World Wrestling Entertainment (WWE) 10-Q 2003 Q2 Quarterly report

UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q

|X|	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the quarterly period ended July 25, 2003
	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 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 |X|    No |_|

Indicate by check mark whether the Registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).

Yes |X|    No |_|

At August 21, 2003, the number of shares outstanding of the Registrant’s Class A common stock, par value $.01 per share, was 13,609,532 and the number of shares outstanding of the Registrant’s Class B common stock, par value $.01 per share, was 54,780,207.

World Wrestling Entertainment, Inc.
Table of Contents
		Page #
Part I – FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
	Consolidated Statements of Income for the three months ended July 25, 2003	2
	and July 26, 2002
	Consolidated Balance Sheets as of July 25, 2003 and April 30, 2003	3
	Consolidated Statements of Cash Flows for the three months ended	4
	July 25, 2003 and July 26, 2002
	Consolidated Statement of Stockholders’ Equity and Comprehensive (Loss) Income for the	5
	three months ended July 25, 2003
	Notes to Consolidated Financial Statements	6
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		13
Item 3. Quantitative and Qualitative Disclosures about Market Risk		18
Item 4. Controls and Procedures		18
Part II – OTHER INFORMATION
Item 1. Legal Proceedings		19
Item 6. Exhibits and Reports on Form 8-K		19
Signature		20

1

World Wrestling Entertainment, Inc.
Consolidated Statements of Income
(dollars in thousands, except per share data)
(Unaudited)

	Three Months Ended
	July 25,				July 26,
	2003				2002
Net revenues		$	74,675			$	85,449
Cost of revenues			49,261				56,618
Selling, general and administrative expenses			19,719				21,787
Depreciation and amortization			2,724				1,992
Operating income			2,971				5,052
Interest income and other, net			1,520				929
Income before income taxes			4,491				5,981
Provision for income taxes			1,683				2,126
Income from continuing operations			2,808				3,855
Discontinued operations:
Loss from discontinued operations, net of tax			(158	)			(1,327	)
Net income		$	2,650			$	2,528
Earnings (loss) per common share - Basic and Diluted:
Continuing operations		$	0.04			$	0.05
Discontinued operations		$	—			$	(0.02	)
Net income		$	0.04			$	0.04

See Notes to Consolidated Financial Statements

2

World Wrestling Entertainment, Inc.
Consolidated Balance Sheets
(dollars in thousands)
(Unaudited)

	As of				As of
	July 25,				April 30,
	2003				2003
ASSETS
CURRENT ASSETS:
Cash and cash equivalents		$	117,237			$	128,473
Short-term investments			145,760				142,641
Accounts receivable (less allowance for doubtful accounts of
$3,022 as of July 25, 2003 and $5,284 as of April 30, 2003)			35,565				49,729
Inventory, net			903				839
Prepaid expenses and other current assets			17,438				18,443
Assets of discontinued operations			20,953				21,129
Total current assets			337,856				361,254
PROPERTY AND EQUIPMENT - NET			57,842				59,325
INTANGIBLE ASSETS - NET			13,373				12,055
OTHER ASSETS			4,547				4,623
TOTAL ASSETS		$	413,618			$	437,257
LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt		$	791			$	777
Accounts payable			12,767				14,188
Accrued expenses and other liabilities			38,185				34,991
Deferred income			20,230				24,662
Liabilities of discontinued operations			10,299				11,554
Total current liabilities			82,272				86,172
LONG-TERM DEBT			8,933				9,126
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS’ EQUITY:
Class A common stock			182				182
Class B common stock			548				548
Treasury stock			(49,815	)			(30,569	)
Additional paid-in capital			297,473				297,315
Accumulated other comprehensive (loss) income			(121	)			243
Retained earnings			74,146				74,240
Total stockholders’ equity			322,413				341,959
					��
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY		$	413,618			$	437,257

See Notes to Consolidated Financial Statements

3

World Wrestling Entertainment, Inc.
Consolidated Statements of Cash Flows
(dollars in thousands)
(Unaudited)

