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EX-31.1 - EX-31.1 - WORLD WRESTLING ENTERTAINMENTINCwwe-20160930xex31_1.htm
EX-10.21 - EX-10.21 - WORLD WRESTLING ENTERTAINMENTINCwwe-20160930xex10_21.htm

 



UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

____________________

FORM 10-Q

____________________





 

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

SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2016

or

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

SECURITIES EXCHANGE ACT OF 1934

For the transition period from ______ to ______



Commission file number 001-16131

WORLD WRESTLING ENTERTAINMENT, INC.

(Exact name of Registrant as specified in its charter)





 

Delaware

04-2693383

(State or other jurisdiction of incorporation or organization)

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



1241 East Main Street

Stamford, CT 06902

(203) 352-8600

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

of Registrant’s principal executive offices)



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



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



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





 

 

 

Large accelerated filer  

Accelerated filer  

Non-accelerated filer  

Smaller reporting company  



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



At October 26, 2016 the number of shares outstanding of the Registrant’s Class A common stock, par value $.01 per share, was 38,455,266 and the number of shares outstanding of the Registrant’s Class B common stock, par value $.01 per share, was 37,949,438.

 





 

 


 

TABLE OF CONTENTS





 



Page #

Part I – FINANCIAL INFORMATION

 

Item 1. Consolidated Financial Statements (unaudited)

Consolidated Statements of Operations for the three and nine months ended September 30, 2016 and 2015

Consolidated Statements of Comprehensive Income for the three and nine months ended September 30, 2016 and 2015

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

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

Consolidated Statements of Cash Flows for the nine months ended September 30, 2016 and 2015

Notes to Consolidated Financial Statements

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

25 

Item 3. Quantitative and Qualitative Disclosures about Market Risk

44 

Item 4. Controls and Procedures

44 

Part II – OTHER INFORMATION

 

Item 1. Legal Proceedings

45 

Item 1A. Risk Factors

46 

Item 6. Exhibits

46 

Signatures

47 



 





 

 


 

 WORLD WRESTLING ENTERTAINMENT, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share data)

(Unaudited)







 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 



 

Three Months Ended

 

Nine Months Ended



 

September 30,

 

September 30,



 

2016

 

2015

 

2016

 

2015

Net revenues

 

$

164,162 

 

$

166,232 

 

$

534,256 

 

$

492,592 

Cost of revenues

 

 

87,637 

 

 

98,270 

 

 

312,991 

 

 

295,283 

Selling, general and administrative expenses

 

 

52,062 

 

 

44,513 

 

 

161,672 

 

 

139,686 

Depreciation and amortization

 

 

6,194 

 

 

5,571 

 

 

17,747 

 

 

17,328 

Operating income

 

 

18,269 

 

 

17,878 

 

 

41,846 

 

 

40,295 

Investment income, net

 

 

654 

 

 

566 

 

 

1,907 

 

 

1,222 

Interest expense

 

 

(571)

 

 

(615)

 

 

(1,765)

 

 

(1,726)

Other expense, net

 

 

(292)

 

 

(609)

 

 

(1,536)

 

 

(1,032)

Income before income taxes

 

 

18,060 

 

 

17,220 

 

 

40,452 

 

 

38,759 

Provision for income taxes

 

 

6,985 

 

 

6,855 

 

 

14,630 

 

 

13,502 

Net income

 

$

11,075 

 

$

10,365 

 

$

25,822 

 

$

25,257 

Earnings per share: basic

 

$

0.15 

 

$

0.14 

 

$

0.34 

 

$

0.33 

Earnings per share: diluted

 

$

0.14 

 

$

0.14 

 

$

0.33 

 

$

0.33 

Weighted average common shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

76,298 

 

 

75,819 

 

 

76,063 

 

 

75,627 

Diluted

 

 

77,578 

 

 

76,488 

 

 

77,365 

 

 

76,240 

Dividends declared per common share (Class A and B)

 

$

0.12 

 

$

0.12 

 

$

0.36 

 

$

0.36 



 

See accompanying notes to consolidated financial statements.

