Item 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

You should read the following discussion of our financial condition and results of operations together with the audited consolidated financial statements and notes to the financial statements included elsewhere in this Annual Report. This discussion contains forward-looking statements that involve risks and uncertainties. The forward-looking statements are not historical facts, but rather are based on current expectations, estimates, assumptions and projections about our industry, business and future financial results. Our actual results could differ materially from the results contemplated by these forward-looking statements due to a number of factors, including those discussed under Item 1A.—Risk Factors and other sections in this Annual Report.

Executive Overview

Live Nation had a very strong year in 2017, marked by growing global fan demand for live experiences. We continued to focus on elevating those experiences through our Concerts, Sponsorship & Advertising and Ticketing businesses to maximize benefits to the fans, to the many artists and teams with whom we work, and to our stockholders. We entered new markets

during the year and introduced new ticketing products that we believe will reap rewards for years to come. Despite a competitive technological landscape that evolved more rapidly than ever, we achieved record levels in our key financial and operational metrics. Our total revenue for the year was $10.3 billion, making this our twelfth consecutive year of revenue growth and giving us, once again, our highest revenue year ever. Our Concerts, Sponsorship & Advertising and Ticketing segments all reported double-digit revenue growth as a result of both record attendance at our concerts and record ticket sales in our ticketing business. Our focus on amplifying and growing our concert flywheel continues to deliver benefits; the unique power of the live concert experience enables fans around the world to connect with artists and each other and provides us the platform to do the same. Our overall revenue in 2017 increased by $2.0 billion on a reported and constant currency basis as compared to last year, a 23% increase without the impact of changes in foreign exchange rates. The increase was largely driven by growth in our Concerts segment with an increase in the number of events, fans, and the revenue we are generating onsite at the events. Ticketing increased as well, with strong growth in concert event sales both in North America and our international markets as well as the continued expansion of our resale business. Sponsorship & Advertising again delivered strong growth over 2016 due to a number of new strategic multi-year deals and market expansion in Europe. Our operating results declined this year, due to a $110.0 million legal accrual to resolve a dispute that had been ongoing for two years and we are pleased to have the matter resolved. As the leading global live event and ticketing company, we believe that we are well-positioned to provide the best service to artists, teams, fans and venues and therefore drive growth across all our businesses. We believe that by leveraging our leadership position in the entertainment industry to reach fans through the live concert experience, we will sell more tickets and uniquely engage more advertising partners. By advancing innovation in ticketing technology, we will continue to improve the fan experience by offering increased and more diversified secure choices in an expanded ticketing marketplace. This gives us a compelling opportunity to grow our fan base and our results.

Our Concerts segment was the largest contributor to our overall revenue growth, with an increase of $1.6 billion on a reported and constant currency basis as compared to last year, a 25% increase without the impact of changes in foreign exchange rates. This higher revenue was partially due to additional arena shows in the United States, stadium events internationally, and growth in our theater and club business worldwide. Some of the biggest tours in 2017 featured U2, Coldplay, Guns N’ Roses, Depeche Mode and Bruno Mars. Overall, Concert attendance grew by nearly 15 million to nearly 86 million fans, a record for the company, and an increase of 21% over 2016. We continued to expand our global festival portfolio in 2017, adding brands like BottleRock to our leading roster and growing total festival attendance by 14%. Nearly 16 million fans attended our amphitheater shows throughout the year, with Florida Georgia Line, Future, Luke Bryan, and Zac Brown all playing to sold out audiences over the summer. The growth of our amphitheater onsite business continued in 2017, particularly with our enhanced beer and wine programs, expansion of our specialty spirits points of sale, and introduction of unique branded food concepts. These programs helped grow our ancillary revenue per fan by 9% in 2017. As pointed out in the third quarter of 2017, another one of our ongoing priorities is to grow our ticket revenue by optimizing ticket pricing. We saw success in this area in the United States, improving the price on our best available seats in the amphitheaters and expanding our premium ticket offerings. In our international business, our promotions business in Germany continued its strong growth, doubling its number of fans to over 1.6 million. Our concert teams abroad also made progress on our ticket pricing initiative, broadening our platinum and VIP pricing programs in both the United Kingdom and mainland Europe. Our Concerts operating results for the year improved over 2016 largely due to the impact of these business improvements and strategic initiatives mentioned above. We will continue to look for expansion opportunities, both domestically and internationally, as well as ways to market our events more effectively, in order to continue to expand our fan base and geographic reach and to sell more tickets and onsite products.

Our Sponsorship & Advertising segment revenue for the year was up $67.5 million on a reported basis as compared to last year, or $66.4 million, an 18% increase, without the impact of changes in foreign exchange rates. Higher revenue resulted from new clients and increased international sponsorship resulting from the opening of the Royal Arena in Copenhagen, the expansion of our Germany business, and the acquisition of prominent festivals in Sweden and Australia. In 2017, we continued to build new venue products across our portfolio in the United States, as well as new festival products. We also saw growth through category expansion. These efforts resulted in growth in the number of strategic brand relationships and our revenue from those clients, both of which increased by double-digits over 2016. We continue to make progress on festival apps, expanding ad units, and geo-fencing products to drive our online business. Sponsorship & Advertising operating income for the year improved by 10% on a reported basis, which was driven by higher revenue, partially offset by continued investment in our sales team’s personnel and expertise. We believe that our extensive onsite and online reach, global venue distribution network, artist relationships, ticketing operations and live entertainment content are the keys to securing long-term sponsorship agreements with major brands, and we plan to expand these assets while extending further into new markets internationally.

Our Ticketing segment revenue for the year increased by $315.9 million on a reported basis as compared to last year, or $311.9 million, a 17% increase, without the impact of changes in foreign exchange rates. This increase was largely due to a 10% growth in fee-bearing ticket sales globally to over 205 million tickets in 2017, largely driven by increased sales for concert events. The rollout of our integrated ticketing platform continues to be a success story and that, along with improvements to both our fan-focused website and our mobile sales platform, drove conversion increases each quarter in 2017 as compared to

the prior year. We also notably launched our Verified Fan product in 2017, which ensures that more tickets get into the hands of bona fide fans, and we are very encouraged by the progress so far, selling nearly 3 million tickets during the year. On the mobile front, 33% of our total tickets were sold via mobile and tablet devices compared to 27% in 2016. Our total mobile ticket sales increased by 35% year-over-year. As mentioned previously, operating results for Ticketing were down this year due to a $110.0 million accrual to settle a legal dispute, although operationally, they delivered strong growth. We will continue to implement new features to drive further expansion of mobile ticket transactions and invest in initiatives aimed at improving the ticket search, purchase and transfer process. As a result, we expect to continue to attract more ticket buyers and enhance the overall fan and venue/artist client experience.

Segment Overview

Our reportable segments are Concerts, Sponsorship & Advertising and Ticketing. Prior to 2017, we reported an Artist Nation segment, which is now included in our Concerts segment. See—Part II—Financial Information—Item 8. Financial Statements and Supplementary Data—Note 12—Segment Data for further discussion of the segment change.

Concerts

Our Concerts segment principally involves the global promotion of live music events in our owned or operated venues and in rented third-party venues, the operation and management of music venues, the production of music festivals across the world, the creation of associated content and the provision of management and other services to artists. While our Concerts segment operates year-round, we experience higher revenue during the second and third quarters due to the seasonal nature of shows at our outdoor amphitheaters and festivals, which primarily occur from May through October. Revenue and related costs for events are generally deferred and recognized when the event occurs. All advertising costs incurred during the year for shows in future years are expensed at the end of the year.

Concerts direct operating expenses include artist fees, event production costs, show-related marketing and advertising expenses, along with other costs.

To judge the health of our Concerts segment, we primarily monitor the number of confirmed events and fan attendance in our network of owned or operated and third-party venues, talent fees, average paid attendance, market ticket pricing, advance ticket sales and number of major artist clients under management. In addition, at our owned or operated venues and festivals, we monitor ancillary revenue per fan and premium ticket sales. For business that is conducted in foreign markets, we also compare the operating results from our foreign operations to prior periods without the impact of changes in foreign exchange rates.

Sponsorship & Advertising

Our Sponsorship & Advertising segment employs a sales force that creates and maintains relationships with sponsors through a combination of strategic, international, national and local opportunities that allow businesses to reach customers through our concerts, venue, artist relationship and ticketing assets, including advertising on our websites. We drive increased advertising scale to further monetize our concerts platform through rich media offerings including advertising associated with live streaming and music-related content. We work with our corporate clients to help create marketing programs that drive their business goals and connect their brands directly with fans and artists. We also develop, book and produce custom events or programs for our clients’ specific brands which are typically experienced exclusively by the clients’ consumers. These custom events can involve live music events with talent and media, using both online and traditional outlets. We typically experience higher revenue in the second and third quarters, as a large portion of sponsorships are associated with shows at our outdoor amphitheaters and festivals, which primarily occur from May through October.

To judge the health of our Sponsorship & Advertising segment, we primarily review the revenue generated through sponsorship arrangements and online advertising revenue, and the percentage of expected revenue under contract. For business that is conducted in foreign markets, we also compare the operating results from our foreign operations to prior periods without the impact of changes in foreign exchange rates.

