W W E Q 4 A N D F U L L Y E A R R E S U LT S F E B R U A R Y 8,

Transcription

1 W W E Q 4 A N D F U L L Y E A R R E S U LT S F E B R U A R Y 8, 2 0 8

2 Forward-Looking Statements This presentation contains forward-looking statements pursuant to the safe harbor provisions of the Securities Litigation Reform Act of 995, which are subject to various risks and uncertainties. These risks and uncertainties include, without limitation, risks relating to: WWE Network (including the risk that we are unable to attract, retain and renew subscribers); major distribution agreements; our need to continue to develop creative and entertaining programs and events; the possibility of a decline in the popularity of our brand of sports entertainment; the continued importance of key performers and the services of Vincent K. McMahon; possible adverse changes in the regulatory atmosphere and related private sector initiatives; the highly competitive, rapidly changing and increasingly fragmented nature of the markets in which we operate and greater financial resources or marketplace presence of many of our competitors; uncertainties associated with international markets; our difficulty or inability to promote and conduct our live events and/or other businesses if we do not comply with applicable regulations; our dependence on our intellectual property rights, our need to protect those rights, and the risks of our infringement of others intellectual property rights; the complexity of our rights agreements across distribution mechanisms and geographical areas; potential substantial liability in the event of accidents or injuries occurring during our physically demanding events including, without limitation, claims relating to CTE; large public events as well as travel to and from such events; our feature film business; our expansion into new or complementary businesses and/or strategic investments; our computer systems and online operations; privacy norms and regulations; a possible decline in general economic conditions and disruption in financial markets; our accounts receivable; our indebtedness; litigation; our potential failure to meet market expectations for our financial performance, which could adversely affect our stock; Vincent K. McMahon exercises control over our affairs, and his interests may conflict with the holders of our Class A common stock; a substantial number of shares are eligible for sale by the McMahons and the sale, or the perception of possible sales, of those shares could lower our stock price; and the relatively small public float of our Class A common stock. In addition, our dividend is dependent on a number of factors, including, among other things, our liquidity and historical and projected cash flow, strategic plan (including alternative uses of capital), our financial results and condition, contractual and legal restrictions on the payment of dividends (including under our revolving credit facility), general economic and competitive conditions and such other factors as our Board of Directors may consider relevant. Forward-looking statements made by the Company speak only as of the date made and are subject to change without any obligation on the part of the Company to update or revise them. Undue reliance should not be placed on these statements. For more information about risks and uncertainties associated with the Company s business, please refer to the Management s Discussion and Analysis of Financial Condition and Results of Operations and Risk Factors sections of the Company s SEC filings, including, but not limited to, our annual report on Form 0-K and quarterly reports on Form 0-Q. This presentation contains non-gaap financial information, including OIBDA. We define OIBDA as operating income before depreciation and amortization, excluding feature film and television production amortization and related impairments. OIBDA is a non-gaap financial measure and may be different than similarlytitled non-gaap financial measures used by other companies. A limitation of OIBDA is that it excludes depreciation and amortization, which represents the periodic charge for certain fixed assets and intangible assets used in generating revenues for the Company's business. OIBDA should not be regarded as an alternative to operating income or net income as an indicator of operating performance, or to the statement of cash flows as a measure of liquidity, nor should it be considered in isolation or as a substitute for financial measures prepared in accordance with GAAP. We believe that operating income is the most directly comparable GAAP financial measure to OIBDA. Reconciliations of OIBDA to operating income can be found in the Company s earnings release dated February 8,

3 207: Another Year of Record Achievements For the year, achieved record revenue of $80M and record Adjusted OIBDA of $2M, which was at the high-end of our guidance For the year, WWE Network s average paid subscribers increased 8% to.53m On social and digital platforms, WWE content reached a record 20B video views (up 32% from 206); social media engagements increased 4% to.2b WWE s YouTube channel remained the # most viewed Sports Channel and the 2nd most viewed channel on YouTube with 20B lifetime views Formed partnerships to create content across multiple platforms including: - Mixed Match Challenge, a live in-ring series that launched on Facebook Watch on Jan 6; Facilitates mobile consumption and social interaction - Miz & Mrs., a reality program that will air on USA Network - Virtual reality experiences, partnered with NextVR to produce content from select 208 special events for the NextVR app This January, we celebrated the 25th anniversary of Raw, which ranked # on cable and #3 on all of TV; Best ratings in 3 years for the Jan 22 event Recently, held first women s Royal Rumble, which was highlighted by appearance of Ronda Rousey Pleased with performance. Looking forward to 208 and expect to achieve record revenue, record Adjusted OIBDA and record subscribers 3

