What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2022-08-09 compared with 2022-05-10 · 119 added, 111 removed, 762 unchanged (23% of the section changed)

36 unchanged sentences

Class A common stock, $ 0.001 par value;

1,000,000,000 shares authorized, 137,198,372 and 122,414,827 shares issued and outstanding as of March 31, 2022 and September 30, 2021, respectively

1,000,000,000 shares authorized, 137,198,864 and 122,414,827 shares issued and outstanding as of June 30, 2022 and September 30, 2021, respectively

Class B common stock, $ 0.001 par value;

1,000,000,000 shares authorized, 377,650,449 and 391,970,996 issued and outstanding as of March 31, 2022 and September 30, 2021, respectively

1,000,000,000 shares authorized, 377,650,449 and 391,970,996 issued and outstanding as of June 30, 2022 and September 30, 2021, respectively

Additional paid-in capital 1,975 1,942

10 unchanged sentences

Three Months Ended

March 31, Six Months Ended

June 30, Nine Months Ended

2022 2021 2022 2021

7 unchanged sentences

Operating income 146 162 551 509

Loss on extinguishment of debt — ( 12 ) — ( 12 )

Interest expense, net ( 32 ) ( 30 ) ( 94 ) ( 93 )

Other (expense) income ( 8 ) 49 46 18

Other income (expense) 50 ( 18 ) 96 —

Income before income taxes 164 102 553 404

16 unchanged sentences

Three Months Ended

March 31, Six Months Ended

June 30, Nine Months Ended

2022 2021 2022 2021

12 unchanged sentences

Consolidated Statements of Cash Flows (Unaudited)

Six Months Ended

Nine Months Ended

(in millions)

5 unchanged sentences

Deferred income taxes 37 27

Loss on extinguishment of debt — 12

Net loss (gain) on divestitures and investments 33 ( 26 )

21 unchanged sentences

Proceeds from issuance of 3.000 % Senior Secured Notes due 2031

Proceeds from increase supplement to Senior Term Loan Facility — 325

Repayment of 5.500 % Senior Notes due 2026

Deferred financing costs paid ( 5 ) ( 8 )

Call premiums paid on early redemption of debt — ( 8 )

Distribution to noncontrolling interest holders ( 5 ) ( 6 )

4 unchanged sentences

Effect of exchange rate changes on cash and equivalents ( 7 ) 10

Net (decrease) increase in cash and equivalents ( 114 ) 35

Net decrease in cash and equivalents ( 154 ) ( 111 )

Cash and equivalents at beginning of period 499 553

3 unchanged sentences

Consolidated Statements of Equity (Unaudited)

Six Months Ended March 31, 2022

Nine Months Ended June 30, 2022

Common Stock Class B

18 unchanged sentences

Other — — — — — — — — 4 4

Balance at March 31, 2022 137,198,372 $ — 377,650,449 $ 1 $ 1,971 $ ( 1,587 ) $ ( 231 ) $ 154 $ 19 $ 173

Three Months Ended March 31, 2022

Balance at June 30, 2022 137,198,864 $ — 377,650,449 $ 1 $ 1,975 $ ( 1,542 ) $ ( 278 ) $ 156 $ 16 $ 172

Three Months Ended June 30, 2022

Common Stock Class B

7 unchanged sentences

(in millions, except share and per share data)

Balance at December 31, 2021 127,236,783 $ — 387,300,086 $ 1 $ 1,973 $ ( 1,601 ) $ ( 220 ) $ 153 $ 19 $ 172

Balance at March 31, 2022 137,198,372 $ — 377,650,449 $ 1 $ 1,971 $ ( 1,587 ) $ ( 231 ) $ 154 $ 19 $ 173

Net income — — — — — 124 — 124 1 125

3 unchanged sentences

Stock-based compensation expense — — — — 4 — — 4 — 4

Vesting of restricted stock units, net of shares withheld for employee taxes 276,565 — — — ( 6 ) — — ( 6 ) — ( 6 )

Conversion of Class B Shares to Class A shares 9,649,637 — ( 9,649,637 ) — — — — — — —

Distribution to noncontrolling interest holders — — — — — — — — ( 4 ) ( 4 )

Shares issued under Omnibus Incentive Plan 492 — — — — — — — — —

Balance at March 31, 2022 137,198,372 $ — 377,650,449 $ 1 $ 1,971 $ ( 1,587 ) $ ( 231 ) $ 154 $ 19 $ 173

Six Months Ended March 31, 2021

Balance at June 30, 2022 137,198,864 $ — 377,650,449 $ 1 $ 1,975 $ ( 1,542 ) $ ( 278 ) $ 156 $ 16 $ 172

Nine Months Ended June 30, 2021

Common Stock Class B

18 unchanged sentences

Shares issued under Omnibus Incentive Plan 33,205 — — — — — — — — —

Balance at March 31, 2021 116,921,411 $ — 397,461,268 $ 1 $ 1,924 $ ( 1,659 ) $ ( 209 ) $ 57 $ 16 $ 73

Three Months Ended March 31, 2021

Other — — — — — — — — 1 1

Balance at June 30, 2021 116,921,554 $ — 397,461,268 $ 1 $ 1,934 $ ( 1,660 ) $ ( 194 ) $ 81 $ 14 $ 95

