Live Nation (LYV) – Part 3 – Accounting

I’m very uncomfortable with Live Nation’s accounting.

Live Nation does not seem interested in helping investors figure out how much money the company actually makes.  One of the unnecessarily tricky areas of Live Nation’s accounting is the interaction between ticketing advances and Adjusted Operating Income (AOI).  I would consider all ticketing advances to be operating expenses.  However, Live Nation adds a subset of ticketing costs to Adjusted Operating Income since non-recoupable ticket advances are amortized.  Management’s definition of AOI seems to be designed to mislead.

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Live Nation (LYV) – Part 1 – Ticketing overview

Live Nation has various business lines associated with live music and live events.  They are pursuing a strategy of vertical integration, trying to find synergies between the various parts of their business.  On the concerts business side, the vertical integration strategy has been tried multiple times with little success.  Will this time be any different?  John Malone seems to think so.  Liberty Media has been buying more Live Nation shares.

Let’s start with an overview of the ticketing industry.

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Saving time with Gurufocus and Google Sheets. Plus, the usefulness of Free Cash Flow.

Gurufocus is a website that presents historical financial data in one giant table.  You can use Google Sheets to pull that data into a spreadsheet and perform your own calculations.  This is much faster than going into a 10-K to copy+paste the financial data.  Here is my spreadsheet that automatically pulls data from Gurufocus.  To use it, sign in to your Google account (registration is free) and then make a copy of the spreadsheet.

Calculations that I like to perform

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What are Valeant’s (VPNA’s) credit terms?

According to a VPNA (Valeant Pharmaceuticals North America) invoice to R&O, invoices are due in 30 days.  See Exhibit E from VPNA’s counterclaim*.
According to the same counterclaim against R&O, “[…] R&O had 45 days in which to pay for the Valeant medications”.  See page 9 of “VRX Counterclaim.pdf” available here.

So is it 30 or 45?  If it is 30, then VPNA may lose a lot of credibility in court.  As well, the timing affects the timeline of events.  R&O (or Philidor?) stopped sending out drugs on August 31, the same day that Russell Reitz’s lawyer wrote a scathing letter to Isolani.  From the VPNA version of events, August 31 is 45+1 days after the last payment was received from R&O.  If VPNA’s credit terms are 30 days, then it is curious that the company continued to send drugs to R&O (or Philidor?) even after its credit terms were breached.  Recall that VPNA’s own Exhibit E states “TERMS: Due in 30 Days”.

EDIT (11/4/2015): This post has been edited extensively because I didn’t realize that the example invoice from my original post was from VPNA’s own counterclaim.

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(Valeant) Shipping drugs knowing that you probably won’t be paid

Somewhere around July 27, 2015, Isolani became aware that Russell Reitz was withholding reimbursement checks from R&O’s accounts.  You might think that this would force the business to halt operations.  An Isolani court filing (page 8) against Reitz states:

As a result of Reitz’s and R&O’s material breaches of the MSA, Isolani will be forced to shut down operations at the Pharmacy within the next 10 days.

In fact, operations did not shut down.  Documents filed with the court suggest that Philidor continued to ship out drugs on R&O’s behalf until August 31, 2015.

I find this very strange.  Why send out drugs when it is highly uncertain as to whether or not your company will be paid?

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