Document and Entity Information
Document and Entity Information - shares | 3 Months Ended | |
Dec. 31, 2016 | Feb. 07, 2017 | |
Document And Entity Information [Abstract] | ||
Document Type | 10-Q | |
Amendment Flag | false | |
Document Period End Date | Dec. 31, 2016 | |
Document Fiscal Year Focus | 2,017 | |
Document Fiscal Period Focus | Q1 | |
Trading Symbol | wmg | |
Entity Registrant Name | Warner Music Group Corp. | |
Entity Central Index Key | 1,319,161 | |
Current Fiscal Year End Date | --09-30 | |
Entity Filer Category | Non-accelerated Filer | |
Entity Common Stock, Shares Outstanding | 1,055 |
Consolidated Balance Sheets (Un
Consolidated Balance Sheets (Unaudited) - USD ($) $ in Millions | Dec. 31, 2016 | Sep. 30, 2016 |
Current assets: | ||
Cash and equivalents | $ 455 | $ 359 |
Accounts receivable, net of allowances of $68 million and $52 million | 384 | 329 |
Inventories | 36 | 41 |
Royalty advances expected to be recouped within one year | 127 | 128 |
Prepaid and other current assets | 59 | 51 |
Total current assets | 1,061 | 908 |
Royalty advances expected to be recouped after one year | 188 | 196 |
Property, plant and equipment, net | 195 | 203 |
Goodwill | 1,612 | 1,627 |
Intangible assets subject to amortization, net | 2,086 | 2,201 |
Intangible assets not subject to amortization | 115 | 116 |
Other assets | 83 | 84 |
Total assets | 5,340 | 5,335 |
Current liabilities: | ||
Accounts payable | 152 | 204 |
Accrued royalties | 1,184 | 1,104 |
Accrued liabilities | 319 | 297 |
Accrued interest | 28 | 38 |
Deferred revenue | 175 | 178 |
Other current liabilities | 86 | 21 |
Total current liabilities | 1,944 | 1,842 |
Long-term debt | 2,755 | 2,778 |
Deferred tax liabilities, net | 268 | 269 |
Other noncurrent liabilities | 233 | 236 |
Total liabilities | 5,200 | 5,125 |
Equity: | ||
Common stock ($0.001 par value; 10,000 shares authorized; 1,055 shares issued and outstanding) | 0 | 0 |
Additional paid-in capital | 1,128 | 1,128 |
Accumulated deficit | (747) | (715) |
Accumulated other comprehensive loss, net | (257) | (218) |
Total Warner Music Group Corp. equity | 124 | 195 |
Noncontrolling interest | 16 | 15 |
Total equity | 140 | 210 |
Total liabilities and equity | $ 5,340 | $ 5,335 |
Consolidated Balance Sheets (U3
Consolidated Balance Sheets (Unaudited) (Parenthetical) - USD ($) $ in Millions | Dec. 31, 2016 | Sep. 30, 2016 |
Statement Of Financial Position [Abstract] | ||
Accounts receivable, allowances | $ 68 | $ 52 |
Common stock, par value | $ 0.001 | $ 0.001 |
Common stock, shares authorized | 10,000 | 10,000 |
Common stock, shares issued | 1,055 | 1,055 |
Common stock, shares outstanding | 1,055 | 1,055 |
Consolidated Statements of Oper
Consolidated Statements of Operations (Unaudited) - USD ($) $ in Millions | 3 Months Ended | ||
Dec. 31, 2016 | Dec. 31, 2015 | ||
Income Statement [Abstract] | |||
Revenue | $ 917 | $ 849 | |
Costs and expenses: | |||
Cost of revenue | (496) | (449) | |
Selling, general and administrative expenses | [1] | (276) | (276) |
Amortization expense | (51) | (62) | |
Total costs and expenses | (823) | (787) | |
Operating (loss) income | 94 | 62 | |
Loss on extinguishment of debt | (32) | ||
Interest expense, net | (40) | (45) | |
Other income | 19 | 8 | |
Income (loss) before income taxes | 41 | 25 | |
Income tax (expense) benefit | (17) | 3 | |
Net income (loss) | 24 | 28 | |
Less: Income attributable to noncontrolling interest | (2) | (1) | |
Net income (loss) attributable to Warner Music Group Corp. | $ 22 | $ 27 | |
[1] | (a) Includes depreciation expense of: $(12) $(13) |
Consolidated Statements of Ope5
Consolidated Statements of Operations (Unaudited) (Parenthetical) - USD ($) $ in Millions | 3 Months Ended | |
Dec. 31, 2016 | Dec. 31, 2015 | |
Income Statement [Abstract] | ||
Depreciation expense | $ (12) | $ (13) |
Consolidated Statements of Comp
Consolidated Statements of Comprehensive (Loss) Income (Unaudited) - USD ($) $ in Millions | 3 Months Ended | |
Dec. 31, 2016 | Dec. 31, 2015 | |
Statement Of Income And Comprehensive Income [Abstract] | ||
Net income | $ 24 | $ 28 |
Other comprehensive loss, net of tax: | ||
Foreign currency adjustment | (37) | (24) |
Deferred (losses) on derivative financial instruments | (2) | (1) |
Other comprehensive loss, net of tax | (39) | (25) |
Total comprehensive (loss) income | (15) | 3 |
Less: Income attributable to noncontrolling interest | (2) | (1) |
Comprehensive (loss) income attributable to Warner Music Group Corp. | $ (17) | $ 2 |
Consolidated Statements of Cash
Consolidated Statements of Cash Flows (Unaudited) - USD ($) $ in Millions | 3 Months Ended | |
Dec. 31, 2016 | Dec. 31, 2015 | |
Cash flows from operating activities | ||
Net income | $ 24 | $ 28 |
Adjustments to reconcile net income to net cash provided by operating activities: | ||
Depreciation and amortization | 63 | 75 |
Unrealized gains and remeasurement of foreign denominated loans | (17) | (8) |
Deferred income taxes | (2) | (9) |
Loss on extinguishment of debt | 32 | |
Non-cash interest expense | 3 | 2 |
Non-cash share-based compensation expense | 10 | 1 |
Changes in operating assets and liabilities: | ||
Accounts receivable | (65) | (63) |
Inventories | 3 | (1) |
Royalty advances | 1 | (16) |
Accounts payable and accrued liabilities | (12) | (11) |
Royalty payables | 112 | 58 |
Accrued interest | (10) | (11) |
Deferred revenue | (1) | 1 |
Other balance sheet changes | 15 | 15 |
Net cash provided by operating activities | 156 | 61 |
Cash flows from investing activities | ||
Acquisition of music publishing rights, net | (1) | (7) |
Capital expenditures | (8) | (10) |
Investments and acquisitions of businesses, net | (3) | (1) |
Net cash used in investing activities | (12) | (18) |
Cash flows from financing activities | ||
Repayment of Acquisition Corp. Senior Term Loan Facility | (3) | |
Proceeds from issuance of Acquisition Corp. Senior Term Loan Facility | 22 | |
Financing costs paid | (27) | |
Deferred financing costs paid | (12) | |
Distribution to noncontrolling interest holder | (3) | |
Net cash used in financing activities | (38) | (6) |
Effect of exchange rate changes on cash and equivalents | (10) | (5) |
Net increase (decrease) in cash and equivalents | 96 | 32 |
Cash and equivalents at beginning of period | 359 | 246 |
Cash and equivalents at end of period | 455 | $ 278 |
4.125% Senior Secured Notes | ||
Cash flows from financing activities | ||
Proceeds from issuance of Acquisition Corp | 380 | |
4.875% Senior Secured Notes | ||
Cash flows from financing activities | ||
Proceeds from issuance of Acquisition Corp | 250 | |
6.00% Senior Secured Notes | ||
Cash flows from financing activities | ||
Repayment of Senior Secured Notes | (450) | |
6.25% Senior Secured Notes | ||
Cash flows from financing activities | ||
Repayment of Senior Secured Notes | (173) | |
5.625% Senior Secured Notes | ||
Cash flows from financing activities | ||
Repayment of Senior Secured Notes | $ (28) |
Consolidated Statements of Cas8
Consolidated Statements of Cash Flows (Unaudited) (Parenthetical) | Dec. 31, 2016 | Dec. 31, 2015 |
4.125% Senior Secured Notes | ||
Interest rate | 4.125% | 4.125% |
4.875% Senior Secured Notes | ||
Interest rate | 4.875% | 4.875% |
6.00% Senior Secured Notes | ||
Interest rate | 6.00% | 6.00% |
6.25% Senior Secured Notes | ||
Interest rate | 6.25% | 6.25% |
5.625% Senior Secured Notes | ||
Interest rate | 5.625% | 5.625% |
Consolidated Statement of Equit
Consolidated Statement of Equity (Unaudited) - 3 months ended Dec. 31, 2016 - USD ($) $ in Millions | Total | Common Stock | Additional Paid-in Capital | Accumulated Deficit | Accumulated Other Comprehensive Loss | Total Warner Music Group Corp. Equity | Noncontrolling Interest |
Beginning balance at Sep. 30, 2016 | $ 210 | $ 1,128 | $ (715) | $ (218) | $ 195 | $ 15 | |
Beginning balance, shares at Sep. 30, 2016 | 1,055 | 1,055 | |||||
Net income | $ 24 | 22 | 22 | 2 | |||
Dividend | (54) | (54) | (54) | ||||
Other comprehensive loss, net of tax | (39) | (39) | (39) | ||||
Distribution to noncontrolling interest holders | (1) | (1) | |||||
Ending balance at Dec. 31, 2016 | $ 140 | $ 1,128 | $ (747) | $ (257) | $ 124 | $ 16 | |
Ending balance, shares at Dec. 31, 2016 | 1,055 | 1,055 |
Description of Business
Description of Business | 3 Months Ended |
Dec. 31, 2016 | |
Organization Consolidation And Presentation Of Financial Statements [Abstract] | |
Description of Business | 1. Description of Business Warner Music Group Corp. (the “Company”) was formed on November 21, 2003. The Company is the direct parent of WMG Holdings Corp. (“Holdings”), which is the direct parent of WMG Acquisition Corp. (“Acquisition Corp.”). Acquisition Corp. is one of the world’s major music-based content companies. Acquisition of Warner Music Group by Access Industries Pursuant to an Agreement and Plan of Merger, dated as of May 6, 2011 (the “Merger Agreement”), by and among the Company, AI Entertainment Holdings LLC (formerly Airplanes Music LLC), a Delaware limited liability company (“Parent”) and an affiliate of Access Industries, Inc. (“Access”), and Airplanes Merger Sub, Inc., a Delaware corporation and a wholly owned subsidiary of Parent (“Merger Sub”), on July 20, 2011 (the “Merger Closing Date”) Merger Sub merged with and into the Company with the Company surviving as a wholly owned subsidiary of Parent (the “Merger”). In connection with the Merger, the Company delisted its common stock from the New York Stock Exchange (“NYSE”). The Company continues to voluntarily file with the SEC current and periodic reports that would be required to be filed with the SEC pursuant to Section 15(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) as provided for in certain covenants contained in the agreements governing its outstanding indebtedness. Acquisition of Parlophone Label Group On July 1, 2013, the Company completed its acquisition of Parlophone Label Group (the “PLG Acquisition”). The Company classifies its business interests into two fundamental operations: Recorded Music and Music Publishing. A brief description of these operations is presented below. Recorded Music Operations The Company’s Recorded Music business primarily consists of the discovery and development of artists and the related marketing, distribution and licensing of recorded music produced by such artists. The Company plays an integral role in virtually all aspects of the recorded music value chain from discovering and developing talent to producing albums and marketing and promoting artists and their products. In the United States, Recorded Music operations are conducted principally through the Company’s major record labels—Warner Bros. Records and Atlantic Records. The Company’s Recorded Music operations also include Rhino, a division that specializes in marketing the Company’s music catalog through compilations and reissuances of previously released music and video titles. The Company also conducts its Recorded Music operations through a collection of additional record labels, including, Asylum, Big Beat, Canvasback, Eastwest, Elektra, Erato, FFRR, Fueled by Ramen, Nonesuch, Parlophone, Reprise, Roadrunner, Sire, Warner Classics and Warner Music Nashville. Outside the United States, Recorded Music activities are conducted in more than 50 countries through various subsidiaries, affiliates and non-affiliated licensees. Internationally, the Company engages in the same activities as in the United States: discovering and signing artists and distributing, marketing and selling their recorded music. In most cases, the Company also markets and distributes the records of those artists for whom the Company’s domestic record labels have international rights. In certain smaller markets, the Company licenses the right to distribute the Company’s records to non-affiliated third-party record labels. The Company’s international artist services operations include a network of concert promoters through which it provides resources to coordinate tours for the Company’s artists and other artists as well as management companies that guide artists with respect to their careers. The Company’s Recorded Music distribution operations include Warner-Elektra-Atlantic Corporation (“WEA Corp.”), which markets and sells music and video products to retailers and wholesale distributors; Alternative Distribution Alliance (“ADA”), which distributes the products of independent labels to retail and wholesale distributors; and various distribution centers and ventures operated internationally. In addition to the Company’s Recorded Music products being sold in physical retail outlets, Recorded Music products are also sold in physical form to online physical retailers such as Amazon.com, barnesandnoble.com and bestbuy.com and in digital form to online digital download services such as Apple’s iTunes and Google Play, and are offered by digital streaming services such as Apple Music, Deezer, Napster, Spotify and YouTube, including digital radio services such as iHeart Radio, Pandora and Sirius XM. The Company has integrated the exploitation of digital content into all aspects of its business, including artist and repertoire (“A&R”), marketing, promotion and distribution. The Company’s business development executives work closely with A&R departments to ensure that while a record is being produced, digital assets are also created with all distribution channels in mind, including streaming services, social networking sites, online portals and music-centered destinations. The Company also works side by side with its online and mobile partners to test new concepts. The Company believes existing and new digital businesses will be a significant source of growth and will provide new opportunities to successfully monetize its assets and create new revenue streams. The proportion of digital revenues attributed to each distribution channel varies by region and proportions may change as the roll out of new technologies continues. As an owner of music content, the Company believes it is well positioned to take advantage of growth in digital distribution and emerging technologies to maximize the value of its assets. The Company has diversified its revenues beyond its traditional businesses by entering into expanded-rights deals with recording artists in order to partner with artists in other aspects of their careers. Under these agreements, the Company provides services to and participates in artists’ activities outside the traditional recorded music business such as touring, merchandising and sponsorships. The Company has built artist services capabilities and platforms for exploiting this broader set of music-related rights and participating more widely in the monetization of the artist brands it helps create. The Company believes that entering into expanded-rights deals and enhancing its artist services capabilities in areas such as concert promotion and management have permitted it to diversify revenue streams and capitalize on other revenue opportunities. This provides for improved long-term relationships with artists and allows the Company to more effectively connect artists and fans. Music Publishing Operations While recorded music is focused on exploiting a particular recording of a composition, music publishing is an intellectual property business focused on the exploitation of the composition itself. In return for promoting, placing, marketing and administering the creative output of a songwriter, or engaging in those activities for other rightsholders, the Company’s Music Publishing business garners a share of the revenues generated from use of the composition. The Company’s Music Publishing operations are conducted principally through Warner/Chappell, its global Music Publishing company, headquartered in Los Angeles with operations in over 50 countries through various subsidiaries, affiliates and non-affiliated licensees. The Company owns or controls rights to more than one million musical compositions, including numerous pop hits, American standards, folk songs and motion picture and theatrical compositions. Assembled over decades, its award-winning catalog includes over 70,000 songwriters and composers and a diverse range of genres including pop, rock, jazz, classical, country, R&B, hip-hop, rap, reggae, Latin, folk, blues, symphonic, soul, Broadway, techno, alternative, gospel and other Christian music. Warner/Chappell also administers the music and soundtracks of several third-party television and film producers and studios, including Lucasfilm, Ltd., Hallmark Entertainment and Disney Music Publishing. The Company has an extensive production music library collectively branded as Warner/Chappell Production Music. |
Summary of Significant Accounti
Summary of Significant Accounting Policies | 3 Months Ended |
Dec. 31, 2016 | |
Accounting Policies [Abstract] | |
Summary of Significant Accounting Policies | 2. Summary of Significant Accounting Policies Interim Financial Statements The accompanying unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and notes required by U.S. GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three month period ended December 31, 2016 are not necessarily indicative of the results that may be expected for the fiscal year ending September 30, 2017. The consolidated balance sheet at September 30, 2016 has been derived from the audited consolidated financial statements at that date but does not include all of the information and notes required by U.S. GAAP for complete financial statements. For further information, refer to the consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the fiscal year ended September 30, 2016 (File No. 001-32502). Basis of Consolidation The accompanying financial statements present the consolidated accounts of all entities in which the Company has a controlling voting interest and/or variable interest required to be consolidated in accordance with U.S. GAAP. All intercompany balances and transactions have been eliminated. Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 810, Consolidation (“ASC 810”) requires the Company first evaluate its investments to determine if any investments qualify as a variable interest entity (“VIE”). A VIE is consolidated if the Company is deemed to be the primary beneficiary of the VIE, which is the party involved with the VIE that has both (i) the power to control the most significant activities of the VIE and (ii) either the obligation to absorb losses or the right to receive benefits that could potentially be significant to the VIE. If an entity is not deemed to be a VIE, the Company consolidates the entity if the Company has a controlling voting interest. The Company maintains a 52-53 week fiscal year ending on the last Friday in each reporting period. As such, all references to December 31, 2016 and December 31, 2015 relate to the periods ended December 30, 2016 and December 25, 2015, respectively. For convenience purposes, the Company continues to date its financial statements as of December 31. The fiscal year ended September 30, 2016 ended on September 30, 2016. The Company has performed a review of all subsequent events through the date the financial statements were issued, and has determined that no additional disclosures are necessary. Income Taxes At the end of each interim period, the Company makes its best estimate of the effective tax rate expected to be applicable for the full fiscal year and uses that rate to provide for income taxes on a current year-to-date basis before discrete items. If a reliable estimate of the annual effective tax rate cannot be made, which could be caused by the significant variability in rates when marginal earnings are expected for the year, a discrete tax rate is calculated for the period. New Accounting Pronouncements During the first quarter of fiscal 2017, the Company adopted ASU 2015-03, Simplifying the Presentation of Debt Issuance Costs (“ASU 2015-03”). ASU 2015-03 requires that debt issuance costs are presented as a direct deduction to the related debt in the liability section of the balance sheet, rather than presented as an asset. The Company has elected to adopt this standard retrospectively, and thus the Company reclassified prior period balances. The application of ASU 2015-03 to the Company’s September 30, 2016 Consolidated Balance Sheets resulted in a decrease to other assets of $34 million and a decrease to long-term debt of $34 million. In May 2014, the FASB issued guidance codified in ASC 606, Revenue Recognition – Revenue from Contracts with Customers (“ASC 606”), which replaces the guidance in former ASC 605, Revenue Recognition and ASC 928, Entertainment – Music. The amendment was the result of a joint effort by the FASB and the International Accounting Standards Board to improve financial reporting by creating common revenue recognition guidance for U.S. GAAP and international financial reporting standards ("IFRS"). The joint project clarifies the principles for recognizing revenue and develops a common revenue standard for U.S. GAAP and IFRS. ASC 606 is effective for annual periods beginning after December 15, 2017, and interim periods within those years. Early adoption is permitted only as of annual reporting periods beginning after December 15, 2016, including interim reporting periods within that reporting period. The update may be applied using one of two methods: retrospective application to each prior reporting period presented, or retrospective application with the cumulative effect of initially applying the update recognized at the date of initial application. The Company is currently evaluating the transition method that will be elected and the impact of the update on its financial statements and disclosures. In August 2014, the FASB issued ASU 2014-15, Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern (“ASU 2014-15”). This ASU will explicitly require management to assess an entity’s ability to continue as a going concern, and to provide related disclosure when substantial doubt exists. ASU 2014-15 will be effective in the first annual period ending after December 15, 2016, and interim periods thereafter. Earlier adoption is permitted. The Company does not expect the adoption of this guidance to have a material effect on our consolidated financial statements. In January 2016, the FASB issued ASU 2016-01, Recognition and Measurement of Financial Assets and Financial Liabilities (“ASU 2016-01”). This ASU will require that equity investments are measured at fair value with changes in fair value recognized in net income. The Company may elect to measure equity investments that do not have a readily determinable fair value at cost minus impairment, if any, plus or minus changes resulting from observable price. ASU 2016-01 will be effective for annual periods beginning after December 15, 2017, and interim periods within those years. Earlier adoption is permitted. The adoption of this standard is not expected to have a significant impact on the Company’s financial statements, other than disclosure. In February 2016, the FASB issued ASU 2016-02, Leases (“ASU 2016-02”). This ASU establishes a right-of-use (“ROU”) model that requires a lessee to record a ROU asset and a lease liability on the balance sheet for all leases with terms longer than 12 months. Leases will be classified as either finance or operating, with classification affecting the pattern of expense recognition in the statement of operations. ASU 2016-02 will be effective for annual periods beginning after December 15, 2018, and interim periods within those years. Earlier adoption is permitted. The Company is evaluating the impact of the adoption of this standard on its financial statements and disclosures. In March 2016, the FASB issued ASU 2016-05, Derivatives and Hedging: Effect of Derivative Contract Novations on Existing Hedge Accounting Relationships (“ASU 2016-05”) and ASU 2016-06, Derivatives and Hedging: Contingent Put and Call Options in Debt Instruments (“ASU 2016-06”). ASU 2016-05 clarifies that a change in the counterparty to a derivative instrument that has been designated as a hedging instrument does not, in and of itself, require dedesignation of that hedging relationship provided that all other hedge accounting criteria continue to be met. ASU 2016-06 clarifies the steps required to determine bifurcation of an embedded derivative. ASU 2016- 05 and ASU 2016-06 are effective for annual periods beginning after December 15, 2016, and interim periods within those years. Early adoption is permitted. The guidance may be adopted prospectively or by a modified retrospective approach. The adoption of this standard is not expected to have a significant impact on the Company’s financial statements. In March 2016, the FASB issued ASU 2016-09, Compensation - Stock Compensation ("ASU 2016-09"). This ASU provides amended guidance which simplifies the accounting for share-based payment transactions involving multiple aspects of the accounting for share-based transactions, including income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. ASU 2016-09 is effective for annual periods beginning after December 15, 2016, and interim periods within those years. Early adoption is permitted. The Company is evaluating the impact of the adoption of this standard on its financial statements and disclosures. In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows: Classification of Certain Cash Receipts and Cash Payments ("ASU 2016-15"). This ASU provides specific guidance of how certain cash receipts and cash payments should be presented and classified in the statement of cash flows. ASU 2016-15 is effective for annual periods beginning after December 15, 2017, and interim periods within those years. Early adoption is permitted. The adoption of this standard is not expected to have a significant impact on the Company’s financial statements, other than presentation. In October 2016, the FASB issued ASU 2016-16, Income Taxes: Intra-Entity Transfers of Assets Other Than Inventory ("ASU 2016-16"). This ASU requires the recognition of current and deferred income taxes for intra-entity asset transfers when the transaction occurs. ASU 2016-16 is effective for annual periods beginning after December 15, 2017, and interim periods within those years. Early adoption is permitted using the modified retrospective approach with a cumulative-effect to opening retained earnings in the period of adoption. The Company does not plan to early adopt this standard and the impact upon the required adoption date is not known or reasonably estimable. |
Comprehensive Loss
Comprehensive Loss | 3 Months Ended |
Dec. 31, 2016 | |
Equity [Abstract] | |
Comprehensive Loss | 3. Comprehensive Loss Comprehensive loss, which is reported in the accompanying consolidated statements of equity, consists of net income (loss) and other gains and losses affecting equity that, under U.S. GAAP, are excluded from net income (loss). For the Company, the components of other comprehensive loss primarily consist of foreign currency translation losses and minimum pension liabilities. The following summary sets forth the changes in the components of accumulated other comprehensive loss, net of related taxes of nil: Foreign Minimum Deferred Losses Accumulated Currency Pension On Derivative Other Translation Liability Financial Comprehensive Loss (a) Adjustment Instruments Loss, net (in millions) Balance at September 30, 2016 $ (201 ) $ (17 ) $ — $ (218 ) Other comprehensive loss (37 ) — (2 ) (39 ) Amounts reclassified from accumulated other comprehensive income — — — — Balance at December 31, 2016 $ (238 ) $ (17 ) $ (2 ) $ (257 ) (a) Foreign currency translation adjustments include intra-entity foreign currency transactions that are of a long-term investment nature of $38.9 million. |
Goodwill and Intangible Assets
Goodwill and Intangible Assets | 3 Months Ended |
Dec. 31, 2016 | |
Goodwill And Intangible Assets Disclosure [Abstract] | |
Goodwill and Intangible Assets | 4. Goodwill and Intangible Assets Goodwill The following analysis details the changes in goodwill for each reportable segment: Recorded Music Music Publishing Total (in millions) Balance at September 30, 2016 $ 1,163 $ 464 $ 1,627 Acquisitions 2 — 2 Divestitures — — — Other adjustments (a) (17 ) — (17 ) Balance at December 31, 2016 $ 1,148 $ 464 $ 1,612 (a) Other adjustments during the three months ended December 31, 2016 represent foreign currency movements. The Company performs its annual goodwill impairment test in accordance with FASB ASC Topic 350, Intangibles—Goodwill and other (“ASC 350”) during the fourth quarter of each fiscal year as of July 1. The Company may conduct an earlier review if events or circumstances occur that would suggest the carrying value of the Company’s goodwill may not be recoverable. No indicators of impairment were identified during the current period that required the Company to perform an interim assessment or recoverability test. Intangible Assets Intangible assets consist of the following: Weighted Average December 31, September 30, Useful Life 2016 2016 (in millions) Intangible assets subject to amortization: Recorded music catalog 10 years $ 890 $ 923 Music publishing copyrights 27 years 1,466 1,504 Artist and songwriter contracts 13 years 853 883 Trademarks 7 years 7 7 Other intangible assets 8 years 5 5 Total gross intangible asset subject to amortization 3,221 3,322 Accumulated amortization (1,135 ) (1,121 ) Total net intangible assets subject to amortization 2,086 2,201 Intangible assets not subject to amortization: Trademarks and tradenames Indefinite 115 116 Total net intangible assets $ 2,201 $ 2,317 |
Debt
Debt | 3 Months Ended |
Dec. 31, 2016 | |
Debt Disclosure [Abstract] | |
Debt | 5. Debt Debt Capitalization Long-term debt consists of the following: December 31, September 30, 2016 2016 (in millions) Revolving Credit Facility—Acquisition Corp. (a) $ — $ — Senior Term Loan Facility due 2023—Acquisition Corp. (b) 985 963 6.00% Senior Secured Notes due 2021—Acquisition Corp. (c) — 444 6.25% Senior Secured Notes due 2021—Acquisition Corp. (d) — 174 5.625% Senior Secured Notes due 2022—Acquisition Corp. (e) 246 272 5.00% Senior Secured Notes due 2023—Acquisition Corp. (f) 296 296 4.125% Senior Secured Notes due 2024— Acquisition Corp. (g) 356 — 4.875% Senior Secured Notes due 2024— Acquisition Corp. (h) 243 — 6.75% Senior Notes due 2022—Acquisition Corp. (i) 629 629 Total debt (j) $ 2,755 $ 2,778 (a) Reflects $150 million of commitments under the Revolving Credit Facility, less letters of credit outstanding of approximately $13 million and $5 million at December 31, 2016 and September 30, 2016, respectively. There were no loans outstanding under the Revolving Credit Facility at December 31, 2016 or September 30, 2016. (b) Principal amount of $1.006 billion and $978 million less unamortized discount of $8 million and $3 million and unamortized deferred financing costs of $13 million and $12 million at December 31, 2016 and September 30, 2016, respectively. (c) Principal amount of $450 million less unamortized deferred financing costs of $6 million at September 30, 2016. (d) Face amount of €158 million. Above amounts represent the dollar equivalent of such notes at September 30, 2016. Principal amount of $177 million less unamortized deferred financing costs of $3 million at September 30, 2016. (e) Principal amount of $248 million and $275 million less unamortized deferred financing costs of $2 million and $3 million at December 31, 2016 and September 30, 2016, respectively. (f) Principal amount of $300 million less unamortized deferred financing costs of $4 million at both December 31, 2016 and September 30, 2016. (g) Face amount of €345 million. Above amounts represent the dollar equivalent of such notes at December 31, 2016. Principal amount of $359 million less unamortized deferred financing costs of $3 million at December 31, 2016. (h) Principal amount of $250 million less unamortized deferred financing costs of $7 million at December 31, 2016. (i) Principal amount of $635 million less unamortized deferred financing costs of $6 million at both December 31, 2016 and September 30, 2016. (j) Principal amount of debt of $2.798 billion and $2.815 billion less unamortized discount of $8 million and $3 million and unamortized deferred financing costs of $35 million and $34 million at December 31, 2016 and September 30, 2016, respectively. October 2016 Refinancing Transactions On October 18, 2016, Acquisition Corp. issued €345 million in aggregate principal amount of its 4.125% Senior Secured Notes due 2024 and $250 million in aggregate principal amount of its 4.875% Senior Secured Notes due 2024. Acquisition Corp. used the net proceeds to pay the consideration in the tender offers and satisfy and discharge its 2021 Senior Secured Notes as described below. On October 18, 2016, Acquisition Corp. accepted for purchase in connection with tender offers for its 6.000% Senior Secured Notes due 2021 (the “Existing Dollar Notes”) and 6.250% Senior Secured Notes due 2021 (the “Existing Euro Notes” and, together with the Existing Dollar Notes, the “2021 Senior Secured Notes”) the 2021 Senior Secured Notes that had been validly tendered and not validly withdrawn on October 17, 2016 (the “Expiration Time”). Acquisition Corp. then issued a notice of redemption on October 18, 2016 with respect to the remaining 2021 Senior Secured Notes not accepted for payment pursuant to the tender offers. Following payment of the 2021 Senior Secured Notes tendered at or prior to the Expiration Time, Acquisition Corp. deposited with the Trustee for the 2021 Senior Secured Notes not accepted for purchase in the tender offers funds sufficient to satisfy all obligations remaining to the date of redemption, which redemption date was January 15, 2017, under the applicable indenture governing the 2021 Senior Secured Notes. The Company recorded a loss on extinguishment of debt of approximately $31 million, which represented the premium paid on early redemption and unamortized deferred financing costs. These transactions are collectively referred to as the “October 2016 Refinancing Transactions.” November 2016 Senior Term Loan Credit Agreement Amendment On November 21, 2016, Acquisition Corp received lender consent to an amendment (the “November 2016 Senior Term Loan Credit Agreement Amendment”) to the Senior Term Loan Credit Agreement governing Acquisition Corp.’s Senior Term Loan Facility, which extended the maturity date of the Senior Term Loan Credit Agreement to November 1, 2023, subject, in certain circumstances, to a springing maturity inside the maturity date of certain of Acquisition Corp.’s other outstanding indebtedness and increased the principal amount outstanding by $27.5 million to $1.006 billion and increased the original issue discount by $5 million to $8 million. Acquisition Corp. used the proceeds from the November 2016 Senior Term Loan Credit Agreement Amendment to redeem $27.5 million of the 5.625% Senior Secured Notes due 2022 and to pay fees, costs and expenses related to the transactions. 5.625% Existing Secured Notes Redemption On November 21, 2016, Acquisition Corp. redeemed $27.5 million, or 10%, of its outstanding 5.625% Senior Secured Notes due 2022. The Company recorded a loss on extinguishment of debt of approximately $1 million, which represents the premium paid on early redemption and unamortized deferred financing costs. Interest Rates The loans under the Revolving Credit Facility bear interest at Acquisition Corp.’s election at a rate equal to (i) the rate for deposits in the borrowing currency in the London interbank market (adjusted for maximum reserves) for the applicable interest period (“Revolving LIBOR”), plus 2.00% per annum, or (ii) the base rate, which is the highest of (x) the corporate base rate established by the administrative agent from time to time, (y) 0.50% in excess of the overnight federal funds rate and (z) the three-month Revolving LIBOR plus 1.0% per annum, plus, in each case, 1.00% per annum. If there is a payment default at any time, then the interest rate applicable to overdue principal will be the rate otherwise applicable to such loan plus 2.0% per annum. Default interest will also be payable on other overdue amounts at a rate of 2.0% per annum above the amount that would apply to an alternative base rate loan. The loans under the Senior Term Loan Facility bear interest at Acquisition Corp.’s election at a rate equal to (i) the rate for deposits in U.S. dollars in the London interbank market (adjusted for maximum reserves) for the applicable interest period (“Term Loan LIBOR”), plus 2.75% per annum, or (ii) the base rate, which is the highest of (x) the corporate base rate established by the administrative agent as its prime rate in effect at its principal office in New York City from time to time, (y) 0.50% in excess of the overnight federal funds rate and (z) three-month Term Loan LIBOR, plus 1.00% per annum, plus, in each case, 1.75% per annum. The loans under the Senior Term Loan Facility are subject to a Term Loan LIBOR “floor” of 1.00%. If there is a payment default at any time, then the interest rate applicable to overdue principal and interest will be the rate otherwise applicable to such loan plus 2.0% per annum. Default interest will also be payable on other overdue amounts at a rate of 2.0% per annum above the amount that would apply to an alternative base rate loan. Maturity of Senior Term Loan Facility The loans outstanding under the Senior Term Loan Facility mature on November 1, 2023, subject, in certain circumstances, to a springing maturity inside the maturity of certain of Acquisition Corp.’s other indebtedness. Maturity of Revolving Credit Facility The maturity date of the Revolving Credit Facility is April 1, 2021. Maturities of Senior Notes and Senior Secured Notes As of December 31, 2016, there are no scheduled maturities of notes until 2022, when $883 million is scheduled to mature. Thereafter, $909 million is scheduled to mature. Interest Expense, net Total interest expense, net, was $40 million and $45 million for the three months ended December 31, 2016 and December 31, 2015, respectively. The weighted-average interest rate of the Company’s total debt was 4.9% at December 31, 2016, 5.3% at September 30, 2016, and 5.6% at December 31, 2015. |
Commitments and Contingencies
Commitments and Contingencies | 3 Months Ended |
Dec. 31, 2016 | |
Commitments And Contingencies Disclosure [Abstract] | |
