walt disney Quarter2001 3rd

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walt disney Quarter2001 3rd

  1. 1. FOR IMMEDIATE RELEASE August 2, 2001 THE WALT DISNEY COMPANY REPORTS EARNINGS FOR THE QUARTER AND NINE MONTHS ENDED JUNE 30, 2001 BURBANK, Calif. – The Walt Disney Company today reported earnings for the quarter and nine months ended June 30, 2001. Pro forma revenues and segment operating income for the quarter decreased 1% and 7% to $6.0 billion and $1.1 billion, respectively, from the prior-year quarter. Excluding the restructuring and impairment charges and gain on the sale of businesses discussed below, net income for the quarter decreased 3% to $479 million, while diluted earnings per share remained flat at $0.23. For the nine months, pro forma revenues increased 1% to $19.4 billion and segment operating income increased 6% to $3.4 billion. Excluding restructuring and impairment charges, gain on the sale of businesses and the cumulative effect of accounting changes, net income and diluted earnings per share increased 17% to $1.4 billion and 18% to $0.66, respectively. “In a soft economy, Disney’s overall performance continues to be solid,” said Michael D. Eisner, Chairman and CEO of The Walt Disney Company. “Our studio has added yet another quarter to a year of strong growth. At our parks, effective expense-management measures have largely compensated for the weaker attendance that we had anticipated.”
  2. 2. “We also continue to take steps to build for the future, as evidenced by our acquisition of Fox Family Worldwide. Once the economy begins to strengthen, we will be well positioned for accelerating growth”. Fox Family Acquisition On July 23, 2001, the Company announced that it had entered into an agreement to purchase Fox Family Worldwide for $3 billion in cash, plus the assumption of $2.3 billion in debt. Among the businesses being acquired are the Fox Family Channel, a programming service that currently reaches approximately 81 million cable and satellite television subscribers throughout the U.S.; a 76% interest in Fox Kids Europe, which reaches more than 24 million subscribers across Europe; Fox Kids channels in Latin America, and the Saban library and entertainment production businesses. The Fox Family Channel is one of the few fully distributed stand-alone channels and gives Disney a platform for launching ABC Family and strengthening its position as the leading provider of family television programming. The acquisition of the Fox Kids international channels strengthens Disney’s presence in important markets in Europe and Latin America and enhances the Company’s potential for growth domestically and internationally. Basis of Presentation The Company acquired Infoseek, created the Internet Group and disposed of Fairchild Publications in November 1999. In January 2001, the Company announced the closure of the GO.com portal business and the conversion of Internet Group common stock into Disney common stock. To enhance comparability, the Company has presented operating results on a pro forma basis, which assumes these transactions occurred at 2
  3. 3. the beginning of fiscal 2000, eliminating the one-time impacts of those events. Additionally, prior-year pro forma operating results for the Studio Entertainment segment have been restated to reflect the impact of the Film Accounting change discussed below. The Company believes that pro forma results provide additional information useful in analyzing underlying business results. However, pro forma results are not necessarily indicative of the combined results that would have occurred had these events actually occurred at the beginning of fiscal 2000, nor are they necessarily indicative of future results. On an as-reported basis, results for the quarter and nine months include restructuring and impairment charges totaling $138 million and $1.3 billion, respectively. Included in the charges for the nine-month period is $862 million associated with the closure of GO.com. On a pro forma basis, restructuring and impairment charges exclude the impact of the GO.com closure and, as a result, amount to $138 million and $466 million, for the quarter and nine-month periods, respectively. See Table C for details of these charges. In addition, as-reported results for the prior year include a $243 million pre-tax gain on the sale of Fairchild Publications in the first quarter and a $93 million pre-tax gain on the sale of the Company’s stake in Eurosport in the third quarter. On an as-reported basis, revenues for the quarter and nine months were $6.0 billion and $19.5 billion, respectively. Including the restructuring and impairment charges and gain on the sale of businesses, as-reported net income attributed to Disney common stock was $392 million (or $0.19 per share) for the quarter and as-reported net loss attributed to Disney 3
