Search the web
Welcome, Guest
[Sign Out, My Account]
EDGAR_Online

Quotes & Info
Enter Symbol(s):
e.g. YHOO, ^DJI
Symbol Lookup | Financial Search
WWE > SEC Filings for WWE > Form 10-Q on 1-Nov-2013All Recent SEC Filings

Show all filings for WORLD WRESTLING ENTERTAINMENTINC | Request a Trial to NEW EDGAR Online Pro

Form 10-Q for WORLD WRESTLING ENTERTAINMENTINC


1-Nov-2013

Quarterly Report


Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Background
The following analysis outlines all material activities contained within each of our reportable segments.
Live and Televised Entertainment
Revenues consist principally of ticket sales to live events, sales of merchandise at these live events, television rights fees, integrated sponsorship fees, and fees for viewing our pay-per-view and video-on-demand programming.

Consumer Products
Revenues consist principally of sales of WWE produced content via home entertainment platforms, magazine sales and royalties or license fees related to various WWE themed products such as video games, toys and apparel.

Digital Media
Revenues consist principally of advertising sales on our websites, rights fees received for digital content, sale of merchandise on our website through our WWEShop internet storefront and sales of various broadband and mobile content.

WWE Studios
Revenues consist of amounts earned from the distribution of filmed entertainment.

Results of Operations
Beginning in the first quarter of 2013, the Company made changes to its operating plan and management reporting to reflect a change in the measurement used by management to evaluate performance. The Company changed its measure of segment profit (loss) to operating income (loss) before depreciation and amortization, or "OIBDA". Prior to 2013, the Company's results of operations analysis included a discussion of profit contribution. The Company revised its discussion of results of operations for prior periods to reflect the segment disclosures as if the current measure of profit (loss), OIBDA, had been in effect throughout all periods presented.

The Company presents OIBDA as the primary measure of segment profit (loss). The Company believes the presentation of OIBDA is relevant and useful for investors because it allows investors to view our segment performance in the same manner as the primary method used by management to evaluate performance and make decisions about allocating resources. The Company defines OIBDA as operating income before depreciation and amortization, excluding feature film amortization and film impairments. OIBDA is a non-GAAP financial measure and may be different than similarly-titled non-GAAP financial measures used by other companies. A limitation of OIBDA is that it excludes depreciation and amortization, which represents the periodic charge for certain fixed assets and intangible assets used in generating revenues for our business. OIBDA should not be regarded as an alternative to operating income or net income as an indicator of operating performance, or to the statement of cash flows as a measure of liquidity, nor should it be considered in isolation or as a substitute for financial measures prepared in accordance with GAAP. We believe that operating income is the most directly comparable GAAP financial measure to OIBDA. See Note 3, Segment Information in the accompanying Consolidated Financial Statements for a reconciliation of OIBDA to operating income for the periods presented.


Table of Contents

Three Months Ended September 30, 2013 compared to Three Months Ended

September 30, 2012
(dollars in millions)

Summary

                                                           Three Months Ended
                                                    September 30,       September 30,
                                                         2013               2012          increase (decrease)
Net Revenues
Live and Televised Entertainment                   $        89.5       $        79.0               13  %
Consumer Products                                           13.4                15.8              (15 )%
Digital Media                                                8.6                 7.5               15  %
WWE Studios                                                  1.8                 1.9               (5 )%
Total                                                      113.3               104.2                9  %

OIBDA
Live and Televised Entertainment                            35.4                30.5               16  %
Consumer Products                                            5.4                 6.8              (21 )%
Digital Media                                                3.6                 3.2               13  %
WWE Studios                                                 (7.4 )              (2.0 )            270  %
Unallocated Corporate Expenses                             (27.3 )             (28.2 )             (3 )%
Total                                                        9.7                10.3               (6 )%
OIBDA as a percentage of revenues                              9 %                10 %