4 WWE Financial Highlights 207 ($ in millions) Revenue Operating Income Adjusted OIBDA $ % $ % $ % $.9 $55.7 $ financial results reflected the successful execution of WWE s content strategy: to increase the monetization of video content by creating compelling original programming, leveraging a large social and digital footprint to increase engagement, and utilizing data analytics to optimize performance Operating income increased 36% with a 0% increase in revenue to over $800M. WWE achieved the highest annual revenue and Adjusted OIBDA in the Company s history and exceeded the financial objectives that were established at the start of 207 A definition of Adjusted OIBDA and a reconciliation to Operating Income can be found in the Company s Q4 and Full Year 207 earnings materials and in the appendix to this presentation 4

5 Q4 207: Financial Highlights ($ in millions) Revenue Operating Income Adjusted OIBDA % % % (49.0) (53.3) (.) (45.5) (49.9) (.) Q4 206 Q4 207 Q4 206 Q4 207 Q4 206 Q4 207 Corporate & Other WWE Studios Consumer Products Live Events Media A definition of Adjusted OIBDA and a reconciliation to Operating Income can be found in the Company s Q4 and Full Year 207 earnings materials and in the appendix to this presentation 5

6 Q4 207: Media Division ($ in millions) Revenue Operating Income Adjusted OIBDA % % % (0.7) (0.8) Q4 206 Q4 207 Q4 206 Q4 207 Q4 206 Q4 207 Home Entertainment Digital Media Network Television A definition of Adjusted OIBDA and a reconciliation to Operating Income can be found in the Company s Q4 and Full Year 207 earnings materials and in the appendix to this presentation 6

7 Q4 207: Live Events ($ in millions) Revenue Operating Income Adjusted OIBDA % % % 5.4 Q4 206 Q4 207 Q4 206 Q4 207 Q4 206 Q4 207 A definition of Adjusted OIBDA and a reconciliation to Operating Income can be found in the Company s Q4 and Full Year 207 earnings materials and in the appendix to this presentation 7

8 Q4 207: Consumer Products ($ in millions) Revenue Operating Income Adjusted OIBDA % % % Q4 206 Q4 207 Q4 206 Q4 207 Q4 206 Q4 207 Venue Merchandise WWEShop Licensing A definition of Adjusted OIBDA and a reconciliation to Operating Income can be found in the Company s Q4 and Full Year 207 earnings materials and in the appendix to this presentation 8

9 Capital Structure ($ in millions) Cash & ST Investments Free Cash Flow $267. +$30.3 $297.4 $7.9 +$39.7 $ As of Dec. 3, 207, WWE held ~$297M in cash and short-term investments and had ~$00M in debt capacity under the Company s revolving credit facility Free Cash Flow year-to-date increased ~$40M over the prior year period to ~$72M reflecting the change in cash from operating activities and $4.9 million paid towards the purchase of a building and underlying real property in the prior year period 9

10 WWE Operational Highlights 207 Made meaningful progress creating new content that reflects the evolving preferences of fans, particularly as it relates to mobile consumption and social interaction Developed a new in-ring series, Mixed Match Challenge, that premiered live on Facebook Watch Announced a new docuseries, Miz & Mrs., that will air on USA network Marked milestone in women s evolution with first Royal Rumble match featuring female superstars and surprise appearance of Ronda Rousey Continued to deliver strong viewership: Raw and Smackdown remained the # and #2 programs on USA; WWE Network continued to be a leader in directto-consumer video; Digital consumption increased 32% to 20B video views Global sponsorship revenue across platforms increased 30% in 207 Innovation across WWE: strengthened talent base, launched new mobile games, delivered # action figure, applied data analytics to enhance marketing 0

11 Planned financial reporting changes Effective starting with Q 208 results Segment Reporting (Including Allocation of Business Support Costs) Adjusted OIBDA Definition Revenue Recognition

