-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, H9G9hj7HE5qxMK+GTYuuigFkeYkLkCgJo4iS/FPE26S8RDb3s6FgdfkZtIyV9xcG 4GJoElOAlXTPyG1icyRPOg== /in/edgar/work/0001001039-00-000014/0001001039-00-000014.txt : 20001110 0001001039-00-000014.hdr.sgml : 20001110 ACCESSION NUMBER: 0001001039-00-000014 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20001109 ITEM INFORMATION: ITEM INFORMATION: FILED AS OF DATE: 20001109 FILER: COMPANY DATA: COMPANY CONFORMED NAME: WALT DISNEY CO/ CENTRAL INDEX KEY: 0001001039 STANDARD INDUSTRIAL CLASSIFICATION: [7990 ] IRS NUMBER: 954545390 STATE OF INCORPORATION: DE FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: 8-K SEC ACT: SEC FILE NUMBER: 001-11605 FILM NUMBER: 757162 BUSINESS ADDRESS: STREET 1: 500 SOUTH BUENA VISTA ST CITY: BURBANK STATE: CA ZIP: 91521 BUSINESS PHONE: 8185601000 MAIL ADDRESS: STREET 1: 500 SOUTH BUENA VISTA ST CITY: BURBANK STATE: CA ZIP: 91521 FORMER COMPANY: FORMER CONFORMED NAME: DC HOLDCO INC DATE OF NAME CHANGE: 19950918 8-K 1 0001.txt FORM 8-K 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 9, 2000 __________ THE WALT DISNEY COMPANY (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) DELAWARE (STATE OF JURISDICTION OF INCORPORATION) 1-11605 95-4545390 (COMMISSION FILE NUMBER) (IRS EMPLOYER IDENTIFICATION NO.) 500 South Buena Vista Street, Burbank, California 91521 (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE) (818) 560-1000 (REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE) Not applicable (FORMER NAME OR ADDRESS, IF CHANGED SINCE LAST REPORT) Item 7. Financial Statements and Exhibits Exhibit 99(a) Presentation dated November 9, 2000 with respect to the Walt Disney Internet Group by Thomas O. Staggs, Senior Executive Vice President and Chief Financial Officer, The Walt Disney Company; Steven Bornstein, Chairman, Walt Disney Internet Group; Steven Wadsworth, President, Walt Disney Internet Group; Spencer Neumann, Senior Vice President and Chief Financial Officer, Walt Disney Internet Group; and Robert A. Iger, President and Chief Operating Officer, The Walt Disney Company. Exhibit 99(b) Presentation dated November 9, 2000 with respect to The Walt Disney Company by Michael D. Eisner, Chairman and Chief Executive Officer, The Walt Disney Company; Robert A. Iger, President and Chief Operating Officer, The Walt Disney Company; and Thomas O. Staggs, Senior Executive Vice President and Chief Financial Officer, The Walt Disney Company. Item 9. Regulation FD Disclosure. On November 9, 2000, in connection with Registrant's issuance of earnings releases relating to The Walt Disney Company and the Walt Disney Internet Group, Registrant held simultaneous conference calls and webcasts to discuss the contents of the earnings releases and ongoing developments in Registrant's businesses. The prepared texts of these presentations are furnished herewith. The furnishing of these presentations is not intended to constitute a representation such furnishing is required by Regulation FD or that the materials they contain include material investor information that is not otherwise publicly available. In addition, all of the information in the presentations is presented as of November 9, 2000, and the Registrant does not assume any obligation to update such information in the future. SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. THE WALT DISNEY COMPANY By: /s/ David K. Thompson --------------------------- David K. Thompson Senior Vice President Assistant General Counsel Dated: November 9, 2000 EX-99 2 0002.txt Exhibit 99(a) Presentation dated November 9, 2000 with respect to the Walt Disney Internet Group by Thomas O. Staggs, Senior Executive Vice President and Chief Financial Officer, The Walt Disney Company; Steven Bornstein, Chairman, Walt Disney Internet Group; Steven Wadsworth, President, Walt Disney Internet Group; Spencer Neumann, Senior Vice President and Chief Financial Officer, Walt Disney Internet Group; and Robert A. Iger, President and Chief Operating Officer, The Walt Disney Company. * * * * * [Remarks of Winifred Webb, Senior Vice President of Investor Relations, The Walt Disney Company] Good morning and thanks for joining us. Here with me today in Burbank, to discuss The Walt Disney Company's and Disney Internet Group's fourth quarter and fiscal year end financial results, are Michael Eisner, Chairman and CEO; Bob Iger, Disney's President and COO; and Tom Staggs, Disney's Senior Executive Vice President and Chief Financial Officer; as well as the executive team from the Walt Disney Internet Group -- Chairman Steve Bornstein, President Steve Wadsworth, and Spencer Neumann, the Internet Group's SVP and CFO. As you probably know, we are scheduled to spend the next 45 minutes or so of this call focusing specifically on the Walt Disney Internet Group's businesses -- and then we expect to move on to a discussion of The Walt Disney Company more broadly beginning at 10:15am Eastern Standard Time. For your information, these calls are also being simulcast over the web at disney.go.com/investors/wdig, or at disney.go.com/investors. Before we begin with the Internet Group remarks, I wanted to highlight that instead of just the typical "hold music" prior to the start of this call, you may have noticed that we also ran a series of recently-launched radio spots which promote the redesigned GO.com web guide service -- radio spots which are already airing in the top four markets for internet usage: Seattle, San Francisco, Los Angeles and New York. For today's call regarding the Walt Disney Internet Group, Tom Staggs will lead off with a few remarks, followed by Steve Bornstein, Spencer Neumann, Steve Wadsworth and Bob Iger. Then we will open up the call to you for Q&A. Please note that all referenced financial figures discussed on the Disney Internet Group call will be pro forma figures in order to enhance comparability year over year. Of course, the pro forma financials represent the combination of Disney's Internet assets with the acquired assets of Infoseek Corporation as if the acquisition had occurred at the start of fiscal 1999. We plan to conclude this call on the Internet Group, and to begin the next call on Disney, at 10:15 am Eastern Standard Time. So, let's get started. [Remarks of Thomas O. Staggs, Senior Executive Vice President and Chief Financial Officer, The Walt Disney Company] Thank you, Wendy, and good morning. I have just a few brief remarks to make before turning the call over to our Internet Group executive team. On this call, I think you will hear clearly that we think that success on the internet ultimately will be determined largely by strong brands and quality content. It is quality content that attracts our viewers, users, customers and guests, and keeps them coming back for more. Great content is the cornerstone of the long- term creative and financial success for Disney, and certainly the same is true for our Internet Group. It is also critical to consider the value Disney's offline assets can bring to bear to help promote the Internet Group's product offerings. And, as we increasingly read about internet companies whose access to capital -- or lack thereof -- is becoming a liability as opposed to an asset, the strength of both the Walt Disney Company balance sheet and the importance of this medium as a vehicle for development and distribution of Disney content should be a comforting factor indeed. We continue to feel that we can create significant value through our activities on the internet and hence our commitment to this business remains strong. Last April, The Walt Disney Company's Board of Directors authorized the open market repurchase of up to 5 million shares of Walt Disney Internet Group stock. So, in the fourth fiscal quarter, we purchased roughly 910,000 shares on behalf of the Internet Group at a cost of approximately $11.4 million. This repurchase underscores the company's belief in the long- term value inherent in our Internet Group's quality assets and in the strength of its strategies for driving to profitability. For more on our specific strategies and a review of the year's results, let me turn the call over to the Internet Group management team, beginning with Steve Bornstein. Steve? [Remarks of Steven Bornstein, Chairman, Walt Disney Internet Group] Thanks, Tom, and good morning everyone. Thank you for joining us on today's call. I'd like to offer a few brief remarks about our first year of operation and our outlook for fiscal year '01. Spencer Neumann will follow with our financial results and Steve Wadsworth will then cover our recent business highlights. Fiscal year 2000 was a transitional period for the Walt Disney Internet Group. We learned and accomplished a great deal and made great strides towards becoming a more efficient business. Today, as we report our year-end results, we feel it is appropriate to offer you a summary of how we have performed this past year. I am pleased to tell you that we have accomplished what we said we would do, and have been both measured and consistent in our efforts. Let me elaborate on the year-in-review: - We consolidated operations in a significant way; - We divested assets that weren't strategic to our primary focus; - We integrated our sales operations; - We controlled costs; - We launched our new GO.com Web guide and debuted Movies.com; - We launched our promising Auctions business with a terrific partner -- eBay; - We have leveraged the offline assets of Disney in several ways -- by maximizing Internet buys through ABC's upfront advertising sales efforts, for example, and with Disney marketing campaigns for all of the Walt Disney Internet Group properties; - We have furthered our leadership position in enhanced television by expanding the quality and quantity of our programming; and - We have solidified an experienced, skilled management team. Let me underscore the significant components of the Walt Disney Internet Group: our business is a portfolio of category leaders -- popular Web sites with rich, deep and distinct content and services. As we look to FY '01, we are placing particular emphasis on building upon our key consumer brands, which are truly some of the most visible and robust brands on the Web today. They are: 1- the Disney and Family brands, 2- our ESPN branded sites, 3- the GO.com brand, 4- our ABC branded sites, and finally, 5- our entertainment sites (Movies.com, Mr.Showbiz and Wall of Sound). As a quick review, I think it is important to reiterate our strategic priorities in becoming the preeminent Internet media player: 1- Develop and grow our market leading sites with the goal of achieving ubiquitous distribution for all of our Internet properties. 