Transcription

Forward-Looking Statements:Certain statements in this communication may constitute “forward-looking statements”within the meaning of the Private Securities Litigation Reform Act of 1995. Suchstatements relate to a variety of matters, including but not limited to: the operations ofthe businesses of The Walt Disney Company ("Disney") and Marvel Entertainment, Inc.("Marvel") separately and as a combined entity; the timing and consummation of theproposed merger transaction; the expected benefits of the integration of the twocompanies; the combined company’s plans, objectives, expectations and intentions andother statements that are not historical fact. These statements are made on the basis ofthe current beliefs, expectations and assumptions of the management of Disney andMarvel regarding future events and are subject to significant risks and uncertainty.Investors are cautioned not to place undue reliance on any such forward-lookingstatements, which speak only as of the date they are made. Neither Disney nor Marvelundertakes any obligation to update or revise these statements, whether as a result ofnew information, future events or otherwise.Actual results may differ materially from those expressed or implied. Such differencesmay result from a variety of factors, including but not limited to: legal or regulatory proceedings or other matters that affect the timing or abilityto complete the transactions as contemplated;the possibility that the expected synergies from the proposed merger will not berealized, or will not be realized within the anticipated time period or that thebusinesses will not be integrated successfully;the possibility of disruption from the merger making it more difficult to maintainbusiness and operational relationships;the possibility that the merger does not close, including but not limited to, due tothe failure to satisfy the closing conditions;any actions taken by either of the companies, including but not limited to,restructuring or strategic initiatives (including capital investments or assetacquisitions or dispositions); anddevelopments beyond the companies’ control, including but not limited to:changes in domestic or global economic conditions, competitive conditions andconsumer preferences; adverse weather conditions or natural disasters; healthconcerns; international, political or military developments; and technologicaldevelopments.Page 1

Bank of America Merrill Lynch 2009 Media,Communications & Entertainment ConferenceSeptember 9, 2009Additional factors that may cause results to differ materially from those described in theforward-looking statements are set forth in the Annual Report on Form 10-K of Disneyfor the year ended September 27, 2008, which was filed with the Securities andExchange Commission (“SEC”) on November 20, 2008, under the heading “Item 1A—Risk Factors” and in the Annual Report on Form 10-K of Marvel for the year endedDecember 31, 2008, which was filed with the SEC on February 27, 2009, under theheading “Item 1A—Risk Factors,” and in subsequent reports on Forms 10-Q and 8-Kand other filings made with the SEC by each of Marvel and Disney.Important Merger Information and Additional Information:This communication does not constitute an offer to sell or the solicitation of an offer tobuy any securities or a solicitation of any vote or approval. In connection with theproposed transaction, Disney and Marvel will file relevant materials with the SEC.Disney will file a Registration Statement on Form S-4 that includes a proxy statement ofMarvel and which also constitutes a prospectus of Disney. Marvel will mail the proxystatement/prospectus to its stockholders. Investors are urged to read the proxystatement/prospectus regarding the proposed transaction when it becomes available,because it will contain important information. The proxy statement/prospectus andother documents that will be filed by Disney and Marvel with the SEC will be availablefree of charge at the SEC’s website, www.sec.gov, or by directing a request when such afiling is made to The Walt Disney Company, 500 South Buena Vista Street, Burbank, CA91521-9722, Attention: Shareholder Services or by directing a request when such a filingis made to Marvel Entertainment, Inc., 417 Fifth Avenue New York, NY 10016,Attention: Corporate Secretary.Disney, Marvel, their respective directors and certain of their executive officers may beconsidered participants in the solicitation of proxies in connection with the proposedtransaction. Information about the directors and executive officers of Marvel is setforth in Marvel’s definitive proxy statement, which was filed with the SEC on March24, 2009, and in Item 5.02 of Form 8-K filed by Marvel on September 4, 2009.Information about the directors and executive officers of Disney is set forth in itsdefinitive proxy statement, which was filed with the SEC on January 16, 2009.Investors may obtain additional information regarding the interests of such participantsby reading the proxy statement/prospectus Disney and Marvel will file with the SECwhen it becomes available.Page 2

