What changed in this filing

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Item 1. Financial Statements

2023-05-10 compared with 2023-02-08 · 320 added, 166 removed, 582 unchanged (46% of the section changed)

3 unchanged sentences

in millions, except per share data)

Quarter Ended

2022 January 1,

Quarter Ended Six Months Ended

2023 April 2,

2022 April 1,

2023 April 2,

Services $ 19,586 $ 17,212 $ 40,583 $ 36,754

10 unchanged sentences

Restructuring and impairment charges ( 152 ) ( 195 ) ( 221 ) ( 195 )

Other expense, net ( 42 ) ( 436 )

Other income (expense), net 149 ( 158 ) 107 ( 594 )

Interest expense, net ( 322 ) ( 355 ) ( 622 ) ( 666 )

22 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

Quarter Ended

2022 January 1,

Quarter Ended Six Months Ended

2023 April 2,

2022 April 1,

2023 April 2,

Net income $ 1,488 $ 597 $ 2,849 $ 1,749

2 unchanged sentences

Pension and postretirement medical plan adjustments

56 119 57 274

Foreign currency translation and other

115 ( 191 ) 342 ( 213 )

Other comprehensive income (loss) 89 ( 44 ) ( 225 ) 139

54 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

Quarter Ended

2022 January 1,

Six Months Ended

2023 April 2,

OPERATING ACTIVITIES

1 unchanged sentence

Depreciation and amortization 2,616 2,556

Net loss on investments and disposition of businesses 68 436

Net (gain)/loss on investments and disposition of businesses ( 88 ) 632

Deferred income taxes ( 46 ) 983

11 unchanged sentences

Income taxes 416 ( 650 )

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

Cash provided by operations - continuing operations 2,262 1,556

INVESTING ACTIVITIES

28 unchanged sentences

Interests (1)

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

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

Comprehensive income (loss) — — 1,271 89 — 1,360 147 1,507

2 unchanged sentences

Distributions and other — ( 5 ) 10 — — 5 ( 445 ) ( 440 )

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

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

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

Comprehensive income (loss) — — 470 ( 36 ) — 434 49 483

Equity compensation activity 1 327 — — — 327 — 327

Distributions and other — ( 4 ) 15 — — 11 ( 472 ) ( 461 )

Balance at April 2, 2022 1,822 $ 55,823 $ 42,032 $ ( 6,312 ) $ ( 907 ) $ 90,636 $ 4,023 $ 94,659

(1) Excludes redeemable noncontrolling interests.

See Notes to Condensed Consolidated Financial Statements

THE WALT DISNEY COMPANY

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY

Six 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 — ( 4 ) 50 — — 46 ( 492 ) ( 446 )

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

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

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

Comprehensive income — — 1,574 128 — 1,702 45 1,747

Equity compensation activity 4 356 — — — 356 — 356

Contributions — — — — — — 29 29

Distributions and other — ( 4 ) 29 — — 25 ( 509 ) ( 484 )

Balance at April 2, 2022 1,822 $ 55,823 $ 42,032 $ ( 6,312 ) $ ( 907 ) $ 90,636 $ 4,023 $ 94,659

(1) Excludes redeemable noncontrolling interests.

7 unchanged sentences

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

Operating results for the six months ended April 1, 2023 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.

13 unchanged sentences

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 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.

At April 1, 2023, NBCU’s interest in Hulu is recorded in the Company’s financial statements at $ 8.8 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.

14 unchanged sentences

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.

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.

2 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.