  4. 4. common stock was $94 million (or $0.04 per share) for the nine months including the cumulative effect of the accounting changes ($0.13 per share). See Table D for a reconciliation of as-reported income (loss) per share attributed to Disney common stock to pro forma earnings per share. Unless otherwise noted, the following discussion reflects pro forma results. Studio Entertainment Studio Entertainment revenues for the quarter increased 8% to $1.3 billion, while segment operating income increased to $65 million compared to a segment operating loss of $1 million in the prior-year quarter. Studio Entertainment results for the quarter were primarily driven by growth in worldwide theatrical motion picture distribution and stage plays. Improvements in worldwide theatrical motion picture distribution were primarily due to the releases of Pearl Harbor, Spy Kids and Atlantis. Growth in stage plays reflected performances of The Lion King in additional cities. The Company’s live action and animated titles continued to perform well on DVD reflecting the overall strength of the DVD market. Media Networks Media Networks revenues for the quarter decreased 6% to $2.1 billion and operating income decreased 29% to $470 million from the prior-year quarter. Broadcasting results for the quarter reflected declines at the ABC television network and the Company’s owned television stations and radio 4
  5. 5. operations driven by the soft advertising market, lower ratings and higher primetime programming costs. Disney’s share of operating income from cable television activities, which consists of Disney’s cable networks and cable equity investments, was $293 million for the quarter. Excluding the gain from the sale of Eurosport in the prior-year quarter, cable television results were up 2%, reflecting higher cable network affiliate revenue and improved results from cable equity investments, including Lifetime Television, The History Channel and E! Entertainment Television. These increases were partially offset by the soft advertising market, higher programming costs and higher costs associated with the launch of international Disney Channels. Higher affiliate revenues from the cable networks were driven by strong subscriber growth, annual contractual rate adjustments and the conversion of the Disney Channel from a premium to a basic service. Additionally, certain European Disney Channel operations showed improvements. Parks & Resorts Parks & Resorts revenues for the quarter remained flat at $1.9 billion and segment operating income decreased 1% to $560 million. Parks & Resorts results reflected increased attendance, guest spending and occupied room nights at the Disneyland Resort, due to the addition of Disney’s California Adventure, Downtown Disney and the Grand Californian Hotel, increased guest spending at Walt Disney World, continued growth at the Disney Cruise Line, due to the success of the 7-day cruise package, and cost savings at Walt Disney World. These increases 5
  6. 6. were offset by higher costs at the Disneyland Resort and decreased theme park attendance and lower occupied room nights at Walt Disney World. The decreased attendance and lower expenses at Walt Disney World reflected the prior-year impact of the Millennium Celebration, which concluded in December 2000. Reduced costs at Walt Disney World also reflected productivity and other cost reduction initiatives. Consumer Products Consumer Products revenues for the quarter decreased 3% to $518 million and segment operating income increased 32% to $58 million. The decline in revenue for the quarter is primarily due to declines in comparative store sales at Disney Stores North America. Operating income reflected cost reduction initiatives across all lines of business and favorable comparable store sales at Disney Stores Europe, partially offset by the impact of declines in comparative store sales at Disney Stores North America. Over the last nine months, the Company has formed a number of alliances with companies such as Coca-Cola, Gillette and Kimberly-Clark in children’s food and personal care, in addition to retailers K-Mart, J.C. Penney and Wal-Mart Canada in children’s apparel. The Company believes that these arrangements will position Consumer Products for future growth. Internet Group Internet Group revenues for the quarter decreased 17% to $38 million; however, segment operating loss improved by 47% to $31 million. Internet Group results for the quarter reflect improved operating performance at the Disney-branded and ESPN-branded Web sites, the 6
