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, 1995 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 522,773,816 shares of common stock outstanding as of
August 4, 1995.
<PAGE>
PART I. FINANCIAL INFORMATION
THE WALT DISNEY COMPANY
CONDENSED CONSOLIDATED STATEMENT OF INCOME
In millions, except per share data (unaudited)
<TABLE>
<CAPTION>
Nine Months Three Months
Ended Ended
June 30 June 30
1995 1994 1995 1994
<S> <C> <C> <C> <C>
REVENUES
Filmed entertainment $ 4,482.1 $ 3,534.7 $ 1,156.8 $ 1,003.7
Theme parks and resorts 2,877.2 2,513.6 1,132.1 942.2
Consumer products 1,629.2 1,308.4 475.1 407.7
8,988.5 7,356.7 2,764.0 2,353.6
COSTS AND EXPENSES
Filmed entertainment 3,573.6 2,867.0 1,003.5 836.3
Theme parks and resorts 2,225.4 1,984.8 829.6 703.9
Consumer products 1,229.8 977.8 368.6 320.8
7,028.8 5,829.6 2,201.7 1,861.0
OPERATING INCOME
Filmed entertainment 908.5 667.7 153.3 167.4
Theme parks and resorts 651.8 528.8 302.5 238.3
Consumer products 399.4 330.6 106.5 86.9
1,959.7 1,527.1 562.3 492.6
CORPORATE ACTIVITIES
General and administrative 126.8 120.6 38.7 39.6
expenses
Net investment and interest
expense (income) 101.3 (17.7) 21.1 (5.1)
228.1 102.9 59.8 34.5
LOSS FROM INVESTMENT IN
EURO DISNEY (19.6) (52.8) (14.4) (52.8)
INCOME BEFORE INCOME TAXES 1,712.0 1,371.4 488.1 405.3
Income taxes 595.9 486.9 169.9 137.8
NET INCOME $ 1,116.1 $ 884.5 $ 318.2 $ 267.5
EARNINGS PER SHARE $ 2.11 $ 1.62 $ 0.60 $ 0.49
AVERAGE NUMBER OF COMMON AND
COMMON EQUIVALENT SHARES
OUTSTANDING 530.2 546.3 531.7 546.1
</TABLE>
<PAGE>
THE WALT DISNEY COMPANY
CONDENSED CONSOLIDATED BALANCE SHEET
In millions
<TABLE>
<CAPTION>
June 30, September 30,
1995 1994
(unaudited)
<S> <C> <C>
ASSETS
Cash and cash equivalents $ 956.7 $ 186.9
Investments 1,457.3 1,323.2
Receivables 1,449.9 1,670.5
Merchandise inventories 727.9 668.3
Film and television costs 1,974.9 1,596.2
Theme parks, resorts, and other property,
net of accumulated depreciation of
$2,943.7 and $2,627.1 6,131.9 5,814.5
Investment in Euro Disney 559.9 629.9
Other assets 1,122.8 936.8
$ 14,381.3 $ 12,826.3
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts and taxes payable and other
accrued liabilities $ 3,170.3 $ 2,742.2
Borrowings 3,362.2 2,936.9
Unearned royalty and other advances 687.6 699.9
Deferred income taxes 787.1 939.0
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 - 573.6 million shares and
567.0 million shares 1,165.2 945.3
Retained earnings 6,773.7 5,790.3
Cumulative translation and other
adjustments 38.4 59.1
7,977.3 6,794.7
Less treasury shares, at cost -
51.0 million shares and 42.9
million shares 1,603.2 1,286.4
6,374.1 5,508.3
$ 14,381.3 $ 12,826.3
</TABLE>
<PAGE>
THE WALT DISNEY COMPANY
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
In millions (unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
June 30
1995 1994
<S> <C> <C>
CASH PROVIDED BY OPERATIONS BEFORE
INCOME TAXES $ 3,057.1 $ 2,329.8
Income taxes paid (311.3) (313.7)
2,745.8 2,016.1
INVESTING ACTIVITIES
Film and television costs (1,373.1) (1,074.0)
Investments in theme parks, resorts,
and other property (694.6) (784.7)
Purchases of investments (893.1) (675.1)
Proceeds from sales of investments 830.6 791.4
Investment in Euro Disney 144.8
Other (65.9) 21.7
(2,051.3) (1,720.7)
FINANCING ACTIVITIES
Borrowings 1,185.7 1,337.6
Reduction of borrowings (760.4) (1,172.5)
Repurchases of common stock (348.7) (58.4)
Dividends (132.7) (114.0)
Other 131.4 55.9
75.3 48.6
Increase in Cash and Cash Equivalents 769.8 344.0
Cash and Cash Equivalents, Beginning
of Period 186.9 363.0
Cash and Cash Equivalents, End of Period $ 956.7 $ 707.0
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 $ 1,712.0 $ 1,371.4
CHARGES TO INCOME NOT REQUIRING CASH OUTLAYS
Amortization of film and television costs 994.4 828.0
Depreciation 345.9 289.4
Euro Disney 19.6 52.8
Other 58.3 45.8
CHANGES IN
Investments in trading securities (77.5)
Receivables 220.6 (45.7)
Merchandise inventories (59.6) 15.9
Other assets (182.0) 22.5
Accounts payable and other accrued
liabilities 37.7 (161.5)
Unearned royalty and other advances (12.3) (88.8)
1,345.1 958.4
CASH PROVIDED BY OPERATIONS BEFORE
INCOME TAXES $ 3,057.1 $ 2,329.8
