DISNEY'S PROFITS DIP 78 PERCENT MORE TROUBLE FORECAST.

Byline: Greg Hernandez Staff Writer

BURBANK - Walt Disney Co.'s fourth-quarter earnings came in just below Wall Street estimates Thursday amid fallout from dropping theme park attendance and weak television advertising. In all, net profit dropped by 78 percent, and company executives warned that the slump would continue well into next year.

Disney, which owns a movie studio, theme parks around the world, and ABC and cable television networks, reported a net profit of $53 million, or 3 cents a common share for the quarter ended Sept. 30, down from $240 million or 11 cents a share a year earlier. Revenue fell to $5.8 billion from $6.1 billion.

``Recent events make this a particularly challenging and somewhat anomalous time for our company,'' said Disney Chairman Michael D. Eisner. ``We know that there are certain factors we can control and influence and others of which we have little to no control.''

Excluding restructuring and impairment charges, including a $126 million restructuring charge in the fourth quarter, the media giant's operating income dropped by 31 percent for the quarter.

``There's no question that the operating income for the quarter was off, and what's really driving that is a weak economy that was already there and exacerbated by the events of Sept. 11,'' Disney Chief Financial Officer Tom Staggs said.

Disney reported pro forma profits of 6 cents per share, down from 15 cents per share a year earlier. Analysts on average expected Disney to earn 7 cents per share.

Executives said they expect a quick rebound once the economy improves and also announced several plans for their prime-time television line-up. Eisner also cited strong attendance at the new Tokyo Disney Sea theme park and last weekend's $62.5 million opening of ``Monsters, Inc.,'' a record debut for an animated film.

Eisner told analysts these are ``the most recent examples of the continuing appeal of Disney product and why I believe Disney's best days lie ahead.''

Paul Kim, a New York-based analyst with Kaufman Bros., said the company's forecast for its next fiscal year is more troubling than its poor fourth-quarter results.

While optimistic about the company's long-term performance, Disney's top executives painted a grim picture for the immediate future, expecting operating profit to be down by as much as 50 percent next quarter and between 10 percent and 15 percent for the three quarters after that.

``It will be interesting to see how the market reacts to that,'' Kim said. ``That looks like the whole year will be down about 25 percent even though they expect improvement as the year progresses. That should add some volatility to the shares in the near term.''

Theme park attendance has dropped dramatically since the Sept. 11 attacks, particularly at Disney World in Florida, where business is down by 25 percent. About half of the park's visitors arrive by plane, which accounts for the drastic decline in international visitors. Disneyland in Anaheim has been able to weather the climate better because only 25 percent of its visitors arrive by air.

The company has responded by shortening park hours, instituting a hiring freeze and by seeking volunteers to reduce work hours.

Eisner made it clear during a conference call with analysts that under the current climate, plans for a third theme park in Anaheim - where Disney owns 80 vacant acres - are not on the fast track.

``Probably the best strawberries in Southern California will continue to grow there,'' Eisner said of the vacant land.

Walt Disney Co. President Robert Iger acknowledged that the prime-time performance of Disney-owned ABC has been ``disappointing'' this season.

``Our goal is to make immediate changes in the schedule and develop aggressively for midseason,'' Iger said.

The most highly anticipated show is a one-hour drama called ``The Court,'' which stars Sally Field and is created by John Wells, executive producer of ``The West Wing'' and ``ER.''

Iger said the network's current edict also is to create a plethora of family-oriented television programming in the vein of such past ABC hits as ``The Wonder Years,'' ``Full House'' and ``Growing Pains.''

``We had great successes there, and we had moved away from that,'' Iger said. ``We feel we need to return to that. Given the environment today, I think there is a greater desire for family-oriented entertainment.''

Iger noted that ratings for news and daytime shows were strong and noted the high ratings of this week's season debut of ``NYPD Blue.''

Disney reported that its DVD sales have doubled from a year ago while revenue from VHS sales were flat. High-profile DVD releases during the next quarter include ``Pearl Harbor,'' ``Unbreakable'' and ``The Princess Diaries.''

Despite bright spots such as the surprise $100 million plus box office gross of ``The Princess Diaries,'' analyst Kim said the results of the film division were down for the quarter, the result of two high-profile films being pulled from the release schedule post-Sept. 11 because of their content.

Also Thursday, the company announced year-end results that included flat revenues of $25.3 billion and a net loss to Disney common stock of $41 million, or 2 cents per share, compared to $1.2 billion, or 57 cents per share a year earlier. The company also had $1.5 billion in restructuring and impairment charges in fiscal year 2001.

The results were announced after the close of the stock markets Thursday, with Disney shares closing at $18.84, up 35 cents on the New York Stock Exchange. Shares fell to $18.80 in after-hours trading.