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The following is an excerpt from a 10-Q SEC Filing, filed by WORLD WRESTLING ENTERTAIN ... on 12/13/1999.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
(dollars in thousands, except share and per share data)

1. Basis of Presentation and Business Description

The accompanying consolidated financial statements include the accounts of World Wrestling Federation Entertainment, Inc., formerly known as Titan Sports Inc., its wholly-owned subsidiaries, TSI Realty Company, WWF Hotel & Casino Ventures LLC, World Wrestling Federation Entertainment Canada, Inc., formerly known as Titan Promotions (Canada), Inc., and Stephanie Music Publishing, Inc. and its majority-owned subsidiary Titan/Shane Partnership, (collectively the "Company"). All significant inter-company transactions and balances have been eliminated. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation have been included. Certain prior year amounts have been reclassified to conform with current year presentation. The results of operations of any interim period are not necessarily indicative of the results of operations for the full year.

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

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

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

2. Initial Public Offering and Other Events

On October 19, 1999 the Company offered 10,000,000 shares of Class A common stock to the public at an initial offering price of $17.00 per share. On October 20, 1999 the underwriters exercised their over-allotment option of 1,500,000 shares. The net proceeds to the Company after deducting underwriter commissions and other offering fees and expenses were $179,497. The holders of Class A common stock have rights identical to holders of Class B common stock, except that holders of Class A common stock are entitled to one vote per share and holders of Class B common stock are entitled to ten votes per share.

On October 15, 1999, the Company effected a 566,670 for one stock split. As a result there are 56,667,000 shares of Class B common stock outstanding. The Class B common stock is fully convertible into Class A common stock, on a one- for-one basis, at any time at the option of the holder or automatically upon the transfer of the Class B common stock to any person or entity not affiliated with Vincent McMahon, Linda McMahon or their family. The holders of the Class B common stock hold 98.0% of the voting power of the Company's outstanding common stock.

In connection with the initial public offering, two affiliated companies were contributed to the Company, World Wrestling Federation Entertainment Canada, Inc. and Stephanie Music Publishing, Inc.

Additionally, on October 19, 1999 the Company granted options to acquire 5,400,500 shares of Class A common stock at an exercise price of $17.00 per share under the Company's long-term incentive plan.

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World Wrestling Federation Entertainment, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
(dollars in thousands, except share and per share data)

Of those options, 623,700 will become exercisable on April 19, 2000; 1,399,288 will become exercisable on October 19, 2000 and the remaining portion will become exercisable in periods thereafter. The Company has 4,599,550 additional shares of Class A common stock reserved for future issuances under the Company's long-term incentive plan.

Included in the option grants discussed above, 987,000 options were granted to independent contractors, consisting primarily of the Company's performers. The Company accounted for such grants in accordance with the provisions set forth in the Statement of Financial Accounting Standard No. 123, "Accounting for Stock- Based Compensation" and Emerging Issues Task Force Issue No. 96-18, "Accounting for Equity Instruments That Are Issued to Other Than Employees for Acquiring, or in Conjunction with Selling, Goods or Services." Based upon the terms of such option grants, the Company recorded a second quarter fiscal 2000 non-cash charge of $6,020.

3. Income Taxes

As a result of the initial public offering of the Company's common stock on October 19, 1999, the Company's status as a Subchapter S Corporation for income tax purposes was terminated. For the fiscal year ending April 30, 2000, the Company will be taxed on income allocated to the Subchapter C Corporation based upon the number of days during the fiscal year that it was a Subchapter C Corporation. Consequently, the Company recorded an income tax provision of $8,016 for the six months ended October 29, 1999, which represented an effective rate of 22.2%. The income tax provision as a percentage of pre-tax earnings generated during the three months ended October 29, 1999 exceeds 22.2% as the Company was required to cumulatively adjust for the impact of the conversion from Subchapter S Corporation status to Subchapter C Corporation status. Additionally, in the second quarter, the Company recorded an income tax benefit of approximately $2,466, representing the gross-up of the Company's net deferred tax assets utilizing a combined federal and state effective tax rate of approximately 39%. Prior to the second quarter, the Company's net deferred tax assets excluded the impact of federal taxes given the Company's status as a Subchapter S Corporation. Excluded from the Company's deferred income tax provision for the three and six months ended October 29, 1999 is the tax benefit resulting from the issuance of common stock options to certain of the Company's independent contractors. The tax benefit amounted to approximately $2,360 and was recorded as an adjustment to additional paid-in capital.

