WORLD WRESTLING FEDERATION ENTERTAINMENT INC - 10-K Annual Report

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

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FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED APRIL 30, 2001

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 0-27639

WORLD WRESTLING FEDERATION
ENTERTAINMENT, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

DELAWARE 04-2693383
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) 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)

SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT

CLASS A COMMON STOCK, $.01 PAR VALUE PER SHARE NEW YORK STOCK EXCHANGE
(TITLE OF EACH CLASS) (NAME OF EACH EXCHANGE ON WHICH REGISTERED)

SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT
NONE

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 [X] No [ ]

Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]

Aggregate market value of the voting stock held by non-affiliates of the
Registrant at July 3, 2001 was approximately $242,418,469.

As of July 3, 2001, the number of shares outstanding of the Registrant's
Class A common stock, par value $.01 per share, was 16,265,384 and the number of
shares outstanding of the Registrant's Class B common stock, par value $.01 per
share, was 56,667,000 shares.

PORTIONS OF THE REGISTRANT'S DEFINITIVE PROXY STATEMENT FOR THE 2001 ANNUAL
MEETING OF STOCKHOLDERS ARE INCORPORATED BY REFERENCE IN PART III OF THIS FORM
10-K.
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TABLE OF CONTENTS

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PART I
Item 1. Business.................................................... 1
Item 2. Properties.................................................. 9
Item 3. Legal Proceedings........................................... 10
Item 4. Submission of Matters to a Vote of Security Holders......... 11

PART II
Item 5. Market for Registrant's Common Equity and Related
Stockholder Matters......................................... 12
Item 6. Selected Historical Consolidated Financial and Other Data... 13
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations................................... 17
Item 7A. Quantitative and Qualitative Disclosures about Market
Risk........................................................ 24
Item 8. Consolidated Financial Statements and Schedule.............. 24
Item 9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure.................................... 24

PART III
Item 10. Directors and Executive Officers of the Registrant.......... *
Item 11. Executive Compensation...................................... *
Item 12. Security Ownership of Certain Beneficial Owners and
Management.................................................. *
Item 13. Certain Relationships and Related Party Transactions........ *

PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form
8-K......................................................... 25

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* Incorporated by reference from the Registrant's Proxy Statement for the 2001
Annual Meeting of Stockholders (the "Proxy Statement").
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PART I

ITEM 1. BUSINESS

We are an integrated media and entertainment company, principally engaged
in the development, production and marketing of television programming,
pay-per-view programming and live events, and the licensing and sale of branded
consumer products featuring our successful World Wrestling Federation brand. We
have been involved in the sports entertainment business for over 20 years, and
have developed the World Wrestling Federation into one of the most popular forms
of entertainment today.

We have experienced significant growth in many aspects of our business. The
key economic drivers of our business, such as attendance, pay-per-view buys and
ratings are manifestations of our strong presence in the marketplace and the
stability and loyalty of our fan base. Our growth has been driven by our success
in monetizing this fan base across our revenue streams. We continue to produce
high quality branded programming, live events and consumer products for
worldwide distribution. At the same time, the demographics of our fan base is of
particular interest to our advertisers and sponsors who view us as a steady and
reliable vehicle to promote their products. We believe our brand can be further
leveraged to enhance our existing businesses by promoting our brand identity
through sponsorships, licensing, marketing, advertising and other activities
featuring our performers and through our entertainment complex at which we air
our regularly scheduled TV shows and pay-per-views and our performers make
appearances. We anticipate continuing to develop broader distribution
arrangements for the brand both in the United States and on a global basis.

World Wrestling Federation Entertainment, Inc., formerly known as Titan
Sports, Inc., was incorporated in Delaware in 1987, and in 1988 we merged with
our predecessor company, which had existed since 1980. In October 1999, we sold
11,500,000 shares of Class A common stock to the public at an initial offering
price of $17.00 per share. To further broaden our exposure in the financial
marketplace, in October 2000, we began trading our Class A common stock on the
New York Stock Exchange under the symbol "WWF." Our operations include our
wholly-owned subsidiaries, World Wrestling Federation Entertainment Canada,
Inc., Stephanie Music Publishing Inc., TSI Realty Company, Event Services, Inc.,
WWF New York Inc., WWF Hotel and Casino Ventures LLC., WWFE Sports, Inc., WCW,
Inc. and our majority owned subsidiary, Titan/Shane Partnership. WWFE Sports,
Inc. owns 50% and has operating control of XFL, LLC., which was a venture
established with NBC. We discontinued the operations of the XFL, LLC. and the
necessary adjustments to our Consolidated Financial Statements have been
reflected as of April 30, 2001.

In this Annual Report on Form 10-K, "WWFE" refers to World Wrestling
Federation Entertainment, Inc. and its subsidiaries and its predecessors, unless
the context otherwise requires. References to "we," "us," "our" and the
"Company" refer to WWFE and its subsidiaries. World Wrestling Federation(R) and
the stylized and highly distinctive World Wrestling Federation scratch logo are
two of our marks. Because insertion of our scratch logo is impossible to insert
into the text of this Annual Report on Form 10-K, we refer to the scratch logo
as "WWF" herein for explanatory purposes only. In commerce, we use the scratch
logo exclusively rather than the initials in block letters. The Annual Report on
Form 10-K also contains other of our trademarks and trade names as well as those
of other companies. All trademarks and trade names appearing in this report are
the property of their respective holders.

CREATIVE DEVELOPMENT AND PRODUCTION

Our creative team, headed by Vincent McMahon, develops soap opera-like
storylines employing the same techniques that are used by many successful
television series. We create compelling and complex characters and weave them
into interactive entertainment that combines social satire, action adventure,
drama, mystery, athleticism and humor. The interactions among the characters
reflect a wide variety of contemporary topics, often depicting exaggerated
versions of real life situations and typically containing "good versus evil" or
"settling the score" themes. Storylines are usually played out in the wrestling
ring, our main stage, and typically unfold on our weekly television shows and
monthly pay-per-view events. Woven into the storylines is the ongoing
competition for the various World Wrestling Federation(R) championship titles.

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In addition, our creative team develops a character for each performer.
Once a character's basic traits have been formulated, we work to define and
emphasize those traits through various accessories, including costumes and
entrance music. We own the rights to substantially all of our characters, and we
exclusively license the rights we do not own through agreements with our
performers.

Our success is, in large part, due to the continuing popularity of our
performers. We currently have exclusive contracts with approximately 160
performers, ranging from development contracts with prospective performers to
long term guaranteed contracts with established performers. These contracts vary
depending upon a number of factors, including the individual's popularity with
our audience, their skill level and prior experience. Our performers are
independent contractors who are highly trained and motivated and portray popular
characters such as Stone Cold Steve Austin(TM), The Rock(TM), The Undertaker(R),
Triple H(TM), Kane(TM) and Kurt Angle(TM). We constantly seek to identify,
recruit and develop additional performers for our business. Once recruited,
established performers are immediately incorporated into our storylines while
less experienced performers are invited to participate in our extensive training
program. Under agreements with regional promoters of wrestling events, promising
candidates are often "loaned" to the regional promoters allowing these new
performers to hone their skills by working in front of live audiences and
appearing on local television programs. The most successful and popular
performers are then incorporated into our television programming and
pay-per-view events where their characters are more fully developed.

With limited exceptions, we retain all proprietary rights in perpetuity to
any intellectual property that is developed in connection with the characters
portrayed by our performers. This includes the character and any associated
costumes, names, props, story lines and merchandise. Our performers share in a
portion of the revenues that we receive. We believe that our relationships with
our performers are good.

Our continuing operations are reported within two reportable segments, Live
and Televised Entertainment and Branded Merchandise.

LIVE AND TELEVISED ENTERTAINMENT

Live events, television programming and pay-per-view programming are our
principal creative and production activities. Revenues from these activities
were approximately $335.7 million, $265.5 million and $170.1 million in fiscal
2001, 2000 and 1999, respectively. For additional segment information, see Note
16 of Notes to Consolidated Financial Statements.

Live Events

Live events are the cornerstone of our business, providing the content for
our television and pay-per-view programming. Each event is a highly theatrical
production, which involves a significant degree of audience participation and
employs various special effects, including lighting, pyrotechnics, powerful
entrance music and a variety of props.

In fiscal 2001, we held 212 live events in approximately 100 cities in
North America, including 18 of the 20 largest metropolitan areas in the United
States, as well as several international locations. We have consistently held
our live events at major arenas, such as Madison Square Garden in New York City,
Arrowhead Pond of Anaheim, Allstate Arena in Chicago, First Union Center in
Philadelphia, Fleet Center in Boston and Earls Court in London, England.
Attendance at our live events was approximately 2.5 million for the fiscal years
ended April 30, 2001 and 2000 and approximately 2.3 million for the fiscal year
ended April 30, 1999.

We promote our live events through a variety of media, including
television, radio, print and the Internet. Our revenues from live events are
primarily derived from ticket sales, with prices for our live events averaging
approximately $33 per ticket. The operator of a venue at which our live event is
held typically receives a fixed fee or a percentage of the revenues from ticket
and merchandise sales. WrestleMania(R) X-Seven was a record breaking live event
for both us and Houston's Reliant Astrodome. Attendance exceeded 67,900 and
broke the box office record for that venue with gross receipts of approximately
$3.5 million.

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Revenues from live events were approximately $81.9 million, $68.9 million
and $49.6 million in fiscal 2001, 2000 and 1999, respectively.

Television Programming

We are an independent producer of television programming. Relying primarily
on our in-house production capabilities, we produce seven shows consisting of
nine hours of original programming 52 weeks per year. On a weekly basis, our
nine hours of programming average approximately 20 million viewers. In addition
to our television programming, we also produce 12 domestic pay-per-views and 2
international pay-per-views annually.

Commencing at the end of September, our programming began to air on cable
networks owned by Viacom. We transitioned Raw is War(R), Livewire(TM) and
Superstars(TM) from the USA Network to The National Network "TNN" and we
transitioned WWF Sunday Night Heat(R) from the USA Network to MTV. Currently TNN
is available in approximately 81 million households and MTV is available in
approximately 79 million households. WWF SmackDown!(TM) continues to air on the
United Paramount Network ("UPN"), which is currently available in approximately
89 million households . Raw is War(R) is our two hour live production, which
airs in primetime and according to Nielsen Media Research, has consistently been
the number one rated regularly scheduled show on cable television for over two
years. WWF SmackDown!(TM) is a taped two hour program that airs in primetime
and, according to Nielsen Media Research, has been the number one rated
regularly scheduled program on UPN since its inception. WWF Sunday Night Heat(R)
is a live one hour show eminating from our entertainment complex, WWF New York.
Livewire(TM) and Superstars(TM) are post produced "magazine" type shows that air
on Saturday and Sunday mornings, and WWF Metal(TM) and WWF Jakked(TM) are our
two syndicated programs, shown by over 140 broadcast stations across the
country.

For our programs on Viacom platforms, there are a variety of financial
arrangements relating to advertising and rights fees.

Advertising revenues were $90.2 million, $77.9 million and $30.1 million
for the fiscal years ended April 30, 2001, 2000 and 1999, respectively.

Due to the density of certain key demographics that our programming
reaches, we are an attractive and efficient buy to advertisers. Our programming
is principally directed to audiences aged 18 to 34, and in recent years, our
audience has expanded to other demographics, including teenagers ages 12 to 17.
Since our programming appeals to such a wide spectrum of age groups, we
voluntarily designate the suitability of each of our shows using standard
television industry ratings.

We sell a substantial portion of the advertising time on our television
programs to over 110 major advertisers and sponsors. We also sell sponsorships
designed to meet the promotional needs of advertisers. These range from
presenting the Slam Of The Week, a 35-second spot that airs within our
television programs, to sponsoring our annual WrestleMania(R) event. Through
these sponsorships, we offer advertisers a full range of our promotional
vehicles, including television, Internet and print advertising, arena signage,
on-air announcements and special appearances by our performers. Additionally, as
part of certain sponsorship packages, we produce commercials featuring our
performers. We advertise products from some of the leading companies in the food
and beverage, video game, toy, movie and television studio and
telecommunications industries, among others.

Advertising time and customized sponsorship programs are sold directly by
our New York, Chicago and Toronto-based sales forces. We believe that we are
uniquely positioned to offer comprehensive advertising programs across all of
our media outlets, including our television shows, magazines, Internet sites,
and various live and pay-per-view events. We believe that our ability to offer
such a comprehensive program enables us to maximize the value of the advertising
time in our television programs. For the ability to control the advertising
inventory, we pay the network the greater of a fixed percentage of our net
advertising revenues less certain adjustments or a minimum guaranteed amount.
With respect to WWF Sunday Night Heat(R), while MTV sells the advertising
inventory, we have a similar share in the participation of the net revenues as
if we were selling the advertising inventory. In connection with our UPN program
we receive production credits in the amount

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of $300,000 per week which are taken into consideration when computing
advertising participation. In connection with our TNN and MTV programming, we
receive a rights fee totaling $550,000 per week.

Our state-of-the-art facility in Stamford, Connecticut, which houses our
television and music recording studios and post-production operations, is
staffed by 106 employees, including producers, directors, editors, cameramen,
audio engineers, graphic designers, English and Spanish-speaking announcers and
an administrative staff that oversees the production schedule. Our staff is
augmented by freelance technicians who assist in our remote television
broadcasts.

As part of our strategy to develop new programming and in conjunction with
our strategic alliance with Viacom, we recently introduced a weekly half hour
reality-based program, WWF Tough Enough(TM), which premiered on MTV in June 2001
and immediately follows WWF SmackDown!(TM). WWF Tough Enough(TM) is a 13 week
series that is a joint collaboration with MTV, for which we receive a rights fee
per episode. To date, the program has been the number one rated basic cable
program among persons 12-34 on Thursday nights.

Pay-Per-View Programming

On a monthly basis, our storylines either culminate or change direction at
each pay-per-view. We intensively market and promote the storylines that are
associated with our upcoming pay-per-view event through our television shows,
our Internet sites, and a variety of other promotional campaigns. We produce 12
domestic pay-per-view programs and two international pay-per-view programs
annually, which consistently rank among the pay-per-view programs achieving the
highest number of buys. Pay-per-view buys of our domestic events have continued
double digit growth over the past three fiscal years, increasing to 8.0 million
in fiscal 2001 from 6.9 million in fiscal 2000 and 5.4 million in fiscal 1999.
WrestleMania(R), our premiere event, generated approximately 0.9 buys million
for fiscal 1999, 1.0 million buys for fiscal 2000 and is currently estimated to
exceed 1.0 million buys for fiscal 2001. A substantial amount of the total buys
for an event and the related payment is determined and paid by the cable and
satellite distributors within 120 days after the event. Final reconciliation is
completed within one year. WrestleMania(R) has a suggested retail price of
$39.95 and each of our other 11 domestic pay-per-view events has a suggested
retail price of $29.95.

Currently, pay-per-view is available to approximately 47 million cable and
satellite subscribers in the United States. Our pay-per-views are available to
approximately 45% of all domestic cable homes with inDemand being the largest
distributor with approximately 28 million cable subscribers. Other major
distributors include DIRECTV, Echostar and a growing number of international
affiliates which continue to increase the potential subscriber base for our
pay-per-view events. We recently introduced the WWF Blast Area(TM) program,
which distributes our pay-per-view events to commercial locations for public
viewing. Consistent with industry practices, we share the revenues with the
cable systems and satellite providers and pay fees to inDemand.

In fiscal 2001, we introduced WWF Fanatics(TM), a new post produced
pay-per-view program, which utilizes content from our extensive tape library.
Each new program airs throughout the month.

Pay-per-view revenues were $128.2 million, $106.4 million and $81.0 million
for the fiscal years ended April 30, 2001, 2000 and 1999, respectively.

International

We continue to expand our global reach through the distribution of our
television programming which is currently broadcast in over 130 countries and 13
different languages. We continue to build on our distribution throughout Asia,
Europe, Latin America and Australia and continue to secure new television
distribution agreements on terrestrial, cable and satellite platforms throughout
those locations. Most notably we have recently signed distribution agreements
with broadcasters in Hong Kong, Japan, South Korea, Australia, and Russia. As we
continue to develop new characters in the future and expand our storylines for
our programming, we will have the opportunity to increase the number of
international tours and pay-per-view events without impacting our domestic
operations. We believe there is a strong demand internationally, and

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with the additional talent, storylines and programming, we should be in a much
stronger position to meet this demand.

Our agreement with BSkyB in the UK has significantly expanded our access to
the UK market. Our last two UK pay-per-view specials generated a 57% increase in
buys from fiscal 2000 to approximately 0.3 million buys. In connection with our
agreement with BSkyB, we are committed to have a minimum of two UK pay-per-view
programs during each fiscal year through April 30, 2003.

BRANDED MERCHANDISE

We offer a wide variety of branded merchandise through a licensing program
and a comprehensive direct sales effort. Our revenues from the sale of our
branded merchandise were approximately $120.4 million, $113.8 million and $81.4
million in fiscal 2001, 2000 and 1999, respectively. For additional segment
information, see Note 16 of Notes to Consolidated Financial Statements.

Licensing and Direct Sales

We have an established licensing program using our World Wrestling
Federation(R) mark and logo, copyrighted works and characters on thousands of
retail products, including toys, video games, apparel, and a wide assortment of
other items. In all of our licensing agreements, we retain creative approval
over the design, packaging, advertising and promotional material associated with
all licensed products to maintain the distinctive style, look and quality of our
intellectual property and brand. Our licensing agreements provide that we
receive a percentage of the wholesale revenues as a royalty and require minimum
guarantees.

Our direct merchandise operations consist of the design, marketing and sale
of various products, such as shirts, caps and other items, all of which feature
our characters and/or our scratch logo. All of these products are designed by
our in-house creative staff and manufactured by third parties. The merchandise
is sold at our live events under arrangements with the arenas, which receive a
percentage of the revenues. Our merchandise is also sold through internally
developed catalogs, which are distributed periodically as part of World
Wrestling Federation Magazine and RAW Magazine. We also sell merchandise on a
direct basis via our television shows, our wwfshopzone.com Internet site and our
retail store, which is part of WWF New York(TM). During 2001, we began to plan
and execute marketing programs with major retailers across the country where we
have implemented contests, sweepstakes and other promotions at store locations.

Home Video

We own and continue to amass a video library containing thousands of hours
of programming from our pay-per-view events and our television shows dating back
to the 1970s. Beginning in the mid-1980s, this library was used in the
production and sale of home videos by a licensee. In 1998, we began to produce
and market home videos in-house. In addition to producing videos from our
library footage, we create new videos utilizing original footage produced
specifically for this purpose. We create master tapes and contract with a third
party to duplicate and distribute the videos to retailers nationwide. Our videos
are sold at retail sales prices ranging from $14.95 to $34.95. In fiscal 2001 we
released 32 new titles, totalling 1.5 million units. According to Billboard
Magazine, six of our home videos ranked among the top 10 best selling home
videos in the "Recreational Sports" category as of July 3, 2001. For fiscal
2001, our home video revenues were derived from sales through approximately 40
unaffiliated distributors and/or direct customers.

As part of our strategy to grow our business and increase retail
distribution, we recently signed an agreement with Sony Music Video to handle
the distribution of all our home video products at retail. In addition, our
strategy also includes seeking to gain distribution in new retail channels and
to implement new product offerings.

