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 June 30, 2007 
 
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  (I.R.S. Employer 
incorporation or organization)    Identification No.) 
 
1241 East Main Street   
Stamford, CT 06902   
(203) 352-8600   
(Address, including zip code, and telephone number, including area code,
of Registrant’s principal executive offices)
   

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 a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of accelerated filer and large accelerated filer in Rule 12b-2 of the Exchange Act.

Large accelerated filer                                    Accelerated filer             X                              Non-accelerated filer                 

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes              No      

X

At July 20, 2007 the number of shares outstanding of the Registrant’s Class A common stock, par value $.01 per share, was 23,830,184 and the number of shares outstanding of the Registrant’s Class B common stock, par value $.01 per share, was 47,713,563.


World Wrestling Entertainment, Inc.
Table of Contents

  Page # 
Part I – FINANCIAL INFORMATION   
   Item 1. Consolidated Financial Statements (unaudited)   
             Consolidated Income Statements for the three and six months ended June 30, 2007   
                   and June 30, 2006 

    2

              Consolidated Balance Sheets as of June 30, 2007 and December 31, 2006 

    3

              Consolidated Statements of Cash Flows for the six months ended June 30, 2007   
                   and June 30, 2006      4
              Consolidated Statement of Stockholders’ Equity and Comprehensive   
                   Income for the six months ended June 30, 2007 

    5

              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      25
   Item 4. Controls and Procedures      25
Part II – OTHER INFORMATION   
   Item 1. Legal Proceedings      26
   Item 4. Submission of Matters to a Vote of Security Holders        26
   Item 6. Exhibits     26
   Signature      28

1


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

   Three Months Ended Six Months Ended 
   June 30,   June 30,   June 30,   June 30, 
   2007        2006         2007         2006
Net revenues  $ 137,511     $ 119,339   $ 244,902   $ 214,417
 
Cost of revenues 100,524   72,955 158,621 124,375
Selling, general and administrative expenses 25,008   22,979 51,369 49,973
Depreciation and amortization   2,252     2,038   4,604   4,412
 
Operating income   9,727     21,367   30,308   35,657
 
Investment income, net 1,681   1,806 3,979 3,804
Interest expense 126   138 234 280
Other (expense)/income, net   (60 )   13   346   997
 
Income before income taxes 11,222   23,048 34,399 40,178
 
Provision for income taxes   4,176     8,381   12,215   16,057
 
Net income  $ 7,046   $ 14,667 $ 22,184 $ 24,121
 
Earnings per share – Basic and Diluted         
     Net income $ 0.10   $ 0.21 $ 0.31 $ 0.34
 
Weighted average common shares outstanding:        
 
     Basic 71,307   71,176 71,176 69,952
     Diluted 72,145   71,397 71,949 70,409

See Notes to Consolidated Financial Statements.

2


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

   As of   As of 
   June 30,   December 31, 
   2007     2006 
CURRENT ASSETS:              
     Cash and equivalents $ 82,367 $ 86,267
     Short-term investments 183,789 161,889
     Accounts receivable, net 54,608 52,113
     Inventory, net 3,309 3,049
     Prepaid expenses and other current assets   19,856     13,803
          Total current assets   343,929     317,121
 
PROPERTY AND EQUIPMENT, NET 66,678 67,972
FEATURE FILM PRODUCTION ASSETS 39,273 53,560
INTANGIBLE ASSETS, NET 2,761 3,328
OTHER ASSETS    13,557     11,304
TOTAL ASSETS  $ 466,198   $ 453,285
 
CURRENT LIABILITIES:    
     Current portion of long-term debt $ 894 $ 862
     Accounts payable 14,890 14,909
     Accrued expenses and other liabilities 31,272 25,837
     Deferred income   18,660     20,166
          Total current liabilities   65,716     61,774
 
LONG-TERM DEBT 5,345 5,800
NON-CURRENT TAX LIABILITY 11,130 -
 
COMMITMENTS AND CONTINGENCIES    
 
STOCKHOLDERS' EQUITY:    
     Class A common stock 238 233
     Class B common stock 477 477
     Additional paid-in capital 298,440 286,985
     Accumulated other comprehensive income 1,552 666
     Retained earnings   83,300     97,350
          Total stockholders' equity   384,007     385,711
 
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 466,198   $ 453,285 

See Notes to Consolidated Financial Statements.

3


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

   Six Months Ended 
   June 30,   June 30, 
   2007     2006 
OPERATING ACTIVITIES:                   
     Net income  $  22,184   $ 24,121  
Adjustments to reconcile net income to net cash provided       
         by operating activities:       
     Write-off of feature film production assets    15,919   -  
     Revaluation of warrants    (117 )  (714 ) 
     Depreciation and amortization    4,604   4,412  
     Realized loss on sale of investments    730   1,029  
     Amortization of investment income    (247 )  (776 ) 
     Stock compensation costs    4,218   2,795  
     Provision for doubtful accounts    (573 )  101  
     Provision for inventory obsolescence    1,090   1,119  
     Benefit for deferred income taxes    (1,636 )  (1,754 ) 
     Excess tax benefits from stock-based payment arrangements    (795 )  (1,475 ) 
     Changes in assets and liabilities:       
          Accounts receivable    (1,923 )  75  
          Inventory    (1,350 )  (1,658 ) 
          Prepaid expenses and other assets    3,508   3,156  
          Feature film production assets    (1,631 )  (10,737 ) 
          Accounts payable    (18 )  (1,654 ) 
          Accrued expenses and other liabilities    6,070   4,298  
          Deferred income    (1,259 )    (1,299 ) 
               Net cash provided by operating activities    48,774   21,039  
 
INVESTING ACTIVITIES:       
     Purchases of property and equipment    (2,578 )  (4,629 ) 
     Purchase of film library assets    (166 )  (2,264 ) 
     Purchase of short-term investments    (79,695 )  (20,154 ) 
     Proceeds from sales or maturities of short-term investments    57,275     101,615  
               Net cash (used in) provided by investing activities    (25,164 )    74,568  
 
FINANCING ACTIVITIES:       
     Repayments of long-term debt    (422 )  (391 ) 
     Dividends paid    (34,214 )  (33,583 ) 
     Issuance of stock, net    438   305  
     Proceeds from exercise of stock options    5,893   12,753  
     Excess tax benefits from stock-based payment arrangements    795     1,475  
               Net cash used in financing activities    (27,510 )    (19,441 ) 
 
NET (DECREASE) INCREASE IN CASH AND EQUIVALENTS    (3,900 )  76,166  
CASH AND EQUIVALENTS, BEGINNING OF PERIOD    86,267     101,314  
CASH AND EQUIVALENTS, END OF PERIOD  $  82,367   $ 177,480  

See Notes to Consolidated Financial Statements.