Depreciation and amortization expense                        6.5                 5.3               23  %
Operating income                                             3.2                 5.0              (36 )%
Investment and other income, net                             0.1                   -              100  %
Income before income taxes                                   3.3                 5.0              (34 )%
Provision for income taxes                                   0.9                 1.5              (40 )%
Net income                                         $         2.4       $         3.5              (31 )%

The comparability of our results for the current year quarter was impacted by $7.0 million in impairment charges related to our film portfolio. There were no such impairments in the prior year quarter.
Our Live and Televised Entertainment segment revenues increased 13% primarily due to increased revenues in our television rights and live events businesses of $10.1 million and $2.2 million, respectively. Our Consumer Products segment experienced a 15% decrease in revenues primarily driven by declines in our licensing and home entertainment businesses. Our Digital Media segment experienced a 15% increase in revenues, primarily driven by higher sales of advertising across various digital platforms. Our WWE Studios segment experienced a $0.1 million decrease in revenues.


Table of Contents

Live and Televised Entertainment
The following tables provide performance results and key drivers for our Live
and Televised Entertainment segment:
                                                              Three Months Ended
Revenues- Live and Televised Entertainment             September 30,         September 30,
(dollars in millions except where noted)                   2013                  2012           increase (decrease)
Live events                                        $          25.0         $          22.8               10  %
North America                                      $          17.5         $          17.0                3  %
International                                      $           7.5         $           5.8               29  %
Total live event attendance                                435,200                 426,200                2  %
Number of North American events                                 62                      70              (11 )%
Average North American attendance                            5,500                   5,200                6  %
Average North American ticket price (dollars)      $         46.78         $         42.73                9  %
Number of international events                                  14                       7              100  %
Average international attendance                             6,700                   8,400              (20 )%
Average international ticket price (dollars)       $         72.30         $         98.23              (26 )%
Venue merchandise                                  $           4.0         $           4.5              (11 )%
Domestic per capita spending (dollars)             $          9.53         $         10.68              (11 )%
Pay-per-view                                       $          14.6         $          16.3              (10 )%
Number of pay-per-view events                                    3                       3                -  %
Number of buys from pay-per-view events                    761,000                 789,000               (4 )%
Average revenue per buy (dollars)                  $         19.35         $         20.57               (6 )%
Domestic retail price excluding WrestleMania
(dollars)                                          $         44.95         $         44.95                -  %
Television rights fees                             $          44.1         $          34.0               30  %
Domestic                                           $          30.5         $          21.3               43  %
International                                      $          13.6         $          12.7                7  %
Other                                              $           1.8         $           1.4               29  %
Total Live and Televised Entertainment             $          89.5         $          79.0               13  %
Ratings
    Average weekly household ratings for RAW                   3.3                     3.4               (3 )%
    Average weekly household ratings
for SmackDown                                                  2.2                     2.2                -  %
    Average weekly household ratings for WWE
Main Event                                                     0.9                     N/A


Table of Contents

                                                           Three Months Ended
OIBDA-Live and Televised Entertainment              September 30,       September 30,
(dollars in millions)                                    2013               2012          increase (decrease)
Live events                                        $         5.6       $         5.0               12  %
Venue merchandise                                            1.7                 1.5               13  %
Pay-per-view                                                 8.3                 9.7              (14 )%
Television rights fees                                      21.8                15.5               41  %
Other                                                       (2.0 )              (1.2 )             67  %
Total                                              $        35.4       $        30.5               16  %
OIBDA as a percentage of revenues                             40 %                39 %

