BURBANK, Calif .– (BUSINESS WIRE) –The Walt Disney Company (NYSE: DIS) reported earnings for its fourth quarter fiscal year ended September 28, 2019. Diluted earnings per share (EPS) from continuing operations for the fourth quarter decreased 72% to $ 0.43 from $ 1.55 in the prior-year quarter. Excluding certain items affecting comparability1, diluted EPS for the quarter declined 28% to $ 1.07 from $ 1.48 in the prior-year quarter. Diluted EPS from continuing operations for the year decreased 25% to $ 6.27 from $ 8.36 in the prior year. Excluding certain items affecting comparability1, diluted EPS from continuing operations for the year fell 19% to $ 5.77 from $ 7.08 in the prior year.

"Our solid results in the fourth quarter reflect the ongoing strength of our brands and businesses," said Robert A. Iger, Chairman and Chief Executive Officer, The Walt Disney Company. The Walt Disney Company to focus the resources and immense creativity across the entire company on delivering an extraordinary direct-to-consumer experience, and we're excited for the launch of Disney + on November 12 . "

On March 20, 2019, the Company acquired Twenty-First Century Fox, Inc., which was subsequently renamed TFCF Corporation (TFCF), for cash and the issuance of 307 million shares. Also, a part of the TFCF acquisition, we acquired a controlling interest in Hulu LLC (Hulu). Results for the current quarter and fiscal year reflect the consolidation of TFCF and Hulu.

The following table summarizes the fourth quarter and full year results for fiscal 2019 and 2018 (in millions, except per share amounts):

Quarter Ended

Year Ended

Sept. 28, 2019

Sept. 29, 2018

Change

Sept. 28, 2019

Sept. 29, 2018

Change

Revenues

$

19,100

$

14,306

34%

$

69,570

$

59,434

17%

Income from continuing operations before income taxes

$

1,258

$

3,202

(61)%

$

13,944

$

14,729

(5)%

Total segment operating income1

$

3,436

$

3,277

5%

$

14,868

$

15,689

(5)%

Net income from continuing operations2

$

785

$

2,322

(66)%

$

10,441

$

12,598

(17)%

Diluted EPS from continuing operations2

$

0.43

$

1.55

(72)%

$

6.27

$

8.36

(25)%

Diluted EPS excluding certain items affecting comparability1

$

1.07

$

1.48

(28)%

$

5.77

$

7.08

(19)%

Cash provided by continuing operations

$

1,718

$

3,853

(55)%

$

5,984

$

14,295

(58)%

Free cash flow1

$

409

$

2,652

(85)%

$

1,108

$

9,830

(89)%

1

EPS excluding certain items affecting comparability, total segment operating income and free cash flow are non-GAAP financial measures. The comparable GAAP measures were diluted EPS from continuing operations, income from continuing operations before income taxes, and cash provided by continuing operations, respectively. See the discussion on page 2 and on pages 9 through 12.

2

Reflections attributable to shareholders of The Walt Disney Company, ie after deduction of noncontrolling interests.

SEGMENT RESULTS

The Company Evaluates Performance of Operating Segments Based on Operating Profit and Loss, and Management Uses Total Segment of Operating Income as a Measurement of Performance of Separate Operating Companies from Non-Operating Factors. The Company believes that information about total segment operating income and the other factors net income, thus providing separate insights into both operations and the other factors that affect reported results.

