Some interesting figures below, it seems as though revenue is down in pratically every area from last year…
World Wrestling Entertainment, Inc. Reports Q3 Results: E.P.S. Rises 44% to $0.13; Increases Full-Year EBITDA Guidance
STAMFORD, Conn.–(BUSINESS WIRE)–Feb. 17, 2004–World Wrestling Entertainment, Inc. (NYSE:WWE) today announced financial results for its third quarter ended January 23, 2004. The Company reported income from continuing operations of $8.9 million, or $0.13 per share, versus $6.0 million, or $0.09 cents per share in the prior year.
Revenues totaled $79.1 million as compared to $92.6 million in the prior year quarter, a decline of approximately 15%. A significant portion of the decrease is due to the fact that during the fiscal quarter, the Company aired only two pay-per-view events as compared to three in the year-ago quarter. Revenues for our January 25, 2004 pay-per-view event, Royal Rumble, which will be recorded in our fiscal fourth quarter, are estimated to be approximately $8.8 million. In addition, revenues from our live events were down approximately 27% primarily as a result of lower attendance, due in part to fewer events held during the current quarter.
EBITDA was $15.1 million in the current quarter as compared to $11.4 million in the prior year quarter. The increase in EBITDA was attributable to a significant reduction in our selling, general and administrative costs as well as increased profitability across much of our branded merchandise businesses and the change in our arrangement with UPN for our SmackDown! program. EBITDA attributable to our January 2004 pay-per-view event, Royal Rumble, which will be reflected in our fiscal fourth quarter, is estimated to be approximately $5.3 million.
“Results for the third quarter exceeded our expectations. Improved operating results across our television, advertising and home video businesses coupled with a continued decrease in our overhead contributed to a strong and profitable quarter. Management remains focused on execution and continuing to improve our profitability,” said Linda McMahon, WWE CEO. “The success of the Royal Rumble pay-per-view, coupled with the buzz being generated around WrestleMania XX, our much anticipated, sold-out pay-per-view event at Madison Square Garden on March 14, indicates significant momentum going into our fourth quarter. We’ve had a solid fiscal year so far, and I’m excited by the prospects of a strong fourth quarter. In particular, WrestleMania XX is shaping up to be something special and a must-see event in 2004.”
Operating income for the quarter was $12.2 million versus $8.8 million in the prior year quarter. Net income was $8.9 million, or $0.13 per share, as compared to a net loss of $16.0 million, or a net loss of $0.23 per share, in the prior year quarter. Included in the prior year quarter was an impairment charge of $32.9 million ($20.4 million, net of tax) related to the Company’s New York restaurant.
Results By Business Segment
Live and Televised Entertainment
Revenues from the Company’s Live and Televised businesses were $55.6 million for the current quarter as compared to $71.0 million in the prior year quarter.
— Pay-Per-View revenues were $13.2 million versus $21.2 million in the prior year quarter. In the third quarter of fiscal 2004, two pay-per-view events were produced as compared to three in the prior year quarter due to the timing of our third quarter end as compared to the air date of our January program. The Company will produce 12 pay-per-view events in fiscal 2004.
— Total domestic pay-per-view buys for the quarter were 0.8 million as compared to 1.3 million in the prior year quarter.
— Buys for our November 2003 event Survivor Series were 0.4 million as compared to 0.3 million in the prior year while buys for Armageddon in December 2003 were 0.2 million as compared to 0.3 million in the prior year.
— Buys for our January 2004 event, Royal Rumble, are currently estimated to be approximately 0.5 million and will be recorded in our fourth fiscal quarter as compared to 0.4 million in the prior year third quarter.
— Live Event revenues were $11.7 million as compared to $16.0 million in the third quarter of last year.
— There were 74 events, including 3 international events, during the quarter as compared to 79 events, including 7 international events, during the same period last year.
— Average attendance for our domestic live events was approximately 4,000 this quarter as compared to approximately 4,300 in the prior year quarter while average attendance for our international live events was 8,700 in the current quarter as compared to 9,100 in the prior year quarter.
— The average ticket price decreased to approximately $37.90 as compared to approximately $41.70 in the prior year quarter.
— Television Advertising revenues were $11.7 million as compared to $17.5 million in the prior year quarter. Commencing with the new television season, which began September 29, 2003, UPN began to sell the inventory related to our SmackDown! program and to pay us a rights fee. The decline in advertising revenues was due to this new arrangement, offset partially by increased advertising revenues from our Spike TV programming.
— Average household ratings for our RAW program were 3.6 for the current quarter as compared to 3.5 for the prior year quarter.
— Average household ratings for our SmackDown! program remained consistent with a 3.4 for the current quarter and the prior year quarter.
— Raw continues to be the top rated regularly scheduled primetime program on ad-supported cable television while SmackDown! has consistently been the top rated program on UPN since its premiere in 1999.
— Television Rights Fees revenues were $19.0 million as compared to $16.2 million in the prior year quarter. The increase was due primarily to rights fees received under the new UPN contract as well as from new international distribution contracts. The prior year quarter included approximately $2.7 million related primarily to rights fees from our former MTV reality series, Tough Enough, executive producer fees for a feature film and one additional television special.
Revenues from the Company’s Branded Merchandise businesses were $23.5 million versus $21.6 million in the prior year quarter.
