gera t's report on the group consolidated fi...
TRANSCRIPT
+ GERA T'S REPORT ON THE GROUP
+ CONSOLIDATED FI NAN CI A L
STATEMENTS OF E URO D ISNEY S .C.A.
+ GENERAL REPORT OF THE STATUTORY AUDITORS
ON THE CONSOLIDATED FINANCIAL STATEMENTS
+ GE ERAL REPORT OF THE SUPERVISORY
BOARD ON THE MA l AGEM ENT
OF THE EURO DISNEY S.C.A. GROUP
+ PARENT COMPANY IN F ORM ATI O N
+ S IGN IF ICANT O PE RATING
CONTRACTS AND AGREEMENTS
+ LEGAL STRUCTURE OF THE GROUP
+ CORPORATE ORGANISATION
+ G ROU P O RGAN ISA TION AND O PE RATI ONS
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I - - ,: GERANT'S REPORT ON THE GROUP, '. '
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+ INTRODUCTIONFiscal year 199 7 was an exci ting year. T hro ugho ut th e yea r, Disneyland" Paris celebra ted its fifth an niversary
with new decoration s, par ad es and shows and man y special events in the Th eme Park . Th ese new entertain ment
programmes highli ghted th e creati vity of our cas t memb ers, the magic of our prod uct and our co mmit ment
to provide a qual ity guest experien ce, a ll of whi ch co nt ributed to sett ing new records for T heme Par k atte ndance
and hotel occupa ncy. Th is growth in activity combined with continued cost contro l resulted in improved opera ting
results which mor e th an offset the increase in lease and net financial cha rges resulting from th e planned reductio n
of int erest forgivene ss as part of th e 1994 financial restr ucturing (the "Fi na ncial Rest ructuring" ). Deta ils related
to the impact of the Financial Restructuring can be found below in th e " Lease rental expense, net financia l
charges, ro yalties and management fees" section.
+ OPERATING ACTIVITIESThe followin g table provides inform at ion regarding attendance, hotel occ upa ncy and spend ing per visitor
and per room :
Theme park Hotels
rorx i . V IS IT O ltS SI' E:\ I ) I x c: ( l C C t JI' A i\: C Y \ I' I-:;-"" I J1:-'; c;
FI SC Al. yr A ll S (111 111 i/l IIlI/5o) PER V IS IT O ll ". \{ ,\ 1" 1; I'ER lU H ) .\ l ':· ::·
1997 12.6 FF 25 1 n .o'y., FF I 042
1996 11. 7 FF 248 72 .2% FF 1 018
1995 10 .7 FF 24 8 68 .5% FF 987
* Admission price and spending for food, beverage and merchandise purchased in the Park , including \fAT*. Room price and spending on foo d, beverage and merchandise sold in hotels, including \fA T
Theme Park attend ance increased 7.7% to 12. 6 million visitors and hotel occupa ncy rose to 78 .0 % in fiscal
year 1997 acco mpa nied by incr ease s in ave rage spending per visito r and per room . T hese increases ca n be
att ributed to th e success of our ent erta inment programmes, sa les and marketin g effo rts and merchandising
and food and beverage str ateg ies.
Entertainment
Throughout th e year, Disn eyland Paris offered special events and new shows to att rac t visito rs to join in
our fifth anniversary celebra tio ns. Th emed around the lat est Disney Animated Class ic "The H unchback
of Notre-Darne" , the Theme Park was decorated in the colours of Me dieval Pari s, with banners down Ma in Street,
U.S.A ., multicoloured jester hat s ad orn ing Sleepin g Beauty's Ca stle, conversion of th e Cent ra l Plaza into Gargoyle
Square and a new interactive Ca rn iva l pa rad e which premiered in November 1996. In addit ion, ma ny shows were
completely redesi gned and numero us specia l events were provided th rou ghout the year such as the ann ual
Chr istmas festiviti es from mid -November to mid-J anuary, th e Fest iva l of Flowe rs in Apri l, the Tour de Fra nce in
Jul y, a Disney's Ca lifo rn ia Dr eam festival in September and num erou s co ncerts in Disney" Village. Addi tiona lly,
in May 199 7, a Ga umo nt eight-screen multi plex cinema opened in Disney Village .
Sales and MarketingDu rin g fiscal year 1997, ad verti sing highli ghted the fifth anniversary of Disney land Paris wit h the slogan
"T he Year to be Here" . The market ing and sales team s continued to focus on our core mar kets accompa nied
by several important sales initiat ives. These included the relaunch of our annual passport programme
in December, a significant increase in th e number of tr avel inclu sive packages created by our intern al to ur
ope rator, Disneyland Pari s Vac ances, in co njunct ion with recent tr avel a lliances signed with vario us Europea n
airl ines and rail t ra nsporters, and the growing success of th e recent ly esta blished UK reservat ion office in selling
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.1-~* GE~T'S REPORT ON THE GROUP" , j/
th ese travel inclu sive packages. Fina lly, in order to continually improve the perception of Disneyland" Par is as an
affordable entertain ment exp erienc e, T heme Park prices were held sta ble at fisca l year 1996 levels.
Merchandising, Food and BeverageIn o rde r to offer a larger product range and better satisfy gues t preferen ces, five bo uti ques with in the Th eme
Park und erw ent a ma jor renovation and a new line o f pro ducts was created based on the fifth annive rsary theme.
In orde r to minimise wait tim es for the gues ts in sea ted restaurants, th e restaura nt reserva tio n system was
improved.
+ FINANCIAL RESULTSCerta in recla ssificarion s have been mad e to th e 1996 co mpara tive amo unts to conform to th e 199 7
presentati on. M an agement believes th at the impact of inflati on has not been materia l on th e co mpa ra bility o f
the Gro up's revenues or o pera ting results for the two yea r period ending September 30, 1997.
RevenuesTh e Gro up's to ta l revenues were FF 5,582 milli on in fiscal yea r 1997 as co mpa red to FF 5,009 milli on in fiscal
yea r 1996 .
T he tota l revenu es o f the Group were generated from the following activities:
(1+ ill 111 i1l1ll1l$J
T heme Park
Hotels and Disney Village
Th eme Park, Hot els an d Disney Village Revenu es
O ther
Total Disneyland Pari s Resort Revenues
Co nst ruct ion and related serv ices
Total Revenues
19 9 7
2 964
2 167
5 131
346
5 477
105
5 51)2
Year e nde d September 3 0 ,19 9 6
2 699
1 915
4 614
354
4 968
41
5 009
T heme Par k, Hotels and Disney" Village revenu es were FF 5, 13 1 million in fisca l yea r 1997, an imp rovement
of I 1.2% from FF 4,61 4 million in fiscal yea r 1996. Th is increase reflects the succe ss o f our ente rtai nment
programmes, market ing an d sa les effo rts, merchandising an d foo d an d beverage st rategies. T hese revenu es we re
a lso bolstered du ring the 1997 seco nd semes ter by overa ll strong tourism ac tivity in Fran ce.
T heme Park revenu es increase d 9.8 % to FF 2, 964 million in fiscal yea r 1997 from FF 2,699 million in fiscal
yea r 1996 . This imp rov ement reflects pr imarily record att endance, driv en by significant incr eases in a tte ndance
from the Unit ed Kingdom, Ital y and Spain. Further progress has been ach ieved in reducing the scaso na lity
of our bus iness, as growth in atte ndance during the first half of the fiscal year wa s greate r than in the seco nd ha lf
and repeat visitat ion increased to a record 34 % o f total a tte ndance. In addit ion, to tal Theme Park spending
per visitor improved for the first tim e since th e O pening, pr ima rily as a result of increased merch andise sa les
despite genera lly sta ble prices in the T heme Park.
Hot els and Disney Village revenues increased 13.2% to FF 2,1 67 million in fiscal yea r 1997 fro m
FF 1,91 5 million in fiscal year 1996 . T his increase was mainly attributa ble to higher hotel occ upa ncy and
per room spending as a result of improved revenue oprimisa t ion programmes and increas ed spend ing in the
boutiques and restaurants . Disney Village revenu es also incre ased driv en by the higher number o f bot h hotel and
local guests resultin g from the improved evenin g enterta inment offerin g.
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Costs and expe nses
Costs and expenses for th e Group represent o pera ti ng costs before lease payments. net financ ial charges,
ro yalties a nd management fees. Principa l components include direct o pera t ing costs, marketing and sa les expenses ,
general and admi nistrative ex penses and depreciation a nd am orti sation.
Tota l cos ts a nd ex penses grew 8.3 % to FF 4 ,5 97 million in fiscal yea r 1997, compared to fiscal year 1996 .
D irect opera ti ng cos ts for th e Gro up (w hich include operating wages and em ployee benefi ts, co st of food, beverage
a nd mercha nd ise sa les, uti lities, mainten an ce, ins ura nce a nd opera ti ng ta xes) rose as a resu lt of th e growth
in att enda nce and occupa ncy and merch an d ise and food a nd bever age sa les, incr eased maintcn.uicc cos ts , the
ad d itio na l enterta inm ent pro gr a mme and increased o pe ra t ing ta xes. Sa les and ma rketing a nd ge ne ra l
a nd ad m inistra tive co sts rem a ined relatively sta ble d uring th e year du e to o ngo ing cos t co nt ro l measures.
Income before lea se and financial chargesThe Grou p's inco me before lease a nd finan cial cha rges improved sig nifican tly to FF 880 mi llio n in fisca l year
199 7, an improveme nt o f 2 1.5 % fro m FF 724 million in prior year, as a res u lt of the significa nt increase
in reven ues and continued co st control measures .
Lease rental expense, net financial charges, royalties and management feesT he Financial Restructuring continues to have a sign ifica nt positi ve impact on th e Group's net income ma inl y
du e to tem po ra ry interest forgiveness and deferral of principal repaym ents gr anted by th e lender s and the
temporary waiver of ro yalties and manag ement fees by The W ait Disn ey Com pa ny ("T \Xf DC ") . However, th e
impact of these benefi ts on th e Group's results is declining and con sequentl y, lease rental ex pe nse a nd net financial
cha rges increased FF 14 7 million to FF 715 million in fiscal yea r 19 97 from H 568 million in fiscal yea r 1996 ,
despi te lower interes t ra tes rela ting to the Group's va riable rate ind ebtedness.
Interest [org iuenessThe rate o f inte res t fo rg iveness was at its pea k d uri ng the second hal f of fisca l year 19 94 a nd has pro gressively
decr ea sed in fiscal years 1995, 1996 and 1997 . The ra te o f in ter est for giveness is sched u led to decre ase thro ugh
fiscal yea r 20 03 , a ltho ugh most of the int erest cha rges w ill ha ve been reinst at ed by the end o f tisca l yea r 19 98.
In fisca l yea r 19 97, the decr ea sing benefits o f the int er est forgiveness provision s ha ve res ulted in an incr ease
in lease a nd net finan cia l cha rges o f a pproximately FF 175 m illion . T his incr ease was partia lly offset by lower
va ria ble inte res t ra tes a nd th e favo ura ble im pac t of foreign cu rrency hedging tran sact ion s whic h resul ted in the net
inc rease of FF 14 7 mi llio n. In fiscal year 1998, substantia lly a ll of th e benefits of the interest for giveness
provisions pursuant to th e Financial Restructuri ng will have been eliminated. Assuming inte res t rates rem ain sta ble
at fisca l yea r 1997 levels, the estimated ann ua l increase in lea se and net financi al cha rges, du e to th e de cr easin g
benefits of the interest forgiveness provisions, will be approximately FF J20 milli on in fiscal yea r 19 98.
Deferral of principal repaymentsIn fiscal year 1994, principal repa yments were deferred fo r three yea rs from th eir o rigina l du e d at e. In fiscal
year 1998, the Ph ase I SN Cs will begin th e repayment o f principa l o n loans including th ose gra nted by th e Group.
Repayment of p rincipal by th e Phase I SNCs is charged to th e Group in the form o f lease rcnral ex pe nse . As a
resu lt , lease a nd net financial charges w ill inc rease by FF 30 million in fiscal year 1998 a nd an ad di tio na l
FF 120 mi llion in fisca l yea r 1999 . H o wever, since a sign ifican r po rtion of th e Phase I SN Cs lo an pay ments will be
mad e to the G ro up, the im pact o n th e Group's cas h flow w ill be lim ited to th e th ird party princ ipa l repayment s
a mo unt ing to FF 10 millio n a nd FF 25 mill io n in fisca l yea rs 1998 a nd 19 99, respect ively.
W aiver of royalties and man agem ent feesPursu ant to th e terms of the Fina nc ia l Restruct ur ing, no roya lty o r ma nagem ent fee ex penses were inc ur red
by the G ro up in fiscal yea rs 1993 th rough 199 7. Both roya lt ies a nd man agem en t fees wi ll be progressiv ely
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J.~ GiE ~T'S REPORT ON THE GROUPJ\ j/ -
rein stated sta rt ing in fisca l yea r 1999. Assuming the se ro yalty and management fees had been rein stated in fiscal
yea r 1997, at the rates wh ich wi ll be in effect in fisca l year 1999, the G ro up's net income wou ld have been
redu ced by approxi ma te ly FF 180 mill ion .
Th e co mpo nents of the lease rental ex pense and net fina ncia l ch arges noted a bove are as follows:
Lease rental expense
Lease rental ex pense rep resents pay ments under lease a rrangem ents with th e Financing Co mpa nies
an d approxima tes th e relat ed debt service payments of suc h Finan cin g Co mpa nies wh ich fluctuat e with variable
int erest rates and int erest forgiveness cha nges as well as the t iming of princip al payments mad e by these parties.
Lease renta l expense increased 37.9 'X, in fisca l yea r 1997 to FF 590 mi llion from FF 428 million in fiscal yea r
1996, primaril y d ue to th e decr easing benefits o f the int erest fo rgiveness provision s o f the Financia l Rest ructur ing
partially offset by lower variab le int er est ra tes dur ing th e period.
Financial incom e
Financia l incom e is primari ly composed o f interest income earne d by the Group on long-term loans pr ovi ded
to the Phase 1 SNCs. Finan cial inco me increased in fisca l yea r 1997 to FF 363 m illion as co mpared to
FF 30 2 milli on in fiscal year 1996. Th is increase is due to the progressive reduct ion o f the interes t forgiven ess
provision s on the G ro up's outs tand ing loans to the Phase I SNCs, partiall y offse t by the impac t of lower va ria ble
interest rates and the favo ura ble imp act o f fo reign cur rency hedging transacti on s.
Financial expense
Financi al expense incr eased to FF 4 88 million in fiscal yea r 1997 fro m FF 442 milli on in fiscal yea r 1996.
The increase is pr ima rily attributabl e to the declining ben efits of th e int erest fo rgiveness prov isions o f the Financia l
Restruc tu ring.
Exceptional income, net
Th e G roup rep orted exceptio na l incom e of FF 52 mill ion in fiscal yea r 1997 principa lly due to the settlement
o f certain cla ims which resulted in lower th an anticipated costs. Exceptional income in fisca l year 199 6 of
FF 4 6 mill ion included a ga in on the repurchase o f a portion of th e Co mp any 's co nve rt ible bond s, and the im pact
of man agement's decision to retain employee ho us ing faci lities , whi ch had bee n previously held for sa le.
Net income
Ne t income for fisca l yea r 199 7 increased to FF 2 17 mi llion as co mpa red to FF 202 million in prior yea r
despit e th e significa nt increase in lease and net finan cial ch arges. T his imp ro vem ent is prim aril y du e to record
T heme Park a tte nda nce and hotel occu pancy co mb ined wi th co nti nued cos t co nt ro l mea sures.
+ CAPITAL INVESTMENT, FINANCING AND LIQUIDITY
Capital Investment
Tota l capi ta l exp endi tures were approx ima tely FF 260 million for fisca l yea r 1997. T his amount primarily
represents the normal rec urring investments in the Theme Park, H otels and Disney" Village as well as development
cos ts fo r new co mpute rised in formati on syste ms .
Debt
Th e prin cip al ind ebtedness of the Gro up (excluding accrued int erest and co nve rt ible bond redemption premium )
remai ned sta ble a t approxima te ly FF 6.9 billion a t Septe mber 30, 1997 as co mpa red to Septem ber 3D, 1996.
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Including the uncon sol idated Phase I SNCs, th e Group's p rinc ipa l indebt ed ness was a pprox imately FF 15, I billi o n
a t September 30, 1997 a nd 1996,
As part o f th e Fin anci al Restructuring, principal paym ents o n a ma jority o f th e o utsta nd ing de bt were deferr ed
for three yea rs fro m th eir o rigina l du e date a nd accordingly, no pr incipa l re pay me nts we re mad e d ur ing fiscal
yea rs 1997 o r 1996. Pr incipal repay me nts o f th e Gro up's ind ebtedness w ill begin in fiscal yea r 2000 w hi le
principal repaym ent by th e Ph ase 1 SNCs w ill begin in fisca l yea r 1998 .
Additionally, th e Finan cial Rest ru cturing ag ree me nrs include covena nt s wi th res pect to the restru ctu red
financin g a rrange me nts between th e Gro up and th e lend er s. Th ese co vena nts include restri cti ons on uddi rion al
indebtedness and ca pita l ex pe ndit ures, th e pr ovi sion of certa in fina ncia l info rm at ion a nd co m plia nce wit h ce rta in
financial rati o thresh olds.
Financial instruments and exposure to interest rate riskIn th e normal co urs e o f bu sin ess, the G ro up em ploys a va riety o f off-ba lance shee t fina nc ia l inst ruments
to m an age its ex pos ure to fluctuat ion s in interest and fo re ign cur rency exc ha nge rates, includ ing in ter est ra te swa p
agr eements, forward rate ag ree me nts, co lla r agreem ents, fo re ign currency forwa rd exc ha nge co nrru crs a nd fore ign
exchange o ptions.
The Group's tota l ex posure to var iabl e rat es is lim ited to a pp rox imate ly FF 2.8 bill ion uf deb t at Sept em be r
30, 1997. Accordingly, the G ro up does not ex pect inter est rate mo vem ents to sign ifica nrly affect its finan cial
sta teme nts in th e for eseeabl e futu re.
The Group conti nua lly mon itors its positions with, a nd th e cred it qu ality of, major inrcrn nti o na l financia l
in stitution s wh ich a re co unte rpa rries to its o ff-ba lance shee t finan cial instrume nt s a nd does not a ntic ipa te fa ilure
to perform by such inst ituti on s.
LiquidityGro up cas h flow s from o pera tio ns a mo unted to FF 400 million in fiscal yea r 1997 as co m pared to
FF 311 milli on in the pri or yea r, despite th e significa nt inc rea se in lease a nd net finan cia l cha rges result ing
from th e planned reduction o f ben efit s fro m th e Fin an cial Restructu rin g.
Cas h and sho rt -te rm invest ment s we re ap proxi ma te ly FF 1.5 billion a t th e end of fisca l yea r 1997, co m pa red
to FF 1.2 billi on a t th e end o f fiscal yea r 1996 . Addi t iona lly, the Gro up has a n unu sed FF 1.1 bi llion l Il-yca r
un secured revo lving cred it faci lit y a t PIBOR, ma de ava ila ble by TWDC in 1994 .
Based on current projecti on s, M anagem ent believes th at th e G ro up has th e resources necessa ry to meet fund ing
req ui reme nts a risin g in fiscal year 1998. M oreover, th e Co mpa ny' s future liqu id ity requirem ents inclu de
th e redemption and/or refinancing of th e rema inin g 6.75 % co nve rt ible bonds up on maturi ty o n October 1, 200 I.
EquityAt September 30, 1997, the Group' s sha re ho lde rs' eq uity a mo unted to a ppro xima tely FF h.O billi on co mpa red
to FF 5.8 billi on at September 30, 1996 .
