(CelebrityAccess MediaWire) — Based on strong operating results, significant excess liquidity, and the successful implementation of its restructuring program, Warner Music Group plans to provide for a return of capital of up to $350 million from the company to its shareholders. The return of capital will be funded out of the WMG's excess cash balance and not from the incurrence of additional debt.
Warner Music Group reported $421 million in cash as of May 31, 2004. This cash balance has grown to $519 million as of August 31, 2004. Before giving effect to the distribution, WMG is currently projecting to have approximately $300 million in cash on hand by November 30, 2004. WMG also reaffirms its previously issued guidance on revenues and adjusted pro forma EBITDA for the year ended November 30, 2004 and on the expected restructuring savings and costs as outlined in the Warner Music Group bondholder call of August 19, 2004.
"As we reported at the end of the second quarter, our profitability and cost saving initiatives are running ahead of plan and in line with previous guidance, restructuring costs are lower than we budgeted, and working capital needs are lower than forecasted," said Edgar Bronfman, Jr., chairman and CEO of Warner Music Group. "At the time of the acquisition, the company was capitalized very conservatively given the magnitude of the contemplated restructuring. With the majority of the restructuring completed in April, the company has been operating successfully with its new management team and leaner organizational structure for quite some time. As Warner Music Group's cash balance continued to build and year-end financials came into focus, we recognized that the company would substantially exceed our conservative cash estimates at the time of the acquisition. As a result, the company has significant excess cash on hand."
"Warner Music Group will use its excess cash to return $350 million of capital to the equity investors in the company, pursuant to the terms of the bond indenture. After this distribution, the company will continue to have substantial liquidity and financial flexibility to fuel future growth."
Warner Music Group also plans to change its fiscal year-end to September 30 from November 30. Its next earnings call will address the four months ending September 30, 2004. To provide for the return of capital and the year-end change, the company is currently in the process of seeking an amendment to its credit agreement. The proposed return of capital is permitted by the company's bond indenture. –Jane Cohen and Bob Grossweiner