As Of                Filer                Filing    For·On·As Docs:Size              Issuer               Agent

 1/14/05  Euro Disney S C A                 20-F        9/30/04   43:19M                                    Merrill Corp-MD/FA

Document/Exhibit                   Description                      Pages   Size 

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 2: EX-1        Underwriting Agreement                              HTML    131K 
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12: EX-4.10     Instrument Defining the Rights of Security Holders  HTML     37K 
13: EX-4.11     Instrument Defining the Rights of Security Holders  HTML     75K 
14: EX-4.12     Instrument Defining the Rights of Security Holders  HTML     50K 
15: EX-4.13(A)  Instrument Defining the Rights of Security Holders  HTML    207K 
16: EX-4.13(B)  Instrument Defining the Rights of Security Holders  HTML    254K 
17: EX-4.14(A)  Instrument Defining the Rights of Security Holders  HTML    291K 
18: EX-4.14(B)  Instrument Defining the Rights of Security Holders  HTML    581K 
19: EX-4.15(A)  Instrument Defining the Rights of Security Holders  HTML    332K 
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23: EX-4.17(A)  Instrument Defining the Rights of Security Holders  HTML    299K 
24: EX-4.17(B)  Instrument Defining the Rights of Security Holders  HTML    369K 
25: EX-4.17(C)  Instrument Defining the Rights of Security Holders  HTML   1.63M 
26: EX-4.18(A)  Instrument Defining the Rights of Security Holders  HTML     48K 
27: EX-4.18(B)  Instrument Defining the Rights of Security Holders  HTML     91K 
28: EX-4.19     Instrument Defining the Rights of Security Holders  HTML     21K 
 4: EX-4.2      Instrument Defining the Rights of Security Holders  HTML     17K 
29: EX-4.20     Instrument Defining the Rights of Security Holders  HTML     54K 
30: EX-4.21     Instrument Defining the Rights of Security Holders  HTML    584K 
31: EX-4.22     Instrument Defining the Rights of Security Holders  HTML    293K 
32: EX-4.23     Instrument Defining the Rights of Security Holders  HTML    209K 
33: EX-4.24     Instrument Defining the Rights of Security Holders  HTML    208K 
34: EX-4.25     Instrument Defining the Rights of Security Holders  HTML    215K 
35: EX-4.26     Instrument Defining the Rights of Security Holders  HTML    228K 
36: EX-4.27     Instrument Defining the Rights of Security Holders  HTML    210K 
37: EX-4.28     Instrument Defining the Rights of Security Holders  HTML     98K 
38: EX-4.29     Instrument Defining the Rights of Security Holders  HTML     45K 
 5: EX-4.3      Instrument Defining the Rights of Security Holders  HTML     18K 
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10: EX-4.8      Instrument Defining the Rights of Security Holders  HTML     56K 
11: EX-4.9      Instrument Defining the Rights of Security Holders  HTML     20K 
39: EX-8        Opinion re: Tax Matters                             HTML     13K 
40: EX-12.1     Statement re: Computation of Ratios                 HTML     21K 
41: EX-12.2     Statement re: Computation of Ratios                 HTML     22K 
42: EX-13.1     Annual or Quarterly Report to Security Holders      HTML     20K 
43: EX-15.1     Letter re: Unaudited Interim Financial Information  HTML     33K 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM 20-F

 

ANNUAL REPORT PURSUANT TO SECTION 13
OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the fiscal year ended September 30, 2004

 

Commission file number 33-79548

 

 

Euro Disney S.C.A.

(Exact name of registrant as specified in its charter)

 

N/A		Republic of France
(Translation of registrant’s name into English)		(Jurisdiction of incorporation or organization)

 

Immeubles Administratifs

Route Nationale 34

77700 Chessy

France

(Address of principal executive offices)

 

Securities registered or to be registered pursuant to Section 12(b) of the Act: None

 

Securities registered or to be registered pursuant to Section 12(g) of the Act:

 

Title of each class		Name of each exchange on which registered
Ordinary Shares of Common Stock par value € 0.01		Euronext Paris, London Stock Exchange, SEAQ International, Brussels Stock Exchange

 

Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act: None

 

Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the annual report: 1,082,680,292 shares of common stock, par value € 0.01.

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  YES ý.   NO o

 

Indicate by check mark which financial statement item the registrant has elected to follow. Item 17 ý Item 18 o

 

 

PART I

 

PRESENTATION OF INFORMATION AND ACCOUNTING PRINCIPLES

 

Euro Disney S.C.A. (the “Company”), including its subsidiaries and consolidated financing companies (together, the “Group”), publishes its consolidated financial statements (“Consolidated Financial Statements”) in euros. All currency amounts in this annual report on Form 20-F (“Annual Report”) are expressed in euros.

 

The Company prepares its Consolidated Financial Statements in accordance with accounting principles generally accepted in France (“French GAAP”), which differ in certain significant respects from generally accepted accounting principles in the United States of America (“U.S. GAAP”).  Unless otherwise specified, all financial information presented in this Annual Report has been derived from or based on the Consolidated Financial Statements.  For a discussion of the principal differences between French GAAP and U.S. GAAP as they relate to the Group’s consolidated results of operations and financial position, See Notes 2 and 30 to the Consolidated Financial Statements in Item 17 “Financial Statements”.

 

The Company’s fiscal year begins on October 1 of a given year and ends on September 30 of the following year.  References in this annual report to a numbered fiscal year are to the twelve-month period ended on September 30 of the calendar year that bears such number (so that, for example, fiscal year 2004 is the fiscal year that ends on September 30, 2004).

 

In September 2004, the Company reached agreement with its lenders and The Walt Disney Company (“TWDC”) on a comprehensive restructuring (the “Restructuring”) of the Group’s financial obligations, intended to provide new cash resources, to reduce or defer cash payment obligations and to provide flexibility for investment and development.  The Restructuring is subject to certain conditions, including the completion of a share capital increase in an amount of at least €250 million (the “Share Capital Increase”).  If the conditions are not met by March 31, 2005, and the Company does not successfully negotiate an alternative arrangement during the subsequent thirty days, most of the provisions of the Restructuring will become null and void, in which case the Company will not be able to meet its financial obligations.  The Restructuring is described in detail under Item 5, “Operating and Financial Review and Prospects – 2004 Financial Restructuring.”

 

ITEM 1.     IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS

 

Not applicable.

 

ITEM 2.     OFFER STATISTICS AND EXPECTED TIMETABLE

 

Not applicable.

