Holders of shares in World Wrestling Entertainment (NYSE: WWE) have already been warned. Corporate filings with the SEC say that the interests of controlling stockholder and CEO Vince McMahon may conflict with those of other shareholders. McMahon, one would think, should have a special sense of responsibility for his nearly powerless fellow owners. The financial performance of the corporation, his obscene pay package and the price of the company’s shares say otherwise.

The WWE is well known around the world and is a particularly valuable brand, but it is a very small business by entertainment company standards. Its revenue last year was only $483 million. Profits were negligible at $25 million, with a net margin of 5%. That net income was the lowest in five years. And revenue has not grown at all over that time. Total revenue was $486 million in 2007. Net income has dropped by half over the same time five-year period through 2011.

McMahon and his senior management have done very well while the shareholders have not. WWE shares traded at $14 five years ago and rose to almost $19 in April 2010. Today, the stock sits near a five-year low at $7.90 — down 57% from the April 2010 peak.

Last year, McMahon made $1.1 million. The top five officers of the company, which include CFO George A. Barrios, EVP Kevin Dunn, EVP Paul Levesque and head of marketing Michelle D. Wilson, made an impressive $6.3 million. That was equal to roughly a quarter of the company’s net income. McMahon could have taken a smaller compensation package. He is beneficial owner of 86.6% of the WWE Class B shares, which is the source of his control over the corporation.

Governance experts would be troubled by the composition of the WWE board if they examined it. Three of the nine directors are executives.

The most serious criticism of McMahon is that he has done so little to exploit a brand with worldwide recognition. Earnings for the most recently reported quarter were mediocre again. Revenue was only $123 million. Net income was $15 million. Shares ticked up on the news but have fallen back to where they traded before the announcement.

WWE investors have every reason to complain. They have been disappointed while McMahon has done ridiculously well.

Douglas A. McIntyre

It was in February of this year that EndZone Sports Management in San Diego announced that it had acquired The United States Football League, LLC (USFL).  When it announced the acquisition, the firm said in the press release that it was planning to relaunch the league in the Spring of 2013.

A FORM D was filed with the SEC on Thursday by the United States Football League, LLC looking to raise up to $30 million and the offering is listed as an equity offering.  So you may have read that the league intends to start back up, but now you know how much the league intends to raise to get off the ground.  This offering is also called a new notice and it was noted that the first sale is yet to occur.  Will this capital raise assure that the season will launch in 2013?  That is probably dependent upon too many issues to give a solid yes/no answer and we are awaiting comment from EndZone Sports Management.

The “use of proceeds” noted that $925,000 was being used for payments to any of the persons required to be named as executive officers, directors or promoters.  It should be no surprise that this filing noted “no revenues” considering that it has no current operations.

The USFL’s goal here is take football to more of a year-round event rather than just August to January.  As a reminder, this is not the first time around the block for the USFL.  It is also not the first competition for the NFL.  There was the experiment of the XFL from World Wrestling Entertainment Inc. (NYSE: WWE) founder Vince McMahon, but that effort lasted only one season.  There is still today the Arena Football League as well, and even an Independent Women’s Football League. And can we forget about the Lingerie Football League?

Will the USFL do better, and can it thrive?  It probably all depends upon its finances, what sort of rules and players it has, and ultimately on the overall attitude toward football by the time 2013 gets here. A little luck always help too.

JON C. OGG

Adobe Systems Inc. (NASDAQ: ADBE) Cut to Neutral at Piper Jaffray.
Advanced Micro Devices Inc. (NYSE: AMD) Reiterated Hold at Argus.
Coach Inc. (NYSE: COH) Maintained Buy with $65 target at BofA/ML.
Elan Corp. plc (NYSE: ELN) Started as Buy at Jefferies.
Kohl’s Corp. (NYSE: KSS) Raised to Buy at Stifel Nicolaus.
McDonald’s Corp (NYSE: MCD) Reiterated Outperform with $87 target at Credit Suisse.
Norfolk Southern Corporation (NYSE: NSC) Cut to Neutral at UBS.
OmniVision Technologies Inc. (NASDAQ: OVTI) Raised to Outperform and listed as Bull of the Day at Zacks.
Petroleo Brasileiro (NYSE: PBR), or Petrobras, Reiterated Buy with $55 target at BofA/ML.
RadioShack Corp. (NYSE: RSH) Raised to Neutral at Wedbush.
RigNet, Inc. (NASDAQ: RNET) Started as Buy at Deutsche Bank.
Southwest Airlines Co. (NYSE: LUV) Reiterated Buy and $18 target at Argus.
World Wrestling Entertainment Inc. (NYSE: WWE) Cut to Neutral at Wedbush.
Xilinx Inc. (NASDAQ: XLNX) Raised to Buy at Auriga.

