WWE Announces 3rd Quarter Results: All Things Down

Profit Contribution (Net revenues less cost of revenues)
Profit contribution decreased to $156.6 million in the current period as compared to $165.6 million in the prior year period, reflecting a reduction in revenue across our operations and marketing expenses to support our film business. In addition, total profit contribution margin decreased to approximately 44% as compared to 46% in the prior year period due to the impact of lower effective pricing and sell-through rates in our Consumer Products business. Excluding items that impact comparability, Adjusted Profit contribution decreased to $152.6 million in the current period as compared to $164.2 million in the prior year period.

Selling, general and administrative expenses
SG&A expenses were $80.3 million for the current period as compared to $95.3 million in the prior year period, led by decreases in staff-related expenses, including accrued management incentive compensation, as well as lower legal and professional fees and reserves for bad debt. Excluding items that impact comparability, Adjusted SG&A expenses were $82.4 million for the current period as compared to $94.2 million in the prior year period.

EBITDA
EBITDA for the current period increased to approximately $76.3 million as compared to $70.3 million in the prior year period, reflecting SG&A cost savings as described above, and a $3.6 million net increase in production tax credits. Excluding items that impact comparability, Adjusted EBITDA was $70.2 million for the current period as compared to $70.0 million in the prior year period.

Investment and Other Income (Expense)
The $1.0 million decline in investment income in the current period reflects lower average interest rates and decreases in realized gains on sales of investments. Other expense of $1.2 million in the current period as compared to other income of $0.3 million in the prior year period primarily reflects the impact of realized foreign exchange gains and losses and the revaluations of warrants. In the current year period, we recorded $0.9 million of foreign exchange losses as compared to gains of $1.7 million in the prior year period. In the current year period, we recorded a gain of $0.6 million as compared to a loss of $0.8 million in the prior year period relating to the revaluation of warrants.

Effective tax rate
The effective tax rate was 33% in the current period as compared to 37% in the prior year period. The decrease in tax rate in the current period was primarily driven by increased benefits from IRC Section 199 related to qualified domestic production activities and the recognition of previously unrecognized tax benefits.

Cash Flows
Net cash provided by operating activities was $27.9 million for the nine months ended September 30, 2010 as compared to $92.8 million in the prior year period. This $64.9 million decrease was driven primarily by an increase in feature film investments and changes in WWE's tax position. Our cash investment in films increased by $40.0 million, driven by a $33.5 million increase in film production spending and the absence of $6.5 million in film tax incentives as compared to the prior year period. Related to the current period spending, we anticipate receiving approximately $7.7 million of film tax incentives in future periods. Capital expenditures increased to $9.1 million from $3.6 million in the prior year period primarily due to increased investments in television production initiatives.