Disney tops 2Q

April 24, 2001: 6:35 p.m. ET

Media company tops estimates from cost-cutting measures, sees lower revenue

NEW YORK (CNNfn) - The Walt Disney Co. breezed past second-quarter earnings estimates Tuesday on the strength of increasing film studio profit and in spite of a slowing economy.

For the quarter ended March 31, Disney (DIS: Research, Estimates), which owns ABC, the home of TV's "Who Wants to be a Millionaire" program, reported second-quarter earnings of $391 million, or 19 cents a share, compared with earnings of $291 million, or 14 cents a share, a year earlier. Analysts on average expected a profit of 13 cents a share, according to earnings tracker First Call.

Results exclude a $1 billion charge incurred for shuttering the Go.com Web portal and other charges related to an accounting change.

Revenue for the second quarter slipped 4 percent to $6 billion from $6.3 billion a year ago. That's below Wall Street forecasts for revenue of $6.4 billion, according to First Call.

Including restructuring charges and charges related to an accounting change, Disney reported a second-quarter net loss of $548 million, or 26 cents a share.

Disney shares ended down $1.28 at $28.75 ahead of its earnings report.

"Of course, economic downturns are never good news, but historically, our company has always emerged from them stronger than ever," CEO Michael Eisner said in a statement. "With this in mind, we remain confident in meeting or exceeding our fiscal goals for this year and about the long-term prospects for The Walt Disney Company."

Tuesday's earnings follow Disney's March 27 announcement that it would eliminate 4,000 jobs, or 3 percent of its work force, as part of an effort to save between $350 million and $400 million a year.

That followed a Feb. 26 announcement that the company would cut 135 jobs at its Internet Group, which includes Disney.com, ESPN.com, ABCNews.com, and the GO.com Web portal, which it shut down in January.

Disney President Robert Iger told analysts during a conference call Tuesday he was optimistic that advertising revenue would not get any worse and that he also remained optimistic that a looming actor and writer strike will be averted before a May 15 deadline.

Iger also said the company was looking to trim jobs at its animation unit as part of the previously announced 4,000 overall jobs it plans to eliminate by July.

"As it relates to animation and the studio part of the company's overall plan to reduce staff ... the goal there is consistent with all of the company's divisions, and that is to reduce staff because of the general slowdown in competition," Iger said.

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Earlier in the day, a report in the Los Angeles Times said the company was considering cuts at its Burbank, Calif., animation studios along with salary cuts of up to 50 percent.

Disney, along with most other media companies, has struggled of late as advertising revenue dried up with the demise of dozens of dot.com companies. It has announced several rounds of layoffs so far this year as it deals with a slowing economy in which consumers have been scaling back spending.

The company lately has favored cheaper animated features with the potential for bigger profits, such as "The Tigger Movie," which cost $6.5 million to make, but grossed a total of $152.6 million worldwide including video revenue.

Disney's film studios reported operating income increased to $164 million from $46 million a year earlier even as revenue declined 5 percent. The company said profit was driven by the home video releases of "Lady and the Tramp II: Scamp's Adventure," "Remember the Titans" and "Dinosaur."

The company also cited slimmed down theatrical budgets, but said declines in international motion picture distribution offset sales along with tough comparisons to the year-ago quarter, which included big hits "Mission to Mars" and "Cradle Will Rock."

Parks and Resorts revenue increased 5 percent to $1.6 billion as operating income remained flat, reflecting increased theme park attendance and guest spending at Disneyland. However, results were offset by decreased attendance at Disney World and cost increases related to the opening of the new theme park Disney's California Adventure next door to the Disneyland Resort.

Media Networks revenue decreased 8 percent to $2.2 billion as operating income slipped 9 percent.

The declines reflect soft advertising revenue at the company's television stations and radio operations.

Cable television income increased 9 percent in the quarter.

Consumer products sales decreased 7 percent to $568 million while operating income jumped 30 percent to $90 million as a result of cost savings and improvements at Disney Interactive.

The Internet Group reported a 49 percent narrower loss in the quarter as revenue decreased 2 percent, reflecting the elimination of losses at Toysmart.com, the company's online toy retailing site, which it shuttered in June, 2000.