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. Holdings has issued and outstanding the 13.75% Senior Notes due 2019 (the “Holdings Notes”). In addition, Acquisition Corp. has issued and outstanding the 5.625% Senior Secured Notes due 2022, the 6.00% Senior Secured Notes due 2021, the 6.25% Senior Secured Notes due 2021, and the 6.75% Senior Notes due 2022 (together, the “Acquisition Corp. Notes”).

The Holdings Notes are guaranteed by the Company. These guarantees are full, unconditional, joint and several. The following condensed consolidating financial statements are presented for the information of the holders of the Holdings Notes and present the results of operations, financial position and cash flows of (i) the Company, which is the guarantor of the Holdings Notes, (ii) Holdings, which is the issuer of the Holdings Notes, (iii) the subsidiaries of Holdings (Acquisition Corp. is the only direct subsidiary of Holdings) and (iv) the eliminations necessary to arrive at the information for the Company on a consolidated basis. Investments in consolidated or combined subsidiaries are presented under the equity method of accounting.

The Acquisition Corp. Notes are, or were, also guaranteed by the Company and, in addition, are guaranteed by all of Acquisition Corp.’s domestic wholly owned subsidiaries. The secured notes are guaranteed on a senior secured basis and the unsecured notes are guaranteed on an unsecured senior basis. The Company’s guarantee of the Acquisition Corp. Notes is full and unconditional. The guarantee of the Acquisition Corp. Notes by Acquisition Corp.’s domestic, wholly-owned subsidiaries are full, unconditional, joint and several. The following condensed consolidating financial statements are also presented for the information of the holders of the Acquisition Corp. Notes and present the results of operations, financial position and cash flows of (i) Acquisition Corp., which is the issuer of the Acquisition Corp. Notes, (ii) the guarantor subsidiaries of Acquisition Corp., (iii) the non-guarantor subsidiaries of Acquisition Corp. and (iv) the eliminations necessary to arrive at the information for Acquisition Corp. on a consolidated basis. Investments in consolidated subsidiaries are presented under the equity method of accounting. There are no restrictions on Acquisition Corp.’s ability to obtain funds from any of its wholly owned subsidiaries through dividends, loans or advances. The New Senior Secured Notes and the New Unsecured Notes are also guaranteed by the Company and, in addition, are guaranteed by all of Acquisition Corp.’s domestic wholly owned subsidiaries.

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, and, with respect to the Company, the indenture for the Holdings Notes.

Consolidating Balance Sheet

September 30, 2016

	WMG											WMG		WMG		Warner					Warner
	Acquisition					Non-						Acquisition		Holdings		Music					Music
	Corp.		Guarantor			Guarantor						Corp.		Corp.		Group					Group Corp.
	(issuer)		Subsidiaries			Subsidiaries			Eliminations			Consolidated		(issuer)		Corp.		Eliminations			Consolidated
	(in millions)
Assets:
Current assets:
Cash and equivalents	$	—	$	180		$	179		$	—		$	359	$	—	$	—	$	—		$	359
Accounts receivable, net		—		177			152			—			329		—		—		—			329
Inventories		—		16			25			—			41		—		—		—			41
Royalty advances expected to be recouped within one year		—		79			49			—			128		—		—		—			128
Prepaid and other current assets		1		13			37			—			51		—		—		—			51
Total current assets		1		465			442			—			908		—		—		—			908
Due (to) from parent companies		750		(312	)		(438	)		—			—		—		—		—			—
Investments in and advances to (from) consolidated subsidiaries		2,260		1,458			—			(3,718	)		—		195		195		(390	)		—
Royalty advances expected to be recouped after one year		—		120			76			—			196		—		—		—			196
Property, plant and equipment, net		—		138			65			—			203		—		—		—			203
Goodwill		—		1,372			255			—			1,627		—		—		—			1,627
Intangible assets subject to amortization, net		—		1,165			1,036			—			2,201		—		—		—			2,201
Intangible assets not subject to amortization		—		71			45			—			116		—		—		—			116
Other assets		37		62			19			—			118		—		—		—			118
Total assets	$	3,048	$	4,539		$	1,500		$	(3,718	)	$	5,369	$	195	$	195	$	(390	)	$	5,369
Liabilities and Deficit:
Current liabilities:
Accounts payable	$	—	$	124		$	80		$	—		$	204	$	—	$	—	$	—		$	204
Accrued royalties		—		606			498			—			1,104		—		—		—			1,104
Accrued liabilities		—		112			185			—			297		—		—		—			297
Accrued interest		38		—			—			—			38		—		—		—			38
Deferred revenue		—		143			35			—			178		—		—		—			178
Current portion of long-term debt		—		—			—			—			—		—		—		—			—
Other current liabilities		—		3			18			—			21		—		—		—			21
Total current liabilities		38		988			816			—			1,842		—		—		—			1,842
Long-term debt		2,812		—			—			—			2,812		—		—		—			2,812
Deferred tax liabilities, net		—		109			160			—			269		—		—		—			269
Other noncurrent liabilities		3		126			107			—			236		—		—		—			236
Total liabilities		2,853		1,223			1,083			—			5,159		—		—		—			5,159
Total Warner Music Group Corp. equity (deficit)		195		3,314			404			(3,718	)		195		195		195		(390	)		195
Noncontrolling interest		—		2			13			—			15		—		—		—			15
Total equity (deficit)		195		3,316			417			(3,718	)		210		195		195		(390	)		210
Total liabilities and equity (deficit)	$	3,048	$	4,539		$	1,500		$	(3,718	)	$	5,369	$	195	$	195	$	(390	)	$	5,369

