Disney 2015 Q4 Financial Report

The Walt Disney Company today reported earnings for its fourth quarter and fiscal year ended October 3, 2015. Diluted earnings per share (EPS) for the fourth quarter increased 10% to $0.95 from $0.86 in the prior-year quarter. Excluding certain items affecting comparability(1), EPS for the quarter increased 35% to $1.20 from $0.89 in the prior-year quarter. Diluted EPS for the year increased 15% to $4.90 from $4.26 in the prior year. Excluding certain items affecting comparability(1), EPS for the year increased 19% to $5.15 from $4.32 in the prior year.

“We had a strong quarter, with adjusted EPS up 35%, completing our fifth consecutive year of record performance,” said Robert A. Iger, chairman and chief executive officer of The Walt Disney Company. “In Fiscal 2015 we delivered the highest revenue, net income and adjusted EPS in the Company’s history, reflecting the power of our great brands and franchises, the quality of our creative content, and our relentless innovation to maximize value from emerging technologies.”

Media Networks
Media Networks revenues for the quarter increased 12% to $5.8 billion, and segment operating income increased 27% to $1.8 billion. The following table provides further detail of the Media Networks results (in millions):

Cable Networks:
Operating income at Cable Networks increased $381 million to $1.7 billion for the quarter due to an increase at ESPN and, to a lesser extent, A&E Television Networks (A & E) and the Disney Channels.

The increase at ESPN reflected higher affiliate and advertising revenues, partially offset by an increase in programming costs. Affiliate revenue growth was driven by contractual rate increases and an increase in subscribers. The increase in subscribers was due to a full quarter of the SEC Network, which launched in August 2014, partially offset by a decline in subscribers at certain of our networks. Growth in advertising revenue reflected higher units sold, partially offset by lower ratings. Higher programming costs reflected a full quarter for the SEC Network, additional rights for the US Open Tennis tournament and contractual rate increases for Major League Baseball and NFL rights, partially offset by the absence of rights costs for NASCAR.

Higher equity income from A & E was due to lower programming and marketing costs, partially offset by lower advertising and affiliate revenue. The increase at Disney Channels was driven by higher affiliate revenues, partially offset by higher programming costs. Affiliate revenue growth reflected contractual rate increases domestically and subscriber growth internationally. The programming cost increase was driven by higher costs for original programming, including more hours of new series in the current quarter.

Broadcasting
Operating income at Broadcasting was essentially flat at $164 million for the quarter. Growth in advertising and affiliate revenue was offset by higher programming costs, lower operating income from program sales, an equity loss from Hulu and higher marketing costs for the fall season launch. The increase in advertising revenue reflected higher units sold, including the benefit of the extra week of operations, and higher rates. Affiliate revenue growth was due to contractual rate increases and new contractual provisions. Higher programming costs reflected the impact of an additional week of operations. Lower operating income from program sales was driven by an increase in cost amortization and lower sales. Program sales reflected decreases for My Wife and Kids and America’s Funniest Home Videos, partially offset by the sale of How to Get Away with Murder in the current quarter. The equity loss from Hulu was due to higher content and marketing costs.