As o f September 1997 and 1996, T W DC, thro ugh ind irect w ho lly-owned subs id ia ries. a nd Pr ince Alwu lccd
Bin Talal Bin Abdul aziz AI Saud , th ro ugh a w ho lly-owned co mpa ny , held 39 '1., and 24% of t he Co m pa ny's
shares, respecti vely. No other shareho lde r has ind icated to th e Co m pany th a t it ho lds mo re th an 5% o f th e sha re
ca p ita l o f th e C om pa ny .
In June 1994, th e Com pa ny 's sha reho ld ers a pproved the imp lem enta tion of an em ployee stoc k option plan
aut horising the issu an ce of stock optio ns for up to 2.5% of th e Co mpany's o ut sta nd ing co mmo n stock . As of
September 30 , 1997, th e Co mpa ny had 16,488,000 o ptio ns o ut sta nd ing a t an average exerc ise price of FF 9.80.
No dividend all ocation is proposed with res pec t to fiscal yea r 1997, and no di vidends we re pa id w it h respect
to fiscal years 1996 and 1995.
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J\""A** G,E ~NT'S REPORT ON THE GROUP
I • .r
+ OUTLOOKIn fiscal yea r 1998, Management will tr y to bui ld on the positi ve op erational momentum established over
the last three yea rs by co nt inuing to provide new ente rta inment programmes, susta ining the st ro ng emphas is on
market ing and sa les effo rts and exp anding the convention act iviti es.
Throughout fiscal yea r 1998, new ente rta inme nt pro grammes and specia l festiva ls, themcd around "Disney
Ani mated Classics", wi ll be int roduced into the Theme Park, H ot els an d Disney" Village . H igh ligh ts of these
programmes will include a new " W innic th e Pooh and Friends, Too" sho w on the Cas tle Stage, :1 new parad e based
on popular heroes of Disney Anima ted Class ics, includi ng Hercules, and a bran d new more lights, more magic
Main Street Electrica l Parad e. Addi tiona lly, to strengthen th e appea l of Disne y Village , seven ad diti on al screens will
be added to the Ga umo nt eight-sc reen multiplex cin em a, wh ich opened in Ma y and furt her development is expect ed
to continue with the opening of new resta ura nts and ente rtai nme nt fac ilities over the next few years.
The sa les and marketi ng programmes wi ll co nti nue to build on a st ro ng brand ima ge based upon th e magica l
and uniqu e Disney Animated movies an d characters. In order to increase the desire to visit Disneyland" Paris,
adve rtis ing w ill highli ght new seas ona l ente rta inme nt eve nts and maintain the focus on th e affordabi lity of a visit
to Disneyland Pari s even th ou gh Park pr ices were slightly increased in October 1997. Additiona lly, emphas is on
th e sa le o f tr an spo rt inclusive packages wi ll be stre ngthe ned, in pa rt icular by the progressive impl ementati on
of a reservation syste m able to provide rea l-tim e acce ss to tr ain and airl ine reser vat ion syste ms .
Manageme nt antici pa tes an increase in co nve nt ion ac t ivities driven by the opening in October 1997
o f the Ne wpo rt Bay Club Co nvent ion Cent re. This seco nd co nvention centre pro vides 5, 500 square met res
of space includin g an 1,800 sq ua re metre ballroom, 23 meet ing rooms and an ex hibit ion area whi ch will furthe r
esta blish Disneyland Paris as a pre mium location for a w ide ran ge of co nvention ac t ivities. M an agem ent believes
th at the growth of convent ion acti viti es wi ll contribute to an increase in hotel occupa ncy, especia lly duri ng
the low season.
Co mmercia l real esta te development on th e 1,300 hect ar es o f land around Disneyland Pari s is co nt inuing.
Th e construction of the urban cent re of Val d ' Eur op e is du e to sta rt in first qua rte r 1998. Th e development
incl udes an int ernation al shopping mall ex pec ted to open in the year 2000, co mbining a t raditi on al sho pping
centr e and an upscale outlet village, resid entia l ho using units, and a new "R.E.R ." suburban rai l sta tion. Cert ain
non-recurring fees associated wi th this development are expected to have a pos itive imp act on th e Group's fisca l
yea r 1998 resu lts.
H owever, lease an d fina ncia l charges w ill incre ase in fiscal year I998 du e to th e planned reducti on o f int erest
forgive ness from the Finan cial Restructuring. In add ition , in fiscal year 1999, pr incip al repayments by th e
Fina nc ing Co mpanies, which is a co mpo ne nt o f lease ex pense , will resu lt in a significant increase in lease rental
expense, and bo th roya lties and management fees payabl e to TWDC wi ll be reinstat ed.
Chessy , Nove mbe r 21 , 1997
The Ge rant , Euro Disney S.A.
Gilles Pelisson,
Cha irma n an d Chief Exec utive Officer
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CONSOLIDATED FINANCIAL STATEMENTSOF EURO DISNEY S.C.A.
-+ CONSOLIDATED BALANCE SHEETSeptember 30,
(U; ill m ill ,o ,,:,J ~ll l I . ...* 19 9 7 I ~)96 1 9 \)"
Fixed Assets
Intangible asse ts ~') 94 116
Tan gibl e assets 3 3026 3050 303 9
Lon g-term receivab les -l ') 522 95 14 9 525
12 637 12 65~ 12 6~O
Current Assets
Invento ries 5 I ~ ~ I ~ O 166
Acco unts receiva ble:
T rad e 6 3 10 29 1 270
Other 7 704 526 402
Sho rt -te rm investm ent s S I 256 9 13 799
Cas h 24~ 3 16 30H
2 706 2226 I 945
Deferred Charges 9 36 4 3H2 4 10
Total Assets 15 707 15 266 15 035
Shareholders' Equity
Share capital 10 3 :)33 3827 3 S25
Share prem ium 10 1 ~l) I I 8SS I SS7
Accumulated ea rn ings / (deficit) 10 3 14 9S ( 1( 2 )
6 (13 ~ 5 813 5 6 10
Bonds Redeemable in Shares ("ORAs") I1 1 002 J 002 I 002
Provisions for Risks and Charges 12 \ - , 251 3791-
Borrowings 13 6375 633 1 6 3 10
Current Liabilities
Payable to relat ed co mpa nies 14 243 \ 79 156
Accounts payable and accrue d liabilities 15 I 545 I 35S I 3 \4
I 7S ~ I 53 7 I 470
Deferred Revenues 16 ' " ", 264~)~) - JJ _
Total Shareholders' Equity and Liabilities 15 707 15 266 15 035
' See No tes to Consolidated Financial Statements
*
jt * C O N S~DAT E 'D FINANCIAL~'STATEMENT ~ ',_~ * 'r- OF EUR.O DISNEY S.C.A. . . 1_ f'
+ CONSOLIDATED STATEMENT OF INCOMEYear ended September 30,
11+ i1t 111I1I11I1li-1 ~ () T L" :;- 1 ') ') 7 19 9 (1 1 1) 1.) 5
Revenues
Disneyland" Paris Resort 5477 4968 4572
Co nstructio n and related servi ces 17 105 41 95
5 582 5009 4667
Costs and Expenses
Disneyland Paris Resort I, 18 (4 597) (4244 ) (4 105)
Co nstruc t ion and relate d services 17 ( 1( 5 ) (41) (95)
Income Before Lease and Financial Charges 880 724 467
Lease rental ex pense 25 (590) (428) (285)
Financia l income 363 302 309
Financial ex pense (488 ) (442) (489)
(7 15) (568) (465)
Incom e Before Exceptional Items 165 156 2
Excep tional incom e, net 19 52 46 112
Net Income 2 17 202 114
Average numbe r of Co mmo n Shares o uts tanding [in lIIill ;(1II5) 10 766 765 765
Earnings per Share (I ·n 0.28 0.26 0.15
"See No tes 10 Consolidated Financia l Statemen ts
*
* * C O N S W '-I D A T E 'D FINANCIAL STATEMENTS >
J\ * , f-< ~ F EURO DISNEY S.C .-A--. -. - l .;
+ CONSOLIDATED STATEMENT OF INCOMEYear e nded Se pt e m be r 30 ,
/1 .1- in nnllion ..;;' :-.:OT I: .... :' 19 9 7 I l.) l) () 19 9 5
Revenues
Disneyland" Pari s Resort 5 477 4 968 4572
Co nstruction and relat ed services 17 105 41 95
5 5X2 5 009 4 667
Costs and Expenses
Disneyland Paris Reso rt I, 18 (4 597) (4 244) (4 105)
Construct ion and related services 17 ( 1( 5) (41) (95)
Income Before Lease and Financial Charges XXO 724 467
Lease rent al expense 25 (590) (428) (285)
Fina nc ial inco me 363 302 309
Financia l ex pense (4XX) (442) (489)
(7 15) (568) (465)
Income Before Exceptional Items 165 156 2
Exceptional income, net 19 52 46 112
Net Income 2 17 202 114
Average num ber o f Common Share s outstandi ng (ill mi llions} 10 7(-, 6 765 765
Earnings per Share (I ll O.2X 0.26 0.15
"Sec N otes 10 Cons olidated Financial Statements
*
,~ ,
~: . . .J 1",
+ CONSOLIDATED STATEMENT OF CASH FLOWSrn : i ll lHill i ll l1s)
Year ended Se pt e m be r 30,:\ o: L \ ~· 19 9 7 I l) t) (l I l)9 5
Net Income 2 17 202 114
Adjustments to reconcile Net Incometo Net Cash Flows from Operating Activities:
Dep reciat ion an d amortisatio n 18 29:-; 279 277
Gai n on rep urchase of convertihle bonds 13 ( 15 ) (84 )
Other 5}; 57 64
Changes in:
Sho rt- term investments (non -cash equiva lents) 8 ( 150)
Receivables ( 1%) ( 145 ) 359
Inven tories ( };) ( 15) 18
Payabl es an d other accrued liabili t ies ! };I (52) (440 )
Cash Flows from Operating Activities 40 () 3 1 1 308
Cash Flows from Investing Activities:
Proceeds fro m the sa le of tangible fixed assets 7 38
Ca pita l ex penditures for fixed assets (23 3 ) (256) ( 17 1)
Capita l expenditures for intangible assets (27) (13) (8)
Increase in deferred charges ( 14 ) (2)
Decrease in lon g-term receivables 12 9 42
Cash Flows used in Investing Activities (2(, I ) (255 ) (99)
Cash Flows from Financing Activities:
Increase in borrowings 100
Decrease / (increase) in debt securi ty deposit 4 ( 19) 3 2
Repurchase of Convertible Bonds 13 ( 100 ) (3 11)
Termina tio n of interest rate hedging instr uments 22 (2) 59
O ther 7 4
Cash Flows from I (used in) Financing Activities ( 14 ) 66 (309)
Change in cash and cash equivalents 125 122 (100)
Cash an d cas h eq uiva lents, beginning of period 22 9 107 1 207
Cash and Cash Equivalents, end of period 35 4 1 22 9 1 107
Supplemental Cash Flow Information:
Int erest pa id 352 3 18 33 4
Non-Cash Financing Activities:
Offset of accum ulated share premi um against accumulated deficit 93 1
*See N otes to Consolidated Financial Statem ents
*
j( * C O N ,S (ft~~ D A T E D FINANCIAL STATEMENTS,,* j OF .EuRO DISNEY S.C.A.
+ NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
1. DESCRIPTION OF THE BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Description of the Business
Euro D isn ey S.CA. (the "Com pa ny ") and its wh oll y-owned subsidi a ries (co llective ly, th e "Group " )
co mmenced operations with the officia l opening of Disn eyland" Pa ris on Apri l 12, 1992 ("Opening Day" ).
T he Group opera tes th e Disneylan d Pa ris Resort, whi ch includes th e Disn eylan d Pa ris T heme Pa rk
(the "Them e Park " ), seven th ern ed hotels, th e Disn ey" Village ente rt a inme nt cent re and a go lf co urse
a t M arne-la-Vall ee, Fran ce. In addi t ion, th e G ro up manages th e real es ta te development a nd ex pa ns ion
of the re la ted infrast ructu re of the pro pert y.
The Com pa ny, a publicly held Frenc h co mpa ny, is o wned 39 % by indirect, w ho lly-owned subs id iaries
of The WaIt Disn ey Com pa ny (" T W DC") a nd man aged by Euro Disn ey S.A. (the Co m pa ny's Ger ant ), an indi rect ,
99 %-owned subsidiary of TWDC
Ent ities inclu ded in th e fisca l year 1997 co nso lidated fina ncia l stateme nts a nd th ei r p rima ry opera t ing ac t ivities
are as follows:
C O .\ l !': \ :" ,
t~ ;l O F C O :":T IU l l. ..\ :\'()
0\\ ':-':Elt' HIlI P I~ I ,\I :\R' ll I'L I{ ,\ rixr : :\ C T I \' I T Y
S.E.T .E. M.O. Imagineering S.A. R. L. 100 .0
*
Euro Disn ey S.CA.
ED L H otels S.CA.
Ce ntre de Divert issem ents S.A .Cheye nne H o tel S.A.H otel New York S.A.H otel Santa Fe S.A.Newpo rt Bay C lu b S.A.Sequoia Lodge S.A.
EDL Servi ces S.A.
EDL H otels Par ticipa tio ns S.A .
Eur o Disn ey Vacan ces S.A.
Euro D isn ey Vacaciones S.A.
ED Resort S.CA.ED Resort Serv ices S.CA.
Va l d'Europe Pro mot ion S.A.
ED Specta cles S.A .R.L.
Debit de Tabac S.N.C
ED Fina nces 1 S.N.CED Finances 2 S.N.CED Fina nces 3 S.N. CED Fin ances 4 S.N. C
99 .9
99.899.899.899.899 .899.8
99 .8
99.9
99.9
99 .9
99 .999.9
99 .8
100. 0
100 .0
100. 0100.0100.0100 .0
O perator of th e T he me Pa rk, Disney land Hotel , Davy CrockettRan ch and go lf co urse, and man ager of rea l esta te development
O perato r of th e Phase IB Faci lities (see terms defin ed below)
Specia l purpose leasing companies, a ll subsidiariesof EDL Hotels S.CA., whic h wer e crea ted in co nnect io nwith th e leasing a nd financ ing of th e Phase IB Fac ilities
M an agem ent co mpa ny of th e Phase IB Financing Com pa nies(see terms defin ed below)
Ge nera l Partner of EDL Hotels S.CA., ED Resort S.CA. andED Reso rt Serv ices S.CA.
T our o pe rato r se lling Disn eyland Paris holiday packages,principall y to gues ts from Ge rma ny, Benelu x, th e UnitedKingdom a nd Ital y.
Spanish subs id ia ry o f Euro Disn ey Vaca nces S.A.
Co m panies created for a nticipated second pha se finan cing
Real es ta te develo per
Provides stud ies a nd supe rvis io n o f co nstru ct io n for th eattrac t ions o f th e Them e Park adde d a fte r Opening Da y and thepossibl e second th em e pa rk
O pe rator of Buffal o Bill' s Wi ld West Show
Tobacco retai ler at Disn ey Villag e
Com pa nies crea ted in 1997 and cur rently inacti ve
Disneyland" Paris Resort Financing
The Group owns the Disneyland Hotel, Davy Crockett Ran ch , golf course an d land on which the five ot her
hotels and the Disney" Village ente rta inme nt centre ar e located and leases subs ta ntially a ll the remaining opera ting
assets as fo llows:
Phase lA
In November 1989, vari ou s agreements wer e signed between the Company and Euro Disneyland S.N. C. (the
" Phase lA Financing Co mpa ny") for th e development and finan cing of the T heme Park . Pursuant to the or igina l
sa le/ lease back ag reement, a ll of the asse ts of th e T heme Park, as o f Openi ng Da y, we re so ld by the Company
to the Phase lA Financing Company and simultaneously leased back to the Co mpany. As parr o f the Financ ia l
Restructuring (see Note 2), th e Company cancelled its or igina l agr eement with the Phase lA Finan cing Company
and esta blished certain new agreement s. Under thi s new lease st ructure, the Pha se lA Fina nci ng Company
is leasing substa ntially all of the T heme Par k assets to Euro Disney Associes 5.N. C. (" EDA 5NC'), an ind irect ,
who lly-owned affi liate of TWDC, wh ich is in turn subleas ing tho se asse ts to the Co mpa ny. T he Group has
no owne rship int erest in the Phase lA Financi ng Compa ny or EDA 51 C.
Phase IB
In M arch 1991, various agreements were signed for the development an d financing of five hotels, Hot el Ne w
York, Newpo rt Bay Club Hotel, Sequ oia Lod ge, H ot el Cheye nne and Hot el Santa Fe, and the Disney Village
ente rtai nment cent re (co llective ly, the " Phase IB Facilities" ). Pursuant to sa le/leaseback ag reemen ts, th e Phase IB
Faci lities were so ld by the Co mpa ny to six special purpose co mpanies th at were esta blished for the fina ncing
of Phase IB o f Disneylan d" Paris (the " Phas e IB Finan cing Co mpa nies") and are being leased back to the o pera tor,
ED L H ot els 5.C.A . Th e Group has no ownership interest in th e Phase 113 Financin g Co mpa nies.
Hereafter , referen ce to the " Phase I 5NCs" includes the Phase lA Financ ing Co mpa ny and the Phase IB
Financin g Companies.
Additional Capacity Theme Parl: Assets
As part o f the Fina ncia l Restructuring (see Note 2 ), th e Company ente red into a sa le/leaseback agre eme nt
wit h EDA 5N C for certa in Th eme Park assets whi ch were con struct ed subsequent to O peni ng Da y. Pur suant
to thi s agreem ent, these assets were so ld by the Co mpan y and the Phase lA Finan cing Co mpany to EDA 5NC
and are being leased back to the Company.
Neuiport Convention Centre
In M ay 1996, va riou s ag reeme nts were signed with Ce nt re de Co ng res New po rt 5.A.5., an indirect wholly
owned affiliate of TWDC for the development and financing of a seco nd co nvent ion centre loca ted adjacent to
th e ewporr Bay Club H ot el. Pursuant to sa le/leas eback ag ree ments, the asse ts of the Newport Bay Club
Conve nt ion Cent re were so ld as they were con structed by ED L Hot els 5.C.A . to Centre de Congres Ne wport
5.A.5. and w ill be leased back to the operator, EDL Hot els 5.C.A.
Herea fter , refe renc e to the " Fina ncing Co mpa nies" includes th e Phase lA Financ ing Com pa ny, the Phase IB
Financing Co mpa nies, EDA 5N C and Cent re de Co ngres Ne wpo rt 5.A.5.
Summary of Significant Accounting Policies
Basis of Preparation
T he Gro up's co nso lidated financia l statements ar e prepared in co nform ity with acco unti ng princip les genera lly
accepted in France .
Cert ain reclassificari on s to th e 1996 and 1995 co mparat ive amo unt s have been made to conform to the 1997
presentation.
*
~*CON S~l DATED FIN ANC IAL STATEMENT Sl\ * f", OF EURO DISNEY S.C.A. .
Principles of ConsolidationThe Group's conso lida ted finan cial statements include the accounts of th e Co mpa ny and its subsidia ries,
All sign ificant intercompany acco unts and tr an sacti on s have been elimina ted .
In Jul y 1997, th e Co mpany so ld its subsid iary Euro Disney Finance S.A. with no imp act on the Gro up's results
an d cash posit ion.
Fixed AssetsInt an gible asse ts consist of software costs and licensee right s and are ca rr ied at cos t. Amo rti sat ion is co mputed
on th e straight- line method over two to ten years.
