UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q/A
(Amendment No. 1)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the Quarter Ended December 31, 2001 Commission File Number 1-11605
[GRAPHIC OMITTED]
Incorporated in Delaware I.R.S. Employer Identification
No. 95-4545390
500 South Buena Vista Street, Burbank, California 91521
(818) 560-1000
Securities Registered Pursuant to Section 12(b) of the Act:
Name of Exchange
Title of class on Which Registered
Common Stock, $.01 par value New York Stock Exchange
Pacific Stock Exchange
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
YES X NO
There were 2,040,818,802 shares of common stock outstanding as of June 26,
2002.
Explanatory Statement
The Company adopted Statement of Financial Accounting Standards No. 142,
Goodwill and Other Intangible Assets (SFAS 142) effective October 1, 2001, the
beginning of its current fiscal year. On February 14, 2002, the Company filed
its financial statements for the three months ended December 31, 2001 on Form
10-Q. In that report, the Company presented its Condensed Consolidated
Statements of Income on an as-reported basis consistent with generally accepted
accounting principles and, consistent with recent practice, presented pro forma
information in its Management's Discussion and Analysis of Financial Condition
and Results of Operations (MD&A) to enhance comparability and facilitate
analysis of operating results.
Pursuant to the requirements of SFAS 142, the Company provided on the face
of its as-reported Statements of Income, supplemental information that presented
earnings and earnings per share for the prior-year quarter as if SFAS 142 had
been in effect during that quarter. The prior-year adjusted earnings and
earnings per share figures in this supplemental information should have excluded
all goodwill amortization but, inadvertently, did not eliminate all of the
goodwill charges associated with the Internet Group. As a result, the corrected
supplemental earnings and earnings per share figures for the prior year are
better than those originally filed, as follows ($ in millions except per share
amounts):
Three months ended
December 31, 2000
------------------------
Earnings
Amount Per Share
----------- -----------
Earnings attributed to Disney Common Stock
before the cumulative effect of
accounting changes adjusted for the impact
of SFAS 142 in fiscal 2001, as previously
reported on Form 10-Q $ 440 $ 0.21
Goodwill adjustment 125 0.06
----------- -----------
Earnings attributed to Disney Common Stock
before the cumulative effect of
accounting changes adjusted for the impact
of SFAS 142 in fiscal 2001, as amended $ 565 $ 0.27
=========== ===========
The reconciliation table in Note 5 to the Condensed Consolidated Financial
Statements (page 8) and the related comments on page 13 in MD&A have also been
amended.
These changes have no impact on the Company's as-reported earnings and earnings
per share, nor on any of the pro forma information, nor any other information
presented in the Form 10-Q's for the three months ended December 31, 2001 and
2000.
24
PART I. FINANCIAL INFORMATION
THE WALT DISNEY COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(unaudited; in millions, except per share data)
Three Months
Ended December 31,
-------------------
2001 2000
-------- --------
Revenues $ 7,048 $ 7,433
Costs and expenses (6,399) (6,283)
Amortization of intangible assets (3) (293)
Gain on sale of business - 22
Net interest (expense) and other 55 (109)
Equity in the income of investees 70 82
Restructuring and impairment charges - (194)
--------- ---------
Income before income taxes, minority interests and the
cumulative effect of accounting changes 771 658
Income taxes (299) (386)
Minority interests (34) (30)
--------- ---------
Income before the cumulative effect of
accounting changes 438 242
Cumulative effect of accounting changes:
Film accounting - (228)
Derivative accounting - (50)
--------- ---------
Net income (loss) $ 438 $ (36)
========= =========
Earnings (loss) attributed to:
Disney Common Stock $ 438 $ 63
Internet Group Common Stock - (99)
--------- ---------
$ 438 $ (36)
========= =========
Earnings (loss) per share before cumulative effect of accounting changes
attributed to:
Disney Common Stock (basic and diluted) $ 0.21 $ 0.16
========= =========
Internet Group Common Stock (basic and diluted) $ n/a $ (2.29)
========= =========
Cumulative effect of accounting changes per Disney share:
Film accounting $ - $ (0.11)
Derivative accounting - (0.02)
--------- -------
$ - $ (0.13)
========= =========
Earnings (loss) per share attributed to:
Disney Common Stock (basic and diluted) $ 0.21 $ 0.03
========= =========
Internet Group Common Stock (basic and diluted) $ n/a $ (2.29)
========= =========
Earnings attributed to Disney Common Stock before the cumulative effect of
accounting changes adjusted for the impact of SFAS 142
in fiscal 2001 (See Note 5) $ 438 $ 565
========= ==========
Earnings per share attributed to Disney Common Stock before the cumulative
effect of accounting changes adjusted for the impact
of SFAS 142 in fiscal 2001 (See Note 5) $ 0.21 $ 0.27
========= =========
Average number of common and common equivalent shares outstanding:
Disney Common Stock:
Diluted 2,040 2,103
========= =========
Basic 2,039 2,082
========= =========
Internet Group Common Stock (basic and diluted) n/a 43
========= =========
See Notes to Condensed Consolidated Financial Statements
THE WALT DISNEY COMPANY
CONDENSED CONSOLIDATED BALANCE SHEETS
(in millions, except per share data)
December 31, September 30,
2001 2001
------------ -------------
(unaudited)
ASSETS
Current assets
Cash and cash equivalents $ 845 $ 618
Receivables 4,606 3,343
Inventories 654 671
Television costs 1,705 1,175
Deferred income taxes 620 622
Other assets 835 600
------------ -----------
Total current assets 9,265 7,029
Film and television costs 5,289 5,235
Investments 1,792 2,061
Parks, resorts and other property, at cost
Attractions, buildings and equipment 19,368 19,089
Accumulated depreciation (7,990) (7,728)
------------ -----------
11,378 11,361
Projects in progress 859 911
Land 639 635
------------ -----------
12,876 12,907
Intangible assets, net 2,718 2,716
Goodwill, net 17,131 12,106
Other assets 1,391 1,645
------------ -----------
$ 50,462 $ 43,699
============ ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts and taxes payable and other accrued $ 5,373 $ 4,603
liabilities
Current portion of borrowings 780 829
Unearned royalties and other advances 703 787
------------ -----------
Total current liabilities 6,856 6,219
Borrowings 14,987 8,940
Deferred income taxes 2,526 2,730