Bank of America Merrill Lynch 2009 Media,Communications & Entertainment ConferenceSeptember 9, 2009Bank of America Merrill Lynch2009 Media, Communications &Entertainment ConferenceSEPTEMBER 9, 2009Disney Speaker:Tom StaggsSenior Executive Vice President and Chief Financial OfficerPRESENTATIONJessica Reif Cohen – Analyst, Bank of America Merrill LynchWelcome Tom Staggs, Senior Executive Vice President and CFO from Disney, for a sitdown Q&A. So before we get into Marvel, let's start with a broad question. You and Bobhave said in the past that key priorities for Disney are one, to invest in quality contentusing your strongest brands; two, to leverage new platforms and technologies to deliverthis product and three, to better exploit international opportunities. So, what are theinvestment spending plans to fulfill this strategy over the next few years and maybeyou can touch on some of the key challenges?Tom Staggs – Senior Executive Vice President and Chief Financial Officer, The Walt Disney CompanySure. Happy to. I don't know who presented in front of me but there's a note pad infront of me which says “sell more tickets” so that's not bad either. I could go with that.We've talked for a while and had a pretty consistent focus on this notion of havingPage 3

Bank of America Merrill Lynch 2009 Media,Communications & Entertainment ConferenceSeptember 9, 2009high- quality content, especially branded content, that we think can cut through thisclutter of consumer choice, that we think has expanded and will continue to expand,and that's really been the centerpiece. We also think that focusing on the kind of contentthat can translate across different platforms--content platforms, distribution platforms-and also be able to be exported or leveraged in geographic markets around the world,and that's really been for some time now our focus, and so it does help define ourinvestment strategy. You said we'll get to Marvel in a minute so I'll honor that butobviously that is part of an investment that we have announced and intend to make thatwe think fits very well with that strategy so we'll come back to that in a second.Jessica Reif Cohen – Analyst, Bank of America Merrill LynchIt’s the next question.Tom Staggs – Senior Executive Vice President and Chief Financial Officer, The Walt Disney CompanyOkay, the next question. Even still, as we think about the investments in each of ourlines of business, we have that overall strategy in mind, and so whether it's investing inCalifornia Adventure here locally or an expansion of the park in Hong Kong, to makesure that we continue to differentiate that product, or as we focused our investment infilm around Disney-branded films and animation and the films that we think can farethe best in this environment, that really has defined how we thought about investing.The same could be said in cable. Key rights for ESPN, programming for ESPN that helpdifferentiate that content. It also includes programming of the Disney Channel,especially programming that we think is marquee programming, both domestically andin the Disney Channels around the world, as we increasingly grow that set ofdistribution platforms, which have a huge impact on our reach and the awareness andthe popularity of our properties around the world.That really is how we think about prioritizing our investment. But, I think somethingelse that's important is it's not just about having this stable of content and properties.The ability to leverage those properties across our different business lines and to do soin a way that's coordinated across business lines is fundamentally part of our businessapproach, our management approach. It's how people think about approaching thebusiness, frankly how people are compensated, and so that notion that we can use thedifferent pieces of business to extend the lives of our properties, increase the return-oninvestment in those properties, and frankly, develop new properties, so that we bolsterour overall stable of properties, is fundamental to what we do.Page 4

Bank of America Merrill Lynch 2009 Media,Communications & Entertainment ConferenceSeptember 9, 2009If you go back five years and look at our licensing business as a case in point, five yearsago, if you took Mickey Mouse and Winnie the Pooh, which are still two of our mostimportant property groups, that was over 60% of the licensing revenue, and in 2009they will be less than 40%. Now that’s not because they're in trouble. It's because we'vesuccessfully grown other properties, such as Princesses, Fairies and Cars so we have abroader, healthier base of business that we can capitalize on. I don't want to transitioninto your next question, but Marvel fits into that overall scheme exactly.Jessica Reif Cohen – Analyst, Bank of America Merrill LynchSo let's talk about Marvel then. There are many questions but let's start with the keyreasons for the acquisition and maybe you can touch on the timing of why now?Tom Staggs – Senior Executive Vice President and Chief Financial Officer, The Walt Disney CompanyWell, the key reasons really do relate to our thinking about our strategy and what fitswith that. We've said for some time that when we think about making an acquisition,we want to make sure that it fits strategically and it helps bolster our strategic position.We think that Marvel does that. It gives us a broader set of properties and it fits wellwith what we do. We think that Marvel, and they've done a very nice job over the lastseveral years of expanding their properties and the value of their properties, but we dothink that it's worth more inside of that business model that I just described than it is ona stand-alone basis, and that's why it made sense to us. It seems like any time someonedoes an acquisition, they get the question "why now”? When you find something that'sthe right strategic fit, one has to be opportunistic, and it makes sense that if there's anopportunity that presents itself that fits and that can create value, it behooves us to goafter it and that's what we did here.I don't think that -- we hadn't seen an opportunity previously. By the way, it's not thatthey were for sale at this point either, but we engaged in conversations because we wereconvinced of the strategic fit, and Bob Iger and Ike Perlmutter spent time talking aboutthe approach to business and what the companies might do together, and that quicklyturned to the real opportunity in bringing the companies together. That led to thediscussion about what it could look like in the context of an acquisition and that wascompelling.Page 5

