The Walt Disney Company (NYSE: DIS) today reported earnings for
its fourth quarter and fiscal year ended October 2, 2021. Diluted
earnings per share (EPS) from continuing operations for the quarter
was income of $0.09 compared to a loss of $0.39 in the prior-year
quarter. Excluding certain items(1), diluted EPS for the quarter
was income of $0.37 compared to a loss of $0.20 in the prior-year
quarter. Diluted EPS from continuing operations for the year ended
October 2, 2021 was income of $1.11 compared to a loss of $1.57 in
the prior-year. Excluding certain items(1), diluted EPS for the
year increased 13% to $2.29 from $2.02 in the prior-year.
“This has been a very productive year for The Walt Disney
Company, as we’ve made great strides in reopening our businesses
while taking meaningful and innovative steps in Direct-to-Consumer
and at our Parks, particularly with our popular new Disney Genie
and Magic Key offerings,” said Bob Chapek, Chief Executive Officer,
The Walt Disney Company. “As we celebrate the two-year anniversary
of Disney+, we’re extremely pleased with the success of our
streaming business, with 179 million total subscriptions across our
DTC portfolio at the end of fiscal 2021 and 60% subscriber growth
year-over-year for Disney+. We continue to manage our DTC business
for the long-term, and are confident that our high-quality
entertainment and expansion into additional markets worldwide will
enable us to further grow our streaming platforms globally.”
The following table summarizes the fourth quarter results for
fiscal 2021 and 2020 (in millions, except per share amounts):
Quarter Ended
Year Ended
October 2, 2021
October 3, 2020
Change
October 2, 2021
October 3, 2020
Change
Revenues
$
18,534
$
14,707
26
%
$
67,418
$
65,388
3
%
Income (loss) from continuing operations
before income taxes
$
290
$
(580
)
nm
$
2,561
$
(1,743
)
nm
Total segment operating income(1)
$
1,587
$
606
>100%
$
7,766
$
8,108
(4
)%
Net income (loss) from continuing
operations(2)
$
160
$
(710
)
nm
$
2,024
$
(2,832
)
nm
Diluted EPS from continuing
operations(2)
$
0.09
$
(0.39
)
nm
$
1.11
$
(1.57
)
nm
Diluted EPS excluding certain items(1)
$
0.37
$
(0.20
)
nm
$
2.29
$
2.02
13
%
Cash provided by continuing operations
$
2,632
$
1,667
58
%
$
5,566
$
7,616
(27
)%
Free cash flow(1)
$
1,522
$
938
62
%
$
1,988
$
3,594
(45
)%
(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 11 through
14.
(2)
Reflects amounts attributable to
shareholders of The Walt Disney Company, i.e. after deduction of
income attributable to noncontrolling interests.
The Company’s fiscal year end is on the Saturday closest to
September 30 and consists of fifty-two weeks with the exception
that approximately every six years, we have a fifty-three week
year. Fiscal 2020 was a fifty-three week year, which began on
September 29, 2019 and ended on October 3, 2020. We estimate that
the additional week resulted in a benefit to pre-tax income in the
prior-year quarter of approximately $200 million, primarily at the
Disney Media and Entertainment Distribution segment.
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
Year Ended
October 2, 2021
October 3, 2020
Change
October 2, 2021
October 3, 2020
Change
Income (loss) from continuing operations
before income taxes
$
290
$
(580
)
nm
$
2,561
$
(1,743
)
nm
Add (subtract):
Corporate and unallocated shared
expenses
283
213
(33
)%
928
817
(14
)%
Restructuring and impairment charges
92
393
77
%
654
5,735
89
%
Other (income) expense, net
13
(656
)
nm
(201
)
(1,038
)
(81
)%
Interest expense, net
317
496
36
%
1,406
1,491
6
%
Amortization of TFCF and Hulu intangible
assets and fair value step-up on film and television costs
592
740
20
%
2,418
2,846
15
%
Total Segment Operating Income
$
1,587
$
606
>100%
$
7,766
$
8,108
(4
)%
Since early 2020 the world has been, and continues to be,
impacted by the novel coronavirus (COVID-19) and its variants.
