Eight Months
Ended
December December
31, 31,
Profit Contribution 2006 2005
------------------------------------------------------------- --------
Live and Televised Entertainment $ 68.1 $ 73.1
Consumer Products 30.5 29.0
Digital Media 7.2 6.2
WWE Films - -
-------- --------
Total profit contribution $ 105.8 $ 108.3
======== ========
Profit contribution margin 40% 44%
-------- --------
Live and Televised Entertainment
Revenues from our Live and Televised Entertainment businesses were
$183.0 million for the current period as compared to $181.6 million
in the prior year period.
-- Live Event revenues were $52.3 million as compared to $43.7 million
in the prior year period, primarily due to an increase in North
American average attendance.
-- There were 246 events, including 34 international
events and 38 ECW(R) branded events, during the
current eight month period. There were 199 events,
including 25 international events, produced in the
prior year period.
-- North American average attendance was approximately
4,900 in the current period as compared to 4,500 in
the prior year period. Excluding the ECW events,
our North American average attendance was 5,700 as
compared to 4,500 in the prior year. The ECW live
events generated approximately $1.1 million with an
average ticket price of approximately $25.00 and
average attendance of approximately 1,100.
-- Pay-Per-View revenues were $53.4 million as compared to $54.5
million in the prior year period. There were eleven Pay-Per-View
events produced in each period.
The details for the number of buys (in 000's) are as follows:
Events (in chronological order) Eight Eight
Months Months
Ended Ended
December December
31, 2006 31, 2005
-------------------------------------------------- --------- ---------
Backlash(R) - 308
Judgment Day(R) 252 266
ECW(R) One Night Stand 304 333
Vengeance(R) 337 429
Great American Bash(R) 232 279
SummerSlam(R) 541 634
Unforgiven(R) 307 240
No Mercy(R) 197 224
Cyber Sunday(TM) /Taboo Tuesday(R) 228 207
Survivor Series(R) 383 375
December to Dismember(TM) 90 -
Armageddon(R) 239 280
Prior events 177 210
------ ------
Total 3,287 3,785
-- Beginning in Q1 of the 2006 Transition Period,
the North American retail price of our
Pay-Per-View events was increased by $5.00 to
$39.95 in order to bring the price more in line
with similar events. This increase in price
partially offset the decline in the number of
buys reported in the current period.
-- International buys comprised approximately 39%
of total buys in the current period as compared
to 37% of total buys in the prior year period.
-- Venue Merchandise revenues were $12.1 million as compared to $8.4
million in the eight month period last year, primarily reflecting
the increase in North American attendance and an increase in per
capita spending by our fans of approximately $0.70 to $10.90 in the
current year period.
-- Television Rights Fees revenues were $58.7 million as compared to
$54.7 million in the prior year. This increase is primarily due to
the rights fees received from our ECW telecasts in the current
year.
-- Television Advertising revenues were $4.5 million as compared to
$19.8 million in the prior year period. This decline was due to our
television distribution agreement with USA Network, which became
effective in October 2005. Due to this change, we no longer
participate in domestic television advertising sales. Advertising
revenues in the current period include sales of advertising on our
Canadian television programs.
Consumer Products
Revenues from our Consumer Products businesses were $59.2 million
versus $50.6 million in the prior year period, a 17% increase.
-- Home Video net revenues were $35.5 million as compared to $28.1
million in the prior year period, reflecting a 55% increase in
gross DVD units sold. This success was highlighted by the release
of WrestleMania 22, which sold over 425,000 gross units in the
transition period, representing the best selling title in our
history.
-- Licensing revenues were $14.7 million as compared to $14.9 million
in the prior year period, reflecting decreases in videogame and
novelty related sales. The decline in videogame revenues primarily
reflects the timing of new videogame releases. Revenue for the
current period reflects no new titles as compared to two new
videogames in the prior year period.
-- Magazine publishing net revenues were $8.5 million as compared to
$7.3 million in the prior year period. In July 2006 we began
publishing WWE(R) Magazine, which replaced our two former
magazines, Raw(R) and SmackDown(R). The increase in revenues
reflects higher newsstand sales.
