Summary Results
$ in millions (except per share amounts)
Q1 2008 Q1 2007
Revenue $636.5 $520.3
Adjusted Operating Income (Loss) $(2.1) $(2.8)
Operating Income (Loss) $(38.5) $(36.9)
Free Cash Flow $(24.0) $(46.6)
Net Income (Loss) $(35.4) $(45.0)
Basic and Diluted EPS $(0.47) $(0.69)
“The first quarter represented a solid start to what we believe will be a very healthy year for concerts globally,” said Michael Rapino, President and Chief Executive Officer of Live Nation. “Our ticket sales to date remain strong despite the slowdown in the economy. Our priorities for 2008 continue to be focused on improving the profitability of our core concert distribution platform, building our ticketing division for our 2009 launch and continuing to divest non-core assets to reduce debt.”
“We are pleased with our financial results which are in line with our plan in what is seasonally a slow quarter for us,” said Kathy Willard, Chief Financial Officer of Live Nation. “Due to earlier timing of ticket sales and continued control over maintenance-related capital expenditures, our cash balances and free cash flow have improved during the quarter, as well.”
Highlights:
* Build-out of our ticketing initiative is in process and on schedule
through our long-term agreement with CTS Eventim, through which we will
exclusively license the Eventim platform in North America, and Eventim
will provide back-office ticketing services in the United Kingdom and
ticketing services across Europe.
* Entered into strategic marketing alliance with Citi(R) that capitalizes
on the company's fully integrated music platform, including concerts,
online ticketing and access to Live Nation Artists, to deliver a
uniquely comprehensive live music experience to Citi(R) customers in
the United States.
* Acquired the operating company that manages and holds the 20-year lease
for the Heineken Music Hall in Amsterdam. We believe that this
5,500-capacity venue is one of the most attended venues in the world.
* Provided services through our Global Artists segment to 797 artists
during the quarter. In addition, we have reached agreements to acquire
long-term rights for Madonna, U2 and Jay-Z.
* Currently have 528 corporate sponsors on a local, national and
international basis as of the first quarter of 2008.
* Agreed to acquire a 65% interest in Mirage Productions, a leading
promoter in Dubai. This acquisition is consistent with our strategy to
expand into global markets in which we don't currently have a
significant presence.
* Recorded 1.45 million unique visitors on LiveNation.com for Jonas
Brothers' information and tickets in one week, a new record for a
single artist on the website.
Below are what we believe to be our key metrics related to our music businesses:
METRICS
(Unaudited)
Key Drivers 2007 Actual Variance
Full Year Q1 2008 Q1 2007 (Qtr.)
Rights Acquisitions
Total Direct Operating Expense
(in millions) $3,017.2 $390.7 $280.6 39.2%
Total Direct Operating Expense
as % of Total Revenue 81.6% 78.3% 74.7%
Number of Live Rights (Events)
(est.) 16,747 4,431 3,253 36.2%
Number of Ancillary Live
Rights (est.) 1,865 797 n/a
Distribution Platform
Total Attendance (est.) 46,438,000 6,327,000 6,109,000 3.6%
Number of Sponsors (est.) 1,201 528 640 (17.5%)
Sponsorship Revenue
Recognized (in millions) $215.0 $18.7 $18.6 0.4%
Total Revenue per Attendee
(Fan) $79.59 $78.85 $61.51 28.2%
FINANCIAL HIGHLIGHTS
Q1 2008 Q1 2007 Growth
$ in millions
Revenue
North American Music $300.1 $248.3 20.9%
International Music 128.9 104.6 23.2%
Global Artists 69.9 22.9 **
Global Digital 5.7 1.3 **
Other and Eliminations 131.9 143.2 (7.9%)
$636.5 $520.3 22.3%
Margins
Adjusted Operating Income (Loss) Q1 2008 Q1 2007
North American Music $(16.9) $(19.0) 11.1% (5.6%) (7.7%)
International Music 1.0 0.6 66.7% 0.8% 0.6%
Global Artists (9.0) (4.8) (87.5%) (12.9%) (21.0%)
Global Digital (3.4) (1.8) (88.9%) ** **
Other and Eliminations 35.5 30.8 15.3% 26.9% 21.5%
Corporate (9.3) (8.6) (8.1%)
