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, 1999 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 2,062,328,316 shares of common stock outstanding as of August 11,
1999.
<PAGE>
PART I. FINANCIAL INFORMATION
THE WALT DISNEY COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
In millions, except per share data (unaudited)
[CAPTION]
<TABLE>
<S> <C> <C> <C> <C>
Three Months Nine Months
Ended Ended
June 30 June 30
1999 1998 1999 1998
------ ------ ----- ------
Revenues $ 5,522 $ 5,248 $ 17,621 $ 16,829
Costs and expenses (4,571) (4,325) (14,911) (13,565)
Gain on sale of Starwave - - 345 -
------ ------ ------ -------
Operating income 951 923 3,055 3,264
Corporate and other activities (34) (49) (171) (175)
Equity in Infoseek loss (87) - (246) -
Net interest expense (166) (161) (504) (445)
------ ------ ------ -------
Income before income taxes 664 713 2,134 2,644
Income taxes (297) (298) (919) (1,090)
------ ------ ------ -------
Net income $ 367 $ 415 $ 1,215 $ 1,554
====== ====== ====== =======
Earnings per share
Diluted $ 0.18 $ 0.20 $ 0.58 $ 0.75
====== ====== ====== =======
Basic $ 0.18 $ 0.20 $ 0.59 $ 0.76
====== ====== ====== =======
Average number of common and
common equivalent shares
outstanding
Diluted 2,086 2,085 2,084 2,077
====== ====== ====== ======
Basic 2,059 2,043 2,054 2,033
====== ====== ====== ======
</TABLE>
See Notes to Condensed Consolidated Financial Statements
<PAGE>
THE WALT DISNEY COMPANY
CONDENSED CONSOLIDATED BALANCE SHEETS
In millions, except share data
[CAPTION]
<TABLE>
<S> <C> <C>
June 30, September 30,
1999 1998
----------- ------------
(unaudited)
ASSETS
Current Assets
Cash and cash equivalents $ 851 $ 127
Receivables 3,319 3,999
Inventories 818 899
Film and television costs 3,562 3,223
Deferred income taxes 452 463
Other assets 780 664
------- -------
Total current assets 9,782 9,375
Film and television costs 2,420 2,506
Investments 2,470 1,814
Theme parks, resorts and other property, at cost
Attractions, buildings and equipment 14,906 14,037
Accumulated depreciation (5,947) (5,382)
------- -------
8,959 8,655
Projects in progress 1,853 1,280
Land 425 411
------- -------
11,237 10,346
Intangible assets, net 15,778 15,769
Other assets 1,557 1,568
------- -------
$ 43,244 $ 41,378
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts and taxes payable and accrued
liabilities $ 4,147 $ 4,767
Current portion of borrowings 1,734 2,123
Unearned royalty and other advances 782 635
------- -------
Total current liabilities 6,663 7,525
Borrowings 10,367 9,562
Deferred income taxes 2,733 2,488
Other long term liabilities, unearned 2,670 2,415
royalties and other advances
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 9,235 8,995
Retained earnings 12,196 10,981
Cumulative translation and other (15) 13
------- -------
21,416 19,989
Treasury shares, at cost -
29 million shares (605) (593)
Shares held by TWDC Stock Compensation Fund,
at cost 0.4 million shares at
September 30, 1998 - (8)
------- -------
20,811 19,388
------- -------
$ 43,244 $ 41,378
======= =======
</TABLE>
See Notes to Condensed Consolidated Financial Statements
<PAGE>
THE WALT DISNEY COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
In millions (unaudited)
[CAPTION]
<TABLE>
<S> <C> <C>
Nine Months Ended
June 30
-------------------
1999 1998
-------- --------
NET INCOME $ 1,215 $ 1,554
OPERATING ITEMS NOT REQUIRING CASH OUTLAYS
Amortization of film and television costs 1,819 1,651
Depreciation 638 595
Amortization of intangibles 332 321
Gain on sale of Starwave (345) -
Equity in Infoseek loss 246 -
Other 26 (28)
CHANGES IN ASSETS AND LIABILITIES 462 (251)
------- -------
3,178 2,288
------- -------
CASH PROVIDED BY OPERATIONS 4,393 3,842
------- -------
INVESTING ACTIVITIES
Film and television costs (2,277) (2,479)
Investments in theme parks, resorts and other
property (1,526) (1,577)
Acquisitions (net of cash acquired) (288) (183)
Other 40 179
------- -------
(4,051) (4,060)
------- -------
FINANCING ACTIVITIES
Commercial paper borrowings, net 294 614
Other borrowings 1,625 1,462
Reduction of borrowings (1,675) (1,180)
Dividends - (305)
Repurchases of common stock (19) -
Other 157 163
------- -------
382 754
------- -------
Increase in cash and cash equivalents 724 536
Cash and cash equivalents, beginning of period 127 317
------- -------
Cash and cash equivalents, end of period $ 851 $ 853
======= =======
</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 nine months, the Company received net proceeds of approximately
$294 million from commercial paper activity and an additional $1.6 billion
through other financing arrangements having effective interest rates ranging
from 4.75% to 5.33% and maturities in fiscal 2000 through 2039. 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 $460 million, including
$421 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. For the quarter and nine months ended June 30, 1999, the Company
recorded $75 million and $165 million of amortization related to intangible
assets, respectively. During the first quarter, the Company recorded a charge
of $44 million for purchased in-process research and development expenditures.
