Jim,
I'm trying to learn from your goodwill post, using your specific example of
Disney.
I'm posting the information the way I'm understanding it, and was hoping you
or others on the thread would tell me if I'm adjusting things in the correct way.
I've grabbed the most recent 10Q I could find on Edgar (June 98)for Disney and
posted Income Stmt, balance sheet, and Stmt of Cash flow at the bottom of this
message.
If I'm understanding you correctly, to correct for goodwill accounting I should
take the $321 million goodwill amortization for the 9 months of 98, and add it
back to earnings. So earnings would be $1,875 vs the stated $1,554. This
increases EPS from the stated $0.75 diluted to $0.90 diluted for the 9 months.
You also mention backing the goodwill out of the balance sheet. How would
this be done? Would you back it solely out of liabilities or would equity be
impacted at all? I'm thinking in terms of impact on book value if any.
I apologize for my ignorance if this is an obvious question, but I'm trying to
make sure I understand this.
Thanks for any comments,
Shane
Disney Financials below
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
1998 1997 1998 1997
-------- -------- --------- --------
Revenues $5,248 $5,194 $16,829 $16,953
Costs and expenses (4,325) (4,134) (13,565) (13,602)
Gain on sale of KCAL - - - 135
-------- -------- --------- --------
Operating income 923 1,060 3,264 3,486
Corporate activities and other (49) (69) (175) (267)
Net interest expense (161) (185) (445) (540)
-------- -------- --------- --------
Income before income taxes 713 806 2,644 2,679
Income taxes (298) (333) (1,090) (1,124)
-------- -------- --------- --------
Net income $ 415 $ 473 $1,554 $1,555
======== ======== ========= ========
Earnings per share
Diluted $ 0.20 $ 0.23 $ 0.75 $ 0.75
======== ======== ========= ========
Basic $ 0.20 $ 0.23 $ 0.76 $ 0.77
======== ======== ========= ========
Average number of common and common
equivalent shares outstanding
Diluted 2,085 2,064 2,077 2,061
======== ======== ========= ========
Basic 2,043 2,023 2,033 2,022
======== ======== ========= ========
THE WALT DISNEY COMPANY
CONDENSED CONSOLIDATED BALANCE SHEETS
In millions, except share data
June 30, September 30,
1998 1997
----------- --------------
(unaudited)
ASSETS
Cash and cash equivalents $ 853 $ 317
Receivables 3,694 3,726
Inventories 920 942
Film and television costs 5,354 4,401
Investments 1,729 1,904
Theme parks, resorts and other property, net of
accumulated depreciation of $5,340 and 4,857 9,797 8,951
Intangible assets, net of accumulated
amortization of $1,028 and $707 15,859 16,011
Other assets 1,830 1,524
-------- ---------
$ 40,036 $ 37,776
-------- ---------
-------- ---------
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts and taxes payable and accrued $ 5,888 $ 6,572
liabilities
Borrowings 11,972 11,068
Unearned royalty and other advances 1,021 1,172
Deferred income taxes 1,941 1,679
Stockholders' equity
Preferred stock, $.01 par value
Authorized - 100 million shares
Issued - none
Common stock, $.01 par value Authorized - 3.6 billion shares Issued - 2.1
billion shares and 2.0
billion shares 8,970 8,548
Retained earnings 10,792 9,543
Cumulative translation and other adjustments 45 (12)
Treasury shares, at cost - 29 million
shares and 24 million shares (593) (462)
Shares held by TWDC Stock Compensation Fund,
at cost - 13 million shares at
September 30, 1997 -- (332)
-------- ---------
19,214 17,285
-------- ---------
$ 40,036 $ 37,776
-------- ---------
-------- ---------
THE WALT DISNEY COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
In millions (unaudited)
Nine Months Ended
June 30
---------------------------
1998 1997
----------- -----------
NET INCOME $ 1,554 $ 1,555
-------- --------
OPERATING ITEMS NOT REQUIRING CASH OUTLAYS
Amortization of film and television costs 3,235 2,889
Depreciation 595 545
Amortization of intangibles 321 337
Gain on sale of SBS and KCAL (38) (135)
Other 10 (1)
CHANGES IN
Receivables 38 (145)
Inventories 22 35
Other assets (79) (113)
Accounts and taxes payable and accrued liabilities (277) 315
Deferred income taxes 263 324
Unearned royalty and other advances (151) (19)
-------- --------
3,939 4,032
-------- --------
CASH PROVIDED BY OPERATIONS 5,493 5,587
-------- --------
INVESTING ACTIVITIES
Film and television costs (4,140) (3,642)
Investments in theme parks, resorts and other (1,577) (1,428)
property
Investment in E! Entertainment television -- (321)
Acquisition of Classic Sports Network (173) --
Proceeds from sale of SBS, KCAL and other 194 392
investments
Other (15) (161)
-------- --------
(5,711) (5,160)
-------- --------
FINANCING ACTIVITIES
Borrowings 2,076 2,303
Proceeds from formation of REITs -- 1,311
Reduction of borrowings (1,180) (3,412)
Dividends (305) (253)
Other 163 (126)
-------- -------
754 (177)
-------- -------
Increase in cash and cash equivalents 536 250
Cash and cash equivalents, beginning of period 317 278
-------- -------
Cash and cash equivalents, end of period $ 853 $ 528
-------- -------
-------- -------
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