0001744489 us-gaap:ForeignExchangeContractMember us-gaap:NondesignatedMember 2019-03-30


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
 
x☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended MarchDecember 30, 20192023
or
¨☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________ to __________.
Commission File Number 001-38842
twdcimagea01a01a01a01a14.jpg
Delaware83-0940635
Delaware83-0940635
State or Other Jurisdiction ofI.R.S. Employer Identification
Incorporation or Organization
500 South Buena Vista Street, Burbank, California91521
Address of Principal Executive OfficesZip Code
(818) 560-1000
Registrant’s Telephone Number, Including Area Code
500 South Buena Vista Street
Burbank, California 91521
Address of Principal Executive Offices and Zip Code
(818) 560-1000
Registrant’s Telephone Number, Including Area Code
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common Stock, $0.01 par value
DISNew York Stock Exchange
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  x☒    No  ¨
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes  x☒    No  ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer☒xAccelerated filer¨☐
Non-accelerated filer☐¨Smaller reporting company¨☐
Emerging growth company¨☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).    Yes  ☐    No  ☒¨    No  x
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common Stock, $0.01 par valueDISNew York Stock Exchange
There were 1,799,698,9221,834,302,235 shares of common stock outstanding as of May 1, 2019.January 31, 2024.


Cautionary Note on Forward-Looking Statements
This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements generally relate to future events or our future financial or operating performance and may include statements concerning, among other things, financial results; business plans (including statements regarding new services and products and future expenditures, costs and investments); future liabilities and other obligations; impairments and amortization; estimates of financial impact of certain items, accounting treatment, events or circumstances; competition and seasonality on our businesses and results of operations; and capital allocation, including share repurchases and dividends. In some cases, you can identify forward-looking statements because they contain words such as “may,” “will,” “would,” “should,” “expects,” “plans,” “could,” “intends,” “target,” “projects,” “believes,” “estimates,” “anticipates,” “potential,” “continue” or “assumption” or the negative of these words or other similar terms or expressions that concern our expectations, strategy, plans or intentions. These statements reflect our current views with respect to future events and are based on assumptions as of the date of this report. These statements are subject to known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from expectations or results projected or implied by forward-looking statements.
Such differences may result from actions taken by the Company, including restructuring or strategic initiatives (including capital investments, asset acquisitions or dispositions, new or expanded business lines or cessation of certain operations), our execution of our business plans (including the content we create and intellectual properties (IP) we invest in, our pricing decisions, our cost structure and our management and other personnel decisions), our ability to quickly execute on cost rationalization while preserving revenue, the discovery of additional information or other business decisions, as well as from developments beyond the Company’s control, including:
•the occurrence of subsequent events;
•deterioration in domestic and global economic conditions or failure of conditions to improve as anticipated;
•deterioration in or pressures from competitive conditions, including competition to create or acquire content, competition for talent and competition for advertising revenue;
•consumer preferences and acceptance of our content, offerings, pricing model and price increases, and corresponding subscriber additions and churn, and the market for advertising sales on our direct-to-consumer services and linear networks;
•health concerns and their impact on our businesses and productions;
•international, political or military developments;
•regulatory and legal developments;
•technological developments;
•labor markets and activities, including work stoppages;
•adverse weather conditions or natural disasters; and
•availability of content.
Such developments may further affect entertainment, travel and leisure businesses generally and may, among other things, affect (or further affect, as applicable):
•our operations, business plans or profitability, including direct-to-consumer profitability;
•demand for our products and services;
•the performance of the Company’s content;
•our ability to create or obtain desirable content at or under the value we assign the content;
•the advertising market for programming;
•income tax expense; and
•performance of some or all Company businesses either directly or through their impact on those who distribute our products.
Additional factors include those described in our 2023 Annual Report on Form 10-K, including under the captions “Risk Factors,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and “Business,” in our subsequent quarterly reports on Form 10-Q, including under the captions “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and in our subsequent filings with the Securities and Exchange Commission.
A forward-looking statement is neither a prediction nor a guarantee of future events or circumstances. You should not place undue reliance on the forward-looking statements. Unless required by federal securities laws, we assume no obligation to update any of these forward-looking statements, or to update the reasons actual results could differ materially from those anticipated, to reflect circumstances or events that occur after the statements are made.

2

PART I. FINANCIAL INFORMATION
Item 1: Financial Statements
THE WALT DISNEY COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(unaudited; in millions, except per share data)
Quarter Ended Six Months Ended
March 30,
2019		 March 31,
2018		 March 30,
2019		 March 31,
2018
Revenues:       
Revenues:
Revenues:
Services
Services
Services$13,006
 $12,520
 $25,872
 $25,504
Products1,916
 2,028
 4,353
 4,395
Products
Products
Total revenues
Total revenues
Total revenues14,922
 14,548
 30,225
 29,899
Costs and expenses:       
Costs and expenses:
Costs and expenses:
Cost of services (exclusive of depreciation and amortization)
Cost of services (exclusive of depreciation and amortization)
Cost of services (exclusive of depreciation and amortization)(7,167) (6,313) (14,731) (13,637)
Cost of products (exclusive of depreciation and amortization)(1,209) (1,228) (2,646) (2,633)
Cost of products (exclusive of depreciation and amortization)
Cost of products (exclusive of depreciation and amortization)
Selling, general, administrative and other
Selling, general, administrative and other
Selling, general, administrative and other(2,327) (2,239) (4,479) (4,326)
Depreciation and amortization(828) (731) (1,560) (1,473)
Depreciation and amortization
Depreciation and amortization
Total costs and expenses
Total costs and expenses
Total costs and expenses(11,531) (10,511) (23,416) (22,069)
Restructuring and impairment charges(662) (13) (662) (28)
Other income4,963
 41
 4,963
 94
Restructuring and impairment charges
Restructuring and impairment charges
Other expense, net
Other expense, net
Other expense, net
Interest expense, net(143) (143) (206) (272)
Equity in the income / (loss) of investees, net(312) 6
 (236) 49
Income from continuing operations before income taxes7,237
 3,928
 10,668
 7,673
Income taxes from continuing operations(1,647) (813) (2,292) (85)
Net income from continuing operations5,590
 3,115
 8,376
 7,588
Income (loss) from discontinued operations (net of income taxes of $5, $0, $5 and $0, respectively)21
 —
 21
 —
Consolidated net income5,611
 3,115
 8,397
 7,588
Less: Net income attributable to noncontrolling interests(159) (178) (157) (228)
Net income attributable to The Walt Disney Company (Disney)$5,452
 $2,937
 $8,240
 $7,360
Interest expense, net
Interest expense, net
Equity in the income of investees
Equity in the income of investees
Equity in the income of investees
Income before income taxes
Income before income taxes
Income before income taxes
Income taxes
Income taxes
Income taxes
Net income
Net income
Net income
Net income attributable to noncontrolling interests
Net income attributable to noncontrolling interests
Net income attributable to noncontrolling interests
Net income attributable to Disney
Net income attributable to Disney
Net income attributable to Disney
       
Earnings per share attributable to Disney:       
Continuing operations$3.53
 $1.95
 $5.42
 $4.86
Discontinued operations0.01
 —
 0.01
 —
Earnings per share attributable to Disney:
Earnings per share attributable to Disney:
Diluted$3.55
 $1.95
 $5.43
 $4.86
       
Continuing operations$3.55
 $1.95
 $5.44
 $4.88
Discontinued operations0.01
 —
 0.01
 —
Diluted
Diluted
Basic
Basic
Basic$3.56
 $1.95
 $5.46
 $4.88
       
Weighted average number of common and common equivalent shares outstanding:       
Weighted average number of common and common equivalent shares outstanding:
Weighted average number of common and common equivalent shares outstanding:
Diluted1,537
 1,510
 1,517
 1,515
Diluted
Diluted
Basic
Basic
Basic
       
Basic1,530
 1,503
 1,510
 1,507
See Notes to Condensed Consolidated Financial Statements

3

THE WALT DISNEY COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(unaudited; in millions)
 
 Quarter Ended Six Months Ended
 March 30,
2019		 March 31,
2018		 March 30,
2019		 March 31,
2018
Consolidated net income$5,611
 $3,115
 $8,397
 $7,588
Other comprehensive income/(loss), net of tax:       
Market value adjustments for investments(4) 7
 (4) 6
Market value adjustments for hedges(80) (112) (89) (94)
Pension and postretirement medical plan adjustments68
 94
 121
 155
Foreign currency translation and other46
 144
 25
 231
Other comprehensive income30
 133
 53
 298
Comprehensive income5,641
 3,248
 8,450
 7,886
Net income attributable to noncontrolling interests, including redeemable noncontrolling interests(159) (178) (157) (228)
Other comprehensive income attributable to noncontrolling interests(34) (74) (36) (115)
Comprehensive income attributable to Disney$5,448
 $2,996
 $8,257
 $7,543

 Quarter Ended
 December 30,
2023		December 31,
2022
Net income$2,151 $1,361 
Other comprehensive income (loss), net of tax:
Market value adjustments for hedges(319)(542)
Pension and postretirement medical plan adjustments(21)1    
Foreign currency translation and other174 227 
Other comprehensive loss(166)(314)
Comprehensive income1,985 1,047 
Net income attributable to noncontrolling interests(240)(82)
Other comprehensive income attributable to noncontrolling interests(44)(45)
Comprehensive income attributable to Disney$1,701    $920 
See Notes to Condensed Consolidated Financial Statements




4

THE WALT DISNEY COMPANY
CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited; in millions, except per share data)
 March 30,
2019		 September 29,
2018
ASSETS   
Current assets   
Cash and cash equivalents$10,108
 $4,150
Receivables14,593
 9,334
Inventories1,445
 1,392
Television costs and advances5,408
 1,314
Other current assets1,257
 635
Assets held for sale1,466
 —
Total current assets34,277
 16,825
Film and television costs24,353
 7,888
Investments4,080
 2,899
Parks, resorts and other property   
Attractions, buildings and equipment57,991
 55,238
Accumulated depreciation(33,132) (30,764)
 24,859
 24,474
Projects in progress4,984
 3,942
Land1,174
 1,124
 31,017
 29,540
Intangible assets, net26,985
 6,812
Goodwill75,057
 31,269
Noncurrent assets held for sale13,182
 —
Other assets5,391
 3,365
Total assets$214,342
 $98,598
    
LIABILITIES AND EQUITY   
Current liabilities   
Accounts payable and other accrued liabilities$20,503
 $9,479
Current portion of borrowings19,158
 3,790
Deferred revenue and other4,281
 4,591
Liabilities held for sale434
 —
Total current liabilities44,376
 17,860
Borrowings37,803
 17,084
Deferred income taxes11,208
 3,109
Noncurrent liabilities held for sale2,659
 —
Other long-term liabilities12,854
 6,590
Commitments and contingencies (Note 13)


 


Redeemable noncontrolling interests1,103
 1,123
Equity   
Preferred stock—
 —
Common stock, $0.01 par value, Authorized – 4.6 billion shares, Issued – 1.8 billion shares at
March 30, 2019 and 2.9 billion shares at September 29, 2018
53,419
 36,779
Retained earnings41,212
 82,679
Accumulated other comprehensive loss(3,786) (3,097)
 90,845
 116,361
Treasury stock, at cost, 19 million shares at March 30, 2019 and 1.4 billion shares at September 29, 2018(907) (67,588)
Total Disney Shareholders’ equity89,938
 48,773
Noncontrolling interests14,401
 4,059
Total equity104,339
 52,832
Total liabilities and equity$214,342
 $98,598
December 30,
2023		September 30,
2023
ASSETS
Current assets
Cash and cash equivalents$7,192 $14,182 
Receivables, net14,115 12,330 
Inventories1,954 1,963 
Content advances1,409 3,002 
Other current assets1,301 1,286 
Total current assets25,971 32,763 
Produced and licensed content costs32,725 33,591 
Investments3,084 3,080 
Parks, resorts and other property
Attractions, buildings and equipment72,096    70,090    
Accumulated depreciation(43,575)(42,610)
28,521 27,480 
Projects in progress5,618 6,285 
Land1,182 1,176 
35,321 34,941 
Intangible assets, net12,639 13,061 
Goodwill77,066 77,067 
Other assets10,968 11,076 
Total assets$197,774 $205,579 
LIABILITIES AND EQUITY
Current liabilities
Accounts payable and other accrued liabilities$18,676 $20,671 
Current portion of borrowings6,087 4,330 
Deferred revenue and other6,270 6,138 
Total current liabilities31,033 31,139 
Borrowings41,603 42,101 
Deferred income taxes7,041 7,258 
Other long-term liabilities12,596 12,069 
Commitments and contingencies (Note 13)
Redeemable noncontrolling interests— 9,055 
Equity
Preferred stock— — 
Common stock, $0.01 par value, Authorized – 4.6 billion shares, Issued – 1.9 billion shares at December 30, 2023 and 1.8 billion shares at September 30, 202357,640 57,383 
Retained earnings47,490 46,093 
Accumulated other comprehensive loss(3,502)(3,292)
Treasury stock, at cost, 19 million shares(907)(907)
Total Disney Shareholders’ equity100,721 99,277 
Noncontrolling interests4,780 4,680 
Total equity105,501 103,957 
Total liabilities and equity$197,774 $205,579 
See Notes to Condensed Consolidated Financial Statements

5

THE WALT DISNEY COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited; in millions)
 Six Months Ended
 March 30,
2019		 March 31,
2018
OPERATING ACTIVITIES   
Net income from continuing operations$8,376
 $7,588
Depreciation and amortization1,560
 1,473
Gain on acquisition(4,917) —
Deferred income taxes1,190
 (1,623)
Equity in the (income) / loss of investees236

(49)
Cash distributions received from equity investees370
 389
Net change in film and television costs and advances(281) (490)
Equity-based compensation475
 194
Other121
 155
Changes in operating assets and liabilities, net of business acquisitions:   
Receivables(386) (1,004)
Inventories(19) 64
Other assets46
 (248)
Accounts payable and other liabilities(283) (92)
Income taxes(474) 406
Cash provided by operations - continuing operations6,014
 6,763
    
INVESTING ACTIVITIES   
Investments in parks, resorts and other property(2,390) (2,044)
Acquisitions(9,901) (1,581)
Other(392) (180)
Cash used in investing activities - continuing operations(12,683) (3,805)
    
FINANCING ACTIVITIES   
Commercial paper borrowings, net376
 1,372
Borrowings31,145
 1,048
Reduction of borrowings(17,398) (1,350)
Dividends(1,310) (1,266)
Repurchases of common stock—
 (2,608)
Proceeds from exercise of stock options83
 91
Other(200) (169)
Cash provided by / (used in) financing activities - continuing operations12,696
 (2,882)
    
CASH FLOWS FROM DISCONTINUED OPERATIONS   
Cash used in operations - discontinued operations(35) —
    
Impact of exchange rates on cash, cash equivalents and restricted cash75
 55
    
Change in cash, cash equivalents and restricted cash6,067
 131
Cash, cash equivalents and restricted cash, beginning of period4,155
 4,064
Cash, cash equivalents and restricted cash, end of period$10,222
 $4,195
 Quarter Ended
December 30,
2023		December 31,
2022
OPERATING ACTIVITIES
Net income$2,151 $1,361 
Depreciation and amortization1,243    1,306 
Deferred income taxes(51)   (15)
Equity in the income of investees(181)(191)
Cash distributions received from equity investees153 176    
Net change in produced and licensed content costs and advances2,642 558 
Equity-based compensation308 270 
Other, net(64)(163)
Changes in operating assets and liabilities:
Receivables(1,554)(1,423)
Inventories8 (88)
Other assets30 (443)
Accounts payable and other liabilities(1,396)(2,378)
Income taxes(1,104)56 
Cash provided by (used in) operations2,185 (974)
INVESTING ACTIVITIES
Investments in parks, resorts and other property(1,299)(1,181)
Other, net53 (111)
Cash used in investing activities(1,246)(1,292)
FINANCING ACTIVITIES
Commercial paper borrowings, net1,046 799 
Borrowings— 67 
Reduction of borrowings(309)(1,000)
Contributions from / sale of noncontrolling interest— 178 
Acquisition of redeemable noncontrolling interest(8,610)(900)
Other, net(133)(187)
Cash used in financing activities(8,006)(1,043)
Impact of exchange rates on cash, cash equivalents and restricted cash79 164 
Change in cash, cash equivalents and restricted cash(6,988)(3,145)
Cash, cash equivalents and restricted cash, beginning of period14,235  11,661  
Cash, cash equivalents and restricted cash, end of period$7,247 $8,516 
See Notes to Condensed Consolidated Financial Statements

6

THE WALT DISNEY COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF EQUITY
(unaudited; in millions)
  Quarter Ended
  Equity Attributable to Disney    
  Shares Common Stock Retained Earnings
Accumulated
Other
Comprehensive
Income
(Loss)
Treasury Stock Total Disney Equity 
Non-controlling
   Interests (1)
 
Total
Equity
Balance at December 29, 2018 1,490
 $36,799
 $84,887
 $(3,782) $(67,588) $50,316
 $4,077
 $54,393
Comprehensive income —
 —
 5,452
 (4) —
 5,448
 191
 5,639
Equity compensation activity 1
 395
 —
 —
 —
 395
 —
 395
Dividends —
 8
 (8) —
 —
 —
 —
 —
Contributions —
 —
 —
 —
 —
 —
 27
 27
Acquisition of 21CF 307
 33,804
 —
 —
 —
 33,804
 10,638
 44,442
Retirement of treasury stock —
 (17,563) (49,118) —
 66,681
 —
 —
 —
Distributions and other —
 (24) (1) —
 —
 (25) (532) (557)
Balance at March 30, 2019 1,798
 $53,419
 $41,212
 $(3,786) $(907) $89,938
 $14,401
 $104,339
                 
Balance at December 30, 2017 1,507
 $36,254
 $75,763
 $(3,404) $(65,324) $43,289
 $3,794
 $47,083
Comprehensive income —
 —
 2,937
 59
 —
 2,996
 251
 3,247
Equity compensation activity 1
 157
 —
 —
 —
 157
 —
 157
Common stock repurchases (12) —
 —
 —
 (1,295) (1,295) —
 (1,295)
Distributions and other —
 —
 4
 —
 —
 4
 (545) (541)
Balance at March 31, 2018 1,496
 $36,411
 $78,704
 $(3,345) $(66,619) $45,151
 $3,500
 $48,651

(1)

 Quarter Ended
Equity Attributable to Disney
 
Shares(1)
Common StockRetained EarningsAccumulated
Other
Comprehensive
Income
(Loss)		Treasury StockTotal Disney Equity
Non-controlling
 Interests(2)
Total
Equity
Balance at September 30, 20231,830 $57,383 $46,093 $(3,292)$(907)$99,277 $4,680 $103,957 
Comprehensive income (loss)— — 1,911 (210)— 1,701 129 1,830 
Equity compensation activity4 250 — — — 250 — 250 
Dividends— — (549)— — (549)— (549)
Distributions and other— 7 35 — — 42 (29)13 
Balance at December 30, 20231,834 $57,640 $47,490 $(3,502)$(907)$100,721 $4,780 $105,501 
Balance at October 1, 20221,824 $56,398 $43,636 $(4,119)$(907)$95,008 $3,871 $98,879 
Comprehensive income (loss)— — 1,279    (359)— 920 (16)904 
Equity compensation activity2 180 — — — 180 — 180 
Contributions— — — — — — 178 178 
Distributions and other— 1 40 — — 41 (47)(6)
Balance at December 31, 20221,826 $56,579 $44,955 $(4,478)$(907)$96,149 $3,986 $100,135 
(1)Shares are net of treasury shares.
(2)Excludes redeemable noncontrolling interests.
Excludes redeemable noncontrolling interest.
See Notes to Condensed Consolidated Financial Statements



7

THE WALT DISNEY COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF EQUITY
(unaudited; in millions)
  Six Months Ended
  Equity Attributable to Disney    
  Shares Common Stock Retained Earnings
Accumulated
Other
Comprehensive
Income
(Loss)
Treasury Stock Total Disney Equity 
Non-controlling
   Interests (1)
 
Total
Equity
Balance at September 29, 2018 1,488
 $36,779
 $82,679
 $(3,097) $(67,588) $48,773
 $4,059
 $52,832
Comprehensive income —
 —
 8,240
 17
 —
 8,257
 190
 8,447
Equity compensation activity 3
 415
 —
 —
 —
 415
 —
 415
Dividends —
 8
 (1,318) —
 —
 (1,310) —
 (1,310)
Contributions —
 —
 —
 —
 —
 —
 47
 47
Acquisition of 21CF 307
 33,804
 —
 —
 —
 33,804
 10,638
 44,442
Adoption of new accounting guidance:   

            
Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income —
 —
 691
 (691) —
 —
 —
 —
Intra-Entity Transfers of Assets Other Than Inventory —
 —
 129
 —
 —
 129
 —
 129
Revenues from Contracts with Customers —
 —
 (116) —
 —
 (116) —
 (116)
Other —
 —
 22
 (15) —
 7
 —
 7
Retirement of treasury stock —
 (17,563) (49,118) —
 66,681
 —
 —
 —
Distributions and other —
 (24) 3
 —
 —
 (21) (533) (554)
Balance at March 30, 2019 1,798
 $53,419
 $41,212
 $(3,786) $(907) $89,938
 $14,401
 $104,339
                 
Balance at September 30, 2017 1,517
 $36,248
 $72,606
 $(3,528) $(64,011) $41,315
 $3,689
 $45,004
Comprehensive income —
 —
 7,360
 183
 —
 7,543
 348
 7,891
Equity compensation activity 4
 163
 —
 —
 —
 163
 —
 163
Common stock repurchases (25) —
 —
 —
 (2,608) (2,608) —
 (2,608)
Dividends —
 —
 (1,266) —
 —
 (1,266) —
 (1,266)
Distributions and other —
 —
 4
 —
 —
 4
 (537) (533)
Balance at March 31, 2018 1,496
 $36,411
 $78,704
 $(3,345) $(66,619) $45,151
 $3,500
 $48,651
(1)
Excludes redeemable noncontrolling interest.
See Notes to Condensed Consolidated Financial Statements




THE WALT DISNEY COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited; tabular dollars in millions, except for per share data)
 
1.Principles of Consolidation
1.Principles of Consolidation
These Condensed Consolidated Financial Statements have been prepared in accordance with accounting principles generally accepted in the United States of America (GAAP) for interim financial information and the instructions to Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. We believe that we have included all normal recurring adjustments necessary for a fair presentationstatement of the results for the interim period. Operating results for the six monthsquarter endedMarch December 30, 20192023 are not necessarily indicative of the results that may be expected for the year ending September 28, 2019.2024.
The terms “Company,” “Disney,” “we,” “us,” and “our” are used in this report to refer collectively to the parent company, andThe Walt Disney Company, as well as the subsidiaries through which ourits various businesses are actually conducted. The term “TWDC” is used to refer to the parent company.
These financial statements should be read in conjunction with the Company’s 20182023 Annual Report on Form 10-K.
On March 20, 2019 the Company acquired Twenty-First Century Fox, Inc. (“21CF”) (see Note 4). As part of the acquisition, the Company agreed to sell 21CF’s Regional Sports Networks and certain sports operations in Brazil and Mexico. The assets and liabilities of these operations are reported as held for sale and the income and cash flows are reported as discontinued operations. In addition, as a result of the 21CF acquisition the Company’s ownership interest in Hulu LLC (Hulu) increased to 60% and the Company started consolidating the results of Hulu. 21CF and Hulu results are consolidated from the acquisition date through March 30, 2019.Variable Interest Entities
The Company enters into relationships with or makes investments within other entities that may be variable interest entities (VIE). A VIE is consolidated in the financial statements if the Company has the power to direct activities that most significantly impact the economic performance of the VIE and has the obligation to absorb losses or the right to receive benefits from the VIE that could potentially be significant (as defined by ASC 810-10-25-38) to the VIE. Hong Kong Disneyland Resort and Shanghai Disney Resort (together the Asia Theme Parks) are VIEs in which the Company has less than 50% equity ownership. Company subsidiaries (the Management Companies) have management agreements with the Asia Theme Parks, which provide the Management Companies, subject to certain protective rights of joint venture partners, with the ability to direct the day-to-day operating activities and the development of business strategies that we believe most significantly impact the economic performance of the Asia Theme Parks. In addition, the Management Companies receive management fees under these arrangements that we believe could be significant to the Asia Theme Parks. Therefore, the Company has consolidated the Asia Theme Parks in its financial statements.
Redeemable Noncontrolling Interest
Hulu LLC
In November 2023, NBC Universal (NBCU) exercised its right to require the Company to purchase NBCU’s 33% interest in Hulu LLC (Hulu), a direct-to-consumer (DTC) streaming service provider, at a redemption value based on NBCU’s equity ownership percentage of the greater of Hulu’s equity fair value or a guaranteed floor value of $27.5 billion. In connection with the redemption, the Company will pay NBCU 50% of the future tax benefits from the amortization of the purchase of NBCU’s interest in Hulu that will generally arise over a 15-year period. In December 2023, the Company paid NBCU $8.6 billion, which reflected the guaranteed floor value less NBCU’s unpaid capital call contributions.
Based on valuation procedures agreed upon by NBCU and the Company, Hulu’s equity fair value for purposes of determining the redemption payment is not expected to be finalized until later in calendar 2024. If Hulu’s equity fair value is determined to be higher than the guaranteed floor value, the Company is required to pay NBCU its share of the difference between the equity fair value and the guaranteed floor value.
The Company is required to accrete NBCU’s interest to the estimated redemption value and has accreted to the guaranteed floor value. If the redemption value is higher than the guaranteed floor value, we would record the increment as “Net income attributable to noncontrolling interests” and thus reduce “Net income attributable to Disney” in the Condensed Consolidated Statements of Income. Estimating the redemption value prior to its final determination requires management to make significant judgments related to assessing the fair value of Hulu.
BAMTech LLC
In November 2022, the Company purchased Major League Baseball’s (MLB) 15% redeemable noncontrolling interest in BAMTech LLC (BAMTech), which holds the Company’s domestic DTC sports business, for $900 million (MLB buy-out). MLB’s interest was recorded in the Company’s financial statements at $828 million prior to the MLB buy-out. The $72 million difference was recorded as an increase in “Net income attributable to noncontrolling interests” in the Condensed Consolidated Statements of Income.
8
THE WALT DISNEY COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited; tabular dollars in millions, except for per share data)
During the three months ended December 31, 2022, Hearst Corporation (Hearst) contributed $178 million to the domestic DTC sports business to fund its 20% share of the MLB buy-out.
Use of Estimates
The preparation of financial statements in conformity with generally accepted accounting principlesGAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and footnotes thereto. Actual results may differ from those estimates.
Reclassifications
Certain reclassifications have been made in the fiscal 20182023 financial statements and notes to conform to the fiscal 20192024 presentation.
2.Description of Business and Segment Information
Our operating segments report2.Segment Information
The Company’s operations are reported in three segments: Entertainment, Sports and Experiences, for which separate financial information which is evaluated regularly by the Chief Executive Officer in order to decide how to allocate resources and to assess performance.
EffectiveSegment operating results reflect earnings before corporate and unallocated shared expenses, restructuring and impairment charges, net other income/expense, net interest expense, income taxes and noncontrolling interests. Segment operating income includes equity in the income of investees and excludes amortization of intangible assets and the fair value step-up for film and television costs recognized in connection with the acquisition of TFCF Corporation (TFCF) and Hulu in fiscal 2019 the Company started reporting its(TFCF and Hulu acquisition amortization). Corporate and unallocated shared expenses principally consist of corporate functions, executive management and certain unallocated administrative support functions.
Segment operating results in the following operating segments:include allocations of certain costs, including information technology, pension, legal and other shared services costs, which are allocated based on metrics designed to correlate with consumption.
Media Networks;
9
Parks, Experiences and Products;
Studio Entertainment; and
Direct-to-Consumer & International
The Parks, Experiences and Products segment reflects the combination of the former Parks & Resorts and Consumer Products & Interactive Media segments. Certain businesses that were previously reported in Media Networks, Studio
THE WALT DISNEY COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited; tabular dollars in millions, except for per share data)


EntertainmentSegment revenues and Consumer Products & Interactive Media are now reported in Direct-to-Consumer & International (DTCI). Fiscal 2018 segment operating results have been recast to align with the fiscal 2019 presentation.income are as follows:
Results for 21CF
 Quarter Ended
 December 30,
2023		December 31,
2022
Revenues:
Entertainment
Third parties$9,881   $10,584   
Intersegment100   91   
9,981   10,675   
Sports
Third parties4,536   4,383   
Intersegment299   257   
4,835   4,640   
Experiences9,132   8,545   
Eliminations(399)  (348)  
Total segment revenues$23,549   $23,512   
Segment operating income:
Entertainment$874   $345   
Sports(103)  (164)  
Experiences3,105   2,862   
Total segment operating income(1)
$3,876   $3,043   
(1) Equity in the current quarter are notincome of investees is included in these segments and are reported separately. We currently plan to include 21CF’s results in our historical segments when we report third-quarter results. Hulu’s results for the period of consolidation and for the period the Company recorded equity method earnings are reportedsegment operating income as part of DTCI.follows:
DESCRIPTION OF BUSINESS
 Quarter Ended
 December 30,
2023		December 31,
2022
Entertainment$171   $193   
Sports13 3  
Experiences— (2) 
Equity in the income of investees included in segment operating income184 194 
Amortization of TFCF intangible assets related to equity investees(3)(3)
Equity in the income of investees, net$181 $191 
Media Networks
10
Significant operations:
◦Disney, ESPN and Freeform branded domestic cable networks
◦ABC branded broadcast television network and eight owned domestic television stations
◦Television programming, production and distribution
◦A 50% equity investment in A+E Television Networks (A+E), which operates a variety of cable networks including A&E, HISTORY and Lifetime
Significant revenues:
◦Affiliate fees - Fees charged to multi-channel video programming distributors (i.e. cable, satellite, telecommunications and digital over-the-top (e.g. Hulu, YouTube TV) service providers) (“MVPDs”) and to television stations affiliated with the ABC Network for the right to deliver our programming to their customers
◦Advertising - Sales of ad time/space on our domestic networks and related platforms (“ratings-based ad sales”, which excludes advertising on digital platforms that is not ratings based), and the sale of time on our domestic television stations. Ratings-based ad sales are generally determined using viewership measured with Nielsen ratings. Non-ratings-based advertising on digital platforms is reported by DTCI
◦TV/SVOD distribution - Licensing fees and other revenues for the right to use our television programs and productions and content transactions with other Company segments (“program sales”)
Significant expenses:
◦Operating expenses consisting primarily of programming and production costs, participations and residuals expense, technical support costs, operating labor and distribution costs
◦Selling, general and administrative costs
◦Depreciation and amortization
Parks, Experiences and Products
Significant operations:
◦Parks & Experiences:
▪Theme parks and resorts, which include: Walt Disney World Resort in Florida; Disneyland Resort in California; Disneyland Paris; and 47% and 43% interests in Hong Kong Disneyland Resort and Shanghai Disney Resort, respectively, all of which are consolidated in our results. Additionally, the Company licenses our intellectual property to a third party to operate Tokyo Disney Resort
▪Disney Cruise Line, Disney Vacation Club and Aulani, a Disney Resort & Spa in Hawaii
◦Consumer Products:
▪Licensing of our trade names, characters, visual, literary and other intellectual properties to various manufacturers, game developers, publishers and retailers throughout the world
▪Sale of branded merchandise through retail, online and wholesale businesses, and development and publishing of books, magazines, comic books and games. As of the end of fiscal 2018, the segment had substantially exited the vertical games development business
Significant revenues:
◦Theme park admissions - Sales of tickets for admission to our theme parks
◦Parks & Experiences merchandise, food and beverage - Sales of merchandise, food and beverages at our theme parks and resorts and cruise ships
◦Resorts and vacations - Sales of room nights at hotels, sales of cruise vacations and sales and rentals of vacation club properties
◦Merchandise licensing and retail
THE WALT DISNEY COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited; tabular dollars in millions, except for per share data)


▪Merchandise licensing - Royalties from intellectual property licensing
▪Retail - Sales of merchandise at The Disney Stores and through branded internet shopping sites, as well as, to wholesalers (including sales of published materials and games)
◦Parks licensing and other - Revenues from sponsorships and co-branding opportunities, real estate rent and sales, and royalties from Tokyo Disney Resort
Significant expenses:
◦Operating expenses consisting primarily of operating labor, costs of goods sold, infrastructure costs, supplies, commissions and entertainment offerings. Infrastructure costs include information systems expense, repairs and maintenance, utilities and fuel, property taxes, retail occupancy costs, insurance and transportation
◦Selling, general and administrative costs
◦Depreciation and amortization
Studio EntertainmentA reconciliation of segment operating income to income before income taxes is as follows:
Significant operations:
◦Motion picture production and distribution under the Walt Disney Pictures, Pixar, Marvel, Lucasfilm and Touchstone banners
◦Development, production and licensing of live entertainment events on Broadway and around the world (“Stage plays”)
Significant revenues:
◦Theatrical distribution - Rentals from licensing our motion pictures to theaters
◦Home entertainment - Sale of our motion pictures to retailers and distributors in physical (DVD and Blu-ray) and electronic formats
◦TV/SVOD distribution and other - Licensing fees and other revenue for the right to use our motion picture productions, content transactions with other Company segments, ticket sales from stage plays and fees from licensing our intellectual properties for use in live entertainment productions
Significant expenses:
◦Operating expenses consisting primarily of amortization of production, participations and residuals costs, distribution costs and costs of sales
◦Selling, general and administrative costs
◦Depreciation and amortization
Direct-to-Consumer & International
 Quarter Ended
 December 30,
2023		December 31,
2022
Segment operating income$3,876 $3,043   
Corporate and unallocated shared expenses(308)  (280)
Restructuring and impairment charges(1)
— (69)
Other expense, net(2)
— (42)
Interest expense, net(246)(300)
TFCF and Hulu acquisition amortization(3)
(451)(579)
Income before income taxes$2,871 $1,773 
Significant operations:(1)See Note 16 for a discussion of amounts in restructuring and impairment charges.
◦Disney and ESPN branded international television networks and channels (“International Channels”)
◦Direct-to-consumer (DTC) businesses:
▪Hulu streaming service, which aggregates acquired television and film entertainment content and produces original content. The content is distributed digitally to internet-connected devices. Prior to the acquisition of 21CF, Hulu was reported as an equity investment
▪ESPN+ streaming service, which was launched in April 2018
▪Disney+ streaming service, which we plan to launch in late 2019
◦Other Company branded digital content distribution platforms and services
◦BAMTech LLC (BAMTech) (owned 75% by the Company since September 25, 2017), which provides streaming technology services
◦Equity investments:
▪A 21% effective ownership in Vice Group Holdings, Inc. (Vice), which is a media company that targets millennial audiences. 21CF has an additional 6% interest in Vice. Vice operates Viceland, which is owned 50% by Vice and 50% by A+E
Significant revenues:(2)See Note 4 for a discussion of amounts in other expense, net.
◦Affiliate fees - Fees charged to MVPDs for the right to deliver our International Channels to their customers
◦Advertising - Sales of ad time/space on our International Channels. Sales of non-ratings based ad time/space on digital platforms (“addressable ad sales”). In general, addressable ad sales are delivered using technology that allows for dynamic insertion of advertisements into video content, which can be targeted to specific viewer groups
(3)TFCF and Hulu acquisition amortization is as follows:
Quarter Ended
December 30,
2023		December 31,
2022
Amortization of intangible assets$380 $417   
Step-up of film and television costs68   159 
Intangibles related to TFCF equity investees3   3 
$451 $579 
Goodwill
The changes in the carrying amount of goodwill are as follows:
EntertainmentSportsExperiencesTotal
Balance at September 30, 2023$55,031 $16,486 $5,550 $77,067 
Currency translation adjustments and other, net(1)— — (1)
Balance at December 30, 2023$55,030 $16,486 $5,550 $77,066 
11
THE WALT DISNEY COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited; tabular dollars in millions, except for per share data)


