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EX-32.1 - EX-32.1 - WORLD WRESTLING ENTERTAINMENTINCwwe-20160630xex32_1.htm
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EX-31.1 - EX-31.1 - WORLD WRESTLING ENTERTAINMENTINCwwe-20160630xex31_1.htm

 



UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

____________________

FORM 10-Q

____________________





 

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE

SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2016

or

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE

SECURITIES EXCHANGE ACT OF 1934

For the transition period from ______ to ______



Commission file number 001-16131

WORLD WRESTLING ENTERTAINMENT, INC.

(Exact name of Registrant as specified in its charter)





 

Delaware

04-2693383

(State or other jurisdiction of incorporation or organization)

(I.R.S. Employer Identification No.)



1241 East Main Street

Stamford, CT 06902

(203) 352-8600

(Address, including zip code, and telephone number, including area code,

of Registrant’s principal executive offices)



Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days.   Yes    No 



Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).   Yes    No 



Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):





 

 

 

Large accelerated filer  

Accelerated filer  

Non-accelerated filer  

Smaller reporting company  



Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).   Yes    No 



At July 27, 2016 the number of shares outstanding of the Registrant’s Class A common stock, par value $.01 per share, was 36,901,356 and the number of shares outstanding of the Registrant’s Class B common stock, par value $.01 per share, was 39,496,810.

 





 

 


 

TABLE OF CONTENTS





 



Page #

Part I – FINANCIAL INFORMATION

 

Item 1. Consolidated Financial Statements (unaudited)

Consolidated Statements of Operations for the three and six months ended June 30, 2016 and 2015

Consolidated Statements of Comprehensive Income for the three and six months ended June 30, 2016 and 2015

Consolidated Balance Sheets as of June 30, 2016 and December 31, 2015

Consolidated Statement of Stockholders’ Equity as of June 30, 2016

Consolidated Statements of Cash Flows for the six months ended June 30, 2016 and 2015

Notes to Consolidated Financial Statements

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

23 

Item 3. Quantitative and Qualitative Disclosures about Market Risk

42 

Item 4. Controls and Procedures

42 

Part II – OTHER INFORMATION

 

Item 1. Legal Proceedings

42 

Item 1A. Risk Factors

44 

Item 6. Exhibits

44 

Signatures

45 



 





 

 


 

WORLD WRESTLING ENTERTAINMENT, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share data)

(Unaudited)







 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 



 

Three Months Ended

 

Six Months Ended



 

June 30,

 

June 30,



 

2016

 

2015

 

2016

 

2015

Net revenues

 

$

198,994 

 

$

150,182 

 

$

370,094 

 

$

326,360 

Cost of revenues

 

 

132,020 

 

 

87,312 

 

 

225,354 

 

 

197,013 

Selling, general and administrative expenses

 

 

59,435 

 

 

49,742 

 

 

109,610 

 

 

95,173 

Depreciation and amortization

 

 

5,966 

 

 

5,844 

 

 

11,553 

 

 

11,757 

Operating income

 

 

1,573 

 

 

7,284 

 

 

23,577 

 

 

22,417 

Investment income, net

 

 

643 

 

 

453 

 

 

1,253 

 

 

656 

Interest expense

 

 

(601)

 

 

(570)

 

 

(1,194)

 

 

(1,111)

Other expense, net

 

 

(588)

 

 

(82)

 

 

(1,244)

 

 

(423)

Income before income taxes

 

 

1,027 

 

 

7,085 

 

 

22,392 

 

 

21,539 

Provision for income taxes

 

 

165 

 

 

1,966 

 

 

7,645 

 

 

6,647 

Net income

 

$

862 

 

$

5,119 

 

$

14,747 

 

$

14,892 

Earnings per share: basic and diluted

 

$

0.01 

 

$

0.07 

 

$

0.19 

 

$

0.20 

Weighted average common shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

75,952 

 

 

75,539 

 

 

75,945 

 

 

75,529 

Diluted

 

 

77,429 

 

 

76,160 

 

 

77,304 

 

 

76,076 

Dividends declared per common share (Class A and B)

 

$

0.12 

 

$

0.12 

 

$

0.24 

 

$

0.24 



 

See accompanying notes to consolidated financial statements.

2


 

WORLD WRESTLING ENTERTAINMENT, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In thousands)

(Unaudited)







 

 

 

 

 

 

 

 

 

 

 

 



 

Three Months Ended

 

Six Months Ended



 

June 30,

 

June 30,



 

2016

 

2015

 

2016

 

2015

Net income

 

$

862 

 

$

5,119 

 

$

14,747 

 

$

14,892 

Other comprehensive income (loss):

 

 

 

 

 

 

 

 

 

 

 

 

Foreign currency translation adjustments

 

 

(118)

 

 

37 

 

 

(105)

 

 

(85)

Unrealized holding gains (losses) on available-for-sale securities (net of tax expense/(benefit) of $38 and

$(59), and $168 and $52, respectively)

 

 

61 

 

 

(95)

 

 

274 

 

 

86 

Total other comprehensive (loss) income

 

 

(57)

 

 

(58)

 

 

169 

 

 

Comprehensive income

 

$

805 

 

$

5,061 

 

$

14,916 

 

$

14,893 



 

See accompanying notes to consolidated financial statements.

3


 

WORLD WRESTLING ENTERTAINMENT, INC.

