John Pepper, Jr. Chairman of the Board. Bob Iger President and Chief Executive Officer

Transcription

1 2010 Annual Meeting of Shareholders MARCH 10, 2010 Disney Speakers: John Pepper, Jr. Chairman of the Board Bob Iger President and Chief Executive Officer PRESENTATION John Pepper, Jr. Chairman of the Board, The Walt Disney Company Good morning, ladies and gentlemen. Welcome. It is a great pleasure for the board and all of the management of Walt Disney to be able to welcome you to the 2010 Annual Meeting of The Walt Disney Company. We are delighted to be with you here at this incredible new facility in San Antonio. It is, I understand, the largest Marriott that exists in the world and having tried to find my way here yesterday I am prepared to believe it. You almost need a GPS to get around here. But it s great for you to be here. I know some of you have come from different parts of Texas and the surrounding area and we re grateful that you took the time to do that. And we hope that you enjoy the meeting. As you well know, last year was an extremely challenging one for the global economy. Very few companies were immune from the pressures brought about by high unemployment, tight credit and weak consumer spending. I m very glad to be able to tell you that Disney s management Page 1

2 team, under the leadership of Bob Iger, has done a very good job of steering through these challenges. The team has maintained its strategic focus. It acted decisively, as it should, to limit the shortterm impact of the economic downturn on the Company, but it didn t forget the importance of providing the very best possible experience to every child and every guest, and to go beyond that to invest for the long-term in developing new and exciting entertainment and experiences of the kind that have made Disney so special to so many people around the world. As your Chairman, I ve had the opportunity to get to know more of the Company s employees and cast members during the past year. I visited our Disney operations in Europe and our rapidly developing business in Russia. I also had the great pleasure of enjoying a Disney cruise with my family, which I hope a good number of you have. On every one of these trips, wherever I ve been, at any park or any part of this Company, I ve been most impressed by how the diverse, and above all else, passionate employees, passionate cast members and the difference they are making and are dedicated to making in each and every person they meet. It really is rare to find individuals who care so much about what they are doing. I can also tell you that, having been on several boards during my career, that this board, at this Company, your Company, is top-notch. It has got an unusually good relationship with management and it is of course working to deliver long-term value to you, our shareholders, in what we all recognize as a very fast-moving and highly competitive global economy. We're all especially excited about the nomination of Sheryl Sandberg to the board. Sheryl is the Chief Operating Officer of Facebook, and she is now a new independent director of ours. And you can see a picture of her on the screen. Sheryl is an outstanding executive. She brings to the table great expertise, of course, in the online world; but beyond that, a great deal of international experience and a deep understanding of consumer behavior of all kinds. We are very much looking forward to her joining the board. I d like to go on now to introduce you to the other members of your Board of Directors, with whom I am very proud to serve. Susan Arnold is just retired Vice-Chairman of the Procter & Gamble Company. She was also President of all global business units of Procter & Gamble. John Bryson is Senior Advisor to Kohlberg, Kravis, Robert & Co. and he is the retired Chairman, President and CEO of Edison International, one of the country s leading energy providers. John Chen, is Chairman, CEO and President of Sybase, a software development company. Page 2

3 Judy Estrin is CEO of JLABS, a company focused on furthering innovation in business, government and non-profit organizations. Bob Iger is, of course, our President and CEO. Steve Jobs is CEO of Apple and the former Chairman of Pixar. You ll be seeing some of their films in a minute. Fred Langhammer is Chairman, Global Affairs of Estee Lauder. Aylwin Lewis is President and CEO of Potbelly Sandwich Works. Monica Lozano is Publisher and CEO of La Opinion, that s the largest Spanish-language daily newspaper in the United States. Bob Matschullat is a private equity investor. He is former Vice Chairman and CFO of the Seagram Company. And finally, Orin Smith. Orin is the former President and CEO of Starbucks, which you might have noted has a great presence in this building. I d like to ask the directors who are here if they would stand and please be recognized. Please join me in recognizing them please. {applause} Thank you very much. You re going to be hearing in a few minutes from Bob Iger. But first, we d like to give you a taste of the present and a glimpse into the future of the incredibly wide-ranging and highquality entertainment and experiences created by The Walt Disney Company. You ll enjoy this. [VIDEO] Announcer Ladies and gentlemen, the President and Chief Executive Officer of The Walt Disney Company, Bob Iger. Page 3

