Company Press Release
January 25, 2000
BURBANK, CA -- The Walt Disney Company yesterday reported results for its operations excluding its Internet business,
GO.com. Disney pro forma diluted earnings per share excluding GO.com were $0.25 for the quarter ended December
31, 1999, a 9% increase over the prior year.
Disney revenues increased 5% to $6.8 billion and operating income increased 8% to $1.1 billion. Excluding the retained
interest in GO.com, net income increased 7% to $515 million.
As discussed more fully below, GO.com will, as has been expected, report a substantial loss for the quarter, reflecting
in part significant intangible asset amortization. GO.com results, as well as Disney results (including Disney's
retained interest in GO.com) will be reported in early February, due to the time necessary to complete the initial
purchase accounting for the Company's November 1999 Infoseek acquisition.
``We have entered the new millennium headed in the right direction,'' said Michael D. Eisner, Disney chairman and
CEO. ``The results of the first quarter reflect the continued strength and popularity of our broadcasting, cable
and theme park assets, the current strong advertising market and the impact that innovative programming has had
in improving the performance of the ABC-TV network. Furthermore, the success of the Walt Disney World Millennium
Celebration, `Who Wants to Be a Millionaire,' and `Toy Story 2,' in particular, demonstrate how the continuing
development of great entertainment product drives the growth of our company.
``While we are very pleased that the quarter came in ahead of expectations, we remain vigilant in our efforts to
continue to create greater shareholder value. We remain focused on executing the strategic initiatives we have
outlined to improve the results of our under-performing home video and consumer products groups, achieve operational
improvements, concentrate on capital allocation, maximize our returns on invested capital, seek international opportunities,
and exploit technologies such as DVD and the Internet.''
Basis of Presentation
As discussed in more detail below, the Company made certain changes to its segment and other disclosures and has
presented pro forma amounts to enhance comparability.
Media Networks
Media Networks revenues for the quarter increased 19% to $2.7 billion and operating income was $642 million, an
increase of 73%.
Broadcasting results for the quarter were driven by increases at the ABC television network and the Company's owned
television stations due to a strong advertising market and the success of ``Who Wants to Be a Millionaire.'' The
network also benefited from increases in the news division, driven in part, by improved ratings for ``Good Morning
America.'' Additionally, a strong advertising market resulted in growth at the radio network and stations.
Disney's share of operating income from cable television activities, which consists of its cable networks and cable
equity investments, increased 31% to $316 million for the quarter.
Cable television results for the quarter were driven by growth at the cable networks, reflecting increases at ESPN,
driven by higher affiliate fees due to contractual rate increases and subscriber growth, and increased advertising
revenues due to a strong advertising market, partially offset by higher programming costs. In addition, increases
at E! Entertainment Television, Lifetime Television and The History Channel contributed to improved results.
Studio Entertainment
Revenues for the quarter were $1.6 billion, a decrease of 10% compared to the prior-year quarter, and operating
income was $23 million, compared to $143 million for the prior-year quarter. Studio Entertainment results for the
quarter were driven primarily by declines in worldwide home video and domestic theatrical motion picture distribution,
partially offset by improvements in international theatrical motion picture distribution.
In worldwide home video, the current period's releases faced difficult comparisons to the prior year, which included
the successful domestic release of ``Lion King II: Simba's Pride'' and the classic animated release of ``The Little
Mermaid'' in international territories. In domestic theatrical motion picture distribution, the successful release
of ``Toy Story 2'' was more than offset by the performance of ``The Insider'' and ``Bicentennial Man.'' Improvements
in international theatrical motion picture distribution were driven primarily by ``Tarzan'' and ``Toy Story 2.''
Theme Parks and Resorts
Theme Parks and Resorts posted record operating results for the quarter, with revenues increasing 9% to $1.6 billion
and operating income up 6% to $363 million.
Theme Parks and Resorts results benefited from increased guest spending, growth in occupied room nights, and record
attendance at Walt Disney World, improved results at Disney Cruise Line and higher guest spending at Disneyland,
partially offset by lower attendance at Disneyland. Increased guest spending and record attendance at Walt Disney
World were driven by the ongoing Millennium Celebration. Higher occupied room nights reflected the opening of the
All Star Movies Resort in the second quarter of the prior year. Disney Cruise Line results reflected a full quarter
of operations from both cruise ships, the Disney Magic and the Disney Wonder, compared to just the Disney Magic
in the prior year. Lower attendance at Disneyland was driven by weakness in international visitation. Revenue gains
at Walt Disney World were partially offset by incremental operating costs associated with the Millennium Celebration.