SmackDown!(TM) Records

Music is an integral part of the entertainment experience at our live
events and on our television programs. We compose and record theme songs
tailored to our characters in our recording studio in Stamford,

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Connecticut. We and a third-party music publisher own the musical composition
rights to this music and we own all of the sound recording rights to our master
recordings. A third party manufactures, markets and distributes CDs of our music
to retailers nationwide, such as MusicLand, K-Mart, Wal-Mart, Best Buy and
Transworld.

Six albums containing our music have been released to date. Our most recent
compilation WWF The Music Volume V, reached number two on the Billboard Top 200
Album Chart and achieved gold status, selling approximately 0.6 million units as
of July 3, 2001. In addition, WWF Aggression, a hip hop compilation of our
entrance music, reached number eight on the Billboard Top 200 Album Chart and
achieved gold status, selling approximately 0.6 million units as of July 3,
2001. During fiscal 2002, we plan to release a rock compilation, which will be
our first album with Columbia Records, a unit of Sony Music Entertainment.

As a natural outgrowth of the continuing popularity of our music, our
marketing and promotional skills coupled with the exposure on our television
programs and at WWF New York(TM) and the demographic make up of our fan base, we
established our own record label, SmackDown!(TM) Records in August 2000. We plan
to sign, market and develop new musical artists, ranging from hard rock to hip
hop to appeal to our fan base. We have hired a director of artists and
repertoire who will be responsible for overseeing and giving direction in the
recording process and talent scouting. Additionally, we recently signed a new
band, Neurotica, scheduled to release its first album in fiscal 2002.

Publishing

Our publishing operations consist primarily of two monthly magazines, World
Wrestling Federation Magazine and RAW Magazine and a series of specials, all of
which are used to help shape and complement our story lines in our television
programs and at our live events. We also include our direct marketing catalog in
our magazines on a quarterly basis. The magazines include color photographs
taken at recent live events, biographies and features of our performers, and
human interest articles. Our in-house publishing and editorial departments
prepare all of the editorial content and use outside contractors to print and
distribute the magazines to subscribers and newsstands. The combined circulation
for our monthly magazines was approximately 6.7 million and circulation for our
specials was approximately 0.9 million in fiscal 2001.

Through our relationship with ReganBooks, an imprint of Harper Collins, we
expanded our book publishing licensing program. We have broadened into literary
genres beyond autobiographies, including children's books, cookbooks and
historical anthologies. To date, seven titles have been released, with six
making an appearance on the New York Times Bestseller List and three reaching
the number 1 position. In fiscal 2001, we published Mick Foley's Christmas
Chaos, which reached number 5 on the New York Times Children's List; Chyna: If
They Only Knew, which reached number 2 on the New York Times Non-fiction List;
The Official Insider's History of WrestleMania(R), which reached number 12 on
the New York Times Non-fiction List and Can You Take The Heat -- The WWF Is
Cooking. Mick Foley's second autobiography, Foley Is Good was released in May
2001 and reached number 1 on the New York Times Non-fiction List two weeks
following its release. We are currently exploring new alternatives with other
larger publishing entities.

During fiscal 2000, we released two hardcover autobiographies of our
performers, The Rock Says... and Mankind: Have a Nice Day. Both books reached
number 1 on The New York Times Bestsellers List.

New Media

We utilize the Internet to promote our brand, create a community experience
among our fans and to market and distribute our various products. Through our
network of Internet sites, our fans can purchase our branded merchandise online,
obtain our latest news and information, including content that is accessible
only online, stay abreast of our evolving storylines, tap into interactive chat
rooms to communicate with each other and our performers, and experience archived
video and audio clips of performers and previous media events. We promote
wwf.com on our televised programming, at our live events, in our two monthly
magazines and in substantially all of our marketing and promotional materials.
In addition to wwf.com, our network of sites includes, among others,
wwfshopzone.com, stonecold.com, therock.com, wwfdivas.com, wwfhhh.com,
undertaker.com and wwfecorpbiz.com. WWF.com also has properties dedicated to
SmackDown! Records,
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WWF New York(TM) and a special website dedicated to parents. New online features
added in fiscal 2001 include a new chat engine, branded superstar browsers,
polling and interactive games.

We have experienced a significant increase in the number of people visiting
our sites and purchasing our products via the Internet. In April 2001, our
Internet sites generated approximately 300 million page views as compared to 200
million page views in April 2000. According to Net Score, we had approximately
8.7 million visitors in April 2001 as compared to 4.4 million in April 2000. The
8.7 million visitors spent an average of 28 minutes on our site.

WWF Shopzone has achieved significant growth over the past three years. Our
WWF Shopzone revenues were $6.9 million, $4.2 million and $2.7 million in fiscal
2001, 2000 and 1999, respectively. We will continue to invest in our new media
business and keep a forward looking perspective on changes in technology. Our
Internet advertising sales have not fully been monetized due to the general lack
of acceptance by major advertisers to use the internet as an effective
advertising medium. For the year ended April 30, 2001, our new media advertising
revenues decreased to $5.6 million from $6.9 million in fiscal 2000. We believe,
however, that we are well positioned to attract major companies to advertise on
our website once a transition takes place within the advertising industry to
commit more dollars to advertising on the Internet. Our desirable demographics,
combined with the volume of traffic on our network of Internet sites, should
enable us to secure campaigns with such major advertisers. We will continue to
use our website network as a marketing tool as well as a vehicle to sell our
merchandise.

WWF New York(TM)

In May 2000, we purchased our 46,500 square foot entertainment complex
located in Times Square for approximately $24.5 million. As part of our
strategic initiative, through April 30, 2001 we invested an additional $9.5
million to further develop the entertainment value of the complex while at the
same time providing a television and recording sound stage and studio. The
complex includes a 960 seat restaurant, 2,200 square feet of retail space and a
video arcade. The complex provides for a variety of entertainment uses,
including:

- the airing of our regularly scheduled TV shows and pay-per-views,

- the backdrop for our live one hour program on MTV, WWF Sunday Night
Heat(R),

- the potential showcase of some of our up and coming rock groups and acts,

- ongoing appearances by our performers and autograph sessions, and

- a night club, known as The World.

For its first year of operations, which was fiscal 2001, WWF New York generated
net revenues of $16.6 million and it incurred an operating loss of $0.2 million,
excluding depreciation and amortization.

OTHER BUSINESS DEVELOPMENTS

In February 2000, we began the start-up operations of our professional
football league, the XFL(TM), which was a 50/50 venture with NBC. The league
consisted of eight teams that played 10 games each After the completion of the
season, we decided to discontinue the operations and accordingly, the operations
of the XFL(TM) have been reflected as Discontinued Operations in our
Consolidated Financial Statements which include adjustments made to reflect the
ultimate disposition of these operations. We determined that the investment
required and the risk inherent in continuing the venture were not commensurate
with the potential return. For the fiscal year ended April 30, 2001, our portion
of the loss from the operations of the XFL(TM) and its estimated shutdown costs
were $46.9 million, net of applicable tax benefits. Included in the $46.9
million net loss was $10.7 million of non-cash charges. See Note 19 of Notes to
the Consolidated Financial Statements.

In March 2001, we acquired substantially all of the intellectual properties
and certain other assets of World Championship Wrestling(R) (the "WCW(R)"),
including the trade name, tape library and other intangible

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assets from a subsidiary of AOL Time Warner for $2.5 million. In addition, we
incurred certain related costs to acquire these assets of approximately $1.8
million. The additional characters and storylines that we can develop opens new
opportunities for growth in all aspects of our business. As a result of this
acquisition, we are adding thousands of hours to our tape library that can be
repurposed for home videos, television, Internet streaming and broadband
applications.

COMPETITION

We compete for advertising dollars with other media companies. For our
live, television and pay-per-view audiences we face competition from
professional and college sports as well as from other forms of live and
televised entertainment and other leisure activities. We compete with
entertainment companies, professional sports leagues and other makers of branded
apparel and merchandise for the sale of our branded merchandise. Certain
companies with whom we compete have greater financial resources than we do.

TRADEMARKS AND COPYRIGHTS

Intellectual property is material to all aspects of our operations and we
expend substantial cost and effort in an attempt to maintain and protect our
intellectual property and to maintain compliance vis-a-vis other parties'
intellectual property. We have a large portfolio of registered and pending
trademarks and service marks worldwide and maintain a large catalog of
registered copyrights on all of our merchandise containing artwork, including
merchandise, music, photographs, books and magazines, videos and apparel art.
The focus of our continuous registration effort is to seek copyright and
trademark registration of marks and works which embody our originally created
characters portrayed by our performers and which encompass images, likenesses or
names of these characters, commonly referred to as their trade dress. We also
own a large number of Internet web domain names and have a network of developed
sites, which contribute to the exploitation of our trademarks and service marks
worldwide. We have the right to use the initials "WWF" as a servicemark and
trademark for our sports entertainment services. In 1994, we entered into an
agreement with an unaffiliated third party, WWF -- World Wide Fund for Nature
(the "Fund"), a nonprofit environmental conservation organization, that sets
forth limitations with respect to our use of these initials domestically and
internationally. This agreement did permit our use of the then-current World
Wrestling Federation(R) logo anywhere in the world. Our current scratch logo
contains the initials "WWF" in a stylized and highly distinctive way and is a
separate and independently recognized commercial impression. While we believe
that the logo is not restricted by the agreement, the Fund initiated litigation
seeking injunctive relief and damages for alleged breaches of the agreement. See
"Legal Proceedings."

We vigorously enforce our intellectual property rights by, among other
things, searching the Internet to ascertain unauthorized use of our intellectual
property, seizing goods at our live events that feature unauthorized use of our
intellectual property and seeking restraining orders in court against any
individual or entity infringing on our intellectual property rights.

EMPLOYEES

As of July 3, 2001, excluding our WWF New York(TM) operations, we had 434
full-time employees. Of that total, 154 were primarily engaged in organizing and
producing live performances and television and pay-per-view shows, 81 were
primarily engaged in licensing, merchandising and consumer product sales and 199
were primarily engaged in management and administration. Our in-house production
staff is supplemented with contract personnel on an as-needed basis.

As of July 3, 2001, we had approximately 247 full time employees at the WWF
New York(TM) complex. Of that total, 38 were engaged in management and
administration and 209 were hourly employees engaged in the food service and
entertainment aspects of the complex.

We believe that our relationships with our employees are generally
satisfactory. None of our employees, other than certain stage production
employees of WWF New York, is represented by a union.

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ITEM 2. PROPERTIES

We maintain our executive offices, television and music recording studios,
post-production operations and warehouses at locations in or near Stamford,
Connecticut, and sales offices in New York, Chicago, and Toronto, Canada.

We own the buildings in which our executive and administrative offices, our
television and music recording studios and our post-production operations are
located. We lease space for our sales offices, our warehouse facilities and our
entertainment complex.

Our principal properties consist of the following:

EXPIRATION DATE
FACILITY LOCATION SQUARE FEET OWNED/LEASED OF LEASE
- -------- -------- ----------- ------------ ---------------

Executive offices Stamford, CT 114,300 Owned --
Executive offices Stamford, CT 13,563 Leased April 9, 2006
Production studio Stamford, CT 39,900(1) Owned --
Production studio Stamford, CT 162,600 Leased March 11, 2006
Sales office New York, NY 10,075 Leased July 15, 2008
Sales office Toronto, Canada 7,069 Leased February 28, 2006
Sales office Chicago, IL 347 Leased October 31, 2001
Warehouse Trumbull, CT 20,000 Leased August 9, 2004
Entertainment complex New York, NY 46,500 Leased October 31, 2017

- ---------------
(1) Excluding 138,000 square feet of parking space adjacent to the production
facilities.

In addition, we own a daycare facility in Stamford, Connecticut on property
adjacent to our production facilities, which originally offered child care
services only to our employees, but is now also open to the public. The
licensing and operation of this facility is fully managed by a third-party
contractor. We have the responsibility to obtain the required licenses and to
ensure that the facility meets health, safety, fire and building codes.

REGULATION

Live Events

In certain states in the United States we are required to comply with
regulations of state athletic commissions and other applicable regulatory
agencies in order to promote and conduct our live entertainment. Twenty-four
states require that we obtain a promoter's license, which is a corporate license
necessary for us to promote our live events and is granted to us on an annual
basis. Twenty-one states require our performers and referees to obtain a
performer's license, which is an individual license necessary for our performers
and referees to perform at our live events and is granted to them on an annual
basis. Nine states require that our performers take an annual physical
examination. In addition to the annual licenses that certain states require, ten
states require that we obtain a permit for each event that we hold. We are also
subject to the regulations of athletic commissions in certain Canadian
provinces. These commissions require that we obtain promoter's licenses and
medical approval for our performers. We are in compliance with all applicable
state and local athletic commission regulations.

Television Programming

The production and distribution of television programming by independent
producers is not directly regulated by the federal or state governments, but the
marketplace for television programming in the United States is substantially
affected by regulations of the Federal Communications Commission applicable to
television stations, television networks and cable television systems and
channels. We voluntarily designate the suitability of each of our television
shows using standard industry ratings, such as PG (L,V) or TV14.

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Other

Our WWF New York(TM) complex is governed by New York State and City rules
and regulations relating to bars and restaurants including liquor regulations
and fire and health codes.

ITEM 3. LEGAL PROCEEDINGS

On May 13, 1991, William R. Eadie, a former professional wrestler who had
been one of our performers, filed a lawsuit in state court in Wisconsin against
us and Mr. McMahon. The case was removed to the United States District Court for
the District of Connecticut on August 7, 1991. The suit alleged that we breached
an oral agreement to compensate Mr. Eadie for the use of his ideas in connection
with a wrestling tag team called "Demolition" and to employ him for life. In a
similar action filed against us on April 10, 1992 in the United States District
Court for the District of Connecticut, Randy Colley, a former professional
wrestler who had been one of our performers, also alleged that the we breached
an oral agreement to compensate him for disclosing his idea for a wrestling tag
team called "Demolition". Mr. Colley's claims were consolidated for trial with
those of Mr. Eadie. On May 25, 2001, the parties entered into a settlement
agreement, under which all claims against us were dismissed with prejudice. By
Order dated July 3, 2001 the court dismissed all claims against us with
prejudice.

On June 15, 1999, members of the family of Owen Hart, a professional
wrestler performing under contract with us filed suit in state court in Missouri
against us, Vincent and Linda McMahon and nine other defendants, including the
manufacturer of the rigging equipment involved, individual equipment riggers and
the arena operator, as a result of the death of Owen Hart during a pay-per-view
event at Kemper Arena in Kansas City, Missouri on May 23, 1999. The parties have
agreed to a settlement that dismisses all claims against us and the McMahons and
allows us the right to pursue contribution and indemnity from the companies
which manufactured and sold the equipment involved in the accident. The parties
have obtained all necessary judicial approvals for the settlement agreement. As
a result of the settlement, we recorded a charge of $7.0 million, which was
included in selling, general and administrative expenses for the fiscal year
ended April 30, 2001.

On September 20, 1999, we were formally served with a complaint regarding
an action that Nicole Bass, a professional wrestler previously affiliated with
us, filed in the United States District Court for the Eastern District of New
York in which she alleges sexual harassment under New York law, civil assault
and intentional infliction of emotional distress. Bass's complaint sought $20.0
million in compensatory damages and $100.0 million in punitive damages. On or
about November 9, 1999, we received a Notice of Charge of Discrimination from
the Equal Employment Opportunity Commission (EEOC) filed by Nicole Bass. On
January 27, 2000, the EEOC closed its file on her claim. We filed a motion to
dismiss the original complaint. During oral argument on our motion to dismiss,
Plaintiff requested leave of court to file an amended complaint. The Plaintiff
filed a second amended complaint on October 20, 2000. Motions to Dismiss the
second amended complaint were filed on December 18, 2000 and granted in part on
February 14, 2001. On March 5, 2001, we answered the surviving counts in the
second amended complaint. We believe that the claims are without merit and
intend to vigorously defend against this action. Based on our preliminary review
of the allegations and the underlying facts, as we understand them, we do not
believe that an unfavorable outcome in this action will have a material adverse
effect on our financial condition, results of operations or prospects.

On April 17, 2000, the WWF -- World Wide Fund for Nature (the "Fund")
instituted legal proceedings against us in the English High Court seeking
injunctive relief and unspecified damages for alleged breaches of an agreement
between the Fund and us. The Fund alleges that our use of the initials "WWF" in
various contexts, including (i) the wwf.com and wwfshopzone.com internet domain
names and in the contents of various of the our websites; (ii) our "scratch"
logo; and (iii) certain oral uses in the contexts of foreign broadcasts of our
programming, violate the agreement between the Fund and us. On August 29, 2000,
we filed our defense and counterclaim. On January 24, 2001, the Fund requested
leave of court to amend its complaint to add a count of money damages. Leave has
not yet been granted. On January 30, 2001, the Fund filed for summary judgment
on its claims. Oral Argument on the Fund's motion for summary judgment was heard
the

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week of July 16, 2001, and the court's decision is currently pending. We believe
that we have meritorious defenses and intend to defend the action vigorously. We
believe that an unfavorable outcome of this suit may have a material adverse
effect on our financial condition, results of operations or prospects.

On November 14, 2000, Stanley Schenker & Associates, Inc. filed a complaint
against us relating to the termination of an Agency Agreement between us and
Plaintiff. Plaintiff seeks compensatory damages and punitive damages in an
unspecified amount, attorneys' fees, an accounting and a declaratory judgment.
We believe that we have meritorious defenses and intend to defend the action
vigorously. On December 15, 2000, we filed a motion to strike all the claims
against us, with the exception of one count for breach of contract. The motion
was fully briefed by both parties on February 7, 2001. On March 27, 2001, the
Plaintiff filed a substituted complaint reasserting all counts against us. On
April 11, 2001, we answered the substitute complaint. We believe that an
unfavorable outcome of this suit may have a material adverse effect on our
financial condition, results of operations or prospects.

In response to a demand letter from the William Morris Agency, Inc., we
filed an action on October 2, 2000 seeking declaratory, legal and equitable
relief relating to Defendant's improper claims for commissions on business
opportunities with which it had no involvement. William Morris filed a
counterclaim on February 1, 2001 alleging breach of contract and seeking to
recover unspecified damages in the form of commissions allegedly owed. William
Morris filed a motion to dismiss all non-contract claims against it. We also
filed a motion to partially dismiss William Morris's counterclaims. By Order
dated June 21, 2001, the court granted William Morris's motion to dismiss only
with respect to our claim for fraud and unfair trade practices; William Morris's
motion to dismiss was denied with respect to the remaining counts of our
complaint. We believe that we have meritorious defenses and intend to defend the
action vigorously. We believe that an unfavorable outcome of this suit may have
a material adverse effect on our financial condition, results of operations or
prospects.

We are not currently a party to any other material legal proceedings.
However, we are involved in several other suits and claims in the ordinary
course of business, and we may from time to time become a party to other legal
proceedings arising in the ordinary course of doing business.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

Not applicable.

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PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

PRICE RANGE OF CLASS A COMMON STOCK

Effective October 25, 2000, our Class A Common Stock began trading on the
New York Stock Exchange, under the symbol "WWF." From October 19, 1999 through
October 24, 2000, our Class A common stock had been traded on the Nasdaq
National Market under the symbol "WWFE."

The following table sets forth the high and the low sale prices for the
shares of Class A common stock as reported by the New York Stock Exchange and
the Nasdaq National Market for the periods indicated.