  7. 7. impact of cost reduction efforts and the elimination of operating losses at toysmart.com, due to its closure in June 2000. The improved operating performance at the Disney-branded sites is primarily due to growth in international licensing revenues and increased sales at DisneyVacations.com resulting from an increase in travel bookings to Disney destinations. Corporate and Unallocated Shared Expenses Corporate and unallocated shared expense increased 15% to $94 million for the quarter, reflecting costs associated with several strategic initiatives designed to improve overall company-wide efficiency and start- up costs for the Disney Club, which was launched in the first quarter of 2001. Workforce Reduction In March 2001, the Company announced that it would eliminate 4,000 full-time jobs through a combination of voluntary and involuntary reductions. The reduction affected employees in all business units and geographic regions. In connection with the reduction and related restructuring initiatives, the Company incurred $95 million in severance and other costs during the quarter. The Company expects that the reduction plan will be substantially complete in the fourth quarter and, over time, will generate in excess of $350 million in annual savings. Net Interest Expense and Other Net interest expense and other decreased 35% to $80 million for the quarter, driven by lower interest rates and gains from sales of certain investments. 7
  8. 8. Equity in the Income of Investees Income from equity investees increased 6% to $86 million for the quarter, reflecting improved results from cable equity investments including Lifetime Television, The History Channel and E! Entertainment Television, partially offset by start-up losses incurred in connection with new investments. Conversion of Internet Group Common Stock On March 30, 2001, the Company converted all of its outstanding Internet Group common stock into Disney common stock, resulting in the issuance of approximately 8.6 million shares of Disney common stock. For the quarter and nine months ended June 30, 2001, Disney common stock as- reported earnings reflect approximately 72% of Internet Group losses from October 1, 2000 through January 28, 2001 (the last date prior to the announcement of the conversion), and 100% thereafter. In addition, the Company has ceased operations of the GO.com portal business, which resulted in restructuring charges in the current nine months. Restructuring, Impairment and Workforce Reduction Related Charges During the quarter and nine months, the Company recorded restructuring and impairment charges on an as-reported basis, totaling $138 million and $1.3 billion, respectively. The charges relate to workforce reduction; the closure of GO.com and approximately 70 Disney Stores; the closure of the Chicago DisneyQuest facility, including the write-down of its fixed assets and leasehold improvements and lease termination costs, and impairment write-downs for certain Internet investments. The second 8
  9. 9. quarter $862 million charge for closure of the GO.com portal business includes a non-cash write-off of intangible assets totaling $820 million and the Disney Store closure charge consists of lease termination costs; write- downs of fixed assets, leasehold improvements and inventory, and other related closure costs. Restructuring and impairment charges on a pro forma basis exclude the impact of the GO.com closure. See Table C for details of the restructuring and impairment charges on both a pro forma and as-reported basis. Accounting Changes 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 FASB Statement 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. FORWARD-LOOKING STATEMENTS Management believes certain statements in this press release may constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are made on the basis of management’s views and assumptions regarding future events and business performance as of the time the statements are made. Actual results may differ materially from those expressed or implied. Such differences may result from actions taken by the Company prior to its fiscal 2001 year end, including further restructuring or strategic initiatives and 9
  10. 10. actions relating to the Company’s strategic sourcing initiative, as well as from developments beyond the Company’s control, including changes in global 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 and, in addition, uncertainties associated with the Internet. Changes in domestic competitive and economic conditions may also affect performance of all significant Company businesses. 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.com/investors 10
