What changed in this filing

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Item 7. Management’s Discussion and Analysis

2023-11-21 compared with 2022-11-29 · 1066 added, 373 removed, 453 unchanged (76% of the section changed)

2 unchanged sentences

($ in millions, except per share data)

2022 2021 % Change

Better (Worse)

2023 2022 2021 2023

Services $ 79,562 $ 74,200 $ 61,768 7 % 20 %

8 unchanged sentences

Restructuring and impairment charges ( 3,892 ) ( 237 ) ( 654 ) >(100) % 64 %

Other income (expense), net ( 667 ) 201 nm

Other income (expense), net 96 ( 667 ) 201 nm nm

Interest expense, net ( 1,209 ) ( 1,397 ) ( 1,406 ) 13 % 1 %

4 unchanged sentences

Loss from discontinued operations, net of income tax benefit of $0, $14 and $9, respectively

— ( 48 ) ( 29 ) 100 % (66) %

Net income 3,390 3,505 2,507 (3) % 40 %

1 unchanged sentence

Net income attributable to Disney $ 2,354 $ 3,145 $ 1,995 (25) % 58 %

Earnings (loss) per share attributable to Disney:

Continuing operations $ 1.75 $ 1.11 58 %

Discontinued operations ( 0.03 ) ( 0.02 ) (50) %

$ 1.72 $ 1.09 58 %

Continuing operations $ 1.75 $ 1.11 58 %

Discontinued operations ( 0.03 ) ( 0.02 ) (50) %

Diluted earnings per share attributable to Disney

$ 1.29 $ 1.75 $ 1.11 (26) % 58 %

Weighted average number of common and common equivalent shares outstanding:

Diluted 1,827 1,828

Basic 1,822 1,816

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

Organization of Information

1 unchanged sentence

It includes the following sections:

• Significant Developments

• Consolidated Results and Non-Segment Items

3 unchanged sentences

• Liquidity and Capital Resources

• Supplemental Guarantor Financial Information

• Critical Accounting Policies and Estimates

In Item 7, we discuss fiscal 2022 and 2021 results and comparisons of fiscal 2022 results to fiscal 2021 results.

Discussions of fiscal 2020 results and comparisons of fiscal 2021 results to fiscal 2020 results can be found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of the Company’s Annual Report on Form 10-K for the fiscal year ended October 2, 2021.

SIGNIFICANT DEVELOPMENTS

Leadership Change and Pending Restructuring

As previously announced, on November 20, 2022, Robert A.

Iger returned to the Company as Chief Executive Officer (“CEO”) and a director.

Iger previously spent more than four decades at the Company, including 15 years as CEO.

In announcing Mr.

Iger’s appointment, the Company noted he has agreed to serve as CEO for two years, with a mandate from the Company’s Board of Directors “to set the strategic direction for renewed growth and to work closely with the Board in developing a successor to lead the Company at the completion of his term.” Mr.

Iger succeeded Robert A.

Chapek, who had served as CEO since 2020.

As contemplated by the leadership change announcement, we anticipate that within the coming months Mr.

Iger will initiate organizational and operating changes within the Company to address the Board’s goals.

While the plans are in early stages, changes in our structure and operations, including within DMED (and including possibly our distribution approach and the businesses/distribution platforms selected for the initial distribution of content), can be expected.

The restructuring and change in business strategy, once determined, could result in impairment charges.

COVID-19 Pandemic

Since early 2020, the world has been, and continues to be, impacted by 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 DPEP where our theme parks and resorts were closed and cruise ship sailings and guided tours were suspended.

In addition, at DMED we delayed, or in some cases, shortened or cancelled theatrical releases and experienced disruptions in the production and availability of content.

Operations have resumed at various points since May 2020, with certain theme park and resort operations and film and television productions resuming by the end of fiscal 2020 and throughout fiscal 2021.

Although operations resumed, many of our businesses continue to experience impacts from COVID-19, such as incremental health and safety measures and related increased expenses, capacity restrictions and closures (including at some of our international parks and in theaters in certain markets), and disruption of content production activities.

The impact of COVID-19 related disruptions on our financial and operational results will be dictated by the currently unknowable duration and severity of COVID-19 and its variants, and among other things, 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.

Additionally, see Part I., Item 1A.

Risk Factors - The adverse impact of COVID-19 on our businesses will continue for an unknown length of time and may continue to impact certain of our key sources of revenue.

• DTC Product Descriptions, Key Definitions and Supplemental Information

• Supplemental Guarantor Financial Information

CONSOLIDATED RESULTS AND NON-SEGMENT ITEMS

In fiscal 2023, the Company reorganized into three business segments:

Entertainment, Sports and Experiences (renamed from Disney Parks, Experiences and Products).

Fiscal 2022 and 2021 segment financial information has been recast for the following:

• The prior Disney Media and Entertainment Distribution segment has been reorganized into the Entertainment and Sports segments

• A portion of Consumer Products revenues is recognized at the Entertainment segment, which is meant to reflect royalties on merchandise licensing revenues generated on IP created by the Entertainment segment

Revenues for fiscal 2023 increased 7%, or $6.2 billion, to $88.9 billion;

net income attributable to Disney increased $1.2 billion, to income of $3.1 billion;

and diluted earnings per share from continuing operations attributable to Disney increased to income of $1.75 compared to income of $1.11 in the prior year.

The EPS increase was due to higher segment

operating results, partially offset by higher income tax expense in the current year compared to the prior year.

Higher segment operating results reflecting growth at DPEP, partially offset by lower operating results at DMED.

Service revenues for fiscal 2022 increased 20%, or $12.4 billion, to $74.2 billion, due to increased revenues at our theme parks and resorts, higher DTC subscription revenue and, to a lesser extent, higher theatrical distribution and advertising revenue.

These increases were partially offset by 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 DTC services (Content License Early Termination).

The increase at theme parks and resorts was due to higher volumes, which generally reflected the impact of operating with capacity restrictions in the prior year as a result of COVID-19, and higher average per capita ticket revenue.

The increase in DTC subscription revenue was due to subscriber growth and higher average rates.

net income attributable to Disney decreased $0.8 billion to income of $2.4 billion compared to $3.1 billion in the prior year;

and diluted earnings per share (EPS) from continuing operations attributable to Disney decreased to $1.29 compared to $1.75 in the prior year.

In the prior year, the Company recorded a reduction in revenue of $1.0 billion 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 at our Entertainment Direct-to-Consumer services (Content License Early Termination).

The EPS decrease was due to higher restructuring and impairment charges and lower operating income at Entertainment.

These decreases were partially offset by the comparison to the impact of the Content License Early Termination, higher operating income at Experiences in the current year compared to the prior year and investment gains in the current year compared to investment losses in the prior year.

Service revenues for fiscal 2023 increased 7%, or $5.4 billion, to $79.6 billion, due to growth at our theme parks and resorts, higher subscription revenue, an increase in theatrical distribution revenue and the comparison to the revenue reduction for the Content License Early Termination in the prior year.

These increases were partially offset by decreases in advertising revenue, TV/VOD distribution sales and affiliate revenue.

Growth at theme parks and resorts was due to higher volumes and guest spending.

The increase in subscription revenue was due to subscriber growth and higher rates.

Service revenues reflected an approximate 1 percentage point decrease due to an unfavorable movement of the U.S.

dollar against major currencies including the impact of our hedging program (Foreign Exchange Impact).

Product revenues for fiscal 2023 increased 10%, or $0.8 billion, to $9.3 billion, due to higher sales volumes of merchandise, food and beverage at our theme parks and resorts, partially offset by lower home entertainment volumes.

Product revenues reflected an approximate 2 percent point decrease due to an unfavorable Foreign Exchange Impact.

Costs and expenses

Cost of services for fiscal 2023 increased 9%, or $4.2 billion, to $53.1 billion, due to higher programming and production costs, inflation and increased volumes at our theme parks and resorts and, to a lesser extent, higher technology and distribution costs at Entertainment Direct-to-Consumer.

The increase in programming and production costs was due to higher costs at Entertainment Direct-to-Consumer and increased production cost amortization resulting from higher theatrical revenue, partially offset by a decrease in production cost amortization due to lower TV/VOD distribution sales.

Costs of services reflected an approximate 1 percentage point decrease due to a favorable Foreign Exchange Impact.

Cost of products for fiscal 2023 increased 11%, or $0.6 billion, to $6.1 billion, due to higher sales volumes of merchandise, food and beverage and cost inflation at our theme parks and resorts.

Cost of products reflected an approximate 1 percent point decrease due to a favorable Foreign Exchange Impact.

Selling, general, administrative and other costs for fiscal 2023 decreased 6%, or $1.1 billion, to $15.3 billion, primarily due to lower marketing costs at Entertainment Direct-to-Consumer.

These decreases were partially offset by higher theatrical marketing costs and an increase in marketing costs at theme parks and resorts.

Selling, general, administrative and other costs reflected an approximate 1 percentage point decrease due to a favorable Foreign Exchange Impact.

Depreciation and amortization increased 4 %, or $0.2 billion, to $5.4 billion due to higher depreciation at our domestic parks and resorts including accelerated depreciation related to the closure of Star Wars:

Galactic Starcruiser and depreciation for the Disney Wish , which launched in the fourth quarter of the prior year, partially offset by lower amortization of intangible assets from the acquisition of TFCF and Hulu.

Restructuring and Impairment Charges

Restructuring and impairment charges in fiscal 2023 were $3,892 million comprising:

• $2,577 million for the Content Impairment charge (see Note 18 of the Consolidated Financial Statements)

• $721 million of goodwill impairments (see Note 18 of the Consolidated Financial Statements)

• $357 million for severance

• $141 million for an impairment of an equity investment

• $96 million for exiting our businesses in Russia and other charges

Restructuring and impairment charges in fiscal 2022 were $237 million primarily due to the impairment of an intangible and other assets related to exiting our businesses in Russia.

Other Income (expense), net

($ in millions)

2023 2022 % Change

Better (Worse)

DraftKings gain (loss)

$ 169 $ ( 663 ) nm

Other, net (73) (4) >(100) %

Other income (expense), net $ 96 $ (667) nm

In fiscal 2023, the Company recognized a gain of $ 169 million on its investment in DraftKings, Inc.

(DraftKings), which was sold in the current fiscal year.

In fiscal 2022, the Company recognized a non-cash loss of $663 million from the adjustment of its investment in DraftKings to fair value.

Interest Expense, net

($ in millions)

2023 2022 % Change

Better (Worse)

Interest expense $ ( 1,973 ) $ ( 1,549 ) (27) %

Interest income, investment income and other 764 152 >100 %

Interest expense, net $ (1,209) $ (1,397) 13 %

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

The increase in interest income, investment income and other resulted from higher interest income on cash balances, which reflected an increase in interest rates, and a larger benefit from pension and postretirement benefit costs, other than service cost.

Equity in the Income of Investees

Equity in the income of investees decreased $34 million to $ 782 million in the current year primarily due to lower income from A+E.

Effective Income Tax Rate

($ in millions)

Income from continuing operations before income taxes $ 4,769 $ 5,285

Income tax expense on continuing operations 1,379 1,732

Effective income tax rate - continuing operations 28.9% 32.8%

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

• A lower effective tax rate on foreign earnings in the current year compared to the prior year;

• A favorable comparison from adjustments related to previous year’s tax matters, which was a benefit in the current year and a detriment in the prior year;

partially offset by

• New tax regulations issued in the prior year that limited our ability to use certain accumulated foreign tax credits;

• An unfavorable impact in the current year from goodwill impairments, which were not tax deductible;

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

Noncontrolling Interests

($ in millions)

2023 2022 % Change

Better (Worse)

Net income from continuing operations attributable to noncontrolling interests

$ ( 1,036 ) $ ( 360 ) >(100) %

The increase in net income from continuing operations attributable to noncontrolling interests was due to improved results at our Asia Theme Parks and higher accretion of NBC Universal’s interest in Hulu.

Net income attributable to noncontrolling interests is determined on income after royalties and management fees, financing costs and income taxes, as applicable.

Certain Items Impacting Results in the Year

Results for fiscal 2023 were impacted by the following:

• TFCF and Hulu acquisition amortization of $1,998 million

• Other income of $96 million due to the DraftKings gain of $169 million

• Restructuring and impairment charges of $3,892 million

Results for fiscal 2022 were impacted by the following:

• TFCF and Hulu acquisition amortization of $2,353 million

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

• Other expense of $667 million due to the DraftKings loss of $663 million

• Restructuring and impairment charges of $237 million

A summary of the impact of these items on EPS is as follows:

($ in millions, except per share data)

Pre-Tax Income (Loss) Tax Benefit (Expense) (1)

After-Tax Income (Loss) EPS Favorable (Adverse) (2)

Year Ended September 30, 2023:

Restructuring and impairment charges (3)

$ (3,836) $ 717 $ (3,119) $ (1.69)

TFCF and Hulu acquisition amortization (4)

(1,998) 465 (1,533) (0.82)

Other income (expense), net 96 (13) 83 0.05

Total $ (5,738) $ 1,169 $ (4,569) $ (2.46)

Year Ended October 1, 2022:

TFCF and Hulu acquisition amortization (4)

$ (2,353) $ 549 $ (1,804) $ (0.97)

Contract License Early Termination (1,023) 238 (785) (0.43)

Other income (expense), net (667) 156 (511) (0.28)

Restructuring and impairment charges (237) 55 (182) (0.10)

Total $ (4,280) $ 998 $ (3,282) $ (1.78)

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

(2) EPS is net of noncontrolling interest, where applicable.

Total may not equal the sum of the column due to rounding.

(3) Restructuring and impairment charges include the impact of a content license agreement termination with A+E, which generated a gain at A+E.

The Company’s 50% interest in this gain was $56 million (A+E gain) and is included in Restructuring and impairment charges in this table.

(4) Includes amortization of intangibles related to TFCF equity investees.

Revenues for fiscal 2022 increased 23%, or $15.3 billion, to $82.7 billion;

net income attributable to Disney increased $1.2 billion, to income of $3.1 billion compared to $2.0 billion in fiscal 2021;

and EPS from continuing operations attributable to Disney increased to $1.75 compared to $1.11 in fiscal 2021.

The EPS increase was due to growth at Experiences, partially offset by lower operating results at Entertainment, higher income tax expense and the Content License Early Termination.

Service revenues for fiscal 2022 increased 20%, or $12.4 billion, to $74.2 billion, due to increased revenues at our theme parks and resorts, subscription revenue growth and, to a lesser extent, higher theatrical distribution and advertising revenue.

These increases were partially offset by the Content License Early Termination.

The increase at theme parks and resorts was due to higher volumes, which generally reflected the impact of operating with capacity restrictions in fiscal 2021 as a result of COVID-19, and higher average per capita ticket revenue.

The increase in subscription revenue was due to subscriber growth and higher average rates.

Service revenues reflected an approximate 1 percent point decrease due to an unfavorable Foreign Exchange Impact.

Product revenues for fiscal 2022 increased 51%, or $2.9 billion, to $8.5 billion, due to higher sales volumes of merchandise, food and beverage at our theme parks and resorts.

Costs and expenses

Cost of services for fiscal 2022 increased 19%, or $7.8 billion, to $49.0 billion, due to higher programming and production costs, increased volumes at our theme parks and resorts and higher technical support costs at Direct-to-Consumer.

The increase in programming and production costs was due to higher costs at Direct-to-Consumer, increased sports programming costs and an increase in production cost amortization due to theatrical revenue growth.

The increase in programming and production costs was due to higher costs at Entertainment Direct-to-Consumer, an increase in sports right costs and higher production cost amortization due to theatrical revenue growth.

These increases were partially offset by lower programming and production costs as a result of international channel closures.

Cost of products for fiscal 2022 increased 36%, or $1.4 billion, to $5.4 billion, due to higher merchandise, food and beverage sales at our theme parks and resorts.

Selling, general, administrative and other costs for fiscal 2022 increased 21%, or $2.9 billion, to $16.4 billion, primarily due to higher marketing costs at our DTC and, to a lesser extent, theatrical distribution and parks and experiences businesses.

Selling, general, administrative and other costs for fiscal 2022 increased 21%, or $2.9 billion, to $16.4 billion, primarily due to higher marketing costs at Entertainment Direct-to-Consumer and, to a lesser extent, our theatrical distribution and parks and experiences businesses.

Restructuring and Impairment Charges

Restructuring and impairment charges in fiscal 2022 were $0.2 billion primarily due to the impairment of an intangible and other assets related to our businesses in Russia.

We may incur additional charges to exit these businesses, which are not anticipated to be material.

Restructuring and impairment charges in fiscal 2021 were $0.7 billion due to $0.4 billion of asset impairments and severance costs related to the shut-down of an animation studio and the closure of a substantial number of Disney-branded retail stores in North America and Europe and $0.3 billion of severance and other costs in connection with the integration of TFCF and workforce reductions at DPEP.

Restructuring and impairment charges in fiscal 2022 were $0.2 billion primarily due to the impairment of an intangible and other assets related to exiting our businesses in Russia.

Restructuring and impairment charges in fiscal 2021 were $0.7 billion comprising:

• $0.4 billion of asset impairments and severance costs related to the shut-down of an animation studio and the closure of a substantial number of Disney-branded retail stores in North America and Europe

• $0.3 billion of severance and other costs in connection with the integration of TFCF and workforce reductions at Experiences

Other Income (expense), net

(in millions) 2022 2021 % Change

($ in millions)

2022 2021 % Change

Better (Worse)

4 unchanged sentences

Other income (expense), net $ (667) $ 201 nm

In fiscal 2022, the Company recognized a non-cash loss of $ 663 million from the adjustment of its investment in DraftKings Inc.

(DraftKings) to fair value (DraftKings loss).

In fiscal 2022, the Company recognized a non-cash loss of $ 663 million from the adjustment of our investment in DraftKings to fair value.

In fiscal 2021, the Company recognized a $186 million gain from the sale of our investment in fuboTV Inc.

(fuboTV gain), a $126 million gain on the sale of our 50% interest in a German free-to-air (FTA) television network (German FTA gain) and a $111 million DraftKings loss.

(fuboTV gain), a $126 million gain on the sale of our 50% interest in a German free-to-air (FTA) television network (German FTA gain) and a non-cash loss of $111 million from the adjustment of our investment in DraftKings to fair value.

Interest Expense, net

(in millions) 2022 2021 % Change

($ in millions)

2022 2021 % Change

Better (Worse)

2 unchanged sentences

Interest expense, net $ (1,397) $ (1,406) 1 %

Interest expense was comparable to the prior year as higher average interest rates were offset by lower average debt balances.

The increase in interest income, investment income and other was due to a favorable comparison of pension and postretirement benefit costs, other than service cost, which was a net benefit in the current year and an expense in the prior year.

This increase was partially offset by investment losses in the current year compared to investment gains in the prior year.

Interest expense in fiscal 2022 was comparable to fiscal 2021 as the impact of higher average interest rates was offset by the impact of lower average debt balances.

This increase was partially offset by investment losses in fiscal 2022 compared to investment gains in fiscal 2021.

Equity in the Income of Investees

Equity in the income of investees increased $55 million to $ 816 million in the current year due to higher income from A+E Television Networks (A+E) and the comparison to investment impairments in the prior year.

Equity in the income of investees increased $55 million to $816 million in fiscal 2022 due to higher income from A+E and the comparison to investment impairments in fiscal 2021.

Effective Income Tax Rate

($ in millions)

Income from continuing operations before income taxes $ 5,285 $ 2,561

1 unchanged sentence

Effective income tax rate - continuing operations 32.8% 1.0%

The effective income tax rate in the current year was higher than the U.S.

The effective income tax rate in fiscal 2022 was higher than the U.S.

statutory rate primarily due to higher effective tax rates on foreign earnings.

The effective income tax rate in the prior year was lower than the U.S.

The effective income tax rate in fiscal 2021 was lower than the U.S.

statutory rate due to favorable adjustments related to prior years and excess tax benefits on employee share-based awards, partially offset by higher effective tax rates on foreign earnings.

Higher effective tax rates on foreign earnings in both the current and prior year reflected the impact of foreign losses and, to a lesser extent, foreign tax credits for which we are unable to recognize a tax benefit.

Higher effective tax rates on foreign earnings in both fiscal 2022 and 2021 reflected the impact of foreign losses and, to a lesser extent, foreign tax credits for which we are unable to recognize a tax benefit.

Noncontrolling Interests

(in millions) 2022 2021 % Change

($ in millions)

2022 2021 % Change

Better (Worse)

1 unchanged sentence

$ ( 360 ) $ ( 512 ) 30 %

The decrease in net income from continuing operations attributable to noncontrolling interests was primarily due to higher losses at Shanghai Disney Resort and higher losses at our DTC sports business, partially offset by higher results for ESPN.

The decrease in net income from continuing operations attributable to noncontrolling interests was primarily due to higher losses at Shanghai Disney Resort and at our DTC sports business, partially offset by higher results for ESPN.

Net income attributable to noncontrolling interests is determined on income after royalties and management fees, financing costs and income taxes, as applicable.

10 unchanged sentences

A summary of the impact of these items on EPS is as follows:

(in millions, except per share data) Pre-Tax Income (Loss) Tax Benefit (Expense) (1)

($ in millions, except per share data)

Pre-Tax Income (Loss) Tax Benefit (Expense) (1)

After-Tax Income (Loss) EPS Favorable (Adverse) (2)

17 unchanged sentences

BUSINESS SEGMENT RESULTS

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

Below is a discussion of the major revenue and expense categories for our business segments.

1 unchanged sentence

Selling, general, administrative and other costs include third-party and internal marketing expenses.

DMED primarily generates revenue across three significant lines of business/distribution platforms:

Linear Networks, Direct-to-Consumer and Content Sales/Licensing.

Programming and production costs to support these businesses/distribution platforms are largely incurred across four content creation groups:

Studios, General Entertainment, Sports and International.

Programming and production costs include amortization of licensed programming rights (including sports rights), amortization of capitalized production costs, subscriber-based fees for programming our Hulu services, production costs related to live programming such as news and sports and amortization of participations and residual obligations.

These costs are generally allocated across the DMED businesses based on the estimated relative value of the distribution windows.

The initial costs of marketing campaigns are generally recognized in the DMED business/distribution platform of initial exploitation.

We have taken an intentionally flexible approach to distribution.

As we refine and adjust our plans, our decisions may impact the results of operations of the businesses within DMED, including cost allocation, revenue timing, viewership timing and patterns, the total mix of content on a business/distribution platform or other aspects relevant to the performance of each business/distribution platform.

For example, a shift in the timing or planned business/platform of distribution impacts the timing and allocation of programming, production and marketing costs.

The Linear Networks business generates revenue from affiliate fees and advertising sales and from fees from sub-licensing of sports programming to third parties.

Operating expenses include programming and production costs, technology support costs, operating labor and distribution costs.

The Direct-to-Consumer business generates revenue from subscription fees, advertising sales and pay-per-view and Premier Access fees.

Operating expenses include programming and production costs, technology support costs, operating labor and distribution costs.

Operating expenses also include fees paid to Linear Networks for the right to air the linear network feeds and other services.

The Content Sales/Licensing business generates revenue from the sale of film and episodic television content in the TV/SVOD and home entertainment markets, distribution of films in the theatrical market, licensing of our music rights, sales of tickets to stage play performances and licensing of our IP for use in stage plays.

Operating expenses include programming and production costs, distribution expenses and costs of sales.

DPEP primarily generates revenue from the sale of admissions to theme parks, the sale of food, beverage and merchandise at our theme parks and resorts, charges for room nights at hotels, sales of cruise vacations, sales and rentals of vacation club properties, royalties from licensing our IP for use on consumer goods and the sale of branded merchandise.

The Entertainment segment comprises three significant lines of business:

• Linear Networks, which primarily generates revenue from affiliate fees and advertising.

In recent years, revenues from affiliate fees have declined due to fewer subscribers to MVPD services that carry our linear networks.

We anticipate this trend to continue, although the extent and duration is uncertain.

In addition, these revenues will be impacted and may be further impacted in the future from the lapse of carriage agreements to certain networks.

• Direct-to-Consumer, which primarily generates revenue from subscription fees and advertising

• Content Sales/Licensing, which primarily generates revenue from the sale of film and episodic content in the TV/VOD and home entertainment markets, distribution of films in the theatrical market, licensing of our music rights, sales of tickets to stage play performances and licensing of our IP for use in stage plays.

Revenues also include an intersegment allocation of revenues from the Experiences segment, which is meant to reflect royalties on consumer products merchandise licensing revenues generated on IP created by the Entertainment segment.

Operating expenses at the Entertainment segment primarily consist of programming and production costs, technology support costs, operating labor, distribution costs and cost of sales.

Programming and production costs include the following:

• Amortization of capitalized production costs and licensed programming rights

• Subscriber-based fees for programming the Hulu Live service, including fees paid by Hulu to the Sports segment and other Entertainment segment businesses for the right to air their linear networks on Hulu Live

• Production costs related to live programming (primarily news)

• Amortization of participations and residual obligations

• Fees paid to the Sports segment to program ESPN on ABC and certain sports content on Star+

Amortization of capitalized production costs and licensed programming rights is generally allocated across Entertainment’s businesses based on the estimated relative value of the distribution windows.

The initial costs of marketing campaigns are generally recognized in the business of initial exploitation.

The Sports segment primarily generates revenue from affiliate fees, advertising, subscription fees, pay-per-view fees and sub-licensing of sports rights.

Linear sports channels are experiencing declines in subscribers that are directionally consistent with those at the linear networks in the Entertainment segment.

Operating expenses consist primarily of programming and

production costs, technology support costs, operating labor and distribution costs.

Programming and production costs include amortization of licensed sports rights and production costs related to live sports and other programming.

The Experiences segment primarily generates revenue from the sale of admissions to theme parks, the sale of food, beverage and merchandise at our theme parks and resorts, charges for room nights at hotels, sales of cruise vacations, sales and rentals of vacation club properties, royalties from licensing our IP for use on consumer goods and the sale of branded merchandise.

Revenues are also generated from sponsorships and co-branding opportunities, real estate rent and sales, and royalties from Tokyo Disney Resort.

2 unchanged sentences

Other operating expenses include costs for such items as supplies, commissions and entertainment offerings.

The Company evaluates the performance of its operating segments based on segment operating income, and management uses total segment operating income as a measure of the overall performance of the operating businesses separate from non-operating factors.

Total segment operating income is not a financial measure defined by GAAP, should be reviewed in conjunction with the relevant GAAP financial measure and may not be comparable to similarly titled measures reported by other companies.

The Company believes that information about total segment operating income assists investors by allowing them to evaluate changes in the operating results of the Company’s portfolio of businesses separate from non-operational factors that affect net income, thus providing separate insight into both operations and other factors that affect reported results.

The following table reconciles revenues to segment revenues:

(in millions) 2022 2021 % Change

The following transactions are recognized in segment revenues and eliminated in total Company revenue:

• Fees paid by Hulu to the Sports segment and other Entertainment segment businesses for the right to air their linear networks on Hulu Live

• Fees paid by the Entertainment segment to the Sports segment to program ESPN on ABC and certain sports content on Star+

BUSINESS SEGMENT RESULTS - 2023 vs.

The following table presents revenues from our operating segments and other components of revenues:

($ in millions)

2023 2022 % Change

Better (Worse)

Revenues $ 82,722 $ 67,418 23 %

Content License Early Termination 1,023 — nm

Total segment revenues $ 83,745 $ 67,418 24 %

The following table reconciles income from continuing operations before income taxes to total segment operating income:

(in millions) 2022 2021 % Change

Entertainment

$ 40,635 $ 39,569 3 %

17,111 17,270 (1) %

32,549 28,085 16 %

(1,397) (1,179) (18) %

Content License Early Termination — ( 1,023 ) 100 %

$ 88,898 $ 82,722 7 %

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

($ in millions)

2023 2022 % Change

Better (Worse)

Income from continuing operations before income taxes $ 5,285 $ 2,561 >100 %

Add (subtract):

Content License Early Termination 1,023 — nm

Entertainment operating income

$ 1,444 $ 2,126 (32) %

Sports operating income

2,465 2,710 (9) %

Experiences operating income

8,954 7,285 23 %

Content License Early Termination — ( 1,023 ) 100 %

Corporate and unallocated shared expenses ( 1,147 ) ( 1,159 ) 1 %

Restructuring and impairment charges (1)

( 3,836 ) ( 237 ) >(100) %

Other income (expense), net 96 ( 667 ) nm

Interest expense, net

( 1,209 ) ( 1,397 ) 13 %

TFCF and Hulu acquisition amortization ( 1,998 ) ( 2,353 ) 15 %

Total segment operating income $ 12,121 $ 7,766 56 %

The following is a summary of segment revenue and operating income:

(in millions) 2022 2021 % Change

Better (Worse)

Segment Revenues:

Disney Media and Entertainment Distribution $ 55,040 $ 50,866 8 %

Disney Parks, Experiences and Products 28,705 16,552 73 %

Total segment revenues $ 83,745 $ 67,418 24 %

Segment operating income:

Disney Media and Entertainment Distribution $ 4,216 $ 7,295 (42) %

Disney Parks, Experiences and Products 7,905 471 >100 %

Total segment operating income $ 12,121 $ 7,766 56 %

Disney Media and Entertainment Distribution

Revenue and operating results for DMED are as follows:

(in millions) 2022 2021 % Change

Income from continuing operations before income taxes $ 4,769 $ 5,285 (10) %

(1) Includes the A+E gain.

Entertainment

Revenue and operating results for Entertainment are as follows:

($ in millions)

2023 2022 % Change

Better (Worse)

Linear Networks

$ 11,701 $ 12,828 (9) %

Direct-to-Consumer 19,886 17,975 11 %

Content Sales/Licensing and Other 9,048 8,766 3 %

Elimination of Intrasegment Revenue (1)

$ 40,635 $ 39,569 3 %

$ 55,040 $ 50,866 8 %

Segment operating income (loss):

Linear Networks

$ 4,119 $ 5,198 (21) %

Direct-to-Consumer (2,496) (3,424) 27 %

1 unchanged sentence

$ 1,444 $ 2,126 (32) %

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

Linear Networks

Operating results for Linear Networks are as follows:

(in millions) 2022 2021 % Change

($ in millions)

2023 2022 % Change

Better (Worse)

8 unchanged sentences

Operating Income $ 4,119 $ 5,198 (21) %

Affiliate revenue is as follows:

(in millions) 2022 2021 % Change

Affiliate fees are as follows:

($ in millions)

2023 2022 % Change

Better (Worse)

Domestic Channels $ 15,694 $ 15,244 3 %

International Channels 2,841 3,408 (17) %

$ 6,136 $ 6,257 (2) %

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

The decrease in affiliate revenue at the International Channels was due to decreases of 13% from fewer subscribers driven by channel closures, and 6% from an unfavorable foreign exchange impact.