{CLASS A
COMMON STOCK}
--------------
HIGH LOW
---- ----

FISCAL 2001
First Quarter............................................. $22 1/4 $16 1/16
Second Quarter............................................ $22 1/2 $14 1/16
Third Quarter............................................. $20 13/16 $12 3/4
Fourth Quarter............................................ $22 $11 1/2

FISCAL 2000
First Quarter............................................. -- --
Second Quarter, since October 19, 1999.................... $34 $20 5/16
Third Quarter............................................. $25 13/16 $14 1/16
Fourth Quarter............................................ $19 11/16 $ 9 3/4

There were 7,376 holders of record of Class A common stock and three
holders of record of Class B common stock as of July 3, 2001.

We plan to retain all of our earnings to finance the expansion of our
business and for general corporate purposes and do not anticipate paying any
cash dividends on our Class A or Class B common stock in the foreseeable future.
Any change to this dividend policy will be determined by our board of directors
on the basis of various factors, including our results of operations, financial
condition, capital requirements and investment opportunities and the limitations
imposed by our credit agreement.

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ITEM 6. SELECTED HISTORICAL CONSOLIDATED FINANCIAL AND OTHER DATA

The following table sets forth our selected historical consolidated
financial data for each of the five fiscal years in the period ended April 30,
2001. The selected historical consolidated financial data as of April 30, 2001
and 2000 and for the fiscal years ended April 30, 2001, 2000 and 1999 have been
derived from the audited consolidated financial statements included elsewhere in
this Form 10-K. The selected historical consolidated financial data as of April
30, 1999, 1998 and 1997 and for the fiscal years ended April 30, 1998 and 1997
have been derived from our audited consolidated financial statements, which have
not been included in this Form 10-K. Certain prior year amounts have been
reclassified to conform to current year presentation. You should read the
selected historical consolidated financial data in conjunction with our
historical consolidated financial statements and related notes and the
information set forth under "Management's Discussion and Analysis of Financial
Condition and Results of Operations" contained elsewhere in this Form 10-K.

Concurrent with the issuance of shares in our initial public offering in
October 1999 (the "Offering"), we terminated our election to be subject to the
provisions of Subchapter S and have become subject to the provisions of
Subchapter C of the Internal Revenue Code. As a Subchapter C Corporation, we are
fully subject to federal, state and foreign income taxes. Prior to the Offering,
our taxable income or loss had been included in the federal and certain state
income tax returns of our stockholder. The provision for income taxes reflected
in our historical consolidated financial statements through the date of our
Offering relates only to foreign and certain state income taxes for those states
that did not recognize Subchapter S status. Our stockholder was responsible for
federal and certain state income taxes with respect to our operations, which
were funded by distributions from our undistributed earnings account.

EBITDA represents income from continuing operations before interest, taxes,
depreciation, amortization and stock option and other non-cash charges. EBITDA
is presented because management believes that such information is considered by
certain investors to be an additional basis for evaluating a company's operating
performance, leverage and liquidity. EBITDA should not be considered an
alternative to measures of operating performance determined in accordance with
generally accepted accounting principles or as a measure of our operating
results and cash flows or as a measure of our liquidity. EBITDA, as derived by
us, may not be comparable to similarly titled measures reported by other
companies.

The following items may affect the comparability between each of the five
years then ended: a) the results of operations and estimated shutdown costs for
the fiscal year ended April 30, 2001 related to our discontinued business, the
XFL; b) the settlement of a $7.0 million outstanding lawsuit during the fiscal
year ended April 30, 2001; c) non-cash stock option and other non-cash charges
of $0.8 million and $15.3 million for the fiscal years ended April 30, 2001 and
2000, respectively; and (d) the impact on our provision for income taxes on
continuing operations resulting from our differences in our effective tax rates
of 37.1%, 20.3%, 3.4%, 5.2% and (2.8)% for the fiscal years ended April 30,
2001, 2000, 1999, 1998 and 1997, respectively, due to our change in status to a
Subchapter C Corporation concurrent with our Offering.

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FISCAL YEAR ENDED APRIL 30,
-----------------------------------------------------
2001 2000 1999 1998 1997
--------- --------- -------- -------- -------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

CONSOLIDATED STATEMENTS OF OPERATIONS DATA:
Net revenues.................................... $ 456,043 $ 379,310 $251,474 $126,231 $81,863
Cost of revenues (excluding performer stock
option charges of $760 and $6,020 for the
years ended April 30, 2001 and 2000,
respectively)................................. 258,103 220,980 147,026 87,969 60,958
Stock option and other non-cash charges(1)...... 760 15,330 -- -- --
Selling, general and administrative
expenses(2)................................... 105,019 71,095 45,521 26,117 25,862
Depreciation and amortization................... 7,180 2,544 1,946 1,676 1,729
Interest expense................................ 856 2,155 1,125 2,019 782
Interest and other income, net.................. 15,916 7,571 2,117 479 777
--------- --------- -------- -------- -------
Income (loss) from continuing operations before
income taxes.................................. 100,041 74,777 57,973 8,929 (6,691)
Provision (benefit) for income taxes............ 37,144 15,200 1,943 463 (186)
--------- --------- -------- -------- -------
Income (loss) from continuing operations........ 62,897 59,577 56,030 8,466 (6,505)
--------- --------- -------- -------- -------
Discontinued Operations:
Loss from XFL operations, net of tax of
$17,679 and $410 for fiscal 2001 and 2000,
respectively and minority interest.......... (31,293) (669) -- -- --
Estimated loss on shutdown of the XFL, net of
tax of $5,265 and minority interest......... (15,617) -- -- -- --
--------- --------- -------- -------- -------
Loss from discontinued operations............. (46,910) (669) -- -- --
--------- --------- -------- -------- -------
Net income (loss)............................... $ 15,987 $ 58,908 $ 56,030 $ 8,466 $(6,505)
========= ========= ======== ======== =======
Earnings from continuing operations per common
share: basic and diluted(3)................... $ 0.87 $ 0.95 $ 0.99 $ 0.15 $ (0.11)
--------- --------- -------- -------- -------
Discontinued Operations:(3)
Loss from XFL operations per common share:
basic and diluted........................... (0.43) (0.01) -- -- --
Estimated loss on shutdown of the XFL per
common share: basic and diluted............. (0.22) -- -- -- --
--------- --------- -------- -------- -------
Loss from discontinued operations per common
share: basic and diluted.................... (0.65) (0.01) -- -- --
--------- --------- -------- -------- -------
Earnings (loss) per common share: basic and
diluted(3).................................... $ 0.22 $ 0.94 $ 0.99 $ 0.15 $ (0.11)
========= ========= ======== ======== =======
UNAUDITED PRO FORMA INFORMATION:
Historical income from continuing operations
before income taxes........................... $ 74,777 $ 57,973
Pro forma adjustment other than income
taxes(4)...................................... 427 2,515
--------- --------
Pro forma income from continuing operations
before income taxes........................... 74,350 55,458
Pro forma provision for income taxes(5)......... 29,132 22,227
--------- --------
Pro forma income from continuing operations..... $ 45,218 $ 33,231
========= ========
Pro forma earnings from continuing operations
per common share -- basic and diluted(3)...... $ 0.72 $ 0.59
========= ========

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FISCAL YEAR ENDED APRIL 30,
-----------------------------------------------------
2001 2000 1999 1998 1997
--------- --------- -------- -------- -------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

CONSOLIDATED STATEMENTS OF CASH FLOWS DATA:
OPERATING ACTIVITIES:
Net cash provided by continuing operations...... $ 62,719 $ 68,689 $ 57,646 $ 6,256 $ 3,628
Net cash used in discontinued operations........ (85,460) (1,079) -- -- --
--------- --------- -------- -------- -------
Net cash (used in) provided by operating
activities.................................... $ (22,741) $ 67,610 $ 57,646 $ 6,256 $ 3,628
========= ========= ======== ======== =======
INVESTING ACTIVITIES:
Net cash used in continuing operations(6),
(7)........................................... $(132,737) $(122,032) $(14,634) $ (1,294) $ (849)
Net cash used in discontinued operations........ (8,734) -- -- -- --
--------- --------- -------- -------- -------
Net cash used in investing activities(6), (7)... $(141,471) $(122,032) $(14,634) $ (1,294) $ (849)
========= ========= ======== ======== =======
FINANCING ACTIVITIES:
Net cash provided by (used in) continuing
operations(8)................................. $ 61,058 $ 110,474 $ (6,082) $ 1,974 $(1,803)
Net cash provided by discontinued operations.... 46,415 -- -- -- --
--------- --------- -------- -------- -------
Net cash provided by (used in) financing
activities(8)................................. $ 107,473 $ 110,474 $ (6,082) $ 1,974 $(1,803)
========= ========= ======== ======== =======

AS OF APRIL 30,
--------------------------------------------------
2001 2000 1999 1997 1998
-------- -------- -------- ------- -------
(DOLLARS IN THOUSANDS)

CONSOLIDATED BALANCE SHEETS DATA:
Cash and cash equivalents(8)....................... $ 45,040 $101,779 $ 45,727 $ 8,797 $ 1,861
Short-term investments(8).......................... 194,631 107,213 -- -- --
Property and equipment -- net...................... 83,521 41,484 28,377 26,177 26,499
Total assets....................................... 443,092 337,032 130,188 59,594 41,856
Total long-term debt (including current portion)... 10,459 11,417 12,791 12,394 8,267
Total stockholders' equity......................... 347,859 258,537 72,260 22,697 16,420

FISCAL YEAR ENDED APRIL 30,
---------------------------------------------------------
2001 2000 1999 1998 1997
--------- --------- --------- --------- ---------
(DOLLARS IN THOUSANDS)}

OTHER FINANCIAL DATA:
EBITDA(2), (9)...................................... $92,921 $87,235 $58,927 $12,145 $(4,957)
Capital expenditures................................ 27,593 15,068 3,756 1,294 892
OTHER NON-FINANCIAL DATA:
Number of live events............................... 212 206 199 218 199
Total attendance.................................... 2,449,800 2,485,100 2,273,701 1,576,112 1,060,740
Average Weekly Nielson Ratings:
Raw is War(R) -- TNN(10).......................... 5.0 -- -- -- --
Raw is War(R) -- USA(10).......................... 6.3 6.2 5.0 3.1 2.4
WWF SmackDown!(TM)(11)............................ 4.6 4.7 -- -- --
Domestic pay-per-view buys.......................... 8,010,400 6,884,600 5,365,100 2,936,100 2,252,200

- ---------------
(1) Reflects fiscal 2001 and 2000 non-cash stock option charges of
approximately $0.8 million ($0.5 million, net of tax) and approximately
$6.0 million ($3.7 million, net of tax), respectively, relating to the
granting of stock options to certain performers who are independent
contractors. In addition, reflects a fiscal 2000 non-cash charge of $9.3
million ($5.7 million, net of tax). In April 2000, we entered into a
non-forfeitable agreement with Viacom whereby, Viacom acquired
approximately 2.3 million newly issued shares of our Class A common stock
at $13 per share.

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18

(2) Included in fiscal 2001 was the settlement of an outstanding lawsuit for
$7.0 million ($4.3 million, net of tax).

(3) Based on a weighted average number of common shares outstanding -- basic of
72,025,222 and 62,806,726 for the fiscal years ended April 30, 2001 and
April 30, 2000, respectively, and 56,667,000 for the fiscal years ended
April 30, 1999, 1998 and 1997, and based on a weighted average number of
common shares outstanding -- diluted of 72,216,870 and 62,830,279 for the
fiscal years ended April 30, 2001 and April 30, 2000, respectively, and
56,667,000 for the fiscal years ended April 30, 1999, 1998 and 1997.

(4) This amount gives pro forma effect to the increase in compensation to
Vincent and Linda McMahon pursuant to employment agreements that became
effective as of July 1, 1999. Historically, both executives were paid less
compensation because they benefited from Subchapter S distributions to Mr.
McMahon.

(5) This amount represents a pro forma estimate of our provision for federal
and state income taxes to give effect to the change in our tax status to a
Subchapter C Corporation for fiscal 2000 and 1999. Concurrent with the
issuance of shares in our initial public offering, we terminated our status
as a Subchapter S Corporation.

(6) Includes our purchases of short-term investments consisting primarily of
government and corporate obligations and mortgage backed securities of
$87.8 million and $107.0 million for the fiscal years ended April 30, 2001
and 2000, respectively.

(7) Our property located in Las Vegas, Nevada was sold in December, 2000. Net
proceeds from the sale were $11.3 million. The property was purchased in
the second quarter of fiscal 1999 for approximately $10.9 million.

(8) Reflects the sale of 2.3 million shares of our Class A common stock to each
of NBC and Viacom for a total of $60.0 million during fiscal 2001 and our
receipt of the net proceeds from our initial pubic offering of
approximately $179.3 million, after deducting the underwriting discount and
offering expenses during fiscal 2000.

(9) EBITDA is defined by us as income from continuing operations, before
interest, taxes, depreciation, amortization and stock option and other
non-cash charges. EBITDA is presented because management believes that such
information is considered by certain investors to be an additional basis
for evaluating a company's operating performance, leverage and liquidity.
EBITDA should not be considered an alternative to measures of operating
performance determined in accordance with generally accepted accounting
principles or as a measure of our operating results and cash flows or as a
measure of our liquidity. EBITDA, as derived by us, may not be comparable
to similarly titled measures reported by other companies.

(10) On September 25, 2000, our Raw is War(R) program was moved to TNN. The
average weekly rating on TNN was based on 32 programs, and the average
weekly rating on USA was based on 21 programs during fiscal 2001.

(11) WWF SmackDown!(TM) commenced on August 26, 1999. The average weekly Nielsen
rating was based on 36 programs during fiscal 2000.

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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

You should read the following discussion in conjunction with the audited
consolidated financial statements and related notes included elsewhere in this
Form 10-K.

BACKGROUND

We are an integrated media and entertainment company principally engaged in
the development, production and marketing of television programming,
pay-per-view programming and live events, and the licensing and sale of branded
consumer products featuring our highly successful World Wrestling Federation
brand.

The key drivers of our business remain strong. We continue to achieve
strong ratings across all of our programs and in particular for our Raw is
War(R) and WWF SmackDown!(TM) programs. Raw is War(R) has consistently been the
number one rated regularly scheduled program on cable television, and since its
inception, WWF SmackDown!(TM) has been the number one rated regularly scheduled
program on the UPN broadcast network. In addition, pay-per-view had another year
of double digit growth, with buys increasing to 8.0 million domestically and 0.3
million internationally. Attendance at our 212 live events was approximately 2.5
million, consistent with last year's record amount, while our average ticket
price increased 20% to approximately $33.00.

Our operations have been organized around two principal activities:

- The creation, marketing and distribution of our live and televised
entertainment and pay-per-view programming. Revenues are derived
principally from ticket sales to our live events, purchases of our
pay-per-view programs, the sale of television advertising time and the
receipt of television rights fees.

- The marketing and promotion of our branded merchandise. Revenues are
generated from royalties from the sale of merchandise by third-party
licensees, the direct sale by us of merchandise, magazines and home
videos and from our WWF New York entertainment complex.

In May 2000, we acquired the WWF New York(TM) entertainment complex located
in Times Square. The complex generated approximately $16.6 million in revenues
during its first year of operations. Fiscal 2001 was a year of transition and
start-up for us regarding the operations of WWF New York(TM), resulting in an
operating loss of $0.2 million, excluding depreciation and amortization.

In March 2001, we acquired substantially all of the intellectual properties
and certain other assets of World Championship Wrestling(R) (the "WCW(R)"),
including the trade name, tape library and other intangible assets from a
subsidiary of AOL Time Warner for $2.5 million. In addition, we incurred certain
related costs to acquire these assets of approximately $1.8 million.

Our Consolidated Financial Statements include the financial statements of
our company, and our wholly and majority owned subsidiaries. In October 1999, we
sold 11,500,000 shares of Class A common stock to the public at an initial
offering price of $17.00 per share. In connection with our initial public
offering, we changed to a Subchapter C Corporation. See Note 11 of Notes to
Consolidated Financial Statements.

In early May 2001, we formalized our decision to discontinue operations of
our professional football league, the XFL and accordingly, have reported XFL(TM)
operating results and estimated shutdown costs as Discontinued Operations in our
Consolidated Financial Statements as of April 30, 2001.

Fiscal Year Ended April 30, 2001 compared to Fiscal Year Ended April 30, 2000

Net Revenues. Net revenues were $456.0 million in fiscal 2001 as compared
to $379.3 million in fiscal 2000, an increase of $76.7 million, or 20%. Of this
increase, $70.2 million was from our live and televised entertainment activities
and $6.5 million was from our branded merchandise activities.

Live and Televised Entertainment. Net revenues were $335.7 million in
fiscal 2001 as compared to $265.5 million in fiscal 2000, an increase of $70.2
million, or 26%. Revenues from our domestic and international television rights
fees increased by $23.1 million, which reflects our new agreement with Viacom
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which commenced in October 2000 and generates an additional $440,000 per week in
fees, and new and renewed agreements in Canada, Japan and various other
countries. Pay-per-view revenues increased by $21.8 million in fiscal 2001,
which resulted substantially from a 1.1 million increase in domestic
pay-per-view buys to approximately 8.0 million for fiscal 2001, from
approximately 6.9 million in fiscal 2000. As part of our ongoing estimating
process, we recorded 1.2 million buys and 0.8 million buys for fiscal 2001 and
fiscal 2000, respectively, for amounts by which certain prior year events
exceeded their estimated buys. Revenues from TV advertising time and
sponsorships increased by $12.3 million in fiscal 2001 as a result of the full
year impact of WWF SmackDown!(TM) on UPN. Attendance at our live events was
approximately 2.5 million in each of the past two fiscal years. Revenues from
our live events increased by $13.0 million in fiscal 2001 as compared to fiscal
2000 due to an increase in average ticket prices.

Branded Merchandise. Net revenues were $120.4 million in fiscal 2001 as
compared to $113.8 million in fiscal 2000, an increase of $6.6 million, or 5.8%.
In May 2000, we purchased WWF New York, which generated net revenues of $16.6
million in its first year of operations. Publishing revenues increased by $2.2
million due to price increases in certain of our magazines and an increase in
unit sales of our special edition magazines. Revenues from our new media and
merchandise businesses increased by $1.4 million and $0.5 million, respectively,
due to increased sales of our merchandise through our WWFShopzone.com website
and from an increase in average sales per capita. Licensing revenues decreased
by $7.6 million primarily due to reduced royalties generated in the toy
category. Home video revenues decreased by $7.8 million. Home video units
decreased by approximately 1.1 million from fiscal 2000. We recently signed a
new distribution agreement with Sony Music Video and in addition, are in the
process of implementing new product offerings.

Cost of Revenues. Cost of revenues was $258.1 million in fiscal 2001 as
compared to $221.0 million in fiscal 2000, an increase of $37.1 million, or 17%.
Of this increase, $30.0 million was from our live and televised entertainment
activities and $7.1 million was from our branded merchandise activities. Gross
profit as a percentage of net revenues was 43% in fiscal 2001 as compared to 42%
in fiscal 2000.

