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