7	International Theme Park Investments

The Company has a 51% effective ownership interest in the operations of Disneyland Paris, a 47% ownership interest in the operations of Hong Kong Disneyland Resort and a 43% ownership interest in the operations of Shanghai Disney Resort, all of which are VIEs and are 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 October 1, 2011 and October 2, 2010, reflecting the impact of consolidating the balance sheets of Disneyland Paris, Hong Kong Disneyland Resort, and Shanghai Disney Resort.


	As of October 1, 2011
	Before International Theme Parks Consolidation		International Theme Parks and Adjustments		Total
Cash and cash equivalents	$	2,407	$	778	$	3,185
Other current assets		10,323		249		10,572

Total current assets		12,730		1,027		13,757
Investments		3,791		(1,356)		2,435
Fixed assets		15,386		4,309		19,695
Other assets		36,137		100		36,237

Total assets	$	68,044	$	4,080	$	72,124


Current portion of borrowings	$	2,866	$	189	$	3,055
Other current liabilities		8,459		574		9,033

Total current liabilities		11,325		763		12,088
Borrowings		8,800		2,122		10,922
Deferred income taxes and other long-term liabilities		9,507		154		9,661
Equity		38,412		1,041		39,453

Total liabilities and equity	$	68,044	$	4,080	$	72,124


	As of October 2, 2010
	Before International Theme Parks Consolidation		International Theme Parks and Adjustments		Total
Cash and cash equivalents	$	2,065	$	657	$	2,722
Other current assets		9,264		239		9,503

Total current assets		11,329		896		12,225
Investments		3,581		(1,068)		2,513
Fixed assets		13,610		4,196		17,806
Other assets		36,564		98		36,662

Total assets	$	65,084	$	4,122	$	69,206


Current portion of borrowings	$	2,182	$	168	$	2,350
Other current liabilities		8,069		581		8,650

Total current liabilities		10,251		749		11,000
Borrowings		7,712		2,418		10,130
Deferred income taxes and other long-term liabilities		8,582		152		8,734
Equity		38,539		803		39,342

Total liabilities and equity	$	65,084	$	4,122	$	69,206

The following table presents summarized income statement information of the Company for the year ended October 1, 2011, reflecting the impact of consolidating the income statements of Disneyland Paris, Hong Kong Disneyland Resort, and Shanghai Disney Resort.


	Before International Theme Parks Consolidation ⁽¹⁾		International Theme Parks and Adjustments		Total
Revenues	$	38,672	$	2,221	$	40,893
Cost and expenses		(30,993)		(2,119)		(33,112)
Restructuring and impairment charges		(55)		—		(55)
Other income		75		—		75
Net interest expense		(246)		(97)		(343)
Equity in the income of investees		578		7		585

Income before income taxes		8,031		12		8,043
Income taxes		(2,762)		(23)		(2,785)

Net income	$	5,269	$	(11)	$	5,258

⁽¹⁾

These amounts include Disneyland Paris, Hong Kong Disneyland Resort and Shanghai Disney Resort 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.

The following table presents summarized cash flow statement information of the Company for the year ended October 1, 2011, reflecting the impact of consolidating the cash flow statements of Disneyland Paris, Hong Kong Disneyland Resort, and Shanghai Disney Resort.


	Before International Theme Parks Consolidation		International Theme Parks and Adjustments		Total
Cash provided by operations	$	6,675	$	319	$	6,994
Investments in parks, resorts, and other property		(3,190)		(369)		(3,559)
Cash provided by other investing activities		—		273		273
Cash used in financing activities		(3,131)		(102)		(3,233)
Impact of exchange rates on cash and cash equivalents		(12)		—		(12)

Increase in cash and cash equivalents		342		121		463
Cash and cash equivalents, beginning of year		2,065		657		2,722

