Darkbeer
01-30-2004, 09:28 PM
Fitch Ratings Press Release
Fitch Comments on Non-Renewal of Disney-Pixar Relationship
NEW YORK--Jan. 30, 2004--Chicago-January 30, 2004: Fitch Ratings views Disney's failure to renew the distribution and profit-sharing agreement with Pixar as a credit concern. While recognizing that credit metrics will not likely be materially affected through fiscal-year (FY) 2006, the non-renewal of the Pixar relationship reinforces Fitch's Negative Rating Outlook. The Rating Outlook reflects Disney's below-average credit metrics and the continuing challenges faced by the company. Fitch presently rates Disney's long-term debt 'BBB+'. Fitch will continue to monitor developments with Disney for their credit impact.
On Jan. 29, 2004, Pixar ended discussions with Disney regarding the extension of its movie distribution and profit-sharing contract. The existing contract expires after the delivery of the final film which is scheduled for late 2005 (FY2006). The loss of the associated earnings from future Pixar releases is potentially significant for Disney's studio business, but less so within the scope of the company's consolidated operations. While the five Pixar films released to date have represented significant contributors to Disney's studio business, each major theatrical and related home video release has only combined to represent approximately 3-5% of Disney's consolidated cash flow. As a result, the impact on key measure of cash flow leverage, including debt/EBITDA and adjusted debt/EBITDAR is modest.
The loss of longer-term Pixar relationship releases reinforces the creative void that has developed in the company's animated film business, a core franchise for the Disney Company. Nevertheless, Disney has until FY2006 to address the creative challenges posed by the absence of a longer term Disney/Pixar distribution agreement. Disney plans to mitigate the loss of the Pixar relationship through internally developed computer animated films and by developing new relationships with emerging animation production companies. Furthermore, Disney will retain distribution and profit-sharing rights for the remaining two films under the existing contract with Pixar, as well as rights on home video sales and the right to release film sequels.
Fitch Comments on Non-Renewal of Disney-Pixar Relationship
NEW YORK--Jan. 30, 2004--Chicago-January 30, 2004: Fitch Ratings views Disney's failure to renew the distribution and profit-sharing agreement with Pixar as a credit concern. While recognizing that credit metrics will not likely be materially affected through fiscal-year (FY) 2006, the non-renewal of the Pixar relationship reinforces Fitch's Negative Rating Outlook. The Rating Outlook reflects Disney's below-average credit metrics and the continuing challenges faced by the company. Fitch presently rates Disney's long-term debt 'BBB+'. Fitch will continue to monitor developments with Disney for their credit impact.
On Jan. 29, 2004, Pixar ended discussions with Disney regarding the extension of its movie distribution and profit-sharing contract. The existing contract expires after the delivery of the final film which is scheduled for late 2005 (FY2006). The loss of the associated earnings from future Pixar releases is potentially significant for Disney's studio business, but less so within the scope of the company's consolidated operations. While the five Pixar films released to date have represented significant contributors to Disney's studio business, each major theatrical and related home video release has only combined to represent approximately 3-5% of Disney's consolidated cash flow. As a result, the impact on key measure of cash flow leverage, including debt/EBITDA and adjusted debt/EBITDAR is modest.
The loss of longer-term Pixar relationship releases reinforces the creative void that has developed in the company's animated film business, a core franchise for the Disney Company. Nevertheless, Disney has until FY2006 to address the creative challenges posed by the absence of a longer term Disney/Pixar distribution agreement. Disney plans to mitigate the loss of the Pixar relationship through internally developed computer animated films and by developing new relationships with emerging animation production companies. Furthermore, Disney will retain distribution and profit-sharing rights for the remaining two films under the existing contract with Pixar, as well as rights on home video sales and the right to release film sequels.