UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the Quarter Ended June 30, 1997 Commission File Number 1-11605
THE WALT DISNEY COMPANY
Incorporated in Delaware I.R.S. Employer Identification
No. 95-4545390
500 South Buena Vista Street, Burbank, California 91521
(818) 560-1000
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
There were 675,133,968 shares of common stock outstanding as of July 29, 1997
(including 891,108 shares held by TWDC Stock Compensation Fund, an
affiliate of the Company).
<PAGE>
PART I. FINANCIAL INFORMATION
THE WALT DISNEY COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
In millions, except per share data (unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
June 30 June 30
1997 1996 1997 1996
-------- -------- --------- --------
<S> <C> <C> <C> <C>
REVENUES $5,194 $5,087 $16,953 $13,467
COSTS AND EXPENSES (4,134) (4,131) (13,602) (10,992)
GAIN ON SALE OF KCAL - - 135 -
ACCOUNTING CHANGE - - - (300)
-------- -------- --------- --------
OPERATING INCOME 1,060 956 3,486 2,175
CORPORATE ACTIVITIES AND OTHER (69) (66) (267) (248)
NET INTEREST EXPENSE (185) (171) (540) (267)
ACQUISITION-RELATED COSTS - - - (225)
-------- -------- --------- --------
INCOME BEFORE INCOME TAXES 806 719 2,679 1,435
INCOME TAX EXPENSE (333) (313) (1,124) (557)
-------- -------- --------- --------
NET INCOME $ 473 $ 406 $1,555 $ 878
======== ======== ========= ========
EARNINGS PER SHARE $ 0.69 $ 0.59 $ 2.26 $ 1.47
======== ======== ========= ========
Average number of common and
common equivalent shares
outstanding 688 691 687 596
======== ======== ========= ========
</TABLE>
See Notes to Condensed Consolidated Financial Statements
<PAGE>
THE WALT DISNEY COMPANY
CONDENSED CONSOLIDATED BALANCE SHEETS
In millions, except share data
<TABLE>
<CAPTION>
June 30, September 30,
1997 1996
----------- --------------
(unaudited)
<S> <C> <C>
ASSETS
Cash and cash equivalents $ 528 $ 278
Receivables 3,544 3,343
Inventories 908 951
Film and television costs 3,980 3,259
Investments 1,812 1,009
Theme parks, resorts and other property,
net of accumulated depreciation of 8,812 8,031
$4,756 and $4,448
Intangible assets, net of accumulated
amortization of $638 and $301 16,983 17,978
Other assets 1,733 1,777
--------- ---------
$ 38,300 $ 36,626
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts and taxes payable and accrued
liabilities $ 6,257 $ 6,276
Borrowings 11,588 12,342
Deferred income taxes 2,028 743
Unearned royalty and other advances 1,160 1,179
Stockholders' equity
Preferred stock, $.01 par value
Authorized - 100 million shares
Issued - none
Common stock, $.01 par value
Authorized - 1.2 billion shares
Issued - 683 million shares and
682 million shares 8,561 8,576
Retained earnings 9,235 7,933
Cumulative translation and other
adjustments (16) 39
Treasury shares, at cost - 8 million
shares (462) (462)
Shares held by TWDC Stock Compensation
Fund- 1 million shares (51) -
--------- ---------
17,267 16,086
--------- ---------
$ 38,300 $ 36,626
========= =========
</TABLE>
See Notes to Condensed Consolidated Financial Statements
<PAGE>
THE WALT DISNEY COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
In millions (unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
June 30
---------------------------
1997 1996
----------- -----------
<S> <C> <C>
NET INCOME $ 1,555 $ 878
-------- --------
OPERATING ITEMS NOT REQUIRING CASH OUTLAYS
Amortization of film and television costs 2,889 1,938
Depreciation 545 509
Amortization of intangibles 337 187
Gain on sale of KCAL (135) -
Accounting change - 300
Other (1) 49
CHANGES IN
Investments in trading securities - 85
Receivables (145) (111)
Inventories 35 2
Other assets (113) (359)
Accounts and taxes payable and accrued
liabilities 315 (91)
Deferred income taxes 324 167
Unearned royalty and other advances (19) 244
-------- --------
4,032 2,920
-------- --------
CASH PROVIDED BY OPERATIONS 5,587 3,798
-------- --------
INVESTING ACTIVITIES
Acquisition of ABC, net of cash acquired - (8,432)
Film and television costs (3,642) (3,131)
Investments in theme parks, resorts and
other property (1,428) (1,194)
Investment in E! Entertainment Television (321) -
Proceeds from sale of KCAL 377 -