Three Months Ended June 30, 2021

Common Stock Class B

7 unchanged sentences

(in millions, except share and per share data)

Balance at December 31, 2020 111,167,356 $ — 403,184,814 $ 1 $ 1,913 $ ( 1,713 ) $ ( 185 ) $ 16 $ 17 $ 33

Balance at March 31, 2021 116,921,411 $ — 397,461,268 $ 1 $ 1,924 $ ( 1,659 ) $ ( 209 ) $ 57 $ 16 $ 73

Net income — — — — — 61 — 61 — 61

Other comprehensive loss, net of tax — — — — — — ( 24 ) ( 24 ) — ( 24 )

Other comprehensive income, net of tax — — — — — — 15 15 — 15

Dividends ($ 0.12 per share)

2 unchanged sentences

Distribution to noncontrolling interest holders — — — — — — — — ( 3 ) ( 3 )

Exchange of Class B shares for Class A shares 968,920 — ( 968,920 ) — — — — — — —

Conversion of Class B shares 4,754,626 — ( 4,754,626 ) — — — — — — —

Shares issued under Omnibus Incentive Plan 143 — — — — — — — — —

Balance at March 31, 2021 116,921,411 $ — 397,461,268 $ 1 $ 1,924 $ ( 1,659 ) $ ( 209 ) $ 57 $ 16 $ 73

Other — — — — — — — — 1 1

Balance at June 30, 2021 116,921,554 $ — 397,461,268 $ 1 $ 1,934 $ ( 1,660 ) $ ( 194 ) $ 81 $ 14 $ 95

See accompanying notes

12 unchanged sentences

The Company listed these shares on the NASDAQ stock market under the ticker symbol “WMG.” The offering consisted entirely of secondary shares sold by Access Industries, LLC (collectively with its affiliates, “Access”) and certain related selling stockholders.

Access continues to hold all of the Class B common stock of the Company, par value $ 0.001 per share (“Class B Common Stock”), representing approximately 98 % of the total combined voting power of the Company’s outstanding common stock and approximately 73 % of the economic interest as of March 31, 2022.

As a result, the Company is a “controlled company” within the meaning of the corporate governance standards of NASDAQ.

12 unchanged sentences

In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included.

Operating results for the three and six months ended March 31, 2022 are not necessarily indicative of the results that may be expected for the fiscal year ending September 30, 2022.

Operating results for the three and nine months ended June 30, 2022 are not necessarily indicative of the results that may be expected for the fiscal year ending September 30, 2022.

The consolidated balance sheet at September 30, 2021 has been derived from the audited consolidated financial statements at that date but does not include all the information and notes required by U.S.

10 unchanged sentences

The additional week in fiscal year 2022 fell in the fiscal quarter ended December 31, 2021.

Accordingly, the results of operations for the six months ended March 31, 2022 reflect 27 weeks compared to 26 weeks for the six months ended March 31, 2021.

All references to March 31, 2022 and March 31, 2021 relate to the periods ended April 1, 2022 and March 26, 2021, respectively, and both periods include 13 weeks.

For convenience purposes, the Company continues to date its second-quarter financial statements as of March 31.

Accordingly, the results of operations for the nine months ended June 30, 2022 reflect 40 weeks compared to 39 weeks for the nine months ended June 30, 2021.

All references to June 30, 2022 and June 30, 2021 relate to the periods ended July 1, 2022 and June 25, 2021, respectively, and both periods include 13 weeks.

For convenience purposes, the Company continues to date its third-quarter financial statements as of June 30.

The fiscal year ended September 30, 2021 ended on September 24, 2021.

7 unchanged sentences

Since the IPO, a total of 528,057 shares of Class A Common Stock have been issued under the Omnibus Incentive Plan.

During the three and six months ended March 31, 2022, 311,952 and 462,998 shares, respectively, were issued, both of which include common shares issued in connection with the vesting of RSUs in January 2022 as described below.

During the three and six months ended March 31, 2021, 30,509 and 33,062 shares, respectively, were issued.

During the three months ended March 31, 2022, the Company satisfied the vesting of RSUs issued to employees in fiscal 2021 in connection with the IPO by issuing 276,565 shares of Class A Common Stock under the Omnibus Incentive Plan, which is net of shares used to settle employee income tax obligations.

During the six months ended March 31, 2022, an aggregate of 14,320,547 shares of Class B Common Stock were converted to Class A Common Stock.

During the three and nine months ended June 30, 2022, 492 and 463,490 shares, respectively, were issued.

During the three and nine months ended June 30, 2021, 143 and 33,205 shares, respectively, were issued.

During the nine months ended June 30, 2022, the Company satisfied the vesting of RSUs issued to employees in fiscal 2021 in connection with the IPO by issuing 276,565 shares of Class A Common Stock under the Omnibus Incentive Plan, which is net of shares used to settle employee income tax obligations.

During the nine months ended June 30, 2022, an aggregate of 14,320,547 shares of Class B Common Stock were converted to Class A Common Stock.

In connection with the Senior Management Free Cash Flow Plan (the “Plan”), a remaining Plan participant redeemed a portion of vested Class B equity units of the LLC holding company, WMG Management Holdings, LLC (“Management LLC”).

