The Walt Disney Company Reports Results for the Quarter and Six Months Ended 4/2/2005
Please note, the following is just the major statements from the Press Release, a full copy, including all the numbers can be found here...
The Walt Disney Company (DIS) today reported earnings for the quarter and six months ended April 2, 2005.
Diluted earnings per share for the second quarter increased 27% to $0.33, compared to $0.26 in the prior-year quarter.
For the six-month period, diluted earnings per share were $0.68, up 15% versus the $0.59 recorded in the prior-year period.
"It is very gratifying to see our company continue to achieve impressive growth. The second quarter's strong results are the latest demonstration that, across the company, our management team continues to effectively execute on its strategic plans. As we anticipated, last year's tremendous momentum has continued into 2005, bringing us well on the way toward another year of double-digit earnings growth for our shareholders," observed Michael Eisner, Disney's Chief Executive Officer.
Robert Iger, President, Chief Operating Officer and CEO-elect remarked, "As we look back on the great performance of the first half of the year, we also look forward and consider how well poised The Walt Disney Company is for sustained long-term growth. Simply consider such current achievements as ABC's ratings resurgence, the launch of the global celebration of Disneyland's 50th anniversary, ESPN's new deal with the NFL, the impressive theatrical performance of `The Pacifier' and the DVD performance of Disney/Pixar's `The Incredibles.' These are just a few of the significant developments underway across the company that should help drive growth into the future and maintain Disney's position as one of the preeminent providers of entertainment for families around the world."
EPS growth of 27% in the quarter was driven by increases in operating income in each segment, led by Studio Entertainment which was up 65% over the prior-year quarter. Current quarter earnings per share included a $61 million benefit ($38 million after-tax) on the restructuring of Euro Disney's borrowings and a $32 million charge ($20 million after-tax) to write down an investment. The six months also includes a $24 million benefit to net income from the resolution of certain income tax matters and restructuring and impairment charges totaling $24 million ($15 million after-tax) related to the sale of the Disney Store North America, of which $7 million was recorded in the second quarter.
Media Networks revenues for the quarter increased 6% to $3.0 billion and segment operating income increased 3% to $725 million. See Table A for further detail of Media networks results.
Segment operating income attributable to cable decreased by 1% to $671 million. Higher affiliate and advertising revenues in the current period exceeded increases in production, administrative and sales and marketing costs, but this benefit was partially offset by the absence of a $41 million benefit in the prior-year period from a bankruptcy settlement with a cable operator in Latin America. In addition, as a result of a number of recently negotiated contracts with cable and satellite operators, ESPN deferred $111 million of revenue until certain annual sports programming commitments are satisfied. We expect to satisfy the programming commitments and recognize the deferred revenue in the second half of the fiscal year with the majority of the revenues deferred for the year to be recognized in the fourth quarter. Increased affiliate revenue for the quarter was driven by contractual rate increases at ESPN and subscriber growth at both ESPN and Disney Channels. Increased advertising revenue was due to improvements at ESPN and ABC Family.
Segment operating income attributable to broadcasting increased to $54 million versus $28 million in the prior year, primarily due to the impact of improved ratings and advertising rates on advertising revenues, along with lower programming costs at the ABC Television Network. These improvements were partially offset by higher advertising, promotion and administrative expenses.
Parks and Resorts
Parks and Resorts revenues for the quarter increased 26% to $2.1 billion, while segment operating income increased 3% to $193 million. The consolidation of Euro Disney and Hong Kong Disneyland contributed $303 million of the increase in revenue and reduced operating income by $44 million. See tables C, D, E and F for the impact of consolidating Euro Disney and Hong Kong Disneyland.
Excluding the consolidation impact, revenue grew $124 million, or 7%, and segment operating income increased $49 million, or 26%. The growth was primarily due to increases at Walt Disney World driven by higher guest spending and increased hotel occupancy.
Increased guest spending at Walt Disney World reflected ticket price increases and fewer promotional offers driven by increased product demand reflecting the ongoing recovery in travel and tourism and the popularity of Disney as a travel destination. Higher occupancy at Walt Disney World was partially driven by the reopening of approximately one thousand rooms in the French Quarter portion of the Port Orleans hotel late in the second quarter of the prior year.
Costs and expenses increased $422 million for the quarter, of which $347 million was due to the consolidation of Euro Disney and, to a lesser extent, Hong Kong Disneyland, which incurred approximately $13 million of pre-opening and other costs. The remaining increase of $75 million was driven by higher volume-related expenses and fixed charges and increased information technology expenses at Walt Disney World.
Studio Entertainment revenue for the quarter increased 5% to $2.3 billion and segment operating income increased 65% to $253 million.
Higher segment operating income was primarily due to improvements in domestic home entertainment (home video) and lower production write-offs as well as increases in worldwide theatrical motion picture distribution, partially offset by declines in international home entertainment (home video). The increase in domestic home entertainment results reflected higher DVD sales of current quarter titles, including "The Incredibles," as compared to the prior-year quarter, which included "The Lion King 1 1/2" and "Brother Bear." Worldwide theatrical motion picture distribution results reflected lower distribution costs due to the timing of film releases. Declines in international home entertainment results reflected lower overall unit sales as the prior-year quarter's slate included "Pirates of the Caribbean," "The Lion King 1 1/2" and Disney/Pixar's "Finding Nemo" while the current quarter included "The Incredibles" and "Bambi."
Revenues for the quarter decreased 9% to $465 million and segment operating income increased 48% to $111 million.
Operating income growth was due to higher licensing revenues and the absence of losses at the Disney Store North America, which was sold in mid-November 2004. Growth in merchandise licensing was primarily due to the recognition of contractual minimum guarantee revenue.
Corporate and Unallocated Shared Expenses
Corporate and unallocated shared expenses increased 28% to $105 million. The increase was primarily due to reductions in litigation reserves in the prior year.