Acquisitions

6 Months Ended

Mar. 28, 2020

TFCF Corporation

On March 20, 2019, the Company acquired the outstanding capital stock of TFCF, a diversified global media and entertainment company. The acquisition purchase price totaled $69.5 billion, of which the Company paid $35.7 billion in cash and $33.8 billion in Disney shares (307 million shares at a price of $110.00 per share).

As part of the TFCF acquisition, the Company acquired TFCF’s 30% interest in Hulu increasing our ownership in Hulu to 60%. As a result, the Company began consolidating Hulu and recorded a one-time gain of $4.9 billion (Hulu gain) in the prior-year quarter from remeasuring our initial 30% interest to its estimated fair value, which was determined based on a discounted cash flow analysis.

The Company is required to allocate the TFCF purchase price to tangible and identifiable intangible assets acquired and liabilities assumed based on their fair values. The excess of the purchase price over those fair values is recorded as goodwill.

The following table summarizes our final allocation of the purchase price:


	Initial Allocation⁽¹⁾		Valuation Adjustments		Final Allocation
Cash and cash equivalents	$	25,666	$	35	$	25,701
Receivables	4,746		350		5,096
Film and television costs	20,120		(2,380)		17,740
Investments	1,471		(509)		962
Intangible assets	20,385		(2,504)		17,881
Net assets held for sale	11,704		(348)		11,356
Accounts payable and other liabilities	(10,753)		(1,776)		(12,529)
Borrowings	(21,723)		—		(21,723)
Deferred income taxes	(6,497)		1,397		(5,100)
Other net liabilities acquired	(3,865)		(114)		(3,979)
Noncontrolling interests	(10,638)		230		(10,408)
Goodwill	43,751		5,496		49,247
Fair value of net assets acquired	74,367		(123)		74,244
Less: Disney’s previously held 30% interest in Hulu	(4,860)		123		(4,737)
Total purchase price	$	69,507	$	—	$	69,507

⁽¹⁾As reported in our March 30, 2019 Form 10-Q.

These adjustments to the initial allocation are based on more detailed information obtained about the specific assets acquired and liabilities assumed. The adjustments made to the initial allocation during the current quarter did not result in any material net changes to amortization expense recorded in prior quarters.

The following table summarizes the revenues and net loss from continuing operations (including purchase accounting amortization and excluding restructuring and impairment charges and interest income and expense) of TFCF and Hulu included in the Company’s Condensed Consolidated Statement of Income for the quarter and six months ended March 28, 2020. In addition, the table provides the impact of intercompany eliminations of transactions between the Company, TFCF and Hulu:


	Quarter		Six Months
TFCF (before intercompany eliminations):
Revenues	$	3,483	$	6,853
Net loss from continuing operations	(201)		(236)
Hulu (before intercompany eliminations):
Revenues	$	1,659	$	3,284
Net loss from continuing operations	(287)		(603)
Intercompany eliminations:
Revenues	$	(793)	$	(1,392)
Net loss from continuing operations	(83)		(131)

The revenues and net loss from continuing operations (including purchase accounting amortization) of TFCF and Hulu included in the Company’s Condensed Consolidated Statement of Income for the quarter and six-months ended March 30, 2019 are $518 million and $115 million, respectively (from the date of acquisition through March 30, 2019).

The following pro forma summary presents consolidated information of the Company for the six months ended March 30, 2019 as if the acquisition had occurred on October 1, 2017:


Revenues	$	38,598
Net income	4,171
Net income attributable to Disney	4,240
Earnings per share attributable to Disney:
Diluted	$	2.35
Basic	$	2.36

The pro forma earnings exclude the Hulu gain, compensation expense of $0.2 billion related to TFCF equity awards that were accelerated to vest upon closing of the acquisition and $0.3 billion of acquisition-related expenses. These amounts were recognized by Disney and TFCF in the six months ended March 30, 2019.

The pro forma results exclude a $10.8 billion gain on sale recorded by TFCF for the six months ended March 30, 2019 related to its 39% interest in Sky plc, which was sold by TFCF in October 2018. The pro forma results include $0.3 billion of net income recorded by TFCF for the six months ended March 30, 2019 related to the TFCF businesses that we are required to divest as a condition of the acquisition.

These pro forma results do not represent financial results that would have been realized had the acquisition actually occurred on October 1, 2017, nor are they intended to be a projection of future results.

Goodwill

The changes in the carrying amount of goodwill for the six months ended March 28, 2020 are as follows:


	Media Networks		Parks, Experiences and Products		Studio Entertainment					Direct-to-Consumer & International			Total




Balance at September 28, 2019	$	33,423	$	5,535		$	17,797	$	23,538		$	80,293

Acquisitions ⁽¹⁾	133		2			15		10			160

Currency translation adjustments and other, net	—		—			—		(133)			(133)
Balance at March 28, 2020	$	33,556	$	5,537		$	17,812	$	23,415		$	80,320

(1) Reflects updates to allocation of purchase price for the acquisition of TFCF.