WARNER MUSIC GROUP
BY THE NUMBERS

Issuing fiscal second-quarter results—its first such report since going public—Warner Music Group says it lost $35 million for the three months ended March 31, narrowing a comparable loss of $48m a year ago.

The company attributed the narrowed loss to improved online music sales, which were offset by continued declines in CD sales, and to the weak dollar, which helped the company realize $18m from favorable exchange rates.

Revenue for the quarter grew 4% to $767m. Operating income grew to $27m, up from an operating loss of $21m a year ago. Operating Income Before Depreciation and Amortization (OIBDA) a measure of performance reportedly favored by media companies (apparently because it makes the numbers look really, really good) increased an impressive 83% to $88 million.

The recorded music segment of WMG logged a 5% revenue increase to $621m. That number included $31m in online sales and a $30m drop in CD sales worldwide.

Publishing unit Warner/Chappell brought in $154m in revenue for a 3% gain, including $4m in online music sales.

Meanwhile, WMG stated in its SEC filing that it expects to take a $140m hit in its fiscal Q3 earnings due to a number of transactions occurring at the same time of its May IPO, in which the company sold 32.6 million shares and netted $517m.

According to the filing, WMG paid $73m to the investment consortium including Thomas H. Lee Partners and Edgar Bronfman Jr. as a “management termination fee.” The company also paid $102m in dividends to those who held stock prior to the IPO (i.e. those same investors). Other major expenses included buying back Time Warner’s three-year warrants (giving TW the option of buying back into WMG) for $138 million, and $33 million in one-time bonuses paid to WMG employees.

WMG funded the above expenses, which total $346m, through a combination of cash on hand and a new senior credit facility allowing the already debt-heavy company to borrow an additional $250m.