Proceeds from sale of investments 15 350
Other (161) (18)
-------- --------
(5,160) (12,425)
-------- --------
FINANCING ACTIVITIES
Borrowings 2,303 9,692
Proceeds from formation of REITs 1,311 -
Reduction of borrowings (3,412) (1,630)
Dividends (253) (197)
Other (126) 42
-------- --------
(177) 7,907
-------- --------
Increase (Decrease) in Cash and Cash Equivalents 250 (720)
Cash and Cash Equivalents, Beginning of Period 278 1,077
-------- --------
Cash and Cash Equivalents, End of Period $ 528 $ 357
======== ========
</TABLE>
See Notes to Condensed Consolidated Financial Statements
<PAGE>
THE WALT DISNEY COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. These condensed consolidated financial statements have been
prepared in accordance with generally accepted accounting
principles for interim financial information and with the
instructions to Rule 10-01 of Regulation S-X. Accordingly,
they do not include all of the information and footnotes
required by generally accepted accounting principles for
complete financial statements. In the opinion of management,
all adjustments (consisting only of normal recurring
adjustments) considered necessary for a fair presentation have
been reflected in these condensed consolidated financial
statements. Operating results for the quarter are not
necessarily indicative of the results that may be expected for
the year ending September 30, 1997. Certain reclassifications
have been made in the 1996 condensed consolidated financial
statements to conform to the 1997 presentation, including the
reclassification of certain equity investments out of other
assets into investments in the condensed consolidated balance
sheets. For further information, refer to the consolidated
financial statements and footnotes thereto included in the
Company's Annual Report on Form 10-K for the year ended
September 30, 1996.
2. For the nine-month period, the Company received proceeds of
approximately $1.1 billion through financing arrangements with
effective interest rates ranging from 4.4% to 5.6% and
maturities in fiscal 1999 through fiscal 2012. Certain of
these financing arrangements are denominated in foreign
currencies for which the Company has entered into
cross-currency swap agreements effectively converting these
obligations into U.S. dollar denominated LIBOR-based variable
rate debt instruments. The Company also established two real
estate investment trusts (REITs) and issued equity interests
in the REITs to third-party investors in exchange for $1.3
billion.
In addition, during the second quarter, the Company issued approximately
$1.2 billion in debt secured by certain assets of its newspaper operations.
The secured debt has an interest rate based on one-month LIBOR and a
maturity date of September 15, 1999. During the third quarter, as discussed
below, $990 million of this debt was assumed by Knight-Ridder, Inc. in
connection with the disposition of certain of the Company's newspaper
operations.
Proceeds from the above transactions were used in part to retire commercial
paper borrowings and other debt. Commercial paper outstanding as of June 30,
1997 totaled $2.1 billion with maturities of up to one year and an average
interest rate of 5.5%. The outstanding commercial paper borrowings are
supported by bank facilities totaling $3 billion, which expire in 5 years
and allow for borrowings at various interest rates.
<PAGE>
Notes to Condensed Consolidated Financial Statements (continued)
3. On May 9, 1997, the Company disposed of a substantial portion
of its newspaper operations, obtained in the 1996 acquisition
of ABC, Inc. ("ABC"), for Knight-Ridder, Inc. preferred stock
convertible to common stock with a market value of $660
million and the assumption by Knight-Ridder, Inc. of
pre-existing secured debt of $990 million. The disposition did
not have a material impact on the financial results of the
Company.
The Company anticipates selling most of the remaining publishing operations
it acquired as part of the ABC acquisition during the fourth quarter.
4. In November 1996, the Company sold KCAL, a Los Angeles television station,
for $387 million in cash, resulting in a pre-tax gain of $135 million.