2- Continue the focus on our existing businesses by putting maximum emphasis on where we can realize substantial operating margins that will accelerate our path to profitability. 3- Enter new Internet businesses where we can leverage Disney's significant offline assets. We view our business as one with several revenue streams -- and although advertising revenue will be important, we will not be solely dependent on ad revenues. Our three-part revenue stream strategy includes: One: advertising -- and we continue to have confidence in the Internet as a compelling advertising medium. In fact, in Q1 we are seeing increased revenue from established companies that want to advertise online and that want to advertise across Walt Disney Internet Group sites -- Steve will speak to this later in the call. Two: e-commerce -- we continue to experience strong growth in this sector with our DisneyStore online and our DisneyVacation sites as well as our new Auctions business. We will elaborate on this point later in the call. And three: our licensing and subscription revenue model. We license content to our distribution partners and also operate significant subscription businesses for ABC, Disney and ESPN. We believe that expanding this revenue stream can make a substantial contribution to our overall success -- when you consider the strength of our brands and proprietary content, we are well positioned to take advantage of this opportunity. For example, in the wireless space, we are pursuing subscription delivery deals that are comparable to our relationship with DoCoMo in Japan -- that relationship offers nearly 14 million Japanese subscribers access to Disney-themed content from their mobile phones. To date, over 300,000 subscribers have signed up for this service -- at 100 yen (or about $1) per subscriber per month. We are actively targeting other domestic and international wireless carriers for similar relationships -- we intend to fully exploit our content in all major global markets, including Asia, Europe and the U.S., where consumers value this type of service. In addition, we believe the opportunity for Walt Disney Internet Group brands and content in a broadband environment is especially attractive; and we are well positioned to distribute our content in broadband as broadband penetration moves from the early adopter to the mass-market user over the next few years. To this end, we will be building a single platform to broadly deploy prototype content targeted at broadband users who want personalized, on-demand, rich media through the Web. Our initial efforts will be specifically focused on sports, news and entertainment offerings. In closing, let me address our operating expectations for this year. As mentioned, we are executing on a more efficient platform. Our number one priority is to increase revenues and drive toward profitability. To that end, we are aggressively managing costs, keeping our cost structure relatively flat, and view FY '01 as a year of significant operating improvements. Moreover, we are creating more revenue opportunities across all of our properties, particularly as we offer a variety of more compelling online branding and advertising solutions for our partners. We will continue to derive benefit as the online business of The Walt Disney Company through our access to Disney's worldwide relationships, its great brands and its significant offline, global assets. Now, I'll turn it over to Spencer Neumann, who will report on our financial results. [Remarks of Spencer Neumann, Senior Vice President and Chief Financial Officer, Walt Disney Internet Group] Today, the Walt Disney Internet Group reported results for the year and fourth quarter ended September 30, 2000. Before walking through our performance I want to point out that our results are impacted by two non-recurring items. First, in July we closed the sale of Ultraseek to Inktomi Corporation. The sale resulted in a pre-tax gain of $153 million and an after-tax EPS benefit of 25 cents. In addition, we recorded non-cash charges for the quarter totaling $31.5 million, or 13 cents per share after tax, and for the full year totaling $36.5 million, or 15 cents per share, to reflect impairment in the value of certain Internet investments. I will briefly review our performance for the fourth quarter and the full year with and without these one- time impacts. I will then focus the remainder of today's call on our results excluding the Ultraseek gain and the non-cash impairment charges. For the fourth quarter of Fiscal 2000, total revenues were $82 million, driven by a 9% year-over-year increase in Internet revenues that was more than offset by a 33% decline in our catalog operations. Operating income, before amortization, was $50 million; however, excluding the Ultraseek gain, our operating loss was $103 million. Loss per share, excluding amortization, was 29 cents 42 cents excluding the Ultraseek gain and impairment charges -- which is favorable to the published analyst consensus of 46 cents). For the full year, total revenues were $392 million -- up 13% over the prior year, driven by a 39% increase in Internet revenues that was partially offset by our catalog operations. Operating loss, before amortization, was $242 million (or $395 million without the Ultraseek gain). Loss per share, excluding amortization, was $1.40 (or $1.50 excluding the Ultraseek gain and impairment charges). Now we'll discuss the income statement in more detail. Focusing on the primary drivers of change, I will start with Media Revenues. For the full year, we generated record Internet Media revenues, closing the year at $201 million, a 24% increase over the prior year. This is despite a 7% year-over-year decline in the fourth quarter to $41 million. Both the fourth quarter and the full year were characterized by growth across our ABC, ESPN, Disney and Family, and Entertainment branded properties. On a year-over-year basis, these properties collectively grew by 35% and 58% for the quarter and full year, respectively. Growth within the ABC brands was primarily driven by the success of the online version of Who Wants to Be a Millionaire and increased advertising sales at ABCNews.com. Disney and Family were driven by increased advertising and sponsorship revenues at the Disney.com and Family.com sites, as well as increased licensing revenues from the Disney-branded international operations. And our ESPN sites continued to drive strong increases in usage and advertising revenue. The offset to this growth was a result of the anticipated reduction in advertising and sponsorship revenues at GO during the redesign. With the launch of the new GO.com behind us, we would expect to see this property regain momentum. One issue that has increasingly been raised is the reliance on dot-com advertising. To analyze this, we isolate pure play "dot coms," or companies that were created for, and conduct all or nearly all of their business on, the Internet. This analysis highlights that advertising agreements with traditional companies represented 60% of our ad revenue this quarter, up 7 percentage points from Q3. The changing mix of our advertising revenue toward more traditional companies is driven by several factors. In particular, it is largely driven by the reduction in funding for many of these young Internet firms, resulting in companies that no longer exist or firms that have rationalized their sales and marketing spend ratios. This undoubtedly creates a drag on our ad revenue base. To counter this drag, the Walt Disney Internet Group plans to leverage its world class brands and innovative marketing solutions to facilitate and accelerate the transition of traditional advertisers to the web. Innovations such as the Big Impression Ad and the Active Ad Box are testament to this commitment. Moving to Internet Commerce Revenues. Our Internet Commerce revenues grew 74% and 100% for the quarter and full year, respectively. This growth reflected increased sales at our Disney-branded properties, specifically