DIS Initiation 2015

JBL Advisors, LLC.

Stock Data

Exchange: NYSE

52-week Range: $46.96 - $69.87

Shares Outstanding (million): 1,786

Market cap ($million): $122,055

Net Debt ($million): $10,357

EV ($million): $132,412

Avg. Daily Trading Vol. (million): 7,780

Short Interest (million shares): 36.6

Dividend, annual (% yield): $0.75 (1.10%)

State of incorporation: Delaware

Auditors: PWC LLP

Revenues (US$ million)

FY2013A

(Cur.)

FY2014E

(Cur.)

FY2015E

(Cur.)

Q1 Dec 11,341 12,200 NA

Q2 Mar 10,554 11,160 NA

Q3 Jun 11,578 12,450 NA

Q4 Sep 11,568 12,515 NA

Total 45,041 48,325E 52,300E

EV/Revs 2.9x 2.7x 2.5x

Earnings per Share (non-GAAP)

FY2013A

(Cur.)

FY2014E

(Cur.)

FY2015E

(Cur.)

Q1 Dec 0.79 0.86 NA

Q2 Mar 0.79 0.90 NA

Q3 Jun 1.03 1.21 NA

Q4 Sep 0.77 0.91 NA

Total 3.39 3.88E 4.51E

P/E 20.2x 17.6x 15.1x

EBIT (US$ million)

FY2013A

(Cur.)

FY2014E

(Cur.)

FY2015E

(Cur.)

Q1 Dec 2,380 2,620 NA

Q2 Mar 2,509 2,800 NA

Q3 Jun 3,351 3,790 NA

Q4 Sep 2,484 2,930 NA

Total 10,724 12,140E 13,660E

EV / EBIT 12.3x 10.9x 9.7x

EBIT defined as earnings before interest, taxes, and stock-

based compensation.

United States Entertainment & Leisure

April 16, 2015

Jeffrey B. Logsdon

(714) 852 - 3774 [email protected]

Important Disclosures: For analyst certification and other important disclosures, refer to the Disclosure Section, located at the end of this report.

We are initiating coverage on DIS with an Outperform rating and a $124.00 price target over the next 12-months.

Basis of Recommendation:

Disney is a premier entertainment company with an asset base that

is unrivaled in the industry. The mix of uniquely profitable brands,

unduplicatable franchises and assets, as well as best in class

financials make it a core holding for growth investors.

Theme Parks & Resorts are in the enviable position of benefitting

from a normalized economy, middle-innings of significant and

profitable capacity expansion (new parks & attractions), and

improving operating margins.

ESPN remains a highly prized and valued asset, which along with

Disney’s other cable networks should continue to be a catalyst of OI

growth over the next two years. While not undiscovered, it is still a

powerful earnings driver in dollars and percentages.

Acquisition of LucasFilm and continuing exploitation of Marvel

characters in film and TV enhances the creative resources of its

Filmed Entertainment business and is highly leveragable

operationally and financially at its theme parks, consumer products

and interactive segments.

Cross-platform consumer interaction with the brands, characters

and franchise portfolio is becoming very profitable. While always a

leader in maximizing the cash-earnings generating utilization of its

creative output, Disney is accelerating that growth with the addition

of LucasFilms.

Share repurchases will compliment organic growth. Disney has

reduced its share count by about 12% since 2010 and should

continue to return $3-$4 billion in capital annually giving a modest

boost to earnings.

Healthy valuation points to meaningful estimated growth in EPS

(17% CAGR F2013 – F2017E) and FCF ($2.8b in F2012 to $7.1b in

F2017E) as new parks, retransmission fees, affiliate fee increases,

dividend growth and better operating margins combine to enhance

Disney’s investment attractiveness.

Our 12-month $124.00 price target is based on a blend of DCF,

EV/EBITDA and P/E valuation tools.

Company Description

The Walt Disney Company is one of the most dominant entertainment conglomerates in the world. It is a leading producer and distributor of films and television series, operates premier theme parks worldwide, is a major television broadcaster, controls two of the most profitable cable networks in ESPN and The Disney Channel, as well as successfully building & acquiring new franchises with Star Wars, Marvel characters, Princesses, and Pirates, among others which help it dominate the licensing and merchandising world.

The Walt Disney Company Initiating Coverage with an OUTPERFORM rating and $124 Price Target

The Magic Kingdom: Momentum Visibility To 2018

COVERAGE

INITIATION

Rating:

Outperform

Ticker: DIS

Price: $107.15

Target: $124.00

Stock Data

Exchange: NYSE

52-week Range: $108.94 - $76.31

Shares Outstanding (million): 1,734

Market cap (million): $185,798

Net Debt (million): $11,466

EV (million): $197,264

ROE (2014) 17.5%

ROIC (2014) 18.9%

Avg. Daily Trading Vol. (million) 6.55

Short Interest (million shares): 42.0

Dividend, annual (yield): $1.15 (1.07%)

Senior Debt Rating: A/A2

Auditors: PWC LLP

Revenues (US$ million)

F2014A

(Cur.)

F2015E

(Cur.)

F2016E

(Cur.)

Q1 Dec 12,309 13,391A NA

Q2 Mar 11,649 12,280 NA

Q3 Jun 12,466 13,040 NA

Q4 Sep 12,389 13,264 NA

Total 48,813 51,975 55,650

EV/Revs 4.0x 3.8x 3.5x

Earnings per Share (US$) (Adjusted)

F2014A

(Cur.)

F2015E

(Cur.)

F2016E

(Cur.)

Q1 Dec 1.04 1.27A NA

Q2 Mar 1.10 1.14 NA

Q3 Jun 1.28 1.42 NA

Q4 Sep 0.89 1.13 NA

Total $4.32 $4.97 $5.79

P/E 24.8x 21.6x 18.5x

EBITDA (US$ million) (Adjusted)

F2014A

(Cur.)

F2015E

(Cur.)

F2016E

(Cur.)

Q1 Dec 3,454 3,955A NA

Q2 Mar 3,789 3,288 NA

Q3 Jun 4,320 3,958 NA

Q4 Sep 2,895 4,634 NA

Total 14,458 15,835 17,730

EV / EBITDA 13.6 x 12.5x 11.1x

EBITDA defined as earnings before interest, taxes,

depreciation, amortization and stock-based compensation.

DIS: The Walt Disney Company – Coverage Initiation

REFER TO IMPORTANT DISCLAIMER INFORMATION ON THE LAST PAGE OF THIS REPORT 2

JBL Advisors, LLC.

INVESTMENT THESIS

We believe DIS is very well positioned operationally to see double digit earnings gains in F2015E – F2017E (our earnings model is on

Page 18), which we believe should lead to above-average returns for investors this next year. While Disney is not an undiscovered

stock, it is likely to remain a core investment holding in most growth portfolios and a momentum investor’s delight given the

numerous catalysts (investable themes) in the next two years. We would expect investment returns should at least track EPS growth,

which should enable Disney to outperform the investment returns of the S&P 500. Disney should show broad-based fundamental

growth, strength at its cable networks, healthy ad markets around ESPN as programming pushes revenues, very positive comps with

its film slate and contributions from Lucas Film’s Star Wars 7 and spin off Star Wars: Rogue One, as well as better theme park earnings

from Park expansion domestically and internationally. Acceleration in estimated FCF growth in F2017 and beyond as well as a

continuation of share repurchases should fuel and complement its fundamental, organic EPS growth.

Disney should experience above-index fundamental growth in F2015-F2017. We expect double-digit operating income, EBITDA, and

EPS estimated growth in F2015-F2017, driven by broad base contributions from most of its operating segments. We forecast three-

year revenue CAGR of 6.9% and EPS of 17% (F2014–F2017E). Disney continues to achieve mid-teen ROIC and has been consistently

decapitalizing the company while maintaining a very healthy and attractive capital structure.