	Three Months Ended
	July 25,				July 26,
	2003				2002
OPERATING ACTIVITIES:
Net income		$	2,650			$	2,528
Adjustments to reconcile net income to net cash provided by
(used in) operating activities:
Loss from discontinued operations, net of tax			158				1,327
Depreciation and amortization			2,724				1,992
Amortization of deferred income			(335	)			(318	)
Stock compensation costs			158				—
Provision for doubtful accounts			(1,976	)			463
Provision for inventory obsolescence			(128	)			314
Changes in assets and liabilities:
Accounts receivable			16,141				12,498
Inventory			64				162
Prepaid expenses and other assets			993				382
Accounts payable			(1,420	)			(4,882	)
Accrued expenses and other liabilities			3,515				2,630
Deferred income			(4,097	)			(961	)
Net cash provided by continuing operations			18,447				16,135
Net cash used in discontinued operations			(1,236	)			(3,977	)
Net cash provided by operating activities			17,211				12,158
INVESTING ACTIVITIES:
Purchase of property and equipment			(980	)			(1,266	)
Purchase of other assets			(1,487	)			—
Purchase of short—term investments, net			(3,811	)			(828	)
Net cash used in continuing operations			(6,278	)			(2,094	)
Net cash used in discontinued operations			—				(895	)
Net cash used in investing activities			(6,278	)			(2,989	)
FINANCING ACTIVITIES:
Repayments of long—term debt			(158	)			(147	)
Obligations under capital lease agreement			(21	)			—
Purchase of treasury stock			(19,246	)			(27,693	)
Dividends paid			(2,744	)			—
Net proceeds from exercise of stock options			—				404
Net cash used in continuing operations			(22,169	)			(27,436	)
Net cash provided by discontinued operations			—				322
Net cash used in financing activities			(22,169	)			(27,114	)
NET DECREASE IN CASH AND CASH EQUIVALENTS			(11,236	)			(17,945	)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD			128,473				86,396
CASH AND CASH EQUIVALENTS, END OF PERIOD		$	117,237			$	68,451
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid during the period for income taxes, net of refunds		$	1,022			$	1,030
Cash paid during the period for interest		$	179			$	190

See Notes to Consolidated Financial Statements

4

World Wrestling Entertainment, Inc.
Consolidated Statement of Stockholders’ Equity and Comprehensive (Loss) Income
(dollars and shares in thousands)
(Unaudited)

														Accumulated
														Other
											Additional			Comprehensive
		Common Stock					Treasury				Paid-in			(Loss)				Retained
		Shares		Amount			Stock				Capital			Income				Earnings				Total
Balance, May 1, 2003			72,996		$	730		$	(30,569	)		$	297,315		$	243			$	74,240			$	341,959
Comprehensive income:
	Translation adjustment					—			—				—			123				—				123
	Unrealized holding loss, net of tax					—			—				—			(487	)			—				(487	)
	Net income					—			—				—			—				2,650				2,650
Total comprehensive income																								2,286
Dividends paid																				(2,744	)			(2,744	)
Stock compensation costs						—			—				158			—				—				158
Purchase of treasury stock						—			(19,246	)			—			—				—				(19,246	)
Balance, July 25, 2003			72,996		$	730		$	(49,815	)		$	297,473		$	(121	)		$	74,146			$	322,413

See Notes to Consolidated Financial Statements

5

World Wrestling Entertainment, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands, except share and per share data)
(Unaudited)

1. Basis of Presentation and Business Description

The accompanying consolidated financial statements include the accounts of World Wrestling Entertainment, Inc., and our wholly owned subsidiaries. In fiscal 2003, we closed the operations of our entertainment complex,The World. We recorded the results from operations of this business and the estimated shutdown cost as discontinued operations.

All significant intercompany balances have been eliminated. Certain prior year amounts have been reclassified to conform with the current year presentation. In the opinion of management, 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.

The preparation of financial statements in conformity with generally accepted accounting principles 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.

We are an integrated media and entertainment company, principally engaged in the development, production and marketing of television programming and live events and the licensing and sale of branded consumer products featuring our World Wrestling Entertainment brand of entertainment. Our operations are organized around two principal activities:

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

•  Branded merchandise, which consists of licensing and direct sale of merchandise.Revenues are derived from sales of consumer products through third party licensees and direct marketing and sales of merchandise, magazines and home videos.