12 Revised Business Segment Reporting Effective starting with Q 208 results WWE has executed a successful business transformation, with an increasing share of revenue coming from the monetization of video content Given this ongoing transformation, management has continued to evolve the way it analyzes results and allocates resources To reflect its revised perspective, the Company is implementing changes in the structure of its reported segments, reducing the number of reported segments from 0 to 3 (WWE Studios to be included in Media) The Company plans to allocate certain Business support costs, such as talent development/training, marketing, business strategy and data analytics, to the revised segments Plan to provide greater visibility into WWE s revenue streams, such as entertainment rights fees, advertising and sponsorship revenue The Company believes the revised presentation of results will be more informative for users of the financial statements and that the revised structure and allocation of costs will be more consistent with that of its media peers Prior 0 Segments Network Television Home Entertainment Digital Media WWE Studios Live Events Licensing Venue Merchandise WWE Shop Corporate & Other Revised Segments 2 3 Media Live Events Consumer Products Corporate * Note: We also plan to evaluate and revise the disclosure of key operating metrics 2

13 The revised business segments expected to reflect WWE s operations as described below Prior 0 Segments Revised Segments Key Drivers of Revenue and Performance Network Television Home Entertainment Digital Media Media Production and monetization of content across platforms, including: Subscription and rights fees, advertising and sponsorship Long-form and short-form programs Distribution across WWE Network, pay television, digital/social media and filmed entertainment outlets 5 6 WWE Studios Live Events 2 Live Events Ticket sales of the Company's global live events, including primary and secondary distribution 7 8 Licensing Venue Merchandise 3 Consumer Products Licensing royalties and direct sales of branded merchandise, including: Video and mobile games, toys, apparel and other products Sold at retail, online and at WWE venues 9 0 WWE Shop Corporate & Other Corporate Expect to reflect traditional "G&A" expenses such as finance, human 9 resources, information technology, facilities and legal Expect to be treated as a reconciling item, not a separate segment (See following page) 3

14 WWE plans to allocate certain business support costs (previously in Corporate & Other ) to revised segments Prior Segment: Corporate & Other Revised: Allocated or Kept as Reconciling Item Business Support (Examples) Talent Development Performance Center Sales & marketing Business Strategy Data Analytics Allocated to Revised Business Segments (Media, Live Events, Consumer Products, Other) Based primarily on segment share of total revenue Plan to allocate certain business support costs to the revised segments. These costs are more directly related to producing and distributing WWE s content and products, and therefore, more directly tied to generating revenue "Traditional G&A The remainder of the Company s prior Corporate & Other expenses, such as costs associated with finance, human resources, information technology, facilities and legal functions are expected to be reported as Corporate expenses, which in aggregate are treated as a reconciling item rather than as a reported segment 4

15 Expect to provide enhanced visibility of revenue, such as rights, advertising and sponsorship Prior Segments: 207 Revenue ($M) ❶ Network $98 - Subscriptions 84 - Pay-per-view 4 ❷ Television 270 ❸ Home Entertainment 9 ❹ Digital Media 34 ❺ WWE Studios 9 ❻ Live Events 52 - North America 5 - International 34 - Travel Packages 4 ❼ Licensing 52 ❽ Venue Merchandise 24 ❾ WWE Shop 38 ❿ Corporate & Other 6 $80 Revised Segments: 207 Revenue ($M) ❶ Media $536 - Network Subscriptions 76 - Core entertainment rights fees Other content rights fees () 49 - Advertising and sponsorship 52 - Pay-per-view 4 ❷ Live Events $52 - North America ticket sales 3 - International ticket sales 32 - Advertising and sponsorship 2 - Travel packages 4 ❸ Consumer Products $4 - Consumer product licensing 52 - ecommerce 38 - Venue merchandise 24 $80 Includes Studios revenue 5

