CYNMAGYELBLK BC Walt Disney Co. 12/13/99 FC 94673 3 CYNMAGYELBLK IFC Walt Disney Co. 12/11/99 IBC 94673 1 BOARD OF DIRECTORS CONTENT LISTING Reveta F. Bowers 1,3,5,6 Thomas S. Murphy 3,4 1 Member of Audit Review Committee Head of School Former Chairman 2 Member Capital Stock Committee Center for Early Education Capital Cities/ABC,Inc. 3 Member of Compensation Committee 4 Member of Executive Committee Financial Highlights 1 Management’s Discussion and Analysis 44 5 Member of Executive Performance 4 1,2 Letter to Shareholders 2 Consolidated Statements of Income 54 Roy E. Disney Leo J. O’Donovan, S.J. Subcommittee of the Compensation Vice Chairman President 5 Committee Financial Review 10 Consolidated Balance Sheets 55 The Walt Disney Company Georgetown University 6 Member of Nominating Committee Theme Parks and Resorts 14 Consolidated Statements of Cash Flows 56 Michael D. Eisner 4 Sidney Poitier 3,5 Attractions 15 Consolidated Statements of Chairman and Chief Executive Officer Chief Executive Officer Disney Regional Entertainment 20 Stockholders’ Equity 57 The Walt Disney Company Verdon-Cedric Productions, Ltd. Walt Disney Imagineering 22 Notes to Consolidated Financial Statements 58 Judith Estrin1 Irwin E. Russell 4 Walt Disney Studios 24 Quarterly Financial Summary 69 Chief Technology Officer and Attorney at Law Buena Vista Music Group 31 Selected Financial Data 70 Senior Vice President Management’s Responsibility for Cisco Systems, Inc. Robert A.M. Stern Media Networks 32 Senior Partner Broadcast Networks 33 Financial Statements 71 Stanley P. Gold 3,5,6 Robert A.M. Stern Architects Cable Networks 36 Report of the Independent Accountants 71 President and Chief Executive Officer Publishing 37 Board of Directors and Shamrock Holdings, Inc. Andrea L. Van de Kamp6 Chairman, Sotheby’s West Coast Consumer Products 38 Corporate Executive Officers 72 Sanford M. Litvack2 Internet and Direct Marketing 42 Vice Chairman Raymond L. Watson1,3,4 The Walt Disney Company Vice Chairman The Irvine Company Ignacio E. Lozano, Jr.1,3,5 Chairman Gary L. Wilson2,6 Lozano Communications Chairman Northwest Airlines Corporation George J. Mitchell 1,2,6 Special Counsel Verner, Liipfert, Bernard, McPherson and Hand DIRECTORS EMERITUS Caroline Leonetti Ahmanson E. Cardon Walker Chairman Emeritus Former Chairman and Chief Executive Officer Federal Reserve Bank of San Francisco The Walt Disney Company Richard A. Nunis Former Chairman Walt Disney Attractions CORPORATE EXECUTIVE OFFICERS Michael D. Eisner Peter E. Murphy Chairman of the Board and Chief Executive Officer Senior Executive Vice President and Chief Strategic Officer FINANCIAL HIGHLIGHTS The Walt Disney Company and Subsidiaries Roy E. Disney Thomas O. Staggs Vice Chairman of the Board Senior Executive Vice President and Chief Financial Officer (In millions, except per share data) 1999 1998 1997 CAGR(3) Sanford M. Litvack Louis M. Meisinger Vice Chairman of the Board Executive Vice President and General Counsel Revenues $23,402 $22,976 $22,473 2% Operating income(1) 3,231 4,079 4,312 (13%) PRINCIPAL BUSINESSES Net income(1) (2) 1,368 1,890 1,886 (15%) Diluted earnings per share(1) (2) 0.66 0.91 0.92 (15%) ABC Group Go Network Cash flow from operations 5,588 5,115 5,099 5% Robert A. Iger, Chairman and President, Walt Disney Steven M. Bornstein, Chairman Stockholders’ equity 20,975 19,388 17,285 10% International Stephen H. Wadsworth, President Book value per share 10.18 9.46 8.59 9% Disney Consumer Products Walt Disney Attractions (1) Barton K. Boyd, Chairman Judson C. Green, Chairman 1999 results exclude a gain from the sale of Starwave Corporation of $345 million and restructuring charges of $132 million. Andrew Mooney, President Paul S. Pressler, President 1998 results exclude a $64 million restructuring charge. 1997 results exclude the impact of a $135 million gain on the sale of KCAL (2) 1999 results also exclude equity in Infoseek loss of $322 million Disneyland Paris Walt Disney Studios (3) Compound annual growth rate 1997 to 1999 Gilles Pelisson, Chairman and Chief Executive Officer Joseph E. Roth, Chairman, The Walt Disney Studios Peter Schneider, President, The Walt Disney Studios ©1999 The Walt Disney Company 72 1 CYNMAGYELBLK 72 Walt Disney Co. 12/13/99 1 94673 6 LETTER TO SHAREHOLDERS MANAGEMENT’S RESPONSIBILITY FOR REPORT OF INDEPENDENT ACCOUNTANTS FINANCIAL STATEMENTS To the Board of Directors and Stockholders of Management is responsible for the preparation of the company’s con- The Walt Disney Company solidated financial statements and related information appearing in this report. Management believes that the consolidated financial state- In our opinion, the consolidated balance sheets (page 55) and the ments fairly reflect the form and substance of transactions and that related consolidated statements of income (page 54) and cash flows the financial statements reasonably present the company’s financial (page 56) and of stockholders’ equity (page 57) present fairly, in all position and results of operations in conformity with generally material respects, the