the DisneyStore.com and DisneyVacations. The primary driver was transaction volume, as the total number of orders per month increased by 51% and 74% for the quarter and full year, respectively. In addition, we experienced a healthy increase of 43% in average order value on a full-year basis. In our Direct Marketing business, revenues declined by 33% and 23% for the quarter and full year, respectively. This decrease in revenue resulted from a planned reduction in catalog circulation, fewer product offerings, lower catalog response rates, and ongoing migration to our online business. We mentioned in our last call that we would expect to see some uplift in Q4 relative to Q3. And we are pleased to report that we are seeing signs of improvement in the business. In particular, on a sequential quarter basis, revenues increased by 25%. This is partially driven by the seasonal nature of the business which is characterized by a stronger third calendar quarter, but the higher revenues were also driven by an enhanced merchandise selection as well as improved marketing efforts. As a result, we were able to mail more books to our targeted customers and improve our response rates. Moving down the income statement total operating losses for the quarter and full year, excluding amortization of intangibles, were $103 million and $395 million, respectively. Losses from our Internet operations increased from $184 million to $365 million for the year, and from $62 million to $93 million for the quarter. These higher Internet losses for the quarter reflected higher operating expenses across each of our branded properties, primarily driven by continued investment in web site technology and new product initiatives; additional infrastructure to address growth across the Disney, ESPN, ABC, and Entertainment businesses; ongoing enhancements to our sites and the redesign of GO.com; and increased sales and marketing expenditures across our Disney, ESPN and ABC properties that were partially offset by reduced marketing at GO. Losses also increased due to the declining revenues at GO.com. In addition, for the full year, Internet operating losses were negatively impacted by toysmart.com. Direct Marketing operating losses increased from $23 million to $30 million for the year, driven by lower revenues that were partially offset by reduced operating costs as a result of a planned reduction in catalog circulation and lower cost of goods sold. For the quarter, operating performance also benefited from an inventory write-off in the prior-year quarter and improved margins in the liquidation channel, driving a reduction in operating losses from $16 million to $9 million. A quick look at a few of our key operating metrics points to the continued consumer satisfaction and increasing usage of our site. According to September Media Metrix, the Walt Disney Internet group maintained its position as the sixth most visited web property on the Internet. Furthermore, total unique visitors across our properties grew by just over 1 million people from June to September. Our registered user base grew by 11% on a sequential quarter basis to 27 million. For the year, this represents a 70% increase in our registered users. And the depth of their usage continues to expand through increased consumption of our content and services. A key barometer in this regard is our ability to earn a share of our user's time. According to Media Metrix, total time spent across the Internet Group's sites increased 7% on a sequential quarter basis to 2.3 billion minutes of usage. That means that on average, during the fourth quarter, our users each spent about 1 hour and 43 minutes on our sites. Average daily page views for the quarter decreased 5% on a sequential basis from 92 million to 87 million, primarily driven by the seasonally soft summer period, the absence of marketing for GO.com pending the October relaunch, and lower traffic to ABC.com's Millionaire. Page views did rebound in October to 93 million. For the full year, page views increased by 60% to a daily average of 83 million. And once again, this is without any material acquisitions during the year and a significant reduction in GO.com marketing spend. With respect to ecommerce, as already noted, these businesses showed strong quantity and quality of usage, as they experienced solid growth in both the number of transactions and average order value. Before providing a look ahead, I'd like to briefly take stock on this fiscal year. Shortly after completing the outright acquisition of Infoseek, we articulated a few key financial objectives. First, we set out to reposition GO, making it clear that in doing so we would be willing to sacrifice near-term revenues in order build a stronger, long-term business. Second, in the midst of the integration of Infoseek, Starwave, and Disney Internet businesses, we committed to continue to invest prudently in our branded properties with a view to drive long-term growth. And third, we set out to build the necessary technology and infrastructure to achieve a scalable Internet Media company. Well, we have now launched the new GO.com. We have also completed the heavy lifting associated with our integration efforts, and did so while building many properties that remain, or have become, category leaders. And finally, this was all achieved with prudent investment and strict financial discipline that should allow us to grow our business while narrowing our losses. Looking ahead to 2001, we expect to continue to drive top line revenue growth. It is likely that the velocity of this growth will be impacted by two factors: First, it is reasonable to suspect that for the industry as a whole, the changing mix of advertising spend will continue to pose a short to medium term drag on revenue growth -- and we will not be immune to those industry forces. Second, we will continue to be effected by a planned, modest decline in Disney Catalog revenues as we encourage migration to our online properties and reduce our losses in this segment. Nonetheless, we continue to be encouraged by our ability to offset these factors, primarily through growth in our Disney and Family, ESPN, and GO branded Internet properties. We will achieve this growth while controlling our operating expenses and in turn meaningfully reduce our operating losses in Fiscal 01. I should note that these trends in both revenue growth and improved bottom line performance will begin to be seen in our first quarter, but should accelerate as we move into the 2nd quarter and then the second half of the year. This is primarily driven by two factors: First, as we have discussed, we are aggressively transitioning our advertising mix to traditional advertisers. The ongoing adjustment in sales and marketing spend of the dot com companies, and the resulting offset to revenue growth, will likely be felt more significantly in the first half of the fiscal year. Secondly, given that the new GO was not even released until mid-October, and sales and marketing efforts are continuing to ramp up, the full benefit of the new GO will not be felt in the first quarter. Having said that, Steve will discuss the positive reaction and early wins that we can already point to with the new product. In addition, the sales and marketing efforts will be ramping up in Q1, and therefore while we would still expect our operating losses to narrow relative to the prior year, the reduction will not be as dramatic as in future quarters. One final housekeeping item as you consider our financial outlook in 2001. Our intangible asset balance at the close of Fiscal 2000 will be significantly reduced due to the amortization of the first tranche of the Infoseek investment as well as the goodwill associated with the Ultraseek sale. As such, relative to the $212 million of non-cash goodwill amortization running through the P&L this quarter, we would expect approximately $185 million in the first quarter of Fiscal 2001, and roughly $155- $160 million in each of the remaining three quarters. Now I'll turn the call over to our President, Steve Wadsworth. [Remarks of Steven Wadsworth, President, Walt Disney Internet Group] Thanks, Spence, and good morning everyone. As you know, we successfully launched our new GO.com site, a guide to the Web unlike any other search or content site available today. The new GO.com Web guide is designed to help the growing number of online users who want to find comprehensive information more easily, particularly in entertainment and recreation. In keeping with our strategic priorities and by building on the strengths of our strong Internet assets, we believe we are in a unique position to lead in this category. With its new focus, GO.com is a more user-friendly and compelling consumer proposition. The site launched with a phased, consumer beta rollout in September and was opened to all Web users in early October. As we have said, we have a three-fold objective with the new GO: 1- to create a better, more effective product for guiding people through the Web; 2- to significantly improve our revenue opportunity by making it a more efficient and compelling forum for advertisers; and 3- to use GO to drive traffic to our other sites and our partners' sites. The consumer beta rollout gave us the opportunity to introduce the product gradually and also refine it with consumer feedback. While