Other long term liabilities, unearned royalties 2,871 2,756
and other advances
Minority interests 463 382
Commitments and contingencies
Stockholders' equity
Preferred stock, $.01 par value Authorized - 100 million shares, Issued -
none
Common stock:
Common stock - Disney, $.01 par value
Authorized - 3.6 billion shares, Issued -
2.1 billion shares 12,100 12,096
Common stock - Internet Group, $.01 par
value
Authorized - 1.0 billion shares - -
Retained earnings 12,181 12,171
Accumulated other comprehensive income 77 10
------------ -----------
24,358 24,277
Treasury stock, at cost, 81.4 million Disney
shares (1,395) (1,395)
Shares held by TWDC Stock Compensation Fund
II, at cost
8.4 million and 6.8 million Disney shares (204) (210)
------------ -----------
22,759 22,672
------------ -----------
$ 50,462 $ 43,699
============ ===========
See Notes to Condensed Consolidated Financial Statements
THE WALT DISNEY COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited, in millions)
Three Months Ended
December 31,
---------------------------
2001 2000
------------ ------------
NET INCOME (LOSS) $ 438 $ (36)
OPERATING ITEMS NOT REQUIRING CASH
Depreciation 250 237
Restructuring and impairment charges - 194
Amortization of intangible assets 3 293
Cumulative effect of accounting changes - 278
Gain on sale of business - (22)
Equity in the income of investees (70) (82)
Minority interests 34 30
Other 145 274
CHANGES IN WORKING CAPITAL (1,379) (699)
------------ ------------
(1,017) 503
------------ ------------
Cash (used) provided by operations (579) 467
------------ ------------
INVESTING ACTIVITIES
Investments in parks, resorts and other
property (237) (456)
Acquisitions (net of cash acquired) (2,845) (20)
Dispositions - 107
Proceeds from sale of investments 545 80
Other (3) (34)
------------ ------------
Cash used by investing activities (2,540) (323)
------------ ------------
FINANCING ACTIVITIES
Borrowings 1,127 300
Reduction of borrowings (1,024) (355)
Repurchases of common stock - (235)
Commercial paper borrowings, net 3,666 908
Exercise of stock options and other 5 34
Dividends (428) (438)
------------ ------------
Cash provided by financing activities 3,346 214
------------ ------------
Increase in cash and cash equivalents 227 358
Cash and cash equivalents, beginning of period 618 842
------------ ------------
Cash and cash equivalents, end of period $ 845 $ 1,200
============ ============
See Notes to Condensed Consolidated Financial Statements
THE WALT DISNEY COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited; tabular dollars in millions, except per share data)
1. These condensed consolidated financial statements have been prepared in
accordance with generally accepted accounting principles (GAAP) for interim
financial information and the instructions to Rule 10-01 of Regulation S-X.
Accordingly, they do not include all of the information and footnotes required
by GAAP 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, 2002. Certain reclassifications have been made in the fiscal 2001
financial statements to conform to the fiscal 2002 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, 2001. In December 1999, DVD Financing, Inc. (DFI), a subsidiary of
Disney Vacation Development, Inc. and an indirect subsidiary of the Company,
completed a receivables sale transaction. In connection with this sale, DFI
prepares separate financial statements, although its separate assets and
liabilities are also consolidated in these financial statements.
2. Effective October 1, 2001, the Company adopted Statement of Financial
Accounting Standards No. 142, Goodwill and Other Intangible Assets (SFAS 142).
As a result of adopting SFAS 142, a substantial amount of the Company's goodwill
and intangible assets are no longer amortized. Pursuant to SFAS 142, intangible
assets must be periodically tested for impairment and the new standard provides
six months to complete the impairment review. During the quarter, the Company
completed its initial impairment review which indicated that there was no
impairment. See Note 5.
The Company also adopted Statement of Financial Accounting Standards No. 144,
Accounting for the Impairment or Disposal of Long-Lived Assets (SFAS 144),
effective October 1, 2001. The adoption of SFAS 144 did not have a material
impact on the Company's consolidated results of operations and financial
position.
Effective October 1, 2000, the Company adopted AICPA Statement of Position No.
00-2, Accounting by Producers or Distributors of Films (SOP 00-2), and Statement
of Financial Accounting Standards No. 133, Accounting for Derivative Instruments
and Hedging Activities (SFAS 133), and recorded one-time after-tax charges for
the adoption of the standards totaling $228 million (or $0.11 per share) and $50
million (or $0.02 per share), respectively in the prior-year quarter.
3. On October 24, 2001 the Company acquired Fox Family Worldwide, Inc. (FFW) for
$5.2 billion, funded with $2.9 billion of new long-term borrowings, plus the
assumption of $2.3 billion of FFW long-term debt. Upon the closing of the
acquisition, the Company changed FFW's name to ABC Family Worldwide, Inc. (ABC
Family). Among the businesses acquired was the Fox Family Channel, which has
been renamed ABC Family Channel, a programming service that currently reaches
approximately 84 million cable and satellite television subscribers throughout
the U.S.; a 76% interest in Fox Kids Europe, which reaches more than 28 million
subscribers across Europe; Fox Kids channels in Latin America, and the Saban
library and entertainment production businesses.
The Company's motivation for the acquisition was to increase shareholder value.
The Company believes that it can reach this objective through the use of new
strategies which include cross promotion with its other television properties,
repurposing a portion of the programming of the ABC Television Network,
utilizing programming from the Disney and ABC libraries, developing original
programming and by reducing operating costs through consolidation.
THE WALT DISNEY COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited; tabular dollars in millions, except per share data)
The acquisition of ABC Family is being accounted for in accordance with
Statement of Financial Accounting Standards No. 141, Business Combinations. The
cost of the acquisition was allocated to the assets acquired and liabilities
assumed based on estimates of their respective fair values at the date of
acquisition. The purchase price allocation presented below is preliminary and
subject to refinements based on the completion of certain valuation studies and
restructuring plans.