financial position of The Walt Disney Company accepted accounting principles. Management also has included in and its subsidiaries (the company) at September 30, 1999 and 1998, the company’s financial statements amounts that are based on esti- and the results of their operations and their cash flows for each of mates and judgments which it believes are reasonable under the the three years in the period ended September 30, 1999, in confor- To Disney Owners and Fellow Cast Members: and, in the past decade, we have enhanced our library with 17 circumstances. mity with accounting principles generally accepted in the United The independent accountants audit the company’s consolidated animated films, 265 live-action films, 1,252 animated television States. These financial statements are the responsibility of the financial statements in accordance with generally accepted auditing company’s management; our responsibility is to express an opinion Last year, I mused about the changing of the seasons. This year, episodes and 6,505 live-action television episodes. standards and provide an objective, independent review of the fair- on these financial statements based on our audits. We conducted our I’d like to discuss the changing of the decades, and the accom- ness of reported operating results and financial position. audits of these statements in accordance with auditing standards panying changes that are taking place in our company. Of This enormous expansion reflected a two-fold corporate strategy: The Board of Directors of the company has an Audit Review generally accepted in the United States, which require that we Committee composed of seven non-management Directors. The course, we’re also changing centuries and millennia, but generally (1) to build the greatest entertainment asset base in the world and plan and perform the audits to obtain reasonable assurance about Committee meets periodically with financial management, the inter- whether the financial statements are free of material misstatement. speaking I believe that a 10-year block of time is about as (2) to simultaneously create the greatest entertainment product nal auditors and the independent accountants to review accounting, An audit includes examining, on a test basis, evidence supporting the far out as any CEO ought to write about in his annual report ... in the world. The first aspect of this strategy is what our Disney control, auditing and financial reporting matters. amounts and disclosures in the financial statements, assessing the although I am willing to bet that Disney will still be doing Decade was all about, and it was achieved. The second aspect – accounting principles used and significant estimates made by man- agement, and evaluating the overall financial statement presentation. very well come January 1, 2100! the creation of great entertainment product – is ongoing and We believe that our audits provide a reasonable basis for the opinion will always be fundamental to our company. expressed above. The last ten years comprised a spectacular decade for Disney. Unfortunately, in financial terms it ended on a down note, with So, now we enter the first decade of the 21st century with a PRICEWATERHOUSECOOPERS LLP revenues for 1999 increasing only 2 percent to $23.4 billion and strategy that is four-pronged: (1) revitalizing underperforming operating income declining 21 percent, to $3.2 billion. On the areas (that’s a euphemism for developing new strategies for other hand, in creative terms, the decade ended strongly, with Home Video and Consumer Products), (2) achieving greater Los Angeles, California our company’s entertainment product continuing to attract wide profitability from existing assets (that’s corporate speak for November 22, 1999 audiences around the world. vigilant and continued efforts at controlling costs and improving efficiency which in itself is corporate speak for worrying about Back in 1990, my optimism for the coming 10 years was reflected the bottom line more aggressively), (3) capital-efficient initiatives at a press conference during which we outlined (slightly tongue- to drive long-term growth (which really means growing our in-cheek) what we were calling “The Disney Decade.” At that existing companies in smart ways at the lowest possible cost) SUPPLEMENTAL INFORMATION event, I laid out our company’s plans, which included the con- and, of course, (4) continued development of creative, innovative struction of new theme parks in Orlando, Anaheim, Tokyo and and engaging products (in other words, continuing to be Disney). STOCK EXCHANGES OTHER INFORMATION Paris; the addition of more than 20,000 new hotel rooms on our Disney Group common stock and go.com common stock are listed for A copy of the company’s annual report filed with the Securities and Exchange Commission (Form 10-K) will be furnished without properties; and the revitalization of feature animation, with the Your company is really in excellent health despite the short-term trading on the New York Stock Exchange under the ticker symbols DIS and GO, respectively.