Tangible asse ts are ca rr ied at cos t. Depreciat ion is computed on th e straight-line meth od based upon estima ted
useful lives, as follows :
E, t i ma le d u s c f u I lives
Secondary infr astructure
Build ings
Improvements, furn itu re, fixtures and equipment
I0 to 25 year s
20 to 33 years
2 to 25 years
Interest cos ts incurred for th e constructio n o f tangible fixed asse ts and the acquis itio n an d development of land
are ca pita lised. Projects under deve lopment arc capitalised to th e ex tent technical and eco no mic feasibility has
been esta blished .
Leased AssetsTh e Gro up leases a significant portion of its o pera ting asse ts . Pur suant to optio ns avai lable und er French
accou nti ng principles, the Group accounts fo r these tran sact ions as opera ting leases.
Debt Issue CostsDirect cos ts of the issua nce of debt are ca pita lised an d amortised on a straight-line basis over th e life
of th e rela ted de bt . Upo n conversion of convertible debt, the pro rata amo unt o f unamortised issue cos ts is offse t
against the sha re premi um arising fro m the issuan ce of th e relat ed sha res . Upon repurchase and/o r retirement
of debt, a pro rata amo unt o f the unam ortised issue cos ts is expensed and included as part of the ga in o r loss
resul t ing from th e transact ion.
InventoriesInvent ories are sta ted at the lower of cos t o r market value, on a we igh ted-average cost basis.
Cash and Cash EquivalentsCa sh and cas h eq uivale nts con sist of cas h on hand and sho rt-term investments with original maru rit ies of three
months or less. No cas h and cas h eq uiva lents were pledged pursuant to th e Group's finan cing agreements as
gua ran tees for future co nstruction payments, land acq uisit ions and other finan cial tr an sacti on s. Short-term
inves tments are stated at th e lower of cos t o r market value.
Income TaxesT he Gro up files a conso lida ted tax retu rn. T he Grou p provides for deferred income taxes on temp orary
di fferences between financi al and tax reportin g. Th e Group uses the liabil ity meth od under wh ich deferred taxes
are ca lculated applying currentl y enacte d tax ra tes ex pected to be in effect wh en the tempor ary differen ces
will reverse.
Convertib le Bond Redemption PremiumTh e liab ility for the converti ble bo nd redemp tio n prem ium is provided for on a straight-line basis over th e
term of the bo nds, depend ing on th e prob a bility th at th e pre mi um will be paid.
*
Pension and Retirem ent Benefits
All employee s (cast members) participate in pension plan s in accordance with French law s an d regulati on s.
Cadre cast memb ers also participat e in a supplementa l defined co nt ribut ion pension plan. Co nt ribut ions
to all plan s, a re shared by the cast members and the Gro up, are based o n gross wa ges and are ex pensed
as incurred . T he Gro up ha s no futu re commitments with respect to these plans.
A retirement indemni ty in an amo unt nor to exceed 1.5 months of gro ss wag es is pa id to cast mem bers wh o
retire from th e Gro up af ter co mpleting a defined number of service yea rs.
Financial Insttuments
In the normal course of business, the Gro up employs a va riety of o ff-balance-sheet finan cial instrument s
to reduce exposure to adverse fluct uati on s in int erest and foreign currency excha nge rat es. Th e Gro up designa tes
inte rest rat e instrument s as hedges of debt obligat ions, and reco gnises the di fferenti al to be pa id o r received und er
the ag reements as ad just ments to net financial expe nse over th e lives o f the co nt rac ts . Ga ins and losses on
th e earl y terminat ion of interest rate inst rum ents are defer red and am ortised to net fina ncia l ex pense rat eab ly over
th e rema ining or igina l term of the instru ments. Ga ins an d losses arising from foreign cur rency inst ruments are
deferred an d recogn ised in incom e as offsets of ga ins and losses resultin g from the unde rlying hedged tran saction s.
T he Group continually mon itors its positions with, and the cred it qua lity of, the fina nc ial institutions which
are counterp art ies to its off-ba lance-shee t financial instr uments and does not anticipa te non -performance
by the counterpart ies.
Foreign CUITellCY Transacti ons
Tran sac tio ns de no minated in foreign cur renc ies are recorded in French francs at th e exc ha nge rat e prevai ling
at the month-end prior to th e tran sacti on dat e. Assets and lia bilit ies de nomi na ted in fo reign currenc ies are stated
at th eir equiva lent value in French fra ncs at the excha nge rate prevail ing as of th e balance sheet date.
Ne t exc hange ga ins or losses result ing fro m the tran slati on of assets and liabil ities in foreign currencies
at th e balanc e sheet dat e are deferred as translat ion ad justments. Provision is mad e for all unreal iscd excha nge
losses to the extent not hedged .
Parti cipant ReuenueFees billed to co mpa nies (" Pa rtic ipa nts" ) which ente r into lon g-term mar ket ing ag reements wit h the Gro up
for the spo nsorship of attractions are recogn ised as reve nue rat eabl y over the per iod of the applicable ag reements
co mmencing with th e opening of th e att ract ion.
Costs and ex pensesTh e principa l components of Disn eyland" Par is Resort costs and ex penses inclu de direct opera t ing cos ts,
market ing an d sales expe nses, genera l and administr a tive ex penses, depr eciation and amo rtisa tio n.
Di rect operating costs include operati ng wag es and employee benefits, cost of foo d, beverage and merch andi se
sa les and other cos ts such as ut ilities, maintenance, insurance and opera ting taxes.
Earnings per shareEarn ings per sha re of co mmon stock is co mputed on the basis o f the weighted average nu mber of sha res
outs ta nding during th e fiscal yea r.
2 . FINANCIAL RESTRUCTURING
O n May 20 , 1994, th e Compa ny, TWDC, the Phase I SN Cs and certa in of th e finan cial inst itution s
and co mpa nies that ar e creditors of the Co mpa ny and th e Phase I SNCs (the "Lend ers" ) executed agreements
relat ed to a finan cial restructu ring (the " Financial Restructuring" ) subject to shareholder approva l.
At an extraordinary genera l meetin g on June 8, 1994, shareho lders approved resolutions for the Financia l
Restruct uring an d by August 10, 1994 , a ll ag reements relat ed to the Financial Rest ructu ring had been exec uted.
*
j( * C o Ns o...i .~DATED FINANCIAL STATEMENTSJ\ * f "OF EURO DISNEY S.C.A.
Th e Financial Restructu rin g was esse nt ia lly co mprised o f co ncess ions and co ntributions mad e by th e Lenders
and TW DC and the prep aym ent of ce rta in outs ta ndi ng loan ind ebtedness of th e Group and th e Phase I SNCs with
the net proc eeds of the Rights Offering (defined be low) . T he significant co mponents of the Fina ncial Restruct ur ing
are set fo rt h be low .
Rights Offering, Use of Proceeds and other Capital Transactions
Issuance of neio sha res and use of proceeds
TWDC and th e Lenders co mpleted an und erw rit ing of 595 million new shares of th e Co mpa ny in th e form
o f a rights offering (the " Rights Offering"), th e gross proceeds o f which were FF 5,950 milli on. TWDC subsc ribed
and paid cas h for 49 % of th e Rights Offering. T he rem ain ing 51 % of th e sha res were so ld pursuant
to an un derwriting co mmitment organ ised by a syndicate comprised essentia lly of the Lenders, of which
114 millio n shares were acqui red by th e Uni ted Sa udi Co mme rcia l Bank and its Chai rma n, Prin ce Alwa leed Bin
Ta la l Bin Abd ulaz iz AI Saud (" Prince Alwaleed" ),
N et proceeds fro m th e Rights O ffering amo unte d to FF 5,776 million, after a pp lica ble issuance cost s
and expenses, of w hic h FF 1,549 million was used to prepay a po rtion of the Company's senior debt and
the remaining proceeds of FF 4 ,22 7 mi llion were loaned directly to the Phase I SNCs, whic h in turn , prep aid
a porti on of thei r outsta nding bor ro w ings.
In Octobe r 1994, Prin ce Alwa leed acquired from ED L H olding Co. , an ind irect , w ho lly-o w ned subs id iary
of T\X1D C, 74 .5 mil lion sha res of co mmon sto ck of th e Company. As a result, thi s transact ion reduced T WDC's
percentage ownership in the Company from 49 % to approximately 39'Yc, and Prince Alwa leed's percentage
ow ne rship increased to approxima te ly 24 % .
Distribution of toarrants to existing shareholders
T he Co mpany dis tributed 170 million warrants to shareholders of reco rd on June 14 , 1994 . One wa rrant
was d istri buted per sha re of co mmon stock held , ena bling the ho lde rs of suc h wa rrants to subscribe
for o ne newl y-issu ed share of th e Co mpa ny 's co mmo n stock at a price of FF 40 fo r eve ry three warra nts held .
The wa rra nts have a term of ten yea rs and may be exercised between Janu ar y 1996 and Jul y 2004.
Capita l reduc tionThe Company's sha reho lders a pp roved the offset of the Co mpa ny 's accumu lated deficit as of Sep tember 30,
1993 aga ins t ex isting sha re pr emium and th e reducti on of th e Co m pa ny's sha re ca pita l fro m FF 1,700 milli on
to FF 85 0 milli on , by reducing th e nominal sha re va lue from FF 10 to FF 5. The specia l equity reserve
of FF 850 million resulting fro m the share capita l reduction an d a portion of the share premiu m genera ted
by th e Rights Offering were used to a bsorb the losses arising in fisca l year 1994 .
Lenders' Concessions
Redu ction of interest paymen ts
T he Len ders ag reed to wa ive aggrega te interes t cha rges paya ble by the Group and th e Phase I SNCs
on o uts tand ing debt ha vin g a net pr esent va lue as of O ctober 1, 1993 of FF 1,600 milli on (d isco unted at a rat e
of 7.5 % from O ctober 1, 1993 ).
Deferral of princ ipa l repay ments
Th e Lenders ag reed to defer for th ree ~ea rs fro m th e o rigi na l du e dat es princip al payments du e by th e Group
and th e Phase I SNCs on cert ain outs ta nd ing ind eb tedness.
*
The W ait Disney Company's Concessions and Contributions
Reducti on of roya lt ies under license agreem ent
TWDC agreed to waive a ll ro ya lt ies pa yabl e by th e Co mpa ny from Octo be r I , 1993 to September 30 , 1998 .
Co mme ncing October 1, 1998, royalties will be reinstated at o ne-ha lf the o rigina l ra te a nd beginning Octobe r I,
2003 , roya lties will be restored to their ori gin al ra tes.
Reduction of base management fees
T W DC ag reed to waive base ma nage ment fees pay ab le by th e Co mpany from October I , 1993 to Septembe r
30 , 1998. In add itio n, T WD C has perman entl y wa ived a ll base ma nagem ent fees payabl e for the yea rs 1992
an d 1993. Co mmencing October 1, 1998, base man agem ent fees will be re instated a t I 'x. of to ta l net revenues
and w ill esca lat e over time to a ma ximum of 6 % on October I, 201 8. T he a mo unt a nd pa yme nt of ba se
management fees ar e subject to certain limitat io ns.
Modifica tio ll of m an agem en t in centive fees
Beginning October J, J993, th e formula used to co mpute the man agem ent incent ive fees payab le
by the Co mpa ny has been modified to reflect , o n an ongoing ba sis, chan ges in the asset levels o f the G ro up
an d th e Pha se I SNCs.
Subscriptio n for ORAs ill O RA offerillg
TWDC subscribed for 99 .3 % of FF 1,000 milli o n of subo rd ina ted o bligat io ns red eema ble in sha res
(O RAs - O bligations subordonn ees Remboursab les en Act ions) issu ed by the Compa ny (rema in ing 0 .7'1.. was
subscribed by the public ). These O RAs have a face va lue of FF 400 per O RA, a term of 10 yea rs, a o ne percen t
cou po n per a nnum a nd will be redeemable at maturi ty in to 25 mill io n sha res of the Co mpa ny's co mmo n sto ck.
Provis ion of interim fina ncing
Fro m Janu ary th rough M ar ch 1994 , TWDC provided FF 69 8 million of interim finan cing to the Gro up whi le
restructuring discussion s pr oceeded . Th is deb t was offset aga inst amo unts pa yabl e by TWDC in co nnect ion
with its subscript io n of O RAs, as described a bove.
Cancellation of receivables
TWDC and certain o f its subs id ia ries cancelled existing receivab les du e fro m th e Co mpa ny of approxi mately
FF 1,200 million in resp ect o f serv ices rendered in connecti on with th e technical a nd administrative suppo rt
activit ies that were provided to the Co mpa ny.
Sale/leaseback of certain fixe d assets
EDA SN C agreed to pu rchase certa in asse ts, principall y T heme Pa rk attrac tio ns fo r their boo k va lue of
FF 1.4 billion. These asse ts were subseq uent ly leased back to th e Co mpa ny by EDA SN C fo r a peri od of 12 yea rs
for a fixed annual lease payment of FF 14 milli on under th e term s descr ibed in N ote 25 .
Provis ion of liquidity faci lity
TWDC agreed to mak e avail abl e, up on requ est by th e Co mpa ny, a subo rdi na ted unsec ured FF 1, 100 million
ten-year srand by revo lvin g cred it facility to th e G ro up whi ch bear s inte rest a t a ra te equ al to th e 3- mo nt h Pa ris
Inrer ba nk Offering Rate (" PIBO R") . Repayment s o f amo unts d rawn under th e facility wi ll be deferred for so lon g
as a mo unt s du e an d paya ble under th e Phase IA, Phas e IB or CDC Loa ns rema in unpa id. As of Septem ber 30 ,
J997, th e Co mpany had not req ues ted T WDC to estab lish thi s faci lity.
*
j( * C O N S W ,~ D A TE D FINANCIAL STATEMENTS** f "OF EURO DISNEY S.C.A.
Future deve lopment fee payable to TWDC
At such time as the Group laun ches a second phase of its development at the Disneyland" Par is Resort
and commitments fo r the necessary financing thereof have been obtai ned, the Company sha ll pay T WOC a
development fee eq ual to FF 1,200 million, subject to the cancellat ion of 38.3 million of the warrants issued
to nxroc in connection with the distri bution of warrants to existing sha reholders.
Concessions to Lenders and to The Wait Disney Company
Issuance of bonds with warrants
T he Co mpany issued to the Lenders FF 2 million of ten-year , subordina ted bonds bearing interest
at one percent per annum with wa rra nts attached ent itl ing them to subscribe for 40 million newly issued shares
of the Company's common stock at a price of FF 40 per share. T he wa rrants are exercisab le fro m Ja nua ry 1996
to Jul y 2004.
Marg in increases
T he Group agr eed, for a specified period of time, to annu a l margin increases applicable to variable interest
rate deb t on the Phase lA an d Phase IB cred it facilities of 0.2 75 % and 0.334 % , respectively. The net present value
of these margin increases as of October I , 1993 was approximately FF 50 million (discounted at a rat e of 7.5 %
from Oc to ber 1, 1993) .
Mo dification of debt covenants
The Financial Restructuring agre ements include covenants with respect to the restructured financing
a rrangements between the Group and the Lenders. Th ese covenants primari ly con sist of restrictions on addition al
indebtedness and capita l expenditures, the provision of certain financi al inform ation and compliance with certain
financial ratio thresholds which were modified by subsequent agre ements with the Lenders in 1996.
New Theme Park leasing structure
T he Co mpany entered into a new lease struc tu re for the Th eme Park with the Phase lA Financing Co mpa ny
and EOA SNC (see No te 25) .
3. TANGIBLE FIXED ASSETS
rn- ;Il mi llio lls ) ~ E I'T . 3 0 . 1996 .-\ » )) ( ri o x s ! ) E I >lJC T I O X S TR :\ X~FE I{S S EPT . .; 0 . 199 i
Land and seco ndaryinfr astructure 1 388 19 I 407
Buildings 1 508 2 63 573
Leaseho ld improvements,furn iture and equipme nt 588 14 (26) 90 66
Other 350 9 (23) 9 345
Subtotal 3 834 25 (49) 181 3 99 1
Construction in progress 185 208 (181 ) 2 12
Accumulated depreciation (96 9) (257) 49 ( I 177 )
3050 3026
Tangible assets include capita lised interes t costs of FF 205 million at September 30, 1997 and 1996.
Fixed assets with a net book value of FF 1,264 million at September 30, 1997, are either mo rtgaged or
pledged as secur ity under the loan agreements .
*
4 . LONG-TERM RECEIVABLES
0+ ill nullton s}
Phase lA Financing Co mpa ny (a)
Phase IB Financing Compa nies (b)
O ther (cl
199 7
6626
2561
l) 522
Septe mber 30 ,
6626
2 561
327
9 5 14
(a) Phase lA Financing Conipanv
Pur suant to the origina l T heme Park fina ncing agreeme nts, the Co mpany provided long-term subordinated
loan s of FF 3,849 mill ion to th e Phase lA Fina nci ng Company, the balance o f whic h wa s redu ced to
FF 3,73 8 mi llion during 1994. As part of the Finan cia l Restruct uring, the Company also provided an
additiona l FF 2,888 million to the Phase lA Financin g Company in the form of a su bo rd ina ted loan . T he loans
bear int erest at PIBOR whi ch , at September 30, 1997, was 3.44 % . Also du e to the Financia l Rest ructuring,
int erest cha rges on the out standi ng balan ce were redu ced by 100% d uring the seco nd ha lf o f fiscal yea r 1994
and progressively increase through fisca l yea r 20 03. Beginn ing in fisca l yea r 2004 , the app lica ble inte res t ra te
wi ll return to pre-restru ctu ring levels. Pr incipa l repayments on th is balance will begin in fiscal yea r 1998 and
continue thro ugh fisca l yea r 20 16. Principal rep ayments w ill to ta l FF 6 mill ion in fisca l year 1998. At
September 30, 1997 and 1996 , there was no accrued int erest on th ese loans.
(b) Phase lB Financing Companies
Pursuant to the original Phase IB finan cing agreeme nts, EO L H ot els S.C. A. provided long-term subordi na ted
loan s of FF 1,45 0 million to th e Phase IB Financing Compa nies, th e balance of wh ich was reduced to
FF 1,222 mill ion during 1994 . As part o f the Financial Rest ructur ing, the Compa ny provided an addi tio na l
FF 1,339 million to the Phase IB Finan cin g Co m pa nies and at the sa me time modified the intere st ra te to a
fixed rat e of 6 % on both loan tranch es. Also du e to th e Finan cia l Rest ructuring, int erest cha rges on the enti re
outsta ndi ng balance were reduced by 100 % during the seco nd ha lf o f fisca l yea r 1994 and progressively
increase th rough fiscal yea r 2003. Beginning in fisca l year 2004, the interest rat e wi ll return to the fixed rat e o f
6% . Rep ay me nt of th is balan ce co mmences in fisca l yea r 1998 and conti nue s throu gh fisca l yea r 20 16.
Repayment of pri ncip a l by the Phase IB Financing Companies wi ll total FF 15 mil lion in fiscal yea r 1998. At
Septem ber 30, 19 97 and 1996, there was no accrue d int erest on these loan s.
(c) Other
O ther consis ts pr imar ily o f long-term dep osits . In acco rdan ce with certain co nd itio ns stip ulated in co nnection
with th e Finan cial Rest ructuring, the Group is required to ma int a in a security dep osit as a pledge for the
benefit of the Phase lA and IB lenders. T he dep osit amo unts are interes t bea ring an d arc no t available to the
Group until a ll of th e senio r debt pursua nt to the fina ncing ag ree me nts has bee n pa id and ot her ob ligations by
both the lenders and the Group have been sa tisfied . At Septem ber 30, 1997 an d 1996 , the de posit amounts
incl uded acc rue d int erest of FF 3 million and FF 2 mill ion , respect ively.
5. INVENTORIES
Invent or ies co nsis t primarily o f merchandise, foo d and beverage and supplies. T hese amo unts a rc sta ted net
of a llowance fo r obsolete and slow-mov ing item s of FF 18 mill ion and FF 24 million a t September 30, 1997
and 1996, respectivel y.