 

ITEM 3.     KEY INFORMATION

 

A.            SELECTED FINANCIAL DATA

 

Five-Year Selected Financial Data

 

The following table sets forth the Group’s selected consolidated financial data for the five-year period ended September 30, 2004.  This table is qualified by reference to, and should be read in conjunction with, the Consolidated Financial Statements and the related notes thereto included in Item 17 “Financial Statements” and Item 5 “Operating and Financial Review and Prospects”.

 

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(€ in millions, except per share data)		2004(1)		Pro-Forma 2003(1)		As-reported Year Ended September 30,
						2003		2002		2001		2000
Income Statement Data:
In accordance with French GAAP:
Segment Revenues
Resort activities		1,036.2		1,023.2		1,023.9		1,043.9		964.3		940.7
Real estate development activities		11.8		23.6		23.6		27.3		37.2		14.5
Total Revenues		1,048.0		1,046.8		1,047.5		1,071.2		1,001.5		955.2
Income (loss) before lease and financial charges		(23.9	)	32.1		132.4	(3)	175.7		185.2		175.8
Income (loss) before exceptional items		(129.6	)	(79.1	)	(67.9	)	4.9		37.7		37.5
Exceptional income (loss)		(22.3	)	12.0		11.9		(38.0	)	(7.2	)	1.2
Minority interests		6.7		8.8		—		—		—		—
Net income (loss)		(145.2	)	(58.3	)	(56.0	)(3)	(33.1	)	30.5		38.7
In accordance with U.S. GAAP:
Revenues		1,049.4		—		1,053.4		1,078.3		1,002.9		960.7
Net loss		(77.5	)(2)	—		(54.4	)	(67.3	)	(50.6	)	(66.2	)
Net loss per share (in €)(4)		(0.07	)	—		(0.05	)	(0.06	)	(0.05	)	(0.07	)

 

						As-reported Year Ended September 30,
(€ in millions, except per share data)		2004				2003		2002		2001		2000
Pro-Forma U.S. GAAP net loss (5)		(130.0	)	—		(153.6	)	(144.5	)	(122.3	)	(135.7	)
Pro-Forma net loss per share (in €) (5)		(0.12	)	—		(0.15	)	(0.14	)	(0.12	)	(0.14	)

 

(€ in millions)		2004(1)		Pro- Forma 2003(1)
						As-reported September 30,
						2003		2002		2001		2000
Balance Sheet Data:
In accordance with French GAAP:
Total assets		2,876.6		2,954.4		2,583.6		2,708.6		3,106.1		2,793.8
Borrowings		2,052.8	(6)	2,448.4		867.5		821.3		1,141.2		916.8
Equity and quasi-equity		(59.9	)	85.6		1,237.2		1,397.6		1,430.7		1,400.3
Minority interests		339.6	(6)	(41.3	)	—		—		—		—
In accordance with U.S. GAAP:
Total assets		2,906.6		—		2,946.8		3,076.5		3,539.0		3,318.8
Borrowings (Current and Long-term)(7)		1,950.0		—		2,208.9		2,218.6		2,565.1		2,349.8
Shareholders’ equity		(48.7	)	—		60.4		112.6		179.7		238.1
Common Shares Outstanding (in millions)		1,082.7		—		1,055.9		1,055.9		1,055.8		1,055.8

 

Certain reclassifications have been made to the prior years comparative amounts in order to conform to the 2004 presentation.

 

⁽¹⁾              Effective October 1, 2003, the Group adopted new accounting rules mandated in France with respect to the consolidation of special purpose financing companies that are not legally controlled by the Group (See Item 4.C.2 “Financing Companies”).  To enhance comparability, fiscal year 2003 French GAAP figures are presented on a pro-forma basis as if this change in accounting principle was in effect during all of fiscal year 2003.  (See Item 5 “Operating and Financial Review and Prospects” — Section B “Results of Operations”).

 

⁽²⁾              Effective October 1, 2003 (first day of fiscal year 2004), the Group implemented FIN 46R, “Consolidation of Variable Interest Entities”.  As a result, fiscal year 2004 U.S. GAAP net loss was reduced by € 36.3 million reflecting the cumulative impact of adopting this change in accounting principle.  (See Note 30 to the Consolidated Financial Statements in Item 17 “Financial Statements).

 

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⁽³⁾              French GAAP net loss for fiscal year 2003 includes the € 11.8 million net impact of a change in accounting principle for major fixed asset renovations and the impact of a conditional waiver of royalties and management fees for the last three quarters of the fiscal year (See Item 5 “Operating and Financial Review and Prospects” — Section B “Results of Operations”).

 

⁽⁴⁾              Per share data is based upon the weighted average number of common shares outstanding of 1,062 million, 1,056 million, 1,056 million, 1,056 million and 992 million for each of the years ended September 30, 2004, 2003, 2002, 2001 and 2000, respectively, and does not give effect to the exercise of any contingently issuable shares as they were anti-dilutive.

 

⁽⁵⁾              The Pro-Forma net loss and pro-forma net loss per share present the U.S. GAAP net loss that the Group would have had if royalties and management fees to The Walt Disney Company had not been adjusted from their original schedule for modifications agreed since the inception of the agreements (See Notes 19(b) and 30 to the Consolidated Financial Statements in Item 17 “Financial Statements”).

 

⁽⁶⁾              Effective September 30, 2004, Euro Disney Associés, one of the Group’s consolidated financing companies, was recapitalised resulting in a €384.1 million decrease in borrowings and a corresponding increase in minority interests (See Notes 11(a) and 14(f) to the Consolidated Financial Statements in Item 17 “Financial Statements”).

 

⁽⁷⁾              As of September 30, 2004 and 2003, under U.S. GAAP all borrowings have been classified as current pending the implementation of the Group’s Restructuring. (See Note 30 to the Consolidated Financial Statements in Item 17 “Financial Statements”).

 

Exchange Rates

 

Since the principal market for the Company’s common stock is the Euronext Paris exchange, fluctuations in the exchange rate between the euro and the U.S. dollar will affect the U.S. dollar value of an investment in its common stock and dividend and other distribution payments, if any, thereon.  The following tables set forth, for each of the periods indicated, certain information related to the euro / U.S. dollar exchange rate for 2000 through 2004 based on the noon buying rates in the city of New York for cable transfers in euro as certified for customs purposes by the Federal Reserve Bank of New York (the “Noon Buying Rates”) expressed in dollars per € 1.00.  Such rates are provided solely for the convenience of the reader and are not necessarily the rates that were used to prepare the Group’s Consolidated Financial Statements nor the selected consolidated financial data included herein.