Digital Media
Revenues from our Digital Media related businesses were $20.7 million
as compared to $15.5 million in the prior year, a 34% increase.
-- WWE.com revenues were $7.3 million as compared to $5.9 million in
the prior year period, reflecting additional revenues from
web-based advertising and wireless content.
-- WWEShop revenues were $13.0 million as compared to $8.7 million in
the prior year period, primarily due to a 54% increase in the
number of orders processed during the current period. The average
amount spent by our customers per order was approximately $53.00,
which was consistent with the prior year period.
WWE Films(TM)
During the eight month 2006 transition period we released two feature films, See No Evil(TM) and The Marine(TM), to theaters in widespread distribution. See No Evil was released domestically in theaters in May 2006 and on DVD in November 2006. The Marine was released domestically in theaters in October 2006 and on DVD in January 2007, subsequent to year end. During the current transition period we incurred approximately $16.9 million in capitalized production costs for our third feature film, The Condemned(TM), which is scheduled for release in April 2007. WWE does not participate in any revenues associated with these film projects until the print and advertising costs incurred by our distributors have been recouped and the results have been reported to us. Accordingly, no revenues have been recorded in the 2006 transition period.
Profit Contribution (Net revenues less cost of revenues)
Profit contribution for the 2006 transition period was $105.8 million as compared to $108.3 million in the prior year period. Total profit contribution margin was approximately 40% for the current period as compared to 44% for the prior year. The decline in the profit contribution is due in part to the absence of domestic television advertising revenues in our Live and Televised Entertainment segment and the increases in revenues from businesses with lower profit margins than advertising, such as live events and venue merchandise.
Selling, general and administrative expenses
SG&A expenses were $61.0 million for the current period as compared to $56.9 million in the prior year period. The prior year period included approximately $3.4 million in positive legal settlements.
EBITDA
EBITDA was approximately $44.8 million in the current period as compared to $51.5 million in the prior year period.
Summary Income Statements
The following chart reflects a summary income statement for the eight month periods ended December 31, 2006 and December 31, 2005:
(Dollars in millions, except per share data)
Eight Eight
Months Months
Ended Ended
December December
31, 2006 31, 2005
--------- ---------
Net revenues $ 262.9 $ 247.7
Operating income $ 39.2 $ 44.2
Income taxes $ 14.5 $ 18.9
Net income $ 31.6 $ 29.8
Earnings per share (Diluted) $ 0.44 $ 0.43
Cash Flows
Net cash provided by operating activities was $22.3 million for the eight months ended December 31, 2006 as compared to $67.1 million in the prior year period. In the 2006 transition period we spent approximately $17.5 million on the production of feature films as compared to $5.3 million in the prior year period.
Change in Fiscal Year
As previously disclosed, the Company switched to a calendar year basis beginning with calendar year 2007.
The financial statements included in the attached supplemental schedules show the results of the eight month 2006 transition period and the twelve months ended April 30, 2006, consistent with the presentation required in Form 10-K.
Business Outlook
The Company is committed to complete a comprehensive strategic review with the objective of identifying sustainable, multi-year growth rates. We expect to communicate our financial objectives within the near term. As such, our management has decided not to provide specific guidance on near-term results. In lieu of providing such financial guidance, we are expanding the depth of our business metrics, and will make these available to investors on a monthly basis on our corporate website - corporate.wwe.com. As a specific point of reference, the Company has targeted 2007 EBITDA growth of approximately 12% over the prior calendar year for the payout of management bonuses.
Note: World Wrestling Entertainment, Inc. will host a conference call on February 13, 2007 at 11:00 a.m. ET to discuss the Company's earnings results for the 2006 transition period. All interested parties can access the conference call by dialing 800-862-9098 (conference ID: WWE). Please reserve a line 15 minutes prior to the start time of the conference call. A presentation that will be referenced during the call can be found at the Company web site at corporate.wwe.com. A replay of the call will be available approximately three hours after the conference call concludes, and can be accessed at corporate.wwe.com.
World Wrestling Entertainment, Inc. (NYSE: WWE - News) is an integrated media and entertainment company headquartered in Stamford, Conn. Additional information on the Company can be found at wwe.com and corporate.wwe.com.
