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 continued to see strong demand for live events in 2018, powering the concerts center of our business flywheel and leading to another record year for all three of our segments. Our execution of our key strategic initiatives is elevating the live experience 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 additional ticketing products that we believe provide growth for years to come. The rapidly changing technology landscape offers unique challenges that we met with transparency and through innovative solutions, while delivering record numbers in our key financial and operational metrics.

Our total revenue for the year was $10.8 billion, making this our thirteenth 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 connect with the fans. Our overall revenue in 2018 increased by $1.1 billion, or 11%, on a reported and constant currency basis as compared to last year. The increase was largely driven by growth in our Concerts segment due to a higher number of events, fans, and average per show revenue we are generating from the events. Ticketing increased as well, with strong growth in concert event ticket sales in North America as well as the continued expansion of our resale business. Sponsorship & Advertising again delivered strong growth over the prior year due to a number of new strategic multi-year deals as well as growth in our European festival sponsorship business. Our operating results improved this year, compared to 2017, due to both improved business performance as well as the impact of the legal settlement accrued in 2017.

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 in 2018, with an increase of $878.0 million, or 11%, on a reported basis as compared to last year, or $852.4 million, also 11%, without the impact of changes in foreign exchange rates. This higher revenue was due to additional arena and amphitheater shows, regional acquisitions in the United States and festival growth worldwide. Some of the biggest tours in 2018 featured Beyoncé and Jay-Z, P!nk, Justin Timberlake, Imagine Dragons and Bruno Mars. Overall, Concerts attendance grew by 6.5 million to nearly 93 million fans, a record for the company, and an increase of 8% over the prior year. We continued to expand our global festival portfolio in 2018, adding brands, including Isle of Wight, to our strong roster and growing total festival attendance. Our amphitheater shows were strong in 2018 as well, with the Dave Matthews Band, Jason Aldean and Kendrick Lamar all playing to sold out audiences over the summer. The growth of our amphitheater onsite business continued in 2018, with a focus on expanding our food and beverage point of sale systems, optimizing beverage sizing and pricing, and developing new premium programs for parking and VIP areas. These programs helped grow our ancillary revenue per fan at our amphitheaters by approximately $3 in 2018. Another of our ongoing priorities is to grow our ticket revenue by optimizing ticket pricing based on demand. We saw success in this area globally this year, by increasing the price for our best available seats in our amphitheaters and arenas by double-digits. Our Concerts operating results for the year improved over the prior year largely due to the impact of these business improvements and strategic initiatives. 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 thereby sell more tickets and onsite products.

Our Sponsorship & Advertising segment revenue for the year was up $58.8 million, or 13%, on a reported basis as compared to last year, or $56.7 million, also 13%, without the impact of changes in foreign exchange rates. In 2018, we

increased our strategic sponsors globally, and grew revenue for these partners by double-digits. In our North America market, we continue to secure deals with innovative, market-leading brands. Our investment in new venue and festival products has grown our onsite sponsorship revenue while we develop new streaming opportunities and other content to support our online business. In Europe, we capitalized on our strong network of festivals, growing our sponsorship revenue on existing shows while adding revenue streams for newly-acquired events. 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 and enhance these assets while extending further into new markets internationally.

Our Ticketing segment revenue for 2018 increased by $183.1 million, or 14%, on a reported basis as compared to last year, or $181.1 million, a 13% increase, without the impact of changes in foreign exchange rates. This increase was largely due to a 6% growth in fee-bearing ticket sales globally to over 217 million tickets in 2018, largely driven by increased sales for concert events. Our digital ticketing initiative continues to accelerate: we have installed our Presence system in over 200 venues in North America through the end of 2018, with approximately 40 million fans entering venues via the platform. App installations increased by over 40% during the year, creating additional marketing opportunities for our company and driving conversion from search and discovery to purchase. On the mobile front, over 40% of our total tickets were sold via mobile and tablet devices in 2018, and our total mobile ticket sales increased by 35% year-over-year. Operating results for Ticketing were up this year due to improved business performance as well as the impact of the legal settlement accrued in 2017. 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.

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 the 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 concert, festival, 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 support 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, 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 when the event occurs.

