International Theme Park Investments

At June 27, 2015, the Company had an 83% effective ownership interest in the operations of Disneyland Paris (see Disneyland Paris recapitalization discussion below), a 46% ownership interest in the operations of HKDL and a 43% ownership interest in the operations of Shanghai Disney Resort, all of which are VIEs consolidated in the Company’s financial statements. See Note 1 for the Company’s policy on consolidating VIEs.

The following tables present summarized balance sheet information for the Company as of June 27, 2015 and September 27, 2014, reflecting the impact of consolidating the International Theme Parks balance sheets.



	As of June 27, 2015
	Before International Theme Parks Consolidation		International Theme Parks and Adjustments			Total
Cash and cash equivalents	$	3,641	$	834		$	4,475
Other current assets	11,771		266			12,037
Total current assets	15,412		1,100			16,512
Investments/Advances	7,268		(4,574		)	2,694
Parks, resorts and other property	17,070		7,366			24,436
Other assets	43,661		64			43,725
Total assets	$	83,411	$	3,956		$	87,367

Current portion of borrowings	$	3,119	$	—		$	3,119
Other current liabilities	11,212		495			11,707
Total current liabilities	14,331		495			14,826
Borrowings	11,903		251			12,154
Deferred income taxes and other long-term liabilities	9,688		192			9,880
Equity	47,489		3,018			50,507
Total liabilities and equity	$	83,411	$	3,956		$	87,367



	As of September 27, 2014
	Before International Theme Parks Consolidation		International Theme Parks and Adjustments			Total
Cash and cash equivalents	$	2,645	$	776		$	3,421
Other current assets	11,452		303			11,755
Total current assets	14,097		1,079			15,176
Investments/Advances	6,627		(3,931		)	2,696
Parks, resorts and other property	17,081		6,251			23,332
Other assets	42,958		24			42,982
Total assets	$	80,763	$	3,423		$	84,186

Current portion of borrowings	$	2,164	$	—		$	2,164
Other current liabilities	10,318		810			11,128
Total current liabilities	12,482		810			13,292
Borrowings	12,423		253			12,676
Deferred income taxes and other long-term liabilities	9,859		181			10,040
Equity	45,999		2,179			48,178
Total liabilities and equity	$	80,763	$	3,423		$	84,186

The following table presents summarized income statement information of the Company for the nine months ended June 27, 2015, reflecting the impact of consolidating the International Theme Parks income statements.



	Before International Theme Parks Consolidation⁽¹⁾			International Theme Parks and Adjustments			Total
Revenues	$	37,414		$	1,539		$	38,953
Cost and expenses	(27,187		)	(1,690		)	(28,877		)
Other income/(expense), net	(31		)	31			—
Interest expense, net	(13		)	(49		)	(62		)
Equity in the income of investees	527			103			630
Income before income taxes	10,710			(66		)	10,644
Income taxes	(3,533		)	—			(3,533		)
Net income	$	7,177		$	(66	)	$	7,111


⁽¹⁾	These amounts include the International Theme Parks under the equity method of accounting. As such, royalty and management fee income from these operations is included in Revenues and our share of their net income/(loss) is included in Equity in the income of investees. Royalties and management fees totaling $39 million were recognized in the nine months ended June 27, 2015.

The following table presents summarized cash flow statement information of the Company for the nine months ended June 27, 2015, reflecting the impact of consolidating the International Theme Parks cash flow statements.



	Before International Theme Parks Consolidation			International Theme Parks and Adjustments			Total
Cash provided by operations	$	7,474		$	107		$	7,581
Investments in parks, resorts and other property	(1,417		)	(1,644		)	(3,061		)
Cash (used in)/provided by other investing activities	(645		)	651			6
Cash (used in)/provided by financing activities	(4,206		)	965			(3,241		)
Impact of exchange rates on cash and cash equivalents	(210		)	(21		)	(231		)
Change in cash and cash equivalents	996			58			1,054
Cash and cash equivalents, beginning of period	2,645			776			3,421
Cash and cash equivalents, end of period	$	3,641		$	834		$	4,475

Disneyland Paris

In January 2015, the shareholders of Disneyland Paris approved a €1.0 billion recapitalization consisting of the following:


•	A €0.4 billion February 2015 equity rights offering of which the Company funded €0.2 billion. The Company purchased shares that were unsubscribed by other Disneyland Paris shareholders, which increased the Company’s effective ownership by approximately four percentage points.

