01.11.2007 12:30:00
|
WWE(R) Reports 2007 Third Quarter Results
World Wrestling Entertainment, Inc. (NYSE:WWE) today announced financial
results for its third quarter ended September 30, 2007. Revenues totaled
$108.1 million as compared to $93.2 million in the prior year quarter
while operating income was $13.4 million as compared to $12.5 million in
the prior year quarter. Net income was $8.5 million, or $0.12 per share,
as compared to $9.2 million, or $0.13 per share, in the prior year
quarter.
"In addition to the $12.8 million in film
related revenues, we posted higher revenues from both the Live and
Televised and Digital Media segments in the third quarter,”
said Linda McMahon, Chief Executive Officer. "We
also announced the development and implementation of our strategic
initiative for continued international expansion. We are establishing
new regional offices in Brazil and Australia to complement our current
offices in Canada, the UK and China. This will enable senior leadership
to be on the ground in these locations, and position our company for
continued growth and provide increased access to our expanding WWE fan
base,” concluded Mrs. McMahon.
Results By Business Segment
The following chart reflects net revenues and profit contribution by
segment for the three months ended September 30, 2007 and September 30,
2006. (Dollars in millions)
Three Months Ended Net Revenues September 30, 2007
September 30, 2006
Live and Televised Entertainment
$ 68.6
$ 65.6
Consumer Products
19.0
21.7
Digital Media
7.7
5.9
WWE Films
12.8
-
Total
$ 108.1
$ 93.2
Three Months Ended Profit Contribution September 30, 2007
September 30, 2006
Live and Televised Entertainment
$ 26.3
$ 23.8
Consumer Products
12.1
12.7
Digital Media
3.5
1.7
WWE Films
2.8
-
Total profit contribution
$ 44.7
$ 38.2
Profit contribution margin
41%
41%
Live and Televised Entertainment
Revenues from our Live and Televised Entertainment businesses were $68.6
million for the current quarter as compared to $65.6 million in the
prior year quarter, representing a 5% increase.
Live Event revenues were $20.1 million as compared to $17.3
million in the prior year quarter, primarily due to an increase in the
number of international events.
There were 78 total events, including 15 international events, during
the current quarter as compared to 102 events, including 8
international events, in the prior year quarter. The prior year
quarter also included 27 stand alone ECW®
events. In the current quarter, our ECW events were co-branded and
included as part of our SmackDown®
events.
International events generated $6.6 million of revenues as compared to
$3.2 million in the prior year. 10 out of the 15 international events
in the current quarter were structured as buy-out deals with
guaranteed fixed revenues as compared to 5 buy-out deals in the prior
year quarter. The remaining international events in which we sold
tickets directly yielded an average ticket price of approximately
$77.75 in the current quarter as compared to $66.30 in the prior year
quarter.
North American events generated $13.5 million of revenues as compared
to $14.0 million in the prior year. North American average attendance
was approximately 5,500 in the current quarter as compared to 4,300 in
the prior year quarter, an increase of 28%. The average ticket price
for North American events was approximately $38.92 in the current
quarter as compared to $35.17 in the prior year quarter. Offsetting
these increases was the absence of the stand-alone ECW events in the
prior year quarter.
Pay-Per-View revenues were $18.8 million as compared to $19.7
million in the prior year quarter. There were three pay-per-view
events produced in each quarter.
The details for the number of buys (in 000s) are as follows:
Events (in chronological order)
Three Months Ended
Three Months Ended September 30, 2007 September 30, 2006
The Great American Bash®
229
227
SummerSlam®
537
529
Unforgiven®
210
289
Prior events
87
81
Total
1,063
1,126
Venue Merchandise revenues were $3.9 million as compared
to $4.4 million in the prior year quarter, primarily reflecting a
decrease in per capita spending by our fans to approximately $10.15 in
the current quarter as compared to $11.12 in the prior year quarter.
The per capita spend in the current quarter was negatively impacted by
a decline in the number of T-shirts sold at arenas, due primarily to
our expanded domestic licensing and the availability of our products
at local retail outlets.
Television Rights Fees revenues were $22.8 million as compared
to $22.5 million in the prior year quarter.
WWE 24/7™ revenues were $1.4
million as compared to $0.6 million in the prior year quarter,
reflecting growth in the number of subscribers for our video-on-demand
program.
