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Warner Bros. Down $18M for the Quarter, Revenues Down 9% for the Year…

Digital Music News:
Warner Music Group posted substantial quarterly and fiscal year losses Tuesday morning, thanks largely to recorded sales declines and restructuring costs. According to details shared ahead of the opening bell on Wall Street, losses at Warner Music (WMG) reached $18 million (12-cents per share) for the period ending September 30th, a reversal from a year-ago quarterly gain of $6 million (4-cents per share).

Analysts, as polled by FactSet, had expected a quarterly gain of 4-cents per share. Separately, a group of analysts polled by Thomson Reuters called for profits of 5-cents per share. The difference between analyst expectations and actual returns will probably drive share-price declines during Tuesday trading.

A substantial portion of the losses were attributable to severance costs, a downsize that will ultimately minimize losses and overhead. That is inline with efforts at other major labels.

Other indicators were mildly positive. Quarterly revenues edged upward one-percent to $861 million, and 5 percent on a constant-currency basis. That actually beat analyst expectations, which hovered around $820 million. Digital revenue topped $184 million, up 10 percent over the previous-year period, and 12 percent on a constant-currency basis. Digital assets accounted for 21 percent of overall quarterly revenues.

Warner Music Group’s quarterly report
Loss from continuing operations was $18 million, or ($0.12) per diluted share, for the quarter, compared with income from continuing operations of $6 million, or $0.04 per diluted share, in the prior-year quarter. The current-year’s quarter included the Severance Charges, which amounted to $0.09 per diluted share.

The company reported a cash balance of $384 million as of September 30, 2009. As of September 30, 2009, the company reported total long-term debt of $1.94 billion and net debt (total long-term debt minus cash) of $1.56 billion. Net debt at September 30, 2008 was $1.85 billion.

For the quarter, net cash provided by operating activities was $36 million compared to $119 million in the prior-year quarter. The decline in operating cash flow was largely related to our anticipated back-end weighted release schedule, which resulted in negative working capital due to an increase in accounts receivable. Free Cash Flow (defined as cash flow from operations less capital expenditures and cash paid or received for investments) was $20 million, compared to $100 million in the comparable fiscal 2008 quarter. Unlevered After-Tax Cash Flow (defined as Free Cash Flow excluding cash interest paid) was $20 million, compared to $122 million in the comparable fiscal 2008 quarter (see below for calculations and reconciliations of Free Cash Flow and Unlevered After-Tax Cash Flow).