  11. 11. The Walt Disney Company PRO FORMA CONSOLIDATED STATEMENTS OF INCOME (unaudited; in millions, except per share data) Three Months Ended Nine Months Ended June 30 June 30 2001 2000 2001 2000 Revenues $ 5,975 $ 6,034 $ 19,444 $ 19,249 Costs and expenses (4,947) (4,904) (16,317) (16,270) Amortization of intangible assets (145) (162) (441) (491) Gain on sale of businesses – 93 22 93 Net interest expense and other (80) (124) (287) (413) Equity in the income of investees 86 81 234 196 Restructuring and impairment charges (138) – (466) (61) Income before income taxes, minority interests and the cumulative effect of accounting changes 751 1,018 2,189 2,303 Income taxes (339) (446) (1,012) (1,025) Minority interests (20) (42) (83) (86) Income before cumulative effect of accounting changes 392 530 1,094 1,192 Cumulative effect of accounting changes: Film accounting – – (228) – Derivative accounting – – (50) – Net income $ 392 $ 530 $ 816 $ 1,192 Earnings per share before cumulative effect of accounting changes (basic and diluted) $ 0.19 $ 0.25 $ 0.52 $ 0.57 Earnings per share including cumulative effect of accounting changes (basic and diluted) (1) $ 0.19 $ 0.25 $ 0.39 $ 0.57 Earnings before cumulative effect of accounting changes, excluding restructuring and impairment charges and gain on the sale of businesses $ 479 $ 495 $ 1,393 $ 1,190 Earnings per share before cumulative effect of accounting changes, excluding restructuring and impairment charges and gain on the sale of businesses: Diluted $ 0.23 $ 0.23 $ 0.66 $ 0.56 Basic $ 0.23 $ 0.24 $ 0.67 $ 0.57 Average number of common and common equivalent shares outstanding: Diluted 2,107 2,123 2,108 2,108 Basic 2,091 2,086 2,090 2,078 (1) The per share impacts of the film and derivative accounting changes for the nine-month period were ($0.11) and ($0.02), respectively. 11
  12. 12. The Walt Disney Company AS-REPORTED CONSOLIDATED STATEMENTS OF INCOME (unaudited; in millions, except per share data) Three Months Ended Nine Months Ended June 30 June 30 2001 2000 2001 2000 Revenues $ 5,975 $ 6,053 $ 19,457 $ 19,300 Costs and expenses (4,947) (4,935) (16,363) (16,326) Amortization of intangible assets (145) (340) (622) (910) Gain on sale of businesses - 93 22 336 Net interest expense and other (80) (124) (287) (417) Equity in the income of investees 86 81 234 155 Restructuring and impairment charges (138) – (1,328) (61) Income before income taxes, minority interests and the cumulative effect of accounting changes 751 828 1,113 2,077 Income taxes (339) (425) (963) (1,238) Minority interests (20) (42) (83) (86) Income before cumulative effect of accounting changes 392 361 67 753 Cumulative effect of accounting changes: Film accounting – – (228) – Derivative accounting – – (50) – Net income (loss) $ 392 $ 361 $ (211) $ 753 Earnings (loss) attributed to: Disney Common Stock (1) $ 392 $ 440 $ (94) $ 957 Internet Group Common Stock - (79) (117) (204) $ 392 $ 361 $ (211) $ 753 Earnings (loss) per share before cumulative effect of accounting changes attributed to: Disney Common Stock (basic and diluted) (1) $ 0.19 $ 0.21 $ 0.09 $ 0.46 Internet Group Common Stock (basic and diluted) n/a $ (1.75) $ (2.72) $ (4.58) Earnings (loss) per share including cumulative effect of accounting changes attributed to: Disney Common Stock (1) (2) (3) Diluted $ 0.19 $ 0.21 $ (0.04) $ 0.46 Basic $ 0.19 $ 0.21 $ (0.05) $ 0.46 Internet Group Common Stock (basic and diluted) n/a $ (1.75) $ (2.72) $ (4.58) Earnings attributed to Disney common stock before cumulative effect of accounting changes, excluding restructuring and impairment charges and gain on the sale of businesses $ 479 $ 405 $ 1,198 $ 934 Earnings per share attributed to Disney common stock before cumulative effect of accounting changes, excluding restructuring and impairment charges and gain on the sale of businesses (1) Diluted $ 0.23 $ 0.19 $ 0.57 $ 0.44 Basic $ 0.23 $ 0.19 $ 0.57 $ 0.45 Average number of common and common equivalent shares outstanding: Disney Diluted 2,107 2,115 2,103 2,100 Basic 2,091 2,078 2,085 2,070 Internet Group (basic and diluted) - 45 43 44 (1) Including Disney’s retained interest in the Internet Group. Disney’s as-reported retained interest in the Internet Group reflects 100% of Internet Group losses through November 17, 1999, approximately 72% for the period from November 18, 1999 through January 28, 2001 (the last date prior to the announcement of the conversion of the Internet Group common stock) and 100% thereafter. (2) Amounts for the current year nine-month period represent basic earnings per share. (3) The per share impacts of the film and derivative accounting changes for the nine month period were ($0.11) and ($0.02), respectively. 12
