Guarantor and Non-Guarantor Subsidiaries Financial Information

6 Months Ended

Mar. 31, 2019

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. As of March 31, 2019, Acquisition Corp. had 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, the 3.625% Senior Secured Notes due 2026 and the 5.50% Senior Notes due 2026 (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 is 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)

March 31, 2019

	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	$	8		$	252		$	210		$	—		$	470		$	—	$	—	$	—		$	470
Accounts receivable, net		—			358			423			—			781			—		—		—			781
Inventories		—			13			52			—			65			—		—		—			65
Royalty advances expected to be recouped within one year		—			95			56			—			151			—		—		—			151
Prepaid and other current assets		—			14			43			—			57			—		—		—			57
Total current assets		8			732			784			—			1,524			—		—		—			1,524
Due from (to) parent companies		480			(385	)		(95	)		—			—			—		—		—			—
Investments in and advances to consolidated subsidiaries		2,401			2,283			—			(4,684	)		—			790		790		(1,580	)		—
Royalty advances expected to be recouped after one year		—			115			69			—			184			—		—		—			184
Property, plant and equipment, net		—			197			98			—			295			—		—		—			295
Goodwill		—			1,370			417			—			1,787			—		—		—			1,787
Intangible assets subject to amortization, net		—			918			884			—			1,802			—		—		—			1,802
Intangible assets not subject to amortization		—			71			82			—			153			—		—		—			153
Deferred tax assets, net		—			—			7			—			7			—		—		—			7
Other assets		6			115			29			—			150			—		—		—			150
Total assets	$	2,895		$	5,416		$	2,275		$	(4,684	)	$	5,902		$	790	$	790	$	(1,580	)	$	5,902
Liabilities and Deficit:
Current liabilities:
Accounts payable	$	—		$	168		$	77		$	—		$	245		$	—	$	—	$	—		$	245
Accrued royalties		6			792			711			—			1,509			—		—		—			1,509
Accrued liabilities		—			218			191			—			409			—		—		—			409
Accrued interest		32			—			—			—			32			—		—		—			32
Deferred revenue		—			54			116			—			170			—		—		—			170
Other current liabilities		—			44			109			—			153			—		—		—			153
Total current liabilities		38			1,276			1,204			—			2,518			—		—		—			2,518
Long-term debt		2,990			—			—			—			2,990			—		—		—			2,990
Deferred tax liabilities, net		—			49			181			—			230			—		—		—			230
Other noncurrent liabilities		7			169			108			—			284			—		—		—			284
Total liabilities		3,035			1,494			1,493			—			6,022			—		—		—			6,022
Total Warner Music Group Corp. (deficit) equity		(140	)		3,918			766			(4,684	)		(140	)		790		790		(1,580	)		(140	)
Noncontrolling interest		—			4			16			—			20			—		—		—			20
Total equity		(140	)		3,922			782			(4,684	)		(120	)		790		790		(1,580	)		(120	)
Total liabilities and equity	$	2,895		$	5,416		$	2,275		$	(4,684	)	$	5,902		$	790	$	790	$	(1,580	)	$	5,902