Live and Televised Entertainment. The cost of revenues to create and
distribute our live and televised entertainment was $187.7 million in fiscal
2001 as compared to $157.7 million in fiscal 2000, an increase of $30.0 million,
or 19%. Of the $30.0 million increase, $13.0 million was due to increased
television costs resulting in part from the full year impact of WWF
SmackDown!(TM) and from WWF Sunday Night Heat(R), which began broadcasting live
from WWF New York(TM) in October 2000. Our television costs include, among other
things, production costs, staff related expenses, stagehands and freelance
crews. Minimum advertising guarantees increased by $5.3 million due
substantially to our new contract with UPN. In addition, $2.5 million was due to
an increase in fees paid to our performers and $3.5 million was due to increased
travel costs due primarily to our leased corporate jet. Additionally, $1.7
million was due to an increase in arena rental charges which are directly
related to our increased event revenues. Gross profit as a percentage of net
revenues was 44% for fiscal 2001 as compared to 41% for fiscal 2000. The gross
profit percentage increase of 3% was due to our increased rights fees due to our
new deal with Viacom, guest performer costs which were incurred only in fiscal
2000 and the additional number of prior year pay-per-view buys for which the
associated costs have been substantially absorbed in the prior year, partially
offset by higher television costs.

Branded Merchandise. The cost of revenues to market and promote our
branded merchandise was $70.4 million in fiscal 2001 as compared to $63.3
million in fiscal 2000, an increase of $7.1 million, or 11%. Of this $7.1
million increase in cost of revenues, $8.2 million was due to the cost of
revenues associated with our first year of operations of WWF New York(TM).
During fiscal 2001, we continued to build the infrastructure of our new media
business and as a result, technical and content staff related expenses accounted
for the majority of the $5.1 million increase in this business. Additionally,
talent royalties and paper, printing and engraving costs accounted for a
majority of the $1.6 million increase in merchandise and $1.3 million increase
in publishing, respectively. These increases were offset partially by decreases
in the cost of revenues from our licensing and home video businesses of $7.3
million and $2.5 million, respectively, due to decreased revenues in both of
these businesses. Gross profit as a percentage of net revenues was 42% for
fiscal 2001 as compared to 44% in fiscal 2000, due to the change in the overall
mix of products.

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Stock Option and Other Non-Cash Charges. In accordance with the provisions
set forth in the Statement of Financial Accounting Standard No. 123, "Accounting
for Stock-Based Compensation" and Emerging Issues Task Force Issue No. 96-18,
"Accounting for Equity Instruments That Are Issued to Other Than Employees for
Acquiring, or in Conjunction with Selling, Goods or Services," we recorded a
third quarter fiscal 2001 non-cash charge of approximately $0.8 million ($0.5
million, net of tax) relating to the granting of stock options to certain
performers who are independent contractors. In fiscal 2000, we recorded a
non-cash charge of approximately $6.0 million ($3.7 million, net of tax)
relating to the granting of stock options to performers who are independent
contractors in conjunction with our October 1999 initial public offering.
Additionally, in April 2000, we entered into a non-forfeitable agreement with
Viacom whereby Viacom acquired approximately 2.3 million newly issued shares of
our Class A common stock at $13 per share, which resulted in a fourth quarter
fiscal 2000 non-cash charge of $9.3 million ($5.7 million, net of tax).

Selling, General and Administrative Expenses. Selling, general and
administrative expenses, excluding a $7.0 million settlement of an outstanding
lawsuit, were $98.0 million in fiscal 2001 as compared to $71.1 million in
fiscal 2000, an increase of $26.9 million, or 38%. Fiscal 2001 was our first
year of operations for WWF New York. SG&A associated with this business was $8.5
million. We have continued to develop our infrastructure to support our rapid
growth and as a result, we increased the number of employees to 434 as of July
3, 2001 from 362 at the year ago period, accounting for a $7.4 million increase
in staff related and travel and entertainment expenses. The increase in travel
and entertainment expenses related to our expanded marketing and promotional
activities. During fiscal 2001, we instituted a number of new marketing
initiatives which accounted for a majority of our increase in consulting fees of
$3.6 million. To further develop our talent we increased the number of
developmental camps at an increased cost of $1.1 million. We incurred increased
professional fees of $1.8 million primarily related to litigation. Selling,
general and administrative expenses as a percentage of net revenues, excluding
the $7.0 million settlement, was 21% for fiscal 2001 as compared to 19% for
fiscal 2000.

Depreciation and Amortization. Depreciation and amortization expense was
$7.2 million in fiscal 2001 as compared to $2.5 million in fiscal 2000. The
increase of $4.7 million reflects the increased spending on capital projects, a
write-off of certain fixed assets and depreciation associated with fixed assets
of WWF New York(TM).

Interest Expense. Interest expense was $0.9 million in fiscal 2001 as
compared to $2.2 million in fiscal 2000. The decrease of $1.3 million was
primarily due to the paydown in full as April 30, 2000 of a $32.0 million note
that we issued to our former sole stockholder. This note, issued on June 30,
1999, was unsecured and accrued interest at 5%.

Interest and Other Income, net. Interest and other income, net was $15.9
million in fiscal 2001 as compared to $7.6 million in fiscal 2000. The increase
of $8.3 million was primarily due to increased interest income resulting from
significantly higher cash and short-term investment balances in fiscal 2001 and
higher average interest rates. Our average cash and short-term investment
balance for fiscal 2001 was approximately $250.0 million as compared to
approximately $180.0 million for fiscal 2000. In addition, $1.2 million of the
increase in interest and other income was due to a gain on the sale of our
property in Las Vegas, Nevada.

Provision for Income Taxes. The provision for income taxes was $37.1
million in fiscal 2001 as compared to $15.2 million in fiscal 2000. Our
effective tax rate was approximately 37.1% for fiscal 2001 as compared to an
effective tax rate of approximately 20.3% for fiscal 2000, which was based upon
the number of days during fiscal 2000 that we were a Subchapter S Corporation
and the number of days we were a C Corporation. Concurrent with our initial
public offering in October 1999, our tax status was changed from a Subchapter S
Corporation to a Subchapter C Corporation. As a Subchapter C Corporation, we are
directly responsible for all federal, state and foreign income taxes.

Discontinued Operations. The loss from discontinued operations of the
XFL(TM) for fiscal 2001 was $46.9 million, net of minority interest and income
taxes, as compared to a loss of $0.7 million in fiscal 2000. Included in this
net loss was a loss from operations of $31.3 million and an estimated loss on
the shutdown of $15.6 million. The estimated shutdown costs consist primarily of
staff, lease and labor obligations, write-offs of certain fixed assets and
accounts receivable and inventory write downs. On June 12, 2000, NBC purchased
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approximately 2.3 million newly issued shares of our Class A common stock at $13
per share for a total investment of $30.0 million. As a result of the stock
purchase, we recorded a non-cash charge of $10.7 million, which was being
amortized over 30 months. Amortization of $3.7 million during fiscal 2001 was
reflected in Discontinued Operations. As a result of our decision to discontinue
operations of the XFL(TM), we wrote off the remaining unamortized asset of $7.0
million which was also reflected in Discontinued Operations.

Fiscal Year Ended April 30, 2000 compared to Fiscal Year Ended April 30, 1999

Net Revenues. Net revenues were $379.3 million in fiscal 2000 as compared
to $251.5 million in fiscal 1999, an increase of $127.8 million, or 51%. Of this
increase, $95.4 million was from our live and televised entertainment activities
and $32.4 million was from our branded merchandise activities.

Live and Televised Entertainment. Net revenues were $265.5 million in
fiscal 2000 as compared to $170.1 million in fiscal 1999, an increase of $95.4
million, or 56%. Revenues from the sale of advertising time and sponsorships
increased by $47.8 million in fiscal 2000 as a result of improved ratings for
our shows, the full year impact of our agreement with USA, and a new contract on
broadcast television with UPN for WWF SmackDown!(TM), both of which provided us
with the right to sell a substantial majority of the advertising time in the
respective programs. Pay-per-view revenues increased $25.4 million in fiscal
2000, which resulted from an increase of 1.5 million in pay-per-view buys to
approximately 6.9 million in fiscal 2000 from approximately 5.4 million.
Included in the 6.9 million buys for fiscal 2000 were 0.8 million buys related
to prior year events. Revenues from attendance at our live events increased by
$19.3 million in fiscal 2000 as compared to fiscal 1999, of which $5.2 million
was due to an increase in attendance and $14.1 million was due to an increase in
average ticket prices.

Branded Merchandise. Net revenues were $113.8 million in fiscal 2000 as
compared to $81.4 million in fiscal 1999, an increase of $32.4 million, or 40%.
This increase was due primarily to increases in licensing revenues of $18.1
million, new media revenues of $7.5 million, publishing revenues of $4.0 million
and home video revenues of $2.0 million. The increase in licensing resulted from
the success of World Wrestling Federation branded toys by Jakks Pacific, Inc.,
and the launch of Wrestlemania 2000 for Nintendo 64 by THQ/Jakks Pacific Inc.,
the sale of World Wrestling Federation video games by Acclaim, the release of
The Rock(TM) and Mankind's(TM) autobiographies by ReganBooks and increased
international licensing revenues. The increase in new media revenues reflects
the increased traffic on our Internet websites and the addition in fiscal 2000
of a dedicated advertising sales force. The increase in publishing revenues was
due to the increased circulation of our two monthly magazines to approximately
6.8 million units in fiscal 2000 from approximately 5.8 million units in fiscal
1999. The increase in home video revenues was due to an increase in
international licensing of our home video units and to a lesser extent, the
introduction of DVD units in fiscal 2000.

Cost of Revenues. Cost of revenues was $221.0 million in fiscal 2000 as
compared to $147.0 million in fiscal 1999, an increase of $74.0 million, or 50%.
Of this increase, $59.2 million was from our live and televised entertainment
activities and $14.8 million was from our branded merchandise activities. Gross
profit as a percentage of net revenues was 42% in both fiscal 2000 and fiscal
1999.

Live and Televised Entertainment. The cost of revenues to create and
distribute our live and televised entertainment was $157.7 million in fiscal
2000 as compared to $98.5 million in fiscal 1999, an increase of $59.2 million,
or 60%. Of the $59.2 million increase, $30.3 million related to the minimum
guarantees associated with the full year impact of our contract with USA Network
and our new contract with UPN, fees paid to our guest celebrities and fees paid
to our performers which are directly related to our increased event revenues. Of
the remaining $28.9 million, $7.8 million was due to an increase in television
production costs, due in part to our new program, WWF SmackDown!(TM), $6.7
million was due to increased arena rental charges and taxes, which are directly
related to our increased event revenues, $4.1 million was due to increased
sponsorship expense and $2.6 million was due to an increase in pay-per-view and
live event advertising costs. Gross profit as a percentage of net revenues was
41% in fiscal 2000 as compared to 42% in fiscal 1999.

Branded Merchandise. The cost of revenues to market and promote our
branded merchandise was $63.3 million in fiscal 2000 as compared to $48.5
million in fiscal 1999, an increase of $14.8 million, or 31%. The increase in
cost of revenues was due primarily to an increase of $12.6 million related to
licensing, $2.5 million
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related to publishing and $1.0 million related to new media which were all
partially offset by a decrease in merchandise. The increase in licensing was due
to a change in product mix which resulted in increased royalties paid to our
performers and $2.9 million incurred in connection with the operations of our
National Hot Rod Association ("NHRA") racing team. The increase in publishing
and new media costs were related to the increased revenues in these areas. The
decrease in merchandise cost of sales was due to the mix of product sold and a
lower provision for obsolete inventory in fiscal 2000. Gross profit as a
percentage of net revenues increased to 44% in fiscal 2000 from 40% in fiscal
1999. The increase in gross profit percentage was due to the new media revenues
increase of $7.5 million, which favorably impacted our overall gross profit
percentage, partially offset by the impact of the increased royalty rate for
licensed product and NHRA expenditures.

Stock Option and Other Non-Cash Charges. In accordance with the provisions
set forth in the Statement of Financial Accounting Standard No. 123, "Accounting
for Stock-Based Compensation" and Emerging Issues Task Force Issue No. 96-18,
"Accounting for Equity Instruments That Are Issued to Other Than Employees for
Acquiring, or in Conjunction with Selling, Goods or Services," we recorded a
second quarter fiscal 2000 non-cash charge of approximately $6.0 million ($3.7
million, net of tax) relating to the granting of stock options to certain
performers who are independent contractors. The options were granted in
conjunction with our initial public offering. Additionally, in April 2000, we
entered into a non-forfeitable agreement with Viacom whereby Viacom acquired
approximately 2.3 million newly issued shares of our Class A common stock at $13
per share, which resulted in a fourth quarter fiscal 2000 non-cash charge of
$9.3 million ($5.7 million, net of tax).

Selling, General and Administrative Expenses. Selling, general and
administrative expenses were $71.1 million in fiscal 2000 as compared to $45.5
million in fiscal 1999, an increase of $25.6 million, or 56%. Of this increase,
$11.7 million was due to an increase in staff-related expenses. The number of
full-time personnel as of April 30, 2000 was 343 as compared to 277 full-time
personnel as of April 30, 1999, an increase of 66 employees. The increase in
personnel was related to the development of our infrastructure to support our
rapid growth. In addition, the chairman and the chief executive officer were
paid in accordance with the terms of their employment contracts, which became
effective July 1, 1999. Of the remaining $13.9 million increase, $5.9 million
related to increased professional fees and $4.8 million related to increased
advertising and promotion costs. Selling, general and administrative expenses as
a percentage of net revenues was 19% in fiscal 2000 as compared to 18% in fiscal
1999.

Depreciation and Amortization. Depreciation and amortization expense was
$2.5 million in fiscal 2000 as compared to $1.9 million in fiscal 1999. The
increase of $0.6 million reflects increased spending on capital projects.

Interest Expense. Interest expense was $2.2 million in fiscal 2000 as
compared to $1.1 million in fiscal 1999. The increase of $1.1 million was due to
interest related to the $32.0 million, 5% interest bearing note issued to our
then sole stockholder on June 29, 1999 for estimated federal and state income
taxes payable by him resulting from our Subchapter S status. As of April 30,
2000, we paid the note in full, plus an additional $8.4 million, which
represented the estimated income tax payments required by the applicable federal
and state taxing authorities.

Interest and Other Income, Net. Interest and other income, net was $7.6
million in fiscal 2000 as compared to $2.1 million in fiscal 1999. The increase
of $5.5 million was primarily due to increased interest income resulting from
significantly higher cash and short-term investment balances in fiscal 2000.

Provision for Income Taxes. Concurrent with our initial public offering,
our tax status was changed from a Subchapter S Corporation to a Subchapter C
Corporation. As a Subchapter C Corporation, we are directly responsible for all
federal, state and foreign income taxes. For the year ended April 30, 2000, we
were taxed on our income at an effective rate of approximately 20.3% based upon
the number of days during the fiscal year that we were a Subchapter S
Corporation and the number of days we were a Subchapter C Corporation. As a
Subchapter S Corporation we had to provide for only certain state and foreign
income taxes. The liability for federal and certain state income taxes was the
responsibility of our then sole stockholder. As a consequence to this change in
tax status, our provision for income taxes substantially increased to $15.2
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million in fiscal 2000 as compared to $1.9 million in fiscal 1999. On a pro
forma basis, as a C Corporation, federal, state and foreign income taxes would
have been $29.1 million and $22.2 million for fiscal 2000 and 1999,
respectively.

LIQUIDITY AND CAPITAL RESOURCES

During fiscal 2001, our cash and cash equivalents and short-term investment
balances increased by $30.7 million to $239.7 million.

Cash flows (used in) provided by operating activities for the fiscal years
ended April 30, 2001, 2000 and 1999 were $(22.7) million, $67.6 million and
$57.6 million, respectively. The decrease in cash from operations results from
our loss from the discontinued operations of the XFL(TM). Excluding the impact
of the XFL(TM), cash provided by continuing operations was $62.7 million for the
fiscal year ended April 30, 2001. Working capital, consisting of current assets
less current liabilities, was $255.2 million as of April 30, 2001 and $219.8
million as of April 30, 2000.

Cash flows used in investing activities for the fiscal years ended April
30, 2001, 2000 and 1999 were $141.5 million, $122.0 million and $14.6 million,
respectively. As of April 30, 2001 we had approximately $194.6 million invested
primarily in short-term corporate and government obligations and mortgage backed
securities. The maturities of these instruments are generally for a term of
three months or shorter. The purchase of property and equipment of $27.6 million
in fiscal 2001 was related to the purchase of equipment for our television and
post production facility, equipment for WWF New York(TM), and the modifications
to our corporate headquarters in order to accommodate our increase in personnel.
Capital expenditures for fiscal 2002, are expected to be approximately $20.0
million, which includes television equipment, computer equipment and leasehold
improvements.

In May, 2000, we purchased the WWF New York(TM) entertainment complex in
Times Square for approximately $24.5 million. In addition, we spent
approximately $9.5 million on audio/visual equipment for our television studio
within the complex and for other leasehold improvements required.

In March 2001, we acquired certain assets of the WCW(R) brand, including
the trade name, tape library and other intangible assets from a subsidiary of
AOL Time Warner for approximately $2.5 million. In addition, we incurred certain
related costs to acquire these assets of approximately $1.8 million.

Cash flows provided by (used in) financing activities for the fiscal years
ended April 30, 2001, 2000 and 1999 were $107.5 million, $110.5 million, and
$(6.1) million, respectively. In fiscal 2001, we sold 2.3 million newly issued
shares of our Class A common stock to NBC for $30.0 million and 2.3 million
newly issued shares of our Class A common stock to Viacom for $30.0 million.
Through July 3, 2001, NBC and we funded an aggregate of approximately $105.8
million for XFL(TM) operations and we expect to be required to advance
additional funds for remaining shutdown liabilities. Based on current
assumptions, we expect the full amount of funding to be approximately $116.0
million, before any applicable tax benefits.

On December 12, 1997, we entered into a mortgage loan agreement with GMAC
Commercial Mortgage Corp., which was subsequently assigned to Citicorp Real
Estate, Inc., under which we borrowed $12.0 million at an annual interest rate
of 7.6% to be repaid in monthly installments over 15 years. This term loan is
collateralized by our executive offices and television production studio, both
of which are located in Stamford, Connecticut. The term loan may not be prepaid
in whole or in part prior to and through January 1, 2006. Thereafter, the term
loan may be prepaid in whole with the payment of a premium. As of July 3, 2001,
the outstanding principal amount of the term loan was $10.3 million.

We have entered into various contracts under which we are required to make
guaranteed payments, including:

- Performer contracts providing for future minimum guaranteed payments.

- Television distribution agreements with Viacom affiliates UPN, MTV and
TNN that provide for the payment of the greater of a fixed percentage of
the revenues from the sale of television advertising time or an annual
minimum payment. Our agreement for UPN programming covers two hours of
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programming every week and expires in September 2003. Our agreement for TNN and
MTV programming covers five hours of programming every week and expires in
September 2005.

- Advertising commitments with AOL Time Warner over a three year period,
commencing July 1, 2001.

- Various operating leases related to our sales offices, warehouse space
and corporate jet.

- Employment contract with Vincent K. McMahon, which is for a seven-year
term and, in addition, a talent contract which is co-terminous with his
employment contract.

- Employment contract with Linda E. McMahon which is for a four-year term.

- Employment contracts with certain executives of the Company, the terms of
which are generally for a period of two to three years.

Our aggregate minimum payment obligations under these contracts is $55.3
million, $53.5 million, and $36.9 million for fiscal 2002, 2003 and 2004,
respectively. We anticipate that all of these obligations will be satisfied out
of cash flows from operating activities.

