FY2012 TWDC financial results

[disneyflush]

I'm not optimistic about WDW's future for the next few years. I hope I'm wrong and they announce something major on December 7. (You know, the day the Germans bombed Pearl Harbor.)

Wasn't it Japan?

 

[jlsHouston]

From the Annual Report:

Interpretation:

We continue to charge WDW guests more every year while spending money on things they never see. We can't understand why WDW attendance is down "modestly". We think the best way to improve free cash flow is to increase prices at WDW.

I know you have to wonder how the high level executives ever got their jobs much less are able to hold onto them...

 

[SirLink]

and that is the problem.... usually people with vision have no concept of finances and vise versa. It's mucky water to be sure. We can only cross our fingers and hope for the best.

Actually there are many CEOs that have both the concept of finances and vision. Vision can be about creativity but in most cases its about seeing what the future is an planning so you aren't caught short and doesn't take you 5-7 years to do something.

 

[cbrune]

Well, they certainly should. The New Fantasyland looks beautiful, but nothing in it is as mind-blowing as what I hear Universal is up to with Harry Potter 2. Avatar hasn't got a chance against it, and anything with Star Wars is probably down the road a ways. TDO has got to stop being so timid and build another Tower of Terror or something!

Finally someone says it... I am tired of all the cloned and not unique attractions. Disney is always late to the ball lately.. Its just so sad.

 

[ParentsOf4]

Disney stock is down 6% this morning. Expect a rebound but it looks like no one was enthused about the forward-looking guidance provided by Iger and Rasulo.

 

[alphac2005]

Disney stock is down 6% this morning. Expect a rebound but it looks like no one was enthused about the forward-looking guidance provided by Iger and Rasulo.

The problem that the company has with regard to the Orlando property is that they no longer have the excuse of the economy. Yes, the economy isn't growing at a rapid pace, but it has been sustained and consumer spending and sentiment has been rising well throughout the year. So, I would expect that Orlando is a big red flag for any analyst that follows the company with any sense.

The answers for the decline in attendance are what we've been through on here many times. The question is whether the board will pull the trigger on action?

 

[powlessfamily4]

Actually there are many CEOs that have both the concept of finances and vision. Vision can be about creativity but in most cases its about seeing what the future is an planning so you aren't caught short and doesn't take you 5-7 years to do something.

My experience, having worked on the executive level for 18 years, is that they rarely go hand in hand. I am not saying it can't go hand in hand, just that it rarely does. The article below mentions Disney in the creative and analytical processes. Can anyone give fact determined insight into how Disney handles this process now?

http://www.searchengineworkshops.com/articles/10-creative-observations.html

 

[Alektronic]

Here is a video by Bloomberg that talks about the businesses of Disney with an interview with Bob Iger

http://www.bloomberg.com/video/the-...t-11-8-5C2jhzBgRHuc6H7bG~M1nw.html?cmpid=yhoo

 

[SirLink]

My experience, having worked on the executive level for 18 years, is that they rarely go hand in hand. I am not saying it can't go hand in hand, just that it rarely does. The article below mentions Disney in the creative and analytical processes. Can anyone give fact determined insight into how Disney handles this process now?

http://www.searchengineworkshops.com/articles/10-creative-observations.html

Like I said vision doesn't have to be creativity - most executives should know where the company should be in 5-10 years time so they don't get caught. Any executive worth their salt would be able to be able to do this. WE aren't talking about having an idea for a new product, but to be able to say to their employees to explore avenues that a company should explore.

Any executive who doesn't look into the future, aka "Have vision", are bound to fail employees as well as consumers.

 

[powlessfamily4]

Like I said vision doesn't have to be creativity - most executives should know where the company should be in 5-10 years time so they don't get caught. Any executive worth their salt would be able to be able to do this. WE aren't talking about having an idea for a new product, but to be able to say to their employees to explore avenues that a company should explore.

Any executive who doesn't look into the future, aka "Have vision", are bound to fail employees as well as consumers.

I agree to disagree. I feel it takes some level of creativity to make a vision happen.

 

[njDizFan]

The striking numbers on the report for me are:

66.4% of operating income came from media(57.2% from cable alone)..yeah ESPN makes a lot of money
9.4% came from merchandise...so between ESPN/Disney channel/ABC and merchandise that more than 75% of their entire profit(so yeah football and t-shirts)

with profit ratios of 34% and 28.8% respectively

opposed to P&R which account for 19% of operating income but only runs at a 14.7% profit(bolstered mostly by Cars Land, DCL and increased prices)

I would love for my personal investments run at at 14% clip but in todays world of business it is a bare minimum. Not hard to see why they would even consider selling off the division. At this rate I think Spirit may be right with a huge increase in tickets for 2013 to make the market/board happy.

