05/08/2015
Entertainment
Walt Disney Company
Ticker: DIS
Recommendati on: Outperform
Current Price: $109.85
Price Target: $126.20
Investment Thesis
Key Statistics
52 Week Price Range

$78.54 - $111.66
50-Day M oving Average
Estimated Beta
1.03
Dividend Yield
1.10%
M arket Capitalization
3-Year Revenue CAGR

$107.21


The domination in each of its business segments allows Disney to take
advantages of economies of scale and actualize long-term steady growth
The unique strategy of replying on franchises and brand loyalty to derive
revenue growth has been and will continue to be successful in the future.
The booming international market offers a great opportunity for Disney to
derive revenue growth in all business segments.
The leading technology in the industry enables Disney to be more efficient
on production and offers the best entertainment experience to its customers.
186.43B
4.91%
Five-Year Stock Chart
Trading Statistics
$120.00
Diluted Shares Outstanding (millions)
1,700
Average Volume (3-M onth) (thousands)
6,395
400,000,000
350,000,000
$100.00
300,000,000
Institutional Ownership
65%
$80.00
250,000,000
Insider Ownership
8%
$60.00
EV/EBITDA (LTM )
200,000,000
13.42x
150,000,000
$40.00
Margins and Ratios
Gross M argin (LTM )
100,000,000
45.86%
$20.00
50,000,000
EBITDA M argin (LTM )
Net M argin (LTM )
30.96%
16.72%
$0.00
May-10 Dec-10
0
Jul-11
Volume
Debt to Enterprise Value
Feb-12
Sep-12
Adjusted Close
Apr-13
Nov-13
50-Day Avg
Jun-14
Jan-15
200-Day Avg
0.11
Covering Analysts: Name
1
University of Oregon Investment Group
05/08/2015
University of Oregon Investment Group
Business Overview
Figure 1: Disney’s Revenue Breakdown by
Segments (in FY 2014)
History
The Walt Disney Company, along with its subsidiaries, is the largest
multinational diversified entertainment company in the world with business
operations in more than 40 countries and approximately 166,000 employees.
The mission of the Walt Disney Company is to provide high-quality
entertainment, deliver its unique technology and magic to audiences around the
world and set the standard in the future of entertainment.
Source: 10-K fillings of Walt Disney Company
Figure 2: Number of subscribers Breakdown by
Disney’s Channels (in millions, FY2014)
Disney was founded on October 16, 1923 by Walt Disney and its brother Roy
Disney, and during that time, the Walt Disney Company was widely known as
the Disney Brother Cartoon Studio, which late on established itself as an
entrepreneur and leader in American animation history. With the great financial
success of Snow White and the Seven Dwarves, Walt Disney was able to move
the company’s headquarter to Burbank, California and in the same year, Disney
went public in one of the biggest IPO in 1940s. The company didn’t change its
name until 1986, when the Board of Directors intended to honor the founder—
Walt Disney—by changing its name to Walt Disney Company.
Today, after 92 years of development and success, the Walt Disney Company
operates its business in five different segments and positions itself as the leader
in each segment. With the capability to adapt to the changing industrial
landscape, Disney implements various strategies to continuously achieve steady
growth and discovery potential opportunity to enter new industries. The Wall
Street Analysts acknowledge Disney’s success with the quote “Disney really
knows how to grow its Kingdom.”
Business Segments and Products
In the Walt Disney Company’s business kingdom, there are five main segments:
Media Network, Park and Resort, Studio Entertainment, Consumer Products and
Interactive.
Media Network Segment
Source: 10-K fillings of Walt Disney Company
Figure 3: ESPN Affiliate Fee Rate vs Select
General Entertainment Network, 1993--2013
$6.00
$5.00
$4.00
$3.00
$2.00
As the largest segment of Disney in terms of revenue, the Media Network
segment, which includes cable television network, broadcast, television
production operations, television distribution and etc., contribut ed a total of
21,152 million dollars to total revenue. In this segment, approximately 71.4% of
the revenue generated from cable network and the rest of revenue comes from
broadcasting. Specifically, cable networks derive their revenue majorly from
fees charged to subscribers for the right to watch Disney’s owned networks,
such as ESPN (80% owned), Disney Channels (100% owned), ABC Family
(100% owned), and A&E Television networks (50% owned). The ESPN and
ESPN2 cable networks, with an estimation of 95 million subscribers for each
network, both have the largest number of subscribers in all the cable network
owned by Disney, and the entire ESPN cable network is estimated to worth
more than 50 billion as the most valuable media property in the world by both
Forbes and Wall Street analysts.
$1.00
$1993
1995
1997
ESPN
1999
2001
TNT
2003
USA
2005
2007
CNN
2009
2011
2013
MTV
Source: J.P. Morgan
UOIG 2
05/08/2015
University of Oregon Investment Group
Figure 4: 2013 Top 10 Largest Theme Parks
worldwide by Annual Attendance (in thousands)
The ESPN2 and Disney channel are rated by Beta Research Corporation as the
second and third in both perceived value and importance. In addition to the great
success in cable networks, Disney positions itself as the second largest player in
broadcasting industry in the U.S. with a 14.1% of the total market share. The
majority of revenue from broadcasting is generated from both subscription fees
and the sale of advertising time.
Park and Resort Segment
Source: Themed Entertainment Association
Figure 5: The Park and Resort Revenue Breakdown
by Domestic and International Market
In the Park and Resort segment, Disney maintains an even more dominated
position than in Media networks by operating a total of 11 theme parks, as well
as their associated resorts, in 4 different countries. Domestic theme parks and
resorts are completely owned by Disney. However, for international theme parks
and resorts, Disney operates and manages them under joint venture agreements
with local partners (For example, Disney and Shanghai Shendi Group construct
the Shanghai Disneyland together and they own 43% and 57% of the Shanghai
Disneyland respectively). Besides theme parks and resorts, Disney also operates
a Disney Resort & Spa in Hawaii, the Disney Vacation Club, and the Disney
Cruise Line. The revenue from the Park and Resort segment derived from the
sale of theme park tickets, sale of food, beverage and merchandise, fees for
room nights at hotels, package of cruise vacation and etc.
As of September 2014, approximately 82% of the revenue of this segment
comes from domestic market and the rest 18% derives from international
market. The Park and Resort segment is the one that are heavily invested by the
Walt Disney Company because of its profitability and high potential growth in
both domestic and international market. Since 2009, the Walt Disney Company
has been heavily spending money on this segment due to the construction of
Shanghai Disneyland, which is expected to be the largest theme park in Asian.
Overall, with the operation of Shanghai Disneyland and expansion of other
theme parks, the Park and Resort segment is expected to be one of the main
revenue driver for Disney in the next decade.
Studio Entertainment Segment
Source: 10-K Fillings of Disney
Figure 6: Top 10 All Time Disney's Movies by
Global Office (in millions)
The Studio Entertainment Segment derives its revenue from the distribution of
films in theaters, home entertainment, television market, the distribution of
music and others. The revenue generated from the distribution of films
contribute more than one-third of the total revenue for this segment in fiscal year
2014 and it is considered by the management of Walt Disney Company as the
key to achieve future steady growth in all five segments, especially in studio
entertainment and consumer product segment. As September 2014, Disney owns
Walt Disney Pictures, Pixar, Marvel, Touchstone and Lucasfilm banners, which
produces and distributes films under the name of Disney. Additionally,
DreamWorks Studio is currently under an agreement with Disney to distribute
live-action motion pictures in order to exchange loan from Disney.
The Home Entertainment Segment usually distribute its releases by both
physical (DVD and Blue-Ray) and digital formats after three to six months after
a film released. Consumers can purchase different pay television windows and
receive electronic delivery from service providers that under license contracts
with Disney, and Disney will generate revenue from licenses.
The Consumer Product Segment
This segment highly engages with licensees, pub lishers and retailers, and
generate revenues from licensing characters from intellectual property, including
live-action movies, animations and television program, sale of books, magazines
Source: IBISworld
UOIG 3
05/08/2015
University of Oregon Investment Group
Figure 7: Estimated Growth Rate of Licensing and
Publishing vs Retails and Other
and comic books, sale of merchandise at both retail stores and website, and fees
charged at Disney’s special English learning centers. The company licenses a
very diverse range of product categories to be used on the products of third
party. Major properties favored by third party include Mickey and Minnie,
Marvel’s characters like Iron man and Captain of American, all Disney’s
princess and princes, characters from famous animations including Frozen and
Toy Story series, and Star War. In terms of the retail business, Disney markets
and promotes Disney-theme products via both internet stores and retail stores in
shopping mall, theme parks and resorts. Currently Disney is operating and
managing 210 stores in North America, 73 stores in Europe and 45 stores in
Japan, and the next step of Disney is to enter Chinese retail market with the help
from the well-established English learning centers in China.
The Interactive Segment
Source: UOIG Projection
Figure 8: Major Players in Cable Network Industry
Currently the Interactive Segment is the smallest segment of Disney in terms of
revenue, only counted for approximately 2.85% of the total revenue. In fiscal
year 2014, the revenue from this segment was 1,056 million dollars, which
increased by 30.05% compared to fiscal year 2013 because of the success of the
Disney Infinity franchise. The revenue of the Interactive Segment comes from
the sale of video games to retailers and distributors, subscription fees from its
games, licensing content to third party as well as to mobile phone providers, and
advertising online.
Industry
Overview
As the largest entertainment company worldwide, the Walt Disney Company
operates its business in five different segments. As a result, it is difficult to
categorize the company in any industry specifically. Overall, in order to predict
the future performance of Disney, it is essential to analyze the following
industries:
Cable Network Industry:
Source: IBISworld
Figure 9: The estimated growth rate of Total
Advertising Expenses (in millions)
The cable network industry generates revenue from distributing TV programs on
a subscription or fee basis through cable systems. The industry has a moderate
concentration of market share with the Walt Disney Company owning 21.6% of
the total market share in the United States. The industry competes on the quality
of programming, the diversity of content and the consistency of programming
delivery. Since customers are protected to have the access to similar
programming without any restrictions, companies in the industry focus on
developing strong content, aggressive promotion and marketing, and social
media outreach.
The industry is expected to growth at a very slow rate of 0.2 percent during the
next five years until 2021 and to benefit from the increasing consumer spending
and the falling unemployment rate. Fortunately, the total expenditure of
advertising in this industry is predicted to grow at 1.5% annualized rate and
profit margin of this industry is relatively high compared to averag e of all
industry. Overall, the cable network industry will still be one of the most
profitable segments for Disney in the next 10 years and with the tailwind of
increasing population of sport industry, the ESPN channel will continue to
derive massive revenue and profit for Disney.
Source: IBISworld
UOIG 4
05/08/2015
University of Oregon Investment Group
Figure 10: Major Players in Amusement Parks
Industry (in the U.S.)
Source: IBISworld
Figure 11: Estimated Compound Growth Rate in
Amusement Parks Industry in the U.S.
Amusement Park Industry:
In the domestic market, the amusement park industry will grow in a steady rate
in the next 10 years due to the benefits from multiple drivers having a positive
trend, such as the steady growth of gross domestic products, increasing domestic
and international travel, and favorable government regulations. Major players in
this industry includes the Walt Disney Company, Universal Park & Resorts,
SeaWorld Parks & Entertainment, Cedar Fair LP and Six Flags, and they are
competing on quality of experience, price, location and brand awareness. In
order to maintain competitive, major players heavily invest in new attractions
and apply advanced 3D technology on current projects in order to meet the
children’s favor. The top two players —the Walt Disney Company and Universal
Parks and Resorts—spend 2.4 billion and 1.2 billion respectively in the industry.
The globalization of the Park and Resort industry is anticipated to increase in the
next decade with major players shifting their focus on potential high -growth
area like China, where has a higher economic growth than the United States.
With an extremely high barriers to entry and high level of market share
concentration, the Walt Disney Company will not likely to expect new
competitors in this industry. By 2014, Disney accounts for about 52% of the
total revenue from domestic industry and it is dominating the top end of this
market by owning the top five most visited theme parks in the United States.
Internationally, the amusement park industry is anticipated to grow more rapidly
than the United States, especially in China with an annualized growth rate of
7.8% in the next five years. With benefit from the operation of Shanghai
Disneyland, Disney is expected to derive a massive amount of revenue from its
international segment.
Movie & Video Production Industry
Source: IBISworld
Figure 12: Major Players in Movie & Video
Production Industry in the U.S.
This industry produces and distributes motion pictures and videos. Third party
distributors and manufacturers of TV shows and for-TV movies are excluded
from this industry and also it is worth to notice that the 3D films are not
included in this industry as well. During the last five years, the domestic market
for movie and video product has been showing a decline in revenue at an
annualized rate of 1.2% and the revenue is anticipated to be 23,503 million by
2021 compared to 29,468 million in 2014. The decline is partially attributed to
the increasing popularity of 3D films and the 3D movie production indu stry is
expected to grow at an annualized rate of 0.2% until 2021.
Major players in this industry compete both internally and externally. Sufficient
funding is essential for a production to attract famous and talented actors and
directors, which are crucial for the success of a film. Accordingly, companies
with the economies of scale can take advantages of this fact. On the other hand,
players in this industry compete externally on consumers’ leisure time with
other available leisure activities.
The Walt Disney Company is currently the largest player in both traditional
movie & video production industry and the 3D film production industry,
accounting for 21.3% and 38.6% respectively. Compared to the stagnant growth
of these two industries, the Walt Disney Company has been growing its business
in Studio Entertainment Segment at an annualized rate of 28.61% during the last
two years.
Macro factors
Because of the diversity of Disney’s business, it is impossible to list all the
macro factors that will potentially affect the financial performance of the Walt
Source: IBISworld
UOIG 5
05/08/2015
University of Oregon Investment Group
Figure 13: Estimated Compound Growth Rate
Consumer Spending in the U.S.
Disney Company. However, there are several crucial macro factors that
influence Disney’s business in some or all segments.