2


 

WORLD WRESTLING ENTERTAINMENT, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In thousands)

(Unaudited)







 

 

 

 

 

 

 

 

 

 

 

 



 

Three Months Ended

 

Nine Months Ended



 

September 30,

 

September 30,



 

2016

 

2015

 

2016

 

2015

Net income

 

$

11,075 

 

$

10,365 

 

$

25,822 

 

$

25,257 

Other comprehensive income (loss):

 

 

 

 

 

 

 

 

 

 

 

 

Foreign currency translation adjustments

 

 

(14)

 

 

(44)

 

 

(119)

 

 

(129)

Unrealized holding gains (losses) on available-for-sale securities (net of tax expense/(benefit) of $(51) and
$(1), and $117 and $51, respectively)

 

 

(82)

 

 

(2)

 

 

192 

 

 

84 

Total other comprehensive (loss) income

 

 

(96)

 

 

(46)

 

 

73 

 

 

(45)

Comprehensive income

 

$

10,979 

 

$

10,319 

 

$

25,895 

 

$

25,212 



 

See accompanying notes to consolidated financial statements.

3


 

WORLD WRESTLING ENTERTAINMENT, INC.

CONSOLIDATED BALANCE SHEETS

(In thousands, except share data)

(Unaudited)







 

 

 

 

 

 



 

 

 

 

 

 



 

As of



 

September 30,

 

December 31,



 

2016

 

2015

ASSETS

 

 

 

 

 

 

CURRENT ASSETS:

 

 

 

 

 

 

Cash and cash equivalents

 

$

11,457 

 

$

38,019 

Short-term investments, net

 

 

56,117 

 

 

64,357 

Accounts receivable (net of allowance for doubtful accounts and returns

   of $8,187 and $10,311, respectively)

 

 

63,742 

 

 

58,437 

Inventory

 

 

7,935 

 

 

6,167 

Prepaid expenses and other current assets

 

 

28,559 

 

 

12,778 

Total current assets

 

 

167,810 

 

 

179,758 

PROPERTY AND EQUIPMENT, NET

 

 

137,429 

 

 

105,217 

FEATURE FILM PRODUCTION ASSETS, NET

 

 

29,831 

 

 

26,353 

TELEVISION PRODUCTION ASSETS, NET

 

 

15,965 

 

 

11,416 

INVESTMENT SECURITIES

 

 

24,928 

 

 

22,278 

NON-CURRENT DEFERRED INCOME TAX ASSETS

 

 

33,538 

 

 

44,709 

OTHER ASSETS, NET

 

 

18,116 

 

 

19,414 

TOTAL ASSETS

 

$

427,617 

 

$

409,145 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

 

CURRENT LIABILITIES:

 

 

 

 

 

 

Current portion of long-term debt

 

$

6,096 

 

$

4,440 

Accounts payable and accrued expenses

 

 

61,712 

 

 

70,001 

Deferred income

 

 

65,459 

 

 

57,152 

Total current liabilities

 

 

133,267 

 

 

131,593 

LONG-TERM DEBT

 

 

36,740 

 

 

17,135 

NON-CURRENT INCOME TAX LIABILITIES

 

 

781 

 

 

1,117 

NON-CURRENT DEFERRED INCOME

 

 

36,795 

 

 

49,983 

Total liabilities

 

 

207,583 

 

 

199,828 

COMMITMENTS AND CONTINGENCIES

 

 

 

 

 

 

STOCKHOLDERS’ EQUITY:

 

 

 

 

 

 

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

   38,448,728 and 34,215,459 shares issued and outstanding as of

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

 

 

385 

 

 

342 

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

   37,949,438 and 41,688,704 shares issued and outstanding as of

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

 

 

379 

 

 

417 

Additional paid-in capital

 

 

382,337 

 

 

369,643 

Accumulated other comprehensive income

 

 

3,084 

 

 

3,011 

Accumulated deficit

 

 

(166,151)

 

 

(164,096)

Total stockholders’ equity

 

 

220,034 

 

 

209,317 

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY

 

$

427,617 

 

$

409,145 



 

See accompanying notes to consolidated financial statements.

