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Disney Store Application For Employment

Disney Store Job Application Form

Target Store Application Form

Disney Store Application For Employment

Disney Store Job Application Form

Target Store Application Form

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Disney Store Application For Employment
Disney Store Job Application Form
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

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FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934

For the Quarter Ended December 31, 2003

Commission File Number 1-11605

Incorporated in Delaware

I.R.S. Employer Identification
No. 95-4545390

500 South Buena Vista Street, Burbank, California 91521

(818) 560-1000

Securities Registered Pursuant to Section 12(b) of the Act:

Name of Exchange
Title of class	on Which Registered
Common Stock, $.01 par value	New York Stock Exchange Pacific Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reportsrequired to be filed by Section 13 or 15(d) of the Securities Exchange Act of1934 during the preceding 12 months (or for such shorter period that theregistrant was required to file such reports), and (2) has been subject to suchfiling requirements for the past 90 days.

YES [X] NO [ ]

Indicate by check mark whether the registrant is an accelerated filer (asdefined in Rule 12b-2 of the Exchange Act).

YES [X] NO [ ]

There were 2,047,595,989 shares of common stock outstanding as of February 6,2004.

PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
CONDENSED CONSOLIDATED BALANCE SHEETS
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Item 3. Quantitative and Qualitative Disclosures about Market Risk
Item 4. Controls and Procedures
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
ITEM 6. Exhibits and Reports on Form 8-K
SIGNATURE
INDEX OF EXHIBITS
EXHIBIT 31(A)
EXHIBIT 31(B)
EXHIBIT 32(A)
EXHIBIT 32(B)

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

THE WALT DISNEY COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(unaudited; in millions, except per share data)

Three Months Ended
December 31,
2003			2002
Revenues		$	8,549	$	7,170
(7,384	)	(6,795	)
Net interest expense		(148	)	(296	)
97	90
Income before income taxes, minority interests and the cumulativeeffect of accounting change		1,114	169
(410	)	(77	)
Minority interests		(16	)	15
Income before the cumulative effect of accounting change		688	107
—	(71	)
$	688	$	36
Earnings per share before the cumulative effect of accounting change:
$	0.33	$	0.05
$	0.34	$	0.05
$	—	$	(0.03	)
Diluted	$	0.33	$	0.02
Basic	$	0.34	$	0.02
Average number of common and common equivalent shares outstanding:
2,099	2,044
2,045	2,042

See Notes to Condensed Consolidated Financial Statements

THE WALT DISNEY COMPANY
CONDENSED CONSOLIDATED BALANCE SHEETS
(in millions, except per share data)

December 31,			September 30,
2003			2003
(unaudited)
ASSETS
Cash and cash equivalents				$	1,462	$	1,583
5,670	4,238
Inventories				660	703
813	568
Deferred income taxes				674	674
797	548
10,076	8,314
Film and television costs					6,146	6,205
1,942	1,849
Parks, resorts and other properties, at cost
19,496	19,499
Accumulated depreciation				(9,002	)	(8,794	)
10,494	10,705
1,157	1,076
Land				919	897
12,570	12,678
2,778	2,786
Goodwill					16,966	16,966
1,042	1,190
$	51,520	$	49,988
Current liabilities
$	5,950	$	5,044
Current portion of borrowings				2,332	2,457
1,273	1,168
9,555	8,669
Borrowings					10,827	10,643
2,744	2,712
Other long term liabilities					3,916	3,745
444	428
Commitments and contingencies (Note 11)
Preferred stock, $.01 par value
—	—
Common stock
12,185	12,154
Authorized - 3.6 billion shares, Issued - 2.1 billion shares
—	—
Authorized - 1.0 billion shares, Issued - none
14,075	13,817
Accumulated other comprehensive loss				(700	)	(653	)
25,560	25,318
(1,526	)	(1,527	)
24,034	23,791
$	51,520	$	49,988

See Notes to Condensed Consolidated Financial Statements

THE WALT DISNEY COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited, in millions)

Three Months Ended
December 31,
2003			2002
OPERATING ACTIVITIES
$	688	$	36
273	261
Deferred income taxes	76	26
(97	)	(90	)
Cash distributions received from equity investees	56	61
—	114
Minority interests	16	(15	)
172	(157	)
Changes in noncurrent assets and liabilities and other	201	46
697	246
Changes in working capital	(1,387	)	(696	)
Cash used by operations	(2	)	(414	)
INVESTING ACTIVITIES
Investments in parks, resorts and other properties	(208	)	(193	)
(3	)	(23	)
Proceeds from sale of investments	—	29
48	—
(163	)	(187	)
Borrowings	—	300
(1,073	)	(943	)
Commercial paper borrowings, net	1,086	1,367
31	18
44	742
(121	)	141
Cash and cash equivalents, beginning of period		1,583	1,239
Cash and cash equivalents, end of period		$	1,462	$	1,380

See Notes to Condensed Consolidated Financial Statements

THE WALT DISNEY COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited; tabular dollars in millions, except per share data)

1. These condensed consolidated financial statements have been prepared inaccordance with accounting principles generally accepted in the United Statesof America (GAAP) for interim financial information and the instructions toRule 10-01 of Regulation S-X. Accordingly, they do not include all of theinformation and footnotes required by GAAP for complete financial statements.In the opinion of management, all adjustments (consisting of normal recurringadjustments) considered necessary for a fair presentation have been reflectedin these condensed consolidated financial statements. Operating results for thethree months ended December 31, 2003 are not necessarily indicative of theresults that may be expected for the year ending September 30, 2004. Certainreclassifications have been made in the fiscal 2003 consolidated financialstatements to conform to the fiscal 2004 presentation. Additionally, thefiscal 2003 financial statements have been adjusted to reflect EITF 00-21Revenue Arrangements with Multiple Deliverables (EITF 00-21). The Companyadopted EITF 00-21 in the fourth quarter of fiscal 2003, effective as of thebeginning of fiscal 2003, and the adoption resulted in a charge for thecumulative effect of the accounting change totaling $71 million, which isreflected in the quarter ended December 31, 2002. For further information,refer to the consolidated financial statements and footnotes thereto includedin the Company’s Annual Report on Form 10-K for the year ended September 30,2003 (the 2003 Annual Report). In December 1999, DVD Financing, Inc. (DFI), asubsidiary of Disney Vacation Development, Inc. and an indirect subsidiary ofthe Company, completed a receivables sale transaction. In connection with thissale, DFI prepares separate financial statements, although its separate assetsand liabilities are also consolidated in these financial statements.

The terms “Company”, “we” and “our” are used in this report to refercollectively to the parent company and the subsidiaries through which ourvarious businesses are actually conducted.

2. The operating segments reported below are the segments of the Company forwhich separate financial information is available and for which segment resultsare evaluated regularly by the Chief Executive Officer in deciding how toallocate resources and in assessing performance.

Three Months
Ended December 31,
2003			2002⁽¹⁾
Media Networks		$	3,114	$	2,944
Parks and Resorts		1,631	1,548
Studio Entertainment
2,949	1,880
Intersegment	15	11
2,964	1,891
Consumer Products
855	798
Intersegment	(15	)	(11	)
840	787
$	8,549	$	7,170
Segment operating income (loss):
$	344	$	(71	)
Parks and Resorts		232	225
458	138
Consumer Products		237	190
$	1,271	$	482

⁽¹⁾ Amounts have been adjusted to reflect the adoption of EITF 00-21

THE WALT DISNEY COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited; tabular dollars in millions, except per share data)

The Company evaluates the performance of its operating segmentsbased on segment operating income. A reconciliation of segment operatingincome to income before income taxes, minority interests and thecumulative effect of accounting change is as follows:

Three Months
Ended December 31,
2003			2002 ⁽¹⁾
Segment operating income	$	1,271	$	482
(103	)	(102	)
Amortization of intangible assets	(3	)	(5	)
(148	)	(296	)
Equity in the income of investees	97	90
Income before income taxes, minorityinterests and the cumulative effect ofaccounting change	$	1,114	$	169

⁽¹⁾ Amounts have been adjusted to reflect the adoption of EITF 00-21

3. FIN 46

In January 2003, the Financial Accounting Standards Board (FASB) issuedFASB Interpretation No. 46, Consolidation of Variable Interest Entities (FIN46) and amended it by issuing FIN 46R in December 2003. Among other things,FIN 46R generally deferred the effective date of FIN 46 for variable interestentities (VIEs) to the quarter ended March 31, 2004. VIEs are entities thatlack sufficient equity to finance their activities without additional financialsupport from other parties or whose equity holders lack adequate decisionmaking ability based on criteria set forth in the interpretation. All VIEs withwhich the Company is involved must be evaluated to determine the primarybeneficiary of the risks and rewards of the VIE. The primary beneficiary isrequired to consolidate the VIE for financial reporting purposes.

The Company has minority equity interests in certain entities, includingEuro Disney S.C.A. (Euro Disney) and Hongkong International Theme Parks Limited(Hong Kong Disneyland), which are currently not consolidated, but under currentrules are accounted for under the equity or cost method of accounting. Basedon the provisions of FIN 46R we will be required to consolidate Euro Disney andHong Kong Disneyland in the second quarter of fiscal 2004 because they are VIEsand we are the primary beneficiary. We have concluded that the rest of ourequity investments do not require consolidation as they either are not VIEs orin the event that they are VIEs, we are not the primary beneficiary. TheCompany also has variable interests in certain other VIEs that will not beconsolidated because the Company is not the primary beneficiary. Thesevariable interests do not involve any material exposure to the Company.