5. Dividends per share for the quarters ended June 30, 1997 and 1996 were
$0.13 and $0.11, respectively. Dividends per share totaled $0.38
and $0.31 for the nine months ended June 30, 1997 and 1996, respectively.
6. The unaudited pro forma information below for the nine months ended
June 30, 1996 presents combined results of operations as if the ABC
acquisition had occurred at the beginning of such period. The unaudited
pro forma information is not necessarily indicative of the results of
operations of the combined company had the acquisition occurred at the
beginning of such period.
<TABLE>
<CAPTION>
(in millions, except per share data)
June 30, 1996
------------------------------------
Quarter ended Nine months ended
--------------- -------------------
<S> <C> <C>
Revenues $ 5,087 $ 15,966
Net income (1) 401 982
Earnings per share (1) 0.58 1.42
(1) Amounts for the nine months include the impact of a $300 million
non-cash charge related to the implementation of Statement of Financial
Accounting Standards No. 121, "Accounting for the Impairment of
Long-lived Assets and for Long-lived Assets to be Disposed of." The
charge reduced earnings per share by $0.27.
</TABLE>
<PAGE>
The Walt Disney Company
Management's Discussion and Analysis of
Financial Condition and Results of Operations
SEASONALITY
The Company's businesses are subject to the effects of seasonality.
Consequently, the operating results for the quarter and nine months ended June
30, 1997 for each line of business, and for the Company as a whole, are not
necessarily indicative of results for the full year.
Creative Content revenues fluctuate based upon the timing of theatrical
and home video releases and seasonal consumer purchasing behavior. Release
dates for theatrical products are determined by several factors, including
timing of vacation and holiday periods and competition in the market.
Broadcasting revenues are influenced by advertiser demand and the
seasonal nature of programming, and generally peak in the spring and fall.
Theme Parks and Resorts revenues fluctuate with changes in theme park
attendance and resort occupancy resulting from the nature of vacation travel.
Peak attendance and resort occupancy generally occur during the summer months
when school vacations occur and during early-winter and spring holiday periods.
RESULTS OF OPERATIONS
For the Quarter and Nine Months Ended June 30, 1997
The Company acquired the operations of ABC, Inc. ("ABC") on February 9,
1996 and completed its final purchase price allocation and determination of the
related intangible assets during the second quarter of this year. To enhance
comparability, certain information for 1996 is presented and discussed on a
"pro forma" basis, which assumes the ABC acquisition and the related final
purchase price allocation occurred at the beginning of 1996. The Company
believes prior-year pro forma results provide more meaningful information for
comparing net income, changes in net income and earnings trends, as the pro
forma presentation includes the entire results of the Company and its acquired
ABC operations for the full fiscal period. Accordingly, the discussion of 1997
results below reflects comparisons to the Company's pro forma 1996 operating
results. The pro forma results are not necessarily indicative of the combined
results that would have occurred had the acquisition actually occurred at the
beginning of 1996. In addition, the discussion of the Company's operating
results excludes the impact of two non-recurring charges recorded during the
second quarter of 1996, as well as the gain on the sale of KCAL recorded by the
Company in the first quarter of 1997. Both the prior-year non-recurring items
and the gain on the sale of KCAL are discussed separately below.
<PAGE>
Consolidated Results - Quarter
<TABLE>
<CAPTION>
(unaudited; in millions, except per share data)
1996 % 1996
1997 (Pro forma) Change (As reported)
------ ----------- ------ -----------
<S> <C> <C> <C> <C>
Revenues $5,194 $5,087 2% $5,087
Costs and Expenses (1) (4,134) (4,136) - (4,131)
------- ------- -------
Operating Income 1,060 951 11% 956
Corporate Activities
and Other (69) (66) (5)% (66)
Net Interest Expense (185) (171) (8)% (171)
------- ------- -------
Income Before Income Taxes 806 714 13% 719
Income Tax Expense (333) (313) (6)% (313)
------- ------- -------
Net Income $ 473 $ 401 18% $ 406
======= ======= =======
Earnings Per Share $ 0.69 $ 0.58 19% $ 0.59
======= ======= =======
Amortization of Intangible Assets
Included in Operating Income $ 103 $ 119 n/m $ 114
======= ======= =======
(1) Pro forma 1996 amounts reflect the final purchase price allocation
completed in the second quarter of 1997 related to the acquisition of ABC.
