How Disney Is Investing $3.2 Billion in Its Future

Photo source: Rick Munarriz.

Keeping the leading family media giant on top isn't cheap. Disney  has been investing billions every year to keep its properties fresh, and that's not going to stop anytime soon. 

Disney amassed $2.8 billion in capital expenditures during fiscal 2013, and that's actually low by the House of Mouse's recent spending patterns. In fact, it has topped $3.2 billion over the past four quarters -- and that number is on the rise.

Where is Disney spending these big bucks? It's easy to guess where the money is going. Most of the media giant's capex is earmarked for its popular theme parks. New rides, refreshed attractions, and even entire new parks don't come cheap. Disney has to keep its attractions fresh to keep the turnstiles clicking, and that always comes at a high price that the company is more than willing to pay.

It's a small world
Disney has spent more than $2.2 billion through the first three quarters of fiscal 2014 on capex, 24% ahead of where it was through the first nine months of fiscal 2013. 

This isn't a surprise. CEO Bob Iger told investors this would happen 11 months ago, forecasting capital expenditures to increase by $1 billion in fiscal 2014, primarily on the development of the Shanghai Disney resort. 

"Capital spending for the Shanghai project will ramp meaningfully in 2014 and 2015 as we prepare for the resort's opening in late 2015," Iger said during last year's fiscal fourth quarter conference call.

You can tie most of the spikes in Disney's recent capital expenditures to theme park expansions.

 CapexTheme Park Project
2011$3.6 billionCars Land in California
2012$3.8 billionNew Fantasyland in Florida
2013$2.8 billionMyMagic+
2014$3.8 billion (est.)Shanghai Disney

Source: Disney financials.

It's a great big beautiful tomorrow
Disney has plenty of moving parts, but its pocketbook always opens its widest for theme park projects. Breaking down the $2.8 billion that it shelled out in fiscal 2001 we find that $2.1 billion went to its domestic and international theme parks and resorts. The balance went to cable networks ($176 million), broadcasting ($87 million), studio entertainment ($78 million), consumer products ($45 million), and interactive ($13 million), with the other $287 million pegged to corporate outlays. 

Disney earmarking three quarters of its capital expenditures for its resorts isn't a one-year fluke. Spending on its parks and resorts division has clocked in between 75% and 77% of total capital expenditure in each of the past three years. It's not just about adding a new coaster or a themed restaurant. Disney spent a record $2.9 billion in fiscal 2012 on several projects including the Cars Land expansion at Disney California Adventure, Disney's Art of Animation Resort in Florida, and the development of MyMagic+ that culminated in the MagicBand rollout during fiscal 2013. 

There will be plenty to keep Disney spending in the near future. It's not just the new park that will open in Shanghai next year. Anyone visiting Animal Kingdom in Florida is seeing cranes and other heavy machinery at work in building out the Avatar section that is expected to open in 2017. There is also rampant speculation that Disney will move to cash in on its Lucasfilm acquisition with a Star Wars expansion at Disney's Hollywood Studios in Florida. 

Naturally regional amusement park operators will never approach the kind of outlays that we see at Disney. The family entertainment titan watches over the eight most visited theme parks in the world, each one drawing at least 10 million guests last year. 

It's easy to justify a budget stretching into nine figures for a new marquee attraction or theme park land when you have that kind of well-to-do traffic going through your turnstiles. It has paid off for Disney in the past, and it will likely continue to pay off in the future.

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Rick Munarriz owns shares of Walt Disney. The Motley Fool recommends Walt Disney. The Motley Fool owns shares of Walt Disney. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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