4 Bob Iger President and Chief Executive Officer, The Walt Disney Company Thank you very much ladies and gentlemen and good morning. We re delighted to be here in the Texas Hill Country and to share with you some of the exciting things going on at The Walt Disney Company, as you just saw in that video. We are lucky to be in the business of creating great entertainment and memorable experiences for millions of people around the world and incredibly privileged to be stewards of some of the world s best known and most loved brands: Disney, Pixar, ABC, ESPN and now, Marvel. Behind these brands stand our Cast Members and employees, whose job it is to create, to innovate, and to grow our businesses. And I m very proud of what we accomplish, day in and day out around the world. Our people do a remarkable job of exceeding the expectations of our guests and viewers and are always coming up with new and innovative ways to make the consumer experience even better. Last year was a really challenging one for the Company, but in many ways a positive one as well. We took some big steps to strengthen our ability to create great original branded content and experiences and to deliver them to more people in more places. Notably, we acquired Marvel Entertainment, whose portfolio of globally-known stories and characters and talented creative people provide the Company with new opportunities to create great content. Another big step towards future growth came last November when we received the initial goahead from China s government to develop a new theme park in Shanghai. And we look forward to working with our partners to create a magnificent Shanghai park that will help share Disney s stories and characters with millions of people in that part of the world. Last year, we also confronted a severe economic downturn, which badly shook consumer confidence and posed additional challenges to all of our businesses. We maintained our strategy while reducing spending, streamlining parts of our organization and innovating in the way we create, market and distribute our content. Our strategic objectives are clear and consistent. They position the Company as a leader in the creation of high-quality branded content. They use innovative new technology to make that content even better and to make it more accessible to more consumers in more ways, and to make Disney an even more prominent and successful provider of entertainment globally in the future. We are confident this strategy is the right one for delivering the best long-term returns to you, our shareholders. Attention to quality is at the heart of everything we do at Disney and I m pleased that just three days ago, Up won the Academy Award for best animated picture and Page 4

5 also for best original musical score. It s a tribute to Pete Docter and the great creative team at Pixar who ve consistently achieved great artistic and box office success. Audiences also embraced The Princess and the Frog, our other best animated [picture] nominee. And Tiana has already become one of our most popular princesses. Disney s Alice in Wonderland -- which just posted the biggest-ever opening weekend for a 3-D movie -- is another example of how we bring together great storytelling, memorable characters and artistic excellence. The re-imagining of this beloved story has unleashed great creativity across the Company from the movie itself to iphone apps, cool consumer products and really fun video games. As you can imagine, there s incredible excitement about our next animated film -- Toy Story 3 -- as our creative teams have been inspired not only by the return of characters like Woody, Buzz and Jessie, but by their funny and touching new adventures as Andy heads off to college. We re really pleased to offer you an exclusive first look of this highly anticipated film, as our old friends, having left Andy s room, get settled into their new surroundings at a day care center. Enjoy. [VIDEO] Toy Story 3 is opening at a theater near you in 3-D, June 18th. I m sure you re going to enjoy it. We would have shown you more but we have other business to do this morning Although that might have been more fun. It s also a great example of a creative pipeline that s looking very good. But before we get to that, I d like to talk a little about our fiscal 2009 performance, which while it wasn t as strong as we would have liked, it underscored the competitive and economic advantage conferred by our brands, our special bond with consumers, and the talents of our great employees. For the year, our revenues, operating income and earnings per share fell from the record levels set in fiscal 2008, ending a five-year streak of consecutive increases in earnings per share. Net income for the year was down by 25% to $3.3 billion, largely as a result of the weak global economy and a poorly performing slate of live action movies. Despite the earnings decrease and our continued substantial investment in new business opportunities, we paid a cash dividend of 35 cents a share, the same as in It was the 54th consecutive year in which we paid a dividend. Page 5

6 Last year was more a period of adaptation than growth, but it also re-affirmed the importance of investing aggressively for the future in high quality, original branded content and experiences. Ultimately, that s the best way to ensure Disney s prosperity. And with that in mind, we ve committed our capital and creative resources to some very exciting projects at our movie studios, our media networks and at parks and resorts. A high quality Disney, Pixar or Marvel film can be of great value to the Company over many years and we have several coming up, including Prince of Persia, Sorcerer s Apprentice and Iron Man 2, which is the first Marvel film to be released since we completed that acquisition. Here s a look at Iron Man 2. The movie is coming to a theater near you on May 7th. [VIDEO] Tron is our December live-action release and that is looking very promising as well, with a TV series, a video game and other projects under development. And this could deliver real value to the Company over the long run. We are also about to start production on Pirates of the Caribbean: On Stranger Tides, with Johnny Depp, in a really funny and fast moving new adventure that reminds me of the original Pirates film, and that hits theaters in May On the animation side, Tangled, a clever musical re-telling of the Rapunzel tale, debuts this Thanksgiving while the next chapter of Cars, a very strong franchise for the Company, will arrive in theaters in June of In addition to our own projects, we reached an agreement to distribute live action films made by Steven Spielberg s Dreamworks SKG. Turning to Parks and Resorts, we re investing in making the guest experience even more enjoyable, as well as increasing the scope of our attractions and our destinations. Work is underway on significant expansion projects at Hong Kong Disneyland and the Magic Kingdom at Disney World, as well as at our Aulani resort in Hawaii, which will open up late next year. This summer, our expansion and enhancement of Disney s California Adventure will continue with the rollout of an amazing new experience called World of Color, while next January, the Disney Dream, the first of our two new cruise ships, sets sail on its maiden voyage. And that s quite a ship. At our Media Networks, we re focusing on creating content that s universal in appeal and adaptable to different technology platforms. At ABC, fan favorites like the final season of Lost. Page 6