These Class B equity units were redeemed in exchange for a total of 510,165 shares of Class B Common Stock, which shares of Class B Common Stock converted to shares of Class A Common Stock upon the exchange.

Additionally, during the six months ended March 31, 2022, Access converted 13,810,382 shares of Class B Common Stock to the same number of shares of Class A Common Stock, which is reflected as a conversion of Class B Common Stock in the consolidated statements of equity for the six months ended March 31, 2022.

Additionally, during the nine months ended June 30, 2022, Access converted 13,810,382 shares of Class B Common Stock to the same number of shares of Class A Common Stock, which is reflected as a conversion of Class B Common Stock in the consolidated statements of equity for the nine months ended June 30, 2022.

Earnings per Share

2 unchanged sentences

The two-class method is an earnings allocation formula that determines earnings per share for each class of common stock according to dividends declared and participation rights in undistributed earnings.

Undistributed

earnings allocated to participating securities are subtracted from net income in determining net income attributable to common stockholders.

Undistributed earnings allocated to participating securities are subtracted from net income in determining net income attributable to common stockholders.

Stock-Based Compensation

9 unchanged sentences

The awards outstanding under the Plan are equity-classified.

The Company recognized approximately $ 6 million and $ 30 million of non-cash stock-based compensation expense for the three and six months ended March 31, 2022, respectively, of which $ 4 million and $ 26 million was recorded to additional paid-in capital, and a remaining $ 4 million has been classified as a share-based compensation liability as of March 31, 2022.

The Company recognized approximately $ 5 million and $ 35 million of non-cash stock-based compensation expense for the three and nine months ended June 30, 2022, respectively, of which $ 4 million and $ 30 million was recorded to additional paid-in capital, and a remaining $ 5 million has been classified as a share-based compensation liability as of June 30, 2022.

The share-based compensation liability represents executive awards that have not yet been granted under the Omnibus Incentive Plan, where a total value is known and settlement will occur in a variable number of RSUs.

During the three and six months ended March 31, 2022, $ 9 million was reclassified from share-based compensation liability to additional paid-in capital, representing the grant date fair value of RSUs granted which were previously classified as a share-based compensation liability as of September 30, 2021.

The Company recognized approximately $ 15 million and $ 21 million of non-cash stock-based compensation expense for the three and six months ended March 31, 2021, respectively.

During the three and nine months ended June 30, 2022, $ 9 million was reclassified from share-based compensation liability to additional paid-in capital, representing the grant date fair value of RSUs granted which were previously classified as a share-based compensation liability as of September 30, 2021.

The Company recognized approximately $ 12 million and $ 33 million of non-cash stock-based compensation expense for the three and nine months ended June 30, 2021, respectively.

The Company uses the estimated annual effective tax rate method in computing its interim tax provision.

33 unchanged sentences

Under the treasury-stock method, potential common shares are excluded from the computation of EPS in periods in which they have an anti-dilutive effect.

The potentially dilutive common shares did not have a dilutive effect on the Company’s EPS calculation for the three and six months ended March 31, 2022 and 2021, respectively.

The potentially dilutive common shares did not have a dilutive effect on the Company’s EPS calculation for the three and nine months ended June 30, 2022 and 2021, respectively.

The Company allocates dividends declared to Class A Common Stock and Class B Common Stock based on timing and amounts actually declared for each class of stock and the undistributed earnings are allocated to Class A Common Stock and Class B Common Stock pro rata on a basic weighted average shares outstanding basis since the two classes of stock participate equally on a per share basis upon liquidation.

3 unchanged sentences

Refer to Note 2 for a description of current period activity.

The following table sets forth the calculation of basic and diluted net income per common share under the two-class method for the three and six months ended March 31, 2022 and 2021 (in millions, except share and per share data):

Three Months Ended March 31,

The following table sets forth the calculation of basic and diluted net income per common share under the two-class method for the three and nine months ended June 30, 2022 and 2021 (in millions, except share and per share data):

Three Months Ended June 30,

Class A Class B Class A Class B

6 unchanged sentences

Basic and Diluted EPS $ 0.24 $ 0.24 $ 0.12 $ 0.12

Six Months Ended March 31,

Nine Months Ended June 30,

Class A Class B Class A Class B

16 unchanged sentences

Three Months Ended

March 31, Six Months Ended

June 30, Nine Months Ended

2022 2021 2022 2021

80 unchanged sentences

Based on this information, management provides a reserve for estimated credit losses.

Based on management’s analysis of sales returns, refund liabilities of $ 22 million and $ 23 million were established at March 31, 2022 and September 30, 2021, respectively.

Based on management’s analysis of estimated credit losses, reserves of $ 22 million and $ 20 million were established at March 31, 2022 and September 30, 2021, respectively.

Based on management’s analysis of sales returns, refund liabilities of $ 20 million and $ 23 million were established at June 30, 2022 and September 30, 2021, respectively.

Based on management’s analysis of estimated credit losses, reserves of $ 21 million and $ 20 million were established at June 30, 2022 and September 30, 2021, respectively.

Principal versus Agent Revenue Recognition

9 unchanged sentences

Reductions in deferred revenue are a result of the Company’s performance under the contract or usage by the licensee.

