Microsoft Excel LibreOffice Calc

Walt Disney Co. (DIS)

Economic Value Added (EVA)

Advanced level

EVA is registered trademark of Stern Stewart.

Economic value added or economic profit is the difference between revenues and costs,where costs include not only expenses, but also cost of capital.

Economic Profit

Walt Disney Co., economic profit calculation

US$ in millions

Microsoft Excel LibreOffice Calc
12 months ended Sep 28, 2019 Sep 29, 2018 Sep 30, 2017 Oct 1, 2016 Oct 3, 2015 Sep 27, 2014
Net operating profit after taxes (NOPAT)1 15,999  12,121  10,148  11,316  9,024  8,610 
Cost of capital2 9.74% 10.13% 9.73% 9.94% 10.25% 10.16%
Invested capital3 169,027  79,511  79,434  74,545  67,978  67,357 
 
Economic profit4 (465) 4,068  2,420  3,910  2,059  1,763 

Based on: 10-K (filing date: 2019-11-20), 10-K (filing date: 2018-11-21), 10-K (filing date: 2017-11-22), 10-K (filing date: 2016-11-23), 10-K (filing date: 2015-11-25), 10-K (filing date: 2014-11-19).

1 NOPAT. See details »

2 Cost of capital. See details »

3 Invested capital. See details »

<>4 2019 Calculation
Economic profit = NOPAT – Cost of capital × Invested capital
= 15,999 – 9.74% × 169,027 = -465

Item Description The company
Economic profit Economic profit is a measure of corporate performance computed by taking the spread between the return on invested capital and the cost of capital, and multiplying by the invested capital. Walt Disney Co.’s economic profit increased from 2017 to 2018 but then decreased significantly from 2018 to 2019.

Net Operating Profit after Taxes (NOPAT)

Walt Disney Co., NOPAT calculation

US$ in millions

Microsoft Excel LibreOffice Calc
12 months ended Sep 28, 2019 Sep 29, 2018 Sep 30, 2017 Oct 1, 2016 Oct 3, 2015 Sep 27, 2014
Net income attributable to The Walt Disney Company (Disney) 11,054  12,598  8,980  9,391  8,382  7,501 
Deferred income tax expense (benefit)1 2,081  (1,581) 344  1,245  (24) 504 
Increase (decrease) in allowance for doubtful accounts2 103  5  34  (4) 3  (1)
Increase (decrease) in deferred revenues3 1,134  —  —  —  —  — 
Increase (decrease) in restructuring reserves4 676  —  —  —  —  — 
Increase (decrease) in equity equivalents5 3,994  (1,576) 378  1,241  (21) 503 
Interest expense 1,246  682  507  354  265  294 
Interest expense, operating lease liability6 404  262  237  178  180  181 
Adjusted interest expense 1,650  944  744  532  445  475 
Tax benefit of interest expense7 (347) (231) (260) (186) (156) (166)
Adjusted interest expense, after taxes8 1,304  713  483  346  290  309 
Interest income, investment income and other (268) (108) (122) (94) (148) (317)
Investment income, before taxes (268) (108) (122) (94) (148) (317)
Tax expense (benefit) of investment income9 56  26  43  33  52  111 
Investment income, after taxes10 (212) (82) (79) (61) (96) (206)
(Income) loss from discontinued operations, net of tax11 (671) —  —  —  —  — 
Net income (loss) attributable to noncontrolling interest 530  468  386  399  470  503 
Net operating profit after taxes (NOPAT) 15,999  12,121  10,148  11,316  9,024  8,610 

Based on: 10-K (filing date: 2019-11-20), 10-K (filing date: 2018-11-21), 10-K (filing date: 2017-11-22), 10-K (filing date: 2016-11-23), 10-K (filing date: 2015-11-25), 10-K (filing date: 2014-11-19).

