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Intermediate Accounting

E-Portfolio
Financial Analysis
The Walt Disney Company

Yue Zhao

Introduction
The company shows great interest in The Walt Disney Company. They hired me
to help them determine if they should invest in it. And if so, should they invest in debt or
equity? I did some ratio analysis on Walt Disneys 2015 and 2014s financial statement,
then compared my analysis with the data obtained from Mergent Intellect, a powerful
business information collector and provider, and corrected some number used in ratio
analysis, to make them consistent. Five categories of ratios are analyzed to evaluate
Walt Disneys business performance.

Detailed Ratio Analysis


Liquidity Ratios
Liquidity ratios tells us the companys ability to pay its current obligations.
Favorable liquidity ratios are critical to a company and its creditors, because they are a
key predictor of a companys ability to make timely payment to creditors and to continue
to meet obligations to lenders when faced with an unforeseen event.

Graphic 1

Working Capital
Current Assets Current Liabilities

&

Current Ratio
Current Assets / Current Liabilities

Work Capital and Current Ratio both measure a companys ability to pay current
liabilities with its current assets. A higher number is preferred because it indicates a
stronger ability to service short-term obligations. When current assets exceed current
liabilities, the firm has enough capital to run its day-to-day operation.
We can see from Graphic 1 that Walt Disney has a Working Capital of 424 for
2015, and 1884 for 2014. Its Current Ratio of 1.03 for 2015, and 1.14 for 2014. Its
working capital dropped dramatically a 77%; while its current ratio dropped 10% from
last year, but both maintains slightly greater than 1. We can see from statistics that its
current assets didnt change much, but it has more current liabilities this year than last
year, thats why its working capital dropped such a lot. From its current ratio, we can tell
that Walt Disney has just enough current assets to cover its current liabilities.

Cash Ratio
(Cash + Cash Equivalents) / Total Current Liabilities

Cash Ratio measures a companys ability to pay current liabilities from cash and
cash equivalent. This ratio is more restrictive than current ratio or quick ratio, because it
allows only cash. Cash ratio is what most creditors look at. They want to see if a
company maintains adequate cash balance to pay off all their short-term debts as they
come due. Creditors like the fact that receivables and inventory are left out, because
only cash is guaranteed to be available to creditors. Inventory could take months to sell,
and receivables could take weeks to collect. Neither of these accounts are guaranteed
for debt servicing.
We can see from Graphic 1 that Walt Disney has a cash ratio of 0.26 for both
years. Which means their cash and cash equivalent takes up only 26% of current
liabilities. In other words, for each dollar of current liability, Walt Disney would have only
26 cents cash to pay it. Walt Disney might need to convert other assets into cash before

they could pay off its current debts. And creditors may have to wait to collect money
from the company.

Quick Ratio
(Cash + Short-Term Investments + Net Current Receivables) / Total Current Liabilities

Quick Ratio, also called Acid-Test Ratio, measures a companys ability to pay all
its current liabilities if they come due immediately. It considers only current assets that
are readily available to pay current debts. Cash, short-term investments and receivables
are considered quick assets, normally, they can be converted into cash within 90 days
or in short-term. It shows how well a company can quickly convert its assets into cash in
order to pay off its current debts.
We can see from Graphic 1 that Walt Disney has quick ratio of 0.75 for 2015, and
0.85 for 2014, and it dropped a 11% from last year. The dropdown could be explained
by the increased current liabilities, even it has increased cash and receivables.
Creditors would like to see a higher quick ratio, because they want to know they could
be paid back on time.

Efficiency Ratios
Efficiency ratios evaluates a companys ability to sell merchandise inventory and
collect receivables. It also tells how well a company manages and utilizes its assets.
Efficiency ratios are also called activity, or turnover ratios of certain assets; they are one
key to a companys profitability. Given that a company incurs costs to finance its assets
with debt (paying interest) or equity (paying dividends), high turnovers are usually
attractive.

Graphic 2

Inventory Turnover
Cost of Goods Sold / Average Merchandise Inventory

&
Days Sales in Inventory
365 days / Inventory Turnover

Inventory Turnover measures the number of times a company sells its average
level of merchandise inventory during a period. It indicates how quickly inventory is sold,
and measures how efficiently a company can control its merchandise, so it is important
to have a high number. A high inventory turnover ratio means the company does not
overspend by buying too much inventory and wastes resources by storing non-salable
inventory, as well as that the company can effectively sell the inventory it buys. This
ratio also shows investors how liquid a companys inventory is. In other words, how
easily a company can turn its inventory into cash.
Days sales in Inventory is the average number of days that inventory is held by a
company, or the number of days it normally takes to sell inventory. This is an important
ratio to creditors and investors. It measures value, liquidity of inventory, and the
companys cash flows. It indicates how fresh the inventory is, how fast they can sell
inventory. In the end, more liquid inventory means better cash flows.
We can see from Graphic 2 that Walt Disney has an inventory turnover of 3.29
for 2015, and 3.31 for 2014. Its Days sales in inventory is 110 for both years. No big
differences in two years, but the relatively big days sales in inventory indicate that it
takes 110 days to sell inventory, and its inventory would stay in stock for like 110 days.

Meanwhile, inventory turnover shows that the company could sell inventory 3 times in
years.

Accounts Receivable Turnover


Net (Credit) Sales / Average Net Accounts Receivables

&
Days Sales in Receivables
365 days / Accounts Receivables Turnover

Accounts Receivable Turnover ratio measures the number of times the company
collects the average receivables balance in a year. It provides an indication of a
companys efficiency in collecting receivables. The higher the ratio, the shorter the
average time between credit sales and cash collection. In some ways the receivables
turnover ratio can be viewed as a liquidity ratio. The more liquid, the faster the company
can covert their receivables into cash. This ratio also is an indication of the quality of
credit sales and receivables. A company with a higher ratio shows that credit sales are
more likely to be collected than a company with a lower ratio.
Days Sales in Receivables is the number of days sales it takes to collect the
average level of receivables. In other words, it measures the average number of days a
company's receivables are outstanding. It shows how well a company can collect cash
from its customers. The sooner cash can be collected; the sooner the cash can be used
for other operations.
We can see from Graphic 2 that Walt Disney has accounts receivables turnover
of 6.62 for 2015 and 6.60 for 2014. Its Days sales in receivables are 55 in both years.
This means there are 55 days before credit sales can be collected, and usually the
company can collect 6.6 times in a year. These two ratios provide useful information
about a companys prospects. An increase in the number of days sales in receivables
indicates an increased possibility of late payment by customers. With both years of 55,
which means the company manages well on collecting receivables from customers.

Gross Profit Percentage


Gross Profit / Net Sales Revenue

Gross Profit Percentage measure the profitability of each sales dollar above the
costs of goods sold. Gross Profit = Sales Cost of Sales. It indicates how much of each
sales dollar is available to cover operating expenses and contribute to profits. The
higher the ratio, the higher the markup a company is able to achieve on its products.
The gross profit ratio is important because it shows management and investors how
profitable the core business activities are. In other words, it shows how efficiently a
company can produce and sell its products, or how profitable a product is. Investors are
typically interested in Gross Profit as a percentage because this allows them to
compare margins between companies without considering their size or sales volume.
We can see from Graphic 2 that the overall gross profit percentage is 45% in
both years, services gross profit percentage is 47%, while products gross profit
percentage is 40%. We can tell that Walt Disney has a higher gross profit percentage
from selling services than products. And their services earn more money for them than
products.

Solvency Ratios
Solvency ratios provide some indication of the riskiness of a company with
regard to its ability to pay its long-term debts. Other things being equal, the risk to an
investor or creditor increases as the percentage of liabilities, relative to equity,
increases. A company with a high level of debt poses a higher risk to long-term creditors
and investors.

Graphic 3

Debt Ratio
Total Liabilities / Total Assets

Debt Ratio measures the proportion of assets financed with debt. In a sense, the
debt ratio shows a company's ability to pay off its liabilities with its assets. A ratio value
greater than 1 indicates a company has more debt than assets. Companies with higher
levels of liabilities compared with assets are considered highly leveraged and riskier for
lenders. This ratio helps investors and creditors analysis the overall debt burden on the
company as well as the firm's ability to pay off the debt in future, uncertain economic
times.
We can see from Graphic 3 that Walt Disney has a debt ratio of 0.5 in 2015, and
0.47 in 2014. A debt ratio of 0.5 is often considered to be less risky. This means that the
company has twice as many assets as liabilities. Or said a different way, Walt Disney's
liabilities take up 50% of its total assets. A lower debt ratio usually implies a more stable
business with the potential of longevity because a company with lower ratio also has
lower overall debt. An increase in total liabilities explains the ratio increase.

Debt to Equity Ratio


Total Liabilities / Total Equity

Debt to Equity Ratio measures the proportion of total liabilities relative to total
equity. It shows the percentage of company financing that comes from creditors and
investors. A higher debt to equity ratio indicates that more creditor financing (loans) is
used than investor financing (shareholders).
Other things being equal, the higher the ratio, the higher the risk. A lower number
suggests there is both a lower risk involved for creditors and strong, long-term, financial
security for a company.
We can see from Graphic 3 that Walt Disney has a debt to equity ratio of 0.98 for
2015, and 0.87 for 2014. This means that creditors and investors have almost an equal

stack in the business assets. A lower debt to equity ratio usually implies a more
financially stable business. Companies with a higher debt to equity ratio are considered
riskier to creditors and investors than companies with a lower ratio. The increased total
liabilities explain well for the increased ratio.

Profitability Ratios
Profitability ratios attempt to measure a companys ability to earn an adequate
return relative to sales or resources devoted to operations. In other words, it measures
a companys ability to use its capital or assets to generate profits.

Graphic 4

Asset Turnover Ratio


Net Sales / Average Total Assets

Asset Turnover Ratio is an indication of how efficiently a company utilizes all of


its assets to generate revenue. It shows how many sales are generated from each
dollar of company assets. Higher turnover ratios mean the company is using its assets
more efficiently. Lower ratios mean that the company isn't using its assets efficiently and
most likely have management or production problems. This gives investors and
creditors a general idea of how a company is managed and uses its assets to produce
products and sales.

We can see from Graphic 4 that Walt Disney has asset turnover ratio of 0.61 for
2015, and 0.59 for 2014. This means that each dollars of assets generates a 61 cents of
sales in 2015. Walt Disney is generating more net sales in 2015 than in 2014. So its
asset turnover ratio is slightly increased.

Profit Margin Ratio


Net Income / Net Sales

Profit Margin Ratio measures how much net income is earned on every dollar of
net sales. It indicates the portion of each dollar of revenue that is available after all
expenses have been covered. Creditors and investors use this ratio to measure how
effectively a company can convert sales into net income. Investors want to make sure
profits are high enough to distribute dividends while creditors want to make sure the
company has enough profits to pay back its loans.
We can see from Graphic 4 that Walt Disney has a profit margin of 15% in both
years. This means 15% of sales is made up of net income. In other words, 15% profits
are produced. This ratio also indirectly measures how well a company manages its
expenses relative to its net sales. In this case, 85% of the sales are expenses.

Rate of Return on Total Assets


(Net Income + Interest Expense) / Average Total Assets

Rate of Return on Total Assets measures the success a company has in using its
assets to earn income. In other words, it measures how effectively a company's assets
are being used to generate profits. A higher number reflects a well managed company
with a healthy return on assets. This ratio helps both management and investors see
how well the company can convert its investments in assets into profits.
We can see from Graphic 4 that Walt Disney has a rate of return on total assets
of 9.89% in 2015, and 9% in 2014. The increase indicates an upward profit trend.

Rate of Return on Common Stockholders Equity


(Net Income Preferred Dividends) / Average Common Stockholders Equity

Rate of Return on Common Stockholders Equity measures the relationship


between net income available to common stockholders and their average common
equity invested in the company. It shows the ability of a company's management to
realize an adequate return on the capital invested by the owners in a company.
We can see from Graphic 4 that Walt Disney has rate of return on common
stockholders equity of 28% in 2015, and 24% in 2014. 28% means that every dollar of
common stockholders equity generate 28% of net income. This measurement is
important for potential investors because it is a profitability ratio from the investor's point
of view. This ratio tells them how efficiently a company will use their money to generate
net income. The 12.87% increase can be explained by the increased net income. And it
shows a positive earning trend of the company and their ability to keep the trend.

Earnings Per Share


(Net Income Preferred Dividends) / Weighted Average Number of Common Shares Outstanding

Earnings per Share is the amount of a companys net income (loss) earned for
each share of its outstanding common stock. In other words, this is the amount of
money each share of stock would receive if all of the profits were distributed to the
outstanding shares at the end of the year. It is also a calculation that shows how
profitable a company is on a shareholder basis. Higher earnings per share is always
better than a lower ratio because this means the company is more profitable and the
company has more profits to distribute to its shareholders.
We can see from Graphic 4 that Walt Disney has an earnings per share of 4.95
for 2015, and 4.31 for 2014. This means that if Walt Disney distributed every dollar of
income to its shareholders, each share would receive 4.95 dollars in 2015. The increase

could be explained by increased net income and decreased weighted average number
of common shares outstanding.

Investment Potential Ratios


Investment potential ratios evaluate stock as an investment. They are used by
investors to estimate the attractiveness of a potential or existing investment and get an
idea of its valuation.

Graphic 5

Graphic 6

Price / Earnings Ratio


Market Price per Share of Common Stock / Earnings per Share

Price/Earnings Ratio is a market prospect ratio that shows what the market is
willing to pay for a stock based on its current earnings. It helps investors analyze how
much they should pay for a stock based on its current earnings. Investors use this ratio
to decide how many times earnings they are willing to pay.
We can see from Graphic 5 that Walt Disney has a price/earnings ratio of 20.13
for 2015 based on March 17, 2016 close price. This means investors should to pay
20.13 dollars for every dollar of earnings. As a company's earnings per share being to
rise, so does their market value per share. A company with a high P/E ratio usually
indicated positive future performance and investors are willing to pay more for this
company's shares. Since the stock price we use here is from March 17, 2016, its
improper to use it to calculate 2014s price/earnings ratio.

Dividend Yield
Annual Dividend per Share / Market Price per Share

Dividend Yield is the percentage of a stocks market value that is returned


annually as dividends to stockholders. It measures the amount of cash dividends
distributed to common shareholders relative to the market value per share. Investors
can use the dividend yield to help analyze their return on investment in stocks. A
company with a high dividend yield pays its investors a large dividend compared to the
fair market value of the stock. This means the investors are getting highly compensated
for their investments compared with lower dividend yielding stocks.
We can see from Graphic 5 that Walt Disney has a dividend yield of 0.02 for
2015. This means if we buy Walt Disneys stock at this price, we would only receive
0.02 dividend for every dollar the stock is worth, that is 1.81 per share.
Dividend Payout
Annual Dividend per Share / Earnings per Share

Dividend Payout is the ratio of dividends declared per common share relative to
the earnings per share of the company. It measures the percentage of net income that
is distributed to shareholders in the form of dividends during the year. In other words, it
shows the portion of profits the company decides to keep to fund operations and the
portion of profits that is given to its shareholders.
We can see from Graphic 5 that Walt Disney has a dividend payout of 36.58% for
2015. This means that the company gives 36.58% of its profit to the shareholders.

Conclusion
Considering Walt Disneys performances and from the detailed ratio analysis we
just did, we can say Walt Disney has an overall good financial health of the business.
For its liquidity ratios, Walt Disney is doing quite well maintaining a good ability to
pay current obligations with current assets. It has adequate current assets to cover
current liabilities, and they have a relatively high quick ratio, which ensures they could
rapidly convert assets into cash to pay off debts as they due. All these liquidity ratios
indicate that Walt Disney manages well on liquidity aspect.
For efficiency ratios, Walt Disneys ability to sell merchandise inventory is not that
good but it manages to collect receivables efficiently. It could sell inventory only 3 times
in a year, so it takes almost 110 days to sell inventory. But it could collect receivables 6
times, so it takes 55 days to collect from customer. In general, Walt Disney manages
and utilizes its assets efficiently. As for the gross profit percentage, it achieves an
overall of 45% gross margin, while its services generate 7% more profit than its
products, which on the other side explains its relatively poor performance from selling
products.
For solvency ratios, Walt Disney is doing well controlling its liabilities in its capital
structure, thus ensures their ability to pay long-term obligations. A 0.5 of debt ratio
indicates their liabilities takes up 50% of their total assets, and they have adequate
assets to cover their debts. A close to 1 debt to equity ratio shows that the company

balances well between funds from investors and creditors. These two ratios show that
Walt Disney manages well on its risk control, and is not a risky choice for both investors
and creditors.
For profitability ratios, Walt Disney is doing well generating profits. It could
generate 61 cents of sales from each dollar of assets, and 15% of it are profits. This
number reaches average in industry (derived from Mergent Intellects competitors
statistics). The increase in both rate of return on total assets and rate of return on
common stockholders equity shows a positive earning trend. We can say Walt Disneys
ability to generate profits for investors and creditors is good.
For investment potential ratios, Walt Disneys stock are not that attractive to
investors as an investment, considering its high stock price these days. Its
price/earnings ratio shows that investors should pay $20.13 for the stock based on its
current earnings. Though its stock has a relatively high market value, its dividend yield
is too low, investors return on the stock is not that good. And Walt Disney pays 36% of
its profits to shareholders.
From the ratios analysis, we can see that Walt Disney is a financially healthy
company that operates efficiently and manages well on liquidity and risk control. It is
also generating profits to attract investors and creditors. As a creditor, you could
undoubtedly lend money to Walt Disney. Bus as an investor, considering its current
stock price and low dividend yield, Walt Disney wont be the best choice of investing on
stock market, if you could choose from other company of other industry.
If Walt Disney is single target of the investment, whether to invest in debt or
equity depends on the interest rate. When interest rate is high enough, you could earn
more interest than the dividends the company distributes. If the interest rate is too low,
maybe investing in equity would be a better option since they show a positive earning
trends.