CONSOLIDATED BALANCE SHEETS

(In thousands, except share data)

(Unaudited)







 

 

 

 

 

 



 

 

 

 

 

 



 

As of



 

June 30,

 

December 31,



 

2016

 

2015

ASSETS

 

 

 

 

 

 

CURRENT ASSETS:

 

 

 

 

 

 

Cash and cash equivalents

 

$

16,193 

 

$

38,019 

Short-term investments, net

 

 

63,716 

 

 

64,357 

Accounts receivable (net of allowance for doubtful accounts and returns

   of $8,500 and $10,311, respectively)

 

 

55,275 

 

 

58,437 

Inventory

 

 

7,374 

 

 

6,167 

Prepaid expenses and other current assets

 

 

21,281 

 

 

12,778 

Total current assets

 

 

163,839 

 

 

179,758 

PROPERTY AND EQUIPMENT, NET

 

 

109,161 

 

 

105,217 

FEATURE FILM PRODUCTION ASSETS, NET

 

 

29,492 

 

 

26,353 

TELEVISION PRODUCTION ASSETS, NET

 

 

8,969 

 

 

11,416 

INVESTMENT SECURITIES

 

 

23,618 

 

 

22,278 

NON-CURRENT DEFERRED INCOME TAX ASSETS

 

 

42,571 

 

 

44,709 

OTHER ASSETS, NET

 

 

18,663 

 

 

19,414 

TOTAL ASSETS

 

$

396,313 

 

$

409,145 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

 

CURRENT LIABILITIES:

 

 

 

 

 

 

Current portion of long-term debt

 

$

16,072 

 

$

4,440 

Accounts payable and accrued expenses

 

 

59,728 

 

 

70,001 

Deferred income

 

 

48,329 

 

 

57,152 

Total current liabilities

 

 

124,129 

 

 

131,593 

LONG-TERM DEBT

 

 

14,878 

 

 

17,135 

NON-CURRENT INCOME TAX LIABILITIES

 

 

809 

 

 

1,117 

NON-CURRENT DEFERRED INCOME

 

 

40,271 

 

 

49,983 

Total liabilities

 

 

180,087 

 

 

199,828 

COMMITMENTS AND CONTINGENCIES

 

 

 

 

 

 

STOCKHOLDERS’ EQUITY:

 

 

 

 

 

 

Class A common stock: ($.01 par value; 180,000,000 shares authorized;

   36,455,849 and 34,215,459 shares issued and outstanding as of

  June 30, 2016 and December 31, 2015, respectively)

 

 

365 

 

 

342 

Class B convertible common stock: ($.01 par value; 60,000,000 shares authorized;

   39,496,810 and 41,688,704 shares issued and outstanding as of

   June 30, 2016 and December 31, 2015, respectively)

 

 

395 

 

 

417 

Additional paid-in capital

 

 

379,872 

 

 

369,643 

Accumulated other comprehensive income

 

 

3,180 

 

 

3,011 

Accumulated deficit

 

 

(167,586)

 

 

(164,096)

Total stockholders’ equity

 

 

216,226 

 

 

209,317 

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY

 

$

396,313 

 

$

409,145 



 

See accompanying notes to consolidated financial statements.

4


 

WORLD WRESTLING ENTERTAINMENT, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(In thousands)

(Unaudited)







 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 



 

Common Stock

 

Additional

 

Other

 

 

 

 

 

 



 

Class A

 

Class B

 

Paid - in

 

Comprehensive

 

Accumulated

 

 

 



 

Shares

 

Amount

 

Shares

 

Amount

 

Capital

 

Income

 

Deficit

 

Total

Balance, December 31, 2015

 

34,215 

 

$

342 

 

41,689 

 

$

417 

 

$

369,643 

 

$

3,011 

 

$

(164,096)

 

$

209,317 

Net income

 

 —

 

 

 —

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

14,747 

 

 

14,747 

Other comprehensive income

 

 —

 

 

 —

 

 —

 

 

 —

 

 

 —

 

 

169 

 

 

 —

 

 

169 

Stock issuances, net

 

49 

 

 

 

 —

 

 

 —

 

 

626 

 

 

 —

 

 

 —

 

 

627 

Conversion of Class B common stock by shareholder

 

2,192 

 

 

22 

 

(2,192)

 

 

(22)

 

 

 —

 

 

 —

 

 

 —

 

 

 —

Tax effect from stock-based payment arrangements

 

 —

 

 

 —

 

 —

 

 

 —

 

 

 

 

 —

 

 

 —

 

 

Cash dividends declared

 

 —

 

 

 —

 

 —

 

 

 —

 

 

 

 

 —

 

 

(18,237)

 

 

(18,229)

Stock-based compensation

 

 —

 

 

 —

 

 —

 

 

 —

 

 

9,589 

 

 

 —

 

 

 —

 

 

9,589 

Balance, June 30, 2016

 

36,456 

 

$

365 

 

39,497 

 

$

395 

 

$

379,872 

 

$

3,180 

 

$

(167,586)

 

$

216,226 



 

See accompanying notes to consolidated financial statements.

5


 

WORLD WRESTLING ENTERTAINMENT, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)







 

 

 

 

 

 



 

 

 

 

 

 



 

Six Months Ended



 

June 30,



 

2016

 

2015

OPERATING ACTIVITIES:

 

 

 

 

 

 

Net income

 

$

14,747 

 

$

14,892 

Adjustments to reconcile net income to net cash provided by (used in) operating activities:

 

 

 

 

 

 

Amortization and impairments of feature film production assets

 

 

2,701 

 

 

1,409 

Amortization of television production assets

 

 

17,569 

 

 

10,054 

Depreciation and amortization

 

 

13,932 

 

 

13,569 

Services provided in exchange for equity instruments

 

 

(1,705)

 

 

(100)

Equity in earnings of affiliate, net of dividends received

 

 

(90)

 

 

(60)

Other amortization

 

 

1,154 

 

 

1,037 

Stock-based compensation

 

 

9,589 

 

 

7,787 

(Recovery from) provision for doubtful accounts

 

 

(167)

 

 

446 

Provision for (benefit from) deferred income taxes

 

 

2,138 

 

 

(8,684)

Other non-cash adjustments

 

 

278 

 

 

66 

Cash (used in)/provided by changes in operating assets and liabilities:

 

 

 

 

 

 

Accounts receivable

 

 

3,225 

 

 

928 

Inventory

 

 

(1,207)

 

 

(1,247)

Prepaid expenses and other assets

 

 

(11,996)

 

 

(2,364)

Feature film production assets

 

 

(5,023)

 

 

(4,692)

Television production assets

 

 

(15,122)

 

 

(14,578)

Accounts payable, accrued expenses and other liabilities

 

 

(10,461)

 

 