we will continue to evolve and improve the new GO.com, overall our users tell us they like what they see -- they particularly like GO's comprehensive search results, its quick download performance, ease of use and new design. In addition, our users find our GO Guides' "Proven Picks" recommendations to be of great value. Our GO Guides -- an online community of reviewers that has grown from 10,000 Guides last year to 43,000 today -- is proving to be a highly differentiating aspect of GO.com. We are very encouraged by users' positive feedback, particularly given that we haven't yet fully rolled out our marketing campaign. A few words about that campaign: to promote the new GO, we're sponsoring a major consumer marketing effort, highlighted by a year-long, national advertising campaign themed, "Where to Look." The campaign, sized in the tens of millions of dollars, will be the first time in over a year that GO.com has undertaken any marketing outreach to consumers. The creative elements of the ad campaign emphasize GO.com's new role as a lifestyle Web guide, using the tagline, "Your Guide to a Better Time," and it has just started to run on print, radio, television and online media. In addition, the campaign will leverage the significant offline media assets of The Walt Disney Company. Specific efforts include co-marketing with ABC Television, ESPN, Walt Disney World and Disney hotel properties in Orlando, the soon-to- open Disney California Adventure in Anaheim, and ABC's Videotron screen in Times Square. We believe the overall campaign will creatively brand GO as the ultimate consumer Web guide. We are also encouraged by the reaction from our marketing partners to the many new advertising opportunities on GO.com - I'll speak more about this in a moment. Over the course of this fall season, we have also been introducing new site designs and enhancements across our portfolio of Web properties -- including ESPN.com, ABC.com and DisneyStore.com -- all of which sport new looks. ABCNews.com and Family.com will introduce their new designs later this month. We're particularly upbeat about Page 2 - a new enhancement to ESPN.com that debuted on Monday. Page 2 is a second ESPN home page that is modeled after ESPN Magazine with its look and attitude, and will feature writers and celebrity authors offering a range of edgy content and opinions on different areas of sports - -- notably gonzo journalist Hunter S. Thompson. We've also signed up Richard Ben Cramer, author of the new Joe DiMaggio biography; humorist Nick Bakay; and several others, including a celebrity guest columnist each Friday. Our objective with each redesign is to make each site a more compelling offering for consumers, and of course, to increase revenues, most notably with the introduction of the "Big Impression" ad, an online advertising space that is prominently positioned on our key sites and is 30% larger than any standard ad space offered on the Web today. We are beginning to see the results of our new advertising revenue opportunities across our sites. As you know, the "Big Impression" is planned for all of our Web sites, and now appears on ESPN.com, ABC.com and GO.com, with ABCNews.com, and Family.com to follow shortly. Response from marketers has been favorable - in fact, we've already sold new Big Impression ads from prominent marketing companies including Procter & Gamble, Hewlett-Packard, Compaq, Universal and Nike, and we are very encouraged by this reception. In addition, AT&T has agreed to a "road block" advertising commitment -- buying the Big Impression simultaneously across all of our sites for a three-day time period later this month. We believe this type of response from traditional advertisers is indicative of the commitment to marketing in the online space and is a credit to Walt Disney Internet Group's differentiated online advertising model -- one in which we as a company have the relationships with major marketers, have great products and brands, and offer the right marketing environments. We've also seen strong interest in GO.com's ActivAd module, which displays relevant products, content or tools on GO's search results page, and can support special promotions and spur user registrations. To date, advertisers signed for the ActivAd include Adidas, J.C. Penney, Kraft, State Farm and Hertz. Our enhanced TV products continue to attract major advertisers, such as Toyota, Mazda, Nortel and Verizon, with cross-media buys on TV and online. Let's move now to e-commerce. We are excited about Disney Auctions, which we launched last month together with eBay. Disney Auctions offers consumers the chance to purchase one-of-a- kind and collectible Disney memorabilia, authenticated by The Walt Disney Company. Auctions introduces a new revenue stream for the Walt Disney Internet Group -- we will receive a significant share of the revenue generated from each Disney auction item sold. Moreover, our deal with eBay affords us with a $30 million marketing allocation over the next four years which will enable us to promote this new offering widely. We are encouraged by the initial results based on strong bidding by consumers and by significant sell-through experienced to date -- this confirms to us the appetite for the type of products we are offering. Moreover, our association with eBay is working well -- eBay, in fact, is planning a high-end, online catalog for the Christmas holiday which will prominently feature Disney items, and we are well-integrated in their site. On the subject of e-commerce, let me highlight the strong results and progress made at DisneyStore.com and DisneyVacations.com. At DisneyStore.com, total revenue is nearly 110 percent over the same period last year, driven by strong sale of Halloween merchandise. We expect to see continued strength in DisneyStore sales as a result of a technology platform upgrade, homepage and site navigation redesign, easier checkout, added feature functionality such as wish lists, aggressive marketing promotions, tighter marketing integration with The Disney Store, as well as ongoing migration from the catalog. As we have stated previously, one of the keys to profitability for the Walt Disney Internet Group - and The Walt Disney Company -- is the success of our online commerce in the travel sector. For that reason, we are very pleased that DisneyVacations experienced a 300% increase in both package and ticket sales during Q4 2000 versus the same period last year, and we expect DisneyVacations to show continued strong growth this quarter and for the remainder of FY '01. Growth will be driven by an increasing share of theme park package sales via the Internet, a richer product offering that includes car and airline reservations, as well as the addition of new Disney properties -- including Disneyland Paris, the Tokyo Disney Resort and the new Disney's California Adventures theme park. Finally, let me briefly touch on our licensing and subscription business. Since last year, we have expanded our Disney Blast program substantially, with the number of overall markets increasing worldwide from four in FY '99 to 26 markets served today. We also recently concluded deals to syndicate our ABC and ESPN content on a licensee basis. In fact, our total revenue from licensing and subscriptions has doubled from Q4 '99 to Q4 2000, driven by Blast and ESPN Fantasy Games. We expect to see continued revenue growth in this area as we pursue more deals worldwide. With these recent developments, we're successfully transitioning our focus toward exciting new product enhancements, revenue growth and a more efficient operation. Thank you, and now I'm pleased to hand the call over to Bob Iger. [Remarks of Robert A. Iger, President and Chief Operating Officer, The Walt Disney Company] Thank you, Steve. Earlier in this presentation, Steve Bornstein discussed the Walt Disney Internet Group's three-part revenue strategy based on advertising, e-commerce, and licensing and subscription models. In commenting on the advertising market, which impacts a number of our media businesses, whether we are in a robust advertising marketplace or one that is less active, advertisers follow the same strategy of seeking out audience delivery leaders to convey their messages. Like our traditional media assets, the reach of the Walt Disney Internet Group is significant, with 93 million page views a day and 22 million visitors a month. We command these results due to the strength of our brands. Advertisers and consumers alike respond to our content offerings, and we have integrated our sales efforts at the Walt Disney Internet Group with our other media properties to better meet the marketing goals of our advertisers and build market share. In the last six months, we have seen tremendous changes in the new media industry, with the failure of numerous dot.com ventures due to unsustainable business models and less than compelling content. The Walt Disney Company is a content company that maintains leadership positions due to the strength of its creativity. We exploit this comparative advantage across all channels to the consumer, including the Internet. The Walt Disney Internet Group provides users with rich content that is either unique to our sites, extends our television, cable, film or theme park assets, or is an interactive application that enhances our television