Walt Disney Company (DIS)

Consumer Products

Consumer Products revenues for the quarter decreased 3% to $746 million and segment operating income decreased 8% to $243 million.

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Lower segment operating income was primarily due to decreased earned licensing revenue across a number of product categories driven by lower performance of High School Musical and Hannah Montana merchandise.

CONSUMER PRODUCTS

The Consumer Products segment engages with licensees, manufacturers, publishers and retailers throughout the world to design, develop, publish, promote and sell a wide variety of products based on existing and new Disney characters and other Company intellectual property through its Merchandise Licensing, Publishing and Retail businesses. In addition to leveraging the Company’s film and television properties, Consumer Products also develops new intellectual property with the potential of also being used in the Company’s other businesses.

Consumer Products

Revenues

Revenues were essentially flat at $2.4 billion as an increase of $131 million at our retail business was offset by decreases of $86 million at Merchandise Licensing and $44 million at Publishing. The increase at our retail business was primarily due to the acquisition of the Disney Stores North America during the third quarter of fiscal 2008 (see discussion of the Disney Stores acquisition below), partially offset by the unfavorable impact of foreign currency translation at The Disney Stores Europe as a result of the strengthening of the U.S. dollar against the British pound and Euro. The decrease at Merchandise Licensing was primarily due to lower earned royalty revenue across multiple product categories due to the difficult retail environment as well as the strength of Hannah Montana and High School Musical properties in the prior year. The decrease at Publishing reflected lower magazine sales driven by the closure of Wondertime magazine.

Costs and Expenses

Costs and expenses, which consist primarily of cost of sales, salaries and benefits, marketing and occupancy, increased 11%, or $181 million, to $1.8 billion primarily due to an increase at our retail business, partially offset by a decrease at Publishing. The increase at retail was due to the acquisition of the Disney Stores North America in the third quarter of fiscal 2008, partially offset by a favorable impact of foreign currency translation at The Disney Stores Europe as a result of the strengthening of the U.S. dollar against the British pound and Euro. The decrease at Publishing reflected lower cost of sales and other operating costs.

Segment Operating Income

Segment operating income decreased 22%, or $169 million, to $609 million due to lower results at Merchandise Licensing and at our retail business, which reflected the adverse impact of a full year of company-owned operations at the Disney Stores North America in fiscal 2009 whereas the prior year included five months of company-owned operations and seven months of licensed operations.

Disney Stores Acquisition

On April 30, 2008, the Company acquired certain assets of the Disney Stores North America for approximately $64 million of cash from, and terminated its long-term licensing arrangement for the Disney Stores with, The Children’s Place, the former licensee. The Company acquired the inventory, leasehold improvements, and certain fixed assets of, and assumed the leases on, 229 stores. The Company conducted the wind-down and closure of an additional 88 stores but did not assume the leases on these stores.

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Consumer Products

Revenues

Revenues increased 21%, or $425 million, to $2.4 billion, due to increases of $196 million at our retail business and $181 million at Merchandise Licensing.

The increase at our retail business was due to the acquisition of the Disney Stores North America during the third quarter of fiscal 2008. The revenue growth at Merchandise Licensing was primarily due to higher earned royalties across multiple product categories, led by Hannah Montana and High School Musical merchandise, partially offset by lower recognition of minimum guarantee revenues.

Costs and Expenses

Costs and expenses increased 26%, or $336 million, to $1.6 billion primarily due to the acquisition of the Disney Stores North America during the third quarter of fiscal 2008, and higher salary and benefits expenses and increased participation costs at Merchandise Licensing.

Segment Operating Income

Segment operating income increased 13%, or $89 million, to $778 million due to growth at Merchandise Licensing, partially offset by a decrease at our retail business.

Consumer Products

The Company licenses the name “Walt Disney,” as well as the Company’s characters and visual and literary properties, to various manufacturers, 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. The Disney Store is owned and operated in Europe and North America and franchised in Japan. The Company publishes entertainment and educational books and magazines for children and families.