COVID-19 and measures to prevent its spread has impacted our
segments in a number of ways, most significantly at the Disney
Parks, Experiences and Products segment where our theme parks and
resorts were closed and cruise ship sailings and guided tours were
suspended. These operations resumed, generally at reduced capacity,
at various points since May 2020. We have delayed, or in some
cases, shortened or cancelled theatrical releases, and stage play
performances were suspended as of March 2020. Stage play operations
resumed, generally at reduced capacity, in the first quarter of
fiscal 2021. Theaters have been subject to capacity limitations and
shifting government mandates or guidance regarding COVID-19
restrictions. We experienced significant disruptions in the
production and availability of content, including the delay of key
live sports programming during fiscal 2020 and fiscal 2021, as well
as the suspension of most film and television production in March
2020. Although film and television production generally resumed
beginning in the fourth quarter of fiscal 2020, we continue to see
disruption of production activities depending on local
circumstances. Fewer theatrical releases and production delays have
limited the availability of film content to be sold in distribution
windows subsequent to the theatrical release.
We have and will continue to incur costs to address government
regulations and implement safety measures for our employees, guests
and talent. The timing, duration and extent of these costs will
depend on the timing and scope of our operations as they resume as
well as regulatory requirements. These costs totaled approximately
$1 billion in fiscal 2021. Some of these costs have been
capitalized and will be amortized over future periods.
The entire current year for both segments was impacted by
COVID-19, while only a portion of the prior year was impacted. The
most significant impact on operating income was at the Disney
Parks, Experiences and Products segment due to revenue lost as a
result of closures and/or reduced operating capacities. Although
results improved in the second half of fiscal 2021 compared to the
second half of fiscal 2020 from reopening our parks and resorts, we
continue to be impacted by reduced operating capacities. Compared
to fiscal 2020, the Disney Media and Entertainment Distribution
segment reflected higher advertising revenue from the return of
live sporting events, which was more than offset by higher sports
programming costs. Our other film and television distribution
businesses were impacted by revenue lost from the deferral or
cancellation of significant film releases, partially offset by
costs avoided due to a reduction in film cost amortization,
marketing and distribution costs.
The following table summarizes the fourth quarter segment
revenue and segment operating income for fiscal 2021 and 2020 (in
millions):
Quarter Ended
Year Ended
October 2, 2021
October 3, 2020
Change
October 2, 2021
October 3, 2020
Change
Revenues:
Disney Media and Entertainment
Distribution
$
13,084
$
11,974
9
%
$
50,866
$
48,350
5
%
Disney Parks, Experiences and Products
5,450
2,733
99
%
16,552
17,038
(3
)%
Total Revenues
$
18,534
$
14,707
26
%
$
67,418
$
65,388
3
%
Segment operating income (loss):
Disney Media and Entertainment
Distribution
$
947
$
1,551
(39
)%
$
7,295
$
7,653
(5
)%
Disney Parks, Experiences and Products
640
(945
)
nm
471
455
4
%
Total Segment Operating Income
$
1,587
$
606
>100%
$
7,766
$
8,108
(4
)%
DISCUSSION OF FULL YEAR SEGMENT RESULTS
Segment operating income decreased at Disney Media and
Entertainment Distribution compared to the prior year due to lower
operating results at Linear Networks and Content Sales/Licensing,
partially offset by lower losses at Direct-to-Consumer. The
decrease at Linear Networks was due to the shift of sports
programming costs from fiscal 2020 into fiscal 2021 as a result of
COVID-19, partially offset by higher sports advertising revenue.
Lower results at Content Sales/Licensing were due to a decrease in
theatrical and home entertainment distribution results reflecting
the impact COVID-19 had on our theatrical release slate since March
2020. Lower operating losses at Direct-to-Consumer were due to
improved results at Hulu and, to a lesser extent, ESPN+, partially
offset by higher losses at Disney+. Segment operating income at
Disney Parks, Experiences and Products was comparable to the prior
year as higher licensing results was offset by lower operating
results at our domestic parks and experiences business.
DISCUSSION OF FOURTH QUARTER SEGMENT RESULTS
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
Year Ended
October 2, 2021
October 3, 2020
October 2, 2021
October 3, 2020
Change
Revenues:
Linear Networks
$
6,698
$
7,012
(4
)%
$
28,093
$
27,583
2
%
Direct-to-Consumer
4,560
3,300
38
%
16,319
10,552
55
%
Content Sales/Licensing and Other
2,047
1,873
9
%
7,346
10,977
(33
)%
Elimination of Intrasegment Revenue(1)
(221
)
(211
)
(5
)%
(892
)
(762
)
(17
)%
$
13,084
$
11,974
9
%
$
50,866
$
48,350
5
%
Operating income (loss):
Linear Networks
$
1,642
$
1,839
(11
)%
$
8,407
$
9,413
(11
)%
Direct-to-Consumer
(630
)
(374
)
(68
)%
(1,679
)
(2,913
)
42
%
Content Sales/Licensing and Other
(65
)
86
nm
567
1,153
(51
)%
$
947
$
1,551
(39
)%
$
7,295
$
7,653
(5
)%
(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 decreased 11% to $1.6 billion. The
following table provides further detail of the Linear Networks
results (in millions):
Quarter Ended
Change
October 2, 2021
October 3, 2020
Supplemental revenue detail
Domestic Channels
$
5,414
$
5,687
(5
)%
International Channels
1,284
1,325
(3
)%
$
6,698
$
7,012
(4
)%
Supplemental operating income detail
Domestic Channels
$
1,390
$
1,621
(14
)%
International Channels
140
94
49
%
Equity in the income of investees
112
124
(10
)%
$
1,642
$
1,839
(11
)%
Domestic Channels
Domestic Channels revenues for the quarter decreased 5% to $5.4
billion and operating income decreased 14% to $1.4 billion. The
decrease in operating income was due to decreases at Broadcasting
and, to a lesser extent, at Cable.
