UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~July 1,~~December 30, 2023

☐ 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


Delaware						83-0940635
State or Other Jurisdiction of						I.R.S. Employer Identification
Incorporation or Organization

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 class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock, $0.01 par value

DIS

New 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 ☒ 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 ☒ 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

☒

Accelerated 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 ☒

There were ~~1,829,778,789~~1,834,302,235 shares of common stock outstanding as of ~~August 2, 2023.~~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,~~results; business plans (including statements regarding new services and products and future expenditures, costs and investments),; future liabilities and other obligations; impairments and ~~amortization,~~amortization; estimates of financial impact of certain items, accounting treatment, events or circumstances; competition and ~~the impact of COVID-19~~seasonality on our businesses and results of ~~operations.~~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 IPintellectual 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;

•~~further~~ 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 ~~2022~~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.

PART I. FINANCIAL INFORMATION

Item 1: Financial Statements

THE WALT DISNEY COMPANY

CONDENSED CONSOLIDATED STATEMENTS OF ~~OPERATIONS~~INCOME

(unaudited; in millions, except per share data)
Quarter Ended Nine Months Ended
July 1,
2023 July 2,
2022 July 1,
2023 July 2,
2022
Revenues:
Services $ 20,008 $ 19,461 $ 60,591 $ 56,215
Products 2,322 2,043 7,066 6,357
Total revenues 22,330 21,504 67,657 62,572
Costs and expenses:
Cost of services (exclusive of depreciation and amortization) (12,974) (12,404) (40,915) (36,895)
Cost of products (exclusive of depreciation and amortization) (1,497) (1,278) (4,558) (3,948)
Selling, general, administrative and other (3,874) (4,100) (11,315) (11,655)
Depreciation and amortization (1,344) (1,290) (3,960) (3,846)
Total costs and expenses (19,689) (19,072) (60,748) (56,344)
Restructuring and impairment charges (2,650) (42) (2,871) (237)
Other income (expense), net (11) (136) 96 (730)
Interest expense, net (305) (360) (927) (1,026)
Equity in the income of investees 191 225 555     674
Income (loss) from continuing operations before income taxes (134) 2,119 3,762 4,909
Income taxes on continuing operations (19) (617) (1,066) (1,610)
Net income (loss) from continuing operations (153) 1,502 2,696 3,299
Loss from discontinued operations, net of income tax benefit of $0, $0, $0 and $14, respectively — —     — (48)
Net income (loss) (153) 1,502 2,696 3,251
Net income from continuing operations attributable to noncontrolling interests (307) (93) (606) (268)
Net income (loss) attributable to Disney $ (460)     $ 1,409 $ 2,090 $ 2,983
Earnings (loss) per share attributable to Disney(1):
Diluted
Continuing operations $ (0.25) $ 0.77 $ 1.14 $ 1.66
Discontinued operations — — — (0.03)
$ (0.25) $ 0.77 $ 1.14 $ 1.63
Basic
Continuing operations $ (0.25) $ 0.77 $ 1.14 $ 1.66
Discontinued operations — — — (0.03)
$ (0.25) $ 0.77 $ 1.14 $ 1.64
Weighted average number of common and common equivalent shares outstanding:
Diluted 1,829 1,825 1,829 1,827
Basic 1,829 1,823 1,827 1,821

~~(1)Total may not equal the sum of the column due to rounding.~~


	Quarter Ended
	December 30, 2023		December 31, 2022
Revenues:
Services	$	20,975	$	20,997
Products	2,574		2,515
Total revenues	23,549		23,512
Costs and expenses:
Cost of services (exclusive of depreciation and amortization)	(13,922)		(14,781)
Cost of products (exclusive of depreciation and amortization)	(1,665)		(1,605)
Selling, general, administrative and other	(3,783)		(3,827)
Depreciation and amortization	(1,243)		(1,306)
Total costs and expenses	(20,613)		(21,519)
Restructuring and impairment charges	—		(69)
Other expense, net	—		(42)
Interest expense, net	(246)		(300)
Equity in the income of investees	181		191
Income before income taxes	2,871		1,773
Income taxes	(720)		(412)


Net income	2,151		1,361
Net income attributable to noncontrolling interests	(240)		(82)

Net income attributable to Disney	$	1,911	$	1,279

Earnings per share attributable to Disney:



Diluted	$	1.04	$	0.70



Basic	$	1.04	$	0.70

Weighted average number of common and common equivalent shares outstanding:
Diluted	1,835		1,827
Basic	1,832		1,825

See Notes to Condensed Consolidated Financial Statements

THE WALT DISNEY COMPANY

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME ~~(LOSS)~~

(unaudited; in millions)


		Quarter Ended				Nine Months Ended
		July 1, 2023		July 2, 2022		July 1, 2023		July 2, 2022
Net income (loss)		$	(153)	$	1,502	$	2,696	$	3,251




Net income
Net income
Net income
Other comprehensive income (loss), net of tax:
Other comprehensive income (loss), net of tax:
Other comprehensive income (loss), net of tax:	Other comprehensive income (loss), net of tax:
Market value adjustments for hedges	Market value adjustments for hedges	10		428		(614)		506
Market value adjustments for hedges
Market value adjustments for hedges
Pension and postretirement medical plan adjustments
Pension and postretirement medical plan adjustments
Pension and postretirement medical plan adjustments	Pension and postretirement medical plan adjustments	1		119		58		393
Foreign currency translation and other	Foreign currency translation and other	(101)		(446)		241		(659)
Other comprehensive income (loss)		(90)		101		(315)		240
Comprehensive income (loss)		(243)		1,603		2,381		3,491
Net income from continuing operations attributable to noncontrolling interests		(307)		(93)		(606)		(268)
Foreign currency translation and other
Foreign currency translation and other
Other comprehensive loss
Other comprehensive loss
Other comprehensive loss
Comprehensive income
Comprehensive income
Comprehensive income
Net income attributable to noncontrolling interests
Net income attributable to noncontrolling interests
Net income attributable to noncontrolling interests
Other comprehensive income attributable to noncontrolling interests	Other comprehensive income attributable to noncontrolling interests	66		69		21		58
Comprehensive income (loss) attributable to Disney		$	(484)	$	1,579	$	1,796	$	3,281
Other comprehensive income attributable to noncontrolling interests
Other comprehensive income attributable to noncontrolling interests
Comprehensive income attributable to Disney
Comprehensive income attributable to Disney
Comprehensive income attributable to Disney

See Notes to Condensed Consolidated Financial Statements

THE WALT DISNEY COMPANY

CONDENSED CONSOLIDATED BALANCE SHEETS

(unaudited; in millions, except per share data)


		July 1, 2023		October 1, 2022
	December 30, 2023							December 30, 2023		September 30, 2023
ASSETS	ASSETS
Current assets	Current assets
Current assets
Current assets
Cash and cash equivalents
Cash and cash equivalents
Cash and cash equivalents	Cash and cash equivalents	$	11,458	$	11,615
Receivables, net	Receivables, net	13,112		12,652
Inventories	Inventories	1,900		1,742
Content advances	Content advances	2,369		1,890

Other current assets	Other current assets	1,335		1,199
Other current assets
Other current assets

Total current assets
Total current assets
Total current assets	Total current assets	30,174		29,098
Produced and licensed content costs	Produced and licensed content costs	34,607		35,777
Investments	Investments	3,062		3,218
Parks, resorts and other property	Parks, resorts and other property
Attractions, buildings and equipment	Attractions, buildings and equipment	69,819		66,998
Attractions, buildings and equipment
Attractions, buildings and equipment							72,096		70,090
Accumulated depreciation	Accumulated depreciation	(42,112)		(39,356)
		27,707		27,642
	28,521
Projects in progress	Projects in progress	5,689		4,814
Land	Land	1,181		1,140
		34,577		33,596
	35,321
Intangible assets, net	Intangible assets, net	13,478		14,837
Goodwill	Goodwill	77,881		77,897

Other assets	Other assets	10,004		9,208
Other assets
Other assets
Total assets	Total assets	$	203,783	$	203,631

LIABILITIES AND EQUITY	LIABILITIES AND EQUITY
LIABILITIES AND EQUITY
LIABILITIES AND EQUITY
Current liabilities	Current liabilities
Current liabilities
Current liabilities
Accounts payable and other accrued liabilities
Accounts payable and other accrued liabilities
Accounts payable and other accrued liabilities	Accounts payable and other accrued liabilities	$	19,115	$	20,213
Current portion of borrowings	Current portion of borrowings	2,645		3,070
Deferred revenue and other	Deferred revenue and other	6,474		5,790

Total current liabilities	Total current liabilities	28,234		29,073
Total current liabilities
Total current liabilities
Borrowings	Borrowings	44,544		45,299
Deferred income taxes	Deferred income taxes	7,304		8,363

Other long-term liabilities
Other long-term liabilities
Other long-term liabilities	Other long-term liabilities	12,759		12,518
Commitments and contingencies (Note 13)	Commitments and contingencies (Note 13)					Commitments and contingencies (Note 13)
Redeemable noncontrolling interests	Redeemable noncontrolling interests	8,886		9,499
Equity	Equity
Preferred stock	Preferred stock	—		—
Common stock, $0.01 par value, Authorized – 4.6 billion shares, Issued – 1.8 billion shares		57,136		56,398
Preferred stock
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, 2023
Retained earnings	Retained earnings	45,794		43,636
Accumulated other comprehensive loss	Accumulated other comprehensive loss	(4,413)		(4,119)

Treasury stock, at cost, 19 million shares
Treasury stock, at cost, 19 million shares
Treasury stock, at cost, 19 million shares	Treasury stock, at cost, 19 million shares	(907)		(907)
Total Disney Shareholders’ equity	Total Disney Shareholders’ equity	97,610		95,008
Noncontrolling interests	Noncontrolling interests	4,446		3,871
Total equity	Total equity	102,056		98,879
Total liabilities and equity	Total liabilities and equity	$	203,783	$	203,631

See Notes to Condensed Consolidated Financial Statements

THE WALT DISNEY COMPANY

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited; in millions)


		Nine Months Ended					Quarter Ended
	December 30, 2023								December 30, 2023		December 31, 2022
OPERATING ACTIVITIES
Net income
Net income
Net income
Depreciation and amortization
		July 1, 2023		July 2, 2022
OPERATING ACTIVITIES
Net income from continuing operations		$	2,696	$	3,299
Depreciation and amortization		3,960		3,846
Impairment of produced and licensed content costs		2,266		—
Net (gain)/loss on investments and disposition of businesses		(184)		779

Deferred income taxes

Deferred income taxes

Deferred income taxes	Deferred income taxes	(899)		605
Equity in the income of investees	Equity in the income of investees	(555)		(674)
Cash distributions received from equity investees	Cash distributions received from equity investees	531		575		Cash distributions received from equity investees	153	176		176
Net change in produced and licensed content costs and advances	Net change in produced and licensed content costs and advances	(1,861)		(4,306)

Equity-based compensation	Equity-based compensation	861		723
Pension and postretirement medical benefit cost amortization		3		465
Equity-based compensation
Equity-based compensation

Other, net
Other, net
Other, net	Other, net	(166)		492
Changes in operating assets and liabilities:	Changes in operating assets and liabilities:
Receivables
Receivables
Receivables	Receivables	(744)		(506)
Inventories	Inventories	(120)		(259)
Other assets	Other assets	(64)		(684)
Accounts payable and other liabilities	Accounts payable and other liabilities	(1,609)		(892)
Income taxes	Income taxes	949		15
Cash provided by operations - continuing operations		5,064		3,478
Cash provided by (used in) operations

INVESTING ACTIVITIES	INVESTING ACTIVITIES
INVESTING ACTIVITIES
INVESTING ACTIVITIES
Investments in parks, resorts and other property	Investments in parks, resorts and other property	(3,595)		(3,795)
Proceeds from sale of investments		458		39
Investments in parks, resorts and other property
Investments in parks, resorts and other property

Other, net	Other, net	(122)		(116)
Cash used in investing activities - continuing operations		(3,259)		(3,872)

Other, net

Other, net
Cash used in investing activities

FINANCING ACTIVITIES	FINANCING ACTIVITIES
Commercial paper borrowings (payments), net		40		(275)
FINANCING ACTIVITIES
FINANCING ACTIVITIES
Commercial paper borrowings, net
Commercial paper borrowings, net
Commercial paper borrowings, net
Borrowings	Borrowings	70		152
Reduction of borrowings	Reduction of borrowings	(1,319)		(1,400)

Contributions from / sale of noncontrolling interest	Contributions from / sale of noncontrolling interest	719		48

Contributions from / sale of noncontrolling interest

Contributions from / sale of noncontrolling interest
Acquisition of redeemable noncontrolling interest	Acquisition of redeemable noncontrolling interest	(900)		—
Other, net	Other, net	(737)		(772)
Cash used in financing activities - continuing operations		(2,127)		(2,247)
Cash used in financing activities

CASH FLOWS FROM DISCONTINUED OPERATIONS
Cash provided by operations - discontinued operations		—		8

Cash used in financing activities - discontinued operations		—		(12)
Cash used in discontinued operations		—		(4)

Impact of exchange rates on cash, cash equivalents and restricted cash

Impact of exchange rates on cash, cash equivalents and restricted cash

Impact of exchange rates on cash, cash equivalents and restricted cash	Impact of exchange rates on cash, cash equivalents and restricted cash	174		(354)

Change in cash, cash equivalents and restricted cash	Change in cash, cash equivalents and restricted cash	(148)		(2,999)
Change in cash, cash equivalents and restricted cash
Change in cash, cash equivalents and restricted cash
Cash, cash equivalents and restricted cash, beginning of period	Cash, cash equivalents and restricted cash, beginning of period	11,661			16,003	Cash, cash equivalents and restricted cash, beginning of period	14,235			11,661
Cash, cash equivalents and restricted cash, end of period	Cash, cash equivalents and restricted cash, end of period	$	11,513	$	13,004

See Notes to Condensed Consolidated Financial Statements

THE WALT DISNEY COMPANY

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY

(unaudited; in millions)


																			Quarter Ended
		Equity Attributable to Disney


																			Shares(1)	Common Stock	Retained Earnings	Accumulated Other Comprehensive Income (Loss)	Treasury Stock	Total Disney Equity	Non-controlling Interests(2)	Total Equity
Balance at September 30, 2023
Comprehensive income (loss)
Equity compensation activity

Dividends
Dividends
Dividends

			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 April 1, 2023			1,827	$	56,919	$	46,236		$	(4,389)	$	(907)	$	97,859	$	3,697	$	101,556

Distributions and other

Distributions and other

Distributions and other
Balance at December 30, 2023

Balance at October 1, 2022
Balance at October 1, 2022
Balance at October 1, 2022
Comprehensive income (loss)	Comprehensive income (loss)		—	—		(460)			(24)		—		(484)		168		(316)
Equity compensation activity	Equity compensation activity		3	210		—			—		—		210		—		210

Contributions

Contributions

Contributions	Contributions		—	—		—			—		—		—		602		602

Distributions and other	Distributions and other		—	7		18			—		—		25		(21)		4
Balance at July 1, 2023			1,830	$	57,136	$	45,794		$	(4,413)	$	(907)	$	97,610	$	4,446	$	102,056

Balance at April 2, 2022			1,822	$	55,823	$	42,032		$	(6,312)	$	(907)	$	90,636	$	4,023	$	94,659
Comprehensive income (loss)			—	—		1,409			170		—		1,579		(67)		1,512
Equity compensation activity			1	259		—			—		—		259		—		259

Dividends			—	—		—			—		—		—		—		—
Contributions			—	—		—			—		—		—		19		19

Distributions and other	Distributions and other		—	5		21			—		—		26		(42)		(16)
Balance at July 2, 2022			1,823	$	56,087	$	43,462		$	(6,142)	$	(907)	$	92,500	$	3,933	$	96,433

Distributions and other
Balance at December 31, 2022

(1)Shares are net of treasury shares.

(2)Excludes redeemable noncontrolling interests.

See Notes to Condensed Consolidated Financial Statements

~~THE WALT DISNEY COMPANY~~

~~CONDENSED CONSOLIDATED STATEMENTS OF EQUITY~~

~~(unaudited; in millions)~~

Nine 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 October 1, 2022 1,824 $ 56,398 $ 43,636 $ (4,119) $ (907) $ 95,008 $ 3,871 $ 98,879
Comprehensive income (loss) — — 2,090 (294) — 1,796 299 2,095
Equity compensation activity 6 735 — — — 735 — 735
Contributions — — — — — — 789 789
Distributions and other — 3 68 — — 71 (513) (442)
Balance at July 1, 2023 1,830 $ 57,136 $ 45,794 $ (4,413) $ (907) $ 97,610 $ 4,446 $ 102,056
Balance at October 2, 2021 1,818 $ 55,471 $ 40,429 $ (6,440) $ (907) $ 88,553 $ 4,458 $ 93,011
Comprehensive income — — 2,983 298 — 3,281 (22) 3,259
Equity compensation activity 5 615 — — — 615 — 615
Contributions — — — — — — 48 48
Distributions and other — 1 50 — — 51 (551) (500)
Balance at July 2, 2022 1,823 $ 56,087 $ 43,462 $ (6,142) $ (907) $ 92,500 $ 3,933 $ 96,433

~~(1)Excludes redeemable noncontrolling interests.~~

~~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

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 statement of the results for the interim period. Operating results for the ~~nine months~~quarter ended ~~July 1,~~December 30, 2023 are not necessarily indicative of the results that may be expected for the year ending September ~~30, 2023.~~28, 2024.

The terms “Company,” “Disney,” “we,” “us,” and “our” are used in this report to refer collectively to the parent company, The Walt Disney Company, as well as the subsidiaries through which its various businesses are actually conducted.

These financial statements should be read in conjunction with the Company’s ~~2022~~2023 Annual Report on Form 10-K.

Variable Interest Entities

The Company enters into relationships with or makes investments in 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 ~~Interests and Contributions from Noncontrolling~~ Interest ~~Holders~~

Hulu LLC

~~The~~In November 2023, NBC Universal (NBCU) exercised its right to require the Company ~~consolidates the results of~~to purchase NBCU’s 33% interest in Hulu LLC (Hulu), a direct-to-consumer (DTC) streaming service provider, which is owned 67% by the Company and 33% by NBC Universal (NBCU). In May 2019, the Company entered into a put/call agreement with NBCU that provided the Company with full operational control of Hulu. Under the agreement, beginning in January 2024, NBCU has the option to require the Company to purchase NBCU’s interest in Hulu and the Company has the option to require NBCU to sell its interest in Hulu to the Company, in either case at a redemption value based on NBCU’s equity ownership percentage of the greater of Hulu’s ~~then~~ equity fair value or a guaranteed floor value of $27.5 billion.

~~NBCU’s interest~~ In connection with the redemption, the Company will generally not be allocated its portion of Hulu’s losses, if any, as the redeemable noncontrolling interest is required to be carried at a minimum value. The minimum value is equal to the fair value aspay NBCU 50% of the ~~May 2019 agreement date accreted to~~future tax benefits from the ~~January 2024 estimated redemption value. At July 1, 2023,~~amortization of the purchase of NBCU’s interest in Hulu ~~is recorded in~~that will generally arise over a 15-year period. In December 2023, the ~~Company’s financial statements at $8.9~~Company paid NBCU $8.6 billion, which ~~is reported as “Redeemable noncontrolling interest” in~~reflected the ~~Condensed Consolidated Balance Sheets.~~

The Company and NBCU have been conducting a confidential arbitration concerning the parties’ rights and responsibilities under the Hulu limited liability company agreement. The Company expects a decision in that arbitration within the next quarter. The outcome of the arbitration is uncertain and we cannot reasonably estimate the amount of any potential loss or the impact on the determination of the value of Hulu’s equity pursuant to the Hulu limited liability company agreement and thus the amount we may be required to pay to acquire NBCU’s interest in Hulu.

~~We are accreting NBCU’s interest in Hulu to its~~ guaranteed floor ~~value. In determining~~value less NBCU’s unpaid capital call contributions.

Based on valuation procedures agreed upon by NBCU and the ~~redemption value, our estimate of~~Company, Hulu’s equity fair value for purposes of determining the redemption payment is not expected to be finalized until later in ~~January 2024 requires management~~calendar 2024. If Hulu’s equity fair value is determined to ~~make significant judgments. If our estimate~~be higher than the guaranteed floor value, the Company is required to pay NBCU its share of the ~~future~~difference between the equity fair value ~~of Hulu’s equity increased above~~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 ~~change our rate of accretion, which would generally increase~~record the ~~amount recorded in~~increment as “Net income ~~from continuing operations~~ attributable to noncontrolling interests” and thus reduce “Net income attributable to Disney” in the Condensed Consolidated Statements of ~~Operations.~~

~~THE WALT DISNEY COMPANY~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(unaudited; tabular dollars in millions, except for per share data)~~

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 ~~from continuing operations~~ attributable to noncontrolling interests” in the Condensed Consolidated Statements of ~~Operations.~~Income.

THE WALT DISNEY COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited; tabular dollars in millions, except for per share data)

During the ~~nine~~three months ended ~~July 1, 2023,~~December 31, 2022, Hearst Corporation (Hearst) contributed ~~$710~~$178 million to the domestic DTC sports business ~~in part~~ to fund its 20% share of the MLB ~~buy-out and in part to fund its share of the domestic DTC sports business’s operating cash requirements, which had been funded by the Company through intercompany loans.~~buy-out.

Use of Estimates

The preparation of financial statements in conformity with GAAP 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 ~~2022~~2023 financial statements and notes to conform to the fiscal ~~2023~~2024 presentation.

2.Segment Information

In February 2023, the Company announced that it will be reorganized into three business segments: Disney Entertainment, ESPN and Disney Parks, Experiences and Products. We will report under the new structure commencing with our annual fiscal 2023 reporting, at which time we will have implemented changes to our financial processes to reflect the reorganization. The Company’s operations are ~~currently~~ reported in ~~the following two~~three segments: ~~Disney Media~~Entertainment, Sports and ~~Entertainment Distribution (DMED) and Disney Parks,~~ Experiences, ~~and Products (DPEP),~~ for which separate financial information is evaluated regularly by the Chief Executive Officer to allocate resources and assess performance.

Segment 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 ~~impairments of certain equity investments and acquisition accounting~~ amortization of ~~TFCF Corporation (TFCF) and Hulu assets (i.e.~~ intangible assets and the fair value step-up for film and television ~~costs)~~costs recognized in connection with the acquisition of TFCF ~~acquisition~~Corporation (TFCF) and Hulu in fiscal 2019 (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 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.

109

THE WALT DISNEY COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited; tabular dollars in millions, except for per share data)

Segment revenues and segment operating income are as follows:






		Quarter Ended				Nine Months Ended
		July 1, 2023		July 2, 2022		July 1, 2023		July 2, 2022
Revenues:	Revenues:
Disney Media and Entertainment Distribution		$	14,004	$	14,110	$	42,819	$	42,315
Disney Parks, Experiences and Products		8,326		7,394		24,838		21,280

Revenues:
Revenues:
Entertainment
Entertainment
Entertainment
Third parties
Third parties
Third parties
Intersegment
Intersegment
Intersegment
		9,981
		9,981
		9,981
Sports
Sports
Sports
Third parties
Third parties
Third parties
Intersegment
Intersegment
Intersegment
		4,835
		4,835
		4,835
Experiences
Experiences
Experiences
Eliminations
Eliminations
Eliminations
Total segment revenues
Total segment revenues
Total segment revenues	Total segment revenues	$	22,330	$	21,504	$	67,657	$	63,595
Segment operating income:	Segment operating income:
Disney Media and Entertainment Distribution		$	1,134	$	1,381	$	2,243	$	4,133
Disney Parks, Experiences and Products		2,425		2,186		7,644		6,391

Segment operating income:
Segment operating income:
Entertainment
Entertainment
Entertainment
Sports
Sports
Sports
Experiences
Experiences
Experiences
Total segment operating income(1)	Total segment operating income(1)	$	3,559	$	3,567	$	9,887	$	10,524
Total segment operating income(1)
Total segment operating income(1)

(1) Equity in the income of investees is included in segment operating income as follows:

Quarter Ended Nine Months Ended
July 1,
2023 July 2,
2022 July 1,
2023 July 2,
2022
Disney Media and Entertainment Distribution $ 194 $ 230 $ 566 $ 693
Disney Parks, Experiences and Products — (2) (2) (10)
Equity in the income of investees included in segment operating income 194 228 564 683
Amortization of TFCF intangible assets related to equity investees (3) (3) (9) (9)
Equity in the income of investees, net $ 191 $ 225 $ 555 $ 674

~~A reconciliation of segment revenues to total revenues is as follows:~~

Quarter Ended Nine Months Ended
July 1,
2023 July 2,
2022 July 1,
2023 July 2,
2022
Segment revenues $ 22,330 $ 21,504 $ 67,657 $ 63,595
Content License Early Termination(1)
— — — (1,023)
Total revenues $ 22,330 $ 21,504 $ 67,657 $ 62,572

~~(1)~~In February 2022, the Company early terminated certain license agreements with a customer for film and television content, which was delivered in previous years, in order for the Company to use the content primarily on our DTC services (Content License Early Termination). Because the content is functional intellectual property (IP), we had recognized substantially all of the consideration to be paid by the customer under the licenses as revenue in prior years when the content was delivered. Consequently, we recorded the amounts to terminate the licenses agreements, net of remaining amounts of deferred revenue, as a reduction of revenue.