Consolidating Balance Sheet

September 30, 2018

	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	$	—		$	169		$	345		$	—		$	514		$	—	$	—	$	—		$	514
Accounts receivable, net		—			262			185			—			447			—		—		—			447
Inventories		—			18			24			—			42			—		—		—			42
Royalty advances expected to be recouped within one year		—			79			44			—			123			—		—		—			123
Prepaid and other current assets		—			15			35			—			50			—		—		—			50
Total current assets		—			543			633			—			1,176			—		—		—			1,176
Due from (to) parent companies		488			(214	)		(274	)		—			—			—		—		—			—
Investments in and advances to consolidated subsidiaries		2,018			2,192			—			(4,210	)		—			675		675		(1,350	)		—
Royalty advances expected to be recouped after one year		—			93			60			—			153			—		—		—			153
Property, plant and equipment, net		—			155			74			—			229			—		—		—			229
Goodwill		—			1,370			322			—			1,692			—		—		—			1,692
Intangible assets subject to amortization, net		—			956			895			—			1,851			—		—		—			1,851
Intangible assets not subject to amortization		—			71			83			—			154			—		—		—			154
Deferred tax assets, net		—			—			11			—			11			—		—		—			11
Other assets		12			55			11			—			78			—		—		—			78
Total assets	$	2,518		$	5,221		$	1,815		$	(4,210	)	$	5,344		$	675	$	675	$	(1,350	)	$	5,344
Liabilities and Deficit:
Current liabilities:
Accounts payable	$	—		$	200		$	81		$	—		$	281		$	—	$	—	$	—		$	281
Accrued royalties		—			869			527			—			1,396			—		—		—			1,396
Accrued liabilities		—			195			228			—			423			—		—		—			423
Accrued interest		31			—			—			—			31			—		—		—			31
Deferred revenue		—			94			114			—			208			—		—		—			208
Other current liabilities		—			2			32			—			34			—		—		—			34
Total current liabilities		31			1,360			982			—			2,373			—		—		—			2,373
Long-term debt		2,819			—			—			—			2,819			—		—		—			2,819
Deferred tax liabilities, net		—			3			162			—			165			—		—		—			165
Other noncurrent liabilities		2			197			108			—			307			—		—		—			307
Total liabilities		2,852			1,560			1,252			—			5,664			—		—		—			5,664
Total Warner Music Group Corp. (deficit) equity		(334	)		3,656			554			(4,210	)		(334	)		675		675		(1,350	)		(334	)
Noncontrolling interest		—			5			9			—			14			—		—		—			14
Total equity		(334	)		3,661			563			(4,210	)		(320	)		675		675		(1,350	)		(320	)
Total liabilities and equity	$	2,518		$	5,221		$	1,815		$	(4,210	)	$	5,344		$	675	$	675	$	(1,350	)	$	5,344

Consolidating Statement of Operations (Unaudited)

For The Three Months Ended March 31, 2019

	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	$	—		$	461		$	672		$	(43	)	$	1,090		$	—	$	—	$	—		$	1,090
Costs and expenses:
Cost of revenue		—			(214	)		(391	)		46			(559	)		—		—		—			(559	)
Selling, general and administrative expenses		—			(186	)		(166	)		(2	)		(354	)		—		—		—			(354	)
Amortization of intangible assets		—			(25	)		(30	)		—			(55	)		—		—		—			(55	)
Total costs and expenses		—			(425	)		(587	)		44			(968	)		—		—		—			(968	)
Operating income		—			36			85			1			122			—		—		—			122
Loss on extinguishment of debt		—			—			—			—			-			—		—		—			—
Interest (expense) income, net		(31	)		1			(6	)		—			(36	)		—		—		—			(36	)
Equity gains from equity method investments		130			34			—			(164	)		—			67		67		(134	)		—
Other income (expense), net		16			51			(38	)		—			29			—		—		—			29
Income before income taxes		115			122			41			(163	)		115			67		67		(134	)		115
Income tax expense		(48	)		(49	)		(26	)		75			(48	)		—		—		—			(48	)
Net income		67			73			15			(88	)		67			67		67		(134	)		67
Less: income attributable to noncontrolling interest		—			—			—			—			—			—		—		—			—
Net income attributable to Warner Music Group Corp.	$	67		$	73		$	15		$	(88	)	$	67		$	67	$	67	$	(134	)	$	67

Consolidating Statement of Operations (Unaudited)