Consumer Products

Consumer Products revenues for the year were essentially flat at $2.4 billion, and segment operating income decreased 22% to $609 million. For the quarter, revenues decreased 12% to $646 million, and segment operating income decreased 28% to $151 million.

Lower operating income for the year and quarter reflected the effect of the difficult global retail environment across our licensing, retail and publishing businesses as well as the strength of Hannah Montana and High School Musical properties in the prior year. Our retail operations reflected the adverse impact of a full year of company-owned operations at the Disney Stores North America in fiscal 2009 whereas the prior year included five months of company-owned operations and seven months of licensed operations.

5

Consumer Products

Consumer Products revenues for the quarter decreased 10% to $510 million and segment operating income decreased 37% to $96 million.

Lower segment operating income was due to a decrease at our retail business driven by the Disney Stores North America and lower earned royalty revenue across

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multiple product categories at Merchandise Licensing due to the difficult retail environment. The decrease at the Disney Stores North America reflected a full period of operations in the current quarter whereas the prior-year quarter included a partial period of operations and royalty revenue from the former licensee.

Consumer Products

Revenues

Revenues for the quarter increased 9%, or $39 million, to $496 million, primarily due to an increase of $50 million at our retail business, which reflected the acquisition of the Disney Stores North America during the third quarter of fiscal 2008 partially offset by decreases of $14 million at Disney Publishing Worldwide primarily due to lower book sales and $11 million at Merchandise Licensing driven by lower earned royalty revenue across multiple product categories.

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS – (continued)

Costs and Expenses

Costs and expenses, which consist primarily of cost of sales, salaries and benefits, marketing, and occupancy, increased 22%, or $71 million, to $401 million, primarily due to an increase at our retail business driven by the acquisition of the Disney Stores North America, partially offset by lower sales and marketing costs at Disney Publishing Worldwide.

Operating Income

Segment operating income decreased 24%, or $30 million, to $97 million, primarily due to lower results at our retail business and a decline in earned royalties at Merchandise Licensing.

Consumer Products

Revenues

Revenues for the six months increased 14%, or $158 million, to $1.3 billion, due to an increase of $164 million at our retail business due to the acquisition of the Disney Stores North America during the third quarter of fiscal 2008.

Costs and Expenses

Costs and expenses increased 30%, or $212 million, to $909 million, primarily due to an increase at our retail business driven by the acquisition of the Disney Stores North America as well as higher selling and administrative costs.

Operating Income

Segment operating income decreased 13%, or $52 million, to $362 million, primarily due to lower results at our retail business and higher selling and administrative costs.

Consumer Products

Consumer Products revenues for the quarter increased 9% to $496 million, and segment operating income decreased 24% to $97 million. The revenue increase was due to the acquisition of the Disney Stores North America in the third quarter of

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fiscal 2008, partially offset by a decrease in earned royalty revenue at Merchandise Licensing.

Lower segment operating income was due to the acquisition of the Disney Stores North America and lower earned royalty revenue across multiple product categories at Merchandise Licensing. At the Disney Stores North America, the increase in revenues due to the acquisition was more than offset by the related operating costs and the absence of royalties from the former licensee.

Consumer Products

Consumer Products revenues for the quarter increased 18% to $773 million, and segment operating income decreased 8% to $265 million. The revenue increase was due to the acquisition of the Disney Stores North America. At merchandise licensing, earned royalty revenue was comparable to the prior-year quarter.

The decrease in operating income in the quarter was due to lower results at our retail business, including the absence of royalties from the former licensee of the Disney Stores North America, and higher selling and administrative costs.

Consumer Products

Revenues

Revenues for the quarter increased 18%, or $119 million, to $773 million, primarily due to an increase of $114 million at our retail business due to the acquisition of the Disney Stores North America during the third quarter of fiscal 2008. At Merchandise Licensing, revenue was comparable to the prior-year quarter.

Costs and Expenses

Costs and expenses, which consist primarily of cost of sales, salaries and benefits, marketing, and occupancy, increased 38%, or $141 million, to $508 million, primarily due to an increase at our retail business driven by the acquisition of the Disney Stores North America as well as higher selling and administrative costs.