◦Subscription fees and other - Fees charged to customers/subscribers for our streaming and technology services
Significant expenses:
◦Operating expenses consisting primarily of programming and production costs (including digital content obtained from other Company segments), technical support costs, operating labor and distribution costs
◦Selling, general and administrative costs
◦Depreciation and amortization
SEGMENT INFORMATION3.Revenues
Segment operating results reflect earnings before corporateThe following table presents our revenues by segment and unallocated shared expenses, restructuringmajor source:
Quarter Ended December 30, 2023
EntertainmentSportsExperiencesEliminationsTotal
Affiliate fees$1,766$2,669$— $(293)$4,142 
Subscription fees4,507415— — 4,922 
Advertising1,9971,351— — 3,348 
Theme park admissions——2,982 — 2,982 
Resort and vacations——2,118 — 2,118 
Retail and wholesale sales of merchandise, food and beverage——2,477    —    2,477    
Merchandise licensing192—967 — 1,159 
TV/VOD distribution licensing53657— — 593 
Theatrical distribution licensing251—— — 251 
Home entertainment209—— — 209 
Other523343588 (106)1,348 
$9,981$4,835$9,132 $(399)$23,549 
Quarter Ended December 31, 2022
EntertainmentSportsExperiencesEliminationsTotal
Affiliate fees$1,873$2,653$— $(266)$4,260 
Subscription fees3,861379— — 4,240 
Advertising2,1801,2621 — 3,443 
Theme park admissions——2,641 — 2,641 
Resort and vacations——1,980 — 1,980 
Retail and wholesale sales of merchandise, food and beverage——2,382    —    2,382 
Merchandise licensing191—952 — 1,143 
TV/VOD distribution licensing72476— — 800 
Theatrical distribution licensing1,140—— — 1,140 
Home entertainment185—— — 185 
Other521270589 (82)1,298 
$10,675 $4,640 $8,545 $(348)$23,512 
    The following table presents our revenues by segment and impairment charges, other income, interest expense, income taxes and noncontrolling interests. Segment operating income includes equityprimary geographical markets:
Quarter Ended December 30, 2023
EntertainmentSportsExperiencesEliminationsTotal
Americas$7,588 $4,358 $7,037 $(399)$18,584 
Europe1,409    179    1,022    —    2,610    
Asia Pacific984 298 1,073 — 2,355 
Total revenues$9,981 $4,835 $9,132 $(399)$23,549 
Quarter Ended December 31, 2022
EntertainmentSportsExperiencesEliminationsTotal
Americas$8,150 $4,315 $6,854 $(348)$18,971 
Europe1,499    126    1,015    —    2,640    
Asia Pacific1,026 199 676 — 1,901 
Total revenues$10,675 $4,640 $8,545 $(348)$23,512 
Revenues recognized in the income of investeescurrent and excludes impairments of certain equity investments and purchase accounting amortization of 21CF and Hulu assets (i.e. intangible assets and the fair value step-upprior-year periods from performance obligations satisfied (or partially satisfied) in previous reporting periods primarily relate to revenues earned on TV/VOD licenses for film and television costs) recognized in connection with the 21CF acquisition. Corporate and unallocated shared expenses principally consist of corporate functions, executive management and certain unallocated administrative support functions.
Intersegment content transactions (e.g. feature films aired on the ABC Television Network, our networks streaming on our DTC services) are presented “gross” (i.e. the segment producing the content reports revenue and profit from intersegment transactions in a manner similartitles made available to the licensee in previous reporting periods. For the quarter ended December 30, 2023, $0.3 billion was recognized related to performance obligations satisfied as of third-party transactions, andSeptember 30, 2023. For the required eliminations are reported on a separate “Eliminations” line when presenting a summaryquarter ended December 31, 2022, $0.3 billion was recognized related to performance obligations satisfied as of our segment results). Previously, these transactions were reported “net”, and the intersegment revenue was eliminated in the results of the segment producing the content. Fiscal 2018 intersegment content transactions have been recast to align with the fiscal 2019 presentation.
Segment revenues and segment operating income are as follows:October 1, 2022.
12
 Quarter Ended Six Months Ended
 March 30,
2019		 March 31,
2018		 March 30,
2019		 March 31,
2018
Revenues (1):
       
Media Networks$5,525

$5,508

$11,446

$11,063
Parks, Experiences and Products6,169

5,903

12,993

12,430
Studio Entertainment2,134

2,499

3,958

5,008
Direct-to-Consumer & International955

831

1,873

1,762
21CF373
 —
 373
 —
Eliminations(2)
(234) (193) (418) (364)
 $14,922
 $14,548
 $30,225
 $29,899
Segment operating income (1):
       
Media Networks$2,185
 $2,258
 $3,515
 $3,501
Parks, Experiences and Products1,506
 1,309
 3,658
 3,263
Studio Entertainment534
 874
 843
 1,699
Direct-to-Consumer & International(393) (188) (529) (230)
21CF25
 —
 25
 —
Eliminations(2)
(41) (16) (41) (10)
 $3,816
 $4,237
 $7,471
 $8,223
(1)
Studio Entertainment revenues and operating income include an allocation of Parks, Experiences and Products revenues, which is meant to reflect royalties on sales of merchandise based on film properties. The increase to Studio Entertainment revenues and operating income and corresponding decrease to Parks, Experiences and Products revenues and operating income was $126 million and $136 million for the quarters ended March 30, 2019 and March 31, 2018, respectively, and $280 million and $307 million for the six months ended March 30, 2019 and March 31, 2018, respectively.
THE WALT DISNEY COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited; tabular dollars in millions, except for per share data)


(2)
Intersegment content transactions are as follows:
 Quarter Ended Six Months Ended
(in millions)March 30,
2019		 March 31,
2018		 March 30,
2019		 March 31,
2018
Revenues:       
Studio Entertainment:       
Content transactions with Media Networks$(13) $(64) $(34) $(95)
Content transactions with Direct-to-Consumer & International(82) (8) (100) (16)
Media Networks:       
Content transactions with Direct-to-Consumer & International(139) (121) (284) (253)
 $(234) $(193) $(418) $(364)
        
Operating income:       
Studio Entertainment:       
Content transactions with Media Networks$5
 $(16) $5
 $(9)
Content transactions with Direct-to-Consumer & International(46) —
 (44) —
Media Networks:       
Content transactions with Direct-to-Consumer & International—
 —
 (2) (1)
Total$(41) $(16) $(41) $(10)

Equity in the income/(loss) of investees is included in segment operating income as follows:
 Quarter Ended Six Months Ended
 March 30,
2019		 March 31,
2018		 March 30,
2019		 March 31,
2018
Media Networks$182
 $182
 $361
 $341
Parks, Experiences and Products—
 (7) (12) (14)
Direct-to-Consumer & International(141) (169) (232) (278)
Equity in the income of investees included in segment operating income41
 6
 117
 49
Vice Impairment(353) —
 (353) —
Equity in the income / (loss) of investees, net$(312) $6
 $(236) $49

THE WALT DISNEY COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited; tabular dollars in millions, except for per share data)


A reconciliation of segment operating income to income from continuing operations before income taxes is as follows:
 Quarter Ended Six Months Ended
 March 30,
2019		 March 31,
2018		 March 30,
2019		 March 31,
2018
Segment operating income$3,816
 $4,237
 $7,471
 $8,223
Corporate and unallocated shared expenses(279) (194) (440) (344)
Restructuring and impairment charges(662) (13) (662) (28)
Other income4,963
 41
 4,963
 94
Interest expense, net(143) (143) (206) (272)
Amortization of 21CF and Hulu intangible assets and fair value step-up on film and television costs(105) —
 (105) —
Impairment of equity investment(353) —
 (353) —
Income from continuing operations before income taxes$7,237
 $3,928
 $10,668
 $7,673

3.Revenues
At the beginning of fiscal 2019, the Company adopted Financial Accounting Standards Board (FASB) guidance, which replaced the existing accounting guidance for revenue recognition with a single comprehensive five-step model (“new revenue guidance”). The core principle is to recognize revenue upon the transfer of control of goods or services to customers at an amount that reflects the consideration expected to be received. We adopted the new revenue guidance using the modified retrospective method; therefore, results for reporting periods beginning after September 30, 2018 are presented under the new revenue guidance, while prior period amounts have not been adjusted and continue to be reported in accordance with our historical accounting. Upon adoption we recorded a net reduction of $116 million to opening retained earnings in the first quarter of fiscal 2019.
The most significant changes to the Company’s revenue recognition policies resulting from the adoption of the new revenue guidance are as follows:
For television and film content licensing agreements with multiple availability windows with the same licensee, the Company now defers more revenue to future windows than under the previous accounting guidance.
For licenses of character images, brands and trademarks with minimum guaranteed license fees, the excess of the minimum guaranteed amount over actual amounts earned based on a percentage of the licensee’s underlying sales (“shortfall”) is now recognized straight-line over the remaining license period once an expected shortfall is probable. Previously, shortfalls were recognized at the end of the contract period.
For licenses that include multiple television and film titles with a minimum guaranteed license fee across all titles that earns out against the aggregate fees based on the licensee’s underlying sales, the Company now allocates the minimum guaranteed license fee to each title at contract inception and recognizes the allocated license fee as revenue when the title is made available to the customer. License fees earned by titles in excess of their allocated amount are deferred until the minimum guaranteed license fee across all titles is exceeded. Once the minimum guaranteed license fee across all titles is exceeded, license fees are recognized as earned based on the licensee’s underlying sales. Previously, license fees were recognized as earned based on the licensee’s underlying sales with any shortfalls recognized at the end of the contract period.
For renewals or extensions of license agreements for television and film content, revenues are now recognized when the licensed content becomes available under the renewal or extension. Previously, revenues were recognized when the agreement was renewed or extended.
The adoption of the new revenue guidance resulted in certain reclassifications on the Condensed Consolidated Balance Sheet. The primary changes are the reclassification of sales returns reserves (previously reported as a reduction of receivables) to other accrued liabilities ($133 million at March 30, 2019) and the reclassification of refundable customer advances (previously reported as deferred revenues) to other accrued liabilities ($1.0 billion at March 30, 2019).
THE WALT DISNEY COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited; tabular dollars in millions, except for per share data)


The cumulative effect of adoption at September 29, 2018 and the impact at March 30, 2019 (had we not applied the new revenue guidance) on the Condensed Consolidated Balance Sheet is as follows:
 September 29, 2018 March 30, 2019
 Fiscal 2018 Ending Balances as Reported Effect of Adoption Q1 2019 Opening Balances 
Balances Assuming
Historical Accounting
 Impact of New Revenue guidance Q2 2019 Ending Balances as Reported
Assets           
Receivables - current/non-current$11,262
 $(241) $11,021
 16,735
 $(130) $16,605
Film and television costs and advances - current/non-current9,202
 48
 9,250
 29,737
 24
 29,761
            
Liabilities           
Accounts payable and other accrued liabilities9,479
 1,039
 10,518
 19,369
 1,134
 20,503
Deferred revenue and other4,591
 (1,082) 3,509
 5,446
 (1,165) 4,281
Deferred income taxes3,109
 (34) 3,075
 11,236
 (28) 11,208
            
Equity52,832
 (116) 52,716
 104,387
 (48) 104,339

The impact on the Condensed Consolidated Statement of Income for the quarter and six months ended March 30, 2019, due to the adoption of the new revenue guidance is as follows:
 Quarter Ended March 30, 2019 Six Months Ended March 30, 2019
 
Results Assuming
Historical Accounting
 Impact of New Revenue guidance Reported 
Results Assuming
Historical Accounting
 Impact of New Revenue guidance Reported
Revenues$14,901
 $21
 $14,922
 $30,010
 $215
 $30,225
Cost and Expenses(11,483) (48) (11,531) (23,289) (127) (23,416)
Income Taxes(1,653) 6
 (1,647) (2,272) (20) (2,292)
Consolidated Net Income5,632
 (21) 5,611
 8,329
 68
 8,397

The most significant impacts were at the Studio Entertainment, Parks, Experiences and Products and Media Networks segments. Studio Entertainment was impacted by a change in the timing of revenue recognition related to film content licensing agreements with multiple availability windows, and the Parks, Experiences and Products and Media Networks segments were impacted by a change in the timing of revenue recognition on contracts with minimum guarantees.
Summary of Significant Revenue Recognition Accounting Policies
The Company generates revenue from the sale of both services and products. Revenue is recognized when control of the services or products is transferred to the customer. The amount of revenue recognized reflects the consideration the Company expects to receive in exchange for the services or products.
The Company has three broad categories of service revenues: licenses of rights to use our intellectual property, sales to guests at our Parks and Experiences businesses and advertising. The Company’s primary product revenues include the sale of food, beverage and merchandise at our parks, resorts and retail stores and the sale of film and television productions in physical formats (DVD and Blu-ray).
The new revenue guidance defines two types of licenses of intellectual property (“IP”): IP that has “standalone functionality,” which is called functional IP, and all other IP, which is called symbolic IP. Revenue related to the license of functional IP is generally recognized upon delivery (availability) of the IP to the customer. The substantial majority of the Company’s film and television content distribution activities at the Media Networks, Studio Entertainment and DTCI segments is considered licensing of functional IP. Revenue related to the license of symbolic IP is generally recognized over the term of the license. The Company’s primary revenue stream derived from symbolic IP is the licensing of trade names, characters, visual and literary properties at the Parks, Experiences and Products segment.
THE WALT DISNEY COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited; tabular dollars in millions, except for per share data)


More detailed information about the revenue recognition policies for our key revenues is as follows:
Affiliate fees - Fees charged to affiliates (i.e., MVPDs or television stations) for the right to deliver our television network programming on a continuous basis to their customers are recognized as the programming is provided based on contractually specified per subscriber rates and the actual number of the affiliate’s customers receiving the programming.
For affiliate contracts with fixed license fees, the fees are recognized ratably over the contract term.
If an affiliate contract includes a minimum guaranteed license fee, the guaranteed license fee is recognized ratably over the guaranteed period and any fees earned in excess of the guarantee are recognized as earned once the minimum guarantee has been exceeded.
Affiliate agreements may also include a license to use the network programming for on demand viewing. As the fees charged under these contracts are generally based on a contractually specified per subscriber rate for the number of underlying subscribers of the affiliate, revenues are recognized as earned.
Subscription fees - Fees charged to customers/subscribers for our streaming services are recognized ratably over the term of the subscription.
Advertising - Sales of advertising time/space on our television networks, digital platforms and television stations are recognized as revenue, net of agency commissions, when commercials are aired. For contracts that contain a guaranteed number of impressions, revenues are recognized based on impressions delivered. When the guaranteed number of impressions is not met (“ratings shortfall”), revenues are not recognized for the ratings shortfall until the additional impressions are delivered.
Theme park admissions - Sales of theme park tickets are recognized when the tickets are used. Sales of annual passes are recognized ratably over the period for which the pass is available for use.
Resorts and vacations - Sales of hotel room nights and cruise vacations and rentals of vacation club properties are recognized as the services are provided to the guest. Sales of vacation club properties are recognized when title to the property transfers to the customer.
Merchandise, food and beverage - Sales of merchandise, food and beverages at our theme parks and resorts, cruise ships and Disney Stores are recognized at the time of sale. Sales from our branded internet shopping sites and to wholesalers are recognized upon delivery. We estimate returns and customer incentives based upon historical return experience, current economic trends and projections of consumer demand for our products.
TV/SVOD distribution licensing - Fixed license fees charged for the right to use our television and motion picture productions are recognized as revenue when the content is available for use by the licensee. License fees based on the underlying sales of the licensee are recognized as revenue as earned based on the contractual royalty rate applied to the licensee sales.
For TV/SVOD licenses that include multiple titles with a fixed license fee across all titles, each title is considered a separate performance obligation. The fixed license fee is allocated to each title at contract inception and the allocated license fee is recognized as revenue when the title is available for use by the licensee.
When the license contains a minimum guaranteed license fee across all titles, the license fees earned by titles in excess of their allocated amount are deferred until the minimum guaranteed license fee across all titles is exceeded. Once the minimum guaranteed license fee is exceeded, revenue is recognized as earned based on the licensee’s underlying sales.
TV/SVOD distribution contracts may limit the licensee’s use of a title to certain defined periods of time during the contract term. In these instances, each period of availability is generally considered a separate performance obligation. For these contracts, the fixed license fee is allocated to each period of availability at contract inception based on relative standalone selling price using management’s best estimate. Revenue is recognized at the start of each availability period when the content is made available for use by the licensee.
When the term of an existing agreement is renewed or extended, revenues are recognized when the licensed content becomes available under the renewal or extension.
Theatrical distribution licensing - Fees charged for licensing of our motion pictures to theatrical distributors are recognized as revenue based on the contractual royalty rate applied to the distributor’s underlying sales from exhibition of the film.
THE WALT DISNEY COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited; tabular dollars in millions, except for per share data)


Merchandise licensing - Fees charged for the use of our trade names and characters in connection with the sale of a licensee’s products are recognized as revenue as earned based on the contractual royalty rate applied to the licensee’s underlying product sales. For licenses with minimum guaranteed license fees, the excess of the minimum guaranteed amount over actual royalties earned (shortfall) is recognized straight-line over the remaining license period once an expected shortfall is probable.
Home entertainment - Sales of our motion pictures to retailers and distributors in physical formats (DVD and Blu-ray) are recognized as revenue on the later of the delivery date or the date that the product can be sold by retailers. We reduce home entertainment revenues for estimated future returns of merchandise and sales incentives based upon historical return experience, current economic trends and projections of consumer demand for our products. Sales of our motion pictures in electronic formats are recognized as revenue when the product is available for use by the consumer.
Taxes - Taxes collected from customers and remitted to governmental authorities are excluded from revenue.
Shipping and handling - Fees collected from customers for shipping and handling are recorded as revenue and the related shipping expenses are recorded in cost of products upon delivery of the product to the consumer.
The following table presents our revenues by segment and major source:
 Quarter Ended March 30, 2019
 
Media
Networks
 Parks, Experiences and Products 
Studio
Entertainment
 Direct-to-Consumer & International 21CF Eliminations Consolidated
Affiliate fees$3,177
 $—
 $—
 $335
 $134
 $(12) $3,634
Advertising1,596
 1
 —
 357
 118
 —
 2,072
Theme park admissions—
 1,768
 —
 —
 —
 —
 1,768
Resort and vacations—
 1,502
 —
 —
 —
 —
 1,502
Retail and wholesale sales of merchandise, food and beverage—
 1,768
 —
 —
 —
 —
 1,768
TV/SVOD distribution licensing678
 —
 709
 24
 91
 (222) 1,280
Theatrical distribution licensing—
 —
 745
 —
 7
 —
 752
Merchandise licensing—
 635
 126
 12
 —
 —
 773
Home entertainment—
 —
 263
 21
 10
 —
 294
Other74
 495
 291
 206
 13
 —
 1,079
Total revenues$5,525
 $6,169
 $2,134
 $955
 $373
 $(234) $14,922
 
Quarter Ended March 31, 2018(1)
 
Media
Networks
 Parks, Experiences and Products 
Studio
Entertainment
 Direct-to-Consumer & International 21CF Eliminations Consolidated
Affiliate fees$3,043
 $—
 $—
 $354
 $—
 $—
 $3,397
Advertising1,643
 2
 —
 301
 —
 —
 1,946
Theme park admissions—
 1,690
 —
 —
 —
 —
 1,690
Resort and vacations—
 1,461
 —
 —
 —
 —
 1,461
Retail and wholesale sales of merchandise, food and beverage—
 1,707
 —
 —
 —
 —
 1,707
TV/SVOD distribution licensing761
 —
 619
 28
 —
 (193) 1,215
Theatrical distribution licensing—
 —
 956
 —
 —
 —
 956
Merchandise licensing—
 625
 139
 19
 —
 —
 783
Home entertainment—
 —
 471
 24
 —
 —
 495
Other61
 418
 314
 105
 —
 —
 898
Total revenues$5,508
 $5,903
 $2,499
 $831
 $—
 $(193) $14,548
(1)
Amounts presented are based on our historical accounting prior to the adoption of the new revenue guidance.
THE WALT DISNEY COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited; tabular dollars in millions, except for per share data)


 Six Months Ended March 30, 2019
 
Media
Networks
 Parks, Experiences and Products 
Studio
Entertainment
 Direct-to-Consumer & International 21CF Eliminations Consolidated
Affiliate fees$6,252
 $—
 $—
 $658
 $134
 $(12) $7,032
Advertising3,619
 3
 —
 774
 118
 —
 4,514
Theme park admissions—
 3,701
 —
 —
 —
 —
 3,701
Resort and vacations—
 3,033
 —
 —
 —
 —
 3,033
Retail and wholesale sales of merchandise, food and beverage—
 3,890
 —
 —
 —
 —
 3,890
TV/SVOD distribution licensing1,400
 —
 1,314
 58
 91
 (406) 2,457
Theatrical distribution licensing—
 —
 1,118
 —
 7
 —
 1,125
Merchandise licensing—
 1,376
 280
 27
 —
 —
 1,683
Home entertainment—
 —
 688
 49
 10
 —
 747
Other175
 990
 558
 307
 13
 —
 2,043
Total revenues$11,446
 $12,993
 $3,958
 $1,873
 $373
 $(418) $30,225
 
Six Months Ended March 31, 2018(1)
 
Media
Networks
 Parks, Experiences and Products 
Studio
Entertainment
 Direct-to-Consumer & International 21CF Eliminations Consolidated
Affiliate fees$5,910
 $—
 $—
 $692
 $—
 $—
 $6,602
Advertising3,606
 4
 —
 712
 —
 —
 4,322
Theme park admissions—
 3,522
 —
 —
 —
 —
 3,522
Resort and vacations—
 2,924
 —
 —
 —
 —
 2,924
Retail and wholesale sales of merchandise, food and beverage—
 3,766
 —
 —
 —
 —
 3,766
TV/SVOD distribution licensing1,385
 —
 1,138
 53
 —
 (364) 2,212
Theatrical distribution licensing—
 —
 2,125
 —
 —
 —
 2,125
Merchandise licensing—
 1,401
 310
 37
 —
 —
 1,748
Home entertainment—
 —
 832
 54
 —
 —
 886
Other162
 813
 603
 214
 —
 —
 1,792
Total revenues$11,063
 $12,430
 $5,008
 $1,762
 $—
 $(364) $29,899
(1)
Amounts presented are based on our historical accounting prior to the adoption of the new revenue guidance.
The following table presents our revenues by segment and primary geographical markets:
 Quarter Ended March 30, 2019
 
Media
Networks
 Parks, Experiences and Products 
Studio
Entertainment
 Direct-to-Consumer & International 21CF Eliminations Consolidated
United States and Canada$5,307
 $4,700
 $1,066
 $294
 $149
 $(208) $11,308
Europe167
 631
 550
 147
 68
 (22) 1,541
Asia Pacific47
 789
 393
 135
 121
 (4) 1,481
Latin America4
 49
 125
 379
 35
 —
 592
Total revenues$5,525
 $6,169
 $2,134
 $955
 $373
 $(234) $14,922
THE WALT DISNEY COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited; tabular dollars in millions, except for per share data)


 Six months ended March 30, 2019
 
Media
Networks
 Parks, Experiences and Products 
Studio
Entertainment
 Direct-to-Consumer & International 21CF Eliminations Consolidated
United States and Canada$10,995
 $9,841
 $2,104
 $519
 $149
 $(372) $23,236
Europe309
 1,486
 963
 336
 68
 (37) 3,125
Asia Pacific110
 1,550
 679
 269
 121
 (9) 2,720
Latin America32
 116
 212
 749
 35
 —
 1,144
Total revenues$11,446
 $12,993
 $3,958
 $1,873
 $373
 $(418) $30,225

Revenues recognized in the current period from performance obligations satisfied (or partially satisfied) in previous reporting periods primarily relate to revenues earned on theatrical and TV/SVOD distribution licensee sales on titles made available to the licensee in previous reporting periods. For the quarter ended March 30, 2019, $431 million was recognized related to performance obligations satisfied prior to December 30, 2018. For the six months ended March 30, 2019, $476 million was recognized related to performance obligations satisfied prior to September 30, 2018.
As of MarchDecember 30, 2019,2023, revenue for unsatisfied performance obligations expected to be recognized in the future is $17.6$14 billion, which primarily relates to contentfor IP or advertising time to be deliveredmade available in the future under existing agreements with merchandise and co-branding licensees and sponsors, television station affiliates, DTC wholesalers, advertisers and TV/SVOD licensees.sports sublicensees. Of this amount, we expect to recognize approximately $3.7$5 billion in the remainder of fiscal 2019, $5.42024, $5 billion in fiscal 2020, $3.52025, $2 billion in fiscal 20212026 and $5$2 billion thereafter. These amounts include only fixed consideration or minimum guarantees and do not include amounts related to (i) contracts with an original expected term of one year or less (such as most advertising contracts) or (ii) licenses of IP that are solely based on the sales of the licensee.
Payment terms vary by the type and location of our customers and the products or services offered. For certain products or services and customer types, we require payment before the products or services are provided to the customer; in other cases, after appropriate credit evaluations, payment is due in arrears. Advertising contracts, which are generally short term, are billed monthly with payments generally due within 30 days. Payments due under affiliate arrangements are calculated monthly and are generally due within 30 days of month end. Home entertainment terms generally include payment within 60 to 90 days of availability date to the customer. Licensing payment terms vary by contract but are generally collected in advance or over the license term. The Company has accounts receivable with original maturities greater than one year related to the sale of film and television program rights and vacation club properties (see Note 13). These receivables are discounted to present value at an appropriate discount rate at contract inception, and the related revenues are recognized at the discounted amount.
When the timing of the Company’s revenue recognition is different from the timing of customer payments, the Company recognizes either a contract asset (customer payment is subsequent to revenue recognition and subject to the Company satisfying additional performance obligations) or deferred revenue (customer payment precedes the Company satisfying the performance obligations). Consideration due under contracts with payment in arrears areis recognized as accounts receivable. Deferred revenues are recognized as (or when) the Company performs under the contract. ContractThe Company’s contract assets accountsand activity for the current and prior-year periods were not material.
Accounts receivable and deferred revenues from contracts with customers are as follows:
December 30,
2023		September 30,
2023
Accounts receivable
Current$11,810   $10,279   
Non-current1,191 1,212 
Allowance for credit losses(156)(154)
Deferred revenues
Current5,641 5,568 
Non-current952 977 
 March 30,
2019		 September 30,
2018
Contract assets$110
 $89
Accounts Receivable   
Current13,565
 8,553
Non-current2,318
 1,640
Allowance for doubtful accounts(263) (226)
Deferred revenues   
Current3,950
 2,926
Non-current572
 609

Contract assetsFor the quarter ended December 30, 2023, the Company recognized revenue of $3.4 billion that was included in the September 30, 2023 deferred revenue balance. For the quarter ended December 31, 2022, the Company recognized revenue of $3.4 billion that was included in the October 1, 2022 deferred revenue balance. Amounts deferred generally relate to certain multi-season TV/SVOD licensing contracts. Activity for the quarter and six months ended March 30, 2019 related to contract assets and the allowance for doubtful accounts was not material.
Deferred revenue primarily relates to non-refundable consideration received in advance for (i) licensing contracts, theme park annual passes, theme park ticketsadmissions and vacation packages, DTC subscriptions and (ii)advances related to merchandise and TV/VOD licenses.
We evaluate our allowance for credit losses and estimate collectability of current and non-current accounts receivable based on historical bad debt experience, our assessment of the deferralfinancial condition of advertisingindividual companies with which we do business, current market conditions, and reasonable and supportable forecasts of future economic conditions. In times of economic turmoil, our estimates and judgments with respect to the collectability of our receivables are subject to greater uncertainty than in more stable periods.
The Company has accounts receivable with original maturities greater than one year related to the sale of film and television program rights (TV/VOD licensing) and vacation club properties. These receivables are discounted to present value at contract inception and the related revenues due to ratings shortfalls.are recognized at the discounted amount. The increasebalance of TV/VOD licensing receivables recorded in the deferred revenueother non-current assets was $0.5 billion at December 30, 2023 and $0.6 billion at September 30, 2023. The balance of vacation club receivables recorded in other non-current assets was $0.7 billion at both December 30, 2023 and September 30, 2023. The allowance for credit losses for TV/VOD licensing and vacation club receivables and related activity for the six monthsperiods ended MarchDecember 30, 2019 was primarily due to the2023 and September 30, 2023 were not material.
13
THE WALT DISNEY COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited; tabular dollars in millions, except for per share data)


4.Other Expense, net
receipt of additional prepaid park admissions, non-refundable travel deposits and advances on certain licensing arrangements, andOther expense, net is as follows:
Quarter Ended
December 30,
2023		December 31,
2022
DraftKings loss$—$(70)
Other—28 
Other expense, net$—$(42)
In the acquisition of 21CF (see Note 4) on March 20, 2019 which increased deferred revenues by $0.6 billion. For theprior-year quarter, and six months ended March 30, 2019, the Company recognized revenuesa $70 million non-cash loss to adjust its investment in DraftKings, Inc. (DraftKings) to fair value.
5.Cash, Cash Equivalents, Restricted Cash and Borrowings
Cash, Cash Equivalents and Restricted Cash
The following table provides a reconciliation of $0.7 billioncash, cash equivalents and $2.3 billion, respectively, primarily related to theme park admissions and vacation packages includedrestricted cash reported in the deferred revenue balance at September 30, 2018.
4.Acquisitions
Twenty-First Century Fox
On March 20, 2019, the Company acquired the outstanding capital stock of Twenty-First Century Fox, Inc. (“21CF”), a diversified global media and entertainment company. PriorCondensed Consolidated Balance Sheets to the acquisition, 21CF and a newly-formed subsidiary of 21CF (“New Fox”) entered into a separation agreement, pursuant to which 21CF transferred to New Fox a portfolio of 21CF’s news, sports and broadcast businesses and certain other assets. 21CF retained alltotal of the assets and liabilities not transferred to New Fox, includingamounts reported in the Twentieth Century Fox film and television studios, certain cable networks and 21CF’s international TV businesses; these remaining assets and businesses are held directly or indirectly byCondensed Consolidated Statements of Cash Flows.
December 30,
2023		September 30,
2023
Cash and cash equivalents$7,192 $14,182 
Restricted cash included in other assets55 53 
Total cash, cash equivalents and restricted cash in the statement of cash flows$7,247 $14,235 
Borrowings
During the acquired 21CF entity.
The acquisition purchase price totaled $69.5 billion, of which the Company paid $35.7 billion in cash and $33.8 billion in Disney shares (307 million shares at a price of $110.00 per share).
We acquired 21CF to enhancequarter ended December 30, 2023, the Company’s positionborrowing activity was as follows: 
September 30,
2023		BorrowingsPaymentsOther
Activity		December 30,
2023
Commercial paper with original maturities less than three months$289 $542 $— $5 $836 
Commercial paper with original maturities greater than three months1,187 754 (250)16 1,707 
U.S. dollar denominated notes43,504 — (295)(39)43,170 
Asia Theme Parks borrowings1,308    —    (14)   50    1,344    
Foreign currency denominated debt and other(1)
143 — — 490 633 
$46,431 $1,296 $(559)$522 $47,690 
(1)The other activity is attributable to market value adjustments for debt with qualifying hedges.
At December 30, 2023, the Company’s bank facilities, which are with a premier, global entertainment company by increasingsyndicate of lenders and support our portfolio of creative assetscommercial paper borrowings, were as follows:
Committed
Capacity		Capacity
Used		Unused
Capacity
Facility expiring March 2024$5,250 $— $5,250 
Facility expiring March 20253,000 — 3,000 
Facility expiring March 20274,000 — 4,000 
Total$12,250 $— $12,250 
These facilities allow for borrowings at rates based on the Secured Overnight Financing Rate (SOFR), and branded content to be monetized through our film and television studio, theme parks and direct-to-consumer offerings.
In connectionat other variable rates for non-U.S. dollar denominated borrowings, plus a fixed spread that varies with the acquisition, outstanding 21CF performance stock unitsCompany’s debt ratings assigned by Moody’s Investors Service and restricted stock units were either vested upon closing of the acquisition or replaced with Disney restricted stock units (which require additional service for vesting)Standard and Poor’s ranging from 0.655% to 1.225%. The purchase price for 21CF includes approximately $340 million related to 21CF awards that were settled or replaced in connection with the acquisition. Additionally, the Company recognized compensation expense of $184 million related to awards that were accelerated to vest upon closing of the acquisition. Approximately $218 million of compensation expense related to awards that were replaced with Disney restricted stock units and will be recognized over the remaining service period of up to approximately two years.bank facilities contain
As part of the 21CF acquisition, the Company acquired 21CF’s 30% interest in Hulu increasing our ownership to 60%. As a result, the Company began consolidating Hulu and recorded a one-time gain of $4.9 billion from remeasuring our initial 30% interest to its estimated fair value, which was determined based on a discounted cash flow analysis.
14
On April 15, 2019, Hulu redeemed Warner Media LLC’s (WM) approximate 10% interest in Hulu for approximately $1.4 billion. The redemption was funded via a loan from the Company to Hulu. Pursuant to the redemption agreement, Hulu’s remaining noncontrolling interest holder, NBC Universal (NBCU), may elect to participate in the redemption by contributing its proportionate share of the purchase price to Hulu. NBCU must make this election within 90 days from the transaction date. If NBCU elects to participate, the Company’s interest in Hulu will increase to 67%. If NBCU does not elect to participate, the Company’s interest in Hulu will increase to 70%.
Upon closing of the acquisition, the Company exchanged new Disney notes for outstanding notes issued by 21st Century Fox America, Inc. (“21CFA Notes”) with a principal balance of $16.8 billion (see Note 6).
The Company also assumed 21CF commitments totaling $31 billion, of which $22 billion relate to the Regional Sports Networks (see Discontinued Operations below). The remaining commitments are primarily for sports and entertainment programming rights. In addition, we entered into commitments with New Fox totaling $0.3 billion, primarily for the lease of production facilities and office space. Hulu commitments total $3.4 billion and relate primarily to programming rights.
The Company is required to allocate the 21CF purchase price to tangible and identifiable intangible assets acquired and liabilities assumed based on their fair values. The excess of the purchase price over those fair values is recorded as goodwill. The Company is in the process of obtaining additional information necessary to finalize the valuation of the assets acquired and liabilities assumed including income tax related amounts. Therefore, the preliminary fair values set forth below are subject to adjustment as additional information is obtained and the valuations are completed.
THE WALT DISNEY COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited; tabular dollars in millions, except for per share data)


The following table summarizes our initial allocation of the purchase price:
 Estimated Fair Value
Cash and cash equivalents$25,666
Receivables4,746
Film and television costs20,120
Investments1,471
Intangible assets20,385
Net assets held for sale11,704
Accounts payables and other liabilities(10,753)
Borrowings(21,723)
Deferred income taxes(6,497)
Other net liabilities acquired(3,865)
Noncontrolling interests(10,638)
Goodwill43,751
Fair value of net assets acquired74,367
Less: Disney’s previously held 30% interest in Hulu(4,860)
Total purchase price$69,507

Intangible assets primarily consistonly one financial covenant relating to interest coverage of MVPD agreements, advertising networksthree times earnings before interest, taxes, depreciation and trade names with estimated useful lives ranging from 2 to 40 yearsamortization, including both intangible amortization and a weighted average lifeamortization of 12 years.
The goodwill reflects the value to Disney of increasing our global portfolio of creative assets and branded content to be monetized through our film and television studio, theme parksproduction and direct-to-consumer offerings.
The goodwill is not deductible for tax purposes.
The fair value of investments acquired in the acquisition include $1.2 billion of equity method investments and $0.3 billion of equity investments. Equity method investments primarily consist of a 50% interest in Endemol Shine Group, a global multi-platform content provider and a 30% interest in Tata Sky Limited, a satellite operator in India).
The fair value of the assets acquired includes current trade receivables of $4.7 billion. The gross amount due under the contracts is $4.9 billion, of which $0.2 billion is expected to be uncollectible.
For the six months ended Marchprogramming costs. On December 30, 2019,2023, the Company incurred $211 million of acquisition-related expenses of which $111 million is included in Selling, general, administrative and other and $100 million related to financing fees is included in Interest expense, net in the Company’s Condensed Consolidated Statement of Income.
met this covenant by a significant margin. The revenues and net loss from continuing operations (including purchase accounting amortization) of 21CF and Hulu included in the Company’s Condensed Consolidated Statement of Income since the date of acquisition through March 30, 2019 is $518 million and $115 million, respectively.
The following pro forma summary presents consolidated information of the Company as if the acquisition had occurred on October 1, 2017:
 Six Months Ended
 March 30,
2019		 March 31,
2018
Revenues$38,764
 $38,651
Net income4,000
 9,472
Net income attributable to Disney4,119
 9,609
Earnings per share attributable to Disney:   
Diluted$2.28
 $5.27
Basic2.29
 5.30

