1 Description of the Business and Segment Information

The Walt Disney Company, together with the subsidiaries through which businesses are conducted (the Company), is a diversified worldwide entertainment company with operations in the following business segments: Media Networks, Parks and Resorts, Studio Entertainment, Consumer Products and Interactive.

DESCRIPTION OF THE BUSINESS

Media Networks

The Company operates cable programming services including the ESPN, Disney Channels Worldwide, ABC Family, SOAPnet, and UTV/Bindass networks, broadcast businesses which include ABC and eight owned television stations, radio businesses consisting of the ESPN Radio Network and the Radio Disney Network and 35 owned and operated radio stations. The ABC, ESPN Radio and Radio Disney Networks have affiliated stations providing coverage to households throughout the U.S. The Company also produces original live-action and animated television programming which may be sold in network, first-run syndication, pay, and international television markets. The Company has interests in media businesses that are accounted for under the equity method including AETN, Hulu and Seven TV. Additionally, the Company operates ABC-, ESPN-, ABC Family- and SOAPnet-branded internet businesses.

Parks and Resorts

The Company owns and operates the Walt Disney World Resort in Florida and the Disneyland Resort in California. The Walt Disney World Resort includes four theme parks (the Magic Kingdom, Epcot, Disney’s Hollywood Studios, and Disney’s Animal Kingdom), 18 resort hotels, a retail, dining, and entertainment complex, a sports complex, conference centers, campgrounds, water parks, and other recreational facilities. The Disneyland Resort includes two theme parks (Disneyland and Disney California Adventure), three resort hotels, and a retail, dining and entertainment complex. Internationally, the Company manages and has an effective 51% ownership interest in Disneyland Paris, which includes two theme parks (Disneyland Park and Walt Disney Studios Park), seven themed hotels, two convention centers, a shopping, dining and entertainment complex, and a 27-hole golf facility. The Company manages and has a 48% ownership interest in Hong Kong Disneyland Resort, which includes one theme park and two resort hotels. The Company has a 70% ownership interest in the management company and 43% ownership of Shanghai Disney Resort, which is currently under construction. The Company also earns royalties on revenues generated by the Tokyo Disneyland Resort, which includes two theme parks and three Disney-branded hotels, and is owned and operated by an unrelated Japanese corporation. The Company manages and markets vacation club ownership interests through the Disney Vacation Club, operates the Disney Cruise Line, the Adventures by Disney guided group vacations business and Aulani, a mixed-use Disney Resort and Spa in Hawaii. The Company’s Walt Disney Imagineering unit designs and develops theme park concepts and attractions, as well as resort properties.

Studio Entertainment

The Company produces and acquires live-action and animated motion pictures for worldwide distribution to the theatrical, home entertainment, and television markets. The Company distributes these products through its own distribution and marketing companies in the U.S. and both directly and through independent companies and joint ventures in foreign markets primarily under the Walt Disney Pictures, Pixar, Marvel, Disneynature, and Touchstone Pictures banners. The Company also produces and distributes motion pictures under the UTV banner. We also distribute certain motion pictures for DreamWorks under the Touchstone Pictures banner. The Company also produces stage plays, musical recordings and live entertainment events.

Consumer Products

The Company licenses trade names, characters and visual and literary properties to various retailers, show promoters, and publishers throughout the world. The Company also engages in retail and online distribution of products through The Disney Store and DisneyStore.com. We operate The Disney Store in Europe, North America and Japan. The Company publishes entertainment and educational books and magazines and comic books for children and families and operates English language learning centers in China.

Interactive

The Company creates and delivers branded entertainment and lifestyle content across interactive media platforms. The primary operating businesses are Interactive Games which produces and distributes console, online and mobile games, and Interactive Media which develops branded online services and provides website maintenance and design for other Company businesses. Interactive also manages the Disney-branded mobile phone business in Japan which provides mobile phone service and downloadable content to consumers. Certain properties are also licensed to third-party game publishers.

SEGMENT INFORMATION

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

Segment operating results reflect earnings before corporate and unallocated shared expenses, restructuring and impairment charges, other income /(expense), net interest expense, income taxes, and noncontrolling interests. Segment operating income includes equity in the income of investees. Corporate and unallocated shared expenses principally consist of corporate functions, executive management, and certain unallocated administrative support functions.

Equity in the income of investees by segment is as follows:


	2012		2011		2010
Media Networks
Cable Networks	$	664	$	578	$	436
Broadcasting		(37)		6		2
Corporate		—		1		2

	$	627	$	585	$	440

Beginning in fiscal 2011, the Company made changes to certain transfer pricing arrangements between its business units. The most significant change was to the allocation of home video revenue and distribution costs between the Media Networks and Studio Entertainment segments for home video titles produced by the Media Networks segment and distributed by the Studio Entertainment segment. These changes generally result in higher revenues, expenses and operating income at our Media Networks segment with offsetting declines at our Studio Entertainment segment.