	Quarter Ended
	December 30, 2023		December 31, 2022
Entertainment	$	171	$	193
Sports	13		3
Experiences	—		(2)
Equity in the income of investees included in segment operating income	184		194

Amortization of TFCF intangible assets related to equity investees	(3)		(3)
Equity in the income of investees, net	$	181	$	191

1110

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				Nine Months Ended
		July 1, 2023		July 2, 2022		July 1, 2023		July 2, 2022
Segment operating income	Segment operating income	$	3,559	$	3,567	$	9,887	$	10,524
Content License Early Termination		—		—		—		(1,023)
Segment operating income
Segment operating income

Corporate and unallocated shared expenses

Corporate and unallocated shared expenses

Corporate and unallocated shared expenses	Corporate and unallocated shared expenses	(295)		(325)		(854)		(825)
Restructuring and impairment charges(1)	Restructuring and impairment charges(1)	(2,650)		(42)		(2,871)		(237)
Other income (expense), net(2)		(11)		(136)		96		(730)
Restructuring and impairment charges(1)
Restructuring and impairment charges(1)
Other expense, net(2)
Other expense, net(2)
Other expense, net(2)
Interest expense, net	Interest expense, net	(305)		(360)		(927)		(1,026)
Interest expense, net
Interest expense, net
TFCF and Hulu acquisition amortization(3)
TFCF and Hulu acquisition amortization(3)
TFCF and Hulu acquisition amortization(3)	TFCF and Hulu acquisition amortization(3)	(432)		(585)		(1,569)		(1,774)

Income from continuing operations before income taxes		$	(134)	$	2,119	$	3,762	$	4,909
Income before income taxes

Income before income taxes

Income before income taxes

(1)See Note 16 for a discussion of amounts in restructuring and impairment charges.

(2)See Note 4 for a discussion of amounts in other ~~income (expense),~~expense, net.

(3)TFCF and Hulu acquisition amortization is as follows:
Quarter Ended Nine Months Ended
July 1,
2023 July 2,
2022 July 1,
2023 July 2,
2022
Amortization of intangible assets $ 361 $ 422    $ 1,186 $ 1,292
Step-up of film and television costs 68    160 374 473
Intangibles related to TFCF equity investees 3    3 9 9
$ 432 $ 585 $ 1,569 $ 1,774


	Quarter Ended
	December 30, 2023		December 31, 2022
Amortization of intangible assets	$	380	$	417
Step-up of film and television costs	68		159
Intangibles related to TFCF equity investees	3		3
	$	451	$	579

Goodwill

The changes in the carrying amount of goodwill are as follows:

DMED DPEP Total
Balance at October 1, 2022 $ 72,347 $ 5,550 $ 77,897
Currency translation adjustments and other, net (16) — (16)
Balance at July 1, 2023 $ 72,331 $ 5,550 $ 77,881


	Entertainment		Sports		Experiences		Total




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

1211

THE WALT DISNEY COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited; tabular dollars in millions, except for per share data)

3.Revenues

The following table presents our revenues by segment and major source:

Quarter Ended July 1, 2023 Quarter Ended July 2, 2022
DMED DPEP Total DMED DPEP Content License Early Termination Total
Affiliate fees $ 4,234 $ — $ 4,234 $ 4,337 $ — $ — $ 4,337
Subscription fees 4,537 — 4,537 3,889 — — 3,889
Advertising 3,042 1 3,043 3,534 1 — 3,535
Theme park admissions — 2,731 2,731 — 2,312 — 2,312
Resort and vacations — 1,990 1,990 — 1,805 — 1,805
Retail and wholesale sales of merchandise, food and beverage — 2,226     2,226     —     1,896 — 1,896
Merchandise licensing — 876 876 — 916 — 916
TV/SVOD distribution licensing 646 — 646 1,119 —     —     1,119
Theatrical distribution licensing 838 — 838 620 — — 620
Home entertainment 209 — 209 149 — — 149
Other 498 502 1,000 462 464 — 926
$ 14,004 $ 8,326 $ 22,330 $ 14,110 $ 7,394 $ — $ 21,504
Nine Months Ended July 1, 2023 Nine Months Ended July 2, 2022
DMED DPEP Total DMED DPEP Content License Early Termination Total
Affiliate fees $ 12,870 $ — $ 12,870 $ 13,310 $ — $ — $ 13,310
Subscription fees 13,382 — 13,382 11,374 — — 11,374
Advertising 9,047 3 9,050 10,425 3 — 10,428
Theme park admissions — 7,800 7,800 — 6,437 — 6,437
Resort and vacations — 5,919 5,919 — 4,701 — 4,701
Retail and wholesale sales of merchandise, food and beverage — 6,750 6,750 —     5,801 — 5,801
Merchandise licensing — 2,791 2,791 — 2,928 — 2,928
TV/SVOD distribution licensing 2,658 — 2,658 3,639 —     (1,023)     2,616
Theatrical distribution licensing 2,745 — 2,745 1,373 — — 1,373
Home entertainment 492 — 492 673 — — 673
Other 1,625 1,575 3,200 1,521 1,410 — 2,931
$ 42,819 $ 24,838 $ 67,657 $ 42,315 $ 21,280 $ (1,023) $ 62,572


	Quarter Ended December 30, 2023
	Entertainment		Sports		Experiences		Eliminations		Total
Affiliate fees	$	1,766	$	2,669	$	—	$	(293)	$	4,142
Subscription fees	4,507		415		—		—		4,922
Advertising	1,997		1,351		—		—		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 licensing	192		—		967		—		1,159
TV/VOD distribution licensing	536		57		—		—		593
Theatrical distribution licensing	251		—		—		—		251
Home entertainment	209		—		—		—		209
Other	523		343		588		(106)		1,348
	$	9,981	$	4,835	$	9,132	$	(399)	$	23,549

	Quarter Ended December 31, 2022
	Entertainment		Sports		Experiences		Eliminations		Total
Affiliate fees	$	1,873	$	2,653	$	—	$	(266)	$	4,260
Subscription fees	3,861		379		—		—		4,240
Advertising	2,180		1,262		1		—		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 licensing	191		—		952		—		1,143
TV/VOD distribution licensing	724		76		—		—		800
Theatrical distribution licensing	1,140		—		—		—		1,140
Home entertainment	185		—		—		—		185
Other	521		270		589		(82)		1,298
	$	10,675	$	4,640	$	8,545	$	(348)	$	23,512

The following table presents our revenues by segment and primary geographical markets:


	Quarter Ended December 30, 2023
	Entertainment		Sports		Experiences		Eliminations		Total
Americas	$	7,588	$	4,358	$	7,037	$	(399)	$	18,584
Europe	1,409		179		1,022		—		2,610
Asia Pacific	984		298		1,073		—		2,355
Total revenues	$	9,981	$	4,835	$	9,132	$	(399)	$	23,549

	Quarter Ended December 31, 2022
	Entertainment		Sports		Experiences		Eliminations		Total
Americas	$	8,150	$	4,315	$	6,854	$	(348)	$	18,971
Europe	1,499		126		1,015		—		2,640
Asia Pacific	1,026		199		676		—		1,901
Total revenues	$	10,675	$	4,640	$	8,545	$	(348)	$	23,512

1312

THE WALT DISNEY COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited; tabular dollars in millions, except for per share data)

~~The following table presents our revenues by segment and primary geographical markets:~~

Quarter Ended July 1, 2023 Quarter Ended July 2, 2022
DMED DPEP Total DMED DPEP Total
Americas $ 11,466 $ 6,299 $ 17,765 $ 11,444 $ 6,130 $ 17,574
Europe 1,352 984 2,336 1,230 897 2,127
Asia Pacific 1,186 1,043 2,229 1,436 367 1,803
Total revenues $ 14,004 $ 8,326 $ 22,330 $ 14,110 $ 7,394 $ 21,504
Content License Early Termination —
$ 21,504
Nine Months Ended July 1, 2023 Nine Months Ended July 2, 2022
DMED DPEP Total DMED DPEP Total
Americas $ 35,009 $ 19,357 $ 54,366 $ 34,465 $ 17,400 $ 51,865
Europe 4,373 2,794 7,167 4,111 2,389 6,500
Asia Pacific 3,437 2,687 6,124 3,739 1,491 5,230
Total revenues $ 42,819 $ 24,838 $ 67,657 $ 42,315 $ 21,280 $ 63,595
Content License Early Termination (1,023)
$ 62,572

Revenues recognized in the current and prior-year periods from performance obligations satisfied (or partially satisfied) in previous reporting periods primarily relate to revenues earned on TV/SVOD licenses for titles made available to the licensee in previous reporting periods. For the quarter ended July 1, 2023, $0.3 billion was recognized related to performance obligations satisfied as of April 1, 2023. For the nine months ended July 1, 2023, $0.7 billion was recognized related to performance obligations satisfied as of October 1, 2022. For the quarter ended July 2, 2022, $0.3 billion was recognized related to performance obligations satisfied as of April 2, 2022. For the nine months ended July 2, 2022, $0.9 billion was recognized related to performance obligations satisfied as of October 2, 2021.

As of ~~July 1,~~December 30, 2023, revenue for unsatisfied performance obligations expected to be recognized in the future is ~~$16~~$14 billion, primarily for ~~content and other~~ IP or advertising time to be made available in the future under existing agreements with merchandise and co-branding licensees and sponsors, television station affiliates, DTC wholesalers, advertisers and sports ~~sublicensees, and advertisers.~~sublicensees. Of this amount, we expect to recognize approximately $2$5 billion in the remainder of fiscal ~~2023, $6 billion in fiscal~~ 2024, $4$5 billion in fiscal 2025, $2 billion in fiscal 2026 and $4$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.

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 is recognized as accounts receivable. Deferred revenues are recognized as (or when) the Company performs under the contract. The Company’s contract assets and activity for the current and prior-year periods were not material.

Accounts receivable and deferred revenues from contracts with customers are as follows:

July 1,
2023

October 1,
2022

December 30,
2023

September 30,
2023

Accounts receivable

Current

11,445

10,886

11,810

10,279

Non-current

1,126

1,226

Allowance for credit losses

(165)

(179)

Deferred revenues

Current

5,871

5,531

Current

Non-current

834

927

For the quarter ~~and nine months~~ ended ~~July 1,~~December 30, 2023, the Company recognized revenue of ~~$0.5~~$3.4 billion ~~and $4.7~~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 ~~respectively,~~ that was included in the October 1, 2022 ~~deferred revenue balance. For the quarter and nine months ended July 2, 2022, the Company recognized revenue of $0.4 billion and $3.2 billion, respectively, that was included in the October 2, 2021~~

~~THE WALT DISNEY COMPANY~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(unaudited; tabular dollars in millions, except for per share data)~~

deferred revenue balance. Amounts deferred generally relate to theme park admissions and vacation packages, DTC subscriptions and advances related to merchandise and TV/~~SVOD~~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 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, 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/~~SVOD~~VOD licensing) and vacation club properties. These receivables are discounted to present value at contract inception and the related revenues are recognized at the discounted amount. The balance of TV/~~SVOD~~VOD licensing receivables recorded in other non-current assets was $0.5 billion at ~~July 1,~~December 30, 2023 and $0.6 billion at ~~October 1, 2022.~~September 30, 2023. The balance of vacation club receivables recorded in other non-current assets was ~~$0.6~~$0.7 billion at both ~~July 1,~~December 30, 2023 and ~~October 1, 2022.~~September 30, 2023. The allowance for credit losses for TV/VOD licensing and vacation club receivables and related activity for the ~~period~~periods ended ~~July 1,~~December 30, 2023 ~~was~~and September 30, 2023 were not material.

THE WALT DISNEY COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited; tabular dollars in millions, except for per share data)

4.Other ~~Income (Expense),~~Expense, net

Other ~~income (expense),~~expense, net is as follows:
Quarter Ended Nine Months Ended
July 1,
2023 July 2,
2022 July 1,
2023 July 2,
2022
DraftKings gain (loss) $ 90 $ (136) $ 169 $ (726)
Other, net (101) — (73) (4)
Other income (expense), net $ (11) $ (136) $ 96 $ (730)


	Quarter Ended
	December 30, 2023		December 31, 2022
DraftKings loss	$	—	$	(70)






Other	—		28
Other expense, net	$	—	$	(42)

~~For~~In the prior-year quarter, ~~and nine months ended July 1, 2023,~~ the Company recognized a ~~gain of $90~~$70 million ~~and $169 million, respectively, on~~non-cash loss to adjust its investment in DraftKings, Inc. (DraftKings), which was sold in the current quarter. “Other, net” for the quarter and nine months ended July 1, 2023 includes a charge of $101 million related to a legal ruling. For the prior-year quarter and nine months ended July 2, 2022, the Company recognized a non-cash loss of $136 million and $726 million, respectively, to adjust its investment in 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 cash, cash equivalents and restricted cash reported in the Condensed Consolidated Balance Sheets to the total of the amounts reported in the Condensed Consolidated Statements of Cash Flows.
July 1,
2023 October 1,
2022
Cash and cash equivalents $ 11,458 $ 11,615
Restricted cash included in:
Other current assets 3 3
Other assets 52 43
Total cash, cash equivalents and restricted cash in the statement of cash flows $ 11,513 $ 11,661

~~THE WALT DISNEY COMPANY~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(unaudited; tabular dollars in millions, except for per share data)~~


	December 30, 2023		September 30, 2023
Cash and cash equivalents	$	7,192	$	14,182


Restricted cash included in other assets	55		53

Total cash, cash equivalents and restricted cash in the statement of cash flows	$	7,247	$	14,235

Borrowings

During the ~~nine months~~quarter ended ~~July 1,~~December 30, 2023, the Company’s borrowing activity was as follows:


		October 1, 2022		Borrowings		Payments		Other Activity		July 1, 2023
		September 30, 2023
		September 30, 2023
		September 30, 2023											Borrowings	Payments	Other Activity	December 30, 2023
Commercial paper with original maturities less than three months	Commercial paper with original maturities less than three months	$	50	$	1,020	$	—	$	3	$	1,073
Commercial paper with original maturities greater than three months	Commercial paper with original maturities greater than three months	1,612		2,519		(3,499)		—		632
U.S. dollar denominated notes(1)		45,091		—		(1,242)		(104)		43,745
U.S. dollar denominated notes

Asia Theme Parks borrowings	Asia Theme Parks borrowings	1,425		70		(77)		18		1,436
Foreign currency denominated debt and other(2)		191		—		—		112		303
		$	48,369	$	3,609	$	(4,818)	$	29	$	47,189
Asia Theme Parks borrowings

Asia Theme Parks borrowings												1,308	—	(14)	50	1,344
Foreign currency denominated debt and other(1)
	$

(1)The other activity is ~~primarily due to the amortization of purchase accounting adjustments and debt issuance fees.~~

~~(2)The other activity is primarily due~~attributable to market value adjustments for debt with qualifying hedges.

At ~~July 1,~~December 30, 2023, the Company’s bank facilities, which are with a syndicate of lenders and support our commercial paper borrowings, were as follows:


	Committed Capacity		Capacity Used		Unused Capacity
Facility expiring March 2024	$	5,250	$	—	$	5,250

Facility expiring March 2025	3,000		—		3,000
Facility expiring March 2027	4,000		—		4,000
Total	$	12,250	$	—	$	12,250

These facilities allow for borrowings at rates based on the Secured Overnight Financing Rate (SOFR), and at other variable rates for non-U.S. dollar denominated borrowings, plus a fixed spread that varies with the Company’s debt ratings assigned by Moody’s Investors Service and Standard and Poor’s ranging from 0.655% to 1.225%. The bank facilities contain

THE WALT DISNEY COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited; tabular dollars in millions, except for per share data)

only one financial covenant relating to interest coverage of 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 ~~July 1,~~December 30, 2023, the Company met this covenant by a significant margin. The bank facilities specifically exclude certain entities, including the Asia Theme Parks, from any representations, covenants or events of default. The Company also has the ability to issue up to $500 million of letters of credit under the facility expiring in March 2027, which if utilized, reduces available borrowings under this facility. As of ~~July 1,~~December 30, 2023, the Company has $1.7 billion of outstanding letters of credit, of which none were issued under this facility.

Cruise Ship Credit Facilities

The Company has credit facilities to finance a significant portion of the contract price of two new cruise ships, which are scheduled to be delivered in fiscal 2025 and fiscal 2026. Under the facilities, $1.1 billion isbecame available beginning in August 2023 and $1.1 billion is available beginning in 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 3.80% and 3.74%, respectively, and the loan and interest will be payable semi-annually over a 12-year period from the borrowing date. Early repayment is permitted subject to cancellation fees.

~~THE WALT DISNEY COMPANY~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(unaudited; tabular dollars in millions, except for per share data)~~

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 ~~Operations~~Income and consist of the following:


		Quarter Ended				Nine Months Ended
		July 1, 2023		July 2, 2022		July 1, 2023		July 2, 2022
		Quarter Ended
		Quarter Ended
		Quarter Ended
		December 30, 2023
		December 30, 2023
		December 30, 2023
Interest expense
Interest expense
Interest expense	Interest expense	$	(503)	$	(380)	$	(1,472)	$	(1,115)
Interest and investment income	Interest and investment income	111		7		288		44
Interest and investment income
Interest and investment income
Net periodic pension and postretirement benefit costs (other than service costs)
Net periodic pension and postretirement benefit costs (other than service costs)
Net periodic pension and postretirement benefit costs (other than service costs)	Net periodic pension and postretirement benefit costs (other than service costs)	87		13		257		45
Interest expense, net	Interest expense, net	$	(305)	$	(360)	$	(927)	$	(1,026)
Interest expense, net
Interest expense, net

Interest and investment income includes gains and losses on certain publicly traded and non-public investments, investment impairments and interest earned on cash and cash equivalents and certain receivables.

6.International Theme Parks

The Company has a 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 Asia Theme Parks’ assets and liabilities included in the Company’s Condensed Consolidated Balance Sheets:


		July 1, 2023		October 1, 2022			December 30, 2023	September 30, 2023
Cash and cash equivalents	Cash and cash equivalents	$	480	$	280
Other current assets	Other current assets	190		137
Total current assets	Total current assets	670		417
Parks, resorts and other property	Parks, resorts and other property	6,175		6,356		Parks, resorts and other property	6,212	6,150
Other assets	Other assets	195		161
Total assets	Total assets	$	7,040	$	6,934

Current liabilities	Current liabilities	$	540	$	468
Current liabilities
Current liabilities
Long-term borrowings	Long-term borrowings	1,436		1,426
Other long-term liabilities	Other long-term liabilities	445		395
Total liabilities	Total liabilities	$	2,421	$	2,289

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 Statements of ~~Operations~~Income for the ~~nine months~~quarter ended ~~July 1,~~December 30, 2023:

Asia Theme Parks’ royalty and management fees of ~~$155~~$67 million for the ~~nine months~~quarter ended ~~July 1,~~December 30, 2023 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 Statements of Cash Flows for the ~~nine months~~quarter ended ~~July 1,~~December 30, 2023 were ~~$1,123~~$352 million provided by operating activities, ~~$683~~$239 million used in investing activities and $5$12 million ~~provided by~~used in financing activities.

~~THE WALT DISNEY COMPANY~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(unaudited; tabular dollars in millions, except for per share data)~~

Hong Kong Disneyland Resort

The Government of the Hong Kong Special Administrative Region (HKSAR) and the Company have a 52% and a 48% equity interest in Hong Kong Disneyland Resort, respectively.

The Company and HKSAR have provided loans to Hong Kong Disneyland Resort with outstanding balances of ~~$160~~$166 million and ~~$107~~$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 $2.7 billion ($~~345~~346 million), which bears interest at a rate of three month HIBOR plus 1.25% and matures in December 2028. The ~~outstanding balance under the~~ line of credit ~~at July 1, 2023~~ was ~~$189 million.~~fully repaid during the quarter ended December 30, 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 ~~$956~~$978 million, bearing interest at rates up to 8% and maturing in 2036, with early repayment permitted. The Company has also provided Shanghai Disney Resort with a 1.9 billion yuan (approximately $0.3 billion) line of credit bearing interest at 8%. ~~As of July 1, 2023, the total amount outstanding under the~~The line of credit was ~~0.8 billion yuan (approximately $112 million).~~fully repaid during the quarter ended December 30, 2023. These balances are eliminated in consolidation.

Shendi has provided Shanghai Disney Resort with loans totaling ~~8.6~~8.8 billion yuan (approximately $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 2.6 billion yuan (approximately $0.4 billion) line of credit bearing interest at 8%. ~~As of July 1, 2023 the total amount outstanding under the~~The line of credit was ~~1.1 billion yuan (approximately $149 million).~~fully repaid during the quarter ended December 30, 2023.

7.Produced and Acquired/Licensed Content Costs and Advances

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 live event as short-term assets. For purposes of amortization and impairment, the capitalized content costs are classified based on their predominant monetization strategy as follows:

•Individual - lifetime value is predominantly derived from third-party revenues that are directly attributable to the specific film or television title (e.g. theatrical revenues or sales to third-party television programmers)

•Group - lifetime value is predominantly derived from third-party revenues that are attributable only to a bundle of titles (e.g. subscription revenue for a DTC service or affiliate fees for a cable television network)

~~Total capitalized produced and licensed content by predominant monetization strategy is as follows:~~

As of July 1, 2023 As of October 1, 2022
Predominantly Monetized Individually Predominantly Monetized
as a Group Total Predominantly Monetized Individually Predominantly Monetized
as a Group Total
Produced content
Released, less amortization $ 5,437 $ 13,282 $ 18,719 $ 4,639 $ 12,688 $ 17,327
Completed, not released 36 963 999 214 2,019 2,233
In-process 3,201 7,560 10,761 5,041 6,793 11,834
In development or pre-production 409 199 608 372 254 626
$ 9,083 $ 22,004 31,087 $ 10,266 $ 21,754 32,020
Licensed content - Television programming rights and advances 5,889 5,647
Total produced and licensed content $ 36,976 $ 37,667
Current portion $ 2,369 $ 1,890
Non-current portion $ 34,607 $ 35,777

1816

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, 2023						As of September 30, 2023
	Predominantly Monetized Individually		Predominantly Monetized as a Group		Total		Predominantly Monetized Individually		Predominantly 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-process	3,157		5,394		8,551		3,331		6,120		9,451
In development or pre-production	262		132		394		279		133		412
	$	8,330	$	20,964	29,294		$	8,648	$	21,594	30,242






Licensed content - Television programming rights and advances					4,840						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 licensed content is as follows:


		Quarter Ended				Nine Months Ended
		July 1, 2023		July 2, 2022		July 1, 2023		July 2, 2022
		Quarter Ended
		Quarter Ended
		Quarter Ended
		December 30, 2023
		December 30, 2023
		December 30, 2023
Produced content
Produced content
Produced content	Produced content
Predominantly monetized individually	Predominantly monetized individually	$	954	$	878	$	3,117	$	2,749
Predominantly monetized individually
Predominantly monetized individually
Predominantly monetized as a group	Predominantly monetized as a group	1,998		1,674		6,110		4,795
		2,952		2,552		9,227		7,544
Predominantly monetized as a group
Predominantly monetized as a group
		2,562
		2,562
		2,562
Licensed programming rights and advances
Licensed programming rights and advances
Licensed programming rights and advances	Licensed programming rights and advances	3,136		3,258		10,871		10,908
Total produced and licensed content costs(1)	Total produced and licensed content costs(1)	$	6,088	$	5,810	$	20,098	$	18,452
Total produced and licensed content costs(1)
Total produced and licensed content costs(1)

(1)Primarily included in “Costs of services” in the Condensed Consolidated Statements of Operations. Amounts exclude impairment charges of $2.0 billion for produced content and $257 million for licensed programming rights recorded in “Restructuring and impairment charges” in the Condensed Consolidated Statements of Operations in the quarter and nine months ended July 1, 2023 (see Note 16).Income.

8.Income Taxes

Unrecognized Tax Benefits

~~During the nine months ended July 1, 2023, the Company increased its~~The Company’s gross unrecognized tax benefits (before interest and penalties) ~~by $0.2 billion to $2.7~~at both December 30, 2023 and September 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, which would reduce our unrecognized tax benefits by ~~$0.1~~$0.3 billion.

~~California Disaster Relief~~

~~Pursuant to relief provided to certain taxpayers by the Internal Revenue Service and California State Board of Equalization as a result of winter storms~~

THE WALT DISNEY COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited; tabular dollars in ~~California, the Company is permitted to defer payment of federal and California state tax payments due in 2023 until October 16, 2023.~~millions, except for per share data)

9.Pension and Other Benefit Programs

The components of net periodic benefit cost (income) are as follows:




																		Pension Plans	Postretirement Medical Plans

		Pension Plans								Postretirement Medical Plans
		Quarter Ended				Nine Months Ended				Quarter Ended				Nine Months Ended
		July 1, 2023		July 2, 2022		July 1, 2023		July 2, 2022		July 1, 2023		July 2, 2022		July 1, 2023		July 2, 2022
Service costs	Service costs	$	65	$	100	$	193	$	302	$	1	$	2	$	4	$	7
Service costs
Service costs
Other costs (benefits):
Other costs (benefits):
Other costs (benefits):	Other costs (benefits):
Interest costs	Interest costs	195		124		586		374		20		13		61		39
Interest costs
Interest costs
Expected return on plan assets
Expected return on plan assets
Expected return on plan assets	Expected return on plan assets	(288)		(293)		(863)		(880)		(15)		(15)		(45)		(44)
Amortization of previously deferred service costs	Amortization of previously deferred service costs	2		3		7		5		—		—		—		—
Amortization of previously deferred service costs
Amortization of previously deferred service costs
Recognized net actuarial loss
Recognized net actuarial loss
Recognized net actuarial loss	Recognized net actuarial loss	5		149		14		441		(6)		6		(17)		20
Total other costs (benefits)	Total other costs (benefits)	(86)		(17)		(256)		(60)		(1)		4		(1)		15
Total other costs (benefits)
Total other costs (benefits)
Net periodic benefit cost (income)	Net periodic benefit cost (income)	$	(21)	$	83	$	(63)	$	242	$	—	$	6	$	3	$	22
Net periodic benefit cost (income)
Net periodic benefit cost (income)

During the ~~nine months~~quarter ended ~~July 1,~~December 30, 2023, the Company did not make any material contributions to its pension and postretirement medical plans and does not currently expect to make any material contributions for the remainder of fiscal ~~2023.~~2024. Final minimum funding requirements for fiscal ~~2023~~2024 will be determined based on a January 1, ~~2023~~2024 funding actuarial valuation, which is expected to be received in the fourth quarter of fiscal ~~2023.~~2024.

