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 December 31, 1998 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 2,055,792,165 shares of common stock outstanding as of
February 10, 1999
(including 304,203 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>
<S> <C> <C>
Three Months Ended
December 31
1998 1997
Revenues $ 6,589 $ 6,339
Costs and expenses (5,559) (4,847)
Gain on sale of Starwave 345 -
------ ------
Operating income 1,375 1,492
Corporate and other activities (52) (78)
Equity in Infoseek loss (84) -
Net interest expense (164) (134)
------ ------
Income before income taxes 1,075 1,280
Income taxes (453) (525)
------ ------
Net income $ 622 $ 755
====== ======
Earnings per share
Diluted $ 0.30 $ 0.37
====== ======
Basic $ 0.30 $ 0.37
====== ======
Average number of common and common
equivalent
shares outstanding
Diluted 2,076 2,067
====== ======
Basic 2,050 2,019
====== ======
</TABLE>
See Notes to Condensed Consolidated Financial Statements
<PAGE>
THE WALT DISNEY COMPANY
CONDENSED CONSOLIDATED BALANCE SHEETS
In millions, except share data
<TABLE>
<CAPTION>
<S> <C> <C>
December 31, September 30,
1998 1998
(unaudited)
ASSETS
Current Assets
Cash and cash equivalents $1,194 $ 127
Receivables 4,242 3,999
Inventories 836 899
Film and television costs 3,305 3,223
Deferred income taxes 458 463
Other assets 759 664
------ ------
Total current assets 10,794 9,375
Film and television costs 2,591 2,506
Investments 2,583 1,814
Theme parks,resorts and other property,at cost
Attractions, buildings and equipment 14,306 14,037
Accumulated depreciation (5,602) (5,382)
------ ------
8,704 8,655
Projects in progress 1,368 1,280
Land 414 411
------ ------
10,486 10,346
Intangible assets, net 15,706 15,769
Other assets 1,377 1,568
------ ------
$ 43,537 $ 41,378
====== ======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts and taxes payable and other accrued
liabilities $ 4,384 $ 4,767
Current portion of borrowings 2,028 2,123
Unearned royalties and other advances 817 635
------ ------
Total current liabilities 7,229 7,525
Borrowings 11,077 9,562
Deferred income taxes 2,764 2,488
Other long term liabilities, unearned
royalties and other advances 2,466 2,415
Stockholders' Equity
Preferred stock, $.01 par value
Authorized - 100 million shares
Issued - none
Common stock, $.01 par value
Authorized - 3.6 billion shares
Issued - 2.1 billion shares 9,001 8,995
Retained earnings 11,603 10,981
Cumulative translation and other - 13
------ ------
20,604 19,989
Treasury stock, at cost, 29 million shares (593) (593)
Shares held by TWDC Stock Compensation Fund,
at cost - (10) (8)
0.4 million shares ------ ------
20,001 19,388
------ ------
$ 43,537 $ 41,378
====== ======
</TABLE>
See Notes to Condensed Consolidated Financial Statements
<PAGE>
THE WALT DISNEY COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
In millions (unaudited)
<TABLE>
<CAPTION>
<S> <C> <C>
Three Months Ended
December 31
1998 1997
NET INCOME $622 $ 755
OPERATING ITEMS NOT REQUIRING CASH OUTLAYS
Amortization of film and television costs 653 558
Depreciation 207 190
Amortization of intangibles 108 106
Gain on sale of Starwave (345) -
Other 95 35
CHANGES IN ASSETS AND LIABILITIES (216) (473)
---- ----
502 416
---- ----
CASH PROVIDED BY OPERATIONS 1,124 1,171
----- -----
INVESTING ACTIVITIES
Film and television costs (1,000) (921)
Investments in theme parks, resorts and
other property (347) (487)
Acquisitions (net of cash acquired) (120) (183)
Other 2 87
----- ----
(1,465) (1,504)
FINANCING ACTIVITIES
Borrowings 1,478 1,947
Reduction of borrowings (69) (983)
Repurchases of common stock (19) -
Dividends - (90)
Other 18 29
----- -----
1,408 903
----- -----
Increase in Cash and Cash Equivalents 1,067 570
Cash and Cash Equivalents, Beginning of
Period 127 317
----- -----
Cash and Cash Equivalents, End of Period $1,194 $ 887
===== =====
</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, 1999. Certain reclassifications
have been made in the fiscal 1998 financial statements to conform to the
fiscal 1999 presentation. 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, 1998.
