Disney Reports 2Q Results
The Walt Disney Company reported earnings for its second fiscal quarter and six months ended March 30, 2013. Diluted earnings per share (EPS) for the second quarter increased 32 percent to $0.83 from $0.63 in the prior-year quarter. Excluding certain items affecting comparability, EPS for the quarter increased 36 percent to $0.79 compared to $0.58 in the prior-year quarter. Diluted EPS for the six-months ended March 30, 2013, was $1.60 compared to $1.43 in the prior-year period.
“With adjusted earnings per share up 36 percent over last year, we’re obviously pleased with our second quarter,” said Robert A. Iger, chairman and CEO of The Walt Disney Company, in a statement. “Our results reflect our successful strategy, the strength of our brands, and the value of our high-quality creative content, all of which continue to drive long-term growth and shareholder value.”
Segment Results
Media Networks
Media Networks revenues for the quarter increased 6 percent to $5 billion and segment operating income increased 8 percent to $1.9 billion.
Cable Networks
Operating income at Cable Networks increased $224 million to $1.7 billion for the quarter due to growth at ESPN. Higher operating income at ESPN was due to increased affiliate revenues and, to a lesser extent, higher advertising revenues, partially offset by increased programming and production costs. Increased affiliate revenues at ESPN were primarily due to contractual rate increases, a reduction in revenue deferrals as a result of changes in provisions related to annual programming commitments in certain affiliate contracts, and international subscriber growth. During the quarter, ESPN deferred $120 million of revenue compared to $190 million in the prior-year quarter. Growth in ESPN advertising revenues was primarily due to an increase in units sold and higher rates, partially offset by lower ratings in certain of programming. The increase in programming costs was driven by contractual rate increases for college sports.
Broadcasting
Operating income at Broadcasting decreased $91 million to $138 million for the quarter due to higher primetime programming costs and a decrease in advertising revenue at the ABC Television Network, partially offset by an increase in advertising revenue at the owned television stations. Higher primetime programming costs were driven by increased production cost write-offs and higher cost acquired programming. The decrease in network advertising revenue was primarily due to lower ratings, partially offset by higher rates and increased online advertising.
Parks and Resorts
Parks and Resorts revenues for the quarter increased 14 percent to $3.3 billion and segment operating income increased 73 percent to $383 million. Results for the quarter were driven by increases at domestic operations and, to a lesser extent, at international operations. Results at both domestic and international parks and resorts reflected a favorable impact due to a shift in the timing of the New Year’s and Easter holidays relative to Disney’s fiscal periods.
Higher operating income at domestic operations was primarily due to increased guest spending and attendance at both Walt Disney World Resort and Disneyland Resort, the addition of the Disney Fantasy cruise ship, which launched in March 2012, and higher occupied room nights at the Walt Disney World Resort. These increases were partially offset by increased costs. Increased guest spending was due to higher average ticket prices, food, beverage and merchandise spending, and daily hotel room rates. Higher costs were driven by new guest offerings, including investments in systems infrastructure at Walt Disney World Resort and resort expansion at Disneyland Resort, as well as labor and other cost inflation. Higher operating income from international operations reflected higher guest spending at Disneyland Paris and increased attendance at Hong Kong Disneyland Resort, partially offset by the absence of business interruption insurance proceeds related to Tokyo Disney Resort, which were collected in the prior-year quarter.
Studio Entertainment
Studio Entertainment revenues increased 13 percent to $1.3 billion and segment operating income increased $202 million to $118 million. Higher operating income for the quarter was driven by lower film impairments, due to the write down on John Carter in the prior year, and an increase in worldwide theatrical distribution. Worldwide theatrical distribution results reflected the strong performance of Oz The Great and Powerful and Wreck-it Ralph in the current quarter compared to John Carter in the prior-year quarter.
Consumer Products
Consumer Products revenues increased 12 percent to $763 million and segment operating income increased 35 percent to $200 million. Higher operating income was primarily due to increases at merchandise licensing and at Disney’s retail business. The increase at merchandise licensing was driven by the performance of Disney Channel, Mickey and Minnie, and Marvel properties, partially offset by lower revenue from sales of Cars merchandise. Merchandise licensing growth also benefited from a licensee audit settlement. At retail business, higher operating income was driven by higher comparable store sales in North America and Japan and higher online sales in North America.
Interactive
Interactive revenues for the quarter increased 8 percent to $194 million and segment operating results improved by $16 million to a loss of $54 million. Higher operating results were due to growth at Disney’s Japan mobile business from a licensing agreement that started in February 2012 and lower acquisition accounting expense at our social games business.
TCG, Ganz Form Strategic Partnership
TCG and Ganz have formed a strategic partnership. The partnership will focus on the development of key toy and game product platforms for specialty and mass retailers. TCG, a license-driven toy company known for its range of children’s and adult’s puzzles, games and activities, brings mass market distribution and a focused in-house team of toy product development specialists.
Ganz, creator of Webkinz, will bring innovation through its Ganz Studios, as well as penetration into the North American gift and specialty market.