On June 29, 1999 the Company made a Subchapter S Corporation distribution to the Company's then sole stockholder, in the form of an unsecured, 5% interest- bearing note in the amount of $32,000. This note represents estimated federal and state income taxes payable by the Company's then sole stockholder attributable to taxable S Corporation earnings generated during the fiscal year ended April 30, 1999 and for the allocated portion of the Company's taxable S Corporation earnings for fiscal year 2000 based on its estimate of those earnings as of the date of the issuance of this note. To the extent the allocated portion of the Company's fiscal year 2000 taxable earnings exceeds those earnings used in the calculation of estimated income taxes payable by its then sole stockholder, the Company has agreed to make an additional distribution to the stockholders of record as of October 18, 1999, payable no later than August 15, 2000. This distribution will represent any additional taxes payable by its then sole stockholder in excess of the original $32,000 estimate due to increased taxable earnings. As of October 29, 1999, the Company estimates such distribution to be $4,000 and has included this amount as a due to stockholder in the consolidated balance sheet. This amount may vary depending upon the Company's actual taxable income for the fiscal year ending April 30, 2000.

In September 1999, the Company paid $800 against this note which represented the prescribed estimated income tax payment required by the Internal Revenue Service.

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World Wrestling Federation Entertainment, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
(dollars in thousands, except share and per share data)

4. Unaudited Pro Forma Information

The unaudited pro forma consolidated income statement information presents the pro forma effects on the historical consolidated income statement for the three months ended October 30, 1998 of $629 and the six months ended October 29, 1999 and October 30, 1998 of $427, and $1,258, respectively for additional compensation to the Chairman of the Board of Directors and to the Chief Executive Officer pursuant to employment agreements that became effective prior to the closing of the offering. Additionally, it presents income taxes of $8,299 and $4,814 for the three months ended October 29, 1999 and October 30, 1998, respectively and $16,360 and $6,657 for the six months ended October 29, 1999 and October 30, 1998, respectively to give pro forma effect due to the change in the Company's tax status from a Subchapter S Corporation to a Subchapter C Corporation, representing a tax rate of 39.2% (before giving effect to the impact of the performer stock option charge which is not currently deductible) for the fiscal 2000 periods and 40% for the fiscal 1999 periods.

5. Earnings Per Share

For the three months ended October 29, 1999, for the purpose of calculating earnings per share - basic, the weighted average number of common shares outstanding was 58,040,626 and for the purpose of calculating earnings per share
- diluted, the weighted average number of common shares outstanding, including dilutive securities, was 58,062,105 which includes 21,479 shares representing the dilutive effect of outstanding stock options.

For the six months ended October 29, 1999, for the purpose of calculating earnings per share - basic, the weighted average number of common shares outstanding was 57,353,813 and for the purpose of calculating earnings per share
- diluted, the weighted average number of common shares outstanding, including dilutive securities, was 57,359,332 which includes 5,519 shares representing the dilutive effect of outstanding stock options.

For the purpose of calculating earnings per share - basic and earnings per share
- diluted, for the three months and six months ended October 30, 1998, the weighted average number of common shares outstanding was 56,667,000.