Appendix A

CONSOLIDATED STATEMENTS OF INCOME


(in millions, except per share data)
2015

2014

2013

Revenues:
$

Services

43,894

40,246

37,280

8,571

8,567

7,761

52,465

48,813

45,041

Cost of services (exclusive of depreciation and amortization)

(23,191)

(21,356)

(20,090)

Cost of products (exclusive of depreciation and amortization)

(5,173)

(5,064)

(4,944)

Selling, general, administrative and other

(8,523)

(8,565)

(8,365)

Depreciation and amortization

(2,354)

(2,288)

(2,192)

Total costs and expenses

(39,241)

(37,273)

(35,591)

(53)

(140)

(214)

(31)

(69)

(117)

23

(235)

814

854

688

Income before income taxes

13,868

12,246

9,620

Income taxes

(5,016)

(4,242)

(2,984)

8,852

8,004

6,636

Products
Total revenues
Costs and expenses:

Restructuring and impairment charges


Other expense, net
Interest income/(expense), net
Equity in the income of investees

Net income

(470)

Less: Net income attributable to noncontrolling interests

(503)

(500)

8,382

7,501

6,136

Diluted

4.90

4.26

3.38

Basic

4.95

4.31

3.42

Net income attributable to The Walt Disney Company (Disney)

Earnings per share attributable to Disney:

Weighted average number of common and common equivalent


shares outstanding:
Diluted

1,709

1,759

1,813

Basic

1,694

1,740

1,792

Dividends declared per share

1.81

See Notes to Consolidated Financial Statements

63

0.86

0.75

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME


(in millions)

2015
$

Net Income

2014

8,852

2013

8,004

6,636

Other comprehensive income/(loss), net of tax:


Market value adjustments for investments

(87)

Market value adjustments for hedges

92

130

121

135

Pension and postretirement medical plan adjustments

(301)

(925)

Foreign currency translation and other

(272)

(18)

(530)

(817)

Other comprehensive income/(loss)

8,322

Comprehensive income

1,963
(80)
2,110

7,187

8,746

Less: Net income attributable to noncontrolling interests

(470)

(503)

(500)

Less: Other comprehensive (income)/loss attributable to


noncontrolling interests

77

36

(31)

Comprehensive income attributable to Disney

7,929

See Notes to Consolidated Financial Statements

64

6,720

8,215

CONSOLIDATED BALANCE SHEETS


(in millions, except per share data)
October 3,
2015
ASSETS
Current assets
Cash and cash equivalents
Receivables
Inventories
Television costs and advances
Deferred income taxes
Other current assets
Total current assets
Film and television costs
Investments
Parks, resorts and other property
Attractions, buildings and equipment
Accumulated depreciation

Projects in progress
Land
Intangible assets, net
Goodwill
Other assets
Total assets
LIABILITIES AND EQUITY
Current liabilities
Accounts payable and other accrued liabilities
Current portion of borrowings
Unearned royalties and other advances
Total current liabilities
Borrowings
Deferred income taxes
Other long-term liabilities
Commitments and contingencies (Note 14)
Equity
Preferred stock, $.01 par value
Authorized 100 million shares, Issued none
Common stock, $.01 par value
Authorized 4.6 billion shares, Issued 2.8 billion shares
Retained earnings
Accumulated other comprehensive loss
Treasury stock, at cost, 1.2 billion shares at October 3, 2015 and 1.1 billion shares
at September 27, 2014
Total Disney Shareholders equity
Noncontrolling interests
Total equity
Total liabilities and equity
See Notes to Consolidated Financial Statements
65

4,269
8,019
1,571
1,170
767
962
16,758
6,183
2,643
42,745
(24,844)
17,901
6,028
1,250
25,179
7,172
27,826
2,421
88,182

7,844
4,563
3,927
16,334
12,773
4,051
6,369

September 27,
2014

3,421
7,822
1,574
1,061
497
794
15,169
5,325
2,696
42,263
(23,722)
18,541
3,553
1,238
23,332
7,434
27,881
2,304
84,141

7,595
2,164
3,533
13,292
12,631
4,098
5,942

35,122
59,028
(2,421)
91,729

34,301
53,734
(1,968)
86,067

(47,204)
44,525
4,130
48,655
88,182

(41,109)
44,958
3,220
48,178
84,141

CONSOLIDATED STATEMENTS OF CASH FLOWS


(in millions)
2015
OPERATING ACTIVITIES
Net income
Depreciation and amortization
Gains on sales of investments and dispositions
Deferred income taxes
Equity in the income of investees
Cash distributions received from equity investees
Net change in film and television costs and advances
Equity-based compensation
Other
Changes in operating assets and liabilities:
Receivables
Inventories
Other assets
Accounts payable and other accrued liabilities
Income taxes
Cash provided by operations

2014

8,852
2,354
(91)
(102)
(814)
752
(922)
410
341

8,004
2,288
(299)
517
(854)
718
(964)
408
234

2013
$

6,636
2,192
(325)
92
(688)
694
(49)
402
395

(211)
1
34
(49)
354
10,909

(480)
(81)
(151)
536
(96)
9,780

(374)
51
(30)
367
89
9,452

INVESTING ACTIVITIES
Investments in parks, resorts and other property
Sales of investments/proceeds from dispositions
Acquisitions
Other
Cash used in investing activities

(4,265)
166

(146)
(4,245)

(3,311)
395
(402)
(27)
(3,345)

(2,796)
479
(2,443)
84
(4,676)

FINANCING ACTIVITIES
Commercial paper borrowings/(repayments), net
Borrowings
Reduction of borrowings
Dividends
Repurchases of common stock
Proceeds from exercise of stock options
Contributions from noncontrolling interest holders
Other
Cash used in financing activities

2,376
2,550
(2,221)
(3,063)
(6,095)
329
1,012
(402)
(5,514)

50
2,231
(1,648)
(1,508)
(6,527)
404
608
(320)
(6,710)

(2,050)
3,931
(1,502)
(1,324)
(4,087)
587
505
(274)
(4,214)

Impact of exchange rates on cash and cash equivalents

(302)

(235)

(18)

Change in cash and cash equivalents


Cash and cash equivalents, beginning of year
Cash and cash equivalents, end of year
Supplemental disclosure of cash flow information:
Interest paid
Income taxes paid

848
3,421
4,269

314

4,396

See Notes to Consolidated Financial Statements


66

(510)
3,931
3,421

544
3,387
3,931

$
$

310
3,483

$
$

316
2,531

CONSOLIDATED STATEMENTS OF SHAREHOLDERS EQUITY


(in millions)
Equity Attributable to Disney

Common
Stock

Shares

Balance at September 29, 2012

1,780

31,731

Retained
Earnings

42,965

Accumulated
Other
Comprehensive
Income
(Loss)

(3,266)

Total
Disney
Equity

Treasury
Stock

$ (31,671)

39,759

Noncontrolling
Interests

2,199

Total Equity

41,958

Comprehensive income

6,136

2,079

8,215

531

8,746

Equity compensation activity

27

1,007

1,007

1,007

(71)

(4,087)

(4,087)

Dividends

18

(1,324)

(1,324)

Acquisition of Lucasfilm

37

679

Contributions

Distributions and other

Common stock repurchases

Balance at September 28, 2013

1,773

1,176

1,855

1,861

505

505

(1)

(520)

(516)

33,440

(1,342)

47,758

Comprehensive income

7,501

Equity compensation activity

18

844

(84)

Dividends

17

Contributions

Distributions and other

Common stock repurchases

Balance at September 27, 2014

1,707

34,301

2,721

48,150

844

844

(6,527)

(6,527)

(6,527)

(1,508)

(1,508)

608

608

(576)

(576)

53,734

14

828

(60)

Dividends

24

Contributions

Distributions and other

(31)

(1,968)

$ (41,109)

44,958

3,220

48,178

(453)

7,929

393

8,322

828

828

(3,087)

Equity compensation activity

35,122

45,429

7,187

8,382

467

1,661

$ (34,582)

6,720

(1,525)

(1,187)

Balance at October 3, 2015

(781)

Comprehensive income

Common stock repurchases

(4,087)

(6,095)

(6,095)

(6,095)

(3,063)

(3,063)

(1)

(32)

59,028

(2,421)

$ (47,204)

See Notes to Consolidated Financial Statements

67

44,525

1,012

1,012

(495)
$

4,130

(527)
$

48,655

CONSOLIDATED STATEMENTS OF INCOME


(in millions, except per share data)
2014

2013

2012

Revenues:
$

Services

40,246

37,280

34,625

8,567

7,761

7,653

48,813

45,041

42,278

Cost of services (exclusive of depreciation and amortization)

(21,356)

(20,090)

(18,625)

Cost of products (exclusive of depreciation and amortization)

(5,064)

(4,944)

(4,843)

Selling, general, administrative and other

(8,565)

(8,365)

(7,960)

Depreciation and amortization

(2,288)

(2,192)

(1,987)

Total costs and expenses

(37,273)

(35,591)

(33,415)

(140)

(214)

(100)

(31)

(69)

239

23

(235)

(369)

854

688

627

Income before income taxes

12,246

9,620

9,260

Income taxes

(4,242)

(2,984)

(3,087)

8,004

6,636

6,173

Products
Total revenues
Costs and expenses:

Restructuring and impairment charges


Other income/(expense), net
Interest income/(expense), net
Equity in the income of investees

Net income

(503)

Less: Net income attributable to noncontrolling interests

(500)

(491)

7,501

6,136

5,682

Diluted

4.26

3.38

3.13

Basic

4.31

3.42

3.17

Net income attributable to The Walt Disney Company (Disney)

Earnings per share attributable to Disney:

