The Things You Find When You Read A 10k

Some of you who are familiar with business filings will know what a 10k is without me saying.  Others of you might first think I’m talking about a race, but then you’d ask ‘How do you READ a race?’  Simple, you don’t.  A 10k is the annual filing that every publicly traded company in the US must file with the US Securities & Exchange Commission (the SEC). 

The interesting thing about a 10k is it is a LEGAL document.  Unlike the nice glossy Annual Report you stock holders get from the company, the 10k often contains much more detailed information than the annual report.  It is also required to be filed in a specific electronic format.

Anyhow, here are some of the interesting things I pulled out of this year’s 10k that I hadn’t noticed about Disney before.  Maybe some of this is new info for you too.

• Disney owns 41 Radio Disney radio stations that reach 60% of the market.  What I didn’t realize is that almost all of those stations are AM!
• Disney has been deeply involved in building a ‘city’ area adjacent Disneyland Paris.  At first I thought it might be like Celebration, but an exploration of their website shows it’s MUCH larger than anything Celebration could ever be.  Online at Val D’Europe.
• Since 1923 Disney Studios has released 928 live action and 80 animated features.
• Interestingly they own 1,407 such titles under the Disney Home Entertainment brand.
• Disney now owns 7 record labels under the Disney Music Group.
• There are FIVE pages of risks that the company feels are material to it’s operations.  No surprises, but it’s always interesting to see such things written out.
• There are over 1 million shareholders of Disney stock.
• The Lehman Brothers implosion cost Disney’s shareholders 3 cents a share on dealings the company had with LB.
• Disney effectively completed the cost of absorbing Pixar in FY 08.
• The domestic parks had 89% occupancy and the average room spent $233 a day (which includes room price, as well as spending on food and merchandise at the hotel (not the park)).
• Consumer Products had the largest bottom line growth, with a 14% increase in income. P&R grew at 11% as did Media Networks.  The Studio posted a 9% loss.
• Disney’s effective income tax rate is 36.1%, so for every dollar in profit, they send 36 cents of it to Uncle Sam.  And you thought your tax bill was high???
• Domestic investment in P&R was inline with the previous year at $793 million.  That includes the parks, hotels and cruise ships. However, foreign park investment is down to $140 million in 08 (and likely to go lower with the Paris line tapped out and the recent pull back for any expansion in HK).
• The Company still owes almost $2.5 BILLION in debt for Disneyland Paris and $1.25 Billion for HK Disneyland.
• Disney and the Hong Kong government came to an agreement on the last day of September to allow Disney to extend a line of credit to the owning company of HK Disneyland to meet it’s debt obligations.  Further, Disney has agreed to to WAIVE the 2008 AND 2009 management fees for the park (notice that’s not DEFER, but WAIVE) and to DEFER royalties until some future date. They have NOT come to an agreement about expansion though.
• Euro Disney, under the terms of its restructuring, has limits on its investment and financing activities.  The recent expansions have been due to financing and money provided by the Disney Company.
• For film and tv shows the company uses a 10 YEAR window to estimate revenues.
• The company has about $10.5 billion in in contractual obligations and commitments in FY 09 to pay and seems to have plenty of access to debt that isn’t due soon (Roy would be proud).
• movies.com went for $17 million when it was sold last year, where as the 39.5% stake in E! was sold to Comcast for $1.23 billion
• It’s stated in a double negative sentenance, but it appears that Disney met its long term goals at Euro Disney in FY 08, allowing it to be paid some management fees that would have otherwise been deferred or subordinated
• The company expects to amortize (i.e. write off) a whopping 83% of their current fielded TV and film catalog in the next 3 years!
• The company pays an effective interest rate on all debt of about 4.5%.  Wish I could borrow for that.
• An investment group entered into a contract with Disney in 2005 to fund up to $500 million for 40% of up to 32 non-sequel, live action movies.  In return, those investors get 40% of the net revenues.  The last film under this agreement is schedule to come out this year
• If your a Disney employee with stock options, you’re crying these days at the current trading price as the average stock option has a strike price of $27.72…  OUCH!