Bank of America Merrill Lynch 2009 Media,Communications & Entertainment ConferenceSeptember 9, 2009Jessica Reif Cohen – Analyst, Bank of America Merrill LynchBefore we get to the opportunity let's go to the cost side. You said on the call after theacquisition, after you announced the acquisition, that in fiscal 2010 there will be midsingle digit dilution. Obviously there will be something in fiscal '11 because you said itwould be accretive in fiscal '12. Can you break out amortization in year one and beyondand can you break out what's deferred revenue as part of that?Tom Staggs – Senior Executive Vice President and Chief Financial Officer, The Walt Disney CompanyWell, let me say it this way because whenever we announce an acquisition, obviouslythe purchase accounting isn't done yet. You don't do the purchase accounting until afteryou close and you go through the process of doing the purchase accountingadjustments, so anything we do at this point is an estimate. I'd just emphasize that butwe try to be relatively conservative in making those estimates.If you take a look at the effect of purchase price accounting and therefore theamortization of intangibles that we would assume comes with the acquisition and thecosts, the fees involved in doing the acquisition, that coupled with the deferredaccounting, the deferred revenue impact, and I’ll come back to that, if you put thosetogether, that's what accounts for the dilution.So apart from that, it would be pretty much EPS-neutral to very marginally positive ifyou ignored those effects. The deferred revenue is important because to the extent that acompany that's being acquired has received cash and has planned to recognize thoserevenues, in many instances, those revenues were essentially a part of the purchaseaccounting adjustments and therefore deferred revenues that might have been realizedby a company on a stand-alone basis are not wholly recognized in the acquisitionscenario. That's the case here to a certain extent, so if you take purchase accounting andthe fees and the deferred revenue adjustment, that's really what drives the dilution.Jessica Reif Cohen – Analyst, Bank of America Merrill LynchOkay, can you give us any more color?Tom Staggs – Senior Executive Vice President and Chief Financial Officer, The Walt Disney CompanyWell, we mentioned the dilution was mid-single digits, so that gives you a sense ofwhat those effects are.Page 6

Bank of America Merrill Lynch 2009 Media,Communications & Entertainment ConferenceSeptember 9, 2009Jessica Reif Cohen – Analyst, Bank of America Merrill LynchWill fiscal 2011 dilution also be similar mid-single digits?Tom Staggs – Senior Executive Vice President and Chief Financial Officer, The Walt Disney CompanyWell, I think it's safe to assume that, we have said even with those effects, that wereached an accretive earnings impact by ‘12, so it gives a reasonably, other thantransaction fees, a reasonably smooth curve to get to that point, so '11 is a little betterthan '10 and then '12 we expect to be accretive.Jessica Reif Cohen – Analyst, Bank of America Merrill LynchHow much revenue do you expect to come from new characters versus establishedcharacters?Tom Staggs – Senior Executive Vice President and Chief Financial Officer, The Walt Disney CompanyAs we looked at the deal, the lion's share of the value that we depend upon in makingthe deal really comes from the most popular characters. We do think there's some valuefrom the rest of the library but I'm not going to break out specific percentages andfrankly a specific percentage will be what it will be as we go through and reallydiscover what's there. My gut feel is that there might be, we might have surprise on theupside when we dig into a library that's so vast, but in terms of saying what does it taketo make sense for us to make this deal and create value for our shareholders, the lion'sshare really comes from the best- known properties.Jessica Reif Cohen – Analyst, Bank of America Merrill LynchMarvel already has an area in Universal Orlando. What opportunities do you see forDisney in theme parks as well as the other divisions, consumer products obviously?Tom Staggs – Senior Executive Vice President and Chief Financial Officer, The Walt Disney CompanyWell, in theme parks, there are some restrictions in their existing deals and obviouslyit's absolutely our intention to honor existing deals that are in place, and rights thatothers may have in that regard, but as we get outside of Orlando and Spider-Man inJapan, we have an opportunity in theme parks, and over time we'll explore just howbest to take advantage of that, but I think that there is a real opportunity there.Page 7