2.During the quarter, the Company received net proceeds of approximately $378
million from commercial paper activity and an additional $1.1 billion through
other financing arrangements having effective interest rates ranging from
5.25% to 5.29% and maturities in fiscal 2004 through 2009. Some of this debt
is denominated in foreign currencies, which the Company has converted into
U.S. dollar-denominated LIBOR-based variable rate debt by entering into
cross-currency swaps.
3.In April 1997, the Company purchased a significant equity stake in Starwave
Corporation ("Starwave"), an internet technology company. In connection with
the acquisition, the Company was granted an option to purchase substantially
all the remaining shares of Starwave, which the Company exercised during the
quarter ended June 30, 1998. Thereafter, the accounts of Starwave were
included in the Company's consolidated financial statements.
On June 18, 1998, the Company reached an agreement for the acquisition of
Starwave by Infoseek Corporation ("Infoseek"), a publicly held internet search
company, the purchase of additional shares of Infoseek common stock for $70
million and the purchase of warrants for $139 million, enabling it, under
certain circumstances, to achieve a majority stake in Infoseek. These warrants
vest over a three-year period and expire in five years. On November 18, 1998,
the shareholders of both Infoseek and Starwave approved the acquisition. As a
result of the acquisition and the Company's purchase of additional shares of
Infoseek common stock pursuant to the merger agreement, the Company owns
approximately 43% of Infoseek's outstanding common stock.
<PAGE>
THE WALT DISNEY COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Upon completion of this transaction, the Company recognized a non-cash gain of
$345 million. The gain reflected the market value of the Infoseek shares
received under a partial sale accounting model. As a result of its investment
in Infoseek, the Company recorded intangible assets of $459 million, including
$420 million of goodwill, which are being amortized over an estimated useful
life of two years. The Company determined the economic useful life of the
acquired goodwill by giving consideration to the useful lives of Infoseek's
identifiable intangible assets, consisting of developed technology, trademarks
and in-place workforce. In addition, the Company considered the competitive
environment and the rapid pace of technological change in the internet
industry.
The Company accounts for its investment in Infoseek under the equity method of
accounting. During the quarter ended December 31, 1998, the Company recorded
$30 million of amortization related to intangible assets and a charge of $44
million for purchased in-process research and development expenditures, which
have been reflected in "Equity in Infoseek loss" on the Company's Condensed
Consolidated Statements of Income. As of December 31, 1998, the Company's
recorded investment in Infoseek was $580 million. The quoted market value of
the Company's Infoseek shares at December 31, 1998 was approximately $1.3
billion.
4.Dividends per share for the quarter ended December 31, 1997 were $0.04. On
September 29, 1998, the Company's Board of Directors voted to begin paying
dividends on an annual, rather than a quarterly basis, to reduce costs and
simplify payments to stockholders. Accordingly, there were no dividend
payments for the quarter ended December 31, 1998.
5.Diluted earnings per share amounts are based upon the weighted average number
of common and common equivalent shares outstanding during the period. Common
equivalent shares are excluded from the computation in periods in which they
have an anti-dilutive effect. The difference between basic and diluted
earnings per share for the Company is solely attributable to stock options.
For the quarters ended December 31, 1998 and 1997, options for 26 million and
9 million shares, respectively, were excluded from the diluted earnings per
share calculation.
<PAGE>
THE WALT DISNEY COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
6.In the current quarter, the Company adopted Statement of Financial Accounting
Standards No. 130, Reporting Comprehensive Income. This statement requires
that the Company present comprehensive income, a measure that reflects all
nonowner changes in equity, in addition to net income. Comprehensive income
(loss) for the three months ended December 31, 1998 and 1997 is as follows (in
millions):
[CAPTION]
<TABLE>
<S> <C> <C>
1998 1997
Cumulative translation and other
adjustments, net of tax $ (8) $ 30
Net income 622 755
--- ---
Comprehensive income $ 614 $ 785
=== ===
</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 ended December 31, 1998 for
each business segment, and for the Company as a whole, are not necessarily
indicative of results to be expected for the full year.
