Description of the Business and Segment Information
The Walt Disney Company, together with the subsidiaries through which businesses are conducted (the Company), is a diversified worldwide entertainment company with operations in the following business segments: Media Networks, Parks and Resorts, Studio Entertainment, Consumer Products and Interactive.
DESCRIPTION OF THE BUSINESS
Media Networks
The Company operates cable programming services including the ESPN, Disney Channels Worldwide, ABC Family, SOAPnet and UTV/Bindass networks, broadcast businesses, which include ABC and eight owned television stations, radio businesses consisting of the ESPN Radio Network and 30 owned and operated Radio Disney and ESPN radio stations. The ABC and ESPN Radio Networks have affiliated stations providing coverage to consumers throughout the U.S. The Company also produces original live-action and animated television programming, which may be sold in network, first-run syndication, pay and international television markets, on DVD and Blu-ray formats and through online services. The Company has interests in media businesses that are accounted for under the equity method including AETN, Hulu and Seven TV. Our Media Networks business also operates branded internet sites.
Parks and Resorts
The Company owns and operates the Walt Disney World Resort in Florida and the Disneyland Resort in California. The Walt Disney World Resort includes four theme parks (the Magic Kingdom, Epcot, Disney’s Hollywood Studios and Disney’s Animal Kingdom), 18 resort hotels, a retail, dining and entertainment complex, a sports complex, conference centers, campgrounds, water parks and other recreational facilities. The Disneyland Resort includes two theme parks (Disneyland and Disney California Adventure), three resort hotels and a retail, dining and entertainment complex. Internationally, the Company manages and has a 51% effective ownership interest in Disneyland Paris, which includes two theme parks (Disneyland Park and Walt Disney Studios Park), seven themed hotels, two convention centers, a shopping, dining and entertainment complex and a 27-hole golf facility. The Company manages and has a 48% ownership interest in Hong Kong Disneyland Resort (HKDL), which includes one theme park and two resort hotels. The Company has a 43% ownership interest in Shanghai Disney Resort, which is currently under construction, and a 70% ownership interest in the management company of Shanghai Disney Resort. The Company also earns royalties on revenues generated by the Tokyo Disneyland Resort, which includes two theme parks (Tokyo Disneyland and Tokyo DisneySea) and three Disney-branded hotels, and is owned and operated by an unrelated Japanese corporation. The Company manages and markets vacation club ownership interests through the Disney Vacation Club, operates the Disney Cruise Line, the Adventures by Disney guided group vacations business and Aulani, a hotel and vacation club resort in Hawaii. The Company’s Walt Disney Imagineering unit designs and develops theme park concepts and attractions as well as resort properties.
Studio Entertainment
The Company produces and acquires live-action and animated motion pictures for worldwide distribution to the theatrical, home entertainment and television markets. The Company distributes these products through its own distribution and marketing companies in the U.S. and both directly and through independent companies and joint ventures in foreign markets primarily under the Walt Disney Pictures, Pixar, Marvel, Touchstone, Lucasfilm and UTV banners. We also distribute certain motion pictures for DreamWorks under our Touchstone Pictures banner. The Company also produces stage plays and musical recordings and licenses and produces live entertainment events.
Consumer Products
The Company licenses trade names, characters and visual and literary properties to various retailers, show promoters and publishers throughout the world. The Company also engages in retail and online distribution of products through The Disney Store and DisneyStore.com. We operate The Disney Store in North America, Europe and Japan. The Company publishes entertainment and educational books and magazines and comic books for children and families and operates English language learning centers in China.
Interactive
The Company creates and delivers branded entertainment and lifestyle content across interactive media platforms. The primary operating businesses are Interactive Games, which produces and distributes console, online and mobile games, and Interactive Media, which develops branded online services and provides website maintenance and design for other Company businesses. Certain properties are also licensed to third-party game publishers. Interactive also manages the Disney-branded mobile phone business in Japan, which provides mobile phones and content to consumers.
SEGMENT INFORMATION
The operating segments reported below are the segments of the Company for which separate financial information is available and for which segment results are evaluated regularly by the Chief Executive Officer in deciding how to allocate resources and in assessing performance.
Segment operating results reflect earnings before corporate and unallocated shared expenses, restructuring and impairment charges, other income/(expense), net interest expense, income taxes and noncontrolling interests. Segment operating income includes equity in the income of investees. Corporate and unallocated shared expenses principally consist of corporate functions, executive management and certain unallocated administrative support functions.
