01—Abstract
Summary
Summary of the 10-K filed February 29, 2008. Cited figures are marked; the original filing is the authoritative source.
Live Nation, Inc. reported a net loss of $11.9 milliona for 2007, an improvement from a net loss of $31.4 million in 2006, on revenue of $4.18 billion, up from $3.71 billion.
Operating income rose to $82.1 millionb from $33.1 million, driven by a $51.2 million gain on sale of operating assets, the sale of non-core venues and theatrical assets, and a stronger International Music segment. Revenue growth was largely driven by acquisitions, including House of Blues (HOB), CPI and Academy Music Group, plus $116.7 million of favorable foreign exchange effects. The company is the world's largest live music company, operating more than 155 venues and promoting approximately 28,000 events in 18 countries in 2007.
Leverage remains a central investor concern. Total debt and redeemable preferred stock stood at approximately $862.6 millionc at December 31, 2007, and the company had cash and cash equivalents of $339.0 million. The company issued $220 million of 2.875% convertible senior notes due 2027 in July 2007.
Management stated it was in compliance with all debt covenants at year end. The company also disclosed a large pending ticketing transition, with a long-term agreement with CTS Eventim to launch its own ticketing business for 2009 events, and a 2008 sale of the majority of its North American theatrical business for a gross price of $90.4 milliond. The filing also highlights litigation exposure: the company is a defendant in twenty-two putative class actions alleging anti-competitive practices in concert promotion, and a class was certified on October 22, 2007 in several regional markets.
The company states it intends to vigorously defend all claims. Net losses in 2005 through 2007 and a effective tax rate of 138% in 2007 reflect the cost of operating as a separate company after the December 2005 spin-off from Clear Channel.
02—Key points
Key Highlights
- Revenue rose 13% to $4.18 billion in 2007 from $3.71 billion in 2006, driven by North American Music (up $325.8 million) and International Music (up $211.3 million), including acquisitions and $116.7 million of favorable foreign exchange effects.
- Net loss narrowed to $11.9 million in 2007 from $31.4 million in 2006; operating income increased to $82.1 million from $33.1 million.
- Operating income was supported by a $51.2 million gain on sale of operating assets in 2007, including the Oriental Theater in Chicago, Broadway in Chicago, and London venues.
- Total debt and redeemable preferred stock was approximately $862.6 million at December 31, 2007, with a weighted average cost of debt of 6.77%; cash and cash equivalents were $339.0 million.
- Issued $220 million of 2.875% convertible senior notes due 2027 in July 2007, and entered into a long-term agreement with CTS Eventim to launch in-house ticketing for 2009 events.
- The company faces twenty-two putative class actions alleging anti-competitive concert promotion practices, with class certification granted in October 2007 in several regional markets.
- Depreciation and amortization was $120.8 million in 2007, with 2006 including a $51.6 million impairment charge primarily related to amphitheaters and one theater project.
03—Questions
Frequently Asked Questions
Why did Live Nation's net loss narrow in 2007?
The net loss narrowed to $11.9 million from $31.4 million in 2006. Operating income rose to $82.1 million from $33.1 million, helped by a $51.2 million gain on sale of operating assets, the acquisition of House of Blues, and improved International Music results. Depreciation and amortization fell to $120.8 million from $128.2 million, reflecting 2006 impairments.
How much debt does Live Nation carry and what are the key maturities?
Total indebtedness for borrowed money, including redeemable preferred stock, was approximately $862.6 million at December 31, 2007. Approximately $36.3 million is due in 2008, $22.2 million in 2009 and 2010, $125.5 million in 2011 and 2012, and $678.6 million thereafter. Its senior secured credit facility had $184.3 million of available revolving borrowing capacity.
What are the main litigation risks disclosed in the filing?
The company is a defendant in twenty-two putative class actions alleging anti-competitive practices in concert promotion that caused artificially high ticket prices. On October 22, 2007, the court granted class certification in the Chicago, New England, New York/New Jersey, Colorado and Southern California regional markets. The company filed for reconsideration in February 2008 and says it intends to vigorously defend all claims.
What is the company's strategy for growth?
The company's strategy is to connect the artist to the fan by improving profitability of its core live music business, extending relationships with artists and sponsors, developing ticketing and online services, expanding its global live music platform, and divesting non-core assets. It also expanded its artist services through acquisitions in 2007, including Anthill and Signatures.
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