SUPPLEMENTAL CASH FLOW INFORMATION
Interest paid $101.7 $ 73.0
</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, except for the
$52.8 million charge recorded in the prior year quarter to reflect
the Company's participation in the Euro Disney financial re-
structuring) 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. During July 1995, the Company and Capital Cities/ABC, Inc. ("Cap
Cities") entered into an agreement to merge. The merger has been
approved by the Board of Directors of each company. Pursuant to
the agreement, shareholders of Cap Cities will have the right to
receive a combination of common stock and cash valued at
approximately $19 billion at the time of announcement. The
merger is subject to regulatory review and approval of the
shareholders of each company, and is expected to be completed
by early 1996.
Cap Cities owns and operates the ABC Television Network and eight
television stations, with plans to purchase two others in August.
In addition, Cap Cities owns the ABC Radio Networks and 21 radio
stations, owns 80% of ESPN, Inc., and provides programming for
cable television. Cap Cities, through joint ventures, is engaged
in international broadcast/cable services and television
production and distribution. Cap Cities also publishes daily and
weekly newspapers, shopping guides, various specialized and
business periodicals, and books.
3. Cash dividends per share for the quarters ended June 30, 1995 and
1994 were $.09 and $.075, respectively.
<PAGE>
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 and nine months
ended June 30, 1995 for each line of business, and for the Company as
a whole, will not necessarily be indicative of results 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 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.
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 and Nine Months Ended June 30, 1995
Filmed Entertainment
Quarter
Revenues increased 15% or $153.1 million to $1.16 billion, driven by
growth of $82 million in home video, $23 million in theatrical
markets, and $21 million in television. Home video revenues increased
primarily due to the current period's strong performances of Pinocchio
in international home video, the live-action Jungle Book in domestic
home video, and The Lion King in worldwide markets, compared to The
Return of Jafar in domestic home video in the prior year. Theatrical
revenues increased primarily due to the domestic box office success of
Pocahontas, Crimson Tide, and While You Were Sleeping, compared to the
prior year performance of The Lion King and When A Man Loves A Woman.
Television revenues grew due to the increased availability and
popularity of titles.
Operating income was the second highest ever reported for the third
quarter, surpassed only by the record prior year quarter, which
included the highly successful direct-to-video release of The Return
of Jafar. Operating income, which decreased 8% or $14.1 million to
$153.3 million, reflected lower results from theatrical markets,
primarily due to higher distribution costs related to domestic
releases, and the prior year strength of The Lion King. Television
results improved for the quarter, while home video results were
comparable to the prior year quarter. Overall, costs and expenses,
which consist principally of film and television cost amortization,
and distribution and selling costs, increased by 20% or $167.2
million.
<PAGE>
THE WALT DISNEY COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
Filmed Entertainment (Continued)
Nine Months
Revenues increased 27% or $947.4 million to $4.48 billion, driven by
growth of $592 million in home video, $152 million in theatrical
markets, and $98 million in television. Home video revenues increased
primarily due to the worldwide release of Snow White and the Seven
Dwarfs and the domestic release of The Lion King, compared to Aladdin
in domestic home video in the prior year. Theatrical revenues
increased primarily due to the domestic rerelease and expanded
international release of The Lion King and the live-action release of
The Santa Clause and Pulp Fiction. Television revenues increased due
to increased availability and popularity of titles.
