The Walt Disney Company Reports Fourth Quarter and Full Year Earnings for Fiscal 2020
“Even with the disruption caused by COVID-19, we’ve been able to effectively manage our businesses while also taking bold, deliberate steps to position our company for greater long-term growth,” said
The following table summarizes the fourth quarter and full year results for fiscal 2020 and 2019 (in millions, except per share amounts):
|
Quarter Ended |
|
|
|
Year Ended |
|
|
|||||||||
|
|
|
|
|
Change |
|
|
|
|
|
Change |
|||||
Revenues |
$ |
14,707 |
|
$ |
19,118 |
|
(23) % |
|
$ |
65,388 |
|
$ |
69,607 |
|
(6) % |
|
Income (loss) from continuing operations before income taxes |
$ |
(580) |
|
$ |
1,247 |
|
nm |
|
$ |
(1,743) |
|
$ |
13,923 |
|
nm |
|
Total segment operating income(1) |
$ |
606 |
|
$ |
3,425 |
|
(82) % |
|
$ |
8,108 |
|
$ |
14,847 |
|
(45) % |
|
Net income (loss) from continuing operations(2) |
$ |
(710) |
|
$ |
777 |
|
nm |
|
$ |
(2,832) |
|
$ |
10,425 |
|
nm |
|
Diluted EPS from continuing operations(2) |
$ |
(0.39) |
|
$ |
0.43 |
|
nm |
|
$ |
(1.57) |
|
$ |
6.26 |
|
nm |
|
Diluted EPS excluding certain items affecting comparability(1) |
$ |
(0.20) |
|
$ |
1.07 |
|
nm |
|
$ |
2.02 |
|
$ |
5.76 |
|
(65) % |
|
Cash provided by continuing operations |
$ |
1,667 |
|
$ |
1,718 |
|
(3) % |
|
$ |
7,616 |
|
$ |
5,984 |
|
27 % |
|
Free cash flow(1) |
$ |
938 |
|
$ |
409 |
|
>100 % |
|
$ |
3,594 |
|
$ |
1,108 |
|
>100 % |
(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 11 through 14. |
||
(2) |
Reflects amounts attributable to shareholders of |
Results for fiscal year 2020 included
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 (loss) from continuing operations before income taxes to total segment operating income (in millions):
|
Quarter Ended |
|
|
|
Year Ended |
|
|
||||||||||||
|
|
|
|
|
Change |
|
|
|
|
|
Change |
||||||||
Income (loss) from continuing operations before income taxes |
$ |
(580) |
|
|
$ |
1,247 |
|
|
nm |
|
$ |
(1,743) |
|
|
$ |
13,923 |
|
|
nm |
Add/(subtract): |
|
|
|
|
|
|
|
|
|
|
|
||||||||
Corporate and unallocated shared expenses |
213 |
|
|
309 |
|
|
31 % |
|
817 |
|
|
987 |
|
|
17 % |
||||
Restructuring and impairment charges |
393 |
|
|
314 |
|
|
(25) % |
|
5,735 |
|
|
1,183 |
|
|
>(100) % |
||||
Other (income) expense, net |
(656) |
|
|
483 |
|
|
nm |
|
(1,038) |
|
|
(4,357) |
|
|
(76) % |
||||
Interest expense, net |
496 |
|
|
361 |
|
|
(37) % |
|
1,491 |
|
|
978 |
|
|
(52) % |
||||
Amortization of TFCF and Hulu intangible assets and fair value step-up on film and television costs |
740 |
|
|
711 |
|
|
(4) % |
|
2,846 |
|
|
1,595 |
|
|
(78) % |
||||
Impairment of equity investments(1) |
— |
|
|
— |
|
|
— % |
|
— |
|
|
538 |
|
|
100 % |
||||
Total Segment Operating Income |
$ |
606 |
|
|
$ |
3,425 |
|
|
(82) % |
|
$ |
8,108 |
|
|
$ |
14,847 |
|
|
(45) % |
(1) |
The prior year reflects an impairment of |
COVID-19 and measures to prevent its spread impacted our segments in a number of ways, most significantly at Parks, Experiences and Products where our theme parks were closed or operating at significantly reduced capacity for a significant portion of the year, cruise ship sailings and guided tours were suspended since late in the second quarter and retail stores were closed for a significant portion of the year. We also had an adverse impact on our merchandise licensing business. In addition, at
The most significant adverse impact in the current quarter and year from COVID-19 was approximately
The following table summarizes the fourth quarter and full year segment revenue and segment operating income for fiscal 2020 and 2019 (in millions):
|
Quarter Ended |
|
|
|
Year Ended |
|
|
||||||||||||
|
|
|
|
|
Change |
|
|
|
|
|
Change |
||||||||
Revenues: |
|
|
|
|
|
|
|
|
|
|
|
||||||||
Media Networks |
$ |
7,213 |
|
|
$ |
6,510 |
|
|
11 % |
|
$ |
28,393 |
|
|
$ |
24,827 |
|
|
