Walt Disney Company (DIS)

Cable Networks

Operating income at Cable Networks increased $27 million to $544 million for the quarter driven by increases at the worldwide Disney Channels and ESPN, partially offset by a decrease in income from equity investments. The increase at the worldwide Disney Channels was driven by higher affiliate revenue due to subscriber growth internationally and higher contractual rates domestically. The increase at ESPN was due to higher affiliate and advertising revenue, partially offset by higher programming and production costs. The increase in affiliate revenue was primarily due to higher contractual rates and subscriber growth, including growth from the launch of a new network in the United Kingdom while higher advertising revenue was due to an increase in sold inventory, partially offset by lower rates. Higher programming and production costs reflected costs for soccer programming rights for the new network in the United Kingdom and increased contractual costs for college football and NFL programming. Decreased equity income was driven by increased programming and restructuring costs, partially offset by higher advertising and affiliate revenue at A&E Television Networks (AETN) which now includes the Lifetime networks. Restructuring charges at AETN were primarily for severance costs as a result of the combination of AETN and Lifetime in the fourth quarter of fiscal 2009.

Cable Networks

Operating income at Cable Networks increased $121 million to $4.3 billion for the year due to growth at ESPN and at ABC Family, partially offset by the impact associated with the transition of Jetix to Disney-branded channels. The growth at ESPN was driven by higher affiliate revenue primarily due to contractual rate increases and, to a lesser extent, the impact of the additional week of operations and subscriber growth, partially offset by decreased advertising revenue and higher programming costs. The decrease in advertising revenues was due to a decrease in units sold, partially offset by higher rates. Higher programming costs reflected contractual rate increases for key rights contracts and the cost of new and renewed rights agreements for college and international sports programming.

Operating income growth at ABC Family reflected higher advertising and affiliate revenue. Increased advertising revenue at ABC Family was primarily due to higher units sold and higher rates while increased affiliate revenue was driven by higher rates. At the worldwide Disney Channels, increased affiliate revenue due to subscriber growth and contractual rate increase was largely offset by lower DVD sales.

For the quarter, operating income at Cable Networks increased 19% to $1.5 billion primarily due to an increase at ESPN and, to a lesser extent, the worldwide Disney Channels. The growth at ESPN was driven by higher affiliate revenue, partially offset by higher programming costs. Higher affiliate revenue reflected increased recognition of previously deferred revenues related to annual programming commitments, the impact of the additional week of operations and contractual rate increases. During the quarter, ESPN recognized $128 million more in net deferred revenues related to programming commitments than in the prior-year quarter. Programming cost increases at ESPN for the quarter reflected similar impacts as discussed above for the year. Growth at the worldwide Disney Channels was driven by higher affiliate revenues due to international subscriber growth, partially offset by lower DVD sales.

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Cable Networks

Operating income at Cable Networks decreased 8% to $1.1 billion for the quarter driven by a decrease in revenue recognized related to annual programming commitments and lower advertising revenue at ESPN, partially offset by the benefit of contractual rate increases and subscriber growth on affiliate revenue. The decrease in revenue recognized related to annual programming commitments was due to the timing of sports programming. During the quarter, we had a net deferral of $37 million of revenue compared to the prior-year quarter when we recognized $79 million of previously deferred revenue. The Company expects that the balance of deferred revenue as of the end of the quarter will be recognized in the fourth quarter. The decrease in advertising revenues was due to a decrease in units sold, partially offset by higher rates.

Cable Networks

Operating income at Cable Networks increased 5% to $1.1 billion for the quarter due to growth at ESPN, ABC Family and the domestic Disney Channel. The growth at ESPN was driven by higher affiliate revenue primarily due to contractual rate increases partially offset by decreased advertising revenues and higher programming costs. The decrease in advertising revenues was due to a decrease in sold inventory, partially offset by higher rates. Operating income growth at ABC Family reflected higher advertising and affiliate revenue, both of which were driven by higher rates, along with higher sold advertising units, while growth at the domestic Disney Channel was driven by higher affiliate revenue due to higher rates.