The decrease at Broadcasting was due to lower results at ABC and
the owned television stations. The decrease at ABC was due to an
increase in marketing costs and higher programming and production
costs, partially offset by higher affiliate revenue. The increase
in programming and production costs was driven by higher average
cost of acquired programming in the current quarter, partially
offset by the comparison to the additional week of operations in
the prior-year quarter. Affiliate revenue growth was due to an
increase in contractual rates, partially offset by the comparison
to the additional week of operations in the prior-year quarter. ABC
advertising revenue was comparable to the prior-year quarter as the
comparison to the additional week of operations and the broadcast
of the Emmy Awards show in the prior-year quarter was offset by
higher impressions in the current quarter, reflecting more units
delivered, and increased rates. The decrease at the owned
television stations was due to lower advertising revenue reflecting
a decrease in political advertising in the current quarter and the
comparison to the additional week of operations in the prior-year
quarter.
The decrease at Cable was due to lower affiliate revenue, an
increase in marketing costs reflecting more titles premiering in
the current quarter, and, to a lesser extent, lower advertising
revenue. These decreases were partially offset by lower programming
and production costs. Lower affiliate revenue was due to the
comparison to the additional week of operations in the prior-year
quarter and fewer subscribers in the current quarter, partially
offset by an increase in contractual rates. The decrease in
advertising revenue was due to the comparison to the additional
week of operations in the prior-year quarter, partially offset by
an increase in rates. Lower programming and production costs were
due to decreases in costs for NBA and MLB programming, partially
offset by increased costs for college football games. In the prior
year as a result of COVID-19, NBA and MLB games were shifted into
the fourth quarter, and college football games were shifted out of
the fourth quarter into the first quarter of fiscal 2021.
International Channels
International Channels revenues for the quarter decreased 3% to
$1.3 billion and operating income increased 49% to $140 million.
The increase in operating income was due to a decrease in
programming and production costs and higher advertising revenue,
partially offset by lower affiliate revenue.
The decrease in programming and production costs was due to the
comparison to the additional week of operations, lower write-offs
in the current quarter and the impact of channel closures. These
decreases were partially offset by higher sports programming costs
driven by an increased number of Indian Premier League (IPL)
cricket matches and soccer games in the current quarter due to the
impact of COVID-19 in the prior-year quarter. Advertising revenue
growth was due to an increase in average viewership, partially
offset by the comparison to the additional week of operations in
the prior-year quarter. Lower affiliate revenue was due to the
comparison to the additional week of operations in the prior-year
quarter and channel closures. Sports programming costs and average
viewership reflected the impact of 18 IPL cricket matches in the
current quarter compared to 16 matches in the prior-year quarter.
Eight of the matches in the prior-year quarter were played in the
additional week of operations.
Direct-to-Consumer
Direct-to-Consumer revenues for the quarter increased 38% to
$4.6 billion and operating loss increased from $0.4 billion to $0.6
billion. The increase in operating loss was due to higher losses at
Disney+, and to a lesser extent, ESPN+, partially offset by
improved results at Hulu.
The higher loss at Disney+ was due to higher programming and
production, marketing and technology costs, partially offset by
increases in subscription and Premier Access revenues. Higher
subscription revenue reflected subscriber growth and increases in
retail pricing. Higher Premier Access revenue was due to two
releases in the current quarter, Black Widow and Jungle Cruise,
compared to one release in the prior-year quarter, Mulan. The
increases in costs and subscribers reflected the ongoing expansion
of Disney+.
Lower results at ESPN+ were due to higher marketing and sports
programming costs, partially offset by subscription revenue growth.
