Highlights from the Disney Company’s 4th Quarter Earnings Report

The Disney Company reported their fiscal year and fourth quarter earnings earlier this month.  Here are a few highlights from that report:

  • Diluted earnings per share (EPS) for the year increased 24% to $3.13 from $2.52 in the prior year. For the quarter, diluted EPS was $0.68 compared to $0.58 in the prior-year quarter. Excluding certain items affecting comparability as detailed below, EPS for the year increased 21% to $3.07 from $2.54 in the prior year and EPS for the quarter increased 15% to $0.68 from $0.59 in the prior-year quarter.
  • Operating income at Cable Networks increased $471 million to $5.7 billion for the year due to growth at ESPN and the worldwide Disney Channels and an increase in equity income. The increase at ESPN was driven by higher affiliate and advertising revenue, partially offset by higher programming costs. Higher affiliate revenue was due to contractual rate increases while the increase in advertising revenue was primarily due to higher rates.
  • The programming cost increase was driven by contractual rate increases for college sports, NFL, Major League Baseball, and NBA programming and expanded rights for the Wimbledon Championships. Growth at the worldwide Disney Channels was driven by higher affiliate revenue due to contractual rate increases domestically and subscriber growth internationally. These increases were partially offset by lower Disney Channel program sales. Increased equity income was driven by growth at A & E.
  • Television Networks (AETN), which reflected higher advertising and affiliate revenues partially offset by higher programming costs.  For the quarter, operating income at Cable Networks increased by $118 million to $1.4 billion due to growth at ESPN, higher equity income at AETN, and improvement at ABC Family, partially offset by lower operating income at the domestic Disney Channels.
  • Operating income at Broadcasting remained relatively flat at $915 million for the year as higher program sales, lower programming and production costs and higher affiliate and royalty revenue were largely offset by lower advertising revenues and higher equity losses at Hulu. Program sales growth was driven by Castle and Once Upon a Time, partially offset by lower home entertainment revenues primarily due to Lost.
  • For the quarter, operating income at Broadcasting decreased $9 million to $192 million driven by a decline in ABC Television Network advertising revenues due to lower ratings and higher equity losses at Hulu, partially offset by higher program sales driven by Castle and Wipeout.
  • Parks and Resorts revenue for the year increased 10% to $12.9 billion and segment operating income increased 22% to $1.9 billion. For the quarter, revenues increased 9% to $3.4 billion and segment operating income increased 18% to $497 million.
  • Results for the year reflected increases at our domestic parks and resorts, Tokyo Disney Resort, Disney Cruise Line and Hong Kong Disneyland Resort, partially offset by a decrease at Disneyland Paris.
  • Higher operating income at our domestic parks and resorts was driven by increased guest spending and attendance, partially offset by higher costs. Increased guest spending reflected higher average ticket prices, food and beverage spending and daily hotel room rates. Increased attendance reflected strong growth at Disneyland Resort which benefited from the opening of Cars Land at Disney California Adventure. Higher costs were driven by resort expansion and new guest offerings, including investments in supporting systems infrastructure, labor cost inflation and higher employee benefits costs.
  • For the quarter, operating income growth reflected increases at Disney Cruise Line, Hong Kong Disneyland Resort, our new Aulani resort and hotel in Hawaii, and Disneyland Paris.
  • Studio Entertainment revenues for the year decreased 8% to $5.8 billion and segment operating income increased 17% to $722 million. For the quarter, revenues decreased 4% to $1.4 billion and segment operating income decreased 32% to $80 million.
  • Domestic theatrical operating income growth reflected the strong performance of Marvel’s The Avengers in the current year, partially offset by marketing costs for Frankenweenie, which was released after the fiscal year-end. The revenue decline from fewer theatrical releases was largely offset by a decrease in the related distribution and marketing costs and production cost amortization.
  • Lower worldwide theatrical operating income was driven by the performance of Brave in the current quarter compared to Cars 2 in the prior-year quarter and the prerelease marketing expense for Frankenweenie in the current quarter.
  • Consumer Products revenues for the year increased 7% to $3.3 billion and segment operating income increased 15% to $937 million. For the quarter, revenues increased 8% to $883 million and segment operating income increased 29% to $267 million.
  • Interactive revenues for the year decreased 14% to $845 million and segment operating results improved $92 million to a loss of $216 million. For the quarter, revenues decreased 14% to $191 million and segment operating results improved $18 million to a loss of $76 million.
  • Improved segment operating results for the year reflected an increase at our social games business and higher allocations to other Company businesses, primarily related to website design and maintenance, partially offset by a decrease at our console game business.
  • Social game results reflected lower acquisition accounting impacts and improved title performance in the current year. Lower console game results were driven by a decline in sales volume from fewer significant releases which was partially offset by lower marketing costs, higher minimum guarantee recognition and decreased product development costs. The reduction in console games product development reflected an ongoing shift from console game releases to mobile and social game releases.
  • Corporate and unallocated shared expenses increased $15 million to $474 million for the year and increased $16 million to $140 million for the quarter. The increase for the year was driven by higher compensation related costs and charitable contributions, while the increase for the quarter was primarily due to higher charitable contributions.

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