The amortization of intangible assets and the charge for research and
development expenditures have been reflected in "Equity in Infoseek loss" in
the Company's Condensed Consolidated Statements of Income. As of June 30,
1999, the Company's recorded investment in Infoseek was $557 million. The
quoted market value of the Company's Infoseek shares at June 30, 1999 was
approximately $1.3 billion.
In July, the Company and Infoseek entered into an agreement for the Company to
acquire the remaining interest in Infoseek it does not already own. (See Note
7).
4.Dividends per share for the quarter and nine months ended June 30, 1998 were
$0.05 and $0.14, respectively. On September 29, 1998, the Company's Board of
Directors adopted a policy of considering the declaration and payment of
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 nine month period ended June 30, 1999.
5.Diluted earnings per share amounts are calculated using the treasury stock
method and 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 would have an
anti-dilutive effect. The difference between basic and diluted earnings per
share for the Company is solely attributable to stock options, which are
considered anti-dilutive when option exercise prices exceed the weighted
average market price per share of common stock during the period. For the
quarters ended June 30, 1999 and 1998, options for 36 million and 13 million
shares, respectively, were excluded from the
<PAGE>
THE WALT DISNEY COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
diluted earnings per share calculation. For the nine month periods, options
for 26 million and 9 million shares, respectively, were excluded.
6.In the first 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
for the periods ended June 30, 1999 and 1998 is as follows (in millions):
[CAPTION]
<TABLE>
<S> <C> <C> <C> <C>
Three Months Ended Nine Months Ended
June 30, June 30,
------------------ ------------------
1999 1998 1999 1998
------- ------- ------- -------
Cumulative translation and other
adjustments, net of tax $ (5) $ (13) $ (16) $ (1)
Net income 367 415 1,215 1,554
----- ----- ----- -----
Comprehensive income $ 362 $ 402 $1,199 $1,553
===== ===== ===== =====
</TABLE>
7.On July 10, 1999, the Company entered into an Agreement and Plan of
Reorganization (the "Reorganization Agreement") with Infoseek. Pursuant to the
Reorganization Agreement, the Company is proposing to acquire the remaining
57% of Infoseek that it does not already own by issuing 1.15 shares of a new
class of common stock for each outstanding share of Infoseek common stock. The
Company will also convert outstanding Infoseek stock options into options
exercisable for shares of the new class of common stock.
The Infoseek merger and issuance of the new class of common stock require
approvals by Infoseek and Company stockholders, respectively. Once approvals
are obtained, the Company will combine its Internet and direct mail catalog
operations with Infoseek to create a single Internet business ("the Disney
Internet Group"). The new class of common stock, anticipated to trade under
the ticker symbol "GO," will be issued to track the performance of the Disney
Internet Group.
As of the effective date of the Infoseek merger, the Company will retain an
initial equity interest of approximately 72% in the Disney Internet Group.
Former Infoseek stockholders will initially own the remaining 28%. Shares of
the Company's existing common stock will be renamed Disney Common Stock, and
will reflect the performance of the Company's businesses other than the Disney
Internet Group, plus the Company's 72% retained interest in the Disney
Internet Group.
<PAGE>
THE WALT DISNEY COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The Infoseek merger will be accounted for as a purchase. Accordingly,
operating results for Infoseek and amortization of its intangible assets,
which is expected to be substantial, will be reflected in the Company's
financial statements from the effective date of the merger, which is expected
to occur during the first quarter of fiscal 2000.
