8-K

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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 8-K

CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934

Date of Report (Date of Earliest Event Reported):

November 8, 2001

THE WALT DISNEY COMPANY
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

DELAWARE
(STATE OF JURISDICTION OF INCORPORATION)

1-11605
(COMMISSION FILE NUMBER) 95-4545390
(IRS EMPLOYER IDENTIFICATION NO.)

500 South Buena Vista Street,
Burbank, California
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) 91521
(ZIP CODE)

(818) 560-1000
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)

Not applicable
(FORMER NAME OR ADDRESS, IF CHANGED SINCE LAST REPORT)

Item 5.  Other Events and Regulation FD Disclosure.

    Earnings Release. On November 8, 2001, the Registrant issued a press release reporting financial results and earnings for the Registrant's 2001 fiscal year, which ended September 30, 2001. A copy of the press release is filed herewith as Exhibit 99(a).

    Conference Call Presentations. Also on November 8, 2001, the Registrant held a telephonic and Webcast conference call concerning the earnings release during which presentations were made by Michael D. Eisner, Chairman of the Board and Chief Executive Officer; Robert A. Iger, President and Chief Operating Officer; and Thomas O. Staggs, Senior Executive Vice President and Chief Financial Officer of the Registrant. A copy of the text of this presentation is filed herewith as Exhibit 99(b).

    Pro Forma Worksheet. On November 8, the Registrant made available a worksheet reflecting the impact of the new Statement of Financial Accounting Standard No. 142 on the Registrant's fiscal 2001 quarterly income statements. This standard eliminates the amortization of goodwill and certain other intangible assets. The Registrant will adopt this new standard as part of its fiscal 2002 reporting. The worksheet is filed herewith as Exhibit 99(c).

    The Registrant believes that certain statements in the earnings release and the presentation may constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are made on the basis of management's views and assumptions regarding future events and business performance as of the time the statements are made. Actual results may differ materially from those expressed or implied. Information concerning factors that could cause actual results to differ materially from those in forward-looking statements is contained from time to time in the Registrant's filings with the U.S. Securities and Exchange Commission, including the Registrant's annual report on Form 10-K for the year ended September 30, 2000.

Item 7.  Financial Statements and Exhibits.

(c)	Exhibits
	99(a)	Press release of the Registrant dated November 8, 2001.
	99(b)	Text of conference call presentations by executives of the Registrant on November 8, 2001.
	99(c)	Pro forma worksheet reflecting the impact of Statement of Financial Accounting Standard No. 142 on the Registrant's fiscal 2001 quarterly income statements.

SIGNATURE

    Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

THE WALT DISNEY COMPANY
By:	/s/ DAVID K. THOMPSON David K. Thompson Senior Vice President Assistant General Counsel

Dated: November 8, 2001

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FORM 8-K
Item 5. Other Events and Regulation FD Disclosure.
Item 7. Financial Statements and Exhibits.
SIGNATURE

EX-99.(A)

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Exhibit 99(a)

FOR IMMEDIATE RELEASE

November 8, 2001

THE WALT DISNEY COMPANY
REPORTS RESULTS FOR THE YEAR ENDED SEPTEMBER 30, 2001

    BURBANK, Calif.—The Walt Disney Company today reported earnings for the year and fourth quarter ended September 30, 2001.

    Pro forma revenues for the year remained approximately at $25.3 billion and segment operating income decreased 2% to $4.0 billion. Excluding restructuring and impairment charges, gain on the sale of businesses and the cumulative effect of accounting changes, pro forma net income and diluted earnings per share were flat at $1.5 billion and $0.72, respectively.

    Pro forma revenues and segment operating income for the quarter decreased 5% and 31% to $5.8 billion and $627 million, respectively, from the prior-year quarter. Excluding the restructuring and impairment charges and gain on the sale of businesses, pro forma net income and diluted earnings per share for the quarter decreased to $132 million and $0.06, respectively.

    "By any measure, these are challenging times for American business," said Michael D. Eisner, chairman and chief executive officer of The Walt Disney Company. "However, this environment and its impact on our operating results will not erode the enduring value of Disney's broad array of assets. Throughout the current downturn, we will continue to manage our company in a way that carefully balances the need for near term cost reduction with the equally compelling need to invest for future growth. As a result, we expect the company to be in an even stronger position to deliver long-term earnings growth and steadily increasing cash flow and returns on invested capital as the economy recovers. We will achieve these goals as we always have by leveraging our brands to create compelling family entertainment products. The crowds filling the new Tokyo Disney Sea theme park and the box office success of Disney/Pixar's Monsters, Inc. are but the most recent examples of the continuing appeal of Disney product and why I believe that Disney's best days lie ahead."

Basis of Presentation

    The Company acquired Infoseek, created the Internet Group and disposed of Fairchild Publications in November 1999. In 2001, the Company closed the GO.com portal business and converted its Internet Group common stock into Disney common stock.

    To enhance comparability, the Company has presented operating results on a pro forma basis, which assumes these transactions occurred at the beginning of fiscal 2000, eliminating the one-time impacts of those events. Additionally, prior-year pro forma operating results for the Studio Entertainment segment have been restated to reflect the impact of the Film Accounting change discussed below.

    The Company believes that pro forma results provide additional information useful in analyzing underlying business results. However, pro forma results are not necessarily indicative of the combined results that would have occurred had these events actually occurred at the beginning of fiscal 2000, nor are they necessarily indicative of future results.

    The Company has also changed the reporting structure of the various components of its Internet Group. As a result, the Internet Group will no longer be reported as a separate segment. The ESPN, ABC, Disney and family-branded Internet Web sites will be reported in the Media Networks segment and DisneyVacations.com will be reported in the Parks & Resorts segment. During the second quarter of fiscal 2001, the Disney Catalog and the Disney Store Online were reassigned from the Internet Group to Consumer Products. These changes have been reflected in the fiscal 2001 financial statements and prior-year amounts have been reclassified to reflect the current-year presentation.

As Reported Results

    On an as-reported basis, results for the year and quarter include restructuring and impairment charges totaling $1.5 billion and $126 million, respectively. Included in the charges for the year is $878 million associated with the closure of GO.com, including an $820 million non-cash write-off of intangible assets. On a pro forma basis, restructuring and impairment charges exclude the impact of the GO.com closure and, as a result, amount to $576 million and $110 million, for the year and quarter, respectively. See Table C for details of these charges. In addition, as-reported results for the prior year include a $243 million pre-tax gain on the sale of Fairchild Publications in the first quarter.

    On an as-reported basis, revenues for the year and quarter were $25.3 billion and $5.8 billion, respectively. Including the restructuring and impairment charges, gain on the sale of businesses and the cumulative effect of the accounting changes ($0.13 per share), as-reported net loss attributed to Disney common stock was $41 million or $0.02 per share for the year versus net income of $1.2 billion or $0.57 per share in the prior year. As-reported net income attributed to Disney common stock was $53 million or $0.03 per share for the quarter versus $240 million or $0.11 per share in the prior-year quarter.

    See Table D for a reconciliation of as-reported income (loss) per share attributed to Disney common stock to pro forma earnings per share.

    Unless otherwise noted, the following discussion reflects pro forma results.

Media Networks

    Media Networks revenues for the year decreased 2% to $9.6 billion and segment operating income decreased 13% to $1.8 billion. For the quarter, revenues decreased 3% to $2.2 billion and segment operating income decreased 12% to $348 million. See Table A for further detail of Media Networks results.

    Broadcasting results for the year and the quarter reflected the impact of lower ratings, the soft advertising market and higher primetime programming costs at the ABC television network. The soft advertising also impacted the Company's owned television and radio stations. Additionally, the quarter reflected lower revenues and increased news programming costs resulting from the events of September 11, 2001 and the days that followed.

    Disney's share of operating income from cable television activities, which consists of Disney's cable networks and cable equity investments, increased 2% for the year to $1.2 billion and increased 27% to $286 million for the quarter. Excluding the gain from the sale of Eurosport in the prior-year, cable television results were up 9% for the year. See Table B for a detail of operating income from cable television activities.

    Cable television results for the year and fourth quarter reflect higher cable network affiliate revenues driven by contractual rate adjustments, strong digital subscriber growth and the conversion of the Disney Channel from a premium to a basic service, partially offset by higher programming costs. Additionally, cable equity investments, including Lifetime Television, The History Channel and A&E Television showed improved performance primarily due to strong subscriber growth.

Parks & Resorts

    Parks & Resorts revenues for the year increased 3% to $7.0 billion and segment operating income decreased 2% to $1.6 billion. For the quarter, revenues decreased 2% to $1.7 billion and segment operating income decreased 13% to $313 million.

    Parks & Resorts results for both the year and fourth quarter reflected increased attendance, spending and growth in occupied room nights at the Disneyland Resort; cost savings at the Walt Disney

2

World Resort; and higher royalties from Tokyo Disneyland. These increases were more than offset by higher costs at the Disneyland Resort and decreased theme park attendance and lower occupied room nights at the Walt Disney World Resort. At the Disneyland Resort, increased attendance, spending and growth in occupied room nights and higher costs were driven by the addition of Disney's California Adventure, Downtown Disney and the Grand Californian Hotel. At the Walt Disney World Resort, declines in theme park attendance and lower occupied room nights reflected the impact of the Millennium Celebration in the prior year, which concluded in December 2000. Cost savings at Walt Disney World reflected the impact of productivity initiatives as well as decreases due to the conclusion of the Millennium Celebration.

    Additionally for the year, Parks & Resorts results reflected increases at the Disney Cruise Line, driven by the strength of the 7-day cruise package, increased guest spending at Walt Disney World and pre-opening costs at the Disneyland Resort due to Disney's California Adventure.

    Parks & Resorts results for the quarter and year reflected the impact of the events of September 11th. Both the Disneyland Resort and Walt Disney World Resort were impacted by theme park closures and lower attendance and hotel occupancy due to cancellations and reduced travel during the last three weeks of September.

Studio Entertainment

    Studio Entertainment revenues for the year increased 2% to $6.1 billion and segment operating income more than tripled to $260 million from $76 million in the prior year. For the fourth quarter, revenues decreased 11% to $1.3 billion and segment operating loss was $121 million compared to operating income of $76 million in the prior-year quarter.

