The Pro Wrestling Thread #6

WWE's 4th Quarter and Annual Financial Report

WWE announced their financial results for its fourth quarter ended December 31, 2011 today. For full results, click here.

WWE (NYSE:WWE) today announced financial results for its fourth quarter ended December 31, 2011. Revenues totaled $112.9 million as compared to $122.5 million in the prior year quarter.

Operating loss was ($13.1) million as compared to Operating income of $14.4 million in the prior year quarter. Net loss was ($8.6) million, or ($0.12) per share, as compared to Net income of $8.1 million, or $0.11 per share, in the prior year quarter. Excluding the impact of film impairments and network related expenses in the current year quarter, Adjusted Operating income was $3.1 million as compared to $14.4 million in the prior year quarter. Adjusted Net income was $1.8 million, or $0.02 per share, as compared to $8.1 million, or $0.11 per share, in the prior year quarter.

"In 2011, we evaluated several paths for creating new programs and distributing all of our content in a way that optimizes its value. Executing this strategy effectively, including the potential creation of a WWE Network, has the power to transform our business," stated Vince McMahon, Chairman and Chief Executive Officer. "While we made significant progress toward this objective, our fourth quarter and full year results were impacted primarily by three items: significant non-cash film impairment charges stemming from the weak performance of our movie releases, strategic decisions to withhold several hours of previously licensed television content for distribution on other platforms, and initial start-up operating expenses associated with our emerging content and distribution strategy. Regarding the first item, we have taken several measures to improve the profitability of our movie business. And, regarding the other items, we believe that our ongoing investment to expand and maximize the value of our content is the most potent approach for driving our future earnings."

Comparability of Results

The current year quarter results included $12.2 million in film impairment charges related to our films The Reunion, Bending the Rules, Barricade, See No Evil, Knucklehead and The Chaperone. In addition, the current year quarter results included approximately $4.0 million in network related expenses. In order to facilitate an analysis of our financial results on a more comparable basis, where noted, we have adjusted our results to exclude these items from our fourth quarter of 2011 results. Excluding the impact of these items, Adjusted Operating income decreased to $3.1 million and Adjusted EBITDA decreased to $7.2 million. (See Supplemental Information – Schedule of Adjustments).

Three Months Ended December 31, 2011 – Results by Business Segment

Total revenues decreased 8% to $112.9 million driven by declines across all of our operating segments. Revenues from North America decreased by 9%, led by declines in our WWE Studios, Television, and WWE.com businesses. Revenues outside North America decreased 5%, primarily due to a decline in our Licensing business, which was partially offset by increased revenue in Live Events. Revenue from Asia Pacific and Latin America benefited from an increase in the number and the timing of our live events. Additionally, revenue growth in the Asia Pacific region reflected higher sales of licensed and home video products. There was no significant impact from changes in foreign exchange rates in the current year quarter.

Live and Televised Entertainment

Revenues from our Live and Televised Entertainment businesses were $81.0 million for the current quarter as compared to $82.4 million in the prior year quarter, representing a 2% decrease.

Live Event revenues were $26.9 million as compared to $26.6 million in the prior year quarter. Revenues increased 1% as an increase in overall average ticket prices was offset by the occurrence of 6 fewer events in the quarter.

Pay-Per-View revenues were $14.6 million as compared to $13.8 million in the prior year quarter, reflecting a 2% increase in total pay-per-view buys. Buys for the four comparable events in the current and prior year quarter declined 3%, but were more than offset by an increase in prior period buys, which resulted in a 6% increase in pay-per-view revenue.

Consumer Products

Revenues from our Consumer Products businesses decreased 15% to $18.7 million from $21.9 million in the prior year quarter, primarily due to the performance of our Licensing and Publishing businesses, partially offset by improved results in our Home Video business.

Home Entertainment net revenues were $6.5 million as compared to $5.8 million in the prior year quarter, representing a 12% increase that was primarily due to an adjustment in the prior year quarter. Gross domestic retail revenue declined 14%, or $1.8 million, due to an 8% decrease in shipments to 825,000 units and a 5% decline in average effective prices to $13.50. The prior year quarter included an adjustment for lower sell-through expectations of prior year releases.

