Tag Archives: The Walt Disney Company

Girls Who Code Experience the Magic at Disney’s Third Summer Immersion Program

Last week marked the culmination of Disney’s third Girls Who Code Summer Immersion Program, a seven-week program that introduces high school students to computer science.

In partnership with Girls Who Code (GWC), a national nonprofit organization working to close the gender gap in technology, The Walt Disney Company gave 22 rising high school juniors and seniors the opportunity to learn the fundamentals of computer science and to explore different careers in technology. Throughout the summer, the students were immersed in an intense computer science curriculum taught on-site by Girls Who Code professionals and enriched by guest speakers, field trips and mentors from across all segments of the Company.

“Building up the number of women in computer science is a priority for us, and GWC helps build and strengthen this critical pipeline of talent,” said Susan O’Day, executive vice president, Enterprise Technology and CIO. “Our products and services need to be designed, built and operated by a workforce that is reflective of our consumers in order to resonate with them. While women in technology fields are increasing, we need to accelerate that growth, and supporting GWC is one of the things that will make that happen.”

During the program, students were given the opportunity to learn more about the tech behind the magic at many segments of the Company. At Walt Disney Animation Studios, the girls saw firsthand how technology plays a role in Disney’s animated feature films, and they even had a chance to use tools to animate hair and create snow effects. The students discovered how technology works hand-in-hand with storytelling at Disney parks through VR, robotics and sound engineering at Walt Disney Imagineering, and they explored how machine learning and apps like Play Disney Parks improve the guest experience at the Disneyland Resort. They also gained insights into how Disney is using technology to bring magic into consumers’ homes at the Advanced Development Lab, and the Walt Disney Studios Technology group showed them how technology is transforming the film industry at the brand-new StudioLAB.

© Disney
© Disney

On top of these behind-the-scenes tours and technology demos, the students also received an invitation to attend the World Premiere of Marvel Studios’ Ant-Man and The Wasp from director Peyton Reed and Victoria Alonso (executive vice president of Physical Production), following a discussion on the impact and importance of women in technology. This year’s class also heard from leaders across The Walt Disney Company who are using technology to change the landscape of the entertainment industry, including Susan O’Day, Anita Lynch (vice president, Data Architecture, Analytics & AI), Ed Catmull (president, Pixar and Walt Disney Animation Studios), Alisa Bowen (senior vice president and general manager of International, Disney SVOD Service) and Paula McMahon (vice president, Product and Innovation).

© Disney

“My favorite part of the program this summer was learning how to code websites and robots with different coding languages, such as Python, HTML, CSS, Javascript and more. I also enjoyed going on various field trips… with my fellow classmates to experience what can be accomplished with technology,” said student Samia A. “This program has [taught] me skills that I can apply to real world programs and gave me confidence that I can make a change in the world.”

The Walt Disney Company Reports Third Quarter and Nine Months Earnings for Fiscal 2018

The Walt Disney Company (NYSE: DIS) today reported quarterly earnings for its third fiscal quarter ended June 30, 2018. Diluted earnings per share (EPS) for the quarter increased 29% to $1.95 from $1.51 in the prior-year quarter. Excluding certain items affecting comparability(1), EPS for the quarter increased 18% to $1.87 from $1.58 in the prior-year quarter. EPS for the nine months ended June 30, 2018 increased to $6.81 from $4.55 in the prior-year period. Excluding certain items affecting comparability(1), EPS for the nine months increased 21% to $5.60 from $4.63 in the prior-year period.

“We’re pleased with our results in the quarter, including a double-digit increase in earnings per share, and excited about the opportunities ahead for continued growth,” said Robert A. Iger, Chairman and Chief Executive Officer, The Walt Disney Company. “Having earned the overwhelming support of shareholders, we are more enthusiastic about the 21st Century Fox acquisition than ever, and confident in our ability to fully leverage these assets along with our own incredible brands, franchises and businesses to drive significant value across the entire company.”

The following table summarizes the third quarter and nine-month results for fiscal 2018 and 2017 (in millions, except per share amounts):

Quarter Ended Nine Months Ended
June 30,
2018
July 1,
2017
Change June 30,
2018
July 1,
2017
Change
Revenues $ 15,228 $ 14,238 7 % $ 45,127 $ 42,358 7 %
Segment operating income (1) $ 4,193 $ 4,011 5 % $ 12,416 $ 11,963 4 %
Net income (2) $ 2,916 $ 2,366 23 % $ 10,276 $ 7,233 42 %
Diluted EPS (2) $ 1.95 $ 1.51 29 % $ 6.81 $ 4.55 50 %
EPS excluding certain items affecting comparability (1) $ 1.87 $ 1.58 18 % $ 5.60 $ 4.63 21 %
Cash provided by operations $ 3,679 $ 4,100 (10)% $ 10,442 $ 8,773 19 %
Free cash flow (1) $ 2,459 $ 3,295 (25)% $ 7,178 $ 6,045 19 %

(1)

EPS excluding certain items affecting comparability, segment operating income and free cash flow are non-GAAP financial measures. See the discussion on pages 7 through 9. The most significant item affecting comparability for the current quarter and nine-month period was a net benefit from new U.S. federal income tax legislation (Tax Act). See page 5 for further discussion.

(2)

Reflects amounts attributable to shareholders of The Walt Disney Company, i.e. after deduction of noncontrolling interests.

