DISNEY Terrorism fears, war lead to profit loss

The company's lone bright spot was its movie division.
BURBANK, Calif. (AP) -- The Walt Disney Co. struggled with fears of terrorism and war in Iraq, which depressed vacation travel and boosted costs at its ABC network division, leading to a nearly 12 percent drop in earnings.
The company reported a profit of $229 million, or 11 cents per share, in the quarter ended March 31, compared with $259 million, or 13 cents per share, in the same period last year.
The results released Thursday matched the expectations of analysts surveyed by Thomson First Call.
Operating income declined at its theme parks, television and consumer products divisions.
Revenues increased 8 percent to $6.33 billion from $5.86 billion in the same quarter last year.
Bright spot
One bright spot during the quarter was Disney's movie division, which saw operating income increase to $206 million from $27 million in the same quarter last year on strong sales of DVDs and videotapes worldwide.
Attendance at its Walt Disney World Resort was off 7 percent during the quarter, while attendance at the Disneyland Resort in Anaheim, Calif., was up slightly, according to Disney chief financial officer Thomas Staggs.
Eisner said the company has suffered because of fears of terrorism as well as the war in Iraq. People continue to wait until the last minute to book vacations at Disney's domestic resorts, making it difficult to predict a recovery anytime soon, Disney said.
The company also said that war coverage cost about $32 million from operating profit with up to $20 million expected in the current quarter.
Staggs declined to give any guidance for future quarters or fiscal 2003 earnings. At the company's annual shareholders' meeting earlier this year, Disney said it would not meet its earlier estimates of earnings per share growth of 25 percent to 35 percent.
"The conditions we set at the beginning of the year didn't materialize," Staggs said during a conference call. "We are hesitant to give a specific guidance."
Revenue increased slightly at Disney's media networks division, which includes the ABC Television network as well as cable channels such as ESPN and the Disney Channel.
But operating income dropped 25 percent to $232 million due to higher programming and production costs.
Satisfied with progress
Disney president Robert Iger said he was satisfied with ABC's progress from last year, although much of the network's successes came last fall. Ratings have since declined.
Iger said he expects the rates advertisers will be willing to pay for ads will increase later this year after ABC unveils its new fall schedule, which will lean heavily on new comedies.
"We're optimistic ABC will be better positioned in the upfront market," Iger said.
Iger also defended a decision by ESPN to seek the full 20 percent increase in rates it is allowed under contracts with cable operators.
"It is very important to focus on the strength ESPN delivers," Iger said. "It's one of the strongest brands in all television."
Iger also said cable companies are being given the option to renew for lower rates in exchange for longer contracts.
ESPN demands about $2 per cable subscriber.