$(2.1) $(2.8) 25.0% (0.3%) (0.5%)
Operating Income (Loss)
North American Music $(32.6) $(33.5) 2.7% (10.9%) (13.5%)
International Music (7.0) (4.0) (75.0%) (5.4%) (3.8%)
Global Artists (17.7) (8.8) ** (25.3%) (38.4%)
Global Digital (3.9) (2.5) (56.0%) ** **
Other and Eliminations 35.9 22.9 56.8% 27.2% 16.0%
Corporate (13.2) (11.0) (20.0%)
$(38.5) $(36.9) (4.3%) (6.0%) (7.1%)
** percentages are not meaningful
The highlights of our financial information for the first quarter of 2008 as compared to the first quarter of 2007 are as follows:
Revenue change - Total increase of $116.2 million, primarily driven by:
* $35.2 million - Acquisition of HOB Canada in North American Music
* $10.8 million - Foreign exchange movements in International Music
* $16.0 million - Acquisitions of AMG and Heineken Music Hall in
International Music
* $24.3 million - Acquisitions of Signatures and Anthill in Global
Artists
* $15.5 million - Increased ticket revenues due to strong arena acts and
improved results at promoted mid-sized music venues as a result of
higher attendance, increased show count and higher average ticket
prices for North American Music. In total, North American Music
promotions increased by approximately 340 events in the quarter to over
2,100 events, although total attendance for these events decreased
slightly.
Adjusted Operating Income (Loss) change – Total improvement of $0.7 million, primarily driven by:
* $1.6 million - Acquisition of HOB Canada in North American Music
* $3.9 million - Acquisitions of AMG and Heineken Music Hall in
International Music
* ($3.2) million - Investment in Global Artists infrastructure
* ($3.9) million - Investment in infrastructure for ticketing and digital
operations in Global Digital
Operating Income (Loss) change – Total decline of $1.6 million, primarily driven by:
* $0.7 million - Overall improvement in Adjusted Operating Income (Loss)
noted above
* ($1.1) million - Increase in non-cash compensation expense for
additional equity grants since March 2007
* $6.0 million - Increase in gain on sale of operating assets due to gain
recorded on the sale of a motor sports related joint venture as
compared to a net loss recorded in 2007 on the sale of two non-core
assets
* ($7.2) million - Increase in depreciation and amortization expense due
to amortization of intangible assets related to the AMG and CPI
acquisitions
Other information
* We completed the divestiture of substantially all of our North American
theatrical business for gross sales proceeds of $90.4 million. The
results for this business are now reported as discontinued operations
for all periods presented.
* Maintenance capital expenditures for the quarter were only
$6.3 million. We also incurred $16.9 million of capital expenditures
for revenue generating projects, including the renovation of The Point
in Ireland and the AMG venue expansion in Sheffield.
* As of March 31, 2008, our cash and cash equivalents were $433.9 million
and our total long-term debt was $764.2 million with no balance
outstanding on our revolving credit facility.
About Live Nation:
Live Nation is the future of the music business. With the most live concerts, music venues and festivals in the world and the most comprehensive concert search engine on the web, Live Nation is revolutionizing the music industry: onstage and online. Headquartered in Los Angeles, California, Live Nation is listed on the New York Stock Exchange, trading under the symbol “LYV”.
Conference Call:
The company will host a teleconference today, May 8th, 2008 at 5:00 p.m. Eastern Time, which can be accessed by dialing 888-603-6873 (U.S.) or 973-321-1019 (Int’l) and referencing passcode 44729185. To access the call via webcast, please visit the Investor Relations section of the company’s website at http://www.livenation.com/investors. Additional statistical and financial information to be provided on the call, if any, will be posted supplementally under that same link.