Cable Networks

Operating income at Cable Networks decreased $69 million to $517 million for the quarter driven by decreases at the domestic Disney Channels and at ESPN. The decrease at the domestic Disney Channels was due to lower DVD sales reflecting the success of High School Musical 2 in the prior-year quarter. The decrease at ESPN was primarily due to lower advertising revenues and higher programming and administrative costs, partially offset by higher affiliate revenue. The decrease in advertising revenues was due to a decrease in sold inventory, partially offset by higher rates. Higher programming costs reflected increased costs for NFL programming. The increase in affiliate revenue was due to higher contractual rates and, to a lesser extent, subscriber growth.

Cable Networks

Operating income at Cable Networks increased $523 million to $4.1 billion for the year driven by increases at ESPN, higher income at our cable equity investments, and increases at ABC Family and the domestic Disney Channels, partially offset by a favorable settlement of a claim with a distributor in the prior year at the international Disney Channels. The growth at ESPN was driven by higher affiliate and advertising revenue, partially offset by higher programming, administrative and marketing costs. The increase in affiliate revenue was due to contractual rate increases and subscriber growth. Increased advertising revenues reflected improved rates and ratings. Growth at our cable equity investments was primarily due to higher affiliate and advertising revenue at Lifetime and a gain on the sale of a European cable channel. The growth at ABC Family was primarily due to the absence of Major League Baseball programming costs, higher affiliate revenue reflecting contractual rate increases, and higher advertising revenue reflecting higher average ratings and rates. The increase at the domestic Disney Channel was primarily due to higher affiliate revenue reflecting subscriber growth and contractual rate increases and strong DVD sales of High School Musical 2.

For the quarter, operating income at Cable Networks increased $116 million to $1.2 billion primarily due to growth at ESPN, higher income at our cable equity investments, and increases at the domestic Disney Channel and at ABC Family Channel, partially offset by the favorable settlement of a claim with a distributor in the prior-year quarter. The growth at ESPN was driven by higher affiliate revenue, partially offset by lower advertising revenue. Higher affiliate revenue was due to contractual rate increases, subscriber growth and increased recognition of previously deferred revenues related to annual programming commitments. During the quarter, ESPN recognized $396 million of previously deferred revenue compared to $359 million in the prior-year quarter. Growth at our cable equity investments was primarily due to a gain on the sale of a European cable channel and higher affiliate and advertising

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revenue at Lifetime. The growth at the domestic Disney Channel was primarily due to higher affiliate revenue driven by subscriber growth and contractual rate increases, while the increase at ABC Family Channel was due to higher affiliate revenue driven by contractual rate increases and higher advertising revenue due to higher average ratings and rates.

Cable Networks

Operating income at Cable Networks increased 14% to $1.2 billion for the quarter primarily due to growth at ESPN and, to a lesser extent, higher income from our cable equity investments and an increase at the international Disney Channels. The growth at ESPN was driven by higher affiliate and advertising revenue, partially offset by higher programming and production, administrative and marketing costs. The increase in affiliate revenue was primarily due to contractual rate increases, subscriber growth, and increased recognition of previously deferred revenue related to annual programming commitments. Higher programming and production costs reflected increased sports rights costs for various sporting events and included production costs for additional NBA games. During the quarter, ESPN recognized $78 million of previously deferred revenues compared to $49 million in the prior-year quarter. Remaining deferred revenues of $396 million as of the end of the current quarter are expected to be recognized in the fourth quarter of the fiscal year compared to $359 million recognized in the fourth quarter of the prior year. Higher income from our cable equity investments was primarily due to the recognition of previously deferred revenues in connection with finalizing certain affiliate contracts at ESPN’s Star Sports joint venture in Asia and higher advertising revenues at Lifetime. Increased operating income at the international Disney Channels reflected higher affiliate revenues due to subscriber growth.