These decreases were partially offset by an increase of 2% from higher contractual rates.

International

1,233 1,482 (17) %

$ 7,369 $ 7,739 (5) %

The decrease in domestic affiliate fees reflected a decrease of 5% from fewer subscribers, partially offset by an increase of 4% from higher contractual rates.

Lower international affiliate fees were attributable to decreases of 8% from fewer subscribers driven by channel closures, 4% from lower contractual rates and 4% from an unfavorable Foreign Exchange Impact.

Advertising revenue is as follows:

(in millions) 2022 2021 % Change

($ in millions)

2023 2022 % Change

Better (Worse)

Cable $ 3,880 $ 3,681 5 %

Broadcasting 3,141 3,239 (3) %

Domestic Channels 7,021 6,920 1 %

International Channels 2,107 1,933 9 %

$ 3,178 $ 3,716 (14) %

The increase in Cable advertising revenue was due to increases of 3% from higher impressions and 2% from higher rates.

The increase in impressions reflected higher average viewership, partially offset by fewer units delivered.

The decrease in Broadcasting advertising revenue was due to a decrease of 12% from fewer impressions at ABC, reflecting lower average viewership, partially offset by an increase of 10% from higher rates at ABC.

The increase in International Channels advertising revenue was due to increases of 8% from higher impressions and 7% from higher rates, partially offset by 7% from an unfavorable foreign exchange impact.

The increase in impressions reflected higher average viewership, partially offset by the impact of channel closures.

The increase in average viewership benefited from airing more cricket matches in the current year.

The current year included the International Cricket Council (ICC) T20 World Cup, more Board of Control for Cricket in India (BCCI) matches and the Asia Cricket Council (ACC) Asia Cup, partially offset by fewer Indian Premier League (IPL) matches in the current year compared to the prior year.

The ICC T20 World Cup generally occurs every two years and was not held in the prior year due to COVID-19.

The ACC Asia Cup was rescheduled from 2020 to the current year as a result of COVID-19.

The increase in BCCI cricket matches aired in the current year was driven by COVID-19-related cancellations of certain BCCI matches in the prior year.

Other revenue increased $95 million, to $683 million from $588 million, due to sub-licensing fees from ICC T20 World Cup matches and higher sub-licensing fees from BCCI cricket matches in the current year compared to the prior year.

International

981 1,161 (16) %

$ 4,159 $ 4,877 (15) %

The decrease in domestic advertising revenue was due to decreases of 12% from fewer impressions and 2% from lower rates.

The decrease in impressions was due to lower average viewership.

Lower international advertising revenue was due to decreases of 9% from an unfavorable Foreign Exchange Impact, 6% from fewer impressions and 1% from a decrease in rates.

Lower impressions reflected a decrease in average viewership, which included the impact of channel closures.

Other revenue decreased $39 million, to $173 million from $212 million, driven by an unfavorable Foreign Exchange Impact.

Costs and Expenses

Operating expenses are as follows:

(in millions) 2022 2021 % Change

($ in millions)

2023 2022 % Change

Better (Worse)

Programming and production costs

Cable $ (9,415) $ (9,353) (1) %

Broadcasting (2,773) (2,767) — %

Domestic Channels (12,188) (12,120) (1) %

International Channels (3,148) (3,139) — %

Domestic $ (3,858) $ (3,894) 1 %

International (712) (796) 11 %

Total programming and production costs

(4,570) (4,690) 3 %

1 unchanged sentence

$ (5,577) $ (5,777) 3 %

The increase in programming and production costs at Cable was due to higher sports programming costs, largely offset by lower non-sports programming costs.

The increase in sports programming costs was due to higher rights costs for NFL and College Football Playoffs (CFP) and an increase in sports production costs reflecting the return of ESPN-hosted events, which were canceled in the prior year due to COVID-19, partially offset by lower rights costs for MLB and NBA programming.

Higher NFL programming costs were due to airing four additional regular season games in the current year compared to the prior year and contractual rate increases.

The increase in CFP rights costs was due to higher contractual rates.

Lower MLB programming costs were due to airing 29 games of the 2022 regular season under our new contract and one 2021 season playoff game in the current year compared to 92 games of the 2021 regular season in the prior year.

The decrease in NBA programming costs was due to the comparison to airing four games of the 2020 NBA Finals in the first quarter of fiscal 2021 due to COVID-19, partially offset by contractual rate increases.

Fiscal 2021 also included the 2021 NBA Finals and fiscal 2022 included the 2022 NBA finals.

Lower non-sports programming costs were due to a lower cost mix of programming at FX Channels.

Programming and production costs at Broadcasting were comparable to the prior year as higher costs for non-primetime programming were largely offset by lower costs for primetime programming.

Increased costs for non-primetime programming were primarily due to higher costs for news programming and higher average costs and more hours of sports programming, while decreased costs for primetime programming were due to lower average costs for reality and scripted programming.

Programming and production costs at the International Channels were comparable to the prior year as an increase in sports programming costs, reflecting more cricket matches in the current year and higher average costs per match for BCCI and IPL cricket matches, was largely offset by the impact of channel closures and a favorable foreign exchange impact.

Selling, general administrative and other costs increased $128 million, to $3,619 million from $3,491 million, driven by higher labor-related costs.

Depreciation and amortization decreased $23 million, to $145 million from $168 million, driven by fully depreciated assets.

The decrease in domestic programming and production costs was due to a lower average cost mix of programming, partially offset by an increase in programming fees for ESPN on ABC and higher program write-offs.

International programming and production costs decreased primarily due to a favorable Foreign Exchange Impact and the impact of channel closures.

The decrease in other operating expenses was due to the realignment of certain costs primarily to selling, general and administrative costs, lower technology and distribution costs and a favorable Foreign Exchange Impact.

Selling, general administrative and other costs increased $70 million, to $2,641 million from $2,571 million.

The increase includes the realignment of certain costs previously primarily reported in other operating expenses and higher labor-related costs, partially offset by lower marketing costs.

Equity in the Income of Investees

Income from equity investees increased $57 million, to $838 million from $781 million, due to higher income from A+E and the comparison to impairments in the prior year.

The increase at A+E resulted from lower programming costs and higher program sales, partially offset by decreases in affiliate and advertising revenue and higher marketing costs.

Income from equity investees decreased $93 million, to $690 million from $783 million, due to lower income from A+E attributable to decreases in advertising and affiliate revenue, partially offset by higher program sales income.

Operating Income from Linear Networks

Operating income increased 1%, to $8,518 million from $8,407 million due to increases at Broadcasting and Cable and higher income from our equity investees, partially offset by a decrease at the International Channels.

Operating income decreased 21%, to $4,119 million from $5,198 million due to lower results both domestically and internationally.

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

(in millions) 2022 2021 % Change

($ in millions)

2023 2022 % Change

Better (Worse)

Supplemental revenue detail

Domestic Channels $ 22,957 $ 22,463 2 %

International Channels 5,389 5,630 (4) %

$ 9,406 $ 10,073 (7) %

International

2,295 2,755 (17) %

$ 11,701 $ 12,828 (9) %

Supplemental operating income detail

Domestic Channels $ 6,785 $ 6,594 3 %

International Channels 895 1,032 (13) %

$ 2,735 $ 3,358 (19) %

International

694 1,057 (34) %

Equity in the income of investees 690 783 (12) %

2 unchanged sentences

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

(in millions) 2022 2021 % Change

($ in millions)

2023 2022 % Change

Better (Worse)

1 unchanged sentence

Advertising 3,260 3,614 (10) %

TV/SVOD distribution and other 534 933 (43) %

Total revenues 19,886 17,975 11 %

3 unchanged sentences

Operating Loss $ (2,496) $ (3,424) 27 %

The increase in subscription fees reflected increases of 20% from higher subscribers, due to growth at Disney+, Hulu and ESPN+, and 9% from higher average rates due to increases in retail pricing at Disney+ and Hulu, partially offset by a decrease of 2% from an unfavorable foreign exchange impact.

Advertising revenue growth reflected increases of 7% from higher rates due to an increase at Hulu, and to a lesser extent, at Disney+, and 4% from higher impressions due to increases at Disney+, ESPN+ and Hulu.

The increase in impressions at Disney+ was primarily due to airing the ICC T20 World Cup and ACC Asia Cup in the current year, neither of which were aired in the prior year.

The decrease in TV/SVOD distribution and other revenue was due to the absence of Disney+ Premier Access revenues in the current year compared to revenues for Black Widow , Raya and the Last Dragon, Jungle Cruise and Cruella in the prior year.

To a lesser extent, the decrease also reflected lower UFC pay-per-view fees due to lower average buys per event.

The following table presents additional information about our Disney+, ESPN+ and Hulu product offerings (1) .

The increase in subscription fees reflected increases of 11% from more subscribers, due to growth at Disney+ Core and, to a lesser extent, Hulu, and 7% from higher average rates due to increases in retail pricing, partially offset by a decrease of 2% from an unfavorable Foreign Exchange Impact.

Lower advertising revenue reflected a decrease of 9% from fewer impressions due to declines at Hulu and, to a lesser extent, at Disney+, partially offset by growth of 2% from higher rates at Hulu.

The decrease in impressions at Disney+ was due to the comparison to Indian Premier League (IPL) cricket programming on Disney+ Hotstar in the prior year, as we did not renew the digital rights beginning with the 2023 season.

The decrease was partially offset by the U.S.

launch of ad-supported Disney+ in the first quarter of the current fiscal year.

The following table presents additional information about Disney+ and Hulu (1) .

Paid subscribers (1) as of:

(in millions) October 1, 2022 October 2, 2021 % Change

(in millions) September 30, 2023 October 1, 2022 % Change

Better (Worse)

6 unchanged sentences

Disney+ Hotstar 37.6 61.3 (39) %

Total Disney+ (4)

SVOD Only 43.9 42.8 3 %

Live TV + SVOD 4.6 4.4 5 %

Total Hulu (2)

48.5 47.2 3 %

ESPN+ 24.3 17.1 42 %

Average Monthly Revenue Per Paid Subscriber (1) for the fiscal year ended:

2023 2022 % Change

Better (Worse)

Domestic (U.S.

and Canada) $ 6.97 $ 6.34 10 %

International (excluding Disney+ Hotstar) (1)

5.93 6.10 (3) %

Disney+ Core 6.39 6.22 3 %

Disney+ Hotstar 0.66 0.88 (25) %

SVOD Only 12.17 12.72 (4) %

Live TV + SVOD 90.52 87.62 3 %

(1) S ee discussion on page 66 —DTC Product Descriptions, Key Definitions and Supplemental Information

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

Domestic Disney+ average monthly revenue per paid subscriber increased from $6.34 to $6.97 due to an increase in average retail pricing and higher advertising revenue, partially offset by a higher mix of subscribers to multi-product offerings.

International Disney+ (excluding Disney+ Hotstar) average monthly revenue per paid subscriber decreased from $6.10 to $5.93 due to a higher mix of subscribers from lower-priced markets and an unfavorable Foreign Exchange Impact, partially offset by an increase in average retail pricing, a lower mix of wholesale subscribers and an increase in wholesale pricing.

Disney+ Hotstar average monthly revenue per paid subscriber decreased from $0.88 to $0.66 due to lower advertising revenue, partially offset by a lower mix of wholesale subscribers.

Hulu SVOD Only average monthly revenue per paid subscriber decreased from $12.72 to $12.17 due to lower advertising revenue, a higher mix of subscribers to multi-product offerings and lower per-subscriber premium and feature add-on revenue, partially offset by an increase in average retail pricing.

Hulu Live TV + SVOD average monthly revenue per paid subscriber increased from $87.62 to $90.52 due to an increase in average retail pricing, partially offset by lower advertising revenue, a higher mix of subscribers to multi-product offerings and lower per-subscriber premium and feature add-on revenue.

Costs and Expenses

Operating expenses are as follows:

($ in millions)

2023 2022 % Change

Better (Worse)

Programming and production costs

Disney+ $ (5,674) $ (4,466) (27) %

Hulu (8,265) (7,564) (9) %

Other (20) (25) 20 %

Total programming and production costs (13,959) (12,055) (16) %

Other operating expense (3,900) (3,586) (9) %

$ (17,859) $ (15,641) (14) %

The increase in programming and production costs at Disney+ was attributable to more content provided on the service and higher costs per hour of non-sports content available on the service, partially offset by a decrease in sports programming costs reflecting the comparison to IPL cricket programming in the prior year.

The increase in programming and production costs at Hulu was due to higher subscriber-based fees for programming the Live TV service and higher costs per hour of content available on the service.

Higher subscriber-based fees for programming the Live TV service resulted from rate increases and an increase in the number of subscribers.

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

Selling, general, administrative and other costs decreased $1,227 million, to $4,168 million from $5,395 million, primarily attributable to lower marketing costs at Disney+ and, to a lesser extent, Hulu.

Operating Loss from Direct-to-Consumer

Operating loss from Direct-to-Consumer decreased $928 million, to $2,496 million from $3,424 million due to a lower loss at Disney+ and, to a lesser extent, higher operating income at Hulu.

Content Sales/Licensing and Other

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

($ in millions)

2023 2022 % Change

Better (Worse)

TV/VOD distribution

$ 2,618 $ 3,520 (26) %

Theatrical distribution 3,174 1,875 69 %

Home entertainment distribution

931 1,083 (14) %

Other 2,325 2,288 2 %

Total revenues 9,048 8,766 3 %

Operating expenses (6,280) (5,508) (14) %

Selling, general, administrative and other (2,595) (2,610) 1 %

Depreciation and amortization (347) (296) (17) %

Equity in the income (loss) of investees

Operating Income (Loss) $ (179) $ 352 nm

The decrease in TV/VOD distribution revenue was due to lower sales volumes of both episodic and film content, in part driven by the impact of the shift from licensing our content to third parties to distributing it on our Entertainment Direct-to-Consumer streaming services.

The increase in theatrical distribution revenue was due to the performance of Avatar:

The Way of Water in the current year.

The current year also included the Marvel titles:

Black Panther:

Wakanda Forever;

Guardians of the Galaxy Vol.

and Ant-Man and the Wasp:

Quantumania , the Disney live action title:

The Little Mermaid, the Lucasfilm title:

Indiana Jones and the Dial of Destiny and two animation titles .

The prior year included the Marvel titles:

Doctor Strange in the Multiverse of Madness;

Love and Thunder;

and the co-produced title Spider-Man:

No Way Home , along with two animation titles.

The decrease in home entertainment distribution revenue was due to lower sales volumes.

The increase in other revenue was due to higher revenue from stage plays, resulting from improved performance, partially offset by an unfavorable Foreign Exchange Impact.

Operating expenses are as follows:

($ in millions)

2023 2022 % Change

Better (Worse)

Programming and production costs $ (5,383) $ (4,688) (15) %

Distribution costs and cost of goods sold (897) (820) (9) %

$ (6,280) $ (5,508) (14) %

The increase in programming and production costs was due to higher production cost amortization attributable to the increase in theatrical revenue, partially offset by a decrease as a result of lower TV/VOD distribution revenues.

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

Selling, general, administrative and other costs decreased $15 million, to $2,595 million from $2,610 million, due to the realignment of certain costs to distribution costs and cost of goods sold, a favorable Foreign Exchange Impact and lower home entertainment overhead and marketing costs, largely offset by higher theatrical marketing costs.