14 % |
Parks, Experiences and Products |
2,580 |
|
|
6,655 |
|
|
(61) % |
|
16,502 |
|
|
26,225 |
|
|
(37) % |
||||
|
1,595 |
|
|
3,310 |
|
|
(52) % |
|
9,636 |
|
|
11,127 |
|
|
(13) % |
||||
Direct-to-Consumer & International |
4,853 |
|
|
3,446 |
|
|
41 % |
|
16,967 |
|
|
9,386 |
|
|
81 % |
||||
Eliminations |
(1,534) |
|
|
(803) |
|
|
(91) % |
|
(6,110) |
|
|
(1,958) |
|
|
>(100) % |
||||
Total Revenues |
$ |
14,707 |
|
|
$ |
19,118 |
|
|
(23) % |
|
$ |
65,388 |
|
|
$ |
69,607 |
|
|
(6) % |
Segment operating income: |
|
|
|
|
|
|
|
|
|
|
|||||||||
Media Networks |
$ |
1,864 |
|
|
$ |
1,783 |
|
|
5 % |
|
$ |
9,022 |
|
|
$ |
7,479 |
|
|
21 % |
Parks, Experiences and Products |
(1,098) |
|
|
1,381 |
|
|
nm |
|
(81) |
|
|
6,758 |
|
|
nm |
||||
|
419 |
|
|
1,079 |
|
|
(61) % |
|
2,501 |
|
|
2,686 |
|
|
(7) % |
||||
Direct-to-Consumer & International |
(580) |
|
|
(751) |
|
|
23 % |
|
(2,806) |
|
|
(1,835) |
|
|
(53) % |
||||
Eliminations |
1 |
|
|
(67) |
|
|
nm |
|
(528) |
|
|
(241) |
|
|
>(100) % |
||||
Total Segment Operating Income |
$ |
606 |
|
|
$ |
3,425 |
|
|
(82) % |
|
$ |
8,108 |
|
|
$ |
14,847 |
|
|
(45) % |
DISCUSSION OF FULL YEAR SEGMENT RESULTS
Segment operating income decreased at Parks, Experiences and Products, Direct-to-Consumer & International and
DISCUSSION OF FOURTH QUARTER SEGMENT RESULTS
Media Networks
Media Networks revenues for the quarter increased 11% to
|
Quarter Ended |
|
|
|
Year Ended |
|
|
||||||||
|
|
|
|
|
Change |
|
|
|
|
|
Change |
||||
Revenues: |
|
|
|
|
|
|
|
|
|
|
|
||||
Cable Networks |
$ |
4,721 |
|
$ |
4,243 |
|
11 % |
|
$ |
17,966 |
|
$ |
16,486 |
|
9 % |
Broadcasting |
2,492 |
|
2,267 |
|
10 % |
|
10,427 |
|
8,341 |
|
25 % |
||||
|
$ |
7,213 |
|
$ |
6,510 |
|
11 % |
|
$ |
28,393 |
|
$ |
24,827 |
|
14 % |
Segment operating income: |
|
|
|
|
|
|
|
|
|
|
|
||||
Cable Networks |
$ |
1,163 |
|
$ |
1,256 |
|
(7) % |
|
$ |
6,283 |
|
$ |
5,425 |
|
16 % |
Broadcasting |
553 |
|
377 |
|
47 % |
|
2,002 |
|
1,351 |
|
48 % |
||||
Equity in the income of investees |
148 |
|
150 |
|
(1) % |
|
737 |
|
703 |
|
5 % |
||||
|
$ |
1,864 |
|
$ |
1,783 |
|
5 % |
|
$ |
9,022 |
|
$ |
7,479 |
|
21 % |
Cable Networks
Cable Networks revenues for the quarter increased 11% to
The decrease at
Higher FX Networks results were due to a decrease in programming and production costs, driven by fewer hours of original programming, and lower marketing costs. The increase at the Domestic Disney Channels was due to the sale of library titles to Disney+.
Broadcasting
Broadcasting revenues for the quarter increased 10% to
The increase in affiliate revenue was due to higher rates and the benefit of an additional week in the current quarter. The decrease in network programming and production costs was due to production shutdowns, cancellations and deferrals of programming, the shift of college football games to later quarters and a delay in airing new season premieres which all reflected the impact of COVID-19. These programming and production cost decreases were partially offset by higher program cost write-downs and the impact of an additional week in the current quarter.
Advertising revenues were comparable to the prior-year quarter as lower average network viewership was offset by the benefit of an additional week in the current quarter, higher network rates and an increase in political advertising at the owned television stations.
At the beginning of fiscal 2020, the Company adopted new accounting guidance, which generally results in lower amortization of capitalized episodic television costs during network airings for shows that we also expect to utilize on our direct-to-consumer services. Compared to the previous accounting, programming and production expense will generally be lower in the first half of the fiscal year and higher in the second half of the fiscal year as the capitalized costs are amortized.
