News
WWE(R) Reports 2007 Fourth Quarter Results
STAMFORD, Conn.-(Business Wire)-February 12, 2008 - World Wrestling Entertainment, Inc. (NYSE:WWE) today announced financial results for its fourth quarter ended December 31, 2007. Revenues totaled $132.6 million as compared to $107.6 million in the prior year quarter while operating income was $24.7 million as compared to $17.5 million in the prior year quarter. Net income was $21.5 million, or $0.30 per share, as compared to $15.5 million, or $0.22 per share, in the prior year quarter.
"We ended the year with solid fourth quarter performances from all of our operating units, resulting in a 23% increase in revenue over last year. The quarter capped off a very successful year in which we set an all time revenue high of $485 million," said Linda McMahon, Chief Executive Officer. "We expect our initiatives for international expansion and the continued improvement in our Digital Media and Wireless businesses will help us sustain our growth momentum in 2008."
Results By Business Segment
The following chart reflects net revenues and profit contribution by segment for the three months ended December 31, 2007 and December 31, 2006. (Dollars in millions) -0- *T Three Months Ended December 31, December 31, Net Revenues 2007 2006 —————————————————————— —————— —————— Live and Televised Entertainment $82.3 $72.7 Consumer Products 35.3 23.9 Digital Media 11.9 11.0 WWE Films 3.1 - —————— —————— Total $132.6 $107.6 ============ ============ *T -0- *T Three Months Ended December 31, December 31, Profit Contribution 2007 2006 —————————————————————— —————— —————— Live and Televised Entertainment $30.7 $26.4 Consumer Products 20.9 11.6 Digital Media 4.3 4.2 WWE Films - - —————— —————— Total profit contribution $55.9 $42.2 ============ ============ Profit contribution margin 42% 39% —————— —————— *T
Live and Televised Entertainment
Revenues from our Live and Televised Entertainment businesses were $82.3 million for the current quarter as compared to $72.7 million in the prior year quarter, representing a 13% increase.
— Live Event revenues were $30.9 million as compared to $24.4 million in the prior year quarter. -0- *T —There were 75 total events, including 26 international events, during the current quarter as compared to 87 events, including 25 international events, in the prior year quarter. The prior year quarter also included 10 stand alone ECW(R) events. In the current quarter, our ECW events were co-branded and included as part of our SmackDown(R) events. —International events generated approximately $16.9 million of revenues as compared to $12.5 million in the prior year quarter, reflecting an increase in average ticket price to $83.47 in the current quarter as compared to $70.12 in the prior year. —North American events generated $14.0 million of revenues from 49 events as compared to $11.9 million from 62 events in the prior year quarter. North American average attendance was approximately 7,100 in the current quarter as compared to 5,300 in the prior year, an increase of 34%. The average ticket price for North American events was approximately $40.66 in the current quarter as compared to $35.78 in the prior year. *T
— Pay-Per-View revenues were $19.9 million as compared to $18.7 million in the prior year quarter. There were four pay-per-view events produced in the current quarter as compared to five events produced in the prior year quarter.
The details for the number of buys (in 000s) are as follows: -0- *T Three Months Ended Three Months Ended Events (in chronological order) December 31, 2007 December 31, 2006 ———————————————— ————————— ————————— No Mercy(R) 271 197 Cyber Sunday(R) 194 228 Survivor Series(R) 341 383 December to Dismember(TM) - 90 Armageddon(R) 237 239 Prior events 107 71 ————————— ————————— Total 1,150 1,208 ================== ================== *T -0- *T — The revenue increase in the current quarter reflects a higher proportion of domestic buys, which generate higher revenues per buy. Buys from domestic markets represented 63% of total buys in the current quarter as compared to 58% of total buys in the prior year quarter. *T
— Venue Merchandise revenues were $4.6 million as compared to $4.4 million in the prior year quarter.
— Television Rights Fees revenues were $23.8 million as compared to $21.6 million in the prior year quarter, reflecting rate increases both internationally and domestically.
— WWE 24/7(TM) revenues were $1.1 million as compared to $1.0 million in the prior year quarter.
Consumer Products
Revenues from our Consumer Products businesses were $35.3 million versus $23.9 million in the prior year quarter, a 48% increase.
— Home Video net revenues were $19.8 million as compared to $14.0 million in the prior year quarter. The increase in Home Video revenues primarily reflects the strong performance of several new titles released in the current quarter, including titles featuring Superstars John Cena(R) and Shawn Michaels(R), among others.
