Hello and welcome to Q2 2013 Walt Disney Company Earnings Conference Call. My name is Mellissa and I will be your operator for today's call. At this time all participants are in a listen-only mode. Later we will conduct a question-and-answer session. (Operator Instructions) Please note this conference is being recorded. I will now turn the call over to Lowell Singer, Senior Vice President of Investor Relations. Mr. Lowell, you may begin.

Thank you. Good afternoon, everyone. Welcome to the Walt Disney Company's second quarter 2013 earnings call. We issued our press release about 45 minutes ago. It’s available on our website at www.disney.com/investors. Today's call is being webcast and we will post a transcript to our website after the call. Joining me in New York for today’s call are Bob Iger, Disney's Chairman and Chief Executive Officer, and Jay Rasulo, Senior Executive Vice President and Chief Financial Officer. Bob will make some comments followed by Jay and then we will be happy to take some questions. So with that let me turn the call over to Bob.

Thank you very much, Lowell and good afternoon everyone. We had a strong second quarter with earnings per share up 36% over last year when adjusted for comparability, driven primarily by studio, parks and resorts, and media networks. We are pleased with our overall performance, confident in our strategy and thrilled with the stock price that keeps reaching new record highs. Of course it's great to announce such a strong earnings just after we are rolling another Marvel blockbuster, Iron Man 3, which had incredible domestic opening with almost $175 million. That makes it the second biggest opening weekend of all times surpassed only by The Avengers. Internationally, Iron Man 3 set new opening weekend box office records in a number of countries and has already brought in over $525 million outside the U.S. So to date the global box office for Iron Man 3 is more than $711 million. We are proud of this movie and thrilled with its performance. The Avengers franchise is certainly strong today but we have a lot more to come with, Thor: The Dark World in November, Captain America: The Winter Soldier next year, and The Avengers 2 in 2015. On the animation front, Pixar continues to create great value for our company too. We are very excited about Monsters University which opens next month. Pixar's slate of films for the next five years includes fantastic original stories as well as some great sequels to their previous hits. And as we recently announced, we are in production on one of those sequels, Finding Dory, featuring Ellen DeGeneres once again as the voice of Dory, one of the most beloved characters from Finding Nemo which was one of the most popular and profitable movies to date. On to Lucasfilm, our integration is well underway and…

Thank you Bob and good afternoon everyone. We delivered another quarter of excellent financial performance, with segment operating income up 29% on revenue growth of 10%. Earnings per share excluding items effecting comparability were up an impressive 36%. These results demonstrate the ongoing successful execution of our strategy and our ability to monetize our assets, and the performance of recent investments in our parks and resorts and business. Let me spend a few minutes discussing our second quarter in more detail and then I will highlight some factors that may influence our performance for the third quarter. Growth at media networks was due to increased operating income from our cable networks, partially offset by a decline in our broadcasting business. The performance of our cable business in the second quarter reflects the benefit of new affiliate agreements resulting in total cable affiliate revenue growth in the low teens or almost 10% when adjusting for the impact of revenue deferral timing at ESPN and foreign exchange rates. Operating income at cable increased 15% on revenue growth of 9%, primarily due to growth at ESPN. Results at ESPN were driven by increased affiliate and advertising revenue partially offset by increased programming and production costs. The increase in programming costs were related to contractual rate increases for college football and college basketball rights. During the second quarter ESPN deferred $70 million in affiliate revenue compared to last year, which benefited reported revenue. In the third quarter, ESPN will recognize $73 million less in net deferred revenue than in the prior year, which will have an unfavorable impact on Q3 reported revenue. I will remind you these changes have no impact on full year results. ESPN ad revenue was up 4% in the second quarter primarily due to higher units sold and higher rates.…

Thank you, Jay. Operator, we are ready for the first question.

(Operator Instructions) Our first question is from Michael Nathanson with Nomura. Please go ahead.

A quick housekeeping for Jay and then one for Bob. Jay, thanks for giving us the organic (inaudible) number. You’ve made Lowell’s life more easier tonight. The question I have for you is for the rest of the year, what’s the right rate to think about a like-for-like growth on affiliated users? Is there anything unusual about this quarter or low teens be consistent for the rest of next couple of quarters?