Our discontinued operations consisted primarily of food and beverage and retail revenues generated from our entertainment complex.

2. Stockholders’ Equity

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.

Had compensation expense for our stock options been recognized based on the fair value on the grant date under the methodology prescribed by SFAS No. 123, our income from continuing operations and basic and diluted earnings from continuing operations per common share for the three months ended July 25, 2003 and July 26, 2002 would have been impacted as shown in the following table:

6

World Wrestling Entertainment, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands, except share and per share data)
(Unaudited)

		Three months ended
		July 25,				July 26,
		2003				2002
Reported income from continuing operations			$	2,808			$	3,855
Add:	Stock-based employee compensation expense included in reported income
	from continuing operations, net of related tax effects			98				—
Deduct:	Total stock-based employee compensation expense determined under fair value based
	method for all awards, net of related tax effects			(754	)			(1,028	)
Pro forma income from continuing operations			$	2,152			$	2,827
Reported basic and diluted earnings from continuing
operations per common share			$	0.04			$	0.05
Pro forma basic and diluted earnings from continuing
operations per common share			$	0.03			$	0.04

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 our stock options are not traded on any exchange, employees can receive no value or derive any benefit from holding stock options under these plans without an increase in market price of our common stock. Such an increase in stock price would benefit all stockholders commensurately.

In July 2003, we paid a quarterly dividend of $0.04 per share, or $2,744, on all Class A and Class B common shares.

In June 2003, we purchased approximately 2.0 million shares of common stock from Viacom for approximately $19,246.

In June 2003, we granted 792,500 options at an exercise price of $9.60 and granted 178,000 restricted stock units at an average price per share of $9.60. Such issuances were granted to officers and employees under our 1999 Long-term Incentive Plan which was approved by our stockholders. Total compensation costs related to the grant of restricted stock units, based on the estimated value of the units on the grant date, is $1,709 and will be amortized over the vesting period, which is seven years, unless targeted EBITDA of $65,000 is met for any fiscal year during the vesting period. In that event, the unvested restricted stock units immediately vest and accordingly, the unamortized balance at that date would be expensed. EBITDA is defined as Earnings before interest, taxes, depreciation and amortization.

Stock-based compensation expense related to the restricted stock grant for the three months ended July 25, 2003 was $158 ($98 net of tax). No compensation expense was recorded for the options granted under the intrinsic accounting method followed by the Company.

7

World Wrestling Entertainment, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands, except share and per share data)
(Unaudited)

3. Earnings Per Share

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

	Three months ended
	July 25,		July 26,
	2003		2002
Weighted average number of common shares outstanding:
Basic		69,045,995		71,110,001
Diluted		69,154,113		71,129,655
Dilutive effect of outstanding options and restricted stock units		108,118		19,654
Anti-dilutive outstanding options		6,613,550		6,258,000

4. Segment Information

Our continuing operations are conducted within two reportable segments, live and televised entertainment and branded merchandise. The live and televised entertainment segment consists of live events and television programming. Our branded merchandise segment includes consumer products sold through third party licensees and the marketing and sale of merchandise, magazines and home videos. The results of operations for theTheWorld are not included in the segment reporting as they are classified as discontinued operations in our consolidated financial statements. We do not allocate corporate overhead to each of the segments and as a result, corporate overhead is a reconciling item in the table below. There are no intersegment revenues. Revenues derived from sales outside of North America were approximately $15,312 and $10,340 for the three months ended July 25, 2003 and July 26, 2002, respectively. Unallocated assets consist primarily of cash, short-term investments and real property.

