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Disney Lowers Earnings Outlook

Economic weakness and a drop in travel are expected to reduce growth from earlier 25% to 35% projection.

March 20, 2003|James Bates and Richard Verrier | Times Staff Writers

The company behind Snow White was bedeviled by white snow Wednesday as a blizzard kept scores of Walt Disney Co. stockholders and most of its directors from attending the company's annual meeting in Denver.

But Chairman Michael Eisner insisted that Disney can weather its own storms, even as fellow executives acknowledged that war with Iraq and a soft economy would reduce earnings growth from the company's ambitious 25% to 35% earlier projection.

"Disney has been through turbulent times before," said Eisner, referring to a climate that threatens such key operations as theme parks, the ABC network and consumer products.

Of the lowered growth projection, Chief Financial Officer Thomas Staggs said: "At the beginning of the year we set earnings targets predicated on a continued improvement in the economy and the travel industry. But that improvement has stalled, which will likely result in more moderate growth this year."

Responding to a shareholder question, Eisner confirmed reports that Disney has revived its long-standing interest in buying Jim Henson Co. from Germany's EM.TV, and hinted that a deal could come soon. But Eisner said it probably would involve far less than the rumored price tag of $100 million to $200 million.

Disney has flirted with buying the company for years, going so far as to strike a deal more than a decade ago that unraveled when the Muppets creator died. The renewed interest follows the recent unraveling of a deal reached late last year under which EM.TV was to sell nearly half the company to an investment group led by former Disney TV executive Dean Valentine.

As for Disney's bedrock theme park business, Staggs said low consumer confidence would continue to cause short-term damage because people are reluctant to travel or plan travel in advance.

But President Robert Iger said Disney theme parks have rebounded strongly in the past after being hurt by big international events, such as the 1979 oil shortage and the 1991 Persian Gulf War.

Lehman Bros. recently reduced its estimate of Disney's theme park operating income this year by $205 million to $1.1 billion, down 6% from 2002.

Nine of Disney's 13 directors were unable to attend Wednesday's meeting because of the weather. Eisner addressed fewer than 50 people, a far cry from the hundreds, and even thousands, who have attended Disney's annual meetings in the past. Flights to Denver were canceled amid snow drifts as tall as 12 feet in some areas.

Among the missing were two of Eisner's critics on Disney's board, Stanley P. Gold and Vice Chairman Roy E. Disney. Another Eisner critic, Andrea Van de Kamp, involuntarily left the board and did not attend. She alleged in a memo to directors that Eisner orchestrated her removal because she has sided against him, an allegation that Disney denies.

Disney stockholders voted down four shareholder proposals, most of which had previously been defeated at stockholder meetings. They would have imposed conditions on Disney merchandise made in China, required a new special report on theme park safety, required a special executive pay review and tied the exercise price of future stock options to top executives to specific criteria.

Disney shares rose 39 cents to $16.97 on the New York Stock Exchange.

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