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EX-31.1 - EX-31.1 - WORLD WRESTLING ENTERTAINMENTINCwwe-20170930xex31_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 September 30, 2017

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, smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company, and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):





 

 

 

 

Large accelerated filer  

Accelerated filer  

Non-accelerated filer  

Smaller reporting company  

Emerging growth company  



If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.



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



At October  24, 2017 the number of shares outstanding of the Registrant’s Class A common stock, par value $.01 per share, was 39,158,452 and the number of shares outstanding of the Registrant’s Class B common stock, par value $.01 per share, was 37,949,438.

 





 

 


 

TABLE OF CONTENTS





 



Page #

Part I – FINANCIAL INFORMATION

 

Item 1. Consolidated Financial Statements (unaudited)

Consolidated Statements of Operations for the three and nine months ended September 30, 2017 and 2016

Consolidated Statements of Comprehensive Income for the three and nine months ended September 30,  2017 and 2016

Consolidated Balance Sheets as of September 30, 2017 and December 31, 2016

Consolidated Statement of Stockholders’ Equity as of September 30,  2017

Consolidated Statements of Cash Flows for the nine months ended September 30,  2017 and 2016

Notes to Consolidated Financial Statements

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

26 

Item 3. Quantitative and Qualitative Disclosures about Market Risk

46 

Item 4. Controls and Procedures

46 

Part II – OTHER INFORMATION

 

Item 1. Legal Proceedings

46 

Item 1A. Risk Factors

48 

Item 6. Exhibits

48 

Signatures

49 



 





 

 


 

WORLD WRESTLING ENTERTAINMENT, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share data)

(Unaudited)







 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 



 

Three Months Ended

 

Nine Months Ended



 

September 30,

 

September 30,



 

2017

 

2016

 

2017

 

2016

Net revenues

 

$

186,325 

 

$

164,162 

 

$

589,355 

 

$

534,256 

Cost of revenues

 

 

95,233 

 

 

87,637 

 

 

340,773 

 

 

312,991 

Selling, general and administrative expenses

 

 

50,677 

 

 

52,062 

 

 

180,238 

 

 

161,672 

Depreciation and amortization

 

 

6,435 

 

 

6,194 

 

 

19,680 

 

 

17,747 

Operating income

 

 

33,980 

 

 

18,269 

 

 

48,664 

 

 

41,846 

Interest expense

 

 

3,569 

 

 

571 

 

 

10,734 

 

 

1,765 

Investment income, net

 

 

896 

 

 

654 

 

 

2,493 

 

 

1,907 

Other expense, net

 

 

(154)

 

 

(292)

 

 

(107)

 

 

(1,536)

Income before income taxes

 

 

31,153 

 

 

18,060 

 

 

40,316 

 

 

40,452 

Provision for income taxes

 

 

9,299 

 

 

6,985 

 

 

12,489 

 

 

14,630 

Net income

 

$

21,854 

 

$

11,075 

 

$

27,827 

 

$

25,822 

Earnings per share: basic

 

$

0.28 

 

$

0.15 

 

$

0.36 

 

$

0.34 

Earnings per share: diluted

 

$

0.28 

 

$

0.14 

 

$

0.36 

 

$

0.33 

Weighted average common shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

76,957 

 

 

76,298 

 

 

76,620 

 

 

76,063 

Diluted

 

 

78,505 

 

 

77,578 

 

 

78,383 

 

 

77,365 

Dividends declared per common share (Class A and B)

 

$

0.12 

 

$

0.12 

 

$

0.36 

 

$

0.36 



 

See accompanying notes to consolidated financial statements.

2


 

WORLD WRESTLING ENTERTAINMENT, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In thousands)

(Unaudited)







 

 

 

 

 

 

 

 

 

 

 

 



 

Three Months Ended

 

Nine Months Ended



 

September 30,

 

September 30,



 

2017

 

2016

 

2017

 

2016

Net income

 

$

21,854 

 

$

11,075 

 

$

27,827 

 

$

25,822 

Other comprehensive income (loss):

 

 

 

 

 

 

 

 

 

 

 

 

Foreign currency translation adjustments

 

 

35 

 

 

(14)

 

 

112 

 

 

(119)

Unrealized holding (losses) gains on available-for-sale securities (net of tax (benefit) expense of ($29) and ($51), and ($66) and $117, respectively)

 

 

(46)

 

 

(82)

 

 

(107)

 

 

192 

Total other comprehensive (loss) income

 

 

(11)

 

 

(96)

 

 

 

 

73 

Comprehensive income

 

$

21,843 

 

$

10,979 

 

$

27,832 

 

$

25,895 



 

See accompanying notes to consolidated financial statements.

