Walt Disney Co., the world’s biggest entertainment company, plans to buy back $6 billion to $8 billion of stock starting next year, stepping up efforts to increase investor returns as capital spending winds down.
Disney, based in Burbank, Calif., will borrow to finance some of the repurchases, Chief Financial Officer Jay Rasulo said Thursday at an investor conference in Beverly Hills, Calif., sponsored by Bank of America Corp. The company intends to maintain its debt ratings, he said.
The buyback comes as outlays shrink 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 will continue spending on projects and make acquisitions, Rasulo said, citing as examples Marvel, Lucasfilm and purchases in games and international TV networks. The company is interested in acquisitions 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.
Disney rose 3.4% to $66.11 at 2:57 p.m. in New York. The stock had gained 28% this year before the day.
Disney is a regular buyer of its stock. The company repurchased $800 million of shares in the recently completed third quarter and $3.2 billion for the year to date, Rasulo said on an Aug. 6 conference call. Disney also spent $1.81 billion on its parks, resorts and other properties during that period, according to the latest quarterly report.
The company has also increased its dividend, with the 2012 annual payout boosted by 25% to $0.75 a share. Debt totaled $15 billion as of June 29, according to a filing.
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.
Image: Flickr, David
This article originally published at Bloomberg here
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