<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, 1999 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 - Quarter
[CAPTION]
<TABLE>
<S> <C> <C> <C>
For the Quarter Ended June 30,
(unaudited; in millions, except per share data)
1999 1998 % Change
----- ----- --------
Revenues $ 5,522 $ 5,248 5%
Costs and expenses (4,571) (4,325) (6)%
------ ------
Operating income 951 923 3%
Corporate and other activities (34) (49) 31%
Equity in Infoseek loss (87) - n/m
Net interest expense (166) (161) (3)%
------ ------
Income before income taxes 664 713 (7)%
Income taxes (297) (298) n/m
------ ------
Net income $ 367 $ 415 (12)%
====== ======
Earnings per share
Diluted $ 0.18 $ 0.20 (10)%
====== ======
Basic $ 0.18 $ 0.20 (10)%
====== ======
Amortization of intangible assets
included in operating income $ 117 $ 108
====== ======
</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 12% and
10% to $367 million and $0.18, respectively. These decreases were driven by
equity in Infoseek's loss, which includes amortization of intangible assets of
$75 million, and an increase in net interest expense, partially offset by an
increase in operating income and lower net expense associated with corporate and
other activities. Excluding the impact of Infoseek, net income and earnings per
share were $418 million and $0.20, respectively. The increase in net interest
expense reflected gains from sales of investments in the prior year and higher
average debt balances in the current quarter. The increase in operating income
reflected improvements from Theme Parks and Resorts and Broadcasting, which were
substantially offset by lower results from Creative Content. Net expense
associated with corporate and other activities decreased due to improved results
from the Company's equity investments, including Lifetime Television, A&E
Television and Euro Disney.
Consolidated Results - Nine Months
[CAPTION]
<TABLE>
<S> <C> <C> <C>
For the Nine Months Ended June 30,
(unaudited; in millions, except per share data)
1999 1998 %Change
------- ------- -------
Revenues $ 17,621 $ 16,829 5%
Costs and expenses (14,911) (13,565) (10)%
Gain on sale of Starwave 345 - n/m
------- -------
Operating income 3,055 3,264 (6)%
Corporate and other activities (171) (175) 2%
Equity in Infoseek loss (246) - n/m
Net interest expense (504) (445) (13)%
------- -------
Income before income taxes 2,134 2,644 (19)%
Income taxes (919) (1,090) 16%
------- -------
Net income $ 1,215 $ 1,554 (22)%
======= =======
Earnings per share
Diluted $ 0.58 $ 0.75 (23)%
======= =======
Basic $ 0.59 $ 0.76 (22)%
======= =======
Amortization of intangible assets
included in operating income $ 332 $ 321
======= =======
</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 decreased 22% and 23% to $1.2
billion and $0.58, respectively. These results were driven by a decrease in
operating income, equity in Infoseek's loss which includes amortization of
intangible assets of $165 million and a $44 million charge for purchased
in-process research and development expenditures, and an increase in net
interest expense. These items were partially offset by the gain on the sale of
Starwave, as discussed below, and lower net expense associated with corporate
and other activities. Excluding the impact of Infoseek, operating income, net
income and earnings per share were $2.7 billion, $1.2 billion and $0.55,
respectively. 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
higher average debt balances in the current year and the absence of gains on
sales of investments in the current period compared to the prior year. Lower net
expense associated with Corporate and other activities reflected improved
results from the Company's equity investments, including Lifetime Television,
A&E Television and Euro Disney. Excluding the gain in the prior year on the sale
of the Company's investment in Scandinavian Broadcasting Systems, net expense
decreased $42 million.
During the quarter, the Company began an across-the-board assessment of its
cost structure and announced several operational realignments in its home video,
television production, international and global merchandise licensing
businesses. The Company's reorganization efforts are directed toward leveraging
marketing and sales efforts, streamlining operations, identifying new
markets, and further developing distribution channels, including its Internet
sites, cable and television networks.
The Company is in the process of completing its cost efficiency and
operational strategies. The Company expects that certain aspects of its
strategies will be completed in the fourth quarter, but it is likely
that such efforts will continue into 2000. The Company will likely incur
costs associated with these organizational changes, and such costs may be
significant. Management expects that its reorganization will better
position the Company to leverage the strength of its brands over the long
term.
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 nine months, the Company recorded $165 million of amortization related to
goodwill and other identifiable intangible assets and a charge of $44 million
for purchased in-process research and
<PAGE>
The Walt Disney Company
Management's Discussion and Analysis of
Financial Condition and Results of Operations (continued)
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 impact of
such charges is expected to be $64 million for the remaining three months of
1999, $256 million in 2000 and $23 million in 2001.
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.