Operating Income

Segment operating income decreased 8%, or $22 million, to $265 million, driven by lower results at our retail business, including the absence of royalties from the former licensee for the Disney Stores North America, and higher selling and administrative costs.

Consumer Products

The Company licenses the name “Walt Disney,” as well as the Company’s characters and visual and literary properties, to various manufacturers, retailers, show promoters, and publishers throughout the world. The Company also engages in retail and online distribution of products through The Disney Store and DisneyShopping.com. The Disney Store is owned and operated in Europe and North America and franchised in Japan. In fiscal 2008, the Company re-acquired certain assets of the Disney Stores North America from subsidiaries of The Children’s Place Retail Stores, Inc. (TCP). See Note 3 for discussion on the acquisition of the Disney Stores North America. The Company publishes books and magazines for children and families for the entertainment and educational marketplace.

Consumer Products

Consumer Products

Revenues

Revenues increased 9%, or $182 million, to $2.3 billion, primarily due to increases of $102 million at Merchandise Licensing and $61 million at Disney Interactive Studios. Growth at Merchandise Licensing was due to higher earned royalties across multiple product categories led by the strong performance of Cars merchandise. Growth at Disney Interactive Studios was due to the performance of fiscal 2007 titles driven by Pirates of the Caribbean: At World’s End, Spectrobes and Meet the Robinsons compared to fiscal 2006 titles, which included The Chronicles of Narnia and Chicken Little. These gains were partially offset by lower contractual minimum guarantee revenues.

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Costs and Expenses

Costs and expenses increased 9%, or $130 million, primarily due to an increase at Disney Interactive Studios due to higher cost of sales, video game development costs and marketing costs and higher salaries and benefits at Merchandise Licensing.

Segment Operating Income

Segment operating income increased 4%, or $24 million, to $631 million, driven by higher earned royalties at Merchandise Licensing, partially offset by the increased investment in video game development at Disney Interactive Studios.

Consumer Products

Consumer Products revenues for the year increased 26% to $2.9 billion, and segment operating income increased 14% to $718 million. For the quarter, revenues increased 41% to $812 million, and segment operating income increased 14% to $176 million. Operating income growth for the year and quarter was primarily due to an increase at Merchandise Licensing, partially offset by a decrease at the Disney Stores.

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The increase at Merchandise Licensing for both the year and quarter was primarily due to higher earned royalties across multiple product categories, led by Hannah Montana and High School Musical merchandise.

At the Disney Stores, the increase in revenues for both the year and the quarter due to the acquisition of the Disney Stores in North America during the third quarter was more than offset by related operating costs and the absence of licensing revenue from the former licensee.

Consumer Products

Consumer Products revenues for the quarter increased from $537 million to $642 million and segment operating income decreased from $118 million to $113 million. The acquisition of the Disney Stores in North America drove a significant portion of the revenue increase for the quarter.

4

Lower segment operating income for the quarter was driven by a decrease at Disney Interactive Studios which was largely offset by an increase in earned revenue at Merchandise Licensing driven by the success of Hannah Montana and High School Musical merchandise. The decrease at Disney Interactive Studios was due to lower sales of self-published video games due to the strong performance in the prior-year quarter of games based on Pirates of the Caribbean: At World’s End compared to The Chronicles of Narnia: Prince Caspian and High School Musical in the current quarter and higher video game development costs.

The increase in revenues due to the acquisition of the Disney Stores in North America was offset by the related operating costs and the absence of licensing revenue from the former licensee.

Consumer Products

Revenues

Revenues increased 21%, or $351 million, to $2.1 billion, due to increases of $123 million at the Disney Stores, $118 million at Disney Interactive Studios and $111 million at Merchandise Licensing.