Exhibit 1: Disney Quarterly Total Revenues F2013 – F2015E

Fiscal years end September

Source: Company reports, JBL Advisors estimates

$11,341

$10,554

$11,578 $11,568 $12,309

$11,649

$12,466 $12,389

$13,391

$12,330 $13,040 $13,214

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15E 3Q15E 4Q15E

Y-O

-Y

Total Revenue

in millions



JBL Advisors, LLC.

Exhibit 2: Disney Quarterly Operating Income F2013 – F2015E

Fiscal years end September

Source: Company reports, JBL Advisors estimates

ESPN remains a marquee franchise and should generate more than an estimated $4.5 billion of EBITDA in F2015. Cable Networks

should continue to push healthy fundamentals as contractual growth in subscriber fees, international expansion, and healthy ratings

(driven in part by expanding sports rights worldwide) drive earnings contributions. The group of cable networks should generate an

estimated $6.85 billion in operating income in F2015 with over $4 billion coming from ESPN. The financial dynamics of ESPN’s suite

of cable networks should be a frequent and important reminder of the value of these franchises and their earnings power, even with

the law of large numbers.

Retransmission fees should help drive operating income growth. We believe that TV broadcasters and network owners are seeing

the financial benefits of retransmission fees and are likely to push the cents per subscribers per month to higher levels as new

contractual negotiations evolve over the next 4 years. Disney has gone on record stating that the operating income contributions

from retransmission fees are likely to grow to the $400-$500 million level this year and we would expect that to grow towards $750

million plus as retransmission fees 2.0 begins to contribute in F2016 and beyond. This is an exceptional contribution to operating

income given the 80% plus pass-through and the current level of operating income at the division ($854 million in F2014). We believe

this accords a certain amount of immunity to the vagaries and typical erosion of the ABC networks ratings (live & same day) and

fluctuations of local advertising.

Capital expenditures at Disney’s Theme Parks and Resorts division should decline meaningfully beginning in F2017 as the major

capex cycle from theme park & resorts expansion winds down. The new amenities at a variety of theme parks (Florida, Hong Kong,

etc.) and new capacity built over the past few years (California Adventure, etc.) should provide a substantial boost to operating

income. Disney has been in the midst of a significant capital expenditure cycle during the past four years, but capex should decline

by $1 billion or so in F2017. The expenditures are related to the addition of two cruise ships (at a cost of about $800 million each,

Disney Dream launched in F2Q11 and Disney Fantasy launched F3Q12), the Aulani Resort on Oahu (at a cost of around the $500

million level and opened in F2012), a major redesign and rebuild at Disney’s California Adventure in Anaheim including Car’s Land

($1 billion plus), a doubling of Fantasyland in Florida (costing an estimated $800 million), spending on its new 43%-owned Disneyland

Shanghai of approximately $2.3 billion for Disney’s share (which will open early in FY2016), and three new lands which opened at

Hong Kong Disneyland within the last 24-months. We estimate the aggregate operating income contribution from these investments

to reach $700-$800 million annually by FY2015-FY2017, a healthy incremental contribution to the F2014 Theme Parks & Resorts

operating income of $2.6 billion. All of these projects should extend and expand existing businesses for a number of years and keep

EPS growth percentage in the teens or better.

$2,380 $2,509

$3,351

$2,484

$3,020

$3,353

$3,857

$2,775

$3,545 $3,523

$4,113

$3,110

-5.0%

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

35.0%

40.0%


Y-O

-Y

Total Operating Income

in millions



JBL Advisors, LLC.

Disney should see significant growth for the next 3 years in its Studio segment operating income which should be a key investment

theme. We estimate Disney’s Studio Entertainment segment’s operating income will grow to $2.2 billion in F2017 from $1.5 billion

in F2014 as its major production verticals (Marvel, Pixar and LucasFilms as well as key sequels) rollout worldwide (see our highly

anticipated films table on page 8 of this report). The addition of LucasFilms (Star Wars franchises) is already contributing to the

Consumer Products segment and should begin to contribute in a more significant proportion to the OI of the Filmed Entertainment

division over the next three-to-five years by hundreds of millions of dollars in operating income. The addition of Alan Horn to head

the Filmed Entertainment group has dramatically improved the utilization of creative resources and franchises, strategic operating

efficiency and profitability of the division. The combination of John Lassiter and Alan Horn is a powerful duo that should continue to

have a positive impact on its filmed entertainment and related businesses for years to come.

Disney has been a consistent outperformer versus the S&P 500. Seven of the past eight years, Disney’s stock has outperformed the

S&P 500 in a meaningful fashion. Overall, since the beginning of 2008, Disney’s stock is up approximately 229% versus a 42% gain

for the S&P 500. We acknowledge and call out that past performance is absolutely not an indicator of future returns, but it is an

important benchmark for institutional investors that are unlikely to overlook the equity’s performance in tough and bountiful times

economically if its operating profile and EPS numbers are healthy. This is a major rationale in our outperform rating as the operating

and financial dynamics that have led to the superior performance of the stock the past seven years remain in place and should remain

visible for the next two years.

The chart below details the annual returns from Disney versus the S&P 500.

Exhibit 3: Annual Returns, 2008 – 2015 Year to Date

Source: Company reports, Thomson Reuters

We believe Disney’s valuation is still attractive at its current 14% premium P/E multiple to the S&P 500 (using F2016E), a mid-point

premium to its 7 year range. We estimate that Disney should grow EPS at close to a 17% CAGR (F2014-F2017) versus the S&P 500’s

EPS CAGR in the 6.5% - 7.0% over the next 3 years. We believe that a doubling of the earnings growth rate of the most widely-used

benchmark index for equities makes its current valuation premium attractive for those who would use GARP valuation methodologies

-28.7%

43.7%

17.6%

1.6%

34.8%

54.9%

24.9%

15.0%

-36.6%

25.9%

14.8%

2.0%

16.6%

30.2%

13.0%

3.9%

-60.0%

-40.0%

-20.0%

0.0%

20.0%

40.0%

60.0%

2008 2009 2010 2011 2012 2013 2014 2015

DIS vs. S&P 500 Total Annual Return Calendar 2008-2015 YTD

DIS S&P 500



JBL Advisors, LLC.

as their primary investment decision-making tool. While we are not postulating multiple expansion as part of our investment themes,

we do believe its double digit EPS growth quotient for the next three years, low leverage level (under 1.0x debt/EBITDA, probability

of further dividend increases, and meaningful growth in FCF should all contribute to stability in its fundamentals and improving

visibility for a positive impact to investor sentiment. The company has multiple momentum variables from its core businesses which

we believe makes it just as attractive to momentum investors as well. It is not an undiscovered stock but that does not mean it is

unlikely to outperform the S&P 500 over the next year or two.

COMPANY DESCRIPTION

The Walt Disney Company is one of the most dominant diversified entertainment conglomerates in the world. It is a leading producer

and distributor of feature films and television series, operates premier theme parks around the world, is a major television

broadcaster, controls two of the most highly respected brands and profitable cable networks in ESPN and The Disney Channel, and

has successfully built new franchises with Marvel, Pixar and now Lucas Film resources. The company dominates the character-

licensing business and the children’s consumer products marketplace with its unique stable of brands and franchises.

The following exhibits visualize the growing importance of the higher contributions from its film and theme park businesses, both of which should be very healthy growers through F2017.