Depreciation and amortization increased $51 million, to $347 million from $296 million, primarily due to increased investment in technology assets.

Operating Income (Loss) from Content Sales/Licensing and Other

Operating results from Content Sales/Licensing and Other decreased $531 million, to a loss of $179 million from income of $352 million, primarily due to lower TV/VOD distribution results.

Items Excluded from Segment Operating Income Related to Entertainment

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

($ in millions)

2023 2022 % Change Better (Worse)

Restructuring and impairment charges (1)

$ (3,431) $ (228) >(100) %

TFCF and Hulu acquisition amortization (2)

(1,602) (1,946) 18 %

Content License Early Termination — (1,023) 100 %

Gain on sale of a business

(1) Fiscal 2023 includes $2,521 million for the Content Impairment Charge (net of the A+E gain), $425 million for a goodwill impairment, $248 million of severance, a $141 million impairment of an equity investment and $96 million primarily related to exiting our businesses in Russia.

Fiscal 2022 includes impairments of assets related to exiting our businesses in Russia.

(2) In fiscal 2023, amortization of step-up on film and television costs was $439 million and amortization of intangible assets was $1,151 million.

In fiscal 2022, amortization of step-up on film and television costs was $ 634 million and amortization of intangible assets was $1,300 million.

Operating results for Sports are as follows:

($ in millions)

2023 2022 % Change

Better (Worse)

Affiliate fees $ 10,590 $ 10,796 (2) %

Advertising 3,920 4,370 (10) %

Subscription fees 1,517 1,113 36 %

1,084 991 9 %

Total revenues 17,111 17,270 (1) %

Operating expenses (13,314) (13,084) (2) %

Selling, general, administrative and other (1,314) (1,441) 9 %

Depreciation and amortization (73) (90) 19 %

Equity in the income of investees 55 55 — %

Operating Income $ 2,465 $ 2,710 (9) %

Affiliate fees are as follows:

($ in millions)

2023 2022 % Change

Better (Worse)

Domestic $ 9,267 $ 9,437 (2) %

International 1,051 1,084 (3) %

10,318 10,521 (2) %

272 275 (1) %

$ 10,590 $ 10,796 (2) %

The decrease in domestic ESPN affiliate fees was due to decreases of 7% from fewer subscribers and 1% from the temporary suspension of carriage with an affiliate, partially offset by an increase of 5% from higher contractual rates.

Lower international ESPN affiliate fees were attributable to decreases of 14% from an unfavorable Foreign Exchange Impact and 3% from fewer subscribers, partially offset by an increase of 14% from higher contractual rates.

Advertising revenue is as follows:

($ in millions)

2023 2022 % Change

Better (Worse)

Domestic $ 3,413 $ 3,424 — %

International 189 173 9 %

3,602 3,597 — %

318 773 (59) %

$ 3,920 $ 4,370 (10) %

Domestic ESPN advertising revenue was comparable to the prior year reflecting a modest decrease in rates, largely offset by a slight increase in impressions.

The increase in international ESPN advertising revenue was due to an increase of 16% from higher impressions, partially offset by a decrease of 6% from an unfavorable Foreign Exchange Impact.

The increase in impressions was attributable to higher average viewership.

Lower Star advertising revenue was due to decreases of 38% from fewer impressions, 14% from lower rates and 7% from an unfavorable Foreign Exchange Impact.

Fewer impressions reflected a decrease in average units delivered and, to a lesser extent, fewer IPL matches aired in the current year compared to the prior year as matches from the 2021 season shifted into fiscal 2022 due to COVID-19.

Growth in subscription fees reflected increases of 19% from higher rates and 18% from more subscribers.

The increase in other revenue was primarily due to higher fees received for programming ESPN on ABC.

The following table presents additional information about ESPN+:

September 30, 2023 October 1, 2022 % Change

Better (Worse)

Paid subscribers at fiscal year end (in millions)

26.0 24.3 7 %

Average Monthly Revenue per Paid Subscriber for the fiscal year

$ 5.49 $ 4.80 14 %

ESPN+ average monthly revenue per paid subscriber increased from $4.80 to $5.49 due to an increase in retail pricing, partially offset by a higher mix of subscribers to multi-product offerings.

Costs and Expenses

Operating expenses are as follows:

($ in millions)

2023 2022 % Change

Better (Worse)

Programming and production costs

Domestic $ (10,221) $ (10,003) (2) %

International (1,127) (998) (13) %

(11,348) (11,001) (3) %

Star (India) (1,025) (1,284) 20 %

(12,373) (12,285) (1) %

Other operating expenses (941) (799) (18) %

$ (13,314) $ (13,084) (2) %

The increase in domestic ESPN programming and production costs was due to contractual rate increases for NBA and College Football Playoffs (CFP) programming, new motor sports programming and higher costs for NFL and Ultimate Fighting Championship (UFC) programming.

These increases were partially offset by lower costs for college football programming (excluding CFP) due to the non-renewal of certain contracts.

NFL programming costs increased as a result of airing one additional regular season game on our linear networks in the current year compared to the prior year, partially offset by lower

costs per game.

The increase in UFC programming costs was due to airing two more events in the current year compared to the prior year and higher contractual rates.

Higher international ESPN programming and production costs were driven by the impact of inflation on soccer rights costs and production costs, partially offset by a favorable Foreign Exchange Impact.

The decrease in Star programming and production costs was due to lower costs for cricket programming and a favorable Foreign Exchange Impact.

The decrease in cricket programming costs was attributable to fewer IPL matches in the current year compared to prior year and lower average costs per match for IPL and International Cricket Council (ICC) T20 World Cup matches.

Other operating expenses increased $142 million, to $941 million from $799 million, driven by higher technology and distribution costs and the realignment of certain costs previously reported in selling, general and administrative costs.

Selling, general, administrative and other costs decreased $127 million, to $1,314 million from $1,441 million, due to lower marketing spend and a realignment of certain costs to other operating expenses.

Operating Income

Operating income decreased 9%, to $2,465 million from $2,710 million due to decreases at Star and international ESPN, partially offset by an increase at domestic ESPN.

The following table provides supplemental revenue and operating income detail for Sports:

($ in millions)

2023 2022 % Change

Better (Worse)

Supplemental revenue detail

Domestic $ 14,945 $ 14,636 2 %

International 1,437 1,434 — %

16,382 16,070 2 %

729 1,200 (39) %

$ 17,111 $ 17,270 (1) %

Supplemental operating income (loss) detail

Domestic $ 2,881 $ 2,814 2 %

International (39) 78 nm

2,842 2,892 (2) %

(432) (237) (82) %

Equity in the income of investees 55 55 — %

$ 2,465 $ 2,710 (9) %

Items Excluded from Segment Operating Income Related to Sports

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

($ in millions)

2023 2022 % Change

Better (Worse)

TFCF acquisition amortization (1)

$ (388) $ (399) 3 %

Restructuring and impairment charges (2)

(346) (1) >(100) %

(1) Represents amortization of intangible assets.

(2) Fiscal 2023 includes $296 million for a goodwill impairment and $50 million for severance.

Operating results for Experiences are as follows:

($ in millions)

2023 2022 % Change

Better (Worse)

Theme park admissions $ 10,423 $ 8,602 21 %

Resorts and vacations 7,949 6,410 24 %

Parks & Experiences merchandise, food and beverage 7,712 6,579 17 %

Merchandise licensing and retail 4,358 4,609 (5) %

Parks licensing and other 2,107 1,885 12 %

Total revenues 32,549 28,085 16 %

Operating expenses (17,129) (14,936) (15) %

Selling, general, administrative and other (3,675) (3,403) (8) %

Depreciation and amortization (2,789) (2,451) (14) %

Equity in the loss of investees (2) (10) 80 %

Operating Income $ 8,954 $ 7,285 23 %

The increase in theme park admissions revenue was due to increases of 12% from attendance growth and 10% from higher average per capita ticket revenue.

Growth in resorts and vacations revenue was due to increases of 14% from additional passenger cruise days, 4% from higher occupied hotel room nights and 3% growth from guided tours.

Parks & Experiences merchandise, food and beverage revenue growth was attributable to increases of 12% from higher volumes and 3% from higher average guest spending.

Lower merchandise licensing and retail revenue was due to decreases of 2% from licensing, 2% from retail and 1% from an unfavorable Foreign Exchange Impact.

The decrease in licensing revenue was due to lower sales of merchandise based on Star Wars, Frozen, Toy Story and Mickey and Friends, partially offset by higher minimum guarantee shortfall recognition.

Lower retail revenue was primarily due to a decrease in online sales.

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

In addition to revenue, costs and operating income, management uses the following key metrics to analyze trends and evaluate the overall performance of our theme parks and resorts, and we believe these metrics are useful to investors in analyzing the business :

Domestic International (1)

2023 2022 2023 2022 2023 2022

Increase (decrease)

Attendance (2)

6 % >100 % 55 % 54 % 17 % 87 %

Per Capita Guest Spending (3)

3 % 13 % 21 % 24 % 2 % 18 %

Occupancy (4)

85 % 82 % 74 % 56 % 83 % 76 %

Available Room Nights (in thousands) (5)

10,096 10,073 3,178 3,179 13,274 13,252

Change in Per Room Guest Spending (6)

— % 19 % 14 % (7) % 1 % 15 %

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

(2) Attendance is used to analyze volume trends at our theme parks and is based on the number of unique daily entries, i.e.

a person visiting multiple theme parks in a single day is counted only once.

Our attendance count includes

complimentary entries but excludes entries by children under the age of three.

(3) Per capita guest spending is used to analyze guest spending trends and is defined as total revenue from ticket sales and sales of food, beverage and merchandise in our theme parks, divided by total theme park attendance.

(4) Occupancy is used to analyze the usage of available capacity at hotels and is defined as the number of room nights occupied by guests as a percentage of available hotel room nights.

(5) Available hotel room nights are defined as the total number of room nights that are available at our hotels and at DVC properties located at our theme parks and resorts that are not utilized by DVC members.

Available hotel room nights include rooms temporarily taken out of service.

(6) Per room guest spending is used to analyze guest spending at our hotels and is defined as total revenue from room rentals and sales of food, beverage and merchandise at our hotels, divided by total occupied hotel room nights.

In the current year, the Company revised its method of allocating revenue on the sales of Disneyland Paris vacation packages between hotel room revenue and admissions revenue.

The new method resulted in a decrease in the percentage of revenue allocated to hotel rooms.

If we had applied the new method in the prior year, the impact would have been a decrease of approximatel y $50 million i n the prior year.

Costs and Expenses

Operating expenses are as follows:

($ in millions)

2023 2022 % Change Better (Worse)

Operating labor $ (7,550) $ (6,577) (15) %

Infrastructure costs (3,127) (2,766) (13) %

Cost of goods sold and distribution costs (3,357) (2,938) (14) %

Other operating expenses (3,095) (2,655) (17) %

$ (17,129) $ (14,936) (15) %

The increase in operating labor was due to inflation, higher volumes and increased costs for new guest offerings.

Higher cost of goods sold and distribution costs were due to increased volumes, while the increase in infrastructure costs was due to higher operations support costs, increased costs for new guest offerings and higher technology spending.

Other operating expenses increased due to higher volumes and inflation.

Selling, general, administrative and other costs increased $272 million from $3,403 million to $3,675 million, driven by higher ma rketing spend and a loss on the disposal of our ownership interest in Villages Nature.

Depreciation and amortization increased $338 million from $2,451 million to $2,789 million, due to accelerated depreciation related to the closure of Star Wars:

Galactic Starcruiser and depreciation for the Disney Wish , which launched in the fourth quarter of the prior year.

Segment Operating Income

Segment operating income increased $1,669 million, to $8,954 million due to growth at our international and domestic parks and experiences, partially offset by a decrease at our consumer products business.

The following table presents supplemental revenue and operating income detail for the Experiences segment:

($ in millions)

2023 2022 % Change

Better (Worse)

Supplemental revenue detail

Parks & Experiences

Domestic $ 22,677 $ 20,131 13 %

International 5,475 3,297 66 %

Consumer Products

4,397 4,657 (6) %

$ 32,549 $ 28,085 16 %

Supplemental operating income (loss) detail

Parks & Experiences

Domestic $ 5,876 $ 5,332 10 %

International 1,104 (237) nm

Consumer Products

1,974 2,190 (10) %

$ 8,954 $ 7,285 23 %

Items Excluded from Segment Operating Income Related to Experiences

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

($ in millions)

2023 2022 % Change

Better (Worse)

Charge related to a legal ruling

$ (101) $ — nm

Restructuring and impairment charges (1)

TFCF acquisition amortization

(1) Charges for the current year were due to severance.

BUSINESS SEGMENT RESULTS - 2022 vs.

The following table presents revenues from our operating segments and other components of revenues:

($ in millions)

2022 2021 % Change

Better (Worse)

Entertainment

$ 39,569 $ 36,489 8 %

17,270 15,960 8 %

28,085 15,961 76 %

(1,179) (992) (19) %

Content License Early Termination ( 1,023 ) — nm

$ 82,722 $ 67,418 23 %

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

($ in millions)

2022 2021 % Change

Better (Worse)

Entertainment operating income

$ 2,126 $ 5,196 (59) %

Sports operating income

2,710 2,690 1 %

Experiences operating income (loss)

7,285 (120) nm

Content License Early Termination ( 1,023 ) — nm

Corporate and unallocated shared expenses ( 1,159 ) ( 928 ) (25) %

Restructuring and impairment charges ( 237 ) ( 654 ) 64 %

Other income (expense), net ( 667 ) 201 nm

Interest expense, net ( 1,397 ) ( 1,406 ) 1 %

TFCF and Hulu acquisition amortization ( 2,353 ) ( 2,418 ) 3 %

Income from continuing operations before income taxes $ 5,285 $ 2,561 >100 %

Entertainment

Revenue and operating results for Entertainment are as follows:

($ in millions)

2022 2021 % Change

Better (Worse)

Linear Networks

$ 12,828 $ 13,516 (5) %

Direct-to-Consumer 17,975 15,036 20 %

Content Sales/Licensing and Other 8,766 7,937 10 %

$ 39,569 $ 36,489 8 %

Operating income (loss):

Linear Networks

$ 5,198 $ 5,271 (1) %

Direct-to-Consumer (3,424) (1,252) >(100) %

Content Sales/Licensing and Other 352 1,177 (70) %

$ 2,126 $ 5,196 (59) %

Linear Networks

Operating results for Linear Networks are as follows:

($ in millions)

2022 2021 % Change

Better (Worse)

Affiliate fees $ 7,739 $ 8,043 (4) %

Advertising 4,877 5,215 (6) %

Other 212 258 (18) %

Total revenues 12,828 13,516 (5) %

Operating expenses (5,777) (6,250) 8 %

Selling, general, administrative and other (2,571) (2,647) 3 %

Depreciation and amortization (65) (78) 17 %

Equity in the income of investees 783 730 7 %

Operating Income $ 5,198 $ 5,271 (1) %

Affiliate fees are as follows:

($ in millions)

2022 2021 % Change

Better (Worse)

$ 6,257 $ 6,045 4 %

International

1,482 1,998 (26) %

$ 7,739 $ 8,043 (4) %

Growth in domestic affiliate fees was due to an increase of 7% from higher contractual rates, partially offset by a decrease of 3% from fewer subscribers.

The decline in international affiliate fees was due to decreases of 17% from fewer subscribers driven by channel closures, 5% from an unfavorable Foreign Exchange Impact and 2% from lower contractual rates.