The increase in subscription revenue was due to subscriber growth
and, to a lesser extent, an increase in retail pricing.
The increase at Hulu was due to subscription revenue growth and
higher advertising revenue, partially offset by increases in
programming and production and, to a lesser extent, marketing
costs. Subscription revenue growth was due to an increase in
subscribers and higher rates driven by an increase in retail
pricing for the Hulu Live TV+ SVOD service in December 2020. Higher
advertising revenue was primarily due to increased impressions. The
increase in programming and production costs was driven by higher
subscriber-based fees for programming the Live television service
due to rate increases and an increase in average monthly
subscribers.
The following table presents the number of paid subscribers(1)
(in millions) for Disney+, ESPN+ and Hulu as of:
October 2, 2021
October 3, 2020
Change
Disney+(2)
118.1
73.7
60
%
ESPN+
17.1
10.3
66
%
Hulu
SVOD Only
39.7
32.5
22
%
Live TV + SVOD
4.0
4.1
(2
)%
Total Hulu(3)
43.8
36.6
20
%
The following table presents the average monthly revenue per
paid subscriber(4) for the quarter ended:
October 2, 2021
October 3, 2020
Change
Disney+
$
4.12
$
4.52
(9
)%
ESPN+
$
4.74
$
4.54
4
%
Hulu
SVOD Only
$
12.75
$
12.59
1
%
Live TV + SVOD
$
84.89
$
71.90
18
%
(1)
Reflects subscribers for which we
recognized subscription revenue. Subscribers cease to be a paid
subscriber as of their effective cancellation date or as a result
of a failed payment method. Subscribers to the bundled offering in
the U.S. are counted as a paid subscriber for each service included
in the bundle (Disney+, Hulu and ESPN+). Star+ in Latin America is
offered as a standalone service or along with Disney+. If a
subscriber has either the standalone Disney+ or Star+ service or
both the Disney+ and Star+ services, they are counted as one
Disney+ paid subscriber. When we aggregate the total number of paid
subscribers across our DTC services, whether acquired individually,
through a wholesale arrangement or via the bundle, we refer to them
as paid subscriptions.
(2)
Includes Disney+ Hotstar and Star+.
Disney+ Hotstar launched on April 3, 2020 in India (as a conversion
of the preexisting Hotstar service), on September 5, 2020 in
Indonesia, on June 1, 2021 in Malaysia, and on June 30, 2021 in
Thailand. Disney+ Hotstar average monthly revenue per paid
subscriber is significantly lower than the average monthly revenue
per paid subscriber for Disney+ in other markets. Star+ launched in
Latin America on August 31, 2021.
(3)
Total may not equal the sum of the column
due to rounding.
(4)
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 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 $4.52 to $4.12 due to a higher mix of Disney+
Hotstar subscribers in the current quarter compared to the
prior-year quarter.
The average monthly revenue per paid subscriber for ESPN+
increased from $4.54 to $4.74 due to an increase in retail pricing,
partially offset by a higher mix of subscribers to the bundled
offering.
The average monthly revenue per paid subscriber for the Hulu
SVOD Only service increased from $12.59 to $12.75 due to a lower
mix of wholesale subscribers and increases in per-subscriber
premium add-on and advertising revenue, partially offset by 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 $71.90 to $84.89 due to an increase in
retail pricing and higher per-subscriber advertising and premium/
feature add-on revenue, 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
increased 9% to $2.0 billion and segment operating results
decreased from an income of $86 million to a loss of $65 million.
The decrease in operating results was due to lower theatrical and
TV/SVOD distribution results.
The decrease in theatrical distribution results was due to a
higher operating loss from titles in release and increased
marketing expense for future releases. Jungle Cruise, Shang-Chi and
the Legend of the Ten Rings, Free Guy and Black Widow were released
in the current quarter, whereas the prior-year quarter included The
New Mutants. The Company incurs significant marketing costs before
and throughout the theatrical release, which may result in a loss
during theatrical distribution.
Lower TV/SVOD distribution results were due to a decrease in
sales of film content, partially offset by an increase in income
from sales of episodic content. 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 and the shift from
licensing our content to third parties to distribution on our
direct-to consumer services. COVID-19 reduced the content available
for TV/SVOD distribution as a result of fewer films released
theatrically and production delays. Higher income from sales of
episodic content was due to lower program and development
write-offs in the current quarter.
Disney Parks, Experiences and
Products
Disney Parks, Experiences and Products revenues for the quarter
increased to $5.5 billion compared to $2.7 billion in the
prior-year quarter. Segment operating results increased $1.6
billion to income of $640 million. Operating income for the quarter
reflected increases at our domestic and international parks and
experiences businesses, partially offset by a decrease at our
consumer products business.
