What changed in this filing

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Item 1. Financial Statements

2024-02-07 compared with 2023-08-09 · 289 added, 370 removed, 530 unchanged (55% of the section changed)

1 unchanged sentence

THE WALT DISNEY COMPANY

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

in millions, except per share data)

Quarter Ended Nine Months Ended

Quarter Ended

2023 December 31,

Services $ 20,975 $ 20,997

10 unchanged sentences

Restructuring and impairment charges — ( 69 )

Other income (expense), net ( 11 ) ( 136 ) 96 ( 730 )

Other expense, net

Interest expense, net ( 246 ) ( 300 )

Equity in the income of investees 181 191

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

Income taxes on continuing operations ( 19 ) ( 617 ) ( 1,066 ) ( 1,610 )

Net income (loss) from continuing operations ( 153 ) 1,502 2,696 3,299

Loss from discontinued operations, net of income tax benefit of $0, $0, $0 and $14, respectively — — — ( 48 )

Net income (loss) ( 153 ) 1,502 2,696 3,251

Net income from continuing operations attributable to noncontrolling interests

( 307 ) ( 93 ) ( 606 ) ( 268 )

Net income (loss) attributable to Disney $ ( 460 ) $ 1,409 $ 2,090 $ 2,983

Earnings (loss) per share attributable to Disney (1) :

Continuing operations $ ( 0.25 ) $ 0.77 $ 1.14 $ 1.66

Discontinued operations — — — ( 0.03 )

Income before income taxes

( 720 ) ( 412 )

Continuing operations $ ( 0.25 ) $ 0.77 $ 1.14 $ 1.66

Discontinued operations — — — ( 0.03 )

Net income 2,151 1,361

Net income attributable to noncontrolling interests

( 240 ) ( 82 )

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

Earnings per share attributable to Disney:

Diluted $ 1.04 $ 0.70

Basic $ 1.04 $ 0.70

Weighted average number of common and common equivalent shares outstanding:

1 unchanged sentence

Basic 1,832 1,825

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

See Notes to Condensed Consolidated Financial Statements

THE WALT DISNEY COMPANY

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

Quarter Ended Nine Months Ended

Net income (loss) $ ( 153 ) $ 1,502 $ 2,696 $ 3,251

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

Quarter Ended

2023 December 31,

Net income $ 2,151 $ 1,361

Other comprehensive income (loss), net of tax:

2 unchanged sentences

Foreign currency translation and other

Other comprehensive loss

( 166 ) ( 314 )

Other comprehensive income (loss) ( 90 ) 101 ( 315 ) 240

Comprehensive income (loss) ( 243 ) 1,603 2,381 3,491

Net income from continuing operations attributable to noncontrolling interests

Comprehensive income

Net income attributable to noncontrolling interests

( 240 ) ( 82 )

Other comprehensive income attributable to noncontrolling interests ( 44 ) ( 45 )

Comprehensive income (loss) attributable to Disney $ ( 484 ) $ 1,579 $ 1,796 $ 3,281

Comprehensive income attributable to Disney $ 1,701 $ 920

See Notes to Condensed Consolidated Financial Statements

2 unchanged sentences

in millions, except per share data)

2023 October 1,

2023 September 30,

Current assets

30 unchanged sentences

Preferred stock

Common stock, $0.01 par value, Authorized – 4.6 billion shares, Issued – 1.8 billion shares

Common stock, $0.01 par value, Authorized – 4.6 billion shares, Issued – 1.9 billion shares at December 30, 2023 and 1.8 billion shares at September 30, 2023

57,640 57,383

10 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

Nine Months Ended

Quarter Ended

2023 December 31,

OPERATING ACTIVITIES

Net income from continuing operations $ 2,696 $ 3,299

$ 2,151 $ 1,361

Depreciation and amortization 1,243 1,306

Impairment of produced and licensed content costs 2,266 —

Net (gain)/loss on investments and disposition of businesses ( 184 ) 779

Deferred income taxes ( 51 ) ( 15 )

3 unchanged sentences

Equity-based compensation 308 270

Pension and postretirement medical benefit cost amortization 3 465

Other, net ( 64 ) ( 163 )

5 unchanged sentences

Income taxes ( 1,104 ) 56

Cash provided by operations - continuing operations 5,064 3,478

Cash provided by (used in) operations

2,185 ( 974 )

INVESTING ACTIVITIES

Investments in parks, resorts and other property ( 1,299 ) ( 1,181 )

Proceeds from sale of investments 458 39

Other, net 53 ( 111 )

Cash used in investing activities - continuing operations ( 3,259 ) ( 3,872 )