Advertising revenue is as follows:

($ in millions)

2022 2021 % Change

Better (Worse)

$ 3,716 $ 4,021 (8) %

International

1,161 1,194 (3) %

$ 4,877 $ 5,215 (6) %

The decline in domestic advertising revenue was due to a decrease of 14% from fewer impressions, reflecting lower average viewership, partially offset by an increase of 7% from higher rates.

Lower international advertising revenue reflected decreases of 8% from an unfavorable Foreign Exchange Impact and 6% from fewer impressions driven by channel closures, partially offset by an increase of 12% from higher rates.

Costs and Expenses

Operating expenses are as follows:

($ in millions)

2022 2021 % Change

Better (Worse)

Programming and production costs

$ (3,894) $ (3,940) 1 %

International (796) (1,165) 32 %

(4,690) (5,105) 8 %

Other operating expenses (1,087) (1,145) 5 %

$ (5,777) $ (6,250) 8 %

The decrease in domestic programming and production costs was due to a lower cost mix of programming at FX Channels, partially offset by an increase in programming and production costs at the ABC Network.

The increase at the ABC Network was due to higher costs for non-primetime news programming and an increase in programming fees for ESPN on ABC, partially offset by a lower cost mix of primetime programming.

Lower international programming and production costs were due to the impact of channel closures and, to a lesser extent, a favorable Foreign Exchange Impact.

Selling, general administrative and other costs decreased $76 million, to $2,571 million from $2,647 million, due to lower marketing costs.

Equity in the Income of Investees

Income from equity investees increased $53 million, to $783 million from $730 million, due to higher income from A+E and the comparison to impairments in fiscal 2021.

The increase at A+E resulted from lower programming costs, partially offset by decreases in affiliate and advertising revenue and higher marketing costs.

Operating Income from Linear Networks

Operating income decreased 1%, to $5,198 million from $5,271 million due to lower domestic results, partially offset by higher income from our equity investees and an increase in international results.

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

($ in millions)

2022 2021 % Change

Better (Worse)

Supplemental revenue detail

$ 10,073 $ 10,223 (1) %

International

2,755 3,293 (16) %

$ 12,828 $ 13,516 (5) %

Supplemental operating income detail

Domestic $ 3,358 $ 3,537 (5) %

International

1,057 1,004 5 %

Equity in the income of investees 783 730 7 %

$ 5,198 $ 5,271 (1) %

Direct-to-Consumer

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

($ in millions)

2022 2021 % Change

Better (Worse)

Subscription fees $ 14,178 $ 11,295 26 %

Advertising 3,614 3,284 10 %

183 457 (60) %

Total revenues 17,975 15,036 20 %

Operating expenses (15,641) (11,906) (31) %

Selling, general, administrative and other (5,395) (4,067) (33) %

Depreciation and amortization (363) (315) (15) %

Operating Loss $ (3,424) $ (1,252) >(100) %

Higher subscription fees reflected increases of 18% from subscriber growth and 9% from higher average rates due to increases in retail pricing, partially offset by a decrease of 2% from an unfavorable Foreign Exchange Impact.

Advertising revenue growth reflected increases of 7% from higher rates due to increases at Hulu, and to a lesser extent, at Disney+, and 3% from higher impressions primarily attributable to Disney+ Hotstar.

The increase in impressions at Disney+ Hotstar was primarily due to airing the ICC T20 World Cup and Asia Cricket Council (ACC) Asia Cup in fiscal 2022, neither of which were aired in fiscal 2021.

The ICC T20 World Cup generally occurs every two years and was not held in fiscal 2021 due to COVID-19.

The ACC Asia Cup was rescheduled from fiscal 2020 to fiscal 2022 as a result of COVID-19.

The decrease in other revenue was due to Disney+ Premier Access revenue in fiscal 2021 compared to none in fiscal 2022, partially offset by a favorable Foreign Exchange Impact.

Disney+ Premier Access titles in fiscal 2021 included Black Widow , Raya and the Last Dragon, Jungle Cruise and Cruella .

The following table presents additional information about our Disney+ and Hulu product offerings.

Paid subscribers as of:

(in millions) October 1, 2022 October 2, 2021 % Change

Better (Worse)

Domestic (U.S.

and Canada) 46.4 38.8 20 %

International (excluding Disney+ Hotstar)

56.5 36.0 57 %

Disney+ Core (1)

102.9 74.8 38 %

Disney+ Hotstar 61.3 43.3 42 %

SVOD Only 42.8 39.7 8 %

Live TV + SVOD 4.4 4.0 10 %

Total Hulu (1)

9 unchanged sentences

Disney+ Hotstar 0.88 0.68 29 %

Global Disney+ 4.24 4.08 4 %

ESPN+ 4.80 4.57 5 %

SVOD Only 12.72 12.86 (1) %

Live TV + SVOD 87.62 81.35 8 %

(1) In the U.S., Disney+, ESPN+ and Hulu SVOD Only are each offered as a standalone service or as a package that includes all three services (the SVOD Bundle).

Effective December 21, 2021, Hulu Live TV + SVOD includes Disney+ and ESPN+ (the new Hulu Live TV + SVOD offering), whereas previously, Hulu Live TV + SVOD was offered as a standalone service or with Disney+ and ESPN+ as optional additions (the old Hulu Live TV + SVOD offering).

Effective March 15, 2022, Hulu SVOD Only is also offered with Disney+ as an optional add-on.

Disney+ is available in more than 150 countries and territories outside the U.S.

In India and certain other Southeast Asian countries, the service is branded Disney+ Hotstar.

In certain Latin American countries, we offer Disney+ as well as Star+, a general entertainment SVOD service, which is available on a standalone basis or together with Disney+ (Combo+).

Depending on the market, our services can be purchased on our websites, through third-party platforms/apps or via wholesale arrangements.

(2) Reflects subscribers for which we recognized subscription revenue.

Subscribers cease to be a paid subscriber as of their effective cancellation date or as a result of a failed payment method.

Subscribers to the SVOD Bundle are counted as a paid subscriber for each service included in the SVOD Bundle and subscribers to the Hulu Live TV + SVOD offerings are counted as one paid subscriber for each of the Hulu Live TV + SVOD, Disney+ and ESPN+ offerings.

A Hulu SVOD Only subscriber that adds Disney+ is counted as one paid subscriber for each of the Hulu SVOD Only and Disney+ offerings.

In Latin America, if a subscriber has either the standalone Disney+ or Star+ service or subscribes to Combo+, the subscriber is counted as one Disney+ paid subscriber.

Subscribers include those

who receive a service through wholesale arrangements including those for which we receive a fee for the distribution of the service to each subscriber of an existing content distribution tier.

When we aggregate the total number of paid subscribers across our DTC streaming services, we refer to them as paid subscriptions.

(3) Includes the Disney+ service outside the U.S.

and Canada and the Star+ service in Latin America.

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

(5) Average monthly revenue per paid subscriber is calculated based on the average of the monthly average paid subscribers for each month in the period.

The monthly average paid subscribers is calculated as the sum of the beginning of the month and end of the month paid subscriber count, divided by two.

Disney+ average monthly revenue per paid subscriber is calculated using a daily average of paid subscribers for the period.

Revenue includes subscription fees, advertising (excluding revenue earned from selling advertising spots to other Company businesses) and premium and feature add-on revenue but excludes Premier Access and Pay-Per-View revenue.

The average revenue per paid subscriber is net of discounts on offerings that carry more than one service.

Revenue is allocated to each service based on the relative retail price of each service on a standalone basis.

Revenue for the new Hulu Live TV + SVOD offering is allocated to the SVOD services based on the wholesale price of the SVOD Bundle.

In general, wholesale arrangements have a lower average monthly revenue per paid subscriber than subscribers that we acquire directly or through third-party platforms.

The average monthly revenue per paid subscriber for domestic Disney+ was comparable to the prior year, as an increase in retail pricing and a lower mix of wholesale subscribers was essentially offset by a higher mix of subscribers to multi-product offerings.

The average monthly revenue per paid subscriber for international Disney+ (excluding Disney+ Hotstar) increased from $5.31 to $6.10 due to increases in retail pricing, partially offset by an unfavorable foreign exchange impact.

The average monthly revenue per paid subscriber for Disney+ Hotstar increased from $0.68 to $0.88 driven by higher per-subscriber advertising revenue and increases in retail pricing, partially offset by a higher mix of wholesale subscribers.

The average monthly revenue per paid subscriber for ESPN+ increased from $4.57 to $4.80 primarily due to an increase in retail pricing, a lower mix of annual subscribers and higher per-subscriber advertising revenue, partially offset by a higher mix of subscribers to multi-product offerings.

The average monthly revenue per paid subscriber for the Hulu SVOD Only service decreased from $12.86 to $12.72 driven by lower per-subscriber advertising revenue, a higher mix of subscribers to multi-product offerings and, to a lesser extent, to promotional offerings, partially offset by an increase in retail pricing.

The average monthly revenue per paid subscriber for the Hulu Live TV + SVOD service increased from $81.35 to $87.62 driven by an increase in retail pricing and higher per-subscriber advertising revenue, partially offset by a higher mix of subscribers to multi-product offerings.

Domestic Disney+ average monthly revenue per paid subscriber was comparable to fiscal 2021, as an increase in retail pricing and a lower mix of wholesale subscribers was essentially offset by a higher mix of subscribers to multi-product offerings.

International Disney+ (excluding Disney+ Hotstar) average monthly revenue per paid subscriber increased from $5.31 to $6.10 due to an increase in average retail pricing, partially offset by an unfavorable Foreign Exchange Impact.

Disney+ Hotstar average monthly revenue per paid subscriber increased from $0.68 to $0.88 driven by higher advertising revenue and increases in retail pricing, partially offset by a higher mix of wholesale subscribers.

Hulu SVOD Only average monthly revenue per paid subscriber decreased from $12.86 to $12.72 driven by lower per-subscriber advertising revenue, a higher mix of subscribers to multi-product offerings and, to a lesser extent, to promotional offerings, partially offset by an increase in average retail pricing.

Hulu Live TV + SVOD average monthly revenue per paid subscriber increased from $81.35 to $87.62 driven by an increase in average retail pricing and higher advertising revenue, partially offset by a higher mix of subscribers to multi-product offerings.

Costs and Expenses

Operating expenses are as follows:

(in millions) 2022 2021 % Change

($ in millions)

2022 2021 % Change

Better (Worse)

2 unchanged sentences

Hulu (7,564) (6,680) (13) %

ESPN+ and other (1,564) (1,121) (40) %

Other (25) (31) 19 %

Total programming and production costs (12,055) (9,247) (30) %

1 unchanged sentence

$ (15,641) $ (11,906) (31) %

The increase in programming and production costs at Disney+ was due to more content provided on the service and, to a lesser extent, higher average cost programming, which reflected an increased mix of original content.

The increase in programming and production costs at Disney+ was attributable to more content provided on the service and, to a lesser extent, higher average cost programming, which reflected an increased mix of original content.

The increase in programming and production costs at Hulu was due to more content provided on the service and higher subscriber-based fees for programming the Live TV service, which reflected rate increases and an increase in the number of subscribers.

The increase in programming and production costs at ESPN+ and other was due to new NHL programming and higher rights costs for soccer and golf programming.

Other operating expenses increased due to higher technology and distribution costs at Disney+ reflecting growth in existing markets and, to a lesser extent, expansion to new markets.

Selling, general, administrative and other costs increased $1,325 million, to $5,760 million from $4,435 million, due to higher marketing costs at Disney+ and Hulu.

Selling, general, administrative and other costs increased $1,328 million, to $5,395 million from $4,067 million, attributable to higher marketing costs.

Depreciation and amortization increased $48 million, to $363 million from $315 million, primarily due to increased investment in technology assets at Disney+.

Operating Loss from Direct-to-Consumer

Operating loss from Direct-to-Consumer increased $2,336 million, to $4,015 million from $1,679 million due to a higher loss at Disney+ and, to a lesser extent, lower operating income at Hulu and a higher loss at ESPN+.

Operating loss from Direct-to-Consumer increased $2,172 million, to $3,424 million from $1,252 million due to a higher loss at Disney+ and, to a lesser extent, lower operating income at Hulu.

Content Sales/Licensing and Other

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

(in millions) 2022 2021 % Change

($ in millions)

2022 2021 % Change

Better (Worse)

TV/SVOD distribution $ 3,781 $ 4,206 (10) %

TV/VOD distribution

$ 3,520 $ 3,925 (10) %

Theatrical distribution 1,875 920 >100 %

Home entertainment 820 1,014 (19) %

Home entertainment distribution

1,083 1,297 (16) %

Other 2,288 1,795 27 %

4 unchanged sentences

Equity in the income of investees — 14 (100) %

Operating Income (Loss) $ (287) $ 567 nm

The decrease in TV/SVOD distribution revenue reflected lower sales volumes, which included the impact from the shift from licensing our content to third parties to distributing it on our DTC streaming services.

The increase in theatrical distribution revenue was due to more titles released in the current year compared to the prior year and revenue in the current year from the co-production of Marvel’s Spider-Man:

Operating Income

$ 352 $ 1,177 (70) %

The decrease in TV/VOD distribution revenue reflected lower sales volumes, which included the impact of the shift from licensing our content to third parties to distributing it on our Entertainment Direct-to-Consumer streaming services.

The increase in theatrical distribution revenue was due to more titles released in fiscal 2022 compared to fiscal 2021 and revenue in fiscal 2022 from the co-production of Marvel’s Spider-Man:

No Way Home .

Although COVID-19 continues to impact our theatrical distribution business in certain markets, the impact in fiscal 2021 was more significant due to theater closures and capacity restrictions in many territories in which we operate.

Titles released in the current year included Doctor Strange In The Multiverse of Madness , Thor:

Love and Thunder , Eternals , Encanto and Lightyear.

Titles released in the prior year included Shang-Chi & The Legend of The Ten Rings , Black Widow and Free Guy .

The decrease in home entertainment revenue was due to lower unit sales despite the benefit of more new release titles in the current year.

Net effective pricing was comparable to the prior year as lower unit pricing was offset by a higher mix of new release titles, which have a higher sales price than catalog titles.

The increase in other revenue was due to more stage play performances in the current year as productions were generally shut down in the prior year due to COVID-19.

Although COVID-19 continued to impact our theatrical distribution business in certain markets in fiscal 2022, the impact in fiscal 2021 was more significant.

Titles released in fiscal 2022 included Doctor Strange in The Multiverse of Madness , Thor:

Love and Thunder , Eternals ,

Encanto and Lightyear.

Titles released in fiscal 2021 included Shang-Chi and the Legend of the Ten Rings , Black Widow and Free Guy .

The decrease in home entertainment distribution revenue was attributable to lower unit sales despite the benefit of more new release titles in fiscal 2022.

Net effective pricing was comparable to fiscal 2021 as lower unit pricing was offset by a higher mix of new release titles, which have a higher sales price than catalog titles.

The increase in other revenue was due to more stage play performances in fiscal 2022 as productions were generally shut down in fiscal 2021 due to COVID-19.

Costs and Expenses

Operating expenses are as follows:

(in millions) 2022 2021 % Change

($ in millions)

2022 2021 % Change

Better (Worse)

2 unchanged sentences

$ (5,508) $ (4,536) (21) %

The increase in programming and production costs was due to higher production cost amortization, driven by more theatrical releases, and, to a lesser extent, higher film cost impairments.

Higher cost of goods sold and distribution costs were due to the increased number of stage play performances in the current year.

