Warner Music Group says that it wants to return $350 million to its investors. The money -- which is earmarked for the equity shareholders that led the acquisition of the company from Time Warner --
Warner Music Group says that it wants to return $350 million to its investors.
The money -- which is earmarked for the equity shareholders that led the acquisition of the company from Time Warner -- will be funded out of excess cash in a onetime payment. WMG will not raise additional debt to make the payment.
WMG also says it plans to move the end of its fiscal year to Sept. 30 from Nov. 30. The company plans for its next earnings call to address the four months ended Sept. 30, 2004.
It is likely that the moves will increase the talk of a potential IPO that has been swirling around the privately held WMG. Published reports have suggested that WMG is looking to go public as early as next spring.
WMG is in the process of seeking an amendment to its credit agreement with its bondholders to allow for the return of capital and the change in its fiscal year. The company says its proposed return of capital is permitted by the company's agreement with its bondholders.
WMG says its cash balance grew from $421 million to $519 million between May 31 and Aug. 31. The company is projecting $300 million in cash on hand as of Nov. 30 -- assuming it completes the payout.
WMG chairman/CEO Edgar Bronfman Jr. notes in a statement that the payout was prompted by the fact that the company's profitability and cost-saving initiatives are running ahead of schedule, restructuring costs are lower than budgeted, and working capital needs are lower than forecasted.
"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," he says. "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."