International Theme Park Investments

The Company has a 47% ownership interest in the operations of Hong Kong Disneyland Resort, a 43% ownership interest in the operations of Shanghai Disney Resort and an 81% effective ownership interest in the operations of Disneyland Paris. The International Theme Parks are VIEs consolidated in the Company’s financial statements. See Note 2 for the Company’s policy on consolidating VIEs.

The following table summarizes the carrying amounts of the International Theme Parks’ assets and liabilities included in the Company’s consolidated balance sheets as of October 1, 2016 and October 3, 2015:



	International Theme Parks
	October 1, 2016		October 3, 2015
Cash and cash equivalents	$	1,008	$	781
Other current assets	331		252
Total current assets	1,339		1,033
Parks, resorts and other property	9,270		7,748
Other assets	88		62
Total assets	$	10,697	$	8,843

Current liabilities	$	1,499	$	1,027
Borrowings - long-term	1,087		319
Other long-term liabilities	256		195
Total liabilities	$	2,842	$	1,541

The following table summarizes the International Theme Parks’ revenues and costs and expenses included in the Company’s consolidated statements of income as of October 1, 2016:



	October 1, 2016
Revenues	$	2,455
Costs and expenses	(2,754		)

Royalty and management fees from the International Theme Parks recognized by the Company totaled $148 million for fiscal 2016. Royalty and management fees are eliminated in consolidation but are considered in calculating earnings allocated to noncontrolling interests.

Fiscal 2016 International Theme Parks’ cash flows included in the Company’s consolidated cash flow statement are $0.4 billion generated from operating activities, $2.1 billion used in investing activities and $0.9 billion generated from financing activities.

Disneyland Paris

During calendar 2015, Disneyland Paris completed a recapitalization consisting of the following:


•	In February 2015, Disneyland Paris completed a €0.4 billion equity rights offering at €1.00 per share 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, Disneyland Paris repaid €0.3 billion that was outstanding under then existing lines of credit from the Company. These lines of credit were replaced by a new €0.4 billion line of credit from the Company bearing interest at EURIBOR plus 2% and maturing in 2023.


•	In September 2015, the Company completed a mandatory tender offer to the other Disneyland Paris shareholders and acquired €0.1 billion in shares at €1.25 per share, which increased the Company’s effective ownership by an additional eight percentage points.


•	In November 2015, to offset the dilution caused by the loan conversion, Disneyland Paris shareholders purchased €0.05 billion in shares from the Company at €1.25 per share, which decreased the Company’s effective ownership by four percentage points, resulting in an 81% effective ownership interest in Disneyland Paris.

As a result of the recapitalization, in fiscal 2015 the Company wrote off a $399 million deferred income tax asset (see Note 9).

The Company has term loans to Disneyland Paris with outstanding balances totaling €1.0 billion at October 1, 2016 bearing interest at a 4% fixed rate and maturing in 2024. In addition, €130 million is outstanding under the line of credit at October 1, 2016.

The Company has waived payment of royalties and management fees for the fourth quarter of fiscal 2016 through the third quarter of fiscal 2018.

Hong Kong Disneyland Resort

At October 1, 2016, the Government of the Hong Kong Special Administrative Region (HKSAR) and the Company had 53% and 47% equity interests in Hong Kong Disneyland Resort, respectively. HKSAR has the right to receive additional shares over time to the extent Hong Kong Disneyland Resort exceeds certain return on asset performance targets. The amount of additional shares HKSAR can receive is capped on both an annual and cumulative basis and could decrease the Company’s equity interest by up to an additional 7 percentage points over a period no shorter than 16 years.

As part of financing the construction of a third hotel, which we expect to open in 2017, the Company contributed $113 million of equity in fiscal 2016. HKSAR also converted $113 million of a loan to equity, leaving a balance at October 1, 2016 of HK$0.4 billion ($45 million) (see Note 8 for further details of this loan). In addition, the Company and HKSAR have committed to provide additional loans up to $149 million and $104 million, respectively. At October 1, 2016, the additional loans provided by the Company and HKSAR are $116 million and $77 million, respectively, bearing interest at a rate of three month HIBOR plus 2% and mature in September 2025.

The net impact to HKSAR and the Company’s ownership of Hong Kong Disneyland Resort during fiscal 2016 and 2015 as a result of the above activities was not material.

Shanghai Disney Resort

Shanghai Disney Resort is owned through two joint venture companies, in which Shanghai Shendi (Group) Co., Ltd (Shendi) owns 57% and the Company owns 43%. A management company, in which the Company has a 70% interest and Shendi a 30% interest, is responsible for operating Shanghai Disney Resort. The investment in Shanghai Disney Resort has been funded in accordance with each shareholder’s ownership percentage, with approximately 67% from equity contributions and 33% from shareholder loans.

The Company has provided Shanghai Disney Resort with term loans totaling $757 million, bearing interest at rates up to 8% and maturing in 2036. In addition, the Company has an outstanding balance of $318 million due from Shanghai Disney Resort related to development and pre-opening costs of the resort, which is anticipated to be paid by the end of 2018. The Company has also provided Shanghai Disney Resort with a $157 million line of credit bearing interest at 8%. There is no outstanding balance under the line of credit at October 1, 2016.

Shendi has provided Shanghai Disney Resort with term loans totaling 6.4 billion yuan (approximately $1.0 billion), bearing interest at rates up to 8% and maturing in 2036; however, early repayment is permitted. Shendi has also provided Shanghai Disney Resort with a 1.4 billion yuan (approximately $205 million) line of credit bearing interest at 8%. There is no outstanding balance under the line of credit at October 1, 2016.