Euro Disney S.C.A. has published their 2015 Interim Report. The full report can be downloaded here (PDF) and here is a summary:
EURO DISNEY S.C.A.
GROUP INTERIM REPORT
First Half Ended March 31, 2015
During the First Half, the Group implemented the recapitalization and debt reduction plan announced on October 6, 2014, backed by The Walt Disney Company (“TWDC”), which amounted to approximately €1 billion (the “Recapitalization Plan”). The Recapitalization Plan aimed at improving the Group’s financial position and enabling it to continue investing in Disneyland Paris so as to improve the guest experience.
The main elements of this Recapitalization Plan are as follows:
- Cash infusion of €422.8 million, through capital increases of the Company and of Euro Disney Associés S.C.A. (“EDA”), its primary operating company
- Conversion of €600.0 million of debt owed to indirect subsidiaries of TWDC into equity through capital increases of the Company and of EDA (this conversion was performed at the debt’s nominal value)
- Deferral of all amortization payments of loans granted by indirect subsidiaries of TWDC until a revised maturity date in December 2024 (previously 2028)
- Repayment of €250.0 million drawn under the standby revolving credit facilities granted previously by TWDC, maturing in 2015, 2017 and 2018, replaced by a single €350.0 million revolving credit facility maturing in December 2023 (the “New Revolving Credit Facility”).
€24.5 MILLION AMOUNT RECEIVED FROM THE WALT DISNEY COMPANY
(FRANCE) S.A.S. AS A LEASE TERMINATION FEE During the First Half, the Group received a €24.5 million fee for the termination, before the contractual term, of a lease agreement with The Walt Disney Company (France) S.A.S. related to office space located in the Walt Disney Studios® Park. This amount was recorded in the consolidated statements of income in Other income / (expense).
DISCUSSION OF COMPONENTS OF OPERATING RESULTS
Seasonality The Group’s business is subject to the effects of seasonality and the annual results are significantly dependent on the second half of the fiscal year, or April 1 to September 30, which traditionally includes the high season at Disneyland® Paris. Consequently, the operating results for the First Half are not necessarily indicative of results to be expected for the full fiscal year 2015.
Resort operating segment revenues increased 11% to €591.1 million from €530.8 million in the prior-year period.
Theme parks revenues increased 14% to €341.1 million from €298.3 million in the prior-year period due to an 8% increase in average spending per guest to €50.57 and a 6% increase in attendance to 6.7 million. The increase in average spending per guest was due to higher spending on admissions, food and beverage and merchandise. The increase in attendance was due to more guests visiting from the United Kingdom, France and Spain.
Hotels and Disney Village® revenues increased 9% to €232.9 million from €214.5 million in the prior-year period, resulting from a 4.8 percentage point increase in hotel occupancy to 77.1%, a 9% increase in Disney Village revenues and a 2% increase in average spending per room to €212.15. The increase in hotel occupancy resulted from 50,000 additional room nights sold compared to the prior-year period, due to more guests staying at the Group’s hotels from the United Kingdom, France and Spain, partly offset by lower guests from the Netherlands. The increase in average spending per room was due to higher spending on food and beverage and higher daily room rates, partly offset by lower spending on merchandise.
Real estate development operating segment revenues decreased by €1.9 million to €0.6 million, from €2.5 million in the prior-year period. This decrease was due to lower land sale activity than in the prior-year period. Given the nature of the Group’s real estate development activity, the number and size of transactions vary from one year to the next.
Direct operating costs increased 10% compared to the prior-year period mainly due to costs associated with higher resort volumes as well as costs related to the enhancement of the guest experience, including depreciation of new assets, labor costs related to new attraction based on the Disney Pixar movie Ratatouille, entertainment offerings and higher staffing levels.
Marketing and sales expenses increased 14% compared to the prior-year period mainly due to incremental media campaigns in certain markets and for new products.
General and administrative expenses increased 8% compared to the prior-year period reflecting labor rate inflation and new positions for social programs in line with regulatory obligations and agreements as well as technology initiatives.
Other Income / (Expense)
During the First Half, the Group received from The Walt Disney Company (France) S.A.S. a €24.5 million fee for the termination, before the contractual term, of a lease agreement related to office space located in the Walt Disney Studios® Park.
NET FINANCIAL CHARGES
Net financial charges increased 2% compared to the prior-year period primarily due to a lower amount of capitalized interest expense as well as certain one-time costs related to the Recapitalization Plan, partially offset by lower interest expense on borrowings that were reduced as a direct result of the Recapitalization Plan.
Net financial charges increased 2% compared to the prior-year period primarily due to a lower amount of capitalized interest expense as well as certain one-time costs related to the Recapitalization Plan, partially offset by lower interest expense on borrowings that were reduced as a direct result of the Recapitalization Plan. NET LOSS For the First Half, the net loss of the Group amounted to €118.8 million compared to €135.8 million for the prior-year period.
The Group’s principal indebtedness decreased by €749.8 million to €997.9 million as of March 31, 2015 compared to €1,747.7 million as of September 30, 2014. The decrease was mainly due to the conversion of €600.0 million of TWDC debt into equity and the repayment of amounts drawn under the standby revolving credit facilities for €250.0 million as part of the Recapitalization Plan. This repayment included a €100.0 million drawdown during the first quarter of fiscal year 2015. For a full description of borrowings, please refer to note 8. “Borrowings” of the Group’s interim condensed consolidated financial statements.