6 . TRADE ACCOUNTS RECEIVABLE
T rade account s rece iva ble a re du e primari ly fro m to ur operato rs a nd tr avel agents , a rising from sa les
o f Them e Park ent rance tick ets, hotel ro om s and ame nities, as well as billin gs for Part icip ant fees.
At September 30, 19 97 an d 1996 , FF 17 million and FF 25 million , respecti vely, were provided fo r pot entia lly
uncollect ible acco unts . All amounts ar e du e within one yea r.
*
j( * C O N S W~\I D A T E D FINANGIAL ' -STATEMENTS '.1. '* ~! "", ~6 FEu R .O D I S'N E·Y S. C . A . ' ,:'~ y ,
7. OTHER ACCOUNTS RECEIVABLESeptember 3D,
(/ + i ll m i/lill ll io J
VAT
O the r
All amo unts a re due within one yea r.
8 . SHORT-TERM INVESTMENTS
1')') 7
469
235
704
332
194
526
Sho rt -ter m investm ents co nsist primaril y o f cash equiva lents such as mon ey market instruments and certificate s
of deposit, carried at cos t, which approxi mated ma rket va lue at Septe mber 30, 1997 an d 1996. At September 30,
1997, the balance includes FF 150 million of sho rt- ter m investm ents with o rigina l rnaru riries grea ter than 3 months.
9 . DEFERRED CHARGESSe ptem ber 30,
Financial co ntribu t ion s to public infrastructure (a )
O the r
1')') 7
' I)J __
42
36 4
33 4
48
38 2
(a) Financial contributions to public infra structure primarily con sist of a payment of FF 232 mi llion mad e
by the Gro up to the S.N .C. F. (Societe nati onale des chemins de fer [ rancais) , the French nation a l railway
cu mpan y, as pa rt of its fina nc ial commitme nt to th e co nstruction of the T. r; .v . (Train a Grande Vitesse) rail way
sta t ion locat ed within Disney land" Par is. T his co ntri but ion is being a mortised over twenty years and co mmenced
on th e opening of th e T .G .V. sta tio n in M ay 1994 . Cont ributions to pub lic in frastructure ar e stated net
of acc um ulate d amo rt isat ion of FF 81 million an d FF 6 1 mi llion at September 30, 1997 and 1996, respective ly.
10. SHAREHOLDERS' EQUITY!': IJ .\1 11 Ell ' HA Il E ~ II :\ R E AC C lJ .\l lI E.-\ T UJ
O F SH A Il ES C A I' IT A E I'l l E .\ II ,XI E Anx 1!':GS/( IJF Fl C IT )
( i ll rbl/u$.l1ldsl / f-r m m ;lI ,lI lI s) (n- m m il h fl l1$) liT i n HIlI/f il m '
Balance at September 30, 1995 76 5 039 3 825 I 887 ( 102 )
Alloca tio n to General Partn er (2 )
Exe rcice o f warrants and employee sto ck options 320 2
Ne t Incom e 202
Balance at September 30, 1996 765 359 3 827 I 888 98
Allo cati on to Ge ne ral Partner ( I )
Exercice of wa rra nts and emp loyee stock o ptio ns I 176 6 3
Ne t Incom e 21 7
Balance at September 30, 1997 766 535 3 833 I 89 1 314
T he num ber of sha res above, which have a nom inal va lue o f FF 5 per share, repr esent th e Co mpany's issued ,
outsta nd ing and fully pa id shares , at th e respect ive dates. At September 30, 1997, the Co mpa ny 's accumulated
ea rn ings incl udes a legal reserve of FF 56 million w hich is not ava ilable fo r distribution. No d ividend s were paid
relating to fiscal yea rs 1996 , 1995 or 1994.
*
11 . BONDS REDEEMABLE IN SHARES (" O RAS")
As part o f the Financial Restructuring, 2 ,500 ,121 O RAs eac h with a nom inal va lue o f FF 400 were issued
on Jul y 11, 1994. T he O RAs have a co upon o f 1% per annum and hav e a ten-yea r term. Upo n maturity,
eac h O RA w ill be redeem abl e by th e issuance of ten sha res o f th e Co mpany's co mmon stoc k. T hc accrued coupon
on th ese O RAs a t Septem ber 30, 1997 wa s a pprox ima tely FF 2 million .
12 . PROVISIONS FOR RISKS AND CHARGES
At September 30, 1997 and 1996, prov isions for risks and cha rges prima rily included provision s fo r va rious
claims and litigati on . During fiscal year 1997, certain provision s for risks and cha rges decreased , du c to the settlement
of certain claims.
13 . BORROWINGSSeptember 30,
(r F ill mil lions] 19 9 7 I YI.J (l
Co nvert ible bon ds (a ) 3696 3 662
CDC (b) I 109 I 10 9
Ph ase lA cred it faci lity (c) 975 975
Phase IB cred it fac ility (d ) 195 195
Other 137 137
6 111 6077
Accru ed int erest 264 25 4
6375 6 33 1
(a) Convertible bondsOn Jul y 15, 1991, th e Co mpa ny issued 28,350,000 un secured co nve rt ible bonds in the agg rega te princi pa l
amo unt of FF 3,969 mill ion , wi th a par va lue of FF 140. Int erest is paya ble annuall y at 6 .75'X, each October
I . Eac h bon d is convert ible int o 1.361 sha res of th e Company's co mmo n stock. T hrough September 30, 1997,
9,5 97 bonds have been converted . During fiscal years 1996 and 1995 , th e Co m pa ny purchased and ca ncelled
a total of 3,453,000 co nverti ble bonds with a face value o f FF 4 83 milli on. As of September 30, 1997, th ere
we re 24 ,887,4 03 bon ds outstand ing . Unless pr eviou sly co nverted, redeemed or purc ha sed by th e Com pany, the
bonds wi ll be redeemed at l 10 '10 of th eir principal amo unt on October I, 200 I . At Septem ber 30, 1997 and
1996, th e above bor ro wing amo unts inclu de accrued bond redem pti on premium of FF 2 12 mill ion and FF 178
million, respecti vely. Accrued interest relat ed to co nve rtible bonds at Septem ber 30, 1997 and 1996 amo unte d
to FF 235 milli on .
(b) Caisse des Depots et Consignations ("CDC") loanIn May 1992 , th e Company borro wed FF 1,4 03 million from th e C DC , of which 40 % wa s senior debt
and 60 % was subo rd inated debt (prets parti cipatifs ), bea ring int erest at a fixed rat e o f 7.85 'X, and matu ring
20 years from th e draw ing dat e . As part of th e Fina ncia l Rest ructuring, a po rt ion o f the proceed s from th e
Rights O ffer ing wa s used to prepay FF 295 million of the senio r C DC debt. Additiona lly, th e int erest wa s
reduced by 100 % during th e second hal f of fiscal year 1994, an d pr ogressively increases th rou gh fisca l yea r
2003. Beginn ing in fiscal yea r 2004, a ll outsta nd ing ba lan ces will bear interest at pre-restr ucruring levels. Th e
senio r debt is secured by th e underl ying lan d of the T heme Park , D isneyland " Hot el and Davy Croc kett Ranch.
The subord ina ted debt is un secured. Pur suant to th e term s of th e Fina ncia l Rest ructur ing, initial prin cip a l
rep aym ents have been defer red to 2002 wi th a ll debt balan ces maturing in 201 5. At September 30, 1997
and 1996, acc rued inte res t related to thi s loan amounted to FF 2 1 million and FF 10 million, respectively.
*
~*c 0 N S~J DATED FINANCIAL STATEMENTSl\* ,'f: ~6FEu,RoD I S N E Y S. C . A .
(c) Phas e lA credit facilityIn Dece mber 1992, th e Co mpa ny borrowed FF 1,295 milli on pursuant to a credit agr eem ent in orde r
to finance costs asso ciated with th e Pha se lA faci litie s bearing interest at PIBOR plus 1a/" (4.44'};, at September
30, 1997). In M arch 1993, th e Co mpa ny borrowed an addit iona l FF 730 mill ion und er th e sa me cred it
agreem ent, w hich bears inte res t ran gin g fro m PIBOR plu s 0.24% (3.68 % at Septem ber 30, 1997) to PIBOR
plus 1% (4.44 % at September 30, 1997). As part of the Financial Restructuring, the Company app lied a
portion of th e proceed s from the Righ ts O ffering to prepa y appro ximate ly FF 1,04 9 mi llion of outs tanding
borro wi ngs und er th is fac ility . In add ition, int erest charges on th e outsta nding balance foll owing the
prepa yment were redu ced by 100 % during th e seco nd half o f fiscal yea r 1994 and progressively increase d
through fiscal yea r 1996. Beginning in fisca l yea r 1997, th e app licab le int erest ra tes returned to pre
rest ruc turi ng levels plu s an addi tio na l ma rgin o f 0.275% per ann um th rough 2003. The obliga tions under th e
cre dit fac ility a re secured by th e Phase lA asse ts. Prin cip al repayme nts were init ia lly schedu led to co m mence in
1997 with all debt ba lances maturing in 200 6. However , pursuant to th e terms o f th e Financia l Restructuring,
initi al pr incipa l repayments have been deferred to 2000 with a ll debt bal ances maturing in fiscal yea r 2010. At
Sep tem ber 30, 1997 and 1996, acc rued inte res t related to this loan amounted to FF 6 million.
(d) Phase IB cred it faci lityPursuant to th e origina l cred it ag reeme nt, EDL Hotels S.C.A. borrowed FF 400 milli on , bearing int er est
at PIBOR plus 1% (4.44% at Septe mber 30 , 1997). As part of the Financia l Restructuring, th e outs ta ndi ng
borrowings under thi s facility were red uced to FF 195 milli on . In add ition, int erest cha rges o n the o utsta nd ing
balan ce foll owing the pr ep ayment were reduced by 100% during th e seco nd half o f fisca l year 1994
an d progressive ly increased th rou gh fisca l yea r 1997. Beginn ing in fisca l year 1998, th e ap plica ble interest rat e
will return to pre-restructur ing levels plu s an increase of 0.334% per annum th rough Sep tem be r 30, 2003.
The obliga t ions under the credit faci lity are secured by th e Phase IB asse ts. Principal rep ayments wer e ini tia lly
schedu led to be mad e beginn ing fiscal yea r 1995. Pursuant to th e terms of th e Finan cial Restructuring, initi al
pr inci pa l repa yme nts have been deferred to 1998 with a ll debt ba lances ma tu ring in 2012 .
Th e G ro up's borrowings at September 30 , 1997 hav e the fo llowing scheduled maruriries:
(/+mI111 1111I11$o 1
1998 1
1999 3
2000 110
2001 21
2002 3 751
Therea fter 2225
6 111
14. PAYABLE TO RELATED COMPANIEST he G ro up has certai n o utsta nd ing pa ya bles pri mar ily to th e Financing Com panies wh ich represent rent
payabl e pursu ant to th e Them e Park and Phase 1B leases and sub-leases (see Note 25) . All am ounts are du e w ith in
on e yea r.
*
15. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
(/+ i" millifJlls)
Supp liers
Payroll a nd employee benefits
VAT
O ther
All a mo unts a re du e within one yea r.
16. DEFERRED REVENUES
1 ') ') 7
77::>
279
2::>5
203
545
September 30,I ~P)h
655
269
234
200
35B
Deferred reve nues co ns ist prim aril y o f land gra nts, pa rti cip an t revenues a nd gai ns o n th e sa le of assets which
are being recognised as incom e over th e te rm during wh ich th e asse ts are leased back to th e Group.
17. CONSTRUCTION SALES AND RELATED SERVICES
The Newport Bay Cl ub Co nve ntion Centre was sold at co st, as it wa s co nst ructed, ro Ce nt re de Cong res
Newport S.A.S . For th e yea rs ended September 30, 1997 and 1996, these sa les totall ed FF 104 milli on a nd FF 38
mi llion, respectively.
18. DISNEYLAND0 PARIS RESORT COSTS AND EXPENSES
Direct operating costs
Ma rketing and sa les, ge nera l a nd ad mi nistra t ive ex penses
Depreciat ion and amo rtisa tio n
19. EXCEPTIONAL INCOME
(IT in nullionst
Provi sion s for ris ks and charges (a )
Ga in o n repu rch ase o f convertib le bo nds (b)
O the r
Year ended Septe mbe r 3 O,19 9 7 19 9 6
, 141) 2833, )
151 132
2n 279
4 597 4244
Year ended Sept ember 30,' 99 7 1 9 9 (\
46 3 1
15
6
52 46
(a) Prov isions for risks and cha rges
For the yea r en de d September 30, 1997, this amount is principa lly du e to rhe sett lement of certain cla ims
w hich resul ted in lower than a nt icipated costs.
For th e year ended September 30, 1996, this amount primaril y represen ts th e imp act o f mau agcm cnt 's decision
to ret ain employe e housing faci litie s, which had been previously held for sa le.
(b) Ga in 0 11 repurchase of convertible bonds
Th is a mo unt represents th e net ga in o n the repurcha se of a portio n o f the Co m pa ny's co nvert ible bonds
(see Note 13).
*
j( CONSO~IDATED FINANCIAL STATEMENTS
*- *. >. "'6FEu RoD I S N E Y S. C . A . ..
20 . INCOME TAXES
Income tax expense is ca lcula ted using the sta tuto ry ta x rate in effect as of th e ba lan ce sheet dat e. For fisca l
yea rs 1997 and 1996, thi s rate wa s 36.6 7%, . During fisca l years 1997 and 1996, no inco me tax was payabl e
by the Gro up as a result of the ut ilisati on o f FF 143 mill ion and H ' 223 millio n, respecti vely of ta x loss carry
for wa rds . Accordingly, th e G ro up's effect ive tax rate is O'x,. Subseq uent to September 3D, 1997, the legislature
app rov ed an addition a l tax that wi ll be app licab le to fiscal year 1997 and which will result in a fisca l yea r 1997
tota l sta tuto ry tax ra te o f 4 1.67% .
At September 3D, 1997, unu sed tax loss carryfo rwards were FF 6. 1 billion, F~ 4. 1 billion of which, if not
uti lised , wi ll expi re in fisca l years 1998 and 1999. T he rem ain ing tax losses can be carried fo rward indefinitely,
however, d ue to the unc ertai nty o f the ultimate rea lisat ion of these tax benefi ts, the Gro up has not recorded
any deferred tax assets.
21 . STOCK OPTIONS
In .June 1994, the Co mpa ny's shareho lde rs a pprove d the imp lementation o f an employee stock option plan
autho rising th e issuan ce o f stock o ptions for acquisition of up to 2.5% of the Co mpany's o uts ta nd ing common
stock (a pprox imately 19 million shares ). T h rou gh Septembe r 30, 1997, the Co mpa ny grante d a to ta l o f
17,963,DOO optio ns, net o f ca nce llat ions, (to acq uire o ne sha re of co mmo n stock eac h) to certai n ma nagers
an d employees at a ma rket exerc ise pric e w hich rep resented the average closi ng market price ove r the pre ced ing
20 trad ing days. Th e optio ns arc va lid for 10 years and becom e exe rcisa ble over 5 years in eq ua l insta lments
begi nn ing one year fro m th e date of gra nt.
A su mmary of the Co mpany's stock option ac tiv ity for th e years ended September 30 , 1997 and 1996,
is as fol lows:
Balance at September 30, 1995
O ptions grante d
O ptions exerci sed
O ptions cance lled
Balance at September 30, 1996
Options grante d
O ptions exercised
Optio ns can celled
Balance at September 30, 1997
:-:U .\II1 E R W E IGHTED - ..\ \' E ILl G E
O F O P T 1 0~ ~ EX EltC l 5 E I' RI C E
( Ill th o u5.md5) (1I11'1'!
15 045 9.82
275 13.72
(3 19) 8.24
( I 05 8) 10. 13
13 943 9.9 1
5 870 8.86
( I 176) 7.95
(2 149) 8.94
16488 9.80
At Septembe r 30, 1997 and 1996, options exe rcisable were 4,20 7,000 and 2,4 78,000, respecti vely.
Upo n term inat ion of employment, any unvested options a re ca nce lled. However , o pt ions that are exe rcisable
as of th e dat e of terminat ion , may be exe rcise d with in a specified period o f time or else th ey are can celle d.
22 . INTEREST RATE RISK MANAGEMENT TRANSACTIONS
T he Gro up uses inte rest rate swa ps and othe r instru ments to manage its ex pos ure to cha nges in interest ra tes
and to lower its ove ra ll borrowing cos ts. Th e imp act o f cha nges in inter est rates affect s both th e financia l incom e
and ex pense as well as the lease renta l ex pense o f the Gro up.
T he followin g tab le summar ises by not ional am o unts the act ivity for eac h ma jo r catego ry of interest ra te
cont racts outstanding d urin g th e yea rs ended September 30, 1997 and 1996. Roll -fo rward activity, wh ich
represent s renewa l o f existin g posit ions, is excl uded.
1:-':1' EH E\ T(I -F", nnlluntsl H.;\ TE S \\' :\ 1"
Balanc e at September 30, 1995 3 25O
Addi tio ns 200
M aru riti es/Amo rt isa tion
T erm ina t ions (3 25O)
Balance at September 3D, 1996 200
Additions 2 00O
Ma ruri ties/ Amo rt isa t ion (200 )
T erminati on s (2 ODD)
Balance at September 3D, 1997 0
C O I. L \ H
.\ G H H M I ;'; I
I ODD
1 000
I 000
1 0 H\\ ,\ H I> 11.\ rr .,H , IO I \1 1:."1; '1"1
2 000
I 250
(2 500)
(750)
o
o
lnrer esr rate co ntracts held by the Company at September 30, 1997 and 1996 are described below:
a) Interest rate swap
D ur ing 1996, th e Co mpa ny entered into a FF 200 mill ion co urrucr w hich co nve rte d the return on ce rt a in
sho rt -te rm investments from da ily ove rn ight ra tes to PIBOR. T his instrument matured in M a rch 1997 wit h
no material im pact on th e 1997 financial sta rern cnrs. During 1997, the Group entered int o a five-year,
FF 2,000 million interest rate sw ap contract which was terminated prior to its orig inall y sc hed u led maturity
date. Under th is co ntract, the Group received a fixed rate of 4.5 9% and paid a n av erage PIBOR of 3.42 'Y.•.
b) Collar agreement
At Septemb er 30, 1997 and 1996, th e Compa ny had o utstand ing a FF 1,000 m illion co lla r ag ree me nt, matur ing
in November 1997, which lim its th e fluct ua tio n of PIBOR to a range between 5.75% and H.75% (o n a qu arterl y
money market basi s). During 1997, the PIBOR rate which applied to th is co nt ract averaged 3.53 %.
Du rin g t he years 1997 and 1996, amortisation of deferred ga ins on the ea rly termination o f in te res t rate
hedging co ntracts w as FF 27 milli on an d FF 29 mi llion , respecti vely.
T he total inter est rat e d ifferenti al resulti ng from t he inte rest ra te hed gin g inst rumen ts, incl ud ing th e defe rred
gai ns a morti sa tio n men tion ed a bove, red uced int er est expense by a pproxima tely FF 12 million and FF 15 mi llion
during the years en ding September 30, 1997 and 1996, respect ively.
The fair value of these contracts is estimated to be the same as th e cost o r gai n to th e Group to term inat e its
inte rest ra te hedging contracts . At September 30, 1997, taki ng into aCCOUIlt the prevai ling interest rate
env iro nment and cr edi t wo rt hiness o f co unre rp artie s, t his a mo unt wo uld represent a lo ss of FF 4 milli o n .
Management believes no sign ificant co ncentra tion o f cred it risk ex ists wit h res pec t to th e G ro up's finan cia l
instruments. The G roup uti lises a va rie ty of off-ba lance sheet instruments fo r hedging purposes. At Septe m be r 30 ,
1997 and 1996, neither the Group nor the counrerparties were required to co lla re ra lise th eir respective obliga tio ns
under the terms of these hedging contracts.