These pro forma results include adjustments for purposes of consolidating the historical financial results of 21CF and Hulu (net of adjustments to eliminate transactions between Disney and 21CF, Disney and Hulu and Hulu and 21CF). These pro
THE WALT DISNEY COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited; tabular dollars in millions, except for per share data)


formas also include an adjustment of $2.1 billion for both the six months ended March 30, 2019 and 2018, to reflect the preliminary estimate of incremental amortization as a result of recording film and television programming and production costs and finite lived intangible assets at fair value. Interest expense was adjusted by $259 million to reflect the cost of borrowings to finance the 21CF acquisition for both the six months ended March 30, 2019 and 2018, which assumed an estimated weighted average interest rate of 3.5%. The six months ended March 30, 2019 and 2018, include a benefit of $109 million, to reflect lower interest expense using an effective interest method to adjust 21CF’s long-term debt to preliminary fair value.
Additionally, the pro forma earnings for the six months ended March 31, 2018 include the impact of remeasuring our initial 30% interest in Hulu to fair value, compensation expense of $184 million related to 21CF equity awards that were accelerated to vest upon closing of the acquisition, and $400 million of acquisition-related expenses.
The pro forma results exclude a $10.8 billion gain on sale and $237 million of equity earnings recorded by 21CF for the six months ended March 30, 2019 and 2018, respectively, related to its 39% interest in Sky plc which was sold by 21CF in October 2018. The pro forma results include $314 million and $321 million of net income recorded by 21CF for the six months ended March 30, 2019 and 2018, respectively, related to the 21CF businesses that we are required to divest as a condition of the acquisition (see the Assets to be Disposed and Discontinued Operations section below).
These pro forma results do not represent financial results that would have been realized had the acquisition actually occurred on October 1, 2017, nor are they intended to be a projection of future results.
Assets to be Disposed and Discontinued Operations
Pursuant to a consent decree with the U.S. Department of Justice (DOJ), we are required to sell 21CF’s twenty-two Regional Sports Networks (the “RSNs”) (the “RSN Divestiture”) within 90 days of the closing of the 21CF acquisition, with the possibility that the DOJ can grant extensions of time up to another 90 days. The DOJ must approve the purchaser(s) and terms and conditions of the RSN Divestiture. On May 3, 2019, the Company entered into a definitive agreement with Sinclair Broadcast Group, Inc. to sell twenty-one of the RSNs (not including the YES Network), for a sales price of approximately $10 billion. Completion of the transaction is subject to customary closing conditions, including the approval of the DOJ.
Additionally, the Company has agreed with Conselho Administrativo de Defesa Economica (CADE) to sell 21CF’s sports operations in Brazil (the “Brazil Divestiture”) and agreed with the Instituto Federal de Telecomunicaciones (IFT) to sell 21CF’s sports operations in Mexico (the “Mexico Divestiture”). The Company will have 180 days from the date of the 21CF acquisition to complete the Brazil Divestiture. The Company will have six months, with the possibility that the IFT can grant extensions of time up to another six months, for the Mexico Divestiture. CADE and the IFT must approve the purchaser(s) and terms and conditions of the Brazil and Mexico Divestitures, respectively.
The European Commission approved the acquisition on the condition that the Company divest its interests in certain cable channels in the European Economic Area that are controlled by A+E, including History, H2, Crime & Investigation, Blaze and Lifetime (“the EEA Channels”). The Company divested its interests in the entities that operate the EEA Channels on April 12, 2019. The EEA Channels are not presented as assets held for sale or discontinued operations.
The RSNs and the Brazil and Mexico sports operations are presented as assets held for sale and discontinued operations in the Condensed Consolidated Balance Sheets and Statements of Income, respectively.
THE WALT DISNEY COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited; tabular dollars in millions, except for per share data)


The preliminary fair values of the major classes of assets and liabilities of the RSNs and the Brazil and Mexico sports operations classified as held for sale on our Condensed Consolidated Balance Sheets are presented below and are subject to change based on developments during the sales process.
 March 30, 2019
Cash$100
Receivables and other current assets855
Television costs and advances511
Total current assets classified as held for sale1,466
Film and television costs1,730
Property and equipment and other assets67
Intangible assets, net7,569
Goodwill3,816
Total assets classified as held for sale$14,648
  
Accounts payable and other accrued liabilities$371
Current portion of borrowings33
Deferred revenue and other30
Total current liabilities classified as held for sale

434
Borrowings1,036
Other long-term liabilities138
Redeemable noncontrolling interests1,485
Total liabilities classified as held for sale$3,093

Goodwill
The changes in the carrying amount of goodwill for the six months ended March 30, 2019 are as follows:
 
Media
Networks
 
Parks and
Resorts
Studio
Entertainment
Consumer
Products & Interactive Media
 Parks, Experiences and ProductsDirect-to-Consumer & InternationalUnallocated Total
Balance at Sept. 29, 2018$19,388
 $291
 $7,164
 $4,426
 $—
 $—
 $—
 $31,269
Segment recast (1)
(3,399) (291) (70) (4,426) 4,487
 3,699
 —
 —
Acquisitions (2)
—
 —
 —
 —
 —
 —
 43,751
 43,751
Other, net—
 —
 14
 —
 —
 23
 —
 37
Balance at Mar. 30, 2019$15,989
 $—
 $7,108
 $—
 $4,487
 $3,722
 $43,751
 $75,057

(1) Represents the reallocation of goodwill as a result of the Company recasting its segments (see Note 2).
(2) Represents the acquisition of 21CF and consolidation of Hulu.
THE WALT DISNEY COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited; tabular dollars in millions, except for per share data)


5.
Other Income
Other income is as follows:
 Quarter Ended Six Months Ended
 March 30,
2019		 March 31,
2018		 March 30,
2019		 March 31,
2018
Hulu gain (see Note 4)$4,917
 $—
 $4,917
 $—
Insurance recoveries related to legal matters46
 38
 46
 38
Gain on the sale of property rights and other—
 3
 —
 56
Other income$4,963
 $41
 $4,963
 $94

6.Cash, Cash Equivalents, Restricted Cash and Borrowings
Cash, Cash Equivalents and Restricted Cash
The following table provides a reconciliation of cash, cash equivalents and restricted cash reported in the Condensed Consolidated Balance Sheet to the total of the amounts reported in the Condensed Consolidated Statements of Cash Flows.
  March 30,
2019		 September 29,
2018
Cash and cash equivalents $10,108
 $4,150
Restricted cash included in:    
Other current assets 9
 1
Other assets 5
 4
Cash included in current assets held for sale 100
 —
Total cash, cash equivalents and restricted cash in the statement of cash flows $10,222
 $4,155

Borrowings
During the six months ended March 30, 2019, the Company’s borrowing activity was as follows:
 September 29,
2018		 Borrowings Payments Borrowings Assumed in Acquisition of 21CF 
Other
Activity
 March 30,
2019
Commercial paper with original maturities less than three months(1)
$50
 $440
 $—
 $—
 $8
 $498
Commercial paper with original maturities greater than three months955
 992
 (1,056) —
 7
 898
U.S. and European notes17,942
 —
 (1,250) 21,174
 (33) 37,833
Credit facilities to acquire 21CF—
 31,100
 (16,100) —
 —
 15,000
Asia Theme Parks borrowings1,145
 —
 (48) —
 54
 1,151
Foreign currency denominated debt and other(2)
782
 45
 —
 549
 205
 1,581
 20,874
 32,577
 (18,454) 21,723
 241
 56,961
Liabilities held for sale—
 —
 —
 1,069
 —
 1,069
 $20,874
 $32,577
 $(18,454) $22,792
 $241
 $58,030

(1)
Borrowings and reductions of borrowings are reported net.
(2)
The other activity is due to market value adjustments for debt with qualifying hedges, partially offset by the impact of changes in foreign currency exchange rates.
THE WALT DISNEY COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited; tabular dollars in millions, except for per share data)


The Company has bank facilities with a syndicate of lenders to support commercial paper borrowings as follows:
 
Committed
Capacity
 
Capacity
Used
 
Unused
Capacity
Facility expiring March 2020$6,000
 $—
 $6,000
Facility expiring March 20212,250
 —
 2,250
Facility expiring March 20234,000
 —
 4,000
Total$12,250
 $—
 $12,250

All of the above bank facilities allow for borrowings at LIBOR-based rates plus a spread depending on the credit default swap spread applicable to the Company’s debt, subject to a cap and floor that vary with the Company’s debt rating assigned by Moody’s Investors Service and Standard & Poor’s. The spread above LIBOR can range from 0.18% to 1.63%. The facilities specifically exclude certain entities, including the Asia Theme Parks, from any representations, covenants or events of default and contain only one financial covenant relating to interest coverage, which the Company met on March 30, 2019 by a significant margin.default. The Company also has the ability to issue up to $500 million of letters of credit under the facility expiring in March 2023,2027, which if utilized, reduces available borrowings under this facility. As of MarchDecember 30, 2019,2023, the Company has $1.4$1.7 billion of outstanding letters of credit, of which none were issued under this facility. Outstanding letters of credit include letters of credit assumed in the acquisition of 21CF primarily in support of international sports programming rights.
U.S. and European Notes
On March 20, 2019, the Company assumed public debt with a fair value of $21.2 billion (principal balance of $17.4 billion) upon the completion of the 21CF acquisition. The debt has maturities ranging from 1 to 78 years and stated rates ranging from 3.00% to 9.50%. On March 20, 2019, 96% ($16.8 billion) of the assumed debt was exchanged for senior notes of The Walt Disney Company, with essentially the same terms. The exchange was with qualified institutional buyers pursuant to Rule 144A under the Securities Act of 1933, as amended (the “Securities Act”), and outside the United States with investors who are not U.S. persons pursuant to Regulation S under the Securities Act. At March 30, 2019, the weighted-average stated interest rates and effective interest rates were 5.94% and 3.86%, respectively.
Credit Facilities to Acquire 21CF
On March 20, 2019, the Company borrowed $31.1 billion under two 364-day unsecured bridge loan facilities with a bank syndicate to fund the cash component of the 21CF acquisition. On March 21, 2019, the Company repaid one bridge loan facility in the amount of $16.1 billion, utilizing cash acquired in the 21CF transaction, and terminated the facility. The remaining 364-day unsecured bridge loan facility has $15.0 billion outstanding and is anticipated to be paid down with the after-tax net proceeds from the divestiture of the RSNs. The $15.0 billion loan facility bears interest at LIBOR plus 0.875% (3.51% as of March 30, 2019).
Foreign Currency Denominated Debt and Other
On March 20, 2019, the Company assumed a term loan and various unsecured credit facilities with an outstanding balance of $211 million upon the completion of the 21CF acquisition. The term loan and credit facilities have stated rates ranging from 7.80% to 10.05%. At March 30, 2019, the weighted-average stated interest rates was 8.56% and the term loan and unsecured credit facilities have been recorded in current borrowings.
On March 20, 2019, the Company consolidated Hulu and now reports its term loan with an outstanding balance of $338 million. The term loan matures in August 2022 and bears interest at LIBOR plus 0.917% (3.71% as of March 30, 2019). Two-thirds of the loan is guaranteed by the Company and one-third is guaranteed by Comcast Corporation and certain of its subsidiaries.
Liabilities Held for Sale
On March 20, 2019 as part of the 21CF acquisition, the Company assumed debt related to the The Yankees Entertainment and Sports Network (the “Yes Network”). The Yes Network has a $1.6 billion secured revolving credit facility and term loan facility that expires in December 2023. As of March 30, 2019, outstanding borrowings under the term loan facility and secured revolving credit facility were $1.1 billion and $10 million, respectively. The credit facilities bear interest at rates that are reset quarterly and are based on the leverage ratio of the Yes Network. The credit facilities contain restrictive covenants and are collateralized by a substantial portion of assets of the Yes Network. The Yes Network is one of the RSNs that is held for sale (see Note 4).
Cruise Ship Credit Facilities
In October 2016 and December 2017, theThe Company entered intohas credit facilities to finance threea significant portion of the contract price of two new cruise ships, which are expectedscheduled to be delivered in 2021, 2022fiscal 2025 and 2023. The financings may be used for up to 80% of the contract price of the
THE WALT DISNEY COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited; tabular dollars in millions, except for per share data)


cruise ships.fiscal 2026. Under the agreements, $1.0facilities, $1.1 billion in financing isbecame available beginning in April 2021, anotherAugust 2023 and $1.1 billion is available beginning in May 2022 and another $1.1 billion is available beginning in April 2023.August 2024. Each tranche of financing may be utilized within a period of 18 months from the initial availability date. If utilized, the interest rates will be fixed at 3.48%, 3.72%3.80% and 3.74%, respectively, and the loansloan and interest will be payable semi-annually over a 12-year period from the borrowing date. Early repayment is permitted subject to cancellation fees.
Interest expense, netfees.
Interest expense, net
Interest expense (net of amounts capitalized), interest and investment income, and net periodic pension and postretirement benefit costs (other than service costs) (see Note 9) are reported net in the Condensed Consolidated Statements of Income and consist of the following (net of capitalized interest):following:
 Quarter Ended Six Months Ended
 March 30,
2019		 March 31,
2018		 March 30,
2019		 March 31,
2018
Interest expense$(198) $(172) $(361) $(318)
Interest and investment income30
 29
 105
 46
Net periodic pension and postretirement benefit costs (other than service costs)25
 —
 50
 —
Interest expense, net$(143) $(143) $(206) $(272)

Quarter Ended
December 30,
2023		December 31,
2022
Interest expense$(528)$(465)
Interest and investment income182    79    
Net periodic pension and postretirement benefit costs (other than service costs)100 86 
Interest expense, net$(246)$(300)
Interest and investment income includes gains and losses on certain publicly traded and non-publicly tradednon-public investments, investment impairments and interest earned on cash and cash equivalents and certain receivables.
7.International Theme Parks
6.International Theme Parks
The Company has a 47%48% ownership interest in the operations of Hong Kong Disneyland Resort and a 43% ownership interest in the operations of Shanghai Disney Resort. The Asia Theme Parks together with Disneyland Paris are collectively referred to as the International Theme Parks.
The following table summarizes the carrying amounts of the InternationalAsia Theme Parks’ assets and liabilities included in the Company’s Condensed Consolidated Balance Sheets as of March 30, 2019 and September 29, 2018:Sheets:
 December 30,
2023		September 30,
2023
Cash and cash equivalents$426 $504 
Other current assets184 159 
Total current assets610 663 
Parks, resorts and other property6,212    6,150    
Other assets223 234 
Total assets$7,045 $7,047 
Current liabilities$710 $720 
Long-term borrowings1,344 1,308 
Other long-term liabilities398 392 
Total liabilities$2,452 $2,420 
 March 30, 2019 September 29, 2018
Cash and cash equivalents$736
 $834
Other current assets356
 400
Total current assets1,092
 1,234
Parks, resorts and other property8,950
 8,973
Other assets106
 103
Total assets (1)
$10,148
 $10,310
    
Current liabilities$667
 $921
Long-term borrowings1,151
 1,106
Other long-term liabilities364
 382
Total liabilities (1)
$2,182
 $2,409
15

(1)
Total assets of the Asia Theme Parks were $8 billion at both March 30, 2019 and September 29, 2018 including parks, resorts and other property of $7 billion. Total liabilities of the Asia Theme Parks were $2 billion at both March 30, 2019 and September 29, 2018.     
THE WALT DISNEY COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited; tabular dollars in millions, except for per share data)


The following table summarizes the International Theme Parks’ revenues and costs and expenses included in the Company’s Condensed Consolidated StatementStatements of Income for the six monthsquarter ended MarchDecember 30, 2019:2023:
 March 30, 2019
Revenues$1,749
Costs and expenses(1,762)
Equity in the loss of investees(12)

Revenues$1,362
Costs and expenses(1,123)
Asia Theme Parks’ royalty and management fees of $71$67 million for the six monthsquarter ended MarchDecember 30, 20192023 are eliminated in consolidation, but are considered in calculating earnings attributable to noncontrolling interests.
International Theme Parks’ cash flows included in the Company’s Condensed Consolidated StatementStatements of Cash Flows for the six monthsquarter ended MarchDecember 30, 20192023 were $315$352 million generated fromprovided by operating activities, $439$239 million used in investing activities and no change in cash from financing activities. Approximately two thirds of cash flows generated from operating activities and$12 million used in investing activities, were for the Asia Theme Parks.financing activities.
Hong Kong Disneyland Resort
The Government of the Hong Kong Special Administrative Region (HKSAR) and the Company have a 53%52% and a 47%48% equity interest in Hong Kong Disneyland Resort, respectively.
The Company and HKSAR have both provided loans to Hong Kong Disneyland Resort with outstanding balances of $144$166 million and $96$111 million, respectively. The interest rate on both loans is three month HIBOR plus 2%, and the scheduled maturity date is September 2025. The Company’s loan is eliminated in consolidation.
The Company has provided Hong Kong Disneyland Resort with a revolving credit facility of HK $2.1$2.7 billion ($269346 million), which bears interest at a rate of three month HIBOR plus 1.25% and matures in December 2023. There is no outstanding balance under the2028. The line of credit at Marchwas fully repaid during the quarter ended December 30, 2019.2023. The Company’s line of credit is eliminated in consolidation.
Shanghai Disney Resort
Shanghai Shendi (Group) Co., Ltd (Shendi) and the Company have 57% and 43% equity interests in Shanghai Disney Resort, respectively. A management company, in which the Company has a 70% interest and Shendi a 30% interest, operates Shanghai Disney Resort.
The Company has provided Shanghai Disney Resort with loans totaling $813$978 million, bearing interest at rates up to 8% and maturing in 2036, with early repayment permitted. In addition, the Company has an outstanding balance of $130 million due from Shanghai Disney Resort primarily related to royalties. The Company has also provided Shanghai Disney Resort with a $157 million1.9 billion yuan (approximately $0.3 billion) line of credit bearing interest at 8%. There is no outstanding balance under theThe line of credit at Marchwas fully repaid during the quarter ended December 30, 2019.2023. These balances are eliminated in consolidation.
Shendi has provided Shanghai Disney Resort with loans totaling 7.18.8 billion yuan (approximately $1.1$1.2 billion), bearing interest at rates up to 8% and maturing in 2036, with early repayment permitted. Shendi has also provided Shanghai Disney Resort with a 1.42.6 billion yuan (approximately $0.2$0.4 billion) line of credit bearing interest at 8%. There is no outstanding balance under theThe line of credit at Marchwas fully repaid during the quarter ended December 30, 2019.2023.
8.Income Taxes
U.S. Tax Cuts7.Produced and Jobs ActAcquired/Licensed Content Costs and Advances
In December 2017, new federal income tax legislation,The Company classifies its capitalized produced and acquired/licensed content costs as long-term assets and classifies advances for live programming rights made prior to the “Tax Cutslive event as short-term assets. For purposes of amortization and Jobs Act” (Tax Act), was signed into law. The most significant impactsimpairment, the capitalized content costs are classified based on the Company aretheir predominant monetization strategy as follows:
Effective January 1, 2018,•Individual - lifetime value is predominantly derived from third-party revenues that are directly attributable to the U.S. corporate federal statutory income tax rate was reducedspecific film or television title (e.g. theatrical revenues or sales to third-party television programmers)
•Group - lifetime value is predominantly derived from 35.0%third-party revenues that are attributable only to 21.0%. Becausea bundle of our fiscal year end, the Company’s fiscal 2018 statutory federal tax rate was 24.5%. The Company’s statutory federal tax rate is 21.0%titles (e.g. subscription revenue for fiscal 2019 (and thereafter).a DTC service or affiliate fees for a cable television network)
The Company remeasured its U.S. federal deferred tax assets and liabilities at the rate that the Company expects to be in effect when those deferred taxes are realized (either 24.5% if in 2018 or 21.0% thereafter) (Deferred Remeasurement). The Company recognized a benefit of approximately $2.2 billion from the Deferred Remeasurement, the majority of which was recognized in the first quarter of fiscal 2018.
16
A one-time tax is due on certain accumulated foreign earnings (Deemed Repatriation Tax), which is payable over eight years. The effective tax rate is generally 15.5% on the portion of the earnings held in cash and cash equivalents
THE WALT DISNEY COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited; tabular dollars in millions, except for per share data)


Total capitalized produced and licensed content by predominant monetization strategy is as follows:
As of December 30, 2023As of September 30, 2023
Predominantly Monetized IndividuallyPredominantly Monetized
as a Group		TotalPredominantly Monetized IndividuallyPredominantly Monetized
as a Group		Total
Produced content
Released, less amortization$4,911 $13,725 $18,636 $4,968 $13,555 $18,523 
Completed, not released— 1,713 1,713 70 1,786 1,856 
In-process3,157   5,394   8,551   3,331   6,120   9,451   
In development or pre-production262 132 394 279 133 412 
$8,330 $20,964 29,294 $8,648 $21,594 30,242 
Licensed content - Television programming rights and advances4,840 6,351 
Total produced and licensed content$34,134 $36,593 
Current portion$1,409 $3,002 
Non-current portion$32,725 $33,591 
Amortization of produced and 8% on the remainder. The Company recognized a charge for the Deemed Repatriation Taxlicensed content is as follows:
Quarter Ended
December 30,
2023		December 31,
2022
Produced content
Predominantly monetized individually$768$1,157 
Predominantly monetized as a group1,7942,160   
2,5623,317 
Licensed programming rights and advances4,5904,539 
Total produced and licensed content costs(1)
$7,152$7,856 
(1)Primarily included in “Costs of approximately $0.4 billion, the majority of which was recognizedservices” in the first quarterCondensed Consolidated Statements of fiscal 2018. Generally there will no longer be a U.S. federal income tax cost arising from the repatriation of foreign earnings.Income.
The Company is eligible to claim an immediate deduction for investments in qualified fixed assets acquired and film and television productions that commenced after September 27, 2017 and placed in service by the end of fiscal 2022. The immediate deduction phases out for assets placed in service in fiscal 2023 through fiscal 2027.
Beginning in fiscal 2019:
◦The domestic production activity deduction is eliminated.
◦Certain foreign derived income will be taxed in the U.S. at an effective rate of approximately 13% (which increases to approximately 16% in 2025) rather than the general statutory rate of 21%.
◦
Certain foreign earnings will be taxed at a minimum effective rate of approximately 13%, which increases to approximately 16% in 2025. The Company8.Income Taxes’s policy is to expense the tax on these earnings in the period the earnings are taxable in the U.S.
Intra-Entity Transfers of Assets Other Than Inventory
At the beginning of fiscal 2019, the Company adopted new FASB accounting guidance that requires recognition of the income tax consequences of an intra-entity transfer of an asset (other than inventory) when the transfer occurs instead of when the asset is ultimately sold to an outside party. In the first quarter of fiscal 2019, the Company recorded a $0.1 billion deferred tax asset with an offsetting increase to retained earnings.
Unrecognized Tax Benefits
During the six months ended March 30, 2019, the Company increased itsThe Company’s gross unrecognized tax benefits by $2.2 billion from $0.6 billion to $2.8 billion (before interest and penalties). The increase includes $2.1 billion related to 21CF. Interest at both December 30, 2023 and penalty reserves related to 21CF unrecognized tax benefits are $0.9September 30, 2023, were $2.5 billion. In the next twelve months, it is reasonably possible that our unrecognized tax benefits could change due to resolutions of open tax matters. These resolutionsmatters, which would reduce our unrecognized tax benefits by $0.2 billion, of which $0.1 billion would reduce our income tax expense and effective tax rate if recognized.
9.Pension and Other Benefit Programs
The components of net periodic benefit cost are as follows:$0.3 billion.
 Pension Plans Postretirement Medical Plans
 Quarter Ended Six Months Ended Quarter Ended Six Months Ended
 Mar. 30,
2019		 Mar. 31,
2018		 Mar. 30,
2019		 Mar. 31,
2018		 Mar. 30,
2019		 Mar. 31,
2018		 Mar. 30,
2019		 Mar. 31,
2018
Service costs$83
 $87
 $166
 $175
 $2
 $2
 $4
 $5
Other costs (benefits):               
Interest costs144
 122
 289
 245
 17
 15
 33
 30
Expected return on plan assets(240) (227) (479) (452) (14) (13) (28) (26)
Amortization of prior-year service costs4
 5
 7
 8
 —
 —
 —
 —
Recognized net actuarial loss67
 88
 131
 175
 —
 4
 —
 7
Total other costs (benefits)(25) (12) (52) (24) 3
 6
 5
 11
Net periodic benefit cost$58
 $75
 $114
 $151
 $5
 $8
 $9
 $16
17

At the beginning of fiscal 2019, the Company adopted new FASB accounting guidance on the presentation of the components of net periodic pension and postretirement benefit cost (“net periodic benefit cost”). This guidance requires the Company to present the service cost component of net periodic benefit cost in the same line items on the statement of operations as other compensation costs of the related employees (i.e. “Costs and expenses” in the Condensed Consolidated Statement of Income). All of the other components of net periodic benefit cost (“other costs / benefits”) are presented as a component of “Interest expense, net” in the Condensed Consolidated Statement of Income (see Note 6). The other costs / benefits in fiscal 2018 were not material and are reported in Costs and expenses.
THE WALT DISNEY COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited; tabular dollars in millions, except for per share data)


9.Pension and Other Benefit Programs
The components of net periodic benefit cost (income) are as follows:
 Pension PlansPostretirement Medical Plans
 Quarter EndedQuarter Ended
 December 30,
2023		December 31,
2022		December 30,
2023		December 31,
2022
Service costs$62 $65 $— $1 
Other costs (benefits):
Interest costs208   196   14   20   
Expected return on plan assets(284)(288)(14)(15)
Amortization of previously deferred service costs2 2 (22)— 
Recognized net actuarial loss5 5 (9)(6)
Total other costs (benefits)(69)(85)(31)(1)
Net periodic benefit cost (income)$(7)$(20)$(31)$— 
During the six monthsquarter ended MarchDecember 30, 2019,2023, the Company did not make any material contributions to its pension and postretirement medical plans. The Company expects total pensionplans and postretirement medical plandoes not currently expect to make any material contributions infor the remainder of fiscal 2019 of approximately $750 million. However, final2024. Final minimum funding amountsrequirements for fiscal 20192024 will be assesseddetermined based on oura January 1, 20192024 funding actuarial valuation, which willis expected to be availablereceived in the fourth quarter of fiscal 2019.2024.
In connection with our acquisition of 21CF, we assumed net pension obligations of $237 million ($824 million in obligations and $587 million in plan assets), which is anticipated to have an immaterial impact on our fiscal 2019 Condensed Consolidated Statement of Income. The Company expects to contribute approximately $50 million to the 21CF plans in fiscal 2019.
10.Earnings Per Share
10.Earnings Per Share
Diluted earnings per share amounts are based upon the weighted average number of common and common equivalent shares outstanding during the period and are calculated using the treasury stock method for equity-based compensation awards (Awards). A reconciliation of the weighted average number of common and common equivalent shares outstanding and the number of Awards excluded from the diluted earnings per share calculation, as they were anti-dilutive, are as follows:
 Quarter Ended
 December 30,
2023		December 31,
2022
Shares (in millions):
Weighted average number of common and common equivalent shares outstanding (basic)1,832   1,825   
Weighted average dilutive impact of Awards3 2 
Weighted average number of common and common equivalent shares outstanding (diluted)1,835 1,827 
Awards excluded from diluted earnings per share39 26 
11.Equity
 Quarter Ended Six Months Ended
 March 30,
2019		 March 31,
2018		 March 30,
2019		 March 31,
2018
Shares (in millions):       
Weighted average number of common and common equivalent shares outstanding (basic)1,530
 1,503
 1,510
 1,507
Weighted average dilutive impact of Awards7
 7
 7
 8
Weighted average number of common and common equivalent shares outstanding (diluted)1,537
 1,510
 1,517
 1,515
Awards excluded from diluted earnings per share14
 12
 13
 13

On November 30, 2023, the Board of Directors declared a cash dividend of $0.30 per share ($549 million) with respect to the second half of fiscal 2023, which was paid in January 2024 to shareholders of record as of December 11, 2023.
On February 7, 2024, the Board of Directors declared a cash dividend of $0.45 per share with respect to the first half of fiscal 2024, which will be paid on July 25, 2024 to shareholders of record as of July 8, 2024.
11.Equity
TheEffective February 7, 2024, the Board of Directors authorized a new share repurchase program for the Company paid the following dividends in fiscal 2019 and 2018:
Per ShareTotal PaidPayment TimingRelated to Fiscal Period
$0.88$1.3 billionSecond quarter of Fiscal 2019Second Half of 2018
$0.84$1.2 billionFourth Quarter of Fiscal 2018First Half of 2018
$0.84$1.3 billionSecond Quarter of Fiscal 2018Second Half of 2017

Asto repurchase a resulttotal of our acquisition of 21CF, the TWDC became the parent entity of both 21CF and TWDC Enterprises 18 Corp. (formerly known as The Walt Disney Company and referred to herein as “Legacy Disney”). TWDC issued 307400 million shares of its common stockstock. The Company plans to acquire 21CF (see Note 4), and all the outstanding sharestarget repurchases of Legacy Disney (other than treasury shares, shares held by subsidiaries of Legacy Disney and shares held on behalf of third parties) were converted on a one-for-one basis into new publicly traded shares of TWDC.
On March 20, 2019, Legacy Disney terminated its share$3 billion in fiscal 2024. The repurchase program and 1.4 billion treasury shares were canceled, which resulted in a decrease to common stock and retained earnings of $17.6 billion and $49.1 billion, respectively. The cost of treasury shares canceled was allocated to common stock based on the ratio of treasury shares to total shares outstanding, with the excess allocated to retained earnings. At March 30, 2019, TWDC held 19 million treasury shares.does not have an expiration date.
TWDC’s authorized share capital consists of 4.6 billion common shares at $0.01 par value and 100 million preferred shares at $0.01 par value, both of which represent the same authorized capital structure in effect prior to the completion of the 21CF acquisition and as of September 29, 2018. As of September 29, 2018, Legacy Disney had 40 thousand preferred series B shares authorized with $0.01 par value, which were eliminated during the first quarter of fiscal 2019.
18
THE WALT DISNEY COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited; tabular dollars in millions, except for per share data)


The following tables summarize the changes in each component of accumulated other comprehensive income (loss) (AOCI) including our proportional share of equity method investee amounts:
 Market Value Adjustments for HedgesUnrecognized
Pension and 
Postretirement
Medical 
Expense		Foreign
Currency
Translation
and Other		AOCI
AOCI, before tax
First quarter of fiscal 2024
Balance at September 30, 2023$259 $(2,172)$(1,974)$(3,887)
Quarter Ended December 30, 2023:
Unrealized gains (losses) arising during the period(277)(3)137 (143)
Reclassifications of realized net (gains) losses to net income(140)(24)— (164)
Balance at December 30, 2023$(158)$(2,199)$(1,837)$(4,194)
First quarter of fiscal 2023
Balance at October 1, 2022$804 $(3,770)$(2,014)$(4,980)
Quarter Ended December 31, 2022:
Unrealized gains (losses) arising during the period(475)   —    146    (329)   
Reclassifications of realized net (gains) losses to net income(218)1 42 (175)
Balance at December 31, 2022$111 $(3,769)$(1,826)$(5,484)
 Market Value Adjustments for HedgesUnrecognized
Pension and 
Postretirement
Medical 
Expense		Foreign
Currency
Translation
and Other		AOCI
Tax on AOCI
First quarter of fiscal 2024
Balance at September 30, 2023$(64)$517 $142 $595 
Quarter Ended December 30, 2023:
Unrealized gains (losses) arising during the period66 — (7)59 
Reclassifications of realized net (gains) losses to net income32 6 — 38 
Balance at December 30, 2023$34 $523 $135 $692 
First quarter of fiscal 2023
Balance at October 1, 2022$(179)$901 $139 $861 
Quarter Ended December 31, 2022:
Unrealized gains (losses) arising during the period100    —    8    108    
Reclassifications of realized net (gains) losses to net income51 — (14)37 
Balance at December 31, 2022$(28)$901 $133 $1,006 
19
     Unrecognized
Pension and 
Postretirement
Medical 
Expense		 Foreign
Currency
Translation
and Other		 AOCI
 Market Value Adjustments 
AOCI, before taxInvestments Cash Flow Hedges 
Second quarter of fiscal 2019         
Balance at December 29, 2018$—
 $166
 $(4,254) $(743) $(4,831)
Quarter Ended March 30, 2019:        

Unrealized gains (losses) arising during the period(5) (82) 19
 15
 (53)
Reclassifications of realized net (gains) losses to net income—
 (22) 72
 —
 50
Balance at March 30, 2019$(5) $62
 $(4,163) $(728) $(4,834)
          
Second quarter of fiscal 2018         
Balance at December 30, 2017$14
 $(69) $(4,810) $(461) $(5,326)
Quarter Ended March 31, 2018:         
Unrealized gains (losses) arising during the period10
 (165) 24
 103
 (28)
Reclassifications of realized net (gains) losses to net income—
 37
 96
 —
 133
Balance at March 31, 2018$24
 $(197) $(4,690) $(358) $(5,221)
          
First and second quarter of fiscal 2019        
Balance at September 29, 2018$24
 $177
 $(4,323) $(727) $(4,849)
Six Months Ended March 30, 2019:         
Unrealized gains (losses) arising during the period(5) (55) 19
 (1) (42)
Reclassifications of net (gains) losses to net income—
 (61) 141
 —
 80
Reclassifications to retained earnings(24) 1
 —
 —
 (23)
Balance at March 30, 2019$(5) $62
 $(4,163) $(728) $(4,834)
          
First and second quarter of fiscal 2018        
Balance at September 30, 2017$15
 $(108) $(4,906) $(523) $(5,522)
Six Months Ended March 31, 2018:         
Unrealized gains (losses) arising during the period9
 (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)
THE WALT DISNEY COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited; tabular dollars in millions, except for per share data)


 Market Value Adjustments for HedgesUnrecognized
Pension and 
Postretirement
Medical 
Expense		Foreign
Currency
Translation
and Other		AOCI
AOCI, after tax
First quarter of fiscal 2024
Balance at September 30, 2023$195 $(1,655)$(1,832)$(3,292)
Quarter Ended December 30, 2023:
Unrealized gains (losses) arising during the period(211)(3)130 (84)
Reclassifications of realized net (gains) losses to net income(108)(18)— (126)
Balance at December 30, 2023$(124)$(1,676)$(1,702)$(3,502)
First quarter of fiscal 2023
Balance at October 1, 2022$625 $(2,869)$(1,875)$(4,119)
Quarter Ended December 31, 2022:
Unrealized gains (losses) arising during the period(375)— 154 (221)
Reclassifications of realized net (gains) losses to net income(167)1 28 (138)
Balance at December 31, 2022$83 $(2,868)$(1,693)$(4,478)
Details about AOCI components reclassified to net income are as follows:
Gain (loss) in net income:Affected line item in the Condensed Consolidated Statements of Operations:Quarter Ended
December 30,
2023		December 31,
2022
Market value adjustments, primarily cash flow hedgesPrimarily revenue$140 $218 
Estimated taxIncome taxes(32)(51)
108 167 
Pension and postretirement medical expenseInterest expense, net24 (1)
Estimated taxIncome taxes(6)  —   
18 (1)
Foreign currency translation and otherRestructuring and impairment charges— (42)
Estimated taxIncome taxes— 14 
— (28)
Total reclassifications for the period$126 $138 
20
     Unrecognized
Pension and 
Postretirement
Medical 
Expense		 Foreign
Currency
Translation
and Other		 AOCI
 Market Value Adjustments 
Tax on AOCIInvestments Cash Flow Hedges 
Second quarter of fiscal 2019         
Balance at December 29, 2018$—
 $(38) $1,007
 $80
 $1,049
Quarter Ended March 30, 2019:        

Unrealized gains (losses) arising during the period1
 19
 (6) (3) 11
Reclassifications of realized net (gains) losses to net income—
 5
 (17) —
 (12)
Balance at March 30, 2019$1
 $(14) $984
 $77
 $1,048
          
Second quarter of fiscal 2018         
Balance at December 30, 2017$(7) $25
 $1,804
 $100
 $1,922
Quarter Ended March 31, 2018:        

Unrealized gains (losses) arising during the period(3) 25
 (3) (33) (14)
Reclassifications of realized net (gains) losses to net income—
 (9) (23) —
 (32)
Balance at March 31, 2018$(10) $41
 $1,778
 $67
 $1,876
          
