HAPPIEST EARNINGS ON EARTH DISNEY BETTERS WALL STREET ESTIMATES.

Byline: Greg Hernandez Staff Writer

BURBANK - Boosted by an upswing in theme park attendance and higher advertising revenues at ABC, The Walt Disney Co. reported a 7 percent increase in first-quarter profit on Monday, beating most Wall Street estimates.

Disney's net income rose to $734 million, or 37 cents a share, up from $686 million, or 33 cents a share during 2006's first quarter ending Dec. 31, 2005. Revenue rose to $8.85 billion, an increase of 2.2 percent.

The better-than-expected performance came despite a rough quarter for the company's movie studio division, which suffered in comparison to the 2005 first-quarter when Disney was riding a box office wave on the strength of ``The Incredibles'' and ``National Treasure.''

Disney CEO Bob Iger, who recently engineered the $7.4 billion purchase of Pixar Animation Studios - the supplier of many of Disney's biggest box office hits - said the company has its eyes firmly on the future.

``We continue to focus on our strategy of creating the finest content, embracing leading edge technologies, and strengthening our global presence,'' Iger said during a conference call with analysts. ``In doing so, we are confident in our ability to deliver long-term success across each of our businesses. Our recently announced plan to acquire Pixar advances our efforts.''

Iger said he expects Pixar to take over the production of ``Toy Story 3'' and will likely spearhead the development of sequels to other Pixar hits.

``We will focus on making the right films and releasing them at the right time,'' he said.

Disney's theme park revenue rose 13 percent to $2.4 billion due to increased attendance at Disneyland Resort in Anaheim and Walt Disney World in Florida as well as strong attendance at the newest theme park in Hong Kong, which had four consecutive days of sellouts during the Chinese New Year. Operating income for the parks and resort business rose a healthy 51 percent, boosted by higher admission prices and increased spending by guests.

Disneyland Resort, which includes the original theme park and Disney's California Adventure, saw attendance rise by 18 percent with visits by local residents and domestic visitors up by 20 percent.

The company's media networks, including broadcast network ABC and cable network ESPN, raked in $3.7 billion in revenues, an increase of 6 percent.

With ABC regularly contending for the ratings lead in the coveted 18-49 age group, broadcasting profit was up a dramatic 87 percent to $234 million. ABC has been able to command higher ad rates on the strength of hit shows like ``Desperate Housewives,'' ``Lost,'' ``Grey's Anatomy,'' ``Dancing With the Stars'' and ``Extreme Makeover: Home Edition.''

The rough spot came in the area of studio entertainment, where revenues fell by 13 percent to $2 billion compared to a year earlier. Operating income for the film division plummeted 60 percent, largely because it had a tough act to follow. Its first-quarter had to compare with a 2005 first quarter that included the box office sensations ``The Incredibles'' and ``National Treasure.''

But the worldwide success ($649 million) of ``The Chronicles of Narnia: The Lion, the Witch and the Wardrobe'' stopped some of the bleeding, as did the domestic success of the animated ``Chicken Little.'' Looking forward, Disney's top brass said they are bullish about the future but are more concerned with the long-term, not simply quarter-by-quarter results.

``We expect robust growth,'' Chief Financial Office Thomas Staggs told analysts. ``We look forward to delivering our fourth straight year of double-digit growth in 2006. This is an exciting time for our company, we're taking bold steps.''

Disney announced its results after the close of the market. In after hours trading on the New York Stock Exchange, shares rose 2.1 percent. Earlier, Disney shares fell 5 cents to close at $24.96.

Greg Hernandez, [phone]

greg.hernandez(at)dailynews.com