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Disney Waves Wand Over Fourth Quarter

The media titan beats estimates and reaffirms guidance. Plus, a Wal-Mart license deal.

Updated from Nov. 20


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posted a solid fiscal fourth-quarter profit Thursday, as strong results at its studio overcame continuing weakness in its theme parks.

The media giant also said it expected to meet analysts' bottom-line 2004 expectations, but its shares slipped. The stock, which has jumped some 50% off its spring low, slid 12 cents Friday morning, to $22.56.

For the fourth quarter ended Sept. 30, Disney earned $415 million, or 20 cents a share, up from the year-ago $175 million, or 9 cents a share. Revenue surged to $7.01 billion from $6.66 billion a year earlier.

Even after subtracting out a 3-cent-per-share benefit from the favorable settlement of certain state tax issues, the numbers beat Wall Street's forecasts; the Thomson First Call analyst consensus called for a 15-cent profit on sales of $6.99 billion.

As expected, results at the Burbank, Calif., media conglomerate's studio operations contributed much of the latest-quarter advance. But the company's theme park arm continues to deteriorate.

"Our company finds itself in a strong position," said CEO Michael Eisner on a conference call with analysts Thursday. The company's studio entertainment division is performing well, he said, "while some other businesses face challenges." He added, "We are confident in our ability to deliver strong growth in 2004."

Studio entertainment revenue rose 9% in the quarter to $2.2 billion, while segment operating income rose to $205 million from $75 million. Results were at the high end of analysts' expectations, which

have been on the rise of late.

But results at the company's parks-and-resorts division, already weakened by the soft economy and world events, appeared weaker than expected. Though analysts appeared to expect a slight revenue increase, revenue fell 1% from the prior fiscal year's fourth quarter to $1.6 billion. Operating income fell 4% to $225 million.

With the company halfway into the December quarter, Disney said that domestic attendance is up 12% from last year's levels, and current room reservations are up 8%. The numbers, said finance chief Tom Staggs, are consistent with the gradual recovery the company is seeing at its theme parks.

Media networks revenue grew 8% in the quarter to $2.6 billion, and operating income grew to $298 million, up from $147 million in the prior year. Lower broadcasting results in the quarter, said Disney, were due mostly to increased programming costs for more expensive series and higher football costs stemming from a greater number of NFL games broadcast in the quarter. Improved results in cable operations were due to lower cost amortization for ESPN's NFL contract and higher revenue from advertising and affiliate fees. Those were partially offset, the company said, by higher programming costs at the ABC Family channel and startup costs at the Disney Channel in Japan.

In the current quarter, the scatter market -- that is, advertising that wasn't sold in the upfront market before the TV season began -- has been weaking at the ABC network, Disney President Bob Eiger told analysts. The quarter started with ad pricing more than 20% above upfront levels, he said, but he said he expected the quarter to end in lower double-digits. That being said, Eiger said he expected advertising budgets to increase after Jan. 1; the Oscar telecast is already sold out, he said. Local TV station advertising is flat with last year's levels, Eiger said, despite the loss of at least $30 million in prior-year political ad spending.

Staggs told analysts the company expects to meet or exceed Wall Street's fiscal 2004 earnings forecast of 84 cents a share, barring unforeseen developments.

Eiger also said the company had reached a direct-to-retailer licensing agreement with


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, but declined to give further details.