dis-20200328

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 28, 2020

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from __________ to __________.

Commission File Number 001-38842


Delaware						83-0940635
State or Other Jurisdiction of						I.R.S. Employer Identification
Incorporation or Organization

500 South Buena Vista Street

Burbank, California 91521

Address of Principal Executive Offices and Zip Code

(818) 560-1000

Registrant’s Telephone Number, Including Area Code

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock, $0.01 par value

DIS

New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ¨

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☒

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☒

There were 1,806,266,743 shares of common stock outstanding as of April 29, 2020.

PART I. FINANCIAL INFORMATION

Item 1: Financial Statements

THE WALT DISNEY COMPANY

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(unaudited; in millions, except per share data)


	Quarter Ended						Six Months Ended
	March 28, 2020		March 30, 2019		March 28, 2020		March 30, 2019
Revenues:
Services	$	16,174	$	13,011	$	34,249	$	25,877
Products	1,835		1,911		4,618		4,348
Total revenues	18,009		14,922		38,867		30,225
Costs and expenses:
Cost of services (exclusive of depreciation and amortization)	(10,664)		(7,167)		(22,041)		(14,731)
Cost of products (exclusive of depreciation and amortization)	(1,254)		(1,209)		(2,893)		(2,646)
Selling, general, administrative and other	(3,388)		(2,330)		(7,091)		(4,482)
Depreciation and amortization	(1,333)		(828)		(2,631)		(1,560)
Total costs and expenses	(16,639)		(11,534)		(34,656)		(23,419)
Restructuring and impairment charges	(145)		(662)		(295)		(662)
Other income	—		4,963		—		4,963
Interest expense, net	(300)		(143)		(583)		(206)
Equity in the income / (loss) of investees	135		(309)		359		(233)
Income from continuing operations before income taxes	1,060		7,237		3,692		10,668
Income taxes on continuing operations	(525)		(1,647)		(984)		(2,292)
Net income from continuing operations	535		5,590		2,708		8,376
Income (loss) from discontinued operations, net of income tax benefit/(expense) of $5, ($5), $13 and ($5), respectively	(15)		21		(41)		21
Net income	520		5,611		2,667		8,397
Net income from continuing operations attributable to noncontrolling interests	(60)		(159)		(100)		(157)

Net income attributable to The Walt Disney Company (Disney)	$	460	$	5,452	$	2,567	$	8,240

Earnings per share attributable to Disney⁽¹⁾:
Diluted
Continuing operations	$	0.26	$	3.53	$	1.44	$	5.42
Discontinued operations	(0.01)		0.01		(0.02)		0.01
	$	0.25	$	3.55	$	1.41	$	5.43
Basic
Continuing operations	$	0.26	$	3.55	$	1.44	$	5.44
Discontinued operations	(0.01)		0.01		(0.02)		0.01
	$	0.25	$	3.56	$	1.42	$	5.46

Weighted average number of common and common equivalent shares outstanding:
Diluted	1,816		1,537		1,816		1,517
Basic	1,808		1,530		1,806		1,510

⁽¹⁾Total may not equal the sum of the column due to rounding.

See Notes to Condensed Consolidated Financial Statements

THE WALT DISNEY COMPANY

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(unaudited; in millions)


	Quarter Ended						Six Months Ended
	March 28, 2020		March 30, 2019		March 28, 2020		March 30, 2019
Net income	$	520	$	5,611	$	2,667	$	8,397
Other comprehensive income (loss), net of tax:
Market value adjustments for investments	—		(4)		—		(4)
Market value adjustments for hedges	129		(80)		22		(89)
Pension and postretirement medical plan adjustments	73		68		180		121
Foreign currency translation and other	(323)		46		(196)		25
Other comprehensive income	(121)		30		6		53
Comprehensive income	399		5,641		2,673		8,450
Net income from continuing operations attributable to noncontrolling interests	(60)		(159)		(100)		(157)
Other comprehensive income (loss) attributable to noncontrolling interests	17		(34)		(26)		(36)
Comprehensive income attributable to Disney	$	356	$	5,448	$	2,547	$	8,257

See Notes to Condensed Consolidated Financial Statements

THE WALT DISNEY COMPANY

CONDENSED CONSOLIDATED BALANCE SHEETS

(unaudited; in millions, except per share data)


	March 28, 2020		September 28, 2019
ASSETS
Current assets
Cash and cash equivalents	$	14,339	$	5,418
Receivables	14,532		15,481
Inventories	1,531		1,649
Licensed content costs and advances	1,869		4,597