</TABLE>
Net income and earnings per share for the quarter increased 18% and 19%
to $473 million and $0.69, respectively. These results were driven by increased
operating income in all business segments.
The effective income tax rate decreased from the prior year primarily as
a result of a reduction in the ratio of nondeductible amortization of
intangible assets to total income before income taxes.
Consolidated Results - Nine Months
The Company's 1997 results and 1996 pro forma amounts reflect the impacts
of the ABC acquisition, including the use of purchase accounting as well as
significant increases in amortization of intangible assets, interest expense,
the effective income tax rate and shares outstanding.
<PAGE>
Consolidated Results - Nine Months (continued)
<TABLE>
<CAPTION>
(unaudited; in millions, except per share data)
1996 % 1996
1997 (Pro forma) Change (As reported)
------- --------- ------ -----------
<S> <C> <C> <C> <C>
Revenues $16,953 $15,966 6% $13,467
Costs and Expenses (13,602) (13,174) (3)% (10,992)
Gain on Sale of KCAL 135 - n/m -
Accounting Change - (300) n/m (300)
-------- -------- --------
Operating Income 3,486 2,492 40% 2,175
Corporate Activities and Other (267) (188) (42)% (248)
Net Interest Expense (540) (527) (2)% (267)
Acquisition Related Costs - - n/m (225)
-------- -------- --------
Income Before Income Taxes 2,679 1,777 51% 1,435
Income Taxes (1,124) (795) (41)% (557)
-------- -------- --------
Net Income $ 1,555 $ 982 58% $ 878
======== ======== ========
Earnings Per Share $ 2.26 $ 1.42 59% $ 1.47
======== ======== ========
Net Income Excluding
Non-recurring Charges and $ 1,475 $ 1,165 27% $ 1,180
KCAL Gain ======== ======== ========
Earnings Per Share Excluding
Non-recurring Charges and $ 2.15 $ 1.69 27% $ 1.98
KCAL Gain ======== ======== ========
Amortization of Intangible
Assets Included in Operating $ 337 $ 357 n/m
Income ======== ========
</TABLE>
Net income and earnings per share for the nine months, excluding the
prior-year non-recurring charges and the gain on the sale of KCAL discussed
below, increased 27% to $1.5 billion and $2.15, respectively.
During the first quarter of 1997 the Company sold KCAL, a Los Angeles
television station, resulting in a pre-tax gain of $135 million. The gain on
the sale of KCAL increased net income from $1.5 billion to $1.6 billion and
earnings per share from $2.15 to $2.26.
During the second quarter of 1996, the Company recorded two non-recurring
charges consisting of a $300 million non-cash charge related to the
implementation of Statement of Financial Accounting Standards No. 121,
"Accounting for the Impairment of Long-lived Assets and for Long-lived Assets
to be Disposed of," and a $225 million charge for costs related to the ABC
acquisition. These charges reduced as reported earnings per share from $1.98
to $1.47 and pro forma earnings per share from $1.69 to $1.42.
<PAGE>
Consolidated Results - Nine Months (continued)
The increase in Corporate Activities and Other reflected certain
non-recurring gains in the prior-year nine months primarily related to the
sale of an investment in a cellular communications company.
The effective income tax rate decreased from the prior year primarily as
a result of a reduction in the ratio of nondeductible amortization of
intangible assets to total income before income taxes.