    Studio Entertainment results for the year primarily were driven by growth in domestic home video and stage plays. Improvements in domestic home video reflected strong VHS and DVD performance, most notably by successful animated titles including Disney/Pixar's Toy Story 2 and Lady & the Tramp II and stronger performing live-action titles including Spy Kids, Scary Movie, Gone in 60 Seconds and Remember the Titans. Growth in stage plays reflected performances of The Lion King in additional cities and the improved performance of Aida.

    Studio Entertainment results for the fourth quarter were primarily driven by declines in both domestic theatrical motion picture distribution and in worldwide home video.

    Despite the box office success of Princess Diaries in domestic theatrical motion picture distribution, other live action titles showed softer performances compared to strong titles in the prior-year quarter, which included Scary Movie, The Kid and Remember The Titans. Additionally, domestic theatrical results reflected the write down of Big Trouble, which was postponed due to the events of September 11^th and by higher marketing costs due to the timing of releases. In worldwide home video, Spy Kids, The Book of Pooh and Recess faced difficult comparisons to strong animated titles in the prior-year quarter, which included The Little Mermaid II: Return to the Sea, The Tigger Movie and Buzz Lightyear: Star Command and the successful international performance of Tarzan.

Consumer Products

    Consumer Products revenues for the year decreased 6% to $2.6 billion while segment operating income increased 4% to $401 million. Revenues for the quarter decreased 6% to $612 million and segment operating income increased 6% to $87 million.

    Results for the year and fourth quarter were driven by cost reduction initiatives, positive comparative store sales at Disney Stores in Europe and Japan and modest growth in licensing. These increases were partially offset by lower comparative store sales at Disney Stores in North America.

3

Corporate and Unallocated Shared Expenses

    Corporate and unallocated shared expense increased 15% to $406 million for the year and was flat at $122 million for the quarter. The increase for the year was driven by costs associated with several strategic initiatives designed to improve overall company-wide efficiency and promote the Disney brand, including the start-up of the Disney Club, which was launched in the first quarter of 2001.

Net Interest Expense and Other

    Net interest expense and other decreased 15% to $417 million for the year versus $493 million in the prior year. For the quarter, net interest expense and other increased to $130 million from the prior year total of $80 million. The decrease for the year was driven by gains on the sale of certain investments, lower interest rates and lower average debt balances throughout most of the year. For the quarter, the increased expense was primarily due to higher average debt balances. Both the year and fourth quarter also reflected lower capitalized interest.

Equity in the Income of Investees

    Income from equity investees increased 20% to $300 million for the year and increased 25% to $66 million for the quarter. These increases reflected improved results from cable equity investments including Lifetime Television, The History Channel and A&E Television and certain international cable equity investments, partially offset by start-up losses incurred in connection with new investments.

Stock Repurchases

    During the quarter, the Company repurchased 55.5 million shares of Disney common stock for approximately $806 million. For the year, the Company repurchased a total of 63.9 million shares for $1.1 billion. As of September 30, 2001, the Company had authorization in place to repurchase approximately 330 million additional shares.

Fox Family Acquisition

    On October 24, 2001 the Company acquired Fox Family Worldwide for $5.2 billion, including $2.9 billion in cash, plus the assumption of $2.3 billion in debt. The Company funded the acquisition with cash on hand as well as short and long-term debt issuances. Among the businesses to be acquired are the Fox Family Channel, a programming service that currently reaches approximately 81 million cable and satellite television subscribers throughout the U.S.; a 76% interest in Fox Kids Europe, which reaches more than 24 million subscribers across Europe; Fox Kids channels in Latin America, and the Saban library and entertainment production businesses.

Current Outlook

    The Company expects that the events of September 11^th and their aftermath, coupled with the already soft economy, will particularly influence its operating results in the first quarter of fiscal 2002. As such, operating income for the first quarter could be somewhat less than half that of the strong first quarter results of the prior year. The impact is likely to be most significant in certain of the Media Networks operations and Parks & Resorts. The Media Networks' advertising-supported businesses, such as the television and radio networks and stations, are expected to have profit declines due to the soft advertising marketplace, and a potential increase in news preemptions and higher news production costs. Parks & Resorts operations are likely to be affected by the significant disruption in air travel and tourism and further declines in consumer confidence caused by the events of September 11, especially as compared to the record setting first quarter the segment achieved in the prior year. Additionally, the Company expects that soft retail sales could impact its Consumer Products business. The Company expects that the first quarter will represent the most difficult year-over-year comparison. While the

4

future is uncertain, the Company should experience an improved business climate in the last three fiscal quarters of 2002, with operating income declines of as much as 10 to 15 percent for those later 3 periods combined versus the prior year.

    "Recent events make this a particularly challenging and somewhat anomalous time for our company," Eisner said. "We know that there are certain factors we can control and influence, and others over which we have little to no control. While we cannot determine or predict the timing of a return to normalcy, we are focused on those factors we can manage—continued output of quality creative content, like Monsters, Inc. and Tokyo DisneySea, greater utilization of our distribution outlets, like the ABC Television Network, ESPN, and the new ABC Family Channel, and a relentless drive for greater cost and capital efficiency in our operations."

Conversion of Internet Group Common Stock

    On March 20, 2001, the Company converted all of its outstanding Internet Group common stock into Disney common stock, resulting in the issuance of approximately 8.6 million shares of Disney common stock. For the quarter and year ended September 30, 2001, as-reported earnings for Disney common stock reflect approximately 72% of Internet Group losses from October 1, 2000 through January 28, 2001 (the last date prior to the announcement of the conversion), and 100% thereafter.

    In addition, the Company has ceased operations of the GO.com portal business, which resulted in restructuring charges in the current year.

Restructuring, Impairment and Workforce Reduction Related Charges

    During the quarter and year, the Company recorded restructuring and impairment charges totaling $126 million and $1.5 billion, respectively, on an as-reported basis. The charges relate to the closure of GO.com; impairment write-downs for certain Internet investments and other long-lived assets; the workforce reduction and the closure of the Chicago DisneyQuest facility and approximately 100 Disney Stores. The $878 million charge for closure of the GO.com portal business includes a non-cash write-off of intangible assets totaling $820 million and the Disney Store closures charge consists of lease termination costs; write-downs of fixed assets, leasehold improvements and inventory; and other related closure costs.

    See Table C for details of the restructuring and impairment charges on both a pro forma and as-reported basis.

Accounting Changes

    Effective October 1, 2000, the Company adopted AICPA Statement of Position No. 00-2, Accounting by Producers or Distributors of Films (SOP 00-2), and FASB Statement No. 133, Accounting for Derivative Instruments and Hedging Activities (SFAS 133), and recorded one-time after-tax charges for the adoption of the standards totaling $228 million (or $0.11 per share) and $50 million (or $0.02 per share), respectively.

Fiscal 2002 Accounting Change

    Effective October 1, 2001, the Company adopted Statement of Financial Accounting Standard No. 142, Goodwill and Other Intangible Assets (SFAS 142). As a result, a substantial amount of its intangible assets will no longer be amortized. The impact of pro forma intangible asset amortization

5

that would not have been amortized pursuant to SFAS 142 during fiscal 2001 on diluted earnings per share is as follows:

Quarter ended (unaudited)
December 31, 2000	$	0.07
March 31, 2001		0.06
June 30, 2001		0.06
September 30, 2001		0.07
	$	0.26

FORWARD-LOOKING STATEMENTS

    Management believes certain statements in this press release may constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are made on the basis of management's views and assumptions regarding future events and business performance as of the time the statements are made. Actual results may differ materially from those expressed or implied. Such differences may result from actions taken by the Company, including further restructuring or strategic initiatives and actions relating to the Company's strategic sourcing initiative, as well as from developments beyond the Company's control, including international, political and military developments that may affect travel and leisure businesses generally; changes in domestic and global economic conditions that may, among other things, affect the performance of the Company's theatrical and home entertainment releases, the advertising market for broadcast and cable television programming and consumer products. Changes in domestic competitive conditions and technological developments may also affect performance of all significant Company businesses.

Editor's Note: The Company makes available its quarterly earnings releases, annual report to shareholders, fact book and SEC filings on its Investor Relations Web site located athttp://www.disney.com/investors

6

The Walt Disney Company
PRO FORMA CONSOLIDATED STATEMENTS OF INCOME
(unaudited; in millions, except per share data)

		Quarter Ended September 30						Year Ended September 30
		2001			2000			2001			2000
Revenues		$	5,812		$	6,107		$	25,256		$	25,356
Costs and expenses			(5,307	)		(5,314	)		(21,624	)		(21,584	)
Amortization of intangible assets			(145	)		(142	)		(586	)		(633	)
Gain on sale of businesses			—			153			22			246
Net interest expense and other			(130	)		(80	)		(417	)		(493	)
Equity in the income of investees			66			53			300			249
Restructuring and impairment charges			(110	)		(31	)		(576	)		(92	)
Income before income taxes, minority interests and the cumulative effect of accounting changes			186			746			2,375			3,049
Income taxes			(102	)		(377	)		(1,114	)		(1,402	)
Minority interests			(21	)		(21	)		(104	)		(107	)
Income before cumulative effect of accounting changes			63			348			1,157			1,540
Cumulative effect of accounting changes:
	Film accounting		—			—			(228	)		—
	Derivative accounting		—			—			(50	)		—
Net income		$	63		$	348		$	879		$	1,540
Earnings per share before cumulative effect of accounting changes:
	Diluted	$	0.03		$	0.16		$	0.55		$	0.73
	Basic	$	0.03		$	0.17		$	0.55		$	0.74
Earnings per share including cumulative effect of accounting changes(1):
	Diluted	$	0.03		$	0.16		$	0.42		$	0.73
	Basic	$	0.03		$	0.17		$	0.42		$	0.74
Earnings before cumulative effect of accounting changes, excluding restructuring and impairment charges and gain on the sale of businesses		$	132		$	328		$	1,525		$	1,518
Earnings per share before cumulative effect of accounting changes, excluding restructuring and impairment charges and gain on the sale of businesses:
	Diluted	$	0.06		$	0.15		$	0.72		$	0.72
	Basic	$	0.06		$	0.16		$	0.73		$	0.73
Average number of common and common equivalent shares outstanding:
	Diluted		2,093			2,123			2,104			2,111
Basic			2,085			2,091			2,089			2,082

(1)

The per share impacts of the film and derivative accounting changes for the year were ($0.11) and ($0.02), respectively.