4


 

WORLD WRESTLING ENTERTAINMENT, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(In thousands)

(Unaudited)







 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 



 

Common Stock

 

Additional

 

Other

 

 

 

 

 

 



 

Class A

 

Class B

 

Paid - in

 

Comprehensive

 

Accumulated

 

 

 



 

Shares

 

Amount

 

Shares

 

Amount

 

Capital

 

Income

 

Deficit

 

Total

Balance, December 31, 2015

 

34,215 

 

$

342 

 

41,689 

 

$

417 

 

$

369,643 

 

$

3,011 

 

$

(164,096)

 

$

209,317 

Net income

 

 —

 

 

 —

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

25,822 

 

 

25,822 

Other comprehensive income

 

 —

 

 

 —

 

 —

 

 

 —

 

 

 —

 

 

73 

 

 

 —

 

 

73 

Stock issuances, net

 

494 

 

 

 

 —

 

 

 —

 

 

(4,236)

 

 

 —

 

 

 —

 

 

(4,231)

Conversion of Class B common stock by shareholder

 

3,740 

 

 

38 

 

(3,740)

 

 

(38)

 

 

 —

 

 

 —

 

 

 —

 

 

 —

Tax effect from stock-based payment arrangements

 

 —

 

 

 —

 

 —

 

 

 —

 

 

892 

 

 

 —

 

 

 —

 

 

892 

Cash dividends declared

 

 —

 

 

 —

 

 —

 

 

 —

 

 

482 

 

 

 —

 

 

(27,877)

 

 

(27,395)

Stock-based compensation

 

 —

 

 

 —

 

 —

 

 

 —

 

 

15,556 

 

 

 —

 

 

 —

 

 

15,556 

Balance, September 30, 2016

 

38,449 

 

$

385 

 

37,949 

 

$

379 

 

$

382,337 

 

$

3,084 

 

$

(166,151)

 

$

220,034 



 

See accompanying notes to consolidated financial statements.

5


 

WORLD WRESTLING ENTERTAINMENT, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)







 

 

 

 

 

 



 

 

 

 

 

 



 

Nine Months Ended



 

September 30,



 

2016

 

2015

OPERATING ACTIVITIES:

 

 

 

 

 

 

Net income

 

$

25,822 

 

$

25,257 

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

 

 

 

 

 

 

Amortization and impairments of feature film production assets

 

 

4,420 

 

 

2,933 

Amortization of television production assets

 

 

19,122 

 

 

26,368 

Depreciation and amortization

 

 

21,480 

 

 

20,121 

Services provided in exchange for equity instruments

 

 

(2,484)

 

 

(1,680)

Equity in earnings of affiliate, net of dividends received

 

 

(400)

 

 

(165)

Other amortization

 

 

1,649 

 

 

1,564 

Stock-based compensation

 

 

15,556 

 

 

12,092 

(Recovery from) provision for doubtful accounts

 

 

(410)

 

 

369 

Provision for (benefit from) deferred income taxes

 

 

11,171 

 

 

(10,558)

Other non-cash adjustments

 

 

(500)

 

 

(822)

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

 

 

 

 

 

 

Accounts receivable

 

 

(4,914)

 

 

(14,675)

Inventory

 

 

(1,768)

 

 

(791)

Prepaid expenses and other assets

 

 

(19,946)

 

 

(6,625)

Feature film production assets

 

 

(7,081)

 

 

(4,311)

Television production assets

 

 

(23,671)

 

 

(26,558)

Accounts payable, accrued expenses and other liabilities

 

 

(15,988)

 

 

7,899 

Deferred income

 

 

(2,397)

 

 

1,496 

Net cash provided by operating activities

 

 

19,661 

 

 

31,914 

INVESTING ACTIVITIES:

 

 

 

 

 

 

Purchases of property and equipment and other assets

 

 

(23,888)

 

 

(15,850)

Purchases of short-term investments

 

 

 —

 

 

(14,721)