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

Quarter Ended

2022 January 1,

Segment revenues and segment operating income are as follows:

Quarter Ended Six Months Ended

2023 April 2,

2022 April 1,

2023 April 2,

Disney Media and Entertainment Distribution $ 14,039 $ 13,620 $ 28,815 $ 28,205

1 unchanged sentence

Total segment revenues $ 21,815 $ 20,272 $ 45,327 $ 42,091

Segment operating income (loss):

Segment operating income:

Disney Media and Entertainment Distribution $ 1,119 $ 1,944 $ 1,109 $ 2,752

3 unchanged sentences

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

Quarter Ended

2022 January 1,

Quarter Ended Six Months Ended

2023 April 2,

2022 April 1,

2023 April 2,

Disney Media and Entertainment Distribution $ 176 $ 218 $ 372 $ 463

6 unchanged sentences

tabular dollars in millions, except for per share data)

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

Quarter Ended Six Months Ended

2023 April 2,

2022 April 1,

2023 April 2,

Segment revenues $ 21,815 $ 20,272 $ 45,327 $ 42,091

Content License Early Termination (1)

— ( 1,023 ) — ( 1,023 )

Total revenues $ 21,815 $ 19,249 $ 45,327 $ 41,068

(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 made available under the agreements.

Consequently, we recorded the amounts to terminate the licenses agreements, net of remaining amounts of deferred revenue, as a reduction of revenue.

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

Quarter Ended

2022 January 1,

Quarter Ended Six Months Ended

2023 April 2,

2022 April 1,

2023 April 2,

Segment operating income $ 3,285 $ 3,699 $ 6,328 $ 6,957

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

Corporate and unallocated shared expenses ( 279 ) ( 272 ) ( 559 ) ( 500 )

Restructuring and impairment charges ( 152 ) ( 195 ) ( 221 ) ( 195 )

Other expense, net (1)

Other income (expense), net (1)

149 ( 158 ) 107 ( 594 )

3 unchanged sentences

Income from continuing operations before income taxes $ 2,123 $ 1,102 $ 3,896 $ 2,790

(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.

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

(2) TFCF and Hulu acquisition amortization is as follows:

Quarter Ended Six Months Ended

2023 April 2,

2022 April 1,

2023 April 2,

Amortization of intangible assets $ 408 $ 435 $ 825 $ 870

Step-up of film and television costs 147 156 306 313

Intangibles related to TFCF equity investees 3 3 6 6

$ 558 $ 594 $ 1,137 $ 1,189

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

2 unchanged sentences

Currency translation adjustments and other, net ( 19 ) — ( 19 )

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

Balance at April 1, 2023 $ 72,328 $ 5,550 $ 77,878

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 major source:

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

DMED DPEP Total DMED DPEP Total

Quarter Ended April 1, 2023 Quarter Ended April 2, 2022

DMED DPEP Total DMED DPEP Content License Early Termination Total

Affiliate fees $ 4,394 $ — $ 4,394 $ 4,602 $ — $ — $ 4,602

10 unchanged sentences

$ 14,039 $ 7,776 $ 21,815 $ 13,620 $ 6,652 $ ( 1,023 ) $ 19,249

Six Months Ended April 1, 2023 Six Months Ended April 2, 2022

DMED DPEP Total DMED DPEP Content License Early Termination Total

Affiliate fees $ 8,636 $ — $ 8,636 $ 8,973 $ — $ — $ 8,973

Subscription fees 8,845 — 8,845 7,485 — — 7,485

Advertising 6,005 2 6,007 6,891 2 — 6,893

Theme park admissions — 5,069 5,069 — 4,125 — 4,125

Resort and vacations — 3,929 3,929 — 2,896 — 2,896

Retail and wholesale sales of merchandise, food and beverage — 4,524 4,524 — 3,905 — 3,905

Merchandise licensing — 1,915 1,915 — 2,012 — 2,012

TV/SVOD distribution licensing 2,012 — 2,012 2,520 — ( 1,023 ) 1,497

Theatrical distribution licensing 1,907 — 1,907 753 — — 753

Home entertainment 283 — 283 524 — — 524

Other 1,127 1,073 2,200 1,059 946 — 2,005

$ 28,815 $ 16,512 $ 45,327 $ 28,205 $ 13,886 $ ( 1,023 ) $ 41,068

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 December 31, 2022 Quarter Ended January 1, 2022

