~~MANAGEMENT’S DISCUSSION AND ANALYSIS OF~~

~~FINANCIAL CONDITION AND RESULTS OF OPERATIONS — (continued)~~

OTHER MATTERS

Accounting Policies and Estimates

We believe that the application of the following accounting policies, which are important to our financial position and results of operations require significant judgments and estimates on the part of management. For a summary of our significant accounting policies, including the accounting policies discussed below, see Note 2 to the Consolidated Financial Statements in the 2017 Annual Report on Form 10-K.

Film and Television Revenues and Costs

We expense film and television production, participation and residual costs over the applicable product life cycle based upon the ratio of the current period’s revenues to the estimated remaining total revenues (Ultimate Revenues) for each production. If our estimate of Ultimate Revenues decreases, amortization of film and television costs may be accelerated. Conversely, if our estimate of Ultimate Revenues increases, film and television cost amortization may be slowed. For film productions, Ultimate Revenues include revenues from all sources that will be earned within ten years from the date of the initial theatrical release. For television series, Ultimate Revenues include revenues that will be earned within ten years from delivery of the first episode, or if still in production, five years from delivery of the most recent episode, if later.

With respect to films intended for theatrical release, the most sensitive factor affecting our estimate of Ultimate Revenues (and therefore affecting future film cost amortization and/or impairment) is theatrical performance. Revenues derived from other markets subsequent to the theatrical release (e.g., the home entertainment or television markets) have historically been highly correlated with the theatrical performance. Theatrical performance varies primarily based upon the public interest and demand for a particular film, the popularity of competing films at the time of release and the level of marketing effort. Upon a film’s release and determination of the theatrical performance, the Company’s estimates of revenues from succeeding windows and markets are revised based on historical relationships and an analysis of current market trends. The most sensitive factor affecting our estimate of Ultimate Revenues for released films is the level of expected home entertainment sales. Home entertainment sales vary based on the number and quality of competing home entertainment products, as well as the manner in which retailers market and price our products.

With respect to television series or other television productions intended for broadcast, the most sensitive factors affecting estimates of Ultimate Revenues are program ratings and the strength of the advertising market. Program ratings, which are an indication of market acceptance, directly affect the Company’s ability to generate advertising revenues during the airing of the program. In addition, television series with greater market acceptance are more likely to generate incremental revenues through the licensing of program rights worldwide to television distributors, SVOD services and in home entertainment formats. Alternatively, poor ratings may result in cancellation of the program, which would require an immediate write-down of any unamortized production costs. A significant decline in the advertising market would also negatively impact our estimates.

We expense the cost of television broadcast rights for acquired series, movies and other programs based on the number of times the program is expected to be aired or on a straight-line basis over the useful life, as appropriate. Amortization of those television programming assets being amortized on a number of airings basis may be accelerated if we reduce the estimated future airings and slowed if we increase the estimated future airings. The number of future airings of a particular program is impacted primarily by the program’s ratings in previous airings, expected advertising rates and availability and quality of alternative programming. Accordingly, planned usage is reviewed periodically and revised if necessary. We amortize rights costs for multi-year sports programming arrangements during the applicable seasons based on the estimated relative value of each year in the arrangement. The estimated value of each year is based on our projections of revenues over the contract period, which include advertising revenue and an allocation of affiliate revenue. If the annual contractual payments related to each season approximate each season’s estimated relative value, we expense the related contractual payments during the applicable season. If planned usage patterns or estimated relative values by year were to change significantly, amortization of our sports rights costs may be accelerated or slowed.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS — (continued)

Costs of film and television productions are subject to regular recoverability assessments, which compare the estimated fair values with the unamortized costs. The net realizable values of television broadcast program licenses and rights are reviewed using a daypart methodology. A daypart is defined as an aggregation of programs broadcast during a particular time of day or programs of a similar type. The Company’s dayparts are: primetime, daytime, late night, news and sports (includes broadcast and cable networks). The net realizable values of other cable programming assets are reviewed on an aggregated basis for each cable network. Individual programs are written off when there are no plans to air or sublicense the program. Estimated values are based upon assumptions about future demand and market conditions. If actual demand or market conditions are less favorable than our projections, film, television and programming cost write-downs may be required.

~~MANAGEMENT’S DISCUSSION AND ANALYSIS OF~~

~~FINANCIAL CONDITION AND RESULTS OF OPERATIONS — (continued)~~

Revenue Recognition

We reduce home entertainment revenues for estimated future returns of merchandise and for customer programs and sales incentives. These estimates are based upon historical return experience, current economic trends and projections of customer demand for and acceptance of our products. If we underestimate the level of returns or sales incentives in a particular period, we may record less revenue in later periods when returns or sales incentives exceed the estimated amount. Conversely, if we overestimate the level of returns or sales incentives for a period, we may have additional revenue in later periods when returns or sales incentives are less than estimated.

We recognize revenues from advance theme park ticket sales when the tickets are used. Revenues from annual pass sales are recognized ratably over the period for which the pass is available for use.

Pension and Postretirement Medical Plan Actuarial Assumptions

The Company’s pension and postretirement medical benefit obligations and related costs are calculated using a number of actuarial assumptions. Two critical assumptions, the discount rate and the expected return on plan assets, are important elements of expense and/or liability measurement, which we evaluate annually. Refer to the 2017 Annual Report on Form 10-K for estimated impacts of changes in these assumptions. Other assumptions include the healthcare cost trend rate and employee demographic factors such as retirement patterns, mortality, turnover and rate of compensation increase.

The discount rate enables us to state expected future cash payments for benefits as a present value on the measurement date. A lower discount rate increases the present value of benefit obligations and increases pension expense. The guideline for setting this rate is a high-quality long-term corporate bond rate. The Company’s discount rate was determined by considering yield curves constructed of a large population of high-quality corporate bonds and reflects the matching of the plans’ liability cash flows to the yield curves.

To determine the expected long-term rate of return on the plan assets, we consider the current and expected asset allocation, as well as historical and expected returns on each plan asset class. A lower expected rate of return on pension plan assets will increase pension expense.

Goodwill, Other Intangible Assets, Long-Lived Assets and Investments

The Company is required to test goodwill and other indefinite-lived intangible assets for impairment on an annual basis and if current events or circumstances require, on an interim basis. Goodwill is allocated to various reporting units, which are an operating segment or one level below the operating segment. The Company compares the fair value of each reporting unit to its carrying amount, and to the extent the carrying amount exceeds the fair value, an impairment of goodwill is recognized for the excess up to the goodwill allocated to the reporting unit.

To determine the fair value of our reporting units, we generally use a present value technique (discounted cash flows) corroborated by market multiples when available and as appropriate. We apply what we believe to be the most appropriate valuation methodology for each of our reporting units. The discounted cash flow analyses are sensitive to our estimates of future revenue growth and margins for these businesses. We include in the projected cash flows an estimate of the revenue we believe the reporting unit would receive if the intellectual property developed by the reporting unit that is being used by other reporting units was licensed to an unrelated third party at its fair market value. These amounts are not necessarily the same as those included in segment operating results. We believe our estimates of fair value are consistent with how a marketplace participant would value our reporting units.

In times of adverse economic conditions in the global economy, the Company’s long-term cash flow projections are subject to a greater degree of uncertainty than usual. If we had established different reporting units or utilized different valuation methodologies or assumptions, the impairment test results could differ, and we could be required to record impairment charges.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS — (continued)

The Company is required to compare the fair values of other indefinite-lived intangible assets to their carrying amounts. If the carrying amount of an indefinite-lived intangible asset exceeds its fair value, an impairment loss is recognized for the excess. Fair values of other indefinite-lived intangible assets are determined based on discounted cash flows or appraised values, as appropriate.

The Company tests long-lived assets, including amortizable intangible assets, for impairment whenever events or changes in circumstances (triggering events) indicate that the carrying amount may not be recoverable. Once a triggering event has occurred, the impairment test employed is based on whether the intent is to hold the asset for continued use or to hold the asset for sale. The impairment test for assets held for use requires a comparison of cash flows expected to be generated over the

~~MANAGEMENT’S DISCUSSION AND ANALYSIS OF~~

~~FINANCIAL CONDITION AND RESULTS OF OPERATIONS — (continued)~~

useful life of an asset group to the carrying value of the asset group. An asset group is established by identifying the lowest level of cash flows generated by a group of assets that are largely independent of the cash flows of other assets and could include assets used across multiple businesses or segments. If the carrying value of an asset group exceeds the estimated undiscounted future cash flows, an impairment would be measured as the difference between the fair value of the group’s long-lived assets and the carrying value of the group’s long-lived assets. The impairment is allocated to the long-lived assets of the group on a pro rata basis using the relative carrying amounts, but only to the extent the carrying value of each asset is above its fair value. For assets held for sale, to the extent the carrying value is greater than the asset’s fair value less costs to sell, an impairment loss is recognized for the difference. Determining whether a long-lived asset is impaired requires various estimates and assumptions, including whether a triggering event has occurred, the identification of the asset groups, estimates of future cash flows and the discount rate used to determine fair values. If we had established different asset groups or utilized different valuation methodologies or assumptions, the impairment test results could differ, and we could be required to record impairment charges.