Operating income increased 36% or $240.8 million to $908.5 million,
primarily due to growth in home video. Television results also
improved for the period, while theatrical results were comparable to
the prior year. Costs and expenses increased 25% or $706.6 million,
primarily reflecting higher home video marketing and distribution
costs due to the worldwide release of Snow White and the Seven Dwarfs
and the domestic release of The Lion King, and higher distribution
costs related to theatrical releases.
Theme Parks and Resorts
Quarter
Revenues increased 20% or $189.9 million to $1.13 billion, driven by
growth of $124 million reflecting higher theme park attendance in
Florida and California, and $39 million from an increase in occupied
rooms at Florida resorts. Higher theme park attendance reflected
increased domestic and international visitation. The increase in
occupied rooms reflected the openings of Disney's Wilderness Lodge and
All-Star Sports Resort during the third quarter of the prior year and
the phased opening of the All-Star Music Resort in the current year.
Operating income increased 27% or $64.2 million to $302.5 million,
driven by higher theme park attendance and increased occupied rooms at
Florida resorts. 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 18% or $125.7 million. The increase was primarily
due to expansion of theme park attractions and Florida resorts and
increased marketing and sales expenses, partially offset by the impact
of ongoing cost reduction initiatives.
<PAGE>
THE WALT DISNEY COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
Theme Parks and Resorts (continued)
Nine Months
Revenues increased 14% or $363.6 million to $2.88 billion, driven by
growth of $218 million from higher theme park attendance in Florida
and California, and $105 million from an increase in occupied rooms at
Florida resorts. Higher theme park attendance reflected increased
domestic and international visitation. The increase in occupied rooms
reflected 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 period.
Operating income increased 23% or $123.0 million to $651.8 million,
driven by higher theme park attendance and increased occupied rooms at
Florida resorts. Costs and expenses increased 12% or $240.6 million,
primarily due to expansion of theme park attractions and resorts in
Florida and increased marketing and sales expenses, partially offset
by the impact of ongoing cost reduction initiatives.
Consumer Products
Quarter
Revenues increased 17% or $67.4 million to $475.1 million, driven by
growth of $48 million from the Disney Stores and $14 million from
worldwide publishing activities. Revenues from worldwide licensed
character merchandise were comparable to the prior year. Full-quarter
operations at 85 stores opened during fiscal 1994 generated 44% of
Disney Stores' revenue growth; sales from 69 new stores worldwide, 31
of which opened during the quarter, contributed the remaining 56%.
Sales were comparable to the prior year quarter at 239 existing
stores. Increased publishing revenues resulted primarily from growth
in domestic magazines.
Operating income increased 23% or $19.6 million to $106.5 million,
reflecting worldwide growth of the Disney Stores and publishing
activities. Costs and expenses, which consist principally of costs of
goods sold, labor, rent and occupancy, and publicity and promotion,
increased 15% or $47.8 million, primarily due to ongoing expansion and
revenue growth of the Disney Stores.
<PAGE>
THE WALT DISNEY COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
Consumer Products (continued)
Nine Months
Revenues increased 25% or $320.8 million to $1.63 billion, driven by
growth of $205 million from the Disney Stores and $83 million from
worldwide character merchandise licensing and publications. Full-
period operations at 85 stores opened during fiscal 1994 and 11%
higher sales at 239 existing stores generated 75% of Disney Stores'
revenue growth; sales from 69 new stores worldwide contributed the
remaining 25%. Worldwide merchandise licensing and publications growth
resulted primarily from increased demand for traditional Disney
characters and more recent animated film properties, particularly The
Lion King and Pocahontas.
Operating income increased 21% or $68.8 million to $399.4 million,
primarily due to growth in the Disney Stores, worldwide character
merchandise licensing, and publications, partially offset by higher
costs and expenses. Costs and expenses increased 26% or $252.0
million, primarily due to ongoing expansion and revenue growth of the
Disney Stores.
Corporate Activities
General and administrative expenses decreased 2% or $0.9 million for
the quarter and increased 5.0% or $6.2 million for the nine months,
reflecting higher corporate general and administrative expenses for
both periods, offset by operating income from Disney Sports
Enterprises (The Mighty Ducks of Anaheim) for the quarter. Disney
Sports Enterprises had operating losses for the nine months, primarily
due to the shortened NHL season.