Quarter Ended April 1, 2023 Quarter Ended April 2, 2022

DMED DPEP Total DMED DPEP Total

3 unchanged sentences

Total revenues $ 14,039 $ 7,776 $ 21,815 $ 13,620 $ 6,652 $ 20,272

THE WALT DISNEY COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

tabular dollars in millions, except for per share data)

Content License Early Termination ( 1,023 )

Six Months Ended April 1, 2023 Six Months Ended April 2, 2022

DMED DPEP Total DMED DPEP Total

Americas $ 23,543 $ 13,058 $ 36,601 $ 23,021 $ 11,270 $ 34,291

Europe 3,021 1,810 4,831 2,881 1,492 4,373

Asia Pacific 2,251 1,644 3,895 2,303 1,124 3,427

Total revenues $ 28,815 $ 16,512 $ 45,327 $ 28,205 $ 13,886 $ 42,091

Content License Early Termination ( 1,023 )

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 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.

For the quarter ended April 1, 2023, $ 0.7 billion was recognized related to performance obligations satisfied as of December 31, 2022.

For the six months ended April 1, 2023, $ 0.5 billion was recognized related to performance obligations satisfied as of October 1, 2022.

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

For the six months ended April 2, 2022, $ 0.7 billion was recognized related to performance obligations satisfied as of October 2, 2021.

As of April 1, 2023, revenue for unsatisfied performance obligations expected to be recognized in the future is $ 16 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, DTC wholesalers, sports sublicensees, and advertisers.

Of this amount, we expect to recognize approximately $ 3 billion in the remainder of fiscal 2023, $ 5 billion in fiscal 2024, $ 4 billion in fiscal 2025 and $ 4 billion thereafter.

13 unchanged sentences

Non-current 870 927

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.

For the quarter and six months ended April 1, 2023, the Company recognized revenue of $ 0.9 billion and $ 4.3 billion, respectively, that was included in the October 1, 2022 deferred revenue balance.

For the quarter and six months ended April 2, 2022, the Company recognized revenue of $ 0.9 billion and $ 2.8 billion, respectively, that was included in the October 2, 2021

THE WALT DISNEY COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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 licenses.

3 unchanged sentences

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 $ 0.6 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 )

The balance of TV/SVOD licensing receivables recorded in other non-current assets was $ 0.5 billion at April 1, 2023 and $ 0.6 billion at October 1, 2022.

The balance of vacation club receivables recorded in other non-current assets was $ 0.6 billion at both April 1, 2023 and October 1, 2022.

The allowance for credit losses and activity for the period ended April 1, 2023 was not material.

Other Income (Expense), net

Other income (expense), net is as follows:

Quarter Ended Six Months Ended

2023 April 2,

2022 April 1,

2023 April 2,

DraftKings gain (loss) $ 149 $ ( 158 ) $ 79 $ ( 590 )

Other, net — — 28 ( 4 )

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).

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

Other income (expense), net $ 149 $ ( 158 ) $ 107 $ ( 594 )

For the quarter and six months ended April 1, 2023, the Company recognized a non-cash gain of $ 149 million and $ 79 million, respectively, to adjust its investment in DraftKings, Inc.

(DraftKings) to fair value (DraftKings gain (loss)).

For the prior-year quarter and six months ended April 2, 2022, the Company recognized a DraftKings loss of $ 158 million and $ 590 million, respectively.

Cash, Cash Equivalents, Restricted Cash and Borrowings

7 unchanged sentences

Total cash, cash equivalents and restricted cash in the statement of cash flows $ 10,453 $ 11,661

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

THE WALT DISNEY COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

tabular dollars in millions, except for per share data)

During the six months ended April 1, 2023, the Company’s borrowing activity was as follows:

2022 Borrowings Payments Other

Activity December 31,

Activity April 1,

Commercial paper with original maturities less than three months $ 50 $ 958 $ — $ 2 $ 1,010

6 unchanged sentences

(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:

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

Capacity Capacity

3 unchanged sentences

Total $ 12,250 $ — $ 12,250

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 Company had a $ 5.25 billion bank facility that was scheduled to expire in March 2023.