Commitments and Contingencies | 6. Commitments and Contingencies Pricing of Digital Music Downloads On December 20, 2005 and February 3, 2006, the Attorney General of the State of New York served the Company with requests for information in connection with an industry-wide investigation as to the pricing of digital music downloads. On February 28, 2006, the Antitrust Division of the U.S. Department of Justice served us with a Civil Investigative Demand, also seeking information relating to the pricing of digitally downloaded music. Both investigations were ultimately closed, but subsequent to the announcements of the investigations, more than thirty putative class action lawsuits were filed concerning the pricing of digital music downloads. The lawsuits were consolidated in the Southern District of New York. The consolidated amended complaint, filed on April 13, 2007, alleges conspiracy among record companies to delay the release of their content for digital distribution, inflate their pricing of CDs and fix prices for digital downloads. The complaint seeks unspecified compensatory, statutory and treble damages. On October 9, 2008, the District Court issued an order dismissing the case as to all defendants, including us. However, on January 12, 2010, the Second Circuit vacated the judgment of the District Court and remanded the case for further proceedings and on January 10, 2011, the U.S. Supreme Court denied the defendants’ petition for Certiorari. Upon remand to the District Court, all defendants, including the Company, filed a renewed motion to dismiss challenging, among other things, plaintiffs’ state law claims and standing to bring certain claims. The renewed motion was based mainly on arguments made in defendants’ original motion to dismiss, but not addressed by the District Court. On July 18, 2011, the District Court granted defendants’ motion in part, and denied it in part. Notably, all claims on behalf of the CD-purchaser class were dismissed with prejudice. However, a wide variety of state and federal claims remain for the class of Internet download purchasers. On March 19, 2014, plaintiffs filed a motion for class certification, which has now been fully briefed. Plaintiffs filed an operative consolidated amended complaint on September 25, 2015. The Company filed its answer to the fourth amended complaint on October 9, 2015, and filed an amended answer on November 3, 2015. A mediation took place on February 22, 2016, but the parties were unable to reach a resolution. The Company intends to defend against these lawsuits vigorously, but is unable to predict the outcome of these suits. Regardless of the merits of the claims, this and any related litigation could continue to be costly, and divert the time and resources of management. The potential outcomes of these claims that are reasonably possible cannot be determined at this time and an estimate of the reasonably possible loss or range of loss cannot presently be made. Sirius XM On September 11, 2013, the Company joined with Capitol Records, LLC, Sony Music Entertainment, UMG Recordings, Inc. and ABKCO Music & Records, Inc. in a lawsuit brought in California Superior Court against Sirius XM Radio Inc., alleging copyright infringement for Sirius XM’s use of pre-1972 sound recordings under California law. A nation-wide settlement was reached on June 17, 2015 pursuant to which Sirius XM paid the plaintiffs, in the aggregate, $210 million on July 29, 2015 and the plaintiffs dismissed their lawsuit with prejudice. The settlement resolves all past claims as to Sirius XM’s use of pre-1972 recordings owned or controlled by the plaintiffs and enables Sirius XM, without any additional payment, to reproduce, perform and broadcast such recordings in the United States through December 31, 2017. As part of the settlement, Sirius XM has the right, to be exercised before December 31, 2017, to enter into a license with each plaintiff to reproduce, perform and broadcast its pre-1972 recordings from January 1, 2018 through December 31, 2022. The royalty rate for each such license will be determined by negotiation or, if the parties are unable to agree, binding arbitration on a willing buyer/willing seller standard. The allocation of the settlement proceeds among the plaintiffs was determined and the settlement proceeds were distributed accordingly. This resulted in a cash distribution to the Company of $33 million of which $28 million was recognized in revenue during the 2016 fiscal year and $1 million was recognized in the first quarter of the 2017 fiscal year. The balance will be recognized in revenue ratably over the next four quarters. The Company is sharing its allocation of the settlement proceeds with its artists on the same basis as statutory revenue from Sirius XM is shared, i.e., the artist share of our allocation will be paid to artists by SoundExchange. Other Matters In addition to the matters discussed above, the Company is involved in various litigation and regulatory proceedings arising in the normal course of business. Where it is determined, in consultation with counsel based on litigation and settlement risks, that a loss is probable and estimable in a given matter, the Company establishes an accrual. In the currently pending proceedings, the amount of accrual is not material. An estimate of the reasonably possible loss or range of loss in excess of the amounts already accrued cannot be made at this time due to various factors typical in contested proceedings, including (1) the results of ongoing discovery; (2) uncertain damage theories and demands; (3) a less than complete factual record; (4) uncertainty concerning legal theories and their resolution by courts or regulators; and (5) the unpredictable nature of the opposing party and its demands. However, the Company cannot predict with certainty the outcome of any litigation or the potential for future litigation. As such, the Company continuously monitors these proceedings as they develop and adjusts any accrual or disclosure as needed. Regardless of the outcome, litigation could have an adverse impact on the Company, including the Company’s brand value, because of defense costs, diversion of management resources and other factors and it could have a material effect on the Company’s results of operations for a given reporting period. |
Income Taxes
Income Taxes | 3 Months Ended |
Dec. 31, 2016 | |
Income Tax Disclosure [Abstract] | |
Income Taxes | 7. Income Taxes For the three months ended December 31, 2016, the Company recorded income tax expense of $17 million. The tax expense for the three months ended December 31, 2016 was higher than the expected tax expense at the statutory tax rate of 35% primarily due to income withholding taxes, state income taxes, foreign losses with no tax benefit and an increase in uncertain tax positions, partially offset by a reduction in valuation allowance. For the three months ended December 31, 2015, the Company recorded an income tax benefit of $3 million. The tax benefit for the three months ended December 31, 2015 was lower than the expected tax expense at the statutory tax rate of 35% primarily due to a $10 million benefit for changes in statutory tax rates in foreign jurisdictions and reduction in valuation allowance, partially offset by income withholding taxes, foreign losses with no tax benefit and an increase in uncertain tax positions. The Company has determined that is reasonably possible that its existing reserve for uncertain tax positions as of December 31, 2016 could decrease by up to approximately $20 million related to various ongoing audits and settlement discussions in various foreign jurisdictions. |
Derivative Financial Instrument
Derivative Financial Instruments | 3 Months Ended |
Dec. 31, 2016 | |
Derivative Instruments And Hedging Activities Disclosure [Abstract] | |
Derivative Financial Instruments | 8. Derivative Financial Instruments The Company uses derivative financial instruments, primarily foreign currency forward exchange contracts, for the purpose of managing foreign currency exchange risk by reducing the effects of fluctuations in foreign currency exchange rates. The Company enters into foreign currency forward exchange contracts primarily to hedge the risk that unremitted or future royalties and license fees owed to its domestic companies for the sale, or anticipated sale, of U.S.-copyrighted products abroad may be adversely affected by changes in foreign currency exchange rates. The Company focuses on managing the level of exposure to the risk of foreign currency exchange rate fluctuations on its major currencies, which include the Euro, British pound sterling, Japanese yen, Canadian dollar, Swedish krona and Australian dollar. The foreign currency forward exchange contracts related to royalties are designated and qualify as cash flow hedges under the criteria prescribed in ASC 815. The Company records these contracts at fair value on its balance sheet and gains or losses on these contracts are deferred in equity (as a component of comprehensive loss). These deferred gains and losses are recognized in income in the period in which the related royalties and license fees being hedged are received and recognized in income. However, to the extent that any of these contracts are not considered to be perfectly effective in offsetting the change in the value of the royalties and license fees being hedged, any changes in fair value relating to the ineffective portion of these contracts are immediately recognized in the statement of operations. The Company may at times choose to hedge foreign currency risk associated with financing transactions such as third-party debt and other balance sheet items. The foreign currency forward exchange contracts related to balance sheet items denominated in foreign currency are reviewed on a contract-by-contract basis and are designated accordingly. If these foreign currency forward exchange contracts do not qualify for hedge accounting, then the Company records these contracts at fair value on its balance sheet and the related gains and losses are immediately recognized in the statement of operations where there is an equal and offsetting entry related to the underlying exposure. The fair value of foreign currency forward exchange contracts is determined by using observable market transactions of spot and forward rates (i.e., Level 2 inputs) which is discussed further in Note 11. Additionally, netting provisions are provided for in existing International Swap and Derivative Association Inc. agreements in situations where the Company executes multiple contracts with the same counterparty. As a result, net assets or liabilities resulting from foreign exchange derivatives subject to these netting agreements are classified within other current assets or other current liabilities in the Company’s consolidated balance sheets. The Company monitors its positions with, and the credit quality of, the financial institutions that are party to any of its financial transactions. As of December 31, 2016, the Company had outstanding hedge contracts for the sale of $233 million and the purchase of $140 million of foreign currencies at fixed rates that will be settled by September 2017. As of December 31, 2016, the Company had $2 million of deferred losses in comprehensive loss related to foreign exchange hedging. As of September 30, 2016, the Company had no outstanding hedge contracts and no deferred gains or losses in comprehensive loss related to foreign exchange hedging. The following is a summary of amounts recorded in the Consolidated Balance Sheet pertaining to the Company’s use of foreign currency derivatives at December 31, 2016 and September 30, 2016: December 31, September 30, 2016 (a) 2016 (b) (in millions) Other current assets $ 6 $ — Other current liabilities — — (a) Includes $15 million and $9 million of foreign exchange derivative contracts in asset and liability positions, respectively. (b) Includes no foreign exchange derivative contracts in asset and liability positions. |
Segment Information
Segment Information | 3 Months Ended |
Dec. 31, 2016 | |
Segment Reporting [Abstract] | |
Segment Information | 9. Segment Information As discussed more fully in Note 1, based on the nature of its products and services, the Company classifies its business interests into two fundamental operations: Recorded Music and Music Publishing, which also represent reportable segments of the Company. Information as to each of these operations is set forth below. The Company evaluates performance based on several factors, of which the primary financial measure is operating income (loss) before non-cash depreciation of tangible assets and non-cash amortization of intangible assets (“OIBDA”). The Company has supplemented its analysis of OIBDA results by segment with an analysis of operating income (loss) by segment. The accounting policies of the Company’s business segments are the same as those described in the summary of significant accounting policies included elsewhere herein. The Company accounts for intersegment sales at fair value as if the sales were to third parties. While intercompany transactions are treated like third-party transactions to determine segment performance, the revenues (and corresponding expenses recognized by the segment that is counterparty to the transaction) are eliminated in consolidation, and therefore, do not themselves impact consolidated results. Corporate Recorded Music expenses and Music Publishing eliminations Total Three Months Ended (in millions) December 31, 2016 Revenues $ 797 $ 124 $ (4 ) $ 917 Operating income (loss) 123 (2 ) (27 ) 94 Amortization of intangible assets 35 16 — 51 Depreciation of property, plant and equipment 7 2 3 12 OIBDA 165 16 (24 ) 157 December 31, 2015 Revenues $ 737 $ 116 $ (4 ) $ 849 Operating income (loss) 98 (13 ) (23 ) 62 Amortization of intangible assets 46 16 — 62 Depreciation of property, plant and equipment 8 2 3 13 OIBDA 152 5 (20 ) 137 |
Additional Financial Informatio
Additional Financial Information | 3 Months Ended |
Dec. 31, 2016 | |
Additional Financial Information [Abstract] | |
Additional Financial Information | 10. Additional Financial Information Cash Interest and Taxes The Company made interest payments of approximately $47 million and $54 million during the three months ended December 31, 2016 and December 31, 2015, respectively. The Company paid approximately $9 million of income and withholding taxes during the three months ended December 31, 2016 and paid approximately $6 million of income and withholding taxes during the three months ended December 31, 2015. Special Cash Dividend On December 2, 2016, the Company’s Board of Directors approved a special cash dividend of $54 million which was paid on January 3, 2017 to stockholders of record as of December 30, 2016. The dividend is accrued at December 31, 2016 in other current liabilities. |
Fair Value Measurements
Fair Value Measurements | 3 Months Ended |
Dec. 31, 2016 | |
Fair Value Disclosures [Abstract] | |
Fair Value Measurements | 11. Fair Value Measurements ASC 820 defines fair value as the price that would be received upon sale of an asset or paid upon transfer of a liability in an orderly transaction between market participants at the measurement date and in the principal or most advantageous market for that asset or liability. The fair value should be calculated based on assumptions that market participants would use in pricing the asset or liability, not on assumptions specific to the entity. In addition to defining fair value, ASC 820 expands the disclosure requirements around fair value and establishes a fair value hierarchy for valuation inputs. The hierarchy prioritizes the inputs into three levels based on the extent to which inputs used in measuring fair value are observable in the market. Each fair value measurement is reported in one of the three levels which is determined by the lowest level input that is significant to the fair value measurement in its entirety. These levels are: Level 1—inputs are based upon unadjusted quoted prices for identical instruments traded in active markets. Level 2—inputs are based upon quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active and model-based valuation techniques for which all significant assumptions are observable in the market or can be corroborated by observable market data for substantially the full term of the assets or liabilities. Level 3—inputs are generally unobservable and typically reflect management’s estimates of assumptions that market participants would use in pricing the asset or liability. The fair values are therefore determined using model-based techniques that include option pricing models, discounted cash flow models and similar techniques. In accordance with the fair value hierarchy, described above, the following table shows the fair value of the Company’s financial instruments that are required to be measured at fair value as of December 31, 2016 and September 30, 2016. Fair Value Measurements as of December 31, 2016 (Level 1) (Level 2) (Level 3) Total (in millions) Other Current Assets: Foreign Currency Forward Exchange Contracts (a) $ — $ 6 $ — $ 6 Other Current Liabilities: Foreign Currency Forward Exchange Contracts (a) — — — — Other Current Liabilities: Contractual Obligations (b) — — — — Other Non-Current Liabilities: Contractual Obligations (b) — — (4 ) (4 ) Total $ — $ 6 $ (4 ) $ 2 Fair Value Measurements as of September 30, 2016 (Level 1) (Level 2) (Level 3) Total (in millions) Other Current Liabilities: Contractual Obligations (b) — — — — Other Non-Current Liabilities: Contractual Obligations (b) — — (4 ) (4 ) Total $ — $ — $ (4 ) $ (4 ) (a) The fair value of the foreign currency forward exchange contracts is based on dealer quotes of market forward rates and reflects the amount that the Company would receive or pay at their maturity dates for contracts involving the same currencies and maturity dates. (b) This represents purchase obligations and contingent consideration related to the Company’s various acquisitions. This is based on a discounted cash flow approach and it is adjusted to fair value on a recurring basis and any adjustments are included as a component of operating income in the statement of operations. These amounts were mainly calculated using unobservable inputs such as future earnings performance of the Company’s various acquisitions and the expected timing of the payment. The following table reconciles the beginning and ending balances of net assets and liabilities classified as Level 3: Total (in millions) Balance at September 30, 2016 (4 ) Additions — Reductions — Payments — Balance at December 31, 2016 $ (4 ) The majority of the Company’s non-financial instruments, which include goodwill, intangible assets, inventories, and property, plant, and equipment, are not required to be re-measured to fair value on a recurring basis. These assets are evaluated for impairment if certain triggering events occur. If such evaluation indicates that impairment exists, the asset is written down to its fair value. In addition, an impairment analysis is performed at least annually for goodwill and indefinite-lived intangible assets. Fair Value of Debt Based on the level of interest rates prevailing at December 31, 2016, the fair value of the Company’s debt was $2.869 billion. Based on the level of interest rates prevailing at September 30, 2016, the fair value of the Company’s debt was $2.896 billion. The fair value of the Company’s debt instruments are determined using quoted market prices from less active markets or by using quoted market prices for instruments with identical terms and maturities; both approaches are considered a Level 2 measurement. |
Guarantor and Non-Guarantor Sub
Guarantor and Non-Guarantor Subsidiaries Financial Information | 3 Months Ended |
Dec. 31, 2016 | |
Condensed Financial Information Of Parent Company Only Disclosure [Abstract] | |
Guarantor and Non-Guarantor Subsidiaries Financial Information | WARNER MUSIC GROUP CORP. Supplementary Information Consolidating Financial Statements The Company is the direct parent of Holdings, which is the direct parent of Acquisition Corp. Acquisition Corp. has issued and outstanding the 5.625% Senior Secured Notes due 2022, the 5.00% Senior Secured Notes due 2023, the 4.125% Senior Secured Notes due 2024, the 4.875% Senior Secured Notes due 2024 and the 6.75% Senior Notes due 2022 (together, the “Acquisition Corp. Notes”). The Acquisition Corp. Notes are guaranteed by the Company and, in addition, are guaranteed by all of Acquisition Corp.’s domestic wholly-owned subsidiaries. The secured notes are guaranteed on a senior secured basis and the unsecured notes are guaranteed on an unsecured senior basis. The Company’s guarantee of the Acquisition Corp. Notes is full and unconditional. The guarantee of the Acquisition Corp. Notes by Acquisition Corp.’s domestic, wholly-owned subsidiaries are full, unconditional, joint and several. The following condensed consolidating financial statements are also presented for the information of the holders of the Acquisition Corp. Notes and present the results of operations, financial position and cash flows of (i) Acquisition Corp., which is the issuer of the Acquisition Corp. Notes, (ii) the guarantor subsidiaries of Acquisition Corp., (iii) the non-guarantor subsidiaries of Acquisition Corp. and (iv) the eliminations necessary to arrive at the information for Acquisition Corp. on a consolidated basis. Investments in consolidated subsidiaries are presented under the equity method of accounting. There are no restrictions on Acquisition Corp.’s ability to obtain funds from any of its wholly-owned subsidiaries through dividends, loans or advances. The Company and Holdings are holding companies that conduct substantially all of their business operations through Acquisition Corp. Accordingly, the ability of the Company and Holdings to obtain funds from their subsidiaries is restricted by the indentures for the Acquisition Corp. Notes and the credit agreements for the Acquisition Corp. Senior Credit Facilities, including the Revolving Credit Facility and Senior Term Loan Facility. Consolidating Balance Sheet (Unaudited) December 31, 2016 WMG WMG Warner Warner Acquisition Non- Acquisition WMG Music Music Corp. Guarantor Guarantor Corp. Holdings Group Group Corp. (issuer) Subsidiaries Subsidiaries Eliminations Consolidated Corp. Corp. Eliminations Consolidated (in millions) Assets: Current assets: Cash and equivalents $ — $ 182 $ 273 $ — $ 455 $ — $ — $ — $ 455 Accounts receivable, net — 196 188 — 384 — — — 384 Inventories — 12 24 — 36 — — — 36 Royalty advances expected to be recouped within one year — 78 49 — 127 — — — 127 Prepaid and other current assets — 15 44 — 59 — — — 59 Total current assets — 483 578 — 1,061 — — — 1,061 Due (to) from parent companies 705 (366 ) (339 ) — — — — — — Investments in and advances to (from) consolidated subsidiaries 2,201 1,648 — (3,849 ) — 178 178 (356 ) — Royalty advances expected to be recouped after one year — 115 73 — 188 — — — 188 Property, plant and equipment, net — 135 60 — 195 — — — 195 Goodwill — 1,374 238 — 1,612 — — — 1,612 Intangible assets subject to amortization, net — 1,140 946 — 2,086 — — — 2,086 Intangible assets not subject to amortization — 71 44 — 115 — — — 115 Other assets 4 61 18 — 83 — — — 83 Total assets $ 2,910 $ 4,661 $ 1,618 $ (3,849 ) $ 5,340 $ 178 $ 178 $ (356 ) $ 5,340 Liabilities and Deficit: Current liabilities: Accounts payable $ — $ 71 $ 81 $ — $ 152 $ — $ — $ — $ 152 Accrued royalties — 646 538 — 1,184 — — — 1,184 Accrued liabilities — 119 200 — 319 — — — 319 Accrued interest 28 — — — 28 — — — 28 Deferred revenue — 113 62 — 175 — — — 175 Other current liabilities — 60 26 — 86 — — — 86 Total current liabilities 28 1,009 907 — 