International Theme Park Investments

The Company has a 51% effective ownership interest in the operations of Disneyland Paris, a 48% ownership interest in the operations of HKDL and a 43% ownership interest in the operations of Shanghai Disney Resort, all of which are VIEs consolidated in the Company’s financial statements. See Note 2 for the Company’s policy on consolidating VIEs.

The following tables present summarized balance sheet information for the Company as of September 27, 2014 and September 28, 2013, reflecting the impact of consolidating the International Theme Parks balance sheets.



	As of September 27, 2014
	Before International Theme Parks Consolidation		International Theme Parks and Adjustments			Total
Cash and cash equivalents	$	2,645	$	776		$	3,421
Other current assets	11,452		303			11,755
Total current assets	14,097		1,079			15,176
Investments/Advances	6,627		(3,931		)	2,696
Parks, resorts and other property	17,081		6,251			23,332
Other assets	42,958		24			42,982
Total assets	$	80,763	$	3,423		$	84,186

Current portion of borrowings	$	2,164	$	—		$	2,164
Other current liabilities	10,318		810			11,128
Total current liabilities	12,482		810			13,292
Borrowings	12,423		253			12,676
Deferred income taxes and other long-term liabilities	9,859		181			10,040
Equity	45,999		2,179			48,178
Total liabilities and equity	$	80,763	$	3,423		$	84,186



	As of September 28, 2013
	Before International Theme Parks Consolidation		International Theme Parks and Adjustments			Total
Cash and cash equivalents	$	3,325	$	606		$	3,931
Other current assets	9,896		282			10,178
Total current assets	13,221		888			14,109
Investments/Advances	6,415		(3,566		)	2,849
Parks, resorts and other property	17,117		5,263			22,380
Other assets	41,879		24			41,903
Total assets	$	78,632	$	2,609		$	81,241

Current portion of borrowings	$	1,512	$	—		$	1,512
Other current liabilities	9,622		570			10,192
Total current liabilities	11,134		570			11,704
Borrowings	12,501		275			12,776
Deferred income taxes and other long-term liabilities	8,466		145			8,611
Equity	46,531		1,619			48,150
Total liabilities and equity	$	78,632	$	2,609		$	81,241

The following table presents summarized income statement information of the Company for the year ended September 27, 2014, reflecting the impact of consolidating the International Theme Parks income statements.



	Before International Theme Parks Consolidation⁽¹⁾			International Theme Parks and Adjustments			Total
Revenues	$	46,455		$	2,358		$	48,813
Cost and expenses	(34,910		)	(2,363		)	(37,273		)
Restructuring and impairment charges	(140		)	—			(140		)
Other income/(expense), net	(31		)	—			(31		)
Interest income/(expense), net	73			(50		)	23
Equity in the income of investees	819			35			854
Income before income taxes	12,266			(20		)	12,246
Income taxes	(4,225		)	(17		)	(4,242		)
Net income	$	8,041		$	(37	)	$	8,004


⁽¹⁾	These amounts include the International Theme Parks under the equity method of accounting. As such, royalty and management fee income from these operations is included in Revenues and our share of their net income/(loss) is included in Equity in the income of investees. There were $86 million of royalties and management fees recognized for the year ended September 27, 2014.

The following table presents summarized cash flow statement information of the Company for the year ended September 27, 2014, reflecting the impact of consolidating the International Theme Parks cash flow statements.



	Before International Theme Parks Consolidation			International Theme Parks and Adjustments			Total
Cash provided by operations	$	9,294		$	486		$	9,780
Investments in parks, resorts and other property	(1,808		)	(1,503		)	(3,311		)
Cash (used in)/provided by other investing activities	(620		)	586			(34		)
Cash (used in)/provided by financing activities	(7,318		)	608			(6,710		)
Impact of exchange rates on cash and cash equivalents	(228		)	(7		)	(235		)
Change in cash and cash equivalents	(680		)	170			(510		)
Cash and cash equivalents, beginning of year	3,325			606			3,931
Cash and cash equivalents, end of year	$	2,645		$	776		$	3,421

Disneyland Paris

In September 2012, the Company provided Disneyland Paris with €1.2 billion ($1.6 billion) of intercompany loans, which were used to repay its outstanding third-party bank debt and resulted in a net charge of $24 million. The Company has also provided Disneyland Paris lines of credit totaling €350 million ($444 million), one of which bears interest at EURIBOR and expires in two tranches (€100 million in 2015 and €150 million in 2018) and another €100 million credit line which bears interest at EURIBOR plus 2.0% and expires in 2017. The balance outstanding under the lines of credit was €180 million ($228 million) at September 27, 2014. The total outstanding balance of loans provided to Disneyland Paris, including amounts outstanding under the lines of credit, was €1.8 billion ($2.3 billion) as of September 27, 2014.

