DISNEY BEATS FORECASTS COST-CUTTING MEASURES PAY OFF.

Byline: Greg Hernandez Staff Writer

BURBANK - Dramatic cost-saving measures helped The Walt Disney Co. beat Wall Street's estimates for first-quarter earnings Thursday, with profits of 15 cents a share on sales of $7.1 billion - about 7 percent below last year's $7.6 billion.

Analysts had expected income of only 10 cents a share.

Still, the entertainment giant experienced a 55 percent drop in fiscal first-quarter earnings due to lower sales across its many business segments. Net income and earnings per share were $438 million and 21 cents, respectively, for the quarter ending Dec. 31.

``The quarter's results are an indication of how we are managing through challenging times,'' Disney Chairman Michael D. Eisner said from New York during a conference call with analysts. ``We exceeded our cost savings goals across our businesses.''

Eisner and Disney President Robert Iger were not paid bonuses in 2001 because the company ended the year with a net loss of $158 million, taking a onetime charge of $1.45 billion stemming from the closing of its failed Go.com Internet portal, layoffs and the closing of some of its Disney stores. The company also curtailed hours and services at its theme parks.

David Joyce, an analyst with Miami-based Guzman & Co. called the company's financial performance for the quarter a ``significant improvement'' after a ``really pessimistic'' outlook when reporting its fourth-quarter results three months ago.

``Clearly Disney has a quality set of revenue brands. They did $7 billion in revenue when I thought they'd do $5.7 billion,'' Joyce said. ``I think it all portends for a decent second half this year.''

Revenue at Disney's theme parks and resorts for the quarter decreased 17 percent to $1.4 billion with operating income down by 51 percent to $187 million. Attendance at Walt Disney World in Florida was down 20 percent due to the reduction of travel in the aftermath of the Sept. 11 attacks. But attendance at the Tokyo Disney Resort increased, reflecting the addition of Tokyo DisneySea.

While theme parks continue to struggle, Disney's movie studio revenue and operating income remained steady, decreasing only 2 percent for the quarter to $1.8 billion and $149 million, respectively.

Disney had a monster hit with the computer-animated comedy ``Monsters, Inc.,'' which recently passed the $250 million mark at the domestic box office. Home entertainment has also been a bright spot for the company, especially with strong first-quarter performances of the DVD versions of ``Pearl Harbor,'' ``The Princess Diaries'' and ``Snow White and the Seven Dwarfs.''

With the ad market still soft, Disney's Media networks revenues for the quarter dropped 3 percent to $3 billion, with a 58 percent decrease in operating income to $246 million. ABC's woeful prime-time performance continues to plague the company.

``Our ratings are still down relative to last year,'' said Thomas Staggs, Disney's chief financial officer. ``The combination of these ratings and weak ad market led to difficult results. We have not yet seen clear signs of a rebound in the ad market. We also expect the Winter Olympics to dampen the sports ad market.''

ABC executives confirmed this week that they have green-lighted eight new drama pilots and four comedy projects for the 2002-03 season as the struggling network tries to climb back to ratings dominance under newly appointed entertainment President Susan Lyne.

``Susan will shape the resurgence of the network,'' said Iger. ``We do not believe the turnaround will be a long-term process. It's possible two or three hit shows will turn the tide for ABC.''

Iger said that as the prime-time schedule rebuilds, the company is buoyed by the performance of its cable properties, including the new ABC Family channel (formerly the Fox Family Channel) and ESPN, which will begin airing NBA games next season. At least 15 games will air on ABC as well as playoff contests.

In the area of consumer products, revenues decreased by 8 percent to $835 million. Operating income decreased 2 percent to $175 million.