The following is a reconciliation of income from continuing operations before income taxes to total segment operating income (in millions):

Quarter Ended

Year Ended

Sept. 28, 2019

Sept. 29, 2018

Change

Sept. 28, 2019

Sept. 29, 2018

Change

Income from continuing operations before income taxes

$

1,258

$

3,202

(61)%

$

13,944

$

14,729

(5)%

Add / (subtract):

Corporate and unallocated shared expenses

309

208

(49)%

987

744

(33)%

Restructuring and impairment charges

314

5

> (100)%

1,183

33

> (100)%

Other (income) / expense, net

483

(507

)

nm

(4,357

)

(601

)

> 100%

Interest expense, net

361

159

> (100)%

978

574

(70)%

Amortization of TFCF and Hulu intangible assets and fair value step-up on film and television costs

711

XNUMX

nm

1,595

XNUMX

nm

Impairment of equity investments

XNUMX

210

nm

538

210

> (100)%

Total Segment Operating Income

$

3,436

$

3,277

5%

$

14,868

$

15,689

(5)%

The following table summarizes the fourth quarter full year segment revenue and segment operating income for fiscal 2019 and 2018 (in millions):

Quarter Ended

Year Ended

Sept. 28, 2019

Sept. 29, 2018

Change

Sept. 28, 2019

Sept. 29, 2018

Change

revenues:

Media Networks

$

6,510

$

5,325

22%

$

24,827

$

21,922

13%

Parks, Experiences and Products

6,655

6,135

8%

26,225

24,701

6%

Studio Entertainment

3,310

2,177

52%

11,127

10,065

11%

Direct-to-Consumer & International

3,428

825

> 100%

9,349

3,414

> 100%

Eliminations

(803

)

(156

)

> (100)%

(1,958

)

(668

)

> (100)%

Total Revenues

$

19,100

$

14,306

34%

$

69,570

$

59,434

17%

Segment operating income:

Media Networks

$

1,783

$

1,842

(3)%

$

7,479

$

7,338

2%

Parks, Experiences and Products

1,381

1,177

17%

6,758

6,095

11%

Studio Entertainment

1,079

604

79%

2,686

3,004

(11)%

Direct-to-Consumer & International

(740

)

(340

)

> (100)%

(1,814

)

(738

)

> (100)%

Eliminations

(67

)

(6

)

> (100)%

(241

)

(10

)

> (100)%

Total Segment Operating Income

$

3,436

$

3,277

5%

$

14,868

$

15,689

(5)%

TFCF and Hulu operating results for the current period are consolidated and reported in our segments. Prior to the acquisition of TFCF, Hulu was accounted for as an equity method and was reported in our Direct-to-Consumer & International segment.

DISCUSSION OF FULL YEAR SEGMENT RESULTS

Segment operating income decreased at Direct-to-Consumer & International and Studio Entertainment and increased at Parks, Experiences and Products and Media Networks. The decrease in Direct-to-Consumer & International was two to the consolidation of Hulu, our ongoing investment in ESPN + and costs to support the launch of Disney +. Lower segment operating income at Studio Entertainment was two to the consolidation of TFCF's operations. TFCF results included in loss from theatrical distribution and film cost impairments, partially offset by income from TV / SVOD distribution. Higher operating results at Parks, Experiences and Products was two to growth at the domestic theme parks and resorts and merchandise licensing. The increase in domestic parks and resorts was two ways to increase spending, partially offset by labor and other cost inflation. Growth at Media Networks was two to the consolidation of TFCF's operations, partially offset by a decrease at our legacy operations. The decrease in our legacy operations was reduced in ABC Studios program sales, partially offset by an increase in affiliate revenue. Eliminations of segment operating income increased two to higher sales of ABC Studios programs to Hulu and the International Channels. The elimination of sales of TFCF television programs to Hulu and our International Channels also contributed to the increase.

DISCUSSION OF FOURTH QUARTER SEGMENT RESULTS

Media Networks

Media Networks revenues for the quarter increased 22% to $ 6.5 billion, and segment operating income decreased 3% to $ 1.8 billion. The following table provides details of the Media Networks results (in millions):

Quarter Ended

Year Ended

Sept. 28, 2019

Sept. 29, 2018

Change

Sept. 28, 2019

Sept. 29, 2018

Change

revenues:

Cable Networks

$

4,243

$

3,527

20%

$

16,486

$

14,610

13%

Broadcasting

2,267

1,798

26%

8,341

7,312

14%

$

6,510

$

5,325

22%

$

24,827

$

21,922

13%

Segment operating income:

Cable Networks

$

1,256

$

1,275

(1)%

$

5,425

$

5,225

4%

Broadcasting

377

394

(4)%

1,351

1,402

(4)%

Equity in the income of investees

150

173

(13)%

703

711

(1)%

$

1,783

$

1,842

(3)%

$

7,479

$

7,338

2%

Cable Networks

Cable Networks revenues for the quarter increased 20% to $ 4.2 billion and operating income decreased $ 19 million to $ 1.3 billion. Lower operating income was two at a decrease at ESPN, partially offset by the consolidation of TFCF businesses (primarily the FX and National Geographic networks).

The decrease at ESPN was two-way in programming, production and marketing costs, a partially offset by higher affiliate revenue. Higher programming costs were driven by rate increases for NFL, college sports and MLB programming. Affiliate revenue growth was two to an increase in contractual rates and the launch of the ACC Network, partially offset by a decrease in subscribers.

Broadcasting

Broadcasting revenues for the quarter increased 26% to $ 2.3 billion and operating income decreased $ 17 million to $ 377 million. The decrease in operating income was two results lowered at our legacy operations, partially offset by the consolidation of TFCF program sales.

ABC Studios program sales, increase programming and production costs at the ABC Television Network, decrease in advertising revenue and higher marketing costs. These decreases were offset by an increase in affiliate revenue due to higher rates. The decrease in ABC Studios sales program is driven by comparison to prior-year sales of Daredevil and Iron Fist and lower sales of B. The increase in programming and production costs was driven by higher write-downs and an increase in the average cost of programming. Lower advertising revenue lowered rates at owned television stations.

Equity in the Income of Investees

Equity in income decreasing from $ 173 in the first quarter to $ 150 in the current quarter to lower income from A + E

Parks, Experiences and Products

8% to $ 6.7 billion, and segment operating income increased 17% to $ 1.4 billion. Operating income growth for the quarter with two increases from merchandise licensing, Disneyland Resort and Disney Vacation Club.

Higher Operating Income at Merchandise Licensing Business, Increase in Revenue from Sales of Merchandise Based on Frozen and Toy Story

Growth at Disneyland Resort was primarily two to higher guest spending, partially offset by expenses associated with Star Wars: Galaxy's Edge, which opened on May 31, and, to a lesser extent, lower attendance. Guest spending growth was primarily due to increases in average food and beverage merchandise spending.

The increase in operating income at Disney Vacation Club was two to higher sales at Disney's Riviera Resort in the current quarter, which included a timing benefit & Cabins in the prior-year quarter.

Results at Walt Disney World Resort were comparable to the prior year, despite the adverse impact of Dorian Hurricane in the current quarter. Increases in guest spending and, to less extent, occupied room nights and attendance were offset by higher costs. Higher costs were driven by costs associated with Star Wars: Galaxy's Edge, which opened on August 29, and cost inflation. Guest spending growth was primarily two to increased food, beverage and merchandise spending and higher average ticket prices.

Disneyland Paris and Shanghai Disneyland Resort. The increase at Disneyland Paris was driven by higher average ticket prices and growth. At Shanghai Disney Resort, higher operating income was two to an increase in average ticket prices, partially offset by lower attendance. Lower results at the Hong Kong Disneyland Resort were two at the waiting and occupied room reflecting the impact of recent events.

Studio Entertainment

Studio Entertainment revenues for the quarter increased 52% to $ 3.3 billion and segment operating income increased 79% to $ 1,079 million. Higher operating income was two in an increase in business distribution results, partially offset by loss of consolidation in the TFCF businesses.

The increase in physical distribution results was two to the performance of The Lion King, Toy Story 4 and Aladdin in the current quarter compared to Incredibles 2 and Ant-Man And The Wasp in the prior-year quarter.