1,944 — — — 1,944 Long-term debt 2,755 — — — 2,755 — — — 2,755 Deferred tax liabilities, net — 113 155 — 268 — — — 268 Other noncurrent liabilities 3 131 99 — 233 — — — 233 Total liabilities 2,786 1,253 1,161 — 5,200 — — — 5,200 Total Warner Music Group Corp. equity 124 3,407 442 (3,849 ) 124 178 178 (356 ) 124 Noncontrolling interest — 1 15 — 16 — — — 16 Total equity 124 3,408 457 (3,849 ) 140 178 178 (356 ) 140 Total liabilities and equity $ 2,910 $ 4,661 $ 1,618 $ (3,849 ) $ 5,340 $ 178 $ 178 $ (356 ) $ 5,340 Consolidating Balance Sheet September 30, 2016 WMG WMG Warner Warner Acquisition Non- Acquisition WMG Music Music Corp. Guarantor Guarantor Corp. Holdings Group Group Corp. (issuer) Subsidiaries Subsidiaries Eliminations Consolidated Corp. Corp. Eliminations Consolidated (in millions) Assets: Current assets: Cash and equivalents $ — $ 180 $ 179 $ — $ 359 $ — $ — $ — $ 359 Accounts receivable, net — 177 152 — 329 — — — 329 Inventories — 16 25 — 41 — — — 41 Royalty advances expected to be recouped within one year — 79 49 — 128 — — — 128 Prepaid and other current assets 1 13 37 — 51 — — — 51 Total current assets 1 465 442 — 908 — — — 908 Due (to) from parent companies 750 (312 ) (438 ) — — — — — — Investments in and advances to (from) consolidated subsidiaries 2,260 1,458 — (3,718 ) — 195 195 (390 ) — Royalty advances expected to be recouped after one year — 120 76 — 196 — — — 196 Property, plant and equipment, net — 138 65 — 203 — — — 203 Goodwill — 1,372 255 — 1,627 — — — 1,627 Intangible assets subject to amortization, net — 1,165 1,036 — 2,201 — — — 2,201 Intangible assets not subject to amortization — 71 45 — 116 — — — 116 Other assets 3 62 19 — 84 — — — 84 Total assets $ 3,014 $ 4,539 $ 1,500 $ (3,718 ) $ 5,335 $ 195 $ 195 $ (390 ) $ 5,335 Liabilities and Deficit: Current liabilities: Accounts payable $ — $ 124 $ 80 $ — $ 204 $ — $ — $ — $ 204 Accrued royalties — 606 498 — 1,104 — — — 1,104 Accrued liabilities — 112 185 — 297 — — — 297 Accrued interest 38 — — — 38 — — — 38 Deferred revenue — 143 35 — 178 — — — 178 Current portion of long-term debt — — — — — — — — - Other current liabilities — 3 18 — 21 — — — 21 Total current liabilities 38 988 816 — 1,842 — — — 1,842 Long-term debt 2,778 — — — 2,778 — — — 2,778 Deferred tax liabilities, net — 109 160 — 269 — — — 269 Other noncurrent liabilities 3 126 107 — 236 — — — 236 Total liabilities 2,819 1,223 1,083 — 5,125 — — — 5,125 Total Warner Music Group Corp. equity (deficit) 195 3,314 404 (3,718 ) 195 195 195 (390 ) 195 Noncontrolling interest — 2 13 — 15 — — — 15 Total equity (deficit) 195 3,316 417 (3,718 ) 210 195 195 (390 ) 210 Total liabilities and equity (deficit) $ 3,014 $ 4,539 $ 1,500 $ (3,718 ) $ 5,335 $ 195 $ 195 $ (390 ) $ 5,335 Consolidating Statement of Operations (Unaudited) For The Three Months Ended December 31, 2016 WMG WMG Warner Warner Acquisition Non- Acquisition WMG Music Music Corp. Guarantor Guarantor Corp. Holdings Group Group Corp. (issuer) Subsidiaries Subsidiaries Eliminations Consolidated Corp. Corp. Eliminations Consolidated (in millions) Revenues $ — $ 490 $ 521 $ (94 ) $ 917 $ — $ — $ — $ 917 Costs and expenses: Cost of revenue — (220 ) (341 ) 65 (496 ) — — — (496 ) Selling, general and administrative expenses (1 ) (176 ) (128 ) 29 (276 ) — — — (276 ) Amortization of intangible assets — (25 ) (26 ) — (51 ) — — — (51 ) Total costs and expenses (1 ) (421 ) (495 ) 94 (823 ) — — — (823 ) Operating (loss) income (1 ) 69 26 — 94 — — — 94 Loss on extinguishment of debt (32 ) — — — (32 ) — — — (32 ) Interest (expense) income, net (23 ) 1 (18 ) — (40 ) — — — (40 ) Equity gains (losses) from equity method investments 83 40 — (123 ) — 22 22 (44 ) — Other income, net 12 3 4 — 19 — — — 19 Income before income taxes 39 113 12 (123 ) 41 22 22 (44 ) 41 Income tax (expense) benefit (17 ) (18 ) (9 ) 27 (17 ) — — — (17 ) Net income 22 95 3 (96 ) 24 22 22 (44 ) 24 Less: income attributable to noncontrolling interest — — (2 ) — (2 ) — — — (2 ) Net income attributable to Warner Music Group Corp. $ 22 $ 95 $ 1 $ (96 ) $ 22 $ 22 $ 22 $ (44 ) $ 22 Consolidating Statement of Operations (Unaudited) For The Three Months Ended December 31, 2015 WMG WMG Warner Warner Acquisition Non- Acquisition WMG Music Music Corp. Guarantor Guarantor Corp. Holdings Group Group Corp. (issuer) Subsidiaries Subsidiaries Eliminations Consolidated Corp. Corp. Eliminations Consolidated (in millions) Revenues $ — $ 448 $ 439 $ (38 ) $ 849 $ — $ — $ — $ 849 Costs and expenses: Cost of revenue — (221 ) (260 ) 32 (449 ) — — — (449 ) Selling, general and administrative expenses — (137 ) (144 ) 5 (276 ) — — — (276 ) Amortization of intangible assets — (31 ) (31 ) — (62 ) — — — (62 ) Total costs and expenses — (389 ) (435 ) 37 (787 ) — — — (787 ) Operating income (loss) — 59 4 (1 ) 62 — — — 62 Interest income (expense), net (20 ) 1 (21 ) — (40 ) (5 ) — — (45 ) Equity gains (losses) from equity method investments 47 19 — (66 ) — 32 27 (59 ) — Other income (expense), net 2 (1 ) 7 — 8 — — — 8 Income (loss) before income taxes 29 78 (10 ) (67 ) 30 27 27 (59 ) 25 Income tax benefit (expense) 3 (5 ) 4 1 3 — — — 3 Net income (loss) 32 73 (6 ) (66 ) 33 27 27 (59 ) 28 Less: income attributable to noncontrolling interest — — (1 ) — (1 ) — — — (1 ) Net income (loss) attributable to Warner Music Group Corp. $ 32 $ 73 $ (7 ) $ (66 ) $ 32 $ 27 $ 27 $ (59 ) $ 27 Consolidating Statement of Comprehensive Income (Unaudited) For The Three Months Ended December 31, 2016 WMG WMG Warner Warner Acquisition Non- Acquisition WMG Music Music Corp. Guarantor Guarantor Corp. Holdings Group Group Corp. (issuer) Subsidiaries Subsidiaries Eliminations Consolidated Corp. Corp. Eliminations Consolidated (in millions) Net income $ 22 $ 95 $ 3 $ (96 ) $ 24 $ 22 $ 22 $ (44 ) $ 24 Other comprehensive (loss) income, net of tax: Foreign currency adjustment (37 ) — 37 (37 ) (37 ) (37 ) (37 ) 74 (37 ) Deferred losses on derivative financial instruments (2 ) (2 ) — 2 (2 ) (2 ) (2 ) 4 (2 ) Other comprehensive (loss) income, net of tax: (39 ) (2 ) 37 (35 ) (39 ) (39 ) (39 ) 78 (39 ) Total comprehensive (loss) income (17 ) 93 40 (131 ) (15 ) (17 ) (17 ) 34 (15 ) Less: income attributable to noncontrolling interest — — (2 ) — (2 ) — — — (2 ) Comprehensive (loss) income attributable to Warner Music Group Corp. $ (17 ) $ 93 $ 38 $ (131 ) $ (17 ) $ (17 ) $ (17 ) $ 34 $ (17 ) Consolidating Statement of Comprehensive Income (Unaudited) For The Three Months Ended December 31, 2015 WMG WMG Warner Warner Acquisition Non- Acquisition WMG Music Music Corp. Guarantor Guarantor Corp. Holdings Group Group Corp. (issuer) Subsidiaries Subsidiaries Eliminations Consolidated Corp. Corp. Eliminations Consolidated (in millions) Net income (loss) $ 32 $ 73 $ (6 ) $ (66 ) $ 33 $ 27 $ 27 $ (59 ) $ 28 Other comprehensive (loss) income, net of tax: Foreign currency adjustment (24 ) — (24 ) 24 (24 ) (24 ) (24 ) 48 (24 ) Deferred losses on derivative financial instruments (1 ) (1 ) — 1 (1 ) (1 ) (1 ) 2 (1 ) Other comprehensive (loss) income, net of tax: (25 ) (1 ) (24 ) 25 (25 ) (25 ) (25 ) 50 (25 ) Total comprehensive income (loss) 7 72 (30 ) (41 ) 8 2 2 (9 ) 3 Less: income attributable to noncontrolling interest — — (1 ) — (1 ) — — — (1 ) Comprehensive income (loss) attributable to Warner Music Group Corp. $ 7 $ 72 $ (31 ) $ (41 ) $ 7 $ 2 $ 2 $ (9 ) $ 2 Consolidating Statement of Cash Flows (Unaudited) For The Three Months Ended December 31, 2016 WMG WMG Warner Warner Acquisition Non- Acquisition WMG Music Music Corp. Guarantor Guarantor Corp. Holdings Group Group Corp. (issuer) Subsidiaries Subsidiaries Eliminations Consolidated Corp. Corp. Eliminations Consolidated (in millions) Cash flows from operating activities Net income $ 22 $ 95 $ 3 $ (96 ) $ 24 $ 22 $ 22 $ (44 ) $ 24 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization — 35 28 — 63 — — — 63 Unrealized (gains)/losses and remeasurement of foreign denominated loans (21 ) (9 ) 13 — (17 ) — — — (17 ) Deferred income taxes — — (2 ) — (2 ) — — — (2 ) Loss on extinguishment of debt 32 — — — 32 — — — 32 Non-cash interest expense 3 — — — 3 — — — 3 Non-cash stock-based compensation expenses — 10 — — 10 — — — 10 Equity (gains) losses, including distributions (83 ) (40 ) — 123 — (22 ) (22 ) 44 — Changes in operating assets and liabilities: Accounts receivable — (19 ) (46 ) — (65 ) — — — (65 ) Inventories — 2 1 — 3 — — — 3 Royalty advances — 7 (6 ) — 1 — — — 1 Accounts payable and accrued liabilities — 6 9 (27 ) (12 ) — — — (12 ) Royalty payables — 40 72 — 112 — — — 112 Accrued interest (10 ) — — — (10 ) — — — (10 ) Deferred revenue — (33 ) 32 — (1 ) — — — (1 ) Other balance sheet changes — 12 3 — 15 — — — 15 Net cash provided by (used in) operating activities (57 ) 106 107 — 156 — — — 156 Cash flows from investing activities Acquisition of music publishing rights, net — — (1 ) — (1 ) — — — (1 ) Capital expenditures — (6 ) (2 ) — (8 ) — — — (8 ) Investments and acquisitions of businesses, net — (3 ) — — (3 ) — — — (3 ) Advances to issuer 95 — — (95 ) — — — — — Net cash (used in) provided by investing activities 95 (9 ) (3 ) (95 ) (12 ) — — — (12 ) Cash flows from financing activities Proceeds from issuance of Acquisition Corp. 4.125% Senior Secured Notes 380 — — — 380 — — — 380 Proceeds from issuance of Acquisition Corp. 4.875% Senior Secured Notes 250 — — — 250 — — — 250 Proceeds from issuance of Acquisition Corp. Senior Term Loan Facility 22 — — — 22 — — — 22 Repayment of Acquisition Corp. 6.00% Senior Secured Notes (450 ) — — — (450 ) — — — (450 ) Repayment of Acquisition Corp. 6.25% Senior Secured Notes (173 ) — — — (173 ) — — — (173 ) Repayment of Acquisition Corp. 5.625% Senior Secured Notes (28 ) — — — (28 ) — — — (28 ) Financing costs paid (27 ) — — — (27 ) — — — (27 ) Deferred financing costs paid (12 ) — — — (12 ) — — — (12 ) Change in due to (from) issuer — (95 ) — 95 — — — — — Net cash provided by (used in) financing activities (38 ) (95 ) — 95 (38 ) — — — (38 ) Effect of exchange rate changes on cash and equivalents — — (10 ) — (10 ) — — — (10 ) Net increase (decrease) in cash and equivalents — 2 94 — 96 — — — 96 Cash and equivalents at beginning of period — 180 179 — 359 — — — 359 Cash and equivalents at end of period $ — $ 182 $ 273 $ — $ 455 $ — $ — $ — $ 455 Consolidating Statement of Cash Flows (Unaudited) For The Three Months Ended December 31, 2015 WMG WMG Warner Warner Acquisition Non- Acquisition WMG Music Music Corp. Guarantor Guarantor Corp. Holdings Group Group Corp. (issuer) Subsidiaries Subsidiaries Eliminations Consolidated Corp. Corp. Eliminations Consolidated (in millions) Cash flows from operating activities Net income (loss) $ 32 $ 73 $ (6 ) $ (66 ) $ 33 $ 27 $ 27 $ (59 ) $ 28 Adjustments to reconcile net (loss) income to net cashprovided by operating activities: Depreciation and amortization — 41 34 — 75 — — — 75 Unrealized gains/losses and remeasurement of foreign denominated loans 120 19 (147 ) — (8 ) — — — (8 ) Deferred income taxes — — (9 ) — (9 ) — — — (9 ) Non-cash interest expense 2 — — — 2 — — — 2 Non-cash share-based compensation expense — 1 — — 1 — — — 1 Equity losses (gains), including distributions (47 ) (19 ) — 66 — (32 ) (27 ) 59 — Changes in operating assets and liabilities: Accounts receivable — (5 ) (58 ) — (63 ) — — — (63 ) Inventories — 2 (3 ) — (1 ) — — — (1 ) Royalty advances — (3 ) (13 ) — (16 ) — — — (16 ) Accounts payable and accrued liabilities — (184 ) 173 — (11 ) — — — (11 ) Royalty payables — 7 51 — 58 — — — 58 Accrued interest (6 ) — — — (6 ) (5 ) — — (11 ) Deferred revenue — (2 ) 3 — 1 — — — 1 Other balance sheet changes — — 15 — 15 — — — 15 Net cash provided by (used in) operating activities 101 (70 ) 40 — 71 (10 ) — — 61 Cash flows from investing activities Acquisition of music publishing rights, net — (6 ) (1 ) — (7 ) — — — (7 ) Capital expenditures — (7 ) (3 ) — (10 ) — — — (10 ) Investments and acquisitions of businesses, net — (1 ) — — (1 ) — — — (1 ) Advances to issuer (88 ) — — 88 — — — — — Net cash provided by (used in) investing activities (88 ) (14 ) (4 ) 88 (18 ) — — — (18 ) Cash flows from financing activities Dividend by Acquisition Corp. to Holdings Corp. (10 ) — — — (10 ) 10 — — — Repayment of Acquisition Corp. Senior Term Loan Facility (3 ) — — — (3 ) — — — (3 ) Distribution to noncontrolling interest holder — — (3 ) — (3 ) — — — (3 ) Change in due to (from) issuer — 88 — (88 ) — — — — — Net cash provided by (used in) financing activities (13 ) 88 (3 ) (88 ) (16 ) 10 — — (6 ) Effect of exchange rate changes on cash and equivalents — — (5 ) — (5 ) — — — (5 ) Net increase (decrease) in cash and equivalents — 4 28 — 32 — — — 32 Cash and equivalents at beginning of period — 73 173 — 246 — — — 246 Cash and equivalents at end of period $ — $ 77 $ 201 $ — $ 278 $ — $ — $ — $ 278 |
Summary of Significant Accoun22
Summary of Significant Accounting Policies (Policies) | 3 Months Ended |
Dec. 31, 2016 | |
Accounting Policies [Abstract] | |
Interim Financial Statements | Interim Financial Statements The accompanying unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and notes required by U.S. GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three month period ended December 31, 2016 are not necessarily indicative of the results that may be expected for the fiscal year ending September 30, 2017. The consolidated balance sheet at September 30, 2016 has been derived from the audited consolidated financial statements at that date but does not include all of the information and notes required by U.S. GAAP for complete financial statements. For further information, refer to the consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the fiscal year ended September 30, 2016 (File No. 001-32502). |
Basis of Consolidation | Basis of Consolidation The accompanying financial statements present the consolidated accounts of all entities in which the Company has a controlling voting interest and/or variable interest required to be consolidated in accordance with U.S. GAAP. All intercompany balances and transactions have been eliminated. Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 810, Consolidation (“ASC 810”) requires the Company first evaluate its investments to determine if any investments qualify as a variable interest entity (“VIE”). A VIE is consolidated if the Company is deemed to be the primary beneficiary of the VIE, which is the party involved with the VIE that has both (i) the power to control the most significant activities of the VIE and (ii) either the obligation to absorb losses or the right to receive benefits that could potentially be significant to the VIE. If an entity is not deemed to be a VIE, the Company consolidates the entity if the Company has a controlling voting interest. The Company maintains a 52-53 week fiscal year ending on the last Friday in each reporting period. As such, all references to December 31, 2016 and December 31, 2015 relate to the periods ended December 30, 2016 and December 25, 2015, respectively. For convenience purposes, the Company continues to date its financial statements as of December 31. The fiscal year ended September 30, 2016 ended on September 30, 2016. The Company has performed a review of all subsequent events through the date the financial statements were issued, and has determined that no additional disclosures are necessary. |
Income Taxes | Income Taxes At the end of each interim period, the Company makes its best estimate of the effective tax rate expected to be applicable for the full fiscal year and uses that rate to provide for income taxes on a current year-to-date basis before discrete items. If a reliable estimate of the annual effective tax rate cannot be made, which could be caused by the significant variability in rates when marginal earnings are expected for the year, a discrete tax rate is calculated for the period. |
New Accounting Pronouncements | New Accounting Pronouncements During the first quarter of fiscal 2017, the Company adopted ASU 2015-03, Simplifying the Presentation of Debt Issuance Costs (“ASU 2015-03”). ASU 2015-03 requires that debt issuance costs are presented as a direct deduction to the related debt in the liability section of the balance sheet, rather than presented as an asset. The Company has elected to adopt this standard retrospectively, and thus the Company reclassified prior period balances. The application of ASU 2015-03 to the Company’s September 30, 2016 Consolidated Balance Sheets resulted in a decrease to other assets of $34 million and a decrease to long-term debt of $34 million. In May 2014, the FASB issued guidance codified in ASC 606, Revenue Recognition – Revenue from Contracts with Customers (“ASC 606”), which replaces the guidance in former ASC 605, Revenue Recognition and ASC 928, Entertainment – Music. The amendment was the result of a joint effort by the FASB and the International Accounting Standards Board to improve financial reporting by creating common revenue recognition guidance for U.S. GAAP and international financial reporting standards ("IFRS"). The joint project clarifies the principles for recognizing revenue and develops a common revenue standard for U.S. GAAP and IFRS. ASC 606 is effective for annual periods beginning after December 15, 2017, and interim periods within those years. Early adoption is permitted only as of annual reporting periods beginning after December 15, 2016, including interim reporting periods within that reporting period. The update may be applied using one of two methods: retrospective application to each prior reporting period presented, or retrospective application with the cumulative effect of initially applying the update recognized at the date of initial application. The Company is currently evaluating the transition method that will be elected and the impact of the update on its financial statements and disclosures. In August 2014, the FASB issued ASU 2014-15, Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern (“ASU 2014-15”). This ASU will explicitly require management to assess an entity’s ability to continue as a going concern, and to provide related disclosure when substantial doubt exists. ASU 2014-15 will be effective in the first annual period ending after December 15, 2016, and interim periods thereafter. Earlier adoption is permitted. The Company does not expect the adoption of this guidance to have a material effect on our consolidated financial statements. In January 2016, the FASB issued ASU 2016-01, Recognition and Measurement of Financial Assets and Financial Liabilities (“ASU 2016-01”). This ASU will require that equity investments are measured at fair value with changes in fair value recognized in net income. The Company may elect to measure equity investments that do not have a readily determinable fair value at cost minus impairment, if any, plus or minus changes resulting from observable price. ASU 2016-01 will be effective for annual periods beginning after December 15, 2017, and interim periods within those years. Earlier adoption is permitted. The adoption of this standard is not expected to have a significant impact on the Company’s financial statements, other than disclosure. In February 2016, the FASB issued ASU 2016-02, Leases (“ASU 2016-02”). This ASU establishes a right-of-use (“ROU”) model that requires a lessee to record a ROU asset and a lease liability on the balance sheet for all leases with terms longer than 12 months. Leases will be classified as either finance or operating, with classification affecting the pattern of expense recognition in the statement of operations. ASU 2016-02 will be effective for annual periods beginning after December 15, 2018, and interim periods within those years. Earlier adoption is permitted. The Company is evaluating the impact of the adoption of this standard on its financial statements and disclosures. In March 2016, the FASB issued ASU 2016-05, Derivatives and Hedging: Effect of Derivative Contract Novations on Existing Hedge Accounting Relationships (“ASU 2016-05”) and ASU 2016-06, Derivatives and Hedging: Contingent Put and Call Options in Debt Instruments (“ASU 2016-06”). ASU 2016-05 clarifies that a change in the counterparty to a derivative instrument that has been designated as a hedging instrument does not, in and of itself, require dedesignation of that hedging relationship provided that all other hedge accounting criteria continue to be met. ASU 2016-06 clarifies the steps required to determine bifurcation of an embedded derivative. ASU 2016- 05 and ASU 2016-06 are effective for annual periods beginning after December 15, 2016, and interim periods within those years. Early adoption is permitted. The guidance may be adopted prospectively or by a modified retrospective approach. The adoption of this standard is not expected to have a significant impact on the Company’s financial statements. In March 2016, the FASB issued ASU 2016-09, Compensation - Stock Compensation ("ASU 2016-09"). This ASU provides amended guidance which simplifies the accounting for share-based payment transactions involving multiple aspects of the accounting for share-based transactions, including income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. ASU 2016-09 is effective for annual periods beginning after December 15, 2016, and interim periods within those years. Early adoption is permitted. The Company is evaluating the impact of the adoption of this standard on its financial statements and disclosures. In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows: Classification of Certain Cash Receipts and Cash Payments ("ASU 2016-15"). This ASU provides specific guidance of how certain cash receipts and cash payments should be presented and classified in the statement of cash flows. ASU 2016-15 is effective for annual periods beginning after December 15, 2017, and interim periods within those years. Early adoption is permitted. The adoption of this standard is not expected to have a significant impact on the Company’s financial statements, other than presentation. In October 2016, the FASB issued ASU 2016-16, Income Taxes: Intra-Entity Transfers of Assets Other Than Inventory ("ASU 2016-16"). This ASU requires the recognition of current and deferred income taxes for intra-entity asset transfers when the transaction occurs. ASU 2016-16 is effective for annual periods beginning after December 15, 2017, and interim periods within those years. Early adoption is permitted using the modified retrospective approach with a cumulative-effect to opening retained earnings in the period of adoption. The Company does not plan to early adopt this standard and the impact upon the required adoption date is not known or reasonably estimable. |