Revenue and operating income growth was due to the reopening of
our parks and resorts, which were open for the entire quarter this
year. In the prior-year quarter, Shanghai Disney Resort was open
for the entire quarter, Walt Disney World Resort and Disneyland
Paris were open for approximately 12 weeks, Hong Kong Disneyland
Resort was open for approximately 4 weeks and Disneyland Resort was
closed for the entire quarter. During the periods our parks and
resorts were open, they were generally operating at reduced
capacities.
Lower results at our consumer products business were driven by
lower royalties from the licensed game titles, Marvel’s Avengers
and Twisted Wonderland.
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)
October 2, 2021
October 3, 2020
Supplemental revenue detail
Parks & Experiences
Domestic
$
3,473
$
935
>100%
International
693
474
46
%
Consumer Products
1,284
1,324
(3
)%
$
5,450
$
2,733
99
%
Supplemental operating income (loss)
detail
Parks & Experiences
Domestic
$
244
$
(1,272
)
nm
International
(222
)
(343
)
35
%
Consumer Products
618
670
(8
)%
$
640
$
(945
)
nm
OTHER FINANCIAL INFORMATION
Corporate and Unallocated Shared
Expenses
Corporate and unallocated shared expenses increased $70 million
from $213 million to $283 million for the quarter primarily due to
higher compensation costs.
Restructuring and Impairment
Charges
During the current and prior-year quarters, the Company recorded
charges totaling $92 million and $393 million, respectively. The
current quarter charges were for asset impairments, pension
settlements and severance primarily at the Disney Parks,
Experiences and Products segment. The charges in the prior-year
quarter were due to severance at our Disney Parks, Experiences and
Products segment and in connection with the integration of TFCF
Corporation (TFCF).
Other Income (Expense),
net
Other income (expense), net was as follows (in millions):
Quarter Ended
October 2, 2021
October 3, 2020
Change
DraftKings gain (loss)
$
(13
)
$
591
nm
Endemol Shine gain
—
65
(100
)%
Other income (expense), net
$
(13
)
$
656
nm
In the current quarter, the Company recognized a non-cash loss
to adjust its investment in DraftKings, Inc. (DraftKings) to fair
value. In the prior-year quarter, the Company recognized a non-cash
gain to adjust its investment in DraftKings to fair value and a
gain on the sale of the Company’s 50% interest in Endemol Shine
Group (Endemol Shine gain).
Interest Expense, net
Interest expense, net was as follows (in millions):
Quarter Ended
October 2, 2021
October 3, 2020
Change
Interest expense
$
(323
)
$
(464
)
30
%
Interest, investment income (loss) and
other
6
(32
)
nm
Interest expense, net
$
(317
)
$
(496
)
36
%
The decrease in interest expense was primarily due to lower
average debt balances and interest rates.
The increase in interest income, investment income (loss) and
other was due to the comparison to investment impairments
recognized in the prior-year quarter, 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
October 2, 2021
October 3, 2020
Change
Amounts included in segment results:
Disney Media and Entertainment
Distribution
$
114
$
113
1
%
Disney Parks, Experiences and Products
3
(4
)
nm
Amortization of TFCF intangible assets
related to equity investees
(4
)
(3
)
(33
)%
Equity in the income of investees
$
113
$
106
7
%
Income Taxes
The effective income tax rate was as follows:
Quarter Ended
October 2, 2021
October 3, 2020
Income (loss) from continuing operations
before income taxes
$
290
$
(580
)
Income tax expense on continuing
operations
34
49
Effective income tax rate - continuing
operations
11.7
%
(8.4
)%
The effective income tax rate in the current quarter was lower
than the U.S. statutory rate due to favorable adjustments related
to prior years, partially offset by an unfavorable impact from
foreign losses for which we are unable to recognize a tax benefit.
The effective income tax rate in the prior-year quarter was higher
than the U.S. statutory rate due to an unfavorable impact from
foreign earnings taxed at rates higher than the U.S. statutory
rate.
Noncontrolling Interests
Net income attributable to noncontrolling interests was as
follows (in millions):
Quarter Ended
October 2, 2021
October 3, 2020
Change
Net income from continuing operations
attributable to noncontrolling interests
$
(96
)
$
(81
)
(19
)%
The increase in net income from continuing operations
attributable to noncontrolling interests was due to 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.