programming. We are ahead of the curve in the area of Enhanced Television and continue to expand our offerings in this space. This past Tuesday night, ABC News.com complemented ABC News' coverage of the elections by offering the first-ever live, interactive network news telecast, which allowed viewers to "connect" in real- time to the ABC News Elections' team. The Walt Disney Internet Group estimates that 215,000 unique viewers -- connecting for an average of 27 minutes -- participated in The ABC News American Election Challenge. ABCNEWS.com, the 24-hour online service of ABC News, registered 27.1 million page views on Tuesday, which bested by 170% the previous single-day site record. Enhanced TV applications, opportunities to distribute our content in the wireless space, and program integration are a principal focus, in order to differentiate our Internet offerings from the competition, provide a more compelling experience for users, and create an interactive link to consumers for our advertisers. In addition to great content, The Walt Disney Company affords other distinct advantages to its Internet Group through its offline marketing support and capital resources, which bolster the Internet Group's competitive positioning. Our Internet businesses are a strategic necessity for the long-term. We remain committed to sustaining and building the Walt Disney Internet Group and driving it to sustained profitability over time. Using the powerful promotional capabilities of the ABC TV Network, owned television stations, radio networks and stations, ESPN, and The Disney Channel, substantial promotional weight was devoted to 10 key online initiatives in the fourth quarter of 2000. Our traffic results during this promotional period trended above industry average growth rates with increased traffic to such sites as ABCNews.com's Moneyscope and ABC News for Kids, ABC.com's Daytime and Millionaire sites, and ESPN.com. Moving forward, our long-term investment in the on-going success of our Internet businesses will be further demonstrated with on-air marketing campaigns on ABC's media assets for the launch of Disneyauctions and TheDisneyStore.com during the holiday selling season. As I stated, The Walt Disney Internet Group has some of the strongest brands on the Internet with lead positions in sports, news, kids, vacations and entertainment. Our long-term strategic plans are focused on building these brands, capturing greater market share, and yielding strong returns. [Remarks of Winifred Webb, Senior Vice President of Investor Relations, The Walt Disney Company] Thanks again for joining us today. Let me remind you that certain statements in today's press release and on this conference call may constitute forward-looking statements under Federal securities laws. These statements are subject to a number of risks and uncertainties and actual results may differ materially from those expressed or implied in light of future decisions by the company and by market, economic, competitive and technological developments beyond the company's control. For more information on factors that may affect future performance, you may wish to review our periodic financial reports, which are available at our disney.com investor relations websites. This concludes Disney Internet Group's year-end conference call. * * * * * EX-99 3 0003.txt Exhibit 99(b) Presentation dated November 9, 2000 with respect to The Walt Disney Company by Michael D. Eisner, Chairman and Chief Executive Officer; Robert A. Iger, President and Chief Operating Officer; and Thomas O. Staggs, Senior Executive Vice President and Chief Financial Officer. * * * * * Good morning and thanks for joining us. Here with me today in Burbank, to discuss The Walt Disney Company's fourth quarter and fiscal year end financial results, are Michael Eisner, Chairman and CEO; Bob Iger, Disney's President and COO; and Tom Staggs, Disney's Senior Executive Vice President and Chief Financial Officer. For your information, this call is being simulcast over the web at disney.go.com/investors. For today's call regarding Disney's yearend financial results, Michael Eisner will lead off with his remarks, followed by Bob Iger and then Tom Staggs. We will then open up the call to you for Q&A. We plan to conclude this call in approximately 1 hour. So, let's get started. [Remarks of Michael D. Eisner, Chairman and Chief Executive Officer] As many of you are aware, we have just concluded our conference call on the Disney Internet Group, so before I talk about the overall Walt Disney Company, let me just say that the Internet continues to be one of the most exciting areas in which our company is involved. None of us were around at the start of the movies or the television business, so this is our chance to be on the ground floor of a major entertainment venue as it emerges, which is a pretty extraordinary thing. And, just as with motion pictures and television, the implications for our company will be phenomenal. So, that said, let me now say good morning to all of you. Indeed, this is such a good morning that it's worth getting up early enough to be able to say good morning while it's still morning for those of you listening in New York. As many of you have already seen, we capped off FY 2000 with another strong quarter as the entire fiscal year has posted earnings growth well in excess of the 15% compound average growth our company has enjoyed for the past 16 years. The year ended up better than we had expected, but not better than what we knew was possible, given our company's wealth of entertainment assets. I'm now going to briefly focus on performance in Parks & Resorts and the Studios, then Bob will summarize Media Networks and Consumer Products and Tom will fill in the details of our financial results. Parks and Resorts came in with record operating results for the quarter and for the year. This is the sixth record-breaking year in a row for this business unit, during which time its earnings have grown at a compound annual rate of 13%. This kind of performance isn't just significant in itself, but it has that much greater meaning because Parks and Resorts is so fundamental to what we do. This business provides an immersive Disney experience for people to not just visit Disney but to really live Disney. It is certainly nice to see that consumers continue to seek this experience out in ever greater numbers. In FY 2000, Walt Disney World proved to be as popular as ever. Performance was also enhanced by the tremendous success of our innovative FASTPASS, which magically eliminates lines and makes every guest feel like a VIP. The Disney Cruise Line is achieving strong performance and - most important -- very strong guest satisfaction, with an astonishing 97 percent of guests rating it as either Excellent or Very Good. My own personal belief is that the other three percent accidentally marked the wrong box. Maybe we should have a recount. Perhaps the most gratifying aspect of this years' Parks and Resorts results was the fact that Disneyland had a strong year, apparently unhampered by the adjacent construction and the absence of a major new attraction. During recent years, some have argued that the days of bricks-and-mortar entertainment are over as people seek out virtual entertainment. Fortunately, we ignored these false prophets and continued to enhance our incredible collection of theme park assets, while still pursuing the cutting-edge opportunities represented by various forms of new media. Consequently, early next year -- as you're all probably tired of hearing but can expect to continue to hear from me -- we will be completely transforming the Disneyland Resort with the addition of a new theme park -- Disney's California Adventure -- a new entertainment district -- Downtown Disney -- a new hotel -- the Grand Californian -- and one very, very large parking garage. This should alter the very essence of our Anaheim property as it becomes a multi-day destination for out-of-towners and a place that invites more frequent repeat visits for locals. Later next year, our partners at Oriental Land Company will be unveiling Tokyo DisneySea, which will similarly reshape the Tokyo Disney Resort. In 2002, a second theme park at Disneyland Paris -- Disney Studios -- should solidify and expand on the gains that have been made at that site, which is now the most popular tourist destination in all of Europe. And next week, Bob and Tom will formally close the bank financing for Hong Kong Disneyland. This financing, which is not on Disney's balance sheet, was nearly three-times oversubscribed. I think this represents a great vote of confidence for the success of our second Asian theme park location, which we expect to open in 2005. For these reasons -- among many others -- we expect growth at Parks and Resorts to continue to underpin the strength of our entire company. As for the Studios, the fourth quarter showed improvement over the prior year, as we stay committed to the path we have set for ourselves earlier in the year, namely to control costs, reduce the overall number of films, and emphasize and expand the Disney brand. In this regard, "Remember the Titans"is a recent example of what we are working to achieve. It was originally developed as a Touchstone period drama. But, we came to realize that its underlying messages about