The Walt Disney Company Reports Fourth Quarter and Full Year Earnings for Fiscal 2021
The Walt Disney Company (NYSE: DIS) reported Q4 and FY 2021 results, achieving diluted EPS from continuing operations of $0.09, up from a loss of $0.39 year-over-year. Excluding certain items, diluted EPS rose to $0.37 from a loss of $0.20. Revenues increased 26% to $18.5 billion, with total annual revenues at $67.4 billion, a 3% rise. However, segment operating income fell 4%, driven by challenges in Parks and Media. Disney+ subscriptions reached 179 million, a 60% increase year-over-year. The full-year results reflect ongoing recovery from COVID-19 impacts.
- Diluted EPS from continuing operations increased to $0.09 from a loss of $0.39 YOY.
- Annual revenues rose to $67.4 billion, a 3% improvement over the previous year.
- Disney+ subscriptions surged to 179 million, demonstrating significant growth.
- Segment operating income decreased by 4%, indicating challenges, especially in Parks.
- Free cash flow dropped 45% year-over-year to $1.99 billion, reflecting increased spending.
“This has been a very productive year for
The following table summarizes the fourth quarter results for fiscal 2021 and 2020 (in millions, except per share amounts):
|
Quarter Ended |
|
|
|
Year Ended |
|
|
||||||||||||||||
|
|
|
|
|
Change |
|
|
|
|
|
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 |
|
|
|
> |
|
$ |
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 Company’s fiscal year end is on the Saturday closest to
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 |
|
|
|||||||||||||||||
|
|
|
|
|
Change |
|
|
|
|
|
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 |
592 |
|
|
740 |
|
|
|
20 |
% |
|
2,418 |
|
|
|
2,846 |
|
|
|
15 |
% |
||||
Total Segment Operating Income |
$ |
1,587 |
|
|
$ |
606 |
|
|
|
> |
|
$ |
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
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
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 |
|
|
|||||||||||||||
|
|
|
|
|
Change |
|
|
|
|
|
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 |
|
|
|
> |
|
$ |
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
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 |
|
|
||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
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
|
Quarter Ended |
|
Change |
|||||
|
|
|
|
|
||||
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
The decrease at Broadcasting was due to lower results at
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
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
Direct-to-Consumer
Direct-to-Consumer revenues for the quarter increased
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
The following table presents the number of paid subscribers(1) (in millions) for Disney+, ESPN+ and Hulu as of:
|
|
|
|
|
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:
|
|
|
|
|
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 |
(2) |
Includes Disney+ Hotstar and Star+. Disney+ Hotstar launched on |
(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
The average monthly revenue per paid subscriber for ESPN+ increased from
The average monthly revenue per paid subscriber for the Hulu SVOD Only service increased from
Content Sales/Licensing and Other
Content Sales/Licensing and Other revenues for the quarter increased
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
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,
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) |
|
|
|
|
||||||||
Supplemental revenue detail |
|
|
|
|
|
|||||||
Parks & Experiences |
|
|
|
|
|
|||||||
Domestic |
$ |
3,473 |
|
|
|
$ |
935 |
|
|
|
> |
|
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
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 (loss) |
$ |
(13 |
) |
|
|
$ |
591 |
|
|
nm |
|
|
— |
|
|
|
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
Interest Expense, net
Interest expense, net was as follows (in millions):
|
Quarter Ended |
|
|
|||||||||
|
|
|
|
|
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 |
|
|
|||||||||
|
|
|
|
|
Change |
|||||||
Amounts included in segment results: |
|
|
|
|
|
|||||||
Disney Media and Entertainment Distribution |
$ |
114 |
|
|
|
$ |
113 |
|
|
|
1 |
% |
Disney Parks, Experiences and Products |
3 |
|
|
|
(4 |
) |
|
|
nm |
|||
Amortization of |
(4 |
) |
|
|
(3 |
) |
|
|
(33 |
)% |
||
Equity in the income of investees |
$ |
113 |
|
|
|
$ |
106 |
|
|
|
7 |
% |
Income Taxes
The effective income tax rate was as follows:
|
Quarter Ended |
||||||
|
|
|
|
||||
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
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 |
$ |
(96 |
) |
|
$ |
(81 |
) |
|
(19 |
)% |
The increase in net income from continuing operations attributable to noncontrolling interests was due to higher 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 |
$ |
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
Capital Expenditures and Depreciation Expense
Investments in parks, resorts and other property were as follows (in millions):
|
Year Ended |
||||
|
|
|
|
||
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
Depreciation expense was as follows (in millions):
|
Year Ended |
||||
|
|
|
|
||
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 |
||||||||||||||||
|
|
|
|
|
|
|
|
||||||||||||
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 |
|
|
||||||||||||||||||||||
|
|
|
|
|
Change |
|
|
|
|
|
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
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
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
Loss |
|
Tax
Expense(1) |
|
After-Tax
Loss(2) |
|
Diluted
|
|
Change vs.
