-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, L+IJwjXdsVOCWmfdcFu0loYxAmnmhs1oKkUhLMS1iCvdZMHH9qzbPeiXQJggFBLG zNXGSyHVDJ4rNeaATPGKKw== 0001001039-97-000034.txt : 19970808 0001001039-97-000034.hdr.sgml : 19970808 ACCESSION NUMBER: 0001001039-97-000034 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970630 FILED AS OF DATE: 19970807 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: WALT DISNEY CO/ CENTRAL INDEX KEY: 0001001039 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-MISCELLANEOUS AMUSEMENT & RECREATION [7990] IRS NUMBER: 954545390 STATE OF INCORPORATION: DE FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-11605 FILM NUMBER: 97652873 BUSINESS ADDRESS: STREET 1: 500 SOUTH BUENA VISTA ST CITY: BURBANK STATE: CA ZIP: 91521 BUSINESS PHONE: 8185601000 MAIL ADDRESS: STREET 1: 500 SOUTH BUENA VISTA ST CITY: BURBANK STATE: CA ZIP: 91521 FORMER COMPANY: FORMER CONFORMED NAME: DC HOLDCO INC DATE OF NAME CHANGE: 19950918 10-Q 1 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, 1997 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 675,133,968 shares of common stock outstanding as of July 29, 1997 (including 891,108 shares held by TWDC Stock Compensation Fund, an affiliate of the Company). PART I. FINANCIAL INFORMATION THE WALT DISNEY COMPANY CONDENSED CONSOLIDATED STATEMENTS OF INCOME In millions, except per share data (unaudited)
Three Months Ended Nine Months Ended June 30 June 30 1997 1996 1997 1996 -------- -------- --------- -------- REVENUES $5,194 $5,087 $16,953 $13,467 COSTS AND EXPENSES (4,134) (4,131) (13,602) (10,992) GAIN ON SALE OF KCAL - - 135 - ACCOUNTING CHANGE - - - (300) -------- -------- --------- -------- OPERATING INCOME 1,060 956 3,486 2,175 CORPORATE ACTIVITIES AND OTHER (69) (66) (267) (248) NET INTEREST EXPENSE (185) (171) (540) (267) ACQUISITION-RELATED COSTS - - - (225) -------- -------- --------- -------- INCOME BEFORE INCOME TAXES 806 719 2,679 1,435 INCOME TAX EXPENSE (333) (313) (1,124) (557) -------- -------- --------- -------- NET INCOME $ 473 $ 406 $1,555 $ 878 ======== ======== ========= ======== EARNINGS PER SHARE $ 0.69 $ 0.59 $ 2.26 $ 1.47 ======== ======== ========= ======== Average number of common and common equivalent shares outstanding 688 691 687 596 ======== ======== ========= ========
See Notes to Condensed Consolidated Financial Statements THE WALT DISNEY COMPANY CONDENSED CONSOLIDATED BALANCE SHEETS In millions, except share data
June 30, September 30, 1997 1996 ----------- -------------- (unaudited) ASSETS Cash and cash equivalents $ 528 $ 278 Receivables 3,544 3,343 Inventories 908 951 Film and television costs 3,980 3,259 Investments 1,812 1,009 Theme parks, resorts and other property, net of accumulated depreciation of 8,812 8,031 $4,756 and $4,448 Intangible assets, net of accumulated amortization of $638 and $301 16,983 17,978 Other assets 1,733 1,777 --------- --------- $ 38,300 $ 36,626 ========= ========= LIABILITIES AND STOCKHOLDERS' EQUITY Accounts and taxes payable and accrued liabilities $ 6,257 $ 6,276 Borrowings 11,588 12,342 Deferred income taxes 2,028 743 Unearned royalty and other advances 1,160 1,179 Stockholders' equity Preferred stock, $.01 par value Authorized - 100 million shares Issued - none Common stock, $.01 par value Authorized - 1.2 billion shares Issued - 683 million shares and 682 million shares 8,561 8,576 Retained earnings 9,235 7,933 Cumulative translation and other adjustments (16) 39 Treasury shares, at cost - 8 million shares (462) (462) Shares held by TWDC Stock Compensation Fund- 1 million shares (51) - --------- --------- 17,267 16,086 --------- --------- $ 38,300 $ 36,626 ========= =========
See Notes to Condensed Consolidated Financial Statements THE WALT DISNEY COMPANY CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS In millions (unaudited)
Nine Months Ended June 30 --------------------------- 1997 1996 ----------- ----------- NET INCOME $ 1,555 $ 878 -------- -------- OPERATING ITEMS NOT REQUIRING CASH OUTLAYS Amortization of film and television costs 2,889 1,938 Depreciation 545 509 Amortization of intangibles 337 187 Gain on sale of KCAL (135) - Accounting change - 300 Other (1) 49 CHANGES IN Investments in trading securities - 85 Receivables (145) (111) Inventories 35 2 Other assets (113) (359) Accounts and taxes payable and accrued liabilities 315 (91) Deferred income taxes 324 167 Unearned royalty and other advances (19) 244 -------- -------- 4,032 2,920 -------- -------- CASH PROVIDED BY OPERATIONS 5,587 3,798 -------- -------- INVESTING ACTIVITIES Acquisition of ABC, net of cash acquired - (8,432) Film and television costs (3,642) (3,131) Investments in theme parks, resorts and other property (1,428) (1,194) Investment in E! Entertainment Television (321) - Proceeds from sale of KCAL 377 - Proceeds from sale of investments 15 350 Other (161) (18) -------- -------- (5,160) (12,425) -------- -------- FINANCING ACTIVITIES Borrowings 2,303 9,692 Proceeds from formation of REITs 1,311 - Reduction of borrowings (3,412) (1,630) Dividends (253) (197) Other (126) 42 -------- -------- (177) 7,907 -------- -------- Increase (Decrease) in Cash and Cash Equivalents 250 (720) Cash and Cash Equivalents, Beginning of Period 278 1,077 -------- -------- Cash and Cash Equivalents, End of Period $ 528 $ 357 ======== ========
See Notes to Condensed Consolidated Financial Statements 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, 1997. Certain reclassifications have been made in the 1996 condensed consolidated financial statements to conform to the 1997 presentation, including the reclassification of certain equity investments out of other assets into investments in the condensed consolidated balance sheets. 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, 1996. 2. For the nine-month period, the Company received proceeds of approximately $1.1 billion through financing arrangements with effective interest rates ranging from 4.4% to 5.6% and maturities in fiscal 1999 through fiscal 2012. Certain of these financing arrangements are denominated in foreign currencies for which the Company has entered into cross-currency swap agreements effectively converting these obligations into U.S. dollar denominated LIBOR-based variable rate debt instruments. The Company also established two real estate investment trusts (REITs) and issued equity interests in the REITs to third-party investors in exchange for $1.3 billion. In addition, during the second quarter, the Company issued approximately $1.2 billion in debt secured by certain assets of its newspaper operations. The secured debt has an interest rate based on one-month LIBOR and a maturity date of September 15, 1999. During the third quarter, as discussed below, $990 million of this debt was assumed by Knight-Ridder, Inc. in connection with the disposition of certain of the Company's newspaper operations. Proceeds from the above transactions were used in part to retire commercial paper borrowings and other debt. Commercial paper outstanding as of June 30, 1997 totaled $2.1 billion with maturities of up to one year and an average interest rate of 5.5%. The outstanding commercial paper borrowings are supported by bank facilities totaling $3 billion, which expire in 5 years and allow for borrowings at various interest rates. Notes to Condensed Consolidated Financial Statements (continued) 3. On May 9, 1997, the Company disposed of a substantial portion of its newspaper operations, obtained in the 1996 acquisition of ABC, Inc. ("ABC"), for Knight-Ridder, Inc. preferred stock convertible to common stock with a market value of $660 million and the assumption by Knight-Ridder, Inc. of pre-existing secured debt of $990 million. The disposition did not have a material impact on the financial results of the Company. The Company anticipates selling most of the remaining publishing operations it acquired as part of the ABC acquisition during the fourth quarter. 4. In November 1996, the Company sold KCAL, a Los Angeles television station, for $387 million in cash, resulting in a pre-tax gain of $135 million. 5. Dividends per share for the quarters ended June 30, 1997 and 1996 were $0.13 and $0.11, respectively. Dividends per share totaled $0.38 and $0.31 for the nine months ended June 30, 1997 and 1996, respectively. 6. The unaudited pro forma information below for the nine months ended June 30, 1996 presents combined results of operations as if the ABC acquisition had occurred at the beginning of such period. The unaudited pro forma information is not necessarily indicative of the results of operations of the combined company had the acquisition occurred at the beginning of such period.
