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Disney Reports Q1 Profit Increase, Radio Group Merger

Feb 6, 2006  •  Post A Comment

Strong results across three of its four main business segments helped The Walt Disney Co. post a 7 percent increase in fiscal first-quarter profit, even as costs associated with programming at ESPN depressed results for the media networks group.

The company also announced that it is merging its radio division with Citadel Broadcasting to form the third-largest radio group in the United States.

Disney’s profit for the three months ended Dec. 31 was $734 million, compared with a year-earlier figure of $686 million. Revenue rose 2 percent to $8.9 billion.

Though media networks — the company’s largest operation — continued to lead the company’s results, the bright spot within the division proved to be the broadcast network. Strong ratings increases and the resulting rise in advertising dollars helped fuel an overall increase in revenue of 6 percent to $3.7 billion and a 7 percent rise in segment operating income to $606 million.

Broadcasting posted a 9 percent rise in revenue to $1.8 billion, while segment profit soared 87 percent to $234 million.

Cable, meanwhile, posted a 3 percent revenue increase to $1.9 billion, while segment profit fell 15 percent to $372 million. The company attributed the results to programming commitment revenue deferrals at ESPN as well as higher programming and marketing costs at ABC Family. Specifically, the company said ESPN had $106 million in revenue deferrals due to annual programming commitments in new affiliate contracts signed before Oct. 1, the start of the fiscal year.

Disney’s deal with Citadel involves combining ABC Radio Networks with Citadel and renaming the combined company Citadel Communications. Disney shareholders will own about 52 percent of the new company, while Citadel shareholders will own the rest. At the close of the deal, Disney expects to receive $1.4 billion to $1.65 billion in cash, based on Citadel’s stock price.