We believe that cash generated from operations and from existing cash and
short-term investments will be sufficient to meet our cash needs over the next
twelve months for working capital (including remaining estimated shutdown costs
of the XFL(TM)), capital expenditures and strategic investments. However, during
such period or thereafter, depending on the size and number of the projects and
investments related to our growth strategy, we may require the issuance of debt
and/or additional equity securities.

SEASONALITY

Our operating results are not materially affected by seasonal factors,
however, because we operate on a fiscal calendar, the number of pay-per-view
events recorded in a given quarter may vary. In addition, revenues from our
licensing and direct sale of consumer products, including through our catalogs,
monthly magazines and Internet sites, may vary from period to period depending
on the volume and extent of licensing agreements and marketing and promotion
programs entered into during any particular period of time, as well as the
commercial success of the media exposure of our characters and brand. The timing
of these events as well as the continued introduction of new product offerings
and revenue generating outlets can and will cause fluctuation in quarterly
revenues and earnings.

INFLATION

During the past three fiscal years, inflation has not had a material effect
on our business.

RECENT PRONOUNCEMENTS

In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards ("SFAS") No. 133, as amended by SFAS No. 137
"Accounting for Derivative Instruments and Hedging Activities." The statement
requires the recognition of all derivatives as either assets or liabilities in
the balance sheet and the measurement of those instruments at fair value, and
based on the amendment, is effective for all fiscal quarters of all fiscal years
beginning after June 15, 2000, which, therefore, would require us to adopt such
statement on May 1, 2001. The impact of adoption of this statement would be to
reflect the estimated fair value of certain warrants that we received in
connection with license agreements and would result in an increase to income
from continuing operations of $1.5 million, net of tax. See Note 17 of Notes to
Consolidated Financial Statements.

In December 1999, the Securities and Exchange Commission ("SEC") issued
Staff Accounting Bulletin No. 101 ("SAB 101"), "Revenue Recognition in Financial
Statements". SAB 101 summarizes certain of the SEC's views in applying generally
accepted accounting principles to revenue recognition in financial statements.
As a result of our implementation of SAB 101, as of April 30, 2001, there was no
change to our revenue recognition policies and procedures.

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In July 2001, SFAS No. 141 "Business Combinations" and SFAS No. 142
"Goodwill and Other Intangible Assets" were released. The related statements
address financial accounting and reporting for business combinations and
acquired goodwill and other intangible assets. SFAS No. 141 is effective for all
business combinations initiated after June 30, 2001. SFAS No. 142 is effective
for all fiscal years beginning after December 15, 2001, however early adoption
is permitted. We are required to adopt SFAS No. 142 in fiscal 2003. We are
currently assessing the impact that SFAS No. 142 will have on our financial
position and results of operations.

CAUTIONARY STATEMENT FOR PURPOSES OF THE "SAFE HARBOR" PROVISIONS OF THE PRIVATE
SECURITIES LITIGATION REFORM ACT OF 1995

The Private Securities Litigation Reform Act of 1995 provides a "safe
harbor" for certain statements that are forward-looking and are not based on
historical facts. When used in this Annual Report on Form 10-K, the words "may,"
"will," "could," "anticipate," "plan," "continue," "project," "intend",
"estimate", "believe", "expect" and similar expressions are intended to identify
forward-looking statements, although not all forward-looking statements contain
such words. These statements relate to our future plans, objectives,
expectations and intentions and are not historical facts and accordingly involve
known and unknown risks and uncertainties and other factors that may cause the
actual results or the performance by us to be materially different from future
results or performance expressed or implied by such forward-looking statements.
The following factors, among others, could cause actual results to differ
materially from those contained in forward-looking statements made in this
Annual Report on Form 10-K and in oral statements made by our authorized
officers: (i) our failure to continue to develop creative and entertaining
programs and events would likely lead to a decline in the popularity of our
brand of entertainment, (ii) our failure to retain or continue to recruit key
performers could lead to a decline in the appeal of our storylines and the
popularity of our brand of entertainment, (iii) the loss of the creative
services of Vincent McMahon could adversely affect our ability to create popular
characters and storylines, (iv) our failure to maintain or renew key agreements
could adversely affect our ability to distribute our television and pay-per-view
programming, (v) we may not be able to compete effectively with companies
providing other forms of entertainment and programming, and many of these
competitors have greater financial resources, (vi) we may not be able to protect
our intellectual property rights which could negatively impact our ability to
compete in the sports entertainment market, (vii) a decline in the general
economic conditions or in the popularity of our brand of sports entertainment
could adversely impact our business, (viii) our insurance may not be adequate to
cover liabilities resulting from accidents or injuries, (ix) we may be
prohibited from promoting and conducting our live events if we do not comply
with applicable regulations, (x) we could incur substantial liabilities, or be
required to conduct certain aspects of our business differently, if pending or
future material litigation is resolved unfavorably, (xi) any new or
complementary businesses into which we may expand in the future could adversely
affect our existing businesses, (xii) through his beneficial ownership of a
substantial majority of our Class B common stock, our controlling stockholder
can exercise significant influence over our affairs, and his interests could
conflict with the holders of our Class A common stock, and (xiii) a substantial
number of shares will be eligible for future sale by our current majority
stockholder, and the sale of those shares could lower our stock price. The
forward-looking statements speak only as of the date of this Annual Report on
Form 10-K and undue reliance should not be placed on these statements.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

No information with respect to market risk has been included as it has not
been material to our financial condition or results of operations.

ITEM 8. CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULE

The information required by this item is set forth in the Consolidated
Financial Statements filed with this report.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURES

Not Applicable.

24
27

PART III

The information required by Part III (Items 10-13) is incorporated herein
by reference to the captions "Election of Directors", "Executive Compensation"
and "Security Ownership of Certain Beneficial Owners and Management" in our
definitive proxy statement for our 2001 Annual Meeting of Stockholders.

PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K

(a) The following documents are filed as a part of this report:

1. Financial Statements and Schedule: See index to Financial Statements on
page F-1 of this Report.

2. Exhibits:

EXHIBIT
NO. DESCRIPTION OF EXHIBIT
- ------- ----------------------

3.1 Amended and Restated Certificate of Incorporation of World
Wrestling Federation Entertainment, Inc. (Incorporated by
reference to Exhibit 3.2 to our Registration Statement on
Form S-1 (No. 333-84327)).
3.2 Amended and Restated By-laws of World Wrestling Federation
Entertainment, Inc. (Incorporated by reference to Exhibit
3.4 to our Registration Statement on Form S-1 (No.
333-84327)).
10.1 Form of 1999 Long-Term Incentive Plan (Incorporated by
reference to Exhibit 10.1 to our Registration Statement on
Form S-1 (No. 333-84327)).*
10.2 Employment Agreement with Vincent K. McMahon dated October
14, 1999 (Incorporated by reference to Exhibit 10.2 to our
Registration Statement on Form S-1 (No. 333-84327)).*
10.3 Booking Contract with Vincent K. McMahon, dated February 15,
2000 (Incorporated by reference to Exhibit 10.3 to our
Annual Report on Form 10-K for the fiscal year ended April
30, 2000).*
10.3A Amendment dated July 3, 2001 to Booking Contract with
Vincent K. McMahon (filed herewith).*
10.4 Employment Agreement with Linda E. McMahon dated October 14,
1999 (Incorporated by reference to Exhibit 10.3 to our
Registration Statement on Form S-1 (No. 333-84327)).*
10.5 Booking Contract with Linda E. McMahon, dated February 15,
2000 (Incorporated by reference to Exhibit 10.5 to our
Annual Report on Form 10-K for the fiscal year ended April
30, 2000).*
10.6 Employment Agreement between Titan Sports Inc. and August J.
Liguori, dated as of August 24, 1998 (Incorporated by
reference to Exhibit 10.4 to our Registration Statement on
Form S-1 (No. 333-84327)).*
10.7 Employment Agreement with Stuart C. Snyder, effective June
5, 2000 (Incorporated by reference to Exhibit 10.7 to our
Annual Report on Form 10-K for the fiscal year ended April
30, 2000).*
10.8 License Agreement between Titan Sports Inc. and inDemand,
formerly known as Viewer's Choice L.L.C., dated as of
January 20, 1999 (Incorporated by reference to Exhibit 10.7
to our Registration Statement on Form S-1 (No.
333-84327)).(1)
10.9 License Agreement between United Paramount Network and World
Wrestling Federation Entertainment, Inc., dated as of August
26, 1999 (Incorporated by reference to Exhibit 10.8 to our
Registration Statement on Form S-1 (No. 333-84327)).(2)
10.10 Limited Liability Company Agreement, dated June 12, 2000,
between WWFE Sports, Inc. and NBC-XFL Holding, Inc.
(Incorporated by reference to Exhibit 10.12 to our Annual
Report on Form 10-K for the fiscal year ended April 30,
2000).

25
28

EXHIBIT
NO. DESCRIPTION OF EXHIBIT
- ------- ----------------------

10.11 Registration Rights Agreement, dated June 12, 2000, by and
between NBC-WWFE Holding, Inc. and the Registrant
(Incorporated by reference to Exhibit 10.13 to our Annual
Report on Form 10-K for the fiscal year ended April 30,
2000).
10.12 Registration Rights Agreement, dated July 28, 2000, by and
between Viacom Inc. and the Registrant (Incorporated by
reference to Exhibit 10.14 to our Annual Report on Form 10-K
for the fiscal year ended April 30, 2000).
10.13 Open End Mortgage Deed, Assignment of Rents and Security
Agreement between TSI Realty Company and GMAC Commercial
Mortgage Corp. (assigned to Citicorp Real Estate, Inc.),
dated as of December 12, 1997 (Incorporated by reference to
Exhibit 10.11 to our Registration Statement on Form S-1 (No.
333-84327)).
10.14 Promissory Note issued by TSI Realty Company to GMAC
Commercial Mortgage Corp. (assigned to Citicorp Real Estate,
Inc.), dated as of December 12, 1997 (Incorporated by
reference to Exhibit 10.12 to our Registration Statement on
Form S-1 (No. 333-84327)).
10.15 Environmental Indemnity Agreement among TSI Realty Company,
Titan Sports Inc. and GMAC Commercial Mortgage Corp.
(assigned to Citicorp Real Estate, Inc.), dated as of
December 12, 1997 (Incorporated by reference to Exhibit
10.13 to our Registration Statement on Form S-1 (No.
333-84327)).
10.16 Assignment of Leases and Rents between TSI Realty Company
and GMAC Commercial Mortgage Corp. (assigned to Citicorp
Real Estate, Inc.), dated as of December 12, 1997
(Incorporated by reference to Exhibit 10.14 to our
Registration Statement on Form S-1 (No. 333-84327)).
10.17 Form of Tax Indemnification Agreement among World Wrestling
Federation Entertainment, Inc., Stephanie Music Publishing,
Inc., Vincent K. McMahon and the Vincent K. McMahon
Irrevocable Deed of Trust, dated as of June 30, 1999
(Incorporated by reference to Exhibit 10.15 to our
Registration Statement on Form S-1 (No. 333-84327)).
10.18 Agreement between WWF-World Wide Fund for Nature and Titan
Sports, Inc. dated January 20, 1994 (Incorporated by
reference to Exhibit 10.16 to our Registration Statement on
Form S-1 (No. 333-84327)).
21.1 List of Significant Subsidiaries (Incorporated by reference
to Exhibit 21.1 to our Registration Statement on Form S-1
(No. 333-84327)).
23.1 Consent of Deloitte & Touche LLP (filed herewith).

- ---------------
* Indicates management contract or compensatory plan or arrangement.

(1) Certain portions of this exhibit have been omitted based upon a request for
confidential treatment filed by the Company with the Secretary of the
Commission on August 25, 1999, as amended on October 8, 1999. The omitted
portion of this exhibit has been separately filed with the Commission.

(2) Certain portions of this exhibit have been omitted based upon a request for
confidential treatment filed by the Company with the Secretary of the
Commission on September 14, 1999 as amended on October 8, 1999. The Omitted
portion of this exhibit has been separately filed with Commission.

(b) Reports on Form 8-K:

The Registrant filed a report on Form 8-K dated April 11, 2001 under Item
5, Other Events.

26
29

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereto duly authorized.

World Wrestling Federation
Entertainment, Inc.
(Registrant)

Dated: July 27, 2001
By: /s/ AUGUST J. LIGUORI
------------------------------------
August J. Liguori
Executive Vice President, Chief
Financial
Officer and Treasurer

Dated: July 27, 2001
By: /s/ FRANK G. SERPE
------------------------------------
Frank G. Serpe
Senior Vice President, Finance and
Chief Accounting Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.

SIGNATURE TITLE OR CAPACITY DATE
--------- ----------------- ----

/s/ VINCENT K. MCMAHON Chairman of the Board of Directors July 27, 2001
- ---------------------------------------------------
Vincent K. McMahon

/s/ LINDA E. MCMAHON Chief Executive Officer and July 27, 2001
- --------------------------------------------------- Director
Linda E. McMahon

/s/ LOWELL P. WEICKER JR. Director July 27, 2001
- ---------------------------------------------------
Lowell P. Weicker Jr.

/s/ DAVID KENIN Director July 27, 2001
- ---------------------------------------------------
David Kenin

/s/ JOSEPH PERKINS Director July 27, 2001
- ---------------------------------------------------
Joseph Perkins

/s/ STUART C. SNYDER President, Chief Operating Officer July 27, 2001
- --------------------------------------------------- and Director
Stuart C. Snyder

/s/ AUGUST J. LIGUORI Executive Vice President, Chief July 27, 2001
- --------------------------------------------------- Financial Officer, Treasurer and
August J. Liguori Director

27
30

WORLD WRESTLING FEDERATION ENTERTAINMENT, INC.

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

PAGE
----

Independent Auditors' Report................................ F-2
Consolidated Balance Sheets as of April 30, 2001 and 2000... F-3
Consolidated Statements of Income for the years ended April
30, 2001, 2000 and 1999................................... F-4
Consolidated Statements of Stockholders' Equity and
Comprehensive Income for the years ended April 30, 2001,
2000 and 1999............................................. F-5
Consolidated Statements of Cash Flows for the years ended
April 30, 2001, 2000 and 1999............................. F-6
Notes to Consolidated Financial Statements.................. F-7
Schedule II -- Valuation and Qualifying Accounts............ F-24

F-1
31

INDEPENDENT AUDITORS' REPORT

To the Board of Directors and Stockholders of
World Wrestling Federation Entertainment, Inc.:

We have audited the accompanying consolidated balance sheets of World
Wrestling Federation Entertainment, Inc. (the "Company") as of April 30, 2001
and 2000 and the related consolidated statements of income, stockholders' equity
and comprehensive income and cash flows for each of the three years in the
period ended April 30, 2001. Our audits also included the financial statement
schedule listed in the index at Item 14(a)1. These financial statements and
financial statement schedule are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements and
financial statement schedule based on our audits.

We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

In our opinion, such consolidated financial statements present fairly, in
all material respects, the consolidated financial position of the Company as of
April 30, 2001 and 2000 and the consolidated results of its operations and its
consolidated cash flows for each of the three years in the period ended April
30, 2001 in conformity with accounting principles generally accepted in the
United States of America. Also, in our opinion, such financial statement
schedule, when considered in relation to the basic consolidated financial
statements taken as a whole, presents fairly in all material respects the
information set forth therein.

/s/ Deloitte and Touche LLP
Stamford, Connecticut

June 20, 2001

F-2
32

WORLD WRESTLING FEDERATION ENTERTAINMENT, INC.

CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS)

AS OF APRIL 30,
--------------------
2001 2000
-------- --------

ASSETS
Current Assets:
Cash and cash equivalents................................. $ 45,040 $101,779
Short-term investments.................................... 194,631 107,213
Accounts receivable (less allowance for doubtful accounts
of $1,868 and $1,085 as of April 30, 2001 and 2000,
respectively).......................................... 72,337 60,424
Inventory, net............................................ 4,918 2,752
Prepaid expenses and other current assets................. 23,581 6,084
Assets held for sale...................................... -- 9,600
-------- --------
Total current assets................................... 340,507 287,852
Property and Equipment -- Net............................... 83,521 41,484
Other Assets................................................ 19,064 7,696
-------- --------
Total Assets...................................... $443,092 $337,032
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Current portion of long-term debt......................... $ 556 $ 1,017
Accounts payable.......................................... 19,490 17,690
Accrued expenses and other liabilities.................... 38,944 37,168
Deferred income........................................... 14,506 12,220
Net liabilities of discontinued operations................ 11,834 --
-------- --------
Total current liabilities.............................. 85,330 68,095
Long-Term Debt.............................................. 9,903 10,400
Commitments and Contingencies (Note 12)
Stockholders' Equity:
Class A common stock: ($.01 par value; 180,000,000 shares
authorized; 16,265,384 shares issued as of April 30,
2001 and 11,500,000 shares issued as of April 30,
2000).................................................. 162 115
Class B Common Stock: ($.01 par value; 60,000,000 shares
authorized; 56,667,000 shares issued as of April 30,
2001 and 2000)......................................... 567 567
Additional paid-in capital................................ 296,525 222,535
Accumulated other comprehensive (loss) income............. (597) 105
Retained earnings......................................... 51,202 35,215
-------- --------
Total stockholders' equity............................. 347,859 258,537
-------- --------
Total Liabilities and Stockholders' Equity........ $443,092 $337,032
======== ========

See Notes to Consolidated Financial Statements.
F-3
33

WORLD WRESTLING FEDERATION ENTERTAINMENT, INC.

CONSOLIDATED STATEMENTS OF INCOME
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

FISCAL YEAR ENDED APRIL 30,
--------------------------------
2001 2000 1999
-------- -------- --------

Net revenues............................................... $456,043 $379,310 $251,474
Cost of revenues (excluding performer stock option charges
of $760 and $6,020 for fiscal 2001 and 2000,
respectively)............................................ 258,103 220,980 147,026
Stock option and other non-cash charges (Note 13).......... 760 15,330 --
Selling, general and administrative expenses............... 105,019 71,095 45,521
Depreciation and amortization.............................. 7,180 2,544 1,946
-------- -------- --------
Operating income........................................... 84,981 69,361 56,981
Interest expense........................................... 856 2,155 1,125
Interest and other income, net............................. 15,916 7,571 2,117
-------- -------- --------
Income from continuing operations before income taxes...... 100,041 74,777 57,973
Provision for income taxes (Note 11)....................... 37,144 15,200 1,943
-------- -------- --------
Income from continuing operations.......................... 62,897 59,577 56,030
-------- -------- --------
Discontinued Operations (Note 19):
Loss from XFL operations, net of taxes of $17,679 and
$410 for fiscal 2001 and 2000, respectively and
minority interest..................................... (31,293) (669) --
Estimated loss on shutdown of the XFL, net of taxes of
$5,265 and minority interest.......................... (15,617) -- --
-------- -------- --------
Loss from discontinued operations........................ (46,910) (669) --
-------- -------- --------
Net income................................................. $ 15,987 $ 58,908 $ 56,030
======== ======== ========
Earnings from continuing operations per common share:
basic and diluted........................................ $ 0.87 $ 0.95 $ 0.99
-------- -------- --------
Discontinued Operations -- basic and diluted:
Loss from XFL operations per common share................ (0.43) (0.01) --
Estimated loss on shutdown per common share.............. (0.22) -- --
-------- -------- --------
Loss from discontinued operations per common share....... (0.65) (0.01) --
-------- -------- --------
Earnings per common share:
basic and diluted........................................ $ 0.22 $ 0.94 $ 0.99
======== ======== ========
Unaudited Pro Forma Information (Note 3):
Historical income from continuing operations before income
taxes.................................................... $ 74,777 $ 57,973
Pro forma adjustment other than income taxes............... 427 2,515
-------- --------
Pro forma income from continuing operations before income
taxes.................................................... 74,350 55,458
Pro forma provision for income taxes....................... 29,132 22,227
-------- --------
Pro forma income from continuing operations................ $ 45,218 $ 33,231
======== ========
Pro forma earnings from continuing operations per common
share:
basic and diluted........................................ $ 0.72 $ 0.59
======== ========

See Notes to Consolidated Financial Statements
F-4
34

WORLD WRESTLING FEDERATION ENTERTAINMENT, INC.