1 Elimination of deferred tax expense. See details »

2 Addition of increase (decrease) in allowance for doubtful accounts.

3 Addition of increase (decrease) in deferred revenues.

4 Addition of increase (decrease) in restructuring reserves.

5 Addition of increase (decrease) in equity equivalents to net income attributable to The Walt Disney Company (Disney).

6 2019 Calculation
Interest expense on capitalized operating leases = Operating lease liability × Discount rate
= 3,704 × 10.91% = 404

7 2019 Calculation
Tax benefit of interest expense = Adjusted interest expense × Statutory income tax rate
= 1,650 × 21.00% = 347

8 Addition of after taxes interest expense to net income attributable to The Walt Disney Company (Disney).

9 2019 Calculation
Tax expense (benefit) of investment income = Investment income, before tax × Statutory income tax rate
= 268 × 21.00% = 56

10 Elimination of after taxes investment income.

11 Elimination of discontinued operations.

Item Description The company
NOPAT Net operating profit after taxes is income from operations, but after removement of taxes calculated on cash basis that are relevant to operating income. Walt Disney Co.’s NOPAT increased from 2017 to 2018 and from 2018 to 2019.

Cash Operating Taxes

Walt Disney Co., cash operating taxes calculation

US$ in millions

Microsoft Excel LibreOffice Calc
12 months ended Sep 28, 2019 Sep 29, 2018 Sep 30, 2017 Oct 1, 2016 Oct 3, 2015 Sep 27, 2014
Income taxes from continuing operations 3,031  1,663  4,422  5,078  5,016  4,242 
Less: Deferred income tax expense (benefit) 2,081  (1,581) 344  1,245  (24) 504 
Add: Tax savings from interest expense 347  231  260  186  156  166 
Less: Tax imposed on investment income 56  26  43  33  52  111 
Cash operating taxes 1,240  3,449  4,296  3,986  5,144  3,793 

Based on: 10-K (filing date: 2019-11-20), 10-K (filing date: 2018-11-21), 10-K (filing date: 2017-11-22), 10-K (filing date: 2016-11-23), 10-K (filing date: 2015-11-25), 10-K (filing date: 2014-11-19).

Item Description The company
Cash operating taxes Cash operating taxes are estimated by adjusting income tax expense for changes in deferred taxes and tax benefit from the interest deduction. Walt Disney Co.’s cash operating taxes decreased from 2017 to 2018 and from 2018 to 2019.

Invested Capital

Walt Disney Co., invested capital calculation (financing approach)

US$ in millions

Microsoft Excel LibreOffice Calc
Sep 28, 2019 Sep 29, 2018 Sep 30, 2017 Oct 1, 2016 Oct 3, 2015 Sep 27, 2014
Current portion of borrowings 8,857  3,790  6,172  3,687  4,563  2,164 
Borrowings, excluding current portion 38,129  17,084  19,119  16,483  12,773  12,676 
Operating lease liability1 3,704  2,360  2,110  2,066  2,198  2,196 
Total reported debt & leases 50,690  23,234  27,401  22,236  19,534  17,036 
Total Disney Shareholder’s equity 88,877  48,773  41,315  43,265  44,525  44,958 
Net deferred tax (assets) liabilities2 7,492  2,975  4,311  3,538  3,239  3,574 
Allowance for doubtful accounts3 295  192  187  153  157  154 
Deferred revenues4 4,669  —  —  —  —  — 
Restructuring reserves5 676  —  —  —  —  — 
Equity equivalents6 13,132  3,167  4,498  3,691  3,396  3,728 
Accumulated other comprehensive (income) loss, net of tax7 6,617  3,097  3,528  3,979  2,421  1,968 
Redeemable noncontrolling interests 8,963  1,123  1,148  —  —  — 
Noncontrolling interests 5,012  4,059  3,689  4,058  4,130  3,220 
Adjusted total Disney Shareholder’s equity 122,601  60,219  54,178  54,993  54,472  53,874 
Projects in progress8 (4,264) (3,942) (2,145) (2,684) (6,028) (3,553)
Invested capital 169,027  79,511  79,434  74,545  67,978  67,357 

Based on: 10-K (filing date: 2019-11-20), 10-K (filing date: 2018-11-21), 10-K (filing date: 2017-11-22), 10-K (filing date: 2016-11-23), 10-K (filing date: 2015-11-25), 10-K (filing date: 2014-11-19).

