The Walt Disney Company (NYSE: DIS) today reported earnings for
its second fiscal quarter ended April 3, 2021. Diluted earnings per
share (EPS) from continuing operations for the quarter increased to
$0.50 from $0.26 in the prior-year quarter. Excluding certain
items(1), diluted EPS for the quarter increased 32% to $0.79 from
$0.60 in the prior-year quarter. EPS from continuing operations for
the six months ended April 3, 2021 decreased 64% to $0.52 from
$1.43 in the prior-year period. Excluding certain items(1), EPS for
the six months decreased 48% to $1.11 from $2.13 in the prior-year
period. Results for the quarter and six months ended April 3, 2021
were adversely impacted by the novel coronavirus (COVID-19). The
most significant impact was at the Disney Parks, Experiences and
Products segment where since late in the second quarter of fiscal
2020, our parks and resorts have been closed or operating at
significantly reduced capacity and our cruise ship sailings have
been suspended.
“We’re pleased to see more encouraging signs of recovery across
our businesses, and we remain focused on ramping up our operations
while also fueling long-term growth for the Company,” said Bob
Chapek, Chief Executive Officer, The Walt Disney Company. “This is
clearly reflected in the reopening of our theme parks and resorts,
increased production at our studios, the continued success of our
streaming services, and the expansion of our unrivaled portfolio of
multiyear sports rights deals for ESPN and ESPN+.”
The following table summarizes the second quarter results for
fiscal 2021 and 2020 (in millions, except per share amounts):
Quarter Ended
Six Months Ended
April 3, 2021
March 28, 2020
Change
April 3, 2021
March 28, 2020
Change
Revenues
$
15,613
$
18,025
(13
) %
$
31,862
$
38,902
(18
) %
Income from continuing operations before
income taxes
$
1,230
$
1,051
17
%
$
1,276
$
3,677
(65
) %
Total segment operating income(1)
$
2,465
$
2,407
2
%
$
3,797
$
6,403
(41
) %
Net income from continuing
operations(2)
$
912
$
468
95
%
$
941
$
2,596
(64
) %
Diluted EPS from continuing
operations(2)
$
0.50
$
0.26
92
%
$
0.52
$
1.43
(64
) %
Diluted EPS excluding certain items(1)
$
0.79
$
0.60
32
%
$
1.11
$
2.13
(48
) %
Cash provided by continuing operations
$
1,393
$
3,157
(56
) %
$
1,468
$
4,787
(69
) %
Free cash flow(1)
$
623
$
1,910
(67
) %
$
(62
)
$
2,202
nm
(1)
Diluted EPS excluding certain items, 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 10 through
13.
(2)
Reflects amounts attributable to
shareholders of The Walt Disney Company, i.e. after deduction of
income attributable to 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 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
Six Months Ended
April 3, 2021
March 28, 2020
Change
April 3, 2021
March 28, 2020
Change
Income from continuing operations before
income taxes
$
1,230
$
1,051
17
%
$
1,276
$
3,677
(65
) %
Add (subtract):
Corporate and unallocated shared
expenses
201
188
(7
) %
433
425
(2
) %
Restructuring and impairment charges
414
145
>(100) %
527
295
(79
) %
Other income, net
(305
)
—
nm
(305
)
—
nm
Interest expense, net
320
300
(7
) %
644
583
(10
) %
Amortization of TFCF and Hulu intangible
assets and fair value step-up on film and television costs
605
723
16
%
1,222
1,423
14
%
Total Segment Operating Income
$
2,465
$
2,407
2
%
$
3,797
$
6,403
(41
) %
Since late in the second quarter of fiscal 2020 and continuing
into fiscal 2021, COVID-19 and measures to prevent its spread have
impacted our segments in a number of ways, most significantly at
Disney Parks, Experiences and Products segment where our theme
parks were closed or operating at significantly reduced capacity
and cruise ship sailings and guided tours were suspended. In
addition, we have delayed, or in some cases, shortened or canceled,
theatrical releases, and stage play performances have been
suspended since March 2020 with a limited number of performances
returning in the first quarter of fiscal 2021. We have experienced
disruptions in the production and availability of content,
including the cancellation or shift of key live sports programming
from fiscal 2020 into the first quarter of fiscal 2021, as well as
the suspension of production of most film and television content.
Although most film and television production resumed beginning in
the fourth quarter of fiscal 2020, we continue to see disruption of
film and television production, as well as live sporting events,
depending on local circumstances. We have incurred, and will
continue to incur, additional costs to address government
regulations and implement safety measures for our employees, talent
and guests. The timing, duration and extent of these costs will
depend on the timing and scope of our operations as they resume. We
currently estimate these costs may total approximately $1 billion
in fiscal 2021. Some of these costs may be capitalized and
amortized over future periods.
