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Disney profits rise, although theme parks remain weak

By GARY GENTILE
AP Business Writer

LOS ANGELES (AP) A strong film slate, including the animated fish tale ``Finding Nemo,'' and higher advertising revenue at its ABC Television network helped boost profits by nearly 10 percent at The Walt Disney Co.

Sluggish attendance at its theme parks, due partly to the war in Iraq, hurt Disney's performance, however, and will likely continue to be a drag on earnings for the near term, the company said Thursday.

Disney reported net income of $400 million, or 19 cents per share, in the quarter ended June 30, compared to $364 million, or 18 cents per share, in the same period last year.

The results beat the expectations of analysts surveyed by Thomson First Call, who had been looking for per-share earnings of 16 cents.

Revenues increased more than 6 percent to $6.2 billion compared to $5.8 billion in the same quarter last year.

Disney said the improved operating results would continue into the fourth quarter and would accelerate in 2004.

The Burbank-based company also posted a profit of $16 million on the sale of its Anaheim Angels baseball team, although the gain was offset by other one-time restructuring charges.

A weak European tourism market, combined with a series of labor strikes in France, have a led to a drop in attendance and profits at Euro Disney's two theme parks.

Earlier Thursday, Euro Disney said it does not expect to meet previously forecast levels of attendance and hotel occupancy and will consequently not meet certain bank obligations, despite Disney's promise to waive all royalty and management fees from Jan. 1 through Sept. 30.

Disney has a 39 percent stake in Euro Disney S.C.A. The company has begun negotiations with banks and Disney to obtain waivers or modifications as well as supplementary financing.

Attendance and hotel occupancy at the Walt Disney World Resort in Florida declined during the quarter. Attendance was up at the Disneyland Resort in Anaheim, but was offset by decreased guest spending and increased marketing and employee costs.

Disney President Robert Iger said the theme park recovery would be slow in coming.

``An uptick is unlikely in the near term and a recovery will be gradual,'' he said during a conference call with analysts.

Disney's Media Networks division, which includes the ABC Television network as well as cable channels such as ESPN and the Disney Channel, showed a gain in revenue to $2.5 billion from $2.1 billion in the same quarter last year. Operating income also improved to $384 million, driven by lower programming costs at ABC and higher ad revenues.

Cable results slipped due to the cost of televising NBA games on ESPN.

Revenues rose 5 percent at Disney's studio to $1.4 billion and operating income increased to $71 million from $22 million in the same quarter last year. The results were driven by strong box office performance as well as an increase in home video sales.

Disney chairman and chief executive Michael Eisner said negotiations are ongoing with Pixar Animation Studios for a new contract, but declined to speculate on the timing or terms.

``Finding Nemo'' was produced in conjunction with Pixar, which has been responsible for some of Disney's most successful animated films.

Disney took a $15 million restructuring charge in the quarter for the closing of some unprofitable Disney Stores. Earlier, Disney said it was seeking a buyer for its chain of retail stores and would continue to close stores and lay off personnel in anticipation of a sale.

For the first nine months of the year, Disney's net income slipped to $885 million, or 43 cents per share, compared to $1.06 billion, or 52 cents per share in the same period last year.

The results were released after the close of trading Thursday. Shares of Disney were up 23 cents to $21.92 after the end of regular trading on the New York Stock Exchange. The shares gained 48 cents in the extended session.

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