To judge the health of our Ticketing segment, we primarily review the GTV and the number of tickets sold through our 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, cost of customer acquisition, 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,
	2018			2017			2016
	(in thousands except estimated events)
Concerts (1)
Estimated events:
North America	24,186			19,933			17,554
International	10,810			9,659			8,731
Total estimated events	34,996			29,592			26,285
Estimated fans:
North America	61,159			54,868			48,611
International	31,607			31,363			22,408
Total estimated fans	92,766			86,231			71,019
Ticketing (2)
Number of fee-bearing tickets sold	217,442			205,703			187,051
Number of non-fee-bearing tickets sold	265,080			267,713			267,767
Total tickets sold	482,522			473,416			454,818

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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 fee-bearing tickets estimated above include 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 when the events occur. The non-fee-bearing tickets estimated above include 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 certain stock-based compensation expense, loss (gain) on disposal of operating assets, depreciation and amortization (including goodwill impairment), amortization of non-recoupable ticketing contract advances and acquisition expenses (including transaction costs, changes in the fair value of accrued acquisition-related contingent consideration obligations, and acquisition-related severance and compensation). 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				Amortization of non-recoupable ticketing contract advances				Acquisition expenses				AOI
									(in thousands)
2018
Concerts	$	(36,205	)		$	12,203			$	10,361			$	206,772			$	—			$	32,851			$	225,982
Sponsorship & Advertising	283,153				1,665				2				30,779				—				—				315,599
Ticketing	201,914				4,753				7				143,551				85,110				1,177				436,512
Other and Eliminations	(18,311		)		—				—				817				(5,023		)		—				(22,517		)
Corporate	(158,015		)		26,961				(1		)		4,610				—				13				(126,432		)
Total	$	272,536			$	45,582			$	10,369			$	386,529			$	80,087			$	34,041			$	829,144
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				112,727				88,050				2,011				297,859
Other and Eliminations	(17,338		)		—				—				433				(4,716		)		—				(21,621		)
Corporate	(140,067		)		18,391				38				5,057				—				(47		)		(116,628		)
Total	$	91,397			$	42,755			$	(969	)		$	372,201			$	83,334			$	36,425			$	625,143
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				98,290				87,635				1,095				365,278
Other and Eliminations	(14,675		)		234				—				2,940				(2,568		)		207				(13,862		)
Corporate	(129,691		)		17,036				117				4,433				—				85				(108,020		)
Total	$	194,940			$	32,723			$	124			$	318,584			$	85,067			$	8,702			$	640,140

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, 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 2018 vs 2017		% Change 2017 vs 2016
	2018				2017				2016
	(in thousands)
Revenue	$	8,770,031			$	7,892,076			$	6,283,521			11%		26%
Direct operating expenses	7,340,757				6,641,071				5,202,097				11%		28%
Selling, general and administrative expenses	1,248,346				1,119,335				950,060				12%		18%
Depreciation and amortization	196,272				206,315				194,715				(5)%		6%
Goodwill impairment	10,500				20,000				—				(48)%		*
Loss (gain) on disposal of operating assets	10,361				(1,056		)		(61		)		*		*
Operating loss	$	(36,205	)		$	(93,589	)		$	(63,290	)		61%		(48)%
Operating margin	(0.4		)%		(1.2		)%		(1.0		)%
AOI **	$	225,982			$	185,003			$	149,138			22%		24%
AOI margin	2.6		%		2.3		%		2.4		%

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

2018 Compared to 2017

Revenue

Concerts revenue increased $878.0 million during the year ended December 31, 2018 as compared to the prior year. Excluding the increase of $25.6 million related to currency impacts, revenue increased $852.4 million, or 11%, primarily due to increased arena and festival activity globally, higher North America amphitheater activity, including increased ancillary revenue per fan, and more shows in our North America theater and clubs. These increases were partially offset by fewer shows in stadiums globally along with lower average ticket prices in our North America stadium events. Concerts had incremental revenue of $291.1 million primarily from the acquisitions of concert and festival promotion businesses.