Other current assets	1,003		979

Total current assets	33,274		28,124
Produced and licensed content costs	26,757		22,810
Investments	3,180		3,224
Parks, resorts and other property
Attractions, buildings and equipment	60,929		58,589
Accumulated depreciation	(33,713)		(32,415)
	27,216		26,174
Projects in progress	3,916		4,264
Land	1,019		1,165
	32,151		31,603
Intangible assets, net	22,037		23,215
Goodwill	80,320		80,293

Other assets	8,575		4,715
Total assets	$	206,294	$	193,984

LIABILITIES AND EQUITY
Current liabilities
Accounts payable and other accrued liabilities	$	17,906	$	17,762
Current portion of borrowings	12,676		8,857
Deferred revenue and other	4,891		4,722

Total current liabilities	35,473		31,341
Borrowings	42,770		38,129
Deferred income taxes	7,965		7,902

Other long-term liabilities	16,113		13,760
Commitments and contingencies (Note 14)
Redeemable noncontrolling interests	9,096		8,963
Equity
Preferred stock	—		—
Common stock, $0.01 par value, Authorized – 4.6 billion shares, Issued – 1.8 billion shares	54,230		53,907
Retained earnings	43,721		42,494
Accumulated other comprehensive loss	(6,637)		(6,617)

Treasury stock, at cost, 19 million shares	(907)		(907)
Total Disney Shareholders’ equity	90,407		88,877
Noncontrolling interests	4,470		5,012
Total equity	94,877		93,889
Total liabilities and equity	$	206,294	$	193,984

See Notes to Condensed Consolidated Financial Statements

THE WALT DISNEY COMPANY

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited; in millions)


	Six Months Ended
	March 28, 2020		March 30, 2019
OPERATING ACTIVITIES
Net income from continuing operations	$	2,708	$	8,376
Depreciation and amortization	2,631		1,560
Gain on acquisition	—		(4,917)
Deferred income taxes	297		1,190
Equity in the (income) / loss of investees	(359)		233
Cash distributions received from equity investees	405		370
Net change in produced and licensed content costs and advances	(925)		(281)
Net change in operating lease right of use assets / liabilities	(96)		—
Equity-based compensation	246		456
Other	156		143
Changes in operating assets and liabilities, net of business acquisitions:
Receivables	828		(386)
Inventories	70		(19)
Other assets	(174)		46
Accounts payable and other liabilities	(888)		(283)
Income taxes	(112)		(474)
Cash provided by operations - continuing operations	4,787		6,014

INVESTING ACTIVITIES
Investments in parks, resorts and other property	(2,585)		(2,390)

Acquisitions	—		(9,901)
Other	(21)		(392)
Cash used in investing activities - continuing operations	(2,606)		(12,683)

FINANCING ACTIVITIES
Commercial paper borrowings, net	3,138		376
Borrowings	6,071		31,145
Reduction of borrowings	(1,048)		(17,398)
Dividends	(1,587)		(1,310)

Proceeds from exercise of stock options	207		83


Other	(165)		(200)
Cash provided by financing activities - continuing operations	6,616		12,696

CASH FLOWS FROM DISCONTINUED OPERATIONS
Cash provided by (used in) operations - discontinued operations	4		(35)
Cash provided by investing activities - discontinued operations	198		—

Cash provided by (used in) discontinued operations	202		(35)

Impact of exchange rates on cash, cash equivalents and restricted cash	(76)		75

Change in cash, cash equivalents and restricted cash	8,923		6,067
Cash, cash equivalents and restricted cash, beginning of period	5,455		4,155
Cash, cash equivalents and restricted cash, end of period	$	14,378	$	10,222

See Notes to Condensed Consolidated Financial Statements

THE WALT DISNEY COMPANY

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY

(unaudited; in millions)


	Quarter Ended
	Equity Attributable to Disney
	Shares	Common Stock		Retained Earnings		Accumulated Other Comprehensive Income (Loss)					Treasury Stock		Total Disney Equity		Non-controlling Interests ⁽¹⁾		Total Equity
Balance at December 28, 2019	1,805	$	53,995	$	43,202		$	(6,533)	$	(907)	$	89,757	$	5,016	$	94,773
Comprehensive income	—	—		460			(104)		—		356		(23)		333
Equity compensation activity	1	226		—			—		—		226		—		226

Dividends	—	9		(9)			—		—		—		—		—
Contributions	—	—		—			—		—		—		33		33





Distributions and other	—	—		68			—		—		68		(556)		(488)
Balance at March 28, 2020	1,806	$	54,230	$