BUSINESS SEGMENT RESULTS - QUARTER
[CAPTION]
<TABLE>
<S> <C> <C> <C>
For the Quarter Ended June 30,
(unaudited; in millions)
------------------------------
1999 1998 %Change
------- ------- --------
Revenues:
Creative Content $ 2,020 $ 2,016 -
Broadcasting 1,791 1,728 4%
Theme Parks & Resorts 1,711 1,504 14%
------ ------
Total $ 5,522 $ 5,248 5%
====== ======
Operating Income: (1)
Creative Content $ 74 $ 111 (33)%
Broadcasting 399 384 4%
Theme Parks & Resorts 478 428 12%
------ ------
Total $ 951 $ 923 3%
====== ======
(1) Includes depreciation and amortization (excluding film costs) of:
Creative Content $ 59 $ 51
Broadcasting 138 136
Theme Parks & Resorts 144 132
------ ------
$ 341 $ 319
====== ======
</TABLE>
<PAGE>
The Walt Disney Company
Management's Discussion and Analysis of
Financial Condition and Results of Operations (continued)
Creative Content
Revenues were unchanged at $2.0 billion, driven by an increase of $69
million in domestic home video, offset by decreases of $33 million in domestic
character merchandise licensing and $25 million in television distribution. The
increase in domestic home video revenues primarily reflected the successful
performance of A Bug's Life in the current quarter. Softness in character
merchandise licensing revenues was primarily attributable to lower activity
domestically, as sales of merchandise associated with this year's film and
television programming fell short of prior year performance. Lower revenues in
television distribution reflected a decline in syndication revenues domestically
and lower activity internationally, primarily in Europe.
Operating income decreased 33% or $37 million to $74 million, driven by
declines in domestic character merchandise licensing and television production
and distribution. These decreases were partially offset by increases in
worldwide theatrical motion picture distribution and worldwide home video. Costs
and expenses, which consist primarily of production cost amortization,
distribution and selling expenses, participations, product cost, labor and
occupancy, increased 2% or $41 million. Participation and production cost
amortization for domestic home video contributed to the increase in costs and
expenses. Higher participation cost was driven by the release of A Bug's Life.
Higher production cost amortization reflected a greater proportion of recent
releases in the current quarter, which carried higher amortization, compared to
classic animated library releases in the prior year. Production cost
amortization also increased in network television production, reflecting
increased network television pilot activity and production deficits for four new
prime time series, all of which have been renewed for the upcoming television
season. Increased production deficits are expected to continue, as 8 new series
were ordered for the upcoming television season. These increases were partially
offset by decreases in distribution costs in domestic theatrical motion picture
distribution and international home video, reflecting fewer titles released in
the current quarter compared to the prior year.
Broadcasting
Revenues increased 4% or $63 million to $1.8 billion, driven by growth of
$69 million at ESPN and the Disney Channel and $18 million at the radio network
and stations, partially offset by a decrease of $20 million at the owned
television stations. Revenue growth at ESPN was driven by increased advertising
revenues and subscriber growth. Increases at the Disney Channel were generated
by subscriber growth and international expansion. Growth at the radio network
and stations was driven by a
<PAGE>
The Walt Disney Company
Management's Discussion and Analysis of
Financial Condition and Results of Operations (continued)
strong advertising market and higher ratings. Lower revenues at the owned
television stations reflected ongoing softness in the local advertising market.
Operating income increased 4% or $15 million to $399 million, reflecting
increased revenues at the cable networks, partially offset by higher programming
costs. Costs and expenses, which consist primarily of programming rights and
amortization, production costs, distribution and selling expenses and labor
costs, increased 4% or $48 million, driven by higher cost television network and
cable programming.
Theme Parks and Resorts
Revenues increased 14% or $207 million to $1.7 billion, driven by growth of
$74 million at Disney Cruise Line, which launched in the prior year fourth
quarter, $69 million at the Walt Disney World Resort due to higher guest
spending, record theme park attendance, and increased occupied room nights, and
$52 million at Anaheim Sports. These gains were partially offset by lower
attendance at Disneyland. Record attendance at the Walt Disney World Resort was
driven by the opening of Asia, the new land at Disney's Animal Kingdom, and
occupied room nights were driven by Disney's All Star Movies Resort, which
opened in the second quarter of the current year. The increase at Anaheim Sports
was due to inclusion of revenues from the Anaheim Angels. During the second
quarter the Company purchased the 75% interest in the Anaheim Angels that it did
not previously own and now consolidates Anaheim Angels results within the Theme
Parks and Resorts segment.
Operating income increased $50 million or 12% to $478 million, resulting
primarily from revenue growth at the Walt Disney World Resort and a full quarter
of operations at Disney Cruise Line, partially offset by lower attendance at
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 $157 million or 15%.
Increased operating costs were driven by higher theme park attendance, Disney
Cruise Line operations, and Anaheim Angels operating costs.
