As of December 31, 2009, Ticketmaster Entertainment had $554.5 million of cash and cash equivalents including $301.9 million in funds representing amounts equal to the face value of tickets sold on behalf of clients (“client funds”). Ticketmaster Entertainment’s $554.5 million of cash and cash equivalents included $339.7 million held in foreign jurisdictions which was maintained principally in Australia, the United Kingdom and Canada; of this balance, $212.6 million were client funds. Ticketmaster Entertainment does not utilize client funds for its own financing or investing activities as the amounts are payable to clients.
Net cash provided by operating activities was $181.8 million and $195.2 million for the years ended December 31, 2009 and 2008, respectively. The decrease of $13.4 million in net cash provided by operating activities reflected the decline in operating results and higher interest payments in 2009 compared to 2008, as well as unfavorable changes in working capital. The decrease in net cash provided by operating activities was partially offset by higher contributions from client funds of $44.4 million, driven by the timing of settlements with clients.
Net cash used in investing activities in the year ended December 31, 2009 was $65.2 million and primarily resulted from cash paid for capital expenditures of $46.3 million and $33.6 million for acquisitions in the artist services segment, partially offset by proceeds received from the sales of Ticketmaster Entertainment’s investment in iLike and its office building in Vancouver, British Columbia. Net cash used in investing activities in 2008 of $1.5 billion primarily resulted from cash transfers to IAC of $910.1 million and acquisitions, net of cash acquired, of $506.6 million.
Net cash used in financing activities for the year ended December 31, 2009 of $63.6 million was primarily due to the repayment of $40.0 million of the outstanding balance under Ticketmaster Entertainment’s senior secured credit facilities, the repurchase of $13.0 million face value of the outstanding 10.75% Notes for $11.5 million in cash, $9.9 million of distributions to
by financing activities in 2008 of $1.2 billion was primarily due to $300.0 million of proceeds received from the issuance of the 10.75% Notes and $565.0 million of proceeds received from borrowings under the senior secured credit facilities. In addition, Ticketmaster Entertainment received $405.5 million in capital contributions from IAC during 2008.
As of December 31, 2008, Ticketmaster Entertainment had $466.1 million of cash and cash equivalents and marketable securities, including $254.0 million in client funds. Ticketmaster Entertainment’s cash and cash equivalents and marketable securities held in foreign jurisdictions were approximately $302.8 million at December 31, 2008, including $169.7 million in client funds, which was maintained principally in Canada, the United Kingdom and Australia.
Net cash provided by operating activities was $195.2 million and $212.0 million for the years ended December 31, 2008 and 2007, respectively. The decrease of $16.8 million in net cash provided by operating activities reflected lower contributions from client funds of $95.3 million which was driven by the timing of settlements with clients, partially offset by lower advance payments under ticketing contracts and sponsorship deals with resale partners, including significant advances made in 2007 which were not repeated in 2008.
Net cash used in investing activities in 2008 of $1.5 billion primarily resulted from cash transfers to IAC of $910.1 million and acquisitions, net of cash acquired, of $506.6 million. The cash transfers to IAC were comprised of total net proceeds from the 10.75% Notes and the senior secured credit facilities, and were distributed to IAC in connection with the Spin-off, as well as other proceeds paid to IAC as part of their centrally managed U.S. treasury function. Acquisitions, net of cash acquired, primarily related to the acquisitions of TicketsNow, Paciolan, GET ME IN! and Front Line. Net cash used in investing activities in 2007 of $13.0 million primarily resulted from $47.5 million of capital expenditures and $29.4 million of acquisitions, net of cash acquired, partially offset by cash transfers from IAC of $64.5 million.
Net cash provided by financing activities in 2008 of $1.2 billion was primarily due to $300.0 million of proceeds received from the issuance of the 10.75% Notes and $565.0 million of proceeds received from borrowings under the senior secured credit facilities. Ticketmaster Entertainment incurred $27.2 million of costs for these debt financings which were initiated in connection with the Spin-off. In addition, we received $405.5 million in capital contributions from IAC during 2008. Net cash provided by financing activities in 2007 of $30.3 million was primarily due to capital contributions from IAC.
Ticketmaster Entertainment anticipates that it will need to make capital and other expenditures in connection with the development and expansion of its operations. Ticketmaster
Entertainment’s ability to fund its cash and capital needs will be affected by its ongoing ability to generate cash from operations and the overall capacity and terms of its financing arrangements as discussed above. Ticketmaster Entertainment believes that its cash on hand along with its anticipated operating cash flow in 2010 and its access to financing arrangements are sufficient to fund its operating needs, capital, investing and other commitments and contingencies for the foreseeable future.
Under the existing senior secured credit facilities and the indenture governing the 10.75% Notes, Ticketmaster Entertainment is required to comply with certain financial covenants. The 10.75% Notes contain two incurrence-based financial covenants, requiring that Ticketmaster
Entertainment meet a minimum fixed charge coverage ratio, as defined therein, of 2.0 to 1.0 and a maximum secured leverage ratio, as defined therein, of 2.25 to 1.0 in order to incur additional indebtedness other than permitted debt. The senior secured
credit facilities have two maintenance-based quarterly financial covenants, requiring a maximum total leverage ratio of 3.5 to 1.0 and a minimum interest coverage ratio of 3.0 to 1.0. The total leverage ratio for the senior secured credit facilities, calculated as total debt, as defined therein, divided by total EBITDA, as defined therein, for the trailing twelve-month period is the most sensitive to change, as debt levels increase and/or earnings decline. As of December 31, 2009, Ticketmaster Entertainment was in compliance with these financial covenants.
Ticketmaster Entertainment believes it has adequate cash and cash equivalents and it will generate sufficient cash from operations to pay down a portion of its debt, if required, in order to maintain compliance with all financial covenants through December 31, 2010. Ticketmaster Entertainment may, from time to time, engage in open market purchases of the 10.75% Notes. As a result of the Merger being consummated, Ticketmaster Entertainment’s cost of capital related to its bank financing will increase as a result of obtaining the necessary amendment to its senior secured credit facilities required for the Merger.
On May 12, 2009, Ticketmaster Entertainment entered into an amendment to the senior secured credit facilities, which became effective on January 25, 2010 upon completion of the Merger and the payment to each lender that consented to the amendment of a consent fee equal to 0.50% of the sum of the principal amount of the term loans outstanding to such lender as of May 12, 2009 and the full amount of such lender’s revolving commitment as of May 12, 2009. The amendment permits the senior secured credit facilities to remain outstanding following the Merger, increases the interest spreads under each of the Term Loan A, Term Loan B and revolving credit facility by 1.25%, institutes a LIBOR floor of 2.50% for the senior secured credit facilities, conditions each borrowing under the revolving credit facility and certain other debt incurrences on Ticketmaster Entertainment having a pro forma consolidated total leverage ratio of no more than 3.50 to 1.00, creates restrictions on Ticketmaster Entertainment and its subsidiaries
transferring assets to Live Nation or Live Nation’s other subsidiaries in certain circumstances and effects certain other changes to facilitate the integration of Ticketmaster Entertainment and its subsidiaries with Live Nation and its subsidiaries following consummation of the Merger. In connection with the Related Transactions, and as a condition to the completion of this offering, we intend to repay in full the indebtedness outstanding under Ticketmaster Entertainment’s existing senior secured credit facilities and our existing senior secured credit facility.