Equity in the income of investees included in segment operating results is as follows:
|
| | | | | | | | | | | |
| 2013 | | 2012 | | 2011 |
Media Networks | | | | | |
Cable Networks | $ | 788 |
| | $ | 664 |
| | $ | 578 |
|
Broadcasting | (46 | ) | | (37 | ) | | 6 |
|
Equity in the income of investees included in segment operating income | $ | 742 |
| | $ | 627 |
| | $ | 584 |
|
In fiscal 2013, the Company recorded a $55 million charge for our share of expense related to an equity redemption at Hulu LLC (Hulu Equity Redemption). This charge is recorded in equity in the income of investees in the Consolidated Statement of Income but has been excluded from segment operating income. See Note 3 for further discussion of the transaction.
The following segment results include allocations of certain costs, including information technology, pension, legal, and other shared services costs, which are allocated based on metrics designed to correlate with consumption. These allocations are agreed-upon amounts between the businesses and may differ from amounts that would be negotiated in arm’s length transactions. In addition, all significant intersegment transactions have been eliminated except that Studio Entertainment revenues and operating income include an allocation of Consumer Products and Interactive revenues, which is meant to reflect royalties on sales of merchandise generated by Consumer Products and Interactive, which is based on intellectual property from certain Studio Entertainment films.
|
| | | | | | | | | | | |
| 2013 | | 2012 | | 2011 |
Revenues | | | | | |
Media Networks | $ | 20,356 |
| | $ | 19,436 |
| | $ | 18,714 |
|
Parks and Resorts | 14,087 |
| | 12,920 |
| | 11,797 |
|
Studio Entertainment | | | | | |
Third parties | 5,721 |
| | 5,566 |
| | 6,061 |
|
Intersegment | 258 |
| | 259 |
| | 290 |
|
| 5,979 |
| | 5,825 |
| | 6,351 |
|
Consumer Products | | | | | |
Third parties | 3,811 |
| | 3,499 |
| | 3,335 |
|
Intersegment | (256 | ) | | (247 | ) | | (286 | ) |
| 3,555 |
| | 3,252 |
| | 3,049 |
|
Interactive | | | | | |
Third parties | 1,066 |
| | 857 |
| | 986 |
|
Intersegment | (2 | ) | | (12 | ) | | (4 | ) |
| 1,064 |
| | 845 |
| | 982 |
|
Total consolidated revenues | $ | 45,041 |
| | $ | 42,278 |
| | $ | 40,893 |
|
Segment operating income (loss) | | | | | |
Media Networks | $ | 6,818 |
| | $ | 6,619 |
| | $ | 6,146 |
|
Parks and Resorts | 2,220 |
| | 1,902 |
| | 1,553 |
|
Studio Entertainment | 661 |
| | 722 |
| | 618 |
|
Consumer Products | 1,112 |
| | 937 |
| | 816 |
|
Interactive | (87 | ) | | (216 | ) | | (308 | ) |
Total segment operating income | $ | 10,724 |
| | $ | 9,964 |
| | $ | 8,825 |
|
Reconciliation of segment operating income to income before income taxes | | | | | |
Segment operating income | $ | 10,724 |
| | $ | 9,964 |
| | $ | 8,825 |
|
Corporate and unallocated shared expenses | (531 | ) | | (474 | ) | | (459 | ) |
Restructuring and impairment charges | (214 | ) | | (100 | ) | | (55 | ) |
Other income/(expense), net | (69 | ) | | 239 |
| | 75 |
|
Net interest expense | (235 | ) | | (369 | ) | | (343 | ) |
Hulu Equity Redemption charge | (55 | ) | | — |
| | — |
|
Income before income taxes | $ | 9,620 |
| | $ | 9,260 |
| | $ | 8,043 |
|
Capital expenditures | | | | | |
Media Networks | | | | | |
Cable Networks | $ | 176 |
| | $ | 170 |
| | $ | 179 |
|
Broadcasting | 87 |
| | 85 |
| | 128 |
|
Parks and Resorts | | | | | |
Domestic | 1,140 |
| | 2,242 |
| | 2,294 |
|
International | 970 |
| | 641 |
| | 429 |
|
Studio Entertainment | 78 |
| | 79 |
| | 118 |
|
Consumer Products | 45 |
| | 69 |
| | 115 |
|
Interactive | 13 |
| | 27 |
| | 21 |
|
Corporate | 287 |
| | 471 |