Selling, general, administrative and other costs increased $675 million, to $2,638 million from $1,963 million, due to higher theatrical marketing costs as more titles were released in the current year compared to the prior year.

The increase in programming and production costs was due to higher production cost amortization driven by more theatrical releases, the increased number of stage play performances in fiscal 2022 and higher film cost impairments.

The increase in distribution costs and cost of goods sold was primarily due to increased theatrical distribution costs.

Selling, general, administrative and other costs increased $666 million, to $2,610 million from $1,944 million, due to higher theatrical marketing costs as more titles were released in fiscal 2022 compared to fiscal 2021.

Operating Income from Content Sales/Licensing and Other

Operating income from Content Sales/Licensing and Other decreased $854 million, to a loss of $287 million from income of $567 million, primarily due to lower TV/SVOD distribution results, higher film cost impairments and decreases in home entertainment and theatrical distribution results, partially offset by higher stage play results.

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

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

(in millions) 2022 2021 % Change Better (Worse)

Operating income from Content Sales/Licensing and Other decreased 70% to $352 million from $1,177 million, due to lower TV/VOD and home entertainment distribution results, higher film cost impairments and lower theatrical distribution results, partially offset by higher stage play results.

Items Excluded from Segment Operating Income Related to Entertainment

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

($ in millions)

2022 2021 % Change Better (Worse)

TFCF and Hulu acquisition amortization (1)

4 unchanged sentences

German FTA gain — 126 (100) %

(1) In the current year, amortization of step-up on film and television costs was $634 million and amortization of intangible assets was $1,699 million.

In the prior year, amortization of step-up on film and television costs was $ 646 million and amortization of intangible assets was $1,749 million.

(2) The current year includes impairments of assets related to our Russian businesses.

The prior year includes impairments and severance costs related to the closure of an animation studio and severance costs and contract termination charges in connection with the integration of TFCF.

Disney Parks, Experiences and Products

Operating results for DPEP are as follows:

(1) In fiscal 2022, amortization of step-up on film and episodic costs was $634 million and amortization of intangible assets was $1,300 million.

In fiscal 2021, amortization of step-up on film and episodic costs was $646 million and amortization of intangible assets was $1,345 million.

(2) Fiscal 2022 includes impairments of assets related to exiting our businesses in Russia.

Fiscal 2021 includes impairments and severance costs related to the closure of an animation studio and severance costs and contract termination charges in connection with the integration of TFCF.

Operating results for Sports are as follows:

($ in millions)

2022 2021 % Change

Better (Worse)

Affiliate fees $ 10,796 $ 10,609 2 %

Advertising 4,370 3,720 17 %

Subscription fees 1,113 725 54 %

Total revenues 17,270 15,960 8 %

Operating expenses (13,084) (11,986) (9) %

Selling, general, administrative and other (1,441) (1,231) (17) %

Depreciation and amortization (90) (104) 13 %

Equity in the income of investees 55 51 8 %

Operating Income $ 2,710 $ 2,690 1 %

Affiliate fees are as follows:

($ in millions)

2022 2021 % Change

Better (Worse)

Domestic $ 9,437 $ 9,199 3 %

International 1,084 1,114 (3) %

10,521 10,313 2 %

275 296 (7) %

$ 10,796 $ 10,609 2 %

The increase in domestic ESPN af filiate fees was primarily due to an increase of 5% from higher contractual rates, partially offset by a decrease of 4% from fewer subscribers.

The decrease in international ESPN af filiate fees was attributable to decreases of 8% from fewer subscribers driven by channel closures, and 7% from an unfavorable Foreign Exchange Impact, partially offset by an increase of 11% from higher contractual rates.

The decrease in Star affiliate fees was due to decreases of 5% from an unfavorable Foreign Exchange Impact and 1% from fewer subscribers.

Advertising revenue is as follows:

($ in millions)

2022 2021 % Change

Better (Worse)

Domestic $ 3,424 $ 2,981 15 %

International 173 150 15 %

3,597 3,131 15 %

$ 4,370 $ 3,720 17 %

The increase in domestic ESPN advertising revenue was due to increases of 11% from higher impressions and 5% from higher rates.

The increase in impressions reflected higher average vi ewership and, to a lesser extent, an increase in units delivered.

Higher international ESPN advertising revenue was primarily due to increases of 11% from higher average viewership and 7% from higher rates, partially offset by a decrease of 6% from an unfavorable Foreign Exchange Impact.

Growth in Star advertising revenue was due to an increase of 37% from higher average viewership, partially offset by decreases of 3% from an unfavorable Foreign Exchange Impact and 3% from lower rates.

The increase in average viewership reflected the airing of more cricket matches in fiscal 2022.

Fiscal 2022 included the ICC T20 World Cup, more Board of Control for Cricket in India (BCCI) matches and the ACC Asia Cup, partially offset by fewer IPL matches compared to fiscal 2021.

The ICC T20 World Cup and the ACC Asia Cup were not held in fiscal 2021.

The increase in BCCI matches in fiscal 2022 was driven by COVID-19-related cancellations in fiscal 2021.

The increase in subscription fees was due to ESPN+ subscriber growth.

The increase in other revenue was due to higher sub-licensing fees and higher fees received for programming ESPN on ABC, partially offset by lower UFC pay-per-view fees due to lower average buys per event.

The increase in sub-licensing fees was due to fees from ICC T20 World Cup matches in fiscal 2022 and higher fees from BCCI cricket matches.

The following table presents additional information about ESPN+.

(in millions) October 1, 2022 October 2, 2021 % Change

Better (Worse)

Paid subscribers at fiscal year end (in millions)

24.3 17.1 42 %

Average Monthly Revenue per Paid Subscriber for the fiscal year

$ 4.80 $ 4.57 5 %

ESPN+ average monthly revenue per paid subscriber increased from $4.57 to $4.80 primarily due to an increase in retail pricing, a lower mix of annual subscribers and higher advertising revenue, partially offset by a higher mix of subscribers to multi-product offerings.

Costs and Expenses

Operating expenses are as follows:

($ in millions)

2022 2021 % Change

Better (Worse)

Programming and production costs

Domestic $ (10,003) $ (9,370) (7) %

International (998) (1,094) 9 %

(11,001) (10,464) (5) %

(1,284) (766) (68) %

(12,285) (11,230) (9) %

Other operating expenses (799) (756) (6) %

$ (13,084) $ (11,986) (9) %

The increase in domestic ESPN programming and production costs was due to new NHL programming, higher rights costs for NFL and CFP and an increase in production costs reflecting the return of ESPN-hosted events, which were canceled in fiscal 2021 due to COVID-19, and more ESPN films in fiscal 2022.

These increases were partially offset by lower rights costs for MLB and NBA programming.

Higher NFL programming costs were due to airing four additional regular season games in fiscal 2022 compared to fiscal 2021 and contractual rate increases.

The increase in CFP rights costs was due to higher contractual rates.

Lower MLB programming costs were due to airing 29 games of the 2022 regular season under our new contract and one 2021 season playoff game in fiscal 2022 compared to 92 games of the 2021 regular season in fiscal 2021.

Fiscal 2021 also included the 2021 NBA Finals and fiscal 2022 included the 2022 NBA finals.

The decrease in international programming and production costs was due to channel closures in fiscal 2021, the impact of shifting exclusive soccer matches from Sports to Star+ in fiscal 2022 and a favorable Foreign Exchange Impact, partially offset by higher production costs.

The increase in Star programming and production costs was due to more cricket matches in fiscal 2022 and higher average costs per match for BCCI and IPL cricket matches.

Selling, general, administrative and other costs increased $210 million, to $1,441 million from $1,231 million, driven by higher marketing costs.

Operating Income

Operating income increased 1%, to $2,710 million from $2,690 million due to an increase at ESPN, partially offset by a decrease at Star.

The following table provides supplemental revenue and operating income (loss) detail for Sports:

($ in millions)

2022 2021 % Change

Better (Worse)

Supplemental revenue detail

$ 14,636 $ 13,623 7 %

International

1,434 1,390 3 %

16,070 15,013 7 %

1,200 947 27 %

$ 17,270 $ 15,960 8 %

Supplemental operating income (loss) detail

$ 2,814 $ 2,610 8 %

International

2,892 2,596 11 %

Equity in the income of investees 55 51 8 %

$ 2,710 $ 2,690 1 %

Items Excluded from Segment Operating Income Related to Sports

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

(in millions) 2022 2021 % Change

Better (Worse)

TFCF acquisition amortization (1)

$ (399) $ (404) 1 %

Restructuring and impairment charges

(1) (15) 93 %

(1) Represents amortization of intangible assets.

Operating results for Experiences are as follows:

($ in millions)

2022 2021 % Change

Better (Worse)

Theme park admissions $ 8,602 $ 3,848 >100 %

Parks & Experiences merchandise, food and beverage 6,579 3,299 99 %

Resorts and vacations 6,410 2,701 >100 %

Parks & Experiences merchandise, food and beverage 6,579 3,299 99 %

Merchandise licensing and retail 4,609 4,650 (1) %

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Equity in the loss of investees (10) (19) 47 %

Operating Income $ 7,905 $ 471 >100 %

Revenues at DPEP benefited from fewer closures and operating capacity restrictions in fiscal 2022 compared to fiscal 2021 as a result of COVID-19.

The following table summarizes the approximate number of weeks of operations in the current and prior year:

Operating Income (loss)

$ 7,285 $ (120) nm

Revenues at Experiences benefited from fewer closures and operating capacity restrictions in fiscal 2022 compared to fiscal 2021 as a result of COVID-19.

The following table summarizes the approximate number of weeks of operations in fiscal 2022 and fiscal 2021:

Weeks of Operation

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Higher attendance reflected increases at Disneyland Resort, Walt Disney World Resort and, to a lesser extent, Disneyland Paris, partially offset by a decrease at Shanghai Disney Resort.

Growth in average per capita ticket revenue was due to the introduction of Genie+ and Lightning Lane at our domestic parks in the first quarter of the current fiscal year and higher average ticket prices at Walt Disney World Resort and Disneyland Paris, partially offset by lower average ticket prices at Disneyland Resort and Shanghai Disney Resort.

Parks & Experiences merchandise, food and beverage revenue growth was due to increases of 82% from higher volumes and 9% from higher average guest spending.

Growth in average per capita ticket revenue was due to the introduction of Genie+ and Lightning Lane at our domestic parks in the first quarter of fiscal 2022 and higher average ticket prices at Walt Disney World Resort and Disneyland Paris, partially offset by lower average ticket prices at Disneyland Resort and Shanghai Disney Resort.

Growth in resorts and vacations revenue was primarily due to increases of 51% from higher occupied hotel room nights, 32% from an increase in passenger cruise days and 17% from higher average daily hotel room rates.

Merchandise licensing and retail revenue was comparable to the prior year, as a decrease of 7% from retail was offset by an increase of 7% from merchandise licensing.

Parks & Experiences merchandise, food and beverage revenue growth was due to increases of 82% from higher volumes and 9% from higher average guest spending.

Merchandise licensing and retail revenue was comparable to the prior year, as a decrease of 8% from retail was offset by an increase of 8% from licensing.

The decrease in retail revenues was due to the closure of a substantial number of Disney-branded retail stores in North America and Europe in the second half of fiscal 2021.

The revenue growth at merchandise licensing was primarily due to higher sales of merchandise based on Mickey and Friends, Star Wars, Encanto , Spider-Man and Disney Princesses, partially offset by a decrease in revenues from merchandise based on Frozen.

The revenue growth at licensing was primarily due to higher sales of merchandise based on Mickey and Friends, Star Wars, Encanto , Spider-Man and Disney Princesses, partially offset by a decrease in revenues from merchandise based on Frozen.

The increase in parks licensing and other revenue was primarily due to higher sponsorship revenues and an increase in royalties from Tokyo Disney Resort.

The following table presents supplemental park and hotel statistics:

Domestic International (1)

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Increase (decrease)

Attendance (2)

nm (17)% 54 % (4)% 87 % (14)%

>100 % (17) % 54 % (4) % 87 % (14) %

Per Capita Guest Spending

13 % 17 % 24 % (3) % 18 % 11 %

Occupancy (4)

82 % 42 % 56 % 21 % 76 % 37 %

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10,073 10,451 3,179 3,179 13,252 13,630

Increase (decrease)

Per Room Guest Spending (6)

Change in Per Room Guest Spending (1)

19 % 1 % (7) % 22 % 15 % 4 %

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

(2) Attendance is used to analyze volume trends at our theme parks and is based on the number of unique daily entries, i.e.

a person visiting multiple theme parks in a single day is counted only once.

Our attendance count includes complimentary entries but excludes entries by children under the age of three.

(4) Occupancy is used to analyze the usage of available capacity at hotels and is defined as the number of room nights occupied by guests as a percentage of available hotel room nights.

Available hotel room nights include rooms temporarily taken out of service.

(1) In fiscal 2023, the Company revised its method of allocating revenue on the sales of Disneyland Paris vacation packages between hotel room revenue and admissions revenue.

The new method resulted in a decrease in the percentage of revenue allocated to hotel rooms.

If we had applied the new method in fiscal 2022, the impact would have been a decrease of approximately $50 million.

There is no impact to fiscal 2021 due to this change.

Costs and Expenses

Operating expenses are as follows:

(in millions) 2022 2021 % Change Better (Worse)

($ in millions)

2022 2021 % Change Better (Worse)

Operating labor $ (6,577) $ (4,711) (40) %

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Depreciation and amortization increased $74 million from $2,377 million to $2,451 million, primarily due to new attractions at our domestic parks and resorts.

Segment Operating Income

Segment operating income increased $7,434 million, to $7,905 million due to growth at our domestic parks and experiences and, to a lesser extent, at our international parks and resorts and consumer products business.

The following table presents supplemental revenue and operating income detail for the Parks, Experiences and Products segment:

(in millions) 2022 2021 % Change

Segment Operating Income (loss)

Segment operating results increased $7,405 million, to income of $7,285 million from a loss of $120 million due to growth at our domestic parks and experiences and, to a lesser extent, at our international parks and experiences and consumer products business.

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

($ in millions)

2022 2021 % Change

Better (Worse)

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$ 28,085 $ 15,961 76 %

Supplemental operating income detail

Supplemental operating income (loss) detail

Parks & Experiences

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2,190 2,093 5 %

$ 7,905 $ 471 >100 %

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

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

(in millions) 2022 2021 % Change

$ 7,285 $ (120) nm

Items Excluded from Segment Operating Income Related to Experiences

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

($ in millions)

2022 2021 % Change

Better (Worse)

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$ — $ (327) 100 %

Amortization of TFCF intangible assets (8) (8) — %

(1) The prior year includes asset impairments and severance costs related to the closure of a substantial number of our Disney-branded retail stores in North America and Europe and severance costs related to other workforce reductions.

TFCF acquisition amortization

(1) Fiscal 2021 included asset impairments and severance costs related to the closure of a substantial number of our Disney-branded retail stores in North America and Europe and severance costs related to other workforce reductions.

CORPORATE AND UNALLOCATED SHARED EXPENSES

Corporate and unallocated shared expenses are as follows:

(in millions) 2022 2021 % Change

Better (Worse)

($ in millions)

2023 2022 2021 2023

Corporate and unallocated shared expenses $ (1,147) $ (1,159) $ (928) 1 % (25) %

The increase in corporate and unallocated shared expenses was driven by higher compensation and human resource-related costs.