~~THE WALT DISNEY COMPANY~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(unaudited; tabular dollars in millions, except for per share data)~~

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

Nine Months Ended

July 1,
2023

July 2,
2022

July 1,
2023

July 2,
2022

Shares (in millions):

Weighted average number of common and common equivalent shares outstanding (basic)

1,829

1,823

1,827

1,821

Weighted average dilutive impact of Awards(1)

—

Weighted average number of common and common equivalent shares outstanding (basic)

Weighted average dilutive impact of Awards

Weighted average number of common and common equivalent shares outstanding (diluted)

1,829

1,825

1,829

1,827

Awards excluded from diluted earnings per share

~~(1)~~11.~~Amounts exclude all potential~~Equity

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.

Effective February 7, 2024, the Board of Directors authorized a new share repurchase program for the Company to repurchase a total of 400 million shares of its common ~~and common equivalent shares~~stock. The Company plans to target repurchases of $3 billion in fiscal 2024. The repurchase program does not have an expiration date.

THE WALT DISNEY COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited; tabular dollars in millions, except for ~~periods when there is a~~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 Hedges		Unrecognized 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 Hedges		Unrecognized 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 period	66		—		(7)		59
Reclassifications of realized net (gains) losses to net income	32		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 period	100		—		8		108
Reclassifications of realized net (gains) losses to net income	51		—		(14)		37

Balance at December 31, 2022	$	(28)	$	901	$	133	$	1,006

THE WALT DISNEY COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited; tabular dollars in millions, except for per share data)


	Market Value Adjustments for Hedges		Unrecognized 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 ~~loss from continuing operations.~~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 hedges	Primarily revenue	$	140	$	218
Estimated tax	Income taxes	(32)		(51)
		108		167


Pension and postretirement medical expense	Interest expense, net	24		(1)
Estimated tax	Income taxes	(6)		—
		18		(1)

Foreign currency translation and other	Restructuring and impairment charges	—		(42)
Estimated tax	Income taxes	—		14
		—		(28)

Total reclassifications for the period		$	126	$	138

THE WALT DISNEY COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited; tabular dollars in millions, except for per share data)

~~11.Equity~~

~~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 Hedges Unrecognized
Pension and
Postretirement
Medical
Expense Foreign
Currency
Translation
and Other AOCI
AOCI, before tax
Third quarter of fiscal 2023
Balance at April 1, 2023 $ 2 $ (3,697) $ (1,701) $ (5,396)
Quarter Ended July 1, 2023:
Unrealized gains (losses) arising during the period 85 — (44) 41
Reclassifications of realized net (gains) losses to net income (73) 1 — (72)
Balance at July 1, 2023 $ 14 $ (3,696) $ (1,745) $ (5,427)
Third quarter of fiscal 2022
Balance at April 2, 2022 $ (51) $ (6,668) $ (1,280) $ (7,999)
Quarter Ended July 2, 2022:
Unrealized gains (losses) arising during the period 601 — (404) 197
Reclassifications of realized net (gains) losses to net income (27) 155 — 128
Balance at July 2, 2022 $ 523 $ (6,513) $ (1,684) $ (7,674)
Nine months ended fiscal 2023
Balance at October 1, 2022 $ 804 $ (3,770) $ (2,014) $ (4,980)
Nine Months Ended July 1, 2023:
Unrealized gains (losses) arising during the period (383) 71 227 (85)
Reclassifications of realized net (gains) losses to net income (407) 3 42 (362)
Balance at July 1, 2023 $ 14 $ (3,696) $ (1,745) $ (5,427)
Nine months ended fiscal 2022
Balance at October 2, 2021 $ (152) $ (7,025) $ (1,047) $ (8,224)
Nine Months Ended July 2, 2022:
Unrealized gains (losses) arising during the period 741 47 (637) 151
Reclassifications of realized net (gains) losses to net income (66) 465 — 399
Balance at July 2, 2022 $ 523 $ (6,513) $ (1,684) $ (7,674)

~~THE WALT DISNEY COMPANY~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(unaudited; tabular dollars in millions, except for per share data)~~

Market Value Adjustments for Hedges Unrecognized
Pension and
Postretirement
Medical
Expense Foreign
Currency
Translation
and Other AOCI
Tax on AOCI
Third quarter of fiscal 2023
Balance at April 1, 2023 $ (1) $ 885 $ 123 $ 1,007
Quarter Ended July 1, 2023:
Unrealized gains (losses) arising during the period (19) — 9 (10)
Reclassifications of realized net (gains) losses to net income 17 — — 17
Balance at July 1, 2023 $ (3) $ 885 $ 132 $ 1,014
Third quarter of fiscal 2022
Balance at April 2, 2022 $ 19 $ 1,570 $ 98 $ 1,687
Quarter Ended July 2, 2022:
Unrealized gains (losses) arising during the period (152) — 27 (125)
Reclassifications of realized net (gains) losses to net income 6 (36) — (30)
Balance at July 2, 2022 $ (127) $ 1,534 $ 125 $ 1,532
Nine months ended fiscal 2023
Balance at October 1, 2022 $ (179) $ 901 $ 139 $ 861
Nine Months Ended July 1, 2023:
Unrealized gains (losses) arising during the period 81 (16) 7 72
Reclassifications of realized net (gains) losses to net income 95 — (14) 81
Balance at July 1, 2023 $ (3) $ 885 $ 132 $ 1,014
Nine months ended fiscal 2022
Balance at October 2, 2021 $ 42 $ 1,653 $ 89 $ 1,784
Nine Months Ended July 2, 2022:
Unrealized gains (losses) arising during the period (184) (11) 36 (159)
Reclassifications of realized net (gains) losses to net income 15 (108) — (93)
Balance at July 2, 2022 $ (127) $ 1,534 $ 125 $ 1,532

~~THE WALT DISNEY COMPANY~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(unaudited; tabular dollars in millions, except for per share data)~~

Market Value Adjustments for Hedges Unrecognized
Pension and
Postretirement
Medical
Expense Foreign
Currency
Translation
and Other AOCI
AOCI, after tax
Third quarter of fiscal 2023
Balance at April 1, 2023 $ 1 $ (2,812) $ (1,578) $ (4,389)
Quarter Ended July 1, 2023:
Unrealized gains (losses) arising during the period 66 — (35) 31
Reclassifications of realized net (gains) losses to net income (56) 1 — (55)
Balance at July 1, 2023 $ 11 $ (2,811) $ (1,613) $ (4,413)
Third quarter of fiscal 2022
Balance at April 2, 2022 $ (32) $ (5,098) $ (1,182) $ (6,312)
Quarter Ended July 2, 2022:
Unrealized gains (losses) arising during the period 449 — (377) 72
Reclassifications of realized net (gains) losses to net income (21) 119 — 98
Balance at July 2, 2022 $ 396 $ (4,979) $ (1,559) $ (6,142)
Nine months ended fiscal 2023
Balance at October 1, 2022 $ 625 $ (2,869) $ (1,875) $ (4,119)
Nine Months Ended July 1, 2023:
Unrealized gains (losses) arising during the period (302) 55 234 (13)
Reclassifications of realized net (gains) losses to net income (312) 3 28 (281)
Balance at July 1, 2023 $ 11 $ (2,811) $ (1,613) $ (4,413)
Nine months ended fiscal 2022
Balance at October 2, 2021 $ (110) $ (5,372) $ (958) $ (6,440)
Nine Months Ended July 2, 2022:
Unrealized gains (losses) arising during the period 557 36 (601) (8)
Reclassifications of realized net (gains) losses to net income (51) 357 — 306
Balance at July 2, 2022 $ 396 $ (4,979) $ (1,559) $ (6,142)

~~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:~~

Gain (loss) in net income: Affected line item in the Condensed Consolidated Statements of Operations: Quarter Ended Nine Months Ended
July 1,
2023 July 2,
2022 July 1,
2023 July 2,
2022
Market value adjustments, primarily cash flow hedges Primarily revenue $ 73 $ 27 $ 407 $ 66
Estimated tax Income taxes (17) (6) (95) (15)
56 21 312 51
Pension and postretirement medical expense Interest expense, net (1) (155) (3) (465)
Estimated tax Income taxes — 36 — 108
(1) (119) (3) (357)
Foreign currency translation and other Restructuring and impairment charges — — (42) —
Estimated tax Income taxes — — 14 —
— — (28) —
Total reclassifications for the period $ 55 $ (98) $ 281 $ (306)

12.Equity-Based Compensation

Compensation expense related to stock options and restricted stock units (RSUs) is as follows:






		Quarter Ended				Nine Months Ended
		July 1, 2023		July 2, 2022		July 1, 2023		July 2, 2022
Stock options	Stock options	$	19	$	23	$	58	$	68
Stock options
Stock options
RSUs
RSUs
RSUs	RSUs	272		250		803		655
Total equity-based compensation expense(1)	Total equity-based compensation expense(1)	$	291	$	273	$	861	$	723
Total equity-based compensation expense(1)
Total equity-based compensation expense(1)
Equity-based compensation expense capitalized during the period	Equity-based compensation expense capitalized during the period	$	35	$	39	$	108	$	109
Equity-based compensation expense capitalized during the period
Equity-based compensation expense capitalized during the period

(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.

Unrecognized compensation cost related to unvested stock options and RSUs was ~~$73~~$137 million and ~~$1.6~~$2.8 billion, respectively, as of ~~July 1,~~December 30, 2023.

During the ~~nine months~~quarters ended ~~July 1,~~December 30, 2023 and ~~July 2,~~December 31, 2022, the weighted average grant date fair values for options granted were ~~$34.70~~$32.06 and ~~$46.86,~~$34.71, respectively, and for RSUs were ~~$91.98~~$93.87 and ~~$139.55,~~$91.89, respectively.

During the ~~nine months~~quarter ended ~~July 1,~~December 30, 2023, the Company made equity compensation grants consisting of ~~1.6~~2.7 million stock options and ~~9.9~~15.7 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 Officer, Christine M. McCarthy, and the former Chairman of the Disney Media and 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 ~~(ii)~~McCarthy, and (iii) violations of Section 20(a) of the Exchange Act against ~~the individual~~all defendants. Plaintiffs in the

~~THE WALT DISNEY COMPANY~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(unaudited; tabular dollars in millions, except for per share data)~~

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.~~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.

OnThree shareholder derivative complaints have been filed. The first, in which Hugues Gervat is the plaintiff, was filed on August 4, 2023, ~~a derivative complaint was filed~~ in the U.S. District Court for the Central District of ~~California~~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, 2023, in the U.S. District Court for the Central District of California. Each named The Walt Disney Company as a nominal defendant and alleged claims on its behalf against ~~nominal Defendant Disney; its~~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, ~~plaintiff seeks~~plaintiffs in both actions sought to 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 ~~the lawsuit~~these lawsuits vigorously. The ~~lawsuit is~~lawsuits are in the early stages, and at this time we cannot reasonably estimate the amount of any potential loss.

THE WALT DISNEY COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited; tabular dollars in millions, except for per share data)

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.

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 July 1, 2023									Fair Value Measurement at December 30, 2023
		Level 1		Level 2		Level 3		Total			Level 1	Level 2	Level 3	Total
Assets	Assets
Investments	Investments	$	40	$	—	$	—	$	40
Investments
Investments
Derivatives	Derivatives

Foreign exchange

Foreign exchange

Foreign exchange	Foreign exchange	—		1,128		—		1,128
Other	Other	—		7		—		7		Other	—	18	—	18
Liabilities	Liabilities
Derivatives	Derivatives
Derivatives
Derivatives
Interest rate
Interest rate
Interest rate	Interest rate	—		(1,745)		—		(1,745)
Foreign exchange	Foreign exchange	—		(767)		—		(767)
Other	Other	—		(8)		—		(8)

Other	Other	—		(474)		—		(474)
Other
Other
Total recorded at fair value	Total recorded at fair value	$	40	$	(1,859)	$	—	$	(1,819)
Fair value of borrowings	Fair value of borrowings	$	—	$	42,915	$	1,462	$	44,377


	Fair Value Measurement at September 30, 2023
	Level 1		Level 2		Level 3		Total
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

2522

THE WALT DISNEY COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited; tabular dollars in millions, except for per share data)

Fair Value Measurement at October 1, 2022
Level 1 Level 2 Level 3 Total
Assets
Investments $ 308 $ — $ — $ 308
Derivatives
Interest rate — 1 — 1
Foreign exchange — 2,223 — 2,223
Other — 10 — 10
Liabilities
Derivatives
Interest rate — (1,783) — (1,783)
Foreign exchange — (1,239) — (1,239)
Other — (31) — (31)
Other — (354) — (354)
Total recorded at fair value $ 308 $ (1,173) $ — $ (865)
Fair value of borrowings $ — $ 42,509 $ 1,510 $ 44,019
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, had an impact on derivative fair value 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. dollar 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.

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.

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 Assets		Other Current Liabilities		Other Long- Term Liabilities
Derivatives designated as hedges
Foreign exchange	$	399	$	206	$	(155)	$	(100)
Interest rate	—		—		(1,459)		—
Other	1		1		(3)		(1)
Derivatives not designated as hedges
Foreign exchange	59		4		(245)		(65)

Other	16		145		—		—
Gross fair value of derivatives	475		356		(1,862)		(166)
Counterparty netting	(372)		(195)		463		104
Cash collateral (received) paid	(13)		—		1,106		—
Net derivative positions	$	90	$	161	$	(293)	$	(62)

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 July 1, 2023
Current
Assets Other Assets Other Current Liabilities Other Long-
Term
Liabilities
Derivatives designated as hedges
Foreign exchange $ 523 $ 336 $ (213) $ (99)
Interest rate — — (1,745) —
Other 1 1 (6) (2)
Derivatives not designated as hedges
Foreign exchange 266 3 (393) (62)
Other 5 — — —
Gross fair value of derivatives 795 340 (2,357) (163)
Counterparty netting (634) (262) 772 124
Cash collateral (received) paid (98) (4) 1,233 —
Net derivative positions $ 63 $ 74 $ (352) $ (39)

As of October 1, 2022
Current
Assets Other Assets Other Current Liabilities Other Long-
Term
Liabilities
Derivatives designated as hedges
Foreign exchange $ 864 $ 786 $ (228) $ (350)
Interest rate — 1 (1,783) —
Other 10 — (4) —
Derivatives not designated as hedges
Foreign exchange 336 247 (374) (287)
Other — — (27) —
Gross fair value of derivatives 1,210 1,034 (2,416) (637)
Counterparty netting (831) (715) 1,070 476
Cash collateral (received) paid (341) (151) 1,282 96
Net derivative positions $ 38 $ 168 $ (64) $ (65)

~~Reference Rate Reform~~

In June 2023, the Company’s interest rate and cross-currency swap agreements were amended to implement modifications related to changing the reference rates from LIBOR to SOFR and from the Canadian Dollar Offered Rate to the Canadian Overnight Repo Rate Average. In connection with these amendments, the Company applied the hedge accounting relief provided by the Financial Accounting Standards Board (FASB) in ASU 2020-04, ~~Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting~~ ~~to preserve the fair value hedge designation of the interest rate and cross-currency swaps.~~


	As of September 30, 2023
	Current Assets		Investments/Other Assets		Other Current Liabilities		Other Long- Term Liabilities
Derivatives designated as hedges
Foreign exchange	$	595	$	338	$	(123)	$	(93)
Interest rate	—		—		(1,791)		—
Other	12		6		—		—
Derivatives not designated as hedges
Foreign exchange	384		19		(520)		(79)

Other	—		128		(13)		—
Gross fair value of derivatives	991		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. The total notional amount of the Company’s pay-floating interest rate swaps at ~~July 1,~~both December 30, 2023 and ~~October 1, 2022,~~September 30, 2023 was $13.5 ~~billion and $14.5 billion, respectively.~~

~~THE WALT DISNEY COMPANY~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(unaudited; tabular dollars in millions, except for per share data)~~

billion.

The following table summarizes fair value hedge adjustments to hedged borrowings:


		Carrying Amount of Hedged Borrowings				Fair Value Adjustments Included in Hedged Borrowings
		July 1, 2023		October 1, 2022		July 1, 2023		October 1, 2022
	Carrying Amount of Hedged Borrowings														Carrying Amount of Hedged Borrowings					Fair Value Adjustments Included in Hedged Borrowings
	December 30, 2023											December 30, 2023				September 30, 2023			December 30, 2023				September 30, 2023
Borrowings:	Borrowings:
Current	Current	$	—	$	997	$	—	$	(3)
Current
Current										$	2,381		$	1,439			$	(60)			$	(59)
Long-term	Long-term	12,542		12,358		(1,640)		(1,733)
		$	12,542	$	13,355	$	(1,640)	$	(1,736)
	$

The following amounts are included in “Interest expense, net” in the Condensed Consolidated Statements of ~~Operations:~~Income:






		Quarter Ended				Nine Months Ended
		July 1, 2023		July 2, 2022		July 1, 2023		July 2, 2022
Gain (loss) on:	Gain (loss) on:
Gain (loss) on:
Gain (loss) on:
Pay-floating swaps
Pay-floating swaps
Pay-floating swaps	Pay-floating swaps	$	(208)	$	(210)	$	98	$	(1,129)
Borrowings hedged with pay-floating swaps	Borrowings hedged with pay-floating swaps	208		210		(98)		1,129
Borrowings hedged with pay-floating swaps
Borrowings hedged with pay-floating swaps
Benefit (expense) associated with interest accruals on pay-floating swaps	Benefit (expense) associated with interest accruals on pay-floating swaps	(140)		6		(360)		76
Benefit (expense) associated with interest accruals on pay-floating swaps
Benefit (expense) associated with interest accruals on pay-floating swaps

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 ~~July 1,~~December 30, 2023 or at ~~October 1, 2022,~~September 30, 2023, and gains and losses related to pay-fixed interest rate swaps recognized in earnings for the quarters ~~and nine-month periods~~ ended ~~July 1,~~December 30, 2023 and ~~July 2,~~December 31, 2022 were not material.

THE WALT DISNEY COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited; tabular dollars in millions, except for per share data)

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 ~~July 1,~~December 30, 2023 and ~~October 1, 2022,~~September 30, 2023, the notional amounts of the Company’s net foreign exchange cash flow hedges were ~~$9.1~~$9.5 billion and ~~$7.4~~$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

~~THE WALT DISNEY COMPANY~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(unaudited; tabular dollars in millions, except for per share data)~~

value of the foreign currency transactions. Net deferred gains recorded in AOCI for contracts that will mature in the next twelve months total ~~$274~~$230 million. The following table summarizes the effect of foreign exchange cash flow hedges on AOCI:

Quarter Ended

Nine Months Ended

July 1,
2023

July 2,
2022

July 1,
2023

July 2,
2022

Quarter Ended

December 30,
2023

Gain (loss) recognized in Other Comprehensive Income

583

(398)

704

Gain (loss) reclassified from AOCI into the Statements of Operations(1)

414

Gain (loss) reclassified from AOCI into the Statements of Operations(1)

(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 ~~July 1,~~both December 30, 2023 and ~~October 1, 2022,~~September 30, 2023, the total notional ~~amounts~~amount of the Company’s designated cross currency swaps ~~were~~was Canadian $1.3 billion ($1.0 billion) ~~and Canadian $1.3 billion ($0.9 billion), respectively.~~. The related gains or losses recognized in earnings were not material for the quarters ~~and nine-month periods~~ ended ~~July 1,~~December 30, 2023 and ~~July 2,~~December 31, 2022.

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 ~~July 1,~~December 30, 2023 and ~~October 1, 2022~~September 30, 2023 were ~~$4.6~~$2.9 billion and ~~$3.8~~$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 by the corresponding line item in which they are recorded in the Condensed Consolidated Statements of ~~Operations:~~Income:


		Costs and Expenses				Interest expense, net				Income Tax Expense					Costs and Expenses		Interest expense, net			Income Tax Expense
Quarter Ended:	Quarter Ended:	July 1, 2023		July 2, 2022		July 1, 2023		July 2, 2022		July 1, 2023		July 2, 2022		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 currency denominated assets and liabilities	$	(61)	$	(275)	$	(19)	$	29	$	(15)	$	96
Net gains (losses) on foreign exchange risk management contracts not designated as hedges	Net gains (losses) on foreign exchange risk management contracts not designated as hedges	—		257		17		(28)		19		(89)		Net gains (losses) on foreign exchange risk management contracts not designated as hedges	(126)	(213)		21	18		42	70
Net gains (losses)	Net gains (losses)	$	(61)	$	(18)	$	(2)	$	1	$	4	$	7

Nine Months Ended:
Net gains (losses) on foreign currency denominated assets and liabilities		$	99	$	(420)	$	(39)	$	17	$	(124)	$	141
Net gains (losses) on foreign exchange risk management contracts not designated as hedges		(260)		327		36		(18)		106		(132)
Net gains (losses)		$	(161)	$	(93)	$	(3)	$	(1)	$	(18)	$	9

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 ~~July 1,~~December 30, 2023 and ~~October 1, 2022~~September 30, 2023 and

THE WALT DISNEY COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited; tabular dollars in millions, except for per share data)

related gains or losses recognized in earnings for the quarters ~~and nine-month periods~~ ended ~~July 1,~~December 30, 2023 and ~~July 2,~~December 31, 2022 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 amounts of these

~~THE WALT DISNEY COMPANY~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(unaudited; tabular dollars in millions, except for per share data)~~

contracts at ~~both July 1,~~December 30, 2023 and ~~October 1, 2022~~September 30, 2023 were $0.5 billion and $0.4 ~~billion.~~billion, respectively. The related gains or losses recognized in earnings were not material for the quarters ~~and nine-month periods~~ ended ~~July 1,~~December 30, 2023 and ~~July 2,~~December 31, 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 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 $1.5 billion and $1.6 billion ~~and $1.5 billion~~ at ~~July 1,~~December 30, 2023 and ~~October 1, 2022,~~September 30, 2023, respectively.

16.Restructuring and Impairment Charges

~~Content Impairment~~

~~As part of~~In the ~~Company’s reorganization announced in February 2023, we reviewed our content for alignment with a strategic change in our approach to content curation, and, during~~prior-year quarter ended December 31, 2022, the third quarter of fiscal 2023, we removed content from our DTC services and terminated certain third-party license agreements for the right to use content primarily on our DTC platforms. Accordingly, we recordedCompany recognized restructuring charges of $2.4 billion in the quarter ended July 1, 2023 (Content Impairment Charge), of which $2.0 billion was related to the write-off of produced content and $0.4 billion was related to the termination of the license agreements. We paid approximately $0.3 billion of cash to terminate these third-party license agreements. The charges are recorded in “Restructuring and impairment charges” in the Condensed Consolidated Statements of Operations.

~~Restructuring~~

~~The quarter ended July 1, 2023 included charges of $210~~$69 million for severance costs. The nine months ended July 1, 2023 included charges of $431 million primarily for severance costs and costs related to exiting our businesses in Russia. The quarter and nine months ended July 2, 2022 included charges of $42 million and $237 million, respectively, primarily due to asset impairments related to exiting our businesses in Russia. These charges are recorded in “Restructuring and impairment charges” in the Condensed Consolidated Statements of ~~Operations.~~Income.

17.New Accounting Pronouncements

~~Accounting Pronouncements Not Yet Adopted~~

Improvements to Reportable Segments Disclosures ~~by Business Entities about Government Assistance~~

In November ~~2021,~~2023, the FASB issued guidance that enhances reportable segment disclosures by requiring ~~annual disclosures about transactions with a government~~the disclosure of significant expenses that are ~~accounted~~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 CODM uses the segment’s measure of profit or loss to assess segment performance and allocate resources. The guidance is effective for ~~by analogizing to a grant or contribution accounting model, including:~~ the ~~nature~~Company beginning in fiscal year 2025 for 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 impacts of the ~~transactions,~~new guidance on its financial statement disclosures.

Improvements to Income Tax Disclosures

In December 2023, the ~~accounting for the transactions,~~FASB issued guidance that enhances income tax disclosures. The new guidance requires an expanded rate reconciliation and the ~~effect~~disaggregation of ~~the transactions on the financial statements.~~cash taxes paid by U.S. federal, U.S. state and foreign jurisdictions and eliminates certain disclosures related to uncertain tax benefits. The guidance is effective for annual periods beginning with the Company’s ~~2023~~2026 fiscal ~~year. While~~year (with early adoption permitted). The Company is currently assessing the impacts of the new guidance ~~will not have an effect~~ on the Company’s Consolidated Statements of Operations or Consolidated Balance Sheets upon adoption in the fourth quarter of fiscal 2023, the Company may need to provide disclosures related to content production incentives, which are the most significant type of government assistance we receive.

its financial statement disclosures.