Weighted average number of common and common equivalent


shares outstanding:
Diluted

1,759

1,813

1,818

Basic

1,740

1,792

1,794

Dividends declared per share

0.86

See Notes to Consolidated Financial Statements

64

0.75

0.60

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME


(in millions)

2014
$

Net Income

2013

8,004

2012

6,636

6,173

Other comprehensive income (loss), net of tax:


Market value adjustments for investments
Market value adjustments for hedges

92

(3)

121

135

(925)

Pension and postretirement medical plan adjustments

(18)

Foreign currency translation and other

(80)

(817)

Other comprehensive income (loss)

(41)
(651)

2,110

7,187

Comprehensive income

(609)

1,963

8,746

5,522

Less: Net income attributable to noncontrolling interests

(503)

(500)

(491)

Less: Other comprehensive (income) loss attributable to


noncontrolling interests

36

(31)

15

Comprehensive income attributable to Disney

6,720

See Notes to Consolidated Financial Statements

65

8,215

5,046

CONSOLIDATED BALANCE SHEETS


(in millions, except per share data)
September 27,
2014
ASSETS
Current assets
Cash and cash equivalents
Receivables
Inventories
Television costs and advances
Deferred income taxes
Other current assets
Total current assets
Film and television costs
Investments
Parks, resorts and other property
Attractions, buildings and equipment
Accumulated depreciation

Projects in progress
Land
Intangible assets, net
Goodwill
Other assets
Total assets
LIABILITIES AND EQUITY
Current liabilities
Accounts payable and other accrued liabilities
Current portion of borrowings
Unearned royalties and other advances
Total current liabilities
Borrowings
Deferred income taxes
Other long-term liabilities
Commitments and contingencies (Note 14)
Equity
Preferred stock, $.01 par value
Authorized 100 million shares, Issued none
Common stock, $.01 par value
Authorized 4.6 billion shares, Issued 2.8 billion shares
Retained earnings
Accumulated other comprehensive loss
Treasury stock, at cost, 1.1 billion shares at September 27, 2014 and 1.0 billion
shares at September 28, 2013
Total Disney Shareholders equity
Noncontrolling interests
Total equity
Total liabilities and equity
See Notes to Consolidated Financial Statements
66

3,421
7,822
1,574
1,061
497
801
15,176
5,325
2,696
42,263
(23,722)
18,541
3,553
1,238
23,332
7,434
27,881
2,342
84,186

7,595
2,164
3,533
13,292
12,676
4,098
5,942

September 28,
2013

3,931
6,967
1,487
634
485
605
14,109
4,783
2,849
41,192
(22,459)
18,733
2,476
1,171
22,380
7,370
27,324
2,426
81,241

6,803
1,512
3,389
11,704
12,776
4,050
4,561

34,301
53,734
(1,968)
86,067

33,440
47,758
(1,187)
80,011

(41,109)
44,958
3,220
48,178
84,186

(34,582)
45,429
2,721
48,150
81,241

CONSOLIDATED STATEMENTS OF CASH FLOWS


(in millions)
2014
OPERATING ACTIVITIES
Net income
Depreciation and amortization
Gains on sales of investments, dispositions and acquisitions
Deferred income taxes
Equity in the income of investees
Cash distributions received from equity investees
Net change in film and television costs and advances
Equity-based compensation
Other
Changes in operating assets and liabilities:
Receivables
Inventories
Other assets
Accounts payable and other accrued liabilities
Income taxes
Cash provided by operations

8,004
2,288
(299)
517
(854)
718
(964)
408
234

2013
$

2012

6,636
2,192
(325)
92
(688)
694
(49)
402
395

6,173
1,987
(198)
472
(627)
663
(52)
408
231

(480)
(81)
(151)
536
(96)
9,780

(374)
51
(30)
367
89
9,452

(108)
18
(151)
(608)
(242)
7,966

INVESTING ACTIVITIES
Investments in parks, resorts and other property
Sales of investments/proceeds from dispositions
Acquisitions
Other
Cash used in investing activities

(3,311)
395
(402)
(27)
(3,345)

(2,796)
479
(2,443)
84
(4,676)

(3,784)
110
(1,088)
3
(4,759)

FINANCING ACTIVITIES
Commercial paper borrowings/(repayments), net
Borrowings
Reduction of borrowings
Dividends
Repurchases of common stock
Proceeds from exercise of stock options
Other
Cash used in financing activities

50
2,231
(1,648)
(1,508)
(6,527)
404
288
(6,710)

(2,050)
3,931
(1,502)
(1,324)
(4,087)
587
231
(4,214)

467
3,779
(3,822)
(1,076)
(3,015)
1,008
(326)
(2,985)

(235)

(18)

(20)

Impact of exchange rates on cash and cash equivalents


(Decrease)/increase in cash and cash equivalents
Cash and cash equivalents, beginning of year
Cash and cash equivalents, end of year
Supplemental disclosure of cash flow information:
Interest paid
Income taxes paid

(510)
3,931
3,421

$
$

310
3,483

See Notes to Consolidated Financial Statements


67

544
3,387
3,931

202
3,185
3,387

$
$

316
2,531

$
$

718
2,630

CONSOLIDATED STATEMENTS OF SHAREHOLDERS EQUITY


(in millions)
Equity Attributable to Disney

Common
Stock

Shares

Balance at October 1, 2011

1,808

30,296

Retained
Earnings

38,375

Comprehensive income

5,682

Equity compensation activity

44

1,415

(72)

Dividends

16

Distributions and other

Common stock repurchases

Balance at September 29, 2012

1,780

31,731

Accumulated
Other
Comprehensive
Income
(Loss)

$ (28,656)

37,385

Noncontrolling
Interests

2,068

Total Equity

39,453

(636)

5,046

476

5,522

1,415

1,415

(3,015)

(3,015)

(1,076)

(1,076)

(1,092)

(2,630)

Total
Disney
Equity

Treasury
Stock

42,965

(3,015)

(3,266)

$ (31,671)

4
$

39,759

(345)
$

2,199

(341)
$

41,958

Comprehensive income

6,136

2,079

8,215

531

8,746

Equity compensation activity

27

1,007

1,007

1,007

(71)

(4,087)

(4,087)

Dividends

18

(1,324)

(1,324)

Acquisition of Lucasfilm

37

679

Contributions

Distributions and other

Common stock repurchases

Balance at September 28, 2013

1,773

1,176

1,855

1,861

505

505

(1)

(520)

(516)

33,440

(1,342)

47,758

Comprehensive income

7,501

Equity compensation activity

18

844

(84)

Dividends

17

Contributions

Distributions and other

Common stock repurchases

Balance at September 27, 2014

1,707

(4,087)

34,301

$ (34,582)

45,429

2,721

48,150

(781)

6,720

467

7,187

844

844

(1,525)

(1,187)

(6,527)

(6,527)

(6,527)

(1,508)

(1,508)

608

608

(576)

(576)

53,734

(1,968)

$ (41,109)

See Notes to Consolidated Financial Statements

68

44,958

3,220

48,178

Appendix B

Statement of Income Statement


Vertical Analysis

Dollar
Revenues:
Services
Products
Total revenues

2015
Percent

$ 43,894
8,571
52,465

Costs and expenses:


Cost of services (exclusive of depreciation and amortization)
Cost of products (exclusive of depreciation and amortization)
Selling, general, administrative and other
Depreciation and amortization
Total costs and expenses

83.66%
16.34%
100.00%

Dollar

2014
Percent

$ 40,246
8,567
48,813

82.45%
17.55%
100.00%

Dollar

2013
Percent

$ 37,280
7,761
45,041

82.77%
17.23%
100.00%

(23,191)
(5,173)
(8,523)
(2,354)
(39,241)

-44.20%
-9.86%
-16.25%
-4.49%
-74.79%

(21,356)
(5,064)
(8,565)
(2,288)
(37,273)

-43.75%
-10.37%
-17.55%
-4.69%
-76.36%

(20,090)
(4,944)
(8,365)
(2,192)
(35,591)

-44.60%
-10.98%
-18.57%
-4.87%
-79.02%

Restructuring and impairment charges


Other expense, net
Interest income/(expense), net
Equity in the income of investees
Income before income taxes

(53)
(117)
814
13,868

-0.10%
0.00%
-0.22%
1.55%
26.43%

(140)
(31)
23
854
12,246

-0.29%
-0.06%
0.05%
1.75%
25.09%

(214)
(69)
(235)
688
9,620

-0.48%
-0.15%
-0.52%
1.53%
21.36%

Income taxes
Net income

(5,016)
8,852

-9.56%
16.87%

(4,242)
8,004

-8.69%
16.40%

(2,984)
6,636

-6.63%
14.73%

(470)
8,382

-0.90%
15.98%

(503)
7,501

-1.03%
15.37%

(500)
6,136

-1.11%
13.62%

Less: Net income attributable to noncontrolling interests


Net income attributable to Disney

Statement of Income Statement


Horizontal Analysis

Revenues:
Services
Products
Total revenues

2015

2014

$ 43,894
8,571
52,465

$ 40,246
8,567
48,813

Costs and expenses:


Cost of services (exclusive of depreciation and amortization)
Cost of products (exclusive of depreciation and amortization)
Selling, general, administrative and other
Depreciation and amortization
Total costs and expenses

Variance
Dollar
Percent

2014

2013

$ 40,246
8,567
48,813

$ 37,280
7,761
45,041

3,648
4
3,652

9.06%
0.05%
7.48%

(1,835)
(109)
42
(66)
(1,968)

