The Walt Disney Co. released their second quarterly results for the fiscal year 2009. As expected their profits were down considerably, but they were not down as much as the industry pundits had predicted, in essence beating the street, which had Disney stock rising a few points in after-hours trading.
The Walt Disney Company today reported earnings for its second fiscal quarter and six months ended March 28, 2009. Diluted earnings per share (EPS) for the second quarter were $0.33 including restructuring and impairment charges which had a $0.10 per share impact on EPS. Excluding these items, EPS decreased 26% to $0.43 from $0.58 in the prior-year quarter.
For the six month period, diluted EPS was $0.78. In addition to the restructuring and impairment charges, EPS for the six month period included a gain on the sale of our investment in two pay television services in Latin America. Collectively, these items adversely affected EPS by $0.07 per share for the six months. Excluding these items, EPS decreased 30% to $0.85 from $1.21 in the prior year six months.
We had a difficult second quarter due to the weak economy and other factors. At the same time, we remain focused on our core business strategy and believe our creativity, brands and businesses will serve us well as the economy recovers.
Robert A. Iger, president and CEO, The Walt Disney Company
Some Fine Detail
Operating income at Cable Networks increased 5% to $1.1 billion for the quarter due to growth at ESPN, ABC Family and the domestic Disney Channel. The growth at ESPN was driven by higher affiliate revenue primarily due to contractual rate increases partially offset by decreased advertising revenues and higher programming costs. The decrease in advertising revenues was due to a decrease in sold inventory, partially offset by higher rates. Operating income growth at ABC Family reflected higher advertising and affiliate revenue, both of which were driven by higher rates, along with higher sold advertising units, while growth at the domestic Disney Channel was driven by higher affiliate revenue due to higher rates.
Operating income at Broadcasting decreased 38% to $162 million for the quarter primarily due to lower advertising sales at the owned television stations and higher programming costs at the ABC Television Network due to an increase in production expenses, partially offset by increased sales of ABC Studios productions in international markets, led by Ugly Betty, Desperate Housewives and Criminal Minds. Higher production expenses reflected more production activity during the current quarter compared to the prior-year quarter which was affected by the Writers’ Guild of America work stoppage.
Parks & Resorts
Parks and Resorts revenues for the quarter decreased 12% to $2.4 billion and segment operating income decreased 50% to $171 million. Lower operating income was due to decreases at the Walt Disney World Resort, Disney Vacation Club, Disneyland Resort and Disneyland Resort Paris. Operating income comparisons were unfavorably impacted by the shift of the Easter holiday from the second quarter in fiscal 2008 to the third quarter in fiscal 2009.
Lower operating income at the Walt Disney World Resort and Disneyland Resort was primarily due to decreased guest spending, partially offset by lower costs. Decreased guest spending at the Walt Disney World Resort was due to lower average daily hotel room rates, lower average ticket prices and decreased merchandise spending. At Disneyland Resort, decreased guest spending was primarily due to lower average ticket prices and decreased merchandise spending. Lower costs reflected savings from cost mitigation activities and lower cost of merchandise, food and beverages sold, partially offset by labor and other cost inflation. Lower operating income at Disney Vacation Club reflected unfavorable impacts associated with securitized ownership interests, higher per unit cost of sales, decreased sales of term extensions on certain existing properties and lower rentals of vacation club units.
At Disneyland Resort Paris, lower operating income was primarily due to decreased guest spending and attendance. The decrease in guest spending reflected lower average ticket prices, lower average daily hotel room rates and decreased merchandise spending.
Studio Entertainment revenues for the quarter decreased 21% to $1.4 billion and segment operating income decreased 97% to $13 million.The decrease in segment operating income was primarily due to decreases in domestic home entertainment and worldwide theatrical distribution.
The decrease in domestic home entertainment was driven by lower unit sales reflecting the performance of current quarter titles, which included High School Musical 3: Senior Year, Beverly Hills Chihuahua and Bolt, as compared to Enchanted, Game Plan and No Country for Old Men in the prior-year quarter.
The decrease in worldwide theatrical distribution reflected a lower performing slate of titles in the current quarter in both domestic and international markets and higher distribution expense for future quarter releases in domestic markets. Significant current quarter titles domestically included Bedtime Stories, Race to Witch Mountain and Confessions of a Shopaholic while the prior-year quarter included National Treasure 2: Book of Secrets, Hannah Montana/Miley Cyrus: Best of Both Worlds and Enchanted.
Significant current quarter titles internationally included Confessions of a Shopaholic, Bolt and Bedtime Stories compared to the strong performance of Enchanted and National Treasure 2: Book of Secrets in the prior-year quarter.
Consumer Products revenues for the quarter increased 9% to $496 million, and segment operating income decreased 24% to $97 million. The revenue increase was due to the acquisition of the Disney Stores North America in the third quarter of fiscal 2008, partially offset by a decrease in earned royalty revenue at Merchandise Licensing.
Lower segment operating income was due to the acquisition of the Disney Stores North America and lower earned royalty revenue across multiple product categories at Merchandise Licensing. At the Disney Stores North America, the increase in revenues due to the acquisition was more than offset by the related operating costs and the absence of royalties from the former licensee.
Interactive Media revenues for the quarter decreased 17% to $129 million and segment operating loss was essentially flat at $61 million as a decrease in revenues at Disney Interactive Studios was largely offset by increased revenues from our mobile phone service business in Japan, which was launched in the second quarter of fiscal 2008, lower marketing expenses at Disney Interactive Studios and Disney Online and lower administrative costs at Disney Online. The decline in revenues at Disney Interactive Studios was driven by lower sales of self-published video games reflecting the strong performance of Turok in the prior-year quarter.
(This information originally appears in Disney Fiscal 2009 2nd Quarterly results on Disney’s Corporate site)
Wrapping it up
Despite the bad news, there is certainly some bright spots in the reports. Desite profits being down, they were not down as much as the industry experts had predicted. Also there is good results that have continued in some of their cable properties, like ESPN.
Moving forward Disney’s business is strong but has been affected by the global economic downturn, as tourism across the world has been. They are well positioned as the economy rebounds and have continued to traditional means to promote their business properties.