Proceeds from sales and maturities of investments

 

 

7,565 

 

 

19,695 

Purchase of investment securities

 

 

(2,250)

 

 

(1,210)

Net cash used in investing activities

 

 

(18,573)

 

 

(12,086)

FINANCING ACTIVITIES:

 

 

 

 

 

 

Repayment of long-term debt

 

 

(13,322)

 

 

(3,250)

Dividends paid

 

 

(27,395)

 

 

(27,237)

Debt issuance costs

 

 

(702)

 

 

(850)

Proceeds from borrowings under credit facilities

 

 

11,583 

 

 

 —

Proceeds from issuance of stock

 

 

1,294 

 

 

992 

Excess tax benefits from stock-based payment arrangements

 

 

892 

 

 

426 

Net cash used in financing activities

 

 

(27,650)

 

 

(29,919)

NET DECREASE IN CASH AND CASH EQUIVALENTS

 

 

(26,562)

 

 

(10,091)

CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD

 

 

38,019 

 

 

47,227 

CASH AND CASH EQUIVALENTS, END OF PERIOD

 

$

11,457 

 

$

37,136 

NON-CASH INVESTING AND FINANCING TRANSACTIONS:

 

 

 

 

 

 

Non-cash purchase of property and equipment

 

$

3,710 

 

$

1,176 

Non-cash assumption of mortgage (See Note 12)

 

$

23,000 

 

$

 —

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

 

$

 —

 

$

13,800 



 



 

 

See accompanying notes to consolidated financial statements.

6


 

Table of Contents

WORLD WRESTLING ENTERTAINMENT, INC.

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except share data)

(Unaudited)

 

1. Basis of Presentation and Business Description

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

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

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

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

Media Division:

Network

·

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

Television

·

Revenues consist principally of television rights fees and advertising.

Home Entertainment

·

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

Digital Media

·

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

Live Events:

·

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

Consumer Products Division:

Licensing

·

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

Venue Merchandise

·

Revenues consist of sales of merchandise at our live events.

WWEShop

·

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

 

7


 

Table of Contents

WORLD WRESTLING ENTERTAINMENT, INC.

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except share data)

(Unaudited)

 

WWE Studios:

·

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

 

2. Significant Accounting Policies

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

Cost of Revenues

Included within Costs of revenues are the following:







 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 



 

Three Months Ended

 

Nine Months Ended



 

September 30,

 

September 30,



 

2016

 

2015

 

2016

 

2015

Amortization and impairment of feature film assets

 

$

1,719 

 

$

1,524 

 

$

4,420 

 

$

2,933 

Amortization of television production assets

 

 

1,553 

 

 

16,314 

 

 

19,122 

 

 

26,368 

Amortization of WWE Network content delivery and technology assets

 

 

1,347 

 

 

981 

 

 

3,726 

 

 

2,793 

Total amortization and impairment included in cost of revenues

 

$

4,619 

 

$

18,819 

 

$

27,268 

 

$

32,094 

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

Recent Accounting Pronouncements

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



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



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



 

8


 

Table of Contents

WORLD WRESTLING ENTERTAINMENT, INC.

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except share data)

(Unaudited)

 

In February 2016, the FASB issued ASU No. 2016-02 “Leases (Topic 842), which will supersede the existing guidance for lease accounting. This new standard will require lessees to recognize leases on their balance sheets, and leaves lessor accounting largely unchanged. The new standard requires a dual approach for lessee accounting under which a lessee would account for leases as finance leases or operating leases. Both finance leases and operating leases will result in the lessee recognizing a right-of-use asset and a corresponding lease liability. For finance leases, the lessee would recognize interest expense and amortization of the right-of-use asset, and for operating leases, the lessee would recognize a straight-line total lease expense. The new guidance is effective for fiscal years beginning after December 15, 2018 and interim periods within those fiscal years, which for the Company will be effective for the fiscal year beginning January 1, 2019, with early adoption permitted.  An entity will be required to recognize and measure leases at the beginning of the earliest period presented using a modified retrospective approach. We are currently evaluating the impact of the adoption of this new standard on our consolidated financial statements.