8.59%
2.15%
-0.49%
2.88%
5.28%

(21,356)
(5,064)
(8,565)
(2,288)
(37,273)

(20,090)
(4,944)
(8,365)
(2,192)
(35,591)

87
-62.14%
31 -100.00%
(140) -608.70%
(40)
-4.68%
1,622
13.25%

(140)
(31)
23
854
12,246

(214)
(69)
(235)
688
9,620

74
38
258
166
2,626

(4,242)
8,004

(2,984)
6,636

(1,258)
1,368

42.16%
20.61%

(3)
1,365

0.60%
22.25%

(23,191)
(5,173)
(8,523)
(2,354)
(39,241)

(21,356)
(5,064)
(8,565)
(2,288)
(37,273)

Restructuring and impairment charges


Other expense, net
Interest income/(expense), net
Equity in the income of investees
Income before income taxes

(53)
(117)
814
13,868

(140)
(31)
23
854
12,246

Income taxes
Net income

(5,016)
8,852

(4,242)
8,004

(774)
848

18.25%
10.59%

33
881

-6.56%
11.75%

(503)
7,501

(500)
6,136

Less: Net income attributable to noncontrolling interests


Net income attributable to Disney

Earnings per share attributable to Disney (Basic)


Weighted average number of common shares
outstanding (Basic)
Dividends declared per share

Variance
Dollar
Percent
2,966
806
3,772

7.96%
10.39%
8.37%

(1,266)
(120)
(200)
(96)
(1,682)

6.30%
2.43%
2.39%
4.38%
4.73%
-34.58%
-55.07%
-109.79%
24.13%
27.30%

(470)
8,382

(503)
7,501

4.95

4.31

0.64

14.78%

4.31

3.42

0.89

25.90%

1,694
1.81

1,740
0.86

(46)
0.95

-2.64%
110.47%

1,740
0.86

1,792
0.75

(52)
0.11

-2.90%
14.67%

Balance Sheet
Vertical Analysis
Oct. 3, 2015
Doller
Percent
ASSETS
Current assets
Cash and cash equivalents
Receivables
Inventories
Television costs and advances
Deferred income taxes
Other current assets
Total current assets
Film and television costs
Investments
Parks, resorts and other property
Attractions, buildings and equipment
Accumulated depreciation
Projects in progress
Land
Intangible assets, net
Goodwill
Other assets
Total assets
LIABILITIES AND EQUITY
Current liabilities
Accounts payable and other accrued liabilities
Current portion of borrowings
Unearned royalties and other advances
Total current liabilities
Borrowings
Deferred income taxes
Other long-term liabilities
Total Liabilities
Equity
Common stock, $.01 par value
Authorized 4.6 billion shares, Issued 2.8 billion
shares
Retained earnings
Accumulated other comprehensive loss
Treasury stock, at cost,
1.2 billion shares at October 3, 2015 and 1.1 billion
shares at September 27, 2014
Total Disney Shareholders equity
Noncontrolling interests
Total equity
Total liabilities and equity

4,269
8,019
1,571
1,170
767
962
16,758

4.84%
9.09%
1.78%
1.33%
0.87%
1.09%
19.00%

6,183
2,643

7.01%
3.00%

42,745
(24,844)
17,901
6,028
1,250
25,179
7,172
27,826
2,421
$ 88,182

48.47%
-28.17%
20.30%
6.84%
1.42%
28.55%
8.13%
31.56%
2.75%
100.00%

7,844
4,563
3,927
16,334

8.90%
5.17%
4.45%
18.52%

12,773
4,051
6,369
43,657

Sep. 27, 2014


Doller
Percent

3,421
7,822
1,574
1,061
497
801
15,176

4.06%
9.29%
1.87%
1.26%
0.59%
0.95%
18.03%

5,325
2,696

6.33%
3.20%

42,263
(23,722)
18,541
3,553
1,238
23,332
7,434
27,881
2,342
$ 84,186

50.20%
-28.18%
22.02%
4.22%
1.47%
27.71%
8.83%
33.12%
2.78%
100.00%

7,595
2,164
3,533
13,292

9.02%
2.57%
4.20%
15.79%

14.48%
4.59%
7.22%
49.51%

12,676
4,098
5,942
39,228

35,122
59,028
(2,421)
91,729

39.83%
66.94%
-2.75%
104.02%

(47,204)
44,525
4,130
48,655
$ 88,182

-53.53%
50.49%
4.68%
55.18%
100.00%

Sep. 28, 2013


Doller
Percent

3,931
6,967
1,487
634
485
605
14,109

4.84%
8.58%
1.83%
0.78%
0.60%
0.74%
17.37%

4,783
2,849

5.89%
3.51%

41,192
(22,459)
18,733
2,476
1,171
22,380
7,370
27,324
2,426
$ 81,241

50.70%
-27.64%
23.06%
3.05%
1.44%
27.55%
9.07%
33.63%
2.99%
100.00%

6,803
1,512
3,389
11,704

8.37%
1.86%
4.17%
14.41%

15.06%
4.87%
7.06%
46.60%

12,776
4,050
4,561
35,812

15.73%
4.99%
5.61%
44.08%

34,301
53,734
(1,968)
86,067

40.74%
63.83%
-2.34%
102.23%

33,440
47,758
(1,187)
80,011

41.16%
58.79%
-1.46%
98.49%

(41,109)
44,958
3,220
48,178
$ 84,186

-48.83%
53.40%
3.82%
57.23%
100.00%

(34,582)
45,429
2,721
48,150
$ 81,241

-42.57%
55.92%
3.35%
59.27%
100.00%

Balance Sheet
Horizontal Analysis

2015
ASSETS
Current assets
Cash and cash equivalents
Receivables
Inventories
Television costs and advances
Deferred income taxes
Other current assets
Total current assets
Film and television costs
Investments
Parks, resorts and other property
Attractions, buildings and equipment
Accumulated depreciation
Projects in progress
Land
Intangible assets, net
Goodwill
Other assets
Total assets
LIABILITIES AND EQUITY
Current liabilities
Accounts payable and other accrued liabilities
Current portion of borrowings
Unearned royalties and other advances
Total current liabilities
Borrowings
Deferred income taxes
Other long-term liabilities
Total Liabilities
Equity
Common stock, $.01 par value
Authorized 4.6 billion shares, Issued 2.8
billion shares
Retained earnings
Accumulated other comprehensive loss
Treasury stock, at cost,
1.2 billion shares at October 3, 2015 and 1.1
billion shares at September 27, 2014
Total Disney Shareholders equity
Noncontrolling interests
Total equity
Total liabilities and equity

4,269
8,019
1,571
1,170
767
962
16,758

2014

Variance
Dollar
Percent

3,421
7,822
1,574
1,061
497
801
15,176

848
197
(3)
109
270
161
1,582

24.79%
2.52%
-0.19%
10.27%
54.33%
20.10%
10.42%

5,325
2,696

858
(53)

16.11%
-1.97%

482
(1,122)
(640)
2,475
12
1,847
(262)
(55)
79
3,996

1.14%
4.73%
-3.45%
69.66%
0.97%
7.92%
-3.52%
-0.20%
3.37%
4.75%

7,595
2,164
3,533
13,292

249
2,399
394
3,042

3.28%
110.86%
11.15%
22.89%

12,773
4,051
6,369
43,657

12,676
4,098
5,942
39,228

97
(47)
427
4,429

0.77%
-1.15%
7.19%
11.29%

35,122
59,028
(2,421)
91,729

34,301
53,734
(1,968)
86,067

821
5,294
(453)
5,662

(47,204)
44,525
4,130
48,655
$ 88,182

(41,109)
44,958
3,220
48,178
$ 84,186

(6,095)
(433)
910
477
3,996

6,183
2,643
42,745
(24,844)
17,901
6,028
1,250
25,179
7,172
27,826
2,421
$ 88,182

42,263
(23,722)
18,541
3,553
1,238
23,332
7,434
27,881
2,342
$ 84,186

7,844
4,563
3,927
16,334

2014

3,421
7,822
1,574
1,061
497
801
15,176

2013

Variance
Dollar
Percent

3,931
6,967
1,487
634
485
605
14,109

(510)
855
87
427
12
196
1,067

-12.97%
12.27%
5.85%
67.35%
2.47%
32.40%
7.56%

4,783
2,849

542
(153)

11.33%
-5.37%

1,071
(1,263)
(192)
1,077
67
952
64
557
(84)
2,945

2.60%
5.62%
-1.02%
43.50%
5.72%
4.25%
0.87%
2.04%
-3.46%
3.63%

6,803
1,512
3,389
11,704

792
652
144
1,588

11.64%
43.12%
4.25%
13.57%

12,676
4,098
5,942
39,228

12,776
4,050
4,561
35,812

(100)
48
1,381
3,416

-0.78%
1.19%
30.28%
9.54%

2.39%
9.85%
23.02%
6.58%

34,301
53,734
(1,968)
86,067

33,440
47,758
(1,187)
80,011

861
5,976
(781)
6,056

2.57%
12.51%
65.80%
7.57%

14.83%
-0.96%
28.26%
0.99%
4.75%

(41,109)
44,958
3,220
48,178
$ 84,186

(34,582)
45,429
2,721
48,150
$ 81,241

(6,527)
(471)
499
28
2,945

18.87%
-1.04%
18.34%
0.06%
3.63%

5,325
2,696
42,263
(23,722)
18,541
3,553
1,238
23,332
7,434
27,881
2,342
$ 84,186