Trademarks: All World Wrestling Entertainment, Inc. programming, talent names, images, likenesses, slogans, wrestling moves, and logos are the exclusive property of World Wrestling Entertainment, Inc. and its subsidiaries. All other trademarks, logos and copyrights are the property of their respective owners.
Forward-Looking Statements: This news release contains forward-looking statements pursuant to the safe harbor provisions of the Securities Litigation Reform Act of 1995, which are subject to various risks and uncertainties. These risks and uncertainties include the conditions of the markets for live events, broadcast television, cable television, pay-per-view, Internet, feature films, entertainment, professional sports, and licensed merchandise; acceptance of the Company's brands, media and merchandise within those markets; uncertainties relating to litigation; risks associated with producing live events both domestically and internationally; uncertainties associated with international markets; risks relating to maintaining and renewing key agreements, including television distribution agreements; and other risks and factors set forth from time to time in Company filings with the Securities and Exchange Commission. Actual results could differ materially from those currently expected or anticipated.
World Wrestling Entertainment, Inc.
Consolidated Income Statements
(dollars and shares in thousands, except per share data)
(Unaudited)
Eight Twelve
Months Months
Ended Ended
December April 30,
31, 2006 2006
--------- ---------
Net revenues $262,937 $400,051
Cost of revenues 157,094 227,172
Selling, general and administrative expenses 61,043 91,867
Depreciation and amortization 5,557 10,472
--------- ---------
Operating income 39,243 70,540
Investment income, net 6,440 7,390
Interest expense 421 587
Other income, net 884 553
--------- ---------
Income from continuing operations before income
taxes 46,146 77,896
Provision for income taxes 14,529 47,012
--------- ---------
Income from continuing operations 31,617 47,012
--------- ---------
Income from discontinued operations, net of taxes - 35
--------- ---------
Net income $ 31,617 $ 47,047
--------- ---------
Earnings per share - basic :
Continuing operations $ 0.45 $ 0.68
--------- ---------
Discontinued operations 0.00 0.00
--------- ---------
Net income $ 0.45 $ 0.68
--------- ---------
Earnings per share - diluted:
Continuing operations $ 0.44 $ 0.67
--------- ---------
Discontinued operations 0.00 0.00
--------- ---------
Net income $ 0.44 $ 0.67
--------- ---------
Shares used in per share calculations:
Basic 70,899 69,361
========= =========
Diluted 71,596 70,176
========= =========
World Wrestling Entertainment, Inc.
Consolidated Balance Sheets
(dollars in thousands)
(Unaudited)
As of As of
December 31, April 30,
2006 2006
------------ -----------
ASSETS
CURRENT ASSETS:
Cash and equivalents $ 86,267 $ 175,203
Short-term investments 161,889 105,655
Accounts receivable, net 52,113 67,775
Inventory, net 3,049 1,788
Prepaid expenses and other current
assets 13,334 11,140
Assets of discontinued operations 469 457
------------ -----------
Total current assets 317,121 362,018
PROPERTY AND EQUIPMENT, NET 67,972 67,570
FEATURE FILM PRODUCTION ASSETS 53,560 36,094
INTANGIBLE ASSETS, NET 3,328 1,461
OTHER ASSETS 11,304 12,247
------------ -----------
TOTAL ASSETS $ 453,285 $ 479,390
============ ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt $ 862 $ 817
Accounts payable 14,909 19,826
Accrued expenses and other liabilities 25,535 36,017
Deferred income 20,166 19,874
Liabilities of discontinued operations 302 294
------------ -----------
Total current liabilities 61,774 76,828
LONG-TERM DEBT 5,800 6,381
STOCKHOLDERS' EQUITY:
Class A common stock 231 227
Class B common stock 479 479
Additional paid-in capital 286,985 277,693
Accumulated other comprehensive income 666 355
Retained earnings 97,350 117,427
------------ -----------
Total stockholders' equity 385,711 396,181
------------ -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 453,285 $ 479,390
============ ===========
World Wrestling Entertainment, Inc.