I think in general you can look for high single digits, low teens moving forward for the rest of the year. nothing extraordinary about this quarter.

And Bob for you, Jay just laid out the big picture story on earlier drivers kicking in the next couple of years. You said the past few years investing in franchises, investing in your parks, while your competitors are focused on buying back stock, you look at the next couple of years your drivers are all known to you. So do you consider at this point increasing the capital returns levels, dividends, buybacks or you've been adding some incremental debt to the company? How do you think about that knowing all you’ve done is now paying dividends?

Well, we feel good about our ability to deliver more free cash flow and don’t have much to say specifically about how we’ll allocate it, except that as you look back we obviously made three pretty important and large acquisitions in Pixar, Marvel and Lucasfilm, which we think delivered great -- has already delivered and will continue to deliver great growth and value to our shareholders. But I am not sure that we -- as we see ahead, we see opportunities that are of [life-size] not to preclude that from occurring completely but it's just not obviously to us. That will than leave us with the opportunity if we continue to grow our cash flow, to increase our dividend or buyback more shares. While we have not made that decision yet, I think it will be a good problem for us to have.

I think, Michael, in terms of the capital allocation, I mean almost because it's a given, Bob didn’t mention it. First and foremost, we look for internal opportunities to invest our capital in projects like you have seen us do over the last five years, in addition to acquisitions. You know the work we have done in parks and resorts, the joint venture on free-to-air television stations. I mean we constantly look for ways that we can get superior returns through investment in organic growth and we continue to want to grow the company organically. What's left after that Bob just handled.

We have also never really been a hoarder of cash, so I think you can expect that philosophy will continue. And we have been pleased with our credit rating. And I doubt you will see us going to the market in the way that would necessarily -- that would impact our rating, for more debt that is.

Next question is Ben Swinburne with Morgan Stanley. Please go ahead. Benjamin Swinburne – Morgan Stanley: Just to clarify, Jay, I wanted to ask you, the almost 10% growth in affiliate rev, that was organic ex-currency and ex-deferrals, was that ESPN or overall cable? I realize we are kind of splitting hairs here but...?

That was the overall cable number. I can tell you that if you back those factors out Ben, you are looking at 12.5% growth this year in affiliate revenues. If you back out this quarter -- I am sorry, if you back out the deferral and the FX impacts. Benjamin Swinburne – Morgan Stanley: At cable?

Yes. Benjamin Swinburne – Morgan Stanley: Okay. Thank you. And then is there any particular reason -- would parks margins be better because of the calendar shift. I realize it benefits attendance etcetera, but that would be obviously the incremental expenses from the extra....?

Yes. But of course with the flow through you have on incremental business, in our business when you are taking on that kind of incremental revenue in a single quarter and if you think about, for instance around the holiday period, we are already fully staffed. So we are pretty, very strong flow through. So, yes, we think that of the 400 basis points, about two percentage points was due to the shift in the front end and the back end of that quarter in terms of impact on margins. Benjamin Swinburne – Morgan Stanley: Okay. Thanks. And then lastly, Bob, could you just talk about your outlook for the studio segment? You have put a lot of capital to work with Lucas and Marvel. And clearly the titles are kicking on all cylinders. When you look back a few year ago, this was a billion dollar plus profit pool. And I know the DVD markets changed and you have also made some headcount changes. How do you think about the potential here for that line over the next several years as you roll out all these franchise (inaudible)?

Well, I think you will see more and more focus on big [tempo] films and less on non-franchise, non-branded smaller films. You have to -- when you consider about strategy and that investment, you also have to consider the impact that that investment in those films have across the company. So obviously, consumer products, to some extent interactive, certainly there are opportunities on the theme park front. So we feel good about the slate ahead from all sectors of the company. Disney Animation which is giving an excellent Christmas film in Frozen. Pixar, I mentioned on the call, would a blend of sequels like Monsters, and for instance in Nemo, with some real good original shows, original movies rather. I mentioned Marvel, which is very very rich. Star Wars in 2015 and then some Disney live action films that we feel quite good about in terms of our ability to basically drive decent return from them. So it is definitely a more challenged business in terms of, what I will call, physical sales, or the physical home entertainment side of the business. That is sell-through and rental of physical goods. But it's been growing nicely on the digital front and I think that bodes well for the future.