Exhibit 4: Revenue by Segment - F2010, F2013, & F2016E

Fiscal years end September Source: Company reports and JBL Advisors estimates

Exhibit 5: Operating Income by Segment - F2010, F2013, & F2016E

Fiscal years end September Source: Company reports and JBL Advisors estimates

Cable Networks: Disney owns and operates many of the premier cable networks worldwide with ESPN and The Disney Channel as

well as a number of other cable networks in the U.S. (Family Channel, Disney XD & Disney Junior) and a 50% equity stake in the AETN

(Lifetime, History Channel, Biography, etc.). It has over 100 million households as subscribers to its domestic cable networks and

close to 160 million international subscribers. The cable networks generate approximately 29.4% of the company’s revenues and

47.9% of Disney’s operating income with operating margins in the 42% region (F2015E).

Broadcasting15%

Cable Networks

30%

Theme Parks & Resorts

28%

Studio Entertainment

18%

Consumer Products

7%

Interactive Media

2%

FY2010Broadcasting

13%

Cable Networks

32%


31%


13%

Consumer Products

8%

Interactive Media

2%

FY2013

Broadcasting12%

Cable Networks

32%Theme Parks &

Resorts31%


14%

Consumer Products

9%

Interactive Media

3%

FY2016E

Broadcasting9%

Cable Networks

59%


17%


9%

Consumer Products

9%

Interactive Media

-3%

FY2010Broadcasting

7%

Cable Networks

56%


21%


6%

Consumer Products

10%

Interactive Media

-1%

FY2013Broadcasting

6%

Cable Networks

48%Theme Parks &

Resorts21%


12%

Consumer Products

12%

Interactive Media

2%

FY2016E



JBL Advisors, LLC.

ESPN (and its suite of channels) is the major contributor to revenues and operating income in the segment. ESPN generates roughly

$12.5 billion in revenues (almost $6 per subscriber per month for the ESPN suite of channels) and over $4.5 billion in operating

income. Approximately 65% of ESPN’s revenues are derived from affiliate fees that are under long term contracts with high-single

digit escalators in place over the next four to five years. The second largest contributor to the division’s revenues is The Disney

Channel, which garners over $1.30 per subscriber per month in subscription fees from cable, satellite & telco carriers to come to 100

million households in the U.S. and close to 180 million internationally. The Disney Channel generates over $3.2 billion in revenues

and over $1.2 billion in operating income despite the absence of traditional advertising revenue contributions.

Complimentary platforms utilizing OTT and SVOD connects are becoming much more important and lucrative variables in the

profitability equation, especially as ratings from traditional networks drift and-or erode. Mobile, tablet and other screens are gaining

lots of attention as a growing source of revenues, but still fractional relative to the traditional portals. Subscriber level disconnects

with MVPD’s have not seemed to be very consequential to the economics of the business so far. Dominating the discussion up to

now have been the dollars paid by aggregators like Netflix and Amazon which have meaningfully surpassed the loss of ad dollars from

ratings disruptions. True to form, that variable will not last for years to come! Recent strategy plans by TWX (with HBO) and CBS

(with Showtime) and others (Starz & Sony) to go for direct connects with $10-$18 monthly subscriber fees will be another variation

which Disney has yet to embrace or adopt. Suffice it to say that we expect Disney will be an important player in utilizing its content

and programming on most platforms, maximizing its split and equity control worldwide.

We do not believe Net Neutrality has particularly influential implications financially for Disney in the near term.

The following graphs visualize the contributions of the cable networks to the company’s profitability. The segment should continue

to see close to double digit growth annually over the next few years as affiliate fees maintain a high-single digit pace.

Exhibit 6: Cable Networks Quarterly Revenue and Operating Income Profile, F2013-F2015E

$3,538 $3,458

$3,884

$3,573

$3,759

$3,633

$3,942

$3,776

$4,166

$3,900

$4,200

$4,084

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%


Y-O

-Y

Cable Networks Revenue

in millions



JBL Advisors, LLC.

Fiscal years end September Source: Company Reports and JBL Advisors estimates

Sports rights are a major revenue and cost variable for Disney’s Cable Network segment and frequently an important debate point

about the segment and the company amongst investors. In simple terms (and there are few elements of sports rights contracts that

are simple!), the early years of longer term renewals create the lowest margins (or modest operating income losses) and the back

end typically have the best margins. Clearly ratings and ad rates are variable while subscriber fees have typically been precast for

most platforms. MLB, NFL, NASCAR (not renewed), FIFA World Cup Soccer (a F2014 cost and revenue item) College football (SEC

network, BCS bowls, etc.) are all influencing F2015 and beyond revenues and operating income, some compressing margins for the

next two years, some enhancing margins. Live sports broadcasting CPM’s have been growing at almost 2x those of other television

based platforms as ratings trends have outperformed. We would note that DIS seems to be both strategic and quantitatively driven

in the acquisition of various domestic and international rights, learning from the successes and cautious when potentially unprofitable

rights come up for bid. These dynamics should keep ESPN in a healthy competitive and financial position.

Studio Entertainment: The Walt Disney Studios consists of Buena Vista, Pixar (acquired in 2006 for $7 billion), Marvel (acquired in

2010 for $4 billion) and LucasFilms (acquired in 2013 for $4 billion). Acquisitions of Pixar, Marvel and Lucas dramatically enhanced

and replenished its creative resources and production expertise, especially in the young and tween male demographics. This has

allowed the company to complement its young and tween female dominance in the consumer product, video, and park attractions

$952

$1,724

$2,087

$1,284 $1,277

$1,974 $1,942

$1,274 $1,255

$2,050 $2,125

$1,420

-10.0%

-5.0%

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

35.0%

40.0%


Y-O

-Y

Cable Networks Operating Income

in millions

26.9%

49.9%

53.7%

35.9%

34.0%

54.3%

49.3%

33.7%

30.1%

52.6%

50.6%

34.8%


Cable Networks Operating Income Margin



JBL Advisors, LLC.

worldwide. The company changed the Chairman and CEO late in F2012, putting Alan Horn, former chief at Warner Bros to run all of

its studio operations and his leadership has meaningfully enhanced the profitability of the studio. We think his creative relationships,

production and financing expertise and distribution experience should continue to pay big dividends for Disney.

Disney has strategically shifted its film production activities over the past two years. It is utilizing major film releases from Marvel,

Pixar and LucasFilms to drive the majority of its annual film portfolio, supplemented by an animated-to-live action film productions

(like Cinderella this past March) and selected other films (Tomorrowland) including sequels like Pirates 5 in the summer of 2017.

High-end franchises, branded sequels, family-Disney-esque films as two-or-three tentpole films will fill their target of 12-14 films per

year. The appeal is to a somewhat broader demographic than those produced a decade ago. It is also much clearer to see the cross-

platform potential these films can experience thereby reducing financial risk and leveraging any success.

Disney is likely to have a very robust summer box office season this year. We are projecting $1.175 billion in domestic box office this

summer from Disney’s film releases domestically and those same films should gross 2-3x that in their international box office runs.

While we place token value to market share stats (low –to-no correlation to profits!), Disney should take the top honors domestically

and internationally this year.

Exhibit 7: Disney Summer Film Comparisons 2015 vs 2014

Source: boxofficemojo, ERC, Reel Source, JBL Advisors estimates

We believe with a new studio head (Alan Horn), significant tent-pole films on the release schedule over the next two years or so, and

the addition of the Star Wars franchise from LucasFilms, profitability at the studio can exceed the $2.0 billion level from the $1.5

billion level (F2014) over the next three years. A key element to the valuation equation for Investors is that the financial success of

the studio is broad-based, should be long-lived and not dominated by one film or franchise.

The following table indicates the most highly anticipated films scheduled for release on the schedule through 2017. While dates may

shift around, we think most of the films should be released near their current scheduled release.

Est

Film Genre Release DBOG Film Genre Release DBOG

Date Mil. Date Mil.

