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Figure 1. Warner Music Group Corp. - Consolidated Statements of Operations, Three & Twelve Months Ended 9/30/12 versus 9/30/11(dollars in millions) Successor Predecessor ------------------------ ----------- For the For the Combined Three From July From July Three Months 20, 2011 1, 2011 Months Ended through through ended September September July 19, September % 30, 2012 30, 2011 2011 30, 2011 Change ----------- ----------- ----------- ----------- ------ (unaudited) (unaudited) (unaudited) (unaudited)Revenues $ 731 $ 556 $ 162 $ 718 2%Costs and expenses:Cost of revenues (368) (288) (92) (380) (3%)Selling, general and administrative expenses (274) (186) (76) (262) 5%Merger transaction costs - (10) (36) (46) (100%)Amortization of intangible assets (48) (38) (13) (51) (6%) ----------- ----------- ----------- ----------- ------Total costs and expenses $ (690) $ (522) $ (217) $ (739) (7%) ----------- ----------- ----------- ----------- ------Operating income (loss) $ 41 $ 34 $ (55) $ (21) -Interest expense, net (56) (62) (10) (72) (22%)Other income, net 2 - - - - ----------- ----------- ----------- ----------- ------Loss before income taxes $ (13) $ (28) $ (65) $ (93) (86%)Income tax expense (4) (3) (7) (10) (60%) ----------- ----------- ----------- ----------- ------Net loss $ (17) $ (31) $ (72) $ (103) (83%)Less: income attributable to noncontrolling interest (1) - - - - ----------- ----------- ----------- ----------- ------Net loss attributable to Warner Music Group Corp. $ (18) $ (31) $ (72) $ (103) (83%) =========== =========== =========== =========== ====== Successor Predecessor ------------------------ ----------- For the For the From Combined Twelve From July October 1, Twelve Months 20, 2011 2010 Months Ended through through ended September September July 19, September % 30, 2012 30, 2011 2011 30, 2011 Change ----------- ----------- ----------- ----------- ------ (unaudited) (unaudited) (unaudited) (unaudited)Revenues $ 2,780 $ 556 $ 2,311 $ 2,867 (3%)Costs and expenses:Cost of revenues (1,459) (288) (1,261) (1,549) (6%)Selling, general and administrative expenses (1,019) (186) (831) (1,017) -Merger transaction costs - (10) (43) (53) (100%)Amortization of intangible assets (193) (38) (178) (216) (11%) ----------- ----------- ----------- ----------- ------Total costs and expenses $ (2,671) $ (522) $ (2,313) $ (2,835) (6%) ----------- ----------- ----------- ----------- ------Operating income (loss) $ 109 $ 34 $ (2) $ 32 -Interest expense, net (225) (62) (151) (213) 6%Other income, net 8 - 5 5 60% ----------- ----------- ----------- ----------- ------Loss before income taxes $ (108) $ (28) $ (148) $ (176) (39%)Income tax expense (1) (3) (27) (30) (97%) ----------- ----------- ----------- ----------- ------Net loss $ (109) $ (31) $ (175) $ (206) (47%)Less: (income) loss attributable to noncontrolling interest (3) - 1 1 - ----------- ----------- ----------- ----------- ------Net loss attributable to Warner Music Group Corp. $ (112) $ (31) $ (174) $ (205) (45%) =========== =========== =========== =========== ======Figure 2. Warner Music Group Corp. - Consolidated Balance Sheets as of 9/30/12 and 09/30/11(dollars in millions) Succesor Succesor ------------- ------------- September 30, September 30, 2012 2011 % Change ------------- ------------- -------- (unaudited) (unaudited)AssetsCurrent assets Cash and equivalents $ 302 $ 154 96% Accounts receivable, less allowance of $63 and $40 million 398 385 3% Inventories 28 29 (3%) Royalty advances expected to be recouped within one year 116 135 (14%) Deferred tax assets 51 54 (6%) Other current assets 44 45 (2%) ------------- ------------- --------Total current assets $ 939 $ 802 17%Royalty advances expected to be recouped after one year 142 173 (18%)Property, plant & equipment, net 152 182 (16%)Goodwill 1,380 1,372 1%Intangible assets subject to amortization, net 2,499 2,678 (7%)Intangible assets not subject to amortization 102 102 -Other assets 64 71 (10%) ------------- ------------- --------Total assets $ 5,278 $ 5,380 (2%) ============= ============= ========Liabilities and EquityCurrent liabilities Accounts payable $ 156 $ 165 (5%) Accrued royalties 997 974 2% Accrued liabilities 258 217 19% Accrued interest 89 55 62% Deferred revenue 101 101 - Other current liabilities 5 10 (50%) ------------- ------------- --------Total current liabilities $ 1,606 $ 1,522 6%Long-term debt 2,206 2,217 -Deferred tax liabilities 375 411 (9%)Other noncurrent liabilities 147 148 (1%) ------------- ------------- --------Total liabilities $ 4,334 $ 4,298 1% ============= ============= ========Equity:Common stock ($0.001 par value; 10,000 shares authorized; 1,000 shares issued and outstanding - - -Additional paid-in capital 1,129 1,129 -Accumulated deficit (143) (31) -Accumulated other comprehensive loss, net (59) (33) 79% ------------- ------------- --------Total Warner Music Group Corp. equity $ 927 $ 1,065 (13%)Noncontrolling interest 17 17 - ------------- ------------- --------Total equity 944 1,082 (13%) ------------- ------------- --------Total liabilities and equity $ 5,278 $ 5,380 (2%) ============= ============= ========Figure 3. Warner Music Group Corp. - Summarized Statements of Cash Flows, Three & Twelve Months Ended 9/30/12 versus 9/30/11(dollars in millions) Successor Predecessor ------------------------ ----------- For the For the Combined Three From July From July Three Months 20, 2011 1, 2011 Months Ended through through ended September September July 19, September 30, 2012 30, 2011 2011 30, 2011 ----------- ----------- ----------- ----------- (unaudited) (unaudited) (unaudited) (unaudited)Net cash provided by (used in) operating activities $ 102 $ (64) $ 30 $ (34)Net cash used in investing activities (22) (1,292) (4) (1,296)Net cash (used in) provided by financing activities (1) 1,199 - 1,199Effect of foreign currency exchange rates on cash 4 (8) 3 (5) ----------- ----------- ----------- -----------Net increase (decrease) in cash and equivalents $ 83 $ (165) $ 29 $ (136) =========== =========== =========== =========== Successor Predecessor ------------------------ ----------- For the For the From Combined Twelve From July October 1, Twelve Months 20, 2011 2010 Months Ended through through ended September September July 19, September 30, 2012 30, 2011 2011 30, 2011 ----------- ----------- ----------- ----------- (unaudited) (unaudited) (unaudited) (unaudited)Net cash provided by (used in) operating activities $ 209 $ (64) $ 12 $ (52)Net cash used in investing activities (58) (1,292) (155) (1,447)Net cash (used in) provided by financing activities (3) 1,199 5 1,204Effect of foreign currency exchange rates on cash - (8) 18 10 ----------- ----------- ----------- -----------Net increase (decrease) in cash and equivalents $ 148 $ (165) $ (120) $ (285) =========== =========== =========== ===========
