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The Walt Disney Company Reports Fourth Quarter And Full Year Earnings For Fiscal 2013

These measures should be reviewed in conjunction with the relevant GAAP financial measures and are not presented as alternative measures of EPS, cash flow or net income as determined in accordance with GAAP. EPS excluding certain items, free cash flow and aggregate segment operating income as we have calculated them may not be comparable to similarly titled measures reported by other companies.

EPS excluding certain items – The Company uses EPS excluding certain items to evaluate the performance of the Company’s operations exclusive of certain items that impact the comparability of results from period to period. The Company believes that information about EPS exclusive of these impacts is useful to investors, particularly where the impact of the excluded items is significant in relation to reported earnings, because the measure allows for comparability between periods of the operating performance of the Company’s business and allows investors to evaluate the impact of these items separately from the impact of the operations of the business.

The following table reconciles reported EPS to EPS excluding certain items:

             
Quarter Ended Year Ended

Sept. 28,2013

   

Sept. 29,2012

Change

Sept. 28,2013

   

Sept. 29,2012

Change
Diluted EPS as reported $ 0.77 $ 0.68

13

%

$ 3.38 $ 3.13 8 %
Exclude:
Favorable tax adjustments related to pre-tax earnings in prior years

nm

 

(0.06 )

nm

Tax benefit from prior-year foreign earnings indefinitely reinvested outside the United States (0.02 ) nm (0.06 ) nm
Restructuring and impairment charges (1) 0.03 0.02

50

%

0.07 0.03

>100

%

Other income/(expense), net (2) (0.01 ) (0.03 )

67

%

0.03 (0.09 ) nm
Hulu Equity Redemption

charge (3)

      nm   0.02       nm
Diluted EPS excluding certain items (4) $ 0.77   $ 0.68  

13

%

$ 3.39   $ 3.07   10 %
 
 
     

(1)

Charges for the current year totaled $214 million and consisted of $186 million of severance and contract and lease termination charges (of which $79 million was recorded in the current quarter) and $28 million of intangible and other asset impairment charges (of which $14 million was recorded in the current quarter). Charges for the prior year totaled $100 million and consisted of $78 million of severance and lease termination charges (of which $35 million was recorded in the fourth quarter of the prior year) and $22 million for intangible and other asset impairment charges (of which $14 million was recorded in the fourth quarter of the prior year).

(2)

The current year includes a charge related to the Celador litigation ($321 million), partially offset by gains on the sale of our 50% interest in ESPN STAR Sports and various businesses ($252 million, of which $23 million was recorded in the current quarter). The prior year includes a non-cash gain recorded in connection with the acquisition of a controlling interest in UTV Software Communications Limited ($184 million) and the recovery of a receivable from Lehman Brothers that was written off in 2008 as a result of the Lehman bankruptcy ($79 million, all of which was recorded in the prior-year quarter), partially offset by a net charge related to the refinancing of Disneyland Paris borrowings ($24 million, all of which was recorded in the prior-year quarter).

(3)

Our share of expense associated with an equity redemption at Hulu LLC ($55 million).

(4)

May not equal the sum of the rows due to rounding.
 

Free cash flow – The Company uses free cash flow (cash provided by operations less investments in parks, resorts and other property), among other measures, to evaluate the ability of its operations to generate cash that is available for purposes other than capital expenditures. Management believes that information about free cash flow provides investors with an important perspective on the cash available to service debt, make strategic acquisitions and investments and pay dividends or repurchase shares.

Aggregate segment operating income – The Company evaluates the performance of its operating segments based on segment operating income, and management uses aggregate segment operating income as a measure of the performance of operating businesses separate from non-operating factors. The Company believes that information about aggregate segment operating income assists investors by allowing them to evaluate changes in the operating results of the Company’s portfolio of businesses separate from non-operational factors that affect net income, thus providing separate insight into both operations and the other factors that affect reported results.

A reconciliation of segment operating income to net income is as follows (in millions):

     
Quarter Ended Year Ended

Sept. 28,2013

   

Sept. 29,2012

Sept. 28,2013

 

Sept. 29,2012

Segment operating income $ 2,484 $ 2,339 $ 10,724 $   9,964
Corporate and unallocated shared expenses (164 ) (140 ) (531 ) (474 )
Restructuring and impairment charges (93 ) (49 ) (214 ) (100 )
Other income/(expense), net 23 55 (69 ) 239
Net interest expense (26 ) (91 ) (235 ) (369 )
Hulu Equity Redemption charge           (55 )      
Income before income taxes 2,224 2,114 9,620 9,260
Income taxes   (681 )   (724 )   (2,984 )     (3,087 )
Net income $ 1,543   $ 1,390   $ 6,636   $   6,173  
 

CONFERENCE CALL INFORMATION

In conjunction with this release, The Walt Disney Company will host a conference call today, November 7, 2013, at 5:00 PM EST/2:00 PM PST via a live Webcast. To access the Webcast go to www.disney.com/investors. The discussion will be available via replay through November 14, 2013 at 7:00 PM EST/4:00 PM PST.

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