41,192
(22,459)
18,733
2,476
1,171
22,380
7,370
27,324
2,426
$ 81,241

7,595
2,164
3,533
13,292

Ratio Expressions
Liquidity The ability to pay current liabilities
Working Capital = "#$$%&' )**%'* "#$$%&' ,-./-0-'-%*
Current Ratio =

12'.0 "#$$%&' )**%'*


12'.0 "#$$%&' ,-./-0-'-%*

Cash Ratio =

".* & ".* 56#-7.0%&'*


12'.0 "#$$%&' ,-./-0-'-%*

Acid-Test Ratio =

".* + 91 :&7%*';%&'* + <%' "#$$%&' =%>%-7./0%*


12'.0 "#$$%&' ,-./-0-'-%*

Efficiency The ability to sell merchandise inventory and collect receivables


Inventory Turnover =

"2*' 2? @22A* 920A


)7%$.B% C%$>.&A-*% :&7%&'2$D

Day's Sales in Inventory =

365 H.D*
:&7%&'2$D 1#$&27%$

Gross Profit Percentage =

@$2** I$2?-'
<%' 9.0%* =%7%&#%

<%' "$%A-' 9.0%*


Accounts Receivable
=
)7%$.B% <%' )>>2#&'* =%>%-7./0%*
Turnover Ratio

Day's Sales in Receivables =

365 H.D*
)>>2#&'* =%>%-7./0% 1#$&27%$ =.'-2

Solvency The ability to pay long-term debt


Debt Ratio =

12'.0 ,-./-0-'-%*
12'.0 )**%'*

Debt to Equity Ratio =

12'.0 ,-./-0-'-%*
12'.0 56#-'D

Times-Interest-Earned Ratio =

<%' :&>2;% + :&>2;% 1.J 5JK%&*% + :&'%$%*' 5JK%&*%


:&'%$%*' 5JK%&*%

Profitability Evaluating profitability


Profit Margin Ratio =
Rate of Return on Total
Assets

Asset Turnover Ratio =

<%' :&>2;%
<%' 9.0%*
<%' :&>2;% + :&'%$%*' 5JK%&*%
)7%$.B% 12'.0 )**%'*
<%' 9.0%*
)7%$.B% 12'.0 )**%'*

Rate of Return on Common


<%' :&>2;% I$%?%$$%A H-7-A%&A*
=
)7%$.B% "2;;2& 9.$%20A%$*L 56#-'D
Stockholder's Equity
Earnings Per Share =

<%' :&>2;% I$%?%$$%A H-7-A%&A*


M%-B'%A )7%$.B% <#;/%$ 2? "2;;2& 9.$%* N#'*'.&A-&B

Investment Potential Evaluating stock as an investment


Price/Earnings Ratio =

C.$O%' I$->% I%$ 9.$% 2? "2;;2& 9'2>O


5.$&-&B* I%$ 9.$%

Dividend Yield

)&&#.0 H-7-A%&A I%$ 9.$%


C.$O%' I$->% I%$ 9.$%

Dividend Payout

)&&#.0 H-7-A%&A I%$ 9.$%


5.$&-&B* I%$ 9.$%

Ratio Analysis
2015
Liquidity
Working Capital
Current Ratio
Cash Ratio
Acid-Test Ratio
Efficiency
Inventory Turnover
Day's Sales in Inventory
Accounts Receivable
Turnover Ratio
Day's Sales in Receivables
Gross Profit Percentage
1) Services:
2) Products:

% Variance

=16758-16334
=16758/16334
=4269/16334
=(4269+0+8019)/16334

424
1.03
0.26
0.75

=15169-13292
=15169/13292
=3421/13292
=(3421+0+7822)/13292

1,877
1.14
0.26
0.85

-77.41%
-10.10%
1.55%
-11.06%

=5173/((1571+1574)/2)
=365/3.29

3.29
110.95

=5064/((1574+1487)/2)
=365/3.31

3.31
110.31

-0.58%
0.58%

6.60

0.34%

=52465/((8019+7822)/2)
=365/6.62
=(52465-23191-5173)/52465
=(43894-23191)/43894
=(8571-5173)/8571

Solvency
Debt Ratio =39527/88182
Debt to Equity Ratio =39527/48655
Times-Interest-Earned Ratio N/A (No Separate Interest Expense)
Profitability
Asset Turnover Ratio
Profit Margin Ratio
Rate of Return on Total
Assets
Rate of Return on Common
Stockholder's Equity
Earnings Per Share

2014

6.62
55.10
45.94%
47.17%
39.65%

0.45
0.81

=48813/((7822+6967)/2)
=365/6.6
=(48813-21356-5064)/48813
=(40246-21356)/40246
=(8567-5064)/8567

4.87%
8.83%

0.59
16.40%

3.15%
2.90%

9.42%

10.46%

26.57%

11.71%

0.61
16.87%

=48813/((84141+81241)/2)
=8004/48813

=(8852+117)/[(88182+84141)/2]

10.41%

=(8004-23)/((88141+81241)/2)

=8852/((44525+44958)/2)

29.68%

=8004/((44958+45429)/2)

Investment Potential
Price/Earnings Ratio =99.6/5.23
Dividend Yield =1.81/99.6
Dividend Payout =1.81/5.23

5.23

19.04
0.02
34.61%

-0.34%
0.14%
0.49%
-3.04%

=35963/84141
0.43
=35963/48178
0.75
N/A (No Separate Interest Expense)

=52465/((88182+84141)/2)
=8852/52465

=8852/1694

55.29
45.88%
46.94%
40.89%

=8004/1740

4.60

13.60%

Ratio Analysis
2015
Liquidity
Working Capital
Current Ratio
Cash Ratio
Acid-Test Ratio
Efficiency
Inventory Turnover
Day's Sales in Inventory
Accounts Receivable
Turnover Ratio
Day's Sales in Receivables
Gross Profit Percentage
1) Services:
2) Products:

2014

=16758-16334
=16758/16334
=4269/16334
=(4269+0+8019)/16334

424
1.03
0.26
0.75

=15176-13292
=15176/13292
=3421/13292
=(3421+0+7822)/13292

1,884
1.14
0.26
0.85

-77.49%
-10.14%
1.55%
-11.06%

=5173/((1571+1574)/2)
=365/3.29

3.29
110.95

=5064/((1574+1487)/2)
=365/3.31

3.31
110.31

-0.58%
0.58%

6.60

0.34%

=52465/((8019+7822)/2)
=365/6.62
=(52465-23191-5173)/52465
=(43894-23191)/43894
=(8571-5173)/8571

6.62
55.10
45.94%
47.17%
39.65%

Solvency
Debt Ratio =43657/88182
0.50
Debt to Equity Ratio =43657/44525
0.98
Times-Interest-Earned Ratio N/A (Interest Expense Netted, Not Seperate)
Profitability
Asset Turnover Ratio
Profit Margin Ratio
Rate of Return on Total
Assets
Rate of Return on Common
Stockholder's Equity
Earnings Per Share

% Variance

=52465/((88182+84186)/2)
=8382/52465
=(8382+117)/((88182+84186)/2)
=8382/((44525+44958)/2)
=8382/1694

Investment Potential
Price/Earnings Ratio =99.6/4.95
Dividend Yield =1.81/99.6
Dividend Payout =1.81/4.95

0.61
15.98%
9.86%
28.10%
4.95

20.13
0.02
36.58%

=48813/((7822+6967)/2)
=365/6.6
=(48813-21356-5064)/48813
=(40246-21356)/40246
=(8567-5064)/8567

55.29
45.88%
46.94%
40.89%

=39228/84186
0.47
=39228/44958
0.87
N/A (Interest Expense Netted, Not Seperate)

=48813/((84186+81241)/2)
=7501/48813
=(7501-23)/((84186+81241)/2)
=7501/((44958+45429)/2)
=7501/1740

-0.34%
0.14%
0.49%
-3.04%

6.25%
12.37%

0.59
15.37%

3.15%
3.97%

9.04%

9.08%

24.90%

12.87%

4.31

14.78%

Appendix C

93-266-0376. THE WALT DISNEY COMPANY


Key Information
D-U-N-S Number
Physical Address
Zip code
MSA code
Subsidiary Status
Manufacturer
Location Type
Ultimate Parent DUNSNO
Ultimate Parent Name
Marketing Pre-Screen Ranking
Company Type
Plant/Facility Size (Sq. ft.) (modeled)
Owns/Rents
Foreign Trade
Employees (All Sites)
Employees (This Site)
1-Year Employee Growth
Year of Founding
Primary SIC Code
Primary NAICS Code
Sales
Minority Owned
Latitude
Longitude
Phone
Fax
Website

93-266-0376
500 S BUENA VISTA ST,BURBANK, CALIFORNIA, USA
91521-0007
LOS ANGELES/LONG BEACH, CA
Non-Subsidiary
No
Headquarters
93-266-0376
THE WALT DISNEY COMPANY
3 (Neutral)
Public
2130000
Owns
Both
175000
6000
175000
1925
48330000 Television broadcasting stations
515120 Television Broadcasting
52465000000
NO
34.15710000
-118.32520000
(818) 560-1000
(818) 560-1035
http://WWW.DISNEY.COM