— Licensing revenues were $9.4 million as compared to $6.3 million in the prior year quarter, primarily reflecting increases in apparel, toy, and novelty related sales of 128%, 48%, and 161%, respectively.
— Magazine publishing net revenues were $6.0 million as compared to $3.3 million in the prior year quarter, reflecting increased newsstand and subscription copies sold per issue. We published four issues of WWE Magazine in each quarter and published three magazine specials in the current quarter as compared to two specials in the prior year quarter.
Digital Media
Revenues from our Digital Media related businesses were $11.9 million as compared to $11.0 million in the prior year, representing a 8% increase.
— WWE.com revenues were $4.2 million as compared to $3.3 million in the prior year quarter. Wireless content revenues increased by $0.7 million, while web-based advertising increased by $0.2 million.
— WWEShop revenues were $7.7 million as compared to $7.7 million in the prior year quarter as the number of orders processed during the current quarter declined by 9%, partially offset by an increase in the average per order spend by our customers to $62.10 as compared to $56.97 per order in the prior year quarter.
WWE Films
Revenues from our WWE Films segment were $3.1 million in the current quarter. WWE participates in film revenue when our distributors have recouped their print and advertising costs and the results have been reported to us. Revenue in the current quarter primarily relates to our feature film "See No Evil". Our capitalized feature film production asset balance is amortized in proportion with the recognition of revenue. In the current quarter we wrote off certain developmental costs which offset our profit in "See No Evil".
Profit Contribution (Net revenues less cost of revenues)
Profit contribution was $55.9 million in the current quarter as compared to $42.2 million in the prior year quarter. Total profit contribution margin has increased to approximately 42% as compared to 39% in the prior quarter, reflecting improved margins in our Live and Televised and Consumer Products segments.
Selling, general and administrative expenses
SG&A expenses were $28.8 million for the current quarter as compared to $22.3 million in the prior year quarter, reflecting an increase in staff related costs as well as legal and professional fees. In addition, the prior year quarter reflected favorable one-time adjustments in both legal and professional fees and the recovery of previously written-off bad debts totaling approximately $2.8 million.
Effective tax rate
In the current quarter the effective tax rate was 23% as compared to 26% in the prior year quarter. These rates reflect tax benefits related to previously unrecognized tax positions.
EBITDA
EBITDA was approximately $27.1 million in the current quarter as compared to $19.8 million in the prior year quarter.
Summary Results for the Twelve Months Ended
Total revenues for the twelve months ended December 31, 2007 were $485.7 million as compared to $415.3 million in the prior year period, a 17% increase. Operating income for the current period was $68.4 million versus $65.6 million in the prior year period. Net income was $52.1 million, or $0.72 per share, as compared to $48.8 million, or $0.68 per share, in the prior year period. EBITDA was $77.8 million for the current twelve month period as compared to $74.3 million in the prior year period. As previously disclosed, the current year results reflect the $15.7 million asset impairment for our feature film "The Condemned". Excluding this impairment charge, EBITDA would have been $93.5 million as compared to $74.3 million in the prior year period, representing a 26% increase.
The following chart reflects net revenues and profit contribution by segment for the twelve months ended December 31, 2007 and December 31, 2006. (Dollars in millions) -0- *T December 31, December 31, Net Revenues 2007 2006 —————————————————————— —————— —————— Live and Televised Entertainment $316.8 $292.2 Consumer Products 118.1 95.0 Digital Media 34.8 28.1 WWE Films 16.0 - —————— —————— Total $485.7 $415.3 ============ ============ *T -0- *T December 31, December 31, Profit Contribution 2007 2006 —————————————————————— —————— —————— Live and Televised Entertainment $114.1 $107.1 Consumer Products 72.4 53.6 Digital Media 13.5 9.7 WWE Films (13.1) - —————— —————— Total profit contribution $186.9 $170.4 ============ ============ Profit contribution margin 38% 41% —————— —————— *T
Live and Televised Entertainment
Revenues from our Live and Televised Entertainment businesses were $316.8 million for the current period as compared to $292.2 million in the prior year, an 8% increase. -0- *T December 31, December 31, 2007 2006 —————— —————— Live Events $99.3 $83.7 Pay-Per-View 94.3 93.6 Venue Merchandise 19.1 18.4 Television Rights Fees 92.4 85.5 Television Advertising 5.9 7.4 WWE 24/7 4.9 2.6 Other 0.9 1.0 —————— —————— Total Live and Televised $316.8 $292.2 ============ ============ *T
Consumer Products
Revenues from our Consumer Products businesses were $118.1 million versus $95.0 million in the prior year, an increase of 24%. -0- *T December 31, December 31, 2007 2006 —————— —————— Home Video $53.7 $49.9 Licensing 47.1 32.0 Magazine Publishing 16.5 12.4 Other 0.8 0.7 —————— —————— Total Consumer Products $118.1 $95.0 ============ ============ *T
Digital Media
Revenues from our Digital Media related businesses were $34.8 million as compared to $28.1 million in the prior year, an increase of 24%. -0- *T December 31, December 31, 2007 2006 —————— —————— WWE.com $16.2 $11.0 WWE Shop 18.6 17.1 —————— —————— Total Digital Media $34.8 $28.1 ============ ============ *T
WWE Films
Revenues from our WWE Films segment were $16.0 million relating to our feature films "See No Evil" and "The Marine". We have approximately $21.9 million of capitalized film production costs on our balance sheet as of December 31, 2007.
