Document and Entity Information
Document and Entity Information - shares | 3 Months Ended | |
Dec. 31, 2017 | Feb. 02, 2018 | |
Document And Entity Information [Abstract] | ||
Document Type | 10-Q | |
Amendment Flag | false | |
Document Period End Date | Dec. 31, 2017 | |
Document Fiscal Year Focus | 2,018 | |
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, 2017 | Sep. 30, 2017 |
Current assets: | ||
Cash and equivalents | $ 776 | $ 647 |
Accounts receivable, net of allowances of $66 million and $50 million | 499 | 404 |
Inventories | 38 | 39 |
Royalty advances expected to be recouped within one year | 142 | 141 |
Prepaid and other current assets | 47 | 44 |
Total current assets | 1,502 | 1,275 |
Royalty advances expected to be recouped after one year | 175 | 172 |
Property, plant and equipment, net | 213 | 213 |
Goodwill | 1,688 | 1,685 |
Intangible assets subject to amortization, net | 2,045 | 2,090 |
Intangible assets not subject to amortization | 117 | 117 |
Deferred tax assets, net | 61 | 97 |
Other assets | 74 | 69 |
Total assets | 5,875 | 5,718 |
Current liabilities: | ||
Accounts payable | 166 | 208 |
Accrued royalties | 1,406 | 1,263 |
Accrued liabilities | 401 | 365 |
Accrued interest | 25 | 41 |
Deferred revenue | 201 | 197 |
Other current liabilities | 35 | 26 |
Total current liabilities | 2,234 | 2,100 |
Long-term debt | 2,818 | 2,811 |
Deferred tax liabilities, net | 196 | 190 |
Other noncurrent liabilities | 306 | 309 |
Total liabilities | 5,554 | 5,410 |
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 | (650) | (654) |
Accumulated other comprehensive loss, net | (171) | (181) |
Total Warner Music Group Corp. equity | 307 | 293 |
Noncontrolling interest | 14 | 15 |
Total equity | 321 | 308 |
Total liabilities and equity | $ 5,875 | $ 5,718 |
Consolidated Balance Sheets (U3
Consolidated Balance Sheets (Unaudited) (Parenthetical) - USD ($) $ in Millions | Dec. 31, 2017 | Sep. 30, 2017 |
Statement Of Financial Position [Abstract] | ||
Accounts receivable, allowances | $ 66 | $ 50 |
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, 2017 | Dec. 31, 2016 | ||
Income Statement [Abstract] | |||
Revenue | $ 1,045 | $ 917 | |
Costs and expenses: | |||
Cost of revenue | (569) | (496) | |
Selling, general and administrative expenses | [1] | (333) | (276) |
Amortization expense | (53) | (51) | |
Total costs and expenses | (955) | (823) | |
Operating income | 90 | 94 | |
Loss on extinguishment of debt | (1) | (32) | |
Interest expense, net | (36) | (40) | |
Other income | 4 | 19 | |
Income before income taxes | 57 | 41 | |
Income tax expense | (52) | (17) | |
Net income | 5 | 24 | |
Less: Income attributable to noncontrolling interest | (1) | (2) | |
Net income attributable to Warner Music Group Corp. | $ 4 | $ 22 | |
[1] | (a) Includes depreciation expense of: $(12) $(12) |
Consolidated Statements of Ope5
Consolidated Statements of Operations (Unaudited) (Parenthetical) - USD ($) $ in Millions | 3 Months Ended | |
Dec. 31, 2017 | Dec. 31, 2016 | |
Income Statement [Abstract] | ||
Depreciation expense | $ (12) | $ (12) |
Consolidated Statements of Comp
Consolidated Statements of Comprehensive Income (Loss) (Unaudited) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | |
Dec. 31, 2017 | Dec. 31, 2016 | Dec. 31, 2016 | |
Statement Of Income And Comprehensive Income [Abstract] | |||
Net income | $ 5 | $ 24 | $ 24 |
Other comprehensive income (loss), net of tax: | |||
Foreign currency adjustment | 9 | (37) | |
Deferred gains (losses) on derivative financial instruments | 1 | (2) | |
Other comprehensive income (loss), net of tax | 10 | (39) | |
Total comprehensive income (loss) | 15 | (15) | |
Less: Income attributable to noncontrolling interest | (1) | (2) | |
Comprehensive income (loss) attributable to Warner Music Group Corp. | $ 14 | $ (17) |
Consolidated Statements of Cash
Consolidated Statements of Cash Flows (Unaudited) - USD ($) $ in Millions | 3 Months Ended | |
Dec. 31, 2017 | Dec. 31, 2016 | |
Cash flows from operating activities | ||
Net income | $ 5 | $ 24 |
Adjustments to reconcile net income to net cash provided by operating activities: | ||
Depreciation and amortization | 65 | 63 |
Unrealized losses/gains and remeasurement of foreign denominated loans | 5 | (17) |
Deferred income taxes | 42 | (2) |
Loss on extinguishment of debt | 1 | 32 |
Net gain on investments | (7) | |
Non-cash interest expense | 1 | 3 |
Equity-based compensation expense | 18 | 10 |
Changes in operating assets and liabilities: | ||
Accounts receivable | (93) | (65) |
Inventories | 2 | 3 |
Royalty advances | (5) | 1 |
Accounts payable and accrued liabilities | (23) | (12) |
Royalty payables | 141 | 112 |
Accrued interest | (16) | (10) |
Deferred revenue | (3) | (1) |
Other balance sheet changes | 3 | 15 |
Net cash provided by operating activities | 136 | 156 |
Cash flows from investing activities | ||
Acquisition of music publishing rights, net | (1) | (1) |
Capital expenditures | (16) | (8) |
Investments and acquisitions of businesses, net | (1) | (3) |
Proceeds from the sale of investments | 12 | |
Net cash (used in) provided by investing activities | (6) | (12) |
Cash flows from financing activities | ||
Proceeds from issuance of Acquisition Corp. Senior Term Loan Facility | 22 | |
Call premiums paid on early redemption of debt | (27) | |
Deferred financing costs paid | (1) | (12) |
Distribution to noncontrolling interest holder | (2) | |
Net cash (used in) provided by financing activities | (3) | (38) |
Effect of exchange rate changes on cash and equivalents | 2 | (10) |
Net increase in cash and equivalents | 129 | 96 |
Cash and equivalents at beginning of period | 647 | 359 |
Cash and equivalents at end of period | $ 776 | 455 |
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, 2017 | Dec. 31, 2016 |
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 Statements of Equi
Consolidated Statements of Equity (Unaudited) - 3 months ended Dec. 31, 2017 - 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, 2017 | $ 308 | $ 1,128 | $ (654) | $ (181) | $ 293 | $ 15 | |
Beginning balance, shares at Sep. 30, 2017 | 1,055 | 1,055 | |||||
Net income | $ 5 | 4 | 4 | 1 | |||
Other comprehensive income, net of tax | 10 | 10 | 10 | ||||
Distribution to noncontrolling interest holders | (2) | (2) | |||||
Ending balance at Dec. 31, 2017 | $ 321 | $ 1,128 | $ (650) | $ (171) | $ 307 | $ 14 | |
Ending balance, shares at Dec. 31, 2017 | 1,055 | 1,055 |
Description of Business
Description of Business | 3 Months Ended |
Dec. 31, 2017 | |
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 NYSE. The Company continues voluntarily to 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. 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 music 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, East West, Elektra, Erato, FFRR, Fueled by Ramen, Nonesuch, Parlophone, Reprise, Roadrunner, Sire, Spinnin’, 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 music 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 and bestbuy.com and in digital form to an expanded universe of digital partners, including digital streaming services such as Amazon, Apple Music, Deezer, Napster, Soundcloud, Spotify and YouTube, digital radio services such as iHeart Radio, Pandora and Sirius XM and digital download services such as Apple’s iTunes and Google Play. 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 music 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 and gospel. Warner/Chappell also administers the music and soundtracks of several third-party television and film producers and studios. 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, 2017 | |
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, 2017 are not necessarily indicative of the results that may be expected for the fiscal year ending September 30, 2018. The consolidated balance sheet at September 30, 2017 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, 2017 (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”) 810, Consolidation 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, 2017 and December 31, 2016 relate to the periods ended December 29, 2017 and December 30, 2016, respectively. For convenience purposes, the Company continues to date its financial statements as of December 31. The fiscal year ended September 30, 2017 ended on September 29, 2017. 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. On December 22, 2017, the U.S. government enacted comprehensive tax legislation commonly referred to as the Tax Cuts and Jobs Act (the “Tax Act”). In accordance with ASC Topic 740, Income Taxes (“ASC 740”) the Company recorded the impacts in the period of enactment. Furthermore, the SEC has provided guidance under Staff Accounting Bulletin No. 118, Income Tax Accounting Implications of the Tax Cuts and Jobs Act (“SAB 118”) that allows companies, for one year following the enactment date, to consider the impact of the Tax Act as “provisional” when a company can make a reasonable estimate but does not have the necessary information available, prepared or analyzed in reasonable detail to finalize its accounting for the impact of the Tax Act. A company may need to reflect adjustments to its provisional amounts upon obtaining, preparing or analyzing additional information about facts and circumstances that existed at the period of enactment. New Accounting Pronouncements In October 2017, the Company adopted ASU 2016-09, Compensation - Stock Compensation The adoption of ASU 2016-09 did not have any effect on the Company’s consolidated financial statements and footnote disclosures as of December 31, 2017. In May 2014, the FASB issued guidance codified in ASC 606, Revenue from Contracts with Customers Revenue Recognition Entertainment – Music In January 2016, the FASB issued ASU 2016-01, Recognition and Measurement of Financial Assets and Financial Liabilities In February 2016, the FASB issued ASU 2016-02, Leases In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows: Classification of Certain Cash Receipts and Cash Payments In October 2016, the FASB issued ASU 2016-16, Income Taxes: Intra-Entity Transfers of Assets Other Than Inventory In August 2017, the FASB issued ASU 2017-12, Targeted Improvements to Accounting for Hedging Activities after December 15, 2018 and interim periods within those fiscal years. Early adoption is permitted and requires |
Comprehensive Income (Loss)
Comprehensive Income (Loss) | 3 Months Ended |
Dec. 31, 2017 | |
Equity [Abstract] | |
Comprehensive Income (Loss) | 3. Comprehensive Income (Loss) Comprehensive income (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 income (loss) primarily consist of foreign currency translation gains and 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 $7 million: Foreign Minimum Deferred Losses Accumulated Currency Pension On Derivative Other Translation Liability Financial Comprehensive Gain (Loss) (a) Adjustment Instruments Loss, net (in millions) Balance at September 30, 2017 $ (171 ) $ (10 ) $ — $ (181 ) Other comprehensive income 9 — 1 10 Amounts reclassified from accumulated other comprehensive income — — — — Balance at December 31, 2017 $ (162 ) $ (10 ) $ 1 $ (171 ) (a) Includes historical foreign currency translation related to certain intra-entity transactions that are no longer considered of a long-term investment nature. |
Goodwill and Intangible Assets
Goodwill and Intangible Assets | 3 Months Ended |
Dec. 31, 2017 | |
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, 2017 $ 1,221 $ 464 $ 1,685 Acquisitions — — — Divestitures — — — Other adjustments (a) 3 — 3 Balance at December 31, 2017 $ 1,224 $ 464 $ 1,688 (a) Other adjustments during the three months ended December 31, 2017 represent foreign currency movements. The Company performs its annual goodwill impairment test in accordance with ASC 350, Intangibles—Goodwill and other At December 31, 2017 and September 30, 2017, the goodwill and intangible balances presented include the preliminary purchase accounting allocation resulting from the acquisition of Spinnin’ Records on September 7, 2017. The acquisition of Spinnin’ Records was accounted for as a business combination under ASC 805, which requires the acquisition method of accounting. At September 30, 2017, the Company performed a preliminary purchase allocation under the acquisition method of accounting, which is subject to revision based on final determinations of fair value and allocations of purchase price to the identifiable assets and liabilities acquired. At December 31, 2017, the Company has not made any adjustments to the preliminary allocation recorded at September 30, 2017. Intangible Assets Intangible assets consist of the following: Weighted Average December 31, September 30, Useful Life 2017 2017 (in millions) Intangible assets subject to amortization: Recorded music catalog 10 years $ 901 $ 898 Music publishing copyrights 27 years 1,540 1,534 Artist and songwriter contracts 13 years 906 904 Trademarks 6 years 14 14 Other intangible assets 7 years 10 10 Total gross intangible asset subject to amortization 3,371 3,360 Accumulated amortization (1,326 ) (1,270 ) Total net intangible assets subject to amortization 2,045 2,090 Intangible assets not subject to amortization: Trademarks and tradenames Indefinite 117 117 Total net intangible assets $ 2,162 $ 2,207 |