Creative Content revenues fluctuate based upon the timing of theatrical
motion picture and home video releases and seasonal consumer purchasing
behavior. Release dates for theatrical and home video 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
Consolidated Results
For the Quarter Ended December 31,
(unaudited; in millions, except per share data)
[CAPTION]
<TABLE>
<S> <C> <C> <C>
1998 1997 % Change
Revenues $6,589 $6,339 4%
Costs and expenses (5,559) (4,847) (15)%
Gain on sale of Starwave 345 - n/m
------ ------
Operating income 1,375 1,492 (8)%
Corporate and other activities (52) (78) 33%
Equity in Infoseek loss (84) - n/m
Net interest expense (164) (134) (22)%
----- -----
Income before income taxes 1,075 1,280 (16)%
Income taxes (453) (525) 14%
----- -----
Net income $ 622 $ 755 (18)%
===== =====
Earnings per share
Diluted $ 0.30 $ 0.37 (19)%
===== =====
Basic $ 0.30 $ 0.37 (19)%
===== =====
Amortization of intangible assets
included in operating income $ 108 $ 106
===== =====
</TABLE>
<PAGE>
The Walt Disney Company
Management's Discussion and Analysis of
Financial Condition and Results of Operations (continued)
Net income and diluted earnings per share for the quarter decreased 18% and
19% to $622 million and $0.30, respectively. These results were driven by a
decline in operating income, an increase in net interest expense and equity in
Infoseek's loss, partially offset by the gain on sale of Starwave and lower
expenses associated with corporate and other activities. Decreased operating
income reflected significantly lower results from Creative Content and
Broadcasting activities, partially offset by improvements from Theme Parks and
Resorts. Net interest expense increased due to gains from sales of investments
in the prior year quarter and higher average debt balances in the current
quarter. Net expense associated with corporate and other activities reflected
improved results from the Company's equity investments, including Euro Disney,
A&E Television and Lifetime Television. Excluding the Starwave gain and the
impact of Infoseek, operating income, net income and earnings per share were
$1.0 billion, $470 million and $0.23, respectively.
On November 18, 1998, the Company completed its acquisition of a 43% equity
interest in Infoseek, an internet search company (discussed more fully in
footnote 3 to the financial statements). In that transaction, Infoseek exchanged
shares of its common stock for the Company's interest in Starwave Corporation,
an internet technology company. As a result of the exchange of its Starwave
investment, the Company recognized a non-cash gain of $345 million. Also during
the quarter, the Company recorded $30 million of amortization related to
goodwill and other identifiable intangible assets and a charge of $44 million
for purchased in-process research and development expenditures, which have been
reflected in "Equity in Infoseek loss" on the Company's Condensed Consolidated
Statements of Income. Acquired intangible assets are being amortized over a
period of two years.
The Company determined the economic useful life of acquired goodwill by
giving consideration to the useful lives of Infoseek's identifiable intangible
assets, consisting of developed technology, trademarks and in-place workforce.
In addition, the company considered the competitive environment and the rapid
pace of technological change in the internet industry.
<PAGE>
The Walt Disney Company
Management's Discussion and Analysis of
Financial Condition and Results of Operations (continued)
Business Segment Results
[CAPTION]
<TABLE>
<S> <C> <C> <C>
For the Quarter Ended December 31,
(Unaudited; in millions)
1998 1997 %Change
Revenues:
Creative Content $2,941 $3,015 (2)%
Broadcasting 2,214 2,064 7%
Theme Parks & Resorts 1,434 1,260 14%
----- -----
Total $6,589 $6,339 4%
===== =====
Operating Income:(1)
Creative Content $430 $ 700 (39)%
Broadcasting 265 505 (48)%
Theme Parks & Resorts 335 287 17%
----- -----
1,030 1,492 (31)%
Gain on Sale of Starwave 345 - n/m
----- -----
Total $1,375 $ 1,492 (8)%
===== =====
(1) Includes depreciation and amortization (excluding film costs) of:
Creative Content $ 51 $ 52
Broadcasting 137 134
Theme Parks & Resorts 120 98
---- ----
$ 308 $ 284
==== ====
</TABLE>
Creative Content
Revenues decreased 2% or $74 million to $2.9 billion, driven by declines of
$133 million in home video, $31 million in the
Disney Stores and $13 million in character merchandise licensing, partially
offset by growth of $120 million in theatrical motion
picture distribution. The decline in home video revenues
reflected fewer unit sales domestically, despite the successful
release of The Lion King II: Simba's Pride, which faced difficult
comparisons to the combined results of Belle's Enchanted
Christmas, The Jungle Book and George of the Jungle in the prior
year. Lower revenues at the Disney Stores reflected a decline in
comparable store sales domestically. Softness in character
merchandise licensing revenues was primarily attributable to
continued economic weakness abroad, partially offset by growth
domestically, driven by the continued strength of Winnie the
Pooh. Growth in theatrical motion picture distribution revenues
was attributable to the domestic box office successes of The
Waterboy, Enemy of the State and A Bug's Life.