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93-266-0376. THE WALT DISNEY COMPANY


Company Description
500 S Buena Vista St,
Burbank, CA 91521-0007,Burbank,
- 91521-0007,
United States
Phone:818-560-1000
Fax:818-560-1035
http://disney.go.com

The monarch of this magic kingdom is no man but a mouse: Mickey Mouse. The Walt Disney Company is
the world's largest media conglomerate, with assets encompassing movies, television, publishing, and
theme parks. Its Disney/ABC Television Group includes the ABC television network and 10 broadcast
stations, as well as a portfolio of cable networks including ABC Family, Disney Channel, and ESPN
(80%-owned). Walt Disney Studios produces films through imprints Walt Disney Pictures, Disney Animation,
and Pixar. It also owns Marvel Entertainment and Lucasfilm, two extremely successful film producers. In
addition, Walt Disney Parks and Resorts runs its popular theme parks including Walt Disney World and
Disneyland.Geographic ReachDisney has properties in the US and Canada, Europe, Asia, Australia, and
Latin America. The company gets about 75% of its revenue from the US and Canada.Other international
Disney park locations include a 40% interest in Euro Disney, which operates Disneyland Paris; the company
also collects royalties and fees from Tokyo Disneyland Resort, operated by Oriental Land Co.Sales and
MarketingDisney incurs significant marketing and advertising costs before and throughout the theatrical
release of its films in an effort to generate publicity and generate consumer interest in the subsequent home
entertainment market. The company's total annual advertising expenses were $2.8 billion in fiscal 2014.
Financial PerformanceDisney's robust revenue has been growing year-over-year. Its revenue increased by

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8% in fiscal 2014 compared the previous year, spiking to $48 billion from $45 billion in fiscal 2013.Disney's
net income increased 22% in fiscal 2014 compared to the prior year. The company cleared $7.5 billion after
claiming a net income of $6.1 billion for fiscal 2013.The growth in revenue and net income was attributed
revenue from nearly all of the company's segments including its media networks segment, the parks and
resorts segment, the interactive segment, and Disney's consumer products segment.Disney's cash flow
remained strong and steady like its revenue in fiscal 2014.StrategyLike other media conglomerates, the
company depends on its wide array of entertainment offerings across its film, television, and theme parks
divisions to generate revenue; it also earns money by distributing its content through multiple channels. A
substantial part of Disney's business also comes from ancillary products, mostly aimed at children, created
from its trove of characters and other intellectual property.Mergers and AcquisitionsIn 2014 Disney agreed
to acquire Maker Studios, the leading network of online video content on YouTube. The acquisition will let
Disney deliver content to consumers on whatever platform they prefer.In December 2012 Disney sent
shockwaves across the media world when it acquired Lucasfilm from George Lucas for more than $4 billion
in order to add the Star Wars franchise to its already bursting portfolio of entertainment properties. The
company plans to build Star Wars themed amusement parks in the next few years.

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93-266-0376. THE WALT DISNEY COMPANY


Rankings

#, Dow Jones Global Titans


#, Dow Jones Industrials
#57, FORTUNE 1000 (June 2015)
#57, FORTUNE 500 (June 2015)
#30, FT Global 500 (June 2015)
#, S&P 500

4/84

93-266-0376. THE WALT DISNEY COMPANY


History

Company BackgroundAfter getting started as an illustrator in Kansas City, Walt Disney and his brother Roy
started Disney Brothers Studio in Hollywood, California, in 1923. Walt directed the first Mickey Mouse
cartoon, Plane Crazy, in 1928 (the third, Steamboat Willie, was the first cartoon with a soundtrack). The
studio produced its first animated feature film, Snow White and the Seven Dwarfs, in 1937. Walt Disney
Productions went public in 1940 and later produced classics such as Fantasia and Pinocchio. The
Disneyland theme park opened in 1955.Roy Disney became chairman after Walt died of lung cancer in
1966. Disney World opened in Florida in 1971, the year Roy died. His son, Roy E., became the company's
principal individual shareholder. Walt's son-in-law, Ron Miller, became president in 1980. Two years later
Epcot Center opened in Florida. In 1984 the Bass family of Texas, in alliance with Roy E., bought a
controlling interest in the company. New CEO Michael Eisner (from Paramount) and president Frank Wells
(from Warner Bros.) ushered in an era of innovation, prosperity, and high executive salaries.The company
later launched The Disney Channel and opened new theme parks, including Tokyo Disneyland (1984) and
Disney-MGM Studios (1989; eventually renamed Hollywood Studios). In 1986 the company changed its
name to The Walt Disney Company. The Disney Store retail chain debuted in 1987. Disneyland Paris
(originally Euro Disney) opened in 1992. The following year Disney expanded its movie studio with the
purchase of independent film company Miramax, the brainchild of producers Bob and Harvey Weinstein.
Following Wells' death in a helicopter crash in 1994, boardroom infighting led to the acrimonious departure
of studio head Jeffrey Katzenberg. (He was awarded $250 million in compensation in 1999.) The next year
Eisner appointed Hollywood agent Michael Ovitz as president. (Ovitz left after 16 months with a severance
package of more than $100 million.) Disney bought Capital Cities/ABC (now ABC, Inc.) for $19 billion in
1996, and two years later it bought Web services firm Starwave from Microsoft co-founder Paul Allen. It later
acquired 43% of Internet search engine Infoseek for $70 million, and together they launched the GO
Network in 1999. Disney bought the remaining 57% of Infoseek later that year and formed GO.com (later

5/84

Disney Online), which began trading as a separate tracking stock.In early 2000 ABC chairman Robert Iger
was named Disney's president and COO. Later that year Time Warner Cable briefly suspended ABC
broadcasts during a dispute over re-broadcasting rights, drawing the ire of some 3.5 million cable
customers. (The FCC later ruled that Time Warner violated rules against dropping a station from cable
systems during sweeps periods.)The company expanded its theme parks in Anaheim in 2001, opening
Downtown Disney and Disney's California Adventure. It also announced a further restructuring of its Internet
business, including closing the GO.com search site and converting its Internet tracking stock back into
Disney common stock. That year Disney formed a joint venture with Wenner Media (US Weekly LLC) and
took a 50% stake in entertainment magazine US Weekly (sold in 2006). Later Disney bought Fox Family
Channel, which it renamed ABC Family, from News Corporation and Haim Saban for $2.9 billion in cash and
assumption of $2.3 billion in debt.In 2003 Disney began its exit from the sports world by selling the Anaheim
Angels. (The company had acquired a 25% stake in the baseball team in 1995 and purchased the remaining
interest four years later.) At Disney's annual shareholder meeting in 2004, about 45% of stock owners voted
to not re-elect the embattled Eisner to the board. In response, Disney directors stripped Eisner of the
chairman title and named director and former US senator George Mitchell to that position.Disney sold its
under-performing chain of Disney Store retail outlets to The Children's Place in 2004. Amid all the strife, the
company boosted its children's entertainment properties by purchasing the Muppet and Bear in the Big Blue
House characters, along with their film and television libraries, from The Jim Henson Company.Several big
executive shakeups occurred at Walt Disney in late 2005. Eisner finally passed the CEO torch after more
than 20 years to former COO Iger. That same year Disney Parks opened Hong Kong Disneyland, the
company's biggest foray into the world's most populated country. In addition, the Weinstein brothers left
Miramax to form The Weinstein Company, ending two of the most successful tenures of the independent
film movement. (Disney ceased the operations of Miramax in a cost-cutting move in 2010, and announced
plans to sell the Miramax label later that year.)In mid-2006 Walt Disney completed a crucial acquisition -- the
$7.4 billion purchase of Pixar Animation. Disney almost lost Pixar as a production partner in the animation
house's blockbuster films, but Iger successfully dodged the bullet. Disney Studios' release of Pirates of the
Caribbean: Dead Man's Chest that year topped box office records when it brought in $132 million during its
opening weekend. The mark was broken by the third installment of the series, Pirates of the Caribbean: At
World's End, which took in $156 million when it was released the next year. Also in 2007, Disney spun off
ABC's radio broadcasting operations to Citadel Broadcasting for $2.7 billion in cash and stock.Disney
re-acquired the Disney Store chain in 2008 from Hoop Holdings, a subsidiary of retailer The Children's
Place, in an effort to save the stores from closing. Hoop Holdings had filed bankruptcy that year citing
continued losses and rising debt. (The Children's Place was not involved in the bankruptcy filing.) Also in
2008 the company reorganized its digital holdings with the formation of Disney Interactive Media Group. The
following year, the company purchased a 30% stake in video streaming website Hulu.Roy E. died in late
2009 at age 79. Also that year Disney acquired Marvel Entertainment, bringing Spider-Man, Iron Man, and
other comic book characters into the Magic Kingdom. The deal was worth a whopping $4 billion, and
changed the course of its movie-making strategy, reducing the number of films the studio releases each
year while significantly ramping up production of costly big-budget franchises.In attempts to cut costs,
Disney Studios in 2010 sold its venerable Miramax production unit (producer of films as Pulp Fiction and
Shakespeare in Love) in 2010 to a group of investors (including Ron Tutor, private equity firm Colony
Capital, and Qatar Holdings) for some $663 million. Also that year the company spent $563.2 million to
acquire Playdom, a popular social game company on Facebook, in order to boost its DIMG holdings.
Meanwhile, Pixar's Toy Story 3 was the top grossing summer release in 2010.Jobs, who stepped down as
CEO of Apple in 2011 for medical reasons and died of pancreatic cancer later that year, had been Disney's
largest individual stockholder with a 7% stake he acquired when the company purchased Pixar. (Jobs had
bought Pixar from Lucasfilm in 1986.) Upon his death, his Disney shares were converted to the Steven P.

