In 2004, we generated record levels of cash flow from operations and free cash flow.⁽³⁾ Our free cash flow this year benefited by several hundred million dollars from the timing of our net investment in film and TV product. Due in part to this timing, we anticipate that we will have a significant increase in our net investment in film and television costs in fiscal 2005. Even absent the timing benefit, our cash flow this year would have set a record for our Company. In addition, we achieved this record cash flow even after giving effect to FIN 46R, which has the effect of reducing our reported free cash flow. Looking ahead, we anticipate that we will generate more than sufficient cash flow to invest in growth, maintain a healthy balance sheet, and return cash to our shareholders.

This strong cash flow performance has given the Company a tremendous amount of financial flexibility. During fiscal 2004, we reduced net borrowings by $2.5 billion to $9 billion, excluding amounts for Euro Disney and Hong Kong Disneyland.⁽³⁾ Moreover, we decided to take advantage of a low interest rate environment, locking in rates on a substantial majority of our borrowings. At fiscal year end, approximately 90% of these net borrowings were at fixed rates.

⁽³⁾See reconciliation of non-GAAP financial metrics to equivalent GAAP financial metrics at end of the Financial Review.