"[Disney's] two segments that have been hit hardest by the pandemic are the studio entertainment segment and the parks, experiences, and products segment."
So predicted my Foolish colleague Danny Vena Monday in his earnings preview for The Walt Disney Company (DIS 1.08%) and, well, Disney didn't disappoint. In its earnings release Tuesday, covering a fiscal second quarter decimated by coronavirus concerns, Disney reported an 8% year-over-year decline in profits from studio entertainment ... and a 58% plunge in profits from parks, experiences, and products.
Disney's earnings from continuing operations absolutely crashed -- down an astonishing 93%, as total net profits fell to just $475 million.
"The COVID-19 impact on operating income at our Parks, Experiences and Products segment [alone] was approximately $1.0 billion," said Disney's earnings release, "primarily due to revenue lost as a result of the closures." Add in other coronavirus-related losses, and economic fallout from efforts to halt the virus spread cost Disney a total of $1.4 billion in GAAP profits foregone.
And yet, was the news really as bad as all that?
I'd argue it was not, mainly because generally accepted accounting principles (GAAP) numbers don't tell the whole story here at the House of Mouse. In fact, if you turn the page from Disney's income statement to Disney's cash flow statement, the picture looks a whole lot brighter. In Q1, Disney generated more than $1.9 billion in positive free cash flow in the quarter.
True, that number was down 30% from last year's Q1. Also true, these cash profits Disney generated were four times the amount of profit Disney reported under GAAP.
So as bad as Disney's quarter looked -- and I admit it looked pretty bad -- it was at least four times better than that.