This facility was refinanced with a new $ 5.25 billion bank facility maturing in March 2024.

All three of the bank facilities allow for borrowings at SOFR-based rates, 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 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 December 31, 2022, the Company met this covenant by a significant margin.

On April 1, 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 December 31, 2022, the Company has $ 2.0 billion of outstanding letters of credit, of which none were issued under this facility.

As of April 1, 2023, the Company has $ 1.9 billion of outstanding letters of credit, of which none were issued under this facility.

Cruise Ship Credit Facilities

4 unchanged sentences

Early repayment is permitted subject to cancellation fees .

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

2022 January 1,

Quarter Ended Six Months Ended

2023 April 2,

2022 April 1,

2023 April 2,

Interest expense $ ( 504 ) $ ( 374 ) $ ( 969 ) $ ( 735 )

6 unchanged sentences

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 $ 2,483 $ 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 quarter ended December 31, 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 six months ended April 1, 2023:

Revenues $ 2,091

1 unchanged sentence

Equity in the loss of investees ( 2 )

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.

Asia Theme Parks’ royalty and management fees of $ 83 million for the six months ended April 1, 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 six months ended April 1, 2023 were $ 509 million provided by operating activities, $ 483 million used in investing activities and $ 78 million provided by financing activities.

THE WALT DISNEY COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

tabular dollars in millions, except for per share data)

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 ($ 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 has provided Hong Kong Disneyland Resort with a revolving credit facility of HK $ 2.7 billion ($ 344 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 April 1, 2023 was $ 230 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 %.

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

As of April 1, 2023, the total amount outstanding under the line of credit was 1.2 billion yuan (approximately $ 180 million).

These balances are eliminated in consolidation.

Shendi has provided Shanghai Disney Resort with loans totaling 8.5 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

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).

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 April 1, 2023 the total amount outstanding under the line of credit was 1.6 billion yuan (approximately $ 238 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 December 31, 2022 As of October 1, 2022

As of April 1, 2023 As of October 1, 2022

Predominantly Monetized Individually Predominantly Monetized

11 unchanged sentences

Non-current portion $ 36,949 $ 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

2022 January 1,

Quarter Ended Six Months Ended

2023 April 2,

2022 April 1,

2023 April 2,

Produced content

1 unchanged sentence

Predominantly monetized as a group 1,952 1,503 4,112 3,121

2,958 2,341 6,275 4,992

Licensed programming rights and advances 3,196 2,839 7,735 7,650

3 unchanged sentences

Unrecognized Tax Benefits

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.

During the six months ended April 1, 2023, the Company increased its gross unrecognized tax benefits (before interest and penalties) by $ 0.2 billion to $ 2.7 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)

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 in California, the Company is permitted to defer payment of fiscal 2023 federal and California state tax payments until October 16, 2023.

Pension and Other Benefit Programs

1 unchanged sentence

Pension Plans Postretirement Medical Plans

Quarter Ended Quarter Ended

2022 January 1,

2022 December 31,

2022 January 1,

Quarter Ended Six Months Ended Quarter Ended Six Months Ended

2023 April 2,

2022 April 1, 2023 April 2, 2022 April 1,

2023 April 2,

2022 April 1, 2023 April 2, 2022

Service costs $ 63 $ 102 $ 128 $ 202 $ 2 $ 3 $ 3 $ 5

6 unchanged sentences

Net periodic benefit cost (income) $ ( 22 ) $ 80 $ ( 42 ) $ 159 $ 3 $ 9 $ 3 $ 16

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.

During the six months ended April 1, 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.

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.