3026

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

~~SIGNIFICANT DEVELOPMENTS~~

~~Leadership Change and Restructuring~~

On November 20, 2022, Robert A. Iger returned to the Company as Chief Executive Officer (CEO) and Director. Mr. Iger previously spent more than four decades at the Company, including 15 years as CEO. Mr. Iger formed a committee to advise him on a new organizational structure and operational changes within the Company to address the goals of the Company’s Board of Directors. In February 2023, the Company announced that it will be reorganized into three business segments: Disney Entertainment, ESPN and Disney Parks, Experiences and Products. We will report under the new structure commencing with our annual fiscal 2023 reporting, at which time we will have implemented changes to our financial processes to reflect the reorganization. The new organizational structure and operational changes have resulted in restructuring and impairment charges (including the Content Impairment Charge discussed in Note 16 to the Condensed Consolidated Financial Statements) and may result in additional charges.

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

•Current Quarter Results Compared to Prior-Year Quarter

•~~Current Nine-Month Period Results Compared to Prior-Year Nine-Month Period~~

•Seasonality

•Business Segment Results

•Corporate and Unallocated Shared Expenses

•Financial Condition

•~~Supplemental Guarantor Financial Information~~

•Commitments and Contingencies

•Other Matters

•DTC Product Descriptions, Key Definitions and Supplemental Information

•Supplemental Guarantor Financial Information

•Market Risk

~~MANAGEMENT’S DISCUSSION AND ANALYSIS OF~~

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

CONSOLIDATED RESULTS


	Quarter Ended
	Quarter Ended
	Quarter Ended
(in millions, except per share data)
(in millions, except per share data)
(in millions, except per share data)
Revenues:
Revenues:
Revenues:
Services
Services
Services
Products
Products
Products
Total revenues
Total revenues
Total revenues
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)
Cost of products (exclusive of depreciation and amortization)
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
Depreciation and amortization
Depreciation and amortization
Depreciation and amortization
Total costs and expenses
Total costs and expenses
Total costs and expenses
Restructuring and impairment charges
Restructuring and impairment charges
Restructuring and impairment charges
Other expense, net
Other expense, net
Other expense, net
Interest expense, net
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

	Quarter Ended				% Change Better (Worse)		Nine Months Ended					% Change Better (Worse)
(in millions, except per share data)	July 1, 2023		July 2, 2022			July 1, 2023			July 2, 2022
Revenues:
Services	$	20,008	$	19,461	3 %		$	60,591		$	56,215	8 %
Products	2,322		2,043		14 %		7,066			6,357		11 %
Total revenues	22,330		21,504		4 %		67,657			62,572		8 %
Costs and expenses:
Cost of services (exclusive of depreciation and amortization)	(12,974)		(12,404)		(5) %		(40,915)			(36,895)		(11) %
Cost of products (exclusive of depreciation and amortization)	(1,497)		(1,278)		(17) %		(4,558)			(3,948)		(15) %
Selling, general, administrative and other	(3,874)		(4,100)		6 %		(11,315)			(11,655)		3 %
Depreciation and amortization	(1,344)		(1,290)		(4) %		(3,960)			(3,846)		(3) %
Total costs and expenses	(19,689)		(19,072)		(3) %		(60,748)			(56,344)		(8) %
Restructuring and impairment charges	(2,650)		(42)		>(100) %		(2,871)			(237)		>(100) %
Other income (expense), net	(11)		(136)		92 %		96			(730)		nm
Interest expense, net	(305)		(360)		15 %		(927)			(1,026)		10 %
Equity in the income of investees	191		225		(15) %		555			674		(18) %
Income (loss) from continuing operations before income taxes	(134)		2,119		nm		3,762			4,909		(23) %
Income taxes on continuing operations	(19)		(617)		97 %		(1,066)			(1,610)		34 %
Net income (loss) from continuing operations	(153)		1,502		nm		2,696			3,299		(18) %
Loss from discontinued operations, net of income tax benefit of $0, $0, $0 and $14, respectively	—		—		nm		—			(48)		100 %
Net income (loss)	(153)		1,502		nm		2,696			3,251		(17) %
Net income from continuing operations attributable to noncontrolling interests	(307)		(93)		>(100) %		(606)			(268)		>(100) %
Net income

Net income (loss) attributable to Disney	$	(460)	$	1,409	nm		$	2,090		$	2,983	(30) %
Diluted earnings per share from continuing operations attributable to Disney	$	(0.25)	$	0.77	nm		$	1.14		$	1.66	(31) %

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
Diluted earnings per share attributable to Disney
Diluted earnings per share attributable to Disney
Diluted earnings per share attributable to Disney

CURRENT QUARTER RESULTS COMPARED TO PRIOR-YEAR QUARTER

Revenues for the quarter ~~increased 4%, or $0.8 billion,~~were comparable to ~~$22.3~~the prior-year quarter at $23.5 billion; net income ~~(loss)~~ attributable to Disney ~~was a loss of $0.5~~increased to $1.9 billion in the current quarter compared to ~~income of $1.4~~$1.3 billion in the prior-year quarter; and diluted earnings per share ~~from continuing operations~~(EPS) attributable to Disney ~~(EPS) was a loss of $0.25 in the current quarter~~increased to $1.04 compared to ~~income of $0.77~~$0.70 in the prior-year quarter. The EPS ~~decrease~~increase was ~~due to the Content Impairment Charge in the current quarter.~~

~~Revenues~~

~~Service revenues for the quarter increased 3%, or $0.5 billion, to $20.0 billion~~primarily due to higher ~~DTC subscription revenue, increased revenues~~operating income at ~~our theme parks and resorts,~~Entertainment, Experiences and, to a lesser extent, an increase in theatrical distribution revenue. The increase in DTC subscription revenue was due to subscriber growth and higher rates. The increase at theme parks and resorts was due to higher volumes and guest spending growth. These increases were partially offset by lower advertising and TV/SVOD distribution revenues. 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 (Foreign Exchange Impact).

Product revenues for the quarter increased 14%, or $0.3 billion, to $2.3 billion due to higher sales volumes of merchandise, food and beverage at our theme parks and resorts. Product revenues reflected an approximate 1 percentage point decrease due to an unfavorable Foreign Exchange Impact.

~~Costs and expenses~~

Cost of services for the quarter increased 5%, or $0.6 billion, to $13.0 billion due to cost inflation and increased volumes at our theme parks and higher programming and production costs. The increase in programming and production costs was dueSports.

3227

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS — (continued)

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 revenues at our theme parks and resorts.

Product revenues for the quarter increased 2%, or $0.1 billion, to $2.6 billion due to higher sales volumes of merchandise, food and beverage at our theme parks and resorts.

Costs and expenses

Cost of services for the quarter decreased 6%, or $0.9 billion, to $13.9 billion primarily due to lower programming and production costs ~~at Direct-to-Consumer~~and, to a lesser extent, lower technical support costs, partially offset by the impact of inflation and increased volumes at our theme parks and resorts. 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 ~~resulting from higher theatrical revenue. These increases were~~at Entertainment Linear Networks and Direct-to-Consumer, partially offset by ~~a decrease in production cost amortization due to lower TV/SVOD distribution sales. Costs of services reflected an approximate 1 percentage point decrease due to a favorable Foreign Exchange Impact.~~Sports.

Cost of products for the quarter increased ~~17%~~4%, or ~~$0.2~~$0.1 billion, to ~~$1.5~~$1.7 billion due to higher sales volumes of merchandise, food and beverage and cost inflation at our theme parks and resorts.

Selling, general, administrative and other costs decreased 6%1% to ~~$3.9~~$3.8 billion, ~~driven by~~primarily due to lower ~~compensation-related~~marketing costs.

Depreciation and amortization ~~increased 4%~~decreased 5% to ~~$1.3~~$1.2 billion due to ~~higher~~lower TFCF and Hulu acquisition amortization and lower depreciation at ~~our domestic theme parks and resorts.~~Experiences.

Restructuring and impairment charges

In the ~~current quarter, the Company recorded charges of $2,650 million due to the Content Impairment Charge and severance.~~

~~In the~~ prior-year quarter, the Company ~~recorded~~recognized charges of ~~$42~~$69 million ~~primarily due to asset impairments~~ related to exiting our businesses in Russia.

Other ~~income (expense),~~expense, net

Other expense, net in the ~~current quarter includes a charge of $101 million related to a legal ruling, largely offset by a DraftKings gain of $90 million. Other expense in the~~ prior-year quarter ~~includes~~included a DraftKings loss of ~~$136 million.~~$70 million, partially offset by a $28 million gain on the sale of a business.

Interest expense, net

Interest expense, net is as follows:


		Quarter Ended
	Quarter Ended
(in millions)
(in millions)
(in millions)	(in millions)	July 1, 2023		July 2, 2022		% Change Better (Worse)	December 30, 2023				December 31, 2022				% Change Better (Worse)
Interest expense	Interest expense	$	(503)	$	(380)	(32) %	Interest expense	$	(528)	$		$	(465)	(14) %			(14) %
Interest income, investment income and other	Interest income, investment income and other	198		20		>100 %	Interest income, investment income and other	282				165				71 %

Interest expense, net	Interest expense, net	$	(305)	$	(360)	15 %
Interest expense, net
Interest expense, net								$	(246)			$	(300)			18 %

The increase in interest expense was due to higher average rates, partially offset by lower average debt balances.

The increase in interest income, investment income and other ~~resulted from~~was driven by higher interest income on cash balances ~~and a favorable comparison of pension and postretirement benefit costs, other than service cost.~~reflecting an increase in interest rates.

Equity in the Income of Investees

Income from equity investees decreased ~~$34~~$10 million, to ~~$191~~$181 million from ~~$225~~$191 million, ~~primarily~~ due to lower income from A+E Television Networks.

~~Effective Income Tax Rate~~

Quarter Ended
July 1,
2023 July 2,
2022
Income (loss) from continuing operations before income taxes $ (134) $ 2,119
Income tax on continuing operations 19 617
Effective income tax rate - continuing operations (14.2)% 29.1%

The current quarter loss from continuing operations before income taxes included the $2,440 million Content Impairment Charge. Income tax on continuing operations included a benefit of $568 million from this charge using the Company’s marginal income tax rate of approximately 23%. Due to the significance of this charge on pre-tax income, our reported effective tax rate for the current quarter is negative 14.2%. Excluding the impact of this charge, the effective income tax rate on continuing operations would have been approximately 25.5% compared to 29.1% in the prior-year quarter. The decrease was due to the following:

•~~Lower effective tax rates on foreign earnings in the current quarter compared to the prior-year quarter; and~~

•~~A benefit from the comparison of adjustments related to prior years, which was favorable in the current quarter and unfavorable in the prior-year quarter.~~

3328

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS — (continued)

Income Taxes


	Quarter Ended
	December 30, 2023			December 31, 2022
Income before income taxes	$	2,871		$	1,773
Income tax	720			412
Effective income tax rate	25.1		%	23.2		%

The increase in the effective income tax rate was due to the impact of adjustments related to prior years, which was unfavorable in the current quarter and favorable in the prior-year quarter, partially offset by lower effective tax rates on foreign earnings compared to the prior-year quarter.

Noncontrolling Interests

Quarter Ended

(in millions)

July 1,
2023

July 2,
2022

% Change
Better (Worse)

Net income from continuing operations attributable to noncontrolling interests

(307)

(93)

>(100) %

(in millions)

December 30,
2023

December 31,
2022

% Change
Better (Worse)

Net income attributable to noncontrolling interests

(240)

(82)

>(100) %

The increase in net income ~~from continuing operations~~ attributable to noncontrolling interests was primarily due to improved results at ~~Shanghai Disney Resort~~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 lesser extent, improved results at ~~Hong Kong Disneyland Resort.~~ESPN, partially offset by 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.

Certain Items Impacting Results in the Quarter

Results for the quarter ended ~~July 1,~~December 30, 2023 were impacted by the following:

•~~Restructuring and impairment charges of $2,650 million~~

•TFCF and Hulu acquisition amortization of ~~$432 million~~

•~~Other expense, net of $11 million reflects a charge of $101 million related to a legal ruling, partially offset by a DraftKings gain of $90~~$451 million

Results for the quarter ended ~~July 2,~~December 31, 2022 were impacted by the following:

•TFCF and Hulu acquisition amortization of ~~$585~~$579 million

•Impairment charges of $69 million

•Other expense, ~~of $136 million reflecting a DraftKings loss~~

•~~Impairment charges~~net of $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 July 1, 2023:
Restructuring and impairment charges $ (2,650)     $ 617 $ (2,033) $ (1.10)
TFCF and Hulu acquisition amortization (432)     101     (331) (0.18)
Other expense, net (11)     5     (6) —
Total $ (3,093) $ 723 $ (2,370) $ (1.28)
Quarter Ended July 2, 2022:
TFCF and Hulu acquisition amortization $ (585) $ 136 $ (449) $ (0.24)
Other expense (136) 32     (104) (0.06)
Restructuring and impairment charges (42) 10     (32)     (0.02)
Total $ (763) $ 178 $ (585) $ (0.32)

~~(1)Tax benefit (expense) amounts are determined using the tax rate applicable to the individual item.~~

~~(2)EPS is net of noncontrolling interest share, where applicable. Total may not equal the sum of the column due to rounding.~~

~~CURRENT NINE-MONTH PERIOD RESULTS COMPARED TO PRIOR-YEAR NINE-MONTH PERIOD~~

Revenues for the current period increased $5.1 billion, to $67.7 billion; net income attributable to Disney decreased $0.9 billion, to $2.1 billion; and EPS decreased to $1.14 from $1.66 in the prior-year period. The EPS decrease was due to the Content Impairment Charge and lower operating income at DMED. These decreases were partially offset by higher operating income at DPEP, the comparison to a revenue reduction for the Content License Early Termination in the prior-year period and investment gains in the current period compared to investment losses in the prior-year period.

~~Revenues~~

Service revenues for the current period increased 8%, or $4.4 billion, to $60.6 billion, due to growth at our theme parks and resorts, higher DTC subscription revenue, an increase in theatrical distribution revenue and the comparison to the revenue reduction for the Content License Early Termination in the prior-year period. These increases were partially offset by decreases

~~MANAGEMENT’S DISCUSSION AND ANALYSIS OF~~

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

in advertising revenue, TV/SVOD distribution sales and, to a lesser extent, affiliate revenue. Growth at theme parks and resorts was due to higher volumes and guest spending. The increase in DTC subscription revenue was due to subscriber growth and higher rates. Service revenues reflected an approximate 1 percentage point decrease due to an unfavorable Foreign Exchange Impact.

Product revenues for the current period increased 11%, or $0.7 billion, to $7.1 billion, due to higher volumes of merchandise, food and beverage at our theme parks and resorts, partially offset by lower home entertainment volumes. Product revenues reflected an approximate 2 percentage point decrease due to an unfavorable Foreign Exchange Impact.

~~Costs and expenses~~

Cost of services for the current period increased 11%, or $4.0 billion, to $40.9 billion, due to higher programming and production costs, cost inflation and increased volumes at our theme parks and resorts and, to a lesser extent, higher technology and distribution costs at Direct-to-Consumer. The increase in programming and production costs was due to higher costs at Direct-to-Consumer, increased production cost amortization resulting from higher theatrical revenue and, to a lesser extent, higher sports programming costs. These increases were partially offset by a decrease in production cost amortization due to lower TV/SVOD distribution sales. Costs of services reflected an approximate 1 percentage point decrease due to a favorable Foreign Exchange Impact.

Cost of products for the current period increased 15%, or $0.6 billion, to $4.6 billion, due to higher volumes of merchandise, food and beverage and cost inflation at our theme parks and resorts, partially offset by a decrease in home entertainment volumes. Costs of products reflected an approximate 1 percentage point decrease due to a favorable Foreign Exchange Impact.

Selling, general, administrative and other costs for the current period decreased 3%, or $0.3 billion, to $11.3 billion due to lower marketing costs at Direct-to-Consumer, partially offset by higher marketing costs at theatrical distribution, Parks and Experiences and Linear Networks. Selling, general, administrative and other costs reflected an approximate 1 percentage point decrease due to a favorable Foreign Exchange Impact.

~~Depreciation and amortization increased 3% to $4.0 billion due to higher depreciation at our domestic theme parks and resorts.~~

~~Restructuring and impairment charges~~

~~In the current period, the Company recorded charges of $2,871 million due to the Content Impairment Charge, severance and costs related to exiting our businesses in Russia.~~

~~In the prior-year period, the Company recorded charges of $237 million primarily due to the impairment of an intangible and other assets related to exiting our businesses in Russia.~~

~~Other income (expense), net~~

Other income, net in the current period includes a DraftKings gain of $169 million and a $28 million gain on the sale of a business, partially offset by a charge of $101 million related to a legal ruling. Other expense, net in the prior-year period includes a DraftKings loss of $726 million.

~~Interest expense, net~~

~~Interest expense, net is as follows:~~

Nine Months Ended
(in millions) July 1,
2023 July 2,
2022 % Change
Better (Worse)
Interest expense $ (1,472) $ (1,115) (32) %
Interest income, investment income and other 545 89 >100 %
Interest expense, net $ (927) $ (1,026) 10 %

~~The increase in interest expense was due to higher average rates, partially offset by lower average debt balances.~~

The increase in interest income, investment income and other resulted from a favorable comparison of pension and postretirement benefit costs, other than service cost and higher interest income on cash balances.

~~Equity in the Income of Investees~~

~~Income from equity investees decreased $119 million, to $555 million from $674 million, due to lower income from A+E Television Networks.~~

~~MANAGEMENT’S DISCUSSION AND ANALYSIS OF~~

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

~~Effective Income Tax Rate~~

Nine Months Ended
July 1,
2023 July 2,
2022
Income from continuing operations before income taxes $ 3,762 $ 4,909
Income tax on continuing operations 1,066 1,610
Effective income tax rate - continuing operations 28.3% 32.8%

~~The decrease in the effective income tax rate was due to the following:~~

•~~The benefit from the comparison of adjustments related to prior years, which was favorable in the current period and unfavorable in the prior-year period;~~

•~~Lower effective tax rates on foreign earnings in the current period compared to the prior-year period; and~~

•~~A favorable comparison to new tax regulations issued in the prior year that limited our ability to use certain accumulated foreign tax credits; and~~

•~~An unfavorable impact in the current period compared to a favorable impact in the prior-year period for the tax effect of employee share-based awards.~~

~~Noncontrolling Interests~~

Nine Months Ended
(in millions) July 1,
2023 July 2,
2022 % Change
Better (Worse)
Net income from continuing operations attributable to noncontrolling interests $ (606) $ (268) >(100) %

The increase in net income from continuing operations attributable to noncontrolling interests was due to improved results at Shanghai Disney Resort, higher accretion of income related to BAMTech due to the MLB buy-out and lower losses at Hong Kong Disneyland Resort and at our domestic DTC sports business. These increases were partially offset by lower results at ESPN.

~~Certain Items Impacting Results in the Nine-Month Period~~

~~Results for the nine months ended July 1, 2023 were impacted by the following:~~

•~~Restructuring and impairment charges of $2,871 million~~

•~~TFCF and Hulu acquisition amortization of $1,569 million~~

•Other income, net of $96 million reflecting a DraftKings gain of $169 million and a gain on the sale of a business of $28 million, partially offset by a charge of $101 million related to a legal ruling

~~Results for the nine months ended July 2, 2022 were impacted by the following:~~

•~~TFCF and Hulu acquisition amortization of $1,774 million~~

•~~A $1.0 billion reduction in revenue for the Content License Early Termination~~

•~~Other expense, net of $730 million reflecting a DraftKings loss~~

•~~Impairment charges of $237 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)	(in millions, except per share data)	Pre-Tax Income (Loss)		Tax Benefit (Expense)(1)		After-Tax Income (Loss)		EPS Favorable (Adverse)(2)		(in millions, except per share data)	Pre-Tax Income (Loss)		Tax Benefit (Expense)(1)		After-Tax Income (Loss)		EPS Favorable (Adverse)(2)
Nine Months Ended July 1, 2023:
Restructuring and impairment charges		$	(2,871)	$	660	$	(2,211)	$	(1.20)
Quarter Ended December 30, 2023:

TFCF and Hulu acquisition amortization	TFCF and Hulu acquisition amortization	(1,569)		365		(1,204)		(0.65)

Other income, net		96		(13)		83		0.05
TFCF and Hulu acquisition amortization

TFCF and Hulu acquisition amortization											$	(451)	$	106	$	(345)	$	(0.18)

Quarter Ended December 31, 2022:

Quarter Ended December 31, 2022:

Quarter Ended December 31, 2022:

TFCF and Hulu acquisition amortization

TFCF and Hulu acquisition amortization

TFCF and Hulu acquisition amortization											$	(579)	$	135	$	(444)	$	(0.24)

Restructuring and impairment charges
Restructuring and impairment charges
Restructuring and impairment charges
Other expense, net

Total	Total	$	(4,344)	$	1,012	$	(3,332)	$	(1.80)

Nine Months Ended July 2, 2022:

TFCF and Hulu acquisition amortization		$	(1,774)	$	413	$	(1,361)	$	(0.73)
Content License Early Termination		(1,023)		238		(785)		(0.43)

Other expense, net		(730)		170		(560)		(0.31)
Restructuring and impairment charges		(237)		55		(182)		(0.10)

Total	Total	$	(3,764)	$	876	$	(2,888)	$	(1.57)

Total

(1)Tax benefit (expense) amounts are determined using the tax rate applicable to the individual item.

(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 ~~nine months~~quarter ended ~~July 1,~~December 30, 2023 for each business segment, and for the Company as a whole, are not necessarily indicative of results to be expected for the full year.

~~DMED~~

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 and demand for film and television ~~programs, and the availability of and demand for sports programming.~~programs. In general, domestic advertising revenues are typically somewhat higher during the fall and somewhat lower during the summer months. 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 take place periodically (e.g. biannually, quadrennially). Affiliate revenues 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 determined by several factors, including competition and the timing of vacation and holiday periods.

~~DPEP~~Sports revenues are subject to seasonal advertising patterns, changes in viewership and subscriber levels, and the availability of and demand for 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 take place periodically (e.g. biannually, quadrennially).

Experiences revenues fluctuate with changes in theme park attendance and resort occupancy resulting from the seasonal nature of vacation travel and leisure activities, which generally results in higher revenues during the Company’s first and fourth fiscal ~~quarters.~~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 winter and spring 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 and in the fourth quarter due to back-to-school.~~season. In addition, licensing revenues fluctuate with the timing and performance of our film and television content.

~~MANAGEMENT’S DISCUSSION AND ANALYSIS OF~~

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

BUSINESS SEGMENT RESULTS - Current Quarter Results Compared to Prior-Year Quarter

The Company evaluates the performance of its operating businesses based on segment revenue and segment operating income.

The following table presents revenues from our operating ~~segments~~segments:


	Quarter Ended				% Change Better (Worse)
(in millions)	December 30, 2023		December 31, 2022
Entertainment	$	9,981	$	10,675	(7) %
Sports	4,835		4,640		4 %
Experiences	9,132		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 ~~components of revenues:~~

Quarter Ended % Change
Better
(Worse) Nine Months Ended % Change
Better
(Worse)
(in millions) July 1,
2023 July 2,
2022 July 1,
2023 July 2,
2022
Disney Media and Entertainment Distribution $ 14,004 $ 14,110 (1) % $ 42,819 $ 42,315 1  %
Disney Parks, Experiences and Products 8,326 7,394 13  % 24,838 21,280 17  %
Content License Early Termination — — nm — (1,023) 100  %
Revenues $ 22,330 $ 21,504 4  % $ 67,657 $ 62,572 8  %
Entertainment businesses for the right to air their linear networks on Hulu Live and fees paid by Entertainment to Sports to program sports on the ABC Network and Star+.