For The Three Months Ended March 31, 2018

	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	$	—		$	535		$	549		$	(121	)	$	963		$	—		$	—		$	—	$	963
Costs and expenses:
Cost of revenue		—			(242	)		(327	)		81			(488	)		—			—			—		(488	)
Selling, general and administrative expenses		—			(244	)		(135	)		42			(337	)		—			—			—		(337	)
Amortization of intangible assets		—			(23	)		(32	)		—			(55	)		—			—			—		(55	)
Total costs and expenses		—			(509	)		(494	)		123			(880	)		—			—			—		(880	)
Operating income		—			26			55			2			83			—			—			—		83
Loss on extinguishment of debt		(23	)		—			—			—			(23	)		—			—			—		(23	)
Interest expense, net		(31	)		—			(5	)		—			(36	)		—			—			—		(36	)
Equity gains (losses) from equity method investments		66			33			—			(99	)		—			(3	)		(3	)		6		—
Other expense, net		4			(1	)		(9	)		—			(6	)		—			—			—		(6	)
Income (loss) before income taxes		16			58			41			(97	)		18			(3	)		(3	)		6		18
Income tax expense		(19	)		(18	)		(18	)		36			(19	)		—			—			—		(19	)
Net (loss) income		(3	)		40			23			(61	)		(1	)		(3	)		(3	)		6		(1	)
Less: income attributable to noncontrolling interest		—			(1	)		(1	)		—			(2	)		—			—			—		(2	)
Net (loss) income attributable to Warner Music Group Corp.	$	(3	)	$	39		$	22		$	(61	)	$	(3	)	$	(3	)	$	(3	)	$	6	$	(3	)

Consolidating Statement of Operations (Unaudited)

For The Six Months Ended March 31, 2019

	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	$	—		$	942		$	1,526		$	(175	)	$	2,293		$	—	$	—	$	—		$	2,293
Costs and expenses:
Cost of revenue		—			(437	)		(896	)		148			(1,185	)		—		—		—			(1,185	)
Selling, general and administrative expenses		—			(375	)		(383	)		28			(730	)		—		—		—			(730	)
Amortization of intangible assets		—			(50	)		(59	)		—			(109	)		—		—		—			(109	)
Total costs and expenses		—			(862	)		(1,338	)		176			(2,024	)		—		—		—			(2,024	)
Operating income		—			80			188			1			269			—		—		—			269
Loss on extinguishment of debt		(3	)		—			—			—			(3	)		—		—		—			(3	)
Interest (expense) income, net		(62	)		2			(12	)		—			(72	)		—		—		—			(72	)
Equity gains from equity method investments		302			143			—			(445	)		—			153		153		(306	)		—
Other income (expense), net		14			70			(27	)		—			57			—		—		—			57
Income before income taxes		251			295			149			(444	)		251			153		153		(306	)		251
Income tax expense		(98	)		(94	)		(50	)		144			(98	)		—		—		—			(98	)
Net income		153			201			99			(300	)		153			153		153		(306	)		153
Less: income attributable to noncontrolling interest		—			—			—			—			—			—		—		—			—
Net income attributable to Warner Music Group Corp.	$	153		$	201		$	99		$	(300	)	$	153		$	153	$	153	$	(306	)	$	153

Consolidating Statement of Operations (Unaudited)

For The Six Months Ended March 31, 2018

	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	$	—		$	1,082		$	1,170		$	(244	)	$	2,008		$	—	$	—	$	—		$	2,008
Costs and expenses:
Cost of revenue		—			(499	)		(720	)		162			(1,057	)		—		—		—			(1,057	)
Selling, general and administrative expenses		—			(479	)		(273	)		82			(670	)		—		—		—			(670	)
Amortization of intangible assets		—			(47	)		(61	)		—			(108	)		—		—		—			(108	)
Total costs and expenses		—			(1,025	)		(1,054	)		244			(1,835	)		—		—		—			(1,835	)
Operating income		—			57			116			—			173			—		—		—			173
Loss on extinguishment of debt		(24	)		—			—			—			(24	)		—		—		—			(24	)
Interest (expense) income, net		(60	)		1			(13	)		—			(72	)		—		—		—			(72	)
Equity gains from equity method investments		156			76			—			(232	)		—			1		1		(2	)		—
Other income (expense), net		—			9			(11	)		—			(2	)		—		—		—			(2	)
Income before income taxes		72			143			92			(232	)		75			1		1		(2	)		75
Income tax expense		(71	)		(69	)		(28	)		97			(71	)		—		—		—			(71	)
Net income		1			74			64			(135	)		4			1		1		(2	)		4
Less: income attributable to noncontrolling interest		—			(1	)		(2	)		—			(3	)		—		—		—			(3	)
Net income attributable to Warner Music Group Corp.	$	1		$	73		$	62		$	(135	)	$	1		$	1	$	1	$	(2	)	$	1

