2010 YEAR in REVIEW Cover Photo: Lightning Mcqueen Takes to the Streets of Tokyo for a ‘Round the World Adventure in Cars 2
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© 2010 YEAR IN REVIEW Cover Photo: Lightning McQueen takes to the streets of Tokyo for a ‘round the world adventure in Cars 2. SUMMARY FINANCIAL HIGHLIGHTS ($ in millions, except per share amounts) 2010(1) 2009(1) 2008(1) 2007(1) 2006(1) Revenues Media Networks $17,162 $16,209 $15,857 $14,913 $14,039 Parks and Resorts 10,761 10,667 11,504 10,626 9,925 Studio Entertainment 6,701 6,136 7,348 7,491 7,529 Consumer Products 2,678 2,425 2,415 1,990 1,869 Interactive Media 761 712 719 490 385 $38,063 $36,149 $37,843 $35,510 $33,747 Segment Operating Income(2) Media Networks $ 5,132 $ 4,765 $ 4,981 $ 4,534 $ 3,629 Parks and Resorts 1,318 1,418 1,897 1,710 1,534 Studio Entertainment 693 175 1,086 1,195 728 Consumer Products 677 609 778 689 626 Interactive Media (234) (295) (258) (291) (135) $ 7,586 $ 6,672 $ 8,484 $ 7,837 $ 6,382 Diluted earnings per share from continuing operations attributable to Disney $ 2.03 $ 1.76 $ 2.28 $ 2.24 $ 1.60 Earnings per share, discontinued operations — — — 0.01 0.03 Diluted earnings per share attributable to Disney(3) $ 2.03 $ 1.76 $ 2.28 $ 2.25 $ 1.64 Cash provided by continuing operating activities $ 6,578 $ 5,319 $ 5,701 $ 5,657 $ 6,133 Free cash flow(2) $ 4,468 $ 3,566 $ 4,123 $ 4,091 $ 4,841 (1) Information affecting the comparability for all periods presented is set forth in Item 6 to the Company’s Annual Report on Form 10-K. (2) Aggregate segment operating income and free cash flow are not financial measures defined by Generally Accepted Accounting Principles (GAAP). Reconciliations of non-GAAP financial measures to equivalent GAAP financial measures are available in the Reconciliations section. (3) Diluted earnings per share attributable to Disney may not equal the sum of the column due to rounding. See Notes to Consolidated Financial Statements 1 THE WALT DISNEY 2010 YEAR IN REVIEW RECONCILIATIONS Certain measures used in the Financial Highlights are not financial measures defined by GAAP. The following tables reconcile these measures to the most comparable financial measures as defined by GAAP. (all figures in millions) SEGMENT OPERATING INCOME 2010 2009 2008 2007 2006 Segment operating income $7,586 $6,672 $8,484 $7,837 $6,382 Corporate and unallocated shared expenses (420) (398) (460) (497) (522) Restructuring and impairment charges (270) (492) (39) (26) (32) Other income / (expense) 140 342 (59) 1,004 88 Net interest expense (409) (466) (524) (593) (592) Income from continuing operations before income taxes $6,627 $5,658 $7,402 $7,725 $5,324 FREE CASH FLOW The Company defines “Free Cash Flow” as cash provided by operations less investments in parks, resorts and other property. 2010 2009 2008 2007 2006 Cash provided by continuing operations $ 6,578 $ 5,319 $ 5,701 $ 5,657 $ 6,133 Investments in parks, resorts and other property (2,110) (1,753) (1,578) (1,566) (1,292) Free cash flow $ 4,468 $ 3,566 $ 4,123 $ 4,091 $ 4,841 22 LETTER TO SHAREHOLDERS To the Shareholders and Cast Members of The Walt Disney Company: At Disney, our exceptional entertainment experiences, widely diverse content and unique skill in managing our businesses in an integrated way allowed us to achieve strong results in 2010 and positioned us well for future growth. Disney has an incredible array of assets, some of the world’s best known brands, and a culture that since the time of Walt Disney, has embraced technological change and maintained an unwavering commitment to great creativity. When it comes to quality, no name shines more brightly in family entertainment than Disney. During the highlight of the Disney Dream Christening ceremony, a helicopter lifts a giant champagne bottle to break on the bow of the ship at Port Canaveral, Florida on Jan. 19, 2011. 3 THE WALT DISNEY 2010 YEAR IN REVIEW And there’s probably no better example this year of who we are as a company and what we stand for than Toy Story 3, the No. 1 animated movie of all time at the global box office. Toy Story 3 is at once a gorgeous work of art, a great example of how new technol- ogy can make entertainment even more Robert A. Iger compelling, and a story that speaks to all President and Chief Executive Officer of us. It shares the DNA of Disney clas- The Walt Disney Company sics like Snow White, Pinocchio and Beauty and the Beast; deeply human stories that appeal to people across cultures and ages and are enjoyed every day the world over. The beauty of great storytelling is that it can create value for a long time for both consumers and shareholders. And no com- tainment that people want to experience; using Diluted earnings per share for the year pany but Disney can so