THE WALT DISNEY COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited; tabular dollars in millions, except per share data)

Thefollowing table presents consolidated financial position for theCompany as of September 30, 2003 as if Euro Disney and Hong Kong Disneyland hadbeen consolidated:

As Reported			Euro Disney			Hong Kong Disneyland			Adjustment		As Adjusted
Balance Sheet:
$	1,583	$	103	$	76	$	—	$	1,762
Other current assets		6,731	191	9	(9	)	6,922
Total current assets	8,314	294	85	(9	)	8,684
1,849	—	—	(623	)	1,226
Fixed assets		12,678	2,951	524	—	16,153
2,786	—	—	—	2,786
Goodwill		16,966	—	—	—	16,966
7,395	128	9	—	7,532
$	49,988	$	3,373	$	618	$	(632	)	$	53,347
$	2,457	$	2,528	$	—	$	(388	)	$	4,597
Other current liabilities		6,212	487	61	(85	)	6,675
Total current liabilities	8,669	3,015	61	(473	)	11,272
10,643	—	237	—	10,880
Deferred income taxes		2,712	—	—	—	2,712
3,745	289	—	(71	)	3,963
Minority interest		428	—	—	301	729
23,791	69	320	(389	)	23,791
$	49,988	$	3,373	$	618	$	(632	)	$	53,347

⁽¹⁾	All of Euro Disney’s borrowings are classified as current as they aresubject to acceleration if a long-term solution to Euro Disney’sfinancing needs is not achieved by March 31, 2004.

The impact of consolidating Euro Disney and Hong Kong Disneyland has notchanged significantly as of December 31, 2003.

Management believes that recognition of any additional liabilities as aresult of consolidating Euro Disney and Hong Kong Disneyland would not increasethe level of claims on the general assets of the Company; rather, they wouldrepresent claims against the additional assets recognized by the Company as aresult of consolidating Euro Disney and Hong Kong Disneyland. Conversely, webelieve that any additional assets recognized as a result of consolidating EuroDisney and Hong Kong Disneyland would not represent additional assets of theCompany that could be used to satisfy claims by the creditors of the Company.

FSP 106-1

In January 2004, the Financial Accounting Standards Board issued FASBStaff Position No. FAS 106-1, Accounting and Disclosure Requirements Related tothe Medicare Prescription Drug, Improvement and Modernization Act of 2003 (FSP106-1) in response to a new law regarding prescription drug benefits underMedicare as well as a federal subsidy to sponsors of retiree health carebenefit plans. Currently, SFAS No. 106, Employers’ Accounting forPostretirement Benefits Other Than Pensions, (SFAS No.106) requires thatchanges in relevant law be considered in current measurement of postretirementbenefit costs. The Company is evaluating the impact of the new law and willdefer recognition, as permitted by FSP 106-1, until authoritative guidance isissued.

THE WALT DISNEY COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited; tabular dollars in millions, except per share data)

4. During the first quarter of fiscal 2003, the Company wrote off its aircraftleveraged lease investment with United Airlines, which filed for bankruptcyprotection, resulting in a pre-tax charge of $114 million, or $0.04 per share.Based on the bankruptcy filing, we believe it is unlikely that the Company willrecover this investment. The pre-tax charge of $114 million for the write-offis reported in “Net interest expense” in the Condensed Consolidated Statementsof Income. As of December 31, 2003, our remaining aircraft leveraged leaseinvestment totaled approximately $175 million, consisting of $119 million and$56 million, with Delta Air Lines and FedEx, respectively. We continue tomonitor the recoverability of these investments, particularly the Delta AirLines leases. The inability of Delta Air Lines to make their lease payments, orthe termination of our lease through a bankruptcy proceeding, could result in amaterial charge for the write-down of some or all of our investment and couldaccelerate income tax payments.

5. The Company operates 469 Disney Stores in North America and Europe. Duringfiscal 2003, the Company announced that it was evaluating strategic options forThe Disney Store, including the possible sale of stores in North America andEurope under a licensing arrangement. In connection with this evaluation, theCompany also announced that it expects to close a certain number of underperforming stores in North America.

During the third and fourth quarters of fiscal 2003, the Company recordedcharges totaling $16 million, principally reflecting fixed asset write-downsrelated to the stores it expects to close (and certain related facilities) andthe cost of certain administrative headcount reductions that were made at thattime. Fixed assets associated with the stores identified for closure have beenwritten down to their fair value, determined on the basis of estimated futurediscounted cash flows through the expected date of the closures. These chargeswere reported in “restructuring and impairment charges” in the ConsolidatedStatements of Income.

The Company continues to evaluate its options with respect to the storesin North America and Europe. These options include operating a smaller chainof the best performing stores, the sale of certain stores, or closing theentire chain. The Company’s investment in the entire chain totaled $100million at December 31, 2003. Certain of the options that are beingconsidered, including a possible sale, would result in an impairment of some orall of this amount.

In addition, total future base rent commitments for the Disney Stores inNorth America and Europe totaled approximately $369 million as of December 31,2003, including $45 million related to the stores identified to date forclosure. Should the Company pursue a sale, it is expected that a buyer wouldassume the lease obligation associated with stores that are sold. The Companywill undertake negotiations with lessors to seek favorable lease terminationterms for stores that will be closed, but will likely incur charges related tothe lease terminations in the latter part of fiscal 2004. It is not possible atthis time to determine what amount will ultimately be paid to terminate theseleases.

6. During the three months ended December 31, 2003, the Company increased itscommercial paper borrowings by $1,086 million. Additionally, during thethree-month period, the Company repaid approximately $194 million of U.S.medium-term notes, $579 million of Global Bonds, and $300 million of Europeanmedium-term notes. As of December 31, 2003, total commercial paper borrowingswere $1,086 million.

7. The Company has a 39% interest in Euro Disney S.C.A., which operates theDisneyland Resort Paris. As of December 31, 2003, the Company’s investment inand accounts and notes receivable from Euro Disney totaled $528 million,including $136 million drawn under a line of credit which is due in June 2004.The maximum amount available under the line is €168 million ($208 million atDecember 31, 2003 exchange rates).

THE WALT DISNEY COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited; tabular dollars in millions, except per share data)

The slowdown in the European travel and tourism industry has negativelyaffected Euro Disney’s results of operations and cash flow. In response to thissituation, Euro Disney initiated discussions with its lenders and the Companyto obtain waivers of its fiscal 2003 loan covenants and to obtain supplementalfinancing to address Euro Disney’s cash requirements.

As a result of an agreement entered into on March 28, 2003, the Companydid not charge Euro Disney royalties and management fees for the period fromJanuary 1, 2003 to September 30, 2003. Additionally, the Company agreed toallow Euro Disney to pay its royalties and management fees annually in arrearsfor fiscal 2004, instead of quarterly. As a result of Euro Disney’s financialdifficulties, the Company did not recognize revenues for royalties andmanagement fees earned during the first quarter of fiscal 2004. Until EuroDisney’s long-term financing is resolved, the Company likely will notrecognizeroyalties and management fees. During the first quarter of fiscal 2003, theCompany’s royalty and management fee income from Euro Disney totaled $8million.

On November 3, 2003, Euro Disney obtained waivers from its lenders,effective through March 31, 2004, with respect to covenants for fiscal 2003.The waivers are expected to give Euro Disney, its lenders and the Company timeto find a resolution to Euro Disney’s financial situation. In conjunction withthe bank waivers, the Company has provided a new €45 million ($56 million atDecember 31, 2003 exchange rates) subordinated credit facility, which can bedrawn on through March 31, 2004 only after Euro Disney’s existing line ofcredit with the Company is fully drawn. As of December 31, 2003, Euro Disneyhad borrowed €110 million ($136 million at December 31, 2003 exchange rates)on the existing credit line which has total available credit of €168 million($208 million at December 31, 2003 exchange rates). Repayment of any amountdrawn down on the new credit facility is subject to Euro Disney meeting certainfinancial thresholds or the prior repayment of all of Euro Disney’s existingdebt to its lenders. As of the December 31, 2003, Euro Disney had not borrowedany amounts under the €45 million subordinated credit facility.

Euro Disney is currently engaged in discussions with its agent banks andthe Company to obtain supplemental financing to address its cash requirements.Such financing may include an extension or change in the terms associated withthe Company’s credit line or additional commitments from the Company. If aresolution to Euro Disney’s future financing needs is not obtained by March 31,2004 and assuming the waiver period is not extended, the waivers would expireand Euro Disney’s lenders could accelerate the maturity of Euro Disney’s debt.Should that occur, Euro Disney would be unable to meet all of its debtobligations. The Company believes that Euro Disney will ultimately obtain therequisite loan modifications and additional financing; however, there can be noassurance that this will be the case. Should Euro Disney be unable to obtainloan modifications and/or additional financing, some or all of the Company’s$528 million Euro Disney investment and receivables would likely becomeimpaired. Additionally, it is possible that financing modifications and/or theform of the resolution could result in an impairment of the Company’s EuroDisney investment and receivables.

SeeNote 4 to the Consolidated Financial Statements in the 2003Annual Report and Note 3 to the Condensed Consolidated FinancialStatements for additional information related toEuro Disney’s financial position and results of operations.

THE WALT DISNEY COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited; tabular dollars in millions, except per share data)

Disneyland Park assets, which payment would be approximately $1.4 billion.Disney SNC would then have the right to sell or lease the assets on behalf ofthe lessor to satisfy the remaining debt, with any excess proceeds payable toDisney SNC. Notwithstanding Euro Disney’s financial difficulties, the Companybelieves it is unlikely that Disney SNC would be required to pay the 75% leasetermination payment as the Company currently expects that either (i) EuroDisney will exercise its assumption option in 2006, (ii) one of the alternativeresolutions available under the current contractual relationships among DisneySNC, Euro Disney and the lenders will be implemented or (iii) one of anyadditional alternatives that may be developed in connection with thediscussions referred to above will be implemented.

8. Diluted earnings per share amounts are based upon the weighted averagenumber of common and common equivalent shares outstanding during the period andare calculated using the treasury stock method for stock options and assumingconversion of the Company’s convertible senior notes. For the three monthsended December 31, 2003 and 2002, options for 108 million and 200 millionshares, respectively, were excluded from the diluted earnings per sharecalculation as they were anti-dilutive.

The Company declared a $430 million dividend ($0.21 per share) on December2, 2003 related to fiscal 2003, which was paid on January 6, 2004 toshareholders of record on December 12, 2003. The Company paid a $429 milliondividend ($0.21 per share) during the first quarter of fiscal 2003 related tofiscal 2002.