6. Property and Equipment

Property and equipment consists of the following as of:

October 29 April 30 1999 1999 -------- -------- (Unaudited) Land, buildings and improvements........................ $34,760 $31,010 Equipment............................................... 21,373 20,170 Vehicles................................................ 578 543 ------- ------- 56,711 51,723 Less accumulated depreciation and amortization.......... 24,484 23,346 ------- ------- Total.............................................. $32,227 $28,377 ======= =======

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World Wrestling Federation Entertainment, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
(dollars in thousands, except share and per share data)

Depreciation and amortization expense was $479 and $486 for the three months ended October 29, 1999 and October 30, 1998 and $1,138 and $904 for the six months ended October 29, 1999 and October 30, 1998, respectively.

7. Segment Information

The Company's operations are conducted within two reportable segments, live and televised entertainment and branded merchandise. The live and televised entertainment segment consists of live events, television programming and pay per view programming. The branded merchandise segment includes consumer products sold through third party licensees and the marketing and sale of merchandise, magazines and home videos. The Company does not allocate corporate overhead to each of the segments and as a result, corporate overhead is a reconciling item in the table below. Included in corporate overhead for the three and six months ended October 29, 1999 is a non-cash charge of $6,020 for stock options granted to certain of the Company's performers, all of whom are independent contractors. There are no intersegment revenues. Results of operations and assets from non- U.S. sources are approximately 5% of the respective consolidated financial statement amounts. The table presents information about the financial results of each segment for the three months ended October 29, 1999 and October 30, 1998 and the six months ended October 29, 1999 and October 30, 1998, respectively.

Three Months Six Months Ended Ended October 29 October 30 October 29 October 30 1999 1998 1999 1998 ---- ---- ---- ---- Revenues: Live and televised entertainment.......... $ 60,888 $36,230 $112,229 $ 63,203 Branded merchandise....................... 27,379 17,182 52,261 29,251 -------- ------- -------- -------- Total revenues............................ $ 88,267 $53,412 $164,490 $ 92,454 ======== ======= ======== ========

Depreciation and Amortization: Live and televised entertainment.......... $ 310 $ 215 $ 725 $ 424 Branded merchandise....................... -- -- -- -- Corporate................................. 169 271 413 480 -------- ------- -------- -------- Total depreciation and amortization....... $ 479 $ 486 $ 1,138 $ 904 ======== ======= ======== ========

Operating Income: Live and televised entertainment.......... $ 20,617 $13,388 $ 40,331 $ 21,365 Branded merchandise....................... 11,401 5,861 21,435 9,164 Corporate (including a $6,020 non-cash charge).................................. (17,058) (6,580) (26,256) (12,572) -------- ------- -------- -------- Total operating income.................... $ 14,960 $12,669 $ 35,510 $ 17,957 ======== ======= ======== ========

As of October 29 April 30 ---------- -------- Assets: 1999 1999 ---- ---- Live and televised entertainment.......... $ 46,879 $ 39,096 Branded merchandise....................... 12,179 24,118 Unallocated............................... 267,750 67,082 -------- -------- Total assets.............................. $326,808 $130,296 ======== ========

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World Wrestling Federation Entertainment, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
(dollars in thousands, except share and per share data)

8. Commitments and Contingencies

On May 13, 1991, William R. Eadie, a former professional wrestler who had been one of the Company's performers, filed a lawsuit in state court in Wisconsin against the Company and Mr. McMahon. The case was removed to the United States District Court for the District of Connecticut on August 7, 1991. The suit alleges that the Company breached a verbal agreement to compensate Eadie for the use of his ideas in connection with a wrestling tag team called "Demolition" and to employ him for life. Plaintiff is seeking $6,500 in compensatory damages and unspecified punitive damages. The Company has denied any liability and is vigorously defending this action. In a similar action filed against the Company on April 10, 1992 in the United States District Court for the District of Connecticut, Randy Colley, a former professional wrestler who had been one of the Company's performers, also alleges that the Company breached an agreement to compensate him for disclosing his idea for a wrestling tag team called "Demolition." He is seeking unspecified compensatory and punitive damages. The Company has denied any liability and is vigorously defending this action. Colley's claims were consolidated for trial with those of Eadie in the action described above. The Company believes that both plaintiffs' claims are without merit. On May 20, 1998, a magistrate judge ruled that the plaintiffs' expert on damages could not testify at trial. Thereafter, the plaintiffs engaged a second expert on damages, whose report was filed on August 31, 1999. Discovery has not been completed, and no trial date has been scheduled. The Company believes that an unfavorable outcome in these actions may have a material adverse effect on the Company's financial condition, results of operations or prospects.