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
Three Months Ended
March 31,
2008 2007
(in thousands except share and per share data)
Revenue $636,451 $520,312
Operating expenses:
Direct operating expenses 468,682 373,289
Selling, general and administrative expenses 161,616 142,467
Depreciation and amortization 34,377 27,062
Loss (gain) on sale of operating assets (1,375) 4,575
Corporate expenses 11,641 9,796
Operating loss (38,490) (36,877)
Interest expense 15,927 14,928
Interest income (1,575) (2,637)
Equity in losses (earnings) of
nonconsolidated affiliates 289 (343)
Minority interest income (2,242) (2,995)
Other income - net (851) (47)
Loss from continuing operations before
income taxes (50,038) (45,783)
Income tax expense:
Current 3,308 2,197
Deferred 3,021 3,704
Loss from continuing operations (56,367) (51,684)
Income from discontinued operations, net
of tax 20,965 6,635
Net loss (35,402) (45,049)
Other comprehensive income (loss), net of tax:
Unrealized holding loss on cash flow
derivatives (1,636) (436)
Foreign currency translation adjustments 12,072 (67)
Comprehensive loss $(24,966) $(45,552)
Basic and diluted income (loss) per common share:
Loss from continuing operations $(.75) $(.79)
Income from discontinued operations .28 .10
Net loss $(.47) $(.69)
Basic and diluted weighted average common
shares outstanding 74,984,934 65,499,719
CONSOLIDATED BALANCE SHEETS
March 31, December 31,
2008 2007
(unaudited) (audited)
(in thousands)
ASSETS
CURRENT ASSETS
Cash and cash equivalents $433,865 $338,991
Accounts receivable, less allowance of
$16,697 as of March 31, 2008 and $18,928
as of December 31, 2007 284,703 264,316
Prepaid expenses 289,375 186,379
Other current assets 49,645 44,722
Total Current Assets 1,057,588 834,408
PROPERTY, PLANT AND EQUIPMENT
Land, buildings and improvements 956,194 1,018,079
Furniture and other equipment 237,736 236,320
Construction in progress 66,975 51,725
1,260,905 1,306,124
Less accumulated depreciation 389,279 391,079
871,626 915,045
INTANGIBLE ASSETS
Intangible assets - net 399,645 382,999
Goodwill 473,944 471,542
OTHER LONG-TERM ASSETS
Notes receivable, less allowance of $745 as
of March 31, 2008 and December 31, 2007 1,685 1,703
Investments in nonconsolidated affiliates 24,508 23,443
Other long-term assets 127,973 122,963
Total Assets $2,956,969 $2,752,103
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $81,557 $79,273
Accrued expenses 460,487 511,636
Deferred revenue 560,432 259,868
Current portion of long-term debt 36,406 36,345
Other current liabilities 27,767 18,348
Total Current Liabilities 1,166,649 905,470
Long-term debt 727,775 786,261
Other long-term liabilities 109,801 91,465
Minority interest liability 66,918 61,841
Series A and Series B redeemable preferred stock 40,000 40,000
Commitments and contingent liabilities
SHAREHOLDERS' EQUITY
Common stock 749 749
Additional paid-in capital 944,574 940,848
Retained deficit (166,343) (130,941)
Accumulated other comprehensive income 66,846 56,410
Total Shareholders' Equity 845,826 867,066
Total Liabilities and Shareholders' Equity $2,956,969 $2,752,103
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
Three Months Ended
March 31,
2008 2007
(in thousands)
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $(35,402) $(45,049)
Reconciling items:
Depreciation 17,508 19,920
Amortization of intangibles 17,036 7,766
Deferred income tax expense 3,021 3,704
Amortization of debt issuance costs 853 301
Non-cash compensation expense 3,435 2,385
Loss (gain) on sale of operating assets (20,340) 4,462
Gain on sale of other investments - (62)
Equity in losses (earnings) of nonconsolidated
affiliates 289 (343)
Minority interest income (2,226) (3,045)
Changes in operating assets and liabilities,
net of effects of acquisitions and dispositions:
Increase in accounts receivable (12,913) (10,341)
Increase in prepaid expenses (103,087) (197,804)
Increase in other assets (30,703) (1,282)
Decrease in accounts payable, accrued
expenses and other liabilities (18,472) (406)
Increase in deferred revenue 335,508 308,096
