2008 Annual Meeting of Shareholders

Transcription

1 2008 Annual Meeting of Shareholders MARCH 6, 2008 Disney Speakers: John Pepper, Jr., Chairman of the Board Bob Iger, President and Chief Executive Officer PRESENTATION Company Announcer Ladies and gentlemen, please welcome the Chairman of the Board of The Walt Disney Company, John Pepper Jr. John Pepper Jr. Chairman of the Board, The Walt Disney Company Good morning. Good morning, ladies and gentlemen, and welcome to the 2008 annual shareholder meeting of The Walt Disney Company. I hope you've all had a chance to see Mickey and Minnie or become reacquainted with them in the back, and Giselle too. It's a real pleasure to be here in Albuquerque, and we thank you for coming out. Page 1

2 I am confident that you're going to be enjoying what you're going to see and hear today. I've been Chairman of the Disney Board now for about a year and it's given me the privilege of getting to know a number of the outstanding people that really take great pride in creating wonderful experiences for our guests, consumers, children, men and women, all around the world. During the course of the past year, I had the treat of visiting Disneyland in Paris. Believe it or not, that is the number one attraction spot in all of Europe, ahead of even the Eiffel Tower. Just as at Walt Disney World and Disneyland, our cast members there have this great commitment to serve our guests and their outstanding attention to detail is just superb, I think, what you'd expect, knowing this company. I've also had the chance to visit ESPN s headquarters up in Bristol, Connecticut. I was amazed there - and you would be too - by the enthusiasm and dedication of the staff, as well as the remarkable state of the art digital control center that exists there for broadcasting, webcasting and publishing thrilling sports and great commentary to satisfy sports fans all around the world. I've also had the pleasure of visiting ABC studios to visit with Charlie Gibson and the first-class ABC news operation that runs there. And most recently, I attended the Broadway smash-hit The Little Mermaid. I absolutely loved it. Beyond the music, which I know many of you have long known and enjoyed, the staging is spectacular, the cast are just terrific and the audience, I can tell you, was totally enthralled. I would highly recommend, if you've got the chance, to take your families there to enjoy this delightful play. Page 2

3 Well, I go through these experiences and other movies that I've seen, and you probably have seen some too Enchanted, National Treasure, Ratatouille - because they remind me of the incredible breadth of amazing entertainment that The Walt Disney Company has created during the past year. It is no wonder that people everywhere share a passion for Disney and a belief that there really is no other company anywhere that can entertain them in quite the same way. During my career, I've had the privilege of being the Chairman and CEO of Procter & Gamble and I've served on a number of other boards. I want to assure you, ladies and gentlemen, that at Disney you do have an outstanding and dedicated group of directors, whose dialogue is characterized by a great deal of openness, healthy debate and mutual respect. The board has developed a very strong relationship with our marvelous chief executive officer, Bob Iger, and his entire management team. I am glad to tell you that Bob and his team have again achieved an extremely impressive creative and financial performance in In what is, as you know, an increasingly challenging environment, they continue to manage and grow this company of yours skillfully. They're doing a good job of staying ahead of technological change and the rising and ever-changing demands of today's consumers. Building real longterm value for shareholders remains the top priority and their quest for making tomorrow better than it is today a never ending quest. As a board, we are profoundly aware of the responsibility that we carry as stewards of your company, and as a worldwide leader in family entertainment and sports media and in stretching the bounds of technology to serve consumers in this new digital universe in which we all live. All of us on the board feel lucky and honored to be in this Page 3

4 position. With that, I'd like to introduce you to the other distinguished members of your Board of Directors, with whom I'm proud to serve. Joining us for her first annual meeting is Susan Arnold. Susan is President of the Global Business Units of the Procter & Gamble Company. As a longtime colleague and admirer of Susan's, I can tell you that her experience connecting with consumers and building a broad portfolio of brands is a perfect fit with Disney's own goals. John Bryson is the Chairman, President and Chief Executive Officer of Edison International, one of the country's major energy providers. John Chen is Chairman, CEO and President of Sybase. He brings great expertise to Disney about technology and doing business throughout the world, especially in Asia. Judy Estrin is the former Chief Technology Officer of Cisco Systems and she is currently CEO of Packet Design Management Company, a company focused on technology innovation. Bob Iger is of course our President and our CEO. Steve Jobs is CEO of Apple, the former Chairman of Pixar, which we are so pleased is now part of our company. Fred Langhammer is retired CEO of Estee Lauder, where he continues to serve as Chairman of Global Affairs. Aylwin Lewis. Aylwin is the former CEO and President of Sears Holding Corporation. Page 4