The following table summarizes the preliminary purchase price allocation of ABC
Family's assets acquired and liabilities assumed at the date of acquisition:
Receivables $ 192
Programming costs 435
Other assets 361
Goodwill 5,014
----------
Total assets 6,002
----------
Accounts payable and
accrued liabilities (473)
Other liabilities (284)
Minority interest (49)
-----------
Total liabilities (806)
-----------
Fair value of net
assets acquired 5,196
Borrowings and preferred
stock assumed (2,371)
-----------
Cash purchase price, net
of cash acquired $ 2,825
===========
The excess of the purchase price over the fair value of the net assets acquired
of $5.0 billion was allocated to goodwill that was assigned to the Cable
Networks reporting unit within the Media Networks segment. None of this amount
is expected to be deductible for tax purposes.
The Company's condensed consolidated results of operations have incorporated ABC
Family's activity, on a consolidated basis from October 24, 2001, the date of
acquisition. On a pro forma basis, adjusting only for the assumption that the
acquisition of ABC Family and related incremental borrowings had occurred at the
beginning of fiscal 2001, revenues for the three months ended December 2001 and
2000 are $7.079 billion and $7.588 billion, respectively, and net income and
earnings per share are approximately the same. The unaudited pro forma
information is not necessarily indicative of the results of operations had the
acquisition actually occurred at the beginning of fiscal 2001, nor is it
necessarily indicative of future results.
The ABC Family acquisition resulted in an increase in the Company's borrowings
of $5.2 billion. As of December 31, 2001, borrowings totaled $15.8 billion and
included commercial paper totaling $4.4 billion, with an effective interest rate
of 3.7%; senior notes originally issued by FFW valued at $1.1 billion, with an
effective interest rate of 8.4% maturing in 2008; and FFW preferred stock
totaling $400 million with an effective cost of capital of 5.25%. The senior
notes are callable at a premium beginning November 1, 2002.
THE WALT DISNEY COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited; tabular dollars in millions, except per share data)
4. During the quarter, the Company sold its remaining shares of Knight-Ridder,
Inc. received in connection with the disposition of certain publishing
operations in fiscal 1997. The pre-tax gain on the sale of $216 million is
reported in "net interest expense and other" in the condensed consolidated
statements of income.
5. Pursuant to SFAS 142, substantially all of the Company's intangible assets
will no longer be amortized and the Company is required to perform an annual
impairment test for goodwill and intangible assets. Goodwill and intangible
assets are allocated to various reporting units, which are either the operating
segment or one reporting level below the operating segment. The Company's
reporting units for purposes of applying the provisions of SFAS 142 are: Cable
Networks, Television Broadcasting, Radio, Studio Entertainment, Consumer
Products and Parks and Resorts. SFAS 142 requires the Company to compare the
fair value of the reporting unit to its carrying amount on an annual basis to
determine if there is potential impairment. If the fair value of the reporting
unit is less than its carrying value, an impairment loss would be recorded to
the extent that the fair value of the goodwill within the reporting unit is less
than the carrying value. The impairment test for intangible assets consists of
comparing the fair value of the intangible asset to its carrying amount. If the
carrying amount of the intangible asset exceeds its fair value, an impairment
loss is recognized. Fair value for goodwill and intangible assets are determined
based on discounted cash flows and appraised values.
The following table provides a reconciliation of the prior-year quarter's
reported net income to adjusted net income had SFAS 142 been applied as of the
beginning of fiscal 2001:
Three Months
Ended December 31, 2000
-----------------------
Earnings
Amount per share
----------- ----------
Reported net income attributed to
Disney Common Stock $ 63 $ 0.03
Cumulative effect of accounting changes 278 0.13
----------- -----------
Reported income attributed to Disney Common
Stock before the cumulative effect of
accounting changes 341 0.16
Add back amortization (net of tax):
Goodwill 212 0.10
Indefinite life intangible assets 12 0.01
----------- -----------
Adjusted income attributed to Disney Common
Stock
before the cumulative effect of
accounting changes $ 565 $ 0.27
=========== ==========
The changes in the carrying amount of goodwill for the quarter ended December
31, 2001, are as follows:
Media
Networks Other Total
---------- ---------- ---------
Balance as of October 1, 2001 $ 12,042 $ 64 12,106
Goodwill acquired during quarter 5,014 11 5,025
---------- ---------- ---------
Balance as of December 31, 2001 $ 17,056 $ 75 17,131
========== ========== =========
Amortizable intangible assets at December 31, 2001 consist of intellectual
copyrights of $300 million amortized over 10-31 years, and stadium facility
leases and other of $95 million amortized primarily over 33 years. Intangible
assets with indefinite lives at December 31, 2001 are FCC licenses of $1,361
million and ESPN trademark and other of $962 million.
THE WALT DISNEY COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited; tabular dollars in millions, except per share data)
6. The Company has a 39% interest in Euro Disney, which operates the Disneyland
Resort Paris. Euro Disney expects to open a second theme park, The Walt Disney
Studios Park, in March 2002.
As of December 31, 2001, the total of the Company's investment, accounts and
notes receivable from Euro Disney totaled $396 million, including investments
and advances associated with The Walt Disney Studios Park and $27 million that
Euro Disney drew during the first quarter of fiscal 2002 under a $149 million
line of credit with the Company. It is expected that Euro Disney will draw
additional amounts under the credit line during fiscal 2002.
As of December 31, 2001, Euro Disney had, on a US GAAP basis, total assets of
$2.8 billion and total liabilities of $2.6 billion, including borrowings of $1.9
billion.
7. 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. For the quarter ended December
31, 2001 and 2000, options for 164 million and 31 million shares, respectively,
were excluded from the Disney diluted earnings per share calculation.