4


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

             Accumulated       
         Additional   Other       
   Common Stock   Paid - in   Comprehensive   Retained     
   Shares     Amount     Capital     Income     Earnings     Total 
Balance, December 31, 2006 70,998       $ 710       $   286,985       $ 666         $   97,350         $   385,711  
 
Comprehensive income:                        
     Net income               22,184     22,184  
     Translation adjustment             788       788  
     Unrealized holding gain, net of tax             (354 )     (354 )
     Reclassification adjustment for losses                    
          realized in net income, net of tax             452       452  
Total comprehensive income                   23,070  
 
Stock issuances, net 72   1   35         36  
Exercise of stock options 446   4   5,889         5,893  
Excess tax benefits from stock based                    
     payment arrangements         795         795  
Dividends paid         518     (34,732 )   (34,214 )
Stock compensation costs         4,218         4,218  
Adjustment to apply FIN 48                    (1,502 )   (1,502 )
Balance, June 30, 2007 71,516 $ 715 $   298,440 $ 1,552   $ 83,300   $  384,007  

See Notes to Consolidated Financial Statements.

5


1. Basis of Presentation and Business Description

     The accompanying consolidated financial statements include the accounts of World Wrestling Entertainment, Inc., and our subsidiaries. We are an integrated media and entertainment company, with operations organized around four principal segments:

Live and Televised Entertainment

  • Revenues consist principally of ticket sales to live events, sales of merchandise at these live events, television rights fees, sales of television advertising and sponsorships, and fees for viewing our pay-per-view and video on demand programming.

Consumer Products

  • Revenues consist principally of the direct sales of WWE produced home videos and magazine publishing and royalties or license fees related to various WWE themed products such as video games, toys and books.

Digital Media

  • Revenues consist principally of advertising sales on our websites, sale of merchandise on our website through our WWEShop internet storefront and various broadband and mobile content.

WWE Films

  • Consists of the production and distribution of filmed entertainment featuring our Superstars. Two feature films were released in 2006 and one film was released in 2007, however, no revenues have been recorded to date as we do not participate in revenues until the print and advertising costs incurred by our distributors have been recouped and the results have been reported to us.

     All significant intercompany balances have been eliminated. Certain prior year amounts have been reclassified to conform to the current year presentation. The accompanying consolidated financial statements are unaudited. 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 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. 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 transition period ended December 31, 2006.

     Beginning on January 1, 2007, we switched our fiscal periods to a calendar basis with a fiscal year end on December 31. All references to years in this report relate to calendar years.

6


Recent Accounting Pronouncements

     In September 2006, the Financial Accounting Standards Board (FASB) issued SFAS No. 157, Fair Value Measurements (SFAS 157). SFAS 157 provides a common definition of fair value and establishes a framework to make the measurement of fair value in generally accepted accounting principles more consistent and comparable. SFAS 157 also requires expanded disclosures to provide information about the extent to which fair value is used to measure assets and liabilities, the methods and assumptions used to measure fair value, and the effect of fair value measures on earnings. SFAS 157 is effective for us on January 1, 2008. We are currently assessing the potential effect of SFAS 157 on our financial statements.

     In February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets and Financial Liabilities Including an amendment of FASB Statement 115 (SFAS 159). SFAS 159 expands opportunities to use fair value measurements in financial reporting and permits entities to choose to measure many financial instruments and certain other items at fair value. SFAS 159 is effective for us on January 1, 2008. We are currently assessing the potential effect of SFAS 159 on our financial statements.

     In July 2006, the FASB issued FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxes (FIN 48). FIN 48 clarifies the accounting for income taxes by prescribing a minimum probability threshold that a tax position must meet before a financial statement benefit is recognized. The minimum threshold is defined in FIN 48 as a tax position that is more likely than not to be sustained upon examination by the applicable taxing authority, including resolution of any related appeals or litigation processes, based on the technical merits of the position. The tax benefit to be recognized is measured as the largest amount of benefit that is estimated to be greater than fifty percent likely of being realized upon ultimate settlement. FIN 48 must be applied to all existing tax positions upon initial adoption. As a result of the implementation of FIN 48 on January 1, 2007, we recognized a $1,502 increase in the liability for unrecognized income tax benefits, with a corresponding decrease in the opening balance of retained earnings.

     At the adoption date of January 1, 2007, we had $10,382 of unrecognized tax benefits, all of which would affect our effective tax rate if recognized. At June 30, 2007, we have $11,130 of unrecognized tax benefits.

     We recognize potential accrued interest and penalties related to uncertain tax positions in income tax expense. We have approximately $2,831 of accrued interest related to uncertain tax positions as of June 30, 2007.

We file income tax returns in the U.S., various states and various foreign jurisdictions. With few exceptions, we are subject to income tax examinations by tax authorities for years on or after April 30, 2004.

As of June 30, 2007, we do not have any tax positions for which management believes it is reasonably possible that the total amounts of unrecognized tax benefits will significantly increase or decrease within the next twelve months.

2. Share Based Compensation

     Effective May 1, 2006, we adopted SFAS 123(R) using the modified prospective method. Prior to May 1, 2006, we accounted for stock option grants using the intrinsic value method. Compensation expense relating to restricted stock unit grants was recognized over the period during which the employee rendered service to the Company necessary to earn the award. In accordance with the modified prospective method, results for prior periods have not been restated. Stock based compensation cost was approximately $2,124 and $1,387 for the three months ended June 30, 2007 and 2006, respectively, and $4,242 and $2,795 for the six months ended June 30, 2007 and 2006, respectively. We have not issued options since June 2004.

7


     The following table summarizes option activity as of June 30, 2007 and changes during the period then ended:

Weighted
Average
Number of Exercise
Activity     Options     Price
Outstanding as of January 1, 2007 1,715,300     $ 13.14
Granted -
Exercised (446,147 ) $ 13.21
Cancelled or expired (44,502 ) $ 12.65
Outstanding as of June 30, 2007 1,224,651 $ 13.43
Exercisable as of June 30, 2007 1,014,106 $ 12.46

     The following table summarizes restricted stock unit activity as of June 30, 2007 and changes during the period then ended:

Weighted
Number of Average
Restricted Stock Grant Date
Activity     Units       Fair Value
Outstanding as of January 1, 2007 1,087,138   $ 14.60
Granted 90,000 $ 16.53
Vested (66,078 ) $ 17.56
Forfeitures (112,821 ) $ 14.93
Dividends 32,430 $ 15.94
Outstanding as of June 30, 2007 1,030,669 $ 15.22

     Total compensation cost related to the grants, based on the estimated value of the units on the grant date is $1,487 and is being amortized over the vesting period, which is three years.

     The following table provides relevant information as to reported results for the three months ended June 30, 2006 under our intrinsic value method of accounting for stock options with supplemental information as if the fair value recognition provisions of SFAS 123 had been applied:

For the Three
Months Ended
    June 30, 2006
Reported income from operations   $ 14,667  
Add: Stock-based employee compensation expense
included in reported income from
operations, net of related tax effects 860
Deduct:    Total stock-based employee compensation
expense determined under fair value based
method for all awards, net of related tax effects   (1,043 )
Pro forma income from operations $ 14,484
Reported basic and diluted earnings from operations per common share $ 0.21
Pro forma basic and diluted earnings from operations per common share $ 0.21

8


3. Stockholders’ Equity

     We paid quarterly dividends of $0.24 per share on all Class A and Class B common shares, or $17,158 and $34,214 for the three and six months ended June 30, 2007, respectively, and $16,955 and $33,583 for the three and six months ended June 30, 2006, respectively.