Next question is Doug Mitchelson with Deutsche Bank. Please go ahead. Douglas Mitchelson – Deutsche Bank: One for Bob and one for Jay. Bob, if you could talk about the timing of the rollout of MyMagic Plus and is there any way to give us a sense of the potential impact from that initiative? It’s not the easiest thing for us to model. And for Jay, hotel bookings up 7% against flat room rates. Is there a discounting strategy to drive hotel market share or are those both an organic outcome as you look at it right now?

I’ll start, Doug. On hotel bookings, I would say it’s an organic outcome. We have -- in California, because of the strength of the demand that has accompanied Disney’s California Adventure, we have really rolled out a lot of the discounting that’s taking place on that property and feel very good about demand holding up despite that and the overall both strategic and financial impact that product is having. But of course when you’re looking at average book rates across the domestic business it’s heavily weighted towards Walt Disney World. We’ve brought on a lot more inventory with that new value hotel that we’ve opened. And I think that we feel pretty strongly that you’re seeing the demand numbers and remember when you bring on a big value hotel, the very mix of the pricing that you have across the inventory of rooms will continue to push your rate down a little bit. But there’s no enormous -- there’s no promotional pricing that’s taking place to push volume right now in that business. We’re really at a point as we said we would be where we are yielding the volume returns and pricing returns on the ticket side that accompany the investment we’ve made in that product and I think you’ll continue to see that as Fantasy Land fully opens and then as MyMagic Plus is fully implemented which Bob can speak to right now in terms of timing.

The goal is for us to roll out MyMagic Plus at some point this year. it’s at various levels of beta testing right now. We want to be very careful that it is working absolutely right before we roll it out to the general public. There’s no reason for us to rush it to market. In terms of what we can expect return wise, you’re right, it’s somewhat -- although we’ve modeled it, it’s somewhat difficult to be specific about. You can expect that it will create a better experience and with that we believe people will spend more time in our parks and ultimately deliver more business per guest. We also know that it will deliver some up sell opportunities in terms of the array of products that basically digital technology will allow. And we also think it’s going to give us somewhat of a competitive advantage. I think you have to look at all of those things, basically new products to sell, better experience that should obviously keep people coming back for more or staying longer and then the competitive advantage would be the way to do it. But I can’t get specific with you, Doug in terms of how to model that. Douglas Mitchelson – Deutsche Bank: Perhaps then Bob just in terms of timeframe, would that be something where by fiscal ’14 you’d think we’d start to see some impact?

Yes. I think -- well, I definitely believe we’ll see some impact in fiscal ’14. That’s certainly our plan. So you were going to mention …

Yeah. Doug, just in terms of how to think about this, we have known for a really long time that getting our visitors to Walt Disney world, to make decisions about where they spend their time before they leave home, is a powerful driver of visits per guest. When they get into the Orlando market and their time isn’t yet planned, they can be subject to everything you see down there which is a lot of in-city marketing for all the many products that people have put there to basically bleed off the feed that we fundamentally motivate. So if we can get people to plan their vacation before they leave home, we know that we get more time with them. We get a bigger share of their wallet. So that’s one thing for you guys to think about. And the second thing is what happens to purchases when they become much more convenient and you don’t spend time queuing up for a transaction, queuing up to get in the park and you actually have more time to enjoy the entertainment and subsequently spend more money doing things that other than standing in line which of course you can't spend any money while you are doing that. So those are the components. Bob spoke to the enhanced product and competitive advantages and so on, sort of on the more strategic level, but on components to think about how to model that financially, you might think through some of those.

Next question is Jessica Reif-Cohen with Bank of America Merrill Lynch. Please go ahead.

I have one for Bob and one for Jay. Bob, I will start with you. The company is obviously hitting on, basically into all cylinders, the parks, films that you mentioned and consumer products, cable networks etcetera. With a really strong multiyear outlook, there is one exception, which is the television business. Meaning not the just the [book itself] but also your TV production is not at the levels of some of your peers. How much of a focus is it for you and can you give us some specifics about what you are thinking about doing in terms of turning that around?