<PAGE>
The Walt Disney Company
Management's Discussion and Analysis of
Financial Condition and Results of Operations (continued)
Business Segment Results - Nine Months
[CAPTION]
<TABLE>
<S> <C> <C> <C>
For the Nine Months Ended June 30,
(unaudited; in millions)
----------------------------------
1999 1998 %Change
-------- -------- ----------
Revenues:
Creative Content $ 7,354 $ 7,440 (1)%
Broadcasting 5,714 5,381 6%
Theme Parks & Resorts 4,553 4,008 14%
------- -------
Total $ 17,621 $ 16,829 5%
======= =======
Operating Income: (1)
Creative Content $ 667 $ 1,150 (42)%
Broadcasting 925 1,128 (18)%
Theme Parks & Resorts 1,118 986 13%
------- -------
2,710 3,264 (17)%
Gain on Sale of Starwave 345 - n/m
------- -------
Total $ 3,055 $ 3,264 (6)%
======= =======
(1) Includes depreciation and amortization (excluding film costs) of:
Creative Content $ 160 $ 153
Broadcasting 413 405
Theme Parks & Resorts 377 334
------- -------
$ 950 $ 892
======= =======
</TABLE>
CREATIVE CONTENT
Revenues decreased 1% or $86 million to $7.4 billion, driven by declines of
$187 million in domestic home video, $123 million in worldwide character
merchandise licensing, and $34 million in the Disney Stores, principally
domestically, partially offset by growth of $246 million in worldwide theatrical
motion picture distribution. Domestic home video reflected fewer unit sales in
the current year due to a greater number of classic animated library titles in
the prior year period. Lower character merchandise licensing revenues were
primarily attributable to declines in domestic activity and economic weakness
abroad. Decreases at the Disney Stores reflected a decline in comparable store
sales domestically, which was only partially offset by growth internationally.
Growth in worldwide theatrical motion picture distribution revenues was
primarily attributable to a stronger film slate in the current year, including
the box office successes of The Waterboy, A Bug's Life and Tarzan domestically
and A Bug's Life and Armageddon internationally.
<PAGE>
The Walt Disney Company
Management's Discussion and Analysis of
Financial Condition and Results of Operations (continued)
Operating income decreased 42% or $483 million to $667 million, reflecting
declines in worldwide home video, worldwide character merchandise licensing and
the Disney Stores, domestically, partially offset by increases in worldwide
theatrical motion picture distribution. Costs and expenses increased 6% or $397
million. In worldwide home video, participation and production cost amortization
increased, reflecting an increase in the current year in the proportion of
recent titles, which carry higher participation and production cost
amortization, versus classic animated library titles. In addition, participation
costs increased due to the release of A Bug's Life in the current quarter.
Improved results in worldwide theatrical motion picture distribution were
partially offset by higher distribution costs and participation and production
cost amortization. Increases in production costs are reflective of industry
trends: as competition for creative talent has increased, costs within the
industry have increased at a rate significantly higher than inflation.
Broadcasting
Revenues increased 6% or $333 million to $5.7 billion, driven by growth of
$282 million at ESPN and the Disney Channel and $56 million at the radio network
and stations, partially offset by a $23 million decrease at the owned television
stations. Revenue growth at ESPN was driven by increased advertising revenues
and subscriber growth as well as additional NFL games under the 1998 NFL
contract. Increases at the Disney Channel were due to subscriber growth and
international expansion. The major broadcast networks continue to be impacted
by declining viewership reflecting the growth in the cable industry's share of
viewers. Growth at the radio network and stations reflected strong
advertising markets and higher ratings. Revenues at the owned television
stations decreased due to ongoing softness in the local advertising market.
Operating income decreased 18% or $203 million to $925 million, reflecting
increased programming costs at the television network and ESPN, partially offset
by revenue increases at the cable and radio networks and radio stations. Costs
and expenses increased 13% or $536 million, driven by higher NFL and other
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 over the contract
period. 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 $545 million to $4.6 billion, driven by growth of
$238 million at the Walt Disney World Resort, due primarily to record theme park
attendance, higher guest spending and increased occupied room nights, $167
million at Disney Cruise Line which launched in the prior year fourth quarter,
and $55 million from Anaheim Sports. Record attendance at the Walt Disney World
Resort was driven by the opening of Asia, the new land at Disney's Animal
Kingdom, while growth in occupied room nights was driven by Disney's All Star
Movies Resort, which opened in the second quarter of the current year. The
increase at Anaheim Sports reflects consolidation of the operations of the
Anaheim Angels, following the Company's second quarter purchase of 75% of the
Angels that it did not previously own.
Operating income increased 13% or $132 million to $1.1 billion, resulting
primarily from revenue growth at the Walt Disney World Resort and a full period
of operations at Disney Cruise Line. Costs and expenses increased $413 million
or 14%. Increased operating costs were driven by higher theme park attendance
and Disney Cruise Line operations.
FINANCIAL CONDITION
For the nine months ended June 30, 1999, cash provided by operations
increased $551 million to $4.4 billion driven by increased collection of
receivables, lower income tax payments and higher film and television cost
amortization, partially offset by decreased net income.
During the nine months, the Company invested $2.3 billion to develop,
produce and acquire rights to film and television properties including $310
million in connection with a prior year agreement to acquire a film library.
During the nine months, the Company invested $1.5 billion 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.