Debt
Debt | 3 Months Ended |
Dec. 31, 2017 | |
Debt Disclosure [Abstract] | |
Debt | 5. Debt Debt Capitalization Long-term debt consists of the following: December 31, September 30, 2017 2017 (in millions) Revolving Credit Facility—Acquisition Corp. (a) $ — $ — Senior Term Loan Facility due 2023—Acquisition Corp. (b) 991 990 5.625% Senior Secured Notes due 2022—Acquisition Corp. (c) 246 246 5.00% Senior Secured Notes due 2023—Acquisition Corp. (d) 297 297 4.125% Senior Secured Notes due 2024— Acquisition Corp. (e) 407 402 4.875% Senior Secured Notes due 2024— Acquisition Corp. (f) 247 246 6.75% Senior Notes due 2022—Acquisition Corp. (g) 630 630 Total debt (h) $ 2,818 $ 2,811 (a) Reflects $150 million of commitments under the Revolving Credit Facility, less letters of credit outstanding of approximately $12 million at both December 31, 2017 and September 30, 2017. There were no loans outstanding under the Revolving Credit Facility at December 31, 2017 or September 30, 2017. On January 31, 2018, Acquisition Corp. entered into a new revolving credit facility that replaced our then existing revolving credit facility in its entirety. See Note 12 of our Consolidated Financial Statements for further discussion. (b) Principal amount of $1.006 billion at both December 31, 2017 and September 30, 2017 (c) Principal amount of $248 million less unamortized deferred financing costs of $2 million at December 31, 2017 and September 30, 2017, respectively. (d) Principal amount of $300 million less unamortized deferred financing costs of $3 million at both December 31, 2017 and September 30, 2017, respectively. (e) Face amount of €345 million. Above amounts represent the dollar equivalent of such notes at December 31, 2017 and September 30, 2017. Principal amount of $412 million and $407 million at December 31, 2017 and September 30, 2017, respectively, less unamortized deferred financing costs of $5 million at both December 31, 2017 and September 30, 2017. (f) Principal amount of $250 million at both December 31, 2017 and September 30, 2017 less unamortized deferred financing costs of $3 million and $4 million at December 31, 2017 and September 30, 2017, respectively. (g) Principal amount of $635 million less unamortized deferred financing costs of $5 million at both December 31, 2017 and September 30, 2017, respectively. (h) Principal amount of debt of $2.851 billion and $2.846 billion less unamortized discount of $5 million and $6 million and unamortized deferred financing costs of $28 million and $29 million at December 31, 2017 and September 30, 2017, respectively. December 2017 Senior Term Loan Credit Agreement Amendment On December 6, 2017, Acquisition Corp. entered into an amendment (the “December 2017 Senior Term Loan Credit Agreement Amendment”) to the Senior Term Loan Credit Agreement, dated November 1, 2012, among Acquisition Corp., the guarantors party thereto, the lenders party thereto and Credit Suisse AG, as administrative agent, governing Acquisition Corp.’s senior secured term loan facility with Credit Suisse AG, as administrative agent, and the other financial institutions and lenders from time to time party thereto, to, among other things, reduce the pricing terms of its outstanding term loans, change certain incurrence thresholds governing the ability to incur debt and liens, change certain EBITDA add-backs and increase the thresholds below which the excess cash flow sweep is triggered. The Company recorded a loss on extinguishment of debt of approximately $1 million, which represented the discount and unamortized deferred financing costs related to the debt of the lenders that was fully repaid. New Revolving Credit Agreement On January 31, 2018, Acquisition Corp. entered into a new revolving credit facility that replaced our then existing revolving credit facility in its entirety, and references to “Revolving Credit Facility” below in this Note 5 are to our new revolving credit facility. See Note 12 of our Consolidated Financial Statements for further discussion. 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”) subject to a zero floor, plus 1.75% 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 one-month Revolving LIBOR plus 1.0% per annum, plus, in each case, 0.75% 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”) subject to a zero floor, plus 2.25% 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) one-month Term Loan LIBOR, plus 1.00% per annum, plus, in each case, 1.25% per annum. 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 January 31, 2023. Maturities of Senior Notes and Senior Secured Notes As of December 31, 2017, there are no scheduled maturities of notes until 2022, when $883 million is scheduled to mature. Thereafter, $962 million is scheduled to mature. Interest Expense, net Total interest expense, net, was $36 million and $40 million for the three months ended December 31, 2017 and December 31, 2016, respectively. The weighted-average interest rate of the Company’s total debt was 4.9% at December 31, 2017, September 30, 2017, and December 31, 2016. |
Commitments and Contingencies
Commitments and Contingencies | 3 Months Ended |
Dec. 31, 2017 | |
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 13, 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. 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. On July 18, 2017, the District Court denied plaintiffs’ motion for class certification. On August 1, 2017, plaintiffs filed a petition with the Second Circuit seeking permission to appeal the district court’s order denying class certification. On August 11, 2017, defendants filed their opposition to plaintiffs’ petition. On December 8, 2017, the Second Circuit denied plaintiffs’ request for leave to appeal the District Court’s order denying their motion for class certification. The parties are attempting to resolve the matter and have informed the District Court that they expect to file a dismissal in February 2018. 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. 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 $4 million was recognized in revenue during the 2017 fiscal year. The balance of $1 million was recognized in the first quarter of the 2018 fiscal year. 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. As part of the settlement, plaintiffs agreed to negotiate in good faith to grant Sirius XM a license to publicly perform the plaintiffs’ pre-1972 sound recordings for the five-year period running from January 1, 2018 to December 31, 2022. Pursuant to the settlement, if the parties are unable to reach an agreement on license terms, the royalty rate for each license will be determined by binding arbitration on a willing buyer/willing seller standard. On December 21, 2017, Sirius XM commenced an arbitration through JAMS to determine the rate for the five-year period. 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, 2017 | |
Income Tax Disclosure [Abstract] | |
Income Taxes | 7. Income Taxes On December 22, 2017, the U.S. government enacted comprehensive tax legislation commonly referred to as the Tax Cuts and Jobs Act. The Tax Act contains significant revisions to U.S. corporate income tax provisions, including, but not limited to, a reduction of the U.S. corporate statutory tax rate from 35% to 21%, a one-time transition tax on accumulated foreign earnings, an income inclusion of global intangible low-taxed income (“GILTI”), and a new minimum tax, base erosion anti-abuse tax (“BEAT”). In accordance with ASC 740, the Company recorded the effects of the Tax Act during the three months ended December 31, 2017, the period of enactment. The reduction in U.S. corporate statutory tax rate from 35% to 21% is effective January 1, 2018. The Tax Act requires companies with a fiscal year that begins before and ends after the effective date of the rate change to calculate a blended tax rate based on the pro rata number of days in the fiscal year before and after the effective date. As a result, for the fiscal year ending September 30, 2018, the Company’s statutory income tax rate will be 24.5%. For the fiscal year ending September 30, 2019, the Company will be subject to the U.S. corporate statutory tax rate will be 21%. The reduction of the U.S. corporate statutory rate requires the Company to adjust its U.S. deferred tax assets and liabilities using the newly enacted tax rate of 21%. As a result, the Company recorded a provisional U.S. income tax expense of $27 million for the reduction of its net U.S. deferred tax assets as a discrete item for the three months ended December 31, 2017. Since the Company has a fiscal year ending September 30, 2018, and has applied an annual effective tax rate in calculating its income tax provision for the three months ended December 31, 2017, the impact of the U.S. corporate statutory tax rate change will not be finalized until September 30, 2018. Furthermore, the Company has a provisional deferred tax liability of approximately $4 million, after the impact of the newly enacted tax rate, associated with unremitted earnings due to the uncertainty of the treatment of future distributions under the Tax Act. The one-time transition tax on accumulated foreign earnings (“Transition Tax”) would be imposed at a rate of 15.5% for cash and cash equivalents and 8% for illiquid assets. The Company reasonably estimates that there is no income tax impact related to the Transition Tax and recorded no income tax liability for the three months ended December 31, 2017 due to an estimated overall deficit in accumulated foreign earnings. This estimate is provisional since the Company has not obtained and analyzed information necessary to finalize its accounting for the impact of the Transition Tax. The final impacts of the Transition Tax may differ from the estimate due to changes in interpretations of the Tax Act and updates or changes to the information that the Company has used to estimate the transition impact, including, but not limited to, the impacts from changes to foreign earnings estimates, foreign exchange rates, and cash positions of foreign subsidiaries. GILTI and BEAT are effective for the Company for the fiscal year ended September 30, 2019. For the period of enactment, the Company has elected not to adjust its deferred taxes for the impact of GILTI and will consider the impact of GILTI in the specific period in which it occurs. For the three months ended December 31, 2017, the Company recorded an income tax expense of $52 million. The income tax expense for the three months ended December 31, 2017 is greater than the expected income tax expense at the blended statutory tax rate of 24.5% primarily due to a U.S. income tax expense of $27 million arising from a reduction in net U.S. deferred tax assets due to the change in the U.S. statutory tax rate, foreign income taxed at rates higher than the U.S. statutory tax rate, income withholding taxes, foreign losses with no tax benefit and an increase in uncertain tax positions. For the three months ended December 31, 2016, the Company recorded income tax expense of $17 million. The income tax expense for the three months ended December 31, 2016 is higher than the expected income 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 a valuation allowance. The Company has determined that it is reasonably possible that the gross unrecognized tax benefits as of December 31, 2017 could decrease by up to approximately $3 million related to various ongoing audits and settlement discussions in various foreign jurisdictions during the next twelve months. |
Derivative Financial Instrument
Derivative Financial Instruments | 3 Months Ended |
Dec. 31, 2017 | |
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, Derivatives and Hedging 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, 2017, the Company had outstanding hedge contracts for the sale of $220 million and the purchase of $131 million of foreign currencies at fixed rates that will be settled by September 2018. As of December 31, 2017, the Company had $1 million of unrealized deferred income in comprehensive income related to foreign exchange hedging. As of September 30, 2017, 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, 2017 and September 30, 2017: December 31, September 30, 2017 (a) 2017 (in millions) Other current assets $ — $ — Other current liabilities 1 — (a) Includes $1 million and $2 million of foreign exchange derivative contracts in asset and liability positions, respectively. |
Segment Information
Segment Information | 3 Months Ended |
Dec. 31, 2017 | |
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, 2017 Revenues $ 904 $ 143 $ (2 ) $ 1,045 Operating income (loss) 129 (1 ) (38 ) 90 Amortization of intangible assets 36 17 — 53 Depreciation of property, plant and equipment 8 1 3 12 OIBDA 173 17 (35 ) 155 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 |
Additional Financial Informatio
Additional Financial Information | 3 Months Ended |
Dec. 31, 2017 | |
Additional Financial Information [Abstract] | |