values, racial understanding and our nation's history were a perfect match for the Disney brand, so we produced it as a Walt Disney Pictures film. This wonderful -- and moderately budgeted -- motion picture will pass $100 million at the box office this weekend, propelled in part by the strength of the Disney brand. There are two overall forces at work in the movie business - - - one is the transition of home video from VHS to DVD and the other, as always, is the unpredictable nature of the product. Since the success of individual titles in the film business is inherently unpredictable, I won't make any predictions, but I will share my hunches -- namely, that there is strong potential in our upcoming holiday releases of "102 Dalmatians," "Unbreakable" - from the same team that created "The Sixth Sense" - - and "The Emperor's New Groove" - which is our latest work from feature animation. And, looking further ahead, we have what should be two of the biggest movies of the summer, "Pearl Harbor" and our first wide-screen animated action adventure film, "Atlantis." As for the home video market, there is no question that it is morphing into a DVD market. The growth in sales of DVD players has exceeded the growth of CD players at this stage. At the end of 1999, there were 9.7 million DVD players in American households. At the end of this year, there are expected to be 22.3 million units. And, at the end of 2001, it is estimated there will be more than 36 million units. This trend is especially important to our company because more and more people are not just buying DVDs of new movies, but they are also buying DVDs of movies they already own on VHS. A survey conducted earlier this year indicated that 14% of people who own DVD players say they are likely to replace all of their VHS movies, while 55% said they are likely to replace their Disney videos. So, it is safe to say that there will be upside benefit for us from this major shift in home entertainment technology. What's more, we have the library and the infrastructure to maximize this opportunity in the months and years ahead -- an opportunity that could take our Studio Entertainment unit to new heights of success. Now, here's Bob Iger to brief you on the rest of our company. [Remarks of Robert A. Iger, President and Chief Operating Officer] Thank you, Michael. In fiscal 2000, The Walt Disney Company's media networks flourished: The ABC Television Network had its highest revenue- generating year in history with near record profits and leading the broadcast industry's Upfront advertising sales period, capturing 30% of the market. ESPN extended its reach through significant growth at ESPN2, ESPN Classic, ESPN Radio, ESPN Magazine and the ESPN Zones. The Disney Channel hit major growth strides due largely to its conversion from a premium program service to a basic cable service, yielding an 18% increase in subscribers. And, the reach of our International Disney Channels expanded with the launch of Spanish and Portuguese language Disney Channels in Latin America. Toon Disney and SoapNet, our newest program services, posted strong audience performance results and have significant additional subscriber commitments over the next 36 months. Our portfolio of advertising sponsored cable assets: ESPN, Lifetime, A&E, History, and E! Entertainment Television, are not only coming off record earnings but sold 75-80% of their commercial inventory in the cable Upfront sales market with double-digit increases in rates. And our broadcasting assets, ABC's 10 owned television stations and radio stations and radio networks performed beyond expectations with significant increases in revenue and operating income as compared to the previous year. The outlook for fiscal 2001 signals a solid year for our businesses. Despite some early softness in the advertising market this quarter relative to last year, we are well-positioned to respond to market conditions due to our on-going efforts to manage costs and our strong results in this season's Upfront markets. With the Olympics and the elections almost history, we believe that the overall advertising market should strengthen and expect momentum to be restored after the first of the year. In terms of ratings performance at the ABC TV Network, on the whole, we are up relative to last season. However, Who Wants to be a Millionaire is not delivering the same audience levels that it did during the January to May period. At the start of this season, we anticipated that there would be a drop-off in Millionaire's ratings as viewers sampled new programming and we protected our business against such shortfalls in audience delivery. Performance to date is below our plan and as a result, we have had to adjust our sellable supply of commercial inventory, in order to meet audience delivery guarantees. Despite lower ratings versus the January to May period, Millionaire continues to be an important program for ABC, as it improves the network's performance levels by 20% among Adults 18- 49 in the time periods in which it runs as compared to the same time periods last year. Millionaire is a powerful program asset, reaching 79.0 million viewers weekly, and remains a profitable program franchise. Thus, we are confident that the Millionaire format maintains a broad appeal, and are taking steps to create more excitement around the program by developing special event episodes throughout the season including: * The extremely popular Celebrity week of Millionaire; * Family Millionaire, which will have a parent and child in the hot seat facing off against Regis Philbin later this month; * Tournaments featuring both high school and college students; * Newly-wed couples team Millionaire; * Rock & Roll Star Millionaire; * and changes to the prize structure for special contestant bonuses. We believe these programming events and the new escalating bonus prize potential will add drama to the series and lift Millionaire to true appointment television. Our new fall schedule includes some bright spots with the successful debut performance of Geena, starring the Academy Award winning actress Geena Davis, and Gideon's Crossing, starring the Emmy winning actor Andre Braugher. Gideon's Crossing outperforms most of its competition in its Wednesday time period, and we expect it to develop like a similar quality drama on our air, The Practice, which took two years to achieve time period leadership. In terms of returning series, the introduction of Charlie Sheen to Spin City has added a spark to this program with an increase in the delivery of Adults 18-49 over last season. We also hope to repeat the success of the series launch of Millionaire last January with the mid-season premiere of The Mole and a number of new comedies. The Mole follows 10 demographically diverse contestants, who work together as a team to accomplish a series of outrageous tasks; the more tasks they accomplish, the more money one of them will win. The one-hour show has a unique twist that will separate it from other game and reality shows already on the air by adding the distinct component of "the Mole," a player whose predetermined purpose is to sabotage the team's efforts to collect all the money. We believe that this program will attract viewers by making them active participants in the drama of trying to figure out the identity of the saboteur. In addition to this compelling new reality program, our midseason comedies feature the incredible talents of James L. Brooks and Joan Cusack, Damon Wayans and Dennis Leary. Our other broadcasting businesses and cable businesses are healthy, and contractual commitments are in place to expand the reach of our cable networks this year. ESPN because of its leading position in reaching men, is the beneficiary of the majority of advertising budgets chasing this demographic this fiscal period. As such, ESPN's strong Upfront performance has held to date with second quarter option commitments being met by advertisers. Our television stations currently are pacing ahead of the prior year in the fiscal first quarter due in part to the substantial volume of political spending and margins are strong. Furthermore, we expect to see continued subscriber growth at The Disney Channel, Toon and SoapNet throughout the year, bolstering our affiliate revenue. During our last conference call in August, I noted that each one of our business unit's strategies included building and strengthening the companies' brands. To that end, the Consumer Products division has developed turnaround plans for its businesses that begin with this fundamental tactic. While the lead-time for these plans varies by category; the long-term outlook for the overall Disney Consumer Products business is optimistic. I will highlight some of these strategies, which we expect to begin to yield positive financial results in fiscal 2002. Turning first to Licensing, which represents 70% of Consumer Product's operating income, we intend to change our current business models to allow for greater flexibility to adapt to market conditions. Rather than relying on our network of licensees to manage Disney's brand identity and brand presentation at point of sale, Licensing now plans to become an active participant in setting our brand identity and presentation at retail. To this end, we are developing new retail models that should result in a more collaborative