Disney Releases Q3 Financials
PRESS RELEASE posted on 31 JUL 2008 by Jim Zabek
Walt Disney Company has released its third quarter financial statement. A partial reading of that release follows.
The Walt Disney Company (NYSE: DIS) today reported earnings for the third fiscal quarter and nine months ended June 28, 2008. Diluted earnings per share (EPS) for the third quarter increased to $0.66, compared to $0.57 in the prior-year quarter. EPS for the current quarter included an accounting gain related to the acquisition of the Disney Stores in North America, a gain on the sale of movies.com, and the favorable resolution of certain prior-year income tax matters. Collectively, these items totaled $0.04 per share.
For the current nine-month period, diluted EPS was $1.87. EPS for the prior-year nine-month period, which included gains on sales of our interests in E! Entertainment and Us Weekly, income from the discontinued operations of the ABC Radio business, and an equity-based compensation plan modification charge, which were all recognized in the first quarter of fiscal 2007, was $1.81. Excluding these items and the current-year items discussed above, EPS for the current-year nine months was $1.83 compared to $1.50 in the prior-year nine months.
“We’ve had another solid quarter at The Walt Disney Company, further illustrating our creative momentum, the competitive strength of our brands and our ability to cohesively manage a great collection of assets to maximize shareholder value,” said Robert A. Iger, president and chief executive officer.
The following table summarizes the third quarter and nine-month results for fiscal 2008 and 2007 (in millions, except per share amounts):
Quarter Ended Nine Months Ended
June 28,
2008
June 30,
2007
Change
June 28,
2008
June 30,
2007
Change
Revenues $ 9,236 $ 9,045 2 % $ 28,398 $ 26,580 7 %
Segment operating income (1) $ 2,323 $ 2,285 2 % $ 6,712 $ 5,999 12 %
Income from continuing operations $ 1,284 $ 1,196 7 % $ 3,667 $ 3,791 (3 ) %
Diluted EPS from continuing operations $ 0.66 $ 0.58 14 % $ 1.87 $ 1.80 4 %
Diluted EPS (2) $ 0.66 $ 0.57 16 % $ 1.87 $ 1.81 3 %
Cash provided by continuing operations $ 936 $ 1,127 (17 ) % $ 4,201 $ 3,825 10 %
Free cash flow (1) $ 583 $ 687 (15 ) % $ 3,252 $ 2,839 15 %
(1) Aggregate segment operating income and free cash flow are non-GAAP financial measures. See the discussion of non-GAAP financial measures below.
(2) Results for the nine months ended June 28, 2008 included an accounting gain related to the acquisition of the Disney Stores in North America, a gain on the sale of movies.com, and the favorable resolution of certain prior-year income tax matters. Diluted EPS for the nine months ended June 28, 2008 excluding these items was $1.83. Results for the nine months ended June 30, 2007 included gains on the sales of equity investments in E! Entertainment and Us Weekly, income from the discontinued ABC Radio business and a charge related to a modification of equity-based compensation plans in connection with the ABC Radio transaction. Diluted EPS for the nine months ended June 30, 2007 excluding these items was $1.50. See the discussion of non-GAAP financial measures below.
SEGMENT RESULTS
The following table summarizes the third quarter and nine-month segment operating results for fiscal 2008 and 2007 (in millions):
Quarter Ended Nine Months Ended
June 28,
2008
June 30,
2007
Change
June 28,
2008
June 30,
2007
Change
Revenues (1) (2):
Media Networks $ 4,123 $ 3,829 8 % $ 11,904 $ 11,071 8 %
Parks and Resorts 3,038 2,904 5 % 8,535 7,839 9 %
Studio Entertainment 1,433 1,775 (19 ) % 5,896 5,958 (1 ) %
Consumer Products 642 537 20 % 2,063 1,712 21 %
$ 9,236 $ 9,045 2 % $ 28,398 $ 26,580 7 %
Segment operating income (1) (2):
Media Networks $ 1,472 $ 1,356 9 % $ 3,697 $ 3,216 15 %
Parks and Resorts 641 621 3 % 1,485 1,280 16 %
Studio Entertainment 97 190 (49 ) % 988 1,027 (4 ) %
Consumer Products 113 118 (4 ) % 542 476 14 %
$ 2,323 $ 2,285 2 % $ 6,712 $ 5,999 12 %
(1) Beginning with the first quarter fiscal 2008 financial statements, the Company began reporting Hyperion Publishing in the Media Networks segment. Previously, Hyperion Publishing had been reported in the Consumer Products segment. Prior-period amounts (which are not material) have been reclassified to conform to the current year presentation.
(2) Operating results of the ABC Radio business are reported as discontinued operations for the prior-year quarter and nine months and therefore have been excluded from the prior-year quarter and nine-month segment results.
Media Networks
Media Networks revenues for the quarter increased 8% to $4.1 billion and segment operating income increased 9% to $1.5 billion. The following table provides further detail of the Media Networks results (in millions):
Quarter Ended Nine Months Ended
June 28,
2008
June 30,
2007
Change
June 28,
2008
June 30,
2007
Change
Revenues:
Cable Networks $ 2,592 $ 2,305 12 % $ 7,114 $ 6,372 12 %
Broadcasting 1,531 1,524 - % 4,790 4,699 2 %
$ 4,123 $ 3,829 8 % $ 11,904 $ 11,071 8 %
Segment operating income:
Cable Networks $ 1,212 $ 1,063 14 % $ 2,892 $ 2,485 16 %
Broadcasting 260 293 (11 ) % 805 731 10 %
$ 1,472 $ 1,356 9 % $ 3,697 $ 3,216 15 %
Cable Networks
Operating income at Cable Networks increased 14% to $1.2 billion for the quarter primarily due to growth at ESPN and, to a lesser extent, higher income from our cable equity investments and an increase at the international Disney Channels. The growth at ESPN was driven by higher affiliate and advertising revenue, partially offset by higher programming and production, administrative and marketing costs. The increase in affiliate revenue was primarily due to contractual rate increases, subscriber growth, and increased recognition of previously deferred revenue related to annual programming commitments. Higher programming and production costs reflected increased sports rights costs for various sporting events and included production costs for additional NBA games. During the quarter, ESPN recognized $78 million of previously deferred revenues compared to $49 million in the prior-year quarter. Remaining deferred revenues of $396 million as of the end of the current quarter are expected to be recognized in the fourth quarter of the fiscal year compared to $359 million recognized in the fourth quarter of the prior year. Higher income from our cable equity investments was primarily due to the recognition of previously deferred revenues in connection with finalizing certain affiliate contracts at ESPN’s Star Sports joint venture in Asia and higher advertising revenues at Lifetime. Increased operating income at the international Disney Channels reflected higher affiliate revenues due to subscriber growth.
Broadcasting
Operating income at Broadcasting decreased 11% to $260 million for the quarter primarily due to higher production cost amortization related to programs in syndication and lower advertising sales at the owned television stations, partially offset by lower costs for new scripted programming for the ABC Television Network. These decreased costs were the result of lower expenses fo
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