The segment footnote in The Walt Disney Company 2014 annual report follows (in m
ID: 2522875 • Letter: T
Question
The segment footnote in The Walt Disney Company 2014 annual report follows (in millions):
SEGMENT INFORMATION
The operating segments reported below are the segments of the Company for which separate financial information is available and for which segment results are evaluated regularly by the Chief Executive Officer in deciding how to allocate resources and in assessing performance.
a. Confirm that each of Disney’s segments exceeds one or more of the quantitative thresholds.
Calculate the quantitative threshold tests for 2014 and 2013.
Round answers to one decimal place (ex: 0.2345 = 23.5%). Use negative signs with answers, when appropriate.
Using 2014 calculations only, indicate whether the segment exceeds each quantitative threshold test or not. Select Yes or No using the drop-down answer menu.
c. Compute a rough DuPont analysis over the past three years of the operating segments (i.e., profit/ revenues, revenues/total assets, and return on assets as the product of the profit and turnover ratios).
Round profit margin answers to one decimal place (ex: 0.2345 = 23.5%). Use negative signs with answers, when appropriate.
Round asset turnover answers to two decimal places.
Use rounded figures from above to calculate.
Round answers to one decimal place (ex: 0.2345 = 23.5%).
Use negative signs with answers, when appropriate.
d. Compute the free cash flow for each operating segment over the three-year period using the following definition: free cash flow = operating profit + depreciation and amortization - capital expenditures.
Use negative signs with answers, when appropriate.
2014 2013 2012 Revenues Media Networks $21,152 $20,356 $19,436 Parks and Resorts 15,099 14,087 12,920 Studio Entertainment Third parties 6,988 5,721 5,566 Intersegment 290 258 259 7,278 5,979 5,825 Consumer Products Third parties 4,274 3,811 3,499 Intersegment (289) (256) (247) 3,985 3,555 3,252 Interactive Third parties 1,300 1,066 857 Intersegment (1) (2) (12) 1,299 1,064 845 Total consolidated revenues $48,813 $45,041 $42,278 Segment operating income (loss) Media Networks $7,321 $6,818 $6,619 Parks and Resorts 2,663 2,220 1,902 Studio Entertainment 1,549 661 722 Consumer Products 1,356 1,112 937 Interactive 116 (87) (216) Total segment operating income $13,005 $10,724 $9,964 Reconciliation of segment operating income to income before income taxes Segment operating income $13,005 $10,724 $9,964 Corporate and unallocated shared expenses (611) (531) (474) Restructuring and impairment charges (140) (214) (100) Other income/(expense), net (31) (69) 239 Interest income/(expense), net 23 (235) (369) Hulu equity redemption charge - (55) - Income before income taxes $12,246 $9,620 $9,260 Capital expenditures Media Networks Cable Networks $172 $176 $170 Broadcasting 88 87 85 Parks and Resorts Domestic 1,184 1,140 2,242 International 1,504 970 641 Studio Entertainment 63 78 79 Consumer Products 43 45 69 Interactive 5 13 27 Corporate 252 287 471 Total capital expenditures $3,311 $2,796 $3,784 Depreciation expense Media Networks $238 $238 $241 Parks and Resorts Domestic 1,117 1,041 927 International 353 327 314 Studio Entertainment 48 54 48 Consumer Products 59 57 55 Interactive 10 20 17 Corporate 239 220 182 Total depreciation expense $2,064 $1,957 $1,784 Amortization of intangible assets Media Networks $12 $13 $17 Parks and Resorts 2 2 - Studio Entertainment 88 107 94 Consumer Products 109 89 60 Interactive 13 24 32 Corporate - - - Total amortization of intangible assets $224 $235 $203 Identifiable assets Media Networks $29,887 $28,627 Parks and Resorts 23,335 22,056 Studio Entertainment 15,155 14,750 Consumer Products 7,526 7,506 Interactive 2,259 2,311 Corporate 6,024 5,991 Total consolidated assets $84,186 $81,241Explanation / Answer
