HITS Daily Double


Fiscal First-Half EBITDA UP 17% With Restructuring Reportedly on Track
Warner Music Group today reported pro forma EBITDA of $135 million for the six months ended May 31, an increase of 17% over 2003 pre-acquisition figures.

The group now owned by Edgar Bronfman Jr., Thomas Lee and partners says its restructuring plan is ahead of schedule and that costs have been sufficiently contained to allow the company to show a profit.

For WMG’s fiscal first half ended May 31, revenue was $1.5 billion, flat compared to 2003. Revenue from recorded music declined 3%, while publishing increased 16%.

Recorded music pulled in $1.22 billion, compared to $1.26 billion a year ago. WMG points to successful albums from Josh Groban, Twista, Alanis Morissette, Jet and The Darkness, among others, as key moneymakers, but says the same period in 2003 had more multi-platinum albums, including Linkin Park’s Meteora, Madonna’s American Life and Kid Rock’s Cocky.

Music publishing revenue increased 16% year-over-year for the six month period, to $286 million from $248 million in 2003.

For the most recent quarter, ended May 31, 2004, WMG’s overall revenue dipped 10% compared to 2003, to $717 million. Recorded music declined 14% to $591 million, compared to $688 million for the same quarter in 2003. The drop in revenue is mostly attributable to the restructuring of East Coast operations, where Atlantic and Elektra were merged, resulting in roster reductions and delayed releases, the company says.

Publishing increased 11% for the quarter ended May 31, to $129 million from $116 million a year ago.

Overall, the quarter resulted in operating income of $16 million versus as loss of $3 million during the same quarter a year ago. EBITDA for the quarter rose to $74 million, compared to $68 million last year. WMG attributes the increase to the positive impact of restructuring, partially offset by the decline in revenue.

WMG says its restructuring effort is ahead of schedule, with $225 million of a planned $250 million in annual savings already achieved. One-time costs associated with the restructuring are also coming in under the $310 million forecast, the company says.

"We have now completed the majority of our restructuring effort, positioning Warner Music Group as a lean and flexible music company," WMG Chairman/CEO Edgar Bronfman Jr. said. "We have merged the Atlantic and Elektra labels, consolidated and streamlined certain overhead operations, lowered variable costs and significantly reduced and focused our artist roster, all while maintaining strong cash flow. With an outstanding management team in place—one that combines the talent and experience of WMG's existing leadership with superbly qualified executives from outside the company—we are building our traditional recorded music and music publishing businesses, and meeting the dynamic challenges of the marketplace."