THE WALT DISNEY COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

tabular dollars in millions, except for per share data)

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

2022 January 1,

Quarter Ended Six Months Ended

2023 April 2,

2022 April 1,

2023 April 2,

Shares (in millions):

12 unchanged sentences

AOCI, before tax

First quarter of fiscal 2023

Second quarter of fiscal 2023

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

Quarter Ended April 1, 2023:

Unrealized gains (losses) arising during the period 7 71 125 203

Reclassifications of realized net (gains) losses to net income ( 116 ) 1 — ( 115 )

Balance at April 1, 2023 $ 2 $ ( 3,697 ) $ ( 1,701 ) $ ( 5,396 )

Second quarter of fiscal 2022

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

Quarter Ended April 2, 2022:

Unrealized gains (losses) arising during the period 53 — ( 196 ) ( 143 )

Reclassifications of realized net (gains) losses to net income ( 21 ) 155 — 134

Balance at April 2, 2022 $ ( 51 ) $ ( 6,668 ) $ ( 1,280 ) $ ( 7,999 )

Six months ended fiscal 2023

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

Quarter Ended December 31, 2022:

Six Months Ended April 1, 2023:

Unrealized gains (losses) arising during the period ( 468 ) 71 271 ( 126 )

Reclassifications of realized net (gains) losses to net income ( 334 ) 2 42 ( 290 )

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

First quarter of fiscal 2022

Balance at April 1, 2023 $ 2 $ ( 3,697 ) $ ( 1,701 ) $ ( 5,396 )

Six months ended fiscal 2022

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

Quarter Ended January 1, 2022:

Six Months Ended April 2, 2022:

Unrealized gains (losses) arising during the period 140 47 ( 233 ) ( 46 )

Reclassifications of realized net (gains) losses to net income ( 39 ) 310 — 271

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

Balance at April 2, 2022 $ ( 51 ) $ ( 6,668 ) $ ( 1,280 ) $ ( 7,999 )

THE WALT DISNEY COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

tabular dollars in millions, except for per share data)

Market Value Adjustments for Hedges Unrecognized

2 unchanged sentences

and Other AOCI

First quarter of fiscal 2023

Second quarter of fiscal 2023

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

Quarter Ended April 1, 2023:

Unrealized gains (losses) arising during the period — ( 16 ) ( 10 ) ( 26 )

Reclassifications of realized net (gains) losses to net income 27 — — 27

Balance at April 1, 2023 $ ( 1 ) $ 885 $ 123 $ 1,007

Second quarter of fiscal 2022

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

Quarter Ended April 2, 2022:

Unrealized gains (losses) arising during the period ( 9 ) — 13 4

Reclassifications of realized net (gains) losses to net income 5 ( 36 ) — ( 31 )

Balance at April 2, 2022 $ 19 $ 1,570 $ 98 $ 1,687

Six months ended fiscal 2023

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

Quarter Ended December 31, 2022:

Six Months Ended April 1, 2023:

Unrealized gains (losses) arising during the period 100 ( 16 ) ( 2 ) 82

Reclassifications of realized net (gains) losses to net income 78 — ( 14 ) 64

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

First quarter of fiscal 2022

Balance at April 1, 2023 $ ( 1 ) $ 885 $ 123 $ 1,007

Six months ended fiscal 2022

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

Quarter Ended January 1, 2022:

Six Months Ended April 2, 2022:

Unrealized gains (losses) arising during the period ( 32 ) ( 11 ) 9 ( 34 )

Reclassifications of realized net (gains) losses to net income 9 ( 72 ) — ( 63 )

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

Balance at April 2, 2022 $ 19 $ 1,570 $ 98 $ 1,687

THE WALT DISNEY COMPANY

6 unchanged sentences

AOCI, after tax

First quarter of fiscal 2023

Second quarter of fiscal 2023

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

Quarter Ended April 1, 2023:

Unrealized gains (losses) arising during the period 7 55 115 177

Reclassifications of realized net (gains) losses to net income ( 89 ) 1 — ( 88 )

Balance at April 1, 2023 $ 1 $ ( 2,812 ) $ ( 1,578 ) $ ( 4,389 )