Cash used in investing activities

( 1,246 ) ( 1,292 )

FINANCING ACTIVITIES

Commercial paper borrowings (payments), net 40 ( 275 )

Commercial paper borrowings, net

Borrowings — 67

3 unchanged sentences

Other, net ( 133 ) ( 187 )

Cash used in financing activities - continuing operations ( 2,127 ) ( 2,247 )

CASH FLOWS FROM DISCONTINUED OPERATIONS

Cash provided by operations - discontinued operations — 8

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

Cash used in discontinued operations — ( 4 )

Cash used in financing activities

( 8,006 ) ( 1,043 )

Impact of exchange rates on cash, cash equivalents and restricted cash 79 164

7 unchanged sentences

Equity Attributable to Disney

Shares Common Stock Retained Earnings

Common Stock Retained Earnings

Comprehensive

2 unchanged sentences

Interests (2)

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

Comprehensive income (loss) — — ( 460 ) ( 24 ) — ( 484 ) 168 ( 316 )

Equity compensation activity 3 210 — — — 210 — 210

Contributions — — — — — — 602 602

Distributions and other — 7 18 — — 25 ( 21 ) 4

Balance at July 1, 2023 1,830 $ 57,136 $ 45,794 $ ( 4,413 ) $ ( 907 ) $ 97,610 $ 4,446 $ 102,056

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

Balance at September 30, 2023 1,830 $ 57,383 $ 46,093 $ ( 3,292 ) $ ( 907 ) $ 99,277 $ 4,680 $ 103,957

Comprehensive income (loss) — — 1,911 ( 210 ) — 1,701 129 1,830

1 unchanged sentence

Dividends — — ( 549 ) — — ( 549 ) — ( 549 )

Contributions — — — — — — 19 19

Distributions and other — 7 35 — — 42 ( 29 ) 13

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

(1) Excludes redeemable noncontrolling interests.

See Notes to Condensed Consolidated Financial Statements

THE WALT DISNEY COMPANY

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY

Nine Months Ended

Equity Attributable to Disney

Shares Common Stock Retained Earnings

Comprehensive

(Loss) Treasury Stock Total Disney Equity

Non-controlling Interests (1)

Balance at December 30, 2023 1,834 $ 57,640 $ 47,490 $ ( 3,502 ) $ ( 907 ) $ 100,721 $ 4,780 $ 105,501

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

3 unchanged sentences

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

Balance at July 1, 2023 1,830 $ 57,136 $ 45,794 $ ( 4,413 ) $ ( 907 ) $ 97,610 $ 4,446 $ 102,056

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

Comprehensive income — — 2,983 298 — 3,281 ( 22 ) 3,259

Equity compensation activity 5 615 — — — 615 — 615

Contributions — — — — — — 48 48

Distributions and other — 1 50 — — 51 ( 551 ) ( 500 )

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

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

(1) Shares are net of treasury shares.

(2) Excludes redeemable noncontrolling interests.

7 unchanged sentences

We believe that we have included all normal recurring adjustments necessary for a fair statement of the results for the interim period.

Operating results for the nine months ended July 1, 2023 are not necessarily indicative of the results that may be expected for the year ending September 30, 2023.

Operating results for the quarter ended December 30, 2023 are not necessarily indicative of the results that may be expected for the year ending September 28, 2024.

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

7 unchanged sentences

Therefore, the Company has consolidated the Asia Theme Parks in its financial statements.

Redeemable Noncontrolling Interests and Contributions from Noncontrolling Interest Holders

The Company consolidates the results of Hulu LLC (Hulu), a direct-to-consumer (DTC) streaming service provider, which is owned 67 % by the Company and 33 % by NBC Universal (NBCU).

In May 2019, the Company entered into a put/call agreement with NBCU that provided the Company with full operational control of Hulu.

Under the agreement, beginning in January 2024, NBCU has the option to require the Company to purchase NBCU’s interest in Hulu and the Company has the option to require NBCU to sell its interest in Hulu to the Company, in either case at a redemption value based on NBCU’s equity ownership percentage of the greater of Hulu’s then equity fair value or a guaranteed floor value of $ 27.5 billion.

NBCU’s interest will generally not be allocated its portion of Hulu’s losses, if any, as the redeemable noncontrolling interest is required to be carried at a minimum value.

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

At July 1, 2023, NBCU’s interest in Hulu is recorded in the Company’s financial statements at $ 8.9 billion, which is reported as “Redeemable noncontrolling interest” in the Condensed Consolidated Balance Sheets.

The Company and NBCU have been conducting a confidential arbitration concerning the parties’ rights and responsibilities under the Hulu limited liability company agreement.