Consumer Spending:
The consumer spending is commonly considered as a proxy for gross domestic
products and it is an essential indicator of Disney’s future revenue growth due to
its influence across all Disney’s business segments. Disney’s products and
services in all five segments, especially Park and Resort segment, will be more
favorable when the economy is booming and consumer spending is increasing.
As the economy of the United States recovers (the compound growth rate of
consumer spending is expected to be 2.6% until 2021), the domestic business
performance of Disney can be expected to growth continuously. Outside of the
United States, the international economy is recovering from the financial crisis
and China, as the second largest revenue driver behind the United States , will
still grow at an annualized rate of 6.8% in GDP until 2021. Overall, the
economic factor now and in the next several years will be in Disney’s favor.
Source: IBISworld
Figure 14: Estimated Growth Rate of Inbound
Trips and Domestic Trips in the U.S.
Domestic trips and Inbound trips
The number of both domestic trips and international inbound trips will have an
incredible impact on Disney’s business performance majorly in Park and Resort
segment and Consumer segment. As the global economic recovery and the
declining employment rate, both United States residents and non-US residents
will be able to travel more than before and pursue more leisure activities,
including spending times in amusement parks and resorts.
For the next five years, the number of domestic trips made by US residents is
going to grow from 664.9 million in 2014 to 748.10 million in 2021, which
represents an annualized growth rate of 1.7%. The inbound trips made by non US residents are expected to grow at an annualized rate of 4.2%, from 74.70
million in 2014 to 100.20 million in 2021. The fast growing travel industry will
be a tailwind for Disney’s business in next five years.
Time Spent on Leisure and Sports
Source: IBISworld
Figure 15: Estimated Growth Rate of Inbound
Trips and Domestic Trips in the U.S.
This macro factor will influence Disney’s business in its three major segments:
Cable Network, Park and Resort and Studio. When more time that people spend
on leisure and sports, the more likely they would either watch TV, go to theme
parks for fun or watch movies. Therefore, an increasing amount of time spends
on leisure and sports will potentially benefit Disney’s revenue growth in the
long run.
As a prediction for the next five years, the average time spending on leisure and
sports will remain nearly unchanged, by slightly declining from 5.28 hours per
day to 5.26 hours per day. However, in the long term beyond 2021, rising
median age will increase the average time spending on leisure activities and
potentially increase Disney’s revenue growth. Currently, it is safe to claim that
this macro factor will not play against the business of the Walt Disney
Company.
Trade-weight Index
Source: IBISworld
Even though currently the U.S. domestic market generate the majority of
revenue for the Walt Disney Company, the international market, particularly
Asian market, still represent an incredible opportunity for revenue growth in the
long run. It is inevitable for Disney to expose to fluctuation in foreign currency
exchange rates globally since Disney conducts purchase and sale transactions in
different currencies.
UOIG 6
05/08/2015
University of Oregon Investment Group
Figure 16: The Estimated Trade-Weight Index
That being said, a stronger U.S. will lower Disney’s revenues from international
markets and result in decreased EBITDA and earnings, especially in Park and
Resort segment due to the increasing revenue in Japan, Hong Kong and China.
The trade-weight index measures the strength of the U.S. dollar compared to the
currencies of its trading partners, with Euro, Canadian dollar, Chinese Yuan,
Japanese Yen and Mexico Peso together accounting for more than two -thirds of
the trade-weight index. As going forward, the trade-weight index is expected to
increase from 90.4 in 2015 to 110.60 in 2021, meaning that the growth of
revenue and earnings from international market will be partially offset by the
stronger U.S. dollars.
Seasonality
Source: IBISworld
Figure 17: Revenue from Consumer Product
Segment shows Seasonality
Disney’s business is subject to different seasonality and the company has been
adjusting its business strategy in order to maximize its operating revenue and
income in the past. It is crucial for the company to prevent any short -term or
long-term negative impact on its business during the period of high seasonal
demand. The seasonality for each of its segment is as follow:
 Revenues in the Media Network segment usually generates a higher
revenue in fall but a lower revenue in summer.
 Revenues in the Park and Resort segment fluctuate with the changes in
parks and resorts attendance. Peak Attendance generally occur during
summer vacation, from June to September and also during the early
winter break in December and Spring breaks in March.

Revenue in the Studio Entertainment is subject to the timing and
performance of released films on show, and the Walt Disney Company
decides the release date by taking several factors into consideration,
including internal competition, competitors performance, and holiday
period.
 Revenues in the Consumer Product segment will be higher normally in
fall and by the timing and performance of new theatrical releases.
 Revenues in Interactive segment is subject to the timing of new video
game release and the performance of theatrical releases and TV
programming.
Source: 10-K Fillings of Disney
Competition
Figure 18: Overall Customers Satisfaction Index
Scores 2014 in Cruise Lines
Due to its diverse business, the Walt Disney Company faces substantial
competition with its competitors in many different aspects, including the quality
of product and service, customer experience, price, accessibility and technology.
Also the company competes on obtaining human resources with other
competitors. To be more specific, the competition in each segment concentrates
on the following:
In the Cable Network segment, the company competes for viewers, the number
of subscription, the sale of advertising time and internet usage.
In the Park and Resort segment, the company competes for guest attendance
with not only similar parks and resorts, but also with all the other forms of
leisure and entertainment activities.
Source: 10-K Fillings of Disney
In the Studio Entertainment segment, the company competes for box office sale,
intellectual performers, story properties, franchises and marking support from
external advertisers.
UOIG 7
05/08/2015
University of Oregon Investment Group
Figure 19: The Comparison of Disney and
Competitors in terms of Size and D/E Ratio
The Consumer Product segment competes on the quality of products and brand
loyalty with other licensers and retailers.
The Interactive segment competes with other publishers of online, mobile and
video games.
Overall, the level of competition across all five segments is either medium or
high and the competition is likely to increase due to the change in technology
development, change in the market structure and the change in customer favors.
Strategic Positioning
Economies of Scale
Source: Yahoo Finance
Figure 20: Top 10 Most Admired Brand
Worldwide in 2015 by Fortune
As the largest and most diverse entertainment company worldwide, the Walt
Disney Company is able to continuously lower its cost of goods sold because of
its economies of scale. During the last five years, the company lower its cost of
goods at an annualized rate of 1.3%, from 78.54% to 71.96%. Due to the
sustainable competition in all business segments, Disney’s capability to decrease
its cost is crucially important to maintain profitable while keep the highest level
of product and service quality. In addition, the Walt Disney Company has the
lowest D/E ratio compared to its competitors like Comcast, Twenty -First
Century Fox and etc. and accordingly the company can potentially leverage
from borrowing more debts in the future to support its business development if
necessary. Disney’s economies of scale also reflect on its dominated position in
the majority of its business segments, as Disney being the largest market share
holder in all three major business lines —Media Network, Park and Resort and
Studio Entertainment segment
Brand Awareness and Loyalty
Source: Fortune
Figure 21: Top 10 Most Expensive Movies All
Time (in millions)
According to Forbes, The Walt Disney Company brand ranked the fifteen in the
World’s Most Powerful Brands list and also recognized as the best brand in
entertainment industry. The brand awareness and loyalty is one of the keys for
the company to succeed. It is the brand that Disney built since the first day it
founded to connect with its guests and customers and drive the long -term steady
revenue growth. Because of the benefits from this brand, the company never has
an issue to attract people to its theme parks and sell its movies and animations.
“The Walt Disney Company is more than just a business. It is an authentic
American icon—which is to say that over the years it has come to stand for
something real and meaningful and worthwhile to millions of people of all ages
and backgrounds around the world. This is not something you can describe
easily on a balance sheet, but it is tangible enough. Indeed, it is the foundation
on which everything we have accomplished as a company —both artistically and
financially—is based.”—Roy Disney’s speech in 2004.
Good Taste and High Quality
The Walt Disney Company is well known by its good taste and high quality of
its product and service. The company’s great vision of industry trends actualized
the acquisition of Marvel Entertainment for 4.28 billion and for the next several
years, Disney launched the fashion of superhero movies and each of the Marvel
movie generated an average of 1 billion box office sale globally. Because of the
good taste and high quality, Disney became the biggest winner in animated
movies industry by winning two Oscar Best Animated Feature Film of the Year
with Frozen in 2013 and the Big Hero Six in 2014. On the other hand, Disney’s
focus on the quality of its products is reflected on the budgets of its films. The
Source: Mojo Box Office
UOIG 8
05/08/2015
University of Oregon Investment Group
Figure 22: Top 10 Licensed Franchises Worldwide
(in millions, Six are owned by Disney)
top 5 most expensive movies (see figure 21) are all produced under the name of
Disney.
Franchises
Source: Forbes
Having a tremendous amount of franchises in all the business segments is what
makes Disney different from its competitors. In its Media Network segment, the
Walt Disney Company owns the most valuable channel—ESPN—as its assets,
and the franchises owned by Disney are the main drivers for the other four
segments as well. Both Disney’s live-action films and animated films are created
based on its past or new created franchises, and those attractions in theme parks
and resorts are also designed based on famous franchises owned by Disney.
Nonetheless to say, the business in its Consumer Product segment heavily
depends on the popularity of characters from Disney’s franchises. During the
past several years, the great success of Marvel’s films and Frozen are the best
example of how franchises make Disney unique.
Stock Buyback
Figure 23: Stock Repurchase by Disney since
2009 (in millions)
Since 2009, the Walt Disney Company began to repurchase its stocks from the
market in order to give values back to its shareholders. The Chief Financial
Officer of Disney emphasized that one of the Disney’s fundamental philosophy
is to return the capital via the stock repurchase program, which is expected to
use 20% of the cash generated by the company each year as a return to
shareholders in the form of either dividend or stock repurchase. During the past
six years, Disney had already repurchased more than 21 billion stocks and
tremendously increased the value of each share. This stock buyback program is
not only an evidence to show Disney’s confidence in its strategy and operation,
but also its commitment to giving value back to its shareholders. This is an
important strategy of Disney to separate itself from its competitors based on the
standing point of value return.
Business Growth Strategies
Source: 10-K Fillings of Disney
Figure 24: Major New or Renewed Properties
Owned By ESPN
The Rise of ABC and the Domination of ESPN
Looking forward to revenue growth in the future, the ABC and ESPN channels
are the key for the steady revenue growth in the Media Network segment.
First, the ABC channel currently holds the first place in C3 ratings excluded
sport. The ABC Scandal is one of the fast growing TV shows and it contributes
largely to the revenue growth. Beside the Scandal, ABC also holds the best new
comedy—Blackish—and the best new drama show—How to Get Away with
Murder. These new and attractive new TV shows represent a potential decent
growth in both revenue and profits.
Second, the ESPN, which is considered as the most valuable channel worldwide,
has a brilliant future for revenue growth due to its recent contracts to lock the
deals with major sport leagues, including NBA, NFL, Major League Baseball
and College Football Playoff, for the next decade. Also the tailwind of rapidly
increasing advertising expenditure s pending on these sport programs adds more
confidence in the steady revenue growth in Media Network Segment. For
example, the advertising revenue from NBA increased by 21% in 2014
compared to 2013 due to the increasing contract rate.
Source: ESPN
Overall, due of the outstanding quality of content, increasing population of
sports and the higher contract rate and advertising spending, the Media Network
UOIG 9
05/08/2015
University of Oregon Investment Group
Figure 25: Major Acquisition by Disney
Segment will bring a high or median single digit revenue growth in the next
decade.
The Kingdom of Franchise
“In fiscal ’14, we had 11 franchises drive more than $1 billion each in retail
sales and more than half of them originated from our studio. We are releasing a
total of 21 tentpole movies under our great banner brands over the next three
years compared to only 13 in the last three years.”—Bob Iger, Chairman and
Chief Executive Officer in the 2014 annual earnings call.
Source: CBS Interactive
Figure 26: Disney’s Major Franchises Created
by Acquired Companies
One of the priorities of the Walt Disney Company is to invest the majority of
capitals in producing great content and high-quality franchise, and leverage from
that to achieve financial success. As mentioned early, Disney has probably the
best and the most franchises in the entertainment industry worldwide, from
Mickey and Minnie to Marvel and Star War. This strategy has been and will
continue to be extremely successful for the company to drive revenue growth in
all its business segments. Not only Disney creates his own franchises but also
acquire famous franchises like Marvel and Lucasfilm.
With these high-quality franchises, Studio Entertainment is expected to grow in
a double-digit rate for the next several years. After the current and new
franchises are popularized and recognized by public via theatrical releases, the
Park and Resort and Consumer Product segments will both benefit from those
franchises and drive revenue growths in these segments as well. In fiscal year
2014, the Walt Disney Company had 11 franchises and each of them drive more
than one billion revenue in retail sales and the five Marvel movies distributed by
Disney after the acquisition of Marvel generated more than one billion in global
box office as average.
As long as the Kingdom of Franchise grows, Disney will have a great chance to
further its long-term steady growth in the future.
The Invasion of Chinese Market
Source: Disney.com
Figure 27: Revenue from Shanghai Disneyland
Source: UOIG Projection
The Chinese market represents a great opportunity for the Walt Disney
Company to expand its business internationally. As the Shanghai Disneyland is
expected to open at the beginning of 2015, the Park and Resort segment will
benefit tremendously from the operation of Shanghai Disneyland due to the big
population in China and high consumer spending, and the Walt Disney
Company, based on its experience of operating Hong Kong Disneyland, knows
how to operate its theme park in a way that is favored by Chinese. Nonetheless
to say, there is currently no theme park that can compete with Disney in terms of
brand awareness, quality of products and service and customers experience.
Beside the Part and Resort segment, the Studio Entertainment segment also
enjoys the benefits from fast growing number of opening theaters in China.
China is currently considered as the second, if not the first, largest market for
films business and the films distributed by the Walt Disney Company have been
extremely successful during the last few years. For example, Iron man 2 was
only able to take 7.9 million box office in Chinese market while the Iron man 3,
which was released three years later than the second one, generated
approximately 122 million revenue due to the popularity of superhero movies
and the increasing westernization in China. Nonetheless to say, the Consumer
Product Segment will also be successful following the other two segments.
