Company reports rise in profits

Friday, Aug. 1, 2003 | 11:03 a.m.

LOS ANGELES -- Walt Disney Co., the second-largest U.S. media and entertainment company, Thursday said fiscal third-quarter profit rose 9.9 percent as higher sales at its television networks and film studios offset lower results at the theme parks.

Net income rose to $400 million, or 20 cents a share, from $364 million, or 18 cents, a year earlier. Revenue in the period ended June 30 increased 6.6 percent to $6.18 billion from $5.8 billion, Burbank, Calif.-based Disney said in a statement.

Disney was helped by lower TV programming costs at its ABC network as well as a jump in advertising revenue at ABC and its TV stations. Profit was trimmed by higher ESPN programming costs and lower sales at theme parks and resorts. Attendance slumped at Disney World in Florida.

"Things are gradually improving," said Vic Hawley, a fund manager with Reed Conner & Birdwell Inc. in Los Angeles, which owns about 1.5 million Disney shares. "You had the networks, you had film, you had animation, you had theme parks all knocked down. Gradually some of them are coming back."

Per-share profit exceeded 16 cents, the average estimate of analysts polled by Thomson Financial. Revenue was higher than the forecast of $6.1 billion.

Disney shares rose as much as $1.07 to $22.99 in extended trading at 4:36 p.m. New York time Thursday.

"Obviously the theme parks are not doing great, with the war at the beginning of the quarter," Hawley said.

The company has said higher spending at the theme parks on information systems, upgrades of rides, insurance and employee benefits reduced profit at Disney World in Florida and Disneyland in California. Those costs dragged down second-quarter results at the parks to their lowest level since 1994.

Disney said third-quarter operating profit at its parks and resorts dropped 25 percent to $352 million. Revenue at the division fell 6.3 percent to $1.73 billion.

Chief Executive Michael Eisner said in June about the theme parks that "the pace of bookings has improved notably since our last earnings call." There are "encouraging trends at our parks."

Operating expenses at the ESPN cable network were forecast to rise about 63 percent in the third quarter to $748 million, according to a research note by Deutsche Bank analyst Doug Mitchelson, who rates Disney shares a "buy."

Disney is responding to rising sports costs by boosting the fees that ESPN charges cable operators by about 20 percent a year. As a result, sales at ESPN, the highest-priced basic cable network, will rise 30 percent to $843 million, Mitchelson said. He estimated that ESPN's ad revenue more than doubled to $261 million from $119 million.

Operating profit at the networks unit, which includes ABC and the ESPN, ABC Family and Disney Channel cable networks, rose 33 percent to $384 million. Revenue increased 18 percent to $2.51 billion.

"The network is still not booming but seems to be coming along a little bit," Hawley said.

Operating profit at the studio division, which includes Walt Disney Studios and Miramax Films, more than tripled to $71 million. Revenue rose 5.5 percent in the quarter to $1.44 billion.

"The studio is doing pretty well and looks like it will continue to do well in the fourth quarter with 'Finding Nemo,' 'Pirates of the Caribbean' and 'Spy Kids,"' Hawley said.