International Theme Park Investments

At March 28, 2015, the Company had a 77% effective ownership interest in the operations of Disneyland Paris (see Disneyland Paris recapitalization discussion below), a 46% 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 March 28, 2015 and September 27, 2014, reflecting the impact of consolidating the International Theme Parks balance sheets.



	As of March 28, 2015
	Before International Theme Parks Consolidation		International Theme Parks and Adjustments			Total
Cash and cash equivalents	$	2,778	$	967		$	3,745
Other current assets	11,644		257			11,901
Total current assets	14,422		1,224			15,646
Investments/Advances	6,844		(4,269		)	2,575
Parks, resorts and other property	17,030		6,732			23,762
Other assets	43,674		58			43,732
Total assets	$	81,970	$	3,745		$	85,715

Current portion of borrowings	$	2,771	$	—		$	2,771
Other current liabilities	10,243		396			10,639
Total current liabilities	13,014		396			13,410
Borrowings	11,928		258			12,186
Deferred income taxes and other long-term liabilities	10,205		177			10,382
Equity	46,823		2,914			49,737
Total liabilities and equity	$	81,970	$	3,745		$	85,715



	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 six months ended March 28, 2015, reflecting the impact of consolidating the International Theme Parks income statements.



	Before International Theme Parks Consolidation⁽¹⁾			International Theme Parks and Adjustments			Total
Revenues	$	24,838		$	1,014		$	25,852
Cost and expenses	(18,409		)	(1,129		)	(19,538		)
Other income/(expense), net	(31		)	31			—
Interest expense, net	(12		)	(38		)	(50		)
Equity in the income of investees	333			85			418
Income before income taxes	6,719			(37		)	6,682
Income taxes	(2,210		)	—			(2,210		)
Net income	$	4,509		$	(37	)	$	4,472


⁽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 $29 million of royalties and management fees recognized for the six months ended March 28, 2015.

The following table presents summarized cash flow statement information of the Company for the six months ended March 28, 2015, 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	$	4,788		$	(15	)	$	4,773
Investments in parks, resorts and other property	(851		)	(1,054		)	(1,905		)
Cash (used in)/provided by other investing activities	(432		)	510			78
Cash (used in)/provided by financing activities	(3,125		)	780			(2,345		)
Impact of exchange rates on cash and cash equivalents	(247		)	(30		)	(277		)
Change in cash and cash equivalents	133			191			324
Cash and cash equivalents, beginning of period	2,645			776			3,421
Cash and cash equivalents, end of period	$	2,778		$	967		$	3,745

Disneyland Paris

In January 2015, Disneyland Paris received its shareholders’ approval to implement a €1.0 billion recapitalization consisting of the following:


•	An equity rights offering completed in February 2015, which raised €0.4 billion in cash proceeds of which the Company funded €0.2 billion. The Company purchased shares that were unsubscribed by other Disneyland Paris shareholders, which increased the Company’s effective ownership by approximately four percentage points.

•

In February 2015, the Company converted €0.6 billion of its loans to Disneyland Paris into equity at a conversion price of €1.25 per share. The conversion increased the Company’s effective ownership by an additional 23 percentage points. In addition, the Company replaced its existing lines of credit with Disneyland Paris with a new €350 million line of credit bearing interest at EURIBOR plus 2.0% and maturing in 2023. The prior lines of credit were repaid, and there is no outstanding balance under the new line of credit at March 28, 2015. As of March 28, 2015, the total outstanding balance of loans provided by the Company to Disneyland Paris was €1.0 billion.


•	Following regulatory approval, the Company opened a mandatory tender offer to the other Disneyland Paris shareholders in April 2015 to purchase their shares at €1.25 per share, and the Company may be required to purchase up to an additional €0.3 billion in shares. There was an appeal to the regulatory approval, and the tender offer will remain outstanding during the appeal process.


•	Following the completion of the mandatory tender offer and to offset the dilution caused by the loan conversion, the Company will offer the right to Disneyland Paris shareholders to purchase shares from the Company at €1.25.

As of March 28, 2015, the Company has a 77% effective ownership interest in Disneyland Paris. The Company’s final ownership interest following the recapitalization will depend on the number of Disneyland Paris shareholders that accept the Company’s tender offer and/or exercise their anti-dilution rights. The Company will have a minimum effective ownership interest of 54% after the above transaction.

The Company has recognized approximately $375 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 although it will depend on the final outcome of the tender offer and anti-dilution process including the determination of our final ownership interest.

The recapitalization is expected to be completed by the end of 2015.

Hong Kong Disneyland Resort

At September 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. Because HKDL exceeded the performance targets in fiscal 2014, HKSAR received additional shares, which increased their ownership interest to approximately 54%. Additional shares that may be issued in future years could decrease the Company’s equity interest by up to an additional 8 percentage points over a period no shorter than 17 years.

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.