What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2023-02-08 compared with 2022-08-10 · 184 added, 342 removed, 564 unchanged (48% of the section changed)

3 unchanged sentences

in millions, except per share data)

Quarter Ended Nine Months Ended

Quarter Ended

2022 January 1,

Services $ 20,997 $ 19,542

10 unchanged sentences

Restructuring and impairment charges ( 69 ) —

Other income (expense), net ( 136 ) ( 91 ) ( 730 ) 214

Other expense, net ( 42 ) ( 436 )

Interest expense, net ( 300 ) ( 311 )

22 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

Quarter Ended Nine Months Ended

Quarter Ended

2022 January 1,

Net income $ 1,361 $ 1,152

2 unchanged sentences

Pension and postretirement medical plan adjustments

119 169 393 510

Foreign currency translation and other

( 446 ) ( 65 ) ( 659 ) 119

Other comprehensive income 101 105 240 567

Other comprehensive income (loss) ( 314 ) 183

Comprehensive income 1,047 1,335

1 unchanged sentence

( 82 ) ( 48 )

Other comprehensive income (loss) attributable to noncontrolling interests 69 ( 24 ) 58 ( 82 )

Other comprehensive loss attributable to noncontrolling interests ( 45 ) ( 19 )

Comprehensive income attributable to Disney $ 920 $ 1,268

49 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

Nine Months Ended

Quarter Ended

2022 January 1,

OPERATING ACTIVITIES

1 unchanged sentence

Depreciation and amortization 1,306 1,269

Net (gain) loss on investments 779 ( 325 )

Net loss on investments and disposition of businesses 68 436

Deferred income taxes ( 15 ) 726

11 unchanged sentences

Income taxes 56 ( 566 )

Cash provided by operations - continuing operations 3,478 2,934

Cash used in operations - continuing operations ( 974 ) ( 209 )

INVESTING ACTIVITIES

3 unchanged sentences

FINANCING ACTIVITIES

Commercial paper payments, net ( 275 ) ( 99 )

Commercial paper borrowings (payments), net 799 ( 124 )

Borrowings 67 33

Reduction of borrowings ( 1,000 ) —

Proceeds from exercise of stock options 100 405

Sale of noncontrolling interest 178 —

Acquisition of redeemable noncontrolling interest ( 900 ) —

Other, net ( 187 ) ( 189 )

1 unchanged sentence

CASH FLOWS FROM DISCONTINUED OPERATIONS

Cash provided by (used in) operations - discontinued operations 8 ( 2 )

Cash provided by investing activities - discontinued operations — 8

Cash provided by operations - discontinued operations — 8

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

Cash (used in) provided by discontinued operations ( 4 ) 6

Cash used in discontinued operations — ( 4 )

Impact of exchange rates on cash, cash equivalents and restricted cash 164 ( 35 )

12 unchanged sentences

Interests (1)

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

Contributions — — — — — — 19 19

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

Balance at April 3, 2021 1,817 $ 55,000 $ 39,365 $ ( 7,918 ) $ ( 907 ) $ 85,540 $ 4,246 $ 89,786

Comprehensive income — — 918 81 — 999 147 1,146

Equity compensation activity — 185 — — — 185 — 185

Contributions — — — — — — 7 7

Cumulative effect of accounting change — — 3 — — 3 — 3

Distributions and other — ( 11 ) 25 — — 14 ( 19 ) ( 5 )

Balance at July 3, 2021 1,817 $ 55,174 $ 40,311 $ ( 7,837 ) $ ( 907 ) $ 86,741 $ 4,381 $ 91,122

(1) Excludes redeemable noncontrolling interests.

See Notes to Condensed Consolidated Financial Statements

THE WALT DISNEY COMPANY

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY

Nine Months Ended

Equity Attributable to Disney

Shares Common Stock Retained Earnings

Comprehensive

(Loss) Treasury Stock Total Disney Equity

Non-controlling Interests (1)

Balance at October 1, 2022 1,824 $ 56,398 $ 43,636 $ ( 4,119 ) $ ( 907 ) $ 95,008 $ 3,871 $ 98,879

3 unchanged sentences

Distributions and other — 1 40 — — 41 ( 47 ) ( 6 )

Balance at July 2, 2022 1,823 $ 56,087 $ 43,462 $ ( 6,142 ) $ ( 907 ) $ 92,500 $ 3,933 $ 96,433

Balance at December 31, 2022 1,826 $ 56,579 $ 44,955 $ ( 4,478 ) $ ( 907 ) $ 96,149 $ 3,986 $ 100,135

Balance at October 2, 2021 1,818 $ 55,471 $ 40,429 $ ( 6,440 ) $ ( 907 ) $ 88,553 $ 4,458 $ 93,011

Comprehensive income — — 1,836 485 — 2,321 256 2,577

Comprehensive income (loss) — — 1,104 164 — 1,268 ( 4 ) 1,264

Equity compensation activity 3 29 — — — 29 — 29

Contributions — — — — — — 29 29

Cumulative effect of accounting change — — 108 — — 108 — 108

Distributions and other — — 14 — — 14 ( 37 ) ( 23 )

Balance at July 3, 2021 1,817 $ 55,174 $ 40,311 $ ( 7,837 ) $ ( 907 ) $ 86,741 $ 4,381 $ 91,122

Balance at January 1, 2022 1,821 $ 55,500 $ 41,547 $ ( 6,276 ) $ ( 907 ) $ 89,864 $ 4,446 $ 94,310

(1) Excludes redeemable noncontrolling interests.

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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 ended July 2, 2022 are not necessarily indicative of the results that may be expected for the year ending October 1, 2022.

Operating results for the quarter ended December 31, 2022 are not necessarily indicative of the results that may be expected for the year ending September 30, 2023.

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 Annual Report on Form 10-K.

The Fox sports media business in Mexico was sold in November 2021.

The Company recognized a $ 58 million loss on the sale, which is presented as discontinued operations in the Condensed Consolidated Statement of Income for the nine months ended July 2, 2022.

At October 2, 2021, the assets and liabilities of the Fox sports media business in Mexico were not material and were included in other assets and other liabilities in the Condensed Consolidated Balance Sheets.

Variable Interest Entities

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Redeemable Noncontrolling Interests

The Company consolidates the results of certain subsidiaries that are less than 100% owned and for which the noncontrolling interest shareholders have the rights to require the Company to purchase their interests in these subsidiaries.

The most significant of these are Hulu LLC (Hulu) and BAMTech LLC (BAMTech).

Hulu provides direct-to-consumer (DTC) streaming services and is owned 67 % by the Company and 33 % by NBC Universal (NBCU).

The Company consolidates the results of 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.

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The minimum value is equal to the fair value as of the May 2019 agreement date accreted to the January 2024 estimated redemption value.

At July 2, 2022, NBCU’s interest in Hulu is recorded in the Company’s financial statements at $ 8.6 billion.

BAMTech provides streaming technology services to third parties and is owned 85 % by the Company and 15 % by Major League Baseball (MLB).

MLB has the right to sell its interest to the Company and the Company has the right to buy MLB’s interest starting five years from and ending ten years after the Company’s September 25, 2017 acquisition date of BAMTech, in either case at a redemption value based on MLB’s equity ownership percentage of the greater of MLB’s then equity fair value or a guaranteed floor value ($ 563 million accreting at 8 % annually for eight years from the date of acquisition).

At December 31, 2022, NBCU’s interest in Hulu is recorded in the Company’s financial statements at $ 8.7 billion, which is reported as “Redeemable noncontrolling interest” in the Condensed Consolidated Balance Sheets.

We are accreting NBCU’s interest in Hulu to its guaranteed floor value.

In determining the redemption value, our estimate of Hulu’s equity fair value in January 2024 requires management to make significant judgments.

If our estimate of the future fair value of Hulu’s equity increased above the guaranteed floor value, we would change our rate of accretion, which would generally increase the amount recorded in “Net income from continuing operations attributable to noncontrolling interests” and thus reduce “Net income attributable to Disney” in the Condensed Consolidated Statements of Income.

At October 1, 2022, Major League Baseball (MLB) held a 15 % redeemable noncontrolling interest in BAMTech LLC (BAMTech), which was recorded in the Company’s financial statements at $ 828 million.

In November 2022, the Company purchased MLB’s redeemable noncontrolling interest for $ 900 million, resulting in $ 72 million recorded as an increase in “Net income from continuing operations attributable to noncontrolling interests” in the Condensed Consolidated Statements of Income.

THE WALT DISNEY COMPANY

1 unchanged sentence

tabular dollars in millions, except for per share data)

The MLB interest is required to be carried at a minimum value equal to its acquisition date fair value accreted to its estimated redemption value through the applicable redemption date.

Therefore, the MLB interest is generally not allocated its portion of BAMTech losses, if any.

As of July 2, 2022, the MLB interest was recorded in the Company’s financial statements at $ 825 million.

Our estimate of the redemption value of noncontrolling interests requires management to make significant judgments with respect to the future value of the noncontrolling interests.

We are accreting the noncontrolling interests of both BAMTech and Hulu to their guaranteed floor values.

If our estimate of the future redemption value increased above either of the guaranteed floor values, we would change our rate of accretion, which would generally increase the amount recorded in “Net income from continuing operations attributable to noncontrolling interests” and thus reduce “Net income attributable to Disney” in the Condensed Consolidated Statements of Income.

Use of Estimates

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The Company’s operations are conducted in the Disney Media and Entertainment Distribution (DMED) and Disney Parks, Experiences and Products (DPEP) segments.

Our operating segments report separate financial information, which is evaluated regularly by the Chief Executive Officer in order to decide how to allocate resources and assess performance.

Our operating segments report separate financial information, which 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, net interest expense, income taxes and noncontrolling interests.

3 unchanged sentences

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.

Impact of COVID-19

Since early 2020, the world has been, and continues to be, impacted by the novel coronavirus (COVID-19) and its variants.

COVID-19 and measures to prevent its spread have impacted our segments in a number of ways, most significantly at the DPEP segment where our theme parks and resorts were closed and cruise ship sailings and guided tours were suspended.

These operations resumed at various points since May 2020, initially at reduced operating capacities as a result of COVID-19 restrictions.

In fiscal 2020 and 2021, we delayed, or in some cases, shortened or canceled, theatrical releases.

In addition, we experienced significant disruptions in the production and availability of content, including the delay of key live sports programming during fiscal 2020 and fiscal 2021.

In fiscal 2022, our domestic parks and resorts are generally operating without significant COVID-19-related capacity restrictions, such as those that were generally in place during the prior year.

In addition, our cruise ships have generally been operating without COVID-19-related capacity restrictions since April 2022.

Certain of our international parks and resorts continue to be impacted by COVID-19-related closures and capacity and travel restrictions.

At the DMED segment, our film and television productions have generally resumed, although we have seen disruptions of production activities depending on local circumstances.

Thus far, we have generally been able to release our films theatrically in fiscal 2022, although certain markets continue to impose restrictions on theater openings and capacity.

The impact of these disruptions and the extent of their adverse impact on our financial and operating results will depend on the length of time that such disruptions continue.

This will, in turn, depend on the duration and severity of the impacts of COVID-19 and its variants, and among other things, the impact of governmental actions imposed in response to COVID-19 and individuals’ and companies’ risk tolerance regarding health matters going forward.

We have incurred and will continue to incur additional costs to address government regulations and the safety of our employees, guests and talent.

THE WALT DISNEY COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

tabular dollars in millions, except for per share data)

Segment revenues and segment operating income (loss) are as follows:

Quarter Ended Nine Months Ended

Quarter Ended

2022 January 1,

Disney Media and Entertainment Distribution $ 14,776 $ 14,585

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

Quarter Ended Nine Months Ended

Quarter Ended

2022 January 1,

Disney Media and Entertainment Distribution $ 196 $ 245

3 unchanged sentences

Equity in the income of investees, net $ 191 $ 239

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

Quarter Ended Nine Months Ended

Segment revenues $ 21,504 $ 17,022 $ 63,595 $ 48,884

Content License Early Termination (1)

— — ( 1,023 ) —

Total revenues $ 21,504 $ 17,022 $ 62,572 $ 48,884

(1) During the nine months ended July 2, 2022, the Company recognized a reduction in revenue for amounts to early terminate 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 direct-to-consumer services (Content License Early Termination).

Because the content is functional intellectual property (IP), we recognized substantially all of the consideration to be paid by the customer under the licenses as revenue in prior years when the content was made available under the agreements.

Consequently, we have recorded the amounts to terminate the license agreements, net of remaining amounts of deferred revenue, as a reduction of revenue in the current nine-month period.

THE WALT DISNEY COMPANY

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A reconciliation of segment operating income to income from continuing operations before income taxes is as follows:

Quarter Ended Nine Months Ended

Quarter Ended

2022 January 1,

Segment operating income $ 3,043 $ 3,258

Content License Early Termination — — ( 1,023 ) —

Corporate and unallocated shared expenses ( 280 ) ( 228 )

Restructuring and impairment charges ( 69 ) —

Other income (expense), net (1)

Other expense, net (1)

( 42 ) ( 436 )

3 unchanged sentences

Income from continuing operations before income taxes $ 1,773 $ 1,688

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

(2) For the quarter ended July 2, 2022 amortization of intangible assets, step-up of film and television costs and intangibles related to TFCF equity investees were $ 422 million, $ 160 million and $ 3 million, respectively.

For the nine months ended July 2, 2022 amortization of intangible assets, step-up of film and television costs and intangibles related to TFCF equity investees were $ 1,292 million, $ 473 million and $ 9 million, respectively.

For the quarter ended July 3, 2021 amortization of intangible assets, step-up of film and television costs and intangibles related to TFCF equity investees were $ 434 million, $ 166 million, and $ 4 million, respectively.

For the nine months ended July 3, 2021 amortization of intangible assets, step-up of film and television costs and intangibles related to TFCF equity investees were $ 1,328 million, $ 487 million and $ 11 million, respectively.

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

(2) For the quarter ended December 31, 2022 amortization of intangible assets, step-up of film and television costs and intangibles related to TFCF equity investees were $ 417 million, $ 159 million and $ 3 million, respectively.

For the quarter ended January 1, 2022 amortization of intangible assets, step-up of film and television costs and intangibles related to TFCF equity investees were $ 435 million, $ 157 million, and $ 3 million, respectively.

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

2 unchanged sentences

Currency translation adjustments and other, net ( 30 ) — ( 30 )

Balance at July 2, 2022 $ 72,395 $ 5,550 $ 77,945

THE WALT DISNEY COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

tabular dollars in millions, except for per share data)

Balance at December 31, 2022 $ 72,317 $ 5,550 $ 77,867

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

Quarter Ended July 2, 2022 Quarter Ended July 3, 2021

DMED DPEP Content License Early Termination Total DMED DPEP Total

Quarter Ended December 31, 2022 Quarter Ended January 1, 2022

DMED DPEP Total DMED DPEP Total

Affiliate fees $ 4,242 $ — $ 4,242 $ 4,371 $ — $ 4,371

Advertising 3,534 1 — 3,535 3,163 — 3,163

Subscription fees 4,240 — 4,240 3,598 — 3,598

Theme park admissions — 2,312 — 2,312 — 1,152 1,152

Resort and vacations — 1,805 — 1,805 — 776 776

Retail and wholesale sales of merchandise, food and beverage — 1,896 — 1,896 — 1,262 1,262

TV/SVOD distribution licensing 1,119 — — 1,119 1,230 — 1,230

Theatrical distribution licensing 620 — — 620 140 — 140

Merchandise licensing — 916 — 916 1 789 790

Home entertainment 149 — — 149 236 — 236

Other 462 464 — 926 324 362 686

$ 14,110 $ 7,394 $ — $ 21,504 $ 12,681 $ 4,341 $ 17,022

Nine Months Ended July 2, 2022 Nine Months Ended July 3, 2021

DMED DPEP Content License Early Termination Total DMED DPEP Total

Affiliate fees $ 13,310 $ — $ — $ 13,310 $ 13,427 $ — $ 13,427

Advertising 3,442 1 3,443 3,868 1 3,869

Subscription fees 11,374 — — 11,374 8,702 — 8,702

Theme park admissions — 2,641 2,641 — 2,152 2,152

1 unchanged sentence

Retail and wholesale sales of merchandise, food and beverage — 2,382 2,382 — 2,089 2,089

Merchandise licensing — 1,143 1,143 — 1,119 1,119

TV/SVOD distribution licensing 979 — 979 1,396 — 1,396

Theatrical distribution licensing 1,140 — 1,140 529 — 529

Merchandise licensing — 2,928 — 2,928 11 2,670 2,681

Home entertainment 135 — 135 294 — 294

1 unchanged sentence

$ 14,776 $ 8,736 $ 23,512 $ 14,585 $ 7,234 $ 21,819

THE WALT DISNEY COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

tabular dollars in millions, except for per share data)

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

Quarter Ended July 2, 2022 Quarter Ended July 3, 2021

DMED DPEP Total DMED DPEP Total

Americas $ 11,444 $ 6,130 $ 17,574 $ 10,409 $ 3,295 $ 13,704

Europe 1,230 897 2,127 1,209 308 1,517

Asia Pacific 1,436 367 1,803 1,063 738 1,801

Total revenues $ 14,110 $ 7,394 $ 21,504 $ 12,681 $ 4,341 $ 17,022

Content License Early Termination —

Nine Months Ended July 2, 2022 Nine Months Ended July 3, 2021

Quarter Ended December 31, 2022 Quarter Ended January 1, 2022

DMED DPEP Total DMED DPEP Total

3 unchanged sentences

Total revenues $ 14,776 $ 8,736 $ 23,512 $ 14,585 $ 7,234 $ 21,819

Content License Early Termination ( 1,023 )

THE WALT DISNEY COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

tabular dollars in millions, except for per share data)

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 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.

For the quarter ended July 3, 2021, $ 0.3 billion was recognized related to performance obligations satisfied as of April 3, 2021.

For the nine months ended July 3, 2021, $ 1.0 billion was related to performance obligations satisfied as of October 3, 2020.

As of July 2, 2022, revenue for unsatisfied performance obligations expected to be recognized in the future is $ 12 billion, primarily for content and other IP to be made available in the future under existing agreements with television station affiliates, merchandise licensees and DTC subscribers.

For the quarter ended December 31, 2022, $ 0.3 billion was recognized related to performance obligations satisfied as of October 1, 2022.

For the quarter ended January 1, 2022, $ 0.4 billion was recognized related to performance obligations satisfied as of October 2, 2021.

As of December 31, 2022, revenue for unsatisfied performance obligations expected to be recognized in the future is $ 15 billion, primarily for content and other IP to be made available in the future under existing agreements with merchandise and co-branding licensees and sponsors, television station affiliates, sports sublicensees, advertisers, and DTC wholesalers.

Of this amount, we expect to recognize approximately $ 4 billion in the remainder of fiscal 2023, $ 4 billion in fiscal 2024, $ 3 billion in fiscal 2025 and $ 4 billion thereafter.

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Deferred revenues are recognized as (or when) the Company performs under the contract.

Contract assets, accounts receivable and deferred revenues from contracts with customers are as follows:

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:

2022 October 1,

Contract assets $ 74 $ 155

Accounts receivable

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Non-current 908 927

Contract assets primarily relate to certain multi-season TV/SVOD licensing contracts.

Activity for the current and prior-year periods related to contract assets was not material.

THE WALT DISNEY COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

tabular dollars in millions, except for per share data)

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 deferred revenue balance.

For the quarter and nine months ended July 3, 2021, the Company recognized revenue of $ 0.4 billion and $ 2.5 billion, respectively, that was included in the October 3, 2020 deferred revenue balance.

Amounts deferred generally relate to DTC subscriptions, TV/SVOD licenses and advances from merchandise licensees.

For the quarter ended December 31, 2022, the Company recognized revenue of $ 3.4 billion that was included in the October 1, 2022 deferred revenue balance.

For the quarter ended January 1, 2022, the Company recognized revenue of $ 1.9 billion that was included in the October 2, 2021 deferred revenue balance.

Amounts deferred generally relate to theme park admissions and vacation packages, DTC subscriptions and advances related to merchandise and TV/SVOD 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.

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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 licensing receivables recorded in other non-current assets was $ 0.7 billion and $ 0.8 billion at July 2, 2022 and October 2, 2021, respectively.

The balance of vacation club receivables recorded in other non-current assets was $ 0.6 billion at both July 2, 2022 and October 2, 2021.

The allowance for credit losses and activity for the period ended July 2, 2022 was not material.

Other Income (Expense), net

Other income (expense), net is as follows:

Quarter Ended Nine Months Ended

The balance of TV/SVOD licensing receivables recorded in other non-current assets was $ 0.6 billion at both December 31, 2022 and October 1, 2022.

The balance of vacation club receivables recorded in other non-current assets was $ 0.6 billion at both December 31, 2022 and October 1, 2022.

The allowance for credit losses and activity for the period ended December 31, 2022 was not material.

THE WALT DISNEY COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

tabular dollars in millions, except for per share data)

Other Expense, net

Other expense, net is as follows:

Quarter Ended

2022 January 1,

DraftKings loss $ ( 70 ) $ ( 432 )

fuboTV gain — — — 186

German FTA gain — 126 — 126

Other, net 28 ( 4 )

Other income (expense), net $ ( 136 ) $ ( 91 ) $ ( 730 ) $ 214

For the quarter and nine months ended July 2, 2022, the Company recognized a non-cash loss of $ 136 million and $ 726 million, respectively, from the adjustment of its investment in DraftKings Inc.

Other expense, net $ ( 42 ) $ ( 436 )

In the current quarter, the Company recognized a $ 70 million non-cash loss to adjust its investment in DraftKings, Inc.

(DraftKings) to fair value (DraftKings loss).

For the prior-year quarter and nine months ended July 3, 2021, the Company recognized a DraftKings loss of $ 217 million and $ 98 million, respectively.

For the nine months ended July 3, 2021, the Company recognized a $ 186 million gain from the sale of our investment in fuboTV Inc.

(fuboTV gain).

For the quarter and nine months ended July 3, 2021, the Company recognized a $ 126 million gain on the sale of its 50 % interest in a German free-to-air (FTA) television network (German FTA gain).

In the prior-year quarter, the Company recorded a $ 432 million DraftKings loss.

Cash, Cash Equivalents, Restricted Cash and Borrowings

7 unchanged sentences

Total cash, cash equivalents and restricted cash in the statement of cash flows $ 8,516 $ 11,661

THE WALT DISNEY COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

tabular dollars in millions, except for per share data)

During the nine months ended July 2, 2022, the Company’s borrowing activity was as follows:

During the quarter ended December 31, 2022, the Company’s borrowing activity was as follows:

2022 Borrowings Payments Other

Activity July 2,

Activity December 31,

Commercial paper with original maturities less than three months $ 50 $ 362 $ — $ 1 $ 413

1 unchanged sentence

dollar denominated notes 45,091 — ( 1,000 ) ( 33 ) 44,058

49,090 — ( 1,400 ) ( 105 ) 47,585

Asia Theme Parks borrowings 1,425 66 — 58 1,549

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$ 48,369 $ 1,580 $ ( 1,714 ) $ 142 $ 48,377

(1) The other activity is due to the amortization of purchase price adjustments on debt assumed in the TFCF acquisition and debt issuance fees.

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

At July 2, 2022, the Company’s bank facilities, which are with a syndicate of lenders and support our commercial paper borrowings, were as follows:

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

THE WALT DISNEY COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

tabular dollars in millions, except for per share data)

At December 31, 2022, the Company’s bank facilities, which are with a syndicate of lenders and support our commercial paper borrowings, were as follows:

Capacity Capacity

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These facilities allow for borrowings at SOFR-based rates 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 0.755% to 1.225%.

The 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, which the Company met on July 2, 2022 by a significant margin.

On December 31, 2022, 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 2, 2022, the Company has $ 1.4 billion of outstanding letters of credit, of which none were issued under this facility.

As of December 31, 2022, the Company has $ 2.0 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 up to 80 % of the contract price of two new cruise ships, which are scheduled to be delivered in 2024 and 2025.

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 is available beginning in August 2023 and $ 1.1 billion is available beginning in August 2024.

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Early repayment is permitted subject to cancellation fees .

The Company did not utilize and terminated a $ 1.0 billion credit facility for a new cruise ship, which was delivered in the third quarter of fiscal 2022.

THE WALT DISNEY COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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 Income and consist of the following:

Quarter Ended Nine Months Ended

Quarter Ended

2022 January 1,

Interest expense $ ( 465 ) $ ( 361 )

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The Asia Theme Parks together with Disneyland Paris are collectively referred to as the International Theme Parks.

THE WALT DISNEY COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

tabular dollars in millions, except for per share data)

The following table summarizes the carrying amounts of the Asia Theme Parks’ assets and liabilities included in the Company’s Condensed Consolidated Balance Sheets:

10 unchanged sentences

Total liabilities $ 2,473 $ 2,289

The following table summarizes the International Theme Parks’ revenues and costs and expenses included in the Company’s Condensed Consolidated Statements of Income for the nine months ended July 2, 2022:

The following table summarizes the International Theme Parks’ revenues and costs and expenses included in the Company’s Condensed Consolidated Statements of Income for the quarter ended December 31, 2022:

Revenues $ 996

1 unchanged sentence

Equity in the loss of investees ( 2 )

Asia Theme Parks’ royalty and management fees of $ 46 million for the nine months ended July 2, 2022 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 ended July 2, 2022 were $ 147 million provided by operating activities, $ 572 million used in investing activities and $ 192 million provided by financing activities.

THE WALT DISNEY COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

tabular dollars in millions, except for per share data)

Asia Theme Parks’ royalty and management fees of $ 24 million for the quarter ended December 31, 2022 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 quarter ended December 31, 2022 were $ 195 million provided by operating activities, $ 292 million used in investing activities and $ 66 million provided by financing activities.

Hong Kong Disneyland Resort

3 unchanged sentences

The Company’s loan is eliminated in consolidation.

The Company has provided Hong Kong Disneyland Resort with a revolving credit facility of HK $ 2.1 billion ($ 268 million), which bears interest at a rate of three month HIBOR plus 1.25 % and matures in December 2023.

The outstanding balance under the line of credit at July 2, 2022 was $ 217 million.

The Company has provided Hong Kong Disneyland Resort with a revolving credit facility of HK $ 2.1 billion ($ 269 million), which bears interest at a rate of three month HIBOR plus 1.25 %.

The line of credit was increased to HK $ 2.7 billion ($ 346 million) in November 2022 and matures in December 2028.

The outstanding balance under the line of credit at December 31, 2022 was $ 232 million.

The Company’s line of credit is eliminated in consolidation.

4 unchanged sentences

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 %.

The line of credit was increased to 1.9 billion yuan (approximately $ 0.3 billion) in July 2022.

As of July 2, 2022, the total amount outstanding under the line of credit was 0.7 billion yuan (approximately $ 112 million).

As of December 31, 2022, the total amount outstanding under the line of credit was 1.2 billion yuan (approximately $ 176 million).

These balances are eliminated in consolidation.

Shendi has provided Shanghai Disney Resort with loans totaling 8.4 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 1.4 billion yuan (approximately $ 0.2 billion) line of credit bearing interest at 8 %.

The line of credit was increased to 2.6 billion yuan (approximately $ 0.4 billion) in July 2022.

As of July 2, 2022 the total amount outstanding under the line of credit was 1.0 billion yuan (approximately $ 148 million).

Shendi has also provided Shanghai Disney

THE WALT DISNEY COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

tabular dollars in millions, except for per share data)

Resort with a 2.6 billion yuan (approximately $ 0.4 billion) line of credit bearing interest at 8 %.

As of December 31, 2022 the total amount outstanding under the line of credit was 1.6 billion yuan (approximately $ 233 million).

Produced and Acquired/Licensed Content Costs and Advances

6 unchanged sentences

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

As of July 2, 2022 As of October 2, 2021

As of December 31, 2022 As of October 1, 2022

Predominantly Monetized Individually Predominantly Monetized

11 unchanged sentences

Non-current portion $ 36,266 $ 35,777

THE WALT DISNEY COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

tabular dollars in millions, except for per share data)

Amortization of produced and licensed content is as follows:

Quarter Ended Nine Months Ended

Quarter Ended

2022 January 1,

Produced content

1 unchanged sentence

Predominantly monetized as a group 2,160 1,618

2,552 2,148 7,544 5,957

Licensed programming rights and advances 4,539 4,811

2 unchanged sentences

(1) Primarily included in “Costs of services” in the Condensed Consolidated Statements of Income .

Interim Period Tax Expense

Generally, we record interim period tax expense based on the estimated annual effective tax rate using projections of full-year pre-tax earnings and income tax expense, adjusted for tax expense amounts recognized fully in the quarter they occur.

We used this approach to determine tax expense in the first three quarters of fiscal 2022.

For interim periods in fiscal 2021, because of the uncertainties associated with the impact of COVID-19 on our projections of full-year pre-tax earnings and income tax expense, our normal approach of calculating interim period tax expense produced an income tax provision that was not meaningful.

Accordingly, we calculated interim period fiscal 2021 tax expense based on the year-to-date earnings before tax, a blended U.S.

Federal and state statutory tax rate of approximately 23 % adjusted for tax expense amounts recognized fully in the quarter they occurred.

Unrecognized Tax Benefits

During the nine months ended July 2, 2022, the Company decreased its gross unrecognized tax benefits (before interest and penalties) by $ 0.2 billion from $ 2.6 billion to $ 2.4 billion.

During the quarter ended December 31, 2022, the Company increased its gross unrecognized tax benefits (before interest and penalties) by $ 0.1 billion to $ 2.6 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 billion.

THE WALT DISNEY COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

tabular dollars in millions, except for per share data)

Pension and Other Benefit Programs

The components of net periodic benefit cost are as follows:

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

Pension Plans Postretirement Medical Plans

Quarter Ended Nine Months Ended Quarter Ended Nine Months Ended

2021 July 2, 2022 July 3, 2021 July 2,

2021 July 2, 2022 July 3, 2021

Quarter Ended Quarter Ended

2022 January 1,

2022 December 31,

2022 January 1,

Service costs $ 65 $ 100 $ 1 $ 2

5 unchanged sentences

Total other costs (benefits) ( 85 ) ( 21 ) ( 1 ) 5

Net periodic benefit cost $ 83 $ 135 $ 242 $ 409 $ 6 $ 8 $ 22 $ 24

During the nine months ended July 2, 2022, 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 2022.

THE WALT DISNEY COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

tabular dollars in millions, except for per share data)

Final minimum funding requirements for fiscal 2022 will be determined based on a January 1, 2022 funding actuarial valuation, which is expected to be received by the end of the fourth quarter of fiscal 2022.

Net periodic benefit cost (income) $ ( 20 ) $ 79 $ — $ 7

During the quarter ended December 31, 2022, 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.

Final minimum funding requirements for fiscal 2023 will be determined based on a January 1, 2023 funding actuarial valuation, which is expected to be received in the fourth quarter of fiscal 2023.

Earnings Per Share

1 unchanged sentence

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

Quarter Ended

2022 January 1,

Shares (in millions):

12 unchanged sentences

AOCI, before tax

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 )

Third quarter of fiscal 2021

Balance at April 3, 2021 $ ( 283 ) $ ( 8,978 ) $ ( 961 ) $ ( 10,222 )

Quarter Ended July 3, 2021:

Unrealized gains (losses) arising during the period ( 1 ) 29 ( 52 ) ( 24 )

Reclassifications of realized net (gains) losses to net income 4 194 — 198

Balance at July 3, 2021 $ ( 280 ) $ ( 8,755 ) $ ( 1,013 ) $ ( 10,048 )

Nine months ended fiscal 2022

First quarter of fiscal 2023

Balance at October 1, 2022 $ 804 $ ( 3,770 ) $ ( 2,014 ) $ ( 4,980 )

Nine Months Ended July 2, 2022:

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 July 2, 2022 $ 523 $ ( 6,513 ) $ ( 1,684 ) $ ( 7,674 )

Nine months ended fiscal 2021

Balance at December 31, 2022 $ 111 $ ( 3,769 ) $ ( 1,826 ) $ ( 5,484 )

First quarter of fiscal 2022

Balance at October 2, 2021 $ ( 152 ) $ ( 7,025 ) $ ( 1,047 ) $ ( 8,224 )

Nine Months Ended July 3, 2021:

Quarter Ended January 1, 2022:

Unrealized gains (losses) arising during the period 87 47 ( 37 ) 97

Reclassifications of realized net (gains) losses to net income ( 18 ) 155 — 137

Balance at July 3, 2021 $ ( 280 ) $ ( 8,755 ) $ ( 1,013 ) $ ( 10,048 )

THE WALT DISNEY COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

tabular dollars in millions, except for per share data)

Balance at January 1, 2022 $ ( 83 ) $ ( 6,823 ) $ ( 1,084 ) $ ( 7,990 )

Market Value Adjustments for Hedges Unrecognized

2 unchanged sentences

and Other AOCI

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

Third quarter of fiscal 2021

Balance at April 3, 2021 $ 69 $ 2,097 $ 138 $ 2,304

Quarter Ended July 3, 2021:

Unrealized gains (losses) arising during the period — ( 9 ) ( 37 ) ( 46 )

Reclassifications of realized net (gains) losses to net income ( 2 ) ( 45 ) — ( 47 )

Balance at July 3, 2021 $ 67 $ 2,043 $ 101 $ 2,211

Nine months ended fiscal 2022

First quarter of fiscal 2023

Balance at October 1, 2022 $ ( 179 ) $ 901 $ 139 $ 861

Nine Months Ended July 2, 2022:

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 July 2, 2022 $ ( 127 ) $ 1,534 $ 125 $ 1,532

Nine months ended fiscal 2021

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

First quarter of fiscal 2022

Balance at October 2, 2021 $ 42 $ 1,653 $ 89 $ 1,784

Nine Months Ended July 3, 2021:

Quarter Ended January 1, 2022:

Unrealized gains (losses) arising during the period ( 23 ) ( 11 ) ( 4 ) ( 38 )

Reclassifications of realized net (gains) losses to net income 4 ( 36 ) — ( 32 )

Balance at July 3, 2021 $ 67 $ 2,043 $ 101 $ 2,211

Balance at January 1, 2022 $ 23 $ 1,606 $ 85 $ 1,714

THE WALT DISNEY COMPANY

6 unchanged sentences

AOCI, after tax

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 )

Third quarter of fiscal 2021

Balance at April 3, 2021 $ ( 214 ) $ ( 6,881 ) $ ( 823 ) $ ( 7,918 )

Quarter Ended July 3, 2021:

Unrealized gains (losses) arising during the period ( 1 ) 20 ( 89 ) ( 70 )

Reclassifications of realized net (gains) losses to net income 2 149 — 151

Balance at July 3, 2021 $ ( 213 ) $ ( 6,712 ) $ ( 912 ) $ ( 7,837 )

Nine months ended fiscal 2022

First quarter of fiscal 2023

Balance at October 1, 2022 $ 625 $ ( 2,869 ) $ ( 1,875 ) $ ( 4,119 )

Nine Months Ended July 2, 2022:

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 July 2, 2022 $ 396 $ ( 4,979 ) $ ( 1,559 ) $ ( 6,142 )

Nine months ended fiscal 2021

Balance at December 31, 2022 $ 83 $ ( 2,868 ) $ ( 1,693 ) $ ( 4,478 )

First quarter of fiscal 2022

Balance at October 2, 2021 $ ( 110 ) $ ( 5,372 ) $ ( 958 ) $ ( 6,440 )

Nine Months Ended July 3, 2021:

Quarter Ended January 1, 2022:

Unrealized gains (losses) arising during the period 64 36 ( 41 ) 59

Reclassifications of realized net (gains) losses to net income ( 14 ) 119 — 105

Balance at July 3, 2021 $ ( 213 ) $ ( 6,712 ) $ ( 912 ) $ ( 7,837 )

THE WALT DISNEY COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

tabular dollars in millions, except for per share data)

Balance at January 1, 2022 $ ( 60 ) $ ( 5,217 ) $ ( 999 ) $ ( 6,276 )

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

Affected line item in the Condensed Consolidated Statements of Operations:

Quarter Ended

2022 January 1,

Market value adjustments, primarily cash flow hedges Primarily revenue $ 218 $ 18

Estimated tax Income taxes ( 51 ) ( 4 )

21 ( 2 ) 51 29

Pension and postretirement medical expense Interest expense, net ( 1 ) ( 155 )

1 unchanged sentence

( 1 ) ( 119 )

Foreign currency translation and other Restructuring and impairment charges ( 42 ) —

Estimated tax Income taxes 14 —

Total reclassifications for the period $ 138 $ ( 105 )

THE WALT DISNEY COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

tabular dollars in millions, except for per share data)

Equity-Based Compensation

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

Quarter Ended Nine Months Ended

Quarter Ended

2022 January 1,

Stock options $ 19 $ 24

RSUs 250 134 655 356

Total equity-based compensation expense (1)

$ 273 $ 158 $ 723 $ 428

Equity-based compensation expense capitalized during the period $ 36 $ 30

(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 $ 110 million and $ 1.9 billion, respectively, as of July 2, 2022.

During the nine months ended July 2, 2022 and July 3, 2021, the weighted average grant date fair values for options granted were $ 46.86 and $ 57.06 , respectively, and for RSUs were $ 139.55 and $ 178.71 , respectively.

During the nine months ended July 2, 2022, the Company made equity compensation grants consisting of 1.7 million stock options and 11.9 million RSUs.

Unrecognized compensation cost related to unvested stock options and RSUs was $ 119 million and $ 2.2 billion, respectively, as of December 31, 2022.

During the quarter ended December 31, 2022 and January 1, 2022, the weighted average grant date fair values for options granted were $ 34.71 and $ 47.66 , respectively, and for RSUs were $ 91.89 and $ 149.95 , respectively.

During the quarter ended December 31, 2022, the Company made equity compensation grants consisting of 1.5 million stock options and 9.4 million RSUs.

Commitments and Contingencies

5 unchanged sentences

Level 1 - Quoted prices for identical instruments in active markets

THE WALT DISNEY COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

tabular dollars in millions, except for per share data)

Level 2 - Quoted prices for similar instruments in active markets;

2 unchanged sentences

Level 3 - Valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable

THE WALT DISNEY COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

tabular dollars in millions, except for per share data)

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 2, 2022

Fair Value Measurement at December 31, 2022

Level 1 Level 2 Level 3 Total

Investments $ 240 $ — $ — $ 240

Interest rate — 1 — 1

Foreign exchange — 1,133 — 1,133

21 unchanged sentences

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.

THE WALT DISNEY COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

tabular dollars in millions, except for per share data)

Level 2 borrowings, which include commercial paper, U.S.

1 unchanged sentence

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 WALT DISNEY COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

tabular dollars in millions, except for per share data)

The Company’s financial instruments also include cash, cash equivalents, receivables and accounts payable.

4 unchanged sentences

The Company’s derivative positions measured at fair value are summarized in the following tables:

As of July 2, 2022

As of December 31, 2022

Assets Other Assets Other Current Liabilities Other Long-

26 unchanged sentences

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

In accordance with its policy, the Company targets its fixed-rate debt as a percentage of its net debt between a minimum and maximum percentage.

The Company primarily uses pay-floating and pay-fixed interest rate swaps to facilitate its interest rate risk management activities.

The Company designates pay-floating interest rate swaps as fair value hedges of fixed-rate borrowings effectively converting fixed-rate borrowings to variable-rate borrowings indexed to LIBOR.

The total notional amount of the Company’s pay-floating interest rate swaps at both December 31, 2022 and October 1, 2022, was $ 13.5 billion and $ 14.5 billion, respectively.

THE WALT DISNEY COMPANY

1 unchanged sentence

tabular dollars in millions, except for per share data)

minimum and maximum percentage.

The Company primarily uses pay-floating and pay-fixed interest rate swaps to facilitate its interest rate risk management activities.

The Company designates pay-floating interest rate swaps as fair value hedges of fixed-rate borrowings effectively converting fixed-rate borrowings to variable-rate borrowings indexed to LIBOR.

The total notional amount of the Company’s pay-floating interest rate swaps at both July 2, 2022 and October 2, 2021, was $ 15.1 billion.

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

1 unchanged sentence

in Hedged Borrowings

2022 October 2, 2021 July 2,

2022 October 1, 2022 December 31,

2022 October 1, 2022

3 unchanged sentences

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

Quarter Ended Nine Months Ended

Quarter Ended

2022 January 1,

Gain (loss) on:

5 unchanged sentences

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 2, 2022 or at October 2, 2021, and gains and losses related to pay-fixed interest rate swaps recognized in earnings for the quarter ended July 2, 2022 and July 3, 2021 were not material.

The Company did not have pay-fixed interest rate swaps that were designated as cash flow hedges of interest payments at December 31, 2022 or at October 1, 2022, and gains and losses related to pay-fixed interest rate swaps recognized in earnings for the quarter ended December 31, 2022 and January 1, 2022 were not material.

Foreign Exchange Risk Management

8 unchanged sentences

dollar denominated borrowings.

THE WALT DISNEY COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

tabular dollars in millions, except for per share data)

The Company designates foreign exchange forward and option contracts as cash flow hedges of firmly committed and forecasted foreign currency transactions.

As of July 2, 2022 and October 2, 2021, the notional amounts of the Company’s net foreign exchange cash flow hedges were $ 8.2 billion and $ 6.9 billion, respectively.

As of December 31, 2022 and October 1, 2022, the notional amounts of the Company’s net foreign exchange cash flow hedges were $ 7.3 billion and $ 7.4 billion, respectively.

Mark-to-market gains and losses on these contracts are deferred in AOCI and are recognized in earnings when the hedged transactions occur, offsetting changes in the value of the foreign currency transactions.

1 unchanged sentence

The following table summarizes the effect of foreign exchange cash flow hedges on AOCI:

Quarter Ended Nine Months Ended

Quarter Ended

2022 January 1,

Gain (loss) recognized in Other Comprehensive Income $ ( 502 ) $ 79

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

16 ( 8 ) 42 32

(1) Primarily recorded in revenue.

THE WALT DISNEY COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

tabular dollars in millions, except for per share data)

The Company designates cross currency swaps as fair value hedges of foreign currency denominated borrowings.

The impact from the change in foreign currency on both the cross currency swap and borrowing is recorded to “Interest expense, net.” The impact from interest rate changes is recorded in AOCI and is amortized over the life of the cross currency swap.

As of both July 2, 2022 and October 2, 2021, the total notional amounts of the Company’s designated cross currency swaps were Canadian $ 1.3 billion ($ 1.0 billion).

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

Quarter Ended Nine Months Ended

Gain (loss) on:

Cross currency swaps $ ( 30 ) $ 19 $ ( 18 ) $ 75

Borrowings hedged with cross currency swaps 30 ( 19 ) 18 ( 75 )

As of December 31, 2022 and October 1, 2022, the total notional amounts of the Company’s designated cross currency swaps were 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 ended December 31, 2022 and January 1, 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 notional amounts of these foreign exchange contracts at July 2, 2022 and October 2, 2021 were $ 4.5 billion and $ 3.5 billion, respectively.

The notional amounts of these foreign exchange contracts at December 31, 2022 and October 1, 2022 were $ 4.2 billion and $ 3.8 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 Income:

1 unchanged sentence

Quarter Ended:

Net gains (losses) on foreign currency denominated assets and liabilities $ ( 275 ) $ 16 $ 29 $ ( 19 ) $ 96 $ 5

Net gains (losses) on foreign exchange risk management contracts not designated as hedges 257 ( 42 ) ( 28 ) 20 ( 89 ) —

Net gains (losses) $ ( 18 ) $ ( 26 ) $ 1 $ 1 $ 7 $ 5

Nine Months Ended:

2022 January 1,

2022 December 31,

2022 January 1,

2022 December 31,

2022 January 1,

Net gains (losses) on foreign currency denominated assets and liabilities $ 145 $ ( 63 ) $ ( 18 ) $ 1 $ ( 88 ) $ 8

1 unchanged sentence

Net gains (losses) $ ( 68 ) $ ( 30 ) $ — $ 1 $ ( 18 ) $ —

THE WALT DISNEY COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

tabular dollars in millions, except for per share data)

Commodity Price Risk Management

1 unchanged sentence

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 2, 2022 and October 2, 2021 and related gains or losses recognized in earnings for the quarter and nine months ended July 2, 2022 and July 3, 2021 were not material.

The notional amount of these commodities contracts at December 31, 2022 and October 1, 2022 and related gains or losses recognized in earnings for the quarter and quarter ended December 31, 2022 and January 1, 2022 were not material.

Risk Management – Other Derivatives Not Designated as Hedges

1 unchanged sentence

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 contracts at July 2, 2022 and October 2, 2021 were $ 0.3 billion and $ 0.4 billion, respectively.

The related gains or losses recognized in earnings were not material for the quarters ended July 2, 2022 and July 3, 2021.

The notional amounts of these contracts at December 31, 2022 and October 1, 2022 were $ 0.4 billion and $ 0.4 billion, respectively.

The related gains or losses recognized in earnings were not material for the quarters ended December 31, 2022 and January 1, 2022.

Contingent Features and Cash Collateral

3 unchanged sentences

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 $ 1,005 million and $ 244 million on July 2, 2022 and October 2, 2021, respectively.

The aggregate fair values of derivative instruments with credit-risk-related contingent features in a net liability position by counterparty were $ 1.7 billion and $ 1.5 billion on December 31, 2022 and October 1, 2022, respectively.

Restructuring and Impairment Charges

For the quarter and nine months ended July 2, 2022, the Company recognized charges of $ 42 million and $ 0.2 billion, respectively, primarily due to asset impairments related to our businesses in Russia.

For the quarter ended July 3, 2021, the Company recognized charges of $ 35 million, primarily for severance at our parks and experience businesses.

For the nine months ended July 3, 2021, the Company recognized charges of $ 0.6 billion, primarily due to the planned closure of an animation studio and a substantial number of our Disney-branded retail stores as well as severance costs at our parks and experiences and other businesses.

For the quarter ended December 31, 2022, the Company recognized restructuring charges of $ 69 million related to exiting our businesses in Russia.

These charges are recorded in “Restructuring and impairment charges” in the Condensed Consolidated Statements of Income.

THE WALT DISNEY COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

tabular dollars in millions, except for per share data)

New Accounting Pronouncements

Accounting Pronouncements Adopted in Fiscal 2022

Simplifying the Accounting for Income Taxes

In December 2019, the Financial Accounting Standards Board (FASB) issued guidance which simplifies the accounting for income taxes.

The guidance amends the rules for recognizing deferred taxes for investments, performing intraperiod tax allocations and calculating income taxes in interim periods.

It also reduces complexity in certain areas, including the accounting for transactions that result in a step-up in the tax basis of goodwill and allocating taxes to members of a consolidated group.

The Company adopted the new guidance in the first quarter of fiscal 2022.

The adoption did not have a material impact on our financial statements.

Facilitation of the Effects of Reference Rate Reform

In March 2020, the FASB issued guidance which provides optional expedients and exceptions for applying current GAAP to contracts, hedging relationships, and other transactions affected by the transition from the use of LIBOR to an alternative reference rate.

The guidance is applicable to contracts entered into before January 1, 2023.

The Company adopted the new guidance in the first quarter of fiscal 2022.

The adoption did not have a material impact on our financial statements.

Accounting Pronouncements Not Yet Adopted

2 unchanged sentences

The new guidance requires the disclosure of the nature of the transactions, the accounting for the transactions, and the effect of the transactions on the financial statements.

THE WALT DISNEY COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

tabular dollars in millions, except for per share data)

guidance is effective for annual periods beginning with the Company’s 2023 fiscal year (with early adoption permitted).

While the guidance will not have an effect on the Company’s Consolidated Statements of Operations or Consolidated Balance Sheets upon adoption, the Company is currently assessing the impacts this guidance will have on its financial statement disclosures.

The guidance is effective for annual periods beginning with the Company’s 2023 fiscal year.

While the 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 disclose the effects on the financial statements of incentives related to the production of content, which are the most significant type of government assistance we receive.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

1 unchanged sentence

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements