WWE Releases 2009 Financial Results: Net Income Up 11%

World Wrestling Entertainment has released its financial results for the final quarter and entire year of 2009.

You can view a PDF file of the complete report from corporate.wwe.com. From the report:

WWE? Reports 2009 Fourth Quarter Results For the year, Net Income Increases 11%

STAMFORD, Conn., February 11, 2010 – World Wrestling Entertainment, Inc. (NYSE:WWE) today announced financial results for its fourth quarter ended December 31, 2009. Revenues totaled $117.3 million as compared to $125.4 million in the prior year quarter. Operating income was $17.8 million as compared to $23.3 million in the prior year quarter. Net income was $11.2 million, or $0.15 per share, as compared to $13.6 million, or $0.18 per share, in the prior year quarter.

"We concluded a strong year with solid performance in the fourth quarter, which was highlighted by 7% growth in Adjusted EBITDA. For the quarter, we generated revenue growth and improved margins in our live event, pay-per-view, and television businesses," stated Vince McMahon, Chairman and Chief Executive Officer. "For the full year, we achieved a 13% increase in Adjusted EBITDA. The results reflected the significant improvements we have made in productivity and a heightened fiscal discipline, which we intend to sustain going forward. The increased operating leverage we have established will enable us to drive greater profits as revenue growth returns. We are confident in our ability to achieve our targeted earnings growth." The WWE business outlook targets average annual earnings growth of 15% to 20% over the 2009- 12 period.

Comparability of Results

Excluding items that impact comparability, Q4 2009 Adjusted Operating income increased 9% to $18.4 million and Adjusted EBITDA increased 7% to $21.9 million from $16.9 million and $20.5 million, respectively, in Q4 2008. The Q4 2009 results include a charge of $6.4 million associated with the write-down of the receivable due from a prior business partner. This was partially offset by $5.8 million of tax credits received related to our television and digital media production activities, which were recorded as a reduction of expense in these areas. The Q4 2008 results include the recognition of a $6.4 million advance related to a multi-year contract with a book publisher. (See Schedule of Adjustments in Supplemental Information)

Live and Televised Entertainment

Revenues from our Live and Televised Entertainment businesses were $83.8 million for the current quarter as compared to $76.2 million in the prior year quarter, representing a 10% increase.

* Live Event revenues were $29.2 million as compared to $25.5 million in the prior year quarter. Revenues increased 15%, attributable to an increase in the number of domestic events as compared to the prior year quarter as well as favorable changes in foreign exchange rates.

- There were 83 events, including 26 international events, during the current quarter as compared to 73 events, including 26 international events, in the prior year quarter.

- North American events generated $13.7 million of revenues from 57 events as compared to $12.4 million from 47 events in the prior year quarter. North American average attendance decreased 4% to approximately 6,600 from 6,900 in the prior year quarter. The average ticket price for North American events was $35.48 in the current quarter as compared to $38.18 in the prior year quarter.

- International events generated approximately $15.5 million of revenues as compared to $13.1 million in the prior year quarter, reflecting a 2% increase in average attendance to approximately 8,500 fans.
* Venue Merchandise revenues were $4.6 million as compared to $3.5 million in the prior year quarter, as increases in the number of events and total attendance more than offset a slight decline in domestic per capita merchandise sales to $8.95 in the current quarter from $9.06 in the prior year quarter.
* Television Rights Fees revenues were $30.4 million as compared to $27.6 million in the prior year quarter. This increase was primarily due to license fees received from our new WWE Superstars television show and contractual increases from our existing programs.
* WWE Classics On Demand revenues were $1.1 million as compared to $1.6 million in the prior year quarter, primarily due to a decline in international distribution.

Consumer Products

Revenues from our Consumer Products businesses were $22.7 million versus $33.3 million in the prior year quarter, representing a 32% decrease, as the prior year quarter included the recognition of a $6.4 million advance relating to a multi-year contract with a book publisher. Excluding the impact of the book advance, Consumer Products revenues declined 16% primarily due to discounting in our Home Video business.

* Home Video net revenues were $10.4 million as compared to $15.0 million in the prior year quarter. The decrease reflects a 14% decline in effective DVD pricing partially offset by a 6% increase in DVD shipments to 940,000 units from the prior year quarter.
* Licensing revenues were $8.0 million as compared to $14.7 million in the prior year quarter. The decrease primarily reflects the recognition of a $6.4 million advance related to a multi-year contract with a book publisher in the prior year quarter.
* Magazine publishing net revenues were $3.6 million as compared to $3.5 million in the prior year quarter as an increase in the number of issues circulated was offset by lower sell-through rates.

Digital Media

Revenues from our Digital Media related businesses were $10.6 million as compared to $10.9 million in the prior year quarter, representing a 3% decrease.

* WWE.com revenues were $3.9 million as compared to $3.8 million in the prior year quarter.
* WWEShop revenues were $6.7 million as compared to $7.1 million in the prior year quarter. The number of orders increased by 3% to approximately 123,000 which was more than offset by an 8% decline in the average revenue per order to $53.43 as compared to the prior year quarter.

WWE Studios

During the current quarter, we recorded revenue of $0.2 million related to previously released films as compared to $5.0 million in the prior year quarter. During the first quarter of 2009, we released our fourth feature film, 12 Rounds, as well as a Direct-to- DVD film, Behind Enemy Lines: Colombia. In the current quarter, we released a Direct- to-DVD film, The Marine 2. 12 Rounds generated approximately $12.2 million in gross domestic box office receipts and was released on DVD on June 30, 2009. We participate in revenues generated by the distribution of these films after the print, advertising and distribution costs incurred by our distributors have been recouped and the results have been reported to us. Accordingly, we have not recorded revenues for 12 Rounds or The Marine 2.

Profit Contribution (Net revenues less cost of revenues)

Profit contribution was $53.7 million in the current quarter as compared to $56.3 million in the prior year quarter. Excluding items that impact comparability (described above), Adjusted profit contribution was essentially flat. The gross profit margin increased to 46% as compared to 45% in the prior year quarter, reflecting efficiencies in our Live and Televised Entertainment segment. These efficiencies were led by sustained cost reductions in marketing, TV production and tax credits associated with our television and digital media production. Improved margins were partially offset by an overall decline in the Consumer Products segment profit contribution, primarily due to decreases in our Licensing and Home Video businesses.

Selling, general and administrative expenses

SG&A expenses were $32.4 million for the current quarter as compared to $29.4 million in the prior year quarter, reflecting a $2.1 million increase in accrued management incentive compensation and $6.4 million of bad debt reserves primarily associated with the write-down of the receivable due from a prior business partner. These factors offset cost savings including the recognition of $2.2 million in tax credits associated with our television and digital media production. Excluding items that impact comparability (described above), Adjusted SG&A expenses declined 4% to $28.2 million as compared to the prior year quarter.

EBITDA

EBITDA was approximately $21.3 million in the current quarter as compared to $26.8 million in the prior year quarter. Excluding items that impact comparability (described above), Adjusted EBITDA increased 7% to $21.9 million.
Investment and Other Income (Expense)

The decline in investment income of $0.8 million in the current quarter reflects lower interest rates. Other expense of $0.7 million, as compared to other expense of $2.7 million in the prior year quarter, reflected changes in realized foreign exchange gains and losses and the revaluation of warrants held in certain licensees.

Effective tax rate

In the current quarter, the effective tax rate was 36% as compared to 38% in the prior year quarter.

Summary Results for the Twelve Months Ended

Total revenues through the year ended December 31, 2009 were $475.2 million as compared to $526.5 million in the prior year. Operating income for the current year was $77.1 million versus $70.3 million in the prior year. Net income was $50.3 million, or $0.68 per share, as compared to $45.4 million, or $0.62 per share, in the prior year. EBITDA was $91.6 million for the current year as compared to $83.4 million in the prior year. Current year expenses included the benefit of $8.3 million in tax credits associated with our television and digital media production, an increase of $7.4 million in bad debt expense related to a prior business partner and a $2.2 million restructuring charge associated with a 10% reduction in staff. As previously disclosed, the prior year results included the recognition of a $6.4 million advance related to a multi-year contract with a book publisher, an expense of $3.5 million associated with our McMahon's Million Dollar Mania brand awareness campaign and a $1.9 million charge for our film See No Evil. Excluding these items, Adjusted EBITDA was $92.9 million for the current year as compared to $82.4 million in the prior year. (See Schedule of Adjustments in Supplemental Information)