1 Addition of capitalized operating leases.

2 Elimination of deferred taxes from assets and liabilities. See details »

3 Addition of allowance for doubtful accounts receivable.

4 Addition of deferred revenues.

5 Addition of restructuring reserves.

6 Addition of equity equivalents to total Disney Shareholder’s equity.

7 Removal of accumulated other comprehensive income.

8 Subtraction of projects in progress.

Item Description The company
Invested capital Capital is an approximation of the economic book value of all cash invested in going-concern business activities. Walt Disney Co.’s invested capital increased from 2017 to 2018 and from 2018 to 2019.

Cost of Capital

Walt Disney Co., cost of capital calculations

Capital (fair value)1 Weights Cost of capital
Equity2 264,826  264,826  ÷ 318,488  = 0.83 0.83 × 11.10% = 9.23%
Borrowings3 49,958  49,958  ÷ 318,488  = 0.16 0.16 × 3.28% × (1 – 21.00%) = 0.41%
Operating lease liability4 3,704  3,704  ÷ 318,488  = 0.01 0.01 × 10.91% × (1 – 21.00%) = 0.10%
Total: 318,488  1.00 9.74%

Based on: 10-K (filing date: 2019-11-20).

1 US$ in millions

2 Equity. See details »

3 Borrowings. See details »

4 Operating lease liability. See details »

Capital (fair value)1 Weights Cost of capital
Equity2 168,264  168,264  ÷ 191,621  = 0.88 0.88 × 11.10% = 9.75%
Borrowings3 20,997  20,997  ÷ 191,621  = 0.11 0.11 × 3.32% × (1 – 24.50%) = 0.27%
Operating lease liability4 2,360  2,360  ÷ 191,621  = 0.01 0.01 × 11.12% × (1 – 24.50%) = 0.10%
Total: 191,621  1.00 10.13%

Based on: 10-K (filing date: 2018-11-21).

1 US$ in millions

2 Equity. See details »

3 Borrowings. See details »

4 Operating lease liability. See details »

Capital (fair value)1 Weights Cost of capital
Equity2 155,169  155,169  ÷ 183,153  = 0.85 0.85 × 11.10% = 9.41%
Borrowings3 25,874  25,874  ÷ 183,153  = 0.14 0.14 × 2.58% × (1 – 35.00%) = 0.24%
Operating lease liability4 2,110  2,110  ÷ 183,153  = 0.01 0.01 × 11.22% × (1 – 35.00%) = 0.08%
Total: 183,153  1.00 9.73%

Based on: 10-K (filing date: 2017-11-22).

1 US$ in millions

2 Equity. See details »

3 Borrowings. See details »

4 Operating lease liability. See details »

Capital (fair value)1 Weights Cost of capital
Equity2 156,377  156,377  ÷ 179,522  = 0.87 0.87 × 11.10% = 9.67%
Borrowings3 21,079  21,079  ÷ 179,522  = 0.12 0.12 × 2.59% × (1 – 35.00%) = 0.20%
Operating lease liability4 2,066  2,066  ÷ 179,522  = 0.01 0.01 × 8.63% × (1 – 35.00%) = 0.06%
Total: 179,522  1.00 9.94%

Based on: 10-K (filing date: 2016-11-23).

1 US$ in millions

2 Equity. See details »

3 Borrowings. See details »

4 Operating lease liability. See details »

Capital (fair value)1 Weights Cost of capital
Equity2 196,183  196,183  ÷ 216,168  = 0.91 0.91 × 11.10% = 10.08%
Borrowings3 17,788  17,788  ÷ 216,168  = 0.08 0.08 × 2.12% × (1 – 35.00%) = 0.11%
Operating lease liability4 2,198  2,198  ÷ 216,168  = 0.01 0.01 × 8.21% × (1 – 35.00%) = 0.05%
Total: 216,168  1.00 10.25%

Based on: 10-K (filing date: 2015-11-25).