(in millions, except per share data) June 30, 1996 ------------------------------------ Quarter ended Nine months ended --------------- ------------------- Revenues $ 5,087 $ 15,966 Net income (1) 401 982 Earnings per share (1) 0.58 1.42 (1) Amounts for the nine months include the impact of a $300 million non-cash charge related to the implementation of Statement of Financial Accounting Standards No. 121, "Accounting for the Impairment of Long-lived Assets and for Long-lived Assets to be Disposed of." The charge reduced earnings per share by $0.27.
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, 1997 for each line of business, and for the Company as a whole, are not necessarily indicative of results for the full year. Creative Content revenues fluctuate based upon the timing of theatrical and home video releases and seasonal consumer purchasing behavior. Release dates for theatrical 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 For the Quarter and Nine Months Ended June 30, 1997 The Company acquired the operations of ABC, Inc. ("ABC") on February 9, 1996 and completed its final purchase price allocation and determination of the related intangible assets during the second quarter of this year. To enhance comparability, certain information for 1996 is presented and discussed on a "pro forma" basis, which assumes the ABC acquisition and the related final purchase price allocation occurred at the beginning of 1996. The Company believes prior-year pro forma results provide more meaningful information for comparing net income, changes in net income and earnings trends, as the pro forma presentation includes the entire results of the Company and its acquired ABC operations for the full fiscal period. Accordingly, the discussion of 1997 results below reflects comparisons to the Company's pro forma 1996 operating results. The pro forma results are not necessarily indicative of the combined results that would have occurred had the acquisition actually occurred at the beginning of 1996. In addition, the discussion of the Company's operating results excludes the impact of two non-recurring charges recorded during the second quarter of 1996, as well as the gain on the sale of KCAL recorded by the Company in the first quarter of 1997. Both the prior-year non-recurring items and the gain on the sale of KCAL are discussed separately below. Consolidated Results - Quarter
(unaudited; in millions, except per share data) 1996 % 1996 1997 (Pro forma) Change (As reported) ------ ----------- ------ ----------- Revenues $5,194 $5,087 2% $5,087 Costs and Expenses (1) (4,134) (4,136) - (4,131) ------- ------- ------- Operating Income 1,060 951 11% 956 Corporate Activities and Other (69) (66) (5)% (66) Net Interest Expense (185) (171) (8)% (171) ------- ------- ------- Income Before Income Taxes 806 714 13% 719 Income Tax Expense (333) (313) (6)% (313) ------- ------- ------- Net Income $ 473 $ 401 18% $ 406 ======= ======= ======= Earnings Per Share $ 0.69 $ 0.58 19% $ 0.59 ======= ======= ======= Amortization of Intangible Assets Included in Operating Income $ 103 $ 119 n/m $ 114 ======= ======= ======= (1) Pro forma 1996 amounts reflect the final purchase price allocation completed in the second quarter of 1997 related to the acquisition of ABC.
