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August 08, 2005
Warner Music Group Corp. Reports Fiscal Third Quarter Ended June 30, 2005 Results
Warner Music Group Corp. announced its third quarter financial results for the three-month period ended June 30, 2005. Reported net loss was $179 million or $(1.41) in earnings per share. Excluding $135 million in non-recurring after-tax expenses and $9 million in FAS 123 expenses, adjusted net loss was $35 million, or $(0.27) per share for the quarter. These non-recurring charges described below relate to specific IPO-related one-time events and do not reflect on-going operations of the business.
* Warner Music Group Corp. revenues grew 2% to $742 million compared to the same quarter in 2004, with both Recorded Music and Music Publishing contributing to growth.
* Digital revenue of $44 million or 6% of total revenue grew by 26% from the second quarter and 76% from the first quarter of fiscal 2005.
* The reported operating loss was $92 million in the quarter. Adjusted for certain non-recurring charges related to the company's initial public offering (IPO) and FAS 123 expenses, operating income rose 33% to $20 million, compared to $15 million for the same period last year.
* Operating income before depreciation and amortization (OIBDA) adjusted for certain IPO-related non-recurring charges and FAS 123 expenses was $79 million up 5% from $75 million for the comparable period last year.
* The company also reported a cash balance as of June 30, 2005 of $265 million and total long-term debt of $2.2 billion.
"Warner Music Group's solid performance in the quarter reaffirms the strength of our strategic plan and the efficacy with which it is being executed by our outstanding management team. In the most advanced digital market place - the U.S. - we are encouraged to see digital gains outpacing the physical business," said Edgar Bronfman, Jr., Warner Music Group's Chairman and CEO. "The industry continues to be faced with complex and significant challenges including piracy and a quickly evolving distribution landscape. However, at WMG, we are transforming these challenges into opportunities by continuing to make smart investments in A&R, managing our costs, improving our margins and working closely with our partners in the technology space to provide innovative music offerings to consumers."
Non-Recurring Items
Non-recurring, IPO-related items include the $73 million fee to terminate a management contract in connection with our IPO, $1 million of management fees paid to the Investor Group, certain cash payments to employees totaling $29 million related to the issuance of stock awards below fair market value and payment of an IPO bonus to our employees, as previously disclosed, and $35 million resulting from the payment of redemption premiums and other charges in connection with the previously announced redemption of debt issued by our subsidiary, WMG Holdings Corp. There were also $9 million in FAS 123 expenses in the quarter.
Recorded Music
Recorded Music revenue expanded by 2% to $588 million, led by robust digital sales. Digital Recorded Music revenues of $38 million represented approximately 6% of Recorded Music revenue, up from 5% in the second fiscal quarter of 2005. Major sellers in the quarter were Rob Thomas, Green Day, Michael Bublé, Mike Jones and James Blunt. Recorded Music OIBDA was $47 million for the quarter. Recorded Music adjusted OIBDA (which excludes the non-recurring charges regarding the IPO and FAS 123 expenses) grew 11% to $73 million from $66 million in last year's comparable quarter as higher-margin digital products contributed to results. Recorded Music adjusted OIBDA margin rose one percentage point to 12.4% as compared to the same quarter last year despite rising promotional expenses ahead of a heavier fourth quarter release schedule. Recorded Music operating income was $6 million for the quarter. Recorded Music adjusted operating income (which excludes the non-recurring charges regarding the IPO and FAS 123 expenses) improved by 33% to $32 million from $24 million in last year's comparable quarter, yielding an adjusted operating margin of 5.4% -- up 1.2 percentage points from 4.2% in the comparable prior year period.
Music Publishing
Music Publishing revenue climbed by 5% to $161 million compared to last year's comparable period. Digital revenue from Music Publishing of $6 million represented 4% of total Music Publishing revenue, up from 3% in the second fiscal quarter of 2005. Increases in synchronization royalties and, to a lesser extent, mechanical revenues, were partially offset by declines in performance royalties and other revenues. Movie, video game and advertisement deals as well as DVDs drove higher synchronization royalties. Lower performance revenues reflect fewer radio hits. Music Publishing operating income was $13 million in the quarter and Music Publishing adjusted operating income (which excludes the non-recurring charges and FAS 123 expenses) was $15 million up 15% from the prior year quarter. Music Publishing OIBDA was $28 million for the quarter. Music Publishing adjusted OIBDA (which excludes the non-recurring charges and FAS 123 expenses) rose 7% to $30 million compared to last year's comparable quarter. Music Publishing adjusted OIBDA margin improved to 18.6% compared to 18.3% and Music Publishing adjusted operating income margin lifted 80 basis points to 9.3% from 8.5% in last year's comparable period.
Posted by BIGBAER at August 8, 2005 11:08 AM
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