  13. 13. THE WALT DISNEY COMPANY SEGMENT RESULTS For the Quarter Ended June 30 (unaudited, in millions) Pro Forma % As Reported 2001 2000 Change 2001 2000 Revenues: (3) Media Networks $ 2,135 $ 2,270 (6)% $ 2,135 $ 2,270 Parks & Resorts 1,942 1,940 n/m 1,942 1,940 Studio Entertainment 1,342 1,246 8% 1,342 1,246 Consumer Products 518 532 (3)% 518 532 Internet Group 38 46 (17)% 38 65 $ 5,975 $ 6,034 (1)% $ 5,975 $ 6,053 Segment operating income (loss): (1) (3) Media Networks $ 470 $ 662 (29)% $ 470 $ 662 Parks & Resorts 560 565 (1)% 560 565 Studio Entertainment (2) 65 (1) n/m 65 (1) Consumer Products 58 44 32 % 58 44 Internet Group (31) (58) 47 % (31) (70) $ 1,122 $ 1,212 (7)% $ 1,122 $ 1,200 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 and minority interests is as follows: Pro Forma As Reported 2001 2000 2001 2000 Segment operating income $ 1,122 $ 1,212 $ 1,122 $ 1,200 Corporate and unallocated shared expenses (94) (82) (94) (82) Amortization of intangible assets (145) (162) (145) (340) Gain on sale of businesses - 93 - 93 Net interest expense and other (80) (124) (80) (124) Equity in the income of investees 86 81 86 81 Restructuring and impairment charges (138) - (138) - Income before income taxes and minority interests $ 751 $ 1,018 $ 751 $ 828 (1) Segment earnings before interest, income taxes, depreciation and amortization (EBITDA) is as follows: Pro Forma As Reported 2001 2000 2001 2000 Media Networks $ 509 $ 697 $ 509 $ 697 Parks & Resorts 731 731 731 731 Studio Entertainment 76 11 76 11 Consumer Products 77 75 77 75 Internet Group (26) (55) (26) (62) $ 1,367 $ 1,459 $ 1,367 $ 1,452 (2) Pro forma segment operating income has been adjusted to reflect the impact of SOP 00-2. The respective adjustments for the year will (decrease) increase segment operating income as follows: Quarter ended December 31, 1999 $ (73) March 31, 2000 37 June 30, 2000 - September 30, 2000 (14) $ (50) (3) The Company made certain changes to its business segment classifications. The Disney Store Catalog and the Disney Store Online, which were previously reported in the Internet Group, are now reported in the Consumer Products segment. Prior-year amounts have been reclassified to reflect the current-year presentation. 13
  14. 14. THE WALT DISNEY COMPANY SEGMENT RESULTS For the Nine Months Ended June 30 (unaudited, in millions) Pro Forma % As Reported 2001 2000 Change 2001 2000 Revenues: (3) Media Networks $ 7,252 $ 7,420 $ 7,252 $ 7,420 (2)% Parks & Resorts 5,312 5,088 5,312 5,088 4% Studio Entertainment 4,765 4,511 4,765 4,511 6% Consumer Products 1,978 2,094 1,978 2,108 (6)% Internet Group 137 136 150 173 1% $ 19,444 $ 19,249 $ 19,457 $ 19,300 1% Segment operating income (loss): (1) (3) Media Networks $ 1,549 $ 1,838 $ 1,549 $ 1,838 (16)% Parks & Resorts 1,276 1,258 1,276 1,258 1% Studio Entertainment (2) 381 – 381 36 n/m Consumer Products 314 303 314 304 4% Internet Group (109) (190) (142) (230) 43 % $ 3,411 $ 3,209 $ 3,378 $ 3,206 6% 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 cumulative effect of accounting changes is as follows: Pro Forma As Reported 2001 2000 2001 2000 Segment operating income $ 3,411 $ 3,209 $ 3,378 $ 3,206 Corporate and unallocated shared expenses (284) (230) (284) (232) Amortization of intangible assets (441) (491) (622) (910) Gain on sale of businesses 22 93 22 336 Net interest expense and other (287) (413) (287) (417) Equity in the income of investees 234 196 234 155 Restructuring and impairment charges (466) (61) (1,328) (61) Income before income taxes, minority interests, and the cumulative effect of accounting changes $ 2,189 $ 2,303 $ 1,113 $ 2,077 (1) Segment EBITDA is as follows: Pro Forma As Reported 2001 2000 2001 2000 Media Networks $ 1,664 $ 1,942 $ 1,664 $ 1,942 Parks & Resorts 1,729 1,696 1,729 1,696 Studio Entertainment 416 40 416 76 Consumer Products 379 386 379 387 Internet Group (91) (183) (121) (209) $ 4,097 $ 3,881 $ 4,067 $ 3,892 (2) Pro forma segment operating income has been adjusted to reflect the impact of SOP 00-2. The respective adjustments for the year will (decrease) increase segment operating income as follows: Quarter ended December 31, 1999 $ (73) March 31, 2000 37 June 30, 2000 - September 30, 2000 (14) $ (50) (3) The Company made certain changes to its business segment classifications. The Disney Store Catalog and the Disney Store Online, which were previously reported in the Internet Group, are now reported in the Consumer Products segment. Prior-year amounts have been reclassified to reflect the current-year presentation. 14