On August 28, 1996, James Hellwig, a former professional wrestler who had been one of the Company's performers, filed a suit against the Company in state court in Arizona alleging breach of two separate service contracts, defamation and unauthorized use of servicemarks and trademarks allegedly owned by him. Hellwig is also seeking a declaration that he owns the characters, Ultimate Warrior and Warrior, which he portrayed as a performer under contract with the Company. Pursuant to mandatory disclosure requirements filed with the court, Hellwig stated that he is seeking approximately $10,000 in compensatory damages and $5,000 in punitive damages, or such other amount as may be determined by the court or jury. The Company has denied all liability and is vigorously defending this action. The Company believes that Hellwig's claims are without merit. The Company has asserted counterclaims against him for breach of his service contracts and seeks rescission of an agreement by which the Company transferred ownership of the servicemarks to him. In addition, the Company filed a separate action in federal district court in Connecticut on March 11, 1998, seeking a declaration that the Company owns the characters, Warrior and Ultimate Warrior, under both contract and copyright law. Hellwig's motion to dismiss the federal case was denied, and the Company has since moved for summary judgment in the federal proceeding. In the state court proceeding in Arizona, on June 3, 1999, the Company has moved for summary judgment on the two contract claims, the defamation claim, and the other claims of the plaintiff. On September 7, 1999, the Arizona court issued a summary judgment decision in the Company's favor on Hellwig's defamation claim. Hellwig had sought $100 in compensatory damages and $5,000 in punitive damages on this claim. The Arizona court also granted the Company's motion for summary judgment on Hellwig's claim for $4,000 in damages for his failed business ventures. The court ruled Hellwig could not properly claim damages for his failed business ventures because the Company made no contractual commitment to fund his failed business ventures. Further, the court denied the Company's summary judgment motions with respect to Hellwig's breach of the 1996 contract and Hellwig's breach of the 1992 contract. On October 1, 1999, in the state court proceeding the Company moved for summary judgment regarding Hellwig's royalty claims on the Company's sale of videos and merchandise. That motion has been opposed by the plaintiffs and is pending. The Company has also moved for summary judgment on

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World Wrestling Federation Entertainment, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
(dollars in thousands, except share and per share data)

four other claims at issue: (i) breach of covenant of good faith and fair dealing; (ii) misappropriation of business opportunities; (iii) fraudulent inducement; and (iv) tortuous interference with contractual relations. Plaintiffs voluntarily moved to dismiss the misappropriation of business relations, fraudulent inducement of contract and tortuous interference with contractual relations claims in response to the Company's motion. Plaintiffs oppose, however, the Company's motion with respect to the breach of covenant of good faith and fair dealing claim. The Company believes that the ultimate liability resulting from this suit, if any, will not have a material adverse effect on its financial condition or results of operations or prospects.

On June 21, 1996, the Company filed an action against World Championship Wrestling ("WCW") and Turner Broadcasting Systems, Inc. ("TBS") in the United States District Court for the District of Connecticut, alleging unfair competition and infringement of the Company's copyrights, servicemarks and trademarks with respect to two characters owned by the Company. The Company claims that WCW, which contracted with two professional wrestlers who previously had performed under contract for the Company in the character roles of Razor Ramon and Diesel, misappropriated those characters in WCW's programming and misrepresented the reason that these former World Wrestling Federation professional wrestlers were appearing on WCW programming. During discovery proceedings, which were completed on October 16, 1998, WCW was twice sanctioned by the court for failure to comply with the court's discovery orders. The Company is seeking damages in the form of revenue disgorgement from WCW and has submitted expert reports supporting our claim for substantial money damages. WCW and TBS have denied any liability.