Additional Financial Information | 10. Additional Financial Information Cash Interest and Taxes The Company made interest payments of approximately $51 million and $47 million during the three months ended December 31, 2017 and December 31, 2016, respectively. The Company paid approximately $8 million of income and withholding taxes during the three months ended December 31, 2017 and paid approximately $9 million of income and withholding taxes during the three months ended December 31, 2016. |
Fair Value Measurements
Fair Value Measurements | 3 Months Ended |
Dec. 31, 2017 | |
Fair Value Disclosures [Abstract] | |
Fair Value Measurements | 11. Fair Value Measurements ASC 820, Fair Value Measurement 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, 2017 and September 30, 2017. Fair Value Measurements as of December 31, 2017 (Level 1) (Level 2) (Level 3) Total (in millions) Other Current Assets: Foreign Currency Forward Exchange Contracts (a) $ — $ — $ — $ — Other Current Liabilities: Foreign Currency Forward Exchange Contracts (a) — (1 ) — (1 ) Other Current Liabilities: Contractual Obligations (b) — — — — Other Non-Current Liabilities: Contractual Obligations (b) — — (5 ) (5 ) Total $ — $ (1 ) $ (5 ) $ (6 ) Fair Value Measurements as of September 30, 2017 (Level 1) (Level 2) (Level 3) Total (in millions) Other Current Liabilities: Contractual Obligations (b) — — — — Other Non-Current Liabilities: Contractual Obligations (b) — — (5 ) (5 ) Total $ — $ — $ (5 ) $ (5 ) (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, 2017 (5 ) Additions — Reductions — Payments — Balance at December 31, 2017 $ (5 ) 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, 2017, the fair value of the Company’s debt was $2.932 billion. Based on the level of interest rates prevailing at September 30, 2017, the fair value of the Company’s debt was $2.936 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. |
Subsequent Events
Subsequent Events | 3 Months Ended |
Dec. 31, 2017 | |
Subsequent Events [Abstract] | |
Subsequent Events | 12. Subsequent Events Special Cash Dividend On January 8, 2018, our Board of Directors approved a special cash dividend of $125 million which was paid on January 12, 2018 to stockholders of record as of January 11, 2018. New Revolving Credit Agreement On January 31, 2018, the Company entered into a new revolving credit agreement (the “Revolving Credit Agreement”) for its Revolving Credit Facility, and terminated its existing revolving credit agreement (the “Old Revolving Credit Agreement”). The Revolving Credit Agreement differs from the Old Revolving Credit Agreement in that it, among other things, reduces the interest rate margin applicable to the loans, extends the maturity date thereunder, provides for the option to increase the commitments under the Company’s then existing revolving credit agreement, provides for greater flexibility to amend and extend the Company’s then existing revolving credit agreement and create additional tranches thereunder, provides for greater flexibility over future amendments, increases the springing financial maintenance covenant to 4.75:1.00 and provides that the covenant shall not be tested unless at the end of a fiscal quarter the outstanding amount of loans and drawings under letters of credit which have not been reimbursed exceeds $54 million and aligns the other negative covenants with those of the Senior Term Loan Credit Agreement. |
Guarantor and Non-Guarantor Sub
Guarantor and Non-Guarantor Subsidiaries Financial Information | 3 Months Ended |
Dec. 31, 2017 | |
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 and 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, 2017 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 $ — $ 435 $ 341 $ — $ 776 $ — $ — $ — $ 776 Accounts receivable, net — 247 252 — 499 — — — 499 Inventories — 13 25 — 38 — — — 38 Royalty advances expected to be recouped within one year — 86 56 — 142 — — — 142 Prepaid and other current assets — 14 33 — 47 — — — 47 Total current assets — 795 707 — 1,502 — — — 1,502 Due from (to) parent companies 500 (4 ) (496 ) — — — — — — Investments in and advances to consolidated subsidiaries 2,644 1,453 — (4,097 ) — 391 391 (782 ) — Royalty advances expected to be recouped after one year — 106 69 — 175 — — — 175 Property, plant and equipment, net — 139 74 — 213 — — — 213 Goodwill — 1,368 320 — 1,688 — — — 1,688 Intangible assets subject to amortization, net — 1,006 1,039 — 2,045 — — — 2,045 Intangible assets not subject to amortization — 71 46 — 117 — — — 117 Deferred tax assets, net — 53 8 — 61 — — — 61 Other assets 7 47 20 — 74 — — — 74 Total assets $ 3,151 $ 5,034 $ 1,787 $ (4,097 ) $ 5,875 $ 391 $ 391 $ (782 ) $ 5,875 Liabilities and Deficit: Current liabilities: Accounts payable $ — $ 87 $ 79 $ — $ 166 $ — $ — $ — $ 166 Accrued royalties — 791 615 — 1,406 — — — 1,406 Accrued liabilities — 175 226 — 401 — — — 401 Accrued interest 25 — — — 25 — — — 25 Deferred revenue — 148 53 — 201 — — — 201 Other current liabilities — 4 31 — 35 — — — 35 Total current liabilities 25 1,205 1,004 — 2,234 — — — 2,234 Long-term debt 2,818 — — — 2,818 — — — 2,818 Deferred tax liabilities, net — — 196 — 196 — — — 196 Other noncurrent liabilities 1 195 110 — 306 — — — 306 Total liabilities 2,844 1,400 1,310 — 5,554 — — — 5,554 Total Warner Music Group Corp. equity 307 3,630 467 (4,097 ) 307 391 391 (782 ) 307 Noncontrolling interest — 4 10 — 14 — — — 14 Total equity 307 3,634 477 (4,097 ) 321 391 391 (782 ) 321 Total liabilities and equity $ 3,151 $ 5,034 $ 1,787 $ (4,097 ) $ 5,875 $ 391 $ 391 $ (782 ) $ 5,875 Consolidating Balance Sheet September 30, 2017 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 $ — $ 347 $ 300 $ — $ 647 $ — $ — $ — $ 647 Accounts receivable, net — 214 190 — 404 — — — 404 Inventories — 12 27 — 39 — — — 39 Royalty advances expected to be recouped within one year — 89 52 — 141 — — — 141 Prepaid and other current assets — 15 29 — 44 — — — 44 Total current assets — 677 598 — 1,275 — — — 1,275 Due from (to) parent companies 418 96 (514 ) — — — — — — Investments in and advances to consolidated subsidiaries 2,721 1,312 — (4,033 ) — 377 377 (754 ) — Royalty advances expected to be recouped after one year — 109 63 — 172 — — — 172 Property, plant and equipment, net — 139 74 — 213 — — — 213 Goodwill — 1,368 317 — 1,685 — — — 1,685 Intangible assets subject to amortization, net — 1,029 1,061 — 2,090 — — — 2,090 Intangible assets not subject to amortization — 71 46 — 117 — — — 117 Deferred tax assets, net — 89 8 — 97 — — — 97 Other assets 7 45 17 — 69 — — — 69 Total assets $ 3,146 $ 4,935 $ 1,670 $ (4,033 ) $ 5,718 $ 377 $ 377 $ (754 ) $ 5,718 Liabilities and Deficit: Current liabilities: Accounts payable $ — $ 135 $ 73 $ — $ 208 $ — $ — $ — $ 208 Accrued royalties — 732 531 — 1,263 — — — 1,263 Accrued liabilities — 144 221 — 365 — — — 365 Accrued interest 41 — — — 41 — — — 41 Deferred revenue — 125 72 — 197 — — — 197 Other current liabilities — 3 23 — 26 — — — 26 Total current liabilities 41 1,139 920 — 2,100 — — — 2,100 Long-term debt 2,811 — — — 2,811 — — — 2,811 Deferred tax liabilities, net — — 190 — 190 — — — 190 Other noncurrent liabilities 1 196 112 — 309 — — — 309 Total liabilities 2,853 1,335 1,222 — 5,410 — — — 5,410 Total Warner Music Group Corp. equity 293 3,596 437 (4,033 ) 293 377 377 (754 ) 293 Noncontrolling interest — 4 11 — 15 — — — 15 Total equity 293 3,600 448 (4,033 ) 308 377 377 (754 ) 308 Total liabilities and equity $ 3,146 $ 4,935 $ 1,670 $ (4,033 ) $ 5,718 $ 377 $ 377 $ (754 ) $ 5,718 Consolidating Statement of Operations (Unaudited) For The Three Months Ended December 31, 2017 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 $ — $ 547 $ 621 $ (123 ) $ 1,045 $ — $ — $ — $ 1,045 Costs and expenses: Cost of revenue — (257 ) (393 ) 81 (569 ) — — — (569 ) Selling, general and administrative expenses — (235 ) (138 ) 40 (333 ) — — — (333 ) Amortization of intangible assets — (24 ) (29 ) — (53 ) — — — (53 ) Total costs and expenses — (516 ) (560 ) 121 (955 ) — — — (955 ) Operating income — 31 61 (2 ) 90 — — — 90 Loss on extinguishment of debt (1 ) — — — (1 ) — — — (1 ) Interest expense, net (29 ) 1 (8 ) — (36 ) — — — (36 ) Equity gains (losses) from equity method investments 90 44 — (133 ) 1 4 4 (8 ) 1 Other income, net (4 ) 9 (2 ) — 3 — — — 3 Income before income taxes 56 85 51 (135 ) 57 4 4 (8 ) 57 Income tax (expense) benefit (52 ) (51 ) (10 ) 61 (52 ) — — — (52 ) Net income 4 34 41 (74 ) 5 4 4 (8 ) 5 Less: income attributable to noncontrolling interest — — (1 ) — (1 ) — — — (1 ) Net income (loss) attributable to Warner Music Group Corp. $ 4 $ 34 $ 40 $ (74 ) $ 4 $ 4 $ 4 $ (8 ) $ 4 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 Comprehensive Income (Unaudited) For The Three Months Ended December 31, 2017 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 $ 4 $ 34 $ 41 $ (74 ) $ 5 $ 4 $ 4 $ (8 ) $ 5 Other comprehensive income, net of tax: Foreign currency adjustment 9 — (9 ) 9 9 9 9 (18 ) 9 Deferred gains (losses) on derivative financial instruments 1 — (1 ) 1 1 1 1 (2 ) 1 Other comprehensive income, net of tax: 10 — (10 ) 10 10 10 10 (20 ) 10 Total comprehensive income (loss) 14 34 31 (64 ) 15 14 14 (28 ) 15 Less: income attributable to noncontrolling interest — — (1 ) — (1 ) — — — (1 ) Comprehensive income attributable to Warner Music Group Corp. $ 14 $ 34 $ 30 $ (64 ) $ 14 $ 14 $ 14 $ (28 ) $ 14 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 Cash Flows (Unaudited) For The Three Months Ended December 31, 2017 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 $ 4 $ 34 $ 41 $ (74 ) $ 5 $ 4 $ 4 $ (8 ) $ 5 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization — 32 33 — 65 — — — 65 Unrealized losses/gains and remeasurement of foreign denominated loans 6 1 (2 ) — 5 — — — 5 Deferred income taxes — — 42 — 42 — — — 42 Loss on extinguishment of debt 1 — — — 1 — — — 1 Net gain on investments — (7 ) — — (7 ) — — — (7 ) Non-cash interest expense 1 — — — 1 — — — 1 Equity-based compensation expense — 18 — — 18 — — — 18 Equity (gains) losses, including distributions (90 ) (43 ) — 133 — (4 ) (4 ) 8 — Changes in operating assets and liabilities: Accounts receivable — (33 ) (60 ) — (93 ) — — — (93 ) Inventories — — 2 — 2 — — — 2 Royalty advances — 5 (10 ) — (5 ) — — — (5 ) Accounts payable and accrued liabilities — 65 (29 ) (59 ) (23 ) — — — (23 ) Royalty payables — 59 82 — 141 — — — 141 Accrued interest (16 ) — — — (16 ) — — — (16 ) Deferred revenue — 17 (20 ) — (3 ) — — — (3 ) Other balance sheet changes - 37 (34 ) — 3 — — — 3 Net cash provided by operating activities (94 ) 185 45 — 136 — — — 136 Cash flows from investing activities Acquisition of music publishing rights, net — — (1 ) — (1 ) — — — (1 ) Capital expenditures — (13 ) (3 ) — (16 ) — — — (16 ) Investments and acquisitions of businesses, net — (1 ) — — (1 ) — — — (1 ) Proceeds from the sale of investments — 12 — — 12 — — — 12 Advances from issuer 95 — — (95 ) — — — — — Net cash used in investing activities 95 (2 ) (4 ) (95 ) (6 ) — — — (6 ) Cash flows from financing activities Proceeds from issuance of Acquisition Corp. 4.125% Senior Secured Notes — — — — — — — — — Proceeds from issuance of Acquisition Corp. 4.875% Senior Secured Notes — — — — — — — — — Proceeds from issuance of Acquisition Corp. Senior Term Loan Facility — — — — — — — — — Repayment of Acquisition Corp. 6.00% Senior Secured Notes — — — — — — — — — Repayment of Acquisition Corp. 6.25% Senior Secured Notes — — — — — — — — — Repayment of Acquisition Corp. 5.625% Senior Secured Notes — — — — — — — — — Call premiums paid on early redemption of debt — — — — — — — — — Deferred financing costs paid (1 ) — — — (1 ) — — — (1 ) Distribution to noncontrolling interest holder — — (2 ) — (2 ) — — — (2 ) Change in due to (from) issuer — (95 ) — 95 — — — — — Net cash used in financing activities (1 ) (95 ) (2 ) 95 (3 ) — — — (3 ) Effect of exchange rate changes on cash and equivalents — — 2 — 2 — — — 2 Net increase in cash and equivalents — 88 41 — 129 — — — 129 Cash and equivalents at beginning of period — 347 300 — 647 — — — 647 Cash and equivalents at end of period $ — $ 435 $ 341 $ — $ 776 $ — $ — $ — $ 776 Consolidating Statement of Cash Flows (Unaudited) For The Nine 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 |
Summary of Significant Accoun23
Summary of Significant Accounting Policies (Policies) | 3 Months Ended |
Dec. 31, 2017 | |