A 1% cha nge in market interest rates, th ro ugh o ut fisca l year 1997, wo uld ha ve resulted in appro ximately a
FF 25 milli on di ffer en ce in th e current perio d ea rn ings o f th e G ro up.
23 . CURRENCY RISK MANAGEMENT TRANSACTIONS
T he Group's policy is to protect itself to the extent possible fro m th e effe cts of fluctuat ion s in th e foreign
excha nge markets . T he Gro up's ex posure to fo reign currency risk relates to va ria t ions in the va lue o f t he
U.5 . do llar a nd ce rta in European currencies.
At Septe m be r 30, 1997 a nd 1996, th e G ro up had FF 122 mi!l ion and FF 239 mi llion, respectively, of fo re ign
cu rrency hedge co nt ra cts o uts ta nd ing, co nsist ing of for wa rd excha nge cont rac ts and o ptio ns . '0materia l impact
to the financia l sta tements res ulted from foreign currency hed gin g operations in 1997 o r 1996.
*
24. COMMITMENTS AND CO NTING ENCIES
T here are va rio us legal pr oceed ings and cla ims aga inst th e G ro up rela ting to co nst ruct ion and other ac tivit ies
incident m the co nd uct of its business . Management has esta blished pro vision s for such matter s and does
not expect th e Group to suffer any mat erial addi t iona l liability by reason o f such act ions, no r does it ex pec t
th at such act ions will have a material effect on its liquid ity or o pera ting results.
The Company is jo intl y liabl e for a ll Phase lA fi na nc ing Co mpa ny obliga tio ns under th e Phase lA credit
agreement w hich total ff 2, I00 milli on as of Septem ber 30, 1997.
EDL Hotels S.Ci\ . has guarantee d a ll o f th e o bligations of the Pha se lB Fina nc ing Co mpa nies under
th e Phase IB credi t faci lity w hich to ta l FF 1,115 mi llion as o f Septe mber 30, 1997.
25. LEASED ASSETS
Th e Gro up owns th e Disney land" Hot el, Davy Crocketr Ran ch, go lf co urse an d th e land o n w hich the other
five hot els an d Dis ney" Village are locat ed, and leases substa ntia lly a ll of the rema ining operat ing asse ts . Pur su ant
m op tio ns avai lab le un de r frenc h account ing pr inci ples, the G ro up has not capita lised th ese leases and has
accounte d for them as operat ing leases.
Theme Park and Hotel Leases
Description
Th e Gro up leases the T heme Park, th e Phase IB faci lities and th e Newpo rt Bay Club Co nve nt ion Ce nt re,
d irectly or indirectl y, fro m eight spec ial purpose finan cing companies. T he following discussio n summarises th e
significa nt term s of eac h lease:
a) Theme Pari? - Phase lA Lease
O rigina lly, purs ua nt to the Phase lA finan cing agreements, the Compa ny leased the T heme Park directl y fro m
the Phase lA fina nc ing Co mpa ny under a credit -hail (lease) w hich co mmenced O pening Day and was to end
w hen th e un derl ying bo rrowings and int erest we re repa id in full by the Phase lA f inancing Co m pa ny .
Purs ua nt to th e term s of th e Fina nc ia l Restru ct uring, a new leasing str uct ure for the T he me Park asse ts was
imp leme nte d.
Under th e new lease st ructure, effective June 30, 1994, the o rigina l lease was ca nce lled and a new lease
esta blished w here by th e Phase lA Financ ing Co m pa ny leases the Th em e Park m EDA SNC with term s similar
to th e origina l lease. The Company, in tu rn , is subleas ing the T heme Park fro m EDA SNC fo r a term of 12
years wi th rent substan tia lly equa l to th e amo unt invoiced by the Phase lA f ina nci ng Co mpa ny m EDA SNC
At th e en d of th e sublease term , th e Company will have the opt ion m acq uire th e leaseh old position of EDA
SNC up on payment of an optio n fee of ap proxi ma te ly ff 5 1h mi llion . If the Co mpa ny does not exe rcise thi s
option and th ereby elects to discontinu e leasing the T heme Park, EDA SNC may co nti nue to lease th e asse ts,
with an ongo ing option m purch ase th em for an amo unt approxima ting the balance of th e Phase lA Finan cing
Compa ny's then outs ta nd ing debt. Alte rna t ively, EDA SNC co uld terminate the lease, in wh ich case EDA SNC
wo uld pay the Phase lA Fina nc ing Co mpany an amo unt eq ua l to 75% of its then o utsta nd ing debt, and co uld
then sell o r lease the asse ts on beha lf o f the Phase lA Financing Co mpa ny, in or der m sa t isfy th e remaining
deb t, wit h any excess proceeds payabl e m the benefit of EDA SNC Under th e new lease str ucture, th e long
term subo rdina ted loan s provide d by th e Co mpa ny m the Phase lA Financ ing Compa ny (as describ ed in Note
4 ) are pledged as security.
b) Theme Pari? - Additional Capaci ty Attractions Lease
As part of th e Fina nc ial Restructuring, EDA SNC pu rch ased certai n tan gibl e fixed asse ts, princip ally Theme
Park at tract ions co nstruc ted subseq uent to O pening Day, for their book va lue o f FF 1,400 mill ion an d
su bseq uently leased th e asse ts back to th e Co mpany for a period of 12 yea rs for a fixed annua l lease pay ment
o f FF 14 milli on . At th e end of th e lease term , th e Co mpa ny wi ll have th e op tion to purc hase the asset s for
FF 1,400 million . If th is op tion is exe rcised, T\X1 0 C has agreed to provide fina ncing ove r an eig ht-year term at
an int erest rate of 1% per annum. As an a lte rna tive to th is purchase optio n, the Co mpa ny may enter inro a
new 12-yea r lease for these asse ts wit h EOA SNC at rhe end of th e or igina l leasc te rm, wi rh rcr ms substant ia lly
similar to those o f th e financing fo r the pu rch ase option described a bove , Ar the cnd of this scco nd lease term,
the Compa ny will have th e opt ion o f purchasing th e leased asse ts fo r a nomi na l a mo unt.
c) Hotels - Phase IB Facilities Leases
EDL H otels S.C. A. leases rhe Phase IB Faciliti es fro m rhe Phase IB Financ ing Co mpanies, T hc lenses wi ll
termi nat e in 201 6, wh en th e underl ying borrowin gs and int erest o f th e Phase IB Financing Companies ar c fully
repaid . Beginning in fiscal yea r 1998, th e Gro up will have th e option to acquire th e leased assets for an
amo unt approxi ma ting th e balan ce of th e Phase IB Fina ncing Co mpa nies' th en outstand ing dcb r. Should rhis
op tio n not be exercised, EOL Hotels S.C. A. will have th e option to pu rch ase these assets fo r a nominal
amo unt up on ex pira tion o f the leases.
d) Hotels - Ne wp011 Bay Club Convention Centre Lease
EOL Hotels S.C.A . has sa le-lease bac k ag reements w ith Ce nt re de Co ngres New po rt S.A.S., for rhc cwporr
Bay Club Co nve nt ion Ce nt re. Th e lease has a term of 20 yea rs, a t the end of which EO L Horcls S.C.A . has
the option to repurcha se th e co nve nt ion cent re for a nominal amount.
Lease rent a l ex pense was FF 590 million an d FF 42 8 million for rhe yea rs ended Septembe r 30 , 1997
and 1996, respect ively. The renta l ex pense un de r th ese leases co nsis ts of the lesso r's deb r service paymen ts
(principa l and int erest ), including th ose related to the long-term loans gra nte d by rhe G rou p (as descr ibed in
N ote 4 ), and any operat ing co sts (prima rily pro perr y taxes ) incurred by th e lesso r. Th us, lease renral expense wi ll
fluctuate princ ipa lly with th e lessor's int erest ex pense variat ions, du e to varia ble interes t ra tes and inte rest
fo rgiveness rat e changes, and the timing of pr incipal repaym ent s on the leasing ent ities' deb t .
Lease Contntitments
Th e follow ing table summarises th e gros s amo unt of future minimum rental co mmi tments (exclud ing opera t ing
costs) d ue to th e Fina nc ing Companies, under non-cancellabl e opera t ing leases. Th e fut ur e co mmitments
ca lculat ion is based up on th e fo llowing assu mptions:
- Average future PIBOR of 6% ;
- T he Co mpa ny w ill exercise its purchase o pt ions at the end o f the 12th yea r o f the T heme Park leases.
In thi s event, th e Co mpa ny wo uld have an add itiona l net co mmitme nr o f FF 8,334 mill io n relat ed to
th e purchase o ption and futur e renta l payment s ove r the subseq uent ren years under th e terms of the lease
with th e Phase [A Financin g Co mpa ny;
- The Gro up wi ll exercise its purchase optio ns on th e Hot el leases at th e end of rhe Phase IB and Newport Bay
Club Co nventi on Centre lease terms.
Rent al commitments as of September 30, 1997 a re as follows:
1998
1999
2000
2001
2002
T he reafter
Total
TO L A I. 1.1.\\ 1' D EBT .... un'l cl ro r :\ I I I ,\\1
TlI DI E 1 · .~It K 1I0 T EI. C O .\I .\11"1 .' \ E:'\ -' 1' ..\ Y .\l I. ~ T '" C O ,\ L\ t1 I .\lE:" "'
1.1-: :\"'[ '" I.E.\\E\ (; 1l0 \ \ ,I,\ \ O U :q \ 1 ( \L1 :" 0 I I. .j ) (:" 1 1 ,I vro u xt , )
73 5 23 3 968 (5 12 ) 456
797 262 I 059 (58 1) 4 78
842 285 I 127 (626 ) 50 1
944 300 I 244 (679 ) 565
1 046 3 18 I 36 4 (696) 668
4 650 5933 10 5 83 (5 807) 4 77 6
9014 733 1 16 34 5 (8 90 1) 7 444
*
'**CON S oJ;'JD ATE D FIN A N C I A L S TAT E MEN T Sl\ '*' ,t" ~O F EURO DISNEY S.C.A.
Gross lease renta l co mm itments include prin cipal and inter est amo unts due to the Gro up as repayment
o f the lon g-term loan s gra nte d by the Gro up to the Phase I SNCs. However, th e portion o f th e rental
commitments related to principal and inte res t amo unts on th e lon g-term loans gra nted by the Gro up to the
Phase I SNCs has no cas h How impact on th e Gro up as the cas h outflow for rental ex pense is exactly offse t
by the cas h inflow of inte res t and principal repa yment s. T herefore, the portion of the gross renta l co mmitme nt
relat ed to the repayment of th ese long-term loans is sepa ra tely ide nt ified to arr ive a t a to ta l ne t lease co mmi tme nt.
Book ualu e of leased assets
As th e Group acco unts fo r th ese t ran sact ions as opera ting leases, th e historical cost and de preciat ion
of th e assets, and rela ted inde btedness are not included in the Gro up's co nso lida ted finan cial sta tements. T he boo k
va lue and depreciat ion o f the asse ts, which a re ca rr ied by the Financing Compa nies , a re summarised as fo llows:
September 30, 1997
II I ST O IU C A J. '\ C C lI .\! lIL ,ITEIl 0: ET BO OK ES T !,\! ,I T E Il
(1"1-' illl11tllirlll:;/ C OS T IlI'l'H ECIAT I0 0: VA LUE LlS E ElI E LIVES
Int angible asset s 10 1 (35) 66 10 yea rs
Lan d and seco ndary infrast ructure 1 985 (40 1) 1 58 4 10 to 25 yea rs
Buildings 12 170 (2630) 9540 25 to 33 years
Lease ho ld irn prove ments,furn itu re and fixtures 2 683 (1 179) I 50 4 10 to 25 yea rs
O the r 15 (9) 6 5 to 10 yea rs
16 954 (4 254) 12 700
Depreciati on above is co mputed on th e st raig ht- line meth o d based upon estima ted useful lives. Depreciati on
ex pense was FF 803 million and FF 806 millio n for th e yea rs ended September 30, 1997 and 1996, respectively.
Other Leases
Th e Gro up has othe r operating leases, pri mari ly for office an d computer eq uipment an d vehicles, for which
tot al renta l ex pense was FF 159 million an d FF 171 million fo r the yea rs ende d September 30 , 1997 and 1996
respect ively. Future minimum renta l commitments under these non -can cella ble o pera ting leases as of September 30,
1997 are as follows:
(/+i" millions)
1998 25
1999 18
2000 16
2001 14
2002 12
Th ereaft er 37
122
26. EMPLOYEES
Th e weig hted average num ber of cas t mem bers em ployed by the Gro up was:Year ended September 30,
' 9 9 7
Ca dres
Non-cadres
I 603
8 705
10 308
I 546
8 838
10 384
Tot al employee cos ts for years ended September 30 , 1997 and 1996 were FF 1,75 1 mi llion and
FF 1,720 million, respectively.
27 . DIRECTORS' FEES
During th e yea rs ende d Septem be r 30 , 1997 an d 1996, fees pa id to members o f the Co m pa ny's Supervisory
Board wer e FF 1,375,000 a nd FF 1,350, 000, res pectively.
28. SUMMARY OF DIFFERENCES BETWEEN ACCOUNTING PRINCIPLES ADOPTED BY THE GROUP ANDGENERALLY ACCEPTED ACCOUNTING PRINCIPLES IN THE U.S. AND SUPPLEMENTAL DISCLOSURES
Reconciliation to U.S. GAAP
As a resu lt o f the Rights O ffer ing described in ore 2 , Euro Disn ey S.CA. is req uired to file a n an nual repo rt
o n Form 20-F w ith th e Securit ies a nd Exchange Co m mission (" SEC ") in th e Un ited Sta tes with in six mo nt hs
of Septem ber 30 ea ch yea r.
As ex plai ned in th e sum ma ry o f sign ifica nt acco unt ing pol icies, the co nso lida ted fin a ncia l sta teme nts ha ve been
pr ep a red in accorda nce wi th account ing princip les ge nera lly accepted in Fra nce (" Frenc h GAA I''' ). French GAA I'
va ries in certa in significa nt respec ts from acco unti ng pr inc ip les gene ra lly accep ted in the United Sta res (" US
GAAP" ) particu larl y for leases o f o pera ti ng ass ets , w hich a re acco unted fo r as o pe rat ing lea ses in accorda nce
w ith o ne of th e o ptio ns a llowed by French GAA P ra th er th an being ca pita lised. Add it io na lly, in co nnection
with th e Fina nc ia l Restructuring, th e Co mpa ny 's computa tio n o f int erest ex pe nse under French GAA I' di ffers
sign ifica ntly fro m u.s. GAA P.
The reco nciliati on s o f net income, eq uity and bo rrowings between French a nd U.S. G AA I' a re sho w n belo w,
foll owed by a condensed co nso lidated ba lance sheet prepa red under U.S. G AAI'. A desc ript ion of th e acc o unting
principles wh ich mater ially d iffer fo llows:
Reconciliation of Net Income (Loss)
(FF ;11 millirJ1ts}
N et Income, as reported under Fren ch GAAP
Lease a nd inte rest ad justme nts
O the r
Net Loss under U.S. GAAP
Reconciliation of Shareholders' Equity
( l+ il1 l11ill;,m~ '
Sha reho lder s' Equity, as reported un der French GAAP
C um ulat ive lease a nd interest ad justme nt s
Effec t of reval uing th e O RAs and sa le/leaseb ack tr an sact ion s
O ther
Shareholders' Equity under U.S. GAAP
Reconciliation of Borrowings
(i+ il1 l1tilli fll1S)
T ota l Bor row ing s, as rep o rted under Fre nch GAAP':'
Unco nso lidated Phase I SN C deb t
Bo rrowing s inclu d ing un con sol idar ed Phase I SN Cs
Lease fina ncing ar ra nge me nts wi th T \XfD C
Ad justme nts to reva lue O RA s a nd lease financi ng a rrangements
Redemp t io n pr emium o n co nve rt ib le bo nd s
Total U.S. GAAP Borrowings
Year ended September 30,1 C)L) 7 19 \) 6
2 17 202
( I 0 16) ( I 2 15 )
un (S)
(SOl ) ( I (2 1)
September 3D,' ') ') 7 1 l) l) 6
603S 5 S 13
(5676 ) (4 ( 60)
I 16S I 16S
(43) (35 )
I 4 S7 22S6
September 30,' 9 9 7 I \) l) (1
h 900 6 900
S 2 1S s 2 1S
15 II S 15 II S
I 54 S I 400
( I 09 4 ) ( I 120 )
2 12 17S
15 7S4 15 576
* Excluding accrued interest and convertible bond redemption premiu m
*
"**CON S W 'I D ATE D FIN A N C I A L ' S TAT E MEN T S
l\* , f' ~6 F E.uRoD I S N E Y S. C. A.
Balance Sheet under U.S. GAAP
(I -T ill mjIJioll~ 1
Cash and short term investments
Receiva bles
fi xed assets
Other asse ts
Total Assets
Accou nt s pa yab le and other lia bilities
Bor rowings ".
Sharehold ers' equity
Total Liabilities and Equity
Se ptem ber 30,1 ') ') 7 19 9 6
I 8 17 I 54 0
I 029 830
17 50 9 18 185
I 114 I 140
2 1 469 21 695
4 198 3 833
15 78 4 15 576
I 487 2 286
2 1 469 21 69 5
e Excl ud ing accrued interest
Lease and interest adjustments
The Group leases substa nt ia lly all of its o pera t ing assets under vario us agreements . Under fre nch GAA P,
th e Gro up has no t cap ita lised these leases and is accounting for them as opera ting leases. Under U.S. GAA P,
the und erlying assets and liab ilit ies and rela ted dep reciat ion and interest ex pense a re reflected in th e Gro up 's
financia l statements .
Under U.S. GAAP, all int erest cha rges rela ting to deb t instruments whose int erest ra tes a re sched uled to chan ge
or have interest " holidays" or fo rgiveness per iods a re requi red to be ca lculated in accorda nce with the "effective
interest method " . Thi s meth od calculates the estimated interest cha rges ove r the life of th e debt , a nd alloca tes
th is amo un t evenly over the term of the debt using an effective yield. This ad justment resulted in addition al
interest ex pense in 1997 and 1996 as interest expense calc ulat ed using this method exceeded actua l interest paid.
Bonds redeema ble in sharesUnder fre nch GAA P, th e ORAs have been reco rded at face va lue (Ff 1,000 mill ion ) as a separa te co mponent
of the bala nce sheet. Und er U.S. GAA P, the O RAs have been reco rded at the discounted fair value, ca lculated
as of th e issua nce dat e, of appro ximate ly Fl' 324 million and included in the Co mpany' s o utstand ing bor ro win gs.
Borrowings
Descrip tion
As descr ibed in Note 25 , the Gro up has not ca pita lised th e leases o f its opera ting assets but has accounted
fo r th em as o perating leases. Under U.S. GAAP, th e leases would be capi ta lised. The und erlying asse ts asso ciated
with these leases are set out in Note 25 a bov e. Set our below is a sched ule of US GAA P o bligatio ns associa ted
with these leases:
(I ·r ill mifl ilJus)
CDC loan (a)
Phase lA credi t faci lity (b)
Phase IB credit facility (c)
Pha se lA partn ers' advances (d)
Phase IB partners' adva nces (e)
EDA SN C lease financ ing a rrangement (f)
Newpo rt Bay Club Convention Cent re lease fina ncing arran gement
Accrued int erest
Sept e m be r 30,1')')7 1')')6
23 70 2 370
2097 2097
I 11 5 1 115
2000 2000
636 636
')X2 957
14 8
9348 9 175
106 56
9 45 4 9 23 1
(a) CDC loan
Loan co ns ists o f bo th sen ior deb t and subo rdi nated debt. Senior dehr is co llurcra lised hy the lan d oi the
Theme Park, Disneyland" H ot el and Davy C rockerr Ran ch . T he dehr hea rs inreresr a r a fixed rare oi 7.li5%.