The most significant impact on operating income in the current
quarter from COVID-19 was at the Disney Parks, Experiences and
Products segment due to revenue lost as a result of the closures
and reduced operating capacities. We estimate an additional $1.2
billion impact on the Disney Parks, Experiences and Products
segment operating income compared to the prior-year quarter. The
impacts of COVID-19 on our Disney Media and Entertainment
Distribution segment, compared to the prior-year quarter, were less
significant as lower revenues across film and television
distribution windows due to the deferral or cancellation of
significant film releases were largely offset by a reduction in the
related costs.
The following table summarizes the second quarter segment
revenue and segment operating income for fiscal 2021 and 2020 (in
millions):
Quarter Ended
Six Months Ended
April 3, 2021
March 28, 2020
Change
April 3, 2021
March 28, 2020
Change
Revenues:
Disney Media and Entertainment
Distribution
$
12,440
$
12,365
1
%
$
25,101
$
25,662
(2
) %
Disney Parks, Experiences and Products
3,173
5,660
(44
) %
6,761
13,240
(49
) %
Total Revenues
$
15,613
$
18,025
(13
) %
$
31,862
$
38,902
(18
) %
Segment operating income (loss):
Disney Media and Entertainment
Distribution
$
2,871
$
1,651
74
%
$
4,322
$
3,125
38
%
Disney Parks, Experiences and Products
(406
)
756
nm
(525
)
3,278
nm
Total Segment Operating Income
$
2,465
$
2,407
2
%
$
3,797
$
6,403
(41
) %
Disney Media and Entertainment
Distribution
Revenue and operating results for the Disney Media and
Entertainment Distribution segment are as follows (in
millions):
Quarter Ended
Change
Six Months Ended
% Change
April 3, 2021
March 28, 2020
April 3, 2021
March 28, 2020
Better
(Worse)
Revenues:
Linear Networks
$
6,746
$
7,025
(4
) %
$
14,439
$
14,561
(1
) %
Direct-to-Consumer
3,999
2,515
59
%
7,503
4,540
65
%
Content Sales/Licensing and Other
1,916
3,011
(36
) %
3,618
6,921
(48
) %
Elimination of Intrasegment Revenue(1)
(221
)
(186
)
(19
) %
(459
)
(360
)
(28
) %
$
12,440
$
12,365
1
%
$
25,101
$
25,662
(2
) %
Operating income (loss):
Linear Networks
$
2,849
$
2,481
15
%
$
4,578
$
4,289
7
%
Direct-to-Consumer
(290
)
(805
)
64
%
(756
)
(1,915
)
61
%
Content Sales/Licensing and Other
312
(25
)
nm
500
751
(33
) %
$
2,871
$
1,651
74
%
$
4,322
$
3,125
38
%
(1)
Reflects fees received by the Linear
Networks from other DMED businesses for the right to air our linear
networks and related services.
Linear Networks
Linear Networks revenues for the quarter decreased 4% to $6.7
billion, and operating income increased 15% to $2.8 billion. The
following table provides further detail of the Linear Networks
results (in millions):
Quarter Ended
Change
April 3, 2021
March 28, 2020
Supplemental revenue detail
Domestic Channels
$
5,418
$
5,638
(4
) %
International Channels
1,328
1,387
(4
) %
$
6,746
$
7,025
(4
) %
Supplemental operating income detail
Domestic Channels
$
2,281
$
2,031
12
%
International Channels
348
273
27
%
Equity in the income of investees
220
177
24
%
$
2,849
$
2,481
15
%
Domestic Channels
Domestic Channels revenues for the quarter decreased 4% to $5.4
billion and operating income increased 12% to $2.3 billion. The
increase in operating income was due to increases at our Cable and
Broadcasting businesses.
The increase at Cable was due to lower programming and
production costs and higher affiliate revenue, partially offset by
lower advertising revenue. The decrease in programming and
production costs was due to the timing of the College Football
Playoffs (CFP) relative to our fiscal periods, lower production
costs for live sporting events reflecting cost savings initiatives
and fewer hours of original programming primarily at Freeform. The
current quarter included one CFP bowl game compared to four in the
prior-year quarter. Affiliate revenue growth was due to an increase
in contractual rates, partially offset by fewer subscribers. Lower
advertising revenue was due to lower average viewership.