Well, I think the network and particularly in this quarter, the stations too, had somewhat of a tough run these last few months. Station business has been generally soft by the way. And even though our stations are performing well in their markets, and actually in some markets growing share nicely, the markets themselves are basically compressing or getting smaller. And that’s obviously an issue. On the network front, we like a stronger prime time schedule, particularly one that is populated with more programming that we own. It's hard to look at that year-over-year in terms of the products that we own because we tend to look more long-term with these investments than short-term. So from a short-term perspective, you have to say that Scandal is certainly, a program that we own, has great potential in terms of delivering on our investment but we like more of them. So what you really end up doing there is you hope that your team is place, which is a great team, comes up with the kind of shows that not only drive higher ratings and more advertising revenue but ultimately includes a number of shows that we own, that drive more revenue in general. And it's basically -- there was no real secret to it, Jessica, as you know, you have been following this for a long time. But we could use a few more new hits and certainly hits that we own. It's that simple. Paul Lee is hard at work with his team on that as you know, as we speak. I have seen the pilots. I am reasonably encouraged by what I have seen, actually more than reasonably encouraged. I am very encouraged by what I have seen and hopeful that the year ahead will deliver more value for us than the year prior.

Okay. Thanks. And then on the parks for Jay. I have a couple of really short questions. Can you breakout what percent of the cost of variable at this point, what your mix is of international and domestic visitors? Obviously, spending has come down quite a bit. But if you could give us, kind of update your thoughts on kind of what margins you have set and that you expect to get to the peak margins at least in the U.S. which we [can see] up. You know how do you feel about margins kind of over the next few years?

Okay. Let me try to take a couple of those. So in terms of the international domestic mix, this quarter is same exact mix as last quarter. I told you that in general we run between 18% and 22%. We are at the low end in Q2 of that. But our strength has been from Brazil and the UK, a little bit of weakness from Canada in the second quarter. But I would say there is not a big story there, although we would love to see our business from Brazil continue to grow, it's been a real driver for us and it's nice to see growth back from the UK. In past quarters a lot of our international attendance growth has been from Canada. So anyway, I think the story there is within the range and we are pretty happy with it. With the overall increase in volume international has kept its pace. In terms of margins, the story there is going to be one of improving margins as we put behind us the launch cost and ramp up lower margins of new business initiatives that has been affecting us since we started on our big parks capital program. Sort of every quarter or every other quarter we have been launching the business. There has been substantial pre-opening costs that are associated with those of course with no revenue and even in the following quarter when the revenue starts it’s usually not at full tilt. So that should be contributing to our overall margins. We’re pretty happy frankly with what we see in the base business margins. If you back out the things that we backed out, I think this has been a quarter that has evidenced very, very strong fundamental growth in margins in that business. And even though there has been a lot of structural changes that have occurred since we used to talk about 20% margin i.e. the consolidation of businesses overseas into the park segment that were not consolidated before, recognizing incentive comp in the park’s margin which was not done before. When you take those things out, we really do believe that we can get back on a steady state basis to the kinds of margins we had pre-downturn. So I think the story is good there. I’m sorry I can’t give you a whole bunch more detail. In terms of the variable percentage, it varies through the course of the year. obviously you are in periods where more down periods in the year when more of the costs are fixed. When you go through the holidays like New Year’s and Easter you have a much larger variable component. But I can’t really give you too much more insight beyond that.

Next question is Alexia Quadrani with JP Morgan. Please go ahead.

Just staying on the parks for a minute, given your experience at Cars Land and the real imprecise attendance growth that has followed that opening, could you give us a bit of color how we should think about Fantasy Land renovation, how significant can it be in terms of driving growth going forward at Disneyworld and any sense of how much that might have already -- I know part of it was renovated and opened, but a lot of it is still ahead of us. Any sense on the timing when we might see a big marketing push behind or we might see more of a notable impact on that renovation.