 

U.S. dollar per euro		Low		High
December 2004		1.32		1.36
November 2004		1.27		1.33
October 2004		1.23		1.28
September 2004		1.20		1.23
August 2004		1.20		1.24
July 2004		1.20		1.24
June 2004		1.20		1.23

 

U.S. dollar per euro Fiscal Year		Low		High		Average(1)		End of Period
2004		1.14		1.28		1.22		1.23
2003		0.97		1.19		1.09		1.16
2002		0.86		1.02		0.92		0.99
2001		0.83		0.95		0.88		0.91
2000		0.85		1.09		0.95		0.88

 

⁽¹⁾              The average of the Noon Buying Rates on the last business day of each month during the relevant period.

 

The Noon Buying Rate on December 31, 2004 for the euro against the U.S. dollar was $1.36 per € 1.00 (€ 0.74 per dollar). No representation is made that the euro could have been converted into U.S. dollars at the rates shown herein or at any other rates for such periods or at such dates.

 

B.            CAPITALISATION AND INDEBTEDNESS

 

Not applicable.

 

C.            REASONS FOR THE OFFER AND USE OF PROCEEDS

 

Not applicable.

 

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D.            RISK FACTORS

 

Risks Relating to the Restructuring

 

If the Company does not complete the Share Capital Increase by March 31, 2005, the Restructuring might not be implemented, in which case the Group would not be able to meet its financial obligations

 

Most of the provisions of the documents relating to the Restructuring will become null and void if the Company does not complete a Share Capital Increase with gross proceeds of at least €250 million by March 31, 2005, unless agreement is reached on an alternative arrangement within the immediately following 30 days.  While the Group has received a commitment from TWDC to subscribe to €100 million of the Share Capital Increase and from certain banks to subscribe for the remainder, the commitments of the banks are subject to certain conditions, including that market conditions permit the Share Capital Increase to go forward.  If the documents relating to the Restructuring become null and void, then certain amounts owed to TWDC and to the Caisse des Dépôts et Consignations (“CDC”) would become payable through June 30, 2005, and the Group’s other lenders would have the right to require the immediate repayment of amounts due under certain of the Group’s credit agreements.  Unless the Group is able to implement an alternative restructuring, the Group would be unable to meet these obligations.

 

In preparing the Consolidated Financial Statements, management has used the “going concern assumption” based on management’s belief that the Restructuring will be completed as contemplated.  If the “going concern assumption” had not been used, it would have had a significant impact on the valuation of the Group’s assets and liabilities as at September 30, 2004 and the Consolidated Financial Statements as of and for the fiscal year then ended.

 

The Share Capital Increase will result in significant dilution for shareholders who do not exercise their preferential subscription rights

 

The Company will issue a substantial number of new shares in the Share Capital Increase, which is expected to take the form of a rights offering.  As is customary in rights offerings, the new shares will be offered at a discount compared to the market price of the Company’s shares at the time the offering is launched.  While all existing shareholders will have the right to subscribe for the new shares, shareholders who do not subscribe will experience significant dilution.  The amount of dilution will depend on the price of the new shares, which will be determined based on market conditions at the time the Share Capital Increase is launched.  While shareholders not wishing to subscribe will be able to sell their preferential subscription rights, the market price of the rights might not be sufficient to compensate for the economic effect of the dilution.  The Company currently expects that, subject to certain limited exceptions, the rights will not be exercisable in the United States.

 

Risks Relating to the Group

 

The Group’s high level of borrowings requires the Group to devote a large portion of its operating cash flow to service debt, and may limit its operating flexibility

 

The Group is highly leveraged. As of September 30, 2004, the Group had consolidated borrowings of €2.1 billion and negative shareholders’ equity of €59.9 million (€2.0 billion of consolidated borrowings and €386 million of positive shareholders’ equity on a pro-forma basis, adjusting for the implementation of the Restructuring).  In addition, the Group pays significant royalties and management fees to affiliates of TWDC.

 

Although the Restructuring contains several measures intended to allow increased capital investment and to protect the Company against disruptions in its liquidity over a long period, the Group’s high degree of leverage and its undertaking in favor of its lenders can have important consequences for its business, such as:

 

•                  limiting the Group’s ability to invest operating cash flow in its business, because its uses a substantial portion of these funds to pay debt service and because the Group’s covenants restrict the amount of its investments;

 

•                  limiting the Group’s ability to make capital investments in new attractions and maintenance of the Theme Parks and Hotels, both of which are essential to its business;

 

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•                  limiting the Group’s ability to borrow additional amounts for working capital, capital expenditures, debt service requirements or other purposes; and

 

•                  limiting the Group’s ability to withstand business and economic downturns, because of the high percentage of its operating cash flow that is dedicated to servicing its debt.

 

If the Group cannot pay its debt service, royalties and management fees and meet its other liquidity needs from operating cash flow, the Group could have substantial liquidity problems.  In those circumstances, the Group might have to sell assets, delay planned investments, obtain additional equity capital or restructure its debt.  Depending on the circumstances at the time, the Group may not be able to accomplish any of these actions on favorable terms, or at all.  The Group’s financing agreements limit its ability to take some actions that could generate additional cash proceeds.  They also require that the Group meet certain financial covenants.  If the Group defaults on any of its debt, the relevant lenders could accelerate the maturity of the debt and take other actions that could adversely affect the Group.  To avoid a default, the Group may need waivers from third parties, which might not be granted.

 

The Group has recently incurred losses, and expects to continue to incur a significant aggregate amount of losses over the next several years

 

The Group’s net loss for fiscal year 2004 totalled €145.2 million, compared to a net loss of €58.3 million in fiscal year 2003, determined on a pro-forma basis adjusting for certain changes in accounting principles described herein.  Management of the Company expects that even under its growth assumptions, the Group will incur a significant aggregate amount of net losses over the next several fiscal years.  Accordingly, the value of the Company’s shares could be adversely affected.

 

The Group is subject to interest rate risk

 

As at September 30, 2004, approximately 33% of the Group’s borrowings was tied to floating interest rates.  While the Group attempts to reduce interest rate risks in respect of a substantial portion of its borrowings through the use of interest rate swaps and other hedging techniques, an increase in interest rates could adversely affect the Group’s financial condition.

 

The Group is subject to exchange rate risks

 

A portion of the Group’s purchases and capital investments are denominated in U.S. dollars and could be adversely affected by an increase in the relative value of the U.S. dollar against the euro.  The Company attempts to reduce the forecasted dollar risk by purchasing hedging instruments, although it cannot be certain that its hedging techniques will be fully effective to insulate the Group from the risk of changes in value of the U.S. dollar.  A weakening of the U.S. dollar (such as that which has recently occurred) also makes tourist destinations in the United States relatively more attractive, increasing competitive pressures on the Group and potentially adversely affecting attendance at the Resort.  In addition, a significant portion of the Group’s guests (19% in fiscal year 2004) come from the United Kingdom, which is not part of the euro zone.  An increase in the relative strength of the euro against the British pound would raise the price of a visit to the resort for guests visiting from the United Kingdom and could negatively affect their rates of attendance, per-guest spending and hotel occupancy.