Ticketing

Our Ticketing segment is primarily an agency business that sells tickets for events on behalf of its clients and retains a portion of the service charges as our fee. Gross transaction value (“GTV”) represents the total amount of the transaction related to a ticket sale and includes the face value of the ticket as well as the service charge. Service charges are generally based on a percentage of the face value or a fixed fee. We sell tickets through websites, mobile apps, ticket outlets and telephone call centers. Our ticketing sales are impacted by fluctuations in the availability of events for sale to the public, which may vary depending upon scheduling by our clients. We also offer ticket resale services, sometimes referred to as secondary ticketing, principally through our integrated inventory platform, league/team platforms and other platforms internationally. Our Ticketing segment manages our online activities including enhancements to our ticketing websites and product offerings. Through our websites, we sell tickets to our own events as well as tickets for our clients and provide event information. Revenue related to ticketing service charges is recognized when the ticket is sold for our outside clients. For our own events, where our concert promoters control ticketing, revenue is deferred and recognized as the event occurs.

To judge the health of our Ticketing segment, we primarily review the GTV and the number of tickets sold through our primary and secondary ticketing operations, the number of clients renewed or added and the average royalty rate paid to clients who use our ticketing services. In addition, we review the number of visits to our websites, the purchase conversion rate, the overall number of customers in our database, the number and percentage of tickets sold via mobile and the number of app installs. For business that is conducted in foreign markets, we also compare the operating results from our foreign operations to prior periods without the impact of changes in foreign exchange rates.

Key Operating Metrics

	Year Ended December 31,
	2017			2016			2015
	(in thousands except estimated events)
Concerts (1)
Estimated events:
North America	19,933			17,554			16,846
International	9,643			8,708			8,665
Total estimated events	29,576			26,262			25,511
Estimated fans:
North America	54,868			48,611			43,622
International	31,038			22,330			19,704
Total estimated fans	85,906			70,941			63,326
Ticketing (2)
Number of fee-bearing tickets sold	205,704			187,094			175,334
Number of non-fee-bearing tickets sold	292,242			297,766			297,087
Total tickets sold	497,946			484,860			472,421

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(1)

Events generally represent a single performance by an artist. Fans generally represent the number of people who attend an event. Festivals are counted as one event in the quarter in which the festival begins, but the number of fans is based on the days the fans were present at the festival and thus can be reported across multiple quarters. Events and fan attendance metrics are estimated each quarter.

(2)

The number of fee-bearing tickets sold includes primary and secondary tickets that are sold using our Ticketmaster systems or that we issue through affiliates. This metric includes primary tickets sold during the year regardless of event timing, except for our own events where our concert promoters control ticketing and which are reported as the events occur. The non-fee-bearing tickets sold reported above includes primary tickets sold using our Ticketmaster systems, through season seat packages and our venue clients’ box offices, along with tickets sold on our ‘do it yourself’ platform.

Non-GAAP Measures

Reconciliation of Adjusted Operating Income (Loss)

AOI is a non-GAAP financial measure that we define as operating income (loss) before acquisition expenses (including transaction costs, changes in the fair value of accrued acquisition-related contingent consideration obligations, and acquisition-related severance and compensation), depreciation and amortization (including goodwill impairment), loss (gain) on disposal of operating assets and certain stock-based compensation expense. We use AOI to evaluate the performance of our operating segments. We believe that information about AOI 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 (loss), thus providing insights into both operations and the other factors that affect reported results. AOI is not calculated or presented in accordance with GAAP. A limitation of the use of AOI as a performance measure is that it does not reflect the periodic costs of certain amortizing assets used in generating revenue in our business. Accordingly, AOI 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, AOI as presented herein may not be comparable to similarly titled measures of other companies.

The following table sets forth the reconciliation of AOI to operating income (loss):

	Operating income (loss)				Stock- based compensation expense				Loss (gain) on disposal of operating assets				Depreciation and amortization				Acquisition expenses				AOI
									(in thousands)
2017
Concerts	$	(93,589	)		$	18,872			$	(1,056	)		$	226,315			$	34,461			$	185,003
Sponsorship & Advertising	251,486				1,375				—				27,669				—				280,530
Ticketing	90,905				4,117				49				200,777				2,011				297,859
Other and Eliminations	(17,338		)		—				—				(4,284		)		—				(21,622		)
Corporate	(140,067		)		18,391				38				5,057				(47		)		(116,628		)
Total	$	91,397			$	42,755			$	(969	)		$	455,534			$	36,425			$	625,142
2016
Concerts	$	(63,290	)		$	10,459			$	(61	)		$	194,715			$	7,315			$	149,138
Sponsorship & Advertising	228,105				1,295				—				18,206				—				247,606
Ticketing	174,491				3,699				68				185,925				1,095				365,278
Other and Eliminations	(14,675		)		234				—				372				207				(13,862		)
Corporate	(129,691		)		17,036				117				4,433				85				(108,020		)
Total	$	194,940			$	32,723			$	124			$	403,651			$	8,702			$	640,140
2015
Concerts	$	(133,488	)		$	11,946			$	645			$	201,775			$	13,867			$	94,745
Sponsorship & Advertising	218,353				1,574				—				9,932				—				229,859
Ticketing	158,229				2,860				26				184,129				1,219				346,463
Other and Eliminations	(113		)		—				—				(2,085		)		—				(2,198		)
Corporate	(111,609		)		16,981				174				3,490				151				(90,813		)
Total	$	131,372			$	33,361			$	845			$	397,241			$	15,237			$	578,056

AOI Margin

AOI margin is a non-GAAP financial measure that we calculate by dividing AOI by revenue. We use AOI margin to evaluate the performance of our operating segments. We believe that information about AOI margin 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 (loss), thus providing insights into both operations and the other factors that affect reported results. AOI margin is not calculated or presented in accordance with GAAP. A limitation of the use of AOI margin as a performance measure is that it does not reflect the periodic costs of certain amortizing assets used in generating revenue in our business. Accordingly, AOI margin should be considered in addition to, and not as a substitute for, operating income (loss) margin, net income (loss) margin, and other measures of financial performance reported in accordance with GAAP. Furthermore, this measure may vary among other companies; thus, AOI margin as presented herein may not be comparable to similarly titled measures of other companies.

Constant Currency

Constant currency is a non-GAAP financial measure. We calculate currency impacts as the difference between current period activity translated using the current period’s currency exchange rates and the comparable prior period’s currency exchange rates. We present constant currency information to provide a framework for assessing how our underlying businesses performed excluding the effect of foreign currency rate fluctuations.

Segment Operating Results

Concerts

Our Concerts segment operating results were, and discussions of significant variances are, as follows:

	Year Ended December 31,												% Change 2017 vs 2016		% Change 2016 vs 2015
	2017				2016				2015
	(in thousands)
Revenue	$	7,892,076			$	6,283,521			$	5,382,965			26%		17%
Direct operating expenses	6,641,071				5,202,097				4,450,517				28%		17%
Selling, general and administrative expenses	1,119,335				950,060				863,516				18%		10%
Depreciation and amortization	206,315				194,715				201,775				16%		(3)%
Goodwill impairment	20,000				—				—				*		*
Loss (gain) on disposal of operating assets	(1,056		)		(61		)		645				*		*
Operating loss	$	(93,589	)		$	(63,290	)		$	(133,488	)		(48)%		53%
Operating margin	(1.2		)%		(1.0		)%		(2.5		)%
AOI **	$	185,003			$	149,138			$	94,745			24%		57%
AOI margin	2.3		%		2.4		%		1.8		%

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*	Percentages are not meaningful.
**	AOI is defined and reconciled to operating income (loss) above.

2017 Compared to 2016

Revenue

Concerts revenue increased $1.6 billion during the year ended December 31, 2017 as compared to the prior year. Excluding the increase of $23.0 million related to currency impacts, revenue still increased $1.6 billion, or 25%, primarily due to more shows and higher average attendance in our arenas, stadiums and theaters and clubs globally and increased festival activity in Europe driven by the addition of new festivals. Concerts had incremental revenue of $210.2 million primarily from the acquisitions of concert and festival promotion businesses.

Operating results

The reduced operating results for Concerts for the year ended December 31, 2017 were primarily driven by a $20.0 million goodwill impairment related to our artist services (non-management) business, higher compensation costs associated with salary increases and headcount growth, including recent acquisitions, startup costs for new venues we are now operating and changes in the fair value of contingent consideration. The goodwill impairment was recorded in the fourth quarter of 2017 in connection with our annual impairment test discussed in “—Critical Accounting Policies—Goodwill.” These impacts were partially offset by strong operating results for our events noted above, increased ancillary revenue per fan at our amphitheaters and higher commissions in the management business.

2016 Compared to 2015

Revenue

Concerts revenue increased $900.6 million during the year ended December 31, 2016 as compared to the prior year. Excluding the decrease of $92.7 million related to currency impacts, revenue increased $993.3 million, or 18%, primarily due to more shows and higher average ticket prices in our worldwide stadium, arena and theater and club events and our North America amphitheaters, increased festival activity globally and higher VIP package sales. Additionally, ancillary onsite revenue for our North America amphitheaters increased due to higher attendance and enhanced concession offerings. Concerts had incremental revenue of $219.9 million from the acquisitions of various concert and festival promotion businesses.