A reconciliation of net income and weighted average number of common andcommon equivalent shares outstanding for calculating diluted earnings per shareis as follows:

Three Months
Ended December 31,
2003			2002
$	688	$	36
Interest expense on convertible senior notes (net of tax)	5	—
$	693	$	36
Weighted average number of common shares outstanding (basic)	2,045	2,042
9	2
Assumed conversion of convertible senior notes	45	—
Weighted average number of common and common equivalentshares outstanding (diluted)	2,099	2,044

9. Comprehensive income is as follows:

Three Months
Ended December 31,
2003			2002
Net income	$	688	$	36
Market value adjustments for investments and hedges, net of tax	(77	)	(18	)
30	12
$	641	$	30

THE WALT DISNEY COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited; tabular dollars in millions, except per share data)

Accumulated other comprehensive loss is as follows:

December 31, 2003			September 30, 2003
Market value adjustments for investments and hedges, net of tax	$	(185	)	$	(108	)
93	63
Additional minimum pension liability adjustment	(608	)	(608	)
Accumulated other comprehensive loss	$	(700	)	$	(653	)

10. The following table reflects pro forma net income and earnings per sharehad the Company elected to record employee stock option expense based on thefair value methodology:

Three Months Ended
December 31,
2003			2002
Net income:
$	688	$	36
Less stock option expense	(91	)	(111	)
34	41
$	631	$	(34	)
As reported	$	0.33	$	0.02
Pro forma after stock option expense	$	0.30	$	(0.02	)
Basic earnings per share:
$	0.34	$	0.02
$	0.31	$	(0.02	)

These pro forma amounts may not be representative of future disclosuressince the estimated fair value of stock options is amortized to expense overthe vesting period, and additional options may be granted in future years. Thepro forma amounts assume that the Company had been following the fair valueapproach since the beginning of fiscal 1996.

The Company grants restricted stock units to certain executives. Certainrestricted stock units vest upon the achievement of defined performanceconditions, while the remaining restricted stock units generally vest ratablyin two and four years from the grant date. Restricted stock units aregenerally forfeited if the grantee terminates employment prior to vesting.During the three months ended December 31, 2003, the Company granted 32,000restricted stock units and as of December 31, 2003, 3,458,000 restricted stockunits were outstanding. During the quarter, the Company recorded compensationexpense totaling $6.4 million. Unearned stock compensation expense totaledapproximately $41 million as of December 31, 2003.

11. The Company has exposure to various legal and other contingencies arisingfrom the conduct of its business.

Litigation

THE WALT DISNEY COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited; tabular dollars in millions, except per share data)

of Winnie the Pooh merchandising rights. The plaintiff seeks damages for thelicensee’s alleged breaches as well as confirmation of the plaintiff’sinterpretation of the licensing agreement with respect to future activities.The plaintiff also seeks the right to terminate the agreement on the basis ofthe alleged breaches. The Company disputes that the plaintiff is entitled toany damages or other relief of any kind, including termination of the licensingagreement. If each of the plaintiff’s claims were to be confirmed in a finaljudgment, damages as argued by the plaintiff could total as much as severalhundred million dollars and adversely impact the value to the Company of anyfuture exploitation of the licensed rights. However, given the number ofoutstanding issues and the uncertainty of their ultimate disposition,management is unable to predict the magnitude of any potential determination ofthe plaintiff’s claims. On April 24, 2003, the matter was removed to the UnitedStates District Court for the Central District of California, which, on May 19,2003, dismissed certain claims and remanded the matter to the Los AngelesSuperior Court. The Company has appealed from the District Court’s order to theCourt of Appeals for the Ninth Circuit. In the meanwhile, the Superior Courthas assigned the case to a different judge in the Court’s Complex LitigationPilot Program. Pre-trial proceedings continue in the state court, which has seta trial date of January 10, 2005.

Milne and Disney Enterprises, Inc. v. Stephen Slesinger, Inc. OnNovember 5, 2002, Clare Milne, the granddaughter of A. A. Milne, author of theWinnie the Pooh books, and the Company’s subsidiary Disney Enterprises, Inc.filed a complaint against Stephen Slesinger, Inc. (“SSI”) in the United StatesDistrict Court for the Central District of California. On November 4, 2002, Ms.Milne served notices to SSI and the Company’s subsidiary terminating A. A.Milne’s prior grant of rights to Winnie the Pooh, effective November 5, 2004,and granted all of those rights to the Company’s subsidiary. In their lawsuit,Ms. Milne and the Company’s subsidiary seek a declaratory judgment, underUnited States copyright law, that Ms. Milne’s termination notices were valid;that SSI’s rights to Winnie the Pooh in the United States will terminateeffective November 5, 2004; that upon termination of SSI’s rights in the UnitedStates, the 1983 licensing agreement that is the subject of the StephenSlesinger, Inc. v. The Walt Disney Company lawsuit will terminate by operationof law; and that, as of November 5, 2004, SSI will be entitled to no furtherroyalties for uses of Winnie the Pooh. In January 2003, SSI filed (a) an answerdenying the material allegations of the complaint and (b) counterclaims seekinga declaration (i) that Ms. Milne’s grant of rights to Disney Enterprises, Inc.is void and unenforceable and (ii) that Disney Enterprises, Inc. remainsobligated to pay SSI royalties under the 1983 licensing agreement. SSI alsofiled a motion to dismiss the complaint or, in the alternative, for summaryjudgment. On May 8, 2003, the Court ruled that Milne’s termination notices areinvalid and dismissed SSI’s counterclaims as moot. Following further motions,on August 1, 2003, SSI filed an amended answer and counterclaims and athird-party complaint against Harriet Hunt (heir to E. H. Shepard, illustratorof the original Winnie the Pooh stories), who had served a notice oftermination and a grant of rights similar to Ms. Milne’s. By order datedOctober 27, 2003, the Court certified an interlocutory appeal from its May 8order to the Court of Appeals for the Ninth Circuit, but on January 15, 2004,the Court of Appeals denied the Company’s and Milne’s petition for aninterlocutory appeal.

Management believes that it is not currently possible to estimate theimpact, if any, that the ultimate resolution of these matters will have on theCompany’s results of operations, financial position or cash flows.

The Company, together with, in some instances, certain of its directorsand officers, is a defendant or co-defendant in various other legal actionsinvolving copyright, breach of contract and various other claims incident tothe conduct of its businesses. Management does not expect the Company to sufferany material liability by reason of such actions.

Contractual Guarantees

THE WALT DISNEY COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited; tabular dollars in millions, except per share data)

improvements and the water and sewer system in the mixed-use, residentialcommunity of Celebration, Florida. As of December 31, 2003, the remaining debtservice obligation guaranteed by the Company was $100 million, of which $61million was principal. The Company is responsible to satisfy any shortfalls indebt service payments, debt service and maintenance reserve funds, and toensure compliance with specified rate covenants. To the extent that the Companyhas to fund payments under its guarantees, the Districts have an obligation toreimburse the Company from District revenues.

The Company has also guaranteed certain bond issuances by the AnaheimPublic Authority for a total of $407 million, of which interest payments total$296 million over the 40-year life of the bond. The bond proceeds were used bythe City of Anaheim to finance construction of infrastructure and a publicparking facility adjacent to the Disneyland Resort. Revenues from sales,occupancy and property taxes from the Disneyland Resort and non-Disney hotelsare used by the City of Anaheim to repay the bonds. In the event of a debtservice shortfall, the Company will be responsible to fund the shortfall. Tothe extent that subsequent tax revenues exceed the debt service payments insubsequent periods, the Company would be reimbursed for any previously fundedshortfalls.

To date, tax revenues have exceeded the debt service payments for both theCelebration and Anaheim bonds.

The Company has guaranteed payment of certain facility and equipmentleases on behalf of a third-party service provider that supplies the Companywith broadcasting transmission, post production, studio and administrativeservices in the U.K. If the third-party service provider defaults on theleases, the Company would be responsible for the remaining obligation unlessthe Company finds another service provider to take over the leases. As ofDecember 31, 2003, the remaining facility and equipment lease obligation was$82 million. These leases expire in March 2014.

12. As a matter of course, the Company is regularly audited by federal, stateand foreign tax authorities. From time to time, these audits result in proposedassessments. The Internal Revenue Service (IRS) has completed its examinationof the Company’s federal income tax returns for 1993 through 1995 and hasproposed assessments that challenge certain of the Company’s tax positions. TheCompany has negotiated the settlement of a number of these proposedassessments, and is pursuing an administrative appeal before the IRS withregard to the remainder. If the remaining proposed assessments are upheldthrough the administrative and legal process, they could have a material impacton the Company’s earnings and cash flow. However, the Company believes that itstax positions comply with applicable tax law and intends to defend itspositions vigorously. The Company believes it has adequately provided for anyreasonably foreseeable outcome related to these matters. Accordingly, althoughtheir ultimate resolution may require additional cash tax payments, the Companydoes not anticipate any material earnings impact from these matters.

THE WALT DISNEY COMPANY
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

SEASONALITY

The Company’s businesses are subject to the effects of seasonality.Consequently, the operating results for the three months ended December 31,2003 for each business segment, and for the Company as a whole, are notnecessarily indicative of results to be expected for the full year.

Media Networks revenues are influenced by advertiser demand and theseasonal nature of programming, and generally peak in the spring and fall.

Studio Entertainment revenues fluctuate based upon the timing oftheatrical motion picture, home video (VHS and DVD) and television releases.Release dates for theatrical, home video and television products are determinedby several factors, including timing of vacation and holiday periods andcompetition in the market.

Parks and Resorts revenues fluctuate with changes in theme park attendanceand resort occupancy resulting from the seasonal nature of vacation travel.Peak attendance and resort occupancy generally occur during the summer months,when school vacations occur and during early-winter and spring holiday periods.

Consumer Products revenues are influenced by seasonal consumer purchasingbehavior and the timing of animated theatrical releases.

RESULTS OF OPERATIONS

Overview

Income before the cumulative effect of accounting change for the quarterwas $688 million, which was $581 million higher than the prior-year quarter.Diluted earnings per share before the cumulative effect of accounting changewas $0.33, which was $0.28 higher than the prior-year quarter. Results for theprior-year quarter included a write-off of an aircraft leveraged leaseinvestment with United Airlines ($114 million pre-tax or $0.04 per share).Additionally, we made an accounting change effective as of the beginning offiscal 2003 to adopt a new accounting rule for multiple element revenueaccounting (EITF 00-21, see Note 2 to the Consolidated Financial Statements inthe 2003 Annual Report), which impacted the timing of revenue recognitionrelated to NFL football programming at ESPN. This change resulted in acumulative effect charge totaling $71 million. Diluted earnings per shareincluding the effect of this accounting change were $0.02 for the prior-yearquarter.