1,193 

Deferred income

 

 

(16,830)

 

 

8,427 

Net cash provided by operating activities

 

 

2,732 

 

 

28,083 

INVESTING ACTIVITIES:

 

 

 

 

 

 

Purchases of property and equipment and other assets

 

 

(15,533)

 

 

(10,993)

Purchases of short-term investments

 

 

 —

 

 

(4,621)

Proceeds from sales and maturities of investments

 

 

400 

 

 

6,090 

Purchase of investment securities

 

 

(1,250)

 

 

(960)

Net cash used in investing activities

 

 

(16,383)

 

 

(10,484)

FINANCING ACTIVITIES:

 

 

 

 

 

 

Repayment of long-term debt

 

 

(2,208)

 

 

(2,161)

Dividends paid

 

 

(18,229)

 

 

(18,129)

Debt issuance costs

 

 

 —

 

 

(797)

Proceeds from borrowings under credit facilities

 

 

11,583 

 

 

 —

Proceeds from issuance of stock

 

 

673 

 

 

527 

Excess tax benefits from stock-based payment arrangements

 

 

 

 

Net cash used in financing activities

 

 

(8,175)

 

 

(20,555)

NET DECREASE IN CASH AND CASH EQUIVALENTS

 

 

(21,826)

 

 

(2,956)

CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD

 

 

38,019 

 

 

47,227 

CASH AND CASH EQUIVALENTS, END OF PERIOD

 

$

16,193 

 

$

44,271 

NON-CASH INVESTING TRANSACTIONS:

 

 

 

 

 

 

Non-cash purchase of property and equipment

 

$

768 

 

$

410 

Non-cash purchase of investment securities (See Note 9)

 

$

 —

 

$

13,800 



 



 

 

See accompanying notes to consolidated financial statements.

6


 

Table of Contents

WORLD WRESTLING ENTERTAINMENT, INC.

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except share data)

(Unaudited)

 

1. Basis of Presentation and Business Description

The accompanying consolidated financial statements include the accounts of WWE.  “WWE” refers to World Wrestling Entertainment, Inc. and its subsidiaries, unless the context otherwise requires.  References to “we,” “us,” “our” and the “Company” refer to WWE. The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires our management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period.  Actual results could differ from those estimates.

The accompanying consolidated financial statements are unaudited. All adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation of financial position, results of operations, and cash flows at the dates and for the periods presented have been included.  The results of operations of any interim period are not necessarily indicative of the results of operations for the full year. Included in Corporate and Other are intersegment eliminations recorded in consolidation. All intercompany balances are eliminated in consolidation.

Certain information and note disclosures normally included in annual financial statements have been condensed or omitted from these interim financial statements; these financial statements should be read in conjunction with the financial statements and notes thereto included in our Form 10-K for the year ended December 31, 2015.

We are an integrated media and entertainment company, principally engaged in the production and distribution of content through various channels, including our premium over-the-top WWE Network, television rights agreements, pay-per-view event programming, live events, feature films, licensing of various WWE themed products, and the sale of consumer products featuring our brands.  Our operations are organized around the following four principal activities:

Media Division:

Network

·

Revenues consist principally of subscriptions to WWE Network, fees for viewing our pay-per-view programming, and advertising fees.

Television

·

Revenues consist principally of television rights fees and advertising.

Home Entertainment

·

Revenues consist principally of sales of WWE produced content via home entertainment platforms, including DVD, Blu-Ray, and subscription and transactional on-demand outlets.

Digital Media

·

Revenues consist principally of advertising sales on our websites and third party websites including YouTube, and sales of various broadband and mobile content.

Live Events:

·

Revenues consist principally of ticket sales and travel packages for live events.

Consumer Products Division:

Licensing

·

Revenues consist principally of royalties or license fees related to various WWE themed products such as video games, toys, and apparel.

Venue Merchandise

·

Revenues consist of sales of merchandise at our live events.

WWEShop

·

Revenues consist of sales of merchandise on our websites, including through our WWEShop Internet storefront and on distribution platforms, including Amazon.

 

7


 

Table of Contents

WORLD WRESTLING ENTERTAINMENT, INC.

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except share data)

(Unaudited)

 

WWE Studios:

·

Revenues consist of amounts earned from investing in, producing, and/or distributing filmed entertainment.

 

2. Significant Accounting Policies

There have been no significant changes to our accounting policies that were previously disclosed in our Annual Report on Form 10-K for our fiscal year ended December 31, 2015, or in the methodology used in formulating these significant judgments and estimates that affect the application of these policies.

Cost of Revenues

Included within Costs of revenues are the following:







 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 



 

Three Months Ended

 

Six Months Ended



 

June 30,

 

June 30,



 

2016

 

2015

 

2016

 

2015

Amortization and impairment of feature film assets

 

$

1,595 

 

$

699 

 

$

2,701 

 

$

1,409 

Amortization of television production assets

 

 

9,438 

 

 

3,211 

 

 

17,569 

 

 

10,054 

Amortization of WWE Network content delivery and technology assets

 

 

1,230 

 

 

833 

 

 

2,379 

 

 

1,812 

Total amortization and impairment included in cost of revenues

 

$

12,263 

 

$

4,743 

 

$

22,649 

 

$

13,275 

Costs to produce our live event programming are expensed when the event is first broadcast, and are not included in the amortization table noted above.

Recent Accounting Pronouncements

In March 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2016-09, “Compensation –Stock Compensation (Topic 718)”, which is intended to simplify several aspects of the accounting for share-based payment award transactions. The amendments require entities to record all excess tax benefits or deficiencies as income tax benefit or expense in the income statement and would require entities to classify excess tax benefits as an operating activity in the statement of cash flows. The amendments will also allow entities to provide net settlement of stock-based awards to cover tax withholding obligations without classifying the awards as a liability as long as the net settlement does not exceed the maximum individual statutory tax rate. The amounts paid to satisfy the statutory income tax withholding obligation would be classified as a financing activity in the statement of cash flows. Additionally, the amendments allow entities to elect an accounting policy to either continue to use a forfeiture estimate on share based awards or account for forfeitures when they occur. The new guidance will be effective for the fiscal year beginning after December 15, 2016, including interim periods within that year, which for the Company will be effective for the fiscal year beginning January 1, 2017. If an entity early adopts the amendments in an interim period, any adjustments should be reflected as of the beginning of the fiscal year that includes that interim period.  The Company is currently evaluating the impact of the adoption of this new standard on our consolidated financial statements.