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The Walt Disney Company
AS-REPORTED CONSOLIDATED STATEMENTS OF INCOME
(unaudited; in millions, except per share data)

			Quarter Ended September 30						Year Ended September 30
			2001			2000			2001			2000
Revenues			$	5,812		$	6,118		$	25,269		$	25,418
Costs and expenses				(5,307	)		(5,334	)		(21,670	)		(21,660	)
Amortization of intangible assets				(145	)		(323	)		(767	)		(1,233	)
Gain on sale of businesses				—			153			22			489
Net interest expense and other				(130	)		(80	)		(417	)		(497	)
Equity in the income of investees				66			53			300			208
Restructuring and impairment charges				(126	)		(31	)		(1,454	)		(92	)
Income before income taxes, minority interests and the cumulative effect of accounting changes				170			556			1,283			2,633
Income taxes				(96	)		(368	)		(1,059	)		(1,606	)
Minority interests				(21	)		(21	)		(104	)		(107	)
Income before cumulative effect of accounting changes				53			167			120			920
Cumulative effect of accounting changes:
	Film accounting			—			—			(228	)		—
	Derivative accounting			—			—			(50	)		—
Net income (loss)			$	53		$	167		$	(158	)	$	920
Earnings (loss) attributed to:
	Disney Common Stock(1)		$	53		$	240		$	(41	)	$	1,196
	Internet Group Common Stock			—			(73	)		(117	)		(276	)
			$	53		$	167		$	(158	)	$	920
Earnings (loss) per share before cumulative effect of accounting changes attributed to:
	Disney Common Stock(1)
		Diluted	$	0.03		$	0.11		$	0.11		$	0.57
		Basic	$	0.03		$	0.12		$	0.11		$	0.58
	Internet Group Common Stock (basic and diluted)			n/a		$	(1.61	)	$	(2.72	)	$	(6.18	)
Earnings (loss) per share including cumulative effect of accounting changes attributed to:
	Disney Common Stock(1)(2)
		Diluted	$	0.03		$	0.11		$	(0.02	)	$	0.57
		Basic	$	0.03		$	0.12		$	(0.02	)	$	0.58
	Internet Group Common Stock (basic and diluted)			n/a		$	(1.61	)	$	(2.72	)	$	(6.18	)
Earnings attributed to Disney common stock before cumulative effect of accounting changes, excluding restructuring and impairment charges and gain on the sale of businesses(1)			$	132		$	240		$	1,330		$	1,174
Earnings per share attributed to Disney common stock before cumulative effect of accounting changes, excluding restructuring and impairment charges and gain on the sale of businesses(1)
		Diluted	$	0.06		$	0.11		$	0.63		$	0.56
		Basic	$	0.06		$	0.12		$	0.64		$	0.57
Average number of common and common equivalent shares outstanding:
	Disney
		Diluted		2,093			2,115			2,100			2,103
		Basic		2,085			2,083			2,085			2,074
Internet Group (basic and diluted)				—			45			43			45

(1)

Including Disney's retained interest in the Internet Group. Disney's as-reported retained interest in the Internet Group reflects 100% of Internet Group losses through November 17, 1999, approximately 72% for the period from November 18, 1999 through January 28, 2001 (the last date prior to the announcement of the conversion of the Internet Group common stock) and 100% thereafter.

(2)

The per share impacts of the film and derivative accounting changes for the current year were ($0.11) and ($0.02), respectively.

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THE WALT DISNEY COMPANY SEGMENT RESULTS
For the Year Ended September 30
(unaudited, in millions)

		Pro Forma						As Reported
						% Change
		2001		2000				2001		2000
Revenues:
	Media Networks	$	9,556	$	9,788	(2	)%	$	9,569	$	9,836
	Parks & Resorts		7,004		6,809	3	%		7,004		6,809
	Studio Entertainment		6,106		6,011	2	%		6,106		6,011
	Consumer Products		2,590		2,748	(6	)%		2,590		2,762
		$	25,256	$	25,356	—		$	25,269	$	25,418
Segment operating income:(1)
	Media Networks	$	1,791	$	2,048	(13	)%	$	1,758	$	1,985
	Parks & Resorts		1,586		1,615	(2	)%		1,586		1,615
	Studio Entertainment(2)		260		76	n/m			260		126
	Consumer Products		401		385	4	%		401		386
		$	4,038	$	4,124	(2	)%	$	4,005	$	4,112

    The Company evaluates the performance of its operating segments based on segment operating income. A reconciliation of segment operating income to income before income taxes, minority interests and the cumulative effect of accounting changes is as follows:

	Pro Forma						As Reported
	2001			2000			2001			2000
Segment operating income	$	4,038		$	4,124		$	4,005		$	4,112
Corporate and unallocated shared expenses		(406	)		(352	)		(406	)		(354	)
Amortization of intangible assets		(586	)		(633	)		(767	)		(1,233	)
Gain on sale of businesses		22			246			22			489
Net interest expense and other		(417	)		(493	)		(417	)		(497	)
Equity in the income of investees		300			249			300			208
Restructuring and impairment charges		(576	)		(92	)		(1,454	)		(92	)
Income before income taxes, minority interests and the cumulative effect of accounting changes	$	2,375		$	3,049		$	1,283		$	2,633

(1)

Segment earnings before interest, income taxes, depreciation and amortization (EBITDA) is as follows:

	Pro Forma				As Reported
	2001		2000		2001		2000
Media Networks	$	1,964	$	2,197	$	1,934	$	2,154
Parks & Resorts		2,190		2,197		2,190		2,197
Studio Entertainment		307		130		307		180
Consumer Products		491		494		491		495
	$	4,952	$	5,018	$	4,922	$	5,026

(2)

Pro forma segment operating income has been adjusted to reflect the impact of SOP 00-2. The respective adjustments for the year will (decrease) increase segment operating income as follows:

Quarter ended
December 31, 1999	$	(73	)
March 31, 2000		37
June 30, 2000		—
September 30, 2000		(14	)
	$	(50	)

9

THE WALT DISNEY COMPANY SEGMENT RESULTS
For the Quarter Ended September 30
(unaudited, in millions)

		Pro Forma							As Reported
							% Change
		2001			2000				2001			2000
Revenues:
	Media Networks	$	2,175		$	2,236	(3	)%	$	2,175		$	2,247
	Parks & Resorts		1,684			1,717	(2	)%		1,684			1,717
	Studio Entertainment		1,341			1,500	(11	)%		1,341			1,500
	Consumer Products		612			654	(6	)%		612			654
		$	5,812		$	6,107	(5	)%	$	5,812		$	6,118
Segment operating income (loss):(1)
	Media Networks	$	348		$	396	(12	)%	$	348		$	373
	Parks & Resorts		313			361	(13	)%		313			361
	Studio Entertainment(2)		(121	)		76	n/m			(121	)		90
	Consumer Products		87			82	6	%		87			82
		$	627		$	915	(31	)%	$	627		$	906

    The Company evaluates the performance of its operating segments based on segment operating income. A reconciliation of segment operating income to income before income taxes and minority interests is as follows:

	Pro Forma						As Reported
	2001			2000			2001			2000
Segment operating income	$	627		$	915		$	627		$	906
Corporate and unallocated shared expenses		(122	)		(122	)		(122	)		(122	)
Amortization of intangible assets		(145	)		(142	)		(145	)		(323	)
Gain on sale of businesses		—			153			—			153
Net interest expense and other		(130	)		(80	)		(130	)		(80	)
Equity in the income of investees		66			53			66			53
Restructuring and impairment charges		(110	)		(31	)		(126	)		(31	)
Income before income taxes and minority interests	$	186		$	746		$	170		$	556

(1)

Segment EBITDA is as follows:

	Pro Forma					As Reported
	2001			2000		2001			2000
Media Networks	$	392		$	435	$	392		$	418
Parks & Resorts		464			505		464			505
Studio Entertainment		(109	)		90		(109	)		104
Consumer Products		108			107		108			107
	$	855		$	1,137	$	855		$	1,134

(2)

Pro forma segment operating income has been adjusted to reflect the impact of SOP 00-2. The respective adjustments for the year will (decrease) increase segment operating income as follows:

Quarter ended
December 31, 1999	$	(73	)
March 31, 2000		37
June 30, 2000		—
September 30, 2000		(14	)
	$	(50	)

10

Table A

MEDIA NETWORKS
(unaudited, in millions)

		Pro Forma
Year Ended September 30						% Change
		2001		2000
Revenues:
	Broadcasting	$	5,713	$	6,279	(9	)%
	Cable Networks		3,843		3,509	10	%
		$	9,556	$	9,788	(2	)%
Segment operating income:
	Broadcasting	$	728	$	1,033	(30	)%
	Cable Networks		1,063		1,015	5	%
		$	1,791	$	2,048	(13	)%

		Pro Forma
Quarter Ended September 30						% Change
		2001		2000
Revenues:
	Broadcasting	$	1,173	$	1,311	(11	)%
	Cable Networks		1,002		925	8	%
		$	2,175	$	2,236	(3	)%
Segment operating income:
	Broadcasting	$	84	$	185	(55	)%
	Cable Networks		264		211	25	%
		$	348	$	396	(12	)%

11

Table B

CABLE TELEVISION ACTIVITIES
(unaudited, in millions)

			Year Ended September 30
			2001			2000			% Change
Operating income:
	Cable Networks		$	1,063		$	1,015		5	%
	Equity investments:
		A&E, Lifetime and E! Entertainment Television		693			614		13	%
	Other(1)			178			211		(16	)%
				1,934			1,840		5	%
Partner share of operating income				(705	)		(639	)	(10	)%
Disney share of operating income			$	1,229		$	1,201		2	%

			Quarter Ended September 30
			2001			2000			% Change
Operating income:
	Cable Networks		$	264		$	211		25	%
	Equity investments:
		A&E, Lifetime and E! Entertainment Television		133			113		18	%
	Other			12			36		(67	)%
				409			360		14	%
Partner share of operating income				(123	)		(135	)	9	%
Disney share of operating income			$	286		$	225		27	%

Note: Amounts presented in this table represent 100% of the operating income for all of the Company's cable businesses. The Disney share of operating income represents the Company's ownership interest in cable television operating income. Cable networks are reported in "Segment operating income" in the statements of income. Equity investments are accounted for under the equity method and the Company's proportionate share of the net income of its cable equity investments is reported in "Equity in the income of investees" in the statements of income.

(1)

Amounts include the gain on the sale of Eurosport in the third quarter of fiscal 2000. Excluding Disney's share of the gain, cable television operating income for the year ended September 30, 2000 was $1,126 million. Reflecting the adjustment for Eurosport in the prior year, Disney's share of operating income from cable television activities increased 9% for the year.