8. Comprehensive income (loss) is as follows:
Three Months
Ended December 31,
------------------
2001 2000
-------- -------
Net income (loss) $ 438 $ (36)
Cumulative effect of adoption of SFAS 133,
net of tax - 60
Market value adjustments for investments 27 (10)
and hedges, net of tax
Foreign currency translation, net of tax 40 (3)
-------- -------
Comprehensive income $ 505 $ 11
======== =======
THE WALT DISNEY COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited; tabular dollars in millions, except per share data)
9. The operating segments reported below are the segments of the Company for
which separate financial information is available and for which segment
operating income amounts are evaluated regularly by executive management in
deciding how to allocate resources and in assessing performance.
Three Months
Ended December 31,
--------------------
2001 2000
--------- --------
Revenues:
Media Networks $ 2,976 $ 2,967
--------- --------
Parks and Resorts 1,433 1,724
--------- --------
Studio Entertainment
Third parties 1,792 1,837
Intersegment 13 13
--------- --------
1,805 1,850
--------- --------
Consumer Products
Third parties 847 905
Intersegment (13) (13)
--------- --------
834 892
--------- --------
$ 7,048 $ 7,433
========= ========
Segment operating income:
Media Networks $ 242 $ 526
Parks and Resorts 187 384
Studio Entertainment 149 152
Consumer Products 175 169
--------- --------
$ 753 $ 1,231
========= ========
The Company evaluates the performance of its operating segments based on segment
operating income. A reconciliation of segment operating income to income before
income taxes, minority interests and the cumulative effect of accounting changes
is as follows:
Three Months
Ended December 31,
-------------------
2001 2000
--------- ---------
Segment operating income $ 753 $ 1,231
Corporate and unallocated shared expenses (104) (81)
Amortization of intangible assets (3) (293)
Gain on sale of business - 22
Net interest expense and other 55 (109)
Equity in the income of investees 70 82
Restructuring and impairment charges - (194)
--------- ---------
Income before income taxes, minority interests and
the cumulative effect of accounting changes $ 771 $ 658
========= =========
THE WALT DISNEY COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited; tabular dollars in millions, except per share data)
10. The Company, together with, in some instances, certain of its directors and
officers, is a defendant or co-defendant in various legal actions involving
copyright, breach of contract and various other claims incident to the conduct
of its businesses.
All Pro Sports Camps, Inc., Nicholas Stracick and Edward Russell v. Walt Disney
Company, Walt Disney World Co., Disney Development Company and Steven B. Wilson.
On January 8, 1997, the plaintiff entity and two of its principals or former
principals filed a lawsuit against the Company, two of its subsidiaries and a
former employee in the Circuit Court for Orange County, Florida. The plaintiffs
asserted that the defendants had misappropriated from them the concept used for
the Disney's Wide World of Sports complex at the Walt Disney World Resort. On
August 11, 2000, a jury returned a verdict against the Company and its two
subsidiaries in the amount of $240 million. Subsequently, the Court awarded
plaintiffs an additional $100.00 in exemplary damages based on particular
findings by the jury. The Company has filed an appeal from the judgment and
believes that there are substantial grounds for complete reversal or reduction
of the verdict.
Management believes that it is not currently possible to estimate the impact, if
any, that the ultimate resolution of these matters will have on the Company's
results of operations, financial position or cash flows.
On January 22, 2002, the Company entered into a six-year agreement with the
National Basketball Association (NBA) beginning with the 2002-03 season to
broadcast more than 100 regular and post-season games per year, including the
NBA finals. The agreement also featured distribution rights for related NBA
programming and content and extensions of several existing agreements.
The Company's contractual commitments other than leases, including the NBA
rights agreement, were approximately $15.2 billion as of December 31, 2001,
including approximately $11.9 billion for sports programming rights.
THE WALT DISNEY COMPANY
ITEM 2. 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 ended December 31, 2001 for
each business segment, and for the Company as a whole, are not necessarily
indicative of results to be expected for the full year.
Media Networks revenues are influenced by advertiser demand and the seasonal
nature of programming, and generally peak in the spring and fall.
Studio Entertainment revenues fluctuate based upon the timing of theatrical
motion picture and home video releases. 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.
Parks and Resorts revenues fluctuate with changes in theme park attendance and
resort occupancy resulting from the seasonal 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.
Consumer Products revenues are influenced by seasonal consumer purchasing
behavior and the timing of animated theatrical releases.
THE WALT DISNEY COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS--(continued)
AS-REPORTED RESULTS OF OPERATIONS
As-reported net income was $438 million compared to a net loss of $36 million in
the prior-year quarter. Net income and earnings per share attributed to Disney
common stock were $438 million and $0.21, respectively, compared to $63 million
and $0.03 in the prior-year quarter. The current year quarter includes a pre-tax
gain ($216 million or $0.06 per share) on the sale of the remaining shares of
Knight Ridder, Inc. Results for the prior-year quarter included the cumulative
effect of accounting changes ($278 million or $0.13 per share) and cessation of
amortization of intangible assets effective October 1, 2001, due to the adoption
of SFAS 142. Net income and earnings per share before the cumulative effect of
accounting changes and after adjusting for the impact of SFAS 142 attributed to
Disney common stock for the prior-year quarter were $565 million and $0.27,
respectively.
Results for the current quarter also reflected decreased segment operating
income, decreased equity in the income of investees and higher corporate and
unallocated shared expenses, partially offset by lower restructuring and
impairment charges and net interest expense and other. Decreased segment
operating income primarily reflected lower Media Networks and Parks and Resorts
results. The prior-year quarter included restructuring and impairment charges
totaling $194 million, primarily related to other-than-temporary declines in the
fair value of certain investments in technology companies. Lower equity in the
income of investees reflected declines at the cable equity services resulting
from the soft advertising market and losses incurred in connection with new
investments. Increased corporate and unallocated shared expenses were driven by
strategic initiatives designed to promote the Disney brand and costs for new
financial and human resources information systems. Declines in net interest
expense and other included a $216 million gain on the sale of Knight-Ridder,
Inc.
On October 24, 2001 the Company acquired ABC Family for $5.2 billion, funded
with $2.9 billion of new long-term borrowings plus the assumption of $2.3
billion of FFW long-term debt (see Notes 3 and 5 to the Condensed Consolidated
Financial Statements). The current quarter included the operations of ABC Family
and incremental interest expense for acquisition-related borrowings as of the
date of acquisition.
