DIS
#Thanks, <UNK>, and good afternoon, everyone
Excluding certain items affecting comparability, earnings per share were $1.07 for the fourth quarter and $5.70 for the full year
Our fiscal 2017 results came in roughly in line with last year, which is consistent with the guidance we provided in early September, although they were adversely affected by three notable items; first, the impact of Hurricane Irma on our Parks business; second, the impact of canceling the animated film Gigantic; and third, the impact at <UNK>AMTech of a valuation adjustment to sports programming rights that were prepaid prior to the accusation
In aggregate, these three items reduced fourth quarter and full-year segment operating income by about $275 million or approximately $0.11 in earnings per share
At Parks and Resorts, operating income was up 7% in the quarter, due to an increase at our international operations, partially offset by lower operating income at our domestic operations
The impact of Hurricane Irma, which I'll discuss in more detail in a moment, adversely affected total segment operating income by 14 percentage points
Results at our international operations continued to improve, led by growth at Disneyland Paris and Shanghai Disney Resort
Disneyland Paris benefited from the resort's 25th anniversary celebration and a more favorable tourism environment, which drove higher attendance, guest spending and hotel occupancy
Shanghai Disney's operating income growth was due to higher attendance and, to a lesser extent, lower marketing costs compared to the fourth quarter last year
I'm pleased to note that Shanghai Disney Resort generated positive operating income during its first full fiscal year of operations, which comfortably surpassed our expectations of breakeven from its first year
At our domestic operations, operating income was 6% below prior year due to lower results at Walt Disney World, which were adversely impacted by Hurricane Irma, partially offset by growth at Disney Cruise Line, Disneyland Resort and Disney Vacation Club
Hurricane Irma disrupted our operations in Florida, forcing the closure of Walt Disney World Parks for two days and the cancelation of three Disney Cruise Line itineraries and the shortening of two others
We estimate the aggregate impact of the hurricane was about $100 million in operating income, or about a 16-percentage point adverse impact to year-over-year growth at our domestic operations
Operating margins at our domestic operations were down 170 basis points compared to Q4 last year, and we estimate they were adversely impacted by about 220 basis points due to the hurricane
Attendance at our domestic parks was up 2% in the quarter, reflecting favorable guest response to new attractions, particularly Avatar Flight of Passage at Disney's Animal Kingdom and Guardians of the Galaxy – Mission: <UNK>REAKOUT, at Disney California Adventure and the unfavorable impact of the hurricane on Walt Disney World (4:34)
We estimate the hurricane had an adverse impact on the year-over-year change in domestic parks' attendance of about 3 percentage points
Per capita spending was comparable to prior year
Per room spending at our domestic hotels was up 4%, and occupancy was down three percentage points to 84%
So far this quarter, domestic resort reservations are pacing down 1% compared to prior year and reflect reduced room inventory due to conversions and ongoing room refurbishments, while booked rates are up 9%
At Media Networks, lower operating income in the fourth quarter was a result of lower equity income and a decline of <UNK>roadcasting, while cable operating income was comparable to prior year
Equity income was lower in the quarter, due to higher losses from our investments in <UNK>AMTech and Hulu and lower income at A&E Television Networks
With the closing of our <UNK>AMTech acquisition on September 25, <UNK>AMTech's results will now be consolidated within our Cable Networks business
At <UNK>roadcasting, double-digit growth in affiliate revenue and lower programming expenses were more than offset by lower advertising revenue and a decrease in operating income from program sales
The year-over-year decline in advertising revenue reflects lower impressions at the A<UNK>C network, lower political advertising at our owned stations and the absence of the Emmy Awards, partially offset by higher network rates
Quarter-to-date, primetime's scatter pricing at the A<UNK>C network is running 34% above upfront levels
As I mentioned earlier, Q4 Cable results were roughly comparable to the prior year
At ESPN, growth in affiliate revenue was offset by higher programming costs and lower advertising revenue
Higher spending on programming was primarily driven by a contractual rate increase for the NFL
Ad revenue at ESPN was down low-single digits in the quarter, as higher rates were more than offset by a decrease in impressions
So far this quarter, ESPN's cash ad sales are pacing down, due in part to the timing of the college football semi-finals and the impact of more game windows on other linear television networks
Like last year, ESPN will air three of the New Year's Six bowl games during the first quarter
However, this year the two semi-final games will air during the second quarter whereas they aired during the first quarter last year
We remain very confident in the value of ESPN's programming, in particular, live must see exclusive events like college football playoffs and in ESPN's ability to reach key audiences that advertisers covet
Total Media Networks' affiliate revenue was up 4% in the quarter, due to growth at both Cable and <UNK>roadcasting
The increase in affiliate revenue was driven by 7 points of growth due to higher rates, partially offset by about a 3 point decline due to a decrease in subscribers
We completed the renewal of a distribution agreement with Altice, which demonstrates the tremendous value of our networks and positions us well as we head into future negotiations
<UNK>y the end of 2019, we expect to have new agreements in place covering about 50% of our subscriber base
At the studio, results in the fourth quarter reflect higher film cost impairments, lower operating income from television distribution, driven by the sale of Star Wars classic titles in Q4 last year and lower revenue share from Consumer Products
Operating income in our theatrical and home entertainment businesses was roughly comparable to the prior year
At Consumer Products & Interactive Media, segment operating income was lower in the quarter due to a decrease in our merchandise licensing business
While we saw nice growth in the sale of Cars and Spiderman merchandise during the fourth quarter, the growth was more than offset by strong sales of Star Wars, Frozen and Finding Dory merchandise in Q4 last year
During the fourth quarter, we repurchased 33.6 million shares for $3.4 billion and for the full year we repurchased 89.5 million shares for $9.4 billion
So far this quarter, we've repurchased 6.5 million shares for approximately $650 million
With fiscal 2017 now behind us, we are excited for the opportunities that lie ahead for our company, which <UNK>ob will discuss momentarily
As we look at fiscal 2018 specifically, our earnings growth will be suppressed somewhat by a couple of factors
First, the consolidation of <UNK>AMTech and its ongoing investment in the business will adversely impact cable operating income by about $130 million compared to last year
This will affect our Cable results for the first three quarters of the year with roughly half of this <UNK>AMTech related impact expected in Q1. We expect Cable expenses to be up high-single digits for the year driven by the consolidation of <UNK>AMTech
However, excluding the impact of <UNK>AMTech, we expect underlying Cable expenses to be up low-single digits
Second, we expect our share of losses from our equity investment in Hulu to increase by more than $100 million for the year, driven by Hulu's investment in its digital MVPD service and higher content spending
Given the timing of these investments, we expect about $70 million of that increase in equity losses in the first quarter
At Consumer Products, a timing issue related to the recognition of minimum guarantee shortfall revenue will cause about $60 million in operating income to shift from Q1 into Q2. The timing issue stems from the fact that these contracts are measured at month-end, and our fiscal first quarter ends on December 30 this year, whereas it ended on December 31 last year
And finally, we will continue to invest in our businesses in 2018, particularly at Parks and Resorts where we are building two Star Wars Lands
We expect these investments among others to drive fiscal 2018 consolidated CapEx higher by about $1 billion
We continue to see attractive opportunities to deploy capital in a balanced way, whether it's through investment in our Parks and Resorts business, in support of our direct-to-consumer strategy, or by returning capital to our shareholders
We have the flexibility because of our strong balance sheet
For fiscal 2018, we expect to repurchase $6 billion in stock, which is close to what we've repurchased on average over the past five years
And with that, I'll now turn the call over to <UNK>ob
<UNK>, we have not yet finalized what the content spend is going to be and the cadence of it
<UNK>ut as <UNK>ob mentioned, we will be providing more information on that as it develops over the next few months
<UNK>en, to answer your question on the 2018 spend, in my comments I mentioned the <UNK>AMTech investment that was going to impact Cable operating income by $130 million
That's <UNK>AMTech, but on the Disney D2C, we don't expect any significant items to impact spend in 2018.
<UNK>, on CapEx, you see for this year that we gave the comment that you can expect CapEx for 2018 to be about $1 billion above the 2017 level
And once again, a lot of that spend is going into the completion of the two Star Wars Lands and we're also completing Toy Story Land in Orlando and there's other initiatives that are in process around the globe
We've talked about the longer-term menu and I think at some of the meetings we've had, we've talked about the longer-term plans for our Parks and Resort business and developing out further on attractions and resorts
So I think it's fair to assume that we will continue to make investments in areas in which we see driving long-term value and long-term returns
So I would say this is a business that we feel very confident in and the business is working right now at a very high level and will continue to do so
So, <UNK>, on your question on Consumer Products specifically related to Cars
Cars is still a very strong franchise for us
So even though Cars 3, the theatrical release of the movie underperformed and the performance of Consumer Products in this calendar year was a little bit lighter than we would have liked it to be, it's still one of our strongest franchises
And when we talk about some of the franchises that are over $1 billion annually, Cars is in there
And just another thing about 2018, for Consumer Products, we feel really, really good about the lineup we have going into this year
We have Star Wars Episode 8: The Last Jedi
We deferred revenue in the fourth quarter into the first quarter like we did with Episode 7 for that
We also have a Han Solo movie coming out named Solo in the spring quarters
And we've got four Marvel movies including Avengers in the spring
We also have Mickey's 90 birthday
You should mark your calendar for this
It's November 18 of 2018. <UNK>ut Mickey's 90th is something that the entire company's going to get behind and that should also be good for our Consumer Products business
Steve, on the buyback, that $6 billion is a number that as I mentioned is the average over the last five years, roughly the average over the last five years
As you saw both in 2017 and 2016, we came in at a higher level than what we originally started out the year at
So if you want to view that as a conservative approach, we are early in the year, and we'll make adjustments as we go through the year based on the business environment
<UNK>ut once again, we have increased the last couple of years from what we originally started out at
We lost you
So, on the <UNK>AMTech valuation adjustment, that was an adjustment to programming rights that were prepaid prior to the acquisition
And we're not going be specific on it, but it does relate just to one rights deal
And we looked at it based on current performance and the duration of the contract and we didn't think we had enough time to recover the payment so the contract was mark-to-market