3


 

WORLD WRESTLING ENTERTAINMENT, INC.

CONSOLIDATED BALANCE SHEETS

(In thousands, except share data)

(Unaudited)







 

 

 

 

 

 



 

 

 

 

 

 



 

As of



 

September 30,

 

December 31,



 

2017

 

2016

ASSETS

 

 

 

 

 

 

CURRENT ASSETS:

 

 

 

 

 

 

Cash and cash equivalents

 

$

109,163 

 

$

211,976 

Short-term investments, net

 

 

153,845 

 

 

55,164 

Accounts receivable (net of allowance for doubtful accounts and returns
   of $2,797 and $8,259, respectively)

 

 

72,057 

 

 

53,155 

Inventory

 

 

8,479 

 

 

6,531 

Prepaid expenses and other current assets

 

 

29,300 

 

 

22,480 

Total current assets

 

 

372,844 

 

 

349,306 

PROPERTY AND EQUIPMENT, NET

 

 

133,132 

 

 

132,631 

FEATURE FILM PRODUCTION ASSETS, NET

 

 

27,715 

 

 

27,137 

TELEVISION PRODUCTION ASSETS, NET

 

 

11,347 

 

 

12,508 

INVESTMENT SECURITIES

 

 

27,121 

 

 

24,957 

NON-CURRENT DEFERRED INCOME TAX ASSETS

 

 

28,040 

 

 

32,556 

OTHER ASSETS, NET

 

 

17,990 

 

 

21,808 

TOTAL ASSETS

 

$

618,189 

 

$

600,903 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

 

CURRENT LIABILITIES:

 

 

 

 

 

 

Current portion of long-term debt

 

$

7,255 

 

$

6,121 

Accounts payable and accrued expenses

 

 

66,396 

 

 

70,360 

Deferred income

 

 

65,538 

 

 

56,653 

Total current liabilities

 

 

139,189 

 

 

133,134 

LONG-TERM DEBT

 

 

32,127 

 

 

35,596 

CONVERTIBLE DEBT

 

 

176,653 

 

 

161,008 

NON-CURRENT INCOME TAX LIABILITIES

 

 

480 

 

 

725 

NON-CURRENT DEFERRED INCOME

 

 

18,107 

 

 

30,697 

Total liabilities

 

 

366,556 

 

 

361,160 

COMMITMENTS AND CONTINGENCIES

 

 

 

 

 

 

STOCKHOLDERS’ EQUITY:

 

 

 

 

 

 

Class A common stock: ($.01 par value; 180,000,000 shares authorized;
   39,153,549 and 38,455,266 shares issued and outstanding as of
   September 30, 2017 and December 31, 2016, respectively)

 

 

392 

 

 

385 

Class B convertible common stock: ($.01 par value; 60,000,000 shares authorized;
   37,949,438 and 37,949,438 shares issued and outstanding as of
   September 30, 2017 and December 31, 2016, respectively)

 

 

379 

 

 

379 

Additional paid-in capital

 

 

415,911 

 

 

403,387 

Accumulated other comprehensive income

 

 

2,900 

 

 

2,895 

Accumulated deficit

 

 

(167,949)

 

 

(167,303)

Total stockholders’ equity

 

 

251,633 

 

 

239,743 

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY

 

$

618,189 

 

$

600,903 



 

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, 2016

 

38,455 

 

$

385 

 

37,949 

 

$

379 

 

$

403,387 

 

$

2,895 

 

$

(167,303)

 

$

239,743 

Net income

 

 —

 

 

 —

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

27,827 

 

 

27,827 

Other comprehensive income

 

 —

 

 

 —

 

 —

 

 

 —

 

 

 —

 

 

 

 

 —

 

 

Stock issuances, net

 

699 

 

 

 

 —

 

 

 —

 

 

(7,699)

 

 

 —

 

 