The following table presents income from our operating segments and other components of income ~~(loss) from continuing operations~~ before income taxes:




		Quarter Ended				% Change Better (Worse)		Nine Months Ended								% Change Better (Worse)
(in millions)	(in millions)	July 1, 2023		July 2, 2022			July 1, 2023			July 2, 2022
Disney Media and Entertainment Distribution operating income		$	1,134	$	1,381		(18) %			$	2,243			$	4,133		(46) %
Disney Parks, Experiences and Products operating income		2,425		2,186		11 %		7,644				6,391				20 %
Content License Early Termination		—		—		nm		—				(1,023)				100 %
(in millions)
(in millions)
Entertainment operating income
Entertainment operating income
Entertainment operating income
Sports operating loss
Sports operating loss
Sports operating loss
Experiences operating income
Experiences operating income
Experiences operating income
Corporate and unallocated shared expenses
Corporate and unallocated shared expenses
Corporate and unallocated shared expenses	Corporate and unallocated shared expenses	(295)		(325)		9 %		(854)				(825)				(4) %
Restructuring and impairment charges	Restructuring and impairment charges	(2,650)		(42)		>(100) %		(2,871)				(237)				>(100) %
Other income (expense), net		(11)		(136)		92 %		96				(730)				nm
Restructuring and impairment charges
Restructuring and impairment charges
Other expense, net
Other expense, net
Other expense, net
Interest expense, net	Interest expense, net	(305)		(360)		15 %		(927)				(1,026)				10 %
Interest expense, net
Interest expense, net
TFCF and Hulu acquisition amortization
TFCF and Hulu acquisition amortization
TFCF and Hulu acquisition amortization	TFCF and Hulu acquisition amortization	(432)		(585)		26 %		(1,569)				(1,774)				12 %

Income (loss) from continuing operations before income taxes		$	(134)	$	2,119	nm		$	3,762			$	4,909			(23) %
Income before income taxes

Income before income taxes

Income before income taxes

3830

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS — (continued)

Depreciation expense is as follows:


		Quarter Ended				% Change Better (Worse)		Nine Months Ended								% Change Better (Worse)


(in millions)
(in millions)
(in millions)	(in millions)	July 1, 2023		July 2, 2022			% Change Better (Worse)			July 1, 2023				July 2, 2022			% Change Better (Worse)

Disney Media and Entertainment Distribution		$	199	$	163	(22) %				$	532			$	485			(10) %
Disney Parks, Experiences and Products
Entertainment

Entertainment

Entertainment
Sports
Sports
Sports
Experiences
Experiences
Experiences

Domestic

Domestic

Domestic	Domestic	524		434		(21) %		1,431				1,236				(16) %
International	International	170		161		(6) %		503				496				(1) %
International
International

Total Disney Parks, Experiences and Products		694		595		(17) %		1,934				1,732				(12) %
Total Experiences

Total Experiences

Total Experiences

Corporate

Corporate

Corporate	Corporate	53		47		(13) %		153				141				(9) %
Total depreciation expense	Total depreciation expense	$	946	$	805	(18) %		$	2,619			$	2,358			(11) %
Total depreciation expense
Total depreciation expense

Amortization of intangible assets is as follows:


		Quarter Ended				% Change Better (Worse)		Nine Months Ended								% Change Better (Worse)


(in millions)
(in millions)
(in millions)	(in millions)	July 1, 2023		July 2, 2022			% Change Better (Worse)			July 1, 2023				July 2, 2022			% Change Better (Worse)

Disney Media and Entertainment Distribution		$	9	$	36	75 %				$	73			$	115			37 %
Disney Parks, Experiences and Products		28		27		(4) %		82				81				(1) %
Entertainment

Entertainment

Entertainment
Sports
Sports
Sports
Experiences
Experiences
Experiences
TFCF and Hulu intangible assets
TFCF and Hulu intangible assets
TFCF and Hulu intangible assets	TFCF and Hulu intangible assets	361		422		14 %		1,186				1,292				8 %

Total amortization of intangible assets	Total amortization of intangible assets	$	398	$	485	18 %		$	1,341			$	1,488			10 %

Total amortization of intangible assets

Total amortization of intangible assets

~~BUSINESS SEGMENT RESULTS - Current Quarter Results Compared to Prior-Year Quarter~~Entertainment

~~Disney Media and Entertainment Distribution~~

Revenue and operating results for the ~~DMED~~Entertainment segment are as follows:
Quarter Ended % Change
Better
(Worse)
(in millions) July 1,
2023 July 2,
2022
Revenues:
Linear Networks $ 6,690    $ 7,189    (7) %
Direct-to-Consumer 5,525 5,058 9  %
Content Sales/Licensing and Other 2,082 2,111 (1) %
Elimination of Intrasegment Revenue(1)
(293) (248) (18) %
$ 14,004 $ 14,110 (1) %
Segment operating income (loss):
Linear Networks $ 1,889 $ 2,469 (23) %
Direct-to-Consumer (512) (1,061) 52  %
Content Sales/Licensing and Other (243) (27) >(100) %
$ 1,134 $ 1,381 (18) %

~~(1)~~ ~~Reflects fees received~~


	Quarter Ended				% Change Better (Worse)
(in millions)	December 30, 2023		December 31, 2022
Revenues:
Linear Networks	$	2,803	$	3,202	(12) %
Direct-to-Consumer	5,546		4,822		15 %
Content Sales/Licensing and Other	1,632		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 decrease 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 ~~the Linear Networks from other DMED businesses for the right~~subscription revenue growth.

Operating income

The increase in operating income was due to ~~air our Linear Networks~~improved results at Direct-to-Consumer, partially offset by a decline at Content Sales/Licensing and ~~related services.~~Other.

3931

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS — (continued)

Linear Networks

Operating results for Linear Networks are as follows:


		Quarter Ended				% Change Better (Worse)			Quarter Ended											% Change Better (Worse)
(in millions)	(in millions)	July 1, 2023		July 2, 2022
Revenues	Revenues
Revenues
Revenues
Affiliate fees
Affiliate fees
Affiliate fees	Affiliate fees	$	4,466	$	4,585	(3) %	$	1,766			$		$	1,873			(6) %				(6) %
Advertising	Advertising	2,124		2,470		(14) %	Advertising		994						1,267						(22) %
Other	Other	100		134		(25) %	Other		43			62				62			(31) %				(31) %
Total revenues	Total revenues	6,690		7,189		(7) %	Total revenues		2,803			3,202				3,202			(12) %				(12) %
Operating expenses	Operating expenses	(4,052)		(4,091)		1 %	Operating expenses		(1,171)			(1,462)				(1,462)			20 %				20 %
Selling, general, administrative and other	Selling, general, administrative and other	(916)		(823)		(11) %	Selling, general, administrative and other		(557)			(591)				(591)			6 %				6 %
Depreciation and amortization	Depreciation and amortization	(29)		(34)		15 %	Depreciation and amortization		(12)			(12)				(12)			— %				— %
Equity in the income of investees	Equity in the income of investees	196		228		(14) %	Equity in the income of investees		173			193				193			(10) %				(10) %
Operating Income	Operating Income	$	1,889	$	2,469	(23) %	Operating Income		$	1,236		$			$	1,330		(7) %				(7) %

Revenues - Affiliate fees

~~Affiliate revenue is as follows:~~

Quarter Ended % Change
Better
(Worse)
(in millions) July 1,
2023 July 2,
2022
Domestic Channels $ 3,817 $ 3,884 (2) %
International Channels 649 701 (7) %
$ 4,466 $ 4,585 (3) %


	Quarter Ended				% Change Better (Worse)
(in millions)	December 30, 2023		December 31, 2022

Domestic	$	1,480	$	1,557	(5) %
International	286		316		(9) %
	$	1,766	$	1,873	(6) %

The decrease in domestic affiliate revenue ~~at the Domestic Channels~~ was due to a decrease of ~~6% from fewer subscribers, partially offset by an increase of 4% from higher contractual rates.~~

~~The decrease in affiliate revenue at the International Channels was due to decreases of~~ 10% ~~from an unfavorable Foreign Exchange Impact and 6%~~ from fewer subscribers, including the impact of ~~channel closures,~~the non-carriage of certain networks by an affiliate, partially offset by an increase of 9%5% from higher contractual rates.

~~Advertising~~Lower international affiliate revenue ~~is as follows:~~was primarily attributable to a decrease of 7% from fewer subscribers.

Quarter Ended % Change
Better
(Worse)
(in millions) July 1,
2023 July 2,
2022
Cable $ 1,034 $ 1,027 1 %
Broadcasting 612 755 (19) %
Domestic Channels 1,646 1,782 (8) %
International Channels 478 688 (31) %
$ 2,124 $ 2,470 (14) %
Revenues - Advertising


	Quarter Ended				% Change Better (Worse)
(in millions)	December 30, 2023		December 31, 2022

Domestic	$	706	$	980	(28) %
International	288		287		— %
	$	994	$	1,267	(22) %

~~Cable~~The decline in domestic advertising revenue reflected ~~a modest increase as higher impressions and rates at ESPN were largely offset by lower impressions at our non-sports channels.~~

~~Lower Broadcasting advertising revenue was due to~~ decreases of 9%15% from fewer impressions, driven by a decrease at ABC ~~resulting from lower average viewership,~~Network, and 7%11% from lower rates primarily attributable to a decrease in political advertising at the owned television stations.

~~The decline~~ Fewer network impressions were in ~~International Channels advertising revenue was~~part due to ~~decreases~~the impact of ~~29% from lower rates attributable~~the guild strikes on our programming schedule primarily due to ~~Indian Premier League (IPL) cricket programming and 6% from an unfavorable Foreign Exchange Impact, partially offset by an increase~~a shift of ~~4% from higher impressions.~~units to the Sports segment reflecting the simulcast of certain NFL games.

Revenues - Other

Other revenue decreased ~~$34~~$19 million, to ~~$100~~$43 million from ~~$134~~$62 million, ~~driven by~~primarily due to an unfavorable movement of the ~~comparison to sub-licensing fees from IPL cricket matches in~~U.S. dollar against major currencies including the ~~prior-year quarter.~~impact of our hedging program (Foreign Exchange Impact).

4032

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS — (continued)

~~Costs and Expenses~~

Operating expenses ~~primarily consist of~~


	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 domestic programming and production costs was primarily due to fewer hours of scripted programming in the current quarter, reflecting the impact of the guild 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 ~~as follows:~~recognized in the Sports segment.

Quarter Ended % Change
Better
(Worse)
(in millions) July 1,
2023 July 2,
2022
Cable $ (2,146) $ (2,066) (4) %
Broadcasting (611) (614) — %
Domestic Channels (2,757) (2,680) (3) %
International Channels (927) (1,000) 7 %
$ (3,684) $ (3,680) — %

~~Programming and production costs at Cable increased due to higher sports~~International programming and production costs ~~attributable to contractual rate increases for NBA programming and new motor sports programming.~~

~~Programming and production costs at the International Channels decreased~~increased primarily due to ~~a favorable Foreign Exchange Impact.~~inflation.

The decrease in other operating expenses included lower technology and distribution costs.

Selling, general, administrative and other

Selling, general, administrative and other costs ~~increased $93~~decreased $34 million, to ~~$916~~$557 million from ~~$823~~$591 million, ~~driven by higher~~due to lower marketing costs.

Equity in the Income of Investees

Income from equity investees decreased ~~$32~~$20 million, to ~~$196~~$173 million from ~~$228~~$193 million, primarily due to lower income from A+E Television Networks driven by ~~a decrease~~decreases in advertising ~~revenue.~~and affiliate revenue, partially offset by a gain on the sale of an investment.

Operating Income from Linear Networks

Operating income from Linear Networks decreased ~~$580~~$94 million, to ~~$1,889~~$1,236 million from ~~$2,469~~$1,330 million, due to decreases at ~~the International Channels, Broadcasting~~our domestic and ~~Cable.~~international businesses and lower income from 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)		Quarter Ended								% Change Better (Worse)
(in millions)	(in millions)	July 1, 2023		July 2, 2022
Supplemental revenue detail	Supplemental revenue detail
Domestic Channels		$	5,494	$	5,700	(4) %
International Channels		1,196		1,489		(20) %
		$	6,690	$	7,189	(7) %
Supplemental revenue detail
Supplemental revenue detail
Domestic
Domestic
Domestic								$	2,210			$	2,565				(14) %
International							International	593				637					(7) %
	$									$	2,803			$	3,202			(12) %
Supplemental operating income detail	Supplemental operating income detail
Domestic Channels		$	1,780	$	2,075	(14) %
International Channels		(87)		166		nm
Domestic
Domestic
Domestic								$	838			$	879				(5) %
International							International	225				258					(13) %
Equity in the income of investees	Equity in the income of investees	196		228		(14) %	Equity in the income of investees	173				193					(10) %
		$	1,889	$	2,469	(23) %
	$									$	1,236			$	1,330			(7) %

4133

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS — (continued)

Direct-to-Consumer

Operating results for Direct-to-Consumer are as follows:


		Quarter Ended				% Change Better (Worse)			Quarter Ended											% Change Better (Worse)
(in millions)	(in millions)	July 1, 2023		July 2, 2022
Revenues	Revenues
Revenues
Revenues
Subscription fees
Subscription fees
Subscription fees	Subscription fees	$	4,537	$	3,889	17 %	$	4,507			$		$	3,861			17 %				17 %
Advertising	Advertising	873		1,018		(14) %	Advertising		974						866						12 %
TV/SVOD distribution and other		115		151		(24) %
Other							Other		65						95						(32) %
Total revenues	Total revenues	5,525		5,058		9 %	Total revenues		5,546			4,822				4,822			15 %				15 %
Operating expenses	Operating expenses	(4,898)		(4,536)		(8) %	Operating expenses		(4,493)			(4,623)				(4,623)			3 %				3 %
Selling, general, administrative and other	Selling, general, administrative and other	(1,059)		(1,494)		29 %	Selling, general, administrative and other		(1,121)			(1,087)				(1,087)			(3) %				(3) %
Depreciation and amortization	Depreciation and amortization	(80)		(89)		10 %	Depreciation and amortization		(70)			(96)				(96)			27 %				27 %
Operating Loss	Operating Loss	$	(512)	$	(1,061)	52 %	Operating Loss		$	(138)		$			$	(984)		86 %				86 %

Revenues - Subscription fees

Growth in subscription fees in the current quarter compared to the prior-year quarter reflected ~~an increase~~increases of ~~10% from more subscribers due to growth at Disney+ Core and, to a lesser extent, Hulu and ESPN+. Higher subscription fees also reflected growth of 9%~~13% from higher rates attributable to increases in retail pricing at Disney+ Core ~~Hulu~~ and, to a lesser extent, Hulu, and 4% from more subscribers, due to growth at ~~ESPN+. These increases were partially offset by a decrease of 2% from an unfavorable Foreign Exchange Impact.~~Disney+ Core and Hulu.

~~Lower~~Revenues - Advertising

Higher advertising revenue reflected a decrease of 13% from fewer impressions due to declines at Disney+ and Hulu. The decrease at Disney+ was attributable to the comparison to IPL cricket programming in the prior-year quarter, as we did not renew the digital rights beginning with the 2023 season. This decrease was partially offset by the U.S. launch of ad-supported Disney+ in the first quarter of the current fiscal year.

The decrease in TV/SVOD distribution and other revenue was attributable to lower Ultimate Fighting Championship (UFC) pay-per-view fees due to a decrease in average buys per event and the impact of airing one less event in the current quarter compared to the prior-year ~~quarter.~~quarter reflected an increase of 23% from higher impressions, partially offset by a decrease of 11% from 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.

Revenues - Other

The decrease in other revenue was due to an unfavorable Foreign Exchange Impact.

Key metrics

~~The~~In addition to revenue, costs and operating income, management uses the following ~~tables present additional information about our~~key metrics to analyze trends and evaluate the overall performance of Disney+~~, ESPN+ and Hulu DTC product offerings~~(1). and Hulu(1), and we believe these metrics are useful to investors in analyzing the business:


Paid subscribers(2) at:					% Change Better (Worse)
Paid subscribers(1) at:
Paid subscribers(1) at:
Paid subscribers(1) at:
(in millions)
(in millions)
(in millions)	(in millions)	July 1, 2023	April 1, 2023	July 2, 2022	July 1, 2023 vs. April 1, 2023	July 1, 2023 vs. July 2, 2022
Disney+	Disney+
Disney+
Disney+
Domestic (U.S. and Canada)	Domestic (U.S. and Canada)	46.0	46.3	44.5	(1) %	3 %
International (excluding Disney+ Hotstar)(3)		59.7	58.6	49.2	2 %	21 %
Disney+ Core(4)		105.7	104.9	93.6	1 %	13 %
Domestic (U.S. and Canada)
Domestic (U.S. and Canada)
International (excluding Disney+ Hotstar)(1)
International (excluding Disney+ Hotstar)(1)
International (excluding Disney+ Hotstar)(1)
Disney+ Core(2)
Disney+ Core(2)
Disney+ Core(2)

Disney+ Hotstar	Disney+ Hotstar	40.4	52.9	58.4	(24) %	(31) %

ESPN+		25.2	25.3	22.8	— %	11 %
Disney+ Hotstar

Disney+ Hotstar

Hulu

Hulu

Hulu	Hulu
SVOD Only	SVOD Only	44.0	43.7	42.2	1 %	4 %
SVOD Only
SVOD Only
Live TV + SVOD	Live TV + SVOD	4.3	4.4	4.0	(2) %	8 %
Total Hulu(4)		48.3	48.2	46.2	— %	5 %
Live TV + SVOD
Live TV + SVOD
Total Hulu(2)
Total Hulu(2)
Total Hulu(2)

4234

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS — (continued)

Average Monthly Revenue Per Paid Subscriber~~(5)~~(1):


		Quarter Ended						% Change Better (Worse)
		July 1, 2023		April 1, 2023		July 2, 2022		July 1, 2023 vs. April 1, 2023	July 1, 2023 vs. July 2, 2022

		December 30, 2023
		December 30, 2023
		December 30, 2023
Disney+
Disney+
Disney+	Disney+
Domestic (U.S. and Canada)	Domestic (U.S. and Canada)	$	7.31	$	7.14	$	6.27	2 %	17 %
International (excluding Disney+ Hotstar)(3)		6.01		5.93		6.31		1 %	(5) %
Domestic (U.S. and Canada)
Domestic (U.S. and Canada)
International (excluding Disney+ Hotstar)(1)
International (excluding Disney+ Hotstar)(1)
International (excluding Disney+ Hotstar)(1)
Disney+ Core	Disney+ Core	6.58		6.47		6.29		2 %	5 %
Disney+ Core
Disney+ Core

Disney+ Hotstar	Disney+ Hotstar	0.59		0.59		1.20		— %	(51) %

ESPN+		5.45		5.64		4.55		(3) %	20 %
Disney+ Hotstar

Disney+ Hotstar

Hulu

Hulu

Hulu	Hulu
SVOD Only	SVOD Only	12.39		11.73		12.92		6 %	(4) %
SVOD Only
SVOD Only
Live TV + SVOD	Live TV + SVOD	91.80		92.32		87.92		(1) %	4 %
Live TV + SVOD
Live TV + SVOD

(1)~~In the U.S., Disney+, ESPN+~~See discussion on page 50 —DTC Product Descriptions, Key Definitions 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.Supplemental Information.

(2)Reflects 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 we receive a fee for the distribution of the service 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.

~~Supplemental information about paid subscribers:~~

(in millions) July 1,
2023 April 1,
2023 July 2,
2022
Domestic (U.S. and Canada) standalone 55.6 57.0 60.6
Domestic (U.S. and Canada) multi-product(a)
21.9 21.4 17.8
77.5 78.4 78.4
International standalone (excluding Disney+ Hotstar)(b)
49.8 49.6 43.6
International multi-product(c)
9.9 9.0 5.6
59.7 58.6 49.2
Total(4)
137.2 137.0 127.6

~~(a)~~At July 1, 2023, there were 20.1 million and 1.8 million subscribers to three-service and two-service multi-product offerings, respectively. At April 1, 2023, there were 20.0 million and 1.4 million subscribers to three-service and two-service multi-product offerings, respectively. At July 2, 2022, there were 17.3 million and 0.5 million subscribers to three-service and two-service multi-product offerings, respectively.

~~(b)Disney+ Hotstar is not included in any of the Company’s multi-product offerings.~~

~~(c)Consists of subscribers to Combo+.~~

~~MANAGEMENT’S DISCUSSION AND ANALYSIS OF~~

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

~~(3)Includes the Disney+ service outside the U.S. and Canada and the Star+ service in Latin America.~~

~~(4)~~Total may not equal the sum of the column due to rounding.

~~(5)~~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 Premier Access and Pay-Per-View revenue. 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 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.

Average Monthly Revenue Per Paid Subscriber - ~~Third~~First Quarter of Fiscal ~~2023~~2024 Comparison to ~~Second~~Fourth Quarter of Fiscal 2023

Domestic Disney+ average monthly revenue per paid subscriber increased from ~~$7.14~~$7.50 to ~~$7.31~~$8.15 due to increases in retail pricing, partially offset by a higher ~~per-subscriber advertising revenue.~~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 higher mix of subscribers to promotional offerings.

Disney+ Hotstar average monthly revenue per paid subscriber increased from ~~$5.93~~$0.70 to ~~$6.01~~$1.28 due to ~~an increase~~higher advertising revenue and increases in ~~average~~ retail pricing, ~~and a favorable Foreign Exchange Impact,~~ partially offset by a higher mix of ~~wholesale subscribers.~~

~~ESPN+ average monthly revenue per paid subscriber decreased~~subscribers from ~~$5.64 to $5.45 due to lower per-subscriber advertising revenue and a higher mix of subscribers to multi-product offerings.~~lower-priced markets.

Hulu SVOD Only average monthly revenue per paid subscriber increased from ~~$11.73~~$12.11 to ~~$12.39~~$12.29 due to ~~higher~~increases in retail pricing, partially offset by lower per-subscriber advertising ~~revenue.~~revenue and a higher mix of subscribers to promotional offerings.

Hulu Live TV + SVOD average monthly revenue per paid subscriber ~~decreased~~increased from ~~$92.32~~$90.08 to ~~$91.80. The decrease included lower per-subscriber subscription revenue~~$93.61 due to ~~a mix shift of subscribers between bundled services. The decrease was partially offset by higher per-subscriber advertising revenue.~~increases in retail pricing.

Average Monthly Revenue Per Paid Subscriber - ~~Third~~First Quarter of Fiscal ~~2023~~2024 Comparison to ~~Third~~First Quarter of Fiscal ~~2022~~2023

Domestic Disney+ average monthly revenue per paid subscriber increased from ~~$6.27~~$5.95 to ~~$7.31~~$8.15 due to ~~an increase~~increases in ~~average~~ retail pricing and higher advertising revenue, ~~from the launch of ad-supported Disney+,~~ partially offset by a higher mix of subscribers to multi-product offerings.

International Disney+ (excluding Disney+ Hotstar) average monthly revenue per paid subscriber ~~decreased~~increased from ~~$6.31~~$5.62 to ~~$6.01~~$5.91 due to ~~an unfavorable~~increases in retail pricing and a favorable Foreign Exchange Impact, ~~and a decrease in average retail pricing,~~ partially offset by ~~a lower mix of wholesale subscribers. The decrease in average retail pricing reflected the impact of~~ a higher mix of subscribers ~~from lower-priced markets.~~to promotional offerings.

Disney+ Hotstar average monthly revenue per paid subscriber ~~decreased~~increased from ~~$1.20~~$0.74 to ~~$0.59~~$1.28 due to ~~lower per-subscriber~~higher advertising ~~revenue.~~

~~ESPN+ average monthly~~ revenue ~~per paid subscriber increased from $4.55 to $5.45 due to an increase~~and increases in retail pricing, partially offset by a higher mix of subscribers ~~to multi-product offerings.~~from lower-priced markets.

Hulu SVOD Only average monthly revenue per paid subscriber decreased from ~~$12.92~~$12.46 to ~~$12.39 due 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 ~~multi-product~~promotional offerings, partially offset by ~~an increase~~increases in ~~average~~ retail pricing.

Hulu Live TV + SVOD average monthly revenue per paid subscriber increased from ~~$87.92~~$87.90 to ~~$91.80~~$93.61 due to ~~an increase~~increases in ~~average~~ retail pricing, partially offset by lower per-subscriber advertising revenue.

4435

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS — (continued)

~~Costs and Expenses~~

Operating expenses ~~are as follows:~~


		Quarter Ended				% Change Better (Worse)		Quarter Ended								% Change Better (Worse)
(in millions)	(in millions)	July 1, 2023		July 2, 2022
Programming and production costs	Programming and production costs
Disney+		$	(1,632)	$	(1,435)	(14) %
Programming and production costs
Programming and production costs
Hulu	Hulu	(2,066)		(1,894)		(9) %
ESPN+ and other		(345)		(385)		10 %
Hulu
Hulu								$	(2,126)			$	(2,106)				(1) %
Disney+ and other							Disney+ and other	(1,459)				(1,556)					6 %
Total programming and production costs	Total programming and production costs	(4,043)		(3,714)		(9) %	Total programming and production costs	(3,585)				(3,662)					2 %
Other operating expense	Other operating expense	(855)		(822)		(4) %	Other operating expense	(908)				(961)					6 %
		$	(4,898)	$	(4,536)	(8) %
	$									$	(4,493)			$	(4,623)			3 %

~~The increase in~~Higher programming and production costs at ~~Disney+ was due to higher costs for non-sports content, partially offset by a decrease in sports programming costs reflecting the comparison to IPL cricket programming~~Hulu in the current quarter compared to the prior-year ~~quarter. Higher costs for non-sports content~~quarter were due to more content provided on the ~~service.~~

~~Higher~~service and higher subscriber-based fees for programming ~~and production~~the Live TV service. These increases were partially offset by lower average costs ~~at Hulu were attributable to more~~per hour of content ~~provided~~available on the ~~service and increased~~service. The increase in subscriber-based fees for programming the Live TV service ~~partially offset by a lower average cost mix of SVOD content. Higher subscriber-based fees for programming the Live TV service resulted from~~was attributable to rate increases and more ~~subscribers and rate increases.~~subscribers.

The decrease in programming and production costs at ~~ESPN+~~Disney+ and other ~~was driven by lower costs for UFC programming due to one less event~~ in the current quarter compared to the prior-year ~~quarter.~~quarter was due to lower average costs per hour of content available on Disney+, partially offset by more content provided on the service and 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 other operating expense was due to lower technology and distribution spend reflecting the impact of cost saving initiatives.

Selling, general, administrative and other

Selling, general, administrative and other costs ~~decreased $435~~increased $34 million, to ~~$1,059~~$1,121 million from ~~$1,494~~$1,087 million, ~~primarily~~ due to ~~a decrease~~an increase in marketing ~~and compensation-related~~ costs at ~~Disney+~~Hulu.

Depreciation and ~~Hulu.~~amortization

Depreciation and amortization decreased $26 million, to $70 million from $96 million driven by assets that were fully depreciated.

Operating Loss from Direct-to-Consumer

The operating loss from Direct-to-Consumer decreased ~~$549~~$846 million, to ~~$512~~$138 million from ~~$1,061~~$984 million, due to a lower loss at Disney+, and higher operating income at ~~Hulu and a lower loss at ESPN+.~~Hulu.