Live events revenues increased by $2.2 million in the current year quarter as compared to the prior year quarter. Revenues from our North America live events business increased $0.5 million or 3%, reflecting increases in average attendance and average ticket prices. These increases were partially offset by eight fewer events held in the current year quarter. Our international live events business revenue increased $1.7 million primarily due to seven additional events held in the current year quarter. This was partially offset by a 26% decline in international ticket prices and a decline in average attendance of 20% in the current year quarter. The decreases in average ticket price and average attendance were due to changes in territory mix as the incremental events in the quarter were concentrated in South Africa, a region that has shown a high proportion of WWE fans, but that has experienced significant economic challenges. In addition, changes in foreign exchange rates contributed to the reduction in average ticket price. The live events OIBDA as a percentage of revenues was 22% in both the current and prior year quarters.
Venue merchandise revenues decreased by $0.5 million in the current year quarter as compared to the prior year quarter. This decrease is primarily due to a 9% reduction in total domestic attendance, reflecting the change in event mix during the quarter, and an 11% decline in domestic per capita merchandise sales to $9.53 in the current year quarter. The venue merchandise OIBDA as a percentage of revenues increased to 43% from 33% in the prior year quarter primarily due to a lower material costs.
Pay-per-view revenues decreased by $1.7 million in the current year quarter as compared to the prior year quarter primarily due to the performance of our SummerSlam event, as total buys for this event decreased 17%. In addition, the current quarter was negatively impacted by pay-per-view buys related to prior period events. Average revenue per buy declined by 6% to $19.35. The pay-per-view OIBDA as a percentage of revenues decreased to 57% from 60% in the prior year quarter primarily due to the aforementioned reduction in revenues. Television rights fees revenues increased by $10.1 million in the current year quarter as compared to the prior year quarter. Domestically, television rights fees increased by $9.2 million, primarily due to the production and licensing of new programs. During the current year quarter, we began to produce and license a new television series, Total Divas, which is carried on the E! Network. In addition, during October 2012, we licensed a new original series, the WWE Main Event which is carried on the ION Television Network. Growth also reflected, to a lesser degree, contractual increases for our existing programs both domestically and internationally. The television rights fees OIBDA as a percentage of revenues increased to 49% from 46% in the prior year quarter.


Table of Contents

Consumer Products
The following tables provide performance results and key drivers for our
Consumer Products segment (dollars in millions):
                                                            Three Months Ended
                                                     September 30,       September 30,
Revenues-Consumer Products                               2013                2012           increase (decrease)
Licensing                                          $           5.7     $           7.1              (20 )%
Home entertainment                                 $           5.2     $           6.4              (19 )%
Gross units shipped                                        718,200             933,100              (23 )%
Magazine publishing                                $           1.5     $           1.6               (6 )%
Net units sold                                             444,700             533,300              (17 )%
Other                                              $           1.0     $           0.7               43  %
Total                                              $          13.4     $          15.8              (15 )%


                                                             Three Months Ended
                                                    September 30,        September 30,
OIBDA-Consumer Products                                  2013                 2012           increase (decrease)
Licensing                                          $        3.3        $          4.0                (18 )%
Home entertainment                                          1.9                   2.5                (24 )%
Magazine publishing                                         0.1                   0.2                (50 )%
Other                                                       0.1                   0.1                  -  %
Total                                              $        5.4        $          6.8                (21 )%
OIBDA as a percentage of revenues                            40 %                  43 %

Licensing revenues decreased by $1.4 million in the current year quarter as compared to the prior year quarter. This decrease was primarily due to a 24% reduction in video game shipments that resulted in a $1.3 million decline in video game royalties. Shipments of the Company's annual franchise video game, WWE '13, which was the last release developed by THQ, declined to 178,000 units as compared to 233,000 units for the corresponding game in the prior year quarter. The licensing OIBDA as a percentage of revenues was 58% in the current year quarter compared to 56% in the prior year quarter due to product mix. Home entertainment revenues decreased by $1.2 million or 19% in the current year quarter as compared to the prior year quarter. Domestic home entertainment revenue fell approximately $0.8 million, or 15%, reflecting a 23% decline in shipments to 718,200 units with five fewer releases in the quarter. The decline in shipments was partially offset by a 4% increase in the average price per unit to $11.41. Revenue from international licensing activities declined by approximately $0.4 million reflecting lower sales in Canada and the transition to a new licensee in the EMEA region. Home entertainment OIBDA as a percentage of revenues was 37% from 39% in the prior year quarter.
Magazine publishing revenues decreased slightly by $0.1 million to $1.5 million in the current quarter as compared to the prior year quarter. Net units sold decreased by 17% primarily due to one fewer issue being published in the current year quarter. We published three issues of WWE Magazine, two issues of WWE Kids magazine and one special issue in the current year quarter compared to three, three and one, respectively, in the prior year quarter. Publishing OIBDA as a percentage of revenues decreased to 7% from 13% in the prior year quarter.


