Management is committed to running its businesses with a day-to-day focus on creating long-term value for shareholders. The company’s objectives in this regard include not only growth in earnings, but also improved cash flow and return on investment.

Disney pursues this vision as an integral part of the annual plan process by identifying and budgeting for key drivers of shareholder value for each business. Senior management receives monthly reports tracking performance against budget for each business, and evaluates cash flow measures every month and in the company’s annual and five-year plans. The company believes that this focus on the fundamental drivers of shareholder value has improved its ability to deliver future earnings growth and steady improvement in return on invested capital and return on equity.

Overall, since the acquisition of Capital Cities/ABC in 1996, operating cash flow has increased at a compound annual growth rate of 16 percent and free cash flow has grown from roughly negative $800 million in 1996 to positive $1.2 billion in 2002, nearly as much as the company generated in 2001, despite this year’s challenging environment.