Business Segment Results - Quarter
<TABLE>
<CAPTION>
(Unaudited; in millions)
1996 % 1996
1997 (Pro forma) Change (As reported)
------- --------- ------ -----------
<S> <C> <C> <C> <C>
Revenues:
Creative Content $2,216 $2,306 (4)% $2,306
Broadcasting 1,609 1,532 5% 1,532
Theme Parks & Resorts 1,369 1,249 10% 1,249
------ ------ ------
Total $5,194 $5,087 2% $5,087
====== ====== ======
Operating Income: (1)
Creative Content $ 333 $ 285 17% $ 285
Broadcasting 337 316 7% 321
Theme Parks & Resorts 390 350 11% 350
------ ------ ------
Total $1,060 $ 951 11% $ 956
====== ====== ======
(1) Includes depreciation and amortization
(excluding film costs) of:
Creative Content $ 50 $ 63
Broadcasting 129 128
Theme Parks & Resorts 120 105
----- -----
$ 299 $ 296
===== =====
</TABLE>
Creative Content
Revenues for the quarter decreased 4% or $90 million, due primarily to
declines of $57 million in publishing revenues, $31 million in theatrical
revenues and $23 million in home video revenues, partially offset by growth in
revenues at the Disney Stores of $28 million. Reductions in publishing revenues
reflected the disposition of certain newspaper operations to Knight-Ridder, Inc.
in May 1997. The decline in theatrical revenues reflected a reduction in the
number of films in release during the quarter. Home video revenues reflected
difficult comparisons to the prior-year strength of Sleeping Beauty, The Lion
King and the animated version of 101 Dalmatians in the international market.
Growth at the Disney Stores reflected continued worldwide expansion with the
opening of 31 stores during the quarter, bringing the total number of stores
to 610.
<PAGE>
Creative Content (continued)
Operating income for the quarter increased 17% or $48 million to $333
million, reflecting improved results for theatrical distribution, partially
offset by the reduction in home video results. Costs and expenses, which
consist primarily of production cost amortization, distribution and selling
expenses, product cost, labor and leasehold expense, decreased 7% or $138
million. The decrease was primarily due to the decline in distribution costs
in the domestic theatrical and home video markets as well as lower overall
costs resulting from the disposition of certain publishing businesses during
the quarter. These decreases were partially offset by an increase in
participation expenses in the domestic home video market, the expansion of
the Disney Stores and increases in amortization of production costs in the
home video and television markets.
Broadcasting
Revenues for the quarter increased $77 million or 5% to $1.6 billion,
driven by increases at ESPN and The Disney Channel. The increases in revenues
at ESPN and The Disney Channel were due primarily to higher affiliate fees and
advertising rates at ESPN and subscriber growth at The Disney Channel.
Operating income for the quarter increased $21 million or 7% to $337
million, primarily reflecting increases in revenues at ESPN and The Disney
Channel, offset by decreases at the television network reflecting the impact
of lower ratings. Costs and expenses, which consist primarily of programming,
selling, general and administrative costs, increased 5% or $56 million. This
increase is primarily driven by higher program costs at ESPN and the
television network.
Theme Parks and Resorts
Revenues for the quarter increased 10% or $120 million to $1.4 billion,
driven by the Walt Disney World Resort, led by growth of $86 million from
higher guest spending and $30 million from increased occupied room nights.
Guest spending growth included increases at the Disney Village Marketplace,
most of which was attributable to the World of Disney, the largest Disney
retail outlet, which opened in October 1996. The remaining growth in guest
spending resulted from price increases and improved merchandise and food and
beverage sales. Attendance gains were driven by increased domestic tourist
visitation primarily attributable to the resort's 25th Anniversary celebration.
Increased occupied room nights reflected continued high occupancy as well as
more available rooms resulting from the opening of Disney's BoardWalk Resort
during the fourth quarter of the prior year.
<PAGE>
Theme Parks and Resorts (continued)
Operating income for the quarter increased 11% or $40 million to $390
million, driven by higher guest spending, theme park attendance and occupied
room nights at the Walt Disney World Resort. Costs and expenses, which consist
principally of labor, costs of merchandise, food and beverages sold,
depreciation, repairs and maintenance, entertainment, and marketing and sales
expenses, increased 9% or $80 million. The increase was primarily due to higher
operating costs resulting from higher attendance and resort expansion,
increased marketing and sales efforts, including those related to the Walt
Disney World Resort's 25th Anniversary celebration, and increased merchandise
and food and beverage costs due to higher guest spending levels.