The Company has cost and equity investments. The fair value of these investments is dependent on the performance of the investee companies as well as volatility inherent in the external markets for these investments. In assessing the potential impairment of these investments, we consider these factors, as well as the forecasted financial performance of the investees and market values, where available. If these forecasts are not met or market values indicate an other-than-temporary decline in value, impairment charges may be required.

Allowance for Doubtful Accounts

We evaluate our allowance for doubtful accounts and estimate collectability of accounts receivable based on our analysis of historical bad debt experience in conjunction with our assessment of the financial condition of individual companies with which we do business. In times of domestic or global economic turmoil, our estimates and judgments with respect to the collectability of our receivables are subject to greater uncertainty than in more stable periods. If our estimate of uncollectible accounts is too low, costs and expenses may increase in future periods, and if it is too high, costs and expenses may decrease in future periods.

Contingencies and Litigation

We are currently involved in certain legal proceedings and, as required, have accrued estimates of the probable and estimable losses for the resolution of these proceedings. These estimates are based upon an analysis of potential results, assuming a combination of litigation and settlement strategies, and have been developed in consultation with outside counsel as appropriate. From time to time, we may also be involved in other contingent matters for which we have accrued estimates for a probable and estimable loss. It is possible, however, that future results of operations for any particular quarterly or annual period could be materially affected by changes in our assumptions or the effectiveness of our strategies related to legal proceedings or our assumptions regarding other contingent matters. See Note 12 to the Condensed Consolidated Financial Statements for more detailed information on litigation exposure.

Income Tax Audits

As a matter of course, the Company is regularly audited by federal, state and foreign tax authorities. From time to time, these audits result in proposed assessments. Our determinations regarding the recognition of income tax benefits are made in consultation with outside tax and legal counsel, where appropriate, and are based upon the technical merits of our tax positions in consideration of applicable tax statutes and related interpretations and precedents and upon the expected outcome of proceedings (or negotiations) with taxing and legal authorities. The tax benefits ultimately realized by the Company may differ from those recognized in our future financial statements based on a number of factors, including the Company’s decision to settle rather than litigate a matter, relevant legal precedent related to similar matters and the Company’s success in supporting its filing positions with taxing authorities.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS — (continued)

New Accounting Pronouncements

See Note 16 to the Condensed Consolidated Financial Statements for information regarding new accounting pronouncements.

MARKET RISK

The Company is exposed to the impact of interest rate changes, foreign currency fluctuations, commodity fluctuations and changes in the market values of its investments.

~~MANAGEMENT’S DISCUSSION AND ANALYSIS OF~~

~~FINANCIAL CONDITION AND RESULTS OF OPERATIONS — (continued)~~

Policies and Procedures

In the normal course of business, we employ established policies and procedures to manage the Company’s exposure to changes in interest rates, foreign currencies and commodities using a variety of financial instruments.

Our objectives in managing exposure to interest rate changes are to limit the impact of interest rate volatility on earnings and cash flows and to lower overall borrowing costs. To achieve these objectives, we primarily use interest rate swaps to manage net exposure to interest rate changes related to the Company’s portfolio of borrowings. By policy, the Company targets fixed-rate debt as a percentage of its net debt between minimum and maximum percentages.

Our objective in managing exposure to foreign currency fluctuations is to reduce volatility of earnings and cash flow in order to allow management to focus on core business issues and challenges. Accordingly, the Company enters into various contracts that change in value as foreign exchange rates change to protect the U.S. dollar equivalent value of its existing foreign currency assets, liabilities, commitments and forecasted foreign currency revenues and expenses. The Company utilizes option strategies and forward contracts that provide for the purchase or sale of foreign currencies to hedge probable, but not firmly committed, transactions. The Company also uses forward and option contracts to hedge foreign currency assets and liabilities. The principal foreign currencies hedged are the euro, British pound, Japanese yen and Canadian dollar. Cross-currency swaps are used to effectively convert foreign currency denominated borrowings to U.S. dollar denominated borrowings. By policy, the Company maintains hedge coverage between minimum and maximum percentages of its forecasted foreign exchange exposures generally for periods not to exceed four years. The gains and losses on these contracts offset changes in the U.S. dollar equivalent value of the related exposures. The economic or political conditions in a country could reduce our ability to hedge exposure to currency fluctuations in the country or our ability to repatriate revenue from the country.

Our objectives in managing exposure to commodity fluctuations are to use commodity derivatives to reduce volatility of earnings and cash flows arising from commodity price changes. The amounts hedged using commodity swap contracts are based on forecasted levels of consumption of certain commodities, such as fuel oil and gasoline.

It is the Company’s policy to enter into foreign currency and interest rate derivative transactions and other financial instruments only to the extent considered necessary to meet its objectives as stated above. The Company does not enter into these transactions or any other hedging transactions for speculative purposes.

Item 3. Quantitative and Qualitative Disclosures about Market Risk.

See Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures – We have established disclosure controls and procedures to ensure that the information required to be disclosed by the Company in the reports that it files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms and that such information is accumulated and made known to the officers who certify the Company’s financial reports and to other members of senior management and the Board of Directors as appropriate to allow timely decisions regarding required disclosure.

Based on their evaluation as of ~~December 30, 2017~~March 31, 2018, the principal executive officer and principal financial officer of the Company have concluded that the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934) are effective.

There have been no changes in our internal controls over financial reporting during the ~~first~~second quarter of fiscal 2018 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II. OTHER INFORMATION

ITEM 1. Legal Proceedings

As disclosed in Note 12 to the Condensed Consolidated Financial Statements, the Company is engaged in certain legal matters, and the disclosure set forth in Note 12 relating to certain legal matters is incorporated herein by reference.

ITEM 1A. Risk Factors

The Private Securities Litigation Reform Act of 1995 (the Act) provides a safe harbor for “forward-looking statements” made by or on behalf of the Company. We may from time to time make written or oral statements that are “forward-looking,” including statements contained in this report and other filings with the Securities and Exchange Commission and in reports to our shareholders. All forward-looking statements are made on the basis of management’s views and assumptions regarding future events and business performance as of the time the statements are made and the Company does not undertake any obligation to update its disclosure relating to forward-looking matters. Actual results may differ materially from those expressed or implied. Such differences may result from actions taken by the Company, including restructuring or strategic initiatives (including capital investments or asset acquisitions or dispositions), as well as from developments beyond the Company’s control, including: changes in domestic and global economic conditions, competitive conditions and consumer preferences; adverse weather conditions or natural disasters; health concerns; international, political or military developments; and technological developments. Such developments may affect entertainment, travel and leisure businesses generally and may, among other things, affect the performance of the Company’s theatrical and home entertainment releases, the advertising market for broadcast and cable television programming, demand for our products and services, expenses of providing medical and pension benefits, ~~and~~ performance of some or all company businesses either directly or through their impact on those who distribute our ~~products.~~products and the proposed transaction with 21CF. Additional factors are discussed in the 2017 Annual Report on Form 10-K and in the Quarterly Report on 10-Q for the period ended December 30, 2017, in each case under the Item 1A, “Risk Factors.”

~~Risk Factors Related to the Acquisition of Twenty-First Century Fox (“21CF”)~~

~~The proposed Acquisition of 21CF may cause disruption in our business.~~

The merger agreement related to the acquisition of 21CF (the “Acquisition”) restricts us from taking certain specified actions without 21CF’s consent until the Acquisition is completed or the merger agreement is terminated, including making certain acquisitions and paying dividends in excess of certain thresholds. These restrictions may affect our ability to execute our business strategies and attain our financial and other goals and may impact our financial condition, results of operations and cash flows.

The proposed Acquisition could cause disruptions to our business or business relationships, which could have an adverse impact on results of operations. Parties with which we have business relationships may experience uncertainty as to the future of such relationships and may delay or defer certain business decisions, seek alternative relationships with third parties or seek to alter their present business relationships with us. Parties with whom we otherwise may have sought to establish business relationships may seek alternative relationships with third parties.

The pursuit of the Acquisition and the preparation for the integration of 21CF may place a significant burden on our management and internal resources. The diversion of management’s attention away from day-to-day business concerns and any difficulties encountered in the transition and integration process could adversely affect our financial results.

We have incurred and expect to continue to incur significant costs, expenses and fees for professional services and other transaction costs in connection with the Acquisition. We may also incur unanticipated costs in the integration of the businesses of 21CF and Disney. The substantial majority of these costs will be non-recurring expenses relating to the Acquisition, and many of these costs are payable regardless of whether or not the Acquisition is consummated. We also could be subject to litigation related to the proposed Acquisition, which could result in significant costs and expenses.

Failure to complete the Acquisition in a timely manner or at all could negatively impact the market price of our common stock, as well as our future business and our financial condition, results of operations and cash flows.

