The Walt Disney Company today reported earnings for its fourth
quarter and fiscal year ended September 29, 2018. Diluted
earnings per share (EPS) for the fourth quarter increased 37% to
$1.55 from $1.13 in the prior-year quarter. Excluding certain items
affecting comparability(1), EPS for the quarter increased 38% to
$1.48 from $1.07 in the prior-year quarter. EPS for the year
increased to $8.36 from $5.69 in the prior year. Excluding certain
items affecting comparability(1), EPS for the year increased to
$7.08 from $5.70 in the prior year.
“We’re very pleased with our financial performance in fiscal
2018, delivering record revenue, net income and earnings per
share,” said Robert A. Iger, Chairman and Chief Executive Officer,
The Walt Disney Company. “We remain focused on the successful
completion and integration of our 21st Century Fox acquisition and
the further development of our direct-to-consumer business,
including the highly anticipated launch of our Disney-branded
streaming service late next year.”
The following table summarizes the fourth quarter and full year
results for fiscal 2018 and 2017 (in millions, except per share
amounts):
Quarter
Ended Year Ended Sept. 29, Sept. 30, Sept. 29,
Sept. 30, 2018 2017 Change 2018 2017 Change Revenues $
14,307 $ 12,779 12 % $ 59,434 $ 55,137 8 % Segment operating
income(1) $ 3,290 $ 2,812 17 % $ 15,706 $ 14,775 6 % Net income(2)
$ 2,322 $ 1,747 33 % $ 12,598 $ 8,980 40 % Diluted EPS(2) $ 1.55 $
1.13 37 % $ 8.36 $ 5.69 47 % EPS excluding certain items affecting
comparability(1) $ 1.48 $ 1.07 38 % $ 7.08 $ 5.70 24 % Cash
provided by operations $ 3,853 $ 3,570 8 % $ 14,295 $ 12,343 16 %
Free cash flow(1) $ 2,652 $ 2,675 (1 %) $ 9,830 $ 8,720 13 %
(1)
EPS excluding certain items affecting comparability, segment
operating income and free cash flow are non-GAAP financial
measures. Fiscal 2018 included a net benefit from new U.S. federal
income tax legislation (Tax Act). See the discussion on pages 8
through 11.
(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 fourth quarter and full year
segment operating results for fiscal 2018 and 2017 (in
millions):
Quarter
Ended Year Ended Sept. 29, Sept. 30, Sept. 29,
Sept. 30, 2018 2017 Change 2018 2017 Change Revenues: Media
Networks $ 5,963 $ 5,465 9 % $ 24,500 $ 23,510 4 % Parks and
Resorts 5,070 4,667 9 % 20,296 18,415 10 % Studio Entertainment
2,151 1,432 50 % 9,987 8,379 19 % Consumer Products &
Interactive Media 1,123 1,215 (8 )% 4,651
4,833 (4 )% $ 14,307 $ 12,779 12 % $ 59,434 $ 55,137 8 %
Segment operating income: Media Networks $ 1,528 $ 1,475 4 % $
6,625 $ 6,902 (4 )% Parks and Resorts 829 746 11 % 4,469 3,774 18 %
Studio Entertainment 596 218
>100
%
2,980 2,355 27 % Consumer Products & Interactive Media
337 373 (10 )% 1,632 1,744 (6 )% $ 3,290 $
2,812 17 % $ 15,706 $ 14,775 6 %
DISCUSSION OF FULL YEAR CONSOLIDATED RESULTS
For the year, the increase in diluted EPS was due to a lower
effective income tax rate, higher segment operating income, a
decrease in weighted average shares outstanding as a result of our
share repurchase program and the benefit from gains on the sale of
real estate. These increases were partially offset by the
comparison to a non-cash net gain in connection with the
acquisition of a controlling interest in BAMTech, LLC (BAMTech) in
the prior year, impairments of our equity investments in Vice Group
Holding, Inc. (Vice) and Villages Nature in the current year and
higher net interest and corporate and unallocated shared
expenses.
The decrease in the effective income tax rate was due to the
impact of the Tax Act, which included:
- A net benefit of $1.7 billion, which
reflected a $2.1 billion benefit from remeasuring our deferred tax
balances to the new statutory rate (Deferred Remeasurement),
partially offset by a charge of $0.4 billion for a one-time tax on
certain accumulated foreign earnings (Deemed Repatriation
Tax).
- A reduction of the Company’s fiscal
2018 U.S. statutory federal income tax rate to 24.5% from 35.0% in
the prior year, which resulted in a net benefit of approximately
$1.2 billion.
Higher segment operating income was due to increases at Parks
and Resorts and Studio Entertainment, partially offset by decreases
at Media Networks and Consumer Products & Interactive Media.
The increase at Parks and Resorts was due to growth at both our
domestic and international operations. The increase at our domestic
operations was due to higher guest spending and volumes, partially
offset by cost inflation, higher technology and operations support
expenses and a special fiscal 2018 domestic employee bonus. In
addition, results reflected the comparison to the negative
prior-year impacts of Hurricanes Irma and Matthew. Internationally,
the increase was due to higher guest spending and volumes at both
Disneyland Paris and Hong Kong Disneyland Resort. The increase at
Studio Entertainment was due to the exceptional performance of our
theatrical releases driven by Black Panther, Star Wars: The Last
Jedi, Avengers: Infinity War and Incredibles 2. The decrease at
Media Networks was due to lower advertising revenue, higher losses
from Hulu LLC (Hulu) and BAMTech and contractual rate increases for
sports programming. These decreases were partially offset by higher
affiliate revenues and an increase in income from program sales.
The decrease at Consumer Products & Interactive Media was
primarily due to lower income from licensing activities and a
decrease in comparable store sales at our retail business.
The increase in net interest expense was due to an increase in
average interest rates, higher average debt balances and financing
costs related to the pending Twenty-First Century Fox, Inc. (21CF)
acquisition. Higher corporate and unallocated shared expenses were
due to costs incurred in connection with the 21CF acquisition and
higher compensation costs.
DISCUSSION OF FOURTH QUARTER SEGMENT RESULTS
Media Networks
Media Networks revenues for the quarter increased 9% to $6.0
billion, and segment operating income increased 4% to $1.5 billion.
The following table provides further detail of the Media Networks
results (in millions):
Quarter
Ended Year Ended Sept. 29, Sept. 30, Sept. 29,
Sept. 30, 2018 2017 Change 2018 2017 Change Revenues: Cable
Networks $ 4,130 $3,951 5 % $ 17,063 $ 16,527 3 % Broadcasting
1,833 1,514 21 % 7,437 6,983 7 % $
5,963 $5,465 9 % $ 24,500 $ 23,510 4 % Segment operating
income: Cable Networks $ 1,159 $1,236 (6 )% $ 5,126 $ 5,353 (4 )%
Broadcasting 379 229
66
%
1,368 1,205 14 % Equity in the income of investees (10 ) 10
nm
131 344 (62 )% $ 1,528 $1,475 4 % $ 6,625 $
6,902 (4 )%
Cable Networks
Cable Networks revenues for the quarter increased 5% to $4.1
billion and operating income decreased $77 million to $1.2 billion.
Lower operating income was due to the consolidation of BAMTech,
partially offset by increases 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 on September 25, 2017. In the prior-year quarter, the
Company’s share of BAMTech results through September 25, 2017 was
reported in equity in the income of investees. The loss at BAMTech
reflects content and marketing costs and ongoing investments in
their technology platform.
The increase at the Disney Channels was driven by lower
programming costs, higher income from program sales and decreased
marketing costs.
Higher operating income at Freeform was due to lower programming
costs, increased affiliate revenue and lower marketing costs. These
increases were partially offset by lower advertising revenue due to
a decrease in impressions driven by a decrease in average
viewership and fewer units delivered.
Results at ESPN were comparable to the prior-year quarter as
affiliate revenue growth was offset by higher programming and
production costs, driven by contractual rate increases, and lower
advertising revenue. Affiliate revenue growth was due to
contractual rate increases, partially offset by a decline in
subscribers. Lower advertising revenue was driven by a decrease in
impressions due to lower average viewership and fewer units
delivered.
Broadcasting
Broadcasting revenues for the quarter increased 21% to $1.8
billion and operating income increased $150 million to $379
million. The increase in operating income was due to higher program
sales and affiliate revenue growth driven by contractual rate
increases.
The increase in program sales was primarily due to sales of two
Marvel series and Black-ish in the current quarter compared to one
Marvel series in the prior-year quarter.
Advertising revenues were comparable to the prior-year quarter
as lower network impressions were offset by higher network rates
and an increase in political advertising at the owned television
stations.
Equity in the Income (loss) of Investees
Equity in the income of investees decreased by $20 million to a
loss of $10 million primarily due to higher losses from Hulu and
lower income at A+E Television Networks (A+E), partially offset by
the comparison to a loss from BAMTech in the prior-year quarter,
which is now consolidated and reported in Cable Networks. The
higher loss at Hulu was due to higher programming, marketing and
labor costs, partially offset by growth in subscription and
advertising revenue. The decrease at A +E was due to higher
programming costs and lower advertising revenue, partially offset
by higher program sales.
Parks and Resorts
Parks and Resorts revenues for the quarter increased 9% to $5.1
billion, and segment operating income increased 11% to $829
million. Operating income growth for the quarter was due to an
increase at our domestic operations. Domestic results reflected the
comparison to the adverse impact of Hurricane Irma, which occurred
in the prior-year quarter.
Higher operating income at our domestic operations was primarily
due to increased guest spending and attendance, partially offset by
increased costs. Guest spending growth was due to increases in
average ticket prices for theme park admissions and cruise line
sailings, food, beverage and merchandise spending and average daily
hotel room rates. The increase in costs was primarily due to labor
and other cost inflation, a special fiscal 2018 domestic employee
bonus and higher charges for project abandonments.
Operating income at our international parks and resorts was
comparable to the prior-year quarter as growth at Disneyland Paris
and Hong Kong Disneyland Resort was offset by a decrease at
Shanghai Disney Resort. Operating income growth at Disneyland Paris
was due to an increase in average ticket prices while growth at
Hong Kong Disneyland Resort was due to higher occupied room nights
and attendance growth, partially offset by cost inflation. The
decrease at Shanghai Disney Resort was due to lower average ticket
prices, partially offset by increased attendance.
Studio Entertainment
Studio Entertainment revenues for the quarter increased 50% to
$2.2 billion and segment operating income increased $378 million to
$596 million. The increase in operating income was due to growth in
theatrical distribution, lower film cost impairments and higher
TV/SVOD and home entertainment distribution results.
The increase in theatrical distribution results was due to the
success of Incredibles 2 and Ant-Man and the Wasp in the current
quarter compared to Cars 3 and no Marvel release in the prior-year
quarter.
The decrease in film cost impairments reflected a write-off in
the prior-year quarter of an animated title that was in
development.
Higher TV/SVOD distribution results were due to growth in our
international free and pay television businesses.
The increase in home entertainment results was due to higher
unit sales and net effective pricing, partially offset by higher
per unit amortization costs, all of which reflected the performance
of Avengers: Infinity War in the current quarter compared to
Guardians of the Galaxy: Vol. 2 in the prior-year quarter. Other
significant titles included Solo: A Star Wars Story in the current
quarter, while the prior-year quarter included Beauty and the
Beast.
Consumer Products & Interactive
Media
Consumer Products & Interactive Media revenues for the
quarter decreased 8% to $1.1 billion, and segment operating income
decreased 10% to $337 million due to asset impairments and lower
income from licensing activities, partially offset by lower general
and administrative costs at our games business. The asset
impairments reflected write-offs of leasehold improvements at
certain retail stores.
Lower income from licensing activities was due to a decrease in
revenue from products based on Star Wars and Cars and lower minimum
guarantee shortfall recognition. These decreases were partially
offset by lower third-party royalty expense and an increase in
revenue from products based on Spider-Man. Lower minimum guarantee
shortfall recognition was due to an unfavorable timing impact.
Shortfalls are generally recognized at the end of the contract
period. Because our fiscal quarter ended on September 29, we did
not recognize shortfalls for contractual periods that ended on
September 30 in the fourth quarter of fiscal 2018, whereas they
were recognized in the fourth quarter of the prior year.
OTHER QUARTERLY FINANCIAL INFORMATION
Corporate and Unallocated Shared
Expenses
Corporate and unallocated shared expenses increased $31 million
from $190 million to $221 million for the quarter due to costs
incurred in connection with the 21CF acquisition and higher
compensation costs, partially offset by the timing of allocations
to operating segments.
Interest Expense, net
Interest expense, net was as follows (in millions):
Quarter Ended Sept. 29,
Sept. 30, 2018 2017 Change Interest expense $ (189 ) $ (137 ) (38
)% Interest and investment income 30 52
(42 )% Interest expense, net $ (159 ) $ (85 ) (87 )%
The increase in interest expense for the quarter was due to an
increase in average interest rates and financing costs related to
the 21CF acquisition.
The decrease in interest and investment income for the quarter
was due to the comparison to gains on investments recognized in the
prior-year quarter.
Equity in the Income (Loss) of
Investees, net
Equity in the income (loss) of investees was as follows (in
millions):
Quarter Ended Sept. 29, 2018
Sept. 30, 2017 Change Equity in the income (loss) of
investees in segment results: Media Networks $ (10 ) $ 10 nm Parks
and Resorts (4 ) (17 ) 76 % Impairment of equity investments
(210 ) —
nm
Equity in the loss of investees, net $ (224 ) $ (7 )
>(100
)%
Income Taxes
The effective income tax rate was as follows:
Quarter Ended Sept. 29,
Sept. 30, 2018 2017 Change Effective income tax rate 24.5 %
30.8 % 6.3 ppt
The decrease in the effective income tax rate for the quarter
was due to the impact of the Tax Act and the benefit of a tax loss
from liquidating a legal entity. The net favorable impact of the
Tax Act 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 a positive impact of
approximately 6.3 percentage points on the effective income tax
rate.
- A negative impact of approximately $100
million from updating our prior quarter Deemed Repatriation Tax and
Deferred Remeasurement. This update reflected the impact of
proposed IRS regulations issued in the current quarter. This impact
was approximately 3.2 percentage points on the effective income tax
rate.
Noncontrolling Interests
Net income attributable to noncontrolling interests was as
follows (in millions):
Quarter Ended Sept. 29,
Sept. 30, 2018 2017 Change Net income attributable to
noncontrolling interests $ 97 $ 118 (18 )%
The decrease in net income attributable to noncontrolling
interests was due to losses at our direct-to-consumer sports
business, partially offset by the impact of lower tax expense at
ESPN.
Net income attributable to noncontrolling interests is
determined on income after royalties and management fees, financing
costs and income taxes, as applicable.
FULL YEAR CASH FLOW STATEMENT INFORMATION
Cash Flow
Cash provided by operations and free cash flow were as follows
(in millions):
Year Ended Sept. 29,
Sept. 30, 2018 2017 Change Cash provided by operations $ 14,295 $
12,343 $ 1,952 Investments in parks, resorts and other property
(4,465 ) (3,623 ) (842 ) Free cash flow(1) $
9,830 $ 8,720 $ 1,110 (1) Free
cash flow is not a financial measure defined by GAAP. See the
discussion on pages 8 through 11.
Cash provided by operations for fiscal 2018 increased 16% or
$2.0 billion to $14.3 billion compared to fiscal 2017. The increase
in cash provided by operations was due to lower income tax
payments, a decrease in pension contributions and higher segment
operating income, partially offset by higher film and television
production spending and a payment for the rights to develop a real
estate property in New York.
Capital Expenditures and Depreciation
Expense
Investments in parks, resorts and other property were as follows
(in millions):
Year Ended Sept. 29, Sept. 30, 2018
2017 Media Networks Cable Networks $ 202 $ 75 Broadcasting
87 64 Total Media Networks 289 139 Parks and
Resorts Domestic 3,212 2,375 International 671 816
Total Parks and Resorts 3,883 3,191 Studio
Entertainment 96 85 Consumer Products & Interactive Media 18 30
Corporate 179 178 Total investments in parks, resorts
and other property $ 4,465 $ 3,623
Capital expenditures increased from $3.6 billion to $4.5 billion
driven by 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):
Year Ended Sept. 29, Sept. 30, 2018
2017 Media Networks Cable Networks $ 172 $ 137 Broadcasting
92 88 Total Media Networks 264 225 Parks and
Resorts Domestic 1,410 1,336 International 742 660
Total Parks and Resorts 2,152 1,996 Studio
Entertainment 55 50 Consumer Products & Interactive Media 69 63
Corporate 218 252 Total depreciation expense $ 2,758
$ 2,586
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 fourth quarter:
EPS
Pre-Tax
Tax
After-Tax
Change vs.
Income/
Benefit/
Income/
prior year
(in millions except EPS) Loss
Expense (1)
Loss (2)
EPS (3)
period Quarter Ended September 29, 2018: As reported $ 3,202 $ (783
) $ 2,419 $ 1.55 37 % Exclude (4): Gain on sale of real estate (507
) 134 (373 ) (0.25 ) Impairment of equity investments 210 (49 ) 161
0.11 Net impact of the Tax Act — 100 100 0.06 Restructuring and
impairment charges 5 (1 ) 4
— Excluding certain items affecting comparability $
2,910 $ (599 ) $ 2,311 $ 1.48 38 %
Quarter Ended September 30, 2017: As reported $ 2,694 $ (829 ) $
1,865 $ 1.13 Exclude (5): Gain related to the acquisition of
BAMTech (255 ) 93 (162 ) (0.10 ) Restructuring and impairment
charges 98 (31 ) 67 0.04
Excluding certain items affecting comparability $ 2,537
$ (767 ) $ 1,770 $ 1.07 (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) Items affecting comparability
during the fourth quarter of fiscal 2018 include a gain on the sale
of real estate ($507 million), which was recorded in “Other income,
net” in the Condensed Consolidated Statements of Income,
impairments of Vice and Villages Nature equity method investments
($157 million and $53 million, respectively), which were recorded
in “Equity in the income (loss) of investees, net” in the Condensed
Consolidated Statements of Income, and the impacts of the Deemed
Repatriation Tax ($86 million) and the Deferred Remeasurement ($14
million) related to the Tax Act. (5) In the prior-year quarter,
items affecting comparability included a non-cash net gain in
connection with the acquisition of a controlling interest in
BAMTech ($255 million), which was recorded in “Other income, net”
in the Condensed Consolidated Statements of Income, and
restructuring and impairment charges ($98 million).
The following table reconciles reported EPS to EPS excluding
certain items affecting comparability for the year:
EPS
Pre-Tax
Tax
After-Tax
Change vs.
Income/
Benefit/
Income/
prior year
(in millions except EPS) Loss
Expense (1)
Loss (2)
EPS (3)
period Year Ended September 29, 2018: As reported $ 14,729 $ (1,663
) $ 13,066 $ 8.36 47 % Exclude(4): Net benefit from the Tax Act —
(1,701 ) (1,701 ) (1.11 ) Other income, net (601 ) 158 (443 ) (0.30
) Impairment of equity investments 210 (49 ) 161 0.11 Restructuring
and impairment charges 33 (7 ) 26
0.02 Excluding certain items affecting
comparability $ 14,371 $ (3,262 ) $ 11,109 $ 7.08
24 % Year Ended September 30, 2017: As reported $
13,788 $ (4,422 ) $ 9,366 $ 5.69 Exclude(5): Gain related to the
acquisition of BAMTech (255 ) 93 (162 ) (0.10 ) Settlement of
litigation 177 (65 ) 112 0.07 Restructuring and impairment charges
98 (31 ) 67 0.04
Excluding certain items affecting comparability $ 13,808 $
(4,425 ) $ 9,383 $ 5.70 (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) Items affecting comparability for
fiscal 2018 include a net benefit of $1.7 billion from the Tax Act
due to a $2.1 billion benefit from the Deferred Remeasurement,
partially offset by a $0.4 billion impact from the Deemed
Repatriation Tax. In addition, the current year includes gains from
the sale of real estate and property rights ($560 million),
insurance proceeds related to a legal matter ($38 million) and an
adjustment to a fiscal 2017 non-cash gain ($3 million), which were
recorded in “Other income, net” in the Condensed Consolidated
Statements of Income, impairments of Vice and Villages Nature
equity method investments ($157 million and $53 million,
respectively), which were recorded in “Equity in the income (loss)
of investees, net” in the Condensed Consolidated Statements of
Income, and restructuring and impairment charges ($33 million). (5)
Items affecting comparability for fiscal 2017 included a non-cash
net gain in connection with the acquisition of a controlling
interest in BAMTech ($255 million), a charge, net of committed
insurance recoveries, in connection with the settlement of
litigation ($177 million) and restructuring and impairment charges
($98 million). The gain in connection with the acquisition of
BAMTech and charge related to the settlement of litigation were
recorded in “Other income, net” in the Condensed Consolidated
Statements of Income.
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.
The following table reconciles income before income taxes to
segment operating income (in millions):
Quarter
Ended Year Ended Sept. 29, Sept. 30, Sept. 29,
Sept. 30, 2018 2017 Change 2018 2017 Change Income before
income taxes $ 3,202 $ 2,694 19 % $ 14,729 $ 13,788 7 %
Add/(subtract): Corporate and unallocated shared expenses 221 190
(16 )% 761 582 (31 )% Restructuring and impairment charges 5 98 95
% 33 98 66 % Other income, net (507 ) (255 ) 99 % (601 ) (78 )
>100
%
Interest expense, net 159 85 (87 )% 574 385 (49 )% Impairment of
equity investments(1) 210 —
nm
210 —
nm
Segment Operating income $ 3,290 $ 2,812 17 % $
15,706 $ 14,775 6 % (1) Reflects
impairments of Vice and Villages Nature
CONFERENCE CALL INFORMATION
In conjunction with this release, The Walt Disney Company will
host a conference call today, November 8, 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.
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
- completion of 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,” and subsequent reports.
THE WALT DISNEY COMPANY CONDENSED CONSOLIDATED
STATEMENTS OF INCOME (unaudited; in millions, except per
share data) Quarter Ended
Year Ended September 29, September 30, September 29,
September 30, 2018 2017 2018 2017 Revenues $ 14,307 $
12,779 $ 59,434 $ 55,137 Costs and expenses (11,224 ) (10,150 )
(44,597 ) (41,264 ) Restructuring and impairment charges (5 ) (98 )
(33 ) (98 ) Other income, net 507 255 601 78 Interest expense, net
(159 ) (85 ) (574 ) (385 ) Equity in the income (loss) of
investees, net (224 ) (7 ) (102 ) 320
Income before income taxes 3,202 2,694 14,729 13,788 Income
taxes (783 ) (829 ) (1,663 ) (4,422 )