In October 2014, Disneyland Paris announced, with the Company’s backing, a €1.0 billion ($1.3 billion) recapitalization consisting of the following:


•	An equity rights offering to raise approximately €0.4 billion ($0.5 billion) in cash proceeds of which the Company will fund approximately €0.2 billion ($0.3 billion). To the extent the other Disneyland Paris shareholders choose not to participate in the rights offering, the Company will also purchase the unsubscribed shares.


•	The Company will convert €0.6 billion ($0.8 billion) of its loans to Disneyland Paris into equity.


•	The Company will be required to make a mandatory tender offer to the other Disneyland Paris shareholders to purchase their shares at a price, which is subject to French regulatory approval. Based on the proposed price of €1.25 per share, the Company may be required to purchase up to an additional €0.3 billion ($0.4 billion) in shares.


•	To mitigate the dilution caused by the loan conversion, the Disneyland Paris shareholders will have the right to purchase shares from the Company at the price used to convert debt to equity.


•	The Company will replace the existing lines of credit with a new consolidated €350 million line of credit bearing interest at EURIBOR plus 2.0% and maturing in 2023.

The Company’s ownership interest in Disneyland Paris after the proposed recapitalization will depend on the number of Disneyland Paris shareholders that participate in the rights offering, accept the Company’s tender offer, and/or exercise their anti-dilution rights to purchase Disneyland Paris shares from the Company. The Company will have a minimum effective ownership interest of 51% after the above transaction.

The transaction is subject to regulatory and Disneyland Paris shareholders’ approval. If approved, it is expected to be completed in fiscal 2015.

Hong Kong Disneyland Resort

In July 2009, the Company entered into a capital realignment and expansion plan for HKDL with the Government of the Hong Kong Special Administrative Region (HKSAR), HKDL’s majority shareholder. The expansion cost approximately $0.5 billion, was completed in 2013 and was financed equally by the Company and HKSAR. As a result the Company’s equity interest in HKDL increased from 43% to 48%.

In addition, HKSAR holds a right to receive additional shares over time if HKDL exceeds certain return on asset performance targets. The amount of additional shares HKSAR can receive varies to the extent certain performance targets are exceeded but is capped on both an annual and cumulative basis. Based on the number of shares currently outstanding, these additional shares could decrease the Company’s equity interest to no less than 38% over a period no shorter than 18 years.

As HKDL exceeded their performance targets in fiscal 2014, HKSAR is entitled to receive an additional equity interest of approximately 1.0 percentage point in fiscal 2015.

HKDL plans to build a third hotel at the resort, which is expected to open in 2017 and cost approximately $550 million. To fund the construction, the Company will contribute approximately $219 million of equity, and HKSAR will convert an equal amount of its outstanding loan to HKDL into equity. Additionally, the Company and HKSAR will provide shareholder loans of up to approximately $149 million and $104 million, respectively. The loans will mature on dates from fiscal 2022 through fiscal 2025 and bear interest at a rate of three month HIBOR plus 2%.

Shanghai Disney Resort

The Company and Shanghai Shendi (Group) Co., Ltd (Shendi) are constructing a Disney Resort (Shanghai Disney Resort) in the Pudong district of Shanghai that includes a theme park, two hotels and a retail, dining and entertainment area. The original planned investment of approximately 29 billion yuan ($4.7 billion) was increased in 2014 by approximately 5 billion yuan ($0.8 billion), primarily to fund additional attractions, entertainment and other offerings to increase capacity at the theme park. Construction on the project began in April 2011, with the resort opening date expected to be announced in early calendar 2015.

The total investment in Shanghai Disney Resort will be funded in accordance with each partner’s ownership percentage, with approximately 67% from equity contributions and 33% from shareholder loans. Shanghai Disney Resort is owned through two joint venture companies, in which Shendi owns 57% and the Company owns 43%. An additional joint venture, in which the Company has a 70% interest and Shendi a 30% interest, is responsible for creating, constructing and operating Shanghai Disney Resort.