CONSOLIDATED STATEMENTS OF
STOCKHOLDERS' EQUITY AND COMPREHENSIVE INCOME
(DOLLARS AND SHARES IN THOUSANDS)

ACCUMULATED
COMMON STOCK ADDITIONAL OTHER
--------------- PAID-IN COMPREHENSIVE RETAINED
SHARES AMOUNT CAPITAL INCOME (LOSS) EARNINGS TOTAL
------ ------ ---------- ------------- -------- --------

Balance, May 1, 1998................ 56,667 $567 $ 1 $ (99) $ 22,228 $ 22,697

Comprehensive income:
Net income........................ -- -- -- 56,030 56,030
Translation adjustment............ -- -- 12 -- 12
--------
Total comprehensive income.......... 56,042
S Corporation distributions......... -- -- -- (6,479) (6,479)
------ ---- -------- ----- -------- --------
Balance, April 30, 1999............. 56,667 567 1 (87) 71,779 72,260

Comprehensive Income:
Net income........................ -- -- -- 58,908 58,908
Translation adjustment............ -- -- (2) -- (2)
Unrealized holding gain, net of
tax............................ -- -- 194 -- 194
--------
Total comprehensive income.......... 59,100
Net proceeds from initial public
offering.......................... 11,500 115 181,700 -- -- 181,815
Stock issuance costs................ -- (2,492) -- -- (2,492)
Stock option and other non-cash
charges........................... -- 15,330 -- -- 15,330
S Corporation earnings retained..... -- 27,996 -- (27,996) --
S Corporation distributions......... -- -- -- (67,476) (67,476)
------ ---- -------- ----- -------- --------
Balance, April 30, 2000............. 68,167 682 222,535 105 35,215 258,537

Comprehensive income:
Net income........................ -- -- -- 15,987 15,987
Translation adjustment............ -- -- (175) -- (175)
Unrealized holding loss, net of
tax............................ -- -- (527) -- (527)
--------
Total comprehensive income.......... 15,285
Issuance of common stock (Note
13)............................... 4,615 46 59,954 -- -- 60,000
Stock issuance costs................ -- (534) -- -- (534)
Non-cash stock issuance charge (Note
13)............................... -- 10,673 -- -- 10,673
Stock option charges................ -- 1,092 -- -- 1,092
Exercise of stock options........... 150 1 2,549 -- -- 2,550
Tax benefit from exercise of stock
options........................... -- 256 -- -- 256
------ ---- -------- ----- -------- --------
Balance, April 30, 2001............. 72,932 $729 $296,525 $(597) $ 51,202 $347,859
====== ==== ======== ===== ======== ========

See Notes to Consolidated Financial Statements
F-5
35

WORLD WRESTLING FEDERATION ENTERTAINMENT, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)

YEAR ENDED APRIL 30,
----------------------------------
2001 2000 1999
--------- --------- --------

OPERATING ACTIVITIES:
Net income................................................ $ 15,987 $ 58,908 $ 56,030
Adjustments to reconcile net income to net cash (used in)
provided by operating activities:
Loss from discontinued operations......................... 46,910 669 --
Gain on sale of property in Las Vegas..................... (1,249) -- --
Depreciation and amortization............................. 7,180 2,544 1,946
Amortization of deferred income........................... (407) -- --
Provision for doubtful accounts........................... 1,239 113 920
Provision for inventory obsolescence...................... 803 1,174 1,530
Stock option and other non-cash charges................... 760 15,330 --
Provision for deferred income taxes....................... 2,235 (6,892) (483)
Changes in assets and liabilities (net of effects of
acquisition of WWF New York)
Accounts receivable..................................... (13,128) (23,027) (17,208)
Inventory............................................... (2,484) (987) (1,842)
Prepaid expenses and other current assets............... (3,109) (1,553) (1,522)
Accounts payable........................................ 1,086 4,744 (1,937)
Accrued expenses and other liabilities.................. 7,350 16,538 15,107
Deferred income......................................... (454) 1,128 5,105
--------- --------- --------
Net cash provided by continuing operations........... 62,719 68,689 57,646
Net cash used in discontinued operations............. (85,460) (1,079) --
--------- --------- --------
Net cash (used in) provided by operating
activities......................................... (22,741) 67,610 57,646
--------- --------- --------
INVESTING ACTIVITIES:
Purchases of property and equipment....................... (27,593) (15,068) (3,756)
Purchase of WWF New York.................................. (24,500) -- --
Acquisition of WCW (including certain related costs of
acquisition)............................................ (4,155) -- --
Purchase of short-term investments........................ (87,794) (106,964) --
Purchase of property in Las Vegas......................... -- -- (10,878)
Net proceeds from the sale of property in Las Vegas....... 11,305 -- --
--------- --------- --------
Net cash used in continuing operations............... (132,737) (122,032) (14,634)
Net cash used in discontinued operations............. (8,734) -- --
--------- --------- --------
Net cash used in investing operations................ (141,471) (122,032) (14,634)
--------- --------- --------
FINANCING ACTIVITIES:
Proceeds from long-term debt.............................. -- -- 1,563
Repayments of long-term debt.............................. (959) (1,373) (1,166)
S Corporation distributions............................... -- (67,476) (6,479)
Net proceeds from initial public offering................. -- 181,815 --
Proceeds from issuance of Class A Common Stock............ 60,000 -- --
Proceeds from exercise of stock options................... 2,551 -- --
Stock issuance costs...................................... (534) (2,492) --
--------- --------- --------
Net cash provided by (used in) continuing
operations......................................... 61,058 110,474 (6,082)
Net cash provided by discontinued operations......... 46,415 -- --
--------- --------- --------
Net cash provided by (used in) financing
activities......................................... 107,473 110,474 (6,082)
--------- --------- --------
Net (Decrease) Increase in Cash and Cash Equivalents........ (56,739) 56,052 36,930
Cash and Cash Equivalents, Beginning of Period.............. 101,779 45,727 8,797
--------- --------- --------
Cash and Cash Equivalents, End of Period.................... $ 45,040 $ 101,779 $ 45,727
========= ========= ========
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid during the period for income taxes, net of
refunds................................................. $ 33,646 $ 19,697 $ 644
Cash paid during the period for interest.................. $ 855 $ 2,153 $ 1,143
SUPPLEMENTAL NON-CASH INFORMATION:
Receipt of warrants (Note 17)............................. $ 2,884 $ 7 $ 2,359

See Notes to Consolidated Financial Statements
F-6
36

WORLD WRESTLING FEDERATION ENTERTAINMENT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)

1. BASIS OF PRESENTATION AND BUSINESS DESCRIPTION

The accompanying consolidated financial statements include the accounts of
World Wrestling Federation Entertainment, Inc., and its wholly owned
subsidiaries, TSI Realty Company, WWF Hotel & Casino Ventures, LLC, World
Wrestling Federation Entertainment Canada, Inc., Stephanie Music Publishing,
Inc., WWFE Sports, Inc., WCW, Inc., Event Services, Inc., WWF New York Inc. and
the Company's majority-owned subsidiary Titan/Shane Partnership (collectively
the "Company"). WWFE Sports, Inc. owns 50% and has operating control of XFL,
LLC, a professional football league, which was a venture with National
Broadcasting Company ("NBC"). In early May 2001, the Company formalized its
decision to discontinue operations of the XFL(TM) and accordingly, has reported
XFL(TM) operating results and estimated shutdown costs as Discontinued
Operations as of April 30, 2001.

All significant intercompany balances have been eliminated. Certain prior
year amounts have been reclassified to conform with the current year
presentation.

The Company is an integrated media and entertainment company, principally
engaged in the development, production and marketing of television programming,
pay-per-view programming and live events, and the licensing and sale of branded
consumer products featuring its World Wrestling Federation brand of
entertainment. The Company's continuing operations are organized around two
principal activities:

- Live and televised entertainment, which consists of live events,
television programming and pay-per-view programming. Revenues consist
principally of attendance at live events, sale of television advertising
time, domestic and international television rights fees and pay-per-view
buys.

- Branded merchandise, which consists of licensing and direct sale of
merchandise. Revenues include sales of consumer products through third
party licensees and direct marketing and sales of merchandise, magazines
and home videos. Revenues also include those generated from the Company's
WWF New York(TM) entertainment complex located in New York City.

The Company's discontinued operations consisted of revenues from the XFL(TM),
including attendance at live events, sale of television advertising time and
sales of consumer products.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Cash and Cash Equivalents -- Cash and cash equivalents include cash on
deposit in overnight deposit accounts, certificates of deposit with original
maturities of three months or less and investments in money market accounts.

Short-term Investments -- The Company classifies all of its short-term
investments as available-for-sale securities. Such short-term investments
consist primarily of the United States government and federal agencies
securities, corporate commercial paper, corporate bonds and mortgage backed
securities which are stated at market value, with unrealized gains and losses on
such securities reflected, net of tax, as other comprehensive income in
stockholders' equity. Realized gains and losses on short-term investments are
included in earnings and are derived using the specific identification method
for determining the cost of securities. As of April 30, 2001, the value of the
Company's short-term investments were approximately $217 lower than market
value, and as a result, the Company recorded an unrealized loss for this amount.
It is the Company's intent to maintain a liquid portfolio to take advantage of
investment opportunities; therefore, all securities are considered to be
available-for-sale and are classified as current assets.

Accounts Receivable -- Accounts receivable relate principally to amounts
due the Company from cable companies for pay-per-view presentations and balances
due from the sale of television advertising, videotapes and magazines.

F-7
37
WORLD WRESTLING FEDERATION ENTERTAINMENT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

Inventory -- Inventory consists of merchandise sold on a direct sales
basis, and videotapes, which are sold through wholesale distributors and
retailers. Inventory is stated at the lower of cost (first-in, first-out basis)
or market. Substantially all inventory is comprised of finished goods.

Property and Equipment -- Property and equipment are stated at historical
cost less accumulated depreciation and amortization. Depreciation and
amortization is computed on a straight-line basis over the estimated useful
lives of the assets or, when applicable, the life of the lease, whichever is
shorter. Vehicles and equipment are depreciated based on estimated useful lives
varying from three to five years. Buildings and related improvements are
amortized over the lesser of the remaining useful life of the buildings or the
anticipated life of improvements.

Income Taxes -- The Company accounts for income taxes in accordance with
the provisions of SFAS 109, "Accounting For Income Taxes." (See Note 11).

Concurrent with the closing of the initial public offering on October 19,
1999 (the "Offering"), the Company terminated its S Corporation election and
thereafter has been subject to federal, state and foreign income taxes. See Note
3 regarding pro forma income taxes assuming that the Company had been a C
Corporation for the periods prior to the Offering.

Other than World Wrestling Federation Entertainment Canada, Inc., prior to
the termination of its S Corporation status, federal taxable income attributable
to the operations of the Company was included in the federal taxable income of
the individual stockholder. The provision for income taxes for the year ended
April 30, 1999 relates to the foreign operations of the Company and certain
state taxes. The deferred state and foreign tax provision was determined under
the asset and liability method. Under this method, deferred assets and
liabilities are recognized based on differences between financial statement and
income tax basis of assets and liabilities using presently enacted tax rates.
Concurrent with the termination of the Company's S Corporation election, all
deferred taxes were revalued using a combined federal and state tax rate.

Revenue Recognition -- Revenues from live and televised entertainment are
recorded when earned, specifically upon the occurrence or airing of the related
event. Revenues from the licensing and sale of branded consumer products consist
principally of royalty revenues, magazine subscription and newsstand revenues
and sales of branded merchandise, net of estimated returns. Royalty revenues are
recognized in accordance with the terms of applicable royalty and license
agreements with each counter party, which is generally upon receipt of notice by
the individual licensee as to license fees due. In certain situations the
Company receives royalty advances from third parties which are deferred and
recognized over the term of the related agreements. Subscription revenues are
initially deferred and earned pro-rata over the related subscription periods.
Sales of merchandise and newsstand magazines are recorded when shipped to third
parties. Revenues from the WWF New York(TM) entertainment complex are recorded
at the time service is performed.

Advertising Expense -- Advertising costs are expensed as incurred, except
for costs related to the development of a major commercial or media campaign
which are expensed in the period in which the commercial or campaign is first
presented.

Foreign Currency Translation -- For translation of the financial statements
of its Canadian subsidiary, the Company has determined that the Canadian dollar
is the functional currency. Assets and liabilities are translated at the
year-end exchange rate, and income statement accounts are translated at average
exchange rates for the year. The resulting translation adjustment is recorded as
accumulated other comprehensive income (loss), a component of stockholders'
equity. Foreign currency transactions are recorded at the exchange rate
prevailing at the transaction date.

Use of Estimates -- The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported

F-8
38
WORLD WRESTLING FEDERATION ENTERTAINMENT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

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.

Valuation of Long-Lived Assets -- The Company periodically evaluates the
carrying value of long-lived assets when events and circumstances warrant such a
review. The carrying value of a long-lived asset is considered impaired when
indicators of impairment are present and undiscounted cash flows estimated to be
generated by the asset are less than the asset's carrying amount. In that event,
a loss is recognized based on the amount by which the carrying value exceeds the
fair value of the long-lived asset. Fair value is determined primarily using the
anticipated cash flows discounted at a rate commensurate with the risk involved.

Stock-Based Compensation -- The Company follows the disclosure-only
provisions of Statement of Financial Accounting Standards ("SFAS") No. 123,
"Accounting for Stock-Based Compensation." SFAS No. 123 encourages, but does not
require, companies to adopt a fair value based method for determining expense
related to stock-based compensation. The disclosures are set forth in Note 13.
The Company continues to account for stock-based compensation using the
intrinsic value method as prescribed under Accounting Principles Board Opinion
("APB") No 25, "Accounting for Stock Issued to Employees," and related
Interpretations.

Recent Accounting Pronouncements -- In June 1998, SFAS No. 133, "Accounting
for Derivative Instruments and Hedging Activities" was released, as amended by
SFAS No. 137, for the deferral of the implementation. The statement requires the
recognition of all derivatives as either assets or liabilities in the balance
sheet and the measurement of those instruments at fair value, and is effective
for all fiscal quarters of all fiscal years beginning after June 15, 2000, which
therefore would require the Company to adopt such statement on May 1, 2001. The
impact of adoption of this statement in the first quarter of fiscal 2002 will
result in an increase to income from continuing operations of $1,500, net of tax
(see Note 17).

In December 1999, the Securities and Exchange Commission ("SEC") issued
Staff Accounting Bulletin No. 101 ("SAB 101"), "Revenue Recognition in Financial
Statements". SAB 101 summarizes certain of the SEC's views in applying generally
accepted accounting principles to revenue recognition in financial statements.
As a result of the Company's implementation of SAB 101, as of April 30, 2001,
there was no change to the Company's revenue recognition policies and
procedures.

In July 2001, SFAS No. 141 "Business Combinations" and SFAS No. 142
"Goodwill and Other Intangible Assets" were released. The related statements
address financial accounting and reporting for business combinations and
acquired goodwill and other intangible assets. SFAS No. 141 is effective for all
business combinations initiated after June 30, 2001. SFAS No. 142 is effective
for all fiscal years beginning after December 15, 2001, however early adoption
is permitted. The Company is required to adopt SFAS 142 in fiscal 2003. The
Company is currently assessing the impact that SFAS No. 142 will have on its
financial position and results of operations.

3. UNAUDITED PRO FORMA INFORMATION

The unaudited pro forma consolidated statements of income information
presents the pro forma effects on the historical consolidated statements of
income from continuing operations for fiscal years ended April 30, 2000 and 1999
of $427 and $2,515, respectively, for additional compensation to the chairman of
the board of directors and to the chief executive officer pursuant to employment
agreements that became effective July 1, 1999. Additionally, it presents income
taxes of $29,132 and $22,227 for the fiscal years ended April 30, 2000 and 1999,
respectively, to give pro forma effect due to the change in the Company's tax
status from a Subchapter S Corporation to a Subchapter C Corporation,
representing an overall effective tax rate of 39.2% for fiscal 2000 and 40% for
fiscal 1999.

F-9
39
WORLD WRESTLING FEDERATION ENTERTAINMENT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

4. EARNINGS PER SHARE

For the year ended April 30, 2001, for the purpose of calculating earnings
per share -- basic, the weighted average number of common shares outstanding was
72,025,222 and for the purpose of calculating earnings per share -- diluted, the
weighted average number of common shares outstanding, including dilutive
securities, was 72,216,870 which includes 191,648 shares representing the
dilutive effect of outstanding options.

For the year ended April 30, 2000, for the purpose of calculating earnings
per share -- basic, the weighted average number of common shares outstanding was
62,806,726 and for the purpose of calculating earnings per share -- diluted, the
weighted average number of common shares outstanding, including dilutive
securities, was 62,830,279 which includes 23,553 shares representing the
dilutive effect of outstanding options.

For the year ended April 30, 1999 for the purpose of calculating earnings
per share -- basic and earnings per share -- diluted, the weighted average
number of common shares outstanding was 56,667,000.

5. INVESTMENTS

Short-term investments consist of the following as of April 30, 2001 and
2000:

APRIL 30, 2001
------------------------------------
UNREALIZED FAIR
COST HOLDING LOSS VALUE
-------- ------------ --------

Government obligations........................... $ 30,350 $ -- $ 30,350
Corporate obligations and other.................. 129,552 (217) 129,335
Mortgage backed securities....................... 34,946 -- 34,946
-------- ----- --------
Total....................................... $194,848 $(217) $194,631
======== ===== ========

APRIL 30, 2000
------------------------------------
UNREALIZED FAIR
COST HOLDING GAIN VALUE
-------- ------------ --------

Government obligations........................... $ 9,300 $ 19 $ 9,319
Corporate obligations............................ 96,435 230 96,665
Other............................................ 1,229 -- 1,229
-------- ---- --------
Total....................................... $106,964 $249 $107,213
======== ==== ========

In addition to the short-term investments included above, the Company has
received warrants from four publicly traded companies with whom it has either
licensing or television agreements. The estimated fair value of the warrants
relating to these contracts on the date of receipt aggregated approximately
$5,237. The carrying amount of these warrants was $4,834 and was included in
other assets in the Consolidated Balance Sheet as of April 30, 2001. At April
30, 2001, the Company recorded an unrealized loss of $324 ($200, net of tax)
related to the markdown to fair value of certain of these warrants.

6. ASSETS HELD FOR SALE

The Company sold its property located in Las Vegas, Nevada on December 22,
2000. As a result of the sale, the Company received net proceeds of $11,305 and
recognized a gain of $1,249, which was included in interest and other income,
net.