Parks, Experiences and Products
Parks, Experiences and Products revenues for the quarter decreased 61% to
As a result of COVID-19,
We estimate the total net adverse impact of COVID-19 on segment operating income in the quarter was approximately
Theatrical distribution was lower as there were generally no significant worldwide theatrical releases in the quarter compared to The Lion King and Toy Story 4, which were in release in the prior-year quarter. The decrease was partially offset by lower marketing expense for future releases. The current quarter was negatively impacted by COVID-19 as many theaters throughout the world were either closed or operating at reduced capacity.
The decrease in home entertainment results was due to lower unit sales, partially offset by lower marketing costs. The prior-year quarter reflected the performance of Avengers: Endgame, Aladdin and
Direct-to-Consumer & International
Direct-to-Consumer & International revenues for the quarter increased 41% to
The improvement at Hulu was due to subscriber growth and increased advertising revenues driven by higher impressions, partially offset by an increase in programming and production costs due to higher subscriber-based fees for programming the live television service.
Higher results at ESPN+ were driven by subscriber growth and higher income from
The decrease at our international channels was due to lower affiliate and advertising revenues, partially offset by a decrease in costs driven by lower general and administrative expenses and bad debt recoveries.
The following table presents the number of paid subscribers(1) (in millions) for Disney+, ESPN+ and Hulu as of:
|
|
|
|
|
Change |
||
Disney+(3) |
73.7 |
|
|
— |
|
|
nm |
ESPN+ |
10.3 |
|
|
3.5 |
|
|
>100 % |
Hulu |
|
|
|
|
|
||
SVOD Only |
32.5 |
|
|
25.6 |
|
|
27 % |
Live TV + SVOD |
4.1 |
|
|
2.9 |
|
|
41 % |
Total Hulu |
36.6 |
|
|
28.5 |
|
|
28 % |
The following table presents the average monthly revenue per paid subscriber(2) for the quarter ended:
|
|
|
|
|
Change |
||
Disney+(3) (4) |
$ |
4.52 |
|
$ |
— |
|
nm |
ESPN+(5) |
$ |
4.54 |
|
$ |
5.15 |
|
(12) % |
Hulu |
|
|
|
|
|
||
SVOD Only |
$ |
12.59 |
|
$ |
12.67 |
|
(1) % |
Live TV + SVOD |
$ |
71.90 |
|
$ |
58.82 |
|
22 % |
(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) |
Revenue per paid subscriber is calculated based upon 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 beginning at the later of the first day of the quarter or launch date, and ending on the last day of the quarter. The average revenue per subscriber is net of discounts provided to both wholesale and bundled subscribers, annual subscriptions and other limited term promotional offers. 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. |
||
(3) |
Disney+ Hotstar launched on |
||
(4) |
Excludes Disney+ Premier Access revenue. |
||
(5) |
Excludes Pay-Per-View revenue. |
The average monthly revenue per paid subscriber for ESPN+ decreased from
The average monthly revenue per paid subscriber for the Hulu SVOD Only service decreased from
Eliminations
Intersegment content transactions are as follows:
|
Quarter Ended |
|
|
||||
(in millions) |
|
|
|
|
Change |
||
Revenues |
|
|
|
|
|
||
|
|
|
|
|
|
||
Content transactions with Media Networks |
$ |
(41) |
|
$ |
(31) |
|
(32) % |
Content transactions with Direct-to-Consumer & International |
(456) |
|
(90) |
|
>(100) % |
||
Media Networks: |
|
|
|
|
|
||
Content transactions with Direct-to-Consumer & International |
(1,037) |
|
(682) |
|
(52) % |
||
Total |
$ |
(1,534) |
|
$ |
(803) |
|
(91) % |
|
|
|
|
|
|
||
Operating income |
|
|
|
|
|
||
|
|
|
|
|
|
||
Content transactions with Media Networks |
$ |
11 |
|
$ |
(8) |
|
nm |
Content transactions with Direct-to-Consumer & International |
88 |
|
(1) |
|
nm |
||
Media Networks: |
|
|
|
|
|
||
Content transactions with Direct-to-Consumer & International |
(98) |
|
(58) |
|
(69) % |
||
Total |
$ |
1 |
|
$ |
(67) |
|
nm |
Revenue eliminations increased from
OTHER FINANCIAL INFORMATION
Corporate and Unallocated Shared Expenses
Corporate and unallocated shared expenses decreased
Restructuring and Impairment Charges
During the current and prior-year quarters, the Company recorded charges totaling
Other income (expense), net
Other income (expense), net was as follows (in millions):
|
Quarter Ended |
|
|
||||||
|
|
|
|
|
Change |
||||
DraftKings gain |
$ |
591 |
|
|
$ |
— |
|
|
nm |
Gain on sale of an investment |
65 |
|
|
— |
|
|
nm |
||
Charge for the extinguishment of a portion of the debt originally assumed in the TFCF acquisition |
— |
|
|
(511) |
|
|
100 % |
||
Gain recognized in connection with the acquisition of TFCF |
— |
|
|
28 |
|
|
(100) % |
||
Other income (expense), net |
$ |
656 |
|
|
$ |
(483) |
|
|
nm |
In the current quarter, the Company recognized a non-cash gain to adjust its investment in DraftKings, Inc. to fair value (DraftKings gain). In the prior-year quarter, the Company recognized a loss on the extinguishment of a portion of the debt originally assumed in the TFCF acquisition.