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

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

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



 

3. Segment Information

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

The Company presents OIBDA as the primary measure of segment profit (loss).  The Company defines OIBDA as operating income before depreciation and amortization, excluding feature film and television production asset amortization and impairments, as well as the amortization of costs related to content delivery and technology assets utilized for our WWE Network.  The Company believes the presentation of OIBDA is relevant and useful for investors because it allows investors to view our segment performance in the same manner as the primary method used by management to evaluate segment performance and make decisions about allocating resources.  Additionally, we believe that OIBDA provides a meaningful representation of operating cash flows within our segments.

 

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WORLD WRESTLING ENTERTAINMENT, INC.

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except share data)

(Unaudited)

 

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

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

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

 

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WORLD WRESTLING ENTERTAINMENT, INC.

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except share data)

(Unaudited)

 

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







 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 



 

Three Months Ended

 

Nine Months Ended



 

September 30,

 

September 30,



 

2016

 

2015

 

2016

 

2015

Net revenues:

 

 

 

 

 

 

 

 

 

 

 

 

Network

 

$

45,054 

 

$

40,883 

 

$

137,135 

 

$

118,618 

Television

 

 

56,343 

 

 

65,247 

 

 

173,105 

 

 

175,532 

Home Entertainment

 

 

2,506 

 

 

2,937 

 

 

8,930 

 

 

10,756 

Digital Media

 

 

6,537 

 

 

5,809 

 

 

18,423 

 

 

13,888 

Live Events

 

 

28,553 

 

 

26,046 

 

 

105,799 

 

 

91,782 

Licensing

 

 

9,043 

 

 

11,557 

 

 

39,001 

 

 

39,325 

Venue Merchandise

 

 

5,101 

 

 

4,889 

 

 

19,311 

 

 

17,960 

WWEShop

 

 

7,423 

 

 

5,990 

 

 

21,721 

 

 

17,119 

WWE Studios

 

 

2,510 

 

 

1,751 

 

 

7,742 

 

 

5,334 

Corporate & Other

 

 

1,092 

 

 

1,123 

 

 

3,089 

 

 

2,278 

Total net revenues

 

$

164,162 

 

$

166,232 

 

$

534,256 

 

$

492,592 



 

 

 

 

 

 

 

 

 

 

 

 

OIBDA:

 

 

 

 

 

 

 

 

 

 

 

 

Network (1)

 

$

17,396 

 

$

17,653 

 

$

27,500 

 

$

33,385 

Television (1)

 

 

32,362 

 

 

26,552 

 

 

87,873 

 

 

73,691 

Home Entertainment

 

 

895 

 

 

1,336 

 

 

3,403 

 

 

3,994 

Digital Media

 

 

2,637 

 

 

3,243 

 

 

2,708 

 

 

2,273 

Live Events

 

 

6,110 

 

 

6,432 

 

 

35,620 

 

 

30,683 

Licensing

 

 

4,612 

 

 

7,062 

 

 

22,836 

 

 

24,305 

Venue Merchandise

 

 

2,051 

 

 

1,753 

 

 

7,743 

 

 

7,009 

WWEShop

 

 

1,296 

 

 

1,052 

 

 

4,268 

 

 

3,590 

WWE Studios

 

 

879 

 

 

(896)

 

 

881 

 

 

(1,295)

Corporate & Other

 

 

(43,775)

 

 

(40,738)

 

 

(133,239)

 

 

(120,012)

Total OIBDA

 

$

24,463 

 

$

23,449 

 

$

59,593 

 

$

57,623 

(1)

Beginning on January 1, 2016, the Company started allocating certain shared costs and expenses between our Network and Television segments, with further refinements to the methodology implemented during the third quarter of 2016We believe this allocation more accurately reflects the operations of each of these reportable segments.  The impact of this allocation methodology during the three and nine months ended September 30, 2016 was a decline to Network segment OIBDA of approximately $3,248 and $11,645, respectively, with a corresponding increase of $3,248 and $11,645, respectively, to Television segment OIBDA.  The allocation methodology had no impact on our consolidated financial statements.  Prior year Network and Television segment results were not revised for this prospective change in the allocation method.  Refer to Management's Discussion and Analysis of Financial Condition and Results of Operations for further discussion.