Deferred revenue increased by $ 201 million during the six months ended March 31, 2022 related to cash received from customers for fixed fees and minimum guarantees in advance of performance, including amounts recognized in the period.

Revenues of $ 207 million were recognized during the six months ended March 31, 2022 related to the balance of deferred revenue at September 30, 2021.

Deferred revenue increased by $ 271 million during the nine months ended June 30, 2022 related to cash received from customers for fixed fees and minimum guarantees in advance of performance, including amounts recognized in the period.

Revenues of $ 253 million were recognized during the nine months ended June 30, 2022 related to the balance of deferred revenue at September 30, 2021.

There were no other significant changes to deferred revenue during the reporting period.

Performance Obligations

For the six months ended March 31, 2022 and March 31, 2021, the Company recognized revenue of $ 43 million and $ 34 million, respectively, from performance obligations satisfied in previous periods.

For the nine months ended June 30, 2022 and June 30, 2021, the Company recognized revenue of $ 55 million and $ 57 million, respectively, from performance obligations satisfied in previous periods.

Wholly and partially unsatisfied performance obligations represent future revenues not yet recorded under long-term intellectual property licensing contracts containing fixed fees, advances and minimum guarantees.

Revenues expected to be recognized in the future related to performance obligations that are unsatisfied at March 31, 2022 are as follows:

Revenues expected to be recognized in the future related to performance obligations that are unsatisfied at June 30, 2022 are as follows:

Rest of FY22 FY23 FY24 Thereafter Total

7 unchanged sentences

The cash consideration paid at closing of the acquisition was approximately $ 397 million, which reflects the base purchase price of $ 400 million, adjusted for, among other items, preliminary working capital of 300 Entertainment.

The final consideration paid was determined to be $ 394 million after the finalization of purchase price adjustments, including working capital and other items.

The acquisition was accounted for as a business combination in accordance with ASC 805, Business Combinations , using the acquisition method of accounting.

21 unchanged sentences

______________________________________

(a) Identifiable intangible assets are comprised of the following (in millions):

(a) Identifiable intangible assets are composed of the following (in millions):

Recorded music catalog $ 155

3 unchanged sentences

Total intangible assets acquired $ 259

At March 31, 2022, the Company updated the preliminary allocation recorded at December 31, 2021 based on revised estimates of fair value, which resulted in an increase to intangible assets and a net decrease to other acquired assets and liabilities, with a corresponding decrease to goodwill.

The acquisition accounting is subject to revision based on final determinations of fair value and allocations of purchase price to the identifiable assets and liabilities acquired, in addition to the determination of the final consideration, including the determination of the final working capital adjustment pursuant to the mechanism set forth in the Merger Agreement.

For both the three and six months ended March 31, 2022, the Company incurred costs related to this acquisition of approximately $ 3 million, which were expensed as incurred and recorded in selling, general and administrative expenses in the accompanying consolidated statement of operations.

At June 30, 2022, the Company updated the preliminary allocation recorded at December 31, 2021 based on final consideration paid and revised estimates of fair value of assets acquired which resulted in an increase to intangible assets of approximately $ 26 million and a net decrease to other acquired assets and liabilities of approximately $ 23 million, with a corresponding net decrease to goodwill of approximately $ 6 million.

The acquisition accounting is subject to revision based on final determinations of fair value and allocations of purchase price to the identifiable assets and liabilities acquired.

For the nine months ended June 30, 2022, the Company incurred costs related to this acquisition of approximately $ 3 million, which were expensed as incurred and recorded in selling, general and administrative expenses in the accompanying consolidated statement of operations.

Prior to the acquisition, the Company had a distribution arrangement with 300 Entertainment.

The unaudited pro forma revenue and operating income as if the acquisition occurred on October 1, 2020 is not material to the Company’s reported results for the three and six months ended March 31, 2022 and March 31, 2021.

The unaudited pro forma revenue and operating income as if the acquisition occurred on October 1, 2020 is not material to the Company’s reported results for the three and nine months ended June 30, 2022 and June 30, 2021.

Comprehensive Income

7 unchanged sentences

Other comprehensive (loss) income ( 102 ) — 26 ( 76 )

Balances at March 31, 2022 $ ( 224 ) $ ( 11 ) $ 4 $ ( 231 )

Balances at June 30, 2022 $ ( 276 ) $ ( 11 ) $ 9 $ ( 278 )

______________________________________

27 unchanged sentences

The landlord for both leases is an affiliate of Access.

As of March 31, 2022, the aggregate lease liability related to these leases was $ 118 million.

As of June 30, 2022, the aggregate lease liability related to these leases was $ 113 million.

There are no restrictions or covenants, such as those relating to dividends or incurring additional financial obligations, relating to our lease portfolio, and residual value guarantees are not significant.

The components of lease expense were as follows:

Three Months Ended March 31, Six Months Ended March 31,

Three Months Ended June 30, Nine Months Ended June 30,

2022 2021 2022 2021

4 unchanged sentences

Total lease cost $ 17 $ 17 $ 50 $ 51

The Company incurred and recorded other occupancy expenses of $ 8 million and $ 12 million for the three and six months ended March 31, 2022, respectively, and $ 4 million and $ 8 million for the three and six months ended March 31, 2021, respectively.