We currently anticipate the Acquisition will be completed within 12 to 18 months after December 13, 2017, but we cannot be certain when or if the conditions for the Acquisition will be satisfied or (if permissible under applicable law) waived. The Acquisition cannot be completed until the conditions to closing are satisfied or (if permissible under applicable law) waived, including (i) the adoption of the merger agreement by the requisite vote of the 21CF stockholders and the approval of the stock issuance by the requisite vote of Disney stockholders, (ii) receipt of certain required governmental approvals and consents, (iii) receipt by 21CF of a surplus and solvency opinion with respect to the separation of the 21CF assets and liabilities that we are not acquiring in the Acquisition, referred to as the separation, and the cash dividend in connection with the Acquisition, (iv) effectiveness of registration statements with respect to the issuance of Disney shares in connection with the Acquisition and the

registration of the common stock of a newly formed subsidiary of 21CF, referred to as New Fox, that is contemplated to own the 21CF assets and liabilities that we are not acquiring in the Acquisition and which will be spun off to 21CF stockholders, (v) authorization of Disney and New Fox shares for listing on NYSE or NASDAQ, as applicable, (vi) the consummation of the separation and spin off of New Fox to 21CF stockholders, (vii) receipt by Disney of a tax ruling from the Australian Taxation Office, (viii) receipt of certain tax opinions by each of 21CF and Disney, including a tax opinion regarding the tax-free treatment of the Acquisition to the 21CF stockholders for U.S. federal income tax purposes, and (ix) the accuracy of the representations and warranties made by 21CF or Disney, as applicable, in the merger agreement. Our obligation to complete the Acquisition is also subject to, among other conditions, the absence of regulatory authorities requiring certain actions on our part.

The satisfaction of the required conditions could delay the completion of the Acquisition for a significant period of time or prevent it from occurring. Further, there can be no assurance that the conditions to the closing of the Acquisition will be satisfied or waived or that the Acquisition will be completed.

~~If the Acquisition is not completed in a timely manner or at all, our ongoing business may be adversely affected as follows:~~

we may experience negative reactions from the financial markets, and our stock price could decline to the extent that the current market price reflects an assumption that the transaction will be completed;

~~we may experience negative reactions from employees, customers, suppliers or other third parties;~~

~~management’s focus may have been diverted from pursuing other opportunities that could have been beneficial to Disney; and~~

~~our costs of pursuing the Acquisition may be higher than anticipated.~~

In addition to the above risks, we may be required, under certain circumstances, to pay 21CF a termination fee equal to $1.525 billion, or in connection with a termination under certain specified circumstances in connection with the failure to obtain regulatory approvals, $2.5 billion. If the Acquisition is not consummated, there can be no assurance that these risks will not materialize and will not materially adversely affect our stock price, business, financial conditions, results of operations or cash flows.

~~The Acquisition may not be accretive, and may be dilutive, to our earnings per share, which may negatively affect the market price of our common stock.~~

We currently expect the Acquisition to be accretive to our earnings per share, excluding the impact of purchase accounting, for the second fiscal year after closing. This expectation, however, is based on preliminary estimates that may materially change. In addition, we could fail to realize all of the benefits anticipated in the Acquisition or experience delays or inefficiencies in realizing such benefits. Such factors could, combined with the issuance of 0.2745 shares of our common stock for each share of the common stock of 21CF, subject to adjustment for certain tax liabilities, result in the Acquisition being dilutive to our earnings per share, which could negatively affect the market price of our common stock.

In order to complete the Acquisition, Disney and 21CF must obtain certain governmental approvals, and if such approvals are not granted or are granted with conditions, completion of the Acquisition may be jeopardized or the anticipated benefits of the Acquisition could be reduced.

Although Disney and 21CF have agreed to use reasonable best efforts, subject to certain limitations, to make certain governmental filings and obtain the required governmental approvals or expiration or earlier termination of relevant waiting periods, as the case may be, there can be no assurance that the relevant waiting periods will expire or be terminated or that the relevant approvals will be obtained. As a condition to approving the Acquisition, these governmental authorities may impose conditions, terms, obligations or restrictions or require divestitures or place restrictions on the conduct of our business after completion of the Acquisition. There can be no assurance that regulators will not impose conditions, terms, obligations or restrictions and that such conditions, terms, obligations or restrictions will not have the effect of delaying or preventing completion of the Acquisition or imposing additional material costs on or materially limiting the revenues of the combined company following the Acquisition, or otherwise adversely affecting, including to a material extent, our businesses and results of operations after completion of the Acquisition. If we or 21CF are required to divest assets or businesses, there can be no assurance that we or 21CF will be able to negotiate such divestitures expeditiously or on favorable terms or that the governmental authorities will approve the terms of such divestitures. We can provide no assurance that these conditions, terms, obligations or restrictions will not result in the abandonment of the Acquisition.

Although we expect that the Acquisition will result in synergies and other benefits to us, we may not realize those benefits because of difficulties related to integration, the achievement of synergies, and other challenges.

Disney and 21CF have operated and, until completion of the Acquisition, will continue to operate, independently, and there can be no assurances that our businesses can be combined in a manner that allows for the achievement of substantial

benefits. If we are not able to successfully integrate 21CF’s businesses with ours or pursue our direct-to-consumer strategy successfully, the anticipated benefits and cost savings of the Acquisition may not be realized fully or may take longer than expected to be realized. Further, it is possible that there could be loss of key Disney or 21CF employees, loss of customers, disruption of either company’s or both companies’ ongoing businesses or unexpected issues, higher than expected costs and an overall post-completion process that takes longer than originally anticipated. Specifically, the following issues, among others, must be addressed in combining the operations of Disney and 21CF in order to realize the anticipated benefits of the Acquisition so the combined company performs as the parties hope:

~~combining the companies’ corporate functions;~~

combining the businesses of Disney and 21CF in a manner that permits us to achieve the synergies anticipated to result from the Acquisition, the failure of which would result in the anticipated benefits of the Acquisition not being realized in the time frame currently anticipated or at all;

maintaining existing agreements with customers, distributors, providers, talent and vendors and avoiding delays in entering into new agreements with prospective customers, distributors, providers, talent and vendors;

~~determining whether and how to address possible differences in corporate cultures and management philosophies;~~

~~integrating the companies’ administrative and information technology infrastructure;~~

~~developing products and technology that allow value to be unlocked in the future; and~~

~~effecting potential actions that may be required in connection with obtaining regulatory approvals.~~

In addition, at times the attention of certain members of our management and resources may be focused on completion of the Acquisition and integration planning of the businesses of the two companies and diverted from day-to-day business operations, which may disrupt our ongoing business and the business of the combined company.

~~Consummation of the Acquisition will increase our exposure to the risks of operating internationally.~~

We are a diversified entertainment company that offers entertainment, travel and consumer products worldwide. Although many of our businesses increasingly depend on acceptance of our offerings and products by consumers outside of the U.S., the combination with 21CF will increase the importance of international operations to our future operations, growth and prospects. The risks of operating internationally that we already face may therefore be exacerbated upon completion of the Acquisition.

Our consolidated indebtedness will increase substantially following completion of the Acquisition. This increased level of indebtedness could adversely affect us, including by decreasing our business flexibility.

Our consolidated indebtedness as of September 30, 2017 was approximately $25 billion. Upon completion of the Acquisition, we will assume an estimated $20 billion of additional outstanding debt of 21CF if the Sky acquisition is completed. The increased indebtedness could have the effect of, among other things, reducing our flexibility to respond to changing business and economic conditions. In addition, the amount of cash required to pay interest on our increased indebtedness levels will increase following completion of the Acquisition, and thus the demands on our cash resources will be greater than prior to the Acquisition. The increased levels of indebtedness following completion of the Acquisition could also reduce funds available for capital expenditures, share repurchases and dividends, and other activities and may create competitive disadvantages for us relative to other companies with lower debt levels. Our funds on hand will be further constrained by the issuance of shares of our common stock in the acquisition, because of dividend payments on our common stock, which, as of the date of this filing, were $0.84 per share of our common stock on a semi-annual basis.

ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds

(a)The following table provides information about Company purchases of equity securities that are registered by the Company pursuant to Section 12 of the Exchange Act during the quarter ended ~~December 30, 2017~~March 31, 2018:

Period
Total
Number of
Shares
Purchased ⁽¹⁾

Weighted
Average
Price Paid
per Share

Total Number
of Shares
Purchased as
Part of Publicly
Announced
Plans or
Programs

Maximum
Number of
Shares that
May Yet Be
Purchased
Under the
Plans or
Programs ⁽²⁾
October 1, 2017 - October 31, 2017 4,847,957
$ 98.82
4,820,000
187 million
November 1, 2017 - November 30, 2017 4,308,205
101.77
4,283,745
183 million
December 1, 2017 - December 30, 2017 3,733,222
107.99
3,707,600
179 million
Total 12,889,384
102.46
12,811,345
179 million



Period	Total Number of Shares Purchased ⁽¹⁾	Weighted Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	Maximum Number of Shares that May Yet Be Purchased Under the Plans or Programs ⁽²⁾
December 31, 2017 - January 31, 2018	4,083,370	$	110.69	3,850,092	175 million
February 1, 2018 - February 28, 2018	3,817,590	106.09		3,793,500	171 million
March 1, 2018 - March 31, 2018	4,562,314	102.89		4,534,524	167 million
Total	12,463,274	106.43		12,178,116	167 million


⁽¹⁾	~~78,039~~285,158 shares were purchased on the open market to provide shares to participants in the Walt Disney Investment Plan (WDIP). These purchases were not made pursuant to a publicly announced repurchase plan or program.