Reconciliation of Total Operating Income to Total OIBDA







 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 



 

Three Months Ended

 

Nine Months Ended



 

September 30,

 

September 30,



 

2016

 

2015

 

2016

 

2015

Total operating income

 

$

18,269 

 

$

17,878 

 

$

41,846 

 

$

40,295 

Depreciation and amortization

 

 

6,194 

 

 

5,571 

 

 

17,747 

 

 

17,328 

Total OIBDA

 

$

24,463 

 

$

23,449 

 

$

59,593 

 

$

57,623 



 

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WORLD WRESTLING ENTERTAINMENT, INC.

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except share data)

(Unaudited)

 

Geographic Information

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







 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 



 

Three Months Ended

 

Nine Months Ended



 

September 30,

 

September 30,



 

2016

 

2015

 

2016

 

2015

North America

 

$

118,527 

 

$

125,857 

 

$

398,308 

 

$

373,607 

Europe/Middle East/Africa

 

 

24,718 

 

 

22,736 

 

 

88,466 

 

 

75,150 

Asia Pacific

 

 

18,419 

 

 

15,901 

 

 

41,253 

 

 

38,388 

Latin America

 

 

2,498 

 

 

1,738 

 

 

6,229 

 

 

5,447 

Total net revenues

 

$

164,162 

 

$

166,232 

 

$

534,256 

 

$

492,592 



Revenues generated from the United Kingdom, our largest international market, totaled $17,290 and $16,297, and $58,166 and $49,609 for the three and nine months ended September 30, 2016 and 2015, respectively.  The Company’s property and equipment was almost entirely located in the United States at September 30, 2016 and 2015.

 

4. Earnings Per Share

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







 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 



 

Three Months Ended

 

Nine Months Ended



 

September 30,

 

September 30,



 

2016

 

2015

 

2016

 

2015

Net income

 

$

11,075 

 

$

10,365 

 

$

25,822 

 

$

25,257 



 

 

 

 

 

 

 

 

 

 

 

 

Weighted average basic common shares outstanding

 

 

76,298 

 

 

75,819 

 

 

76,063 

 

 

75,627 

Dilutive effect of restricted and performance stock units

 

 

1,280 

 

 

669 

 

 

1,301 

 

 

612 

Dilutive effect of employee share purchase plan

 

 

 —

 

 

 —

 

 

 

 

Weighted average dilutive common shares outstanding

 

 

77,578 

 

 

76,488 

 

 

77,365 

 

 

76,240 



 

 

 

 

 

 

 

 

 

 

 

 

Earnings per share:

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

0.15 

 

$

0.14 

 

$

0.34 

 

$

0.33 

Diluted

 

$

0.14 

 

$

0.14 

 

$

0.33 

 

$

0.33 



 

 

 

 

 

 

 

 

 

 

 

 

Anti-dilutive outstanding restricted and performance stock

  units (excluded from per-share calculations)

 

 

 —

 

 

 —

 

 

 

 

 —









 

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WORLD WRESTLING ENTERTAINMENT, INC.

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except share data)

(Unaudited)

 

5. Stock-based Compensation



2007 Omnibus Incentive Plan



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



2016 Omnibus Incentive Plan  



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

Restricted Stock Units

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

The following table summarizes the RSU activity during the nine months ended September 30, 2016:







 

 

 

 

 



 

 

 

 

 



 

Units

 

Weighted-

Average

Grant-Date

Fair Value

Unvested at January 1, 2016

 

266,450 

 

$

16.31 

Granted

 

222,880 

 

$

17.16 

Vested

 

(91,661)

 

$

16.72 

Forfeited

 

(46,200)

 

$

16.51 

Dividend equivalents

 

8,711 

 

$

16.69 

Unvested at September 30, 2016

 

360,180 

 

$

16.71 





Performance Stock Units

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

 

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WORLD WRESTLING ENTERTAINMENT, INC.

