World Wrestling EntertainmentT Issues Q1 Results
Media contact: Gary Davis 203-353-5066
Investor contact: Michele Goldstein 203-352-8642
STAMFORD Conn. August 25 2003 – World Wrestling Entertainment Inc. (NYSE:WWE) today announced financial results for its first quarter ended July 25 2003.
The Company reported income from continuing operations of $2.8 million or $0.04 per share versus $3.9 million or $0.05 per share in the prior year. Significantly the Company noted that for the first time in its recent history the quarterly results include only two monthly pay-per-view events. The Company’s July event Vengeance™ occurred after the close of the fiscal first quarter and will result in four events in the fiscal second quarter. Other than the shift in timing of revenue and profit reporting there are no business implications to this occurrence; the Company’s schedule of 12 monthly pay- per-view events is unchanged.
“We had a good quarter and exceeded our expectations. Our pay-per-view buys for the quarter were better than anticipated and our cost-cutting measures initiated in 2003 produced better profitability than we planned ” said Linda McMahon WWE™ CEO. “I am also excited that our first RAW® and SmackDown!™ separately branded pay-per-view events were well received. This is significant and adds to the strength of the WWE brand. As our results show the strategy enhanced our pay-per-view product and international growth. We now expect EBITDA for fiscal 2004 to be between $42.5 million and $47.5 million an increase of $2.5 million.”
Total revenues were $74.7 million as compared to $85.4 million in the prior year quarter. Revenues for the prior year quarter included approximately $5.5 million related to our July 2002 pay-per-view event.
EBITDA was $5.7 million in the current quarter as compared to $7.0 million in the prior year quarter. EBITDA for the prior year quarter included $3.1 million related to the July 2002 pay-per-view event and a $3.5 million favorable settlement of litigation. Operating income for the quarter was $3.0 million versus $5.1 million in the prior year quarter. Net income was $2.7 million or $0.04 per share as compared to $2.5 million or $0.04 per share in the prior year quarter.
Results By Business Segment
Live and Televised Entertainment
Revenues from the Company’s Live and Televised businesses were $62.7 million as compared to $67.8 million in the prior year quarter.
- Pay-Per-View revenues were $13.8 million versus $19.0 million in the prior year quarter. In the first quarter of fiscal 2004 only two pay-per-view events were produced as compared to three in the prior year quarter due to the timing of our quarter end as compared to the air date. The Company will produce 12 pay-per-view events in fiscal 2004 with 4 events taking place in its second fiscal quarter.
- Total domestic pay-per-view buys for the quarter were 0.9 million as compared to 1.1 million in the prior year quarter.
- Overall buys for the two pay-per-view events that aired in the quarter were equal to the number of buys recorded for the corresponding events in the prior year quarter.
- Total buys for the Company’s July 2003 event Vengeance were 275 000. The event is expected to contribute EBITDA of $2.6 million to the Company’s second fiscal quarter.
- Live Event revenues were $18.1 million as compared to $19.1 million in the first quarter of last year.
- There were 84 events including 10 international events during the quarter as compared to 87 events including 4 international events during the same period last year.
- The average attendance at the Company’s live events was approximately 5 200 as compared to approximately 5 750 in the prior year quarter.
- The average ticket price increased $2.50 to $40.42 for the quarter due to the increased number of international events which have higher average ticket prices.
- Television Advertising revenues were $16.1 million as compared to $16.7 million in the prior year quarter. This decline was principally due to the impact of lower sponsorship revenues.
- Average household ratings for the quarter for the Company’s RAW and SmackDown! programs were even when compared to the prior year quarter.
- Television Rights Fees revenues increased $1.8 million to $14.7 million due primarily to the benefit from new contracts and executive producer fees related to an upcoming feature film starring The Rock®.
Branded Merchandise
Revenues from the Company’s Branded Merchandise businesses were $12.0 million versus $17.6 million in the prior year quarter.
- Merchandise revenues were $4.3 million as compared to $6.3 million in the prior year quarter the decrease due primarily to a 29% reduction in revenues derived at the Company’s live events due to lower attendance and lower per capita spending.
- Publishing revenues decreased $1.8 million to $1.7 million due to a decrease in newsstand units sold and one less special magazine published in the quarter as compared to the prior year quarter.