 

The Company has not paid any dividends in recent years, and does not expect to pay dividends for a substantial period of time

 

The Company will pay no dividends in respect of fiscal year 2004 and does not expect to pay dividends for a substantial period of time.  The Company’s ability to pay dividends is dependent on the availability of distributable profits under French law, which, in turn, depends on the Company’s operating results, liquidity and financial condition.  In addition, certain of the Company’s loan agreements limit or prohibit the payment of dividends in certain circumstances.

 

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As part of the Restructuring, the Group will have the authorization and obligation to implement a €240 million development plan over the next few years.  The development plan will include the construction of new attractions, as well as other investments, all designed to increase attendance.  There can be no assurance, however, that the planned investments will in fact result in increased attendance at levels anticipated by the Group (or at all), or that, if attendance increases, the additional revenues will be sufficient to permit the recovery of the amounts invested, a return on such investments or the payment of the Group’s other financial obligations.

 

The theme park resort business is competitive, which could limit the Group’s ability to increase prices or to attract guests

 

The Group competes for guests throughout the year with other European and international holiday destinations and also other leisure and entertainment activities in the Paris region. The parks operated by the Group also compete with other European theme parks.  The Group also relies on convention business, which is highly competitive, for a portion of its revenues and to maintain hotel occupancy in off-peak periods.

 

The Group’s hotels are subject to competition from the third-party hotels located on the Resort Site (2,033 rooms/units as at the date of this Annual Report), in central Paris and in the Seine-et-Marne area.  The Group believes that its hotels are priced at a premium compared to the market, reflecting among other advantages, their proximity to Disneyland Park and Walt Disney Studios Park, their unique themes and the quality service they offer.  The Group is aware, however, that a number of less costly alternatives exist.

 

Competition limits the Group’s ability to raise prices, and may require the Group to make significant new investments to avoid losing guests to competitors.

 

Risks of investing in the Company’s  shares

 

No U.S. Public Market

 

There has been no public market in the United States for its shares, and the Company has no present intention to apply to list the shares on any U.S. exchange.  Therefore, the opportunity for U.S. holders to trade shares may be limited.

 

ITEM 4.     INFORMATION ON THE COMPANY

 

A.            HISTORY AND DEVELOPMENT OF THE COMPANY AND BUSINESS OVERVIEW

 

Introduction

 

The Group is primarily engaged in the development and operation of Disneyland Resort Paris (the “Resort”), formerly Euro Disneyland.  The Resort commenced operations on April 12, 1992 (“Opening Day”) on a 2,000 hectare site (the “Site”), located 32 kilometers (approximately 20 miles) east of Paris in Marne-la-Vallée, Seine-et-Marne, France.  Disneyland Resort Paris principally consists of Disneyland Park, Walt Disney Studios Park, seven themed hotels, including two convention centers, the Disney Village entertainment center comprising shopping and restaurant facilities, and a 27-hole golf course. The Group’s operating activities also include the management and development of the Site, which currently includes approximately 1,000 hectares of undeveloped land.  Most of these facilities (with the exception of the Walt Disney Studios Park facilities, two hotels and the golf course, which are owned by the Company) are leased, directly or indirectly, by the Company from special-purpose financing companies, which as of October 1, 2003 have been consolidated into the reporting group.  The Group has no ownership interest in these entities.  Disneyland Resort Paris is modeled on the theme park and resort concepts developed by The Walt Disney Company for its own theme parks and hotel infrastructure.

 

Its principal executive offices are located at Immeubles Administratifs, Route Nationale 34, 77700 Chessy (Seine-et-Marne), France.  The postal address is BP 100, 77777 Marne-la-Vallée Cedex 04, France.  Its telephone number is (33) (1) 64 74 40 00.

 

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A.1.                          History of the Group

 

In March 1987, TWDC entered into an agreement for the creation and operation of Euro Disneyland in France (the “Master Agreement”) with the Republic of France and certain other French public authorities.  The Company became a party to the Master Agreement after its original signature.  The Master Agreement sets out a master land-use plan and general development program establishing the type and size of facilities that the Company has the right, subject to certain conditions, to develop at the Resort Site over a 30-year period ending in 2017.

 

The Resort, as it exists today, represents the fulfillment of the following development phases:

 

Phase		Development Period		Development Description
Phase IA		1989 to 1992		Disneyland Park, Disneyland Hôtel, Davy Crockett Ranch, golf course, infrastructure and support facilities.
Phase IB		1989 to 1992		Five themed hotels and Disney Village, defined as the “Phase IB Facilities”.
Phase IC		1992 to 1995		Additional Capacity Disneyland Park Assets which included among other attractions, Space Mountain and Indiana Jones and the Temple of Peril: Backwards!
		1996 to 1997		Disneyland Park attraction Honey, I Shrunk the Audience! and the Newport Bay Club Convention Centre
Phase II		1998 to 2004		Val d’Europe new city development including an international mall, a second urban rail station on the Resort Site, and the development of a downtown district comprising offices and housing, the first phase of a business park, and Walt Disney Studios Park.

 

The Group experienced significant losses during the period from the Opening Day through September 30, 1994. Net operating losses before the cumulative effect of an accounting change totaled approximately €625 million for the two-and-a-half-year period ending September 30, 1994. In addition, the Group began to experience serious cash flow difficulties in the course of fiscal year 1993.

 

In March 1994, the Group entered into a memorandum of agreement with major stakeholders outlining the terms of a major restructuring of the Group’s obligations and those of the Phase I Financing Companies and of TWDC.  The 1994 Financial Restructuring essentially provided for concessions and contributions to be made by the Group’s lenders and by TWDC, and for the prepayment of certain outstanding loan indebtedness of the Group and the Phase I Financing Companies, using the proceeds of a share capital increase of the Company amounting to €907.0 million.

 

In fiscal year 1999, the Company obtained the approval of its lenders to obtain the financing necessary for the construction of Walt Disney Studios Park, which opened on March 16, 2002 adjacent to Disneyland Park. The construction of Walt Disney Studios Park was financed using the proceeds received from a share capital increase in the amount of €219.5 million in fiscal year 2000 and a new subordinated long-term loan from the CDC (€381.1 million).