Excluding the aforementioned items, the increase in net income for thecurrent quarter was primarily due to increased segment operating incomeprimarily at our Media Networks and Studio Entertainment segments, increasedequity in the income of cable investees and decreased net interest expense.Changes in segment operating income are discussed in detail in the separatesections below.

Net Interest Expense

Net interest expense is detailed below:

Three Months
Ended December 31,
(unaudited, in millions)	2003			2002
Interest expense	$	(148	)	$	(187	)
—	(109	)
$	(148	)	$	(296	)

THE WALT DISNEY COMPANY
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS — (continued)

The $39 million decrease in interest expense is due to lower average debtbalances and interest rates. Interest income and investment losses in theprior-year quarter included the $114 million write-off of our leveraged leaseinvestment with United Airlines referred to above.

Equity in the Income of Investees

The increase in equity in the income of investees reflected higheradvertising and affiliate revenues at A&E, and lower advertising expenses atLifetime. These increases were partially offset by declines at Euro Disneydriven by higher costs.

Effective Income Tax Rate

The effective income tax rate decreased from 45.6% for the quarter endedDecember 31, 2002 to 36.8% for the quarter ended December 31, 2003. The incometax provision for the prior-year quarter included a non-recurring tax impactthat resulted from the write-off of the Company’s investment in the UnitedAirlines airplane leveraged lease.

Pension and Benefit Costs

Increasing pension and postretirement medical benefit plan costs haveaffected results in all of our segments, with the majority of these costs beingborne by the Parks and Resorts segment. Pension and postretirement medicalcosts will increase in fiscal 2004 to $375 million from $131 million in fiscal2003. The increase is due primarily to a decrease in the discount rateassumption and, to a lesser extent, a reduction in the expected return on planassets. For fiscal 2004 expense, the discount rate assumption is decreasingfrom 7.20% to 5.85%, reflecting the decline in prevailing market interestrates. Our long-term expected rate of return on plan assets has been reducedfrom 8.50% for fiscal 2003 to 7.50% for fiscal 2004.

Cash contributions to the pension plans are expected to increase in fiscal2004 to approximately $130 million from $25 million in fiscal 2003.

Business Segment Results

Three Months Ended December 31,
(unaudited, in millions)		2003			2002⁽¹⁾		% Change
Media Networks	$	3,114	$	2,944	6	%
1,631	1,548	5	%
Studio Entertainment	2,964	1,891	57	%
840	787	7	%
$	8,549	$	7,170	19	%
Media Networks	$	344	$	(71	)	n/m
232	225	3	%
Studio Entertainment	458	138	232	%
237	190	25	%
$	1,271	$	482	164	%

⁽¹⁾	Amounts have been adjusted to reflect the adoption of EITF 00-21

The Company evaluates the performance of its operating segments based onsegment operating income. The following table reconciles segment operatingincome to income before income taxes, minority interests and the cumulativeeffect of accounting change.

THE WALT DISNEY COMPANY
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS — (continued)

Three Months Ended December 31,
(unaudited, in millions)	2003			2002⁽¹⁾			% Change
$	1,271	$	482	164	%
Corporate and unallocated shared expenses	(103	)	(102	)	(1	)%
(3	)	(5	)	40	%
Net interest expense	(148	)	(296	)	50	%
97	90	8	%
Income before income taxes, minorityinterests and the cumulative effect ofaccounting change	$	1,114	$	169	n/m

⁽¹⁾ Amounts have been adjusted to reflect the adoption of EITF 00-21

Depreciation expense is as follows:

Three Months Ended
December 31,
(unaudited, in millions)		2003		2002
Depreciation expense:
$	42	$	42
Parks and Resorts	177	170
4	9
Consumer Products	13	15
Segment depreciation expense	236	236
37	25
$	273	$	261

Segment depreciation expense is included in segment operating income andcorporate depreciation expense is included in corporate and unallocated sharedexpenses.

Business Segment Results

Media Networks

The following table provides supplemental revenue and segment operatingincome detail for the Media Networks segment:

Three Months Ended December 31,
(unaudited, in millions)			2003			2002⁽¹⁾	% Change
Broadcasting	$	1,554	$	1,564	(1	)%
1,560	1,380	13	%
$	3,114	$	2,944	6	%
Broadcasting	$	148	$	38	289	%
196	(109	)	280	%
$	344	$	(71	)	n/m

⁽¹⁾ Amounts have been adjusted to reflect the adoption of EITF 00-21

Revenues

Media Networks revenues increased 6%, or $170 million, to $3.1 billion.The increase reflected an increase of 13%, or $180 million at the

THE WALT DISNEY COMPANY
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS — (continued)

CableNetworks, partially offset by a decrease of 1% or $10 million at Broadcasting.

Decreased Broadcasting revenues were driven primarily by a decrease of $76million at the television production and distribution businesses, partiallyoffset by an increase of $42 million at the ABC Television Network, andincreases at the radio networks and stations, the Company’s owned and operatedtelevision stations and the Internet Group totaling $24 million. The decreasein television production and distribution revenues was primarily due to lowersyndication revenue and license fees. The increases at the television andradio network and stations were primarily driven by higher advertising revenuesreflecting higher rates due to an improved advertising marketplace, partiallyoffset by declines at the ABC Television Network due to fewer NFL broadcasts,and at the owned television stations due to the absence of politicaladvertising which was included in the prior-year quarter.

Increased Cable Networks revenues were driven by increases of $136 millionin revenues from cable and satellite operators and $47 million in advertisingrevenues. Revenues from cable and satellite operators are largely derived fromfees charged on a per subscriber basis, and the increases in the currentquarter reflected both contractual rate adjustments and subscriber growth.

The Company’s contractual arrangements with cable and satellite operatorsare renewed or renegotiated from time to time in the ordinary course ofbusiness. A significant number of these arrangements will be up for renewal inthe next 12 months. Consolidation in the cable and satellite distributionindustry and other factors may adversely affect the Company’s ability to obtainand maintain contractual terms for the distribution of its various cable andsatellite programming services that are as favorable as those currently inplace. If this were to occur, revenues from Cable Networks could increase atslower rates than in the past or could be stable or decline.

Costs and Expenses

Costs and expenses, which consist primarily of programming rights costs,production costs, distribution and selling expenses and labor costs, decreased8%, or $245 million, to $2.8 billion. The decrease was primarily due to lowerprogramming costs partially offset by higher pension and employee benefit costsand start up costs for the launch of the Company’s MovieBeam venture which is anew video on demand service.

Lower programming costs at Broadcasting were driven by lower NFLprogramming costs, including the impact of fewer NFL broadcasts in the currentquarter, less expensive prime time series and lower program amortization at thetelevision production and distribution businesses. Lower programming costs atthe Cable Networks were primarily due to lower cost amortization for the NFLcontract due to commencing the three year option period as described under“Sports Programming Costs,” below.

Segment Operating Income

Segment operating income increased by $415 million to $344 million for thequarter from an operating loss of $71 million in the prior-year quarter. Theincrease reflected increases of $305 million at the Cable Networks and $110million at Broadcasting. Growth at the Cable Networks reflected higheraffiliate revenue from cable and satellite operators, lower cost amortizationfor the NFL contract, as well as higher advertising revenue. Increased segmentoperating income at Broadcasting reflected lower programming costs and higheradvertising revenues.

Sports Programming Costs

The initial five-year period of the Company’s contract to televise NFLgames was non-cancelable and ended with the telecast of the 2003 Pro Bowl. InFebruary 2003, the NFL did not exercise its renegotiation option and as aresult, the Company’s NFL contract was extended for an additional three yearsending with the telecast of the 2006 Pro Bowl. The aggregate fee for thethree-year period will be $3.7 billion. ESPN recognized the costs of theinitial five-year term of the contract at levels that increased each yearcommensurate with expected increases in NFL revenues. As a result, ESPNexperienced its highest level of NFL programming costs during fiscal 2003. Theimplementation of the contract extension resulted in a $165 million reductionin NFL programming costs for the quarter ended December 31, 2003. For the fullyear, we expect NFL costs to be approximately $170 million lower

THE WALT DISNEY COMPANY
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS — (continued)

than in fiscal 2003, and such costs are expected to be relatively level overthe remaining two years of the contract extension.

Cost recognition for NFL programming at the ABC Television Network infiscal 2004 is expected to decrease by $300 million compared to fiscal 2003.The decrease at the ABC Television Network is primarily due to the absence ofthe Super Bowl, which was aired by the ABC Television Network in fiscal 2003and will be absent in fiscal 2004, as well as fewer games in fiscal 2004. Theabsence of the Super Bowl and the lower number of games at the ABC TelevisionNetwork will also result in lower revenue from NFL broadcasts in fiscal 2004.

Due to the payment terms in the NFL contract, cash payments under thecontract in fiscal 2004 will total $1.2 billion as compared to $1.3 billion infiscal 2003.

The Company has various contractual commitments for the purchase oftelevision rights for sports and other programming, including the NFL, NBA,MLB, NHL and various college football conference and bowl games. The costs ofthese contracts have increased significantly in recent years. We enter intothese contractual commitments with the expectation that, over the life of thecontracts, revenue from advertising during the programming and affiliate feeswill exceed the costs of the programming. While contract costs may initiallyexceed incremental revenues and negatively impact operating income, it is ourexpectation that the combined value to our sport networks from all of thesecontracts will result in long-term benefits. The actual impact of thesecontracts on the Company’s results over the term of the contracts is dependentupon a number of factors, including the strength of advertising markets,effectiveness of marketing efforts and the size of viewer audiences.

Parks and Resorts

Revenues

Revenues at Parks and Resorts increased 5%, or $83 million, to $1.6billion. The increase was driven primarily by increases of $78 million at theWalt Disney World Resort and $16 million at the Disneyland Resort. Theseincreases were partially offset by a $7 million decrease in revenues from EuroDisney reflecting the cessation of royalties and management fees commencingwith the second quarter of fiscal 2003 due to Euro Disney’s financialdifficulties. The Company likely will not recognize revenues from royaltiesand management fees until Euro Disney’s financing needs are resolved.