Operating results

The improved operating results for Concerts for the year ended December 31, 2016 were primarily driven by strong operating results for our worldwide stadium events and North America amphitheaters and festivals partially offset by higher compensation costs associated with annual salary increases and incentive compensation as a result of the increased operating results, and loss of certain rent credits received in 2015.

Sponsorship & Advertising

Our Sponsorship & Advertising segment operating results were, and discussions of significant variances are, as follows:

	Year Ended December 31,												% Change 2017 vs 2016		% Change 2016 vs 2015
	2017				2016				2015
	(in thousands)
Revenue	$	445,148			$	377,618			$	333,726			18%		13%
Direct operating expenses	78,725				60,218				47,760				31%		26%
Selling, general and administrative expenses	87,268				71,089				57,681				23%		23%
Depreciation and amortization	27,669				18,206				9,932				52%		83%
Operating income	$	251,486			$	228,105			$	218,353			10%		4%
Operating margin	56.5		%		60.4		%		65.4		%
AOI **	$	280,530			$	247,606			$	229,859			13%		8%
AOI margin	63.0		%		65.6		%		68.9		%

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**	AOI is defined and reconciled to operating income (loss) above.

2017 Compared to 2016

Revenue

Sponsorship & Advertising revenue increased $67.5 million during the year ended December 31, 2017 as compared to the prior year. Excluding the increase of $1.1 million related to currency impacts, revenue increased $66.4 million, or 18%, primarily due to new sponsorship programs globally, higher online advertising in North America and incremental revenue of $22.1 million from the acquisitions of a sponsorship agency and festival promotion businesses.

Operating results

The increased operating income for the year ended December 31, 2017 was primarily driven by new sponsorship programs, net of higher fulfillment costs, increased online sponsorship activity and lower reserves for bad debt partially offset by increased compensation costs associated with higher headcount and incremental amortization of $5.6 million from the acquisitions noted above.

2016 Compared to 2015

Revenue

Sponsorship & Advertising revenue increased $43.9 million during the year ended December 31, 2016 as compared to the prior year. Excluding the decrease of $6.8 million related to currency impacts, revenue increased $50.7 million, or 15%, primarily due to new sponsorship programs, higher online advertising and festival activity in North America along with incremental revenue of $9.3 million from the acquisitions of various festival promotion businesses.

Operating results

The increased operating income for the year ended December 31, 2016 was primarily driven by higher North America sponsorship and festival operating results partially offset by incremental amortization of $9.5 million from the acquisitions noted above, higher reserves for bad debt, increased compensation costs and currency impacts.

Ticketing

Our Ticketing segment operating results were, and discussions of significant variances are, as follows:

	Year Ended December 31,												% Change 2017 vs 2016		% Change 2016 vs 2015
	2017				2016				2015
	(in thousands)
Revenue	$	2,143,800			$	1,827,930			$	1,639,564			17%		11%
Direct operating expenses	1,170,121				956,956				808,697				22%		18%
Selling, general and administrative expenses	681,948				510,490				488,483				34%		5%
Depreciation and amortization	200,777				185,925				184,129				8%		1%
Loss on disposal of operating assets	49				68				26				*		*
Operating income	$	90,905			$	174,491			$	158,229			(48)%		10%
Operating margin	4.2		%		9.5		%		9.7		%
AOI **	$	297,859			$	365,278			$	346,463			(18)%		5%
AOI margin	13.9		%		20.0		%		21.1		%

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*	Percentages are not meaningful.
**	AOI is defined and reconciled to operating income (loss) above.

2017 Compared to 2016

Revenue

Ticketing revenue increased $315.9 million during the year ended December 31, 2017 as compared to the prior year. Excluding the increase of $4.0 million related to currency impacts, revenue increased $311.9 million, or 17%, primarily due to increased global primary ticket volume and higher associated ticket fees, driven by concert events, along with higher North America resale volume driven by concert and theatrical events.

Operating results

Ticketing operating income decreased for the year ended December 31, 2017 primarily due to a $110.0 million accrual for a legal settlement entered into in January 2018 and increased compensation costs associated with higher headcount partially offset by improved operating results from higher primary and resale ticket sales. See —Item 8. Financial Statements and Supplementary Data—Note 6—Commitments and Contingent Liabilities for further discussion of the legal settlement.

2016 Compared to 2015

Revenue

Ticketing revenue increased $188.4 million during the year ended December 31, 2016 as compared to the prior year. Excluding the decrease of $23.6 million related to currency impacts, revenue increased $212.0 million, or 13%, primarily due to increased worldwide primary ticket volume and fees, higher North America resale ticket volume and incremental revenue of $10.4 million from the acquisitions of various ticketing businesses.

Operating results

Ticketing operating income increased for the year ended December 31, 2016 primarily due to increased operating results from higher primary and North America resale ticket sales, net of the impact of royalty fees and other costs, partially offset by increased compensation costs driven by higher headcount.

Consolidated Results of Operations

	Year Ended December 31,																				% Change 2017 vs 2016					% Change 2016 vs 2015
	2017												2016				2015
	As Reported				Currency Impacts				Constant Currency**				As Reported				As Reported				As Reported		Constant Currency			As Reported
	(in thousands)
Revenue	$	10,337,448			$	(28,096	)		$	10,309,352			$	8,354,934			$	7,245,731			24%		23%			15%
Operating expenses:
Direct operating expenses	7,748,791				(20,932		)		7,727,859				6,082,708				5,196,473				27%		27%			17%
Selling, general and administrative expenses	1,907,723				(723		)		1,907,000				1,548,450				1,411,855				23%		23%			10%
Depreciation and amortization	455,534				797				456,331				403,651				397,241				13%		13%			2%
Loss (gain) on disposal of operating assets	(969		)		17				(952		)		124				845				*		*			*
Corporate expenses	134,972				14				134,986				125,061				107,945				8%		8%			16%
Operating income	91,397				$	(7,269	)		$	84,128			194,940				131,372				(53)%		(57	)%		48%
Operating margin	0.9		%						0.8		%		2.3		%		1.8		%
Interest expense	106,722												106,506				102,881
Loss on extinguishment of debt	1,048												14,049				—
Interest income	(5,717		)										(2,573		)		(3,528		)
Equity in losses (earnings) of nonconsolidated affiliates	(1,161		)										17,802				(1,502		)
Other expense (income), net	(115		)										10,830				27,168
Income before income taxes	(9,380		)										48,326				6,353
Income tax expense (benefit)	(17,154		)										28,029				22,122
Net income (loss)	7,774												20,297				(15,769		)
Net income attributable to noncontrolling interests	13,789												17,355				16,739
Net income (loss) attributable to common stockholders of Live Nation	$	(6,015	)										$	2,942			$	(32,508	)

		Year Ended December 31,												% Change 2017 vs 2016			% Change 2016 vs 2015
		2017				2016				2015
		(in thousands)
Depreciation		$	149,634			$	139,288			$	134,148			7	%		4	%
Amortization of intangibles		202,566				178,130				173,959				14	%		2	%
Amortization of nonrecoupable ticketing contract advances ***		83,334				85,067				86,550				(2	)%		(2	)%
Goodwill impairment		20,000				—				—				*			*
Amortization of other assets		—				1,166				2,584				(100	)%		(55	)%
Depreciation and amortization		$	455,534			$	403,651			$	397,241

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*	Percentages are not meaningful.
**	See “—Non-GAAP Measures” above for definition of constant currency.
***	In accounting for the merger between Live Nation and Ticketmaster Entertainment LLC in January 2010, the nonrecoupable ticketing contract advances that existed at the date of the merger were written off in acquisition accounting in accordance with GAAP. Had we continued amortizing the net book value of these nonrecoupable ticketing contract advances, the amortization above would have been $1.5 million, $1.3 million and $1.7 million higher for the years ended December 31, 2017, 2016 and 2015, respectively.

Selling, general and administrative expenses

Selling, general and administrative expenses for the year ended December 31, 2017 include a $110.0 million legal settlement entered into in January 2018, which was accrued in the Company’s Ticketing segment. See—Item 8. Financial Statements and Supplementary Data—Note 6—Commitments and Contingent Liabilities for further discussion.

Corporate

Corporate expenses increased $17.1 million, or 16%, during the year ended December 31, 2016 as compared to the prior year primarily due to costs incurred during 2016 associated with the relocation of an office and higher compensation costs driven by higher headcount.

Loss on extinguishment of debt

We recorded a loss on extinguishment of debt of $14.0 million for the year ended December 31, 2016 in connection with the refinancing of the term loans under our senior secured credit facility and the redemption of our 7.0% senior notes in October 2016. These obligations were paid with proceeds from the amended senior secured credit facility and the issuance of 4.875% senior notes due 2024. There were no significant gains or losses on extinguishment of debt recorded in 2017 or 2015.

Equity in losses (earnings) of nonconsolidated affiliates

Equity in losses (earnings) of nonconsolidated affiliates for the year ended December 31, 2016 includes impairment charges of $16.5 million primarily related to investments in a digital content company and an online merchandise company both located in the United States. There were no significant impairments of nonconsolidated affiliates recorded in 2017 or 2015.