 —

 

 

(7,692)

Debt discount on convertible debt, net (See Note 13)

 

 —

 

 

 —

 

 —

 

 

 —

 

 

2,487 

 

 

 —

 

 

 —

 

 

2,487 

Purchase of convertible note hedge (See Note 13)

 

 —

 

 

 —

 

 —

 

 

 —

 

 

(2,558)

 

 

 —

 

 

 —

 

 

(2,558)

Proceeds from issuance of warrants (See Note 13)

 

 —

 

 

 —

 

 —

 

 

 —

 

 

1,460 

 

 

 —

 

 

 —

 

 

1,460 

Cash dividends declared

 

 —

 

 

 —

 

 —

 

 

 —

 

 

872 

 

 

 —

 

 

(28,473)

 

 

(27,601)

Stock-based compensation

 

 —

 

 

 —

 

 —

 

 

 —

 

 

17,962 

 

 

 —

 

 

 —

 

 

17,962 

Balance, September 30, 2017

 

39,154 

 

$

392 

 

37,949 

 

$

379 

 

$

415,911 

 

$

2,900 

 

$

(167,949)

 

$

251,633 



 

See accompanying notes to consolidated financial statements.

5


 

WORLD WRESTLING ENTERTAINMENT, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)







 

 

 

 

 

 



 

 

 

 

 

 



 

Nine Months Ended



 

September 30,



 

2017

 

2016

OPERATING ACTIVITIES:

 

 

 

 

 

 

Net income

 

$

27,827 

 

$

25,822 

Adjustments to reconcile net income to net cash provided by operating activities:

 

 

 

 

 

 

Amortization and impairments of feature film production assets

 

 

9,065 

 

 

4,420 

Amortization of television production assets

 

 

13,633 

 

 

19,122 

Depreciation and amortization

 

 

24,281 

 

 

21,480 

Services provided in exchange for equity instruments

 

 

(2,090)

 

 

(2,484)

Equity in earnings of affiliate, net of dividends received

 

 

(11)

 

 

(400)

Other amortization

 

 

4,758 

 

 

1,649 

Stock-based compensation

 

 

17,962 

 

 

15,556 

Provision for (recovery from) doubtful accounts

 

 

240 

 

 

(410)

Provision for deferred income taxes

 

 

4,516 

 

 

11,171 

Other non-cash adjustments

 

 

154 

 

 

(500)

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

 

 

 

 

 

 

Accounts receivable

 

 

(19,030)

 

 

(4,914)

Inventory

 

 

(1,948)

 

 

(1,768)

Prepaid expenses and other assets

 

 

(8,813)

 

 

(19,946)

Feature film production assets

 

 

(9,643)

 

 

(7,081)

Television production assets

 

 

(12,472)

 

 

(23,671)

Accounts payable, accrued expenses and other liabilities

 

 

(5,851)

 

 

(10,464)

Deferred income

 

 

(1,615)

 

 

(2,397)

Net cash provided by operating activities

 

 

40,963 

 

 

25,185 

INVESTING ACTIVITIES:

 

 

 

 

 

 

Purchases of property and equipment and other assets

 

 

(17,652)

 

 

(23,888)

Purchases of short-term investments

 

 

(123,806)

 

 

 —

Proceeds from sales and maturities of short-term investments

 

 

23,990 

 

 

7,565 

Purchase of investment securities

 

 

(2,116)

 

 

(2,250)

Net cash used in investing activities

 

 

(119,584)

 

 

(18,573)

FINANCING ACTIVITIES:

 

 

 

 

 

 

Repayment of long-term debt

 

 

(3,718)

 

 

(13,322)

Dividends paid

 

 

(27,601)

 

 

(27,395)

Debt issuance costs

 

 

 —

 

 

(702)

Proceeds from borrowings under credit facilities

 

 

1,383 

 

 

11,583 

Proceeds from borrowings on convertible notes, net of issuance costs

 

 

14,534 

 

 

 —

Proceeds from issuance of warrants

 

 

1,460 

 

 

 —

Purchase of convertible note hedge

 

 

(2,558)

 

 

 —

Taxes paid related to net settlement upon vesting of equity awards

 

 

(9,185)

 

 

(5,524)

Proceeds from issuance of stock

 

 

1,493 

 