12

Table C

RESTRUCTURING AND IMPAIRMENT CHARGES
(unaudited, in millions)

	Pro Forma				As Reported
Quarter Ended September 30
	2001		2000		2001		2000
Go.com severance, fixed asset write-offs and other	$	—	$	—	$	16	$	—
Workforce reductions and related costs		16		—		16		—
Disney Store closures		13		—		13		—
Investment and asset impairment		81		31		81		31
	$	110	$	31	$	126	$	31

	Pro Forma				As Reported
Year Ended September 30
	2001		2000		2001		2000
GO.com intangible assets impairment	$	—	$	—	$	820	$	—
GO.com severance, fixed asset write-offs and other		—		—		58		—
Workforce reductions and related costs		111		—		111		—
Chicago DisneyQuest Closure		94		—		94		—
Disney Store closures		54		—		54		—
Investment and asset impairment		317		92		317		92
	$	576	$	92	$	1,454	$	92

13

Table D

    The following table provides a reconciliation of as-reported income (loss) per share attributed to Disney common stock to pro forma earnings per share before the cumulative effect of accounting changes, excluding restructuring and impairment charges and gains on the sale of businesses.

	Quarter Ended September 30,					Year Ended September 30,
(unaudited)
	2001		2000			2001			2000
As-reported income (loss) per share attributed to Disney common stock	$	0.03	$	0.11		$	(0.02	)	$	0.57
Adjustment to exclude restructuring and impairment charges attributed to Disney common stock		0.03		—			0.52			0.01
Adjustment to exclude gain on the sale of businesses attributed to Disney common stock		—		—			—			(0.02	)
Adjustment to exclude the cumulative effect of accounting changes		—		—			0.13			—
As-reported earnings per share before the cumulative effect of accounting changes, excluding restructuring and impairment charges and gain on the sale of businesses		0.06		0.11			0.63			0.56
Adjustment to attribute 100% of Internet Group operating results to Disney common stock (72% included in as- reported amounts)		—		(0.04	)		(0.06	)		(0.13	)
Adjustment to exclude pre-closure GO.com portal operating results and amortization of intangible assets		—		0.09			0.09			0.35
Adjustment to exclude restructuring and impairment charges attributed to the Internet Group		—		0.01			0.06			0.02
Adjustment to exclude gain on the sale of business attributed to the Internet Group		—		(0.02	)		—			(0.02	)
Adjustment to include pre-acquisition Infoseek operating results		—		—			—			(0.04	)
Adjustment to reflect the impact of the new Film Accounting rules		—		—			—			(0.02	)
Pro forma earnings per share before the cumulative effect of accounting changes, excluding restructuring and impairment charges and gain on the sale of businesses	$	0.06	$	0.15		$	0.72		$	0.72

14

QuickLinks

Exhibit 99(a)
THE WALT DISNEY COMPANY REPORTS RESULTS FOR THE YEAR ENDED SEPTEMBER 30, 2001
FORWARD-LOOKING STATEMENTS
The Walt Disney Company PRO FORMA CONSOLIDATED STATEMENTS OF INCOME (unaudited; in millions, except per share data)
The Walt Disney Company AS-REPORTED CONSOLIDATED STATEMENTS OF INCOME (unaudited; in millions, except per share data)
THE WALT DISNEY COMPANY SEGMENT RESULTS For the Year Ended September 30 (unaudited, in millions)
THE WALT DISNEY COMPANY SEGMENT RESULTS For the Quarter Ended September 30 (unaudited, in millions)
Table A
MEDIA NETWORKS (unaudited, in millions)
Table B
CABLE TELEVISION ACTIVITIES (unaudited, in millions)
Table C
RESTRUCTURING AND IMPAIRMENT CHARGES (unaudited, in millions)
Table D

EX-99.(B)

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EXHIBIT 99(b)

Conference Call Presentation by Michael D. Eisner, Chairman of the Board and Chief Executive Officer; Robert A. Iger, President and Chief Operating Officer; and Thomas O. Staggs, Senior Executive Vice President and Chief Financial Officer of The Walt Disney Company

November 8, 2001

THOMAS O. STAGGS:

THE ECONOMIC DOWNTURN, EXACERBATED BY THE RECENT TERRORIST ATTACKS, HAS IMPACTED OUR BUSINESSES IN TERMS OF BOTH THE RESULTS WE JUST ANNOUNCED AND OUR CURRENT OPERATIONS.

NONETHELESS, NEAR-TERM TRENDS SHOULD NOT OBSCURE THE FACT THAT DISNEY'S LONGER-TERM STORY REMAINS INTACT. WE EXPECT TO MANAGE THROUGH THE CURRENT ECONOMIC CYCLE WHILE GAINING MARKET SHARE IN KEY BUSINESSES AND DRIVING GREATER EFFICIENCY IN OUR OPERATIONS.

AND AS THE ECONOMY REBOUNDS, WE WILL BE IN AN EVEN STRONGER POSITION TO DELIVER ATTRACTIVE AND GROWING EARNINGS AND CASH FLOW COUPLED WITH STEADY INCREASES IN OUR CAPITAL RETURNS.

RATHER THAN RECOUNT THE BUSINESS-BY-BUSINESS RESULTS FOR YOU THAT ARE IN TODAY'S PRESS RELEASE, LET ME JUST TOUCH UPON SOME OF THE HIGHLIGHTS AND KEY DRIVERS FOR THE YEAR.

IN FISCAL 2001, THE COMPANY RECORDED OPERATING INCOME AND EARNINGS THAT WERE ROUGHLY ON PAR WITH THE PRIOR YEAR, DESPITE THE ECONOMIC SOFTNESS THAT WE EXPERIENCED OVER THE LAST THREE QUARTERS, AND A FOURTH QUARTER THAT WAS IMPACTED SIGNIFICANTLY BY THE EVENTS OF SEPTEMBER 11^TH AND THEIR AFTERMATH.

THE COMPANY ALSO GENERATED AFTER-TAX CASH FLOW FROM OPERATIONS OF OVER $3 BILLION, NEARLY $1.8 BILLION OF WHICH WE REINVESTED FOR THE FUTURE GROWTH AND MAINTENANCE OF OUR BUSINESSES.

IT IS WORTH NOTING THAT FOR FISCAL 2002, WE EXPECT THAT WE WILL REDUCE OUR CAPITAL EXPENDITURES BY MORE THAN $500 MILLION VERSUS WHAT WE INVESTED IN 2001.

STUDIO ENTERTAINMENT WAS OUR STRONGEST YEAR OVER YEAR PERFORMER, WITH OPERATING INCOME MORE THAN TRIPLING TO $260 MILLION, LED BY OUR DVD BUSINESS, WHICH MORE THAN DOUBLED VERSUS FISCAL 2000.

AT THE SAME TIME, OUR REVENUES FROM VHS WERE ROUGHLY FLAT WITH THE PRIOR YEAR, DEMONSTRATING THAT DVD IS DOING FAR MORE THAN JUST DISPLACING AN EXISTING TECHNOLOGY.

SOLID PERFORMANCE AT THE BOX OFFICE BY FILMS LIKE PRINCESS DIARIES, PEARL HARBOR, UNBREAKABLE AND SPY KIDS ALSO CONTRIBUTED TO THE STUDIO'S GROWTH FOR THE YEAR.

TAKING INTO ACCOUNT FILMS FROM ALL OUR LABELS, WALT DISNEY, TOUCHSTONE, HOLLYWOOD, MIRAMAX, AND DIMENSION, WE ARE #1 AT THE BOX OFFICE AGAIN FOR THE YEAR SO FAR.

JUST AS IMPORTANTLY, THIS SUCCESSFUL CREATIVE EFFORT, COUPLED WITH OUR ONGOING EFFORTS TO EFFECTIVELY MANAGE OUR FILM SPENDING MEANS THAT

LAST YEAR'S LIVE ACTION FILM SLATE IS EXPECTED TO EARN A RETURN ON INVESTMENT COMFORTABLY ABOVE OUR COST OF CAPITAL.

AT MEDIA NETWORKS, THE SOFT ADVERTISING CLIMATE, ESPECIALLY IN COMPARISON TO THE FANTASTIC MARKET IN THE PRIOR YEAR, COUPLED WITH LOWER RATINGS AT THE ABC TELEVISION NETWORK, RESULTED IN A DECLINE IN OPERATING INCOME TO A STILL-STRONG $1.8 BILLION FOR THE YEAR.

RESULTS WERE ALSO IMPACTED BY LOST ADVERTISING REVENUES AND INCREASED NEWS COSTS AS A RESULT OF THE SEPTEMBER 11^TH TRAGEDY.

WHILE OUR BROADCASTING SEGMENT WAS DOWN ON A YEAR-OVER-YEAR BASIS, OUR CABLE NETWORKS BUSINESSES DELIVERED 27% OPERATING INCOME GROWTH FOR THE QUARTER AND APPLES TO APPLES GROWTH OF 9% FOR THE FULL YEAR, EVEN IN THE FACE OF TOUGH 2000 COMPARISONS.

AT ESPN, UPSIDE FROM SUBSCRIBER REVENUE GROWTH AS WELL AS THE CONTINUED SUCCESS OF ESPN THE MAGAZINE MORE THAN OUTWEIGHED INCREASED PROGRAMMING COSTS ASSOCIATED WITH SPORTS RIGHTS AND THE DEVELOPMENT OF ORIGINAL PROGRAMMING.

THE CABLE SEGMENT ALSO BENEFITED FROM THE DISNEY CHANNEL'S ONGOING CONVERSION TO A BASIC CABLE SERVICE, CONTINUED SUBSCRIBER GROWTH AT OUR START-UP SERVICES, TOON DISNEY AND SOAPNET, AND THE FACT THAT THE DISNEY CHANNEL IS NOT EXPOSED TO THE SOFT AD MARKET.

OUR DISNEY CHANNEL INTERNATIONAL BUSINESS ALSO SHOWED STRONG SUBSCRIBER GAINS AND CONTINUES ON ITS TRACK TO REACH PROFITABILITY BY 2003.

LAST FEBRUARY, WE INDICATED THAT WE SAW SOME SOFTNESS DEVELOPING IN THE ECONOMY, AS EVIDENCED BY ADVANCE BOOKINGS AT OUR PARKS AND RESORTS DIVISION.