16 New primary measure of performance: Adjusted OIBDA modified to exclude stock compensation The Company plans to change its primary measure of performance from OIBDA to Adjusted OIBDA, and to modify its definition of Adjusted OIBDA to exclude stock-based compensation expense (a non-cash expense that may vary from period to period with limited correlation to operating performance) The Company will continue to exclude certain impairment charges and other non-recurring material items from its definition of Adjusted OIBDA as these items also impact the comparability of results between periods The Company believes Adjusted OIBDA is relevant because it provides a meaningful representation of operating cash flows and is a primary measure used by media investors, analysts and peers for purposes of valuation The Company s previously stated 208 Adjusted OIBDA target of $5M equates to a target of approximately $40M based on the revised definition Note: Adjusted OIBDA is a non-gaap financial measure and may be different than similarly-titled non-gaap financial measures used by other companies. WWE views operating income as the most directly comparable GAAP measure. Adjusted OIBDA should not be considered in isolation of, or as a substitute for operating income or other GAAP measures, such as net income or operating cash flow, as an indicator of operating performance or liquidity Reconciliation to Adjusted OIBDA (revised; $M) Adjusted OIBDA (Revised definition) Target Operating Income () $ Depreciation & amortization () OIBDA () Adjustments (2) Adjusted OIBDA (Prior) Stock Compensation 24. ~25.0 Adjusted OIBDA (Revised) $36. ~$40.0 Adjusted OIBDA is defined as operating income excluding depreciation and amortization, stock-based compensation expense, certain impairment charges and other non-recurring materials items that otherwise would impact the comparability of results between periods. Adjusted OIBDA includes amortization expenses directly related to the Company s revenue generating activities including the amortization of feature film, television production and WWE Network programming assets At this time, WWE is unable to reconcile to GAAP measures for 208, as the Company is unable to determine all of the adjustments that would be required adjustments include $4.7 million in film impairment charges and non-recurring expenses of $5.6 million primarily related to certain legal matters and other contractual obligations 6 6

17 Revenue recognition: adoption of new FASB standard (Effective //8) In May 204, the FASB issued ASU No , Revenue from Contracts with Customer (Topic 606)" Adoption of guidance requires WWE to record revenue based on current period estimates rather than wait for statements that show actual results The revised approach expected to have the most significant impact on WWE s licensing and filmed entertainment businesses, where it shifts the timing of revenue Existing Licensing Accounting Royalties from the sale of licensed products recorded upon receipt of statements from individual licensees Unearned minimum guarantees are recorded as revenue after the end of the licensing contract New Licensing Accounting Product royalties estimated during the period of sale (lagged reporting no longer acceptable) Fixed MG payments will not be deferred until the end of the contract. The Company anticipates changes in the quarterly timing of revenue, but does not expect a material impact on full-year results Specifically, the Company estimates an $M to $3M decline in licensing revenue from the first quarter 207 to the first quarter 208 WWE adopted the new standard January, 208 Note: As part of its implementation, the cumulative effect of initially applying the guidance - primarily estimated Q4 207 licensing royalties - will be reflected as an adjustment to beginning retained earnings Existing WWE Studios Accounting In arrangements with distribution partners, revenue is recorded on a net basis after partners recoup distribution fees and expenses Participation statements are reported on a lag and not during the period of film sale/ exhibition New WWE Studios Accounting Feature film distribution revenue recorded in the period of film sales/ exhibition (based on estimates) For co-distributed films, where WWE receives a revenue share, revenue recorded in the period of film exhibition (not on a lag) 7

18 Adoption of the FASB guideline accelerates the timing of licensing revenue as demonstrated below Basis of Revenue Recognition Q 208 Q2 208 Q3 208 Q Accounting Methodology (If continued) Statement of Q4 207 sales/ royalties Statement of Q 208 sales/ royalties Statement of Q2 208 sales/ royalties Statement of Q3 208 sales/ royalties 208 Accounting Methodology (New Standard) Estimate of Q 208 sales/ royalties Estimate of Q2 208 sales/ royalties Estimate of Q3 208 sales/ royalties Estimate of Q4 208 sales/ royalties Note: Statement of Q4 207 sales/ royalties Q4 207 product sales/ royalties which would be previously have been recorded in Q 208, is recorded in the beginning balance of Q 208 retained earnings (and will not impact the income statement) 8 8