The Company expects a decision in that arbitration within the next quarter.

The outcome of the arbitration is uncertain and we cannot reasonably estimate the amount of any potential loss or the impact on the determination of the value of Hulu’s equity pursuant to the Hulu limited liability company agreement and thus the amount we may be required to pay to acquire NBCU’s interest in Hulu.

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

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

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

Redeemable Noncontrolling Interest

In November 2023, NBC Universal (NBCU) exercised its right to require the Company to purchase NBCU’s 33 % interest in Hulu LLC (Hulu), a direct-to-consumer (DTC) streaming service provider, at a redemption value based on NBCU’s equity ownership percentage of the greater of Hulu’s equity fair value or a guaranteed floor value of $ 27.5 billion.

In connection with the redemption, the Company will pay NBCU 50 % of the future tax benefits from the amortization of the purchase of NBCU’s interest in Hulu that will generally arise over a 15 -year period.

In December 2023, the Company paid NBCU $ 8.6 billion, which reflected the guaranteed floor value less NBCU’s unpaid capital call contributions.

Based on valuation procedures agreed upon by NBCU and the Company, Hulu’s equity fair value for purposes of determining the redemption payment is not expected to be finalized until later in calendar 2024.

If Hulu’s equity fair value is determined to be higher than the guaranteed floor value, the Company is required to pay NBCU its share of the difference between the equity fair value and the guaranteed floor value.

The Company is required to accrete NBCU’s interest to the estimated redemption value and has accreted to the guaranteed floor value.

If the redemption value is higher than the guaranteed floor value, we would record the increment as “Net income attributable to noncontrolling interests” and thus reduce “Net income attributable to Disney” in the Condensed Consolidated Statements of Income.

Estimating the redemption value prior to its final determination requires management to make significant judgments related to assessing the fair value of Hulu.

In November 2022, the Company purchased Major League Baseball’s (MLB) 15 % redeemable noncontrolling interest in BAMTech LLC (BAMTech), which holds the Company’s domestic DTC sports business, for $ 900 million (MLB buy-out).

MLB’s interest was recorded in the Company’s financial statements at $ 828 million prior to the MLB buy-out.

The $ 72 million difference was recorded as an increase in “Net income attributable to noncontrolling interests” in the Condensed Consolidated Statements of Income.

THE WALT DISNEY COMPANY

1 unchanged sentence

tabular dollars in millions, except for per share data)

MLB’s interest was recorded in the Company’s financial statements at $ 828 million prior to the MLB buy-out.

The $ 72 million difference was recorded as an increase in “Net income from continuing operations attributable to noncontrolling interests” in the Condensed Consolidated Statements of Operations.

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

During the three months ended December 31, 2022, Hearst Corporation (Hearst) contributed $ 178 million to the domestic DTC sports business to fund its 20 % share of the MLB buy-out.

Use of Estimates

4 unchanged sentences

Segment Information

In February 2023, the Company announced that it will be reorganized into three business segments:

Disney Entertainment, ESPN and Disney Parks, Experiences and Products.

We will report under the new structure commencing with our annual fiscal 2023 reporting, at which time we will have implemented changes to our financial processes to reflect the reorganization.

The Company’s operations are currently reported in the following two segments:

Disney Media and Entertainment Distribution (DMED) and Disney Parks, Experiences and Products (DPEP), for which separate financial information is evaluated regularly by the Chief Executive Officer to allocate resources and assess performance.

The Company’s operations are reported in three segments:

Entertainment, Sports and Experiences, for which separate financial information is evaluated regularly by the Chief Executive Officer to allocate resources and assess performance.

Segment operating results reflect earnings before corporate and unallocated shared expenses, restructuring and impairment charges, net other income/expense, net interest expense, income taxes and noncontrolling interests.

Segment operating income includes equity in the income of investees and excludes impairments of certain equity investments and acquisition accounting amortization of TFCF Corporation (TFCF) and Hulu assets (i.e.

intangible assets and the fair value step-up for film and television costs) recognized in connection with the TFCF acquisition in fiscal 2019 (TFCF and Hulu acquisition amortization).

Segment operating income includes equity in the income of investees and excludes amortization of intangible assets and the fair value step-up for film and television costs recognized in connection with the acquisition of TFCF Corporation (TFCF) and Hulu in fiscal 2019 (TFCF and Hulu acquisition amortization).

Corporate and unallocated shared expenses principally consist of corporate functions, executive management and certain unallocated administrative support functions.

