The Walt Disney Co. reported strong second-quarter earnings yesterday, with double-digit increases in each of its business units except its movie studios, which would prefer not to remember "The Alamo."
Disney's film studio -- which also includes Touchstone Pictures and Miramax Pictures -- had a 26 percent drop in operating income for the fiscal second quarter, compared with the same quarter in 2003, largely because of "higher film write-downs and higher marketing and distribution costs for films released after the quarter-end," according to the company's earnings release. The release did not mention "The Alamo" by name.
The good news for Disney was that "The Alamo," which cost more than $120 million to make and market but has taken in only $22 million, barely dented the rest of the company's earnings. Disney's net income for the quarter was $537 million (26 cents per share), up from $314 million (15 cents) for the same quarter of 2003.
The report marks the second straight quarter of strong earnings growth and should strengthen the position of chief executive Michael D. Eisner, who still is fighting off a shareholder rebellion. More than 45 percent of shareholders withheld their vote for Eisner's reelection to the company's board in March. Former directors Roy E. Disney and Stanley P. Gold, who are leading the rebellion, vow to run an alternative slate of directors at next year's board meeting to oust Eisner and other targeted directors.
The rebellion was not mentioned in yesterday's conference call, either by company officials or in questions from stock analysts.
"We are headed toward a return to strong and steady earnings growth," Eisner said. "We have set our compass and we plan to follow it."
At the company's theme parks -- the bellwether Disney uses to gauge the economy -- operating income rose 21 percent in the quarter, from $155 million to $188 million. This was due to growing attendance, which has been in slow recovery over the past few months, after several years of low attendance resulting from the Sept. 11, 2001, terrorist attacks and a flat economy.
International attendance, which has suffered the most, rose 20 percent at the U.S. theme parks in the most recent quarter, and is on pace to rise another 25 percent in the coming three months, Disney President Robert A. Iger said.
The second half of the year will be crucial for Disney's continued growth. Most of the top executives at the company's fourth-place ABC network were fired last month and a new team heads into next week's yearly "upfront," when the networks preview their fall shows for advertisers.
"[ABC] may have passed on a couple of reality shows that they should have jumped on that became big hits on other channels," Iger said, referring to NBC's "The Apprentice," which ABC turned down. Iger said that a number of advertisers are asking to have their products placed in the new ABC shows.
Also, after a weak quarter at the box office, the studio is pinning its hopes for the current quarter on summer releases such as M. Night Shyamalan's thriller "The Village" and the Camelot-themed "King Arthur."
Earlier this spring, Disney decided not to renew its contract with Pixar Animation, which has produced hit films such as "Finding Nemo." Eisner said yesterday that Disney's own computer animation studio has "at least 20" computer-animated films in the works.
"All I want to see is a couple of them that bring in a quarter of a billion at the box office," said Tom Wolzien, media analyst for Sanford C. Bernstein & Co., referring to "Finding Nemo." Wolzien recently upgraded Disney stock from "market perform" to "outperform."
Eisner addressed the recent flap over "Fahrenheit 9/11," the controversial Michael Moore film on President Bush's response to terrorism that Disney refused to allow Miramax to distribute. Disney and Miramax said yesterday that they are near agreement for Miramax chiefs Harvey and Bob Weinstein to obtain Disney's rights to the movie so they can distribute it personally or resell the distribution rights. Eisner emphasized that the Weinsteins cannot distribute it through Miramax.
On the issue of his successor -- or the lack of one, which has been an issue for disgruntled shareholders -- Eisner said Disney's board "continues to analyze internal candidates for if and when I get hit by a truck, which I hope will not be for a while."