Second quarter of fiscal 2022

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

Quarter Ended April 2, 2022:

Unrealized gains (losses) arising during the period 44 — ( 183 ) ( 139 )

Reclassifications of realized net (gains) losses to net income ( 16 ) 119 — 103

Balance at April 2, 2022 $ ( 32 ) $ ( 5,098 ) $ ( 1,182 ) $ ( 6,312 )

Six months ended fiscal 2023

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

Quarter Ended December 31, 2022:

Six Months Ended April 1, 2023:

Unrealized gains (losses) arising during the period ( 368 ) 55 269 ( 44 )

Reclassifications of realized net (gains) losses to net income ( 256 ) 2 28 ( 226 )

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

First quarter of fiscal 2022

Balance at April 1, 2023 $ 1 $ ( 2,812 ) $ ( 1,578 ) $ ( 4,389 )

Six months ended fiscal 2022

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

Quarter Ended January 1, 2022:

Six Months Ended April 2, 2022:

Unrealized gains (losses) arising during the period 108 36 ( 224 ) ( 80 )

Reclassifications of realized net (gains) losses to net income ( 30 ) 238 — 208

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

Balance at April 2, 2022 $ ( 32 ) $ ( 5,098 ) $ ( 1,182 ) $ ( 6,312 )

THE WALT DISNEY COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

tabular dollars in millions, except for per share data)

Details about AOCI components reclassified to net income are as follows:

1 unchanged sentence

Affected line item in the Condensed Consolidated Statements of Operations:

Quarter Ended

2022 January 1,

Quarter Ended Six Months Ended

2023 April 2,

2022 April 1,

2023 April 2,

Market value adjustments, primarily cash flow hedges Primarily revenue $ 116 $ 21 $ 334 $ 39

6 unchanged sentences

Total reclassifications for the period $ 88 $ ( 103 ) $ 226 $ ( 208 )

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

2022 January 1,

Quarter Ended Six Months Ended

2023 April 2,

2022 April 1,

2023 April 2,

Stock options $ 20 $ 21 $ 39 $ 45

RSUs 280 233 531 405

Total equity-based compensation expense (1)

$ 300 $ 254 $ 570 $ 450

Equity-based compensation expense capitalized during the period $ 37 $ 40 $ 73 $ 70

(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 $ 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.

Unrecognized compensation cost related to unvested stock options and RSUs was $ 96 million and $ 1.9 billion, respectively, as of April 1, 2023.

During the six months ended April 1, 2023 and April 2, 2022, the weighted average grant date fair values for options granted were $ 34.72 and $ 47.39 , respectively, and for RSUs were $ 92.07 and $ 148.75 , respectively.

During the six months ended April 1, 2023, the Company made equity compensation grants consisting of 1.6 million stock options and 9.7 million RSUs.

Commitments and Contingencies

2 unchanged sentences

Management does not believe that the Company has incurred a probable material loss by reason of any of those actions.

THE WALT DISNEY COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

tabular dollars in millions, except for per share data)

Fair Value Measurements

5 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 December 31, 2022

Fair Value Measurement at April 1, 2023

Level 1 Level 2 Level 3 Total

21 unchanged sentences

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.

Counterparty credit risk, which is

THE WALT DISNEY COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

tabular dollars in millions, except for per share data)

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.

2 unchanged sentences

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 December 31, 2022

As of April 1, 2023

Assets Other Assets Other Current Liabilities Other Long-

23 unchanged sentences

Net derivative positions $ 38 $ 168 $ ( 64 ) $ ( 65 )

THE WALT DISNEY COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

tabular dollars in millions, except for per share data)

Interest Rate Risk Management

3 unchanged sentences

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

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

tabular dollars in millions, except for per share data)

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 April 1, 2023 and October 1, 2022, was $ 13.5 billion and $ 14.5 billion, respectively.