Table of Contents

Digital Media
The following tables provide performance results for our Digital Media segment
(dollars in millions except average revenues per order):
                                                              Three Months Ended
                                                       September 30,         September 30,
Revenues-Digital Media                                     2013                  2012           increase (decrease)
WWE.com                                            $           5.7         $           4.8                19 %
WWEShop                                                        2.9                     2.7                 7 %
Total                                              $           8.6         $           7.5                15 %
Average WWEShop revenues per order (dollars)       $         48.87         $         47.77                 2 %


                                                             Three Months Ended
                                                    September 30,        September 30,         increase
OIBDA-Digital Media                                      2013                 2012            (decrease)
WWE.com                                            $        3.1        $          3.0              3 %
WWEShop                                                     0.5                   0.2            150 %
Total                                              $        3.6        $          3.2             13 %
OIBDA as a percentage of revenues                            42 %                  43 %

WWE.com revenues increased by $0.9 million in the current year quarter as compared to the prior year quarter, due to higher sales of advertising and digital content, including the Company's pay-per-view events, across various digital platforms. WWE.com OIBDA as a percentage of revenues decreased to 54% in the current year quarter from 63% in the prior year quarter due to a $1.1 million increase in staff related expenses due to the hiring of additional personnel.
WWEShop revenues increased by $0.2 million in the current year quarter as compared to the prior year quarter. The number of on-line merchandise sales increased by 11% to 59,800 and the average revenue per order increased by 2% to $48.87. WWEShop OIBDA as a percentage of revenues increased to 17% in the current year quarter from 7% in the prior year quarter due to lower shipping related expenses.


Table of Contents

WWE Studios
The following table provides detailed information for our WWE Studios' segment
(in millions):
                                                 Feature
                                                   Film
                                                Production
                                             Assets-net as of                                  For the Three Months Ended September 30,
                                                 Sept 30,            Inception to-date              Revenue                  OIBDA
               Release     Production              2013
   Title        Date         Costs*                                 Revenue        OIBDA        2013        2012        2013       2012
2013
12 Rounds       June
2: Reloaded     2013     $         1.5     $              1.4     $        -     $     -     $      -       $ N/A     $    -      $ N/A
No One           May
Lives           2013               2.2                    0.5            0.8        (0.9 )        0.1         N/A       (0.9 )      N/A
                 Mar
The Call        2013               1.0                    1.0            0.1         0.1            -         N/A          -        N/A
Dead Man         Mar
Down            2013               5.8                    1.0              -        (4.7 )          -         N/A          -        N/A
The Marine
3:               Mar
Homefront       2013               1.5                    1.4              -           -            -         N/A          -        N/A
                                  12.0                    5.3            0.9        (5.5 )        0.1           -       (0.9 )        -
2012
                 Nov
The Day         2012                 -                      -            0.2         0.1          0.2         N/A          -        N/A
                Sept
Barricade       2012               4.1                    0.1            1.2        (4.0 )        0.1         0.9       (0.3 )     (0.5 )
No Holds        July
Barred          2012                 -                      -            0.6         0.3          0.1         0.5        0.1        0.2
Bending The      Mar
Rules           2012               5.5                    0.1            1.0        (5.4 )          -        (0.4 )     (0.7 )     (0.4 )
                                   9.6                    0.2            3.0        (9.0 )        0.4         1.0       (0.9 )     (0.7 )

Prior
Releases                         106.7                    4.1           98.2       (22.9 )        1.3         0.9       (4.7 )     (0.3 )