First and second quarter of fiscal 2019        
Balance at September 29, 2018$(9) $(32) $1,690
 $103
 $1,752
Six Months Ended March 30, 2019:         
Unrealized gains (losses) arising during the period1
 13
 (6) (10) (2)
Reclassifications of net (gains) losses to net income—
 14
 (33) —
 (19)
Reclassifications to retained earnings (1)
9
 (9) (667) (16) (683)
Balance at March 30, 2019$1
 $(14) $984
 $77
 $1,048
          
First and second quarter of fiscal 2018        
Balance at September 30, 2017$(7) $46
 $1,839
 $116
 $1,994
Six Months Ended March 31, 2018:         
Unrealized gains (losses) arising during the period(3) 12
 (3) (49) (43)
Reclassifications of net (gains) losses to net income—
 (17) (58) —
 (75)
Balance at March 31, 2018$(10) $41
 $1,778
 $67
 $1,876
THE WALT DISNEY COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited; tabular dollars in millions, except for per share data)


12.Equity-Based Compensation
Compensation expense related to stock options and restricted stock units (RSUs) is as follows:
 Quarter Ended
 December 30,
2023		December 31,
2022
Stock options$17 $19 
RSUs291   251   
Total equity-based compensation expense(1)
$308 $270 
Equity-based compensation expense capitalized during the period$44 $36 
     Unrecognized
Pension and 
Postretirement
Medical 
Expense		 Foreign
Currency
Translation
and Other		 AOCI
 Market Value Adjustments 
AOCI, after taxInvestments Cash Flow Hedges 
Second quarter of fiscal 2019         
Balance at December 29, 2018$—
 $128
 $(3,247) $(663) $(3,782)
Quarter Ended March 30, 2019:         
Unrealized gains (losses) arising during the period(4) (63) 13
 12
 (42)
Reclassifications of realized net (gains) losses to net income—
 (17) 55
 —
 38
Balance at March 30, 2019$(4) $48
 $(3,179) $(651) $(3,786)
          
Second quarter of fiscal 2018         
Balance at December 30, 2017$7
 $(44) $(3,006) $(361) $(3,404)
Quarter Ended March 31, 2018:         
Unrealized gains (losses) arising during the period7
 (140) 21
 70
 (42)
Reclassifications of realized net (gains) losses to net income—
 28
 73
 —
 101
Balance at March 31, 2018$14
 $(156) $(2,912) $(291) $(3,345)
          
First and second quarter of fiscal 2019        
Balance at September 29, 2018$15
 $145
 $(2,633) $(624) $(3,097)
Six Months Ended March 30, 2019:         
Unrealized gains (losses) arising during the period(4) (42) 13
 (11) (44)
Reclassifications of net (gains) losses to net income—
 (47) 108
 —
 61
Reclassifications to retained earnings (1)
(15) (8) (667) (16) (706)
Balance at March 30, 2019$(4) $48
 $(3,179) $(651) $(3,786)
          
First and second quarter of fiscal 2018        
Balance at September 30, 2017$8
 $(62) $(3,067) $(407) $(3,528)
Six Months Ended March 31, 2018:         
Unrealized gains (losses) arising during the period6
 (134) 21
 116
 9
Reclassifications of net (gains) losses to net income—
 40
 134
 —
 174
Balance at March 31, 2018$14
 $(156) $(2,912) $(291) $(3,345)
(1)Equity-based compensation expense is net of capitalized equity-based compensation and estimated forfeitures and excludes amortization of previously capitalized equity-based compensation costs.
(1)
At the beginning of fiscal 2019, the Company adopted new FASB accounting guidance, Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income, and reclassified $691 million from AOCI to retained earnings.
In addition, atUnrecognized compensation cost related to unvested stock options and RSUs was $137 million and $2.8 billion, respectively, as of December 30, 2023.
During the beginning of fiscal 2019,quarters ended December 30, 2023 and December 31, 2022, the weighted average grant date fair values for options granted were $32.06 and $34.71, respectively, and for RSUs were $93.87 and $91.89, respectively.
During the quarter ended December 30, 2023, the Company adopted new FASB accounting guidance, Recognitionmade equity compensation grants consisting of 2.7 million stock options and Measurement15.7 million RSUs.
13.Commitments and Contingencies
Legal Matters
On May 12, 2023, a private securities class action lawsuit was filed in the U.S. District Court for the Central District of California against the Company, its former Chief Executive Officer, Robert Chapek, its former Chief Financial AssetsOfficer, Christine M. McCarthy, and Liabilities,the former Chairman of the Disney Media and reclassified $24 million ($Entertainment Distribution segment, Kareem Daniel on behalf of certain purchasers of securities of the Company (the “Securities Class Action”). On November 6, 2023, a consolidated complaint was filed in the same action, adding Robert Iger, the Company’s Chief Executive Officer, as a defendant. Claims in the Securities Class Action include (i) violations of Section 10(b) of the Exchange Act and Rule 10b-5 promulgated thereunder against all defendants, (ii) violations of Section 20A of the Exchange Act against Iger and McCarthy, and (iii) violations of Section 20(a) of the Exchange Act against all defendants. Plaintiffs in the Securities Class Action allege purported misstatements and omissions concerning, and a scheme to conceal, accurate costs and subscriber growth of the Disney+ platform. The Company intends to defend against the lawsuit vigorously and filed a motion to dismiss the complaint for failure to state a claim on December 21, 2023. Plaintiffs filed their opposition on February 5, 2024, and the Company may file a reply brief by March 5, 2024. The lawsuit is in the early stages and at this time we cannot reasonably estimate the amount of any potential loss.
Three shareholder derivative complaints have been filed. The first, in which Hugues Gervat is the plaintiff, was filed on August 4, 2023, in the U.S. District Court for the Central District of California. The second, in which Stourbridge Investments LLC is the plaintiff, was filed on August 23, 2023 in the U.S. District Court for the District of Delaware. And the third, in which Audrey McAdams is the Plaintiff, was filed on December 15, million after tax)2023, in the U.S. District Court for the Central District of market value adjustmentsCalifornia. Each named The Walt Disney Company as a nominal defendant and alleged claims on investments previously recordedits behalf against the Company’s Chief Executive Officer, Robert Iger; its former Chief Executive Officer, Robert Chapek; its former Chief Financial Officer, Christine M. McCarthy; the former Chairman of the Disney Media and Entertainment Distribution segment, Kareem Daniel, and ten current and former members of the Disney Board (Susan E. Arnold; Mary T. Barra; Safra A. Catz; Amy L. Chang; Francis A. deSouza; Michael B.G. Froman; Maria Elena Lagomasino; Calvin R. McDonald; Mark G. Parker; and Derica W. Rice). Along with alleged violations of Sections 10(b), 14(a), 20(a), and Rule 10b-5 of the Securities Exchange Act, premised on the same allegations as the Securities Class Action, plaintiffs in AOCIboth actions sought to retained earnings.recover for alleged breach of fiduciary duty, unjust enrichment, abuse of control, gross mismanagement and waste. On October 24, 2023, the Stourbridge action was voluntarily dismissed and, on November 16, 2023, was refiled in Delaware state court alleging analogous theories of liability based on state law. On October 30, 2023, the Gervat action was stayed pending a ruling on the motion to dismiss filed in the Securities Class Action. The Stourbridge action was likewise stayed under an order entered December 12, 2023. The Company intends to defend against these lawsuits vigorously. The lawsuits are in the early stages, and at this time we cannot reasonably estimate the amount of any potential loss.
21
THE WALT DISNEY COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited; tabular dollars in millions, except for per share data)


Details about AOCI components reclassified to net income are as follows:
Gains/(losses) in net income: 
Affected line item in the
  Condensed Consolidated
  Statements of Income:
 Quarter Ended Six Months Ended
  March 30,
2019		 March 31,
2018		 March 30,
2019		 March 31,
2018
Cash flow hedges Primarily revenue $22
 $(37) $61
 $(57)
Estimated tax Income taxes (5) 9
 (14) 17
    17
 (28) 47
 (40)
           
Pension and postretirement
  medical expense
 Costs and expenses —
 (96) —
 (192)
  Interest expense, net (72) —
 (141) —
Estimated tax Income taxes 17
 23
 33
 58
    (55) (73) (108) (134)
           
Total reclassifications for the period   $(38) $(101) $(61) $(174)

12.Equity-Based Compensation
Compensation expense related to stock options and restricted stock units (RSUs) is as follows:
 Quarter Ended Six Months Ended
 March 30,
2019		 March 31,
2018		 March 30,
2019		 March 31,
2018
Stock options$24
 $23
 $43
 $46
RSUs (1)
100
 77
 173
 148
Total equity-based compensation expense (2)
$124
 $100
 $216
 $194
Equity-based compensation expense capitalized during the period$22
 $18
 $38
 $37

(1)
Excludes 21CF RSUs converted to Company RSUs in connection with the acquisition of 21CF (see Note 4). The Company recognized $259 million of equity based compensation in connection with the 21CF acquisition.
(2)
Equity-based compensation expense is net of capitalized equity-based compensation and excludes amortization of previously capitalized equity-based compensation costs.
Unrecognized compensation cost related to unvested stock options and RSUs was $170 millionand $827 million, respectively, as of March 30, 2019, including $141 million of unrecognized compensation cost related to equity awards assumed and converted to Company RSUs in the 21CF acquisition.
The weighted average grant date fair values of options granted during the six months ended March 30, 2019 and March 31, 2018 were $28.67 and $28.01, respectively.
During the six months ended March 30, 2019, the Company made equity compensation grants consisting of 3.9 million stock options and 3.3 million RSUs.
13.Commitments and Contingencies
Legal Matters
The Company, together with, in some instances, certain of its directors and officers, is a defendant in various other legal actions involving copyright, breach of contract and various other claims incident to the conduct of its businesses. Management does not believe that the Company has incurred a probable material loss by reason of any of those actions.
Contractual Guarantees
The Company has guaranteed bond issuances by the Anaheim Public Authority that were used by the City of Anaheim to finance construction of infrastructure and a public parking facility adjacent to the Disneyland Resort. Revenues from sales, occupancy and property taxes from the Disneyland Resort and non-Disney hotels are used by the City of Anaheim to repay the bonds, which have various maturities through 2037. In the event of a debt service shortfall, the Company will be responsible to14.Fair Value Measurements
THE WALT DISNEY COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited; tabular dollars in millions, except for per share data)


fund the shortfall. As of March 30, 2019, the remaining debt service obligation guaranteed by the Company was $290 million. To the extent that tax revenues exceed the debt service payments subsequent to the Company funding a shortfall, the Company would be reimbursed for any previously funded shortfalls. To date, tax revenues have exceeded the debt service payments for these bonds.
Long-Term Receivables and the Allowance for Credit Losses
The Company has accounts receivable with original maturities greater than one year related to the sale of film and television program rights and vacation club properties. Allowances for credit losses are established against these receivables as necessary.
The Company estimates the allowance for credit losses related to receivables from the sale of film and television programs based upon a number of factors, including historical experience and the financial condition of individual companies with which we do business. The balance of film and television program sales receivables recorded in other non-current assets, net of an immaterial allowance for credit losses, was $0.9 billion as of March 30, 2019. The activity for the quarter and six-month periods ended March 30, 2019 and March 31, 2018 related to the allowance for credit losses was not material.
The Company estimates the allowance for credit losses related to receivables from sales of its vacation club properties based primarily on historical collection experience. Estimates of uncollectible amounts also consider the economic environment and the age of receivables. The balance of mortgage receivables recorded in other non-current assets, net of a related allowance for credit losses of approximately 4%, was $0.8 billion as of March 30, 2019. The activity for the quarter and six-month periods ended March 30, 2019 and March 31, 2018 related to the allowance for credit losses was not material.
14.Fair Value Measurements
Fair value is defined as the amount that would be received for selling an asset or paid to transfer a liability in an orderly transaction between market participants and is generally classified in one of the following categories:
Level 1 - Quoted prices for identical instruments in active markets
Level 2 - Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations in which all significant inputs and significant value drivers are observable in active markets
Level 3 - Valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable
The Company’s assets and liabilities measured at fair value are summarized in the following tables by fair value measurement Level:
 Fair Value Measurement at December 30, 2023
 Level 1Level 2Level 3Total
Assets
Investments$— $145 $— $145 
Derivatives
Foreign exchange— 668 — 668 
Other—    18    —    18    
Liabilities
Derivatives
Interest rate— (1,459)— (1,459)
Foreign exchange— (565)— (565)
Other— (4)— (4)
Other— (539)— (539)
Total recorded at fair value$— $(1,736)$— $(1,736)
Fair value of borrowings$— $44,075 $1,370 $45,445 
 Fair Value Measurement at September 30, 2023
 Level 1Level 2Level 3Total
Assets
Investments$46 $128 $— $174 
Derivatives
Foreign exchange—    1,336    —    1,336    
Other— 18 — 18 
Liabilities
Derivatives
Interest rate— (1,791)— (1,791)
Foreign exchange— (815)— (815)
Other— (13)— (13)
Other— (465)— (465)
Total recorded at fair value$46 $(1,602)$— $(1,556)
Fair value of borrowings$— $40,123 $1,333 $41,456 
22
 Fair Value Measurement at March 30, 2019
 Level 1 Level 2 Level 3 Total
Assets       
 Investments$20
 $—
 $—
 $20
Derivatives       
Interest rate—
 18
 —
 18
Foreign exchange—
 525
 —
 525
Other—
 6
 —
 6
Liabilities       
Derivatives       
Interest rate—
 (158) —
 (158)
Foreign exchange—
 (425) —
 (425)
Other—
 (2) —
 (2)
Total recorded at fair value$20
 $(36) $—
 $(16)
Fair value of borrowings$—
 $41,482
 $17,833
 $59,315
THE WALT DISNEY COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited; tabular dollars in millions, except for per share data)


 Fair Value Measurement at September 29, 2018
 Level 1 Level 2 Level 3 Total
Assets       
 Investments$38
 $—
 $—
 $38
Derivatives       
Foreign exchange—
 469
 —
 469
Other—
 15
 —
 15
Liabilities       
Derivatives       
Interest rate—
 (410) —
 (410)
Foreign exchange—
 (274) —
 (274)
Total recorded at fair value$38
 $(200) $—
 $(162)
Fair value of borrowings$—
 $19,826
 $1,171
 $20,997

The fair value of Level 2 investments are primarily determined based on an internal valuation model that uses observable inputs such as stock trading price, volatility and risk free rate.
The fair values of Level 2 derivatives are primarily determined by internal discounted cash flow models that use observable inputs such as interest rates, yield curves and foreign currency exchange rates. Counterparty credit risk, which is mitigated by master netting agreements and collateral posting arrangements with certain counterparties, did not have a materialhad an impact on derivative fair value estimates.estimates that was not material.
Level 2 other liabilities are primarily arrangements that are valued based on the fair value of underlying investments, which are generally measured using Level 1 and Level 2 fair value techniques.
Level 2 borrowings, which include commercial paper, U.S. and Europeandollar denominated notes and certain foreign currency denominated borrowings, are valued based on quoted prices for similar instruments in active markets or identical instruments in markets that are not active.
Level 3 borrowings include the Asia Theme Park borrowings, which are valued based on the current borrowing cost and credit risk of the Asia Theme Parks as well as prevailing market interest rates. Level 3 borrowings at March 30, 2019 also include a bridge loan facility used to finance the acquisition of 21CF. The carrying value approximates fair value of this floating rate financial instrument.
The Company’s financial instruments also include cash, cash equivalents, receivables and accounts payable. The carrying values of these financial instruments approximate the fair values.
The Company also has assets that are required to be recorded at fair value on a non-recurring basis. These assets are evaluated when certain triggering events occur (including a decrease in estimated future cash flows) that indicate the asset should be evaluated for impairment. For the quarter and six-month period ending March 30, 2019, the Company recorded an impairment charge of $353 million for the write-off of an equity method investment as a result of a level 3 fair value measurement. The impairment was recorded in “15.Equity in the income / (loss) of investees, net” in the Condensed Consolidated Statements of Income.Derivative Instruments
15.Derivative Instruments
The Company manages its exposure to various risks relating to its ongoing business operations according to a risk management policy. The primary risks managed with derivative instruments are interest rate risk and foreign exchange risk.
The Company’s derivative positions measured at fair value are summarized in the following tables:
 As of December 30, 2023
 Current
Assets		Investments/Other AssetsOther Current LiabilitiesOther Long-
Term
Liabilities
Derivatives designated as hedges
Foreign exchange$399 $206 $(155)$(100)
Interest rate— — (1,459)— 
Other1    1    (3)   (1)   
Derivatives not designated as hedges
Foreign exchange59 4 (245)(65)
Other16 145 — — 
Gross fair value of derivatives475 356 (1,862)(166)
Counterparty netting(372)(195)463 104 
Cash collateral (received) paid(13)— 1,106 — 
Net derivative positions$90 $161 $(293)$(62)
23
THE WALT DISNEY COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited; tabular dollars in millions, except for per share data)


The Company’s derivative positions measured at fair value are summarized in the following tables:
 As of March 30, 2019
 
Current
Assets
 Other Assets Other Current Liabilities 
Other Long-
Term
Liabilities
Derivatives designated as hedges       
Foreign exchange$192
 $176
 $(72) $(148)
Interest rate—
 18
 (121) —
Other5
 1
 (1) (1)
Derivatives not designated as hedges       
Foreign exchange44
 113
 (129) (76)
Interest rate—
 —
 —
 (37)
Gross fair value of derivatives241
 308
 (323) (262)
Counterparty netting(156) (253) 229
 180
Cash collateral (received)/paid(8) —
 65
 —
Net derivative positions$77
 $55
 $(29) $(82)
 As of September 29, 2018
 
Current
Assets
 Other Assets Other Current Liabilities 
Other Long-
Term
Liabilities
Derivatives designated as hedges       
Foreign exchange$166
 $169
 $(80) $(39)
Interest rate—
 —
 (329) —
Other13
 2
 —
 —
Derivatives not designated as hedges       
Foreign exchange38
 96
 (95) (60)
Interest rate—
 —
 —
 (81)
Gross fair value of derivatives217
 267
 (504) (180)
Counterparty netting(158) (227) 254
 131
Cash collateral (received)/paid—
 —
 135
 5
Net derivative positions$59
 $40
 $(115) $(44)

 As of September 30, 2023
 Current
Assets		Investments/Other AssetsOther Current LiabilitiesOther Long-
Term
Liabilities
Derivatives designated as hedges
Foreign exchange$595 $338 $(123)$(93)
Interest rate— — (1,791)— 
Other12    6    —    —    
Derivatives not designated as hedges
Foreign exchange384 19 (520)(79)
Other— 128 (13)— 
Gross fair value of derivatives991 491 (2,447)(172)
Counterparty netting(770)(262)900 132 
Cash collateral (received) paid(123)(7)1,257 — 
Net derivative positions$98 $222 $(290)$(40)
Interest Rate Risk Management
The Company is exposed to the impact of interest rate changes primarily through its borrowing activities. The Company’s objective is to mitigate the impact of interest rate changes on earnings and cash flows and on the market value of its borrowings. In accordance with its policy, the Company targets its fixed-rate debt as a percentage of its net debt between a minimum and maximum percentage. The Company primarily uses pay-floating and pay-fixed interest rate swaps to facilitate its interest rate risk management activities.
The Company designates pay-floating interest rate swaps as fair value hedges of fixed-rate borrowings effectively converting fixed-rate borrowings to variable rate borrowings indexed to LIBOR. As of March 30, 2019 and September 29, 2018, thevariable-rate borrowings. The total notional amount of the Company’s pay-floating interest rate swaps at both December 30, 2023 and September 30, 2023 was $7.2 billion and $7.6 billion, respectively.
THE WALT DISNEY COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited; tabular dollars in millions, except for per share data)


$13.5 billion.
The following table summarizes fair value hedge adjustments to hedged borrowings at March 30, 2019 and September 29, 2018:borrowings:
Carrying Amount of Hedged BorrowingsFair Value Adjustments Included
in Hedged Borrowings
December 30,
2023		September 30,
2023		December 30,
2023		September 30,
2023
Borrowings:
Current$2,381    $1,439    $(60)   $(59)   
Long-term10,296 10,748 (1,253)(1,694)
$12,677 $12,187 $(1,313)$(1,753)
 
Carrying Amount of Hedged Borrowings (1)
 
Fair Value Adjustments Included
in Hedged Borrowings (1)
 March 30, 2019 September 29, 2018 March 30, 2019 September 29, 2018
Borrowings:       
Current$1,245
 $1,585
 $(4) $(14)
Long-term6,623
 6,425
 (66) (290)
 $7,868
 $8,010
 $(70) $(304)
(1)
Includes $39 million and $41 million of gains on terminated interest rate swaps as of March 30, 2019 and September 29, 2018, respectively.
The following amounts are included in “Interest expense, net” in the Condensed Consolidated Statements of Income:
 Quarter Ended Six Months Ended
 March 30,
2019		 March 31,
2018		 March 30,
2019		 March 31,
2018
Gain (loss) on:       
Pay-floating swaps$117
 $(102) $234
 $(166)
Borrowings hedged with pay-floating swaps(117) 102
 (234) 166
Benefit (expense) associated with interest accruals on pay-floating swaps(18) —
 (32) 7

 Quarter Ended
 December 30,
2023		December 31,
2022
Gain (loss) on:
Pay-floating swaps$432 $71 
Borrowings hedged with pay-floating swaps(432)  (71)  
Benefit (expense) associated with interest accruals on pay-floating swaps(154)(95)
The Company may designate pay-fixed interest rate swaps as cash flow hedges of interest payments on floating-rate borrowings. Pay-fixed interest rate swaps effectively convert floating-rate borrowings to fixed-rate borrowings. The unrealized gains or losses from these cash flow hedges are deferred in AOCI and recognized in interest expense as the interest payments occur. The Company did not have pay-fixed interest rate swaps that were designated as cash flow hedges of interest payments at MarchDecember 30, 20192023 or at September 29, 2018,30, 2023, and gains and losses related to pay-fixed interest rate swaps recognized in earnings for the quarterquarters ended December 30, 2023 and six months ended March 30, 2019 and MarchDecember 31, 20182022 were not material.
24
THE WALT DISNEY COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited; tabular dollars in millions, except for per share data)

To facilitate its interest rate risk management activities, the Company sold options in November 2016, October 2017 and April 2018 to enter into a future pay-floating interest rate swaps indexed to LIBOR for $2.0 billion in future borrowings. The fair values of these contracts as of March 30, 2019 or at September 29, 2018 were not material. The options are not designated as hedges and do not qualify for hedge accounting; accordingly, changes in their fair value are recorded in earnings. Gains and losses on the options for the quarter and six months ended March 30, 2019 and March 31, 2018 were not material.
Foreign Exchange Risk Management
The Company transacts business globally and is subject to risks associated with changing foreign currency exchange rates. The Company’s objective is to reduce earnings and cash flow fluctuations associated with changes in foreign currency exchange rate changes,rates, enabling management to focus on core business issues and challenges.operations.
The Company enters into option and forward contracts that change in value as foreign currency exchange rates change to protect the value of its existing foreign currency assets, liabilities, firm commitments and forecasted but not firmly committed foreign currency transactions. In accordance with policy, the Company hedges its forecasted foreign currency transactions for periods generally not to exceed four years within an established minimum and maximum range of annual exposure. The gains and losses on these contracts offset changes in the U.S. dollar equivalent value of the related forecasted transaction, asset, liability or firm commitment. The principal currencies hedged are the euro, Canadian dollar, Japanese yen, British pound and Chinese yuan and Canadian dollar.yuan. Cross-currency swaps are used to effectively convert foreign currency denominated borrowings into U.S. dollar denominated borrowings.
The Company designates foreign exchange forward and option contracts as cash flow hedges of firmly committed and forecasted foreign currency transactions. As of MarchDecember 30, 20192023 and September 29, 2018,30, 2023, the notional amounts of the Company’s net foreign exchange cash flow hedges were $6.4$9.5 billion and $6.2$8.3 billion, respectively. Mark-to-market gains and losses on these contracts are deferred in AOCI and are recognized in earnings when the hedged transactions occur, offsetting changes in the value of the foreign currency transactions. Net deferred gains recorded in AOCI for contracts that will mature in
THE WALT DISNEY COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited; tabular dollars in millions, except for per share data)


the next twelve months total $131$230 million. The following table summarizes the effect of foreign exchange cash flow hedges on AOCI:
Quarter Ended
December 30,
2023		December 31,
2022
Gain (loss) recognized in Other Comprehensive Income$(264)$(502)
Gain (loss) reclassified from AOCI into the Statements of Operations(1)
141    222    
(1)Primarily recorded in revenue.
The Company designates cross currency swaps as fair value hedges of foreign currency denominated borrowings. The impact from the change in foreign currency on both the cross currency swap and borrowing is recorded to “Interest expense, net.” The impact from interest rate changes is recorded in AOCI and is amortized over the life of the cross currency swap. As of both December 30, 2023 and September 30, 2023, the total notional amount of the Company’s designated cross currency swaps was Canadian $1.3 billion ($1.0 billion). The related gains or losses recognized in earnings were not material for the quarterquarters ended December 30, 2023 and six months ended March 30, 2019:December 31, 2022.
Quarter Ended: 
Gain/(loss) recognized in Other Comprehensive Income$(91)
Gain/(loss) reclassified from AOCI into the Statement of Income (1)
20
  
Six Months Ended: 
Gain/(loss) recognized in Other Comprehensive Income(41)
Gain/(loss) reclassified from AOCI into the Statement of Income (1)
57
(1)
Primarily recorded in revenue.
Foreign exchange risk management contracts with respect to foreign currency denominated assets and liabilities are not designated as hedges and do not qualify for hedge accounting. The net notional amounts of these foreign exchange contracts at MarchDecember 30, 20192023 and September 29, 201830, 2023 were $2.5$2.9 billion and $3.3$3.1 billion, respectively. The following table summarizes the net foreign exchange gains or losses recognized on foreign currency denominated assets and liabilities and the net foreign exchange gains or losses on the foreign exchange contracts we entered into to mitigate our exposure with respect to foreign currency denominated assets and liabilities for the quarter and six months ended March 30, 2019 and March 31, 2018by the corresponding line item in which they are recorded in the Condensed Consolidated Statements of Income:
Costs and ExpensesInterest expense, netIncome Tax Expense
Quarter Ended:Quarter Ended:December 30,
2023		December 31,
2022		December 30,
2023		December 31,
2022		December 30,
2023		December 31,
2022
Net gains (losses) on foreign currency denominated assets and liabilities
Net gains (losses) on foreign exchange risk management contracts not designated as hedgesNet gains (losses) on foreign exchange risk management contracts not designated as hedges(126)  (213)  21   18   42   70   
Net gains (losses)
Costs and Expenses Interest expense, net Income Tax expense
Quarter Ended:March 30,
2019		 March 31,
2018		 March 30,
2019		 March 31,
2018		 March 30,
2019		 March 31,
2018
Net gain (loss) on foreign currency denominated assets and liabilities$1
 $64
 $(12) $24
 $—
 $(15)
Net gain (loss) on foreign exchange risk management contracts not designated as hedges(4) (77) 11
 (27) (4) 17
Net gain (loss)$(3) $(13) $(1) $(3) $(4) $2
           
Six Months Ended:           
Net gains (losses) on foreign currency denominated assets and liabilities$(26) $81
 $28
 $27
 $15
 $(12)
Net gains (losses) on foreign exchange risk management contracts not designated as hedges20
 (91) (28) (28) (22) 16
Net gains (losses)$(6) $(10) $—
 $(1) $(7) $4
Commodity Price Risk Management
The Company is subject to the volatility of commodities prices and the Company designates certain commodity forward contracts as cash flow hedges of forecasted commodity purchases. Mark-to-market gains and losses on these contracts are deferred in AOCI and are recognized in earnings when the hedged transactions occur, offsetting changes in the value of commodity purchases. The notional amount of these commodities contracts at MarchDecember 30, 20192023 and September 29, 201830, 2023 and
25
THE WALT DISNEY COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited; tabular dollars in millions, except for per share data)

 and
related gains or losses recognized in earnings for the quarterquarters ended December 30, 2023 and six months ended March 30, 2019 and MarchDecember 31, 20182022 were not material.
Risk Management – Other Derivatives Not Designated as Hedges
The Company enters into certain other risk management contracts that are not designated as hedges and do not qualify for hedge accounting. These contracts, which include certain total return swap contracts, are intended to offset economic exposures of the Company and are carried at market value with any changes in value recorded in earnings. The notional amount and fair valueamounts of these contracts at MarchDecember 30, 20192023 and September 29, 201830, 2023 were not material.$0.5 billion and $0.4 billion, respectively. The related gains or losses recognized in earnings were not material for the quarterquarters ended December 30, 2023 and six months ended March 30, 2019 and MarchDecember 31, 2018 were not material.2022.
Contingent Features and Cash Collateral
The Company has master netting arrangements by counterparty with respect to certain derivative financial instrument contracts. The Company may be required to post collateral in the event that a net liability position with a counterparty exceeds
THE WALT DISNEY COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited; tabular dollars in millions, except for per share data)


limits defined by contract and that vary with the Company’s credit rating. In addition, these contracts may require a counterparty to post collateral to the Company in the event that a net receivable position with a counterparty exceeds limits defined by contract and that vary with the counterparty’s credit rating. If the Company’s or the counterparty’s credit ratings were to fall below investment grade, such counterparties or the Company would also have the right to terminate our derivative contracts, which could lead to a net payment to or from the Company for the aggregate net value by counterparty of our derivative contracts. The aggregate fair values of derivative instruments with credit-risk-related contingent features in a net liability position by counterparty were $176$1.5 billion and $1.6 billion at December 30, 2023 and September 30, 2023, respectively.
16.Restructuring and Impairment Charges
In the prior-year quarter ended December 31, 2022, the Company recognized restructuring charges of $69 million and $299 million on March 30, 2019 and September 29, 2018, respectively.
16.Restructuring Charges
The Company has begun implementing a restructuring and integration plan as a part of its initiativerelated to realize previously announced cost synergies from the acquisition of 21CF. Althoughexiting our plans are not yet finalized, we currently anticipate that the total severance and related costs could be on the order of $1.5 billion. To date, we have recorded severance and related costs totaling $403 millionbusinesses in connection with the plan. In addition, we recorded charges totaling $259 million for equity based compensation, primarily for 21CF awards that were accelerated to vest upon the closing of the 21CF acquisition.Russia. These charges are recorded in “Restructuring and impairment charges” in the Condensed Consolidated Statements of Income. The Company may incur other costs in connection with the plan such as lease termination costs, but is unable to estimate those amounts at this time. For the prior-year quarter and six-month period, restructuring and impairment charges were not material.
The following table summarizes the changes in restructuring reserves:
 
Beginning
Balance
 Additions Payments Other 
Ending
Balance
Quarter ended March 30, 2019:         
Restructuring reserves$39
 $403
 $(19) $—
 $423

17.New Accounting Pronouncements

17.Condensed Consolidating Financial Information
Legacy Disney has outstanding public debt that has been fully and unconditionally guaranteed by TWDC. In addition, Legacy Disney has provided a full and unconditional guarantee of debt held by TWDC. Legacy Disney is a 100% owned subsidiary of TWDC.
Set forth below are condensed consolidating financial statements presenting the results of operations, financial position and cash flows of TWDC, Legacy Disney and non-guarantor subsidiaries on a combined basis along with eliminations necessary to arrive at the reported information on a consolidated basis. This condensed consolidating financial information has been prepared and presented pursuant to the Securities and Exchange Commission Regulation S-X Rule 3-10, “Financial Statements of Guarantors and Issuers of Guaranteed Securities Registered or being Registered.” This information is not intended to present the financial position, results of operations and cash flows of the individual companies or groups of companies in accordance with U.S. GAAP. Eliminations represent adjustments to eliminate investments in subsidiaries and intercompany balances and transactions.
Prior to March 20, 2019, Legacy Disney was the parent entity of TWDC. TWDC was formed in June 2018 and did not have any activity prior to fiscal 2019.
THE WALT DISNEY COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited; tabular dollars in millions, except for per share data)


SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENT OF INCOME
For the Quarter Ended March 30, 2019
(unaudited; in millions)
 TWDC Legacy Disney Non-Guarantor Subsidiaries Reclassifications & Eliminations Total
Revenues$—
 $—
 $14,896
 $26
 $14,922
Costs and expenses         
Operating expenses—
 —
 (8,376) —
 (8,376)
Selling, general, administrative and other—
 (218) (2,109) —
 (2,327)
Depreciation and amortization—
 (1) (827) —
 (828)
Total costs and expenses—
 (219) (11,312) —
 (11,531)
Restructuring and impairment charges—
 —
 (662) —
 (662)
Allocations to non-guarantor subsidiaries—
 203
 (203) —
 —
Other income, net—
 19
 4,970
 (26) 4,963
Interest expense, net(109) (112) 78
 —
 (143)
Equity in the income (loss) of investees, net—
 —
 (312) —
 (312)
Income from continuing operations before income taxes(109) (109) 7,455
 —
 7,237
Income taxes from continuing operations25
 25
 (1,697) —
 (1,647)
Earnings from subsidiary entities317
 5,982
 —
 (6,299) —
Net income from continuing operations233
 5,898
 5,758
 (6,299) 5,590
Income (loss) from discontinued operations21
 —
 21
 (21) 21
Consolidated net income254
 5,898
 5,779
 (6,320) 5,611
Less: Net income attributable to noncontrolling interests—
 —
 (159) —
 (159)
Net income excluding noncontrolling interests$254
 $5,898
 $5,620
 $(6,320) $5,452
Comprehensive income excluding noncontrolling interests$254
 $5,895
 $5,634
 $(6,335) $5,448
SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENT OF INCOME
For the Quarter Ended March 31, 2018
(unaudited; in millions)
 TWDC Legacy Disney Non-Guarantor Subsidiaries Reclassifications & Eliminations Total
Revenues$—
 $—
 $14,586
 $(38) $14,548
Costs and expenses         
Operating expenses—
 —
 (7,541) —
 (7,541)
Selling, general, administrative and other—
 (158) (2,081) —
 (2,239)
Depreciation and amortization—
 —
 (731) —
 (731)
Total costs and expenses—
 (158) (10,353) —
 (10,511)
Restructuring and impairment charges—
 1
 (14) —
 (13)
Allocations to non-guarantor subsidiaries—
 147
 (147) —
 —
Other income, net—
 (108) 111
 38
 41
Interest expense, net—
 (173) 30
 —
 (143)
Equity in the income (loss) of investees, net—
 —
 6
 —
 6
Income before taxes—
 (291) 4,219
 —
 3,928
Income taxes—
 70
 (883) —
 (813)
Earnings from subsidiary entities—
 3,158
 —
 (3,158) —
Consolidated net income—
 2,937
 3,336
 (3,158) 3,115
Less: Net income attributable to noncontrolling interests—
 —
 (178) —
 (178)
Net income excluding noncontrolling interests$—
 $2,937
 $3,158
 $(3,158) $2,937
Comprehensive income excluding noncontrolling interests$—
 $2,996
 $3,250
 $(3,250) $2,996
THE WALT DISNEY COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited; tabular dollars in millions, except for per share data)


SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENT OF INCOME
For the Six Months Ended March 30, 2019
(unaudited; in millions)
 TWDC Legacy Disney Non-Guarantor Subsidiaries Reclassifications & Eliminations Total
Revenues$—
 $—
 $30,144
 $81
 $30,225
Costs and expenses         
Operating expenses—
 —
 (17,377) —
 (17,377)
Selling, general, administrative and other—
 (359) (4,120) —
 (4,479)
Depreciation and amortization—
 (1) (1,559) —
 (1,560)
Total costs and expenses—
 (360) (23,056) —
 (23,416)
Restructuring and impairment charges—
 —
 (662) —
 (662)
Allocations to non-guarantor subsidiaries—
 330
 (330) —
 —
Other income, net—
 95
 4,949
 (81) 4,963
Interest expense, net(175) (236) 205
 —
 (206)
Equity in the income (loss) of investees, net—
 —
 (236) —
 (236)
Income from continuing operations before income taxes(175) (171) 11,014
 —
 10,668
Income taxes from continuing operations38
 37
 (2,367) —
 (2,292)
Earnings from subsidiary entities317
 8,886
 —
 (9,203) —
Net income from continuing operations180
 8,752
 8,647
 (9,203) 8,376
Income (loss) from discontinued operations21
 —
 21
 (21) 21
Consolidated net income201
 8,752
 8,668
 (9,224) 8,397
Less: Net income attributable to noncontrolling interests—
 —
 (157) —
 (157)
Net income excluding noncontrolling interests$201
 $8,752
 $8,511
 $(9,224) $8,240
Comprehensive income excluding noncontrolling interests$200
 $8,770
 $8,486
 $(9,199) $8,257
SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENT OF INCOME
For the Six Months Ended March 31, 2018
(unaudited; in millions)
 TWDC Legacy Disney Non-Guarantor Subsidiaries Reclassifications & Eliminations Total
Revenues$—
 $—
 $29,953
 $(54) $29,899
Costs and expenses         
Operating expenses—
 —
 (16,270) —
 (16,270)
Selling, general, administrative and other—
 (285) (4,041) —
 (4,326)
Depreciation and amortization—
 —
 (1,473) —
 (1,473)
Total costs and expenses—
 (285) (21,784) —
 (22,069)
Restructuring and impairment charges—
 —
 (28) —
 (28)
Allocations to non-guarantor subsidiaries—
 266
 (266) —
 —
Other income, net—
 (127) 167
 54
 94
Interest expense, net—
 (314) 42
 —
 (272)
Equity in the income (loss) of investees, net—
 —
 49
 —
 49
Income before taxes—
 (460) 8,133
 —
 7,673
Income taxes—
 35
 (120) —
 (85)
Earnings from subsidiary entities—
 7,785
 —
 (7,785) —
Consolidated net income—
 7,360
 8,013
 (7,785) 7,588
Less: Net income attributable to noncontrolling interests—
 —
 (228) —
 (228)
Net income excluding noncontrolling interests$—
 $7,360
 $7,785
 $(7,785) $7,360
Comprehensive income excluding noncontrolling interests$—
 $7,543
 $7,929
 $(7,929) $7,543

THE WALT DISNEY COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited; tabular dollars in millions, except for per share data)


CONDENSED CONSOLIDATING BALANCE SHEETS
As of March 30, 2019
(unaudited; in millions)
 TWDC Legacy Disney Non-Guarantor Subsidiaries Reclassifications & Eliminations Total
ASSETS         
Current assets         
Cash and cash equivalents$4,133
 $3
 $5,972
 $—
 $10,108
Receivables, net231
 —
 14,362
 —
 14,593
Inventories—
 4
 1,441
 —
 1,445
Television costs and advances—
 —
 5,408
 —
 5,408
Other current assets—
 96
 1,161
 —
 1,257
Assets held for sale—
 —
 1,466
 —
 1,466
Total current assets4,364
 103
 29,810
 —
 34,277
Film and television costs—
 —
 24,353
 —
 24,353
Investments in subsidiaries125,651
 158,701
 —
 (284,352) —
Other investments—
 —
 4,080
 —
 4,080
Parks, resorts and other property, net—
 11
 31,006
 —
 31,017
Intangible assets, net—
 —
 26,985
 —
 26,985
Goodwill—
 —
 75,057
 —
 75,057
Noncurrent assets held for sale—
 —
 13,182
 —
 13,182
Intercompany receivables4,226
 —
 139,527
 (143,753) —
Other assets110
 736
 5,176
 (631) 5,391
Total assets$134,351
 $159,551
 $349,176
 $(428,736) $214,342
LIABILITIES AND EQUITY         
Current liabilities         
Accounts payable and other accrued liabilities$169
 $292
 $20,042
 $—
 $20,503
Current portion of borrowings16,396
 2,506
 256
 —
 19,158
Deferred revenues and other—
 26
 4,255
 —
 4,281
Liabilities held for sale—
 —
 434
 —
 434
Total current liabilities16,565
 2,824
 24,987
 —
 44,376
Non-current liabilities         
Borrowings$20,353
 $14,880
 $2,570
 $—
 $37,803
Deferred income taxes—
 —
 11,839
 (631) 11,208
Noncurrent liabilities held for sale—
 —
 2,659
 —
 2,659
Other long-term liabilities751
 2,863
 9,240
 —
 12,854
Intercompany payables6,744
 132,342
 4,667
 (143,753) —
Total non-current liabilities27,848
 150,085
 30,975
 (144,384) 64,524
Redeemable noncontrolling interests—
 —
 1,103
 —
 1,103
Total Disney Shareholders’ equity89,938
 6,642
 277,710
 (284,352) 89,938
Noncontrolling interests—
 —
 14,401
 —
 14,401
Total equity89,938
 6,642
 292,111
 (284,352) 104,339
Total liabilities and equity$134,351
 $159,551
 $349,176
 $(428,736) $214,342
THE WALT DISNEY COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited; tabular dollars in millions, except for per share data)


CONDENSED CONSOLIDATING BALANCE SHEETS
As of September 29, 2018
(unaudited; in millions)
 TWDC Legacy Disney Non-Guarantor Subsidiaries Reclassifications & Eliminations Total
ASSETS         
Current assets         
Cash and cash equivalents$—
 $1,367
 $2,783
 $—
 $4,150
Receivables, net—
 155
 9,179
 —
 9,334
Inventories—
 4
 1,388
 —
 1,392
Television costs and advances—
 —
 1,314
 —
 1,314
Other current assets—
 152
 483
 —
 635
Total current assets—
 1,678
 15,147
 —
 16,825
Film and television costs—
 —
 7,888
 —
 7,888
Investments in subsidiaries—
 149,586
 —
 (149,586) —
Other investments—
 —
 2,899
 —
 2,899
Parks, resorts and other property, net—
 12
 29,528
 —
 29,540
Intangible assets, net—
 —
 6,812
 —
 6,812
Goodwill—
 —
 31,269
 —
 31,269
Intercompany receivables—
 —
 79,499
 (79,499) —
Other assets—
 911
 3,178
 (724) 3,365
Total assets$—
 $152,187
 $176,220
 $(229,809) $98,598
LIABILITIES AND EQUITY         
Current liabilities         
Accounts payable and other accrued liabilities$—
 $688
 $8,791
 $—
 $9,479
Current portion of borrowings—
 3,751
 39
 —
 3,790
Deferred revenues and other—
 115
 4,476
 —
 4,591
Total current liabilities—
 4,554
 13,306
 —
 17,860
Non-current liabilities         
Borrowings$—
 $15,676
 $1,408
 $—
 $17,084
Deferred income taxes—
 —
 3,833
 (724) 3,109
Other long-term liabilities—
 3,685
 2,905
 —
 6,590
Intercompany payables—
 79,499
 —
 (79,499) —
Total non-current liabilities—
 98,860
 8,146
 (80,223) 26,783
Redeemable noncontrolling interests—
 —
 1,123
 —
 1,123
Total Disney Shareholders’ equity—
 48,773
 149,586
 (149,586) 48,773
Noncontrolling interests—
 —
 4,059
 —
 4,059
Total equity—
 48,773
 153,645
 (149,586) 52,832
Total liabilities and equity$—
 $152,187
 $176,220
 $(229,809) $98,598

THE WALT DISNEY COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited; tabular dollars in millions, except for per share data)


CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS
For the Six Months Ended March 30, 2019
(unaudited; in millions)
 TWDC Legacy Disney Non-Guarantor Subsidiaries Reclassifications & Eliminations Total
OPERATING ACTIVITIES         
Cash provided by operations$534
 $(763) $6,403
 $(160) $6,014
          
INVESTING ACTIVITIES         
Investments in parks, resorts and other property—
 —
 (2,390) —
 (2,390)
Acquisitions(35,702) —
 25,801
 —
 (9,901)
Intercompany investing activities, net22,900
 —
 —
 (22,900) —
Other—
 —
 (392) —
 (392)
Cash used in investing activities(12,802) —
 23,019
 (22,900) (12,683)
         
FINANCING ACTIVITIES        
Commercial paper, net1,387
 (1,009) (2) —
 376
Borrowings31,100
 —
 45
 —
 31,145
Reduction of borrowings(16,100) (1,250) (48) —
 (17,398)
Dividends—
 (1,310) —
 —
 (1,310)
Repurchases of common stock—
 —
 —
 —
 —
Proceeds from exercise of stock options—
 83
 —
 —
 83
Intercompany financing and other, net14
 3,134
 (26,208) 23,060
 —
Other—
 (241) 41
 —
 (200)
Cash used in financing activities16,401
 (593) (26,172) 23,060
 12,696
          
Discontinued operations—
 —
 (35) —
 (35)
          
Impact of exchange rates on cash, cash equivalents and restricted cash—
 —
 75
 —
 75
          
Change in cash, cash equivalents and restricted cash4,133
 (1,356) 3,290
 —
 6,067
Cash, cash equivalents and restricted cash, beginning of year—
 1,367
 2,788
 —
 4,155
Cash, cash equivalents and restricted cash, end of period$4,133
 $11
 $6,078
 $—
 $10,222
THE WALT DISNEY COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited; tabular dollars in millions, except for per share data)


CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS
For the Six Months Ended March 31, 2018
(unaudited; in millions)
 TWDC Legacy Disney Non-Guarantor Subsidiaries Reclassifications & Eliminations Total
OPERATING ACTIVITIES         
Cash provided by operations$—
 $507
 $6,282
 $(26) $6,763
          
INVESTING ACTIVITIES         
Investments in parks, resorts and other property—
 (17) (2,027) —
 (2,044)
Acquisitions—
 —
 (1,581) —
 (1,581)
Intercompany investing activities, net—
 (1,581) —
 1,581
 —
Other—
 —
 (180) —
 (180)
Cash used in investing activities—
 (1,598) (3,788) 1,581
 (3,805)
         
FINANCING ACTIVITIES        
Commercial paper, net—
 1,372
 —
 —
 1,372
Borrowings—
 997
 51
 —
 1,048
Reduction of borrowings—
 (1,300) (50) —
 (1,350)
Dividends—
 (1,266) (26) 26
 (1,266)
Repurchases of common stock—
 (2,608) —
 —
 (2,608)
Intercompany financing and other, net—
 4,297
 (2,716) (1,581) —
Proceeds from exercise of stock options—
 91
 —
 —
 91
Other—
 (159) (10) —
 (169)
Cash used in financing activities—
 1,424
 (2,751) (1,555) (2,882)
          
Impact of exchange rates on cash, cash equivalents and restricted cash—
 —
 55
 —
 55
          
Change in cash, cash equivalents and restricted cash—
 333
 (202) —
 131
Cash, cash equivalents and restricted cash, beginning of year—
 693
 3,371
 —
 4,064
Cash, cash equivalents and restricted cash, end of period$—
 $1,026
 $3,169
 $—
 $4,195

18.New Accounting Pronouncements
Accounting Pronouncements Adopted in Fiscal 2019
Revenues from Contracts with Customers - See Note 3
Intra-Entity Transfers of Assets Other Than Inventory - See Note 8
Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost - See Note 9
Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income - See Note 11
Recognition and Measurement of Financial Assets and Liabilities - See Note 11
Targeted Improvements to Accounting for Hedging Activities - The adoption of the new guidance did not have a material impact on our consolidated financial statementsReportable Segments Disclosures
Leases
In February 2016,November 2023, the FASB issued new lease accounting guidance whichthat enhances reportable segment disclosures by requiring the disclosure of significant expenses that are regularly provided to the chief operating decision maker (CODM) and included in the segment’s measure of profit or loss. It also requires an explanation of how the present valueCODM uses the segment’s measure of committed operating lease paymentsprofit or loss to be recorded as right-of-use lease assetsassess segment performance and lease liabilities on the balance sheet.allocate resources. The guidance is effective at the beginning of the Company’s 2020 fiscal year. We expect to adopt the guidance without restating prior periods.
The new guidance provides a number of practical expedients for transition upon adoption. The Company expects to elect the practical expedients that permit the Company not to reassess its prior conclusions concerning whether:
Arrangements contain a lease
•
The Company’s lease arrangements are operating or capital leases (financing)
Initial direct costs should be capitalized
THE WALT DISNEY COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited; tabular dollarsbeginning in millions, exceptfiscal year 2025 for per share data)


Existing land easements are leases
annual periods and beginning in fiscal year 2026 for interim periods and requires retrospective adoption (with early adoption permitted). The Company is currently assessing the impactimpacts of the new guidance on its financial statements. We believe the most significant effects of adoption will be:statement disclosures.
Recognizing new right-of-use assets and lease liabilities on our balance sheet for our operating leases
Reclassifying a deferred gain of approximately $350 million related to a prior sale-leaseback transaction to retained earnings
As of September 29, 2018, the Company had an estimated $3.6 billion in undiscounted future minimum lease commitments. The Company also assumed an estimated $1 billion in undiscounted future minimum lease commitments in connection with the acquisition of 21CF and consolidation of Hulu.
Improvements to Accounting for Costs of Films and License Agreements for Program MaterialsIncome Tax Disclosures
In March 2019,December 2023, the FASB updatedissued guidance for the accounting for film and television content costs.that enhances income tax disclosures. The new guidance impactsrequires an expanded rate reconciliation and the capitalization, amortizationdisaggregation of cash taxes paid by U.S. federal, U.S. state and impairment of these costs as follows:
Eliminates the limitation on capitalization of production costs for episodic content, aligning the capitalization model with film content;
Requires production costs amortized using estimated usageforeign jurisdictions and eliminates certain disclosures related to be reviewed and updated each reporting period, with any changes in estimated usage applied prospectively; and
Requires produced and acquired programming costs to be tested for impairment based on the lowest level of identifiable cash flows using the predominant monetization strategy for the produced content (i.e., monetized individually or in a group)
While we currently do not expect the new guidance will have a material impact on our financial statements, it is relevant to the accounting for content to be used on our streaming services.uncertain tax benefits. The guidance is effective atfor annual periods beginning with the beginning of the Company’s 2021Company’s 2026 fiscal year (with early adoption permitted) and requires prospective adoption.. The Company plans to adoptis currently assessing the impacts of the new guidance by the beginning of fiscal 2020.on its financial statement disclosures.
26





MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Item 2: Management’s Discussion and Analysis of Financial Condition and Results of Operations
ORGANIZATION OF INFORMATION
Management’s Discussion and Analysis provides a narrative of the Company’s financial performance and condition that should be read in conjunction with the accompanying financial statements. It includes the following sections:
•Consolidated Results and Non-segment Items
Seasonality•Current Quarter Results Compared to Prior-Year Quarter
•Seasonality
•Business Segment Results
Restructuring in Connection with the Acquisition of 21CF•Corporate and Unallocated Shared Expenses
•Financial Condition
•Commitments and Contingencies
•Other Matters
•DTC Product Descriptions, Key Definitions and Supplemental Information
•Supplemental Guarantor Financial Information
•Market Risk
CONSOLIDATED RESULTS AND NON-SEGMENT ITEMS
Quarter Ended% Change
Better
(Worse)
(in millions, except per share data)December 30,
2023		December 31,
2022
Revenues:
Services$20,975 $20,997 —  %
Products2,574 2,515 2  %
Total revenues23,549 23,512 —  %
Costs and expenses:
Cost of services (exclusive of depreciation and amortization)(13,922)(14,781)6  %
Cost of products (exclusive of depreciation and amortization)(1,665)(1,605)(4) %
Selling, general, administrative and other(3,783)(3,827)1  %
Depreciation and amortization(1,243)(1,306)5  %
Total costs and expenses(20,613)(21,519)4  %
Restructuring and impairment charges— (69)100  %
Other expense, net— (42)100  %
Interest expense, net(246)(300)18  %
Equity in the income of investees181 191 (5) %
Income before income taxes2,871 1,773 62  %
Income taxes(720)(412)(75) %
Net income2,151 1,361 58  %
Net income attributable to noncontrolling interests(240)(82)>(100) %
Net income attributable to Disney$1,911 $1,279 49  %
Diluted earnings per share attributable to Disney$1.04 $0.70 49  %
Our summary consolidated results are presented below:
CURRENT QUARTER RESULTS COMPARED TO PRIOR-YEAR QUARTER
Revenues for the quarter were comparable to the prior-year quarter at $23.5 billion; net income attributable to Disney increased to $1.9 billion in the current quarter compared to $1.3 billion in the prior-year quarter; and diluted earnings per share (EPS) attributable to Disney increased to $1.04 compared to $0.70 in the prior-year quarter. The EPS increase was primarily due to higher operating income at Entertainment, Experiences and, to a lesser extent, Sports.
27
 Quarter Ended % Change Six Months Ended % Change
(in millions, except per share data)March 30,
2019		 March 31,
2018		 
Better/
(Worse)
 March 30,
2019		 March 31,
2018		 Better/
(Worse)
Revenues:          

Services$13,006
 $12,520
 4 % $25,872
 $25,504
 1 %
Products1,916
 2,028
 (6) % 4,353
 4,395
 (1) %
Total revenues14,922
 14,548
 3 % 30,225
 29,899
 1 %
Costs and expenses:    

     

Cost of services (exclusive of depreciation and amortization)(7,167) (6,313) (14) % (14,731) (13,637) (8) %
Cost of products (exclusive of depreciation and amortization)(1,209) (1,228) 2 % (2,646) (2,633) — %
Selling, general, administrative and other(2,327) (2,239) (4) % (4,479) (4,326) (4) %
Depreciation and amortization(828) (731) (13) % (1,560) (1,473) (6) %
Total costs and expenses(11,531) (10,511) (10) % (23,416) (22,069) (6) %
Restructuring and impairment charges(662) (13) >(100) % (662) (28) >(100) %
Other income4,963
 41
 >100 % 4,963
 94
 >100 %
Interest expense, net(143) (143) — % (206) (272) 24 %
Equity in the income / (loss) of investees, net(312) 6
 nm
 (236) 49
 nm
Income from continuing operations before income taxes7,237
 3,928
 84 % 10,668
 7,673
 39 %
Income taxes from continuing operations(1,647) (813) >(100) % (2,292) (85) >(100) %
Net income from continuing operations5,590
 3,115
 79 % 8,376
 7,588
 10 %
Income (loss) from discontinued operations (net of income taxes of $5, $0, $5 and $0, respectively)21
 —
 nm
 21
 —
 nm
Consolidated net income5,611
 3,115
 80 % 8,397
 7,588
 11 %
Less: Net income attributable to noncontrolling interests(159) (178) 11 % (157) (228) 31 %
Net income attributable to Disney$5,452
 $2,937
 86 % $8,240
 $7,360
 12 %
Diluted earnings per share from continuing operations attributable to Disney$3.53
1.9450331126
$1.95
 81 % $5.42
4.8580858086
$4.86
 12 %
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS — (continued)


The Company’s financial results for fiscal 2019 are presented in accordance with new accounting guidance for revenue recognition (ASC 606) that we adopted at the beginning of fiscal 2019. Prior period results have not been restated to reflect this change in accounting guidance. Current quarter segment operating income includes a $27 million unfavorable impact from the ASC 606 adoption while the current six-month segment operating income includes an $88 million benefit. For the current quarter the most significant ASC 606 impacts were a $63 million decrease at Parks, Experiences and Products and a $30 million decrease at Media Networks, both of which reflected a change in timing of revenue recognition on contracts with minimum guarantees. These impacts were partially offset by a $71 million increase at Studio Entertainment, which reflected a change in the timing of revenue recognition at our TV/SVOD distribution business. For the six months, the most significant benefit from ASC 606 was a $90 million increase at Studio Entertainment for the timing of revenue recognition at our TV/SVOD distribution business. We do not anticipate the impact of adoption of ASC 606 on our full-year fiscal 2019 results will be material. Further information about our adoption of ASC 606 is provided in Note 3 to the Condensed Consolidated Financial Statements.
Results for 21CF in the current quarter and six months are not included in our segments results and are reported separately. We currently plan to include 21CF’s results in our historical segments when we report third-quarter results. Hulu’s results for the period of consolidation and for the period the Company recorded equity method earnings are reported as part of Direct to Consumer & International.
Quarter Results
Revenues for the quarter increased 3%, or $0.4 billion, to $14.9 billion; net income attributable to Disney increased by $2.5 billion, to $5.5 billion; and diluted earnings per share from continuing operations attributable to Disney (EPS) increased 81% from $1.95 to $3.53. The EPS increase for the quarter was due to a non-cash gain recognized in connection with the acquisition of a controlling interest in Hulu (Hulu gain), partially offset by lower segment operating income, severance and related charges and equity based compensation costs in connection with the acquisition and integration of 21CF and the absence of a benefit in the prior-year quarter related to new federal income tax legislation, the “Tax Cuts and Jobs Act” (Tax Act) (See Note 8 to the Condensed Consolidated Financial Statements). Lower segment operating income was due to a decrease at Studio Entertainment, increased losses at Direct-to-Consumer & International and a decrease at Media Networks, partially offset by growth at Parks, Experiences and Products.
Revenues
Service revenues for the quarter were comparable to prior-year quarter at $21.0 billion as lower theatrical distribution revenue and, to a lesser extent, lower TV/VOD distribution revenue were largely offset by higher DTC subscription revenue and increased 4%, or $0.5 billion, to $13.0 billion due to the consolidation of 21CF and Hulu, higher affiliate fees and growth in guest spendingrevenues at our theme parks and resorts, partially offset by lower theatrical distribution revenue and a decrease in program sales at our Media Networks segment. Service revenues reflected an approximate 1 percentage point decrease due to an unfavorable movement of the U.S. dollar against major currencies including the impact of our hedging program (FX Impact).resorts.
Product revenues for the quarter decreased 6%increased 2%, or $0.1 billion, to $1.9$2.6 billion due to lower home entertainmenthigher sales volumes partially offset by guest spending growthof merchandise, food and beverage at our theme parks and resorts. Product revenues reflected an approximate 1 percentage point decrease due to an unfavorable FX Impact.
Costs and expenses
Cost of services for the quarter increased 14%decreased 6%, or $0.9 billion, to $7.2$13.9 billion primarily due to the consolidation of 21CF and Hulu, higherlower programming and production costs an increase inand, to a lesser extent, lower technical support costs, partially offset by the impact of inflation and increased volumes at our DTC businesstheme parks and laborresorts. The decrease in programming and production costs was due to lower amortization resulting from lower theatrical and TV/VOD distribution revenue and a decrease in programming and production cost amortization at Entertainment Linear Networks and Direct-to-Consumer, partially offset by Sports.
Cost of products for the quarter increased 4%, or $0.1 billion, to $1.7 billion due to higher sales volumes of merchandise, food and beverage and cost inflation at our theme parks and resorts.
Cost of products for the quarterSelling, general, administrative and other costs decreased 2%, or $19 million,1% to $3.8 billion, primarily due to lower marketing costs.
Depreciation and amortization decreased 5% to $1.2 billion due to lower home entertainment volumesTFCF and Hulu acquisition amortization and lower depreciation at Experiences.
Restructuring and impairment charges
In the prior-year quarter, the Company recognized charges of $69 million related to exiting our businesses in Russia.
Other expense, net
Other expense, net in the prior-year quarter included a DraftKings loss of $70 million, partially offset by higher guest spending costs at our theme parks and resorts. Costa $28 million gain on the sale of products reflected an approximate 2 percentage point decreasea business.
Interest expense, net
Interest expense, net is as follows:
Quarter Ended
(in millions)December 30,
2023		December 31,
2022		% Change
Better (Worse)
Interest expense$(528)$(465)(14) %
Interest income, investment income and other282    165    71  %
Interest expense, net$(246)$(300)18  %
The increase in interest expense was due to a favorable FX Impact.higher average rates, partially offset by lower average debt balances.
Selling, general, administrativeThe increase in interest income, investment income and other costs increased 4%, or $88was driven by higher interest income on cash balances reflecting an increase in interest rates.
Equity in the Income of Investees
Income from equity investees decreased $10 million, to $2.3 billion driven by the consolidation of 21CF and Hulu and costs associated with the acquisition of 21CF. Selling, general, administrative and other costs reflected an approximate 3 percentage point decrease due to a favorable FX Impact.
Depreciation and amortization increased 13%, or $97$181 million to $828from $191 million, due to the consolidation of 21CF and Hulu and depreciation of technology investments at our Direct-to-Consumer & International segment.lower income from A+E Television Networks.
28
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS — (continued)


Income Taxes
Restructuring and impairment charges
Quarter Ended
December 30,
2023		December 31,
2022
Income before income taxes$2,871       $1,773       
Income tax720       412       
Effective income tax rate25.1 %23.2 %
Restructuring and impairment charges of $662 million for the current quarter were for severance and related charges and equity based compensation costs in connection with the acquisition and integration of 21CF.
Restructuring and impairment charges of $13 million in the prior-year quarter were primarily severance costs.
Other income
Other income of $5.0 billion in the current year was due to the Hulu gain.
Other income of $41 million in the prior-year quarter was due to insurance recoveries related to a legal matter.
Interest expense, net
Interest expense, net is as follows: 
 Quarter Ended 
(in millions)March 30,
2019		 March 31,
2018		 
% Change
Better/(Worse)
Interest expense$(198) $(172) (15) %
Interest income, investment income and other55
 29
 90 %
Interest expense, net$(143) $(143) — %
The increase in interest expense was due to higher average interest rates and financing costs related to the 21CF acquisition, partially offset by market value adjustments on pay-floating interest rate swap options and higher capitalized interest.
The increase in interest income, investment income and other was due to the inclusion of a $22 million benefit related to pension and postretirement benefit costs, other than service cost. The Company adopted new accounting guidance in fiscal 2019 and now presents the elements of pension and postretirement plan costs, other than service cost, in “Interest expense, net.” The comparable benefit of $6 million in the prior-year quarter was reported in “Costs and expenses.” The benefit in the current quarter was due to the expected return on pension plan assets exceeding interest expense on plan liabilities and amortization of prior net actuarial losses.
Equity in the income / (loss) of investees
Equity in the income / (loss) of investees decreased $318 million to a loss of $312 million for the quarter due to an impairment of our investment in Vice, partially offset by the impact of consolidating Hulu. In the current quarter, 11 days of Hulu’s results are reported in revenues and expenses. Prior to the consolidation of Hulu, the Company recognized its ownership share of Hulu’s results in equity in the income of investees.
Effective Income Tax Rate
 Quarter Ended  
 March 30,
2019		 March 31,
2018		 
Change
Better/(Worse)
Effective income tax rate22.8% 20.7% (2.1)ppt
The increase in the effective income tax rate was due to the comparison to a $0.1 billion benefitimpact of adjustments related to prior years, which was unfavorable in the Tax Act recognizedcurrent quarter and favorable in the prior-year quarter, and an unfavorable impact in the current year from a change in our full year estimated effective tax rate. The estimated full year effective rate is used to determine the quarterly income tax provision and is adjusted each quarter based on information available at the end of that quarter. These increases were partially offset by a reduction inlower effective tax rates on foreign earnings compared to the Company’s U.S. statutory federal income tax rate to 21.0% in fiscal 2019 from 24.5% in fiscal 2018.prior-year quarter.
Noncontrolling Interests
Quarter Ended  
Quarter Ended
(in millions)
(in millions)
(in millions)March 30,
2019		 March 31,
2018		 
% Change
Better/(Worse) 
December 30,
2023		December 31,
2022		% Change
Better (Worse) 
Net income attributable to noncontrolling interests$(159) $(178) 11%Net income attributable to noncontrolling interests$(240)$(82)>(100) %
The decreaseincrease in net income attributable to noncontrolling interests was primarily due to improved results at our Asia Theme Parks, the accretion of Hulu’s noncontrolling interest to the amount paid to NBCU in December 2023 (see Note 1 to the Condensed Consolidated Financial Statements) and, to a higher loss from our direct-to-consumer sports business and the consolidation of a losslesser extent, improved results at Hulu,ESPN, partially offset by growth at ESPN and Hong Kong Disneyland Resort.the comparison to the impact of the prior year purchase of Major League Baseball’s 15% interest in BAMTech LLC.
Net income attributable to noncontrolling interests is determined on income after royalties and management fees, financing costs and income taxes, as applicable.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS — (continued)


Certain Items Impacting ComparabilityResults in the Quarter
Results for the quarter ended MarchDecember 30, 20192023 were impacted by the following:
•The Hulu gain of $4.9 billion
•A benefit of $46 million from insurance recoveries related to a legal matter
•Restructuring charges of $662 million
•An impairment of our investment in Vice of $353 million
Amortization of $105 million related to 21CFTFCF and Hulu intangible assets and fair value step-up on film and television costsacquisition amortization of $451 million
Results for the quarter ended MarchDecember 31, 20182022 were impacted by the following:
•A benefitTFCF and Hulu acquisition amortization of $134$579 million from the Tax Act
•A benefitImpairment charges of $38$69 million from insurance recoveries related to a legal matter
•Restructuring chargesOther expense, net of $13$42 million due to the DraftKings loss of $70 million, partially offset by a $28 million gain on the sale of a business
A summary of the impact of these items on EPS is as follows:
(in millions, except per share data)Pre-Tax Income (Loss)
Tax Benefit (Expense)(1)
After-Tax Income (Loss)
EPS Favorable (Adverse)(2)
Quarter Ended December 30, 2023:
TFCF and Hulu acquisition amortization$(451)   $106  $(345)$(0.18)   
Quarter Ended December 31, 2022:
TFCF and Hulu acquisition amortization$(579)$135  $(444)$(0.24)   
Restructuring and impairment charges(69)8    (61)   (0.03)
Other expense, net(42)16    (26)   (0.01)
Total$(690)$159  $(531)$(0.29)
(1)Tax benefit (expense) amounts are determined using the tax rate applicable to the individual item.
(in millions, except per share data)Pre-Tax Income/(Loss) 
Tax Benefit/(Expense)(1)
 After-Tax Income/(Loss) 
EPS Favorable/(Adverse) (2)
Quarter Ended March 30, 2019:       
Hulu gain$4,917
 $(1,131) $3,786
 $2.46
Insurance recoveries related to a legal matters46
 (11) 35
 0.02
Restructuring and impairment charges(662) 152
 (510) (0.33)
Impairment of Vice(353) 81
 (272) (0.18)
Amortization of 21CF and Hulu intangible assets and fair value step-up on film and television costs(105) 24
 (81) (0.05)
Total$3,843
 $(885) $2,958
 $1.92
        
Quarter Ended March 31, 2018:       
Net benefit from the Tax Act$—
 $(134) $(134) $0.09
Insurance recoveries related to a legal matter38
 (10) 28
 0.02
Restructuring and impairment charges(13) 3
 (10) (0.01)
Total$25
 $(141) $(116) $0.10
(2)(1)
Tax benefit/expense adjustments are determined using the tax rate applicable to the individual item affecting comparability.
(2)
EPS is net of noncontrolling interest share, where applicable. Total may not equal the sum of the column due to rounding.

Six-Month Results
Revenues for the six-month period increased 1%, or $326 million, to $30.2 billion; net income attributable to Disney increased 12%, or $0.9 billion, to $8.2 billion; and EPS increased 12% from $4.86 to $5.42. The EPS increase for the six-month period was due the Hulu gain, partially offset by the comparison to a benefit from the Tax Act in the prior year, lower segment operating income and severance and related charges and equity compensation costs in connection with the acquisition and integration of 21CF. The decrease in segment operating income was due to lower results at Studio Entertainment and increased losses at Direct-to-Consumer & International, partially offset by growth at Parks, Experiences and Products.
Revenues
Service revenues for the six-month period increased 1%, or $368 million, to $25.9 billion due to the consolidation of 21CF and Hulu, higher guest spending at our theme parks and resorts, affiliate fee growth and an increase in TV/SVOD distribution revenue. These increases were partially offset by lower theatrical distribution revenue.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS — (continued)


Product revenues for the six-month period decreased 1%, or $42 million, to $4.4 billion due to lower domestic home entertainment volumes, partially offset by increases in guest spending at our theme parks and resorts. Product revenues reflected an approximate 1 percentage point decrease due to an unfavorable FX Impact.
Costs and expenses
Cost of services for the six-month period increased 8%, or $1.1 billion, to $14.7 billion, due to the consolidation of 21CF and Hulu, higher programming and production costs, higher technical support costs at our DTC business and labor cost inflation at our theme parks and resorts. These increases were partially offset by a decrease in film cost amortization driven by the impact of lower theatrical distribution revenue.
Cost of products for the six-month period was comparable to the prior-year period at $2.6 billion as labor cost inflation at our theme parks and resorts was offset by lower home entertainment volumes. Cost of products reflected an approximate 2 percentage point decrease due to a favorable FX Impact.
Selling, general, administrative and other costs for the six-month period increased 4%, or $0.2 billion, to $4.5 billion, primarily due to the consolidation of 21CF and Hulu, costs associated with the acquisition of 21CF and higher marketing costs. Selling, general, administrative and other costs reflected an approximate 2 percentage point decrease due to a favorable FX Impact.
Depreciation and amortization increased 6%, or $87 million, to $1,560 million, due to the consolidation of 21CF and Hulu and depreciation of technology investments at our Direct-to-Consumer & International segment.
Restructuring and impairment charges
Restructuring and impairment charges of $662 million for the current period were for severance and related charges and equity compensation costs in connection with the acquisition and integration of 21CF.
Restructuring and impairment charges of $28 million in the prior-year period were primarily severance costs.
Other income
Other income of $5.0 billion in the current period was due to the Hulu gain.
Other income of $94 million for the prior-year period reflects a gain from the sale of property rights and insurance recoveries related to a legal matter.
Interest expense, netrounding.
Interest expense, net is as follows: 
 Six Months Ended  
(in millions)March 30,
2019		 March 31,
2018		 
% Change
Better/(Worse)
Interest expense$(361) $(318) (14) %
Interest income, investment income and other155
 46
 >100 %
Interest expense, net$(206) $(272) 24 %
The increase in interest expense for the six-month period was due to financing costs related to the 21CF acquisition and higher average interest rates, partially offset by higher capitalized interest, market value adjustments on pay-floating interest rate swap options and lower average debt balances.
The increase in interest income, investment income and other was due to unrealized investment gains in the current six month period and the inclusion of a $47 million benefit related to pension and postretirement benefit costs, other than service cost. The comparable benefit of $13 million in the prior-year six month period was reported in “Costs and expenses.” The benefit in the current six month period was due to the expected return on pension plan assets exceeding interest expense on plan liabilities and amortization of prior net actuarial losses.
Equity in the income / (loss) of investees
Equity in the income / (loss) of investees decreased $285 million to a loss of $236 million for the current period due to an impairment of our investment in Vice, partially offset by lower equity losses from Hulu as a result of our consolidation of Hulu following the 21CF acquisition and higher income from A+E Television Network (A+E). Hulu results were due to higher subscription and advertising revenue, partially offset by higher programming costs. The increase at A+E was driven by higher program sales revenue, lower marketing costs and affiliate revenue growth.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS — (continued)


Effective Income Tax Rate
 Six Months Ended  
 March 30,
2019		 March 31,
2018		 
Change
Better/(Worse)
Effective income tax rate21.5% 1.1% (20.4)ppt
The increase in the effective income tax rate reflected the comparison to a $1.7 billion (22.1 percentage point) net benefit related to the Tax Act that was recognized in the prior-year period. The current period benefited from a reduction in the Company’s U.S. statutory federal income tax rate to 21.0% in fiscal 2019 from 24.5% in fiscal 2018.
Refer to Note 8 of the Condensed Consolidated Financial Statements for further information on the impact of the Tax Act on the Company.
Noncontrolling Interests
 Six Months Ended  
(in millions)March 30,
2019		 March 31,
2018		 
% Change
Better/(Worse) 
Net income attributable to noncontrolling interests$(157) $(228) 31%
The decrease in net income attributable to noncontrolling interests for the six-month period was due to higher losses from our direct-to-consumer sports business, lower earnings at ESPN (largely due to a Tax Act benefit recognized in the prior-year period) and the consolidation of losses from Hulu.
Certain Items Impacting Comparability
Results for the six months ended March 30, 2019 were impacted by the following:
•The Hulu gain totaling $4.9 billion
•A benefit of $46 million from insurance recoveries related to a legal matter
•A benefit of $34 million from the Tax Act
•Restructuring charges of $662 million
•An impairment of our investment in Vice of $353 million
Amortization of $105 million related to 21CF and Hulu intangible assets and fair value step-up on film and television costs
Results for the six months ended March 31, 2018 were impacted by the following:
•A benefit of $1.7 billion from the Tax Act
•Gains of $53 million from the sale of property rights
•A benefit of $38 million from insurance recoveries related to a legal matter
•Restructuring charges of $28 million
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS — (continued)


A summary of the impact of these items on EPS is as follows:
(in millions, except per share data)Pre-Tax Income/(Loss) 
Tax Benefit/(Expense)(1)
 After-Tax Income/(Loss) 
EPS Favorable/(Adverse) (2)
Six Months Ended March 30, 2019:       
Hulu gain$4,917
 $(1,131) $3,786
 $2.50
Insurance recoveries related to a legal matter46
 (11) 35
 0.02
Net benefit from the Tax Act—
 34
 34
 0.02
Restructuring and impairment charges(662) 152
 (510) (0.33)
Impairment of Vice(353) 81
 (272) (0.18)
Amortization of 21CF and Hulu intangible assets and fair value step-up on film and television costs(105) 24
 (81) (0.05)
Total$3,843
 $(851) $2,992
 $1.98
        
