Supplemental Disclosures Regarding Non-GAAP Financial Measures
We evaluate our operating performance based on several factors, including the following non-GAAP financial measures:
OIBDA
OIBDA reflects our operating income before non-cash depreciation of tangible assets, non-cash amortization of intangible assets and non-cash impairment charges to reduce the carrying value of goodwill and intangible assets. We consider OIBDA to be an important indicator of the operational strengths and performance of our businesses, and believe the presentation of OIBDA helps improve the ability to understand our operating performance and evaluate our performance in comparison to comparable periods. However, a limitation of the use of OIBDA as a performance measure is that it does not reflect the periodic costs of certain capitalized tangible and intangible assets used in generating revenue in our businesses. Accordingly, OIBDA should be considered in addition to, not as a substitute for, operating income, net (loss) income and other measures of financial performance reported in accordance with GAAP. In addition, OIBDA, as we calculate it, may not be comparable to similarly titled measures employed by other companies.
Figure 4. Warner Music Group Corp. - Reconciliation of OIBDA to Net Loss, Three Months Ended 12/31/12 versus 12/31/11(dollars in millions) For the Three For the Three Months Ended Months Ended December 31, December 31, 2012 2011 % Change ------------- ------------- --------- (unaudited) (unaudited)OIBDA $ 112 $ 99 13%Depreciation expense (13) (12) 8%Amortization expense (48) (48) - ------------- ------------- ---------Operating income $ 51 $ 39 31%Loss on extinguishment of debt (83) - -Interest expense, net (53) (57) (7%)Other income, net (5) (2) 150% ------------- ------------- ---------Loss before income taxes $ (90) $ (20) 350%Income tax benefit (expense) 11 (6) (283%) ------------- ------------- ---------Net loss $ (79) $ (26) 204%Less: income attributable to noncontrolling interest (1) - - ------------- ------------- ---------Net loss attributable to Warner Music Group Corp. $ (80) $ (26) 208% ============= ============= =========Operating income margin 6.6% 5.0%OIBDA margin 14.6% 12.8%Figure 5. Warner Music Group Corp. - Reconciliation of Segment Operating Income to OIBDA, Three Months Ended 12/31/12 versus 12/31/11(dollars in millions) For the Three For the Three Months Ended Months Ended December 31, December 31, 2012 2011 % Change ------------- -------------- --------- (unaudited) (unaudited)Total WMG operating income - GAAP $ 51 $ 39 31%Depreciation and amortization expense 61 60 2% ------------- -------------- ---------Total WMG OIBDA $ 112 $ 99 13% ============= ============== =========Recorded Music operating income - GAAP $ 74 $ 63 17%Depreciation and amortization expense 40 41 (2%) ------------- -------------- ---------Recorded Music OIBDA $ 114 $ 104 10% ============= ============== =========Music Publishing operating income - GAAP $ (1) $ - -Depreciation and amortization expense 17 16 6% ------------- -------------- ---------Music Publishing OIBDA $ 16 $ 16 - ============= ============== =========