From fiscal 2022 to fiscal 2023, the decrease in corporate and unallocated shared expenses was driven by lower compensation and human resource-related costs, partially offset by increases in rent expense and technology costs.

From fiscal 2021 to fiscal 2022, the increase in corporate and unallocated shared expenses was driven by higher compensation and human resource-related costs.

RESTRUCTURING ACTIVITIES

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($ in millions)

2023 2022 2021

Cash provided by operations - continuing operations $ 9,866 $ 6,002 $ 5,566

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

73 ( 603 ) 30

Change in cash, cash equivalents and restricted cash $ 2,574 $ (4,342) $ (1,951)

Operating Activities

Continuing operations

Cash provided by operating activities of $6.0 billion for fiscal 2022 increased 8% or $436 million compared to $5.6 billion in fiscal 2021 due to higher operating cash flow at DPEP and, to a lesser extent, lower income tax payments and pension contributions, partially offset by lower operating cash flow at DMED and, to a lesser extent, a partial payment for the Content License Early Termination.

The increase in operating cash flow at DPEP was due to higher operating cash receipts driven by higher revenue, partially offset by an increase in operating cash disbursements due to higher operating expenses.

The decrease in operating cash flow at DMED was due to higher operating cash disbursements and higher spending on film and television productions, partially offset by higher operating cash receipts.

Cash provided by operating activities of $9.9 billion for fiscal 2023 increased 64% or $3.9 billion compared to $6.0 billion in fiscal 2022 due to lower spending on film and episodic content at Entertainment and higher operating cash flow at Experiences, partially offset by higher spending on sports content.

The decrease in spending on film and episodic content at Entertainment included the impact of the WGA and SAG-AFTRA work stoppages.

The increase in operating cash flow at Experiences was due to higher operating cash receipts driven by higher revenue, partially offset by an increase in operating cash disbursements due to higher operating expenses.

The decrease in operating cash flow at Sports was due to the timing of payments for sports content.

Cash provided by operating activities of $6.0 billion for fiscal 2022 increased 8% or $436 million compared to $5.6 billion in fiscal 2021 due to higher operating cash flow at Experiences and, to a lesser extent, lower income tax payments and pension contributions, partially offset by lower operating cash flow at Entertainment and, to a lesser extent, a partial payment for the Content License Early Termination.

The decrease in operating cash flow at Entertainment was due to higher operating cash disbursements and higher spending on film and episodic content, partially offset by higher operating cash receipts.

Higher operating cash disbursements were driven by increased operating expenses while higher operating cash receipts were due to revenue growth.

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($ in millions)

Disney Media and Entertainment Distribution $ 650 $ 613

Disney Parks, Experiences and Products

2023 2022 2021

Entertainment

$ 669 $ 560 $ 513

Domestic 2,011 1,680 1,551

International 669 662 718

Total Disney Parks, Experiences and Products 2,342 2,269

Total Experiences

2,680 2,342 2,269

Corporate 204 191 186

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($ in millions)

Disney Media and Entertainment Distribution $ 164 $ 178

Disney Parks, Experiences and Products 109 108

2023 2022 2021

Entertainment

$ 87 $ 164 $ 174

TFCF and Hulu 1,547 1,707 1,757

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Produced and licensed content costs

DMED incurs costs to produce and license film, episodic television and other content.

The Entertainment and Sports segments incur costs to produce and license film, episodic, sports and other content.

Production costs include spend on content internally produced at our studios such as live-action and animated films, episodic series, specials, shorts and theatrical stage plays.

Production costs also include original content commissioned from third-party studios.

Programming costs include content rights licensed from third parties for use on the Company’s Linear Networks and DTC streaming services.

Programming costs include content rights licensed from third parties for use on the Company’s sports and general entertainment networks and DTC streaming services.

Programming assets are generally recorded when the programming becomes available to us with a corresponding increase in programming liabilities.

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($ in millions)

2023 2022 2021

Beginning balances:

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Change in production and programming costs 1,908 6,271 4,301

Content Impairment

Other non-cash activity (568) (163) 224

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$ 32,801 $ 33,727 $ 27,619

The Company currently expects its fiscal 2023 spend on produced and licensed content, including sports rights, to be in the low $30 billion range.

The Company currently expects its fiscal 2024 spend on produced and licensed content to be approximately $25 billion, with sports rights expected to account for over 40% of spend.

See Note 14 to the Consolidated Financial Statements for information regarding the Company’s contractual commitments to acquire sports and broadcast programming.

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($ in millions)

Disney Media and Entertainment Distribution $ 810 $ 862

Disney Parks, Experiences and Products

2023 2022 2021

Entertainment

$ 1,032 $ 802 $ 838

Domestic 2,203 2,680 1,597

International 822 767 675

Total Disney Parks, Experiences and Products 3,447 2,272

Total Experiences

3,025 3,447 2,272

Corporate 897 686 444

$ 4,969 $ 4,943 $ 3,578

Capital expenditures at DMED primarily reflect investments in technology and in facilities and equipment for expanding and upgrading broadcast centers, production facilities and television station facilities.

Capital expenditures at DPEP are principally for theme park and resort expansion, new attractions, cruise ships, capital improvements and systems infrastructure.

The increase in capital expenditures at our domestic parks and resorts in fiscal 2022 compared to fiscal 2021 was due to cruise ship fleet expansion.

Capital expenditures at Entertainment primarily reflect investments in technology and in facilities and equipment for expanding and upgrading broadcast centers, production facilities and television station facilities.

The increase in fiscal 2023 compared to fiscal 2022 was driven by higher technology spending to support our streaming services.

Capital expenditures at Experiences are principally for theme park and resort expansion, new attractions, cruise ships, capital improvements and systems infrastructure.

The decrease in capital expenditures in fiscal 2023 compared to fiscal 2022 was due to lower spending on cruise ship fleet expansion.

The increase in capital expenditures in fiscal 2022 compared to fiscal 2021 was due to cruise ship fleet expansion.

Capital expenditures at Corporate primarily reflect investments in facilities, information technology infrastructure and equipment.

The increase in fiscal 2022 compared to fiscal 2021 was due to higher spending on facilities.

The Company currently expects its fiscal 2023 capital expenditures will be up to approximately $6.7 billion compared to fiscal 2022 capital expenditures of $4.9 billion.

The increase in capital expenditures is due to higher spending across the enterprise.

Other Investing Activities

Cash provided by other investing activities of $ 407 million in fiscal 2021 reflects proceeds from the sales of investments.

The increases in fiscal 2023 compared to fiscal 2022 and in fiscal 2022 compared to fiscal 2021 were both due to higher spending on facilities.

The Company currently expects its fiscal 2024 capital expenditures to total approximately $6 billion compared to fiscal 2023 capital expenditures of $5 billion.

The increase in capital expenditures is primarily due to higher spending at Experiences, in part due to continued investment in our Disney Cruise Line business.

Financing Activities

Continuing operations

Cash used in financing activities was $4.7 billion in fiscal 2022 compared to $4.4 billion in fiscal 2021.

Cash used in financing activities in fiscal 2022 was due to a reduction in borrowings.

The increase in cash used in financing activities in fiscal 2022 compared to fiscal 2021 reflected a higher reduction in net borrowings ($4.0 billion in fiscal 2022 compared to $3.7 billion in fiscal 2021) and lower proceeds from the exercise of stock options ($0.1 billion in fiscal 2022 compared to $0.4 billion in fiscal 2021).

In addition, cash used in financing activities in fiscal 2021 included a $0.4 billion purchase of a redeemable noncontrolling interest.

Financing activities for fiscal 2023, 2022 and 2021 are as follows:

($ in millions)

2023 2022 2021

Change in borrowings

$ (1,783) $ (4,017) $ (3,699)

Activities related to noncontrolling and redeemable noncontrolling interests

(707) (507) (874)

Cash used in other financing activities, net (1)

(234) (205) 188

Cash used in financing activities - continuing operations

$ (2,724) $ (4,729) $ (4,385)

(1) Primarily consists of equity award activity.

Borrowings activities and other

During the year ended October 1, 2022, the Company’s borrowing activity was as follows:

(in millions) October 2, 2021 Borrowings Payments Other

Activity October 1, 2022

During the year ended September 30, 2023, the Company’s borrowing activity was as follows:

($ in millions)

October 1, 2022 Borrowings Payments Other

Activity September 30, 2023

Commercial paper with original maturities less than three months (1)

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The Company may use operating cash flows, commercial paper borrowings up to the amount of its unused $12.25 billion bank facilities and incremental term debt issuances to retire or refinance other borrowings before or as they come due.

See Note 2 to the Consolidated Financial Statements for a summary of the Company’s put/call agreement with NBCU.

The Company did not declare or pay a dividend or repurchase any of its shares in fiscal 2022 or 2021.

The Company’s operating cash flow and access to the capital markets can be impacted by factors outside of its control, including COVID-19, which had an adverse impact on the Company’s operating cash flows in fiscal 2021 and, to a lesser extent, fiscal 2022.

We believe that the Company’s financial condition is strong and that its cash balances, other liquid assets, operating cash flows, access to debt and equity capital markets and borrowing capacity under current bank facilities, taken together, provide adequate resources to fund ongoing operating requirements and upcoming debt maturities as well as future capital expenditures related to the expansion of existing businesses and development of new projects.

In addition, the Company could undertake other measures to ensure sufficient liquidity, such as continuing to not declare dividends (the Company did not pay a dividend with respect to fiscal 2021 operations and has not declared or paid a dividend with respect to fiscal 2022 operations);

In November 2023, NBCU exercised its put right to require the Company to purchase NBCU’s interest in Hulu for the greater of approximately $9 billion or NBCU’s share of fair value (see Note 2 of the Consolidated Financial Statements for additional information).

The Company did not declare or pay a dividend or repurchase any of its shares in fiscal 2023, 2022 and 2021.

The Company’s operating cash flow and access to the capital markets can be impacted by factors outside of its control.

We believe that the Company’s financial condition is strong and that its cash balances, other liquid assets, operating cash flows, access to debt and equity capital markets and borrowing capacity under current bank facilities, taken together, provide adequate resources to fund ongoing operating requirements, contractual obligations, upcoming debt maturities as well as future capital expenditures related to the expansion of existing businesses and development of new projects.

In addition, the Company could undertake other measures to ensure sufficient liquidity, such as continuing to not declare dividends;

raising financing;

suspending or reducing capital spending;

reducing film and television content investments;

reducing capital spending;

reducing film and episodic content investments;

or implementing furloughs or reductions in force.

The Company’s borrowing costs can also be impacted by short- and long-term debt ratings assigned by nationally recognized rating agencies, which are based, in significant part, on the Company’s performance as measured by certain credit metrics such as leverage and interest coverage ratios.

As of October 1, 2022, Moody’s Investors Service’s long- and short-term debt ratings for the Company were A2 and P-1 (Stable), respectively, Standard and Poor’s long- and short-term debt ratings for the Company were BBB+ and A-2 (Positive), respectively, and Fitch’s long- and short-term debt ratings for the Company were A- and F2 (Stable), respectively.

As of September 30, 2023, Moody’s Investors Service’s long- and short-term debt ratings for the Company were A2 and P-1 (Stable), respectively, Standard and Poor’s long- and short-term debt ratings for the Company were A- and A-2 (Positive), respectively, and Fitch’s long- and short-term debt ratings for the Company were A- and F2 (Stable), respectively.

The Company’s bank facilities contain only one financial covenant, relating to interest coverage of three times earnings before interest, taxes, depreciation and amortization, including both intangible amortization and amortization of our film and television production and programming costs.

On October 1, 2022, the Company met this covenant by a significant margin.

On September 30, 2023, the Company met this covenant by a significant margin.

The Company’s bank facilities also specifically exclude certain entities, including the Asia Theme Parks, from any representations, covenants or events of default.

SUPPLEMENTAL GUARANTOR FINANCIAL INFORMATION

On March 20, 2019, as part of the acquisition of TFCF, The Walt Disney Company (“TWDC”) became the ultimate parent of TWDC Enterprises 18 Corp.

(formerly known as The Walt Disney Company) (“Legacy Disney”).

Legacy Disney and TWDC are collectively referred to as “Obligor Group”, and individually, as a “Guarantor”.

Concurrent with the close of the TFCF acquisition, $16.8 billion of TFCF’s assumed public debt (which then constituted 96% of such debt) was exchanged for senior notes of TWDC (the “exchange notes”) issued pursuant to an exemption from registration under the Securities Act of 1933, as amended (the “Securities Act”), pursuant to an Indenture, dated as of March 20, 2019, between TWDC, Legacy Disney, as guarantor, and Citibank, N.A., as trustee (the “TWDC Indenture”) and guaranteed by Legacy Disney.

On November 26, 2019, $14.0 billion of the outstanding exchange notes were exchanged for new senior notes of TWDC registered under the Securities Act, issued pursuant to the TWDC Indenture and guaranteed by Legacy Disney.

In addition, contemporaneously with

the closing of the March 20, 2019 exchange offer, TWDC entered into a guarantee of the registered debt securities issued by Legacy Disney under the Indenture dated as of September 24, 2001 between Legacy Disney and Wells Fargo Bank, National Association, as trustee (the “2001 Trustee”) (as amended by the first supplemental indenture among Legacy Disney, as issuer, TWDC, as guarantor, and the 2001 Trustee, as trustee).

Other subsidiaries of the Company do not guarantee the registered debt securities of either TWDC or Legacy Disney (such subsidiaries are referred to as the “non-Guarantors”).

The par value and carrying value of total outstanding and guaranteed registered debt securities of the Obligor Group at October 1, 2022 was as follows:

TWDC Legacy Disney

(in millions) Par Value Carrying Value Par Value Carrying Value

Registered debt with unconditional guarantee $ 35,343 $ 35,736 $ 9,105 $ 8,851

The guarantees by TWDC and Legacy Disney are full and unconditional and cover all payment obligations arising under the guaranteed registered debt securities.

The guarantees may be released and discharged upon (i) as a general matter, the indebtedness for borrowed money of the consolidated subsidiaries of TWDC in aggregate constituting no more than 10% of all consolidated indebtedness for borrowed money of TWDC and its subsidiaries (subject to certain exclusions), (ii) upon the sale, transfer or disposition of all or substantially all of the equity interests or all or substantially all, or substantially as an entirety, the assets of Legacy Disney to a third party, and (iii) other customary events constituting a discharge of a guarantor’s obligations.

In addition, in the case of Legacy Disney’s guarantee of registered debt securities issued by TWDC, Legacy Disney may be released and discharged from its guarantee at any time Legacy Disney is not a borrower, issuer or guarantor under certain material bank facilities or any debt securities.

Operations are conducted almost entirely through the Company’s subsidiaries.

Accordingly, the Obligor Group’s cash flow and ability to service its debt, including the public debt, are dependent upon the earnings of the Company’s subsidiaries and the distribution of those earnings to the Obligor Group, whether by dividends, loans or otherwise.

Holders of the guaranteed registered debt securities have a direct claim only against the Obligor Group.

Set forth below are summarized financial information for the Obligor Group on a combined basis after elimination of (i) intercompany transactions and balances between TWDC and Legacy Disney and (ii) equity in the earnings from and investments in any subsidiary that is a non-Guarantor.

This summarized financial information has been prepared and presented pursuant to the Securities and Exchange Commission Regulation S-X Rule 13-01, “Financial Disclosures about Guarantors and Issuers of Guaranteed Securities” and is not intended to present the financial position or results of operations of the Obligor Group in accordance with U.S.