  15. 15. Table A MEDIA NETWORKS (unaudited, in millions) Quarter Ended June 30 2001 2000 % Change Revenues: Broadcasting $ 1,321 $ 1,509 (12) % Cable Networks 814 761 7% $ 2,135 $ 2,270 (6) % Segment operating income: (1) Broadcasting $ 244 $ 421 (42) % Cable Networks 226 241 (6) % $ 470 $ 662 (29) % Nine Months Ended June 30 2001 2000 % Change Revenues: Broadcasting $ 4,454 $ 4,876 (9) % Cable Networks 2,798 2,544 10 % $ 7,252 $ 7,420 (2) % Segment operating income: (1) Broadcasting $ 723 $ 1,010 (28) % Cable Networks 826 828 n/m $ 1,549 $ 1,838 (16) % (1) Amounts exclude intangible asset amortization 15
  16. 16. Table B CABLE TELEVISION ACTIVITIES (unaudited, in millions) Quarter Ended June 30 2001 2000 % Change Operating income: Cable Networks $ 226 $ 241 (6) % Equity investments: A&E, Lifetime and E! Entertainment Television 206 183 13 % Other (1) 52 124 (58) % 484 548 (12) % Partner share of operating income (191) (186) (3) % Disney share of operating income $ 293 $ 362 (19) % Nine Months Ended June 30 2001 2000 % Change Operating income: Cable Networks $ 826 $ 828 n/m Equity investments: A&E, Lifetime and E! Entertainment Television 560 501 12 % Other (1) 166 175 (5) % 1,552 1,504 3% Partner share of operating income (582) (504) (15) % Disney share of operating income $ 970 $ 1,000 (3) % Note: Amounts presented in this table represent 100% of the operating income for all of the Company’s cable businesses. The Disney share of operating income represents the Company’s ownership 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. (1) Amounts include the gain on the sale of Eurosport in fiscal 2000. Excluding Disney’s share of the gain, cable television operating income for the quarter and nine months ended June 30, 2000 was $287 million and $925 million, respectively. Reflecting the adjustment for Eurosport in the prior year, Disney’s share of operating income from cable television activities increased 2% and 5% for the quarter and nine months, respectively. 16
  17. 17. Table C RESTRUCTURING AND IMPAIRMENT CHARGES (unaudited, in millions) Pro Forma As Reported Quarter Ended June 30 2001 2000 2001 2000 Workforce reductions and other $ 95 $ – $ 95 $ – Chicago DisneyQuest closure (1) 33 – 33 – Disney Store closures – – – – Investment impairment 10 – 10 – $ 138 $ – $ 138 $ – Pro Forma As Reported Nine Months Ended June 30 2001 2000 2001 2000 GO.com intangible assets impairment $ – $ – $ 820 $ – GO.com severance, fixed asset write- offs and other – – 42 – Workforce reductions and other 95 – 95 – Chicago DisneyQuest closure (1) 94 – 94 – Disney Store closures 51 – 51 – Investment impairment 226 61 226 61 $ 466 $ 61 $ 1,328 $ 61 (1) The charge for the quarter ended June 30, 2001 reflects lease termination costs for the closure of the Chicago DisneyQuest facility. The charge for the nine months includes a write-down to the estimated salvage value of the property and equipment at the facility. 17
  18. 18. Table D The following table provides a reconciliation of as-reported income (loss) per share attributed to Disney common stock to pro forma earnings per share before the cumulative effect of accounting changes, excluding restructuring and impairment charges and gains on the sale of businesses. Three Months Nine Months Ended June 30, Ended June 30, (unaudited) 2001 2000 2001 2000 As-reported income (loss) per share attributed to Disney common stock $ 0.19 $ 0.21 $ (0.04) $ 0.46 Adjustment to exclude restructuring and impairment charges attributed to Disney common stock 0.04 — 0.48 — Adjustment to exclude gain on the sale of businesses — (0.02) — (0.02) Adjustment to exclude the cumulative effect of accounting changes — — 0.13 — As-reported earnings per share before the cumulative effect of accounting changes, excluding restructuring and impairment charges and gain on the sale of businesses 0.23 0.19 0.57 0.44 Adjustment to attribute 100% of Internet Group operating results to Disney common stock (72% included in as- reported amounts) — (0.04) (0.06) (0.10) Adjustment to exclude pre-closure GO.com portal operating results and amortization of intangible assets — 0.09 0.09 0.26 Adjustment to exclude restructuring and impairment charges attributed to the Internet Group — — 0.06 0.01 Adjustment to include pre-acquisition Infoseek operating results — (0.01) — (0.04) Adjustment to reflect the impact of the new Film Accounting rules — — — (0.01) Pro forma earnings per share before the cumulative effect of accounting changes, excluding restructuring and impairment charges and gain on the sale of businesses $ 0.23 $ 0.23 $ 0.66 $ 0.56 18

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