The Company incurred and recorded other occupancy expenses of $ 5 million and $ 17 million for the three and nine months ended June 30, 2022, respectively, and $ 3 million and $ 11 million for the three and nine months ended June 30, 2021, respectively.

Supplemental cash flow information related to leases was as follows:

Six Months Ended March 31,

Nine Months Ended June 30,

(in millions)

19 unchanged sentences

Imputed interest ( 52 )

As of March 31, 2022, there have been no leases entered into that have not yet commenced.

As of June 30, 2022, we have additional operating leases for facilities that have not yet commenced with lease obligations of $ 28 million with lease terms of 10 to 16 years.

Goodwill and Intangible Assets

5 unchanged sentences

Other adjustments (b) ( 43 ) — ( 43 )

Balances at March 31, 2022 $ 1,458 $ 464 $ 1,922

Balances at June 30, 2022 $ 1,468 $ 464 $ 1,932

______________________________________

(a) Primarily relates to the acquisition of 300 Entertainment as described in Note 5.

(b) Other adjustments during the six months ended March 31, 2022 represent foreign currency movements.

(b) Other adjustments during the nine months ended June 30, 2022 represent foreign currency movements.

The Company performs its annual goodwill impairment test in accordance with ASC 350, Intangibles—Goodwill and Other (“ASC 350”) during the fourth quarter of each fiscal year as of July 1.

3 unchanged sentences

Intangible assets consist of the following:

Weighted-Average Useful Life March 31,

Weighted-Average Useful Life June 30,

2022 September 30,

12 unchanged sentences

Total net intangible assets $ 2,494 $ 2,171

The increase in intangible assets during the six months ended March 31, 2022 primarily relates to the acquisition of 300 Entertainment, which resulted in an increase in intangible assets as described in Note 5, and an acquisition of music-related assets within music publishing copyrights for approximately $ 250 million.

The increase in intangible assets during the nine months ended June 30, 2022 primarily relates to the acquisition of 300 Entertainment, which resulted in an increase in intangible assets as described in Note 5, and an acquisition of music-related assets within music publishing copyrights for approximately $ 250 million.

Debt Capitalization

13 unchanged sentences

______________________________________

(a) Reflects $ 300 million of commitments under the Revolving Credit Facility, less letters of credit outstanding of approximately $ 7 million at both March 31, 2022 and September 30, 2021.

There were no loans outstanding under the Revolving Credit Facility at March 31, 2022 or September 30, 2021.

(a) Reflects $ 300 million of commitments under the Revolving Credit Facility, less letters of credit outstanding of approximately $ 7 million at both June 30, 2022 and September 30, 2021.

There were no loans outstanding under the Revolving Credit Facility at June 30, 2022 or September 30, 2021.

The Company is the direct parent of Holdings, which is the direct parent of Acquisition Corp.

As of March 31, 2022 Acquisition Corp.

As of June 30, 2022 Acquisition Corp.

had issued and outstanding the 2.750 % Senior Secured Notes due 2028, the 3.750 % Senior Secured Notes due 2029, the 3.875 % Senior Secured Notes due 2030, the 2.250 % Senior Secured Notes due 2031 and the 3.000 % Senior Secured Notes due 2031 (together, the “Acquisition Corp.

20 unchanged sentences

provided that, in respect of 2020 Revolving Loans, the applicable margin with respect to such loans is subject to adjustment as set forth in the pricing grid in the Revolving Credit Agreement.

Based on the Senior Secured Indebtedness to EBITDA Ratio of 3.06 x at March 31, 2022, the applicable margin for Eurodollar loans would be 1.625 % instead of 1.875 % and the applicable margin for ABR loans would be 0.625 % instead of 0.875 % in the case of 2020 Revolving Loans.

Based on the Senior Secured Indebtedness to EBITDA Ratio of 3.09 x at June 30, 2022, the applicable margin for Eurodollar loans would be 1.625 % instead of 1.875 % and the applicable margin for ABR loans would be 0.625 % instead of 0.875 % in the case of 2020 Revolving Loans.

If there is a payment default at any time, then the interest rate applicable to overdue principal will be the rate otherwise applicable to such loan plus 2.0 % per annum.

11 unchanged sentences

Maturities of Senior Secured Notes

As of March 31, 2022, there are no scheduled maturities of notes until 2028, when $ 360 million is scheduled to mature.

As of June 30, 2022, there are no scheduled maturities of notes until 2028, when $ 341 million is scheduled to mature.

Thereafter, $ 2.341 billion is scheduled to mature.

Interest Expense, net

Total interest expense, net was $ 32 million and $ 32 million for the three months ended March 31, 2022 and 2021, respectively, and $ 62 million and $ 63 million for the six months ended March 31, 2022 and 2021, respectively.

The weighted-average interest rate of the Company’s total debt was 3.3 % at March 31, 2022, 3.2 % at September 30, 2021 and 3.7 % at March 31, 2021.

Total interest expense, net was $ 32 million and $ 30 million for the three months ended June 30, 2022 and 2021, respectively, and $ 94 million and $ 93 million for the nine months ended June 30, 2022 and 2021, respectively.

