Disney Quarterly Results: August 2015

(press release) The Walt Disney Company today reported record quarterly earnings of $2.5 billion for its third fiscal quarter ended June 27, 2015 compared to $2.2 billion for the prior-year quarter. Diluted earnings per share (EPS) for the third quarter increased 13% to $1.45 from $1.28 in the prior-year quarter. EPS for the nine months ended June 27, 2015 increased 16% to $3.95 from $3.40 in the prior-year period. Excluding certain items affecting comparability(1), EPS for the nine months increased 15%.

"We’re very pleased with our performance in the third quarter, with record net income and diluted earnings per share of $1.45, up 13% from the prior year,” said Robert A. Iger, Chairman and Chief Executive Officer, The Walt Disney Company. “The strong results across our many diverse lines of business demonstrate the power of our unparalleled brands, franchises and creative content."

The following table summarizes the third quarter and nine-month results for fiscal 2015 and 2014 (in millions, except per share amounts):



SEGMENT RESULTS

The following table summarizes the third quarter and nine-month segment operating results for fiscal 2015 and 2014 (in millions):



Media Networks

Media Networks revenues for the quarter increased 5% to $5.8 billion and segment operating income increased 4% to $2.4 billion. The following table provides further detail of the Media Networks results (in millions):



Cable Networks

Operating income at Cable Networks increased 7% to $2.1 billion for the quarter due to growth at the domestic Disney Channels, ABC Family and ESPN.

The increases at the domestic Disney Channels and ABC Family were due to higher program sales and increased affiliate revenue, driven by contractual rate increases. Program sales growth reflected increased subscription video on demand (SVOD) distribution revenues in the current quarter.

Operating results at ESPN were driven by growth in affiliate revenue, partially offset by lower advertising revenue. The increase in affiliate revenues was due to contractual rate increases and an increase in subscribers. The increase in subscribers was due to the new SEC Network launched in August 2014, partially offset by a decline in subscribers at certain of our networks. The impact of contractual rates and subscribers on affiliate revenue was partially offset by a decrease due to the recognition of $176 million of previously deferred revenue in the prior-year quarter related to annual programming commitments. As a result of changes in contractual provisions, ESPN did not recognize any deferred revenue in the current quarter. Lower advertising revenues reflected lower ratings and rates, partially offset by more units sold driven by NBA playoff games. Lower rates reflected the benefit of World Cup soccer in the prior-year quarter. ESPN programming and production costs were relatively flat in the quarter as the addition of the SEC Network and higher rights costs for NBA programming were essentially offset by the absence of rights costs for NASCAR and World Cup soccer.

Broadcasting

Operating income at Broadcasting decreased 15% to $300 million for the quarter driven by higher programming costs, lower advertising revenue and higher labor related costs, partially offset by growth in affiliate fees and higher program sales revenue from SVOD distribution. Higher programming costs were driven by increases in the average cost of primetime programming and pilot costs in the current quarter. Lower advertising revenues reflected decreased news and daytime ratings, partially offset by higher rates. Affiliate fee growth was due to new contractual provisions and contractual rate increases.

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