SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED):
November 4, 1999
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THE WALT DISNEY COMPANY
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE
(STATE OF JURISDICTION OF INCORPORATION)
1-11605 95-4545390
(COMMISSION FILE NUMBER) (IRS EMPLOYER IDENTIFICATION NO.)
500 South Buena Vista Street, Burbank, California 91521
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
(818) 560-1000
(REGISTRANT'S TELEPHONE NUMBER)
ITEM 5. OTHER EVENTS
On November 4, 1999, the Registrant issued a press release
reporting earnings results for its 1999 fiscal year. The release
also set forth certain information with respect to the
Registrant's expectations for fiscal 2000. In addition, the
release reported a change in the manner in which the Registrant
reports the results of its business segments.
A copy of the press release is attached as Exhibit 99 hereto.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
Exhibit 99 -- Press Release dated November 4, 1999.
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act
of 1934, the Registrant has duly caused this report to be signed
on its behalf by the undersigned hereunto duly authorized.
THE WALT DISNEY COMPANY
Date: November 4, 1999 By: /s/ David K. Thompson
_________________________
David K. Thompson
Senior Vice President
Assistant General Counsel
Exhibit 99
FOR IMMEDIATE RELEASE
November 4, 1999
DISNEY RELEASES YEAR END RESULTS
DECLARES ANNUAL DIVIDEND
BURBANK, Calif. - The Walt Disney Company today reported earnings for the year
and fourth quarter ended September 30, 1999.
Revenues for the full year increased 2% to $23.4 billion. Excluding the
impact of certain fourth quarter restructuring charges and the Company's
November 1998 acquisition of a 43% interest in Infoseek Corporation, operating
income was $3.2 billion, a 21% decline, net income was $1.4 billion and diluted
earnings per share were $0.66, off 27%. Including the restructuring charges and
Infoseek, operating income, net income and earnings per share were $3.4 billion,
$1.3 billion and $0.62, respectively.
"Although we are disappointed with our 1999 results overall, we are pleased
by the tremendous growth of our cable assets and the continuing strong
performance of our theme parks and feature animation," said Michael D. Eisner,
Chairman and Chief Executive Officer. "Our successes in those areas and the
creative product we will introduce in the next two years, including Toy Story 2,
Fantasia 2000, international Disney Channels, Disney's California Adventure and
Tokyo DisneySea, underscore the fact that The Walt Disney Company continues to
own and expand upon one of the world's most valuable collection of entertainment
assets and brands.
"We are also pleased with our number one position at the box office,
especially since we have maintained that position while reducing our ongoing
annual investment in live action film by roughly $500 million. We plan to manage
our production and marketing costs further so that our live-action film slate
can generate attractive returns on a consistent basis."
Revenues for the quarter were $5.8 billion, a decline of 6%. Excluding the
impact of restructuring charges and Infoseek, operating income was $521 million,
down 36%, net income was $212 million, down 37%, and diluted earnings per share
were $0.10, a decrease of 38%. Including the restructuring charges and Infoseek,
operating income, net income and earnings per share were $389 million, $85
million and $0.04, respectively.
Restructuring and Cost Savings
During the quarter the Company recorded restructuring charges related to
certain cost saving initiatives designed to reduce overhead and consolidate
operations within certain of its operating units. These charges amounted to $132
million ($0.04 per share) for the quarter and the year and relate principally to
severance and lease and other contract cancellation costs, primarily in
connection with the consolidation of operations in the Company's broadcasting,
television production and regional entertainment businesses.
The Company's cost saving initiatives will continue into next year. In
addition, the Company is undertaking a strategic sourcing initiative which is
designed to consolidate its purchasing power. Together these cost savings
measures are expected to result in total annual savings in excess of $500
million in fiscal 2001 and thereafter.
Fiscal 2000 Outlook
The Company expects certain trends that affected its 1999 results to
continue in fiscal 2000, especially in the first half of the year, primarily in
the Company's home video and merchandise licensing businesses. In addition,
continued strategic investments in the Company's network television production
and cable network businesses, including Toon Disney and the Soap Net, are
expected to result in higher costs in fiscal 2000. As a result, the Company
believes that fiscal 2000 earnings per share should be approximately in line
with fiscal 1999 results, excluding restructuring charges and go.com, discussed
below.
"Although we realize that we must continue to address our financial
challenges," Eisner added, "we are confident that we are doing so while at the
same time creating long-term shareholder value through our international
initiatives, changes we are making in our consumer products and home video
merchandising and marketing strategies, and our ongoing investments in the
growth of our core assets. We are also increasing our focus on capital
allocation and returns on invested capital in the ongoing management of our
businesses.