4 unchanged sentences

Segment revenues and segment operating income are as follows:

Quarter Ended Nine Months Ended

Disney Media and Entertainment Distribution $ 14,004 $ 14,110 $ 42,819 $ 42,315

Disney Parks, Experiences and Products 8,326 7,394 24,838 21,280

Quarter Ended

2023 December 31,

Entertainment

Third parties $ 9,881 $ 10,584

Intersegment 100 91

Third parties 4,536 4,383

Intersegment 299 257

Experiences 9,132 8,545

Eliminations ( 399 ) ( 348 )

Total segment revenues $ 23,549 $ 23,512

Segment operating income:

Disney Media and Entertainment Distribution $ 1,134 $ 1,381 $ 2,243 $ 4,133

Disney Parks, Experiences and Products 2,425 2,186 7,644 6,391

Entertainment $ 874 $ 345

Sports ( 103 ) ( 164 )

Experiences 3,105 2,862

Total segment operating income (1)

1 unchanged sentence

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

Quarter Ended Nine Months Ended

Disney Media and Entertainment Distribution $ 194 $ 230 $ 566 $ 693

Disney Parks, Experiences and Products — ( 2 ) ( 2 ) ( 10 )

Quarter Ended

2023 December 31,

Entertainment $ 171 $ 193

Experiences — ( 2 )

Equity in the income of investees included in segment operating income 184 194

1 unchanged sentence

Equity in the income of investees, net $ 181 $ 191

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

Quarter Ended Nine Months Ended

Segment revenues $ 22,330 $ 21,504 $ 67,657 $ 63,595

Content License Early Termination (1)

— — — ( 1,023 )

Total revenues $ 22,330 $ 21,504 $ 67,657 $ 62,572

(1) In February 2022, the Company early terminated certain license agreements with a customer for film and television content, which was delivered in previous years, in order for the Company to use the content primarily on our DTC services (Content License Early Termination).

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

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

THE WALT DISNEY COMPANY

1 unchanged sentence

tabular dollars in millions, except for per share data)

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

Quarter Ended Nine Months Ended

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

Quarter Ended

2023 December 31,

Segment operating income $ 3,876 $ 3,043

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

Corporate and unallocated shared expenses ( 308 ) ( 280 )

Restructuring and impairment charges (1)

( 2,650 ) ( 42 ) ( 2,871 ) ( 237 )

Other income (expense), net (2)

( 11 ) ( 136 ) 96 ( 730 )

Other expense, net (2)

Interest expense, net ( 246 ) ( 300 )

1 unchanged sentence

( 451 ) ( 579 )

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

Income before income taxes

$ 2,871 $ 1,773

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

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

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

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

Quarter Ended Nine Months Ended

Quarter Ended

2023 December 31,

Amortization of intangible assets $ 380 $ 417

1 unchanged sentence

Intangibles related to TFCF equity investees 3 3

$ 432 $ 585 $ 1,569 $ 1,774

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

DMED DPEP Total

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

Entertainment Sports Experiences Total

Balance at September 30, 2023 $ 55,031 $ 16,486 $ 5,550 $ 77,067

Currency translation adjustments and other, net ( 1 ) — — ( 1 )

Balance at July 1, 2023 $ 72,331 $ 5,550 $ 77,881

Balance at December 30, 2023 $ 55,030 $ 16,486 $ 5,550 $ 77,066

THE WALT DISNEY COMPANY

2 unchanged sentences

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

Quarter Ended July 1, 2023 Quarter Ended July 2, 2022

DMED DPEP Total DMED DPEP Content License Early Termination Total

Quarter Ended December 30, 2023

Entertainment Sports Experiences Eliminations Total

Affiliate fees $ 1,766 $ 2,669 $ — $ ( 293 ) $ 4,142

5 unchanged sentences

Merchandise licensing 192 — 967 — 1,159

TV/SVOD distribution licensing 646 — 646 1,119 — — 1,119

TV/VOD distribution licensing

536 57 — — 593

Theatrical distribution licensing 251 — — — 251

2 unchanged sentences

$ 9,981 $ 4,835 $ 9,132 $ ( 399 ) $ 23,549

Nine Months Ended July 1, 2023 Nine Months Ended July 2, 2022

DMED DPEP Total DMED DPEP Content License Early Termination Total

Quarter Ended December 31, 2022

Entertainment Sports Experiences Eliminations Total

Affiliate fees $ 1,873 $ 2,653 $ — $ ( 266 ) $ 4,260

5 unchanged sentences

Merchandise licensing 191 — 952 — 1,143

TV/SVOD distribution licensing 2,658 — 2,658 3,639 — ( 1,023 ) 2,616

TV/VOD distribution licensing

724 76 — — 800

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

2 unchanged sentences

$ 10,675 $ 4,640 $ 8,545 $ ( 348 ) $ 23,512

THE WALT DISNEY COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

tabular dollars in millions, except for per share data)

