01—Abstract
Summary
Summary of the 10-K filed March 1, 2007. Cited figures are marked; the original filing is the authoritative source.
Live Nation, Inc. (LYV) reported 2006 revenue of $3.69 billiona, up from $2.94 billion in 2005, driven mainly by its Events segment ($2.93 billion in revenue) and acquisitions including House of Blues (acquired for $354 million in cash, about $360 million including fees) and Concert Productions International.
The company was still in its first year as a standalone public company after its December 2005 spin-off from Clear Channel. Net loss narrowed to $31.4 millionb in 2006 from $130.6 million in 2005, and operating income improved to $30.3 million from a loss of $13.2 million. Results were affected by a $51.6 million impairment charge on several amphitheaters and a theater development project, and by a $29.5 million valuation allowance on deferred tax assets, with the effective tax rate at 645%.
Leverage remains significant. Total debt plus redeemable preferred stock was $679.1 millionc at December 31, 2006, with a weighted average cost of debt of 8.18%. Available borrowing capacity under the senior secured credit facility was about $835.0 million, of which $193.0 million was available after letters of credit.
Cash and cash equivalents fell to $313.9 milliond from $403.7 million, and cash from operations was $16.7 million. The company also disclosed 22 putative class actions over concert ticket pricing, consolidated in the Central District of California, with trial set for December 11, 2007. Management describes a strategy to divest non-core assets and focus on live music, expanding its venue and international promoter presence.
Recent events in January 2007 included the acquisition of 51% of Jackie Lombard Productions, the addition of the Dodge Theater in Phoenix, and the sale of Donington Park. The company's internal controls were assessed as effective at December 31, 2006, excluding the recently acquired businesses, which represented 27% of total assets and 7% of revenues.
02—Key points
Key Highlights
- Revenue rose to $3.69 billion in 2006 from $2.94 billion in 2005, an increase of $754.7 million, or 26%, with the Events segment contributing $2.93 billion (79% of total revenue).
- Net loss narrowed to $31.4 million in 2006 from $130.6 million in 2005, while operating income swung to $30.3 million from a $13.2 million operating loss.
- A $51.6 million impairment charge on several amphitheaters and a theater development project weighed on Venues and Sponsorship results, which posted operating income of $47.3 million versus $84.5 million in 2005.
- Total debt and redeemable preferred stock were $679.1 million at December 31, 2006, with a weighted average cost of debt of 8.18%; cash and cash equivalents were $313.9 million.
- Major 2006 acquisitions included House of Blues for $354 million in cash, Concert Productions International, Trunk, Musictoday and Gamerco, S.A.
- Twenty-two putative class actions alleging artificially high concert ticket prices were consolidated in the Central District of California, with trial set for December 11, 2007.
- Cash provided by operating activities was $16.7 million in 2006, compared with cash used of $3.9 million in 2005.
03—Questions
Frequently Asked Questions
How did Live Nation perform financially in 2006?
Revenue increased $754.7 million, or 26%, to $3.69 billion. The company reported a net loss of $31.4 million, an improvement from a net loss of $130.6 million in 2005. Operating income was $30.3 million, compared with an operating loss of $13.2 million in 2005.
What drove the increase in revenue?
Events revenue rose $666.5 million, primarily due to more global touring events, including tours by the Rolling Stones, U2, Madonna, Barbra Streisand and The Who, and to acquisitions made during the year. Venues and Sponsorship revenue rose $99.9 million and Digital Distribution revenue rose $26.4 million.
How much debt does Live Nation carry and what are the key terms?
Total debt and redeemable preferred stock was $679.1 million at December 31, 2006. The senior secured credit facility includes a $546.8 million term loan outstanding and $48.0 million drawn on a $285.0 million revolver. The company also has $40 million of 13% redeemable preferred stock, mandatorily redeemable in December 2011, and it reported compliance with all debt covenants.
What risks does the filing highlight regarding the company's separation from Clear Channel?
The company has a short operating history as a standalone public company and historical financials may not reflect its results as an independent entity. Standalone costs may rise, and the IRS could challenge the tax-free treatment of the December 2005 spin-off, which could create significant tax liabilities for Clear Channel and for Live Nation under the tax matters agreement.
What legal proceedings are pending?
The company is a defendant in twenty-two putative class actions in various U.S. District Courts, consolidated in the Central District of California. The plaintiffs allege anti-competitive practices in concert promotion caused artificially high ticket prices. The court set a class certification hearing for April 23, 2007, and trial for December 11, 2007.
04—Continue