UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Quarter Ended December 31, 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 519,603,667 shares of common stock outstanding as
of February 10, 1995.
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PART I. FINANCIAL INFORMATION
THE WALT DISNEY COMPANY
CONDENSED CONSOLIDATED STATEMENT OF INCOME
In millions, except per share data (unaudited)
<TABLE>
<CAPTION>
Three Months Ended
December 31
1994 1993
<S> <C> <C>
REVENUES
Filmed entertainment $1,767.5 $1,426.4
Theme parks and resorts 853.3 768.9
Consumer products 680.9 532.0
3,301.7 2,727.3
COSTS AND EXPENSES
Filmed entertainment 1,319.3 1.086.2
Theme parks and resorts 686.2 630.8
Consumer products 505.4 385.9
2,510.9 2,102.9
OPERATING INCOME
Filmed entertainment 448.2 340.2
Theme parks and resorts 167.1 138.1
Consumer products 175.5 146.1
790.8 624.4
CORPORATE ACTIVITIES
General and administrative expenses 42.3 43.6
Net investment and interest expense (income) 36.5 (4.2)
78.8 39.4
INCOME FROM INVESTMENT IN EURO DISNEY 27.9
INCOME BEFORE INCOME TAXES 739.9 585.0
Income taxes 257.5 216.4
NET INCOME $ 482.4 $ 368.6
EARNINGS PER SHARE $ .91 $ .68
AVERAGE NUMBER OF COMMON AND COMMON
EQUIVALENT SHARES OUTSTANDING 527.8 545.3
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THE WALT DISNEY COMPANY
CONDENSED CONSOLIDATED BALANCE SHEET
In millions
<TABLE>
<CAPTION>
December 31, September 30,
1994 1994
(unaudited)
<S> <C> <C>
ASSETS
Cash and cash equivalents $ 1,137.6 $ 186.9
Investments 897.4 1,323.2
Receivables 2,073.7 1,670.5
Merchandise inventories 598.2 668.3
Film and television costs 1,733.2 1,596.2
Theme parks, resorts and other property,
net of accumulated depreciation of
$2,726.6 and $2,627.1 5,928.4 5,814.5
Investment in Euro Disney 513.7 629.9
Other assets 922.8 936.8
$13,805.0 $12,826.3
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts and taxes payable and other
accrued liabilities $ 3,157.5 $ 2,742.2
Borrowings 3,665.4 2,936.9
Unearned royalty and other advances 684.2 699.9
Deferred income taxes 683.6 939.0
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 - 568.4 million shares and
567.0 million shares 984.4 945.3
Retained earnings 6,233.9 5,790.3
Cumulative translation and other
adjustments (0.8) 59.1
7,217.5 6,794.7
Less treasury shares, at cost - 51.0
million shares and 42.9 million shares 1,603.2 1,286.4
5,614.3 5,508.3
$13,805.0 $12,826.3
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THE WALT DISNEY COMPANY
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
In millions (unaudited)
<TABLE>
<CAPTION>
Three Months Ended
December 31
1994 1993
<S> <C> <C>
CASH PROVIDED BY OPERATIONS BEFORE INCOME
TAXES $ 816.6 $ 655.8
Income taxes paid (45.0) (25.1)
771.6 630.7
INVESTING ACTIVITIES
Film and television costs (456.4) (349.8)
Investments in theme parks, resorts and
other property (220.0) (244.4)
Purchases of investments (130.9) (146.3)
Proceeds from sales of investments 483.4 232.9
Euro Disney investment 144.8
Other 6.7 (67.8)
(172.4) (575.4)
FINANCING ACTIVITIES
Borrowings 803.9 301.4
Reduction of borrowings (75.4) (32.8)
Repurchases of common stock (348.7)
Dividends (38.8) (33.5)
Other 10.5 31.7
351.5 266.8
Increase in Cash and Cash Equivalents 950.7 322.1
Cash and Cash Equivalents, Beginning of Period 186.9 363.0
Cash and Cash Equivalents, End of Period $1,137.6 $ 685.1
The difference between Income Before Income Taxes 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 $ 739.9 $ 585.0
CHARGES TO INCOME NOT REQUIRING CASH OUTLAYS
Depreciation 103.1 85.1
Amortization of film and television costs 319.4 264.2
Euro Disney (27.9)
Other 13.9 6.2
CHANGES IN
Investments in trading securities 10.6
Receivables (403.2) (392.4)
Merchandise inventories 70.1 135.3
Other assets 36.4 (50.1)
Accounts payable and other accrued liabilities (30.0) (11.7)
Unearned royalty and other advances (15.7) 34.2
76.7 70.8
CASH PROVIDED BY OPERATIONS BEFORE INCOME
TAXES $ 816.6 $ 655.8
SUPPLEMENTAL CASH FLOW INFORMATION:
Interest paid $ 20.5 $ 21.9
</TABLE>
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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, 1995. Certain
reclassifications have been made in the 1994 financial
statements to conform to the 1995 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, 1994.