"We continue to believe that sound strategic investment is necessary to
sustain industry leadership, maximize long-term growth and create value for
shareholders. Therefore, we remain committed to investing in core markets;
pursuing international opportunities, including Theme Park expansions; achieving
operational improvements; and leveraging technologies such as DVD and the
Internet. At the same time, we will continue to produce the innovative,
appealing and creative entertainment that forms the basis of long-term growth
for our company."
Dividend and Stock Repurchase
The Board of Directors of The Walt Disney Company today declared an annual
cash dividend of 21 cents per share. The dividend is payable December 17, 1999
to shareholders of record of Disney common stock at the close of business
November 16, 1999.
The Disney Board last year decided to move to an annual, rather than
quarterly, dividend policy to reduce costs and simplify payments to the more
than 2.7 million shareholders of Disney common stock.
The Company also indicated that it may repurchase its shares from time to
time. At the end of the fiscal year, the Company had authorization to purchase
up to approximately 400 million of its outstanding shares.
Disclosure Changes and Segment Results
During the quarter, the Company made changes in the manner in which it
reports its operating segments. Businesses previously included in the Creative
Content segment have been disaggregated into separate business segments. In
addition, intangible asset amortization has been broken out as a separate
component of operating income.
Accordingly, the Company now reports five operating segments:
Media Networks, which is broken into two categories, Broadcasting and
Cable Networks. Broadcasting includes the ABC Television Network, the
Company's ten television stations, the Company's radio stations, and the
ABC, Radio Disney, and ESPN Radio Networks. Cable Networks consists of
the ESPN branded cable networks, the Disney Channel and start-up cable
operations including Toon Disney and the soon-to-be launched Soap Net;
Studio Entertainment, which principally includes the Company's feature
animation and live-action motion picture, home video, television, stage
play, and music production and distribution businesses;
Theme Parks and Resorts, reflecting the Company's theme park and
resort activities except Disneyland Paris, which is accounted for under
the equity method and included in Corporate and Other Activities, its
sports team franchises and its DisneyQuest and ESPN Zone regional
entertainment businesses;
Consumer Products, reflecting primarily merchandise licensing, Disney
Store, Disney Interactive software and publishing operations; and
Internet and Direct Marketing, representing the operations of the
Company's online activities, except for its investment in Infoseek
Corporation, and the Disney Catalog.
Media Networks
As presented in the accompanying Table A, Media Networks revenues for the
year increased 5% to $7.5 billion and operating income decreased 8% to $1.6
billion. For the quarter, revenues increased 2% to $1.8 billion and operating
income increased 21% to $369 million.
Broadcasting results for the quarter and year were driven by declines at
the television network due to higher programming costs and lower primetime
ratings. In addition, the prior-year quarter included a gain on the sale of
World TV News. Results for the year also reflected higher sports programming
costs at the television network associated with Monday Night Football.
The accompanying Table B presents operating income for the Company's
overall Cable Television activities, which consist of the Cable Networks and the
Company's cable equity investments. The Company's share of operating income from
Cable Television activities increased 79% to $227 million for the quarter and
32% to $1.0 billion for the year.
Cable Television results for the quarter and year were driven by increases
at the Cable Networks, reflecting higher advertising revenues at ESPN,
subscriber growth at ESPN and the Disney Channel and higher subscriber rates at
ESPN due to contractual increases. Additionally, subscriber growth at ESPN2 and
decreased losses from start-up ventures, including the Classic Sports Network,
contributed to improved results. These increases were partially offset by higher
production and programming costs at ESPN. In addition, subscriber growth at A&E
Television and Lifetime Television and lower losses from start-up cable equity
investments contributed to improved results.
Studio Entertainment
Studio Entertainment revenues for the year were $6.5 billion, a decrease of
4%, and operating income was $116 million, down 85%. Revenues and operating loss
for the quarter were $1.6 billion and $94 million, respectively. While Studio
Entertainment results for the quarter and year reflected improvements in
worldwide theatrical motion picture distribution, these improvements were more
than offset by lower worldwide home video results.
Worldwide theatrical motion picture distribution results for the quarter
and the year reflected an improved film slate, including the successful domestic
titles The Sixth Sense and Inspector Gadget in the quarter. Declines in
worldwide home video for the quarter and the year were primarily attributable to
a greater number of classic animated library releases in the prior year periods.
In addition, home video profit margins declined due to increased amortization
associated with a greater proportion of first-run theatrical and direct-to-video
releases (as opposed to library titles whose production costs are fully
amortized) in the current quarter and year.