 

In fiscal year 2003, the Group experienced reduced revenues as a result of, in particular, a prolonged downturn in European travel and tourism combined with challenging general economic and geopolitical conditions in key markets of the Group.  While this was partially offset by the impact of the opening of Walt Disney Studios Park, the number of visitors and the revenues generated by the new park were below expectations.  The Group also recorded increased losses as a result of reduced revenues, as well as higher operating costs and higher marketing and sales expenses related to the opening of Walt Disney Studios Park.

 

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In this context, the Company (on behalf of the Group) once again entered into negotiations with its various lenders with a view to restructuring all the credit agreements.  After receiving successive waivers of covenants in its credit agreements, the Company (on behalf of the Group) entered into a Memorandum of Agreement and various agreements necessary for the implementation of the Memorandum of Agreement.  For further information, see Item 5, “Operating and Financial Review and Prospects” – Section F. “2004 Financial Restructuring”.

 

A.2.                          Strategic Overview

 

The Restructuring is an important step in re-establishing the Group’s liquidity, and a necessary condition to allow the Group to pursue its development strategy, described below.  By reaching agreement on the Restructuring and subject to its effective implementation, the Group has the opportunity to pursue a strategy designed to attract new Theme Park visitors and hotel guests, and to increase repeat visitation by enhancing guest satisfaction and value perception. Coupled with what management hopes will be a strong rebound in the short break and theme park markets in Europe, the Group believes that its development strategy has the potential to increase its revenues and improve its financial performance.

 

The Group has designed its development strategy to take advantage of what management believes are significant opportunities to attract and retain visitors.  The Group’s market research shows that guest satisfaction levels at the Theme Parks are very high – in recent surveys, guests indicating that they were “completely satisfied” or “very satisfied” represented over 80% of the guests surveyed at Disneyland Park, and over 70% at Walt Disney Studios Park (a differential consistent with second parks in other Disney resorts).  Market research also indicates that there are substantial numbers of European families that have never visited the Resort, but have indicated that they might like to do so in the future.

 

The Group’s strategy to take advantage of this opportunity includes the construction of three major new attractions scheduled to open in fiscal years 2006, 2007 and 2008, and the enhancement of existing attractions and the magical atmosphere of the Theme Parks.  The enhancements will include significant short-term improvements, designed to attract new visitors, while the new attractions are being constructed, most prominently the upgrade and re-launch of Space Mountain in Fiscal Year 2005.  The principal elements of the Group’s development strategy are the following:

 

•                  Revitalize the Disneyland Park experience

 

With the increase in ongoing capital expenditure authorization provided by the Restructuring, the Group will reinvigorate its long-standing policy of continually upgrading Disneyland Park, starting with the fiscal year 2005 upgrade and re-launch of Space Mountain, creating a completely new experience in order to provide its visitors with a new twist on this already popular roller coaster ride.

 

The Group also plans to introduce new children’s attractions to further penetrate its European core market. In addition to these major attractions, the Group will continue its ongoing efforts to enhance guest satisfaction, focusing on overall quality and reduction of waiting times, improved food and beverage experience and increased merchandising innovation.

 

•                  Enhance the Walt Disney Studios Park experience

 

The Group intends to increase the appeal of Walt Disney Studios Park to young children and their families.  This will make the park more attractive to the Group’s core customer base and should encourage more visitors to take advantage of the “Park Hopper” ticket (which permits guests to visit both theme parks for a single, premium price).  The Group also plans to construct certain of the major new attractions at Walt Disney Studios Park, enhancing the overall attractiveness of the park.

 

•                  Expand seasonal events and popular shows

 

Although the Group’s business is seasonal, the Group has successfully employed a strategy to reduce the impact of seasonality through the staging of special promotional events in the off-peak season.  The Group intends to add to its popular Halloween and Christmas events with new seasonal features that will include a “Magic Unlimited” season in January (allowing repeat rides on certain attractions without waiting in line), a Kids Carnival season and an Easter season.  The Group also intends to continue The Legend of the Lion King show, which proved to be highly popular when it was introduced in June 2004.

 

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The Group intends to capitalize on major events with promotional campaigns designed to maximize the number of visitors.  For example, in fiscal year 2005, the Group will implement a promotional campaign around the re-launch of Space Mountain, expected to occur in the spring, at the beginning of the high season.  The Group also plans to mark the 50^th anniversary of the original Disneyland Park in California with a fireworks celebration throughout the summer of 2005.

 

•                  Focus on differentiation of the Disney Hotels

 

The Group intends to focus visitors on the attractiveness of its own on-site Hotels in order to meet the short-term challenges presented by the opening of the new on-site hotels operated by third-parties in Fiscal Years 2003 and 2004.  Its marketing effort will highlight the proximity of its hotels to the Theme Parks and special attractions such as Disney character breakfasts.  In addition, the Group has determined that the prospective balance between the Theme Parks and Hotel price components of its travel packages shall give more weight to the ticket prices, and it intends to modify its policy to achieve a better competitive equilibrium and to improve the attractiveness of the Disney Hotels in packages booked through tour operators.

 

•                  Focus on sales and marketing on first-time visitors and new distribution channels

 

The Group will implement sales and marketing efforts designed specifically to encourage attendance by first-time visitors, taking advantage of the large untapped population base in Europe discussed above.  The marketing effort will include a new communication strategy that will familiarize European visitors with the theme park experience, while differentiating the Disneyland Resort Paris experience.  The Group also intends to take advantage of new distribution channels by establishing relationships with low-cost airlines and internet travel sites, as well as developing “calls to action” to trigger bookings when marketable news is released (for example, the re-launch of Space Mountain).

 

A.3.                Operations by Segment

 

The Group operates in the following segments:

 

•                  Resort activities include the operation of the Theme Parks, the Hotels and Disney Village, and the various services that are provided to guests visiting the Resort destination; and

 

•                  Real Estate Development activities include the conceptualization and planning of improvements and additions to the existing Resort activity, as well as other commercial and residential real estate projects, whether financed internally or through third-party partners.

 

A breakdown of total revenues by major segment and activity during the past five Fiscal Years is set forth in the table below:

 

				Pro-Forma		As-reported
(€ in millions)		2004		2003		2003		2002		2001		2000
Theme Parks		531.3		508.5		508.5		526.0		476.4		459.5
Hotels and Disney Village		405.2		416.7		416.7		411.7		386.5		370.3
Other		99.7		98.0		98.7		106.2		101.4		110.9
Resort Segment		1,036.2		1,023.2		1,023.9		1,043.9		964.3		940.7
Real Estate Development Segment		11.8		23.6		23.6		27.3		37.2		14.5
Total Revenues		1,048.0		1,046.8		1,047.5		1,071.2		1,001.5		955.2

 

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A.3.1.                Resort Segment

 

A.3.1.1.      Theme Parks

 

Theme Parks

 

Within the Resort segment, theme park activity includes all operations of Disneyland Park and Walt Disney Studios Park, including merchandise, food and beverage, special events and all other services provided to guests in the parks.  Theme Park revenue is determined primarily by two factors: the number of guests and the total average spending per guest (which includes the admission price and spending on food, beverage and merchandise).