The increase at Broadcasting was due to growth at ABC, partially
offset by a decrease at the owned television stations. The increase
at ABC was due to lower programming and productions costs and
higher affiliate revenue, partially offset by lower advertising
revenue. The decrease in programming and production costs was
primarily due to the shift in timing of The Academy Awards, which
aired in the third quarter of the current fiscal year compared to
the second quarter in the prior fiscal year. Affiliate revenue
growth was due to an increase in contractual rates. ABC advertising
revenue declined due to fewer impressions, reflecting lower average
viewership, and the timing of The Academy Awards, partially offset
by increased rates. The decrease at the owned television stations
was due to lower advertising revenue reflecting a decrease in
political advertising and the timing of The Academy Awards.
International Channels
International Channels revenues for the quarter decreased 4% to
$1.3 billion and operating income increased 27% to $348 million.
The increase in operating income was driven by lower programming
and production costs and an increase in advertising revenue,
partially offset by lower affiliate revenue. The decrease in
programming and production costs was driven by a higher percentage
of content costs being allocated to Disney+ as we continue to
launch the service in additional markets, and lower costs as a
result of channel closures. Advertising revenue growth was due to
an increase in average viewership. The decrease in affiliate
revenue was due to channel closures and an unfavorable foreign
currency impact.
Equity in the Income of
Investees
Income from equity investees increased 24% to $220 million,
driven by higher income from A+E Television Networks due to lower
programming costs and higher program sales, partially offset by
lower advertising revenue.
Direct-to-Consumer
Direct-to-Consumer revenues for the quarter increased 59% to
$4.0 billion and operating loss decreased from $0.8 billion to $0.3
billion. The decrease in operating loss was due to improved results
at Hulu, and to a lesser extent, at ESPN+.
The increase at Hulu was due to subscription revenue growth and
higher advertising revenue, partially offset by an increase in
programming and production costs driven by higher subscriber-based
fees for programming the live television service. Subscription
revenue growth was due to an increase in subscribers and, to a
lesser extent, higher rates driven by an increase in retail pricing
for the Hulu Live TV+ SVOD service in December 2020. Higher
advertising revenue was due to increased impressions.
The improvement at ESPN+ was driven by subscriber growth and
higher income from Ultimate Fighting Championship pay-per-view
events.
Results at Disney+ were comparable to the prior-year quarter as
an increase in subscribers was largely offset by higher programming
and production, marketing and technology costs. The increases in
subscribers and costs reflected the ongoing expansion of Disney+
including launches in additional markets.
The following table presents the number of paid subscribers(1)
(in millions) for Disney+, ESPN+ and Hulu as of:
April 3, 2021
March 28, 2020
Change
Disney+(2)
103.6
33.5
>100 %
ESPN+
13.8
7.9
75
%
Hulu
SVOD Only
37.8
28.8
31
%
Live TV + SVOD
3.8
3.3
15
%
Total Hulu
41.6
32.1
30
%
The following table presents the average monthly revenue per
paid subscriber(3) for the quarter ended:
April 3, 2021
March 28, 2020
Change
Disney+(2)
$
3.99
$
5.63
(29
) %
ESPN+
$
4.55
$
4.24
7
%
Hulu
SVOD Only
$
12.08
$
12.06
—
%
Live TV + SVOD
$
81.83
$
67.75
21
%
(1)
A subscriber for which we recognized
subscription revenue. A subscriber ceases to be a paid subscriber
as of their effective cancellation date or as a result of a failed
payment method. A subscription bundle is considered a paid
subscriber for each service included in the bundle. Subscribers
include those who receive the service through wholesale
arrangements in which we receive a fee for the distribution of
Disney+ to each subscriber to an existing content distribution
tier. When we aggregate the total number of paid subscribers across
our direct-to-consumer services, whether acquired individually,
through a wholesale arrangement or via the bundle, we refer to them
as paid subscriptions.
(2)
Includes Disney+ Hotstar. Disney+ Hotstar
launched on April 3, 2020 in India (as a conversion of the
preexisting Hotstar service) and on September 5, 2020 in Indonesia.
Disney+ Hotstar average monthly revenue per paid subscriber is
significantly lower than the average monthly revenue per paid
subscriber for Disney+ in other markets.
(3)
Revenue per paid subscriber is calculated
based on the average of the monthly average paid subscribers for
each month in the period. The monthly average paid subscribers is
calculated as the sum of the beginning of the month and end of the
month paid subscriber count, divided by two. Disney+ average
monthly revenue per paid subscriber is calculated using a daily
average of paid subscribers for the period. Revenue includes
subscription fees, advertising (excluding revenue earned from
selling advertising spots to other Company businesses) and premium
and feature add-on revenue but excludes Premier Access and
Pay-Per-View revenue. The average revenue per subscriber is net of
discounts offered on bundled services. The
bundled discount is allocated to each service based on the relative
retail price of each service on a standalone basis. In general,
wholesale arrangements have a lower average monthly revenue per
paid subscriber than subscribers that we acquire directly or
through third party platforms like Apple.