<PAGE>
The Walt Disney Company
Management's Discussion and Analysis of
Financial Condition and Results of Operations (continued)
Operating income decreased 39% or $270 million to $430 million, reflecting
declines in worldwide home video, the Disney Stores domestically and
international character merchandise licensing. These decreases were partially
offset by increased domestic theatrical motion picture distribution results.
Costs and expenses, which consist primarily of production cost amortization,
distribution and selling expenses, participations, product cost, labor and
occupancy, increased 8% or $196 million. This increase was primarily due to
higher production and participation cost amortization and distribution costs in
the theatrical motion picture market and production cost amortization in the
home video market. Increases in production cost amortization are reflective of
industry trends: as competition for creative talent has increased, costs within
the industry have increased at a rate significantly above inflation.
Broadcasting
Revenues increased 7% or $150 million to $2.2 billion, driven by growth of
$154 million from ESPN and the Disney Channel. Revenue growth at ESPN was driven
by additional NFL games under the 1998 NFL contract. Revenue growth at the
Disney Channel was due to subscriber growth and international expansion.
Revenues were essentially flat at the television network, as improved results
from college bowl games were offset by lower news ratings. There has been a
continuing decline in viewership at all major broadcast networks, including ABC,
reflecting the growth in the cable industry's share of viewers. In addition,
there have been continuing increases in the cost of sports and other
programming.
Operating income decreased 48% or $240 million to $265 million, reflecting
increased programming costs at the television network and ESPN, partially offset
by revenue increases at ESPN and the Disney Channel. Costs and expenses, which
consist primarily of programming rights and amortization, production costs,
distribution and selling expenses and labor costs, increased 25% or $390
million, driven by higher NFL sports programming costs at the television network
and ESPN. In addition, higher program amortization at the television network
reflected a reduction in benefits from the ABC acquisition.
The programming rights fees under the 1998 NFL contract are significantly
higher than those required by the previous contract and the fee increases exceed
the estimated revenue increases over the contract term. The contract's impact on
the Company's results over the remaining contract term is dependent upon a
number of factors, including the strength of advertising markets, effectiveness
of marketing efforts and the size of viewer audiences.
<PAGE>
The Walt Disney Company
Management's Discussion and Analysis of
Financial Condition and Results of Operations (continued)
The cost of the NFL contract is charged to expense based on the ratio of
each period's gross revenues to estimated total gross revenues. Estimates of
total gross revenues can change significantly and, accordingly, they are
reviewed periodically and amortization is adjusted if necessary. Such
adjustments could have a material effect on results of operations in future
periods.
Theme Parks and Resorts
Revenues increased 14% or $174 million to $1.4 billion, driven by growth at
the Walt Disney World Resort of $64 million due to record theme park attendance
and $51 million from Disney Cruise Line. Revenues also increased $23 million due
to record attendance at Disneyland. Record attendance at the Walt Disney World
Resort was driven by the new theme park, Disney's Animal Kingdom. Record
attendance at Disneyland was due in part to a successful Christmas holiday
program.
Operating income increased $48 million or 17% to $335 million, resulting
primarily from record theme park attendance at both the Walt Disney World Resort
and Disneyland. 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 $126 million or 13%.
Increased operating costs were driven by higher theme park attendance and Disney
Cruise Line operations.
FINANCIAL CONDITION
For the quarter ended December 31, 1998, cash provided by operations
decreased $47 million to $1.1 billion, driven by decreased net income, partially
offset by lower tax payments, due to timing, and higher film and television
amortization.
During the quarter, the Company invested $690 million to develop, produce
and acquire rights to film and television properties and $310 million in
connection with a prior year agreement to acquire a film library.
During the quarter, the Company invested $347 million in theme parks,
resorts and other properties. These expenditures reflected continued expansion
activities related to Disney's California Adventure, Disney's Animal Kingdom,
Disney Cruise Line and certain resort facilities at the Walt Disney World
Resort.