At the Walt Disney World Resort, increased revenues were primarily drivenby higher theme park attendance and occupied room nights, partially offset bylower guest spending. Higher theme park attendance and occupied room nightswere primarily driven by increased domestic and local guest visitation,reflecting promotional programs and the opening of the “Mission: Space”attraction at Epcot during the quarter. Guest spending decreases reflected theimpact of promotional programs offered during the quarter.

At the Disneyland Resort, increased revenues reflected higher theme parkattendance, primarily at Disney’s California Adventure, occupied room nights,and guest spending at the theme parks.

Across our domestic theme parks, attendance increased 7% and per capitaguest spending was flat during the first quarter of fiscal 2004 compared to thefirst quarter of the prior year. Hotel occupancy was 80% on 2,148,024available room nights for the first quarter of fiscal 2004 compared to 81% on1,954,083 available room nights for the first quarter of fiscal 2003. Perroom guest spending was $200 and $204 during the first quarters of fiscal 2004and 2003, respectively. The increase in available room nights for the firstquarter of fiscal 2004 reflected the opening of Disney’s Pop Century Resort andthe completion of room refurbishment at certain other Walt Disney World Resortproperties.

THE WALT DISNEY COMPANY
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS — (continued)

Costs and expenses

Costs and expenses, which consist principally of labor, cost ofmerchandise, food and beverages sold, depreciation, repairs and maintenance,entertainment, marketing and sales expense, increased 6%, or $76 millioncompared to the prior-year quarter. The increase in costs and expenses wasprimarily due to employee benefit costs and volume-related operating costs atboth domestic resorts, and higher spending on marketing and information systemsat the Walt Disney World Resort. Higher marketing costs at the Walt DisneyWorld Resort were driven by the opening of “Mission: Space” at Epcot andDisney’s Pop Century Resort.

Higher employee benefits costs at both Walt Disney World and Disneylandreflected increased pension and post-retirement medical costs, which grew by$34 million across the entire segment. We expect that these costs willincrease by an additional $103 million versus 2003 over the remainder of fiscal2004.

Segment operating income

Segment operating income increased 3%, or $7 million, to $232 million, asincreased revenues at the Walt Disney World Resort and The Disneyland Resortwere offset by higher costs and expenses at both domestic resorts, anddecreased revenues from Euro Disney.

Studio Entertainment

Revenues

Revenues increased 57%, or $1.1 billion, to $3.0 billion. The increase wasdriven by an increase of $986 million in worldwide home entertainment and $137million in international theatrical motion picture distribution.

Higher worldwide home entertainment revenues reflected the successfulreleases of Disney/Pixar’s Finding Nemo and of Pirates of the Caribbean, TheLion King, Santa Clause 2 and Freaky Friday compared to the prior-year quarter,which included Lilo & Stitch and Beauty & the Beast. International theatricalmotion picture distribution increases reflected the strong performance ofFinding Nemo compared to Signs in the prior-year quarter.

In January 2004, Pixar announced that it will not renew its currentfeature film agreement with the Company. Under this agreement and a prioragreement, the Company and Pixar have produced five computer animated featurefilms and two more are in production (The Incredibles, due to be released infiscal 2005 and Cars, due to be released in fiscal 2006). The Company retainsthe right to determine whether sequels of these seven films will be made, andPixar may elect to co-finance and produce any sequel or to receive a passivepayment with the Company producing the sequel. In any event, the Company hasexclusive distribution and exploitation rights to all of these products inperpetuity.

Costs and Expenses

Costs and expenses, which consist primarily of production costamortization, distribution and selling expenses, product costs andparticipation costs, increased 43%, or $753 million. Higher costs and expensesreflected increases in worldwide home entertainment and internationaltheatrical motion picture distribution and higher production write-offs.Higher costs in worldwide home entertainment reflected increased distributioncosts for current quarter titles, including Finding Nemo, The Lion King andPirates of the Caribbean, and higher participation costs for Finding Nemo andPirates of the Caribbean. Cost increases in international theatrical motionpicture distribution reflected higher distribution and participation costs forcurrent quarter titles, which included Finding Nemo.

During January 2004, the Company announced that it would close its featureanimation facility located in Orlando, Florida. We expect that we will incurcharges in the second quarter totaling approximately $15 million primarily forseverance costs. The closure was part of the consolidation of featureanimation operations in Burbank.

THE WALT DISNEY COMPANY
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS — (continued)

Segment Operating Income

Segment operating income increased from $138 million to $458 million, dueto growth in worldwide home entertainment, partially offset by higherproduction write-offs. Higher revenues in international theatrical motionpicture distribution were offset by higher costs and expenses during thecurrent quarter.

Consumer Products

Revenues

Revenues increased 7%, or $53 million, to $840 million, reflectingincreases of $27 million in publishing and $23 million in merchandiselicensing.

Higher publishing revenues were driven by increases in Europe, reflectingthe strong performance of the Topolino, W.i.t.c.h. and Art Attack titles. Theincrease in merchandise licensing primarily reflected higher sales volume fromfood and beverage and stationery products, primarily in Japan and Europe, andstrong performance from direct-to-retail apparel licensees in Europe. Revenuesat the Disney Store were flat to the prior year as increases at continuingstores, due to strong comparative store sales, were offset by decreases due tothe closure of approximately 60 stores.

Costs and Expenses

Costs and expenses, which consist primarily of labor, product costs,(including product development costs) distribution and selling expenses andleasehold and occupancy expenses, increased 1% or $6 million. The increase wasprimarily driven by volume increases at publishing and higher expenses atmerchandise licensing. These increases were partially offset by lower costs atthe Disney Store due to cost reduction measures as well as the closure ofunprofitable stores.

Segment Operating Income

Segment operating income increased 25%, or $47 million, to $237 million,primarily driven by increases at the Disney Store from higher comparative storesales and cost decreases along with strong performance in merchandise licensingand publishing.

Disney Stores

The Company operates 469 Disney Stores in North America and Europe. Duringfiscal 2003, the Company announced that it was evaluating strategic options forThe Disney Store, including the possible sale of stores in North America andEurope under a licensing arrangement. In connection with this evaluation, theCompany also announced that it expects to close a certain number of underperforming stores in North America.

THE WALT DISNEY COMPANY
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS – (continued)

In addition, total future base rent commitments for the Disney Stores inNorth America and Europe totaled approximately $369 million as of December 31,2003, including $45 million related to the stores identified for closure.Should the Company pursue a sale, it is expected that a buyer would assume thelease obligation associated with stores that are sold. The Company willundertake negotiations with lessors to seek favorable lease termination termsfor stores that will be closed, but will likely incur charges related to thelease terminations in the latter part of fiscal 2004. It is not possible atthis time to determine what amount will ultimately be paid to terminate theseleases.

The following table provides supplemental revenues and operating incomedetail for The Disney Store in North America and Europe, which includes theresults of stores we expect to close:

THE WALT DISNEY COMPANY
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS – (continued)

STOCK OPTION ACCOUNTING

The following table reflects pro forma net income and earnings per sharehad the Company elected to record stock option expense based on the fair valuemethodology:

Three Months Ended
December 31,
(unaudited, in millions, except per share data		2003			2002
As reported	$	688	$	36
(91	)	(111	)
Tax effect	34	41
Pro forma after stock option expense	$	631	$	(34	)
Diluted earnings per share:
$	0.33	$	0.02
Pro forma after stock option expense	$	0.30	$	(0.02	)

These pro forma amounts may not be representative of future disclosuressince the estimated fair value of stock options is amortized to expense overthe vesting period and additional options may be granted in future years. Thepro forma amounts assume that the Company had been following the fair valueapproach since the beginning of fiscal 1996.

Fully diluted shares outstanding and diluted earnings per share includethe effect of in-the-money stock options calculated based on the average shareprice for the period and assumes conversion of the convertible senior notes.The dilution from employee options increases as the Company’s share priceincreases, as shown below:

Percentage of
Average	Total		Incremental			Average		Hypothetical
Disney	In-the-Money		Diluted Shares			Shares		Q1 2004
Share Price	Options		(1)			Outstanding		EPS Impact (3)
$	111 million		—	(2)	—	$	0.000
25.00	117 million		7 million	0.33	%	(0.001	)
144 million		18 million	0.86	%	(0.003	)
40.00	209 million		42 million	2.00	%	(0.007	)
216 million		60 million	2.86	%	(0.009	)

(1)	Represents the incremental impact on fully diluted shares outstandingassuming the average share prices indicated, using the treasury stockmethod. Under the treasury stock method, the tax effected proceeds thatwould be received from the exercise of all in-the-money options areassumed to be used to repurchase shares.
(2)	Fully diluted shares outstanding for the quarter ended December 31,2003 total 2,099 million and include the dilutive impact of in-the-moneyoptions at the average share price for the period of $22.35 and assumesconversion of the convertible senior notes. At the average share priceof $22.35, the dilutive impact of in-the-money options was 9 millionshares for the quarter.
(3)	Based upon Q1 2004 earnings of $688 million, or $0.33 per share.

THE WALT DISNEY COMPANY
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS – (continued)

FINANCIAL CONDITION

Cash and cash equivalents decreased by $121 million during the threemonths ended December 31, 2003. The change in cash and cash equivalents is asfollows:

Three Months Ended
December 31,
(unaudited, in millions)	2003			2002
Cash used by operations	$	(2	)	$	(414	)
(163	)	(187	)
Cash provided by financing activities	44	742
(Decrease) Increase in cash and cash equivalents	$	(121	)	$	141

Operating Activities

For the three months ended December 31, 2003, cash flow from operationsimproved by $412 million from a use of $414 million in the prior year to a useof $2 million in the current period, reflecting increased net income adjustedfor non cash impacts and lower film and television production spending,partially offset by negative working capital impacts. Cash flow for thequarter reflected our seasonal trend for the first quarter, which is typicallycash flow negative. Negative working capital impacts were primarily due toincreases in accounts receivable due to significant increases in homeentertainment revenues, which will be collected in the second quarter of thecurrent year. The increases in receivables were partially offset by relatedincreases in accrued liabilities for home entertainment participation anddistribution costs.