Avengers: Age of Ultron Action 5/1 $550 Million Dollar Arm Sports 5/16 $36.5

Tomorrowland Sci-Fi 5/22 $160 Maleficent Fantasy 5/30 $241.4

Inside Out Animated 6/19 $275 Planes, Fire & Rescue Animation 7/18 $59.2

Ant-Man Action 7/17 $190 Guardians Action 8/1 $332.9

100 Foot Journey Drama 8/8 $54.2

TOTAL $1,175 TOTAL $724.2

Disney Summer Film Comps 2015 vs 2014

2015 2014



JBL Advisors, LLC.

Exhibit 8: Disney Highly Anticipated Films, 2015-2017

Source: BoxOfficeMojo, ERC, Company Reports

Exhibits 9 denotes the recovery in profitability the studio has experienced the past year or so. Most investors realize the significant

contributions from Frozen which should contribute in excess of $1 billion in operating income over its first 24 months in release. One

thing important for investors to remember is the timing of earnings from any particular film’s release is influenced by accounting

rules (SOP 00-2) which require all distribution costs to be expensed as incurred (i.e. – the vast majority of those dollars are spent

before a film’s release and oftentimes in the quarter or two preceding the generation of any meaningful revenues). We also note

that the home video market remains in transition from a physical media product (BR, DVD) to a digitally delivered product which has

yet to catch-up to the hard disk revenue generation of five to seven years ago. Countering a good portion of the shortfall in home

video has been the phenomenal growth in international box office revenues, incremental contributions from 3D releases and growing

EST revenues. Thankfully the significant declines in packaged media revenues has leveled off. We would also note that there still

remains large population centers globally (especially in Russia, China, India and Latin America) that are becoming avid moviegoers as

well as consumers of digital platforms.

The following exhibits visualize the Studio segment’s revenue, operating income and margins.

Calendar 2015 - 2017 Films Talent Expected Release Date

The Avengers: Age of Ultron Robert Downey Jr. 5/1/15

Tomorrowland George Clooney 5/22/15

Inside Out Pixar 6/19/15

Ant-Man Paul Rudd, Michael Douglas 7/17/15

Bridge of Spies Tom Hanks 10/16/15

The Good Dinosaur Neil Patrick Harris 11/25/15

Star Wars: Episode VII J.J. Abrams 12/18/15

The Jungle Book Idris Elba 4/15/16

Captain America: Civil War Chris Evans, Robert Downey Jr. 5/6/16

Alice in Wonderland 2 Johnny Depp, Mia Wasikowski 5/27/16

Finding Dory Pixar 6/17/16

Pete's Dragon Bryce Dallas Howard 8/12/16

Doctor Strange Benedict Cumberbatch 11/4/16

Star Wars: Rogue One 12/16/16

Beauty and the Beast Emma Watson 3/17/17

Guardians of the Galaxy 2 Chris Pratt 5/5/17

Star Wars 8 5/27/17

Toy Story 4 Pixar 6/16/17

Pirates of the Caribbean: Dead Men Tell No Tales Johnny Depp 7/7/17

Thor: Ragnorok 11/3/17



JBL Advisors, LLC.

Exhibit 9: Studio Entertainment Quarterly Revenue and Operating Income Profile, F2013-F2015E


$1,545

$1,338

$1,590 $1,506

$1,893 $1,800 $1,807 $1,778

$1,858 $1,850 $1,850 $1,842

-10.0%

-5.0%

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

35.0%

40.0%


Y-O

-Y

Studio Entertainment Revenue

in millions

$234

$118

$201

$108

$409

$475

$411

$254

$544

$475

$425

$256

-300.0%

-200.0%

-100.0%

0.0%

100.0%

200.0%

300.0%

400.0%

1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15E 3Q15E 4Q15EY

-O-Y

Studio Entertainment Operating Income

in millions

15.1%

8.8%

12.6%

7.2%

21.6%

26.4%

22.7%

14.3%

29.3%

25.7%

23.0%

13.9%


Studio Entertainment Operating Income Margin



JBL Advisors, LLC.

Broadcasting: Disney owns and operates the ABC Television Network and eight local market TV stations (NY, LA, Chicago,

Philadelphia, SF, Houston, Raleigh-Durham and Fresno). Through broadcast carriage agreements, ABC is aired in over 240 television

markets in the US and is available in 99% of the domestic television households. The company also owns 33% of the OTT digital

content provider Hulu (along with Fox and NBC Universal). Broadcasting accounts for approximately 12% of the annual revenues and

6.1% of the operating income on F2015E.

The key drivers of the Broadcasting segment are ratings for the ABC network and success of owned and distributed series at ABC

Studios, as well as local and national advertising rates. The improvement in the economy over the past few years has helped push

annual ad revenues up mid-to-high single digit annually, although ratings erosion has eaten away at a measurable portion of the ad

rate increases. Enhancing the segment’s revenues and operating income the past few years has been retransmission fees that cable

and satellite system operators are now paying to broadcast the ABC network. Disney has noted that they expect retransmission fees

to be in the ~$500 million range annually by F2015. We believe that can grow-up towards the $750 million level over the next few

years, especially as retrans 2.0 emerges at the end of the decade. The growth quotient should be powered as well by the Presidential

and general election cycle in FY2016 and 1Q F2017.

The following exhibits detail the revenue, operating income and margins of Disney’s Broadcast business.

Exhibit 10: Broadcasting Quarterly Revenue and Operating Income Profile, F2013-F2015E

$1,563 $1,499

$1,468

$1,373

$1,531 $1,501 $1,569

$1,441

$1,694

$1,550 $1,515 $1,491

-6.0%

-4.0%

-2.0%

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%


Y-O

-Y

Broadcasting Revenue

in millions

$262

$138

$213

$158

$178

$159

$354

$163

$240

$163

$300

$172

-60.0%

-40.0%

-20.0%

0.0%

20.0%

40.0%

60.0%

80.0%


Y-O

-Y

Broadcasting Operating Income

in millions



JBL Advisors, LLC.

Source: Company Reports and JBL Advisors estimates

Theme Parks & Resorts: Disney owns (or operates) five destination resorts worldwide (US – two, Japan – 0%, Hong Kong (48%

owned) & France (51% owned) with Shanghai (43% owned) expected to open in F2016), four cruise liners (and one island in the

Caribbean!), over 38,000 hotel rooms and close to 3,550 Vacation Club accommodations as well as a wide and extensive variety of

guest amenities (golf courses, restaurants, NASCAR race track, Disney Institute, MLB spring training facility, water parks, etc.) and

raw land. The segment accounts for approximately 31.3% of the company’s revenues and 21% of its operating income. It is by far

the most labor intensive and most sensitive to changes that affect retirement and medical benefits.

The division has three important dynamics occurring presently that should help push OI growth into the double digit range for the

next two or three years. First, the domestic economy stabilization has enabled a healthy flow through of pricing increase at the

parks, complemented nicely by 3%-5% per-capita spending gains. Secondly, margin expansion has and should continue to be a

meaningful contributor to OI growth through 2017. Third, it is in the middle of a five year, extensive capacity expansion program

that should add an incremental $700-750 million or more to the segment’s operating income through 2017 (above F2014’s $2.66

billion). The dynamics of a stabilized economy, margin expansion and capacity expansion should help sustain a healthy premium

valuation quotient for years to come. We believe this is one of the two key drivers to creating shareholder sentiment and value over

the next few years.

The opening of Shanghai Disney is likely to be a key catalyst in F2016 and earnings contributor (management fees and royalties which

are likely to be In the $250 million range) in F2017 and beyond. Disney owns 43% of the equity of Shanghai Disney and will have

invested about $2.3 billion in the park by opening day.

16.8%

9.2%

14.5%

11.5% 11.6%

10.6%

22.6%

11.3%

14.2%

10.5%

19.8%

11.5%


Broadcasting Operating Income Margin



JBL Advisors, LLC.