The following segment results include allocations of certain costs, including information technology, pension, legal, and other shared services costs, which are allocated based on metrics designed to correlate with consumption. These allocations are agreed-upon amounts between the businesses and may differ from amounts that would be negotiated in arm’s length transactions. In addition, all significant intersegment transactions have been eliminated except that Studio Entertainment revenues and operating income include an allocation of Consumer Products and Interactive revenues, which is meant to reflect royalties on sales of merchandise generated by Consumer Products and Interactive which is based on intellectual property from certain Studio Entertainment films.


	2012		2011		2010
Revenues
Media Networks	$	19,436	$	18,714	$	17,162
Parks and Resorts		12,920		11,797		10,761
Studio Entertainment
Third parties		5,566		6,061		6,495
Intersegment		259		290		206

		5,825		6,351		6,701

Consumer Products
Third parties		3,499		3,335		2,876
Intersegment		(247)		(286)		(198)

		3,252		3,049		2,678

Interactive
Third parties		857		986		769
Intersegment		(12)		(4)		(8)

		845		982		761


Total consolidated revenues	$	42,278	$	40,893	$	38,063


Segment operating income (loss)
Media Networks	$	6,619	$	6,146	$	5,132
Parks and Resorts		1,902		1,553		1,318
Studio Entertainment		722		618		693
Consumer Products		937		816		677
Interactive		(216)		(308)		(234)

Total segment operating income	$	9,964	$	8,825	$	7,586


Reconciliation of segment operating income to income before income taxes
Segment operating income	$	9,964	$	8,825	$	7,586
Corporate and unallocated shared expenses		(474)		(459)		(420)
Restructuring and impairment charges		(100)		(55)		(270)
Other income /(expense), net		239		75		140
Net interest expense		(369)		(343)		(409)

Income before income taxes	$	9,260	$	8,043	$	6,627


Capital expenditures
Media Networks
Cable Networks	$	170	$	179	$	132
Broadcasting		85		128		92
Parks and Resorts
Domestic		2,242		2,294		1,295
International		641		429		238
Studio Entertainment		79		118		102
Consumer Products		69		115		97
Interactive		27		21		17
Corporate		471		275		137

Total capital expenditures	$	3,784	$	3,559	$	2,110


	2012		2011		2010
Depreciation expense
Media Networks	$	241	$	229	$	213
Parks and Resorts
Domestic		927		842		807
International		314		323		332
Studio Entertainment		48		53		56
Consumer Products		55		48		33
Interactive		17		16		19
Corporate		182		148		142

Total depreciation expense	$	1,784	$	1,659	$	1,602

Amortization of intangible assets
Media Networks	$	17	$	8	$	9
Parks and Resorts		–		–		–
Studio Entertainment		94		79		33
Consumer Products		60		57		45
Interactive		32		38		24
Corporate		–		–		–

Total amortization of intangible assets	$	203	$	182	$	111

Identifiable assets⁽¹⁾⁽²⁾
Media Networks	$	28,660	$	27,244
Parks and Resorts		20,951		19,530
Studio Entertainment		12,928		12,221
Consumer Products		5,016		4,992
Interactive		1,926		1,801
Corporate⁽³⁾		5,417		6,336

Total consolidated assets	$	74,898	$	72,124

Supplemental revenue data
Media Networks
Advertising⁽⁴⁾	$	7,773	$	7,668	$	7,099
Affiliate Fees		9,360		8,837		8,122
Parks and Resorts
Merchandise, food and beverage		3,945		3,738		3,457
Admissions		4,225		3,870		3,504

Revenues
United States and Canada	$	31,770	$	30,848	$	28,279
Europe		6,223		6,455		6,550
Asia Pacific		2,990		2,517		2,320
Latin America and Other		1,295		1,073		914

	$	42,278	$	40,893	$	38,063

Segment operating income
United States and Canada	$	6,991	$	6,388	$	5,474
Europe		1,692		1,517		1,275
Asia Pacific		835		627		620
Latin America and Other		446		293		217

	$	9,964	$	8,825	$	7,586


	2012		2011
Long-lived assets ⁽⁵⁾
United States and Canada	$	47,959	$	47,124
Europe		7,484		6,458
Asia Pacific		3,303		2,037
Latin America and Other		270		267

	$	59,016	$	55,886

⁽¹⁾	Identifiable assets include amounts associated with equity method investments. Equity method investments by segment are as follows:


	2012		2011
Media Networks	$	2,423	$	2,044
Parks and Resorts		8		–
Studio Entertainment		2		2
Consumer Products		1		1
Interactive		–		4
Corporate		4		1

	$	2,438	$	2,052

⁽²⁾	Goodwill and intangible assets by segment are as follows:


	2012		2011
Media Networks	$	17,854	$	17,421
Parks and Resorts		172		172
Studio Entertainment		6,783		6,498
Consumer Products		3,700		3,715
Interactive		1,486		1,330
Corporate		130		130

	$	30,125	$	29,266

⁽³⁾	Primarily fixed assets, deferred tax assets, cash and cash equivalents

⁽⁴⁾	Advertising revenue includes amounts reported in Interactive

⁽⁵⁾	Long-lived assets are total assets less the following: current assets, long-term receivables, deferred taxes, financial investments and derivatives