Other expense (income), net

Other expense (income), net was income of $0.1 million for the year ended December 31, 2017 and includes net foreign exchange rate gains of $3.1 million, and was expense of $10.8 million and $27.2 million for the years ended December 31, 2016 and 2015, respectively, and includes net foreign exchange rate losses of $8.8 million and $35.3 million, respectively. The net foreign exchange rate gains and losses result primarily from revaluation of certain foreign currency denominated net assets held internationally. The 2015 net loss was partially offset by remeasurement gains of $9.1 million recorded in connection with the consolidation of a festival promotion business, a ticketing company and an artist management business that were all previously accounted for as equity investments, due to the acquisition of additional interests in the companies.

Income taxes

For the year ended December 31, 2017, we had a net tax benefit of $17.2 million on loss before income taxes of $9.4 million compared to a net tax expense of $28.0 million on income before income taxes of $48.3 million for 2016. In 2017, the net income tax benefit consisted of a $57.1 million tax benefit related to United States federal income taxes offset by tax expense of $35.1 million related to foreign entities and $4.8 million related to state and local income taxes. The net decrease in

tax expense of $45.2 million is due primarily to the reduction in certain federal deferred tax liabilities as a result of the enactment of the Tax Cuts and Jobs Act (“TCJA”), partially offset by additional tax expense due to an increase in and the geographical mix of pre-tax foreign earnings.

On December 22, 2017, the TCJA was enacted, which amends the Internal Revenue Code to reduce tax rates and modify policies, credits, and deductions for individuals and businesses. For businesses, the TCJA reduces the corporate federal tax rate from a maximum of 35% to a flat 21% rate. The rate reduction took effect on January 1, 2018. We have concluded that the TCJA will cause our United States deferred tax assets and liabilities to be revalued. Deferred income taxes result from temporary differences between the tax basis of assets and liabilities and their reported amounts in the financial statements that will result in taxable or deductible amounts in future years. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in years in which those temporary differences are expected to be recovered or settled. As changes in tax laws or rates are enacted, deferred tax assets and liabilities are adjusted through income tax expense. The provisional amount recorded to revalue our United States net deferred tax liability balance was a $55.7 million income tax benefit in our consolidated statement of operations for the year ended December 31, 2017.

For the year ended December 31, 2016, we had a net tax expense of $28.0 million on income before income taxes of $48.3 million compared to a net tax expense of $22.1 million on income before income taxes of $6.4 million for 2015. In 2016, income tax expense consisted of $18.2 million related to foreign entities, $5.7 million related to United States federal income taxes and $4.1 million related to state and local income taxes. The net increase is due primarily to expense for valuation allowances established for certain foreign entities and a reduced benefit in 2016 for valuation allowance release in the United States related to acquired deferred tax liabilities.

Liquidity and Capital Resources

Our cash is centrally managed on a worldwide basis. Our primary short-term liquidity needs are to fund general working capital requirements, capital expenditures and debt service requirements while our long-term liquidity needs are primarily related to acquisitions and debt repayment. Our primary sources of funds for our short-term liquidity needs will be cash flows from operations and borrowings under our senior secured credit facility, while our long-term sources of funds will be from cash flows from operations, long-term bank borrowings and other debt or equity financings. We may from time to time engage in open market purchases of our outstanding debt securities or redeem or otherwise repay such debt.

Our balance sheet reflects cash and cash equivalents of $1.8 billion at December 31, 2017 and $1.5 billion at December 31, 2016. Included in the December 31, 2017 and 2016 cash and cash equivalents balance is $769.4 million and $591.0 million, respectively, of cash received that includes the face value of tickets sold on behalf of our ticketing clients and their share of service charges, which we refer to as client cash. We generally do not utilize client cash for our own financing or investing activities as the amounts are payable to clients on a regular basis. Our foreign subsidiaries held approximately $873.7 million in cash and cash equivalents, excluding client cash, at December 31, 2017. We do not intend to repatriate these funds, but if we did, we would need to accrue and pay United States state income taxes as well as any applicable foreign withholding or transaction taxes on future repatriations. We may from time to time enter into borrowings under our revolving credit facility. If the original maturity of these borrowings is 90 days or less, we present the borrowings and subsequent repayments on a net basis in the statement of cash flows to better represent our financing activities. Our balance sheet reflects total net debt of $2.3 billion at each of December 31, 2017 and 2016. Our weighted-average cost of debt, excluding the unamortized debt discounts and debt issuance costs on our term loans and notes, was 3.9% at December 31, 2017.

Our cash and cash equivalents are held in accounts managed by third-party financial institutions and consist of cash in our operating accounts and invested cash. Cash held in interest-bearing operating accounts in many cases exceeds the Federal Deposit Insurance Corporation insurance limits. The invested cash is in interest-bearing funds consisting primarily of bank deposits and money market funds. While we monitor cash and cash equivalents balances in our operating accounts on a regular basis and adjust the balances as appropriate, these balances could be impacted if the underlying financial institutions fail. To date, we have experienced no loss or lack of access to our cash and cash equivalents; however, we can provide no assurances that access to our cash and cash equivalents will not be impacted by adverse conditions in the financial markets.

For our Concerts segment, we generally receive cash related to ticket revenue at our owned or operated venues and festivals in advance of the event, which is recorded in deferred revenue until the event occurs. With the exception of some upfront costs and artist deposits, which are recorded in prepaid expenses until the event occurs, we pay the majority of event-related expenses at or after the event.

We view our available cash as cash and cash equivalents, less ticketing-related client cash, less event-related deferred revenue, less accrued expenses due to artists and cash collected on behalf of others, plus event-related prepaid expenses. This is essentially our cash available to, among other things, repay debt balances, make acquisitions and finance capital expenditures.

Our intra-year cash fluctuations are impacted by the seasonality of our various businesses. Examples of seasonal effects include our Concerts segment, which reports the majority of its revenue in the second and third quarters. Cash inflows and

outflows depend on the timing of event-related payments but the majority of the inflows generally occur prior to the event. See “—Seasonality” below. We believe that we have sufficient financial flexibility to fund these fluctuations and to access the global capital markets on satisfactory terms and in adequate amounts, although there can be no assurance that this will be the case, and capital could be less accessible and/or more costly depending on economic conditions at the time. We expect cash flows from operations and borrowings under our senior secured credit facility, along with other financing alternatives, to satisfy working capital requirements, capital expenditures and debt service requirements for at least the succeeding year.

We may need to incur additional debt or issue equity to make other strategic acquisitions or investments. There can be no assurance that such financing will be available to us on acceptable terms or at all. We may make significant acquisitions in the near term, subject to limitations imposed by our financing agreements and market conditions.

The lenders under our revolving loans and counterparties to our interest rate hedge agreements consist of banks and other third-party financial institutions. While we currently have no indications or expectations that such lenders and counterparties will be unable to fund their commitments as required, we can provide no assurances that future funding availability will not be impacted by adverse conditions in the financial markets. Should an individual lender default on its obligations, the remaining lenders would not be required to fund the shortfall, resulting in a reduction in the total amount available to us for future borrowings, but would remain obligated to fund their own commitments. Should any counterparty to our interest rate hedge agreements default on its obligations, we could experience higher interest rate volatility during the period of any such default.

Sources of Cash

Senior Secured Credit Facility

In June 2017, we amended our term loan B under the senior secured credit facility reducing the applicable interest rate. At December 31, 2017, our senior secured credit facility consists of (i) a $190 million term loan A, (ii) a $970 million term loan B and (iii) a $365 million revolving credit facility. Subject to certain conditions, we have the right to increase the facility by an amount equal to the sum of $625 million and the aggregate principal amount of voluntary prepayments of the term B loans and permanent reductions of the revolving credit facility commitments, in each case, other than from proceeds of long-term indebtedness, and additional amounts so long as the senior secured leverage ratio calculated on a pro-forma basis (as defined in the credit agreement) is no greater than 3.25x. The revolving credit facility provides for borrowings up to the amount of the facility with sublimits of up to (i) $150 million for the issuance of letters of credit, (ii) $50 million for swingline loans, (iii) $200 million for borrowings in Euros or British Pounds and (iv) $50 million for borrowings in one or more other approved currencies. The senior secured credit facility is secured by (i) a first priority lien on substantially all of the tangible and intangible personal property of our domestic subsidiaries that are guarantors and (ii) a pledge of substantially all of the shares of stock, partnership interests and limited liability company interests of our direct and indirect domestic subsidiaries and 65% of each class of capital stock of any first-tier foreign subsidiaries, subject to certain exceptions.

The interest rates per annum applicable to revolving credit facility loans and term loan A under the senior secured credit facility are, at our option, equal to either LIBOR plus 2.25% or a base rate plus 1.25%, subject to stepdowns based on our net leverage ratio. The interest rates per annum applicable to the term loan B are, at our option, equal to either LIBOR plus 2.25% or a base rate plus 1.25%. We are required to pay a commitment fee of 0.5% per year on the undrawn portion available under the revolving credit facility, subject to a stepdown based on our net leverage ratio, and variable fees on outstanding letters of credit.

For the term loan A, we are required to make quarterly payments increasing over time from $4.8 million to $28.5 million, with the balance due at maturity in October 2021. For the term loan B, we are required to make quarterly payments of $2.4 million, with the balance due at maturity in October 2023. The revolving credit facility matures in October 2021. We are also required to make mandatory prepayments of the loans under the credit agreement, subject to specified exceptions, from excess cash flow, and with the proceeds of asset sales, debt issuances and other specified events.