Operating results

The improved operating results for Concerts for the year ended December 31, 2018 were primarily driven by improved overall operating results at our events discussed above partially offset by higher compensation costs associated with salary increases and headcount growth and a loss recognized on the sale of an artist management business located in the United Kingdom and the United States. Included in selling, general and administrative expenses for the year ended December 31, 2018 is $41.5 million of expenses related to new acquisitions and new venues in the Concerts segment. We recorded a $10.5 million goodwill impairment related to our artist services (non-management) business in the fourth quarter of 2018 in connection with our annual impairment test discussed in “—Critical Accounting Policies—Goodwill.”

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.

Sponsorship & Advertising

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

	Year Ended December 31,												% Change 2018 vs 2017		% Change 2017 vs 2016
	2018				2017				2016
	(in thousands)
Revenue	$	503,968			$	445,148			$	377,618			13%		18%
Direct operating expenses	92,494				78,725				60,218				17%		31%
Selling, general and administrative expenses	97,540				87,268				71,089				12%		23%
Depreciation and amortization	30,779				27,669				18,206				11%		52%
Loss on sale of operating assets	2				—				—				*		*
Operating income	$	283,153			$	251,486			$	228,105			13%		10%
Operating margin	56.2		%		56.5		%		60.4		%
AOI **	$	315,599			$	280,530			$	247,606			13%		13%
AOI margin	62.6		%		63.0		%		65.6		%

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

2018 Compared to 2017

Revenue

Sponsorship & Advertising revenue increased $58.8 million during the year ended December 31, 2018 as compared to the prior year. Excluding the increase of $2.1 million related to currency impacts, revenue increased $56.7 million, or 13%, primarily due to higher online advertising and festival sponsorships globally along with new sponsorship programs in North America.

Operating results

The increased operating income for the year ended December 31, 2018 was primarily driven by the higher online advertising, festival activity and sponsorship programs discussed above net of related fulfillment costs.

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 advertising 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.

Ticketing

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

	Year Ended December 31,												% Change 2018 vs 2017		% Change 2017 vs 2016
	2018				2017				2016
					(as adjusted)				(as adjusted)
	(in thousands)
Revenue	$	1,529,566			$	1,346,510			$	1,166,029			14%		15%
Direct operating expenses	549,265				460,881				382,690				19%		20%
Selling, general and administrative expenses	634,829				681,948				510,490				(7)%		34%
Depreciation and amortization	143,551				112,727				98,290				27%		15%
Loss on disposal of operating assets	7				49				68				*		*
Operating income	$	201,914			$	90,905			$	174,491			*		(48)%
Operating margin	13.2		%		6.8		%		15.0		%
AOI **	$	436,512			$	297,859			$	365,278			47%		(18)%
AOI margin	28.5		%		22.1		%		31.3		%

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

2018 Compared to 2017

Revenue

Ticketing revenue increased $183.1 million during the year ended December 31, 2018 as compared to the prior year. Excluding the increase of $2.0 million related to currency impacts, revenue increased $181.1 million, or 13%, primarily due to increased North America ticket volume and higher associated fees driven by concert events along with increased ancillary revenue.

Operating results

Ticketing operating income increased for the year ended December 31, 2018 primarily due to increased operating results from higher ticket sales in North America and increased ancillary revenue along with the impact of a $110.0 million accrual in 2017 for a legal settlement entered into in January 2018. These increases were partially offset by higher credit card related costs, increased compensation costs associated with higher headcount and annual salary increases, higher professional services costs and increased depreciation expense associated with technology enhancements.

2017 Compared to 2016

Revenue

Ticketing revenue increased $180.5 million during the year ended December 31, 2017 as compared to the prior year. Excluding the increase of $4.1 million related to currency impacts, revenue increased $176.4 million, or 15%, 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 the $110.0 million legal accrual discussed above and increased compensation costs associated with higher headcount partially offset by improved operating results from higher primary and resale ticket sales.