The weighted-average interest rate of the Company’s total debt was 3.4 % at June 30, 2022, 3.2 % at September 30, 2021 and 3.4 % at June 30, 2021.

Commitments and Contingencies

4 unchanged sentences

Any claims or proceedings against the Company, whether meritorious or not, can have an adverse impact because of defense costs, diversion of management and operational resources, negative publicity and other factors.

For the three and six months ended March 31, 2022, the Company recorded an income tax expense of $ 34 million and $ 109 million.

The income tax expense for the three and six months ended March 31, 2022 is higher than the expected tax expense at the statutory rate of 21% primarily due to U.S.

For the three and nine months ended June 30, 2022, the Company recorded an income tax expense of $ 39 million and $ 148 million.

The income tax expense for the three and nine months ended June 30, 2022 is higher than the expected tax expense at the statutory rate of 21% primarily due to U.S.

state and local taxes, withholding taxes, foreign income taxed at rates higher than the U.S., and non-deductible executive compensation under IRC Section 162(m), offset by a deduction against foreign derived intangible income (“FDII”).

For the three and six months ended March 31, 2021, the Company recorded an income tax expense of $ 51 million and $ 86 million, respectively.

The income tax expense for the three months ended March 31, 2021 is higher than the expected tax benefit at the statutory tax rate of 21% primarily due to U.S.

For the three and nine months ended June 30, 2021, the Company recorded an income tax expense of $ 41 million and $ 127 million, respectively.

The income tax expense for the three months ended June 30, 2021 is higher than the expected tax benefit at the statutory tax rate of 21% primarily due to income tax arising from an increase in our net U.K.

deferred tax liability due to the change in the U.K.

future statutory tax rate, U.S.

state and local taxes, foreign income taxes at rates higher than the U.S., and non-deductible executive compensation under IRC Section 162(m), offset by FDII.

The income tax expense for the six months ended March 31, 2021 is higher than the expected tax expense at the statutory tax rate of 21% primarily due to U.S.

state and local taxes, foreign income taxes at rates higher than the U.S., and non-deductible executive compensation under IRC Section 162(m), offset by FDII and excess tax benefits from the Company’s long term incentive plan.

The Company has determined that it is reasonably possible that the gross unrecognized tax benefits as of March 31, 2022 could decrease by up to approximately $ 2 million related to various ongoing audits and settlement discussions in various foreign jurisdictions during the next twelve months.

The income tax expense for the nine months ended June 30, 2021 is higher than the expected tax expense at the statutory tax rate of 21% primarily due to income tax arising from an increase in our net U.K.

deferred tax liability due to the change in the U.K.

future statutory tax rate, U.S.

state and local taxes, foreign income taxes at rates higher than the U.S., and non-deductible executive compensation under IRC Section 162(m), offset by FDII and excess tax benefits from the Plan.

The Company has determined that it is reasonably possible that the gross unrecognized tax benefits as of June 30, 2022 could decrease by up to approximately $ 2 million related to various ongoing audits and settlement discussions in various foreign jurisdictions during the next twelve months.

Derivative Financial Instruments

7 unchanged sentences

The Company’s foreign currency forward exchange contracts have not been designated as hedges under the criteria prescribed in ASC 815.

The Company records these contracts at fair value on its balance sheet and the related gains and losses are immediately recognized in the consolidated statement of operations where there is an offsetting entry related to the underlying exposure.

The Company records these contracts at fair value on its balance sheet and the related gains and losses are immediately

recognized in the consolidated statement of operations where there is an offsetting entry related to the underlying exposure.

The Company has entered into, and in the future may enter into, interest rate swaps to manage interest rate risk.

6 unchanged sentences

As a result, net assets or liabilities resulting from foreign exchange derivatives subject to these netting agreements are classified within other current assets or other current liabilities in the Company’s consolidated balance sheets.

The Company’s hedged interest rate transactions as of March 31, 2022 are expected to be recognized within two years .

The Company’s hedged interest rate transactions as of June 30, 2022 are expected to be recognized within two years .

The fair value of interest rate swaps is based on dealer quotes of market rates (i.e., Level 2 inputs) which is discussed further in Note 15.

2 unchanged sentences

The Company monitors its positions with, and the credit quality of, the financial institutions that are party to any of its financial transactions.

As of March 31, 2022, the Company had outstanding hedge contracts for the sale of $ 287 million and the purchase of $ 204 million of foreign currencies at fixed rates that will be settled by September 2022.

As of March 31, 2022, the Company had outstanding $ 820 million in pay-fixed receive-variable interest rate swaps with $ 4 million of unrealized deferred gains in comprehensive income related to the interest rate swaps.

As of June 30, 2022, the Company had outstanding hedge contracts for the sale of $ 148 million and the purchase of $ 112 million of foreign currencies at fixed rates that will be settled by September 2022.

As of June 30, 2022, the Company had outstanding $ 820 million in pay-fixed receive-variable interest rate swaps with $ 9 million of unrealized deferred gains in comprehensive income related to the interest rate swaps.

As of September 30, 2021, the Company had outstanding $ 820 million in pay-fixed receive-variable interest rate swaps with $ 17 million of unrealized deferred losses in comprehensive income related to the interest rate swaps.

