Disney Sees Profit Climb 30%

Desperate housewives and a potbellied superhero helped Walt Disney Co. continue its financial rebound as the company Wednesday posted a 30% earnings jump in its fiscal second quarter.

Disney’s profit of $698 million, or 33 cents a share, was a shade above Wall Street estimates and contrasts with the $537 million, or 26 cents, it earned a year earlier. Revenue in the period ended April 2 climbed 9% to $7.8 billion.

The Burbank-based entertainment giant’s results were boosted by the recovery at the ABC network, which has benefited from such hits as “Desperate Housewives” and “Lost.” DVD sales from the animated hit film “The Incredibles” also were a key factor.

Theme park results improved and are expected to get a further boost from the company’s worldwide celebration of Disneyland’s 50th anniversary.

“Overall they had a solid quarter,” said Jeffrey Logsdon, an analyst at Harris Nesbitt. “Most of the divisions are operating in a healthy manner.”

Disney’s top brass predicted double-digit earnings growth for 2005.

“We’re on a path right now to continue this trend,” Chief Executive-designate Robert Iger said in an interview. “That’s very good news.”

The robust earnings come at an opportune time for Iger, Disney’s president, who was tapped in March to succeed Michael Eisner. Eisner plans to retire Sept. 30 after 21 years as chief.

In a conference call, Eisner reminded analysts that he predicted a turnaround two years ago.

“We’re roaring back,” he said.

Disney’s studio unit posted a 65% boost in operating income to $253 million. That was mostly because of “The Incredibles,” the computer-animated film about an aging superhero made by partner Pixar Animation Studios. Emeryville, Calif.-based Pixar last year ended talks to renew its partnership with Disney beyond 2006.

Wall Street has been watching closely to see whether Iger can jump-start those discussions. Iger said he had recently begun informal talks with Pixar Chief Executive Steve Jobs but said he would only back a deal that benefited shareholders.

ABC helped deliver a 93% jump in operating income for Disney’s broadcast unit to $54 million. With its double-digit ratings increase, the network is expected to return to overall profitability this year, Iger said.

Last year, a 30-second ad spot for “Desperate Housewives” sold for $125,000. Advertisers now are paying $350,000 or more for the same spot, analysts said, creating a potential windfall for the network this year.

Operating income at Disney’s theme parks rose 3% to $193 million. The biggest gain came at Walt Disney World in Florida, which saw a single-digit increase in attendance in the quarter.

Attendance at Disneyland was down 3% partly because of heavy rains in California, although the park saw an increase in guest spending, Chief Financial Officer Thomas Staggs said. Both U.S. parks, he said, saw a more than 20% increase in international visitors and were experiencing a steady rise in reservations bookings.

Improved business in the U.S., however, was offset by higher costs related to construction of Hong Kong Disneyland and increased marketing expenses and losses at Euro Disney, which operates a theme park resort near Paris.

Profit at Disney’s cable channels slipped slightly, partly because the ESPN sports channel deferred $111 million in revenue until its programming commitments are satisfied.

In one notable setback, Disney took a $32-million write-down related to its struggling video-on-demand service, MovieBeam. Disney last month said it was closing the experimental service in three cities to upgrade systems and seek potential partners.

In the interview, Iger lashed out at the actions this week of dissident former directors Roy E. Disney and Stanley P. Gold, who filed a lawsuit in Delaware alleging that the job search leading to Iger’s selection was a sham.

“I’ve spent a lot of time with our cast members [employees] ... and I can tell you people are fed up by this,” Iger said. “They want to be left alone. They feel enough is enough.”

Roy Disney and Gold contend that promises of a thorough search caused them to not run a dissident slate of directors at Disney’s annual meeting this year. They are asking the court to hold a new vote.

Mike Sitrick, spokesman for Roy Disney and Gold, said the two “continue to receive strong support and encouragement” from Disney employees.

Disney, which usually announces earnings after the stock market closes, released the results more than an hour ahead of schedule after an e-mail containing the earnings was sent out internally by mistake, the company said. Trading of Disney stock was briefly halted pending the news.

The company’s shares fell 28 cents to $26.67 on the New York Stock Exchange.

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Solid quarter

Disney’s quarterly net income (in millions)

‘03: $314

‘04: $537

‘05: $698

Source: Bloomberg News