Net income 2,419 1,865 13,066 9,366 Less: Net income attributable
to noncontrolling interests (97 ) (118 ) (468
) (386 ) Net income attributable to The Walt Disney Company
(Disney) $ 2,322 $ 1,747 $ 12,598 $ 8,980
Earnings per share attributable to Disney: Diluted $
1.55 $ 1.13 $ 8.36 $ 5.69 Basic $ 1.56
$ 1.14 $ 8.40 $ 5.73 Weighted
average number of common and common equivalent shares outstanding:
Diluted 1,497 1,547 1,507
1,578 Basic 1,489 1,538
1,499 1,568 Dividends declared
per share $ — $ — $ 1.68 $ 1.56
THE WALT DISNEY COMPANY CONDENSED CONSOLIDATED
BALANCE SHEETS (unaudited; in millions, except per share
data) September 29,
September 30, 2018 2017 ASSETS Current assets Cash and cash
equivalents $ 4,150 $ 4,017 Receivables 9,334 8,633 Inventories
1,392 1,373 Television costs and advances 1,314 1,278 Other current
assets 635 588 Total current assets
16,825 15,889 Film and television costs 7,888 7,481 Investments
2,899 3,202 Parks, resorts and other property Attractions,
buildings and equipment 55,238 54,043 Accumulated depreciation
(30,764 ) (29,037 ) 24,474 25,006 Projects in
progress 3,942 2,145 Land 1,124 1,255
29,540 28,406 Intangible assets, net 6,812 6,995 Goodwill 31,269
31,426 Other assets 3,365 2,390 Total
assets $ 98,598 $ 95,789 LIABILITIES AND
EQUITY Current liabilities Accounts payable and other accrued
liabilities $ 9,479 $ 8,855 Current portion of borrowings 3,790
6,172 Deferred revenue and other 4,591 4,568
Total current liabilities 17,860 19,595 Borrowings
17,084 19,119 Deferred income taxes 3,109 4,480 Other long-term
liabilities 6,590 6,443 Commitments and contingencies Redeemable
noncontrolling interests 1,123 1,148 Equity Preferred stock, $.01
par value Authorized – 100 million shares, Issued – none — — Common
stock, $.01 par value, Authorized – 4.6 billion shares, Issued –
2.9 billion shares 36,779 36,248 Retained earnings 82,679 72,606
Accumulated other comprehensive loss (3,097 ) (3,528
) 116,361 105,326 Treasury stock, at cost, 1.4 billion shares
(67,588 ) (64,011 ) Total Disney Shareholders’ equity
48,773 41,315 Noncontrolling interests 4,059
3,689 Total equity 52,832 45,004
Total liabilities and equity $ 98,598 $ 95,789
THE WALT DISNEY COMPANY CONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOWS (unaudited; in millions)
Year Ended September 29, September 30,
2018 2017 OPERATING ACTIVITIES Net income $ 13,066 $ 9,366
Depreciation and amortization 3,011 2,782 Gains on acquisitions and
dispositions (560) (289) Deferred income taxes (1,573) 334 Equity
in the income of investees 102 (320) Cash distributions received
from equity investees 775 788 Net change in film and television
costs and advances (523) (1,075) Equity-based compensation 393 364
Other 441 503 Changes in operating assets and liabilities:
Receivables (720) 107 Inventories (17) (5) Other assets (927) (52)
Accounts payable and other accrued liabilities 235 (368) Income
taxes 592 208 Cash provided by operations
14,295 12,343 INVESTING ACTIVITIES Investments in
parks, resorts and other property (4,465) (3,623) Acquisitions
(1,581) (417) Other 710 (71) Cash used in investing
activities (5,336) (4,111) FINANCING
ACTIVITIES Commercial paper borrowings/(payments), net (1,768)
1,247 Borrowings 1,056 4,820 Reduction of borrowings (1,871)
(2,364) Dividends (2,515) (2,445) Repurchases of common stock
(3,577) (9,368) Proceeds from exercise of stock options 210 276
Contributions from noncontrolling interest holders 399 17 Other
(777) (1,142) Cash used in financing activities
(8,843) (8,959) Impact of exchange rates on
cash, cash equivalents and restricted cash (25) 31
Change in cash, cash equivalents and restricted cash 91
(696) Cash, cash equivalents and restricted cash, beginning of year
4,064 4,760 Cash, cash equivalents and restricted
cash, end of year $ 4,155 $ 4,064
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The Walt Disney CompanyZenia MuchaCorporate
Communications818-560-5300orLowell SingerInvestor
Relations818-560-6601
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