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Figure 28: Disney’s MyMagic+
That being said, China is currently representing the best opportunity ever for the
Walt Disney Company to expand its international business.
The Technology and Innovation
The Walt Disney Company always concentrates on the development of new
technology and innovation. Using new technology and innovation to make its
products better and service more efficient is one of the priorities. With the
implementation of this strategy, the Walt Disney Company is able to produce so
many high-quality films during the last five years and the production is expected
to increase by nearly 50% in the next three years in its Studio Entertainment
Segment. The MagicBand and MyMagic+ are both great example of the
application of Disney’s technology on improving customer experience. Of
course it is easy to find out that the recent technology of 3D animated films
production show up on Frozen and Big Hero Six, which are considered as the
two best animated films in history.
Source: Google Image
Figure 29: New Attractions Constructed By Walt
Disney Imagineering with New Technology
The Walt Disney Imagineering Company (WDI), which is a subsidiary of the
Walt Disney Company, focus on the development of theme parks, resorts and
etc for Disney. From the recent completed projects, such as Seven Dwarfs Mine
Train, the latest technology of 3D dark ride has been equipped and that makes
these new projects to become the most attractive attractions.
Overall, the technology and innovation serve for the purpose to deliver the bes t
customer experience and product quality as well as to increase the overall
efficiency across all business segments.
Management and Employee Relations
Robert A. Iger—Chairman and Chief Executive Officer
Source: WDI
Figure 30: New Attractions Constructed By Walt
Disney Imagineering with New Technology
Robert A. Iger is currently served as the Chairman and Chief Executive Officer
of The Walt Disney Company. Mr. Iger officially joined the Walt Disney
Company management team in 1996 and was promoted to be the Chief
Operation Officer in 2005. During the last ten years under Mr. Iger’s
management, the Walt Disney Company enhance its storytelling history with the
acquisition of Pixar, Marvel, Maker and Lucasfilms. In fiscal year 2014, the
Walt Disney Company renewed its record for revenue, net income and earnings
per share.
Jay Rasulo—Senior Vice President and Chief Financial Officer
Jay Rasulo began his current role as the Senior Executive Vice President and
Chief Financial Officer in 2010. The main responsibility of Mr. Rasulo is to
oversee the financial organizations, risk management, tax plan and etc. Recently
he also was in charge as the Chairman of Parks and Resorts, and under his
leadership, the California Disney Adventure and Hong Kong Disneyland were
both expanded and achieved great success. Also Mr. Rasulo was in charge of the
Shanghai Disneyland construction and development, including the negotiation
with Chinese government.
Management Guidance
Source: MorningStar
In order to measure and monitor its business performance, the Walt Disney
Company decided to establish long-term financial goals as following:
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Figure 31: Disney’s Revenue Projection
1) Expanding gross margin by delivering innovate and high -quality products,
reducing product costs through improvement on production efficiency by
technology and innovation.
3) Actualizing high/medium single-digit revenue growth in the long-run.
4) Focusing on stock repurchase and capital return to shareholders.
5) Developing and protecting franchises and other intellectual properties.
In fiscal year 2014, the Walt Disney Company accomplished all these guidance
and made the best year with three new financial records. As going forward, the
Walt Disney Company believes that it will continuously to follow the guidance
and achieve long-term financial success in the future.
Portfolio Strategy
Source: UOIG Projection
Figure 32: The Most Successful Movie of Disney
Marvel’s Avengers: Age of Ultron
The University of Oregon Investment Group currently does not hold any stock
of the Walt Disney Company in any of the three portfolios. Given the value and
steady potential growth of the Walt Disney Company and the fact that Tall Firs
portfolio is currently underweighted large cap companies and entertainment
sector, I decided to pitch Disney for Tall Firs portfolio.
Recent News
Avengers 2' Snags Super $187M in Near-Record Weekend
Forbes—May 03, 2015
The Walt Disney Company’s Avengers: Age of Ultron generated $187 million
box office in its opening weekend in domestic market, reaching the second -best
debut weekend. Outside of the U.S., the Avengers: Age of Ultron already
derived 626.7 million dollars without releasing the film in its biggest two movie
countries: China and Japan. Based on the historical performance of Marvel
movies, especially the success of Iron man 3, we can expect the box office of
Avengers: Age of Ultron will be soaring in the next coming week.
Frozen 2 is Officially Announced
Source: Google Image
Figure 33: The Most Successful Animated Film
Worldwide—Frozen from Disney
Disney.com—April 04, 2014
The most successful movie of all time in terms of box office eventually will
welcome its sequel hitting in the theater in 2018. This news was both announced
and confirmed by the C.E.O of the Walt Disney Company and its starring
Kristen Bell. With the incredible success of Frozen in 2013, the Walt Disney
Company continuously invest on this franchise, which has already generate
1.276 billion worldwide in box office and more than 1 billion in retail stores in
2014. In order to avoid the internal competition with the sequel of the second
greatest animated film—Toy Story—in 2017, Frozen was scheduled to release
in 2018. With another two Pixar animated films released in 2015 and 2016,
Disney’s animated film line has never been this solid.
Catalysts
Upside
 The global economy has been recovering from the financial crisis in
Source: Google Image
2008, and the consumer spending is expected to increase in the next
decade. The favorable economy worldwide will strength the revenue
growth in the long run for Disney.
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Figure 34: The Number of New International
Students Studying in the U.S.




Source: Institution of internal education
Downside
 The total number of TV subscription is anticipated to slight decline in

Figure 35: Chinese Population Breakdown by
Classes in Year 2012 and 2020
The globalization and westernization facilitate the popularity of
Disney’s Franchise, especially Marvel’s movies and Disney animated
films. The continuous growing trend of globalization will add more
confidence in Disney’s brilliant future.
Both sport participation rate continuously to grow in a worldwide basis
and this will be a tailwind for the revenue growth in Disney’s Media
Network segment.
The fast growing demand for movies and increasing number of middle
and upper class in China provide a solid fundamental for Disney’s
international expansion.
Fast growing domestic trips and inbound trips will drive more
customers into Disney’s theme parks and resorts.


the next decade, which will potentially have a negative impact on
Disney’s business in Media Network segment. However, this downside
can be offset (or partially) by the increasing advertising spending.
The movie production industry has been declining during the last five
years and will continue to decline in the next decade. This will be the
headwind for all the film producers, including Disney.
The regulation and government relationship between the U.S. and other
countries is unpredictable in the future. Disney might will have to face
unpredictable regulation in both domestic and internation ally and
potentially decrease business growth.
U.S. Dollar is expected to be stronger and will decrease the revenue
generated from international market.
Comparable Analysis (20%)
Source: McKinsey
Figure 36: Weighting Analysis for Comparable
Valuation.
Source: UOIG Projection
Comparable companies were chosen based on 10 different factors, including
industry, product & service, customers & end market, geography, brand equity,
growth rate, size, profitability, D/E ratio, Beta and credit rating. Among these 10
characters, industry, growth rate, profitability and size are the four primary
characters, which account 60% of the total weights. For each factor of a
company, I assigned a score (from 0 to 100) based on my research and
understanding of the company and the weighting for each company was
generated based on their overall score.
Due to the diversity of its business and brand loyalty, it is extremely different to
target a good comparable for the Walt Disney Company. The best comparable is
Comcast, which operates in all the same business segments as Disney and it is
also the only company to offer a decent exposure and comparison in the Park
and Resort Segment with its acquisition of NBCUniversal in 2012. Even though
Time Warner operates the Six Flags theme parks under its name, it is useless to
comparable it with Disney’s Kingdom due to the enormous difference between
sizes, quality, brand awareness and themes.
It is worthy to notice that the final weighting for each comparable was generated
with 30% of weighting in 2015 and 70% weighting in 2016 because of the
unexpected and disappointing financial results, majorly reflecting in both
revenue and EBITDA growth in 2015. However, when I arrived at my multiples,
I still use the data from 2015 as the base. The logic behind this methodology is
that it is more difficult to predict a company’s performance in the next two years
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Figure 37: Comcast Logo.
than in one year, so that the data for 2015 is more likely to be accurate and
appropriate to use. However, it is also necessary to take 2016 into consideration
when generated the final weighting in order to present the true comparability for
all the comparable companies.
Comcast (CMCSA)—44%
Source: Google Image
Figure 38: Time Warner Logo.
“Comcast Corporation operates as a media and technology company worldwide.
It operates through Cable Communications, Cable Networks, Broadcast
Television, Filmed Entertainment, and Theme Parks segments. The Cable
Communications segment offers video, high-speed Internet, and voice services
to residential and business customers. The Broadcast Television segment
operates NBC, broadcast networks and broadcast television production
operations. The Filmed Entertainment segment produces, acquires, markets, and
distributes live-action and animated filmed entertainment under the Universal
Pictures, Focus Features, and Illumination names . The Theme Parks segment
operates theme parks; studios; Island of adventures; and a dining, retail, and
entertainment complex. Comcast Corporation was founded in 1963 and is
headquartered in Philadelphia, Pennsylvania.”—Yahoo Finance
Comcast is given the highest weighting of 44% due to its comparable similarity
in majority of the financial factors, including size, growth rate, credit rating and
profitability. In addition to these primary factors, Comcast is also the only one
that shares close similarity in industry, customers, end markets, and product and
service with Disney. Based on these similarity, Comcast was given nearly half
of the total weighting as the No.1 comparable company for Disney.
Time Warner Inc. (TWX)—34%
Source: Google Image
Figure 39: Twenty-First Century Fox Logo.
“Time Warner Inc. operates as a media and entertainment company in the
United States and internationally. It operates through three segments: Turner,
Home Box Office, and Warner Bros. The Turner segment owns and operates a
portfolio of cable television networks and related properties. The Home Box
Office segment provides premium pay and basic tier television services
comprising HBO and Cinemax; and sells its original programming through
DVDs, Blu-ray discs, and electronic sell-through. The Warner Bros. segment
produces, distributes, and licenses television programming and feature films;
produces and distributes videogames and licenses consumer products and
brands.”—Yahoo Finance
As another giant in the entertainment industry, Time Warner was given the
second highest weight among the four comparable companies. Time Warner
share an extremely similar profitability with Disney, which is an important
factor to consider for mature companies. Also in terms of all business factors,
including industry, product and service, consumers and markets, geography and
brand equity, Time Warner offers a great comparability. However, due to the
difference between sizes, growth rates of both revenue and EBITDA, Time
Warner was only given the second highest weighting of 34%.
Twenty-First Century Fox, Inc. (FOXA)—14%
Source: Google Image
“Twenty-First Century Fox, Inc. operates as a diversified media and
entertainment company worldwide. It operates through Cable Network
Programming, Television, Filmed Entertainment, and Direct Broadcast Satellite
Television segments. The company was formerly known as News Corporation.
Twenty-First Century Fox, Inc. was founded in 1922 and is headquartered in
New York, New York.”—Yahoo Finance
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Figure 40: CBS Corporation Logo.
The Twenty-First Century Fox is a decent comparable company in terms of all
business profiles. However, in financial profiles, The Twenty -First Century Fox
does not represent a good similarity with Disney due to its higher D/E ratio,
higher Beta, lower growth rate, lower credit rating and smaller size compared to
Disney. In addition, the lack of business in Park and Resort segment also
weakens its comparability. Taking into all these factors into consideration, I
assigned a final weighting of 14% to the Twenty-First Century Fox
CBS Corporation (CBS)—8%
Source: Google Image
Figure 41: Implied Price by Comparable
Valuation.
“CBS Corporation operates as a mass media company worldwide. It operates
through four segments: Entertainment, Cable Networks, Publishing, and Local
Broadcasting. The Entertainment segment distributes a schedule of news and
public affairs broadcasts, and the Cable Networks segment offers subscription
program services, such as original series, theatrical feature films, documentaries,
boxing and other sports -related programming. The Publishing segment publishes
and distributes adult and children’s consumer books in printed, digital, and
audio formats; develops special imprints and publishes titles based on the
products CBS Corporation was founded in 1986 and is headquartered in New
York, New York.”—Yahoo Finance
CBS Corporation was given the lowest weighting of 8% because of the
difference from the Walt Disney Company in terms of both business and
financial profiles. In business profiles, CBS focuses its business within the U.S.
and does not have too much exposure to international market and currency risk.
The lack of business in Park and Resort also limits its comparability as well.
From the standing point of financial profiles, there is a tremendous gap between
CBS Corporation and the Walt Disney Company in terms of size, growth rate,
D/E ratio and Beta. Therefore, the CBS was only given a weighting of 8%.
Discounted Cash Flow Analysis (80%)
Source: UOIG Projection
Revenue Model
Due to the diversity of Disney’s business segments, the revenue was projected
by first breaking down the total revenue into five segments, and then breaking
down the revenue of each segments into their subcategories.
Figure 42: Estimated Revenue Breakdown by
Segment in FY2024.
Source: UOIG Projection
Media Network Segment:
The revenue generated from this segment was divided into Cable Network and
Broadcasting. For each sub-segment, the revenue was projected by taking
history performance, management guidance, industry trend and competitive
advantages into consideration. For example, I projected the revenue from Cable
Network will be growing in the next decade in high single-digit rate even though
the total industry is declining. The evidences to supp ort my assumption are as
below:
 Management guideline said that the Media Network is going to grow in
a high/medium single-digit rate.
 ESPN’s extremely high affiliate fees and gross margin will secure the
long-term steady growth in Cable Networking, and the new shows in
ABC Channel drive the revenue to grow as well.
 Average growth rate during the last five years is 7.53%, outperforming
the industry by 3.45%.
 Therefore, I believe the management guidance is reasonable and I
projected the revenue for Cable Network to be growing in a single-digit
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Figure 43: The Park and Resort Industry Growth
Rate in the U.S and China
rate and ended with a growth rate of nearly 4.0% in the final year
before going to perpetuity. The same process applied on projecting the
revenue from Broadcast.
Park and Resort Segment:
First, the revenue from this segment was separated into domestic and
international market. For each market, I projected the revenue for the Park and
Resort segment by using the attendance model, which is to project the
attendance for each theme park and the average revenue per guest (ARPG)
separately.
Source: IBISworld
Figure 44: The Estimated Attendance Growth
Rate of Hong Kong Disney and Shanghai Disney
In domestic market, the growth rate of total attendance in 2014 was projected to
be similar to 2013 and the total attendance in the final year was projected to be
approximately 1.66%, which is slight lower than the compound annual growth
rate of domestic travelling trips in U.S. The compound growth rate of APRG
was projected by using the growth rate of theme park ticket price, which is a
good proxy for the APRG growth rate since the majority consumer spending in
the theme park was on admission tickets. The ARPG growth rate of 5.05% in the
final year was the lowest growth rate among 10-years, 20-years and 30-years
compound growth rate of theme park ticket.
In the international market, the attendance growth rate was projected by taking
historical performance, industry trend, and westernization into consideration.
The growth rate of total attendance in the final year is twice larger than the
growth rate of attendance in domestic market. I believe that this is reasonable
because the number is very close to the ratio of the growth rate of Part and
Resort industry in China to the growth rate in the U.S. The growth rate of ARPG
was projected by using the domestic ARPG growth rate as a proxy with the
adjustment by trade-weight index.
Source: UOIG Projection
Figure 45: The 22 Tentpole Movies of Disney and
their Release Dates
Finally, the revenue from Shanghai Disneyland was project by using Hong Kong
Disneyland as a starting point. The ARPG for Shanghai Disneyland was the
same as the ARPG for international market and the growth rate of attendance
was projected by taking into the industry trend in China and the GDP growth
rate compared to Hong Kong.
Studio Entertainment Segment:
The revenue in this segment was projected in the Tentpole Movies Box Office
Model based on the movie release schedule. The majority of theatrical revenue
comes from so-called tentpole movies, which are those movies that received the
highest budget and box office. Currently the management team disclosed the
releasing of tentpole movies in the next three years would be a total of 22 films,
compared to 13 films in the last three years. Therefore, the first step was to
calculate the Average Revenue per Box Office (ARBO) during the last three
years, and then took the average as the starting ARBO for 2015. The next step
was to project the box office for the 22 tentpole movies. The box office for each
movie was projected by taking the guidance offered on IMDB, IBtimes, Cinema
Blend, Wall Street analysts and historical performance. The projected revenue
for each year will be reached by multiplying the total box office by the adjusted
ARBO.
Source: Mojo Box Office
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Figure 46: The 22 Tentpole Movies of Disney and
their Release Dates
Since there is no guidance about how many tentpole movies will be released
after 2017. Therefore I projected the revenue based on management guidance,
historical performance and the estimated performance for those tentpole movies
that has been placed on schedule. The revenue of Home Entertainment and
Television Distribution were projected based on the performance of films box
office.
Consumer Product & Interactive Segments:
The revenue growth of Consumer Product and Interactive s egments are highly
dependent on the overall performance of studio entertainment, majorly on
movies box office’s performance. Accordingly, the revenue of both these two
segments was projected based on the projection of theatrical distribution,
historical performance and industry trend.
Source: Mojo Box Office
Discounted Cash Flow Model
Cost of Goods Sold
Figure 47: The Projected COGS
Cost of goods sold was projected by analyzing the historic change as the
percentage of revenue. Because of the increasing revenue generated from China,
which offers much lower cost than U.S., and the management guidance to
continuously reduce cost of goods sold, I projected the cost of goods sold to
decrease by approximately 5% between 2015 and 2024 with the additional
consideration of the historical trend, which is that the COGS decreased by 6.5%
during the last five years.
Capital Expenditure
Source: UOIG Projection
The capital expenditure was projected to be growing going forward primarily
due to the plan that Disney would expand its Park and Resort business in
international market, which requires substantial investment and commitment of
resources. Additionally, the domestic TV stations, theme parks and resorts will
require investment for its maintenance and remodeling. Therefore, I projected
the capital expenditure would slight increase from 4.86% of the total revenue
5.68% by the end of 2024. The drop in 2016 was due to the completion of
Shanghai Disney.
Depreciation and Amortization
Figure 48: The Projected Capital Expenditure
The depreciation and amortization was projected as a percentage of beginning
PP&E, and the percentage was calculated by looking at historic data and the
trend of capital expenditure. Since the capital expenditure was projected to grow
in the next decade, the depreciation will be increasing in a similar growth rate.
Inventory
As the demand of merchandises and consumer goods in theme parks and resorts
worldwide will continue to increase, especially after the opening of Shanghai
Disneyland in China, the Walt Disney Company will likely to increase its
inventory level in order to meet the demand from market. However, a stronger
dollar will increase its inventory cost in the future. After taking this two factors
into consideration, I decided to project the inventory level would be increasing
slightly going forward.
Tax Rate
Source: UOIG Projection
I projected the tax rate would be slightly decreasing due to the business
expansion to low-tax areas, for example, China. The increasing international
exposure will enable the Walt Disney Company to take advantage of lower tax
rates in countries. As a result, I projected the tax rate will decrease from 34.10%
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to 32.58%.
Figure 49: The Projected Beta of Disney
Discounted Cash Flow Assumptions
Beta
The Beta was calculated by running the regression on Disney’s stock return
against the return of the market, which is the S&P 500 for the one year daily,
three year daily, five year daily, three year weekly and five year weekly.
Source: UOIG Projection
During the last five years, there was no big corporate structure change
happening in Disney and the betas generated by running regressions against the
S&P 500 had very small standard errors. Therefore, I decided to weight 60% on
the three year daily beta, which is the CFA standard, and also weight 20% on the
five year daily beta since it has the lowest standard error. The rest 20% went to
the one year daily Beta and three year daily Hamada-ETF Beta equally. The
final estimated Beta of the Walt Disney Company is 1.04.
Risk Free Rate
The rate of a 10-years treasury bill is used as the risk free rate when calculating
WACC.
The rate of a 30-years treasury bill is used as the risk free rate when calculating
the terminal WACC.
Market Risk Premium
The market risk premium of 6.45%, which is the University of Oregon
Investment Group Standard was used in the calculation of CAPM and terminal
CAPM.
Terminal Growth Rate
The U.S. GDP growth rate of 3% was used as the terminal growth rate based on
the University of Oregon Investment Group Standard.
Figure 50: The Implied Target Price
Source: UOIG Projection
Recommendation
After the most successful year in history, The Walt Disney Company is expected
to maintain its growth and profitability by capitalizing on its diversity of
business, brand loyalty and the kingdom of franchises. As the global economy
recovers from the financial crisis and the booming of Chinese market, the Walt
Disney Company will expect to have a brilliant future by positioning itself as the
leader in the entertainment industry. With a 20% weighting assigned to
comparable analysis and an 80% weighting to DCF valuation, a final target price
of $126.77 was generated, representing an undervaluation by 15.40%. Because
of the undervaluation and the Walt Disney Company commitment to deliver
long-term value, I recommend a buy for the Tall Firs Portfolio.
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Date of Presentation
Appendix 1 – Comparable Screen (FY2015)
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Date of Presentation
Appendix 2 – Comparable Screen (FY2016)
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Date of Presentation
Appendix 3 – Relative Valuation
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Date of Presentation
Appendix 4 – Beta
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Date of Presentation
Appendix 5 – Theme Park Model—Domestic
The Walt Disney Theme Park Attendance and Revenue Model
Domestic Theme Park Attendence
Attendance (in thousands)
2010A
Magic Kingdom
2011A
2012A
2013A
2014E
2015E
2016E
2017E
2018E
2019E
2020E
2021E
2022E
2023E
2024E
16,972
17,142
17,536
18,588
19,566
20,554
21,536
22,501
23,428
24,323
25,189
26,003
26,754
27,439
28,059
% Growth
(1.51%)
1.00%
2.30%
6.00%
5.26%
5.05%
4.78%
4.48%
4.12%
3.82%
3.56%
3.23%
2.89%
2.56%
2.26%
% of Domestic Attendance
28.14%
24.47%
24.51%
24.27%
24.84%
25.29%
25.73%
26.13%
26.50%
26.82%
27.11%
27.38%
27.60%
27.80%
27.98%
DisneyLand
15,980
16,140
15,963
16,202
16,437
16,664
16,885
17,102
17,312
17,516
17,719
17,918
18,108
18,294
18,481
% Growth
.50%
1.00%
(1.10%)
1.50%
1.45%
1.38%
1.33%
1.28%
1.23%
1.18%
1.16%
1.12%
1.06%
1.03%
1.02%
23.04%
23.08%
22.10%
21.65%
21.25%
20.86%
20.49%
20.14%
19.82%
19.52%
19.26%
19.02%
18.82%
18.65%
18.54%
10,825
10,825
11,063
11,229
11,392
11,549
11,703
11,852
11,998
12,140
12,281
12,418
12,550
12,679
12,808
% Growth
(1.50%)
0.00%
2.20%
1.50%
1.45%
1.38%
1.33%
1.28%
1.23%
1.18%
1.16%
1.12%
1.06%
1.03%
1.02%
% of Domestic Attendance
15.61%
15.48%
15.31%
15.00%
14.73%
14.46%
14.20%
13.96%
13.73%
13.53%
13.35%
13.18%
13.04%
12.93%
12.85%
Disney's Animal Kingdom
9,686
9,783
9,998
10,198
10,382
10,568
10,780
10,974
11,182
11,372
11,554
11,745
11,936
12,130
12,318
1.00%
1.00%
2.20%
2.00%
1.80%
1.80%
2.00%
1.80%
1.90%
1.70%
1.60%
1.65%
1.63%
1.62%
1.55%
13.97%
13.99%
13.84%
13.63%
13.42%
13.23%
13.08%
12.92%
12.80%
12.67%
12.56%
12.47%
12.40%
12.37%
12.35%
9,603
9,699
9,912
10,110
10,292
10,477
10,687
10,879
11,086
11,274
11,455
11,644
11,833
12,025
12,212
% Growth
(1.00%)
1.00%
2.20%
2.00%
1.80%
1.80%
2.00%
1.80%
1.90%
1.70%
1.60%
1.65%
1.63%
1.62%
1.55%
% of Domestic Attendance
13.85%
13.87%
13.72%
13.51%
13.31%
13.12%
12.97%
12.81%
12.69%
12.57%
12.45%
12.36%
12.30%
12.26%
12.25%
6,287
6,341
7,775
8,514
9,285
10,060
10,829
11,600
12,357
13,101
13,816
14,487
15,047
15,505
15,823
3.15%
.86%
22.61%
9.50%
9.05%
8.35%
7.65%
7.12%
6.52%
6.02%
5.46%
4.86%
3.86%
3.05%
2.05%
% of Domestic Attendance
Epcot
% Growth
% of Domestic Attendance
Disney's Hollywood Studios
Disney California Adventure
% Growth
% of Domestic Attendance
9.07%
9.07%
10.76%
11.38%
12.00%
12.59%
13.14%
13.66%
14.14%
14.60%
15.02%
15.38%
15.64%
15.81%
15.87%
Total Domestic Attendence (In thousands)
69,353
69,930
72,247
74,841
77,353
79,872
82,420
84,908
87,363
89,726
92,014
94,215
96,228
98,073
99,701
% Growth
(.22%)
.83%
3.31%
3.59%
3.36%
3.26%
3.19%
3.02%
2.89%
2.71%
2.55%
2.39%
2.14%
1.92%
1.66%
Total Domestic Revenue (In thousands)
$ 8,404,000 $ 9,302,000 $ 10,339,000 $ 11,394,000 $ 12,329,000 $ 13,628,079 $ 15,013,510 $ 16,484,469 $ 18,038,066 $ 19,665,361 $ 21,360,595 $ 23,131,276 $ 24,915,579 $ 26,726,348 $ 28,542,179
% Growth
Average Revenue per Attendance (ARPA)
% Growth
$
(.45%)
10.69%
11.15%
10.20%
121.18 $
133.02 $
143.11 $
152.24 $
(.23%)
9.77%
7.58%
6.38%
8.21%
159.39 $
4.69%
10.54%
10.17%
170.62 $
182.16 $
7.05%
6.76%
9.80%
194.14 $
6.58%
9.42%
206.47 $
6.35%
9.02%
219.17 $
6.15%
8.62%
232.15 $
5.92%
8.29%
245.52 $
5.76%
7.71%
258.92 $
5.46%
7.27%
272.52
5.25%
6.79%
$
286.28
5.05%
UOIG 23
05/08/2015
University of Oregon Investment Group
Date of Presentation
Appendix 6 – Theme Park Model—International
The Walt Disney Theme Park Attendance and Revenue Model
International Theme Park Attendence
Attendance (in thousands)
2010A
Tokyo DisneyLand
2011A
2012A
2013A
2014E
2015E
2016E
2017E
2018E
2019E
2020E
2021E
2022E
2023E
2024E
14452.00
13996.00
14847.00
17214.00
18911.30
20401.51
21788.81
23139.72
24481.82
25754.88
26991.11
28232.70
29418.48
30418.71
5.91%
(3.16%)
6.08%
15.94%
9.86%
7.88%
6.80%
6.20%
5.80%
5.20%
4.80%
4.60%
4.20%
3.40%
3.20%
% of Total Attendance
30.54%
29.45%
29.58%
32.12%
32.75%
33.17%
33.44%
33.67%
33.89%
34.04%
34.18%
34.32%
34.41%
34.39%
34.38%
Tokyo DisneySea
12663.00
11930.00
12656.00
14084.00
15288.18
16335.42
17323.72
18250.53
19144.81
20048.45
20896.49
21728.18
22556.02
23349.99
24099.53
5.49%
(5.79%)
6.09%
11.28%
8.55%
6.85%
6.05%
5.35%
4.90%
4.72%
4.23%
3.98%
3.81%
3.52%
3.21%
26.76%
25.10%
25.22%
26.28%
26.48%
26.56%
26.59%
26.56%
26.51%
26.50%
26.47%
26.41%
26.38%
26.39%
26.39%
12399.96
% Growth
% Growth
% of Total Attendance
Disneyland Park Paris
% Growth
% of Total Attendance
Walt Disney Studios Park Paris
31392.10
10500.00
10990.00
11200.00
10430.00
10643.82
10841.79
11028.27
11213.54
11392.96
11567.27
11738.47
11908.68
12075.40
12238.42
(17.58%)
4.67%
1.91%
(6.88%)
2.05%
1.86%
1.72%
1.68%
1.60%
1.53%
1.48%
1.45%
1.40%
1.35%
1.32%
22.19%
23.12%
22.31%
19.46%
18.44%
17.63%
16.93%
16.32%
15.77%
15.29%
14.87%
14.48%
14.12%
13.83%
13.58%
4500.00
4710.00
4789.00
4470.00
4658.19
4839.39
5016.03
5189.08
5357.73
5522.74
5678.49
5825.56
5968.87
6104.96
6234.38
69.49%
4.67%
1.68%
(6.66%)
4.21%
3.89%
3.65%
3.45%
3.25%
3.08%
2.82%
2.59%
2.46%
2.28%
2.12%
% of Total Attendance
9.51%
9.91%
9.54%
8.34%
8.07%
7.87%
7.70%
7.55%
7.42%
7.30%
7.19%
7.08%
6.98%
6.90%
6.83%
Hong Kong Disneyland
5200.00
5900.00
6700.00
7400.00
8234.72
9095.25
9994.77
10929.28
11852.80
12763.10
13653.96
14561.95
15473.53
16352.43
17178.22
% Growth
13.04%
13.46%
13.56%
10.45%
11.28%
10.45%
9.89%
9.35%
8.45%
7.68%
6.98%
6.65%
6.26%
5.68%
5.05%
% of Total Attendance
10.99%
12.41%
13.35%
13.81%
14.26%
14.79%
15.34%
15.90%
16.41%
16.87%
17.29%
17.70%
18.10%
18.48%
18.81%
Total International Attendence
47,315
47,526
50,192
53,598
57,736
61,513
65,152
68,722
72,230
75,656
78,959
82,257
85,492
88,464
91,304
% Growth
3.66%
.45%
5.61%
6.79%
7.72%
6.54%
5.91%
5.48%
5.10%
4.74%
4.36%
4.18%
3.93%
3.48%
3.21%
% Growth
Total International Revenue (In Thousands)
$ 2,357,000 $ 2,495,000 $ 2,581,000 $ 2,693,000 $ 2,770,000 $ 2,805,131 $ 3,044,129 $ 3,358,021 $ 3,679,434 $ 4,010,058 $ 4,236,139 $ 4,446,645 $ 4,679,766 $ 4,902,993 $ 5,113,512
% Growth
Average Revenue per Attendance
% ARPA Growth
Total International Revenue Inc Shanghai
DisneyLand (In Thousands)
% Growth
5.93%
$
49.82
2.19%
$
5.85%
3.45%
4.34%
2.86%
1.27%
8.52%
9.57%
8.99%
5.64%
4.97%
5.24%
4.77%
52.50 $
51.42 $
50.24 $
47.98 $
45.60 $
46.72 $
48.86 $
50.94 $
53.00 $
53.65 $
54.06 $
54.74 $
55.42 $
56.01
2.46%
4.58%
4.25%
4.05%
1.22%
1.26%
1.25%
1.05%
5.38%
(2.05%)
(2.29%)
(4.51%)
(4.95%)
10.31%
.76%
4.29%
$ 2,357,000 $ 2,495,000 $ 2,581,000 $ 2,693,000 $ 2,770,000 $ 2,805,131 $ 3,961,663 $ 5,029,422 $ 5,634,796 $ 6,276,144 $ 6,765,666 $ 7,246,449 $ 7,776,809 $ 8,308,424 $ 8,826,554
5.93%
5.85%
3.45%
4.34%
Trade-weight Index Adjustment
2.86%
1.27%
41.23%
26.95%
12.04%
11.38%
7.80%
7.11%
7.32%
6.84%
6.24%
-12.0%
-4.3%
-2.0%
-2.1%
-2.1%
-4.7%
-5.0%
-4.2%
-4.0%
-4.0%
UOIG 24
05/08/2015
University of Oregon Investment Group
Date of Presentation
Appendix 7 – Shanghai Disneyland Model
Shanghai DisneyLand Attendance and Revenue Model
HongKong DisneyLand Attendance (Reference)
Attendance (in thousands)
2013A
Hong Kong Disneyland
% Growth
Average Revenue per Attendance
Population (in millions)
2013 Median GDP (in USD)
Population in Shanghai City and Cities around
2017E
2018E
2019E
2020E
2021E
2022E
2023E
2024E
9,995
10,929
11,853
12,763
13,654
14,562
15,474
16,352
17,178
10.45%
11.28%
10.45%
9.89%
9.35%
8.45%
7.68%
6.98%
6.65%
6.26%
5.68%
5.05%
50.24
$
47.98
$
(4.51%)
Hong Kong
China
7.188
1357.2
38,123
6,807
N/A
78.82
Implied Attendence Ratio (China/HK) by Population
310
45.60
$
(4.95%)
46.72
35%
Min attendance estimated by travel agencies (In millions)
4.5
4
Max attendance estimated by travel agencies (In millions)
4.5
17
0.889
Implied Attendence Ratio (China/HK) by Max Estimate
3.778
Final DisneyLand Attendance Ratio (Shanghai / HongKong)
$
50.94
$
4.25%
53.00
$
4.05%
Year
China
Hongkong
2017E
2018E
6.20%
2.33%
6.20%
2.43%
53.65
$
1.22%
China
Hongkong
13.22%
9.35%
12.22%
8.45%
2021E
2022E
2019E
15%
3.226
Implied Attendence Ratio (China/HK) by Min estimate
48.86
4.58%
54.06
$
54.74
.76%
1.26%
$
55.42
1.25%
$
56.01
1.05%
Estimated GDP Growth Rate
1,000
Implied Attendence Ratio (China/HK) by Size
$
2.46%
Weighting
1.958
Hong Kong Disney Size (In acres)
2016E
9,095
(2.29%)
Analysis Compare
2015E
8,235
$
% ARPA Growth
2014E
7,400
2021E
2022E
2023E
2024E
6.20%
6.10%
6.10%
2.50%
2.80%
2.90%
Estimated Attendence Growth Rate
11.38%
10.28%
9.85%
7.68%
6.98%
6.65%
2020E
5.98%
3.00%
5.92%
3.00%
5.85%
3.00%
9.24%
6.26%
8.60%
5.68%
7.90%
5.05%
10%
40%
3.023
Shanghai DisneyLand Attendance
Attendance (in thousands)
2016E
Shanghai DisneyLand Attendance
% Growth
Average Revenue per Attendance
$
46.72 $
% Growth
Total Shanghai Disney Revenue (In Thousands)
2.46%
2018E
2019E
2020E
2023E
2024E
34,205
38,385
42,753
47,149
51,793
56,578
61,444
66,298
13.22%
12.22%
11.38%
10.28%
9.85%
9.24%
8.60%
7.90%
48.86 $
4.58%
50.94 $
4.25%
53.00 $
4.05%
53.65 $
1.22%
54.06 $
.76%
54.74 $
1.26%
55.42 $
1.25%
56.01
1.05%
$ 1,411,591 $ 1,671,401 $ 1,955,361 $ 2,266,086 $ 2,529,528 $ 2,799,804 $ 3,097,043 $ 3,405,431 $ 3,713,042
% Growth
-
0.65
Opening Duration Adjustment Ratio
Adjusted Shanghai Disney Revenue (In Thousands)
2017E
30,211
$
18.41%
16.99%
15.89%
11.63%
10.68%
10.62%
9.96%
9.03%
1
1
1
1
1
1
1
1
917,534 $ 1,671,401 $ 1,955,361 $ 2,266,086 $ 2,529,528 $ 2,799,804 $ 3,097,043 $ 3,405,431 $ 3,713,042
UOIG 25
05/08/2015
University of Oregon Investment Group
Date of Presentation
Appendix 8 – Tentpole Movies Model
Tentpole Movies Model
Box Office Sale Allocation (in millions)
Title of Film
Marvel's The Avengers
Release Date
Total Box Office
(in millions)
Total Budget (in
millions)
Total Weeks in
Release
FY2013A
1,518.59
FY2014A
1,518.59
220.00
Brave
June 22, 2012
538.98
185.00
30.00
531.00
7.98
-
John Carter
March 9, 2012
685.00
263.70
15.00
685.00
-
-
Wreck-It Ralph
22.00
FY2012A
May 4, 2012
-
2015E
2016E
2017E
2018E
-
November 02, 2012
471.22
165.00
26.00
-
471.22
-
Oz the Great and Powerful
March 8, 2013
493.31
215.00
19.00
-
493.31
-
Iron Man 3
May 03, 2013
1,215.44
200.00
19.00
-
1,215.44
Monsters University
June 21, 2013
743.56
200.00
26.00
-
736.95
Frozen
November 27, 2013
1,274.22
150.00
34.00
-
-
1,274.22
Year
Avg. Price
Thor: The Dark World
November 8, 2013
644.78
170.00
23.00
-
-
644.78
April 4, 2014
714.77
170.00
20.00
-
-
714.77
2015
2014
$8.12
$8.17
(0.61%)
0.49%
Planes: Fire & Rescue
July 15, 2014