 

1,294 

Excess tax benefits from stock-based payment arrangements

 

 

 —

 

 

892 

Net cash used in financing activities

 

 

(24,192)

 

 

(33,174)

NET DECREASE IN CASH AND CASH EQUIVALENTS

 

 

(102,813)

 

 

(26,562)

CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD

 

 

211,976 

 

 

38,019 

CASH AND CASH EQUIVALENTS, END OF PERIOD

 

$

109,163 

 

$

11,457 

NON-CASH INVESTING AND FINANCING TRANSACTIONS:

 

 

 

 

 

 

Non-cash purchase of property and equipment

 

$

4,648 

 

$

3,710 

Non-cash assumption of mortgage (See Note 12)

 

$

 —

 

$

23,000 



 



 

 

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. 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, 2016.  Certain reclassifications have been made to the Consolidated Statements of Cash Flows in the prior year to conform to the current year presentation pursuant to our adoption of a new accounting standard as of January 1, 2017 related to share-based payment award accounting simplifications. See Note 2, Significant Accounting Policies, for further details.

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.

 

7


 

Table of Contents

WORLD WRESTLING ENTERTAINMENT, INC.

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except share data)

(Unaudited)

 

WWEShop

·

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

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, 2016, 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

 

Nine Months Ended



 

September 30,

 

September 30,



 

2017

 

2016

 

2017

 

2016

Amortization and impairment of feature film assets

 

$

3,262 

 

$

1,719 

 

$

9,065 

 

$

4,420 

Amortization of television production assets

 

 

2,912 

 

 

1,553 

 

 

13,633 

 

 

19,122 

Amortization of WWE Network content delivery and technology assets

 

 

1,239 

 

 

1,347 

 

 

4,594 

 

 

3,726 

Total amortization and impairment included in cost of revenues

 

$

7,413 

 

$

4,619 

 

$

27,292 

 

$

27,268 

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 May 2017, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2017-09, “Compensation – Stock Compensation (Topic 718) Scope of Modification Accounting.” The ASU provides guidance on the various types of changes which would trigger modification accounting for share-based payment awards. In summary, an entity would not apply modification accounting if the fair value, vesting conditions, and classification of the awards are the same immediately before and after the modification. The guidance is effective for annual periods beginning after December 15, 2017, and interim periods within those annual periods, which for the Company will be effective for the fiscal year beginning January 1, 2018. Early adoption is permitted, including adoption in any interim period for which financial statements have not yet been issued. The amendments are to be applied prospectively to an award modified on or after the adoption date, consequently the impact will be dependent on whether the Company modifies any of its share-based payment awards and the nature of such modifications.

In January 2017, the FASB issued ASU No. 2017-01, “Business Combinations (Topic 805) Clarifying the Definition of a Business”. The amendments in this ASU clarifies the definition of a business with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. The definition of a business affects many areas of accounting including acquisitions, disposals, goodwill, and consolidation. The guidance is effective for annual periods beginning after December 15, 2017, which for the Company will be effective for the fiscal year beginning January 1, 2018.  The Company does not expect that the adoption of this new standard will have a material impact on our consolidated financial statements.

In August 2016, the FASB issued ASU No. 2016-15, “Statement of Cash Flows (Topic 230), Classification of Certain Cash Receipts and Cash Payments,” which addresses eight specific cash flow issues and is intended to reduce diversity in practice in how certain cash receipts and cash payments are presented and classified in the statement of cash flows.  The guidance is effective for interim and annual periods beginning after December 15, 2017, which for the Company will be effective for the fiscal year beginning January 1, 2018, with early adoption permitted.  The amendments in the ASU should be applied using a retrospective transition method to each period presented. The Company does not expect that the adoption of this new standard will have a material impact on our consolidated financial statements.



 

8


 

Table of Contents

WORLD WRESTLING ENTERTAINMENT, INC.

