Mickey pick-me-up

Eisner says Disney still healthy despite dip

NEW YORK — Walt Disney chairman/CEO Michael Eisner waxed apologetic that his company ended the past decade on a down note, financially speaking, but insisted in a letter to shareholders that the Mouse is still in excellent health “despite the short-term earnings hiccup” that eroded net income in fiscal 1999.

That dip, along with a correspondingly dismal stock price performance amid a raging bull market, meant no bonus for Eisner or most other top Disney execs for the year. Eisner’s base salary was virtually unchanged at $750,000, but his bonus was clipped to zero from $5 million in fiscal 1998 and $9.9 million the year before that, according to a proxy statement filed Wednesday with the SEC, alongside the company’s latest annual report, which included Eisner’s letter.

Disney’s weak spots have been well documented, residing mainly in homevideo and consumer products, which includes licensing, Disney stores and related businesses. Both units, which would easily rank in the Fortune 500, are huge operations and not easy to turn around.

In his letter, Eisner discussed a rather general, four-pronged approach to carry the company successfully through the first decade of the 21st century. That includes aggressively attacking trouble spots, squeezing more profit out of all existing businesses, growing those businesses at the same time and continuing to develop new and engaging products.

It might also lead to more divestitures, Eisner hinted, noting the company’s sale last year of Fairchild Publications and the closure of Club Disney.

The film studio, the market share leader in 1999, has been at the fore on the cost-cutting front. Fewer films and talent deals and less expensive pics helped trim investments in live-action film production by $400 million last year, with an additional $100 million in cuts expected this year.

“The overall economics of the box office continue to be challenging, (but) with ongoing discipline, we can continue to succeed at the box office while improving the bottom line,” he said.

Some $1.5 million a year can be saved by retooling contracts with the many dozens of vendors that supply Disney with goods and services — “from tacks to trucks to toilet paper,” he said.

Flush from the success of “Toy Story 2” in theaters, from “Fantasia/ 2000” and from ABC’s “Who Wants to Be a Millionaire,” Eisner predicted other strong franchises to come. He named the upcoming “Dinosaur” as well as animated offerings “Kingdom in the Sun” and “Atlantis.”

And he touted the company’s wide range of assets including its Internet business, aggregated in Go.com, now a tracking stock of Disney. “It would have been very difficult to mount our Internet strategy had we not purchased Capital Cities/ABC,” in 1996, Eisner noted, defending that purchase, which changed the shape of Disney and has sometimes been criticized for not displaying the synergies it promised.

Disney’s proxy statement also revealed that in 1999 Eisner exercised stock options, which were about to expire, for 2 million Disney shares, worth nearly $50 million. He holds options for 24 million shares valued at $68.4 million.

Eisner was not awarded any new options in 1999, although Disney said that it will start including option grants in annual executive pay packages from now on. That will bring it more into line with other corporations in tying execs’ long-term compensation to stock price appreciation. In the past, Disney has tended to grant options only in the case of initial employment, promotions or new contracts — or when previously granted options have vested.

As for other execs, Disney vice-chairman Sanford Litvack earned $750,000. Disney’s other vice chairman, Roy Disney, earned $537,692. Neither received raises or bonuses.

John Cooke, executive VP for corporate affairs, received a base salary of $600,000.

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