- Home Video revenues were $2.5 million as compared to $3.5 million in the prior year quarter the decrease due primarily to a decrease in units sold. Sales of catalog titles released in the prior year were down 69% while new title releases were 21% ahead of the year ago quarter. The reduction in catalog units was related to a court ordered injunction prohibiting the sale of such titles containing the Company’s former logo.
- Licensing revenues decreased $0.9 million to $2.2 million due to a decrease in video game and toy sales reflecting heightened competition for licensed products and a contraction in the number of retail outlets.
Profit Contribution (Net revenues less cost of revenues)
Profit contribution for the quarter was $25.4 million as compared to $28.8 million in the prior year quarter. Total profit contribution margin was approximately 34% for both periods.
The profit contribution margin for the Live and Televised businesses was approximately 34% for both periods. The impact of airing one less pay-per-view event was offset by increased television rights fees and decreased television production costs.
The profit contribution margin for the Branded Merchandise businesses was approximately 34% for both periods.
Selling general and administrative expenses
SG&A expenses decreased by $2.1 million for the quarter to $19.7 million as compared to $21.8 million in the prior year quarter. Included in the prior year was a favorable litigation settlement of $3.5 million. Reflected in the current quarter was a reduction in bad debt expense of $2.0 million as a result of a payment received from a pay-per-view service that was fully reserved for in the prior year. Excluding these items SG&A expenses decreased by $3.6 million as compared to the prior year quarter due primarily to lower advertising and promotion expenses and the impact of the cost cutting measures taken during fiscal 2003.
Fiscal 2004 Outlook
The Company anticipates that its net revenue results for fiscal 2004 will be between $325.0 and $350.0 million EBITDA will be between $42.5 and $47.5 million and Income from continuing operations will be between $23.0 and $26.0 million or between $0.34 and $0.38 per share.
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. For additional information on WrestleMania XX to be broadcast live on pay-per-view from Madison Square Garden in New York City on March 14 2004 go to wrestlemania.wwe.com. Information on television ratings and community activities can be found at parents.wwe.com.
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Editor’s Note: World Wrestling Entertainment Inc. will host a conference call on Tuesday August 26 2003 at 11:00 a.m. ET to discuss the Company’s first quarter earnings results for fiscal year 2004. All interested parties can access the conference call by dialing 800-362-0574 (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.
Trademarks: The names of all World Wrestling Entertainment televised and live programming talent names images likenesses slogans and wrestling moves and all World Wrestling Entertainment logos are trademarks which are the exclusive property of World Wrestling Entertainment 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 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; 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 Statements of Income
(dollars in thousands except per share data)
(Unaudited)
| July 25 2003 | July 26 2002 | |
|---|---|---|
| Net revenues | $ 74 675 | $ 85 449 |
| Cost of revenues | 49 261 | 56 618 |
| Selling general and administrative expenses | 19 719 | 21 787 |
| Depreciation and amortization | 2 724 | 1 992 |
| Operating income | 2 971 | 5 052 |
| Interest income and other net | 1 520 | 929 |
| Income before income taxes | 4 491 | 5 981 |
| Provision for income taxes | 1 683 | 2 126 |
| Income from continuing operations | 2 808 | 3 855 |
| Discontinued operations: | ||
| Loss from discontinued operations net of tax | (158) | (1 327) |
| Net income | $ 2 650 | $ 2 528 |
| Earnings (loss) per common share – Basic and Diluted: | ||
| Continuing operations | $ 0.04 | $ 0.05 |
| Discontinued operations | $ – | $ (0.02) |
| Net income | $0.04 | $0.04 |
| Weighted average common and common equivalent shares outstanding: | ||
| Basic | 69 045 995 | 71 110 001 |
| Diluted | 69 154 113 | 71 129 655 |
World Wrestling Entertainment Inc.