2. Accounting Change
Effective October 1, 1994, the Company adopted the method of
accounting prescribed by Statement of Financial Accounting
Standards (SFAS) 115, Accounting for Certain Investments in
Debt and Equity Securities.
This statement requires that certain investments in debt and
equity securities be classified into one of three categories.
Debt securities that the Company has the positive intent and
ability to hold to maturity are classified as "held-to-
maturity" and reported at amortized cost. Debt securities not
classified as held-to-maturity and marketable equity
securities are reported at fair value and classified as
either "trading" or "available-for-sale," with unrealized
gains and losses included in earnings or stockholders'
equity, respectively.
The Company has classified $71 million of securities as
trading, $660 million of securities and cash equivalents as
available-for-sale, and $589 million of securities and cash
equivalents as held-to-maturity. Realized gains and losses,
determined principally using the average cost basis, and
unrealized gains and losses on trading and available-for-sale
securities were not material. The fair values of held-to-
maturity securities do not differ materially from carrying
value.
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THE WALT DISNEY COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
3. During the quarter, the Company sold approximately 75 million
shares, or 20% of its investment in Euro Disney, to Price
Alwaleed Bin Talal Bin Abdulaziz Al Saud, and recognized a
gain of $55 million. As a result of the sale, the Company's
equity ownership in Euro Disney was reduced from 49% at
September 30, 1994 to approximately 39%. The gain was
partially offset by the Company's equity share of Euro
Disney's operating results for the quarter.
4. During December 1994, the Company issued $300 million of
Notes (the "Notes") in the Eurobond market. The Notes are
senior, unsecured debt obligations of the Company which
mature on December 19, 1997. Interest on the Notes is payable
annually at a fixed rate of 8.0% per annum through maturity.
During the quarter, the Company also issued approximately
$500 million of commercial paper and other floating-rate
short-term debt, which matures within 90 days.
5. During November 1994, the Company increased the authorized
share repurchase amount under its existing share repurchase
program by 90 million shares. Under this program, the Company
purchased 8.9 million shares at prevailing market prices
during the quarter. As of December 31, 1994, approximately
104 million shares remained authorized for repurchase.
6. Dividends per share for the quarters ended December 31, 1994
and 1993 were $.075 and $.0625, respectively.
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THE WALT DISNEY COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The Company's businesses are subject to the effects of
seasonality. Consequently, the operating results for the quarter
ended December 31, 1994 for each line of business, and for the
Company as a whole, will not necessarily be indicative of the
results expected for the full year. The reader is encouraged to
read the Company's 1994 Annual Report on Form 10-K in conjunction
with this interim report.
Filmed Entertainment operating results fluctuate based upon the
timing of theatrical and home video releases. Release dates are
determined by several factors, including timing of vacation and
holiday periods and competition in the market.
The Theme Parks and Resorts business experiences fluctuations in
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.
Operating results for Consumer Products are influenced by
seasonal consumer purchasing behavior and by the timing of
animated theatrical releases.
RESULTS OF OPERATIONS
For the Quarter Ended December 31, 1994
Filmed Entertainment
Revenues increased 24% or $341.1 million to $1.77 billion, driven
by growth of $125 million in theatrical revenues, $109 million in
home video revenues, and $58 million in television revenues.
Theatrical revenues increased due to the domestic rerelease and
expanded international release of The Lion King and the live-
action releases The Santa Clause and Pulp Fiction, compared to
the expanded international theatrical release of Aladdin in the
prior year. Home video revenues were driven by the worldwide
release of Snow White and the Seven Dwarfs and the expanded
international release of Aladdin in the current year, compared to
the domestic release of Aladdin, the international release of The
Jungle Book, and the expanded international release of Beauty and
the Beast in the prior year. Television revenues grew due to
increased title availabilities worldwide.
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THE WALT DISNEY COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
Filmed Entertainment (continued)
Operating income increased 32% or $108.0 million to $448.2
million, primarily due to improved performance of current year
theatrical releases, growth in home video, and increased title
availabilities in television. Costs and expenses, which consist
principally of film and television cost amortization, and
distribution and selling costs, increased 21% or $233.1 million,
primarily reflecting increased theatrical distribution and
selling costs associated with the worldwide release of The Lion
King and the domestic release of The Santa Clause, and higher
home video marketing and distribution costs, principally due to
the worldwide release of Snow White and the Seven Dwarfs.
