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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
____________________
FORM 10-Q
____________________
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
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For the quarterly period ended
March 31, 2022
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or
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF
THE
SECURITIES EXCHANGE ACT OF 1934
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For the transition period from ______ to ______
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Commission File Number:
001-16131
WORLD WRESTLING ENTERTAINMENT, INC.
(Exact name of Registrant as specified in its charter)
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Delaware
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04-2693383
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(State or other jurisdiction of incorporation or
organization)
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(I.R.S. Employer Identification No.)
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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)
Securities registered pursuant to Section 12(b) of the
Act:
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Title of each class
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Trading Symbol(s)
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Name of each exchange on which registered
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Class A Common Stock, par value $0.01 per share
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WWE
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New York Stock Exchange
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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 every Interactive Data File required to be submitted
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 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):
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Large Accelerated Filer
x
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Accelerated Filer ¨
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Non-Accelerated Filer ¨
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Smaller Reporting Company ¨
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Emerging Growth Company ¨
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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 May 3, 2022, the number of shares outstanding of the
Registrant’s Class A common stock, par value $.01 per share,
was
43,246,147
and the number of shares outstanding of the Registrant’s Class B
common stock, par value $.01 per share, was
31,099,011.
WORLD
WRESTLING ENTERTAINMENT, INC.
Consolidated Statements of Operations
(In thousands, except per share data)
(Unaudited)
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|
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|
|
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Three Months Ended
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March 31,
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2022
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2021
|
|
Net revenues
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$
|
333,448
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$
|
263,524
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Operating expenses
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|
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180,685
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|
|
142,154
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Marketing and selling expenses
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|
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18,420
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18,912
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General and administrative expenses
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|
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32,227
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|
|
26,560
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Depreciation and amortization
|
|
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9,707
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|
|
10,842
|
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Operating income
|
|
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92,409
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|
|
65,056
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Interest expense
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|
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6,345
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|
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8,508
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Other income, net
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321
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|
|
556
|
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Income before income taxes
|
|
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86,385
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|
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57,104
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Provision for income taxes
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|
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20,344
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|
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13,272
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|
Net income
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$
|
66,041
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$
|
43,832
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Earnings per share: basic
|
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$
|
0.88
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$
|
0.57
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Earnings per share: diluted
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$
|
0.77
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$
|
0.51
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Weighted average common shares outstanding:
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|
|
|
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|
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Basic
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74,781
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|
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77,376
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Diluted
|
|
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87,575
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|
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85,686
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Dividends declared per common share (Class A and B)
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$
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0.12
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$
|
0.12
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WORLD
WRESTLING ENTERTAINMENT, INC.
Consolidated Statements of Comprehensive Income
(In thousands)
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
|
March 31,
|
|
|
|
2022
|
|
2021
|
|
Net income
|
|
$
|
66,041
|
|
$
|
43,832
|
|
Other comprehensive loss:
|
|
|
|
|
|
|
|
Foreign currency translation adjustments
|
|
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(60)
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|
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(46)
|
|
Net unrealized holding losses on available-for-sale debt
securities (net of tax benefit of $525
and $7,
respectively)
|
|
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(1,663)
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(21)
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Total other comprehensive loss
|
|
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(1,723)
|
|
|
(67)
|
|
Comprehensive income
|
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$
|
64,318
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$
|
43,765
|
WORLD
WRESTLING ENTERTAINMENT, INC.