•

In February 2015, the Company converted €0.6 billion of its loans to Disneyland Paris into equity at a conversion price of €1.25 per share. The conversion increased the Company’s effective ownership by an additional 23 percentage points. In addition, the Company replaced its existing lines of credit with Disneyland Paris with a new €350 million line of credit bearing interest at EURIBOR plus 2% and maturing in 2023. The prior lines of credit were repaid, and there is no outstanding balance under the new line of credit at June 27, 2015. As of June 27, 2015, the total outstanding balance of loans provided by the Company to Disneyland Paris was €1.0 billion.

•

Following regulatory approval, the Company opened a mandatory tender offer to the other Disneyland Paris shareholders in April 2015 to purchase their shares at €1.25 per share, and the Company may be required to purchase up to €0.3 billion in shares. As of June 27, 2015, the Company has acquired €0.1 billion in shares, which increased the Company's effective ownership by an additional six percentage points. There was an appeal to the regulatory approval, and the tender offer will remain outstanding during the appeal process.


•	Following the completion of the mandatory tender offer and to offset the dilution caused by the loan conversion, the Company will offer the right to certain of the remaining Disneyland Paris shareholders to purchase shares from the Company at €1.25.

As of June 27, 2015, the Company has an 83% effective ownership interest in Disneyland Paris reflecting purchases in connection with the recapitalization discussed above. The Company’s final ownership interest following the recapitalization will depend on the number of Disneyland Paris shareholders that accept the Company’s tender offer and/or exercise their anti-dilution rights. The Company will have a minimum effective ownership interest of 54% after the recapitalization.

The Company has recognized approximately $400 million of deferred income tax assets on the difference between the Company’s tax basis in its investment in Disneyland Paris and the Company’s financial statement carrying value of Disneyland Paris. The Company will likely be required to write-off this deferred tax asset as a result of the recapitalization although it will depend on the final outcome of the tender offer and anti-dilution process including the determination of our final ownership interest.

The recapitalization is expected to be completed by the end of calendar 2015.

Hong Kong Disneyland Resort

At September 27, 2014, the Government of the Hong Kong Special Administrative Region (HKSAR) and the Company had a 52% and 48% equity interest in HKDL, respectively. In addition, HKSAR holds a right to receive additional shares over time to the extent HKDL exceeds certain return on asset performance targets. The amount of additional shares HKSAR can receive is capped on both an annual and cumulative basis. Because HKDL exceeded the performance target in fiscal 2014, HKSAR received additional shares, which increased their ownership interest to approximately 54%. Additional shares that may be issued in future years could decrease the Company’s equity interest by up to an additional 8 percentage points over a period no shorter than 17 years.

HKDL plans to build a third hotel at the resort, which is expected to open in 2017 and cost approximately $550 million. To fund the construction, the Company will contribute approximately $219 million of equity, and HKSAR will convert an equal amount of its outstanding loan to HKDL into equity. Additionally, the Company and HKSAR will provide shareholder loans of up to approximately $149 million and $104 million, respectively. The loans will mature on dates from fiscal 2022 through fiscal 2025 and bear interest at a rate of three month HIBOR plus 2%.

Shanghai Disney Resort

The Company and Shanghai Shendi (Group) Co., Ltd (Shendi) are constructing a Disney Resort (Shanghai Disney Resort) in the Pudong district of Shanghai that initially includes a theme park, two hotels and a retail, dining and entertainment area. Major construction work is anticipated to be complete by the end of calendar 2015 and the opening of the park is planned for spring 2016. Shanghai Disney Resort is owned through two joint venture companies, in which Shendi owns 57% and the Company owns 43%. An additional joint venture, in which the Company has a 70% interest and Shendi a 30% interest, is responsible for designing, constructing and operating Shanghai Disney Resort.