Consolidated Balance Sheets
(dollars in thousands)
(Unaudited)
| ASSETS | July 25 2003 | April 30 2003 |
|---|---|---|
| CURRENT ASSETS: | ||
|
Cash and cash equivalents
|
$ 117 237 | $ 128 473 |
|
Short-term investments
|
145 760 | 142 641 |
|
Accounts receivable net
|
35 565 | 49 729 |
|
Inventory net
|
903 | 839 |
|
Prepaid expenses and other current assets
|
17 438 | 18 443 |
|
Assets of discontinued operations
|
20 953 | 21 129 |
|
Total current assets
|
337 856 | 361 254 |
| PROPERTY AND EQUIPMENT – NET | 57 842 | 59 325 |
| INTANGIBLE ASSETS – NET | 13 373 | 12 055 |
| OTHER ASSETS | 4 547 | 4 623 |
| TOTAL ASSETS | $ 413 618 | $ 437 257 |
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||
| CURRENT LIABILITIES: | ||
|
Current portion of long-term debt
|
$ 791 | $ 777 |
|
Accounts payable
|
12 767 | 14 188 |
|
Accrued expenses and other liabilities
|
38 185 | 34 991 |
|
Deferred income
|
20 230 | 24 662 |
|
Liabilities of discontinued operations
|
10 299 | 11 554 |
|
Total current liabilities
|
82 272 | 86 172 |
| LONG-TERM DEBT | 8 933 | 9 126 |
| COMMITMENTS AND CONTINGENCIES | ||
| STOCKHOLDERS’ EQUITY: | ||
|
Class A common stock
|
182 | 182 |
|
Class B common stock
|
548 | 548 |
|
Treasury stock
|
(49 815) | (30 569) |
|
Additional paid-in capital
|
297 473 | 297 315 |
|
Accumulated other comprehensive (loss) income
|
(121) | 243 |
|
Retained earnings
|
74 146 | 74 240 |
|
Total stockholders’ equity
|
322 413 | 341 959 |
| TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY | $ 413 618 | $ 437 257 |
World Wrestling Entertainment Inc.
Consolidated Statements of Cash Flows
(dollars in thousands)
(Unaudited)
| July 25 2003 | July 26 2002 | |
|---|---|---|
| OPERATING ACTIVITIES: | ||
| Net income | $ 2 650 | $ 2 528 |
| Adjustments to reconcile net income to net cash provided by (used in) operating activities: | ||
| Loss from discontinued operations | 158 | 1 327 |
| Depreciation and amortization | 2 724 | 1 992 |
| Amortization of deferred income | (335) | (318) |
| Amortization of deferred compensation costs | 158 | – |
| Provision for doubtful accounts | (1 976) | 463 |
| Provision for inventory obsolescence | (128) | 314 |
| Changes in assets and liabilities: | ||
| Accounts receivable | 16 141 | 12 498 |
| Inventory | 64 | 162 |
| Prepaid expenses and other assets | 993 | 382 |
| Accounts payable | (1 420) | (4 882) |
| Accrued expenses and other liabilities | 3 515 | 2 630 |
| Deferred income | (4 097) | (961) |
| Net cash provided by continuing operations | 18 447 | 16 135 |
| Net cash used in discontinued operations | (1 236) | (3 977) |
| Net cash provided by operating activities | 17 211 | 12 158 |
| INVESTING ACTIVITIES: | ||
| Purchase of property and equipment | (980) | (1 266) |
| Purchase of other assets | (1 487) | – |
| Purchase of short-term investments net | (3 811) | (828) |
| Net cash used in continuing operations | (6 278) | (2 094) |
| Net cash used in discontinued operations | – | (895) |
| Net cash used in investing activities | (6 278) | (2 989) |
| FINANCING ACTIVITIES: | ||
| Repayment of long-term debt | (158) | (147) |
| Obligation under capital lease agreement | (21) | – |
| Purchase of treasury stock net of treasury stock reissued | (19 246) | (27 693) |
| Dividends paid | (2 744) | – |
| Net proceeds from exercise of stock options | – | 404 |
| Net cash used in continuing operations | (22 169) | (27 436) |
| Net cash provided by discontinued operations | – | 322 |
| Net cash used in financing activities | (22 169) | (27 114) |
| NET DECREASE IN CASH AND CASH EQUIVALENTS | (11 236) | (17 945) |
| CASH AND CASH EQUIVALENTS BEGINNING OF PERIOD | 128 473 | 86 396 |
| CASH AND CASH EQUIVALENTS END OF PERIOD | $ 117 237 | $ 68 451 |
Supplemental Information – EBITDA
(dollars in thousands)
(Unaudited)
| July 25 2003 | July 26 2002 | |
|---|---|---|
| Net income reported on GAAP basis | $ 2 650 | $ 2 528 |
| Loss from discontinued operations | 158 | 1 327 |
| Provision for income taxes | 1 683 | 2 126 |
| Interest income and other net | (1 520) | (929) |
| Depreciation and amortization | 2 724 | 1 992 |
| EBITDA | $ 5 695 | $ 7 044 |