Comprehensive Loss (Tables)
Comprehensive Loss (Tables) | 3 Months Ended |
Dec. 31, 2016 | |
Equity [Abstract] | |
Schedule of Accumulated Other Comprehensive Loss | Comprehensive loss, which is reported in the accompanying consolidated statements of equity, consists of net income (loss) and other gains and losses affecting equity that, under U.S. GAAP, are excluded from net income (loss). For the Company, the components of other comprehensive loss primarily consist of foreign currency translation losses and minimum pension liabilities. The following summary sets forth the changes in the components of accumulated other comprehensive loss, net of related taxes of nil: Foreign Minimum Deferred Losses Accumulated Currency Pension On Derivative Other Translation Liability Financial Comprehensive Loss (a) Adjustment Instruments Loss, net (in millions) Balance at September 30, 2016 $ (201 ) $ (17 ) $ — $ (218 ) Other comprehensive loss (37 ) — (2 ) (39 ) Amounts reclassified from accumulated other comprehensive income — — — — Balance at December 31, 2016 $ (238 ) $ (17 ) $ (2 ) $ (257 ) (a) Foreign currency translation adjustments include intra-entity foreign currency transactions that are of a long-term investment nature of $38.9 million. |
Goodwill and Intangible Assets
Goodwill and Intangible Assets (Tables) | 3 Months Ended |
Dec. 31, 2016 | |
Goodwill And Intangible Assets Disclosure [Abstract] | |
Changes in Goodwill for Each Reportable Segment | The following analysis details the changes in goodwill for each reportable segment: Recorded Music Music Publishing Total (in millions) Balance at September 30, 2016 $ 1,163 $ 464 $ 1,627 Acquisitions 2 — 2 Divestitures — — — Other adjustments (a) (17 ) — (17 ) Balance at December 31, 2016 $ 1,148 $ 464 $ 1,612 (a) Other adjustments during the three months ended December 31, 2016 represent foreign currency movements. |
Schedule of Intangible Assets | Intangible assets consist of the following: Weighted Average December 31, September 30, Useful Life 2016 2016 (in millions) Intangible assets subject to amortization: Recorded music catalog 10 years $ 890 $ 923 Music publishing copyrights 27 years 1,466 1,504 Artist and songwriter contracts 13 years 853 883 Trademarks 7 years 7 7 Other intangible assets 8 years 5 5 Total gross intangible asset subject to amortization 3,221 3,322 Accumulated amortization (1,135 ) (1,121 ) Total net intangible assets subject to amortization 2,086 2,201 Intangible assets not subject to amortization: Trademarks and tradenames Indefinite 115 116 Total net intangible assets $ 2,201 $ 2,317 |
Debt (Tables)
Debt (Tables) | 3 Months Ended |
Dec. 31, 2016 | |
Debt Disclosure [Abstract] | |
Long-term Debt | Long-term debt consists of the following: December 31, September 30, 2016 2016 (in millions) Revolving Credit Facility—Acquisition Corp. (a) $ — $ — Senior Term Loan Facility due 2023—Acquisition Corp. (b) 985 963 6.00% Senior Secured Notes due 2021—Acquisition Corp. (c) — 444 6.25% Senior Secured Notes due 2021—Acquisition Corp. (d) — 174 5.625% Senior Secured Notes due 2022—Acquisition Corp. (e) 246 272 5.00% Senior Secured Notes due 2023—Acquisition Corp. (f) 296 296 4.125% Senior Secured Notes due 2024— Acquisition Corp. (g) 356 — 4.875% Senior Secured Notes due 2024— Acquisition Corp. (h) 243 — 6.75% Senior Notes due 2022—Acquisition Corp. (i) 629 629 Total debt (j) $ 2,755 $ 2,778 (a) Reflects $150 million of commitments under the Revolving Credit Facility, less letters of credit outstanding of approximately $13 million and $5 million at December 31, 2016 and September 30, 2016, respectively. There were no loans outstanding under the Revolving Credit Facility at December 31, 2016 or September 30, 2016. (b) Principal amount of $1.006 billion and $978 million less unamortized discount of $8 million and $3 million and unamortized deferred financing costs of $13 million and $12 million at December 31, 2016 and September 30, 2016, respectively. (c) Principal amount of $450 million less unamortized deferred financing costs of $6 million at September 30, 2016. (d) Face amount of €158 million. Above amounts represent the dollar equivalent of such notes at September 30, 2016. Principal amount of $177 million less unamortized deferred financing costs of $3 million at September 30, 2016. (e) Principal amount of $248 million and $275 million less unamortized deferred financing costs of $2 million and $3 million at December 31, 2016 and September 30, 2016, respectively. (f) Principal amount of $300 million less unamortized deferred financing costs of $4 million at both December 31, 2016 and September 30, 2016. (g) Face amount of €345 million. Above amounts represent the dollar equivalent of such notes at December 31, 2016. Principal amount of $359 million less unamortized deferred financing costs of $3 million at December 31, 2016. (h) Principal amount of $250 million less unamortized deferred financing costs of $7 million at December 31, 2016. (i) Principal amount of $635 million less unamortized deferred financing costs of $6 million at both December 31, 2016 and September 30, 2016. (j) Principal amount of debt of $2.798 billion and $2.815 billion less unamortized discount of $8 million and $3 million and unamortized deferred financing costs of $35 million and $34 million at December 31, 2016 and September 30, 2016, respectively. |
Derivative Financial Instrume26
Derivative Financial Instruments (Tables) | 3 Months Ended |
Dec. 31, 2016 | |
Derivative Instruments And Hedging Activities Disclosure [Abstract] | |
Summary of Amounts Recorded in Consolidated Balance Sheet | The following is a summary of amounts recorded in the Consolidated Balance Sheet pertaining to the Company’s use of foreign currency derivatives at December 31, 2016 and September 30, 2016: December 31, September 30, 2016 (a) 2016 (b) (in millions) Other current assets $ 6 $ — Other current liabilities — — (a) Includes $15 million and $9 million of foreign exchange derivative contracts in asset and liability positions, respectively. (b) Includes no foreign exchange derivative contracts in asset and liability positions. |
Segment Information (Tables)
Segment Information (Tables) | 3 Months Ended |
Dec. 31, 2016 | |
Segment Reporting [Abstract] | |
Schedule of Segment Information | The accounting policies of the Company’s business segments are the same as those described in the summary of significant accounting policies included elsewhere herein. The Company accounts for intersegment sales at fair value as if the sales were to third parties. While intercompany transactions are treated like third-party transactions to determine segment performance, the revenues (and corresponding expenses recognized by the segment that is counterparty to the transaction) are eliminated in consolidation, and therefore, do not themselves impact consolidated results. Corporate Recorded Music expenses and Music Publishing eliminations Total Three Months Ended (in millions) December 31, 2016 Revenues $ 797 $ 124 $ (4 ) $ 917 Operating income (loss) 123 (2 ) (27 ) 94 Amortization of intangible assets 35 16 — 51 Depreciation of property, plant and equipment 7 2 3 12 OIBDA 165 16 (24 ) 157 December 31, 2015 Revenues $ 737 $ 116 $ (4 ) $ 849 Operating income (loss) 98 (13 ) (23 ) 62 Amortization of intangible assets 46 16 — 62 Depreciation of property, plant and equipment 8 2 3 13 OIBDA 152 5 (20 ) 137 |
Fair Value Measurements (Tables
Fair Value Measurements (Tables) | 3 Months Ended |
Dec. 31, 2016 | |
Fair Value Disclosures [Abstract] | |
Schedule of Fair Value of Financial Instruments | In accordance with the fair value hierarchy, described above, the following table shows the fair value of the Company’s financial instruments that are required to be measured at fair value as of December 31, 2016 and September 30, 2016. Fair Value Measurements as of December 31, 2016 (Level 1) (Level 2) (Level 3) Total (in millions) Other Current Assets: Foreign Currency Forward Exchange Contracts (a) $ — $ 6 $ — $ 6 Other Current Liabilities: Foreign Currency Forward Exchange Contracts (a) — — — — Other Current Liabilities: Contractual Obligations (b) — — — — Other Non-Current Liabilities: Contractual Obligations (b) — — (4 ) (4 ) Total $ — $ 6 $ (4 ) $ 2 Fair Value Measurements as of September 30, 2016 (Level 1) (Level 2) (Level 3) Total (in millions) Other Current Liabilities: Contractual Obligations (b) — — — — Other Non-Current Liabilities: Contractual Obligations (b) — — (4 ) (4 ) Total $ — $ — $ (4 ) $ (4 ) (a) The fair value of the foreign currency forward exchange contracts is based on dealer quotes of market forward rates and reflects the amount that the Company would receive or pay at their maturity dates for contracts involving the same currencies and maturity dates. (b) This represents purchase obligations and contingent consideration related to the Company’s various acquisitions. This is based on a discounted cash flow approach and it is adjusted to fair value on a recurring basis and any adjustments are included as a component of operating income in the statement of operations. These amounts were mainly calculated using unobservable inputs such as future earnings performance of the Company’s various acquisitions and the expected timing of the payment. |
Reconciliation of Net Liabilities Classified as Level 3 | The following table reconciles the beginning and ending balances of net assets and liabilities classified as Level 3: Total (in millions) Balance at September 30, 2016 (4 ) Additions — Reductions — Payments — Balance at December 31, 2016 $ (4 ) |
Guarantor and Non-Guarantor S29
Guarantor and Non-Guarantor Subsidiaries Financial Information (Tables) | 3 Months Ended |
Dec. 31, 2016 | |
Condensed Financial Information Of Parent Company Only Disclosure [Abstract] | |
Schedule of Consolidating Balance Sheet | Consolidating Balance Sheet (Unaudited) December 31, 2016 WMG WMG Warner Warner Acquisition Non- Acquisition WMG Music Music Corp. Guarantor Guarantor Corp. Holdings Group Group Corp. (issuer) Subsidiaries Subsidiaries Eliminations Consolidated Corp. Corp. Eliminations Consolidated (in millions) Assets: Current assets: Cash and equivalents $ — $ 182 $ 273 $ — $ 455 $ — $ — $ — $ 455 Accounts receivable, net — 196 188 — 384 — — — 384 Inventories — 12 24 — 36 — — — 36 Royalty advances expected to be recouped within one year — 78 49 — 127 — — — 127 Prepaid and other current assets — 15 44 — 59 — — — 59 Total current assets — 483 578 — 1,061 — — — 1,061 Due (to) from parent companies 705 (366 ) (339 ) — — — — — — Investments in and advances to (from) consolidated subsidiaries 2,201 1,648 — (3,849 ) — 178 178 (356 ) — Royalty advances expected to be recouped after one year — 115 73 — 188 — — — 188 Property, plant and equipment, net — 135 60 — 195 — — — 195 Goodwill — 1,374 238 — 1,612 — — — 1,612 Intangible assets subject to amortization, net — 1,140 946 — 2,086 — — — 2,086 Intangible assets not subject to amortization — 71 44 — 115 — — — 115 Other assets 4 61 18 — 83 — — — 83 Total assets $ 2,910 $ 4,661 $ 1,618 $ (3,849 ) $ 5,340 $ 178 $ 178 $ (356 ) $ 5,340 Liabilities and Deficit: Current liabilities: Accounts payable $ — $ 71 $ 81 $ — $ 152 $ — $ — $ — $ 152 Accrued royalties — 646 538 — 1,184 — — — 1,184 Accrued liabilities — 119 200 — 319 — — — 319 Accrued interest 28 — — — 28 — — — 28 Deferred revenue — 113 62 — 175 — — — 175 Other current liabilities — 60 26 — 86 — — — 86 Total current liabilities 28 1,009 907 — 1,944 — — — 1,944 Long-term debt 2,755 — — — 2,755 — — — 2,755 Deferred tax liabilities, net — 113 155 — 268 — — — 268 Other noncurrent liabilities 3 131 99 — 233 — — — 233 Total liabilities 2,786 1,253 1,161 — 5,200 — — — 5,200 Total Warner Music Group Corp. equity 124 3,407 442 (3,849 ) 124 178 178 (356 ) 124 Noncontrolling interest — 1 15 — 16 — — — 16 Total equity 124 3,408 457 (3,849 ) 140 178 178 (356 ) 140 Total liabilities and equity $ 2,910 $ 4,661 $ 1,618 $ (3,849 ) $ 5,340 $ 178 $ 178 $ (356 ) $ 5,340 Consolidating Balance Sheet September 30, 2016 WMG WMG Warner Warner Acquisition Non- Acquisition WMG Music Music Corp. Guarantor Guarantor Corp. Holdings Group Group Corp. (issuer) Subsidiaries Subsidiaries Eliminations Consolidated Corp. Corp. Eliminations Consolidated (in millions) Assets: Current assets: Cash and equivalents $ — $ 180 $ 179 $ — $ 359 $ — $ — $ — $ 359 Accounts receivable, net — 177 152 — 329 — — — 329 Inventories — 16 25 — 41 — — — 41 Royalty advances expected to be recouped within one year — 79 49 — 128 — — — 128 Prepaid and other current assets 1 13 37 — 51 — — — 51 Total current assets 1 465 442 — 908 — — — 908 Due (to) from parent companies 750 (312 ) (438 ) — — — — — — Investments in and advances to (from) consolidated subsidiaries 2,260 1,458 — (3,718 ) — 195 195 (390 ) — Royalty advances expected to be recouped after one year — 120 76 — 196 — — — 196 Property, plant and equipment, net — 138 65 — 203 — — — 203 Goodwill — 1,372 255 — 1,627 — — — 1,627 Intangible assets subject to amortization, net — 1,165 1,036 — 2,201 — — — 2,201 Intangible assets not subject to amortization — 71 45 — 116 — — — 116 Other assets 3 62 19 — 84 — — — 84 Total assets $ 3,014 $ 4,539 $ 1,500 $ (3,718 ) $ 5,335 $ 195 $ 195 $ (390 ) $ 5,335 Liabilities and Deficit: Current liabilities: Accounts payable $ — $ 124 $ 80 $ — $ 204 $ — $ — $ — $ 204 Accrued royalties — 606 498 — 1,104 — — — 1,104 Accrued liabilities — 112 185 — 297 — — — 297 Accrued interest 38 — — — 38 — — — 38 Deferred revenue — 143 35 — 178 — — — 178 Current portion of long-term debt — — — — — — — — - Other current liabilities — 3 18 — 21 — — — 21 Total current liabilities 38 988 816 — 1,842 — — — 1,842 Long-term debt 2,778 — — — 2,778 — — — 2,778 Deferred tax liabilities, net — 109 160 — 269 — — — 269 Other noncurrent liabilities 3 126 107 — 236 — — — 236 Total liabilities 2,819 1,223 1,083 — 5,125 — — — 5,125 Total Warner Music Group Corp. equity (deficit) 195 3,314 404 (3,718 ) 195 195 195 (390 ) 195 Noncontrolling interest — 2 13 — 15 — — — 15 Total equity (deficit) 195 3,316 417 (3,718 ) 210 195 195 (390 ) 210 Total liabilities and equity (deficit) $ 3,014 $ 4,539 $ 1,500 $ (3,718 ) $ 5,335 $ 195 $ 195 $ (390 ) $ 5,335 |
Schedule of Consolidating Statement of Operations | Consolidating Statement of Operations (Unaudited) For The Three Months Ended December 31, 2016 WMG WMG Warner Warner Acquisition Non- Acquisition WMG Music Music Corp. Guarantor Guarantor Corp. Holdings Group Group Corp. (issuer) Subsidiaries Subsidiaries Eliminations Consolidated Corp. Corp. Eliminations Consolidated (in millions) Revenues $ — $ 490 $ 521 $ (94 ) $ 917 $ — $ — $ — $ 917 Costs and expenses: Cost of revenue — (220 ) (341 ) 65 (496 ) — — — (496 ) Selling, general and administrative expenses (1 ) (176 ) (128 ) 29 (276 ) — — — (276 ) Amortization of intangible assets — (25 ) (26 ) — (51 ) — — — (51 ) Total costs and expenses (1 ) (421 ) (495 ) 94 (823 ) — — — (823 ) Operating (loss) income (1 ) 69 26 — 94 — — — 94 Loss on extinguishment of debt (32 ) — — — (32 ) — — — (32 ) Interest (expense) income, net (23 ) 1 (18 ) — (40 ) — — — (40 ) Equity gains (losses) from equity method investments 83 40 — (123 ) — 22 22 (44 ) — Other income, net 12 3 4 — 19 — — — 19 Income before income taxes 39 113 12 (123 ) 41 22 22 (44 ) 41 Income tax (expense) benefit (17 ) (18 ) (9 ) 27 (17 ) — — — (17 ) Net income 22 95 3 (96 ) 24 22 22 (44 ) 24 Less: income attributable to noncontrolling interest — — (2 ) — (2 ) — — — (2 ) Net income attributable to Warner Music Group Corp. $ 22 $ 95 $ 1 $ (96 ) $ 22 $ 22 $ 22 $ (44 ) $ 22 Consolidating Statement of Operations (Unaudited) For The Three Months Ended December 31, 2015 WMG WMG Warner Warner Acquisition Non- Acquisition WMG Music Music Corp. Guarantor Guarantor Corp. Holdings Group Group Corp. (issuer) Subsidiaries Subsidiaries Eliminations Consolidated Corp. Corp. Eliminations Consolidated (in millions) Revenues $ — $ 448 $ 439 $ (38 ) $ 849 $ — $ — $ — $ 849 Costs and expenses: Cost of revenue — (221 ) (260 ) 32 (449 ) — — — (449 ) Selling, general and administrative expenses — (137 ) (144 ) 5 (276 ) — — — (276 ) Amortization of intangible assets — (31 ) (31 ) — (62 ) — — — (62 ) Total costs and expenses — (389 ) (435 ) 37 (787 ) — — — (787 ) Operating income (loss) — 59 4 (1 ) 62 — — — 62 Interest income (expense), net (20 ) 1 (21 ) — (40 ) (5 ) — — (45 ) Equity gains (losses) from equity method investments 47 19 — (66 ) — 32 27 (59 ) — Other income (expense), net 2 (1 ) 7 — 8 — — — 8 Income (loss) before income taxes 29 78 (10 ) (67 ) 30 27 27 (59 ) 25 Income tax benefit (expense) 3 (5 ) 4 1 3 — — — 3 Net income (loss) 32 73 (6 ) (66 ) 33 27 27 (59 ) 28 Less: income attributable to noncontrolling interest — — (1 ) — (1 ) — — — (1 ) Net income (loss) attributable to Warner Music Group Corp. $ 32 $ 73 $ (7 ) $ (66 ) $ 32 $ 27 $ 27 $ (59 ) $ 27 |
Schedule of Consolidating Statement of Comprehensive Income | Consolidating Statement of Comprehensive Income (Unaudited) For The Three Months Ended December 31, 2016 WMG WMG Warner Warner Acquisition Non- Acquisition WMG Music Music Corp. Guarantor Guarantor Corp. Holdings Group Group Corp. (issuer) Subsidiaries Subsidiaries Eliminations Consolidated Corp. Corp. Eliminations Consolidated (in millions) Net income $ 22 $ 95 $ 3 $ (96 ) $ 24 $ 22 $ 22 $ (44 ) $ 24 Other comprehensive (loss) income, net of tax: Foreign currency adjustment (37 ) — 37 (37 ) (37 ) (37 ) (37 ) 74 (37 ) Deferred losses on derivative financial instruments (2 ) (2 ) — 2 (2 ) (2 ) (2 ) 4 (2 ) Other comprehensive (loss) income, net of tax: (39 ) (2 ) 37 (35 ) (39 ) (39 ) (39 ) 78 (39 ) Total comprehensive (loss) income (17 ) 93 40 (131 ) (15 ) (17 ) (17 ) 34 (15 ) Less: income attributable to noncontrolling interest — — (2 ) — (2 ) — — — (2 ) Comprehensive (loss) income attributable to Warner Music Group Corp. $ (17 ) $ 93 $ 38 $ (131 ) $ (17 ) $ (17 ) $ (17 ) $ 34 $ (17 ) Consolidating Statement of Comprehensive Income (Unaudited) For The Three Months Ended December 31, 2015 WMG WMG Warner Warner Acquisition Non- Acquisition WMG Music Music Corp. Guarantor Guarantor Corp. Holdings Group Group Corp. (issuer) Subsidiaries Subsidiaries Eliminations Consolidated Corp. Corp. Eliminations Consolidated (in millions) Net income (loss) $ 32 $ 73 $ (6 ) $ (66 ) $ 33 $ 27 $ 27 $ (59 ) $ 28 Other comprehensive (loss) income, net of tax: Foreign currency adjustment (24 ) — (24 ) 24 (24 ) (24 ) (24 ) 48 (24 ) Deferred losses on derivative financial instruments (1 ) (1 ) — 1 (1 ) (1 ) (1 ) 2 (1 ) Other comprehensive (loss) income, net of tax: (25 ) (1 ) (24 ) 25 (25 ) (25 ) (25 ) 50 (25 ) Total comprehensive income (loss) 7 72 (30 ) (41 ) 8 2 2 (9 ) 3 Less: income attributable to noncontrolling interest — — (1 ) — (1 ) — — — (1 ) Comprehensive income (loss) attributable to Warner Music Group Corp. $ 7 $ 72 $ (31 ) $ (41 ) $ 7 $ 2 $ 2 $ (9 ) $ 2 |