Fiscal 2002 Outlook
We expect weakness in the economy and ongoing disruption in travel patterns to
continue to impact the Company's operating results, particularly in our Media
Networks and Parks and Resorts segments. As of early February, the advertising
market had not shown clear signs of rebounding, and ratings at the ABC
television network remained lower relative to the prior year. We expect the
trends that impacted the Media Network business in the first quarter to
continue. In addition, the winter Olympics in Feburary 2002 are likely to impact
the sports advertising market negatively, which may adversely affect ESPN's
results. In the Parks and Resorts segment, Walt Disney World attendance was down
roughly 20% as of early February versus the first quarter of last year, while
occupancy levels were down by slightly less than 20%. While the Parks and
Resorts segment experienced some improvement in trends after the end of the
first quarter, we expect that the down-turn in leisure travel will continue to
impact results.
THE WALT DISNEY COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS--(continued)
PRO FORMA RESULTS OF OPERATIONS
To enhance comparability, the unaudited pro forma information that follows
presents consolidated results of operations as if the acquisition of ABC Family,
the conversion of the Internet Group common stock into Disney common stock, the
closure of the GO.com portal business and the adoption of new goodwill and
intangible asset accounting rules (see Notes 2 and 3 to the Condensed
Consolidated Financial Statements) had occurred at the beginning of fiscal 2001.
The acquisition of ABC Family resulted in a $5.2 billion increase in borrowings.
Pro forma net interest and other has been adjusted as if these incremental
borrowings had been outstanding as of the beginning of the periods presented.
The unaudited pro forma information is not necessarily indicative of the results
of operations had these events actually occurred at the beginning of fiscal
2001, nor is it necessarily indicative of future results.
Three Months Ended
December 31,
--------------------
(unaudited; in millions, except per share data) 2001 2000 % Change
--------- ---------- ---------
Revenues $ 7,079 $ 7,577 (7)%
Costs and expenses (6,426) (6,353) (1)%
Amortization of intangible assets (3) (8) 63 %
Gain on sale of business - 22 n/m
Net interest (expense) and other 43 (165) n/m
Equity in the income of investees 70 86 (19)%
Restructuring and impairment charges - (194) n/m
--------- ----------
Income before income taxes, minority interests
and the cumulative effect of accounting changes 763 965 (21)%
Income taxes (296) (405) 27 %
Minority interests (34) (31) (10)%
--------- ----------
Income before the cumulative effect of accounting
changes 433 529 (18)%
Cumulative effect of accounting changes:
Film accounting - (228) n/m
Derivative accounting - (50) n/m
-------- ---------
Net income 433 $ 251 73 %
========= ==========
Earnings per share before the cumulative effect
of accounting changes (basic and diluted) $ 0.21 $ 0.25 (16)%
========= ==========
Earnings per share including the cumulative effect
of accounting changes (basic and diluted) (1) $ 0.21 $ 0.12 75 %
========= ==========
Earnings before the cumulative effect of
accounting changes, excluding the KRI gain in
fiscal 2002, restructuring and impairment
charges and gain on the sale of business $ 297 $ 657 (55)%
========= ==========
Earnings per share before the cumulative effect
of accounting changes, excluding the KRI gain
in fiscal 2002, restructuring and impairment
charges and gain on the sale of business
(basic and diluted) $ 0.15 $ 0.31 (52)%
========= ==========
Average number of common and common
equivalent shares outstanding:
Diluted 2,040 2,111
========= ==========
Basic 2,039 2,090
========= ==========
----------------------------------------------------
(1) The per share impacts of the film and derivative accounting changes for the
prior year were $(0.11) and $(0.02), respectively.
THE WALT DISNEY COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS--(continued)
The following table provides a reconciliation of as-reported earnings per share
attributed to Disney common stock to pro forma earnings per share before the
cumulative effect of accounting changes, excluding the investment gain in fiscal
2002, restructuring and impairment charges and gain on the sale of business.
Three Months
Ended December 31,
------------------
(unaudited) 2001 2000
-------- --------
As-reported earnings per share attributed to $ 0.21 $ 0.03
Disney common stock
Adjustment to attribute 100% of Internet Group operating results to Disney
common stock (72% included in
as-reported amounts) - (0.05)
Adjustment to exclude pre-closure GO.com portal
operating results and amortization of intangible assets - 0.07
Adjustment to exclude goodwill and intangible assets
amortization pursuant to SFAS 142 - 0.07
Adjustment to exclude the cumulative effect
of accounting changes - 0.13
-------- --------
Pro forma earnings per share before the cumulative effect
of accounting changes 0.21 0.25
Adjustment to exclude restructuring and
impairment charges - 0.06
Adjustment to exclude investment gain in fiscal 2002 (0.06) -
-------- --------
Pro forma earnings per share before the cumulative effect of accounting changes,
excluding the investment gain in fiscal 2002, restructuring and impairment
charges and gain on the sale of business
$ 0.15 $ 0.31
======== ========
------------------------------------------------------------------
The impact of the gain on sale of a business on fiscal 2001 and the pro forma
impact of ABC Family on both periods was less than $0.01.
THE WALT DISNEY COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS--(continued)
Business Segment Results
Three Months Ended December 31,
-----------------------------------------------
(unaudited, in millions) Pro Forma As Reported
----------------- -----------------
Revenues: 2001 2000 %Change 2001 2000
------- ------- -------- ------- -------
Media Networks $ 3,006 $ 3,099 (3)% $ 2,976 $ 2,967
Parks and Resorts 1,433 1,724 (17)% 1,433 1,724
Studio Entertainment 1,805 1,850 (2)% 1,805 1,850
Consumer Products 835 904 (8)% 834 892
------- ------- ------- -------
$ 7,079 $ 7,577 (7)% $ 7,048 $ 7,433
======= ======= ======= =======
Segment operating income:
Media Networks $ 246 $ 591 (58)% $ 242 $ 526
Parks and Resorts 187 384 (51)% 187 384
Studio Entertainment 149 152 (2)% 149 152
Consumer Products 175 178 (2)% 175 169
------- ------- ------- -------
$ 757 $ 1,305 (42)% $ 753 $ 1,231
======= ======= ======= =======
The Company evaluates the performance of its operating segments based on segment
operating income. The following table reconciles segment operating income to
income before income taxes and minority interests.