7 Dancing with the Stars, Desperate Housewives, Grey s Anatomy and Modern Family are among the most watched programs anywhere, particularly when you include online viewing, while ABC Family and Disney Channel last year posted record domestic ratings. Disney Channel, which is one of our best brand ambassadors and an important launching pad for new Company talent, also continues to expand internationally. And the Disney Channel has become a huge value generator for the Company. ESPN is extremely important to our bottom line, an incredibly valuable brand and is the number one destination for sports fans in the United States. Last year, ESPN had its highest ratings ever and is continuing to pioneer the use of technology to serve and reach fans in new ways. Last year, ESPN made a major international move with the purchase of Premier League television rights in the UK and at the same time deepened its relationship with US fans by setting up local online portals in cities including Boston, Chicago, Los Angeles and right here in Texas, in Dallas. While the quality of our products and the integrity of our people are paramount, more and more, reputation is an important business driver for the Company. And with that in mind, we know our customers, employees and our shareholders expect us to act in the most responsible ways. We ve put important projects and processes in place to do just that, primarily in the direction of improving the environment. Our goal is to reduce our impact on the environment while also using our great media reach to teach and inspire young and old alike to care more for the planet we share. Through Disney s Friends for Change, kids have made more than 1.5 million pledges to take simple actions on behalf of the environment while over 2,000 classrooms across the U.S. took part last year in Disney s Planet Challenge, an environmental learning competition for 4th to 6th graders. Separately, in just over two months one million guests signed up to take part in the Give a Day, Get a Disney Day program at our parks and resorts, contributing significantly to a rise in community volunteerism across the country and underscoring the true affinity consumers have for The Walt Disney Company. With all of these things going on, we ve also been doing more to communicate with you directly. If you aren t one of the millions of Disney fans on Facebook or You Tube, you are missing out on some great content and information from around the Company. And those of you who attended last year s inaugural Expo of D23, our new official fanclub, know how fantastic it was to get an inside look at some amazing new technologies and projects, and to mingle with Disney talent, and also to enjoy exclusive screenings and events. Page 7

8 We are planning an even bigger and better D23 Expo in Anaheim August 19-21, 2011 and of course we hope to see all of you there. A question that frequently comes up at our annual meetings is: When will you offer a single annual pass for multiple parks? I m happy to announce that starting tomorrow you ll be able to purchase the new Premier Passport at Disneyland Resort and at Walt Disney World. This premium pass covers all of our US parks, has no blackout dates and will be mailed to all of you who currently are dual pass holders. And finally, I wanted to just say a few words about a true Disney legend, Roy Disney, who for fifty six years was an executive of our Company and who also served on our Board of Directors. Right until he passed away, Roy was dedicated to Disney and particularly to the art of animation. He fought valiantly to save feature animation in the 1980s when its future wasn t particularly bright, and his introduction to us of Pixar helped sustain animation as a vital force at the Company. Roy s enthusiasm and passion for Disney were infectious and his appreciation for our past and his keen interest in our future will be sorely missed. Now here with us today in the audience we have Roy's son, Roy Patrick Disney. Roy, if you don t mind standing up and taking a bow? Thank you for being with us, Roy. And now, before I turn the stage back over to John Pepper to conduct the business portion of the meeting, I thought I d provide you one more treat. Every year is a big year for Texas sports. Your enthusiasm for your teams is infectious and our friends at ESPN have put together some of the finest moments in Texas sports from last year. So enjoy this video and thank you, San Antonio. [VIDEO] ### Page 8

9 Forward-Looking Statements: Management believes certain statements in this call may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of These statements are made on the basis of management s views and assumptions regarding future events and business performance as of the time the statements are made. Management does not undertake any obligation to update these statements. Actual results may differ materially from those expressed or implied. Such differences may result from actions taken by the Company, including restructuring or strategic initiatives (including capital investments or asset acquisitions or dispositions), as well as from developments beyond the Company s control, including: - adverse weather conditions or natural disasters; - health concerns; - international, political, or military developments; - technological developments; and - changes in domestic and global economic conditions, competitive conditions and consumer preferences. Such developments may affect travel and leisure businesses generally and may, among other things, affect: - the performance of the Company s theatrical and home entertainment releases; - the advertising market for broadcast and cable television programming; - expenses of providing medical and pension benefits; - demand for our products; and - performance of some or all company businesses either directly or through their impact on those who distribute our products. Additional factors are set forth in the Company s Annual Report on Form 10-K for the year ended October 3, 2009 and in subsequent reports on Form 10-Q under Item 1A, Risk Factors. Reconciliations of non-gaap measures to closest equivalent GAAP measures can be found at Page 9