Schedule of Consolidating Statement of Cash Flows | Consolidating Statement of Cash Flows (Unaudited) For The Three Months Ended December 31, 2016 WMG WMG Warner Warner Acquisition Non- Acquisition WMG Music Music Corp. Guarantor Guarantor Corp. Holdings Group Group Corp. (issuer) Subsidiaries Subsidiaries Eliminations Consolidated Corp. Corp. Eliminations Consolidated (in millions) Cash flows from operating activities Net income $ 22 $ 95 $ 3 $ (96 ) $ 24 $ 22 $ 22 $ (44 ) $ 24 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization — 35 28 — 63 — — — 63 Unrealized (gains)/losses and remeasurement of foreign denominated loans (21 ) (9 ) 13 — (17 ) — — — (17 ) Deferred income taxes — — (2 ) — (2 ) — — — (2 ) Loss on extinguishment of debt 32 — — — 32 — — — 32 Non-cash interest expense 3 — — — 3 — — — 3 Non-cash stock-based compensation expenses — 10 — — 10 — — — 10 Equity (gains) losses, including distributions (83 ) (40 ) — 123 — (22 ) (22 ) 44 — Changes in operating assets and liabilities: Accounts receivable — (19 ) (46 ) — (65 ) — — — (65 ) Inventories — 2 1 — 3 — — — 3 Royalty advances — 7 (6 ) — 1 — — — 1 Accounts payable and accrued liabilities — 6 9 (27 ) (12 ) — — — (12 ) Royalty payables — 40 72 — 112 — — — 112 Accrued interest (10 ) — — — (10 ) — — — (10 ) Deferred revenue — (33 ) 32 — (1 ) — — — (1 ) Other balance sheet changes — 12 3 — 15 — — — 15 Net cash provided by (used in) operating activities (57 ) 106 107 — 156 — — — 156 Cash flows from investing activities Acquisition of music publishing rights, net — — (1 ) — (1 ) — — — (1 ) Capital expenditures — (6 ) (2 ) — (8 ) — — — (8 ) Investments and acquisitions of businesses, net — (3 ) — — (3 ) — — — (3 ) Advances to issuer 95 — — (95 ) — — — — — Net cash (used in) provided by investing activities 95 (9 ) (3 ) (95 ) (12 ) — — — (12 ) Cash flows from financing activities Proceeds from issuance of Acquisition Corp. 4.125% Senior Secured Notes 380 — — — 380 — — — 380 Proceeds from issuance of Acquisition Corp. 4.875% Senior Secured Notes 250 — — — 250 — — — 250 Proceeds from issuance of Acquisition Corp. Senior Term Loan Facility 22 — — — 22 — — — 22 Repayment of Acquisition Corp. 6.00% Senior Secured Notes (450 ) — — — (450 ) — — — (450 ) Repayment of Acquisition Corp. 6.25% Senior Secured Notes (173 ) — — — (173 ) — — — (173 ) Repayment of Acquisition Corp. 5.625% Senior Secured Notes (28 ) — — — (28 ) — — — (28 ) Financing costs paid (27 ) — — — (27 ) — — — (27 ) Deferred financing costs paid (12 ) — — — (12 ) — — — (12 ) Change in due to (from) issuer — (95 ) — 95 — — — — — Net cash provided by (used in) financing activities (38 ) (95 ) — 95 (38 ) — — — (38 ) Effect of exchange rate changes on cash and equivalents — — (10 ) — (10 ) — — — (10 ) Net increase (decrease) in cash and equivalents — 2 94 — 96 — — — 96 Cash and equivalents at beginning of period — 180 179 — 359 — — — 359 Cash and equivalents at end of period $ — $ 182 $ 273 $ — $ 455 $ — $ — $ — $ 455 Consolidating Statement of Cash Flows (Unaudited) For The Three Months Ended December 31, 2015 WMG WMG Warner Warner Acquisition Non- Acquisition WMG Music Music Corp. Guarantor Guarantor Corp. Holdings Group Group Corp. (issuer) Subsidiaries Subsidiaries Eliminations Consolidated Corp. Corp. Eliminations Consolidated (in millions) Cash flows from operating activities Net income (loss) $ 32 $ 73 $ (6 ) $ (66 ) $ 33 $ 27 $ 27 $ (59 ) $ 28 Adjustments to reconcile net (loss) income to net cashprovided by operating activities: Depreciation and amortization — 41 34 — 75 — — — 75 Unrealized gains/losses and remeasurement of foreign denominated loans 120 19 (147 ) — (8 ) — — — (8 ) Deferred income taxes — — (9 ) — (9 ) — — — (9 ) Non-cash interest expense 2 — — — 2 — — — 2 Non-cash share-based compensation expense — 1 — — 1 — — — 1 Equity losses (gains), including distributions (47 ) (19 ) — 66 — (32 ) (27 ) 59 — Changes in operating assets and liabilities: Accounts receivable — (5 ) (58 ) — (63 ) — — — (63 ) Inventories — 2 (3 ) — (1 ) — — — (1 ) Royalty advances — (3 ) (13 ) — (16 ) — — — (16 ) Accounts payable and accrued liabilities — (184 ) 173 — (11 ) — — — (11 ) Royalty payables — 7 51 — 58 — — — 58 Accrued interest (6 ) — — — (6 ) (5 ) — — (11 ) Deferred revenue — (2 ) 3 — 1 — — — 1 Other balance sheet changes — — 15 — 15 — — — 15 Net cash provided by (used in) operating activities 101 (70 ) 40 — 71 (10 ) — — 61 Cash flows from investing activities Acquisition of music publishing rights, net — (6 ) (1 ) — (7 ) — — — (7 ) Capital expenditures — (7 ) (3 ) — (10 ) — — — (10 ) Investments and acquisitions of businesses, net — (1 ) — — (1 ) — — — (1 ) Advances to issuer (88 ) — — 88 — — — — — Net cash provided by (used in) investing activities (88 ) (14 ) (4 ) 88 (18 ) — — — (18 ) Cash flows from financing activities Dividend by Acquisition Corp. to Holdings Corp. (10 ) — — — (10 ) 10 — — — Repayment of Acquisition Corp. Senior Term Loan Facility (3 ) — — — (3 ) — — — (3 ) Distribution to noncontrolling interest holder — — (3 ) — (3 ) — — — (3 ) Change in due to (from) issuer — 88 — (88 ) — — — — — Net cash provided by (used in) financing activities (13 ) 88 (3 ) (88 ) (16 ) 10 — — (6 ) Effect of exchange rate changes on cash and equivalents — — (5 ) — (5 ) — — — (5 ) Net increase (decrease) in cash and equivalents — 4 28 — 32 — — — 32 Cash and equivalents at beginning of period — 73 173 — 246 — — — 246 Cash and equivalents at end of period $ — $ 77 $ 201 $ — $ 278 $ — $ — $ — $ 278 |
Description of Business - Addit
Description of Business - Additional Information (Detail) | 3 Months Ended |
Dec. 31, 2016OperationsCountrysongwriters | |
Description Of Business [Line Items] | |
Number of fundamental operations | Operations | 2 |
Number of countries in which Recorded Music activity conducted | Country | 50 |
Number of songwriters and composers | songwriters | 70,000 |
Parlophone Label Group | |
Description Of Business [Line Items] | |
Acquisition date | Jul. 1, 2013 |
Summary of Significant Accoun31
Summary of Significant Accounting Policies - Additional Information (Detail) - ASU 2015-03 $ in Millions | 3 Months Ended |
Dec. 31, 2016USD ($) | |
Accounting Policies [Line Items] | |
Decrease in other assets | $ 34 |
Decrease in long-term debt | $ 34 |
Comprehensive Loss - Schedule o
Comprehensive Loss - Schedule of Accumulated Other Comprehensive Loss (Detail) $ in Millions | 3 Months Ended | |
Dec. 31, 2016USD ($) | ||
Accumulated Other Comprehensive Income Loss [Line Items] | ||
Beginning balance | $ 210 | |
Ending balance | 140 | |
Foreign Currency Translation Loss | ||
Accumulated Other Comprehensive Income Loss [Line Items] | ||
Beginning balance | (201) | [1] |
Other comprehensive loss | (37) | [1] |
Ending balance | (238) | [1] |
Minimum Pension Liability Adjustment | ||
Accumulated Other Comprehensive Income Loss [Line Items] | ||
Beginning balance | (17) | |
Ending balance | (17) | |
Deferred Losses On Derivative Financial Instruments | ||
Accumulated Other Comprehensive Income Loss [Line Items] | ||
Other comprehensive loss | (2) | |
Ending balance | (2) | |
Accumulated Other Comprehensive Loss | ||
Accumulated Other Comprehensive Income Loss [Line Items] | ||
Beginning balance | (218) | |
Other comprehensive loss | (39) | |
Ending balance | $ (257) | |
[1] | Foreign currency translation adjustments include intra-entity foreign currency transactions that are of a long-term investment nature of $38.9 million. |
Comprehensive Loss - Schedule33
Comprehensive Loss - Schedule of Accumulated Other Comprehensive Loss (Parenthetical) (Detail) $ in Millions | 3 Months Ended |
Dec. 31, 2016USD ($) | |
Equity [Abstract] | |
Intra-entity foreign currency transaction adjustments | $ 38.9 |
Goodwill and Intangible Asset34
Goodwill and Intangible Assets - Changes in Goodwill for Each Reportable Segment (Detail) $ in Millions | 3 Months Ended | |
Dec. 31, 2016USD ($) | ||
Goodwill [Line Items] | ||
Beginning balance | $ 1,627 | |
Acquisitions | 2 | |
Other adjustments | (17) | [1] |
Ending balance | 1,612 | |
Recorded Music | ||
Goodwill [Line Items] | ||
Beginning balance | 1,163 | |
Acquisitions | 2 | |
Other adjustments | (17) | [1] |
Ending balance | 1,148 | |
Music Publishing | ||
Goodwill [Line Items] | ||
Beginning balance | 464 | |
Ending balance | $ 464 | |
[1] | Other adjustments during the three months ended December 31, 2016 represent foreign currency movements. |
Goodwill and Intangible Asset35
Goodwill and Intangible Assets - Schedule of Intangible Assets (Detail) - USD ($) $ in Millions | 3 Months Ended | |
Dec. 31, 2016 | Sep. 30, 2016 | |
Finite Lived And Indefinite Lived Intangible Assets [Line Items] | ||
Total gross intangible asset subject to amortization | $ 3,221 | $ 3,322 |
Accumulated amortization | (1,135) | (1,121) |
Total net intangible assets subject to amortization | 2,086 | 2,201 |
Intangible assets not subject to amortization | 115 | 116 |
Total net intangible assets | 2,201 | 2,317 |
Trademarks and tradenames | ||
Finite Lived And Indefinite Lived Intangible Assets [Line Items] | ||
Intangible assets not subject to amortization | $ 115 | 116 |
Recorded music catalog | ||
Finite Lived And Indefinite Lived Intangible Assets [Line Items] | ||
Intangible assets, Useful Life | 10 years | |
Total gross intangible asset subject to amortization | $ 890 | 923 |
Music publishing copyrights | ||
Finite Lived And Indefinite Lived Intangible Assets [Line Items] | ||
Intangible assets, Useful Life | 27 years | |
Total gross intangible asset subject to amortization | $ 1,466 | 1,504 |
Artist and songwriter contracts | ||
Finite Lived And Indefinite Lived Intangible Assets [Line Items] | ||
Intangible assets, Useful Life | 13 years | |
Total gross intangible asset subject to amortization | $ 853 | 883 |
Trademarks | ||
Finite Lived And Indefinite Lived Intangible Assets [Line Items] | ||
Intangible assets, Useful Life | 7 years | |
Total gross intangible asset subject to amortization | $ 7 | 7 |
Other Intangible Assets | ||
Finite Lived And Indefinite Lived Intangible Assets [Line Items] | ||
Intangible assets, Useful Life | 8 years | |
Total gross intangible asset subject to amortization | $ 5 | $ 5 |
Debt - Long-term Debt (Detail)
Debt - Long-term Debt (Detail) - USD ($) $ in Millions | Dec. 31, 2016 | Sep. 30, 2016 | |
Debt Instrument [Line Items] | |||
Total debt | [1] | $ 2,755 | $ 2,778 |
Acquisition Corp. | Senior Term Loan Facility due 2023 | |||
Debt Instrument [Line Items] | |||
Total debt | [2] | 985 | 963 |
Acquisition Corp. | 6.25% Senior Secured Notes due 2021 | |||
Debt Instrument [Line Items] | |||
Total debt | [3] | 174 | |
Acquisition Corp. | 6.00% Senior Secured Notes due 2021 | |||
Debt Instrument [Line Items] | |||
Total debt | [4] | 444 | |
Acquisition Corp. | 5.625% Senior Secured Notes due 2022 | |||
Debt Instrument [Line Items] | |||
Total debt | [5] | 246 | 272 |
Acquisition Corp. | 5.00% Senior Secured Notes due 2023 | |||
Debt Instrument [Line Items] | |||
Total debt | [6] | 296 | 296 |
Acquisition Corp. | 4.125% Senior Secured Notes due 2024 | |||
Debt Instrument [Line Items] | |||
Total debt | [7] | 356 | |
Acquisition Corp. | 4.875% Senior Secured Notes due 2024 | |||
Debt Instrument [Line Items] | |||
Total debt | [8] | 243 | |
Acquisition Corp. | 6.75% Senior Notes due 2022 | |||
Debt Instrument [Line Items] | |||
Total debt | [9] | $ 629 | $ 629 |
[1] | Principal amount of debt of $2.798 billion and $2.815 billion less unamortized discount of $8 million and $3 million and unamortized deferred financing costs of $35 million and $34 million at December 31, 2016 and September 30, 2016, respectively | ||
[2] | Principal amount of $1.006 billion and $978 million less unamortized discount of $8 million and $3 million and unamortized deferred financing costs of $13 million and $12 million at December 31, 2016 and September 30, 2016, respectively. | ||
[3] | Face amount of €158 million. Above amounts represent the dollar equivalent of such notes at September 30, 2016. Principal amount of $177 million less unamortized deferred financing costs of $3 million at September 30, 2016. | ||
[4] | Principal amount of $450 million less unamortized deferred financing costs of $6 million at September 30, 2016. | ||
[5] | Principal amount of $248 million and $275 million less unamortized deferred financing costs of $2 million and $3 million at December 31, 2016 and September 30, 2016, respectively | ||
[6] | Principal amount of $300 million less unamortized deferred financing costs of $4 million at both December 31, 2016 and September 30, 2016. | ||
[7] | Face amount of €345 million. Above amounts represent the dollar equivalent of such notes at December 31, 2016. Principal amount of $359 million less unamortized deferred financing costs of $3 million at December 31, 2016 | ||
[8] | Principal amount of $250 million less unamortized deferred financing costs of $7 million at December 31, 2016 | ||
[9] | Principal amount of $635 million less unamortized deferred financing costs of $6 million at both December 31, 2016 and September 30, 2016. |
Debt - Long-term Debt (Parenthe
Debt - Long-term Debt (Parenthetical) (Detail) € in Millions | 3 Months Ended | ||||
Dec. 31, 2016USD ($) | Sep. 30, 2016USD ($) | Dec. 31, 2016EUR (€) | Sep. 30, 2016EUR (€) | Dec. 31, 2015 | |
Debt Instrument [Line Items] | |||||
Face or principal amount of debt instrument | $ 2,798,000,000 | $ 2,815,000,000 | |||
Unamortized discount | 8,000,000 | 3,000,000 | |||
Unamortized deferred financing costs | 35,000,000 | 34,000,000 | |||
Revolving Credit Facility | |||||
Debt Instrument [Line Items] | |||||
Commitments under revolving credit facility | 150,000,000 | 150,000,000 | |||
Letters of credit outstanding | 13,000,000 | 5,000,000 | |||
Revolving Credit Facility Outstanding | $ 0 | $ 0 | |||
6.00% Senior Secured Notes due 2021 | |||||
Debt Instrument [Line Items] | |||||
Interest rate | 6.00% | 6.00% | 6.00% | ||
6.00% Senior Secured Notes due 2021 | Acquisition Corp. | |||||
Debt Instrument [Line Items] | |||||
Interest rate | 6.00% | 6.00% | 6.00% | 6.00% | |
Due date of Senior Secured Notes | 2,021 | 2,021 | |||
Face or principal amount of debt instrument | $ 450,000,000 | ||||
Unamortized deferred financing costs | $ 6,000,000 | ||||
6.25% Senior Secured Notes due 2021 | |||||
Debt Instrument [Line Items] | |||||
Interest rate | 6.25% | 6.25% | 6.25% | ||
6.25% Senior Secured Notes due 2021 | Acquisition Corp. | |||||
Debt Instrument [Line Items] | |||||
Interest rate | 6.25% | 6.25% | 6.25% | 6.25% | |
Due date of Senior Secured Notes | 2,021 | 2,021 | |||
Face or principal amount of debt instrument | $ 177,000,000 | € 158 | |||
Unamortized deferred financing costs | $ 3,000,000 | ||||
5.625% Senior Secured Notes due 2022 | |||||
Debt Instrument [Line Items] | |||||
Interest rate | 5.625% | 5.625% | 5.625% | ||
5.625% Senior Secured Notes due 2022 | Acquisition Corp. | |||||
Debt Instrument [Line Items] | |||||
Interest rate | 5.625% | 5.625% | 5.625% | 5.625% | |
Due date of Senior Secured Notes | 2,022 | 2,022 | |||
Face or principal amount of debt instrument | $ 248,000,000 | $ 275,000,000 | |||
Unamortized deferred financing costs | $ 2,000,000 | $ 3,000,000 | |||
5.00% Senior Secured Notes due 2023 | Acquisition Corp. | |||||
Debt Instrument [Line Items] | |||||
Interest rate | 5.00% | 5.00% | 5.00% | 5.00% | |
Due date of Senior Secured Notes | 2,023 | 2,023 | |||
Face or principal amount of debt instrument | $ 300,000,000 | $ 300,000,000 | |||
Unamortized deferred financing costs | $ 4,000,000 | $ 4,000,000 | |||
4.125% Senior Secured Notes due 2024 | |||||
Debt Instrument [Line Items] | |||||
Interest rate | 4.125% | 4.125% | 4.125% | ||
4.125% Senior Secured Notes due 2024 | Acquisition Corp. | |||||
Debt Instrument [Line Items] | |||||
Interest rate | 4.125% | 4.125% | 4.125% | 4.125% | |
Due date of Senior Secured Notes | 2,024 | 2,024 | |||
4.875% Senior Secured Notes due 2024 | |||||
Debt Instrument [Line Items] | |||||
Interest rate | 4.875% | 4.875% | 4.875% | ||
4.875% Senior Secured Notes due 2024 | Acquisition Corp. | |||||
Debt Instrument [Line Items] | |||||
Interest rate | 4.875% | 4.875% | 4.875% | 4.875% | |
Due date of Senior Secured Notes | 2,024 | 2,024 | |||
6.75% Senior Notes due 2022 | Acquisition Corp. | |||||
Debt Instrument [Line Items] | |||||
Interest rate | 6.75% | 6.75% | 6.75% | 6.75% | |
Due date of Senior Secured Notes | 2,022 | 2,022 | |||
Senior Term Loan Facility due 2023 | Acquisition Corp. | |||||
Debt Instrument [Line Items] | |||||
Face or principal amount of debt instrument | $ 1,006,000,000 | $ 978,000,000 | |||
Unamortized discount | 8,000,000 | 3,000,000 | |||
Unamortized deferred financing costs | 13,000,000 | 12,000,000 | |||
4.125% Senior Secured Notes due 2024 | Acquisition Corp. | |||||
Debt Instrument [Line Items] | |||||
Face or principal amount of debt instrument | 359,000,000 | € 345 | |||
Unamortized deferred financing costs | 3,000,000 | ||||
4.875% Senior Secured Notes due 2024 | Acquisition Corp. | |||||
Debt Instrument [Line Items] | |||||
Face or principal amount of debt instrument | 250,000,000 | ||||
Unamortized deferred financing costs | 7,000,000 | ||||
6.75% Senior Notes due 2022 | Acquisition Corp. | |||||
Debt Instrument [Line Items] | |||||
Face or principal amount of debt instrument | 635,000,000 | 635,000,000 | |||
Unamortized deferred financing costs | $ 6,000,000 | $ 6,000,000 |
Debt - October 2016 Refinancing
Debt - October 2016 Refinancing Transactions - Additional Information (Detail) € in Millions, $ in Millions | Oct. 18, 2016USD ($) | Dec. 31, 2016USD ($) | Oct. 18, 2016EUR (€) | Sep. 30, 2016USD ($) |
Debt Instrument [Line Items] | ||||
Face or principal amount of debt instrument | $ 2,798 | $ 2,815 | ||
Loss on extinguishment of debt | $ (32) | |||
October 2016 Refinancing Transactions | ||||
Debt Instrument [Line Items] | ||||
Loss on extinguishment of debt | $ (31) | |||
October 2016 Refinancing Transactions | 4.125% Senior Secured Notes due 2024 | ||||
Debt Instrument [Line Items] | ||||
Face or principal amount of debt instrument | € | € 345 | |||
Due date of Senior Secured Notes | 2,024 | |||
Interest rate | 4.125% | 4.125% | ||
October 2016 Refinancing Transactions | 4.875% Senior Secured Notes due 2024 | ||||
Debt Instrument [Line Items] | ||||
Face or principal amount of debt instrument | $ 250 | |||
Due date of Senior Secured Notes | 2,024 | |||
Interest rate | 4.875% | 4.875% | ||
October 2016 Refinancing Transactions | 6.000% Senior Secured Notes due 2021 | ||||
Debt Instrument [Line Items] | ||||
Due date of Senior Secured Notes | 2,021 | |||
Interest rate | 6.00% | 6.00% | ||
October 2016 Refinancing Transactions | 6.250% Senior Secured Notes due 2021 | ||||
Debt Instrument [Line Items] | ||||
Due date of Senior Secured Notes | 2,021 | |||
Interest rate | 6.25% | 6.25% |
Debt - November 2016 Senior Ter
Debt - November 2016 Senior Term Loan Credit Agreement Amendment - Additional Information (Detail) - USD ($) $ in Millions | Nov. 21, 2016 | Dec. 31, 2016 | Nov. 20, 2016 | Sep. 30, 2016 |
Debt Instrument [Line Items] | ||||
Unamortized discount | $ 8 | $ 3 | ||
November 2016 Senior Term Loan Credit Agreement Amendment | ||||
Debt Instrument [Line Items] | ||||
Credit facility maturity date | Nov. 1, 2023 | |||
Revolving Credit Facility Outstanding | $ 1,006 | $ 27.5 | ||
Redemption of senior notes | $ 27.5 | |||
Interest rate | 5.625% | |||
November 2016 Senior Term Loan Credit Agreement Amendment | Minimum | ||||
Debt Instrument [Line Items] | ||||
Unamortized discount | $ 5 | |||
November 2016 Senior Term Loan Credit Agreement Amendment | Maximum | ||||
Debt Instrument [Line Items] | ||||
Unamortized discount | $ 8 |
Debt - 5.625% Existing Secured
Debt - 5.625% Existing Secured Notes Redemption - Additional Information (Detail) - USD ($) $ in Millions | Nov. 21, 2016 | Dec. 31, 2016 |
Debt Instrument [Line Items] | ||
Loss on extinguishment of debt | $ (32) | |
5.625% Existing Secured Notes Redemption | ||
Debt Instrument [Line Items] | ||
Redemption of senior notes | $ 27.5 | |
Percentage of outstanding debt redeemed | 10.00% | |
Interest rate | 5.625% | |
Loss on extinguishment of debt | $ (1) |
Debt - Interest Rates - Additio
Debt - Interest Rates - Additional Information (Detail) | 3 Months Ended |
Dec. 31, 2016 | |
Senior Term Loan Facility due 2020 | |
Debt Instrument [Line Items] | |
Description of variable rate basis | The loans under the Senior Term Loan Facility bear interest at Acquisition Corp.’s election at a rate equal to (i) the rate for deposits in U.S. dollars in the London interbank market (adjusted for maximum reserves) for the applicable interest period (“Term Loan LIBOR”), plus 2.75% per annum, or (ii) the base rate, which is the highest of (x) the corporate base rate established by the administrative agent as its prime rate in effect at its principal office in New York City from time to time, (y) 0.50% in excess of the overnight federal funds rate and (z) three-month Term Loan LIBOR, plus 1.00% per annum, plus, in each case, 1.75% per annum. |