 

The Theme Parks are operated on a year-round basis. In the first years of operations, Disneyland Park experienced significant difficulties in accommodating all prospective guests during peak days, which resulted in long wait times for attractions, guest dissatisfaction and lost revenues. Despite progress, operations continue to be subject to seasonal fluctuations.

 

Beginning in fiscal year 2004, seasonal theme park pricing has been eliminated and replaced with stable year-round ticket pricing. However, specific packages are regularly offered for specific markets.

 

The Company began offering and promoting a “Park Hopper” ticket for one-day, two-day and three-day periods in October 2003 whereby for an additional price of €9 over a single-gate, one day admission price, a guest can go back and forth freely between Disneyland Park and Walt Disney Studios Park.

 

The following table summarizes the evolution of the single-gate, one-day theme park admission prices, attendance and average spending per guest:

 

Fiscal Year		Total Guests (1) (in millions)		Total Average Spending per Guest (2)			Theme Park Admission Price High Season (3)			Theme Park Admission Price Low Season (3)
2004		12.4		€	42.7		€	40.0		€	40.0
2003		12.4		€	40.7		€	39.0		€	29.0
2002		13.1		€	40.1		€	38.0		€	27.0
2001		12.2		€	38.9		€	36.0		€	25.9
2000		12.0		€	38.1		€	33.5		€	25.2

 

⁽¹⁾              Includes Disneyland Park and, from March 16, 2002, Walt Disney Studios Park.

 

⁽²⁾              Average daily admission price and spending for food, beverage, merchandise and other services sold in the Theme Parks, excluding value added tax.

 

⁽³⁾              Represents at-gate park admission price for one adult including value added tax at the end of the Fiscal Year.  Starting in Fiscal Year 2002, high season pricing generally applied to the whole year with the exception of the period from January to March inclusive.  Since January 2004, a single rate applies throughout the year.

 

Disneyland Park

 

Disneyland Park is composed of five “themed lands”: Main Street U.S.A., which transports guests to an American town at the turn of the 20^th century, with its houses and shops, Frontierland, which takes guests on the path of the pioneers who settled the American West, Adventureland, where guests dive into a world of intrigue and mystery, reliving Disney’s most extraordinary legends and best adventure movies, Fantasyland, a magical land where guests find the fairy tale heroes brought to life in Disney’s animated films, and Discoveryland, which lets guests discover different “futures” through the works of visionaries, inventors, thinkers and authors of science fiction from all periods.

 

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Since June 2002, the Disney Cinema Parade celebrates the steps in the life of a movie from A to Z featuring well-known Disney characters. To add to the overall park ambience, this parade also includes street entertainers (e.g. movie “look-alikes” and musicians), Disney characters centered around the world of animation and special entertainment such as Sister Act.

 

As in Disneyland Park, the Fastpass system reduces guest waiting-times at Rock’n Roller Coaster and the Flying Carpets over Agrabah.  The Company currently allows guests of Walt Disney Studios Park to cross over to Disneyland Park after 5:00 p.m. at no additional charge.

 

A.3.1.2.      Hotels and Disney Village

 

Also included in the Resort segment are the Group’s hotels and Disney Village operations. Revenues from these activities include room rental, food and beverage, merchandise, dinner shows, convention revenues and fixed and variable rent received from third-party partners operating within the Resort.

 

All of the hotel and resort amenities are currently operated on a year-round basis.  Hotel operations are subject to significant seasonal fluctuations, as well as significant fluctuations between weekdays and weekends especially in off-peak seasons. The fiscal year 1998 opening of a second convention center, the continued success of seasonal promotions such as Halloween, Guy Fawkes and Christmas, and the introduction of travel inclusive packages have helped to reduce these fluctuations.  The Company believes that the successful implementation and marketing of these events is important to maintaining high average occupancy levels at the hotels.

 

Hotel Operations

 

In fiscal year 2004, approximately 27% of total hotel room-nights sold were generated in the three-month period from June through August, while approximately 24% were generated in the three-month period from November through January, versus 36% and 14% respectively in fiscal year 1993 during the same periods.  The Group currently differentiates pricing according to the season and the level of demand with a focus on yield optimization.

 

Hotel revenues are determined primarily by two factors: the average occupancy rate and per-room spending.

 

 

⁽¹⁾              Number of rooms occupied per night divided by the number of rooms available during the relevant period.

 

⁽²⁾              Average daily room price and spending on food, beverage and merchandise and other services sold in the Hotels, excluding value added tax.

 

The Group operates seven hotels at the Resort: the Disneyland Hôtel, the Hôtel New York, the Newport Bay Club, the Sequoia Lodge, the Hôtel Cheyenne, the Hôtel Santa Fe and the Davy Crockett Ranch (the “Hotels”).  Together, the Hotels have a total capacity of approximately 5,800 rooms.  Each of the Hotels was designed and built with a specific theme and for a particular market segment.  The Disneyland Hôtel, which is located at the entrance of Disneyland Park, and the Hôtel New York are positioned as deluxe hotels offering service equivalent to that of the best hotels in Paris.  The Newport Bay Club and the Sequoia Lodge are positioned as “first-class” hotels, while the Hôtel Cheyenne and the Hôtel Santa Fe were designed as “moderately-priced” hotels.  The Davy Crockett Ranch campground is comprised of individual bungalows with private kitchens, camping sites, sports and leisure facilities and a retail shop.  Both the Hôtel New York and the Newport Bay Club include convention facilities, which provide a total of approximately 10,500 square meters of meeting space.  Resort amenities also include 12 restaurants, 9 cafés/bars, a 27-hole golf course, 5 swimming pools, 4 fitness centers, tennis courts and an ice-skating rink.

 

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A.3.1.3.  Food and beverage

 

The Group has 68 restaurants and bars throughout the Resort (four of which are operated by third parties). Restaurants are themed both in decoration and menu, based upon their location within the Resort, and offer guests a wide variety of dining experiences including quick service, cafeteria-style, table service (including convention catering), and sophisticated French cuisine.  There are also food carts and kiosks located throughout the Resort which offer fast-food. The Group offers guests the option of a fixed-price menu in all of its table service restaurants.  During Fiscal Years 2001 and 2002, the capacity of three Disney Village facilities were increased: Billy Bob’s Country Western Bar (+94 seats), The Steakhouse (+180 seats) and Annette’s Diner (+ 90 seats). In fiscal year 2003, the Rock’n Roll America was transformed into King Ludwig’s Castle, a 296 seat restaurant specializing in Bavarian cuisine.