The increase at the Disney Stores was driven by the acquisition of the Disney Stores in North America. The revenue growth at Disney Interactive Studios was primarily due to the strong performance of new self-published titles including High School Musical, Turok, and Hannah Montana in the current period compared to Pirates of the Caribbean: At World’s End, Spectrobes and Meet the Robinsons in the prior-year period. The increase in Merchandise Licensing revenues was driven by higher earned royalties across multiple product categories, led by Hannah Montana and High School Musical merchandise, partially offset by lower recognition of minimum guarantee revenues.

Costs and Expenses

Costs and expenses increased 23%, or $286 million, to $1.5 billion primarily due to higher cost of sales, video game development costs and marketing costs at Disney Interactive Studios, higher operating costs at the Disney Stores due to the acquisition of the Disney Stores in North America and higher salaries and benefits and participation costs with respect to certain licensed properties at Merchandise Licensing.

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS — (continued)

Segment Operating Income

Segment operating income increased 14%, or $66 million, to $542 million due to growth at Merchandise Licensing.

Consumer Products

Revenues

Revenues increased 21%, or $246 million, to $1.4 billion primarily due to increases of $150 million at Disney Interactive Studios and $68 million at Merchandise Licensing.

The revenue growth at Disney Interactive Studios was primarily due to the strong performance of new self-published titles including High School Musical, Turok, and Hannah Montana in the current period compared to Meet the Robinsons and Spectrobes in the prior-year period. The increase in Merchandise Licensing revenues was primarily due to higher earned royalties across multiple product categories, led by Hannah Montana and High School Musical merchandise, partially offset by lower recognition of minimum guarantee revenues.

Costs and Expenses

Costs and expenses increased 22%, or $176 million, to $993 million primarily due to higher cost of sales, video game development costs and marketing costs at Disney Interactive Studios and higher operating costs at Merchandise Licensing.

Segment Operating Income

Segment operating income increased 20%, or $71 million, to $429 million primarily due to increases at Merchandise Licensing and Disney Interactive Studios.

Consumer Products

Consumer Products revenues for the quarter increased 10% to $551 million and segment operating income decreased 14% to $107 million. Lower segment operating income for the quarter was primarily due to lower recognition of minimum guarantee revenues at Merchandise Licensing and decreased revenue from licensed product at Disney Interactive Studios reflecting our continuing transition towards self-published titles. These decreases were partially offset by

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higher earned royalties at Merchandise Licensing and higher sales of self-published titles at Disney Interactive Studios. Higher earned royalties were driven by sales of Hannah Montana and High School Musical merchandise and increased sales at Disney Interactive Studios reflected the performance of Turok and High School Musical in the current quarter compared to Meet the Robinsons and Spectrobes in the prior-year quarter.

Consumer Products

Revenues

Revenues for the quarter increased 29%, or $197 million, to $870 million, primarily due to increases of $118 million at Disney Interactive Studios and $64 million at Merchandise Licensing. Growth at Disney Interactive Studios was primarily due to the success of new self-published titles based on High School Musical and Hannah Montana. Growth at Merchandise Licensing was due to higher earned royalties across multiple product categories, led by the strong performance of Hannah Montana and High School Musical merchandise.

Costs and Expenses

Costs and expenses, which consist primarily of cost of sales, salaries and benefits, marketing, and video game development, increased 25%, or $109 million, to $548 million, due to higher cost of sales and video game development costs at Disney Interactive Studios.

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS—(continued)

Operating Income

Segment operating income increased 38%, or $88 million, to $322 million, primarily due to higher earned revenues at Merchandise Licensing and increased unit sales of self-published titles at Disney Interactive Studios.

Consumer Products

Consumer Products revenues for the quarter increased 29% to $870 million and segment operating income increased 38% to $322 million. Segment operating income growth was primarily due to increases at Merchandise Licensing and Disney Interactive Studios.

Growth at Merchandise Licensing was driven by higher earned royalties across multiple product categories, led by the strong performance of Hannah Montana and High School Musical merchandise. The growth at Disney Interactive Studios was primarily due to the success of new self-published titles based on High School Musical and Hannah Montana in the current quarter, partially offset by higher video game development costs.

