UNITED STATESSECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the quarterly period ended June 30, 2017OR
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934Commission File Number 001-32502
Warner Music Group Corp.
(Exact name of Registrant as specified in its charter)
Delaware
13-4271875
(State or other jurisdiction of incorporation or organization)
(I.R.S. EmployerIdentification No.)
1633 BroadwayNew York, NY 10019
(Address of principal executive offices)
(212) 275-2000
(Registrant’s telephone number, including area code)
Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filingrequirements for the past 90 days. Yes
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No
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Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data Filerequired to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes
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No
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Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or anemerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company”in Rule 12b-2 of the Exchange Act.
Large accelerated filer
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Accelerated filer
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Non-accelerated filer
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(Do not check if a smaller reporting company)
Smaller reporting company
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Emerging growth company
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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with anynew or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
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Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act.) Yes
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No
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There is no public market for the Registrant’s common stock. As of August 8, 2017 the number of shares of the Registrant’s common stock, par value$0.001 per share, outstanding was 1,055. All of the Registrant’s common stock is owned by affiliates of Access Industries, Inc. The Registrant has filed allExchange Act reports for the preceding 12 months.
WARNER MUSIC GROUP CORP.INDEX
PageNumber
Part I.
Financial Information
Item 1.
Financial Statements (Unaudited) 3 Consolidated Balance Sheets as of June 30, 2017 and September 30, 2016 3 Consolidated Statements of Operations for the Three and Nine Months Ended June 30, 2017 and June 30, 2016 4 Consolidated Statement of Comprehensive Income (Loss) for the Three and Nine Months Ended June 30, 2017 and June 30, 2016 5 Consolidated Statements of Cash Flows for the Nine Months Ended June 30, 2017 and June 30, 2016 6 Consolidated Statement of Equity for the Nine Months Ended June 30, 2017 7 Notes to Consolidated Interim Financial Statements 8 Supplementary Information—Consolidating Financial Statements 21Item 2.
Management’s Discussion and Analysis of Financial Condition and Results of Operations 34Item 3.
Quantitative and Qualitative Disclosures About Market Risk 62Item 4.
Controls and Procedures 63
Part II.
Other Information
64Item 1.
Legal Proceedings 64Item 1A.
Risk Factors 64Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds 64Item 3.
Defaults Upon Senior Securities 65Item 4.
Mine Safety Disclosures 65Item 5.
Other Information 65Item 6.
Exhibits 65Signatures
66 2
ITEM 1.FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Warner Music Group Corp.Consolidated Balance Sheets (Unaudited)
June 30, September 30, 2017 2016 (in millions)
Assets
Current assets: Cash and equivalents $567 $359 Accounts receivable, net of allowances of $53 million and $52 million 380 329 Inventories 38 41 Royalty advances expected to be recouped within one year 136 128 Prepaid and other current assets 57 51 Total current assets 1,178 908 Royalty advances expected to be recouped after one year 204 196 Property, plant and equipment, net 203 203 Goodwill 1,630 1,627 Intangible assets subject to amortization, net 2,020 2,201 Intangible assets not subject to amortization 117 116 Deferred tax assets, net 59 2 Other assets 68 82 Total assets $5,479 $5,335
Liabilities and Equity
Current liabilities: Accounts payable $166 $204 Accrued royalties 1,248 1,104 Accrued liabilities 286 297 Accrued interest 24 38 Deferred revenue 161 178 Other current liabilities 53 21 Total current liabilities 1,938 1,842 Long-term debt 2,797 2,778 Deferred tax liabilities, net 159 269 Other noncurrent liabilities 260 236 Total liabilities $5,154 $5,125 Equity: Common stock ($0.001 par value; 10,000 shares authorized; 1,055 shares issued and outstanding) $— $— Additional paid-in capital 1,128 1,128 Accumulated deficit (615) (715)Accumulated other comprehensive loss, net (205) (218)Total Warner Music Group Corp. equity 308 195 Noncontrolling interest 17 15 Total equity 325 210 Total liabilities and equity $5,479 $5,335 See accompanying notes 3