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except share data)

(Unaudited)

 

In March 2016, the FASB issued ASU No. 2016-09, "Compensation-Stock Compensation (Topic 718) Improvements to Employee Share-Based Payment Accounting." This update simplifies several aspects of the accounting for employee share-based payment transactions, including the accounting for income taxes, forfeitures, and statutory tax withholding requirements, as well as classification in the statement of cash flows. The update contains various amendments, each requiring a specific method of adoption, and designates whether each amendment should be adopted using a retrospective, modified retrospective, or prospective transition method. The new guidance was adopted on January 1, 2017. The impact of adoption of the update is summarized below: 



·

All excess tax benefits and deficiencies that result from the difference between the deduction for tax purposes and the compensation cost recognized for financial reporting purposes related to our share-based payment awards will be recognized as income tax benefit or expense in the income statement instead of as an adjustment to additional paid-in capital.  In addition, excess tax benefits are no longer included in the calculation of diluted shares outstanding for purposes computing diluted earnings per share under the treasury stock method. The transition guidance related to these changes has been adopted by the Company on a prospective basis. During the three and nine months ended September 30, 2017, we recorded $1,599 and $1,603, respectively, of excess tax benefits related to the vesting of our share-based awards.  Prior to adoption, this amount was recorded in additional paid-in capital. This change reduced the Company’s effective tax rate from 35% to 30% and 35% to 31% for the three and nine months ended September 30, 2017, respectively



·

An entity is now required to recognize excess tax benefits regardless of whether the benefit reduces taxes payable in the current period. Under the required modified retrospective transition, the Company had no cumulative-effect adjustment to retained earnings at January 1, 2017, as the Company had no previously unrecognized excess tax benefits.



·

Excess tax benefits will be classified along with other income tax cash flows as an operating activity on the statement of cash flows. Prior to the update, excess tax benefits were separated from other income tax cash flows and classified as a financing activity. In fiscal year 2016 and 2015, excess tax benefits of $893 and $431, respectively, were recorded as part of financing cash inflows. The Company adopted these changes on a prospective basis.



·

Cash paid by an employer when directly withholding shares for tax-withholding purposes upon vesting of a share-based payment award are now classified as a financing activity on the statement of cash flows rather than as operating cash outflows. This amendment has been adopted by the Company on a retrospective basis. As a result of the retrospective adoption of this amendment, cash outflows of $5,524 was reclassified in the accompanying Consolidated Statements of Cash Flows from "Changes in accounts payable, accrued expenses and other liabilities" to "Taxes paid related to net settlement upon vesting of equity awards " for the nine months ended September 30, 2016.  



·

The threshold to qualify for equity classification of a share-based payment award would now permit withholding up to a maximum individual statutory tax rate in the applicable jurisdictions. The Company had no share-based payment awards receiving liability treatment under the prior rules. Therefore, the change from minimum up to a maximum statutory rate on tax withholdings had no impact on our consolidated financial statements and no cumulative effect adjustment was required.



·

The Company has elected to continue its current policy of estimating forfeitures rather than recognizing forfeitures when they occur. 

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 was adopted on January 1, 2017 with no 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 the fiscal

 

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WORLD WRESTLING ENTERTAINMENT, INC.

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except share data)

(Unaudited)

 

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. While we are evaluating the impact the new guidance will have on our consolidated financial statements, we currently expect a gross-up of our consolidated balance sheet as a result of recognizing right of use assets and lease liabilities.  The extent of such gross-up remains to be determined once we complete a review of our existing lease contracts (we are primarily a lessee) and service contracts which may contain embedded leases.

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 does not expect that the adoption of this new standard will have a material impact 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 was adopted on January 1, 2017 with no impact 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, “Principal versus Agent Considerations,” ASU No. 2016-10, “Identifying Performance Obligations and Licensing,” ASU No. 2016-12, “Narrow Scope Improvements and Practical Expedients,” and ASU No. 2016-20, “Technical Corrections and Improvements to Topic 606, Revenue from Contracts with Customers,” 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. While we are currently evaluating the impact of adoption of this new standard and clarifying guidance on our consolidated financial statements, we believe the most significant impact will be an acceleration in the timing of revenue recognition in our licensing and WWE Studios businesses. We currently record revenues from our licensed products and WWE Studios film distribution revenues after receiving statements from the licensee and/or film distributor. Under the new revenue recognition rules, revenues will be recorded based on best estimates available in the period of sales or usage. We do not expect the impact of this change to be material on a full-year basis, but will likely impact the revenues recorded in a specific quarter as compared to previously reported periods.  We intend to adopt the standard and the related modifications on January 1, 2018, using the modified retrospective approach.  Under this approach, the cumulative effect of initially applying the guidance will be reflected as an adjustment to beginning retained earnings.