In March 2016, the FASB issued ASU No. 2016-07, “Investments – Equity Method and Joint Ventures (Topic 323): Simplifying the Transition to the Equity Method of Accounting”. The amendments eliminate the requirement to retroactively adopt the equity method of accounting when a change in ownership occurs. The amendments require that the equity method investor add the cost of acquiring the additional interest in the investee to the current basis of the investment and adopt the equity method of accounting as of the date the investment becomes qualified for equity method accounting. Therefore, upon qualifying for the equity method of accounting, no retroactive adjustment of the investment is required. This new guidance is effective for annual and interim reporting periods beginning after December 15, 2016 which for the Company will be effective for the fiscal year beginning January 1, 2017. The Company is currently evaluating the impact of this new standard and do not expect it to have a material impact on our consolidated financial statements.



In February 2016, the FASB issued ASU No. 2016-02 “Leases (Topic 842)”, which will supersede the existing guidance for lease accounting. This new standard will require lessees to recognize leases on their balance sheets, and leaves lessor accounting largely unchanged. The new standard requires a dual approach for lessee accounting under which a lessee would account for leases as finance leases or operating leases. Both finance leases and operating leases will result in the lessee recognizing a right-of-use asset and a corresponding lease liability. For finance leases, the lessee would recognize interest expense and amortization of the right-of-use asset, and for operating leases, the lessee would recognize a straight-line total lease expense. The new guidance is effective for fiscal years beginning after December 15, 2018 and interim periods within those fiscal years, which for the Company will be effective for

 

8


 

Table of Contents

WORLD WRESTLING ENTERTAINMENT, INC.

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except share data)

(Unaudited)

 

the fiscal year beginning January 1, 2019, with early adoption permitted.  An entity will be required to recognize and measure leases at the beginning of the earliest period presented using a modified retrospective approach. We are currently evaluating the impact of the adoption of this new standard on our consolidated financial statements.



In January 2016, the FASB issued ASU No. 2016-01, “Financial Instruments-Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities”, which requires that most equity investments be measured at fair value, with subsequent changes in fair value recognized in net income (other than those accounted for under equity method of accounting). Under the new guidance, entities will no longer be able to recognize unrealized holding gains and losses on equity securities classified today as available-for-sale in other comprehensive income, and they will no longer be able to use the cost method of accounting for equity securities that do not have readily determinable fair values. However, entities will be able to elect to record equity investments without readily determinable fair values at cost, less impairment, and plus or minus subsequent adjustments for observable price changes. The guidance for classifying and measuring investments in debt securities and loans is not impacted The new guidance is effective for fiscal years, and interim periods within those years, beginning after December 15, 2017, which for the Company is effective for the fiscal year beginning January 1, 2018, with early adoption permitted. The Company is currently evaluating the impact of the adoption of this new standard on our consolidated financial statements.

In July 2015, the FASB issued ASU No. 2015-11, “Simplifying the Measurement of Inventory,” which requires all inventory to be measured at the lower of cost and net realizable value, except for inventory that is accounted for using the LIFO or the retail inventory method, which will be measured under existing accounting standards. The new guidance must be applied on a prospective basis and is effective for fiscal years beginning after December 15, 2016, which for the Company will be effective for the fiscal year beginning January 1, 2017, with early adoption permitted. We are currently evaluating the impact of the adoption of this new standard and do not expect it to have a material impact on our consolidated financial statements.

In February 2015, the FASB issued ASU No. 2015-02, "Consolidation -Amendments to the Consolidation Analysis." This standard modified the evaluation of whether certain limited partnerships and legal entities are variable interest entities, eliminated the presumption that the general partner should consolidate a limited partnership, affected the consolidation analysis of reporting entities that are involved with variable interest entities, and provided a scope exception from consolidation for entities with interests in legal entities that are similar to money market funds. This standard is effective for fiscal years beginning after December 15, 2016, and for interim periods within fiscal years beginning after December 15, 2017. This guidance is effective for our fiscal year beginning January 1, 2017 and for interim periods beginning January 1, 2018. We are currently evaluating the impact of the adoption of this new standard on our consolidated financial statements.

In May 2014, the FASB issued ASU No. 2014-09, "Revenue from Contracts with Customers (Topic 606)." This standard will supersede the revenue recognition requirements in ASC 605, "Revenue Recognition," and most industry-specific guidance. The standard requires an entity to recognize revenue in an amount that reflects the consideration to which the entity expects to receive in exchange for goods or services. In addition, during 2016, the FASB has issued ASU No. 2016-08, “Principle versus Agent Considerations,” ASU No. 2016-10, “Identifying Performance Obligations and Licensing,” and ASU No. 2016-12, “Narrow Scope Improvements and Practical Expedients,” all of which clarify certain implementation guidance in ASU No. 2014-09.  This standard along with the subsequent clarifications issued are effective for annual reporting periods beginning after December 15, 2017, and interim periods within those fiscal years, making it effective for our fiscal year beginning January 1, 2018. Early adoption is permitted to the original effective date for annual reporting periods beginning after December 15, 2016. The standard allows an entity to either apply the requirements retrospectively to all prior periods presented, or apply the requirements in the year of adoption, through a cumulative adjustment. We are currently evaluating the impact of adoption of this new standard, along with subsequent clarifying guidance, on our consolidated financial statements.



 

3. Segment Information

The Company currently classifies its operations into ten reportable segments.  The ten reportable segments of the Company include the following: Network (which includes our pay-per-view business), Television, Home Entertainment and Digital Media, which are individual segments that comprise the Media Division; Live Events; Licensing, Venue Merchandise and WWEShop, which are individual segments that comprise the Consumer Products Division; WWE Studios, and Corporate and Other (as defined below).