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, 2017 are not necessarily indicative of the results that may be expected for the fiscal year ending September 30, 2018. The consolidated balance sheet at September 30, 2017 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, 2017 (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”) 810, Consolidation 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, 2017 and December 31, 2016 relate to the periods ended December 29, 2017 and December 30, 2016, respectively. For convenience purposes, the Company continues to date its financial statements as of December 31. The fiscal year ended September 30, 2017 ended on September 29, 2017. 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. On December 22, 2017, the U.S. government enacted comprehensive tax legislation commonly referred to as the Tax Cuts and Jobs Act (the “Tax Act”). In accordance with ASC Topic 740, Income Taxes (“ASC 740”) the Company recorded the impacts in the period of enactment. Furthermore, the SEC has provided guidance under Staff Accounting Bulletin No. 118, Income Tax Accounting Implications of the Tax Cuts and Jobs Act (“SAB 118”) that allows companies, for one year following the enactment date, to consider the impact of the Tax Act as “provisional” when a company can make a reasonable estimate but does not have the necessary information available, prepared or analyzed in reasonable detail to finalize its accounting for the impact of the Tax Act. A company may need to reflect adjustments to its provisional amounts upon obtaining, preparing or analyzing additional information about facts and circumstances that existed at the period of enactment. |
New Accounting Pronouncements | New Accounting Pronouncements In October 2017, the Company adopted ASU 2016-09, Compensation - Stock Compensation The adoption of ASU 2016-09 did not have any effect on the Company’s consolidated financial statements and footnote disclosures as of December 31, 2017. In May 2014, the FASB issued guidance codified in ASC 606, Revenue from Contracts with Customers Revenue Recognition Entertainment – Music In January 2016, the FASB issued ASU 2016-01, Recognition and Measurement of Financial Assets and Financial Liabilities In February 2016, the FASB issued ASU 2016-02, Leases In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows: Classification of Certain Cash Receipts and Cash Payments In October 2016, the FASB issued ASU 2016-16, Income Taxes: Intra-Entity Transfers of Assets Other Than Inventory In August 2017, the FASB issued ASU 2017-12, Targeted Improvements to Accounting for Hedging Activities after December 15, 2018 and interim periods within those fiscal years. Early adoption is permitted and requires |
Comprehensive Income (Loss) (Ta
Comprehensive Income (Loss) (Tables) | 3 Months Ended |
Dec. 31, 2017 | |
Equity [Abstract] | |
Schedule of Accumulated Other Comprehensive Loss | Comprehensive income (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 income (loss) primarily consist of foreign currency translation gains and 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 $7 million: Foreign Minimum Deferred Losses Accumulated Currency Pension On Derivative Other Translation Liability Financial Comprehensive Gain (Loss) (a) Adjustment Instruments Loss, net (in millions) Balance at September 30, 2017 $ (171 ) $ (10 ) $ — $ (181 ) Other comprehensive income 9 — 1 10 Amounts reclassified from accumulated other comprehensive income — — — — Balance at December 31, 2017 $ (162 ) $ (10 ) $ 1 $ (171 ) (a) Includes historical foreign currency translation related to certain intra-entity transactions that are no longer considered of a long-term investment nature. |
Goodwill and Intangible Assets
Goodwill and Intangible Assets (Tables) | 3 Months Ended |
Dec. 31, 2017 | |
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, 2017 $ 1,221 $ 464 $ 1,685 Acquisitions — — — Divestitures — — — Other adjustments (a) 3 — 3 Balance at December 31, 2017 $ 1,224 $ 464 $ 1,688 (a) Other adjustments during the three months ended December 31, 2017 represent foreign currency movements. |
Schedule of Intangible Assets | Intangible assets consist of the following: Weighted Average December 31, September 30, Useful Life 2017 2017 (in millions) Intangible assets subject to amortization: Recorded music catalog 10 years $ 901 $ 898 Music publishing copyrights 27 years 1,540 1,534 Artist and songwriter contracts 13 years 906 904 Trademarks 6 years 14 14 Other intangible assets 7 years 10 10 Total gross intangible asset subject to amortization 3,371 3,360 Accumulated amortization (1,326 ) (1,270 ) Total net intangible assets subject to amortization 2,045 2,090 Intangible assets not subject to amortization: Trademarks and tradenames Indefinite 117 117 Total net intangible assets $ 2,162 $ 2,207 |
Debt (Tables)
Debt (Tables) | 3 Months Ended |
Dec. 31, 2017 | |
Debt Disclosure [Abstract] | |
Long-term Debt | Long-term debt consists of the following: December 31, September 30, 2017 2017 (in millions) Revolving Credit Facility—Acquisition Corp. (a) $ — $ — Senior Term Loan Facility due 2023—Acquisition Corp. (b) 991 990 5.625% Senior Secured Notes due 2022—Acquisition Corp. (c) 246 246 5.00% Senior Secured Notes due 2023—Acquisition Corp. (d) 297 297 4.125% Senior Secured Notes due 2024— Acquisition Corp. (e) 407 402 4.875% Senior Secured Notes due 2024— Acquisition Corp. (f) 247 246 6.75% Senior Notes due 2022—Acquisition Corp. (g) 630 630 Total debt (h) $ 2,818 $ 2,811 (a) Reflects $150 million of commitments under the Revolving Credit Facility, less letters of credit outstanding of approximately $12 million at both December 31, 2017 and September 30, 2017. There were no loans outstanding under the Revolving Credit Facility at December 31, 2017 or September 30, 2017. On January 31, 2018, Acquisition Corp. entered into a new revolving credit facility that replaced our then existing revolving credit facility in its entirety. See Note 12 of our Consolidated Financial Statements for further discussion. (b) Principal amount of $1.006 billion at both December 31, 2017 and September 30, 2017 (c) Principal amount of $248 million less unamortized deferred financing costs of $2 million at December 31, 2017 and September 30, 2017, respectively. (d) Principal amount of $300 million less unamortized deferred financing costs of $3 million at both December 31, 2017 and September 30, 2017, respectively. (e) Face amount of €345 million. Above amounts represent the dollar equivalent of such notes at December 31, 2017 and September 30, 2017. Principal amount of $412 million and $407 million at December 31, 2017 and September 30, 2017, respectively, less unamortized deferred financing costs of $5 million at both December 31, 2017 and September 30, 2017. (f) Principal amount of $250 million at both December 31, 2017 and September 30, 2017 less unamortized deferred financing costs of $3 million and $4 million at December 31, 2017 and September 30, 2017, respectively. (g) Principal amount of $635 million less unamortized deferred financing costs of $5 million at both December 31, 2017 and September 30, 2017, respectively. (h) Principal amount of debt of $2.851 billion and $2.846 billion less unamortized discount of $5 million and $6 million and unamortized deferred financing costs of $28 million and $29 million at December 31, 2017 and September 30, 2017, respectively. |
Derivative Financial Instrume27
Derivative Financial Instruments (Tables) | 3 Months Ended |
Dec. 31, 2017 | |
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, 2017 and September 30, 2017: December 31, September 30, 2017 (a) 2017 (in millions) Other current assets $ — $ — Other current liabilities 1 — (a) Includes $1 million and $2 million of foreign exchange derivative contracts in asset and liability positions, respectively. |
Segment Information (Tables)
Segment Information (Tables) | 3 Months Ended |
Dec. 31, 2017 | |
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, 2017 Revenues $ 904 $ 143 $ (2 ) $ 1,045 Operating income (loss) 129 (1 ) (38 ) 90 Amortization of intangible assets 36 17 — 53 Depreciation of property, plant and equipment 8 1 3 12 OIBDA 173 17 (35 ) 155 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 |
Fair Value Measurements (Tables
Fair Value Measurements (Tables) | 3 Months Ended |
Dec. 31, 2017 | |
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, 2017 and September 30, 2017. Fair Value Measurements as of December 31, 2017 (Level 1) (Level 2) (Level 3) Total (in millions) Other Current Assets: Foreign Currency Forward Exchange Contracts (a) $ — $ — $ — $ — Other Current Liabilities: Foreign Currency Forward Exchange Contracts (a) — (1 ) — (1 ) Other Current Liabilities: Contractual Obligations (b) — — — — Other Non-Current Liabilities: Contractual Obligations (b) — — (5 ) (5 ) Total $ — $ (1 ) $ (5 ) $ (6 ) Fair Value Measurements as of September 30, 2017 (Level 1) (Level 2) (Level 3) Total (in millions) Other Current Liabilities: Contractual Obligations (b) — — — — Other Non-Current Liabilities: Contractual Obligations (b) — — (5 ) (5 ) Total $ — $ — $ (5 ) $ (5 ) (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, 2017 (5 ) Additions — Reductions — Payments — Balance at December 31, 2017 $ (5 ) |
Guarantor and Non-Guarantor S30
Guarantor and Non-Guarantor Subsidiaries Financial Information Unaudited (Tables) | 3 Months Ended |
Dec. 31, 2017 | |
Condensed Financial Information Of Parent Company Only Disclosure [Abstract] | |
Schedule of Consolidating Balance Sheet | Consolidating Balance Sheet (Unaudited) December 31, 2017 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 $ — $ 435 $ 341 $ — $ 776 $ — $ — $ — $ 776 Accounts receivable, net — 247 252 — 499 — — — 499 Inventories — 13 25 — 38 — — — 38 Royalty advances expected to be recouped within one year — 86 56 — 142 — — — 142 Prepaid and other current assets — 14 33 — 47 — — — 47 Total current assets — 795 707 — 1,502 — — — 1,502 Due from (to) parent companies 500 (4 ) (496 ) — — — — — — Investments in and advances to consolidated subsidiaries 2,644 1,453 — (4,097 ) — 391 391 (782 ) — Royalty advances expected to be recouped after one year — 106 69 — 175 — — — 175 Property, plant and equipment, net — 139 74 — 213 — — — 213 Goodwill — 1,368 320 — 1,688 — — — 1,688 Intangible assets subject to amortization, net — 1,006 1,039 — 2,045 — — — 2,045 Intangible assets not subject to amortization — 71 46 — 117 — — — 117 Deferred tax assets, net — 53 8 — 61 — — — 61 Other assets 7 47 20 — 74 — — — 74 Total assets $ 3,151 $ 5,034 $ 1,787 $ (4,097 ) $ 5,875 $ 391 $ 391 $ (782 ) $ 5,875 Liabilities and Deficit: Current liabilities: Accounts payable $ — $ 87 $ 79 $ — $ 166 $ — $ — $ — $ 166 Accrued royalties — 791 615 — 1,406 — — — 1,406 Accrued liabilities — 175 226 — 401 — — — 401 Accrued interest 25 — — — 25 — — — 25 Deferred revenue — 148 53 — 201 — — — 201 Other current liabilities — 4 31 — 35 — — — 35 Total current liabilities 25 1,205 1,004 — 2,234 — — — 2,234 Long-term debt 2,818 — — — 2,818 — — — 2,818 Deferred tax liabilities, net — — 196 — 196 — — — 196 Other noncurrent liabilities 1 195 110 — 306 — — — 306 Total liabilities 2,844 1,400 1,310 — 5,554 — — — 5,554 Total Warner Music Group Corp. equity 307 3,630 467 (4,097 ) 307 391 391 (782 ) 307 Noncontrolling interest — 4 10 — 14 — — — 14 Total equity 307 3,634 477 (4,097 ) 321 391 391 (782 ) 321 Total liabilities and equity $ 3,151 $ 5,034 $ 1,787 $ (4,097 ) $ 5,875 $ 391 $ 391 $ (782 ) $ 5,875 Consolidating Balance Sheet September 30, 2017 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 $ — $ 347 $ 300 $ — $ 647 $ — $ — $ — $ 647 Accounts receivable, net — 214 190 — 404 — — — 404 Inventories — 12 27 — 39 — — — 39 Royalty advances expected to be recouped within one year — 89 52 — 141 — — — 141 Prepaid and other current assets — 15 29 — 44 — — — 44 Total current assets — 677 598 — 1,275 — — — 1,275 Due from (to) parent companies 418 96 (514 ) — — — — — — Investments in and advances to consolidated subsidiaries 2,721 1,312 — (4,033 ) — 377 377 (754 ) — Royalty advances expected to be recouped after one year — 109 63 — 172 — — — 172 Property, plant and equipment, net — 139 74 — 213 — — — 213 Goodwill — 1,368 317 — 1,685 — — — 1,685 Intangible assets subject to amortization, net — 1,029 1,061 — 2,090 — — — 2,090 Intangible assets not subject to amortization — 71 46 — 117 — — — 117 Deferred tax assets, net — 89 8 — 97 — — — 97 Other assets 7 45 17 — 69 — — — 69 Total assets $ 3,146 $ 4,935 $ 1,670 $ (4,033 ) $ 5,718 $ 377 $ 377 $ (754 ) $ 5,718 Liabilities and Deficit: Current liabilities: Accounts payable $ — $ 135 $ 73 $ — $ 208 $ — $ — $ — $ 208 Accrued royalties — 732 531 — 1,263 — — — 1,263 Accrued liabilities — 144 221 — 365 — — — 365 Accrued interest 41 — — — 41 — — — 41 Deferred revenue — 125 72 — 197 — — — 197 Other current liabilities — 3 23 — 26 — — — 26 Total current liabilities 41 1,139 920 — 2,100 — — — 2,100 Long-term debt 2,811 — — — 2,811 — — — 2,811 Deferred tax liabilities, net — — 190 — 190 — — — 190 Other noncurrent liabilities 1 196 112 — 309 — — — 309 Total liabilities 2,853 1,335 1,222 — 5,410 — — — 5,410 Total Warner Music Group Corp. equity 293 3,596 437 (4,033 ) 293 377 377 (754 ) 293 Noncontrolling interest — 4 11 — 15 — — — 15 Total equity 293 3,600 448 (4,033 ) 308 377 377 (754 ) 308 Total liabilities and equity $ 3,146 $ 4,935 $ 1,670 $ (4,033 ) $ 5,718 $ 377 $ 377 $ (754 ) $ 5,718 |