Net income and earnings per share for the quarter increased 18% and 19% to $473 million and $0.69, respectively. These results were driven by increased operating income in all business segments. The effective income tax rate decreased from the prior year primarily as a result of a reduction in the ratio of nondeductible amortization of intangible assets to total income before income taxes. Consolidated Results - Nine Months The Company's 1997 results and 1996 pro forma amounts reflect the impacts of the ABC acquisition, including the use of purchase accounting as well as significant increases in amortization of intangible assets, interest expense, the effective income tax rate and shares outstanding. Consolidated Results - Nine Months (continued)
(unaudited; in millions, except per share data) 1996 % 1996 1997 (Pro forma) Change (As reported) ------- --------- ------ ----------- Revenues $16,953 $15,966 6% $13,467 Costs and Expenses (13,602) (13,174) (3)% (10,992) Gain on Sale of KCAL 135 - n/m - Accounting Change - (300) n/m (300) -------- -------- -------- Operating Income 3,486 2,492 40% 2,175 Corporate Activities and Other (267) (188) (42)% (248) Net Interest Expense (540) (527) (2)% (267) Acquisition Related Costs - - n/m (225) -------- -------- -------- Income Before Income Taxes 2,679 1,777 51% 1,435 Income Taxes (1,124) (795) (41)% (557) -------- -------- -------- Net Income $ 1,555 $ 982 58% $ 878 ======== ======== ======== Earnings Per Share $ 2.26 $ 1.42 59% $ 1.47 ======== ======== ======== Net Income Excluding Non-recurring Charges and $ 1,475 $ 1,165 27% $ 1,180 KCAL Gain ======== ======== ======== Earnings Per Share Excluding Non-recurring Charges and $ 2.15 $ 1.69 27% $ 1.98 KCAL Gain ======== ======== ======== Amortization of Intangible Assets Included in Operating $ 337 $ 357 n/m Income ======== ========
Net income and earnings per share for the nine months, excluding the prior-year non-recurring charges and the gain on the sale of KCAL discussed below, increased 27% to $1.5 billion and $2.15, respectively. During the first quarter of 1997 the Company sold KCAL, a Los Angeles television station, resulting in a pre-tax gain of $135 million. The gain on the sale of KCAL increased net income from $1.5 billion to $1.6 billion and earnings per share from $2.15 to $2.26. During the second quarter of 1996, the Company recorded two non-recurring charges consisting of a $300 million non-cash charge related to the implementation of Statement of Financial Accounting Standards No. 121, "Accounting for the Impairment of Long-lived Assets and for Long-lived Assets to be Disposed of," and a $225 million charge for costs related to the ABC acquisition. These charges reduced as reported earnings per share from $1.98 to $1.47 and pro forma earnings per share from $1.69 to $1.42. Consolidated Results - Nine Months (continued) The increase in Corporate Activities and Other reflected certain non-recurring gains in the prior-year nine months primarily related to the sale of an investment in a cellular communications company. The effective income tax rate decreased from the prior year primarily as a result of a reduction in the ratio of nondeductible amortization of intangible assets to total income before income taxes. Business Segment Results - Quarter
(Unaudited; in millions) 1996 % 1996 1997 (Pro forma) Change (As reported) ------- --------- ------ ----------- Revenues: Creative Content $2,216 $2,306 (4)% $2,306 Broadcasting 1,609 1,532 5% 1,532 Theme Parks & Resorts 1,369 1,249 10% 1,249 ------ ------ ------ Total $5,194 $5,087 2% $5,087 ====== ====== ====== Operating Income: (1) Creative Content $ 333 $ 285 17% $ 285 Broadcasting 337 316 7% 321 Theme Parks & Resorts 390 350 11% 350 ------ ------ ------ Total $1,060 $ 951 11% $ 956 ====== ====== ====== (1) Includes depreciation and amortization (excluding film costs) of: Creative Content $ 50 $ 63 Broadcasting 129 128 Theme Parks & Resorts 120 105 ----- ----- $ 299 $ 296 ===== =====
Creative Content Revenues for the quarter decreased 4% or $90 million, due primarily to declines of $57 million in publishing revenues, $31 million in theatrical revenues and $23 million in home video revenues, partially offset by growth in revenues at the Disney Stores of $28 million. Reductions in publishing revenues reflected the disposition of certain newspaper operations to Knight-Ridder, Inc. in May 1997. The decline in theatrical revenues reflected a reduction in the number of films in release during the quarter. Home video revenues reflected difficult comparisons to the prior-year strength of Sleeping Beauty, The Lion King and the animated version of 101 Dalmatians in the international market. Growth at the Disney Stores reflected continued worldwide expansion with the opening of 31 stores during the quarter, bringing the total number of stores to 610. Creative Content (continued) Operating income for the quarter increased 17% or $48 million to $333 million, reflecting improved results for theatrical distribution, partially offset by the reduction in home video results. Costs and expenses, which consist primarily of production cost amortization, distribution and selling expenses, product cost, labor and leasehold expense, decreased 7% or $138 million. The decrease was primarily due to the decline in distribution costs in the domestic theatrical and home video markets as well as lower