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 March 31, 1994 Commission File Number: 1-4083
THE WALT DISNEY COMPANY
Incorporated in Delaware I.R.S. Employer Identification
No. 95-0684440
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 537,263,487 shares of Common Stock, $.025 par value,
outstanding as of May 6, 1994.
<PAGE>
PART I. FINANCIAL INFORMATION
THE WALT DISNEY COMPANY
CONDENSED CONSOLIDATED STATEMENT OF INCOME
In millions, except per share data (unaudited)
<TABLE>
<CAPTION>
Six Months Ended Three Months Ended
March 31 March 31
1994 1993 1994 1993
<S> <C> <C> <C> <C>
REVENUES
Theme parks and resorts $1,571.4 $1,520.9 $ 802.4 $ 775.8
Filmed entertainment 2,531.0 2,139.0 1,104.6 929.8
Consumer products 900.7 757.9 368.8 320.8
5,003.1 4,417.8 2,275.8 2,026.4
COSTS AND EXPENSES
Theme parks and resorts 1,281.0 1,226.5 650.1 618.1
Filmed entertainment 2,030.8 1,747.1 944.6 773.3
Consumer products 656.9 546.2 271.1 233.6
3,968.7 3,519.8 1,865.8 1,625.0
OPERATING INCOME
Theme parks and resorts 290.4 294.4 152.3 157.7
Filmed entertainment 500.2 391.9 160.0 156.5
Consumer products 243.8 211.7 97.7 87.2
1,034.4 898.0 410.0 401.4
CORPORATE ACTIVITIES
General and administrative 80.9 83.5 37.4 40.3
expenses
Net interest and investment
income (12.6) (14.3) (8.4) (9.1)
68.3 69.2 29.0 31.2
LOSS FROM INVESTMENT IN EURO
DISNEY (69.2) (37.1)
INCOME BEFORE INCOME TAXES AND
CUMULATIVE EFFECT OF ACCOUNTING
CHANGES 966.1 759.6 381.0 333.1
Income taxes 349.1 269.7 132.6 118.3
INCOME BEFORE CUMULATIVE EFFECT
OF ACCOUNTING CHANGES 617.0 489.9 248.4 214.8
CUMULATIVE EFFECT OF ACCOUNTING
CHANGES
Pre-opening costs (271.2)
Postretirement benefits (130.3)
Income taxes 30.0
NET INCOME $ 617.0 $ 118.4 $ 248.4 $ 214.8
</TABLE>
<PAGE>
THE WALT DISNEY COMPANY
CONDENSED CONSOLIDATED STATEMENT OF INCOME (Continued)
In millions, except per share data (unaudited)
<TABLE>
<CAPTION>
Six Months Ended Three Months Ended
March 31 March 31
1994 1993 1994 1993
<S> <C> <C> <C> <C>
AMOUNTS PER COMMON SHARE
EARNINGS BEFORE CUMULATIVE EFFECT
OF ACCOUNTING CHANGES $1.13 $ .90 $ .45 $ .39
CUMULATIVE EFFECT OF ACCOUNTING
CHANGES
Pre-opening costs (.50)
Postretirement benefits (.24)
Income taxes .06
EARNINGS PER SHARE $1.13 $ .22 $ .45 $ .39
AVERAGE NUMBER OF COMMON AND
COMMON EQUIVALENT SHARES
OUTSTANDING 546.4 544.8 547.5 546.1
</TABLE>
<PAGE>
THE WALT DISNEY COMPANY
CONDENSED CONSOLIDATED BALANCE SHEET
In millions
<TABLE>
<CAPTION>
March 31, September 30,
1994 1993
(unaudited)
(s)
ASSETS <C> <C>
Cash and cash equivalents $ 673.6 $363.0
Investments 2,048.2 1,888.5
Receivables 1,590.0 1,390.3
Merchandise inventories 502.6 608.9
Film and television costs 1,502.9 1,360.9
Theme parks, resorts and other property,
net of accumulated depreciation of 5,540.6 5,228.2
$2,438.6 and $2,286.4
Other assets 964.3 911.3
$12,822.2 $11,751.1
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts and taxes payable and other $2,932.6 $2,821.1
accrued liabilities
Borrowings 2,717.8 2,385.8
Unearned royalty and other advances 837.4 840.7
Deferred income taxes 698.9 673.0
Stockholders' equity
Preferred stock, $.10 par value