relationship with key retailers worldwide. From a creative property perspective, we plan to diversify our portfolio significantly by aggressively developing new and library properties from our collection of 124 characters -- thus developing a stronger Disney image at retail and bolstering the appeal of our primary characters. Part of this over-arching strategy will be to grant retail exclusives around secondary characters such as Little Simba, Bambi or Tinker Bell, to enable key accounts to be differentiated from each other, thereby providing an attractive retail incentive of market exclusivity. Apparel has been our most challenged licensed category over the last few years. Although our business model remained the same, the retail landscape experienced considerable change during this period in terms of consolidation and growth of mass market retailers. In addition, these retailers rather than relying on external brands, provide consumers with a wider selection of private label brands characterized by high quality and a high price-to-value relationship, putting further pressure on our ability to capture market share. In response to these market changes, we plan to extend the Disney brand into the non-character segment of the children's apparel market, offering totally new thematic collections. Furthermore, we will execute a direct to retail licensing model, in order to tap into this new opportunity. We have had discussions with the 20 largest retailers in the world about this strategy and have received an overwhelmingly positive response. Our strategies in toys are very different from apparel. Consumer Products has enjoyed an 11 year near exclusive relationship with Mattel, a world-class company and category leader in infant and pre-school toys and fashion dolls. Hasbro has had a similar level of success in building programs around film properties such as Star Wars, Batman, and Jurassic Park, becoming leaders in the boy's categories of action figures, vehicles, games and puzzles. Taking advantage of the strengths of these two companies, Consumer Products has restructured our alliances with each company. Going forward, Mattel will focus on Disney Standard Characters including Mickey, Winnie the Pooh, and princesses, capitalizing on its leadership position in infant and pre-school toys and dolls, and Hasbro will focus on film properties capitalizing on its market position in action figures, vehicles, games and puzzles. By aligning ourselves with the strongest players in each category, we believe we significantly can grow our market share in toys. In Disney Publishing, which represents 16% of Consumer Products' operating income, we are the world's largest publisher of children's books and magazines, selling 345 million copies annually. This profitable division has become an important source for content that can be leveraged across the company. Another growth area for Consumer Products is our Interactive division, which represents 8% of Consumer Products' operating income and experienced double-digit growth this year. We've spent the last two years expanding our title base and diversifying our product range by category, platform and geography. Rounding out Consumer Products, The Disney Store represents 6% of Consumer Products' operating income. The Disney Stores continue to be important to the Disney brand, as they are the primary interface between the brand and the consumer and have a halo effect over our entire consumer products business. This month, we've launched our first-ever on-air marketing campaign in support of the stores with creative that focuses on our new merchandise that ties into our theatrical release 102 Dalmatians. Our two new store design prototypes, which opened last month, allow us to make a powerful brand statement in a more efficient retail environment. We will be measuring the success of these design concepts, fine tuning where necessary, and rolling out a significant number of the new format over the next two years. Store remodels and optimizing the chain size are fundamental to The Disney Store's renewal strategy, and are consistent with our requirement of double-digit returns on Disney capital from our divisions. The shortest lead-time business I discussed is apparel. To that end, we have begun the process of diversifying our property portfolio with a company-wide initiative behind Disney Princesses, and will begin to see results in this fiscal year. Lead-time in toys is impacted by our new licensee alignment, which does not go into effect until the release of Monsters, Inc. in the fall of 2001. Growing our branded businesses in the U.S. and international markets is critical, and I believe that we are well poised to increase the reach of The Walt Disney Company through our consumer products and media assets, which are powerful growth drivers for the company. I'd like to turn the call over to Tom Staggs, who will review our quarterly and fiscal year results. [Remarks of Thomas O. Staggs, Senior Executive Vice President and Chief Financial Officer] Thank you, Bob. Since we discussed the results for the Walt Disney Internet Group on our earlier call, I will concentrate my remarks on Disney apart from our retained interest in the Internet Group. For the fourth quarter of fiscal 2000, our revenues increased 6% to $6 billion. Operating income was $898 million, up 58% excluding restructuring charges taken in the prior year quarter, and net income was up 77% to $417 million, which delivered earnings per share of $0.20. For the full year our results were equally robust. Revenues were $25 billion, an increase of 9% over the prior year. Operating income was $4 billion, which represents a 26% increase, and net income was $1.9 billion. Fully diluted earnings per share were $0.92 -- 42% higher than pro-forma results from last year. Media Networks, led by our broadcasting group, was our strongest performing division for both the quarter and the year. Media Networks revenue for the fourth quarter totaled $2.2 billion, bringing revenues for the year to $9.6 billion: a 21% increase over 1999. Operating income for the quarter totaled $460 million, which means that for the year, Media Networks operating profit grew 45% over 1999 to a total of roughly $2.3 billion. Broadcasting benefited from a 21% year-over-year increase in advertising revenues, which drove a 95%increase in operating profit. These results are indicative of the tremendous earnings power of this businesses. And it should not go unnoticed that in these business, great earnings equals great cash flow. As a whole, Media Networks generated over $2.4 billion in EBITDA. I should also have to commend the broadcasting group management team, because even as they generated revenues that far exceeded expectations, they managed costs to within 1% of their original budget for the year. Cable Television also contributed significantly to the year's success even as we continued to invest in new growth initiatives like SoapNet and our 3 newest international Disney Channels. Overall, Disney's share of operating income from its total cable television activities increased by 7% for the quarter and 25% for the year. As a result, Disney's cable-based operating profit totaled more than $1.2 billion in our 2000 fiscal year. The biggest component of our cable TV activities is, of course, ESPN, which benefited from increased affiliate fees, a growing subscriber base and a 20% year-over-year increase in advertising revenue, delivering growth despite the impact of higher costs of new sports contracts. It is worth noting that after the first two quarters of this year, we will lap these rights fee increases, making our year-over-year comparisons somewhat easier. At the Disney Channel, subscriber growth and the conversion to basic cable in key markets were positive contributors for both the quarter and for the full year. In fact, on Oct. 28th we celebrated the latest conversion of the Disney Channel to basic, when Time Warner added 1.2 million basic homes in New York to the Disney Channel universe. Bob mentioned the initial softness in the advertising market so far this year. While we look for a reversal of this trend later in the year, it is worth noting that Disney generates well under 50% of its cable revenues from advertising. In fact, just 40% of ESPN's revenue and virtually none of the Disney Channel's revenue is advertising based. Therefore, we believe that our cable businesses are both powerful drivers of future growth and generally more resistant to advertising downturns than many other cable programming networks. Still, looking ahead, the ad market coupled with network ratings will be the biggest variables in Media Networks results for next year. I would expect that the early softness will likely impact our earnings for the first quarter of the year. As we look further down the road, though, we are confident in the ongoing strength of our Media Networks business for all the reasons that Bob has mentioned. While in fiscal year 2000 the Media Networks segment showed just what a powerful growth driver it can be, Studio Entertainment was experiencing the year of transition that we had indicated it would. The Studios ended the year with just under $6 billion in revenue, off slightly from the prior year, and operating income of $110 million, down from the $154 million recorded in 