Cash and cash equivalents, end of year	$	2,407	$	778	$	3,185

Disneyland Paris Financial Restructuring

Effective October 1, 2004, Disneyland Paris, the Company, and Disneyland Paris’s lenders finalized a Memorandum of Agreement (MOA) related to the financial restructuring of Disneyland Paris (the 2005 Financial Restructuring) which provided for new financing as well as the restructuring of Disneyland Paris’s existing financing at that time. The transactions contemplated by the MOA were fully implemented on February 23, 2005 with the completion of a €253 million equity rights offering in which the Company invested €100 million. The MOA included provisions for a ten-year €100 million line of credit from the Company for liquidity needs which has not been drawn and deferral of certain royalties and management fees payable by Disneyland Paris to the Company as follows:

•

Royalties and management fees for fiscal 2005 through fiscal 2009, totaling €125 million, payable to the Company have been deferred and converted into subordinated long-term borrowings

•

Royalties and management fees for fiscal 2007 through fiscal 2014, of up to €25 million per year, are subject to conditional deferral and conversion into subordinated long-term borrowings if operating results do not achieve specified levels. Royalties and management fees for fiscal 2008 and 2007, subject to conditional deferral, were not deferred and have been paid. Royalties and management fees for fiscal 2010 and 2009, subject to conditional deferral, have been deferred and converted into subordinated long-term borrowings. Based on operating results and subject to third-party confirmation, the Company will defer €25 million of royalties and management fees subject to conditional deferral for fiscal 2011. The Company also deferred an additional €9 million of royalties so that Disneyland Paris could comply with its annual financial covenants. (See further discussion in Note 9)

Certain indirect, wholly-owned subsidiaries of The Walt Disney Company have liability as current or former general partners of Disney S.C.A. In addition to their equity interest in Disney S.C.A., certain of these subsidiaries of the Company have been capitalized with interest-bearing demand notes with an aggregate face value of €200 million. In addition, interest of €41 million has accrued on the notes from the date of issuance and has been added to the amount owed.

Hong Kong Disneyland Resort Capital Realignment

In July 2009, the Company entered into a capital realignment and expansion plan for Hong Kong Disneyland Resort (HKDL) with the Government of the Hong Kong Special Administrative Region (HKSAR), HKDL’s majority shareholder. Key provisions of the plan include:

•

The Company converted its $354 million term and revolving credit facility loan to HKDL into equity during fiscal 2009. This was accompanied by conversion of an equal amount of the HKSAR loan to HKDL into equity

•

The Company would make approximately $0.4 billion of equity contributions to fund HKDL during the expansion, which is currently scheduled to be completed in phases by 2013. The actual amount of equity contributions by the Company may differ depending on the actual final cost of the expansion and operating results of HKDL during the relevant timeframe. The HKSAR will convert an additional amount of its loan to HKDL equal to these contributions into equity, subject to a maximum conversion amount that would leave approximately HK $1.0 billion ($128 million at October 1, 2011 exchange rates) of the HKSAR loan to HKDL outstanding. At October 1, 2011, the HKSAR loan to HKDL was $330 million. During fiscal 2011, 2010 and 2009, the Company made equity contributions totaling $153 million, $66 million and $40 million, respectively.

As a result of the above arrangement, the Company’s interest in HKDL has increased from 43% to 47% and is projected to increase to approximately 48% although the Company’s ending ownership will depend on the aggregate amount of equity contributions made by the Company pursuant to the expansion plan.

Shanghai Disney Resort

On April 8, 2011, the Company and Shanghai Shendi (Group) Co., Ltd (Shendi) announced that the Chinese central government in Beijing had approved an agreement to build and operate a Disney resort in the Pudong district of Shanghai (Shanghai Disney Resort) that is operated through a joint venture between the Company and Shendi, in which Shendi owns a 57% interest and the Company owns 43%. Shanghai Disney Resort is scheduled to open in approximately five years. The project will be constructed in phases, and we expect the total investment to be approximately 24.5 billion yuan to build the theme park and an additional 4.5 billion yuan to build other aspects of the resort, including two hotels and a retail, dining and entertainment area. The Company will finance 43% of the initial investment in accordance with its equity ownership percentage. The Company consolidates Shanghai Disney Resort for financial statement reporting purposes due to the Company’s involvement in the management of the resort.