Consolidated Results of Operations

	Year Ended December 31,																				% Change 2018 vs 2017				% Change 2017 vs 2016
	2018												2017				2016
	As Reported				Currency Impacts				Constant Currency**				As Reported				As Reported				As Reported		Constant Currency		As Reported
													(as adjusted)				(as adjusted)
	(in thousands)
Revenue	$	10,787,800			$	(29,779	)		$	10,758,021			$	9,687,222			$	7,826,336			11%		11%		24%
Operating expenses:
Direct operating expenses	7,967,932				(19,032		)		7,948,900				7,181,898				5,639,177				11%		11%		27%
Selling, general and administrative expenses	1,997,028				(10,283		)		1,986,745				1,907,723				1,548,450				5%		4%		23%
Depreciation and amortization	386,529				(2,147		)		384,382				372,201				318,584				4%		3%		17%
Loss (gain) on disposal of operating assets	10,369				169				10,538				(969		)		124				*		*		*
Corporate expenses	153,406				(33		)		153,373				134,972				125,061				14%		14%		8%
Operating income	272,536				$	1,547			$	274,083			91,397				194,940				*		*		(53)%
Operating margin	2.5		%						2.5		%		0.9		%		2.5		%
Interest expense	138,505												106,722				106,506
Loss on extinguishment of debt	2,471												1,048				14,049
Interest income	(8,961		)										(5,717		)		(2,573		)
Equity in losses (earnings) of nonconsolidated affiliates	(2,747		)										(1,161		)		17,802
Other expense (income), net	12,163												(115		)		10,830
Income (loss) before income taxes	131,105												(9,380		)		48,326
Income tax expense (benefit)	40,765												(17,154		)		28,029
Net income	90,340												7,774				20,297
Net income attributable to noncontrolling interests	30,091												13,789				17,355
Net income (loss) attributable to common stockholders of Live Nation	$	60,249											$	(6,015	)		$	2,942

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*	Percentages are not meaningful.
**	See “—Non-GAAP Measures” above for definition of constant currency.

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 Ticketing segment.

Corporate

Corporate expenses increased $18.4 million, or 14%, during the year ended December 31, 2018 as compared to the prior year primarily due to higher stock-based compensation expense associated with the issuance of deferred stock awards in December 2017 along with higher headcount and annual salary increases.

Interest expense

Interest expense increased $31.8 million, or 30%, during the year ended December 31, 2018 as compared to the prior year primarily due to additional interest costs from the 5.625% senior notes and the 2.5% convertible senior notes due 2023, issued in March 2018.

Our debt balances, excluding unamortized debt discounts, were $2.9 billion and $2.3 billion as of December 31, 2018 and 2017, respectively.

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 losses on extinguishment of debt recorded in 2018 or 2017.

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 2018 or 2017.

Other expense (income), net

Other expense (income), net was expense of $12.2 million and $10.8 million for the years ended December 31, 2018 and 2016, respectively, and includes net foreign exchange rate losses of $11.6 million and $8.8 million, respectively, and was income of $0.1 million for the year ended December 31, 2017 and includes net foreign exchange rate gains of $3.1 million. The net foreign exchange rate gains and losses result primarily from revaluation of certain foreign currency denominated net assets held internationally.

Income taxes

For the year ended December 31, 2018, we had a net tax expense of $40.8 million on income before income taxes of $131.1 million compared to a net tax benefit of $17.2 million on a loss before income taxes of $9.4 million for 2017. In 2018, the net income tax expense consisted of a $2.2 million tax expense related to United States federal income taxes, $31.6 million tax expense related to foreign entities and $7.0 million tax expense related to state and local income taxes. The net increase in tax expense of $57.9 million is due primarily to the $55.7 million tax benefit recorded in 2017 due to the reduction in certain federal deferred tax liabilities as a result of the enactment of the Tax Cuts and Jobs Act (“TCJA”).

For the year ended December 31, 2017, we had a net tax benefit of $17.2 million on a 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, 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 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 was effective 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 bases 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

TCJA subjects a United States corporation to tax on its Global Intangible Low-Taxed Income (“GILTI”). GAAP allows companies to make an accounting policy election to either (1) treat taxes due on future GILTI inclusions in United States taxable income as a current-period expense when incurred (“period cost method”) or (2) factor such amounts into the measurement of its deferred taxes. We have elected to use the period cost method. Our financial statements for the current year reflect the effects of the TCJA based on current guidance, including the effects of the one-time transition tax on certain foreign earnings previously deferred from United States income taxes, the revaluation of our deferred tax assets and liabilities, the effects of the reduced rate of United States corporate income tax and certain other provisions of the TCJA.