151.20
200.00
16.00
-
-
151.20
Maleficent
May 30, 2014
758.41
180.00
27.00
-
-
755.34
3.07
25.00
Total Estimated
Weeks in
Release
-
-
744.32
29.86
2013
2012
2011
$8.13
$7.96
$7.93
2.14%
0.38%
0.51%
2010
2009
2008
2007
2006
$7.89
$7.50
$7.18
$6.88
$6.55
5.20%
4.46%
4.36%
5.04%
2.18%
2005
2004
2003
2002
2001
2000
1999
1998
1997
1996
1995
1994
1993
1992
1991
1990
1989
1988
1987
1986
1985
$6.41
$6.21
$6.03
$5.81
$5.66
$5.39
$5.08
$4.69
$4.59
$4.42
$4.35
$4.18
$4.14
$4.15
$4.21
$4.23
$3.97
$4.11
$3.91
$3.71
$3.55
3.22%
2.99%
3.79%
2.65%
5.01%
6.10%
8.32%
2.18%
3.85%
1.61%
4.07%
0.97%
(0.24%)
(1.43%)
(0.47%)
6.55%
(3.41%)
5.12%
5.39%
4.51%
0.0
Captain America:The Winter Soldier
Guardians of the Galaxy
Title of Film
August 01, 2014
Release Date
774.18
Total Estimated
Box Office (in
millions)
196.00
Total Estimated
Budget (in
millions)
Historical Price Change of Movie
Tickets
6.61
Big Hero 6
November 7, 2014
652.31
50.00
24.40
-
-
-
652.31
Into the Woods
December 25, 2014
204.31
50.00
16.00
-
-
-
204.31
March 13, 2015
480.49
95.00
19.00
-
-
-
480.49
Marvel's The Avengers 2: Age of Ultron
May 01, 2015
1,974.17
279.90
23.00
-
-
-
1,974.17
Tomorrowland
May 22, 2015
721.00
190.00
21.00
-
-
-
721.00
Inside Out
June 19, 2015
794.84
N/A
27.25
-
-
-
794.84
Ant-Man
July 17, 2015
611.86
N/A
16.00
-
-
-
611.86
Cinderella
The Good Dinosaur
November 25, 2015
779.42
N/A
24.00
-
-
-
-
779.42
Star Wars: The Force Awakens
December 18, 2015
1,678.33
N/A
22.00
-
-
-
-
1,678.33
Zootopia
March 4, 2016
584.59
N/A
24.00
-
-
-
-
584.59
The Jungle Book
April 15, 2016
821.46
N/A
30.00
-
-
-
-
813.24
8.21
Captain America: Civil War
May 6, 2016
929.20
N/A
20.00
-
-
-
-
929.20
-
Alice Through the Looking Glass
May 27, 2016
1,095.38
N/A
20.00
-
-
-
-
1,095.38
Finding Dory
June 17, 2016
1,005.21
N/A
29.00
-
-
-
-
985.10
20.10
Dr. Strange
November 4, 2016
766.07
N/A
18.00
-
-
-
-
-
766.07
Star Wars Anthology: Rogue One
December 16, 2016
818.65
N/A
22.00
-
-
-
-
-
818.65
Beauty and the Beast
March 17, 2017
830.10
N/A
18.00
-
-
-
-
-
830.10
Guardians of the Galaxy 2
May 15, 2017
1,006.43
N/A
25.00
-
-
-
-
-
1,001.40
Star Wars Episode VIII
May 26, 2017
1,728.68
N/A
20.00
-
-
-
-
-
1,728.68
-
Toy Story 4
June 16, 2017
1,383.03
N/A
32.00
-
-
-
-
-
1,355.37
27.66
Pirates of the Caribbean: Dead Men Tell No Tales
July 7, 2017
1,359.43
N/A
20.00
-
-
-
-
-
1,359.43
Thor: Ragnarok
July 28. 2017
838.21
N/A
23.00
-
-
-
-
-
796.30
Total Box Office Sales by FY
$2,734.59
$2,924.90
$4,291.24
% Growth
Total Revenue from theatrical Segment (in millions)
$1,470.00
6.96%
$1,870.00
46.71%
$2,431.00
% Growth
(15.18%)
27.21%
$0.64
30.00%
$0.57
Average Revenue per Box Office (ARPBO)
% Growth
$0.54
$5,471.91
$6,865.26
27.51%
$3,271.94 $
34.59%
$0.60 $
2.89%
-
$
29.09%
0.62
2.89%
41.91
$8,684.32
25.46%
4,223.90
5.03
26.50%
-
5,497.73
-
30.16%
$
0.63
2.89%
$
0.65
2.89%
Increase
2.89%
Compound Price Growth Rate
UOIG 26
05/08/2015
University of Oregon Investment Group
Date of Presentation
Appendix 9 – Revenue Model
Revenue Model
($ in millions)
2010A
Cable Networks
2011A
2012A
2013A
2014A
Q1
Q2
Q3
Q4
12/31/2014A
03/31/2015E
06/30/2015E
09/30/2015E
2015E
2016E
2017E
2018E
2019E
2020E
2021E
2022E
2023E
2024E
11475.00
12877.00
13621.00
14453.00
15110.00
4166.00
3886.58
4282.98
4018.21
16353.78
17604.84
18877.67
20151.92
21403.35
22610.50
23768.16
24878.13
25952.86
9.00%
12.22%
5.78%
6.11%
4.55%
11.00%
6.98%
8.65%
6.25%
8.23%
7.65%
7.23%
6.75%
6.21%
5.64%
5.12%
4.67%
4.32%
4.08%
30.15%
31.49%
32.22%
32.09%
30.95%
31.11%
30.07%
30.90%
28.23%
30.06%
28.60%
27.24%
25.96%
24.87%
24.00%
23.35%
22.87%
22.52%
22.33%
Broadcasting
5687.00
5837.00
5815.00
5903.00
6042.00
1694.00
1574.40
1640.55
1495.76
6404.70
6781.94
7104.76
7378.29
7615.14
7842.07
8058.51
8255.94
8440.05
8621.51
% Growth
1.00%
2.64%
(.38%)
1.51%
2.35%
11.00%
4.89%
4.56%
3.45%
6.00%
5.89%
4.76%
3.85%
3.21%
2.98%
2.76%
2.45%
2.23%
2.15%
14.94%
14.27%
13.75%
13.11%
12.38%
12.65%
12.18%
11.84%
10.51%
11.77%
11.02%
10.25%
9.51%
8.85%
8.33%
7.92%
7.59%
7.32%
7.13%
$ 17,162.00
$ 18,714.00
$ 19,436.00
$ 20,356.00
5,860.00 $ 5,460.98 $ 5,923.53 $ 5,513.97
$ 22,758.48
$ 24,386.78
$ 25,982.43
$ 27,530.21
$ 29,018.49
$ 30,452.57
% Growth
% of Total Revenue
% of Total Revenue
Media Networks
$ 21,152.00 $
27011.74
$ 31,826.66 $ 33,134.07 $ 34,392.91 $ 35,633.25
Domestic Park and Resorts
8404.00
9302.00
10339.00
11394.00
12329.00
3233.00
3197.81
3548.27
3649.01
13628.08
15013.51
16484.47
18038.07
19665.36
21360.60
23131.28
24915.58
26726.35
% Growth
(.45%)
10.69%
11.15%
10.20%
8.21%
11.00%
6.95%
7.85%
16.69%
10.54%
10.17%
9.80%
9.42%
9.02%
8.62%
8.29%
7.71%
7.27%
6.79%
% of Total Revenue
22.08%
22.75%
24.45%
25.30%
25.26%
24.14%
24.74%
25.60%
25.64%
25.05%
24.39%
23.78%
23.24%
22.85%
22.68%
22.72%
22.90%
23.19%
23.60%
International Park and Resorts
2357.00
2495.00
2581.00
2693.00
2770.00
677.00
596.02
713.74
818.37
2805.13
3961.66
5029.42
5634.80
6276.14
6765.67
7246.45
7776.81
8308.42
8826.55
% Growth
5.93%
5.85%
3.45%
4.34%
2.86%
0.00%
4.20%
4.50%
(2.92%)
1.27%
41.23%
26.95%
12.04%
11.38%
7.80%
7.11%
7.32%
6.84%
6.24%
% of Total Revenue
6.19%
6.10%
6.10%
5.98%
5.67%
5.06%
4.61%
5.15%
5.75%
5.16%
6.44%
7.26%
7.26%
7.29%
7.18%
7.12%
7.15%
7.21%
7.30%
$ 10,761.00
$ 11,797.00
$ 12,920.00
$ 14,087.00
3,910.00 $ 3,793.83 $ 4,262.00 $ 4,467.38
$ 16,433.21
$ 18,975.17
$ 21,513.89
$ 23,672.86
$ 25,941.51
$ 28,126.26
Park and Resorts
Theatrical distribution
% Growth
% of Total Revenue
Home entertainment
$ 15,099.00 $
28542.18
$ 30,377.73 $ 32,692.39 $ 35,034.77 $ 37,368.73
2050.00
1733.00
1470.00
1870.00
2431.00
336.00
710.91
1194.63
1030.39
3271.94
4223.90
5497.73
7298.78
9196.47
11099.22
12836.24
14335.52
15591.31
55.00%
(15.46%)
(15.18%)
27.21%
30.00%
(46.00%)
52.23%
58.65%
74.64%
34.59%
29.09%
30.16%
32.76%
26.00%
20.69%
15.65%
11.68%
8.76%
16470.66
5.64%
5.39%
4.24%
3.48%
4.15%
4.98%
2.51%
5.50%
8.62%
7.24%
6.01%
6.86%
7.93%
9.40%
10.68%
11.78%
12.61%
13.18%
13.53%
13.62%
2666.00
2435.00
2221.00
1750.00
2094.00
678.00
780.00
378.10
669.90
2506.00
2974.12
3565.67
4298.78
4997.33
5657.47
6215.87
6691.38
7068.77
7362.13
(3.00%)
(8.66%)
(8.79%)
(21.21%)
19.66%
10.00%
25.00%
(5.00%)
45.00%
19.68%
18.68%
19.89%
20.56%
16.25%
13.21%
9.87%
7.65%
5.64%
4.15%
% of Total Revenue
7.00%
5.95%
5.25%
3.89%
4.29%
5.06%
6.04%
2.73%
4.71%
4.61%
4.83%
5.14%
5.54%
5.81%
6.01%
6.11%
6.15%
6.13%
6.09%
Television distribution and other
1985.00
2183.00
2134.00
2359.00
2753.00
844.00
853.99
764.24
860.88
3323.11
3917.61
4488.02
5021.64
5550.92
6037.18
6453.14
6783.55
7092.87
7378.01
(3.00%)
9.97%
(2.24%)
10.54%
16.70%
30.00%
20.45%
16.50%
16.65%
20.71%
17.89%
14.56%
11.89%
10.54%
8.76%
6.89%
5.12%
4.56%
4.02%
5.22%
5.34%
5.05%
5.24%
5.64%
6.30%
6.61%
5.51%
6.05%
6.11%
6.36%
6.48%
6.47%
6.45%
6.41%
6.34%
6.24%
6.15%
6.10%
1,858.00 $ 2,344.90 $ 2,336.97 $ 2,561.16 $ 9,101.04
$ 11,115.63
$ 13,551.42
$ 16,619.20
$ 19,744.72
$ 22,793.87
% Growth
% Growth
% of Total Revenue
Studio Entertainment
$ 6,701.00 $ 6,351.00 $ 5,825.00 $ 5,979.00 $ 7,278.00 $
$ 25,505.25 $ 27,810.44 $ 29,752.96 $ 31,210.79
Licensing and publishing
1725.00
1933.00
2056.00
2254.00
2538.00
781.00
669.13
676.24
858.05
2984.42
3465.51
4027.97
4692.58
5351.89
5952.90
6462.47
6879.30
7246.66
7540.15
% Growth
9.00%
12.06%
6.36%
9.63%
12.60%
23.00%
16.98%
15.40%
14.56%
17.59%
16.12%
16.23%
16.50%
14.05%
11.23%
8.56%
6.45%
5.34%
4.05%
% of Total Revenue
4.53%
4.73%
4.86%
5.00%
5.20%
5.83%
5.18%
4.88%
6.03%
5.49%
5.63%
5.81%
6.05%
6.22%
6.32%
6.35%
6.32%
6.29%
6.23%
Retail and other
953.00
1116.00
1196.00
1301.00
1447.00
598.00
357.54
355.34
372.48
1683.36
1950.34
2331.05
2843.88
3377.39
3892.78
4368.86
4752.45
5063.26
5271.87
13.00%
17.10%
7.17%
8.78%
11.22%
22.00%
14.23%
12.45%
13.56%
16.33%
15.86%
19.52%
22.00%
18.76%
15.26%
12.23%
8.78%
6.54%
4.12%
2.50%
2.73%
2.83%
2.89%
2.96%
4.47%
2.77%
2.56%
2.62%
3.09%
3.17%
3.36%
3.66%
3.92%
4.13%
4.29%
4.37%
4.39%
4.36%
% Growth
% of Total Revenue
Consumer Products
$ 2,678.00 $ 3,049.00 $ 3,252.00 $ 3,555.00 $ 3,985.00 $
1,379.00 $ 1,026.67 $ 1,031.59 $ 1,230.53 $ 4,667.78 $ 5,415.85 $ 6,359.01 $ 7,536.46 $ 8,729.27 $ 9,845.68
$ 10,831.34 $ 11,631.75 $ 12,309.92 $ 12,812.01
Game sales and subscriptions
563.00
768.00
613.00
812.00
1056.00
328.00
225.40
240.15
414.36
1207.91
1398.51
1606.75
1936.46
2297.61
2609.16
2877.38
3120.52
3334.28
3486.32
% Growth
0.00%
36.41%
(20.18%)
32.46%
30.05%
(2.00%)
15.00%
18.30%
28.56%
14.39%
15.78%
14.89%
20.52%
18.65%
13.56%
10.28%
8.45%
6.85%
4.56%
% of Total Revenue
1.48%
1.88%
1.45%
1.80%
2.16%
2.45%
1.74%
1.73%
2.91%
2.22%
2.27%
2.32%
2.50%
2.67%
2.77%
2.83%
2.87%
2.89%
2.88%
Advertising and other
198.00
214.00
232.00
252.00
243.00
56.00
72.80
65.72
46.55
241.07
266.53
292.81
317.81
342.12
365.70
387.16
407.84
428.15
447.54
35.00%
8.08%
8.41%
8.62%
(3.57%)
(16.00%)
4.00%
6.00%
5.00%
(.79%)
10.56%
9.86%
8.54%
7.65%
6.89%
5.87%
5.34%
4.98%
4.53%
.55%
.56%
.50%
.33%
.44%
.43%
.42%
.41%
.40%
.39%
% Growth
% of Total Revenue
.52%
$
982.00
$
845.00 $ 1,064.00 $ 1,299.00
.42%
$
384.00
.56%
$
298.20
.47%
$
Total Revenue
$ 38,063.00
$ 40,893.00
$ 42,278.00
$ 45,041.00
$ 48,813.00
$ 13,391.00
$ 12,924.58
$ 13,859.96
$ 14,233.95
$ 54,409.49
$ 61,558.48
$ 69,306.31
$ 77,613.00
$ 86,073.71
5.00%
7.44%
3.39%
6.54%
8.37%
8.79%
(3.48%)
7.24%
2.70%
11.47%
13.14%
12.59%
11.99%
10.90%
% Growth
761.00
.52%
Interactive Media
$
305.87
$
460.91 $ 1,448.98 $ 1,665.04 $ 1,899.56 $ 2,254.27 $ 2,639.73 $ 2,974.86
.38%
$
3,264.55
$ 94,193.24 $ 101,805.53
9.43%
8.08%
.37%
$
3,528.36
.37%
$
3,762.43
.37%
$
3,933.87
$ 108,797.01