4. 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 Six months ended
    June 30,     June 30,     June 30,     June 30,
    2007     2006     2007     2006
Basic   71,307,423   71,176,246   71,175,704   69,952,083
Diluted 72,145,790 71,397,862 71,948,938 70,409,137
Dilutive effect of outstanding options and restricted stock units 837,188 656,351 773,234 642,252
Anti-dilutive outstanding options - 10,292 174,400 277,700

5. Segment Information

     During 2006, we expanded the number of our reportable segments to four in order to better to reflect the manner in which management analyzes our performance, including our digital media businesses and the production of feature films. We have also reclassified certain other operations between the reportable segments. All prior year segment information has been adjusted to reflect the current presentation. 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 inter-segment revenues. Revenues derived from sales outside of North America were approximately $33,397 and $57,469 for the three and six months ended June 30, 2007, respectively, and $28,181 and $52,294 for the three and six months ended June 30, 2006, respectively. Unallocated assets consist primarily of cash, short-term investments, real property and other investments.

Three Months Ended Six Months Ended
June 30, June 30, June 30, June 30,
    2007     2006     2007     2006
Net revenues:
           Live and Televised Entertainment   $ 102,884     $ 92,597     $ 165,928     $ 153,948  
           Consumer Products 26,449 20,408 63,846 49,264
           Digital Media 8,178 6,333 15,127 11,205
           WWE Films   -   -   -   -
           Total net revenues $ 137,511 $ 119,339 $ 244,902 $ 214,417
Depreciation and amortization:
           Live and Televised Entertainment $ 903 $ 869 $ 1,813 $ 1,789
           Consumer Products 314 340 733 847
           Digital Media 207 108 416 317
           WWE Films - - - -
           Corporate   828   721   1,642   1,459
           Total depreciation and amortization $ 2,252 $ 2,038 $ 4,604 $ 4,412
Operating income:
           Live and Televised Entertainment $ 30,370 $ 29,990 $ 50,871 $ 51,012
           Consumer Products 14,018 9,425 36,097 26,442
           Digital Media 1,947 1,222 2,238 1,372
           WWE Films (16,406 ) (407 ) (16,863 ) (897 )
           Corporate   (20,202 )   (18,864 )   (42,036 )   (42,271 )
           Total operating income $ 9,727 $ 21,367 $ 30,308 $ 35,657

9



    As of
    June 30, December 31,
        2007     2006
Assets:         
  Live and Televised Entertainment   $ 90,252   $ 77,083
  Consumer Products 11,735 14,982
  Digital Media 7,234 6,128
  WWE Films 39,273 56,299
  Unallocated   317,704     298,793
  Total assets $ 466,198   $ 453,285

6. Property and Equipment

Property and equipment consisted of the following:

  As of
  June 30, December 31,
      2007     2006
Land, buildings and improvements   $ 56,808   $ 56,084
Equipment 47,647 45,752
Corporate aircraft 20,829 20,829
Vehicles   634   634
  125,918 123,299
Less accumulated depreciation and amortization   (59,240 )   (55,327 )
               Total $ 66,678 $ 67,972

     Depreciation and amortization expense for property and equipment was $1,938 and $3,871 for the three and six months ended June 30, 2007, respectively, as compared to $1,698 and $3,565 for the three and six months ended June 30, 2006, respectively.

7. Feature Film Production Assets

Feature film production assets are summarized as follows:

  As of
  June 30, December 31,
      2007     2006
Feature film productions:    
In release   $ 37,979   $ 34,104
Completed but not released - 18,558
In development   1,294   898
Total $ 39,273 $ 53,560

     Two of our feature films, See No Evil and The Marine, were released in 2006. See No Evil achieved more than $15,000 in gross domestic box office receipts while The Marine, has achieved more than $18,800 in gross domestic box office receipts. Our third feature film, The Condemned, was released domestically on April 27, 2007 and achieved more than $7,300 in gross domestic box office receipts to-date.

     Approximately 56% of “In release” film production assets are estimated to be amortized over the next twelve months. Approximately 80% of “In release” film production assets are estimated to be amortized over the next three years.

     Unamortized feature film production assets are evaluated for impairment each reporting period. If the estimated revenue is not sufficient to recover the unamortized asset, the asset will be written down to fair value. During the three months ended June 30, 2007 we recorded an asset impairment charge of $15,662, which reflects our updated expectations related to the performance of The Condemned. As of June 30, 2007, we do not believe any additional capitalized assets included in Feature Film Production Assets are impaired.

10


     In addition to the capitalized production costs related for these three films, we have also capitalized certain script development costs for various other film projects. Capitalized script development costs are reviewed periodically for impairment, and are expensed if a project is deemed to be abandoned. During the three and six months ended June 30, 2007 we expensed $257 of previously capitalized development costs for abandoned projects. There were no costs incurred in the prior year for abandoned projects.

8. Intangible Assets

     Intangible assets consist of acquired sports entertainment film libraries, trademarks and trade names. We have classified these costs as intangible assets and amortize them over the period of the expected revenues to be derived from these assets, generally from three to six years.

     Intangible assets consisted of the following:

As of
June 30, 2007
Gross Net
Carrying Accumulated Carrying
    Amount     Amortization     Amount
Film libraries   $ 7,470   $ (5,524 )   $ 1,946
Trademarks and trade names   3,708   (2,893 )   815
$ 11,178 $ (8,417 ) $ 2,761
 
As of
December 31, 2006
Gross Net
Carrying Accumulated Carrying
Amount Amortization Amount
Film libraries $ 7,304 $ (5,077 ) $ 2,227
Trademarks and trade names   3,708   (2,607 )   1,101
$ 11,012 $ (7,684 ) $ 3,328

     Amortization expense was $314 and $733 for the three and six months ended June 30, 2007, respectively, as compared to $340 and $847 for the three and six months ended June 30, 2006, respectively.

     The following table presents estimated future amortization expense:

     For the year ending December 31, 2007   $ 635
     For the year ending December 31, 2008 1,261
     For the year ending December 31, 2009 851
     For the year ending December 31, 2010   14
$ 2,761

11


9. Short-term Investments

     Short-term investments consisted of the following as of June 30, 2007 and December 31, 2006:

June 30, 2007
Unrealized
Holding Fair
    Cost     Loss     Value
Fixed-income mutual funds and other $ 76,056 $ (2,892 ) $ 73,164
Municipal auction rate securities   110,625   -   110,625
   Total $ 186,681 $ (2,892 ) $ 183,789
 
December 31, 2006
Unrealized
Holding Fair
Cost Loss Value
Fixed-income mutual funds and other $ 89,990 $ (3,101 ) $ 86,889
Municipal auction rate securities   75,000     75,000
   Total $ 164,990 $ (3,101 ) $ 161,889

10. 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 12 of Notes to Consolidated Financial Statements in our Transition Report on Form 10-K for the fiscal period ended December 31, 2006, except as follows:

By order and judgment dated April 2, 2007, the English Court of Appeals reversed the High Court, ruling that the Fund is not entitled in point of law to seek restitutionary damages against us. On May 1, 2007, the Fund filed a petition to the House of Lords for leave to appeal the judgment of the Court of Appeals. On June 28, 2007, the House of Lords refused to grant leave to appeal.