Interest rate applicable to overdue principal | 2.00% |
Term loan Base rate plus Election Rate | 1.00% |
London Interbank Offered Rate (LIBOR) | Senior Term Loan Facility due 2020 | |
Debt Instrument [Line Items] | |
Debt instrument, marginal interest rate | 2.75% |
Base Rate | Senior Term Loan Facility due 2020 | |
Debt Instrument [Line Items] | |
Debt instrument, marginal interest rate | 1.75% |
Additional Interest rate on other overdue amounts | 2.00% |
Federal Funds Effective Swap Rate | Senior Term Loan Facility due 2020 | |
Debt Instrument [Line Items] | |
Debt instrument, marginal interest rate | 0.50% |
Revolving Credit Facility | |
Debt Instrument [Line Items] | |
Debt instrument, marginal interest rate | 1.00% |
Description of variable rate basis | The loans under the Revolving Credit Facility bear interest at Acquisition Corp.’s election at a rate equal to (i) the rate for deposits in the borrowing currency in the London interbank market (adjusted for maximum reserves) for the applicable interest period (“Revolving LIBOR”), plus 2.00% per annum, or (ii) the base rate, which is the highest of (x) the corporate base rate established by the administrative agent from time to time, (y) 0.50% in excess of the overnight federal funds rate and (z) the three-month Revolving LIBOR plus 1.0% per annum, plus, in each case, 1.00% per annum. If there is a payment default at any time, then the interest rate applicable to overdue principal will be the rate otherwise applicable to such loan plus 2.0% per annum. |
Interest rate applicable to overdue principal | 2.00% |
Revolving Credit Facility | London Interbank Offered Rate (LIBOR) | |
Debt Instrument [Line Items] | |
Debt instrument, marginal interest rate | 2.00% |
Revolving Credit Facility | Base Rate | |
Debt Instrument [Line Items] | |
Debt instrument, marginal interest rate | 1.00% |
Additional Interest rate on other overdue amounts | 2.00% |
Revolving Credit Facility | Federal Funds Effective Swap Rate | |
Debt Instrument [Line Items] | |
Debt instrument, marginal interest rate | 0.50% |
Debt - Additional Information (
Debt - Additional Information (Detail) - USD ($) $ in Millions | 3 Months Ended | ||
Dec. 31, 2016 | Dec. 31, 2015 | Sep. 30, 2016 | |
Debt Instrument [Line Items] | |||
Interest expense, net | $ 40 | $ 45 | |
Weighted-average interest rate of total debt | 4.90% | 5.60% | 5.30% |
Senior Notes | |||
Debt Instrument [Line Items] | |||
Scheduled maturities of long-term debt in 2022 | $ 883 | ||
Scheduled to mature | $ 909 | ||
Revolving Credit Facility | |||
Debt Instrument [Line Items] | |||
Extended maturity date of credit facility | Apr. 1, 2021 | ||
Term Loan Facility | |||
Debt Instrument [Line Items] | |||
Credit facility maturity date | Nov. 1, 2023 |
Commitments and Contingencies -
Commitments and Contingencies - Additional Information (Detail) - USD ($) $ in Millions | Jul. 29, 2015 | Mar. 31, 2017 | Dec. 31, 2016 | Dec. 31, 2015 | Sep. 30, 2016 |
Commitments And Contingencies [Line Items] | |||||
Revenues | $ 917 | $ 849 | |||
Sirius XM | Settled Litigation | |||||
Commitments And Contingencies [Line Items] | |||||
Receipts from plaintiff | $ 210 | ||||
Cash distribution | $ 33 | ||||
Revenues | $ 28 | ||||
Scenario Forecast | Sirius XM | Settled Litigation | |||||
Commitments And Contingencies [Line Items] | |||||
Revenues | $ 1 |
Income Taxes - Additional Infor
Income Taxes - Additional Information (Detail) - USD ($) | 3 Months Ended | |
Dec. 31, 2016 | Dec. 31, 2015 | |
Income Tax Contingency [Line Items] | ||
Income tax (expense) benefit | $ (17,000,000) | $ 3,000,000 |
Statutory income tax rate | 35.00% | 35.00% |
Income withholding taxes and foreign losses uncertain tax positions | $ 0 | $ 10,000,000 |
Income withholding taxes and state income tax losses uncertain tax positions | 0 | |
Maximum | ||
Income Tax Contingency [Line Items] | ||
Decrease in uncertain tax position | $ 20,000,000 |
Derivative Financial Instrume45
Derivative Financial Instruments - Additional Information (Detail) - USD ($) | Dec. 31, 2016 | Sep. 30, 2016 |
Derivatives Fair Value [Line Items] | ||
Outstanding hedge contracts | $ 0 | |
Deferred gains (losses) in comprehensive loss related to foreign exchange hedging | $ (2,000,000) | $ 0 |
Sale | ||
Derivatives Fair Value [Line Items] | ||
Outstanding hedge contracts | 233,000,000 | |
Purchase | ||
Derivatives Fair Value [Line Items] | ||
Outstanding hedge contracts | $ 140,000,000 |
Derivative Financial Instrume46
Derivative Financial Instruments - Summary of Amounts Recorded in Consolidated Balance Sheet (Detail) $ in Millions | Dec. 31, 2016USD ($) | |
Other Current Assets | ||
Derivatives Fair Value [Line Items] | ||
Other current assets | $ 6 | [1],[2] |
[1] | Includes $15 million and $9 million of foreign exchange derivative contracts in asset and liability positions, respectively. | |
[2] | The fair value of the foreign currency forward exchange contracts is based on dealer quotes of market forward rates and reflects the amount that the Company would receive or pay at their maturity dates for contracts involving the same currencies and maturity dates. |
Derivative Financial Instrume47
Derivative Financial Instruments - Summary of Amounts Recorded in Consolidated Balance Sheet (Parenthetical) (Detail) - USD ($) | Dec. 31, 2016 | Sep. 30, 2016 |
Derivative Instruments And Hedging Activities Disclosure [Abstract] | ||
Foreign exchange derivative contracts in asset | $ 15,000,000 | $ 0 |
Foreign exchange derivative contracts in liability | $ 9,000,000 | $ 0 |
Segment Information - Additiona
Segment Information - Additional Information (Detail) | 3 Months Ended |
Dec. 31, 2016Operations | |
Segment Reporting [Abstract] | |
Number of fundamental operations | 2 |
Segment Information - Schedule
Segment Information - Schedule of Segment Information (Detail) - USD ($) $ in Millions | 3 Months Ended | |
Dec. 31, 2016 | Dec. 31, 2015 | |
Segment Reporting Information [Line Items] | ||
Revenues | $ 917 | $ 849 |
Operating income (loss) | 94 | 62 |
Amortization of intangible assets | 51 | 62 |
Depreciation of property, plant and equipment | 12 | 13 |
OIBDA | 157 | 137 |
Operating Segments | Recorded Music | ||
Segment Reporting Information [Line Items] | ||
Revenues | 797 | 737 |
Operating income (loss) | 123 | 98 |
Amortization of intangible assets | 35 | 46 |
Depreciation of property, plant and equipment | 7 | 8 |
OIBDA | 165 | 152 |
Operating Segments | Music Publishing | ||
Segment Reporting Information [Line Items] | ||
Revenues | 124 | 116 |
Operating income (loss) | (2) | (13) |
Amortization of intangible assets | 16 | 16 |
Depreciation of property, plant and equipment | 2 | 2 |
OIBDA | 16 | 5 |
Corporate Expenses and Eliminations | ||
Segment Reporting Information [Line Items] | ||
Revenues | (4) | (4) |
Operating income (loss) | (27) | (23) |
Depreciation of property, plant and equipment | 3 | 3 |
OIBDA | $ (24) | $ (20) |
Additional Financial Informat50
Additional Financial Information - Additional Information (Detail) - USD ($) $ in Millions | Dec. 02, 2016 | Dec. 31, 2016 | Dec. 31, 2015 |
Supplemental Cash Flow Information [Abstract] | |||
Accrued interest paid | $ 47 | $ 54 | |
Income taxes paid net of refunds | $ 9 | $ 6 | |
Special cash dividends payable, date to be paid | Jan. 3, 2017 | ||
Special cash dividends | $ 54 | ||
Special cash dividends payable, date of record | Dec. 30, 2016 |
Fair Value Measurements - Sched
Fair Value Measurements - Schedule of Fair Value of Financial Instruments (Detail) - USD ($) $ in Millions | Dec. 31, 2016 | Sep. 30, 2016 | |
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items] | |||
Contractual Obligations | $ (4) | ||
Total | $ 2 | ||
Level 2 | |||
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items] | |||
Total | 6 | ||
Level 3 | |||
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items] | |||
Contractual Obligations | (4) | ||
Total | (4) | ||
Other Current Assets | |||
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items] | |||
Foreign Currency Forward Exchange Contracts | [1],[2] | 6 | |
Other Current Assets | Level 2 | |||
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items] | |||
Foreign Currency Forward Exchange Contracts | [2] | 6 | |
Other Non-Current Liabilities | |||
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items] | |||
Contractual Obligations | [3] | (4) | (4) |
Other Non-Current Liabilities | Level 3 | |||
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items] | |||
Contractual Obligations | [3] | $ (4) | $ (4) |
[1] | Includes $15 million and $9 million of foreign exchange derivative contracts in asset and liability positions, respectively. | ||
[2] | The fair value of the foreign currency forward exchange contracts is based on dealer quotes of market forward rates and reflects the amount that the Company would receive or pay at their maturity dates for contracts involving the same currencies and maturity dates. | ||
[3] | This represents purchase obligations and contingent consideration related to the Company’s various acquisitions. This is based on a discounted cash flow approach and it is adjusted to fair value on a recurring basis and any adjustments are included as a component of operating income in the statement of operations. These amounts were mainly calculated using unobservable inputs such as future earnings performance of the Company’s various acquisitions and the expected timing of the payment. |
Fair Value Measurements - Recon
Fair Value Measurements - Reconciliation of Net Liabilities Classified as Level 3 (Detail) - Level 3 $ in Millions | Dec. 31, 2016USD ($) |
Fair Value Liabilities Measured On Recurring Basis Unobservable Input Reconciliation [Line Items] | |
Balance at September 30, 2016 | $ (4) |
Balance at December 31, 2016 | $ (4) |
Fair Value Measurements - Addit
Fair Value Measurements - Additional Information (Detail) - USD ($) $ in Millions | Dec. 31, 2016 | Sep. 30, 2016 |
Level 2 measurement | ||
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items] | ||
Debt Instrument, Fair Value Disclosure | $ 2,869 | $ 2,896 |
Guarantor and Non-Guarantor S54
Guarantor and Non-Guarantor Subsidiaries Financial Information - Additional Information (Detail) | 3 Months Ended | ||
Dec. 31, 2016 | Sep. 30, 2016 | Dec. 31, 2015 | |
5.625% Senior Secured Notes | |||
Condensed Financial Statements Captions [Line Items] | |||
Interest rate | 5.625% | 5.625% | |
5.625% Senior Secured Notes | Acquisition Corp. | |||
Condensed Financial Statements Captions [Line Items] | |||
Interest rate | 5.625% | 5.625% | |
Due date of Senior Secured Notes | 2,022 | 2,022 | |
5.00% Senior Secured Notes due 2023 | Acquisition Corp. | |||
Condensed Financial Statements Captions [Line Items] | |||
Interest rate | 5.00% | ||
Due date of Senior Secured Notes | 2,023 | ||
4.125% Senior Secured Notes due 2024 | Acquisition Corp. | |||
Condensed Financial Statements Captions [Line Items] | |||
Interest rate | 4.125% | ||
Due date of Senior Secured Notes | 2,024 | ||
4.875% Senior Secured Notes due 2024 | |||
Condensed Financial Statements Captions [Line Items] | |||
Interest rate | 4.875% | 4.875% | |
4.875% Senior Secured Notes due 2024 | Acquisition Corp. | |||
Condensed Financial Statements Captions [Line Items] | |||
Interest rate | 4.875% | 4.875% | |
Due date of Senior Secured Notes | 2,024 | 2,024 | |
6.75% Senior Notes due 2022 | Acquisition Corp. | |||
Condensed Financial Statements Captions [Line Items] | |||
Interest rate | 6.75% | ||
Due date of Senior Secured Notes | 2,022 |
Guarantor and Non-Guarantor S55
Guarantor and Non-Guarantor Subsidiaries Financial Information - Consolidating Balance Sheet (Detail) - USD ($) $ in Millions | Dec. 31, 2016 | Sep. 30, 2016 | Dec. 31, 2015 | Sep. 30, 2015 |
Current assets: | ||||
Cash and equivalents | $ 455 | $ 359 | $ 278 | $ 246 |
Accounts receivable, net | 384 | 329 | ||
Inventories | 36 | 41 | ||
Royalty advances expected to be recouped within one year | 127 | 128 | ||
Prepaid and other current assets | 59 | 51 | ||
Total current assets | 1,061 | 908 | ||
Royalty advances expected to be recouped after one year | 188 | 196 | ||
Property, plant and equipment, net | 195 | 203 | ||
Goodwill | 1,612 | 1,627 | ||
Intangible assets subject to amortization, net | 2,086 | 2,201 | ||
Intangible assets not subject to amortization | 115 | 116 | ||
Other assets | 83 | 84 | ||
Total assets | 5,340 | 5,335 | ||
Current liabilities: | ||||
Accounts payable | 152 | 204 | ||
Accrued royalties | 1,184 | 1,104 | ||
Accrued liabilities | 319 | 297 | ||
Accrued interest | 28 | 38 | ||
Deferred revenue | 175 | 178 | ||
Other current liabilities | 86 | 21 | ||
Total current liabilities | 1,944 | 1,842 | ||
Long-term debt | 2,755 | 2,778 | ||
Deferred tax liabilities, net | 268 | 269 | ||
Other noncurrent liabilities | 233 | 236 | ||
Total liabilities | 5,200 | 5,125 | ||
Total Warner Music Group Corp. equity | 124 | 195 | ||
Noncontrolling interest | 16 | 15 | ||
Total equity | 140 | 210 | ||
Total liabilities and equity | 5,340 | 5,335 | ||
Reportable Legal Entities | WMG Acquisition Corp. | ||||
Current assets: | ||||
Prepaid and other current assets | 1 | |||
Total current assets | 1 | |||
Due (to) from parent companies | 705 | 750 | ||
Investments in and advances to (from) consolidated subsidiaries | 2,201 | 2,260 | ||
Other assets | 4 | 3 | ||
Total assets | 2,910 | 3,014 | ||
Current liabilities: | ||||
Accrued interest | 28 | 38 | ||
Total current liabilities | 28 | 38 | ||
Long-term debt | 2,755 | 2,778 | ||
Other noncurrent liabilities | 3 | 3 | ||
Total liabilities | 2,786 | 2,819 | ||
Total Warner Music Group Corp. equity | 124 | 195 | ||
Total equity | 124 | 195 | ||
Total liabilities and equity | 2,910 | 3,014 | ||
Reportable Legal Entities | Guarantor Subsidiaries | ||||
Current assets: | ||||
Cash and equivalents | 182 | 180 | 77 | 73 |
Accounts receivable, net | 196 | 177 | ||
Inventories | 12 | 16 | ||
Royalty advances expected to be recouped within one year | 78 | 79 | ||
Prepaid and other current assets | 15 | 13 | ||
Total current assets | 483 | 465 | ||
Due (to) from parent companies | (366) | (312) | ||
Investments in and advances to (from) consolidated subsidiaries | 1,648 | 1,458 | ||
Royalty advances expected to be recouped after one year | 115 | 120 | ||
Property, plant and equipment, net | 135 | 138 | ||
Goodwill | 1,374 | 1,372 | ||
Intangible assets subject to amortization, net | 1,140 | 1,165 | ||
Intangible assets not subject to amortization | 71 | 71 | ||
Other assets | 61 | 62 | ||
Total assets | 4,661 | 4,539 | ||
Current liabilities: | ||||
Accounts payable | 71 | 124 | ||
Accrued royalties | 646 | 606 | ||
Accrued liabilities | 119 | 112 | ||
Deferred revenue | 113 | 143 | ||
Other current liabilities | 60 | 3 | ||
Total current liabilities | 1,009 | 988 | ||
Deferred tax liabilities, net | 113 | 109 | ||
Other noncurrent liabilities | 131 | 126 | ||
Total liabilities | 1,253 | 1,223 | ||
Total Warner Music Group Corp. equity | 3,407 | 3,314 | ||
Noncontrolling interest | 1 | 2 | ||
Total equity | 3,408 | 3,316 | ||
Total liabilities and equity | 4,661 | 4,539 | ||
Reportable Legal Entities | Non-Guarantor Subsidiaries | ||||
Current assets: | ||||
Cash and equivalents | 273 | 179 | 201 | 173 |
Accounts receivable, net | 188 | 152 | ||
Inventories | 24 | 25 | ||
Royalty advances expected to be recouped within one year | 49 | 49 | ||
Prepaid and other current assets | 44 | 37 | ||
Total current assets | 578 | 442 | ||
Due (to) from parent companies | (339) | (438) | ||
Royalty advances expected to be recouped after one year | 73 | 76 | ||
Property, plant and equipment, net | 60 | 65 | ||
Goodwill | 238 | 255 | ||
Intangible assets subject to amortization, net | 946 | 1,036 | ||
Intangible assets not subject to amortization | 44 | 45 | ||
Other assets | 18 | 19 | ||
Total assets | 1,618 | 1,500 | ||
Current liabilities: | ||||
Accounts payable | 81 | 80 | ||
Accrued royalties | 538 | 498 | ||
Accrued liabilities | 200 | 185 | ||
Deferred revenue | 62 | 35 | ||
Other current liabilities | 26 | 18 | ||
Total current liabilities | 907 | 816 | ||
Deferred tax liabilities, net | 155 | 160 | ||
Other noncurrent liabilities | 99 | 107 | ||
Total liabilities | 1,161 | 1,083 | ||
Total Warner Music Group Corp. equity | 442 | 404 | ||
Noncontrolling interest | 15 | 13 | ||
Total equity | 457 | 417 | ||
Total liabilities and equity | 1,618 | 1,500 | ||
Reportable Legal Entities | WMG Acquisition Corp. Consolidated | ||||
Current assets: | ||||
Cash and equivalents | 455 | 359 | $ 278 | $ 246 |
Accounts receivable, net | 384 | 329 | ||
Inventories | 36 | 41 | ||
Royalty advances expected to be recouped within one year | 127 | 128 | ||
Prepaid and other current assets | 59 | 51 | ||
Total current assets | 1,061 | 908 | ||
Royalty advances expected to be recouped after one year | 188 | 196 | ||
Property, plant and equipment, net | 195 | 203 | ||
Goodwill | 1,612 | 1,627 | ||
Intangible assets subject to amortization, net | 2,086 | 2,201 | ||
Intangible assets not subject to amortization | 115 | 116 | ||
Other assets | 83 | 84 | ||
Total assets | 5,340 | 5,335 | ||
Current liabilities: | ||||
Accounts payable | 152 | 204 | ||
Accrued royalties | 1,184 | 1,104 | ||
Accrued liabilities | 319 | 297 | ||
Accrued interest | 28 | 38 | ||
Deferred revenue | 175 | 178 | ||
Other current liabilities | 86 | 21 | ||
Total current liabilities | 1,944 | 1,842 | ||
Long-term debt | 2,755 | 2,778 | ||
Deferred tax liabilities, net | 268 | 269 | ||
Other noncurrent liabilities | 233 | 236 | ||
Total liabilities | 5,200 | 5,125 | ||
Total Warner Music Group Corp. equity | 124 | 195 | ||
Noncontrolling interest | 16 | 15 | ||
Total equity | 140 | 210 | ||
Total liabilities and equity | 5,340 | 5,335 | ||
Reportable Legal Entities | WMG Holdings Corp. | ||||
Current assets: | ||||
Investments in and advances to (from) consolidated subsidiaries | 178 | 195 | ||
Total assets | 178 | 195 | ||
Current liabilities: | ||||
Total Warner Music Group Corp. equity | 178 | 195 | ||
Total equity | 178 | 195 | ||
Total liabilities and equity | 178 | 195 | ||
Reportable Legal Entities | Warner Music Group Corp. | ||||
Current assets: | ||||
Investments in and advances to (from) consolidated subsidiaries | 178 | 195 | ||
Total assets | 178 | 195 | ||
Current liabilities: | ||||
Total Warner Music Group Corp. equity | 178 | 195 | ||
Total equity | 178 | 195 | ||
Total liabilities and equity | 178 | 195 | ||
Eliminations | ||||
Current assets: | ||||
Investments in and advances to (from) consolidated subsidiaries | (356) | (390) | ||
Total assets | (356) | (390) | ||
Current liabilities: | ||||
Total Warner Music Group Corp. equity | (356) | (390) | ||
Total equity | (356) | (390) | ||
Total liabilities and equity | (356) | (390) | ||
Eliminations | WMG Acquisition Corp. | ||||
Current assets: | ||||
Investments in and advances to (from) consolidated subsidiaries | (3,849) | (3,718) | ||
Total assets | (3,849) | (3,718) | ||
Current liabilities: | ||||
Total Warner Music Group Corp. equity | (3,849) | (3,718) | ||
Total equity | (3,849) | (3,718) | ||
Total liabilities and equity | $ (3,849) | $ (3,718) |
Guarantor and Non-Guarantor S56
Guarantor and Non-Guarantor Subsidiaries Financial Information - Consolidating Statement of Operations (Detail) - USD ($) $ in Millions | 3 Months Ended | |
Dec. 31, 2016 | Dec. 31, 2015 | |
Condensed Income Statements Captions [Line Items] | ||
Revenues | $ 917 | $ 849 |
Costs and expenses: | ||
Cost of revenue | (496) | (449) |
Selling, general and administrative expenses | (276) | (276) |
Amortization expense | (51) | (62) |
Total costs and expenses | (823) | (787) |
Operating (loss) income | 94 | 62 |
Loss on extinguishment of debt | (32) | |
Interest (expense) income, net | (40) | (45) |
Other income (expense), net | 19 | 8 |
Income (loss) before income taxes | 41 | 25 |
Income tax (expense) benefit | (17) | 3 |
Net income (loss) | 24 | 28 |
Less: Income attributable to noncontrolling interest | (2) | (1) |
Net income (loss) attributable to Warner Music Group Corp. | 22 | 27 |
Reportable Legal Entities | WMG Acquisition Corp. | ||
Costs and expenses: | ||
Selling, general and administrative expenses | (1) | |
Total costs and expenses | (1) | |
Operating (loss) income | (1) | |
Loss on extinguishment of debt | (32) | |
Interest (expense) income, net | (23) | (20) |
Equity gains (losses) from equity method investments | 83 | 47 |
Other income (expense), net | 12 | 2 |
