Disney Profit Rises 10%, Helped by Movie Hits

A hot streak at Walt Disney Co.’s film studio boosted the company’s fiscal third-quarter profit 10%, even as the bleak tourism market continued to squeeze its theme parks.

The Burbank-based entertainment giant said Thursday that net income rose to $400 million, or 19 cents a share, from $364 million, or 18 cents, a year earlier. Revenue in the quarter ended June 30 rose to $6.18 billion from $5.8 billion.

Net income for the first nine months was $885 million, or 43 cents a share, down 17% from $1.06 billion, or 52 cents, while revenue increased to $20 billion from $18.7 billion.

Quarterly profit came in higher than the 16 cents a share forecast by analysts polled by Thomson First Call.

“I’m pleased to see improvements in our financial results, which I expect to accelerate over the next 12 to 18 months,” Disney Chairman and Chief Executive Michael Eisner said.

Operating profit from Disney’s studio more than tripled to $71 million from $22 million, thanks to a string of hits that included “Finding Nemo,” “Holes” and “The Lizzie McGuire Movie.”

“Finding Nemo,” produced by Disney and Pixar Animation Studios, has so far taken in more than $315 million at the U.S. box office.

Disney also benefited from lower programming costs at its ABC television network and an upturn in advertising revenue at the network and the company’s TV stations, which helped offset higher sports programming costs at ESPN.

Operating profit for the company’s media networks group increased to $384 million from $288 million. In addition, the company posted a $16-million gain on the sale of its Anaheim Angels baseball team.

However, the world’s largest theme park operator said it was hurt by the war with Iraq and terrorism alerts.

Operating profit from park operations tumbled to $352 million, from $467 million, mostly because of declines in hotel occupancy and theme park attendance at Walt Disney World in Orlando, Fla.

At Disneyland in California, higher attendance and occupancy were countered by decreased guest spending and higher marketing and employee benefit costs.

The company is counting on luring new visitors with upcoming attractions, such as Mission: Space at Walt Disney World, which debuts Aug. 15, and Tower of Terror, which opens at its California Adventure theme park next year.

The travel downturn has had an even greater effect at Euro Disney, where Disney has waived its royalty and management fees. Euro Disney has been bruised by strikes and a tourism slump.

The resort outside of Paris said Thursday that weak visitor numbers meant it would be unable to meet its agreements with its creditors and that it had entered talks with Walt Disney Co. and its banks to modify its credit agreements.

Disney has $522 million invested in Euro Disney, of which it owns 39%.

Although the domestic parks are showing attendance gains in the current quarter, Disney executives were reluctant to predict when they would return to growth.

“A dramatic uptick in visitation is not likely in the near term,” Disney President Robert Iger told analysts on a conference call. Citing recent disruptions in travel because of the war in Iraq, Iger said: “A recovery will be gradual.”

Disney’s merchandising division continued to struggle, as operating profit fell to $39 million from $51 million, including $15 million in write-downs related to store closings.

“The numbers were encouraging, but they fell short of an extreme makeover,” said Jordan Rohan, an analyst with SoundView Technology Group.

Disney shares rose 23 cents to $21.92 in New York Stock Exchange trading before the results were announced.