overall costs resulting from the disposition of certain publishing businesses during the quarter. These decreases were partially offset by an increase in participation expenses in the domestic home video market, the expansion of the Disney Stores and increases in amortization of production costs in the home video and television markets. Broadcasting Revenues for the quarter increased $77 million or 5% to $1.6 billion, driven by increases at ESPN and The Disney Channel. The increases in revenues at ESPN and The Disney Channel were due primarily to higher affiliate fees and advertising rates at ESPN and subscriber growth at The Disney Channel. Operating income for the quarter increased $21 million or 7% to $337 million, primarily reflecting increases in revenues at ESPN and The Disney Channel, offset by decreases at the television network reflecting the impact of lower ratings. Costs and expenses, which consist primarily of programming, selling, general and administrative costs, increased 5% or $56 million. This increase is primarily driven by higher program costs at ESPN and the television network. Theme Parks and Resorts Revenues for the quarter increased 10% or $120 million to $1.4 billion, driven by the Walt Disney World Resort, led by growth of $86 million from higher guest spending and $30 million from increased occupied room nights. Guest spending growth included increases at the Disney Village Marketplace, most of which was attributable to the World of Disney, the largest Disney retail outlet, which opened in October 1996. The remaining growth in guest spending resulted from price increases and improved merchandise and food and beverage sales. Attendance gains were driven by increased domestic tourist visitation primarily attributable to the resort's 25th Anniversary celebration. Increased occupied room nights reflected continued high occupancy as well as more available rooms resulting from the opening of Disney's BoardWalk Resort during the fourth quarter of the prior year. Theme Parks and Resorts (continued) Operating income for the quarter increased 11% or $40 million to $390 million, driven by higher guest spending, theme park attendance and occupied room nights at the Walt Disney World Resort. 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 9% or $80 million. The increase was primarily due to higher operating costs resulting from higher attendance and resort expansion, increased marketing and sales efforts, including those related to the Walt Disney World Resort's 25th Anniversary celebration, and increased merchandise and food and beverage costs due to higher guest spending levels. Business Segment Results - Nine Months
(Unaudited; in millions) 1996 % 1996 1997 (Pro forma) Change (As reported) ------ --------- ------ ----------- Revenues: Creative Content $8,201 $7,914 4% $7,466 Broadcasting 5,030 4,754 6% 2,703 Theme Parks & Resorts 3,722 3,298 13% 3,298 ------- ------- ------- Total $16,953 $15,966 6% $13,467 ======= ======= ======= Operating Income: (1) Creative Content $1,434 $1,183 21% $1,189 Broadcasting 1,053 861 22% 538 Theme Parks & Resorts 864 748 16% 748 ------- ------- ------- 3,351 2,792 20% 2,475 Gain on Sale of KCAL 135 - n/m - Accounting Change - (300) n/m (300) ------- ------- ------- Total $ 3,486 $ 2,492 40% $ 2,175 ======= ======= ======= (1) Includes depreciation and amortization (excluding film costs) of: Creative Content $ 168 $ 175 Broadcasting 385 386 Theme Parks & Resorts 307 279 ----- ----- $ 860 $ 840 ===== =====
Creative Content Revenues increased 4% or $287 million to $8.2 billion, driven by growth of $153 million in the Disney Stores, $122 million in character merchandise licensing and $53 million in television distribution, partially offset by declines in home video revenues of $29 million. Growth at the Disney Stores reflected strong holiday sales in the first quarter and increased revenues due to continued worldwide expansion. Character merchandise licensing reflected the strength of film and television properties, including Winnie the Pooh and Toy Story domestically, and standard characters and 101 Dalmatians worldwide. The increase in television revenues was driven by an increase in the distribution of theatrical releases in the international television market. The decrease in home video revenues reflected the prior year strength of The Lion King and the animated version of 101 Dalmatians both in the international market. Operating income increased 21% or $251 million to $1.4 billion, reflecting improved results for theatrical distribution, character merchandise licensing and television distribution, partially offset by a reduction in home video results. Costs and expenses increased 1% or $36 million. Broadcasting Revenues increased $276 million or 6% to $5.0 billion, driven by increases of $255 million at ESPN and The Disney Channel and $49 million at the television network. The increase in revenues at ESPN was due primarily to higher affiliate fees resulting from increased subscribers and improved rates, as well as increased advertising revenues, resulting from higher advertising rates. Growth in revenues at the television network was primarily the result of improved performance of sports programming. Operating income increased $192 million or 22% to $1.1 billion, reflecting increases in revenues at ESPN and The Disney Channel, as well as improved results at the