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  • Disney Forgoes Dividend Payment

    This afternoon was the Disney quarterly investor's call. They reported a quarterly loss of revenues of over 58% for the Parks division and overall profitability plunged over 91% for the entire company.

    During the call, Disney announced that they will NOT be paying a dividend for the first half of the year as previously planned, which will save the company $1.6 billion.

    This is obviously very bad news for the company and its customers. Most analysts on Wall St. seem to agree that it's the right move to forego the dividend but they also fear that because of that decision, Disney has serious liquidity issues (meaning that they don't have very much cash on hand to pay for things) which is worse than everybody had previously assumed, especially for a company that has been so rock solid for most of our lives. Most investors appear to say that the stock isn't worth buying yet - there's more damage to the price coming.

    While their are some bright spots, especially around Disney+ and the reopening of the Shanghai resort (and the planning implemented there that will carry forward to the other resorts around the world), we can expect the stock to drop precipitously tomorrow when trading opens. With a low stock price, and little cash on hand, we can expect that Disney will most likely postpone or halt any investments in future product for the foreseeable future. There simply isn't money on hand to pay for new rides, lands, restaurants, shows, ships, etc.

    This is a sad time.

    For more details see this report on CNBC:
    https://apple.news/Av3J_zqDcQ0O4w-qWzvnXyA
    Last edited by PoopedPirate; 05-05-2020, 02:50 PM.

  • #2
    Good thing Iger is back to set things right. You know, the guy that paid twice as much for fox pictures as what they were worth, and put the company $40b in debt in the process.
    "Disneyland is a work of love. We didn't go into Disneyland just with the idea of making money." - ​Walt Disney

    Comment


    • #3
      Disney had said a few weeks ago, when they were laying off their hourly employees, that they were still going to pay the 1.5 billion dividend and keep executives bonuses in place. I guess they couldn't pull off giving away 1.5 billion of the company's cash when earnings dropped through the floor. But funny, no mention of discontinuing the executive bonuses. Does Igor still think he is going to get tens of millions of dollars in bonus money later this year?

      Comment


      • #4
        Originally posted by PoopedPirate View Post
        This afternoon was the Disney quarterly investor's call. They reported a quarterly loss of revenues of over 58% for the Parks division and overall profitability plunged over 91% for the entire company.

        During the call, Disney announced that they will NOT be paying a dividend for the first half of the year as previously planned, which will save the company $1.6 billion.

        This is obviously very bad news for the company and its customers. Most analysts on Wall St. seem to agree that it's the right move to forego the dividend but they also fear that because of that decision, Disney has serious liquidity issues (meaning that they don't have very much cash on hand to pay for things) which is worse than everybody had previously assumed, especially for a company that has been so rock solid for most of our lives. Most investors appear to say that the stock isn't worth buying yet - there's more damage to the price coming.

        While their are some bright spots, especially around Disney+ and the reopening of the Shanghai resort (and the planning implemented there that will carry forward to the other resorts around the world), we can expect the stock to drop precipitously tomorrow when trading opens. With a low stock price, and little cash on hand, we can expect that Disney will most likely postpone or halt any investments in future product for the foreseeable future. There simply isn't money on hand to pay for new rides, lands, restaurants, shows, ships, etc.

        This is a sad time.