Consolidating Balance Sheet

September 30, 2015

	WMG											WMG		WMG		Warner					Warner
	Acquisition					Non-						Acquisition		Holdings		Music					Music
	Corp.		Guarantor			Guarantor						Corp.		Corp.		Group					Group Corp.
	(issuer)		Subsidiaries			Subsidiaries			Eliminations			Consolidated		(issuer)		Corp.		Eliminations			Consolidated
	(in millions)
Assets:
Current assets:
Cash and equivalents	$	—	$	73		$	173		$	—		$	246	$	—	$	—	$	—		$	246
Accounts receivable, net		—		170			179			—			349		—		—		—			349
Inventories		—		15			27			—			42		—		—		—			42
Royalty advances expected to be recouped within one year		—		80			50			—			130		—		—		—			130
Prepaid and other current assets		5		9			46			—			60		—		—		—			60
Total current assets		5		347			475			—			827		—		—		—			827
Due (to) from parent companies		863		(174	)		(689	)		—			—		—		—		—			—
Investments in and advances to (from) consolidated subsidiaries		2,365		1,187			—			(3,552	)		—		376		221		(597	)		—
Royalty advances expected to be recouped after one year		—		120			75			—			195		—		—		—			195
Property, plant and equipment, net		—		145			75			—			220		—		—		—			220
Goodwill		—		1,379			253			—			1,632		—		—		—			1,632
Intangible assets subject to amortization, net		—		1,271			1,243			—			2,514		—		—		—			2,514
Intangible assets not subject to amortization		—		71			48			—			119		—		—		—			119
Other assets		39		53			17			—			109		5		—		—			114
Total assets	$	3,272	$	4,399		$	1,497		$	(3,552	)	$	5,616	$	381	$	221	$	(597	)	$	5,621
Liabilities and Deficit:
Current liabilities:
Accounts payable	$	—	$	79		$	94		$	—		$	173	$	—	$	—	$	—		$	173
Accrued royalties		—		513			574			—			1,087		—		—		—			1,087
Accrued liabilities		1		269			26			—			296		—		—		—			296
Accrued interest		48		—			—			—			48		10		—		—			58
Deferred revenue		—		140			66			—			206		—		—		—			206
Current portion of long-term debt		13		—			—			—			13		—		—		—			13
Other current liabilities		—		7			18			(1	)		24		—		—		—			24
Total current liabilities		62		1,008			778			(1	)		1,847		10		—		—			1,857
Long-term debt		2,831		—			—			—			2,831		150		—		—			2,981
Deferred tax liabilities, net		—		110			192			—			302		—		—		—			302
Other noncurrent liabilities		3		131			105			3			242		—		—		—			242
Total liabilities		2,896		1,249			1,075			2			5,222		160		—		—			5,382
Total Warner Music Group Corp. equity (deficit)		376		3,149			405			(3,554	)		376		221		221		(597	)		221
Noncontrolling interest		—		1			17			—			18		—		—		—			18
Total equity (deficit)		376		3,150			422			(3,554	)		394		221		221		(597	)		239
Total liabilities and equity (deficit)	$	3,272	$	4,399		$	1,497		$	(3,552	)	$	5,616	$	381	$	221	$	(597	)	$	5,621

