Warner Music on Thursday posted a higher than expected net loss in its second quarter and suspended a quarterly dividend in order to raise cash and lower its debt.
The world's third-largest record company posted a net loss of $37 million or 25 cents a share, compared with a loss of $27 million or 19 cents a year ago. Sales rose 2 percent to $800 million, and declined 3.6 percent at constant currency rates.
Revenue rose 2 percent to $800 million, although factoring out the impact of the weak dollar, revenue declined 3.6 percent. Domestic revenue declined 14 percent.
The company has been struggling with declining CD sales as consumer switch to new forms of digital music. Excluding some costs, the loss of 23 cents a share missed analysts' average 11-cent estimate. Sales rose 2 percent to $800 million, and declined 3.6 percent at constant currency rates.
The shares fell 22 percent or $1.99 to $7.06 on the New York Stock Exchange where it was one of the day's biggest percentage losers.
On a conference call with analysts, Warner executives face questions about the company's debt pile which stood at $2 billion at the end of the quarter. It has a cash balance of $249 million.
We are not concerned about our ability to meet our debt covenants, Chief Executive Edgar Bronfman said.
We decided to suspend the dividend in order to take a conservative approach to cash management. (The move) allows us to reduce the net debt and maintaining level of A&R investment. That's the best combination to create equity appreciation for shareholders, he added.
Major sellers in the quarter included artists Simple Plan, Nickelback and the soundtrack to the film Juno.