Theme Parks, ESPN Boost Disney Profit

Propelled by the performance of its theme parks and the muscle of cable channel ESPN, Walt Disney Co. on Tuesday reported a 20% increase in its fiscal third-quarter profit.

The Burbank-based entertainment giant said it earned $604 million, or 29 cents a share, in the three months ended June 30. That’s up from $502 million, or 24 cents a share, in the same period last year. Revenue climbed 17% to $7.47 billion.

The results beat the expectations of analysts, who had predicted earnings of 27 cents a share.

“Strong results like we’ve seen this year do not happen by accident,” Chief Executive Michael Eisner told analysts during a conference call.

“Are we gratified by the company’s financial performance this year? Yes,” he said, and then added, “Are we satisfied? ... No.”

The company’s improved performance continues to give Eisner, who spent the first part of the year fending off calls for his resignation after nearly 20 years at the helm, more breathing room.

During a tumultuous shareholders meeting in March, 45% of the voting shares withheld their support for Eisner’s reelection to the board. As a result, Eisner was stripped of his chairman title.

Through it all, though, Eisner and his top lieutenants urged shareholder patience, promising double-digit earnings growth through 2007.

After two quarters, the company has not disappointed.

Disney executives said they were especially pleased with the results of the theme parks, which have been popular with foreign visitors. The theme park unit posted a 20% increase in operating income, to $421 million, fueled by a 20% rise in attendance at the Florida resorts.

The company’s cable networks, particularly ESPN, provided the gains in its TV divisions. Operating income for its Media Networks grew 15% to $673 million. Cable networks were responsible for an increase of $126 million in operating income.

“The theme park results were a little better than expected, the cable networks were phenomenal, and even their consumer-products division has shown improvement,” said Jeffrey Logsdon, media analyst with investment banking firm Harris Nesbitt Gerard.

“The soft spot for the quarter was the film unit,” Logsdon said.

Disney has suffered through several box-office flops this year for many of its big-budget movies, including “King Arthur,” “The Alamo” and “Hidalgo.” Operating income for Disney’s studio division fell to $28 million from $71 million in the same quarter last year.

“Last year, they had ‘Finding Nemo’ in the box office,” Logsdon said. “But, thankfully, their DVD business has been exceptionally healthy.”

Eisner told analysts that he was encouraged by the strong start of “The Village,” a thriller by M. Night Shyamalan, and the studio’s slate of new releases for the rest of the year, including “Princess Diaries 2: Royal Engagement,” and the much anticipated arrival of Pixar Animation Studios’ “The Incredibles,” which opens in November.

“The question is how the next batch of films will do,” said Lowell Singer, media analyst at S.G. Cowen. “We’re watching to see whether the studio bounces back from its disappointing year.”

Eisner told analysts, “I have my fingers crossed.” He said the studio also was developing two sequels for Disney’s blockbuster last summer, “Pirates of the Caribbean,” as well as sequels to previous Pixar hits.

Eisner declined to say whether he was negotiating an exit for Harvey Weinstein or Bob Weinstein, the founders of Disney’s specialty film studio, Miramax.

As reported, Disney executives are exploring whether they could retain a partnership with Bob Weinstein while cutting ties with his brother, Harvey. Harvey Weinstein has clashed with Eisner over business strategy, film costs and Eisner’s refusal to distribute the politically charged Michael Moore film “Fahrenheit 9/11.”

It wasn’t all good news for Disney. Its ABC Television network continues to be a drag on earnings: The network finished the last season in fourth place, losing 8.8% of its prime-time viewers from the previous season. Disney President Robert Iger said that transforming ABC’s prime-time fortunes “remains our key focus.”

Executives said the theme-park rebound after the terrorist attacks suggested that they were beginning to see returns on some of their investments, including new attractions.

Disney’s parks in Anaheim didn’t fare as well. Attendance there has been soft since June and was up only 1% from the same quarter last year. But unlike last year, the company decided not to offer big discounts to draw more visitors. However, visitors are spending a bit more money inside the park.

Disney shares rose 50 cents, to $22.44 on the New York Stock Exchange. The company reported earnings after the markets closed.