DESPITE THIS SLOWDOWN, PARKS AND RESORTS RECORDED OVERALL OPERATING INCOME IMPROVEMENT FOR THE FIRST THREE QUARTERS OF THE YEAR LARGELY DUE TO A STRONG FIRST QUARTER AND EFFECTIVE COST CONTAINMENT MEASURES.

HOWEVER, FOR THE FOURTH QUARTER, RESULTS DECLINED, IN LARGE MEASURE DUE TO THE FALLOFF IN BUSINESS IN THE DAYS AND WEEKS IMMEDIATELY AFTER SEPTEMBER 11^TH.

WHICH BRINGS ME TO THE CURRENT ENVIRONMENT.

WE NOTED LAST QUARTER THAT WE CONTINUED TO SEE WEAKNESS IN THE ECONOMY. THAT WEAKNESS WAS MOST APPARENT IN OUR AD-SUPPORTED BUSINESSES AND HAD A MORE MODEST IMPACT ON OUR PARKS.

SINCE SEPTEMBER 11, THAT WEAKNESS HAS INCREASED CONSIDERABLY, ESPECIALLY IN THE TRAVEL AND TOURISM BUSINESS.

LET ME GIVE YOU AN IDEA OF HOW OUR PARKS BUSINESS IS CURRENTLY TRACKING. SO FAR THIS QUARTER, WALT DISNEY WORLD ATTENDANCE IS DOWN ROUGHLY 25% VERSUS OUR RECORD-SETTING FIRST QUARTER OF LAST YEAR.

AT DISNEYLAND, WHICH ALSO HAD A RECORD FIRST QUARTER IN 2001, ATTENDANCE IS UP YEAR-OVER-YEAR DRIVEN LARGELY BY THE PRESENCE OF THE NEW CALIFORNIA ADVENTURE THEME PARK.

TO PUT THESE FIGURES INTO GREATER CONTEXT, REMEMBER THAT APPROXIMATELY 50% OF OUR WALT DISNEY WORLD GUESTS ARRIVE TO THE CENTRAL FLORIDA AREA

BY PLANE, WHILE JUST 25% OF OUR VISITORS TO THE DISNEYLAND RESORT IN SOUTHERN CALIFORNIA ARRIVE BY AIR.

NOT SURPRISINGLY, WE ARE SEEING THE GREATEST ATTENDANCE DECLINES IN INTERNATIONAL VISITATION.

OUR DOMESTIC TOURIST ATTENDANCE IS ALSO DOWN AT WALT DISNEY WORLD, BUT IS UP SOMEWHAT AT THE DISNEYLAND RESORT.

LOCAL ATTENDANCE AT WALT DISNEY WORLD IS RELATIVELY FLAT; HOWEVER, AT DISNEYLAND, LOCAL ATTENDANCE IS ACTUALLY UP VERSUS THE PRIOR YEAR.

HOTEL OCCUPANCIES FOR THE QUARTER, WHILE STILL STRONG RELATIVE TO THE INDUSTRY, ARE LIKELY TO BE SLIGHTLY MORE THAN 20 PERCENTAGE POINTS LOWER THAN THE PRIOR YEAR QUARTER AT WDW AND OFF A LITTLE LESS THAN 15 PERCENTAGE POINTS AT DISNEYLAND.

IT IS ALSO WORTH NOTING THAT THE FIRST QUARTER IS GENERALLY A STRONG QUARTER FOR GROUP AND CONVENTION BUSINESS AT OUR RESORTS, ESPECIALLY AT WALT DISNEY WORLD.

NOT SURPRISINGLY, A GREAT DEAL OF THIS BUSINESS HAS BEEN DISPLACED IN THE WAKE OF SEPT 11 AND THOSE GROUPS THAT HAVE HELD THEIR EVENTS HAVE EXPERIENCED LOWER-THAN-EXPECTED ATTENDANCE.

MOST IMPORTANTLY, OF THOSE GROUPS THAT HAVE CANCELLED, WALT DISNEY WORLD HAS ALREADY REBOOKED MORE THAN HALF FOR A LATER PERIOD.

ADVANCE BOOKINGS IN GENERAL, WHILE STILL SOFT, ARE SHOWING EARLY SIGNS OF IMPROVEMENT, WHICH WE BELIEVE IS EVIDENCE THAT THE PASSAGE OF TIME WILL HELP RESTORE SOME NORMALCY TO TRAVEL PATTERNS.

BOB WILL GIVE YOU SOME FURTHER THOUGHTS ON THE CURRENT ADVERTISING MARKET IN A MOMENT, BUT WE CURRENTLY EXPECT THAT FOR OUR FISCAL FIRST QUARTER, THE CONTINUED SOFTNESS IN THE AD MARKET AND A WEAKER UP-FRONT RELATIVE TO 2001, COUPLED WITH LOWER RATINGS AT ABC, WILL HAVE A NEGATIVE IMPACT ON RESULTS AT MEDIA NETWORKS.

SIMILARLY, WEAKNESS IN CONSUMER SPENDING WILL LIKELY HAVE A NEGATIVE IMPACT ON OUR CONSUMER PRODUCTS BUSINESSES, PARTICULARLY AT THE DISNEY STORE. GIVEN THAT MORE THAN 50% OF CONSUMER PRODUCTS REVENUES ARE GENERATED INTERNATIONALLY, THE STRONG DOLLAR COULD ALSO IMPACT OUR RESULTS.

SINCE THIS ENVIRONMENT IS UNPRECEDENTED FOR CORPORATE AMERICA, INTERPRETING ITS IMPACT OVER TIME OR EXTRAPOLATING CURRENT STATISTICS TO MAKE A PREDICTION ON EARNINGS IS NOT EASY.

CERTAINLY, ANY PREDICTION WE MAKE IS SUBJECT TO CONSIDERABLE UNCERTAINTY. AT THIS POINT, WE BELIEVE THAT OUR OPERATING INCOME FOR THE FIRST QUARTER COULD BE SOMEWHAT LESS THAN HALF THAT OF THE FIRST QUARTER OF THE PRIOR YEAR.

IT IS EVEN MORE DIFFICULT TO PREDICT MARKET CONDITIONS FOR THE REMAINDER OF THE YEAR, BUT AS TIME PASSES WE WOULD EXPECT CONDITIONS TO IMPROVE SOMEWHAT AND THAT THE YEAR-OVER-YEAR COMPARISONS FOR THE LATER QUARTERS OF THE YEAR WILL BE BETTER THAN FOR THE FIRST QUARTER.

AS A RESULT, WE BELIEVE THAT TOTAL OPERATING INCOME FOR THE COMPANY FOR THE LAST THREE QUARTERS OF THE YEAR COULD BE OFF BY JUST 10-15%, ALTHOUGH A FASTER-THAN-EXPECTED UP-TURN IN MARKET CONDITIONS OR

FURTHER SUCCESS BY OUR NEW PRODUCT RELEASES COULD ENABLE US TO IMPROVE ON THAT ESTIMATE.

EIGHTEEN MONTHS AGO WE SET OUT TO TAKE $500 MILLION OUT OF OUR COST STRUCTURE AND WE HAVE MET THIS GOAL. LAST YEAR'S WORKFORCE REDUCTION WILL YIELD ANOTHER $350 MILLION IN ANNUAL SAVINGS OVER TIME.

IN RESPONSE TO THE CURRENT DOWNTURN, WE ARE TARGETING SEVERAL HUNDRED MILLION DOLLARS OF ADDITIONAL COST SAVINGS, MUCH OF WHICH WILL BE PERMANENT.

GIVEN THESE STEPS, WE ARE BETTER ABLE TO MEET THE CURRENT CHALLENGES IN OUR BUSINESS AND WE WILL BE BETTER POSITIONED TO REBOUND WHEN THE ECONOMY TURNS.

BEFORE I CLOSE IT'S WORTH NOTING THAT DURING THE QUARTER, THE COMPANY ALSO PURCHASED 55.5 MILLION SHARES OF DISNEY COMMON STOCK AT AN AVERAGE PRICE OF JUST OVER $14.50 PER SHARE.

FOR THE YEAR, THE COMPANY INVESTED A TOTAL OF $1.1 BILLION TO PURCHASE 63.9 MILLION SHARES OF OUR STOCK, WHICH IS CERTAINLY AN INVESTMENT THAT WE BELIEVE WILL SHOW GREAT RETURNS.

DISNEY HAS UNPARALLELED ASSETS, A STRONG BALANCE SHEET, AND TREMENDOUS EARNINGS AND CASH FLOW POTENTIAL. IN THESE MARKET CONDITIONS IT IS EASY TO LOSE SIGHT OF THOSE FACTS, BUT NEVER MORE IMPORTANT TO KEEP THEM IN MIND.

WITH THAT, I'LL TURN THE CALL OVER TO BOB.

ROBERT A. IGER

THANK YOU TOM.

THE WALT DISNEY COMPANY'S STRONG COLLECTION OF ENTERTAINMENT BRANDS AND CONTENT CONSISTENTLY PROPELS DISNEY TO A LEADING POSITION AMONG ALL GLOBAL BRANDS YEAR AFTER YEAR.

DESPITE THE CHALLENGES WE FACE TODAY, IT IS IMPORTANT TO KEEP IN MIND THAT OUR LONG-TERM STRENGTH IS DRIVEN BY THE CONTINUED APPEAL OF OUR PORTFOLIO OF BRANDS AND CONTENT RATHER THAN CURRENT OR NEAR-TERM PERFORMANCE.

TAKING CURRENT MARKET CONDITIONS INTO ACCOUNT, YOU SHOULD LOOK AT OUR MAJOR SEGMENTS AS FALLING INTO ONE OF THREE CATEGORIES:

•

FIRST, BUSINESSES FACING NEAR-TERM EXTERNAL CHALLENGES OUTSIDE OUR CONTROL;



•

SECONDLY, BUSINESSES WITH FUNDAMENTAL CHALLENGES THAT WE HAVE DISCUSSED IN THE PAST, AND FOR WHICH WE ARE AGGRESSIVELY IMPLEMENTING TURNAROUND PLANS;



•

AND LASTLY, ESTABLISHED AND GROWING BUSINESSES, WHICH REMAIN STRONG AND PROVIDE A FOUNDATION DURING THIS DIFFICULT TIME.

BUSINESSES THAT FACE NEAR-TERM EXTERNAL CHALLENGES ARE ALSO ONES THAT ARE WELL POSITIONED FOR A RAPID REBOUND WHEN THE ECONOMY BEGINS TO SHOW SIGNS OF RECOVERY.