Profit Contribution (Net revenues less cost of revenues)
Profit contribution was $186.9 million in the current period as compared to $170.4 million in the prior year period. Total profit contribution margin was approximately 38% in the current year as compared to 41% in the prior year period, primarily reflecting the impact of the feature film impairment.
Selling, general and administrative expenses
SG&A expenses were $109.1 million for the current period as compared to $96.1 million in the prior year period, primarily due to increased staff related costs and increased legal and professional fees. In addition, the prior year period reflected favorable one-time adjustments in both legal and professional fees and the recovery of previously written-off bad debts.
Effective tax rate
In the current period the effective tax rate was 32% as compared to 35% in the prior year period. This decline represents tax benefits related to previously unrecognized tax positions.
Cash Flows
Net cash provided by operating activities was $98.2 million for the twelve months ended December 31, 2007 as compared to $37.9 million in the prior year period.
Note: World Wrestling Entertainment, Inc. will host a conference call on February 12, 2008 at 11:00 a.m. ET to discuss the Company's earnings results for fourth quarter of 2007. All interested parties can access the conference call by dialing 800-894-5910 (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) 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. ECW is a trademark of WWE Libraries, Inc.
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. -0- *T World Wrestling Entertainment, Inc. Consolidated Income Statements (in thousands, except per share data) (Unaudited) Three Months Ended Twelve Months Ended Dec. 31, Dec. 31, Dec. 31, Dec. 31, 2007 2006 2007 2006 ———————————————————- Net revenues $ 132,643 $ 107,636 $ 485,655 $ 415,280 Cost of revenues 76,710 65,472 298,769 244,875 Selling, general and administrative expenses 28,848 22,348 109,134 96,056 Depreciation and amortization 2,347 2,361 9,319 8,741 ————- ————- ————- ————- Operating income 24,738 17,455 68,433 65,608 Investment income, net 3,365 2,251 9,110 8,644 Interest expense 199 114 552 609 Other (expense) income, net (22) 1,391 (517) 1,740 ————- ————- ————- ————- Income before income taxes 27,882 20,983 76,474 75,383 Provision for income taxes 6,378 5,471 24,337 26,535 ————- ————- ————- ————- ————- ————- ————- ————- Net income $ 21,504 $ 15,512 $ 52,137 $ 48,848 ========= ========= ========= ========= Earnings per share - basic: Net income $ 0.30 $ 0.22 $ 0.73 $ 0.69 Earnings per share - diluted: Net income $ 0.30 $ 0.22 $ 0.72 $ 0.68 Shares used in per share calculations: Basic 72,093 71,052 71,616 70,814 Diluted 72,851 71,691 72,301 71,407 *T -0- *T World Wrestling Entertainment, Inc. Consolidated Balance Sheets (dollars in thousands) (Unaudited) As of As of December 31, December 31, 2007 2006 —————— —————— ASSETS CURRENT ASSETS: Cash and equivalents $135,805 $86,267 Short-term investments 130,548 161,889 Accounts receivable, net 56,597 52,113 Inventory, net 4,717 3,049 Prepaid expenses and other current assets 20,053 13,803 —————— —————— Total current assets 347,720 317,121 —————— —————— PROPERTY AND EQUIPMENT, NET 77,771 67,972 FEATURE FILM PRODUCTION ASSETS 21,890 53,560 INTANGIBLE ASSETS, NET 2,302 3,328 OTHER ASSETS 20,373 11,304 —————— —————— TOTAL ASSETS $470,056 $453,285 ============ ============ LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Current portion of long-term debt $927 $862 Accounts payable 21,951 14,909 Accrued expenses and other liabilities 30,684 25,837 Deferred income 18,012 20,166 —————— —————— Total current liabilities 71,574 61,774 —————— —————— LONG-TERM DEBT 4,875 5,800 NON-CURRENT TAX LIABILITY 10,227 - STOCKHOLDERS' EQUITY: Class A common stock 241 233 Class B common stock 477 477 Additional paid-in capital 301,329 286,985 Accumulated other comprehensive income 2,894 666 Retained earnings 78,439 97,350 —————— —————— Total