"We have entered the new millennium headed in the right direction," said Michael D. Eisner, Disney chairman and CEO. "The results of the first quarter reflect the continued strength and popularity of our broadcasting, cable and theme park assets, the current strong advertising market and the impact that innovative programming has had in improving the performance of the ABC-TV network. Furthermore, the success of the Walt Disney World Millennium Celebration, `Who Wants to Be a Millionaire,' and `Toy Story 2,' in particular, demonstrate how the continuing development of great entertainment product drives the growth of our company.

"While we are very pleased that the quarter came in ahead of expectations, we remain vigilant in our efforts to continue to create greater shareholder value. We remain focused on executing the strategic initiatives we have outlined to improve the results of our under-performing home video and consumer products groups, achieve operational improvements, concentrate on capital allocation, maximize our returns on invested capital, seek international opportunities, and exploit technologies such as DVD and the Internet."

Basis of Presentation

As discussed in more detail below, the Company made certain changes to its segment and other disclosures and has presented pro forma amounts to enhance comparability.

Media Networks

Media Networks revenues for the quarter increased 19% to $2.7 billion and operating income was $642 million, an increase of 73%.

Broadcasting results for the quarter were driven by increases at the ABC television network and the Company's owned television stations due to a strong advertising market and the success of "Who Wants to Be a Millionaire." The network also benefited from increases in the news division, driven in part, by improved ratings for "Good Morning America." Additionally, a strong advertising market resulted in growth at the radio network and stations.

Disney's share of operating income from cable television activities, which consists of its cable networks and cable equity investments, increased 31% to $316 million for the quarter.

Cable television results for the quarter were driven by growth at the cable networks, reflecting increases at ESPN, driven by higher affiliate fees due to contractual rate increases and subscriber growth, and increased advertising revenues due to a strong advertising market, partially offset by higher programming costs. In addition, increases at E! Entertainment Television, Lifetime Television and The History Channel contributed to improved results.

Studio Entertainment

Revenues for the quarter were $1.6 billion, a decrease of 10% compared to the prior-year quarter, and operating income was $23 million, compared to $143 million for the prior-year quarter. Studio Entertainment results for the quarter were driven primarily by declines in worldwide home video and domestic theatrical motion picture distribution, partially offset by improvements in international theatrical motion picture distribution.

In worldwide home video, the current period's releases faced difficult comparisons to the prior year, which included the successful domestic release of "Lion King II: Simba's Pride" and the classic animated release of "The Little Mermaid" in international territories. In domestic theatrical motion picture distribution, the successful release of "Toy Story 2" was more than offset by the performance of "The Insider" and "Bicentennial Man." Improvements in international theatrical motion picture distribution were driven primarily by "Tarzan" and "Toy Story 2."

Theme Parks and Resorts

Theme Parks and Resorts posted record operating results for the quarter, with revenues increasing 9% to $1.6 billion and operating income up 6% to $363 million.

Theme Parks and Resorts results benefited from increased guest spending, growth in occupied room nights, and record attendance at Walt Disney World, improved results at Disney Cruise Line and higher guest spending at Disneyland, partially offset by lower attendance at Disneyland. Increased guest spending and record attendance at Walt Disney World were driven by the ongoing Millennium Celebration. Higher occupied room nights reflected the opening of the All Star Movies Resort in the second quarter of the prior year. Disney Cruise Line results reflected a full quarter of operations from both cruise ships, the Disney Magic and the Disney Wonder, compared to just the Disney Magic in the prior year. Lower attendance at Disneyland was driven by weakness in international visitation. Revenue gains at Walt Disney World were partially offset by incremental operating costs associated with the Millennium Celebration.