Principa l repayments commence in fiscal year 2000.
(b) Phase lA credit facility
T he Phase lA cred it facil ity consists of three rranches of debt, drawn again st a facility oi FF 4,500 million
and co llarera lised by a mortgage on the T heme Pa rk, Dis ney land Hotel a nd Davy C rockerr Ranch. Th e
Co m pa ny is a eo-obligo r on thi s facility with the Pha se lA Fina ncing Company. Interest rates on the di fferent
rran ches ra nge between PIBOR plus 0.75 %, (4. 19'% at September 30, 1997) and a fixed rare of 9.0 % .
Prin cip a l repayments co mme nce in 1998.
(c) Phase IB credit facility
Drawn agai ns t a fac ility of FF 2,300 mi llion from a syndicate of hanks and secured hy th e five Phase IB hot els
and entert a inment centre. Th e debt bea rs interest at PIBOR plu s 1.0% (4.44' X. a t Sept ember 30, 1997).
Principal repayments commence in 1998.
(d) Phase lA partners' advances
Senior debt related to the Phase lA asse ts . Th e tw o tr anches of debt bear inte rest ar !'IBOR plus 4.5 % (7.94 %
at September 30, 1997) and a fixed rat e of 3.0% . Beginn ing Apr il 1sr, 1997, all debr hea rs interest at a fixed
rate o f 3 % . Pr incipal rep ayments ar e scheduled to commence in 2010.
(e) Phase IB pa rtne rs' advances
Sen ior debt related to Phase IB asset s co llareralised by Pha se IB buildings and fixtures. T he di fferent rrnnchcs
of debt bear interest ra ng ing from a fixed rate of 3.0% to i'WO R plu s 1.13% (4.57% at September 30, 1997).
Principal repayme nts a re schedu led to co mmence in 2006. T his amount includes FF 124 mi llion of hank
borrowings.
Und er th e terms of the Financia l Restructuring, the interest rat es on these o uts ta nd ing borrowings we re
red uce d by 100 '% during the seco nd hal f o f fiscal yea r 1994 and progressively increase over var ying periods
th ro ug h fisca l yea r 2003 (see Notes 2 and 13).
(f) EDA SNC lease financing arrangement
Represents the Company's o bligation und er the Theme Park-Addition al Ca pacity Artr action s lease with
EDA SN C (as described in Not es 2 and 25 ). Under US GAAP th is tran sact ion is co nsidered a financing
arrangem ent at a ra te below market levels, therefor e th e oh liga tion was d isco unted to reflect current marker
rates of interest at th e ince pt ion of th e lease. Th e discounted obliga tion is being accre red to its maturity value
o f FF 1,400 million.
These o utsta nd ing borrowings ha ve the following sched uled mar uriries as of September 30, 1997:
1998
1999
2000
200 1
20 02
T he rea fte r
12
42
107
2 17
s 947
9348
1<*C0 N,,~ ~! DA TED FIN AN C lA L S TA TE M ENT S~ * .>: OF ·E U R O DISNEY S.C.A.
Fair value of borrowings
At September 30, 1997 and 1996 , the fair va lue of the Gr oup's US GAA P cash and short -te rm investment s,
receivab les and accoun ts payabl e approx imated carrying va lues du e to the sho rt -te rm nature of these instru ments.
T he estimated fair val ues o f US GAAP borrowings based upon quoted market prices o r the pr esent value of future
cash flows and the rela ted car rying am o unts are as follows:
September 30, 19 9 7 September 30, 1996
C A H I{ Y I i\:G r .~ 1R C A R I! \'I :-;G FA IR
(1+ ill JJl rllilJ l1sJ f\ .\ 1 0 lJ ~ T " AI.U E A .\l O ll :'JT VA LUE
Convert ible bonds 3696 3734 3662 3 5 18
Lease fina ncing arrangeme nts I 130 936 957 7 10
O ther bo rrowi ngs 10 958 [I 050 10 957 10508
Total 15 78 4 15 72 0 15 576 14 736
The fair value of other borrow ings a bo ve increased slightly in fisca l year 1997 primari ly as a resu lt
of th e progressive phase-our o f th e interest forgiveness prov ision s of the Financia l Rest ructu ring, the impact
of which was partially o ffset by lower va riable inte rest ra tes.
Additional U.S. GAAP disclosures
Incom e tax esUnde r US GAA P, th e Gro up follows th e Stat em ent of Acco unt ing Sta nda rds no. 109 ("S FAS 109" ),
"A cco unting for Income T axes". SFAS I09 requ ires recogni t ion o f deferr ed ta x asse ts an d lia bilit ies
fo r the ex pected future ta x co nsequences o f events that hav e been recogn ised in the financ ia l sta tements
o r ta x ret urn s. Under th is meth od, deferred ta x assets and lia bilities ar e determined based on t he difference
between the fina ncial sta tement carrying amo unts and ta x bases of assets and lia bilit ies using enacted tax rat es
in effect in the yea rs in wh ich th e diff erence s ar e ex pected to reverse.
Th e fo llow ing ta ble summarises the sign ificant co mponents o f deferred ta x assets and liab ilities:
(/ ·r in nnlliun s]
Effecti ve interest method liabi lity
Leased asse ts
Loss car ryforwa rds
Tota l Deferred Tax Assets
Valuation allowance
Net Deferred Tax Assets and Liabilities
September 30,' 9 9 7 '99 6
466 33 1
I 868 1 351
2542 2310
4876 3 992
(4 876) (3992)
0 0
Th e total sta tutory tax rate, app lied under US GAAP, was 41 .67% and 36 .67% for the years end ing
September 30, 1997 and 1996 , respectively. As described in No te 20, the Group's effective tax ra te is 0%
for the fisca l years ending September 30, 1997 and 1996. Due to the uncerta inty o f th e ultimate rea lisation
of the deferred tax asse ts listed a bove, the Group has esta blished a 100 % va luation allowance aga inst these asset s.
Imp ainnent of long- lived assets
Sta tement of Financia l Accounting Stan da rds 12 1 (" SFAS 121 " ), " Acco unt ing for the Imp a irment
of Lon g-L ived Assets and for Lon g-Lived Assets to be Disposed of ", wa s adopted as of October 1, 1996
with no ma teria l effect on the financ ia l sta tem ent s. T his sta tement req uires tha t lon g-lived assets held and used
by an entity be reviewed for imp ai rme nt w henever events or cha nges in circumsta nces ind icat e that th e carrying
value of an asse t may no t be recoverab le.
*
Em ployee stock options
Effec t ive, Octobe r 1, 1996, the Company ado pted State ment o f Fina ncia l Acco unt ing Sta nda rds 123
("SFAS 12 3 " ), "Account ing for Stock Based Compensa t ion" . T his stateme nt defi nes a fair va lue ba sed method
o f accounti ng fo r employee stock op tions; however , it a lso a llow s an entity to continue to measure compen sation
costs using th e intrinsic va lue base d method of acco unting pre scribed by Accounting Principles Board Opinion 25
("APB 25") "Accounting fo r Stock Issued to Employees" . Compensation cost und er APB No 25 is th e excess ,
if any, o f th e mark et pr ice of th e stock at the da te of gran t ove r the amount an employee mu st pay to acquire
th e stock.
Under US GAAP, th e Co mpa ny has elected to co nt inue to measur e co mpensa tion cos ts using the meth od
of accounting prescribed by APB 25 wh ich resulted in no mat eri al co mpensa t ion ex pense for options granted
during th e tw o yea r peri od ended Sep tember 30, 1997 . H ad co mpensation co st for th e Co mpany's stock options
bee n determined co nsistent wi th th e fair va lue approach set fort h in SFAS 123, no ma ter ial adjustments to
net inco me or ea rn ings per sha re would have been requ ired .
The weighted-average fai r val ue of op tions granted was esti mated using the Black-Sch oles option pricing
mode l. Using a dividend yie ld assumption of 0 %, expected volati lity of 4 1.47 'X>, a weig ht ed-average risk free
interest rat e of 4.92 % and an ex pec ted average nu mber of yea rs until exercise of 4, th e weighted -a verage fa ir
va lue of options granted in fisca l years 1997 and 1996 was FF 3.5 1 and FF 6.32 , respecti vely.
The foll owing ta ble summari ses informat ion a bo ut stock options at September 30 , 1997:
It A N G r OF EX r n CI S E PIU CE
FF 5 .00 - 10.00
FF 10. 01 - 15.00
FF 15.01 - 20.00
Options ou tstanding Optio ns exercisab le
\\' 1'.IGllT EIJ - ,l l' l' n ,\(; I·. \\' E IG lln.lJ- 111.1 <; 11 11.1 >-x ~I B E n It E .\ I :\ I :'0: 1:-':( ; ,I I' I. I{,I (; I' :\' 11.\1 BUt :\ \ ' I.IL \ C I
or SH ,l n r s C (] ~T n ACT U A I. 1.1 1'1' I.XUt C ISE O f '\ 11..\ I{ L' L X I !U . J"a I.
(;11tb lltts.mdsJ (m yt'." sJ ,' ({I C E ( / /1 tI.I I ,,, ~ .mds l "I U U
11 563 8 FF 8.0 9 2 9 1S FF 7.95
2 240 9 FF 11.06 21 5 FF 12.89
2 685 8 FF 16.1 5 I 074 FF 16.15
16 4 88 8 FF 9.80 4 20 7 FF 10.30
*
'* GENERA Id':REPORT OF THE STATUTORY AUDITORSJ\* ON ~Ij~ ~c)N S OLI DATED FINANCIAL STATEMENTS
Year ended September 30, 1997
To th e Shareh o lders o f EURO DIS EY S.C. A.
In co mp liance with the assi gnme nt ent rusted ro us by yo ur Sha reho lder s' Annua l Ge nera l M eeting, we have
co nd ucted o ur audit o f th e accompanying co nso lidated fina nc ia l srarerncnrs of Euro Disne y S.C.A. as at
Sep tember 30, 1997.
T hese con sol idated fina nc ia l sta reme nrs ha ve been a ppro ved by Eur o Disn ey SA, Gera nr of Euro D isn ey
S.C. A.. O ur ro le is ro ex press an o pin io n o n th ese co nso lida ted finan cia l sta teme nts ba sed o n o ur audit.
\'I/ e co nd ucted o ur a udi ts o f these co nsolidated finan cial statem ents in accorda nce with gen era lly acc ep ted
a uditi ng sta nda rds in Fran ce wh ich req uire th at we plan a nd perform th e au dit to o bta in rea sonable assurance
a bo ut wh et her the co nsolidated financi al sta tements a re free of mater ial misstnrcm cnr.
An a ud it incl udes, exam ining o n a test basis, evidence suppo rt ing the am ounts an d d isclosures in th e
co nso lida ted fina ncia l sta teme nts. An a udit a lso inc ludes as sessing the acco unti ng princ ip les used a nd significa nt
est ima tes mad e, as we ll as eva luat ing the o vera ll fina nc ia l sta tement presen tati o n. W/ e believe th at o ur a ud its
provide a rea so nab lc basis for o ur opinion.
In o ur o pinion, th e co nsolida ted financ ial sta teme nts give a tru e a nd fa ir view o f the G ro up's financia l positio n
and its assets a nd lia bil it ies as of September 30, 1997 a nd th e result s of operations a nd ca sh flows o f th e
compan ies included in th e con sol idati on fo r th e yC:H rhen ended .
W/ e ha ve a lso veri fied th e in formation pr o vided in th e Ce ranr's rep ort o n th e Gro up. W/ e ha ve no co mment to
make as to its fair p resentat ion a nd its co nformity w ith th e co nso lida rcd financ ial sta teme nts .
Pari s, N ove m ber 25, 1997
T he Sta ruro ry Auditor s
Befec - Pr ice Wa terhouse
*
Brian Towhill Franco is M artin
-
, GENERAL REPORT OF THE SUPERVISORY BOARDON THE MANAGEMENT OF THE EURO DISNEY S.C.A. GROUP
Ladies and Ge ntle men ,
W e are pleased to present yo u o ur Genera l Rep ort on the man agement ot' the Euro D isn ey S.C.A . Group (the
" G ro up") fo r th e yea r en ded Septem ber 30 , 199 7.
\'i!e do not ha ve a ny particular co mments o n the M an agem ent Rep ort of th e Gera nr o n th e Gro up, wh ich we
ha ve reviewed and w hich have been su bm itt ed to yo u.
The net co nso lida ted incom e o f th e G rou p fo r th e yea r is o f FF 21 7 mil lion , whi ch includes:
• income before except io na l item s o f FF 165 mill ion , a nd
• exc eptional income of FF 52 milli on.
During th e fiscal year ende d Septe m be r 30, 199 7, D isneyland ' Pari s welcom ed 12 .6 million gues ts to the
Them e Park and ac hieved a n average occ upancy ra te of 78 'Yc, in th e hotels.
The improvement in th e G ro up's resu lts fo r fiscal yea r 1997 reflect s co nt inued increa se in T he me Pa rk
attenda nce a nd hote l occupa ncy , accompa nied by a slight increase in ave rage spe ndi ng pe r visito r a nd per roo m
th ro ugh out th e res o rt , as well as o ngo ing cost contro l management o f marketing a nd gene ra l a nd ad mi n ist ra tive
ex pe nses . All th ese achieveme nts have had a sign ifica nt impact o n th e G rou p's inco me before lease and financia l
ch arges, mo re th an o ffsett ing th e FF 147 million inc rea se in lease a nd fina ncial ex penses esse nti a lly du e to the
planned reduction of interest fo rgiveness as pa rt of th e 19 94 financ ia l restructuring. In fisca l yea r 1997, th e
decreasing ben efits of the int er est forgiveness provisions ha ve resu lted in an incr ea se in lea se a nd net finan c ial
cha rges o f FF 175 million w hich w as parti all y o ffset by lo wer va ria ble inter est rat es and the fa vourabl e impact o f
foreign curren cy exc ha nge gai ns, which resulted in th e net incr ea se of FF 14 7 mill ion . In fisca l rea r 1998,
pursu ant to th e term s of the 1994 fina nci a l restr ucturing, t he int erest co m po ne nt of lease a nd net fina nc ia l charges
wi ll increase by FF 120 milli on as th e benefit s of int er est forgive ness pr o vision s la rgely term inate. Lease cha rges
w ill a lso increase as the repa yment o f principal by the Phase I SNCs, w hic h is a no ther com po nent of th e lease
re nta l expense, co m me nces in fiscal yea r 1998. Fro m fiscal r ea r 1999, the pa yment o f ro yalti es a nd man age me nt
fees to The W ait Di sn ey Com pa ny will a lso begin to ha ve a sign ifica nt impact o n th e Co m pa ny 's results.
Add itionally , w e info rm yo u th at in line wi th th e recommendati on s o f th e Vien ot repo rt o n corpora te
gov erna nce, th e Super visory Boa rd has decided to crea te an Audit Co m m itt ee to review fina ncia l report ing a nd
ex te rn al a ud it issues . This specia lised co m mi ttee o f th e Super visory Boa rd , to be co m po sed of th ree membe rs, wi ll
meet o n an ad hoc basis sta rti ng in fisca l yea r 1998 a nd will report to th e Board. Duri ng its meeting of Novem be r
12 , 1997, th e Board has designated Mr. Anroine Jea nc ou rt -Gali gn ani , M r. jean T air ringer a nd D r. j eus Odewald
as th e first mem bers o f th e co m m ittee, sub ject to ren ewa l by th e Ge ne ra l M eeti ng of Mr. Tn itr ing ers a ppointment
as member of th e Board.
Yours sincerely,
Pari s, Novem ber 24 , 1997
The Supe rviso ry Board
Antoin e j ean courr-C align ani
*
*.:\* ~A'~N T != OMPANY INF ORMATI ON
+ FIVE YEAR FINANCIAL REVIEW( P A R E :': T C ll ," !' A :': Y . E U Rll DIS :': E Y s.c ." .)
Year ended September 30,1 ') ') 7 19 9 (, 19 95 1 ') ')4 1 ') ') ,I
Capital at th e endof the period
Sha re Capita l (Ill FFI 3 832 673 795 3 82 6 793 6 15 3825 195 31 0 3 825 193 930 I 700 08 2 120
N umber of outs tandingordinary sha res 766 534 759 765 35 8 723 765 03 9 062 765 03 8786 1700082 12
Ma ximum amount of sha reswhich can be created by wa y of:
- conversion of bonds 33 87 1 755 33 87 1 755 34 957 83 3 38571567 28 34 1 1S8
- con version of G RAs 25 00 I 210 25 00 1 2 10 25 00 1 2 10 25 00 1 210
- exercise of warrants 90 97 4 73 1 90975 428 90975 428 96 669 428
- exercise of employeestoc k options 16 48S 000 13 943 000 15 045 000
Results of the period(Ill J+ 111111io 1lS)
Sales (net of VAT ) 5 110 4707 4482 4 32 0 58 19
Incom e / (loss ) beforeincom e taxes, depr eciationand proviso ns 552 27 2 309 (378) (4605)
Incom e ta xes / (tax benefit) ( 107) ( 127) ( 187)
Ne t incom e / (loss ) 234 242 24 1 ( I IS I ) (5 297)
Divide nds dist ributed
Earnings / (loss)per share fill FH
Ea rnings / (loss) per sharebefor e depr eciation an d provisionsbut af ter income taxes 0.8 6 0.52 0.65 (0.50) (27 .09)
Earn ings / (loss) per shareafter income taxesand dep reciation a nd provisions 0.3 1 0.32 0.3 2 (2. 33 ) (3 1.16)
Net dividend per sha re
Personnel
Avera ge number of employees 10 22 9 10 307 9356 10 941 12 177
To ta l payroll costs tin /+ 11I, 111<>1/;) I 21 4 1 2 10 I 104 I 309 I 468
To ta l em ploy ee benefitcos ts fill n;mi/liw lS} 50 4 476 454 543 640
*
SIGNIFICANT OPERATING CONTRACTSAND AGREEMENTS
+ AGREEMENTS WITH FRENCH GOVERNMENTAL AUTHORITIESO n M arch 24 , 1987, T \V DC ente red int o th e Master Agreement with the Republic of France. the Region oi
Ile-de-Fran ce, the De partment o f Seine-er-Ma rne, the Public Establishment io r the Development oi the New Town
o f M a rne-la-Val lee il'Etablissement Public d'Antenagement de la Ville No uuell« de M ame-Ll-V,i1h;e - J-:['A,\ 'ldme)
and th e RATP (the Subur ba n Paris Tran sportat ion Aut hority ), for the development in various phases of 2.000
hectares of undeveloped land located 32 kilornerers east o f Paris in Marne-la-Vnllee, France (the " Reso rt " ).
Immed iately afte r, nVDC assigned its rights and obl igat ions und er the Ma ster Agreement to Euro Disneylan d
Corpo ra t ion, a wh oll y-own ed subsid iary incorporat ed in Delawa re.T he Frenc h govern menta l aurhoriru-s pa rty to
the Master Agreement have sub sequently waived a ll rights of reco urse aga inst T \X' DC under th e Master
Agreeme nt . In addit ion, in 1988 a new govern mental aut hor ity nam ed the Pub lic Establi shment for the
Development of Sector IV of M a rne-la-V allee (" EPA France" ), with responsibility for the development of the
ent irety of th e Resort, was created pur suant to the Ma ster Agreement and becam e a pa rty thereto. In April 19S9.
th e Co mpa ny and the Phase l A Fina ncing Company (as defined below "Corpora te Organ isati on - Finan cing
Co mpanies ") also became parties to the M aster Agreement .
