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Disney Repurchasing $8 Billion of Stock as Spending Slows

Disney Planning to Repurchase Up to $8 Billion of Shares
Walt Disney Co. Mickey Mouse balloons are displayed for sale outside the Carthay Circle Restaurant in the Buena Vista Street area of Disney's California Adventure Park, part of the Disneyland Resort, in Anaheim, California. Photographer: Patrick T. Fallon/Bloomberg

Walt Disney Co., saying it expects to increase cash flow after years of spending to upgrade its resorts, announced plans to buy back $6 billion to $8 billion of stock starting in 2014.

Disney, based in Burbank, California, will borrow to finance some of the repurchases, Chief Financial Officer Jay Rasulo said yesterday at an investor conference in Beverly Hills, California, sponsored by Bank of America Corp. The company intends to maintain its debt ratings, he said.

The buyback comes as capital spending shrinks from a peak of $3.78 billion in fiscal 2012. In recent years, Disney has expanded parks in California and Florida, built cruise ships and developed a resort in Hawaii. A new destination in Shanghai is scheduled to open at the end of 2015.

“Based on the investment we have been doing, we will see an increase in cash flow,” Rasulo said. “We just worked our way through a huge capital cycle.”

Disney rose 1.8 percent to $66.69 at the close in New York and has gained 34 percent this year. The company could repurchase about 6.7 percent of the stock at current prices.

Spending on projects and acquisitions will continue, Rasulo said, citing as examples Marvel, Lucasfilm and purchases in games and international TV networks. The company is interested in deals that increase its distribution capability.

“We want to invest in our businesses either through organic growth initiatives or to grow our company through acquisitions,” Rasulo said.

Buyback History

Disney is a regular buyer of its stock. The company repurchased $800 million in the recently completed third quarter and $3.2 billion for the year to date, Rasulo said on an Aug. 6 conference call.

Spending on parks, resorts and other properties totaled $1.81 billion through nine months of the fiscal year, according to the latest quarterly regulatory filing, and Disney bought Lucasfilm in December for $4 billion in cash and stock.

Debt totaled $15 billion as of June 29, according to the filing. Shares outstanding totaled 1.79 billion shares as of July 31. The annual dividend was increased 25 percent last year to 75 cents a share.

After a summer movie season that saw one of its biggest financial flops ever, the Jerry Bruckheimer-Johnny Depp film “The Lone Ranger,” Rasulo said Disney plans to limit the budgets on motion pictures to limit risks.

The curbs will apply to major films that aren’t part of movie series, he said.

“We feel very, very good about the direction our slate is headed in,” Rasulo said. “We’ve also learned that there needs to be a cap on tentpole, nonfranchise films.”

Disney said on Aug. 6 it expects to record a loss of as much as $190 million from “The Lone Ranger.”

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