International Theme Parks

The Company has a 47% ownership interest in the operations of Hong Kong Disneyland Resort and a 43% ownership interest in the operations of Shanghai Disney Resort (together, the Asia Theme Parks), which are both VIEs

consolidated in the Company’s financial statements. See Note 2 for the Company’s policy on consolidating VIEs. Disneyland Paris was also a consolidated VIE until the Company acquired 100% ownership of Disneyland Paris in June 2017. Given our

100% ownership, the Company will continue to consolidate Disneyland Paris’ financial results. The Asia Theme

Parks and Disneyland Paris are collectively referred to as the International Theme Parks.

The following table summarizes the carrying amounts of the International Theme Parks’ assets and liabilities included in the Company’s consolidated balance sheets as of September 30, 2017 and October 1, 2016:



	September 30, 2017		October 1, 2016
Cash and cash equivalents	$	843	$	1,008
Other current assets	376		331
Total current assets	1,219		1,339
Parks, resorts and other property	9,403		9,270
Other assets	111		88
Total assets ⁽¹⁾	$	10,733	$	10,697

Current liabilities	$	1,163	$	1,499
Borrowings - long-term	1,145		1,087
Other long-term liabilities	371		256
Total liabilities ⁽¹⁾	$	2,679	$	2,842


⁽¹⁾	The total assets of the Asia Theme Parks were $8.1 billion and $8.2 billion at September 30, 2017 and October 1, 2016, respectively, and primarily consist of parks, resorts and other property of $7.3 billion at both September 30, 2017 and October 1, 2016. The total liabilities of the Asia Theme Parks were $2.1 billion and $2.2 billion at September 30, 2017 and October 1, 2016, respectively.

The following table summarizes the International Theme Parks’ revenues and costs and expenses included in the Company’s consolidated statements of income as of September 30, 2017:



	September 30, 2017
Revenues	$	3,318
Costs and expenses	(3,265		)
Equity in the loss of investees	(25		)

International Theme Parks’ royalty and management fees of $166 million for fiscal 2017 are eliminated in consolidation but are considered in calculating earnings allocated to noncontrolling interests.

International Theme Parks’ cash flows included in the Company’s fiscal 2017 consolidated cash flow statement were $757 million generated from operating activities, $840 million used in investing activities and $225 million used in financing activities. The majority of cash flows used in investing activities were for the Asia Theme Parks.

Disneyland Paris

In February 2017, the Company increased its effective ownership percentage in Disneyland Paris from 81% to 88% by exchanging 1.36 million of the Company’s common shares for 70.5 million outstanding shares of Euro Disney S.C.A. (EDSCA), a publicly-traded French entity, which has an 82% interest in the Disneyland Paris operating company. The transaction was valued at €141 million ($150 million) based on the purchase price of €2 per share.

In the third quarter of fiscal 2017, the Company acquired the remaining outstanding shares of EDSCA at €2 per share, a total cost of €224 million ($250 million), and EDSCA was delisted from Euronext Paris.

During calendar 2015, Disneyland Paris completed a recapitalization, which included an equity rights offering and a conversion of Company loans to Disneyland Paris into equity. In addition, the Company completed a mandatory tender offer to the other Disneyland Paris shareholders. These transactions resulted in an increase from 51% to 81% effective ownership interest in Disneyland Paris.

Hong Kong Disneyland Resort

The Government of the Hong Kong Special Administrative Region (HKSAR) and the Company have 53% and 47% equity interests in Hong Kong Disneyland Resort, respectively.

As part of financing the construction of a third hotel, which opened April 30, 2017, HKSAR converted $219 million of a loan to equity during fiscal 2016 and 2015, leaving a balance on the loan at September 30, 2017 of HK $0.4 billion ($46 million) (see Note 8 for further details of this loan). In addition, the Company and HKSAR have provided loans with outstanding balances of $138 million and $93 million, respectively, which bear interest at a rate of three month HIBOR plus 2% and mature in September 2025. The Company’s loan is eliminated in consolidation.

In August 2017, the Company and HKSAR entered into an agreement for a multi-year expansion of Hong Kong Disneyland that will add a number of new guest offerings, including two new themed areas, by 2023. Under the terms of the agreement, the HK $10.9 billion ($1.4 billion) expansion will be funded by equity contributions made by the Company and HKSAR on an equal basis.

HKSAR has the right to receive additional shares over time to the extent Hong Kong Disneyland Resort exceeds certain return on asset performance targets. The amount of additional shares HKSAR can receive is capped on both an annual and cumulative basis and could decrease the Company’s equity interest by up to an additional 7 percentage points over a period no shorter than 15 years. Assuming HK $10.9 billion is contributed in the expansion, the impact to the Company’s equity interest would be limited to 4 percentage points.

The Company has a revolving credit facility HK $2.1 billion ($269 million), which bears interest at a rate of three month HIBOR plus 1.25% and matures in December 2023. There is no outstanding balance under the line of credit at September 30, 2017.

The net impact to HKSAR and the Company’s ownership shares of Hong Kong Disneyland Resort during fiscal 2017, 2016 and 2015 as a result of the above activities was not material.

Shanghai Disney Resort

Shanghai Shendi (Group) Co., Ltd (Shendi) and the Company have 57% and 43% equity interests in Shanghai Disney Resort, respectively. A management company, in which the Company has a 70% interest and Shendi a 30% interest, is responsible for operating Shanghai Disney Resort.

The Company has provided Shanghai Disney Resort with term loans totaling $782 million, bearing interest at rates up to 8% and maturing in 2036, with early repayment permitted. In addition, the Company has an outstanding balance of $305 million due from Shanghai Disney Resort related to development costs, pre-opening expenses and royalties and management fees. The Company has also provided Shanghai Disney Resort with a $157 million line of credit bearing interest at 8%. There is no outstanding balance under the line of credit at September 30, 2017. These balances are eliminated in consolidation.

Shendi has provided Shanghai Disney Resort with term loans totaling 6.7 billion yuan (approximately $1.0 billion), bearing interest at rates up to 8% and maturing in 2036, with early repayment permitted. Shendi has also provided Shanghai Disney Resort with a 1.4 billion yuan (approximately $205 million) line of credit bearing interest at 8%. There is no outstanding balance under the line of credit at September 30, 2017.