Three Months Ended December 31,
-----------------------------------------------
Pro Forma As Reported
----------------- -----------------
(unaudited, in millions) 2001 2000 %Change 2001 2000
------- ------- -------- ------- -------
Segment operating income $ 757 $ 1,305 (42)% $ 753 $ 1,231
Corporate and unallocated
shared expenses (104) (81) (28)% (104) (81)
Amortization of
intangible assets (3) (8) 63 % (3) (293)
Gain on sale of businesses - 22 n/m - 22
Net interest (expense)
and other 43 (165) n/m 55 (109)
Equity in the income of
investees 70 86 (19)% 70 82
Restructuring and impairment
charges - (194) n/m - (194)
------- ------- ------- -------
Income before income taxes
and minority interests $ 763 965 (21)% $ 771 658
======= ======= ======= =======
Segment earnings before interest, income taxes, depreciation and amortization
(EBITDA) is as follows:
Three Months Ended December 31,
----------------------------------------------
Pro Forma As Reported
----------------- -----------------
(unaudited, in millions) 2001 2000 %Change 2001 2000
------- ------- -------- ------- -------
Media Networks $ 293 $ 637 (54)% $ 288 $ 571
Parks and Resorts 348 527 (34)% 348 527
Studio Entertainment 160 165 (3)% 160 165
Consumer Products 188 202 (7)% 188 193
------- ------- ------- -------
$ 989 $ 1,531 (35)% $ 984 $ 1,456
======= ======= ======= =======
THE WALT DISNEY COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS--(continued)
Management believes that segment EBITDA provides additional information useful
in analyzing the underlying business results. However, segment EBITDA is a
non-GAAP financial metric and should be considered in addition to, not as a
substitute for, reported segment operating income.
Media Networks
The following table provides supplemental revenue and operating income detail
for the Media Networks segment:
(unaudited, in millions) Pro Forma
---------------------------------
Three Months Ended December 31, 2001 2000 % Change
---------- --------- ---------
Revenues:
Broadcasting $ 1,476 $ 1,802 (18)%
Cable Networks 1,530 1,297 18 %
---------- ---------
$ 3,006 $ 3,099 (3)%
========== =========
Segment operating income
Broadcasting $ (76) $ 287 n/m
Cable Networks 322 304 6 %
---------- ---------
$ 246 $ 591 (58)%
========== =========
On a pro forma basis, revenues decreased 3%, or $93 million, to $3.0
billion, driven by decreases of $326 million at Broadcasting, partially offset
by increases of $233 million at the Cable Networks. The decrease at Broadcasting
was driven by declines at the ABC television network and the Company's owned
television and radio stations due to the soft advertising market and lower
ratings. Increased cable revenues were driven by annual contractual rate
adjustments at ESPN, partially offset by the impact of the soft advertising
market.
On a pro forma basis, segment operating income decreased 58%, or $345
million, to $246 million, driven by decreases of $363 million at Broadcasting,
resulting from decreased revenues and higher programming costs. Costs and
expenses, which consist primarily of programming rights and amortization,
production costs, distribution and selling expenses and labor costs, increased
by $252 million for the quarter. Increased costs were driven by higher sports
programming costs at ESPN and increased primetime programming costs at the ABC
television network.
As-reported amounts include a partial period of ABC Family operations in
the current period and GO.com portal losses (which was closed in February 2001)
in the prior-year period. As-reported revenues remained flat at $3.0 billion and
segment operating income decreased 54% to $242 million.
The Company has various contractual commitments for the purchase of
broadcast rights for sports and other programming, including the National
Football League (NFL), Major League Baseball (MLB) and National Hockey League
(NHL). Additionally, the Company entered into a programming rights agreement
with the National Basketball Association (NBA) in January 2002. The costs of
these contracts have increased significantly in recent years. The Company has
implemented a variety of strategies, including marketing efforts, to reduce the
impact of the higher costs. The impact of these contracts on the Company's
results over the remaining term of the contracts is dependent upon a number of
factors, including the strength of advertising markets, effectiveness of
marketing efforts and the size of viewer audiences.
THE WALT DISNEY COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS--(continued)
The Company has investments in cable operations that are accounted for as
unconsolidated equity investments. The table below presents operating income
from cable television activities, which comprise the Cable Networks and the
Company's cable equity investments:
(unaudited, in millions) Pro Forma
---------------------------------
Three Months Ended December 31, 2001 2000 % Change
---------- --------- ---------
Operating income:
Cable Networks $ 322 $ 304 6 %
Equity investments:
A&E Television, Lifetime
Television and E! Entertainment
Television 166 186 (11)%
Other 65 66 (2)%
---------- ---------
Operating income from cable television
activities 553 556 (1)%
Partner share of operating income (192) (206) 7 %
---------- ---------
Disney share of operating income $ 361 $ 350 3%
========== =========
Note: Operating income from cable television activities presented in
this table represents 100% of both the Company's owned cable businesses
and its cable equity investees. The Disney share of operating income
represents the Company's interest in cable television operating income.
Cable Networks are reported in "Segment operating income" in the
statements of income. Equity investments are accounted for under the
equity method, and the Company's proportionate share of the net income
of its cable equity investments is reported in "Equity in the income of
investees" in the statements of income.
The Company believes that operating income from cable television activities
provides additional information useful in analyzing the underlying business
results. However, operating income from cable television activities is a
non-GAAP financial metric and should be considered in addition to, not as a
substitute for, segment operating income.
The Company's share of cable television operating income increased 3%, or
$11 million, to $361 million, reflecting higher cable network affiliate revenues
driven by contractual rate adjustments, subscriber growth and continued
improvement at the international Disney Channel, partially offset by higher
programming costs at ESPN and the weak advertising market, at both ESPN and the
cable equity investments.
