[MouseMan]

Disney Sees Higher Pension Costs, Plans Charges
12/12/03
By Ben Berkowitz

LOS ANGELES (Reuters) - The Walt Disney Co. expects its cash contributions to its pension plan to increase more than five-fold this fiscal year, the company said in a filing with securities regulators on Friday.

The company, which runs movie studios, broadcast networks including ABC, and its signature theme parks, also said it expected to take unspecified charges in the March- and June-ended quarters related to its planned sale of its retail store operation.


In its annual report with the Securities and Exchange Commission (news - web sites), Disney said cash contributions to its pension plan in the fiscal year ending September 2004 were expected to rise to about $130 million from $25 million in fiscal 2003.


Meanwhile, Disney said its pension and post-retirement medical costs were expected to rise to $375 million in fiscal 2004 from $131 million in the year prior.


Disney said its increased pension costs were the result of lowering its assumption on investment returns and the discount rate used to calculate how much new money is required to fund pension obligations.


Discount rates are typically based on the yield on investment-grade corporate debt, and as those returns have fallen with lower interest rates, U.S. companies with defined benefit pensions have had to lower their assumptions as well.


Disney said it had reduced its discount rate to 5.85 percent in fiscal 2004 from 7.2 percent, and its expected rate of return on pension assets to 7.5 percent from 8.5 percent.


Much of corporate America has felt the sting in the last year of rising pension plan costs, as holes emerged where the plan assets were not enough to cover the expected obligations to pensioners.


A recent Credit Suisse First Boston report pegged the funding gap at Standard & Poor's 500 companies at about $247 billion by the end of 2003, up from $225 billion at the end of last year.


As of Sept. 30, Disney said, its pension plan assets had a fair value of $2.6 billion, with accumulated benefit obligations of $3.4 billion and projected benefit obligations of $3.7 billion.


Elsewhere in the annual report, Disney disclosed what its profits would have been if it had accounted for stock options using the fair value method.


Had it used that method, the company's profit would have fallen to $973 million from $1.27 billion, with earnings per share declining to 48 cents from 62 cents as reported.


A number of major companies, mostly in the technology sector, have resisted calls to use the fair-value method to value options, arguing there is no fair way to value employee stock options as a business expense.


Disney also said it expects to take unspecified charges in the second and third quarters of fiscal 2004 for lease terminations related to the closure of some of its Disney Stores. It is negotiating to sell that business. Executives have said a conclusion of the sale was expected in 2004.


The annual report also included a copy of the new employment contracts signed by Chief Financial Officer Thomas Staggs and General Counsel Alan Braverman on Sept. 26.


Staggs' contract, which runs through March 2008, provides for a salary of $950,000 in calendar 2004, $1 million for 2005, $1.05 million in 2006 and $1.125 million for 2007 and the first three months of 2008.


Braverman's contract, which runs through September 2008, provides for a salary of $750,000, with a guarantee that he can terminate the contract if his salary is not raised by at least $50,000 within three years of the effective date of the deal.

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[MouseMan]

Ah yes...the Eisner regime is loosing it, and bits and pieces are starting to come out in the media! Is it just a matter of time before things get so bad the stockholders say adios to him?