Bank of America Merrill Lynch 2009 Media,Communications & Entertainment ConferenceSeptember 9, 2009Jessica Reif Cohen – Analyst, Bank of America Merrill LynchDo you think it would be confusing to consumers if you have a Spider-Man in Californiaand one in Universal in Orlando?Tom Staggs – Senior Executive Vice President and Chief Financial Officer, The Walt Disney CompanyWell, people tend to space their visits out so I'm guessing they could make the trip inthat amount of time and it's all fine.Jessica Reif Cohen – Analyst, Bank of America Merrill LynchOkay and consumer products, when you think about the different areas of growth fromMarvel as the different drivers, is consumer products the biggest area?Tom Staggs – Senior Executive Vice President and Chief Financial Officer, The Walt Disney CompanyWhen we think about synergies, I think the biggest opportunity really is in consumerproducts and licensing, and breaking it down from there, I think international isprobably the biggest piece of that. As you know, there are a number of licensing dealsin place, and we went through those in the context of our diligence and feel good aboutthose deals. On the licensing side, many of them are relatively short-term. There areopportunities and I think the synergies, over the next several years, I think we can reallystart to deliver some meaningful synergies. When we look at it, in the licensing side,here again, they've done a good job, but we have a broader licensing infrastructure, wehave key account relationships that we can leverage. So I think that we can broaden theexposure of these properties, both in terms of geographies and their international mixand across product lines, as we've done the last five or six years, really focusing onproduct development and having product development teams that can broaden thereach of the property. It's our intention and our hope that we can be successful in doingthat.Jessica Reif Cohen – Analyst, Bank of America Merrill LynchOkay, enough of Marvel then.Tom Staggs – Senior Executive Vice President and Chief Financial Officer, The Walt Disney CompanyAre you sure?Page 8

Bank of America Merrill Lynch 2009 Media,Communications & Entertainment ConferenceSeptember 9, 2009Jessica Reif Cohen – Analyst, Bank of America Merrill LynchI'm sure. We'll go to the audience later on with maybe more questions.On theme parks, just going through the divisions. On the last call, you indicated thatunderlying bookings, excluding the extra week in this fiscal quarter, were runningdown 7%. Has anything changed?Tom Staggs – Senior Executive Vice President and Chief Financial Officer, The Walt Disney CompanyRight, so you're giving the figure excluding the 53rd week, which I think is appropriate.Jessica Reif Cohen – Analyst, Bank of America Merrill LynchRight.Tom Staggs – Senior Executive Vice President and Chief Financial Officer, The Walt Disney CompanyThe trends in parks have been relatively stable. In the parks business, as you've seen,the volumes have held up pretty well. There's been a strong response to the promotionsthat we've put in place in the market, and so the trends that we've seen since the time ofthe earnings call have been relatively consistent with what we were seeing at that pointin time.Jessica Reif Cohen – Analyst, Bank of America Merrill LynchYou've announced a price increase recently. Does that have--you do extensive research-do you think that's impacting attendance or is the price elasticity low enough that thisreally doesn't have a material effect even in this economy?Tom Staggs – Senior Executive Vice President and Chief Financial Officer, The Walt Disney CompanyWell, we do take a close look and try to do as much research as we can reasonably doon that, and the answer is we think that the price increase is both reasonable, and giventhe value that people see in the parks, something that is acceptable to consumers. Nowas you know, we've had promotions in the marketplace and will continue to stay in themarketplace going forward to see what promotions are appropriate and I think it'simportant to also make sure we're taking the right price increases so that we don't losethat compounding effect when we return to a period of fewer promotions.Page 9

