The depreciation numbers also include amortization and the capital expenditures include

The depreciation numbers also include amortization and the capital expenditures include acquisitions; the acquisition of Capital Cities/ABC is reflected in the large jump in capital expenditures in 1996 and in depreciation in the years after as goodwill was amortized. Increases in non-cash working capital, shown as positive numbers, represent a drain on the cash. In 1994, for example, non-cash working capital increased by $ 654.10 million, reducing the cash available for stockholders in that year by the same amount. Finally, the net cashflow from debt is the cash generated by the issuance of new debt, netted out against the cash outflow from the repayment of old debt. Again, using 1994 as an example, Disney issued $ 551.10 million more in new debt than it paid off on old debt, and this represents a cash inflow in that year.

We have computed two measures of free cashflow to equity, one before the net debt cashflow and one after. Using 1994 as an illustration, we compute each as follows:

FCFE before net Debt CF = Net Income + Depreciation - Capital Expenditures -Change in non-cash Working Capital = 1110.40 + 1608.30 - 1026.11 -654.10 = $ 1038.49 million

FCFE after net Debt CF = FCFE before net Debt CF + Net Debt Cashflow = 1038.49 + 551.10 = $1589.59 million As Table 11.4 indicates, Disney had negative free cash flows to equity in 2 of the 10 years, in 1996 because of the Capital Cities acquisition and in 2001 because they reported a loss. The average annual FCFE before net debt issues over the period was $968 million and the average net debt issued over the period was $676 million, resulting in an annual FCFE after net debt issues of $1,645 million.

A similar estimation of FCFE was done for Aracruz from 1998 to 2003 in table 11.5, again using historical information:

Table 11.5: FCFE for Aracruz in US$ from 1998 to 2003


Net Income


Capital Expenditures

Change in non-cash WC

FCFE (before net Debt CF)

Net Debt Cashflow

FCFE (after net Debt CF)

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