⁽²⁾	Under a share repurchase program implemented effective June 10, 1998, the Company is authorized to repurchase shares of its common stock. On January 30, 2015, the Company’s Board of Directors increased the share repurchase authorization to a total of 400 million shares as of that date. The repurchase program does not have an expiration date.

ITEM 5. Other Items

Mayer DTC-WDI Agreement

On May 3, 2018, Walt Disney International (“WDI”) entered into an employment agreement with Kevin A. Mayer (the “Executive”), whose contract with the Company as Senior Executive Vice President and Chief Strategy Officer ended when his new contract (the “Mayer DTC-WDI Agreement”) became effective. The Mayer DTC-WDI Agreement has a stated term commencing as of March 14, 2018 and ending on December 31, 2022.

Under the Mayer DTC-WDI Agreement, Mr. Mayer will serve as Chairman, Direct-to-Consumer and International. The Mayer DTC-WDI Agreement provides that Mr. Mayer will receive an annual salary of $1,800,000, commencing as of March 14, 2018, and that for each year thereafter the annual salary for Mr. Mayer will be determined by WDI in its sole discretion but shall not be less than $1,800,000. The Mayer DTC-WDI Agreement provides that Mr. Mayer is also eligible for an annual, performance-based bonus under the Company’s applicable annual incentive plan (currently, the Company’s Management Incentive Bonus Program) and that the Compensation Committee will set a target bonus each fiscal year of not less than 200% of the annual base salary for Mr. Mayer in effect at the end of such fiscal year. The actual amount payable to Mr. Mayer as an annual bonus will be dependent upon the achievement of performance objectives, which will be substantially the same as the objectives established under the plan for comparable executives of the Company’s subsidiaries. Depending on performance, the actual amount payable as an annual bonus to Mr. Mayer may be less than, greater than or equal to the stated target bonus (and could be zero).

The Mayer DTC-WDI Agreement also provides that Mr. Mayer is entitled to participate in the Company’s equity-based long-term incentive plans and programs generally made available to comparable executives of the Company’s subsidiaries and that for each fiscal year during the term of the Agreement, Mr. Mayer will be granted a long-term incentive award having a target value of not less than three times his annual base salary as expected to be in effect at the end of such fiscal year. These awards will be subject to substantially the same terms and conditions (including vesting and performance conditions) as will be established for comparable executives of the Company’s subsidiaries in accordance with the Board’s policies for the grant of equity-based awards, as in effect at the time of the award, and do not guarantee Mr. Mayer any minimum amount of compensation. The actual amounts payable to Mr. Mayer in respect of such opportunities will be determined based on the extent to which any performance conditions and/or service conditions applicable to such awards are satisfied and on the value of the Company’s stock. Accordingly, Mr. Mayer may receive compensation in respect of any such award that is greater or less than the stated target value, depending on whether, and to what extent, the applicable performance and other conditions are satisfied, and on the value of the Company’s stock.

Under the Mayer DTC-WDI Agreement, Mr. Mayer is entitled to participate in employee benefits and perquisites generally made available to comparable executives of the Company’s subsidiaries.

Mr. Mayer’s employment may be terminated by WDI for “cause,” which is defined to include gross negligence, gross misconduct, willful nonfeasance or a willful material breach of the Agreement.

Mr. Mayer has the right to terminate his employment for “good reason,” which is defined as (i) a reduction in any of his base salary, annual target bonus opportunity or annual target long-term incentive award opportunity; (ii) removal from the position of Chairman, Direct-to-Consumer and International; (iii) a material reduction in his duties and responsibilities; (iv) the assignment to him of duties that are materially inconsistent with his position or duties or that materially impair his ability to function in his current position or any other position in which he is then serving; (vi) relocation of his principal office to a location that is more than 50 miles outside of the greater Los Angeles area; or (vii) a material breach of any material provision of the Agreement by WDI. Following a change in control of the Company, as defined in the Company’s stock plans, good reason also includes any event that is a triggering event as defined in the plans. A triggering event is defined to include a termination of employment by WDI other than for “cause” or a termination of employment by the participant following a reduction in position, pay or other “constructive termination.”

In the event that Mr. Mayer’s employment is terminated by WDI without “cause” or by Mr. Mayer for “good reason,” he will be entitled to termination benefits, which include the following: (i) a lump sum payment of the base salary that would have been payable over the remaining term of the Agreement, (ii) a pro-rated bonus for the year of termination (any prior-year bonus not yet paid at time of termination is also paid), and (iii) the outstanding unvested stock options and outstanding unvested restricted stock unit awards that could vest in accordance with their scheduled vesting provisions if Mr. Mayer’s employment had continued through the remaining term of the Agreement will be eligible to vest at the same time and subject to the same performance conditions as though he continued in WDI’s employ, and all stock options, whether vested on date of termination or vesting thereafter as described above, shall vest and remain exercisable to the same extent as if his employment had continued through the term of the Agreement. However, the Agreement provides that, unless necessary to preserve the tax

deductibility of the compensation payable in respect of restricted stock units, the Company will waive any performance conditions related to performance in future fiscal years that were imposed primarily to permit the Company to claim a tax deduction for the compensation payable in respect of such units.

To qualify for the foregoing cash severance benefit, pro-rated bonus (and prior-year bonus, if not already paid), opportunity to vest in unvested equity awards and extended exercisability of stock options following an involuntary termination by WDI without cause, or a termination by Mr. Mayer for good reason, he must execute a release in favor of WDI and the Company and agree to provide WDI with certain consulting services for a period of six months after his termination (or, if less, for the remaining term of the Agreement). Additionally, during the period of these consulting services, Mr. Mayer must also agree not to provide any services to entities that compete with any of the Company’s business segments.

Merger Agreement Amendment

As previously disclosed, on December 13, 2017, The Walt Disney Company (“Disney”), TWC Merger Enterprises 2 Corp., a Delaware corporation and wholly owned subsidiary of Disney (“Merger Sub”), TWC Merger Enterprises 1, LLC, a Delaware limited liability company and wholly owned subsidiary of Disney (“Merger LLC”), and Twenty-First Century Fox (“21CF”) entered into an Agreement and Plan of Merger (the “Merger Agreement”).

The Merger Agreement contemplates that at the effective time of the Initial Merger (as defined in the Merger Agreement), each issued and outstanding share of common stock of 21CF, except as otherwise set forth in the Merger Agreement, will be exchanged automatically for 0.2745 shares of Disney common stock, subject to adjustment as provided in the Merger Agreement (as so adjusted, the “Exchange Ratio”), together with cash in lieu of fractional shares of Disney common stock (such consideration, the “Common Stock Merger Consideration”).

On May 7, 2018, Disney, Merger Sub, Merger LLC and 21CF entered into an Amendment to the Merger Agreement (the “Merger Agreement Amendment”) pursuant to which, among other things, in lieu of receiving the Common Stock Merger Consideration at the effective time of the Initial Merger, each issued and outstanding share of 21CF common stock owned by a subsidiary of 21CF will be exchanged automatically for a number of shares of series B preferred stock, par value $0.01, of Disney equal to the Exchange Ratio multiplied by 1/10,000. Each share of series B preferred stock is convertible into 10,000 shares of Disney common stock upon transfer to any person who is not Disney or a subsidiary of Disney. The terms of the series B preferred stock are described in more detail in Disney’s current report on Form 8-K filed with the Securities and Exchange

Commission on March 9, 2018. The Merger Agreement Amendment permits Disney’s board of directors to elect, in its sole discretion at any time prior to the Closing Date (as defined in the Merger Agreement), for each issued and outstanding share of 21CF common stock owned by a subsidiary of 21CF to be exchanged, at the effective time of the Initial Merger, automatically for the Common Stock Merger Consideration.

The foregoing description of the Merger Agreement Amendment and the transactions contemplated thereby does not purport to be complete and is subject to, and qualified in its entirety by reference to, the full text of the Merger Agreement Amendment, which is attached as Exhibit 2.1 and incorporated herein by reference.

Other than as expressly modified pursuant to the Merger Agreement Amendment, the Merger Agreement, which was previously filed as Exhibit 2.1 to the Current Report on Form 8-K/A filed with the Securities Exchange Commission on December 14, 2017, remains in full force and effect as originally executed on December 13, 2017.