        For more details see this report on CNBC:
        https://apple.news/Av3J_zqDcQ0O4w-qWzvnXyA
        Earnings releases are fact based. You have made assumptions about the company's cash - which are completely disproved by the facts from the earnings release. Disney reported they have $14.3 Billion (with a B) cash and cash equivalents. Operating Income (PROFIT) was $2.48 Billion dollars, which was down 37% from $3.82 Billion. Not a 91% decline in profitability. Although they have taken out new debt - they have a long time to pay it off too, and with the value of their holdings they could refinance that debt again and again if needed. In fact taking out debt may prove to be a shrewd cost cutting move because they borrowed early in the crisis before the credit crunch began, so they have potentially saved a fortune long term in borrowing costs. Comparing the situation when they borrowed money a month ago versus now - the situation is much worse and they probably would not be able to get affordable financing now. By slashing spending while less money is coming in they ensure those Billions are not going to bleed away and the company will be there for the future. They earned money and made a profit of 60 cents a share - even with the parks closed for the end of the quarter they surprised Wall Street by bringing in a whopping $202
        ​​Million more revenue (cash) than expected. As bad as the situation is they have still overlicensed the Disney brand to the point that every enterprise they directly operate can be closed and they will still have billions in licensing income from Mickey Mouse's face on everything from purses to ice cream bars to diapers. They could write a check today to build and open an entire new theme park, refurbish everything in all the existing parks that needs an overhaul or replacement, build a couple more massive new lands with similar cost and scale of Galaxy's Edge, and still have billions of dollars left in the bank. They have billions of dollars of guaranteed revenue with the upcoming Marvel releases that are done and paid for, and they're just waiting to be released at a more opportune time for maximum profit. There are entire chunks of the business that could be sold off piecemeal if needed for even more cash. Maybe they wouldn't get top dollar if they unloaded ESPN right now, but it would still go for far more than the Fox regional networks. The much smaller Fox regional sports networks sold for $9.6 Billion and that was another "fire sale price" because Disney HAD to sell them to close the merger. ESPN even with the current interruption is making money - cable and satellite TV providers are still having to pay for the content - and because there isn't anything happening ESPN isn't paying out for content.

        Disney isn't going anywhere and isn't short on cash.
        Last edited by ClownLoach; 05-05-2020, 08:48 PM.

        Comment


        • #5
          Originally posted by ClownLoach View Post

          Earnings releases are fact based. You have made assumptions about the company's cash - which are completely disproved by the facts from the earnings release. Disney reported they have $14.3 Billion (with a B) cash and cash equivalents. Although they have taken out new debt - they have a long time to pay it off too, and with the value of their holdings they could refinance that debt again and again if needed. In fact taking out debt may prove to be a shrewd cost cutting move because they borrowed early in the crisis before the credit crunch began, so they have potentially saved a fortune long term in borrowing costs. Comparing the situation when they borrowed money a month ago versus now - the situation is much worse and they probably would not be able to get affordable financing now. By slashing spending while less money is coming in they ensure those Billions are not going to bleed away and the company will be there for the future. They earned money and made a profit of 60 cents a share - even with the parks closed for the end of the quarter they surprised Wall Street by bringing in nearly half a Billion more revenue (cash) than expected. As bad as the situation is they have still overlicensed the Disney brand to the point that every enterprise they directly operate can be closed and they will still have billions in income from Mickey Mouse's face on everything from purses to ice cream bars to diapers. They could write a check today to build and open an entire new theme park, refurbish everything in all the existing parks that needs an overhaul or replacement, build a couple more massive new lands with similar cost and scale of Galaxy's Edge, and still have billions of dollars left in the bank. They have billions of dollars of guaranteed revenue with the upcoming Marvel releases that are done and paid for, and they're just waiting to be released at a more opportune time for maximum profit. There are entire chunks of the business that could be sold off piecemeal if needed for even more cash. Maybe they wouldn't get top dollar if they unloaded ESPN right now, but it would still go for far more than the Fox regional networks. The much smaller Fox regional sports networks sold for $9.6 Billion and that was another "fire sale price" because Disney HAD to sell them to close the merger. ESPN even with the current interruption is making money - cable and satellite TV providers are still having to pay for the content - and because there isn't anything happening ESPN isn't paying out for content.

          Disney isn't going anywhere.
          While I completely agree with you that Disney is not going anywhere the picture is not quite as "pretty" as you paint it.

          They have a handful of releases that need to come out, and billions is a far cry from the bottom line on those pieces. Reported film budgets almost NEVER include the promotional and marketing cost, which many times can equal about half or even more of an actual film's cost, furthermore, the box office is split between a whole bunch of parties with Disney taking in a substantial portion but not all of the bottom line. Most of these films have had no marketing yet, which means chunks of cash, and theatres will most likely be less visited for awhile meaning there is probably far less cash in the bank than previous films.

          They are not in a position to sell ESPN right now because it is tied to Disney+ subscriptions, which would mean untangling a mess both on a corporate level and a user level; it is also being used as leverage to push Disney+. On that note Disney+ is still not turning a profit and is not expected to for a long time, which hurts when you also factor in Disney lost out on hundreds of millions of dollars of licensing from Netflix. In fact, Disney+ will probably be an even bigger money sink for the time being because the expectation will be that they need to add content, at a time when they are probably not going to add substantial viewers in the near future.

          Finally the parks division, which has hemorrhaged money for a number of weeks now, will still do so more probably several more weeks while the parks are closed, and then continue to do so when they are opened at limited capacity.

          They did beat Wall Street's estimations, but they also did that on a first quarter where almost everything was open for 2.5 months, let's see how their Q2 looks, which will probably not be very rosy. Remember too that licensing contracts expire, and if consumerism goes down...which it surely will...those lucrative contracts will either not be renewed or will be renegotiated at rock bottom prices....Fantasy Flight Games did this during the financial crises when they picked up the Star Wars license (which wasn't Disney at the time I know but it's an example) for next to nothing.

          So time will tell, people are quick to think that the worst of this is behind us...and that MAY start being true health wise but financially....financially we are just beginning. It's a global world now, like it or not, and the negative impacts that this is having on travel, tourism, business etc. worldwide are going to drastically impact consumption and the North American Economy.

          Comment


          • #6
            Originally posted by tarheelalum View Post
            Does Igor still think he is going to get tens of millions of dollars in bonus money later this year?
            Originally posted by greenalfonzo View Post
            Good thing Iger is back to set things right. You know, the guy that paid twice as much for fox pictures as what they were worth, and put the company $40b in debt in the process.
            Despite him returning to the day to day business, Iger is no longer the CEO. Unless Chapek gets the boot to the curb or leaves, Iger's actions for the company are going to gradually diminish.

            Originally posted by ClownLoach View Post
            Disney isn't going anywhere and isn't short on cash.
            While you make good points, there is more at stake. First, Disney had an over the top successful 2019... but it was too good. The company likely had plans to invest that profit into new expenditures or debts this year. Now all of that is out of the window. Like other companies, Disney will likely make cutbacks via permanent furloughs, canceling projects or even liquidating certain assets.

            Then there is another problem, the company is at risk from a hostile takeover. If shareholders sell their Disney stock off because of current Coronavirus receding economy, some potential investors may jump at the chance to buy the stock up. This could cause a major power shift at the company.And not necessarily in the best direction.

            Comment


            • #7
              Originally posted by linkeq2001 View Post

              While I completely agree with you that Disney is not going anywhere the picture is not quite as "pretty" as you paint it.

              They have a handful of releases that need to come out, and billions is a far cry from the bottom line on those pieces. Reported film budgets almost NEVER include the promotional and marketing cost, which many times can equal about half or even more of an actual film's cost, furthermore, the box office is split between a whole bunch of parties with Disney taking in a substantial portion but not all of the bottom line. Most of these films have had no marketing yet, which means chunks of cash, and theatres will most likely be less visited for awhile meaning there is probably far less cash in the bank than previous films.

              They are not in a position to sell ESPN right now because it is tied to Disney+ subscriptions, which would mean untangling a mess both on a corporate level and a user level; it is also being used as leverage to push Disney+. On that note Disney+ is still not turning a profit and is not expected to for a long time, which hurts when you also factor in Disney lost out on hundreds of millions of dollars of licensing from Netflix. In fact, Disney+ will probably be an even bigger money sink for the time being because the expectation will be that they need to add content, at a time when they are probably not going to add substantial viewers in the near future.

              Finally the parks division, which has hemorrhaged money for a number of weeks now, will still do so more probably several more weeks while the parks are closed, and then continue to do so when they are opened at limited capacity.

              They did beat Wall Street's estimations, but they also did that on a first quarter where almost everything was open for 2.5 months, let's see how their Q2 looks, which will probably not be very rosy. Remember too that licensing contracts expire, and if consumerism goes down...which it surely will...those lucrative contracts will either not be renewed or will be renegotiated at rock bottom prices....Fantasy Flight Games did this during the financial crises when they picked up the Star Wars license (which wasn't Disney at the time I know but it's an example) for next to nothing.

              So time will tell, people are quick to think that the worst of this is behind us...and that MAY start being true health wise but financially....financially we are just beginning. It's a global world now, like it or not, and the negative impacts that this is having on travel, tourism, business etc. worldwide are going to drastically impact consumption and the North American Economy.
              Fair enough. I'm not trying to say things are great, clearly they aren't, but Disney is FAR from financial ruin and collapse and VERY FAR from being out of cash. The projected financial loss each quarter that the parks division is $1B, which although it is ugly to lose a billion a quarter when they're used to making billions a quarter in profit - there will still be lots of money in the bank and the company will likely still turn a tidy profit for the year. Now that it is apparent that some operations will resume this quarter, even though it is the joint venture of Shanghai, the loss will be blunted. In fact if you factor in the dividend cut Disney comes out ahead - the shareholders are going to eat the park closure loss. And although the stock price becomes an issue - the additional debt Iger took on plus all the ongoing parks questions become a bit of a poison pill for hostile bidders too and will nullify interest. If anyone with the capacity to buy Disney really wanted to - they would already be bidding. When Disney was fighting off hostile takeover attempts decades ago the company was a tiny fraction of the size it is today... But I think that experience galvanized the company to always ensure that they are able to control their own destiny. It may be another reason why Disney stopped construction expenses while Universal continues - to maintain maximum financial strength and flexibility - because of the fear and learnings of the past and having the fortitude to make tough choices to ensure they never go through it again. If I recall correctly the fight decades ago would have likely been a disaster for the parks themselves, possibly even their death knell as the buyers would have chopped the company up and sold the pieces as the assets were worth more than the company - Disney was worth more dead than alive. That was why they reinvented themselves and diversified to what they are today.

              ​The long term play within the organization will likely pivot towards using cash carefully for stock buy backs while the price is low and at the same time more aggressively trying to sell subscriptions to Disney+ to accelerate break-even. This in turn will enable Disney to continue to make the case to investors that as a growing streaming company their stock price should be much higher like Netflix (I believe the difference is Netflix is worth 80X earnings while Disney is only 12X), and Disney makes up for all their losses with the price increase of their own stock as they "invest in themselves". Disney+ is all about painting a different picture of what the company is and hoping that it drives up the stock price since Wall Street is paying a premium for streaming content providers, even if the streaming isn't yet profitable.

              Comment


              • #8
                Originally posted by linkeq2001 View Post
                ...So time will tell, people are quick to think that the worst of this is behind us...and that MAY start being true health wise but financially....financially we are just beginning. It's a global world now, like it or not, and the negative impacts that this is having on travel, tourism, business etc. worldwide are going to drastically impact consumption and the North American Economy.
                The economy will not be able to recover until the health crisis is controlled. Unfortunately, the medical experts are forecasting that because of states and counties relaxing social distancing without mass testing and tracing, the coronavirus death rate will more than double by June 1. And that puts Disney between the proverbial rock and a hard place.

                Disney sees profit drop because of coronavirus, but worst is likely yet to come

                Some excerpts from the article:

                With a pandemic battering its businesses, the Walt Disney Co. on Tuesday reported notably lower profit figures for its most recent quarter. More significantly, it offered few specifics on when many of its divisions might return to normal operations or how it would make up shortfalls in the interim.

                As its theme parks began to be shuttered, movies could not be released and sports could be played, Disney saw total operating income drop 37 percent to $2.4 billion in the quarter ending March 31. Parks and cruises had profit go from $1.5 billion in the quarter last year to $639 million this year, with a loss of about $1 billion in revenue....

                Those reduced numbers were cushioned by the fact that much of the quarter played out before the crisis hit in the United States, and many analysts and investors believe the worst is yet to come....

                “Today’s not the point,” said Lloyd Greif, a veteran Los Angeles-based investment banker who closely follows Disney. “We haven’t seen ugly yet. Third and fourth quarter is where the rubber will really hit the road”....

                Though there is no timetable for reopening U.S. parks, Chapek suggested that the company would go slowly, and also not reopen if executives weren’t confident visitors would follow.