Content Sales/Licensing and Other

Operating results for Content Sales/Licensing and Other are as follows:

Quarter Ended % Change
Better
(Worse)
(in millions) July 1,
2023 July 2,
2022
Revenues
TV/SVOD distribution $ 605 $ 937 (35) %
Theatrical distribution 838    620    35  %
Home entertainment 209    149    40  %
Other 430 405 6  %
Total revenues 2,082 2,111 (1) %
Operating expenses (1,467) (1,414) (4) %
Selling, general, administrative and other (757) (650) (16) %
Depreciation and amortization (99) (76) (30) %
Equity in the income (loss) of investees (2) 2 nm
Operating Loss $ (243) $ (27) >(100) %

~~Revenues~~

~~The decrease in TV/SVOD distribution revenue was due to lower sales volumes of episodic television and film content.~~

~~The increase in theatrical distribution revenue was due to the release of more significant titles in the current quarter compared to the prior-year quarter. The current quarter included~~ ~~Guardians of the Galaxy Vol. 3~~, ~~The Little Mermaid,Elemental~~


	Quarter Ended				% Change Better (Worse)
(in millions)	December 30, 2023		December 31, 2022
Revenues
TV/VOD distribution	$	522	$	713	(27) %
Theatrical distribution	251		1,140		(78) %
Home entertainment distribution	209		185		13 %

Other	650		613		6 %
Total revenues	1,632		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) %

4536

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS — (continued)

~~and~~ ~~Indiana Jones and the Dial of Destiny, which was released~~Revenues - TV/VOD distribution

The decrease in ~~most territories in the last few days of June. The prior-year quarter included~~ ~~Doctor Strange In the Multiverse of Madness~~ ~~and~~ ~~Lightyear~~.

~~The increase in home entertainment~~TV/VOD distribution revenue was due to ~~higher unit~~lower sales of ~~new release titles driven by~~episodic content.

Revenues - Theatrical distribution

The decrease in theatrical distribution revenue was due to the performance ofThe Marvels in the current quarter compared to Avatar: The Way of Water. and Black Panther: Wakanda Forever in the prior-year quarter. Other ~~new releases~~titles released in the current quarter included ~~Ant-Man and the Wasp: Quantumania~~Wish~~, whereas~~ while the prior-year quarter included ~~Turning Red~~, ~~Encanto~~ ~~and~~ ~~Death on the Nile~~Strange World.

~~Costs and Expenses~~

~~Operating expenses are as follows:~~

Quarter Ended % Change
Better
(Worse)
(in millions) July 1,
2023 July 2,
2022
Programming and production costs $ (1,135) $ (1,123) (1) %
Cost of goods sold and distribution costs (332) (291) (14) %
$ (1,467) $ (1,414) (4) %

Programming and production costs were comparable to the prior-year quarter as higher production cost amortization from more theatrical releases and higher home entertainment distribution revenue was largely offset by a decrease due to lower TV/SVOD distribution sales.Revenues - Other

The increase in other revenue was driven by higher revenue at Lucasfilm’s special effects business.

Operating expenses


	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 decrease in programming and production costs was due to lower production cost amortization attributable to the decreases in theatrical and, to a lesser extent, TV/VOD distribution revenues, partially offset by an increase in film cost impairments.

The decrease in distribution costs and cost of goods sold ~~and distribution costs~~ was driven by ~~increased~~lower theatrical distribution costs, partially offset by an increase at Lucasfilm’s special effects business.

Selling, general, administrative and ~~higher home entertainment volumes.~~other

Selling, general, administrative and other costs ~~increased $107~~decreased $137 million, to ~~$757~~$585 million from ~~$650 million, due to higher theatrical marketing costs driven by more titles released in the current quarter compared to the prior-year quarter.~~

~~Depreciation and amortization increased $23 million, to $99 million from $76~~$722 million, primarily due to ~~asset write-offs~~lower theatrical marketing costs reflecting fewer significant releases in the current ~~quarter and increased investment in technology assets.~~quarter.

Operating Loss from Content Sales/Licensing and Other

Operating loss from Content Sales/Licensing and Other increased ~~$216~~$223 million to ~~$243~~$224 million from ~~$27~~$1 million primarily due to lower ~~TV/SVOD and~~ theatrical distribution results.

Items Excluded from Segment Operating Income Related to ~~Disney Media and~~ Entertainment ~~Distribution~~

The following table presents supplemental information for items related to the ~~DMED~~Entertainment segment that are excluded from segment operating income:


	Quarter Ended											Quarter Ended		% Change Better (Worse)
(in millions)
TFCF and Hulu acquisition amortization(1)
TFCF and Hulu acquisition amortization(1)
TFCF and Hulu acquisition amortization(1)								$	(353)	$	(480)		26 %
Restructuring and impairment charges~~(1)~~(2)							Restructuring and impairment charges~~(1)~~(2)	—		(69)			100 %
Gain on sale of a business							Gain on sale of a business	—		28			(100) %

		Quarter Ended				% Change Better (Worse)
(in millions)		July 1, 2023		July 2, 2022
Restructuring and impairment charges~~(1)~~(2)		$	(2,619)	$	(34)	>(100) %
TFCF and Hulu acquisition amortization(2)		(430)		(583)		26 %

(1)Charges for the current period were due to the Content Impairment Charge and, to a lesser extent, severance. Charges for the prior-year quarter were primarily due to asset impairments related to exiting our businesses in Russia.

~~(2)~~In the current quarter, amortization of intangible assets was ~~$359~~$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 ~~$420~~$318 million and amortization of step-up on film and television costs was ~~$160~~$159 million.

(2)Charges for the prior-year quarter related to exiting our businesses in Russia.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS — (continued)

~~Disney Parks, Experiences and Products~~Sports

Operating results for ~~the DPEP segment~~Sports are as follows:

Quarter Ended % Change
Better
(Worse)
(in millions) July 1,
2023 July 2,
2022
Revenues
Theme park admissions $ 2,731 $ 2,312 18  %
Parks & Experiences merchandise, food and beverage 1,963    1,688    16  %
Resorts and vacations 1,990 1,805 10  %
Merchandise licensing and retail 1,138 1,175 (3) %
Parks licensing and other 504 414 22  %
Total revenues 8,326 7,394 13  %
Operating expenses (4,279) (3,729) (15) %
Selling, general, administrative and other (900) (855) (5) %
Depreciation and amortization (722) (622) (16) %
Equity in the loss of investees — (2) —  %
Operating Income $ 2,425 $ 2,186 11  %


	Quarter Ended				% Change Better (Worse)
(in millions)	December 30, 2023		December 31, 2022
Revenues
Affiliate fees	$	2,669	$	2,653	1 %
Advertising	1,351		1,262		7 %
Subscription fees	415		379		9 %
Other	400		346		16 %
Total revenues	4,835		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 investees	13		3		>100 %
Operating Loss	$	(103)	$	(164)	37 %

Revenues - Affiliate fees

~~Higher theme park admissions~~


	Quarter Ended				% Change Better (Worse)
(in millions)	December 30, 2023		December 31, 2022
ESPN
Domestic	$	2,339	$	2,328	— %
International	265		256		4 %
	2,604		2,584		1 %
Star (India)	65		69		(6) %
	$	2,669	$	2,653	1 %

Domestic ESPN affiliate revenue was ~~due~~comparable to ~~increases~~the prior-year quarter as an increase of ~~13% from attendance growth and 5%~~6% from higher ~~average per capita ticket revenue. Attendance growth reflected increases at Shanghai Disney Resort and, to a lesser extent, Disneyland Resort, partially~~contractual rates was offset by a decrease ~~at Walt Disney World Resort.~~of 6% from fewer subscribers.

Parks & Experiences merchandise, food and beverage revenue growth reflected increases of 11% from higher volumes and 3% from higher average guest spending. Volume growth reflected increases at Shanghai Disney Resort and, to a lesser extent, Disneyland Resort and Hong Kong Disneyland Resort, partially offset by a decrease at Walt Disney World Resort.

~~Higher resorts and vacations~~The increase in international ESPN affiliate revenue was due to an increase of ~~13%~~41% from ~~additional passenger cruise days,~~higher contractual rates, partially offset by ~~a decrease~~decreases of 3%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) %
International	49		52		(6) %
	1,167		1,190		(2) %
Star (India)	184		72		>100 %
	$	1,351	$	1,262	7 %

Lower domestic ESPN advertising revenue was due to decreases of 1% from lower ~~unit sales at Disney Vacation Club. Occupied room nights were comparable~~rates and 1% from fewer impressions. These decreases reflected the timing of College Football Playoff (CFP) games relative to ~~the prior-year quarter as increases at Shanghai Disney Resort and Hong Kong Disneyland Resort, were largely offset by a decrease at Walt Disney World Resort.~~

Merchandise licensing and retail revenue was lower primarily due to a decrease of 2% from merchandise licensing primarily attributable to a decrease in sales of merchandise based on Star Wars, Toy Story and Avengers,our fiscal period, partially offset by ~~higher minimum guarantee shortfall recognition~~the benefits from the timing of the week 17 NFL game that aired in the current quarter compared to the second quarter of the prior year and ~~an increase~~the simulcast of certain 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 ~~sales of merchandise based on Disney Princess and Spider-Man.~~

~~The increase in parks licensing and other revenue was primarily due to increases in sponsorship revenue and royalties from Tokyo Disney Resort.~~the prior-year quarter.

4738

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS — (continued)

The increase in Star 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 in production costs due to inflation, partially offset by a favorable Foreign Exchange Impact.

The increase in Star programming and production costs reflected higher rights costs for ICC cricket programming due to an increase in average costs per match and more matches aired.

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.

Selling, general, administrative and other

Selling, general, administrative and other costs increased $45 million, to $341 million from $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 $103 million from $164 million, due to an improvement at domestic ESPN, partially offset by lower results at Star and, 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 %
International	363		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 investees	13		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:


	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

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS — (continued)

Experiences

Operating results for the Experiences segment are as follows:


	Quarter Ended				% Change Better (Worse)
(in millions)	December 30, 2023		December 31, 2022
Revenues
Theme park admissions	$	2,982	$	2,641	13 %
Resorts and vacations	2,118		1,980		7 %
Parks & Experiences merchandise, food and beverage	2,103		1,980		6 %
Merchandise licensing and retail	1,341		1,355		(1) %
Parks licensing and other	588		589		— %
Total revenues	9,132		8,545		7 %
Operating expenses	(4,480)			(4,139)	(8) %
Selling, general, administrative and other	(925)		(899)		(3) %
Depreciation and amortization	(622)		(643)		3 %
Equity in the loss of investees	—		(2)		nm
Operating Income	$	3,105	$	2,862	8 %

Revenues - Theme park admissions

Theme 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 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 for cruise line sailings and 2% from additional passenger cruise days.

Revenues - Park & Experiences merchandise, food and beverage

Parks & Experiences merchandise, food and beverage revenue growth reflected increases of 5% from higher volume and 1% from guest 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.

Revenues - Merchandise licensing and retail

Lower merchandise licensing and retail revenue was due to decreases of 4% from retail and 1% from an unfavorable Foreign Exchange Impact, partially offset by an increase of 4% from licensing. Lower retail revenue was due to a decrease in online sales. The increase in licensing revenue was 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.

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			Domestic			International(1)						Total(1)
		Quarter Ended		Quarter Ended		Quarter Ended			Quarter Ended						Quarter Ended
		July 1, 2023	July 2, 2022	July 1, 2023	July 2, 2022	July 1, 2023	July 2, 2022		Dec. 30, 2023		Dec. 31, 2022			Dec. 30, 2023			Dec. 31, 2022			Dec. 30, 2023		Dec. 31, 2022
Parks	Parks
Increase (decrease)	Increase (decrease)
Increase (decrease)
Increase (decrease)
Attendance(2)
Attendance(2)
Attendance(2)	Attendance(2)	1 %	93 %	88 %	17 %	20 %	69 %	— %		11 %			30 %			13 %			8 %		12 %
Per Capita Guest Spending(3)	Per Capita Guest Spending(3)	— %	10 %	16 %	28 %	(2) %	18 %	Per Capita Guest Spending(3)	4 %		8 %			12 %			24 %			2 %		10 %
Hotels	Hotels
Occupancy(4)	Occupancy(4)	84 %	90 %	74 %	61 %	82 %	83 %
Occupancy(4)
Occupancy(4)									85 %		88 %			80 %			67 %			84 %		83 %
Available Hotel Room Nights (in thousands)(5)	Available Hotel Room Nights (in thousands)(5)	2,527	2,501	793	793	3,320	3,294	Available Hotel Room Nights (in thousands)(5)	2,547		2,520			799			799			3,346		3,319
Change in Per Room Guest Spending(6)	Change in Per Room Guest Spending(6)	(1) %	19 %	19 %	6 %	1 %	18 %	Change in Per Room Guest Spending(6)	1 %		1 %			3 %			4 %			1 %		2 %

(1)Per capita guest spending growth rate and per room guest spending growth rate exclude the impact of changes in foreign exchange rates.

(2)Attendance is used to analyze volume trends at our theme parks and is 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.

(3)Per capita guest spending is used to analyze guest spending trends and is defined as total revenue from ticket sales and sales 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 room rentals and sales of food, beverage and merchandise at our hotels, divided by total occupied hotel room nights. In the ~~current~~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 hotel rooms. If we had applied the new method in the prior-year quarter, the impact would have been a decrease of approximately ~~$20~~$17 million in the prior-year quarter.

~~Costs and Expenses~~

Operating expenses ~~are as follows:~~


		Quarter Ended				% Change Better (Worse)
	Quarter Ended											Quarter Ended							% Change Better (Worse)
(in millions)	(in millions)	July 1, 2023		July 2, 2022			% Change Better (Worse)
Operating labor	Operating labor	$	(1,938)	$	(1,693)
Operating labor
Operating labor								$	(2,000)				$	(1,789)			(12) %
Infrastructure costs							Infrastructure costs	(797)					(722)				(10) %
Cost of goods sold and distribution costs	Cost of goods sold and distribution costs	(811)		(679)		(19) %	Cost of goods sold and distribution costs	(904)					(912)				1 %
Infrastructure costs		(754)		(731)		(3) %
Other operating expense	Other operating expense	(776)		(626)		(24) %	Other operating expense	(779)					(716)				(9) %
		$	(4,279)	$	(3,729)	(15) %
	$									$	(4,480)				$	(4,139)		(8) %

Higher operating labor was primarily due to inflation. The increase in infrastructure costs was driven by higher operations support costs and increased costs for new guest offerings. Higher other operating expense was primarily attributable to inflation, increased costs for new guest offerings and higher ~~volumes. The increases in cost of goods sold and distribution costs and infrastructure costs reflected volume growth. Other operating expense increased due to higher volumes and inflation.~~operations support costs.

4842

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS — (continued)

Selling, general, administrative and other

Selling, general, administrative and other costs increased ~~$45~~$26 million, to ~~$900~~$925 million from ~~$855 million, primarily due~~$899 million. The increase included the impact of inflation and higher costs for new guest offerings, partially offset by the comparison to ~~higher marketing expense.~~a loss in the prior-year quarter on the disposal of our ownership interest in Villages Nature.

Depreciation and amortization

Depreciation and amortization ~~increased $100~~decreased $21 million, to ~~$722~~$622 million from ~~$622~~$643 million, due to ~~accelerated~~lower depreciation ~~related to the planned closure of Star Wars: Galactic Starcruiser.~~at our domestic parks and experiences.

~~Segment~~ Operating Income from Experiences

Segment operating income increased from ~~$2.2 billion~~$2,862 million to ~~$2.4 billion~~$3,105 million due to growth at our international parks and ~~resorts, partially offset by decreases at our domestic parks~~resorts.

Supplemental revenue and ~~experiences and, to a lesser extent, our consumer products business.~~operating income

The following table presents supplemental revenue and operating income ~~(loss)~~ detail for the ~~DPEP~~Experiences segment:


		Quarter Ended				% Change Better (Worse)
	Quarter Ended													Quarter Ended									% Change Better (Worse)
(in millions)	(in millions)	July 1, 2023		July 2, 2022			% Change Better (Worse)
Supplemental revenue detail	Supplemental revenue detail
Supplemental revenue detail
Supplemental revenue detail
Parks & Experiences	Parks & Experiences
Parks & Experiences
Parks & Experiences
Domestic
Domestic
Domestic	Domestic	$	5,649	$	5,423	4 %	$	6,297		$			$	6,072			4 %				4 %
International	International	1,532		788		94 %	International		1,476						1,094						35 %
Consumer Products	Consumer Products	1,145		1,183		(3) %	Consumer Products		1,359			1,379				1,379				(1) %		(1) %
		$	8,326	$	7,394	13 %
Supplemental operating income (loss) detail
	$										$	9,132						$	8,545			7 %
Supplemental operating income detail
Parks & Experiences	Parks & Experiences
Parks & Experiences
Parks & Experiences
Domestic
Domestic
Domestic	Domestic	$	1,436	$	1,651	(13) %	$	2,077		$			$	2,113			(2) %				(2) %
International	International	428		(64)		nm	International		328			79				79				>100 %		>100 %
Consumer Products	Consumer Products	561		599		(6) %	Consumer Products		700			670				670				4 %		4 %
		$	2,425	$	2,186	11 %
	$										$	3,105						$	2,862			8 %

~~Items Excluded from Segment Operating Income Related to Disney Parks, Experiences~~

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 ~~Products~~

~~The following table presents supplemental information for items related to the DPEP segment that are excluded from segment operating income:~~

Quarter Ended % Change
Better
(Worse)
(in millions) July 1,
2023 July 2,
2022
Charge related to a legal ruling $ (101)    $ —    nm
Restructuring and impairment charges(1)
(16)    —    nm
TFCF and Hulu acquisition amortization (2)    (2)    —  %

~~(1)Charges~~unallocated shared expenses increased $28 million for the ~~current period were~~quarter, from $280 million to $308 million, primarily due to ~~severance at our consumer products~~higher rent expense and ~~parks and resorts businesses.~~inflation.

~~MANAGEMENT’S DISCUSSION AND ANALYSIS OF~~

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

~~BUSINESS SEGMENT RESULTS - Current Period Nine-MonthResults Compared to the Prior-Year Nine-MonthPeriod~~

~~Disney Media~~The change in cash and ~~Entertainment Distribution~~

~~Revenue and operating results for the DMED segment are as follows:~~
Nine Months Ended % Change
Better
(Worse)
(in millions) July 1,
2023 July 2,
2022
Revenues:
Linear Networks $ 20,608    $ 22,011    (6) %
Direct-to-Consumer 16,346 14,651 12  %
Content Sales/Licensing and Other 6,739 6,410 5  %
Elimination of Intrasegment Revenue(1)
(874) (757) (15) %
$ 42,819 $ 42,315 1  %
Segment operating income (loss):
Linear Networks $ 4,972 $ 6,783 (27) %
Direct-to-Consumer (2,224) (2,541) 12  %
Content Sales/Licensing and Other (505) (109) >(100) %
$ 2,243 $ 4,133 (46) %

~~(1)~~ ~~Reflects fees received by the Linear Networks from other DMED businesses for the right to air our Linear Networks and related services.~~

~~Linear Networks~~

~~Operating results for Linear Networks are as follows:~~

Nine Months Ended % Change
Better
(Worse)
(in millions) July 1,
2023 July 2,
2022
Revenues
Affiliate fees $ 13,683 $ 14,067 (3) %
Advertising 6,390 7,392 (14) %
Other 535 552 (3) %
Total revenues 20,608 22,011 (6) %
Operating expenses (13,460) (13,331) (1) %
Selling, general, administrative and other (2,664) (2,480) (7) %
Depreciation and amortization (79) (108) 27 %
Equity in the income of investees 567 691 (18) %
Operating Income $ 4,972 $ 6,783 (27) %

~~Revenues~~

~~Affiliate revenue~~cash equivalents is as follows:

Nine Months Ended % Change
Better
(Worse)
(in millions) July 1,
2023 July 2,
2022
Domestic Channels $ 11,746 $ 11,869 (1) %
International Channels 1,937 2,198 (12) %
$ 13,683 $ 14,067 (3) %


	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 cash	79		164		(52) %
Change in cash, cash equivalents and restricted cash	$	(6,988)	$	(3,145)	>(100) %

5043

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS — (continued)

~~Affiliate revenue at the Domestic Channels was comparable to the prior-year period as a decrease of 6% from fewer subscribers was largely offset by an increase of 5% from higher contractual rates.~~

The decrease in affiliate revenue at the International Channels was due to decreases of 10% from an unfavorable Foreign Exchange Impact and 7% from fewer subscribers, driven by channel closures. These decreases were partially offset by an increase of 5% from higher contractual rates.

~~Advertising revenue is as follows:~~

Nine Months Ended % Change
Better
(Worse)
(in millions) July 1,
2023 July 2,
2022
Cable $ 3,052 $ 3,153 (3) %
Broadcasting 2,151 2,451 (12) %
Domestic Channels 5,203 5,604 (7) %
International Channels 1,187 1,788 (34) %
$ 6,390 $ 7,392 (14) %

~~Lower advertising revenue at Cable was driven by a decrease of 1% from fewer impressions as lower viewership at our non-sports channels was partially offset by higher viewership at ESPN.~~

The decrease in Broadcasting advertising revenue was due to decreases of 10% from fewer impressions at ABC, 1% from lower rates at the owned television stations and 1% from lower rates at ABC. The decrease in ABC impressions was due to lower average viewership.

The decrease in International Channels advertising revenue was due to decreases of 18% from lower rates, 8% from fewer impressions attributable to lower average viewership, and 7% from an unfavorable Foreign Exchange Impact. The decrease in average viewership reflected the timing of IPL matches. Fewer IPL matches aired in the current period compared to the prior-year period as matches from the 2021 season shifted into fiscal 2022 due to COVID-19.

~~Costs and Expenses~~

~~Operating expenses primarily consist of programming and production costs, which are as follows:~~

Nine Months Ended % Change
Better
(Worse)
(in millions) July 1,
2023 July 2,
2022
Cable $ (7,733) $ (7,423) (4) %
Broadcasting (2,190) (2,152) (2) %
Domestic Channels (9,923) (9,575) (4) %
International Channels (2,347) (2,588) 9 %
$ (12,270) $ (12,163) (1) %

The increase in programming and production costs at Cable was due to higher sports programming costs attributable to contractual rate increases for NBA, College Football Playoffs and NFL programming, higher sports production costs, new motor sports programming and higher costs for NHL and MLB programming. These increases were partially offset by lower non-sports programming costs due to a lower cost mix of programming at FX Channels. Higher sports production costs were primarily due to programming additions in the current period and increased talent costs. The increase in NHL rights costs was due to more games aired in the current period. Higher MLB programming costs in the current period were a result of fewer games aired in the prior-year period, as the start of the 2022 season was delayed.

~~The increase in programming and production costs at Broadcasting was due to a higher cost mix of programming at ABC.~~

The decrease in programming and production costs at the International Channels was due to a favorable Foreign Exchange Impact, and to a lesser extent, lower sports programming costs and the impact of channel closures. The decrease in sports programming costs was due to lower costs for cricket programming driven by fewer IPL matches in the current period compared to the prior-year period, partially offset by higher soccer rights costs and increased production spending.

Selling, general administrative and other costs increased $184 million, to $2,664 million from $2,480 million, primarily due to higher overhead and marketing costs, partially offset by a favorable Foreign Exchange Impact and a gain on the sale of an interest in our X Games business.

~~MANAGEMENT’S DISCUSSION AND ANALYSIS OF~~

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

~~Depreciation and amortization decreased $29 million, to $79 million from $108 million, driven by technology assets that were fully depreciated.~~

~~Equity in the Income of Investees~~

~~Income from equity investees decreased $124 million, to $567 million from $691 million, due to lower income from A+E Television Networks primarily due to a decrease in advertising revenue.~~

~~Operating Income from Linear Networks~~

Operating income from Linear Networks decreased $1,811 million, to $4,972 million from $6,783 million, due to decreases at the International Channels, Cable and Broadcasting, and to a lesser extent, lower income from our equity investees.

~~The following table provides supplemental revenue and operating income detail for Linear Networks:~~

Nine Months Ended % Change
Better
(Worse)
(in millions) July 1,
2023 July 2,
2022
Supplemental revenue detail
Domestic Channels $ 17,133 $ 17,678 (3) %
International Channels 3,475 4,333 (20) %
$ 20,608 $ 22,011 (6) %
Supplemental operating income detail
Domestic Channels $ 4,276 $ 5,312 (20) %
International Channels 129 780 (83) %
Equity in the income of investees 567 691 (18) %
$ 4,972 $ 6,783 (27) %

~~Direct-to-Consumer~~

~~Operating results for Direct-to-Consumer are as follows:~~

Nine Months Ended % Change
Better
(Worse)
(in millions) July 1,
2023 July 2,
2022
Revenues
Subscription fees $ 13,382 $ 11,374 18  %
Advertising 2,520 2,889 (13) %
TV/SVOD distribution and other 444 388 14  %
Total revenues 16,346 14,651 12  %
Operating expenses (15,062) (12,860) (17) %
Selling, general, administrative and other (3,244) (4,059) 20  %
Depreciation and amortization (264) (273) 3  %
Operating Loss $ (2,224) $ (2,541) 12  %

~~Revenues~~

Growth in subscription fees reflected an increase of 13% from more subscribers due to growth at Disney+ Core and, to a lesser extent, Hulu and ESPN+. Higher subscription fees also reflected growth of 7% from higher rates, attributable to increases in retail pricing at Hulu, Disney+ Core and ESPN+. These increases were partially offset by a decrease of 2% from an unfavorable Foreign Exchange Impact.

Lower advertising revenue reflected a decrease of 13% from fewer impressions due to declines at Hulu and Disney+, partially offset by growth of 3% from higher rates due to an increase at Hulu. The decrease in impressions at Disney+ was due to the comparison to IPL cricket programming in the prior-year period, as we did not renew the digital rights beginning with the 2023 season. This decrease was partially offset by the U.S. launch of ad-supported Disney+ in the first quarter of the current fiscal year.

