Commitments and Contingencies
Commitments
The Company has various contractual commitments for broadcast rights for sports, feature films and other programming, totaling approximately $50.7 billion, including approximately $0.8 billion for available programming as of September 28, 2013, and approximately $48.2 billion related to sports programming rights, primarily college football (including college bowl games) and basketball conferences, NFL, MLB, NBA and NASCAR.
The Company has entered into operating leases for various real estate and equipment needs, including retail outlets and distribution centers for consumer products, broadcast equipment and office space for general and administrative purposes. Rental expense for operating leases during fiscal years 2013, 2012 and 2011, including common-area maintenance and contingent rentals, was $875 million, $863 million and $820 million, respectively.
The Company also has contractual commitments for creative talent and employment agreements and unrecognized tax benefits. Creative talent and employment agreements include obligations to actors, producers, sports, television and radio personalities and executives.
Contractual commitments for broadcast programming rights, future minimum lease payments under non-cancelable operating leases and creative talent and other commitments totaled $59.2 billion at September 28, 2013, payable as follows:
|
| | | | | | | | | | | | | | | |
| Broadcast Programming | | Operating Leases | | Other | | Total |
2014 | $ | 5,995 |
| | $ | 507 |
| | $ | 2,638 |
| | $ | 9,140 |
|
2015 | 4,984 |
| | 422 |
| | 634 |
| | 6,040 |
|
2016 | 4,953 |
| | 342 |
| | 349 |
| | 5,644 |
|
2017 | 4,469 |
| | 272 |
| | 197 |
| | 4,938 |
|
2018 | 4,377 |
| | 217 |
| | 145 |
| | 4,739 |
|
Thereafter | 25,906 |
| | 1,784 |
| | 1,013 |
| | 28,703 |
|
| $ | 50,684 |
| | $ | 3,544 |
| | $ | 4,976 |
| | $ | 59,204 |
|
The Company has assets under non-cancelable capital leases, primarily for land and broadcast equipment, which had gross carrying values of $572 million and $559 million at September 28, 2013 and September 29, 2012, respectively. Accumulated amortization related to these capital leases totaled $208 million and $167 million at September 28, 2013 and September 29, 2012, respectively. Future payments under these leases as of September 28, 2013 are as follows:
|
| | | |
2014 | $ | 60 |
|
2015 | 70 |
|
2016 | 38 |
|
2017 | 35 |
|
2018 | 18 |
|
Thereafter | 522 |
|
Total minimum obligations | 743 |
|
Less amount representing interest | (451 | ) |
Present value of net minimum obligations | 292 |
|
Less current portion | (18 | ) |
Long-term portion | $ | 274 |
|
Contractual Guarantees
The Company has guaranteed bond issuances by the Anaheim Public Authority that were used by the City of Anaheim to finance construction of infrastructure and a public parking facility adjacent to the Disneyland Resort. Revenues from sales, occupancy and property taxes from the Disneyland Resort and non-Disney hotels are used by the City of Anaheim to repay the bonds. In the event of a debt service shortfall, the Company will be responsible to fund the shortfall. As of September 28, 2013, the remaining debt service obligation guaranteed by the Company was $343 million, of which $75 million was principal. To the extent that tax revenues exceed the debt service payments in subsequent periods, the Company would be reimbursed for any previously funded shortfalls. To date, tax revenues have exceeded the debt service payments for Anaheim bonds.
Legal Matters
Beef Products, Inc. v. American Broadcasting Companies, Inc. On September 13, 2012, plaintiffs filed an action in South Dakota state court against certain subsidiaries and employees of the Company and others, asserting claims for defamation arising from alleged false statements and implications, statutory and common law product disparagement, and tortious interference with existing and prospective business relationships. The claims arise out of ABC News reports published in March and April 2012 that discussed the subject of labeling requirements for production processes related to a product one plaintiff produces that is added to ground beef before sale to consumers. Plaintiffs seek actual and consequential damages in excess of $400 million, statutory damages (including treble damages) pursuant to South Dakota's Agricultural Food Products Disparagement Act, and punitive damages. On October 24, 2012, the Company removed the action to the United States District Court for the District of South Dakota, and on October 31, 2012, the Company moved to dismiss all claims. On November 28, 2012, plaintiffs filed motion to remand the case to state court. On June 12, 2013, the district court granted plaintiffs' motion to remand to state court and denied the Company's motions to dismiss all claims, without prejudice to its right to move again in state court. On July 9, 2013, the Company moved in state court to dismiss all claims, and the hearing on those motions is set for December 17, 2013.
The Company, together with, in some instances, certain of its directors and officers, is a defendant or codefendant in various other legal actions involving copyright, breach of contract and various other claims incident to the conduct of its businesses.
Management does not believe that the Company has incurred a probable, material loss by reason of any of the above actions.
Celador International Ltd. v. American Broadcasting Companies, Inc.
In connection with the Company's litigation with Celador International Ltd., the Company recorded a $321 million charge in Other income/(expense), net, in fiscal 2013. This amount was paid in fiscal 2013.
Long-Term Receivables and the Allowance for Credit Losses
The Company has accounts receivable with original maturities greater than one year related to the sale of television program rights within the Media Networks segment and vacation ownership units within the Parks and Resorts segment. Allowances for credit losses are established against these receivables as necessary.
The Company estimates the allowance for credit losses related to receivables from the sale of television programs based upon a number of factors, including historical experience and the financial condition of individual companies with which we do business. The balance of television program sales receivables recorded in other non-current assets, net of an immaterial allowance for credit losses, was $0.9 billion as of September 28, 2013. The activity in fiscal 2013 related to the allowance for credit losses was not material.
The Company estimates the allowance for credit losses related to receivables from sales of its vacation ownership units based primarily on historical collection experience. Estimates of uncollectible amounts also consider the economic environment and the age of receivables. The balance of mortgage receivables recorded in other non-current assets, net of a related allowance for credit losses of approximately 4%, was $0.7 billion as of September 28, 2013. The activity in fiscal 2013 related to the allowance for credit losses was not material.