 

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 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.

 

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WORLD WRESTLING ENTERTAINMENT, INC.

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except share data)

(Unaudited)

 

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 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 offices, talent development costs, including costs associated with our WWE Performance Center, and our business strategy and data analytics functions.

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.

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







 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 



 

Three Months Ended

 

Nine Months Ended



 

September 30,

 

September 30,



 

2017

 

2016

 

2017

 

2016

Net revenues:

 

 

 

 

 

 

 

 

 

 

 

 

Network

 

$

50,325 

 

$

45,054 

 

$

151,698 

 

$

137,135 

Television

 

 

64,661 

 

 

56,343 

 

 

194,858 

 

 

173,105 

Home Entertainment

 

 

2,208 

 

 

2,506 

 

 

7,640 

 

 

8,930 

Digital Media

 

 

7,943 

 

 

6,537 

 

 

21,725 

 

 

18,423 

Live Events

 

 

31,600 

 

 

28,553 

 

 

116,533 

 

 

105,799 

Licensing

 

 

11,331 

 

 

9,043 

 

 

40,819 

 

 

39,001 

Venue Merchandise

 

 

5,460 

 

 

5,101 

 

 

19,343 

 

 

19,311 

WWEShop

 

 

7,211 

 

 

7,423 

 

 

23,519 

 

 

21,721 

WWE Studios

 

 

4,186 

 

 

2,510 

 

 

9,018 

 

 

7,742 

Corporate & Other

 

 

1,400 

 

 

1,092 

 

 

4,202 

 

 

3,089 

Total net revenues

 

$

186,325 

 

$

164,162 

 

$

589,355 

 

$

534,256 



 

 

 

 

 

 

 

 

 

 

 

 

OIBDA:

 

 

 

 

 

 

 

 

 

 

 

 

Network

 

$

25,927 

 

$

17,396 

 

$

43,210 

 

$

27,500 

Television

 

 

36,478 

 

 

32,362 

 

 

99,136 

 

 

87,873 

Home Entertainment

 

 

711 

 

 

895 

 

 

2,443 

 

 

3,403 

Digital Media

 

 

3,301 

 

 

2,637 

 

 

4,287 

 

 

2,708 

Live Events

 

 

7,160 

 

 

6,110 

 

 

36,887 

 

 

35,620 

Licensing

 

 

6,748 

 

 

4,612 

 

 

24,598 

 

 

22,836 

Venue Merchandise

 

 

2,152 

 

 

2,051 

 

 

7,256 

 

 

7,743 

WWEShop

 

 

1,439 

 

 

1,296 

 

 

5,473 

 

 

4,268 

WWE Studios

 

 

(212)

 

 

879 

 

 

(3,857)

 

 

881 

Corporate & Other

 

 

(43,289)

 

 

(43,775)

 

 

(151,089)

 

 

(133,239)

Total OIBDA

 

$

40,415 

 

$

24,463 

 

$

68,344 

 

$

59,593 



Reconciliation of Total Operating Income to Total OIBDA







 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 



 

Three Months Ended

 

Nine Months Ended



 

September 30,

 

September 30,



 

2017

 

2016

 

2017

 

2016

Total operating income

 

$

33,980 

 

$

18,269 

 

$

48,664 

 

$

41,846 

Depreciation and amortization

 

 

6,435 

 

 

6,194 

 

 

19,680 

 

 

17,747 

Total OIBDA

 

$

40,415 

 

$

24,463 

 

$

68,344 

 

$

59,593 



 

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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

 

Nine Months Ended



 

September 30,

 

September 30,



 

2017

 

2016

 

2017

 

2016

North America

 

$

140,640 

 

$

118,527 

 

$

446,272 

 

$

398,308 

Europe/Middle East/Africa

 

 

24,641 

 

 

24,718 

 

 

87,846 

 

 

88,466 

Asia Pacific

 

 

18,736 

 

 

18,419 

 

 

47,252 

 

 

41,253 

Latin America

 

 

2,308 

 

 

2,498 

 

 

7,985 

 

 

6,229 

Total net revenues

 

$

186,325 

 

$

164,162 

 

$

589,355 

 

$

534,256 



Revenues generated from the United Kingdom, our largest international market, totaled $15,826 and $17,290, and $54,538 and $58,166 for the three and nine months ended September 30, 2017 and 2016, respectively.  The Company’s property and equipment was almost entirely located in the United States at September 30, 2017 and 2016.