~~MANAGEMENT’S DISCUSSION AND ANALYSIS OF~~

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

The increase in TV/SVOD distribution and other revenue was due to a favorable Foreign Exchange Impact and higher recognition of minimum guarantee shortfalls from wholesale distributors, partially offset by lower UFC pay-per-view fees. The decrease in UFC pay-per-view fees was attributable to a decrease in average buys per event, partially offset by the impact of airing one more event in the current period compared to the prior-year period and higher pricing.

~~The following table presents Average Monthly Revenue Per Paid Subscriber:~~

Nine Months Ended % Change
Better
(Worse)
July 1,
2023 July 2,
2022
Disney+
Domestic (U.S. and Canada) $ 6.80 $ 6.42 6  %
International (excluding Disney+ Hotstar) 5.82 6.22 (6) %
Disney+ Core 6.26 6.32 (1) %
Disney+ Hotstar 0.65 1.01 (36) %
ESPN+ 5.54 4.79 16  %
Hulu
SVOD Only 12.19 12.88 (5) %
Live TV + SVOD 90.66 87.90 3  %

Domestic Disney+ average monthly revenue per paid subscriber increased from $6.42 to $6.80 due to increases in average retail pricing and per-subscriber 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 decreased from $6.22 to $5.82 due to an unfavorable Foreign Exchange Impact and a decrease in average retail pricing, partially offset by a lower mix of wholesale subscribers. The decrease in average retail pricing reflected the impact of a higher mix of subscribers from lower-priced markets.

~~Disney+ Hotstar average monthly revenue per paid subscriber decreased from $1.01 to $0.65 due to lower per-subscriber advertising revenue, partially offset by a lower mix of wholesale subscribers.~~

~~ESPN+ average monthly revenue per paid subscriber increased from $4.79 to $5.54 due to an increase in retail pricing, partially offset by a higher mix of subscribers to multi-product offerings.~~

Hulu SVOD Only average monthly revenue per paid subscriber decreased from $12.88 to $12.19 due to lower per-subscriber advertising revenue and a higher mix of subscribers to multi-product offerings, partially offset by an increase in average retail pricing.

Hulu Live TV + SVOD average monthly revenue per paid subscriber increased from $87.90 to $90.66 due to an increase in average retail pricing, partially offset by a higher mix of subscribers to multi-product offerings and, to a lesser extent, a decrease in per-subscriber advertising revenue and lower per-subscriber premium and feature add-on revenue.

~~Costs and Expenses~~

~~Operating expenses are as follows:~~

Nine Months Ended % Change
Better
(Worse)
(in millions) July 1,
2023 July 2,
2022
Programming and production costs
Disney+ $ (4,880) $ (3,551) (37) %
Hulu (6,300) (5,639) (12) %
ESPN+ and other (1,190) (1,266) 6 %
Total programming and production costs (12,370) (10,456) (18) %
Other operating expense (2,692) (2,404) (12) %
$ (15,062) $ (12,860) (17) %

~~MANAGEMENT’S DISCUSSION AND ANALYSIS OF~~

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

~~The increase in programming and production costs at Disney+ was attributable to more content provided on the service.~~

Higher programming and production costs at Hulu were due to more content provided on the service and increased subscriber-based fees for programming the Live TV service attributable to rate increases and more subscribers.

The decrease in programming and production costs at ESPN+ and other was due to fewer new docuseries and lower costs for soccer and NHL programming, partially offset by higher costs for UFC programming. The decreases in soccer and NHL programming reflected the impact from a greater percentage of games aired or simulcast at Linear Networks in the current period compared to the prior-year period. The increase in costs for UFC programming was attributable to an increase in contractual rates.

~~Other operating expenses increased primarily due to higher technology and distribution costs at Disney+.~~

Selling, general, administrative and other costs decreased $815 million, to $3,244 million from $4,059 million, primarily attributable to lower marketing costs at Disney+ and, to a lesser extent, at Hulu.

~~Operating Loss from Direct-to-Consumer~~

The operating loss from Direct-to-Consumer decreased $317 million, to $2,224 million from $2,541 million, due to improved results at ESPN+ and Disney+, partially offset by lower operating income at Hulu.

~~Content Sales/Licensing and Other~~

~~Operating results for Content Sales/Licensing and Other are as follows:~~

Nine Months Ended % Change
Better
(Worse)
(in millions) July 1,
2023 July 2,
2022
Revenues
TV/SVOD distribution $ 2,212 $ 3,109 (29) %
Theatrical distribution 2,745    1,373    100  %
Home entertainment 492    673    (27) %
Other 1,290 1,255 3  %
Total revenues 6,739 6,410 5  %
Operating expenses (4,927) (4,271) (15) %
Selling, general, administrative and other (2,054) (2,031) (1) %
Depreciation and amortization (262) (219) (20) %
Equity in the income (loss) of investees (1) 2 nm
Operating Loss $ (505) $ (109) >(100) %

~~Revenues~~

The decrease in TV/SVOD distribution revenue was due to lower sales of both episodic television and film content. The decrease in sales of episodic television content was due to non-returning series sold in the prior-year period. The decrease in sales of film content was due to lower sales volume including the impact of the shift from licensing content to third parties to distributing it on our DTC services.

~~The increase in theatrical distribution revenue was due to the release of~~ ~~Avatar: The Way of Water, three Marvel titles and~~ ~~The Little Mermaid~~ ~~in the current period compared to the release of three Marvel titles~~,~~Death on the Nile~~ ~~and~~ ~~The King’s Man~~ ~~in the prior-year period. The Marvel titles released in the current period were~~ ~~Black Panther: Wakanda Forever~~, ~~Guardians of the Galaxy Vol. 3~~ ~~and~~ ~~Ant-Man and the Wasp: Quantumania, whereas the prior-year period included~~ ~~Doctor Strange In the Multiverse of Madness,Eternals~~ ~~and the co-produced title~~ ~~Spider-Man: No Way Home~~.

~~The decrease in home entertainment revenue was primarily due to lower unit sales.~~

~~The increase in other revenue was due to higher revenue from stage plays, resulting from improved performance, partially offset by lower music revenues.~~

~~MANAGEMENT’S DISCUSSION AND ANALYSIS OF~~

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

~~Costs and Expenses~~

~~Operating expenses are as follows:~~

Nine Months Ended % Change
Better
(Worse)
(in millions) July 1,
2023 July 2,
2022
Programming and production costs $ (3,889) $ (3,292) (18) %
Cost of goods sold and distribution costs (1,038) (979) (6) %
$ (4,927) $ (4,271) (15) %

The increase in programming and production costs was due to higher production cost amortization attributable to the increase in theatrical revenue, partially offset by decreases due to lower TV/SVOD and, to a lesser extent, home entertainment distribution revenues.

Higher cost of goods sold and distribution costs were attributable to the realignment of certain costs previously reported in general and administrative costs and increased theatrical distribution costs.

Selling, general, administrative and other costs increased $23 million, to $2,054 million from $2,031 million, due to higher theatrical marketing costs, partially offset by the realignment of certain costs to cost of goods sold and distribution costs.

~~Depreciation and amortization increased $43 million, to $262 million from $219 million, due to increased investment in technology assets and asset write-offs in the current period.~~

~~Operating Loss from Content Sales/Licensing and Other~~

The operating loss from Content Sales/Licensing and Other increased $396 million, to $505 million from $109 million, due to lower TV/SVOD distribution results, partially offset by higher theatrical distribution results.

~~Items Excluded from Segment Operating Income Related to Disney Media and Entertainment Distribution~~

~~The following table presents supplemental information for items related to the DMED segment that are excluded from segment operating income:~~

Nine Months Ended % Change
Better
(Worse)
(in millions) July 1,
2023 July 2,
2022
Restructuring and impairment charges(1)
$ (2,810) $ (229) >(100) %
TFCF and Hulu acquisition amortization(2)
(1,563)    (1,768)    12  %
Content License Early Termination —    (1,023)    100  %
Gain on sale of a business 28    —    nm

~~(1)~~Charges for the current period were due to the Content Impairment Charge and, to a lesser extent, severance and exiting our businesses in Russia. Charges for the prior-year period were due to the impairment of an intangible and other assets related to exiting our businesses in Russia.

~~(2)~~In the current period, amortization of intangible assets was $1,180 million and amortization of step-up on film and television costs was $374 million. In the prior-year period, amortization of intangible assets was $1,286 million and amortization of step-up on film and television costs was $473 million.

~~MANAGEMENT’S DISCUSSION AND ANALYSIS OF~~

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

~~Disney Parks, Experiences and Products~~

~~Operating results for the DPEP segment are as follows:~~

Nine Months Ended % Change
Better
(Worse)
(in millions) July 1,
2023 July 2,
2022
Revenues
Theme park admissions $ 7,800 $ 6,437 21  %
Parks & Experiences merchandise, food and beverage 5,846 4,829 21  %
Resorts and vacations 5,919 4,701 26  %
Merchandise licensing and retail 3,695 3,902 (5) %
Parks licensing and other 1,578 1,411 12  %
Total revenues 24,838 21,280 17  %
Operating expenses (12,524) (10,665) (17) %
Selling, general, administrative and other (2,652) (2,401) (10) %
Depreciation and amortization (2,016) (1,813) (11) %
Equity in the loss of investees (2) (10) 80  %
Operating Income $ 7,644    $ 6,391    20  %

~~Revenues~~

~~The increase in theme park admissions revenue was due to increases of 14% from attendance growth and 8% from higher average per capita ticket revenue.~~

~~Parks & Experiences merchandise, food and beverage revenue growth reflected increases of 14% from higher volumes and 4% from higher average guest spending.~~

~~Higher resorts and vacations revenue was attributable to increases of 18% from additional passenger cruise days and 5% from higher occupied hotel room nights.~~

The decrease in merchandise licensing and retail revenue was due to decreases of 2% from merchandise licensing, 1% from retail and 1% from an unfavorable Foreign Exchange Impact. The decrease in merchandise licensing revenue was primarily due to lower sales of merchandise based on Star Wars, Frozen and Mickey and Friends, partially offset by higher minimum guarantee shortfall recognition. Lower retail revenue was primarily due to a decrease in online sales.

The increase in parks licensing and other revenue was primarily due to higher royalties from Tokyo Disney Resort and increases in sponsorship and co-branding revenues, partially offset by lower real estate sales.

~~MANAGEMENT’S DISCUSSION AND ANALYSIS OF~~

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

Domestic International Total
Nine Months Ended Nine Months Ended Nine Months Ended
July 1,
2023 July 2,
2022 July 1,
2023 July 2,
2022 July 1,
2023 July 2,
2022
Parks
Increase (decrease)
Attendance 6  % nm 64  % 64  % 19  % nm
Per Capita Guest Spending 4  % 17  % 20  % 21  % 2  % 23  %
Hotels
Occupancy 87  % 82  % 71  % 53  % 83  % 75  %
Available Hotel Room Nights (in thousands) 7,565 7,564 2,380 2,380 9,945 9,944
Change in Per Room Guest Spending(1)
1  % 26  % 14  % (3) % 1  % 21  %

~~(1)~~In the current quarter, 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 hotel rooms. If we had applied the new method in the prior-year period and the first six months of the current year, the impact would have been a decrease of approximately $30 million in both periods.

~~Costs and Expenses~~

~~Operating expenses are as follows:~~

Nine Months Ended % Change
Better
(Worse)
(in millions) July 1,
2023 July 2,
2022
Operating labor $ (5,553) $ (4,818) (15) %
Cost of goods sold and distribution costs (2,490) (2,119) (18) %
Infrastructure costs (2,226) (1,958) (14) %
Other operating expense (2,255) (1,770) (27) %
$ (12,524) $ (10,665) (17) %

The increase in operating labor was attributable to inflation, higher volumes and increased costs for new guest offerings. Cost of goods sold and distribution costs increased due to higher volumes, while the increase in infrastructure costs was attributable to higher volumes and increased technology spending. Other operating expense increased due to volume growth, inflation and higher operations support costs.

Selling, general, administrative and other costs increased $251 million, to $2,652 million from $2,401 million, driven by higher marketing spend and a loss on the disposal of our ownership interest in Villages Nature.

Depreciation and amortization increased $203 million, to $2,016 million from $1,813 million, primarily due to accelerated depreciation related to the planned closure of Star Wars: Galactic Starcruiser and depreciation for the ~~Disney Wish, which launched in the fourth quarter of the prior year.~~

~~Segment Operating Income~~

Segment operating income increased from $6.4 billion to $7.6 billion due to growth at our international and domestic parks and experiences, partially offset by a decrease at our consumer products business.

~~MANAGEMENT’S DISCUSSION AND ANALYSIS OF~~

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

~~The following table presents supplemental revenue and operating income (loss) detail for the DPEP segment:~~

Nine Months Ended % Change
Better
(Worse)
(in millions) July 1,
2023 July 2,
2022
Supplemental revenue detail
Parks & Experiences
Domestic $ 17,293 $ 15,121 14  %
International 3,810    2,223    71  %
Consumer Products 3,735 3,936 (5) %
$ 24,838 $ 21,280 17  %
Supplemental operating income (loss) detail
Parks & Experiences
Domestic $ 5,068 $ 4,591 10  %
International 663 (311) nm
Consumer Products 1,913 2,111 (9) %
$ 7,644 $ 6,391 20  %

~~Items Excluded from Segment Operating Income Related to Disney Parks, Experiences and Products~~

~~The following table presents supplemental information for items related to the DPEP segment that are excluded from segment operating income:~~

Nine Months Ended % Change
Better
(Worse)
(in millions) July 1,
2023 July 2,
2022
Charge related to a legal ruling $ (101)    $ —    nm
Restructuring and impairment charges(1)
(27)    —    nm
TFCF and Hulu acquisition amortization (6)    (6)    —  %

~~(1)Charges for the current period were due to severance at our consumer products and parks and resorts businesses.~~

~~CORPORATE AND UNALLOCATED SHARED EXPENSES~~

Quarter Ended % Change
Better
(Worse) Nine Months Ended % Change
Better
(Worse)
(in millions) July 1,
2023 July 2,
2022 July 1,
2023 July 2,
2022
Corporate and unallocated shared expenses $ (295) $ (325) 9 % $ (854) $ (825) (4) %

Corporate and unallocated shared expenses decreased $30 million for the quarter, from $325 million to $295 million, primarily due to lower compensation and human resource-related costs, partially offset by an expense associated with an abandoned project and higher rent expense. Corporate and unallocated shared expenses for the current nine-month period increased $29 million, from $825 million to $854 million, primarily due to increases in rent expense and technology costs, an expense associated with an abandoned project and higher marketing spend on the ~~Disney100~~ ~~celebration. These increases were partially offset by lower compensation and human resource-related costs.~~

~~MANAGEMENT’S DISCUSSION AND ANALYSIS OF~~

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

~~FINANCIAL CONDITION~~

~~The change in cash and cash equivalents is as follows:~~

Nine Months Ended % Change
Better
(Worse)
(in millions) July 1,
2023 July 2,
2022
Cash provided by operations - continuing operations $ 5,064 $ 3,478 46  %
Cash used in investing activities - continuing operations (3,259) (3,872) 16  %
Cash used in financing activities - continuing operations (2,127)     (2,247)     5  %
Cash used in discontinued operations — (4) 100  %
Impact of exchange rates on cash, cash equivalents and restricted cash 174 (354) nm
Change in cash, cash equivalents and restricted cash $ (148) $ (2,999) 95  %

Operating Activities

Cash provided by operations increased ~~$1,586~~$3,159 million to ~~$5,064~~$2,185 million for the current ~~period~~quarter compared to ~~$3,478~~cash used in operations of $974 million in the prior-year ~~period.~~quarter. The increase was due to ~~higher operating cash receipts at DPEP and, to a lesser extent,~~ lower ~~spending on~~ film and television ~~content~~production spending reflecting the impact of the guild strikes in the current quarter, the timing of payments for sports rights and ~~higher operating cash receipts at DMED.~~lower collateral payments related to our hedging program. These increases were partially offset by ~~higher operating cash disbursements at DPEP.~~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.

Produced and licensed programming costs

The ~~DMED segment incurs~~Entertainment and Sports segments incur costs to produce and license ~~feature~~ film, episodic, sports and ~~television~~other content. ~~Film and television production~~Production costs include ~~all~~spend on content internally produced ~~content~~at our studios such as live-action and animated ~~feature~~ films, ~~television~~episodic series, ~~television~~ specials, shorts and theatrical stage plays. Production costs also include original content commissioned from third-party studios. Programming costs include ~~film or television~~ content rights licensed from third parties for use on the Company’s ~~Linear Networks~~sports and general entertainment networks and DTC streaming services. Programming assets are generally recorded when the programming becomes available to us with a corresponding increase in programming liabilities.

The Company’s film and television production and programming activity for the ~~nine months~~quarters ended ~~July 1,~~December 30, 2023 and ~~July 2,~~December 31, 2022 are as follows:


		Nine Months Ended					Quarter Ended
(in millions)	(in millions)	July 1, 2023		July 2, 2022		(in millions)	December 30, 2023	December 31, 2022
Beginning balances:	Beginning balances:
Produced and licensed programming assets	Produced and licensed programming assets	$	37,667	$	31,732
Produced and licensed programming assets
Produced and licensed programming assets
Programming liabilities	Programming liabilities	(3,940)		(4,113)		Programming liabilities	(3,792)	(3,940)
		33,727		27,619
	32,801
Spending:	Spending:
Programming licenses and rights	Programming licenses and rights	11,518		10,850
Programming licenses and rights
Programming licenses and rights
Produced film and television content	Produced film and television content	10,441		11,908
		21,959		22,758
	4,510
Amortization:	Amortization:
Programming licenses and rights	Programming licenses and rights	(10,871)		(10,908)
Programming licenses and rights
Programming licenses and rights
Produced film and television content	Produced film and television content	(9,227)		(7,544)
	(7,152)
Change in produced and licensed content costs
		(20,098)		(18,452)
Change in produced and licensed content costs		1,861		4,306
Content impairment		(2,266)		—

Other non-cash activity

Other non-cash activity

Other non-cash activity	Other non-cash activity	(191)		209
Ending balances:	Ending balances:
Produced and licensed programming assets	Produced and licensed programming assets	36,976		35,979
Produced and licensed programming assets
Produced and licensed programming assets
Programming liabilities	Programming liabilities	(3,845)		(3,845)
		$	33,131	$	32,134
	$

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 $27 billion.

5944

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS — (continued)

The Company currently expects its fiscal 2023 spend on produced and licensed content, including sports rights, to be approximately $27 billion compared to fiscal 2022 spend of $30 billion. The expected decrease is due to lower spending on produced content, including the estimated impact of the recent WGA and SAG-AFTRA work stoppages, partially offset by higher spending for sports content.

Investing Activities

Investing activities consist principally of investments in parks, resorts and other property and acquisition and divestiture activity. The Company’s investing activities for the ~~nine months~~quarters ended ~~July 1,~~December 30, 2023 and ~~July 2,~~December 31, 2022 are as follows:

Nine Months Ended
(in millions) July 1,
2023 July 2,
2022
Investments in parks, resorts and other property:
Disney Media and Entertainment Distribution $ 755 $ 543
Disney Parks, Experiences and Products
Domestic 1,544 2,226
International 609 584
Total Disney Parks, Experiences and Products 2,153 2,810
Corporate 687 442
Total investments in parks, resorts and other property 3,595 3,795
Cash used in (provided by) other investing activities, net(1)
(336) 77
Cash used in investing activities - continuing operations $ 3,259 $ 3,872

~~(1)The current period reflects proceeds from sales of investments.~~


	Quarter Ended
(in millions)	December 30, 2023		December 31, 2022
Investments in parks, resorts and other property:




Entertainment	$	309	$	273
Sports	—		6
Experiences
Domestic	571		519
International	244		219

Total Experiences	815		738


Corporate	175		164
Total investments in parks, resorts and other property	1,299		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 the ~~DMED~~Entertainment segment primarily reflect investments in technology and in facilities and equipment for expanding and upgrading broadcast centers, production facilities and television station facilities. ~~The increase in the current period compared to the prior-year period was driven by higher technology spending to support our streaming services.~~

Capital expenditures at the ~~DPEP~~Experiences segment are principally for theme park and resort expansion, new attractions, cruise ships, capital improvements and technology. The ~~decrease~~increase in the current ~~period~~quarter compared to the prior-year ~~period~~quarter was due to ~~lower spending~~higher spend on new attractions and cruise ship fleet expansion.

Capital expenditures at Corporate primarily reflect investments in corporate facilities, technology and equipment. ~~The increase in the current period compared to the prior-year period was driven by higher spending on facilities.~~

The Company currently expects its fiscal 2024 capital expenditures to total approximately $6 billion compared to fiscal 2023 capital expenditures of $5 billion. The increase in capital expenditures is primarily due to ~~be comparable to fiscal 2022 at approximately $5.0 billion as increases at DMED and on Corporate facilities are offset by lower~~higher spending at ~~DPEP.~~Experiences, in part due to continued investment in our Disney Cruise Line business.

Financing Activities

Financing activities for the ~~nine months~~quarters ended ~~July 1,~~December 30, 2023 and ~~July 2,~~December 31, 2022 are as follows:


		Nine Months Ended
	Quarter Ended										Quarter Ended
(in millions)	(in millions)	July 1, 2023		July 2, 2022		(in millions)	December 30, 2023		December 31, 2022

Change in borrowings	Change in borrowings	$	(1,209)	$	(1,523)

Change in borrowings

Change in borrowings							$	737	$	(134)

Activities related to noncontrolling and redeemable noncontrolling interest(1)	Activities related to noncontrolling and redeemable noncontrolling interest(1)	(181)		48
Cash used in other financing activities, net(2)		(737)		(772)
Cash used in financing activities - continuing operations		$	(2,127)	$	(2,247)

Activities related to noncontrolling and redeemable noncontrolling interest(1)

Activities related to noncontrolling and redeemable noncontrolling interest(1)
Cash used in other financing activities, net
Cash used in financing activities

(1)Activities related to noncontrolling and redeemable noncontrolling interests in the current ~~period~~and prior-year quarter were due to ~~the purchase of a~~payments for redeemable noncontrolling ~~interest, partially offset by contributions from noncontrolling interest holders.~~

~~(2)Primarily consists of dividends~~interests in Hulu and BAMTech, respectively (see Note 1 to ~~noncontrolling interest holders and equity award activity.~~the Condensed Consolidated Financial Statements).

See Note 5 to the Condensed Consolidated Financial Statements for a summary of the Company’s borrowing activities during the ~~nine months~~quarter ended ~~July 1,~~December 30, 2023 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 and incremental term debt issuances to retire or refinance other borrowings before or as they come due.

~~MANAGEMENT’S DISCUSSION AND ANALYSIS OF~~

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

See Note 11 to the Condensed Consolidated Financial Statements for a summary of dividends declared and shares authorized for repurchase in fiscal 2024. There were no dividends or share repurchases in fiscal 2023.

The Company’s operating cash flow and access to the capital markets can be impacted by factors outside of its 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, contractual obligations, upcoming debt maturities as well as future capital

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. In addition, the Company could undertake other measures to ensure sufficient liquidity, such as ~~continuing to~~raising additional financing, reducing or not ~~declare~~declaring future dividends; ~~raising financing;~~ reducing capital spending; reducing film and ~~television~~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 ratios. As of ~~July 1,~~December 30, 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 A- and A-2 (Positive), respectively, and Fitch’s long- and short-term debt ratings for the Company were A- and F2 (Stable), respectively. The Company’s bank facilities contain only one financial covenant, relating to interest coverage of 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 ~~July 1,~~December 30, 2023, the Company met 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.

~~SUPPLEMENTAL GUARANTOR FINANCIAL INFORMATION~~MARKET RISK

~~On March 20, 2019~~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 ~~part~~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 ~~acquisition~~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 ~~TFCF,~~earnings and cash flows arising from commodity price changes. The ~~Walt Disney Company (“TWDC”) became~~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 ~~ultimate parent~~volatility of ~~TWDC Enterprises 18 Corp. (formerly known as~~earnings arising from changes in these retirement liabilities. The ~~Walt Disney Company) (“Legacy Disney”). Legacy Disney~~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 ~~TWDC are collectively referred to as “Obligor Group”,~~interest rate derivative transactions 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 pursuantother financial instruments only to the ~~TWDC Indenture and guaranteed by Legacy Disney. In addition, contemporaneously with the closing of the March 20, 2019 exchange offer, TWDC entered~~extent considered necessary to meet its objectives as stated above. The Company does not enter 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 July 1, 2023 was as follows:

TWDC Legacy Disney
(in millions) Par Value Carrying Value Par Value Carrying Value
Registered debt with unconditional guarantee $ 35,187 $ 35,564 $ 8,144 $ 7,902

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 facilitiesthese transactions or any ~~debt securities.~~

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.

~~MANAGEMENT’S DISCUSSION AND ANALYSIS OF~~

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

~~Set forth below is summarized financial information~~other hedging transactions 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)~~	~~Nine Months Ended July 1, 2023~~
~~Revenues~~	$	—
~~Costs and expenses~~	—
~~Net income (loss) from continuing operations~~	~~(1,168)~~
~~Net income (loss)~~	~~(1,168)~~
~~Net income (loss) attributable to TWDC shareholders~~	~~(1,168)~~

Balance Sheet (in millions) July 1, 2023 October 1, 2022
Current assets $ 3,924 $ 5,665
Noncurrent assets 2,009 1,948
Current liabilities 3,634 3,741
Noncurrent liabilities (excluding intercompany to non-Guarantors) 45,870 46,218
Intercompany payables to non-Guarantors 148,775 148,958
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.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS — (continued)

Guarantees

See Note 14 to the Consolidated Financial Statements in the ~~2022~~2023 Annual Report on Form 10-K.