Shenker & Associates; THQ/Jakks

There has been no significant development in this legal proceeding subsequent to the disclosure in Note 11 of Notes to Consolidated Financial Statements in our Transition Report on Form 10-K for the fiscal period ended December 31, 2006, except as follows:

With regard to the Shenker & Associates matter, on May 1, 2007, Stanley Shenker and Jim Bell were sentenced by the United States District Court for the District of Connecticut in connection with their criminal conduct directed towards us, for which they previously pled guilty. Shenker was sentenced to thirty-three months in prison and Bell was sentenced to eight months in prison. We have received approximately $0.8 million out of the previously reported $2.8 million that Shenker is required as a part of his sentencing to pay to us as restitution. No assurances can be given that we will be successful in collecting the entire $2.8 million.

With regard to the Connecticut state court matter, on March 30, 2007, we filed a motion to cite in and to amend complaint in order to add new claims against the existing defendants, THQ, Inc. and THQ/Jakks Pacific, LLC, and new defendants, Jakks Pacific, Inc., Jack Friedman, Steve Berman, Joel Bennett, Brian Farrell, and Stanley Shenker and Associates, Inc., and Shenker. The new claims relate to the defendants’ conduct in connection with the corruption of WWE’s agents, Shenker and Bell, and collusion to secure the WWE videogame license for THQ/Jakks.

12


IPO Class Action

There has been no significant development in this legal proceeding subsequent to the disclosure in Note 12 of Notes to Consolidated Financial Statements in our Transition Report on Form 10-K for the fiscal period ended December 31, 2006, except as follows:

On July 2, 2007, based upon the Second Circuit’s ruling (previously disclosed in our 10-K) that the certification of this proceeding as a class action was invalid, the plaintiffs and issuer-defendants filed a stipulation with the court terminating the proposed settlement.

Other

We have recently received letters from the U.S. Congressional Committee on Oversight and Government Reform and the Subcommittee on Commerce, Trade, and Consumer Protection requesting information relating to our drug policies. We will respond accordingly.

Item 2.

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

Background

     As previously disclosed, we changed our financial reporting to a calendar basis beginning with calendar year 2007. This change is intended to simplify our communication with shareholders and enables us to report our financial results in a timeframe consistent with the majority of our media and entertainment peers.

     In 2006 we expanded the number of our reportable segments to four in order to better reflect the manner in which management analyzes our performance, including our digital media businesses and the production of feature films. We have also reclassified certain other operations between the reportable segments. All prior year information has been adjusted to reflect the current presentation. The following analysis outlines all material activities contained within each segment.

Live and Televised Entertainment

  • Revenues consist principally of ticket sales to live events, sales of merchandise at these live events, television rights fees, sales of television advertising and sponsorships, and fees for viewing our pay-per-view and video on demand programming.

Consumer Products

  • Revenues consist principally of direct sales of WWE produced home videos and magazine publishing and royalties or license fees related to various WWE themed products such as video games, toys and books.

Digital Media

  • Revenues consist principally of advertising sales on our websites, sale of merchandise on our website through our WWEShop internet storefront and various broadband and mobile content.

WWE Films

  • Consists of the production and distribution of filmed entertainment featuring our Superstars. Two feature films were released in 2006 and one feature film was released in 2007, however, no revenues have been recorded to date as we do not participate in revenues until the print and advertising costs incurred by our distributors have been recouped and the results have been reported to us.

13


Results of Operations

Three Months Ended June 30, 2007 compared to Three Months Ended June 30, 2006
(Dollars in millions, except as noted)

Summary

June 30, June 30, better
Net Revenues       2007     2006     (worse)
Live and Televised Entertainment   $ 102.9     $ 92.6   11%
Consumer Products 26.4 20.4   30%
Digital Media 8.2 6.3 30%
WWE Films   -   - NA
Total $ 137.5 $ 119.3 15%

June 30, June 30, better
Cost of Revenues:       2007     2006     (worse)
Live and Televised Entertainment $ 69.5 $ 59.6 (17% )
Consumer Products 10.6 9.6 (11% )
Digital Media 4.5 3.8 (19% )
WWE Films   15.9   - NA
Total $ 100.5 $ 73.0 (38% )
Profit contribution margin 27% 39%

June 30, June 30, better
Operating Income:       2007     2006     (worse)
Live and Televised Entertainment $ 30.4 $ 30.0 1%
Consumer Products 14.0 9.4 49%
Digital Media 1.9 1.2 58%
WWE Films (16.4 ) (0.4 ) NA
Corporate   (20.2 )   (18.8 ) (8% )
Total operating income $ 9.7 $ 21.4 (55% )
Net income $ 7.0 $ 14.7 (52% )

     Our Live and Televised Entertainment segment revenues benefited from both strong international and North American live events. Our Consumer Products segment reflected increases in licensing based revenues, specifically from the sales of licensed toys and apparel. Our Digital Media revenue increase reflects additional wireless based content and advertising revenues. Our operating income in the current quarter was negatively impacted by the recording of an asset impairment for our feature film The Condemned. Based upon the film’s performance to-date, we have reduced the capitalized film asset by approximately $15.7 million to its net fair value.

14


     The following chart reflects comparative revenues and key drivers for each of the businesses within our Live and Televised Entertainment segment:

June 30, June 30, better
Live and Televised Entertainment Revenues       2007     2006     (worse)
Live events   $ 30.1   $ 25.0 20%
           Number of North American events 58 68 (15% )
           Average North American attendance 6,900 5,700 21%
           Average North American ticket price (dollars) $ 46.00 $ 42.07 9%
           Number of international events 26 17 53%
           Average international attendance 6,000 7,500 (20% )
           Average international ticket price (dollars) $ 74.53 $ 66.26 13%
Venue merchandise $ 5.4 $ 5.1 6%
           Domestic per capita spending (dollars) $ 12.76 $ 11.67 9%
 
Pay-per-view $ 39.8 $ 38.1 4%
           Number of pay-per-view events 5 5 -
           Number of buys from pay-per-view events 2,104,000 2,227,000 (6% )
           Average revenue per buy (dollars) $ 18.92 $ 17.11 11%
           Domestic retail price (dollars) $ 39.95 $ 34.95* 14%
 
WWE 24/7 $ 1.3 $ 0.7 86%
 
Television advertising $ 1.3 $ 1.8 (28% )
 
Television rights fees
           Domestic $ 15.6 $ 13.3 17%
           International $ 8.3 $ 7.5 11%
Other $ 1.1   $ 1.0 10%
Total $ 102.9 $ 92.6 11%
Ratings
           Average weekly household ratings for Raw 3.8 4.2 (10% )
           Average weekly household ratings for SmackDown 2.6 2.4 8%
           Average weekly household ratings for ECW 1.6 2.5** (36% )

     *Includes two PPV events at $34.95 and two events at $39.95.