The Company presents OIBDA as the primary measure of segment profit (loss).  The Company defines OIBDA as operating income before depreciation and amortization, excluding feature film and television production asset amortization and impairments, as well as the amortization of costs related to content delivery and technology assets utilized for our WWE Network.  The Company believes the presentation of OIBDA is relevant and useful for investors because it allows investors to view our segment performance

 

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WORLD WRESTLING ENTERTAINMENT, INC.

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except share data)

(Unaudited)

 

in the same manner as the primary method used by management to evaluate segment performance and make decisions about allocating resources.  Additionally, we believe that OIBDA provides a meaningful representation of operating cash flows within our segments.

OIBDA is a non-GAAP financial measure and may be different than similarly titled non-GAAP financial measures used by other companies. A limitation of OIBDA is that it excludes depreciation and amortization, which represents the periodic charge for certain fixed assets and intangible assets used in generating revenues for our business. OIBDA should not be regarded as an alternative to operating income or net income as an indicator of operating performance, or to the statement of cash flows as a measure of liquidity, nor should it be considered in isolation or as a substitute for financial measures prepared in accordance with GAAP. We believe that operating income is the most directly comparable GAAP financial measure to OIBDA. See below for a reconciliation of OIBDA to operating income for the periods presented.

We record certain costs within our Corporate and Other segment since the costs benefit the Company as a whole and are not directly attributable to our other reportable segments. These costs are categorized and presented into two categories, Corporate Support and Business Support. Corporate Support expenses primarily include our corporate general and administrative functions. Business Support expenses include our sales and marketing functions, our international sales offices, talent development costs, including costs associated with our WWE Performance Center, and our business strategy and data analytics functions.  Included in Corporate and Other are intersegment eliminations recorded in consolidation.

We do not disclose assets by segment information. In general, assets of the Company are leveraged across its reportable segments and we do not provide assets by segment information to our chief operating decision maker, as that information is not typically used in the determination of resource allocation and assessing business performance of each reportable segment.

 

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WORLD WRESTLING ENTERTAINMENT, INC.

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except share data)

(Unaudited)

 

The following tables present summarized financial information for each of the Company's reportable segments:







 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 



 

Three Months Ended

 

Six Months Ended



 

June 30,

 

June 30,



 

2016

 

2015

 

2016

 

2015

Net revenues:

 

 

 

 

 

 

 

 

 

 

 

 

Network

 

$

51,750 

 

$

40,176 

 

$

92,081 

 

$

77,735 

Television

 

 

56,043 

 

 

52,097 

 

 

116,762 

 

 

110,285 

Home Entertainment

 

 

3,155 

 

 

3,096 

 

 

6,424 

 

 

7,819 

Digital Media

 

 

6,489 

 

 

3,734 

 

 

11,886 

 

 

8,079 

Live Events

 

 

51,912 

 

 

26,449 

 

 

77,246 

 

 

65,736 

Licensing

 

 

8,916 

 

 

11,305 

 

 

29,958 

 

 

27,768 

Venue Merchandise

 

 

8,770 

 

 

4,640 

 

 

14,210 

 

 

13,071 

WWEShop

 

 

7,491 

 

 

5,859 

 

 

14,298 

 

 

11,129 

WWE Studios

 

 

3,289 

 

 

2,119 

 

 

5,232 

 

 

3,583 

Corporate & Other

 

 

1,179 

 

 

707 

 

 

1,997 

 

 

1,155 

Total net revenues

 

$

198,994 

 

$

150,182 

 

$

370,094 

 

$

326,360 



 

 

 

 

 

 

 

 

 

 

 

 

OIBDA:

 

 

 

 

 

 

 

 

 

 

 

 

Network (1)

 

$

(5,656)

 

$

17,256 

 

$

10,104 

 

$

15,732 

Television (1)

 

 

27,204 

 

 

21,205 

 

 

55,511 

 

 

47,139 

Home Entertainment

 

 

964 

 

 

539 

 

 

2,508 

 

 

2,658 

Digital Media

 

 

183 

 

 

(841)

 

 

71 

 

 

(970)

Live Events

 

 

23,425 

 

 

6,665 

 

 

29,510 

 

 

24,251 

Licensing

 

 

3,953 

 

 

6,400 

 

 

18,224 

 

 

17,243 

Venue Merchandise

 

 

3,627 

 

 

2,052 

 

 

5,692 

 

 

5,256 

WWEShop

 

 

1,571 

 

 

1,434 

 

 

2,972 

 

 

2,538 

WWE Studios

 

 

439 

 

 

(32)

 

 

 

 

(399)

Corporate & Other

 

 

(48,171)

 

 

(41,550)

 

 

(89,464)

 

 

(79,274)

Total OIBDA

 

$

7,539 

 

$

13,128 

 

$

35,130 

 

$

34,174 

(1)

Beginning on January 1, 2016, the Company started allocating certain shared costs and expenses between our Network and Television segments.  Management believes this allocation more accurately reflects the operations of each of these reportable segments.  The impact of this allocation methodology during the three and six months ended June 30, 2016 was a decline to Network segment OIBDA of approximately $5,323 and $8,397, respectively, with a corresponding increase of $5,323 and $8,397, respectively, to Television segment OIBDA.  The allocation methodology had no impact on our consolidated financial statements.  Prior year Network and Television segment results were not revised for this prospective change in the allocation method.  Refer to Management's Discussion and Analysis of Financial Condition and Results of Operations for further discussion.



Reconciliation of Total Operating Income to Total OIBDA







 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 



 

Three Months Ended

 

Six Months Ended



 

June 30,

 

June 30,



 

2016

 

2015

 

2016

 

2015

Total operating income

 

$

1,573 

 

$

7,284 

 

$

23,577 

 

$

22,417 

Depreciation and amortization

 

 

5,966 

 

 

5,844 

 

 

11,553 

 

 

11,757 

Total OIBDA

 

$

7,539 

 

$

13,128 

 

$

35,130 

 

$

34,174 



 

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WORLD WRESTLING ENTERTAINMENT, INC.