Schedule of Consolidating Statement of Operations | Consolidating Statement of Operations (Unaudited) For The Three Months Ended December 31, 2017 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 $ — $ 547 $ 621 $ (123 ) $ 1,045 $ — $ — $ — $ 1,045 Costs and expenses: Cost of revenue — (257 ) (393 ) 81 (569 ) — — — (569 ) Selling, general and administrative expenses — (235 ) (138 ) 40 (333 ) — — — (333 ) Amortization of intangible assets — (24 ) (29 ) — (53 ) — — — (53 ) Total costs and expenses — (516 ) (560 ) 121 (955 ) — — — (955 ) Operating income — 31 61 (2 ) 90 — — — 90 Loss on extinguishment of debt (1 ) — — — (1 ) — — — (1 ) Interest expense, net (29 ) 1 (8 ) — (36 ) — — — (36 ) Equity gains (losses) from equity method investments 90 44 — (133 ) 1 4 4 (8 ) 1 Other income, net (4 ) 9 (2 ) — 3 — — — 3 Income before income taxes 56 85 51 (135 ) 57 4 4 (8 ) 57 Income tax (expense) benefit (52 ) (51 ) (10 ) 61 (52 ) — — — (52 ) Net income 4 34 41 (74 ) 5 4 4 (8 ) 5 Less: income attributable to noncontrolling interest — — (1 ) — (1 ) — — — (1 ) Net income (loss) attributable to Warner Music Group Corp. $ 4 $ 34 $ 40 $ (74 ) $ 4 $ 4 $ 4 $ (8 ) $ 4 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 |
Schedule of Consolidating Statement of Comprehensive Income | Consolidating Statement of Comprehensive Income (Unaudited) For The Three Months Ended December 31, 2017 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 $ 4 $ 34 $ 41 $ (74 ) $ 5 $ 4 $ 4 $ (8 ) $ 5 Other comprehensive income, net of tax: Foreign currency adjustment 9 — (9 ) 9 9 9 9 (18 ) 9 Deferred gains (losses) on derivative financial instruments 1 — (1 ) 1 1 1 1 (2 ) 1 Other comprehensive income, net of tax: 10 — (10 ) 10 10 10 10 (20 ) 10 Total comprehensive income (loss) 14 34 31 (64 ) 15 14 14 (28 ) 15 Less: income attributable to noncontrolling interest — — (1 ) — (1 ) — — — (1 ) Comprehensive income attributable to Warner Music Group Corp. $ 14 $ 34 $ 30 $ (64 ) $ 14 $ 14 $ 14 $ (28 ) $ 14 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 ) |
Schedule of Consolidating Statement of Cash Flows | Consolidating Statement of Cash Flows (Unaudited) For The Three Months Ended December 31, 2017 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 $ 4 $ 34 $ 41 $ (74 ) $ 5 $ 4 $ 4 $ (8 ) $ 5 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization — 32 33 — 65 — — — 65 Unrealized losses/gains and remeasurement of foreign denominated loans 6 1 (2 ) — 5 — — — 5 Deferred income taxes — — 42 — 42 — — — 42 Loss on extinguishment of debt 1 — — — 1 — — — 1 Net gain on investments — (7 ) — — (7 ) — — — (7 ) Non-cash interest expense 1 — — — 1 — — — 1 Equity-based compensation expense — 18 — — 18 — — — 18 Equity (gains) losses, including distributions (90 ) (43 ) — 133 — (4 ) (4 ) 8 — Changes in operating assets and liabilities: Accounts receivable — (33 ) (60 ) — (93 ) — — — (93 ) Inventories — — 2 — 2 — — — 2 Royalty advances — 5 (10 ) — (5 ) — — — (5 ) Accounts payable and accrued liabilities — 65 (29 ) (59 ) (23 ) — — — (23 ) Royalty payables — 59 82 — 141 — — — 141 Accrued interest (16 ) — — — (16 ) — — — (16 ) Deferred revenue — 17 (20 ) — (3 ) — — — (3 ) Other balance sheet changes - 37 (34 ) — 3 — — — 3 Net cash provided by operating activities (94 ) 185 45 — 136 — — — 136 Cash flows from investing activities Acquisition of music publishing rights, net — — (1 ) — (1 ) — — — (1 ) Capital expenditures — (13 ) (3 ) — (16 ) — — — (16 ) Investments and acquisitions of businesses, net — (1 ) — — (1 ) — — — (1 ) Proceeds from the sale of investments — 12 — — 12 — — — 12 Advances from issuer 95 — — (95 ) — — — — — Net cash used in investing activities 95 (2 ) (4 ) (95 ) (6 ) — — — (6 ) Cash flows from financing activities Proceeds from issuance of Acquisition Corp. 4.125% Senior Secured Notes — — — — — — — — — Proceeds from issuance of Acquisition Corp. 4.875% Senior Secured Notes — — — — — — — — — Proceeds from issuance of Acquisition Corp. Senior Term Loan Facility — — — — — — — — — Repayment of Acquisition Corp. 6.00% Senior Secured Notes — — — — — — — — — Repayment of Acquisition Corp. 6.25% Senior Secured Notes — — — — — — — — — Repayment of Acquisition Corp. 5.625% Senior Secured Notes — — — — — — — — — Call premiums paid on early redemption of debt — — — — — — — — — Deferred financing costs paid (1 ) — — — (1 ) — — — (1 ) Distribution to noncontrolling interest holder — — (2 ) — (2 ) — — — (2 ) Change in due to (from) issuer — (95 ) — 95 — — — — — Net cash used in financing activities (1 ) (95 ) (2 ) 95 (3 ) — — — (3 ) Effect of exchange rate changes on cash and equivalents — — 2 — 2 — — — 2 Net increase in cash and equivalents — 88 41 — 129 — — — 129 Cash and equivalents at beginning of period — 347 300 — 647 — — — 647 Cash and equivalents at end of period $ — $ 435 $ 341 $ — $ 776 $ — $ — $ — $ 776 Consolidating Statement of Cash Flows (Unaudited) For The Nine 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 |
Description of Business - Addit
Description of Business - Additional Information (Detail) | 3 Months Ended |
Dec. 31, 2017CountryMusical_compositionsongwriters | |
Accounting Policies [Abstract] | |
Number of countries in which Recorded Music activity conducted | Country | 50 |
Minimum number of musical compositions on which Company owns or controls rights | Musical_composition | 1,000,000 |
Number of songwriters and composers | songwriters | 70,000 |
Comprehensive Income (Loss) - A
Comprehensive Income (Loss) - Additional Information (Detail) $ in Millions | 3 Months Ended |
Dec. 31, 2017USD ($) | |
Equity [Abstract] | |
Changes in accumulated other comprehensive loss, net of related taxes | $ 7 |
Comprehensive Income (Loss) - S
Comprehensive Income (Loss) - Schedule of Accumulated Other Comprehensive Loss (Detail) $ in Millions | 3 Months Ended | |
Dec. 31, 2017USD ($) | ||
Accumulated Other Comprehensive Income Loss [Line Items] | ||
Beginning balance | $ 308 | |
Ending balance | 321 | |
Foreign Currency Translation Gain (Loss) | ||
Accumulated Other Comprehensive Income Loss [Line Items] | ||
Beginning balance | (171) | [1] |
Other comprehensive income | 9 | [1] |
Ending balance | (162) | [1] |
Minimum Pension Liability Adjustment | ||
Accumulated Other Comprehensive Income Loss [Line Items] | ||
Beginning balance | (10) | |
Ending balance | (10) | |
Deferred Losses On Derivative Financial Instruments | ||
Accumulated Other Comprehensive Income Loss [Line Items] | ||
Other comprehensive income | 1 | |
Ending balance | 1 | |
Accumulated Other Comprehensive Loss, net | ||
Accumulated Other Comprehensive Income Loss [Line Items] | ||
Beginning balance | (181) | |
Other comprehensive income | 10 | |
Ending balance | $ (171) | |
[1] | Includes historical foreign currency translation related to certain intra-entity transactions that are no longer considered of a long-term investment nature. |
Goodwill and Intangible Asset34
Goodwill and Intangible Assets - Changes in Goodwill for Each Reportable Segment (Detail) $ in Millions | 3 Months Ended | |
Dec. 31, 2017USD ($) | ||
Goodwill [Line Items] | ||
Beginning balance | $ 1,685 | |
Other adjustments | 3 | [1] |
Ending balance | 1,688 | |
Recorded Music | ||
Goodwill [Line Items] | ||
Beginning balance | 1,221 | |
Other adjustments | 3 | [1] |
Ending balance | 1,224 | |
Music Publishing | ||
Goodwill [Line Items] | ||
Beginning balance | 464 | |
Ending balance | $ 464 | |
[1] | Other adjustments during the three months ended December 31, 2017 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, 2017 | Sep. 30, 2017 | |
Finite Lived And Indefinite Lived Intangible Assets [Line Items] | ||
Total gross intangible asset subject to amortization | $ 3,371 | $ 3,360 |
Accumulated amortization | (1,326) | (1,270) |
Total net intangible assets subject to amortization | 2,045 | 2,090 |
Intangible assets not subject to amortization | 117 | 117 |
Total net intangible assets | 2,162 | 2,207 |
Trademarks and tradenames | ||
Finite Lived And Indefinite Lived Intangible Assets [Line Items] | ||
Intangible assets not subject to amortization | $ 117 | 117 |
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 | $ 901 | 898 |
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 | $ 1,540 | 1,534 |
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 | $ 906 | 904 |
Trademarks | ||
Finite Lived And Indefinite Lived Intangible Assets [Line Items] | ||
Intangible assets, Useful Life | 6 years | |
Total gross intangible asset subject to amortization | $ 14 | 14 |
Other Intangible Assets | ||
Finite Lived And Indefinite Lived Intangible Assets [Line Items] | ||
Intangible assets, Useful Life | 7 years | |
Total gross intangible asset subject to amortization | $ 10 | $ 10 |
Debt - Long-term Debt (Detail)
Debt - Long-term Debt (Detail) - USD ($) $ in Millions | Dec. 31, 2017 | Sep. 30, 2017 | |
Debt Instrument [Line Items] | |||
Total debt | [1] | $ 2,818 | $ 2,811 |
Acquisition Corp. | Senior Term Loan Facility due 2023 | |||
Debt Instrument [Line Items] | |||
Total debt | [2] | 991 | 990 |
Acquisition Corp. | 5.00% Senior Secured Notes due 2023 | |||
Debt Instrument [Line Items] | |||
Total debt | [3] | 297 | 297 |
Acquisition Corp. | 5.625% Senior Secured Notes due 2022 | |||
Debt Instrument [Line Items] | |||
Total debt | [4] | 246 | 246 |
Acquisition Corp. | 4.125% Senior Secured Notes due 2024 | |||
Debt Instrument [Line Items] | |||
Total debt | [5] | 407 | 402 |
Acquisition Corp. | 4.875% Senior Secured Notes due 2024 | |||
Debt Instrument [Line Items] | |||
Total debt | [6] | 247 | 246 |
Acquisition Corp. | 6.75% Senior Notes due 2022 | |||
Debt Instrument [Line Items] | |||
Total debt | [7] | $ 630 | $ 630 |
[1] | Principal amount of debt of $2.851 billion and $2.846 billion less unamortized discount of $5 million and $6 million and unamortized deferred financing costs of $28 million and $29 million at December 31, 2017 and September 30, 2017, respectively. | ||
[2] | Principal amount of $1.006 billion at both December 31, 2017 and September 30, 2017 less unamortized discount of $5 million and $6 million and unamortized deferred financing costs of $10 million and $10 million at December 31, 2017 and September 30, 2017, respectively. | ||
[3] | Principal amount of $300 million less unamortized deferred financing costs of $3 million at both December 31, 2017 and September 30, 2017, respectively. | ||
[4] | Principal amount of $248 million less unamortized deferred financing costs of $2 million at December 31, 2017 and September 30, 2017, respectively. | ||
[5] | Face amount of €345 million. Above amounts represent the dollar equivalent of such notes at December 31, 2017 and September 30, 2017. Principal amount of $412 million and $407 million at December 31, 2017 and September 30, 2017, respectively, less unamortized deferred financing costs of $5 million at both December 31, 2017 and September 30, 2017. | ||
[6] | Principal amount of $250 million at both December 31, 2017 and September 30, 2017 less unamortized deferred financing costs of $3 million and $4 million at December 31, 2017 and September 30, 2017, respectively. | ||
[7] | Principal amount of $635 million less unamortized deferred financing costs of $5 million at both December 31, 2017 and September 30, 2017, respectively. |
Debt - Long-term Debt (Parenthe
Debt - Long-term Debt (Parenthetical) (Detail) € in Millions | 3 Months Ended | 12 Months Ended | |||
Dec. 31, 2017USD ($) | Sep. 30, 2017USD ($) | Dec. 31, 2017EUR (€) | Sep. 30, 2017EUR (€) | Dec. 31, 2016 | |
Debt Instrument [Line Items] | |||||
Face or principal amount of debt instrument | $ 2,851,000,000 | $ 2,846,000,000 | |||
Unamortized discount | 5,000,000 | 6,000,000 | |||
Unamortized deferred financing costs | 28,000,000 | 29,000,000 | |||
Acquisition Corp. | Revolving Credit Facility | |||||
Debt Instrument [Line Items] | |||||
Commitments under revolving credit facility | 150,000,000 | 150,000,000 | |||
Letters of credit outstanding | 12,000,000 | 12,000,000 | |||
Revolving credit facility outstanding | $ 0 | $ 0 | |||
Senior Term Loan Facility due 2023 | Acquisition Corp. | |||||
Debt Instrument [Line Items] | |||||
Due date of senior secured notes | 2,023 | 2,023 | |||
Face or principal amount of debt instrument | $ 1,006,000,000 | $ 1,006,000,000 | |||
Unamortized discount | 5,000,000 | 6,000,000 | |||
Unamortized deferred financing costs | $ 10,000,000 | $ 10,000,000 | |||
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] | |||||
Due date of senior secured notes | 2,022 | 2,022 | |||
Interest rate | 5.625% | 5.625% | 5.625% | 5.625% | |
Face or principal amount of debt instrument | $ 248,000,000 | $ 248,000,000 | |||
Unamortized deferred financing costs | $ 2,000,000 | $ 2,000,000 | |||
5.00% Senior Secured Notes due 2023 | Acquisition Corp. | |||||
Debt Instrument [Line Items] | |||||
Due date of senior secured notes | 2,023 | 2,023 | |||
Interest rate | 5.00% | 5.00% | 5.00% | 5.00% | |
Face or principal amount of debt instrument | $ 300,000,000 | $ 300,000,000 | |||
Unamortized deferred financing costs | $ 3,000,000 | $ 3,000,000 | |||
4.125% Senior Secured Notes due 2024 | Acquisition Corp. | |||||
Debt Instrument [Line Items] | |||||
Due date of senior secured notes | 2,024 | 2,024 | |||
Interest rate | 4.125% | 4.125% | 4.125% | 4.125% | |
Face or principal amount of debt instrument | $ 412,000,000 | $ 407,000,000 | € 345 | € 345 | |
Unamortized deferred financing costs | $ 5,000,000 | $ 5,000,000 | |||
4.875% Senior Secured Notes due 2024 | Acquisition Corp. | |||||
Debt Instrument [Line Items] | |||||
Due date of senior secured notes | 2,024 | 2,024 | |||