Consolidating Statement of Operations

For The Fiscal Year Ended September 30, 2016

	WMG												WMG			WMG			Warner					Warner
	Acquisition						Non-						Acquisition			Holdings			Music					Music
	Corp.			Guarantor			Guarantor						Corp.			Corp.			Group					Group Corp.
	(issuer)			Subsidiaries			Subsidiaries			Eliminations			Consolidated			(issuer)			Corp.		Eliminations			Consolidated
	(in millions)
Revenues	$	—		$	1,668		$	1,887		$	(309	)	$	3,246		$	—		$	—	$	—		$	3,246
Costs and expenses:
Cost of revenue		—			(703	)		(1,192	)		188			(1,707	)		—			—		—			(1,707	)
Selling, general and administrative expenses		—			(739	)		(464	)		121			(1,082	)		—			—		—			(1,082	)
Amortization of intangible assets		—			(118	)		(125	)		—			(243	)		—			—		—			(243	)
Total costs and expenses		—			(1,560	)		(1,781	)		309			(3,032	)		—			—		—			(3,032	)
Operating income (loss)		—			108			106			—			214			—			—		—			214
Loss on extinguishment of debt		(4	)		—			—			—			(4	)		(14	)		—		—			(18	)
Interest income (expense), net		(84	)		3			(79	)		1			(159	)		(14	)		—		—			(173	)
Equity gains (losses) from consolidated subsidiaries		162			74			—			(236	)		—			53			25		(78	)		—
Other income (expense), net		(10	)		2			26			—			18			—			—		—			18
Income (loss) before income taxes		64			187			53			(235	)		69			25			25		(78	)		41
Income tax (expense) benefit		(11	)		(20	)		1			19			(11	)		—			—		—			(11	)
Net income (loss)		53			167			54			(216	)		58			25			25		(78	)		30
Less: income attributable to noncontrolling interest		—			(1	)		(4	)		—			(5	)		—			—		—			(5	)
Net income (loss) attributable to Warner Music Group Corp.	$	53		$	166		$	50		$	(216	)	$	53		$	25		$	25	$	(78	)	$	25

Consolidating Statement of Operations

For The Fiscal Year Ended September 30, 2015

	WMG												WMG			WMG			Warner					Warner
	Acquisition						Non-						Acquisition			Holdings			Music					Music
	Corp.			Guarantor			Guarantor						Corp.			Corp.			Group					Group Corp.
	(issuer)			Subsidiaries			Subsidiaries			Eliminations			Consolidated			(issuer)			Corp.			Eliminations		Consolidated
	(in millions)
Revenues	$	—		$	1,632		$	1,588		$	(254	)	$	2,966		$	—		$	—		$	—	$	2,966
Costs and expenses:
Cost of revenue		—			(788	)		(866	)		143			(1,511	)		—			—			—		(1,511	)
Selling, general and administrative expenses		1			(675	)		(509	)		110			(1,073	)		—			—			—		(1,073	)
Amortization of intangible assets		—			(122	)		(133	)		—			(255	)		—			—			—		(255	)
Total costs and expenses		1			(1,585	)		(1,508	)		253			(2,839	)		—			—			—		(2,839	)
Operating (loss) income		1			47			80			(1	)		127			—			—			—		127
Loss on extinguishment of debt		—			—			—			—			—			—			—			—		—
Interest income (expense), net		(82	)		6			(83	)		—			(159	)		(22	)		—			—		(181	)
Equity gains (losses) from consolidated subsidiaries		35			(67	)		—			32			—			(69	)		(91	)		160		—
Other income (expense), net		(10	)		1			(12	)		—			(21	)		—			—			—		(21	)
Income (loss) before income taxes		(56	)		(13	)		(15	)		31			(53	)		(91	)		(91	)		160		(75	)
Income tax benefit (expense)		(13	)		(29	)		—			29			(13	)		—			—			—		(13	)
Net income (loss)		(69	)		(42	)		(15	)		60			(66	)		(91	)		(91	)		160		(88	)
Less: income attributable to noncontrolling interest		—			(1	)		(2	)		—			(3	)		—			—			—		(3	)
Net income (loss) attributable to Warner Music Group Corp.	$	(69	)	$	(43	)	$	(17	)	$	60		$	(69	)	$	(91	)	$	(91	)	$	160	$	(91	)

