Earnings Report
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FOR IMMEDIATE RELEASE November 7, 2013 THE WALT DISNEY COMPANY REPORTS FOURTH QUARTER AND FULL YEAR EARNINGS FOR FISCAL 2013 • Revenues for the year increased 7% to a record $45.0 billion. • EPS for the year increased 8% to a record $3.38 compared to $3.13 in the prior year. • Net income(1) for the year increased 8% to a record $6.1 billion. BURBANK, Calif. – The Walt Disney Company today reported earnings for its fourth quarter and fiscal year ended September 28, 2013. Diluted earnings per share (EPS) for the quarter increased 13% to $0.77 from $0.68 in the prior-year quarter. For the year, diluted EPS increased 8% to $3.38 from $3.13 in the prior year. Excluding certain items affecting comparability, EPS for the year increased 10% to $3.39 compared to $3.07 in the prior year. For the quarter, items affecting comparability had no net effect on year-over-year growth. “We’re extremely pleased with our results for Fiscal 2013, delivering record revenue, net income and earnings per share for the third year in a row,” said Robert A. Iger, Chairman and CEO, The Walt Disney Company. “It was another great year for the Company, both creatively and financially, and we remain confident that we are well positioned to continue our strong performance and drive long-term shareholder value.” The following table summarizes the fourth quarter and full year results for fiscal 2013 and 2012 (in millions, except per share amounts): Quarter Ended Year Ended Sept. 28, Sept. 29, Sept. 28, Sept. 29, 2013 2012 Change 2013 2012 Change Revenues $ 11,568 $ 10,782 7 % $ 45,041 $ 42,278 7 % Segment operating $ 2,484 $ 2,339 6 % $ 10,724 $ 9,964 8 % income(2) Net income(1) $ 1,394 $ 1,244 12 % $ 6,136 $ 5,682 8 % Diluted EPS(1) $ 0.77 $ 0.68 13 % $ 3.38 $ 3.13 8 % Cash provided by $ 2,735 $ 1,535 78 % $ 9,452 $ 7,966 19 % operations Free cash flow(2) $ 1,748 $ 602 >100 % $ 6,656 $ 4,182 59 % (1) Reflects amounts attributable to shareholders of The Walt Disney Company, i.e. after deduction of noncontrolling interests. (2) Aggregate segment operating income and free cash flow are non-GAAP financial measures. See the discussion of non-GAAP financial measures that follows. 1 SEGMENT RESULTS The following table summarizes the full year and fourth quarter segment operating results for fiscal 2013 and 2012 (in millions): Quarter Ended Year Ended Sept. 28, Sept. 29, Sept. 28, Sept. 29, 2013 2012 Change 2013 2012 Change Revenues: Media Networks $ 4,946 $ 4,881 1 % $ 20,356 $ 19,436 5 % Parks and Resorts 3,716 3,425 8 % 14,087 12,920 9 % Studio Entertainment 1,506 1,402 7 % 5,979 5,825 3 % Consumer Products 1,004 883 14 % 3,555 3,252 9 % Interactive 396 191 >100 % 1,064 845 26 % $ 11,568 $ 10,782 7 % $ 45,041 $ 42,278 7 % Segment operating income (loss): Media Networks $ 1,442 $ 1,571 (8) % $ 6,818 $ 6,619 3 % Parks and Resorts 571 497 15 % 2,220 1,902 17 % Studio Entertainment 108 80 35 % 661 722 (8)% Consumer Products 347 267 30 % 1,112 937 19 % Interactive 16 (76) nm (87) (216) 60 % $ 2,484 $ 2,339 6 % $ 10,724 $ 9,964 8 % Media Networks Media Networks revenues for the quarter increased 1% to $4.9 billion and segment operating income decreased 8% to $1.4 billion. For the year, revenues increased 5% to $20.4 billion and segment operating income increased 3% to $6.8 billion. The following table provides further detail of the Media Networks results (in millions): Quarter Ended Year Ended Sept. 28, Sept. 29, Sept. 28, Sept. 29, 2013 2012 Change 2013 2012 Change Revenues: Cable Networks $ 3,573 $ 3,535 1 % $ 14,453 $ 13,621 6 % Broadcasting 1,373 1,346 2 % 5,903 5,815 2 % $ 4,946 $ 4,881 1 % $ 20,356 $ 19,436 5 % Segment operating income: Cable Networks $ 1,284 $ 1,379 (7)% $ 6,047 $ 5,704 6 % Broadcasting 158 192 (18)% 771 915 (16)% $ 1,442 $ 1,571 (8)% $ 6,818 $ 6,619 3 % 2 Cable Networks Results for the Quarter Operating income at Cable Networks decreased $95 million to $1.3 billion for the quarter. The decrease in operating income was driven by a reduction of $172 million in the recognition of previously deferred ESPN affiliate fee revenues related to annual programming commitments. Absent this impact, operating income would have increased by $77 million driven by affiliate fee contractual rate increases at ESPN and the domestic Disney Channels and higher advertising revenue at ESPN, partially offset by higher programming and production costs. ESPN advertising revenues increased primarily due to an increase in units delivered and higher rates. The increase in programming and production costs was due to the addition of new college football rights, contractual rate increases for NFL, Major League Baseball (MLB) and college football rights and more episodes of original programming at the domestic Disney Channels. Results for the Year For the year, operating income at Cable Networks increased $343 million to $6.0 billion due to growth at ESPN, the domestic Disney Channels and A&E Television Networks (AETN). Growth at ESPN was due to increased affiliate and advertising revenues, partially offset by increased programming and production costs. Affiliate revenue improvement at ESPN was due to contractual rate increases and, to a lesser extent, international subscriber growth. ESPN advertising revenue growth was primarily due to an increase in units delivered and higher rates, partially offset by lower ratings. The increase in programming and production costs was due to contractual rate increases for college sports, NFL, MLB and NBA rights, production costs for new X Games events and the addition of new college football rights. Domestic Disney Channels growth was due to higher affiliate revenues from contractual rate increases, partially offset by higher programming costs driven by more episodes of original programming. Higher equity income from AETN reflected advertising and affiliate revenue growth, along with the benefit of the increase in the Company's ownership interest from 42% to 50%. Broadcasting Results for the Quarter Operating income at Broadcasting decreased $34 million to $158 million for the quarter due to higher primetime programming costs, an unfavorable comparison to syndication sales of Castle and Wipeout in the prior year and higher marketing costs for the fall season, partially offset by advertising and affiliate revenue growth. Higher primetime programming costs were driven by an increase in the average cost per hour due to a shift of hours from lower cost reality and primetime news to higher cost original scripted programming. Higher affiliate revenues were due to contractual rate increases and new contractual provisions. Growth in advertising revenue was due to higher units delivered at the ABC Television Network, increased Network rates and growth in online advertising, partially offset by lower primetime ratings and the absence of the Emmys, which was broadcast by ABC in the prior-year quarter. Results for the Year For the year, operating income at Broadcasting decreased $144 million to $771 million due to higher primetime programming costs and lower program sales, partially offset by higher affiliate and advertising revenues. Primetime programming costs reflected an increase in the average cost per hour as a result of a shift in hours from lower cost reality and primetime news to higher cost original scripted programming. The decline in program sales reflected higher sales in the prior year for Desperate Housewives, Castle and Grey's Anatomy, partially offset by current year increases for Scandal, Revenge and Once Upon a Time. Affiliate revenues benefited from contractual rate increases and new contractual provisions. Growth in advertising revenues was due to higher units delivered at the ABC Television Network, increased Network rates and growth in online advertising, partially offset by lower primetime ratings. 3 Parks and Resorts Parks and Resorts revenues for the quarter increased 8% to $3.7 billion and segment operating income increased 15% to $571 million. For the year, revenues increased 9% to $14.1 billion and segment operating income increased 17% to $2.2 billion. Results for the Quarter Results for the quarter reflected growth at our domestic parks and resorts, an increase in vacation club ownership sales and higher royalty revenue from Tokyo Disney Resort, partially offset by a decrease at Disneyland Paris. Higher operating income at our domestic parks and resorts was primarily due to increased guest spending, attendance and occupied room nights at Walt Disney World Resort and increased guest spending at Disneyland Resort. These increases were partially offset by higher costs at both resorts and lower attendance at Disneyland Resort, which reflected the success in the prior year from the opening of Cars Land at Disney California Adventure. Increased guest spending at our domestic parks was due to higher average ticket prices, food, beverage and merchandise spending and average daily hotel room rates. Higher costs were due to spending on MyMagic+ and labor and other cost inflation. Lower operating income at Disneyland Paris was due to lower attendance and occupied room nights, partially offset by increased guest spending. Increased guest spending reflected higher average ticket prices, merchandise, food and beverage spending and average daily hotel room rates. Results for the Year For the year, operating income growth reflected increases at our domestic parks and resorts, Disney Vacation Club and Hong Kong Disneyland Resort, partially offset by a decrease at Disneyland Paris and higher pre-opening costs at Shanghai Disney Resort. Operating income growth at our domestic parks and resorts was due to increased guest spending, attendance and occupied room nights, partially offset by higher costs.