Business Segment Results - Nine Months
<TABLE>
<CAPTION>
(Unaudited; in millions)
1996 % 1996
1997 (Pro forma) Change (As reported)
------ --------- ------ -----------
<S> <C> <C> <C> <C>
Revenues:
Creative Content $8,201 $7,914 4% $7,466
Broadcasting 5,030 4,754 6% 2,703
Theme Parks & Resorts 3,722 3,298 13% 3,298
------- ------- -------
Total $16,953 $15,966 6% $13,467
======= ======= =======
Operating Income: (1)
Creative Content $1,434 $1,183 21% $1,189
Broadcasting 1,053 861 22% 538
Theme Parks & Resorts 864 748 16% 748
------- ------- -------
3,351 2,792 20% 2,475
Gain on Sale of KCAL 135 - n/m -
Accounting Change - (300) n/m (300)
------- ------- -------
Total $ 3,486 $ 2,492 40% $ 2,175
======= ======= =======
(1) Includes depreciation and amortization
(excluding film costs) of:
Creative Content $ 168 $ 175
Broadcasting 385 386
Theme Parks & Resorts 307 279
----- -----
$ 860 $ 840
===== =====
</TABLE>
<PAGE>
Creative Content
Revenues increased 4% or $287 million to $8.2 billion, driven by growth
of $153 million in the Disney Stores, $122 million in character merchandise
licensing and $53 million in television distribution, partially offset by
declines in home video revenues of $29 million. Growth at the Disney Stores
reflected strong holiday sales in the first quarter and increased revenues due
to continued worldwide expansion. Character merchandise licensing reflected the
strength of film and television properties, including Winnie the Pooh and Toy
Story domestically, and standard characters and 101 Dalmatians worldwide. The
increase in television revenues was driven by an increase in the distribution
of theatrical releases in the international television market. The decrease in
home video revenues reflected the prior year strength of The Lion King and the
animated version of 101 Dalmatians both in the international market.
Operating income increased 21% or $251 million to $1.4 billion,
reflecting improved results for theatrical distribution, character merchandise
licensing and television distribution, partially offset by a reduction in home
video results. Costs and expenses increased 1% or $36 million.
Broadcasting
Revenues increased $276 million or 6% to $5.0 billion, driven by
increases of $255 million at ESPN and The Disney Channel and $49 million at
the television network. The increase in revenues at ESPN was due primarily to
higher affiliate fees resulting from increased subscribers and improved rates,
as well as increased advertising revenues, resulting from higher advertising
rates. Growth in revenues at the television network was primarily the result
of improved performance of sports programming.
Operating income increased $192 million or 22% to $1.1 billion,
reflecting increases in revenues at ESPN and The Disney Channel, as well as
improved results at the television stations, partially offset by decreases at
the television network. Results at the television network reflected the impact
of lower ratings, partially offset by benefits arising from current period
sporting events, continued strength in the advertising market and decreased
program amortization. Costs and expenses increased 2% or $84 million. This
increase reflected increased programming rights and production costs, driven by
international growth at ESPN and increases at the television network, partially
offset by benefits arising from significant reductions in program amortization
and other costs at the television network, primarily attributable to the
acquisition.
<PAGE>
Theme Parks and Resorts
Revenues increased 13% or $424 million to $3.7 billion, reflecting
strength at the Walt Disney World Resort, which had growth of $211 million from
increased guest spending, $90 million from record attendance and $88 million
from increased occupied room nights. Guest spending growth reflected increased
prices and higher per capita merchandise and food and beverage sales as well as
increases at the Disney Village Marketplace, primarily attributable to the
World of Disney retail outlet. Attendance gains resulted primarily from
increased domestic tourism attributable to the 25th Anniversary celebration.
Increased occupied room nights reflected higher occupancy and more available
rooms due to the opening of Disney's BoardWalk Resort.
Operating income increased 16% or $116 million to $864 million, driven by
higher guest spending, theme park attendance and occupied room nights at the
Walt Disney World Resort. Costs and expenses increased 12% or $308 million. The
increase was primarily due to higher operating costs resulting from higher
attendance and resort expansion, increased marketing and sales efforts,
including those related to the Walt Disney World Resort's 25th Anniversary
celebration, and increased merchandise and food and beverage costs due to
higher guest spending levels.
