Linda McMahon held the Advisory/WWFE 2nd Quarter Conference call this morning. I listened in and jotted down the following notes. Replay information is at the bottom of the post.

The moderator starts the off welcoming everyone to the WWFE second quarter conference call. -- Tom Gibbons introduces Linda McMahon, CEO, and August, "Auggy", Liguori, EVP & CFO. Gibbons turns the call over to Linda:

Linda welcomes everyone. She will be covering the key challenges and issues over the last quarter. There is some degree of cyclicality in the business right now. They remain focused on their long-term goals. WWFE will continue to concentrate on branding. The most challenging thing now is the drop in ratings. The ratings seem to be stabilized and continue to show improvement. However, Linda [and company] are not satisfied with the current ratings and will continue to work with the creative team to increase fan satisfaction.

Linda feels of the reason for the ratings drop is that weekly storylines are not as compelling. The integration of WCW hasn't taken off as they had hoped. The WWF listens to their fans and will remedy this drop off in ratings with improved storylines. They have started a new tour and to date have had very strong sales from it. (This would be live shows with WCW/ECW stars.)

They are still planning to open an office in London. They are continuing to beef up their international relationships. They have made relationships a few new countries and strengthened a few existing 'friends' as well: Japan, South Africa, Brazil, India and Finland. They are still finalizing the number of tours and will give the dates in the beginning of the year.

They have decided to stop negotiations with DirecTV. They feel in the long term they will not be hurt by this to a large degree. They aren't opposed to talk to them at some point in the future, but they will not make a deal that was less than the existing agreement they had.

They are still holding strong with sponsors and are very proud to be above their peers in the industry. 60% of their merchandize stock has been sold which is above the industry standard. Linda mentions the launch of Box at WWF NY. They have really beefed up their software releases in the coming months and are looking forward to the positive impact this will have on their revenues.

They events of Sept 11th have impacted there sales a to a degree, but they are seeing a much stronger pattern in sales now that the nation is pulling back together.

Linda discusses the "World." The World is WWF NY at night; the restaurant turns into a nightclub. They will be having more concerts and illusionists in the up coming months. The nightclub has been doing very well.

To help with the reduction in revenues for the year WWFE reduced their workforce by 9%.

Linda turns things over to Auggy:

For a more precise and extensive run down of the financial aspects please see the revenue breakdown on http://www.wwfecorpbiz.com/2q.html . [Please check it out tons of details!]

-Revenues: 98.2M this quarter / 100.9M last year
26% is merchandise
15% to 25.5%

-Ticket prices have increased by 5%.

-Domestic rates fees more than doubled.
-International rates fees increased 36%

-TV revenues fell 15%. (Though the WWF beat the industry by 100%.)

-They have signed new sponsors: Taco Bell, Subway, Microsoft, and Adidas; and increased their gaming licenses with Nintendo, Xbox and Sony.

-5.5M merchandise sales for this quarter (lower because of decrease of attendance).

-The new contract with Sony Music should help their merchandise sales tremendously.

-Profit margins are softening. Profit contribution was 36%.

-Reduced payroll by 3.6M.


Auggy opens it up to questions:

Q: Explain the concept of the second brand. How is the second brand going to be developed w/out giving to much information about the storylines?
A: Linda - They announced the consolidation of The Alliance and the WWF at Survivor Series. The development of the second brand didn't take off like they wanted. They have gone through a creative confusion over the last few weeks and feel that is a part of the decrease in ratings. The storylines and of the second brand will become much more apparent in the following months. There will be additional PPVs. Not many but they have plans to beef up the second brand under the WWF umbrella. Linda refers to the second brand as "Second Tier Tours". They will be adding 100 live shows. A lot focus will be on the UK market.

Q: Do you believe the drop off in ratings because a lot of the creative talent was used up on the XFL?
A: Linda said it was much more to trying to keep to focus on the second brand not taking off than the failing XFL. [Bottom line, no the XFL had nothing to do with the drop in ratings for shows.] Linda also mentions the injuries and the Rock's absence; making his movie, hurt the ratings. [She seemed very confident to have the 'creative confusion' figured out and the up coming storylines will be fresh and interesting.]

Q: Would you tribute some of the ratings drop to people watching CNN for the news of Sept. 11.
A: Linda said only a small amount.

Q: He noticed that the WWFE has some strange occurrences in the way the have projected for 3rd and 4th quarter revenues.
A: Auggy - 15-18% of the revenues are from DirecTV. / They are looking very forward to a very heavy Christmas season on their video gaming software. They will be seeing 2 quarter licensing and gaming revenues, which will boost their overall revenues for the fiscal year. [There was some confusion about there being new licensing as to just the timeline of the existing licensing revenues coming to fruition.] Linda adds that a few shows will be added one being Tough Enough 2 and Divas.

Q: Brief record of Smackdown? Interest in WWF Amusement Park? Interest in acquiring a movie production company?
A: Linda - They will be having WWF rides inside existing amusement parks, but will not be opening their own chain of amusement parks. They are offering new releases to WWF music and they will be releasing a new CD. Nerotica was signed and will be releasing a CD in April. Smackdown Records is slow growth but they are doing it in meticulously to ensure the right decisions are made for this venture. They are thinking about doing a music release with Lillian Garcia, who recently performed at the World with her band. Discussions are going on and funding is there for movies and scripting. They will be hiring someone for their CA office to further scripting and movie deals.

Q: Over the last 12 to 18 months the retail channel has peeks and troughs. How do you think it looks now?
A: Auggy says they have almost gotten rid of their overstock. Jakks is saying they feel the sales will be strong over the Christmas holiday, nor have they complained about merchandise sales over the last few months. [That's a good thing.] Overall things have been very good recently. Auggy hits more on the fact that WWF has beefed up video and gaming software.

Q: Give us a feeling for ratings that you can guarantee us for made goods.
A: Linda say they are really strong and they are selling at a 4 and 5 rating so there is really no issue in this area. [From what I could gather 4 and 5 ratings are very high. Kudos WWFE.]

Q: International TV deals - how much do you expect to contribute to the revenues.
A: the greatest growth will come from business partnerships and live shows. 5% is international revenue so there is a lot of room for growth but she isn't expecting anything to happen from the TV deals... (They are not all across India and breaking into Brazil is a big step for the WWF).

Tom ends the call asks the participants to see the WWFE's site for more information on their revenue breakdown (see url posted above). He wishes everyone a Happy Thanksgiving. End of call.


Replay Information
From: Wednesday, November 21, 2001 @ 1:00 PM EST
To: Friday, November 23, 2001 @ 5:00 PM EST
Domestic US Callers: 800-633-8284
International Callers: 858-812-6440
Reservation Number: # 19973402