SEGMENT RESULTS

The following table summarizes the third quarter and nine-month segment operating results for fiscal 2018 and 2017 (in millions):

Quarter Ended Nine Months Ended
June 30,
2018
July 1,
2017
Change June 30,
2018
July 1,
2017
Change
Revenues:
Media Networks $ 6,156 $ 5,866 5 % $ 18,537 $ 18,045 3 %
Parks and Resorts 5,193 4,894 6 % 15,226 13,748 11 %
Studio Entertainment 2,878 2,393 20 % 7,836 6,947 13 %
Consumer Products & Interactive Media 1,001 1,085 (8)% 3,528 3,618 (2)%
$ 15,228 $ 14,238 7 % $ 45,127 $ 42,358 7 %
Segment operating income:
Media Networks $ 1,822 $ 1,842 (1)% $ 5,097 $ 5,427 (6)%
Parks and Resorts 1,339 1,168 15 % 3,640 3,028 20 %
Studio Entertainment 708 639 11 % 2,384 2,137 12 %
Consumer Products & Interactive Media 324 362 (10)% 1,295 1,371 (6)%
$ 4,193 $ 4,011 5 % $ 12,416 $ 11,963 4 %

Media Networks

Media Networks revenues for the quarter increased 5% to $6.2 billion and segment operating income was comparable to the prior-year quarter at $1.8 billion.

The following table provides further detail of the Media Networks results (in millions):

Quarter Ended Nine Months Ended
June 30,
2018
July 1,
2017
Change June 30,
2018
July 1,
2017
Change
Revenues:
Cable Networks $ 4,188 $ 4,086 2 % $ 12,933 $ 12,576 3 %
Broadcasting 1,968 1,780 11 % 5,604 5,469 2 %
$ 6,156 $ 5,866 5 % $ 18,537 $ 18,045 3 %
Segment operating income:
Cable Networks $ 1,383 $ 1,462 (5)% $ 3,967 $ 4,117 (4)%
Broadcasting 361 253 43 % 989 976 1 %
Equity in the income of investees 78 127 (39)% 141 334 (58)%
$ 1,822 $ 1,842 (1)% $ 5,097 $ 5,427 (6)%

Cable Networks

Cable Networks revenues for the quarter increased 2% to $4.2 billion and operating income decreased 5% to $1.4 billion. Lower operating income was due to a loss at BAMTech and a decrease at Freeform, partially offset by an increase at ESPN.

In the current quarter, BAMTech’s operating loss is reported in Cable Networks as a result of our acquisition of a controlling interest in the fourth quarter of fiscal 2017. In the prior-year quarter, the Company’s share of BAMTech results was reported in equity in the income of investees. The loss at BAMTech reflects higher content and marketing costs and ongoing investments in their technology platform including costs associated with ESPN+, which was launched in April 2018.

The decline at Freeform was primarily due to lower advertising revenue and higher marketing costs, partially offset by lower programming costs. The decrease in advertising revenue was due to lower impressions from a decline in average viewership.

The increase at ESPN was due to affiliate revenue growth and the comparison to severance and contract termination costs incurred in the prior-year quarter, partially offset by higher programming costs and a decrease in advertising revenue. Affiliate revenue growth reflected contractual rate increases, partially offset by a decline in subscribers. The programming cost increase was primarily due to a contractual rate increase for NBA programming. Lower advertising revenue was due to a decrease in impressions from lower average viewership, partially offset by higher rates. Advertising revenue was adversely impacted by one less NBA final game.

Broadcasting

Broadcasting revenues for the quarter increased 11% to $2.0 billion and operating income increased 43% to $361 million. The increase in operating income was due to higher program sales, affiliate revenue growth and increased network advertising revenue, partially offset by higher programming costs.

The increase in program sales was driven by higher sales of Designated Survivor, How to Get Away with Murder and Grey’s Anatomy, partially offset by lower sales of Quantico. Additionally, the current quarter included the sale of Luke Cage compared to the sale of The Defenders in the prior-year quarter. Affiliate revenue growth was due to contractual rate increases. The increase in network advertising revenue was due to higher rates, partially offset by lower average viewership. The programming costs increase was driven by higher cost primetime programming, including the impact of American Idol and Roseanne in the current quarter.

Equity in the Income of Investees
Equity in the income of investees decreased from $127 million in the prior-year quarter to $78 million in the current quarter due to higher losses from Hulu and lower income from A+E Television Networks (A+E). These decreases were partially offset by the absence of a loss from BAMTech, which is now consolidated and reported in Cable Networks. The decrease at Hulu was driven by higher programming and labor costs, partially offset by growth in subscription and advertising revenue. The decrease at A+E was due to lower advertising revenue and higher programming costs, partially offset by higher program sales.

Parks and Resorts
Parks and Resorts revenues for the quarter increased 6% to $5.2 billion and segment operating income increased 15% to $1.3 billion. Operating income growth for the quarter was due to increases across key operations. Results include an unfavorable impact due to the timing of the Easter holiday relative to our fiscal periods. One week of the Easter holiday fell in the third quarter of the current year whereas both holiday weeks fell in the third quarter of the prior year.
Higher operating income at our domestic parks and resorts was due to increased guest spending, partially offset by increased costs. Guest spending growth was due to increases in average ticket prices, food, beverage and merchandise spending and average daily hotel room rates. The increase in costs was due to labor and other cost inflation, partially offset by lower marketing costs. At our cruise line, growth was driven by higher passenger cruise days, which was primarily due to the Disney Fantasy dry-dock in the prior-year quarter.
The increased operating income at our international parks and resorts was due to growth at Shanghai Disney Resort and Hong Kong Disneyland Resort. Higher operating income at Shanghai Disney Resort was due to lower costs and attendance growth, partially offset by decreased guest spending. The decrease in guest spending was driven by lower average ticket prices, partially offset by higher food and beverage spending. At Hong Kong Disneyland Resort, the increase in operating income was primarily due to higher occupied room nights, average ticket prices and attendance.
Studio Entertainment
Studio Entertainment revenues for the quarter increased 20% to $2.9 billion and segment operating income increased 11% to $708 million. Operating income growth was due to increases in domestic theatrical and worldwide TV/SVOD distribution results, partially offset by film cost impairments related to animated films that will not be released and lower domestic home entertainment results.
The increase in domestic theatrical distribution results was due to the success of Avengers: Infinity War and Incredibles 2 in the current quarter compared to Guardians of the Galaxy Vol. 2 and Cars 3 in the prior-year quarter, partially offset by higher pre-release marketing costs. Additionally, the current quarter included the continuing performance of Black Panther and the release of Solo: A Star Wars Story, whereas the prior-year quarter included the continuing performance of Beauty and the Beast and the release of Pirates of the Caribbean: Dead Men Tell No Tales.
Higher TV/SVOD distribution results were due to the timing of title availabilities at our domestic pay and free television businesses, international growth and higher domestic pay television rates.
Lower domestic home entertainment results were due to a decrease in unit sales driven by the timing of the release of Star Wars titles. The DVD/Blu-ray release of Star Wars: The Last Jedi was in the second quarter of the current year whereas the DVD/Blu-ray release of Rogue One: A Star Wars Story occurred in the prior-year third quarter. Other significant titles included Black Panther in the current quarter, while the prior-year quarter included Beauty and the Beast and Moana.
Consumer Products & Interactive Media
Consumer Products & Interactive Media revenues decreased 8% to $1.0 billion and segment operating income decreased 10% to $324 million. The decrease in operating income was due to lower income from licensing activities and decreased comparable retail store sales, partially offset by lower costs at our games business.
The decrease in income from licensing activities was driven by lower revenue from products based on Spider-Man and Cars, partially offset by an increase from products based on Avengers.