$ 115,252.99
$ 120,958.66
6.87%
5.93%
4.95%
UOIG 27
05/08/2015
University of Oregon Investment Group
Date of Presentation
Appendix 10 – Working Capital Model
Days in Year
365
365
366
365
365
Working Capital Model
Q1
Q2
Q3
Q4
12/31/2014A
03/31/2015E
06/30/2015E
09/30/2015E
366
8,490.01
59.12
65.69%
1,587.27
15.45
12.28%
842.97
5.87
6.52%
511.24
3.56
3.96%
884.56
8.61
6.84%
$12,316.05
95.29%
8,954.14
58.79
64.60%
1,669.63
15.20
12.05%
871.20
5.72
6.29%
525.46
3.45
3.79%
880.93
8.67
6.36%
$12,901.36
93.08%
9,177.81
9,177.81
9,707.69 11,499.15 12,541.41 14,446.23
15,713.50
17,357.14
18,018.57
19,693.78
21,225.76
59.32
61.74
57.56
60.56
58.98
61.26
60.89
62.23
60.45
62.54
64.05
64.48%
16.87%
15.77%
16.59%
16.16%
16.78%
16.68%
17.05%
16.56%
17.09%
17.23%
1,726.91
1,726.91
1,956.06
2,173.24
2,429.77
2,701.87
2,929.08
3,189.60
3,329.40
3,561.93
3,757.58
15.67
16.22
16.34
16.20
16.31
16.45
16.56
16.78
16.56
16.87
17.02
12.13%
3.17%
3.18%
3.14%
3.13%
3.14%
3.11%
3.13%
3.06%
3.09%
3.11%
940.68
940.68
1,027.10
1,160.17
1,305.60
1,455.00
1,612.90
1,768.35
1,901.71
2,043.69
2,160.69
6.08
6.33
6.09
6.11
6.14
6.17
6.25
6.34
6.38
6.49
6.52
6.61%
1.73%
1.67%
1.67%
1.68%
1.69%
1.71%
1.74%
1.75%
1.77%
1.79%
584.83
584.83
952.89
1,051.94
1,135.49
1,242.76
1,339.35
1,458.75
1,541.04
1,615.43
1,666.91
3.78
5.49
5.65
5.54
5.34
5.27
5.19
5.23
5.17
5.13
5.03
4.11%
1.07%
1.55%
1.52%
1.46%
1.44%
1.42%
1.43%
1.42%
1.40%
1.38%
882.41
882.41
1,011.55
1,163.08
1,282.67
1,427.31
1,540.60
1,665.13
1,755.17
1,868.59
1,991.39
8.78
8.29
8.45
8.67
8.61
8.69
8.71
8.76
8.73
8.85
9.02
6.20%
1.62%
1.64%
1.68%
1.65%
1.66%
1.64%
1.64%
1.61%
1.62%
1.65%
$13,312.64 $13,312.64 $14,655.29 $17,047.58 $18,694.94 $21,273.18 $23,135.42 $25,438.97 $26,545.91 $28,783.41 $30,802.32
93.53%
24.47%
23.81%
24.60%
24.09%
24.72%
24.56%
24.99%
24.40%
24.97%
25.47%
17,597.00
2,110.00
2,493.00
(1,713.00)
17,806.00
$27,309.00
71.75%
17,806.00
19,695.00
17,895.00
18,733.00
3,559.00
3,783.00
2,796.00
3,311.00
184.00
1,088.00
2,443.00
402.00
(1,841.00)
(1,987.00)
(2,192.00)
(2,288.00)
19,695.00
17,895.00
18,733.00
18,541.00
$30,267.00 $28,217.00 $28,911.00 $30,296.00
74.02%
66.74%
64.19%
62.07%
18,541.00
998.00
0.00
(592.00)
18,279.00
$30,442.00
227.33%
18,279.00
1,092.13
445.90
(586.76)
19,230.27
$31,546.32
244.08%
19,230.27
1,171.17
711.02
(621.14)
20,491.31
$33,392.68
240.93%
20,491.31 21,612.51 25,352.01 27,441.23 30,192.39 33,989.51
38,182.63
41,884.87
45,959.46
50,264.10
54,706.21
1,171.45
4,432.75
2,991.74
3,624.72
4,835.29
5,439.86
4,926.31
5,446.60
5,929.44
6,361.96
6,870.45
617.75
1,774.67
2,056.05
2,342.55
2,654.36
2,978.15
3,296.76
3,603.92
3,894.93
4,172.16
4,402.90
(668.02) (2,467.91) (2,958.58) (3,216.11) (3,692.53) (4,224.90)
(4,520.82)
(4,975.92)
(5,519.73)
(6,092.01)
(6,668.69)
21,612.51 25,352.01 27,441.23 30,192.39 33,989.51 38,182.63
41,884.87
45,959.46
50,264.10
54,706.21
59,310.87
$34,925.14 $38,664.65 $42,096.52 $47,239.97 $52,684.45 $59,455.80 $65,020.29 $71,398.43 $76,810.01 $83,489.63 $90,113.19
245.37%
71.06%
68.38%
68.16%
67.88%
69.08%
69.03%
70.13%
70.60%
72.44%
74.50%
6,109.00
74.59
16.05%
2,350.00
6.17%
2,541.00
6.68%
$11,000.00
28.90%
6,362.00
6,393.00
6,803.00
7,595.00
74.13
74.21
73.87
78.92
15.56%
15.12%
15.10%
15.56%
3,055.00
2,806.00
3,389.00
3,533.00
7.47%
6.64%
7.52%
7.24%
2,671.00
3,614.00
1,512.00
2,164.00
6.53%
8.55%
3.36%
4.43%
$12,088.00 $12,813.00 $11,704.00 $13,292.00
29.56%
30.31%
25.99%
27.23%
9,069.00
86.99
67.72%
3,359.00
25.08%
4,376.00
32.68%
$16,804.00
31.37%
8,687.36
84.56
67.22%
3,375.90
26.12%
3,846.36
29.76%
$15,909.62
30.77%
9,154.40
83.34
66.05%
3,620.22
26.12%
4,731.79
34.14%
$17,506.41
31.58%
9,086.39
9,086.39
9,643.85 10,833.99 12,063.95 13,323.76
14,387.16
15,545.03
16,476.12
17,311.34
18,129.99
82.45
85.33
80.56
80.76
80.98
81.12
81.34
81.78
81.95
81.99
82.12
63.84%
16.70%
15.67%
15.63%
15.54%
15.48%
15.27%
15.27%
15.14%
15.02%
14.99%
3,811.85
3,811.85
4,296.78
4,934.61
5,495.00
6,197.31
6,913.78
7,513.25
8,105.38
8,851.43
9,652.50
26.78%
7.01%
6.98%
7.12%
7.08%
7.20%
7.34%
7.38%
7.45%
7.68%
7.98%
4,507.89
4,507.89
4,856.96
5,087.08
5,533.81
7,083.87
6,075.46
6,322.12
6,288.47
6,454.17
6,410.81
31.67%
8.29%
7.89%
7.34%
7.13%
8.23%
6.45%
6.21%
5.78%
5.60%
5.30%
$17,406.13 $17,406.13 $18,797.60 $20,855.68 $23,092.76 $26,604.93 $27,376.41 $29,380.40 $30,869.97 $32,616.94 $34,193.30
30.57%
31.99%
30.54%
30.09%
29.75%
30.91%
29.06%
28.86%
28.37%
28.30%
28.27%
0.72
0.77
0.74
0.80
2023E
365
8,591.00
59.02
64.16%
1,476.00
14.16
11.02%
712.00
4.89
5.32%
452.00
3.11
3.38%
932.00
8.94
6.96%
$12,163.00
90.83%
0.81
2022E
366
6,182.00
6,540.00
6,967.00
7,822.00
55.18
56.62
56.46
58.49
15.12%
15.47%
15.47%
16.02%
1,595.00
1,537.00
1,487.00
1,574.00
18.58
17.84
16.15
16.36
3.90%
3.64%
3.30%
3.22%
674.00
676.00
634.00
1,061.00
6.02
5.85
5.14
7.93
1.65%
1.60%
1.41%
2.17%
1,487.00
765.00
485.00
497.00
13.27
6.62
3.93
3.72
3.64%
1.81%
1.08%
1.02%
634.00
804.00
605.00
801.00
7.39
9.33
6.57
8.32
1.55%
1.90%
1.34%
1.64%
$10,572.00 $10,322.00 $10,178.00 $11,755.00
25.85%
24.41%
22.60%
24.08%
0.82
2021E
365
5,784.00
55.46
15.20%
1,442.00
17.61
3.79%
678.00
6.50
1.78%
1,018.00
9.76
2.67%
581.00
7.09
1.53%
$9,503.00
24.97%
0.78
2020E
365
$14,233.95 $54,409.49 $61,558.48 $69,306.31 $77,613.00 $86,073.71
0.76
2019E
365
$13,859.96
0.76
2018E
365
$12,924.58
0.88
2017E
365
$13,391.00
0.87
2016E
365
$40,893.00 $42,278.00 $45,041.00 $48,813.00
0.81
2015E
365
$38,063.00
0.87
2014A
92
Total Revenue
0.86
2013A
91
2010A
Current Ratio
2012A
90
($ in millions)
Current Assets
Accounts Receivable
Days Sales Outstanding A/R
% of Revenue
Inventory
Days Inventory Outstanding
% of Revenue
Television costs and advances
Days Television costs Outstanding
% of Revenue
Deferred income taxes
Days Deferred income taxes Outstanding
% of Revenue
Other Assets
Days COGS Outstanding
% of Revenue
Total Current Assets
% of Revenue
Long Term Assets
Net PP&E Beginning
Capital Expenditures
Acquisitions
Depreciation and Amortization
Net PP&E Ending
Total Current Assets & Net PP&E
% of Revenue
Current Liabilities
Accounts Payable
Days Payable Outstanding
% of Revenue
Unearned royalties and other advances
% of Revenue
Current Portion of Long Term Debt
% of Revenue
Total Current Liabilities
% of Revenue
2011A
92
2024E
$94,193.24 $101,805.53 $108,797.01 $115,252.99 $120,958.66
0.85
0.87
0.86
0.88
0.90
UOIG 28
05/08/2015
University of Oregon Investment Group
Date of Presentation
Appendix 11 – DCF Model
Discounted Cash Flow Analysis
Q1
($ in millions)
2010A
2011A
2012A
2013A
2014A
Total Revenue
$38,063.00
$40,893.00
$42,278.00
$45,041.00
$48,813.00
% YoY Growth
Cost of Goods Sold
% Revenue
Gross Profit
Gross Margin
Other income/(expense), net
% Revenue
Q2
12/31/2014A
Q3
Q4
03/31/2015E 06/30/2015E 09/30/2015E
$13,391.00
$12,924.58
$13,859.96
$14,233.95
2015E
2016E
2017E
2018E
2019E
2020E
$54,409.49
$61,558.48
$69,306.31
$77,613.00
$86,073.71
$94,193.24
2021E
2022E
$101,805.53
2023E
$108,797.01
2024E
$115,252.99
$120,958.66
5.00%
7.44%
3.39%
6.54%
8.37%
8.79%
(3.48%)
7.24%
2.70%
11.47%
13.14%
12.59%
11.99%
10.90%
9.43%
8.08%
6.87%
5.93%
4.95%
29894.00
31326.00
31528.00
33613.00
35125.00
9591.00
9246.25
9995.80
10138.84
$38,971.89
$43,694.21
48,964.91
54,375.66
59,950.34
64,560.05
69,380.47
73,383.59
77,277.13
80,582.66
74.57%
74.63%
71.96%
71.62%
71.54%
72.12%
71.23%
71.63%
70.98%
70.65%
70.06%
69.65%
68.54%
68.15%
67.45%
67.05%
66.62%
$10,750.00 $11,428.00
$13,688.00
$3,800.00
$3,678.34
$3,864.16
$4,095.11
$15,437.60
$17,864.27
$20,341.40
$23,237.33
$26,123.37
$29,633.19
$32,425.06
$35,413.43
$37,975.86
$40,376.00
33.38%
78.54%
76.60%
$8,169.00
$9,567.00
21.46%
23.40%
25.43%
25.37%
28.04%
28.38%
28.46%
27.88%
28.77%
28.37%
29.02%
29.35%
29.94%
30.35%
31.46%
31.85%
32.55%
32.95%
140.00
75.00
239.00
(69.00)
(31.00)
0.00
38.77
41.58
42.70
123.06
-
-
-
-
-
-
-
-
-
.37%
.18%
.57%
(.15%)
(.06%)
0.00%
.30%
.30%
.30%
.23%
-
-
-
-
-
-
-
-
-
Depreciation and Amortization
1713.00
1841.00
1987.00
2192.00
2288.00
592.00
586.76
621.14
668.02
2,467.91
2,958.58
3,216.11
3,692.53
4,224.90
4,520.82
4,975.92
5,519.73
6,092.01
6,668.69
% Net PP&E Beginning
9.73%
10.34%
10.09%
12.25%
12.21%
3.19%
3.21%
3.23%
3.26%
11.42%
11.67%
11.72%
12.23%
12.43%
11.84%
11.88%
12.01%
12.12%
12.19%
2,612.71
Equity in the income of investees
440.00
585.00
627.00
688.00
854.00
212.00
227.47
261.95
264.75
966.18
1,120.36
1,296.03
1,482.41
1,678.44
1,865.03
2,056.47
2,252.10
2,443.36
% Revenue
1.16%
1.43%
1.48%
1.53%
1.75%
1.58%
1.76%
1.89%
1.86%
1.78%
1.82%
1.87%
1.91%
1.95%
1.98%
2.02%
2.07%
2.12%
2.16%
$7,036.00
$8,386.00
$9,629.00
$9,855.00
$12,223.00
$3,420.00
$3,357.83
$3,546.55
$3,734.54
$14,058.92
$16,026.06
$18,421.32
$21,027.21
$23,576.91
$26,977.40
$29,505.61
$32,145.79
$34,327.21
$36,320.02
30.03%
Earnings Before Interest & Taxes
% Revenue
18.49%
20.51%
22.78%
21.88%
25.04%
25.54%
25.98%
25.59%
26.24%
25.84%
26.03%
26.58%
27.09%
27.39%
28.64%
28.98%
29.55%
29.78%
Interest Expense
409.00
343.00
369.00
(235.00)
23.00
(58.00)
112.44
92.86
123.84
64.79
-
-
-
-
-
-
-
-
-
% Revenue
1.07%
.84%
.87%
(.52%)
.05%
(.43%)
.87%
.67%
.87%
.12%
-
-
-
-
-
-
-
-
-
Earnings Before Taxes
6,627.00
8,043.00
9,260.00
10,090.00
12,200.00
3,478.00
3,245.38
3,453.69
3,610.71
13,994.13
16,026.06
18,421.32
21,027.21
23,576.91
26,977.40
29,505.61
32,145.79
34,327.21
% Revenue
17.41%
19.67%
21.90%
22.40%
24.99%
25.97%
25.11%
24.92%
25.37%
25.72%
26.03%
26.58%
27.09%
27.39%
28.64%
28.98%
29.55%
29.78%
29.08%
2314.00
2785.00
3087.00
2984.00
4242.00
1188.00
1135.56
1192.90
1255.80
4,772.27
5,413.60
6,185.88