Consolidating Statement of Operations

For The Fiscal Year Ended September 30, 2014

	WMG												WMG			WMG			Warner					Warner
	Acquisition						Non-						Acquisition			Holdings			Music					Music
	Corp.			Guarantor			Guarantor						Corp.			Corp.			Group					Group Corp.
	(issuer)			Subsidiaries			Subsidiaries			Eliminations			Consolidated			(issuer)			Corp.			Eliminations		Consolidated
	(in millions)
Revenues	$	—		$	1,498		$	1,804		$	(275	)	$	3,027		$	—		$	—		$	—	$	3,027
Costs and expenses:
Cost of revenue		—			(639	)		(1,089	)		158			(1,570	)		—			—			—		(1,570	)
Selling, general and administrative expenses		(1	)		(633	)		(655	)		117			(1,172	)		—			—			—		(1,172	)
Amortization of intangible assets		—			(120	)		(146	)		—			(266	)		—			—			—		(266	)
Total costs and expenses		(1	)		(1,392	)		(1,890	)		275			(3,008	)		—			—			—		(3,008	)
Operating income (loss)		(1	)		106			(86	)		—			19			—			—			—		19
Loss on extinguishment of debt		(141	)		—			—			—			(141	)		—			—			—		(141	)
Interest income (expense), net		(102	)		9			(88	)		—			(181	)		(22	)		—			—		(203	)
Equity gains (losses) from consolidated subsidiaries		(80	)		113			—			(33	)		—			(286	)		(308	)		594		—
Other income (expense), net		12			(18	)		2			—			(4	)		—			—			—		(4	)
Income (loss) before income taxes		(312	)		210			(172	)		(33	)		(307	)		(308	)		(308	)		594		(329	)
Income tax benefit (expense)		26			(9	)		26			(17	)		26			—			—			—		26
Net income (loss)		(286	)		201			(146	)		(50	)		(281	)		(308	)		(308	)		594		(303	)
Less: income attributable to noncontrolling interest		—			(1	)		(4	)		—			(5	)		—			—			—		(5	)
Net income (loss) attributable to Warner Music Group Corp.	$	(286	)	$	200		$	(150	)	$	(50	)	$	(286	)	$	(308	)	$	(308	)	$	594	$	(308	)

Consolidating Statement of Comprehensive Income

For The Fiscal Year Ended September 30, 2016

	WMG												WMG			WMG			Warner						Warner
	Acquisition						Non-						Acquisition			Holdings			Music						Music
	Corp.			Guarantor			Guarantor						Corp.			Corp.			Group						Group Corp.
	(issuer)			Subsidiaries			Subsidiaries			Eliminations			Consolidated			(issuer)			Corp.			Eliminations			Consolidated
	(in millions)
Net income (loss)	$	53		$	167		$	54		$	(216	)	$	58		$	25		$	25		$	(78	)	$	30
Other comprehensive income (loss), net of tax:
Foreign currency adjustment		(44	)		—			(44	)		44			(44	)		(44	)		(44	)		88			(44	)
Minimum pension liability		(7	)		—			(7	)		7			(7	)		(7	)		(7	)		14			(7	)
Deferred (loss) gain on derivative financial instruments		—			(1	)		—			1			—			—			—			—			—
Other comprehensive (loss) income , net of tax:		(51	)		(1	)		(51	)		52			(51	)		(51	)		(51	)		102			(51	)
Total comprehensive (loss) income		2			166			3			(164	)		7			(26	)		(26	)		24			(21	)
Less: income attributable to noncontrolling interest		—			(1	)		(4	)		—			(5	)		—			—			—			(5	)
Comprehensive (loss) income attributable to Warner Music Group Corp.	$	2		$	165		$	(1	)	$	(164	)	$	2		$	(26	)	$	(26	)	$	24		$	(26	)