Cable Networks

Operating income at Cable Networks increased 14% to $1.1 billion for the quarter primarily due to growth at ESPN and, to a lesser extent, higher income from our cable equity investments. The growth at ESPN was driven by higher affiliate revenue primarily due to contractual rate increases and subscriber growth, and advertising revenues driven by higher rates, partially offset by higher programming, administrative and marketing costs. Higher programming costs were driven by increased rights costs arising from college basketball contract renewals. Growth from our cable equity investments was primarily due to higher affiliate and advertising revenue at Lifetime and A&E.

Cable Networks

Operating income at Cable Networks increased $125 million to $586 million for the quarter driven by increases at ABC Family Channel and the domestic Disney Channels. Growth at ABC Family Channel was due to the absence of programming costs for Major League Baseball and higher affiliate and advertising revenue, both of which were driven by higher rates. The growth at the domestic Disney Channels

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was primarily due to strong DVD sales of High School Musical 2 and higher affiliate revenue due to contractual rate increases and subscriber growth.

At ESPN, both advertising and affiliate revenues grew, offset by higher programming and production costs. Increased advertising revenue and programming and production costs reflected the addition of NASCAR programming. The increase in affiliate revenue was due to higher contractual rates and subscriber growth, partially offset by $53 million of incremental programming covenant revenue deferrals. Total revenue deferrals for the quarter were $234 million, which are expected to be recognized in the second half of the fiscal year.

Cable Networks

Operating income at Cable Networks increased $577 million to $3.6 billion for the year driven by increases at ESPN, the international Disney Channels and the domestic Disney-ABC Cable Networks. The growth at ESPN was primarily due to higher affiliate revenues, driven by contractual rate increases and subscriber growth, and higher advertising revenues. Higher advertising revenues reflected the addition of NASCAR programming in the current year. Operating income at ESPN also benefited from lower costs associated with mobile phone operations, which have transitioned to a licensing model. The increases at ESPN were partially offset by higher programming and production costs driven by the addition of NASCAR. Growth at the international Disney Channels was primarily due to increased affiliate revenue from subscriber growth and proceeds from the settlement of a claim with a distributor. The increase at the domestic Disney-ABC Cable Networks was due to higher affiliate revenues reflecting subscriber growth and rate increases, higher DVD unit sales driven by High School Musical and increased advertising revenues, partially offset by higher programming costs.

For the quarter, operating income at Cable Networks increased $255 million to $1.1 billion primarily due to growth at ESPN and, to a lesser extent, the international Disney Channels. The growth at ESPN was driven by higher affiliate and advertising revenues, partially offset by higher programming and production costs. Higher affiliate revenues were due to increased recognition of previously deferred revenues related to annual programming commitments, higher contractual rates and subscriber growth. During the quarter, ESPN recognized $359 million of previously deferred revenues compared to $171 million in the prior-year quarter. Higher advertising revenues and increased programming costs reflected the addition of NASCAR programming in the

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current year. Growth at the international Disney Channels was primarily due to the settlement of the distributor claim and higher affiliate revenues driven by subscriber growth.

Cable Networks

Operating income at Cable Networks increased $88 million to $1.1 billion for the quarter primarily due to growth at ESPN and at the domestic Disney/ABC Cable Networks. The growth at ESPN was driven by higher affiliate revenues due to contractual rate increases and subscriber growth, partially offset by decreased recognition of previously deferred revenues related to annual programming commitments. Operating income at ESPN also benefited from lower costs associated with mobile phone operations, which have transitioned to a licensing model since the prior-year period. During the quarter, ESPN recognized $49 million of previously deferred revenues compared to $106 million in the prior-year quarter. The remaining deferred revenues totaling $359 million as of the end of the current quarter are expected

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to be recognized in the fourth quarter of the fiscal year compared to $171 million of deferred revenues which were recognized in the fourth quarter of the prior year. Increased operating income at the domestic Disney/ABC Cable Networks reflected higher affiliate and advertising revenues. Growth in affiliate revenues was primarily due to higher contractual rates and subscriber growth.