— Merchandise revenues were $4.3 million as compared to $5.0 million in the prior year quarter. The decrease was due in part to a change that occurred in fiscal 2004 from the direct sale of our merchandise to a licensing arrangement for merchandise sold at our Canadian and International events. In addition, revenues decreased due to the fewer live events held in the quarter as compared to the prior year.
— Publishing revenues were $3.0 million as compared to $4.0 million in the prior year quarter. The decrease was due to a decrease in both newsstand and subscription units sold for our RAW and SmackDown! branded magazines.
— Home Video revenues were $3.7 million as compared to $2.7 million in the prior year quarter, the increase due primarily to a 29% increase in units sold.
— Our recent 3 DVD set titled The Ultimate Ric Flair Collection sold approximately 89,000 units during the current quarter.
— Licensing revenues were $10.9 million as compared to $8.4 million in the prior year quarter. The increase was due primarily to increased book publishing revenues.
— Titles released this quarter included The Stone Cold Truth, which has spent the last three months on the New York Times Best-Seller list, and Unscripted, a glossy photo coffee table book.
Profit Contribution (Net revenues less cost of revenues)
Profit contribution for the quarter was $35.0 million as compared to $35.9 million in the prior year quarter. Total profit contribution margin was approximately 44% for the current quarter as compared to 39% for the prior year quarter.
The profit contribution margin for the Live and Televised businesses was approximately 40% for the current quarter as compared to 37% in the prior year quarter. The profit margin for the current period was favorably impacted by the change in our UPN agreement and decreased television production costs.
The profit contribution margin for the Branded Merchandise businesses was approximately 54% for the current quarter as compared to 45% in the prior year quarter. The increase is due primarily to higher licensing, merchandise and home video margins.
Selling, general and administrative expenses
SG&A expenses decreased by $5.5 million for the quarter to $18.9 million as compared to $24.4 million in the prior year quarter. SG&A expenses decreased primarily due to lower professional fees and, to a lesser extent, the favorable impact of the cost cutting measures taken during fiscal 2003. The prior year included a $1.5 million expense for a proposed litigation settlement as well as $0.7 million related to the termination of a lease for additional office space.
Stock compensation costs
Stock compensation costs were $1.0 million for the current quarter. During the third quarter, we completed an exchange offer that gave all active employees and independent contractors that held options with a grant price of $17 or higher the ability to exchange options, at a 6 to 1 ratio, for restricted stock units, or, for holders with fewer than 25,000 options, for cash at a 25% discounted rate. Overall, 4.2 million options were eligible for the offer, of which 4.1 million were exchanged for either cash or restricted stock units. As a result of the offer, we will record a total charge of $6.7 million, of which approximately $0.9 million was recorded in the current quarter and the remaining charge will be amortized over the 24-month vesting period of the restricted stock units. As of January 23, 2004, after the exchange offer, there were approximately 3.1 million options outstanding at an average exercise price of $12.60 and there were approximately 0.8 million restricted stock units outstanding.
Depreciation and amortization
Depreciation and amortization was $2.9 million for the current quarter as compared to $2.6 million for the prior year quarter.
— In January 2004, the Company paid $20.1 million to pay off a lease on our corporate jet. The lease, which was the Company’s only synthetic lease, had previously been accounted for as an operating lease. The transaction will be accounted for as a capital acquisition in the current period. In addition, this transaction should result in a reduction in the Company’s net financing costs.
— The purchase price of the jet, net of a $9.5 million estimated residual value, will be depreciated over a 10 year period commencing in February 2004.
The discontinued operations of The World was a loss of $0.1 million, after tax, as compared to a loss of $22.0 million, after tax, in the prior year quarter. Included in the prior year quarter was a charge of $32.9 million ($20.4 million, net of tax) as a result of impairment tests conducted on goodwill and other long-lived assets related to The World.
Nine months ended results
Total revenues through the first nine months of fiscal 2004 were $248.2 million as compared to $268.3 million in the prior year period. EBITDA was $49.7 million for the nine month period as compared to $22.0 million in the prior year period. EBITDA for the current year period included $5.9 million related to the favorable settlement of litigation. EBITDA for the prior year period included $3.9 million in net unfavorable settlements of litigation. Operating income for the current period was $41.1 million versus $15.3 million in the prior year period. Net income was $28.7 million, or $0.42 per share, as compared to a net loss of $15.1 million, or $0.21 per share, in the prior year period. Included in net loss for the prior year was a $25.2 million loss after tax from discontinued operations related to the Company’s New York restaurant.
Free cash flow (net cash provided by continuing operations less cash used for capital expenditures) for the nine months ended January 23, 2004 was $46.5 million as compared to $15.1 million for the prior year.
Fiscal 2004 Outlook
The Company has updated its outlook for fiscal 2004 and accordingly, now anticipates that its net revenue results will be between $335.0 and $350.0 million as compared to $325.0 and $350.0 million previously. The Company’s EBITDA range was increased by $2.5 million and is currently estimated to be between $57.5 and $62.5 million; and income from continuing operations is currently estimated to be between $32.0 and $34.5 million, or between $0.48 and $0.50 per share, an increase from $0.45 to $0.48 per share.
Note: World Wrestling Entertainment, Inc. will host a conference call on Wednesday, February 18, 2004 at 1:00 p.m. ET to discuss the Company’s third quarter earnings results for fiscal year 2004. All interested parties can access the conference call by dialing 800-895-0198 (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. 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.
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.