Disney says studio to lose up to $300 mln in Q4
Wed Sep 14, 2005 08:58 PM ET
By Gina Keating
LOS ANGELES, Sept 14 (Reuters) - Walt Disney Co. (DIS.N: Quote, Profile, Research) on Wednesday said its movie studio division would post a loss of up to $300 million in its fourth quarter, hurt by weak box office ticket sales and higher marketing expenses from a larger slate of Miramax releases.
Disney Chief Financial Officer Tom Staggs also told investors at a Merrill Lynch conference in Pasadena, California that the company could have to write off $100 million in Delta Airlines (DAL.N: Quote, Profile, Research) aircraft leases as the carrier filed for bankruptcy.
Staggs said a charge from the Delta investment "would obviously have a meaningful impact on our results for the quarter and the year."
But he said that Disney was on track to meet its forecast of double-digit overall growth in earnings, excluding the Delta charge, based on the performance of its theme parks and cable networks, including ESPN. Staggs did not say whether he was talking about the fourth quarter, the year or both, but Wall Street analysts had been forecasting that Disney would post nearly 20-percent gain in full-year earnings per share. That was in line with the company's long-held outlook.
Disney is seeing stronger-than-expected bookings at its domestic theme parks and robust year-over-year growth in ad sales at its cable networks and ABC broadcast network, Staggs said.
Sanders Morris Harris analyst David Miller said many analysts had already expected Disney's studio division to lose money because of the costs associated with releasing a larger slate of films by Miramax, the studio acquired from founders Harvey and Bob Weinstein.
Disney reached a deal to sever ties with the Weinstein brothers that saw the studio unit release seven more Miramax films in the fourth quarter than it had a year ago in order to clear an inventory of titles produced during their tenure.
"The loss is going to be higher than what was anticipated by most analysts, but Staggs did reiterate targets of double-digit growth so that probably means the other divisions will be stronger than expected," Miller said.
He added that a write-down on the Delta leases would probably represent a charge equivalent to 6 cents per share.
Studio revenues were hurt not only by a poor box office showing for the Miramax releases, but by flat domestic home video sales and softer pricing overseas for home video releases, Staggs said.
The widening losses for the studio division will prompt Disney "to manage even more closely our production and marketing budgets," Staggs said.
"We have to adapt our marketing and release strategies to most effectively match consumer demand," he said.
Last month, incoming Disney Chief Executive Bob Iger said the company could consider cutting marketing costs by shrinking the time between theatrical and DVD releases of its movies.
Wall Street analysts on average had expected Disney to post net earnings of 26 cents per share for the current, fiscal fourth quarter and $1.34 per share for the fiscal year, according to Reuters Estimates.
Disney posted 2004 fourth-quarter earnings of 25 cents per share and fiscal-year earnings of $1.12 per share. The company posted 2004 fiscal year revenue of $30.7 billion, of which its studio division contributed $8.7 billion.
Staggs said that Disney, which made its investment in the Delta leases in the early 1990s, would face a write-off if the airline "is unable to resolve its financial difficulties."
Delta filed for Chapter 11 bankruptcy on Wednesday afternoon, saying the step was needed to cut costs.
Disney shares were down 3 cents, or 1 percent, at $24.08 in after-hours trade on Inet, from a Wednesday close of $24.11 on the New York Stock Exchange.
© Reuters 2005. All Rights Reserved.
Wed Sep 14, 2005 08:58 PM ET
By Gina Keating
LOS ANGELES, Sept 14 (Reuters) - Walt Disney Co. (DIS.N: Quote, Profile, Research) on Wednesday said its movie studio division would post a loss of up to $300 million in its fourth quarter, hurt by weak box office ticket sales and higher marketing expenses from a larger slate of Miramax releases.
Disney Chief Financial Officer Tom Staggs also told investors at a Merrill Lynch conference in Pasadena, California that the company could have to write off $100 million in Delta Airlines (DAL.N: Quote, Profile, Research) aircraft leases as the carrier filed for bankruptcy.
Staggs said a charge from the Delta investment "would obviously have a meaningful impact on our results for the quarter and the year."
But he said that Disney was on track to meet its forecast of double-digit overall growth in earnings, excluding the Delta charge, based on the performance of its theme parks and cable networks, including ESPN. Staggs did not say whether he was talking about the fourth quarter, the year or both, but Wall Street analysts had been forecasting that Disney would post nearly 20-percent gain in full-year earnings per share. That was in line with the company's long-held outlook.
Disney is seeing stronger-than-expected bookings at its domestic theme parks and robust year-over-year growth in ad sales at its cable networks and ABC broadcast network, Staggs said.
Sanders Morris Harris analyst David Miller said many analysts had already expected Disney's studio division to lose money because of the costs associated with releasing a larger slate of films by Miramax, the studio acquired from founders Harvey and Bob Weinstein.
Disney reached a deal to sever ties with the Weinstein brothers that saw the studio unit release seven more Miramax films in the fourth quarter than it had a year ago in order to clear an inventory of titles produced during their tenure.
"The loss is going to be higher than what was anticipated by most analysts, but Staggs did reiterate targets of double-digit growth so that probably means the other divisions will be stronger than expected," Miller said.
He added that a write-down on the Delta leases would probably represent a charge equivalent to 6 cents per share.
Studio revenues were hurt not only by a poor box office showing for the Miramax releases, but by flat domestic home video sales and softer pricing overseas for home video releases, Staggs said.
The widening losses for the studio division will prompt Disney "to manage even more closely our production and marketing budgets," Staggs said.
"We have to adapt our marketing and release strategies to most effectively match consumer demand," he said.
Last month, incoming Disney Chief Executive Bob Iger said the company could consider cutting marketing costs by shrinking the time between theatrical and DVD releases of its movies.
Wall Street analysts on average had expected Disney to post net earnings of 26 cents per share for the current, fiscal fourth quarter and $1.34 per share for the fiscal year, according to Reuters Estimates.
Disney posted 2004 fourth-quarter earnings of 25 cents per share and fiscal-year earnings of $1.12 per share. The company posted 2004 fiscal year revenue of $30.7 billion, of which its studio division contributed $8.7 billion.
Staggs said that Disney, which made its investment in the Delta leases in the early 1990s, would face a write-off if the airline "is unable to resolve its financial difficulties."
Delta filed for Chapter 11 bankruptcy on Wednesday afternoon, saying the step was needed to cut costs.
Disney shares were down 3 cents, or 1 percent, at $24.08 in after-hours trade on Inet, from a Wednesday close of $24.11 on the New York Stock Exchange.
© Reuters 2005. All Rights Reserved.