Well, as you may or may not know, the Magic Kingdom Park in Orlando is the number one park down there. It’s actually the number one park in the world. And we hadn’t really done much to Fantasy Land in many, many years since we opened. So this was significant both from our perspective, but also from a guest perspective. The only thing I can tell you that may give you some sense is that the Magic Kingdom broke an all-time single day record for attendance during the Easter holiday and we believe that was a direct result of the investment that we made in Fantasy Land. Obliviously the summer will tell us a lot more. We do know from a guest satisfaction perspective that the numbers that we’re seeing from the Magic Kingdom, specifically from Fantasy Land, are way up. We have more to open as you cited Alexia, but what we’ve opened is really being well received.

And in terms of the expenses or launch costs, I’m guessing it’s straight line as far your opening or was there a bigger component of it that comes later on that we’ll see a bit more cost pressure around?

I wouldn’t expect to see significant cost pressure. When you think about the magnitude of Fantasy Land, extraordinarily important for us to do that Magic Kingdom because of all of the reasons Bob just discussed. But if you look at the impact of that on the overall cost base at Walt Disneyworld, it’s nothing like the Disney’s California Adventure expansion which was substantive relative to the base of the Disneyland resort. So I wouldn’t look very hard for a whole bunch of costs associated with this launch and I think that you can see certainly in ’14 you will start to see a reasonably good contribution from that. I wouldn’t look for a cost degradation there.

Next question is Todd Juenger with Sanford Bernstein. Please go ahead.

I have what is probably a handful of questions that are disguised as one question. So I’ll just limit myself to that. I’m interested in your international television business. So particularly as a network operator or other cases where you’re the de facto operator by licensing large box of content and really just interested in any commentary you’d share on how fast is that part of your business growing in both affiliate fees and advertising? How much is that contributing to your immediate segment growth of those line items? What are the margin trends? I told you this was several questions disguised as one. And the top, how big that would be as we look out and it compounds over the next couple of years and are there any opportunities for investment there, either organically or even through M&A to increase that portion of your business? Thank you for indulging all that.

I am not sure that we can give you much detail except to say that our international television business which is largely Disney branded, Disney Channel, Disney XD, Disney Junior as I mentioned on my call, 166 countries. We do have, as you mentioned, we have programs blocks that we have licensed to third party distributors in a variety of places in the world. And obviously we distribute the other content that the company owns, notably our movies and our TV shows. All of that has grown very nicely over the years and we think that it will continue to grow. We have also continued to make investments in new channels, in new markets. So we are launching a free over the air Disney Channel in Germany, we launched in Russia, we launched in Turkey. We are looking for some other opportunities there as well. But to give you some perspective on -- I just don’t have the details in terms of growth trajectory or what it looks like from a margin perspective. We also look at it as brand building opportunity too, because as I mentioned a number of times, the Disney Channel has become one of the most important drivers of, basically, brand value for the company. The impact that it has not only with the programs that it puts on but essentially supporting all the other content that the company has, particularly our movies, is pretty substantial around the world. And there is value there that you don’t necessarily put specifics again. But it has been a great growth engine for the company and we believe it will continue to be. Particularly, again, some of these markets that we have only launched recently and mature. Russia, a good example of that.

Yeah. I mean what you are seeing right now in the numbers, Todd, are dilutive to our earnings in each of those. They are still all in the launch stage. Germany, Turkey, Russia and our Japan (inaudible) project, we are still in investment mode on all of those new ones. And needless to say, we wouldn’t invest in those if they are not going to turn around and be accretive to our earnings down the road. As Bob said, we can't get too much in to the details of how the margins relate to our domestic business. But we are investing in growth in the international television business.

Okay. I had to give it a try. Can I ask, is it material to the affiliate fee growth rate when we look at sort of low teens, 10 percentage organic. Is the international contribution, which I assume that things are growing maybe faster than that, is it material? Or if it's not, we not even think about it as we think about how that grows over the years and props up or aids the acceleration to that growth, then how we do them? Thank you.

It was not material in Q2 Todd.

But what I will say, and I think what you can say just as you think of the future is, we have been very very aggressive over the last five years at launching new channels in many, many places. So I think while we will continue to look for opportunities to launch channels in new market as I mentioned, there will be fewer new launches in the future than there have been in the past five years. And obviously, as they mature, we move out of the investment phase and basically enter the real growth phase, then you will start to see an impact on the bottom line, both from advertising and from affiliate piece.