Interest rate | 4.875% | 4.875% | 4.875% | 4.875% | |
Face or principal amount of debt instrument | $ 250,000,000 | $ 250,000,000 | |||
Unamortized deferred financing costs | $ 3,000,000 | $ 4,000,000 | |||
6.75% Senior Notes due 2022 | Acquisition Corp. | |||||
Debt Instrument [Line Items] | |||||
Due date of senior secured notes | 2,022 | 2,022 | |||
Interest rate | 6.75% | 6.75% | 6.75% | 6.75% | |
Face or principal amount of debt instrument | $ 635,000,000 | $ 635,000,000 | |||
Unamortized deferred financing costs | $ 5,000,000 | $ 5,000,000 |
Debt - December 2017 Senior Ter
Debt - December 2017 Senior Term Loan Credit Agreement Amendment - Additional Information (Detail) - USD ($) $ in Millions | May 22, 2017 | Dec. 31, 2017 | Dec. 31, 2016 | Dec. 31, 2016 |
Debt Instrument [Line Items] | ||||
Loss on extinguishment of debt | $ (1) | $ (32) | $ (32) | |
December 2017 Senior Term Loan Credit Agreement Amendment | ||||
Debt Instrument [Line Items] | ||||
Loss on extinguishment of debt | $ (1) |
Debt - New Revolving Credit Agr
Debt - New Revolving Credit Agreement - Additional Information (Detail) | Jan. 31, 2018 |
Subsequent Event | New Revolving Credit Agreement | Revolving Credit Facility | |
Debt Instrument [Line Items] | |
Debt instrument, agreement date | Jan. 31, 2018 |
Debt - Interest Rates - Additio
Debt - Interest Rates - Additional Information (Detail) | 3 Months Ended |
Dec. 31, 2017 | |
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”) subject to a zero floor, plus 2.25% 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) one-month Term Loan LIBOR, plus 1.00% per annum, plus, in each case, 1.25% 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 | 2.25% |
Base Rate | Senior Term Loan Facility due 2020 | |
Debt Instrument [Line Items] | |
Debt instrument, marginal interest rate | 1.25% |
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 | 0.75% |
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”) subject to a zero floor, plus 1.75% 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 one-month Revolving LIBOR plus 1.0% per annum, plus, in each case, 0.75% 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 | 1.75% |
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, 2017 | Dec. 31, 2016 | Sep. 30, 2017 | |
Debt Instrument [Line Items] | |||
Interest expense, net | $ 36 | $ 40 | |
Weighted-average interest rate of total debt | 4.90% | 4.90% | 4.90% |
Senior Notes | |||
Debt Instrument [Line Items] | |||
Scheduled maturities of long-term debt in 2022 | $ 883 | ||
Scheduled to mature | $ 962 | ||
Revolving Credit Facility | |||
Debt Instrument [Line Items] | |||
Extended maturity date of credit facility | Jan. 31, 2023 | ||
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 | Dec. 31, 2017 | Dec. 31, 2016 | Sep. 30, 2017 | Sep. 30, 2016 |
Commitments And Contingencies [Line Items] | |||||
Revenues | $ 1,045 | $ 917 | |||
Sirius XM | Settled Litigation | |||||
Commitments And Contingencies [Line Items] | |||||
Receipts from plaintiff | $ 210 | ||||
Cash distribution | $ 33 | ||||
Revenues | $ 1 | $ 4 | $ 28 |
Income Taxes - Additional Infor
Income Taxes - Additional Information (Detail) - USD ($) | Jan. 01, 2018 | Dec. 31, 2017 | Dec. 31, 2016 | Sep. 30, 2019 | Sep. 30, 2018 |
Income Tax Contingency [Line Items] | |||||
U.S. corporate statutory tax rate | 35.00% | 35.00% | |||
Enacted tax rate | 21.00% | ||||
Provisional income tax expense | $ 27,000,000 | ||||
Provisional deferred tax liability | $ 4,000,000 | ||||
One time transition tax for accumulated foreign earnings imposed tax rate on cash and cash equivalents | 15.50% | ||||
One time transition tax for accumulated foreign earnings imposed tax rate on illiquid assets | 8.00% | ||||
Income tax impact to transition tax | $ 0 | ||||
Income tax liability | 0 | ||||
Income tax expense | $ 52,000,000 | $ 17,000,000 | |||
Blended federal statutory income tax rate | 24.50% | ||||
Income withholding taxes and foreign losses uncertain tax positions | $ 0 | $ 0 | |||
Maximum | |||||
Income Tax Contingency [Line Items] | |||||
Reasonably possible decrease in gross unrecognized tax benefits from ongoing audits and settlement | $ 3,000,000 | ||||
Scenario, Forecast | |||||
Income Tax Contingency [Line Items] | |||||
U.S. corporate statutory tax rate | 21.00% | 24.50% | |||
Subsequent Event | |||||
Income Tax Contingency [Line Items] | |||||
U.S. corporate statutory tax rate | 21.00% |
Derivative Financial Instrume44
Derivative Financial Instruments - Additional Information (Detail) - USD ($) | 3 Months Ended | |
Dec. 31, 2017 | Sep. 30, 2017 | |
Derivatives Fair Value [Line Items] | ||
Outstanding hedge contracts | $ 0 | |
Unrealized deferred income in comprehensive income related to foreign exchange hedging | $ 1,000,000 | |
Deferred gains (losses) in comprehensive loss related to foreign exchange hedging | $ 0 | |
Sale | ||
Derivatives Fair Value [Line Items] | ||
Outstanding hedge contracts | 220,000,000 | |
Purchase | ||
Derivatives Fair Value [Line Items] | ||
Outstanding hedge contracts | $ 131,000,000 |
Derivative Financial Instrume45
Derivative Financial Instruments - Summary of Amounts Recorded in Consolidated Balance Sheet (Detail) $ in Millions | Dec. 31, 2017USD ($) | |
Other Current Liabilities | ||
Derivatives Fair Value [Line Items] | ||
Other current liabilities | $ 1 | [1],[2] |
[1] | Includes $1 million and $2 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 Instrume46
Derivative Financial Instruments - Summary of Amounts Recorded in Consolidated Balance Sheet (Parenthetical) (Detail) $ in Millions | Dec. 31, 2017USD ($) |
Derivative Instruments And Hedging Activities Disclosure [Abstract] | |
Foreign exchange derivative contracts in asset | $ 1 |
Foreign exchange derivative contracts in liability | $ 2 |
Segment Information - Additiona
Segment Information - Additional Information (Detail) | 3 Months Ended |
Dec. 31, 2017Operations | |
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, 2017 | Dec. 31, 2016 | |
Segment Reporting Information [Line Items] | ||
Revenues | $ 1,045 | $ 917 |
Operating income | 90 | 94 |
Amortization of intangible assets | 53 | 51 |
Depreciation of property, plant and equipment | 12 | 12 |
OIBDA | 155 | 157 |
Operating Segments | Recorded Music | ||
Segment Reporting Information [Line Items] | ||
Revenues | 904 | 797 |
Operating income | 129 | 123 |
Amortization of intangible assets | 36 | 35 |
Depreciation of property, plant and equipment | 8 | 7 |
OIBDA | 173 | 165 |
Operating Segments | Music Publishing | ||
Segment Reporting Information [Line Items] | ||
Revenues | 143 | 124 |
Operating income | (1) | (2) |
Amortization of intangible assets | 17 | 16 |
Depreciation of property, plant and equipment | 1 | 2 |
OIBDA | 17 | 16 |
Corporate Expenses and Eliminations | ||
Segment Reporting Information [Line Items] | ||
Revenues | (2) | (4) |
Operating income | (38) | (27) |
Depreciation of property, plant and equipment | 3 | 3 |
OIBDA | $ (35) | $ (24) |
Additional Financial Informat49
Additional Financial Information - Additional Information (Detail) - USD ($) $ in Millions | 3 Months Ended | |
Dec. 31, 2017 | Dec. 31, 2016 | |
Supplemental Cash Flow Information [Abstract] | ||
Accrued interest paid | $ 51 | $ 47 |
Income taxes paid net of refunds | $ 8 | $ 9 |
Fair Value Measurements - Sched
Fair Value Measurements - Schedule of Fair Value of Financial Instruments (Detail) - USD ($) $ in Millions | Dec. 31, 2017 | Sep. 30, 2017 | |
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items] | |||
Contractual Obligations | $ (5) | ||
Total | $ (6) | ||
Level 2 | |||
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items] | |||
Total | (1) | ||
Level 3 | |||
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items] | |||
Contractual Obligations | (5) | ||
Total | (5) | ||
Other Current Liabilities | |||
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items] | |||
Foreign Currency Forward Exchange Contracts | [1],[2] | (1) | |
Other Current Liabilities | Level 2 | |||
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items] | |||
Foreign Currency Forward Exchange Contracts | [2] | (1) | |
Other Non-Current Liabilities | |||
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items] | |||
Contractual Obligations | [3] | (5) | (5) |
Other Non-Current Liabilities | Level 3 | |||
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items] | |||
Contractual Obligations | [3] | $ (5) | $ (5) |
[1] | Includes $1 million and $2 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, 2017USD ($) |
Fair Value Liabilities Measured On Recurring Basis Unobservable Input Reconciliation [Line Items] | |
Balance at September 30, 2017 | $ (5) |
Balance at December 31, 2017 | $ (5) |
Fair Value Measurements - Addit
Fair Value Measurements - Additional Information (Detail) - USD ($) $ in Millions | Dec. 31, 2017 | Sep. 30, 2017 |
Level 2 measurement | ||
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items] | ||
Debt instrument, fair value disclosure | $ 2,932 | $ 2,936 |
Subsequent Events - Additional
Subsequent Events - Additional Information (Detail) - Subsequent Event - USD ($) $ in Millions | Jan. 31, 2018 | Jan. 08, 2018 |
Subsequent Event [Line Items] | ||
Special cash dividends | $ 125 | |
Special cash dividends payable, date to be paid | Jan. 12, 2018 | |
Special cash dividends payable, date of record | Jan. 11, 2018 | |
New Revolving Credit Agreement | Revolving Credit Facility | ||
Subsequent Event [Line Items] | ||
Debt instrument, agreement date | Jan. 31, 2018 | |
Credit agreement covenant terms | The Revolving Credit Agreement differs from the Old Revolving Credit Agreement in that it, among other things, reduces the interest rate margin applicable to the loans, extends the maturity date thereunder, provides for the option to increase the commitments under the Company’s then existing revolving credit agreement, provides for greater flexibility to amend and extend the Company’s then existing revolving credit agreement and create additional tranches thereunder, provides for greater flexibility over future amendments, increases the springing financial maintenance covenant to 4.75:1.00 and provides that the covenant shall not be tested unless at the end of a fiscal quarter the outstanding amount of loans and drawings under letters of credit which have not been reimbursed exceeds $54 million and aligns the other negative covenants with those of the Senior Term Loan Credit Agreement. | |
Debt instrument, springing financial maintenance covenant | 4.75% | |
Maximum | New Revolving Credit Agreement | Revolving Credit Facility | ||
Subsequent Event [Line Items] | ||
Debt instrument, reimbursed amount | $ 54 |
Guarantor and Non-Guarantor S54
Guarantor and Non-Guarantor Subsidiaries Financial Information - Additional Information (Detail) | 3 Months Ended | 12 Months Ended | |
Dec. 31, 2017 | Sep. 30, 2017 | Dec. 31, 2016 | |
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% | 4.125% | |
Due date of Senior Secured Notes | 2,024 | 2,024 | |
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 Unaudited (Detail) - USD ($) $ in Millions | Dec. 31, 2017 | Sep. 30, 2017 | Dec. 31, 2016 | Sep. 30, 2016 | Mar. 31, 2016 |
Current assets: | |||||
Cash and equivalents | $ 776 | $ 647 | $ 455 | $ 359 | $ 359 |
Accounts receivable, net | 499 | 404 | |||
Inventories | 38 | 39 | |||
Royalty advances expected to be recouped within one year | 142 | 141 | |||
Prepaid and other current assets | 47 | 44 | |||
Total current assets | 1,502 | 1,275 | |||
Royalty advances expected to be recouped after one year | 175 | 172 | |||
Property, plant and equipment, net | 213 | 213 | |||
Goodwill | 1,688 | 1,685 | |||
Intangible assets subject to amortization, net | 2,045 | 2,090 | |||
Intangible assets not subject to amortization | 117 | 117 | |||
Deferred tax assets, net | 61 | 97 | |||
Other assets | 74 | 69 | |||
Total assets | 5,875 | 5,718 | |||
Current liabilities: | |||||
Accounts payable | 166 | 208 | |||
Accrued royalties | 1,406 | 1,263 | |||
Accrued liabilities | 401 | 365 | |||
Accrued interest | 25 | 41 | |||
Deferred revenue | 201 | 197 | |||
Other current liabilities | 35 | 26 | |||
Total current liabilities | 2,234 | 2,100 | |||
Long-term debt | 2,818 | 2,811 | |||
Deferred tax liabilities, net | 196 | 190 | |||
Other noncurrent liabilities | 306 | 309 | |||
Total liabilities | 5,554 | 5,410 | |||
Total Warner Music Group Corp. equity | 307 | 293 | |||
Noncontrolling interest | 14 | 15 | |||
Total equity | 321 | 308 | |||
Total liabilities and equity | 5,875 | 5,718 | |||
Reportable Legal Entities | Guarantor Subsidiaries | |||||
Current assets: | |||||
Cash and equivalents | 435 | 347 | 182 | 180 | |
Accounts receivable, net | 247 | 214 | |||
Inventories | 13 | 12 | |||
Royalty advances expected to be recouped within one year | 86 | 89 | |||
Prepaid and other current assets | 14 | 15 | |||
Total current assets | 795 | 677 | |||
Due from (to) parent companies | (4) | 96 | |||
Investments in and advances to consolidated subsidiaries | 1,453 | 1,312 | |||
Royalty advances expected to be recouped after one year | 106 | 109 | |||