Results of operations (in millions) 2022

Costs and expenses —

Net income (loss) from continuing operations (742)

Net income (loss) (742)

Net income (loss) attributable to TWDC shareholders (742)

Balance Sheet (in millions) October 1, 2022 October 2, 2021

Current assets $ 5,665 $ 9,506

Noncurrent assets 1,948 1,689

Current liabilities 3,741 6,878

Noncurrent liabilities (excluding intercompany to non-Guarantors) 46,218 51,439

Intercompany payables to non-Guarantors 148,958 147,629

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

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Upon a film’s release and determination of the theatrical performance, the Company’s estimates of revenues from succeeding windows and markets, which may include imputed license fees for content that is used on our DTC streaming services, are revised based on historical relationships and an analysis of current market trends.

With respect to capitalized television production costs that are classified as individual, the most sensitive factors affecting estimates of Ultimate Revenues are program ratings of the content on our licensees’ platforms.

With respect to capitalized television production costs that are classified as individual, the most sensitive factor affecting estimates of Ultimate Revenues is program ratings of the content on our licensees’ platforms.

Program ratings, which are an indication of market acceptance, directly affect the program’s ability to generate advertising and subscriber revenues and are correlated with the license fees we can charge for the content in subsequent windows and for subsequent seasons.

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Conversely, if our estimate of Ultimate Revenues increases, cost amortization may be slowed.

Production costs classified as individual are tested for impairment at the individual title level by comparing that title’s unamortized costs to the present value of discounted cash flows directly attributable to the title.

To the extent the title’s unamortized costs exceed the present value of discounted cash flows, an impairment charge is recorded for the excess.

Produced content costs that are part of a group and acquired/licensed content costs are amortized based on projected usage, typically resulting in an accelerated or straight-line amortization pattern.

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Adjustments to projected usage are applied prospectively in the period of the change.

For example, beginning in the fourth quarter of fiscal 2022, for certain content, we are accelerating the rate of amortization in early periods, slowing the rate in later periods and have adjusted the useful life based on historical and projected usage patterns.

The most sensitive factors affecting projected usage are historical and estimated viewing patterns.

Historical viewing patterns are the most significant input into determining the projected usage, and significant judgment is required in using historical viewing patterns to derive projected usage.

If projected usage changes we may need to accelerate or slow the recognition of amortization expense.

For content that is predominantly monetized as a group, the aggregate unamortized costs of the group are compared to the present value of the discounted cash flows using the lowest level for which identifiable cash flows are independent of other produced and licensed content.

Cost of content that is predominantly monetized as a group is tested for impairment by comparing the present value of the discounted cash flows of the group to the aggregate unamortized costs of the group.

The group is established by identifying the lowest level for which cash flows are independent of the cash flows of other produced and licensed content.

If the unamortized costs exceed the present value of discounted cash flows, an impairment charge is recorded for the excess and allocated to individual titles based on the relative carrying value of each title in the group.

If there are no plans to continue to use an individual film or television program that is part of a group, the unamortized cost of the individual title is written-off immediately.

Licensed content is included as part of the group within which it is monetized for purposes of assessing recoverability.

If there are no plans to continue to use an individual film or television program that is part of a group, the unamortized cost of the individual title is written down to its estimated fair value.

Licensed content is included as part of the group within which it is monetized for purposes of impairment testing.

The amortization of multi-year sports rights is based on projections of revenues for each season relative to projections of total revenues over the contract period (estimated relative value).

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The Company’s discount rate was determined by considering yield curves constructed of a large population of high-quality corporate bonds and reflects the matching of the plans’ liability cash flows to the yield curves.

A one percentage point decrease in the assumed discount rate would increase total benefit expense for fiscal 2023 by approximately $ 242 million and would increase the projected benefit obligation at October 1, 2022 by approximately $2.3 billion.

A one percentage point increase in the assumed discount rate would decrease total benefit expense and the projected benefit obligation by approximately $ 59 million and $2.0 billion, respectively.

A one percentage point decrease in the assumed discount rate would increase total benefit expense for fiscal 2024 by approximately $200 million and would increase the projected benefit obligation at September 30, 2023 by approximately $2.0 billion.

percentage point increase in the assumed discount rate would decrease total benefit expense and the projected benefit obligation by approximately $ 45 million and $1.8 billion, respectively.

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

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The quantitative assessment compares the fair value of each goodwill reporting unit to its carrying amount, and to the extent the carrying amount exceeds the fair value, an impairment of goodwill is recognized for the excess up to the amount of goodwill allocated to the reporting unit.

In fiscal 2022, the Company bypassed the qualitative test and performed a quantitative assessment of goodwill for impairment.

The impairment test for goodwill requires judgment related to the identification of reporting units, the assignment of assets and liabilities to reporting units including goodwill, and the determination of fair value of the reporting units.

To determine the fair value of our reporting units, we apply what we believe to be the most appropriate valuation methodology for each of our reporting units.

We generally use a present value technique (discounted cash flows) corroborated by market multiples when available and as appropriate.

The discounted cash flow analyses are sensitive to our estimates of future revenue growth and margins for these businesses as well as the discount rates used to calculate the present value of future cash flows.

In times of adverse economic conditions in the global economy, the Company’s long-term cash flow projections are subject to a greater degree of uncertainty than usual.

In fiscal 2023, the Company bypassed the qualitative test and performed a quantitative assessment of goodwill for impairment, under both the previous segment reporting structure and the new segment reporting structure.

There were no goodwill impairments under the previous reporting structure.

The change in reporting structure requires judgment to identify new reporting units, allocate goodwill to these reporting units (based on relative fair values) and assign other recorded assets and liabilities to these reporting units.

To determine the fair value of our reporting units, we generally use a present value technique (discounted cash flows) corroborated by market multiples when available and as appropriate.

The discounted cash flow analyses are sensitive to our estimated projected future cash flows as well as the discount rates used to calculate their present value.

Our future cash flows are based on internal forecasts for each reporting unit, which consider projected inflation and other economic indicators, as well as industry growth projections.

Discount rates for each reporting unit are determined based on the inherent risks of each reporting unit’s underlying operations.

We believe our estimates are consistent with how a marketplace participant would value our reporting units.

If we had established different reporting units or utilized different valuation methodologies or assumptions, the impairment test results could differ, and we could be required to record impairment charges.

To test its other indefinite-lived intangible assets for impairment, the Company first performs a qualitative assessment to determine if it is more likely than not that the carrying amount of each of its indefinite-lived intangible assets exceeds its fair value.

Since our prior annual impairment assessment performed in the fourth quarter of fiscal 2022, the fair values of our media and entertainment businesses have generally declined as a result of higher discount rates and lower projections for certain revenue streams.

Based on our projections, the carrying amounts of our entertainment and international sports linear networks reporting units exceeded their fair values and we recorded non-cash goodwill impairment charges of approximately $0.7 billion.

The entertainment linear networks reporting unit goodwill after impairment is approximately $8 billion and the international sports linear networks reporting unit goodwill is fully impaired.

In addition, the fair value of our entertainment DTC services reporting unit exceeded its carrying amount by less than 10%.

Goodwill of the entertainment DTC services reporting unit is approximately $45 billion.

Significant judgments and assumptions in the discounted cash flow model relate to future revenues and certain operating expenses, terminal growth rates and discount rates.

Changes to these significant assumptions, market trends, or macroeconomic events could produce test results in the future that differ, and we could be required to record additional impairment charges.

For our entertainment linear networks reporting unit, a 25 basis point increase in the discount rate or a 1% reduction in projected cash flows used to determine fair value would result in an incremental impairment charge of approximately $0.3 billion.

For our entertainment DTC services reporting unit, a 25 basis point increase in the discount rate used to determine fair value would result in an impairment of $0.5 billion, and a 1% reduction in projected cash flows would result in a decrease in the excess fair value over carrying amount by approximately $0.9 billion.

To test other indefinite-lived intangible assets for impairment, the Company first performs a qualitative assessment to determine if it is more likely than not that the carrying amount of each of its indefinite-lived intangible assets exceeds its fair

If it is, a quantitative assessment is required.

14 unchanged sentences

If these forecasts are not met, impairment charges may be recorded.

The Company recorded non-cash impairment charges of $ 0.2 billion and $ 0.3 billion in fiscal 2022 and 2021, respectively.

The fiscal 2022 charges primarily related to our businesses in Russia.

The Company tested its indefinite-lived intangible assets, long-lived assets and investments for impairment and recorded non-cash impairment charges of $2.3 billion, $ 0.2 billion and $ 0.3 billion in fiscal 2023, 2022 and 2021, respectively.

The fiscal 2023 charges primarily related to content impairments resulting from a strategic change in our approach to content curation.

See Note 18 to the Consolidated Financial Statements for additional information.

The fiscal 2022 charges primarily related to exiting our businesses in Russia.

The fiscal 2021 charges primarily related to the closure of an animation studio and a substantial number of our Disney-branded retail stores in North America and Europe.

13 unchanged sentences

Our determinations regarding the recognition of income tax benefits are made in consultation with outside tax and legal counsel, where appropriate, and are based upon the technical merits of our tax positions in consideration of applicable tax statutes and related interpretations and precedents and upon the expected outcome of proceedings (or negotiations) with taxing and legal authorities.

The tax benefits ultimately realized by the Company may differ from those recognized in our future financial statements based on a number of factors, including the Company’s decision to settle rather than litigate a matter, relevant legal precedent related to similar matters and the Company’s success in supporting its filing positions with taxing authorities.

The tax benefits ultimately realized by the Company may differ from those recognized in our future financial statements based on a number of factors, including the Company’s decision to

settle rather than litigate a matter, relevant legal precedent related to similar matters and the Company’s success in supporting its filing positions with taxing authorities.

See Note 9 to the Consolidated Financial Statements for additional discussion.

New Accounting Pronouncements

See Note 19 to the Consolidated Financial Statements for information regarding new accounting pronouncements.

DTC PRODUCT DESCRIPTIONS, KEY DEFINITIONS AND SUPPLEMENTAL INFORMATION

Product Offerings

In the U.S., Disney+, ESPN+ and Hulu SVOD Only are each offered as a standalone service or together as part of various multi-product offerings.

Hulu Live TV + SVOD includes Disney+ and ESPN+.

Disney+ is available in more than 150 countries and territories outside the U.S.

In India and certain other Southeast Asian countries, the service is branded Disney+ Hotstar.

In certain Latin American countries, we offer Disney+ as well as Star+, a general entertainment SVOD service, which is available on a standalone basis or together with Disney+ (Combo+).

Depending on the market, our services can be purchased on our websites or through third-party platforms/apps or are available via wholesale arrangements.

Paid Subscribers

Paid subscribers reflect subscribers for which we recognized subscription revenue.

Subscribers cease to be a paid subscriber as of their effective cancellation date or as a result of a failed payment method.

Subscribers to multi-product offerings in the U.S.

are counted as a paid subscriber for each service included in the multi-product offering and subscribers to Hulu Live TV + SVOD are counted as one paid subscriber for each of the Hulu Live TV + SVOD, Disney+ and ESPN+ services.

In Latin America, if a subscriber has either the standalone Disney+ or Star+ service or subscribes to Combo+, the subscriber is counted as one Disney+ paid subscriber.

Subscribers include those who receive a service through wholesale arrangements including those for which the service is distributed to each subscriber of an existing content distribution tier.

When we aggregate the total number of paid subscribers across our DTC streaming services, we refer to them as paid subscriptions.

International Disney+ (excluding Disney+ Hotstar)

International Disney+ (excluding Disney+ Hotstar) includes the Disney+ service outside the U.S.

and Canada and the Star+ service in Latin America.

Average Monthly Revenue Per Paid Subscriber

Hulu and ESPN+ average monthly revenue per paid subscriber is calculated based on the average of the monthly average paid subscribers for each month in the period.

The monthly average paid subscribers is calculated as the sum of the beginning of the month and end of the month paid subscriber count, divided by two.

Disney+ average monthly revenue per paid subscriber is calculated using a daily average of paid subscribers for the period.

The average revenue per paid subscriber is net of discounts on offerings that carry more than one service.

Revenue is allocated to each service based on the relative retail or wholesale price of each service on a standalone basis.

Hulu Live TV + SVOD revenue is allocated to the SVOD services based on the wholesale price of the Hulu SVOD Only, Disney+ and ESPN+ multi-product offering.

In general, wholesale arrangements have a lower average monthly revenue per paid subscriber than subscribers that we acquire directly or through third-party platforms.

Supplemental information about paid subscribers (1) :

(in millions) September 30,

2023 October 1,

2022 October 2,

Domestic (U.S.

and Canada) standalone 55.5 60.4 65.4

Domestic (U.S.

and Canada) multi-product (1)

22.6 19.4 11.4

78.1 79.7 76.9

International standalone (excluding Disney+ Hotstar) (2)

55.3 49.2 34.8

International multi-product (3)

66.1 56.5 36.0

144.2 136.2 112.9

(1) At September 30, 2023, there were 20.3 million and 2.3 million subscribers to three-service and two-service multi-product offerings, respectively.

At October 1, 2022, there were 18.7 million and 0.7 million subscribers to three-

service and two-service multi-product offerings, respectively.

At October 2, 2021, there were 11.4 million subscribers to three-service offerings and no subscribers to two-service offerings.

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

(3) Consists of subscribers to Combo+.

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

SUPPLEMENTAL GUARANTOR FINANCIAL INFORMATION

On March 20, 2019, as part of the acquisition of TFCF, The Walt Disney Company (“TWDC”) became the ultimate parent of TWDC Enterprises 18 Corp.

(formerly known as The Walt Disney Company) (“Legacy Disney”).

Legacy Disney and TWDC are collectively referred to as “Obligor Group”, and individually, as a “Guarantor”.

In addition, contemporaneously with the closing of the March 20, 2019 exchange offer, TWDC entered into a guarantee of the registered debt securities issued by Legacy Disney under the Indenture dated as of September 24, 2001 between Legacy Disney and Wells Fargo Bank, National Association, as trustee (the “2001 Trustee”) (as amended by the first supplemental indenture among Legacy Disney, as issuer, TWDC, as guarantor, and the 2001 Trustee, as trustee).

Other subsidiaries of the Company do not guarantee the registered debt securities of either TWDC or Legacy Disney (such subsidiaries are referred to as the “non-Guarantors”).

The par value and carrying value of total outstanding and guaranteed registered debt securities of the Obligor Group at September 30, 2023 was as follows:

TWDC Legacy Disney

($ in millions)

Par Value Carrying Value Par Value Carrying Value

Registered debt with unconditional guarantee $ 35,163 $ 35,393 $ 8,121 $ 7,880

The guarantees by TWDC and Legacy Disney are full and unconditional and cover all payment obligations arising under the guaranteed registered debt securities.

Operations are conducted almost entirely through the Company’s subsidiaries.

Holders of the guaranteed registered debt securities have a direct claim only against the Obligor Group.

Results of operations ($ in millions)

Costs and expenses —

Net income (loss) from continuing operations (2,160)

Net income (loss) (2,160)

Net income (loss) attributable to TWDC shareholders (2,160)

Balance Sheet ($ in millions)

September 30, 2023 October 1, 2022

Current assets $ 8,544 $ 5,665

Noncurrent assets 2,927 1,948

Current liabilities 5,746 3,741

Noncurrent liabilities (excluding intercompany to non-Guarantors) 43,307 46,218

Intercompany payables to non-Guarantors 154,018 148,958

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-K

Item 7. Management’s Discussion and Analysis