Next question is Anthony DiClemente with Barclays. Please go ahead.

Just one question, turning to ESPN and your sports franchises. So I think if I have this correct, you mean the spring of next year your new MLB deal takes effect, and then in the fall of 2014 your new NFL deal and presumably new SEC network agreement kicks in. I want to ask you about the NBA deal which you share with TNT. That I think goes into a '15-'16, and I am just wondering how core the NBA is to your sports franchises. There are other national sports networks out there, Fox Sports 1, NBC Sports. They will presumably be hungry for sports content when that deal comes up. And so I just wanted to get your thoughts on that. And the other question there is, do you current affiliate renewals with the MSOs contemplate a renewal of your NBA deal in those contracts. Thank you.

The NBA deal that we currently have goes through '16. So you are off a little bit, Anthony, in your timing there. If you look at ESPN, they have locked down rights other than with the NBA, so virtually every other important sports franchise that they have for a long time. And they have also included a number of very long term affiliate agreements. So if you think about our businesses going forward, there’s probably more certainty as it relates to ESPN than almost any other business that we’re in, which I think generally speaking is a good thing. There are some opportunities to buy some other events and we obviously have the NBA which is an important program to us coming up. And we have a few new affiliate deals to do, but not many. But I think generally speaking ESPN is in great shape. As we look at the timing of when new contracts kick in, as you mentioned Major League Baseball and the FCC, we don’t at it in a vacuum. We look at it against the timing of when new distribution deals kick in. we talked about I think more in the last quarter as it related to Comcast and new rates as a for instance. So we think that ESPN’s future in terms of its growth trajectory is actually quite good and we know a lot about what it is likely to be. And I can’t comment as to whether there are affiliate deals that are in any way tied to a renewal of the NBA.

Next question is David Bank with RBC Capital Markets. Please go ahead. David Bank – RBC Capital Markets: Two questions. The first is, Bob, can you talk about as viewership of premium video over time, both ESPN and ABC migrates incrementally over online. How do you view the optimal -- like the optimal monetization for adding inventory on a Nielsen OCR demo sold basis versus just a gross impression. How do you think that inventory is maximized most and why? And then second, as you think about rolling out the FastPass Plus and all those new technological elements, do you think it’s a better strategy to bifurcate them by offering them to resort guests or something only at first to drive higher occupancy or do you go wide for everybody with that stuff? Thank you very much.

I’ll answer the second question because it’s easier to answer. We have for years had in place products that are available only to hotel guests. And actually one thing that I think that Jay alluded to, didn’t say specifically, is the MyMagic Plus will definitely encourage people to stay more on property than off property. Jay was talking about essentially by being able to plan ahead, people will basically have more plan with us and that will in effect discourage them from doing other things. I think it will also encourage them to stay more in our hotels. And so I think you have to look at that as an additional value to MyMagic Plus. I’m not 100% sure I understand your question, the first part but let me give it a shot. I don’t know that you’re going to see more viewing migrating online necessarily. I think you’ll see more online viewing of product, both scripted traditional entertainment and sports. We look at that as essentially a real opportunity because we think we’re giving consumers, particularly consumers who have already bought the expanded basic bundle, an opportunity to choose the screen that makes most sense for us. We obviously needs to happen at the same time is we need for either Nielsen or some measurement system to kick in that adequately compensates us for the increased consumption on new devices. What we have done is we’ve created selling tools and a selling structure across our businesses, including at the network by the way that is essentially selling to -- in fact we’re already talking as it relates to ABC in the upfront, selling packages to advertisers that go across all media, which we’ve been doing for a while at ESPN and we’re doing much more aggressively at ABC and the other networks. We think that will also add value. But I think the key is for us to get a measurement system in place that enables to monetize because I’m convinced that there’s a lot of consumption going on there.

Our next question is Alan Gould with Evercore Partners. Please go ahead.

A couple of park related questions real quick though. When could you conceivably get the rights back to the Marvel characters and extensions at the parks? Second, could you give us the international park revenue and operating income which I think comes in the Q. And then thirdly, the interactive division, do you still think it will breakeven with the push back of Infinity to August.