| | 275 |
|
Total capital expenditures | $ | 2,796 |
| | $ | 3,784 |
| | $ | 3,559 |
|
|
| | | | | | | | | | | |
| 2013 | | 2012 | | 2011 |
Depreciation expense | | | | | |
Media Networks | $ | 238 |
| | $ | 241 |
| | $ | 229 |
|
Parks and Resorts | | | | | |
Domestic | 1,041 |
| | 927 |
| | 842 |
|
International | 327 |
| | 314 |
| | 323 |
|
Studio Entertainment | 54 |
| | 48 |
| | 53 |
|
Consumer Products | 57 |
| | 55 |
| | 48 |
|
Interactive | 20 |
| | 17 |
| | 16 |
|
Corporate | 220 |
| | 182 |
| | 148 |
|
Total depreciation expense | $ | 1,957 |
| | $ | 1,784 |
| | $ | 1,659 |
|
Amortization of intangible assets | | | | | |
Media Networks | $ | 13 |
| | $ | 17 |
| | $ | 8 |
|
Parks and Resorts | 2 |
| | — |
| | — |
|
Studio Entertainment | 107 |
| | 94 |
| | 79 |
|
Consumer Products | 89 |
| | 60 |
| | 57 |
|
Interactive | 24 |
| | 32 |
| | 38 |
|
Corporate | — |
| | — |
| | — |
|
Total amortization of intangible assets | $ | 235 |
| | $ | 203 |
| | $ | 182 |
|
Identifiable assets(1)(2) | | | | | |
Media Networks | $ | 28,627 |
| | $ | 28,660 |
| | |
Parks and Resorts | 22,056 |
| | 20,951 |
| | |
Studio Entertainment | 14,750 |
| | 12,928 |
| | |
Consumer Products | 7,506 |
| | 5,016 |
| | |
Interactive | 2,311 |
| | 1,926 |
| | |
Corporate(3) | 5,991 |
| | 5,417 |
| | |
Total consolidated assets | $ | 81,241 |
| | $ | 74,898 |
| | |
Supplemental revenue data | | | | | |
Media Networks | | | | | |
Advertising(4) | $ | 8,006 |
| | $ | 7,773 |
| | $ | 7,668 |
|
Affiliate Fees | 10,018 |
| | 9,360 |
| | 8,837 |
|
Parks and Resorts | | | | | |
Merchandise, food and beverage | 4,189 |
| | 3,945 |
| | 3,738 |
|
Admissions | 4,704 |
| | 4,225 |
| | 3,870 |
|
Revenues | | | | | |
United States and Canada | $ | 34,021 |
| | $ | 31,770 |
| | $ | 30,848 |
|
Europe | 6,181 |
| | 6,223 |
| | 6,455 |
|
Asia Pacific | 3,333 |
| | 2,990 |
| | 2,517 |
|
Latin America and Other | 1,506 |
| | 1,295 |
| | 1,073 |
|
| $ | 45,041 |
| | $ | 42,278 |
| | $ | 40,893 |
|
Segment operating income | | | | | |
United States and Canada | $ | 7,871 |
| | $ | 6,991 |
| | $ | 6,388 |
|
Europe | 1,361 |
| | 1,692 |
| | 1,517 |
|
Asia Pacific | 1,016 |
| | 835 |
| | 627 |
|
Latin America and Other | 476 |
| | 446 |
| | 293 |
|
| $ | 10,724 |
| | $ | 9,964 |
|
| $ | 8,825 |
|
|
| | | | | | | |
| 2013 | | 2012 |
Long-lived assets (5) | | | |
United States and Canada | $ | 53,225 |
| | $ | 47,959 |
|
Europe | 7,552 |
| | 7,484 |
|
Asia Pacific | 3,909 |
| | 3,303 |
|
Latin America and Other | 215 |
| | 270 |
|
| $ | 64,901 |
| | $ | 59,016 |
|
| |
(1) | Identifiable assets include amounts associated with equity method investments. Equity method investments by segment are as follows: |
|
| | | | | | | |
| 2013 | | 2012 |
Media Networks | $ | 2,369 |
| | $ | 2,423 |
|
Parks and Resorts | 15 |
| | 8 |
|
Studio Entertainment | 2 |
| | 2 |
|
Consumer Products | 1 |
| | 1 |
|
Interactive | — |
| | — |
|
Corporate | 20 |
| | 4 |
|
| $ | 2,407 |
| | $ | 2,438 |
|
| |
(2) | Goodwill and intangible assets by segment are as follows: |
|
| | | | | | | |
| 2013 | | 2012 |
Media Networks | $ | 17,782 |
| | $ | 17,854 |
|
Parks and Resorts | 342 |
| | 172 |
|
Studio Entertainment | 8,425 |
| | 6,783 |
|
Consumer Products | 6,262 |
| | 3,700 |
|
Interactive | 1,753 |
| | 1,486 |
|
Corporate | 130 |
| | 130 |
|
| $ | 34,694 |
| | $ | 30,125 |
|
| |
(3) | Primarily fixed assets, deferred tax assets, cash and cash equivalents |
| |
(4) | Advertising revenue includes amounts reported in Interactive |
| |
(5) | Long-lived assets are total assets less the following: current assets, long-term receivables, deferred taxes, financial investments and derivatives |
