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Disney Beats Q2 Forecasts But Still Reports Net Loss

Walt Disney Co. beat Wall Street earnings expectations with improved results in some business units, but restructuring charges from its operations resulted in an overall second-quarter net loss of $548 million. Excluding the $1 billion charge resulting from the closing of the money-losing Web portal and an accounting change, for the quarter ending March 31, the company reported second-quarter earnings of $391 million, or 19 cents a share, compared to a year-ago figure of $291 million, or 14 cents a share. Revenue fell to $6 billion, a 4 percent decrease from the $6.3 billion the company posted a year ago. Disney's Studio Entertainment revenue decreased 5% to $1.6 billion, while operating income increased to $164 million compared with $46 million in the prior-year quarter. The results reflect the successful VHS and DVD releases of LADY AND THE TRAMP II: SCAMP'S ADVENTURE, REMEMBER THE TITANS and DINOSAUR as well as improvements in domestic theatrical motion picture distribution. Parks and Resorts revenue increased 5 percent to $1.6 billion as operating income remained flat at $331 million. The results reflect increased theme park attendance and guest spending at Disneyland and growth at Disney Cruise Line. The results, however, were offset by lower Disney World attendance and increased costs related to the opening of the new Disney's California Adventure theme park adjacent to the companys Anaheim, California Disneyland resort. Media Networks revenue for the quarter decreased 8 percent to $2.2 billion, with operating income slipping 9 percent to $489 million. The results reflect decreased advertising revenue at the company's TV and radio station operations. Cable television income increased 9 percent to $353 million for the quarter. The results reflect higher affiliate revenues and subscriber growth. Consumer products sales decreased 7 percent to $568 million while operating income jumped 30 percent to $90 million as a result of cost savings and improvements at Disney Interactive. The Internet Group revenue decreased 2% to $47 million, with operating loss decreasing by 49% to $37 million. The results reflect improved performance at Disney-branded sites as well as the elimination of losses at, the company's online toy retailing site, which closed in June, 2000. With the specter of company-wide layoffs and pay cuts looming, in addition to a soft advertising market and anticipated actor and writer strike, the company still has some rough waters to navigate. However, in a prepared company statement, chairman and chief executive officer Michael D. Eisner was optimistic about the companys recent performance and future direction. "We are pleased with our company's strong performance, especially given the recent softness of the American economy," said Eisner. "We are taking appropriate action to remain on our growth track while we weather the current market conditions and to ensure the long-term growth and strength of the company. Eisner also commented, "Of course, economic downturns are never good news, but historically, our company has always emerged from them stronger than ever. With this in mind, we remain confident in meeting or exceeding our fiscal goals for this year and about the long-term prospects for The Walt Disney Company."