FOR EXAMPLE, ALTHOUGH THE DYNAMICS OF TODAY'S TRAVEL AND TOURISM INDUSTRY WILL IMPACT OUR THEME PARK ADMISSIONS OVER THE SHORT-TERM, THE FACT REMAINS THAT THIS SEGMENT IS EXCEEDINGLY WELL OPERATED WITH TREMENDOUS GLOBAL MARKET SHARE.

WALT DISNEY PARKS & RESORTS CONTINUES TO SET THE BAR IN TERMS OF BOTH ECONOMIC METRICS AND GUEST SERVICE IN THE THEME PARK INDUSTRY.

THE FUNDAMENTAL APPEAL, AND THEREFORE THE FUNDAMENTAL VALUE, OF OUR PARKS AND RESORTS ASSETS REMAINS INTACT. THE TREMENDOUS SUCCESS OF THE NEWLY OPENED TOKYO DISNEY SEAS THEME PARK, WHICH CONTINUES TO EXCEED OUR EXPECTATIONS, IS JUST ONE PIECE OF EVIDENCE OF THIS ONGOING APPEAL.

TO MITIGATE RECENT CHALLENGES IN THE TRAVEL AND TOURISM INDUSTRY, OUR THEME PARKS AND RESORTS' ORGANIZATION IS ADAPTING TO MEET CURRENT DEMAND THROUGH ACTIONS SUCH AS REDUCING MAN-HOURS, CLOSING NON-ESSENTIAL FOOD AND BEVERAGE LOCATIONS, INSTITUING A HIRING FREEZE AND DELAYING NON-ESSENTIAL REFURBISHMENTS—ALL WHILE ENSURING THAT OUR ENTERTAINMENT EXPERIENCE CONTINUES TO EXCEED GUEST EXPECTATIONS.

WE ARE WELL-POSITIONED TO GROW RAPIDLY IN THIS AREA WHEN THE ECONOMY IS ONCE AGAIN MORE ROBUST.

THIS BUSINESS HAS A HIGH DEGREE OF OPERATING LEVERAGE THAT WE ARE CURRENTLY IMPROVING FURTHER, MEANING THAT IT WILL WORK EVEN MORE IN OUR FAVOR AS SIGNS OF ECONOMIC IMPROVEMENT MATERIALIZE.

AND, OVER THE LONGER TERM, IN OUR EXPERIENCE, PEOPLE DO NOT CANCEL VACATIONS, THEY DEFER THEM, THEREBY CREATING PENT-UP DEMAND FOR FUTURE PERIODS.

ANOTHER BYPRODUCT OF THE MACRO-ECONOMY IS THE SOFT ADVERTISING MARKET. ALTHOUGH IT IS DIFFICULT TO MEASURE HOW THE EVENTS OF THE LAST TWO MONTHS FURTHER DEPRESSED AN ALREADY WEAK MARKET, THE SOFTNESS IN ADVERTISING IS LIKELY TO CONTINUE WELL INTO 2002 AS THERE ARE CURRENTLY NO VISIBLE SIGNS OF RECOVERY.

SEVERAL WEEKS AGO, I OUTLINED A NUMBER OF KEY TRENDS THAT HAVE EMERGED IN THIS SECTOR.

THE ONE THAT CONTINUES TO DRAMATICALLY AFFECT OUR ABILITY TO FORECAST BEYOND THE IMMEDIATE TERM IS THE RELUCTANCE OF AGENCIES AND ADVERTISERS TO COMMIT TO LONG-TERM ADVERTISING BUDGETS.

WE EXPERIENCED THIS TREND IN OUR MOST RECENT UPFRONT SELLING SEASON AND WE CONTINUE TO EXPERIENCE THE SHORT-TERM NATURE OF BUYING IN THE PRESENT SCATTER MARKET.

ANOTHER KEY TREND IN CABLE IS THE SLOW ECONOMY AND A SURPLUS OF INVENTORY ARE RESULTING IN DOWNWARD PRESSURE ON CPMS.

HOWEVER, ACCORDING TO THE AGENCIES I SPOKE TO, THE DOMINANT NETWORKS AND BRANDS LIKE ESPN, LIFETIME, AND A&E, ARE RETAINING MARKET SHARE AND HOLDING CPMS TO LEVELS SIGNIFICANTLY BETTER THAN LESS VALUABLE AND DIFFERENTIATED PEERS.

IN TERMS OF OUR BUSINESSES WITH FUNDAMENTAL INTERNAL CHALLENGES, WE ARE FOCUSED ON TURNING AROUND OR REINVENTING THESE ENTERPRISES.

AT ABC, WHILE OUR NEWS AND DAYTIME PROGRAMMING CONTINUE TO DELIVER SOLID RATINGS, OUR PRIMETIME RATINGS PERFORMANCE HAS BEEN DISAPPOINTING.

OUR GOALS ARE TO MAKE IMMEDIATE CHANGES TO THE SCHEDULE TO OFFER STRONGER LEAD-INS TO NEW PROMISING SERIES AND TO DEVELOP AGGRESSIVELY FOR MIDSEASON.

TO THAT END, ON TUESDAY, "NYPD BLUE" HAD ITS SEASON PREMIERE, DOMINATING THE COMPETITION, WHICH INCLUDED THE SEASON PREMIERE OF "24" ON FOX.

IN TERMS OF MIDSEASON, THIS WINTER WE WILL DEBUT A NUMBER OF COMPELLING NEW SERIES INCLUDING "THE COURT" FROM MULTIPLE EMMY WINNER JOHN WELLS STARRING SALLY FIELD.

WITH OUR NEW LINE-UP INCLUDING THE STRENGTH OF OUR WEDNESDAY NIGHT COMEDY BLOCK, ADDITIONAL NIGHTS OF OUR CORE NEWS FRANCHISE "20/20," "NYPD BLUE," AND NEW MIDSEASON SHOWS, WE EXPECT TO IMPROVE OVERALL DELIVERY AMONG THE KEY SALES DEMOGRAPHIC OF YOUNG ADULTS AS THE SEASON PROGRESSES.

IN CONSUMER PRODUCTS, WE'VE TAKEN A NUMBER OF IMPORTANT STEPS TO IMPROVE THE PERFORMANCE OF THE DISNEY STORE.

IN RESPONSE TO THE CHANGES IN THE ECONOMY, WE ARE SLOWING OUR MORE CAPITAL-INTENSIVE STORE-REFURBISHING SCHEDULE IN FAVOR OF A NEW MERCHANDISING STRATEGY, WHICH WE CURRENTLY ARE TESTING.

AND AS I RECENTLY NOTED, WE ALSO CONTINUE TO EVALUATE INDIVIDUAL STORE PERFORMANCE WITHIN OUR PORTFOLIO OF STORES.

WHEN A STORE IS UNDER-PERFORMING OUR BENCHMARK METRICS, WE WILL CONTINUE TO TAKE AGGRESSIVE STEPS—INCLUDING CLOSURES—THAT WILL ULTIMATELY REDUCE THE TOTAL NUMBER OF DOMESTIC STORES TO 300-400.

IN LICENSING, WE ARE ESTABLISHING NEW RELATIONSHIPS WITH CATEGORY LEADERS THAT AFFORD US GREATER CONTROL OVER OUR BRAND, PRODUCT QUALITY, MARKETING PROGRAMS, AND ACCESS TO CONSUMER INFORMATION, AND WHICH WE BELIEVE WILL ULTIMATELY LEAD TO GREATER SALES VOLUME AND PROFITABILITY.

WE ARE SEEING SUCCESS IN SOME LICENSING INITIATIVES WHICH WILL IMPACT FUTURE QUARTERS, INCLUDING OUR NEW MERCHANDISE AGREEMENT WITH HASBRO, WHICH BEGAN WITH OUR "MONSTERS, INC." TOY LINE, AND THROUGH OUR COCA COLA BEVERAGE DEAL.

IT IS OUR UNDERSTANDING THAT OUR PRODUCT LINE WITH COKE HAS EXPERIENCED ONE OF THE MOST SUCCESSFUL NEW PRODUCT BUY-INS EVER.

IN TERMS OF OUR ESTABLISHED AND GROWING BUSINESSES THAT REMAIN STRONG AND PROVIDE A FOUNDATION DURING THIS DIFFICULT TIME, OUR HOME VIDEO DIVISION CONTINUES TO SHINE, WITH SIX OF THE TOP-10 INCLUDING FOUR OF THE TOP FIVE BEST-SELLING TITLES OF CALENDAR 2001.

THIS NEW FISCAL YEAR HAS ALREADY GOTTEN OFF TO A STRONG START WITH THE OCTOBER 9TH DVD RELEASE OF "SNOW WHITE AND THE SEVEN DWARFS."

TO DATE, "SNOW WHITE" IS ON TRACK TO SELL 3 MILLION DVD UNITS MAKING IT OUR STRONGEST SELLING DVD PRODUCT EVER. AND ON NOV. 27^TH, IT HITS THE STREET IN VHS FORMAT.

GIVEN THE RELATIVELY SHORT TIME THAT "SNOW WHITE" WAS HELD IN MORATORIUM, WE DON'T BELIEVE IT WILL MOVE THE NEEDLE AS MUCH AS THE NEXT PLATINUM TITLE "BEAUTY AND THE BEAST," WHICH WE WILL RELEASE THIS

JANUARY IN WIDESCREEN FORMAT IN IMAX THEATERS, FOLLOWED BY ITS DVD RELEASE NEXT FALL.

IN THE PAST, EACH NEW THEATRICAL WINDOW OR TECHNOLOGY FOR DISTRIBUTION HAS EXPANDED THE MARKETPLACE, AND DVD IS NO EXCEPTION. IN THE FUTURE, WE EXPECT CONTINUED GROWTH IN DVD AND ANOTHER ROUND OF EXPANSION FROM VIDEO ON DEMAND.

THE MARGIN POTENTIAL FOR VOD IS CONSIDERABLE.

THE STUDIOS CURRENTLY TAKE ONLY 35% OF THE $9 BILLION CONSUMERS SPEND ON HOME VIDEO RENTALS. EACH FIVE PERCENTAGE POINTS OF MARGIN IMPROVEMENT IS WORTH $450MM TO THE CONTENT OWNERS.

AND WE BELIEVE V.O.D. COULD IMPROVE MARGINS BY MORE THAN 20 PERCENTAGE POINTS. GIVEN OUR 20% MARKET SHARE OF BOX OFFICE, THE UPSIDE TO DISNEY IS POTENTIALLY HUGE.