stockholders' equity 383,380 385,711 —————— —————— TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $470,056 $453,285 ============ ============ *T -0- *T World Wrestling Entertainment, Inc. Consolidated Statements of Cash Flows (dollars in thousands) (Unaudited) Twelve Months Twelve Months Ended Ended December 31, December 31, 2007 2006 ——————- ——————- OPERATING ACTIVITIES: Net income $ 52,137 $ 48,848 Adjustments to reconcile net income to net cash provided by operating activities: Amortization of feature film production assets 29,062 - Revaluation of warrants 1,178 (1,553) Depreciation and amortization 9,319 8,741 Realized loss on sale of investments 1,958 1,134 Amortization of investment income (493) (1,022) Stock compensation costs 7,777 6,725 Provision for doubtful accounts 47 (1,474) Provision for inventory obsolescence 1,037 1,779 Benefit from deferred income taxes (7,421) 530 Excess tax benefit from stock-based payment arrangements (841) (2,418) Changes in assets and liabilities: Accounts receivable (4,531) 5370 Inventory (2,704) (3,074) Prepaid expenses and other assets 8,688 2,909 Feature film production assets (1,833) (19,627) Accounts payable 7,042 (398) Accrued expenses and other liabilities (598) (10,567) Deferred income (1,661) 2,046 ——————- ——————- Net cash provided by operating activities 98,163 37,949 ——————- ——————- INVESTING ACTIVITIES: Purchase of property and equipment (18,153) (8,112) Purchase of other assets (363) (3,607) Purchase of short-term investments (211,366) (78,527) Proceeds from sales or maturities of short-term investments 242,888 104,615 ——————- ——————- Net cash provided by investing activities 13,006 14,369 ——————- ——————- FINANCING ACTIVITIES: Repayments of long-term debt (860) (796) Dividends paid (68,664) (84,527) Issuance of stock, net 882 594 Proceeds from exercise of stock options 6,170 14,946 Excess tax benefit from stock-based compensation arrangements 841 2,418 ——————- ——————- Net cash used in financing activities (61,631) (67,365) ——————- ——————- NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 49,538 (15,047) CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 86,267 101,314 ——————- ——————- CASH AND CASH EQUIVALENTS, END OF PERIOD $ 135,805 $ 86,267 ============= ============= *T -0- *T World Wrestling Entertainment, Inc. Supplemental Information - EBITDA (dollars in thousands) (Unaudited) Three Months Ended Twelve Months Ended Dec. 31, Dec. 31, Dec. 31, Dec. 31, 2007 2006 2007 2006 —————————————————————- Net income reported on U.S. GAAP basis $21,504 $15,512 $52,137 $48,848 Provision for income taxes 6,378 5,471 24,337 26,535 Investment and other income, net 3,144 3,528 8,041 9,775 Depreciation and amortization 2,347 2,361 9,319 8,741 ————— ————— ————— ————— EBITDA $27,085 $19,816 $77,752 $74,349 ========== ========== ========== ========== *T
Non-GAAP Measure:
EBITDA is defined as net income before investment 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. -0- *T World Wrestling Entertainment, Inc. Supplemental Information- Free Cash Flow (dollars in thousands) (Unaudited) Three Months Ended Twelve Months Ended Dec. 31, Dec. 31, Dec. 31, Dec. 31, 2007 2006 2007 2006 ——————————————————— Net cash provided by operating activities $ 25,104 $5,325 $ 98,163 $37,949 Less cash used in capital expenditures: Purchase of property and equipment (10,164) (1,728) (18,153) (8,112) Purchase of other film library assets (62) (1,122) (363) (3,607) ————- ———— ————— ———— Free Cash Flow $ 14,878 $2,475 $ 79,647 $26,230 ========= ======== ========== ======== *T
Non-GAAP Measure:
We define Free Cash Flow as net cash provided by continuing operations less cash used for capital expenditures. Although it is not a recognized measure of liquidity under U.S. GAAP, Free Cash Flow provides useful information regarding the amount of cash our continuing business is generating after capital expenditures, available for reinvesting in the business and for payment of dividends.
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