Consolidating Statement of Comprehensive Income (Unaudited)

For The Three Months Ended March 31, 2019

	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	$	67		$	73	$	15	$	(88	)	$	67		$	67		$	67		$	(134	)	$	67
Other comprehensive (loss) income, net of tax:
Foreign currency adjustment		(10	)		—		10		(10	)		(10	)		(13	)		(13	)		26			(10	)
Deferred loss on derivatives		(3	)		—		—		—			(3	)		(3	)		(3	)		6			(3	)
Other comprehensive (loss) income, net of tax:		(13	)		—		10		(10	)		(13	)		(16	)		(16	)		32			(13	)
Total comprehensive income		54			73		25		(98	)		54			51			51			(102	)		54
Less: income attributable to noncontrolling interest		—			—		—		—			—			—			—			—			—
Comprehensive income attributable to Warner Music Group Corp.	$	54		$	73	$	25	$	(98	)	$	54		$	51		$	51		$	(102	)	$	54

Consolidating Statement of Comprehensive Income (Unaudited)

For The Three Months Ended March 31, 2018

	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 (loss) income	$	(3	)	$	40		$	23		$	(61	)	$	(1	)	$	(3	)	$	(3	)	$	6		$	(1	)
Other comprehensive income (loss), net of tax:
Foreign currency adjustment		9			—			(9	)		9			9			9			9			(18	)		9
Deferred gains on derivative financial instruments		1			—			1			(1	)		1			1			1			(2	)		1
Other comprehensive income (loss), net of tax:		10			—			(8	)		8			10			10			10			(20	)		10
Total comprehensive income		7			40			15			(53	)		9			7			7			(14	)		9
Less: income attributable to noncontrolling interest		—			(1	)		(1	)		—			(2	)		—			—			—			(2	)
Comprehensive income attributable to Warner Music Group Corp.	$	7		$	39		$	14		$	(53	)	$	7		$	7		$	7		$	(14	)	$	7

Consolidating Statement of Comprehensive Income (Unaudited)

For The Six Months Ended March 31, 2019

	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	$	153		$	201	$	99		$	(300	)	$	153		$	153		$	153		$	(306	)	$	153
Other comprehensive (loss) income, net of tax:
Foreign currency adjustment		(26	)		—		26			(26	)		(26	)		(29	)		(29	)		58			(26	)
Deferred losses on derivative financial instruments		(9	)		—		(2	)		2			(9	)		(9	)		(9	)		18			(9	)
Other comprehensive (loss) income, net of tax:		(35	)		—		24			(24	)		(35	)		(38	)		(38	)		76			(35	)
Total comprehensive income		118			201		123			(324	)		118			115			115			(230	)		118
Less: income attributable to noncontrolling interest		—			—		—			—			—			—			—			—			—
Comprehensive income attributable to Warner Music Group Corp.	$	118		$	201	$	123		$	(324	)	$	118		$	115		$	115		$	(230	)	$	118

Consolidating Statement of Comprehensive Income (Unaudited)

For The Six Months Ended March 31, 2018

	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	$	1	$	74		$	64		$	(135	)	$	4		$	1	$	1	$	(2	)	$	4
Other comprehensive income (loss), net of tax:
Foreign currency adjustment		18		—			(18	)		18			18			18		18		(36	)		18
Deferred gain on derivative financial instruments		2		—			—			—			2			2		2		(4	)		2
Other comprehensive income (loss), net of tax:		20		—			(18	)		18			20			20		20		(40	)		20
Total comprehensive income		21		74			46			(117	)		24			21		21		(42	)		24
Less: income attributable to noncontrolling interest		—		(1	)		(2	)		—			(3	)		—		—		—			(3	)
Comprehensive income attributable to Warner Music Group Corp.	$	21	$	73		$	44		$	(117	)	$	21		$	21	$	21	$	(42	)	$	21