 

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

 

Nine Months Ended



 

September 30,

 

September 30,



 

2017

 

2016

 

2017

 

2016

Net income

 

$

21,854 

 

$

11,075 

 

$

27,827 

 

$

25,822 



 

 

 

 

 

 

 

 

 

 

 

 

Weighted average basic common shares outstanding

 

 

76,957 

 

 

76,298 

 

 

76,620 

 

 

76,063 

Dilutive effect of restricted and performance stock units

 

 

1,548 

 

 

1,280 

 

 

1,761 

 

 

1,301 

Dilutive effect of employee share purchase plan

 

 

 —

 

 

 —

 

 

 

 

Weighted average dilutive common shares outstanding

 

 

78,505 

 

 

77,578 

 

 

78,383 

 

 

77,365 



 

 

 

 

 

 

 

 

 

 

 

 

Earnings per share:

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

0.28 

 

$

0.15 

 

$

0.36 

 

$

0.34 

Diluted

 

$

0.28 

 

$

0.14 

 

$

0.36 

 

$

0.33 



 

 

 

 

 

 

 

 

 

 

 

 

Anti-dilutive outstanding restricted and performance stock
units (excluded from per-share calculations)

 

 

 —

 

 

 —

 

 

 —

 

 

The convertible notes due 2023 had no impact on diluted earnings per share during the three and nine months ended September 30, 2017 since the average price of our common stock did not exceed the conversion price of $24.91 per share.







5. Stock-based Compensation



Our 2016  Omnibus Incentive Plan (the “2016 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, employees, consultants and advisors of the Company and its affiliates and to non-employee directors of the Company to participate in our long-term success.

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. 

 

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WORLD WRESTLING ENTERTAINMENT, INC.

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except share data)

(Unaudited)

 

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 nine months ended September 30, 2017:







 

 

 

 

 



 

 

 

 

 



 

Units

 

Weighted-
Average
Grant-Date
Fair Value

Unvested at January 1, 2017

 

356,761 

 

$

16.68 

Granted

 

306,388 

 

$

19.51 

Vested

 

(143,522)

 

$

17.12 

Forfeited

 

(48,399)

 

$

17.72 

Dividend equivalents

 

9,754 

 

$

18.08 

Unvested at September 30, 2017

 

480,982 

 

$

18.27 





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 estimated performance 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 when recognizing compensation expense and adjust the estimate of forfeitures when they are expected to differ or as forfeitures occur.  Unvested PSUs 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.

The following table summarizes the PSU activity during the nine months ended September 30, 2017:







 

 

 

 

 



 

 

 

 

 



 

Units

 

Weighted-
Average
Grant-Date
Fair Value

Unvested at January 1, 2017

 

2,161,311 

 

$

16.39 

Granted

 

550,460 

 

$

23.55 

Achievement adjustment

 

282,662 

 

$

20.96 

Vested

 

(897,338)

 

$

17.05 

Forfeited

 

(68,481)

 

$

20.79 

Dividend equivalents

 

35,538 

 

$

17.98 

Unvested at September 30, 2017

 

2,064,152 

 

$

19.66 





During the nine months ended September 30, 2017,  we granted 550,460 PSUs which are subject to certain performance conditions.

During the year ended December 31, 2016, we granted 956,730 PSUs,  which were subject to performance conditions.  During the first quarter of 2017,  it was determined that the performance conditions related to these PSUs were exceeded, which resulted in an increase of 282,662 PSUs in 2017 relating to the initial 2016 PSU grant.

 

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WORLD WRESTLING ENTERTAINMENT, INC.

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except share data)

(Unaudited)

 

Stock-based compensation costs, which includes costs related to RSUs, PSUs and the Company's qualified employee stock purchase plan, totaled $5,180 and $5,967, and $17,962 and $15,556 for the three and nine months ended September 30, 2017 and 2016, respectively.

