As noted in the footnotes, certain measures used in this financial review are not financial measures defined by GAAP. The following tables reconcile these measures to the most comparable financial measures defined by GAAP.
| 2003 | 2004 | 2005 | 2006 | 2007 | |
| Segment operating income | $3,311 | $4,666 | $4,968 | $6,361 | $7,827 |
| Corporate and unallocated shared expenses | (447) | (428) | (543) | (522) | (497) |
| Amortization of intangible assets | (18) | (12) | (11) | (11) | (16) |
| Equity-based compensation plan modification charge |
— | — | — | — | (48) |
| Gains on sales of equity investments and businesses | 16 | — | 26 | 70 | 1,052 |
| Restructuring and impairment (charges) and other credits, net | (16) | (64) | (32) | 18 | – |
| Net interest expense | (793) | (617) | (597) | (592) | (593) |
| Income from continuing operations before income taxes, minority interests and the cumulative effect of accounting changes | $2,053 | $3,545 | $3,811 | $5,324 | $7,725 |
Accounting rules require The Walt Disney Company to consolidate Euro Disney and Hong Kong Disneyland, even though Disney's effective ownership is only 51% and 43%, respectively. We began consolidating Euro Disney and Hong Kong Disneyland at the end of the second quarter of fiscal 2004.
| 2003 | 2004 | 2005 | 2006 | 2007 | |
| Capital expenditures from continuing operations | |||||
| Media Networks | $ 203 | $ 215 | $ 218 | $ 220 | $ 265 |
| Parks and Resorts | |||||
| Domestic | 577 | 719 | 726 | 667 | 816 |
| International | — | 289 | 711 | 248 | 256 |
| Studio Entertainment | 49 | 39 | 37 | 41 | 85 |
| Consumer Products | 44 | 14 | 10 | 16 | 36 |
| Corporate | 176 | 145 | 111 | 100 | 108 |
| 1,049 | 1,421 | 1,813 | 1,292 | 1,566 | |
| Less: Capital expenditures of Euro Disney and Hong Kong Disneyland | — | (289) | (711) | (248) | (256) |
| $1,049 | $1,132 | $1,102 | $1,044 | $1,310 |
The Company defines "Free Cash Flow" as cash provided by continuing operations less investments in parks, resorts and other property. Please see the Company's Consolidated Statements of Cash Flows on page 74 of this Annual Report.
| 2003 | 2004 | 2005 | 2006 | 2007 | |
| Cash provided by continuing operations | $ 2,776 | $ 4,232 | $ 4,139 | $ 5,960 | $ 5,398 |
| Investments in parks, resorts and other property | (1,049) | (1,421) | (1,813) | (1,292) | (1,566) |
| Free cash flow | $ 1,727 | $ 2,811 | $ 2,326 | $ 4,668 | $ 3,832 |
The Company defines "net borrowings" as total borrowings less cash and cash equivalents.
| 2003 | 2004 | 2005 | 2006 | 2007 | |
| Current portion of borrowings | $ 2,457 | $ 4,093 | $ 2,310 | $ 2,682 | $ 3,280 |
| Long-term portion of borrowings | 10,643 | 9,395 | 10,157 | 10,843 | 11,892 |
| Total borrowings | $13,100 | $13,488 | $12,467 | $13,525 | $15,172 |
| Cash and cash equivalents | (1,583) | (2,042) | (1,723) | (2,411) | (3,670) |
| Net borrowings | $11,517 | $11,446 | $10,744 | $11,114 | $11,502 |
| Less: net borrowings of Euro Disney and Hong Kong Disneyland | — | (2,454) | (2,418) | (2,643) | (2,979) |
| Net borrowings excluding Euro Disney and Hong Kong Disneyland | $11,517 | $ 8,992 | $ 8,326 | $8,471 | $ 8,523 |
Forward Looking Statements
Management believes certain statements in the Financial Review may constitute
"forward-looking statements" within the meaning of the Private Securities Litigation
Reform Act of 1995. These statements are made on the basis of management's views
and assumptions regarding future events and business performance as of the time the
statements are made and management does not undertake any obligation to update
these statements. Actual results may differ materially from those expressed or implied.
Such differences may result from actions taken by the Company including restructuring
or strategic initiatives (including capital investments or asset acquisitions or dispositions)
as well as from developments beyond the Company's control, including: adverse
weather conditions or natural disasters; health concerns; international, political, or military
developments; technological developments; and changes in domestic and global
economic conditions, competitive conditions and consumer preferences. Such developments
may affect assumptions regarding the operations of the business of The Walt
Disney Company including, among other things, the performance of the Company's
theatrical and home entertainment releases, the advertising market for broadcast and
cable television programming, expenses of providing medical and pension benefits,
demand for our products and performance of some or all of the Company's businesses
either directly or through their impact on those who distribute our products. Additional
factors that may affect results are set forth in the Company's Annual Report on Form
10-K for the year ended September 29, 2007 under the heading "Item 1-A, Risk
Factors" and subsequent filings.
The peer group index is a custom index consisting of the companies that were formerly included in the Standard & Poor's Entertainment and Leisure Index. Although this index was discontinued in January 2002, the Company believes the companies included in the index continue to provide a representative sample of enterprises in the primary lines of business in which the Company engages. These companies are, in addition to The Walt Disney Company, media enterprises Time Warner Inc., CBS Corporation (formerly Viacom, Inc.) (Class B common stock) and Viacom Inc. (created on December 31, 2005 by the separation of the company formerly known as Viacom, Inc. into two publicly held companies, CBS Corporation and Viacom, Inc.) (Class B common stock); resort and leisure-oriented companies Carnival Corporation, Harrah's Entertainment, Inc., Hilton Hotels Corporation, Marriott International, Inc. and Starwood Hotels and Resorts Worldwide, Inc.; and consumer-oriented businesses Brunswick Corporation, Darden Restaurants, Inc., McDonald's Corporation, Starbucks Corporation, Yum! Brands, Inc. and Wendy's International Inc.
