Disney Second Quarter Earnings - not too pretty

[Mouseaholic!!!]

From Market Watch today at 4:30.....so you cannot call me a liar this time....only cutting and pasting!


Parks and 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.

Domestic Operations

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.

International Operations

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


The Walt Disney Company Reports Second Quarter Earnings


Last update: 4:03 p.m. EDT May 5, 2009
BURBANK, Calif., May 05, 2009 (BUSINESS WIRE) -- The Walt Disney Company (DIS:Walt Disney Co
News , chart , profile , more
Last: 23.15+0.29+1.27%

4:00pm 05/05/2009

DIS 23.15, +0.29, +1.3%) 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," said Robert A. Iger, president and CEO, The Walt Disney Company. "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."
The following table summarizes the second quarter and six-month results for fiscal 2009 and 2008 (in millions, except per share amounts):
Quarter Ended Six Months Ended
March 28, March 29, Change March 28, March 29, Change
2009 2008 2009 2008
Revenues $ 8,087 $ 8,710 (7 ) % $ 17,686 $ 19,162 (8 ) %
Segment operating income (1) $ 1,526 $ 2,139 (29 ) % $ 2,970 $ 4,387 (32 ) %
Net income $ 613 $ 1,133 (46 ) % $ 1,458 $ 2,383 (39 ) %
Diluted EPS (2) $ 0.33 $ 0.58 (43 ) % $ 0.78 $ 1.21 (36 ) %
Cash provided by operations $ 1,805 $ 2,603 (31 ) % $ 2,067 $ 3,265 (37 ) %
Free cash flow (1) $ 1,347 $ 2,256 (40 ) % $ 1,318 $ 2,669 (51 ) %
(1) Aggregate segment operating income and free cash flow are non-GAAP
financial measures.See the discussion of non-GAAP financial
measures below.
(2) EPS for the current quarter includes restructuring and impairment
charges which had a $0.10 per share impact on EPS.Excluding
these items, EPS for the quarter was $0.43, down 26% from the
prior-year quarter. EPS for the six months also included a gain on
the sale of our investment in two pay television services in Latin
America which is reported in "Other Income" in the consolidated
statements of income.This gain and the restructuring and
impairment charges collectively had a negative $0.07 per share
impact on EPS for the six months. Excluding these items, EPS for
the six months was $0.85, down 30% from the prior-year period.

SEGMENT RESULTS
The following table summarizes the second quarter and six-month segment operating results for fiscal 2009 and 2008 (in millions):
Quarter Ended Six Months Ended
March 28, March 29, Change March 28, March 29, Change
2009 2008 2009 2008
Revenues (1):
Media Networks $ 3,620 $ 3,550 2 % $ 7,523 $ 7,659 (2 ) %
Parks and Resorts 2,407 2,725 (12 ) % 5,072 5,497 (8 ) %
Studio Entertainment 1,435 1,822 (21 ) % 3,380 4,463 (24 ) %
Consumer Products 496 457 9 % 1,269 1,111 14 %
Interactive Media 129 156 (17 ) % 442 432 2 %
$ 8,087 $ 8,710 (7 ) % $ 17,686 $ 19,162 (8 ) %
Segment operating income (1):
Media Networks $ 1,306 $ 1,356 (4 ) % $ 1,961 $ 2,285 (14 ) %
Parks and Resorts 171 339 (50 ) % 553 844 (34 ) %
Studio Entertainment 13 377 (97 ) % 200 891 (78 ) %
Consumer Products 97 127 (24 ) % 362 414 (13 ) %
Interactive Media (61 ) (60 ) (2 ) % (106 ) (47 ) nm
$ 1,526 $ 2,139 (29 ) % $ 2,970 $ 4,387 (32 ) %
(1) Beginning with the first quarter fiscal 2009 financial statements,
the Company began reporting its Disney Interactive Media Group
along with certain new business initiatives as "Interactive Media"
for segment reporting purposes. Prior period amounts have been
reclassified to conform to the new presentation.

 

[jlewisinsyr]

All things considered, I thought there were a lot better then expected.

 

[Mouseaholic!!!]

Certainly better than some thought they would be.

I guess this settles the question about parks being full - therefore Disney is not affected by the economy.....sadly.

I wonder when the next round of layoffs and cost cutting will be? ....more non-essential castmembers available to let go?

 

[scooter15]

I dont think that this is good news for the parks honestly. I read somewhere that the deep discounts in admission and hotels are negatively impacting their revenue. It may look busy but in both DL and WDW, hotel rooms are not being booked and outside companies are canceling events/conventions/meetings. Those that are visiting the park and making hotel reservations are getting some hotel nights for free or getting deeply discounted rooms. As far as park admission, some are getting free days and I know at DL, they are offering admission for multiple days for discounts when in the past, they have not done so, at least to the degree they are offering.

I think the next wave of cuts are going to happen and I'm sure we will see it soon.

 

[jlewisinsyr]

I'm not sure you'll see cuts at the park level, they've anticipated some of this decline in volume/revenue/profit with the escalation of the reorganizations and job eliminations. Park attendance is not greatly impacted currently, which means that the number of positions required to handle the current guest load is really unchanged. What they may need to do is work smarter, look for efficiencies, etc, but general cuts will just impact their service quality which has already been receiving hits in the past few years and in the current market, I'm not sure they're willing to take more.

 

[MassJester]

Can't imagine that the results could have come in any other way. My business has been impacted, all of my clients' business has been impacted, and from what I read in the newspaper, so has everyone else's. How could we possibly expect that Disney would have been immune.

The good news is that they didn't operate at a loss--given the track record of the many of the other large companies in the country, this is quite an accomplishment.

 

[MassJester]

From today's NY Times web site:

Disney’s parks and resorts, an $11.5 billion annual business that is carefully watched as a barometer of consumer confidence, reported a 50 percent decline in income to $171 million. Revenue for the quarter declined just 12 -ercent, however, indicating that aggressive discounting is keeping the parks busy but hurting margins. Although the Easter holiday did not fall in the company’s fiscal second quarter this year, attendance at Disney World was down just 1 percent while Disneyland posted a 2 percent increase.

In contrast, the rival Universal Studios theme parks, operated by NBC Universal, suffered attendance declines of about 20 percent in recent months.

 

[scooter15]

I'm not sure you'll see cuts at the park level, they've anticipated some of this decline in volume/revenue/profit with the escalation of the reorganizations and job eliminations. Park attendance is not greatly impacted currently, which means that the number of positions required to handle the current guest load is really unchanged. What they may need to do is work smarter, look for efficiencies, etc, but general cuts will just impact their service quality which has already been receiving hits in the past few years and in the current market, I'm not sure they're willing to take more.

WDP&R could actually have more job losses. What people tend to forget that the people that work at the parks, dont' necessarily have any guest interaction. There are many that are employed that service the park in marketing, sales, broadcasting, community relations, HR, etc that can be cut. Remember they are talking about creating "One Disney" and therefore consolidating positions and responsibilities. If that is the case, you will see further cuts in more backstage positions as they try to "combine" the two parks organization. Otherwise, no cuts will probably be felt by front line cast members or managers.

Also, I am out in California and so I only could remark on the West Coast stuff but even though the amount of visitors remains high, they are still not spending money. Also, many events at the hotel have been canceled and there have been too many rooms available at the hotels than in the past. The economy is still in decline in Southern California and we have double digit unemployment. There are still a lot of companies that are laying off despite what you may hear from the media. People are losing jobs and there a lot of families losing their homes. Disneyland relies on the locals moreso than WDW. If DL is going to keep their revenue even they are really going to have to cut operating costs somewhere to accomodate the fact that people aren't buying things inside the park. Yeah, you might have had that discounted admission, but there was an increase in food prices and the portions are smaller. I personally have seen more people eat outside the park where they can get their $'s worth.

 

[crazy4wdw]

From the Orlando Sentinel:

Walt Disney Co. reports 46% drop in quarterly profit as revenue falls 7%
Jason Garcia | Sentinel Staff Writer
7:40 PM EDT, May 5, 2009

The Walt Disney Co. reported on Tuesday sharply lower profit during the first three months of the year, as the media-and-entertainment giant was squeezed by heavy discounting in its theme parks and a poor performance at its movie studio.

Disney said it made $613 million during the three months that ended March 28 -- the second quarter of the company's fiscal year -- down 46 percent from $1.1 billion during the same period last year.

Revenue dropped 7 percent to $8.1 billion.

Yet the results -- when one-time costs were excluded -- narrowly beat Wall Street estimates. And Disney Co. President and Chief Executive Officer Bob Iger said the Burbank, Calif.-based company is beginning to see signs that some of its businesses -- including its theme parks -- are stabilizing despite the continuing global recession.

"On the parks side, we haven't seen a trend downward for a few months. The trends that we've seen this year seem to be continuing and not worsening," Iger said during a conference call with analysts. "But we're not suggesting we're seeing signs of improvements in that business yet."

Disney's earnings amounted to 43 cents a share, excluding one-time costs. That was down from 58 cents a share a year ago but ahead of the 40 cents that analysts polled by Thomson Reuters had been expecting.

Still, Disney's theme-park division was hard hit during the quarter. Operating profit at Walt Disney Parks and Resorts fell 50 percent, dropping from $339 million to $171 million. Sales sank 12 percent to $2.4 billion.

Both sales and profit fell even though attendance slipped just 1 percent at Walt Disney World and rose 2 percent at Disneyland in Anaheim, Calif. The reason: Disney's decision to use deep discounts to stimulate travel.

The effect was particularly pronounced at Disney's hotels.

Hotel occupancy at Disney World, where Disney has been selling seven hotel nights for the price of four, actually climbed one percentage point during the period to 89 percent. But per-room spending plummeted 17 percent.

Meanwhile, at Disneyland, which does not have a seven-for-four offer, hotel occupancy dropped 14 percentage points to 69 percent. But per-room spending slipped just 6 percent.

Overall guest spending at Disney's two U.S. resorts fell 6 percent because of lower average hotel rates, lower average admission prices and lower merchandise sales.

The discount strategy "has had a predictable impact on margins. But it's also had the intended effect of bringing people to our parks," Iger said. "We expect these visits will keep guests coming back for more and telling others about the great time they had."

The parks' January-through-March performance was also affected by the shift of the busy Easter travel period from March last year to April this year.

Disney said profit also fell at its Disney Vacation Club time-share arm, in part because of difficult credit-market conditions and fewer contract-extension sales. Still, Disney Chief Financial Officer Tom Staggs said, "We're pleased with the pace of sales" in the time-share unit, which is currently selling interests in three resorts in Orlando.

Iger and Staggs credited theme-park executives with aggressive cost-cutting during the quarter -- steps that included cutting roughly 1,900 jobs in the U.S., of which 1,400 were in Florida. Disney said the cuts, which included 1,200 layoffs and buyouts, cost it roughly $51 million in restructuring charges during the quarter.

Looking forward, Disney said hotel bookings are nearly even with last year's pace for the remainder of the company's fiscal year. The company stopped short of saying it would no longer rely on discounts once the seven-for-four promotion ends in mid-August, despite its comments that business appears to be stabilizing. "We'll have to read the marketplace as we get there," Staggs said.

It was enough to send Disney shares rising in after-hours trading.

"I think people were really concerned about the theme-park results. And they weren't great. But they were, let's say, serviceable," said Hal Vogel, president of Vogel Capital Management. "It showed that Disney is quite responsive to the economic environment."

Disney's move studio struggled even more than its theme parks. Operating profit plunged 97 percent to $13 million, in large part because movies such as Highly School Musical 3: Senior Year, Beverly Hills Chihuahua and Bolt failed to sell nearly as many DVDs as Enchanted, Game Plan and No Country for Old Men did a year ago. Disney said its theatrical releases during the quarter also struggled when compared with a year ago.

Iger called the studio results "a disappointment."

On the other hand, he said Disney's media networks held up "remarkably well" during the quarter, as operating income fell just 4 percent to $1.3 billion and overall revenue rose 2 percent to $3.6 billion. Disney credited growth at its ESPN, ABC Family and Disney Channel cable-TV channels.

Disney said operating profit fell 24 percent in its consumer products division and 2 percent in its interactive media division.

Jason Garcia can be reached at jrgarcia@orlandosentinel.com or 407-420-5414.

 

[lovemickeyshouse]

I think there doing just fine .

 

[Mouseaholic!!!]

I think there doing just fine .

PLEASE tell us how you have decided that Disney is doing so well when Robert Iger just said.......

“We had a difficult second quarter due to the weak economy and other factors,” said Robert A. Iger, president and CEO, The Walt Disney Company."

 

[jimmymac]

I think there doing just fine .

Please pass the Kool Aid What set of numbers are you looking at???

 

[dexim54]

PLEASE tell us how you have decided that Disney is doing so well when Robert Iger just said.......

“We had a difficult second quarter due to the weak economy and other factors,” said Robert A. Iger, president and CEO, The Walt Disney Company."

What he probably meant is Disney beat market expecatations, and stock rose nearly $3 a share. Of course Iger is gonna say something like that since everything went down, if he said everything was fine the press would be all over him.

 

[Mouseaholic!!!]

What he probably meant is Disney beat market expecatations, and stock rose nearly $3 a share. Of course Iger is gonna say something like that since everything went down, if he said everything was fine the press would be all over him.

I guess in this day and age - revenue dropping 7% and profits down 46% is a ......... good thing?

So they beat the market by a few points.......numbers still cannot be comfortable in the comptrollers office.

 

[KYMickey]

Folks, you need to look at the positive side of things, Profits are down! Yes, that's very positive because there still are profits even with all of the free or reduced priced benefits. Many companies are losing money these days yet Disney has figured out how to keep making a profit! Seems like very good news to me.

 

[Peter Pirate 2]

Folks, you need to look at the positive side of things, Profits are down! Yes, that's very positive because there still are profits even with all of the free or reduced priced benefits. Many companies are losing money these days yet Disney has figured out how to keep making a profit! Seems like very good news to me.

Yes and no don't you think? If Disney were selling razor blades, then yes that'd be great news but what Disney sells is so unique, so special that the things they need to do to keep making a profit are virtually killing the reasons for buying the product at all.

Sure the name will be left and the remnnants of the empire, and some (maybe many) people will continue to be persuaded to buy anything labled 'Disney' by the PR machine but the true magic, the understanding CM's, the imagination, the creativity? They can't survive this, can they?

 

[praline3001]

Yes and no don't you think? If Disney were selling razor blades, then yes that'd be great news but what Disney sells is so unique, so special that the things they need to do to keep making a profit are virtually killing the reasons for buying the product at all.

Sure the name will be left and the remnnants of the empire, and some (maybe many) people will continue to be persuaded to buy anything labled 'Disney' by the PR machine but the true magic, the understanding CM's, the imagination, the creativity? They can't survive this, can they?

I have been lurking on this thread but you do make a very valid point. Yesterday the new codes came out to give my example... with the club level at GF (as those were the numbers I was playing with)
a regular GV room is 399 a night
with this new CL code
sugar loaf (outer lodge CL) is 338
RPC (main building CL) is 448

So CL is cheaper than GV now
I am concerned because with cutting prices THAT much how can they offer the same service? I expect a certain level of service as a club level guest ...its why I pay the extra money. The only way they can keep doing this is if they cut services...

 

[MassJester]

If Disney were selling razor blades, then yes that'd be great news but what Disney sells is so unique, so special that the things they need to do to keep making a profit are virtually killing the reasons for buying the product at all.

Says who?

 

[Peter Pirate 2]

Says who?

I was simply asking a question for discussion.