Investing Activities

During the three months ended December 31, 2003, the Company invested $208million in parks, resorts and other properties. Investments in parks, resortsand other properties by segment are as follows:

Three Months Ended
December 31,
(unaudited, in millions)	2003			2002
Media Networks	$	27	$	28
133	125
Studio Entertainment	9	7
3	7
Corporate and unallocated shared expenditures	36	26
$	208	$	193

Media Networks’ capital expenditures consist principally of investments infacilities and equipment. Parks and Resorts’ capital expenditures areprimarily for new rides and attractions, capital improvements and equipment.Corporate’s capital expenditures are primarily for information technologyhardware and software.

THE WALT DISNEY COMPANY
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS – (continued)

Financing Activities

During the three months ended December 31, 2003, the Company’s borrowingactivity was as follows:

(unaudited, in millions)	Additions			Payments			Total
Commercial paper borrowings (net change)	$	1,086	$	—	$	1,086
US medium term notes and other USD denominated debt	—	(773	)	(773	)
—	(300	)	(300	)
Other	9	—	9
$	1,095	$	(1,073	)	$	22

During the three months ended December 31, 2003, the Company increased itscommercial paper borrowings by approximately $1,086 million. Additionally,during the three-month period, the Company repaid approximately $194 million ofmatured U.S. medium-term notes, $579 million of matured Global Bonds, and $300million of matured European medium-term notes. As of December 31, 2003, totalcommercial paper borrowings were approximately $1,086 million and netcommercial paper borrowings (total commercial paper less money marketsecurities held by the Company) was $650 million. The Company’s commercialpaper program is supported by the following bank facilities:

Committed			Capacity			Unused
(unaudited, in millions)		Capacity			Used			Capacity
Bank facilities expiring 2004⁽¹⁾⁽²⁾		$	2,250	$	195	$	2,055
2,250	—	2,250
$	4,500	$	195	$	4,305

⁽¹⁾	These bank facilities allow for borrowings at LIBOR-based rates plus aspread, depending upon the Company’s public debt rating. As of December31, 2003, the Company had not borrowed under these bank facilities.
⁽²⁾	The Company also has the ability to issue up to $350 million of lettersof credit under this facility, which if utilized, reduces availableborrowing. As of December 31, 2003, $195 million of letters of credit hadbeen issued under this facility.

The Company has filed a U.S. shelf registration statement which allows theCompany to borrow up to $7.5 billion of which $1.8 billion was available atDecember 31, 2003. The Company also has a Euro medium-term note program, whichpermits issuance of up to approximately $4 billion of additional debtinstruments, of which $2.8 billion is available at December 31, 2003.

We believe that the Company’s financial condition is strong and that itscash balances, other liquid assets, operating cash flows, access to debt andequity capital markets and borrowing capacity, taken together, provide adequateresources to fund ongoing operating requirements and future capitalexpenditures related to the expansion of existing businesses and development ofnew projects. However, the Company’s operating cash flow and access to thecapital markets can be impacted by macroeconomic factors outside of itscontrol. In addition to macroeconomic factors, the Company’s borrowing costscan be impacted by short and long-term debt ratings assigned by independentrating agencies, which are based, in significant part, on the Company’sperformance as measured by certain credit measures such as interest coverageand leverage ratios. On December 3, 2003, Standard & Poor’s removed theCompany’s long-term credit rating from Credit Watch with negative implicationsand affirmed its existing BBB+ with a negative outlook. At the same time,Standard & Poor’s affirmed its A-2 short-

THE WALT DISNEY COMPANY
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS – (continued)

term corporate credit rating on the Company. Moody’s Investors Service ratesthe Company’s long-term debt as Baa1 and commercial paper as P2 and hasindicated that our outlook is stable. The Company’s bank facilities containonly one financial covenant, relating to interest coverage, which the Companymet on December 31, 2003 by a significant margin.

COMMITMENTS AND CONTINGENCIES

Euro Disney

The Company has a 39% interest in Euro Disney S.C.A., which operates theDisneyland Resort Paris. As of December 31, 2003, the Company’s investment inand accounts and notes receivable from Euro Disney totaled $528 million,including $136 million drawn under a line of credit which is due in June 2004.The maximum amount available under the line is€168 million ($208 million atDecember 31, 2003 exchange rates).

As a result of an agreement entered into on March 28, 2003, the Companydid not charge Euro Disney royalties and management fees for the period fromJanuary 1, 2003 to September 30, 2003. Additionally, the Company agreed toallow Euro Disney to pay its royalties and management fees annually in arrearsfor fiscal 2004, instead of quarterly. As a result of Euro Disney’s financialdifficulties, the Company did not recognize revenues for royalties andmanagement fees earned during the first quarter of fiscal 2004. Until EuroDisney’s long-term financing is resolved, the Company likely will not recognizeroyalties and management fees. During the first quarter of fiscal 2003, theCompany’s royalty and management fee income from Euro Disney totaled $8million.

THE WALT DISNEY COMPANY
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS – (continued)

See Note4 to the Consolidated Financial Statements in the 2003 Annual Reportand Note 3 to the Condensed Consolidated Financial Statements for additional information related toEuro Disney’s financial position and results of operations.

In connection with a financial restructuring of Euro Disney in 1994, EuroDisney Associés S.N.C. (Disney SNC), a wholly owned affiliate of the Company,entered into a lease arrangement with a financing company with a noncancelableterm of 12 years related to substantially all of the Disneyland Park assets,and then entered into a 12-year sublease agreement with Euro Disney onsubstantially the same payment terms. Remaining lease rentals at December 31,2003 of approximately $535 million receivable from Euro Disney under thesublease approximate the amounts payable by Disney SNC under the lease. At theconclusion of the sublease term, Euro Disney will have the option of assumingDisney SNC’s rights and obligations under the lease for a payment of $98million over the ensuing 15 months. If Euro Disney does not exercise itsoption, Disney SNC may purchase the assets, continue to lease the assets orelect to terminate the lease. In the event the lease is terminated, Disney SNCwould be obligated to make a termination payment to the lessor equal to 75% ofthe lessor’s then outstanding debt related to the Disneyland Park assets, whichpayment would be approximately $1.4 billion. Disney SNC would then have theright to sell or lease the assets on behalf of the lessor to satisfy theremaining debt, with any excess proceeds payable to Disney SNC. NotwithstandingEuro Disney’s financial difficulties, the Company believes it is unlikely thatDisney SNC would be required to pay the 75% lease termination payment as theCompany currently expects that (i) Euro Disney will exercise its assumptionoption in 2006, (ii) one of the alternative resolutions available under thecurrent contractual relationships among Disney SNC, Euro Disney and the lenderswill be implemented or (iii) one of any additional alternatives that may bedeveloped in connection with the discussions referred to above will beimplemented.

Broadcast Programming Commitments

At December 31, 2003, contractual commitments to purchase broadcastprogramming rights totaled $10.1 billion, including $907 million for availableprogramming and $7.6 billion for sports programming rights, primarily NFL, NBA,college football, MLB and NHL.

Contractual commitments relating to broadcast programming rights arepayable as follows (unaudited, in millions):

$	2,478
2005	2,940
2,344
2007	1,094
860
Thereafter		371
$	10,087

We expect that the ABC Television Network, ESPN, ABC Family, The DisneyChannels and the Company’s television and radio stations will continue to enterinto programming commitments to purchase broadcast rights for sports and otherprogramming and various feature films.

Legal and Tax Matters

As disclosed in the Notes to the Condensed Consolidated FinancialStatements (see Notes 11 and 12), the Company has exposure for certain legaland tax matters for which management believes it is currently not possible toestimate the impact, if any, which the ultimate resolution of these matterswill have on the Company’s financial position or cash flows.

THE WALT DISNEY COMPANY
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS – (continued)

Aircraft leveraged lease investment

During the first quarter of fiscal 2003, the Company wrote off itsaircraft leveraged lease investment with United Airlines, which filed forbankruptcy protection, resulting in a pre-tax charge of $114 million, or $0.04per share. Based on the bankruptcy filing, we believe it is unlikely that theCompany will recover this investment. The pre-tax charge of $114 million forthe write-off is reported in “Net interest expense” in the CondensedConsolidated Statements of Income. As of December 31, 2003, our remainingaircraft leveraged lease investment totaled approximately $175 million,consisting of $119 million and $56 million, with Delta Air Lines and FedEx,respectively. We continue to monitor the recoverability of these investments,particularly the Delta Air Lines leases. The inability of Delta Air Lines tomake their lease payments, or the termination of our lease through a bankruptcyproceeding, could result in a material charge for the write-down of some or allof our investment and could accelerate income tax payments.

Contractual Guarantees

The Company has guaranteed certain special assessment and water/sewerrevenue bond series issued by the Celebration Community Development Districtand the Enterprise Community Development District (collectively, theDistricts). The bond proceeds were used by the Districts to finance theconstruction of infrastructure improvements and the water and sewer system inthe mixed-use, residential community of Celebration, Florida. As of December31, 2003, the remaining debt service obligation guaranteed by the Company was$100 million, of which $61 million was principal. The Company is responsibleto satisfy any shortfalls in debt service payments, debt service andmaintenance reserve funds, and to ensure compliance with specified ratecovenants. To the extent that the Company has to fund payments under itsguarantees, the Districts have an obligation to reimburse the Company fromDistrict revenues.

To date, tax revenues have exceeded the debt service payments for both theCelebration and Anaheim bonds.

THE WALT DISNEY COMPANY
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS – (continued)

OTHER MATTERS

Accounting Policies and Estimates

We believe that the application of the following accounting policies,which are important to our financial position and results of operations,requires significant judgments and estimates on the part of management. For asummary of all of our accounting policies, including the accounting policiesdiscussed below, see Note 2 of the Consolidated Financial Statements in the2003 Annual Report.

