Path: bloom-picayune.mit.edu!snorkelwacker.mit.edu!news.media.mit.edu!americast.com!usa-post Newsgroups: usa-today.bonus From: usa-post@AmeriCast.Com Organization: American Cybercasting Approved: usa-post@AmeriCast.com Subject: bonus Fri, Feb 28 1992 Date: Fri, 28 Feb 92 05:50:42 EST Message-ID: 02-28 0000 BONUS: Wall Street cheers Disney USA TODAY Update Feb. 28, 1992 Source: USA TODAY:Gannett National Information Network A year ago, there was very little whistling coming from the work hutches in Walt Disney headquarters in Burbank, Calif. Attendance at Disney theme parks was down as much as 20%. Two expensive films -"The Marrying Man" and "The Rocketeer" - flopped at the box office. It appeared the winning streak of Disney CEO Michael Eisner might be ending. Wall Street and Hollywood - were starting to hiss. Late in the year, however, Disney's fortunes began to change. The Disney kingdom began conjuring up its old-time magic with hits at the video store as well as the box office. Suddenly, Disney fans are cheering again. WHY ARE DISNEY FANS CHEERING? Last week, Disney's 30th feature-length animated film, "Beauty and the Beast," received an Academy Award nomination for Best Picture - a first. Four Disney films - including "The Hand that Rocks the Cradle" and "Medicine Man" - are among the top 10 hits at U.S. movie theaters. Five were on the list two weeks ago. "They're on a roll," says Peter Appert, analyst at C.J. Lawrence. Says Eisner: "I don't think we're as good as everyone is now giving us credit for. But I don't think we were as bad as everybody said last year." AND WHAT ARE WALL STREETERS CHEERING ABOUT? Ten days ago, Disney announced a long-awaited four-for-one stock split - the first since January 1986. The stock jumped $3.50 on the news to $146.50. By Thursday, it was up another 7 5:8 to $154 1:8. Analysts say the split, to be voted on April 20, sends a very comforting signal from management. "It shows confidence that the stock will not fall back," says Eisner. Just since Dec. 10, the stock has risen nearly 50%. WHAT ELSE COULD DISNEY WANT? The $3 billion Euro Disney Resort near Paris is scheduled to open April 12. That promises to boost not only theme-park revenue, but also the strength of all Disney products - from home videos to Minnie Mouse slippers. Disney is renowned for using its films as a springboard for popular attractions and consumer products. And if Euro Disney is the smash it's predicted to be, it could even help offset the impact of the recession on Disney's U.S. theme parks. Euro Disney could boost annual earnings 60 cents a share (prestock split) as early as next year. IS DISNEY INFALLIBLE? Disney's franchise never lost its luster for long-term investors. But the one-two punch of last year's gulf war and the recession badly hurt tourism and, as a result, Disney's theme parks. Operating profits at the parks, which account for 53% of Disney's total, tumbled 31% from 1990. Given today's gloomy economic climate, even Eisner is cautious about the turnaround. He says advance bookings for Disney theme parks are encouraging, but "I just don't know what's going to happen during the course of the year. What's going to happen to airline fares?" CAN DISNEY KEEP RAISING ITS COST OF ADMISSION? Eisner points out that Disney is not recession-proof but "somewhat recession-resistant. ... One of the last things people tend to give up is their planned vacations." Yet, some analysts are casting a suspicious eye at the rich admission-price hikes Disney has been hitting visitors with every year. "By my calculations, they raised prices by more than twice the rate of inflation between 1985 and 1990," Appert says. "That really helped the margins, but it's now very expensive to go to Disney World or Disneyland on vacation." HOW COSTLY IS IT? Appert says a five-day trip to Walt Disney World for a family of four can run as high as $3,000 - including tickets, hotel, discount airfares and food. "It's still less expensive than going to a ski resort," Eisner says. "The admission price is not a determining factor. The most expensive thing about coming is the transportation, food and hotel." Appert still predicts healthy growth in theme-park earnings this year - about 25%. HOW'S DISNEY'S FILM BUSINESS DOING? The film division's operating profit and revenue last quarter topped the theme parks' for the first time in 25 years. "Beauty and the Beast" grossed $113 million its first 15 weeks. Its phenomenal success, buoyed by the Academy Award nomination, will translate into big profits for all Disney divisions - from home videos to theme-park attractions and consumer products. And Disney is planning one animated feature film a year. WHO GETS THE CREDIT FOR DISNEY'S SUCCESS? The credit for Disney's rebound goes to Eisner's cost-conscious but creative management team - including Walt Disney Studios Chairman Jeffrey Katzenberg. In Disney's head-turning neoclassical corporate headquarter here - giant sculptures of Snow White's seven dwarves adorn the facade - hard work and penny pinching are the rule. HOW DID EISNER REVIVE DISNEY? Before Eisner arrived in 1984, the company's assets were painfully undermanaged. Eisner jacked up prices at theme parks but added attractions and launched a national ad campaign. He marketed Disney merchandise through a string of Disney Stores and aggressively released videos of Disney children's classics - including "Fantasia," which sold 20 million copies last year to become the top-selling home-video release in history. WHAT ELSE HELPED DISNEY? Katzenberg kept his filmmaking costs down - average film budgets fell to about $15 million - and the company formed moviemaking partnerships that put much of the risk on outside investors. The results: In the Eisner years, Disney stock has zoomed from $11 1:4, adjusted for a four-for-one split in 1986, to Thursday's $154 1:8. And that was "not a matter of luck. It was smart management," Appert says. WHAT IS DISNEY PROMISING INVESTORS? Last fall, Eisner promised a 20% return on equity and 20% annual earnings growth the next five years. That won't won't be easy, but once the economy turns around, Disney should benefit, says Christopher Dixon of PaineWebber. He estimates earnings of $6 a share this year on a pre-split basis, vs. $4.78 last year. Currently, 28% of Disney's 200,000 shareholders own just one share. A large part of the attraction: Shareholders get 10% to 15% discounts on admission to Disney theme parks and hotel rooms. Plus, the stock certificates are engraved with Disney characters. WHAT'S DISNEY'S PHILOSOPHY? Says Eisner: "We're a consumer company. ... That continues to make us a company that the average American can participate in." And investors who get in now could profit from what amounts to the second coming of Eisner & Co. "The press kind of looked at us and wondered whether or not we lost the magic touch," Eisner says. "All of a sudden, we hit it again." Bonus Editor: Michele Coleman. (1-919-855-3491) Making copies of USA TODAY Update (Copyright, 1992) for further distribution violates federal law. This article is copyright 1992 Gannett News Service. Redistribution to other sites is not permitted except by arrangement with American Cybercasting Corporation. For more information, send-email to usa@AmeriCast.COM