Ans (a). 2014 2013 Segment Revenue Media Networks 43.3 45.2 Exceeds the quantitative threshhold of 10%. Hence a reportable segment Parks & Resorts 30.9 31.3 Exceeds the quantitative threshhold of 10%. Hence a reportable segment Studio Entertainment 14.9 13.3 Exceeds the quantitative threshhold of 10%. Hence a reportable segment Consumer Products 8.2 7.9 Does not exceed the quantitative threshhold of 10%. Hence not a reportable segment. Interactive Media 2.7 2.4 Does not exceed the quantitative threshhold of 10%. Hence not a reportable segment. Operating Profit Media Networks 56.3 63.6 Exceeds the quantitative threshhold of 10%. Hence a reportable segment Parks & Resorts 20.5 20.7 Exceeds the quantitative threshhold of 10%. Hence a reportable segment Studio Entertainment 11.9 6.2 Exceeds the quantitative threshhold of 10% in 2014. Hence a reportable segment Consumer Products 10.4 10.4 Exceeds the quantitative threshhold of 10%. Hence a reportable segment Interactive Media 0.9 100.0 Does not exceed the quantitative threshhold of 10%. Hence not a reportable segment in 2014. However can be considered as a reportable segment in 2013 as the only loss making segment Assets Media Networks 35.5 35.2 Exceeds the quantitative threshhold of 10%. Hence a reportable segment Parks & Resorts 27.7 27.1 Exceeds the quantitative threshhold of 10%. Hence a reportable segment Studio Entertainment 18.0 18.2 Exceeds the quantitative threshhold of 10%. Hence a reportable segment Consumer Products 8.9 9.2 Does not exceed the quantitative threshhold of 10%. Hence not a reportable segment. Interactive Media 2.7 2.8 Does not exceed the quantitative threshhold of 10%. Hence not a reportable segment. Ans (b). Segment Revenue Operating Profit Assets Media Networks Y Y Y Parks & Resorts Y Y Y Studio Entertainment Y Y Y Consumer Products N Y N Interactive Media N N N Ans (c). 2014 2013 Profit Margin Media Networks 34.6 33.5 Operating income/Revenue X 100 Parks & Resorts 17.6 15.8 Operating income/Revenue X 100 Studio Entertainment 21.3 11.1 Operating income/Revenue X 100 Consumer Products 34.0 59.5 Operating income/Revenue X 100 Interactive Media 8.9 -8.2 Operating income/Revenue X 100 Asset Turnover Ratio Media Networks 70.8 71.1 Turnover/Gross Assets Parks & Resorts 64.7 63.9 Turnover/Gross Assets Studio Entertainment 48.0 40.5 Turnover/Gross Assets Consumer Products 52.9 47.4 Turnover/Gross Assets Interactive Media 21.6 17.8 Turnover/Gross Assets Return on assets Media Networks 24.5 23.8 Profit Margin * Asset Turnover Ratio/100 Parks & Resorts 11.4 10.1 Profit Margin * Asset Turnover Ratio/100 Studio Entertainment 10.2 4.5 Profit Margin * Asset Turnover Ratio/100 Consumer Products 18.0 28.2 Profit Margin * Asset Turnover Ratio/100 Interactive Media 1.9 -1.5 Profit Margin * Asset Turnover Ratio/100 Ans (d). 2014 2013 2012 Media Networks 8190 6806 6622 Operating Profit+Depreciation & Amortization-Capital Expenditure Parks & Resorts 1447 1480 260 Operating Profit+Depreciation & Amortization-Capital Expenditure Studio Entertainment 1622 744 785 Operating Profit+Depreciation & Amortization-Capital Expenditure Consumer Products 1481 1189 983 Operating Profit+Depreciation & Amortization-Capital Expenditure Interactive Media 134 -56 -194 Operating Profit+Depreciation & Amortization-Capital Expenditure
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