The average monthly revenue per paid subscriber for Disney+
decreased from $5.63 to $3.99 due to the launch of Disney+
Hotstar.
The average monthly revenue per paid subscriber for ESPN+
increased from $4.24 to $4.55 due to an increase in retail
pricing.
The average monthly revenue per paid subscriber for the Hulu
SVOD Only service increased from $12.06 to $12.08 due to a lower
mix of wholesale subscribers and an increase in per-subscriber
premium add-on revenue, partially offset by a decrease in
per-subscriber advertising revenue and a higher mix of subscribers
to the bundled offering. The average monthly revenue per paid
subscriber for the Hulu Live TV + SVOD service increased from
$67.75 to $81.83 due to increases in retail pricing, per-subscriber
advertising revenue and to a lesser extent, per-subscriber premium
and feature add-on revenues, partially offset by a higher mix of
subscribers to the bundled offering.
Content Sales/Licensing and Other
Content Sales/Licensing and Other revenues for the quarter
decreased 36% to $1.9 billion and segment operating results
increased from a loss of $25 million to income of $312 million. The
increase in operating income was due to higher TV/SVOD distribution
results and lower film and television cost impairments, partially
offset by lower home entertainment distribution results.
Higher TV/SVOD distribution results were due to an increase in
income from sales of episodic content, partially offset by a
decrease in sales of film content. Higher income from sales of
episodic content was driven by sales of more profitable programs in
the current period. Lower results from film content sales were
driven by fewer titles sold in the current year as a result of the
ongoing impact of COVID-19.
The decrease in home entertainment distribution results was due
to lower unit sales of new release titles reflecting the ongoing
impact of COVID-19, partially offset by lower marketing costs. The
current quarter included Mulan and Soul, whereas the prior-year
quarter included Frozen II, Maleficent: Mistress of Evil, Ford v.
Ferrari, Star Wars: The Rise of Skywalker and Onward.
Disney Parks, Experiences and
Products
Disney Parks, Experiences and Products revenues for the quarter
decreased 44% to $3.2 billion, and segment operating results
decreased $1.2 billion to a loss of $406 million. Lower operating
results for the quarter were due to decreases at our parks and
experiences business, partially offset by growth at our consumer
products business.
As a result of COVID-19, Disneyland Resort and Disneyland Paris
were closed and our cruise business was suspended for all of the
current quarter, whereas these businesses closed in mid-March of
the prior-year quarter. Hong Kong Disneyland Resort was open for
approximately 30 days during the current quarter, compared to
approximately 25 days in the prior-year quarter. Walt Disney World
Resort and Shanghai Disney Resort were both open in the current
quarter. In the prior-year quarter, Walt Disney World Resort closed
in mid-March and Shanghai Disney Resort closed in late January. Our
parks and resorts that were open during the quarter operated at
significantly reduced capacities.
At our consumer products business, operating income growth was
driven by increases in merchandise and games licensing revenues.
Growth in merchandise licensing revenues was driven by higher
revenue from merchandise based on Star Wars, including The
Mandalorian, Disney Princesses and Mickey and Minnie, partially
offset by a decrease in revenues from merchandise based on Frozen.
The increase in games licensing revenues was primarily due to the
fiscal 2021 release of Marvel’s Spider-Man: Miles Morales and
higher royalties from Twisted Wonderland, partially offset by lower
royalties from Star Wars Jedi: Fallen Order.
We estimate the total net adverse impact of COVID-19 compared to
the prior-year quarter was a decrease in segment operating income
of approximately $1.2 billion.
The following table presents supplemental revenue and operating
income (loss) detail for the Disney Parks, Experiences and Products
segment:
Quarter Ended
% Change
Better
(Worse)
(in millions)
April 3, 2021
March 28, 2020
Supplemental revenue detail
Parks & Experiences
Domestic
$
1,735
$
4,139
(58
) %
International
262
480
(45
) %
Consumer Products
1,176
1,041
13
%
$
3,173
$
5,660
(44
) %
Supplemental operating income (loss)
detail
Parks & Experiences
Domestic
$
(587
)
$
661
nm
International
(380
)
(343
)
(11
) %
Consumer Products
561
438
28
%
$
(406
)
$
756
nm
OTHER FINANCIAL INFORMATION
Restructuring and Impairment
Charges
During the current and prior-year quarters, the Company recorded
charges totaling $414 million and $145 million, respectively. The
current quarter charges were due to asset impairments and severance
related to the planned closure of an animation studio and a
substantial number of our Disney-branded retail stores as well as
severance at our parks and resorts businesses. The charges in the
prior-year quarter were due to severance in connection with the
acquisition and integration of TFCF.
Interest Expense, net
Interest expense, net was as follows (in millions):
Quarter Ended
April 3, 2021
March 28, 2020
Change
Interest expense
$
(415
)
$
(365
)
(14
) %
Interest, investment income and other
95
65
46
%
Interest expense, net
$
(320
)
$
(300
)
(7
) %
The increase in interest expense was due to higher average debt
balances, partially offset by lower average interest rates.
The increase in interest income, investment income and other was
due to higher investment gains, partially offset by higher pension
and postretirement benefit costs, other than service cost.
Equity in the Income of
Investees
Equity in the income of investees was as follows (in
millions):
Quarter Ended
April 3, 2021
March 28, 2020
Change
Amounts included in segment results:
Disney Media and Entertainment
Distribution
$
226
$
149
52
%
Disney Parks, Experiences and Products
(9
)
(6
)
(50
) %
Amortization of TFCF intangible assets
related to equity investees
(4
)
(8
)
50
%
Equity in the income of investees
$
213
$
135
58
%
Income Taxes
The effective income tax rate was as follows:
Quarter Ended
April 3, 2021
March 28, 2020
Change
Effective income tax rate - continuing
operations
8.8
%
49.8
%
41.0
ppt
The decrease in the effective income tax rate was due to lower
U.S. tax on foreign income, a benefit from the resolution of
various tax matters in the current quarter and higher excess tax
benefits on employee share-based awards in the current quarter.
Noncontrolling Interests
Net income attributable to noncontrolling interests was as
follows (in millions):
Quarter Ended
April 3, 2021
March 28, 2020
Change
Net income from continuing operations
attributable to noncontrolling interests
$
(210
)
$
(60
)
>(100) %
The increase in net income from continuing operations
attributable to noncontrolling interests was driven by lower losses
at Shanghai Disney Resort, Hong Kong Disneyland Resort and our
direct-to-consumer sports business and higher results at ESPN.
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
April 3, 2021
March 28, 2020
Change
Cash provided by operations
$
1,468
$
4,787
$
(3,319
)
Investments in parks, resorts and other
property
(1,530
)
(2,585
)
1,055
Free cash flow(1)
$
(62
)
$
2,202
$
(2,264
)
- Free cash flow is not a financial measure defined by GAAP. See
the discussion on pages 10 through 13.
Cash provided by operations for fiscal 2021 decreased by $3.3
billion from $4.8 billion in the prior year to $1.5 billion in the
current year. The decrease in cash provided by operations was due
to lower segment operating results.
Capital Expenditures and Depreciation
Expense
Investments in parks, resorts and other property were as follows
(in millions):
Six Months Ended
April 3, 2021
March 28, 2020
Disney Media and Entertainment
Distribution
$
369
$
426
Disney Parks, Experiences and Products
Domestic
656
1,549
International
355
441
Total Disney Parks, Experiences and
Products
1,011
1,990
Corporate
150
169
Total investments in parks, resorts and
other property
$
1,530
$
2,585
Capital expenditures decreased from $2.6 billion to $1.5 billion
driven by the temporary suspension of certain capital projects as a
result of COVID-19.
Depreciation expense was as follows (in millions):
Six Months Ended
April 3, 2021
March 28, 2020
Disney Media and Entertainment
Distribution
$
300
$
279
Disney Parks, Experiences and Products
Domestic
779
806
International
360
344
Total Disney Parks, Experiences and
Products
1,139
1,150
Corporate
92
77
Total depreciation expense
$
1,531
$
1,506
NON-GAAP FINANCIAL
MEASURES
This earnings release presents free cash flow, diluted EPS
excluding the impact of certain items, 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 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
Six Months Ended
April 3, 2021
March 28, 2020
April 3, 2021
March 28, 2020
Cash provided by operations - continuing
operations
$
1,393
$
3,157
$
1,468
$
4,787
Cash used in investing activities -
continuing operations
(595
)
(1,256
)
(1,327
)
(2,606
)
Cash provided by (used in) financing
activities - continuing operations
(1,908
)
5,499
(2,241
)
6,616
Cash provided by (used in) operations -
discontinued operations
(5
)
23
4
4
Cash provided by investing activities -
discontinued operations
4
198
4
198
Impact of exchange rates on cash, cash
equivalents and restricted cash
(69
)
(117
)
70
(76
)
Change in cash, cash equivalents and
restricted cash
(1,180
)
7,504
(2,022
)
8,923
Cash, cash equivalents and restricted
cash, beginning of period
17,112
6,874
17,954
5,455
Cash, cash equivalents and restricted
cash, end of period
$
15,932
$
14,378
$
15,932
$
14,378
The following table presents a reconciliation of the Company’s
consolidated cash provided by operations to free cash flow (in
millions):
Quarter Ended
Six Months Ended
April 3, 2021
March 28, 2020
Change
April 3, 2021
March 28, 2020
Change
Cash provided by operations - continuing
operations
$
1,393
$
3,157
$
(1,764
)
$
1,468
$
4,787
$
(3,319
)
Investments in parks, resorts and other
property
(770
)
(1,247
)
477
(1,530
)
(2,585
)
1,055
Free cash flow
$
623
$
1,910
$
(1,287
)
$
(62
)
$
2,202
$
(2,264
)
Diluted EPS excluding certain
items
The Company uses diluted EPS excluding (1) certain items
affecting comparability of results from period to period and (2)
amortization of TFCF and Hulu intangible assets, including purchase
accounting step-up adjustments for released content, to facilitate
the evaluation of the performance of the Company’s operations
exclusive of these items, and these adjustments reflect how senior
management is evaluating segment performance.
The Company believes that providing diluted EPS exclusive of
certain items impacting comparability is useful to investors,
particularly where the impact of the excluded items is significant
in relation to reported earnings and 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.
The Company further believes that providing diluted EPS
exclusive of amortization of TFCF and Hulu intangible assets
associated with the acquisition in 2019 is useful to investors
because the TFCF and Hulu acquisition was considerably larger than
the Company’s historic acquisitions with a significantly greater
acquisition accounting impact.
The following table reconciles reported diluted EPS from
continuing operations to diluted EPS excluding certain items for
the second 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 April 3, 2021
As reported
$
1,230
$
(108
)
$
1,122
$
0.50
92
%
Exclude:
Other income(4)
(305
)
71
(234
)
(0.13
)
Amortization of TFCF and Hulu intangible
assets and fair value step-up on film and television costs(5)
605
(141
)
464
0.24
Restructuring and impairment
charges(6)
414
(97
)
317
0.17
Excluding certain items
$
1,944
$
(275
)
$
1,669
$
0.79
32
%
Quarter Ended March 28, 2020
As reported
$
1,051
$
(523
)
$
528
$
0.26
Exclude:
Amortization of TFCF and Hulu intangible
assets and fair value step-up on film and television costs(5)
723
(167
)
556
0.28
Restructuring and impairment
charges(6)
145
(34
)
111
0.06
Excluding certain items
$
1,919
$
(724
)
$
1,195
$
0.60
(1)
Tax benefit/expense is determined using
the tax rate applicable to the individual item.
(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)
For the current quarter, other income was
due to a gain from an adjustment of an investment to fair value
($305 million).
(5)
For the current quarter, intangible asset
amortization was $447 million, step-up amortization was $154
million and amortization of intangible assets related to TFCF
equity investees was $4 million. For the prior-year quarter,
intangible asset amortization was $498 million, step-up
amortization was $217 million and amortization of intangible assets
related to TFCF equity investees was $8 million.
(6)
Charges for the current quarter were due
to asset impairments and severance costs related to the planned
closure of an animation studio and a substantial number of our
Disney-branded retail stores as well as severance at our parks and
resorts businesses. Charges for the prior-year quarter were
primarily for severance costs related to the acquisition and
integration of TFCF.
The following table reconciles reported diluted EPS from
continuing operations to diluted EPS excluding certain items 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
Six Months Ended April 3, 2021:
As reported
$
1,276
$
(124
)
$
1,152
$
0.52
(64
) %
Exclude:
Other income(4)
(305
)
71
(234
)
(0.13
)
Amortization of TFCF and Hulu intangible
assets and fair value step-up on film and television costs(5)
1,222
(285
)
937
0.50
Restructuring and impairment
charges(6)
527
(124
)
403
0.22
Excluding certain items
$
2,720
$
(462
)
$
2,258
$
1.11
(48
) %
Six Months Ended March 28, 2020:
As reported
$
3,677
$
(981
)
$
2,696
$
1.43
Exclude:
Amortization of TFCF and Hulu intangible
assets and fair value step-up on film and television costs(5)
1,423
(330
)
1,093
0.57
Restructuring and impairment
charges(6)
295
(68
)
227
0.13
Excluding certain items
$
5,395
$
(1,379
)
$
4,016
$
2.13
(1)
Tax benefit/expense is determined using
the tax rate applicable to the individual item.
(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)
For the current six-month period, other
income was due to a gain from an adjustment of investments to fair
value.
(5)
For the current six-month period,
intangible asset amortization was $894 million, step-up
amortization was $321 million and amortization of intangible assets
related to TFCF equity investees was $7 million. For the prior-year
six-month period, intangible asset amortization was $984 million,
step-up amortization was $423 million and amortization of
intangible assets related to TFCF equity investees was $16
million.
(6)
Charges for the current six-month period
were due to asset impairments and severance costs primarily related
to the planned closure of an animation studio and a substantial
number of our Disney-branded retail stores as well as severance at
our other businesses. Charges for the prior-year six-month period
were primarily due to severance costs related to the acquisition
and integration of TFCF.
CONFERENCE CALL INFORMATION
In conjunction with this release, The Walt Disney Company will
host a conference call today, May 13, 2021, at 4:30 PM EDT/1:30 PM
PDT via a live Webcast. To access the Webcast go to www.disney.com/investors. The discussion will be
archived.
FORWARD-LOOKING STATEMENTS
Certain statements and information in this communication may be
deemed to be “forward-looking statements” within the meaning of the
Federal Private Securities Litigation Reform Act of 1995, including
statements such as expected or estimated costs or impacts of
certain items, the future impact of COVID-19 on our businesses,
business positioning, expected growth, the future of our business
or Company 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,
new or expanded business lines or cessation of certain operations)
or other business decisions, as well as from developments beyond
the Company’s control, including:
- further changes in domestic and global economic
conditions;
- changes in competitive conditions and consumer
preferences;
- health concerns;
- international, regulatory, political, or military
developments;
- technological developments;
- labor markets and activities; and
- adverse weather conditions or natural disasters;
each such risk includes the current and future impacts of, and
is amplified by, COVID-19 and related mitigation efforts.
Such developments may further affect entertainment, travel and
leisure businesses generally and may, among other things, affect
(or further affect, as applicable):
- demand for our products and services;
- the performance of the Company’s theatrical and home
entertainment releases and other content;
- the advertising market for programming;
- construction;
- expenses of providing medical and pension benefits;
- income tax expense; and
- performance of some or all Company businesses either directly
or through their impact on those who distribute our products.
Additional factors are set forth in the Company’s Annual Report
on Form 10-K for the year ended October 3, 2020 under Item 1A,
“Risk Factors,” Item 7, “Management’s Discussion and Analysis,”
Item 1, “Business,” and subsequent reports, including, among
others, quarterly reports on Form 10-Q.
The terms “Company,” “we,” and “our” are used in this report to
refer collectively to the parent company and the subsidiaries
through which our various businesses are actually conducted.
THE WALT DISNEY
COMPANY
CONDENSED CONSOLIDATED
STATEMENTS OF INCOME
(unaudited; in millions,
except per share data)
Quarter Ended
Six Months Ended
April 3, 2021
March 28, 2020
April 3, 2021
March 28, 2020
Revenues
$
15,613
$
18,025
$
31,862
$
38,902
Costs and expenses
(14,167
)
(16,664
)
(30,157
)
(34,706
)
Restructuring and impairment charges
(414
)
(145
)
(527
)
(295
)
Other income, net
305
—
305
—
Interest expense, net
(320
)
(300
)
(644
)
(583
)
Equity in the income of investees
213
135
437
359
Income from continuing operations before
income taxes
1,230
1,051
1,276
3,677
Income taxes on continuing operations
(108
)
(523
)
(124
)
(981
)
Net income from continuing operations
1,122
528
1,152
2,696
Loss from discontinued operations, net of
income tax benefit of $3, $3, $7 and $10, respectively)
(11
)
(8
)
(23
)
(29
)
Net income
1,111
520
1,129
2,667
Net income from continuing operations
attributable to noncontrolling interests
(210
)
(60
)
(211
)
(100
)
Net income attributable to The Walt Disney
Company (Disney)
$
901
$
460
$
918
$
2,567
Earnings (loss) per share attributable to
Disney(1):
Diluted
Continuing operations
$
0.50
$
0.26
$
0.52
$
1.43
Discontinued operations
(0.01
)
—
(0.01
)
(0.02
)
$
0.49
$
0.25
$
0.50
$
1.41
Basic
Continuing operations
$
0.50
$
0.26
$
0.52
$
1.44
Discontinued operations
(0.01
)
—
(0.01
)
(0.02
)
$
0.50
$
0.25
$
0.51
$
1.42
Weighted average number of common and
common equivalent shares outstanding:
Diluted
1,829
1,816
1,826
1,816
Basic
1,817
1,808
1,814
1,806
(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)
April 3, 2021
October 3, 2020
ASSETS
Current assets
Cash and cash equivalents
$
15,890
$
17,914
Receivables, net
12,533
12,708
Inventories
1,406
1,583
Content advances
2,204
2,171
Other current assets
844
875
Total current assets
32,877
35,251
Produced and licensed content costs
26,858
25,022
Investments
4,309
3,903
Parks, resorts and other property
Attractions, buildings and equipment
63,037
62,111
Accumulated depreciation
(36,866
)
(35,517
)
26,171
26,594
Projects in progress
4,891
4,449
Land
1,075
1,035
32,137
32,078
Intangible assets, net
18,123
19,173
Goodwill
77,861
77,689
Other assets
8,085
8,433
Total assets
$
200,250
$
201,549
LIABILITIES AND EQUITY
Current liabilities
Accounts payable and other accrued
liabilities
$
17,062
$
16,801
Current portion of borrowings
5,243
5,711
Deferred revenue and other
4,337
4,116
Total current liabilities
26,642
26,628
Borrowings
50,903
52,917
Deferred income taxes
6,894
7,288
Other long-term liabilities
16,615
17,204
Commitments and contingencies
Redeemable noncontrolling interests
9,410
9,249
Equity
Preferred stock
—
—
Common stock, $0.01 par value, Authorized
– 4.6 billion shares, Issued – 1.8 billion shares
55,000
54,497
Retained earnings
39,365
38,315
Accumulated other comprehensive loss
(7,918
)
(8,322
)
Treasury stock, at cost, 19 million
shares
(907
)
(907
)
Total Disney Shareholders’ equity
85,540
83,583
Noncontrolling interests
4,246
4,680
Total equity
89,786
88,263
Total liabilities and equity
$
200,250
$
201,549
THE WALT DISNEY
COMPANY
CONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOWS
(unaudited; in
millions)
Six Months Ended
April 3, 2021
March 28, 2020
OPERATING ACTIVITIES
Net income from continuing operations
$
1,152
$
2,696
Depreciation and amortization
2,570
2,633
Net (gain)/loss on investments
(481
)
5
Deferred income taxes
(556
)
297
Equity in the income of investees
(437
)
(359
)
Cash distributions received from equity
investees
372
405
Net change in produced and licensed
content costs and advances
(1,685
)
(925
)
Net change in operating lease right of use
assets / liabilities
146
(96
)
Equity-based compensation
270
246
Other, net
490
161
Changes in operating assets and
liabilities, net of business acquisitions:
Receivables
(37
)
828
Inventories
175
70
Other assets
(131
)
(174
)
Accounts payable and other liabilities
(780
)
(888
)
Income taxes
400
(112
)
Cash provided by operations - continuing
operations
1,468
4,787
INVESTING ACTIVITIES
Investments in parks, resorts and other
property
(1,530
)
(2,585
)
Other
203
(21
)
Cash used in investing activities -
continuing operations
(1,327
)
(2,606
)
FINANCING ACTIVITIES
Commercial paper borrowings (payments),
net
(87
)
3,138
Borrowings
37
6,071
Reduction of borrowings
(1,816
)
(1,048
)
Dividends
—
(1,587
)
Proceeds from exercise of stock
options
394
207
Other
(769
)
(165
)
Cash provided by (used in) financing
activities - continuing operations
(2,241
)
6,616
CASH FLOWS FROM DISCONTINUED
OPERATIONS
Cash provided by operations - discontinued
operations
4
4
Cash provided by investing activities -
discontinued operations
4
198
Cash provided by discontinued
operations
8
202
Impact of exchange rates on cash, cash
equivalents and restricted cash
70
(76
)
Change in cash, cash equivalents and
restricted cash
(2,022
)
8,923
Cash, cash equivalents and restricted
cash, beginning of period
17,954
5,455
Cash, cash equivalents and restricted
cash, end of period
$
15,932
$
14,378
View source
version on businesswire.com: https://www.businesswire.com/news/home/20210513006007/en/
Zenia Mucha Corporate Communications 818-560-5300
Lowell Singer Investor Relations 818-560-6601
Walt Disney (NYSE:DIS)
Historical Stock Chart
From Mar 2024 to Apr 2024
Walt Disney (NYSE:DIS)
Historical Stock Chart
From Apr 2023 to Apr 2024