Property, plant and equipment, net | 139 | 139 | |||
Goodwill | 1,368 | 1,368 | |||
Intangible assets subject to amortization, net | 1,006 | 1,029 | |||
Intangible assets not subject to amortization | 71 | 71 | |||
Deferred tax assets, net | 53 | 89 | |||
Other assets | 47 | 45 | |||
Total assets | 5,034 | 4,935 | |||
Current liabilities: | |||||
Accounts payable | 87 | 135 | |||
Accrued royalties | 791 | 732 | |||
Accrued liabilities | 175 | 144 | |||
Deferred revenue | 148 | 125 | |||
Other current liabilities | 4 | 3 | |||
Total current liabilities | 1,205 | 1,139 | |||
Other noncurrent liabilities | 195 | 196 | |||
Total liabilities | 1,400 | 1,335 | |||
Total Warner Music Group Corp. equity | 3,630 | 3,596 | |||
Noncontrolling interest | 4 | 4 | |||
Total equity | 3,634 | 3,600 | |||
Total liabilities and equity | 5,034 | 4,935 | |||
Reportable Legal Entities | Non-Guarantor Subsidiaries | |||||
Current assets: | |||||
Cash and equivalents | 341 | 300 | 273 | 179 | |
Accounts receivable, net | 252 | 190 | |||
Inventories | 25 | 27 | |||
Royalty advances expected to be recouped within one year | 56 | 52 | |||
Prepaid and other current assets | 33 | 29 | |||
Total current assets | 707 | 598 | |||
Due from (to) parent companies | (496) | (514) | |||
Royalty advances expected to be recouped after one year | 69 | 63 | |||
Property, plant and equipment, net | 74 | 74 | |||
Goodwill | 320 | 317 | |||
Intangible assets subject to amortization, net | 1,039 | 1,061 | |||
Intangible assets not subject to amortization | 46 | 46 | |||
Deferred tax assets, net | 8 | 8 | |||
Other assets | 20 | 17 | |||
Total assets | 1,787 | 1,670 | |||
Current liabilities: | |||||
Accounts payable | 79 | 73 | |||
Accrued royalties | 615 | 531 | |||
Accrued liabilities | 226 | 221 | |||
Deferred revenue | 53 | 72 | |||
Other current liabilities | 31 | 23 | |||
Total current liabilities | 1,004 | 920 | |||
Deferred tax liabilities, net | 196 | 190 | |||
Other noncurrent liabilities | 110 | 112 | |||
Total liabilities | 1,310 | 1,222 | |||
Total Warner Music Group Corp. equity | 467 | 437 | |||
Noncontrolling interest | 10 | 11 | |||
Total equity | 477 | 448 | |||
Total liabilities and equity | 1,787 | 1,670 | |||
Reportable Legal Entities | Warner Music Group Corp. | |||||
Current assets: | |||||
Investments in and advances to consolidated subsidiaries | 391 | 377 | |||
Total assets | 391 | 377 | |||
Current liabilities: | |||||
Total Warner Music Group Corp. equity | 391 | 377 | |||
Total equity | 391 | 377 | |||
Total liabilities and equity | 391 | 377 | |||
Reportable Legal Entities | WMG Acquisition Corp. | |||||
Current assets: | |||||
Due from (to) parent companies | 500 | 418 | |||
Investments in and advances to consolidated subsidiaries | 2,644 | 2,721 | |||
Other assets | 7 | 7 | |||
Total assets | 3,151 | 3,146 | |||
Current liabilities: | |||||
Accrued interest | 25 | 41 | |||
Total current liabilities | 25 | 41 | |||
Long-term debt | 2,818 | 2,811 | |||
Other noncurrent liabilities | 1 | 1 | |||
Total liabilities | 2,844 | 2,853 | |||
Total Warner Music Group Corp. equity | 307 | 293 | |||
Total equity | 307 | 293 | |||
Total liabilities and equity | 3,151 | 3,146 | |||
Reportable Legal Entities | WMG Acquisition Corp. Consolidated | |||||
Current assets: | |||||
Cash and equivalents | 776 | 647 | $ 455 | $ 359 | |
Accounts receivable, net | 499 | 404 | |||
Inventories | 38 | 39 | |||
Royalty advances expected to be recouped within one year | 142 | 141 | |||
Prepaid and other current assets | 47 | 44 | |||
Total current assets | 1,502 | 1,275 | |||
Royalty advances expected to be recouped after one year | 175 | 172 | |||
Property, plant and equipment, net | 213 | 213 | |||
Goodwill | 1,688 | 1,685 | |||
Intangible assets subject to amortization, net | 2,045 | 2,090 | |||
Intangible assets not subject to amortization | 117 | 117 | |||
Deferred tax assets, net | 61 | 97 | |||
Other assets | 74 | 69 | |||
Total assets | 5,875 | 5,718 | |||
Current liabilities: | |||||
Accounts payable | 166 | 208 | |||
Accrued royalties | 1,406 | 1,263 | |||
Accrued liabilities | 401 | 365 | |||
Accrued interest | 25 | 41 | |||
Deferred revenue | 201 | 197 | |||
Other current liabilities | 35 | 26 | |||
Total current liabilities | 2,234 | 2,100 | |||
Long-term debt | 2,818 | 2,811 | |||
Deferred tax liabilities, net | 196 | 190 | |||
Other noncurrent liabilities | 306 | 309 | |||
Total liabilities | 5,554 | 5,410 | |||
Total Warner Music Group Corp. equity | 307 | 293 | |||
Noncontrolling interest | 14 | 15 | |||
Total equity | 321 | 308 | |||
Total liabilities and equity | 5,875 | 5,718 | |||
Reportable Legal Entities | WMG Holdings Corp. | |||||
Current assets: | |||||
Investments in and advances to consolidated subsidiaries | 391 | 377 | |||
Total assets | 391 | 377 | |||
Current liabilities: | |||||
Total Warner Music Group Corp. equity | 391 | 377 | |||
Total equity | 391 | 377 | |||
Total liabilities and equity | 391 | 377 | |||
Eliminations | |||||
Current assets: | |||||
Investments in and advances to consolidated subsidiaries | (782) | (754) | |||
Total assets | (782) | (754) | |||
Current liabilities: | |||||
Total Warner Music Group Corp. equity | (782) | (754) | |||
Total equity | (782) | (754) | |||
Total liabilities and equity | (782) | (754) | |||
Eliminations | WMG Acquisition Corp. | |||||
Current assets: | |||||
Investments in and advances to consolidated subsidiaries | (4,097) | (4,033) | |||
Total assets | (4,097) | (4,033) | |||
Current liabilities: | |||||
Total Warner Music Group Corp. equity | (4,097) | (4,033) | |||
Total equity | (4,097) | (4,033) | |||
Total liabilities and equity | $ (4,097) | $ (4,033) |
Guarantor and Non-Guarantor S56
Guarantor and Non-Guarantor Subsidiaries Financial Information - Consolidating Statement of Operations Unaudited (Detail) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | ||
Dec. 31, 2017 | Dec. 31, 2016 | Dec. 31, 2016 | ||
Condensed Income Statements Captions [Line Items] | ||||
Revenues | $ 1,045 | $ 917 | ||
Costs and expenses: | ||||
Cost of revenue | (569) | (496) | ||
Selling, general and administrative expenses | [1] | (333) | (276) | |
Amortization expense | (53) | (51) | ||
Total costs and expenses | (955) | (823) | ||
Operating income | 90 | 94 | ||
Loss on extinguishment of debt | (1) | (32) | $ (32) | |
Interest (expense) income, net | (36) | (40) | ||
Equity gains (losses) from equity method investments | 1 | |||
Other income, net | 3 | 19 | ||
Income before income taxes | 57 | 41 | ||
Income tax (expense) benefit | (52) | (17) | ||
Net income | 5 | 24 | 24 | |
Less: Income attributable to noncontrolling interest | (1) | (2) | ||
Net income attributable to Warner Music Group Corp. | 4 | 22 | ||
Reportable Legal Entities | Guarantor Subsidiaries | ||||
Condensed Income Statements Captions [Line Items] | ||||
Revenues | 547 | 490 | ||
Costs and expenses: | ||||
Cost of revenue | (257) | (220) | ||
Selling, general and administrative expenses | (235) | (176) | ||
Amortization expense | (24) | (25) | ||
Total costs and expenses | (516) | (421) | ||
Operating income | 31 | 69 | ||
Interest (expense) income, net | 1 | 1 | ||
Equity gains (losses) from equity method investments | 44 | 40 | ||
Other income, net | 9 | 3 | ||
Income before income taxes | 85 | 113 | ||
Income tax (expense) benefit | (51) | (18) | ||
Net income | 34 | 95 | 95 | |
Net income attributable to Warner Music Group Corp. | 34 | 95 | ||
Reportable Legal Entities | Non-Guarantor Subsidiaries | ||||
Condensed Income Statements Captions [Line Items] | ||||
Revenues | 621 | 521 | ||
Costs and expenses: | ||||
Cost of revenue | (393) | (341) | ||
Selling, general and administrative expenses | (138) | (128) | ||
Amortization expense | (29) | (26) | ||
Total costs and expenses | (560) | (495) | ||
Operating income | 61 | 26 | ||
Interest (expense) income, net | (8) | (18) | ||
Other income, net | (2) | 4 | ||
Income before income taxes | 51 | 12 | ||
Income tax (expense) benefit | (10) | (9) | ||
Net income | 41 | 3 | 3 | |
Less: Income attributable to noncontrolling interest | (1) | (2) | ||
Net income attributable to Warner Music Group Corp. | 40 | 1 | ||
Reportable Legal Entities | Warner Music Group Corp. | ||||
Costs and expenses: | ||||
Equity gains (losses) from equity method investments | 4 | 22 | ||
Income before income taxes | 4 | 22 | ||
Net income | 4 | 22 | 22 | |
Net income attributable to Warner Music Group Corp. | 4 | 22 | ||
Reportable Legal Entities | WMG Acquisition Corp. | ||||
Costs and expenses: | ||||
Selling, general and administrative expenses | (1) | |||
Total costs and expenses | (1) | |||
Operating income | (1) | |||
Loss on extinguishment of debt | (1) | (32) | (32) | |
Interest (expense) income, net | (29) | (23) | ||
Equity gains (losses) from equity method investments | 90 | 83 | ||
Other income, net | (4) | 12 | ||
Income before income taxes | 56 | 39 | ||
Income tax (expense) benefit | (52) | (17) | ||
Net income | 4 | 22 | 22 | |
Net income attributable to Warner Music Group Corp. | 4 | 22 | ||
Reportable Legal Entities | WMG Acquisition Corp. Consolidated | ||||
Condensed Income Statements Captions [Line Items] | ||||
Revenues | 1,045 | 917 | ||
Costs and expenses: | ||||
Cost of revenue | (569) | (496) | ||
Selling, general and administrative expenses | (333) | (276) | ||
Amortization expense | (53) | (51) | ||
Total costs and expenses | (955) | (823) | ||
Operating income | 90 | 94 | ||
Loss on extinguishment of debt | (1) | (32) | (32) | |
Interest (expense) income, net | (36) | (40) | ||
Equity gains (losses) from equity method investments | 1 | |||
Other income, net | 3 | 19 | ||
Income before income taxes | 57 | 41 | ||
Income tax (expense) benefit | (52) | (17) | ||
Net income | 5 | 24 | 24 | |
Less: Income attributable to noncontrolling interest | (1) | (2) | ||
Net income attributable to Warner Music Group Corp. | 4 | 22 | ||
Reportable Legal Entities | WMG Holdings Corp. | ||||
Costs and expenses: | ||||
Equity gains (losses) from equity method investments | 4 | 22 | ||
Income before income taxes | 4 | 22 | ||
Net income | 4 | 22 | 22 | |
Net income attributable to Warner Music Group Corp. | 4 | 22 | ||
Eliminations | ||||
Costs and expenses: | ||||
Equity gains (losses) from equity method investments | (8) | (44) | ||
Income before income taxes | (8) | (44) | ||
Net income | (8) | (44) | (44) | |
Net income attributable to Warner Music Group Corp. | (8) | (44) | ||
Eliminations | WMG Acquisition Corp. | ||||
Condensed Income Statements Captions [Line Items] | ||||
Revenues | (123) | (94) | ||
Costs and expenses: | ||||
Cost of revenue | 81 | 65 | ||
Selling, general and administrative expenses | 40 | 29 | ||
Total costs and expenses | 121 | 94 | ||
Operating income | (2) | |||
Equity gains (losses) from equity method investments | (133) | (123) | ||
Income before income taxes | (135) | (123) | ||
Income tax (expense) benefit | 61 | 27 | ||
Net income | (74) | (96) | $ (96) | |
Net income attributable to Warner Music Group Corp. | $ (74) | $ (96) | ||
[1] | (a) Includes depreciation expense of: $(12) $(12) |
Guarantor and Non-Guarantor S57
Guarantor and Non-Guarantor Subsidiaries Financial Information - Consolidating Statement of Comprehensive Income Unaudited (Detail) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | |
Dec. 31, 2017 | Dec. 31, 2016 | Dec. 31, 2016 | |
Condensed Statement Of Income Captions [Line Items] | |||
Net income | $ 5 | $ 24 | $ 24 |
Other comprehensive income (loss), net of tax: | |||
Foreign currency adjustment | 9 | (37) | |
Deferred gains (losses) on derivative financial instruments | 1 | (2) | |
Other comprehensive income (loss), net of tax | 10 | (39) | |
Total comprehensive income (loss) | 15 | (15) | |
Less: Income attributable to noncontrolling interest | (1) | (2) | |
Comprehensive income (loss) attributable to Warner Music Group Corp. | 14 | (17) | |
Reportable Legal Entities | Guarantor Subsidiaries | |||
Condensed Statement Of Income Captions [Line Items] | |||
Net income | 34 | 95 | 95 |
Other comprehensive income (loss), net of tax: | |||
Deferred gains (losses) on derivative financial instruments | (2) | ||
Other comprehensive income (loss), net of tax | (2) | ||
Total comprehensive income (loss) | 34 | 93 | |
Comprehensive income (loss) attributable to Warner Music Group Corp. | 34 | 93 | |
Reportable Legal Entities | Non-Guarantor Subsidiaries | |||
Condensed Statement Of Income Captions [Line Items] | |||
Net income | 41 | 3 | 3 |
Other comprehensive income (loss), net of tax: | |||
Foreign currency adjustment | (9) | 37 | |
Deferred gains (losses) on derivative financial instruments | (1) | ||
Other comprehensive income (loss), net of tax | (10) | 37 | |
Total comprehensive income (loss) | 31 | 40 | |
Less: Income attributable to noncontrolling interest | (1) | (2) | |
Comprehensive income (loss) attributable to Warner Music Group Corp. | 30 | 38 | |
Reportable Legal Entities | Warner Music Group Corp. | |||
Condensed Statement Of Income Captions [Line Items] | |||
Net income | 4 | 22 | 22 |
Other comprehensive income (loss), net of tax: | |||
Foreign currency adjustment | 9 | (37) | |