Consolidated Balance Sheets
(In thousands, except share data)
(Unaudited)
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|
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|
|
|
|
|
|
|
|
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As of
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|
|
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March 31,
|
|
December 31,
|
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|
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2022
|
|
2021
|
|
Assets
|
|
|
|
|
|
|
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Current assets:
|
|
|
|
|
|
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Cash and cash equivalents
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|
$
|
105,594
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$
|
134,828
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Short-term investments, net
|
|
|
342,219
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|
|
280,957
|
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Accounts receivable (net of allowance for doubtful accounts and
returns
of
$5,157
and $5,155,
respectively)
|
|
|
163,192
|
|
|
171,196
|
|
Inventory, net
|
|
|
9,200
|
|
|
8,033
|
|
Prepaid expenses and other current assets
|
|
|
30,716
|
|
|
32,242
|
|
Total current assets
|
|
|
650,921
|
|
|
627,256
|
|
Property and equipment, net
|
|
|
183,793
|
|
|
172,677
|
|
Finance lease right-of-use assets, net
|
|
|
308,549
|
|
|
313,360
|
|
Operating lease right-of-use assets, net
|
|
|
14,723
|
|
|
8,973
|
|
Content production assets, net
|
|
|
15,798
|
|
|
13,781
|
|
Investment securities
|
|
|
11,618
|
|
|
11,618
|
|
Deferred income tax assets, net
|
|
|
16,745
|
|
|
13,100
|
|
Other assets, net
|
|
|
43,201
|
|
|
43,302
|
|
Total assets
|
|
$
|
1,245,348
|
|
$
|
1,204,067
|
|
Liabilities and Stockholders' Equity
|
|
|
|
|
|
|
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Current liabilities:
|
|
|
|
|
|
|
|
Current portion of long-term debt
|
|
$
|
435
|
|
$
|
430
|
|
Finance lease liabilities
|
|
|
12,465
|
|
|
12,190
|
|
Operating lease liabilities
|
|
|
3,783
|
|
|
4,755
|
|
Convertible debt
|
|
|
213,396
|
|
|
201,093
|
|
Accounts payable and accrued expenses
|
|
|
111,121
|
|
|
120,516
|
|
Deferred revenues
|
|
|
83,947
|
|
|
74,633
|
|
Total current liabilities
|
|
|
425,147
|
|
|
413,617
|
|
Long-term debt
|
|
|
21,173
|
|
|
21,284
|
|
Finance lease liabilities
|
|
|
370,948
|
|
|
374,681
|
|
Operating lease liabilities
|
|
|
11,547
|
|
|
5,063
|
|
Other non-current liabilities
|
|
|
10,689
|
|
|
8,162
|
|
Total liabilities
|
|
|
839,504
|
|
|
822,807
|
|
Commitments and contingencies
|
|
|
|
|
|
|
|
Stockholders' equity:
|
|
|
|
|
|
|
|
Class A common stock: ($0.01
par value;
180,000,000
shares authorized;
43,242,334
and
43,732,977
shares issued and outstanding as of
March
31, 2022 and December 31, 2021, respectively)
|
|
|
433
|
|
|
438
|
|
Class B convertible common stock: ($0.01
par value;
60,000,000
shares authorized;
31,099,011
shares issued and outstanding)
|
|
|
311
|
|
|
311
|
|
Additional paid-in capital
|
|
|
386,562
|
|
|
409,884
|
|
Accumulated other comprehensive income
|
|
|
697
|
|
|
2,420
|
|
Retained earnings (accumulated deficit)
|
|
|
17,841
|
|
|
(31,793)
|
|
Total stockholders’ equity
|
|
|
405,844
|
|
|
381,260
|
|
Total liabilities and stockholders' equity
|
|
$
|
1,245,348
|
|
$
|
1,204,067
|
WORLD
WRESTLING ENTERTAINMENT, INC.