The M aster Agr eeme nt, as amen ded fro m time to tim e, determ ines th e genera l ou tline of eac h phase of the
development as well as the legal an d init ial financial st ructu re. Th e signi ficant component s thereof are summarized
below.
Development planning
T he M aster Agreement sets o ut a ma ster land use plan and genera l development prog ramme establi shing the
type and size of facilit ies w hich the Co mpa ny has the righ t, sub ject to certai n co nd itio ns. to develop at the Resort
over a 3D-year period end ing in 201 7. For each phase of development, the Company is requi red to provide a
proposal and othe r rele vant info rmat ion to EPA Fran ce and cer tain o ther French aut horities for approval. After
approva l, detailed land use an d land tr ansfer programm es are joint ly prepa red .
O n Septe mber 13, 1997, th e board of d irectors of EPA Fra nce approved the det a iled programm e of a new
development pha se. Subseq uent ly, on December 9, 1997 all the relevant French pub lic author ities offic ially agreed
to sa me.
Financing of infrastructure
T he M aster Agree ment specifies the inf ras tructure to be provided hy the French authori ties to the project. The
releva nt French pub lic a ut ho rit ies have a cont inuing obligation to finance constr uctio n of the pr imary
infrast ru cture, such as highway int erc han ges, primary roadw ays to access the site. wa ter d istri bution and sto rage
fac ilities, ra in wa ter and waste wat er treatment fac ilities, waste treatment installations, gas and electricity
d istributi o n systems as well as telecommunica tion netw orks.
\Vith respect to this commitment, infrast ructure provided by French gove rn menta l autho rities has included
loans fro m the Ca isse des Depot s et Consigna tion s, th e extension of the A line of the RATP 's "R ER" suburban
rail link (w hich se rves Paris and its eas te rn and western suburbs ), the construction of two interchanges linkin g the
Reso rt di rectl y w ith the A4 highway, and a new T GV (high speed train ) sta tion linking the Resort to oth er major
citie s of Europe which opened on M ay 19, 1994.
Land rights
The Master Agree ment provides for th e right of th e Co mpany. subject to cert ain conditions . to acquire the
land necessa ry fo r th e rea lisa tion of th e Disneyla nd" Pari s pro ject on the Marne-la-Vallee site. T he exercise of such
right is subject to ce rta in development deadlines w hich if not met wo uld result in the expiration of such land
right s. T hrough December 3 1, 1997 all minimum development deadl ines have been met and no land right s haw
expired unused. The next dead line is December 3 1, 2007.
*
'* SI ~N IlE,ICANT OPERATI_NG 'C O N T R A C T S,"*" , \)r~\ '"" A~ D A G R E E MEN T 'S _'.
In ex cha nge for th ese land rights, th e Co m pa ny and th e Phase lA Fin ancing Co m pa ny ha ve the obl igation to
pay annual fees to EPA France in respect o f th e ca rrying cha rges o n th e o pt io ns o n the remaining 1,300 hecta res
of undeveloped la nd aro und the Resort. T he Co m pa ny a nd the Phase IA f ina nc ing Co m pa ny we re req uired
to pa y a ppro x ima tely l-F 14 milli on for each o f the fisca l years 1993 through 199 7 in connection therewith.
RATP Ridership Guarant ee
Pursuant to th e Master Agr eement, th e Com pa ny and th e Pha se 1A Fina nci ng C o m pa ny guaranteed
to th e RATP a min imum level of o ne -way RER t rip s to or from the Resort for th e peri od fro m April 12, 1992
th rough Apr il 11, 1997.
D ep artment of Seine-et-Marn e Tax Guarantee
In add it io n, purs ua nt to th e M ast er Agree me nt , th e Com pa ny, th e Phas e IA financing Com pa ny a nd th e
Republic of France guaranteed a min imum level of ta x re venues to loca l ta x authorit ies (De pa rt me nt of Seine-et
Marne}, If local ta x revenues are less than the tota l a mo unt of fund s ex pe nde d by the Department for primary and
seconda ry infrastructu re, the Republ ic of Fran ce o n th e o ne hand, a nd th e Comp any and th e Ph ase 1A Financing
Co m pa ny o n th e othe r hand, w ill re im burse in eq ua l sha res th e Department up to an ag gr egate a mount
of FF 200 mi llion (ca lcu la ted in con stan t 1986 francs ). Any such payments wo uld be mad e in 1999 a nd 2004.
+ PARTICIPANT AGREEMENTSIn connect ion with the Theme Park a nd Disn ey" Village, th e Co m pa ny has entered into a number of
pa rt icipant agreements. A pa rtici pant spo nsors or pr esents o ne or more of th e Theme Park' s o r Disn ey Village' s
a tt rac t io ns, restaurants or o ther fac ilit ies in exc ha nge for an individuall y negoti ated annual fee. Relatio nship s w ith
participants ma y a lso invo lve, ill so me cases, excl usive supp ly rights gra nte d to the pa rti cipa nt a nd sign ifica nt
pu rc hase comm itments by th e Com pa ny as well as ma rk et ing ac tivi ties fea tu ring th e associa t io n between th e
part icipants a nd the Co m pa ny, or th e provisio n o f goods an d serv ices by th e partic ipants to th e Com pa ny.
T he Co m pa ny's cur rent partic ipants are Am erican Express, Banque N ario na lc de Pa ris, Coca-C o la, Esso , Fra nce
Telecom, Hertz, I.B .~I., Koda k-Path e, M atrel, McDona ld's. Nestle, Ph ilips an d Ren ault. The participant
agreeme nt s a re gen erally for a n ini ti al term of 10 yea rs fro m O pe ni ng Day a nd termina te a utoma tica lly in the
event of terminati on of the Licen se Agree me nt between T he \X1al t Disn ey Co m pa ny (Nethe rla nds) B.V. and th e
C o m pa ny . See "Development Agr eement" a nd " License Agreem ent " below.
+ UNDERTAKINGS AND AGREEMENTS OF TWDC AND SUBSIDIARIES
Undertal<ings
Pursuant to th e M aster Ag ree me nt , TWDC ori ginal ly agr eed to hol d di rectl y or indirectly at least 16.7'X, of
the share cap ita l o f th e Co m pa ny a nd th e Pha se IA f inancing Co m pa ny unt il t he fifth a nniversa ry of Opening
Da y, o n Apri l 12, 1997. In co nnect ion wi th th e Financial Restructuring, T\X1DC agr eed, so lon g as certa in
ind eb tedness is o utsta nd ing to the G ro up 's maj or cred ito rs, to hol d at least 34 % of th e co m mo n sto ck o f th e
Co m pa ny from Au gust 10, 1994 to june 10, 1999, at least 25 % fro m june 11, 1999 to j une 10, 2004 an d at
least 16.67% th erea fter.
T WDC had a lso underta ken not to licen se th e o pe ra tio n o f an y th em e park w ith a n attenda nce capacity of
50 % or more o f the ca pac ity of the Theme Park at suc h t ime in any other country in Europe withi n five yea rs
a fter O pe n ing Da y. T \XID C a lso ag ree d not to compet e with the Reso rt by opening or licensing a no ther th em e
pa rk tha t uses th e TWDC na me o r o ther TWDC intellectual or industrial p ro pe rty rights (except for subse q ue nt
*
ph ases of th e Resort), with in 800 kilom etr es (a ppro ximately 500 miles ) of Disneyland Pa ris for the period until
April 12 , 1997. If suc h a par k we re opened or license d in the five-year period following April 12, 1997, T \X'DC
has ag ree d to offer or cau se to be offered to the Company the option to acquire up to a 4 9'X. equity interest in
th at pa rk at a pr ice equa l to th e pro rata share of th e fai r ma rket value of suc h park, or at the offering price of
th e shares of th e company owning suc h pa rk, in th e case of a pu blic offe ring . In add it io n, pu rsuant to a separa te
letter to th e lenders under on e of th e Co mpa ny's princip al debt ag ree me nts, T W DC has agreed that if it o pens, or
licen ses a third party to open, a TWDC-type park within 2,500 kilom etres o f the Resort pri or to the ea rl ier o f
Ja nu ar y 1, 2004 and th e t ime that th e Com pany meets certa in finan cial conditions, then TWDC will guuruntee th e
rep aym ent o f amounts o uts ta ndi ng un der such debt ag reement until Ja nua ry I, 2004 or such tim e as th e fina ncial
co nd it io ns have been sa t isfied .
T he Co m pa ny and Euro Disn eyland Pa rricipari on s S.A., an indir ect 99 '){,-owned subsid ia ry of T \X' D (which
is a lso a pa rtner of th e Phase lA Financin g Co m pany , see "Corpo ra te Organi sati on" below), have agreed to
ind emnify the partners of the Pha se lA Financing Co mpa ny as to a ll liab ilities a rising under the M aster Ag reeme nt
o f th e Co m pany and th e Phase lA Financing Co mpa ny. T o th e ex tent the reso urc es o f the Co m pany a nd the Phase
lA Financin g Com pa ny are ins ufficie nt to cover any such ind emni ty, T W DC, thro ugh a who lly-owned subsidiary,
has agreed to inde m nify th e partners of th e Phase lA Fina nci ng Co mpany for up to a further FF 500 million. The
o bl iga tions to which th is indemn ity rela tes have bee n substantially pe rformed. In connection with the Financial
Rest ru cturing, ED A S.N.C., an indirec t wholly-owned affiliate of TWDC (as defined below - see " Corporate
Organ isati o n - Fin ancing Com pa nies" ), also undertook certai n indem nification obligations in favour of the
par tn er s of th e Phase lA Finan cing Company in resp ect of certain liabilities arising un der the M aster Agreement.
Development Agreement
Pursuant to the Development Agreem ent dated Februar y 28, 1989 (the " Deve lopme nt Agreem ent " ) wi th the
Compan y, Fu ro Disney S.A. prov ide s and arranges for other subsidia ries o f TWDC to pro vide, a va riety of
tec hn ica l and adminis tra t ive servi ces to th e Co m pany. These services are in addition to the services Eurn Disne y
S.A. is requi red to pro vide as Gera nt and inclu de, among othe r things, the deve lop ment of co nce ptua l de signs fo r
th e T he me Park and future fac ilit ies a nd att rac tions, th e manu facture and installa tion of specia lised sho w
eleme nt s, specia lised tr a inin g fo r operating personnel, th e preparation a nd up dat ing of operations, mai ntenance
a nd other tec hnica l manual s and development of a master lan d use plan and real estate de velopment st rategy.
Euro Disne yland Imagineer ing S.A.R.L. ("EDU") , an indirect subsid ia ry of TWDC, wa s respon sibl e for
managem ent and administration o f the ove ra ll design as well as th e co nst ruc tion of the Th em e Park . ED U was
a lso resp onsible for management of th e design and procurem ent of the show-a nd -ride eq uipment for the T he me
Park . Furt hermo re, most o f th e othe r faci lities of th e Resort were design ed under the supervision of the Co mpa ny
with th e ad min istra tive a nd technical assista nce of a ffilia tes of T \X' DC responsib le for the deve lopment of hotels,
resorts a nd other reta il and commercial rea l esta te p ro ject s in the United States, in accordance with the relevant
se rvici ng ag ree me nt s.
The Com pa ny reimbur ses Euro Disney S.A. for all of its direc t and indirect cos ts incurred in connection with
the pro vision of ser vices un der the Deve lopme nt Agreement. T hese costs include, without limita tion , (i) all
o pe ra t ing ex pe nses of Euro Disn ey S.A., incl udi ng ove rhead and implici t fun di ng costs, (ii) all costs incurred
directl y by Euro Disney S.A. o r bill ed to it by thi rd parties a nd (iii) certain co sts plus 10 % bi lled to Euro Disney
S.A., th e Ceranr, fo r services performed by TWDC o r any of its affilia tes .
The Develo pment Ag reement ha s an initial term of 30 yea rs a nd ca n be renew ed for up to three add itio na l
l Ovyear te rms at th e option of either party. T he Deve lop ment Agre em ent ma y be te rm inat ed by Euro Disney S.A.
under certa in co nd itions .
*
'" SI ~NItf(ICANT OPERATING CONTRACTS*"* ,j "'\ AN.D AGREE M ENT S
License Agreement
Under th e License Agreement, da ted February 28, 1989 between T he Wa it Disney Company (Ne therla nds)
B.V. (a subsidiary of TWDC) an d the Co mpa ny (the " License Agreement " ), the Co mpa ny wa s gra nte d a license to
use any present or future TWDC int ellectu a l and industrial pr op erty rights th at ma y be incorporated in att ract ions
and fac ilities designed from time to tim e by T\X1 DC and mad e ava ilable to the Company for the Reso rt. In
add it ion, the License Agreement auth orises th e sa le a t th e Reso rt of merch an d ise incorpor ati ng or based on
TWDC intellectua l pro pert y rights owned by or otherwise ava ilable to T WD C. Royalties to be paid by the
Co mpany for the use of th ese rights were o rigina lly eq ua l to:
(i) 10% of gross revenue s (net o f val ue-added ta x (" VAT ") and other similar ta xes) from rides, ad missions
and related fees (such as par kin g, to ur guide and similar service fees) at a ll them e parks and attracti on s;
(ii) 5 % of gross revenues (net of VAT and other simi lar ta xes) fro m merchandise, food and beverage sales in
o r ad jacent to an y theme park or other at t rac t ion o r in an y other faci lity (wi th the exce ption o f th e
Disneyland" H otel) who se overall design concept is based predomina nt ly o n a theme owned by T W DC;
(iii) 10% of a ll fees due from participant s; and
(iv) 5 % of all gross revenue s (net o f VAT and other similar taxes) fro m room ra tes and related charges at
certai n Disney-rhem ed acc ommoda tions (with th e exception o f the Disneyland Hotel).
T he Finan cial Rest ructuring provides that , for as lo ng as th e inde btedness to th e credi to rs remains outsta nd ing,
th e Company will pa y no roya lt ies in respect o f revenu es an d fees rea lised in fisca l yea r 1994 thro ugh fiscal yea r
1998. Fro m fiscal yea r 1999 th ro ugh fiscal yea r 2003, hal f o f th e roya lties as calcu lated a bove wi ll be paya ble by
the Co mpa ny, i.e. 5 % of Th eme Par k ad mission revenues, 5 % of a ll part icip ant fees an d 2.5 % of T heme Park
food and beverage and merchandise revenu es. Beginning in fisca l yea r 2004, th e Co mpany will be respon sible fo r
the payment o f 100% of the roya lties as per abov e. Reven ues fro m ex ist ing hotels in th e Reso rt ar e not subject to
roya lt ies as th ey do not con sti tute Disney-th em ed acco mmo da tio ns apa rt fro m th e Disneyland Hotel which is
ex press ly excluded. In add it ion, acc rued roya lties payabl e in respect o f fisca l yea r 1994 (eq ua l to FF 73 million ),
were perman entl y wa ived pursuant to th e Financial Restructu ring.
Th e Licen se Agreement has an initi a l ter m of 30 yea rs and ca n be renewed for up to three ad dit iona l 10-year
ter ms at the option of either party. T he License Agre eme nt gives T WDC substant ia l rights and d iscretion to
ap prove, mo nito r and enfo rce th e use o f T WDC properties within the Resort. T he Licen se Agreem ent may be
term inat ed by TWDC upon the occur rence of ce rta in events , inclu ding the rem ova l o r rep lacement of the Geranr,
a change in co nt ro l, directl y or ind irec tly , of th e Co mpa ny o r certa in affiliates, th e liq uidati on o f the Co mpa ny or
certain affiliates, certain assig nments o f the Co mpany's interests in the License Agreement, the impos itio n of laws
or regul at ion s th at prohibit th e Compa ny o r certa in affiliates from per forming their material o bliga tions und er the
License Agre emen t or th e imposit ion o f taxes, d uties o r asse ssments th at wo uld mat eriall y impair th e assets,
surplus or distr ibutable ea rn ings of th e Co mpa ny o r certai n o f its affilia tes .
*
, LEGAL STRUCTURE OF THE GROUP
The Compa ny is a societe en commandi te par actions ("SCA") orga nised under the laws of the Republic of
France. The Co mpa ny was o rigina lly o rga nise d an d incorporated in Par is on December 17, 1985 under the name
M ivas S.A., in th e form of a French societe anonym e ("SA" ), wh ich was close ly held. In 1988, EDL Hold ing
Company, a Delawa re corporati on wh oll y-owned by nXTDC and cur rently owner of a pproxi ma tely 39% of the
sha res o f common srock of th e Company, acq uired 99% of th e sha res of Mivas S,A" wh ose co rpo ra te na me was
changed ro Soc iete d'Exploirarion d'Euro Disne yland" S,A. An extraordina ry meetin g of sha reho lders of Societe
d'Exploirarion d 'Eur o Disneyland S.A. on February 24 , 1989 decid ed to modify its corporate form from an SA to
an SCA a nd to cha nge its corporate na me to Euro Disneyland S,C.A , In November 1989, Euro Disneyland S,C. A,
becam e a pu blicl y held co m pa ny as a result of a public offeri ng of its co mmo n stock in Fra nce, the Unite d
Kingd om and Belgium. At th e annual gene ra l meetin g of sha reho lde rs on Februa ry 4, 1991 , the Company's
prese nt co rpo ra te nam e, Euro Disney S.C.A., was ado pted.
The fo ur pri mary co mponent s o f the Company's legal structu re a re:
• a gerant, appointed to manage the Company;
• a conseil de surveillance (the "Superv isory Board" );
• an associe commandite (the " Ge ne ra l Partner " ); and
• associes commanditaires (the "Sha reho lders") .
+ TH E GERANTThe ge ra nr's pr imary resp onsibility, under French corporate law, is to ma nage the affairs of the company at all
times in th e co mpa ny's best inte res ts . Eu ro Disney S.A. (the "Cera nt" ), a Frenc h SA, has been appointed as the
so le ge ra nr o f th e Company under th e Co mpany' s by-law s (statuts) . Th e Gera nr is an ind irect , wholly-owned
subs id iary o f nXTDc. Under the Co m pany's by-laws, the Ge rant has the pow er to tak e any and all action in th e
name of the Company within the sco pe of th e Company's co rpo rate purpose and to bind the Company in all
respects.
If the Gera nt ceases to hold office fo r any reason, the Genera l Partner (currenrly an indi rect subsid ia ry of
TWDC ) has th e ex clusive right to a ppo int a successo r. Th e Gera nt ma)' resign on giving six months not ice to the
Supe rv iso ry Boa rd and otherwise may only be removed from office:
• fo r inca pacity, including ban kru ptcy or judicia l reorgani sation, by the General Pa rtner;
• for any other reason with th e consent of both the General Partner and ho lder s of a two -thi rds ma jority
of th e shares o f th e common sto ck of the Company at an ex trao rdinary genera l meet ing; or
• by a court on the grounds of fraud or gross mismanagement.
The Ger ant is entitled under th e by-laws to annua l fees co ns isting of a base management fee and a
mana gem ent incentive fee, and is a lso enti rled to a fee payable on the sale of hot els, each as described below. In
ad di t ion, th e by-laws provid e th at th e Geranr is ent irled to be reimbursed by the Com pa ny for all its d irect and
indirect expenses incurred in its ro le as Geranr. No am endm ent may be made to the enti tlemen t of the Geranr to
remunerati on o r reimbursem ent of ex penses except by amendment to the by-laws, whic h requires the a ppro va l of
th e Ge ne ra l Partner and the Shar eh old ers as described below,
Base Management Fee of the Gerant
The by-laws of the Company origina lly provided that th e base man agement fee was eq ua l to 3 % (initia lly
sched uled to increase to 6 % in 1997) of the to ta l revenues of the Company, less 0.5% of net inco me for the
relevant fisca l yea r. Pr io r to th e Fina ncia l Restructuring, the Gera nr had agreed to defer base man agement fees for
fiscal years 1992 and 1993, pr ovided th at in th e event of the subsequent achievement of certa in pro fi t levels, such
fee wo uld aga in become du e and paya ble. T he base man agement fee wa s equa l to FF 113 million for fisca l yea r
1992 a nd FF 145 million for fisca l yea r 1993. Such fees were perman ently waived in co nnection with the Financi al
*
Restructuring. In add ition, the Ge rant agreed to waive accrued bas e ma nagement fees in respect o f fiscal year
1994 of FF 45 mill ion (thro ugh March 3 1, 1994).