Results for the year also reflected increased costs in network television
production and distribution. Higher costs included increased production deficits
primarily associated with four new prime time series, all of which have been
renewed for the current 1999/2000 season, and increased development of pilot
programs.
Theme Parks and Resorts
Theme Parks and Resorts revenues for the year increased 10% to $6.1 billion
and operating income increased 12% to $1.4 billion. For the quarter, revenues
increased 2% to $1.6 billion and operating income increased 6% to $318 million.
For the year, Theme Parks and Resorts reflected increased guest spending at
Walt Disney World and Disneyland, record attendance at Walt Disney World, and
improvements at Disney Cruise Line. Record attendance at Walt Disney World was
driven by Asia, the new land at Disney's Animal Kingdom, Test Track at EPCOT,
and Fantasmic at Disney-MGM Studios, all of which opened in the third quarter,
and Rock `n' Roller Coaster Starring Aerosmith at Disney-MGM Studios, which
opened in the fourth quarter. Disney Cruise Line results reflected a full year
of operations from the first cruise ship, the Disney Magic, and a partial year
of operations from the Disney Wonder, compared to pre-opening costs for the
majority of the prior year.
Theme Parks and Resorts results for the quarter reflected improvements at
Disney Cruise Line due to operations from Disney's second cruise ship, the
Disney Wonder, which launched during the quarter, and increased guest spending
at Walt Disney World and Disneyland, partially offset by decreased attendance
and occupied room nights at Walt Disney World and Disneyland. Lower attendance
at Walt Disney World was due, in part, to the impact of Hurricane Floyd in the
current year, which caused the first-ever, full day theme park closure at Walt
Disney World. Lower attendance at Disneyland reflected, in part, prior-year
strength from the opening of New Tomorrowland in the third quarter of 1998. In
addition, the quarter benefited from cost reductions at the Walt Disney World
Resort.
Consumer Products
Consumer Product revenues for the year were $3.0 billion, a 5% decline, and
operating income was $607 million, down 24%. For the quarter, revenues were $747
million, down 8%, and operating income was $102 million, a decrease of 38%.
Results for the quarter and the year were driven by declines in worldwide
merchandise licensing and the Disney Stores, partially offset by increases at
Disney Interactive.
Declines in worldwide merchandise licensing reflected continuing softness
domestically and in Japan, partially offset by improvements in the rest of Asia
and Latin America. Lower Disney Store results were driven by lower comparative
store sales, principally domestically. Improved results at Disney Interactive
were primarily attributable to video game performance.
Internet and Direct Marketing
In Disney's Internet and Direct Marketing business, revenues from Internet
activities, excluding the change in the manner of accounting for Starwave and
related businesses discussed below, increased 53% for the year and 32% for the
quarter; however, these increases were more than offset by lower Direct
Marketing revenues. For the year, Internet and Direct Marketing revenues were
$206 million, down 21%, and operating loss was essentially unchanged at $93
million. For the quarter, revenues were $47 million, a decrease of 18%, and
operating loss increased 35% to $50 million. Revenues also decreased due to the
change in the manner of accounting for Starwave and related businesses from
consolidation to the equity method following the Company's exchange of Starwave
for its interest in Infoseek in the first quarter. Operating losses for the
quarter and the year were primarily attributable to continued investment in
Internet initiatives.
Corporate Activities and Other
For the year, net expense associated with corporate and other activities,
excluding the gain in the prior year on the sale of the Company's investment in
Scandinavian Broadcasting System, decreased 28% to $196 million. For the
quarter, the net expense decreased 59% to $25 million. The decrease in net
expense for the quarter and the year reflected improved results from the
Company's cable equity investments and Euro Disney. Improvements at Euro Disney
reflected the reinstatement of royalties earned during the year. These
improvements were partially offset by increased corporate general and
administrative expenses due, in part, to start-up costs associated with the
company-wide strategic sourcing initiative which, as previously discussed, is
expected to result in lower costs.
Net interest expense decreased 2% to $612 million for the year, and 39% to
$108 million for the quarter, due to gains from the sale of investments in
the quarter and lower interest rates in the current quarter and year compared
to the prior year periods, partially offset by higher debt balances in the
current periods.