F-10
40
WORLD WRESTLING FEDERATION ENTERTAINMENT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

7. ACQUISITIONS

In March 2001, the Company acquired substantially all of the intellectual
properties and certain other assets of World Championship Wrestling(R)(the
"WCW(R)"),including the trade name, tape library and other intangible assets
from a subsidiary of AOL Time Warner for $2,500. In addition, the Company
incurred certain related costs to acquire these assets of approximately $1,800.
Intellectual properties and certain other assets acquired, in addition to the
related costs to acquire these assets, will be amortized over 10 years.

On May 3, 2000, the Company acquired the net assets of the WWF New York(TM)
entertainment complex from its licensee for $24,500. The Company accounted for
this transaction as a purchase. The allocation of the purchase price included
approximately $21,200 in fixed assets, $1,300 in current assets and $900 in
liabilities. Goodwill arising as a result of this transaction amounted to
approximately $2,900 which is being amortized over 10 years and is included in
other assets in the Consolidated Balance Sheet. Included in depreciation and
amortization expense for the twelve months ended April 30, 2001 was $372 of
goodwill amortization.

8. PROPERTY AND EQUIPMENT

Property and equipment consists of the following as of:

APRIL 30,
-------------------
2001 2000
-------- -------

Land, buildings and improvements............................ $ 69,067 $41,960
Equipment................................................... 45,561 24,785
Vehicles.................................................... 673 629
-------- -------
115,301 67,374
Less accumulated depreciation and amortization............ 31,780 25,890
-------- -------
Total.................................................. $ 83,521 $41,484
======== =======

Depreciation and amortization expense included in continuing operations was
$6,808, $2,544 and $1,946 for the years ended April 30, 2001, 2000 and 1999,
respectively. Additionally, included in discontinued operations was depreciation
expense related to the XFL(TM) of $7,334 for the year ended April 30, 2001,
which includes the write-off of certain fixed assets of $6,201.

9. ACCRUED EXPENSES AND OTHER LIABILITIES

Accrued expenses and other liabilities consisted of the following as of:

APRIL 30,
------------------
2001 2000
------- -------

Accrued pay-per-view event costs............................ $ 7,802 $ 7,020
Accrued talent royalties.................................... 718 1,981
Accrued payroll related costs............................... 7,666 7,228
Accrued television costs.................................... 12,619 8,719
Accrued other............................................... 10,139 12,220
------- -------
Total.................................................. $38,944 $37,168
======= =======

F-11
41
WORLD WRESTLING FEDERATION ENTERTAINMENT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

10. DEBT

Debt as of April 30, 2001 and 2000 consisted of the following:

2001 2000
------- -------

GMAC Commercial Mortgage Corporation........................ $10,459 $10,932
IBJ Business Credit Corporation............................. -- 485
------- -------
Total debt.................................................. 10,459 11,417
Less current portion........................................ 556 1,017
------- -------
Long-term debt.............................................. $ 9,903 $10,400
======= =======

During December 1997, the Company entered into a mortgage loan agreement
with GMAC Commercial Mortgage Corporation, assigned to Citicorp Real Estate,
Inc., under the terms of which the Company borrowed $12,000 at an annual
interest rate of 7.6%. Principal and interest are to be paid in 180 monthly
installments of approximately $112, which commenced on January 1, 1998. The loan
is collateralized by the Company's executive offices and television studio in
Stamford, Connecticut.

During July 1998, the Company amended its then revolving line of credit
agreement with IBJ to allow the Company to make a capital expenditure loan,
under the terms of which the Company borrowed $1,564 at the IBJ Swap Rate plus
3% (8.92% at April 30, 2000) to be repaid in 29 monthly installments of
approximately $54 which commenced on September 1, 1998. The loan was
collateralized by the purchased equipment. As of December 31, 2000, the loan was
paid in full.

Interest expense was $856, $2,155 and $1,125 for the years ended April 30,
2001, 2000 and 1999, respectively. Included in interest expense for the year
ended April 30, 2000 was interest of $1,127 incurred in connection with the
$32,000 note payable to the Company's then sole stockholder, which was paid in
full as of April 30, 2000 (see Note 15).

As of April 30, 2001, the scheduled principal repayments under the mortgage
loan agreement described above are as follows:

YEAR ENDING APRIL 30,
- ---------------------

2002...................................................... $ 556
2003...................................................... 601
2004...................................................... 647
2005...................................................... 701
2006...................................................... 756
Thereafter.................................................. 7,198
-------
Total.................................................. $10,459
=======

11. INCOME TAXES

Concurrent with the Company's initial public offering in October 1999, its
tax status was changed from a Subchapter S Corporation to a Subchapter C
Corporation. As a Subchapter C Corporation, the Company is directly responsible
for all federal, state and foreign income taxes. As a result of the change in
its tax status, for the year ended April 30, 2001, the Company was taxed on its
income from continuing operations at an effective tax rate of 37.1% and for the
year ended April 30, 2000, the Company was taxed on its income from continuing
operations at an effective rate of approximately 20.3% based upon the number of
days during the fiscal year that it was a Subchapter S Corporation and the
number of days it was a Subchapter C Corporation.

F-12
42
WORLD WRESTLING FEDERATION ENTERTAINMENT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

The Company's income tax provision related to its income from continuing
operations for fiscal 2001 and 2000 was $37,144 and $15,200 respectively, and
includes federal, state and foreign taxes. Including its loss from discontinued
operations of the XFL(TM), the Company's provision for income taxes was $14,200
and $14,790 for the fiscal years ended April 30, 2001 and 2000, respectively.
Other than World Wrestling Federation Entertainment Canada, Inc., the Company
was formerly an S Corporation for U.S. federal income tax purposes. An S
Corporation's income or loss and distributions are passed through to, and taken
into account by, the corporation's stockholder in computing personal taxable
income. Accordingly, no provision for U.S. federal income tax was made in the
consolidated financial statements for the fiscal year ended April 30, 1999. See
Note 3 regarding pro forma income taxes assuming the Company had not been an S
Corporation.

The Company accounts for income taxes in accordance with the provisions of
SFAS 109, "Accounting For Income Taxes." The components of the Company's tax
provision from continuing operations for each of the three years in the period
ended April 30, 2001 are as follows:

APRIL 30,
----------------------------
2001 2000 1999
------- ------- ------

Current:
Federal.............................................. $31,526 $17,036 --
State and local...................................... 2,983 4,783 $2,202
Foreign.............................................. 400 273 224
Deferred:
Federal.............................................. 1,961 (5,726) --
State and local...................................... 271 (1,150) (413)
Foreign.............................................. 3 (16) (70)
------- ------- ------
Total............................................. $37,144 $15,200 $1,943
======= ======= ======

The Company's provision for income taxes from continuing operations and
discontinued operations was as follows for the fiscal years ended April 30,
2001, 2000 and 1999:

2001 2000 1999
-------- ------- ------

Provision for income taxes from continuing
operations.......................................... $ 37,144 $15,200 $1,943
Provision for income taxes from discontinued
operations.......................................... (22,944) (410) --
-------- ------- ------
Provision for income taxes............................ $ 14,200 $14,790 $1,943
======== ======= ======

The following sets forth the difference between the provision for income
taxes from continuing operations computed at the U.S. federal statutory income
tax rate of 35% and that reported for financial statement purposes:

APRIL 30,
-------------------
2001 2000
------- --------

Statutory U.S. federal tax at 35%........................... $35,014 $ 26,172
State and local taxes, net of federal benefit............... 3,034 3,236
Deferred tax benefit due to change in tax status............ -- (2,660)
Federal benefit of S Corporation............................ -- (11,976)
Foreign..................................................... 140 93
Other....................................................... (1,044) 335
------- --------
Provision for income taxes.................................. $37,144 $ 15,200
======= ========

F-13
43
WORLD WRESTLING FEDERATION ENTERTAINMENT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities consist of the
following as of April 30, 2001 and 2000:

2001 2000
------- -------

Deferred tax assets:
Accounts receivable....................................... $ 693 $ 364
Inventories............................................... 995 1,665
Prepaid royalties......................................... 529 1,251
Stock options............................................. 5,409 6,012
Investments............................................... 1,096 --
Intangibles............................................... 3,036 --
Accrued liabilities and reserves.......................... 5,940 548
Capital loss carry forward................................ 3,580 --
Other..................................................... 710 464
Foreign................................................... 83 86
------- -------
22,071 10,390
Valuation allowance....................................... (3,580) --
------- -------
18,491 10,390
Deferred tax liabilities:
Fixed assets and depreciation............................. 3,234 1,109
Intangible assets......................................... -- 108
Prepaid royalties......................................... 980 1,522
------- -------
4,214 2,739
------- -------
Total, net............................................. $14,277 $ 7,651
======= =======

The temporary differences described above represent differences between the
tax basis of assets or liabilities and their reported amounts in the
consolidated financial statements that will result in taxable or deductible
amounts in future years when the reported amounts of the assets or liabilities
are recovered or settled. As of April 30, 2001 and 2000, $10,208 and $2,349,
respectively, of the net deferred tax assets are included in prepaid expenses
and other current assets and the remaining $4,069 and $5,302, respectively, are
included in other non-current assets in the Consolidated Balance Sheets.

As of April 30, 2001, the Company recorded a valuation allowance of $3,580
to reduce its deferred tax assets to an amount more likely than not to be
recovered. The valuation allowance primarily relates to the deferred tax assets
arising from capital loss carry forwards associated with the liquidation of an
investment. The capital loss carry forward expires in 2007.

Based upon the level of historical taxable income and projections for the
future taxable periods in which the temporary differences are anticipated to
reverse, it is more likely than not that the Company will realize the benefits
of the remaining deductible differences, net of the valuation allowance at April
30, 2001.

United States income taxes have not been provided on unremitted earnings of
the Company's foreign subsidiary, because the Company's intent is to keep such
earnings indefinitely reinvested in the foreign subsidiary's operations.

F-14
44
WORLD WRESTLING FEDERATION ENTERTAINMENT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

12. COMMITMENTS AND CONTINGENCIES

The Company has certain commitments, including various non-cancelable
operating leases, performance contracts with various performers, employment
agreements with certain executive officers, advertising commitments with AOL
Time Warner, and agreements with Viacom and United Paramount Network ("UPN"),
which guarantees each party a minimum payment for advertising during the course
of the respective agreements. Future minimum payments as of April 30, 2001 under
the agreements described above are as follows:

OPERATING LEASE OTHER
YEAR ENDING APRIL 30, COMMITMENTS COMMITMENTS TOTAL
- --------------------- --------------- ----------- --------

2002....................................... $ 5,792 $ 49,552 $ 55,344
2003....................................... 5,805 47,683 53,488
2004....................................... 5,859 31,032 36,891
2005....................................... 5,713 23,664 29,377
2006....................................... 5,665 6,848 12,513
Thereafter................................... 42,038 7,390 49,428
------- -------- --------
Total................................... $70,872 $166,169 $237,041
======= ======== ========

Rent expense under operating leases was approximately $4,142, $643 and $260 for
the fiscal years ended April 30, 2001, 2000, and 1999, respectively.

Legal Proceedings

On May 13, 1991, William R. Eadie, a former professional wrestler who had
been one of the Company's performers, filed a lawsuit in state court in
Wisconsin against the Company and Mr. McMahon. The case was removed to the
United States District Court for the District of Connecticut on August 7, 1991.
The suit alleged that the Company breached an oral agreement to compensate Mr.
Eadie for the use of his ideas in connection with a wrestling tag team called
"Demolition" and to employ him for life. In a similar action filed against the
Company on April 10, 1992 in the United States District Court for the District
of Connecticut, Randy Colley, a former professional wrestler who had been one of
the Company's performers, also alleged that the Company breached an oral
agreement to compensate him for disclosing his idea for a wrestling tag team
called "Demolition." Mr. Colley's claims were consolidated for trial with those
of Mr. Eadie. On May 25, 2001, the parties entered into a settlement agreement,
under which all claims against the Company were dismissed with prejudice. By
Order dated July 3, 2001 the court dismissed all claims against the Company with
prejudice.

On June 15, 1999, members of the family of Owen Hart, a professional
wrestler performing under contract with the Company, filed suit in state court
in Missouri against the Company, Vincent and Linda McMahon and nine other
defendants, including the manufacturer of the rigging equipment involved,
individual equipment riggers and the arena operator, as a result of the death of
Owen Hart during a pay-per-view event at Kemper Arena in Kansas City, Missouri
on May 23, 1999. The parties have agreed to a settlement that dismisses all
claims against the Company and the McMahons and allows the Company the right to
pursue contribution and indemnity from the companies which manufactured and sold
the equipment involved in the accident. The parties have obtained all necessary
judicial approvals for the settlement agreement. As a result of the settlement,
the Company recorded a charge of $7,000, which was included in selling, general
and administrative expenses for the fiscal year ended April 30, 2001.

On September 20, 1999, the Company was formally served with a complaint
regarding an action that Nicole Bass, a professional wrestler previously
affiliated with the Company, filed in the United States District

F-15
45
WORLD WRESTLING FEDERATION ENTERTAINMENT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

Court for the Eastern District of New York in which she alleges sexual
harassment under New York law, civil assault and intentional infliction of
emotional distress. Bass's complaint sought $20,000 in compensatory damages and
$100,000 in punitive damages. On or about November 9, 1999, the Company received
a Notice of Charge of Discrimination from the Equal Employment Opportunity
Commission (EEOC) filed by Nicole Bass. On January 27, 2000, the EEOC closed its
file on her claim. The Company filed a motion to dismiss the original complaint.
During oral argument on the Company's motion to dismiss, plaintiff requested
leave of court to file an amended complaint. The Plaintiff filed a second
amended complaint on October 20, 2000. Motions to Dismiss the second amended
complaint were filed on December 18, 2000 and granted in part on February 14,
2001. On March 5, 2001, the Company answered the surviving counts in the second
amended complaint. The Company believes that the claims are without merit and
intends to vigorously defend against this action. Based on the Company's
preliminary review of the allegations and the underlying facts, as the Company
understands them, the Company does not believe that an unfavorable outcome in
this action will have a material adverse effect on its financial condition,
results of operations or prospects.

On April 17, 2000, the WWF -- World Wide Fund for Nature (the "Fund")
instituted legal proceedings against the Company in the English High Court
seeking injunctive relief and unspecified damages for alleged breaches of an
agreement between the Fund and the Company. The Fund alleges that the Company's
use of the initials "WWF" in various contexts, including (i) the wwf.com and
wwfshopzone.com internet domain names and in the contents of various of the
Company's websites; (ii) the Company's "scratch" logo; and (iii) certain oral
uses in the contexts of foreign broadcasts of its programming, violate the
agreement between the Fund and the Company. On August 29, 2000, the Company
filed its defense and counterclaim. On January 24, 2001, the Fund requested
leave of court to amend its complaint to add a count of money damages. Leave has
not yet been granted. On January 30, 2001, the Fund filed for summary judgment
on its claims. Oral Argument on the Fund's motion for summary judgment was heard
the week of July 16, 2001, and the court's decision is currently pending. The
Company believes that it has meritorious defenses and intends to defend the
action vigorously. The Company believes that an unfavorable outcome of this suit
may have a material adverse effect on its financial condition, results of
operations or prospects

On November 14, 2000, Stanley Schenker & Associates, Inc. filed a complaint
against the Company, relating to the termination of an Agency Agreement between
the Company and Plaintiff. Plaintiff seeks compensatory damages and punitive
damages in an unspecified amount, attorneys' fees, an accounting and a
declaratory judgment. The Company believes that it has meritorious defenses and
intends to defend the action vigorously. On December 15, 2000, the Company filed
a motion to strike all the claims against it, with the exception of one count
for breach of contract. The motion was fully briefed by both parties on February
7, 2001. On March 27, 2001, the Plaintiff filed a substituted complaint
reasserting all counts against the Company. On April 11, 2001, the Company
answered the substitute complaint. The Company believes that an unfavorable
outcome of this suit may have a material adverse effect on its financial
condition, results of operations or prospects.

In response to a demand letter from the William Morris Agency, Inc., the
Company filed an action on October 2, 2000 seeking declaratory, legal and
equitable relief relating to Defendant's improper claims for commissions on
business opportunities with which it had no involvement. William Morris filed a
counterclaim on February 1, 2001 alleging breach of contract and seeking to
recover unspecified damages in the form of commissions allegedly owed. William
Morris filed a motion to dismiss all non-contract claims against it. The Company
also filed a motion to partially dismiss William Morris's counterclaims. By
Order dated June 21, 2001, the court granted William Morris's motion to dismiss
only with respect to our claim for fraud and unfair trade practices; William
Morris's motion to dismiss was denied with respect to the remaining counts of
the Company's complaint. The Company believes that it has meritorious defenses
and intends to defend the action vigorously. The Company believes that an
unfavorable outcome of this suit may have a material adverse effect on its
financial condition, results of operations or prospects.
F-16
46
WORLD WRESTLING FEDERATION ENTERTAINMENT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

The Company is not currently a party to any other material legal
proceedings. However, it is involved in several other suits and claims in the
ordinary course of business, and may from time to time become a party to other
legal proceedings arising in the ordinary course of doing business.

13. STOCKHOLDERS' EQUITY

On October 15, 1999, the Company filed an amended and restated certificate
of incorporation which, among other things, authorized 60,000,000 shares of new
Class B common stock, par value $.01 per share, reclassified each outstanding
share of World Wrestling Federation Entertainment, Inc. common stock into
566,670 shares of Class B common stock, authorized 180,000,000 shares of new
Class A common stock, par value $.01 per share and authorized 20,000,000 shares
of preferred stock, par value $.01 per share. In October 1999, the Company sold
11,500,000 shares of its Class A common stock to the public at an initial
offering price of $17.00 per share (the "Offering"). The net proceeds to the
Company generated from the offering were approximately $179,323 after deducting
commissions, fees and expenses. Class B common stock is fully convertible into
Class A common stock, on a one for one basis, at any time at the option of the
holder. The two classes are entitled to equal per share dividends and
distributions and vote together as a class with each share of Class B entitled
to ten votes and each share of Class A entitled to one vote, except when
separate class voting is required by applicable law. If, at any time any shares
of Class B common stock are beneficially owned by any person other than Vincent
McMahon, Linda McMahon, any descendant of either of them, any entity which is
wholly owned and is controlled by any combination of such persons or any trust,
all the beneficiaries of which are any combination of such persons, each of
those shares will automatically convert into shares of Class A common stock.

On June 12, 2000, NBC purchased approximately 2.3 million newly issued
shares of the Company's Class A common stock at $13 per share for a total
investment of $30,000. As a result of the stock purchase, the Company recorded a
non-cash charge of $10,673 which was being amortized over 30 months.
Amortization of $3,699 during fiscal 2001 was reflected in Discontinued
Operations. As a result of the Company's decision to discontinue operations of
the XFL, the Company wrote-off the remaining unamortized asset of $6,974 which
was also reflected in Discontinued Operations.

On July 28, 2000, Viacom Inc. ("Viacom") purchased approximately 2.3
million newly issued shares of the Company's Class A common stock at $13 per
share for a total investment of $30,000. In conjunction with the agreement to
sell the stock, the Company recorded a fiscal 2000 non-cash charge of $9,310
($5,660, net of taxes.) As of April 30, 2001,Viacom owned approximately 2.2
million shares.

On April 30, 2001, the Company had 56,667,000 shares of Class B common
stock and 16,265,384 shares of Class A common stock outstanding.

In July 1999, the Company adopted the 1999 Long-Term Incentive Plan
("LTIP"), which became effective with the Offering. The LTIP provides for grants
of options as incentives and rewards to encourage employees, directors,
consultants and performers in the long-term success of the Company. The LTIP
provides for grants of options to purchase shares at a purchase price equal to
the fair market value on the date of the grant. The options expire 10 years
after the date of the grant and are generally exercisable in installments
beginning one year from the date of the grant. The LTIP also provides for the
grant of other forms of equity based incentive awards as determined by the
Compensation Committee of the Board of Directors. The total number of shares
reserved for issuance under the LTIP are 10,000,050, of which 6,670,700 stock
options were outstanding under the LTIP as of April 30, 2001. Of these options,
1,172,000 were granted to independent contractors consisting primarily of the
Company's performers. With respect to the options granted to independent
contractors, the Company accounted for the equity instrument grants in
accordance with SFAS No. 123, "Accounting for Stock Based Compensation" and with
Emerging Issues Task Force Issue No. 96-18, "Accounting for Equity Instruments
That Are Issued to Other Than Employees
F-17
47
WORLD WRESTLING FEDERATION ENTERTAINMENT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

For Acquiring, or in Conjunction with Selling, Goods or Services" and as a
result recorded a charge of $1,092 (of which, $332 was included in Discontinued
Operations) and $6,020 for the years ended April 30, 2001 and 2000,
respectively. The options granted to employees have been accounted for in
accordance with Accounting Principles Board Opinion No. 25, "Accounting for
Stock Issued to Employees."

Presented below is a summary of the LTIP's activity for the period
commencing with the date of the Offering through the fiscal year ended April 30,
2001.

WEIGHTED AVERAGE
OPTIONS EXERCISE PRICE
--------- ----------------

Options granted at Offering.............................. 5,400,500 $17.00
Options granted subsequent to the Offering............... 45,000 $17.00
Options canceled......................................... (97,000) $17.00
--------- ------
Options outstanding at April 30, 2000.................... 5,348,500 $17.00
Options granted.......................................... 1,666,200 $14.42
Options canceled......................................... (194,000) $17.00
Options exercised........................................ (150,000) $17.00
--------- ------
Options outstanding at April 30, 2001.................... 6,670,700 $16.36
========= ======
Options available for future grants at April 30, 2001.... 3,179,350
=========

The number of options exercisable as of April 30, 2001 and 2000 were
1,832,743 and 621,100, respectively. The following table summarizes information
for options outstanding and exercisable as of April 30, 2001:

NUMBER OF
RANGE OF NUMBER OF OPTIONS WEIGHTED AVERAGE WEIGHTED AVERAGE OPTIONS WEIGHTED AVERAGE
EXERCISE PRICES OUTSTANDING REMAINING LIFE EXERCISE PRICE EXERCISABLE EXERCISE PRICE
- --------------- ----------------- ---------------- ---------------- ----------- ----------------

$11.93-$21.25.. 6,670,700 8.8 years $16.36 1,832,743 $17.00

Pro Forma Fair Value Disclosures

The fair value of options granted to employees, which is amortized to
expense over the option vesting period in determining the pro forma impact, is
estimated on the date of the grant using the Black-Scholes option-pricing model
with the following assumptions:

APRIL 30,
------------------------
2001 2000
---------- ----------

Expected life of option..................................... 3 years 3 years
Risk-free interest rate..................................... 4.5% 5.5%
Expected volatility of the Company's common stock........... 71% 44%

2001 2000
---------- ----------

Weighted average fair value per share of each option granted
to employees.............................................. $ 7.21 $ 6.04
Total number of options granted to employees................ 1,481,200 4,458,500
Total fair value of all options granted to employees........ $ 10,677 $ 26,929

F-18
48
WORLD WRESTLING FEDERATION ENTERTAINMENT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

Had compensation expense for the Company's stock options been recognized
based on the fair value on the grant date under the methodology prescribed by
SFAS No. 123, the Company's income from continuing operations and basic and
diluted earnings from continuing operations per common share for the years ended
April 30, 2001 and 2000 would have been impacted as shown in the following
table:

2001 2000
------- -------

Reported income from continuing operations.................. $62,897 $59,577
Pro forma income from continuing operations................. $54,809 $53,708
Reported basic and diluted earnings from continuing
operations per common share............................... $ 0.87 $ 0.95
Pro forma basic and diluted earnings from continuing
operations per common share............................... $ 0.76 $ 0.85

In accordance with SFAS No. 123, the weighted average fair value of stock
options granted to employees was based on a theoretical statistical model using
assumptions. In actuality, because the Company's stock options are not traded on
any exchange, employees can receive no value nor derive any benefit from holding
stock options under these plans without an increase in market price of the World
Wrestling Federation Entertainment, Inc. common stock. Such an increase in stock
price would benefit all stockholders commensurately.

14. EMPLOYEE BENEFIT PLANS

The Company sponsors a 401(k) defined contribution plan covering
substantially all employees. Under this plan, participants are allowed to make
contributions based on a percentage of their salaries, subject to a statutorily
prescribed annual limit. The Company makes matching contributions of 50 percent
of each participant's contributions, up to 6 percent of eligible compensation
(maximum 3% matching contribution). The Company may also make additional
discretionary contributions to the 401(k) plan. The Company's expense for
matching contributions and additional discretionary contributions to the 401(k)
plan was $1,453, $1,082, and $233 during fiscal 2001, 2000 and 1999,
respectively.

During fiscal 1999 the Company created its Money Purchase Plan. Under this
plan, the Company made a contribution to each participant's account based upon a
formula as prescribed by the plan document. The Company's expense under the
Money Purchase Plan was $1,434 and $769 during fiscal 2000 and fiscal 1999,
respectively. The Money Purchase plan was terminated during fiscal 2001 and
assets associated with the Money Purchase Plan were transferred into the
Company's 401(k) plan. Prior to the Money Purchase Plan, the Company sponsored a
profit sharing plan for the benefit of employees meeting certain eligibility
requirements. This profit sharing plan was merged into the Company's 401(k) plan
during fiscal 1999, with all assets associated with the profit sharing plan
being transferred into the 401(k) plan.

15. RELATED PARTY TRANSACTIONS

The Company expensed $2 and $123 in fiscal 2000 and 1999, respectively, in
travel related costs and management fees paid to a travel agency, which is owned
by the chief executive officer of the Company. There were no such transactions
in fiscal 2001.

The management fee was paid in return for the travel agency's overall
management of the Company's travel planning requirements. Amounts receivable
from the travel agency at April 30, 2001 and 2000 was $332 and $336,
respectively, which arose from transactions conducted in the normal course of
business.

A member of the Company's board of directors also was an independent
contractor engaged by the Company during fiscal 2001 and 2000. In fiscal 2001
this director received $60 for his services as an

F-19
49
WORLD WRESTLING FEDERATION ENTERTAINMENT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

independent contractor. For the period commencing May 1, 1999 to the date of the
Offering, this director received $63 for his services and for the period
subsequent to the Offering through April 30, 2000, this director received $38.

The Company had a receivable from Shane Distribution Co. in the amount of
$307 at April 30, 2001 and $377 at April 30, 2000 and 1999. Shane Distribution
Co. is a movie distribution company owned by the chairman of the Company.

For the fiscal years ended April 30, 2000 and 1999, the Company made S
Corporation distributions to its sole stockholder of $67,476 and $6,479
respectively. Of the $67,476 distributed in fiscal 2000, $40,412 related to the
payment of taxes by its then sole stockholder for S Corporation earnings of the
Company.

On April 10, 2000, in connection with the payment of the outstanding
balance of the note payable to its then sole stockholder, the Company paid
$1,127 of interest on the $32,000 note payable to its then sole stockholder.

On June 29, 1999, the Company made a distribution of $25,500 to its then
sole stockholder representing a portion of previously earned and undistributed
earnings, which have been fully taxed at the stockholder level. In addition, on
June 29, 1999, the Company made an S Corporation distribution to its then sole
stockholder in the form of an unsecured, 5% interest-bearing note in the
principal amount of $32,000 due April 10, 2000. The note represented estimated
federal and state income taxes payable by the Company's then sole stockholder
with respect to the Company's taxable income for fiscal 1999 and estimated
taxable income for the period May 1, 1999 through October 18, 1999 which
represents the portion of the Company's taxable earnings for fiscal 2000
allocated to the S Corporation. As of April 30, 2000, the Company paid the
$32,000 note in full plus an additional $8,400. The additional $8,400
represented additional tax liabilities of the then sole stockholder due to a
revision of estimated taxes payable for the tax periods described above.

16. SEGMENT INFORMATION

The Company's continuing operations are currently conducted within two
reportable segments, live and televised entertainment and branded merchandise.
The live and televised entertainment segment consists of live events, television
programming and pay per view programming. The branded merchandise segment
includes consumer products sold through third party licensees and the marketing
and sale of merchandise, magazines and home videos, and the operations from the
Company's WWF New York entertainment complex. The results of operations for the
XFL(TM) are not included in the segment reporting as they are classified
separately as discontinued operations in the consolidated financial statements
(See Note 19). The Company does not allocate corporate overhead to each of the
segments and as a result, corporate overhead is a reconciling item in the table
below. Included in the Corporate operating loss for the year ended April 30,
2001 and 2000 are stock option and other non-cash charges of $760 and $15,330,
respectively. There are no intersegment revenues. Revenues, operating income and
assets from non-U.S. sources are less than 10% of their respective consolidated
financial statement amounts. The table presents information about the financial
results of each segment for the years ended April 30, 2001, 2000 and 1999 and
assets as of April 30, 2001 and 2000. Unallocated assets consist primarily of
each, short-term investments, real property and other investments.

F-20
50
WORLD WRESTLING FEDERATION ENTERTAINMENT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

APRIL 30,
--------------------------------
2001 2000 1999
-------- -------- --------

NET REVENUES:
Live and televised entertainment......................... $335,668 $265,485 $170,045
Branded merchandise...................................... 120,375 113,825 81,429
-------- -------- --------
Total net revenues....................................... $456,043 $379,310 $251,474
======== ======== ========
DEPRECIATION AND AMORTIZATION:
Live and televised entertainment......................... $ 2,839 $ 1,333 $ 908
Branded merchandise...................................... 2,444 -- --
Corporate................................................ 1,897 1,211 1,038
-------- -------- --------
Total depreciation and amortization...................... $ 7,180 $ 2,544 $ 1,946
======== ======== ========
OPERATING INCOME (LOSS):
Live and televised entertainment......................... $131,385 $ 94,672 $ 61,870
Branded merchandise...................................... 26,442 41,340 26,163
Corporate (including fiscal 2001 and 2000 stock option
and other non-cash charges of $760 and $15,330,
respectively)......................................... (72,846) (66,651) (31,052)
-------- -------- --------
Total operating income................................... $ 84,981 $ 69,361 $ 56,981
======== ======== ========
ASSETS:
Live and televised entertainment......................... $ 86,700 $ 72,042
Branded merchandise...................................... 49,596 23,320
Unallocated.............................................. 306,796 241,670
-------- --------
Total assets............................................. $443,092 $337,032
======== ========

17. FINANCIAL INSTRUMENTS AND OFF-BALANCE SHEET RISK

Concentration of Credit Risk -- Financial instruments, which potentially
subject the Company to concentrations of credit risk, are principally bank
deposits, short-term investments and accounts receivable. Cash and cash
equivalents are deposited with high credit quality financial institutions.
Short-term investments principally consist of triple A or double A rated
instruments. Except for receivables from cable companies related to pay-per-view
events, concentrations of credit risk with respect to trade receivables are
limited due to the large number of customers. A significant portion of trade
receivables for pay-per-view events are due from the Company's pay-per-view
administrator, who collects and remits payments to the Company from individual
cable system operators. The Company performs ongoing evaluations of its
customers' financial condition, including its pay-per-view administrator, and
monitors its exposure for credit losses and maintains allowances for anticipated
losses.

Fair Value of Financial Instruments -- The carrying amounts of cash, cash
equivalents, short-term investments accounts receivable and accounts payable
approximate fair value because of the short-term nature, and maturity of such
instruments. The carrying amount of the Company's long-term debt approximates
fair value as the interest rates on the debt approximate market rates. In
addition, the Company has received warrants from four publicly traded companies
with whom it has either licensing or television agreements. The fair value of
these warrants at the date of receipt are being recognized as revenues over the
respective license or television periods. The carrying amount of these warrants
was $4,834 and was included in other assets at April 30, 2001. The estimated
fair value of such warrants was $7,259 at April 30, 2001 (see Note 2). In June
2001, the Company sold certain of these warrants for net proceeds of $10,900 and
as a result

F-21
51
WORLD WRESTLING FEDERATION ENTERTAINMENT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

recorded a gain of approximately $7,100 ($4,400, net of tax) which will be
reflected as other income in its Consolidated Statements of Income in the first
quarter of fiscal 2002.

18. QUARTERLY FINANCIAL SUMMARIES (UNAUDITED)

1ST 2ND 3RD 4TH
QUARTER QUARTER(2) QUARTER QUARTER(3)
-------- ---------- -------- ----------

2001
Net revenues................................... $101,861 $111,880 $111,194 $131,108
Gross profit................................... $ 45,963 $ 49,515 $ 46,493 $ 55,969
Income from continuing operations.............. $ 16,256 $ 12,374 $ 17,230 $ 17,036
Loss from discontinued operations(1)........... $ (1,017) $ (2,902) $ (5,546) $(37,444)
Net income (loss).............................. $ 15,239 $ 9,472 $ 11,684 $(20,408)
Earnings (loss) per common share: basic and
diluted
Continuing Operations........................ $ 0.23 $ 0.17 $ 0.24 $ 0.23
Discontinued Operations...................... $ (0.01) $ (0.04) $ (0.08) $ (0.51)
Net income (loss)............................ $ 0.22 $ 0.13 $ 0.16 $ (0.28)
2000
Net revenues................................... $ 76,222 $ 88,267 $ 98,374 $116,447
Gross profit................................... $ 35,177 $ 36,139 $ 41,711 $ 45,303
Income from continuing operations.............. $ 20,276 $ 7,848 $ 20,169 $ 11,284
Loss from discontinued operations (1).......... -- -- -- $ (669)
Net income..................................... $ 20,276 $ 7,848 $ 20,169 $ 10,615
Earnings (loss) per common share: basic
Continuing Operations........................ $ 0.36 $ 0.14 $ 0.30 $ 0.15
Discontinued Operations...................... -- -- -- $ (0.01)
Net income................................... $ 0.36 $ 0.14 $ 0.30 $ 0.14
Earnings per common share: diluted
Continuing Operations........................ $ 0.36 $ 0.14 $ 0.29 $ 0.15
Discontinued Operations...................... -- -- -- $ (0.01)
Net income................................... $ 0.36 $ 0.14 $ 0.29 $ 0.14
Pro forma income from continuing operations.... $ 12,499 $ 6,851 $ 15,721 $ 10,147
Pro forma earnings per common share: basic and
diluted...................................... $ 0.22 $ 0.12 $ 0.23 $ 0.14

- ---------------
(1) Fiscal 2001 reflects the Company's share, net of applicable tax benefits, of
the start-up costs, results of operations and estimated shutdown costs of
its discontinued professional football league, the XFL(TM). Fiscal 2000
reflects the Company's share, net of applicable tax benefits, of the
start-up costs incurred as of April 30, 2000.

(2) Included in the second quarter fiscal 2000 was a non-cash charge of
approximately $6,020 relating to the granting of stock options to certain
performers who are independent contractors.

(3) Included in the fourth quarter of fiscal 2000 was a non-cash charge of
approximately $9,310 ($5,660, net of tax) relating to the Company's
agreement with Viacom whereby Viacom acquired approximately 2.3 million
newly issued shares of the Company's Class A common stock.

F-22
52
WORLD WRESTLING FEDERATION ENTERTAINMENT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

19. DISCONTINUED OPERATIONS

In early May 2001, the Company formalized its decision to discontinue
operations of the XFL and accordingly, has reported XFL operating results and
estimated shutdown costs as Discontinued Operations in the Consolidated
Statements of Income. This decision was a culmination of management's analysis
of the financial viability of the venture which commenced during the fourth
quarter of fiscal 2001. Estimated shutdown costs consist primarily of fixed
asset and other asset impairment charges of $9,600, contractual labor costs of
$8,400, lease costs of $1,700, and workers compensation and severance costs of
$5,400 and other shutdown costs of $2,600. Of the charges noted above, $18,362
was accrued as of April 30, 2001.

On June 12, 2000, NBC purchased approximately 2.3 million newly issued
shares of the Company's Class A common stock at $13 per share for a total
investment of $30,000. As a result of the stock purchase, the Company recorded a
non-cash charge of $10,673 which was being amortized over 30 months.
Amortization of $3,699 during fiscal 2001 was reflected in Discontinued
Operations. As a result of the Company's decision to discontinue operations of
the XFL(TM), the Company wrote-off the remaining unamortized asset of $6,974
which was also reflected in Discontinued Operations.

The results of the XFL(TM) business, which has been classified separately
as Discontinued Operations in the accompanying consolidated financial
statements, are summarized as follows:

FISCAL YEAR ENDED
APRIL 30,
-----------------
2001 2000
-------- -----

Discontinued Operations:
Loss from XFL operations, net of minority interest of
$42,940 for fiscal 2001 and applicable income tax
benefits of $17,679 and $410 for fiscal 2001 and 2000,
respectively........................................... $(31,293) $(669)
Estimated loss on shutdown of the XFL, net of minority
interest of $13,907 and applicable income tax benefits
of $5,265.............................................. (15,617) --
-------- -----
Loss from discontinued operations........................... $(46,910) $(669)
======== =====

AS OF
APRIL 30, 2001
--------------

Assets:
Cash...................................................... $ 2,007
Accounts receivable....................................... 19,456
Prepaid expenses.......................................... 50
Inventory................................................. 150
Equipment................................................. 1,400
--------
Total Assets................................................ $ 23,063
--------
Liabilities:
Accounts payable.......................................... 9,103
Accrued expenses.......................................... 36,225
Minority interest......................................... (10,431)
--------
Total Liabilities........................................... $ 34,897
--------
Net Liabilities............................................. $(11,834)
========

Assets of the discontinued operations are stated at their estimated net
realizable value. Net revenues of the XFL, LLC were $49,327 for the fiscal year
ended April 30, 2001.

F-23
53

SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS
(DOLLARS IN THOUSANDS)

BALANCE ADDITIONS
AT CHARGED TO BALANCE AT
BEGINNING COSTS AND END OF
DESCRIPTION OF PERIOD EXPENSES DEDUCTIONS(1) PERIOD
- ----------- --------- ---------- ------------- ----------

FOR THE YEAR ENDED APRIL 30, 2001
Allowance for doubtful accounts............... $1,085 $ 1,239 $ (456) $ 1,868
Inventory obsolescence reserve................ 2,071 803 (2,417) 457
Accrued XFL shutdown costs.................... -- 18,362 -- 18,362
FOR THE YEAR ENDED APRIL 30, 2000
Allowance for doubtful accounts............... 972 355 (242) 1,085
Inventory obsolescence reserve................ 1,530 1,174 (633) 2,071
FOR THE YEAR ENDED APRIL 30, 1999
Allowance for doubtful accounts............... -- 972 -- 972
Inventory obsolescence reserve................ -- 1,530 -- 1,530

- ---------------
(1) Deductions are comprised of disposals of obsolete inventory and write-offs
of specific bad debts.

F-24