Question

Go to a finance/investing site such as yahoo finance or the “investor relations” page of a company and find the annual report (10K) for a public corporation. Describe and analyze examples from the “Management’s Discussion and Analysis of Financial Condition and Results of Operations”. Explain if the company is doing well or not according to the management discussion and analysis for the company Disneyland

Answer 1

Management discussion and analysis of financial conditions and results of operations (Popularly known as MD&A) is a part of a public company's annual report (Form 10-K). It addresses the various key elements like company’s performance, business outlook, how it managed capital, compliance with laws and regulations, future goals, key risks, competition in the industry, internal financial system, performance trends, social responsibility, ratio analysis etc.,

The management discussion and analysis report is an important source of information for analysts and investors who want to review the company’s financial fundamentals and management performance. This is a mandatory report to be filed by the public companies with Securities Exchange commission(SEC). This part of annual report is not audited by the Independent Auditor as this is only the opinion of the management.

Since there are many indicators in MD&A we will describe and taken an example of one such indicator from Apple Inc. i.e., Products and service performance. In this section the company explains it performance in the sale of its products. In 2019, It has a sale of $260,174 million compared to 2018 sales which are at $ 265,595 million. A decrease of 2% from last year sales. The reason the company given for decrease in sales was due to lower iphone unit sales.So, we can find a complete information from this section of Form 10-K.

Management discussion and Analysis for the company Disneyland.

The revenue of Disneyland which includes services and products is increased from $59,434 million to $69,570 million (17% increase).             Cost and expenses has seen an increase from $44,597 million to $57,719 (29% increase). This is mainly due to restructuring and acquiring of some companies. The net profit of the company has seen a dip from $12,598 million to $11,054 million (12% decrease). This resulted in decrease of diluted EPS in continuing operations from $8.36 to $6.27(25% decrease). The other reason for decreasing net income in 2019 is because of federal tax rates compared to 2018.the Effective tax rate increased from 11.3% in 2018 to 21.7% in 2019.

Although the net profit on overall decreases but when we compare the segment revenue and costs we get a better idea of the performance of the company as a whole because net profit is arrived after all considerations as per laws which are not spent also. The Disneyland company generates revenue from Media networks, Parks experiences and products, Studio entertainment and Direct to consumer and international. From MD&A we can observe that the segment revenues has gone up in the range of 6% to 13%.

On Overall according to the management discussion and analysis, although net profit has decreased which is mainly due to restructuring and acquisition of TFCF, the segment revenue is in good condition. Based on the above figures, the Disneyland company is doing well in the present.