Licensing revenues were $9.5 million as compared to $12.3 million in the prior year quarter as lower sales of toy, collectible and novelty products more than offset an increase in video game sales. Revenues related to toys declined 15%, or $1.0 million, reflecting, in part, a challenging retail environment for certain toy categories. Revenues from our collectible products declined due to a tough comparison to a successful product launch in the prior year. Revenue from video games, increased by approximately $0.4 million, led by sales of the WWE All Stars video game, which launched in March 2011. Unit shipments of our SmackDown vs. Raw video game decreased 51% to 162,000 units as compared to the prior year quarter.

Magazine publishing net revenues were $2.0 million as compared to $3.1 million in the prior year quarter, primarily reflecting lower newsstand sales in the current quarter.

Digital Media

Revenues from our Digital Media related businesses were $8.9 million as compared to $10.3 million in the prior year, representing a 14% decrease.

WWE.com revenues were $2.7 million as compared to $4.5 million in the prior year quarter, primarily reflecting a reduction in online advertising.

WWEShop revenues were $6.2 million as compared to $5.8 million in the prior year quarter. This was driven by a 13% increase in average revenue per order to $52.09, partially offset by a 5% decline in the total number of orders, to approximately 120,000.

WWE Studios

Current year, we recorded revenue of $4.3 million as compared to $7.9 million in the prior year quarter, with the decline in revenue driven by the relative performance of our current film releases compared to the prior year quarter releases. Film profits declined $13.2 million from the prior year quarter due to $12.2 million in non-cash film impairment charges, primarily driven by lower DVD sales expectations associated with previous releases, The Reunion, See No Evil, Knucklehead, The Chaperone and pending releases, Bending the Rules and Barricade. The decline in film profits also reflected lower receipts from our other films.

Profit Contribution (Net revenues less cost of revenues)

Profit contribution decreased to $24.3 million in the current year quarter from $46.8 million in the prior year quarter, reflecting $12.2 million non-cash film impairment charges and other operating factors. Excluding the impact of the film impairments, Adjusted Profit contribution was $36.5 million in the current year quarter as compared to $46.8 million in the prior year quarter, reflecting the absence of television rights fees for our WWESuperstars program, a reduction in toy and collectibles licensing revenue, and increased Pay-Per-View production and marketing costs. Gross profit margin decreased to approximately 22% from 38% in the prior year quarter, primarily driven by the performance of our film business. Adjusted profit margins were 32% as compared to 38% in the prior year quarter reflecting lower television and licensing revenues, which have high variable margins, as well as the increase in pay-per-view costs.

Selling, general and administrative expenses

SG&A expenses were $33.3 million for the current year quarter as compared to $29.2 million in the prior year quarter, led by increases in staffing related costs, including salary, benefits, and recruitment, as well as higher professional fees, due in part to the potential creation of a WWE Network. Network related expenses were approximately $4.0 million in the current year quarter.

Depreciation and amortization

Depreciation and amortization expense was $4.1 million for the current year quarter as compared to $3.2 million in the prior year quarter.

EBITDA

EBITDA reflected a loss of ($9.0) million in the current year quarter as compared to a profit of $17.6 million in the prior year quarter. The EBITDA decline was primarily driven by the change in profit contribution as described above. Adjusted EBITDA (which excludes the film impairment charges and network related expenses in the current year quarter) decreased to $7.2 million in the current year quarter as compared to $17.6 million in the prior year quarter, also driven by the change in profit contribution.

Investment and Other (Expense) Income

Investment income was $0.6 million in the current year quarter as compared to $0.5 million in the prior year quarter. Other expense was $0.5 million in the current year quarter as compared to $0.9 million in the prior year quarter, reflecting foreign exchange losses of $0.2 million in the current year quarter as compared to foreign exchange loss of $0.4 million in the prior year quarter.

Effective tax rate

In the current year quarter, the effective tax rate was 35% as compared to 42% in the prior year quarter. The prior year rate was negatively impacted by a $0.8 million adjustment due to lower than expected deductions for qualified production activities as a result of changes in the tax code in late 2010.