Tax Matters

As disclosed in Note 9 to the Consolidated Financial Statements in the ~~2022~~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 ~~2022~~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 ~~2022~~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

~~MANAGEMENT’S DISCUSSION AND ANALYSIS OF~~

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

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

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 ~~2022~~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 ~~2022~~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.

~~MANAGEMENT’S DISCUSSION AND ANALYSIS OF~~

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

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 ~~apply what we believe to be the most appropriate valuation methodology for each 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 ~~estimates of~~estimated projected future ~~revenue growth and margins for these businesses~~cash flows as well as the discount rates used to calculate ~~the~~their present ~~value of~~value. Our future cash ~~flows.~~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.

~~In February~~As discussed in our Critical Accounting Policies and Estimates section of our fiscal 2023 Annual Report on Form 10-K, the ~~Company initiated a reorganization~~carrying amounts of ~~its businesses that will result in a new segment~~our entertainment and international sports linear networks reporting ~~structure~~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 ~~Company will perform its annual~~entertainment linear networks reporting unit goodwill after impairment ~~assessment in the fourth quarter under both the current reporting structure~~is approximately $8 billion and the ~~new~~international sports

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS — (continued)

linear networks reporting ~~structure. The change in~~unit goodwill was fully impaired. In addition, the fair value of our entertainment DTC services reporting ~~structure will require us to identify new~~unit exceeded its carrying amount by less than 10%. Goodwill of the entertainment DTC services reporting ~~units, allocate goodwill to these reporting units (generally based~~unit is approximately $45 billion.

Based on ~~relative fair values) and assign other recorded assets and liabilities to these reporting units. Since~~ our ~~prior~~ annual ~~impairment~~ assessment performed in the fourth quarter of fiscal ~~2022,~~2023, for our entertainment linear networks reporting unit, a 25 basis point increase in the discount ~~rates have generally increased and certain~~rate or a 1% reduction in projected ~~revenue streams at our media and entertainment businesses have declined, which declines we expect will continue. Both of these impacts, all else being equal, have the effect of reducing the~~cash flows used to determine fair value would result in an incremental impairment charge of ~~these businesses and consequently reducing~~approximately $0.3 billion.

For our entertainment DTC services reporting unit, a 25 basis point increase in the ~~excess of~~discount rate used to determine fair value over book value of our reporting units. As we finalize our impairment assessment in the fourth quarter, the assumptions we make about future cash flows and discount rates as well as the identification of new reporting units and the results of reallocating goodwill and other net assets to the new reporting units, couldwould result in an impairment of ~~goodwill~~$0.5 billion, and ~~intangible assets.~~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 ~~its~~ 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

~~MANAGEMENT’S DISCUSSION AND ANALYSIS OF~~

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

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,

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.

~~MARKET RISK~~DTC PRODUCT DESCRIPTIONS, KEY DEFINITIONS AND SUPPLEMENTAL INFORMATION

~~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~~Product Offerings

In the ~~normal course~~U.S., Disney+, ESPN+ and Hulu SVOD Only are each offered as a standalone service or together as part of ~~business,~~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 ~~employ established policies~~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 ~~procedures~~subscribers to ~~manage~~Hulu Live TV + SVOD are counted as one paid subscriber for each of the ~~Company’s exposure~~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 ~~changes~~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 ~~interest rates, foreign currencies~~Latin America.

Average Monthly Revenue Per Paid Subscriber

Hulu and ~~commodities~~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 ~~variety~~daily average of ~~financial instruments.~~

~~Our objectives in managing exposure~~paid subscribers for the period. Revenue includes subscription fees, advertising (excluding revenue earned from selling advertising spots to ~~interest rate changes are~~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 ~~limit~~each service based on the ~~impact~~relative retail or wholesale price of ~~interest rate volatility~~each service 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~~a standalone basis. Hulu Live TV + SVOD revenue is allocated to the ~~Company’s portfolio~~SVOD services based on the wholesale price of ~~borrowings. By policy,~~ the ~~Company targets fixed-rate debt as~~Hulu SVOD Only, Disney+ and ESPN+ multi-product offering. In general, wholesale arrangements have a ~~percentage of its net debt between minimum and maximum percentages.~~

6550

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS — (continued)

~~currency swaps~~Supplemental information about paid subscribers:


(in millions)	December 30, 2023	September 30, 2023	December 31, 2022

Domestic (U.S. and Canada) standalone	53.8	55.5	58.5
Domestic (U.S. and Canada) multi-product(1)	23.7	22.6	20.8
	77.5	78.1	79.3

International standalone (excluding Disney+ Hotstar)(2)	53.7	55.3	49.5
International multi-product(3)	11.5	10.8	8.1
	65.2	66.1	57.7

Total(4)	142.7	144.2	136.9

(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 ~~used~~collectively referred to ~~effectively convert foreign currency denominated borrowings~~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 ~~U.S. dollar denominated borrowings. By policy,~~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 ~~maintains hedge coverage~~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:


	TWDC				Legacy Disney
(in millions)	Par Value		Carrying Value		Par Value		Carrying Value
Registered debt with unconditional guarantee	$	34,903	$	35,470	$	8,143	$	7,968

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS — (continued)

Set forth below is summarized financial information for the Obligor Group on a combined basis after elimination of (i) intercompany transactions and balances between ~~minimum~~TWDC and ~~maximum percentages~~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 ~~its forecasted foreign exchange exposures generally for periods~~Guaranteed Securities” and is not ~~to exceed four years. The gains and losses on these contracts are~~ intended to ~~offset changes in~~present the ~~U.S. dollar equivalent value~~financial position or results of operations of the ~~related exposures. The economic or political conditions~~Obligor Group 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.~~accordance with GAAP.

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.


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)

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.


Balance Sheet (in millions)	December 30, 2023		September 30, 2023
Current assets	$	2,985	$	8,544
Noncurrent assets	3,070		2,927
Current liabilities	7,804		5,746
Noncurrent liabilities (excluding intercompany to non-Guarantors)	42,915		43,307
Intercompany payables to non-Guarantors	150,067		154,018

6652

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 ~~July 1,~~December 30, 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 control over financial reporting during the ~~third~~first quarter of fiscal ~~2023~~2024 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

6753

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

For an enterprise as large and complex as the Company, a wide range of factors 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 financial results of these operations elsewhere in our filings with the SEC, the most significant factors affecting our business include the factors discussed in our ~~2022~~2023 Annual Report on Form 10-K under ~~the~~ Item 1A, “Risk Factors” as updated below:

BUSINESS, ECONOMIC, MARKET and OPERATING CONDITION RISKS

Changes in technology, in consumer consumption patterns and in how entertainment products are created affect demand for our entertainment products, the revenue we can generate from these products or the cost of producing or distributing products.

The media entertainment and internet businesses in which we participate increasingly depend on our ability to successfully adapt to new technologies, including shifting patterns of content consumption and how entertainment products are generated. New technologies affect the demand for our products, the manner in which our products are distributed to consumers, ways we charge for and receive revenue for our entertainment products and the stability of those revenue streams, the sources and nature of competing content offerings, the time and manner in which consumers acquire and view some of our entertainment products and the options available to advertisers for reaching their desired audiences. These developments have impacted the business model for certain traditional forms of distribution, as evidenced by the industry-wide decline in ratings for broadcast television, the reduction in demand for home entertainment sales of theatrical content, the development of alternative distribution channels for broadcast and cable programming and declines in subscriber levels for traditional cable channels, including for a number of our networks. These trends have decreased advertising and affiliate revenue and the profitability of our linear business. In addition, theater-going to watch movies currently is, and may continue to be, below pre-COVID-19 levels.

Rules governing new technological developments, such as developments in generative AI, remain unsettled, and these developments may affect aspects of our existing business model, including revenue streams for the use of our IP and how we create our entertainment products. In order to respond to the impact of new technologies on our businesses, we regularly consider, and from time to time implement, changes to our business models, most recently by developing, investing in and acquiring DTC products, initiating plans to again reorganize our media and entertainment businesses to advance our DTC strategies, and developing new media offerings. There can be no assurance that our DTC offerings, new media offerings and other efforts will successfully respond to technological changes. In addition, declines in certain traditional forms of distribution may increase the cost of content allocable to our DTC offerings, negatively impacting the profitability of our DTC offerings. We expect to forgo revenue from traditional sources, particularly as we expand our DTC offerings. To date we have experienced significant losses in our DTC businesses. There can be no assurance that the DTC model and other business models we may develop will ultimately be profitable or as profitable as our existing or historic business models.

~~The success of our businesses is highly dependent on the existence and maintenance of intellectual property rights in the entertainment products and services we create.~~

The value to us of our IP is dependent on the scope and duration of our rights as defined by applicable laws in the U.S. and abroad and the manner in which those laws are construed. If those laws are drafted or interpreted in ways that limit the extent or duration of our rights, or if existing laws are changed, our ability to generate revenue from our IP may decrease, or the cost of obtaining and maintaining rights may increase. The terms of some copyrights for IP related to some of our products and services have expired and other copyrights will expire in the future. For example, in the United States and countries that look to the United States copyright term when shorter than their own, the copyright term for early works such as the short film Steamboat Willie (1928), and the specific early versions of characters depicted in those works, expires at the end of the 95th calendar year after the date the copyright was originally secured in the United States. As copyrights expire, we expect that revenues generated from such IP will be negatively impacted to some extent.

The unauthorized use of our IP may increase the cost of protecting rights in our IP or reduce our revenues. The convergence of computing, communication and entertainment devices, increased broadband internet speed and penetration, increased availability and speed of mobile data transmission and increasingly sophisticated attempts to obtain unauthorized access to data systems have made the unauthorized digital copying and distribution of our films, television productions and

other creative works easier and faster and protection and enforcement of IP rights more challenging. The unauthorized distribution and access to entertainment content generally continues to be a significant challenge for IP rights holders. Inadequate laws or weak enforcement mechanisms to protect entertainment industry IP in one country can adversely affect the results of the Company’s operations worldwide, despite the Company’s efforts to protect its IP rights. COVID-19 and distribution innovation in response to COVID-19 has increased opportunities to access content in unauthorized ways. Additionally, negative economic conditions coupled with a shift in government priorities could lead to less enforcement. These developments require us to devote substantial resources to protecting our IP against unlicensed use and present the risk of increased losses of revenue as a result of unlicensed distribution of our content and other commercial misuses of our IP. The legal landscape for some new technologies, including some generative AI, remains uncertain, and development of the law in this area could impact our ability to protect against infringing uses.

With respect to IP developed by the Company and rights acquired by the Company from others, the Company is subject to the risk of challenges to our copyright, trademark and patent rights by third parties. In addition, the availability of copyright protection and other legal protections for IP generated by certain new technologies, such as generative AI, is uncertain. Successful challenges to our rights in IP may result in increased costs for obtaining rights or the loss of the opportunity to earn revenue from or utilize the IP that is the subject of challenged rights. From time to time, the Company has been notified that it may be infringing certain IP rights of third parties. Technological changes in industries in which the Company operates and extensive patent coverage in those areas may increase the risk of such claims being brought and prevailing.

Regulations applicable to our businesses may impair the profitability of our businesses.

Each of our businesses, including our broadcast networks and television stations, is subject to a variety of U.S. and international ~~regulations.~~regulations, which impact the operations and profitability of our businesses. Some of these regulations include:

•U.S. ~~FCC~~Federal Communications Commission regulation of our television and radio networks, our national programming networks and our owned television stations. See our ~~2022~~2023 Annual Report on Form 10-K under Item 1 — ~~Business — Disney Media~~Federal Regulation - Entertainment and ~~Entertainment Distribution, Federal Regulation.~~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 ~~potential~~ 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 profitable, 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 ~~2019 India implemented regulation and tariffs impacting certain bundling of channels; 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;~~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 ~~EU)~~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 ~~(including the passage of legislation)~~ have been taken, ~~and future actions have been threatened,~~ which collectively ~~could~~have negatively ~~impact (and may have already impacted)~~impacted our ability to execute 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.

~~Public~~Further, in response to the COVID-19 pandemic, public health and other regional, national, state and local regulations and policies impacted most of our ~~businesses as a result of COVID-19.~~businesses. Government requirements ~~may continue to be extended or~~could be reinstated and new government requirements may be imposed to address COVID-19 or future health outbreaks or pandemics.

A variety of uncontrollable events may disrupt our businesses, reduce demand for or consumption of our products and services, impair our ability to provide our products and services or increase the cost or reduce the profitability of providing our products and services.

The operation and profitability of our businesses and demand for and consumption of our products and services, particularly our parks and experiences businesses, are highly dependent on the general environment for travel and tourism. In addition, we have extensive international operations, including our international theme parks and resorts, which are dependent on domestic and international regulations consistent with trade and investment in those regions. The operation of our businesses and the environment for travel and tourism, as well as demand for and consumption of our other entertainment products, can be significantly adversely affected in the U.S., globally or in specific regions as a result of a variety of factors beyond our control, including: health concerns (including as it has been by COVID-19 and could be by future health outbreaks and pandemics); adverse weather conditions arising from short-term weather patterns or long-term climate change, catastrophic events or natural disasters (such as excessive heat or rain, hurricanes, typhoons, floods, droughts, tsunamis and earthquakes); international, political or military developments, including trade and other international disputes and social unrest; a decline in economic activity; and terrorist attacks. These events and others, such as fluctuations in travel and energy costs and computer virus attacks, intrusions or other widespread computing or telecommunications failures, may also damage our ability to provide our products and services or to obtain insurance coverage with respect to some of these events. An incident that affected our property directly would have a direct impact on our ability to provide goods and services and could have an extended effect of discouraging consumers from attending our facilities. Moreover, the costs of protecting against such incidents, including the costs of protecting against the spread of COVID-19, reduces the profitability of our operations.

For example, hurricanes, including Hurricane Ian in late September 2022, which caused Walt Disney World Resort parks in Florida to close for two days, have impacted the profitability of Walt Disney World Resort and may do so in the future. The Company has paused certain operations in certain regions, including in response to sanctions, trade restrictions and related developments and the profitability of certain operations has been impacted as a result of events in the corresponding regions.

In addition, we derive affiliate fees and royalties from the distribution of our programming, sales of our licensed goods and services by third parties, and the management of businesses operated under brands licensed from the Company, and we are therefore dependent on the successes of those third parties for that portion of our revenue. Third-party suppliers also provide products and services essential to the operation of a number of our businesses. A wide variety of factors could influence the success of those third parties and if negative factors significantly impacted a sufficient number of those third parties or materially impacted a supplier of a significant product or service, the profitability of one or more of our businesses could be adversely affected. In specific geographic markets, we have experienced delayed and/or partial payments from certain affiliate partners due to liquidity issues.

We obtain insurance against the risk of losses relating to some of these events, generally including certain physical damage to our property and resulting business interruption, certain injuries occurring on our property and some liabilities for alleged breach of legal responsibilities. When insurance is obtained it is subject to deductibles, exclusions, terms, conditions and limits of liability. The types and levels of coverage we obtain vary from time to time depending on our view of the likelihood of specific types and levels of loss in relation to the cost of obtaining coverage for such types and levels of loss and we may experience material losses not covered by our insurance. For example, many losses related to impacts of COVID-19 have not been covered by insurance.

~~Environmental, social and governance matters and any related reporting obligations may impact our businesses.~~

U.S. and international regulators, investors and other stakeholders are increasingly focused on environmental, social and governance matters. For example, new domestic and international laws and regulations relating to environmental, social and governance matters, including environmental sustainability and climate change, human capital management and cybersecurity, are under consideration or being adopted, which may include specific, target-driven disclosure requirements or obligations. Our response will require additional investments and implementation of new practices and reporting processes, all entailing additional compliance risk. In addition, we have announced a number of related initiatives and goals, which will require ongoing investment, and there is no assurance that we will achieve any of these goals or that our initiatives will achieve their intended outcomes. Consumer, government and other stakeholder perceptions of our efforts to achieve these goals often differ widely and present risks to our reputation and brands. In addition, our ability to implement some initiatives or achieve some goals is dependent on external factors. For example, our ability to meet certain environmental sustainability goals or initiatives may depend in part on third-party collaboration, mitigation innovations and/or the availability of economically feasible solutions at scale.

~~Labor disputes may disrupt our operations and adversely affect the profitability of one or more of our businesses.~~

A significant number of employees in various parts of our businesses, including employees of our theme parks, and writers, directors, actors, and production personnel for our productions are covered by collective bargaining agreements. In addition, some of our employees outside the U.S. are represented by works councils, trade unions or other employee associations. Further, the employees of licensees who manufacture and retailers who sell our licensed consumer products, and employees of providers of programming content (such as sports leagues) may be covered by labor agreements with their employers. From time to time, collective bargaining agreements and other labor agreements expire, requiring renegotiation of their terms. In general, labor disputes and work stoppages involving our employees; persons employed on our productions; or the employees of our licensees or retailers who sell our licensed consumer products or providers of programming content may disrupt our operations and reduce our revenues. For example, on May 2, 2023, members of the Writers Guild of America commenced a work stoppage. On July 14, 2023, members of SAG-AFTRA, the union representing television and movie actors, also commenced a work stoppage. These work stoppages have impacted our productions and the pipeline for programming and theatrical releases, and if either is prolonged, would further undermine our ability to produce, distribute or license programming and theatrical releases, which could result in reduced revenue and have an adverse effect on our profitability. Resolution of disputes or negotiation of new agreements, including rate increases and other changes to employee benefits, has in the past increased our costs and may increase our costs in the future.

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

~~(a)~~The following table provides information about Company purchases of equity securities that are registered by the Company pursuant to Section 12 of the Exchange Act during the quarter ended July 1, 2023:

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)
April 2, 2023 - April 30, 2023 25,112 $ 98.58 — na
May 1, 2023 - May 31, 2023 24,363 94.10 — na
June 1, 2023 - July 1, 2023 27,975 88.88 — na
Total 77,450 93.67 — na

~~(1)~~77,450 shares were purchased on the open market to provide shares to participants in the Walt Disney Investment Plan. These purchases were not made pursuant to a publicly announced repurchase plan or program.

~~(2)Not applicable as the Company no longer has a stock repurchase plan or program.~~

7254

ITEM 5. Other Items

None of our directors or officers 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.

7355

ITEM 6. Exhibits

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

3.3

Amended and Restated Bylaws of The Walt Disney Company, effective as of November 30, 2023

Exhibit 3.1 to the Current Report on Form 8-K of the Company filed November 30, 2023

10.1

Second Amendment dated ~~June~~December 15, 2023, to ~~Amended~~ that certain Employment Agreement, dated as of November 20, 2022, as amended, by and between The Walt Disney Company and Robert A. Iger †

Filed herewith

10.2

Employment Agreement dated as of ~~July 1, 2015~~December 4, 2023 by and between ~~the~~The Walt Disney Company and ~~Christine M. McCarthy, as previously assigned~~Hugh F. Johnston †

Exhibit 10.1 to the Current Report on Form 8-K of the Company filed ~~June 15,~~November 6, 2023

~~10.2~~10.3

Amendment dated ~~April~~ ~~18,~~December 15, 2023, to that certain Employment Agreement, dated ~~June 29, 2022,~~as of December 4, 2023, by and between ~~the~~ The Walt Disney Company and ~~Kristina K. Schake~~Hugh F. Johnston †

Filed herewith

~~10.3~~10.4

Second Amendment dated ~~July 12,~~December 13, 2023, to that certain Employment Agreement, dated as of ~~November 20, 2022,~~December 21, 2021, by and between ~~the Company~~Disney Corporate Services Co., LLC and ~~Robert A. Iger~~Horacio E. Gutierrez, as amended †

Filed herewith

10.5

Amendment dated December 21, 2023 to that certain Employment Agreement, dated as of December 21, 2021, by and between Disney Corporate Services Co., LLC and Horacio E. Gutierrez, as amended; and to that certain Indemnification Agreement, dated as of December 21, 2021, by and between The Walt Disney Company and Horacio E. Gutierrez, as amended †

Exhibit 10.1 to the Current Report on Form 8-K of the Company filed ~~July 12,~~December 22, 2023

10.6

Amendment dated December 13, 2023, to that certain Employment Agreement, dated as of April 8, 2023, by and between The Walt Disney Company and Sonia L. Coleman †

Filed herewith

10.7

Amendment dated December 13, 2023 to that certain Employment Agreement, dated as of June 29, 2022, by and between The Walt Disney Company and Kristina K. Schake, as amended †

Filed herewith

10.8

Form of Non-Qualified Stock Option Award Agreement †

Filed herewith

10.9

Form of Performance-Based Restricted Stock Unit Award Agreement (Three-Year Vesting subject to Total Shareholder Return/ROIC Tests) †

Filed herewith

List of Guarantor Subsidiaries

Filed herewith

31(a)

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

Filed herewith

31(b)

Rule 13a-14(a) Certification of ~~Interim~~ Chief Financial Officer of the Company in accordance with Section 302 of the Sarbanes-Oxley Act of 2002

Filed herewith

32(a)

Section 1350 Certification of Chief Executive Officer of the Company in accordance with Section 906 of the Sarbanes-Oxley Act of 2002*

Furnished

32(b)

Section 1350 Certification of ~~Interim~~ Chief Financial Officer of the Company in accordance with Section 906 of the Sarbanes-Oxley Act of 2002*

Furnished

101

The following materials from the Company’s Quarterly Report on Form 10-Q for the quarter ended ~~July 1,~~December 30, 2023 formatted in Inline Extensible Business Reporting Language (iXBRL): (i) the Condensed Consolidated Statements of ~~Operations,~~Income, (ii) the Condensed Consolidated Statements of Comprehensive Income, ~~(Loss),~~ (iii) the Condensed Consolidated Balance Sheets, (iv) the Condensed Consolidated Statements of Cash Flows, (v) the Condensed Consolidated Statements of Equity and (vi) related notes

Filed herewith

104

Cover 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.
†			Management Contract or compensatory plan or arrangement.

7456

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/ ~~KEVIN A. LANSBERRY~~HUGH F. JOHNSTON
						~~Kevin A. Lansberry,~~Hugh F. Johnston,
						~~Interim~~ Senior Executive Vice President and Chief Financial Officer ~~(Principal Financial Officer)~~

~~August 9, 2023~~February 7, 2024

Burbank, California

7557


	DMED			DPEP			Total




Balance at October 1, 2022		$	72,347		$	5,550		$	77,897




Currency translation adjustments and other, net		(16)			—			(16)
Balance at July 1, 2023		$	72,331		$	5,550		$	77,881


	Quarter Ended July 1, 2023				Quarter Ended July 2, 2022
	DMED		DPEP		Total		DMED		DPEP		Content License Early Termination			Total
Affiliate fees	$	4,234	$	—	$	4,234	$	4,337	$	—		$	—	$	4,337
Subscription fees	4,537		—		4,537		3,889		—			—		3,889
Advertising	3,042		1		3,043		3,534		1			—		3,535
Theme park admissions	—		2,731		2,731		—		2,312			—		2,312
Resort and vacations	—		1,990		1,990		—		1,805			—		1,805
Retail and wholesale sales of merchandise, food and beverage	—		2,226		2,226		—		1,896			—		1,896
Merchandise licensing	—		876		876		—		916			—		916
TV/SVOD distribution licensing	646		—		646		1,119		—			—		1,119
Theatrical distribution licensing	838		—		838		620		—			—		620
Home entertainment	209		—		209		149		—			—		149
Other	498		502		1,000		462		464			—		926
	$	14,004	$	8,326	$	22,330	$	14,110	$	7,394		$	—	$	21,504

	Nine Months Ended July 1, 2023				Nine Months Ended July 2, 2022
	DMED		DPEP		Total		DMED		DPEP		Content License Early Termination			Total
Affiliate fees	$	12,870	$	—	$	12,870	$	13,310	$	—		$	—	$	13,310
Subscription fees	13,382		—		13,382		11,374		—			—		11,374
Advertising	9,047		3		9,050		10,425		3			—		10,428
Theme park admissions	—		7,800		7,800		—		6,437			—		6,437
Resort and vacations	—		5,919		5,919		—		4,701			—		4,701
Retail and wholesale sales of merchandise, food and beverage	—		6,750		6,750		—		5,801			—		5,801
Merchandise licensing	—		2,791		2,791		—		2,928			—		2,928
TV/SVOD distribution licensing	2,658		—		2,658		3,639		—			(1,023)		2,616
Theatrical distribution licensing	2,745		—		2,745		1,373		—			—		1,373
Home entertainment	492		—		492		673		—			—		673
Other	1,625		1,575		3,200		1,521		1,410			—		2,931
	$	42,819	$	24,838	$	67,657	$	42,315	$	21,280		$	(1,023)	$	62,572


	As of July 1, 2023						As of October 1, 2022
	Predominantly Monetized Individually		Predominantly Monetized as a Group		Total		Predominantly Monetized Individually		Predominantly Monetized as a Group		Total
Produced content
Released, less amortization	$	5,437	$	13,282	$	18,719	$	4,639	$	12,688	$	17,327
Completed, not released	36		963		999		214		2,019		2,233
In-process	3,201		7,560		10,761		5,041		6,793		11,834
In development or pre-production	409		199		608		372		254		626
	$	9,083	$	22,004	31,087		$	10,266	$	21,754	32,020






Licensed content - Television programming rights and advances					5,889						5,647
Total produced and licensed content					$	36,976					$	37,667

Current portion					$	2,369					$	1,890
Non-current portion					$	34,607					$	35,777


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)
April 2, 2023 - April 30, 2023	25,112	$	98.58	—	na
May 1, 2023 - May 31, 2023	24,363	94.10		—	na
June 1, 2023 - July 1, 2023	27,975	88.88		—	na
Total	77,450	93.67		—	na

~~3,530~~1,362

Costs and expenses

~~(3,067)~~(1,123)

~~Equity in the loss of investees~~