Infoseek Acquisition
At special meetings of stockholders, to be held on November 17, 1999, the
shareholders of The Walt Disney Company and Infoseek Corporation will vote on
the Company's proposed acquisition of the 58% of Infoseek that it does not
currently own. If approved, Infoseek will become a wholly owned subsidiary of
the Company. The Company's Internet and Direct Marketing business will be
combined with Infoseek to establish go.com. In the transaction, the Company will
create and issue a new class of common stock to reflect the performance of
go.com. The go.com common stock is expected to trade on the NYSE under the
symbol GO. Subsequent to the acquisition, if approved, the Company will
separately report earnings per share for go.com and the Disney Group. The
Company's existing class of outstanding common stock will track Disney Group
financial performance. The Disney Group will consist of all of the Company's
businesses (other than "go.com"), as well as its initial 72% retained interest
in go.com. Former Infoseek shareholders will initially own the remaining 28%
interest in go.com. As a result of its initial 72% interest in go.com, the
Company expects this transaction to have a significant negative impact on fiscal
2000 Disney Group earnings per share, including substantially increased
amortization of intangible assets.
Management believes certain statements in this press release may constitute
"forward-looking statements" within the meaning of the Private Securities
Litigation Reform Act of 1995. These statements are made on the basis of
management's views and assumptions regarding future events and business
performance as of the time the statements are made. Actual results may differ
materially from those expressed or implied. Such differences may result from
actions taken by the Company prior to its fiscal 2000 year end, including
further restructuring or strategic initiatives and actions relating to the
Company's strategic sourcing initiative, as well as from developments beyond the
Company's control, including changes in global economic conditions that may,
among other things, affect the international performance of the Company's
theatrical and home video releases, television programming and consumer products
and, in addition, uncertainties associated with the Internet. Changes in
domestic competitive and economic conditions may also affect performance of all
significant Company businesses.
Editor's Note: The Company makes available its quarterly earnings releases,
annual report to shareholders, fact book and SEC filings on its Investor
Relations web-site located at http://www.disney.go.com/investors
[CAPTION]
<TABLE>
CONSOLIDATED STATEMENTS OF INCOME
For the Quarter Ended September 30
(Unaudited; in millions, except per share data)
<S> <C> <C>
1999 1998
---- ----
REVENUES $5,781 $6,147
COSTS AND EXPENSES (5,260) (5,332)
RESTRUCTURING CHARGES (132) (64)
----- -----
OPERATING INCOME 389 751
CORPORATE AND OTHER ACTIVITIES (25) (61)
EQUITY IN INFOSEEK LOSS (76) -
NET INTEREST EXPENSE (108) (177)
---- ----
INCOME BEFORE INCOME TAXES 180 513
INCOME TAXES (95) (217)
---- ----
NET INCOME $ 85 $ 296
==== ====
EARNINGS PER SHARE:
Diluted $0.04 $0.14
==== ====
Basic $0.04 $0.14
==== ====
Average number of common and common equivalent shares outstanding:
Diluted 2,082 2,083
===== =====
Basic 2,062 2,049
===== =====
</TABLE>
[CAPTION]
<TABLE>
CONSOLIDATED STATEMENTS OF INCOME
For the Year Ended September 30
(Unaudited; in millions, except per share data)
<S> <C> <C>
1999 1998
---- ----
REVENUES $23,402 $22,976
COSTS AND EXPENSES (20,171) (18,897)
RESTRUCTURING CHARGES (132) (64)
GAIN ON SALE OF STARWAVE 345 -
------ ------
OPERATING INCOME 3,444 4,015
CORPORATE AND OTHER ACTIVITIES (196) (236)
EQUITY IN INFOSEEK LOSS (322) -
NET INTEREST EXPENSE (612) (622)
----- -----
INCOME BEFORE INCOME TAXES 2,314 3,157
INCOME TAXES (1,014) (1,307)
----- -----
NET INCOME $1,300 $1,850
===== =====
EARNINGS PER SHARE:
Diluted $ 0.62 $ 0.89
===== =====
Basic $ 0.63 $ 0.91
===== =====
Average number of common and common equivalent shares outstanding:
Diluted 2,083 2,079
===== =====
Basic 2,056 2,037
===== =====
</TABLE>
[CAPTION]
<TABLE>
SEGMENT RESULTS
For The Quarter Ended September 30
(Unaudited; in millions)
<S> <C> <C> <C>
1999 1998 % Change
---- ---- --------