Consumer Products

Revenues

Revenues increased 3%, or $66 million, to $2.2 billion, primarily due to increases of $112 million at Disney Interactive Studios and $91 million at Merchandise Licensing. These increases were partially offset by a decrease of $106 million at the Disney Stores primarily due to the sale of The Disney Store North America chain in the first quarter of 2005.

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Sales growth at Disney Interactive Studios was due to the release of self-published titles based on The Chronicles of Narnia: The Lion, The Witch and The Wardrobe, Chicken Little, and Pirates of the Caribbean. Sales growth at Merchandise Licensing was driven by higher earned royalties across multiple product categories, led by the strong performance of Cars, Disney Princess, and Pirates of the Caribbean merchandise.

Costs and Expenses

Costs and expenses were essentially flat at $1.6 billion as decreases at The Disney Stores were offset by increases at Disney Interactive Studios. The decrease in costs at The Disney Stores was primarily due to the sale of The Disney Store North America chain in the first quarter of fiscal 2005. Costs increased at Disney Interactive Studios due to higher costs of goods sold driven by increased volumes, increased video game development spending on both current and future titles, and higher marketing expenditures.

Segment Operating Income

Segment operating income increased 14%, or $75 million, to $618 million, due to growth at Merchandise Licensing, partially offset by a decrease at Disney Interactive Studios. Growth at Merchandise Licensing was due to higher earned royalties across multiple product categories. The decrease at Disney Interactive Studios was driven by increased video game development spending on future self-published titles.

Consumer Products

Consumer Products revenues for the year increased 7% to $2.3 billion, and segment operating income increased 2% to $631 million. For the quarter, revenues increased 5% to $590 million, and segment operating income increased 10% to $153 million.

The increase in segment operating income for the year was primarily due to growth at Merchandise Licensing, partially offset by higher video game development costs at Disney Interactive Studios. Growth at Merchandise Licensing was primarily due to higher earned royalties across multiple product categories, led by Cars merchandise.

5

For the quarter, the increase in segment operating income was primarily due to growth at Merchandise Licensing due to higher earned royalties across multiple product categories, led by High School Musical and Cars merchandise.

Consumer Products

Revenues

Revenues increased 8%, or $128 million, to $1.8 billion, primarily due to increases of $66 million at Merchandise Licensing and $58 million at Disney Interactive Studios. Growth at Merchandise Licensing was due to higher earned royalties across multiple product categories led by the strong performance of Cars merchandise. Growth at Disney Interactive Studios was due to the performance of current period titles, which included Pirates of the Caribbean: At World’s End and Spectrobes, compared to prior period titles, which included The Chronicles of Narnia and Chicken Little. These gains were partially offset by a higher revenue share with the Studio Entertainment segment due to increased revenues from Studio properties, primarily Cars, and lower contractual minimum guarantee revenues.

Costs and Expenses

Costs and expenses increased 10%, or $111 million, primarily due to an increase at Disney Interactive Studios due to higher cost of sales, video game development costs and marketing costs.

Operating Income

Segment operating income was essentially flat as higher operating income at Merchandise Licensing was offset by lower results at Disney Interactive Studios due to the increased investment in video game development.

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS—(continued)

Consumer Products

Consumer Products revenues for the quarter increased 23% to $549 million and segment operating income increased 12% to $118 million.

Higher segment operating income for the quarter was driven by increased unit volumes at Disney Interactive Studios, higher earned revenues at Merchandise Licensing and by Disney Store North America license royalties, which commenced in the first quarter of fiscal 2007. These gains were partially offset by a higher revenue share with the Studio Entertainment segment, increased marketing and video game development costs at Disney Interactive Studios and higher operating costs at Merchandise Licensing.

Unit volume growth at Disney Interactive Studios reflected the success of the self-published video game based on Pirates of the Caribbean: At World’s End while earned revenues at Merchandise Licensing grew across multiple product categories led by Cars merchandise.

Consumer Products segment revenues generated from recent Studio Entertainment properties are shared with the Studio segment. The increased revenues from Studio properties, primarily Cars and Pirates of the Caribbean, resulted in an increase in this allocation in the current quarter.

