WWE has released an 8-K that provides additional details on payments made by Vince McMahon since 2006 that were not reported as expenses in previous earnings reports.
In the 8-K filing, WWE states that $14.6 million in payments were discovered – a figure that is $2.1 million above the amount uncovered by the Wall Street Journal’s reporting regarding non-disclosure agreements.
In the filing, the company stated that the payments should have been reported as expenses, although will be paid by McMahon personally. As a result of this reporting error, the company is revising statements over the past three years with the hope of completing the updated reports by August 9th but cannot guarantee that will meet that deadline. As a result, the financial statement for the most recent quarter that ended June 30th is not complete yet.
It added that “internal control over financial reporting was not effective as a result of one or more material weaknesses.” The filing also noted the potential for investigative, regulatory, and enforcement inquiries in the future.
From the filing:
The Company has made a preliminary determination that certain payments that Vince McMahon agreed to make during the period from 2006 through 2022 (including amounts paid and payable in the future), and that were not recorded in the WWE consolidated financial statements, should have been recorded as expenses in the quarters in which those agreements were made (the “Unrecorded Expenses”).
As of the date hereof, the Company has identified Unrecorded Expenses totaling approximately $14.6 million. All payments underlying the Unrecorded Expenses were or will be paid by Vince McMahon personally. While the Company continues to evaluate the impact on previously reported financial statements, the Company has preliminarily determined that, while the amount of Unrecorded Expenses was not material in any individual period in which the Unrecorded Expenses arose, the aggregate amount of Unrecorded Expenses would be material if recorded entirely in the second quarter of 2022.
Accordingly, the Company currently anticipates that it will revise its previously issued financial statements to record the Unrecorded Expenses in the applicable periods for the years ended December 31, 2019, 2020 and 2021, as well as the first quarter of 2022, when it issues its financial statements for the second quarter of 2022. The Company is working with the goal of issuing such financial statements by August 9, 2022, but there is no assurance that it will be able to meet this deadline.
In light of the Unrecorded Expenses and related facts, the Company expects to conclude that its internal control over financial reporting was not effective as a result of one or more material weaknesses. The Company continues to evaluate the appropriate accounting treatment for the Unrecorded Expenses, as well as its internal control over financial reporting, and its ultimate conclusions on these topics may differ from what the Company currently anticipates.
As previously announced, a special committee of independent members of the Board is conducting an investigation into alleged misconduct by Vince McMahon, which investigation remains ongoing.
The Company has also received, and may receive in the future, regulatory, investigative and enforcement inquiries, subpoenas or demands arising from, related to, or in connection with these matters.
On Friday, Vince McMahon publicly stated he was retiring while Stephanie McMahon-Levesque and Nick Khan would assume the positions of co-CEOs. On Monday, WWE announced that Paul Levesque will be responsible for the creative duties for the company in addition to his role as head of talent relations.