6/84

Jobs Trust led by his widow, Laurene Powell Jobs.Disney's 2012 box office bomb John Carter lost some
$200 million, and is reported to be one of the biggest money-losing films of all time.

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93-266-0376. THE WALT DISNEY COMPANY


Balance Sheet
Balance Sheet
Total Assets
Current Assets
Total Liabilities
Long Term Debt
Stockholders'
Equity
Total Assets per
Share
Current Liabilities
Net Assets per
Share

2015
88,182,000
16,758,000
43,657,000
12,773,000

2014
84,186,000
15,176,000
39,228,000
12,676,000

(In Thousands)
2013
81,241,000
14,109,000
35,812,000
13,050,000

44,525,000

44,958,000

45,429,000

39,759,000

37,385,000

55.11

49.32

45.13

42.08

40.93

16,334,000

13,292,000

11,704,000

12,813,000

12,088,000

27.83

26.34

25.24

22.34

21.21

8/84

2012
74,898,000
13,709,000
35,139,000
10,981,000

2011
72,124,000
13,757,000
34,739,000
11,210,000

93-266-0376. THE WALT DISNEY COMPANY


Historical Financial
Year

Sales volume (Millions)


$42,278.00
$42,278.00
$40,893.00
$38,063.00

2013
2012
2011
2010

Year
2013
2012
2011
2010

Employees This Site


6,000
6,000
6,000
6,000

Employees All Sites


166,000
156,000
149,000
144,020

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93-266-0376. THE WALT DISNEY COMPANY


Cash Flow Statement
Cash Flow
2015
Cash from
Operations
Cash from
Investing
Cash from
Financing
Capital
Expenditures
Cash Flow per
Share
Cash & Cash
Equivalents,
Beginning of Year
Cash & Cash
Equivalents, End
of Year

(In Thousands)
2013

2014

2012

2011

10,909,000

9,780,000

9,452,000

7,966,000

6,994,000

(4,245,000)

(3,345,000)

(4,676,000)

(4,759,000)

(3,286,000)

(5,514,000)

(6,710,000)

(4,214,000)

(2,985,000)

(3,233,000)

4,265,000

3,311,000

2,796,000

3,784,000

3,559,000

6.38

5.56

5.21

4.38

3.66

3,421,000

3,931,000

3,387,000

3,185,000

2,722,000

4,269,000

3,421,000

3,931,000

3,387,000

3,185,000

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93-266-0376. THE WALT DISNEY COMPANY


Income Statement
Income
Statement
Total Revenue
EBITDA
Operating
Income
Net Income
Revenue per
Share
EPS from
Continuing
Operations
EPS - Net
Income - Diluted
Share
Outstanding
Weighted
Average Shares
Outstanding Basic
Weighted
Average Shares
Outstanding Diluted
Earnings per
Share - Basic

(In Thousands)
2015
52,465,000
15,525,000

2014
48,813,000
13,657,000

2013
45,041,000
11,140,000

2012
42,278,000
10,989,000

2011
40,893,000
9,642,000

13,171,000

11,400,000

9,236,000

8,763,000

7,726,000

8,382,000

7,501,000

6,136,000

5,682,000

4,807,000

30.47

28.13

25.20

23.63

21.83

4.90

4.26

3.38

3.13

2.52

4.90

4.26

3.38

3.13

2.52

1,600,000

1,707,000

1,800,000

1,780,000

1,762,200

1,694,000

1,740,000

1,792,000

1,794,000

1,878,000

1,709,000

1,759,000

1,813,000

1,818,000

1,909,000

4.95

4.31

3.42

3.17

2.56

11/84

93-266-0376. THE WALT DISNEY COMPANY


Ratios
Ratios
Profitability Ratios
Gross Margin
Operating Margin
EBITDA Margin %
Calculated Tax Rate %
Profit Margin (TTM)
Valuation Ratios
Price/Earnings (TTM)
Price/Book (TTM)
Price/Cash Flow(TTM)
Liquidity Indicators
Quick Ratio
Current Ratio
Net Current Assets as %
of Total Assets
Free Cash Flow per
Share
Revenue to Assets

2015

2014

2013

2012

2011

45.94
25.10
29.59
38.43
15.98

45.88
23.35
27.98
37.24
15.37

N/A
20.51
24.73
34.25
13.62

N/A
20.73
25.99
35.76
13.44

N/A
18.89
23.58
37.34
11.76

21.15
3.70
16.26

20.53
3.37
15.74

19.01
2.58
12.33

16.45
2.34
11.74

11.75
1.42
8.08

0.75
1.03

0.85
1.14

0.93
1.21

0.77
1.07

0.77
1.14

0.48

2.24

2.96

1.20

2.31

3.86

3.73

3.72

2.34

1.83

0.59

0.58

0.55

0.56

0.57

12/84

93-266-0376. THE WALT DISNEY COMPANY


Products and Operation
2014 Sales
$ mil. % of total
Media networks 21,152 43
Parks & resorts 15,099 31
Studio entertainment 7,278 15
Consumer products 3,985 8
Interactive media 1,299 3
Total 48,813 100
2014 Sales
$ mil. % of total
Service 40,246 82
Product 8,567 18
Total 48,813 100
Selected Operations
Consumer products
Disney Publishing Worldwide
Disney Stores (retail outlets)
Interactive media
Disney Interactive Studios (video games)
Club Penguin (social networking for children)
Disney Online
Disney.com
DisneyFamily.com
Media networks
A&E Television Networks (42%)
A&E
Bio (The Biography Channel)
The History Channel
History International
Lifetime
Lifetime Movie Network
Lifetime Real Women
The Military History Channel
ABC Family Channel
ABC Television Network
Disney Channel
ESPN (80%)
ESPN2

80/84

ESPN Classic
ESPNEWS
JETIX Europe
SOAPnet
Television broadcast stations
KABC (Los Angeles)
KFSN (Fresno, CA)
KGO (San Francisco)
KTRK (Houston)
WABC (New York City)
WJRT (Flint, MI)
WLS (Chicago)
WPVI (Philadelphia)
WTVD (Raleigh-Durham, NC)
WTVG (Toledo, OH)
Toon Disney
Studio entertainment
Dimension
Disney Music Group (music production and distribution)
Disney Theatrical Group (live entertainment events)
Lucasfilm
Marvel Entertainment
Pixar
Touchstone Pictures
Walt Disney Pictures
Theme parks and resorts
Adventures by Disney (vacation packages)
Disney Cruise Line
Euro Disney (40%)
Disney Village
Disneyland Paris
The Walt Disney Studios Park (Marne-La-Vallee, France)
Disneyland Resort (Anaheim, CA)
Disneyland
Disney's California Adventure
Hong Kong Disneyland (47%)
Tokyo Disney Resort (owned and operated by Oriental Land Co.; Disney earns royalties)
Tokyo Disneyland
Tokyo DisneySea
Walt Disney Imagineering (planning and development)
Walt Disney World Resort (Orlando, FL)
Disney Vacation Club
Disney's Animal Kingdom
Disney's Hollywood Studios
Disney's Wide World of Sports
Downtown Disney
Epcot

81/84

Magic Kingdom

82/84

93-266-0376. THE WALT DISNEY COMPANY


Industry Information
Computer Software
Education & Training Software
Entertainment & Games Software
Toy & Game Manufacturing
Manufacturing Sector
Arts, Entertainment & Recreation Sector
Hotels, Motels & Resorts
Film & Video
Motion Picture Production & Distribution
Music Production & Distribution
Publishing
Book Publishers
Magazine Publishers
Radio Broadcasting & Programming
Television Broadcasting
TV Broadcast & Cable Networks
TV Program Production & Distribution
Internet Publishing, Broadcasting & Search Portals
Lodging
Amusement Parks & Arcades

83/84

93-266-0376. THE WALT DISNEY COMPANY


Competitors
Company
21st Century Fox
AOL
CBS Corp
Comcast
Discovery Communications
DreamWorks Animation
Liberty Interactive
MGM
SeaWorld
Six Flags
Sony Pictures Entertainment
Time Warner
Viacom
Yahoo!

Sales
28,987.00 Million
2,527.20 Million
13,806.00 Million
68,775.00 Million
6,265.00 Million
684.62 Million
10,499.00 Million
68.88 Million
1,377.81 Million
1,175.79 Million
439.46 Million
27,359.00 Million
13,268.00 Million
4,618.13 Million

Net Income
8,306.00
125.60
1,413.00
8,163.00
1,034.00
-54.80
869.00
0.00
49.10
154.70
0.00
3,833.00
1,922.00
-4,359.10

84/84

Employee Count
20,500.00
4,350.00
17,310.00
139,000.00
6,800.00
2,700.00
20,078.00
1,440.00
11,100.00
1,900.00
4,200.00
34,000.00
9,900.00
12,500.00