Completed but not
released                           4.4                    4.4              -           -            -           -          -          -
In
production                         2.4                    2.4              -           -            -           -          -          -
In
development                        0.8                    0.8              -        (4.1 )                      -          -       (0.5 )
Sub-total                $       135.9     $             17.2     $    102.1     $ (41.5 )   $    1.8     $   1.9     $ (6.5 )   $ (1.5 )
Selling, General &
Administrative
Expenses                                                                                                                (0.9 )     (0.5 )
Total                                                                                                                 $ (7.4 )   $ (2.0 )

* Production costs are presented net of the associated benefit of production incentives. WWE Studios revenues decreased $0.1 million in the current year quarter as compared to the prior year quarter. The decrease in revenue is attributable to the timing of recognizing revenue from our movie portfolio. During the current year quarter, we did not release any feature films as compared to the prior year quarter in which we released two feature films, Barricade and No Holds Barred. OIBDA decreased $5.4 million in the current year quarter as compared to the prior year quarter, primarily as a result of recording impairment charges totaling $7.0 million in the current year quarter associated with the recent performance of movies released over the 2010 through 2012 period. This decrease was partially offset by lower amortization expense in the current quarter as compared to the prior year quarter. At September 30, 2013, the Company had $17.2 million (net of accumulated amortization and impairment charges) of feature film production assets capitalized on its Consolidated Balance Sheet of which $9.6 million relates to films completed and in release and $7.6 million relates to various films not yet released. We review and revise estimates of ultimate revenue and participation costs at the end of each reporting period to reflect the most current information available. If estimates for a film's ultimate revenue are revised and indicate a significant decline in a film's profitability or if events or circumstances change that would indicate we


Table of Contents

should assess whether the fair value of a film is less than its unamortized film costs, we calculate the film's estimated fair value using a discounted cash flows model. If fair value is less than unamortized cost, the film asset is written down to fair value.
Unallocated Corporate Expenses
The following table presents the amounts and percent change of certain significant unallocated corporate expenses (dollars in millions):

                                                           Three Months Ended
                                                    September 30,       September 30,
                                                         2013               2012          increase (decrease)
Staff related                                      $        12.4       $        11.9                 4  %
Management incentive compensation                            0.5                 2.6               (81 )%
Legal, accounting and other professional                     4.9                 3.6                36  %
Travel and entertainment expense                             1.3                 1.0                30  %
Advertising, marketing and promotion                         1.3                 1.2                 8  %
Corporate insurance                                          1.2                 0.9                33  %
Bad debt (recovery) expense                                 (0.2 )               0.3              (167 )%
All other                                                    5.9                 6.7               (12 )%
Total unallocated corporate expenses               $        27.3       $        28.2                (3 )%
Unallocated corporate expenses as a percentage
of net revenues                                               24 %                27 %

Unallocated corporate expenses decreased by $0.9 million or 3% in the current year quarter compared to the prior year quarter. This was primarily due to a decrease in management incentive compensation in the current quarter of $2.1 million, reflecting amounts expected to be paid based on the Company's operating performance and by a $0.5 million reduction in bad debt expense. These items were partially offset by a $1.3 million increase in consulting and professional fees and a $0.5 million increase salary and benefits.

Depreciation and Amortization
(dollars in millions)
. . .
  Add WWE to Portfolio     Set Alert         Email to a Friend  
Get SEC Filings for Another Symbol: Symbol Lookup
Quotes & Info for WWE - All Recent SEC Filings
Sign Up for a Free Trial to the NEW EDGAR Online Pro
Detailed SEC, Financial, Ownership and Offering Data on over 12,000 U.S. Public Companies.
Actionable and easy-to-use with searching, alerting, downloading and more.
Request a Trial Sign Up Now


Copyright © 2014 Yahoo! Inc. All rights reserved. Privacy Policy - Terms of Service
SEC Filing data and information provided by EDGAR Online, Inc. (1-800-416-6651). All information provided "as is" for informational purposes only, not intended for trading purposes or advice. Neither Yahoo! nor any of independent providers is liable for any informational errors, incompleteness, or delays, or for any actions taken in reliance on information contained herein. By accessing the Yahoo! site, you agree not to redistribute the information found therein.