<PAGE>
The Walt Disney Company
Management's Discussion and Analysis of
Financial Condition and Results of Operations (continued)
Total commitments to purchase broadcast programming approximated $13.6
billion at June 30, 1999, including approximately $8 billion related to NFL
programming. Substantially all of this amount is payable over the next six
years.
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 nine months, the Company received approximately $294 million
from net commercial paper activity and $1.6 billion from other financing
arrangements. Commercial paper borrowings outstanding as of June 30, 1999
totaled $2.7 billion, with maturities of up to one year, supported by bank
facilities totaling $4.5 billion, which expire in one to two 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 $4.2 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. Certification
as Y2K compliant for the bulk of these systems was completed on July 31, 1999,
with the remainder to be completed by October 1999.
<PAGE>
The Walt Disney Company
Management's Discussion and Analysis of
Financial Condition and Results of Operations (continued)
Non-IT Systems. The Company has completed its inventory of third-party and
internal embedded, or "non-IT" systems. Company representatives continue to meet
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 of significant
embedded systems has been substantially completed and the Company expects
remaining systems to be completed by September 30, 1999. Additionally, testing
plans are being developed and some vendor validation has occurred for other key
embedded systems, such as satellite transmission and broadcast 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.
Business Partners. The Company continued testing its online interfaces with
many businesses that provide services and products to the Company, but the
Company has experienced instances where some third parties have indicated that
they will not be prepared to conduct online systems tests with the Company's
systems at least until the Fall of 1999. The Company has devoted significant
resources to this phase of its Y2K plan in order to minimize the risk to the
Company. Where appropriate, manual or other semi-automated workarounds are being
considered.
Contingency Planning. Contingency planning has 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. Crisis management teams
have been meeting regularly throughout the Company formalizing Y2K
contingency plans, and these meetings will continue through the remainder of
the year.
<PAGE>
The Walt Disney Company
Management's Discussion and Analysis of
Financial Condition and Results of Operations (continued)
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.
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 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 the Company believes 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. The Company believes
that 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.
<PAGE>
The Walt Disney Company
Management's Discussion and Analysis of
Financial Condition and Results of Operations (continued)
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 under the heading "Factors that may affect forward-looking statements."
<PAGE>
PART II. OTHER INFORMATION
THE WALT DISNEY COMPANY
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
3 Amended and restated certificate of incorporation
(b) Reports on Form 8-K
(i) Current report on form 8-K dated July 12, 1999, with respect to the
proposed acquisition of Infoseek Corporation
<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/ Thomas O. Staggs
Thomas O. Staggs
Executive Vice President and
Chief Financial Officer
August 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 nine months ended June 30, 1999, 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-30-1999
<PERIOD-START> OCT-01-1998
<PERIOD-END> JUN-30-1999
<EXCHANGE-RATE> 1
<CASH> 851
<SECURITIES> 0
<RECEIVABLES> 3,319
<ALLOWANCES> 0
<INVENTORY> 818
<CURRENT-ASSETS> 9,782
<PP&E> 17,184
<DEPRECIATION> 5,947
<TOTAL-ASSETS> 43,244
<CURRENT-LIABILITIES> 6,663
<BONDS> 12,101
0
0
<COMMON> 9,235
<OTHER-SE> 11,576
<TOTAL-LIABILITY-AND-EQUITY> 43,244
<SALES> 0
<TOTAL-REVENUES> 17,621
<CGS> 0
<TOTAL-COSTS> 14,566
<OTHER-EXPENSES> 417
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 504
<INCOME-PRETAX> 2,134
<INCOME-TAX> 919
<INCOME-CONTINUING> 1,215
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,215
<EPS-BASIC> .58
<EPS-DILUTED> .59
</TABLE>
RESTATED
CERTIFICATE OF INCORPORATION
OF
THE WALT DISNEY COMPANY
The undersigned, David K. Thompson, certifies that he is the Senior Vice
President-Assistant General Counsel of The Walt Disney Company, a corporation
organized and existing under the laws of the State of Delaware (the
"Corporation"), and hereby further certifies as follows:
1. The name of the Corporation is The Walt Disney Company and the name
under which the corporation was originally incorporated is DC Holdco, Inc.
2. The original Certificate of Incorporation of the Corporation was filed
in the Office of the Secretary of State of the State of Delaware on July
28, 1995.
3. Restated Certificates of Incorporation were filed in the Office of the
Secretary of State of the State of Delaware on September 21, 1995, January
19, 1996, February 20, 1996, February 25, 1998 and June 10, 1998.
4. This Restated Certificate of Incorporation was duly adopted in
accordance with the provisions of Sections 242 and 245 of the General
Corporation Law of the State of Delaware.
5. This Restated Certificate of Incorporation restates and integrates and
further amends the Certificate of Incorporation of this Corporation by
amending Article FOURTH to reflect the elimination of the Series R
Preferred Stock as stated in the Certificate of Elimination filed on July
6, 1999.