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except share data)

(Unaudited)

 

Geographic Information

Net revenues by major geographic region are based upon the geographic location of where our content is distributed. The information below summarizes net revenues to unaffiliated customers by geographic area:







 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 



 

Three Months Ended

 

Six Months Ended



 

June 30,

 

June 30,



 

2016

 

2015

 

2016

 

2015

North America

 

$

149,761 

 

$

107,428 

 

$

279,781 

 

$

247,750 

Europe/Middle East/Africa

 

 

36,142 

 

 

30,798 

 

 

63,748 

 

 

52,414 

Asia Pacific

 

 

11,245 

 

 

10,495 

 

 

22,834 

 

 

22,487 

Latin America

 

 

1,846 

 

 

1,461 

 

 

3,731 

 

 

3,709 

Total net revenues

 

$

198,994 

 

$

150,182 

 

$

370,094 

 

$

326,360 



Revenues generated from the United Kingdom, our largest international market, totaled $24,000 and $21,100, and $40,876 and $33,312 for the three and six months ended June 30, 2016 and 2015, respectively.  The Company’s property and equipment was almost entirely located in the United States at June 30, 2016 and 2015.

 

4. Earnings Per Share

For purposes of calculating basic and diluted earnings per share, we used the following weighted average common shares outstanding (in thousands):







 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 



 

Three Months Ended

 

Six Months Ended



 

June 30,

 

June 30,



 

2016

 

2015

 

2016

 

2015

Net income

 

$

862 

 

$

5,119 

 

$

14,747 

 

$

14,892 



 

 

 

 

 

 

 

 

 

 

 

 

Weighted average basic common shares outstanding

 

 

75,952 

 

 

75,539 

 

 

75,945 

 

 

75,529 

Dilutive effect of restricted and performance stock units

 

 

1,474 

 

 

611 

 

 

1,354 

 

 

531 

Dilutive effect of employee share purchase plan

 

 

 

 

10 

 

 

 

 

16 

Weighted average dilutive common shares outstanding

 

 

77,429 

 

 

76,160 

 

 

77,304 

 

 

76,076 



 

 

 

 

 

 

 

 

 

 

 

 

Earnings per share:

 

 

 

 

 

 

 

 

 

 

 

 

Basic and diluted

 

$

0.01 

 

$

0.07 

 

$

0.19 

 

$

0.20 



 

 

 

 

 

 

 

 

 

 

 

 

Anti-dilutive outstanding restricted and performance stock

  units (excluded from per-share calculations)

 

 

 

 

 

 

 

 









 

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WORLD WRESTLING ENTERTAINMENT, INC.

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except share data)

(Unaudited)

 

5. Stock-based Compensation



2007 Omnibus Incentive Plan



Our 2007 Amended and Restated Omnibus Incentive Plan (the “2007 Plan”) provides for equity-based incentive awards as determined by the Compensation Committee of the Board of Directors as incentives and rewards to encourage officers and employees to participate in our long-term success.



2016 Omnibus Incentive Plan  



The Company’s Board of Directors and stockholders approved the 2016 Omnibus Incentive Plan (the “2016 Plan”) on February 3, 2016, and April 21, 2016, respectively. A total of 5,000,000 shares of the Company’s common stock have been authorized for issuance under the 2016 Plan.  Beginning on February 3, 2016, the 2016 Plan replaced the 2007 Plan, and no new awards will be granted under the 2007 Plan.  Any awards outstanding under the 2007 Plan on the date of stockholder approval of the 2016 Plan will remain subject to and be paid under the 2007 Plan, and any shares subject to outstanding awards under the 2007 Plan that subsequently cease to be subject to such awards (other than by reason of settlement of the awards in shares) will automatically become available for issuance under the 2016 Plan. The 2016 Plan provides for the grant of incentive or non-qualified stock options, stock appreciation rights, restricted stock, restricted stock units, other stock-based awards, and performance awards to eligible participants as determined by the Compensation Committee of the Board of Directors.  Awards may be granted under the 2016 Plan to officers, employees, consultants, advisors and independent contractors of the Company and its affiliates and to non-employee directors of the Company.

Restricted Stock Units

The Company grants restricted stock units ("RSUs") to officers and employees under the 2016 Plan. Stock-based compensation costs associated with our RSUs are determined using the fair market value of the Company’s common stock on the date of the grant.  These costs are recognized over the requisite service period using the graded vesting method, net of estimated forfeitures.  RSUs have a service requirement typically over a three and one half year vesting schedule and vest in equal annual installments.  We estimate forfeitures based on historical trends when recognizing compensation expense and adjust the estimate of forfeitures when they are expected to differ or as forfeitures occur. Unvested RSUs accrue dividend equivalents at the same rate as are paid on our shares of Class A common stock.  The dividend equivalents are subject to the same vesting schedule as the underlying RSUs.

The following table summarizes the RSU activity during the six months ended June 30, 2016:







 

 

 

 

 



 

 

 

 

 



 

Units

 

Weighted-

Average

Grant-Date

Fair Value

Unvested at January 1, 2016

 

266,450 

 

$

16.31 

Granted

 

212,491 

 

$

17.07 

Vested

 

(6,993)

 

$

14.10 

Forfeited

 

(22,651)

 

$

16.39 

Dividend equivalents

 

6,538 

 

$

16.68 

Unvested at June 30, 2016

 

455,835 

 

$

16.70 





Performance Stock Units

The Company grants performance stock units (“PSUs”) to officers and employees under the 2016 Plan. Stock-based compensation costs associated with our PSUs are initially determined using the fair market value of the Company’s common stock on the date the awards are approved by our Compensation Committee (service inception date).  The vesting of these PSUs are subject to certain performance conditions and a service requirement of typically three and one half years.  Until such time as the performance conditions are met, stock compensation costs associated with these PSUs are re-measured each reporting period based upon the fair market value of the Company's common stock and the probability of attainment on the reporting date.  The ultimate number of PSUs that are issued to an employee is the result of the actual performance of the Company at the end of the performance period compared to the performance conditions.  Stock compensation costs for our PSUs are recognized over the requisite service period using the graded vesting method, net of estimated forfeitures. We estimate forfeitures based on historical trends which recognizing compensation expense and adjust the estimate of forfeitures when they are expected to differ or as forfeitures occur.  Unvested PSUs

 

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WORLD WRESTLING ENTERTAINMENT, INC.

