The Walt Disney Company (NYSE: DIS) today reported quarterly
earnings for its third fiscal quarter ended June 29, 2019. Diluted
earnings per share (EPS) from continuing operations for the quarter
decreased 59% to $0.79 from $1.95 in the prior-year quarter.
Excluding certain items affecting comparability(1), EPS for the
quarter decreased 28% to $1.35 from $1.87 in the prior-year
quarter. EPS from continuing operations for the nine months ended
June 29, 2019 decreased to $5.98 from $6.81 in the prior-year
period. Excluding certain items affecting comparability(1), EPS
from continuing operations for the nine months decreased 15% to
$4.75 from $5.60 in the prior-year period.
“Our third-quarter results reflect our efforts to effectively
integrate the 21st Century Fox assets to enhance and advance our
strategic transformation,” said Robert A. Iger, Chairman and Chief
Executive Officer, The Walt Disney Company. “I’d like to
congratulate The Walt Disney Studios for reaching $8 billion at the
global box office so far this year--a new industry record--thanks
to the stellar performance of our Marvel, Pixar and Disney films.
The incredible popularity of Disney’s brands and franchises
positions us well as we launch Disney+, and the addition of
original and library content from Fox will only further strengthen
our direct-to-consumer offerings.”
On March 20, 2019, the Company acquired Twenty-First Century Fox
(21CF) for cash and the issuance of 307 million shares. Results for
the current quarter and nine months reflect the consolidation of
21CF and Hulu LLC (Hulu) activities.
The following table summarizes the third quarter and nine-month
results for fiscal 2019 and 2018 (in millions, except per share
amounts):
Quarter Ended
Nine Months Ended
June 29, 2019
June 30, 2018
Change
June 29, 2019
June 30, 2018
Change
Revenues
$
20,245
$
15,229
33
%
$
50,470
$
45,128
12
%
Segment operating income (1)
$
3,961
$
4,189
(5
)%
$
11,432
$
12,412
(8
)%
Net income from continuing operations
(2)
$
1,437
$
2,916
(51
)%
$
9,656
$
10,276
(6
)%
Diluted EPS from continuing operations
(2)
$
0.79
$
1.95
(59
)%
$
5.98
$
6.81
(12
)%
EPS excluding certain items affecting
comparability (1)
$
1.35
$
1.87
(28
)%
$
4.75
$
5.60
(15
)%
Cash provided by continuing operations
$
(1,748
)
$
3,679
nm
$
4,266
$
10,442
(59
)%
Free cash flow (1)
$
(2,925
)
$
2,459
nm
$
699
$
7,178
(90
)%
(1)
EPS excluding certain items affecting comparability, segment
operating income and free cash flow are non-GAAP financial
measures. See the discussion on pages 9 through 12.
(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 2019 and 2018 (in millions).
21CF and Hulu operating results for the current period are
consolidated and reported in our segments. Prior to the acquisition
of 21CF, Hulu was accounted for as an equity method investment and
was reported in our Direct-to-Consumer & International
segment:
Quarter Ended
Nine Months Ended
June 29, 2019
June 30, 2018
Change
June 29, 2019
June 30, 2018
Change
Revenues:
Media Networks
$
6,713
$
5,534
21
%
$
18,317
$
16,597
10
%
Parks, Experiences and Products
6,575
6,136
7
%
19,570
18,566
5
%
Studio Entertainment
3,836
2,880
33
%
7,817
7,888
(1
)%
Direct-to-Consumer & International
3,858
827
>100
%
5,921
2,589
>100
%
Eliminations
(737
)
(148
)
>(100
)%
(1,155
)
(512
)
>(100
)%
$
20,245
$
15,229
33
%
$
50,470
$
45,128
12
%
Segment operating income/(loss):
Media Networks
$
2,136
$
1,995
7
%
$
5,696
$
5,496
4
%
Parks, Experiences and Products
1,719
1,655
4
%
5,377
4,918
9
%
Studio Entertainment
792
701
13
%
1,607
2,400
(33
)%
Direct-to-Consumer & International
(553
)
(168
)
>(100
)%
(1,074
)
(398
)
>(100
)%
Eliminations
(133
)
6
nm
(174
)
(4
)
>(100
)%
$
3,961
$
4,189
(5
)%
$
11,432
$
12,412
(8
)%
Media Networks
Media Networks revenues for the quarter increased 21% to $6.7
billion and segment operating income increased 7% to $2.1
billion.
The following table provides further detail of the Media
Networks results (in millions):
Quarter Ended
Nine Months Ended
June 29, 2019
June 30, 2018
Change
June 29, 2019
June 30, 2018
Change
Supplemental revenue detail:
Cable Networks
$
4,464
$
3,597
24
%
$
12,243
$
11,083
10
%
Broadcasting
2,249
1,937
16
%
6,074
5,514
10
%
$
6,713
$
5,534
21
%
$
18,317
$
16,597
10
%
Supplemental operating income detail:
Cable Networks
$
1,637
$
1,429
15
%
$
4,169
$
3,950
6
%
Broadcasting
307
369
(17
)%
974
1,008
(3
)%
Equity in the income of investees
192
197
(3
)%
553
538
3
%
$
2,136
$
1,995
7
%
$
5,696
$
5,496
4
%
Cable Networks
Cable Networks revenues for the quarter increased 24% to $4.5
billion and operating income increased 15% to $1.6 billion. Higher
operating income was due to the consolidation of 21CF businesses
(primarily the FX and National Geographic networks) and an increase
at ESPN, partially offset by a decrease at Freeform.
The increase at ESPN was due to higher advertising and affiliate
revenue, partially offset by an increase in programming and
production costs. Higher advertising revenue was due to increases
in units sold and rates, partially offset by lower viewership.
Advertising revenue was positively impacted by two additional NBA
finals games. Affiliate revenue growth was driven by contractual
rate increases, partially offset by a decline in subscribers. The
increase in programming and production costs was due to contractual
rate increases for MLB and NBA programming and new rights for
boxing and mixed martial arts.
The decrease at Freeform was due to an increase in programming
and production costs, partially offset by higher income from
program sales. The programming and production cost increase
reflected the timing of amortization and higher average cost of
programming in the current quarter.
Broadcasting
Broadcasting revenues for the quarter increased 16% to $2.2
billion and operating income decreased 17% to $307 million. Lower
operating income was due to decreases in ABC Studios program sales
and network advertising revenue, partially offset by a decrease in
programming costs, higher affiliate revenue and, to a lesser
extent, the consolidation of 21CF businesses.
The decrease in ABC Studios program sales was driven by the
prior year sale of Luke Cage and lower sales of How to Get Away
With Murder and Designated Survivor. The decrease in network
advertising revenues reflected lower viewership, partially offset
by higher rates. Lower programming costs reflected a decrease in
the average cost of programming in the current quarter compared to
the prior-year quarter, which included airings of Roseanne, as well
as lower program cost write-downs.
Parks, Experiences and
Products
Parks, Experiences and Products revenues for the quarter
increased 7% to $6.6 billion and segment operating income increased
4% to $1.7 billion. Operating income growth for the quarter was due
to increases at our consumer products businesses and Disneyland
Paris, partially offset by a decrease at our domestic parks and
resorts. Results included a benefit from a shift in the timing of
the Easter holiday. In the current year, the entire Easter holiday
fell in the third quarter, while the third quarter of the prior
year included only one week of the Easter holiday.
The increase at our consumer products business was due to growth
at our merchandise licensing and retail businesses. Growth at
merchandise licensing was primarily due to higher revenue from
merchandise based on Toy Story, partially offset by a decrease from
Star Wars merchandise. The increase at our retail business was due
to higher comparable store sales and online revenue.
Higher operating income at Disneyland Paris was primarily due to
higher average ticket prices, partially offset by labor and other
cost inflation and lower attendance.
The decrease in operating income at our domestic parks and
resorts was due to higher costs and lower volume, partially offset
by increased average per capita guest spending. Higher costs were
driven by labor and other cost inflation and expenses associated
with Star Wars: Galaxy’s Edge, which opened at Disneyland Resort on
May 31. The decrease in volume was due to lower attendance,
partially offset by higher occupied room nights. Guest spending
growth was primarily due to higher average ticket prices and
increased food, beverage and merchandise spending.
Studio Entertainment
Studio Entertainment revenues for the quarter increased 33% to
$3.8 billion and segment operating income increased 13% to $792
million. Higher operating income was due to an increase in
theatrical distribution results and lower film cost impairments at
our legacy operations. These improvements were partially offset by
a loss from the 21CF businesses and lower TV/SVOD and home
entertainment distribution results at our legacy operations.
The increase in theatrical distribution results was due to the
performance of Avengers: Endgame, Aladdin, Captain Marvel and Toy
Story 4 in the current quarter compared to Avengers: Infinity War,
Incredibles 2, Black Panther and Solo: A Star Wars Story in the
prior-year quarter.
Operating results at the 21CF businesses reflected a loss from
theatrical distribution driven by the performance of Dark Phoenix,
for which we also recorded a film cost impairment, partially offset
by income from TV/SVOD distribution.
Lower TV/SVOD distribution results were due to sales of Star
Wars: The Last Jedi and Thor: Ragnarok in domestic pay television
in the prior-year quarter with no comparable titles in the current
quarter.
The decrease in home entertainment results was due to lower unit
sales and net effective pricing reflecting the performance of Black
Panther in the prior-year quarter compared to Captain Marvel in the
current quarter.
Direct-to-Consumer &
International
Direct-to-Consumer & International revenues for the quarter
increased from $827 million to $3,858 million and segment operating
loss increased from $168 million to $553 million. The increase in
operating loss was due to the consolidation of Hulu, the ramp up of
investment in ESPN+, which was launched in April 2018 and costs
associated with the upcoming launch of Disney+. Results for the
quarter also reflected a benefit from the inclusion of the 21CF
businesses due to income at the Fox and National Geographic
international channels, partially offset by a loss at Star
India.
Commencing on March 20, 2019, 100% of Hulu’s operating results
are included in the Direct-to-Consumer & International segment
as a result of our acquisition of a controlling interest in Hulu.
Prior to March 20, 2019, the Company’s ownership share of Hulu
results was reported as equity in the loss of investees.
Eliminations
Revenue eliminations increased from $148 million to $737 million
and segment operating income eliminations went from income of $6
million to a loss of $133 million driven by eliminations of
licenses of ABC Studios and Twentieth Century Fox Television
programs to Hulu.
ADOPTION OF NEW REVENUE RECOGNITION ACCOUNTING
GUIDANCE
At the beginning of fiscal 2019, the Company adopted new revenue
recognition accounting guidance (ASC 606). Results for fiscal 2019
are presented under ASC 606, while prior period amounts continue to
be reported in accordance with our historical accounting.
The current quarter includes a $53 million unfavorable impact on
segment operating income from the ASC 606 adoption. The most
significant impacts were a $23 million decrease at Parks,
Experiences and Products, which reflected the deferral of revenues
related to sales of vacation club properties, and a $16 million
decrease at Media Networks, which reflected a change in timing of
revenue recognition on contracts with minimum guarantees.
OTHER FINANCIAL INFORMATION
Corporate and Unallocated Shared
Expenses
Corporate and unallocated shared expenses increased $46 million
to $238 million in the current quarter due to costs incurred in
connection with the 21CF acquisition.
Restructuring Charges
During the quarter, the Company recorded charges totaling $207
million, primarily for severance, in connection with the
integration of 21CF. These charges are recorded in “Restructuring
and impairment charges” in the Condensed Consolidated Statements of
Income.
Other income/(expense),
net
Other income/(expense), net was as follows (in millions):
Quarter Ended
June 29, 2019
June 30, 2018
Change
Hulu gain adjustment
$
(123
)
$
—
nm
The Company acquired 21CF’s 30% interest in Hulu as part of the
21CF acquisition. As a result, upon the closing of the 21CF
transaction, the Company owned a 60% interest in Hulu, began
consolidating Hulu and recorded a one-time gain of $4.9 billion in
the second quarter of the current year as a result of remeasuring
our initial 30% interest in Hulu to fair value. During the current
quarter, the Company adjusted the gain by $123 million due to an
update to our estimate of the fair value of the Company’s initial
30% interest in connection with our agreement with NBCU that
provided the Company with full operational control of Hulu.
Interest expense, net
Interest expense, net was as follows (in millions):
Quarter Ended
June 29, 2019
June 30, 2018
Change
Interest expense
$
(472
)
$
(175
)
>(100
)%
Interest income, investment income and
other
61
32
91
%
Interest expense, net
$
(411
)
$
(143
)
>(100
)%
The increase in interest expense was due to higher debt balances
as a result of the 21CF acquisition.
The increase in interest income, investment income and other was
due to higher cash balances and the inclusion of a $27 million
benefit related to pension and postretirement benefit costs, other
than service cost, partially offset by higher investment
impairments. The Company adopted new accounting guidance in fiscal
2019 and now presents the elements of pension and postretirement
plan costs, other than service cost, in “Interest expense, net.”
The comparable benefit of $9 million in the prior-year quarter was
reported in “Costs and expenses.” The benefit in the current
quarter was due to the expected return on pension plan assets
exceeding interest expense on plan liabilities and amortization of
prior net actuarial losses.
Equity in the Income (Loss) of
Investees, net
Equity in the income (loss) of investees was as follows (in
millions):
Quarter Ended
June 29, 2019
June 30, 2018
Change
Amounts included in segment results:
Media Networks
$
192
$
197
(3
)%
Parks, Experiences and Products
—
(5
)
nm
Direct-to-Consumer & International
7
(119
)
nm
Impairment of equity investments
(185
)
—
nm
Amortization of 21CF intangible assets
related to equity investees
(15
)
—
nm
Equity in the income / (loss) of
investees, net
$
(1
)
$
73
nm
The decrease in equity losses at Direct-to-Consumer &
International was due to the impact of consolidating Hulu.
Income Taxes
The effective income tax rate was as follows:
Quarter Ended
June 29, 2019
June 30, 2018
Change
Effective income tax rate
19.6
%
20.6
%
1.0
ppt
The decrease in the effective income tax rate was due to U.S.
federal income tax legislation, the “Tax Cuts and Jobs Act” (Tax
Act), which was enacted in the prior year. The Tax Act reduced the
Company’s U.S. statutory federal income tax rate to 21.0% in fiscal
2019 from 24.5% in fiscal 2018. This was partially offset by the
comparison to a one-time $0.1 billion benefit from the Tax Act in
the prior-year quarter.
Noncontrolling Interests
Net (income) loss attributable to noncontrolling interests was
as follows (in millions):
Quarter Ended
June 29, 2019
June 30, 2018
Change
Net income from continuing operations
attributable to noncontrolling interests
$
(186
)
$
(143
)
(30
) %
The increase in net income from continuing operations
attributable to noncontrolling interests was primarily due to
accretion of the fair value of the redeemable noncontrolling
interest in Hulu, the consolidation of 21CF’s operations and growth
at ESPN. These increases were partially offset by a higher loss
from our direct-to-consumer sports business. The impact from 21CF
was primarily due to the allocation of income to the National
Geographic noncontrolling interest holder.
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 continuing operations and free cash flow were
as follows (in millions):
Nine Months Ended
June 29, 2019
June 30, 2018
Change
Cash provided by operations - continuing
operations
$
4,266
$
10,442
$
(6,176
)
Investments in parks, resorts and other
property
(3,567
)
(3,264
)
(303
)
Free cash flow (1)
$
699
$
7,178
$
(6,479
)
(1)
Free cash flow is not a financial measure defined by GAAP. See
the discussion on pages 9 through 12.
Cash provided by continuing operations for the first nine months
of fiscal 2019 decreased by $6.2 billion from $10.4 billion in the
prior-year nine months to $4.3 billion in the current nine months.
The decrease was due to the payment of certain tax obligations that
arose from the spin-off of Fox Corporation in connection with the
21CF acquisition, lower segment operating income and higher
payments for interest.
Capital Expenditures and Depreciation
Expense
Investments in parks, resorts and other property were as follows
(in millions):
Nine Months Ended
June 29, 2019
June 30, 2018
Media Networks
Cable Networks
$
60
$
90
Broadcasting
65
54
Total Media Networks
125
144
Parks, Experiences and Products
Domestic
2,491
2,379
International
611
468
Total Parks, Experiences and Products
3,102
2,847
Studio Entertainment
61
72
Direct-to-Consumer & International
137
85
Corporate
142
116
Total investments in parks, resorts and
other property
$
3,567
$
3,264
Capital expenditures increased by $303 million to $3.6 billion
driven by higher spending on new attractions at our theme parks and
resorts.
Depreciation expense was as follows (in millions):
Nine Months Ended
June 29, 2019
June 30, 2018
Media Networks
Cable Networks
$
79
$
83
Broadcasting
62
68
Total Media Networks
141
151
Parks, Experiences and Products
Domestic
1,085
1,075
International
549
561
Total Parks, Experiences and Products
1,634
1,636
Studio Entertainment
53
42
Direct-to-Consumer & International
155
75
Corporate
124
138
Total depreciation expense
$
2,107
$
2,042
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 from continuing
operations 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 29, 2019:
As reported
$
2,018
$
(395
)
$
1,623
$
0.79
(59
)%
Exclude:
Amortization of 21CF and Hulu intangible
assets and fair value step-up on film and television costs(4)
779
(168
)
611
0.34
Restructuring and impairment
charges(5)
207
(48
)
159
0.09
Impairment of equity investments(6)
185
(42
)
143
0.08
Other income, net(7)
123
(28
)
95
0.05
Excluding certain items affecting
comparability
$
3,312
$
(681
)
$
2,631
$
1.35
(28
)%
Quarter Ended June 30, 2018:
As reported
$
3,854
$
(795
)
$
3,059
$
1.95
Exclude:
One-time net benefit from the Tax Act
—
(110
)
(110
)
(0.07
)
Excluding certain items affecting
comparability
$
3,854
$
(905
)
$
2,949
$
1.87
(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)
Intangible asset amortization was $490
million, step-up amortization was $274 million and amortization of
intangible assets related to 21CF equity investees was $15
million.
(5)
Reflects severance and equity-based
compensation charges related to the acquisition and integration of
21CF ($207 million).
(6)
Primarily reflects the impairment of an
investment in a cable channel at A+E Television Networks.
(7)
Reflects an adjustment to the non-cash
gain that was recorded in the second quarter of the current year in
connection with the acquisition of a controlling interest in Hulu
($123 million).
The following table reconciles reported EPS from continuing
operations to EPS excluding certain items affecting comparability
for the year.
(in millions except EPS)
Pre-Tax Income/
Loss
Tax Benefit/
Expense(1)
After-Tax Income/
Loss(2)
EPS(3)
Change vs. prior year period
Nine Months Ended June 29, 2019:
As reported
$
12,686
$
(2,687
)
$
9,999
$
5.98
(12
)%
Exclude:
Other income, net(4)
(4,840
)
1,114
(3,726
)
(2.30
)
One-time net benefit from the Tax Act
—
(34
)
(34
)
(0.02
)
Amortization of 21CF and Hulu intangible
assets and fair value step-up on film and television costs(5)
884
(191
)
693
0.43
Restructuring and impairment
charges(6)
869
(200
)
669
0.42
Impairment of equity investments
538
(123
)
415
0.26
Excluding certain items affecting
comparability
$
10,137
$
(2,121
)
$
8,016
$
4.75
(15
)%
Nine Months Ended June 30, 2018:
As reported
$
11,527
$
(880
)
$
10,647
$
6.81
Exclude:
One-time net benefit from the Tax Act
—
(1,801
)
(1,801
)
(1.17
)
Other income, net(4)
(94
)
23
(71
)
(0.05
)
Restructuring and impairment charges
28
(6
)
22
0.01
Excluding certain items affecting
comparability
$
11,461
$
(2,664
)
$
8,797
$
5.60
(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)
Other income, net for the current
nine-month period includes a non-cash gain recognized in connection
with the acquisition of a controlling interest in Hulu ($4.8
billion) and insurance recoveries on a legal matter ($46 million).
Other income in the prior-year nine-month period included a gain
from the sale of property rights ($53 million) and insurance
recoveries on a legal matter ($38 million).
(5)
Intangible asset amortization was $562
million, step-up amortization was $307 million and amortization of
intangible assets related to 21CF equity investees was $15
million.
(6)
Reflects severance and equity-based
compensation charges related to the acquisition and integration of
21CF ($869 million).