Consolidating Statement of Cash Flows (Unaudited)

For The Six Months Ended March 31, 2019

	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	$	153		$	201		$	99		$	(300	)	$	153		$	153		$	153		$	(306	)	$	153
Adjustments to reconcile net income to net cash    provided by operating activities:
Depreciation and amortization		—			68			69			—			137			—			—			—			137
Unrealized gains and remeasurement of    foreign denominated loans		(20	)		(5	)		—			1			(24	)		—			—			—			(24	)
Deferred income taxes		—			—			27			—			27			—			—			—			27
Loss on extinguishment of debt		3			—			—			—			3			—			—			—			3
Net gain on investments		—			(30	)		(2	)		—			(32	)		—			—			—			(32	)
Non-cash interest expense		3			—			—			—			3			—			—			—			3
Equity-based compensation expense		—			14			—			—			14			—			—			—			14
Equity gains, including distributions		(302	)		(143	)		—			445			—			(153	)		(153	)		306			—
Changes in operating assets and liabilities:
Accounts receivable		—			(16	)		(74	)		—			(90	)		—			—			—			(90	)
Inventories		—			4			9			—			13			—			—			—			13
Royalty advances		—			(37	)		(24	)		—			(61	)		—			—			—			(61	)
Accounts payable and accrued liabilities		—			218			(172	)		(146	)		(100	)		—			—			—			(100	)
Royalty payables		6			(93	)		133			—			46			—			—			—			46
Accrued interest		1			-			—			—			1			—			—			—			1
Deferred revenue		—			(44	)		25			—			(19	)		—			—			—			(19	)
Other balance sheet changes		4			41			(17	)		—			28			—			—			—			28
Net cash (used in) provided by operating activities		(152	)		178			73			—			99			—			—			—			99
Cash flows from investing activities
Acquisition of music publishing rights, net		—			(11	)		(5	)		—			(16	)		—			—			—			(16	)
Capital expenditures		—			(50	)		(9	)		—			(59	)		—			—			—			(59	)
Investments and acquisitions of businesses, net		—			(26	)		(192	)		—			(218	)		—			—			—			(218	)
Proceeds from the sale of investments		—			—			—			—			—			—			—			—			—
Advances from issuer		(24	)		—			—			24			—			—			—			—			—
Net cash used in investing activities		(24	)		(87	)		(206	)		24			(293	)		—			—			—			(293	)
Cash flows from financing activities
Proceeds from issuance of Acquisition Corp. 3.625% Senior Notes due 2026		287			—			—			—			287			—			—			—			287
Repayment of Acquisition Corp. 4.125% Senior Secured Notes		(40	)		—			—			—			(40	)		—			—			—			(40	)
Repayment of Acquisition Corp. 4.875% Senior Secured Notes		(30	)		—			—			—			(30	)		—			—			—			(30	)
Repayment of Acquisition Corp. 5.625% Senior Secured Notes		(27	)		—			—			—			(27	)		—			—			—			(27	)
Call premiums paid on and redemption deposit for early redemption of debt		(2	)		—			—			—			(2	)		—			—			—			(2	)
Deferred financing costs paid		(4	)		—			—			—			(4	)		—			—			—			(4	)
Distribution to noncontrolling interest holder		—			(1	)		(1	)		—			(2	)		—			—			—			(2	)
Dividends paid		—			(31	)		—			—			(31	)		—			—			—			(31	)
Change in due to (from) issuer		—			24			—			(24	)		—			—			—			—			—
Net cash provided by (used in) financing activities		184			(8	)		(1	)		(24	)		151			—			—			—			151
Effect of exchange rate changes on cash and equivalents		—			—			(1	)		—			(1	)		—			—			—			(1	)
Net increase (decrease) in cash and equivalents		8			83			(135	)		—			(44	)		—			—			—			(44	)
Cash and equivalents at beginning of period		—			169			345			—			514			—			—			—			514
Cash and equivalents at end of period	$	8		$	252		$	210		$	—		$	470		$	—		$	—		$	—		$	470