During the year ended December 31, 2017, we made principal payments totaling $21.6 million on these term loans. At December 31, 2017, the outstanding balances on these term loans, excluding discounts and debt issuance costs, were $1.1 billion. There were no borrowings under the revolving credit facility as of December 31, 2017. Based on our outstanding letters of credit of $83.8 million, $281.2 million was available for future borrowings.

4.875% Senior Notes

In October 2016, we issued $575 million principal amount of 4.875% senior notes due 2024. Interest on the notes is payable semi-annually in cash in arrears on May 1 and November 1 of each year, and the notes will mature in November 2024. We may redeem some or all of the notes, at any time prior to November 1, 2019, at a price equal to 100% of the aggregate principal amount, plus any accrued and unpaid interest to the date of redemption, plus a ‘make-whole’ premium. We may redeem up to 35% of the aggregate principal amount of the notes from the proceeds of certain equity offerings prior to November 1, 2019, at a price equal to 104.875% of the aggregate principal amount, plus accrued and unpaid interest thereon, if any, to the date of redemption. In addition, on or after November 1, 2019, we may redeem some or all of the notes at any time

at the redemption prices that start at 103.656% of their principal amount, plus any accrued and unpaid interest to the date of redemption. We must make an offer to redeem the notes at 101% of their aggregate principal amount, plus accrued and unpaid interest to the repurchase date, if we experience certain defined changes of control.

5.375% Senior Notes

In May 2014, we issued $250 million principal amount of 5.375% senior notes due 2022. Interest on the notes is payable semiannually in arrears on June 15 and December 15, and the notes will mature in June 2022. We may redeem at our option some or all of the notes at redemption prices that start at 104.0313% of their principal amount, plus any accrued and unpaid interest to the date of redemption. We must make an offer to redeem the notes at 101% of the aggregate principal amount, plus any accrued and unpaid interest to the repurchase date, if we experience certain defined changes of control.

2.5% Convertible Senior Notes

In May 2014, we issued $275 million principal amount of convertible senior notes due 2019. The notes pay interest semiannually in arrears on May 15 and November 15 at a rate of 2.5% per annum. The notes will mature in May 2019 and may not be redeemed by us prior to the maturity date. The notes will be convertible, under certain circumstances, until November 15, 2018, and on or after such date without condition, at an initial conversion rate of 28.8363 shares of our common stock per $1,000 principal amount of notes, subject to adjustment, which represents a 52.5% conversion premium based on the last reported sale price for our common stock of $22.74 on May 19, 2014. Upon conversion, the notes may be settled in shares of common stock or, at our election, cash or a combination of cash and shares of common stock. Assuming we fully settled the notes in shares, the maximum number of shares that could be issued to satisfy the conversion is currently 7.9 million.

If we experience a fundamental change, as defined in the indenture governing the notes, the holders of the 2.5% convertible senior notes may require us to purchase for cash all or a portion of their notes, subject to specified exceptions, at a price equal to 100% of the principal amount of the notes plus accrued and unpaid interest, if any.

Extinguishment of Debt

In October 2016, we issued $575 million principal amount of 4.875% senior notes due 2024 and amended our senior secured credit facility. The amendment to the senior secured credit facility provided the existing term loan A and term loan B lenders with an option to convert their outstanding principal amounts into the new term loans. Excluding the outstanding principal amounts for lenders who elected to convert their outstanding term loans, total proceeds of $858.5 million were used to repay $123.3 million outstanding principal amount of our borrowings under the senior secured credit facility, to repay the entire $425 million principal amount of our 7% senior notes due 2020 and to pay the related redemption premium of $14.9 million on the 7% senior notes and accrued interest and fees of $38.4 million, leaving $256.9 million in additional cash available for general corporate purposes. We recorded $14.0 million as a loss on extinguishment of debt related to this refinancing in 2016. There were no significant gains or losses on extinguishment of debt in 2017 or 2015.

Debt Covenants

Our senior secured credit facility contains a number of restrictions that, among other things, require us to satisfy a financial covenant and restrict our and our subsidiaries’ ability to incur additional debt, make certain investments and acquisitions, repurchase our stock and prepay certain indebtedness, create liens, enter into agreements with affiliates, modify the nature of our business, enter into sale-leaseback transactions, transfer and sell material assets, merge or consolidate, and pay dividends and make distributions (with the exception of subsidiary dividends or distributions to the parent company or other subsidiaries on at least a pro-rata basis with any noncontrolling interest partners). Non-compliance with one or more of the covenants and restrictions could result in the full or partial principal balance of the credit facility becoming immediately due and payable. The senior secured credit facility agreement has one covenant, measured quarterly, that relates to total leverage. The consolidated total leverage covenant requires us to maintain a ratio of consolidated total funded debt to consolidated EBITDA (both as defined in the credit agreement) of 5.25x over the trailing four consecutive quarters through September 30, 2018. The consolidated total leverage ratio will reduce to 5.0x on December 31, 2018, 4.75x on December 31, 2019 and 4.5x on December 31, 2020.

The indentures governing our 4.875% senior notes and 5.375% senior notes contain covenants that limit, among other things, our ability and the ability of our restricted subsidiaries to 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 us, merge, consolidate or sell all of our assets, create certain liens, and engage in transactions with affiliates on terms that are not on an arms-length basis. Certain covenants, including those pertaining to incurrence of indebtedness, restricted payments, asset sales, mergers, and transactions with affiliates will be suspended during any period in which the notes are rated investment grade by both rating agencies and no default or event of default under the indenture has occurred and is continuing. The 4.875% senior notes and the 5.375% senior notes contain two incurrence-based financial covenants, as defined, requiring a minimum fixed charge coverage ratio of 2.0x and a maximum secured indebtedness leverage ratio of 3.5x.

Some of our other subsidiary indebtedness includes restrictions on entering into various transactions, such as acquisitions and disposals, and prohibits payment of ordinary dividends. They also have financial covenants including minimum consolidated EBITDA to consolidated net interest payable, minimum consolidated cash flow to consolidated debt service and maximum consolidated debt to consolidated EBITDA, all as defined in the applicable debt agreements.

As of December 31, 2017, we believe we were in compliance with all of our debt covenants. We expect to remain in compliance with all of our debt covenants throughout 2018.

Stock Option Exercises

During 2017, 2016 and 2015 we received $51.1 million, $20.3 million and $16.3 million, respectively, of proceeds from the exercise of employee stock options.

Uses of Cash

Acquisitions

When we make acquisitions, the acquired entity may have cash at the time of acquisition. All amounts related to the use of cash for acquisitions discussed in this section are presented net of any cash acquired. During 2017, we used $47.9 million of cash primarily for the acquisitions of a concert promotions business located in the United States, ticketing businesses located in the United States, the Czech Republic and Poland, and controlling interests in an artist management business located in the United States and a festival promotion business located in Switzerland. As of the date of acquisition, the acquired businesses had a total of $11.8 million of cash on their balance sheets, primarily related to deferred revenue for future events.

During 2016, we used $211.6 million of cash primarily for the acquisitions of a concert promoter in Germany, controlling interests in festival and concert promoters in the United Kingdom, United States and Sweden and an artist management business with locations in the United States and Canada. These businesses had a total of $39.0 million of cash on their balance sheets primarily related to deferred revenue for future events.

During 2015, we used $89.8 million of cash primarily for the acquisitions of all or part of festival promoters located in the United States, the United Kingdom, and Sweden and a ticketing business located in Canada. As of the date of acquisition, these businesses had a total of $114.6 million of cash on their balance sheets primarily related to deferred revenue for future events.

Purchases and Sales of Noncontrolling Interests, net

In 2017, we used $71.5 million of cash primarily for the acquisition of an additional interest in a concert and festival promotion business located in the United States and the remaining interest in a festival promotion business located in Sweden.

In 2016, we used $69.1 million of cash primarily for the acquisition of all or additional equity interests in two artist management businesses located in the United States and a festival and concert promoter located in Australia.

Capital Expenditures

Venue and ticketing operations are capital intensive businesses, requiring continual investment in our existing venues and ticketing systems in order to address audience and artist expectations, technological industry advances and various federal, state and/or local regulations.

We categorize capital outlays between maintenance capital expenditures and revenue generating capital expenditures. Maintenance capital expenditures are associated with the renewal and improvement of existing venues and technology systems, web development and administrative offices. Revenue generating capital expenditures generally relate to the construction of new venues, major renovations to existing buildings or buildings that are being added to our venue network, the development of new ticketing tools and technology enhancements. Revenue generating capital expenditures can also include smaller projects whose purpose is to increase revenue and/or improve operating income. Capital expenditures typically increase during periods when our venues are not in operation since that is the time that such improvements can be completed.

Our capital expenditures, including accruals for amounts incurred but not yet paid for but net of expenditures funded by outside parties such as landlords or replacements funded by insurance proceeds, consisted of the following:

	Year Ended December 31,
	2017				2016				2015
	(in thousands)
Maintenance capital expenditures	$	113,595			$	92,125			$	79,008
Revenue generating capital expenditures	113,756				94,702				65,726
Total capital expenditures	$	227,351			$	186,827			$	144,734

Maintenance capital expenditures for 2017 increased from the prior year primarily associated with the relocation of certain office facilities and technology system enhancements.