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except share data)

(Unaudited)

 

accrue dividend equivalents once the performance conditions are met at the same rate as are paid on our shares of Class A common stock.  The dividend equivalents are subject to the same vesting schedule as the underlying PSUs.

During the first quarter of 2015, the Compensation Committee approved agreements to grant PSUs to three executive management members for an aggregate value of $15,000.  These awards vary from the typical PSU grant in that the awards vest in three annual tranches of 20%,  30%, and 50%, compared to the typical 33%, 33%, 33% vesting schedule.  These agreements provide for two $7,500 awards, the first with performance conditions tied to 2015 results, and the second with performance conditions tied to 2016 results. The Company began expensing the second award of $7,500 concurrent with the first award beginning in February 2015.  The units associated with these awards are included in the table below.

The following table summarizes the PSU activity during the six months ended June 30, 2016:







 

 

 

 

 



 

 

 

 

 



 

Units

 

Weighted-

Average

Grant-Date

Fair Value

Unvested at January 1, 2016

 

1,238,679 

 

$

17.95 

Granted

 

956,730 

 

$

18.41 

Achievement adjustment

 

620,923 

 

$

14.94 

Forfeited

 

(95,498)

 

$

16.59 

Dividend equivalents

 

25,292 

 

$

15.43 

Unvested at June 30, 2016

 

2,746,126 

 

$

16.43 





During the six months ended June 302016, we granted 956,730 PSUs, inclusive of the second half of the executive grants noted above, which are subject to certain performance conditions.

During the year ended December 31, 2015, we granted 1,000,146 PSUs, inclusive of the first half of the executive grants noted above, which were subject to performance conditions.  During the first quarter of 2016, the performance conditions related to these PSUs were exceeded, which resulted in an increase of 620,923 PSUs in 2016 relating to the initial 2015 PSU grant.

Stock-based compensation costs, which includes costs related to RSUs, PSUs and the Company's Employee Stock Purchase Plan, totaled $6,429 and $5,308, and $9,589 and $7,787 for the three and six months ended June 30, 2016 and 2015, respectively.

 

6. Property and Equipment

Property and equipment consisted of the following:







 

 

 

 

 

 



 

 

 

 

 

 



 

As of



 

June 30,

 

December 31,



 

2016

 

2015

Land, buildings and improvements

 

$

103,718 

 

$

100,594 

Equipment

 

 

127,029 

 

 

117,018 

Corporate aircraft

 

 

31,277 

 

 

31,277 

Vehicles

 

 

244 

 

 

244 



 

 

262,268 

 

 

249,133 

Less: accumulated depreciation and amortization

 

 

(153,107)

 

 

(143,916)

    Total

 

$

109,161 

 

$

105,217 



Depreciation expense for property and equipment totaled $5,655 and $5,412, and $10,936 and $10,905 for the three and six months ended June 30, 2016 and 2015, respectively.  On June 29, 2016, the Company entered into a building purchase and sale agreement (the “Agreement”).  Pursuant to the Agreement, the Company expects to acquire all of the rights, title, and interest in a building located in Stamford, Connecticut.  The Company currently leases a portion of the building, and expects to expand its use of space in the building and leave the remaining space leased to a current tenant.  The purchase price under the Agreement of approximately $26,900 will be funded, in part, via the assumption of an existing mortgage of $23,000.  In connection with entering into the Agreement, the Company paid $2,687 of cash as a deposit towards the purchase price.  The transaction is expected to close during the third quarter of 2016.

 

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WORLD WRESTLING ENTERTAINMENT, INC.

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except share data)

(Unaudited)

 

 

7. Feature Film Production Assets, Net

Feature film production assets consisted of the following:







 

 

 

 

 

 



 

 

 

 

 

 



 

As of



 

June 30,

 

December 31,



 

2016

 

2015

In release

 

$

13,519 

 

$

15,249 

Completed but not released

 

 

6,658 

 

 

2,432 

In production

 

 

8,494 

 

 

8,029 

In development

 

 

821 

 

 

643 

    Total

 

$

29,492 

 

$

26,353 



Approximately 35% of “In release” film production assets are estimated to be amortized over the next 12 months, and approximately 66% of “In release” film production assets are estimated to be amortized over the next three years.  We anticipate amortizing approximately 80% of our "In release" film production asset within four years as we receive revenues associated with television distribution of our licensed films.  During the three and six months ended June 302016 and 2015, we amortized $1,595 and $699,  and $2,701 and $1,409,  respectively, of feature film production assets. During these periods, our films were released under a co-distribution model.  Under the co-distribution model, third-party distribution partners control the distribution and marketing of co-distributed films, and as a result, we recognize revenue on a net basis after the third-party distribution partners recoup distribution fees and expenses and results are reported to us.  Results are typically reported to us in periods subsequent to the initial release of the film.

During the six months ended June 302016, we released one feature film,  Countdown, direct to DVD, which comprises $996 of our “In release” feature film assets as of June 30, 2016.    We currently have five films designated as “Completed but not released” and have seven films “In production.”  We also have capitalized certain script development costs and pre-production costs for various other film projects designated as “In development.”  Development costs are evaluated at each reporting period for impairment and to determine if a project is deemed to be abandoned.  We did not record any impairment charges related to abandoned projects during the three and six months ended June 30, 2016 and 2015.

Unamortized feature film production assets are evaluated for impairment each reporting period.  We review and revise estimates of ultimate revenue and participation costs at each reporting period to reflect the most current information available.  If estimates for a film’s ultimate revenue and/or costs are revised and indicate a significant decline in a film’s profitability, or if events or circumstances change that indicate we should assess whether the fair value of a film is less than its unamortized film costs, we calculate the film's estimated fair value using a discounted cash flows model.  If fair value is less than unamortized cost, the film asset is written down to fair value.    We did not record any impairment charges during the three and six months ended June 302016 and 2015 related to our feature films.

