I think that debt is going to be a big problem for Disney. Their most recent SEC 10-Q report, which is online at sec.gov lists 11.588 billion dollars in long term bonds, 2.1 billion in short term commercial paper, and 3 billion in bank loans or 15.688 billion dollars in debt. On the other hand, the SGML tags at the bottom of the SEC document show 8.706 billion dollars under the category of liabilities ("other securities"). Does this mean that the other debt is really 8.706 billion instead of the 5.1 billion I mentioned? Probably, because my guess is that figure includes debt assumed when they bought ABC. So, let's say Disney is in hock for close to 20.3 billion, and has plans to issue another 3 billion in debt (see the 10-Q filing for more). Someone made a comment about exploited Disney workers in Haiti -- Disney's debt load is 4 times the annual Gross Domestic Product of Haiti!!
The reason I looked up the numbers, even though I'm an engineer, and not an accountant, is that a stock database I use was calculating a real debt to shareholders' equity ratio of over 4000% - a number that stunned even a jaded cynic like myself. It also showed a price to book value ratio of 192. I assume that the database suppliers (Reality Online) are calculating their figures based on the fact that among its "assets", Disney lists intangible assets of 16.983 billion dollars -- this is an accounting fiction, and refers to things like "good will" - it won't pay the bills if a financial crunch at Disney occurs.
It should be real interesting on Nov. 26, when Disney releases its annual financial report. I am really debating whether I should short Disney before then.
The following could be a public service announcement coming to your TV soon:
"Hello, I'm Mickey Mouse, and I'm here to tell you that debt is good. My friend here, Uncle Sam, will tell you how good debt was for him. Debt means that you can buy things now and not have to worry about paying the money back because the future is so rosy you'll always have enough income to pay back a little debt each month..."
Yeah, sure, right... the possibilities of that short are getting stronger.
Paul McGinnis / PaulMcG@aol.com
[my public e-mail address, not my main Internet account] |