Decrease in other - net (43) -
Net cash provided by operating activities 154,464 88,302
CASH FLOWS FROM INVESTING ACTIVITIES
Collection of notes receivable 19 1,266
Advances to notes receivable (552) (12,046)
Distributions from nonconsolidated affiliates 2,445 2,684
Investments made to nonconsolidated affiliates (250) (22,332)
Proceeds from disposal of other investments - 3,615
Purchases of property, plant and equipment (23,120) (13,679)
Proceeds from disposal of operating assets,
net of cash divested 22,895 15,516
Cash paid for acquisitions, net of cash acquired (6,754) (4,142)
Purchases of intangible assets (1,248) -
Decrease (increase) in other - net 31 (173)
Net cash used in investing activities (6,534) (29,291)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from long-term debt, net of debt
issuance costs 18,329 77,000
Payments on long-term debt (77,014) (51,698)
Distributions to minority interest partners (195) (2,844)
Proceeds from exercise of stock options - 424
Net cash provided by (used in) financing
activities (58,880) 22,882
Effect of exchange rate changes on cash 5,824 (1,007)
Net increase in cash and cash equivalents 94,874 80,886
Cash and cash equivalents at beginning of period 338,991 313,880
Cash and cash equivalents at end of period $433,865 $394,766
Forward Looking Statements, Non-GAAP Financial Measures and Reconciliations:
Certain statements in this press release constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements include, but are not limited to, statements regarding the potential health and growth of the live music industry in 2008; Live Nation’s competitive position within the industry and its potential to benefit from that anticipated growth and from various industry trends; the anticipated lack of impact to the company of the current economic slowdown; the company’s anticipated achievement of its operational objectives for the year, including the expansion of its distribution platform; the company’s efforts to build out its ticketing and e-commerce businesses and the anticipated benefits of its ticketing and online strategies; the anticipated strength of the company’s 2008 summer concert season; and the anticipated economics associated with the company’s artist rights arrangements. Live Nation wishes 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 the company’s plans, the possibility that artists may unexpectedly cancel or reschedule all or part of currently scheduled tours, the risk that the company’s markets do not evolve as anticipated, the potential impact of any general economic slowdown, competition for corporate sponsors and in the industry generally and operational challenges associated with building out the company’s ticketing and digital media operations.
Live Nation refers you to the documents it files from time to time with the U.S. Securities and Exchange Commission, specifically the section titled “Item 1A. Risk Factors” of the company’s most recent Annual Report filed on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K, which contain and identify other important factors that could cause actual results to differ materially from those contained in the company’s projections or forward-looking statements. You are cautioned not to place undue reliance on these forward-looking statements which speak only as of the date on which they are made. All subsequent written and oral forward-looking statements by or concerning Live Nation are expressly qualified in their entirety by the cautionary statements above. Live Nation does not undertake any obligation to publicly update or revise any forward-looking statements because of new information, future events or otherwise.
This press release contains certain non-GAAP financial measures as defined by SEC Regulation G. A reconciliation of each such measure to its most directly comparable GAAP financial measure, together with an explanation of why management believes that these non-GAAP financial measures provide useful information to investors, is provided below.
