Walt Disney Co. Doubles 4th Quarter Earnings

The Walt Disney Co. reports it has doubled its earnings for the fourth quarter and fiscal year ended Sept. 30, 2006, compared to the same time a year ago. Diluted earnings per share (EPS) for the fourth quarter increased 89% to $0.36, compared to $0.19 the same time a last year. The company also reports growth at each operating segment -- Studio Entertainment, Parks and Resorts and Media Networks.

In July 2006, The Walt Disney Studios announced it was restructuring and downsizing. It consolidated global marketing and distribution, would cut back on live-action movie production and reduce its work force by approximately 650 positions worldwide (approximately 20%).

Studio Entertainment revenues for the year decreased 1% to $7.5 billion and segment operating income increased from $207 million to $729 million. This income growth was primarily due to improvements in worldwide theatrical motion picture distribution and worldwide home entertainment.

For the quarter, revenues increased 33% to $2.0 billion and segment operating income increased $527 million to $214 million, an increase due again to improvements in worldwide theatrical motion picture distribution and worldwide home entertainment.

The improvement in worldwide theatrical motion picture distribution for the year was primarily due to lower distribution costs resulting from fewer domestic Miramax releases and good performance of PIRATES OF THE CARIBBEAN: DEAD MAN'S CHEST, THE CHRONICLES OF NARNIA: THE LION, THE WITCH AND THE WARDROBE and Disney/Pixar's CARS.

Worldwide home entertainment growth for the year was primarily due to reduced marketing and trade programs, lower distribution costs driven in part by fewer returns and improved margins from increased sales of television series DVD box sets.

Media Networks revenues for the year increased 11% to $14.6 billion and segment operating income increased 12% to $3.6 billion. For the quarter, revenues increased 10% to $3.7 billion while segment operating income increased 18% to $883 million.

Operating income at Cable Networks increased $259 million to $3.0 billion for the year primarily due to growth at ESPN from higher affiliate and advertising revenues. Higher affiliate revenues were due to contractual rate increases and, to a lesser extent, subscriber growth while advertising revenue growth was driven by higher ratings and rates. Increased costs for the ESPN branded mobile phone service, which the company recently announced would be transitioned into its existing wireless licensing business, and higher general and administrative costs also impacted results for the year.

For the quarter, operating income at Cable Networks increased $156 million to $854 million due to growth at ESPN.

Operating income at Broadcasting increased $142 million to $606 million for the year, driven by improved primetime performance at the ABC Television Network and increased sales of Touchstone Television series, partially offset by higher costs at the Internet Group and Radio, and the increased number and costs of pilot productions.

The cost increase at the Internet Group was primarily due to the launch of Disney branded mobile phone services as well as the costs of other new initiatives. Higher costs at Radio included an impairment charge related to FCC licenses.

For the quarter, operating income at Broadcasting decreased $19 million to $29 million as improved performance at the ABC Television Network and higher DVD unit sales of Touchstone Television series were offset by the increased costs associated with the roll-out of Disney branded mobile phone services and the FCC license impairment charge.

Consumer Products revenues for the year increased 3% to $2.2 billion and segment operating income increased 14% to $618 million. Revenues for the quarter increased 9% to $564 million and segment operating income increased 1% to $139 million.

The increase in segment operating income for the year was due to earned revenue growth at Merchandise Licensing, partially offset by lower results at Buena Vista Games. Growth at Merchandise Licensing was due to higher earned royalties across multiple product categories, led by the strong performance of Cars, Disney Princess and Pirates of the Caribbean merchandise. The decrease at Buena Vista Games was driven by increased product development spending on future self-published titles.

Parks and Resorts revenues for the year increased 10% to $9.9 billion and segment operating income increased 30% to $1.5 billion., led by the success of the 50th anniversary celebration, the first year of operations at Hong Kong Disneyland Resort and improvements at Disneyland Resort Paris.

For the quarter, revenues increased 8% to $2.5 billion and segment operating income increased 28% to $396 million, due to improvements at our international resorts and at Walt Disney World.

"Disney had a spectacular year, posting record revenues, record net income and record cash flow," said Bob Iger, president/ceo of the Walt Disney Co. "It is a result of the incredible creativity at our company."

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