Consumer Products
Revenues from our Consumer Products businesses were $19.0 million versus
$21.7 million in the prior year quarter, representing a 13% decrease.
Home Video net revenues were $5.7 million as compared to $11.4
million in the prior year quarter. The decline in Home Video revenues
primarily reflects changes in the timing of new releases as there were
no new titles released in the current quarter, excluding the monthly
releases of our pay-per-view events. There are several new titles
scheduled for release in the upcoming 4th
quarter, including retrospective titles on Superstars Rey Mysterio®,
Shawn Michaels®, and John Cena®,
among others.
Licensing revenues were $9.4 million as compared to $7.2
million in the prior year quarter, primarily reflecting increases in
apparel and toy related sales. Revenues increased by $1.2 million in
both the apparel and toy categories as compared to the prior year
quarter.
Magazine publishing net revenues were $3.9 million as compared
to $3.1 million in the prior year quarter, reflecting increased
newsstand and subscription copies sold. We published three issues of
WWE Magazine in each quarter and published one additional magazine
special in the current quarter.
Digital Media
Revenues from our Digital Media related businesses were $7.7 million as
compared to $5.9 million in the prior year, representing a 31% increase.
WWE.com revenues were $4.6 million as compared to $2.6 million
in the prior year quarter. Web-based advertising increased by $1.3
million, or 68%, while wireless content revenues increased by $0.7
million as compared to the prior year quarter.
WWEShop revenues were $3.1 million as compared to $3.3 million
in the prior year quarter. The number of orders processed during the
current quarter declined by 9%, but was offset by an increase in the
average per order spend by our customers to $53.58, as compared to
$50.05 per order in the prior year quarter.
WWE Films
Revenues from our WWE Films segment were $12.8 million in the current
quarter. WWE only participates in film revenue when our distributors
have recouped their print and advertising costs and the results have
been reported to us. This is the first quarter in which we have recorded
film revenue, primarily relating to our feature film "The
Marine”. Our capitalized feature film
production asset balance is amortized in proportion with the recognition
of revenue. As a result, we have amortized approximately $10.0 million
of feature film assets, yielding approximately $2.8 million in profit
contribution for feature films.
Profit Contribution (Net revenues less
cost of revenues)
Profit contribution was $44.7 million in the current quarter as compared
to $38.2 million in the prior year quarter. Total profit contribution
margin remained unchanged at approximately 41% as compared to the prior
quarter.
Selling, general and administrative
expenses
SG&A expenses were $28.9 million for the current quarter as compared to
$23.7 million in the prior year quarter, reflecting an increase in
staff-related costs as well as professional and legal fees related to
the Chris Benoit tragedy and the review of our Talent Wellness Program.
Effective tax rate
In the current quarter the effective tax rate was 40% as compared to 35%
in the prior year quarter. This increase reflects the impact of
approximately $0.8 million of realized investment losses which were not
deductible for tax purposes.
EBITDA
EBITDA was approximately $15.8 million in the current quarter as
compared to $14.5 million in the prior year quarter.
Summary Results for the Nine Months
Ended
Total revenues through the nine months ended September 30, 2007 were
$353.0 million as compared to $307.6 million in the prior year period, a
15% increase, while operating income for the current period was $43.7
million versus $48.2 million in the prior year period. Net income was
$30.6 million, or $0.42 per share, as compared to $33.3 million, or
$0.47 per share, in the prior year period. EBITDA was $50.7 million for
the current nine month period as compared to $54.5 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 $66.4 million as compared to $54.5
million in the prior year period, representing a 22% increase.
The following chart reflects net revenues and profit contribution by
segment for the nine months ended September 30, 2007 and September 30,
2006. (Dollars in millions)
Net Revenues
September 30, 2007
September 30, 2006
Live and Televised Entertainment
$ 234.5
$ 219.5
Consumer Products
82.8
71.0
Digital Media
22.9
17.1
WWE Films
12.8
-
Total
$ 353.0
$ 307.6
Profit Contribution
September 30, 2007
September 30, 2006
Live and Televised Entertainment
$ 83.4
$ 80.7
Consumer Products
51.5
42.0
Digital Media
9.2
5.5
WWE Films
(13.1
)
-
Total profit contribution
$ 131.0
$ 128.2
Profit contribution margin
37
%
42
%
Live and Televised Entertainment
Revenues from our Live and Televised Entertainment businesses were
$234.5 million for the current period as compared to $219.5 million in
the prior year, a 7% increase.