Exhibit 11: Theme Parks and Resorts Quarterly Revenue and Operating Income Profile, F2013-F2015E


$3,391

$3,302

$3,678 $3,716 $3,597

$3,562

$3,980 $3,960 $3,910

$3,775

$4,300 $4,265

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

14.0%

16.0%


Y-O

-Y

Parks & Resorts Revenue

in millions

$952

$1,724

$2,087

$1,284 $1,277

$1,974 $1,942

$1,274 $1,255

$2,050 $2,125

$1,420

-10.0%

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

70.0%

80.0%

1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15E 3Q15E 4Q15EY

-O-Y

Parks & Resorts Operating Income

in millions

17.0%

11.6%

18.7%

15.4%

22.4%

12.8%

21.3%

17.3%

20.6%

13.2%

22.1%

17.5%


Parks & Resorts Operating Income Margin



JBL Advisors, LLC.

Consumer Products: Disney has been a worldwide leader in the licensing of consumer products based on its franchises, publishing,

and a wide variety of merchandising with almost every major retailer worldwide. The segment was driven in large part historically by

its Mickey & Minnie Mouse and Winnie the Pooh franchises and complemented by its successful animated film product and

characters (Lion King, etc.). The past five years or so have propelled Disney even further with the addition of Pixar (Cars, Toy Story,

etc.), Marvel super heroes (Iron Man, Thor, Captain America, Avengers, Ant-Man etc.), unprecedented commercial success of Frozen

and soon the renewed shelf life of the Star Wars characters via LucasFilms in Christmas 2015.

While it is growing towards the $4.4 billion revenue mark (about 8.5% of revenues) and exceeds $1.6 billion in operating income

(close to 11.5% of the company’s expected $14.3 billion OI in F2015), the ability to monetize its growing group of characters and

franchises in licensing and merchandising is providing a healthy contribution to the overall company. The beauty and value

proposition for investors remains the broad base nature of the contributors to its Consumer Products business lines so that the

evolution of annual characters does not compare unfavorably.

The following exhibit delineate the financial dynamics of Disney’s Consumer Products business. We believe the enhanced operating

margin profile is a result of the success of the Frozen franchise and anticipated incremental contributions of Star Wars.

Exhibit 12: Consumer Products Quarterly Revenue and Operating Income Profile, F2013-F2015E

$1,013

$763 $775

$1,004

$1,126

$885 $902

$1,072

$1,379

$975 $900

$1,146

-5.0%

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%


Y-O

-Y

Consumer Products Revenue

in millions

$346

$200 $219

$347

$430

$274 $273

$379

$626

$310 $300

$414

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

35.0%

40.0%

45.0%

50.0%


Y-O

-Y

Consumer Products Operating Income

in millions



JBL Advisors, LLC.


Interactive Media: The Interactive Media segment designs, develops, publishes and distributes content though a portfolio of

websites and other digital platforms. A major portion of the segments revenues come from interactive games that utilize multiple

platforms (game consoles, PC, tablet and mobile devices, amongst others). Its introduction of the Infinity play line has sparked

considerable interest in the cross-platform gaming of toys and digital media over the past two years. Disney has two new locomotives

that are likely to be multi-year drivers of revenues in its Frozen and Star Wars franchises. The segment turned profitable in F2014

and should be a double digit EBIT grower over the next several years.

MANAGEMENT

Bob Iger – Chairman & CEO Mr. Iger joined Disney as part of the company’s acquisition of CapCities ABC in 1996. He has risen through

the ranks at Disney and became President from 2000-2006 and CEO in 2005.

Tom Staggs – COO – Recently promoted to the COO position after almost 5-years as Chairman of the Theme Parks and Resorts. Prior

to that, he served as CFO for The Walt Disney Company from 1998 to 2010.

Jay Rasulo – CFO Mr. Rasulo has served as CFO since 2010. Prior to his current role, Mr. Rasulo served as Chairman of Walt Disney

Theme Parks and Resorts since 2000.

FINANCIALS

Disney’s balance sheet remains the most under levered in the media – entertainment industry, despite the capital intensive nature

of its theme parks and resorts. It currently trades at approximately 12.5x our 2015E and 11.0x EV/EBITDA on F2016E, even when

incorporating the debt of its minority owned Euro-Disney and Hong Kong Disneyland.

We expect Disney to grow revenues at mid-to-high single digit pace over the next three years, especially as theme park expansion

rolls out and matures, incremental affiliate and retransmission fees grow and the Consumer Product segment grows revenue dollars

at a faster pace as the LucasFilm and Marvel businesses become bigger revenue generators via film and television projects. EBITDA

is expected to grow at a mid-teen percentage pace and EPS should grow at a similar pace (or perhaps faster if share repurchases

accelerate). We forecast percentage gains in the teens for EPS through F2017.

34.2%

26.2%28.3%

34.6%

38.2%

31.0% 30.3%

35.4%

45.4%

31.8%33.3%

36.1%


Consumer Products Operating Income Margin



JBL Advisors, LLC.

VALUATION

Disney has captured the premium valuation amongst the large cap entertainment equities over the past two decades because of the

irreplaceable value of its brands, franchises, fundamentals (most years), and financials. It has typically traded at 10%-30% premiums

to the group on an EV/EBITDA basis. We estimate EBITDA CAGR (F2013 – F2017) to be close to 12% and its EPS CAGR during the same

period is estimated to be approximately 17%, levels that have been and should continue to be highly attractive to large cap growth

investors. We also believe that its underlevered balance sheet (net debt/EBITDA at 0.7x based on F2015E), accelerating FCF growth,

enhanced decapitalization, and dividend increases compliment the premium valuation Disney has consistently been afforded. Disney

and each of the other major entertainment equities have seen healthy multiple expansion from depressed levels of three or four

years ago as investor confidence and sentiment has grown as FCF has been redirected back to shareholders versus M&A activity that

did not turn out to be as appreciated by the market.

The following exhibits visually compare traditional valuation metrics for the large cap entertainment conglomerates. While Disney

trades at a 20% or so premium to its best peers (FOXA and TWX), this has been true for some time given the quality of its earnings

growth (not simply manufactured by decapitalization) and the consistency of its operating segments. We do not see Disney losing

its premium P/E valuation given its superior growth to the S&P 500, quality of its reported earnings and its growth quotient over the

next 3 fiscal years.

Exhibit 13: Large Cap Entertainment Stocks 2016E P/E Valuations

Source: ThomsonOne and JBL Advisors estimates

18.5x

14.1x15.5x

9.9x

16.8x

DIS FOXA TWX VIAB S&P 500

2016E P/E



JBL Advisors, LLC.

Exhibit 14: Large Cap Entertainment Stocks 2016E EV/EBITDA Valuations

Source: ThomsonOne and JBL Advisors estimates

Exhibit 15: Large Cap Entertainment Companies EPS Growth vs S&P 500, F2015E & F2016E

Source: Company Reports, ThomsonOne, and JBL Advisors estimates

Our valuation matrix for Disney will use DCF, EV/EBITDA, and Price/Earnings tools. We think a blended approach should give investors

a fair cross-balance that captures the variety of investor sentiment variables typically employed to arrive at targeted valuations in

healthy and volatile markets.

11.0x

11.8x

10.9x

8.8x

DIS FOXA TWX VIAB

EV/EBITDA F2016E

15.1%

1.1%

5.7% 6.6% 5.7%

16.5%

20.4%18.0%

13.5%

6.5%

DIS FOXA TWX VIAB S&P 500

Estimated EPS Growth

2015E EPS Growth 2016E EPS Growth



JBL Advisors, LLC.

As an added level of cross check and comfort and for those investors seeking the added quant base of EVA, Disney scores

exceptionally well with a positive 1000 bps on the Economic Value Added (EVA) comparable (ROE-WACC).

Our DCF model, using an 7.16% WACC, beta of 1.16, market risk premium of 5%, terminal growth rate of 3%, and an 12.0x terminal

multiple yields a present value of $132.04 (please see our attached model to see the matrix of various terminal multiples). We believe

more quantitatively driven investors weight the DCF tool very heavily in deriving their valuation target.

Using an EV/EBITDA tool, with $17.730 billion in F2016E EBITDA, net debt (which includes Euro, Shanghai & Hong Kong theme park

debt) of $11.466 billion, a current enterprise value of $197.3 billion, and using our estimated average share count of 1.65 billion for

F2016 on a 12.0x multiple yields a price target of $122.00.

Disney has traditionally been the only entertainment equity that has a large segment of institutional investors who heavily weight

EPS and P/E ratio. Disney has traded at 1.0x to 1.5x the S&P 500P/E multiple over the past 10 years and the swings from high to low

(or vice-versa) have often been driven by macro-financial/economic factors away from Disney’s own fundamentals. Its estimated

mid-teen EPS growth over the next three years, with most of the growth coming from organic sources, does not make a 20% premium

to the S&P 500 multiple unreasonable in our opinion. At 20.0x, our F2016 EPS estimate yields a price target of $115.80.

Equally weighting each of the valuation tools (DCF based - $132.04; EV/EBITDA based- $122.00; P/E based - $115.80) leads us to our

$124.00 price target over the next twelve months.

We believe that mid-teen potential stock appreciation should position Disney to outperform the S&P 500 over the next year and

hence our Outperform rating.

INVESTMENT RISKS

Investment risks for Disney’s equity will likely center around five variables away from the normal global financial – geopolitical –

world health – capital markets issues that could impact all companies. The largest risk in our opinion revolves around ESPN’s ability

to maintain carriage and ratings against the perception of competition in the live sports events business (against Fox Sports 1, NBC

Sports, CBS Sports, etc.). Second, a change in the macro domestic economic outlook has historically compressed expectations for

the Theme Park and Resorts businesses. Third, delays in major expansion projects internationally in the Theme Parks and Resorts

segment would have an impact on investor sentiment. Fourth, contributions from international parks has been volatile at times, any

major downside in earnings expectations could influence Disney’s earnings and stock price. Lastly, Disney has made a number of

acquisitions the past few years which from time-to-time raise ROIC commentary that has been critical of its acquisitions.



JBL Advisors, LLC.

Exhibit 16: The Walt Disney Company Income Statement and Projections ($ in millions)

The Walt Disney CompanyEarnings Model (Fiscal Year End September)

(Millions, except per-share data)

F2014 F2015 % F2014 F2015E % F2014 F2015E % F2014 F2015E % F2014 % F2015E % F2016E % F2017E %

Revenue

Broadcasting $1,531.0 $1,694.0 11% $1,501.0 $1,550.0 3% $1,569.0 $1,515.0 -3% $1,441.0 $1,491.0 3% $6,042.0 2% $6,250.0 3% $6,350.0 2% $6,575.0 4%

Cable Networks 3,759.0 4,166.0 11% 3,633.0 3,850.0 6% 3,942.0 4,200.0 7% 3,776.0 4,134.0 9% 15,110.0 5% 16,350.0 8% 17,550.0 7% 18,850.0 7%

Parks & Resorts 3,597.0 3,910.0 9% 3,562.0 3,775.0 6% 3,980.0 4,300.0 8% 3,960.0 4,265.0 8% 15,099.0 7% 16,250.0 8% 17,500.0 8% 18,750.0 7%

Studio Entertainment 1,893.0 1,858.0 -2% 1,800.0 1,850.0 3% 1,807.0 1,850.0 2% 1,778.0 1,842.0 4% 7,278.0 22% 7,400.0 2% 8,000.0 8% 8,600.0 8%

Consumer Products 1,126.0 1,379.0 22% 885.0 975.0 10% 902.0 900.0 0% 1,072.0 1,146.0 7% 3,985.0 12% 4,400.0 10% 4,800.0 9% 5,250.0 9%

Interactive Media 403.0 384.0 -5% 268.0 280.0 4% 266.0 275.0 3% 362.0 386.0 7% 1,299.0 22% 1,325.0 2% 1,450.0 9% 1,575.0 9%

Total Revenue 12,309.0 13,391.0 9% 11,649.0 12,280.0 5% 12,466.0 13,040.0 5% 12,389.0 13,264.0 7% 48,813.0 8% 51,975.0 6% 55,650.0 7% 59,600.0 7%

Operating Income (EBIT)

Broadcasting 178.0 240.0 35% 159.0 163.0 3% 354.0 300.0 -15% 163.0 172.0 6% 854.0 11% 875.0 2% 925.0 6% 1,000.0 8%

Cable Networks 1,277.0 1,255.0 -2% 1,974.0 2,000.0 1% 1,942.0 2,125.0 9% 1,274.0 1,470.0 15% 6,467.0 7% 6,850.0 6% 7,700.0 12% 8,400.0 9%

Parks & Resorts 671.0 805.0 20% 457.0 500.0 9% 848.0 950.0 12% 687.0 745.0 8% 2,663.0 20% 3,000.0 13% 3,275.0 9% 3,600.0 10%

Studio Entertainment 409.0 544.0 33% 475.0 450.0 -5% 411.0 425.0 3% 254.0 281.0 11% 1,549.0 134% 1,700.0 10% 2,000.0 18% 2,150.0 8%

Consumer Products 430.0 626.0 46% 274.0 310.0 13% 273.0 300.0 10% 379.0 414.0 9% 1,356.0 22% 1,650.0 22% 1,900.0 15% 2,000.0 5%

Interactive Media 55.0 75.0 36% 14.0 25.0 79% 29.0 12.5 -57% 18.0 102.5 469% 116.0 215.0 250.0 275.0

Total Operating Income 3,020.0 3,545.0 17% 3,353.0 3,448.0 3% 3,857.0 4,112.5 7% 2,775.0 3,184.5 15% 13,005.0 21% 14,290.0 10% 16,050.0 12% 17,425.0 9%

Corporate Expense (116.0) (125.0) (155.0) (160.0) (137.0) (155.0) (203.0) (150.0) (611.0) (590.0) (620.0) (650.0)

Net Interest Expense & Other 49.0 (58.0) 62.0 (50.0) (50.0) (45.0) (38.0) (47.0) 23.0 (200.0) (175.0) (175.0)

Restructuring & Impairment Losses (19.0) 0.0 (48.0) 0.0 0.0 0.0 (73.0) 0.0 (140.0) 0.0 0.0 0.0

Other items 6.0 0.0 (37.0) 0.0 0.0 0.0 (0.0) 0.0 (31.0) 0.0 0.0 0.0

Pre-Tax Income 2,940.0 3,362.0 14% 3,175.0 3,238.0 2% 3,670.0 3,912.5 7% 2,461.0 2,987.5 21% 12,246.0 27% 13,500.0 10% 15,255.0 13% 16,600.0 9%

Income Taxes (1,036.0) (1,118.0) 33% (1,119.0) (1,100.9) 34% (1,251.0) (1,291.1) 33% (836.0) (945.0) 32% (4,242.0) 35% (4,455.0) 33% (5,034.2) 33% (5,478.0) 33%

Net Income 1,904.0 2,244.0 18% 2,056.0 2,137.1 4% 2,419.0 2,621.4 8% 1,625.0 2,042.6 26% 8,004.0 21% 9,045.0 13% 10,220.9 13% 11,122.0 9%

Acctg.Changes/Derivatives 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

Non-Controlling interests (64.0) (62.0) (139.0) (190.0) (174.0) (210.0) (126.0) (138.0) (503.0) (600.0) (660.0) (726.0)

Other 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

Net Income to Disney $1,840.0 $2,182.0 19% $1,917.0 $1,947.1 2% $2,245.0 $2,411.4 7% $1,499.0 $1,904.6 27% $7,501.0 22% $8,445.0 13% $9,560.9 13% $10,396.0 9%

Net EPS $1.03 $1.27 $1.08 $1.14 $1.28 $1.42 $0.86 $1.13 $4.26 $4.97 $5.79 $6.40

EPS from Continuing Ops $1.04 $1.27 22% $1.10 $1.14 4% $1.28 $1.42 11% $0.89 $1.13 27% $4.32 28% $4.97 15% $5.79 17% $6.40 10%

Outstanding Shares Diluted 1,784 1,717 1,770 1,705 1,748 1,695 1,734 1,680 1,759 1,699 1,650 1,625

EBITDA 3,454.0 3,955.0 15% 3,789.0 3,288.0 -13% 4,320.0 3,957.5 -8% 2,895.0 4,634.5 60% 14,458.0 17% 15,835.0 10% 17,730.0 12% 19,425.0 10%

Operating Margins

Broadcasting 11.6% 14.2% 10.6% 10.5% 22.6% 19.8% 11.3% 11.5% 14.1% 14.0% 14.6% 15.2%

Cable Networks 34.0% 30.1% 54.3% 51.9% 49.3% 50.6% 33.7% 35.6% 42.8% 41.9% 43.9% 44.6%

Theme Parks & Resorts 18.7% 20.6% 12.8% 13.2% 21.3% 22.1% 17.3% 17.5% 17.6% 18.5% 18.7% 19.2%

Studio Entertainment 21.6% 29.3% 26.4% 24.3% 22.7% 23.0% 14.3% 15.3% 21.3% 23.0% 25.0% 25.0%

CP + Internet Media 31.7% 39.8% 25.0% 26.7% 25.9% 26.6% 27.7% 33.7% 27.9% 32.6% 34.4% 33.3%

Operating 24.5% 26.5% 28.8% 28.1% 30.9% 31.5% 22.4% 24.0% 26.6% 27.5% 28.8% 29.2%

EBITDA 28.1% 29.5% 32.5% 26.8% 34.7% 30.3% 23.4% 34.9% 29.6% 30.5% 31.9% 32.6%

Tax Rate 35.2% 33.3% 35.2% 34.0% 34.1% 33.0% 34.0% 31.6% 34.6% 33.0% 33.0% 33.0%

Source: JBL Advisors estimates and Disney corporate reports.

Updated 4/15/15

JuneDecember March Year Ended SeptemberSeptember



JBL Advisors, LLC.

Exhibit 17: The Walt Disney Company Balance Sheet ($ in millions)

The Walt Disney CompanyBalance Sheet

$/mil 10/2/2010 10/1/2011 9/29/2012 9/28/2013 9/27/2014 12/27/2014

Assets

Cash and cash equivalents $2,722.0 $3,185.0 $3,387.0 $3,931.0 $3,421.0 $5,077.0

Receivables 5,784.0 6,182.0 6,540.0 6,967.0 7,822.0 8,591.0

Inventories 1,442.0 1,595.0 1,537.0 1,487.0 1,574.0 1,476.0

Television costs & advances 678.0 674.0 676.0 634.0 1,061.0 712.0

Deferred income taxes 1,018.0 1,487.0 765.0 485.0 497.0 452.0

Other assets 581.0 634.0 804.0 605.0 801.0 932.0

Total Current Assets 12,225 13,757 13,709 14,109 15,176 17,240

Film and television costs 4,773.0 4,357.0 4,541.0 4,783.0 5,325.0 5,672.0

Investments 2,513.0 2,435.0 2,723.0 2,849.0 2,696.0 2,642.0

Theme parks, resorts and other property, net 14,502.0 15,943.0 17,895.0 18,733.0 18,541.0 18,279.0

Projects in progress and land 3,304.0 3,752.0 3,617.0 3,647.0 4,791.0 5,381.0

Intangible assets, net 5,081.0 5,121.0 5,015.0 7,370.0 7,434.0 7,369.0

Goodwill, net 24,100.0 24,145.0 25,110.0 27,324.0 27,881.0 27,849.0

Other assets 2,708 2,614 2,288 2,426 2,342 2,603 Total Assets $69,206 $72,124 $74,898 $81,241 $84,186 $87,035

Liabilities And Shareholders' Equity

Accounts,taxes payable,accrued liabilities $6,109 $6,362 $6,393 $6,803 $7,595 $9,069

Current borrowings 2,350 3,055 3,614 1,512 2,164 4,376

Unearned royalty and other advances 2,541 2,671 2,806 3,389 3,533 3,359

Total Current Liabilities 11,000 12,088 12,813 11,704 13,292 16,804

Long-term borrowings 10,130 10,922 10,697 12,776 12,676 12,167

Deferred income taxes 2,630 2,866 2,251 4,050 4,098 4,414

Other long-term liabilities 6,104 6,795 7,179 4,561 5,942 5,857

Total Liabilities 29,864 32,671 32,940 33,091 36,008 39,242

Common stock 28,736 30,296 31,731 33,440 34,301 34,488

Retained earnings 34,327 38,375 42,965 47,758 53,734 53,969

Cumulative translation and other adjustments (1,881) (2,630) (3,266) (1,187) (1,968) (1,880)

Treasury shares, at cost (23,663) (28,656) (31,671) (34,582) (41,109) (42,412)

Non-controlling interest 1,823 2,068 2,199 2,721 3,220 3,628

Shareholders' Equity 39,342 39,453 41,958 48,150 48,178 47,793 Liabilities And Shareholders' Equity $69,206 $72,124 $74,898 $81,241 $84,186 $87,035

Debt $12,480 $13,977 $14,311 $14,288 $14,840 $16,543

Cash (2,722) (3,185) (3,387) (3,931) (3,421) (5,077)

Net debt $9,758 $10,792 $10,924 $10,357 $11,419 $11,466




JBL Advisors, LLC.

Exhibit 18: The Walt Disney Company Free Cash Flow Model ($ in millions)

The Walt Disney CompanySimplified Free Cash Flow Analysis

(Millions, except per share amounts) F2010 F2011 F2012 F2013 F2014 F2015E F2016E F2017E

Net Income $4,313 $4,807 $5,682 $6,136 $7,501 $8,445 $9,561 $10,396

Plus: D&A 1,713 1,841 1,987 2,192 2,064 2,135 2,300 2,300

After-Tax Cash Flow 6,026 6,648 7,669 8,328 9,565 10,580 11,861 12,696

Less: CAPEX (2,110) (3,559) (3,785) (2,796) (3,311) (3,950) (4,100) (3,000)

Change in Net Working Capital (266) (1,139) (1,091) 103 (272) (100) (100) (100)

Other (Loss) 818 1,485 58 1,227 1,042 500 500 500

After-Tax Free Cash Flow 4,468 3,435 2,851 6,862 7,024 7,030 8,161 10,096

Fully diluted shares out 1,948 1,909 1,818 1,813 1,759 1,699 1,650 1,625

Free Cash Flow Per Share $2.29 $1.80 $1.57 $3.78 $3.99 $4.14 $4.95 $6.21

Dividends $0.35 $0.40 $0.60 $0.75 $0.86 $1.15 $1.30 $1.45




JBL Advisors, LLC.