Consolidating Statement of Comprehensive Income

For The Fiscal Year Ended September 30, 2015

	WMG											WMG			WMG			Warner					Warner
	Acquisition						Non-					Acquisition			Holdings			Music					Music
	Corp.			Guarantor			Guarantor					Corp.			Corp.			Group					Group Corp.
	(issuer)			Subsidiaries			Subsidiaries			Eliminations		Consolidated			(issuer)			Corp.			Eliminations		Consolidated
	(in millions)
Net (loss) income	$	(69	)	$	(42	)	$	(15	)	$	60	$	(66	)	$	(91	)	$	(91	)	$	160	$	(88	)
Other comprehensive income (loss), net of tax:
Foreign currency adjustment		(59	)		—			(59	)		59		(59	)		(59	)		(59	)		118		(59	)
Minimum pension liability		—			—			—			—		—			—			—			—		—
Other comprehensive income (loss), net of tax:		(59	)		—			(59	)		59		(59	)		(59	)		(59	)		118		(59	)
Total comprehensive (loss) income		(128	)		(42	)		(74	)		119		(125	)		(150	)		(150	)		278		(147	)
Less: income attributable to noncontrolling interest		—			(1	)		(2	)		—		(3	)		—			—			—		(3	)
Comprehensive (loss) income attributable to Warner Music Group Corp.	$	(128	)	$	(43	)	$	(76	)	$	119	$	(128	)	$	(150	)	$	(150	)	$	278	$	(150	)

Consolidating Statement of Comprehensive Income

For The Fiscal Year Ended September 30, 2014

	WMG												WMG			WMG			Warner					Warner
	Acquisition						Non-						Acquisition			Holdings			Music					Music
	Corp.			Guarantor			Guarantor						Corp.			Corp.			Group					Group Corp.
	(issuer)			Subsidiaries			Subsidiaries			Eliminations			Consolidated			(issuer)			Corp.			Eliminations		Consolidated
	(in millions)
Net (loss) income	$	(286	)	$	201		$	(146	)	$	(50	)	$	(281	)	$	(308	)	$	(308	)	$	594	$	(303	)
Other comprehensive income (loss), net of tax:
Foreign currency adjustment		(41	)		—			(41	)		41			(41	)		(41	)		(41	)		82		(41	)
Minimum Pension Liability		(6	)		—			(6	)		6			(6	)		(6	)		(6	)		12		(6	)
Other comprehensive income (loss), net of tax:		(47	)		—			(47	)		47			(47	)		(47	)		(47	)		94		(47	)
Total comprehensive (loss) income		(333	)		201			(193	)		(3	)		(328	)		(355	)		(355	)		688		(350	)
Less: income attributable to noncontrolling interest		—			(1	)		(4	)		—			(5	)		—			—			—		(5	)
Comprehensive (loss) income attributable to Warner Music Group Corp.	$	(333	)	$	200		$	(197	)	$	(3	)	$	(333	)	$	(355	)	$	(355	)	$	688	$	(355	)