The Company recorded realized pre-tax gains of $ 3 million and unrealized pre-tax gains of $ 2 million related to its foreign currency forward exchange contracts in the consolidated statement of operations as other income for the six months ended March 31, 2022.

The Company recorded realized pre-tax losses of $ 2 million and no unrealized pre-tax gains or losses related to its foreign currency forward exchange contracts in the consolidated statement of operations as other expense for the six months ended March 31, 2021.

The unrealized pre-tax gains of the Company’s derivative interest rate swaps designated as cash flow hedges recorded in other comprehensive income during the six months ended March 31, 2022 were $ 28 million.

The following is a summary of amounts recorded in the consolidated balance sheets pertaining to the Company’s derivative instruments at March 31, 2022 and September 30, 2021:

The Company recorded realized pre-tax gains of $ 6 million and unrealized pre-tax gains of $ 3 million related to its foreign currency forward exchange contracts in the consolidated statement of operations as other income for the nine months ended June 30, 2022.

The Company recorded realized pre-tax losses of $ 4 million and no unrealized pre-tax gains or losses related to its foreign currency forward exchange contracts in the consolidated statement of operations as other expense for the nine months ended June 30, 2021.

The unrealized pre-tax gains of the Company’s derivative interest rate swaps designated as cash flow hedges recorded in other comprehensive income during the nine months ended June 30, 2022 were $ 34 million.

The following is a summary of amounts recorded in the consolidated balance sheets pertaining to the Company’s derivative instruments at June 30, 2022 and September 30, 2021:

2022 (a) September 30,

5 unchanged sentences

______________________________________

(a) Includes $ 12 million and $ 10 million of foreign exchange derivative contracts which net to $ 3 million of current assets and $ 1 million of current liabilities, and $ 8 million and $ 2 million of interest rate swaps in noncurrent asset and current liability positions, respectively.

(a) Includes $ 13 million and $ 10 million of foreign exchange derivative contracts in current asset and liability positions which net to $ 3 million of current assets, and $ 1 million and $ 11 million of interest rate swaps in current and noncurrent asset positions, respectively.

(b) Includes $ 22 million of interest rate swaps in noncurrent liability positions.

11 unchanged sentences

Three Months Ended (in millions)

March 31, 2022

June 30, 2022

Revenues $ 1,189 $ 245 $ ( 2 ) $ 1,432

3 unchanged sentences

OIBDA 224 57 ( 48 ) 233

March 31, 2021

June 30, 2021

Revenues $ 1,152 $ 189 $ ( 1 ) $ 1,340

5 unchanged sentences

eliminations Total

Six Months Ended (in millions)

March 31, 2022

Nine Months Ended (in millions)

June 30, 2022

Revenues $ 3,722 $ 704 $ ( 4 ) $ 4,422

3 unchanged sentences

OIBDA 804 172 ( 168 ) 808

March 31, 2021

June 30, 2021

Revenues $ 3,372 $ 556 $ ( 3 ) $ 3,925

5 unchanged sentences

Cash Interest and Taxes

The Company made interest payments of approximately $ 44 million and $ 37 million during the three months ended March 31, 2022 and 2021, respectively, and approximately $ 57 million and $ 64 million during the six months ended March 31, 2022 and 2021, respectively.

The Company paid approximately $ 37 million and $ 35 million of income and withholding taxes, net of refunds, for the three months ended March 31, 2022 and 2021, respectively, and approximately $ 66 million and $ 52 million of income and withholding taxes, net of refunds, for the six months ended March 31, 2022 and 2021, respectively.

The Company made interest payments of approximately $ 21 million and $ 28 million during the three months ended June 30, 2022 and 2021, respectively, and approximately $ 78 million and $ 92 million during the nine months ended June 30, 2022 and 2021, respectively.

The Company paid approximately $ 38 million and $ 37 million of income and withholding taxes, net of refunds, for the three months ended June 30, 2022 and 2021, respectively, and approximately $ 104 million and $ 89 million of income and withholding taxes, net of refunds, for the nine months ended June 30, 2022 and 2021, respectively.

The Company’s ability to pay dividends may be restricted by covenants in the credit agreement for the Revolving Credit Facility which are currently suspended but which will be reinstated if Acquisition Corp.’s Total Indebtedness to EBITDA Ratio increases above 3.50 :1.00 and the term loans do not achieve an investment grade rating.

2 unchanged sentences

Therefore, there can be no assurance that the Company will pay any dividends to holders of the Company’s common stock, or as to the amount of any such dividends.

On February 8, 2022, the Company’s board of directors declared a cash dividend of $ 0.15 per share on the Company’s Class A Common Stock and Class B Common Stock, as well as related payments under certain stock-based compensation plans, which was paid to stockholders on March 1, 2022.

The Company paid an aggregate of approximately $ 78 million and $ 156 million, or $ 0.15 and $ 0.30 per share, in cash dividends to stockholders and participating security holders for the three and six months ended March 31, 2022, respectively.

On May 13, 2022, the Company’s board of directors declared a cash dividend of $ 0.15 per share on the Company’s Class A Common Stock and Class B Common Stock, as well as related payments under certain stock-based compensation plans, which was paid to stockholders on June 1, 2022.

