Nothing mouse-sized about this…

December 19, 2003

Still trying to catch up on some of the filings I missed while on vacation and found Disney’s (DIS) disclosure on pensions pretty interesting. It also shows you how a small decrease in the expected rate of return that the company uses to calculate its expenses — in Chapter 6 I talk about how a company can choose its own number here — can cause expenses to climb sharply. In its K filed last week, Disney disclosed hefty increases in both its pension and post-retirement benefits. In fiscal 2003, Disney said its costs were $131 million, up 85 percent over fiscal 2002. Disney said the difference was primarily due to lowering its expected rate of return from 9.5 percent to 8.5 percent. In fiscal 2004, Disney will lower the interest rate again to 7.5 percent, which is expected to raise pension and post-retirement expenses to $375 million this year, a four-fold increase from fiscal 2002 when the 9.5 percent interest rate was used. Disney also said it planned to contribute $130 million in cash to its pension plans this year. At 7.5 percent, that will add $9.75 million to Disney’s bottom line and substantially reduce Disney’s taxes, since the contribution is tax-deductible.

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