 

A.3.1.4.  Merchandising

 

The Group’s merchandising facilities include 54 boutiques, 4 kiosks and a large number of mobile carts strategically located throughout the Resort, which offer a wide range of both Disney-themed and non-Disney-themed goods.  The product mix is constantly re-evaluated in an effort to better adapt to guest preferences and guest mix.  New merchandise development focuses on Disney character products, such as the Mickey Sorcerer line, which is popular with guests, and on more variety for the repeat guest.  Other innovative merchandising options include photo locations at four attractions, Big Thunder Mountain, Space Mountain - From the Earth to the Moon, Pirates of the Caribbean and Rock’n’Roller Coaster, which offer to its guests the opportunity to purchase candid photos taken of them during their ride.

 

A.3.2.      Real Estate Development Segment

 

Real estate development segment

 

The Group’s activities include the planning and development of the 1,943 hectare site on which the Resort is located, in accordance with the Master Plan.  Development activities include the conceptualization and planning of improvements and additions to the existing Resort, as well as other commercial and residential real estate projects to be located on the Resort Site, whether financed internally or through third-party partners.

 

The Group’s principal real estate development revenues are derived from conceptual design services related to third party development projects on the Resort Site and from the sale of land development rights or from ground lease income from third-party developers.  Such transactions not only provide a source of up-front cash inflows but also contribute to improving the potential of future Resort and real estate development projects and to increasing the potential local clientele for Disneyland Resort Paris.

 

The following table summarises the financial impact of real estate development activities on the financial statements:

 

(€ in millions)		2004		2003		2002		2001		2000
Revenues
Operating		11.8		23.6		27.3		37.2		14.5
Exceptional		—		0.1		—		0.4		0.6
Total Revenues		11.8		23.7		27.3		37.6		15.1
Costs and Expenses		(10.1	)	(13.3	)	(15.2	)	(13.4	)	(11.6	)
Net Income		1.7		10.4		12.1		24.2		3.5

 

Real estate development revenues are primarily related to the following projects:

 

The first phase of development between 1989 and 1997 was essentially devoted to the creation of the Resort destination, the second phase between 1998 and 2003 focused on the emergence of the development of an urban center located adjacent to the Resort  (Val d’Europe). In addition to Walt Disney Studios Park, this second phase of development resulted in:

 

•                  new infrastructure such as a second RER train station (Val d’Europe) on the Resort Site and a new interchange on the A4 motorway;

 

•                  an International Shopping Mall at Val d’Europe, which comprises 103,000 square meters of retail space.  The Group owns the land on which the mall is located and leases it to the developer under a 75-year ground lease;

 

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•                  development of the Val d’Europe town center, which currently includes residential, retail and commercial developments and the Elysées Val d’Europe hotel, which opened in June 2002 on land leased from the Group; and

 

•                  a first phase of an international business park, which upon completion will comprise an area of 40 hectares, strategically positioned near the motorway. Construction and commercialization of the first seven hectares is currently being carried out by Arlington plc, a leading European developer of business parks.

 

Hotel capacity developments

 

With the development of Walt Disney Studios Park, the Group also focused on the expansion of on-site Resort lodging capacity.  A number of projects have been completed or are in various stages of progress with third-party international hotel developers/tour operators for the creation of additional hotels and vacation units.  These projects have or will be constructed, owned and operated by third parties on land purchased from the Group or leased from the Group under long-term ground leases.  In addition, the Group has and will earn conceptualization fees and other development service fees related to these transactions.

 

As a result of these projects, approximately 1,400 hotel/vacation units were opened on the Resort Site in Fiscal Year 2003 and 457 units were opened in Fiscal Year 2004, bringing the total on-site capacity to approximately 7,800 total room units.

 

The agreements and projects currently in place will result in a total of approximately 350 additional hotel/vacation units on the Resort Site in the course of Fiscal Years 2005 and 2006.

 

Residential developments

 

The Group also sells land to third-party residential developers working on projects in the areas surrounding the Resort, including the commercially successful middle and high-end housing developments near the golf course in the communities of Magny-le-Hongre and Bailly-Romainvilliers.

 

To date, this residential development has been financed by third parties.  The Group’s role has been limited to overseeing the master planning and architectural design of each development, and to selling to selected developers the land development rights necessary to realize the projects.  The Group does not anticipate significant changes in its role for future residential development projects, although the Group may consider expanding its role in a certain number of these projects to include an equity participation via joint ventures with the third-party developers.

 

Development plans for the coming years

 

More recently, a third phase of development was signed with the French Public Authorities on July 9, 2003 and covers the period 2004 through 2010.  In this phase of development, the following is anticipated:

 

•                  the expansion of Disney Village, the development of business tourism and additional hotel capacity, when needed;

 

•                  the continuation of the Val d’Europe town center expansion (residential and office development);

 

•                  the development of new public services such as the development of a high school (Lycée) in Serris with international sections, the development of an university center in Val d’Europe as well as a new module for the TGV station;

 

•                  the continuation of the international business park development (second phase); and

 

•                  other residential developments in the area surrounding the Val d’Europe golf course.

 

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A.4.         Marketing and Sales Strategy

 

A.4.1.     Marketing and Sales

 

Product Offer

 

Disneyland Paris Resort is the number one tourist destination in Europe in terms of guest visitation with a product offer that currently includes two theme parks, 7 themed Hotels (5,800 total rooms), two separate convention facilities (totaling 10,500 square meters), a dining, shopping and entertainment center and a 27-hole golf course.

 

With the opening of Walt Disney Studios Park, the Group’s package offers were modified to focus on 2-night, 3-day visits.  During Fiscal Year 2003 the Group re-introduced a widely distributed 1-night, 2-day package to accommodate its guests desiring a shorter break.  The Group’s Resort packages include “Park Hopper” tickets whereby guests can go back and forth freely between Disneyland Park and Walt Disney Studios Park, which were introduced during the course of Fiscal Year 2004.

 

Strategic Location

 

Disneyland Resort Paris is located approximately 32 kilometres (20 miles) east of Paris, France and benefits from access to a highly developed transportation network.  In addition to service to Paris on the French suburban rail system, Disneyland Resort Paris has access to an extensive highway network that links it in less than one hour to both Paris and the two international airports serving the Paris area, and also makes it easily accessible to most other regions of France.  In addition, the train station that is located on the Resort Site is one of the most active in France, with about forty high speed trains arriving per day and providing service to London in three hours by the Eurostar train, and to Brussels in 1 hour and 30 minutes, Amsterdam in 4 hours and 30 minutes and Cologne in 4 hours by the Thalys train.  The strategic geographic location allows access to a market of 17 million potential guests less than 2 hours away by road or rail transport and 320 million potential guests less than 2 hours away by plane.

 

 

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Target Markets

 

The Group has six key proximate markets: France, the United Kingdom, Benelux (Belgium, Luxembourg, the Netherlands) Germany, Italy and Spain.  Within these markets, its primary target market is families with children from 3-15 years old but secondary markets also include groups, young adults and convention planners.  Each year, its success in marketing to specific countries and markets is impacted by a variety of strategic decisions, including its pricing policy and its package offers, as well as external factors such as the strength of local economies, exchange rates, cultural interests, and holiday and vacation timing.  The introduction of the euro has eliminated exchange rate concerns in all key markets except the United Kingdom.

 

Based on internal surveys, the geographical breakdown of its theme park guest attendance is as follows:

 

		2004		2003		2002
France		40	%	39	%	40	%
United Kingdom		19	%	22	%	21	%
Belgium, Luxembourg and the Netherlands		16	%	16	%	15	%
Spain		8	%	6	%	6	%
Germany		6	%	6	%	7	%
Italy		3	%	3	%	3	%
Other		8	%	8	%	8	%
Total		100	%	100	%	100	%

 

Distribution

 

The Group distributes its product offer through a wide variety of channels. Tour packages, which in many cases include transportation, lodging, food and theme park tickets are distributed through its call centers, on its internet site or through third-party distributors.

 

Theme park tickets are sold not only within these packages, but also through tourism intermediaries, directly at the gate and by various retail outlets (the Disney Stores, FNAC, Virgin Megastores, Auchan, RATP, and at French, Belgian and Swiss railway stations, etc.).

 

Hotel bookings can be made by individual guests, either directly or through Euro Disney Vacances S.A.S., the Group’s in-house tour operator. The call centers, based at the Resort Site and in the United Kingdom, receive an average of approximately 6,100 calls per day from all over Europe. Apart from the United Kingdom, all other markets are serviced from the central reservation office at the Resort Site in Paris, with country-specific telephone numbers. Third-party distributors, including tour operators with their own packages, for individuals and groups, currently account for the remaining hotel reservations.

 

Euro Disney Vacances S.A.S. focuses on distribution of short-break packages, with offices in Paris and other French cities as well as regional offices in Amsterdam, Brussels, Copenhagen, Frankfurt, London and Madrid. These offices provide a local marketing presence and the necessary travel industry trade support. The Group also works with a select number of tour operators in its major markets.

 

In addition, the Group has established special travel alliance partnerships with the principal European transporters. Travel alliance agreements have been completed with Air France on a pan-European basis and with Eurostar and Thalys. These agreements provide carriers with the right to use Disneyland Resort Paris in their advertising campaigns and some with the right to special joint promotional packages. In return, the Group has the right to provide airline or train tickets in its short-break packages and to secure allotments. Guest visitation from the United Kingdom, Spain, Italy and Belgium reflects its relationship with these partners.

 

The Group’s internet site at www.disneylandparis.com is available in 6 languages and allows site visitors to learn about its Resort, order a brochure, e-mail reservation requests directly to its reservation center, purchase theme park-tickets, and to book certain packages. The Group is currently working on projects to expand and improve its ability to sell its products directly to guests on its internet site.

 

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A.4.2.     Competition

 

The Group competes for guests throughout the year with theme parks as well as other European and international holiday destinations (including ski and seaside resorts) and with other leisure and entertainment activities (including museums and cultural activities) in the Paris region. Its Hotels compete with other hotels on the Site and in the Paris region and convention centers all over Europe. Its Resort also competes with major international tourist-attracting events and major sporting events, such as the soccer World Cup, the World Athletics Championships and the Olympic Games.

 

The theme park market in Europe has grown significantly over the last two decades. According to the publication Amusement Business, the ten largest European theme parks attracted approximately 36.2 million guests in 2003. The following table sets forth the attendance of each of these ten destinations.

 

Theme Parks in Europe⁽¹⁾

(in millions)

 

				Attendance
Theme Park		Location		2003		2002
Disneyland Resort Paris (fiscal year ended September 30)		France		12.4		13.1
Tivoli Gardens		Denmark		3.3		3.8
Europa Park		Germany		3.3		3.3
Gardaland		Italy		3.2		2.9
De Efteling		Netherlands		3.1		3.0
Lieseberg		Sweden		3.0		3.1
Universal’s Mediterrania (formerly Port Aventura)		Spain		2.7		3.2
Bakken		Denmark		2.7		2.5
Alton Towers		United Kingdom		2.5		2.5
				36.2		37.4

 

⁽¹⁾              Source: Amusement Business. Excluding non-gated amusement parks. Most recent data available is 2003.

 

A.5.         Human Resources Management

 

To entertain its guests, the Group employs an average of approximately 12,200 employees during fiscal year 2004. The Group’s employees come from approximately 100 different countries and more than 25% of them have been employed since Opening Day. The table below presents the average number of persons employed by the Group as well as the associated employee costs for each of the last five fiscal years:

 

Fiscal Year		Average Number of Employees		Total Employee Costs (€ in millions)
2004		12,162		366.0
2003		12,223		365.7
2002		12,467		352.0
2001		11,109		307.0
2000		11,432		297.6

 

The seasonal nature of the business means that the need for employees is, to a certain extent, also seasonal. Accordingly, the Group has developed a system, used in both the theme parks and the Hotels, to optimize scheduling and automate labor exchange between operations. The system improves efficiency by automating both scheduling and the corresponding pay systems. In conjunction with this system, flexible working contracts have been negotiated with the employee representatives. Special part-time contracts such as four-day working weeks, 32-hour weeks or individually negotiated contracts, have been implemented. Over the past four Fiscal Years, many temporary jobs have been turned into flexible long-term contracts with Disneyland Resort Paris, facilitating job security and better training for employees. This new flexibility has helped management to better match the number of employees to the levels of customer demand.

 

In addition, based upon an assessment of current employment policies and practices within the Group, negotiations will be undertaken with employee labor representatives for the purpose of proposing a solution for certain difficulties in the implementation of required changes in the defined work hours, as well as the treatment of the working hours of management (cadre) employees. These negotiations are considered part of the normal evolution over time of the Group’s collective bargaining agreements with employee labor representatives, taking into account changes in the legal environment, and should have no significant

 

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