As numbers fall, Disney pledges more cuts

Nov 12, 2001  •  Post A Comment

Reporting one of the company’s worst quarterly returns ever, Walt Disney Co. officials say they will eliminate TV affiliate compensation, develop second revenue streams, create lower-cost dual-purpose programming and rely more on repurposed programs.
Disney Chairman and CEO Michael Eisner also said the company will “change its relationship with media buyers to leverage ABC and our other media properties.”
Disney said it is on track in fiscal 2002 to achieve a total of $800 million in cost savings and restructuring of its businesses begun last year.
Such moves should help offset continued and deep revenue and earnings losses over the next year. Disney warned that its fiscal first-quarter results could be less than half what they were a year earlier. The company said its operating income for the remainder of its fiscal year could decline by 10 percent to 15 percent. The news prompted a wide lowering of fiscal year 2002 revenue and earnings estimates by industry analysts.
Most notably, Merrill Lynch analyst Jessica Reif Cohen reduced her estimates for Disney’s fiscal 2002 broadcasting operating income by $470 million to $255 million, a decline of 65 percent, and reduced her fiscal 2002 estimates for the company’s theme park operating income by 40 percent to $955 million.
Disney said its fiscal 2001 fourth-quarter pro forma earnings fell 60 percent to $132 million, or 6 cents a share, on a 5 percent decline in revenues to $5.8 billion, just missing analysts’ estimates. Net income fell 68 percent to $53 million, or 3 cents a share, from the year-earlier $167 million, or 11 cents.
Having achieved the $500 million in targeted cost cuts promised 18 months ago, Disney now has promised another $350 million in cuts.
For its full fiscal year, Disney said pro forma profit was $1.5 billion, or 72 cents a share, on $25 billion in revenues. Noting that the company has been through “uncertain times before,” Mr. Eisner said, “Nothing will impact the fundamental value of our assets.” However, Disney stock has dropped another 20 percent to below $19 a share since the Sept. 11 terrorist attacks.
Disney executives clearly have been unnerved by the amount of damage its television and theme park businesses have sustained.
Disney’s media businesses reported a 12 percent decline in operating income to $348 million on a 3 percent decline in revenues to $2.2 billion. Disney President Bob Iger said he was “disappointed” with ABC’s prime-time performance so far this season and promised to revamp the lineup with more “audience- and advertiser-friendly” family-oriented series. For instance, “The Court,” starring Sally Field, will premiere early next year.