Consolidated Statements of Stockholders’ Equity
(In thousands)
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, 2022
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated
|
|
Retained
|
|
|
|
|
|
|
Common Stock
|
|
Additional
|
|
Other
|
|
Earnings
|
|
|
|
|
|
|
Class A
|
|
Class B
|
|
Paid - in
|
|
Comprehensive
|
|
(Accumulated
|
|
|
|
|
|
|
Shares
|
|
Amount
|
|
Shares
|
|
Amount
|
|
Capital
|
|
Income
|
|
Deficit)
|
|
Total
|
|
Balance, December 31, 2021
|
|
43,733
|
|
$
|
438
|
|
31,099
|
|
$
|
311
|
|
$
|
409,884
|
|
$
|
2,420
|
|
$
|
(31,793)
|
|
$
|
381,260
|
|
Cumulative effect of adopting ASU 2020-06
|
|
—
|
|
|
—
|
|
—
|
|
|
—
|
|
|
(26,383)
|
|
|
—
|
|
|
17,609
|
|
|
(8,774)
|
|
Net income
|
|
—
|
|
|
—
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
66,041
|
|
|
66,041
|
|
Other comprehensive loss
|
|
—
|
|
|
—
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(1,723)
|
|
|
—
|
|
|
(1,723)
|
|
Repurchases and retirements of common stock
|
|
(525)
|
|
|
(5)
|
|
—
|
|
|
—
|
|
|
(4,916)
|
|
|
—
|
|
|
(25,085)
|
|
|
(30,006)
|
|
Stock issuances, net
|
|
34
|
|
|
—
|
|
—
|
|
|
—
|
|
|
1,239
|
|
|
—
|
|
|
—
|
|
|
1,239
|
|
Taxes paid related to net settlement upon vesting of equity
awards
|
|
—
|
|
|
—
|
|
—
|
|
|
—
|
|
|
(32)
|
|
|
—
|
|
|
—
|
|
|
(32)
|
|
Cash dividends declared
|
|
—
|
|
|
—
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(8,931)
|
|
|
(8,931)
|
|
Stock-based compensation
|
|
—
|
|
|
—
|
|
—
|
|
|
—
|
|
|
6,770
|
|
|
—
|
|
|
—
|
|
|
6,770
|
|
Balance, March 31, 2022
|
|
43,242
|
|
$
|
433
|
|
31,099
|
|
$
|
311
|
|
$
|
386,562
|
|
$
|
697
|
|
$
|
17,841
|
|
$
|
405,844
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, 2021
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated
|
|
Retained
|
|
|
|
|
|
|
Common Stock
|
|
Additional
|
|
Other
|
|
Earnings
|
|
|
|
|
|
|
Class A
|
|
Class B
|
|
Paid - in
|
|
Comprehensive
|
|
(Accumulated
|
|
|
|
|
|
|
Shares
|
|
Amount
|
|
Shares
|
|
Amount
|
|
Capital
|
|
Income
|
|
Deficit)
|
|
Total
|
|
Balance, December 31, 2020
|
|
46,695
|
|
$
|
467
|
|
31,099
|
|
$
|
311
|
|
$
|
424,758
|
|
$
|
2,985
|
|
$
|
(39,727)
|
|
$
|
388,794
|
|
Net income
|
|
—
|
|
|
—
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
43,832
|
|
|
43,832
|
|
Other comprehensive loss
|
|
—
|
|
|
—
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(67)
|
|
|
—
|
|
|
(67)
|
|
Repurchases and retirements of common stock
|
|
(1,498)
|
|
|
(15)
|
|
—
|
|
|
—
|
|
|
(13,625)
|
|
|
—
|
|
|
(61,360)
|
|
|
(75,000)
|
|
Stock issuances and other, net
|
|
60
|
|
|
1
|
|
—
|
|
|
—
|
|
|
1,962
|
|
|
—
|
|
|
—
|
|
|
1,963
|
|
Taxes paid related to net settlement upon vesting of equity
awards
|
|
—
|
|
|
—
|
|
—
|
|
|
—
|
|
|
(629)
|
|
|
—
|
|
|
—
|
|
|
(629)
|
|
Cash dividends declared
|
|
—
|
|
|
—
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(9,160)
|
|
|
(9,160)
|
|
Stock-based compensation
|
|
—
|
|
|
—
|
|
—
|
|
|
—
|
|
|
7,548
|
|
|
—
|
|
|
—
|
|
|
7,548
|
|
Balance, March 31, 2021
|
|
45,257
|
|
$
|
453
|
|
31,099
|
|
$
|
311
|
|
$
|
420,014
|
|
$
|
2,918
|
|
$
|
(66,415)
|
|
$
|
357,281
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
WORLD
WRESTLING ENTERTAINMENT, INC.
Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
|
March 31,
|
|
|
|
2022
|
|
2021
|
|
OPERATING ACTIVITIES:
|
|
|
|
|
|
|
|
Net income
|
|
$
|
66,041
|
|
$
|
43,832
|
|
Adjustments to reconcile net income to net cash provided by
operating activities:
|
|
|
|
|
|
|
|
Amortization and impairments of content production
assets
|
|
|
9,820
|
|
|
5,823
|
|
Depreciation and amortization
|
|
|
11,980
|
|
|
12,643
|
|
Other amortization
|
|
|
3,516
|
|
|
4,222
|
|
Stock-based compensation
|
|
|
9,618
|
|
|
7,980
|
|
Provision for (benefit from) deferred income taxes
|
|
|
297
|
|
|
(453)
|
|
Other non-cash adjustments
|
|
|
345
|
|
|
817
|
|
Cash provided by (used in) changes in operating assets and
liabilities:
|
|
|
|
|
|
|
|
Accounts receivable
|
|
|
7,799
|
|
|
(32,864)
|
|
Inventory
|
|
|
(872)
|
|
|
282
|
|
Prepaid expenses and other assets
|
|
|
(1,388)
|
|
|
12,184
|
|
Content production assets
|
|
|
(11,714)
|
|
|
(5,771)
|
|
Accounts payable, accrued expenses and other liabilities
|
|
|
(9,278)
|
|
|
12,530
|
|
Deferred revenues
|
|
|
9,286
|
|
|
(1,319)
|
|
Net cash provided by operating activities
|
|
|
95,450
|
|
|
59,906
|
|
INVESTING ACTIVITIES:
|
|
|
|
|
|
|
|
Purchases of property and equipment and other assets
|
|
|
(21,487)
|
|
|
(6,167)
|
|
Purchases of short-term investments
|
|
|
(111,623)
|
|
|
(52,405)
|
|
Proceeds from sales and maturities of short-term
investments
|
|
|
47,424
|
|
|
22,842
|
|
Purchase of investment securities
|
|
|
—
|
|
|
(210)
|
|
Net cash used in investing activities
|
|
|
(85,686)
|
|
|
(35,940)
|
|
FINANCING ACTIVITIES:
|
|
|
|
|
|
|
|
Repayment of long-term debt
|
|
|
(106)
|
|
|
(100,101)
|
|
Repayment of finance leases
|
|
|
(3,435)
|
|
|
(2,723)
|
|
Dividends paid
|
|
|
(8,931)
|
|
|
(9,160)
|
|
Proceeds from tenant improvement allowances
|
|
|
2,273
|
|
|
—
|
|
Taxes paid related to net settlement upon vesting of equity
awards
|
|
|
(32)
|
|
|
(629)
|
|
Proceeds from issuance of stock and other
|
|
|
1,239
|
|
|
1,963
|
|
Repurchase and retirement of common stock
|
|
|
(30,006)
|
|
|
(75,000)
|
|
Net cash used in financing activities
|
|
|
(38,998)
|
|
|
(185,650)
|
|
NET DECREASE IN CASH AND CASH EQUIVALENTS
|
|
|
(29,234)
|
|
|
(161,684)
|
|
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD
|
|
|
134,828
|
|
|
462,102
|
|
CASH AND CASH EQUIVALENTS, END OF PERIOD
|
|
$
|
105,594
|
|
$
|
300,418
|
|
NON-CASH INVESTING AND FINANCING TRANSACTIONS:
|
|
|
|
|
|
|
|
Purchases of property and equipment recorded in accounts
payable
and
accrued expenses (See Note 12)
|
|
$
|
21,352
|
|
$
|
2,696
|
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, 2021.