On May 18, 1998, WCW filed an action against the Company in the United States District Court for the District of Connecticut and immediately moved to consolidate this action with the Company's pending action against WCW and TBS described above. WCW alleges that the Company has diluted various marks owned by and/or licensed to WCW by disparaging those marks and also claims that the Company engaged in unfair competition when the Company aired a "Flashback" series of past World Wrestling Federation performances on USA Network without disclosing that some of the performers, at the time the series was subsequently broadcast, were then affiliated with WCW. The Company has denied any liability and is vigorously defending against this action. The Company has filed a counterclaim for abuse of process, which WCW has moved to dismiss. Discovery is ongoing, and the Company intends to move for summary judgment when discovery is concluded. The Company believes that WCW's claims are without merit. WCW has yet to state a claim for damages. The Company believes that the ultimate liability resulting from such proceeding, if any, will not have a material adverse effect on its financial condition, results of operations or prospects.

On June 15, 1999, members of the family of Owen Hart, a professional wrestler performing under contract with the Company, filed suit in state court in Missouri against the Company, Vincent and Linda McMahon and nine other defendants, including the manufacturer of the rigging equipment involved, individual equipment riggers and the arena operator, as a result of the death of Owen Hart during a pay-per-view event at Kemper Arena in Kansas City, Missouri on May 23, 1999. The specific allegations against the Company include the failure to use ordinary care to provide proper equipment and personnel for the safety of Owen Hart, the failure to take special precautions when conducting an inherently dangerous activity, endangerment and the failure to warn, vicarious liability for the negligence of the named individual defendants, the failure to properly train and supervise, and the provision of dangerous and unsafe equipment. Plaintiffs seek compensatory and punitive damages in unspecified amounts. On September 1, 1999, the Company filed its answer, affirmative defenses and cross-claims, denying any liability for

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World Wrestling Federation Entertainment, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
(dollars in thousands, except share and per share data)

negligence and other claims asserted against the Company. The Company believes that it has meritorious defenses and intends to defend vigorously against the suit. On October 1, 1999, the Company filed a complaint in the United States District Court for the District of Connecticut. The Company is principally seeking a declaratory judgment with respect to the enforceability of contractual defenses, forum selection clauses, and other provisions of Owen Hart's contract with the Company. The defendants have not yet filed an answer. The Company believes that an unfavorable outcome of this suit may have a material adverse effect on the Company's financial condition, results of operations or prospects.

On September 16, 1999, Nicole Bass, a professional wrestler affiliated with the Company, filed an action in the United States District Court for the Eastern District of New York alleging sexual harassment under New York law, civil assault and intentional infliction of emotional distress. Bass seeks $20,000 in compensatory damages and $100,000 in punitive damages. The Company has advised the court that it intends to file a motion to dismiss all claims and a motion for summary judgment on any claims not dismissed. Pursuant to a local rule of court, the Company was precluded from filing any motions until after a pre- motion conference with the court, which was scheduled for November 19, 1999. On or about November 9, 1999, the Company received a Notice of Charge of Discrimination from the Equal Employment Opportunity Commission (EEOC) filed by Nicole Bass. On or about November 30, 1999, the Company's outside counsel confirmed that no action regarding the EEOC claim is required by the Company at this time. The Company believes that the claims are without merit and intends to vigorously defend against this action. Based on the Company's preliminary review of the allegations and the underlying facts, as it understands them, the Company does not believe that an unfavorable outcome in this action will have a material adverse effect on its financial condition or results of operations or prospects.

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

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