Bank of America Merrill Lynch 2009 Media,Communications & Entertainment ConferenceSeptember 9, 2009Jessica Reif Cohen – Analyst, Bank of America Merrill LynchSo you're not seeing a big impact from the price increases?Tom Staggs – Senior Executive Vice President and Chief Financial Officer, The Walt Disney CompanyI know you'll go still, so that's good.Jessica Reif Cohen – Analyst, Bank of America Merrill LynchOf course.Tom Staggs – Senior Executive Vice President and Chief Financial Officer, The Walt Disney CompanyNo, I think that the market has and will take that price increase in stride.Jessica Reif Cohen – Analyst, Bank of America Merrill LynchWhat's the percentage of fixed versus variable costs at this point?Tom Staggs – Senior Executive Vice President and Chief Financial Officer, The Walt Disney CompanyWell, we're sort of careful not to break down a specific percentage and not to be elusive,but because it's not actually a cut and dried answer. If you look at the experience theparks have had this year, I think last quarter, they lost about 2 points of margin versusthe prior year for the third quarter. I think that was pretty good performance and thecost measures that have been taken really break down into a few buckets. If you thinkabout it just from the standpoint of what's fixed versus what's variable, obviously ourdepreciation, our set maintenance schedule, the property taxes, those are as fixed asthey can get, but there's a whole host of costs that I would call semi-fixed and that's abig piece of it. We've got a high essentially fixed cost base in parks, which is reflectiveof the investment we've made to make sure that our parks are a differentiatedexperience, et cetera, but as you saw, revenues were down last quarter 9%, costs weredown probably about 7%, to show that they were able to respond to a certain extent.Certain of the actions they've taken have been back-of-house opportunities torestructure and be more efficient. I think those are on the order--and like permanentcost reductions.Page 10

Bank of America Merrill Lynch 2009 Media,Communications & Entertainment ConferenceSeptember 9, 2009Others have to do with volume. Their opportunities there have been somewhat limited,because as you know, our volumes have been relatively strong given the success of thepromotion that we've put in the marketplace.Our parks group does a good job every year of looking for cost efficiencies just in theiroperations, and that's an on-going thing, but also in a marketplace and an economy likewe've seen, there are certain things that we can and have done to mitigate normal costescalation in the business, whether it's in regard to salary expense or that sort of thing,and our ability to repeat that and replicate that to a large degree has to do with wherethe economy is and how quickly it recovers. To the extent there's economic recovery,it's hard to keep those costs, the increases completely in check.Jessica Reif Cohen – Analyst, Bank of America Merrill LynchRight. How different will the two new cruise ships look and what will the routes be?Tom Staggs – Senior Executive Vice President and Chief Financial Officer, The Walt Disney CompanyWell, the most important thing about the two new cruise ships is that they actually lookquite similar, just a lot bigger, sort of a couple of big brothers to the ships that we havenow. In terms of tonnage, they are nearly 50% bigger in terms of gross tonnage, sothese are pretty good-sized ships. And we expect the first one in our fiscal 2011,relatively early in the year, sailing some time probably second-quarterish.Given the space that we occupy in the cruise business, we really are a niche player incruise. This is for us a big expansion, obviously well more than a doubling of ourcapacity, but at the same time in the scheme of the cruise business, we'll still be a nicheplayer to the family niche, which will still be an attractive place for us to play.They are programmatically, stylistically very similar to the first ones. I think they aregoing to be new and improved and there will obviously be new features, including awater slide that's at the top deck that goes out over the water for thrill seekers, but we'repretty excited both about the design and the prospects.Jessica Reif Cohen – Analyst, Bank of America Merrill LynchAnd what's the increase in capacity for rooms?Tom Staggs – Senior Executive Vice President and Chief Financial Officer, The Walt Disney CompanyFor the staterooms?Page 11