	Three months ended
	July 25,					July 26,
	2003					2002
Net Revenues:
Live and televised entertainment		$	62,693				$		67,816
Branded merchandise			11,982				17,633
Total net revenues		$	74,675				$		85,449
Depreciation and Amortization:
Live and televised entertainment		$		1,058			$		807
Branded merchandise				642					374
Corporate				1,024					811
Total depreciation and amortization		$		2,724			$	1,992
Operating Income:
Live and televised entertainment		$	17,669				$		18,939
Branded merchandise				2,054				3,632
Corporate		(16,752			)		(17,519			)
Total operating income		$		2,971			$	5,052

8

World Wrestling Entertainment, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands, except share and per share data)
(Unaudited)

	As of
	July 25,			April 30,
Assets:	2003			2003
Live and televised entertainment		$	56,755		$	73,727
Branded merchandise			18,356			17,395
Unallocated (1)			338,507			346,135
Total assets		$	413,618		$	437,257

(1) – Includes Assets of discontinued operations of $20,953 and $21,129 as of July 25, 2003 and April 30, 2003, respectively.

5. Property and Equipment

Property and equipment consisted of the following:

	As of
	July 25,			April 30,
	2003			2003
Land, buildings and improvements		$	51,068		$	51,009
Equipment			41,267			40,374
Vehicles			639			639
Property under capital lease			1,056			1,056
			94,030			93,078
Less accumulated depreciation and amortization			36,188			33,753
Total		$	57,842			59,325

Depreciation and amortization expense for property and equipment was $2,474 and $1,992 for the three months ended July 25, 2003 and July 26, 2002, respectively.

6. Intangible Assets

Intangible assets consisted of the following:

	As of
	July 25, 2003
	Gross
	Carrying			Accumulated
	Amount			Amortization
Amortized intangible assets:
Film libraries		$	4,568		$	(250	)
Unamortized intangible assets
Trademarks		$	9,055

9

World Wrestling Entertainment, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands, except share and per share data)
(Unaudited)

	As of April 30, 2003
	Gross Carrying			Accumulated
	Amount			Amortization
Amortized intangible assets:
Film libraries		$	3,000		$	-
Unamortized intangible assets
Trademarks		$	9,055

For the three months ended July 25, 2003, amortization expense was $250.

Estimated amortization expense for each of the years ending is as follows:

April 30, 2004	$	1,392
April 30, 2005		1,523
April 30, 2006		1,523
April 30, 2007		130
	$	4,568

7. Investments

Short-term investments consisted of the following as of July 25, 2003 and April 30, 2003:

	July 25, 2003
				Unrealized					Fair
	Cost			Holding Loss					Value
Fixed-income mutual funds		$	146,322		$	(562	)	$	145,760
	April 30, 2003
				Unrealized					Fair
	Cost			Holding Gain					Value
Government obligations		$	63,755		$	—		$	63,755
Corporate obligations and other			38,711			—			38,711
Fixed-income mutual funds			40,027			148			40,175
Total		$	142,493			148		$	142,641

8. Commitments and Contingencies

Legal Proceedings

World Wide Fund for Nature

There has been no significant development in this legal proceeding subsequent to the disclosure in Note 10 of Notes to Consolidated Financial Statements in our Annual Report on Form 10-K for the fiscal year ended April 30, 2003. We are unable to predict the outcome of any adjudication of the Fund’s claims in an English court if the Fund were actually to present a damages claim. An unfavorable outcome of the Fund’s damages claims, however, may have a material adverse effect on our financial condition or results of operations.

10

World Wrestling Entertainment, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands, except share and per share data)
(Unaudited)

Shenker & Associates

There has been no significant development in this legal proceeding subsequent to the disclosure in Note 10 of Notes to Consolidated Financial Statements in our Annual Report on Form 10-K for the fiscal year ended April 30, 2003, except for the following. On May 23, 2003, we filed a motion for sanctions asserting significant litigation misconduct by the plaintiff, for which we are seeking, among other things, dismissal of all claims against us. That motion is currently pending before the court. Discovery in the consolidated cases has been extended through October 2003 to allow us to pursue our claims in both actions. With regard to the plaintiff's claims, we have denied liability and intend to defend the action vigorously. An unfavorable outcome of this suit may have a material adverse effect on our financial condition or results of operations.