Interest Expense, net
Interest expense, net was as follows (in millions):
|
Quarter Ended |
|
|
||||||
|
|
|
|
|
Change |
||||
Interest expense |
$ |
(464) |
|
|
$ |
(413) |
|
|
(12) % |
Interest, investment income and other |
(32) |
|
|
52 |
|
|
nm |
||
Interest expense, net |
$ |
(496) |
|
|
$ |
(361) |
|
|
(37) % |
The increase in interest expense was due to higher average debt balances, the impact of an additional week in the current quarter and lower capitalized interest, partially offset by lower average interest rates.
The decrease in interest income, investment income and other was due to higher investment impairments and a lower benefit related to pension and postretirement benefit costs, other than service costs.
Equity in the Income of Investees
Equity in the income of investees was as follows (in millions):
|
Quarter Ended |
|
|
||||||
|
|
|
|
|
Change |
||||
Amounts included in segment results: |
|
|
|
|
|
||||
Media Networks |
$ |
148 |
|
|
$ |
150 |
|
|
(1) % |
Parks, Experiences and Products |
(4) |
|
|
(1) |
|
|
>(100) % |
||
|
(1) |
|
|
— |
|
|
nm |
||
Direct-to-Consumer & International |
(34) |
|
|
(18) |
|
|
(89) % |
||
Amortization of TFCF intangible assets related to equity investees |
(3) |
|
|
— |
|
|
nm |
||
Equity in the income of investees |
$ |
106 |
|
|
$ |
131 |
|
|
(19) % |
Equity in the income of investees decreased
Income Taxes
The effective income tax rate was as follows:
|
Quarter Ended |
|
|
|
|||
|
|
|
|
|
Change |
||
Effective income tax rate - continuing operations |
(8.4)% |
|
27.3% |
|
35.7 |
|
ppt |
The effective income tax rate was negative in the current quarter due to foreign losses for which we are unable to recognize a tax benefit.
Noncontrolling Interests
Net income attributable to noncontrolling interests was as follows (in millions):
|
Quarter Ended |
|
|
||||
|
|
|
|
|
Change |
||
Net income from continuing operations attributable to noncontrolling interests |
$ |
(81) |
|
$ |
(129) |
|
37 % |
The decrease in net income from continuing operations attributable to noncontrolling interests was due to lower results at
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 |
|
|
||||||||||
|
|
|
|
|
Change |
||||||||
Cash provided by operations |
$ |
7,616 |
|
|
|
$ |
5,984 |
|
|
|
$ |
1,632 |
|
Investments in parks, resorts and other property |
(4,022 |
) |
|
|
(4,876 |
) |
|
|
854 |
|
|||
Free cash flow(1) |
$ |
3,594 |
|
|
|
$ |
1,108 |
|
|
|
$ |
2,486 |
|
(1) |
Free cash flow is not a financial measure defined by GAAP. See the discussion on pages 11 through 14. |
Cash provided by operations for fiscal 2020 increased by
Capital Expenditures and Depreciation Expense
Investments in parks, resorts and other property were as follows (in millions):
|
Year Ended |
||||
|
|
|
|
||
Media Networks |
|
|
|
||
Cable Networks |
$ |
61 |
|
$ |
93 |
Broadcasting |
51 |
|
81 |
||
Total Media Networks |
112 |
|
174 |
||
Parks, Experiences and Products |
|
|
|
||
Domestic |
2,145 |
|
3,294 |
||
International |
759 |
|
852 |
||
Total Parks, Experiences and Products |
2,904 |
|
4,146 |
||
|
77 |
|
88 |
||
Direct-to-Consumer & International |
594 |
|
258 |
||
Corporate |
335 |
|
210 |
||
Total investments in parks, resorts and other property |
$ |
4,022 |
|
$ |
4,876 |
Capital expenditures decreased from
Depreciation expense was as follows (in millions):
|
Year Ended |
||||
|
|
|
|
||
Media Networks |
|
|
|
||
Cable Networks |
$ |
120 |
|
$ |
107 |
Broadcasting |
83 |
|
84 |
||
Total Media Networks |
203 |
|
191 |
||
Parks, Experiences and Products |
|
|
|
||
Domestic |
1,634 |
|
1,474 |
||
International |
694 |
|
724 |
||
Total Parks, Experiences and Products |
2,328 |
|
2,198 |
||
|
87 |
|
74 |
||
Direct-to-Consumer & International |
348 |
|
214 |
||
Corporate |
174 |
|
167 |
||
Total depreciation expense |