DISNEY IS UNIQUELY POSITIONED TO BUILD ASSETS ACROSS ITS LINES OF BUSINESS, GENERATING MULTIPLE REVENUE STREAMS. USING OUR RECENTLY RELEASED "MONSTERS, INC." AS AN EXAMPLE, AT RETAIL, INCLUDING AT THE DISNEY STORES, YOU CAN SEE THE SPECTACULAR ARRAY OF "MONSTERS" TOYS, GAMES, INTERACTIVE PRODUCTS, PLUSH, AND APPAREL.

AT OUR DOMESTIC THEME PARKS, THERE ARE "MONSTERS" ATTRACTIONS, MEET AND GREET OPPORTUNITIES WITH THE CHARACTERS, SPECIAL EVENTS, AND PROMOTIONS.

WE ALSO STRUCK MAJOR PROMOTIONAL ALLIANCES WITH KEY CHANNELS OF DISTRIBUTION INCLUDING WAL-MART AND TOYS-R-US THAT PROVIDES FOR EXTENSIVE POINT OF SALE PRESENCE IN-STORE.

FURTHER EXAMPLES OF OUR UNIQUE STRENGTH IN BUILDING FRANCHISES INCLUDE OUR SLATE OF SEQUELS TO THE SUCCESSFUL LIVE ACTION FILMS "SPY KIDS" AND "PRINCESS DIARIES," AND ANIMATED EXTENSIONS OF "PETER PAN," "CINDERELLA," "THE HUNCHBACK OF NOTRE DAME," "101 DALMATIANS," "TARZAN," AND "JUNGLEBOOK."

ANOTHER BRAND THAT WE INTEND TO BUILD ACROSS OUR ASSETS IS OUR RECENTLY ACQUIRED BABY EINSTEIN—- THE AWARD-WINNING CREATOR OF HIGHLY INNOVATIVE MEDIA PRODUCTS, TOYS AND BOOKS FOR BABIES AND TODDLERS AND THE LEADER IN THE RELATIVELY NEW, DEVELOPMENTAL VIDEO MARKET WITH A 70% SHARE.

WHILE CURRENTLY SMALL, THE INFANT EDU-TAINMENT MARKET IS GROWING RAPIDLY AS PARENTS INCREASINGLY SEEK OUT "GOOD-FOR-KIDS" PRODUCTS.

IN ADDITION TO OUR GOAL OF EXPANDING BOTH BABY EINSTEIN'S PRODUCT OFFERINGS AND DISTRIBUTION, THEREBY SOLIDIFYING ITS POSITION AS THE GLOBAL MARKET LEADER IN THIS DEVELOPING SEGMENT, WE BELIEVE THERE ARE SIGNIFICANT GROWTH OPPORTUNITIES IN EXTENDING THE BRAND TO A "LITTLE EINSTEIN" SERIES THAT WILL APPEAL TO PRE-SCHOOLERS.

TURNING TO ANOTHER SOLID PERFORMER—OUR CABLE TELEVISION BUSINESSES ARE TOP TIER SERVICES IN TERMS OF BRAND RECOGNITION, DEMOGRAPHIC DELIVERY, AND PROFITABILITY.

DESPITE A CHALLENGING MARKETPLACE, ESPN CONTINUES TO GROW BY REACHING SPORTS FANS GLOBALLY WITH QUALITY CONTENT THROUGH OUR FOUR DOMESTIC

NETWORKS, 20 INTERNATIONAL NETWORKS, ESPN RADIO, ESPN.COM, EXPN.COM, ESPN THE MAGAZINE, AND ESPN ZONE SPORTS EXPERIENCE RESTAURANTS.

IN OCTOBER, DOMESTIC DISNEY CHANNEL'S SUBSCRIBERS INCREASED BY 16% TO 77.2 MILLION WHILE TOON DISNEY'S SUBSCRIBERS INCREASED BY 73% TO 27.6 MILLION.

AND, IN OCTOBER, OUR NEWEST SERVICE SOAPNET HIT 17.3 MILLION HOMES. ADD TO THOSE THE CONTINUED SUCCESS OF DISNEY CHANNEL INTERNATIONAL AND OUR NEW FOX KIDS EUROPE, AND WE BELIEVE CABLE IS WELL POSITIONED TO HELP DRIVE OUR FUTURE GROWTH.

YOU CAN SEE THAT, DESPITE THE CLIMATE IN WHICH WE FIND OURSELVES, WE ARE MANAGING OUR BUSINESSES EFFICIENTLY IN ORDER TO GAIN RAPID MOMENTUM WHEN THE ECONOMY RECOVERS.

IN ADDITION, WE ARE FOCUSED ON KEY BUSINESSES THAT CONTINUE TO THRIVE DESPITE THE DOWNTURN, WHICH IN TURN, EXPAND OUR CREATIVE LIBRARY FOR FUTURE EXPLOITATION. WITH OUR DIVERSIFIED REVENUE STREAM, SOLID MARKET SHARE POSITION, STRONG MANAGEMENT TEAM, OUR FOCUS ON GROWING CORE AND NEW BUSINESSES, AND RIGOROUS APPROACH TO COST CONTAINMENT, DISNEY WILL WEATHER THE CHALLENGES OF EXISTING MARKET CONDITIONS WHILE REMAINING COMMITTED TO ITS MISSION OF CREATING INNOVATIVE, QUALITY CONTENT THAT ENTERTAINS AND ENLIGHTENS. . .

THEREBY STRENGTHENING OUR POSITION AS THE PREMIER PROVIDER OF FAMILY-FRIENDLY PRODUCTS AND EXPERIENCES.

THANK YOU. NOW I WILL TURN THE CALL OVER TO MICHAEL.

MICHAEL D. EISNER:

AS TOM AND BOB HAVE POINTED OUT, THIS IS A CHALLENGING TIME FOR MANY COMPANIES.

AN ALREADY SOFT ECONOMY HAS—ACCORDING TO MOST ECONOMISTS—BEEN PUSHED INTO RECESSION BY UNIMAGINABLE EVENTS—EVENTS THAT HAVE TAKEN A PARTICULAR TOLL ON THE TRAVEL AND ADVERTISING MARKETS.

UNFORTUNATELY, DISNEY'S BUSINESSES

HAVE NOT REMAINED EXEMPT FROM THIS DISLOCATION.

DESPITE ALL THIS TURMOIL, WE HAVE NOT LOST SIGHT OF OUR PRIMARY FOCUS: TO BE THE WORLD'S PREMIER FAMILY ENTERTAINMENT COMPANY, AND TO CREATE AND DISTRIBUTE GREAT CONTENT.

THIS IS THE DIRECTIVE THAT COLORS EVERY ASPECT OF OUR WORK.

AT THE SAME TIME, WE ARE COMMITTED TO DELIVERING THE HIGHEST LEVELS OF EARNINGS AND RETURNS IN OUR INDUSTRY, COUPLED WITH STEADILY INCREASING CASH FLOW, THEREBY BUILDING VALUE FOR DISNEY SHAREHOLDERS.

WE'VE LOOKED HARD AT THE FACTORS INFLUENCING OUR BUSINESSES TODAY, AND WE KNOW THAT THERE ARE SOME THAT WE CAN CONTROL AND INFLUENCE, AND OTHERS OVER WHICH WE HAVE LITTLE TO NO CONTROL.

OBVIOUSLY, THE MACRO ECONOMY AND THE TIMELINE BACK TO A SENSE OF "NORMALCY" ARE IMPOSSIBLE FOR ANY ONE COMPANY TO DICTATE.

OUR CALL TO ACTION IS TO ADDRESS THOSE FACTORS WE CAN DRIVE AND INFLUENCE—CONTINUED OUTPUT OF QUALITY CREATIVE CONTENT, GREATER

UTILIZATION OF OUR DISTRIBUTION CHANNELS, EXPANSION INTO NEW MARKETS—ALL WITH AN EYE TO IMPROVING FINANCIAL RETURNS.

WE ARE ADDRESSING THE CURRENT TURBULENCE BY MAKING SURE THAT EVERY POSSIBLE RESPONSIBLE MEASURE IS BEING TAKEN.

WE WILL ENSURE THAT THE COMPANY IS BEING OPERATED AS LEANLY AND EFFICIENTLY AS POSSIBLE, AND I HAVE CHARGED OUR SOLID EXECUTIVE TEAM WITH MAKING MEANINGFUL STRIDES FORWARD IN THEIR RESPECTIVE BUSINESSES.

AS CREATORS OF GREAT PRODUCT, WE ARE MAKING SURE THAT THE PIPELINE CONTINUES TO BE FULL OF APPEALING NEW ENTERTAINMENT.

IN A CLIMATE WHERE FAMILY ENTERTAINMENT IS MORE IMPORTANT THAN EVER, WE HAVE AN EXCEPTIONALLY STRONG SLATE OF THEATRICAL AND HOME ENTERTAINMENT TITLES TO LEVERAGE.

THIS PAST WEEKEND SAW THE RELEASE OF THE MOST RECENT EXAMPLE—DISNEY AND PIXAR'S "MONSTERS, INC.," WHICH HAD AN OPENING WEEKEND BOX OFFICE OF $62.6 MILLION—THE HIGHEST OF ANY ANIMATED FILM IN HISTORY. WHAT MADE "MONSTERS" SUCH A SMASH? TWO THINGS—GREAT, CREATIVE ENTERTAINMENT COUPLED WITH THE DISNEY BRAND. DURING THE FOURTH QUARTER, THERE WERE TWO OTHER DRAMATIC EXAMPLES OF THIS CONTENT-PLUS-BRAND PHENOMENON.

THE FIRST WAS THE MOVIE "THE PRINCESS DIARIES," WHICH WAS A WONDERFUL, MODESTLY BUDGETED FILM THAT BROKE THROUGH THE $100 MILLION BOX OFFICE LEVEL IN PART BECAUSE IT WAS A WALT DISNEY PICTURES FILM.

THE SECOND WAS THE ALL-NEW TOKYO DISNEYSEA THEME PARK, WHICH IS A SPECTACULARLY ORIGINAL PARK THAT GREATLY BENEFITS FROM HAVING THE NAME "DISNEY" ABOVE THE ENTRANCE GATE AND THE CREATIVE MAGIC OF DISNEY'S IMAGINEERS INFUSED THROUGHOUT.

