The Walt Disney Company (NYSE: DIS) today reported quarterly
earnings for its first fiscal quarter ended December 30, 2017.
Diluted earnings per share (EPS) for the quarter increased 88% to
$2.91 from $1.55 in the prior-year quarter. Excluding a $1.6
billion one-time net tax benefit associated with new U.S. federal
income tax legislation (Tax Act) and certain other items affecting
comparability(1), EPS for the quarter increased 22% to $1.89 from
$1.55 in the prior-year quarter.
“The strategic investments we’ve made have driven meaningful
growth over the long term, and we remain confident in our ability
to continue to deliver significant shareholder value,” said Robert
A. Iger, Chairman and Chief Executive Officer, The Walt Disney
Company. “We’re excited about what lies ahead, with a robust
film slate, the launch of our ESPN direct-to-consumer business, new
investments in our theme parks, and our pending
acquisition of Twenty-First Century Fox.”
The following table summarizes the first quarter results for
fiscal 2018 and 2017 (in millions, except per share amounts):
Quarter Ended December 30,2017 December
31,2016 Change Revenues $ 15,351 $ 14,784 4 % Segment operating
income (1) $ 3,986 $ 3,956 1 % Net income (2) $ 4,423 $ 2,479 78 %
Diluted EPS (2) $ 2.91 $ 1.55 88 % EPS excluding certain items
affecting comparability (1) $ 1.89 $ 1.55 22 % Cash provided by
operations $ 2,237 $ 1,445 55 % Free cash flow (1) $ 1,256 $ 405
>100 %
(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.
(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 first quarter segment
operating results for fiscal 2018 and 2017 (in millions):
Quarter Ended December 30,2017 December
31,2016 Change Revenues: Media Networks $ 6,243 $ 6,233 — % Parks
and Resorts 5,154 4,555 13 % Studio Entertainment 2,504 2,520 (1
) %
Consumer Products & Interactive Media 1,450 1,476
(2 ) % $ 15,351 $ 14,784 4 % Segment operating
income: Media Networks $ 1,193 $ 1,362 (12 ) % Parks and Resorts
1,347 1,110 21 % Studio Entertainment 829 842 (2 ) % Consumer
Products & Interactive Media 617 642 (4 ) % $
3,986 $ 3,956 1 %
Media Networks
Media Networks revenues for the quarter was flat at $6.2 billion
and segment operating income decreased 12% to $1.2 billion.
The following table provides further detail of the Media
Networks results (in millions):
Quarter Ended December 30,2017 December
31,2016 Change Revenues: Cable Networks $ 4,493 $ 4,428 1 %
Broadcasting 1,750 1,805 (3 ) % $ 6,243 $
6,233 — % Segment operating income: Cable Networks $ 858 $
864 (1 ) % Broadcasting 285 379 (25 ) % Equity in the income of
investees 50 119 (58 ) % $ 1,193 $ 1,362
(12 ) %
Cable Networks
Cable Networks revenues for the quarter increased 1% to $4.5
billion and operating income decreased 1% to $0.9 billion. Lower
operating income was due to a loss at BAMTech and a decline at
ESPN, partially offset by growth at the Disney Channels and
Freeform.
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. The Company’s share
of BAMTech results was previously reported in equity in the income
of investees. The loss at BAMTech reflects ongoing investments in
their technology platform.
The decrease at ESPN was due to lower advertising revenue,
partially offset by affiliate revenue growth and lower programming
costs. Lower advertising revenue was due to a decrease in
impressions and lower rates. The decrease in impressions reflected
lower average viewership and fewer units delivered. Rates and
average viewership were negatively impacted by the shift in timing
of College Football Playoff (CFP) games. The current quarter
included three “host” bowl games, whereas the prior-year quarter
included one host game and two semi-final games. Semi-final games
generally generate more advertising revenue than host games.
Affiliate revenue growth was due to contractual rate increases,
partially offset by a decline in subscribers. Programming costs
decreased due to the shift of the CFP games, partially offset by
contractual rate increases for college sports and NFL programming.
Semi-final games generally have a higher cost than host games.
Growth at the Disney Channels and Freeform was driven by higher
affiliate revenue and lower marketing costs. Affiliate revenue
growth was due to contractual rate increases, partially offset by a
decline in subscribers. Results at Freeform also benefited from
higher advertising and program sales revenues. The growth in
advertising revenue was due to higher rates and an increase in
impressions, which reflected more units delivered, partially offset
by a decrease in average viewership.
Broadcasting
Broadcasting revenues for the quarter decreased 3% to $1.8
billion and operating income decreased 25% to $285 million. The
decrease in operating income was due to lower advertising revenue,
higher production cost write-downs and a decline in program sales
income. These decreases were partially offset by affiliate revenue
growth due to rate increases.
Advertising revenues reflected fewer network impressions and
lower political advertising at our owned television stations,
partially offset by higher network rates. The decline in network
impressions was due to a decrease in average viewership, partially
offset by an increase in units delivered. The decrease in program
sales income was due to a higher cost mix of programs sold in the
current quarter compared to the prior-year quarter.
Equity in the Income of Investees
Equity in the income of investees decreased from $119 million in
the prior-year quarter to $50 million in the current quarter due to
higher losses from Hulu and lower operating results from A+E
Television Networks (A+E), partially offset by the absence of a
loss from BAMTech, which is now consolidated and reported in Cable
Networks. The decrease at Hulu was due to higher programming and
labor costs, partially offset by subscription and advertising
revenue growth. The decrease at A+E was due to lower advertising
revenue, higher marketing costs and increased programming
costs.
Parks and Resorts
Parks and Resorts revenues for the quarter increased 13% to $5.2
billion and segment operating income increased 21% to $1.3 billion.
Operating income growth for the quarter was due to increases at our
domestic parks and resorts, cruise line and vacation club
businesses as well as at Disneyland Paris. Domestic results
benefited from the comparison to the impact of Hurricane Matthew,
which occurred in the prior-year quarter.
Higher operating income at our domestic parks and resorts was
driven by guest spending growth and an increase in attendance,
partially offset by higher costs. Guest spending growth was due to
higher average ticket prices, food, beverage and merchandise
spending and average daily hotel room rates. The increase in costs
was driven by labor and other cost inflation, expenses for new
guest offerings and an increase in depreciation associated with new
attractions. At our cruise line, growth was primarily due to higher
passenger cruise days, which reflected the impact of the Disney
Wonder dry-dock in the prior-year quarter. The increase at Disney
Vacation Club was driven by sales at Copper Creek Villas &
Cabins in the current quarter.
Growth at Disneyland Paris reflected higher attendance and
increased average ticket prices, both of which benefited from the
25th Anniversary celebration.
Studio Entertainment
Studio Entertainment revenues for the quarter were relatively
flat at $2.5 billion and segment operating income decreased 2% to
$829 million as an increase in theatrical distribution results was
more than offset by decreases in home entertainment and TV/SVOD
distribution results as well as lower income from Consumer Products
& Interactive Media segment revenue share.
The increase in theatrical distribution results reflected the
success of Star Wars: The Last Jedi and Thor: Ragnarok in the
current quarter compared to Rogue One: A Star Wars Story and Doctor
Strange in the prior-year quarter. Other significant releases in
the current quarter included Coco, while the prior-year quarter
included Moana.
The decrease in home entertainment results was driven by lower
unit sales reflecting the performance of Cars 3 in the current
quarter compared to Finding Dory in the prior-year quarter.
Lower TV/SVOD distribution results were primarily due to a
decrease from pay television driven by the domestic availability of
two key titles in the prior-year quarter compared to one key title
in the current quarter. The prior-year quarter included Captain
America: Civil War and Jungle Book, while the current quarter
included Guardians of the Galaxy Vol. 2.
Consumer Products & Interactive
Media
Consumer Products & Interactive Media revenues for the
quarter decreased 2% to $1.5 billion and segment operating income
decreased 4% to $617 million. Lower operating income was due to
decreases at our merchandise licensing and retail businesses,
partially offset by an increase at our games business.
The decrease at merchandise licensing was due to unfavorable
timing of minimum guarantee shortfall recognition and lower
licensing revenues from merchandise based on Frozen and Finding
Nemo/Dory, partially offset by increases from merchandise based on
Cars and Star Wars. Star Wars licensing revenue included the
recognition of revenue from merchandise based on Star Wars: The
Last Jedi that was deferred in the fourth quarter of fiscal 2017.
Minimum guarantee shortfalls are generally recognized at the end of
the contract period. For contracts that ended on December 31,
minimum guarantee shortfalls were recognized in the prior-year
first quarter compared to the second quarter of the current
year.
Lower results at our retail business were due to an unfavorable
foreign currency impact.
The increase at our games business was due to licensing revenue
from Star Wars Battlefront II, which was released in the current
quarter, whereas there was no comparable release in the prior-year
quarter.
OTHER FINANCIAL INFORMATION
Corporate and Unallocated Shared
Expenses
Corporate and unallocated shared expenses increased $18 million
to $150 million in the current quarter due to costs incurred in
connection with our agreement to acquire Twenty-First Century Fox,
Inc.
Other income, net
Other income for the current quarter reflects a $53 million gain
from the sale of property rights.
Interest expense, net
Interest expense, net was as follows (in millions):
Quarter Ended December 30,2017 December
31,2016 Change Interest expense $ (146 ) $ (121 ) (21 ) % Interest
and investment income 17 22 (23 ) % Interest expense,
net $ (129 ) $ (99 ) (30 ) %
The increase in interest expense was due to higher average debt
balances and interest rates. The decrease in interest and
investment income was due to an investment write-down in the
current quarter.
Income Taxes
The effective income tax rate was as follows:
Quarter Ended December 30,2017 December
31,2016 Change Effective income tax rate (benefit) / expense (19.4
)% 33.2 % 52.6 ppt
For the current quarter, we recognized an income tax benefit
compared to expense in the prior-year quarter. The 52.6 percentage
point change in our effective tax rate compared to the prior-year
quarter reflected two significant impacts of the Tax Act:
- A one-time net benefit of approximately
$1.6 billion, which reflected an approximate $1.9 billion benefit
from remeasuring our deferred tax balances to the new statutory
rate, partially offset by a charge of approximately $0.3 billion
from accruing a deemed repatriation tax. This net benefit had an
impact of approximately 41.8 percentage points on the effective
income tax rate.
- 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 effects, the reduction
in the statutory rate had an impact of approximately 9.2 percentage
points on the effective income tax rate.
Noncontrolling Interests
Quarter Ended (in millions) December 30,2017
December 31,2016 Change Net income attributable to noncontrolling
interests $ 50 $ 9 >100 %
The increase in net income attributable to noncontrolling
interests was driven by lower tax expense at ESPN, largely due to a
one-time benefit from the Tax Act.
Net income attributable to noncontrolling interests is
determined on income after royalties and management fees, financing
costs and income taxes.
Cash Flow
Cash provided by operations and free cash flow were as follows
(in millions):
Quarter Ended December 30,2017 December
31,2016 Change Cash provided by operations $ 2,237 $ 1,445 $ 792
Investments in parks, resorts and other property (981 ) (1,040 ) 59
Free cash flow (1) $ 1,256 $ 405 $ 851
(1)
Free cash flow is not a financial measure defined by GAAP.
See the discussion on pages 7 through 9.
Cash provided by operations for the first quarter of fiscal 2018
increased by $0.8 billion from $1.4 billion in the prior-year
quarter to $2.2 billion in the current quarter. The increase was
due to lower pension plan contributions, 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):
Quarter Ended December 30,2017 December 31,2016 Media
Networks Cable Networks $ 81 $ 46 Broadcasting 36 22
Total Media Networks
117 68 Parks and Resorts Domestic 641 609 International 147
291 Total Parks and Resorts 788 900 Studio
Entertainment 22 27 Consumer Products & Interactive Media 7 6
Corporate 47 39 Total investments in parks, resorts and
other property $ 981 $ 1,040
Capital expenditures decreased by $59 million to $1.0 billion
due to lower spending at Shanghai Disney Resort and Hong Kong
Disneyland Resort, partially offset by higher spending at Cable
Networks and on new attractions at our domestic parks. The increase
at Cable Networks was due to technology spending at BAMTech.
Depreciation expense was as follows (in millions):
Quarter Ended December 30,2017 December 31,2016 Media
Networks Cable Networks $ 39 $ 36 Broadcasting 24 21 Total
Media Networks 63 57 Parks and Resorts Domestic 357 328
International 177 156 Total Parks and Resorts 534 484
Studio Entertainment 13 12 Consumer Products & Interactive
Media 13 15 Corporate 54 68 Total depreciation expense $ 677
$ 636
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
December 30, 2017: As reported $ 3,745 $ 728 $ 4,473 $ 2.91 88 %
Exclude: One-time net benefit from the Tax Act — (1,557 ) (1,557 )
(1.00 ) Gain from sale of property rights (53 ) 12 (41 ) (0.03 )
Restructuring and impairment charges 15 (3 ) 12 0.01
Excluding certain items affecting comparability $ 3,707
$ (820 ) $ 2,887 $ 1.89 22 %
(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.
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 segment operating income to net income is as
follows (in millions):
Quarter Ended December 30,2017 December 31,2016
Segment operating income $ 3,986 $ 3,956 Corporate and unallocated
shared expenses (150 ) (132 ) Restructuring and impairment charges
(15 ) — Other income, net 53 — Interest expense, net (129 ) (99 )
Income before income taxes 3,745 3,725 Income taxes 728
(1,237 ) Net income $ 4,473 $ 2,488
CONFERENCE CALL INFORMATION
In conjunction with this release, The Walt Disney Company will
host a conference call today, February 6, 2018, at 4:30 PM
EST/1:30 PM PST via a live Webcast. To access the Webcast go to
www.disney.com/investors. The
discussion will be archived.
IMPORTANT INFORMATION ABOUT THE TRANSACTION
WITH 21CF AND WHERE TO FIND IT
In connection with the proposed transaction between The Walt
Disney Company (“Disney”) and Twenty-First Century Fox, Inc.
(“21CF”), Disney and 21CF 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 Disney. 21CF will file with
the SEC a registration statement for a newly formed subsidiary
(“SpinCo”), which is contemplated to own certain assets and
businesses of 21CF not being acquired by Disney in connection with
the proposed transaction. 21CF and Disney may also file other
documents with the SEC regarding the proposed transaction. This
document is not a substitute for the joint proxy
statement/prospectus or registration statement or any other
document which 21CF or 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 and Disney through the website maintained by
the SEC at www.sec.gov or by contacting the investor relations
department of:
21CF Disney 1211 Avenue of Americas c/o Broadridge
Corporate Issuer Solutions New York, NY 10036 P.O. Box 1342
Attention: Investor Relations Brentwood, NY 11717 1 (212) 852 7059
Attention: Disney Shareholder Services 1 (855) 553 4763
Participants in the Solicitation
21CF, 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 SpinCo.
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.
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;
- the proposed 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,” and subsequent reports.
THE WALT DISNEY COMPANY CONDENSED CONSOLIDATED
STATEMENTS OF INCOME (unaudited; in millions, except per
share data) Quarter Ended December 30,2017
December 31,2016 Revenues: Services $ 12,984 $ 12,406 Products
2,367 2,378
Total revenues
15,351 14,784 Costs and expenses: Cost of services (exclusive of
depreciation and amortization) (7,334 ) (7,020 ) Cost of products
(exclusive of depreciation and amortization) (1,403 ) (1,386 )
Selling, general, administrative and other (2,079 ) (1,985 )
Depreciation and amortization (742 ) (687 ) Total costs and
expenses (11,558 ) (11,078 ) Restructuring and impairment charges
(15 ) — Other income, net 53 — Interest expense, net (129 ) (99 )
Equity in the income of investees 43 118 Income
before income taxes 3,745 3,725 Income taxes 728 (1,237 )
Net income 4,473 2,488 Less: Net income attributable to
noncontrolling interests (50 ) (9 ) Net income attributable to The
Walt Disney Company (Disney) $ 4,423 $ 2,479
Earnings per share attributable to Disney: Diluted $ 2.91 $
1.55 Basic $ 2.93 $ 1.56
Weighted average number of common and common equivalent shares
outstanding: Diluted 1,521 1,603 Basic 1,512
1,592 Dividends declared per share $ 0.84
$ 0.78
THE WALT DISNEY COMPANY
CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited; in
millions, except per share data) December 30,2017
September 30,2017 ASSETS Current assets Cash and cash equivalents $
4,677 $ 4,017 Receivables 9,886 8,633 Inventories 1,307 1,373
Television costs and advances 846 1,278 Other current assets 558
588 Total current assets 17,274 15,889 Film and
television costs 7,937 7,481 Investments 3,206 3,202 Parks, resorts
and other property Attractions, buildings and equipment 54,617
54,043 Accumulated depreciation (29,647 ) (29,037 ) 24,970 25,006
Projects in progress 2,355 2,145 Land 1,259 1,255
28,584 28,406 Intangible assets, net 6,930 6,995 Goodwill 31,430
31,426 Other assets 2,373 2,390 Total assets $ 97,734
$ 95,789 LIABILITIES AND EQUITY Current
liabilities Accounts payable and other accrued liabilities $ 9,574
$ 8,855 Current portion of borrowings 6,009 6,172 Deferred revenue
and other 4,292 4,568 Total current liabilities
19,875 19,595 Borrowings 20,082 19,119 Deferred income taxes 2,826
4,480 Other long-term liabilities 6,726 6,443 Commitments and
contingencies Redeemable noncontrolling interests 1,142 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
36,254 36,248 Retained earnings 75,763 72,606 Accumulated other
comprehensive loss (3,404 ) (3,528 ) 108,613 105,326 Treasury
stock, at cost, 1.4 billion shares (65,324 ) (64,011 ) Total Disney
Shareholders’ equity 43,289 41,315 Noncontrolling interests 3,794
3,689 Total equity 47,083 45,004 Total
liabilities and equity $ 97,734 $ 95,789
THE WALT DISNEY COMPANY CONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOWS (unaudited; in millions)
Quarter Ended December 30,2017 December 31,2016 OPERATING
ACTIVITIES Net income $ 4,473 $ 2,488 Depreciation and amortization
742 687 Deferred income taxes (1,726 ) (76 ) Equity in the income
of investees (43 ) (118 ) Cash distributions received from equity
investees 170 203 Net change in film and television costs and
advances 34 440 Equity-based compensation 94 97 Other 139 187
Changes in operating assets and liabilities: Receivables (1,378 )
(1,160 ) Inventories 65 102 Other assets (29 ) 311 Accounts payable
and other accrued liabilities (1,160 ) (2,763 ) Income taxes 856
1,047 Cash provided by operations 2,237 1,445
INVESTING ACTIVITIES Investments in parks, resorts
and other property (981 ) (1,040 ) Other (62 ) 5 Cash used
in investing activities (1,043 ) (1,035 ) FINANCING
ACTIVITIES Commercial paper borrowings, net 1,140 732 Borrowings
1,025 42 Reduction of borrowings (1,330 ) (194 ) Repurchases of
common stock (1,313 ) (1,465 ) Proceeds from exercise of stock
options 50 65 Other (156 ) (167 ) Cash used in financing activities
(584 ) (987 ) Impact of exchange rates on cash, cash
equivalents and restricted cash 21 (112 ) Change in
cash, cash equivalents and restricted cash 631 (689 ) Cash, cash
equivalents and restricted cash, beginning of period 4,064
4,760 Cash, cash equivalents and restricted cash, end of
period $ 4,695 $ 4,071
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The Walt Disney CompanyZenia MuchaCorporate
Communications818-560-5300orLowell SingerInvestor
Relations818-560-6601
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