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Walt Disney Company Parks Division Profit Soars 73% in Latest Quarter;
Overall Profits Grew 32%

By Jason Garcia, Orlando SentinelMcClatchy-Tribune Regional News

May 08, 2013--Profits soared across the Walt Disney Co.'s vacation empire during the first three months the year, surging 73 percent on the strength of new cruise ships and theme-park attractions worldwide.

The booming parks business helped lift Disney to 32 percent profit growth during its fiscal second quarter. The company said Tuesday it turned an overall profit of $1.5 billion for the period, up from $1.1 billion a year ago. Revenue rose 10 percent to nearly $10.6 billion.

Those results, which exceeded Wall Street estimates, came as Disney's stock price climbed to record heights and the company basked in the glow of the just-released "Iron Man 3," yet another blockbuster superhero movie.

"It's an exciting time at Disney," company Chairman and Chief Executive Officer Bob Iger said during a conference call with analysts.

None of Disney's divisions performed stronger during the quarter than its parks, where Disney has plowed approximately $6 billion into new domestic projects during the past few years. Among the additions: two new cruise ships; a Hawaiian resort; a rebuilt Disney California Adventure at Disneyland in Anaheim, Calif.; and a new hotel, an expanded Fantasyland and the MyMagic--vacation-planning system at Walt Disney World.

With many of those projects moving past the break-even point, operating income in Parks and Resorts skyrocketed 73 percent, from $222 million a year ago to $383 million. Sales jumped 14 percent to $3.3 billion.

The parks were helped by favorable timing of the busy Christmas and Easter holiday periods. Easter, for instance, fell earlier this year than in 2012, padding Disney's second-quarter operating profit by about $35 million.

Still, Disney executives said the results were an emphatic endorsement of the investments made in new attractions and businesses.

"Let's call it what it was: a great quarter for the parks," Iger said. "This was a quarter that I think stood out because the product that we recently put online really worked, like California Adventure and Fantasyland and the cruise ships."

Disney recorded gains across its holdings. Disney World and Disneyland both set quarterly attendance records, with combined attendance up 8 percent from a year earlier. Visitor spending was up 10 percent on higher ticket prices as well as more food and souvenir sales.

Iger said the Magic Kingdom, the world's busiest theme park, set a single-day attendance record during this year's Easter period thanks to interest in the new Fantasyland attractions. He said the extra breathing room created by the expansion, which will continue through this year, has sent guest-satisfaction ratings "way up" in the chronically congested park.

Occupancy at Disney's U.S. hotels -- which are heavily concentrated in Orlando -- dipped two percentage points to 80 percent because of additional capacity from the roughly 2,000-room Disney's Art of Animation Resort, which opened last summer. But per-room spending, which includes the nightly rate, rose 7 percent.

Disney said bookings for the current quarter are running 7 percent ahead of last year's pace. Prices are about flat, as the Art of Animation -- which is priced toward the low end of Disney's hotel scale -- weighs on the resort's average rates.

Another big profit center: Disney Cruise Line, which carried more passengers because of the Disney Fantasy, the second of two new ships the company has added to what is now a four-vessel fleet. The 4,000-passenger ship had not yet begun sailing during Disney's second quarter last year.

Results also improved, albeit at a lesser pace, at Disney's international parks. The company said attendance grew at Hong Kong Disneyland, which was recently expanded, while guest spending rose at Disneyland Paris.

The parks' multibillion-dollar spending spree is not quite over. Disney continues to test elements of MyMagic+, the technology that will outfit guests with wireless wristbands functioning as all-in-one park passes, hotel keys and credit cards, and allowing them to book ride times before leaving on vacation.

The timing of a full introduction is somewhat in flux. "The goal is for us to roll out MyMagic--at some point this year," Iger said. "We want to be careful that this is working absolutely right before we roll out to the general public."

Once it's up and running, Disney Co. Chief Financial Officer Jay Rasulo said, the project is expected to boost Disney's bottom line in several ways.

"If we can get people to plan their vacation before they leave home, we know that we get more time with them, we get a bigger share of their wallet," Rasulo said. "The second thing is what happens to purchases when they become much more convenient and you don't spend time queuing up for the transaction."

Iger said he also expects MyMagic--to lure more people into staying in Disney hotels, likely because they will be given access to more of the system's perks than guests who spend their nights in off-property competitors.

Beyond its parks, the big swing factor for Disney during the quarter was its film studio, even though "Iron Man 3" was released after the quarter was over. After losing $84 million a year ago on the flop John Carter, the film unit rebounded to an operating profit of $118 million, buoyed by "Wreck-it Ralph" and "Oz the Great and Powerful."

Disney's largest business -- its television networks, which are anchored by cable-sports behemoth ESPN -- posted an operating profit of $1.9 billion for the quarter, up 8 percent from a year ago. Its consumer-products division turned an operating profit of $200 million, up 35 percent, on sales of Disney Channel, Mickey and Minnie, and Marvel Entertainment merchandise.

Disney's newest and smallest unit, interactive media, continued to lose money, though not quite as much as last year. The division, which produces video games, posted a $54 million operating loss from the quarter, down from a $70 million loss. or 407-420-5414


(c)2013 The Orlando Sentinel (Orlando, Fla.)

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