FULL YEAR CASH FLOW STATEMENT INFORMATION
Cash Flow
Cash provided by operations and free cash flow were as follows
(in millions):
Year Ended
October 2, 2021
October 3, 2020
Change
Cash provided by operations
$
5,566
$
7,616
$
(2,050
)
Investments in parks, resorts and other
property
(3,578
)
(4,022
)
444
Free cash flow(1)
$
1,988
$
3,594
$
(1,606
)
(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 2021 decreased by $2.0
billion from $7.6 billion in the prior year to $5.6 billion in the
current year. The decrease was due to higher spending for film and
television content and cash tax payments, partially offset by a
favorable working capital impact as net working capital liabilities
declined in the prior year as our businesses activities were
suspended and increased in the current year as our business
activities resumed.
Capital Expenditures and Depreciation
Expense
Investments in parks, resorts and other property were as follows
(in millions):
Year Ended
October 2, 2021
October 3, 2020
Disney Media and Entertainment
Distribution
$
862
$
783
Disney Parks, Experiences and Products
Domestic
1,597
2,145
International
675
759
Total Disney Parks, Experiences and
Products
2,272
2,904
Corporate
444
335
Total investments in parks, resorts and
other property
$
3,578
$
4,022
Capital expenditures decreased from $4.0 billion to $3.6 billion
driven by the temporary suspension of certain capital projects
since the onset of COVID-19 in fiscal 2020 at Disney Parks,
Experiences and Products as a result of COVID-19 although spending
increased in the latter part of fiscal 2021 compared to fiscal
2020. The decrease was partially offset by higher spending on
Corporate facilities.
Depreciation expense was as follows (in millions):
Year Ended
October 2, 2021
October 3, 2020
Disney Media and Entertainment
Distribution
$
613
$
638
Disney Parks, Experiences and Products
Domestic
1,551
1,634
International
718
694
Total Disney Parks, Experiences and
Products
2,269
2,328
Corporate
186
174
Total depreciation expense
$
3,068
$
3,140
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
Year Ended
October 2, 2021
October 3, 2020
October 2, 2021
October 3, 2020
Cash provided by operations - continuing
operations
$
2,632
$
1,667
$
5,566
$
7,616
Cash used in investing activities -
continuing operations
(1,086
)
(530
)
(3,171
)
(3,850
)
Cash provided by (used in) financing
activities - continuing operations
(1,614
)
(6,439
)
(4,385
)
8,480
Cash provided by operations - discontinued
operations
3
—
1
2
Cash provided by investing activities -
discontinued operations
—
15
8
213
Impact of exchange rates on cash, cash
equivalents and restricted cash
(47
)
87
30
38
Change in cash, cash equivalents and
restricted cash
(112
)
(5,200
)
(1,951
)
12,499
Cash, cash equivalents and restricted
cash, beginning of period
16,115
23,154
17,954
5,455
Cash, cash equivalents and restricted
cash, end of period
$
16,003
$
17,954
$
16,003
$
17,954
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
October 2, 2021
October 3, 2020
Change
October 2, 2021
October 3, 2020
Change
Cash provided by operations - continuing
operations
$
2,632
$
1,667
$
965
$
5,566
$
7,616
$
(2,050
)
Investments in parks, resorts and other
property
(1,110
)
(729
)
(381
)
(3,578
)
(4,022
)
444
Free cash flow
$
1,522
$
938
$
584
$
1,988
$
3,594
$
(1,606
)
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 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 October 2, 2021
As reported
$
290
$
(34
)
$
256
$
0.09
nm
Exclude:
Other (income) expense, net(4)
13
(3
)
10
0.01
Amortization of TFCF and Hulu intangible
assets and fair value step-up on film and television costs(5)
592
(138
)
454
0.25
Restructuring and impairment
charges(6)
92
(21
)
71
0.04
Excluding certain items
$
987
$
(196
)
$
791
$
0.37
nm
Quarter Ended October 3, 2020
As reported
$
(580
)
$
(49
)
$
(629
)
$
(0.39
)
Exclude:
Other (income) expense, net(4)
(656
)
153
(503
)
(0.28
)
Amortization of TFCF and Hulu intangible
assets and fair value step-up on film and television costs(5)
740
(173
)
567
0.30
Restructuring and impairment
charges(6)
393
(94
)
299
0.17
Excluding certain items
$
(103
)
$
(163
)
$
(266
)
$
(0.20
)
(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)
In the current quarter, other (income)
expense, net was due to a loss from adjusting the Company’s
investment in DraftKings, Inc. (DraftKings) to fair value ($13
million). In the prior-year quarter, other (income) expense, net
included a gain from adjusting the Company’s investment in
DraftKings to fair value ($591 million) and the Endemol Shine gain
($65 million).