1999. Nonetheless, the segment ended the year on a significantly more positive note, posting operating income of $87 million versus a loss of $84 million in Q4 of the prior year. In the Studios' Home Video business, difficult comparisons early in the year dampened overall results. Despite the success of Tarzan and the Gold Collection, these titles faced difficult comparisons to the prior year's slate, which included Simba's Pride, A Bug's Life and Mulan. However, in the fourth quarter, the performance of Little Mermaid II: Return to the Sea, The Tigger Movie and Buzz Lightyear: Star Command as well as the solid theatrical performances of films like Scary Movie, Coyote Ugly and The Kid all contributed to our positive earnings. For next year, the key drivers of Studio Entertainment performance will be the new release slate, starting with the key films that Michael noted in addition to the performance of new releases on VHS and DVD, including Toy Story 2 and Dinosaur. While Michael discussed the anticipated creative success of our 2001 slate, progress also has been made on the financial side. We have taken $500 million out of our annual investment in live action films over the past 2 years and have significantly brought down the cost of our animated films going forward. Our film slate is also more heavily weighted toward films with low to moderate budgets that Peter Schneider and his team feel have strong potential commercial appeal. And, as Michael outlined, in big budget pictures like Pearl Harbor, we are structuring deals to mitigate our financial risk. The success of Remember the Titans is an encouraging sign that our strategy here will pay off. In addition, during the year we will complete the rollout of the Gold Collection, which we hope will benefit greatly from the continued growth of DVD. In Consumer Products for the quarter, revenues were $628 million, down somewhat from the $672 recorded in the fourth quarter of 1999. Operating income improved from $80 million to $100 million, largely reflecting the impact of restructuring charges in the prior year. For the year, Consumer Products delivered revenues of $2.6 billion, a decline of 6%, while operating income for 2000 was down 20% to $454 million. Results for both the quarter and the full year reflect continued softness in worldwide licensing, which, as we have said, is a trend that we are taking steps to reverse over time. Nonetheless, it is unlikely that Consumer Products will be a growth driver for 2001, with the first quarter being the most difficult in terms of year over year comparisons. Our Consumer Products business certainly is still the most successful of its kind. However, as Bob mentioned, we are single-mindedly focused on better tapping into the strength of this business and we are confident that we will be successful in doing so over the longer term. Next, in our Parks and Resorts division, strategies to drive demand through broad marketing-based celebrations spurred record- breaking growth for both the year and the quarter. For the quarter, Parks and Resorts generated revenues of $1.7 billion and operating income of $362 million, both of which represent a 10% increase over the same period last year. And for the year, Parks and Resorts revenue grew from $6.1 to $6.8 billion, and operating income increased by 10% to a record $1.6 billion. Contributing to our increases for both the quarter and the year were: * The Millennium Celebration at Epcot, which increased traffic across our Florida parks, driving record attendance at Walt Disney World; * At Disneyland, the success of the Annual Pass Program and the 45th Anniversary Celebration, which increased attendance most notably within our local resident segment; * Increased guest spending on Millennium and Disneyland 45th Anniversary merchandise; * And of course, the positive impact of FASTPASS on guest satisfaction, spending and intent to return cannot be overlooked. By the end of 2001, we expect to have over 50 FASTPASS locations installed in all our parks throughout the world. Also contributing to our results was the impact of over $80 million in productivity improvement and cost reduction initiatives achieved by our Parks and Resorts division. Remember that for the quarter, Parks and Resorts delivered these robust results despite the fact that we have begun to book pre-opening costs for Disney's California Adventure. These costs will continue through the 2nd quarter of fiscal 2001, and we expect that they will have roughly a $55 million impact on Parks and Resorts operating earnings for fiscal 2001. In recent years we have been a net investor in our Parks and Resorts business, so it is important to note that after tax free cash flow from this segment totaled more than $450 million this past fiscal year even as we invested significant capital in projects like Disney's California Adventure in Anaheim and the Animal Kingdom Lodge in Florida. So we are well on our way to generating the $1 billion plus in annual free cash flow that we are expecting from this segment in 2002 and beyond. For 2001, the key to Parks and Resorts results will be the opening of Disney's California Adventure. At the Disneyland Resort, we expect nearly 6 million guests to visit Disney's California Adventure during the park's first eight months of operations, which will begin February 8.. As I mentioned, the pre- opening expenses for Disney's California Adventure will be incurred and expensed throughout the year. At Walt Disney World, the Millennium Celebration draws to an end in January. Growth drivers for the next year in our Orlando resort will include new hotels like Animal Kingdom Lodge and new attractions, like Aladdin's Magic Carpet Ride in late spring. Given the strength of our results, Disney's overall cash flow increased significantly on a year-over-year basis. As a result, Disney's net debt decreased by more than $2 billion from Q4 1999 to Q4 2000 and Net Interest expense declined by 13%. As we have mentioned in the past, we believe that the strength of our cash flow and financial position will be an increasingly important asset going forward. During the quarter, we purchased 1 million Disney shares for approximately $40 million bringing our total repurchase for the year to 4.9 million shares at a cost of $155 million. As I mentioned earlier this morning, we also purchased slightly over 900,000 shares of the Walt Disney Internet Group at a cost of roughly $11 million. And lastly, let me restate that we remain on track to deliver the $500 million in annual savings by 2001 that we targeted at the beginning of the year. I have tried to outline some of the key variables that will most influence our results over the coming year. While we are not going to project actual earnings for our next fiscal year today, I hope our discussion of 2001 gives you a sense of our continued confidence in the outlook for Disney. For the first fiscal quarter of 2001 we believe that the factors we have outlined will likely result in our posting earnings that are roughly on par with last year's $0.25 per share. As we continue to follow the strategies we have outlined on this call, and as we roll out quality new products, content and services throughout the year, we expect that our earnings outlook will be very positive. A year ago, we identified our 2000 fiscal year as one in which we would lay the foundation for the company's next phase of growth. And, while our earnings for the year have been unquestionably strong, we've remained focused on positioning ourselves for the future. While successfully leveraging the unprecedented strength of the ad market and ratings improvements at the ABC Network, we continued to lay the groundwork for long term growth in our cable television assets through the continued development of the ESPN brand and the launch of SoapNet domestically and the expansion of the Disney Channel's reach both domestically and internationally. We have planned and begun executing turnaround strategies for both Studio Entertainment and Consumer Products. As we generated another year of record performance in Parks & Resorts, we also continued to manage the development of four additional parks at various locations around the world. Finally, we have substantially augmented our attention to returns on capital and generation of free cash flow across our various lines of business, which will help insure that our growth initiatives are consistent with our overall objective of delivering ever-greater value for our shareholders. [Remarks of Winifred Webb, Senior Vice President of Investor Relations] Thanks again for joining us today. Let me remind you that certain statements in today's press release and on this conference call may constitute forward-looking statements under Federal securities laws. These statements are subject to a number of risks and uncertainties and actual results may differ materially from those expressed or implied in light of future decisions by the company and by market, economic, competitive and technological developments beyond the company's control. For more information on factors that may affect future performance, you may wish to review our periodic financial reports, which are available at our disney.com investor relations websites. This concludes Disney's year-end conference call. * * * * * -----END PRIVACY-ENHANCED MESSAGE-----