth Live Nation’s operating income (loss) for the last eight fiscal quarters:
(in thousands) Operatingincome
(loss) Fiscal quarter ended
March 31, 2008 . . . $ (74,770) June 30, 2008 . . . $ 26,531 September 30, 2008 . . . $ 74,377 December 31, 2008 . . . $(323,431) March 31, 2009 . . . $ (88,259) June 30, 2009 . . . $ (8,135) September 30, 2009 . . . $ 108,399 December 31, 2009 . . . $ (64,361)
We may be adversely affected by the current, or any future, general deterioration in economic conditions, which could affect consumer and corporate spending and, therefore, significantly adversely impact our operating results.
A decline in attendance at or reduction in the number of live music events may have an adverse effect on our revenue and operating income. In addition, during past economic slowdowns and recessions, many consumers reduced their discretionary spending and advertisers reduced their advertising expenditures. The impact of slowdowns on our business is difficult to predict, but they may result in reductions in ticket sales, sponsorship opportunities and our ability to generate revenue. The risks associated with our businesses may become more acute in periods of a slowing economy or recession, which may be accompanied by a decrease in attendance at live music events. Our business depends on discretionary consumer and corporate spending. Many factors related to corporate spending and discretionary consumer spending, including economic conditions affecting disposable consumer income such as employment, fuel prices, interest and tax rates and inflation which can significantly impact our operating results. Business conditions, as well as various industry conditions, including corporate marketing and promotional spending and interest levels, can also significantly impact our operating results. These factors can affect attendance at our events, premium seat sales, sponsorship, advertising and hospitality spending,
concession and souvenir sales, as well as the financial results of sponsors of our venues, events and the industry. Negative factors such as challenging economic conditions, public concerns over terrorism and security incidents, particularly when combined, can impact corporate and consumer spending, and one negative factor can impact our results more than another. There can be no assurance that consumer and corporate spending will not be adversely impacted by current economic conditions, or by any further or future deterioration in economic conditions, thereby possibly impacting our operating results and growth.
Loss of our key promoters, management and other personnel could result in the loss of key tours and negatively impact our business.
The live music business is uniquely dependent upon personal relationships, as promoters and executives within the live music companies such as ours leverage their existing network of
relationships with artists, agents and managers in order to secure the rights to the live music tours and events which are critical to our success. Due to the importance of those industry contacts to our business, the loss of any of our promoters, officers or other key personnel could adversely affect our operations. Although we have entered into long-term agreements with many of those individuals to protect our interests in those relationships, we can give no assurance that all or any of these key employees will remain with us or will retain their associations with key business contacts.
Doing business in foreign countries creates risks not found in doing business in the United States.
Live Nation’s international operations accounted for approximately 35% of its revenue in 2009. Ticketmaster Entertainment’s international operations accounted for approximately 27% of its revenue in 2009. The risks involved in foreign operations that could result in losses against which we are not insured include:
• exposure to local economic conditions;
• potential adverse changes in the diplomatic relations of foreign countries with the United States; • restrictions on the withdrawal of foreign investment and earnings;
• investment restrictions or requirements on businesses owned by foreigners; • expropriations of property;
• potential instability of foreign governments;
• risks of renegotiation or modification of existing agreements with governmental authorities; • diminished ability to legally enforce our contractual rights in foreign countries;
• foreign exchange restrictions;
• withholding and other taxes on remittances and other payments by subsidiaries; and • changes in foreign taxation structures.
In addition, we may incur substantial tax liabilities if we repatriate any of the cash generated by our international operations back to the United States due to significant current limitations on our ability to recognize foreign tax credits that would be associated with such repatriation. We could repatriate some of the cash generated by our international operations and use certain of our substantial net operating losses to offset associated tax liabilities. We are not currently in a position to recognize any tax assets in the United States that are the result of payments of income or withholding taxes in foreign jurisdictions.
Exchange rates may cause fluctuations in our results of operations that are not related to our operations.
Because we own assets overseas and derive revenue from our international operations, we may incur currency translation losses or gains due to changes in the values of foreign currencies
relative to the United States Dollar. We cannot predict the effect of exchange rate fluctuations upon future operating results. For the year ended December 31, 2009, Live Nation’s international operations accounted for approximately 35% of its revenue. Although we cannot predict the future relationship between the United States Dollar and the currencies used by our international businesses, principally the British Pound and the Euro, Live Nation experienced a foreign
exchange rate net loss of $39.9 million in 2009 which had a negative effect on its operating income and, in 2008 and 2007, Live Nation had net gains of $0.2 million and $3.5 million, respectively, which had a positive effect on its operating income. For the year ended December 31, 2009, Ticketmaster Entertainment’s international operations accounted for approximately 27% of its revenue. Although we cannot predict the future relationship between the United States Dollar and the currencies used by our international businesses, principally the British Pound, the Canadian Dollar and the Euro, Ticketmaster Entertainment experienced foreign exchange rate net losses of $7.2 million and $2.2 million in 2009 and 2008, respectively, which had a negative effect on its operating income and, in 2007, Ticketmaster Entertainment had a net gain of $3.3 million which had a positive effect on its operating income.
We may enter into future acquisitions and long-term artist rights arrangements and take certain actions in connection with such transactions that could affect the price of our common stock.
As part of our growth strategy, we expect to review acquisition prospects that would offer growth opportunities. We also may enter into additional long-term arrangements with certain artists under which we would acquire the rights to certain music-related activities, including touring, merchandising, recording, online fan clubs, film/DVD and other rights, or a subset of these rights. In the event of future acquisitions or artist rights arrangements, we could: • use a significant portion of our available cash;
• issue equity securities, which would dilute current stockholders’ percentage ownership; • incur substantial debt;
• incur or assume contingent liabilities, known or unknown; • incur amortization expenses related to intangibles; and • incur large accounting write-offs.
Such actions by us could harm our results from operations and adversely affect the price of our common stock.
We may be unsuccessful in our future acquisition endeavors, if any, which may have an adverse effect on our business. Our compliance with antitrust, competition and other regulations may limit our operations and future acquisitions.
Our future growth rate depends in part on our selective acquisition of additional businesses. A significant portion of our growth has been attributable to acquisitions, including, among others, our acquisitions of HOB Entertainment, Inc. (“HOB”) and an equity interest in Academy Music Holdings Limited Group (“AMG”). We may be unable to identify other suitable targets for further acquisition or make further acquisitions at favorable prices. If we identify a suitable acquisition candidate, our ability to successfully implement the acquisition would depend on a variety of factors, including our ability to obtain financing on acceptable terms and requisite government approvals. Acquisitions involve risks, including those associated with:
• integrating the operations, financial reporting, technologies and personnel of acquired companies;