Cable Networks

Operating income at Cable Networks increased $154 million to $963 million for the quarter primarily due to growth at ESPN and, to a lesser extent, the international Disney Channels. The growth at ESPN was driven by higher affiliate revenues due to contractual rate increases and subscriber growth, higher advertising sales and lower costs, partially offset by higher revenue deferrals related to programming commitments. Lower costs reflected the airing of one fewer regular season NFL game and the benefit of the transition of ESPN’s mobile phone operations to a licensing model. Revenue deferrals for the quarter increased by $85 million compared to the prior-year quarter primarily due to annual programming commitments in new affiliate contract provisions. The deferred revenues are expected to be recognized in the second half of the fiscal year. The increase at the international Disney Channels was primarily due to subscriber growth and a settlement of a claim in the bankruptcy of a distributor, partially offset by higher programming and other costs.

Cable Networks

Operating income at Cable Networks increased $81 million to $453 million for the quarter, driven by increases at the international Disney Channels and domestic Disney/ABC cable networks. The increase at the international Disney Channels was primarily due to subscriber growth while the increase at the domestic cable networks was driven by DVD sales of High School Musical and higher affiliate and advertising revenues.

At ESPN, increases in affiliate revenue, primarily due to contractual rate increases, and advertising revenue, driven by higher advertising sales from Monday Night Football (MNF) compared to Sunday Night Football in the prior-year quarter, were more than offset by higher programming costs associated with MNF and higher revenue deferrals related to programming commitments. Revenue deferrals for the quarter increased by $60 million compared to the prior-year quarter due to annual programming commitments in new affiliate contract provisions. The deferred revenues are expected to be recognized in the second half of the fiscal year.

Cable Networks

Operating income at Cable Networks increased $259 million to $3.0 billion for the year primarily due to growth at ESPN from higher affiliate and advertising revenues. Higher affiliate revenues were due to contractual rate increases and, to a lesser extent, subscriber growth while advertising revenue growth was driven by higher ratings and rates. The revenue increases at ESPN were partially offset by higher programming expenses primarily due to the new Major League Baseball (MLB) and National Football League (NFL) rights agreements and an additional NFL game. Increased costs for the ESPN branded mobile phone service, which the Company recently announced would be transitioned into its existing wireless licensing business, and higher general and administrative costs also impacted results for the year.

For the quarter, operating income at Cable Networks increased $156 million to $854 million due to growth at ESPN. The increase at ESPN was driven by higher affiliate and advertising revenues and lower marketing expenses. Higher affiliate revenues were due to the recognition of increased deferred revenues and higher contractual rates. During the quarter, ESPN recognized $171 million of previously deferred programming commitment revenues compared to $84 million in the prior-year quarter. These increases in ESPN operating income were partially offset by the higher programming expenses from the new MLB and NFL rights agreements and the additional NFL game.

Cable Networks

Operating income at Cable Networks increased $130 million to $969 million for the quarter primarily due to growth at ESPN. The increase at ESPN was driven by higher affiliate revenues from contractual rate increases, increased recognition of previously deferred revenues related to annual programming commitments and higher advertising revenues from higher ratings. During the quarter, ESPN recognized $106 million of previously deferred programming commitment revenues compared to $42 million in the prior-year quarter driven by new programming commitment provisions in affiliate contracts. The revenue increases at ESPN were partially offset by higher programming expenses, primarily due to the new Major League Baseball rights agreement, and increased costs associated with ESPN branded mobile phone services. Cable Networks operating income also benefited from the absence of an impairment charge for a cable television investment, which was recorded in the prior-year quarter, and growth at the domestic Disney Channel.