Total commitments to purchase broadcast programming approximated $13.4
billion at December 31, 1998 including approximately $8 billion related to NFL
programming. Substantially all of this amount is payable over the next six
years.
The Walt Disney Company
Management's Discussion and Analysis of
Financial Condition and Results of Operations (continued)
The Company expects the ABC Television Network, ESPN and the Company's
television and radio stations to continue to enter into programming commitments
to purchase the broadcast rights for various feature films, sports and other
programming.
During the quarter, the Company received approximately $378 million from
net commercial paper activity and $1.1 billion from other financing
arrangements. Commercial paper borrowings outstanding as of December 31, 1998
totaled $2.6 billion, with maturities of up to one year, supported by bank
facilities totaling $5.2 billion, which expire in one to four years and allow
for borrowings at various interest rates. The Company also has the ability to
borrow under a U.S. shelf registration statement and a euro medium-term note
program, which collectively permit the issuance of up to approximately $4.7
billion of additional debt.
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.
OTHER MATTERS
During the quarter, the Company continued its efforts to minimize the risk
of disruption from the "year 2000 (`Y2K') problem." This problem is a result of
computer programs having been written using two digits (rather than four) to
define the applicable year. The Company's overall plan to address the Y2K
problem is described more fully in its 1998 Annual Report on Form 10-K, and the
following is an update of the information included therein.
IT Systems. Remediation efforts (including testing and certification)
continued with respect to the Company's previously identified "critical" and
"important" business ("information technology" or "IT") systems. The Company
continues to expect that the bulk of these systems will be tested and certified
as Y2K compliant by July 31, 1999, although remediation of a small number of
critical or important business systems may not be completed until October 1999.
<PAGE>
The Walt Disney Company
Management's Discussion and Analysis of
Financial Condition and Results of Operations (continued)
Non-IT Systems. Also during the quarter, the Company completed its
inventory of third-party and internal embedded, or "non-IT" systems. Company
representatives began meeting with vendors of equipment used in the Company's
theme parks, hotels and owned office buildings and with property managers of
important leased properties worldwide to ensure that the equipment is Y2K
compliant. Testing for these embedded systems is expected to be completed by
mid-1999. Additionally, testing plans are being developed and some vendor
validation has occurred for other key embedded systems, such as satellite
transmission, broadcast and cruise line navigation systems. Testing for some of
these systems will require taking them off-line for varying periods, which may
cause temporary interruptions in particular business operations, although such
interruptions are not expected to materially impact operations. In appropriate
cases, the Company will be relying upon vendors' laboratory testing and
certification documents to validate that the related systems are Y2K compliant.
Where the Company does not have adequate assurance that remediation efforts by
third parties are on schedule, contingency plans are being developed to minimize
potential disruption from embedded system failures. Validation efforts are
expected to continue through October 1999.
Contingency Planning. Contingency planning also continued at all business
units under the leadership of the Company's Y2K task force. These plans are
intended to provide guidance and alternatives for unexpected failures of
internal systems, as well as external failures (such as electricity,
communications and transportation) that may impede any business unit's ability
to operate normally. Plans also provide for staffing of crisis management teams;
identification of methods for ensuring prioritization of remedial efforts;
storage of emergency inventories, and the development of plans for business
resumption in the event of extended disruptions.
Costs. Total anticipated expenditures related to the Y2K project remain on
target at approximately $261 million, of which approximately $142 million is
expected to be capitalized.
<PAGE>
The Walt Disney Company
Management's Discussion and Analysis of
Financial Condition and Results of Operations (continued)
Based upon its efforts to date, the Company continues to believe that the
vast majority of both its IT and its non-IT systems, including all critical and
important systems, will remain up and running after January 1, 2000.
Accordingly, the Company does not currently anticipate that internal systems
failures will result in any material adverse effect to its operations or
financial condition. At this time, the Company continues to believe that the
most likely "worst-case" scenario involves potential disruptions in areas in
which the Company's operations must rely on such third parties whose systems may
not work properly after January 1, 2000. In addition, the Company's
international operations may be adversely affected by failures of businesses in
other parts of the world to take adequate steps to address the Y2K problem.
While such failures could affect important operations of the Company and its
subsidiaries, either directly or indirectly, in a significant manner, the
Company cannot at present estimate either the likelihood or the potential cost
of such failures.