September 30, 2007
September 30, 2006
Live Events
$ 68.4
$ 59.3
Pay-Per-View
74.4
74.9
Venue Merchandise
14.5
14.0
Television Rights Fees
68.6
63.9
Television Advertising
3.7
4.8
WWE 24/7
3.8
1.6
Other
1.1
1.0
Total Live and Televised
$234.5
$ 219.5
Consumer Products
Revenues from our Consumer Products businesses were $82.8 million versus
$71.0 million in the prior year, an increase of 17%.
September 30, 2007
September 30, 2006
Home Video
$ 33.9
$ 35.9
Licensing
37.7
25.7
Magazine Publishing
10.5
9.1
Other
0.7
0.3
Total Consumer Products
$ 82.8
$ 71.0
Digital Media
Revenues from our Digital Media related businesses were $22.9 million as
compared to $17.1 million in the prior year, an increase of 34%.
September 30, 2007
September 30, 2006
WWE.com
$ 12.0
$ 7.7
WWE Shop
10.9
9.4
Total Digital Media
$ 22.9
$ 17.1
WWE Films
As discussed above, revenues from our WWE Films segment were $12.8
million primarily relating to our feature film The Marine. We
have approximately $29.2 million of capitalized film production costs on
our balance sheet as of September 30, 2007.
Profit Contribution (Net revenues less
cost of revenues)
Profit contribution was $131.0 million in the current period as compared
to $128.2 million in the prior year period. Total profit contribution
margin was approximately 37% in the current year as compared to 42% in
the prior year period, primarily reflecting the impact of the feature
film impairment.
Selling, general and administrative
expenses
SG&A expenses were $80.3 million for the current period as compared to
$73.7 million in the prior year period, primarily due to increased staff
related costs, including costs associated with the expansion of our
digital media operations.
Effective tax rate
In the current period the effective tax rate was 37% as compared to 39%
in the prior year period. This decline represents the benefit of
increased tax exempt interest income, partially offset by the impact of
additional realized investment losses which were not currently
deductible for tax purposes.
Cash Flows
Net cash provided by operating activities was $73.1 million for the nine
months ended September 30, 2007 as compared to $32.6 million in the
prior year period.
Note: World Wrestling
Entertainment, Inc. will host a conference call on November 1, 2007 at
11:00 a.m. ET to discuss the Company’s
earnings results for third 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.
World Wrestling Entertainment, Inc. Consolidated Income Statements
(in thousands, except per share data)
(Unaudited)
Three Months Ended Nine Months Ended Sept. 30,
Sept. 30, Sept. 30,
Sept. 30, 2007
2006
2007
2006
Net revenues
$
108,110
$93,227
$
353,012
$
307,644
Cost of revenues
63,438
55,028
222,059
179,403
Selling, general and administrative expenses
28,917
23,735
80,286
73,708
Depreciation and amortization
2,368
1,968
6,972
6,380
Operating income
13,387
12,496
43,695
48,153
Investment income, net
1,766
2,589
5,745
6,393
Interest expense
119
215
353
495
Other income, net
(841
)
(648
)
(495
)
349
Income before income taxes
14,193
14,222
48,592
54,400
Provision for income taxes
5,744
5,007
17,959
21,064
Net income
$
8,449
$ 9,215
$
30,633
$
33,336
Earnings per share – basic :
Net income
$
0.12
$ 0.13
$
0.43
$
0.47
Earnings per share – diluted:
Net income
$
0.12
$ 0.13
$
0.42
$
0.47
Shares used in per share calculations:
Basic
71,949
70,907
71,445
70,563
Diluted
72,469
71,583
72,211
71,282
World Wrestling Entertainment, Inc. Consolidated Balance Sheets
(dollars in thousands)
(Unaudited)
As of
As of September 30, December 31, 2007 2006 ASSETS
CURRENT ASSETS:
Cash and equivalents
$
67,059
$
86,267
Short-term investments
201,643
161,889
Accounts receivable, net
50,337
52,113
Inventory, net
4,672
3,049
Prepaid expenses and other current assets
17,553
13,803
Total current assets