ITEM 6. Exhibits

See Index of Exhibits.

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.




		THE WALT DISNEY COMPANY
		(Registrant)

By:		/s/ CHRISTINE M. MCCARTHY
		Christine M. McCarthy, Senior Executive Vice President and Chief Financial Officer

~~February 6,~~May 8, 2018

Burbank, California

INDEX OF EXHIBITS




Number and Description of Exhibit (Numbers Coincide with Item 601 of Regulation S-K)		Document Incorporated by Reference from a Previous Filing or Filed Herewith, as Indicated below

2.1	Amendment to Agreement and Plan of Merger, dated as of ~~December 13, 2017,~~May 7, 2018, among Twenty-First Century Fox Inc., The Walt Disney Company, TWC Merger Enterprises 2 Corp. and TWC Merger Enterprises 1, ~~LLC~~ LLC*	~~Exhibit 2.1 to the Current Report on Form 8-K/A of the Company filed December 14, 2017~~Filed herewith

3.1	~~Amended and Restated Bylaws~~Certificate of Designation of Series B Convertible Preferred Stock of The Walt Disney Company, as filed with the Secretary of ~~December 13, 2017~~State of the State of Delaware on March 8, 2018	Exhibit 3.1 to the Current Report on Form 8-K of the Company filed ~~December 14, 2017~~March 9, 2018

10.1	~~Voting~~364 Day Credit Agreement dated as of ~~December 13, 2017, among The Walt Disney Company, Murdoch Family Trust and Cruden Financial Services LLC~~March 9, 2018	Exhibit 10.1 to the Current Report on Form 8-K of the Company filed ~~December 14, 2017~~March 9, 2018

10.2	~~Amendment dated December 13, 2017 to Amended and Restated Employment~~Five-Year Credit Agreement ~~with Robert A. Iger,~~ dated as of ~~October 6, 2011~~March 9, 2018	Exhibit 10.2 to the Current Report on Form 8-K of the Company filed ~~December 14, 2017~~March 9, 2018

10.3	~~Performance-Based Stock Unit Award (Four-Year Vesting subject to Total Shareholder Return Test/Section 162(m) Vesting Requirements) for Robert A. Iger~~Employment Agreement dated as of ~~December 13, 2017~~	~~Filed herewith~~

~~10.4~~	~~Performance-Based Stock Unit Award (Section 162(m) Vesting Requirement) for Robert~~March 14, 2018 between the Company and Kevin A. ~~Iger dated as of December 13, 2017~~ Mayer	Filed herewith

12.1	Ratio of Earnings to Fixed Charges	Filed herewith

31(a)	Rule 13a-14(a) Certification of Chief Executive Officer of the Company in accordance with Section 302 of the Sarbanes-Oxley Act of 2002	Filed herewith

31(b)	Rule 13a-14(a) Certification of Chief Financial Officer of the Company in accordance with Section 302 of the Sarbanes-Oxley Act of 2002	Filed herewith

32(a)	Section 1350 Certification of Chief Executive Officer of the Company in accordance with Section 906 of the Sarbanes-Oxley Act of 2002**	Furnished

32(b)	Section 1350 Certification of Chief Financial Officer of the Company in accordance with Section 906 of the Sarbanes-Oxley Act of 2002**	Furnished

101	The following materials from the Company’s Quarterly Report on Form 10-Q for the quarter ended ~~December 30, 2017~~March 31, 2018 formatted in Extensible Business Reporting Language (XBRL): (i) the Condensed Consolidated Statements of Income, (ii) the Condensed Consolidated Statements of Comprehensive Income, (iii) the Condensed Consolidated Balance Sheets, (iv) the Condensed Consolidated Statements of Cash Flows, (v) the Condensed Consolidated Statements of Equity and (vi) related notes	Filed



*	Certain schedules and exhibits have been omitted pursuant to 601(b)(2) of Regulation S-K. A copy of any omitted schedule or exhibit will be furnished supplementally to the SEC upon request.
**	A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

4658



Large accelerated filer	x	Accelerated filer	¨

Non-accelerated filer (Do not check if smaller reporting company)	¨	Smaller reporting company	¨

		Emerging growth company	¨


	Quarter Ended						Quarter Ended						Six Months Ended
	December 30, 2017			December 31, 2016			March 31, 2018			April 1, 2017			March 31, 2018			April 1, 2017
Revenues:
Services	$	12,984		$	12,406		$	12,520		$	11,487		$	25,504		$	23,893
Products	2,367			2,378			2,028			1,849			4,395			4,227
Total revenues	15,351			14,784			14,548			13,336			29,899			28,120
Costs and expenses:
Cost of services (exclusive of depreciation and amortization)	(7,334		)	(7,020		)	(6,304		)	(5,839		)	(13,638		)	(12,859		)
Cost of products (exclusive of depreciation and amortization)	(1,403		)	(1,386		)	(1,229		)	(1,130		)	(2,632		)	(2,516		)
Selling, general, administrative and other	(2,079		)	(1,985		)	(2,247		)	(1,941		)	(4,326		)	(3,926		)
Depreciation and amortization	(742		)	(687		)	(731		)	(676		)	(1,473		)	(1,363		)
Total costs and expenses	(11,558		)	(11,078		)	(10,511		)	(9,586		)	(22,069		)	(20,664		)
Restructuring and impairment charges	(15		)	—			(13		)	—			(28		)	—
Other income, net	53			—			41			—			94			—
Interest expense, net	(129		)	(99		)	(143		)	(84		)	(272		)	(183		)
Equity in the income of investees	43			118			6			85			49			203
Income before income taxes	3,745			3,725			3,928			3,751			7,673			7,476
Income taxes	728			(1,237		)	(813		)	(1,212		)	(85		)	(2,449		)
Net income	4,473			2,488			3,115			2,539			7,588			5,027
Less: Net income attributable to noncontrolling interests	(50		)	(9		)	(178		)	(151		)	(228		)	(160		)
Net income attributable to The Walt Disney Company (Disney)	$	4,423		$	2,479		$	2,937		$	2,388		$	7,360		$	4,867

Earnings per share attributable to Disney:
Diluted	$	2.91		$	1.55		$	1.95		$	1.50		$	4.86		$	3.05

Basic	$	2.93		$	1.56		$	1.95		$	1.51		$	4.88		$	3.07

Weighted average number of common and common equivalent shares outstanding:
Diluted	1,521			1,603			1,510			1,591			1,515			1,597

Basic	1,512			1,592			1,503			1,580			1,507			1,586

Dividends declared per share	$	0.84		$	0.78		$	—		$	—		$	0.84		$	0.78


	Quarter Ended						Quarter Ended						Six Months Ended
	December 30, 2017			December 31, 2016			March 31, 2018			April 1, 2017			March 31, 2018			April 1, 2017
Net income	$	4,473		$	2,488		$	3,115		$	2,539		$	7,588		$	5,027
Other comprehensive income/(loss), net of tax:
Market value adjustments for investments	(1		)	(11		)	7			1			6			(10		)
Market value adjustments for hedges	18			280			(112		)	(164		)	(94		)	116
Pension and postretirement medical plan adjustments	61			46			94			80			155			126
Foreign currency translation and other	87			(290		)	144			67			231			(223		)
Other comprehensive income	165			25
Other comprehensive income/(loss)							133			(16		)	298			9
Comprehensive income	4,638			2,513			3,248			2,523			7,886			5,036
Net income attributable to noncontrolling interests, including redeemable noncontrolling interests	(50		)	(9		)	(178		)	(151		)	(228		)	(160		)
Other comprehensive (income)/loss attributable to noncontrolling interests	(41		)	99			(74		)	(9		)	(115		)	90
Comprehensive income attributable to Disney	$	4,547		$	2,603		$	2,996		$	2,363		$	7,543		$	4,966


	December 30, 2017			September 30, 2017			March 31, 2018			September 30, 2017
ASSETS
Current assets
Cash and cash equivalents	$	4,677		$	4,017		$	4,179		$	4,017
Receivables	9,886			8,633			9,678			8,633
Inventories	1,307			1,373			1,301			1,373
Television costs and advances	846			1,278			1,114			1,278
Other current assets	558			588			536			588
Total current assets	17,274			15,889			16,808			15,889
Film and television costs	7,937			7,481			8,074			7,481
Investments	3,206			3,202			3,148			3,202
Parks, resorts and other property
Attractions, buildings and equipment	54,617			54,043			55,317			54,043
Accumulated depreciation	(29,647		)	(29,037		)	(30,435		)	(29,037		)
	24,970			25,006			24,882			25,006
Projects in progress	2,355			2,145			3,056			2,145
Land	1,259			1,255			1,262			1,255
	28,584			28,406			29,200			28,406
Intangible assets, net	6,930			6,995			6,962			6,995
Goodwill	31,430			31,426			31,350			31,426
Other assets	2,373			2,390			2,401			2,390
Total assets	$	97,734		$	95,789		$	97,943		$	95,789

LIABILITIES AND EQUITY
Current liabilities
Accounts payable and other accrued liabilities	$	9,574		$	8,855		$	9,022		$	8,855
Current portion of borrowings	6,009			6,172			5,918			6,172
Deferred revenue and other	4,292			4,568			4,788			4,568
Total current liabilities	19,875			19,595			19,728			19,595
Borrowings	20,082			19,119			18,766			19,119
Deferred income taxes	2,826			4,480			2,949			4,480
Other long-term liabilities	6,726			6,443			6,699			6,443
Commitments and contingencies (Note 12)
Redeemable noncontrolling interests	1,142			1,148			1,150			1,148
Equity
Preferred stock, $0.01 par value, Authorized – 100 million shares, Issued – none	—			—			—			—
Common stock, $0.01 par value, Authorized – 4.6 billion shares, Issued – 2.9 billion shares	36,254			36,248			36,411			36,248
Retained earnings	75,763			72,606			78,704			72,606
Accumulated other comprehensive loss	(3,404		)	(3,528		)	(3,345		)	(3,528		)
	108,613			105,326			111,770			105,326
Treasury stock, at cost, 1.4 billion shares	(65,324		)	(64,011		)	(66,619		)	(64,011		)
Total Disney Shareholders’ equity	43,289			41,315			45,151			41,315
Noncontrolling interests	3,794			3,689			3,500			3,689
Total equity	47,083			45,004			48,651			45,004
Total liabilities and equity	$	97,734		$	95,789		$	97,943		$	95,789


	Quarter Ended						Six Months Ended
	December 30, 2017			December 31, 2016			March 31, 2018			April 1, 2017
OPERATING ACTIVITIES
Net income	$	4,473		$	2,488		$	7,588		$	5,027
Depreciation and amortization	742			687			1,473			1,363
Deferred income taxes	(1,726		)	(76		)	(1,623		)	126
Equity in the income of investees	(43		)	(118		)	(49		)	(203		)
Cash distributions received from equity investees	170			203			389			397
Net change in film and television costs and advances	34			440			(490		)	(428		)
Equity-based compensation	94			97			194			189
Other	139			187			155			261
Changes in operating assets and liabilities:
Receivables	(1,378		)	(1,160		)	(1,004		)	(284		)
Inventories	65			102			64			90
Other assets	(29		)	311			(248		)	78
Accounts payable and other accrued liabilities	(1,160		)	(2,763		)	(92		)	(1,934		)
Income taxes	856			1,047			406			(9		)
Cash provided by operations	2,237			1,445			6,763			4,673

INVESTING ACTIVITIES
Investments in parks, resorts and other property	(981		)	(1,040		)	(2,044		)	(1,923		)
Acquisitions							(1,581		)	(557		)
Other	(62		)	5			(180		)	90
Cash used in investing activities	(1,043		)	(1,035		)	(3,805		)	(2,390		)

FINANCING ACTIVITIES
Commercial paper borrowings, net	1,140			732			1,372			914
Borrowings	1,025			42			1,048			2,053
Reduction of borrowings	(1,330		)	(194		)	(1,350		)	(1,233		)
Dividends							(1,266		)	(1,237		)
Repurchases of common stock	(1,313		)	(1,465		)	(2,608		)	(3,500		)
Proceeds from exercise of stock options	50			65			91			186
Other	(156		)	(167		)	(169		)	(232		)
Cash used in financing activities	(584		)	(987		)	(2,882		)	(3,049		)

Impact of exchange rates on cash, cash equivalents and restricted cash	21			(112		)	55			(69		)

Change in cash, cash equivalents and restricted cash	631			(689		)	131			(835		)
Cash, cash equivalents and restricted cash, beginning of period	4,064			4,760			4,064			4,760
Cash, cash equivalents and restricted cash, end of period	$	4,695		$	4,071		$	4,195		$	3,925



For the Quarterly Period Ended		Commission File Number 1-11605
~~December 30, 2017~~March 31, 2018




Incorporated in Delaware		I.R.S. Employer Identification
		No. 95-4545390


	Quarter Ended																	Quarter Ended
	December 30, 2017								December 31, 2016									March 31, 2018									April 1, 2017
	Disney Shareholders			Non- controlling Interests ⁽¹⁾		Total Equity			Disney Shareholders			Non- controlling Interests ⁽¹⁾			Total Equity			Disney Shareholders			Non- controlling Interests ⁽¹⁾			Total Equity			Disney Shareholders			Non- controlling Interests ⁽¹⁾			Total Equity
Beginning balance	$	41,315		$	3,689	$	45,004		$	43,265		$	4,058		$	47,323		$	43,289		$	3,794		$	47,083		$	43,210		$	3,967		$	47,177
Comprehensive income/(loss)	4,547			97		4,644			2,603			(90		)	2,513
Comprehensive income																		2,996			251			3,247			2,363			160			2,523
Equity compensation activity	6			—		6			48			—			48			157			—			157			182			—			182
Dividends	(1,266		)	—		(1,266		)	(1,237		)	—			(1,237		)
Common stock repurchases	(1,313		)	—		(1,313		)	(1,465		)	—			(1,465		)	(1,295		)	—			(1,295		)	(2,035		)	—			(2,035		)
Distributions and other	—			8		8			(4		)	(1		)	(5		)	4			(545		)	(541		)	64			(644		)	(580		)
Ending balance	$	43,289		$	3,794	$	47,083		$	43,210		$	3,967		$	47,177		$	45,151		$	3,500		$	48,651		$	43,784		$	3,483		$	47,267


	Media Networks		Parks and Resorts		Studio Entertainment		Consumer Products & Interactive Media		Unallocated ⁽¹⁾			Total		Media Networks		Parks and Resorts		Studio Entertainment		Consumer Products & Interactive Media		Unallocated ⁽¹⁾			Total
Balance at Sept. 30, 2017	$	16,325	$	291	$	6,817	$	4,393	$	3,600		$	31,426	$	16,325	$	291	$	6,817	$	4,393	$	3,600		$	31,426
Acquisitions	—		—		—		—		—			—		—		—		—		—		—			—
Dispositions	—		—		—		—		—			—		—		—		—		—		—			—
Other, net	7		—		7		2		(12		)	4		3		—		2		1		(82		)	(76		)
Balance at Dec. 30, 2017	$	16,332	$	291	$	6,824	$	4,395	$	3,588		$	31,430
Balance at Mar. 31, 2018														$	16,328	$	291	$	6,819	$	4,394	$	3,518		$	31,350


⁽¹⁾	~~Goodwill~~Unallocated amount will be allocated to the segments once the BAMTech purchase price allocation is finalized. Other, net represents the impact on goodwill of updates to our initial estimated fair value of intangible assets related to BAMTech.


	September 30, 2017		Borrowings		Payments			Other Activity			December 30, 2017		September 30, 2017		Borrowings		Payments			Other Activity			March 31, 2018
Commercial paper with original maturities less than three months⁽¹⁾	$	1,151	$	2,047	$	—		$	—		$	3,198	$	1,151	$	—	$	(764	)	$	(2	)	$	385
Commercial paper with original maturities greater than three months	1,621		712		(1,619		)	(1		)	713		1,621		4,467		(2,331		)	9			3,766
U.S. and European medium-term notes	19,721		—		(1,300		)	6			18,427		19,721		—		(1,300		)	12			18,433
BAMTech acquisition payable	1,581		—		—			—			1,581		1,581		—		(1,581		)	—			—
Asia Theme Parks borrowings(2)	1,145		—		—			30			1,175		1,145		—		—			81			1,226
Foreign currency denominated debt and other⁽²⁾⁽³⁾	72		1,025		(30		)	(70		)	997		72		1,048		(50		)	(196		)	874
Total	$	25,291	$	3,784	$	(2,949	)	$	(35	)	$	26,091	$	25,291	$	5,515	$	(6,026	)	$	(96	)	$	24,684


⁽²⁾	The other activity is primarily the U.S. dollar weakening against the Chinese Renminbi.


⁽³⁾	The other activity is primarily market value adjustments for debt with qualifying hedges.