The last question, the push back of Infinity to August is doubtful that you are going to get breakeven this year. Because of when Infinity will (inaudible), which is essentially in our fourth quarter. So it potentially pushes that back. We believe in Infinity it’s actually been very well received by the gaming community and by consumers and we are pleased with what we see in the product. That also resellers had really great buying for it as well. So we think it will be great product and it's going to help drive profitability for fiscal 2014. But by pushing it back it's going to make us harder to achieve profitability or breakeven this year at that division, even though the division will deliver results this year that are substantially improved from last year. Had Infinity not pushed back and Infinity had done what we expect it will do, then achieving breakeven this year was very very doable. I can't really say much about Marvel rights of the parks other than to say, the rights to the Marvel Properties, particularly in Florida, are not ours at this point. And I am not going to speculate as to not only when we will get them back or whether we will ever get them back. We have plenty of opportunity though from Marvel in other parks. We are hard at work in developing Marvel presence particularly in our international parks, notably in Hong Kong.

Alan, in terms of revenue regarding international parks, it was $543 million this quarter. We saw growth in Paris and Hong Kong as I mentioned, because in the prior quarter we had a business interruption insurance payments in Tokyo. Our revenue there was down a little bit but the fundamentals of Tokyo Disney Resort are quite strong.

And the operating income for the international parks, Jay?

Well, we will wait for the Q for that number, never mind.

Next question is Michael Senno with Credit Suisse. Please go ahead.

I just wonder if you guys could quantify, as you have done in the past, the margin impact of parks from new initiatives in this quarter and if we could expect to see that continue to decelerate as the year goes on. And then second question, just in regard to the strong per cap spending. I understand there were ticket price increases but it seemed to accelerate this quarter and I just want to see if there any other particular drivers you are seeing at the parks that are resulting in that. Thanks.

On the margin impact on new initiatives. So they are a little lumpy. This quarter they happen to be marginally accretive to the overall margins. But just modestly, to be honest with you. As I said, they are lumpy and I think next year, as everything moves into full stride, you will start to see those to be more positive drivers to margins. Your second question on spending for the quarter across all categories. Of course for caps we are helped by the holiday business that Bob mentioned, particularly Easter. But there was nothing unusual about any of the categories, they were all up across the board.

Next question is David Miller with B. Riley & Co. Please go ahead. David Miller - B. Riley & Co.: Good call being in New York because it's raining here in Los Angeles. Jay, just following up on, I think it was Ben Swinburne's question, I think the third question in. Going back to my -- I have followed you guys for a long time and I am going back through my models here, actually in the spreadsheet all the way back to 2001. And I don’t see any example of a Q2 which is your March quarter, usually your weakest quarter, ironically enough for the parks, where your margins were this high, 11.6%. I know what you are going to say, you are going to talk about the timing shift, you are going to talk about the demand curve moving to the right, I believe phase three shutdown sequences that occurred in late March. But was there anything else going on on cost that you are willing to elaborate on, because these are truly outstanding margins and I believe, correct me if I am wrong, a record for Q2. And then within that, do you guys still have a fuel hedge for the boats or has that been [unwound]? Thanks very much.

David, Jay mentioned that obviously some of the impact in Q2, the Parks, both on the margin and then on the bottom line had to do with the shift in timing of both Christmas and Easter. But I don't -- let's call it what it was. It was a great quarter for the Parks, a great quarter. There was nothing on the expense side to really note in this case, continued diligence in that regard for the parks. I think they've done a good job of managing their expenses, particularly when they've continued to invest to grow. But this was a quarter that I think stood out because the product that we recently put online really worked, like California Adventure and Fantasy Land and the shifts as we talked about. And the product that we've had online for years and years as I think in many respects just never looked better to the consumer. And in an economy that is I think seeing some slight improvement, you get results like the results that we got. I think it bodes very well for our future. As we mentioned earlier, there will be a little lumpiness in terms of margin expansion. The cost, for instance, of the MyMagic Plus we'll see in the next quarter, as for instance, some little more on Fantasy Land, but generally speaking we have a great parks story to tell. Just as an aside and we've talked a lot about California Adventure, before we redid California Adventure, at a typical day at Disneyland, the Disneyland Resort, you see about 75% of the attendants going to Disneyland and 25% going to California Adventure. That's now in most days more like 55-45. That's an incredible change and it enables us to drive real bottom-line growth because you’ve got a better experience at Disneyland. We're getting pricing out of California Adventure that's substantially above what we were able to drive before. We have increased food and merch spending there. As a for instance that obviously contributes nicely to the margins. I think, I'm not sure there's any other way to categorize -- or characterize the quarter for the Company in Parks and Resorts, except to say it was a tremendous quarter.