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 from continuing operations before
income taxes to segment operating income is as follows (in
millions):
Quarter Ended
% Change
Nine Months Ended
% Change
June 29, 2019
June 30, 2018
Better/ (Worse)
June 29, 2019
June 30, 2018
Better/ (Worse)
Income from continuing operations before
income taxes
$
2,018
$
3,854
(48
)%
$
12,686
$
11,527
10
%
Add/(subtract):
Corporate and unallocated shared
expenses
238
192
(24
)%
678
536
(26
)%
Restructuring and impairment charges
207
—
nm
869
28
>(100
)%
Other income/(expense), net
123
—
nm
(4,840
)
(94
)
>100
%
Interest expense, net
411
143
>(100
)%
617
415
(49
)%
Amortization of 21CF and Hulu intangible
assets and fair value step-up on film and television costs(1)
779
—
nm
884
—
Nm
Impairment of equity investments
185
—
nm
538
—
Nm
Segment Operating Income
$
3,961
$
4,189
(5
)%
$
11,432
$
12,412
(8
)%
(1)
For the quarter ended June 29, 2019,
amortization of intangible assets, step-up of film and television
costs and intangibles related to Twenty First Century Fox (21CF)
equity investees were $490 million, $274 million and $15 million,
respectively. For the nine-months ended June 29, 2019, amortization
of intangible assets, step-up of film and television costs and
intangibles related to 21CF equity investees were $562 million,
$307 million and $15 million, respectively.
CONFERENCE CALL INFORMATION
In conjunction with this release, The Walt Disney Company will
host a conference call today, August 6, 2019, 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, including
statements such as expectations regarding our products and services
and other statements that are not historical in nature. 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, asset acquisitions or dispositions,
integration initiatives and timing of synergy realization) or other
business decisions, 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, regulatory, political, or military
developments;
- technological developments; and
- labor markets and activities.
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;
- construction;
- 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
- achievement of anticipated benefits of the 21st Century Fox
transaction.
Additional factors are set forth in the Company’s Annual Report
on Form 10-K for the year ended September 29, 2018 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 29, 2019
June 30, 2018
June 29, 2019
June 30, 2018
Revenues:
Services
$
18,022
$
13,143
$
43,899
$
38,647
Products
2,223
2,086
6,571
6,481
Total revenues
20,245
15,229
50,470
45,128
Costs and expenses:
Cost of services (exclusive of
depreciation and amortization)
(11,445
)
(7,124
)
(26,176
)
(20,761
)
Cost of products (exclusive of
depreciation and amortization)
(1,374
)
(1,224
)
(4,020
)
(3,857
)
Selling, general, administrative and
other
(3,362
)
(2,213
)
(7,844
)
(6,539
)
Depreciation and amortization
(1,304
)
(744
)
(2,864
)
(2,217
)
Total costs and expenses
(17,485
)
(11,305
)
(40,904
)
(33,374
)
Restructuring and impairment charges
(207
)
—
(869
)
(28
)
Other income/(expense), net
(123
)
—
4,840
94
Interest expense, net
(411
)
(143
)
(617
)
(415
)
Equity in the income / (loss) of
investees, net
(1
)
73
(234
)
122
Income from continuing operations before
income taxes
2,018
3,854
12,686
11,527
Income taxes from continuing
operations
(395
)
(795
)
(2,687
)
(880
)
Net income from continuing operations
1,623
3,059
9,999
10,647
Income from discontinued operations (net
of income taxes of $100, $0, $105 and $0, respectively)
359
—
380
—
Net income
1,982
3,059
10,379
10,647
Less: Net income from continuing
operations attributable to noncontrolling and redeemable
noncontrolling interests
(186
)
(143
)
(343
)
(371
)
Less: Net income from discontinued
operations attributable to noncontrolling interests
(36
)
—
(36
)
—
Net income attributable to The Walt Disney
Company (Disney)
$
1,760
$
2,916
$
10,000
$
10,276
Earnings per share attributable to
Disney:
Continuing operations
$
0.79
$
1.95
$
5.98
$
6.81
Discontinued operations
0.18
—
0.21
—
Diluted(1)
$
0.97
$
1.95
$
6.19
$
6.81
Continuing operations
$
0.80
$
1.96
$
6.01
$
6.84
Discontinued operations
0.18
—
0.21
—
Basic(1)
$
0.98
$
1.96
$
6.22
$
6.84
Weighted average number of common and
common equivalent shares outstanding:
Diluted
1,814
1,498
1,616
1,510
Basic
1,802
1,491
1,607
1,502
(1) Total may not equal the sum of the
column due to rounding.
THE WALT DISNEY
COMPANY
CONDENSED CONSOLIDATED BALANCE
SHEETS
(unaudited; in millions,
except per share data)
June 29, 2019
September 29, 2018
ASSETS
Current assets
Cash and cash equivalents
$
6,728
$
4,150
Receivables
15,673
9,334
Inventories
1,516
1,392
Television costs and advances
4,526
1,314
Other current assets
1,035
635
Assets held for sale
1,892
—
Total current assets
31,370
16,825
Film and television costs
22,552
7,888
Investments
3,872
2,899
Parks, resorts and other property
Attractions, buildings and equipment
57,457
55,238
Accumulated depreciation
(32,088
)
(30,764
)
25,369
24,474
Projects in progress
4,853
3,942
Land
1,170
1,124
31,392
29,540
Intangible assets, net
25,114
6,812
Goodwill
77,801
31,269
Noncurrent assets held for sale
12,591
—
Other assets
4,783
3,365
Total assets
$
209,475
$
98,598
LIABILITIES AND EQUITY
Current liabilities
Accounts payable and other accrued
liabilities
$
17,647
$
9,479
Current portion of borrowings
21,923
3,790
Deferred revenue and other
4,730
4,591
Liabilities held for sale
293
—
Total current liabilities
44,593
17,860
Borrowings
36,311
17,084
Deferred income taxes
10,404
3,109
Noncurrent liabilities held for sale
2,353
—
Other long-term liabilities
10,561
6,590
Commitments and contingencies
Redeemable noncontrolling interests
8,897
1,123
Equity
Preferred stock
—
—
Common stock, $0.01 par value, Authorized
– 4.6 billion shares, Issued – 1.8 billion shares at
June 29, 2019 and 2.9 billion shares at
September 29, 2018
53,718
36,779
Retained earnings
41,382
82,679
Accumulated other comprehensive loss
(3,721
)
(3,097
)
91,379
116,361
Treasury stock, at cost, 19 million shares
at June 29, 2019 and 1.4 billion shares at September 29, 2018
(907
)
(67,588
)
Total Disney Shareholders’ equity
90,472
48,773
Noncontrolling interests
5,884
4,059
Total equity
96,356
52,832
Total liabilities and equity
$
209,475
$
98,598
THE WALT DISNEY
COMPANY
CONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOWS
(unaudited; in
millions)
Nine Months Ended
June 29, 2019
June 30, 2018
OPERATING ACTIVITIES
Net income from continuing operations
$
9,999
$
10,647
Depreciation and amortization
2,864
2,217
Gain on acquisition
(4,794
)
—
Deferred income taxes
1,716
(1,411
)
Equity in the (income) / loss of
investees
234
(122
)
Cash distributions received from equity
investees
548
587
Net change in film and television costs
and advances
59
(601
)
Equity-based compensation
591
307
Other
152
297
Changes in operating assets and
liabilities, net of business acquisitions:
Receivables
(1,428
)
(1,178
)
Inventories
(96
)
53
Other assets
450
(472
)
Accounts payable and other liabilities
219
(316
)
Income taxes
(6,248
)
434
Cash provided by operations - continuing
operations
4,266
10,442
INVESTING ACTIVITIES
Investments in parks, resorts and other
property
(3,567
)
(3,264
)
Acquisitions
(9,901
)
(1,581
)
Other
(317
)
(298
)
Cash used in investing activities -
continuing operations
(13,785
)
(5,143
)
FINANCING ACTIVITIES
Commercial paper borrowings, net
2,973
453
Borrowings
31,348
1,056
Reduction of borrowings
(19,039
)
(1,356
)
Dividends
(1,310
)
(1,266
)
Repurchases of common stock
—
(3,577
)
Proceeds from exercise of stock
options
278
129
Contributions from / sales of
noncontrolling interests
544
363
Acquisition of noncontrolling and
redeemable noncontrolling interests
(1,430
)
—
Other
(831
)
(783
)
Cash provided by / (used in) financing
activities - continuing operations
12,533
(4,981
)
CASH FLOWS FROM DISCONTINUED
OPERATIONS
Cash provided by operations - discontinued
operations
320
—
Cash used in financing activities -
discontinued operations
(179
)
—
Cash used in discontinued operations
141
—
Impact of exchange rates on cash, cash
equivalents and restricted cash
47
(51
)
Change in cash, cash equivalents and
restricted cash
3,202
267
Cash, cash equivalents and restricted
cash, beginning of period
4,155
4,064
Cash, cash equivalents and restricted
cash, end of period
$
7,357
$
4,331
View source
version on businesswire.com: https://www.businesswire.com/news/home/20190806005927/en/
Zenia Mucha Corporate Communications 818-560-5300
Lowell Singer Investor Relations 818-560-6601
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