Revenue generating capital expenditures for 2017 increased from the prior year primarily due to wi-fi enhancements at our amphitheaters, festival site improvements and higher investment in technology.

Maintenance capital expenditures for 2016 increased from the prior year primarily associated with technology system enhancements and venue-related projects.

Revenue generating capital expenditures for 2016 increased from the prior year primarily due to development and enhancement of certain venues.

For the years ended December 31, 2017, 2016 and 2015, $20.5 million, $2.8 million and $0.4 million, respectively, of insurance proceeds and landlord reimbursements have been excluded from capital expenditures in the table above.

We currently expect capital expenditures to be approximately $250 million for the year ending December 31, 2018.

Contractual Obligations and Commitments

Firm Commitments

In addition to the scheduled maturities on our debt, we have future cash obligations under various types of contracts. We lease office space, certain equipment and many of the venues used in our concert operations under long-term operating leases. Some of our lease agreements contain renewal options and annual rental escalation clauses (generally tied to the consumer price index), as well as provisions for our payment of utilities and maintenance. We also have minimum payments associated with non-cancelable contracts related to our operations, such as artist guarantees and client ticketing agreements. As part of our ongoing capital projects, we will enter into construction-related commitments for future capital expenditure work. The scheduled maturities discussed below represent contractual obligations as of December 31, 2017 and thus do not represent all expected expenditures for those periods.

The scheduled maturities of our outstanding long-term debt (excluding unamortized debt discounts and issuance costs), future minimum rental commitments under non-cancelable operating lease agreements, minimum payments under other non-cancelable contracts, capital expenditure commitments and expected payments of contingent and deferred consideration liabilities as of December 31, 2017 are as follows:

	Payments Due by Period
	Total				2018				2019-2020				2021-2022				2023 and thereafter
	(in thousands)
Long-term debt obligations, including current maturities:
Term loans and revolving credit facility	$	1,138,599			$	28,701			$	90,653			$	104,903			$	914,342
4.875% senior notes	575,000				—				—				—				575,000
5.375% senior notes	250,000				—				—				250,000				—
2.5% convertible senior notes (1)	275,000				275,000				—				—				—
Other long-term debt	99,393				50,037				23,208				19,656				6,492
Estimated interest payments (2)	482,747				91,329				164,309				144,931				82,178
Non-cancelable operating leases (3)	2,168,346				175,863				327,029				242,166				1,423,288
Non-cancelable contracts (3)	1,372,401				897,266				311,870				66,280				96,985
Capital expenditures	60,138				16,499				7,653				5,053				30,933
Contingent and deferred consideration	206,096				143,932				29,306				14,469				18,389
Uncertain income tax positions (4)	—				—				—				—				—
Total	$	6,627,720			$	1,678,627			$	954,028			$	847,458			$	3,147,607

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(1) On or after November 15, 2018, holders may convert their 2.5% convertible senior notes.

(2) Does not include interest on the revolving credit facility as the balance was zero as of December 31, 2017.

(3) Commitment amounts for non-cancelable operating leases and non-cancelable contracts which stipulate an increase in the commitment amount based on an inflationary index have been estimated using an inflation factor of 1.8% for North America, 2.9% for the United Kingdom, 1.7% for Denmark and 1.6% for the Netherlands.

(4) Does not include $9.9 million of uncertain tax positions due to the unpredictable timing of the future payments.

During 2006, in connection with our acquisition of a theatrical business, we guaranteed obligations related to a lease agreement. In the event of default, we could be liable for obligations which have future lease payments (undiscounted) of approximately $15.3 million through the end of 2035 which are not reflected in the table above. The scheduled future minimum rentals for this lease for the years 2018 through 2022 are $1.6 million each year. The venues under the lease agreement were included in the sale of our North American theatrical business in 2008. The buyer assumed our obligations under the guaranty, however we remain contingently liable to the lessor. We believe that the likelihood of a material liability being triggered under this lease is remote, and no liability has been accrued for these contingent lease obligations as of December 31, 2017.

Aggregate minimum rentals of $47.7 million to be paid to us in years 2018 through 2032 under non-cancelable subleases are excluded from the commitment amounts in the above table.

Guarantees of Third-Party Obligations

As of December 31, 2017 and 2016, we guaranteed the debt of third parties of approximately $18.3 million and $18.0 million, respectively, primarily related to maximum credit limits on employee and tour-related credit cards, obligations of a nonconsolidated affiliate and obligations under a venue management agreement.

Cash Flows

	Year Ended December 31,
	2017				2016				2015
	(in thousands)
Cash provided by (used in):
Operating activities	$	623,006			$	597,490			$	307,854
Investing activities	$	(327,586	)		$	(426,477	)		$	(290,985	)
Financing activities	$	(127,083	)		$	99,212			$	(44,121	)

Operating Activities

Year Ended 2017 Compared to Year Ended 2016

Cash provided by operating activities increased $25.5 million for the year ended December 31, 2017 as compared to the prior year. During 2017, our accounts payable and accrued liabilities increased based on timing of payments partially offset by an increase in prepaid event-related expenses and lower increase in deferred revenue as compared to the prior year.

Year Ended 2016 Compared to Year Ended 2015

Cash provided by operating activities increased $289.6 million for the year ended December 31, 2016 as compared to the prior year. During 2016, our accounts payable and accrued liabilities increased based on the timing of payments, we delivered higher cash-related net income and received more cash for future events, increasing deferred revenue, partially offset by a larger increase in accounts receivable as compared to the prior year.

Investing Activities

Year Ended 2017 Compared to Year Ended 2016

Cash used in investing activities decreased $98.9 million for the year ended December 31, 2017 as compared to the prior year primarily due to lower net payments for acquisitions partially offset by higher purchases of property, plant and equipment. See “—Uses of Cash” above for further discussion.

Year Ended 2016 Compared to Year Ended 2015

Cash used in investing activities increased $135.5 million for the year ended December 31, 2016 as compared to the prior year due to higher acquisition activity and higher purchases of property, plant and equipment partially offset by lower advances of notes receivable. See “—Uses of Cash” above for further discussion.

Financing Activities

Year Ended 2017 Compared to Year Ended 2016

Cash used in financing activities increased $226.3 million for the year ended December 31, 2017 as compared to cash provided by financing activities in the prior year primarily due to net proceeds of $267.3 million received in 2016 from the issuance of the 4.875% senior notes and increased term loan A and term loan B borrowings, after repayment of the 7% senior notes and related costs, partially offset by higher proceeds from the exercise of stock options in 2017.

Year Ended 2016 Compared to Year Ended 2015

Cash provided by financing activities increased $143.3 million for the year ended December 31, 2016 as compared to the prior year primarily due to net proceeds of $267.3 million received in 2016 from the issuance of the 4.875% senior notes and increased term loan A and term loan B borrowings, after repayment of the 7% senior notes and related costs. The higher net proceeds from the debt issuance were partially offset by higher purchases of noncontrolling interests and distributions to noncontrolling interest partners along with higher payments for deferred and contingent consideration due to past acquisitions.

Seasonality

Our Concerts and Sponsorship & Advertising segments typically experience higher operating income in the second and third quarters as our outdoor venues and festivals are primarily used in or occur from May through October. In addition, the timing of when tickets are sold and the tours of top-grossing acts can impact comparability of quarterly results year over year, although annual results may not be impacted. Our Ticketing segment revenue is impacted by fluctuations in the availability of events for sale to the public, which vary depending upon scheduling by our clients.

Cash flows from our Concerts segment typically have a slightly different seasonality as payments are often made for artist performance fees and production costs for tours in advance of the date the related event tickets go on sale. These artist fees and production costs are expensed when the event occurs. Once tickets for an event go on sale, we generally begin to receive payments from ticket sales at our owned or operated venues and festivals in advance of when the event occurs. We record these ticket sales as revenue when the event occurs.

We expect these trends to continue in the future. See Item 1A.—Risk Factors—“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 quarters or years.”

Market Risk

We are exposed to market risks arising from changes in market rates and prices, including movements in foreign currency exchange rates and interest rates.

Foreign Currency Risk

We have operations in countries throughout the world. The financial results of our foreign operations are measured in their local currencies. Our foreign subsidiaries also carry certain net assets or liabilities that are denominated in a currency other than that subsidiary’s functional currency. As a result, our financial results could be affected by factors such as changes in foreign currency exchange rates or weak economic conditions in the foreign markets in which we have operations. Currently, we do not operate in any hyper-inflationary countries. Our foreign operations reported operating income of $139.4 million for the year ended December 31, 2017. We estimate that a 10% change in the value of the United States dollar relative to foreign currencies would change our operating income for the year ended December 31, 2017 by $13.9 million. As of December 31, 2017, our most significant foreign exchange exposure included the Euro, British Pound, Australian Dollar and Canadian Dollar. This analysis does not consider the implication such currency fluctuations could have on the overall economic conditions of the United States or other foreign countries in which we operate or on the results of operations of our foreign entities. In addition, the reported carrying value of our assets and liabilities, including the total cash and cash equivalents held by our foreign operations, will also be affected by changes in foreign currency exchange rates.