5 Monica Lozano is Publisher and CEO of La Opinion, the largest Spanish-speaking daily newspaper in the United States. Bob Matschullat is the former Vice Chairman and CFO of Seagram Company. And finally, let me introduce Orin Smith. Orin is former President and CEO of Starbucks Corporation. He helped lead that company to its outstanding growth. I'd like to ask the directors who are with us here today if they would please stand and be recognized. Ladies and gentlemen, the Board of the Walt Disney Company. Thank you. Thank you all very much. It's also a special treat to be able to recognize today in the audience Emeritus Director Roy Disney. Roy happens to have a very special connection to Albuquerque. You see, the Roy E. Disney Center for the Performing Arts, is part of the National Hispanic Cultural Center here. This is the largest Latino cultural center in the United States. Roy, would you please stand? It's good to have you with us, Roy. Roy Disney. We are going to be hearing in just a couple of minutes now from Bob Iger, our CEO. Before that, however, we'd like to give you a taste of the incredibly diverse entertainment produced lately by The Walt Disney Company. As you watch this, I think you'd have the same reaction that I would have had if I weren't on the Disney Board, and that is one of, I didn't know Disney did all that. Let's take a look. [VIDEO] Page 5

6 Company Announcer Ladies and gentlemen, the President and Chief Executive Officer of The Walt Disney Company, Bob Iger. Bob Iger President and Chief Executive Officer, The Walt Disney Company Thank you very much and good morning, ladies and gentlemen. That video makes me really proud of the progress that we've made in implementing our core strategies that we set out three years ago - creating high-quality content and experiences, using technology to expand consumer access, and of course, reaching into promising international markets. Quality content really is at the heart of everything we do at The Walt Disney Company, and I'm really thrilled with the recognition we received just last week at the Academy Awards. Great stories never go out of style, and both Ratatouille and No Country for Old Men, as different as they are, hit the highest possible mark, winning for Best Animated Feature and Best Picture, respectively. It's great to be here in Albuquerque for our annual meeting. For more than a decade, our annual meeting has moved from city to city, giving us a chance to speak with a wide variety of shareholders from across the country. And it doesn't hurt, of course, that Albuquerque is also the mythical setting of East High from High School Musical, which is a great example of the creative and business strength now on display at The Walt Disney Company. But before we talk in more detail about your company's performance in 2007, I want to take this opportunity to acknowledge a very special Albuquerque family. This family Page 6

7 has helped transform through hard work, dedication and sacrifice, an area of town once known as the war zone into a new and better place, called God's Block. And in doing so they risked their home, their financial well-being and even their personal safety. Their act of human kindness and commitment has made an incredible difference, not only to their specific community, but to all of Albuquerque. And in light of this family's sacrifice, ABC's Extreme Makeover: Home Edition, with hundreds of local volunteers, came together to give them a proper thank you by creating an environment where they could continue their mission of helping to change the lives of those most in need. [VIDEO PLAYING] So, ladies and gentlemen, the Martinez family. On behalf of everyone at The Walt Disney Company, we thank you for your outstanding work. The work you're doing is just incredible and we wish you the best in your new home. It looks great. Just as it is a privilege to be here, it is also a privilege to be your Chief Executive Officer and a member of the diverse, experienced and dedicated Board of Directors that's simply one of the finest around. We're also fortunate to have as our Chairman, John Pepper, whose wisdom, integrity and unbridled enthusiasm for Disney we greatly value. I'm delighted to report that 2007 was an exceptional year for Disney, and that we are off to a strong start in Our performance last year illustrates a concept we've been talking about lately, which you just saw some great examples of in that video, and we call it the Disney Difference. Page 7

8 And I'd like to elaborate on it, because I believe it can deliver consistent value to our shareholders, and because it sets us apart from our competition. It starts with the fact that we now have multiple creative engines capable of developing and producing quality content in numerous ways - from Disney Channel, to the Disney Studio and Pixar, to ESPN and ABC, and including our Music Group, our video games division, our Internet group, Publishing, Parks and Resorts and of course, Walt Disney Imagineering. Disney Fairies and Disney Princesses have roots in our studio. Hannah Montana came from The Disney Channel. Pirates of the Caribbean began at our Parks and Resorts. Cars and Toy Story are from Pixar. And the Jonas Brothers were brought in from our Music Group. And these are all examples of Disney-branded creative content emanating from different parts of the Company. Consumers recognize the quality and relevance of our content, and they actively seek it out, and that's something few other entertainment companies in the world can claim. This set of creative engines has given rise to many new franchises that provide us with a running start in any given marketplace, at any given time. Essentially, we start each year with a strong brand and franchise foundation and then build on it with great new stories and characters coming from multiple places. This now includes international markets, where we are investing aggressively to create original, locally relevant, lasting Disney content. Five years ago, we could only count upon two major franchises, and today we have multiple vibrant creative properties which are managed and promoted on an integrated basis across all of our businesses. Page 8