19 Q 208 Business Outlook Estimate first quarter 208 Adjusted OIBDA of $23M to $27M, excluding stock-based compensation expense As compared to the first quarter 207, this range represents higher profits from the increased monetization of content, which are partially offset by the timing of lower licensing revenue associated with the new FASB standard for revenue recognition As shown (at right), on a pro-forma basis, reflecting 207 revenue on a comparable basis to 208, the range of first quarter 208 Adjusted OIBDA represents growth of approximately $8M to $2M WWE also projects Q 208 average paid subscribers to WWE Network of approximately.53 million Pro Forma Impact of New FASB standard on Adjusted OIBDA (revised, $M) 208 Q 207 Q Operating Income () - $4.0 Depreciation & amortization () OIBDA () Adjustments (2) Adjusted OIBDA (Prior) () Stock Compensation Adjusted OIBDA (Revised) Estimated Impact Due to Changes in Revenue Recognition Guidance (3) - ~(0) Pro Forma Adjusted OIBDA $23 - $27 ~$5.2 At this time, WWE is unable to reconcile to GAAP measures for 208, as the Company is unable to determine all of the adjustments that would be required 2 For Q 207, Adjustments include $2. million in film impairment charges and $5.6 million primarily related to certain legal matters and other contractual obligations 3 Impact to Q 207 Adjusted OIBDA represents an approximate estimate of the effect due to the timing shift in our licensing business 9

20 208 Full Year Outlook* In 208, expect to achieve another year of record revenue and previously targeted Adjusted OIBDA of at least $5M. Based on revised definition (excluding stock compensation), this equates to an approximate 208 Adjusted OIBDA target of at least $40M Given significant long-term growth potential, our target balances near-term results with strategic investments For 208, expect capital expenditures of $50M to $70M reflecting, in part, the shift from 207 (In 207, planned capex to expand overall production capacity was largely delayed) Expect long-term benefit from new tax law as the reduced corporate rate more than offsets eliminations of deductions for domestic production and certain executive compensation. Effective tax rate to decrease from ~36% to 25-27% (ex discrete items) Key 208 initiatives include delivering a wide range of content across platforms, continuing to develop data and technology infrastructure and investing in markets with the greatest long-term potential. Integral goal is finalizing distribution in US, UK and India A definition of Adjusted OIBDA and a reconciliation to Operating Income can be found in the Company s Q4 and Full Year 207 earnings materials and in the appendix to this presentation * The Company s business model and expected results will continue to be subject to significant execution risks, including those risks outlined in the Company s Form 0-K filing with the SEC. See additional notes on page 26 of this presentation 20

21 K e y I n i t i a t i v e s Announce Future Distribution: U.S., U.K., India Expected Announcement of Future Distribution Plan Expiration of Current Licensing Agreements U.S. U.K. May - Sept. 208 Second Half of 208 India First Half of 209 End of Quarter Q2 208 Q3 208 Q4 208 Q 209 Q2 209 Q3 209 Q4 209 Future distribution is subject to negotiations, which are expected to begin next year. Although these announcements could occur either before or after these dates, management believes that these ranges represent the most likely periods for such communication. 2

22 A P P E N D I X

23 Reconciliation of Non-GAAP Measures Reconciliation of Adjusted OIBDA () to Operating Income $mm Q4 206 Q4 207 FY 206 FY 207 Adjusted OIBDA $20.5 $ 34.8 $ 80. $.9 Depreciation & amortization (6.6) (6.3) (24.4) (26.0) Film Impairments (2) - (.5) - (4.7) Asset Impairments Gain (loss) on operating assets Restructuring charges Other operating income items (3) (5.6) Operating Income (U.S. GAAP Basis) $ 3.9 $ 27.0 $ 55.7 $ 75.6 Reconciliation of Net Cash to Free Cash Flow $mm Q4 206 Q4 207 FY 206 FY 207 Net cash provided by operating activities $ 36.9 $ 55.6 $ 62. $ 96.6 Less cash used for capital expenditures: Purchase of property and equipment and other assets (6.0) (7.0) (29.9) (24.7) Free Cash Flow $ 30.9 $ 48.6 $ 32.2 $ 7.9 A definition of OIBDA and Adjusted OIBDA can be found on page 26 of this presentation. Source: WWE Q4 and Full Year 207 Earnings 02/08/208 (corporate.wwe.com/investors) 2 Adjustments to Q4 207 and FY 207 OIBDA reflects film impairment charges of $.5 million and $4.7 million, respectively, considered to be material in the period in which they occurred, and may differ from total film impairments 3 Adjustments to FY 207 OIBDA of $5.6 million of non-recurring expenses primarily related to certain legal matters and other contractual obligations 23

24 Reconciliation of Non-GAAP Measures Reconciliation of Adjusted OIBDA () Three Months Ended December 3, 207 Operating Adjustments Adjusted $mm Income Depreciation OIBDA to OIBDA OIBDA Network $ 9. $.9 $ 2.0 $ - $ 2.0 Television Home Entertainment (0.7) (0.) (0.8) - (0.8) Digital Media Live Events Licensing Venue Merchandise WWEShop WWE Studios (2) Corporate & Other (53.3) 3.4 (49.9) - (49.9) Total Operating Income $ 27.0 $ 6.3 $ 33.3 $.5 $ 34.8 Three Months Ended December 3, 206 Operating Adjustments Adjusted $mm Income Depreciation OIBDA to OIBDA OIBDA Network $ 3.7 $.8 $ 5.5 $ - $ 5.5 Television Home Entertainment Digital Media Live Events Licensing Venue Merchandise WWEShop WWE Studios (.) - (.) - (.) Corporate & Other (49.0) 3.5 (45.5) - (45.5) Total Operating Income $ 3.9 $ 6.6 $ 20.5 $ - $ 20.5 A definition of OIBDA and Adjusted OIBDA can be found on page 26 of this presentation. Source: WWE Q4 and Full Year 207 Earnings 02/08/208 (corporate.wwe.com/investors) 2 Adjustments to Q4 207 OIBDA reflects film impairment charges of $.5 million, considered to be material in the quarter in which they occurred 24

25 Reconciliation of Non-GAAP Measures Reconciliation of Adjusted OIBDA () Year Ended December 3, 207 $mm Operating Income Depreciation OIBDA Adjustments to OIBDA Adjusted OIBDA Network $ 57.3 $ 6.9 $ 64.2 $ - $ 64.2 Television Home Entertainment Digital Media Live Events Licensing Venue Merchandise WWEShop WWE Studios (2) (3.6) - (3.6) 4.7. Corporate & Other (3) (25.2) 4.2 (20.0) 5.6 (95.4) Total Operating Income $ 75.6 $ 26.0 $ 0.6 $ 0.3 $.9 Year Ended December 3, 206 $mm Operating Income Depreciation OIBDA Adjustments to OIBDA Adjusted OIBDA Network $ 36.9 $ 6. $ 43.0 $ - $ 43.0 Television Home Entertainment Digital Media Live Events Licensing Venue Merchandise WWEShop WWE Studios (0.2) - (0.2) - (0.2) Corporate & Other (9.7) 3.0 (78.7) - (78.7) Total Operating Income $ 55.7 $ 24.4 $ 80. $ - $ 80. A definition of OIBDA and Adjusted OIBDA can be found on page 26 of this presentation. Source: WWE Q4 and Full Year 207 Earnings 02/08/208 (corporate.wwe.com/investors) 2 Adjustments to Full Year 207 OIBDA reflects film impairment charges of $4.7 million, considered to be material in the quarter in which they occurred, and may differ from total film impairments 3 Adjustments to OIBDA of $5.6 million of non-recurring expenses primarily related to certain legal matters and other contractual obligations 25

26 Notes: Non-GAAP Measures The Company defines OIBDA as operating income before depreciation and amortization, excluding feature film and television production asset amortization and related impairments, as well as the amortization of costs related to content delivery and technology assets utilized for our WWE Network. OIBDA is a non-gaap financial measure and may be different than similarly-titled non-gaap financial measures used by other companies. A limitation of OIBDA is that it excludes depreciation and amortization, which represents the periodic charge for certain fixed assets and intangible assets used in generating revenues for the Company's business. OIBDA should not be regarded as an alternative to operating income or net income as an indicator of operating performance, or to the statement of cash flows as a measure of liquidity, nor should it be considered in isolation or as a substitute for financial measures prepared in accordance with GAAP. We believe that operating income is the most directly comparable GAAP financial measure to OIBDA Adjusted OIBDA, Adjusted Operating income, Adjusted Net income and Adjusted Earnings per share exclude certain material items, which otherwise would impact the comparability of results between periods. These should not be considered as an alternative to net income, cash flows from operations or any other indicator of WWE's performance or liquidity, determined in accordance with U.S. GAAP The Company defines Free Cash Flow as net cash provided by operating activities less cash used for capital expenditures. Although it is not a recognized measure of liquidity under U.S. GAAP, Free Cash Flow provides useful information regarding the amount of cash our continuing business is generating after capital expenditures, available for reinvesting in the business, debt service, and payment of dividends 26