The Walt Disney Company today reported earnings for its second fiscal quarter and six months ended March 31, 2012. Diluted earnings per share (EPS) for the second quarter increased 29% to $0.63 from $0.49 in the prior-year quarter. EPS for the current quarter included a gain related to an acquisition and restructuring and impairment charges, which together resulted in a net $0.05 benefit to EPS. Excluding these items, EPS for the quarter increased 18% to $0.58 compared to $0.49 in the prior-year quarter. Diluted EPS for the six-months ended March 31, 2012 was $1.43 compared to $1.16 in the prior-year period.
With 18% adjusted growth in earnings per share, we’re pleased with our second quarter performance. We’re incredibly optimistic about our future, given the strength of our core brands, Disney, Pixar, Marvel, ESPN, and ABC, and our extraordinary ability to grow franchises across our businesses, such as The Avengers, which shattered domestic box office records with a $207.1 million opening weekend for a global performance of more than $702 million to date.
Robert A. Iger, Disney Chairman and CEO
EPS for the current quarter includes restructuring and impairment charges totaling $38 million and a $184 million non-cash gain on the Company’s existing equity investment in UTV Software Communication Limited (UTV) which arose in connection with the acquisition of a controlling interest in UTV. The UTV gain was recorded in “Other Income” in the Consolidated Statements of Income.
EPS for the prior-year six months included gains on the sales of Miramax and BASS ($75 million) and restructuring and impairment charges ($12 million). On an after-tax basis, these items had a net negative impact on EPS of $0.01. Excluding these items and the current year items discussed above, EPS for the six-month period increased 18% to $1.38 compared to $1.17 in the prior-year period.
Media Networks revenues for the quarter increased 9% to $4.7 billion and segment operating income increased 13% to $1.7 billion.
Operating income at Cable Networks increased $143 million to $1.5 billion for the quarter due to growth at ESPN and, to a lesser extent, at the domestic Disney Channels. The increase at ESPN was driven by higher affiliate and advertising revenue partially offset by higher programming and production costs. The increase in affiliate revenue was due to contractual rate increases and a reduction in revenue deferrals related to annual program commitments. During the quarter, ESPN deferred $190 million of revenue compared to $262 million in the prior year quarter. The decrease was due to a change in the provisions related to annual programming commitments in an affiliate contract. Advertising revenue growth was due to higher rates and a shift in the timing of Rose Bowl, Fiesta Bowl and NBA games relative to our fiscal period end. Higher programming and production costs were driven by the shift in the timing of college bowl and NBA games and higher contractual rates for college basketball programming. Higher operating income at the domestic Disney Channels was primarily due to increased affiliate revenue from contractual rate increases and higher sales of Disney Channel programs.
Operating income at Broadcasting increased $62 million to $229 million due to lower programming and production costs and higher advertising revenue. Lower programming and production costs were due to the absence of costs for The Oprah Winfrey Show at the owned television stations and decreased daytime and news production costs at the ABC Television Network. Higher advertising revenues were due to increased primetime rates at the ABC Television Network partially offset by a decrease at the owned television stations.
Parks and Resorts
Parks and Resorts revenues for the quarter increased 10% to $2.9 billion and segment operating income increased 53% to $222 million. Results for the quarter were driven by increases at our domestic parks and resorts, Tokyo Disney Resort 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 increased costs. Increased guest spending reflected higher average ticket prices, daily hotel room rates and food, beverage and merchandise spending. Higher costs were driven by labor cost inflation, resort expansion and new guest offerings, volume-related cost increases, and increased investments in systems infrastructure.
The increase at Tokyo Disney Resort reflected the loss of income in the prior-year quarter from the March 2011 earthquake and tsunami in Japan, which resulted in a temporary suspension of operations, and the collection of related business interruption insurance proceeds in the current-year quarter. The increase at Hong Kong Disneyland Resort was due to higher guest spending and attendance. The decrease at Disneyland Paris was due to lower attendance and labor cost inflation.
Studio Entertainment revenues decreased 12% to $1.2 billion and segment operating income decreased $161 million to a loss of $84 million.
The decline in operating income was primarily due to lower worldwide theatrical results reflecting the performance of John Carter in the current quarter along with the related film cost write-down. Other titles in the current quarter include The Muppets and Beauty and the Beast 3D while the prior year included Tangled, Tron: Legacy and Mars Needs Moms.
Consumer Products revenues increased 8% to $679 million and segment operating income increased 4% to $148 million. Higher operating income was primarily due to an increase at Merchandise Licensing partially offset by lower results at our retail business.
The increase at Merchandise Licensing was primarily due to higher minimum guarantee shortfall recognition in the current quarter and earned revenue growth driven by the performance of Minnie, Mickey, The Avengers and Princess merchandise.
The decrease at our retail business was due to a decline in our North American business driven by decreased margins due to higher promotions.
Interactive Media revenues for the quarter increased 13% to $179 million and segment operating results improved by $45 million to a loss of $70 million. Operating results were driven by an increase at our games business reflecting improved results from social and console games.
Social game results were driven by lower acquisition accounting impacts which had a higher adverse impact on the prior-year quarter and improved title performance in the current quarter.
Improved console game results were primarily due to lower product development costs, partially offset by a decline in console game sales, which reflected fewer titles in release in the current year. Lower product development costs reflected our ongoing shift from console games to social and other interactive platforms.
Wrapping it Up
So, despite the flop that is John Carter, the company had a great quarter that beat the street’s expectations. Thanks to the strong showing of ESPN and the Disney Parks the net income grew 21%; from $1.14 billion, or 63 cents per share, from $942 million, or 49 cents per share, a year ago.
Earnings rose to 58 cents per share after one-time items, including a $184 million non-cash gain related to Disney acquiring a controlling stake in Indian media company UTV. Topping the 55 cents expected by many analysts.
Revenue rose 6 percent to $9.63 billion from $9.08 billion; also beating the $9.57 billion expected.
You can find more detailed information on the results of the 2nd quarter on Disney’s site here.