Net investment and interest expense was $21.1 million and $101.3
million for the quarter and nine months, respectively, primarily
reflecting the impact of higher net borrowings, due in part to
calendar 1994 common stock repurchases and prior-year Euro Disney
funding.
<PAGE>
THE WALT DISNEY COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
Investment in Euro Disney
The Company's investment in Euro Disney resulted in losses of $14.4
million and $19.6 million for the quarter and nine months,
respectively. Results for the nine-month period include a gain of $55
million from the sale of approximately 75 million shares, or 20% of
the Company's investment in Euro Disney, to Prince Alwaleed Bin Talal
Bin Abdulaziz Al Saud in the first quarter.
In the third quarter of the prior year, the Company recorded a charge
of $52.8 million to reflect its participation in the Euro Disney
financial restructuring.
Income Taxes
The effective income tax rate was 34.8% for the quarter and nine
months, compared to 34.0% and 35.5% for the prior-year quarter and
nine months, respectively.
FINANCIAL CONDITION
For the nine months ended June 30, 1995, cash provided by operations
increased 36% or $729.7 million to $2.75 billion, primarily due to
increased operating income in each business segment.
Net borrowings (the Company's borrowings less cash and liquid
investments) decreased $393 million to $1.3 billion. The decrease was
primarily due to payments of existing debt, and an increase in cash
and liquid investments, partially offset by the issuance of $400
million of Senior Participating Notes in the second quarter and $300
million of senior, unsecured debt obligations in the first quarter.
During the nine months, the Company invested $1.37 billion to develop
and produce film and television properties and $695 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 first quarter.
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, or 20%, of its Euro Disney
shares to Prince Alwaleed Bin Talal Bin Abdulaziz Al Saud for
approximately $145 million in October 1994.
<PAGE>
THE WALT DISNEY COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
During April 1995, the Company increased its unsecured revolving line
of bank credit from $525 million to $1 billion.
Also during April 1995, the Company entered into agreements with a
shipyard to build two cruise ships for its Disney Cruise Lines. During
June 1995, the Company announced its plans to open a fourth theme park
at the Walt Disney World Resort in Florida. The new theme park,
Disney's Wild Animal Kingdom, is scheduled to open in the spring of
1998. Construction will begin in September 1995.
During July 1995, the Company and Capital Cities/ABC, Inc. ("Cap
Cities") entered into an agreement to merge. The merger has been
approved by the Board of Directors of each company. Pursuant to the
agreement, shareholders of Cap Cities will have the right to receive
a combination of common stock and cash valued at approximately
$19 billion at the time of announcement. The merger is subject to
regulatory review and approval of the shareholders of each company,
and is expected to be completed by early 1996.
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, including the proposed
acquisition of Cap Cities.
<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.
<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/ Stephen F. Bollenbach
Stephen F. Bollenbach
Senior Executive Vice President and
Chief Financial Officer
August 11, 1995
Burbank, California
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
The schedule contains summary financial information extracted from the condensed
consolidated balance sheet and condensed consolidated statement of income found
on the Company's Form 10-Q for the nine months ended June 30, 1995 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-30-1994
<PERIOD-START> OCT-01-1994
<PERIOD-END> JUN-30-1995
<EXCHANGE-RATE> 1
<CASH> 957
<SECURITIES> 1457
<RECEIVABLES> 1450
<ALLOWANCES> 0
<INVENTORY> 728
<CURRENT-ASSETS> 0
<PP&E> 9076
<DEPRECIATION> 2944
<TOTAL-ASSETS> 14381
<CURRENT-LIABILITIES> 0
<BONDS> 3362
<COMMON> 1165
0
0
<OTHER-SE> 5209
<TOTAL-LIABILITY-AND-EQUITY> 14381
<SALES> 8989
<TOTAL-REVENUES> 8989
<CGS> 0
<TOTAL-COSTS> 7029
<OTHER-EXPENSES> 127
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 138
<INCOME-PRETAX> 1712
<INCOME-TAX> 596
<INCOME-CONTINUING> 1116
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1116
<EPS-PRIMARY> 2.11
<EPS-DILUTED> 2.11
</TABLE>