Consumer Products
Consumer Products revenues for the quarter were $903 million, down 6% from the prior-year quarter, and operating
income was $207 million, down 29%. Results for the quarter were driven by declines in merchandise licensing domestically
and in Latin America and Europe, and softer publishing results in Europe. These declines were partially offset
by improvements at Disney Interactive, primarily driven by the success of the ``Who Wants to Be a Millionaire''
video game and the ``Toy Story 2'' action game.
Corporate and Other Activities
Corporate and other activities improved over the prior-year quarter, principally due to increased income from equity
investments, including E! Entertainment Television, Lifetime Television and The History Channel.
Net Interest Expense
Net interest expense increased 18% to $193 million, due primarily to non-cash charges related to certain financial
instruments and higher interest rates, partially offset by lower average debt balances in the current quarter.
Publishing Dispositions
During the quarter, the Company completed its sale of Fairchild Publications, which it had acquired in connection
with the 1996 acquisition of ABC, Inc. The sale did not have a material impact on net income, as income taxes on
the transaction largely offset the pre-tax gain.
Today, the Company announced that it has reached a definitive agreement with EMMIS Communications Corporation for
the sale of Los Angeles Magazine.
Disney Group and GO.com Reporting
On November 17, 1999, stockholders of The Walt Disney Company and Infoseek Corporation approved the Company's acquisition
of the remaining interest in Infoseek Corporation that the Company did not already own.
The acquisition was effected by the creation and issuance of a new class of common stock, called ``GO.com'' common
stock (NYSE:GO - news), and resulted in the creation of GO.com, which comprises the Company's Internet businesses
as well as its direct marketing operations. Shares of the Company's existing common stock were reclassified as
``Disney Group'' common stock (NYSE:DIS - news), and track the financial performance of the Company's businesses
other than GO.com, plus the Disney Group's retained interest of approximately 72% in GO.com.
In addition to reporting consolidated results of operations for The Walt Disney Company, the Company now also separately
reports operating results, including earnings per share, for GO.com and the Disney Group.
GO.com will report its results in early February and the Disney Group will concurrently report its results including
its retained interest in GO.com. Losses at GO.com will reflect significant amortization of intangible assets and
higher operating losses before amortization. Operating losses before amortization of intangible assets are expected
to increase significantly over the prior-year quarter, driven by higher expenses associated with Internet commerce
and investment activity, partially offset by revenue growth.
Segment and Disclosure Changes and Pro Forma Presentation
During the quarter, the Company made certain changes to its business segment and other disclosures:
The merger of television production activities of the Walt Disney Studios with those of the ABC television network
was completed during the quarter. Accordingly, television production activities formerly reported in Studio Entertainment
are now reported in the Media Networks segment.
Prior-year amounts used for comparative purposes have been restated to reflect the current presentation. To enhance
comparability, the Company has presented operating results for the current and prior period on a ``pro forma''
basis, which assumes that the acquisition of the remaining interest in Infoseek and subsequent creation of GO.com
and the disposition of Fairchild Publications had occurred at the beginning of fiscal 1999.
Stock Repurchases
The Company repurchased 2.6 million Disney shares for approximately $75 million during the quarter. The purchases
were effected through open market purchases under the Company's existing stock repurchase program. As of December
31, 1999, the Company was authorized to repurchase approximately 396 million additional shares.
Forward-Looking Statements
Certain statements in this press release constitute ``forward-looking statements'' within the meaning of the Private
Securities Litigation Reform Act of 1995. These statements are subject to a number of risks and uncertainties,
and actual results may differ materially from those expressed or implied. Such differences may result from actions
taken by the Company, as well as from developments beyond the Company's control, including changes in global economic
conditions that may, among other things, affect the Company's international sales of theatrical and home video
releases, television programming and consumer products. In addition, changes in U.S. economic and financial market
conditions may also affect actual performance of significant Company businesses, by influencing attendance and
spending at the Company's resort operations or the performance of the Company's broadcasting operations.
Editor's Note: The Company makes available its quarterly earnings releases, annual report to shareholders, fact
book and SEC filings on its Investor Relations web-site located at http://www.disney.go.com/investors
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Contact:
The Walt Disney Company, Burbank
John Dreyer, 818/560-5300