Summary Results for the Year Ended December 31, 2011

Total revenues for the year ended December 31, 2011 were $483.9 million as compared to $477.7 million in the prior year. Operating income was $37.0 million as compared to $82.3 million in the prior year. Net income was $24.8 million, or $0.33 per share, as compared to $53.5 million, or $0.71 per share, in the prior year. EBITDA was $52.0 million for the current year as compared to $94.0 million in the prior year. Excluding items that impact comparability, Adjusted Operating income for the current year was $64.4 million as compared $82.3 million in the prior year (See Supplemental Information – Schedule of Adjustments). Adjusted Net income was $43.3 million, or $0.58 per share, as compared to $53.5 million, or $0.71 per share, in the prior year. Adjusted EBITDA was $79.4 million for the current year as compared to $94.0 million in the prior year.

Revenues increased 1% led by our Live and Televised Entertainment segment primarily reflecting the impact of WrestleMania. Growth in Pay-Per-View and Licensing was offset by the absence of two hours of television programming and declines across our other businesses. The decline in Television Advertising reflects a new agreement with a Canadian television distributor. We receive television rights fees rather than advertising revenue under the new agreement.

Revenues from North America increased 2% led by higher Pay-Per-View and Licensing revenues reflecting the impact of WrestleMania and an additional video game, respectively. This was partially offset by the absence of domestic television rights fees for NXT and Superstars and lower WWE.com revenues primarily driven by lower advertising sales.

Revenues from outside North America were essentially flat to the prior year as lower sales of licensed toy, collectible and home video products were offset by contractual expansion of television rights fees and increased pay-per-view buy rates, primarily in our Asia Pacific markets. The current year also benefited from a $3.4 million favorable impact from changes in foreign exchange rates.

Cash Flows

Net cash provided by operating activities was $63.2 million for the year ended December 31, 2011 as compared to $39.8 million in the prior year. This increase was primarily driven by a $37 million reduction in feature film production spending, which was partially offset by the impact of $15 million in advances received from a licensee in the prior year.

Capital expenditures increased to $28.0 million in the current year from $12.3 million in the prior year, primarily due to a $15.5 million investment in assets to support our effort to create and distribute new content, including through a potential network.

Timmy84	^ It's a decrease. A slow decrease but a decrease nonetheless.
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alexnvrmnd777	Timmy84 said: ^ It's a decrease. A slow decrease but a decrease nonetheless. Yep, yep, yep! I'm hoping it goes down even sharper for this year. So sharp that Vince has no choice but to make a huge change in direction for the company.
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Timmy84	alexnvrmnd777 said: Timmy84 said: ^ It's a decrease. A slow decrease but a decrease nonetheless. Yep, yep, yep! I'm hoping it goes down even sharper for this year. So sharp that Vince has no choice but to make a huge change in direction for the company. From the decisions they've been making, I hope so too.
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angel345	babybugz said: The Rock's new DVD is good .. my only complaint is it should have had more matches . The last DVD covered the matches though. I don't know if the bluray had more content. Cena was throwing shade in some of the clips (on rock's DVD)lol Oh really? He has a new DVD? Wow! I must check it out
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alexnvrmnd777	Damn, talk about a spittin' image!! Wow. Wish Shane'd come back to the WWE, but from what I hear, he's rakin' in some nice bucks with various business dealings with China.
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Timmy84	alexnvrmnd777 said: Damn, talk about a spittin' image!! Wow. Wish Shane'd come back to the WWE, but from what I hear, he's rakin' in some nice bucks with various business dealings with China. He definitely is looking like a younger version of his dad.
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Timmy84	StonedImmaculate said: So...saw the numbers for the year end PPV buys for WWE. Survivor Series drew 282,000 buys ($11.2 million gross) and they're blaming the Miz for low buy numbers? Supposedly they were expecting "much, much more" for thr Rock's return...again...why was this "failure" the Miz's fault? Because they're too chicken to admit the truth: that their shows suck.
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Timmy84	babybugz said: So WWE made Drew McIntyre a gay character now ... I was never a fan of him to begin with. HUH!?
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Timmy84	babybugz said: Timmy84 said: HUH!? Quote from another site I was at. http://www.lordsofpain.net/reports/wwe/houseshows/WWE_House_Show_Results_from_Tegucigalpa_Honduras_2_23_12.html (Drew started a new sexually ambiguous gimmick, kissing the guys in the crowd and undoing his hair and started combing it mid match) well damn lol
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Timmy84	I can't even get mad, it's just hilarious.
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Kurt Angle Tweets on CM Punk/Chris Brown and Violence...

WWE's 4th Quarter and Annual Financial Report