Bank of America Merrill Lynch 2009 Media,Communications & Entertainment ConferenceSeptember 9, 2009Jessica Reif Cohen – Analyst, Bank of America Merrill LynchYes.Tom Staggs – Senior Executive Vice President and Chief Financial Officer, The Walt Disney CompanyI think that we've got about, I'm trying to remember the exact number of staterooms,but it's not a 50% increase in the capacity but it's 25% or so.Jessica Reif Cohen – Analyst, Bank of America Merrill LynchAnd are the routes going to be very different?Tom Staggs – Senior Executive Vice President and Chief Financial Officer, The Walt Disney CompanySorry?Jessica Reif Cohen – Analyst, Bank of America Merrill LynchAre the routes going to be very different?Tom Staggs – Senior Executive Vice President and Chief Financial Officer, The Walt Disney CompanyOh, the routes that they take?Jessica Reif Cohen – Analyst, Bank of America Merrill LynchYes.Tom Staggs – Senior Executive Vice President and Chief Financial Officer, The Walt Disney CompanyI thought you were talking about their genealogy. The first two are Italian and the nexttwo are German so they've got different roots.We haven't announced the routes as yet, but there will be new routes that we'llintroduce as the new ships come on-line. We've had very good success with newitineraries as we try out itineraries so we're excited about the possibility of opening upnew routes even as we have the new ships so we'll have something to sell on both sides.Page 12

Bank of America Merrill Lynch 2009 Media,Communications & Entertainment ConferenceSeptember 9, 2009Jessica Reif Cohen – Analyst, Bank of America Merrill LynchAnd will the economics be very different from the first two ships?Tom Staggs – Senior Executive Vice President and Chief Financial Officer, The Walt Disney CompanyI think in terms of our return of capital, I think they'll be quite consistent. I've said in thepast that we see our cruise business giving us sort of mid-teens return on investedcapital, and once we get past the initial period there, I think that we'll see a similar kindof return on the new ships and the business overall as we get to steady state.Jessica Reif Cohen – Analyst, Bank of America Merrill LynchBefore we leave the theme parks area, one last question on Disney Vacation Clubs.Have you seen any improvement in trends?Tom Staggs – Senior Executive Vice President and Chief Financial Officer, The Walt Disney CompanyWell, actually, the Disney Vacation Club trends have continued to be quite strongthroughout, and they've been aided by the fact that we brought on some new propertiesduring that period of time that I think have really generated a lot of excitement andhelped sales. The addition that we made next to the Contemporary, which is somethingthat people have been hoping for, something on the monorail, for some time down inFlorida, that was very well-received and so the volume of sales for the Vacation Clubhave really been quite solid, so we're encouraged by that.Jessica Reif Cohen – Analyst, Bank of America Merrill LynchOkay, let's move over to the networks. What is the current scatter in terms of calendarthird quarter for broadcasting and for cable?Tom Staggs – Senior Executive Vice President and Chief Financial Officer, The Walt Disney CompanyWhat are the trends?Jessica Reif Cohen – Analyst, Bank of America Merrill LynchYes. What's the time to market?Page 13

Bank of America Merrill Lynch 2009 Media,Communications & Entertainment ConferenceSeptember 9, 2009Tom Staggs – Senior Executive Vice President and Chief Financial Officer, The Walt Disney CompanyWe've talked in the last couple of quarters about the fact that we've seen a return tosome more stabilization in the ad market and that continues to be true. There seems tobe a much more stable market there but recently we've seen some encouraging signs,especially in national ad sales. Not enough or a little too early for me to declare victoryor anything but some encouraging signs there. At ESPN, at the network, I think thatimprovement bodes well in scatter.Jessica Reif Cohen – Analyst, Bank of America Merrill LynchA few people, a few presenters earlier have mentioned that auto seems to be comingback?Tom Staggs – Senior Executive Vice President and Chief Financial Officer, The Walt Disney CompanyWell, on the local basis, I wouldn't call a rebound in auto. We've seen some politicalstrength in a couple of markets in local, and as I said the local has firmed some, but nota turnaround. On the national level, the auto industry has gotten a little bit more activeand I think it is an encouraging sign. So as I said, it's a little early and we'll wait and seebut I'm cautiously optimistic about the trends.Jessica Reif Cohen – Analyst, Bank of America Merrill LynchAnd can you give us a wrap-up of how you did in broadcastin

Forward-Looking Statements: Certain statements in this communication may constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Such . Bank of America Merrill Lynch 2009 Media, Commun