     **Only 3 ECW episodes aired in the second quarter of 2006.

June 30, June 30, better
Cost of Revenues-Live and Televised Entertainment       2007     2006     (worse)
Live events   $ 21.4   $ 17.8 (20% )
Venue merchandise 3.3 3.9 15%
Pay-per-view 24.4 20.4 (20% )
24/7 0.5 0.6 17%
Advertising 0.1 0.3 67%
Television 17.3 14.3 (21% )
Other   2.5     2.2 (14% )
Total $ 69.5   $ 59.6 (17% )
           Profit contribution margin 33% 36%

     Live events revenues increased primarily as a result of increased attendance at both our international and North American events. We held nine additional international events in the current quarter and the average international ticket price reflects a 13% increase in average ticket price. North American live event revenues increased by approximately $2.1 million despite the production of ten fewer events. The primary drivers were the success of our WrestleMania 23 event in Detroit, which contributed approximately $5.2 million in ticket sales, and increases in average attendance at our other live events. The profit contribution margin remained unchanged at 28% in the current year quarter as compared to the prior year quarter.

     Venue merchandise revenues reflected increases in venue sales at our international events and increased per capita spending of approximately 9% by our fans at our North American events. The decline in venue merchandise cost of revenues reflected the expiration of a consulting service agreement and lower material costs, resulting in the profit contribution margin increasing by 16% to 39% in the current quarter.

15


     Pay-per-view revenues increased by $1.7 million in the current quarter based on the success of our WrestleMania event. The domestic retail price for our WrestleMania event was $49.95 in both the current and  prior year quarter. In addition, the domestic retail price of our other pay-per-view events was increased from $34.95 to $39.95 in June 2006. Pay-per-view buys for the five events that occurred in current quarter declined by approximately 6% as compared to the prior year quarter. This decline in buys was offset, in part, by the higher retail price. Pay-per-view costs of revenues increased in the current quarter, due in part to higher production costs and talent expense, resulting in a decline in profit contribution margin of approximately 10% to 38% in the current quarter.

     WWE 24/7, our subscription based video-on-demand service, generated an 86% increase in revenues in the current quarter as the number of subscribers increased significantly. Currently, WWE 24/7 is offered in approximately 75% of video-on-demand enabled homes in the United States. We are currently preparing a marketing campaign for WWE 24/7 in our third quarter that will coincide with our Summer Slam pay-per-view event in August 2007.

     The increase in domestic television rights fees was primarily due to the rights fees received for our ECW programming in the current quarter, which were only present for three weeks in the prior year quarter. The $3.0 million increase in television cost of revenues is due to an overall increase in the costs incurred to produce televised events, partially due to additional direct costs associated with producing four television shows while touring internationally and for the production of our weekly ECW television program.

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

  June 30, June 30, better
Consumer Products Revenues            2007       2006       (worse)
Licensing  $ 7.7 $ 5.2 48%  
Magazine publishing  $ 3.7 $ 3.0 23%  
     Net units sold    933,900   1,069,600         (13% )
Home video  $ 14.8 $ 12.1 22%  
     Gross DVD units shipped    1,043,603   992,426 5%  
Other  $  0.2   $ 0.1 100%  
Total  $  26.4   $ 20.4 30%  
 
 
  June 30, June 30, better
Cost of Revenues-Consumer Products   2007 2006 (worse)
Licensing  $ 1.9 $ 0.9 (111% ) 
Magazine publishing    3.0   2.3 (31% ) 
Home video    5.5   6.3 13%  
Other    0.2     0.1 (100% ) 
Total  $ 10.6   $ 9.6 (11% ) 
     Profit contribution margin    60%   53%  

     Licensing revenues increased in part due to higher royalties earned on sales of toys and apparel products in the current quarter. Toy and apparel based revenues increased by an aggregate of approximately $2.4 million in the current quarter. The increase in the licensing cost of revenues was due to additional amounts paid to our talent based on the increase in associated revenues and changes in our product mix.

     Magazine publishing revenue increased by 23% in the current quarter. In July 2006, we began publishing a new magazine titled WWE Magazine that replaced our two former Raw and SmackDown magazines. We published three issues in the current quarter as compared to seven issues in the prior year quarter. We also published two special edition issues in both the current and prior year quarters. The increase in newsstand price of approximately $1.00 has more than offset the decline in the net number of units sold. Magazine publishing cost of revenues increased primarily due to higher editorial expenses associated with WWE Magazine. The profit contribution margin for magazine publishing declined slightly to 19% in the current quarter.

     Home video revenues increased by 22%, led by the successful release of our WrestleMania 23 DVD, which shipped more than 310,000 gross units in the current quarter. Home video cost of revenues declined by 13% due in part to lower duplication fees, reflecting fewer multi-disc titles shipped in the current quarter. Profit contribution margin in the current quarter was 63% in the current quarter as compared to 48% in the prior year quarter.

16


     The following chart provides performance results and key drivers for our Digital Media segment:

  June 30,   June 30,   better
Digital Media Revenues        2007       2006       (worse)
WWE.com  $ 4.6   $ 2.9   59%  
WWEShop  $ 3.6   $ 3.4   6%  
     Average revenues per order (dollars)  $ 50.98   $ 48.58   NA  
Total  $ 8.2   $ 6.3   30%  
 
  June 30,   June 30,   better
Cost of Revenues-Digital Media  2007   2006   (worse)
WWE.com    $ 1.9   $ 1.5   (27% )
WWEShop    2.6     2.3           (13% )
Total  $ 4.5   $ 3.8   (19% )
     Profit contribution margin  45%   38%    

     WWE.com revenues reflect an increase in the revenue generated by advertising sales on our website and additional wireless based content. In March 2007, we announced a multi-year deal with AT&T Wireless to provide exclusive WWE content, including videos and ring tones.

     WWEShop revenues increased due to an increase in the average amount per order coupled with the number of orders processed to over 68,000 in the current quarter.

WWE Films

     We do not participate in film revenues until the print and advertising costs incurred by our distributors have been recouped and the results have been reported to us. Accordingly, no revenues have been recorded to date for our three feature films, See No Evil, The Marine and The Condemned, which were released in 2006, 2006 and 2007, respectively. During the three months ended June 30, 2007 we recorded an asset impairment charge of approximately $15.7 million, which reflects our updated expectations related to the performance of The Condemned, which was released domestically in April 2007. As of June 30, 2007 we have approximately $39.3 million in capitalized film development costs associated with these films and various other film projects that are in development.

Selling, General and Administrative

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

  June 30,   June 30,   better
        2007       2006       (worse)
Staff related  $  12.1   $ 9.9   (22% )
Legal, accounting and other professional    2.6     3.6   28%  
Stock compensation costs    2.1     1.4   (50% )
Advertising and promotion    1.3     1.1           (18% )
All other    6.9     7.0   2%  
Total SG&A  $  25.0   $ 23.0   (9% )
SG&A as a percentage of net revenues    18%     19%    

17


     Staff related costs have increased in the current quarter primarily due to additional headcount to support our digital media initiatives and salesforce. Stock compensation expense in the current quarter includes $1.9 million of expenses related to the amortization of restricted stock unit grants issued to employees under our 1999 Long-Term Incentive Plan.