Consumer Products

Consumer Products revenues for the quarter increased 14% to $516 million and segment operating income increased 20% to $125 million.

The increase in segment operating income for the quarter was primarily due to growth in earned royalties across multiple product categories at Merchandise Licensing, including the strong performance of Cars merchandise. Revenues also increased at Disney Interactive Studios (formerly Buena Vista Games) due to higher sales of self-published titles but were largely offset by higher costs of goods sold, product development spending and marketing costs.

4

Consumer Products

Revenues

Revenues increased 2%, or $24 million, to $1.2 billion, primarily due to higher earned royalties across multiple product categories at Merchandise Licensing, which included the strong performance of Cars merchandise. Higher revenues were partially offset by lower contractual minimum guarantee revenues.

Costs and Expenses

Costs and expenses increased 3%, or $28 million, driven by an increase at Disney Interactive Studios due to increased product development spending.

Operating Income

Segment operating income decreased 4%, or $14 million, to $360 million, as higher earned royalties at Merchandise Licensing were more than offset by lower contractual minimum guarantee revenues and increased product development spending at Disney Interactive Studios.

Consumer Products

Revenues

Consumer Products revenues for the quarter decreased 6% to $692 million and segment operating income decreased 13% to $235 million.

The decrease in segment operating income for the quarter was primarily due to lower contractual minimum guarantee revenues and a decline in self-published revenues at Buena Vista Games, partially offset by higher earned royalties across multiple licensing product categories, led by the strong performance of Cars and Pirates of the Caribbean merchandise. Lower self-published revenues at Buena Vista Games reflected stronger performing titles in the prior-year quarter, which included the release of titles based on The Chronicles of Narnia: The Lion, The Witch and The Wardrobe and Chicken Little.

Costs and Expenses

Costs and expenses decreased 2%, or $10 million, to $457 million, driven by a decrease at Buena Vista Games due to lower marketing expenditures and a decline in costs of goods sold driven by lower volumes.

Operating Income

Segment operating income decreased 13%, or $35 million, to $235 million, primarily due to lower contractual minimum guarantee revenues and lower revenues for self-published titles at Buena Vista Games, partially offset by higher earned royalties at Merchandise Licensing.

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS—(continued)

Consumer Products

Consumer Products revenues for the quarter decreased 6% to $692 million and segment operating income decreased 13% to $235 million.

The decrease in segment operating income for the quarter was primarily due to lower contractual minimum guarantee revenues and a decline in revenues from self-published titles at Buena Vista Games, partially offset by higher earned royalties across multiple licensing product categories, led by the strong performance of Cars and Pirates of the Caribbean merchandise. Lower revenues from self-published titles at Buena Vista Games reflected stronger performing titles in the prior-year quarter, which included the release of titles based on The Chronicles of Narnia: The Lion, The Witch and The Wardrobe and Chicken Little.

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Consumer Products

Revenues

Revenues decreased 15%, or $384 million, to $2.1 billion, primarily due to a decrease of $543 million as a result of the sale of The Disney Store North America in the first quarter of fiscal 2005. This decrease was partially offset by increases at Merchandise Licensing and Buena Vista Games of $118 million and $53 million, respectively.

The increase in Merchandise Licensing was due to higher revenues across multiple product categories and recognition of contractual minimum guarantee revenues that increased by $49 million in fiscal 2005 compared to fiscal 2004. The increase at Buena Vista Games was due to the performance of The Incredibles licensed products, recognition of contractual minimum guarantee revenue, which increased by $17 million in fiscal 2005 compared to fiscal 2004, and higher sales of Game Boy Advance games.

Costs and Expenses

Costs and expenses decreased 19%, or $370 million, to $1.6 billion, due to a decrease of $528 million related to the sale of The Disney Store North America chain, partially offset by higher product development spending at Buena Vista Games, increased operating expenses at Merchandise Licensing, and $20 million of stock option expense associated with the adoption of SFAS 123R in fiscal year 2005.

