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# Mickey Mouse math

## Biz reports on Disney year add up (almost)

Did the Walt Disney Co.’s profit this year go up or down?

You’d think that would be an easy question. But with a company as large as the Mouse House, which reported its third-quarter earnings last week, there are several ways to look at the numbers. Consider:

• The Wall Street Journal’s Disney headline read: “Disney Profit Jumps 8.6%, Amid Cost Cuts.”

• Daily Variety painted an entirely different headline picture: “Despite pix perfs, Disney profits drop.” And the drop was a steep 26%.

• The Los Angeles Times took the middle road, reporting a 3% drop in profit for the quarter.

• And the New York Times, apparently trying to avoid confusion or controversy, didn’t use a percentage figure in its story at all and eventually used the numbers cited by both the Journal and the L.A. Times.

So, who was right?

Actually, everyone was, and that only points up the difficulty of making sense of earnings reports.

The WSJ used the actual reported profit for the three months ending June 30, compared with the reported profit for the three months ending June 30, 2000.

Daily Variety, on the other hand, used “pro forma” figures, which many people feel give a more accurate picture of what is happening in a company. Pro forma numbers assume that any major transaction, such as buying or selling a subsidiary or closing a division, occurred at the beginning of the periods being compared. This would eliminate, for example, a major jump in revenue if a company bought another company this year.

In Disney’s case, closure of the money-losing Go.com Internet portal, which actually occurred at the beginning of this year, is assumed to have occurred at the beginning of the company’s fiscal year 2000 — Oct. 1, 1999. The pro forma numbers make last year’s profit look larger and therefore show a larger percentage drop compared to this year.

The Los Angeles Times and the New York Times used the pro forma numbers, but excluded the cumulative effect of accounting changes, a gain on the sale of Fairchild Publications and restructuring charges.

Which is the best set of figures to use? Unfortunately, there isn’t any right answer — that’s why economics isn’t an exact science.

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