$ |
3,140 |
|
$ |
2,844 |
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 |
||||||||||||||||
|
|
|
|
|
|
|
|
||||||||||||
Cash provided by operations - continuing operations |
$ |
1,667 |
|
|
|
$ |
1,718 |
|
|
|
$ |
7,616 |
|
|
|
$ |
5,984 |
|
|
Cash used in investing activities - continuing operations |
(530 |
) |
|
|
(1,311 |
) |
|
|
(3,850 |
) |
|
|
(15,096 |
) |
|
||||
Cash provided by (used in) financing activities - continuing operations |
(6,439 |
) |
|
|
(12,997 |
) |
|
|
8,480 |
|
|
|
(464 |
) |
|
||||
Cash provided by operations - discontinued operations |
— |
|
|
|
302 |
|
|
|
2 |
|
|
|
622 |
|
|
||||
Cash provided by investing activities - discontinued operations |
15 |
|
|
|
10,978 |
|
|
|
213 |
|
|
|
10,978 |
|
|
||||
Cash used in financing activities - discontinued operations |
— |
|
|
|
(447 |
) |
|
|
— |
|
|
|
(626 |
) |
|
||||
Impact of exchange rates on cash, cash equivalents and restricted cash |
87 |
|
|
|
(145 |
) |
|
|
38 |
|
|
|
(98 |
) |
|
||||
Change in cash, cash equivalents and restricted cash |
(5,200 |
) |
|
|
(1,902 |
) |
|
|
12,499 |
|
|
|
1,300 |
|
|
||||
Cash, cash equivalents and restricted cash, beginning of period |
23,154 |
|
|
|
7,357 |
|
|
|
5,455 |
|
|
|
4,155 |
|
|
||||
Cash, cash equivalents and restricted cash, end of period |
$ |
17,954 |
|
|
|
$ |
5,455 |
|
|
|
$ |
17,954 |
|
|
|
$ |
5,455 |
|
|
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 |
|
|
|||||||||||||||||||||
|
|
|
|
|
Change |
|
|
|
|
|
Change |
|||||||||||||||||
Cash provided by operations - continuing operations |
$ |
1,667 |
|
|
|
$ |
1,718 |
|
|
|
$ |
(51 |
) |
|
|
$ |
7,616 |
|
|
|
$ |
5,984 |
|
|
|
$ |
1,632 |
|
Investments in parks, resorts and other property |
(729 |
) |
|
|
(1,309 |
) |
|
|
580 |
|
|
|
(4,022 |
) |
|
|
(4,876 |
) |
|
|
854 |
|
||||||
Free cash flow |
$ |
938 |
|
|
|
$ |
409 |
|
|
|
$ |
529 |
|
|
|
$ |
3,594 |
|
|
|
$ |
1,108 |
|
|
|
$ |
2,486 |
|
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.
|
||||||||||||
Quarter Ended |
|
|
|
|
|
|
|
|
|
||||||||||||
As reported |
$ |
(580 |
) |
|
|
$ |
(49 |
) |
|
|
$ |
(629 |
) |
|
|
$ |
(0.39 |
) |
|
|
n/m |
Exclude: |
|
|
|
|
|
|
|
|
|
||||||||||||
Amortization of TFCF and Hulu intangible assets and fair value step-up on film and television costs(4) |
740 |
|
|
|
(173 |
) |
|
|
567 |
|
|
|
0.30 |
|
|
|
|
||||
Restructuring and impairment charges(5) |
393 |
|
|
|
(94 |
) |
|
|
299 |
|
|
|
0.17 |
|
|
|
|
||||
Other income, net(6) |
(656 |
) |
|
|
153 |
|
|
|
(503 |
) |
|
|
(0.28 |
) |
|
|
|
||||
Excluding certain items affecting comparability |
$ |
(103 |
) |
|
|
$ |
(163 |
) |
|
|
$ |
(266 |
) |
|
|
$ |
(0.20 |
) |
|
|
n/m |
|
|
|
|
|
|
|
|
|
|
||||||||||||
Quarter Ended |
|
|
|
|
|
|
|
|
|
||||||||||||
As reported |
$ |
1,247 |
|
|
|
$ |
(341 |
) |
|
|
$ |
906 |
|
|
|
$ |
0.43 |
|
|
|
|
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(6) |
483 |
|
|
|
(112 |
) |
|
|
371 |
|
|
|
0.21 |
|
|
|
|
||||
Restructuring and impairment charges(5) |
314 |
|
|
|
(73 |
) |
|
|
241 |
|
|
|
0.13 |
|
|
|
|
||||
Excluding certain items affecting comparability |
$ |
2,755 |
|
|
|
$ |
(690 |
) |
|
|
$ |
2,065 |
|
|
|
$ |
1.07 |
|
|
|
|
(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, intangible asset amortization was |
||
(5) |
Charges in the current quarter were due to severance costs in connection with the reduction-in-force at our Parks, Experiences and Products segment and the integration of TFCF. Charges in the prior-year quarter included severance costs related to the acquisition and integration of TFCF. |
||
(6) |
Other income, net for the current quarter included a non-cash gain to adjust the Company’s investment in DraftKings, Inc. to fair value (DraftKings gain) ( |
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.
|
|||||||||||
Year Ended |
|
|
|
|
|
|
|
|
|
|||||||||||
As reported |
$ |
(1,743 |
) |
|
|
$ |
(699 |
) |
|
|
$ |
(2,442 |
) |
|
|
$ |
(1.57 |
) |
|
n/m |
Exclude: |
|
|
|
|
|
|
|
|
|
|||||||||||
Amortization of TFCF and Hulu intangible assets and fair value step-up on film and television costs(4) |
2,846 |
|
|
|
(662 |
) |
|
|
2,184 |
|
|
|
1.17 |
|
|
|
||||
Restructuring and impairment charges(5) |
5,735 |
|
|
|
(571 |
) |
|
|
5,164 |
|
|
|
2.86 |
|
|
|
||||
Other income, net(6) |
(1,038 |
) |
|
|
242 |
|
|
|
(796 |
) |
|
|
(0.44 |
) |
|
|
||||
Excluding certain items affecting comparability |
$ |
5,800 |
|
|
|
$ |
(1,690 |
) |
|
|
$ |
4,110 |
|
|
|
$ |
2.02 |
|
|
(65) % |
|
|
|
|
|
|
|
|
|
|
|||||||||||
Year Ended |
|
|
|
|
|
|
|
|
|
|||||||||||
As reported |
$ |
13,923 |
|
|
|
$ |
(3,026 |
) |
|
|
$ |
10,897 |
|
|
|
$ |
6.26 |
|
|
|
Exclude: |
|
|
|
|
|
|
|
|
|
|||||||||||
Amortization of TFCF and Hulu intangible assets and fair value step-up on film and television costs(4) |
1,595 |
|
|
|
(355 |
) |
|
|
1,240 |
|
|
|
0.74 |
|
|
|
||||
Restructuring and impairment charges(5) |
1,183 |
|
|
|
(273 |
) |
|
|
910 |
|
|
|
0.55 |
|
|
|
||||
Impairment of equity investments(7) |
538 |
|
|
|
(123 |
) |
|
|
415 |
|
|
|
0.25 |
|
|
|
||||
Other income, net(6) |
(4,357 |
) |
|
|
1,002 |
|
|
|
(3,355 |
) |
|
|
(2.01 |
) |
|
|
||||
One-time impact from the Tax Act(8) |
— |
|
|
|
(34 |
) |
|
|
(34 |
) |
|
|
(0.02 |
) |
|
|
||||
Excluding certain items affecting comparability |
$ |
12,882 |
|
|
|
$ |
(2,809 |
) |
|
|
$ |
10,073 |
|
|
|
$ |
5.76 |
|
|
|
(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 fiscal 2020, intangible asset amortization was |
||
(5) |
Charges in fiscal 2020 were due to goodwill and intangible asset impairments ( |
||
(6) |
Other income, net for fiscal 2020 included the DraftKings gain ( |
||
(7) |
Includes the impairments of |
||
(8) |
Reflects a benefit from the |
CONFERENCE CALL INFORMATION
In conjunction with this release,
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 business positioning, expected growth, the future of our businesses 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, integration initiatives and timing of synergy realization, 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:
- 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;
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):
- 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
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (unaudited; in millions, except per share data) |
|||||||||||||||||||
|
Quarter Ended |
|
Year Ended |
||||||||||||||||
|
|
|
|
|
|
|
|
||||||||||||
Revenues |
$ |
14,707 |
|
|
|
$ |
19,118 |
|
|
|
$ |
65,388 |
|
|
|
$ |
69,607 |
|
|
Costs and expenses |
(15,160 |
) |
|
|
(16,844 |
) |
|
|
(61,594 |
) |
|
|
(57,777 |
) |
|
||||
Restructuring and impairment charges |
(393 |
) |
|
|
(314 |
) |
|
|
(5,735 |
) |
|
|
(1,183 |
) |
|
||||
Other income (expense), net |
656 |
|
|
|
(483 |
) |
|
|
1,038 |
|
|
|
4,357 |
|
|
||||
Interest expense, net |
(496 |
) |
|
|
(361 |
) |
|
|
(1,491 |
) |
|
|
(978 |
) |
|
||||
Equity in the income (loss) of investees |
106 |
|
|
|
131 |
|
|
|
651 |
|
|
|
(103 |
) |
|
||||
Income (loss) from continuing operations before income taxes |
(580 |
) |
|
|
1,247 |
|
|
|
(1,743 |
) |
|
|
13,923 |
|
|
||||
Income taxes on continuing operations |
(49 |
) |
|
|
(341 |
) |
|
|
(699 |
) |
|
|
(3,026 |
) |
|
||||
Net income (loss) from continuing operations |
(629 |
) |
|
|
906 |
|
|
|
(2,442 |
) |
|
|
10,897 |
|
|
||||
Income (loss) from discontinued operations, net of income tax benefit (expense) of |
— |
|
|
|
299 |
|
|
|
(32 |
) |
|
|
687 |
|
|
||||
Net income (loss) |
(629 |
) |
|
|
1,205 |
|
|
|
(2,474 |
) |
|
|
11,584 |
|
|
||||
Net income from continuing operations attributable to noncontrolling and redeemable noncontrolling interests |
(81 |
) |
|
|
(129 |
) |
|
|
(390 |
) |
|
|
(472 |
) |
|
||||
Net income from discontinued operations attributable to noncontrolling interests |
— |
|
|
|
(22 |
) |
|
|
— |
|
|
|
(58 |
) |
|
||||
Net income attributable to |
$ |
(710 |
) |
|
|
$ |
1,054 |
|
|
|
$ |
(2,864 |
) |
|
|
$ |
11,054 |
|
|
|
|
|
|
|
|
|
|
||||||||||||
Earnings per share attributable to |
|
|
|
|
|
|
|
||||||||||||
Diluted |
|
|
|
|
|
|
|
||||||||||||
Continuing operations |
$ |
(0.39 |
) |
|
|
$ |
0.43 |
|
|
|
$ |
(1.57 |
) |
|
|
$ |
6.26 |
|
|
Discontinued operations |
— |
|
|
|
0.15 |
|
|
|
(0.02 |
) |
|
|
0.38 |
|
|
||||
|
$ |
(0.39 |
) |
|
|
$ |
0.58 |
|
|
|
$ |
(1.58 |
) |
|
|
$ |
6.64 |
|
|
Basic |
|
|
|
|
|
|
|
||||||||||||
Continuing operations |
$ |
(0.39 |
) |
|
|
$ |
0.43 |
|
|
|
$ |
(1.57 |
) |
|
|
$ |
6.30 |
|
|
Discontinued operations |
— |
|
|
|
0.15 |
|
|
|
(0.02 |
) |
|
|
0.38 |
|
|
||||
|
$ |
(0.39 |
) |
|
|
$ |
0.58 |
|
|
|
$ |
(1.58 |
) |
|
|
$ |
6.68 |
|
|
|
|
|
|
|
|
|
|
||||||||||||
Weighted average number of common and common equivalent shares outstanding: |
|
|
|
|
|
|
|
||||||||||||
Diluted |
1,809 |
|
|
|
1,816 |
|
|
|
1,808 |
|
|
|
1,666 |
|
|
||||
Basic |
1,809 |
|
|
|
1,804 |
|
|
|
1,808 |
|
|
|
1,656 |
|
|
(1) |
Total may not equal the sum of the column due to rounding. |
CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited; in millions, except per share data) |
|||||||||
|
|
|
|
||||||
ASSETS |
|
|
|
||||||
Current assets |
|
|
|
||||||
Cash and cash equivalents |
$ |
17,914 |
|
|
|
$ |
5,418 |
|
|
Receivables |
12,708 |
|
|
|
15,481 |
|
|
||
Inventories |
1,583 |
|
|
|
1,649 |
|
|
||
Licensed content costs and advances |
2,171 |
|
|
|
4,597 |
|
|
||
Other current assets |
875 |
|
|
|
979 |
|
|
||
Total current assets |
35,251 |
|
|
|
28,124 |
|
|
||
Produced and licensed content costs |
25,022 |
|
|
|
22,810 |
|
|
||
Investments |
3,903 |
|
|
|
3,224 |
|
|
||
Parks, resorts and other property |
|
|
|
||||||
Attractions, buildings and equipment |
62,111 |
|
|
|
58,589 |
|
|
||
Accumulated depreciation |
(35,517 |
) |
|
|
(32,415 |
) |
|
||
|
26,594 |
|
|
|
26,174 |
|
|
||
Projects in progress |
4,449 |
|
|
|
4,264 |
|
|
||
Land |
1,035 |
|
|
|
1,165 |
|
|
||
|
32,078 |
|
|
|
31,603 |
|
|
||
Intangible assets, net |
19,173 |
|
|
|
23,215 |
|
|
||
|
77,689 |
|
|
|
80,293 |
|
|
||
Other assets |
8,433 |
|
|
|
4,715 |
|
|
||
Total assets |
$ |
201,549 |
|
|
|
$ |
193,984 |
|
|
LIABILITIES AND EQUITY |
|
|
|
||||||
Current liabilities |
|
|
|
||||||
Accounts payable and other accrued liabilities |
$ |
16,801 |
|
|
|
$ |
17,762 |
|
|
Current portion of borrowings |
5,711 |
|
|
|
8,857 |
|
|
||
Deferred revenue and other |
4,116 |
|
|
|
4,722 |
|
|
||
Total current liabilities |
26,628 |
|
|
|
31,341 |
|
|
||
Borrowings |
52,917 |
|
|
|
38,129 |
|
|
||
Deferred income taxes |
7,288 |
|
|
|
7,902 |
|
|
||
Other long-term liabilities |
17,204 |
|
|
|
13,760 |
|
|
||
Commitments and contingencies |
|
|
|
||||||
Redeemable noncontrolling interests |
9,249 |
|
|
|
8,963 |
|
|
||
Equity |
|
|
|
||||||
Preferred stock |
— |
|
|
|
— |
|
|
||
Common stock, |
54,497 |
|
|
|
53,907 |
|
|
||
Retained earnings |
38,315 |
|
|
|
42,494 |
|
|
||
Accumulated other comprehensive loss |
(8,322 |
) |
|
|
(6,617 |
) |
|
||
|
(907 |
) |
|
|
(907 |
) |
|
||
Total Disney Shareholders’ equity |
83,583 |
|
|
|
88,877 |
|
|
||
Noncontrolling interests |
4,680 |
|
|
|
5,012 |
|
|
||
Total equity |
88,263 |
|
|
|
93,889 |
|
|
||
Total liabilities and equity |
$ |
201,549 |
|
|
|
$ |
193,984 |
|
|
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited; in millions) |
|||||||||
|
Year Ended |
||||||||
|
|
|
|
||||||
OPERATING ACTIVITIES |
|
|
|
||||||
Net income (loss) from continuing operations |
$ |
(2,442 |
) |
|
|
$ |
10,897 |
|
|
Depreciation and amortization |
5,345 |
|
|
|
4,167 |
|
|
||
|
4,953 |
|
|
|
— |
|
|
||
Net gain on acquisition and investments |
(920 |
) |
|
|
(4,733 |
) |
|
||
Deferred income taxes |
(392 |
) |
|
|
117 |
|
|
||
Equity in the (income) loss of investees |
(651 |
) |
|
|
103 |
|
|
||
Cash distributions received from equity investees |
774 |
|
|
|
754 |
|
|
||
Net change in produced and licensed content costs and advances |
397 |
|
|
|
(542 |
) |
|
||
Net change in operating lease right of use assets / liabilities |
31 |
|
|
|
— |
|
|
||
Equity-based compensation |
525 |
|
|
|
711 |
|
|
||
Other |
641 |
|
|
|
154 |
|
|
||
Changes in operating assets and liabilities, net of business acquisitions: |
|
|
|
||||||
Receivables |
1,943 |
|
|
|
55 |
|
|
||
Inventories |
14 |
|
|
|
(223 |
) |
|
||
Other assets |
(157 |
) |
|
|
932 |
|
|
||
Accounts payable and other liabilities |
(2,293 |
) |
|
|
191 |
|
|
||
Income taxes |
(152 |
) |
|
|
(6,599 |
) |
|
||
Cash provided by operations - continuing operations |
7,616 |
|
|
|
5,984 |
|
|
||
|
|
|
|
||||||
INVESTING ACTIVITIES |
|
|
|
||||||
Investments in parks, resorts and other property |
(4,022 |
) |
|
|
(4,876 |
) |
|
||
Acquisitions |
— |
|
|
|
(9,901 |
) |
|
||
Other |
172 |
|
|
|
(319 |
) |
|
||
Cash used in investing activities - continuing operations |
(3,850 |
) |
|
|
(15,096 |
) |
|
||
|
|
|
|
||||||
FINANCING ACTIVITIES |
|
|
|
||||||
Commercial paper borrowings, net |
(3,354 |
) |
|
|
4,318 |
|
|
||
Borrowings |
18,120 |
|
|
|
38,240 |
|
|
||
Reduction of borrowings |
(3,533 |
) |
|
|
(38,881 |
) |
|
||
Dividends |
(1,587 |
) |
|
|
(2,895 |
) |
|
||
Proceeds from exercise of stock options |
305 |
|
|
|
318 |
|
|
||
Contributions from / sales of noncontrolling interests |
94 |
|
|
|
737 |
|
|
||
Acquisition of noncontrolling and redeemable noncontrolling interests |
— |
|
|
|
(1,430 |
) |
|
||
Other |
(1,565 |
) |
|
|
(871 |
) |
|
||
Cash provided by financing activities - continuing operations |
8,480 |
|
|
|
(464 |
) |
|
||
|
|
|
|
||||||
CASH FLOWS FROM DISCONTINUED OPERATIONS |
|
|
|
||||||
Cash provided by operations - discontinued operations |
2 |
|
|
|
622 |
|
|
||
Cash provided by investing activities - discontinued operations |
213 |
|
|
|
10,978 |
|
|
||
Cash used in financing activities - discontinued operations |
— |
|
|
|
(626 |
) |
|
||
Cash provided by discontinued operations |
215 |
|
|
|
10,974 |
|
|
||
|
|
|
|
||||||
Impact of exchange rates on cash, cash equivalents and restricted cash |
38 |
|
|
|
(98 |
) |
|
||
|
|
|
|
||||||
Change in cash, cash equivalents and restricted cash |
12,499 |
|
|
|
1,300 |
|
|
||
Cash, cash equivalents and restricted cash, beginning of period |
5,455 |
|
|
|
4,155 |
|
|
||
Cash, cash equivalents and restricted cash, end of period |
$ |
17,954 |
|
|
|
$ |
5,455 |
|
|
View source version on businesswire.com: https://www.businesswire.com/news/home/20201112006058/en/
Corporate Communications
818-560-5300
Investor Relations
818-560-6601
Source:
Zenia Mucha
Corporate Communications
818-560-5300
Lowell Singer
Investor Relations
818-560-6601