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From the Orlando Sentinel:
Disney quarterly profit jumps 21%,thanks to parks, TV advertising
In a positive sign for the state of the economy, the Walt Disney Co. said Tuesday that improvements in two of its most consumer-sensitive businesses theme parks and television advertising lifted the company to 21 percent profit growth during the second quarter of its fiscal year.
The Burbank, Calif.-based entertainment giant said it earned $1.1 billion for the three months that ended March 31, compared with $942 million a year ago. Total sales climbed 6 percent to $9.6 billion.
But even more than sounding a note on the economy, Disney's earnings underscored the whipsaw nature of its movie studio, which remains the creative heart of the company and the key content pipeline for everything from theme-park rides to consumer products.
Disney's film business lost $84 million in the three months, pulled under by the colossal science-fiction flop "John Carter." But Disney executives spent much of their conference call with investment analysts crowing about the performance of a film released after the quarter had ended: "The Avengers," the Marvel superhero movie that just set an opening-weekend record in the U.S. with $207.1 million in ticket sales and has already grossed more than $700 million worldwide.
Disney Co. President and Chief Executive Officer Bob Iger assured Wall Street that the company is moving quickly to take advantage of the popular film, which features an assortment of well-known comic-book characters. Disney has already lined up releases of "Thor 2" and "Iron Man 3" next year and "Captain America 2" in 2014, and Iger confirmed the company has put an overall Avengers sequel into development.
In addition, Iger said Disney is "hard at work with licensees as well as retailers around the world to stock the shelves as fast as possible" with Avengers merchandise. And he said the company's theme-park engineers have "ramped up" design work on Marvel-based attractions for parks in California and overseas, though none is likely to be added at Walt Disney World because Universal Orlando holds exclusive theme-park rights to key Marvel properties on the U.S. East Coast.
"I think what you're essentially seeing here is a true franchise, not necessarily in the making, but having been made and launched," Iger said. "There are multiple opportunities to continue to mine this great set of characters."
In addition to their apparently insatiable appetite for superheroes, consumers also showed a willingness to spend more on Disney vacations, as Disney's sprawling theme-parks business continued to recover from the global economic downturn.
Operating income at Walt Disney Parks and Resorts soared 53 percent for the quarter to $222 million on revenue that was up 10 percent to $2.9 billion.
Combined attendance at Disney World and Disneyland in Anaheim, Calif., was up 7 percent during the quarter from a year ago. Per-capita spending in Disney's U.S. theme parks where Iger said Marvel merchandise was "pretty much off the shelves" was up 5 percent on higher ticket prices and increased food and souvenir spending.
Occupancy in Disney's domestic hotel rooms about 90 percent of which are in Orlando was up about two percentage points to 82 percent, while per-room spending was up 7 percent on higher nightly rates.
Executives were especially upbeat about Disneyland, which will open the last and biggest piece of a billion-dollar expansion in its Disney California Adventure theme park a 12-acre section based on the Pixar film "Cars" on June 15. Disney Co. Chief Financial Officer Jay Rasulo said Disneyland set a financial record for the second quarter.
Though executives didn't provide much detail about Disney World's performance as an individual resort, they did say international attendance particularly from Brazil was strong during the quarter and that international travelers now account for about 22 percent of the giant attraction's total head count. Domestic attendance at the company's U.S. theme parks was flat during the quarter compared with a year earlier.
Disney's U.S. hotel reservations for the third quarter are running 1 percent ahead of last year's pace, with prices up by low single-digit percentages.
Disney Cruise Line is also seeing positive early returns from the Fantasy, the second of its two new cruise ships, which launched in March from Port Canaveral. Disney said bookings across its four-ship fleet are up 30 percent so far in its third quarter and that occupancy is above 90 percent.
The January-to-March quarter is typically one of the leanest stretches on the calendar for Disney's theme parks, and the division's profit margin for the quarter was just 7.7 percent. But that was still the highest since 2008, when park margins were 12.4 percent.
And analysts expect Disney's profit margins to expand rapidly during the second half of this year, now that some big capital projects notably the new cruise ships, the Disney California Adventure expansion and Disney World's Art of Animation Resort hotel are essentially complete.
"We believe the outlook for attendance and profitability remains encouraging for [the second half of the 2012] and [leads] into a big margin growth year" in 2013, Goldman Sachs analyst Alexia Quadrani wrote in a research note issued ahead of Disney's earnings announcement.
In addition to positive theme-park trends, Disney said advertising revenue climbed in the second quarter for its television networks both its perennially strong cable networks, which include ESPN and Disney Channels, and its long-struggling broadcaster, ABC. Total operating profit at the media networks rose 13 percent for the quarter to $1.7 billion on revenue that was up 9 percent to $4.7 billion.
Disney is still waiting for its smallest division, interactive media, to turn a profit. But the unit, which makes video games, narrowed its losses during the second quarter, posting an operating loss of $70 million, compared with a $115 million operating loss a year ago.
jrgarcia@tribune.com or 407-420-5414