Six Months Ended March 31, 2018:       
Net benefit from the Tax Act$—
 $(1,691) $(1,691) $1.10
Gain from sale of property rights53
 (12) 41
 0.03
Insurance recoveries related to a legal matter38
 (10) 28
 0.02
Restructuring and impairment charges(28) 6
 (22) (0.01)
Total$63
 $(1,707) $(1,644) $1.14
(1)
Tax benefit/expense adjustments are determined using the tax rate applicable to the individual item affecting comparability.
(2)
EPS is net of noncontrolling interest share, where applicable. Total may not equal the sum of the column due to rounding.
SEASONALITY
The Company’s businesses are subject to the effects of seasonality. Consequently, the operating results for the six monthsquarter ended MarchDecember 30, 20192023 for each business segment, and for the Company as a whole, are not necessarily indicative of results to be expected for the full year.
Media Networks
29
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS — (continued)
Entertainment revenues are subject to seasonal advertising patterns, changes in viewership and subscriber levels, timing and performance of film releases in the theatrical and home entertainment markets, and the timing of program sales.and demand for film and television programs. In general, domestic advertising revenues are typically somewhat higher during the fall and somewhat lower during the summer months. Affiliate feesrevenues vary with the subscriber trends of multi-channel video programming distributors (i.e. cable, satellite telecommunications and digital over-the-top service providers). Theatrical release dates are generally recognized ratably throughout the year. Effective at the beginning of fiscal 2019, the Company adopted ASC 606, which changeddetermined by several factors, including competition and the timing of affiliate revenue recognitionvacation and holiday periods.
Sports revenues are subject to seasonal advertising patterns, changes in viewership and subscriber levels, and the availability of and demand for certain contracts,sports programming. In addition, advertising revenues generated from sports programming are impacted by the timing of sports seasons and events, which varies throughout the year or may result in higher revenue in the first quarter of our fiscal year.take place periodically (e.g. biannually, quadrennially).
Parks, Experiences and Products revenues fluctuate with changes in theme park attendance and resort occupancy resulting from the seasonal nature of vacation travel and leisure activities, and seasonal consumer purchasing behavior, which generally results in increasedhigher revenues during the Company’s first and fourth fiscal quarter.quarters, the opening of new guest offerings and pricing and promotional offers. Peak attendance and resort occupancy generally occur during the summer months when school vacations occur and during early-winterearly winter and spring-holidayspring holiday periods. In addition, theme park and resort revenues may be higher during significant celebrations such as theme park or character anniversaries and lower in the periods following such celebrations. Consumer products revenue fluctuates with consumer purchasing behavior, which generally results in higher revenues during the Company’s first fiscal quarter due to the winter holiday season. In addition, licensing revenues fluctuate with the timing and performance of our theatrical releasesfilm and cable programming broadcasts.television content.
Studio Entertainment revenues fluctuate due
BUSINESS SEGMENT RESULTS - Current Quarter Results Compared to Prior-Year Quarter
The Company evaluates the timing and performance of releases inits operating businesses based on segment revenue and segment operating income.
The following table presents revenues from our operating segments:
 Quarter Ended% Change
Better
(Worse)
(in millions)December 30,
2023		December 31,
2022
Entertainment$9,981  $10,675  (7) %
Sports4,835  4,640  4  %
Experiences9,132  8,545  7  %
Eliminations (1)
(399) (348) (15) %
Revenues$23,549  $23,512  —  %
(1)Reflects fees paid by Direct-to-Consumer to Sports and other Entertainment businesses for the theatrical, home entertainmentright to air their linear networks on Hulu Live and television markets. Release dates are determinedfees paid by several factors, including competition and the timing of vacation and holiday periods.
Direct-to-Consumer & International revenues fluctuate based on: the timing and performance of releases of our digital media content; viewership levels on our cable channels and digital platforms; changes in subscriber levels; and the demand forEntertainment to Sports to program sports and Disney content. Each of these may depend on the availabilityABC Network and Star+.
The following table presents income from our operating segments and other components of content, which varies from time to time throughout the year based on, among other things, sports seasons and content production schedules.income before income taxes:
In general, 21CF revenues are similar to revenues generated at Media Networks and Studio Entertainment and are subject to similar fluctuations.
 Quarter Ended% Change
Better
(Worse)
(in millions)December 30,
2023		December 31,
2022
Entertainment operating income$874 $345 >100  %
Sports operating loss(103)(164)37  %
Experiences operating income3,105 2,862 8  %
Corporate and unallocated shared expenses(308)(280)(10) %
Restructuring and impairment charges— (69)100  %
Other expense, net— (42)100  %
Interest expense, net(246)(300)18  %
TFCF and Hulu acquisition amortization(451)  (579)  22  %
Income before income taxes$2,871 $1,773 62  %
30
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS — (continued)


BUSINESS SEGMENT RESULTS

Depreciation expense is as follows:
 Quarter Ended% Change
Better
(Worse)
(in millions)December 30,
2023		December 31,
2022
Entertainment$163 $154 (6) %
Sports11   10   (10) %
Experiences
Domestic424   452   6  %
International171 164 (4) %
Total Experiences595 616 3  %
Corporate54 48 (13) %
Total depreciation expense$823 $828 1  %
Amortization of intangible assets is as follows:
 Quarter Ended% Change
Better
(Worse)
(in millions)December 30,
2023		December 31,
2022
Entertainment$13$3462  %
Sports——nm
Experiences2727—  %
TFCF and Hulu intangible assets3804179  %
Total amortization of intangible assets$420$47812  %
Entertainment
Revenue and operating results for the Entertainment segment are as follows:
 Quarter Ended% Change
Better
(Worse)
(in millions)December 30,
2023		December 31,
2022
Revenues:
Linear Networks$2,803   $3,202   (12) %
Direct-to-Consumer5,546 4,822 15  %
Content Sales/Licensing and Other1,632 2,651 (38) %
$9,981 $10,675 (7) %
Segment operating income (loss):
Linear Networks$1,236 $1,330 (7) %
Direct-to-Consumer(138) (984)86  %
Content Sales/Licensing and Other(224)(1)>(100) %
$874 $345 >100  %
Revenues
The Company evaluates the performance of its operating segments based on segmentdecrease in Entertainment revenues was due to lower theatrical distribution revenue and, to a lesser extent, decreases in TV/VOD distribution, advertising and affiliate revenue. These decreases were partially offset by subscription revenue growth.
Operating income
The increase in operating income which is shown below along with segment revenues:was due to improved results at Direct-to-Consumer, partially offset by a decline at Content Sales/Licensing and Other.
31
 Quarter Ended % Change Six Months Ended % Change
(in millions)March 30,
2019		 March 31,
2018		 Better/
(Worse)		 March 30,
2019		 March 31,
2018		 Better/
(Worse)
Revenues:           
Media Networks$5,525
 $5,508
 — % $11,446
 $11,063
 3 %
Parks, Experiences and Products6,169
 5,903
 5 % 12,993
 12,430
 5 %
Studio Entertainment2,134
 2,499
 (15) % 3,958
 5,008
 (21) %
Direct-to-Consumer & International955
 831
 15 % 1,873
 1,762
 6 %
21CF373
 —
 nm
 373
 —
 nm
Eliminations(234) (193) (21) % (418)
(364) (15) %
 $14,922
 $14,548
 3 % $30,225
 $29,899
 1 %
Segment operating income/(loss):           
Media Networks$2,185
 $2,258
 (3) % $3,515
 $3,501
 — %
Parks, Experiences and Products1,506
 1,309
 15 % 3,658
 3,263
 12 %
Studio Entertainment534
 874
 (39) % 843
 1,699
 (50) %
Direct-to-Consumer & International(393) (188) >(100) % (529) (230) >(100) %
21CF25
 —
 nm
 25
 —
 nm
Eliminations(41) (16) >(100) % (41) (10) >(100) %
 $3,816
 $4,237
 (10) % $7,471
 $8,223
 (9) %
The following table reconciles income from continuing operations before income taxes to segment operating income:
 Quarter Ended % Change Six Months Ended % Change
(in millions)March 30,
2019		 March 31,
2018		 Better/
(Worse)		 March 30,
2019		 March 31,
2018		 Better/
(Worse)
Income from continuing operations before income taxes$7,237
 $3,928
 84 % $10,668
 $7,673
 39 %
Add/(subtract):           
Corporate and unallocated shared expenses279
 194
 (44) % 440
 344
 (28) %
Restructuring and impairment charges662
 13
 >(100) % 662
 28
 >(100) %
Other income(4,963) (41) >100 % (4,963) (94) >100 %
Interest expense, net143

143
 — % 206

272

24 %
Amortization of 21CF and Hulu intangible assets and fair value step-up on film and television costs105
 —
 nm
 105
 —
 nm
Impairment of equity investment353
 —
 nm
 353
 —
 nm
Segment Operating Income$3,816

$4,237
 (10) % $7,471
 $8,223
 (9) %
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS — (continued)


Linear Networks
Depreciation expense is as follows:
 Quarter Ended % Change Six Months Ended % Change
(in millions)March 30,
2019		 March 31,
2018		 Better/
(Worse)		 March 30,
2019		 March 31,
2018		 Better/
(Worse)
Media Networks           
Cable Networks$25
 $28
 11 % $49
 $57
 14 %
Broadcasting20
 23
 13 % 40
 46
 13 %
Total Media Networks45
 51
 12 % 89
 103
 14 %
Parks, Experiences and Products    

      
Domestic367
 364
 (1) % 719
 727
 1 %
International182
 185
 2 % 368
 367
 — %
Total Parks, Experiences and Products549
 549
 — % 1,087
 1,094
 1 %
Studio Entertainment16
 14
 (14) % 30
 27
 (11) %
Direct-to-Consumer & International35
 27
 (30) % 67
 49
 (37) %
21CF4
 —
 nm
 4
 —
 nm
Corporate42
 46
 9 % 81
 91
 11 %
Total depreciation expense$691
 $687
 (1) % $1,358
 $1,364
 — %
Amortization of intangible assets isOperating results for Linear Networks are as follows:
 Quarter Ended% Change
Better
(Worse)
(in millions)December 30,
2023		December 31,
2022
Revenues
Affiliate fees$1,766 $1,873 (6) %
Advertising994   1,267   (22) %
Other43 62 (31) %
Total revenues2,803 3,202 (12) %
Operating expenses(1,171)(1,462)20  %
Selling, general, administrative and other(557)(591)6  %
Depreciation and amortization(12)(12)—  %
Equity in the income of investees173 193 (10) %
Operating Income$1,236 $1,330 (7) %
Revenues - Affiliate fees
 Quarter Ended% Change
Better
(Worse)
(in millions)December 30,
2023		December 31,
2022
Domestic$1,480 $1,557 (5) %
International286 316 (9) %
$1,766 $1,873   (6) %
The decrease in domestic affiliate revenue was due to a decrease of 10% from fewer subscribers, including the impact of the non-carriage of certain networks by an affiliate, partially offset by an increase of 5% from higher contractual rates.
Lower international affiliate revenue was primarily attributable to a decrease of 7% from fewer subscribers.
Revenues - Advertising
 Quarter Ended% Change
Better
(Worse)
(in millions)December 30,
2023		December 31,
2022
Domestic$706 $980 (28) %
International288 287 —  %
$994 $1,267 (22) %
The decline in domestic advertising revenue reflected decreases of 15% from fewer impressions, driven by a decrease at ABC Network, and 11% from lower rates primarily attributable to a decrease in political advertising at the owned television stations. Fewer network impressions were in part due to the impact of the guild strikes on our programming schedule primarily due to a shift of units to the Sports segment reflecting the simulcast of certain NFL games.
Revenues - Other
Other revenue decreased $19 million, to $43 million from $62 million, primarily due to an unfavorable movement of the U.S. dollar against major currencies including the impact of our hedging program (Foreign Exchange Impact).
32
 Quarter Ended % Change Six Months Ended % Change
(in millions)March 30,
2019		 March 31,
2018		 Better/
(Worse)		 March 30,
2019		 March 31,
2018		 Better/
(Worse)
Media Networks$—
 $—
 nm
 $—
 $—
 nm
Parks, Experiences and Products27
 28
 4 % 54
 55
 2 %
Studio Entertainment15
 15
 — % 31
 32
 3 %
Direct-to-Consumer & International23
 1
 >(100) % 45
 22
 >(100) %
21CF and Hulu72
 —
 nm
 72
 —
 nm
Total amortization of intangible assets$137
 $44
 >(100) % $202
 $109
 (85) %
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS — (continued)


Operating expenses
Media Networks
Operating results for the Media Networks segment are as follows:
 Quarter Ended % Change
(in millions)March 30,
2019		 March 31,
2018		 Better/
(Worse)
Revenues     
Affiliate fees$3,177
 $3,043
 4 %
Advertising1,596
 1,643
 (3) %
TV/SVOD distribution and other752
 822
 (9) %
Total revenues5,525
 5,508
 — %
Operating expenses(3,012) (2,917) (3) %
Selling, general, administrative and other(465) (464) — %
Depreciation and amortization(45) (51) 12 %
Equity in the income of investees182
 182
 — %
Operating Income$2,185
 $2,258
 (3) %
Revenues
The increase in affiliate fees was due to growth of 7% from higher contractual rates, partially offset by a 2% decrease from fewer subscribers and a 1% decrease from the adoption of ASC 606.
 Quarter Ended% Change
Better
(Worse)
(in millions)December 30,
2023		December 31,
2022
Programming and production costs
Domestic$(760) $(1,027) 26  %
International(183) (163) (12) %
Total programming and production costs(943) (1,190) 21  %
Other operating expenses(228) (272) 16  %
$(1,171) $(1,462) 20  %
The decrease in advertising revenuesdomestic programming and production costs was primarily due to decreasesfewer hours of $31 million at Broadcasting, from $898 million to $867 million, and $16 million at Cable Networks, from $745 million to $729 million. Broadcasting advertising revenue reflected a decrease of 9% from lower network impressions due to lower average viewership, partially offset by an increase of 5% from higher network rates. Cable Networks advertising revenue reflected a decrease of 7% from lower rates, partially offset by an increase of 5% from higher impressions. Rates reflectedscripted programming in the current quarter, reflecting the impact of the shiftguild strikes. Scripted programming was primarily replaced with lower average cost non-scripted programming as well as ESPN on ABC sports programming, the costs of which are recognized in the mix of College Football Playoff (CFP) games. Three “host” games and the championship were aired in the current quarter, whereas one host game, two semi-finals and the championship were aired in the prior-year quarter. Semi-final games generally generate more advertising revenue than host games. The increase in impressions reflected more units delivered, partially offset by lower average viewership.Sports segment.
TV/SVOD distribution and other revenue decreased $70 million due to lower program sales including lower sales of Grey’s Anatomy, Agents of S.H.I.E.L.D. and Criminal Minds,partially offset by higher sales of How to Get Away With Murder.
Costs and Expenses
Operating expenses include programming and production costs, which increased $104 million, from $2,766 million to $2,870 million. At Broadcasting,International programming and production costs increased $71primarily due to inflation.
The decrease in other operating expenses included lower technology and distribution costs.
Selling, general, administrative and other
Selling, general, administrative and other costs decreased $34 million, to $557 million from $591 million, due to higher production cost write-downslower marketing costs.
Equity in the current quarterIncome of Investees
Income from equity investees decreased $20 million, to $173 million from $193 million, primarily due to lower income from A+E Television Networks driven by decreases in advertising and affiliate revenue, partially offset by a gain on the sale of an increase in the average cost of network programming. At Cableinvestment.
Operating Income from Linear Networks programming and production costs increased $33
Operating income from Linear Networks decreased $94 million, to $1,236 million from $1,330 million, due to contractual rate increases for CFP, NBA, college sportsdecreases at our domestic and NFL programming and higher sports production costs. These increases were partially offset by the timing of sports costs allocated between quarters due to the shift in the mix of CFP bowl games. Host games generally have a lower cost than semi-final games.
Segment Operating Income
Segment operating income decreased 3%, or $73 million, to $2,185 million due to a decrease at the ABC Networkinternational businesses and lower income from program sales, partially offset by an increase at ESPN.equity investees.
Supplemental revenue and operating income
The following table provides supplemental revenue and operating income detail for Linear Networks:
 Quarter Ended% Change
Better
(Worse)
(in millions)December 30,
2023		December 31,
2022
Supplemental revenue detail
Domestic$2,210 $2,565 (14) %
International593 637 (7) %
$2,803 $3,202 (12) %
Supplemental operating income detail
Domestic$838 $879 (5) %
International225 258 (13) %
Equity in the income of investees173 193 (10) %
$1,236 $1,330 (7) %
33
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS — (continued)


Direct-to-Consumer
The following table presents supplemental revenue and operating income detail for the Media Networks segment:
 Quarter Ended % Change
(in millions)March 30,
2019		 March 31,
2018		 Better/
(Worse)
Supplemental revenue detail     
Cable Networks$3,708
 $3,653
 2 %
Broadcasting1,817
 1,855
 (2) %
 $5,525
 $5,508
 — %
Supplemental operating income detail     
Cable Networks$1,756
 $1,728
 2 %
Broadcasting247
 348
 (29) %
Equity in the income of investees182
 182
 — %
 $2,185
 $2,258
 (3) %

Parks, Experiences and Products
Operating results for the Parks Experiences, and Products segmentDirect-to-Consumer are as follows:
 Quarter Ended % Change
(in millions)March 30,
2019		 March 31,
2018		 Better/
(Worse)
Revenues     
Theme park admissions$1,768
 $1,690
 5 %
Parks & Experiences merchandise, food and beverage1,411
 1,352
 4 %
Resorts and vacations1,501
 1,461
 3 %
Merchandise licensing and retail992
 980
 1 %
Parks licensing and other497
 420
 18 %
Total revenues6,169
 5,903
 5 %
Operating expenses(3,339) (3,245) (3) %
Selling, general, administrative and other(748) (765) 2 %
Depreciation and amortization(576) (577) — %
Equity in the loss of investees—
 (7) — %
Operating Income$1,506
 $1,309
 15 %
 Quarter Ended% Change
Better
(Worse)
(in millions)December 30,
2023		December 31,
2022
Revenues
Subscription fees$4,507 $3,861 17  %
Advertising974   866   12  %
Other65 95 (32) %
Total revenues5,546 4,822 15  %
Operating expenses(4,493)(4,623)3  %
Selling, general, administrative and other(1,121)(1,087)(3) %
Depreciation and amortization(70)(96)27  %
Operating Loss$(138)$(984)86  %
Revenues - Subscription fees
Parks, Experiences and Products results include an adverse impact from a shiftGrowth in subscription fees in the timingcurrent quarter compared to the prior-year quarter reflected increases of the Easter holiday. In13% from higher rates attributable to increases in retail pricing at Disney+ Core and, to a lesser extent, Hulu, and 4% from more subscribers, due to growth at Disney+ Core and Hulu.
Revenues - Advertising
Higher advertising revenue in the current year,quarter compared to the entire Easter holiday falls in the thirdprior-year quarter while the second quarter of the prior year included one week of the Easter holiday.
The increase in theme parks admissions revenue was due toreflected an increase of 5%23% from higher average ticket prices,impressions, partially offset by a decrease of 1%11% from an unfavorable FX Impact.lower rates attributable to a decrease at Hulu. The increase in impressions was due to airing more hours of International Cricket Council (ICC) cricket programming compared to the prior-year quarter, growth of the U.S. ad-supported Disney+ service, which launched in December 2022, and higher impressions at Hulu due to more units delivered.
Parks & Experiences merchandise, food and beverageRevenues - Other
The decrease in other revenue growth was due to an increaseunfavorable Foreign Exchange Impact.
Key metrics
In addition to revenue, costs and operating income, management uses the following key metrics to analyze trends and evaluate the overall performance of 5% from higher average guest spending.
The increase in resortsDisney+(1) and vacations revenue was primarily due to increases of 1% each from average ticket prices for cruise line sailings, passenger cruise days and average daily hotel room rates.
Merchandise licensing and retail revenues were higher due to an increase of 5% from higher revenue at our games business, partially offset by decreases of 1% from lower merchandise licensing revenue and 1% from our retail stores. The increase in games revenue was due to the sale of rights to a video game and royalties from the licensed title, HuluKingdom Hearts III(1), which was releasedand we believe these metrics are useful to investors in analyzing the current quarter. Lower merchandise licensing revenues were due to a decrease in minimum guarantee shortfall recognition from the adoption of ASC 606, partially offset by a favorable FX Impact. The decrease at our retail stores was primarily due to lower comparable store sales.business:
 Paid subscribers(1) at:
% Change Better (Worse)
(in millions)December 30,
2023		September 30,
2023		December 31,
2022
Dec. 30, 2023 vs.
Sept. 30, 2023
Dec. 30, 2023 vs.
Dec. 31, 2022
Disney+
Domestic (U.S. and Canada)46.1   46.5   46.6   (1) %(1) %
International (excluding Disney+ Hotstar)(1)
65.2   66.1   57.7   (1) %13  %
Disney+ Core(2)
111.3   112.6   104.3   (1) %7  %
Disney+ Hotstar38.3   37.6   57.5   2  %(33) %
Hulu
SVOD Only45.1 43.9 43.5 3  %4  %
Live TV + SVOD4.6 4.6 4.5 —  %2  %
Total Hulu(2)
49.7 48.5 48.0 2  %4  %
34
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS — (continued)


The increase in parks licensing and other revenue was driven by the adoption of ASC 606, which required certain cost reimbursements from licensees to be recognized as revenue (rather than recorded as an offset to operating expenses).
The following table presents supplemental park and hotel statistics: 
 Domestic 
International (2)
 Total
 Quarter Ended Quarter Ended Quarter Ended
 Mar. 30,
2019		 Mar. 31,
2018		 Mar. 30,
2019		 Mar. 31,
2018		 Mar. 30,
2019		 Mar. 31,
2018
Parks           
Increase/(decrease)           
Attendance1% 5% (3) % 1% —% 4%
Per Capita Guest Spending4% 6% 10 % 10% 6% 7%
Hotels (1)
           
Occupancy93% 90% 79 % 84% 89% 88%
Available Room Nights (in thousands)2,484
 2,509
 787
 787
 3,271
 3,296
Per Room Guest Spending
$351
 
$347
 
$287
 
$277
 
$337
 
$331
(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 2018 second quarter average foreign exchange rate.
Costs and Expenses
Operating expenses include operating labor, which increased $41 million, from $1,474 million to $1,515 million, costAverage Monthly Revenue Per Paid Subscriber(1):
 Quarter Ended% Change Better (Worse)
December 30,
2023		September 30,
2023		December 31,
2022		Dec. 30, 2023 vs.
Sept. 30, 2023		Dec. 30, 2023 vs.
Dec. 31, 2022
Disney+
Domestic (U.S. and Canada)$8.15 $7.50 $5.95 9  %37  %
International (excluding Disney+ Hotstar)(1)
5.91 6.10 5.62 (3) %5  %
Disney+ Core6.84 6.70 5.77 2  %19  %
Disney+ Hotstar1.28 0.70 0.74 83  %73  %
Hulu
SVOD Only12.29 12.11 12.46 1  %(1) %
Live TV + SVOD93.61 90.08 87.90 4  %6  %
(1)See discussion on page 50 —DTC Product Descriptions, Key Definitions and Supplemental Information.
(2)Total may not equal the sum of goods sold and distribution costs, which increased $18 million, from $585 million to $603 million, and infrastructure costs, which decreased $3 million, from $600 million to $597 million. The increase in operating labor wasthe column due to inflation,rounding.
Average Monthly Revenue Per Paid Subscriber - First Quarter of Fiscal 2024 Comparison to Fourth Quarter of Fiscal 2023
Domestic Disney+ average monthly revenue per paid subscriber increased from $7.50 to $8.15 due to increases in retail pricing, partially offset by the comparisona higher mix of subscribers to promotional offerings.
International Disney+ (excluding Disney+ Hotstar) average monthly revenue per paid subscriber decreased from $6.10 to $5.91 due to a special domestic employee bonushigher mix of subscribers to promotional offerings.
Disney+ Hotstar average monthly revenue per paid subscriber increased from $0.70 to $1.28 due to higher advertising revenue and increases in the prior-year quarterretail pricing, partially offset by a higher mix of subscribers from lower-priced markets.
Hulu SVOD Only average monthly revenue per paid subscriber increased from $12.11 to $12.29 due to increases in retail pricing, partially offset by lower per-subscriber advertising revenue and a higher mix of subscribers to promotional offerings.
Hulu Live TV + SVOD average monthly revenue per paid subscriber increased from $90.08 to $93.61 due to increases in retail pricing.
Average Monthly Revenue Per Paid Subscriber - First Quarter of Fiscal 2024 Comparison to First Quarter of Fiscal 2023
Domestic Disney+ average monthly revenue per paid subscriber increased from $5.95 to $8.15 due to increases in retail pricing and higher advertising revenue, partially offset by a higher mix of subscribers to multi-product offerings.
International Disney+ (excluding Disney+ Hotstar) average monthly revenue per paid subscriber increased from $5.62 to $5.91 due to increases in retail pricing and a favorable FX Impact. Higher cost of goods sold and distribution costs were driven by inflation. Infrastructure costs were comparable to the prior-year quarter as the comparison to costs incurred in the prior-year quarter for the dry-dock of the Disney Magic was largelyForeign Exchange Impact, partially offset by an increase in property taxes. Other operating expenses, which include costs for such items as supplies, commissions and entertainment offerings,a higher mix of subscribers to promotional offerings.
Disney+ Hotstar average monthly revenue per paid subscriber increased $38 million, from $586 million$0.74 to $624 million$1.28 due to the recognition of certain cost reimbursements ashigher advertising revenue (rather than recorded as anand increases in retail pricing, partially offset to operating expenses).
Selling, general, administrative and other costs decreased $17 million from $765 million to $748 million driven by a favorable FX Impact.higher mix of subscribers from lower-priced markets.
Segment Operating IncomeHulu SVOD Only average monthly revenue per paid subscriber decreased from $12.46 to $12.29 reflecting lower per-subscriber advertising revenue, a higher mix of subscribers to multi-product offerings, lower per-subscriber premium add-on revenue and a higher mix of subscribers to promotional offerings, partially offset by increases in retail pricing.
Segment operating incomeHulu Live TV + SVOD average monthly revenue per paid subscriber increased 15%, or $197 million,from $87.90 to $1,506 million$93.61 due to increases at our domestic theme parks and resorts, consumer products business, cruise line and Hong Kong Disneyland Resort.in retail pricing, partially offset by lower per-subscriber advertising revenue.
35
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS — (continued)


Operating expenses
The following table presents supplemental revenue
 Quarter Ended% Change
Better
(Worse)
(in millions)December 30,
2023		December 31,
2022
Programming and production costs
Hulu$(2,126) $(2,106) (1) %
Disney+ and other(1,459) (1,556) 6  %
Total programming and production costs(3,585) (3,662) 2  %
Other operating expense(908) (961) 6  %
$(4,493) $(4,623) 3  %
Higher programming and operating income detail for the Parks, Experiences and Products segment to provide continuity with our legacy reporting:
 Quarter Ended 
% Change
Better /
(Worse)
(in millions)March 30,
2019		 March 31,
2018		 
Supplemental revenue detail     
Parks & Experiences     
Domestic$4,206
 $3,965
 6%
International929
 914
 2%
Consumer Products1,034
 1,024
 1%
 $6,169
 $5,903
 5%
Supplemental operating income detail     
Parks & Experiences     
Domestic$1,046
 $931
 12%
International44
 23
 91%
Consumer Products416
 355
 17%
 $1,506
 $1,309
 15%

Studio Entertainment
Operating results for the Studio Entertainment segment are as follows:
 Quarter Ended % Change
(in millions)March 30,
2019		 March 31,
2018		 Better/
(Worse)
Revenues     
Theatrical distribution$745
 $956
 (22) %
Home entertainment263
 471
 (44) %
TV/SVOD distribution and other1,126
 1,072
 5 %
Total revenues2,134
 2,499
 (15) %
Operating expenses(965) (993) 3 %
Selling, general, administrative and other(604) (603) — %
Depreciation and amortization(31) (29) (7) %
Operating Income$534
 $874
 (39) %
Revenues
The decrease in theatrical distribution revenue was due to the success of Black Panther and the continued performance of Star Wars: The Last Jedi in the prior-year quarter compared to Captain Marvel and no comparable Star Wars title in the current quarter. This decrease was partially offset by two Disney live-action titles and the international distribution of Glassproduction costs at Hulu in the current quarter compared to one Disney live-action title in the prior-year quarter. The current quarter included the continued performance of Mary Poppins Returns and release of Dumbo, while the prior-year quarter included A Wrinklewere due to more content provided on the service and higher subscriber-based fees for programming the Live TV service. These increases were partially offset by lower average costs per hour of content available on the service. The increase in Time.subscriber-based fees for programming the Live TV service was attributable to rate increases and more subscribers.
Lower home entertainment revenueThe decrease in programming and production costs at Disney+ and other in the current quarter compared to the prior-year quarter was due to decreaseslower average costs per hour of 36% from unit salescontent available on Disney+, partially offset by more content provided on the service and 9% from net effective pricing. higher costs for ICC cricket programming. The increase in costs for ICC cricket programming was attributable to higher average costs per match and more matches aired.
The decrease in unit salesother operating expense was due to lower technology and distribution spend reflecting the performanceimpact of Thor: Ragnarok and Star Wars: The Last Jedi in the prior-year quarter compared to no comparable Marvel or Star Wars titles in the current quarter. The decrease in net effective pricing was driven by a decrease in sales of new release titles, which have a higher sales price compared to catalog titles. Net effective pricing is the wholesale selling price adjusted for discounts, sales incentives and returns.cost saving initiatives.
Growth in TV/SVOD distributionSelling, general, administrative and other revenue was
Selling, general, administrative and other costs increased $34 million, to $1,121 million from $1,087 million, due to an increase of 8%in marketing costs at Hulu.
Depreciation and amortization
Depreciation and amortization decreased $26 million, to $70 million from TV/SVOD distribution and an increase of 2%$96 million driven by assets that were fully depreciated.
Operating Loss from higher music revenues, partially offset by a decrease of 3%Direct-to-Consumer
The operating loss from Lucasfilm’s special effects businessDirect-to-Consumer decreased $846 million, to $138 million from $984 million, due to fewer projects during the current quarter. The increase from TV/SVOD distribution was due to the adoption of ASC 606a lower loss at Disney+ and higher operating income at Hulu.
Content Sales/Licensing and Other
Operating results for Content Sales/Licensing and Other are as follows:
 Quarter Ended% Change
Better
(Worse)
(in millions)December 30,
2023		December 31,
2022
Revenues
TV/VOD distribution$522 $713 (27) %
Theatrical distribution251   1,140   (78) %
Home entertainment distribution209   185   13  %
Other650 613 6  %
Total revenues1,632 2,651 (38) %
Operating expenses(1,175)(1,850)36  %
Selling, general, administrative and other(585)(722)19  %
Depreciation and amortization(94)(80)(18) %
Equity in the income (loss) of investees(2)— nm
Operating Loss$(224)$(1)>(100) %
36
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS — (continued)


Revenues - TV/VOD distribution
increasesThe decrease in domestic pay television title availabilities and rates, partially offset by lower free television sales in part in anticipation of the launch of Disney+.
Costs and Expenses
Operating expenses include a decrease of $14 million in film cost amortization, from $702 million to $688 million,TV/VOD distribution revenue was due to lower revenues, partially offset by higher average film cost amortization rates for theatrical releases in the current quarter. Operating expenses also include costsales of goods sold andepisodic content.
Revenues - Theatrical distribution costs, which decreased $14 million, from $291 million to $277 million due to lower home entertainment volumes and fewer projects at Lucasfilm’s special effects business, partially offset by higher music distribution costs driven by higher sales.
Selling, general, administrative and other costs was comparable to the prior-year quarter at $604 million, as higher theatrical marketing expense was largely offset by lower home entertainment marketing expenses, an insurance recovery in the current quarter and a favorable FX Impact. The increasedecrease in theatrical marketing expensedistribution revenue was due to the performance of Captain Marvel and DumboThe Marvels in the current quartercompared to Black PantherAvatar: The Way of Water and A Wrinkle in TimeBlack Panther: Wakanda Forever in the prior-year quarter. Other titles released in the current quarter included Wish while the prior-year quarter included Strange World.
Segment Operating Income
Segment operating income decreased 39%, or $340 million, to $534 million due to lower theatrical and home entertainment distribution results, partially offset by an increase in TV/SVOD distribution.