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except share data)

(Unaudited)

 

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

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

The following table summarizes the PSU activity during the nine months ended September 30, 2016:







 

 

 

 

 



 

 

 

 

 



 

Units

 

Weighted-

Average

Grant-Date

Fair Value

Unvested at January 1, 2016

 

1,238,679 

 

$

17.95 

Granted

 

956,730 

 

$

21.30 

Achievement adjustment

 

620,923 

 

$

14.94 

Vested

 

(590,632)

 

$

16.53 

Forfeited

 

(104,815)

 

$

17.63 

Dividend equivalents

 

32,458 

 

$

15.32 

Unvested at September 30, 2016

 

2,153,343 

 

$

17.63 





During the nine months ended September 30, 2016, we granted 956,730 PSUs, inclusive of the second half of the executive grants noted above, which are subject to certain performance conditions.

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

Stock-based compensation costs, which includes costs related to RSUs, PSUs and the Company's Employee Stock Purchase Plan, totaled $5,967 and $4,305 and $15,556 and $12,092 for the three and nine months ended September 30, 2016 and 2015, respectively.

 

6. Property and Equipment

Property and equipment consisted of the following:







 

 

 

 

 

 



 

 

 

 

 

 



 

As of



 

September 30,

 

December 31,



 

2016

 

2015

Land, buildings and improvements

 

$

129,323 

 

$

100,594 

Equipment

 

 

135,575 

 

 

117,018 

Corporate aircraft

 

 

31,277 

 

 

31,277 

Vehicles

 

 

244 

 

 

244 



 

 

296,419 

 

 

249,133 

Less: accumulated depreciation and amortization

 

 

(158,990)

 

 

(143,916)

    Total

 

$

137,429 

 

$

105,217 



Depreciation expense for property and equipment totaled $5,887 and $5,147, and $16,823 and $16,052 for the three and nine months ended September 30, 2016 and 2015, respectively. 



 

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WORLD WRESTLING ENTERTAINMENT, INC.

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except share data)

(Unaudited)

 

Asset Acquisition



On September 14, 2016, the Company acquired, through WWE Real Estate Holdings, LLC a wholly-owned special purpose subsidiary (“WWE Real Estate”), a building and underlying real property located in Stamford, Connecticut (the “Purchased Property”) from one of the debtors in the Chapter 11 bankruptcy proceedings of Newbury Common Associates, LLC and certain of its affiliates. The purchase price of $26,883 was funded, in part, by the assumption of an existing mortgage of $23,000  (see Note 12, Debt, for further discussion). The Company has been one of the tenants in the Purchased Property for approximately 16 years.  In connection with the acquisition, WWE Real Estate assumed the seller’s interests as landlord under several existing leases of the Purchased Property, including the landlord’s interest in leases under which the Company is a tenant.  Since the assets of WWE Real Estate represent collateral for the underlying mortgage, these assets are not available to satisfy debts and obligations to any other creditors of the Company.  As of September 30, 2016, costs of $28,039, consisting of purchase price and capitalized transaction costs, are reflected in Land, buildings and improvements, which is a component of Property and equipment, on the Consolidated Balance Sheets.  Depreciation on the Purchased Property is computed on a straight-line basis over the estimated useful lives of the Purchased Property in accordance with the Company’s existing accounting policy for property and equipment. 

 

7. Feature Film Production Assets, Net

Feature film production assets consisted of the following:







 

 

 

 

 

 



 

 

 

 

 

 



 

As of



 

September 30,

 

December 31,



 

2016

 

2015

In release

 

$

14,079 

 

$

15,249 

Completed but not released

 

 

7,076 

 

 

2,432 

In production

 

 

7,826 

 

 

8,029 

In development

 

 

850 

 

 

643 

    Total

 

$

29,831 

 