Consolidating Statement of Cash Flows (Unaudited)

For The Six Months Ended March 31, 2018

	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	$	1		$	74		$	64		$	(135	)	$	4		$	1		$	1		$	(2	)	$	4
Adjustments to reconcile net income to net cash    provided by operating activities:
Depreciation and amortization		—			67			67			—			134			—			—			—			134
Unrealized losses (gains) and remeasurement of    foreign denominated loans		17			3			(9	)		—			11			—			—			—			11
Deferred income taxes		—			—			38			—			38			—			—			—			38
Loss on extinguishment of debt		24			—			—			—			24			—			—			—			24
Net gain on divestitures and investments		—			(7	)		—			—			(7	)		—			—			—			(7	)
Non-cash interest expense		3			—			—			—			3			—			—			—			3
Equity-based compensation expense		—			27			—			—			27			—			—			—			27
Equity gains, including distributions		(156	)		(76	)		—			232			—			(1	)		(1	)		2			—
Changes in operating assets and liabilities:
Accounts receivable		—			(16	)		1			—			(15	)		—			—			—			(15	)
Inventories		—			(1	)		2			—			1			—			—			—			1
Royalty advances		—			(20	)		8			—			(12	)		—			—			—			(12	)
Accounts payable and accrued liabilities		—			101			(104	)		(97	)		(100	)		—			—			—			(100	)
Royalty payables		—			48			20			—			68			—			—			—			68
Accrued interest		(14	)		—			—			—			(14	)		—			—			—			(14	)
Deferred revenue		—			9			(25	)		—			(16	)		—			—			—			(16	)
Other balance sheet changes		(4	)		43			(49	)		—			(10	)		—			—			—			(10	)
Net cash (used in) provided by operating activities		(129	)		252			13			—			136			—			—			—			136
Cash flows from investing activities
Acquisition of music publishing rights, net		—			(4	)		(1	)		—			(5	)		—			—			—			(5	)
Capital expenditures		—			(23	)		(6	)		—			(29	)		—			—			—			(29	)
Investments and acquisitions of businesses, net		—			(6	)		—			—			(6	)		—			—			—			(6	)
Proceeds from the sale of investments		—			12			—			—			12			—			—			—			12
Advances from issuer		151			—			—			(151	)		—			—			—			—			—
Net cash provided by (used in) investing activities		151			(21	)		(7	)		(151	)		(28	)		—			—			—			(28	)
Cash flows from financing activities
Proceeds from issuance of Acquisition Corp. 5.50% Senior Notes		325			—			—			—			325			—			—			—			325
Proceeds from supplement of Acquisition Corp. Senior Term Loan Facility		320			—			—			—			320			—			—			—			320
Repayment of redemption deposit for Acquisition Corp. 6.75% Senior    Notes		(635	)		—			—			—			(635	)		—			—			—			(635	)
Call premiums paid on and redemption deposit for early redemption of debt		(23	)		—			—			—			(23	)		—			—			—			(23	)
Deferred financing costs paid		(9	)		—			—			—			(9	)		—			—			—			(9	)
Distribution to noncontrolling interest holder		—			—			(2	)		—			(2	)		—			—			—			(2	)
Dividends paid		—			(98	)		(27	)		—			(125	)		—			—			—			(125	)
Change in due to (from) issuer		—			(151	)		—			151			—			—			—			—			—
Net cash (used in) provided by financing activities		(22	)		(249	)		(29	)		151			(149	)		—			—			—			(149	)
Effect of exchange rate changes on cash and equivalents		—			—			6			—			6			—			—			—			6
Net decrease in cash and equivalents		—			(18	)		(17	)		—			(35	)		—			—			—			(35	)
Cash and equivalents at beginning of period		—			347			300			—			647			—			—			—			647
Cash and equivalents at end of period	$	—		$	329		$	283		$	—		$	612		$	—		$	—		$	—		$	612