 

8. Television Production Assets, Net

Television production assets consisted of the following:







 

 

 

 

 

 



 

 

 

 

 

 



 

As of



 

June 30,

 

December 31,



 

2016

 

2015

In release

 

$

2,945 

 

$

425 

In production

 

 

6,024 

 

 

10,991 

    Total

 

$

8,969 

 

$

11,416 



Television production assets consist primarily of non-live event episodic television series we have produced for distribution through a variety of platforms including on our WWE Network. Amounts capitalized include development costs, production costs, production overhead and employee salaries. Costs to produce episodic programming for television or distribution on WWE Network are amortized in the proportion that revenues bear to management's estimates of the ultimate revenue expected to be recognized from exploitation, exhibition or sale.



 

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WORLD WRESTLING ENTERTAINMENT, INC.

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except share data)

(Unaudited)

 

Amortization of television production assets, which are included in Costs of revenues, consisted of the following:







 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 



 

Three Months Ended

 

Six Months Ended



 

June 30,

 

June 30,



 

2016

 

2015

 

2016

 

2015

WWE Network programming

 

$

7,396 

 

$

1,875 

 

$

8,729 

 

$

2,909 

Television programming

 

 

2,042 

 

 

1,336 

 

 

8,840 

 

 

7,145 

    Total

 

$

9,438 

 

$

3,211 

 

$

17,569 

 

$

10,054 



Costs to produce our live event programming are expensed when the event is first broadcast, and are not included in the capitalized costs or amortization tables noted above.

Unamortized television production assets are evaluated for impairment each reporting period.  If conditions indicate a potential impairment, and the estimated future cash flows are not sufficient to recover the unamortized asset, the asset is written down to fair value.  In addition, if we determine that a program will not likely air, we will expense the remaining unamortized asset.  During the three and six months ended June 30, 2016 and 2015, we did not record any impairments related to our television production assets.

 

9. Investment Securities and Short-Term Investments

Investment Securities

Included within Investment Securities are the following:





 

 

 

 

 

 



 

 

 

 

 

 



 

As of



 

June 30,

 

December 31,



 

2016

 

2015

Equity method investment

 

$

14,252 

 

$

14,163 

Cost method investments

 

 

9,366 

 

 

8,115 

Total investment securities

 

$

23,618 

 

$

22,278 

Equity Method Investment



In March 2015, WWE and ABG formed a joint venture to re-launch an apparel and lifestyle brand, Tapout (the "Brand"). ABG agreed to contribute certain intangible assets for the Brand, licensing contracts, systems, and other administrative functions to Tapout.  The Company agreed to contribute promotional and marketing services related to the venture for a period of at least five years in exchange for a 50% interest in the profits and losses and voting interest in Tapout.  The Company valued its initial investment based on the fair value of the existing licensing contracts contributed by ABG.  Our interest on the inception date of the agreement was determined to be $13,800. To the extent that Tapout records income or losses, we record our share proportionate to our ownership percentage, and any dividends received reduce the carrying amount of the investment. Net equity method earnings from Tapout are included as a component of Investment income, net on the Consolidated Statements of Operations. Net dividends received from Tapout are reflected on the Consolidated Statements of Cash Flows as a component of Equity in earnings of affiliate, net of dividends received. The Company did not record any impairment charges related to our investment in Tapout during the three and six months ended June 30, 2016 or 2015. 



The following table presents the net equity method earnings from Tapout and net dividends received from Tapout for the periods presented:







 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 



 

Three Months Ended

 

Six Months Ended



 

June 30,

 

June 30,



 

2016

 

2015

 

2016

 

2015

Net equity method earnings from Tapout

 

$

415 

 

$

260 

 

$

837 

 

$

260 

Net dividends received from Tapout

 

 

(453)

 

 

(200)

 

 

(747)

 

 

(200)

Equity in earnings of affiliate, net of dividends received

 

$

(38)

 

$

60 

 

$

90 

 

$

60 



 

16


 

Table of Contents

WORLD WRESTLING ENTERTAINMENT, INC.

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except share data)

(Unaudited)

 

As promotional services are provided to Tapout, we will record revenue and reduce the existing service obligation.  During the three and six months ended June 30, 2016 and 2015, we recorded revenues of $947 and $0, and $1,705 and $100, respectively, related to our fulfillment of our promotional services obligation to Tapout.  The remaining service obligation as of June 30, 2016  was $9,665, and was included in Deferred Income and Non-Current Deferred Income for $1,385 and $8,280, respectively.

Our known maximum exposure to loss approximates the remaining service obligation to Tapout, which was $9,665 as of June 30, 2016. Creditors of Tapout do not have recourse against the general credit of the Company.

Cost Method Investments

WWE maintains several cost method investments, including a $3,000 investment in a mobile video publishing business, a $2,715 investment in a live event touring business and a $2,400 investment in a software application developer.  During the three months ended June 30, 2016, the Company made an investment of $1,000 in a fantasy sports contest provider and an investment of $250 in a virtual reality platform operator. We evaluate our cost method investments for impairment if factors indicate that a significant decrease in value has occurred. The Company did not record any impairment charges on our cost method investments during the three and six months ended June 30, 2016 and 2015.

Short-Term Investments

Short-term investments measured at fair value consisted of the following:







 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

As of June 30, 2016

 

As of December 31, 2015



 

 

 

 

Gross Unrealized

 

 

 

 

 

 

 

Gross Unrealized

 

 

 



 

Amortized

 

 

 

 

 

 

 

Fair

 

Amortized

 

 

 

 

 

 

 

Fair



 

Cost

 

Gain

 

(Loss)

 

Value

 

Cost

 

Gain

 

(Loss)

 

Value

Municipal bonds

 

$

20,518 

 

$

51 

 

$

(1)

 

$

20,568 

 

$

21,284 

 

$

11 

 

$

(56)

 

$

21,239