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, msgs), 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, msgs), 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.
Related Link
-- Posted January 25, 2000
Source: Company Press Release