|
||||||||||||
Quarter Ended |
|
|
|
|
|
|
|
|
|
||||||||||||
As reported |
$ |
290 |
|
|
|
$ |
(34 |
) |
|
|
$ |
256 |
|
|
|
$ |
0.09 |
|
|
|
nm |
Exclude: |
|
|
|
|
|
|
|
|
|
||||||||||||
Other (income) expense, net(4) |
13 |
|
|
|
(3 |
) |
|
|
10 |
|
|
|
0.01 |
|
|
|
|
||||
Amortization of |
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 |
|
|
|
|
|
|
|
|
|
||||||||||||
As reported |
$ |
(580 |
) |
|
|
$ |
(49 |
) |
|
|
$ |
(629 |
) |
|
|
$ |
(0.39 |
) |
|
|
|
Exclude: |
|
|
|
|
|
|
|
|
|
||||||||||||
Other (income) expense, net(4) |
(656 |
) |
|
|
153 |
|
|
|
(503 |
) |
|
|
(0.28 |
) |
|
|
|
||||
Amortization of |
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 ( |
(5) |
For the current quarter, intangible asset amortization was |
(6) |
Charges for the current quarter were for asset impairments, pension settlements and severance primarily at the Disney Parks, Experiences and Products segment ( |
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
Loss |
|
Tax Benefit/ Expense(1) |
|
After-Tax Income/ Loss(2) |
|
Diluted
|
|
Change vs.
|
||||||||||||
Year Ended Ended |
|
|
|
|
|
|
|
|
|
||||||||||||
As reported |
$ |
2,561 |
|
|
|
$ |
(25 |
) |
|
|
$ |
2,536 |
|
|
|
$ |
1.11 |
|
|
nm |
|
Exclude: |
|
|
|
|
|
|
|
|
|
||||||||||||
Other (income) expense, net(4) |
(201 |
) |
|
|
46 |
|
|
|
(155 |
) |
|
|
(0.08 |
) |
|
|
|||||
Amortization of |
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 |
|
|
|
|
|
|
|
|
|
||||||||||||
As reported |
$ |
(1,743 |
) |
|
|
$ |
(699 |
) |
|
|
$ |
(2,442 |
) |
|
|
$ |
(1.57 |
) |
|
|
|
Exclude: |
|
|
|
|
|
|
|
|
|
||||||||||||
Other (income) expense, net(4) |
(1,038 |
) |
|
|
242 |
|
|
|
(796 |
) |
|
|
(0.44 |
) |
|
|
|||||
Amortization of |
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 ( |
(5) |
For the current year, intangible asset amortization was |
(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 |
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 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
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.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (unaudited; in millions, except per share data) |
|||||||||||||||||||
|
Quarter Ended |
|
Year Ended |
||||||||||||||||
|
|
|
|
|
|
|
|
||||||||||||
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 |
(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 |
$ |
159 |
|
|
|
$ |
(710 |
) |
|
|
$ |
1,995 |
|
|
|
$ |
(2,864 |
) |
|
|
|
|
|
|
|
|
|
||||||||||||
Earnings (loss) per share attributable to |
|
|
|
|
|
|
|
||||||||||||
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. |
CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited; in millions, except per share data) |
|||||||||
|
|
|
|
||||||
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 |
|
|
||
|
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, |
55,471 |
|
|
|
54,497 |
|
|
||
Retained earnings |
40,429 |
|
|
|
38,315 |
|
|
||
Accumulated other comprehensive loss |
(6,440 |
) |
|
|
(8,322 |
) |
|
||
|
(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 |
|
|
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited; in millions) |
|||||||||
|
Year Ended |
||||||||
|
|
|
|
||||||
OPERATING ACTIVITIES |
|
|
|
||||||
Net income (loss) from continuing operations |
$ |
2,536 |
|
|
|
$ |
(2,442 |
) |
|
Depreciation and amortization |
5,111 |
|
|
|
5,345 |
|
|
||
|
— |
|
|
|
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/
Corporate Communications
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Investor Relations
818-560-8273
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