 

6. Property and Equipment

Property and equipment consisted of the following:







 

 

 

 

 

 



 

 

 

 

 

 



 

As of



 

September 30,

 

December 31,



 

2017

 

2016

Land, buildings and improvements

 

$

133,863 

 

$

130,330 

Equipment

 

 

105,438 

 

 

136,114 

Corporate aircraft

 

 

31,277 

 

 

31,277 

Vehicles

 

 

1,094 

 

 

244 



 

 

271,672 

 

 

297,965 

Less: accumulated depreciation and amortization

 

 

(138,540)

 

 

(165,334)

    Total

 

$

133,132 

 

$

132,631 



Depreciation expense for property and equipment totaled $6,151 and $5,887, and $18,517 and $16,823 for the three and nine months ended September 30, 2017 and 2016, respectively.



During the second quarter of 2017, the Company removed fully depreciated assets, primarily television production equipment, that were no longer in use and reduced property and equipment cost by $43,297, with a corresponding reduction to accumulated depreciation. This adjustment did not have an impact on our consolidated financial statements.

 

7. Feature Film Production Assets, Net

Feature film production assets consisted of the following:







 

 

 

 

 

 



 

 

 

 

 

 



 

As of



 

September 30,

 

December 31,



 

2017

 

2016

In release

 

$

18,388 

 

$

13,892 

Completed but not released

 

 

 —

 

 

8,881 

In production

 

 

8,274 

 

 

3,387 

In development

 

 

1,053 

 

 

977 

    Total

 

$

27,715 

 

$

27,137 



Approximately 38% of “In release” film production assets are estimated to be amortized over the next 12 months, and approximately 69% 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 assets within four years as we receive revenues associated with television distribution of our licensed films. During the three and nine months ended September 30, 2017 and 2016, we amortized $2,346 and $1,719, and $4,987 and $4,420, respectively, of feature film production assets.

During the nine months ended September 30, 2017, we released  four feature films via theatrical distribution, The Resurrection of Gavin Stone, Sleight,  Armed Response and Birth of the Dragon,  and five films direct to DVD, Surf’s Up 2: WaveMania,  The Jetsons & WWE: Robo-WrestleMania!, The Marine 5: Battleground, Pure Country: Pure Heart and Killing Hasselhoff.    These nine films comprised $9,099 of our “In release” feature film assets as of September 30, 2017.

We currently have four films “In production.” We also have capitalized certain script development costs and pre-production costs for various other film projects designated as “In development.”  Capitalized script development costs are evaluated at each reporting period for impairment and to determine if a project is deemed to be abandoned. During the three and nine months ended September 30,

 

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WORLD WRESTLING ENTERTAINMENT, INC.

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except share data)

(Unaudited)

 

2017, we expensed $157 related to previously capitalized development costs related to abandoned projects.  We did not incur any comparable expenses during the three and nine months ended September 30, 2016.

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 recorded impairment charges of $759 and $3,921 related to our feature films during the three and nine months ended September 30, 2017, respectively. These impairment charges represent the excess of the recorded net carrying value over the estimated fair value. We did not record any impairment charges during the three and nine months ended September 30, 2016 related to our feature films.

 

8. Television Production Assets, Net

Television production assets consisted of the following:







 

 

 

 

 

 



 

 

 

 

 

 



 

As of



 

September 30,

 

December 31,



 

2017

 

2016

In release

 

$

5,938 

 

$

12,198 

In production

 

 

5,409 

 

 

310 

    Total

 

$

11,347 

 

$

12,508 



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. 



Amortization of television production assets consisted of the following:







 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 



 

Three Months Ended

 

Nine Months Ended



 

September 30,

 

September 30,



 

2017

 

2016

 

2017

 

2016

WWE Network programming

 

$

566 

 

$

1,887 

 

$

3,685 

 

$

10,616 

Television programming

 

 

2,346 

 

 

(334)

 

 

9,948 

 

 

8,506 

    Total

 

$

2,912 

 

$

1,553 

 

$

13,633 

 

$

19,122 



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 nine months ended September 30, 2017 and 2016, we did not record any impairments related to our television production assets.

 

 

15


 

Table of Contents

WORLD WRESTLING ENTERTAINMENT, INC.

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except share data)

(Unaudited)

 

9. Investment Securities and Short-Term Investments

Investment Securities

Included within Investment Securities are the following: