Deciphering Financial Statements (The Walt Disney Company)
In the press release announcing Disney’s results for the quarter ending July 2, 2005, the company stated the following:
The Walt Disney Company today reported earnings for the quarter and nine months ended July 2, 2005. Diluted earnings per share (EPS) for the third quarter increased
41% to $0.41, compared to $0.29 in the prior year quarter. . . .
Current quarter EPS included a $26 million gain on the sale of the Mighty Ducks of Anaheim, a $32 million partial impairment charge for a cable television investment in Latin America, and a $24 million write down related to the Movie Beam venture. In aggregate, these items reduced current quarter EPS by $0.01 per share. The prior year quarter’s EPS included restructuring and impairment charges of $56 million, or $0.02 per share, recorded in connection with the disposition of the Disney Stores North America.
1. How did Disney arrive at the 41% increase?
2. Suppose none of the non operating transactions disclosed in the second paragraph had occurred in the third quarter of 2005 or the third quarter of 2004. Compute the EPS increase.