Operating results at the TFCF businesses reflected in loss from theatrical distribution driven by the performance of In Astra, Art of Racing In The Rain and Dark Phoenix, partially offset by income from TV / SVOD distribution.

Direct-to-Consumer & International

Direct-to-Consumer & International revenues from $ 0.8 billion to $ 3.4 million to $ 340 million. The increase in operating loss was due to the launch of Disney + and our ongoing investment in ESPN +, which was launched in April 740. These decreases were partially offset by the benefits of the TFCF businesses driven by income at Star India.

Commencing March 20, 2019, as a result of the acquisition of controlling interests in Hulu, 100% of Hulu's operating results are included in the Direct-to-Consumer & International segment. Prior to March 20, 2019, the Company's share of Hulu results was reported as equity in the loss of investees.

Eliminations

Revenue eliminations increased from $ 156 million to $ 803 million and segmentation income-driven eliminations increased from $ 6 Hulu.

ADOPTION OF NEW REVENUE RECOGNITION ACCOUNTING GUIDANCE

2019, the Company adopted new revenue recognition accounting guidance (ASC 606). Results for fiscal 2019 are presented under ASC 606, while prior period amounts continue to be reported in accordance with our historical accounting.

The current quarter includes a $ 55 million favorable impact on a segment of operating income from the ASC 606 adoption. The most significant impact on parks, experiences and products, has been shown to be the most significant impact on parks, experiences and products.

OTHER QUARTERLY FINANCIAL INFORMATION

Corporate and Unallocated Shared Expenses

Corporate and unallocated shared expenses increased $ 101 million from $ 208 million to $ 309 million to the consolidation of TFCF operations, costs related to integration of TFCF and higher compensation costs.

Restructuring Charges

During the quarter, the Company recorded charges totaling $ 314 million, primarily for severance, in connection with the integration of TFCF. These charges recorded in "Restructuring and impairment charges" in the Consolidated Statement of Income.

Other income (expense), net

Other income (expense), net was as follows (in millions):

Quarter Ended

Sept. 28, 2019

Sept. 29, 2018

Change

Loss on debt extinguishment

$

(511

)

$

XNUMX

nm

Gain recognized in connection with the acquisition of TFCF

28

XNUMX

nm

Gain on sale of real estate

XNUMX

507

nm

Other income (expense), net

$

(483

)

$

507

nm

In the current quarter, the Company recognized a loss on the extinguishment of a debt originally assumed in the TFCF acquisition and to a settlement of preexisting relationships with TFCF pursuant to acquisition accounting guidance.

Interest Expense, net

Interest expense, net was as follows (in millions):

Quarter Ended

Sept. 28, 2019

Sept. 29, 2018

Change

Interest expense

$

(413

)

$

(189

)

> (100)%

Interest, investment income and other

52

30

73%

Interest expense, net

$

(361

)

$

(159

)

> (100)%

The increase in interest payments was due to higher debt balances as a result of the TFCF acquisition.

Increase in interest, investment income and other benefits related to retirement benefits, other than service cost. 27 and other service costs, in "Interest expense, net." “Costs and expenses.” Benefits in the current quarter of the year.

Equity in the Income (Loss) of Investees, net

Equity in the income (loss) of investees was as follows (in millions):

Quarter Ended

Sept. 28, 2019

Sept. 29, 2018

Change

Amounts included in segment results:

Media Networks

$

150

$

173

(13)%

Parks, Experiences and Products

(1

)

(4

)

75%

Direct-to-Consumer & International

(18

)

(183

)

90%

Impairment of equity investments

XNUMX

(210

)

nm

Equity in the income (loss) of investees, net

$

131

$

(224

)

nm

The decrease in equity income at Media Networks was due to lower income from A + E Television Networks driven by a decrease in affiliate and advertising revenues and higher marketing costs.

The decrease in equity losses at Direct-to-Consumer & International was two to the consolidation of Hulu.