OTHER FINANCIAL INFORMATION

Corporate and Unallocated Shared Expenses

Corporate and unallocated shared expenses increased $97 million to $196 million in the current quarter primarily due to costs incurred in connection with our agreement to acquire Twenty-First Century Fox, Inc., higher compensation costs and the timing of allocations to operating segments.

Other income/(expense), net

Other expense in the prior-year quarter consisted of a charge, net of committed insurance recoveries, incurred in connection with the settlement of litigation.

Interest expense, net

Interest expense, net was as follows (in millions):

Quarter Ended
June 30,
2018
July 1,
2017
Change
Interest expense $ (175 ) $ (134 ) (31)%
Interest and investment income

32

17 88 %
Interest expense, net $ (143 ) $ (117 ) (22)%

The increase in interest expense was due to higher average interest rates and an increase in average debt balances.

The increase in interest and investment income was driven by net investment income in the current quarter compared to net investment losses in the prior-year quarter.

Income Taxes

The effective income tax rate was as follows:

Quarter Ended
June 30,
2018
July 1,
2017
Change
Effective income tax rate 20.6 % 31.6 % 11.0 ppt

The decrease in the effective income tax rate for the quarter was due to a net favorable impact of the Tax Act, which reflects the following:

  • A reduction in the Company’s fiscal 2018 U.S. statutory federal income tax rate to 24.5% from 35.0% in the prior year. Net of state tax and other related effects, the reduction in the statutory rate had an impact of approximately 8.6 percentage points on the effective income tax rate.
  • A net benefit of approximately $110 million from updating our prior quarter estimates of the remeasurement of our net federal deferred tax liability to the new statutory rates (Deferred Remeasurement) and a one-time tax on certain accumulated foreign earnings (Deemed Repatriation Tax). This update reflected the impact from finalizing our fiscal 2017 income tax return. This benefit had an impact of approximately 2.9 percentage points on the effective income tax rate.

Noncontrolling Interests

Quarter Ended
(in millions) June 30,
2018
July 1,
2017
Change
Net income attributable to noncontrolling interests $ 143 $ 108 (32)%

The increase in net income attributable to noncontrolling interests was due to higher results at ESPN and Shanghai Disney Resort. Results at ESPN included the benefit of lower tax expense, largely due to the Tax Act.

Net income attributable to noncontrolling interests is determined on income after royalties and management fees, financing costs and income taxes, as applicable.

Cash Flow

Cash provided by operations and free cash flow were as follows (in millions):

Nine Months Ended
June 30,
2018
July 1,
2017
Change
Cash provided by operations $ 10,442 $ 8,773 $ 1,669
Investments in parks, resorts and other property (3,264 ) (2,728 ) (536 )
Free cash flow (1) $ 7,178 $ 6,045 $ 1,133

(1)

Free cash flow is not a financial measure defined by GAAP. See the discussion on pages 7 through 9.

Cash provided by operations increased by $1.7 billion from $8.8 billion in the prior-year nine months to $10.4 billion in the current nine months. The increase was driven by a decrease in income tax payments due to the Tax Act, lower pension plan contributions and higher operating results at our Parks and Resorts segment, partially offset by higher film and television production spending.

Capital Expenditures and Depreciation Expense

Investments in parks, resorts and other property were as follows (in millions):

Nine Months Ended
June 30,
2018
July 1,
2017
Media Networks
Cable Networks $ 161 $ 70
Broadcasting 54 44
Total Media Networks 215 114
Parks and Resorts
Domestic 2,368 1,682
International 466 721
Total Parks and Resorts 2,834 2,403
Studio Entertainment 72 64
Consumer Products & Interactive Media 14 17
Corporate 129 130
Total investments in parks, resorts and other property $ 3,264 $ 2,728

Capital expenditures increased by $536 million to $3.3 billion due to higher spending on new attractions at our domestic parks and resorts and on technology at BAMTech, partially offset by lower spending at Hong Kong Disneyland Resort and Shanghai Disney Resort.

Depreciation expense was as follows (in millions):

Nine Months Ended
June 30,
2018
July 1,
2017
Media Networks
Cable Networks $ 126 $ 105
Broadcasting 71 67
Total Media Networks 197 172
Parks and Resorts
Domestic 1,053 983
International 546 500
Total Parks and Resorts 1,599 1,483
Studio Entertainment 41 36
Consumer Products & Interactive Media 41 46
Corporate 164 189
Total depreciation expense $ 2,042 $ 1,926

Non-GAAP Financial Measures

This earnings release presents EPS excluding the impact of certain items affecting comparability, free cash flow and aggregate segment operating income, all of which are important financial measures for the Company, but are not financial measures defined by GAAP.

These measures should be reviewed in conjunction with the relevant GAAP financial measures and are not presented as alternative measures of EPS, cash flow or net income as determined in accordance with GAAP. EPS excluding certain items affecting comparability, free cash flow and aggregate segment operating income as we have calculated them may not be comparable to similarly titled measures reported by other companies.

EPS excluding certain items affecting comparability – The Company uses EPS excluding certain items to evaluate the performance of the Company’s operations exclusive of certain items affecting comparability of results from period to period. The Company believes that information about EPS exclusive of these items is useful to investors, particularly where the impact of the excluded items is significant in relation to reported earnings, because the measure allows for comparability between periods of the operating performance of the Company’s business and allows investors to evaluate the impact of these items separately from the impact of the operations of the business.

The following table reconciles reported EPS to EPS excluding certain items affecting comparability for the quarter.

(in millions except EPS) Pre-Tax Income/
Loss
Tax Benefit/
Expense (1)
After-Tax Income/
Loss (2)
EPS (3) Change vs. prior year period
Quarter Ended June 30, 2018:
As reported $ 3,854 $ (795 ) $ 3,059 $ 1.95 29 %
Exclude:
Net benefit from the Tax Act (4) (110 ) (110 ) (0.07 )
Excluding certain items affecting comparability $ 3,854 $ (905 ) $ 2,949 $ 1.87 18 %
Quarter Ended July 1, 2017:
As reported $ 3,618 $ (1,144 ) $ 2,474 $ 1.51
Exclude:
Other income/(expense), net (5) 177 (65 ) 112 0.07
Excluding certain items affecting comparability $ 3,795 $ (1,209 ) $ 2,586 $ 1.58
Nine Months Ended June 30, 2018:
As reported $ 11,527 $ (880 ) $ 10,647 $ 6.81 50 %
Exclude:
Net benefit from the Tax Act (4) (1,801 ) (1,801 ) (1.17 )
Other income/(expense), net (5) (94 ) 23 (71 ) (0.05 )
Restructuring and impairment charges (6) 28 (6 ) 22 0.01
Excluding certain items affecting comparability $ 11,461 $ (2,664 ) $ 8,797 $ 5.60 21 %
Nine Months Ended July 1, 2017:
As reported $ 11,094 $ (3,593 ) $ 7,501 $ 4.55
Exclude:
Other income/(expense), net (5) 177 (65 ) 112 0.07
Excluding certain items affecting comparability $ 11,271 $ (3,658 ) $ 7,613 $ 4.63

(1)

Tax benefit/expense adjustments are determined using the tax rate applicable to the individual item affecting comparability.

(2)

Before noncontrolling interest share.

(3)

Net of noncontrolling interest share, where applicable. Total may not equal the sum of the column due to rounding.

(4)

Amounts reflect the Deferred Remeasurement, partially offset by the Deemed Repatriation Tax. In the current nine-month period, the Company recognized a net benefit of approximately $1.8 billion due to an approximate $2.1 billion benefit from the Deferred Remeasurement, partially offset by an approximate $0.3 billion impact from the Deemed Repatriation Tax. The current quarter reflects a net benefit of approximately $0.1 billion from updating our prior quarter estimates. See page 5 for further discussion.

(5)

Other expense for the prior-year quarter and nine-month period consisted of a charge, net of committed insurance recoveries, incurred in connection with the settlement of litigation. Other income for the current nine-month period includes a gain from the sale of property rights and insurance proceeds related to a legal mater.

(6)

For the nine-month period, the Company recorded $28 million of restructuring and impairment charges primarily for severance costs.

Free cash flow – The Company uses free cash flow (cash provided by operations less investments in parks, resorts and other property), among other measures, to evaluate the ability of its operations to generate cash that is available for purposes other than capital expenditures. Management believes that information about free cash flow provides investors with an important perspective on the cash available to service debt obligations, make strategic acquisitions and investments and pay dividends or repurchase shares.

Aggregate segment operating income – The Company evaluates the performance of its operating segments based on segment operating income, and management uses aggregate segment operating income as a measure of the performance of operating businesses separate from non-operating factors. The Company believes that information about aggregate segment operating income assists investors by allowing them to evaluate changes in the operating results of the Company’s portfolio of businesses separate from non-operational factors that affect net income, thus providing separate insight into both operations and the other factors that affect reported results.

A reconciliation of income before income taxes to segment operating income is as follows (in millions):

Quarter Ended % Change Nine Months Ended % Change
(in millions) June 30,
2018
July 1,
2017
Better/
(Worse)
June 30,
2018
July 1,
2017
Better/
(Worse)
Income before income taxes $ 3,854 $ 3,618 7 % $ 11,527 $ 11,094 4 %
Add/(subtract):
Corporate and unallocated shared expenses 196 99 (98)% 540 392 (38)%
Restructuring and impairment charges

nm

28

nm

Other income/(expense), net 177

— %

(94 ) 177

nm

Interest expense, net 143 117 (22)% 415 300 (38)%
Segment Operating Income $ 4,193 $ 4,011 5 % $ 12,416 $ 11,963 4 %

CONFERENCE CALL INFORMATION

In conjunction with this release, The Walt Disney Company will host a conference call today, August 7, 2018, at 4:30 PM EDT/1:30 PM PDT via a live Webcast. To access the Webcast go to www.disney.com/investors. The discussion will be archived.

FORWARD-LOOKING STATEMENTS

Management believes certain statements in this earnings release may constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are made on the basis of management’s views and assumptions regarding future events and business performance as of the time the statements are made. Management does not undertake any obligation to update these statements.

Actual results may differ materially from those expressed or implied. Such differences may result from actions taken by the Company, including restructuring or strategic initiatives (including capital investments or asset acquisitions or dispositions), as well as from developments beyond the Company’s control, including:

  • changes in domestic and global economic conditions, competitive conditions and consumer preferences;
  • adverse weather conditions or natural disasters;
  • health concerns;
  • international, political, or military developments; and
  • technological developments.

Such developments may affect entertainment, travel and leisure businesses generally and may, among other things, affect:

  • the performance of the Company’s theatrical and home entertainment releases;
  • the advertising market for broadcast and cable television programming;
  • demand for our products and services;
  • expenses of providing medical and pension benefits;
  • income tax expense;
  • performance of some or all company businesses either directly or through their impact on those who distribute our products; and
  • the pending transaction with 21CF.

Additional factors are set forth in the Company’s Annual Report on Form 10-K for the year ended September 30, 2017 under Item 1A, “Risk Factors,” in the Company’s Report on Form 10-Q for the quarter ended December 30, 2017 under Item 1A, “Risk Factors,” and subsequent reports.

THE WALT DISNEY COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(unaudited; in millions, except per share data)
Quarter Ended Nine Months Ended
June 30,
2018
July 1,
2017
June 30,
2018
July 1,
2017
Revenues:
Services $ 13,142 $ 12,097 $ 38,646 $ 35,990
Products 2,086 2,141 6,481 6,368
Total revenues 15,228 14,238 45,127 42,358
Costs and expenses:
Cost of services (exclusive of depreciation and amortization) (7,124 ) (6,469 ) (20,762 ) (19,328 )
Cost of products (exclusive of depreciation and amortization) (1,224 ) (1,248 ) (3,856 ) (3,764 )
Selling, general, administrative and other (2,212 ) (2,022 ) (6,538 ) (5,948 )
Depreciation and amortization (744 ) (711 ) (2,217 ) (2,074 )
Total costs and expenses (11,304 ) (10,450 ) (33,373 ) (31,114 )
Restructuring and impairment charges (28 )
Other income/(expense), net (177 ) 94 (177 )
Interest expense, net (143 ) (117 ) (415 ) (300 )
Equity in the income of investees 73 124 122 327
Income before income taxes 3,854 3,618 11,527 11,094
Income taxes (795 ) (1,144 ) (880 ) (3,593 )
Net income 3,059 2,474 10,647 7,501
Less: Net income attributable to noncontrolling interests (143 ) (108 ) (371 ) (268 )
Net income attributable to The Walt Disney Company (Disney) $ 2,916 $ 2,366 $ 10,276 $ 7,233
Earnings per share attributable to Disney:
Diluted $ 1.95 $ 1.51 $ 6.81 $ 4.55
Basic $ 1.96 $ 1.51 $ 6.84 $ 4.58
Weighted average number of common and common equivalent shares outstanding:
Diluted 1,498 1,572 1,510 1,588
Basic 1,491 1,562 1,502 1,578
Dividends declared per share $ 0.84 $ 0.78 $ 1.68 $ 1.56
THE WALT DISNEY COMPANY
CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited; in millions, except per share data)
June 30,
2018
September 30,
2017
ASSETS
Current assets
Cash and cash equivalents $ 4,326 $ 4,017
Receivables 10,071 8,633
Inventories 1,322 1,373
Television costs and advances 1,241 1,278
Other current assets 769 588
Total current assets 17,729 15,889
Film and television costs 7,684 7,481
Investments 3,155 3,202
Parks, resorts and other property
Attractions, buildings and equipment 55,284 54,043
Accumulated depreciation (30,611 ) (29,037 )
24,673 25,006
Projects in progress 3,446 2,145
Land 1,254 1,255
29,373 28,406
Intangible assets, net 6,892 6,995
Goodwill 31,306 31,426
Other assets 2,653 2,390
Total assets $ 98,792 $ 95,789
LIABILITIES AND EQUITY
Current liabilities
Accounts payable and other accrued liabilities $ 9,763 $ 8,855
Current portion of borrowings 5,992 6,172
Deferred revenue and other 4,459 4,568
Total current liabilities 20,214 19,595
Borrowings 17,681 19,119
Deferred income taxes 3,222 4,480
Other long-term liabilities 6,467 6,443
Commitments and contingencies
Redeemable noncontrolling interests 1,137 1,148
Equity
Preferred stock, $0.01 par value, Authorized – 100 million shares, Issued – none

Common stock, $0.01 par value,
Authorized – 4.6 billion shares, Issued – 2.9 billion shares

36,574 36,248
Retained earnings 80,364 72,606
Accumulated other comprehensive loss (3,262 ) (3,528 )
113,676 105,326
Treasury stock, at cost, 1.4 billion shares (67,588 ) (64,011 )
Total Disney Shareholders’ equity 46,088 41,315
Noncontrolling interests 3,983 3,689
Total equity 50,071 45,004
Total liabilities and equity $ 98,792 $ 95,789
THE WALT DISNEY COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited; in millions)
Nine Months Ended
June 30,
2018
July 1,
2017
OPERATING ACTIVITIES
Net income $ 10,647 $ 7,501
Depreciation and amortization 2,217 2,074
Deferred income taxes (1,411 ) 294
Equity in the income of investees (122 ) (327 )
Cash distributions received from equity investees 587 584
Net change in film and television costs and advances (601 ) (745 )
Equity-based compensation 307 278
Other 297 373
Changes in operating assets and liabilities:
Receivables (1,178 ) (786 )
Inventories 53 93
Other assets (472 ) 72
Accounts payable and other accrued liabilities (316 ) (781 )
Income taxes 434 143
Cash provided by operations 10,442 8,773
INVESTING ACTIVITIES
Investments in parks, resorts and other property (3,264 ) (2,728 )
Acquisitions (1,581 ) (557 )
Other (298 ) (5 )
Cash used in investing activities (5,143 ) (3,290 )
FINANCING ACTIVITIES
Commercial paper borrowings/(payments), net 453 (112 )
Borrowings 1,056 4,053
Reduction of borrowings (1,356 ) (1,736 )
Dividends (1,266 ) (1,237 )
Repurchases of common stock (3,577 ) (5,944 )
Proceeds from exercise of stock options 129 256
Other (420 ) (1,072 )
Cash used in financing activities (4,981 ) (5,792 )
Impact of exchange rates on cash, cash equivalents and restricted cash (51 ) (23 )
Change in cash, cash equivalents and restricted cash 267 (332 )
Cash, cash equivalents and restricted cash, beginning of period 4,064 4,760
Cash, cash equivalents and restricted cash, end of period $ 4,331 $ 4,428

 


The Walt Disney Company to Eliminate Plastic Straws and More by mid-2019

Today, The Walt Disney Company announced that by mid-2019, they will eliminate single-use plastic straws and plastic stirrers at all owned and operated locations across the globe, amounting to a reduction of more than 175 million straws and 13 million stirrers annually.