(5)
For the current quarter, intangible asset
amortization was $429 million, step-up amortization was $159
million and amortization of intangible assets related to TFCF
equity investees was $4 million. For the prior-year quarter,
intangible asset amortization was $451 million, step-up
amortization was $286 million and amortization of intangible assets
related to TFCF equity investees was $3 million.
(6)
Charges for the current quarter were for
asset impairments, pension settlements and severance primarily at
the Disney Parks, Experiences and Products segment ($92 million).
Charges in the prior-year quarter were due to severance at our
Disney Parks, Experiences and Products segment and in connection
with the integration of TFCF ($393 million).
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
Year Ended Ended October 2, 2021:
As reported
$
2,561
$
(25
)
$
2,536
$
1.11
nm
Exclude:
Other (income) expense, net(4)
(201
)
46
(155
)
(0.08
)
Amortization of TFCF and Hulu intangible
assets and fair value step-up on film and television costs(5)
2,418
(562
)
1,856
1.00
Restructuring and impairment
charges(6)
654
(152
)
502
0.27
Excluding certain items
$
5,432
$
(693
)
$
4,739
$
2.29
13
%
Year Ended Ended October 3, 2020:
As reported
$
(1,743
)
$
(699
)
$
(2,442
)
$
(1.57
)
Exclude:
Other (income) expense, net(4)
(1,038
)
242
(796
)
(0.44
)
Amortization of TFCF and Hulu intangible
assets and fair value step-up on film and television costs(5)
2,846
(662
)
2,184
1.17
Restructuring and impairment
charges(6)
5,735
(571
)
5,164
2.86
Excluding certain items
$
5,800
$
(1,690
)
$
4,110
$
2.02
(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 year, other (income)
expense, net was due to gains from the sales of investments ($312
million), partially offset by a loss from adjusting our investment
in DraftKings to fair value ($111 million). For the prior year,
other (income) expense, net was due to a gain from adjusting our
investment in DraftKings to fair value ($973 million) and the
Endemol Shine gain ($65 million).
(5)
For the current year, intangible asset
amortization was $1,757 million, step-up amortization was $646
million and amortization of intangible assets related to TFCF
equity investees was $15 million. For the prior year, intangible
asset amortization was $1,921 million, step-up amortization was
$899 million and amortization of intangible assets related to TFCF
equity investees was $26 million.
(6)
Charges for the current year 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 in North America and Europe, as
well as severance at our other businesses ($654 million). Charges
for the prior year were due to goodwill and intangible asset
impairments ($4,953 million) and severance and contract termination
costs related to the acquisition and integration of TFCF and
severance at our Disney Parks, Experiences and Products segment
($782 million).
CONFERENCE CALL INFORMATION
In conjunction with this release, The Walt Disney Company will
host a conference call today, November 10, 2021, 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
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;
future business management; 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 and annual reports on Form
10-K.
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
Year Ended
October 2, 2021
October 3, 2020
October 2, 2021
October 3, 2020
Revenues
$
18,534
$
14,707
$
67,418
$
65,388
Costs and expenses
(17,935
)
(15,160
)
(63,759
)
(61,594
)
Restructuring and impairment charges
(92
)
(393
)
(654
)
(5,735
)
Other income (expense), net
(13
)
656
201
1,038
Interest expense, net
(317
)
(496
)
(1,406
)
(1,491
)
Equity in the income of investees
113
106
761
651
Income (loss) from continuing operations
before income taxes
290
(580
)
2,561
(1,743
)
Income taxes on continuing operations
(34
)
(49
)
(25
)
(699
)
Net income (loss) from continuing
operations
256
(629
)
2,536
(2,442
)
Loss from discontinued operations, net of
income tax benefit of $0, $0, $9 and $10, respectively)
(1
)
—
(29
)
(32
)
Net income (loss)
255
(629
)
2,507
(2,474
)
Net income from continuing operations
attributable to noncontrolling interests
(96
)
(81
)
(512
)
(390
)
Net income (loss) attributable to The Walt
Disney Company (Disney)
$
159
$
(710
)
$
1,995
$
(2,864
)
Earnings (loss) per share attributable to
Disney(1):
Diluted