Consolidated Statements of Cash Flows
(dollars in thousands)
(Unaudited)
December 31, April 30,
2006 2006
------------- -----------
OPERATING ACTIVITIES:
Net income $ 31,617 $ 47,047
Adjustments to reconcile net income to net
cash provided by operating activities:
Income from discontinued operations, net
of taxes - (35)
Revaluation of warrants (839) (1,474)
Depreciation and amortization 5,557 10,472
Realized loss on sale of investments 105 1,820
Amortization of investment income (329) (1,702)
Stock compensation costs 4,843 4,694
Provision for doubtful accounts (1,574) 494
Provision for inventory obsolescence 1,429 1,894
Provision (benefit) for deferred income
taxes 2,442 (1,661)
Excess tax benefit from stock-based
payment arrangements (712) -
Changes in assets and liabilities:
Accounts receivable 17,237 (6,368)
Inventory (2,689) (2,625)
Prepaid expenses and other assets (2,764) (2,658)
Feature film production assets (17,466) (7,323)
Accounts payable (4,917) 4,156
Accrued expenses and other
liabilities (10,273) 20,849
Deferred income 621 (478)
------------- -----------
Net cash provided by
continuing operations 22,288 67,102
Net cash provided by
discontinued operations - 162
------------- -----------
Net cash provided by operating
activities 22,288 67,264
------------- -----------
INVESTING ACTIVITIES:
Purchase of property and equipment (5,099) (9,376)
Purchase of other assets (2,726) (881)
Purchase of short-term investments (77,436) (53,765)
Proceeds from sales or maturities of short-
term investments 20,850 148,908
------------- -----------
Net cash (used in) provided by
continuing operations (64,411) 84,886
Net cash used in discontinued
operations - -
------------- -----------
Net cash (used in) provided by
investing activities (64,411) 84,886
------------- -----------
FINANCING ACTIVITIES:
Repayments of long-term debt (537) (757)
Dividends paid (51,017) (50,064)
Issuance of stock, net 350 483
Proceeds from exercise of stock options 3,679 16,823
Excess tax benefit from stock-based
compensation arrangements 712 -
------------- -----------
Net cash used in continuing
operations (46,813) (33,515)
Net cash used in discontinued
operations - -
------------- -----------
Net cash used in financing
activities (46,813) (33,515)
------------- -----------
NET (DECREASE) INCREASE IN CASH AND CASH
EQUIVALENTS (88,936) 118,635
CASH AND CASH EQUIVALENTS, BEGINNING OF
PERIOD 175,203 56,568
------------- -----------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 86,267 $ 175,203
============= ===========
World Wrestling Entertainment, Inc.
Supplemental Information - EBITDA
(dollars in thousands)
(Unaudited)
Eight Twelve
Months Ended Months Ended
December 31, April 30,
2006 2006
------------- ------------
Net income reported on U.S. GAAP basis $ 31,617 $ 47,047
Income from discontinued operations, net - (35)
Provision for income taxes 14,529 30,884
Interest and other, net (6,903) (7,356)
Depreciation and amortization 5,557 10,472
------------- ------------
EBITDA $ 44,800 $ 81,012
============= ============
Non-GAAP Measure:
EBITDA is defined as net income from continuing operations before interest and other income, income taxes, depreciation and amortization. Although it is not a recognized measure of performance under U.S. GAAP, EBITDA is presented because it is a widely accepted financial indicator of a company's performance. The Company uses EBITDA to measure its own performance and to set goals for operating managers. EBITDA should not be considered as an alternative to net income, cash flows from operations or any other indicator of World Wrestling Entertainment Inc.'s performance or liquidity, determined in accordance with U.S. GAAP.
World Wrestling Entertainment, Inc.
Supplemental Information- Free Cash Flow
(dollars in thousands)
(Unaudited)
Eight Twelve
Months Ended Months Ended
December 31, April 30,
2006 2006
-------------- ------------
Net cash provided by continuing operations $22,288 $67,102
Less cash used in capital expenditures:
Purchase of property and equipment (5,099) (9,376)
Purchase of other film library assets (2,726) (881)
-------------- ------------
Free Cash Flow $14,463 $56,845
============== ============
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