Disney’s Statement to the SEC Details The Company’s Financial Challenges Amid COVID-19 Outbreak

Disney has filed a statement with the Securities and Exchange Commission on the anticipated affects the COVID-19 outbreak will have on the Company.  

What’s happening:

  • This morning, The Walt Disney Company filed a statement with the Securities and Exchange Commission (SEC) warning investors of the expected toll the COVID-19 pandemic could have on the company.
  • Disney did not hold back, highlighting what areas of business already are and are most likely to take a hit during the outbreak.
  • Last week, Disney announced they would be closing their domestic parks and resorts in California and Florida which joined the previously shuttered destinations in Shanghai, Hong Kong, Tokyo, and Paris.
  • Following that news, the Company also decided to pull the theatrical release of six of their films from four of their studios including the highly anticipated Marvel film Black Widow.
  • But the parks and studios aren’t the only areas where Disney will take a hit. Disney Cruise Line has temporarily suspended all sailings, and Adventures by Disney has cancelled their domestic and international excursions for the time being.
  • Disney on Broadway’s three shows Aladdin, Frozen, The Lion King are currently not playing.
  • Disney-owned sports network ESPN, while still covering sports, has nothing new to follow as professional games, college tournaments, and school sports are all suspended.

The Walt Disney Company SEC Filing:

The impact of the novel coronavirus (“COVID-19”) and measures to prevent its spread are affecting our businesses in a number of ways. We have closed our theme parks; suspended our cruises and theatrical shows; delayed theatrical distribution of films both domestically and internationally; and experienced supply chain disruption and ad sales impacts. In addition there has been a disruption in creation and availability of content we rely on for our various distribution paths, including most significantly the cancellation of certain sports events and the shutting down of production of most film and television content.

We expect the ultimate significance of the impact of these disruptions, including the extent of their adverse impact on our financial and operational results, will be dictated by the length of time that such disruptions continue which will, in turn, depend on the currently unknowable duration of the COVID-19 pandemic and the impact of governmental regulations that might be imposed in response to the pandemic. Our businesses could also be impacted should the disruptions from COVID-19 lead to changes in consumer behavior. The COVID-19 impact on the capital markets could impact our cost of borrowing. There are certain limitations on our ability to mitigate the adverse financial impact of these items, including the fixed costs of our theme park business. COVID-19 also makes it more challenging for management to estimate future performance of our businesses, particularly over the near to medium term.

Cautionary Notes on Forward Looking Statements:

  • In their filing with the SEC, Disney points out to investors that there are several developments The Company has no control over that could also ultimately affect their earnings throughout the year. These include:
    • Changes in domestic and global economic conditions, competitive conditions and consumer preferences
    • Adverse weather conditions or natural disasters
    • Health concerns, including COVID-19, among other health concerns
    • International, regulatory, political, or military developments
    • Technological developments
    • Labor markets and activities
  • They go on to mention that such developments may affect entertainment, travel and leisure businesses generally and may, among other things, affect:
    • The performance of the Company’s theatrical and home entertainment releases
    • Content for our distribution platforms
    • The advertising market for broadcast and cable television programming
    • Demand for our products and services
    • Construction
    • Expenses of providing medical and pension benefits
    • Income tax expense
    • Performance of some or all company businesses either directly or through their impact on those who distribute our products
    • Achievement of anticipated benefits of the TFCF transaction