Consolidating Statement of Cash Flows

For The Fiscal Year Ended September 30, 2016

	WMG												WMG			WMG			Warner						Warner
	Acquisition						Non-						Acquisition			Holdings			Music						Music
	Corp.			Guarantor			Guarantor						Corp.			Corp.			Group						Group Corp.
	(issuer)			Subsidiaries			Subsidiaries			Eliminations			Consolidated			(issuer)			Corp.			Eliminations			Consolidated
	(in millions)
Cash flows from operating activities
Net income (loss)	$	53		$	167		$	54		$	(216	)	$	58		$	25		$	25		$	(78	)	$	30
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization		—			156			137			—			293			—			—			—			293
Unrealized gains/losses and remeasurement of foreign denominated loans		—			—			—			—			—			—			—			—			—
Deferred income taxes		—			—			(26	)		—			(26	)		—			—			—			(26	)
Loss on extinguishment of debt		4			—			—			—			4			14			—			—			18
Net gain on divestitures		—			(3	)		(6	)		—			(9	)		—			—			—			(9	)
Gain on sale of real estate		—			—			(24	)		—			(24	)		—			—			—			(24	)
Non-cash interest expense		10			—			—			—			10			1			—			—			11
Non-cash share-based compensation expense		—			23			—			—			23			—			—			—			23
Equity losses (gains), including distributions		(162	)		(74	)		—			236			—			(53	)		(25	)		78			—
Changes in operating assets and liabilities:
Accounts receivable		—			(7	)		24			—			17			—			—			—			17
Inventories		—			—			—			—			—			—			—			—			—
Royalty advances		—			1			(14	)		—			(13	)		—			—			—			(13	)
Accounts payable and accrued liabilities		—			142			(99	)		(20	)		23			—			—			—			23
Royalty payables		—			93			(44	)		—			49			—			—			—			49
Accrued interest		(10	)		—			—			—			(10	)		(10	)		—			—			(20	)
Deferred revenue		—			(4	)		(31	)		—			(35	)		—			—			—			(35	)
Other balance sheet changes		(4	)		(10	)		19			—			5			—			—			—			5
Net cash (used in) provided by operating activities		(109	)		484			(10	)		—			365			(23	)		—			—			342
Cash flows from investing activities
Acquisition of music publishing rights, net		—			(16	)		(9	)		—			(25	)		—			—			—			(25	)
Capital expenditures		—			(30	)		(12	)		—			(42	)		—			—			—			(42	)
Investments and acquisitions of businesses, net		—			(10	)		(18	)		—			(28	)		—			—			—			(28	)
Divestitures, net of cash on hand		—			8			37			—			45			—			—			—			45
Proceeds from the sale of real estate		—			—			42			—			42			—			—			—			42
Advance to Issuer		329			—			—			(329	)		—			—			—			—			—
Net cash (used in) provided by investing activities		329			(48	)		40			(329	)		(8	)		—			—			—			(8	)
Cash flows from financing activities
Dividend by Acquisition Corp. to Holdings Corp.		(183	)		—			—			—			(183	)		183			—			—			—
Repayment of Acquisition Corp. Senior Term Loan Facility		(309	)		—			—			—			(309	)		—			—			—			(309	)
Proceeds from issuance of Acquisition Corp. 5.00% Senior Secured Notes		300			—			—			—			300			—			—			—			300
Repayment of Holdings 13.75% Senior Notes		—			—			—			—			—			(150	)		—			—			(150	)
Repayment of Acquisition Corp. 6.75% Senior Notes		(24	)		—			—			—			(24	)		—			—			—			(24	)
Financing costs paid		—			—			—			—			—			(10	)		—			—			(10	)
Deferred financing costs paid		(4	)		—			—			—			(4	)		—			—			—			(4	)
Distribution to noncontrolling interest holder		—			—			(5	)		—			(5	)		—			—			—			(5	)
Repayment of capital lease obligations		—			—			(14	)		—			(14	)		—			—			—			(14	)
Change in due to (from) issuer		—			(329	)		—			329			—			—			—			—			—
Net cash (used in) provided by financing activities		(220	)		(329	)		(19	)		329			(239	)		23			—			—			(216	)
Effect of exchange rate changes on cash and equivalents		—			—			(5	)		—			(5	)		—			—			—			(5	)
Net increase in cash and equivalents		—			107			6			—			113			—			—			—			113
Cash and equivalents at beginning of period		—			73			173			—			246			—			—			—			246
Cash and equivalents at end of period	$	—		$	180		$	179		$	—		$	359		$	—		$	—		$	—		$	359