The Company paid an aggregate of approximately $ 79 million and $ 235 million, or $ 0.15 and $ 0.45 per share, in cash dividends to stockholders and participating security holders for the three and nine months ended June 30, 2022, respectively.

Noncash Investment Activity

Noncash investing activities for the three months ended March 31, 2022 was approximately $ 125 million related to the acquisition of music publishing rights and music catalogs, net during the six months ended March 31, 2022.

The corresponding notes payable balance is reflected as other current liabilities within the Company’s consolidated balance sheet at March 31, 2022.

Noncash investing activities was approximately $ 125 million related to the acquisition of music publishing rights and music catalogs, net during the nine months ended June 30, 2022.

The corresponding notes payable balance is reflected as other current liabilities within the Company’s consolidated balance sheet at June 30, 2022.

COVID-19 Pandemic

On March 11, 2020, the COVID-19 outbreak was declared a global pandemic by the World Health Organization.

Government-imposed mandates limiting public assembly and restrictions on non-essential businesses have adversely impacted the Company’s operations for the three and six months ended March 31, 2022 and March 31, 2021, including touring and live events.

For the three and six months ended March 31, 2022, revenues improved due to the ongoing recovery of certain COVID-19 impacted revenue streams despite a rise in COVID-19 cases associated with the Omicron variant.

The continued impact of COVID-19, including increases in infection rates, new variants, renewed governmental action to slow the spread of COVID-19 and to what extent it will impact the Company’s music and related services cannot be predicted.

Government-imposed mandates limiting public assembly and restrictions on non-essential businesses have adversely impacted the Company’s operations for the three and nine months ended June 30, 2022 and June 30, 2021, including touring and live events.

For the three and nine months ended June 30, 2022, revenues improved due to the ongoing recovery of certain COVID-19 impacted revenue streams.

The continued impact of COVID-19, including increases in infection rates, new variants and sub-variants, renewed governmental action to slow the spread of COVID-19 and to what extent it will impact the Company’s music and related services cannot be predicted.

The Company is not presently aware of any events or circumstances arising from the global pandemic that would require us to update any estimates, judgments or materially revise the carrying value of our assets or liabilities.

13 unchanged sentences

The fair values are therefore determined using model-based techniques that include option pricing models, discounted cash flow models and similar techniques.

In accordance with the fair value hierarchy, described above, the following tables show the fair value of the Company’s financial instruments that are required to be measured at fair value as of March 31, 2022 and September 30, 2021.

Fair Value Measurements as of March 31, 2022

Fair Value Measurements as of June 30, 2022

(Level 1) (Level 2) (Level 3) Total

2 unchanged sentences

Foreign Currency Forward Exchange Contracts (a) $ — $ 3 $ — $ 3

Other Current Liabilities:

Interest Rate Swap (e) $ — $ 1 $ — $ 1

Foreign Currency Forward Exchange Contracts (a) — ( 1 ) — ( 1 )

Other Noncurrent Assets:

22 unchanged sentences

(c) This represents an equity method investment which was acquired in fiscal 2019 whereby the Company elected the fair value option under ASC 825, Financial Instruments (“ASC 825”).

During the three months ended March 31, 2022, this investment was sold.

During the nine months ended June 30, 2022, this investment was sold.

(d) These represent equity investments with a readily determinable fair value.

The Company has measured its investments to fair value in accordance with ASC 321, Investments—Equity Securities, based on quoted prices in active markets.

(e) The fair value of the interest rate swaps is based on dealer quotes of market forward rates and reflects the amount that the Company would receive or pay as of March 31, 2022 for contracts involving the same attributes and maturity dates.

(e) The fair value of the interest rate swaps is based on dealer quotes of market forward rates and reflects the amount that the Company would receive or pay as of June 30, 2022 for contracts involving the same attributes and maturity dates.

The following table reconciles the beginning and ending balances of net liabilities classified as Level 3:

2 unchanged sentences

Additions ( 1 )

Balance at March 31, 2022 $ ( 11 )

Reductions 15

Balance at June 30, 2022 $ ( 1 )

The majority of the Company’s non-financial instruments, which include goodwill, intangible assets, inventories and property, plant and equipment, are not required to be re-measured to fair value on a recurring basis.

5 unchanged sentences

The Company has elected to use the measurement alternative to fair value that will allow these investments to be recorded at cost, less impairment, and adjusted for subsequent observable price changes.

The Company did not record any impairment charges on these investments during the three and six months ended March 31, 2022 and 2021.

In addition, there were no observable price changes events that were completed during the three and six months ended March 31, 2022 and 2021.

The Company did not record any impairment charges on these investments during the three and nine months ended June 30, 2022 and 2021.

In addition, there were no observable price changes events that were completed during the three and nine months ended June 30, 2022 and 2021.

Fair Value of Debt

Based on the level of interest rates prevailing at March 31, 2022, the fair value of the Company’s debt was $ 3.652 billion.

Based on the level of interest rates prevailing at June 30, 2022, the fair value of the Company’s debt was $ 3.278 billion.

Based on the level of interest rates prevailing at September 30, 2021, the fair value of the Company’s debt was $ 3.412 billion.

2 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements