The Walt Disney Company (NYSE: DIS) today reported earnings for
its fourth quarter and fiscal year ended September 28, 2019.
Diluted earnings per share (EPS) from continuing operations for the
fourth quarter decreased 72% to $0.43 from $1.55 in the prior-year
quarter. Excluding certain items affecting comparability(1),
diluted EPS for the quarter decreased 28% to $1.07 from $1.48 in
the prior-year quarter. Diluted EPS from continuing operations for
the year decreased 25% to $6.27 from $8.36 in the prior year.
Excluding certain items affecting comparability(1), diluted EPS
from continuing operations for the year decreased 19% to $5.77 from
$7.08 in the prior year.
“Our solid results in the fourth quarter reflect the ongoing
strength of our brands and businesses,” said Robert A. Iger,
Chairman and Chief Executive Officer, The Walt Disney Company.
“We’ve spent the last few years completely transforming The Walt
Disney Company to focus the resources and immense creativity across
the entire company on delivering an extraordinary
direct-to-consumer experience, and we’re excited for the launch of
Disney+ on November 12.”
On March 20, 2019, the Company acquired Twenty-First Century
Fox, Inc., which was subsequently renamed TFCF Corporation (TFCF),
for cash and the issuance of 307 million shares. Additionally, as
part of the TFCF acquisition, we acquired a controlling interest in
Hulu LLC (Hulu). Results for the current quarter and fiscal year
reflect the consolidation of TFCF and Hulu.
The following table summarizes the fourth quarter and full year
results for fiscal 2019 and 2018 (in millions, except per share
amounts):
Quarter Ended
Year Ended
Sept. 28, 2019
Sept. 29, 2018
Change
Sept. 28, 2019
Sept. 29, 2018
Change
Revenues
$
19,100
$
14,306
34 %
$
69,570
$
59,434
17 %
Income from continuing operations before
income taxes
$
1,258
$
3,202
(61)%
$
13,944
$
14,729
(5)%
Total segment operating income(1)
$
3,436
$
3,277
5 %
$
14,868
$
15,689
(5)%
Net income from continuing
operations(2)
$
785
$
2,322
(66)%
$
10,441
$
12,598
(17)%
Diluted EPS from continuing
operations(2)
$
0.43
$
1.55
(72)%
$
6.27
$
8.36
(25)%
Diluted EPS excluding certain items
affecting comparability(1)
$
1.07
$
1.48
(28)%
$
5.77
$
7.08
(19)%
Cash provided by continuing operations
$
1,718
$
3,853
(55)%
$
5,984
$
14,295
(58)%
Free cash flow(1)
$
409
$
2,652
(85)%
$
1,108
$
9,830
(89)%
(1)
EPS excluding certain items affecting
comparability, total segment operating income and free cash flow
are non-GAAP financial measures. The comparable GAAP measures are
diluted EPS from continuing operations, income from continuing
operations before income taxes, and cash provided by continuing
operations, respectively. See the discussion on page 2 and 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 Company evaluates the performance of its operating segments
based on segment operating income, and management uses total
segment operating income as a measure of the performance of
operating businesses separate from non-operating factors. The
Company believes that information about total 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 is a reconciliation of income from continuing
operations before income taxes to total segment operating income
(in millions):
Quarter Ended
Year Ended
Sept. 28, 2019
Sept. 29, 2018
Change
Sept. 28, 2019
Sept. 29, 2018
Change
Income from continuing operations before
income taxes
$
1,258
$
3,202
(61)%
$
13,944
$
14,729
(5)%
Add/(subtract):
Corporate and unallocated shared
expenses
309
208
(49)%
987
744
(33)%
Restructuring and impairment charges
314
5
>(100)%
1,183
33
>(100)%
Other (income) / expense, net
483
(507
)
nm
(4,357
)
(601
)
>100 %
Interest expense, net
361
159
>(100)%
978
574
(70)%
Amortization of TFCF and Hulu intangible
assets and fair value step-up on film and television costs
711
—
nm
1,595
—
nm
Impairment of equity investments
—
210
nm
538
210
>(100)%
Total Segment Operating Income
$
3,436
$
3,277
5 %
$
14,868
$
15,689
(5)%
The following table summarizes the fourth quarter and full year
segment revenue and segment operating income for fiscal 2019 and
2018 (in millions):
Quarter Ended
Year Ended
Sept. 28, 2019
Sept. 29, 2018
Change
Sept. 28, 2019
Sept. 29, 2018
Change
Revenues:
Media Networks
$
6,510
$
5,325
22 %
$
24,827
$
21,922
13 %
Parks, Experiences and Products
6,655
6,135
8 %
26,225
24,701
6 %
Studio Entertainment
3,310
2,177
52 %
11,127
10,065
11 %
Direct-to-Consumer & International
3,428
825
>100 %
9,349
3,414
>100 %
Eliminations
(803
)
(156
)
>(100)%
(1,958
)
(668
)
>(100)%
Total Revenues
$
19,100
$
14,306
34 %
$
69,570
$
59,434
17 %
Segment operating income:
Media Networks
$
1,783
$
1,842
(3)%
$
7,479
$
7,338
2 %
Parks, Experiences and Products
1,381
1,177
17 %
6,758
6,095
11 %
Studio Entertainment
1,079
604
79 %
2,686
3,004
(11)%
Direct-to-Consumer & International
(740
)
(340
)
>(100)%
(1,814
)
(738
)
>(100)%
Eliminations
(67
)
(6
)
>(100)%
(241
)
(10
)
>(100)%
Total Segment Operating Income
$
3,436
$
3,277
5 %
$
14,868
$
15,689
(5)%
TFCF and Hulu operating results for the current period are
consolidated and reported in our segments. Prior to the acquisition
of TFCF, Hulu was accounted for as an equity method investment and
was reported in our Direct-to-Consumer & International
segment.
DISCUSSION OF FULL YEAR SEGMENT RESULTS
Segment operating income decreased at Direct-to-Consumer &
International and Studio Entertainment and increased at Parks,
Experiences and Products and Media Networks. The decrease at
Direct-to-Consumer & International was due to the consolidation
of Hulu, our ongoing investment in ESPN+ and costs to support the
launch of Disney+. Lower segment operating income at Studio
Entertainment was due to the consolidation of TFCF’s operations.
TFCF results included a loss from theatrical distribution and film
cost impairments, partially offset by income from TV/SVOD
distribution. Higher operating results at Parks, Experiences and
Products was due to growth at the domestic theme parks and resorts
and merchandise licensing. The increase at our domestic parks and
resorts was due to higher guest spending, partially offset by labor
and other cost inflation. Growth at Media Networks was due to the
consolidation of TFCF’s operations, partially offset by a decrease
at our legacy operations. The decrease at our legacy operations was
due to higher programming and production costs and a decrease in
ABC Studios program sales, partially offset by an increase in
affiliate revenue. Eliminations of segment operating income
increased due to higher sales of ABC Studios programs to Hulu and
the International Channels. The elimination of sales of TFCF
television programs to Hulu and our International Channels also
contributed to the increase.
DISCUSSION OF FOURTH QUARTER SEGMENT RESULTS
Media Networks
Media Networks revenues for the quarter increased 22% to $6.5
billion, and segment operating income decreased 3% to $1.8 billion.
The following table provides further detail of the Media Networks
results (in millions):
Quarter Ended
Year Ended
Sept. 28, 2019
Sept. 29, 2018
Change
Sept. 28, 2019
Sept. 29, 2018
Change
Revenues:
Cable Networks
$
4,243
$
3,527
20 %
$
16,486
$
14,610
13 %
Broadcasting
2,267
1,798
26 %
8,341
7,312
14 %
$
6,510
$
5,325
22 %
$
24,827
$
21,922
13 %
Segment operating income:
Cable Networks
$
1,256
$
1,275
(1)%
$
5,425
$
5,225
4 %
Broadcasting
377
394
(4)%
1,351
1,402
(4)%
Equity in the income of investees
150
173
(13)%
703
711
(1)%
$
1,783
$
1,842
(3)%
$
7,479
$
7,338
2 %
Cable Networks
Cable Networks revenues for the quarter increased 20% to $4.2
billion and operating income decreased $19 million to $1.3 billion.
Lower operating income was due to a decrease at ESPN, partially
offset by the consolidation of TFCF businesses (primarily the FX
and National Geographic networks).
The decrease at ESPN was due to increases in programming,
production and marketing costs, partially offset by higher
affiliate revenue. Higher programming costs were driven by rate
increases for NFL, college sports and MLB programming. Affiliate
revenue growth was due to an increase in contractual rates and the
launch of the ACC Network, partially offset by a decrease in
subscribers.
Broadcasting
Broadcasting revenues for the quarter increased 26% to $2.3
billion and operating income decreased $17 million to $377 million.
The decrease in operating income was due to lower results at our
legacy operations, partially offset by the consolidation of TFCF
program sales.
The decrease at our legacy operations was due to lower ABC
Studios program sales, an increase in programming and production
costs at the ABC Television Network, a decrease in advertising
revenue and higher marketing costs. These decreases were partially
offset by an increase in affiliate revenue due to higher rates. The
decrease in ABC Studios program sales was driven by the comparison
to prior-year sales of Daredevil and Iron Fist and lower sales of
Black-ish. The increase in programming and production costs was
driven by higher write-downs and an increase in the average cost of
network programming in the current quarter compared to the
prior-year quarter. Lower advertising revenue reflected a decrease
in rates at the owned television stations.
Equity in the Income of Investees
Equity in the income of investees decreased from $173 million in
the prior-year quarter to $150 million in the current quarter due
to lower income from A+E Television Networks driven by a decrease
in affiliate and advertising revenues and higher marketing
costs.
Parks, Experiences and
Products
Parks, Experiences and Products revenues for the quarter
increased 8% to $6.7 billion, and segment operating income
increased 17% to $1.4 billion. Operating income growth for the
quarter was due to increases from merchandise licensing, Disneyland
Resort and Disney Vacation Club.
Higher operating income at our merchandise licensing business
was due to an increase in revenue from sales of merchandise based
on Frozen and Toy Story, partially offset by lower sales of
merchandise based on Mickey and Minnie.
Growth at Disneyland Resort was primarily due to higher guest
spending, partially offset by expenses associated with Star Wars:
Galaxy’s Edge, which opened on May 31, and, to a lesser extent,
lower attendance. Guest spending growth was primarily due to
increases in average ticket prices and higher food, beverage and
merchandise spending.
The increase in operating income at Disney Vacation Club was due
to higher sales at Disney’s Riviera Resort in the current quarter,
which included a timing benefit from the adoption of new revenue
recognition accounting guidance (see page 6), compared to sales of
Copper Creek Villas & Cabins in the prior-year quarter.
Results at Walt Disney World Resort were comparable to the
prior-year quarter, despite the adverse impact of Hurricane Dorian
in the current quarter. Increases in guest spending and, to a
lesser extent, occupied room nights and attendance were offset by
higher costs. Higher costs were driven by costs associated with
Star Wars: Galaxy’s Edge, which opened on August 29, and cost
inflation. Guest spending growth was primarily due to increased
food, beverage and merchandise spending and higher average ticket
prices.
Operating income at our international parks and resorts was
comparable to the prior-year quarter, as growth at Disneyland Paris
and Shanghai Disney Resort was largely offset by a decrease at Hong
Kong Disneyland Resort. The increase at Disneyland Paris was driven
by higher average ticket prices and attendance growth. At Shanghai
Disney Resort, higher operating income was due to an increase in
average ticket prices, partially offset by lower attendance. Lower
results at Hong Kong Disneyland Resort were due to decreases in
attendance and occupied room nights reflecting the impact of recent
events.
Studio Entertainment
Studio Entertainment revenues for the quarter increased 52% to
$3.3 billion and segment operating income increased 79% to $1,079
million. Higher operating income was due to an increase in
theatrical distribution results, partially offset by a loss from
the consolidation of the TFCF businesses.
The increase in theatrical distribution results was due to the
performance of The Lion King, Toy Story 4 and Aladdin in the
current quarter compared to Incredibles 2 and Ant-Man And The Wasp
in the prior-year quarter.
Operating results at the TFCF businesses reflected a loss from
theatrical distribution driven by the performance of Ad Astra, Art
of Racing In The Rain and Dark Phoenix, partially offset by income
from TV/SVOD distribution.
Direct-to-Consumer &
International
Direct-to-Consumer & International revenues for the quarter
increased from $0.8 billion to $3.4 billion and segment operating
loss increased from $340 million to $740 million. The increase in
operating loss was due to the consolidation of Hulu, costs
associated with the upcoming launch of Disney+ and our ongoing
investment in ESPN+, which was launched in April 2018. These
decreases were partially offset by a benefit from the inclusion of
the TFCF businesses driven by income at Star India.
Commencing March 20, 2019, as a result of our acquisition of a
controlling interest in Hulu, 100% of Hulu’s operating results are
included in the Direct-to-Consumer & International segment.
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 $156 million to $803 million
and segment operating income eliminations increased from a loss of
$6 million to a loss of $67 million driven by eliminations of sales
of ABC Studios and Twentieth Century Fox Television programs to the
International Channels and 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 $55 million favorable impact on
segment operating income from the ASC 606 adoption. The most
significant impact was an $88 million increase at Parks,
Experiences and Products, which reflected licensing revenue from
products related to films not yet released and benefits from the
timing of recognition of licensing minimum guarantees and sales of
vacation club properties.
OTHER QUARTERLY FINANCIAL INFORMATION
Corporate and Unallocated Shared
Expenses
Corporate and unallocated shared expenses increased $101 million
from $208 million to $309 million for the quarter due primarily to
the consolidation of TFCF operations, costs related to the
integration of TFCF and higher compensation costs.
Restructuring Charges
During the quarter, the Company recorded charges totaling $314
million, primarily for severance, in connection with the
integration of TFCF. These charges are recorded in “Restructuring
and impairment charges” in the Consolidated Statement of
Income.
Other income (expense),
net
Other income (expense), net was as follows (in millions):
Quarter Ended
Sept. 28, 2019
Sept. 29, 2018
Change
Loss on debt extinguishment
$
(511
)
$
—
nm
Gain recognized in connection with the
acquisition of TFCF
28
—
nm
Gain on sale of real estate
—
507
nm
Other income (expense), net
$
(483
)
$
507
nm
In the current quarter, the Company recognized a loss on the
extinguishment of a portion of the debt originally assumed in the
TFCF acquisition and a gain on the deemed settlement of preexisting
relationships with TFCF pursuant to acquisition accounting
guidance.
Interest Expense, net
Interest expense, net was as follows (in millions):
Quarter Ended
Sept. 28, 2019
Sept. 29, 2018
Change
Interest expense
$
(413
)
$
(189
)
>(100)%
Interest, investment income and other
52
30
73 %
Interest expense, net
$
(361
)
$
(159
)
>(100)%
The increase in interest expense was due to higher debt balances
as a result of the TFCF acquisition.
The increase in interest, investment income and other for the
quarter was due to a $27 million benefit related to pension and
postretirement benefit costs, other than service cost. 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
$8 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 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
Sept. 28, 2019
Sept. 29, 2018
Change
Amounts included in segment results:
Media Networks
$
150
$
173
(13)%
Parks, Experiences and Products
(1
)
(4
)
75 %
Direct-to-Consumer & International
(18
)
(183
)
90 %
Impairment of equity investments
—
(210
)
nm
Equity in the income (loss) of investees,
net
$
131
$
(224
)
nm
The decrease in equity income at Media Networks was due to lower
income from A+E Television Networks driven by a decrease in
affiliate and advertising revenues and higher marketing costs.
The decrease in equity losses at Direct-to-Consumer &
International was due to the consolidation of Hulu.
Income Taxes
The effective income tax rate was as follows:
Quarter Ended
Sept. 28, 2019
Sept. 29, 2018
Change
Effective income tax rate - continuing
operations
27.3
%
24.5
%
(2.8
)
ppt
The increase in the effective income tax rate from continuing
operations for the quarter was driven by an unfavorable impact from
the update of our full year effective income tax rate for the
current year relative to the estimate at the end of the third
quarter. The full year effective rate is used to determine the
quarterly income tax provision and is adjusted each quarter based
on information available at the end of that quarter. This increase
was partially offset by a reduction of the Company’s U.S. statutory
federal income tax rate to 21.0% in fiscal 2019 from 24.5% in
fiscal 2018 as the result of U.S. federal income tax legislation
(Tax Act), which was enacted in the prior year, and the comparison
to a $0.1 billion unfavorable impact from the Tax Act recognized in
the prior-year quarter.
Noncontrolling Interests
Net (income) loss attributable to noncontrolling interests was
as follows (in millions):
Quarter Ended
Sept. 28, 2019
Sept. 29, 2018
Change
Net income attributable to noncontrolling
interests
$
(129
)
$
(97
)
(33)%
The increase in net income attributable to noncontrolling
interests was due to accretion of the fair value of the redeemable
noncontrolling interest in Hulu, partially offset by lower results
at Hong Kong Disneyland Resort.
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. 28, 2019
Sept. 29, 2018
Change
Cash provided by operations
$
5,984
$
14,295
$
(8,311
)
Investments in parks, resorts and other
property
(4,876
)
(4,465
)
(411
)
Free cash flow(1)
$
1,108
$
9,830
$
(8,722
)
(1) Free cash flow is not a financial measure defined by GAAP.
See the discussion on pages 9 through 12.
Cash provided by operations for fiscal 2019 decreased by $8.3
billion from $14.3 billion in the prior year to $6.0 billion in the
current year. The decrease was due to the payment of tax
obligations that arose from the spin-off of Fox Corporation in
connection with the TFCF acquisition and the sale of the regional
sports networks acquired with TFCF, higher pension contributions,
lower segment operating income, an increase in film and television
production spending and higher interest payments.
Capital Expenditures and Depreciation
Expense
Investments in parks, resorts and other property were as follows
(in millions):
Year Ended
Sept. 28, 2019
Sept. 29, 2018
Media Networks
Cable Networks
$
93
$
96
Broadcasting
81
107
Total Media Networks
174
203
Parks, Experiences and Products
Domestic
3,294
3,223
International
852
677
Total Parks, Experiences and Products
4,146
3,900
Studio Entertainment
88
96
Direct-to-Consumer & International
258
107
Corporate
210
159
Total investments in parks, resorts and
other property
$
4,876
$
4,465
Capital expenditures increased from $4.5 billion to $4.9 billion
driven by higher spending on new attractions at our theme parks and
resorts and spending on technology to support our
direct-to-consumer streaming services.
Depreciation expense was as follows (in millions):
Year Ended
Sept. 28, 2019
Sept. 29, 2018
Media Networks
Cable Networks
$
107
$
111
Broadcasting
84
88
Total Media Networks
191
199
Parks, Experiences and Products
Domestic
1,474
1,449
International
724
768
Total Parks, Experiences and Products
2,198
2,217
Studio Entertainment
74
55
Direct-to-Consumer & International
207
106
Corporate
167
181
Total depreciation expense
$
2,837
$
2,758
NON-GAAP FINANCIAL
MEASURES
This earnings release presents free cash flow, diluted EPS
excluding the impact of certain items affecting comparability, and
total 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 operating cash flow, diluted EPS or income
from continuing operations before income taxes as determined in
accordance with GAAP. Free cash flow, diluted EPS excluding certain
items affecting comparability and total segment operating income as
we have calculated them may not be comparable to similarly titled
measures reported by other companies. See further discussion of
total segment operating income on page 2.
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.
The following table presents a summary of the Company’s
consolidated cash flows (in millions):
Quarter Ended
Year Ended
Sept. 28, 2019
Sept. 29, 2018
Sept. 28, 2019
Sept. 29, 2018
Cash provided by operations - continuing
operations
$
1,718
$
3,853
$
5,984
$
14,295
Cash used in investing activities -
continuing operations
(1,311
)
(193
)
(15,096
)
(5,336
)
Cash used in financing activities -
continuing operations
(12,997
)
(3,862
)
(464
)
(8,843
)
Cash provided by operations - discontinued
operations
302
—
622
—
Cash provided by investing activities -
discontinued operations
10,978
—
10,978
—
Cash used in financing activities -
discontinued operations
(447
)
—
(626
)
—
Impact of exchange rates on cash, cash
equivalents and restricted cash
(145
)
26
(98
)
(25
)
Change in cash, cash equivalents and
restricted cash
(1,902
)
(176
)
1,300
91
Cash, cash equivalents and restricted
cash, beginning of period
7,357
4,331
4,155
4,064
Cash, cash equivalents and restricted
cash, end of period
$
5,455
$
4,155
$
5,455
$
4,155
The following table presents a reconciliation of the Company’s
consolidated cash provided by operations to free cash flow (in
millions):
Quarter Ended
Year Ended
Sept. 28, 2019
Sept. 29, 2018
Change
Sept. 28, 2019
Sept. 29, 2018
Change
Cash provided by operations - continuing
operations
$
1,718
$
3,853
$
(2,135
)
$
5,984
$
14,295
$
(8,311
)
Investments in parks, resorts and other
property
(1,309
)
(1,201
)
(108
)
(4,876
)
(4,465
)
(411
)
Free cash flow
$
409
$
2,652
$
(2,243
)
$
1,108
$
9,830
$
(8,722
)
Diluted EPS excluding certain items
affecting comparability – The Company uses diluted 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 diluted 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 diluted EPS from
continuing operations to diluted EPS excluding certain items
affecting comparability for the fourth quarter:
(in millions except EPS)
Pre-Tax Income/
Loss
Tax Benefit/
Expense(1)
After-Tax Income/
Loss(2)
Diluted EPS(3)
Change vs. prior year period
Quarter Ended September 28, 2019:
As reported
$
1,258
$
(344
)
$
914
$
0.43
(72)%
Exclude:
Amortization of TFCF and Hulu intangible
assets and fair value step-up on film and television costs(4)
711
(164
)
547
0.30
Other income, net(5)
483
(112
)
371
0.21
Restructuring and impairment
charges(6)
314
(73
)
241
0.13
Excluding certain items affecting
comparability
$
2,766
$
(693
)
$
2,073
$
1.07
(28)%
Quarter Ended September 29, 2018:
As reported
$
3,202
$
(783
)
$
2,419
$
1.55
Exclude:
Gain on sale of real estate
(507
)
134
(373
)
(0.25
)
Impairment of equity investments(7)
210
(49
)
161
0.11
One-time impact from 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
(1)
Tax benefit/expense is 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 $481
million and step-up amortization was $230 million for assets
recorded in connection with the TFCF acquisition and consolidation
of Hulu.
(5)
Reflects a charge for the extinguishment
of a portion of the debt originally assumed in the TFCF acquisition
($511 million), partially offset by a gain on the deemed settlement
of preexisting relationships with TFCF pursuant to our acquisition
accounting ($28 million).
(6)
Primarily severance related to the
acquisition and integration of TFCF.
(7)
Reflects impairments of Vice Group
Holding, Inc. and Villages Nature ($157 million and $53 million,
respectively).
The following table reconciles reported diluted EPS from
continuing operations to diluted 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)
Diluted EPS(3)
Change vs. prior year period
Year Ended September 28, 2019:
As reported
$
13,944
$
(3,031
)
$
10,913
$
6.27
(25)%
Exclude:
Other income, net(4)
(4,357
)
1,002
(3,355
)
(2.01
)
One-time impact from the Tax Act
—
(34
)
(34
)
(0.02
)
Amortization of TFCF and Hulu intangible
assets and fair value step-up on film and television costs(5)
1,595
(355
)
1,240
0.74
Restructuring and impairment
charges(6)
1,183
(273
)
910
0.55
Impairment of equity investments(7)
538
(123
)
415
0.25
Excluding certain items affecting
comparability
$
12,903
$
(2,814
)
$
10,089
$
5.77
(19)%
Year Ended September 29, 2018:
As reported
$
14,729
$
(1,663
)
$
13,066
$
8.36
Exclude:
One-time impact from the Tax Act
—
(1,701
)
(1,701
)
(1.11
)
Other income, net(4)
(601
)
158
(443
)
(0.30
)
Impairment of equity investments(7)
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
(1)
Tax benefit/expense is 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 fiscal 2019 includes
a non-cash gain recognized in connection with the acquisition of a
controlling interest in Hulu ($4.8 billion), insurance recoveries
on a legal matter ($46 million) and a gain on the deemed settlement
of preexisting relationships with TFCF pursuant to acquisition
accounting guidance ($28 million), partially offset by a charge for
the extinguishment of a portion of the debt originally assumed in
the TFCF acquisition ($511 million). Other income for fiscal 2018
included 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).
(5)
Intangible asset amortization was $1,043
million, step-up amortization was $537 million and amortization of
intangible assets related to TFCF equity investees was $15 million
for assets recorded in connection with the TFCF acquisition and
consolidation of Hulu.
(6)
Reflects severance and accelerated
equity-based compensation charges related to the acquisition and
integration of TFCF.
(7)
Impairment of equity investments for
fiscal 2019 primarily reflects impairments of Vice Group Holding,
Inc. and of an investment in a cable channel at A+E Television
Networks ($353 million and $170 million, respectively). Impairment
of equity investments for fiscal 2018 reflects impairments of Vice
Group Holding, Inc. and Villages Nature ($157 million and $53
million, respectively).
CONFERENCE CALL INFORMATION
In conjunction with this release, The Walt Disney Company will
host a conference call today, November 7, 2019, 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, 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 TFCF
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,” Item 7, “Management’s Discussion and Analysis,”
Item 1, “Business,” and subsequent reports.
THE WALT DISNEY
COMPANY
CONDENSED CONSOLIDATED
STATEMENTS OF INCOME
(unaudited; in millions,
except per share data)
Quarter Ended
Year Ended
September 28, 2019
September 29, 2018
September 28, 2019
September 29, 2018
Revenues
$
19,100
$
14,306
$
69,570
$
59,434
Costs and expenses
(16,815
)
(11,223
)
(57,719
)
(44,597
)
Restructuring and impairment charges
(314
)
(5
)
(1,183
)
(33
)
Other income (expense), net
(483
)
507
4,357
601
Interest expense, net
(361
)
(159
)
(978
)
(574
)
Equity in the income (loss) of investees,
net
131
(224
)
(103
)
(102
)
Income from continuing operations before
income taxes
1,258
3,202
13,944
14,729
Income taxes from continuing
operations
(344
)
(783
)
(3,031
)
(1,663
)
Net income from continuing operations
914
2,419
10,913
13,066
Income from discontinued operations
(includes income tax benefit of $51, $0 and $0, respectively)
291
—
671
—
Net income
1,205
2,419
11,584
13,066
Less: Net income from continuing
operations attributable to noncontrolling and redeemable
noncontrolling interests
(129
)
(97
)
(472
)
(468
)
Less: Net income from discontinued
operations attributable to noncontrolling interests
(22
)
—
(58
)
—
Net income attributable to The Walt Disney
Company (Disney)
$
1,054
$
2,322
$
11,054
$
12,598
Earnings per share attributable to
Disney:
Continuing operations
$
0.43
$
1.55
$
6.27
$
8.36
Discontinued operations
0.15
—
0.37
—
Diluted(1)
$
0.58
$
1.55
$
6.64
$
8.36
Continuing operations
$
0.44
$
1.56
$
6.30
$
8.40
Discontinued operations
$
0.15
$
—
$
0.37
$
—
Basic(1)
$
0.58
$
1.56
$
6.68
$
8.40
Weighted average number of common and
common equivalent shares outstanding:
Diluted
1,816
1,497
1,666
1,507
Basic
1,804
1,489
1,656
1,499
(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)
September 28, 2019
September 29, 2018
ASSETS
Current assets
Cash and cash equivalents
$
5,418
$
4,150
Receivables
15,481
9,334
Inventories
1,649
1,392
Television costs and advances
4,597
1,314
Other current assets
979
635
Total current assets
28,124
16,825
Film and television costs
22,810
7,888
Investments
3,224
2,899
Parks, resorts and other property
Attractions, buildings and equipment
58,589
55,238
Accumulated depreciation
(32,415
)
(30,764
)
26,174
24,474
Projects in progress
4,264
3,942
Land
1,165
1,124
31,603
29,540
Intangible assets, net
23,215
6,812
Goodwill
80,293
31,269
Other assets
4,715
3,365
Total assets
$
193,984
$
98,598
LIABILITIES AND EQUITY
Current liabilities
Accounts payable and other accrued
liabilities
$
17,942
$
9,479
Current portion of borrowings
8,857
3,790
Deferred revenue and other
4,722
4,591
Total current liabilities
31,521
17,860
Borrowings
38,129
17,084
Deferred income taxes
7,902
3,109
Other long-term liabilities
13,580
6,590
Commitments and contingencies
Redeemable noncontrolling interests
8,963
1,123
Equity
Preferred stock
—
—
Common stock, $.01 par value, Authorized –
4.6 billion shares, Issued – 1.8 billion shares at September 28,
2019 and 2.9 billion shares at September 29, 2018
53,907
36,779
Retained earnings
42,494
82,679
Accumulated other comprehensive loss
(6,617
)
(3,097
)
Treasury stock, at cost, 19 million shares
at September 28, 2019 and 1.4 billion shares at September 29,
2018
(907
)
(67,588
)
Total Disney Shareholders’ equity
88,877
48,773
Noncontrolling interests
5,012
4,059
Total equity
93,889
52,832
Total liabilities and equity
$
193,984
$
98,598
THE WALT DISNEY
COMPANY
CONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOWS
(unaudited; in
millions)
Year Ended
September 28, 2019
September 29, 2018
OPERATING ACTIVITIES
Net income from continuing operations
$
10,913
$
13,066
Depreciation and amortization
4,160
3,011
Gain on acquisitions and dispositions
(4,794
)
(560
)
Deferred income taxes
117
(1,573
)
Equity in the (income) / loss of
investees
103
102
Cash distributions received from equity
investees
754
775
Net change in film and television costs
and advances
(542
)
(523
)
Equity-based compensation
711
393
Other
206
441
Changes in operating assets and
liabilities, net of business acquisitions:
Receivables
55
(720
)
Inventories
(223
)
(17
)
Other assets
932
(927
)
Accounts payable and other accrued
liabilities
191
235
Income taxes
(6,599
)
592
Cash provided by operations - continuing
operations
5,984
14,295
INVESTING ACTIVITIES
Investments in parks, resorts and other
property
(4,876
)
(4,465
)
Acquisitions
(9,901
)
(1,581
)
Other
(319
)
710
Cash used in investing activities -
continuing operations
(15,096
)
(5,336
)
FINANCING ACTIVITIES
Commercial paper borrowings/(payments),
net
4,318
(1,768
)
Borrowings
38,240
1,056
Reduction of borrowings
(38,881
)
(1,871
)
Dividends
(2,895
)
(2,515
)
Repurchases of common stock
—
(3,577
)
Proceeds from exercise of stock
options
318
210
Contributions from / sales of
noncontrolling interests
737
399
Acquisition of noncontrolling and
redeemable noncontrolling interests
(1,430
)
—
Other
(871
)
(777
)
Cash used in financing activities -
continuing operations
(464
)
(8,843
)
CASH FLOWS FROM DISCONTINUED
OPERATIONS
Cash provided by operations - discontinued
operations
622
—
Cash provided by investing activities -
discontinued operations
10,978
—
Cash used in financing activities -
discontinued operations
(626
)
—
Cash used in discontinued operations
10,974
—
Impact of exchange rates on cash, cash
equivalents and restricted cash
(98
)
(25
)
Change in cash, cash equivalents and
restricted cash
1,300
91
Cash, cash equivalents and restricted
cash, beginning of year
4,155
4,064
Cash, cash equivalents and restricted
cash, end of year
$
5,455
$
4,155
View source
version on businesswire.com: https://www.businesswire.com/news/home/20191107006062/en/
Zenia Mucha Corporate Communications 818-560-5300
Lowell Singer Investor Relations 818-560-6601
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