Marvel Enterprises

There has been no significant development in this legal proceeding subsequent to the disclosure in Note 10 of Notes to Consolidated Financial Statements in our Annual Report on Form 10-K for the fiscal year ended April 30, 2003, except for the following. By Order dated July 31, 2003, the court granted our motion for summary judgment in its entirety and dismissed all claims asserted against us. The plaintiff has thirty days from the date of the order to appeal. While we believe the Court’s decision to dismiss claims against us was correct, we are unable to predict whether the plaintiff will file an appeal, and if so, the likelihood of success of such an appeal. The court also granted in part and denied in part Universal, Inc.’s (formerly known as World Championship Wrestling, Inc.) motion for summary judgment. Trial on the remaining claims asserted against Universal, Inc. is scheduled for October 21, 2003. We are defending Universal in connection with these claims. In light of the summary judgment rulings, we do not believe that an unfavorable outcome of the remaining claims against Universal, Inc. would have a material adverse effect on our financial condition or results of operations, however no assurances can be given in this regard.

IPO Class Action

There has been no significant development in this legal proceeding subsequent to the disclosure in Note 10 of Notes to Consolidated Financial Statements in our Annual Report on Form 10-K for the fiscal year ended April 30, 2003, except for the following. The class plaintiffs and the issuer defendants, including our officers named in the suit and us, have reached an agreement in principle for the settlement of all claims. To that end, a memorandum of understanding concerning the terms of the settlement (the “MOU”) was circulated for approval among all issuer defendants. While we strongly deny all allegations, we approved the MOU, subject to certain conditions, including, specifically, approval of the settlement as reflected in the MOU by our primary insurer. It is our understanding that the significant majority of issuer defendants have approved the MOU as well. We expect the settlement process will move forward toward the execution of a definitive settlement agreement; however no assurances can be given in this regard. If a settlement is consummated on the terms set forth in the MOU, we believe it will not have a material adverse effect on our financial condition or results of operations.

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.

11

World Wrestling Entertainment, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands, except share and per share data)
(Unaudited)

9. Discontinued operations

During fiscal 2003, we closed the operations ofThe World. In early May 2001, we formalized our decision to discontinue operations of the XFL. The results ofThe World business and the assets and liabilities ofThe Worldand the XFL have been classified as discontinued operations in our consolidated financial statements and are summarized as follows:

		Three months ended
		July 25, 2003				July 26, 2002
Discontinued operations:
	Loss from The World operations, net of taxes of $97 and $814 for the three months ended July 25, 2003 and July 26, 2002, respectively		$	(158	)		$	(1,327	)

	As of
	July 25, 2003				April 30, 2003
Assets:
Cash		$	899			$	1,185
Accounts receivable			1				5
Income tax receivable			5,461				5,343
Prepaid expenses			90				94
Inventory			65				65
Deferred income taxes, net of valuation allowance of $1,350			14,437				14,437
Total Assets		$	20,953			$	21,129
Liabilities:
Accounts payable		$	—				$19
Accrued expenses			10,353				11,561
Due to World Wresting Entertainment, Inc.			234				262
Minority Interest			(288	)			(288	)
Total Liabilities		$	10,299			$	11,554

Assets of the discontinued operations are stated at their estimated net realizable value.

12

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

Background

We are an integrated media and entertainment company principally engaged in the development, production and marketing of television programming and live events and the licensing and sale of branded consumer products featuring our highly successful brands.

Our operations are organized around two principal activities:

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

•  Branded merchandise, which consists of licensing and direct sale of merchandise.Revenues are derived from sales of consumer products through third party licensees and direct marketing and sale of merchandise, magazines and home videos.

Results of Operations

First Quarter Ended July 25, 2003 compared to First Quarter Ended July 26, 2002 (Dollars in millions)

	July 25,			July 26,			better
Net Revenues	2003			2002			(worse)
Live & televised		$	62.7		$	67.8		(8	%)
Branded merchandise			12.0			17.6		(32	%)
Total		$	74.7		$	85.4		(13	%)

     The following chart reflects comparative revenues and key drivers for each of the businesses within our live and televised segment:

	July 25,			July 26,			better
Live & Televised Revenues	2003			2002			(worse)
Live events		$	18.1		$	19.1		(5	%)
Number of events			84			87		(3	%)
Average attendance			5,200			5,750		(10	%)
Average ticket price		$	40.42		$	37.92		7	%
Pay-per-view		$	13.8		$	19.0		(27	%)
Number of domestic buys			877,300			1,135,100		(23	%)
Retail price		$	34.95		$	34.95		—	%
Advertising		$	16.1		$	16.7		(4	%)
Average weekly household ratings for RAW			3.9			3.9		—	%
Average weekly household ratings forSmackDown!			3.3			3.3		—	%
Sponsorship revenues		$	0.9		$	1.5		(40	%)
Television rights fees:
Domestic		$	9.2		$	8.4		10	%
International		$	5.5		$	4.5		22	%

13

In the first quarter of fiscal 2004, only two pay-per-view events were produced as compared to three in the prior year quarter. This was due to the timing of our quarter end as compared to the date of our July pay-per-view event.

The increase in domestic television rights fees was due primarily to executive producer fees related to an upcoming feature film staringThe Rock.

The following chart reflects comparative revenues and certain drivers for selected businesses within our branded merchandise segment:

	July 25,			July 26,			better
Branded Merchandise Revenues	2003			2002			(worse)
Licensing		$	2.2		$	3.2		(31	%)
Merchandise		$	4.3		$	6.3		(32	%)
Per capita spending		$	8.09		$	8.93		(9	%)
Publishing		$	1.7		$	3.5		(51	%)
Net units sold			1,024,000			1,576,700		(35	%)
Home video		$	2.5		$	3.5		(29	%)
Net units sold:
DVD			214,000			188,000		14	%
VHS			50,200			187,300		(73	%)
Total			264,200			375,300		(30	%)
Internet Advertising		$	1.0		$	0.9		11	%

The decrease in merchandise revenues was due primarily to lower attendance at our live events and a decrease in per capita.

	July 25,				July 26,				better
Cost of Revenues	2003				2002				(worse)
Live & televised		$	41.4			$	44.9			8	%
Branded merchandise			7.9				11.7			32	%
Total		$	49.3			$	56.6			13	%
Profit contribution margin			34	%			34	%

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The following chart reflects comparative cost of revenues for each of the businesses within our live and televised segment:

	July 25,			July 26,			better
Cost of Revenues-Live & Televised	2003			2002			(worse)
Live events		$	14.2		$	14.5		2	%
Pay-per-view		$	5.4		$	7.8		31	%
Advertising		$	7.0		$	7.7		9	%
Television production costs		$	11.8		$	12.1		2	%
Other		$	3.0		$	2.8		(7	%)

Profit contribution margin was approximately 34% for both periods. The impact of airing one less pay-per-view event was offset by increased television rights fees and decreased television production costs.

The following chart reflects comparative cost of revenues for certain of the businesses within our branded merchandise segment:

	July 25,			July 26,			better
Cost of Revenues — Branded Merchandise	2003			2002			(worse)
Licensing		$	0.6		$	1.1		45	%
Merchandise		$	3.4		$	5.5		38	%
Publishing		$	1.6		$	2.1		24	%
Home video		$	1.3		$	2.0		35	%
Digital media		$	0.8		$	1.0		20	%

Profit contribution margin was approximately 34% for both periods.

	July 25,			July 26,			better
	2003			2002			(worse)
Selling, General and Administrative Expenses		$	19.7		$	21.8		10	%

The following chart reflects the amounts and percent change of certain significant overhead items:

	July 25,			July 26,				better
	2003			2002				(worse)
Staff related expenses	$	10.3			$	8.9			(16	%)
Legal fees		3.0				3.2			6	%
Settlement of litigation		—				(3.5	)		(100	%)
Consulting and accounting fees		2.3				2.3			—
Advertising and promotion expenses		1.1				4.6			76	%
Bad debt expense		(2.0	)			0.5			500	%
All other		5.0				5.8			14	%
Total SG&A	$	19.7			$	21.8			10	%
SG&A as a percentage of net revenues		26	%			26	%

The increase in staff related expenses primarily reflects an accrual related to incentive compensation. The decrease in advertising and promotion expenses was primarily a result of costs incurred in the prior year quarter related to our advertising campaign associated with our new company name and logo. The decrease in bad debt expense was a result of a payment received from a pay-per-view service that was fully reserved for in the prior year. Included in consulting fees for the current quarter was $1.0 million related to an asset acquisition.