Exhibit 19: The Walt Disney Company Discounted Cash Flow Model ($ in millions)

The Walt Disney Company

Discounted Cash Flow Model

(Millions, except per-share data) F2012 F2013 F2014E F2015E F2016E F2017E F2018E F2019E

Debt Forecast Amount EBITDA $11,477 $12,385 $14,458 $15,835 $17,730 $19,425 $21,282 $23,317

LT debt + current portion 16,543$ Yr/Yr % 12.4% 7.9% 16.7% 9.5% 12.0% 9.6% 9.6% 9.6%

Current Cash (5,077) Less: Depr. & amort. 1,987 2,192 2,064 2,135 2,300 2,650 2,650 2,650

Net Debt 11,466$ EBIT $9,490 $10,193 $12,394 $13,700 $15,430 $16,775 $18,632 $20,667

Less: Tax @ Corp Rate 3,132 3,364 4,090 4,521 5,092 5,536 6,149 6,820

Est Annual Net Interest. Expense 200.0$ Plus: Depr. & amort. 1,987 2,192 2,064 2,135 2,300 2,650 2,650 2,650

Est Net Cost of Debt 2.3% Less: CapX 3,785 2,796 3,311 (3,950) (4,100) (3,000) (2,750) (2,750)

Unlevered free cash flow 4,560 6,225 7,057 15,264 16,738 16,889 17,883 19,247

Discount periods 0.0 1.0 2.0 3.0 4.0

WACC Calculation Discounted UFCF @ WACC -1 14,377 14,850 14,114 14,945 15,150

Beta 1.16 Discounted UFCF @ WACC 14,243 14,574 13,723 14,530 14,592

Risk-free rate (10 yr treasuries) 1.86% Discounted UFCF @ WACC+1 14,111 14,306 13,345 14,131 14,060

Market risk premium 5.00%

Cost of equity (CAPM) 7.66% Terminal Value-F2020E EBITDA

10.0x $240,161

Stock Price @04/15/15 $107.15 11.0x 264,177

Market value of equity 188,477 12.0x 288,193

Book debt 16,543 13.0x 312,210

Weighted average cost of debt 2.26%

Corporate tax rate 33.0% Terminal Value Multiple @ WACC-1 Terminal Value Multiple @ WACC Terminal Value Multiple @ WACC+1

MV/(MV+debt) 91.9% 10.0x 11.0x 12.0x 13.0x 10.0x 11.0x 12.0x 13.0x 10.0x 11.0x 12.0x 13.0x

Debt/(MV+debt) 8.1% Sum of discounted FCF 73,436 73,436 73,436 73,436 71,662 71,662 71,662 71,662 69,953 69,953 69,953 69,953

PV of terminal value 189,046 207,951 226,856 245,760 182,086 200,295 218,504 236,712 175,444 192,988 210,533 228,077

WACC 7.16% PV Enterprise Value 262,482 281,387 300,292 319,196 253,748 271,957 290,166 308,374 245,397 262,941 280,485 298,030

Assumptions Less: debt 16,543 16,543 16,543 16,543 16,543 16,543 16,543 16,543 16,543 16,543 16,543 16,543

Terminal growth rate 3.0% Plus: cash 5,077 5,077 5,077 5,077 5,077 5,077 5,077 5,077 5,077 5,077 5,077 5,077

Discount back to F2015E PV Equity 251,016 269,921 288,826 307,730 242,282 260,491 278,700 296,908 233,931 251,475 269,019 286,564

WACC 7.2%

EBIT CAGR F2009 - F2019E 18.6% Shares outstanding 1,759 1,759 1,759 1,759 1,759 1,759 1,759 1,759 1,759 1,759 1,759 1,759

Corporate tax rate 33.0% Calculated one-year share price $142.70 $153.45 $164.20 $174.95 $137.74 $148.09 $158.44 $168.79 $132.99 $142.96 $152.94 $162.91

Public market discount 20.0% Value at public discount (20%) $118.92 $127.88 $136.83 $145.79 $114.78 $123.41 $132.04 $140.66 $110.83 $119.14 $127.45 $135.76


8.3x9.0x

9.4x 9.4x 9.1x

11.8x

12.2x 12.4x

6.5x

5.1x

7.4x

6.3x6.9x 7.6x

9.3x

10.5x

7.4x7.0x

8.4x7.8x 8.0x

9.7x

10.8x11.5x

3.0x

4.0x

5.0x

6.0x

7.0x

8.0x

9.0x

10.0x

11.0x

12.0x

13.0x

08 09 10 11 12 13 14 15E

EV/EBITDA Trading Range

14E (-) = current price



JBL Advisors, LLC.

Companies mentioned in this report: Amazon (AMZN - $385.30); AMC Entertainment (AMC - $33.91); Carmike Cinemas (CKEC -

$31.88); Cinemark (CNK - $43.04); Cineplex (CGX.TO - C$48.14); Comcast (CMCSA - $59.91); DreamWorks Animation (DWA - $25.77);

21st Century Fox (FOXA - $34.15); IMAX (IMAX - $35.86); JP Morgan (JPM - $ 64.21); Lions Gate (LGF - $31.01); National CineMedia

(NCMI - $15.83); Netflix (NFLX - $535.71); Real D (RLD - $12.25); Regal Entertainment (RGC - $22.25); Sony (SNE- $31.75); Time

Warner (TWX - $85.00); Viacom (VIAB - $70.64). Prices as of 4/15/15.

JBL Advisors Rating System:

OUTPERFORM – We estimate the stock will outperform the S&P 500 in total return by 15% over the following 12-month period.

MARKET PERFORM – We estimate the stock will generate a total return that is within 5% (above or below) the S&P 500.

UNDERPERFORM - We estimate the stock will underperform the S&P 500 by 10% over the following 12-month period.

SHORT – We estimate the stock will decline more than 20% in the following 12-months.



JBL Advisors, LLC.

IMPORTANT LEGAL INFORMATION - DISCLAIMER & DISCLOSURES

I, Jeffrey Logsdon, author of this research report, hereby certify that that the views expressed in this report accurately reflect my personal views about the subject securities and issuers. No part of my compensation was, is, or will be directly or indirectly related to the specific recommendations or views contained in this report.

JBL Advisors, LLC. is a Registered Investment Advisor. JBL Advisors, LLC. does not manage individual investment or trading accounts nor does it maintain custody of assets or securities of accounts of any individual.

Information, opinions, or recommendations contained in this report are submitted solely for advisory and information purposes. While the information has been taken from sources believed reliable, we do not represent that it is accurate, complete, or otherwise. The opinions expressed are those of the analyst and are subject to change without notice. The report or study is not intended to be construed as an offering or a solicitation of an offer to buy or sell the securities mentioned or discussed. The investments referred to may not be suitable for the specific investment objectives, financial situation or needs of recipients and should not be relied upon in substitution for the exercise of independent judgment. Neither JBL Advisors, LLC. nor other associated persons shall be liable for any direct, indirect, special, incidental, consequential, punitive, or exemplary damages, including but not limited to loss of profits arising in any way from the information contained in this material. This material is for the use of the intended recipients only. Distribution of this document is intended solely for institutional investors as defined in Rule 15a-6 under the U.S. Securities Act of 1934. All persons that receive this document by their acceptance thereof represent and agree that they are a major institutional investor and understand the risks involved in executing transactions in securities.

JBL Advisors, LLC. is not a market maker in debt or equity securities and does not sell securities to or buy securities from customers on a principal basis. JBL Advisors, LLC. does not have an investment banking, advisory, fee-for service or other compensated business relationship with the companies mentioned in this report, and was not a manager or co-manager of any offering for any of the companies at any time in the past 3 years.

Analysts, associates and members of their households may from time to time maintain a financial interest in the securities of companies in the analyst’s area of coverage or mentioned in its research publications, subject to compliance with applicable regulations. A family member of the analyst maintains an investment in Regal Entertainment Group, Inc. of less than $100,000.

JBL Advisors, LLC. prohibits analysts and associates from serving as an officer, director, advisory board member or employee of any company that the firm provides research coverage.

This report may not be reproduced, distributed or published for any purpose by another person without prior consent from JBL Advisors. Should you need additional information please contact:

Laurie A. Logsdon, CFA ([email protected]) JBL Advisors, LLC 4000 Barranca Parkway. Suite 250 Irvine, California 92604 www.jbladvisors.com

DIS Initiation 2015

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