Disney profit at $297 mil, versus last year's $657 mil

The Mouse House seemed a slightly happier place Thursday, as Disney posted a less severe falloff than expected in fiscal first-quarter profit, thanks to an investment gain and cost-saving steps at slumping theme parks.

Though broadcast ad sales again got pummeled, the Burbank conglom managed to report $433 million in pro forma net income for the three months ended Dec. 31, adjusted to reflect changes in operations since a year earlier. That’s down from year-earlier profit of $529 million before the effect of fiscal 2000 accounting changes.

Excluding the investment gain and other one-time items, profit totaled $297 million. The figure compares with year-ago earnings of $657 million on a similar basis.

Pro forma revenue slipped almost 7% to $7.08 billion.

Cost-cutting pays off

Financial results show Mouse’s cost-cutting moves of the past year are beginning to bear fruit, execs suggested.

“This quarter’s results are an indication of how we are managing through challenging times while building for the future,” head Mouseketeer Michael Eisner said. “Our efforts during this period are being guided by two overarching goals — to achieve the greatest possible efficiencies in our operations and to continue to create great content.”

Revenue from media network operations, featuring a first quarter of results for the recently acquired ABC Family Channel, fell 3% to $3 billion. Disney’s one-time investment gain involved the sale of a block of shares in Knight Ridder that the Mouse sold to fund its acquisition of ABC Family from News Corp. and Saban Entertainment.

Revenue at Disney’s parks and resorts declined 17% to $1.4 billion.

Waiting for turnaround

“Efficiency has never been greater at our theme parks,” Disney prexy Robert Iger stressed in a conference call with press and analysts. “Now, it’s just a matter of waiting for the (economic) turnaround.”

Revenue from conglom’s studio unit — featuring the theatrical success of Disney/Pixar tooner “Monsters, Inc.” — dipped 2% to $1.8 billion.

Officials cited a difficult comparison with a year ago, when major film releases included “Remember the Titans” and “Unbreakable.” But they took heart in strong homevid and DVD perfs in the latest quarter, including robust sales of “Snow White and the Seven Dwarfs,” “The Princess Diaries” and “Pearl Harbor.”

Senior exec veep and chief financial officer Thomas Staggs said conglom’s film production and marketing budget would be “down slightly” from 2001, but he declined to detail either budget. It’s believed the Mouse’s film expenditures remain well north of $1 billion a year, despite recent cutbacks in the number of productions and size of individual pic budgets.

Consumer-products revenue slipped 2% to $175 million in the quarter. Unit’s been getting a thorough restructuring in an effort to goose stagnant sales.

Analysts approve

Disney released its financial results after the close of market trading, when Mouse shares closed down 34ยข, or almost 2%, at $21.06. But analysts were upbeat about what they heard.

“They’re doing a superb job of keeping costs in line, and there is a much stronger than anticipated turnaround in theme parks,” UBS Warburg’s Christopher Dixon said. “There was a strong holiday period in theme parks.”

Broadcasting (ABC) reps a continuing concern, Dixon said. “But Disney is lean and mean and ready to continue to benefit as the economy continues to improve,” he added.

“We will continue to focus on our near-term priorities, as well as our long-term strategies for growth,” Disney’s Iger said.

Those latter thrusts include an eventual major rebound in broadcasting, Staggs said. “One of the most important pieces of a long-term strategy is knowing your strengths and knowing your opportunities,” Staggs said. “Then, you capitalize on them.”

That’s what Disney intends to do in its media-networks operations, he added, though the CFO said there still aren’t any “clear” signs of an advertising rebound. Disney projected fiscal operating profit could decline as much as 42% in the fiscal second quarter, with a more modest 15% drop forecast for second through fourth quarters.

During the conference call, Eisner said Disney no longer will contract with its outside accounting firm, PricewaterhouseCoopers, for simultaneous consulting services. Move follows the financial scandal involving alleged practices of the Enron energy conglom and accounting giant Arthur Anderson.

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