  June 30,    June 30,    better 
        2007        2006        (worse)  
Depreciation and amortization    $  2.3   $  2.0           (15% ) 
 
Investment income, net  $  1.7   $  1.8   (6% ) 
 
Interest expense  $  0.1   $  0.1   -  
 
  June 30,    June 30,     
  2007    2006     
Provision for income taxes  $  4.2   $  8.4    
Effective tax rate    37%     36%   -  

Six Months Ended June 30, 2007 compared to Six Months Ended June 30, 2006
(Dollars in millions, except as noted)

Summary

  June 30,    June 30,    better 
Net Revenues        2007        2006        (worse) 
Live and Televised Entertainment  $  165.9   $  153.9   8%  
Consumer Products      63.8     49.3   30%  
Digital Media    15.2     11.2   36%  
WWE Films    -     -   NA  
Total  $  244.9   $  214.4   14%  
 
  June 30,    June 30,    better 
Cost of Revenues:  2007    2006    (worse) 
Live and Televised Entertainment  $ 108.8   $  97.1   (12% )
Consumer Products    24.5     19.9   (23% ) 
Digital Media    9.4     7.4   (27% ) 
WWE Films    15.9     -   NA  
Total  $ 158.6   $  124.4   (28% ) 
Profit contribution margin    36%     42%    
 
  June 30,    June 30,    better 
Operating Income:  2007    2006    (worse) 
Live and Televised Entertainment  $  50.9   $  51.0   -  
Consumer Products    36.1     26.4   37%  
Digital Media    2.2     1.4   57%  
WWE Films    (16.9 )    (0.9 )  NA  
Corporate    (42.0 )    (42.2 )  1%  
Total operating income  $  30.3   $  35.7   (15% ) 
Net income  $  22.2   $  24.1   (8% ) 

18


     Our Live and Televised Entertainment segment revenues benefited from an increase in our North American attendance and sales of merchandise at these live events. Our Consumer Products segment reflected a 53% increase in licensing based revenues, driven in part from our strong sales of our videogame, toy and apparel lines. Our Digital Media segment reflected additional adverting and wireless based revenues and a 30% increase in the number of orders processed for our WWEShop e-commerce site. Our operating income in the current period was negatively impacted by the recording of an asset impairment for our feature film The Condemned. Based upon the film’s performance to date, we have reduced the capitalized film asset by approximately $15.7 million to its net fair value.

     The following chart reflects comparative revenues and key drivers for each of the businesses within our Live and Televised Entertainment segment:

        June 30,       June 30,       better
Live and Televised Entertainment Revenues  2007 2006   (worse)
Live events $ 48.3 $ 42.1   15%  
       Number of North American events   121   129   (6% )
       Average North American attendance   6,900   5,800   19%  
       Average North American ticket price (dollars) $ 41.04   $ 37.93   8%  
       Number of international events   34   28   21%  
       Average international attendance   6,800   9,400           (28% )
       Average international ticket price (dollars)   $ 74.55 $ 68.23   9%  
Venue merchandise $ 10.6 $ 9.6   10%  
       Domestic per capita spending (dollars) $ 11.97 $ 11.10   8%  
 
Pay-per-view $ 55.6 $ 55.2   1%  
       Number of pay-per-view events   8   8   -  
       Number of buys from pay-per-view events   3.0   3.4   (12% )
       Average revenue per buy (dollars) $ 17.77 $ 15.59   14%  
       Domestic retail price (dollars) $ 39.95 $ 34.95   14%  
 
WWE 24/7 $ 2.3 $ 0.9   156%  
 
 
Television advertising $ 2.2 $ 3.7   (41% )
 
Television rights fees          
       Domestic $ 29.6 $ 26.2   13%  
       International  $ 16.3 $ 15.3   7%  
Other $ 1.0   $ 0.9   11%  
Total $ 165.9 $ 153.9   8%  
Ratings          
       Average weekly household ratings for Raw   3.9   4.2   (7% )
       Average weekly household ratings for SmackDown   2.8   2.7   4%  
       Average weekly household ratings for ECW   1.6   2.5*   (36% )
 
*Only 3 ECW episodes in the six months ended 2006.          
 
 
  June 30, June 30,   better
Cost of Revenues-Live and Televised Entertainment  2007 2006   (worse)
Live events $ 34.5 $ 30.1   (15% )
Venue merchandise   6.6   7.3   10%  
Pay-per-view   29.9   26.8   (12% )
24/7   1.0   1.0   -  
Advertising   0.2   0.7   72%  
Television   32.8   27.4   (20% )
Other   3.8     3.8   -  
Total  $ 108.8   $ 97.1 (12% )
       Profit contribution margin  35% 37%

19


     Live events revenues increased primarily as a result of the 19% increase in North American average attendance and an 8% increase in the average ticket price at these events. Included in the thirty-four international events in the current period were nine events constructed as buy-out deals, where local promoters provided us with guaranteed revenues and limited the potential risk of performing these events in emerging markets. In the prior year, seven of the international events performed were constructed as buy-out deals. The overall profit contribution margin remained unchanged at 28% in the current period as compared to the prior year.

     Venue merchandise revenues increased based on the 19% increase in average attendance at our North American events combined with an 8% increase in the per capita spend by our fans. The decline in venue merchandise cost of revenues reflects an expiration of a consulting services agreement and lower material costs, which contributed to the increase in profit contribution margin from 24% to 37% in the current period.

     Pay-per-view revenues decreased due to a 7% decline of total buys for the eight events that occurred in the current period. We recorded approximately 1.2 million buys for WrestleMania 23, representing the highest selling pay-per-view event in our history. The increase in pay-per-view cost of revenues in the current period reflects the higher costs associated with the production costs of WrestleMania 23 at Ford Field as compared to the prior year WrestleMania which was held in a smaller venue. The domestic retail price of our pay-per-view events was increased by $5.00 to $39.95 in June 2006, two events in the prior year included this increased domestic retail price. This increase in domestic retail price mitigated the decline in the overall number of buys in the current period. The profit contribution margin for pay-per-view decreased to 46% in the current period from 52% in the prior year.

     WWE 24/7, our subscription based video-on-demand service, generated a 156% increase in revenues in the current period as the number of subscribers has expanded significantly from the prior year. WWE 24/7 is currently offered in approximately 75% of video-on-demand enabled homes in the United States.

     Advertising revenues decreased by approximately 41% from the prior year period. Advertising revenues for the current period are primarily comprised of the sale of advertising on our Canadian television programs and various sponsorships. The decline in advertising revenues, and the corresponding decline in the advertising cost of revenues, reflects a reduction of sponsorship related activities in the current period.

     The increase in domestic television rights fees was primarily due to the rights fees received for our ECW programming in the current period which were minimally present in the prior year. The $5.4 million increase in television cost of revenues is due to an overall increase in the costs incurred to produce televised events, including the production of television shows while on tour internationally, as well as the direct costs for the production of our weekly ECW television program.

