2012 The Walt Disney Company Annual Report

[Pages:31]2012 The Walt Disney Company Annual Report

Robert Hedges, Garrett Cimina, Matthew Pihl, Jake Ochroch, Rachel

Popivchak

Table of Contents

Executive Summary

2

Financial Analysis

5

Liquidity Ratios

5

Profitability Ratios

8

Long-Term Solvency Ratios

11

Cash Flow Adequacy Ratios

12

Market Strength Ratios

14

Vertical Analysis

16

Industry Overview

19

Comparative Analysis

20

Industry Statistics

20

Profit Margin

22

Operating Margin

22

Return on Assets

23

Return on Equity

24

Stock

25

Analysis Overview

26

Bibliography

29

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Executive Summary

Chairman and Chief Executive Officer Robert "Bob" A. Iger 2005-Present Headquarters of The Walt Disney Company Walt Disney Studios 500 S. Buena Vista Street Burbank, California, U.S. Ending Date of Last Fiscal Year September 29th, 2012 The Walt Disney Company's Products and Services The Walt Disney Company first began as Walt Disney Productions, founded by Walt and Roy Disney in 1923, and specialized in short animation films. After finding success in American homes through the creation of lovable characters, such as Mickey and Minnie Mouse, Walt Disney expanded its business ventures to television, merchandising, and even theme parks. Today, The Walt Disney Company cites five main areas where they credit their revenue coming from:

Media Networks: This piece of the company is comprised of two different segments: The Disney/ABC Television Group and ESPN Inc. Revenue can from a variety of different sources within Media Networks, ranging from television to radio to broadcasting.

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Parks and Resorts: Perhaps the most famous segment of The Walt Disney Company is its parks and resorts, which originally began with the creation of Disneyland in 1955. Now, Disney has 11 parks, 43 resorts, and four cruise lines scattered throughout the globe which have become major tourist spots for family vacations. The Walt Disney Studios: This is the movie sector of The Walt Disney Company, which is what the company was originally founded upon. Today, the Walt Disney Studios produces a variety of family-friendly music, movies, and even theatrical events for its consumers to enjoy. Disney Consumer Products: Disney Consumer Products includes any of the merchandise that The Disney Company sells, which ranges anywhere from clothing, to furniture to toys. Disney Publishing Worldwide (publisher of children's books) and revenue generated from The Disney Store are included in this category as well. Disney Interactive: This is the digital aspect of the Walt Disney Company, which began in 2008. Disney Interactive includes , online and media games, and "virtual worlds" for one's entertainment. Geographic Areas of Activity The majority of the Walt Disney Company's business is done in the United States, although it is popular internationally as well. Disney has 27 major offices located in the US, with its headquarters located in Burbank, California. Additionally, 360 Disney stores are located in many places in the United States. Stores are also located worldwide. While Disney World in Orlando, FL may be the most popular Disney vacation spot, the company also has 10 other theme parks and 43 resorts in North America, Europe, and Asia. Locations include California, Florida, Tokyo, Paris, and Hong Kong.

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Independent Auditors

The Walt Disney Company's independent auditors are PriceWaterhouseCoopers LLP. In The

Walt Disney Company's 2012 Annual report, PriceWaterhouseCoopers LLP stated:

"In our opinion, the accompanying consolidated balance sheets and the related consolidated statements of income, statements of comprehensive income, shareholders' equity and cash flows present fairly, in all material respects, the financial position of The Walt Disney Company and its subsidiaries (the Company) at September 29, 2012 and October 1, 2011, and the results of their operations and their cash flows for each of the three years in the period ended September 29, 2012 in conformity with accounting principles generally accepted in the United States of America."

Price of The Walt Disney Company's Stock All information as of April 02, 2013

Price Year-to-Date % Change

P/E Ratio Beta

52-Week Range Market Cap

Earnings Per Share

$57.46 +13.86%

18.54 1.09 $40.88 - $57.82 $103.74 billion $3.09

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Financial Analysis

Ratio Working Capital

Current Ratio Acid-Test Ratio

Liquidity Ratios

Formula

2012 2011 2010 2009 2008

Current Assets - Current Liabilities

$896 million

$1669 million

$1225 million

$2955 million

$75 million

Current Assets

/ Current

1.07 1.14 1.11 1.33 1.01

Liabilities

Quick Assets/

Current

0.77 0.77 0.77 0.93 0.72

Liabilities

Accounts Receivable Turnover

Net Sales / Avg Accts

Receivable

6.65 times

6.83 times

7.16 times

7.07 times

7.27 times

Days' Sales Uncollected

Days in Year/ Receivable Turnover

54.92 days

53.40 days

51.01 days

51.63 days

50.18 days

Total Asset Turnover

Net Sales / Avg 0.58 Total Assets times

0.58 times

0.58 times

0.58 times

0.61 times

*Inventory Ratios were not included due to the fact that Disney's inventory makes up only 2% of its total assets and is therefore negligible compared to the other ratios.

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Percentage of 2008 Value

140.00%

Liquidity Ratio Trends 2008-2012

130.00%

120.00% 110.00% 100.00%

Current Ratio Acid-Test Ratio Accounts Receivable Turnover Total Asset Turnover

90.00%

2008

2009

2010

2011

Fiscal Year

2012

For the Fiscal Year that ended September 29, 2012, The Walt Disney Company saw a large decrease in working capital to about half of what it was the year before and also a decline in their current ratio. Now although this might appear to be a bad sign for the company, it actually isn't. The Walt Disney Company is using more of its assets by investing them towards future growth, with their main investments in 2012 being expanding The Walt Disney World Resort and constructing Shanghai Disney Resort. Although these investments are taking up assets at the moment, they will expand Disney's assets and revenues in the near future. One positive aspect is the fact that The Walt Disney Company's acid-test ratio has remained constant at .77 for the past three years. This means that although the company is investing a lot more now, they are insuring that they are not using so much of their assets that they cannot pay off their debt.

Over the past five years, The Walt Disney Company has also seen a decline in its accounts receivable turnover rate and, therefore, an increase in their days' sales uncollected number. Currently, it is taking the company about 54 days to collect payments from its

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customers, and the issues of this number depend on the terms of agreement. If the payment period is 60 days, then the company is doing a good job at collecting payments, as on average the company is paid 6 days before the end of the period. Nevertheless, this decrease in accounts receivable turnover rate is not that worrisome for the company due to the fact that its receivables have made up about 8% of its total assets over the past 5 fiscal years.

The final important liquidity ratio for The Walt Disney Company is total asset turnover, which has remained about .58 times/year for the past four years. This is a very good number for the type of industries that The Walt Disney Company is in. Only a small proportion of Disney's assets are current assets (18%), while they have a lot of their assets in the form of buildings/equipment (23%) and land (28%). A lot of these assets can be attributed to the Parks and Resorts part of the company. The Walt Disney Company owns six resort areas, each with dozens of hotels and several different theme parks. All of these hotels and theme parks take a lot of land, equipment, and buildings, which is why the company has so much of its assets in these two categories. These types of assets are not going to be turned over, so they artificially bring down the company's total asset turnover rate. If you disregard just these two types of assets completely, the company's turnover rate would be more than double, so the company is actually very good at turning over the assets that it actually can.

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