On your fuel hedging question, we generally hedge our fuel out of Port Canaveral. It accounts for about a third of what we will be using in terms of fuel for the cruise line this year.

Our last question is Jason Bazinet with Citi. Please go ahead.

Just have a question for Mr. Iger. One of the things that always struck me as unusual about your financials on a trailing basis is how much of the growth came from Media Nets relative to the other divisions, even though if you asked a man on the street what they thought of Disney they would necessarily think of ESPN. Now that you've made all of the investments in Parks and made all the investments in IP, are we just in harvest mode now and just the investments that you've made you're just going to execute and let the strategy play out? Is that the right way to think about it or is there another pivot that you sort of see sort of on the horizon over the next three years?

That's a bit of a tricky question there, Jason. I don't want to in anyway say there is something big afoot when I answer your question by saying we're never in harvest mode per se. There are always opportunities to harvest what we've invested in. But we're in extremely dynamic businesses and a very dynamic global marketplace and there are always going to be opportunities for us, particularly given the strength of these assets, ESPN, Disney, Pixar, Marvel and Star Wars. There are going to always be opportunities for us to invest in those, to grow in a marketplace that generally is pretty robust. So I think we talked about the fact that we believe we'll able to grow free cash flow nicely. I guess in a way that's a form of harvesting. But I get a little bit concerned about using the world harvest because sometimes it suggests a status quo approach and I don't think status quo in this dynamic marketplace as we operate in is a good strategy.

Well, let me recast it. Is it fair to say that Lucas acquisition was the capstone of a fairly significant strategic pivot for the firm?

I said it before it’s kind of -- asking me today as we look ahead at whether there's a Pixar, a Lucas, a Marvel on the horizon, I have to say, not likely. We just don't see it. But that doesn't mean one isn't going to crop up and that we won't act opportunistically as we did on those three to take advantage of it if we see an acquisition that we believe is going to really deliver long-term value and growth for our shareholders. We feel really good about Pixar. We feel great about Marvel, not just because of this week although we have to admit that it certainly helped, but when you look ahead at what Marvel has got in the pipeline and the opportunity to monetize those properties not only across our businesses but across the world, obviously significant. We feel great about Lucas. It's been very well received. As we look at Lucas, the more we get into it, the more we realize that we've got a property in our hands that is probably more loved and more well known than almost anything else that we have which is remarkable. Remarkable that it was even available for us to buy. I don't want to say never, meaning that there is never again, or there isn't one out there. It's just much more difficult as we look ahead to sight one and I certainly wouldn't be able to mention it to you in this call. I will say that on the Marvel, and to give you maybe a little bit more of a perspective, on the Marvel and the Star Wars or the Lucasfilm acquisitions, those appeared on, I'll call it internal list of things that we thought might make real sense for this company and its shareholders for quite a long time. We looked at them very carefully. That list is shorter today than it used to be.

Thanks, Jason. Thanks again everyone for joining us today. Note that a reconciliation of non-GAAP measures that were referred to on this call to equivalent GAAP measures can be found on our website. Let me also remind you that certain statements on this call may constitute forward-looking statements under the securities laws. We make these statements on the basis of our views and assumptions regarding future events and business performance at the time we make them and we do not undertake any obligation to update these statements. Forward-looking statements are subject to a number of risks and uncertainties and actual results may differ materially from the results expressed or implied in light of a variety of factors, including factors contained in our Annual Report on Form 10-K and in our other filings with the Securities and Exchange Commission. This concludes today's call. Have a good night, everyone.

Thank you, ladies and gentlemen. This concludes the Q2 2013 Walt Disney Company earnings conference call. Thank you all for participating. You may now disconnect.