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

1 unchanged sentence

in Hedged Borrowings

2022 October 1, 2022 December 31,

2023 October 1, 2022 April 1,

2023 October 1, 2022

3 unchanged sentences

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

Quarter Ended

2022 January 1,

Quarter Ended Six Months Ended

2023 April 2,

2022 April 1,

2023 April 2,

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 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.

The Company did not have pay-fixed interest rate swaps that were designated as cash flow hedges of interest payments at April 1, 2023 or at October 1, 2022, and gains and losses related to pay-fixed interest rate swaps recognized in earnings for the quarters and six-month periods ended April 1, 2023 and April 2, 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 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.

As of April 1, 2023 and October 1, 2022, the notional amounts of the Company’s net foreign exchange cash flow hedges were $ 8.4 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

2022 January 1,

Quarter Ended Six Months Ended

2023 April 2,

2022 April 1,

2023 April 2,

Gain (loss) recognized in Other Comprehensive Income $ 15 $ 42 $ ( 487 ) $ 121

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

116 13 338 26

(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 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.

As of April 1, 2023 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 and six-month periods ended April 1, 2023 and April 2, 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 December 31, 2022 and October 1, 2022 were $ 4.2 billion and $ 3.8 billion, respectively.

The net notional amounts of these foreign exchange contracts at April 1, 2023 and October 1, 2022 were $ 4.3 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:

2022 January 1,

2022 December 31,

2022 January 1,

2022 December 31,

2022 January 1,

2023 April 2,

2022 April 1,

2023 April 2,

2022 April 1,

2023 April 2,

Net gains (losses) on foreign currency denominated assets and liabilities $ 15 $ ( 82 ) $ ( 2 ) $ ( 13 ) $ ( 21 ) $ 37

1 unchanged sentence

Net gains (losses) $ ( 32 ) $ ( 45 ) $ ( 1 ) $ ( 3 ) $ ( 4 ) $ 2

Six Months Ended:

Net gains (losses) on foreign currency denominated assets and liabilities $ 160 $ ( 145 ) $ ( 20 ) $ ( 12 ) $ ( 109 ) $ 45

Net gains (losses) on foreign exchange risk management contracts not designated as hedges ( 260 ) 70 19 10 87 ( 43 )

Net gains (losses) $ ( 100 ) $ ( 75 ) $ ( 1 ) $ ( 2 ) $ ( 22 ) $ 2

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 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.

The notional amount of these commodities contracts at April 1, 2023 and October 1, 2022 and related gains or losses recognized in earnings for the quarters and six-month periods ended April 1, 2023 and April 2, 2022 were not material.

THE WALT DISNEY COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

tabular dollars in millions, except for per share data)

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 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.

The notional amounts of these contracts at both April 1, 2023 and October 1, 2022 were $ 0.4 billion.

The related gains or losses recognized in earnings were not material for the quarters and six-month periods ended April 1, 2023 and April 2, 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 $ 1.7 billion and $ 1.5 billion on December 31, 2022 and October 1, 2022, respectively.

The aggregate fair values of derivative instruments with credit-risk-related contingent features in a net liability position by counterparty were $ 1.5 billion at both April 1, 2023 and October 1, 2022.

Restructuring and Impairment Charges

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

The quarter ended April 1, 2023 included charges of $ 152 million primarily for severance costs.

The six months ended April 1, 2023 included charges of $ 221 million primarily for severance costs and costs related to exiting our businesses in Russia.

The quarter and six months ended April 2, 2022 included charges of $ 195 million due to the impairment of an intangible asset related to the Disney Channel 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

1 unchanged sentence

Disclosures by Business Entities about Government Assistance

In November 2021, the FASB issued guidance requiring annual disclosures about transactions with a government that are accounted for by analogizing to a grant or contribution accounting model.

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.

In November 2021, the FASB issued guidance requiring annual disclosures about transactions with a government that are accounted for by analogizing to a grant or contribution accounting model, including:

the nature of the transactions, the accounting for the transactions, and the effect of the transactions on the financial statements.

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.

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 provide disclosures related to content production incentives, 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