We are an integrated media and entertainment company, principally
engaged in the production and distribution of wrestling
entertainment content through various channels, including our
premium over-the-top network (“WWE Network”) monetized through
license arrangements or through direct-to-consumer subscriptions,
content rights agreements, premium live event programming, filmed
entertainment, live events, licensing of various WWE themed
products, and the sale of consumer products featuring our brands.
Our operations are organized around the following principal
activities:
Media:
The
Media segment reflects the production and monetization of long-form
and short-form video content across various platforms, including
WWE Network, broadcast and pay television, digital and social
media, as well as filmed entertainment. Across these platforms,
revenues principally consist of content rights fees, subscriptions
to WWE Network, and advertising and sponsorships. Effective March
18, 2021, the domestic monetization of WWE Network is generated
from content license fees and certain shared sponsorship revenues
from NBC Universal (“NBCU”). Media segment revenues for the three
months ended March 31, 2021 include the upfront revenue recognition
related to the delivery of certain intellectual property rights
under this agreement.
Live Events:
Live
events provide ongoing content for our media platforms. Live Event
segment revenues consist primarily of ticket sales, revenues from
events for which we receive a fixed fee, as well as the sale of
travel packages associated with the Company’s global live events.
As a result of the global spread of the coronavirus pandemic
(“COVID-19”), these revenues had been greatly limited from March
2020 through the first half of 2021. In July 2021, we resumed our
domestic and international live event touring schedules.
Consumer Products:
The
Consumer Products segment engages in the merchandising of WWE
branded products, such as video games, toys and apparel, through
licensing arrangements and direct-to-consumer sales. Revenues
principally consist of royalties and licensee fees related to WWE
branded products, and sales of merchandise distributed at our live
events and through eCommerce platforms.
Note on the COVID-19 Pandemic
The global spread of COVID-19 and the various attempts to contain
it resulted in restrictions, postponements and cancellations of
various sports and other events and required us to cancel, postpone
or relocate certain of our live events since March 2020. While
restrictions have lessened
and we have resumed our domestic and international live event
touring schedules,
COVID-19 and its variants continue to create significant
uncertainty and the full extent of the impact will depend on
numerous evolving factors that we can neither predict nor control,
including the pandemic’s duration and severity and the
governmental, business and individual responses to it. We will
continue to actively monitor the issues raised by the COVID-19
pandemic and may take further actions that alter our
business
operations that are required by applicable governmental authorities
and/or that we determine to be in the best interests of our
employees, talent, customers, partners and stockholders. Any of the
foregoing could have a material negative effect on our business and
results of operations.
2. Significant Accounting Policies
Our significant accounting policies are detailed in Note 2,
Summary of Significant Accounting Policies,
in the Notes to Consolidated Financial Statements within our Annual
Report on Form 10-K for the year ended December 31, 2021. Except
for the policies on the Company’s convertible debt, there have been
no material changes to the Company’s significant accounting
policies described in our Annual Report on Form 10-K. The Company’s
policy on the accounting for its convertible debt was updated due
to the Company’s adoption of Accounting Standards Update (“ASU”)
No. 2020-06, as described below.
Operating Expenses
Operating expenses consist of our production costs associated with
developing our content, venue rental and related costs associated
with the staging of our live events, compensation costs for our
talent, material and related costs associated with our consumer
product merchandise sales, and costs associated with operating WWE
Network. In addition, operating expenses include the operating
costs associated with talent development, data analytics, data
engineering, business strategy and real estate and facilities
functions.