Authorized - 100.0 million shares
Issued - none
Common stock, $.025 par value
Authorized - 1.2 billion shares
Issued - 566.3 million and 564.6 927.2 876.4
million shares
Retained earnings 5,376.2 4,833.1
Cumulative translation adjustments 47.8 36.7
6,351.2 5,746.2
Less treasury shares, at cost - 29.1 715.7 715.7
million shares
5,635.5 5,030.5
$12,822.2 $11,751.1
</TABLE>
<PAGE>
THE WALT DISNEY COMPANY
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
In millions (unaudited)
<TABLE>
<CAPTION>
Six Months Ended
March 31
1994 1993
<S> <C> <C>
CASH PROVIDED BY OPERATIONS BEFORE
INCOME TAXES $1,617.6 $1,204.9
Income taxes paid (242.5) (163.0)
CASH PROVIDED BY OPERATIONS 1,375.1 1,041.9
INVESTING ACTIVITIES
Theme parks, resorts and other 492.8 401.7
property, net
Film and television costs 717.4 501.9
Investments 159.7 499.3
Euro Disney investment and advances 32.6
1,369.9 1,435.5
FINANCING ACTIVITIES
Borrowings 1,036.6 1,436.7
Reduction of borrowings (704.6) (1,395.4)
Dividends (73.8) (61.6)
Other 47.2 69.3
305.4 49.0
INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS 310.6 (344.6)
Cash and cash equivalents, beginning 363.0 764.8
of period
CASH AND CASH EQUIVALENTS, END OF $ 673.6 $ 420.2
PERIOD
The difference between Income Before Income Taxes and Cumulative
Effect of Accounting Changes as shown on the Condensed Consolidated
Statement of Income and Cash Provided by Operations Before Income
Taxes is explained as follows:
INCOME BEFORE INCOME TAXES AND
CUMULATIVE EFFECT OF ACCOUNTING
CHANGES $ 966.1 $ 759.6
CUMULATIVE EFFECT OF ACCOUNTING (514.2)
CHANGES
CHARGES TO INCOME NOT REQUIRING CASH
OUTLAYS
Depreciation 180.4 153.3
Amortization of film and television 575.4 292.4
costs
Other 13.2 149.7
CHANGES IN
Receivables (199.7) (144.0)
Merchandise inventories 106.3 43.3
Other assets (66.2) 226.5
Accounts payable and other accrued 45.4 257.3
liabilities
Unearned royalty and other advances (3.3) (19.0)
651.5 445.3
CASH PROVIDED BY OPERATIONS BEFORE
INCOME TAXES $1,617.6 $1,204.9
SUPPLEMENTAL CASH FLOW INFORMATION
Interest paid $ 57.8 $ 41.0
</TABLE>
<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 included. Operating
results for the quarter are not necessarily indicative of the
results that may be expected for the year ending September 30,
1994. Certain reclassifications have been made in the 1993
financial statements to conform to the 1994 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, 1993.
2. Cash dividends per share for the quarters ended March 31, 1994 and
1993 were $.0750 and $.0625, respectively.
3. During March 1994, the Company issued $475 million of Senior
Participating Notes (the "Notes") in the Eurobond market and
through the private placement market in the United States. The
Notes are senior, unsecured debt obligations of the Company which
mature on March 15, 2001. Interest on the Notes is payable semi-
annually at a fixed rate of 4.2% per annum through maturity. In
addition, contingent interest payments will be made on the Notes
if revenues from a portfolio of eligible non-animated
films, in which the Company invests, exceed a specified threshold.