We primarily use forward currency contracts, in addition to options, to reduce our exposure to foreign currency risk associated with short-term artist fee commitments. We also may enter into forward currency contracts to minimize the risks and/or costs associated with changes in foreign currency rates on forecasted operating income. At December 31, 2017, we had forward currency contracts and options outstanding with a notional amount of $72.4 million.

Interest Rate Risk

Our market risk is also affected by changes in interest rates. We had $2.3 billion of total debt, excluding unamortized debt discounts and issuance costs, outstanding as of December 31, 2017. Of the total amount, taking into consideration existing interest rate hedges, we had $1.1 billion of fixed-rate debt and $1.2 billion of floating-rate debt.

Based on the amount of our floating-rate debt as of December 31, 2017, each 25-basis point increase or decrease in interest rates would increase or decrease our annual interest expense and cash outlay by approximately $2.9 million when the floor rate is not applicable. This potential increase or decrease is based on the simplified assumption that the level of floating-rate debt remains constant with an immediate across-the-board increase or decrease as of December 31, 2017 with no subsequent change in rates for the remainder of the period.

We have one interest rate cap agreement with an aggregate notional amount of $4.9 million at December 31, 2017. The interest rate cap agreement ensures that a portion of our floating-rate debt does not exceed 4.25% and expires in June 2018. This agreement has not been designated as a hedging instrument. Therefore, any change in fair value is recorded in earnings during the period of the change.

Recent Accounting Pronouncements

In May 2014, the FASB issued a comprehensive new revenue recognition standard that will supersede nearly all existing revenue recognition guidance under GAAP. The new standard provides a five-step analysis of transactions to determine when and how revenue is recognized. The core principle of the guidance is that a company should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration which the entity expects to be entitled to receive in exchange for those goods or services. The FASB also issued important guidance clarifying certain guidelines of the standard including (1) reframing the indicators in the principal versus agent guidance to focus on evidence that a company is acting as a principal rather than agent and (2) identifying performance obligations and licensing. The standard is effective for annual periods beginning after December 15, 2017 and interim periods within that year. The guidance should be applied retrospectively, either to each prior period presented in the financial statements, or only to the most current reporting period presented in the financial statements with a cumulative-effect adjustment as of the date of adoption.

The table below represents the impact of the adoption on our consolidated and Ticketing segment’s results of operations. The impact to the consolidated results of operations includes the elimination of intercompany transactions between our Concerts and Ticketing segments.

		As Reported				Adjustment				As Restated
		(in thousands)
Consolidated
2017
Revenue		$	10,337,448			$	(650,226	)		$	9,687,222
Direct operating expenses		$	7,748,791			$	(566,893	)		$	7,181,898
Depreciation and amortization		$	455,534			$	(83,333	)		$	372,201
2016
Revenue		$	8,354,934			$	(528,598	)		$	7,826,336
Direct operating expenses		$	6,082,708			$	(443,531	)		$	5,639,177
Depreciation and amortization		$	403,651			$	(85,067	)		$	318,584
Ticketing Segment
2017
Revenue		$	2,143,800			$	(797,290	)		$	1,346,510
Direct operating expenses		$	1,170,121			$	(709,240	)		$	460,881
Depreciation and amortization		$	200,777			$	(88,050	)		$	112,727
2016
Revenue		$	1,827,930			$	(661,901	)		$	1,166,029
Direct operating expenses		$	956,956			$	(574,266	)		$	382,690
Depreciation and amortization		$	185,925			$	(87,635	)		$	98,290

A more comprehensive discussion of the revenue recognition guidance and information regarding other recent accounting pronouncements can be found in Item 8.—Financial Statements and Supplementary Data—Note 1—The Company and Summary of Significant Accounting Policies.

Critical Accounting Policies and Estimates

The preparation of our financial statements in conformity with GAAP requires management to make estimates, judgments and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements and the reported amount of revenue and expenses during the reporting period. On an ongoing basis, we evaluate our estimates that are based on historical experience and on various other assumptions that are believed to be reasonable under the circumstances. The result of these evaluations forms the basis for making judgments about the carrying values of assets and liabilities and the reported amount of revenue and expenses that are not readily apparent from other sources. Because future events and their effects cannot be determined with certainty, actual results could differ from our assumptions and estimates, and such difference could be material. Management believes that the following accounting estimates are the most critical to aid in fully understanding and evaluating our reported financial results, and they require management’s most difficult, subjective or complex judgments, resulting from the need to make estimates about the effect of matters that are inherently uncertain. The following narrative describes these critical accounting estimates, the judgments and assumptions and the effect if actual results differ from these assumptions where applicable.

Consolidation

Typically we consolidate entities in which we own more than 50% of the voting common stock and control operations and also VIEs for which we are the primary beneficiary. Investments in nonconsolidated affiliates in which we own more than 20% of the voting common stock or otherwise exercise significant influence over operating and financial policies, but not control of the nonconsolidated affiliate, are accounted for using the equity method of accounting. Investments in nonconsolidated affiliates in which we own less than 20% of the voting common stock are accounted for using the cost method of accounting. Intercompany accounts among the consolidated businesses have been eliminated in consolidation. Net income (loss) attributable to noncontrolling interests is reflected in the statements of operations for consolidated affiliates.

Business Combinations

We account for our business combinations under the acquisition method of accounting. Identifiable assets acquired, liabilities assumed and any noncontrolling interest in the acquiree are recognized and measured as of the acquisition date at fair value. Additionally, contingent consideration is recorded at fair value on the acquisition date and classified as a liability. Goodwill is recognized to the extent by which the aggregate of the acquisition-date fair value of the consideration transferred and any noncontrolling interest in the acquiree exceeds the recognized basis of the identifiable assets acquired, net of assumed liabilities. Determining the fair value of assets acquired, liabilities assumed and noncontrolling interest requires management’s judgment and often involves the use of significant estimates and assumptions, including assumptions with respect to future cash flows, discount rates and asset lives among other items.

Property, Plant and Equipment

We test for possible impairment of property, plant and equipment whenever events or circumstances change, such as a current period operating cash flow loss combined with a history of, or projected, operating cash flow losses or a significant adverse change in the manner in which the asset is intended to be used, which may indicate that the carrying amount of the asset may not be recoverable. If indicators exist, we compare the estimated undiscounted future cash flows related to the assets to the carrying amount of those assets. If the carrying value is greater than the estimated undiscounted future cash flows, the cost basis of the asset is reduced to reflect the current fair value. We use various assumptions in determining the current fair value of these assets, including future expected cash flows and discount rates, as well as future salvage values and other fair value measures. Our impairment loss calculations require us to apply judgment in estimating future cash flows, including forecasting useful lives of the assets and selecting the discount rate that reflects the risk inherent in future cash flows.

If actual results are not consistent with our assumptions and judgments used in estimating future cash flows and asset fair values, we may be exposed to future impairment losses that could be material to our results of operations.

Intangibles

We test for possible impairment of definite-lived intangible assets whenever events or circumstances change, such as a current period operating cash flow loss combined with a history of, or projected, operating cash flow losses or a significant adverse change in the manner in which the asset is intended to be used, which may indicate that the carrying amount of the asset may not be recoverable. When specific assets are determined to be unrecoverable, the cost basis of the asset is reduced to reflect the current fair value.

We test for possible impairment of indefinite-lived intangible assets on at least an annual basis. Based on facts and circumstances, we perform either a qualitative or a quantitative assessment for impairment. If a qualitative assessment is performed, and the existence of events and circumstances indicate that it is more likely than not that an indefinite-lived intangible asset is impaired, we perform the quantitative impairment test by comparing the fair value with the carrying amount. When specific assets are determined to be impaired, the cost basis of the asset is reduced to reflect the current fair value.

When performing quantitative assessments for impairment, we use various assumptions in determining the current fair value of these definite-lived and indefinite-lived intangible assets, including future expected cash flows, discount rates and royalty rates as well as other fair value measures. For intangibles related to artist rights, we use assumptions about future revenue and operating income for the rights acquired. These projections are based on information about the artists’ past results and expectations about future results. Our impairment loss calculations require us to apply judgment in estimating future cash flows, including forecasting useful lives of the assets and selecting the discount rate that reflects the risk inherent in future cash flows.

If actual results are not consistent with our assumptions and judgments used in estimating future cash flows and asset fair values, we may be exposed to future impairment losses that could be material to our results of operations.

Goodwill

We currently have seven reporting units with goodwill balances: International Concerts, North America Concerts, Artist Management and Artist Services (non-management) within the Concerts segment; Sponsorship & Advertising; and International Ticketing and North America Ticketing within the Ticketing segment.

We review goodwill for impairment annually, as of October 1, using a two-step process. We also test goodwill for impairment in other periods if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying amount or when we change our reporting units.

The first step is a qualitative evaluation as to whether it is more likely than not that the fair value of any of our reporting units is less than its carrying value using an assessment of relevant events and circumstances. Examples of such events and circumstances include historical financial performance, industry and market conditions, macroeconomic conditions, reporting unit-specific events, historical results of goodwill impairment testing, and the timing of the last performance of a quantitative assessment.

