The Walt Disney Company Reports Second Quarter Earnings for Fiscal 2020

The Walt Disney Company today reported earnings for its second fiscal quarter that ended on March 28, 2020. Results in the quarter and six months ended March 28, 2020 were adversely impacted by the novel coronavirus (“COVID-19”) pandemic.

“While the COVID-19 pandemic has had an appreciable financial impact on a number of our businesses, we are confident in our ability to withstand this disruption and emerge from it in a strong position,” said Bob Chapek, Chief Executive Officer, The Walt Disney Company. “Disney has repeatedly shown that it is exceptionally resilient, bolstered by the quality of our storytelling and the strong affinity consumers have for our brands, which is evident in the extraordinary response to Disney+ since its launch last November.”

The impact of COVID-19 and measures to prevent its spread are affecting our segments in a number
of ways, most significantly at Parks, Experiences and Products where we have closed our theme parks and retail stores, suspended cruise ship sailings and guided tours and experienced supply chain disruptions.

In addition, we have delayed, or in some cases, shortened or cancelled theatrical releases and suspended stage play performances at Studio Entertainment and have seen advertising sales impacts at Media Networks and Direct-to-Consumer & International. We have experienced disruptions in the production and availability of content, including the cancellation or deferral of certain sports events and suspension of production of most film and television content. Many of these businesses have been closed consistent with government mandates or guidance.

We estimate the COVID-19 impact on operating income at our Parks, Experiences and Products segment was approximately $1.0 billion primarily due to revenue lost as a result of the closures. In total, we estimate that the COVID-19 impacts on our current quarter income from continuing operations before income taxes across all of our businesses was as much as $1.4 billion, inclusive of the impact at the Parks, Experiences and Products segment.

Impacts at our other segments include lower advertising revenue at Media Networks and Direct-to-Consumer & International driven by a decrease in viewership in the current quarter reflecting COVID-19’s impact on live sports events and higher bad debt expense and a loss of revenue at Studio Entertainment due to theater and stage play closures.

Parks, Experiences and Products

Parks, Experiences and Products revenues for the quarter decreased 10% to $5.5 billion, and segment
operating income decreased 58% to $639 million. Lower operating income for the quarter was due to
decreases at both the domestic and international parks and experiences businesses and to a lesser extent, at our games and merchandise licensing businesses.

As a result of COVID-19, we closed our domestic parks and resorts, cruise line business and Disneyland Paris in mid-March, while our Asia parks and resorts were closed earlier in the quarter. As a result, volumes were negatively impacted in the quarter. We estimate the total impact of COVID-19 on segment operating income in the quarter was approximately $1.0 billion.

Prior to the closure of our domestic parks and resorts, volumes and guest spending were higher
compared to the prior-year quarter. Costs for the quarter were higher compared to the prior-year quarter due to an increase at our domestic parks and experiences driven by expenses for new guest offerings, which included Star Wars: Galaxy’s Edge, the net cost of pay to employees who were not performing services as a result of actions taken in response to COVID-19, and inflation.
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