Segment Operating Income

Segment operating income decreased 1%, or $4 million, to $543 million, primarily due to lower operating income at The Disney Store, partially offset by growth in Merchandise Licensing.

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Disney Stores

Effective November 21, 2004, the Company sold substantially all of The Disney Store chain in North America under a long-term licensing arrangement to a wholly-owned subsidiary of The Children’s Place (TCP). The Company received $100 million for the working capital transferred to the buyer at the closing of the transaction. During fiscal 2005, the Company recorded a loss on the working capital that was transferred to the buyer and additional restructuring and impairment charges related to the sale (primarily for employee retention and severance and lease termination costs) totaling $32 million. Pursuant to the terms of sale, The Disney Store North America retained its lease obligations related to the stores transferred to the buyer and became a wholly owned subsidiary of TCP. TCP is required to pay the Company a royalty on substantially all of the physical retail store sales beginning on the second anniversary of the closing date of the sale.

During fiscal year 2004, the Company recorded $64 million of restructuring and impairment charges related to The Disney Stores. The bulk of these charges were impairments of the carrying value of fixed assets related to the stores that were sold.

The following table provides revenue and operating (loss) income for The Disney Store North America prior to divestiture:

Consumer Products

Consumer Products revenues for the year increased 3% to $2.2 billion and segment operating income increased 14% to $618 million. Revenues for the quarter

5

increased 9% to $564 million and segment operating income increased 1% to $139 million.

The increase in segment operating income for the year was primarily due to earned revenue growth at Merchandise Licensing, partially offset by lower results at Buena Vista Games. Growth at Merchandise Licensing was due to higher earned royalties across multiple product categories, led by the strong performance of Cars, Disney Princess, and Pirates of the Caribbean merchandise. The decrease at Buena Vista Games was driven by increased product development spending on future self-published titles.

For the quarter, segment operating income was essentially flat as an increase at Merchandise Licensing was offset by a decrease at Buena Vista Games. Growth at Merchandise Licensing was primarily due to higher earned royalties across multiple product categories, led by the strong performance of Cars and Pirates of the Caribbean merchandise. The decrease at Buena Vista Games was due to higher expenses reflecting an increase in product development spending.

Consumer Products

Consumer Products revenues for the quarter increased 6% to $445 million and segment operating income increased 69% to $105 million.

Higher segment operating income for the quarter was primarily due to higher earned royalties in Merchandise Licensing, led by the strong performance of merchandise related to Cars and Pirates of the Caribbean. Revenues also increased at Buena Vista Games due to higher sales of self-published titles but were offset by higher costs of goods sold, product development spending on both current and future titles and marketing costs.

4

Consumer Products

Revenues

Revenues increased 1%, or $21 million, to $1.6 billion, due to sales growth of $106 million at Buena Vista Games and $57 million at Merchandise Licensing. These increases were partially offset by a decrease of $84 million related to the sale of The Disney Store North America chain in the first quarter of 2005, as well as a decrease of $29 million at The Disney Store Europe.

Sales growth at Buena Vista Games was due to the release of Disney published titles based on The Chronicles of Narnia: The Lion, The Witch and The Wardrobe, and Chicken Little. Sales growth at Merchandise Licensing was driven by higher revenues at Home and Hardlines primarily due to home and infant furnishings and food and personal care products, respectively.

Costs and Expenses

Costs and expenses decreased 4%, or $52 million, due to the sale of The Disney Store North America chain and a decrease at The Disney Store Europe, partially offset by higher costs of goods sold, increased product development spending on both current and future titles and higher marketing at Buena Vista Games.

Segment Operating Income

Segment operating income increased 18%, or $74 million, to $479 million, driven by higher Merchandise Licensing revenues at Home and Hardlines.

Revenues

      Higher Merchandise Licensing revenues were due to higher sales of hardlines, softlines and toys which were driven by the strong performance of Disney Princess and certain film properties. The increase at Publishing primarily reflected the strong performance of Finding Nemo and other childrens books and W.I.T.C.H. magazine and book titles across all regions.

Costs and Expenses

Segment Operating Income

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