The Walt Disney Company (NYSE: DIS) today reported quarterly
earnings for its second fiscal quarter ended March 31, 2018.
Diluted earnings per share (EPS) for the quarter increased 30% to
$1.95 from $1.50 in the prior-year quarter. Excluding certain items
affecting comparability(1), EPS for the quarter increased 23% to
$1.84 from $1.50 in the prior-year quarter. EPS for the six months
ended March 31, 2018 increased to $4.86 from $3.05 in the
prior-year period. Excluding certain items affecting
comparability(1), EPS for the six months increased 22% to $3.73
from $3.05 in the prior-year period.
“Driven by strong results in our parks and resorts and studio
businesses, our Q2 performance reflects our continued ability to
drive significant shareholder value,” said Robert A. Iger, Chairman
and Chief Executive Officer, The Walt Disney Company. “Our ability
to create extraordinary content like Black Panther and Avengers:
Infinity War and leverage it across all business units, the unique
value proposition we’re creating for consumers with our DTC
platforms, and our recent reorganization strengthen our confidence
that we are very well positioned for future growth.”
The following table summarizes the second quarter and six-month
results for fiscal 2018 and 2017 (in millions, except per share
amounts):
Quarter Ended Six Months Ended March
31,2018 April 1,2017 Change March 31,2018 April
1,2017 Change Revenues $ 14,548 $ 13,336 9 % $ 29,899 $ 28,120 6 %
Segment operating income (1) $ 4,237 $ 3,996 6 % $ 8,223 $ 7,952 3
% Net income (2) $ 2,937 $ 2,388 23 % $ 7,360 $ 4,867 51 % Diluted
EPS (2) $ 1.95 $ 1.50 30 % $ 4.86 $ 3.05 59 % EPS excluding certain
items affecting comparability (1) $ 1.84 $ 1.50 23 % $ 3.73 $ 3.05
22 % Cash provided by operations $ 4,526 $ 3,228 40 % $ 6,763 $
4,673 45 % Free cash flow (1) $ 3,463 $ 2,345 48 % $ 4,719 $ 2,750
72 %
(1)
EPS excluding certain items affecting
comparability, segment operating income and free cash flow are
non-GAAP financial measures. See the discussion on pages 7 through
9. The most significant item affecting comparability for the
current quarter and six-month period was a net benefit from new
U.S. federal income tax legislation (Tax Act) resulting from
remeasuring our deferred tax balances to a new lower U.S. statutory
rate, partially offset by the accrual of a Deemed Repatriation Tax
(see page 5 for further discussion).
(2)
Reflects amounts attributable to
shareholders of The Walt Disney Company, i.e. after deduction of
noncontrolling interests.
SEGMENT RESULTS
The following table summarizes the second quarter and six-month
segment operating results for fiscal 2018 and 2017 (in
millions):
Quarter Ended Six Months Ended March
31,2018 April 1,2017 Change March 31,2018 April
1,2017 Change Revenues: Media Networks $ 6,138 $ 5,946 3 % $ 12,381
$ 12,179 2 % Parks and Resorts 4,879 4,299 13 % 10,033 8,854 13 %
Studio Entertainment 2,454 2,034 21 % 4,958 4,554 9 % Consumer
Products & Interactive Media 1,077 1,057 2 %
2,527 2,533 — % $ 14,548 $ 13,336 9 % $
29,899 $ 28,120 6 % Segment operating income: Media
Networks $ 2,082 $ 2,223
(6
)
%
$ 3,275 $ 3,585
(9
)
%
Parks and Resorts 954 750 27 % 2,301 1,860 24 % Studio
Entertainment 847 656 29 % 1,676 1,498 12 % Consumer Products &
Interactive Media 354 367
(4
)
%
971 1,009
(4
)
%
$ 4,237 $ 3,996 6 % $ 8,223 $ 7,952 3 %
Media Networks
Media Networks revenues for the quarter increased 3% to $6.1
billion and segment operating income decreased 6% to $2.1
billion.
The following table provides further detail of the Media
Networks results (in millions):
Quarter Ended Six Months Ended March
31,2018 April 1,2017 Change March 31,2018 April
1,2017 Change Revenues: Cable Networks $ 4,252 $ 4,062 5 % $
8,745 $ 8,490 3 % Broadcasting 1,886 1,884 — % 3,636
3,689
(1
)
%
$ 6,138 $ 5,946 3 % $ 12,381 $ 12,179 2
% Segment operating income: Cable Networks $ 1,726 $ 1,791
(4
)
%
$ 2,584 $ 2,655
(3
)
%
Broadcasting 343 344 — % 628 723
(13
)
%
Equity in the income of investees 13 88
(85
)
%
63 207
(70
)
%
$ 2,082 $ 2,223
(6
)
%
$ 3,275 $ 3,585
(9
)
%
Cable Networks
Cable Networks revenues for the quarter increased 5% to $4.3
billion and operating income decreased 4% to $1.7 billion. Lower
operating income was primarily due to a loss at BAMTech and
decreases at Freeform and ESPN.
In the current quarter, BAMTech’s operating loss is reported in
Cable Networks as a result of our acquisition of a controlling
interest in the fourth quarter of fiscal 2017. In the prior-year
quarter, the Company’s share of BAMTech results was reported in
equity in the income of investees. The loss at BAMTech reflects
ongoing investments in their technology platform including costs
associated with ESPN+.
Results at Freeform were primarily due to lower advertising
revenue reflecting a decrease in average viewership.
The decrease at ESPN was driven by higher programming costs,
partially offset by affiliate revenue growth and higher advertising
revenue. The programming cost increase was due to a shift in timing
of College Football Playoff (CFP) bowl games and contractual rate
increases for college sports and NBA programming. The current
quarter included two semi-final bowl games and one host bowl game,
whereas the prior-year quarter included three host bowl games.
Semi-final games generally have a higher cost than host games.
Affiliate revenue growth reflected contractual rate increases,
partially offset by a decline in subscribers. Higher advertising
revenue was due to an increase in rates, partially offset by lower
impressions driven by fewer units delivered and a decrease in
average viewership. Rates benefited from the shift of CFP
games.
Broadcasting
Broadcasting revenues and segment operating income for the
quarter were essentially flat at $1.9 billion and $343 million,
respectively. Higher affiliate revenue due to contractual rate
increases was offset by a decline in advertising revenue, lower
income from program sales and higher network programming and
marketing costs.
The decrease in advertising revenues was due to fewer network
impressions, 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. Lower income
from program sales reflected higher sales of How to Get Away with
Murder in the prior-year quarter. The increase in network
programming costs was due to a higher cost mix of programming,
including the impact of more hours of higher cost acquired
programming, and contractual increases, partially offset by lower
production cost write-downs. Marketing costs increased to support
new primetime series and mid-season launches.
Equity in the Income of Investees
Equity in the income of investees decreased from $88 million in
the prior-year quarter to $13 million in the current quarter due to
higher losses from Hulu, partially offset by higher operating
results from A +E Television Networks (A+E). The decrease at
Hulu was driven by higher programming, marketing and labor costs,
partially offset by growth in subscription and advertising revenue.
The increase at A+E was due to lower marketing and programming
costs, a gain from an investment and higher affiliate revenue,
partially offset by lower advertising revenue.
Parks and Resorts
Parks and Resorts revenues for the quarter increased 13% to $4.9
billion and segment operating income increased 27% to $1.0 billion.
Operating income growth for the quarter was due to increases at our
domestic and international parks and resorts. Results included a
benefit from a shift in the timing of the Easter holiday relative
to our fiscal periods. The current quarter included one week of the
Easter holiday, whereas the entire Easter holiday fell in the third
quarter of the prior year.
Higher operating income at our domestic parks and resorts was
primarily due to increased guest spending, attendance growth at
Walt Disney World Resort and higher sponsorship revenue, partially
offset by increased costs. Guest spending growth was due to
increases in average ticket prices, average daily hotel room rates
and food, beverage and merchandise spending. The increase in costs
was primarily due to labor and other cost inflation, an increase in
depreciation associated with new attractions and higher technology
spending.
The increase at our international parks and resorts was due to
growth at Disneyland Paris and higher occupied room nights and
attendance at Hong Kong Disneyland Resort. These increases were
partially offset by a decrease at Shanghai Disney Resort driven by
lower attendance, cost inflation and an unfavorable foreign
currency impact. Higher operating income at Disneyland Paris was
due to increases in guest spending and attendance, partially offset
by cost inflation. Guest spending growth at Disneyland Paris was
due to higher average ticket prices driven by less discounting, and
increases in average daily hotel room rates and food, beverage and
merchandise spending.
Studio Entertainment
Studio Entertainment revenues for the quarter increased 21% to
$2.5 billion and segment operating income increased 29% to $847
million. Operating income growth was due to increases in
theatrical, home entertainment and TV/SVOD distribution results,
partially offset by higher film cost impairments.
The increase in theatrical distribution results was due to the
success of Black Panther in the current quarter with no comparable
Marvel title in the prior-year quarter. This increase was partially
offset by the performance of A Wrinkle in Time in the current
quarter compared to Beauty and the Beast in the prior-year
quarter.
Growth at home entertainment was driven by higher average net
effective pricing and an increase in unit sales, both of which
reflected the successful release of Star Wars: The Last Jedi.
Higher unit sales reflected the DVD/Blu-ray release of Star Wars:
The Last Jedi in the current quarter whereas the DVD/Blu-ray
release of Rogue One: A Star Wars Story occurred in the prior-year
third quarter. Other significant titles included Thor: Ragnarok and
Coco in the current quarter compared to Moana and Doctor Strange in
the prior-year quarter.
Higher TV/SVOD distribution results were due to international
growth and the domestic free television sale of Star Wars: The
Force Awakens in the current quarter.
Consumer Products & Interactive
Media
Consumer Products & Interactive Media revenues increased 2%
to $1.1 billion and segment operating income decreased 4% to $354
million as higher income from licensing activities was more than
offset by a decrease in comparable retail store sales and an
unfavorable foreign currency impact.
The increase in income from licensing was due to higher minimum
guarantee shortfall recognition and increased sponsorship revenue,
partially offset by a decrease in settlements and lower licensing
revenue from sales of merchandise and games. Higher minimum
guarantee shortfall recognition was due to a favorable timing
impact. Shortfalls are generally recognized at the end of the
contract period. For contracts that ended on December 31,
shortfalls were recognized in the second quarter of the current
year whereas they were recognized in the first quarter of the prior
year.
OTHER FINANCIAL INFORMATION
Corporate and Unallocated Shared
Expenses
Corporate and unallocated shared expenses increased $33 million
to $194 million in the current quarter due to costs incurred in
connection with our agreement to acquire Twenty-First Century Fox,
Inc. and higher compensation costs.
Other income, net
Other income for the current quarter reflects insurance proceeds
related to a legal matter.
Interest expense, net
Interest expense, net was as follows (in millions):
Quarter Ended March 31,2018 April 1,2017
Change Interest expense $ (172 ) $ (115 )
(50
)
%
Interest and investment income 29 31
(6
)
%
Interest expense, net $ (143 ) $ (84 )
(70
)
%
The increase in interest expense was due to higher average debt
balances and an increase in average interest rates.
Income Taxes
The effective income tax rate was as follows:
Quarter Ended March 31,2018 April 1,2017
Change Effective income tax rate 20.7 % 32.3 % 11.6 ppt
The decrease in the effective income tax rate for the quarter
reflected a net favorable impact of the Tax Act, partially offset
by lower tax benefits from share-based awards. The net 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 an impact of approximately
10.2 percentage points on the effective income tax rate.
- A net benefit of approximately $0.1
billion from updating our first quarter estimates of the
remeasurement of U.S. federal deferred tax assets and liabilities
and a one-time tax on certain accumulated foreign earnings (Deemed
Repatriation Tax). This update includes the impact of legislation
enacted in the second quarter that accelerated tax deductions into
fiscal 2017 at the higher 2017 statutory rate. In the current-year
six-month period, the Company recognized a net benefit of $1.7
billion due to a $2.0 billion benefit from the remeasurement of
deferred income tax assets and liabilities, partially offset by an
approximately $350 million impact from the Deemed Repatriation
Tax.
Noncontrolling Interests
Quarter Ended (in millions) March 31,2018
April 1,2017 Change Net income attributable to noncontrolling
interests $ 178 $ 151
(18
)
%
The increase in net income attributable to noncontrolling
interests was due to lower tax expense at ESPN, largely due to the
Tax Act, and the impact of the Company’s acquisition of the
noncontrolling interest in Disneyland Paris in the third quarter of
the prior year, partially offset by lower operating results at
Shanghai Disney Resort.
Net income attributable to noncontrolling interests is
determined on income after royalties and management fees, financing
costs and income taxes, as applicable.
Cash Flow
Cash provided by operations and free cash flow were as follows
(in millions):
Six Months Ended March 31,2018 April 1,2017
Change Cash provided by operations $ 6,763 $ 4,673 $ 2,090
Investments in parks, resorts and other property (2,044 ) (1,923 )
(121 ) Free cash flow (1) $ 4,719 $ 2,750 $ 1,969
(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 six months of fiscal
2018 increased by $2.1 billion from $4.7 billion in the prior-year
quarter to $6.8 billion in the current quarter. The increase was
due to lower pension plan contributions, a decrease in income tax
payments due to the Tax Act and higher operating results at our
Parks and Resorts segment, partially offset by higher film and
television production spending.
Capital Expenditures and Depreciation
Expense
Investments in parks, resorts and other property were as follows
(in millions):
Six Months Ended March 31,2018 April 1,2017 Media
Networks Cable Networks $ 135 $ 60 Broadcasting 45 33
Total Media Networks
180 93 Parks and Resorts Domestic 1,413 1,093 International
307 579 Total Parks and Resorts 1,720 1,672 Studio
Entertainment 52 47 Consumer Products & Interactive Media 10 8
Corporate 82 103 Total investments in parks, resorts and
other property $ 2,044 $ 1,923
Capital expenditures increased by $121 million to $2.0 billion
due to higher spending on new attractions at our domestic parks and
resorts and on technology at BAMTech, partially offset by lower
spending at Hong Kong Disneyland Resort and Shanghai Disney
Resort.
Depreciation expense was as follows (in millions):
Six Months Ended March 31,2018 April 1,2017 Media
Networks Cable Networks $ 84 $ 71 Broadcasting 48 46 Total
Media Networks 132 117 Parks and Resorts Domestic 713 650
International 357 313 Total Parks and Resorts 1,070
963 Studio Entertainment 26 23 Consumer Products & Interactive
Media 27 31 Corporate 109 129 Total depreciation expense $
1,364 $ 1,263
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 yearperiod
Quarter Ended March 31, 2018: As reported $ 3,928 $ (813 ) $ 3,115
$ 1.95 30 % Exclude: Net benefit from the Tax Act (4) — (134 ) (134
) (0.09 ) Other income, net (5) (41 ) 11 (30 ) (0.02 )
Restructuring and impairment charges (6) 13 (3 ) 10
0.01 Excluding certain items affecting comparability $ 3,900
$ (939 ) $ 2,961 $ 1.84 23 % Six Months
Ended March 31, 2018: As reported $ 7,673 $ (85 ) $ 7,588 $ 4.86 59
% Exclude: Net benefit from the Tax Act (4) — (1,691 ) (1,691 )
(1.10 ) Other income, net (5) (94 ) 23 (71 ) (0.05 ) Restructuring
and impairment charges (6) 28 (6 ) 22 0.01
Excluding certain items affecting comparability $ 7,607 $
(1,759 ) $ 5,848 $ 3.73 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. (4) Amounts reflect the remeasurement
of U.S. federal deferred tax assets and liabilities, partially
offset by the Deemed Repatriation Tax (see page 5 for more
information). (5) Other income for the current quarter reflects
insurance proceeds related to a legal matter. Other income for the
current six-month period also includes a gain from the sale of
property rights. (6) For the current quarter and six-month period,
the Company recorded $13 million and $28 million, respectively, of
restructuring and impairment charges primarily for severance costs.
Free cash flow – The Company uses
free cash flow (cash provided by operations less investments in
parks, resorts and other property), among other measures, to
evaluate the ability of its operations to generate cash that is
available for purposes other than capital expenditures. Management
believes that information about free cash flow provides investors
with an important perspective on the cash available to service debt
obligations, make strategic acquisitions and investments and pay
dividends or repurchase shares.
Aggregate segment operating income
– The Company evaluates the performance of its operating segments
based on segment operating income, and management uses aggregate
segment operating income as a measure of the performance of
operating businesses separate from non-operating factors. The
Company believes that information about aggregate segment operating
income assists investors by allowing them to evaluate changes in
the operating results of the Company’s portfolio of businesses
separate from non-operational factors that affect net income, thus
providing separate insight into both operations and the other
factors that affect reported results.
A reconciliation of income before income taxes to segment
operating income is as follows (in millions):
Quarter Ended % Change Six Months Ended
% Change (in millions) March 31,2018 April 1,2017
Better/(Worse) March 31,2018 April 1,2017 Better/(Worse)
Income before income taxes $ 3,928 $ 3,751 5 % $ 7,673 $ 7,476 3 %
Add/(subtract): Corporate and unallocated shared expenses 194 161
(20
)
%
344 293
(17
)
%
Restructuring and impairment charges 13 — nm 28 — nm Other income,
net (41 ) — nm (94 ) — nm Interest expense, net 143 84
(70
)
%
272 183
(49
)
%
Segment Operating Income $ 4,237 $ 3,996 6 % $ 8,223
$ 7,952 3 %
CONFERENCE CALL INFORMATION
In conjunction with this release, The Walt Disney Company will
host a conference call today, May 8, 2018, at 4:30 PM EDT/1:30
PM PDT via a live Webcast. To access the Webcast go to
www.disney.com/investors. The discussion will be archived.
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 have filed with the Securities and
Exchange Commission (the “SEC”) a preliminary registration
statement on Form S-4 that includes a joint proxy statement of
Disney and 21CF that also constitutes a preliminary 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 will
file final versions of the preliminary registration statement and
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, its proxy statement filed on
September 28, 2017, and the preliminary registration statement on
Form S-4, all of 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, its proxy statement filed on
January 12, 2018, and the preliminary registration statement on
Form S-4, all of which are filed with the SEC.
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; and
- 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,” in the Company’s Report on Form 10-Q
for the quarter ended December 30, 2017 under Item 1A, “Risk
Factors,” the preliminary registration statement on Form S-4, and
subsequent reports.
THE WALT DISNEY COMPANY CONDENSED
CONSOLIDATED STATEMENTS OF INCOME (unaudited; in millions,
except per share data) Quarter Ended Six Months Ended
March 31,2018 April 1,2017 March 31,2018 April 1,2017
Revenues: Services $ 12,520 $ 11,487 $ 25,504 $ 23,893 Products
2,028 1,849 4,395 4,227 Total revenues
14,548 13,336 29,899 28,120 Costs and expenses: Cost of services
(exclusive of depreciation and amortization) (6,304 ) (5,839 )
(13,638 ) (12,859 ) Cost of products (exclusive of depreciation and
amortization) (1,229 ) (1,130 ) (2,632 ) (2,516 ) Selling, general,
administrative and other (2,247 ) (1,941 ) (4,326 ) (3,926 )
Depreciation and amortization (731 ) (676 ) (1,473 ) (1,363 ) Total
costs and expenses (10,511 ) (9,586 ) (22,069 ) (20,664 )
Restructuring and impairment charges (13 ) — (28 ) — Other income,
net 41 — 94 — Interest expense, net (143 ) (84 ) (272 ) (183 )
Equity in the income of investees 6 85 49 203
Income before income taxes 3,928 3,751 7,673 7,476 Income
taxes (813 ) (1,212 ) (85 ) (2,449 ) Net income 3,115 2,539 7,588
5,027 Less: Net income attributable to noncontrolling interests
(178 ) (151 ) (228 ) (160 ) Net income attributable to The Walt
Disney Company (Disney) $ 2,937 $ 2,388 $ 7,360
$ 4,867 Earnings per share attributable to
Disney: Diluted $ 1.95 $ 1.50 $ 4.86 $ 3.05
Basic $ 1.95 $ 1.51 $ 4.88 $
3.07 Weighted average number of common and common
equivalent shares outstanding: Diluted 1,510 1,591
1,515 1,597 Basic 1,503 1,580
1,507 1,586 Dividends declared per share $ —
$ — $ 0.84 $ 0.78
THE
WALT DISNEY COMPANY CONDENSED CONSOLIDATED BALANCE
SHEETS (unaudited; in millions, except per share data)
March 31,2018 September 30,2017 ASSETS Current assets
Cash and cash equivalents $ 4,179 $ 4,017 Receivables 9,678 8,633
Inventories 1,301 1,373 Television costs and advances 1,114 1,278
Other current assets 536 588 Total current assets
16,808 15,889 Film and television costs 8,074 7,481 Investments
3,148 3,202 Parks, resorts and other property Attractions,
buildings and equipment 55,317 54,043 Accumulated depreciation
(30,435 ) (29,037 ) 24,882 25,006 Projects in progress 3,056 2,145
Land 1,262 1,255 29,200 28,406 Intangible assets, net
6,962 6,995 Goodwill 31,350 31,426 Other assets 2,401 2,390
Total assets $ 97,943 $ 95,789
LIABILITIES AND EQUITY Current liabilities Accounts payable and
other accrued liabilities $ 9,022 $ 8,855 Current portion of
borrowings 5,918 6,172 Deferred revenue and other 4,788
4,568 Total current liabilities 19,728 19,595 Borrowings
18,766 19,119 Deferred income taxes 2,949 4,480 Other long-term
liabilities 6,699 6,443 Commitments and contingencies Redeemable
noncontrolling interests 1,150 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 36,411 36,248 Retained earnings 78,704
72,606 Accumulated other comprehensive loss (3,345 ) (3,528 )
111,770 105,326 Treasury stock, at cost, 1.4 billion shares (66,619
) (64,011 ) Total Disney Shareholders’ equity 45,151 41,315
Noncontrolling interests 3,500 3,689 Total equity
48,651 45,004 Total liabilities and equity $ 97,943
$ 95,789
THE WALT DISNEY COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited; in millions) Six Months Ended March
31,2018 April 1,2017 OPERATING ACTIVITIES Net income $ 7,588
$ 5,027 Depreciation and amortization 1,473 1,363 Deferred income
taxes (1,623 ) 126 Equity in the income of investees (49 ) (203 )
Cash distributions received from equity investees 389 397 Net
change in film and television costs and advances (490 ) (428 )
Equity-based compensation 194 189 Other 155 261 Changes in
operating assets and liabilities: Receivables (1,004 ) (284 )
Inventories 64 90 Other assets (248 ) 78 Accounts payable and other
accrued liabilities (92 ) (1,934 ) Income taxes 406 (9 )
Cash provided by operations 6,763 4,673
INVESTING ACTIVITIES Investments in parks, resorts and other
property (2,044 ) (1,923 ) Acquisitions (1,581 ) (557 ) Other (180
) 90 Cash used in investing activities (3,805 ) (2,390 )
FINANCING ACTIVITIES Commercial paper borrowings, net 1,372
914 Borrowings 1,048 2,053 Reduction of borrowings (1,350 ) (1,233
) Dividends (1,266 ) (1,237 ) Repurchases of common stock (2,608 )
(3,500 ) Proceeds from exercise of stock options 91 186 Other (169
) (232 ) Cash used in financing activities (2,882 ) (3,049 )
Impact of exchange rates on cash, cash equivalents and restricted
cash 55 (69 ) Change in cash, cash equivalents and
restricted cash 131 (835 ) Cash, cash equivalents and restricted
cash, beginning of period 4,064 4,760 Cash, cash
equivalents and restricted cash, end of period $ 4,195 $
3,925
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The Walt Disney CompanyZenia MuchaCorporate
Communications818-560-5300orLowell SingerInvestor
Relations818-560-6601
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