Deferred gains (losses) on derivative financial instruments | 1 | (2) | |
Other comprehensive income (loss), net of tax | 10 | (39) | |
Total comprehensive income (loss) | 14 | (17) | |
Comprehensive income (loss) attributable to Warner Music Group Corp. | 14 | (17) | |
Reportable Legal Entities | WMG Acquisition Corp. | |||
Condensed Statement Of Income Captions [Line Items] | |||
Net income | 4 | 22 | 22 |
Other comprehensive income (loss), net of tax: | |||
Foreign currency adjustment | 9 | (37) | |
Deferred gains (losses) on derivative financial instruments | 1 | (2) | |
Other comprehensive income (loss), net of tax | 10 | (39) | |
Total comprehensive income (loss) | 14 | (17) | |
Comprehensive income (loss) attributable to Warner Music Group Corp. | 14 | (17) | |
Reportable Legal Entities | WMG Acquisition Corp. Consolidated | |||
Condensed Statement Of Income Captions [Line Items] | |||
Net income | 5 | 24 | 24 |
Other comprehensive income (loss), net of tax: | |||
Foreign currency adjustment | 9 | (37) | |
Deferred gains (losses) on derivative financial instruments | 1 | (2) | |
Other comprehensive income (loss), net of tax | 10 | (39) | |
Total comprehensive income (loss) | 15 | (15) | |
Less: Income attributable to noncontrolling interest | (1) | (2) | |
Comprehensive income (loss) attributable to Warner Music Group Corp. | 14 | (17) | |
Reportable Legal Entities | WMG Holdings Corp. | |||
Condensed Statement Of Income Captions [Line Items] | |||
Net income | 4 | 22 | 22 |
Other comprehensive income (loss), net of tax: | |||
Foreign currency adjustment | 9 | (37) | |
Deferred gains (losses) on derivative financial instruments | 1 | (2) | |
Other comprehensive income (loss), net of tax | 10 | (39) | |
Total comprehensive income (loss) | 14 | (17) | |
Comprehensive income (loss) attributable to Warner Music Group Corp. | 14 | (17) | |
Eliminations | |||
Condensed Statement Of Income Captions [Line Items] | |||
Net income | (8) | (44) | (44) |
Other comprehensive income (loss), net of tax: | |||
Foreign currency adjustment | (18) | 74 | |
Deferred gains (losses) on derivative financial instruments | (2) | 4 | |
Other comprehensive income (loss), net of tax | (20) | 78 | |
Total comprehensive income (loss) | (28) | 34 | |
Comprehensive income (loss) attributable to Warner Music Group Corp. | (28) | 34 | |
Eliminations | WMG Acquisition Corp. | |||
Condensed Statement Of Income Captions [Line Items] | |||
Net income | (74) | (96) | $ (96) |
Other comprehensive income (loss), net of tax: | |||
Foreign currency adjustment | 9 | (37) | |
Deferred gains (losses) on derivative financial instruments | 1 | 2 | |
Other comprehensive income (loss), net of tax | 10 | (35) | |
Total comprehensive income (loss) | (64) | (131) | |
Comprehensive income (loss) attributable to Warner Music Group Corp. | $ (64) | $ (131) |
Guarantor and Non-Guarantor S58
Guarantor and Non-Guarantor Subsidiaries Financial Information - Consolidating Statement of Cash Flows Unaudited (Detail) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | |
Dec. 31, 2017 | Dec. 31, 2016 | Dec. 31, 2016 | |
Cash flows from operating activities | |||
Net income | $ 5 | $ 24 | $ 24 |
Adjustments to reconcile net income to net cash provided by operating activities: | |||
Depreciation and amortization | 65 | 63 | |
Unrealized losses/gains and remeasurement of foreign denominated loans | 5 | (17) | (17) |
Deferred income taxes | 42 | (2) | (2) |
Loss on extinguishment of debt | 1 | 32 | 32 |
Net gain on investments | (7) | ||
Non-cash interest expense | 1 | 3 | 3 |
Non-cash stock-based compensation expenses | 10 | ||
Equity-based compensation expense | 18 | 10 | |
Changes in operating assets and liabilities: | |||
Accounts receivable | (93) | (65) | (65) |
Inventories | 2 | 3 | 3 |
Royalty advances | (5) | 1 | 1 |
Accounts payable and accrued liabilities | (23) | (12) | (12) |
Royalty payables | 141 | 112 | 112 |
Accrued interest | (16) | (10) | (10) |
Deferred revenue | (3) | (1) | (1) |
Other balance sheet changes | 3 | 15 | 15 |
Net cash provided by operating activities | 136 | 156 | 156 |
Cash flows from investing activities | |||
Acquisition of music publishing rights, net | (1) | (1) | (1) |
Capital expenditures | (16) | (8) | (8) |
Investments and acquisitions of businesses, net | (1) | (3) | (3) |
Proceeds from the sale of investments | 12 | ||
Net cash (used in) provided by investing activities | (6) | (12) | (12) |
Cash flows from financing activities | |||
Proceeds from issuance of Acquisition Corp. Senior Term Loan Facility | 22 | 22 | |
Financing costs paid | (27) | ||
Call premiums paid on early redemption of debt | (27) | ||
Deferred financing costs paid | (1) | (12) | (12) |
Distribution to noncontrolling interest holder | (2) | ||
Net cash (used in) provided by financing activities | (3) | (38) | (38) |
Effect of exchange rate changes on cash and equivalents | 2 | (10) | (10) |
Net increase in cash and equivalents | 129 | 96 | 96 |
Cash and equivalents at beginning of period | 647 | 359 | 359 |
Cash and equivalents at end of period | 776 | 455 | 455 |
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 | Guarantor Subsidiaries | |||
Cash flows from operating activities | |||
Net income | 34 | 95 | 95 |
Adjustments to reconcile net income to net cash provided by operating activities: | |||
Depreciation and amortization | 32 | 35 | |
Unrealized losses/gains and remeasurement of foreign denominated loans | 1 | (9) | |
Net gain on investments | (7) | ||
Non-cash stock-based compensation expenses | 10 | ||
Equity-based compensation expense | 18 | ||
Equity (gains) losses, including distributions | (43) | (40) | |
Changes in operating assets and liabilities: | |||
Accounts receivable | (33) | (19) | |
Inventories | 2 | ||
Royalty advances | 5 | 7 | |
Accounts payable and accrued liabilities | 65 | 6 | |
Royalty payables | 59 | 40 | |
Deferred revenue | 17 | (33) | |
Other balance sheet changes | 37 | 12 | |
Net cash provided by operating activities | 185 | 106 | |
Cash flows from investing activities | |||
Capital expenditures | (13) | (6) | |
Investments and acquisitions of businesses, net | (1) | (3) | |
Proceeds from the sale of investments | 12 | ||
Net cash (used in) provided by investing activities | (2) | (9) | |
Cash flows from financing activities | |||
Change in due to (from) issuer | (95) | (95) | |
Net cash (used in) provided by financing activities | (95) | (95) | |
Net increase in cash and equivalents | 88 | 2 | |
Cash and equivalents at beginning of period | 347 | 180 | |
Cash and equivalents at end of period | 435 | 182 | 182 |
Reportable Legal Entities | Non-Guarantor Subsidiaries | |||
Cash flows from operating activities | |||
Net income | 41 | 3 | 3 |
Adjustments to reconcile net income to net cash provided by operating activities: | |||
Depreciation and amortization | 33 | 28 | |
Unrealized losses/gains and remeasurement of foreign denominated loans | (2) | 13 | |
Deferred income taxes | 42 | (2) | |
Changes in operating assets and liabilities: | |||
Accounts receivable | (60) | (46) | |
Inventories | 2 | 1 | |
Royalty advances | (10) | (6) | |
Accounts payable and accrued liabilities | (29) | 9 | |
Royalty payables | 82 | 72 | |
Deferred revenue | (20) | 32 | |
Other balance sheet changes | (34) | 3 | |
Net cash provided by operating activities | 45 | 107 | |
Cash flows from investing activities | |||
Acquisition of music publishing rights, net | (1) | (1) | |
Capital expenditures | (3) | (2) | |
Net cash (used in) provided by investing activities | (4) | (3) | |
Cash flows from financing activities | |||
Distribution to noncontrolling interest holder | (2) | ||
Net cash (used in) provided by financing activities | (2) | ||
Effect of exchange rate changes on cash and equivalents | 2 | (10) | |
Net increase in cash and equivalents | 41 | 94 | |
Cash and equivalents at beginning of period | 300 | 179 | |
Cash and equivalents at end of period | 341 | 273 | 273 |
Reportable Legal Entities | Warner Music Group Corp. | |||
Cash flows from operating activities | |||
Net income | 4 | 22 | 22 |
Adjustments to reconcile net income to net cash provided by operating activities: | |||
Equity (gains) losses, including distributions | (4) | (22) | |
Reportable Legal Entities | WMG Acquisition Corp. | |||
Cash flows from operating activities | |||
Net income | 4 | 22 | 22 |
Adjustments to reconcile net income to net cash provided by operating activities: | |||
Unrealized losses/gains and remeasurement of foreign denominated loans | 6 | (21) | |
Loss on extinguishment of debt | 1 | 32 | 32 |
Non-cash interest expense | 1 | 3 | |
Equity (gains) losses, including distributions | (90) | (83) | |
Changes in operating assets and liabilities: | |||
Accrued interest | (16) | (10) | |
Net cash provided by operating activities | (94) | (57) | |
Cash flows from investing activities | |||
Advances (from) to issuer | 95 | 95 | |
Net cash (used in) provided by investing activities | 95 | 95 | |
Cash flows from financing activities | |||
Proceeds from issuance of Acquisition Corp. Senior Term Loan Facility | 22 | ||
Financing costs paid | (27) | ||
Deferred financing costs paid | (1) | (12) | |
Net cash (used in) provided by financing activities | (1) | (38) | |
Reportable Legal Entities | WMG Acquisition Corp. Consolidated | |||
Cash flows from operating activities | |||
Net income | 5 | 24 | 24 |
Adjustments to reconcile net income to net cash provided by operating activities: | |||
Depreciation and amortization | 65 | 63 | |
Unrealized losses/gains and remeasurement of foreign denominated loans | 5 | (17) | |
Deferred income taxes | 42 | (2) | |
Loss on extinguishment of debt | 1 | 32 | 32 |
Net gain on investments | (7) | ||
Non-cash interest expense | 1 | 3 | |
Non-cash stock-based compensation expenses | 10 | ||
Equity-based compensation expense | 18 | ||
Changes in operating assets and liabilities: | |||
Accounts receivable | (93) | (65) | |
Inventories | 2 | 3 | |
Royalty advances | (5) | 1 | |
Accounts payable and accrued liabilities | (23) | (12) | |
Royalty payables | 141 | 112 | |
Accrued interest | (16) | (10) | |
Deferred revenue | (3) | (1) | |
Other balance sheet changes | 3 | 15 | |
Net cash provided by operating activities | 136 | 156 | |
Cash flows from investing activities | |||
Acquisition of music publishing rights, net | (1) | (1) | |
Capital expenditures | (16) | (8) | |
Investments and acquisitions of businesses, net | (1) | (3) | |
Proceeds from the sale of investments | 12 | ||
Net cash (used in) provided by investing activities | (6) | (12) | |
Cash flows from financing activities | |||
Proceeds from issuance of Acquisition Corp. Senior Term Loan Facility | 22 | ||
Financing costs paid | (27) | ||
Deferred financing costs paid | (1) | (12) | |
Distribution to noncontrolling interest holder | (2) | ||
Net cash (used in) provided by financing activities | (3) | (38) | |
Effect of exchange rate changes on cash and equivalents | 2 | (10) | |
Net increase in cash and equivalents | 129 | 96 | |
Cash and equivalents at beginning of period | 647 | 359 | |
Cash and equivalents at end of period | 776 | 455 | 455 |
Reportable Legal Entities | WMG Holdings Corp. | |||
Cash flows from operating activities | |||
Net income | 4 | 22 | 22 |
Adjustments to reconcile net income to net cash provided by operating activities: | |||
Equity (gains) losses, including distributions | (4) | (22) | |
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 | (8) | (44) | (44) |
Adjustments to reconcile net income to net cash provided by operating activities: | |||
Equity (gains) losses, including distributions | 8 | 44 | |
Eliminations | WMG Acquisition Corp. | |||
Cash flows from operating activities | |||
Net income | (74) | $ (96) | (96) |
Adjustments to reconcile net income to net cash provided by operating activities: | |||
Equity (gains) losses, including distributions | 133 | 123 | |
Changes in operating assets and liabilities: | |||
Accounts payable and accrued liabilities | (59) | (27) | |
Cash flows from investing activities | |||
Advances (from) to issuer | (95) | (95) | |
Net cash (used in) provided by investing activities | (95) | (95) | |
Cash flows from financing activities | |||
Change in due to (from) issuer | 95 | 95 | |
Net cash (used in) provided by financing activities | $ 95 | $ 95 |
Guarantor and Non-Guarantor S59
Guarantor and Non-Guarantor Subsidiaries Financial Information - Consolidating Statement of Cash Flows (Parenthetical) Unaudited (Detail) | Dec. 31, 2017 | Dec. 31, 2016 |
4.125% Senior Secured Notes | ||
Condensed Cash Flow Statements Captions [Line Items] | ||
Interest rate | 4.125% | 4.125% |
4.875% Senior Secured Notes | ||
Condensed Cash Flow Statements Captions [Line Items] | ||
Interest rate | 4.875% | 4.875% |
6.00% Senior Secured Notes | ||
Condensed Cash Flow Statements Captions [Line Items] | ||
Interest rate | 6.00% | 6.00% |
6.25% Senior Secured Notes | ||
Condensed Cash Flow Statements Captions [Line Items] | ||
Interest rate | 6.25% | 6.25% |
5.625% Senior Secured Notes | ||
Condensed Cash Flow Statements Captions [Line Items] | ||
Interest rate | 5.625% | 5.625% |