WARNER MUSIC PROFIT FALLS Ed Christman – Billboard Warner Music Group on Thursday (Nov. 29) revealed a fall in quarterly profits. The company posted $5 million in net income, or 3 cents per diluted share, on revenues of $869 million in its fiscal fourth quarter ended Sept. 30. That figure is down 62% from the $12 million in net income, or 8 cents per diluted share, the company posted in the fiscal fourth quarter last year.
While profits slipped, WMG increased net revenues in a declining music industry market 1.8% to $869 million from $854 posted in the prior period. On constant currency basis, the company said revenue declined 2%. “As expected, this has been a challenging quarter, reflecting the difficulties in any industry transformation of this scale," WMG chairman and CEO Edgar Bronfman Jr. said in a statement.
For the full fiscal year, the Warner Music Group 's net income totaled $21 million, or 14% per diluted share, on revenues of $3.39 billion. But both totals are down from the prior year, when the company posted $60 million in net income, or 40 cents per diluted share, on revenues of $3.52 billion.
During the year, the company recorded a $64 million benefit from a favorable settlement with Bertelsmann AG regarding Napster. But that was offset by $63 million in restructuring charges recorded during the year. Michael Fleisher, Warner Music Group's executive VP and CFO, said that the company's realignment announced in May were completed on schedule, but the charges came in under the previously announced budget range of $65 million-$80 million. "Even as we redefine our role in the overall music industry, we maintain our focus on financial discipline," Fleisher said in a statement.
During the year, the company generated $461 million in earnings before interest, taxes, depreciation and amortization, as compared with $516 million last year. Revenue was split between 49% in the U.S. ($1.67 billion) and 51% internationally ($1.73 billion).
Within total revenue, the recorded music side of the operation accounted for $2.84 billion, down 5.3% from almost $3 billion last year, while the music publishing operation generated $570 million, outperforming last year's total of $538 million by a 6%.
Recorded music sales were challenged by fewer high-volume sellers and a weaker physical sales backdrop, with digital gains failing to compensate for physical declines as the recorded music industry continues to be in transition, the company said.
As a reflection of its long-term plans, the company said digital revenue in the fourth quarter totaled $130 million. For the year the digital distribution channel generated $460 million, or 13.6% of total revenue, and within the domestic operation accounted for 68% of revenue, while the international operation generated 32%.
In looking at the company's balance sheet, long-term debt totals $2.3 billion and the company's equity as a negative net worth of $36 million. The latter number is compared to the end of last year, when the balance sheet carried $58 million in shareholders equity.
Earnings were announced Thursday morning before the start of trading. At mid-day, WMG shares were up 36 cents to $7.51. |