Revenues:
Media Networks $1,798 $1,761 2 %
Studio Entertainment 1,636 1,991 (18)%
Theme Parks & Resorts 1,553 1,524 2 %
Consumer Products 747 814 (8)%
Internet and Direct Marketing (1) 47 57 (18)%
----- -----
$5,781 $6,147 (6)%
====== ======
Operating Income: (2)
Media Networks $ 369 $ 305 21 %
Studio Entertainment (94) 192 n/m
Theme Parks & Resorts 318 301 6 %
Consumer Products 102 164 (38)%
Internet and Direct Marketing (1) (50) (37) (35)%
Amortization of Intangible Assets (124) (110) (13)%
----- -----
521 815 (36)%
Restructuring Charges (132) (64) n/m
----- -----
Operating Income $ 389 $ 751 (48)%
===== =====
(1) Excludes impact of Infoseek investment
(2) Segment results exclude intangible asset amortization and include
depreciation as follows:
Media Networks $ 35 $ 32
Studio Entertainment 16 38
Theme Parks & Resorts 131 110
Consumer Products 23 21
Internet and Direct Marketing 2 3
----- -----
$ 207 $ 204
===== =====
</TABLE>
[CAPTION]
<TABLE>
SEGMENT RESULTS
For The Year Ended September 30
(Unaudited; in millions)
<S> <C> <C> <C>
1999 1998 % Change
---- ---- --------
Revenues:
Media Networks $ 7,512 $ 7,142 5 %
Studio Entertainment 6,548 6,849 (4)%
Theme Parks & Resorts 6,106 5,532 10 %
Consumer Products 3,030 3,193 (5)%
Internet and Direct Marketing (1) 206 260 (21)%
------ ------
$23,402 $22,976 2 %
======= =======
Operating Income: (2)
Media Networks $ 1,611 $ 1,746 (8)%
Studio Entertainment 116 769 (85)%
Theme Parks & Resorts 1,446 1,288 12 %
Consumer Products 607 801 (24)%
Internet and Direct Marketing (1) (93) (94) 1 %
Amortization of Intangible Assets (456) (431) (6)%
------ ------
3,231 4,079 (21)%
Gain on sale of Starwave 345 - n/m
Restructuring Charges (132) (64) n/m
----- -----
Operating Income $ 3,444 $ 4,015 (14)%
===== =====
(1) Excludes impact of Infoseek investment
(2) Segment results exclude intangible asset amortization and include
depreciation as follows:
Media Networks $ 131 $ 122
Studio Entertainment 64 115
Theme Parks & Resorts 498 443
Consumer Products 124 85
Internet and Direct Marketing 8 10
----- -----
$ 825 $ 775
===== =====
</TABLE>
[CAPTION]
<TABLE>
Table A
MEDIA NETWORKS
(Unaudited; in millions)
<S> <C> <C> <C>
Quarter Ended September 30
---------------------------
1999 1998 % Change
---- ---- --------
Revenues:
Broadcasting $1,029 $1,117 (8)%
Cable Networks 769 644 19 %
----- -----
$1,798 $1,761 2 %
===== =====
Operating Income: (1)
Broadcasting $ 145 $ 178 (19)%
Cable Networks 224 127 76 %
----- -----
$ 369 $ 305 21 %
===== =====
Year Ended September 30
--------------------------
1999 1998 % Change
---- ---- --------
Revenues:
Broadcasting $ 4,694 $ 4,734 (1)%
Cable Networks 2,818 2,408 17 %
------ ------
$ 7,512 $ 7,142 5 %
====== ======
Operating Income: (1)
Broadcasting $ 659 $ 977 (33)%
Cable Networks 952 769 24 %
------ ------
$ 1,611 $ 1,746 (8)%
====== ======
(1) Amounts exclude intangible asset amortization
</TABLE>
[CAPTION]
<TABLE>
Table B
CABLE TELEVISION ACTIVITIES
(Unaudited; in millions)
<S> <C> <C> <C>
Quarter Ended September 30
----------------------------
1999 1998 % Change
---- ---- --------
Operating Income:
Cable Networks $ 224 $ 127 76%
Equity Investments:
A&E, Lifetime and E!Entertainment
Television 98 80 23%
Other 4 (12) n/m
---- ----
326 195 67%
Partner Share of Operating Income (99) (68)
---- ----
Disney Share of Operating Income $ 227 $ 127 79%
==== ====
Year Ended September 30
---------------------------
1999 1998 % Change
---- ---- --------
Operating Income:
Cable Networks $ 952 $ 769 24%
Equity Investments:
A&E, Lifetime and E! Entertainment 480 393 22%
Television
Other 37 (68) n/m
---- ----
1,469 1,094 34%
Partner Share of Operating Income (462) (333)
----- -----
Disney Share of Operating Income $1,007 $ 761 32%
===== ====
Note: Amounts presented in this table represent 100% of the operating income for
all of the Company's cable businesses. The Disney share of Operating Income
represents the Company's ownership interest in Cable Television Operating
Income. Cable Networks are reported in "Operating Income" in the consolidated
statements of income. Equity Investments are accounted for under the equity
method and the Company's proportionate share of the net income of its cable
equity investments is reported in "Corporate and Other Activities" in the
consolidated statements of income.
</TABLE>
