The Walt Disney Company reported their quarterly earnings for its third fiscal quarter ended June 30, 2018. Let’s take a look at what all was released…
Diluted earnings per share (EPS) for the quarter increased 29% to $1.95 from $1.51 in the prior-year quarter. Excluding certain items affecting comparability, EPS for the quarter increased 18% to $1.87 from $1.58 in the prior-year quarter. EPS for the nine months ended June 30, 2018 increased to $6.81 from $4.55 in the prior-year period. Excluding certain items affecting comparability, EPS for the nine months increased 21% to $5.60 from $4.63 in the prior-year period.
“We’re pleased with our results in the quarter, including a double-digit increase in earnings per share, and excited about the opportunities ahead for continued growth,” said Robert A. Iger, Chairman and Chief Executive Officer, The Walt Disney Company. “Having earned the overwhelming support of shareholders, we are more enthusiastic about the 21st Century Fox acquisition than ever, and confident in our ability to fully leverage these assets along with our own incredible brands, franchises and businesses to drive significant value across the entire company.”
Media Networks
Media Networks revenues for the quarter increased 5% to $6.2 billion and segment operating income was comparable to the prior-year quarter at $1.8 billion.
- Cable Networks – Cable Networks revenues for the quarter increased 2% to $4.2 billion and operating income decreased 5% to $1.4 billion. Lower operating income was due to a loss at BAMTech and a decrease at Freeform, partially offset by an increase at ESPN.
- Broadcasting – Broadcasting revenues for the quarter increased 11% to $2.0 billion and operating income increased 43% to $361 million. The increase in operating income was due to higher program sales, affiliate revenue growth and increased network advertising revenue, partially offset by higher programming costs.
- Equity in the Income of Investees – Equity in the income of investees decreased from $127 million in the prior-year quarter to $78 million in the current quarter due to higher losses from Hulu and lower income from A+E Television Networks (A+E). These decreases were partially offset by the absence of a loss from BAMTech, which is now consolidated and reported in Cable Networks. The decrease at Hulu was driven by higher programming and labor costs, partially offset by growth in subscription and advertising revenue. The decrease at A+E was due to lower advertising revenue and higher programming costs, partially offset by higher program sales.
Parks and Resorts
Parks and Resorts revenues for the quarter increased 6% to $5.2 billion and segment operating income increased 15% to $1.3 billion. Operating income growth for the quarter was due to increases across key operations. Results include an unfavorable impact due to the timing of the Easter holiday relative to the fiscal periods. One week of the Easter holiday fell in the third quarter of the current year whereas both holiday weeks fell in the third quarter of the prior year.
Higher operating income at the domestic parks and resorts was due to increased guest spending, partially offset by increased costs. Guest spending growth was due to increases in average ticket prices, food, beverage and merchandise spending and average daily hotel room rates. The increase in costs was due to labor and other cost inflation, partially offset by lower marketing costs. At Disney Cruise Line, growth was driven by higher passenger cruise days, which was primarily due to the Disney Fantasy dry-dock in the prior-year quarter.
The increased operating income at the international parks and resorts was due to growth at Shanghai Disney Resort and Hong Kong Disneyland Resort. Higher operating income at Shanghai Disney Resort was due to lower costs and attendance growth, partially offset by decreased guest spending. The decrease in guest spending was driven by lower average ticket prices, partially offset by higher food and beverage spending. At Hong Kong Disneyland Resort, the increase in operating income was primarily due to higher occupied room nights, average ticket prices and attendance.
Studio Entertainment
Studio Entertainment revenues for the quarter increased 20% to $2.9 billion and segment operating income increased 11% to $708 million. Operating income growth was due to increases in domestic theatrical and worldwide TV/SVOD distribution results, partially offset by film cost impairments related to animated films that will not be released and lower domestic home entertainment results.
The increase in domestic theatrical distribution results was due to the success of Avengers: Infinity War and Incredibles 2 in the current quarter compared to Guardians of the Galaxy Vol. 2 and Cars 3 in the prior-year quarter, partially offset by higher pre-release marketing costs. Additionally, the current quarter included the continuing performance of Black Panther and the release of Solo: A Star Wars Story, whereas the prior-year quarter included the continuing performance of Beauty and the Beast and the release of Pirates of the Caribbean: Dead Men Tell No Tales.
Higher TV/SVOD distribution results were due to the timing of title availabilities at the domestic pay and free television businesses, international growth and higher domestic pay television rates.
Lower domestic home entertainment results were due to a decrease in unit sales driven by the timing of the release of Star Wars titles. The DVD/Blu-ray release of Star Wars: The Last Jedi was in the second quarter of the current year whereas the DVD/Blu-ray release of Rogue One: A Star Wars Story occurred in the prior-year third quarter. Other significant titles included Black Panther in the current quarter, while the prior-year quarter included Beauty and the Beast and Moana.
Consumer Products & Interactive Media
Consumer Products & Interactive Media revenues decreased 8% to $1.0 billion and segment operating income decreased 10% to $324 million. The decrease in operating income was due to lower income from licensing activities and decreased comparable retail store sales, partially offset by lower costs at the games business.
The decrease in income from licensing activities was driven by lower revenue from products based on Spider-Man and Cars, partially offset by an increase from products based on Avengers.
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