$

26,353 



Approximately 43% of “In release” film production assets are estimated to be amortized over the next 12 months, and approximately 70% of “In release” film production assets are estimated to be amortized over the next three years.  We anticipate amortizing approximately 80% of our "In release" film production asset within four years as we receive revenues associated with television distribution of our licensed films.  During the three and nine months ended September 30, 2016 and 2015, we amortized $1,719 and $1,254,  and $4,420 and $2,663,  respectively, of feature film production assets. During these periods, our films were released under a co-distribution model.  Under the co-distribution model, third-party distribution partners control the distribution and marketing of co-distributed films, and as a result, we recognize revenue on a net basis after the third-party distribution partners recoup distribution fees and expenses and results are reported to us.  Results are typically reported to us in periods subsequent to the initial release of the film.

During the nine months ended September 30, 2016, we released three feature films,  Countdown,  Scooby Doo! & WWE: Curse of the Speed Demon, and Interrogation,  direct to DVD, which comprises $3,273 of our “In release” feature film assets as of September 30, 2016.    We currently have six films designated as “Completed but not released” and have four films “In production.”  We also have capitalized certain script development costs and pre-production costs for various other film projects designated as “In development.”  Development costs are evaluated at each reporting period for impairment and to determine if a project is deemed to be abandoned.  We did not  record any impairment charges related to abandoned projects during the three and nine months ended September 30, 2016 and 2015.

Unamortized feature film production assets are evaluated for impairment each reporting period.  We review and revise estimates of ultimate revenue and participation costs at each reporting period to reflect the most current information available.  If estimates for a film’s ultimate revenue and/or costs are revised and indicate a significant decline in a film’s profitability, or if events or circumstances change that indicate we should assess whether the fair value of a film is less than its unamortized film costs, we calculate the film's estimated fair value using a discounted cash flows model.  If fair value is less than unamortized cost, the film asset is written down to fair value.    We recorded an impairment charge of $270 related to our feature films  during the three and nine months ended September 30, 2015.  We did not record any impairment charges during the three and nine months ended September 30, 2016 related to our feature films.

 

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WORLD WRESTLING ENTERTAINMENT, INC.

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except share data)

(Unaudited)

 

 

8. Television Production Assets, Net

Television production assets consisted of the following:







 

 

 

 

 

 



 

 

 

 

 

 



 

As of



 

September 30,

 

December 31,



 

2016

 

2015

In release

 

$

4,648 

 

$

425 

In production

 

 

11,317 

 

 

10,991 

    Total

 

$

15,965 

 

$

11,416 



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



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







 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 



 

Three Months Ended

 

Nine Months Ended



 

September 30,

 

September 30,



 

2016

 

2015

 

2016

 

2015

WWE Network programming

 

$

1,887 

 

$

1,856 

 

$

10,616 

 

$

4,765 

Television programming

 

 

(334)

 

 

14,458 

 

 

8,506 

 

 

21,603 

    Total

 

$

1,553 

 

$

16,314 

 

$

19,122 

 

$

26,368 



During the three months ended September 30, 2016, we reduced previously recorded amortization expenses for certain television programming as their final production costs were less than originally estimated and expensed.



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

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

 

9. Investment Securities and Short-Term Investments

Investment Securities

Included within Investment Securities are the following:





 

 

 

 

 

 



 

 

 

 

 

 



 

As of



 

September 30,

 

December 31,



 

2016

 

2015

Equity method investment

 

$

14,563 

 

$

14,163 

Cost method investments

 

 

10,365 

 

 

8,115 

Total investment securities

 

$

24,928 

 

$

22,278 

 

16


 

Table of Contents

WORLD WRESTLING ENTERTAINMENT, INC.

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except share data)

(Unaudited)

 

Equity Method Investment



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



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







 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 



 

Three Months Ended

 

Nine Months Ended



 

September 30,

 

September 30,



 

2016

 

2015

 

2016

 

2015

Net equity method earnings from Tapout

 

$

470 

 

$

369 

 

$

1,307 

 

$

629 

Net dividends received from Tapout

 

 

(160)

 

 

(264)

 

 

(907)

 

 

(464)

Equity in earnings of affiliate, net of dividends received

 

$