Cash and cash equivalents as of March 31, 2015 were €253.4 million, up €204.1 million compared with September 30, 2014 and up €199.3 million compared with March 31, 2014.
Free cash flow used for the First Half was €66.6 million compared to €123.7 million used in the prior-year period.
Cash flow used in operating activities for the First Half totaled €16.3 million compared to €56.7 million used in the prior-year period. This improvement resulted from cash proceeds from a one-time gain related to the early termination of a lease (see section “Other Income / (Expense)” above for more information) as well as lower working capital requirements.
Cash flow used in investing activities for the First Half totaled €50.3 million compared to €67.0 million used in the prior-year period. This decrease was mainly due to the repayment of cash advances received from entities in charge of the Villages Nature project.
Cash flow generated by financing activities totaled €270.7 million for the First Half compared to €99.8 million generated in the prior-year period.
During the First Half, before the implementation of the Recapitalization Plan, the Group drew €100.0 million from a standby revolving credit facility of €250.0 million. The same amount was drawn in the prior-year period.
As part of the Recapitalization Plan, the Group received €422.8 million of cash following the capital increases of the Company and of EDA. This amount was partly offset by €250.0 million repayments on standby revolving credit facilities previously granted by TWDC.
The Group entered into certain transactions with TWDC and its subsidiaries.
The significant transactions related to a license for the use of TWDC intellectual property rights, management arrangements, technical and administrative agreements for services provided by TWDC and its subsidiaries. TWDC also provided the Group with borrowings and standby revolving credit facilities.
During the First Half, the Group also received a €24.5 million fee for the termination, before the contractual term, of a lease agreement with The Walt Disney Company (France) S.A.S. related to office space located in the Walt Disney Studios® Park.
In addition, as part of the implementation of the Recapitalization Plan, the following transactions with TWDC were performed during the First Half:
- Cash infusion of €229.6 million made by TWDC through capital increases of the Company and of EDA;
- Conversion of €600.0 million of debt into equity;
- Repayment of €250.0 million drawn under the standby revolving credit facilities granted previously by TWDC and replaced by a single €350.0 million revolving credit facility.
For a description of the Recapitalization Plan and the related-party activity for the First Half, please refer to notes 1.3. “Recapitalization Plan” and 13. “Related-Party Transactions” of the Group’s interim condensed consolidated financial statements.
UPDATE ON RECENT AND UPCOMING EVENTS
Mandatory Tender Offer
As a result of the Company’s capital increases, EDL Holding Company, LLC, Euro Disney Investments S.A.S. and EDL Corporation S.A.S. reported that their interests in the Company crossed certain thresholds. As a result, they were required to launch a mandatory tender offer on the Company’s shares that they did not own (the “Mandatory Tender Offer”). The French Autorité des marchés financiers (the “AMF”) issued its clearance decision (décision de conformité) on this Mandatory Tender Offer on March 31, 2015.
The Company was informed that an appeal against the clearance decision has been filed on April 9, 2015 with the Court of Appeal of Paris (Cour d’appel de Paris). In its notice no. 215C0446 dated April 14, 2015, the AMF has indicated that, pending the decision of the Court of Appeal of Paris, the Mandatory Tender Offer has been extended and new information will be published on a modified schedule.
For more details on the Mandatory Tender Offer, please refer to the press release and the other documents which are available on the Group’s website (http://corporate.disneylandparis.com).
Disneyland® Paris continues “Swing into Spring” celebrations for spring 2015
Until May 31, 2015, Disneyland® Paris celebrates the spring season highlighting nature and the awakening of the season. Disneyland® Park has been transformed into a floral garden with brand new musical performances to give our guests the ultimate springtime experience.
Frozen returns in 2015, creating the coolest summer
Starting June 1, Disneyland® Paris will celebrate a “Frozen Summer Fun” with a brand new show, an icethemed musical production combining singing and dancing with guest participation. The famous sisters, Anna and Elsa, along with their faithful companions, Kristoff and Olaf the funny snowman, will take to the stage to bring the show to life and expand the unique experience of Frozen live.
The Jedi Training Academy opens at Disneyland Paris
This summer, the Jedi Training Academy will open its doors at Disneyland Paris to aspiring Padawans aged 7 to 12 to learn to use the Force from a true Jedi Master. Kids visiting Disneyland Paris will meet the heroes of the epic saga through a unique and interactive experience that the whole family can enjoy. The adventure will begin on July 11.
The main risks1 and uncertainties related to the Group are described in the Group’s 2014 Reference Document2 and primarily relate to those inherent to theme park activities, which includes being subject to the potential effects of general economic conditions, and the Group’s high level of borrowings.
During the First Half, the Group launched the Recapitalization Plan and recorded all its financial impacts on the Group’s equity and borrowings. The Company’s and EDA’s capital increases and the reduction of the Group’s indebtedness were completed, which removed the risks related to these transactions. The timeline of the Mandatory Tender Offer, as part of the Recapitalization Plan, has been extended from the initial one as aforementioned in section “Update on Recent and Upcoming events”. The implementation schedule of the anti-dilutive mechanism, as part of the Recapitalization Plan as well, under which the eligible Company’s shareholders will have the opportunity to acquire a portion of the Company’s shares3 , will be modified accordingly. For more information please refer to notes 1.3.2. “Mandatory Tender Offer” and 1.3.3. “AntiDilution Protection Mechanism – Right to Acquire Company’s Shares” of the Group’s interim condensed consolidated financial statements.