Theme Parks and Resorts
Revenues increased 11% or $84.4 million to $853.3 million, driven
by growth of $46 million from higher theme park attendance in
Florida and California and increased guest spending at Florida
theme parks and resorts, and $24 million from an increase in
occupied rooms at Florida resorts. Higher theme park attendance
reflected increased visitation of both domestic and international
guests, primarily in Florida. Guest spending rose primarily due
to expanded product offerings and certain price increases. The
increase in occupied rooms reflected absorption of additional
capacity from the openings of Disney's Wilderness Lodge and All-
Star Sports Resort in the third quarter of the prior year and the
phased opening of the All-Star Music Resort during the current
quarter.
Operating income increased 21% or $29.0 million to $167.1
million, driven by increased attendance, occupancy, and guest
spending at Florida theme parks and resorts. Costs and expenses,
which consist principally of labor, costs of merchandise, food
and beverages sold, depreciation, repairs and maintenance, and
entertainment and marketing expenses, increased 9% or $55.4
million, primarily due to expansion of theme park attractions and
resorts in Florida, partially offset by the impact of ongoing
cost reduction initiatives.
Consumer Products
Revenues increased 28% or $148.9 million to $680.9 million,
driven by growth of $110 million from the Disney Stores and $36
million from worldwide character merchandise licensing,
publications, and audio entertainment. Full-quarter operations at
85 stores opened during fiscal 1994 and 15% higher sales at 239
existing stores generated 85% of Disney Stores' revenue growth;
sales from 24 new stores worldwide contributed the remaining 15%.
Worldwide merchandise licensing growth resulted from increased
demand for animated film properties, particularly The Lion King.
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THE WALT DISNEY COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
Consumer Products (Continued)
Operating income increased 20% or $29.4 million to $175.5
million, primarily due to growth of the Disney Stores and
worldwide character merchandise licensing, partially offset by
higher costs and expenses. Costs and expenses, which consist
principally of costs of goods sold, labor, rent and occupancy,
and publicity and promotion, increased 31% or $119.5 million,
primarily reflecting support of the expansion and revenue growth
of the Disney Stores.
Corporate Activities
General and administrative expenses decreased 3% or $1.3 million,
reflecting lower corporate general and administrative expenses,
partially offset by operating losses from Disney Sports
Enterprises (The Mighty Ducks of Anaheim).
Net investment and interest expense was $36.5 million, primarily
reflecting the impact of higher net borrowings, due in part to
common stock repurchases and prior-year Euro Disney funding.
Investment in Euro Disney
The Company's investment in Euro Disney resulted in income of
$27.9 million, reflecting a gain of $55 million from the sale of
approximately 75 million shares, or 20% of its investment in Euro
Disney, to Prince Alwaleed Bin Talal Bin Abdulaziz Al Saud. The
gain was partially offset by the Company's equity share of Euro
Disney's operating results for the quarter.
In the prior year quarter, no activity was reported related to
the Company's investment in Euro Disney, pending the outcome of
the financial restructuring.
Income taxes
The effective income tax rate was 34.8% for the quarter compared
to 37% for the prior year quarter.
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THE WALT DISNEY COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
FINANCIAL CONDITION
For the three months ended December 31, 1994, cash provided by
operations increased 22% or $140.9 million to $771.6 million,
primarily due to increased operating income in each business
segment.
Net borrowings (the Company's borrowings less cash and liquid
investments) increased $294 million to $2.0 billion, reflecting
incremental financing during the period to fund cash
requirements. This increase was primarily due to the issuance of
$300 million of senior, unsecured debt obligations in the
Eurobond market, and the issuance of approximately $500 million
of short-term borrowings, offset by payments of existing debt,
and increased investments in short-term instruments of
approximately $430 million.
During the quarter, the Company invested $456 million to develop
and produce film and television properties and $220 million to
design and develop new theme park attractions and resort
properties.
The Company repurchased 8.9 million shares of common stock for
$349 million under its share repurchase program during the
period. The Company purchased 13.8 million shares during fiscal
1994, and is authorized to purchase up to an additional 104
million shares under the program.
The Company sold approximately 75 million (20%) of its Euro
Disney shares to Prince Alwaleed Bin Talal Bin Abdulaziz Al Saud
for approximately $145 million in October 1994.
The Company's financial condition remains strong. The Company
believes that its cash, other liquid assets, operating cash
flows, access to equity capital markets and borrowing capacity
taken together provide more than adequate resources to fund
ongoing operating requirements and future capital expenditures
related to the expansion of existing businesses and development
of new projects.
<PAGE>
PART II. OTHER INFORMATION
THE WALT DISNEY COMPANY
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
(27) Financial Data Schedule (filed electronically only).
(b) Reports on Form 8-K
The Company did not file any reports on Form 8-K during the quarter.
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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
February 13, 1995
Burbank, California
