International Theme Park Investments

At December 27, 2014, the Company had 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 1 for the Company’s policy on consolidating VIEs.

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



	As of December 27, 2014
	Before International Theme Parks Consolidation		International Theme Parks and Adjustments			Total
Cash and cash equivalents	$	4,174	$	903		$	5,077
Other current assets	11,883		280			12,163
Total current assets	16,057		1,183			17,240
Investments/Advances	6,812		(4,170		)	2,642
Parks, resorts and other property	16,981		6,679			23,660
Other assets	43,480		13			43,493
Total assets	$	83,330	$	3,705		$	87,035

Current portion of borrowings	$	4,376	$	—		$	4,376
Other current liabilities	11,660		768			12,428
Total current liabilities	16,036		768			16,804
Borrowings	11,912		255			12,167
Deferred income taxes and other long-term liabilities	10,088		183			10,271
Equity	45,294		2,499			47,793
Total liabilities and equity	$	83,330	$	3,705		$	87,035



	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

The following table presents summarized income statement information of the Company for the quarter ended December 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	$	12,813		$	578		$	13,391
Cost and expenses	(9,597		)	(586		)	(10,183		)
Other income/(expense), net	(31		)	31			—
Interest income/(expense), net	(43		)	(15		)	(58		)
Equity in the income of investees	218			(6		)	212
Income before income taxes	3,360			2			3,362
Income taxes	(1,118		)	—			(1,118		)
Net income	$	2,242		$	2		$	2,244


⁽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 $14 million of royalties and management fees recognized for the quarter ended December 27, 2014.

The following table presents summarized cash flow statement information of the Company for the quarter ended December 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	$	1,742		$	113		$	1,855
Investments in parks, resorts and other property	(360		)	(638		)	(998		)
Cash (used in)/provided by other investing activities	(320		)	327			7
Cash provided by financing activities	562			335			897
Impact of exchange rates on cash and cash equivalents	(95		)	(10		)	(105		)
Change in cash and cash equivalents	1,529			127			1,656
Cash and cash equivalents, beginning of period	2,645			776			3,421
Cash and cash equivalents, end of period	$	4,174		$	903		$	5,077

Disneyland Paris

In September 2012, the Company provided Disneyland Paris with €1.2 billion ($1.5 billion) of intercompany loans, which were used to repay its outstanding third-party bank debt. The Company has also provided Disneyland Paris lines of credit totaling €350 million ($428 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 €250 million ($305 million) at December 27, 2014. The total outstanding balance of loans provided to Disneyland Paris, including amounts outstanding under the lines of credit, was €1.8 billion ($2.2 billion) as of December 27, 2014.

Disneyland Paris is currently implementing a €1.0 billion ($1.2 billion) recapitalization consisting of the following:


•	An equity rights offering to raise approximately €0.4 billion ($0.4 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 ($0.7 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 recapitalization received Disneyland Paris shareholders’ approval in January 2015 and the rights offering has commenced. The recapitalization is expected to be completed in fiscal 2015.

The Company has recognized approximately $365 million of deferred income tax assets on the difference between the Company’s tax basis in its investment in Disneyland Paris and the Company’s financial statement carrying value of Disneyland Paris. The Company will likely be required to write-off this deferred tax asset as a result of the recapitalization.

Hong Kong Disneyland Resort

At December 27, 2014, the Government of the Hong Kong Special Administrative Region (HKSAR) and the Company had a 52% and 48% equity interest in HKDL, respectively. 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 by up to 10 percentage points over a period no shorter than 18 years. As HKDL exceeded the performance targets in fiscal 2014, HKSAR received an additional equity interest of one percentage point in January 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 with a planned investment of approximately 34 billion yuan ($5.5 billion). Construction on the project began in April 2011, with the completion of major construction work anticipated by the end of calendar 2015 and opening planned for spring 2016.

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 designing, constructing and operating Shanghai Disney Resort.