Continuing operations
$
0.09
$
(0.39
)
$
1.11
$
(1.57
)
Discontinued operations
—
—
(0.02
)
(0.02
)
$
0.09
$
(0.39
)
$
1.09
$
(1.58
)
Basic
Continuing operations
$
0.09
$
(0.39
)
$
1.11
$
(1.57
)
Discontinued operations
—
—
(0.02
)
(0.02
)
$
0.09
$
(0.39
)
$
1.10
$
(1.58
)
Weighted average number of common and
common equivalent shares outstanding:
Diluted
1,830
1,809
1,828
1,808
Basic
1,818
1,809
1,816
1,808
(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)
October 2, 2021
October 3, 2020
ASSETS
Current assets
Cash and cash equivalents
$
15,959
$
17,914
Receivables, net
13,367
12,708
Inventories
1,331
1,583
Content advances
2,183
2,171
Other current assets
817
875
Total current assets
33,657
35,251
Produced and licensed content costs
29,549
25,022
Investments
3,935
3,903
Parks, resorts and other property
Attractions, buildings and equipment
64,892
62,111
Accumulated depreciation
(37,920
)
(35,517
)
26,972
26,594
Projects in progress
4,521
4,449
Land
1,131
1,035
32,624
32,078
Intangible assets, net
17,115
19,173
Goodwill
78,071
77,689
Other assets
8,658
8,433
Total assets
$
203,609
$
201,549
LIABILITIES AND EQUITY
Current liabilities
Accounts payable and other accrued
liabilities
$
20,894
$
16,801
Current portion of borrowings
5,866
5,711
Deferred revenue and other
4,317
4,116
Total current liabilities
31,077
26,628
Borrowings
48,540
52,917
Deferred income taxes
7,246
7,288
Other long-term liabilities
14,522
17,204
Commitments and contingencies
Redeemable noncontrolling interests
9,213
9,249
Equity
Preferred stock
—
—
Common stock, $0.01 par value, Authorized
– 4.6 billion shares, Issued – 1.8 billion shares
55,471
54,497
Retained earnings
40,429
38,315
Accumulated other comprehensive loss
(6,440
)
(8,322
)
Treasury stock, at cost, 19 million
shares
(907
)
(907
)
Total Disney Shareholders’ equity
88,553
83,583
Noncontrolling interests
4,458
4,680
Total equity
93,011
88,263
Total liabilities and equity
$
203,609
$
201,549
THE WALT DISNEY
COMPANY
CONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOWS
(unaudited; in
millions)
Year Ended
October 2, 2021
October 3, 2020
OPERATING ACTIVITIES
Net income (loss) from continuing
operations
$
2,536
$
(2,442
)
Depreciation and amortization
5,111
5,345
Goodwill and intangible asset
impairments
—
4,953
Net gain on investments
(332
)
(920
)
Deferred income taxes
(1,241
)
(392
)
Equity in the income of investees
(761
)
(651
)
Cash distributions received from equity
investees
754
774
Net change in produced and licensed
content costs and advances
(4,301
)
397
Net change in operating lease right of use
assets / liabilities
46
31
Equity-based compensation
600
525
Pension and postretirement medical
amortization
816
547
Other, net
144
94
Changes in operating assets and
liabilities:
Receivables
(357
)
1,943
Inventories
252
14
Other assets
171
(157
)
Accounts payable and other liabilities
2,410
(2,293
)
Income taxes
(282
)
(152
)
Cash provided by operations - continuing
operations
5,566
7,616
INVESTING ACTIVITIES
Investments in parks, resorts and other
property
(3,578
)
(4,022
)
Other
407
172
Cash used in investing activities -
continuing operations
(3,171
)
(3,850
)
FINANCING ACTIVITIES
Commercial paper borrowings (payments),
net
(26
)
(3,354
)
Borrowings
64
18,120
Reduction of borrowings
(3,737
)
(3,533
)
Dividends
—
(1,587
)
Proceeds from exercise of stock
options
435
305
Contributions from noncontrolling
interests
91
94
Acquisition of redeemable noncontrolling
interests
(350
)
—
Other
(862
)
(1,565
)
Cash provided by (used in) financing
activities - continuing operations
(4,385
)
8,480
CASH FLOWS FROM DISCONTINUED
OPERATIONS
Cash provided by operations - discontinued
operations
1
2
Cash provided by investing activities -
discontinued operations
8
213
Cash provided by discontinued
operations
9
215
Impact of exchange rates on cash, cash
equivalents and restricted cash
30
38
Change in cash, cash equivalents and
restricted cash
(1,951
)
12,499
Cash, cash equivalents and restricted
cash, beginning of year
17,954
5,455
Cash, cash equivalents and restricted
cash, end of year
$
16,003
$
17,954
View source
version on businesswire.com: https://www.businesswire.com/news/home/20211110006335/en/
Zenia Mucha Corporate Communications 818-560-5300
Tamara Munsey Investor Relations 818-560-8273
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