7,012.57
7,818.10
8,897.15
9,698.49
10,537.39
11,218.13
11,833.06
Less Taxes (Benefits)
Tax Rate
36,320.02
34.92%
34.63%
33.34%
29.57%
34.77%
34.16%
34.99%
34.54%
34.78%
34.10%
33.78%
33.58%
33.35%
33.16%
32.98%
32.87%
32.78%
32.68%
32.58%
Net Income
$4,313.00
$5,258.00
$6,173.00
$7,106.00
$7,958.00
$2,290.00
$2,109.82
$2,260.79
$2,354.90
$9,221.86
$10,612.45
$12,235.44
$14,014.64
$15,758.81
$18,080.25
$19,807.12
$21,608.40
$23,109.08
$24,486.96
Net Margin
11.33%
12.86%
14.60%
15.78%
16.30%
17.10%
16.32%
16.31%
16.54%
16.95%
17.24%
17.65%
18.06%
18.31%
19.19%
19.46%
19.86%
20.05%
20.24%
Add Back: Depreciation and Amortization
1,713.00
1,841.00
1,987.00
2,192.00
2,288.00
592.00
586.76
621.14
668.02
2,467.91
2,958.58
3,216.11
3,692.53
4,224.90
4,520.82
4,975.92
5,519.73
6,092.01
6,668.69
Add Back: Interest Expense*(1-Tax Rate)
266.19
224.23
245.99
(165.50)
15.00
(38.19)
73.10
60.79
80.77
42.70
-
-
-
-
-
-
-
-
-
$6,292.19
$7,323.23
$8,405.99
$9,132.50
$10,261.00
$2,843.81
$2,769.68
$2,942.71
$3,103.69
$11,732.47
$13,571.03
$15,451.55
$17,707.16
$19,983.70
$22,601.07
$24,783.04
$27,128.13
$29,201.09
$31,155.64
Operating Cash Flow
% Revenue
16.53%
17.91%
19.88%
20.28%
21.02%
21.24%
21.43%
21.23%
21.80%
21.56%
22.05%
22.29%
22.81%
23.22%
23.99%
24.34%
24.93%
25.34%
25.76%
Current Assets
9,503.00
10,572.00
10,322.00
10,178.00
11,755.00
12,163.00
12,316.05
12,901.36
13,312.64
13,312.64
14,655.29
17,047.58
18,694.94
21,273.18
23,135.42
25,438.97
26,545.91
28,783.41
30,802.32
% Revenue
24.97%
25.85%
24.41%
22.60%
24.08%
90.83%
95.29%
93.08%
93.53%
24.47%
23.81%
24.60%
24.09%
24.72%
24.56%
24.99%
24.40%
24.97%
25.47%
Current Liabilities
11,000.00
12,088.00
12,813.00
11,704.00
13,292.00
16,804.00
15,909.62
17,506.41
17,406.13
17,406.13
18,797.60
20,855.68
23,092.76
26,604.93
27,376.41
29,380.40
30,869.97
32,616.94
34,193.30
30.31%
25.99%
27.23%
125.49%
123.10%
126.31%
122.29%
31.99%
30.54%
30.09%
29.75%
30.91%
29.06%
28.86%
28.37%
28.30%
28.27%
($2,491.00) ($1,526.00)
($1,537.00)
($4,641.00)
($3,593.56)
($4,605.05)
($4,093.50)
($4,093.50)
($4,142.30)
($3,808.10)
($4,397.82)
($5,331.75)
($4,240.99)
($3,941.42)
($4,324.06)
($3,833.53)
($3,390.98)
% Revenue
28.90%
29.56%
($1,497.00)
($1,516.00)
% Revenue
(3.93%)
(3.71%)
(5.89%)
(3.39%)
(3.15%)
(34.66%)
(27.80%)
(33.23%)
(28.76%)
(7.52%)
(6.73%)
(5.49%)
(5.67%)
(6.19%)
(4.50%)
(3.87%)
(3.97%)
(3.33%)
(2.80%)
Change in Working Capital
($387.00)
($19.00)
($975.00)
$965.00
($11.00)
($3,104.00)
$1,047.44
($1,011.48)
$511.55
($2,556.50)
($48.81)
$334.20
($589.71)
($933.94)
$1,090.77
$299.56
($382.64)
$490.53
$442.54
Capital Expenditures
2110.00
3559.00
3783.00
2796.00
3311.00
998.00
1092.13
1171.17
1171.45
4,432.75
2,991.74
3,624.72
4,835.29
5,439.86
4,926.31
5,446.60
5,929.44
6,361.96
6,870.45
% Revenue
5.54%
8.70%
8.95%
6.21%
6.78%
7.45%
8.45%
8.45%
8.23%
8.15%
4.86%
5.23%
6.23%
6.32%
5.23%
5.35%
5.45%
5.52%
5.68%
Acquisitions
2493.00
184.00
1088.00
2443.00
402.00
0.00
445.90
711.02
617.75
1,774.67
2,056.05
2,342.55
2,654.36
2,978.15
3,296.76
3,603.92
3,894.93
4,172.16
4,402.90
Net Working Capital
% Revenue
Unlevered Free Cash Flow
6.55%
.45%
2.57%
5.42%
.82%
0.00%
3.45%
5.13%
4.34%
3.26%
3.34%
3.38%
3.42%
3.46%
3.50%
3.54%
3.58%
3.62%
3.64%
$2,076.19
$3,599.23
$4,509.99
$2,928.50
$6,559.00
$4,949.81
$184.22
$2,072.01
$802.93
$8,081.55
$8,572.04
$9,150.08
$10,807.22
$12,499.63
$13,287.24
$15,432.96
$17,686.40
$18,176.43
$19,439.75
$180.69
$1,993.35
$757.64
$7,486.04
$7,395.61
$8,084.34
$8,653.84
$8,513.89
$9,152.17
$9,707.23
$9,233.07
$9,139.23
Discounted Free Cash Flow
Discount Period
EBITDA
EBITDA Margin
EBITDA Growth
$11,616.00 $12,047.00
0.25
0.5
0.75
1.75
2.75
3.75
4.75
5.75
6.75
7.75
8.75
9.75
$8,749.00
$10,227.00
$14,511.00
$4,012.00
$3,944.58
$4,167.69
$4,402.56
$16,526.83
$18,984.64
$21,637.43
$24,719.74
$27,801.81
$31,498.22
$34,481.53
$37,665.53
$40,419.22
$42,988.71
22.99%
25.01%
27.48%
26.75%
29.73%
29.96%
30.52%
30.07%
30.93%
30.37%
30.84%
31.22%
31.85%
32.30%
33.44%
33.87%
34.62%
35.07%
35.54%
16.89%
13.58%
3.71%
20.45%
NA
NA
NA
NA
13.89%
14.87%
13.97%
14.25%
12.47%
13.30%
9.47%
9.23%
7.31%
6.36%
UOIG 29
05/08/2015
University of Oregon Investment Group
Date of Presentation
Appendix 12 – DCF Assumption
Discounted Free Cash Flow Assumptions
Tax Rate
Considerations
32.58% Terminal Growth Rate
Risk Free Rate
3.00%
2.12% Terminal Value
Beta
1.034 PV of Terminal Value
Market Risk Premium
6.45% Sum of PV Free Cash Flows
352,922
Avg. Industry Debt / Equity
56.21%
165,920
Avg. Industry Tax Rate
22.52%
Current Reinvestment Rate
17.73%
Reinvestment Rate in Year 2020E
20.61%
Implied Return on Capital in Perpetuity
14.55%
80,297
% Equity
89.29% Firm Value
246,217
% Debt
10.71% Total Debt
22,661
Cost of Debt
2.74% Cash & Cash Equivalents
5,077
CAPM
8.79% Market Capitalization
WACC
8.05% Fully Diluted Shares
Terminal Risk Free Rate
2.82% Implied Price
$ 129.63
Terminal CAPM
9.49% Current Price
$ 109.85
Terminal WACC
8.67% Undervalued
18.01%
223,556
1,725
Terminal Value as a % of Total
67.4%
Implied 2015E EBITDA Multiple
14.9x
Implied Multiple in Year 2024E
3.9x
Free Cash Flow Growth Rate in Year 2024E
6%
Discounted Free Cash Flow Assumptions
Comparable Method
$
115.32
DCF Method
20%
$
129.63
80%
Current Price
$
109.85
15.40%
Final Target Price
$
126.77
Undervaluation
UOIG 30
05/08/2015
University of Oregon Investment Group
Date of Presentation
Appendix 13 – Sensitivity Analysis (Part One)
Implied Price
Undervalued/(Overvalued)
Terminal Growth Rate
2.0%
2.5%
3.0%
3.5%
4.0%
0
2.3%
2.3%
3.0%
3.8%
4.5%
0.83
145.1
156.5
170.4
187.8
210.1
0.83
37.00%
37.00%
55.11%
80.43%
118.31%
0.93
128.3
137.1
147.7
160.5
176.5
0.93
20.61%
20.61%
34.42%
53.01%
79.34%
1.03
114.4
121.4
129.6
139.4
151.3
1.13
102.8
108.4
114.9
122.6
131.7
1.23
93.0
97.5
102.8
108.9
116.0
Adjusted Beta
Adjusted Beta
Terminal Growth Rate
130
1.03
7.20%
7.20%
17.99%
32.06%
51.19%
1.13
(3.95%)
(3.95%)
4.63%
15.55%
29.92%
1.23
(13.36%)
(13.36%)
(6.43%)
2.21%
13.28%
Implied Price
Undervalued/(Overvalued)
Terminal Growth Rate
2.3%
2.3%
3.0%
3.8%
4.5%
0
2.3%
2.3%
3.0%
3.8%
4.5%
6.0% $ 140.09 $ 140.09 $ 154.32 $ 172.89 $ 198.13
6.0%
27.67%
27.67%
40.64%
57.56%
80.57%
7.0%
8.0%
17.06%
7.30%
17.06%
7.30%
28.90%
18.09%
44.34%
32.18%
65.33%
51.33%
9.0%
(1.38%)
(1.38%)
8.50%
21.39%
38.92%
10.0%
(9.40%)
(9.40%)
(0.36%)
11.44%
27.47%
7.0% $ 128.45 $ 128.45 $ 141.44 $ 158.38 $ 181.42
8.0% $ 117.86 $ 117.86 $ 129.73 $ 145.20 $ 166.24
9.0% $ 108.22 $ 108.22 $ 119.06 $ 133.21 $ 152.43
10.0% $
99.42 $
WACC
WACC
130
Terminal Growth Rate
99.42 $ 109.34 $ 122.28 $ 139.87
Implied Price
Undervalued/(Overvalued)
Terminal Growth Rate
7.5% $
2.3%
99.08 $
2.3%
3.0%
3.8%
4.5%
0
2.3%
2.3%
3.0%
3.8%
4.5%
99.08 $ 107.36 $ 117.75 $ 131.20
7.5%
(9.80%)
(9.80%)
(2.27%)
7.19%
19.44%
7.0%
(1.88%)
(1.88%)
7.09%
18.55%
33.73%
7.0% $ 107.79 $ 107.79 $ 117.64 $ 130.23 $ 146.90
6.5% $ 117.78 $ 117.78 $ 129.63 $ 145.09 $ 166.11
6.0% $ 129.36 $ 129.36 $ 143.79 $ 163.07 $ 190.15
5.5% $ 142.92 $ 142.92 $ 160.74 $ 185.25 $ 221.08
Market Risk
Premium
Market Risk
Premium
130
Terminal Growth Rate
6.5%
7.22%
7.22%
18.01%
32.08%
51.22%
6.0%
17.76%
17.76%
30.90%
48.45%
73.10%
5.5%
30.10%
30.10%
46.33%
68.64%
101.25%
UOIG 31
05/08/2015
University of Oregon Investment Group
Date of Presentation
Appendix 14 – Sensitivity Analysis (Part Two)
Implied Price
Undervalued/(Overvalued)
Terminal Growth Rate
2.3%
2.3%
3.0%
3.8%
4.5%
0
2.3%
2.3%
3.0%
3.8%
4.5%
43.10% $ 118.50 $ 118.50 $ 130.50 $ 146.19 $ 167.55
43.10%
7.87%
7.87%
18.80%
33.08%
52.53%
38.10%
7.56%
7.56%
18.42%
32.61%
51.90%
32.58%
7.22%
7.22%
18.01%
32.08%
51.22%
28.10%
6.94%
6.94%
17.67%
31.66%
50.67%
23.10%
6.63%
6.63%
17.30%
31.19%
50.05%
38.10% $ 118.16 $ 118.16 $ 130.09 $ 145.67 $ 166.87
32.58% $ 117.78 $ 117.78 $ 129.63 $ 145.09 $ 166.11
28.10% $ 117.47 $ 117.47 $ 129.26 $ 144.63 $ 165.51
Tax Rate
Tax Rate
130
Terminal Growth Rate
23.10% $ 117.13 $ 117.13 $ 128.85 $ 144.12 $ 164.83
Implied Price
Undervalued/(Overvalued)
Terminal Growth Rate
2.3%
2.3%
3.0%
3.8%
4.5%
0
2.3%
2.3%
3.0%
3.8%
4.5%
20.2% $ 113.80 $ 113.80 $ 124.83 $ 139.11 $ 158.31
20.2%
-15.00%
-15.00%
-8.34%
-0.06%
10.50%
15.2% $ 115.86 $ 115.86 $ 127.32 $ 142.20 $ 162.33
15.2%
-9.45%
-9.45%
-1.86%
7.68%
20.05%
10.9%
-4.11%
-4.11%
4.44%
15.31%
29.62%
5.2%
3.52%
3.52%
13.55%
26.52%
43.97%
0.2%
11.17%
11.17%
22.81%
38.13%
59.21%
10.9% $ 117.72 $ 117.72 $ 129.56 $ 145.00 $ 165.99
5.2% $ 120.17 $ 120.17 $ 132.53 $ 148.74 $ 170.92
% Debt
% Debt
130
Terminal Growth Rate
0.2% $ 122.42 $ 122.42 $ 135.28 $ 152.21 $ 175.52
Implied Price
Undervalued/(Overvalued)
Terminal Growth Rate
2.3%
2.3%
3.0%
Terminal Growth Rate
3.8%
4.5%
0
2.3%
2.3%
3.0%
3.8%
4.5%
2.52% $ 114.23 $ 114.23 $ 125.71 $ 140.68 $ 161.04
2.46%
4.47%
4.47%
14.97%
28.66%
47.28%
2.26%
6.08%
6.08%
16.74%
30.66%
49.58%
2.06%
7.71%
7.71%
18.55%
32.70%
51.93%
1.86%
9.37%
9.37%
20.39%
34.77%
54.31%
1.66%
11.06%
11.06%
22.26%
36.87%
56.73%
2.32% $ 115.99 $ 115.99 $ 127.65 $ 142.87 $ 163.55
2.12% $ 117.78 $ 117.78 $ 129.63 $ 145.09 $ 166.11
1.92% $ 119.60 $ 119.60 $ 131.64 $ 147.36 $ 168.72
1.72% $ 121.44 $ 121.44 $ 133.68 $ 149.66 $ 171.37
Risk Free Rate
Risk Free Rate
130
UOIG 32
University of Oregon Investment Group
05/08/2015
Date of Presentation
Appendix 15 – Sources
Allears
Box Mojo Office
Chinese Southern Travel Magazine
CNN
Disney.com
Federal Reserve Bank
Forbes
Fortune
Google and Google finance
Google Finance
Google Image
IBISworld
IMBD
Institution of internal education
McKinsey
Sec.org
Seeking Alpha
The World Bank
Themed Entertainment Association
WDI
Yahoo Finance
UOIG 33