Direct-to-Consumer & International
Operating results for the Direct-to-Consumer & International segment are as follows:
 Quarter Ended % Change
(in millions)March 30,
2019		 March 31,
2018		 Better/
(Worse)
Revenues     
Affiliate fees$335
 $354
 (5) %
Advertising357
 301
 19 %
Subscription fees and other263
 176
 49 %
Total revenues955
 831
 15 %
Operating expenses(947) (547) (73) %
Selling, general, administrative and other(202) (275) 27 %
Depreciation and amortization(58) (28) >(100) %
Equity in the loss of investees(141) (169) 17 %
Operating Loss$(393) $(188) >(100) %
Revenues
The decrease in affiliate fees was due to a decrease of 11% from an unfavorable FX Impact, partially offset by an increase of 7% from higher contractual rates. - Other
The increase in advertising revenuesother revenue was due to an increase of 20% from higher addressable ad sales driven by the consolidation of Hulu as of March 20, 2019. The Company’s share of Hulu results was previously reported in equity in the loss of investees.
Subscription fees and otherhigher revenue increased due to the consolidation of Hulu and subscription fees for ESPN+, which launched in April 2018, partially offset by lower revenue from streaming technology services.
Costs and Expensesat Lucasfilm’s special effects business.
Operating expenses include a $252 million increase in programming and production costs, from $388 million to $640 million and a $148 million increase in other operating expenses, from $159 million to $307 million.
 Quarter Ended% Change
Better
(Worse)
(in millions)December 30,
2023		December 31,
2022
Programming and production costs$(990) $(1,605)38  %
Distribution costs and cost of goods sold(185) (245)24  %
$(1,175) $(1,850)36  %
The increasedecrease in programming and production costs was due to the consolidation of Hulu and higher sports programming costs. The increase in sports programming costs was duelower production cost amortization attributable to the launch of ESPN+,decreases in theatrical and, to a lesser extent, TV/VOD distribution revenues, partially offset by aan increase in film cost impairments.
The decrease in soccer rights costs for our International Channels. Other operating expenses, which include technical support and distribution costs increasedand cost of goods sold was driven by lower theatrical distribution costs, partially offset by an increase at Lucasfilm’s special effects business.
Selling, general, administrative and other
Selling, general, administrative and other costs decreased $137 million, to $585 million from $722 million, primarily due to lower theatrical marketing costs reflecting fewer significant releases in the realignmentcurrent quarter.
Operating Loss from Content Sales/Licensing and Other
Operating loss from Content Sales/Licensing and Other increased $223 million to $224 million from $1 million primarily due to lower theatrical distribution results.
Items Excluded from Segment Operating Income Related to Entertainment
The following table presents supplemental information for items related to the Entertainment segment that are excluded from segment operating income:
Quarter Ended% Change
Better
(Worse)
(in millions)December 30,
2023		December 31,
2022
TFCF and Hulu acquisition amortization(1)
$(353)$(480)26  %
Restructuring and impairment charges(2)
—   (69)  100  %
Gain on sale of a business— 28 (100) %
(1)In the current quarter, amortization of intangible assets was $282 million and amortization of step-up on film and television costs was $68 million. In the prior-year quarter, amortization of intangible assets was $318 million and amortization of step-up on film and television costs was $159 million.
(2)Charges for the prior-year quarter related to exiting our technical support operations and technology cost growth. As a result of the realignment, certain costs that were previously reportedbusinesses in general and administrative are now being reported as operating expense.Russia.
37
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS — (continued)


Sports
Selling, general, administrative and other costs decreased $73 millionOperating results for Sports are as follows:
 Quarter Ended% Change
Better
(Worse)
(in millions)December 30,
2023		December 31,
2022
Revenues
Affiliate fees$2,669 $2,653 1  %
Advertising1,351   1,262   7  %
Subscription fees415 379 9  %
Other400 346 16  %
Total revenues4,835 4,640 4  %
Operating expenses(4,599)(4,501)(2) %
Selling, general, administrative and other(341)(296)(15) %
Depreciation and amortization(11)(10)(10) %
Equity in the income of investees13 3 >100  %
Operating Loss$(103)$(164)37  %
Revenues - Affiliate fees
 Quarter Ended% Change
Better
(Worse)
(in millions)December 30,
2023		December 31,
2022
ESPN
Domestic$2,339 $2,328 —  %
International265 256 4  %
2,604   2,584   1  %
Star (India)65 69 (6) %
$2,669 $2,653 1  %
Domestic ESPN affiliate revenue was comparable to the prior-year quarter as an increase of 6% from $275 million to $202 millionhigher contractual rates was offset by a decrease of 6% from fewer subscribers.
The increase in international ESPN affiliate revenue was due to the realignmentan increase of our technical support operations and a favorable FX Impact,41% from higher contractual rates, partially offset by higher marketing costs. The increase in marketing costsdecreases of 20% from fewer subscribers and 13% from an unfavorable Foreign Exchange Impact.
Revenues - Advertising
 Quarter Ended% Change
Better
(Worse)
(in millions)December 30,
2023		December 31,
2022
ESPN
Domestic$1,118 $1,138 (2) %
International49 52 (6) %
1,167 1,190 (2) %
Star (India)184 72 >100  %
$1,351 $1,262 7  %
Lower domestic ESPN advertising revenue was drivendue to decreases of 1% from lower rates and 1% from fewer impressions. These decreases reflected the timing of College Football Playoff (CFP) games relative to our fiscal period, partially offset by the consolidationbenefits from the timing of Hulu and marketing costs for ESPN+.
Depreciation and amortization increased $30 million from $28 million to $58 million driven by increased investmentthe week 17 NFL game that aired in technology.
Equity in the Loss of Investees
Loss from equity investees decreased $28 million, from $169 million to $141 million, due to the consolidation of Hulu. In the current quarter 11 days of Hulu’s results are reported in revenues and expenses. Priorcompared to the consolidationsecond quarter of Hulu, the Company recognized its ownership shareprior year and the simulcast of Hulu’s results in equitycertain NFL games on the ABC Network. The timing of CFP games reflected the airing of three CFP host games compared to the airing of two host games and two semi-final games in the loss of investees.
Segment Operating Loss
Segment operating loss increased to $393 million due to our ongoing investment in ESPN+, which launched in April 2018, costs associated with the upcoming launch of Disney+, the consolidation of a loss at Hulu and a loss from streaming technology services, partially offset by an increase at our International Channels.
The following table presents supplemental revenue and operating income detail for the Direct-to-Consumer & International segment to provide information on International Channels that were historically reported in the Media Networks segment:prior-year quarter.
38
 Quarter Ended % Change
(in millions)March 30, 2019 March 31, 2018 
Better /
(Worse)
Supplemental revenue detail     
International Channels$440
 $458
 (4) %
Direct-to-Consumer businesses and other515
 373
 38 %
 $955
 $831
 15 %
Supplemental operating income/(loss) detail     
International Channels$91
 $49
 86 %
Direct-to-Consumer businesses and other(343) (68) >(100) %
Equity in the loss of investees(141) (169) 17 %
 $(393) $(188) >(100) %


MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS — (continued)


Eliminations
Intersegment content transactions are as follows:
 Quarter Ended % Change
(in millions)March 30,
2019		 March 31,
2018		 Better/
(Worse)
Revenues     
Studio Entertainment:    

Content transactions with Media Networks$(13) $(64) 80 %
Content transactions with Direct-to-Consumer & International(82) (8) >(100) %
Media Networks:     
Content transactions with Direct-to-Consumer & International(139) (121) (15) %
Total$(234) $(193) (21) %
      
Operating income    

Studio Entertainment:    

Content transactions with Media Networks$5
 $(16) nm
Content transactions with Direct-to-Consumer & International(46) —
 nm
Media Networks:     
Content transactions with Direct-to-Consumer & International—
 —
 nm
Total$(41) $(16) >(100) %


BUSINESS SEGMENT RESULTS - Six Month Results

Media Networks
Operating results for the Media Networks segment are as follows:
 Six Months Ended % Change
(in millions)March 30,
2019		 March 31,
2018		 Better/
(Worse)
Revenues     
Affiliate Fees$6,252
 $5,910
 6 %
Advertising3,619
 3,606
 — %
TV/SVOD distribution and other1,575
 1,547
 2 %
Total revenues11,446
 11,063
 3 %
Operating expenses(7,260) (6,880) (6) %
Selling, general, administrative and other(943) (920) (3) %
Depreciation and amortization(89) (103) 14 %
Equity in the income of investees361
 341
 6 %
Operating Income$3,515
 $3,501
 — %
Revenues
The increase in affiliate feesStar advertising revenue in the current quarter compared to the prior-year quarter was due to higher impressions, partially offset by lower rates. Higher impressions were due to increases in average units delivered and average viewership, both of which reflected the airing of more hours of ICC cricket programming compared to the prior-year quarter.
Revenues - Subscription fees
Subscription fees increased $36 million, to $415 million from $379 million, due to increases of 6% from higher rates and 3% from more subscribers.
Revenues - Other
Other revenue increased $54 million, to $400 million from $346 million, due to higher sub-licensing fees from ICC cricket programming.
Key Metrics
In addition to revenue, costs and operating income, management uses the following key metrics to analyze trends and evaluate the overall performance of ESPN+(1), and we believe these metrics are useful to investors in analyzing the business:
Quarter Ended% Change Better (Worse)
December 30,
2023		September 30,
2023		December 31,
2022		Dec. 30, 2023 vs.
Sept. 30, 2023
Dec. 30, 2023 vs.
Dec. 31, 2022
Paid subscribers(1) at (in millions)
25.2 26.0 24.9 (3) %1  %
Average Monthly Revenue per Paid Subscriber(1) for the quarter end
$6.09 $5.34 $5.53 14  %10  %
(1)See discussion on page 50 —DTC Product Descriptions, Key Definitions and Supplemental Information.
Average Monthly Revenue Per Paid Subscriber - First Quarter of Fiscal 2024 Comparison to Fourth Quarter of Fiscal 2023
ESPN+ average monthly revenue per paid subscriber increased from $5.34 to $6.09 due to increases in retail pricing and higher advertising revenue.
Average Monthly Revenue Per Paid Subscriber - First Quarter of Fiscal 2024 Comparison to First Quarter of Fiscal 2023
ESPN+ average monthly revenue per paid subscriber increased from $5.53 to $6.09 due to increases in retail pricing and higher advertising revenue.
Operating expenses
 Quarter Ended% Change
Better
(Worse)
(in millions)December 30,
2023		December 31,
2022
Programming and production costs
ESPN
Domestic$(3,389) $(3,649) 7  %
International(306) (270) (13) %
(3,695) (3,919) 6  %
Star (India)(684) (326) >(100) %
(4,379) (4,245) (3) %
Other operating expenses(220) (256) 14  %
$(4,599) $(4,501) (2) %
Domestic ESPN programming and production costs decreased in the current quarter compared to the prior-year quarter due to lower CFP rights costs attributable to the timing of games relative to our fiscal periods.
Higher international ESPN programming and production costs were attributable to a new contract for soccer programming rights and an increase of 7% from higher contractual rates,in production costs due to inflation, partially offset by a 1% decrease from fewer subscribers.favorable Foreign Exchange Impact.
The increase in advertising revenues was due to an increase of $23 million at Broadcasting, from $1,860 million to $1,883 million, partially offset by a decrease of $10 million at Cable Networks, from $1,746 million to $1,736 million. Broadcasting advertising revenueStar programming and production costs reflected increases of 7% from higher network rates and 4% at the the owned television stationsrights costs for ICC cricket programming due to an increase in rates, partially offset by a decrease of 10% from lower network impressions due to lower average viewership. Cablecosts per match and more matches aired.
39
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS — (continued)


Other operating expenses decreased $36 million, to $220 million from $256 million, primarily due to lower technology and distribution costs.
Networks advertising revenue reflected a decrease of 1% from lower rates. Impressions at Cable Networks were comparable to the prior-year period as higher units delivered were offset by lower average viewership.
TV/SVOD distributionSelling, general, administrative and other revenue increased $28 million due to the adoption of ASC 606 and higher program sales.
Costs and Expenses
Operating expenses include programming and production costs, which increased $381 million, from $6,590 million to $6,971 million. At Cable Networks, programming and production costs increased $218 million due to contractual rate increases for college sports, NFL and NBA programming. At Broadcasting, programming and production costs increased $163 million due to higher average cost of network programming and an increase in production cost write-downs.
Selling, general, administrative and other costs increased $23$45 million, to $341 million from $920$296 million, reflecting the comparison to the gain on the sale of an interest in our X Games business in the prior-year quarter and an unfavorable Foreign Exchange Impact.
Operating Loss from Sports
Operating loss decreased $61 million, to $943$103 million from $164 million, due to higher marketing costsan improvement at the ABC Network and Freeform.
Depreciation and amortization decreased $14 million, from $103 million to $89 million, due to higher asset write-offs in the prior year.
Equity in the Income of Investees
Income from equity investees increased $20 million, from $341 million to $361 million, due to higher income from A+E driven by higher program sales revenue, lower marketing costs and affiliate revenue growth.
Segment Operating Income
Segment operating income was comparable to the prior-year period as an increase at the owned television stations, growth at the Domestic Disney Channels, an increase at A+E and higher income from program sales were largelydomestic ESPN, partially offset by decreaseslower results at the ABC Network, ESPNStar and, Freeform.to a lesser extent, international ESPN.
Supplemental revenue and operating income
The following table provides supplemental revenue and operating income (loss) detail for Sports:
 Quarter Ended% Change
Better
(Worse)
(in millions)December 30,
2023		December 31,
2022
Supplemental revenue detail
ESPN
Domestic$4,073   $4,049   1  %
International363   358   1  %
4,436   4,407   1  %
Star (India)399   233   71  %
$4,835   $4,640   4  %
Supplemental operating income (loss) detail
ESPN
Domestic$255    $(41)   nm
International(56)   3    nm
199    (38)   nm
Star (India)(315)   (129)   >(100) %
Equity in the income of investees13    3    >100  %
$(103)   $(164)   37  %
Items Excluded from Segment Operating Income Related to Sports
The following table presents supplemental information for items related to the Sports segment that are excluded from segment operating income detail for the Media Networks segment:income:
Quarter Ended% Change
Better
(Worse)
(in millions)December 30,
2023		December 31,
2022
TFCF acquisition amortization(1)
$(96)  $(97)  1  %
(1)Amortization of intangible assets
40
 Six Months Ended % Change
(in millions)March 30,
2019		 March 31,
2018		 Better/
(Worse)
Revenues     
Cable Networks$7,694
 $7,486
 3 %
Broadcasting3,752
 3,577
 5 %
 $11,446
 $11,063
 3 %
Segment operating income     
Cable Networks$2,499
 $2,521
 (1) %
Broadcasting655
 639
 3 %
Equity in the income of investees361
 341
 6 %
 $3,515
 $3,501
 — %

MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS — (continued)


Experiences
Parks, Experiences and Products
Operating results for the Parks, Experiences and Products segment are as follows:
Six Months Ended % Change Quarter Ended% Change
Better
(Worse)
(in millions)March 30,
2019		 March 31,
2018		 Better/
(Worse)
Revenues     
Revenues
Revenues
Theme park admissions$3,701
 $3,522
 5 %
Theme park admissions
Theme park admissions$2,982 $2,641 13  %
Resorts and vacationsResorts and vacations2,118 1,980 7  %
Parks & Experiences merchandise, food and beverage2,976
 2,847
 5 %Parks & Experiences merchandise, food and beverage2,103   1,980   6  %
Resorts and vacations3,032
 2,924
 4 %
Merchandise licensing and retail2,292
 2,322
 (1) %Merchandise licensing and retail1,341 1,355 1,355 (1) %(1) %
Parks licensing and other992
 815
 22 %Parks licensing and other588 589 589 —  %—  %
Total revenues12,993
 12,430
 5 %Total revenues9,132 8,545 8,545 7  %7  %
Operating expenses(6,745) (6,574) (3) %Operating expenses(4,480)  (4,139)(8) %(8) %
Selling, general, administrative and other(1,437) (1,430) — %Selling, general, administrative and other(925)(899)(899)(3) %(3) %
Depreciation and amortization(1,141) (1,149) 1 %Depreciation and amortization(622)(643)(643)3  %3  %
Equity in the loss of investees(12) (14) 14 %Equity in the loss of investees— (2)(2)nmnm
Operating Income$3,658
 $3,263
 12 %Operating Income$3,105 $$2,862 8  %8  %
Revenues - Theme park admissions
The increase in theme parksTheme park admissions revenue growth was due to increases of 10% from higher average per capita ticket revenue and 3% from attendance growth. Attendance growth reflected an increase at our international parks attributable to higher attendance at Shanghai Disney Resort and Hong Kong Disneyland Resort, partially offset by a decrease in attendance at Disneyland Paris. Shanghai Disney Resort was open for all of 7%the current quarter compared to 58 days in the prior-year quarter as a result of COVID-19 related closures. At our domestic parks, an increase in attendance at Disneyland Resort was largely offset by a decrease at Walt Disney World Resort.
Revenues - Resorts and vacations
Higher resorts and vacations revenue was primarily due to increases of 3% from higher average ticket prices partially offset by a decrease of 1%for cruise line sailings and 2% from an unfavorable FX Impact.additional passenger cruise days.
Revenues - Park & Experiences merchandise, food and beverage
Parks & Experiences merchandise, food and beverage revenue growth was due to an increasereflected increases of 5% from higher averagevolume and 1% from guest spending.spending growth. Higher volume was attributable to an increase at our international parks and experiences due to growth at Shanghai Disney Resort and, to a lesser extent, at Hong Kong Disneyland Resort.
The increase in resortsRevenues - Merchandise licensing and vacationsretail
Lower merchandise licensing and retail revenue was primarily due to increasesdecreases of 2%4% from higher average daily hotel room rates,retail and 1% from an increase in average ticket prices for cruise line sailings and 1% from higher occupied hotel room nights.
Merchandise licensing and retail revenues were lower driven by decreases of 2% from our merchandise licensing business and 1% from our publishing business,unfavorable Foreign Exchange Impact, partially offset by an increase of 2%4% from our games business. Thelicensing. Lower retail revenue was due to a decrease in merchandise licensing and publishing revenues was primarily due to loweronline sales. The increase in licensing revenue fromwas attributable to higher sales of products based on Spider-Man and Mickey and Friends, partially offset by a decrease in sales of products based on Star Wars, partially offset by higher licensing revenues from products based on Disney Classics and an increase in licensee settlements. The increase in games revenue was due to the sale of rights to a video game and royalties from the licensed title, Kingdom Hearts III, which was released in the current period.Wars.
The increase in parks licensing and other revenue was driven by the adoption of ASC 606, which required certain cost reimbursements from licensees to be recognized as revenue (rather than recorded as an offset to operating expenses).
41
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS — (continued)


Key metrics
In addition to revenue, costs and operating income, management uses the following key metrics to analyze trends and evaluate the overall performance of our theme parks and resorts, and we believe these metrics are useful to investors in analyzing the business:
 Domestic
International(1)
Total(1)
 Quarter EndedQuarter EndedQuarter Ended
 Dec. 30,
2023		Dec. 31,
2022		Dec. 30,
2023		Dec. 31,
2022		Dec. 30,
2023		Dec. 31,
2022
Parks
Increase (decrease)
Attendance(2)
—  %11  %30  %13  %8  %12  %
Per Capita Guest Spending(3)
4  %8  %12  %24  %2  %10  %
Hotels
Occupancy(4)
85  %88  %80  %67  %84  %83  %
Available Hotel Room Nights (in thousands)(5)
2,5472,5207997993,3463,319
Change in Per Room Guest Spending(6)
1  %1  %3  %4  %1  %2  %
The following table presents supplemental park(1)Per capita guest spending growth rate and hotel statistics:per room guest spending growth rate exclude the impact of changes in foreign exchange rates.
 Domestic 
International (2)
 Total
 Six Months Ended Six Months Ended Six Months Ended
 March 30,
2019		 March 31,
2018		 March 30,
2019		 March 31,
2018		 March 30,
2019		 March 31,
2018
Parks           
Increase/(decrease)           
Attendance1% 5% (4) % 6% (1) % 5%
Per Capita Guest Spending6% 6% 9 % 9% 7 % 7%
Hotels (1)
           
Occupancy93% 90% 83 % 84% 91 % 89%
Available Room Nights (in thousands)4,975
 5,024
 1,587
 1,587
 6,562
 6,611
Per Room Guest Spending
$355
 
$345
 
$304
 
$294
 
$344
 
$334
(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 2018 six-month average foreign exchange rate.
Costs(2)Attendance is used to analyze volume trends at our theme parks and Expensesis based on the number of unique daily entries, i.e. a person visiting multiple theme parks in a single day is counted only once. Our attendance count includes complimentary entries but excludes entries by children under the age of three.
Operating expenses include operating labor, which increased $93 million(3)Per capita guest spending is used to analyze guest spending trends and is defined as total revenue from $2,915 million to $3,008 million, cost ofticket sales and distribution costs, which increased $21 millionsales of food, beverage and merchandise in our theme parks, divided by total theme park attendance.
(4)Occupancy is used to analyze the usage of available capacity at hotels and is defined as the number of room nights occupied by guests as a percentage of available hotel room nights.
(5)Available hotel room nights is defined as the total number of room nights that are available at our hotels and at Disney Vacation Club (DVC) properties located at our theme parks and resorts that are not utilized by DVC members. Available hotel room nights include rooms temporarily taken out of service.
(6)Per room guest spending is used to analyze guest spending at our hotels and is defined as total revenue from $1,313 millionroom rentals and sales of food, beverage and merchandise at our hotels, divided by total occupied hotel room nights. In the third quarter of the prior fiscal year, the Company revised its method of allocating revenue on the sales of Disneyland Paris vacation packages between hotel room revenue and admissions revenue. The new method resulted in a decrease in the percentage of revenue allocated to $1,334 million, and infrastructure costs, which decreasedhotel rooms. If we had applied the new method in the prior-year quarter, the impact would have been a decrease of approximately $17 million from $1,164 million to $1,147 million. The increase in the prior-year quarter.
Operating expenses
Quarter Ended% Change
Better
(Worse)
(in millions)December 30,
2023		December 31,
2022
Operating labor$(2,000)$(1,789)(12) %
Infrastructure costs(797)(722)(10) %
Cost of goods sold and distribution costs(904)(912)1  %
Other operating expense(779)(716)(9) %
$(4,480)$(4,139)(8) %
Higher operating labor was due to inflation, partially offset by a favorable FX Impact. Higher cost of sales and distribution costs wereprimarily due to inflation. The decreaseincrease in infrastructure costs was primarily due to the comparison todriven by higher operations support costs incurred in the prior-year quarter for the dry-dock of the Disney Magic. Other operating expenses, which includeand increased costs for such items as supplies, commissions and entertainmentnew guest offerings. Higher other operating expense was primarily attributable to inflation, increased costs for new guest offerings increased $74 million, from $1,182 million to $1,256 million, due to the recognition of certain cost reimbursements as revenue (rather than recorded as an offset to operating expenses) and higher third-party royalty expense, partially offset by a favorable FX Impact and lower operations support costs.
Segment Operating Income
Segment operating income increased 12%, or $395 million, to $3,658 million due to growth at our domestic theme parks and resorts.
The following table presents supplemental revenue and operating income detail for the Parks Experiences, and Products segment to provide continuity with our legacy reporting:
42
 Six Months Ended 
% Change
Better /
(Worse)
(in millions)March 30,
2019		 March 31,
2018		 
Supplemental revenue detail     
Parks & Experiences     
Domestic$8,679
 $8,136
 7 %
International1,941
 1,899
 2 %
Consumer Products2,373
 2,395
 (1)%
 $12,993
 $12,430
 5 %
Supplemental operating income detail     
Parks & Experiences     
Domestic$2,527
 $2,171
 16 %
International143
 132
 8 %
Consumer Products988
 960
 3 %
 $3,658
 $3,263
 12 %
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS — (continued)


Selling, general, administrative and other

Studio Entertainment
Operating resultsSelling, general, administrative and other costs increased $26 million, to $925 million from $899 million. The increase included the impact of inflation and higher costs for the Studio Entertainment segment are as follows:
 Six Months Ended % Change
(in millions)March 30,
2019		 March 31,
2018		 Better/
(Worse)
Revenues     
Theatrical distribution$1,118
 $2,125
 (47) %
Home entertainment688
 832
 (17) %
TV/SVOD distribution and other2,152
 2,051
 5 %
Total revenues3,958
 5,008
 (21) %
Operating expenses(1,841) (2,019) 9 %
Selling, general, administrative and other(1,213) (1,231) 1 %
Depreciation and amortization(61) (59) (3) %
Operating Income$843
 $1,699
 (50) %
Revenues
The decrease in theatrical distribution revenue was due tonew guest offerings, partially offset by the comparison of two Marvel titles, Black Panther and Thor: Ragnarok, and Star Wars: The Last Jedito a loss in the prior-year period compared to one Marvel title, Captain Marvel,quarter on the disposal of our ownership interest in Villages Nature.
Depreciation and no comparable Star Wars title in the current period. Other significant releases in the current period included Ralph Breaks the Internet, Mary Poppins Returns, The Nutcrackeramortization
Depreciation and the Four Realms and Dumbo, while the prior-year period included Coco and A Wrinkle in Time.
Lower home entertainment revenue was due to decreases of 13% from lower unit sales and 5% from net effective pricing. The decrease in unit sales was due to the release of Thor: Ragnarok and Star Wars: The Last Jedi in the prior-year period compared to Ant-Man and the Wasp and no comparable Star Wars release in the current period. Other significant titles in the current period included Incredibles 2, Ralph Breaks the Internet, Christopher Robin and Mary Poppins Returns, whereas the prior-year period included Cars 3, Pirates of the Caribbean: Dead Men Tell No Tales and Coco.
Higher TV/SVOD distribution and other revenue was due to an increase of 9% from TV/SVOD distribution, partially offset by a decrease of 3% from Lucasfilm’s special effects business due to fewer projects during the current period. The increase in TV/SVOD distribution was due to the impact of the adoption of ASC 606, higher pay television rates and more title availabilities in the current period, partially offset by lower free television sales in part in anticipation of the launch of Disney+.
Costs and Expenses
Operating expenses include a decrease of $107 million in film cost amortization from $1,413decreased $21 million, to $1,306 million, due to the impact of lower revenues, partially offset by higher average film cost amortization rates. Operating expenses also include cost of goods sold and distribution costs, which decreased $71$622 million from $606 million to $535$643 million, due to lower theatrical distribution costsdepreciation at our domestic parks and decreased costs at Lucasfilm’s special effects business.experiences.
Segment Operating Income from Experiences
Segment operating income decreased 50%, or $856increased from $2,862 million to $843$3,105 million due to decreasesgrowth at our international parks and resorts.
Supplemental revenue and operating income
The following table presents supplemental revenue and operating income detail for the Experiences segment:
Quarter Ended% Change
Better
(Worse)
(in millions)December 30,
2023		December 31,
2022
Supplemental revenue detail
Parks & Experiences
Domestic$6,297 $6,072 4  %
International1,476   1,094   35  %
Consumer Products1,359 1,379 (1) %
$9,132 $8,545 7  %
Supplemental operating income detail
Parks & Experiences
Domestic$2,077 $2,113 (2) %
International328 79 >100  %
Consumer Products700 670 4  %
$3,105 $2,862 8  %
CORPORATE AND UNALLOCATED SHARED EXPENSES
 Quarter Ended% Change
Better
(Worse)
(in millions)December 30,
2023		December 31,
2022
Corporate and unallocated shared expenses$(308)$(280)(10) %
Corporate and unallocated shared expenses increased $28 million for the quarter, from $280 million to $308 million, primarily due to higher rent expense and inflation.
FINANCIAL CONDITION
The change in theatricalcash and home entertainment distribution results, partially offset by an increase in TV/SVOD distribution.cash equivalents is as follows:

 Quarter Ended% Change
Better
(Worse)
(in millions)December 30,
2023		December 31,
2022
Cash provided by (used in) operations$2,185 $(974)nm
Cash used in investing activities(1,246)(1,292)4  %
Cash used in financing activities(8,006)   (1,043)   >(100) %
Impact of exchange rates on cash, cash equivalents and restricted cash79 164 (52) %
Change in cash, cash equivalents and restricted cash$(6,988)$(3,145)>(100) %
43
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS — (continued)


Direct-to-Consumer & International
Operating results for the Direct-to-Consumer & International segment are as follows:
 Six Months Ended % Change
(in millions)March 30,
2019		 March 31,
2018		 Better/
(Worse)
Revenues     
Affiliate fees$658
 $692
 (5) %
Advertising774
 712
 9 %
Subscription fees and other441
 358
 23 %
Total revenues1,873
 1,762
 6 %
Operating expenses(1,602) (1,135) (41) %
Selling, general, administrative and other(456) (508) 10 %
Depreciation and amortization(112) (71) (58) %
Equity in the loss of investees(232) (278) 17 %
Operating Loss$(529) $(230) >(100) %
Revenues
The decrease in affiliate fees was due to a decrease of 12% from an unfavorable FX Impact, partially offset by increases of 6% from higher contractual rates and 1% from subscriber growth.
The increase in advertising revenues was due to an increase of 13% from higher addressable ad sales, partially offset by a decrease of 4% from ad sales at our International Channels. The increase in addressable ad sales was due to the consolidation of Hulu and higher impressions. Lower ad sales at our International Channels was driven by a decrease in impressions and an unfavorable FX Impact.
Subscription fees and other revenue increased $83 million due to the consolidation of Hulu and subscription fees for ESPN+, which launched in April 2018, partially offset by lower revenue from streaming technology services.
Costs and Expenses
Operating expenses include a $294 million increase in programming and production costs, from $792 million to $1,086 million, and a $173 million increase in other operating expenses, from $343 million to $516 million. The increase in programming and production costs was due to higher sports rights costs and the consolidation of Hulu. The increase in sports rights costs was primarily due to the launch of ESPN+, partially offset by a decrease in soccer rights costs for our International Channels. Other operating expenses, which include technical support and distribution costs, increased due to technology cost growth and the realignment of our technical support operations. As a result of the realignment, certain costs that were previously reported in general and administrative are now being reported as operating expense.
Selling, general, administrative and other costs decreased $52 million, from $508 million to $456 million, due to a favorable FX Impact and the realignment of our technical support operations, partially offset by higher marketing costs. The increase in marketing costs was due to marketing costs for ESPN+ and the consolidation of Hulu.
Depreciation and amortization increased $41 million, from $71 million to $112 million, primarily due to increased investment in technology.
Equity in the Loss of Investees
Loss from equity investees decreased $46 million, from $278 million to $232 million, driven by a lower loss from Hulu due to increases in advertising and subscription revenue, partially offset by higher programming costs.
Segment Operating Loss
Segment operating loss increased from $230 million to $529 million due to our ongoing investment in ESPN+, which launched in April 2018, costs associated with the upcoming launch of Disney+ and a higher loss from streaming technology services. These impacts were partially offset by an increase at our International Channels.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS — (continued)


The following table presents supplemental revenue and operating income detail for the Direct-to-Consumer & International segment to provide information on International Channels that were historically reported in the Media Networks segment:
 Six Months Ended % Change
(in millions)March 30, 2019 March 31, 2018 
Better /
(Worse)
Supplemental revenue detail     
International Channels$934
 $968
 (4) %
Direct-to-Consumer businesses and other939
 794
 18 %
 $1,873
 $1,762
 6 %
Supplemental operating income/(loss) detail     
International Channels$228
 $157
 45 %
Direct-to-Consumer businesses and other(525) (109) >(100) %
Equity in the loss of investees(232) (278) 17 %
 $(529) $(230) >(100) %


Eliminations
Intersegment content transactions are as follows:
 Six Months Ended % Change
(in millions)March 30,
2019		 March 31,
2018		 Better/
(Worse)
Revenues     
Studio Entertainment:    

Content transactions with Media Networks$(34) $(95) 64 %
Content transactions with Direct-to-Consumer & International(100) (16) >(100) %
Media Networks:     
Content transactions with Direct-to-Consumer & International(284) (253) (12) %
Total$(418) $(364) (15) %
      
Operating income    

Studio Entertainment:    

Content transactions with Media Networks$5
 $(9) nm
Content transactions with Direct-to-Consumer & International(44) —
 nm
Media Networks:     
Content transactions with Direct-to-Consumer & International(2) (1) (100) %
Total$(41) $(10) >(100) %

CORPORATE AND UNALLOCATED SHARED EXPENSES
 Quarter Ended % Change Six Months Ended % Change
(in millions)March 30,
2019		 March 31,
2018		 Better/
(Worse)		 March 30,
2019		 March 31,
2018		 Better/
(Worse)
Corporate and unallocated shared expenses$(279) $(194) (44) % $(440) $(344) (28) %
Corporate and unallocated shared expenses increased $85 million to $279 million in the current quarter and increased $96 million to $440 million for the six-month period due to costs incurred in connection with the 21CF acquisition.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS — (continued)


RESTRUCTURING IN CONNECTION WITH THE ACQUISITION OF 21CF
As discussed in Note 16 to the Condensed Consolidated Financial Statements, in connection with the acquisition of 21CF, The Company has begun implementing a restructuring and integration plan as a part of its initiative to realize previously announced cost synergies from the acquisition of 21CF. Although our plans are not yet finalized, we currently anticipate that the total severance and related costs could be on the order of $1.5 billion. To date, we have recorded severance and related costs totaling $403 million in connection with the plan. In addition, we recorded charges totaling $259 million for equity based compensation, primarily for 21CF awards that were accelerated to vest upon the closing of the 21CF acquisition. These charges are recorded in “Restructuring and impairment charges” in the Condensed Consolidated Statements of Income. The Company may incur other costs in connection with the plan such as lease termination costs, but is unable to estimate those amounts at this time. For the prior-year quarter and six-month period, restructuring and impairment charges were not material.
The following table summarizes the changes in restructuring reserves:
 
Beginning
Balance
 Additions Payments Other 
Ending
Balance
Quarter ended March 30, 2019:         
Restructuring reserves$39
 $403
 $(19) $—
 $423

FINANCIAL CONDITION
The change in cash and cash equivalents is as follows:
 Six Months Ended % Change
Better/
(Worse)
(in millions)March 30,
2019		 March 31,
2018		 
Cash provided by operations - continuing operations$6,014
 $6,763
 (11) %
Cash used in investing activities - continuing operations(12,683) (3,805) >(100) %
Cash provided by / (used in) financing activities - continuing operations12,696
 (2,882) nm
Cash used in operations - discontinued operations(35) —
 nm
Impact of exchange rates on cash, cash equivalents and restricted cash75
 55
 36 %
Change in cash, cash equivalents and restricted cash$6,067
 $131
 >100 %
Operating Activities
Cash provided by continuing operating activities decreased 11%operations increased $3,159 million to $6.0 billion$2,185 million for the current six monthsquarter compared to $6.8 billioncash used in operations of $974 million in the prior-year six months driven by lower operating cash flows at Direct to Consumer & Internationalquarter. The increase was due to increased programminglower film and technical support costs and highertelevision production spending reflecting the impact of the guild strikes in the current quarter, the timing of payments for interestsports rights and income taxes.lower collateral payments related to our hedging program. These increases were partially offset by the deferral of fiscal 2023 federal and California tax payments into the current quarter pursuant to relief provided by the Internal Revenue Service and California State Board of Equalization as a result of 2023 winter storms in California.
FilmProduced and Television Costslicensed programming costs
The Company’s Studio Entertainment Media Networks and Direct-to-Consumer & InternationalSports segments and 21CF incur costs to acquireproduce and produce featurelicense film, episodic, sports and television programming. Film and television productionother content. Production costs include allspend on content internally produced contentat our studios such as live-action and animated feature films, animated direct-to-video programming, televisionepisodic series, television specials, shorts and theatrical stage plays or other similar product.plays. Production costs also include original content commissioned from third-party studios. Programming costs include film or television productcontent rights licensed for a specific period from third parties for airinguse on the Company’s broadcastsports and cablegeneral entertainment networks television stations and direct-to-consumerDTC streaming services. Programming assets are generally recorded when the programming becomes available to us with a corresponding increase in programming liabilities. Accordingly, we analyze our
The Company’s film and television production and programming assets netactivity for the quarters ended December 30, 2023 and December 31, 2022 are as follows:
 Quarter Ended
(in millions)December 30,
2023		December 31,
2022
Beginning balances:
Produced and licensed programming assets$36,593 $37,667 
Programming liabilities(3,792)  (3,940)  
32,801 33,727 
Spending:
Programming licenses and rights2,710 3,547 
Produced film and television content1,800 3,751 
4,510 7,298 
Amortization:
Programming licenses and rights(4,590)(4,539)
Produced film and television content(2,562)(3,317)
(7,152)(7,856)
Change in produced and licensed content costs(2,642)(558)
Other non-cash activity(7)(178)
Ending balances:
Produced and licensed programming assets34,134 37,566 
Programming liabilities(3,982)(4,575)
$30,152 $32,991 
The Company currently expects its fiscal 2024 spend on produced and licensed content, including sports rights, to be approximately $24 billion compared to fiscal 2023 spend of the related liability.$27 billion.
44
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS — (continued)


The Company’s film and television production and programming activity for the six months ended March 30, 2019 and March 31, 2018 are as follows:
 Six Months Ended
(in millions)March 30,
2019		 March 31,
2018
Beginning balances:   
Production and programming assets$9,202
 $8,759
Programming liabilities(1,178) (1,108)
 8,024
 7,651
Spending:   
Television program licenses and rights4,710
 4,092
Film and television production2,896
 3,011
 7,606
 7,103
Amortization:   
Television program licenses and rights(4,959) (4,411)
Film and television production(2,366) (2,202)
 (7,325) (6,613)
    
Change in film and television production and programming costs281
 490
Net film and television production costs from the 21CF acquisition and consolidation of Hulu14,141
 —
Other non-cash activity372
 (146)
Ending balances:   
Production and programming assets29,761
 9,188
Programming liabilities(6,943) (1,193)
 $22,818
 $7,995
Investing Activities
Investing activities consist principally of investments in parks, resorts and other property and acquisition and divestiture activity. The Company’s investments in parks, resorts and other propertyinvesting activities for the six monthsquarters ended MarchDecember 30, 20192023 and MarchDecember 31, 20182022 are as follows:
 Six Months Ended
(in millions)March 30,
2019		 March 31,
2018
Media Networks   
Cable Networks$41
 $63
Broadcasting55
 45
Total Media Networks96
 108
Parks, Experiences and Products   
Domestic1,678
 1,419
International415
 310
Total Parks, Experiences and Products2,093
 1,729
Studio Entertainment39
 52
Direct-to-Consumer & International83
 81
21CF5
 —
Corporate74
 74
 $2,390
 $2,044
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS — (continued)


Capital expenditures for the Parks, Experiences and Products segment are principally for theme park and resort expansion, new attractions, cruise ships, capital improvements and systems infrastructure. The increase in capital expenditures was driven by higher spending on new attractions at our domestic theme parks and resorts.
Quarter Ended
(in millions)December 30,
2023		December 31,
2022
Investments in parks, resorts and other property:
Entertainment$309   $273   
Sports— 6 
Experiences
Domestic571 519 
International244 219 
Total Experiences815 738 
Corporate175 164 
Total investments in parks, resorts and other property1,299 1,181 
Cash used in (provided by) other investing activities, net(53)111 
Cash used in investing activities$1,246 $1,292 
Capital expenditures at Media Networksthe Entertainment segment primarily reflect investments in technology and in facilities and equipment for expanding and upgrading broadcast centers, production facilities and television station facilities.
Capital expenditures at Direct-to-Consumer & International primarily reflect investmentsthe Experiences segment are principally for theme park and resort expansion, new attractions, cruise ships, capital improvements and technology. The increase in technology.the current quarter compared to the prior-year quarter was due to higher spend on new attractions and cruise ship fleet expansion.
Capital expenditures at Corporate primarily reflect investments in corporate facilities, information technology infrastructure and equipment.
The Company currently expects its fiscal 20192024 capital expenditures will beto total approximately $1$6 billion higher thancompared to fiscal 20182023 capital expenditures of $4.5 billion$5 billion. The increase in capital expenditures is primarily due to increased investmentshigher spending at Experiences, in part due to continued investment in our domestic and international parks and resorts.Disney Cruise Line business.
Other InvestingFinancing Activities
Cash usedFinancing activities for acquisitions of $9.9 billionthe quarters ended December 30, 2023 and December 31, 2022 are as follows:
Quarter Ended
(in millions)December 30,
2023		December 31,
2022
Change in borrowings$737   $(134)  
Activities related to noncontrolling and redeemable noncontrolling interest(1)
(8,610)(722)
Cash used in other financing activities, net(133)(187)
Cash used in financing activities$(8,006)$(1,043)
(1)Activities related to noncontrolling and redeemable noncontrolling interests in the current period reflects $35.7 billion of cash paidand prior-year quarter were due to acquire 21CF less $25.7 billion of cash acquiredpayments for redeemable noncontrolling interests in the transaction (SeeHulu and BAMTech, respectively (see Note 41 to the Condensed Consolidated Financial Statements).