Included within Operating expenses are the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
|
March 31,
|
|
|
|
2022
|
|
2021
|
|
Amortization and impairment of content production assets
|
|
$
|
9,820
|
|
$
|
5,823
|
|
Depreciation and amortization of WWE Network content delivery and
technology assets
|
|
|
2,176
|
|
|
1,724
|
|
Amortization of right-of-use assets - finance leases of
equipment
|
|
|
2,222
|
|
|
2,385
|
|
Depreciation on equipment used directly to support
operations
|
|
|
166
|
|
|
147
|
|
Total depreciation and amortization included in operating
expenses
|
|
$
|
14,384
|
|
$
|
10,079
|
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. These costs include production-related costs,
such as lighting, pyrotechnics and staging, associated with our
weekly, in-ring televised programming as well as our premium live
events, which are included as a component of our Media segment
operating expenses. We also incur event-related costs, such as
venue rental, security and travel, associated with our premium live
events as well as our televised and non-televised events, which are
included as a component of our Live Events segment operating
expenses. Talent-related costs primarily associated with our
premium live events and televised programming are included within
our Media segment, while talent-related costs associated with our
non-televised events are included within our Live Events
segment.
Recent Accounting Pronouncements
In August 2020, the Financial Accounting Standards Board (“FASB”)
issued ASU No. 2020-06,
Accounting for Convertible Instruments and Contracts in an Entity’s
Own Equity
(ASU 2020-06). The new guidance eliminates two of the three models
in ASC 470-20,
Debt with Conversion and Other Options,
that require separating embedded conversion features from
convertible instruments. Specifically, the ASU removes the
separation models for convertible debt with a cash conversion
feature or convertible instruments with a beneficial conversion
feature. The Company's existing
3.375%
convertible senior notes due December 2023 ("Convertible Notes")
are currently accounted for under the cash conversion feature
model, which is one of the models being eliminated. As a result,
after adopting the new guidance, the Company will no longer
separately present in equity an embedded conversion feature of such
debt. Instead, the Company will account for a convertible debt
instrument wholly as debt unless (i) a convertible debt instrument
contains features that require bifurcation as a derivative or (ii)
a convertible debt instrument was issued at a substantial premium.
Additionally, the ASU revises the scope exception from derivative
accounting in ASC 815-40 for freestanding financial instruments
(e.g., warrants) and embedded features (e.g., conversion features)
that are both indexed to the issuer’s own stock and classified in
stockholders’ equity, by removing certain criteria required for
equity classification. The new guidance also requires the use of
the if-converted method when calculating diluted earnings per share
(“EPS”) for convertible instruments and the treasury stock method
should no longer be used. Under the new guidance, convertible
instruments that may be settled in cash or shares (e.g., the
Company’s Convertible Notes) are to be included in the calculation
of diluted EPS if the effect is more dilutive, with no option for
rebutting the presumption of share settlement based on stated
policy or past experience. The ASU is effective for fiscal years
beginning after December 15, 2021 (fiscal year 2022 for the
Company) and can be adopted on either a fully retrospective or
modified retrospective basis. The Company adopted the ASU effective
January 1, 2022 under the modified retrospective approach. The
cumulative effect of the change was recognized as an
adjustment to the opening balance of retained earnings (accumulated
deficit) at the date of adoption. The comparative information has
not been restated and continues to be presented according to
accounting standards in effect for those periods. As a result of
the adoption, the Company’s Convertible Notes are no longer
bifurcated into a separate liability and equity component in the
March 31, 2022 consolidated balance sheet. Rather, the Convertible
Notes are presented as a single liability at amortized cost, net of
unamortized debt issuance costs, on the March 31, 2022 consolidated
balance sheet. Upon adoption of the ASU, the Company recorded a net
increase of $12,068
to the Convertible Notes liability component, a
$26,383
net decrease to the equity component (additional paid-in capital)
and a net increase of $17,609
to retained earnings (accumulated deficit) for the cumulative
effect of the adoption. The Company also recorded a net increase of
$3,294
to deferred income tax assets. The adjustments were calculated
based on the carrying amount of the Convertible Notes as if it had
always been treated as a liability only. Furthermore, included in
the above adjustments, are adjustments to the debt issuance costs
contra-liability and equity (additional paid-in capital) components
under the same premise (i.e., as if the total amount of debt
issuance costs had always been treated as a contra-liability only).