6. The text of the Certificate of Incorporation as amended or
supplemented heretofore is further amended to read as herein set forth in
full:
FIRST: The name of the Corporation is The Walt Disney Company.
SECOND: The address of the registered office of the Corporation in the
State of Delaware is Corporation Trust Center, 1209 Orange Street, in the City
of Wilmington, County of New Castle. The name of its registered agent at that
address is The Corporation Trust Company.
THIRD: The purpose of the Corporation is to engage in any lawful act or
activity for which a corporation may now or hereafter be organized under the
General Corporation Law of the State of Delaware as set forth in Title 8 of the
Delaware Code, as in effect from time to time (the "GCL").
FOURTH: The total number of shares of stock which the Corporation shall
have authority to issue is 3,700,000,000, consisting of 3,600,000,000 shares of
common stock, par value $0.01 per share ("Common Stock"), and 100,000,000 shares
of preferred stock, par value $0.01 per share ("Preferred Stock").
Shares of the Preferred Stock of the Corporation may be issued from time to
time in one or more classes or series, each of which class or series shall have
such distinctive designation, number of shares, or title as shall be fixed by
the Board of Directors of the Corporation (the "Board of Directors") prior to
the issuance of any shares thereof. Each such class or series of Preferred Stock
shall consist of such number of shares, and have such voting powers, full or
limited, or no voting powers, and such preferences and relative, participating,
optional or other special rights and such qualifications, limitations or
restrictions thereof, as shall be stated in such resolution or resolutions
providing for the issue of such class or series of Preferred Stock as may be
adopted from time to time by the Board of Directors prior to the issuance of any
shares thereof pursuant to the authority hereby expressly vested in it, all in
accordance with the laws of the State of Delaware.
FIFTH: The business and affairs of the Corporation shall be managed by or
under the direction of a Board of Directors consisting of not less than nine
directors or more than twenty-one directors, the exact number of directors to be
determined from time to time solely by resolution adopted by the Board of
Directors. Until the annual meeting of stockholders in 2001, the directors shall
be divided into three classes, consisting initially of five, six and five
directors and designed Class I, Class II and Class III, respectively. Each
director elected prior to the effective date of this Article FIFTH shall serve
for the full term for which he or she was elected, such that the term of each
director elected at the 1996 annual meeting (Class III) shall end at the annual
meeting in 1999, the term of each director elected at the 1997 annual meeting
(Class I) shall end at the annual meeting in 2000, and the term of each director
elected at the 1998 annual meeting (Class II) shall end at the annual meeting in
2001. The term of each director elected after the 1998 annual meeting, whether
at an annual meeting or to fill a vacancy in the Board of Directors arising for
any reason, including an increase in the size of the Board of Directors, shall
end at the first annual meeting following his or her election. Commencing with
the annual meeting in 2001, the foregoing classification of the Board of
Directors shall cease, and all directors shall be of one class and serve for a
term ending at the annual meeting following the annual meeting at which the
director was elected. In no case shall a decrease in the number of directors
shorten the term of any incumbent director. Each director shall hold office
after the annual meeting at which his or her term is scheduled to end until his
or her successor shall be elected and shall qualify, subject, however, to prior
death, resignation, disqualification or removal from office. Any newly created
directorship resulting from an increase in the number of directors may be filled
by a majority of the Board of Directors then in office, provided that a quorum
is present, and any other vacancy on the Board of Directors may be filed by a
majority of the directors then in office, even if less than a quorum, or by a
sole remaining director.
SIXTH: Notwithstanding the provisions of Article FIFTH, whenever the
holders of any one or more classes or series of Preferred Stock issued by the
Corporation shall have the right, voting separately by class or series, to elect
directors at an annual or special meeting of stockholders, the election, term of
office, filling of vacancies and other features of such directorships shall be
governed by the terms of this Restated Certificate of Incorporation or the
resolution or resolutions adopted by the Board of Directors pursuant to Article
FOURTH applicable thereto.
SEVENTH: Elections of directors at an annual or special meeting
of stockholders shall be by written ballot unless the Bylaws of the
Corporation shall otherwise provide.
EIGHTH: Special meetings of the stockholders of the Corporation for any
purpose or purposes may be called at any time by the Board of Directors, the
Chairman of the Board of Directors or the President. Special meetings of the
stockholders of the Corporation may not be called by any other person or
persons.
NINTH: A. Except as set forth in Section B of this Article NINTH,
the affirmative vote of the holders of four-fifths (4/5) of the
outstanding stock of the Corporation entitled to vote shall be required for:
(i) any merger or consolidation to which the Corporation, or any of its
subsidiaries, and an Interested Person (as hereinafter defined) are
parties;
(ii) any sale or other disposition by the Corporation, or any of its
subsidiaries, of all or substantially all of its assets to an Interested
Person;
(iii) any purchase or other acquisition by the Corporation, or any of
its subsidiaries, of all or substantially all of the assets or stock of an
Interested Person; and
(iv) any other transaction with an Interested Person which requires the
approval of the stockholders of the Corporation under the GCL.