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	July 25,			July 26,			better
	2003			2002			(worse)
Depreciation and Amortization		$	2.7		$	2.0		35	%

The increase reflects amortization related to a film library acquired in fiscal 2003 and depreciation associated with our newWWE shopzone.com commerce engine.

	July 25,			July 26,			better
	2003			2002			(worse)
Interest expense		$	0.2		$	0.2		—

	July 25,			July 26,			better
	2003			2002			(worse)
Interest income and other, net		$	1.7		$	1.1		55	%

The increase reflects a higher overall rate of return on our investments in the current quarter.

	July 25,				July 26,				better
Provision for Income Taxes	2003				2002				(worse)
Provision for income taxes		$	1.7			$	2.1			(19	%)
Effective tax rate			37	%			36	%

Discontinued Operations —The World. In fiscal 2003, we closed the operations of our entertainment complex,The World. As a result, the operations ofThe World have been reflected in discontinued operations.

Loss from discontinued operations of The World, net of taxes, was $0.2 million for the three months ended July 25, 2003 as compared to a loss from discontinued operations, net of taxes, of $1.3 million for the three months ended July 25, 2002.

Liquidity and Capital Resources

Cash flows from operating activities for the first quarter of fiscal 2004 and fiscal 2003 were $17.2 million and $12.2 million, respectively. Cash flows provided by operating activities from continuing operations were $18.4 million and $16.1 million for the first quarter of fiscal 2004 and fiscal 2003, respectively. Working capital, consisting of current assets less current liabilities, was $255.6 million as of July 25, 2003 and $275.1 million as of April 30, 2003.

Cash flows used for investing activities were $6.3 million and $3.0 million for the first quarter of fiscal 2004 and fis cal 2003, respectively. Capital expenditures for the three months ended July 25, 2003 were $1.0 million as compared to $1.3 million for the three months ended July 26, 2003. For fiscal 2004, we estimate capital expenditures to be approximately $7.5 million – $10.0 million, which includes a conversion of our critical business and financial systems, television equipment and building improvements. In July 2003, we acquired a film library and certain other assets for approximately $1.5 million. As of August 21, 2003, we had approximately $164.9 million invested in fixed-income mutual funds, which primarily held AAA and AA debt rated instruments and $24.4 million in United States Treasury Notes. Our investment policy is designed to assume a minimum of credit, interest rate and market risk.

Cash flows used in financing activities for the first quarter of fiscal 2004 were $22.2 million and were $27.1 million for the first quarter of fiscal 2003. In June 2003, we purchased approximately 2.0 million shares of our Class A common stock from Viacom for approximately $19.2 million. In July 2003, we paid a quarterly dividend of $0.04 per share, or approximately $2.7 million, on all Class A and Class B common shares.

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We have not entered into any contracts that would require us to make significant guaranteed payments other than those that were previously disclosed in the Liquidity and Capital Resource section of our Annual Report on Form 10-K for our fiscal year ended April 30, 2003.

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 and capital expenditures as well as costs related to the shutdown of theThe World.

Application of Critical Accounting Policies

There have been no changes to our accounting policies that were previously disclosed in our Annual Report on Form 10-K for our fiscal year ended April 30, 2003 nor in the methodology used in formulating these significant judgments and estimates that affect the application of these policies. Amounts included in our consolidated balance sheet in accounts that we have identified as being subject to significant judgments and estimates were as follows:

	As of
	July 25, 2003		April 30, 2003
Pay-per-view accounts receivable		$12.0 million		$24.3 million
Advertising reserve for underdelivery		$4.7 million		$6.9 million
Home video reserve for returns		$1.8 million		$1.5 million
Publishing newsstand reserve for returns		$3.8 million		$5.0 million
Allowance for doubtful accounts		$3.0 million		$5.3 million

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 Quarterly Report, 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 Quarterly Report, in press releases 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 story lines 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 story lines; (iv) our failure to maintain or renew key agreements could adversely affect our ability to distribute our television and pay-per-view programming, and in this regard our primary distribution agreement with Viacom runs until Fall 2004 for its UPN network and Fall 2005 for its Spike TV networks; (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 than we; (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) general economic conditions or a change in the popularity of our brand of sports entertainment could adversely impact our business; (viii) risks associated with producing live events, both domestically and internationally, including without limitation risks that our insurance may not cover liabilities resulting from accidents or injuries and that we may be prohibited from promoting and conducting live events if we do not comply with applicable regulations; (ix) uncertainties associated with international markets; (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

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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 Quarterly Report and undue reliance should not be placed on these statements.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

In the normal course of business, we are exposed to foreign currency exchange rate, interest rate and equity price risks that could impact our results of operations. Our foreign currency exchange rate risk is minimized by maintaining minimal net assets and liabilities in currencies other than our functional currency.