1 US$ in millions

2 Equity. See details »

3 Borrowings. See details »

4 Operating lease liability. See details »

Capital (fair value)1 Weights Cost of capital
Equity2 152,309  152,309  ÷ 169,780  = 0.90 0.90 × 11.10% = 9.96%
Borrowings3 15,275  15,275  ÷ 169,780  = 0.09 0.09 × 2.27% × (1 – 35.00%) = 0.13%
Operating lease liability4 2,196  2,196  ÷ 169,780  = 0.01 0.01 × 8.24% × (1 – 35.00%) = 0.07%
Total: 169,780  1.00 10.16%

Based on: 10-K (filing date: 2014-11-19).

1 US$ in millions

2 Equity. See details »

3 Borrowings. See details »

4 Operating lease liability. See details »

Economic Spread Ratio

Walt Disney Co., economic spread ratio calculation

Microsoft Excel LibreOffice Calc
Sep 28, 2019 Sep 29, 2018 Sep 30, 2017 Oct 1, 2016 Oct 3, 2015 Sep 27, 2014
Selected Financial Data (US$ in millions)
Economic profit1 (465) 4,068  2,420  3,910  2,059  1,763 
Invested capital2 169,027  79,511  79,434  74,545  67,978  67,357 
Performance Ratio
Economic spread ratio3 -0.28% 5.12% 3.05% 5.24% 3.03% 2.62%

Based on: 10-K (filing date: 2019-11-20), 10-K (filing date: 2018-11-21), 10-K (filing date: 2017-11-22), 10-K (filing date: 2016-11-23), 10-K (filing date: 2015-11-25), 10-K (filing date: 2014-11-19).

1 Economic profit. See details »

2 Invested capital. See details »

3 2019 Calculation
Economic spread ratio = 100 × Economic profit ÷ Invested capital
= 100 × -465 ÷ 169,027 = -0.28%

Performance ratio Description The company
Economic spread ratio The ratio of economic profit to invested capital, also equal to the difference between return on invested capital (ROIC) and cost of capital. Walt Disney Co.’s economic spread ratio improved from 2017 to 2018 but then deteriorated significantly from 2018 to 2019.

Economic Profit Margin

Walt Disney Co., economic profit margin calculation

Microsoft Excel LibreOffice Calc
Sep 28, 2019 Sep 29, 2018 Sep 30, 2017 Oct 1, 2016 Oct 3, 2015 Sep 27, 2014
Selected Financial Data (US$ in millions)
Economic profit1 (465) 4,068  2,420  3,910  2,059  1,763 
Revenues 69,570  59,434  55,137  55,632  52,465  48,813 
Add: Increase (decrease) in deferred revenues 1,134  —  —  —  —  — 
Adjusted revenues 70,704  59,434  55,137  55,632  52,465  48,813 
Performance Ratio
Economic profit margin2 -0.66% 6.84% 4.39% 7.03% 3.93% 3.61%

Based on: 10-K (filing date: 2019-11-20), 10-K (filing date: 2018-11-21), 10-K (filing date: 2017-11-22), 10-K (filing date: 2016-11-23), 10-K (filing date: 2015-11-25), 10-K (filing date: 2014-11-19).

1 Economic profit. See details »

2 2019 Calculation
Economic profit margin = 100 × Economic profit ÷ Adjusted revenues
= 100 × -465 ÷ 70,704 = -0.66%

Performance ratio Description The company
Economic profit margin The ratio of economic profit to sales. It is the company’s profit margin covering income efficiency and asset management. Economic profit margin is not biased in favor of capital-intensive business models, because any added capital is a cost to the economic profit margin. Walt Disney Co.’s economic profit margin improved from 2017 to 2018 but then deteriorated significantly from 2018 to 2019.