Adjusted Operating Income (Loss) is a non-GAAP financial measure that the company defines as operating income (loss) before depreciation and amortization, loss (gain) on sale of operating assets and non-cash compensation expense. The company uses Adjusted Operating Income (Loss) to evaluate the performance of its operating segments. The company believes that information about Adjusted Operating Income (Loss) assists investors by allowing them to evaluate changes in the operating results of the company’s 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 U.S. generally accepted accounting principles. 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 the company’s 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 U.S. 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.
Free Cash Flow is a non-GAAP financial measure that the company defines as Adjusted Operating Income (Loss) less maintenance capital expenditures, less net interest expense, less cash taxes, less distributions to minority interest partners plus distributions from investments in nonconsolidated affiliates net of contributions to investments in nonconsolidated affiliates. The company uses free cash flow, among other measures, to evaluate the ability of its operations to generate cash that is available for purposes other than maintenance capital expenditures. The company believes that information about free cash flow provides investors with an important perspective on the cash available to service debt and make acquisitions. Free cash flow is not calculated or presented in accordance with U.S. generally accepted accounting principles. A limitation of the use of free cash flow as a performance measure is that it does not necessarily represent funds available for operations and it is not necessarily a measure of our ability to fund our cash needs. Accordingly, free cash flow should be considered in addition to, and not as a substitute for, operating income (loss) and other measures of financial performance reported in accordance with U.S. GAAP. Furthermore, this measure may vary among other companies; thus, free cash flow as presented above may not be comparable to similarly titled measures of other companies.
Reconciliation of Non-GAAP Measures to Their Most Directly Comparable GAAP
Measures (Unaudited)
Adjusted Operating Income (Loss) to Operating Income (Loss) – First Quarter
For the three months ended March 31, 2008
Loss
(gain)
Adjusted Non- on sale
operating cash of Depreciation Operating
income compensation operating and income
(loss) expense assets amortization (loss)
($ in millions)
North American
Music $(16.9) $1.5 $- $14.2 $(32.6)
International
Music 1.0 0.6 - 7.4 (7.0)
Global Artists (9.0) (0.2) - 8.9 (17.7)
Global Digital (3.4) 0.1 - 0.4 (3.9)
Other and
Eliminations 35.5 (0.8) (1.9) 2.3 35.9
Corporate (9.3) 2.3 0.5 1.1 (13.2)
Total Live Nation $(2.1) $3.5 $(1.4) $34.3 $(38.5)
For the three months ended March 31, 2007
Loss
(gain)
Adjusted Non- on sale
operating cash of Depreciation Operating
income compensation operating and income
(loss) expense assets amortization (loss)
($ in millions)
North American
Music $(19.0) $0.8 $- $13.7 $(33.5)
International
Music 0.6 0.1 (0.1) 4.6 (4.0)
Global Artists (4.8) 0.3 - 3.7 (8.8)
Global Digital (1.8) 0.1 - 0.6 (2.5)
Other and
Eliminations 30.8 0.0 4.7 3.2 22.9
Corporate (8.6) 1.1 - 1.3 (11.0)
Total Live Nation $(2.8) $2.4 $4.6 $27.1 $(36.9)
Reconciliation of Adjusted Operating Income (Loss) to Free Cash Flow – First
Quarter
($ in millions) March 31, 2008 March 31, 2007
Adjusted operating income ($2.1) ($2.8)
Less: Interest expense, net (14.3) (12.2)
Cash taxes (3.3) (2.2)
Maintenance capital expenditures (6.3) (6.9)
Distributions to minority interest
partners (0.2) (2.9)
Distributions from (contributions to) investments
in nonconsolidated affiliates 2.2 (19.6)
Free Cash Flow ($24.0) ($46.6)
First Call Analyst:
FCMN Contact:
SOURCE: Live Nation
CONTACT: Media, John Vlautin of Live Nation, +1-310-867-7000, or
Investors, Brad Edwards of Brainerd Communicators, Inc., +1-212-986-6667, for
Live Nation