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

  June 30, June 30, better
Consumer Products Revenues        2007       2006       (worse)
Licensing  $ 28.3 $ 18.5 53%  
Magazine publishing  $ 6.6   $ 6.0 10%  
     Net units sold  2,091,600 2,219,600 (6% )
Home video  $ 28.2 $ 24.5 15%  
     Gross DVD units shipped  2,127,250 1,672,413   27%  
Other  $ 0.7   $ 0.3        133%  
Total  $ 63.8   $ 49.3 30%  
 
 
  June 30, June 30, better
Cost of Revenues-Consumer Products  2007 2006 (worse)
Licensing  $ 7.4 $ 4.5 (65% )
Magazine publishing    5.3     4.3   (23% )
Home video    11.3     10.9   (4% )
Other    0.5     0.2   (150% )
Total  $  24.5   $  19.9   (23% )
     Profit contribution margin    62%   60%  

20


     Licensing revenues increased due to higher royalties earned on sales of videogames, toys and apparel in the current period. Videogame revenues increased by approximately $4.3 million in the current period, reflecting the success of our SmackDown vs. Raw 2007 title. In addition, royalties earned from the sale of toys increased by approximately $3.1 million in the current period. The addition of two new apparel based licensees also helped to generate an increase of approximately $2.1 million in the current period. The increase in the licensing cost of revenues was due to higher commissions paid to international licensing agents and amounts paid to our talent based on higher sales.

     Magazine publishing revenue increased by 10% in the current period. In July 2006, we began publishing a new publication titled WWE Magazine that replaced our two former Raw and SmackDown magazines. We published six issues in the current period as compared to thirteen issues in the prior year period. We also published three special edition issues in the current period as compared to five special issues in the prior year period. The increase in newsstand price of approximately $1.00 has more than offset the decline in the net number of units sold. The increase in editorial costs associated with WWE Magazine generated the higher magazine publishing cost of revenues.

      Home video revenues increased by 15%, led by the successful releases of WrestleMania 23 and The New and Improved DX, which shipped more than 500,000 gross units combined. Home video cost of revenues increased due to the higher volume of home videos shipped in the current year. The profit contribution margin increased to 60% in the current period as compared to 56% in the prior year.

     The following chart provides performance results and key drivers for our Digital Media segment:

  June 30,   June 30,   better
Digital Media Revenues        2007       2006       (worse)
WWE.com  $ 7.4   $ 5.1   45%  
WWEShop  7.8   6.1   28%  
     Average revenues per order (dollars)  $ 49.71   $ 48.99   2%  
Total  $ 15.2   $ 11.2   36%  
 
  June 30,   June 30,   better
Cost of Revenues-Digital Media  2007   2006   (worse)
WWE.com  $ 3.8   $ 3.0   (27% )
WWEShop      5.6     4.4   (27% )
Total  $ 9.4   $ 7.4           (27% )
     Profit contribution margin  38%   34%    

     WWE.com revenues increased primarily due to additional advertising and wireless based revenues. In March 2007, we announced a multi-year deal with AT&T Wireless to provide exclusive WWE content, including videos and ring tones.

     WWEShop revenue reflects a 30% increase in the number of orders processed to 150,000 in the current period. This increase in the number of orders processed was also the primary driver for the increase in the cost of revenues.

WWE Films

     We do not participate in film revenues until the print and advertising costs incurred by our distributors have been recouped and the results have been reported to us. Accordingly, no revenues have been recorded to date for our three feature films, See No Evil, The Marine and The Condemned, which were released in 2006, 2006 and 2007, respectively. During the six months ended June 30, 2007 we recorded an asset impairment charge of approximately $15.7 million, which reflects our updated expectations related to the performance of The Condemned, which was released domestically in April 2007. As of June 30, 2007 we have approximately $39.3 million in capitalized film development costs associated with these films and other film projects that are in development.

21


Selling, General and Administrative

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

  June 30, June 30, better
        2007        2006        (worse)
Staff related $ 24.7   $ 23.0   (7% )
Legal, accounting and other professional   5.8     6.9   16%  
Stock compensation costs   4.2     2.8           (50% )
Advertising and promotion   2.6     3.0   13%  
All other   14.1     14.3   1%  
Total SG&A $ 51.4   $ 50.0   (3% )
SG&A as a percentage of net revenues   21%     23%   9%  

     Stock compensation expense in the current period includes $3.8 million of expenses related to the amortization of restricted stock unit grants issued to employees under our 1999 Long-Term Incentive Plan.

  June 30, June 30, better
        2007        2006        (worse)
Depreciation and amortization $ 4.6   $ 4.4   (5% )
 
Investment income, net $ 4.0   $ 3.8   5%  
 
Interest expense $ 0.2   $ 0.3            33%  
 
  June 30, June 30,
        2007       2006      
Provision for income taxes $ 12.2   $ 16.1    
Effective tax rate   36%     40%    

     The prior year effective tax rate reflects a provision for state and local examinations.

22


Liquidity and Capital Resources

     Cash flows from operating activities for the six months ended June 30, 2007 and June 30, 2006 were $48.8 million and $21.0 million, respectively. Working capital, consisting of current assets less current liabilities, was $278.2 million and $255.3 million as of June 30, 2007 and December 31, 2006, respectively.

     Cash flows used by investing activities were $25.2 million for six months ended June 30, 2007 and cash flows provided by investing activities were $74.6 million for the six months ended June 30, 2006. Our investment policy is designed to preserve capital and minimize interest rate, credit and market risk. Capital expenditures for the six months ended June 30, 2007 were $2.6 million as compared to $4.6 million for the six months ended June 30, 2006. Capital expenditures for the remainder of 2007 are estimated to range between $10.0 million and $20.0 million, reflecting significant projects related to television equipment, including the implementation of high definition broadcasting. Additional projects include wireless content delivery and video management systems and building improvements.

     Cash flows used in financing activities were $27.5 million and $19.4 million for the six months ended June 30, 2007 and June 30, 2006, respectively. Total dividend payments on all Class A and Class B common shares in the six month period ended June 30, 2007 were approximately $34.2 million as compared to $33.6 million in the prior year period ended June 30, 2006.

Contractual Obligations

     In addition to long-term debt, we have entered into various other contracts under which we are required to make guaranteed payments, including:

  • Various operating leases for office space and equipment.
     
  • Employment contract with Vincent K. McMahon, which runs through October 2008, with annual renewals thereafter if not terminated by us or Mr. McMahon, as well as a talent contract with Mr. McMahon that is coterminous with his employment contract. Mr. McMahon is currently waiving all of his compensation under these agreements, except for a salary of $850,000 per year beginning in January 2007.
     
  • Employment contract with Linda E. McMahon, which runs through October 2008, with annual renewals thereafter if not terminated by us or Mrs. McMahon. Mrs. McMahon is currently waiving all of her compensation under these agreements, except for a salary of $500,000 beginning in January 2007.
     
  • Service contracts with certain of our independent contractors, including our talent, which are generally for one-to four-year terms.