television stations, partially offset by decreases at the television network. Results at the television network reflected the impact of lower ratings, partially offset by benefits arising from current period sporting events, continued strength in the advertising market and decreased program amortization. Costs and expenses increased 2% or $84 million. This increase reflected increased programming rights and production costs, driven by international growth at ESPN and increases at the television network, partially offset by benefits arising from significant reductions in program amortization and other costs at the television network, primarily attributable to the acquisition. Theme Parks and Resorts Revenues increased 13% or $424 million to $3.7 billion, reflecting strength at the Walt Disney World Resort, which had growth of $211 million from increased guest spending, $90 million from record attendance and $88 million from increased occupied room nights. Guest spending growth reflected increased prices and higher per capita merchandise and food and beverage sales as well as increases at the Disney Village Marketplace, primarily attributable to the World of Disney retail outlet. Attendance gains resulted primarily from increased domestic tourism attributable to the 25th Anniversary celebration. Increased occupied room nights reflected higher occupancy and more available rooms due to the opening of Disney's BoardWalk Resort. Operating income increased 16% or $116 million to $864 million, driven by higher guest spending, theme park attendance and occupied room nights at the Walt Disney World Resort. Costs and expenses increased 12% or $308 million. The increase was primarily due to higher operating costs resulting from higher attendance and resort expansion, increased marketing and sales efforts, including those related to the Walt Disney World Resort's 25th Anniversary celebration, and increased merchandise and food and beverage costs due to higher guest spending levels. FINANCIAL CONDITION For the nine months ended June 30, 1997, cash provided by operations increased $1.4 billion to $5.2 billion, which includes the impact of the ABC acquisition. During the nine months, the Company received $2.3 billion from various financing arrangements and $1.3 billion from the formation of two real estate investment trusts, as more fully explained in the notes to the condensed consolidated financial statements. Certain of the proceeds from these transactions were used to repay commercial paper borrowings. Commercial paper borrowings outstanding as of June 30, 1997, with maturities of up to one year totaled $2.1 billion and are supported by bank facilities totaling $3 billion, which expire in five years and allow for borrowings at various interest rates. The Company continues to replace some of the remaining commercial paper with longer-term financing and may utilize, among other options, a U.S. shelf registration statement filed in March 1996 and a Euro medium-term note program established in June 1996, which collectively permit the future issuance of up to approximately $3.0 billion of additional debt. FINANCIAL CONDITION (continued) Borrowings decreased $1.3 billion for the nine months reflecting scheduled principal reductions and the assumption of $990 million of debt by Knight-Ridder, Inc. related to the Company's disposition of a substantial portion of the newspaper operations obtained in the ABC acquisition. During the nine months, the Company invested $3.6 billion to produce and acquire film and television properties. These costs increased over the prior-year nine months due primarily to the inclusion in fiscal 1997 of a full period of spending at the acquired ABC operations. During the nine months, the Company invested $1.4 billion in theme parks, resorts and other properties. These expenditures reflected continued expansion activities including Disney's Animal Kingdom, the Coronado Springs Resort and Convention Center and Disney's Wide World of Sports at the Walt Disney World Resort as well as the Disney Cruise Line. Total commitments to purchase broadcast programming approximated $4.2 billion at June 30, 1997. Substantially all of this amount is payable over the next five years. The Company expects the ABC Television Network, its cable operations and its television and radio stations to continue to enter into programming commitments to purchase the broadcast rights for various feature films, sports and other programming. 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. PART II. OTHER INFORMATION THE WALT DISNEY COMPANY Item 6. Exhibits and Reports on Form 8-K (a) Exhibits None (b) Reports on Form 8-K None 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 Senior Executive Vice President and Chief Financial Officer August 9, 1997 Burbank, California EX-27 2
5 This schedule contains summary financial information extracted from the condensed consoldiated balance sheet and condensed consolidated statement of income found on the Company's Form 10-Q for the nine months ended June 30, 1997 and is qualified in its entirety by reference to such financial statements. 1,000,000 U.S. DOLLARS 9-MOS SEP-30-1996 OCT-01-1996 JUN-30-1997 1 528 1,812 3,544 0 908 0 13,568 4,756 38,300 0 11,588 0 0 8,561 8,706 38,300 16,953 16,953 0 13,467 267 0 540 2,679 1,124 1,555 0 0 0 1,555 2.26 2.26
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