Consolidating Statement of Cash Flows

For The Fiscal Year Ended September 30, 2015

	WMG												WMG			WMG			Warner						Warner
	Acquisition						Non-						Acquisition			Holdings			Music						Music
	Corp.			Guarantor			Guarantor						Corp.			Corp.			Group						Group Corp.
	(issuer)			Subsidiaries			Subsidiaries			Eliminations			Consolidated			(issuer)			Corp.			Eliminations			Consolidated
	(in millions)
Cash flows from operating activities
Net (loss) income	$	(69	)	$	(42	)	$	(15	)	$	60		$	(66	)	$	(91	)	$	(91	)	$	160		$	(88	)
Adjustments to reconcile net (loss) income to net cash provided by operating activities:
Loss on extinguishment of debt		—			—			—			—			—			—			—			—			—
Depreciation and amortization		(1	)		162			148			—			309			—			—			—			309
Unrealized gains/losses and remeasurement of foreign denominated loans		21			55			(48	)		—			28			—			—			—			28
Deferred income taxes		—			—			(11	)		—			(11	)		—			—			—			(11	)
Gain on sale of assets		—			—			—			—			—			—			—			—			—
Non-cash interest expense		10			—			—			—			10			1			—			—			11
Non-cash share-based compensation expense		—			3			—			—			3			—			—			—			3
Equity losses (gains), including distributions		(35	)		67			—			(32	)		—			69			91			(160	)		—
Changes in operating assets and liabilities:
Accounts receivable		—			4			2			—			6			—			—			—			6
Inventories		—			(1	)		(5	)		—			(6	)		—			—			—			(6	)
Royalty advances		—			(23	)		(23	)		—			(46	)		—			—			—			(46	)
Accounts payable and accrued liabilities		—			26			(15	)		(28	)		(17	)		—			—			—			(17	)
Royalty payables		—			(19	)		46			—			27			—			—			—			27
Accrued interest		(2	)		—			—			—			(2	)		—			—			—			(2	)
Deferred revenue		—			(9	)		21			—			12			—			—			—			12
Other balance sheet changes		—			3			(7	)		—			(4	)		—			—			—			(4	)
Net cash provided by (used in) operating activities		(76	)		226			93			—			243			(21	)		—			—			222
Cash flows from investing activities
Acquisition of music publishing rights, net		—			(9	)		(7	)		—			(16	)		—			—			—			(16	)
Capital expenditures		—			(48	)		(15	)		—			(63	)		—			—			—			(63	)
Investments and acquisitions of businesses, net		—			(11	)		(5	)		—			(16	)		—			—			—			(16	)
Advances to issuer		110			—			—			(110	)		—			—			—			—			—
Net cash provided by (used in) investing activities		110			(68	)		(27	)		(110	)		(95	)		—			—			—			(95	)
Cash flows from financing activities
Dividend by Acquisition Corp. to Holdings Corp.		(21	)		—			—			—			(21	)		21			—			—			—
Proceeds from the Revolving Credit Facility		258			—			—			—			258			—			—			—			258
Repayment of the Revolving Credit Facility		(258	)		—			—			—			(258	)		—			—			—			(258	)
Repayment of Acquisition Corp. Senior Term Loan Facility		(13	)		—			—			—			(13	)		—			—			—			(13	)
Proceeds from issuance of Acquisition Corp. 5.625% Senior Secured Notes		—			—			—			—			—			—			—			—			—
Proceeds from issuance of Acquisition Corp. 6.750% Senior Notes		—			—			—			—			—			—			—			—			—
Repayment of Acquisition Corp. 11.5% Senior Notes		—			—			—			—			—			—			—			—			—
Financing costs paid		—			—			—			—			—			—			—			—			—
Deferred financing costs paid		—			—			—			—			—			—			—			—			—
Distribution to noncontrolling interest holder		—			(1	)		(2	)		—			(3	)		—			—			—			(3	)
Repayment of capital lease obligations		—			—			(3	)		—			(3	)		—			—			—			(3	)
Change in due to (from) issuer		—			(110	)		—			110			—			—			—			—			—
Net cash provided by (used in) financing activities		(34	)		(111	)		(5	)		110			(40	)		21			—			—			(19	)
Effect of exchange rate changes on cash and equivalents		—			—			(19	)		—			(19	)		—			—			—			(19	)
Net increase (decrease) in cash and equivalents		—			47			42			—			89			—			—			—			89
Cash and equivalents at beginning of period		—			26			131			—			157			—			—			—			157
Cash and equivalents at end of period	$	—		$	73		$	173		$	—		$	246		$	—		$	—		$	—		$	246