Net income attributable to noncontrolling interests

Net income attributable to noncontrolling interests increased $16.3 million during the year ended December 31, 2018 as compared to the prior year primarily related to improved operating results from certain festival promotion businesses located in the United States and the United Kingdom along with the acquisition of noncontrolling interests in various concert and festival promotion businesses globally.

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 $2.4 billion at December 31, 2018 and $1.8 billion at December 31, 2017. Included in the December 31, 2018 and 2017 cash and cash equivalents balance is $859.1 million and $769.4 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 $992.8 million in cash and cash equivalents, excluding client cash, at December 31, 2018. We generally do not 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 $2.8 billion and $2.3 billion at December 31, 2018 and 2017, respectively. Our weighted-average cost of debt, excluding the unamortized debt discounts and debt issuance costs on our term loans and notes, was 4.2% at December 31, 2018.

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 consist of banks and other third-party financial institutions. While we currently have no indications or expectations that such lenders 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.

Sources of Cash

Senior Secured Credit Facility

In March 2018, we amended our term loan B under the senior secured credit facility to reduce the applicable interest rate. At December 31, 2018, 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 1.75% or a base rate plus 0.75%. 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, 2018, we made principal payments totaling $28.7 million on these term loans. At December 31, 2018, 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, 2018. Based on our outstanding letters of credit of $88.7 million, $276.3 million was available for future borrowings.

4.875% Senior Notes

At December 31, 2018, we had $575 million principal amount of 4.875% senior notes due 2024. Interest on the notes is payable semiannually 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.

5.625% Senior Notes

In March 2018, we issued $300 million principal amount of 5.625% senior notes due 2026. Interest on the notes is payable semiannually in cash in arrears on March 15 and September 15 and the notes will mature in March 2026. We may redeem some or all of the notes at any time prior to March 15, 2021 at a price equal to 100% of the 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 proceeds of certain equity offerings prior to March 15, 2021, at a price equal to 105.625% of the aggregate principal amount being redeemed, plus any accrued and unpaid interest thereon to the date of redemption. In addition, on or after March 15, 2021, we may redeem some or all of the notes at any time at redemption prices that start at 104.219% 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 any accrued and unpaid interest to the repurchase date, if we experience certain defined changes of control.

5.375% Senior Notes

At December 31, 2018, we had $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 Due 2019

At December 31, 2018, we had $28.7 million principal amount of convertible senior notes due 2019 outstanding. 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 are currently convertible 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, we have elected to settle the notes in shares of common stock. The maximum number of shares that will be issued to satisfy the conversion is currently 0.8 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.

2.5% Convertible Senior Notes Due 2023

In March 2018, we issued $550 million principal amount of 2.5% convertible senior notes due 2023. The notes pay interest semiannually in arrears on March 15 and September 15 at a rate of 2.5% per annum. The notes will mature in March 2023, and may not be redeemed by us prior to the maturity date. The notes will be convertible, under certain circumstances, until December 15, 2022, and on or after such date without condition, at an initial conversion rate of 14.7005 shares of our common stock per $1,000 principal amount of notes, subject to adjustment, which represents a 54.4% conversion premium based on the last reported sale price of our common stock of $44.05 on March 19, 2018. 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 8.1 million.

If we experience a fundamental change, as defined in the indenture governing the notes, the holders of the 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 any accrued and unpaid interest.

Extinguishment of Debt

In the March 2018 refinancing noted above, we received total proceeds of $850.0 million from the notes which were used to repay $246.3 million of the outstanding principal amount of our 2.5% convertible senior notes due 2019 and to pay the related repurchase premium of $90.4 million on these notes along with accrued interest and fees of $20.8 million, leaving $492.5 million in additional cash available for general corporate purposes. We recorded a $2.5 million loss on extinguishment of debt related to this refinancing.

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 losses on extinguishment of debt recorded in 2017.

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 5.0x over the trailing four consecutive quarters through September 30, 2019. The consolidated total leverage ratio will reduce to 4.75x on December 31, 2019 and 4.5x on December 31, 2020.

The indentures governing our 4.875% senior notes, 5.375% senior notes and 5.625% 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, the 5.375% senior notes and the 5.625% 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, 2018, 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 2019.