FINANCIAL CONDITION
For the nine months ended June 30, 1997, cash provided by operations
increased $1.4 billion to $5.2 billion, which includes the impact of the ABC
acquisition.
During the nine months, the Company received $2.3 billion from various
financing arrangements and $1.3 billion from the formation of two real estate
investment trusts, as more fully explained in the notes to the condensed
consolidated financial statements. Certain of the proceeds from these
transactions were used to repay commercial paper borrowings. Commercial paper
borrowings outstanding as of June 30, 1997, with maturities of up to one year
totaled $2.1 billion and are supported by bank facilities totaling $3 billion,
which expire in five years and allow for borrowings at various interest rates.
The Company continues to replace some of the remaining commercial paper with
longer-term financing and may utilize, among other options, a U.S. shelf
registration statement filed in March 1996 and a Euro medium-term note program
established in June 1996, which collectively permit the future issuance of up
to approximately $3.0 billion of additional debt.
<PAGE>
FINANCIAL CONDITION (continued)
Borrowings decreased $1.3 billion for the nine months reflecting
scheduled principal reductions and the assumption of $990 million of debt by
Knight-Ridder, Inc. related to the Company's disposition of a substantial
portion of the newspaper operations obtained in the ABC acquisition.
During the nine months, the Company invested $3.6 billion to produce and
acquire film and television properties. These costs increased over the
prior-year nine months due primarily to the inclusion in fiscal 1997 of a full
period of spending at the acquired ABC operations.
During the nine months, the Company invested $1.4 billion in theme parks,
resorts and other properties. These expenditures reflected continued expansion
activities including Disney's Animal Kingdom, the Coronado Springs Resort and
Convention Center and Disney's Wide World of Sports at the Walt Disney World
Resort as well as the Disney Cruise Line.
Total commitments to purchase broadcast programming approximated $4.2
billion at June 30, 1997. Substantially all of this amount is payable over the
next five years. The Company expects the ABC Television Network, its cable
operations and its television and radio stations to continue to enter into
programming commitments to purchase the broadcast rights for various feature
films, sports and other programming.
The Company believes that its financial condition is strong and that its
cash, other liquid assets, operating cash flows, access to equity capital
markets and borrowing capacity, taken together, provide adequate resources to
fund ongoing operating requirements and future capital expenditures related to
the expansion of existing businesses and development of new projects.
<PAGE>
PART II. OTHER INFORMATION
THE WALT DISNEY COMPANY
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
None
(b) Reports on Form 8-K
None
<PAGE>
THE WALT DISNEY COMPANY
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 thereunto duly authorized.
THE WALT DISNEY COMPANY
(Registrant)
By /s/ Richard D. Nanula
-----------------------------------
Richard D. Nanula
Senior Executive Vice President and
Chief Financial Officer
August 9, 1997
Burbank, California
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
condensed consoldiated balance sheet and condensed consolidated statement of
income found on the Company's Form 10-Q for the nine months ended June 30, 1997
and is qualified in its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-START> OCT-01-1996
<PERIOD-END> JUN-30-1997
<EXCHANGE-RATE> 1
<CASH> 528
<SECURITIES> 1,812
<RECEIVABLES> 3,544
<ALLOWANCES> 0
<INVENTORY> 908
<CURRENT-ASSETS> 0
<PP&E> 13,568
<DEPRECIATION> 4,756
<TOTAL-ASSETS> 38,300
<CURRENT-LIABILITIES> 0
<BONDS> 11,588
0
0
<COMMON> 8,561
<OTHER-SE> 8,706
<TOTAL-LIABILITY-AND-EQUITY> 38,300
<SALES> 16,953
<TOTAL-REVENUES> 16,953
<CGS> 0
<TOTAL-COSTS> 13,467
<OTHER-EXPENSES> 267
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 540
<INCOME-PRETAX> 2,679
<INCOME-TAX> 1,124
<INCOME-CONTINUING> 1,555
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,555
<EPS-PRIMARY> 2.26
<EPS-DILUTED> 2.26
</TABLE>