     Our aggregate minimum payment obligations under these contracts as of June 30, 2007 were as follows:

  Payments due by period
  ($ in millions)
        After   
       2007       2008 to 2010       2011 to 2012       2012       Total 
Long-term debt (including interest expense)          $   0.7 $     4.0 $   2.7 $     0.4 $     7.8
Operating leases 0.5 2.1 1.0 1.3 4.9
Talent, employment agreements and other          
     commitments 10.7   16.4   3.8   12.5   43.4
Total commitments $   11.9   $   22.5   $   7.5   $   14.2   $   56.1

The non-current tax liability of $11.1 million is not included in the table above.

23


     We believe that cash generated from operations and our existing cash and short-term investments will be sufficient to meet our cash needs over the next twelve months for working capital, capital expenditures and payment of quarterly dividends.

Application of Critical Accounting Policies

     There have been no additional changes to our accounting policies that were previously disclosed in our Transition Report on Form 10-K for our fiscal year ended December 31, 2006 or in the methodology used in formulating these significant judgments and estimates that affect the application of these policies. Amounts included in our consolidated balance sheets in accounts that we have identified as being subject to significant judgments and estimates were as follows:

As of
     June 30, 2007     

December 31, 2006

Pay-per-view accounts receivable $22.7 million  $  19.6 million      
Home video reserve for returns $7.8 million   $   8.5 million      
Publishing newsstand reserve for returns   $3.2 million $ 4.1 million      
Allowance for doubtful accounts $1.4 million $   2.1 million      
Inventory obsolescence reserve $5.6 million $ 4.9 million      

Recent Accounting Pronouncements

     There are no other accounting standards or interpretations that have been issued, but which we have not yet adopted, that we believe will have a material impact on our financial statements.

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 maintain or renew key agreements could adversely affect our ability to distribute our television and pay-per-view programming; (ii) 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; (iii) our failure to retain or continue to recruit key performers could lead to a decline in the appeal of our storylines and the popularity of our brand of entertainment; (iv) the loss of the creative services of Vincent K. McMahon could adversely affect our ability to create popular characters and creative storylines; (v) a decline in general economic conditions could adversely affect our business; (vi) a decline in the popularity of our brand of sports entertainment, including as a result of changes in the social and political climate, could adversely affect our business; (vii) changes in the regulatory atmosphere and related private sector initiatives could adversely affect our business; (viii) the markets in which we operate are highly competitive, rapidly changing and increasingly fragmented, and we may not be able to compete effectively, especially against competitors with greater financial resources or marketplace presence; (ix) we face uncertainties associated with international markets; (x) we may be prohibited from promoting and conducting our live events if we do not comply with applicable regulations; (xi) because we depend upon our intellectual property rights, our inability to protect those rights, or our infringement of others’ intellectual property rights, could adversely affect our business; (xii) we could incur substantial liabilities if pending material litigation is resolved unfavorably; (xiii) our insurance may not be adequate to cover liabilities resulting from accidents or injuries that occur during our physically demanding events; (xiv) we will face a variety of risks as we expand into new and complementary businesses such as feature films; (xv) through his beneficial ownership of a substantial majority of our Class B common stock, our controlling stockholder, Vincent K. McMahon, can exercise control over our affairs, and his interests may conflict with the holders of our Class A common stock; (xvi) a substantial number of shares will be eligible for future sale by Mr. McMahon, and the sale of those shares could lower our stock price; and (xvii) our Class A common stock has a relatively small public “float”. The forward-looking statements speak only as of the date of this Quarterly Report and undue reliance should not be placed on these statements.

24


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%.

     Our investment portfolio currently consists primarily of fixed-income mutual funds and municipal auction rate securities, 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 one year.

Item 4. Controls and Procedures

     Under the direction of our Chairman and Chief Executive Officer, as co-principal executive officers, and our Chief Financial Officer, we evaluated our disclosure controls and procedures and internal control over financial reporting and concluded that our disclosure controls and procedures were effective as of June 30, 2007. No change in internal control over financial reporting occurred during the quarter ended June 30, 2007, that materially affected, or is reasonably likely to materially affect, such internal control over financial reporting.

25


PART II. OTHER INFORMATION

Item 1. Legal Proceedings

     See Note 10 to Notes to Consolidated Financial Statements, which is incorporated herein by reference.

Item 4. Submission of Matters to a Vote of Security Holders

     (a) The Annual Meeting of Stockholders was held on May 11, 2007.

     (b) At the meeting all eight Directors of the Company were reelected as follows:

Votes
Nominees      For      Withheld
Vincent K. McMahon 488,635,570 6,794,203
Linda E. McMahon 489,059,410   6,370,363
Robert A. Bowman 495,000,017 429,755
David Kenin 495,109,573   320,200
Joseph Perkins 489,315,765 6,114,008
Michael B. Solomon 494,879,136 550,637
Lowell P. Weicker, Jr. 494,850,473 579,300
Michael Sileck 487,252,222 8,117,551

In addition, the appointment of Deloitte and Touche LLP as independent registered public accounting firm for the Company for the fiscal period ending December 31, 2007 was ratified as follows:

Votes
For   Against    Abstain
494,406,155 1,012,101 11,515

Item 6. Exhibits

(a.) Exhibits

10.19   Revised offer letter between the Company and Michael Sileck (incorporated by reference to Exhibit 10.7 to the Current Report on Form 8-K filed March 19, 2007).*
 
10.20 Employment Agreement, as of May 20, 2007, between the Company and Joel Simon (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed July 26, 2007).*
 
10.21 World Wrestling Entertainment, Inc. 2007 Omnibus Incentive Plan, effective July 20, 2007 (incorporated by reference to Exhibit 10.2 to the Current Report on Form 8-K filed July 26, 2007).*
 
10.22 Form of Agreement for Performance Stock Units to the Company’s employees and officers under the Company’s 2007 Omnibus Incentive Plan (incorporated by reference to Exhibit 10.3 to the Current Report on Form 8-K filed July 26, 2007).*
 
10.23 Form of Agreement for Restricted Stock Units to the Company’s employees and officers under the Company’s 2007 Omnibus Incentive Plan (incorporated by reference to Exhibit 10.4 to the Current Report on Form 8-K filed July 26, 2007).*
 
31.1 Certification by Vincent K. McMahon pursuant to Section 302 of Sarbanes-Oxley Act of 2002 (filed herewith).
 
31.2 Certification by Linda E. McMahon pursuant to Section 302 of Sarbanes-Oxley Act of 2002 (filed herewith).

26



31.3    

Certification by Frank G. Serpe pursuant to Section 302 of Sarbanes-Oxley Act of 2002 (filed herewith).

 
32.1

Certification by Vincent K. McMahon, Linda E. McMahon and Frank G. Serpe pursuant to Section 906 of Sarbanes-Oxley Act of 2002 (filed herewith).

____________________
* Indicates management contract or compensatory plan or arrangement.

27


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 3, 2007 By:  /s/ Frank G. Serpe  
    Frank G. Serpe    
  Chief Financial Officer  

28