B. The provisions of Section A of this Article NINTH shall not be
applicable to any transaction described therein if (i) such transaction is
approved by resolution of the Corporation's Board of Directors, provided that a
majority of the members of the Board of Directors voting for the approval of
such transaction were duly elected and acting members of the Board of Directors
prior to the date that the person, firm or corporation, or any group thereof,
with whom such transaction is proposed, became an Interested Person, or (ii) the
provision of a vote in excess of that required by the GCL for such transaction
violates the express provisions of the GCL.
C. As used in this Article NINTH, the term "Interested Person" shall mean
any person, firm or corporation, or any group thereof, acting or intending to
act in concert, including any person directly or indirectly controlling or
controlled by or under direct or indirect common control with such person, firm
or corporation or group, which owns of record or beneficially, directly or
indirectly, five percent (5%) or more of any class of voting securities of the
Corporation.
D. The affirmative vote of the owners of four-fifths (4/5) of the
outstanding stock of the Corporation entitled to vote shall be required to
amend, alter or repeal this Article NINTH.
TENTH: The officers of the Corporation shall be chosen in such a manner,
shall hold their offices for such terms and shall carry out such duties as are
determined solely by the Board of Directors, subject to the right of the Board
of Directors to remove any officer or officers at any time with or without
cause.
ELEVENTH: A. The Corporation shall indemnify to the full extent authorized
or permitted by law (as now or hereinafter in effect) any person made, or
threatened to be made, a defendant or witness to any action, suit or proceeding
(whether civil or criminal or otherwise) by reason of the fact that he, his
testator or intestate, is or was a director or officer of the Corporation or by
reason of the fact that such director or officer, at the request of the
Corporation, is or was serving any other corporation, partnership, joint
venture, trust, employee benefit plan or other enterprise, in any capacity.
Nothing contained herein shall affect any rights to indemnification to which
employees other than directors and officers may be entitled by law. No amendment
or repeal of this Section A of Article ELEVENTH shall apply to or have any
effect on any right to indemnification provided hereunder with respect to any
acts or omissions occurring prior to such amendment or repeal.
B. A director of this Corporation shall not be liable to the Corporation or
its stockholders for monetary damages for breach of fiduciary duty as a
director, except to the extent such exemption from liability or limitation
thereof is not permitted under the GCL.
Any repeal or modification of the foregoing paragraph shall not adversely
affect any right or protection of a director of the Corporation existing
hereunder with respect to any act or omission occurring prior to such repeal or
modification.
C. In furtherance and not in limitation of the powers conferred by statute:
(i) the Corporation may purchase and maintain insurance on behalf of any
person who is or was a director, officer, employee or agent of the
Corporation, or is serving at the request of the Corporation as a director,
officer, employee or agent of another corporation, partnership, joint
venture, trust, employee benefit plan or other enterprise against any
liability asserted against him and incurred by him in any such capacity, or
arising out of his status as such, whether or not the Corporation would
have the power to indemnify him against such liability under the provisions
of law; and
(ii) the Corporation may create a trust fund, grant a security interest
and/or use other means (including, without limitation, letters of credit,
surety bonds and/or other similar arrangements), as well as enter into
contracts providing indemnification to the full extent authorized or
permitted by law and including as part thereof provisions with respect to
any or all of the foregoing to ensure the payment of such amounts as may
become necessary to effect indemnification as provided therein, or
elsewhere.
TWELFTH: In furtherance and not in limitation of the powers conferred by
statute, the Board of Directors is expressly authorized to adopt, repeal, alter,
amend or rescind the Bylaws of the Corporation. In addition, the Bylaws of the
Corporation may be adopted, repealed, altered, amended or rescinded by the
affirmative vote of sixty-six and two-thirds percent (66-2/3%) of the
outstanding stock of the Corporation entitled to vote thereon.
THIRTEENTH: The Corporation reserves the right to repeal, alter, amend or
rescind any provision contained in this Certificate of Incorporation, in the
manner now or hereafter prescribed by statute, and all rights conferred on
stockholders herein are granted subject to this reservation.
IN WITNESS WHEREOF, The Walt Disney Company, has caused its corporate
seal to be hereunto affixed and this Restated Certificate of Incorporation to
be signed by David K. Thompson, its Senior Vice President-Assistant General
Counsel, this 20th day of July, 1999.
THE WALT DISNEY COMPANY
By /s/ David K. Thompson
------------------------------
David K. Thompson
Senior Vice President-
Assistant General Counsel
