Financial Review
Business Segment Performance
Theme Parks
In 2006, Disney Theme Parks and Resorts continued to enjoy a powerful and enduring competitive advantage driven by the strength of the Disney brand and character properties. The 50th anniversary celebration, coupled with new guest programs designed to let guests customize their Disney vacation, helped deliver increases in attendance, guest spending and hotel occupancies for the year. All of these positive factors in turn spurred double-digit gains in revenue and operating profit for the year.1 Notably, we also further improved operating margins for our domestic theme parks in 2006.
In 2007, we expect to increase capital spending at our domestic parks as we continue to refresh and update our portfolio of assets in conjunction with the launch of the new The Year of a Million Dreams celebration at our U.S. parks. We expect expenditures at our U.S. parks will remain meaningfully below our $1 billion per year target cap for domestic theme park capital spending.2 This segment also will continue to generate substantial levels of free cash flow, even taking into account the ongoing investments we are making to further enrich the Disney theme park experience. Our research suggests that the “immersion” in the world of Disney afforded by the parks is a vital means of engaging with our audiences around the world and a key driver of affinity for the Disney brand, stories, and characters.
The Walt Disney Company Capital Expenditures
Excluding Euro Disney and Hong Kong Disneyland
1 Accounting rules require The Walt Disney Company to consolidate 100% of Euro Disney and Hong Kong Disneyland’s financial results (Disney’s effective ownership is 51% and 43% respectively). The Parks & Resorts segment recognized gains in revenue and operating profit for the year both including and excluding this consolidation.
2 Our discussion and supporting charts regarding Disney’s capital expenditures exclude the impact of consolidating Euro Disney and Hong Kong Disneyland (discussed in Footnote 1). Measures excluding Euro Disney and Hong Kong Disneyland are not financial measures defined by GAAP. Reconciliations of these non-GAAP financial measures to equivalent GAAP financial measures are available at the end of this Financial Review.