9 Each of these stories have been developed and enriched over time, but they also work well on multiple technological platforms and have appeal across cultural and national boundaries. This same creative dynamic and embrace of new platforms extends to other parts of the Company as well. At ABC, they have been doing a great job creatively, bringing back an impressive 14 primetime shows next year, including favorites like Grey's Anatomy, Desperate Housewives, Lost, Ugly Betty and Dancing With the Stars, as well as new hits, such as Samantha Who? and Pushing Daisies. And at ABC Family, they've carved out a great niche, with outstanding shows like Kyle X/Y, while ABC News consistently engages their audience with quality coverage of breaking news and insightful news analysis. ESPN remains the worldwide leader in sports media, coming up with an ever-changing lineup of exciting games, analysis and stats to captivate the sports fan on any technology platform, whenever and wherever they want it. Just as Disney manages its brand for maximum impact, ESPN really knows how to leverage sports coverage and build franchises like SportsCenter and Monday Night Football, which add incredible shareholder value. I primarily see my role as nurturing our vibrant creative culture and advocating and implementing new technologies that make it easier for the consumer to enjoy the great entertainment experiences that we create and we offer. But the success of our company rests more than anything else on the commitment of our more than 137,000 employees and cast members worldwide, who work tirelessly to create special memories and experiences for our guests and consumers every day. And without them, there would be no Disney Difference. Page 9

10 My other job is to make sure we're living up to the expectations of our shareholders, and I'm pleased to report that our strong performance over the last several years has translated into a stock price increase that has outpaced the broader market. As of February 29th, Disney's total return to shareholders over the last five years was 15.3% per year, well above the 11.5% annual average return in the S&P 500 market index. Underpinning that stock market performance is our record in achieving improvements in earnings per share, return on invested capital and after-tax cash flow. In fiscal 2007, I'm happy to say we delivered solid performance in each of these key measures for the fifth consecutive year, and in fact our success in 2007 was broad-based, with each of our four major business segments contributing to our record earnings. We're pleased with our 2007 results, but as you'd expect, our attention is firmly focused on building on our success, and we're off to a solid start this year, with first quarter earnings per share up 29% when excluding gains on asset sales through the first quarter of the previous year. Growth in the first quarter of 2008 was driven by double-digit increases in operating profit at our Media Networks, Parks and Resorts, and at Consumer Products. Moving forward, we expect to return cash to shareholders through buybacks and dividends. Over the last three and a half years, we have repurchased over $18 billion worth of our shares, while at the same time solidifying our financial position. We have also maintained our consistent track record of returning value to shareholders through annual dividends. And last year's cash dividend of $0.35 per share marks the 52nd year that Disney has paid a dividend and the fourth consecutive year of doubledigit growth in dividends per share. Page 10

11 Now I'd like to talk about some projects we're incredibly excited about. Last year, we acquired Club Penguin, which is a captivating online world for kids and families that helps anchor our strategy for growth in this important and expanding space. At Disney.com, we recently launched a richly detailed online Pirates world that's doing extremely well. And we're expanding the popular virtual universe built around Tinker Bell and her friends to complement the first of our new Disney Fairies movies that's coming out later this fall. And we're developing an exciting online version of Radiator Springs, making the world of Cars interactive. Given the changes in the ways families entertain themselves, we feel that building these safe, entertaining and immersive environments is a huge priority of our company. Expansion is also underway at our Parks and Resorts. The Disneyland Resort will become an even more compelling destination, with the extension and improvement of Disney's California Adventure, kicking off this summer with the opening of a great new attraction called Toy Story Mania! It's also opening in Orlando at Walt Disney World later in the year. The two beautiful new cruise ships now being built will extend a successful business that's become a guest favorite, as well as an important global ambassador for The Walt Disney Company. And we've also unveiled plans to build a new resort in Hawaii, expanding our Disney Vacation Club concept, as well as offering a great Disney family destination in those beautiful islands. Page 11

12 Then, of course, is our upcoming slate of new movies, television shows, video games, resort attractions and stage shows. And we have some sensational entertainment coming your way. There's Disney Channel's Camp Rock, which features the Jonas Brothers, the High School Musical and Hannah Montana theatrical movies and our highly anticipated summer and fall releases, Prince Caspian, which is the second installment of The Chronicles of Narnia, and Bolt, a terrific feature from Walt Disney Animation Studios. So it's a great time to be at The Walt Disney Company. We have enormous creative momentum, inventing new hits and sustaining traditional favorites like never before, using the latest technology to enhance our creativity and to distribute our entertainment in all kinds of exciting and innovative ways. And we've developed what we believe is a real competitive advantage in an ever-more complex and cluttered media world, one that we believe will serve our Company well and our shareholders for decades to come. But it wouldn't be a real Disney annual meeting unless we did something a little bit special for those of you who were gracious enough to attend. And so today, I'm delighted to show you a never-before-seen trailer from Wall. E, which is the latest Pixar film, which will raise computer animation to new heights through great technology, memorable characters, and an original story full of lots of humor and lots of heart. So thank you again for your support. I'll be back later with John Pepper for our question and answer session, and please enjoy this trailer of Wall. E. Thank you. ### Page 12

13 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 September 29, 2007 and in subsequent reports on Form 10-Q under Item 1A, Risk Factors. Reconciliations of non-gaap financial measures to equivalent GAAP financial measures are available on Disney s Investor Relations website. Page 13