In co nnec tion with the Fina ncia l Rest ructu ring, the by-law s of the Co mpa ny were ame nded at an
extraord inary Shareho lders' meet ing held on .June 8, 1994 to provide th at the base man agement fee will eq ua l th e
following perc entages o f tota l revenues of the Company for the relevant fisca l year:
• from October 1, 1993 to September 30, 1998: 0%
• fro m Oc to ber 1, 1998 to September 30, 2008: 1%
• fro m October 1, 2008 to Septe mber 30, 2013: 1.5%
• from October 1,2013 to Septe m ber 30, 201 8: 3%; and
• from October 1,20 18 on: 6%
Beginning on October I, 200 8, th e right o f th e Ge ra nt to receive payment o f that portion of th e base
man agem ent fee in excess of an amo unt equa l to 1% of the to tal revenu es will be co nt inge nt upo n th e Compa ny
ac hieving a posit ive net con sol idat ed incom e before ta xes for the fiscal yea r to whi ch such fee relates, aft er tak ing
int o account all of such rem un erat ion, and up o n the Co mpany 's legal abi lity to distribute dividends for such fisca l
year. In add it ion, that portion of the base man agement fee in excess o f an amo unt eq ua l to 3% o f to ta l revenu es
for any fisca l year wi ll not be due or paya ble until aft er certain inde bte dness o f the Gro up and th e Phase I SNCs
has been repa id in full, an d may not exceed 40% o f th e Co m pa ny's conso lida ted after-t ax profits for such fiscal
year (net of th e base man agem ent fee of 3%) . Ce rt a in o f the Co mpa ny's debt agreem ents a lso provide for deferral
of the base managem ent fee under specified circumstances.
Management Incentive Fee of the Gerant
In co nnectio n with the Financial Restructuring, th e by-law s of th e Co mpany were amended at an
ex trao rdina ry Shareholders' meeting held on .J une 8, 1994 to provide that th e management incent ive fee for a
given fisca l yea r be fixed at 30 % of any po rtion of a pre-rax cas h flow in excess of 10'X, of the con solidat ed gross
fixed asse ts for th at fiscal year. Ce rtai n of the Co mpa ny's debt agreements provide for deferral of the managem ent
incenti ve fee under spec ified circums ta nces.
Hotel Sale Fee
There is also paya ble to th e Ge ran r on th e sa le of any of the Hotels a fee eq ua l to 35 % of pre-rax net reve nue
received by the Company from any such sale. T his fee was not cha nged by the Fina ncia l Restructuring.
+ THE SUPERVISORY BOARDTh e memb ers of th e Superv iso ry Board are elected by the Shareho lders . Th e by-laws pro vide for a min imum o f
three members, each o f wh om mu st be a Shareho lde r. In its ow n charter , the Superviso ry Board ha s req uested
from its members that each of them ho ld at lea st 1,000 sha res o f th e Co mpany (see "Corpo ra te Gove rn ance"
section in " 1997 in Review " ). T he ro le o f the Superv iso ry Board is to moni to r the gene ra l affa irs a nd th e
man agement of the Co mpa ny . T he Superv isory Board reports on the performance of th e Ge ranr and submits to
eac h annua l gene ra l meetin g o f the Sharehold ers a report on the Company's annua l fina nc ia l sta teme nts . T he
Sup ervisory Board ca nnot, ho wever, rem ove the Ge rant or the Genera l Part ner or require eithe r to take any actio n
wh ich th e Ge ra nt or Ge ne ral Partn er deem s inappropriat e.
Th e Superviso ry Board mu st approve a ll co nt rac ts , ag ree ments and tran saction s bet wee n th e Ceranr and the
Co mpany, as well as a ll agreem ents discussed below in "T he Shar eho lders" (other than agreements ente red into in
the ord ina ry co ur se of business o n normal commercia l term s) o r any a mend ments thereto, and mu st report on
such tr an sactions at th e next genera l meeting o f the Sha reho lde rs . In addi tion, the by-laws pr ovid e that th e
ap pro val of th e Supervisory Board is require d to ena ble the Ge ranr to ente r int o any mat eri al agreements on
behalf o f the Compa ny with any affiliate o f th e Ceranr.
*
The by-laws a lso provide th at any employees of the Ce ranr or any person affilia ted with the Geranr on the
Superviso ry Boar d w ill be d isq ua lified from voting on such agreements or any arnen drnenrs thereto.
The cur rent members of th e Superv iso ry Board hold office for three-yea r terms ending on the dates of the
ge ne ra l meetings of Sharehold ers in res pec t of the years endi ng Septem ber 30, 1997, 1995 and 1999 and may be
re-elected . N ew mem ber s, as well as those wh o a re re-elected, wi ll eac h serve for period s of three year s from their
date of election.
O n Novem ber 12, 1997, the Superv iso ry Board created a Financial Acco unts Committe e co mposed of duce
Board members to review financial repo rti ng and ex te rna l a ud it issues. T his Committe e, wh ich will meet on an ad
hoc basis sta rt ing in fiscal yea r 199 8, reports to th e Board .
+ THE GENERAL PARTNERT he Genera l Partner has un limited lia bility for all th e debts and lia bilities of the Co mpany.
T he Genera l Partner is EOL Parriciparions S.A. (" EOL Participati on s" ), a French SA tha t is a 99 'X.-owned
subs idiary of EO L H old ing Com pa ny, an ind irect wh oll y-owned subs idiary of TWDC. ED/. Pa rriciparions ca nnot
be removed as Genera l Pa rt ner without its co nsent and canno t dispose of any pa rr of its interest as General
Partner without the approv al of a vo te of ho lde rs of a simp le ma jo rity of shares of common stock represent ed at a
genera l Shareh o lde rs' meeting. A un animou s vo te of the Shareholders is required to approve a transfer o f EDJ.
Parricipat ions entire int erest.
Excep t w ith rega rd to th e elect ion o r removal o f members of the Supe rvisory Board by the Shareholders, a
reso lut ion may only be adopted by the Sha reho lde rs in a gene ra l meeti ng with the prior ap proval of the Cencral
Pa rtn er . T he Genera l Partner is enti tled to a dis tributi on eac h yea r equa l to 0.5'Yo of the Company's net afte r-tax
pr o fits (a fte r de duction of losses ca rried forward). T he Ge neral Partner received such a dist ribut ion in the amo unt
of a pproximately FF 1.2 milli on in respect o f each of fiscal yea rs 1995 and 1996 and is enrirled to a distribution
nf the sa me amo unt w ith respect to fisca l yea r 1997.
+ THE SHAREHOLDERST he Sha reho lde rs hav e th e right to attend general meetings and vote in person, hy proxy or hy mail. Each
Shareho lder is enti tled to cast one vote for each sha re of co mmon stock held .
T he fo llo wi ng matter s req uire a resol uti on pa ssed by the hold ers of a simple ma jority of the sha res of co mmo n
stock (together with a ny ap prova l req ui red of the General Partner, as described a bove ):
• elect ions to the Sup er visor y Boa rd;
• a pprova l o f the an nua l accounts, includ ing payment of any d ividend pro posed by the Ceranr: and
• a pproval o f an y contract or tr ansac tion (other than contracts or transactions en tered into in the ordinary
cou rse of business on normal commerc ial terms), o r any amendment the reto , between the Company and
the Ceranr, a ny member of th e Sup ervisory Boa rd or any company of which the Ceranr or a member of
the Superv iso ry Boa rd is th e owner, a d irector, an officer, a gerant , a member of the executive committee
r ·directoirc") o r of the superv iso ry board , o r a pa rtn er with unl imited liabi lity. Shareho lders with an
int erest in the contract or tr an sac tion genera lly ar e nor prohibited fro m voting on such co ntract or
t ransaction , unl ess th ey hold one of the position s set fort h a bove .
A resolution passed by holders of a tw o-t hird s ma jority of the sha res of co mmon stock (together with any
a pprova l required of th e Genera l Pa rtn er, as describ ed a bove) is requ ired to approv e any amendment to the hy
laws, including an y increase o r red uction of the eq uity capita l o f th e Company, any merger o r conso lida tion or
any co nversio n to a no the r for m of compa ny.
Sha reho lde rs as such have no lia bility fo r th e debts of the Co mpa ny.
*
.1.1l* , ~Q R P O R A T E ORGANISATION
" " f '
+ OPERATING COMPANIES
Euro Disney S.C.A.
Th e Co mpa ny opera tes th e Th eme Park , th e Disneyland" Hot el, the Davy Croc kett Ranch and the Go lf Co urse .
EDL Hotels S.C.A.
EDL H ot els S.C. A. (" EDL Hotel s" ), a 99%-owned subsid ia ry o f th e Co mpany wh ich opera tes Disney" Village
and all o f th e hot els, o ther than the Disney land Hotel and th e Davy Croc kett Ran ch, is o rga nised as a French SCA
gove rned by the same principles as the Co mpa ny.
Th e general partner uf EDL Ilotel s is EDL Hot els Parri cipntion s S.A., a French SA and a 99Ofc, -owned
subsidia ry of th e Compa ny. T he gera nr of ED L Hot els is Euro Disney S.A., which is also the geran r of th e
Co mpany.
+ FINANCING COMPANIES
Euro Disneyland S.N .C. and Euro Disney Associes S.N .C.
Euro Disneylan d S.N .C. (the " Phase lA Fina ncing Co mp any") ow ns the T heme Park and leases it to Euro
Disney Assoc ies S.N.C. ("EDA SNC") , an ind irect wh oll y-own ed affi liate of TWD C, pursuant to a leasing
stru cture ente red into in connec tion with the Fina ncial Restructuring. Both are o rganised as French societes ell
110 11I collectif ("SNC") . EDA SNC in tu rn subleases the T heme Park to the Co mpa ny . Also, as part o f th e
Financial Restructuring, th e Co mp any and th e Phase lA Finan cing Co mpany so ld to EDA SN C certain Th em e
Park asse ts for FF lA bill ion , which are leased back to th e Co mpa ny by EDA SNC at a nom inal I% interest rat e.
Th e Co mpa ny has an option to repurch ase such assets . See also Note 25 to th e Co nso lida ted Finan cial Sta tements
above.
The pa rtners (assoc ies) of the Phase I A Fina ncing Co mpa ny are various ba nks , fina nc ial institution s and
companies that hav e an aggregate particip at ion of S3'X" and Euro Disneyland Parricipation s S.A., a French SA
and an ind irect who lly-owned su bsidiary of TWD C, th at has a participa tion of 17%. T he Group has no
ownership int erest in the Phase IA Financi ng Co mpany. For a descript ion o f the financ ing arran gements o f th e
Phase l A Fina ncing Company with the Group and relat ed future lease co mmitments, see No tes I and 25 to th e
Co nso lidated Fina ncia l Sta tements above. Th e Co mpa ny is joint ly lia ble for much of the indeb ted ness of the
Phase lA Financing Co mpa ny . T he partners are subject to unlimited joint and several liability fo r th e financial
ob ligatio ns or the Phase l A Financing Company. Certai n of the credi to rs of th e Phase l A Fina nc ing Co mpa ny,
however , have effectively wa ived recourse agains t th e partners of the Phase I A Fina nc ing Co mpa ny . During th e
co nstruc tion per iod an d ea rly yea rs fo llowi ng O pening Day, th e int erest and depreciation ex penses produced, and
are exp ected to continue to prod uce, French tax losses for the Phase I A Finan cing Co mpa ny .T he legal st ructu re
of th e Phase 1A Financing Co mpa ny ena bles its partners to tak e these Fren ch tax losses dir ectl y int o th eir own
acco unts for French tax purposes. As a result, th e part ners furnished subo rdina ted pa rtners advances to th e Phase
l A Financing Co mpa ny at an int erest rat e below th e market rat e.
Th e Phase l A Financing Co mpany is ma naged by a gerant, Societe de Gera nce d'Eur o Disneyland" S.A.,
a French SA and an indirect 99.8%-owned a ffi liate of TWDC.
Phase 18 Financing Companies
H otel New Yo rk Associ es S.N .C., N ewport Bay Club Associes S.N.C. , Seq uo ia Lod ge Associes S.N .C. ,
Cheye nn e Hot el Associes S.N .C. , H ot el Santa Fe Associes S.N.C. and Cent re de Divertissem ents Associes S.N .C.
(collectively, the " Phase IB Financ ing Co mpanies") , each o f whi ch (i) rents the land on which the related Hot el or
Disney Village, as th e cas e may be, is located, from EDL Hot els, (ii) owns the related Hot el or Disney Village, as
d
the case may be, and (iii) leases th e relat ed Hot el o r Disn ey" Village, as the case may be, to the related Phase IB
SA (as defined below), and (iv) is o rga nised as a French S.N. C. governed by the same principles as the Phase IA
Fin ancing Co mpany .
The partners of the Phase IB Finan cin g Co mpanies are var ious bank s and fina ncial insti tutions tha t are
cr editors of the Phase IB Financing Co mpanies. The Group has no ow nership interest in the Phase IB Financing
Companies. For a description of the finan cial arrangements of th e Phase IB Financing Co mpa nies with the Group
and related future lease commitments, see Notes I and 25 to the Co nsolidated Financi al Sta tements above.
EDL H otels has gua ra ntee d a ll of th e loan repa yment ob ligat ion s of the Phase IB Financing Companies to their
cred ito rs and partners. The pa rtners of th e Phase IB Financing Companies are subjec t to unlimited joint and
severa l liability fo r the finan cial obliga tions of th e Phase IB Fina ncing Companies. Neve rtheless, th e credito rs of
th e Phase IB Fina ncing Co mpanies have wa ived reco urse aga inst the partners of the Phase lB Financing
Co mpanies. T he Phase IB Fina nci ng Companies have co nsiste ntly generated ta x losses primaril y du e to interest
charges during the constr uction period and depreciation charges since Opening Day. Th e lega l structure of the
Phase IB Fina ncing Companies ena bles their partners to tak e these French tax losses d irectly into their ow n
accounts fo r French tax purposes. As a result, th e partners furn ished subo rdi na ted partners advances to the Phase
IB Fina ncing Companies a t an inte res t rate below the market ra te.
Pursu ant to the respecti ve by-laws of th e Phase IB Finan cing Companies, the geran r of each of the Phase IB
Financing Co mpanies is EDL Services S.A., a French SA an d a 99 .8%-owned subsidia ry of the Company.
Phase IB SAs
Each o f H otel New York S.A., Newport Bay Club S.A., Sequ oia Lodge S.A., Cheye nne Hotel S.A., Hotel Santa
Fe S.A. and Centre de Divertissem ents S.A. (co llectively, th e " Phase IB SAs" ) rents the related Hot el o r Disney
Village, as the case may be, from th e related Phase IB Financing Co mpa ny and subleases such property to EDL
H otels. T he Phase IB SAs are organised as French SAs and ar e 99 .8 %-owned subsidiaries of EDL Hotels.
Centre de Congres Newport S.A.S.
Ce nt re de Co ng res Newport S.A.S. ("SAS") , an indirect wh olly-owned affiliate o f TWDC, organ ised as a
Fre nc h soc iete par action s sirnplifiee, entered int o sa lellease bac k agree ment s with EDL Hotels pursuant to which
the SAS finan ced and acquired th e Newport Bay Club Co nventio n Cent re as and when co nstructed and leases it
back to EDL Hotels. EDL Hotels has an op tio n to repurchase such assets. See a lso Notes I, 17 and 25 to the
Consolida ted Fin ancial Statements above.
*
+ OWNERSHIP, FINANCING AND MANAGEMENT STRUCTUREOF THE GROUP
I II I'ublic
I 1 1
100%
TW DC Th e \V.llt Disncy Co mpa ny100%
INcrherl.mdc! B.\'. -'7IX.
II 24':';'l)Y'~ ~,
100 ':';, HRI I Prince
, ', Disncv II Alwalccd IService Agreeme nt
I ILicense Agreement'ipari(Hl\ S.A.
99%4S -:;'
IElIfO Di" ,,'y Cor pora tion I
IEDL. Holding C(lI11 P~lI1Y
' .1I1ce IInd S.A. Service AgrcCI111'Ilt
0 .6' ,";. YlJ",;,
IEuru Disney S.A. (Ge,am) ---------- -... ,,
EDl. Par ticipation ... S.:\ .
· · ....1 Service Agreement Iviand Il1Iagillt:l'rint!-S.,\ .IU ..
,Ccnc r.t! .14 ':"
IDevelopment I! Pa rm cr
Agreem ent
EURO DISNEY S.C. A.
:\ " OC;O, / ·.. ·1 Lease ;111 1.1 Sub-Lease I..·- O wns DisllcY(;1I1J Ho tel, 1>.1\' )' C roc kctr Ranch .
and Gulf Disucyl.un] I'aris- SU h· It:;l~l·S Disneyland P.u i~ Th em e Par k
CC HlS( l l iJ;l r in~ subvidi.u-icv,includ ing EDI. IlcHd , S.C ." .
SEE CHAR"]"
ON FOl.l.OWING PAGE
Wl'ar tic
Eur u Disney.
SS.CLe .1St:
SIl( i ~[ ~ dt' cc:J 'Euru Disncyla
1- .." ..Pa rtn er
Em u Disnc
_I···..
Ownershi p
Euro Di...ncylnucl S.i\'.C.- O wn s Dislll'yb llLl'O) Pa ri...
Theme Park
Co m priscv certain of rill' lenders ill the Financia l Restr ucturin g
•
IPartners ' I - - - - - - ---- ---- - - ----- - -- - - Euro Divncv S,A( Gcr~ln ;'
- -- - - --
100% 99 .7%Partn ers EURO D1S:-iEY S.C.A.
99 .9%
I 99.9 %
IEDL S .r.. S Al l O ther consolida tingIen Kes . . subsidiaries I ELK Hillel, 1
Panicip.n iun S.:\.
ITechnical AssistanclAgreement General
Partner
EO!. Hi,tel, ~ . C.A.
- Own, the land for the: hotel Complexand Disney Vi lla ~c
- Rcru s the Hotel Complex and Disncv Villa~t'
from the Phase 11\ SAs .
· ·· · lconstroetio~ ....
- Reruv the Newport (b y Club Co nvention Centcr
Phase IB Financing Com paniesLease
from Centre de Congre, Newpo rt SAS
- Rent the landfor the Hotel Complexand Disney'· Village from EDL Hotels SCA
- Co nstructed and 0 \ \ "" the Hotel Co mplex I Sub.;me Iand Disney Village 99.8%
- Lease the Hotel Com plex and Disney Villageto the Phase III SAs
Phase III SAs
- Rent the Hotel Complex and Disney ViII.lgc
:·················· ·····················8 ·····from the Phase IB Financing Companies
- Sub-leave the Hotel Complex .1I1d Divncj- Vill.1J.: l"to EDL Hmr:! <; S .A ..
O\..-nersbip
M a nagement
Agr eements (o ther than loans)
Comprises certain of [he lenders in the Financial Resrrucruring
4
© Disney, Euro Disney S.C.A. Societe en commandite par actions au capita l de 3,832,673,795 FF . SIREN 334 173 887 RCS MeauxB.P. 100 - 77777 Marne-la-Vallce Cedex 04 - France
Licences ES 770137 and 770 139