4. In 1993, the Company provided $350 million to fully reserve its
receivables and limited funding commitment to Euro Disney. The
Company has not reported any financial impact in its second
quarter or six-month results related to its investment in Euro
Disney.
Discussions continue with respect to the previously announced
financial restructuring plan for Euro Disney which is intended to
help provide for the long-term viability of the resort. The plan,
which has been recommended by the Euro Disney lenders' steering
committee and is currently under review by all the lenders,
contemplates that the lenders would forgive interest with a
present value of approximately $270 million and defer all
principal payments until three years later than originally
scheduled. In addition, the lenders would subscribe for 51% and
the Company would subscribe for 49% of a $1 billion rights
offering of new shares.
<PAGE>
THE WALT DISNEY COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
The Company would provide lease financing of approximately $240
million bearing interest at 1%; subscribe, principally in return
for funds advanced during the six months ended March 31, 1994, for
approximately $175 million of bonds repayable in shares bearing
interest at 1%; forgive fully reserved receivables due from Euro
Disney of approximately $210 million; and make available to Euro
Disney a 10-year standby credit facility of approximately $190
million. Additionally, the Company would waive royalties and
management fees for a period of five years and reduce amounts
otherwise payable for specified periods thereafter.
Based upon the proposed terms, the estimated impact of the
financial restructuring plan on the Company's results of
operations for the quarter and six months ended March 31, 1994,
had the plan been effective as of that date, would not be
material. If the proposed agreement is finalized and the Company
makes the equity investment and assumes the other commitments
contemplated by the agreement, thereafter, the Company would
reflect its equity share of Euro Disney's subsequent operating
results in its income statement.
<PAGE>
THE WALT DISNEY COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The Company's business is materially affected by seasonal factors and,
therefore, interim results are comparable only if similar periods are
reviewed. The reader is encouraged to read the Company's 1993 Annual
Report on Form 10-K in conjunction with this interim report.
RESULTS OF OPERATIONS
For the Quarter and Six Months Ended March 31, 1994
Theme Parks and Resorts
Quarter
Operating income decreased slightly compared to the prior year period,
reflecting lower theme park attendance in California, due primarily to
the impact of the January earthquake, and lower attendance in Florida,
due primarily to a decline in international tourist visitation. The
decrease in attendance in Florida was offset by higher per capita
spending, driven by price increases.
Six Months
Results reflected lower attendance in California and Florida,
partially offset by increased per capita spending in Florida,
primarily resulting from price increases.
Filmed Entertainment
Quarter
Results for the quarter reflected the strong performance of Bambi and
continued success of The Jungle Book in international home video and
the successful domestic home video release of The Fox and the Hound.
Revenues and operating income also reflected increased domestic and
international television activities. These results were offset by
weak domestic theatrical performances of Angie, The Ref, Iron Will and
The Air Up There. Prior year results included the successful domestic
home video release of Pinocchio, the domestic theatrical release of
Aladdin and the international theatrical distribution of Beauty and
the Beast and Sister Act, partially offset by the performance of
domestic live-action releases.
<PAGE>
THE WALT DISNEY COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Continued)
Filmed Entertainment (continued)
Six Months
Results reflected the successful domestic home video and the expanded
international theatrical release of Aladdin. Revenues and operating
income also included the impact of the international home video
release of The Jungle Book and Bambi and the domestic home video
release of The Fox and the Hound, offset by weak domestic theatrical
performances of Angie, Iron Will, The Ref, Cabin Boy and The Air Up
There. Prior year results included the successful domestic home
video release of Beauty and the Beast and Pinocchio, the international
home video release of Cinderella and international theatrical
distribution of Beauty and the Beast and Sister Act. The domestic
theatrical release of Aladdin also had a positive impact on prior year
results.
Consumer Products
Quarter
Increased revenues and operating income reflected the strong
performance of licensing and publishing activities in Europe and Asia
driven primarily by the continued strength of Aladdin character
merchandise. Results also reflected the success of licensed video
game products and domestic character merchandise. Prior year results
reflected the success of Aladdin and Beauty and the Beast soundtracks.