	Committed Capacity		Capacity Used		Unused Capacity		Committed Capacity		Capacity Used		Unused Capacity
Facility expiring March 2018	$	2,500	$	—	$	2,500
Facility expiring March 2019	2,250		—		2,250		$	6,000	$	—	$	6,000
Facility expiring March 2021	2,250		—		2,250		2,250		—		2,250
Facility expiring March 2023							4,000		—		4,000
Total	$	7,000	$	—	$	7,000	$	12,250	$	—	$	12,250


	December 30, 2017		September 30, 2017		March 31, 2018		September 30, 2017
Cash and cash equivalents	$	844	$	843	$	780	$	843
Other current assets	397		376		450		376
Total current assets	1,241		1,219		1,230		1,219
Parks, resorts and other property	9,449		9,403		9,640		9,403
Other assets	110		111		94		111
Total assets ⁽¹⁾	$	10,800	$	10,733	$	10,964	$	10,733

Current liabilities	$	1,061	$	1,163	$	1,075	$	1,163
Borrowings - long-term	1,175		1,145		1,226		1,145
Other long-term liabilities	390		371		386		371
Total liabilities ⁽¹⁾	$	2,626	$	2,679	$	2,687	$	2,679


1.	Principles of Consolidation


3.	Segment Information


	Quarter Ended				Quarter Ended				Six Months Ended
	December 30, 2017		December 31, 2016		March 31, 2018		April 1, 2017		March 31, 2018		April 1, 2017
Revenues ⁽¹⁾:
Media Networks	$	6,243	$	6,233	$	6,138	$	5,946	$	12,381	$	12,179
Parks and Resorts	5,154		4,555		4,879		4,299		10,033		8,854
Studio Entertainment	2,504		2,520		2,454		2,034		4,958		4,554
Consumer Products & Interactive Media	1,450		1,476		1,077		1,057		2,527		2,533
	$	15,351	$	14,784	$	14,548	$	13,336	$	29,899	$	28,120
Segment operating income ⁽¹⁾:
Media Networks	$	1,193	$	1,362	$	2,082	$	2,223	$	3,275	$	3,585
Parks and Resorts	1,347		1,110		954		750		2,301		1,860
Studio Entertainment	829		842		847		656		1,676		1,498
Consumer Products & Interactive Media	617		642		354		367		971		1,009
	$	3,986	$	3,956	$	4,237	$	3,996	$	8,223	$	7,952


7.	Income Taxes


	December 30, 2017			March 31, 2018
Revenues	$	905		$	1,749
Costs and expenses	(870		)	(1,752		)
Equity in the loss of investees	(7		)	(14		)


	Pension Plans						Postretirement Medical Plans						Pension Plans												Postretirement Medical Plans
	Quarter Ended						Quarter Ended						Quarter Ended						Six Months Ended						Quarter Ended						Six Months Ended
	December 30, 2017			December 31, 2016			December 30, 2017			December 31, 2016			March 31, 2018			April 1, 2017			March 31, 2018			April 1, 2017			March 31, 2018			April 1, 2017			March 31, 2018			April 1, 2017
Service costs	$	88		$	91		$	3		$	3		$	87		$	92		$	175		$	183		$	2		$	3		$	5		$	6
Interest costs	123			112			15			14			122			111			245			223			15			14			30			28
Expected return on plan assets	(225		)	(219		)	(13		)	(12		)	(227		)	(218		)	(452		)	(437		)	(13		)	(12		)	(26		)	(24		)
Amortization of prior-year service costs	3			3			—			—			5			2			8			5			—			—			—			—
Recognized net actuarial loss	87			101			3			4			88			101			175			202			4			4			7			8
Net periodic benefit cost	$	76		$	88		$	8		$	9		$	75		$	88		$	151		$	176		$	8		$	9		$	16		$	18



Per Share	Total Paid	Payment Timing	Related to Fiscal Period
$0.84	$1.3 billion	Second Quarter of Fiscal 2018	Second Half 2017
$0.78	$1.2 billion	Fourth Quarter of Fiscal 2017	First Half 2017
$0.78	$1.2 billion	Second Quarter of Fiscal 2017	Second Half 2016


							Unrecognized Pension and Postretirement Medical Expense			Foreign Currency Translation and Other			AOCI									Unrecognized Pension and Postretirement Medical Expense			Foreign Currency Translation and Other			AOCI
	Market Value Adjustments															Market Value Adjustments
AOCI, before tax	Investments			Cash Flow Hedges												Investments			Cash Flow Hedges
Balance at September 30, 2017	$	15		$	(108	)	$	(4,906	)	$	(523	)	$	(5,522	)
Quarter Ended December 30, 2017:
Balance at December 30, 2017																$	14		$	(69	)	$	(4,810	)	$	(461	)	$	(5,326	)
Quarter Ended March 31, 2018:
Unrealized gains (losses) arising during the period	(1		)	19			—			62			80			10			(165		)	24			103			(28		)
Reclassifications of realized net (gains) losses to net income	—			20			96			—			116			—			37			96			—			133
Balance at December 30, 2017	$	14		$	(69	)	$	(4,810	)	$	(461	)	$	(5,326	)
Balance at March 31, 2018																$	24		$	(197	)	$	(4,690	)	$	(358	)	$	(5,221	)

Balance at December 31, 2016																$	26		$	398		$	(5,751	)	$	(662	)	$	(5,989	)
Quarter Ended April 1, 2017:
Unrealized gains (losses) arising during the period																8			(206		)	5			63			(130		)
Reclassifications of realized net (gains) losses to net income																(6		)	(51		)	108			—			51
Balance at April 1, 2017																$	28		$	141		$	(5,638	)	$	(599	)	$	(6,068	)

Balance at September 30, 2017																$	15		$	(108	)	$	(4,906	)	$	(523	)	$	(5,522	)
Six Months Ended March 31, 2018:
Unrealized gains (losses) arising during the period																9			(146		)	24			165			52
Reclassifications of net (gains) losses to net income																—			57			192			—			249
Balance at March 31, 2018																$	24		$	(197	)	$	(4,690	)	$	(358	)	$	(5,221	)

Balance at October 1, 2016	$	44		$	(38	)	$	(5,859	)	$	(521	)	$	(6,374	)	$	44		$	(38	)	$	(5,859	)	$	(521	)	$	(6,374	)
Quarter Ended December 31, 2016:
Six Months Ended April 1, 2017:
Unrealized gains (losses) arising during the period	(18		)	506			—			(141		)	347			(10		)	300			5			(78		)	217
Reclassifications of realized net (gains) losses to net income	—			(70		)	108			—			38
Balance at December 31, 2016	$	26		$	398		$	(5,751	)	$	(662	)	$	(5,989	)
Reclassifications of net (gains) losses to net income																(6		)	(121		)	216			—			89
Balance at April 1, 2017																$	28		$	141		$	(5,638	)	$	(599	)	$	(6,068	)


Gains/(losses) in net income:	Affected line item in the Condensed Consolidated Statements of Income:	Quarter Ended						Affected line item in the Condensed Consolidated Statements of Income:	Quarter Ended						Six Months Ended
		December 30, 2017			December 31, 2016				March 31, 2018			April 1, 2017			March 31, 2018			April 1, 2017
Investments, net								Interest expense, net	$	—		$	6		$	—		$	6
Estimated tax								Income taxes	—			(2		)	—			(2		)
									—			4			—			4

Cash flow hedges	Primarily revenue	$	(20	)	$	70		Primarily revenue	(37		)	51			(57		)	121
Estimated tax	Income taxes	8			(26		)	Income taxes	9			(19		)	17			(45		)
		(12		)	44				(28		)	32			(40		)	76

Pension and postretirement medical expense	Costs and expenses	(96		)	(108		)	Costs and expenses	(96		)	(108		)	(192		)	(216		)
Estimated tax	Income taxes	35			40			Income taxes	23			40			58			80
		(61		)	(68		)		(73		)	(68		)	(134		)	(136		)

Total reclassifications for the period		$	(73	)	$	(24	)		$	(101	)	$	(32	)	$	(174	)	$	(56	)


⁽¹⁾	Equity-based compensation expense is net of capitalized equity-based compensation and excludes amortization of previously capitalized equity-based compensation costs.


	Fair Value Measurement at December 30, 2017										Fair Value Measurement at March 31, 2018
	Level 1		Level 2			Level 3		Total			Level 1		Level 2			Level 3		Total
Assets
Investments	$	32	$	—		$	—	$	32		$	42	$	—		$	—	$	42
Derivatives
Foreign exchange	—		416			—		416			—		458			—		458
Other	—		13			—		13			—		10			—		10
Liabilities
Derivatives
Interest rate	—		(188		)	—		(188		)	—		(296		)	—		(296		)
Foreign exchange	—		(459		)	—		(459		)	—		(688		)	—		(688		)
Total recorded at fair value	$	32	$	(218	)	$	—	$	(186	)	$	42	$	(516	)	$	—	$	(474	)
Fair value of borrowings	$	—	$	23,935		$	2,793	$	26,728		$	—	$	23,762		$	1,267	$	25,029



	Fair Value Measurement at September 30, 2017
	Level 1		Level 2			Level 3		Total
Assets
Investments	$	36	$	—		$	—	$	36
Derivatives
Interest rate	—		10			—		10
Foreign exchange	—		403			—		403
Other	—		8			—		8
Liabilities
Derivatives
Interest rate	—		(122		)	—		(122		)
Foreign exchange	—		(427		)	—		(427		)
Total recorded at fair value	$	36	$	(128	)	$	—	$	(92	)
Fair value of borrowings	$	—	$	23,110		$	2,764	$	25,874