consistently write new technology to maximize the quality and increased 15 percent to $2.03 from $1.76. timeless stories and invent from them new reach of that entertainment; and growing our entertainment experiences that capture businesses in promising international markets This performance is particularly gratifying people’s imaginations. to extend the impact of that entertainment. given the challenging global economic con- ditions we’ve faced since 2008. In my five years as CEO of this great These priorities again served us well in 2010. Company, we’ve sought to build on Net income attributable to Disney for the year Creatively speaking, we had a banner year. Disney’s legacy by focusing on three core increased 20 percent to $3.96 billion on a Our movie studio last year was the first strategic priorities: creating great enter- 5 percent rise in revenue to $38 billion. in history to make two films that crossed Critics and audiences alike adored Toy Story 3, the No. 1 animated movie of all time. 4 Johnny Depp’s Captain Jack Sparrow shoves off on a quest to find the fabled Fountain of Youth in Pirates of the Caribbean: On Stranger Tides. the billion-dollar mark at the global box This fiscal year is off to a promising start way fans of Disney do. With two Marvel office – Toy Story 3 and Disney’s Alice in as well. Disney Animation Studios’ marvel- epics, Thor and Captain America: The First Wonderland, another timeless story made ous movie Tangled has been a big artistic Avenger, coming to theaters in 3D this sum- new. The quality of our programming and and commercial success and, with Rapunzel, mer and Marvel TV shows, games, comics presentation led to the highest ever fis- added a popular new Princess to our royal and merchandise now flowing through our cal year ratings for ESPN, ABC Family court. TRON: Legacy has dazzled audiences global marketing and distribution network, and Disney Channel. And our Parks and globally with its unique 3D virtual world. This we couldn’t be more excited. Resorts opened World of Color, an amazing summer, two of our most important franchise water, light and sound spectacle featuring properties are making a highly anticipated Our acquisitions, from Pixar and Club many of our most beloved characters at return to the silver screen, Cars 2 and Pirates Penguin to Marvel and Playdom, the pub- Disney California Adventure. of the Caribbean: On Stranger Tides. lisher of social network-based games we bought last August, bolster Disney in many We also strengthened our creative important ways. They add to our ranks of and brand portfolio with the acqui- talented artists, engineers and business sition of Marvel Entertainment. innovators. They fortify our global brand Just as the 2006 acquisition of presence. And they give us new ways to Pixar brought us the incredible build on our unique capacity to bring great talented team of artists and writ- stories and characters to life across our ers behind such award-winning many businesses. and commercially successful films as Ratatouille, Wall-E and Given these strengths and our global repu- Up, Marvel can bring long-lasting tation as the world’s leader in high quality value to Disney. family entertainment, we see tremendous opportunity in the shifting dynamics of the Marvel has world-class artists, global economy. Rapid technological change a fantastic stable of well-known and the stunning rise of family incomes in characters like Iron Man, the Hulk, countries like China and India mean demand Thor and Captain America and for high-quality entertainment is growing loyal fans who express their pas- fast while barriers to delivering it directly to sion every day in much the same consumers are falling quickly. Marvel’s Captain America: The First Avenger, coming to theaters everywhere, Summer 2011. 5 THE WALT DISNEY 2010 YEAR IN REVIEW We’ve responded by making sure we are providing consumers the entertainment Disney they want on the platforms they use most Channel’s Phineas and on a well-timed and well-priced basis. This Ferb was the is not only our best defense against piracy; No. 1 animated it ensures we are front and center in show among people’s daily lives. No matter where they kids and are in the world, consumers can easily tweens in the U.S. enjoy great Disney entertainment, whether through traditional television, the Internet or mobile devices. No part of our Company has taken more advantage of technological change to offer consumers a great experience than ESPN. Jumping off from its expert coverage of the NFL, the NBA, major league baseball, golf, tennis, soccer, cricket – you name it – ESPN has integrated itself purposefully into the wide variety of digital platforms Monday Night Football celebrated its 40th season and helped drive ESPN ratings to an all-time high.