                “We would not reopen any park until we can make a positive contribution to overhead and operating-profit level,” he said.

                Chapek did say that Shanghai Disneyland will open on Monday. He said contact tracing, social-distancing and “early detection systems” will be among the tools used to limit virus exposure. Masks will be given to staff and guests, he said.

                The opening will serve as a test case for potential U.S. re-openings in Florida and California, particularly on the issue of capacity. The Chinese government is mandating a capacity limit of about 30 percent, or 24,000 of the roughly 80,000 people who visit the park daily. The first few weeks will see Disney cap the number at below even that, Chapek said, as staffers work out the new protocols....
                Last edited by Mr Wiggins; 05-06-2020, 03:07 AM.
                "Disneyland is often called a magic kingdom because
                it combines fantasy and history, adventure and learning,
                together with every variety of recreation and fun,
                designed to appeal to everyone."

                - Walt Disney

                "Disneyland is all about turning movies into rides."
                - Michael Eisner

                "It's very symbiotic."
                - Bob Chapek

                Comment


                • #9
                  Originally posted by ClownLoach View Post

                  You have made assumptions about the company's cash - which are completely disproved by the facts from the earnings release.

                  Disney isn't going anywhere and isn't short on cash.
                  Please take a look at the CNBC link and remember: There's a difference between Cash and Liquidity. Liquidity is having the cash available 'right now' to pay for things and not have it tied up doing work somewhere else. A good example is my 401k. Sure, there's money in there, but I can't simply take it out today and spend it. It's not liquid. Market analysts are worried about liquidity.

                  Comment


                  • #10
                    Originally posted by ClownLoach View Post

                    Fair enough. I'm not trying to say things are great, clearly they aren't, but Disney is FAR from financial ruin and collapse and VERY FAR from being out of cash. The projected financial loss each quarter that the parks division is $1B, which although it is ugly to lose a billion a quarter when they're used to making billions a quarter in profit - there will still be lots of money in the bank and the company will likely still turn a tidy profit for the year. Now that it is apparent that some operations will resume this quarter, even though it is the joint venture of Shanghai, the loss will be blunted. In fact if you factor in the dividend cut Disney comes out ahead - the shareholders are going to eat the park closure loss. And although the stock price becomes an issue - the additional debt Iger took on plus all the ongoing parks questions become a bit of a poison pill for hostile bidders too and will nullify interest. If anyone with the capacity to buy Disney really wanted to - they would already be bidding. When Disney was fighting off hostile takeover attempts decades ago the company was a tiny fraction of the size it is today... But I think that experience galvanized the company to always ensure that they are able to control their own destiny. It may be another reason why Disney stopped construction expenses while Universal continues - to maintain maximum financial strength and flexibility - because of the fear and learnings of the past and having the fortitude to make tough choices to ensure they never go through it again. If I recall correctly the fight decades ago would have likely been a disaster for the parks themselves, possibly even their death knell as the buyers would have chopped the company up and sold the pieces as the assets were worth more than the company - Disney was worth more dead than alive. That was why they reinvented themselves and diversified to what they are today.

                    ​The long term play within the organization will likely pivot towards using cash carefully for stock buy backs while the price is low and at the same time more aggressively trying to sell subscriptions to Disney+ to accelerate break-even. This in turn will enable Disney to continue to make the case to investors that as a growing streaming company their stock price should be much higher like Netflix (I believe the difference is Netflix is worth 80X earnings while Disney is only 12X), and Disney makes up for all their losses with the price increase of their own stock as they "invest in themselves". Disney+ is all about painting a different picture of what the company is and hoping that it drives up the stock price since Wall Street is paying a premium for streaming content providers, even if the streaming isn't yet profitable.
                    I completely agree with you that Disney is far from in danger of being bought out. They are monstrous and have enough cash in liquidity to continue spending. Anyone near large enough to buy them, which are not many companies at all, are also going to be repositioning themselves. Remember that both Amazon and Apple rely on consumers, many of whom will not be consuming; these companies are not going to looking to make the largest acquisition in the modern era

                    Comment

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