Parks and Resorts
Parks and Resorts revenues decreased 17%, or $291 million, to $1.4 billion,
driven primarily by decreases of $303 million at the Walt Disney World Resort,
partially offset by growth of $27 million at the Disneyland Resort and increased
royalties of $15 million from the Tokyo Disney Resort. At the Walt Disney World
Resort, decreased revenues reflected decreased attendance, reduced guest
spending and lower hotel occupancy resulting from cancellations, deferrals and
reduced travel due to continued softness in the economy and the events of
September 11th. The opening of Disney's California Adventure, Disney's Grand
Californian Hotel and Downtown Disney drove increased attendance and hotel
occupancy at the Disneyland Resort. The increased royalties at Tokyo Disney
Resort are due primarily to the opening of Tokyo DisneySea in the fourth quarter
of the prior year.
Segment operating income decreased 51%, or $197 million, to $187 million,
reflecting revenue declines at the Walt Disney World Resort and higher operating
costs at the Disneyland Resort, partially offset by ongoing productivity
improvements and cost reduction initiatives at Walt Disney World. Costs and
expenses, which consist principally of labor, costs of merchandise, food and
beverages sold, depreciation, repairs and maintenance, entertainment and
marketing and sales expense, decreased 7% or $94 million. Higher operating costs
at the Disneyland Resort were due to the opening of Disney's California
Adventure, Disney's Grand Californian Hotel and Downtown Disney, which opened in
the second quarter of fiscal 2001.
THE WALT DISNEY COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS--(continued)
Studio Entertainment
Revenues decreased 2%, or $45 million, to $1.8 billion, driven by a
decrease of $71 million in international theatrical motion picture distribution,
partially offset by an increase of $24 million in domestic theatrical motion
picture distribution and domestic home video. In international theatrical motion
picture distribution, the performance of Atlantis and The Princess Diaries faced
difficult comparisons to the prior-year quarter titles, which included Dinosaur,
Unbreakable, Coyote Ugly and The Kid. The increase in domestic theatrical motion
picture distribution reflected the success of Disney/Pixar's Monsters, Inc., and
growth in domestic home video reflected the strong VHS and DVD performance of
Snow White and the Seven Dwarfs, The Princess Diaries and Pearl Harbor compared
to the prior-year period, which included Disney/Pixar's Toy Story 2 including
the Toy Story/Toy Story 2 DVD multipacks.
Segment operating income decreased 2%, or $3 million, to $149 million,
driven by declines in worldwide theatrical motion picture distribution. Domestic
theatrical motion picture distribution experienced increased costs and
international motion picture distribution had revenue declines, both of which
were partially offset by revenue growth in domestic home video. Costs and
expenses, which consist primarily of production cost amortization, distribution
and selling expenses, product costs and participation costs decreased 2% or $42
million. Lower costs and expenses reflected decreased distribution and
amortization expense in international theatrical motion picture distribution,
partially offset by higher distribution and participation costs in domestic
theatrical motion picture distribution.
Consumer Products
On a pro forma basis, revenues decreased 8%, or $69 million, to $835
million, primarily reflecting declines of $42 million at Disney Interactive and
$12 million at the Disney Stores. These declines were driven by weaker
performing personal computer CD-ROM titles, due in part to the softening in the
personal computer market at Disney Interactive and fewer Disney Stores in North
America as a result of store closures.
On a pro forma basis, segment operating income decreased 2%, or $3 million,
to $175 million, reflecting revenue declines at Disney Interactive, partially
offset by increases at the Disney Stores. Costs and expenses, which consist
primarily of labor, product costs, including product development costs,
distribution and selling expenses and leasehold expenses, decreased 9% or $66
million, primarily driven by lower costs at the Disney Store and Disney
Interactive due to lower sales volume and lower advertising costs and store
closures at the Disney Store.
As-reported amounts include a partial period of ABC Family operations in
the current period. Revenues decreased 7% to $834 million and segment operating
income increased 4% to $175 million.
THE WALT DISNEY COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS--(continued)
FINANCIAL CONDITION
For the quarter ended December 31, 2001, cash used by operations was $579
million, reflecting lower pre-tax income before non-cash charges and the timing
of the collection of accounts receivable, which resulted in a higher receivable
balance. The increase in accounts receivable was driven by higher cable network
affiliate revenues and the timing of home video releases both domestically and
internationally.
During the quarter, the Company invested $237 million in parks, resorts and
other properties. The decrease from the prior year was due to the completion of
Disney's California Adventure, which opened in February 2001.
In January 2002, the ABC Television Network and ESPN reached a six-year
agreement with the NBA to televise more than 100 regular and post-season games.
Including the NBA contract, contractual commitments, other than leases,
including commitments to purchase broadcast programming were approximately $15.2
billion at December 31, 2001, including approximately $11.9 billion related to
sports programming rights, primarily NFL, NBA, college football, MLB and NHL.
Substantially all of this amount is payable over the next six years.
The Company expects that the ABC Television Network, ESPN, ABC Family, The
Disney Channels and the Company's television and radio stations will continue to
enter into programming commitments to purchase the broadcast rights for various
feature films, sports and other programming.
On October 24, 2001, the Company acquired ABC Family for $5.2 billion,
funded with $2.9 billion of new long-term borrowings, plus the assumption of
$2.3 billion of FFW long-term debt (of which $861 million was subsequently
repaid).
During the quarter, the Company increased its commercial paper borrowings
by $3.7 billion and issued debt with proceeds of $1.1 billion, consisting of
$295 million of retail callable bonds and $832 million of euro-yen notes. These
borrowings have effective interest rates, including the impact of interest rate
swaps, ranging from 3.2% to 7.0% and maturities in fiscal 2005 through fiscal
2032. During the quarter, the Company repaid approximately $157 million of term
debt, which either matured or was called during the quarter. Additionally,
during the quarter the Company repaid approximately $861 million of debt assumed
in the acquisition of ABC Family.
Commercial paper borrowings outstanding as of December 31, 2001 totaled
$4.4 billion, with maturities of up to one year, supported by a $2.25 billion
bank facility due in February 2002 and a $2.25 billion bank facility due in
2005. The Company expects to renew the bank facility that expires in 2002. These
bank facilities allow for borrowings at LIBOR-based rates plus a spread,
depending upon the Company's public debt rating. As of December 31, 2001, the
Company had not borrowed against these bank facilities.
During the quarter, the Company paid $428 million in annual dividends.
Recent events have caused significant changes in the insurance market which
will likely impact the extent and cost of the Company's insurance coverage.
However, the Company believes that as renewals for various policies occur, it
will be able to obtain reasonable levels of coverage based on historical loss
experience.
THE WALT DISNEY COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS--(continued)
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. However,
the Company's operating cash flow and access to the capital markets can be
impacted by macroeconomic factors outside of its control. In addition to
macroeconomic factors, the Company's borrowing costs can be impacted by short-
and long-term debt ratings assigned by independent rating agencies, which are
based, in significant part, on certain credit measures such as interest coverage
and leverage ratios.
OTHER MATTERS
Effective October 1, 2001, the Company adopted Statement of Financial
Accounting Standards No. 142, Goodwill and Other Intangible Assets (SFAS 142).
As a result of adopting SFAS 142, a substantial amount of the Company's
intangible assets are no longer amortized. Pursuant to SFAS 142, intangible
assets must be periodically tested for impairment and the new standard provides
six months to complete the impairment review. During the quarter, the Company
completed its initial impairment review which indicated that there was no
impairment. See Note 5 to the Condensed Consolidated Financial Statements.
The Company also adopted Statement of Financial Accounting Standards No.
144, Accounting for the Impairment or Disposal of Long-Lived Assets (SFAS 144),
effective October 1, 2001. The adoption of SFAS 144 did not have a material
impact on the Company's consolidated results of operations and financial
position.
MARKET RISK
Interest Rate Risk Management
The Company is exposed to the impact of interest rate changes. The
Company's objective is to manage the impact of interest rate changes on earnings
and cash flows and on the market value of its investments and borrowings. The
Company maintains fixed-rate debt as a percentage of its net debt between a
minimum and maximum percentage, which is set by policy.
The Company uses interest rate swaps and other instruments to manage net
exposure to interest rate changes related to its borrowings and investments and
to lower its overall borrowing costs. Significant interest rate risk management
instruments held by the Company during the quarter included pay-floating and
pay-fixed swaps. Pay-floating swaps, which expire in one to 19 years,
effectively convert medium- and long-term obligations to LIBOR-indexed variable
rate instruments. Pay-fixed swaps, which expire in one to two years, effectively
convert floating-rate obligations to fixed-rate instruments.
Foreign Exchange Risk Management
The Company transacts business in virtually every part of the world and is
subject to risks associated with changing foreign exchange rates. The Company's
objective is to reduce earnings and cash flow volatility associated with foreign
exchange rate changes to allow management to focus its attention on its core
business issues and challenges. Accordingly, the Company enters into various
contracts that change in value as foreign exchange rates change to protect the
value of its existing foreign currency assets and liabilities, commitments and
anticipated foreign currency revenues. By policy, the Company maintains hedge
coverage between minimum and maximum percentages of its anticipated foreign
exchange exposures for periods of up to five years. The gains and losses on
these contracts offset changes in the value of the related exposures. It is the
Company's policy to enter into foreign currency transactions only to the extent
considered necessary to meet its objectives as stated above. The Company does
not enter into foreign currency transactions for speculative purposes.
THE WALT DISNEY COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS--(continued)
The Company uses forward and option strategies that provide for the sale of
foreign currencies to hedge probable, but not firmly committed, revenues. The
Company also uses forward contracts to hedge foreign currency assets and
liabilities. These forward and option contracts mature within three years. While
these hedging instruments are subject to fluctuations in value, such
fluctuations should offset changes in the value of the underlying exposures
being hedged. The principal currencies hedged are the European euro, Japanese
yen, British pound and Canadian dollar. Cross-currency swaps are used to hedge
foreign currency-denominated borrowings.
Other Derivatives
The Company holds warrants in both public and private companies. These
warrants, although not designated as hedging instruments, are deemed derivatives
if they contain a net-share settlement clause. During the quarter, the Company
recorded the change in fair value of certain of these instruments to current
earnings.
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. We may from time to time make written or oral statements that are
"forward-looking", including statements contained in this report and other
filings with Securities and Exchange Commission and in reports to our
shareholders. All statements that express expectations and projections with
respect to future matters may be affected by changes in the Company's strategic
direction, as well as by developments beyond the Company's control. These
developments may include changes in global, political or economic conditions
that may, among other things, affect the international performance of the
Company's theatrical and home video releases, television programming and
consumer products; regulatory and other uncertainties associated with the
Internet and other technological developments, and the launching or prospective
development of new business initiatives. All forward-looking 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 our expectations will necessarily come to pass.
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,
2001 under the heading "Factors that may affect forward-looking statements."
PART II. OTHER INFORMATION
ITEM 6. Reports on Form 8-K
(a) Reports on Form 8-K
The following current reports on Form 8-K were filed by the Company during
the Company's first fiscal quarter:
(1) Current Report on Form 8-K/A dated October 3, 2001, setting forth the text
of a presentation by Company President Robert A. Iger at the Goldman Sachs
Communacopia Conference.
(2) Current Report on Form 8-K dated October 15, 2001, reporting that Standard
& Poor's lowered its ratings on the Company.
(3) Current Report on Form 8-K dated October 24, 2001, reporting issuance of
the Company's 7% Quarterly Interest Bonds due 2031.
(4) Current Report on Form 8-K dated October 24, 2001, reporting (a)completion
of the acquisition of Fox Family Worldwide, Inc. (FFW) on October 24, 2001
and (b) ratings upgrade announcements with respect to FFW.
(5) Current Report on Form 8-K dated November 8, 2001, setting forth (a) the
earnings release for the fiscal year ended September 30, 2001, (b) text of
the conference call concerning the earnings release and (c) pro forma
worksheets reflecting the impact of SFAS 142 on the Company's fiscal 2001
quarterly income statements.
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, Senior Executive
Vice President and Chief Financial
Officer)
June 28, 2002
Burbank, California