Interest Rate Risk

We are exposed to interest rate risk related to our debt and investment portfolio. Our debt primarily consists of the mortgage related to our corporate headquarters, which has an annual interest rate of 7.6%. Due to the decrease in mortgage rates, this debt is now at a rate in excess of market, however due to the terms of our agreement we are prohibited from refinancing for several years. The impact of the decrease in mortgage rates is considered immaterial to our consolidated financial statements.

Our investment portfolio currently consists primarily of fixed-income mutual funds and treasury notes , with a strong emphasis placed on preservation of capital. In an effort to minimize our exposure to interest rate risk, our investment portfolio’s dollar weighted duration is less than two years.

Item 4. Controls and Procedures

Based on their most recent review, which was completed within 90 days of filing of this report, our Chief Executive Officer and our Chief Financial Officer have concluded that our disclosure controls and procedures are effective to ensure that information required to be disclosed by us in the reports that we file or submit under the Securities Exchange Act of 1934, as amended, is accumulated and communicated to our management, including our Chief Executive Officer and our Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure and are effective to ensure that such information is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. While we are in the process of formalizing certain of our control procedures, there were no significant changes in our internal controls or in other factors that could significantly affect those controls subsequent to the date of this evaluation.

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PART II. OTHER INFORMATION

Item 1. Legal Proceedings

See Note 8 to Notes to Consolidated Financial Statements, which is incorporated herein by reference.

Item 6. Exhibits and Reports on Form 8-K

(a.) Exhibits

10.8	World Wrestling Entertainment, Inc. Management Bonus Plan (Incorporated by reference to Appendix
	A to Proxy Statement for 2003 Annual Meeting of Stockholders, filed July 31, 2003).*
10.17	Offer letter, dated January 13, 2003, between the Registrant and Kurt Schneider (filed herewith).*
10.18	Offer letter, dated February 24, 2003, between the Registrant and Philip B. Livingston (filed herewith).*
10.19	Booking Contract, dated as of January 1, 2000, between the Registrant and Shane B. McMahon
	(“McMahon Booking Contract”) (filed herewith).*
10.19A	First Amendment to McMahon Booking Contract, dated March 12, 2001 (filed herewith). *
10.20	Employment Agreement, dated as of October 29, 1996, between the Registrant and James W. Ross
	(“Ross Employment Agreement”) (filed herewith).*
10.20A	Amendment to Ross Employment Agreement, dated March 12, 2001 (filed herewith).*
10.20B	Second Amendment to Ross Employment Agreement, dated June 2, 2003 (filed herewith).*
10.20C	Third Amendment to Ross Employment Agreement, dated August 13, 2003 (filed herewith).*
31.1	Certification by Linda E. McMahon pursuant to Section 302 of Sarbanes-Oxley Act of 2002 (filed
	herewith).
31.2	Certification by Philip B. Livingston pursuant to Section 302 of Sarbanes-Oxley Act of 2002 (filed
	herewith).
32.1	Certification by Linda E. McMahon and Philip B. Livingston pursuant to Section 906 of Sarbanes-
	Oxley Act of 2002 (filed herewith).

* Indicates management contract or compensatory plan or arrangement.

(b.)Reports on Form 8-K

The Registrant filed a report on Form 8-K dated June 13, 2003 under Item 5, Other Events and Item 7, Financial Statements and Exhibits.

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SIGNATURE

      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 Entertainment, Inc.
	(Registrant)
Dated: August 29, 2003	By:	/s/	Philip B. Livingston
			Philip B. Livingston
			Chief Financial Officer

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