Financing Activities
Cash provided by financing activities was $12.7 billion in the current six-month period, which reflected net bridge loan borrowing to finance the acquisition of 21CF, partially offset by dividend payments.
Cash provided by financing activities of $12.7 billion in the current six-month period was $15.6 billion higher than the $2.9 billion used in the prior-year six-month period as higher net borrowings in the current period compared to the prior-year six-month period ($14.1 billion increase in the current six-month period compared to $1.1 billion increase in the prior-year six-month period) and an increase of $2.6 billion due to no repurchases of common stock in the current period.
See Note 65 to the Condensed Consolidated Financial Statements for a summary of the Company’s borrowing activities during the six monthsquarter ended MarchDecember 30, 20192023 and information regarding the Company’s bank facilities. The Company may use cash balances, operating cash flows, commercial paper borrowings up to the amount of its unused $12.25 billion bank facilities in conjunction withand incremental term debt issuance and operating cash flow,issuances to retire or refinance other borrowings before or as they come due.
See Note 11 to the Condensed Consolidated Financial Statements for a summary of the Company’s dividends declared and shares authorized for repurchase in fiscal 20192024. There were no dividends or share repurchases in fiscal 2023.
The Company’s operating cash flow and 2018. Duringaccess to the six month ended March 30, 2019, the Company did not repurchase anycapital markets can be impacted by factors outside of its common stock to hold as treasury shares.
control. We believe that the Company’s financial condition is strong and that its cash balances, other liquid assets, operating cash flows, access to debt and equity capital markets and borrowing capacity under current bank facilities, taken together, provide adequate resources to fund ongoing operating requirements, andcontractual obligations, upcoming debt maturities as well as future capital
45
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS — (continued)
expenditures related to the expansion of existing businesses and development of new projects. However, the Company’s operating cash flow and access to the capital markets can be impacted by macroeconomic factors outside of its control. In addition, the Company could undertake other measures to macroeconomic factors, theensure sufficient liquidity, such as raising additional financing, reducing or not declaring future dividends; reducing capital spending; reducing film and episodic content investments; or implementing furloughs or reductions in force.
The Company’s borrowing costs can also be impacted by short- and long-term debt ratings assigned by nationally recognized rating agencies, which are based, in significant part, on the Company’s performance as measured by certain credit metrics such as leverage and interest coverage and leverage ratios. As of MarchDecember 30, 2019,2023, Moody’s Investors Service’s long- and short-term debt ratings for the Company were A2 and P-1 (Stable), respectively, Standard and Poor’s long- and short-term debt ratings for the Company were AA- and A-1,A-2 (Positive), respectively, and Fitch’s long- and short-term debt ratings for the Company were AA- and F1,F2 (Stable), respectively. Each of Moody’s Investors Service, Standard and Poor’s and Fitch had placed the Company’s long- and short-term debt ratings on review for downgrade as a result of the pending acquisition of 21CF. On October 8, 2018, Moody’s Investor Service affirmed the Company’s long- and short-term debt ratings of A2 and P-1, respectively, with stable outlook following its review of the impact of the acquisition. On January 18, 2019, Fitch affirmed the Company’s long- and short-term debt ratings of A and F1, respectively, with stable outlook. On March 12, 2019, Standard and Poor’s finalized its review of the Company’s debt ratings and lowered the Company’s long- and short-term ratings to A and A-1, from A+ and A-1+. The Company’s bank facilities contain only one financial covenant, relating to interest coverage whichof three times earnings before interest, taxes, depreciation and amortization, including both intangible amortization and amortization of our film and television production and programming costs. On December 30, 2023, the Company met on March 30, 2019,this covenant by a significant margin. The Company’s bank facilities also specifically exclude certain entities, including the Asia Theme Parks, from any representations, covenants or events of default.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS — (continued)


COMMITMENTS AND CONTINGENCIES
Legal Matters
As disclosed in Note 13 to the Condensed Consolidated Financial Statements, the Company has exposure for certain legal matters.
Guarantees
See Note 14 to the Consolidated Financial Statements in the 2018 Annual Report on Form 10-K for information regarding the Company’s guarantees.
Tax Matters
As disclosed in Note 9 to the Consolidated Financial Statements in the 2018 Annual Report on Form 10-K, the Company has exposure for certain tax matters.
Contractual Commitments
See Note 14 to the Consolidated Financial Statements in the 2018 Annual Report on Form 10-K for information regarding the Company’s contractual commitments and see Note 4 to the Condensed Consolidated Financial Statements for contractual commitments assumed in the 21CF acquisition.
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 2018 Annual Report on Form 10-K. In addition, for our revenue recognition policy, see Note 3 to the Condensed Consolidated Financial Statements.
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
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS — (continued)


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.
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.
Revenue Recognition
The Company has revenue recognition policies for its various operating segments that are appropriate to the circumstances of each business. We have updated our revenue recognition policies in conjunction with our adoption of the new revenue recognition guidance as further described in Note 3 to the Condensed Consolidated Financial Statements.
Fixed license fees charged for the right to use our television and motion picture productions are recognized as revenue when the content is available for use by the licensee. TV/SVOD distribution contracts may contain more than one title and/or provide that certain titles are only available for use during defined periods of time during the contract term. In these instances, each title and/or period of availability is generally considered a separate performance obligation. For these contracts, license fees are allocated to each title and period of availability at contract inception based on relative standalone selling price using management’s best estimate. Estimates used to determine a performance obligations’ standalone selling price impact the timing of revenue recognition, but not the total revenue to be recognized under the arrangements.
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 2018 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 amount of 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
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS — (continued)


reporting units was licensed to an unrelated third party at its fair market value. 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.
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 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 13 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
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS — (continued)


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.
New Accounting Pronouncements
See Note 18 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.
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, Japanese yen, British pound, Chinese yuan 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 are intended to offset changes in the U.S. dollar equivalent value of the related exposures. The economic or political conditions in a country have reduced and in the future 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.
Our objectives in managing exposures to market-based fluctuations in certain retirement liabilities are to use total return swap contracts to reduce the volatility of earnings arising from changes in these retirement liabilities. The amounts hedged using total return swap contracts are based on estimated liability balances.
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.
COMMITMENTS AND CONTINGENCIES
Legal Matters
As disclosed in Note 13 to the Condensed Consolidated Financial Statements, the Company has exposure for certain legal matters.
46
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS — (continued)
Guarantees
See Note 14 to the Consolidated Financial Statements in the 2023 Annual Report on Form 10-K.
Tax Matters
As disclosed in Note 9 to the Consolidated Financial Statements in the 2023 Annual Report on Form 10-K, the Company has exposure for certain tax matters.
Contractual Commitments
See Note 14 to the Consolidated Financial Statements in the 2023 Annual Report on Form 10-K.
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 2023 Annual Report on Form 10-K.
Produced and Acquired/Licensed Content Costs
We amortize and test for impairment of capitalized film and television production costs based on whether the content is predominantly monetized individually or as a group. See Note 7 to the Condensed Consolidated Financial Statements for further discussion.
Production costs that are classified as individual are amortized based upon the ratio of the current period’s revenues to the estimated remaining total revenues (Ultimate Revenues).
With respect to produced films intended for theatrical release, the most sensitive factor affecting our estimate of Ultimate Revenues is theatrical performance. Revenues derived from other markets subsequent to the theatrical release are generally highly correlated with 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, which may include imputed license fees for content that is used on our DTC streaming services, are revised based on historical relationships and an analysis of current market trends.
With respect to capitalized television production costs that are classified as individual, the most sensitive factor affecting estimates of Ultimate Revenues is program ratings of the content on our licensees’ platforms. Program ratings, which are an indication of market acceptance, directly affect the program’s ability to generate advertising and subscriber revenues and are correlated with the license fees we can charge for the content in subsequent windows and for subsequent seasons.
Ultimate Revenues are reassessed each reporting period and the impact of any changes on amortization of production cost is accounted for as if the change occurred at the beginning of the current fiscal year. If our estimate of Ultimate Revenues decreases, amortization of costs may be accelerated or result in an impairment. Conversely, if our estimate of Ultimate Revenues increases, cost amortization may be slowed.
Production costs classified as individual are tested for impairment at the individual title level by comparing that title’s unamortized costs to the present value of discounted cash flows directly attributable to the title. To the extent the title’s unamortized costs exceed the present value of discounted cash flows, an impairment charge is recorded for the excess.
Produced content costs that are part of a group and acquired/licensed content costs are amortized based on projected usage, typically resulting in an accelerated or straight-line amortization pattern. The determination of projected usage requires judgment and is reviewed on a regular basis for changes. Adjustments to projected usage are applied prospectively in the period of the change. Historical viewing patterns are the most significant input into determining the projected usage, and significant judgment is required in using historical viewing patterns to derive projected usage. If projected usage changes we may need to accelerate or slow the recognition of amortization expense.
Cost of content that is predominantly monetized as a group is tested for impairment by comparing the present value of the discounted cash flows of the group to the aggregate unamortized costs of the group. The group is established by identifying the lowest level for which cash flows are independent of the cash flows of other produced and licensed content. If the unamortized costs exceed the present value of discounted cash flows, an impairment charge is recorded for the excess and allocated to individual titles based on the relative carrying value of each title in the group. If there are no plans to continue to use an individual film or television program that is part of a group, the unamortized cost of the individual title is written down to its
47
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS — (continued)
estimated fair value. Licensed content is included as part of the group within which it is monetized for purposes of impairment testing.
The amortization of multi-year sports rights is based on projections of revenues for each season relative to projections of total revenues over the contract period (estimated relative value). Projected revenues 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 estimated relative values by year were to change significantly, amortization of our sports rights costs may be accelerated or slowed.
Revenue Recognition
The Company has revenue recognition policies for its various operating segments that are appropriate to the circumstances of each business. Refer to Note 2 to the Consolidated Financial Statements in the 2023 Annual Report on Form 10-K for our revenue recognition policies.
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. See Note 10 to the Consolidated Financial Statements in the 2023 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 and postretirement medical 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 plan assets will increase pension and postretirement medical 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. The Company performs its annual test of goodwill and indefinite-lived intangible assets for impairment in its fiscal fourth quarter.
Goodwill is allocated to various reporting units, which are an operating segment or one level below the operating segment. To test goodwill for impairment, the Company first performs a qualitative assessment to determine if it is more likely than not that the carrying amount of a reporting unit exceeds its fair value. If it is, a quantitative assessment is required. Alternatively, the Company may bypass the qualitative assessment and perform a quantitative impairment test.
The qualitative assessment requires the consideration of factors such as recent market transactions, macroeconomic conditions and changes in projected future cash flows of the reporting unit.
The quantitative assessment compares the fair value of each goodwill 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 amount of goodwill allocated to the reporting unit.
The impairment test for goodwill requires judgment related to the identification of reporting units, the assignment of assets and liabilities to reporting units including goodwill, and the determination of fair value of the reporting units. 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. The discounted cash flow analyses are sensitive to our estimated projected future cash flows as well as the discount rates used to calculate their present value. Our future cash flows are based on internal forecasts for each reporting unit, which consider projected inflation and other economic indicators, as well as industry growth projections. Discount rates for each reporting unit are determined based on the inherent risks of each reporting unit’s underlying operations. We believe our estimates are consistent with how a marketplace participant would value our reporting units.
As discussed in our Critical Accounting Policies and Estimates section of our fiscal 2023 Annual Report on Form 10-K, the carrying amounts of our entertainment and international sports linear networks reporting units exceeded their fair values and we recorded non-cash goodwill impairment charges of approximately $0.7 billion in the fourth quarter of fiscal 2023. The entertainment linear networks reporting unit goodwill after impairment is approximately $8 billion and the international sports
48
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS — (continued)
linear networks reporting unit goodwill was fully impaired. In addition, the fair value of our entertainment DTC services reporting unit exceeded its carrying amount by less than 10%. Goodwill of the entertainment DTC services reporting unit is approximately $45 billion.
Based on our annual assessment performed in the fourth quarter of fiscal 2023, for our entertainment linear networks reporting unit, a 25 basis point increase in the discount rate or a 1% reduction in projected cash flows used to determine fair value would result in an incremental impairment charge of approximately $0.3 billion.
For our entertainment DTC services reporting unit, a 25 basis point increase in the discount rate used to determine fair value would result in an impairment of $0.5 billion, and a 1% reduction in projected cash flows would result in a decrease in the excess fair value over carrying amount by approximately $0.9 billion.
Significant judgments and assumptions in the discounted cash flow model used to determine fair value relate to future revenues and certain operating expenses, terminal growth rates and discount rates. Changes to these assumptions, shifts in market trends, or the impact of macroeconomic events could produce test results in the future that differ, and we could be required to record additional impairment charges.
In addition, changes to our business strategy, including entering into a joint venture arrangement or the sale of a business, could result in impairment charges.
To test other indefinite-lived intangible assets for impairment, the Company first performs a qualitative assessment to determine if it is more likely than not that the carrying amount of each of its indefinite-lived intangible assets exceeds its fair value. If it is, a quantitative assessment is required. Alternatively, the Company may bypass the qualitative assessment and perform a quantitative impairment test.
The qualitative assessment requires the consideration of factors such as recent market transactions, macroeconomic conditions and changes in projected future cash flows.
The quantitative assessment compares the fair value of an indefinite-lived intangible asset to its carrying amount. 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 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 Company’s 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 the estimated undiscounted future cash flows expected to be generated over the useful life of the significant assets of an asset group to the carrying amount of the asset group. An asset group is generally 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. If the carrying amount 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 asset group and the carrying amount of the asset group. For assets held for sale, to the extent the carrying amount 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 asset groups, estimates of future cash flows and the discount rate used to determine fair values.
The Company has investments in equity securities. For equity securities that do not have a readily determinable fair value, we consider forecasted financial performance of the investee companies, as well as volatility inherent in the external markets for these investments. If these forecasts are not met, impairment charges may be recorded.
Allowance for Credit Losses
We evaluate our allowance for credit losses and estimate collectability of accounts receivable based on historical bad debt experience, our assessment of the financial condition of individual companies with which we do business, current market conditions, and reasonable and supportable forecasts of future economic conditions. In times of economic turmoil, including COVID-19, 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. See Note 3 to the Condensed Consolidated Financial Statements for additional discussion.
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,
49
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS — (continued)
assuming a combination of litigation and settlement strategies and have been developed in consultation with outside counsel as appropriate. From time to time, we are also involved in other contingent matters for which we accrue 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 13 to the Condensed Consolidated Financial Statements for more detailed information on litigation exposure.
Income Tax
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.
New Accounting Pronouncements
See Note 17 to the Condensed Consolidated Financial Statements for information regarding new accounting pronouncements.
DTC PRODUCT DESCRIPTIONS, KEY DEFINITIONS AND SUPPLEMENTAL INFORMATION
Product Offerings
In the U.S., Disney+, ESPN+ and Hulu SVOD Only are each offered as a standalone service or together as part of various multi-product offerings. Hulu Live TV + SVOD includes Disney+ and ESPN+. Disney+ is available in more than 150 countries and territories outside the U.S. and Canada. In India and certain other Southeast Asian countries, the service is branded Disney+ Hotstar. In certain Latin American countries, we offer Disney+ as well as Star+, a general entertainment SVOD service, which is available on a standalone basis or together with Disney+ (Combo+). Depending on the market, our services can be purchased on our websites or through third-party platforms/apps or are available via wholesale arrangements.
Paid Subscribers
Paid subscribers reflect subscribers for which we recognized subscription revenue. Subscribers cease to be a paid subscriber as of their effective cancellation date or as a result of a failed payment method. Subscribers to multi-product offerings in the U.S. are counted as a paid subscriber for each service included in the multi-product offering and subscribers to Hulu Live TV + SVOD are counted as one paid subscriber for each of the Hulu Live TV + SVOD, Disney+ and ESPN+ services. In Latin America, if a subscriber has either the standalone Disney+ or Star+ service or subscribes to Combo+, the subscriber is counted as one Disney+ paid subscriber. Subscribers include those who receive a service through wholesale arrangements including those for which the service is distributed to each subscriber of an existing content distribution tier. When we aggregate the total number of paid subscribers across our DTC streaming services, we refer to them as paid subscriptions.
International Disney+ (excluding Disney+ Hotstar)
International Disney+ (excluding Disney+ Hotstar) includes the Disney+ service outside the U.S. and Canada and the Star+ service in Latin America.
Average Monthly Revenue Per Paid Subscriber
Hulu and ESPN+ average monthly revenue per paid subscriber is calculated based on the average of the monthly average paid subscribers for each month in the period. The monthly average paid subscribers is calculated as the sum of the beginning of the month and end of the month paid subscriber count, divided by two. Disney+ average monthly revenue per paid subscriber is calculated using a daily average of paid subscribers for the period. Revenue includes subscription fees, advertising (excluding revenue earned from selling advertising spots to other Company businesses) and premium and feature add-on revenue but excludes Pay-Per-View revenue. Advertising revenue generated by content of one streaming service that is accessed through another streaming service (for example, Hulu content accessed through Disney+) is allocated between both services. The average revenue per paid subscriber is net of discounts on offerings that carry more than one service. Revenue is allocated to each service based on the relative retail or wholesale price of each service on a standalone basis. Hulu Live TV + SVOD revenue is allocated to the SVOD services based on the wholesale price of the Hulu SVOD Only, Disney+ and ESPN+ multi-product offering. In general, wholesale arrangements have a lower average monthly revenue per paid subscriber than subscribers that we acquire directly or through third-party platforms.
50
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS — (continued)
Supplemental information about paid subscribers:
(in millions)December 30,
2023		September 30,
2023		December 31,
2022
Domestic (U.S. and Canada) standalone53.855.558.5
Domestic (U.S. and Canada) multi-product(1)
23.722.620.8
77.578.179.3
International standalone (excluding Disney+ Hotstar)(2)
53.755.349.5
International multi-product(3)
11.510.88.1
65.266.157.7
Total(4)
142.7144.2136.9
(1)At December 30, 2023, there were 19.8 million and 3.9 million subscribers to three-service and two-service multi-product offerings, respectively. At September 30, 2023, there were 20.3 million and 2.3 million subscribers to three-service and two-service multi-product offerings, respectively. At December 31, 2022, there were 19.6 million and 1.2 million subscribers to three-service and two-service multi-product offerings, respectively.
(2)Disney+ Hotstar is not included in any of the Company’s multi-product offerings.
(3)Consists of subscribers to Combo+.
(4)Total may not equal the sum of the column due to rounding.
SUPPLEMENTAL GUARANTOR FINANCIAL INFORMATION
On March 20, 2019 as part of the acquisition of TFCF, The Walt Disney Company (“TWDC”) became the ultimate parent of TWDC Enterprises 18 Corp. (formerly known as The Walt Disney Company) (“Legacy Disney”). Legacy Disney and TWDC are collectively referred to as “Obligor Group”, and individually, as a “Guarantor”. Concurrent with the close of the TFCF acquisition, $16.8 billion of TFCF’s assumed public debt (which then constituted 96% of such debt) was exchanged for senior notes of TWDC (the “exchange notes”) issued pursuant to an exemption from registration under the Securities Act of 1933, as amended (the “Securities Act”), pursuant to an Indenture, dated as of March 20, 2019, between TWDC, Legacy Disney, as guarantor, and Citibank, N.A., as trustee (the “TWDC Indenture”) and guaranteed by Legacy Disney. On November 26, 2019, $14.0 billion of the outstanding exchange notes were exchanged for new senior notes of TWDC registered under the Securities Act, issued pursuant to the TWDC Indenture and guaranteed by Legacy Disney. In addition, contemporaneously with the closing of the March 20, 2019 exchange offer, TWDC entered into a guarantee of the registered debt securities issued by Legacy Disney under the Indenture dated as of September 24, 2001 between Legacy Disney and Wells Fargo Bank, National Association, as trustee (the “2001 Trustee”) (as amended by the first supplemental indenture among Legacy Disney, as issuer, TWDC, as guarantor, and the 2001 Trustee, as trustee).
Other subsidiaries of the Company do not guarantee the registered debt securities of either TWDC or Legacy Disney (such subsidiaries are referred to as the “non-Guarantors”). The par value and carrying value of total outstanding and guaranteed registered debt securities of the Obligor Group at December 30, 2023 was as follows:
TWDCLegacy Disney
(in millions)Par ValueCarrying ValuePar ValueCarrying Value
Registered debt with unconditional guarantee$34,903$35,470$8,143$7,968
The guarantees by TWDC and Legacy Disney are full and unconditional and cover all payment obligations arising under the guaranteed registered debt securities. The guarantees may be released and discharged upon (i) as a general matter, the indebtedness for borrowed money of the consolidated subsidiaries of TWDC in aggregate constituting no more than 10% of all consolidated indebtedness for borrowed money of TWDC and its subsidiaries (subject to certain exclusions), (ii) upon the sale, transfer or disposition of all or substantially all of the equity interests or all or substantially all, or substantially as an entirety, the assets of Legacy Disney to a third party, and (iii) other customary events constituting a discharge of a guarantor’s obligations. In addition, in the case of Legacy Disney’s guarantee of registered debt securities issued by TWDC, Legacy Disney may be released and discharged from its guarantee at any time Legacy Disney is not a borrower, issuer or guarantor under certain material bank facilities or any debt securities.
51
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS — (continued)
Operations are conducted almost entirely through the Company’s subsidiaries. Accordingly, the Obligor Group’s cash flow and ability to service its debt, including the public debt, are dependent upon the earnings of the Company’s subsidiaries and the distribution of those earnings to the Obligor Group, whether by dividends, loans or otherwise. Holders of the guaranteed registered debt securities have a direct claim only against the Obligor Group.
Set forth below is summarized financial information for the Obligor Group on a combined basis after elimination of (i) intercompany transactions and balances between TWDC and Legacy Disney and (ii) equity in the earnings from and investments in any subsidiary that is a non-Guarantor. This summarized financial information has been prepared and presented pursuant to the Securities and Exchange Commission Regulation S-X Rule 13-01, “Financial Disclosures about Guarantors and Issuers of Guaranteed Securities” and is not intended to present the financial position or results of operations of the Obligor Group in accordance with GAAP.
Results of operations (in millions)Quarter Ended December 30, 2023
Revenues$—
Costs and expenses—
Net income (loss)(172)
Net income (loss) attributable to TWDC shareholders(172)
Balance Sheet (in millions)December 30, 2023September 30, 2023
Current assets$2,985$8,544
Noncurrent assets3,0702,927
Current liabilities7,8045,746
Noncurrent liabilities (excluding intercompany to non-Guarantors)42,91543,307
Intercompany payables to non-Guarantors150,067154,018
52

Item 3. Quantitative and Qualitative Disclosures about Market Risk.
See Item 2, Management’s Discussion and Analysis of Financial Condition and Results of Operations, and Note 15 to the Condensed Consolidated Financial Statements.

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 MarchDecember 30, 2019,2023, 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.
Changes in Internal Controls – There have been no changes in our internal controlscontrol over financial reporting during the secondfirst quarter of fiscal 20192024 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting, except as noted below.reporting.
During the quarter ended March 30, 2019, we completed the 21CF acquisition (see Note 4 to the Condensed Consolidated Financial Statements for more information). We are currently integrating 21CF into our operations and internal control processes and, pursuant to the SEC’s guidance that an assessment of a recently acquired business may be omitted from the scope of an assessment in the year of acquisition, the scope of our assessment of the effectiveness of our internal controls over financial reporting at September 28, 2019 will not include 21CF.
53

PART II. OTHER INFORMATION
ITEM 1. Legal Proceedings
As disclosed in Note 13 to the Condensed Consolidated Financial Statements, the Company is engaged in certain legal matters, and the disclosure set forth in Note 13 relating to certain legal matters is incorporated herein by reference.

ITEM 1A. Risk Factors
The Private Securities Litigation Reform ActFor an enterprise as large and complex as the Company, a wide range of 1995 (the Act) provides a safe harbor for “forward-looking statements” made by or on behalffactors could materially affect future developments and performance. In addition to the factors affecting specific business operations identified in connection with the description of these operations and the Company. We may from time to time make written or oral statements that are “forward-looking,” including statements containedfinancial results of these operations elsewhere in this report and otherour filings with the Securities and Exchange Commission and in reports to our shareholders. All forward-looking statements are made onSEC, 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, performance of some or all company businesses either directly or through their impact on those who distribute our products.
The seasonality of certain of our businesses could exacerbate negative impacts on our operations.
Each of our businesses is normally subject to seasonal variations, as described in “Management’s Discussion and Analysis - Seasonality.”
Accordingly, if a short-term negative impact onmost significant factors affecting our business occurs during a time of high seasonal demand (such as hurricane damage to our parks duringinclude the summer travel season), the effect could have a disproportionate effect on the results of that business for the year.
Consummation of the Acquisition has increased 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 has increased the importance of international operations to our future operations, growth and prospects. The risks of operating internationally that we face have increased following the completion of the Acquisition.
Our consolidated indebtedness has increased 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 29, 2018 was approximately $20.9 billion. Upon completion of the Acquisition, we assumed $23 billion of outstanding debt of 21CF. In addition, we have $15 billion of additional debt under a 364-day credit agreement used to finance a portion of the cash consideration for the 21CF acquisition. We anticipate using proceeds from the sale of the 21CF RSNs to pay down indebtedness when those proceeds become available.
The increased indebtedness could have the effect of, among other things, reducing our flexibility to respond to changing business and economic conditions. The increased levels of indebtedness 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 financial flexibility may be further constrained by the issuance of shares of common stock in the 21CF acquisition, because of dividend payments.
Risks that impact our business as a whole may also impact the success of our direct-to-consumer business.
We may not successfully execute on technology development, service promotion, or creative development. Consumers may not be willing to pay for an expanding set of Direct-to-Consumer (DTC) services, potentially exacerbated by an economic downturn. We face competition for creative talent and may not be successful in recruiting and retaining talent. Government regulation, including revised foreign content and ownership regulations, may impact the implementation of our DTC business plans. Poor quality broadband infrastructure in certain markets may impact our customers’ access to our DTC products and may diminish our customers’ experience with our DTC products. These and other risks may impact the profitability and success of our DTC businesses.
Additional factors are discussed in the 2018our 2023 Annual Report on Form 10-K under the Item 1A, “Risk Factors.”Factors” as updated below:
BUSINESS, ECONOMIC, MARKET and OPERATING CONDITION RISKS

Regulations applicable to our businesses may impair the profitability of our businesses.
ITEM 2. Unregistered SalesEach of Equity Securitiesour businesses, including our broadcast networks and Usetelevision stations, is subject to a variety of ProceedsU.S. and international regulations, which impact the operations and profitability of our businesses. Some of these regulations include:
(a)•The following table provides information about Company purchasesU.S. Federal Communications Commission regulation of equity securitiesour television and radio networks, our national programming networks and our owned television stations. See our 2023 Annual Report on Form 10-K under Item 1 — Federal Regulation - Entertainment and Sports.
•Federal, state and foreign privacy and data protection laws and regulations.
•Regulation of the safety and supply chain of consumer products and theme park operations, including regulation regarding the sourcing, importation and the sale of goods.
•Land planning, use and development regulations applicable to our theme parks operations.
•Environmental protection regulations.
•U.S. and international anti-corruption laws, sanction programs, trade restrictions and anti-money laundering laws.
•Restrictions on the manner in which content is currently licensed and distributed, ownership restrictions or film or television content requirements, investment obligations or quotas.
•Domestic and international labor laws, tax laws or currency controls.
New laws and regulations, as well as changes in any of these current laws and regulations or regulator activities in any of these areas, or others, may require us to spend additional amounts to comply with the regulations, or may restrict our ability to offer products and services in ways that are registered byprofitable, and create an increasingly unpredictable regulatory landscape. In addition, ongoing and future developments in international political, trade and security policy may lead to new regulations limiting international trade and investment and disrupting our operations outside the U.S., including our international theme parks and resorts operations in France, mainland China and Hong Kong. For example, in 2022 the U.S. and other countries implemented a series of sanctions against Russia in response to events in Russia and Ukraine; U.S. agencies have enhanced trade restrictions, including new prohibitions on the importation of goods from certain regions and other jurisdictions are considering similar measures; U.S. state governments have become more active in passing legislation targeted at specific sectors and companies and applying existing laws in novel ways to new technologies, including streaming and online commerce; and in many countries/regions around the world (including but not limited to the European Union) regulators are requiring us to broadcast on our linear networks (or display on our DTC streaming services) programming produced in specific countries as well as invest specified amounts of our revenues in local content productions. In Florida, legislative, regulatory and other steps directed at the Company pursuanthave been taken, which collectively have negatively impacted our ability to Section 12execute on our business strategy, and such steps, along with future potential legislative and regulatory actions, could negatively impact our costs and the growth and profitability of our operations in Florida.
Further, in response to the Exchange Act during the quarter ended COVID-19 pandemic, public health and other regional, national, state and local regulations and policies impacted most of our businesses. Government requirements could be reinstated and new government requirements may be imposed to address COVID-19 or future health outbreaks or pandemics.

March 30, 2019:
54
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 30, 2018 - January 31, 2019 229,366
 $111.93
 —
 158 million
February 1, 2019 - February 28, 2019 24,341
 113.06
 —
 158 million
March 1, 2019 - March 30, 2019 25,285
 112.65
 —
 0
Total 278,992
 112.10
 —
 0
(1)

278,992 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)
On March 20, 2019, the Company terminated the repurchase program.



ITEM 5. Other Items
Costs Associated with ExitNone of our directors or Disposal Activitiesofficers adopted or terminated a Rule 10b5-1 trading arrangement or a non-Rule 10b5-1 trading arrangement (as defined in Item 408(c) of Regulation S-K) during the quarterly period covered by this report.
The information set forth below is included herein for the purpose of providing the disclosure required under “Item 2.05 - Costs Associated with Exit or Disposal Activities” of Form 8-K.
55
On May 8, 2019, the Company disclosed a restructuring and integration plan as part of its initiative to realize cost synergies from its previously announced acquisition of 21CF. We expect to complete the restructuring and integration plan by the end of Fiscal Year 2021.
The Company estimates it will incur severance and severance-related costs on the order of $1.5 billion. This amount represents an estimate which is subject to change as management finalizes its assessment. The Company may also incur other costs in connection with the plan, such as lease termination costs, but is unable to estimate those amounts at this time.


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
May 8, 2019
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
3.13.3
Exhibit 3.1 to the Current Report on Form 8-K of the Company filed March 20, 2019November 30, 2023
3.210.1CertificateFiled herewith
10.2
Exhibit 3.2 to the Current Report on Form 8-K of the Company filed March 20, 2019
3.3AmendedDecember 4, 2023 by and Restated Bylaws ofbetween The Walt Disney Company effective as of March 20, 2019and Hugh F. Johnston †
Exhibit 3.3 to the Current Report on Form 8-K of the Company filed March 20, 2019
3.4Amended and Restated Certificate of Incorporation of TWDC Enterprises 18 Corp., effective as of March 20, 2019
Exhibit 3.1 to the Current Report on Form 8-K of Legacy Disney filed March 20, 2019
3.5Amended and Restated Bylaws of TWDC Enterprises 18 Corp., effective as of March 20, 2019
Exhibit 3.2 to the Current Report on Form 8-K of Legacy Disney filed March 20, 2019
4.1First Supplemental Indenture to the Indenture dated as of September 24, 2001 between TWDC Enterprises 18 Corp. and the 2001 Indenture Trustee, dated as of March 20, 2019, by and among TWDC Enterprises 18 Corp., as issuer, The Walt Disney Company, as guarantor, and Wells Fargo Bank, National Association, as trustee
Exhibit 4.1 to the Current Report on Form 8-K of the Company filed March 20, 2019
4.2Indenture, dated as of March 20, 2019, by and among The Walt Disney Company, as issuer, and TWDC Enterprises 18 Corp., as guarantor, and Citibank, N.A., as trustee
Exhibit 4.1 to the Current Report on Form 8-K of the Company filed March 20, 2019
4.3Form of Disney Make-Whole Notes (Disney 5.650% 2020 Notes, Disney 4.500% 2021 Notes, Disney 3.000% 2022 Notes, Disney 4.000% 2023 Notes, Disney 6.400% 2035 Notes, Disney 6.150% 2037 Notes, Disney 6.650% 2037 Notes, Disney 7.850% 2039 Notes, Disney 6.900% 2039 Notes, Disney 6.150% 2041 Notes and Disney 5.400% 2043 Notes)
Exhibit 4.2 to the Current Report on Form 8-K of the Company filed March 20, 2019
4.4Form of Disney Par Call Notes (Disney 3.700% 2024 Notes, Disney 3.700% 2025 Notes, Disney 3.375% 2026 Notes, Disney 4.750% 2044 Notes, Disney 4.950% 2045 Notes and Disney 4.750% 2046 Notes)
Exhibit 4.3 to the Current Report on Form 8-K of the Company filed March 20, 2019
4.5Form of Disney Non-Redeemable Notes (Disney 8.875% 2023 Notes, Disney 7.750% January 2024 Notes, Disney 7.750% February 2024 Notes, Disney 9.500% 2024 Notes, Disney 8.500% 2025 Notes, Disney 7.700% 2025 Notes, Disney 7.430% 2026 Notes, Disney 7.125% 2028 Notes, Disney 7.300% 2028 Notes, Disney 7.280% 2028 Notes, Disney 7.625% 2028 Notes, Disney 6.550% 2033 Notes, Disney 8.450% 2034 Notes, Disney 6.200% 2034 Notes, Disney 8.150% 2036 Notes, Disney 6.750% 2038 Notes, Disney 7.750% 2045 Notes, Disney 7.900% 2095 Notes and Disney 8.250% 2096 Notes )
Exhibit 4.4 to the Current Report on Form 8-K of the Company filed March 20, 2019
4.6Registration Rights Agreement, dated as of March 20, 2019, by and among The Walt Disney Company, as issuer, TWDC Enterprises 18 Corp., as guarantor, and Citigroup Global Markets Inc., J.P. Morgan Securities LLC, BNP Paribas Securities Corp., HSBC Securities (USA) Inc. and RBC Capital Markets, LLC, as dealer managers
Exhibit 4.5 to the Current Report on Form 8-K of the Company filed March 20, 2019

10.1364-Day Bridge Credit Agreement, dated as of March 15, 2019, among The Walt Disney Company, as the borrower, the lenders party thereto, Citibank, N.A., as a co-administrative agent, and JPMorgan Chase Bank, N.A., as a co-administrative agent and as the designated agent
Exhibit 10.1 to the Current Report on Form 8-K of the Company filed March 20, 2019November 6, 2023
10.210.3364-Day CreditFiled herewith
10.4Filed herewith
10.5
Exhibit 10.210.1 to the Current Report on Form 8-K of the Company filed March 20, 2019
December 22, 2023
10.6Filed herewith
10.3
10.7
Exhibit 10.1 to the Current Report on Form 8-K of Legacy Disney filed March 4, 2019Filed herewith
10.8Filed herewith
31(a)
10.9Filed herewith
22Filed herewith
31(a)
Filed herewith
31(b)
Filed herewith
32(a)
Furnished
32(b)
Furnished
101The following materials from the Company’s Quarterly Report on Form 10-Q for the quarter ended MarchDecember 30, 20192023 formatted in Inline Extensible Business Reporting Language (XBRL)(iXBRL): (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 notesFiled herewith
104Cover Page Interactive Data File (embedded within the Inline XBRL document)Filed herewith

*
This certification is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liability of that section, nor shall it be deemed incorporated by reference into any filing under the Securities Act of 1933, as amended or the Exchange Act.
†
*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 CommissionManagement Contract or its staff upon request.compensatory plan or arrangement.

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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/ HUGH F. JOHNSTON
Hugh F. Johnston,
Senior Executive Vice President and
Chief Financial Officer
February 7, 2024
Burbank, California
57