The nature and focus of the Company's efforts to address the Year 2000
problem may be revised periodically as interim goals are achieved or new issues
are identified. In addition, it is important to note that the description of the
Company's efforts necessarily involves estimates and projections with respect to
activities required in the future. These estimates and projections are subject
to change as work continues, and such changes may be substantial.
FORWARD LOOKING STATEMENTS
The Private Securities Litigation Reform Act of 1995 (the "Act") provides a
safe harbor for forward-looking statements made by or on behalf of the Company.
The Company and its representatives may from time to time make written or oral
statements that are "forward-looking," including statements contained in this
report and other filings with the Securities and Exchange Commission and in
reports to the Company's stockholders. All statements that express expectations
and projections with respect to future matters, including the launching or
prospective development of new business initiatives; anticipated motion picture
or television releases; internet or theme park and resort projects; Y2K
remediation efforts, are forward-looking statements within the meaning of the
Act. These statements are made on the basis of management's views and
assumptions, as of the time the statements are made, regarding future events and
business performance. There can be no assurance, however, that management's
expectations will necessarily come to pass.
Factors that may affect forward-looking statements. For an enterprise as
large and complex as the Company, a wide range of factors could materially
affect future developments and performance. A list of such factors, is set forth
in the Company's Annual Report on Form 10-K for the year ended September 30,
1998.
<PAGE>
PART II. OTHER INFORMATION
THE WALT DISNEY COMPANY
Item 4. Submission of Matters to a Vote of Security Holders
None
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
10Letter agreement, dated December 29, 1998, between the
Company and Michael D. Eisner
(b) Reports on Form 8-K
None
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/ Thomas O. Staggs
Thomas O. Staggs
Executive Vice President and
Chief Financial Officer
February 16, 1999
Burbank, California
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary information extracted from the condensed
consolidated balance sheet and condensed consolidated statement of income found
in the Company's Form 10-Q for the three months ended December 31, 1998, and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
<RESTATED>
<CIK> 0001001039
<NAME> THE WALT DISNEY COMPANY
<MULTIPLIER> 1,000,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-1999
<PERIOD-START> OCT-01-1998
<PERIOD-END> DEC-31-1998
<EXCHANGE-RATE> 1
<CASH> 1,194
<SECURITIES> 0
<RECEIVABLES> 4,242
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<CURRENT-ASSETS> 10,794
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<BONDS> 13,105
0
0
<COMMON> 9,001
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<TOTAL-REVENUES> 6,589
<CGS> 0
<TOTAL-COSTS> 5,214
<OTHER-EXPENSES> 136
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 164
<INCOME-PRETAX> 1,075
<INCOME-TAX> 453
<INCOME-CONTINUING> 622
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 622
<EPS-PRIMARY> .30
<EPS-DILUTED> .30
</TABLE>
December 29, 1998
Mr. Michael D. Eisner
Chairman and Chief Executive Officer
The Walt Disney Company
500 South Buena Vista Street
Burbank, California 91521
Dear Michael:
Reference is made to the employment agreement between The Walt Disney Company
("Company") and you ("Executive") dated January 8, 1997 (the "Agreement").
Company and Executive hereby agree as follows:
1. Notwithstanding any provision to the contrary in Section 4 of the
Agreement, Executive's incentive bonus for Company's fiscal year ending
September 30, 1999, shall be determined pursuant to Company's Annual Bonus
Performance Plan for Executive Officers. In furtherance of the foregoing,
Executive hereby waives all rights to any bonus for such fiscal year pursuant to
the bonus formula attached to the Agreement.
2. Executive and Company shall negotiate and agree upon, before September
30, 1999, a new incentive bonus provision for Executive which shall be
applicable to each fiscal year of Company which shall end after September 30,
1999 and on or before termination of the Agreement and for such additional
periods as are provided in Section 4(e) of the Agreement.
Company and Executive confirm their agreement that this letter agreement is
being entered into pursuant to Section 4(c) of the Agreement and shall be
subject to all of the provisions thereof. Except as modified by the foregoing,
the Agreement shall remain in full force and effect and shall be unaffected by
any failure of Company and Executive to reach agreement regarding a new
incentive bonus provision as contemplated by paragraph 2 above.
If the foregoing accurately reflects our agreement, please sign a copy of this
letter in the space provided below and return a copy of same to us.
Very truly yours,
THE WALT DISNEY COMPANY
By: /s/ Raymond L. Watson
Title:
AGREED AND ACCEPTED:
/s/ Michael D. Eisner