Income Taxes

The effective income tax rate was as follows:

Quarter Ended

Sept. 28, 2019

Sept. 29, 2018

Change

Effective income tax rate - continuing operations

27.3

%

24.5

%

(2.8

)

ppt

The increase in the effective income tax rate from continuing operations to the estimate of the total income. The full-year tax rate is adjusted to the quarterly 21.0 from the 2019% in fiscal 24.5 as the result of the US federal income tax legislation (Tax Act) , and the comparison to $ 2018 billion unfavorable impact from the Tax Act recognized in the prior-year quarter.

Noncontrolling Interests

Net (income) loss attributable to noncontrolling interests was as follows (in millions):

Quarter Ended

Sept. 28, 2019

Sept. 29, 2018

Change

Net income attributable to noncontrolling interests

$

(129

)

$

(97

)

(33)%

The increase in net income attributable to noncontrolling interests in Hulu, partially offset by lower results at Hong Kong Disneyland Resort.

Net income attributable to noncontrolling interests is determined after income and management fees, financing costs and income taxes, as applicable.

FULL YEAR CASH FLOW STATEMENT INFORMATION

Cash flow

Cash provided by operations and free cash flow were as follows (in millions):

Year Ended

Sept. 28, 2019

Sept. 29, 2018

Change

Cash provided by operations

$

5,984

$

14,295

$

(8,311

)

Investments in parks, resorts and other property

(4,876

)

(4,465

)

(411

)

Free cash flow1

$

1,108

$

9,830

$

(8,722

)

1 Free cash flow is not a financial measure defined by GAAP. See the discussion on pages 9 through 12.

Cash provided by fiscal operations 2019 decreased by $ 8.3 billion from $ 14.3 billion in the current year. Fox Corporation's connection with the TFCF acquisition and the sale of regional sports networks with TFCF, higher pension contributions, lower segment operating income, an increase in film and television production spending and higher interest payments.

Capital Expenditures and Depreciation Expense

Investments in parks, resorts and other properties were as follows (in millions):

Year Ended

Sept. 28, 2019

Sept. 29, 2018

Media Networks

Cable Networks

$

93

$

96

Broadcasting

81

107

Total Media Networks

174

203

Parks, Experiences and Products

Domestic

3,294

3,223

International

852

677

Total Parks, Experiences and Products

4,146

3,900

Studio Entertainment

88

96

Direct-to-Consumer & International

258

107

Corporate

210

159

Total investments in parks, resorts and other properties

$

4,876

$

4,465

Capital expenditures increased from $ 4.5 billion to $ 4.9 billion driven by higher spending on our theme parks and resorts and spending on technology to support our direct-to-consumer streaming services.

Depreciation expense was as follows (in millions):

Year Ended

Sept. 28, 2019

Sept. 29, 2018

Media Networks

Cable Networks

$

107

$

111

Broadcasting

84

88

Total Media Networks

191

199

Parks, Experiences and Products

Domestic

1,474

1,449

International

724

768

Total Parks, Experiences and Products

2,198

2,217

Studio Entertainment

74

55

Direct-to-Consumer & International

207

106

Corporate

167

181

Total depreciation expense

$

2,837

$

2,758

NON-GAAP FINANCIAL MEASURES

This earnings release presents no cash measures defined by GAAP.

These measures should be reported together with the relevant GAAP financial measures and not presented as alternative measures of operating cash flow, diluted EPS or income from continuing operations before income taxes as determined in accordance with GAAP. Free cash flow, diluted EPS. Excluding certain items affecting comparability and total segment operating income. See further discussion of total segment operating income on page 2.

Free cash flow - The Company uses free cash flow (cash provided by operations less investments in parks, resorts and other properties), by other means, to generate cash that is available for purposes of capital expenditure. Management believes that information about free cash flow provides investors with an important perspective on cash available to service debt obligations, make strategic acquisitions and investments and pay dividends or repurchase shares.

Contacts

Zenia Mucha
Corporate Communications
818-560-5300

Lowell Singer
Investor Relations
818-560-6601

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