The company’s commitment to environmental stewardship goes back to  more than 60 years ago starting with  Walt Disney himself who said , “conservation isn’t just the business of a few people. It’s a matter that concerns all of us.”

In addition to removing plastic straws, over the next few years, The Walt Disney Company will also be transitioning to refillable in-room amenities in their hotels and on their cruise ships, reducing plastics in guest rooms by 80 percent. They will also reduce the number of plastic shopping bags in their owned and operated parks and on the cruise line, offering guests the option to purchase reusable bags at a nominal price. Finally, The Walt Disney Company will complete their work to eliminate polystyrene cups across their global owned and operated business. These steps are part of the long-term effort to reduce single-use plastics, and they will continue recycling and responsibly disposing single-use waste that cannot be eliminated.

“Eliminating plastic straws and other plastic items are meaningful steps in our long-standing commitment to environmental stewardship,” said Bob Chapek, Chairman, Disney Parks, Experiences, and Consumer Products. “These new global efforts help reduce our environmental footprint, and advance our long-term sustainability goals.”

Since 1995, the Disney Conservation Fund has directed more than $70 million to reverse the decline of wildlife around the world. They’ve also reduced their net greenhouse gas emissions by 41 percent in 2017 and diverted nearly 50 percent of waste from landfills and incineration in 2017, making significant progress on their long-term goal of attaining a net zero greenhouse gas emissions and zero waste, while conserving water resources.

© Disney

“Disney has always been inspired by nature – and it is a uniquely powerful brand that inspires, educates, and entertains, all at the same time,” said Dr. M. Sanjayan, CEO of Conservation International. “Today’s announcement is more than about reducing single-use plastic waste, it’s also about showing millions of kids and adults from around the world the many ways we can change our daily habits to care for the oceans and protect nature that sustains us all. It also builds on Disney’s longstanding commitment to conservation and environmental stewardship, a legacy that stretches from the highlands of Peru to the islands of the South Pacific.”

To learn more about Disney’s commitment to the environment, visit www.thewaltdisneycompany.com/environment.


The Walt Disney Company to Webcast Special Meeting of Shareholders

The special meeting of shareholders of The Walt Disney Company (NYSE: DIS) will be webcast live at www.disney.com/investors beginning at 10:00 a.m. EDT / 7:00 a.m. PDT on July 27, 2018.

The presentation will be archived.

The Walt Disney Company Ups Bid to $71.3 Billion To Acquire Twenty-First Century Fox

The Walt Disney Company (NYSE: DIS) today announced that it has signed an amended acquisition agreement with Twenty-First Century Fox, Inc. (“21st Century Fox” —NASDAQ: FOXA, FOX), for $38 per share in cash and stock. Disney will acquire 21st Century Fox immediately following the spin-off of the businesses comprising “New Fox” as previously announced.

Under the amended agreement, 21st Century Fox shareholders may elect to receive, for each share of 21st Century Fox common stock, $38 in either cash or shares of Disney common stock (subject to adjustment for certain tax liabilities as described in the original acquisition announcement). The overall mix of consideration paid to 21st Century Fox shareholders will be approximately 50% cash and 50% stock. The stock consideration is subject to a collar (described below under ‘Transaction Details’) and is expected to be tax-free to 21st Century Fox shareholders.

The 21st Century Fox businesses to be acquired by Disney remain the same as under the original agreement. Since the original agreement was announced, the intrinsic value of these assets has increased, notably due to tax reform and operating improvements.

“The acquisition of 21st Century Fox will bring significant financial value to the shareholders of both companies, and after six months of integration planning we’re even more enthusiastic and confident in the strategic fit of the assets and the talent at Fox,” said Robert A. Iger, Chairman and Chief Executive Officer, The Walt Disney Company. “At a time of dynamic change in the entertainment industry, the combination of Disney’s and Fox’s unparalleled collection of businesses and franchises will allow us to create more appealing high-quality content, expand our direct-to-consumer offerings and international presence, and deliver more personalized and compelling entertainment experiences to meet growing consumer demand around the world.”

Transaction Details

Disney is expected to pay a total of approximately $35.7 billion in cash and issue approximately 343 million new shares to 21st Century Fox shareholders, representing about a 19% stake in Disney on a pro forma basis.

The collar on the stock consideration will ensure that 21st Century Fox shareholders will receive a number of Disney shares equal to $38 in value if the average Disney stock price at closing is between $93.53 and $114.32. 21st Century Fox shareholders will receive an exchange ratio of 0.3324 shares of Disney common stock if the average Disney stock price at closing is above $114.32 and 0.4063 shares of Disney common stock if the average Disney stock price at closing is below $93.53. Elections of cash and stock will be subject to proration to the extent cash or stock is oversubscribed.

Disney will also assume about $13.8 billion of net debt of 21st Century Fox. The acquisition price implies a total equity value of approximately $71.3 billion and a total transaction value of approximately $85.1 billion (assuming no tax adjustment). Disney has secured financing commitments for the cash portion of the acquisition.

The amended transaction is expected to be accretive to Disney earnings per share before the impact of purchase accounting for the second fiscal year after the close of the transaction, and to yield at least $2 billion in cost synergies by 2021 from operating efficiencies realized through the combination of businesses.

As announced in the original acquisition agreement, the businesses to be acquired by Disney include 21st Century Fox’s film production businesses, including Twentieth Century Fox, Fox Searchlight Pictures and Fox 2000 Pictures; Fox‘s television creative units, Twentieth Century Fox Television, FX Productions and Fox21; FX Networks; National Geographic Partners; Fox Sports Regional Networks; Fox Networks Group International; Star India; and Fox’s interests in Hulu, Sky plc, and Tata Sky. The acquisition will occur immediately after the spin-off by 21st Century Fox of the Fox Broadcasting network and stations, Fox News Channel, Fox Business Network, FS1, FS2 and Big Ten Network into a newly listed company referred to as New Fox. If 21st Century Fox completes its acquisition of the 61% of Sky it doesn’t already own prior to closing of the Disney acquisition, Disney would assume full ownership of Sky, including the assumption of its outstanding debt, upon closing.

The acquisition will significantly increase Disney’s international footprint and expand the content and distribution for its direct-to-consumer (DTC) offerings, which include ESPN+ for sports fans; a Disney-branded streaming video-on-demand service launching in late 2019 that will feature Disney, Pixar, Marvel and Star Wars films along with a host of exclusive original content and library titles; and its ownership stake in Hulu. As a result of the acquisition, Disney will hold a controlling stake in Hulu.

Disney believes the transaction has a clear and timely path to regulatory approval. Both companies have spent the past six months working toward meeting all conditions necessary for closing. In the amended agreement, Disney has increased the scope of its commitment to take actions required to secure regulatory approval.

The amended agreement has been approved by the boards of directors of Disney and 21st Century Fox. The transaction is subject to approval by Disney and 21st Century Fox shareholders, clearance under the Hart-Scott-Rodino Antitrust Improvements Act, a number of other non-United States merger and other regulatory reviews, and other customary closing conditions. Both companies had been scheduled to hold shareholder meetings on the previously announced transaction on July 10. In light of the amended agreement, the companies are required to prepare updated SEC filings and proxy materials which will be sent to shareholders. A new date for the shareholder meetings will be announced.

Investor Conference Call

Disney will conduct an investor conference call at approximately 8:30 a.m. EDT / 5:30 a.m. PDT today, June 20, 2018. To listen to the live webcast, please visit www.disney.com/investors. The webcast presentation will be archived.

About The Walt Disney Company

The Walt Disney Company, together with its subsidiaries, is a diversified worldwide entertainment company with operations in four business segments: Media Networks; Studio Entertainment; Parks, Experiences and Consumer Products; and Direct-to-Consumer and International. Disney is a Dow 30 company and had annual revenues of $55.1 billion in its Fiscal Year 2017.

About 21st Century Fox

21st Century Fox is one of the world’s leading portfolios of cable, broadcast, film, pay TV and satellite assets spanning six continents across the globe. Reaching more than 1.8 billion subscribers in approximately 50 local languages every day, 21st Century Fox is home to a global portfolio of cable and broadcasting networks and properties, including FOX, FX, FXX, FXM, FS1, Fox News Channel, Fox Business Network, FOX Sports, Fox Sports Network, National Geographic Channels, Star India, 28 local television stations in the U.S. and more than 350 international channels; film studio Twentieth Century Fox Film; and television production studios Twentieth Century Fox Television and a 50 per cent ownership interest in Endemol Shine Group. 21st Century Fox also holds approximately 39.1 per cent of the issued shares of Sky, Europe’s leading entertainment company, which serves nearly 23 million households across five countries. For more information about 21st Century Fox, please visit www.21CF.com.

Important Information About the Transaction and Where to Find It

In connection with the proposed transaction between The Walt Disney Company (“Disney”) and Twenty-First Century Fox, Inc. (“21CF”), which will be effected through the formation of a new holding company that will become the parent of both Disney and 21CF and is referred to as New Disney, TWDC Holdco 613 Corp. (“New Disney”) will file with the Securities and Exchange Commission (the “SEC”) a registration statement on Form S-4 that will include a joint proxy statement of Disney and 21CF that also constitutes a prospectus of New Disney, which will replace the definitive joint proxy statement/prospectus which Disney and 21CF previously filed with the SEC on May 24, 2018 and mailed to their respective stockholders on or about June 1, 2018. 21CF will file with the SEC a registration statement for a newly formed subsidiary (“New Fox”), which is contemplated to own certain assets and businesses of 21CF not being acquired by Disney in connection with the proposed transaction. 21CF, Disney and New Disney may also file other documents with the SEC regarding the proposed transaction. This document is not a substitute for the Form S-4, the joint proxy statement/prospectus or the registration statement of New Fox or any other document which 21CF, Disney or New Disney may file with the SEC. INVESTORS AND SECURITY HOLDERS OF 21CF AND DISNEY ARE URGED TO READ THE REGISTRATION STATEMENTS, THE JOINT PROXY STATEMENT/PROSPECTUS AND ALL OTHER RELEVANT DOCUMENTS THAT ARE FILED OR WILL BE FILED WITH THE SEC, AS WELL AS ANY AMENDMENTS OR SUPPLEMENTS TO THESE DOCUMENTS, CAREFULLY AND IN THEIR ENTIRETY BECAUSE THEY CONTAIN OR WILL CONTAIN IMPORTANT INFORMATION ABOUT THE PROPOSED TRANSACTION AND RELATED MATTERS. Investors and security holders may obtain free copies of the registration statements and the joint proxy statement/prospectus (when available) and other documents filed with the SEC by 21CF, Disney and New Disney through the web site maintained by the SEC at www.sec.gov or by contacting the investor relations department of:

21CF
1211 Avenue of Americas
New York, NY 10036
Attention: Investor Relations
1 (212) 852 7059
Investor@21CF.com
Disney
c/o Broadridge Corporate Issuer Solutions
P.O. Box 1342
Brentwood, NY 11717
Attention: Disney Shareholder Services
1 (855) 553 4763

Participants in the Solicitation

21CF, Disney, New Disney and their respective directors and executive officers may be deemed to be participants in the solicitation of proxies in respect of the proposed transaction. Information regarding 21CF’s directors and executive officers, including a description of their direct interests, by security holdings or otherwise, is available in 21CF’s Annual Report on Form 10-K for the year ended June 30, 2017 and its proxy statement filed on September 28, 2017, which are filed with the SEC. Information regarding Disney’s directors and executive officers, including a description of their direct interests, by security holdings or otherwise, is available in Disney’s Annual Report on Form 10-K for the year ended September 30, 2017 and its proxy statement filed on January 12, 2018, which are filed with the SEC. A more complete description will be available in the registration statement on Form S-4, the joint proxy statement/prospectus and the registration statement of New Fox.

No Offer or Solicitation

This communication is for informational purposes only and is not intended to and does not constitute an offer to subscribe for, buy or sell, or the solicitation of an offer to subscribe for, buy or sell, or an invitation to subscribe for, buy or sell any securities or a solicitation of any vote or approval in any jurisdiction, nor shall there be any sale, issuance or transfer of securities in any jurisdiction in which such offer, invitation, sale or solicitation would be unlawful prior to registration or qualification under the securities laws of any such jurisdiction. No offer of securities shall be made except by means of a prospectus meeting the requirements of Section 10 of the Securities Act of 1933, as amended, and otherwise in accordance with applicable law.

Cautionary Notes on Forward Looking Statements

This communication contains “forward-looking statements” within the meaning of the federal securities laws, including Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. In this context, forward-looking statements often address expected future business and financial performance and financial condition, and often contain words such as “expect,” “anticipate,” “intend,” “plan,” “believe,” “seek,” “see,” “will,” “would,” “target,” similar expressions, and variations or negatives of these words. Forward-looking statements by their nature address matters that are, to different degrees, uncertain, such as statements about the consummation of the proposed transaction and the anticipated benefits thereof. These and other forward-looking statements are not guarantees of future results and are subject to risks, uncertainties and assumptions that could cause actual results to differ materially from those expressed in any forward-looking statements, including the failure to consummate the proposed transaction or to make any filing or take other action required to consummate such transaction in a timely matter or at all, are not guarantees of future results and are subject to risks, uncertainties and assumptions that could cause actual results to differ materially from those expressed in any forward-looking statements. Important risk factors that may cause such a difference include, but are not limited to: (i) the completion of the proposed transaction may not occur on the anticipated terms and timing or at all, (ii) the required regulatory approvals are not obtained, or that in order to obtain such regulatory approvals, conditions are imposed that adversely affect the anticipated benefits from the proposed transaction or cause the parties to abandon the proposed transaction, (iii) the risk that a condition to closing of the transaction may not be satisfied (including, but not limited to, the receipt of legal opinions with respect to the treatment of certain aspects of the transaction under U.S. and Australian tax laws), (iv) the risk that the anticipated tax treatment of the transaction is not obtained, (v) an increase or decrease in the anticipated transaction taxes (including due to any changes to tax legislation and its impact on tax rates (and the timing of the effectiveness of any such changes)) to be paid in connection with the separation prior to the closing of the transactions could cause an adjustment to the number of Disney shares and the cash amount to be paid to holders of 21CF’s common stock, (vi) potential litigation relating to the proposed transaction that could be instituted against 21CF, Disney or their respective directors, (vii) potential adverse reactions or changes to business relationships resulting from the announcement or completion of the transactions, (viii) risks associated with third party contracts containing consent and/or other provisions that may be triggered by the proposed transaction, (ix) negative effects of the announcement or the consummation of the transaction on the market price of 21CF’s common stock, Disney’s common stock and/or New Disney’s common stock, (x) risks relating to the value of the New Disney shares to be issued in the transaction and uncertainty as to the long-term value of New Disney’s common stock, (xi) the potential impact of unforeseen liabilities, future capital expenditures, revenues, expenses, earnings, synergies, economic performance, indebtedness, financial condition and losses on the future prospects, business and management strategies for the management, expansion and growth of New Disney’s operations after the consummation of the transaction and on the other conditions to the completion of the merger, (xii) the risks and costs associated with, and the ability of New Disney to, integrate the businesses successfully and to achieve anticipated synergies, (xiii) the risk that disruptions from the proposed transaction will harm 21CF’s or Disney’s business, including current plans and operations, (xiv) the ability of 21CF or Disney to retain and hire key personnel, (xv) adverse legal and regulatory developments or determinations or adverse changes in, or interpretations of, U.S., Australian or other foreign laws, rules or regulations, including tax laws, rules and regulations, that could delay or prevent completion of the proposed transactions or cause the terms of the proposed transactions to be modified, (xvi) the ability of the parties to obtain or consummate financing or refinancing related to the proposed transactions upon acceptable terms or at all, (xvii) as well as management’s response to any of the aforementioned factors.

These risks, as well as other risks associated with the proposed transactions, will be more fully discussed in the joint proxy statement/prospectus that will be included in the registration statement on Form S-4 that will be filed with the SEC in connection with the proposed transactions, as well as in the registration statement filed with respect to New Fox. While the list of factors presented here is, and the list of factors to be presented in the registration statement on Form S-4 and the registration statement of New Fox will be, considered representative, no such list should be considered to be a complete statement of all potential risks and uncertainties. Unlisted factors may present significant additional obstacles to the realization of forward looking statements. Consequences of material differences in results as compared with those anticipated in the forward-looking statements could include, among other things, business disruption, operational problems, financial loss, legal liability to third parties and similar risks, any of which could have a material adverse effect on 21CF’s, Disney’s or New Disney’s consolidated financial condition, results of operations, credit rating or liquidity. Neither 21CF, Disney nor New Disney assume any obligation to publicly provide revisions or updates to any forward looking statements, whether as a result of new information, future developments or otherwise, should circumstances change, except as otherwise required by securities and other applicable laws.