Financial Review

Free Cash Flow

Over the past several years, we have continued to strengthen our financial performance, while our capital needs have been relatively stable. The combination of these factors helped us deliver over $4.7 billion in free cash flow for fiscal year 2006 – a record for the Company and a reflection of our commitment to maximize the cash efficiency of our operations and our balance sheet.⁴ In 2006, our after tax free cash flow per share was well above our earnings per share, with much of the difference due to our move to decrease our overall investment in live action films, the timing of certain spending and amortization expenses, and timing and improvements in working capital. While we expect to generate substantial cash flow going forward, we don’t expect this disparity to repeat itself in 2007.

Disney’s strong cash flow performance continues to give our Company a tremendous amount of financial flexibility by helping to maintain our solid, A3/A- credit rating and ready access to both debt and equity capital that we can put to work for our shareholders. Over the last several years, we have significantly reduced our net borrowing levels, even as we have returned substantial capital to our shareholders through share repurchase and dividends. We have also taken advantage of the interest rate environment, locking in low fixed rates on over 80% of our net debt portfolio as of the end of fiscal year 2006. We enjoy an attractive average effective yield on our debt portfolio of just under 5%, with a weighted average maturity of more than 9 years.⁵

The Walt Disney Company
Free Cash Flow

The Walt Disney Company
Net Borrowings at Fiscal Year End