Lastly, the Company derecognized deferred income taxes associated
with the Convertible Notes debt discount and adjusted deferred
income taxes relative to unamortized debt issuance costs associated
with the Convertible Notes. The Company also expects lower interest
expense related to the Convertible Notes that will be recognized in
future periods subsequent to adoption as a result of accounting for
the Convertible Notes as a single liability measured at amortized
cost. The following table summarizes the impact of the adoption of
ASU 2020-06 on the Company’s opening consolidated balance sheet on
January 1, 2022:
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|
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|
|
|
|
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|
|
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|
|
|
|
|
|
|
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|
|
|
|
December 31, 2021
|
|
ASU 2020-06
|
|
January 1, 2022
|
|
|
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As Reported
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Adoption Impact
|
|
As Adjusted
|
|
Consolidated Balance Sheet line item:
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|
|
|
|
|
|
|
|
|
|
Deferred income tax assets, net
|
|
$
|
13,100
|
|
$
|
3,294
|
|
$
|
16,394
|
|
Convertible debt (1)
|
|
$
|
201,093
|
|
$
|
12,068
|
|
$
|
213,161
|
|
Additional paid-in-capital (conversion feature, net of
tax)
|
|
$
|
409,884
|
|
$
|
(26,383)
|
|
$
|
383,501
|
|
Accumulated deficit (cumulative effect adjustment, net of
tax)
|
|
$
|
(31,793)
|
|
$
|
17,609
|
|
$
|
(14,184)
|
(1)Prior
to adoption, the carrying value of the Convertible Debt represents
the principal amount less the unamortized debt discount and
unamortized debt issuance costs. After adoption, the carrying value
of the Convertible Debt represents the principal amount less the
unamortized debt issuance costs.
3. Segment Information
The Company currently classifies its operations into
three
reportable segments: Media, Live Events and Consumer Products.
Segment information is prepared on the same basis that our chief
operating decision maker manages the segments, evaluates financial
results, and makes key operating decisions.
Unallocated corporate general and administrative expenses largely
relate to corporate functions such as finance, investor relations,
community relations, corporate communications, information
technology, legal, facilities, human resources and our Board of
Directors. These unallocated corporate general and administrative
expenses will be shown, as applicable, as a reconciling item in
tables where segment and consolidated results are both
shown.
The Company presents Adjusted OIBDA as the primary measure of
segment profit (loss). The Company defines Adjusted OIBDA as
operating income before depreciation and amortization, excluding
stock-based compensation, certain impairment charges and other
non-recurring material items. Adjusted OIBDA includes depreciation
and amortization expenses directly related to supporting the
operations of our segments, including content production asset
amortization, depreciation and amortization of costs related to
content delivery and technology assets utilized for WWE Network, as
well as amortization of right-of-use assets related to finance
leases of equipment used to produce and broadcast our live events.
The Company believes the presentation of Adjusted 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 Adjusted
OIBDA is a primary measure used by media investors, analysts and
peers for comparative purposes.
We do not disclose assets by segment information. 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:
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|
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Three Months Ended
|
|
|
|
March 31,
|
|
|
|
2022
|
|
2021
|
|
Net revenues:
|
|
|
|
|
|
|
|
Media
|
|
$
|
278,119
|
|
$
|
242,027
|
|
Live Events
|
|
|
23,101
|
|
|
472
|
|
Consumer Products
|
|
|
32,228
|
|
|
21,025
|
|
Total net revenues
|
|
$
|
333,448
|
|
$
|
263,524
|
|
|
|
|
|
|
|
|
|
Adjusted OIBDA:
|
|
|
|
|
|
|
|
Media
|
|
$
|
128,217
|
|
$
|
106,599
|
|
Live Events
|
|
|
2,814
|
|
|
(4,308)
|
|
Consumer Products
|
|
|
11,873
|
|
|
6,670
|
|
Corporate
|
|
|
(31,170)
|
|
|
(25,083)
|
|
Total Adjusted OIBDA
|
|
$
|
111,734
|
|
$
|