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Submitted by Robert Fallon on Wednesday, August 21, 2002 at 11:29 AM EST
WWE Slammed by Weaker Ratings, Pay-Per-View WORLD WRESTLING ENTERTAINMENT, INC. REPORTS FIRST QUARTER RESULTS: REVENUES OF $88.1 MILLION AND EARNINGS PER COMMON SHARE OF $0.04 Stamford, Conn. August 21, 2002 – World Wrestling Entertainment, Inc. (NYSE:WWE) today announced financial results for its first fiscal quarter ended July 26, 2002. Total revenues for the quarter were $88.1 million as compared to $90.7 million in the prior year quarter. Net income was $2.5 million versus $12.0 million in the first quarter last year. In the current quarter, the Company recorded a favorable settlement with the Parents Television Council (PTC) on an after-tax basis of $2.2 million. The prior year quarter included an after-tax gain of $5.8 million associated with the revaluation and sale of certain equity investments. Earnings per common share were $0.04 for the quarter. Free cash flow (net income plus depreciation and amortization less capital expenditures and payment of long-term debt) for the first quarter was $3.0 million as compared to $7.7 million in the prior year quarter. Earnings before interest, taxes, depreciation and amortization, excluding the gain from a favorable PTC litigation settlement (EBITDA) were $2.2 million versus $7.1 million last year. "This was a difficult quarter as we experienced softness in our key drivers particularly in our television ratings and pay-per-view buys," said Linda E. McMahon, Chief Executive Officer. "During the past few months we focused on establishing two separate and unique brands and introduced a number of new talent and roster changes to both our SmackDown! and Raw brands. As we blend our talent into increasingly more compelling story lines with longer story arcs, we expect to see a positive impact on our attendance, ratings, and pay-per-view buys," said Mrs. McMahon. "As our brand extension strategy fully engages, we expect our U.S. based touring to improve. On the international touring front, we continue to build on the momentum we established earlier in the year. We recently held our Global Warning Tour in Melbourne, Australia and set a new attendance record at Colonial Stadium where we played to an extremely enthusiastic crowd of approximately 56,700 who attended our first live event tour on the continent in nearly two decades," added Mrs. McMahon. "Earlier this month we announced initiatives to realign our operating expenses and we expect to see the benefits of these initiatives in subsequent quarters. We are confident that the positive impact of our brand extension and international expansion strategies, together with the reduction and realignment of our operating budgets, will lead to operating results that more accurately reflect the strength of our businesses," concluded Mrs. McMahon. First Quarter Results Total revenues were $88.1 million for the quarter. Increases in Branded Merchandise revenues were offset by declines in Live and Televised Entertainment revenues. Live and Televised Entertainment Total revenues for our Live and Televised businesses for the quarter were $67.8 million as compared to $72.4 million in the same period last year. Live Event revenues increased 28% to $19.0 million. There were 87 events, including 4 international events, during the quarter. This compares to 43 events, including 1 international event, during the same period last year. Attendance increased 20% to approximately 500,400. This includes attendance of 37,100 from our international live event tour. Total attendance in the prior year quarter was 418,100, which included attendance of 16,000 from our international live event. The average ticket price increased approximately 7% to $37.92. Pay-Per-View revenues declined 24% to $19.2 million versus $25.4 million in the prior year quarter. Total domestic pay-per-view buys for the quarter were 1.1 million as compared to 1.6 million in the prior year quarter. Television Rights Fees revenues increased to $12.9 million primarily due to the Divas Special on TNN and growth in international rights fees. Television Advertising revenues were $16.7 million as compared to $19.5 million last year. This decrease was principally due to the impact of lower television ratings. Branded Merchandise Total revenues were $20.3 million for the quarter versus $18.3 million last year. Licensing revenues were $3.1 million as compared to $0.6 million in the prior year quarter. The variance was principally due to the timing of cash receipts of $3.1 million in the prior year that were reflected in the second quarter of Fiscal 2002. Consistent with the industry, we are seeing signs of strength in video game software as evidenced by WWE WrestleMania X8 which was the #1 GameCube title on the market and #7 on the top 100 video game titles for the month of June. We have seen a substantial reduction in sales of our action figures as compared to the prior year. Merchandise revenues increased 27% to $6.3 million as compared to $5.0 million in the prior year quarter. The growth in revenues was due to increases in attendance from the additional live events associated with our brand extension as well as an increase in per capita spending to $8.93 from $7.51 in the first quarter last year. Publishing revenues were essentially flat at approximately $4.0 million as compared to the same period last year. Home video revenues increased 26% to $3.5 million from $2.8 million due to a 36% increase in the number of units sold. The number of titles sold in DVD format accounted for about 50% of total units sold versus approximately 18% in the prior year quarter. According to Billboard Magazine, 6 of our home videos ranked among the 10 best selling home videos in the "Recreational Sports" category as of August 2002. The World revenues declined 32% to $2.3 million. Revenues continue to be soft principally as a result of the decrease in ratings and the decline in tourism in Times Square. Profit Contribution Total profit contribution for the quarter was $29.6 million as compared to $32.4 million in the prior year quarter. Total profit contribution margin decreased to 34% from 36%. The profit contribution margin for the Live and Televised businesses was approximately 34% versus 38% in the first quarter last year primarily reflecting the decline in pay-per-view revenues. The profit contribution margin for the Branded Merchandise businesses was 33% as compared to 25% during the same period last year due in part to increased licensing revenues. Selling, General and Administrative Expenses SG&A expenses for the quarter were $23.9 million as compared to $25.3 million last year. The current quarter included a gain from a favorable settlement of a lawsuit against the PTC, L. Brent Bozell III, Media Research Center, and others. This gain was partially offset by an increase in advertising expenses. As previously announced, the Company reduced and realigned its operating budgets, including a 3% reduction in the workforce, by approximately $20 million which will be reflected throughout the course of the year. Balance Sheet Total assets as of quarter end were $456.1 million which includes $277.0 million in cash, cash equivalents and short-term investments and $51.0 million in receivables. Long-term debt, including the current portion, as of quarter end was $9.8 million and shareholders’ equity totaled $362.7 million. Capital expenditures for the quarter totaled approximately $2.2 million. During the quarter, the Company repurchased 2,307,692 of its Class A common shares from NBC at $12.00 per share for a total cost of approximately $27.7 million. The Company also purchased 180,800 shares of our Class A stock at an average price of $10.24 per share in the marketplace as part of its previously announced stock buyback program. The total amount of Class A common stock purchased represents approximately 3% of total common shares outstanding. The total number of common shares outstanding is 70.4 million shares. Financials Attached World Wrestling Entertainment, Inc. Consolidated Statements of Income (dollars in thousands, except per share data) (Unaudited) Three Months Ended July 26, 2002 July 27, 2001 Net revenues $88,147 $90,669 Cost of revenues 58,519 58,266 Selling, general and administrative expenses 23,903 25,256 Depreciation and amortization 2,814 2,240 Operating income 2,911 4,907 Interest income, net and other income, net 929 14,540 Income from continuing operations before income taxes 3,840 19,447 Provisions for income taxes 1,312 7,455 Net income 2,528 11,992 Earnings per share - Basic and Diluted $0.04 $0.16 Weighted average common and common equivalent shares: Basic 71,110,001 72,932,384 Diluted 71,129,655 72,948,392 World Wrestling Entertainment, Inc. Consolidated Balance Sheets (dollars in thousands) (Unaudited) As of July 26, 2002 April 30, 2002 Assets Cash, cash equivalents and short-term investments $277.0 $294.1 Other current assets 67.6 81.5 Property, plant and equipment and other assets 111.5 111.8 Total Assets $456.1 $487.4 Liabilities and Stockholder's Equity Current liabilities $83.6 $88.1 Long-term debt, including current portion 9.8 9.9 Total Liabilities 93.4 98.0 Stockholders' equity 362.7 389.4 Total Liabilities and Stockholders' Equity $456.1 $487.4 World Wrestling Entertainment, Inc. (NYSE: WWE) is an integrated media and entertainment company headquartered in Stamford, Conn., with offices in New York, Los Angeles, Toronto and London. Additional information on the company can be found at wwe.com and corporate.wwe.com. Information on television ratings and community activities can be found at parents.wwe.com. Media Contact: Gary Davis, 203-353-5066 Investor Contact: Tom Gibbons, 203-328-2576 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, food and beverage, 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. Credit to: WWECorpBiz.com The Original WWF Fan Club
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