Consolidating Statement of Cash Flows

For The Fiscal Year Ended September 30, 2014

	WMG												WMG			WMG			Warner						Warner
	Acquisition						Non-						Acquisition			Holdings			Music						Music
	Corp.			Guarantor			Guarantor						Corp.			Corp.			Group						Group Corp.
	(issuer)			Subsidiaries			Subsidiaries			Eliminations			Consolidated			(issuer)			Corp.			Eliminations			Consolidated
	(in millions)
Cash flows from operating activities
Net (loss) income	$	(286	)	$	201		$	(146	)	$	(50	)	$	(281	)	$	(308	)	$	(308	)	$	594		$	(303	)
Adjustments to reconcile net (loss) income to net cash provided by operating activities:
Loss on extinguishment of debt		141			—			—			—			141			—			—			—			141
Depreciation and amortization		—			160			161			—			321			—			—			—			321
Unrealized gains/losses and remeasurement of foreign denominated loans		(12	)		(23	)		(4	)		—			(39	)											(39	)
Deferred income taxes		—			—			(55	)		—			(55	)		—			—			—			(55	)
Gain on sale of assets		—			(2	)		—			—			(2	)		—			—			—			(2	)
Non-cash interest expense		12			—			—			—			12			1			—			—			13
Non-cash share-based compensation expense		—			8			—			—			8			—			—			—			8
Equity losses (gains), including distributions		80			(113	)		—			33			—			286			308			(594	)		—
Changes in operating assets and liabilities:
Accounts receivable		—			10			62			—			72			—			—			—			72
Inventories		—			(3	)		(4	)		—			(7	)		—			—			—			(7	)
Royalty advances		—			(9	)		(23	)		—			(32	)		—			—			—			(32	)
Accounts payable and accrued liabilities		—			(162	)		75			—			(87	)		—			—			—			(87	)
Royalty payables		—			(38	)		63			—			25			—			—			—			25
Accrued interest		(15	)		—			—			—			(15	)		—			—			—			(15	)
Deferred revenue		—			107			(12	)		—			95			—			—			—			95
Other balance sheet changes		—			2			(22	)		15			(5	)		—			—			—			(5	)
Net cash provided by (used in) operating activities		(80	)		138			95			(2	)		151			(21	)		—			—			130
Cash flows from investing activities
Acquisition of music publishing rights, net		—			(16	)		(10	)		—			(26	)		—			—			—			(26	)
Capital expenditures		—			(53	)		(23	)		—			(76	)		—			—			—			(76	)
Investments and acquisitions of businesses, net		—			2			(55	)		—			(53	)		—			—			—			(53	)
Advances to issuer		58			—			—			(58	)		—			—			—			—			—
Net cash provided by (used in) investing activities		58			(67	)		(88	)		(58	)		(155	)		—			—			—			(155	)
Cash flows from financing activities
Dividend by Acquisition Corp. to Holdings Corp.		(21	)		—			—			—			(21	)		21			—			—			—
Proceeds from the Revolving Credit Facility		600			—			—			—			600			—			—			—			600
Repayment of the Revolving Credit Facility		(600	)		—			—			—			(600	)		—			—			—			(600	)
Repayment of Acquisition Corp. Senior Term Loan Facility		(10	)		—			—			—			(10	)		—			—			—			(10	)
Proceeds from issuance of Acquisition Corp. 5.625% Senior Secured Notes		275			—			—			—			275			—			—			—			275
Proceeds from issuance of Acquisition Corp. 6.750% Senior Notes		660			—			—			—			660			—			—			—			660
Repayment of Acquisition Corp. 11.5% Senior Notes		(765	)		—			—			—			(765	)		—			—			—			(765	)
Financing costs paid		(104	)		—			—			—			(104	)		—			—			—			(104	)
Deferred financing costs paid		(13	)		—			—			—			(13	)		—			—			—			(13	)
Distribution to noncontrolling interest holder		—			(1	)		(2	)		—			(3	)		—			—			—			(3	)
Repayment of capital lease obligations		—			—			(3	)		—			(3	)		—			—			—			(3	)
Change in due to (from) issuer		—			(60	)		—			60			—			—			—			—			—
Net cash provided by (used in) financing activities		22			(61	)		(5	)		60			16			21			—			—			37
Effect of exchange rate changes on cash and equivalents		—			—			(10	)		—			(10	)		—			—			—			(10	)
Net increase (decrease) in cash and equivalents		—			10			(8	)		—			2			—			—			—			2
Cash and equivalents at beginning of period		—			16			139			—			155			—			—			—			155
Cash and equivalents at end of period	$	—		$	26		$	131		$	—		$	157		$	—		$	—		$	—		$	157