Stock Option Exercises

During 2018, 2017 and 2016 we received $22.6 million, $51.1 million and $20.3 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 2018, we used $120.2 million of cash primarily for the payment of contingent consideration related to an acquisition in Europe that occurred prior to the current accounting guidance for business combinations along with the acquisitions of controlling interests in various concert promotion and artist management businesses that are all located in the United States. As of the date of acquisition, the acquired businesses had a total of $19.3 million of cash on their balance sheets, primarily related to deferred revenue for future events.

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.

Purchases and Sales of Noncontrolling Interests, net

In 2018, we used $159.6 million of cash primarily for the final payment due in connection with the 2017 acquisition of the remaining interest in a concert and festival promotion business located in the United States.

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,
	2018				2017				2016
	(in thousands)
Maintenance capital expenditures	$	135,022			$	113,595			$	92,125
Revenue generating capital expenditures	115,667				113,756				94,702
Total capital expenditures	$	250,689			$	227,351			$	186,827

Maintenance capital expenditures for 2018 increased from the prior year primarily due to venue-related projects and leasehold improvements of certain office facilities.

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

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

For the years ended December 31, 2018, 2017 and 2016, $11.6 million, $20.5 million and $2.8 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 $300 million for the year ending December 31, 2019.

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, 2018 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, 2018 are as follows:

	Payments Due by Period
	Total				2019				2020-2021				2022-2023				2024 and thereafter
	(in thousands)
Long-term debt obligations, including current maturities:
Term loans and revolving credit facility	$	1,109,898			$	31,076			$	154,777			$	924,045			$	—
4.875% senior notes	575,000				—				—				—				575,000
5.625% senior notes	300,000				—				—				—				300,000
5.375% senior notes	250,000				—				—				250,000				—
2.5% convertible senior notes due 2023 (1)	550,000				—				—				550,000				—
2.5% convertible senior notes due 2019	28,673				28,673				—				—				—
Other long-term debt	96,308				22,393				39,718				16,495				17,702
Estimated interest payments (2)	604,712				122,551				235,375				180,897				65,889
Non-cancelable operating leases (3)	2,518,689				195,160				357,327				314,942				1,651,260
Non-cancelable contracts (3)	2,051,065				1,190,326				531,299				235,522				93,918
Capital expenditures	53,313				14,428				7,901				1,654				29,330
Contingent and deferred consideration	75,262				44,929				22,703				2,704				4,926
Uncertain income tax positions (4)	—				—				—				—				—
Total	$	8,212,920			$	1,649,536			$	1,349,100			$	2,476,259			$	2,738,025

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(1) On or after December 15, 2022, 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, 2018.

(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 1.7% for North America, 2.8% for the United Kingdom, 1.6% for Denmark and 1.6% for the Netherlands.

(4) Does not include $9.3 million of uncertain tax positions due to the unpredictable timing of the future payments.

Aggregate minimum rentals of $31.6 million to be paid to us in years 2019 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, 2018 and 2017, we guaranteed the debt of third parties of approximately $15.6 million and $18.3 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,
	2018				2017				2016
	(in thousands)
Cash provided by (used in):
Operating activities	$	941,586			$	623,522			$	598,739
Investing activities	$	(496,909	)		$	(327,586	)		$	(426,477	)
Financing activities	$	188,784			$	(127,083	)		$	99,212

Operating Activities

Year Ended 2018 Compared to Year Ended 2017

Cash provided by operating activities increased $318.1 million for the year ended December 31, 2018 as compared to the prior year. During 2018, we had higher net cash-related income and received more cash for future events, increasing deferred revenue. Additionally, our prepaid expenses increased due to higher event-related costs partially offset by the timing of payments of our accounts payable and accrued liabilities.

Year Ended 2017 Compared to Year Ended 2016

Cash provided by operating activities increased $24.8 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.

Investing Activities

Year Ended 2018 Compared to Year Ended 2017

Cash used in investing activities increased $169.3 million for the year ended December 31, 2018 as compared to the prior year primarily due to higher acquisition payments, including purchases of intangible assets, and increased net notes receivable advances. See “—Uses of Cash” above for further discussion.

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 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.