DESPITE THE ONGOING DEEP RECESSION IN JAPAN, IT HAS EXCEEDED ALL OF OUR ATTENDANCE PROJECTIONS. . . AS HAS TOKYO DISNEYLAND NEXT DOOR.

OUR OVERARCHING STRATEGY HAS ALWAYS BEEN TO ACHIEVE GROWTH THROUGH THE CREATION OF GREAT BRANDED CONTENT.

CONTENT CREATION IS NOT SOMETHING THAT IS EASY TO CHART ON A SPREAD-SHEET, BUT IT IS SOMETHING WE CONSISTENTLY DO WELL.

AND ONCE ONE HAS CREATED A GREAT BIT OF CONTENT, WHETHER A MOVIE OR A THEME PARK OR A TV SHOW, IT BECOMES AN ANNUITY THAT HOLDS—OR EVEN INCREASES—VALUE FOR YEARS TO COME.

SO LAST WEEKEND REPRESENTED THE BIRTH OF ANOTHER SUCH FRANCHISE IN MONSTERS, INC., AND THERE WILL BE MORE IN THE FUTURE.

MEANWHILE. . .

THE CHALLENGING ECONOMIC ENVIRONMENT HAS REQUIRED US TO CREATE OUR CONTENT IN AN EVER MORE EFFICIENT AND COST-EFFECTIVE MANNER.

AT THE STUDIO, OUR SHIFT TOWARD A MORE STRATEGIC AND FINANCIALLY DISCIPLINED APPROACH TO MAKING AND DISTRIBUTING FILMS HAS SERVED US WELL IN PURSUIT OF OUR DUAL GOALS OF EXCEPTIONAL BOX OFFICE PERFORMANCE AND FINANCIAL RETURNS. OUR TURNAROUND EFFORTS TOOK SOME TIME, BUT WE ARE NOW SEEING EVIDENCE OF THEIR SUCCESS.

WE ARE PUTTING THE SAME ATTENTION INTO THE ABC NETWORK AND DISNEY CONSUMER PRODUCTS, AND WHILE THE SOFT ECONOMY HAS SOME EFFECT ON THOSE EFFORTS, I AM CONFIDENT WE WILL BE SUCCESSFUL THERE AS WELL.

WE ARE NOT WAVERING FROM THE PLAN OF ACTION THAT BOB DISCUSSED FOR OUR MERCHANDISE SEGMENTS.

AND AT ABC—WHICH IS OUR MOST IMPORTANT POINT OF FOCUS—WE ARE EXTREMELY PLEASED WITH A NUMBER OF OUR NEW SHOWS LIKE ALIAS AND ACCORDING TO JIM.

HOWEVER, THE FACT IS THAT WE NEED TO IMPROVE UPON OUR RECENT DEVELOPMENT EFFORTS IN THIS AREA.

IN ADDITION, WE ARE DRIVING A NUMBER OF INITIATIVES TO IMPROVE THE ECONOMICS OF THE NETWORK BUSINESS OVERALL.

THESE INCLUDE

•

CHANGING THE MODEL FROM A SINGLE TO DUAL REVENUE STREAM,



•

ELIMINATING STATION COMPENSATION,



•

DEVELOPING LOWER COST AND DUAL-PURPOSED PROGRAMMING



•

. . . AND CHANGING OUR RELATIONSHIP WITH MEDIA BUYERS TO LEVERAGE ABC AND OUR OTHER MEDIA PROPERTIES.

OUR RECENTLY ACQUIRED ABC FAMILY SERVICE, FOR EXAMPLE, WILL ULTIMATELY SERVE AS AN IMPORTANT NEW DISTRIBUTION VEHICLE—HELPING US AMORTIZE THE HIGH COST OF THE ABC NETWORK'S QUALITY FAMILY PROGRAMMING.

ABC FAMILY IS AN ASSET THAT WE ARE EXCITED ABOUT GROWING.

IN THE U.S., BUILDING ANALOG DISTRIBUTION IN TODAY'S CROWDED AND COMPETITIVE ENVIRONMENT IS EXTREMELY CHALLENGING AND DOES NOT NECESSARILY RESULT IN SUBSCRIPTION REVENUE CONSISTENT WITH THE STRENGTH OF THE SERVICE.

WITH ABC FAMILY, WE INSTANTLY HAVE A PLATFORM OF MORE THAN 80 MILLION ANALOG SUBSCRIBERS.

WE WILL SEEK TO MAINTAIN AND EXPAND THIS BASE BY COMPLEMENTING THE NETWORK'S CURRENT KEY PROGRAMMING—OF ACTION-ORIENTED KIDS ANIMATION, FOR EXAMPLE—WITH APPROPRIATE FAMILY CONTENT FROM THE WALT DISNEY COMPANY.

ABC FAMILY WILL PROVIDE A WONDERFUL HOME FOR DUAL-PURPOSED PROGRAMMING, ORIGINAL SHOWS, FILMS AND THE PROVEN TGIF FORMAT OF KIDS' SHOWS.

AND, EVEN MORE SIGNIFICANT IS THE OPPORTUNITY THAT THIS ACQUISITION PRESENTS FOR US IN INTERNATIONAL MARKETS.

OUR INTERNATIONAL DISNEY CHANNELS REPRESENT THE DOMINANT KIDS' FRANCHISE IN PREMIUM CABLE OUTSIDE THE U.S.

FOX KIDS WILL ALLOW US TO BECOME AN EQUALLY STRONG PRESENCE IN THE FAMILY MARKET IN BASIC CABLE, REACHING 35 MILLION SUBSCRIBERS THROUGHOUT EUROPE, LATIN AMERICA, AND AUSTRALIA.

THIS WILL BE AN INCREDIBLY STRONG PLATFORM FOR FUTURE GROWTH IN PRIME MARKETS AND WITH A PRIME AUDIENCE FOR OUR COMPANY.

SO. . . AS TROUBLING AS THE ECONOMIC CONDITIONS ARE, IT IS IMPORTANT TO KEEP THEM IN PERSPECTIVE AND RECOGNIZE THAT THIS COMPANY HAS BEEN THROUGH UNCERTAIN TIMES BEFORE.

THERE IS NO QUESTION THAT THE CURRENT SITUATION WILL HAVE AN IMPACT ON OUR RESULTS FOR A FEW QUARTERS TO COME.

BUT NOTHING WILL IMPACT THE FUNDAMENTAL VALUE OF OUR ASSETS. . . . OR OUR FOCUS ON MANAGING FOR RETURNS, DRIVING FOR GROWTH AND BUILDING ON THE UNPARALLELED TRADITION OF GREAT FAMILY FRIENDLY CONTENT FOR WHICH DISNEY IS KNOWN.

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EXHIBIT 99(b)

EX-99.(C)

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Exhibit 99(c)

The pro forma worksheet which follows takes into account the new Statement of Financial Accounting Standard No. 142. This accounting standard eliminates the amortization of goodwill and certain intangible assets. The Walt Disney Company will adopt this standard effective October 1, 2001.

The Walt Disney Company
PRO FORMA CONSOLIDATED INCOME STATEMENT WORKSHEET
(unaudited; in millions, except per share data)

Quarter ended		Dec 31 2000			Mar 31 2001			Jun 30 2001			Sep 30 2001			FY 2001
Revenues:
	Media Networks	$	2,956		$	2,256		$	2,169		$	2,175		$	9,556
	Parks & Resorts		1,724			1,650			1,946			1,684			7,004
	Studio Entertainment		1,850			1,573			1,342			1,341			6,106
	Consumer Products		892			568			518			612			2,590
		$	7,422		$	6,047		$	5,975		$	5,812		$	25,256
Segment Operating Income:
	Media Networks	$	547		$	457		$	439		$	348		$	1,791
	Parks & Resorts		384			329			560			313			1,586
	Studio Entertainment		152			164			65			(121	)		260
	Consumer Products		169			87			58			87			401
			1,252			1,037			1,122			627			4,038
Amortization of Intangible Assets			(8	)		(5	)		(5	)		(5	)		(23	)
Corporate and unallocated share expenses			(81	)		(109	)		(94	)		(122	)		(406	)
Gain on sale of businesses			22			—			—			—			22
Net interest expense and other			(109	)		(98	)		(80	)		(130	)		(417	)
Equity in the income of investees			84			68			88			69			309
Restructuring and impairment charges			(194	)		(134	)		(138	)		(110	)		(576	)
Income before income taxes, minority interests and accounting changes			966			759			893			329			2,947
Income taxes			(405	)		(284	)		(346	)		(109	)		(1,144	)
Minority interests			(30	)		(33	)		(20	)		(21	)		(104	)
Income before cumulative effect of accounting changes			531			442			527			199			1,699
Cumulative effect of accounting changes:
	Film accounting		(228	)		—			—			—			(228	)
	Derivative accounting		(50	)		—			—			—			(50	)
Net income		$	253		$	442		$	527		$	199		$	1,421
Earnings per share before cumulative effect of accounting changes:
	Diluted	$	0.25		$	0.21		$	0.25		$	0.10		$	0.81
	Basic	$	0.25		$	0.21		$	0.25		$	0.10		$	0.81
Earnings per share including cumulative effect of accounting changes:
	Diluted	$	0.12		$	0.21		$	0.25		$	0.10		$	0.68
	Basic	$	0.12		$	0.21		$	0.25		$	0.10		$	0.68
Earnings before cumulative effect of accounting changes, excluding restructuring and impairment charges and gains on sale of businesses		$	659		$	526		$	614		$	268		$	2,067
Earnings per share before cumulative effect of accounting changes, excluding restructuring and impairment charges and gains on sale of businesses
	Diluted	$	0.31		$	0.25		$	0.29		$	0.13		$	0.98
	Basic	$	0.32		$	0.25		$	0.29		$	0.13		$	0.99
Average number of common and common equivalent shares outstanding:
	Diluted		2,111			2,105			2,107			2,093			2,104
	Basic		2,090			2,089			2,091			2,085			2,089

Pro forma results assume that the issuance of shares for the conversion of the Internet Group common stock and the closing of the GO.com property occurred at the beginning of fiscal 2001 excluding the one-time impact of those events. The pro forma results also exclude amortization of goodwill and certain intangible assets as if the new goodwill accounting rules were in effect during fiscal 2001.

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Exhibit 99(c)
The Walt Disney Company PRO FORMA CONSOLIDATED INCOME STATEMENT WORKSHEET (unaudited; in millions, except per share data)