Tom Staggs, Senior Executive Vice President &
CFO
It's a pleasure to be here with you today to provide a financial overview of your Company.
As shareholders, I'm sure you recognize that the current economic environment has created
challenges for most of corporate America, including Disney.
In the face of a weakened US economy -- and a fourth quarter that was impacted significantly by the events of September 11th and their aftermath -- Disney's pro forma earnings per share were roughly flat in 2001 versus the prior year.
Despite this difficult environment, our business units delivered still solid operating income of $4 billion and as I'll discuss in a moment, we continued to deliver increased levels of cash flow.
More importantly, the challenging environment has done nothing to diminish the strength of Disney's unrivaled brands, characters and entertainment franchises; which, of course, are the assets that have driven your company for so many years and that continue to provide the foundation for future growth.
Given the recent public discussion of corporate accounting policies, I would also like to point out that our balance sheet, liquidity, and financial flexibility all remain strong as well. We strive to make our financial statements both complete and clear and our public disclosure makes plain all material obligations, including contingent ones. In short, we apply the same standards of quality and integrity to our accounting practices that we apply to the protection and development of the Disney brand itself.
We recently announced results for Disney's first fiscal quarter, which reflected the continued softness in the advertising market and the broad-scale disruption in travel patterns as a result of September 11.
As we continue to manage through this difficult period, a key priority for the company is improving the primetime performance of ABC. Although we can't influence the recovery of the ad market, we have taken steps to drive the turnaround of our primetime performance, as Bob Iger will discuss later this morning.
Another primary area of focus has been Consumer Products and we are pleased with the progress this segment is making in its turnaround. Over the past two years our consumer products group has taken a number of significant steps. We've rationalized the total number of licensees. We've moved to a more product-driven approach and we've given greater emphasis to promoting a more cohesive presentation of our products at retail. Disney's consumer products business continues to be the strongest of its kind and we are confident in its ability to contribute to our long-term growth.
To mitigate recent challenges in the travel and tourism industry, our theme parks and resorts' operation has shown great flexibility in managing costs, through actions such as reducing man-hours, closing non-essential food and beverage locations, and instituting a hiring freeze.
Of even greater importance is the fact that our Parks and Resorts continue to meet the high expectations of our guests: during the downturn, our guest satisfaction ratings remain strong and we are capturing even greater market share.
In our experience, people tend not to permanently cancel trips to our Parks. Rather, they defer them, thereby creating pent-up demand for future periods.
As a result, our more cost-efficient Parks and Resorts are particularly well positioned to benefit from an economic recovery. Our near-term view of the marketplace in general is still somewhat uncertain. However, we expect that the worst is behind us, and we are beginning to see signs that the economy is coming back.
The calendar fourth quarter GDP actually posted a gain ... and the Conference Board's Consumer Confidence Index -- which had declined dramatically from September through November -- rebounded sharply in December, jumping from 84.9 to 93.7 and nearly another three points in January to 97.3.
This type of increase is often a leading indicator of an improved business climate, especially at our Parks.
At this point, our expectations for the balance of the year are consistent with what we told you to expect at the time of our last earnings release. However, changes in our theatrical and video release schedule will likely result in shifts in earnings among the remaining three quarters of the year. Media Networks is still tracking about as we expected and our Parks and Resorts segment is showing the gradual signs of improvement in attendance and advance reservation bookings we had hoped it would.