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The Walt Disney Company : Disney Profit Slips 5.6% as Studio Income Falls

02/05/2013 | 05:06pm US/Eastern

By Nathalie Tadena

Walt Disney Co.'s (DIS) fiscal first-quarter earnings slipped 5.6% as the entertainment giant recorded lower profits at its studio business.

Shares were up 1.1% to $55 after hours as results beat analyst expectations. Through the close, the stock was up 36% over the past 12 months.

Disney had posted stronger per-share earnings over the past two years, largely due to strength in its cable channels and theme parks business. The company has completed several multibillion-dollar acquisitions in recent years, most recently buying Lucasfilm Ltd., owner of the hugely successful "Star Wars" franchise," for $4.05 billion. Other major deals include its acquisition of Marvel Entertainment, the comics giant behind "The Avengers" and other superhero properties, for more than $4 billion in 2009 and its purchase of Pixar Animation for $7.4 billion in 2006.

However, most of Disney's sales comes from its media networks business, which includes ESPN, ABC and the Disney Channel. The division has benefited in particular as sports programming on ESPN commands higher affiliate fees. Disney noted that in the latest quarter, ESPN saw a decrease in operating income due to higher programming and production costs.

The media networks segment, the company's most profitable division, reported a 1.8% improvement in operating income and 6.7% increase in revenue.

In the parks and resorts division, which accounts for nearly a third of revenue, operating income rose 4.3% as revenue increased 7.5%. Disney has spent the past few years investing heavily in the division, including a $1.1 billion overhaul of its California Adventure Park. The division's results were driven by an increase in domestic operations, partially offset by a decrease internationally.

The studio division saw income decline 43% and revenue drop 4.5%. Disney attributed the division's decline in operating income to decreases in home entertainment and theatrical distribution, partially offset by an increase in television and subscription video-on-demand distribution.

Consumer products earnings improved 11% while revenue was up 6.9%.

Overall, for the quarter ended Dec. 29, Disney reported a profit of $1.38 billion, or 77 cents a share, down from $1.46 billion, or 80 cents a share, a year earlier. Excluding special items such as charges related to litigation and expense associated with an equity redemption at Hulu LLC and other items, the latest period's adjusted earnings were 79 cents a share.

Revenue was up 5.2% to $11.34 billion.

Analysts polled by Thomson Reuters most recently projected earnings of 76 cent a share and revenue of $11.21 billion.

-Write to Nathalie Tadena at nathalie.tadena@dowjones.com

Subscribe to WSJ: http://online.wsj.com?mod=djnwires

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