Six Months
Increased revenues and operating income were driven by the worldwide
success of character merchandise, including traditional Disney
characters and newly-created film properties, including Aladdin. The
Disney Stores also contributed to earnings growth, with 264 locations
worldwide compared to 202 in the prior year and higher same-store
sales performance. Prior year results reflected the success of
worldwide licensing, publishing and records and audio entertainment,
driven by Aladdin and Beauty and the Beast products.
Corporate Activities
Lower general and administrative expenses for the quarter and six-
month periods reflected operating income from Disney Sports
Enterprises (The Mighty Ducks of Anaheim) in the current year, versus
no operations in the corresponding prior year periods, and lower
losses incurred by Hollywood Records.
<PAGE>
THE WALT DISNEY COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)
Corporate Activities (continued)
The decrease in net interest and investment income for the quarter and
six-month periods reflected lower average investments partially offset
by lower current year levels of average borrowings and higher
capitalized interest. Results for the quarter and six-month period in
the prior year also included the write-off of unamortized issue costs
resulting from the redemption of the Company's zero coupon convertible
subordinated debentures in March 1993, partially offset by gains on
termination of certain interest rate swap agreements.
Investment in Euro Disney
In 1993, the Company provided $350 million to fully reserve its
receivables and limited funding commitment to Euro Disney. The
Company has not reported any financial impact in its second quarter or
six-month results related to its investment in Euro Disney. In the
prior year quarter and six months, the impact of the Company's share
of Euro Disney's loss recorded under the equity method was partially
offset by royalties and gain amortization related to the investment.
Discussions continue with respect to the previously announced
financial restructuring plan for Euro Disney which is intended to help
provide for the long-term viability of the resort. The plan provides
for contributions and concessions from Euro Disney's lenders and the
Company (see Note 4 of Notes to Condensed Consolidated Financial
Statements). If the proposed restructuring plan is finalized, the
Company would thereafter reflect its equity share of Euro Disney's
subsequent operating results in its income statement.
The Company does not expect the Euro Disney financial restructuring
plan to impact the Company's ability to raise funds adequate to meet
its needs, or to have a significant impact on its financial condition.
Income Taxes
The effective income tax rate was 34.8% for the quarter and 36.1% for
the six-month period, and 35.5% for the prior year quarter and six-
month periods.
<PAGE>
PART II. OTHER INFORMATION
THE WALT DISNEY COMPANY
Item 4. Submission of Matters to a Vote of Security Holders
The following matters were submitted to a vote of security holders
during the Company's Annual Meeting of Stockholders held February 22,
1994:
<TABLE>
<CAPTION>
# of Withheld
Description of Votes Cast For Authority
Matter
1. Election of directors:
<S> <C> <C>
Michael D. Eisner 461,144,293 5,274,936
Stanley P. Gold 461,103,328 5,315,901
Irwin E. Russell 461,186,073 5,233,156
Raymond L. Watson 461,227,458 5,191,771
</TABLE>
<TABLE>
<CAPTION>
# of Votes Cast # of
For Against Abstention
s
2. Ratification of
appointment of <C> <C> <C>
independent 464,051,156 984,800 1,383,273
accountants
</TABLE>
Item 6. Exhibits and Reports on Form 8-K
(a)Exhibits
None.
(b)Reports on Form 8-K
The Company filed a current report on Form 8-K, dated March 14,
1994, with respect to a joint press release issued by the Company,
Euro Disney S.C.A. and the Joint Steering Committee for the
lenders to Euro Disney S.C.A.
<PAGE>
THE WALT DISNEY COMPANY
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.
THE WALT DISNEY COMPANY
(Registrant)
By /s/ Richard D. Nanula
Richard D. Nanula
Executive Vice President and
Chief Financial Officer
May 13, 1994
Burbank, California