341,264
317,121
PROPERTY AND EQUIPMENT, NET
70,044
67,972
FEATURE FILM PRODUCTION ASSETS
29,150
53,560
INTANGIBLE ASSETS, NET
2,574
3,328
OTHER ASSETS
13,491
11,304
TOTAL ASSETS
$
456,523
$
453,285
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt
$
910
$
862
Accounts payable
15,387
14,909
Accrued expenses and other liabilities
26,744
25,837
Deferred income
19,421
20,166
Total current liabilities
62,462
61,774
LONG-TERM DEBT
5,114
5,800
NON-CURRENT TAX LIABILITY
11,407
-
STOCKHOLDERS' EQUITY:
Class A common stock
241
233
Class B common stock
477
477
Additional paid-in capital
299,601
286,985
Accumulated other comprehensive income
2,875
666
Retained earnings
74,346
97,350
Total stockholders' equity
377,540
385,711
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY
$
456,523
$
453,285
World Wrestling Entertainment, Inc. Consolidated Statements of Cash Flows
(dollars in thousands)
(Unaudited)
Nine Months Ended September 30,
September 30, 2007 2006
OPERATING ACTIVITIES:
Net income
$ 30,633
$33,336
Adjustments to reconcile net income to net cash provided by
operating activities:
Amortization of feature film production assets
25,851
-
Revaluation of warrants
727
153
Depreciation and amortization
6,972
6,380
Realized loss on sale of investments
1,580
1,029
Amortization of investment income
(370
)
(899
)
Stock compensation costs
6,442
4,727
Provision for doubtful accounts
(603
)
178
Provision for inventory obsolescence
1,200
1,543
Benefit from deferred income taxes
(3,011
)
(2,327
)
Excess tax benefit from stock-based payment arrangements
(824
)
(1,879
)
Changes in assets and liabilities:
Accounts receivable
2,378
9,282
Inventory
(2,824
)
(3,651
)
Prepaid expenses and other assets
5,819
2,581
Feature film production assets
(1,440
)
(18,723
)
Accounts payable
478
(2,364
)
Accrued expenses and other liabilities
426
4,082
Deferred income
(375
)
(824
)
Net cash provided by operating activities
73,059
32,624
INVESTING ACTIVITIES:
Purchase of property and equipment
(7,989
)
(6,384
)
Purchase of other assets
(301
)
(2,485
)
Purchase of short-term investments
(144,977
)
(47,649
)
Proceeds from sales or maturities of short-term investments
105,475
101,615
Net cash (used in) provided by investing activities
(47,792
)
45,097
FINANCING ACTIVITIES:
Repayments of long-term debt
(638
)
(591
)
Dividends paid
(51,436
)
(50,607
)
Issuance of stock, net
807
(1,658
)
Proceeds from exercise of stock options
5,968
14,612
Excess tax benefit from stock-based compensation arrangements
824
1,879
Net cash used in financing activities
(44,475
)
(36,365
)
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS
(19,208
)
41,356
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD
86,267
101,314
CASH AND CASH EQUIVALENTS, END OF PERIOD
$ 67,059
$142,670
World Wrestling Entertainment, Inc. Supplemental Information - EBITDA
(dollars in thousands)
(Unaudited)
Three Months Ended
Nine Months Ended Sept. 30,
Sept. 30, Sept. 30,
Sept. 30, 2007
2006
2007 2006
Net income reported on U.S. GAAP basis
$
8,449
$
9,215
$
30,633
$
33,336
Provision for income taxes
5,744
5,007
17,959
21,064
Interest and other, net
806
1,726
4,897
6,247
Depreciation and amortization
2,368
1,968
6,972
6,380
EBITDA
$
15,755
$
14,464
$
50,667
$
54,533
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)
Three Months Ended Nine Months Ended Sept. 30,
Sept. 30, Sept. 30, Sept. 30, 2007
2006
2007
2006
Net cash provided by operating activities
$
24,285
$ 11,585
$
73,059
$
32,624
Less cash used in capital expenditures:
Purchase of property and equipment
(5,411
)
(1,755
)
(7,989
)
(6,384
)
Purchase of other film library assets
(135
)
(221
)
(301
)
(2,485
)
Free Cash Flow
$
18,739
$ 9,609
$
64,769
$
23,755
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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