Financing Activities

Year Ended 2018 Compared to Year Ended 2017

Cash provided by financing activities increased $315.9 million for the year ended December 31, 2018 as compared to cash used in financing activities in the prior year primarily due to net proceeds from the refinancing of debt in March 2018 partially offset by taxes paid for net share settlements of equity awards and an increase in purchases of noncontrolling interests.

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.

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 financial 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 have significant operations in any hyper-inflationary countries. Our foreign operations reported operating income of $98.6 million for the year ended December 31, 2018. 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, 2018 by $9.9 million. As of December 31, 2018, 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, 2018, we had forward currency contracts outstanding with a notional amount of $89.4 million.

Interest Rate Risk

Our market risk is also affected by changes in interest rates. We had $2.9 billion of total debt, excluding unamortized debt discounts and issuance costs, outstanding as of December 31, 2018. Of the total amount, taking into consideration existing interest rate hedges, we had $1.8 billion of fixed-rate debt and $1.1 billion of floating-rate debt.

Based on the amount of our floating-rate debt as of December 31, 2018, 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, 2018 with no subsequent change in rates for the remainder of the period.

Recent Accounting Pronouncements

Information regarding recently issued and adopted 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 and do not exercise significant influence over operating and financial policies 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 projections of, operating cash flow losses or a significant adverse change in the manner in which the asset is intended to be used, which could 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 projections of, operating cash flow losses or a significant adverse change in the manner in which the asset is intended to be used, which could indicate that the carrying amount of the asset may not be recoverable.

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 performing quantitative assessments for impairment of our definite-lived and indefinite-lived intangible assets, we compare the estimated undiscounted future cash flows related to the asset or asset group to the carrying amount of those assets or asset group. If the carrying value is greater than the estimated undiscounted future cash flows, the cost basis of the asset or asset group is reduced to reflect the current fair value. 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. 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. 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 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 rates, revenue growth, and market multiples, which are the most significant assumptions.

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 used on projected future cash flows 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. 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 2018, 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 reporting units had improved market multiples and considerable excess of fair value over their carrying value in the most recent quantitative tests, while also having mixed results on discount rates 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 increased discount rates but had higher than previously projected financial results in the current year. Market multiples remained consistent with the prior year. Sensitivity tests on the Artist Management reporting unit showed that a 220-basis point change in the discount rate, or a 56% decline in the revenue growth rate, or a 240-basis point change in the market multiple was needed to change the conclusion.

Finally, the Artist Services reporting unit also advanced to the second step. However, due to a decrease in future financial performance expectations and increased discount rates, the reporting unit did not pass the quantitative test. This reporting unit accounts for approximately 2% of our goodwill at December 31, 2018. Based upon the results of the 2018 and 2017 tests, we recorded impairment charges of $10.5 million and $20.0 million, respectively, for the Artist Services (non-management) reporting unit. There were no impairment charges in 2016.

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, other than the Artist Services reporting unit, are at risk of failing the second step in the near future.

Revenue Recognition

Revenue from the promotion or production of an event is recognized when the show occurs. Revenue related to larger global tours is also recognized when 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 sponsorship agreements, which is not related to a single event, is classified as deferred revenue and recognized over the term of the agreement or operating season as the benefits are provided to the sponsor.

Revenue from our ticketing operations primarily consists of our share of convenience and order processing fees charged at the time a ticket for an event is sold in either the primary or secondary markets. We act as an agent on behalf of our clients and therefore do not record the face value of the tickets as revenue. For tickets sold for our concert and festival events, where our concert promoters control ticketing, revenue is recognized when 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 are shared between our Ticketing and Concerts segments. For tickets sold for events of our third-party clients and secondary market sales, 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 TCJA significantly changed existing United States tax law and includes numerous provisions that affect our business. We have completed the accounting for all the impacts of the TCJA. See—Item 8. Financial Statements and Supplementary Data—Note 8—Income Taxes for further information about these changes. These computations are based on the regulations and guidance already provided by federal and state tax authorities. We will continue to assess the impact of any further guidance from federal and state tax authorities on our business and consolidated financial statements. Any future adjustments will be recognized as discrete income tax expense or benefit in the period the guidance is issued.