Disney Earnings Drop 37% on Weak Video, Merchandise Sales

Walt Disney Co., the world’s second-largest media company, predicted another disappointing year in 2000 during a conference call Thursday in which it reported that fiscal fourth-quarter earnings fell 37%.

“It is impossible to predict when growth will be back,” said Chairman Michael Eisner, adding that it will “not absolutely be next year.”

Eisner held a rare conference call with analysts after the release of Disney earnings. The company also disclosed its earnings in finer detail to highlight the value of certain assets that had previously been buried within a group, such as feature films, cable and Internet operations.

Disney’s stock price and earnings have been under pressure during the last year because of its ailing consumer products and home video businesses.

While conceding that 1999 was a disappointment and that next year’s per-share profit is likely to fall short of forecasts, the company said continued cost reductions, earnings write-offs and new products could yield savings and fuel growth.

“We’re not giving up our goal of 20% annual growth,” said Eisner, referring to the benchmark the company hit through much of the ‘90s.

In its fiscal fourth quarter, profit from operations fell to $212 million, or 10 cents a share, matching the average forecast of analysts surveyed by First Call Corp. A year ago, profit from operations was $336 million, or 16 cents a share.

Disney said it expects earnings per share in 2000 to be about even with this year’s 66 cents, well below the 75 cents forecasted.

Eisner has responded to Disney’s doldrums by trimming capital spending, restructuring operations and closing some businesses. In the period, Disney took pretax restructuring charges of $132 million, or 4 cents a share, for severance and lease costs related to the company’s consolidation of its TV production division and the closing of ESPN retail stores. It also had charges related to the purchase of the remainder of Infoseek Corp. that it doesn’t already own.

After these items, it earned $85 million, or 4 cents a share.

Buoyed by the animated hit “Tarzan” and the surprise blockbuster “The Sixth Sense,” Disney had a solid but unspectacular year in theaters compared with 1998, when hits such as “Armageddon” and “The Waterboy” helped make Disney the box-office leader with $1.1 billion.

Studio revenue, which includes feature films and home videos, fell 4% to $6.5 billion for the year.

Disney’s theme parks and resorts remain strong, with revenue in that division rising 10% to $6.1 billion for the year. The company this week announced a deal to build a new park in Hong Kong. The deal was structured so Hong Kong taxpayers will bear most of the construction cost, potentially minimizing Disney’s risk.

“Consumer products continues to be weak. That’s down significantly,” said Scott Davis, an analyst at Schroder & Co.

Revenue fell 6%, to $5.78 billion.

Operating income fell 36%, to $521 million. Disney defines operating income as revenue minus costs, before corporate and other activities.

Disney stock fell to $26.50 in late trading, off 38 cents for the day, after soaring as high as $29 on the New York Stock Exchange. The company’s financial results were released after regular trading ended.

The stock has declined about 5% so far this year.

Eisner has been cutting costs at the studio and has said it expects to save $500 million by trimming spending on live-action films. The company is also consolidating purchasing power across its business divisions, a move Disney said is expected to save it more than $500 million a year beginning in fiscal 2001.

Eisner was bullish about the opening of new theme parks and the consolidation of international operations. “If there’s one single realm that can put our company back on the growth track, it is the overseas market,” Eisner said.