	As of December 30, 2017												As of March 31, 2018
	Current Assets			Other Assets			Other Current Liabilities			Other Long- Term Liabilities			Current Assets			Other Assets			Other Current Liabilities			Other Long- Term Liabilities
Derivatives designated as hedges
Foreign exchange	$	152		$	237		$	(187	)	$	(184	)	$	107		$	308		$	(281	)	$	(282	)
Interest rate	—			—			(161		)	—			—			—			(260		)	—
Other	11			2			—			—			8			2			—			—
Derivatives not designated as hedges
Foreign exchange	24			3			(64		)	(25		)	25			18			(86		)	(39		)
Interest rate	—			—			—			(27		)	—			—			—			(36		)
Gross fair value of derivatives	187			242			(412		)	(236		)	140			328			(627		)	(357		)
Counterparty netting	(141		)	(238		)	204			175			(125		)	(324		)	206			243
Cash collateral (received)/paid	(12		)	(1		)	35			—			(10		)	—			261			—
Net derivative positions	$	34		$	3		$	(173	)	$	(61	)	$	5		$	4		$	(160	)	$	(114	)



	As of September 30, 2017
	Current Assets			Other Assets			Other Current Liabilities			Other Long- Term Liabilities
Derivatives designated as hedges
Foreign exchange	$	175		$	190		$	(192	)	$	(170	)
Interest rate	—			10			(106		)	—
Other	6			2			—			—
Derivatives not designated as hedges
Foreign exchange	38			—			(46		)	(19		)
Interest rate	—			—			—			(16		)
Gross fair value of derivatives	219			202			(344		)	(205		)
Counterparty netting	(142		)	(190		)	188			144
Cash collateral (received)/paid	(20		)	(7		)	19			—
Net derivative positions	$	57		$	5		$	(137	)	$	(61	)


	Costs and Expenses						Interest expense, net						Income Tax expense						Costs and Expenses						Interest expense, net						Income Tax expense
Quarter Ended:	December 30, 2017			December 31, 2016			December 30, 2017			December 31, 2016			December 30, 2017			December 31, 2016			March 31, 2018			April 1, 2017			March 31, 2018			April 1, 2017			March 31, 2018			April 1, 2017
Net gains (losses) on foreign currency denominated assets and liabilities	$	17		$	(233	)	$	3		$	7		$	3		$	23		$	64		$	110		$	24		$	(3	)	$	(15	)	$	(11	)
Net gains (losses) on foreign exchange risk management contracts not designated as hedges	(14		)	221			(1		)	(7		)	(1		)	(31		)	(77		)	(103		)	(27		)	3			17			14
Net gains (losses)	$	3		$	(12	)	$	2		$	—		$	2		$	(8	)	$	(13	)	$	7		$	(3	)	$	—		$	2		$	3

Six Months Ended:
Net gains (losses) on foreign currency denominated assets and liabilities																			$	81		$	(123	)	$	27		$	4		$	(12	)	$	12
Net gains (losses) on foreign exchange risk management contracts not designated as hedges																			(91		)	118			(28		)	(4		)	16			(17		)
Net gains (losses)																			$	(10	)	$	(5	)	$	(1	)	$	—		$	4		$	(5	)


	Quarter Ended						% Change		Quarter Ended						% Change		Six Months Ended						% Change
(in millions, except per share data)	December 30, 2017			December 31, 2016			Better/ (Worse)		March 31, 2018			April 1, 2017			Better/ (Worse)		March 31, 2018			April 1, 2017			Better/ (Worse)
Revenues:
Services	$	12,984		$	12,406		5	%	$	12,520		$	11,487		9	%	$	25,504		$	23,893		7	%
Products	2,367			2,378			—	%	2,028			1,849			10	%	4,395			4,227			4	%
Total revenues	15,351			14,784			4	%	14,548			13,336			9	%	29,899			28,120			6	%
Costs and expenses:
Cost of services (exclusive of depreciation and amortization)	(7,334		)	(7,020		)	(4)	%	(6,304		)	(5,839		)	(8)	%	(13,638		)	(12,859		)	(6)	%
Cost of products (exclusive of depreciation and amortization)	(1,403		)	(1,386		)	(1)	%	(1,229		)	(1,130		)	(9)	%	(2,632		)	(2,516		)	(5)	%
Selling, general, administrative and other	(2,079		)	(1,985		)	(5)	%	(2,247		)	(1,941		)	(16)	%	(4,326		)	(3,926		)	(10)	%
Depreciation and amortization	(742		)	(687		)	(8)	%	(731		)	(676		)	(8)	%	(1,473		)	(1,363		)	(8)	%
Total costs and expenses	(11,558		)	(11,078		)	(4)	%	(10,511		)	(9,586		)	(10)	%	(22,069		)	(20,664		)	(7)	%
Restructuring and impairment charges	(15		)	—			nm		(13		)	—			nm		(28		)	—			nm
Other income, net	53			—			nm		41			—			nm		94			—			nm
Interest expense, net	(129		)	(99		)	(30)	%	(143		)	(84		)	(70)	%	(272		)	(183		)	(49)	%
Equity in the income of investees	43			118			(64)	%	6			85			(93)	%	49			203			(76)	%
Income before income taxes	3,745			3,725			1	%	3,928			3,751			5	%	7,673			7,476			3	%
Income taxes	728			(1,237		)	nm		(813		)	(1,212		)	33	%	(85		)	(2,449		)	97	%
Net income	4,473			2,488			80	%	3,115			2,539			23	%	7,588			5,027			51	%
Less: Net income attributable to noncontrolling interests	(50		)	(9		)	>(100)	%	(178		)	(151		)	(18)	%	(228		)	(160		)	(43)	%
Net income attributable to Disney	$	4,423		$	2,479		78	%	$	2,937		$	2,388		23	%	$	7,360		$	4,867		51	%

Diluted earnings per share attributable to Disney	$	2.91		$	1.55		88	%	$	1.95		$	1.50		30	%	$	4.86		$	3.05		59	%



	Quarter Ended
(in millions)	March 31, 2018			April 1, 2017			% Change Better/(Worse)
Interest expense	$	(172	)	$	(115	)	(50)	%
Interest and investment income	29			31			(6)	%
Interest expense, net	$	(143	)	$	(84	)	(70)	%


⁽¹⁾	Cable Networks results in the current quarter include the consolidated results of BAMTech, whereas in the prior-year quarter the Company’s share of BAMTech’s results was reported in equity in the income of investees.


	Domestic						International ⁽²⁾						Total						Domestic						International ⁽²⁾						Total
	Quarter Ended						Quarter Ended						Quarter Ended						Quarter Ended						Quarter Ended						Quarter Ended
	Dec. 30, 2017			Dec. 31, 2016			Dec. 30, 2017			Dec. 31, 2016			Dec. 30, 2017			Dec. 31, 2016			Mar. 31, 2018			Apr. 1, 2017			Mar. 31, 2018			Apr. 1, 2017			Mar. 31, 2018			Apr. 1, 2017
Parks
Increase/(decrease)
Attendance	6		%	(5)		%	10		%	50		%	7		%	6		%	5		%	4		%	1		%	70		%	4		%	17		%
Per Capita Guest Spending	7		%	7		%	9		%	(3)		%	7		%	2		%	6		%	—		%	10		%	—		%	7		%	(3)		%
Hotels ⁽¹⁾
Occupancy	91		%	91		%	84		%	79		%	89		%	88		%	90		%	88		%	84		%	82		%	88		%	87		%
Available Room Nights (in thousands)	2,516			2,569			799			731			3,315			3,300			2,509			2,561			787			719			3,296			3,280
Per Room Guest Spending		$344			$324			$293			$286			$332			$316			$347			$310			$252			$226			$326			$292


⁽¹⁾	Per room guest spending consists of the average daily hotel room rate, as well as food, beverage and merchandise sales at the hotels. Hotel statistics include rentals of Disney Vacation Club units.


⁽²⁾	Per capita guest spending growth rate is stated on a constant currency basis. Per room guest spending is stated at the fiscal 2017 ~~first~~second quarter average foreign exchange rate.


⁽¹⁾	Cable Networks results in the current period include the consolidated results of BAMTech, whereas in the prior-year period the Company’s share of BAMTech’s results was reported in equity in the income of investees.


	Quarter Ended						% Change Better/ (Worse)		Six Months Ended						% Change Better/ (Worse)
(in millions)	December 30, 2017			December 31, 2016			% Change Better/ (Worse)		March 31, 2018			April 1, 2017			% Change Better/ (Worse)
Cash provided by operations	$	2,237		$	1,445		55	%	$	6,763		$	4,673		45	%
Cash used in investing activities	(1,043		)	(1,035		)	(1)	%	(3,805		)	(2,390		)	(59)	%
Cash used in financing activities	(584		)	(987		)	41	%	(2,882		)	(3,049		)	5	%
Impact of exchange rates on cash, cash equivalents and restricted cash	21			(112		)	nm		55			(69		)	nm
Change in cash, cash equivalents and restricted cash	$	631		$	(689	)	nm		$	131		$	(835	)	nm