If any reporting units are concluded to be more likely than not impaired, or if that conclusion cannot be determined qualitatively, a second step is performed for that reporting unit. Regardless, it is our policy that all reporting units undergo a second step at least once every five years. This second step, used to quantitatively screen for potential impairment and measure the impairment, if any, compares the fair value of the reporting unit with its carrying amount, including goodwill. If a reporting unit’s carrying value is negative, the reporting unit passes the impairment test. In this case, we will disclose the amount of goodwill allocated to that reporting unit and disclose which reportable segment the reporting unit is included in. In both steps, discount rates, market multiples and sensitivity tests are derived and/or computed with the assistance of external valuation consultants. We perform sensitivity analyses when the most likely result is unclear in the first and second steps in our process. Generally, we test for sensitivities to discount rate, revenue growth, and market multiples, which are the most significant assumptions.

The second step that we use to evaluate goodwill for impairment and measure the impairment, if any, involves the determination of the fair value of our reporting units. Inherent in such fair value determinations are certain judgments and estimates relating to future cash flows, including our interpretation of current economic indicators and market valuations, and assumptions about our strategic plans with regard to our operations. Due to the uncertainties associated with such estimates, actual results could differ from such estimates.

In developing fair values for our reporting units, we may employ a market multiple or a discounted cash flow methodology, or a combination thereof. The market multiple methodology compares us to similar companies on the basis of risk characteristics to determine our risk profile relative to those companies as a group. This analysis generally focuses on both quantitative considerations, which include financial performance and other quantifiable data, and qualitative considerations, which include any factors which are expected to impact future financial performance. The most significant assumptions affecting the market multiple methodology are the market multiples and control premium. A control premium represents the additional value an investor would pay in order to obtain a controlling interest in the respective reporting unit.

The discounted cash flow methodology establishes fair value by estimating the present value of the projected future cash flows to be generated from the reporting unit less those cash flows attributable to noncontrolling interests. It is important to note that items such as depreciation, amortization and stock-based compensation expense are not part of cash flows which is more akin to our AOI metric. The discount rate applied to the projected future cash flows to arrive at the present value is intended to reflect all risks of ownership and the associated risks of realizing the stream of projected future cash flows. The discounted cash flow methodology uses our estimates of future financial performance. The most significant assumptions used in the discounted cash flow methodology are the discount rate and expected future revenue, which vary among reporting units.

If actual results are not consistent with our assumptions and judgments used in estimating future cash flows and asset fair values, we may be exposed to future impairment losses that could be material to our results of operations.

In 2017, all of our reporting units with goodwill were assessed under the first qualitative step. Five of the reporting units did not advance to the second step. These five reporting units had improved discount rates and considerable excess of fair value over their carrying value in the most recent quantitative tests, while also having mixed results on market multiples and financial results when compared to recent financial expectations. Further review of these reporting units with sensitivity tests did not change our first step conclusions.

The Artist Management reporting unit advanced to the second step and its excess of fair value over carrying value was approximately 20%. The reporting unit had lower than expected financial results in the current year and decreased market multiples. Discount rates remained consistent with the prior year. Sensitivity tests on the Artist Management reporting unit showed that a 200-basis point change in the discount rate, or a 56% decline in the revenue growth rate was needed to change the conclusion. It was not sensitive to market multiple changes.

Finally, the Artist Services reporting unit also advanced to the second step. However, due to a decrease in future financial performance expectations and risk associated with those projections, the reporting unit did not pass the quantitative test. This reporting unit accounts for approximately 3% of our goodwill at December 31, 2017. Based upon the results of the 2017 test, we recorded an impairment charge of $20.0 million for the Artist Services (non-management) reporting unit. There were no impairment charges in 2016 or 2015.

Given the results of the tests performed, although we cannot predict future performance or market conditions, we do not currently believe any of our reporting units are at risk of failing the second step in the near future.

Revenue Recognition

Revenue from the promotion and production of an event is recognized after the show occurs. Revenue related to larger global tours is also recognized after the show occurs; however, any profits related to these tours, primarily related to music tour production and tour management services, is recognized after minimum revenue thresholds, if any, have been achieved. Revenue collected in advance of the event is recorded as deferred revenue until the event occurs. Revenue collected from sponsorships and other revenue, which is not related to any single event, is classified as deferred revenue and generally recognized over the operating season or the term of the contract.

Revenue from our ticketing operations primarily consists of convenience and order processing fees charged at the time a ticket for an event is sold and is recorded on a net basis (net of the face value of the ticket). For tickets sold for events at our owned or operated venues in the United States, and where we control the tickets internationally, revenue is recognized after the show occurs. Revenue for these ticket service charges collected in advance of the event is recorded as deferred revenue until the event occurs and these service charges will be shared between our Ticketing and Concerts segments. For tickets sold for events at third-party venues, this revenue is recognized at the time of the sale and is recorded by our Ticketing segment.

We account for taxes that are externally imposed on revenue producing transactions on a net basis, as a reduction of revenue.

Litigation Accruals

We are currently involved in certain legal proceedings and, as required, have accrued our estimate of the probable costs for the resolution of these claims. Management’s estimates used have been developed in consultation with counsel and are based upon an analysis of potential results, assuming a combination of litigation and settlement strategies. It is possible, however, that future results of operations for any particular period could be materially affected by changes in our assumptions or the effectiveness of our strategies related to these proceedings.

Income Taxes

We account for income taxes using the liability method in accordance with the FASB guidance for income taxes. Under this method, deferred tax assets and liabilities are determined based on differences between financial reporting bases and tax bases of assets and liabilities and are measured using the enacted tax rates expected to apply to taxable income in the periods in which the deferred tax asset or liability is expected to be realized or settled. Deferred tax assets are reduced by valuation allowances if we believe it is more likely than not that some portion or the entire asset will not be realized. As almost all earnings from our continuing foreign operations are permanently reinvested and not distributed, our income tax provision does not include additional United States state taxes and foreign withholding or transaction taxes on those foreign earnings that would be incurred if they were distributed. It is not practicable to determine the amount of state and foreign income taxes, if any, that might become due in the event that any remaining available cash associated with these earnings were distributed.

The FASB guidance for income taxes prescribes a recognition threshold and a measurement attribute for the financial statement recognition and measurement of tax positions taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more likely than not to be sustained upon examination by taxing authorities. The amount recognized is measured as the largest amount of benefit that is more likely than not to be realized upon ultimate settlement.

The effect of the international provisions of the TCJA, which generally establishes a territorial-style system for taxing foreign-sourced income of domestic multinational corporations, is uncertain. The TCJA requires companies to pay a one-time transition tax on earnings of certain foreign-sourced subsidiaries that were previously tax-deferred and creates new taxes on certain foreign-sourced earnings. At December 31, 2017, we have made a reasonable estimate of the effects on our existing deferred tax balances and the one-time transition tax. The one-time transition tax is based on our total post-1986 earnings and profits (“E&P”) that we previously deferred from United States income taxes. We recorded an estimated amount for our one-time transition tax liability for our foreign subsidiaries of approximately $25.8 million, which does not impact income tax expense for 2017 since we have reflected the transition tax liability as a reduction to existing fully-valued tax attribute carryforwards. We have not completed our calculation of the total post-1986 E&P for these foreign subsidiaries. Further, the transition tax is based in part on the amount of those earnings held in cash and other specified assets. This amount may change when we finalize the calculation of post-1986 foreign E&P previously deferred from United States federal taxation and finalize

the amounts held in cash or other specified assets. No additional income taxes have been provided for any remaining undistributed foreign earnings that we consider to be permanently reinvested.

In December 2017, the SEC issued guidance to address the application of GAAP in situations when a registrant does not have the necessary information available, prepared, or analyzed (including computations) in reasonable detail to complete the accounting for certain income tax effects of the TCJA. In accordance with this guidance, we have determined that the impact of the enacted rate change and the inclusion recorded in connection with the transition tax on the mandatory deemed repatriation of foreign earnings was a provisional amount and a reasonable estimate at December 31, 2017. Additional work is necessary for a more detailed analysis of our deferred tax assets and liabilities and our historical foreign earnings as well as potential correlative adjustments. The estimate of the transition tax inclusion does not impact income tax expense for 2017 since we have reflected the transition tax liability as a reduction to existing fully-valued tax attribute carryforwards. Any subsequent adjustment to the amount will be recorded in the quarter of 2018 when the analysis is complete, but is not anticipated to impact tax expense due to the existence of the aforementioned fully-valued tax attribute carryforwards.

Ratio of Earnings to Fixed Charges

The ratio of earnings to fixed charges is as follows:

Year Ended December 31,
2017		2016		2015		2014		2013
*		1.38		1.03		*		*

*	For the years ended December 31, 2017, 2014 and 2013, fixed charges exceeded earnings before income taxes and fixed charges by $10.5 million, $104.0 million and $6.0 million, respectively.

The ratio of earnings to fixed charges was computed on a total company basis. Earnings represent income from continuing operations before income taxes less equity in undistributed net income (loss) of nonconsolidated affiliates plus fixed charges. Fixed charges represent interest, amortization of debt discounts, debt issuance costs and premium and the estimated interest portion of rental charges. Rental charges exclude variable rent expense for events in third-party venues.