WWE Announces Full Year 2010 Financial Results



Following the release of WWE’s Fourth Quarter 2010 financial results on Thursday morning, the company also announced it’s full-year financial numbers for 2010. Here are some highlights from the WWE press release, which can be seen here in its entirety:

Total revenues for the year ended December 31, 2010 were $477.7 million as compared to $475.2 million in the prior year. Operating income was $82.3 million as compared to $77.1 million in the prior year. Net income was $53.5 million, or $0.71 per share, as compared to $50.3 million, or $0.68 per share, in the prior year. EBITDA was $94.0 million for the current year as compared to $91.6 million in the prior year. Excluding items that impact comparability (discussed above), Adjusted Operating income for the current year was $82.3 million as compared $86.7 million in the prior year. Adjusted Net income was $53.5 million, or $0.71 per share, as compared to $56.1 million, or $0.76 per share, in the prior year. Adjusted EBITDA was $94.0 million for the current year as compared to $101.2 million in the prior year.

Revenues increased 1% led by our WWE Studios segment reflecting the expansion of our release slate and a change in revenue recognition with our revised film distribution model. Growth in Television and Licensing was offset by declines across our other businesses.

Revenues from outside North America increased 6% led by an expansion of our Television and Licensing businesses in our Asia Pacific and Latin American markets, respectively, as well as an approximate $2.5 million favorable impact from changes in foreign exchange rates.

Revenues from our Live and Televised Entertainment businesses were $331.8 million for the current year as compared to $335.0 million in the prior year, a decrease of 1%.

Revenues from our Consumer Products businesses were $97.4 million as compared to $99.7 million in the prior year, a decrease of 2%.

Revenues from our Digital Media related businesses were $28.9 million as compared to $32.8 million in the prior year, a decrease of 12%.

WWE Studios

We recorded revenue from our Studios business of $19.6 million as compared to $7.7 million in the prior year. The increase was primarily driven by the release of our latest films, Legendary and Knucklehead, under our revised film distribution model. This new model entails self-distribution and marketing of our films. Under this new model, we reflect the entirety of a film’s gross receipts and its associated distribution and advertising costs in our results. In addition, this change in the distribution model results in the earlier recognition of revenue and expenses as compared to our previous model. The current year included $8.8 million in revenue and $11.5 million in expenses (including $6.2 million of distribution and advertising costs), resulting in a $2.7 million loss for the films released under the new distribution model.

Profit Contribution (Net revenues less cost of revenues)

Profit contribution decreased to $203.4 million in the current year as compared to $219.3 million in the prior year, reflecting lower revenue from Pay-Per-View, Home Video and Live Events and the recognition of film costs under our new self-distribution model. The resulting changes in business mix, including the increased share of film revenue, contributed to a reduction in gross profit contribution margin to approximately 43% as compared to 46% in the prior year.

Selling, general and administrative expenses

SG&A expenses were $109.4 million for the current year as compared to $127.7 million in the prior year, led by decreases in staff-related expenses, including accrued management incentive compensation and bad debt, as well as lower legal and professional fees. Excluding items that impact comparability (discussed above), Adjusted SG&A expenses were $109.4 million for the current year as compared to $118.1 million in the prior year.

EBITDA

EBITDA for the current year increased to approximately $94.0 million as compared to $91.6 million in the prior year, reflecting SG&A cost savings as described above, partially offset by reduced profits from Pay-Per-View, Home Video, Live Events and WWE Studios. Excluding items that impact comparability (discussed above), Adjusted EBITDA was $94.0 million for the current year as compared to $101.2 million in the prior year.

Investment and Other Income (Expense)

Investment income, net was $2.0 million as compared to $3.1 million in the prior year. Prior year investment income included $1.0 million in realized investment gains as compared to $0.1 million in the current year. Additionally in the current year, increased investment yields offset lower average investment balances. Other expense of $2.1 million in the current year as compared to $0.4 million in the prior year primarily reflects the impact of realized foreign exchange gains and losses and the revaluation of warrants. In the current year, we recorded $1.3 million of foreign exchange losses as compared to gains of $1.5 million in the prior year. In the current year, we recorded a gain of $0.6 million as compared to a loss of $1.0 million in the prior year relating to the revaluation of warrants.

Effective tax rate

The effective tax rate was 35% in the current year as compared to 37% in the prior year. The decrease in tax rate in the current year was primarily driven by increased benefits related to qualified domestic production activities and the recognition of previously unrecognized tax benefits.

Cash Flows

Net cash provided by operating activities was $38.6 million for the year ended December 31, 2010 as compared to $116.4 million in the prior year. This $77.8 million decrease was driven primarily by an increase in feature film investments, changes in WWE’s tax position and working capital. Our cash investment in films increased by $33.5 million, driven by a $30.0 million increase in film production spending and a decrease of $3.5 million in film tax incentives received as compared to the prior year. Also driving a significant change in cash flow from operating activities was a $20.3 million increase in cash paid for taxes due to higher estimated taxable income and an $11.0 million refund received in the prior year. Moreover, the prior year reflected a one-time $13.2 million advance from a business partner. Capital expenditures increased to $11.0 million from $5.4 million in the prior year primarily due to increased investments in television production initiatives.



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