 

[TalkingHead]

Wasn't it Japan?

And fifty years from now someone will say France attacked on 9/11.

 

[cheezbat]

Understand this. Whatever WDW builds at this point from Avatar to Cars Land to Monsters to any possible Lucas addition to Studios to some mystery project that hopefully is out there in hiding for EPCOT is at least 4-7 years away depending on when it is approved and budgeted.

This means that UNI and SW will have so much new product and Disney will have ... they'll have their NEXT GEN initiative featuring FastPass Plus ... oh, and a kiddie coaster at MK too!

If this is the case- no real new additions aside from the 7DMT in the next 3-5 years, then I truly believe now is the time for Universal and Sea World to shine. I really hope if Disney jumps ticket prices and hotel rates that this whole thing comes back to bite them in the butt.

If we see a big increase on ticket prices, I won't be visiting WDW in 2013 unless I'm either getting discounted tickets or in for free.

 

[MichWolv]

Wasn't it Japan?

 

[threvester]

I got it right away...guess im showing my age

 

[GoofGoof]

WDW related items from the conference call. Sorry if I misinterpret some of the statements.

• Record revenue, net income, and earning per share.
• Good Q4 results.
• Things are not looking good for the upcoming quarter so TWDC is going to blame Hurricane Sandy, along with bookkeeping factors. They "did not see a rash of cancellations" at WDW. New Jersey attendance for Jersey Week seems as strong as previous years.
• Combined, all of the Parks and Resorts initiatives (e.g. DCL, FLE, Next Gen, Carsland, Hong Kong, Shanghai, etc.) will generate $500 Million in incremental revenue but also cost $500 Million of incremental expense.
• FLE "is going to be pretty spectacular". Sounds to me like WWOHP should be shaking in its boots.
• TWDC is spending a lot of money on Next Gen. This will allow people to "plan their itinerary ahead of time." Comment: Seems like a lot of money so people can do something they already can do. Thank goodness we have FP+.
• DLR attendance was way up because of the "great success of Carsland".
• They are hoping FLE will improve WDW attendance, feel good about upcoming bookings for Q1.
• However, they had several bookkeeping excuses to warn stockholders that Q1 earnings are not going to be strong, including at the parks, where the last week is going to shift about $30 Million into Q2.
• Attendance was driven by Brazil and Argentina, with the U.K. pitching in. Interpretation, if it wasn't for foreign visitors, WDW attendance would be really bad right now.
• "Transitioning out of investment mode" and "transitioning into a growth mode", "ramp down of capital spending". Interpretation: TWDC is going to be investing less at the theme parks.
• Star Wars: Eventually want to bring this into the theme parks. "Ability to expand our presence" "mostly internationally". Interpretation: TWDC does not plan any expanded Star Wars offerings at WDW or DLR in the foreseeable future.
• Domestic attendance was up 3% (up a lot at DLR, down "modestly" at WDW), spending on food & merchandise up 7%, revenue from rooms up 8%. Interpretation: Even though more people are coming to see Carsland, revenue is up significantly more than attendance because TWDC increased prices a lot.
• Hotel occupancy rates were down domestically to 78%.
• Domestic capital spending at the theme parks will be down about $1 Billion. In other words, TWDC plans to spend less at WDW and DLR in 2013. It doesn’t sound like they are rushing to build anything new at DHS or DAK in 2013. Even if they were going to build something major, I can imagine it would take WDI at least a year to design it, even if it's Carsland at DHS. IMHO, this is reasonable, given the amount of behind-the-scenes prep work needed to fit even a Carsland clone into the DHS footprint. However, it does suggest that TWDC won't be rushing anything to battle WWOHP2. I hope I'm wrong.
• WDW attendance was "down modestly". This despite the increased attendance from Brazil and Argentina.

Perhaps WDW does business differently but isn't down bad?

Nice summary. I didn't get a chance to digest the whole release yet. A couple of initial "glass half full" thoughts.

1) $2.2B in domestic P&R capital spending in 2012 so even if they decrease by $1B in 2013 that still leaves us $1.2B of potential goodies. If half goes to normal spending on stuff we dont really see or care about and a small portion to Avatar in AK (assuming it really starts in 2013) it still leaves some wiggle room (few hundred million) for a capital project like Carsland. RSR cost about $300M to build so if you spread that over 3 years there is room in the budget to start in 2013. Here's to hoping.

2) 78% hotel occupancy rate seems higher than expected given we were hearing that hotel occupancy was way down at WDW. Not sure if they factor in cabins on cruise ships to that percentage or not, but if not then occupancy at WDW was not so bad. The past 2 years the rate was 82% so a drop of 4% is not immaterial, but not as bad as I was anticipating either.

3) if Carsland is really the big driver of positive results that management likes to claim then they have a "play book" for making more money by expanding other parks and building Carsland at WDW. Seems like a no brainer to me. In other words, they could see the success of DCA and decide to do the same thing with other lower performing parks (DHS and AK).

The glass half full segment of my post is now over. The cynical part of me thinks that the actual primary driver of growth in P&R is increases in prices coupled with cost cutting with some DVC and cruise line sprinkled in. They have to talk up DCA and FLE since they spent large sums of money on them. I have no doubt that Carsland has increased attendance at DCA, but they dont release any data on how much is from new guests and/or guests staying an extra day vs those choosing DCA over DL. Increased attendance at DCA doesn't necessarily mean more profitability if you are canabalizing potential sales. That issue is just compounded at WDW with the multi-day ticket pricing. I would love to believe there is some "accountant type" with a spreadsheet showing that if they build more Carsland type projects and improve the product that that is the best path to growth. Unfortunately, if that guy exists the guy in the cubicle next to him probably has the raise prices/cut cost spreadsheet. I'm pretty sure we know which spreadsheet gets picked.

 

[GoofGoof]

The striking numbers on the report for me are:

66.4% of operating income came from media(57.2% from cable alone)..yeah ESPN makes a lot of money
9.4% came from merchandise...so between ESPN/Disney channel/ABC and merchandise that more than 75% of their entire profit(so yeah football and t-shirts)

with profit ratios of 34% and 28.8% respectively

opposed to P&R which account for 19% of operating income but only runs at a 14.7% profit(bolstered mostly by Cars Land, DCL and increased prices)

I would love for my personal investments run at at 14% clip but in todays world of business it is a bare minimum. Not hard to see why they would even consider selling off the division. At this rate I think Spirit may be right with a huge increase in tickets for 2013 to make the market/board happy.

P&R is a huge driver of capital spending so they have large non-cash accounting expense in the form of depreciation that lowers net income, but has no impact on free cash flow. The parks are a steady source of reliable cash flow which helps to stabilize the film studio and TV results which fluctuate depending on successful TV shows and movies.

 

[asianway]

I thought the same but then reconsidered Domestic Park Capital Expenditures in 2011 ($2.294B) and 2012 ($2,242B). If we look at recent "enhancement" capital investments at the Domestic Parks, these include (I think) FLE, Carsland, Next Gen, Dream (launched 2011), and Fantasy (launched 2012). The two ships cost a combined $1.8 Billion but this was spread out over several years so the amount associated with the ships in 2012 should be considerably less. Carsland is done, Next Gen is nearing completion, while construction continues at FLE. The point I'm trying to make is that when you look at all these completed projects, consider what's left for FLE and Avatarland (which should be starting soon), and then take into account the $1B decrease in expenditures, wonder what remains in the 2013 $1.2B Capital Expenditures budget for theme park "enhancement" construction. Don't get me wrong, I'm not suggesting TWDC isn't considering a new land in DHS, only that it doesn't seem they intend to fast track it in 2013. I hope I'm proven wrong on December 7 but I suspect, at best, they'll announce Carsland but, like Avatarland, it might be years before we see anything.

Given today's treatment of Disney stock by Wall Street, I strongly suspect Iger is shying away from committing further capital investments beyond those already announced in 2013. The stock has seen this steep of a decline in over a year. Carsland might be a "go" but it could be years before you and I are on a Carsland attraction at DHS.

Don't forget Aulani-the hotel rooms & DVD owned assets will be in the Capex number

 

[GoofGoof]

I thought the same but then reconsidered Domestic Park Capital Expenditures in 2011 ($2.294B) and 2012 ($2,242B). If we look at recent "enhancement" capital investments at the Domestic Parks, these include (I think) FLE, Carsland, Next Gen, Dream (launched 2011), and Fantasy (launched 2012). The two ships cost a combined $1.8 Billion but this was spread out over several years so the amount associated with the ships in 2012 should be considerably less. Carsland is done, Next Gen is nearing completion, while construction continues at FLE. The point I'm trying to make is that when you look at all these completed projects, consider what's left for FLE and Avatarland (which should be starting soon), and then take into account the $1B decrease in expenditures, wonder what remains in the 2013 $1.2B Capital Expenditures budget for theme park "enhancement" construction. Don't get me wrong, I'm not suggesting TWDC isn't considering a new land in DHS, only that it doesn't seem they intend to fast track it in 2013. I hope I'm proven wrong on December 7 but I suspect, at best, they'll announce Carsland but, like Avatarland, it might be years before we see anything.

Given today's treatment of Disney stock by Wall Street, I strongly suspect Iger is shying away from committing further capital investments beyond those already announced in 2013. The stock has seen this steep of a decline in over a year. Carsland might be a "go" but it could be years before you and I are on a Carsland attraction at DHS.

Forgot about mine train. So they have to finish FLE, start Avatar and finish GF DVC in 2013. They have roughly $1.2B to spend. still hopeful that they can set aside a hundred million or so for the start of something in DHS in 2013.

The wall street reaction was interesting, but from what I have read it may be more related to poor expectations for ad revenue in Q1 next year due to Sandy and also lower TV ratings in general. Ticked back up by the end of the day. Still down.

 

[WDW1974]

WDW related items from the conference call. Sorry if I misinterpret some of the statements.

• Record revenue, net income, and earning per share.
• Good Q4 results.
• Things are not looking good for the upcoming quarter so TWDC is going to blame Hurricane Sandy, along with bookkeeping factors. They "did not see a rash of cancellations" at WDW. New Jersey attendance for Jersey Week seems as strong as previous years.
• Combined, all of the Parks and Resorts initiatives (e.g. DCL, FLE, Next Gen, Carsland, Hong Kong, Shanghai, etc.) will generate $500 Million in incremental revenue but also cost $500 Million of incremental expense.
• FLE "is going to be pretty spectacular". Sounds to me like WWOHP should be shaking in its boots.
• TWDC is spending a lot of money on Next Gen. This will allow people to "plan their itinerary ahead of time." Comment: Seems like a lot of money so people can do something they already can do. Thank goodness we have FP+.
• DLR attendance was way up because of the "great success of Carsland".
• They are hoping FLE will improve WDW attendance, feel good about upcoming bookings for Q1.
• However, they had several bookkeeping excuses to warn stockholders that Q1 earnings are not going to be strong, including at the parks, where an accounting change for the last week is going to shift about $30 Million into Q2.
• Attendance was driven by Brazil and Argentina, with the U.K. pitching in. Interpretation: If it wasn't for foreign visitors, WDW attendance would be really bad right now.
• "Transitioning out of investment mode" and "transitioning into a growth mode", "ramp down of capital spending". Interpretation: TWDC is going to be investing less at the theme parks.
• Star Wars: Eventually want to bring this into the theme parks. "Ability to expand our presence" "mostly internationally". Interpretation: TWDC does not plan any expanded Star Wars offerings at WDW or DLR in the foreseeable future.
• Domestic attendance was up 3% (up a lot at DLR, down "modestly" at WDW), spending on food & merchandise up 7%, revenue from rooms up 8%. Interpretation: Even though more people are coming to see Carsland, revenue is up significantly more than attendance because TWDC increased prices a lot.
• Hotel occupancy rates were down domestically to 78%.
• Domestic capital spending at the theme parks will be down about $1 Billion. In other words, TWDC plans to spend less at WDW and DLR in 2013. It doesn’t sound like they are rushing to build anything new at DHS or DAK in 2013. Even if they were going to build something major, I can imagine it would take WDI at least a year to design it, even if it's Carsland at DHS. IMHO, this is reasonable, given the amount of behind-the-scenes prep work needed to fit even a Carsland clone into the DHS footprint. However, it does suggest that TWDC won't be rushing anything to battle WWOHP2. I hope I'm wrong.
• WDW attendance was "down modestly". This despite the increased attendance from Brazil and Argentina.

Perhaps WDW does business differently but isn't down bad?

Well, this is a company where you can celebrate your Unbirthday, so it makes perfect sense to me.
What's scary is some of the rumours I am hearing regarding how TDO thinks it will increase its bottom line.