Income (loss) before income taxes | 39 | 29 |
Income tax (expense) benefit | (17) | 3 |
Net income (loss) | 22 | 32 |
Net income (loss) attributable to Warner Music Group Corp. | 22 | 32 |
Reportable Legal Entities | Guarantor Subsidiaries | ||
Condensed Income Statements Captions [Line Items] | ||
Revenues | 490 | 448 |
Costs and expenses: | ||
Cost of revenue | (220) | (221) |
Selling, general and administrative expenses | (176) | (137) |
Amortization expense | (25) | (31) |
Total costs and expenses | (421) | (389) |
Operating (loss) income | 69 | 59 |
Interest (expense) income, net | 1 | 1 |
Equity gains (losses) from equity method investments | 40 | 19 |
Other income (expense), net | 3 | (1) |
Income (loss) before income taxes | 113 | 78 |
Income tax (expense) benefit | (18) | (5) |
Net income (loss) | 95 | 73 |
Net income (loss) attributable to Warner Music Group Corp. | 95 | 73 |
Reportable Legal Entities | Non-Guarantor Subsidiaries | ||
Condensed Income Statements Captions [Line Items] | ||
Revenues | 521 | 439 |
Costs and expenses: | ||
Cost of revenue | (341) | (260) |
Selling, general and administrative expenses | (128) | (144) |
Amortization expense | (26) | (31) |
Total costs and expenses | (495) | (435) |
Operating (loss) income | 26 | 4 |
Interest (expense) income, net | (18) | (21) |
Other income (expense), net | 4 | 7 |
Income (loss) before income taxes | 12 | (10) |
Income tax (expense) benefit | (9) | 4 |
Net income (loss) | 3 | (6) |
Less: Income attributable to noncontrolling interest | (2) | (1) |
Net income (loss) attributable to Warner Music Group Corp. | 1 | (7) |
Reportable Legal Entities | WMG Acquisition Corp. Consolidated | ||
Condensed Income Statements Captions [Line Items] | ||
Revenues | 917 | 849 |
Costs and expenses: | ||
Cost of revenue | (496) | (449) |
Selling, general and administrative expenses | (276) | (276) |
Amortization expense | (51) | (62) |
Total costs and expenses | (823) | (787) |
Operating (loss) income | 94 | 62 |
Loss on extinguishment of debt | (32) | |
Interest (expense) income, net | (40) | (40) |
Other income (expense), net | 19 | 8 |
Income (loss) before income taxes | 41 | 30 |
Income tax (expense) benefit | (17) | 3 |
Net income (loss) | 24 | 33 |
Less: Income attributable to noncontrolling interest | (2) | (1) |
Net income (loss) attributable to Warner Music Group Corp. | 22 | 32 |
Reportable Legal Entities | WMG Holdings Corp. | ||
Costs and expenses: | ||
Interest (expense) income, net | (5) | |
Equity gains (losses) from equity method investments | 22 | 32 |
Income (loss) before income taxes | 22 | 27 |
Net income (loss) | 22 | 27 |
Net income (loss) attributable to Warner Music Group Corp. | 22 | 27 |
Reportable Legal Entities | Warner Music Group Corp. | ||
Costs and expenses: | ||
Equity gains (losses) from equity method investments | 22 | 27 |
Income (loss) before income taxes | 22 | 27 |
Net income (loss) | 22 | 27 |
Net income (loss) attributable to Warner Music Group Corp. | 22 | 27 |
Eliminations | ||
Costs and expenses: | ||
Equity gains (losses) from equity method investments | (44) | (59) |
Income (loss) before income taxes | (44) | (59) |
Net income (loss) | (44) | (59) |
Net income (loss) attributable to Warner Music Group Corp. | (44) | (59) |
Eliminations | WMG Acquisition Corp. | ||
Condensed Income Statements Captions [Line Items] | ||
Revenues | (94) | (38) |
Costs and expenses: | ||
Cost of revenue | 65 | 32 |
Selling, general and administrative expenses | 29 | 5 |
Total costs and expenses | 94 | 37 |
Operating (loss) income | (1) | |
Equity gains (losses) from equity method investments | (123) | (66) |
Income (loss) before income taxes | (123) | (67) |
Income tax (expense) benefit | 27 | 1 |
Net income (loss) | (96) | (66) |
Net income (loss) attributable to Warner Music Group Corp. | $ (96) | $ (66) |
Guarantor and Non-Guarantor S57
Guarantor and Non-Guarantor Subsidiaries Financial Information - Consolidating Statement of Comprehensive Income (Detail) - USD ($) $ in Millions | 3 Months Ended | |
Dec. 31, 2016 | Dec. 31, 2015 | |
Condensed Statement Of Income Captions [Line Items] | ||
Net income (loss) | $ 24 | $ 28 |
Other comprehensive (loss) income, net of tax: | ||
Foreign currency adjustment | (37) | (24) |
Deferred losses on derivative financial instruments | (2) | (1) |
Other comprehensive loss, net of tax | (39) | (25) |
Total comprehensive (loss) income | (15) | 3 |
Less: Income attributable to noncontrolling interest | (2) | (1) |
Comprehensive (loss) income attributable to Warner Music Group Corp. | (17) | 2 |
Reportable Legal Entities | WMG Acquisition Corp. | ||
Condensed Statement Of Income Captions [Line Items] | ||
Net income (loss) | 22 | 32 |
Other comprehensive (loss) income, net of tax: | ||
Foreign currency adjustment | (37) | (24) |
Deferred losses on derivative financial instruments | (2) | (1) |
Other comprehensive loss, net of tax | (39) | (25) |
Total comprehensive (loss) income | (17) | 7 |
Comprehensive (loss) income attributable to Warner Music Group Corp. | (17) | 7 |
Reportable Legal Entities | Guarantor Subsidiaries | ||
Condensed Statement Of Income Captions [Line Items] | ||
Net income (loss) | 95 | 73 |
Other comprehensive (loss) income, net of tax: | ||
Deferred losses on derivative financial instruments | (2) | (1) |
Other comprehensive loss, net of tax | (2) | (1) |
Total comprehensive (loss) income | 93 | 72 |
Comprehensive (loss) income attributable to Warner Music Group Corp. | 93 | 72 |
Reportable Legal Entities | Non-Guarantor Subsidiaries | ||
Condensed Statement Of Income Captions [Line Items] | ||
Net income (loss) | 3 | (6) |
Other comprehensive (loss) income, net of tax: | ||
Foreign currency adjustment | 37 | (24) |
Other comprehensive loss, net of tax | 37 | (24) |
Total comprehensive (loss) income | 40 | (30) |
Less: Income attributable to noncontrolling interest | (2) | (1) |
Comprehensive (loss) income attributable to Warner Music Group Corp. | 38 | (31) |
Reportable Legal Entities | WMG Acquisition Corp. Consolidated | ||
Condensed Statement Of Income Captions [Line Items] | ||
Net income (loss) | 24 | 33 |
Other comprehensive (loss) income, net of tax: | ||
Foreign currency adjustment | (37) | (24) |
Deferred losses on derivative financial instruments | (2) | (1) |
Other comprehensive loss, net of tax | (39) | (25) |
Total comprehensive (loss) income | (15) | 8 |
Less: Income attributable to noncontrolling interest | (2) | (1) |
Comprehensive (loss) income attributable to Warner Music Group Corp. | (17) | 7 |
Reportable Legal Entities | WMG Holdings Corp. | ||
Condensed Statement Of Income Captions [Line Items] | ||
Net income (loss) | 22 | 27 |
Other comprehensive (loss) income, net of tax: | ||
Foreign currency adjustment | (37) | (24) |
Deferred losses on derivative financial instruments | (2) | (1) |
Other comprehensive loss, net of tax | (39) | (25) |
Total comprehensive (loss) income | (17) | 2 |
Comprehensive (loss) income attributable to Warner Music Group Corp. | (17) | 2 |
Reportable Legal Entities | Warner Music Group Corp. | ||
Condensed Statement Of Income Captions [Line Items] | ||
Net income (loss) | 22 | 27 |
Other comprehensive (loss) income, net of tax: | ||
Foreign currency adjustment | (37) | (24) |
Deferred losses on derivative financial instruments | (2) | (1) |
Other comprehensive loss, net of tax | (39) | (25) |
Total comprehensive (loss) income | (17) | 2 |
Comprehensive (loss) income attributable to Warner Music Group Corp. | (17) | 2 |
Eliminations | ||
Condensed Statement Of Income Captions [Line Items] | ||
Net income (loss) | (44) | (59) |
Other comprehensive (loss) income, net of tax: | ||
Foreign currency adjustment | 74 | 48 |
Deferred losses on derivative financial instruments | 4 | 2 |
Other comprehensive loss, net of tax | 78 | 50 |
Total comprehensive (loss) income | 34 | (9) |
Comprehensive (loss) income attributable to Warner Music Group Corp. | 34 | (9) |
Eliminations | WMG Acquisition Corp. | ||
Condensed Statement Of Income Captions [Line Items] | ||
Net income (loss) | (96) | (66) |
Other comprehensive (loss) income, net of tax: | ||
Foreign currency adjustment | (37) | 24 |
Deferred losses on derivative financial instruments | 2 | 1 |
Other comprehensive loss, net of tax | (35) | 25 |
Total comprehensive (loss) income | (131) | (41) |
Comprehensive (loss) income attributable to Warner Music Group Corp. | $ (131) | $ (41) |
Guarantor and Non-Guarantor S58
Guarantor and Non-Guarantor Subsidiaries Financial Information - Consolidating Statement of Cash Flows (Detail) - USD ($) $ in Millions | 3 Months Ended | |
Dec. 31, 2016 | Dec. 31, 2015 | |
Cash flows from operating activities | ||
Net income (loss) | $ 24 | $ 28 |
Adjustments to reconcile net income to net cash provided by operating activities: | ||
Depreciation and amortization | 63 | 75 |
Unrealized (gains)/losses and remeasurement of foreign denominated loans | (17) | (8) |
Deferred income taxes | (2) | (9) |
Loss on extinguishment of debt | 32 | |
Non-cash interest expense | 3 | 2 |
Non-cash stock-based compensation expenses | 10 | 1 |
Changes in operating assets and liabilities: | ||
Accounts receivable | (65) | (63) |
Inventories | 3 | (1) |
Royalty advances | 1 | (16) |
Accounts payable and accrued liabilities | (12) | (11) |
Royalty payables | 112 | 58 |
Accrued interest | (10) | (11) |
Deferred revenue | (1) | 1 |
Other balance sheet changes | 15 | 15 |
Net cash provided by operating activities | 156 | 61 |
Cash flows from investing activities | ||
Acquisition of music publishing rights, net | (1) | (7) |
Capital expenditures | (8) | (10) |
Investments and acquisitions of businesses, net | (3) | (1) |
Net cash used in investing activities | (12) | (18) |
Cash flows from financing activities | ||
Proceeds from issuance of Acquisition Corp. Senior Term Loan Facility | 22 | |
Financing costs paid | (27) | |
Deferred financing costs paid | (12) | |
Repayment of Acquisition Corp. Senior Term Loan Facility | (3) | |
Distribution to noncontrolling interest holder | (3) | |
Net cash used in financing activities | (38) | (6) |
Effect of exchange rate changes on cash and equivalents | (10) | (5) |
Net increase (decrease) in cash and equivalents | 96 | 32 |
Cash and equivalents at beginning of period | 359 | 246 |
Cash and equivalents at end of period | 455 | 278 |
4.125% Senior Secured Notes | ||
Cash flows from financing activities | ||
Proceeds from issuance of Acquisition Corp | 380 | |
4.875% Senior Secured Notes | ||
Cash flows from financing activities | ||
Proceeds from issuance of Acquisition Corp | 250 | |
6.00% Senior Secured Notes | ||
Cash flows from financing activities | ||
Repayment of Senior Secured Notes | (450) | |
6.25% Senior Secured Notes | ||
Cash flows from financing activities | ||
Repayment of Senior Secured Notes | (173) | |
5.625% Senior Secured Notes | ||
Cash flows from financing activities | ||
Repayment of Senior Secured Notes | (28) | |
Reportable Legal Entities | WMG Acquisition Corp. | ||
Cash flows from operating activities | ||
Net income (loss) | 22 | 32 |
Adjustments to reconcile net income to net cash provided by operating activities: | ||
Unrealized (gains)/losses and remeasurement of foreign denominated loans | (21) | 120 |
Loss on extinguishment of debt | 32 | |
Non-cash interest expense | 3 | 2 |
Equity (gains) losses, including distributions | (83) | (47) |
Changes in operating assets and liabilities: | ||
Accrued interest | (10) | (6) |
Net cash provided by operating activities | (57) | 101 |
Cash flows from investing activities | ||
Advances to issuer | 95 | (88) |
Net cash used in investing activities | 95 | (88) |
Cash flows from financing activities | ||
Proceeds from issuance of Acquisition Corp. Senior Term Loan Facility | 22 | |
Financing costs paid | (27) | |
Deferred financing costs paid | (12) | |
Repayment of Acquisition Corp. Senior Term Loan Facility | (3) | |
Net cash used in financing activities | (38) | (13) |
Dividend by Acquisition Corp. to Holdings Corp. | (10) | |
Reportable Legal Entities | Guarantor Subsidiaries | ||
Cash flows from operating activities | ||
Net income (loss) | 95 | 73 |
Adjustments to reconcile net income to net cash provided by operating activities: | ||
Depreciation and amortization | 35 | 41 |
Unrealized (gains)/losses and remeasurement of foreign denominated loans | (9) | 19 |
Non-cash stock-based compensation expenses | 10 | 1 |
Equity (gains) losses, including distributions | (40) | (19) |
Changes in operating assets and liabilities: | ||
Accounts receivable | (19) | (5) |
Inventories | 2 | 2 |
Royalty advances | 7 | (3) |
Accounts payable and accrued liabilities | 6 | (184) |
Royalty payables | 40 | 7 |
Deferred revenue | (33) | (2) |
Other balance sheet changes | 12 | |
Net cash provided by operating activities | 106 | (70) |
Cash flows from investing activities | ||
Acquisition of music publishing rights, net | (6) | |
Capital expenditures | (6) | (7) |
Investments and acquisitions of businesses, net | (3) | (1) |
Proceeds from divestiture of asset | 4 | |
Net cash used in investing activities | (9) | (14) |
Cash flows from financing activities | ||
Change in due to (from) issuer | (95) | 88 |
Net cash used in financing activities | (95) | 88 |
Net increase (decrease) in cash and equivalents | 2 | 4 |
Cash and equivalents at beginning of period | 180 | 73 |
Cash and equivalents at end of period | 182 | 77 |
Reportable Legal Entities | Non-Guarantor Subsidiaries | ||
Cash flows from operating activities | ||
Net income (loss) | 3 | (6) |
Adjustments to reconcile net income to net cash provided by operating activities: | ||
Depreciation and amortization | 28 | 34 |
Unrealized (gains)/losses and remeasurement of foreign denominated loans | 13 | (147) |
Deferred income taxes | (2) | (9) |
Changes in operating assets and liabilities: | ||
Accounts receivable | (46) | (58) |
Inventories | 1 | (3) |
Royalty advances | (6) | (13) |
Accounts payable and accrued liabilities | 9 | 173 |
Royalty payables | 72 | 51 |
Deferred revenue | 32 | 3 |
Other balance sheet changes | 3 | 15 |
Net cash provided by operating activities | 107 | 40 |
Cash flows from investing activities | ||
Acquisition of music publishing rights, net | (1) | (1) |
Capital expenditures | (2) | (3) |
Net cash used in investing activities | (3) | (4) |
Cash flows from financing activities | ||
Distribution to noncontrolling interest holder | (3) | |
Net cash used in financing activities | (3) | |
Effect of exchange rate changes on cash and equivalents | (10) | (5) |
Net increase (decrease) in cash and equivalents | 94 | 28 |
Cash and equivalents at beginning of period | 179 | 173 |
Cash and equivalents at end of period | 273 | 201 |
Reportable Legal Entities | WMG Acquisition Corp. Consolidated | ||
Cash flows from operating activities | ||
Net income (loss) | 24 | 33 |
Adjustments to reconcile net income to net cash provided by operating activities: | ||
Depreciation and amortization | 63 | 75 |
Unrealized (gains)/losses and remeasurement of foreign denominated loans | (17) | (8) |
Deferred income taxes | (2) | (9) |
Loss on extinguishment of debt | 32 | |
Non-cash interest expense | 3 | 2 |
Non-cash stock-based compensation expenses | 10 | 1 |
Changes in operating assets and liabilities: | ||
Accounts receivable | (65) | (63) |
Inventories | 3 | (1) |
Royalty advances | 1 | (16) |
Accounts payable and accrued liabilities | (12) | (11) |
Royalty payables | 112 | 58 |
Accrued interest | (10) | (6) |
Deferred revenue | (1) | 1 |
Other balance sheet changes | 15 | 15 |
Net cash provided by operating activities | 156 | 71 |
Cash flows from investing activities | ||
Acquisition of music publishing rights, net | (1) | (7) |
Capital expenditures | (8) | (10) |
Investments and acquisitions of businesses, net | (3) | (1) |
Net cash used in investing activities | (12) | (18) |
Cash flows from financing activities | ||
Proceeds from issuance of Acquisition Corp. Senior Term Loan Facility | 22 | |
Financing costs paid | (27) | |
Deferred financing costs paid | (12) | |
Repayment of Acquisition Corp. Senior Term Loan Facility | (3) | |
Distribution to noncontrolling interest holder | (3) | |
Net cash used in financing activities | (38) | (16) |
Dividend by Acquisition Corp. to Holdings Corp. | (10) | |
Effect of exchange rate changes on cash and equivalents | (10) | (5) |
Net increase (decrease) in cash and equivalents | 96 | 32 |
Cash and equivalents at beginning of period | 359 | 246 |
Cash and equivalents at end of period | 455 | 278 |
Reportable Legal Entities | WMG Holdings Corp. | ||
Cash flows from operating activities | ||
Net income (loss) | 22 | 27 |
Adjustments to reconcile net income to net cash provided by operating activities: | ||
Equity (gains) losses, including distributions | (22) | (32) |
Changes in operating assets and liabilities: | ||
Accrued interest | (5) | |
Net cash provided by operating activities | (10) | |
Cash flows from financing activities | ||
Net cash used in financing activities | 10 | |
Dividend by Acquisition Corp. to Holdings Corp. | 10 | |
Reportable Legal Entities | Warner Music Group Corp. | ||
Cash flows from operating activities | ||
Net income (loss) | 22 | 27 |
Adjustments to reconcile net income to net cash provided by operating activities: | ||
Equity (gains) losses, including distributions | (22) | (27) |
Reportable Legal Entities | 4.125% Senior Secured Notes | WMG Acquisition Corp. | ||
Cash flows from financing activities | ||
Proceeds from issuance of Acquisition Corp | 380 | |
Reportable Legal Entities | 4.125% Senior Secured Notes | WMG Acquisition Corp. Consolidated | ||
Cash flows from financing activities | ||
Proceeds from issuance of Acquisition Corp | 380 | |
Reportable Legal Entities | 4.875% Senior Secured Notes | WMG Acquisition Corp. | ||
Cash flows from financing activities | ||
Proceeds from issuance of Acquisition Corp | 250 | |
Reportable Legal Entities | 4.875% Senior Secured Notes | WMG Acquisition Corp. Consolidated | ||
Cash flows from financing activities | ||
Proceeds from issuance of Acquisition Corp | 250 | |
Reportable Legal Entities | 6.00% Senior Secured Notes | WMG Acquisition Corp. | ||
Cash flows from financing activities | ||
Repayment of Senior Secured Notes | (450) | |
Reportable Legal Entities | 6.00% Senior Secured Notes | WMG Acquisition Corp. Consolidated | ||
Cash flows from financing activities | ||
Repayment of Senior Secured Notes | (450) | |
Reportable Legal Entities | 6.25% Senior Secured Notes | WMG Acquisition Corp. | ||
Cash flows from financing activities | ||
Repayment of Senior Secured Notes | (173) | |
Reportable Legal Entities | 6.25% Senior Secured Notes | WMG Acquisition Corp. Consolidated | ||
Cash flows from financing activities | ||
Repayment of Senior Secured Notes | (173) | |
Reportable Legal Entities | 5.625% Senior Secured Notes | WMG Acquisition Corp. | ||
Cash flows from financing activities | ||
Repayment of Senior Secured Notes | (28) | |
Reportable Legal Entities | 5.625% Senior Secured Notes | WMG Acquisition Corp. Consolidated | ||
Cash flows from financing activities | ||
Repayment of Senior Secured Notes | (28) | |
Eliminations | ||
Cash flows from operating activities | ||
Net income (loss) | (44) | (59) |
Adjustments to reconcile net income to net cash provided by operating activities: | ||
Equity (gains) losses, including distributions | 44 | 59 |
Eliminations | WMG Acquisition Corp. | ||
Cash flows from operating activities | ||
Net income (loss) | (96) | (66) |
Adjustments to reconcile net income to net cash provided by operating activities: | ||
Equity (gains) losses, including distributions | 123 | 66 |
Changes in operating assets and liabilities: | ||
Accounts payable and accrued liabilities | (27) | |
Cash flows from investing activities | ||
Advances to issuer | (95) | 88 |
Net cash used in investing activities | (95) | 88 |
Cash flows from financing activities | ||
Change in due to (from) issuer | 95 | (88) |
Net cash used in financing activities | $ 95 | $ (88) |
Guarantor and Non-Guarantor S59
Guarantor and Non-Guarantor Subsidiaries Financial Information - Consolidating Statement of Cash Flows (Parenthetical) (Detail) | Dec. 31, 2016 |
4.125% Senior Secured Notes | |
Condensed Cash Flow Statements Captions [Line Items] | |
Interest rate | 4.125% |
4.875% Senior Secured Notes | |
Condensed Cash Flow Statements Captions [Line Items] | |
Interest rate | 4.875% |
6.00% Senior Secured Notes | |
Condensed Cash Flow Statements Captions [Line Items] | |
Interest rate | 6.00% |
6.25% Senior Secured Notes | |
Condensed Cash Flow Statements Captions [Line Items] | |
Interest rate | 6.25% |
5.625% Senior Secured Notes | |
Condensed Cash Flow Statements Captions [Line Items] | |
Interest rate | 5.625% |