Film and Television Revenues and Costs

We expense the cost of film and television production and participationsas well as certain multi-year sports rights over the applicable product lifecycle based upon the ratio of the current period’s gross revenues to theestimated remaining total gross revenues or straight-line, as appropriate.These estimates are calculated on an individual production basis for film andtelevision and on an individual contract basis for sports rights. Estimates oftotal gross revenues can change due to a variety of factors, including thelevel of market acceptance, advertising rates and subscriber fees.

For film and television productions, estimated remaining gross revenuefrom all sources includes revenue that will be earned within ten years of thedate of the initial theatrical release for film productions. For televisionseries, we include revenues that will be earned within 10 years of the deliveryof the first episode, or if still in production, five years from the date ofdelivery of the most recent episode. For acquired film libraries, remainingrevenues include amounts to be earned for up to 20 years from the date ofacquisition.

Television network and station rights for theatrical movies, series andother programs are charged to expense based on the number of times the programis expected to be shown. Estimates of usage of television network and stationprogramming can change based on competition and audience acceptance.Accordingly, revenue estimates and planned usage are reviewed periodically andare revised if necessary. A change in revenue projections or planned usagecould have an impact on our results of operations.

Costs of film and television productions and programming costs for ourtelevision and cable networks are subject to valuation adjustments pursuant tothe applicable accounting rules. The net realizable value of the televisionbroadcast program licenses and rights are reviewed using a daypart methodology.The Company’s dayparts are: early morning, daytime, late night, prime time,news, children and sports (includes network and cable). A daypart is defined asan aggregation of programs broadcast during a particular time of day orprograms of a similar type. The net realizable values of other cableprogramming are reviewed on an aggregated basis for each cable channel.Estimated values are based upon assumptions about future demand and marketconditions. If actual demand or market conditions are less favorable than ourprojections, film, television and programming cost write-downs may be required.

Revenue Recognition

The Company has revenue recognition policies for its various operatingsegments, which are appropriate to the circumstances of each business. See Note2 to the Consolidated Financial Statements in the 2003 Annual Report for asummary of these revenue recognition policies.

We record reductions to revenues for estimated future returns ofmerchandise, primarily home video, DVD and software products, and for customerprograms and sales incentives. These estimates are based upon historical returnexperience, current economic trends and projections of customer demand for andacceptance of our products. Differences may result in the amount and timing ofour revenue for any period if actual performance varies from our estimates.

THE WALT DISNEY COMPANY
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS – (continued)

Pension and Postretirement Benefit Plan Actuarial Assumptions

The Company’s pension benefit and postretirement medical benefitobligations and related costs are calculated using actuarial concepts, withinthe framework of Statement of Financial Accounting Standards No. 87 Employer’sAccounting for Pensions (SFAS 87) and Statement of Financial AccountingStandards No. 106, Employers’ Accounting for Postretirement Benefit Other thanPension (SFAS 106), respectively. Two critical assumptions, the discount rateand the expected return on plan assets, are important elements of expenseand/or liability measurement. We evaluate these critical assumptions annually.Refer to the 2003 Annual Report for estimated impacts of changes in theseassumptions. Other assumptions involve demographic factors such as retirement,mortality, turnover and rate of compensation increases.

The discount rate enables us to state expected future cash flow as apresent value on the measurement date. The guideline for setting this rate is ahigh-quality long-term corporate bond rate. A lower discount rate increases thepresent value of benefit obligations and increases pension expense.

To determine the expected long-term rate of return on the plan assets, weconsider the current and expected asset allocation, as well as historical andexpected returns on each plan asset class. A lower expected rate of return onpension plan assets will increase pension expense.

Goodwill, Intangible Assets, Long-lived Assets and Investments

Goodwill and other intangible assets must be tested for impairment on anannual basis. We completed our impairment testing as of September 30, 2003 anddetermined that there were no impairment losses related to goodwill and otherintangible assets. In assessing the recoverability of goodwill and otherintangible assets, market values and projections regarding estimated futurecash flows and other factors are used to determine the fair value of therespective assets. If these estimates or related projections change in thefuture, we may be required to record impairment charges for these assets.

For purposes of performing the impairment test for goodwill and otherintangible assets as required by SFAS 142 we established the followingreporting units: Cable Networks, Television Broadcasting, Radio, StudioEntertainment, Consumer Products and Parks and Resorts.

For purposes of performing our impairment test, we used a present valuetechnique (discounted cash flow) to determine fair value for all of thereporting units except for Television Broadcasting. The Television Broadcastingreporting unit includes the ABC Television Network and owned and operatedtelevision stations. These businesses have been grouped together because theirrespective cash flows are dependent on one another. For purposes of ourimpairment test, we used a present value technique to value the owned andoperated television stations and a revenue multiple to value the televisionnetwork. We did not use a present value technique or a market multiple approachto value the television network as a present value technique would not capturethe full fair value of the television network and there have been no recentcomparable sale transactions fora television network. We applied what we believe to be the most appropriatevaluation methodologies for each of the reporting units. If we had establisheddifferent reporting units or utilized different valuation methodologies theimpairment test results could differ.

Long-lived assets include certain long-term investments. The fair value ofthe long-term investments is dependent on the performance of the investeecompanies, as well as volatility inherent in the external markets for theseinvestments. In assessing potential impairment for these investments, weconsider these factors as well as forecasted financial performance of ourinvestees. If these forecasts are not met, impairment charges may be required.

WALT DISNEY COMPANY
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS – (continued)

Contingencies and Litigation

We are currently involved in certain legal proceedings and, as required,have accrued our estimate of the probable costs for the resolution of theseclaims. This estimate has been developed in consultation with outside counseland is based upon an analysis of potential results, assuming a combination oflitigation and settlement strategies. It is possible, however, that futureresults of operations for any particular quarterly or annual period could bematerially affected by changes in our assumptions or the effectiveness of ourstrategies related to these proceedings.

Income Tax Audits

As a matter of course, the Company is regularly audited by federal, stateand foreign tax authorities. From time to time, these audits result in proposedassessments. The Internal Revenue Service (IRS) has completed its examinationof the Company’s federal income tax returns for 1993 through 1995 and hasproposed assessments that challenge certain of the Company’s tax positions. TheCompany has negotiated the settlement of a number of these assessments, and ispursuing an administrative appeal before the IRS with regard to the remainder.If the remaining proposed assessments are upheld through the administrative andlegal process, they could have a material impact on the Company’s earnings andcash flow. However, the Company believes that its tax positions comply withapplicable tax law and intends to defend its positions vigorously. The Companybelieves it has adequately provided for any reasonably foreseeable outcomerelated to these matters. Accordingly, although their ultimate resolution mayrequire additional cash tax payments, the Company does not anticipate anymaterial earnings impact from these matters.

Accounting Changes

FIN 46

The Company has minority equity interests in certain entities, includingEuro Disney S.C.A. (Euro Disney) and Hongkong International Theme Parks Limited(Hong Kong Disneyland), which are currently not consolidated, but under currentrules are accounted for under the equity or cost method of accounting. Basedon the provisions of FIN 46R we will be required to consolidate Euro Disney andHong Kong Disneyland in the second quarter of fiscal 2004 because they are VIEsand we are the primary beneficiary. We have concluded that the rest of ourequity investments do not require consolidation as either they are not VIEs orin the event that they are VIEs, we are not the primary beneficiary. TheCompany also has variable interest in certain other VIEs that will not beconsolidated because the Company is not the primary beneficiary. Thesevariable interests do not involve any material exposure to the Company. SeeNote 3 to the Condensed Consolidated Financial Statements for the estimate of the impactof consolidating Euro Disney and Hong Kong Disneyland as of September 30, 2003.The impact of consolidating Euro Disney and Hong Kong Disneyland has notchanged significantly as of December 31, 2003.

WALT DISNEY COMPANY
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS – (continued)

FSP 106-1

MARKET RISK

Interest Rate Risk Management

The Company is exposed to the impact of interest rate changes. Ourobjective is to manage the impact of interest rate changes on earnings and cashflows and on the market value of the Company’s investments and borrowings. Wemaintain fixed-rate debt as a percentage of our net debt between minimum andmaximum percentages, which are set by policy.

We use interest rate swaps and other instruments to manage net exposure tointerest rate changes related to our borrowings and investments and to lowerthe Company’s overall borrowing costs. We do not enter into interest rateswaps for speculative purposes. Significant interest rate risk managementinstruments held by the Company during the quarter included receive-fixed andpay-fixed swaps. Receive-fixed swaps, which expire in one to 19 years,effectively convert medium- and long-term obligations to LIBOR-indexed variablerate instruments. Pay-fixed swaps, which expire in one to two years,effectively convert floating-rate obligations to fixed-rate instruments.

Foreign Exchange Risk Management

The Company transacts business in virtually every part of the world and issubject to risks associated with changing foreign exchange rates. Ourobjective is to reduce earnings and cash flow volatility associated withforeign exchange rate changes to allow management to focus its attention on ourcore business issues and challenges. Accordingly, the Company enters intovarious contracts that change in value as foreign exchange rates change toprotect the value of its existing foreign currency denominated assets andliabilities, commitments and anticipated revenues. By policy, we maintainhedge coverage between minimum and maximum percentages of anticipated foreignexchange exposures for periods of up to five years. The gains and losses onthese contracts offset changes in the value of the related exposures. TheCompany does not enter into foreign currency transactions for speculativepurposes.

WALT DISNEY COMPANY
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS – (continued)

We use forward and option strategies that provide for the sale of foreigncurrencies to hedge probable, but not firmly committed, revenues. We also useforward contracts to hedge foreign currency assets and liabilities. Theseforward and option contracts generally mature within five years. While thesehedging instruments are subject to fluctuations in value, such fluctuationsshould offset changes in the value of the underlying exposures being hedged.The principal currencies hedged are the European euro, Japanese yen, Britishpound and Canadian dollar. Cross-currency swaps are used to hedge foreigncurrency-denominated borrowings.

