01—Abstract
Summary
Summary of the 10-K filed March 5, 2009. Cited figures are marked; the original filing is the authoritative source.
Live Nation, Inc. reported a net loss of $231.8 milliona for 2008 on revenue of $4.17 billion, up from $3.76 billion in 2007.
The loss was driven by a $269.9 millionb goodwill impairment recorded in the fourth quarter after a significant decline in market capitalization, including $189.2 million for North American Music and $80.7 million for Artist Nation. Loss from continuing operations was $320.2 million, partly offset by $88.4 million of income from discontinued operations, which included gains on the sales of the motor sports business and the North American theatrical business. Operating loss was $284.2 million, compared with operating income of $16.8 million in 2007.
Operating cash flow was negative at $52.8 millionc, and total debt, including redeemable preferred stock, was $925.7 million at year end. The company has agreed to a merger with Ticketmaster Entertainment, Inc. under an agreement dated February 10, 2009. Under the merger, Ticketmaster stockholders would own approximately 50.01% of the combined company.
The merger requires approval from both companies' stockholders, consent from Ticketmaster's lenders, and regulatory review. The filing also notes a $15 milliond termination fee payable to Ticketmaster in certain circumstances. Liquidity is a key watch item.
The senior secured credit facility had $122.0 million drawn on the revolver at year end, with $120.7 million available after letters of credit, and the company stated it was in compliance with all debt covenants. The 2.875% convertible senior notes ($220 million due 2027) and $40 million of redeemable preferred stock carry obligations that could require significant cash. The company also disclosed roughly $1.1 billion in non-cancelable operating lease obligations and two pending securities-related class actions over concert ticket pricing.
02—Key points
Key Highlights
- Revenue rose to $4,166.8 million in 2008 from $3,755.5 million in 2007, an increase of 11%, driven by North American Music, International Music and Artist Nation.
- Net loss of $231.8 million in 2008, compared with a net loss of $11.9 million in 2007, reflecting a $269.9 million goodwill impairment and an operating loss of $284.2 million.
- Goodwill impairment charges of $189.2 million for North American Music and $80.7 million for Artist Nation were recorded in Q4 2008 after a significant decline in market capitalization.
- Income from discontinued operations of $88.4 million, mainly from the sales of the motor sports business (pre-tax gain of $145.0 million) and the North American theatrical business.
- Pending merger with Ticketmaster Entertainment, Inc. would give Ticketmaster stockholders approximately 50.01% of the combined company, subject to stockholder, lender and regulatory approvals.
- Total debt including redeemable preferred stock was $925.7 million at December 31, 2008, with $120.7 million of revolver capacity available and the company in compliance with all covenants.
- Operating cash flow was negative at $52.8 million in 2008, compared with positive $49.8 million in 2007, mainly due to advances under artist rights agreements.
03—Questions
Frequently Asked Questions
Why did Live Nation report a large net loss in 2008?
The net loss of $231.8 million was primarily due to goodwill impairment charges totaling $269.9 million recorded in the fourth quarter of 2008, after a significant decline in the company's market capitalization. The company also recorded an operating loss of $284.2 million and a tax benefit of $15.9 million. Income from discontinued operations of $88.4 million partly offset these losses.
What happens to Live Nation shareholders under the Ticketmaster merger?
Under the merger agreement dated February 10, 2009, Ticketmaster stockholders would own approximately 50.01% of the combined company, and Ticketmaster's common stock would convert at an exchange ratio of 1.384 Live Nation shares, subject to adjustment. The filing states that the board and management of the combined company would change, with seven new Ticketmaster board members and a new Executive Chairman.
What are the company's main debt obligations and near-term liquidity sources?
At December 31, 2008, the company had term loans of $418.1 million and $122.0 million drawn on its revolver, plus $220 million of 2.875% convertible senior notes due 2027 and $40 million of redeemable preferred stock. Of total debt, approximately $48.6 million was due in 2009. The company had $120.7 million available under the revolver after letters of credit, and cash and cash equivalents of $199.7 million.
What drove revenue growth in 2008?
Revenue increased $411.4 million, or 11%, to $4,166.8 million. North American Music revenue rose $259.5 million, International Music rose $103.9 million, and Artist Nation rose $90.7 million, partly offset by a $54.1 million decline in other operations. The filing attributes the increases to more events, higher ticket prices and acquisitions, including the acquisition of the remaining interest in House of Blues Concerts Canada.
Are there material legal risks disclosed?
Yes. The company is a defendant in twenty-two putative class actions in U.S. District Courts alleging anti-competitive practices in concert promotion that caused artificially high ticket prices. The cases were consolidated in the U.S. District Court for the Central District of California, where a class was certified in October 2007 for several regional markets. The company has filed for reconsideration and states it intends to vigorously defend all claims.
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