You can join our free daily email distribution list to hear more about analyst upgrades and downgrades, top day trader and active trader alerts, dividend trends, news on Buffett and other investment gurus, IPOs, secondary offerings, private equity, and more.

JON C. OGG

We have given a breakdown of what has come about on each and what to expect during the week ahead  if applicable.  You will notice that we did not include any earnings previews this week.  This is the crest of earnings season and we gave a full earnings preview on about 25 major companies reporting this coming week, 11 of which are DJIA components.  We have a separate issue on The Top 5 Analyst Calls of the Week that we released independently over the weekend as well.  There was also enough in research calls specific to biotech and drug companies that we released a Top BioHealth Research Calls of the Week.

Berkshire Hathaway Inc. (NYSE: BRK-B) (NYSE: BRK-A) was given the “Mr. Moneybags” cover article in Barron’s over the weekend.  The report calls that the billions and billions in new cash coming in from debt repayments and the huge increase in cash flow from operations could lead to a dividend in the next 12 to 18 months if Buffett doesn’t find another elephant of a deal.

Clinical Data Inc. (NASDAQ: CLDA) is back on the radar after the FDA approved its antidepressant drug Viibyrd.  Analysts already see potential peak sales above $2 billion as this antidepressant is believed to not interfere with sexual desire as much as in some rival drugs.  Shares closed at $15.03 on Friday and rose almost 15% to $17.24 in the Friday after-hours session.  The 52-week trading range is $10.87 to $22.39 and the consensus price target is already $29.67 per Thomson Reuters data.

Google Inc. (NASDAQ: GOOG) closed down on Friday after having been up originally after huge blowout earnings.  The ongoing problem is that of the lack of adult supervision.  Some say that making Larry Page CEO is good and that it is time, but with close to a $200 billion market cap there were at least some concerns that Google needs more.  If Apple is a model based upon the Steve Jobs news, something hard to exactly compare on a Apples-to-Googles basis, then the same 6.2% drop from after the news would come to another slide of close to 2% on a static basis.

McMahon & Co. has announced that it is cutting 10% of its staff,which should result in annual cost savings of approximately $8million.  In exchange for that, the company will take a one-time chargeof $3 million.  WWE also noted that the company has completed anevaluation of its operating and capital expenditures and has identified"additional efficiencies."  In short, more cost cuts are on the way.The company’s ultimate goal is to trim $20 million from its expensestructure in 2009.

WWE is not the only sports and entertainment fallout here in theeconomy.  We have seen and heard of cost cuts in many professionalsporting teams and even in some of the leagues.  In December, the Arena Football League decided to cancel its 2009season.

The next time you go to a game or event and notice how there are manyvacant seats, it might be the recession’s impact rather than thequality of your team or venue.

Does WWE get to fully expense all those chairs and other bits of equipment they break, or do those get amortized?  Maybe it shouldn’t blow up any more cars or other expensive props as part of the cost cutting ahead.

Jon C. Ogg
January 9, 2009

Linda McMahon noted that the company has not over-penetrated markets as not all events are sold out, and also noted the media properties it has.  She also noted that Pay-per-view was a growth mechanism.  As far as dividend are concerned, Cramer noted the high yield and increased dividends.  The common holders get a $0.36 dividend quarterly, while the McMahon family dividend stayed at $0.24.

We looked, and that yield is 8%.  In fact, its at the top of the 52-week trading range of $13.35 to $18.60.  Shares closed up almost 4% today at $18.16, and shares were at $18.50 on last look in after-hours trading.

Jon C. Ogg
March 11, 2008