FORWARD LOOKING STATEMENTS

The Private Securities Litigation Reform Act of 1995 (the Act) provides asafe harbor for “forward-looking statements” made by or on behalf of theCompany. We may from time to time make written or oral statements that are“forward-looking” including statements contained in this report and otherfilings with the Securities and Exchange Commission and in reports to ourshareholders. All statements that express expectations and projections withrespect to future matters may be affected by changes in the Company’s strategicdirection, as well as by developments beyond the Company’s control. For anenterprise as large and complex as the Company, a wide range of factors couldmaterially affect future developments and performance. These factors mayinclude international, political, health concern and military developments thatmay affect travel and leisure businesses generally; changes in domestic andglobal economic conditions that may, among other things, affect theinternational performance of the Company’s theatrical and home video releases,television programming and consumer products; regulatory and otheruncertainties associated with the Internet and other technologicaldevelopments; and the launching or prospective development of new businessinitiatives. Additional factors are set forth in the 2003 Annual Report underthe heading “Factors that may affect forward-looking statements.” Allforward-looking statements are made on the basis of management’s views andassumptions, as of the time the statements are made, regarding future eventsand business performance. There can be no assurance, however, that ourexpectations will necessarily come to pass. The Company does not undertake anyduty to update its disclosure relating to forward looking matters.

PART I. FINANCIAL INFORMATION

Item 3. Quantitative and Qualitative Disclosures about Market Risk. See Item2. Management’s Discussion and Analysis of Financial Condition and Results ofOperations.

Item 4. Controls and Procedures

(a) Evaluation of Disclosure Controls and Procedures. We have establisheddisclosure controls and procedures to ensure that material information relatingto the Company, including its consolidated subsidiaries, is made known to theofficers who verify the Company’s financial reports and to other members ofsenior management and the Board of Directors.

Based on their evaluation as of December 31, 2003, the principal executiveofficer and principal financial officer of the Company have concluded that theCompany’s disclosure controls and procedures (as defined in Rules 13a-14(c) and15d-14(c) under the Securities Exchange Act of 1934) are effective to ensurethat the information required to be disclosed by the Company in the reportsthat it files or submits under the Securities Exchange Act of 1934 is recorded,processed, summarized and reported within the time periods specified in SECrules and forms.

(b) Changes in Internal Controls. In fiscal 2002, the Company initiated acompany-wide implementation of new integrated finance and human resourcesapplications software, related information technology systems, and enterprisewide shared services (the new systems). As of September 30, 2003, a substantialnumber of the Company’s business units were using the new systems. As a resultof subsequent implementations during the quarter ended December 31, 2003, themajority of the Company’s businesses are using the new systems. Theimplementation has involved changes in systems that included internal controls,and accordingly, these changes have required changes to our system of internalcontrols. We have reviewed each system as it is being implemented and thecontrols affected by the implementation of the new systems and made appropriatechanges to affected internal controls as we implemented the new systems. Webelieve that the controls as modified are appropriate and functioningeffectively.

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

Stephen Slesinger, Inc. v. The Walt Disney Company. In this lawsuit,filed on February 27, 1991 and pending in the Los Angeles County SuperiorCourt, the plaintiff claims that a Company subsidiary defrauded it and breacheda 1983 licensing agreement with respect to certain Winnie the Pooh properties,by failing to account for and pay royalties on revenues earned from the sale ofWinnie the Pooh movies on videocassette and from the exploitation of Winnie thePooh merchandising rights. The plaintiff seeks damages for the licensee’salleged breaches as well as confirmation of the plaintiff’s interpretation ofthe licensing agreement with respect to future activities. The plaintiff alsoseeks the right to terminate the agreement on the basis of the allegedbreaches. The Company disputes that the plaintiff is entitled to any damages orother relief of any kind, including termination of the licensing agreement. Ifeach of the plaintiff’s claims were to be confirmed in a final judgment,damages as argued by the plaintiff could total as much as several hundredmillion dollars and adversely impact the value to the Company of any futureexploitation of the licensed rights. However, given the number of outstandingissues and the uncertainty of their ultimate disposition, management is unableto predict the magnitude of any potential determination of the plaintiff’sclaims. On April 24, 2003, the matter was removed to the United States DistrictCourt for the Central District of California, which, on May 19, 2003, dismissedcertain claims and remanded the matter to the Los Angeles Superior Court. TheCompany has appealed from the District Court’s order to the Court of Appealsfor the Ninth Circuit. In the meanwhile, the Superior Court has assigned thecase to a different judge in the Court’s Complex Litigation Pilot Program.Pre-trial proceedings continue in the state court, which has set a trial dateof January 10, 2005.

PART II. OTHER INFORMATION (continued)

Item 1. Legal Proceedings - (continued)

SEC Proceeding. The U.S. Securities and Exchange Commission (the “SEC”)is conducting an investigation into an amendment of the Company’s Annual Reporton Form 10-K for fiscal year 2001, certain related matters and other relatedparty transactions that have been previously disclosed by the Company. Theinvestigation does not relate to the Company’s financial statements but ratherto the issue of disclosure of those relationships. As previously disclosed inthe Company’s Proxy Statement for the 2004 annual meeting of shareholders, theCompany and its Chief Executive Officer are currently in discussions with thestaff of the SEC about a possible administrative resolution of thesenon-financial matters, which would allege disclosure deficiencies generallyabout these matters and cite violation under Sections 13(a) and 14(a) of theExchange Act regarding the following relationships between the Company andcertain directors: the employment of adult children of three directors by theCompany and the wife of another director by a 50% owned joint venture (whoseemployment preceded the director’s tenure); the provision of an office,secretary and driver to one director following his retirement as ChiefExecutive Officer of Capital/Cities ABC, Inc.; and the payments to AirShamrock, Inc., a company controlled by a former director, in reimbursement forhis business use of his private corporate jet. If agreement is reached, thesettlement under discussion would involve the issuance of an administrative“cease and desist” order.

PART II. OTHER INFORMATION (continued)

ITEM 6. Exhibits and Reports on Form 8-K

(a)	Exhibits
See Index of Exhibits.
(b)	Reports on Form 8-K
The following current reports on Form 8-K were filed by the Company duringthe Company’s first fiscal quarter:

(1)	Current report on Form 8-K dated October 9, 2003, setting forth(a) the Company’s press release in connection with a presentation madeto analysts at the Walt Disney World Resort in Orlando and (b) theprepared text of presentations made at the meeting.
(2)	Current report on Form 8-K dated November 21, 2003, setting forth(a) the earnings release for the fiscal year ended September 30, 2003and (b) the text of the conference call concerning the earningsrelease.
(3)	Current report on Form 8-K dated December 5, 2003, setting forth(a) resignation letter dated November 30, 2003 from Roy E. Disney, (b)resignation letter dated December 1, 2003 from Stanley P. Gold and (c)text of the statements filed by the Board of Directors of the Companyconcerning the resignations.
(4)	Current report on Form 8-K dated December 10, 2003, setting forth(a) the Company’s press release in connection with a presentation madeto analysts and investors in New York City and (b) the prepared textof presentations made at the meeting.

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, theregistrant has duly caused this report to be signed on its behalf by theundersigned thereunto duly authorized.

THE WALT DISNEY COMPANY

(Registrant)

By:

/s/ THOMAS O. STAGGS

(Thomas O. Staggs, Senior Executive Vice President
and Chief Financial Officer)

February 11, 2004

Burbank, California

INDEX OF EXHIBITS

Number and Description of Exhibit

(Numbers Coincide with Item 601 of Regulation S-K)				DocumentIncorporated by Reference from a Previous Filing or Filed Herewith, as Indicated below
Rule 13a-14(a) Certification of ChiefExecutive Officer of the Company in accordance withSection 302 of the Sarbanes-Oxley Act of 2002		Filed Herewith
(31(b))	Rule 13a-14(a) Certification of ChiefFinancial Officer of the Company in accordance with Section 302 of the Sarbanes-Oxley Act of 2002		Filed Herewith
Section 1350 Certification of ChiefExecutive Officer of the Company in accordance with Section 906 of the Sarbanes-Oxley Act of 2002*		Furnished
(32(b))	Section 1350 Certification of ChiefFinancial Officer of the Company in accordance with Section 906 of the Sarbanes-Oxley Act of 2002*		Furnished

* A signed original of this written statement required by Section 906 has beenprovided to the Company and will be retained by the Company and furnished tothe Securities and Exchange Commission or its staff upon request.

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I guess the reasons mentioned above are enough to head towards the desktop installation method of My Disney Experience.

My Disney Experience For PC can be easily installed and used on a desktop computer or laptop running Windows XP, Windows 7, Windows 8, Windows 8.1, Windows 10 and a Macbook, iMac running Mac OS X. This will be done by means of an Android emulator. In order to install My Disney Experience For PC, we will use BlueStacks app player, BlueStacks 2 app player or Andy OS Android emulator. The methods listed below are set to help you get My Disney Experience For PC. Go ahead and get it done now.

Download and install BlueStacks App Player or BlueStacks 2 App Player. It totally depends on yourliking. BlueStacks 2 isn’t available for Mac OS X so far, so you will want to install BlueStacks if you’re using a Mac PC or Laptop.
Setup BlueStacks or BlueStacks 2 using the guides linked in the above step.
Once you’ve setup the BlueStacks or BlueStacks 2 App Player, you’re all set to install the My Disney Experience For PC.
Open the BlueStacks App Player that you just installed.
Click on the search button in BlueStacks, for BlueStacks 2, you will click on “Android” button and you will find the search button in the Android menu.
Now type “My Disney Experience” in the search box and search it via Google Play Store.
Once it shows the result, select your target application and install it.
Once installed, it will appear under all apps.
Access the newly installed app from the app drawer in BlueStacks or BlueStacks 2.
Use your mouses’s right and left click or follow the on-screen instructions to play or use My Disney Experience.
That’s all you got to do in order to be able to use My Disney Experience For PC.

Download My Disney Experience APK.
Download and install BlueStacks or BlueStacks 2 app player.
Setup the BlueStacks app player completely using the guides linked in the Method 1.
Double click the downloaded APK file.
It will begin to install via BlueStacks or BlueStacks 2.
Once the APK has been installed, access the newly installed app under “All Apps” in BlueStacks and under “Android > All Apps” in BlueStacks 2.
Click the application and follow on-screen instructions to play it.
That’s all. Best of Luck.

In order to install My Disney Experience For PC via Andy OS Android emulator, you may want to use the guide: How To Run Apps For PC On Windows, Mac Using Andy OS.

Three Months Ended

December 31,

(unaudited, in millions)

Operating income