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

Quarter Ended July 1, 2023 Quarter Ended July 2, 2022

DMED DPEP Total DMED DPEP Total

Quarter Ended December 30, 2023

Entertainment Sports Experiences Eliminations Total

Americas $ 7,588 $ 4,358 $ 7,037 $ ( 399 ) $ 18,584

2 unchanged sentences

Total revenues $ 9,981 $ 4,835 $ 9,132 $ ( 399 ) $ 23,549

Content License Early Termination —

Nine Months Ended July 1, 2023 Nine Months Ended July 2, 2022

DMED DPEP Total DMED DPEP Total

Quarter Ended December 31, 2022

Entertainment Sports Experiences Eliminations Total

Americas $ 8,150 $ 4,315 $ 6,854 $ ( 348 ) $ 18,971

2 unchanged sentences

Total revenues $ 10,675 $ 4,640 $ 8,545 $ ( 348 ) $ 23,512

Content License Early Termination ( 1,023 )

Revenues recognized in the current and prior-year periods from performance obligations satisfied (or partially satisfied) in previous reporting periods primarily relate to revenues earned on TV/SVOD licenses for titles made available to the licensee in previous reporting periods.

For the quarter ended July 1, 2023, $ 0.3 billion was recognized related to performance obligations satisfied as of April 1, 2023.

For the nine months ended July 1, 2023, $ 0.7 billion was recognized related to performance obligations satisfied as of October 1, 2022.

For the quarter ended July 2, 2022, $ 0.3 billion was recognized related to performance obligations satisfied as of April 2, 2022.

For the nine months ended July 2, 2022, $ 0.9 billion was recognized related to performance obligations satisfied as of October 2, 2021.

As of July 1, 2023, revenue for unsatisfied performance obligations expected to be recognized in the future is $ 16 billion, primarily for content and other IP to be made available in the future under existing agreements with merchandise and co-branding licensees and sponsors, television station affiliates, DTC wholesalers, sports sublicensees, and advertisers.

Revenues recognized in the current and prior-year periods from performance obligations satisfied (or partially satisfied) in previous reporting periods primarily relate to revenues earned on TV/VOD licenses for titles made available to the licensee in previous reporting periods.

For the quarter ended December 30, 2023, $ 0.3 billion was recognized related to performance obligations satisfied as of September 30, 2023.

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

THE WALT DISNEY COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

tabular dollars in millions, except for per share data)

As of December 30, 2023, revenue for unsatisfied performance obligations expected to be recognized in the future is $ 14 billion, primarily for IP or advertising time to be made available in the future under existing agreements with merchandise and co-branding licensees and sponsors, television station affiliates, DTC wholesalers, advertisers and sports sublicensees.

Of this amount, we expect to recognize approximately $ 5 billion in the remainder of fiscal 2024, $ 5 billion in fiscal 2025, $ 2 billion in fiscal 2026 and $ 2 billion thereafter.

5 unchanged sentences

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

2023 October 1,

2023 September 30,

Accounts receivable

5 unchanged sentences

Non-current 952 977

For the quarter and nine months ended July 1, 2023, the Company recognized revenue of $ 0.5 billion and $ 4.7 billion, respectively, that was included in the October 1, 2022 deferred revenue balance.

For the quarter and nine months ended July 2, 2022, the Company recognized revenue of $ 0.4 billion and $ 3.2 billion, respectively, that was included in the October 2, 2021

THE WALT DISNEY COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

tabular dollars in millions, except for per share data)

deferred revenue balance.

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

For the quarter ended December 30, 2023, the Company recognized revenue of $ 3.4 billion that was included in the September 30, 2023 deferred revenue balance.

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

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

We evaluate our allowance for credit losses and estimate collectability of current and non-current accounts receivable based on historical bad debt experience, our assessment of the financial condition of individual companies with which we do business, current market conditions, and reasonable and supportable forecasts of future economic conditions.

In times of economic turmoil, our estimates and judgments with respect to the collectability of our receivables are subject to greater uncertainty than in more stable periods.

The Company has accounts receivable with original maturities greater than one year related to the sale of film and television program rights (TV/SVOD licensing) and vacation club properties.

The Company has accounts receivable with original maturities greater than one year related to the sale of film and television program rights (TV/VOD licensing) and vacation club properties.

These receivables are discounted to present value at contract inception and the related revenues are recognized at the discounted amount.

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

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

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

Other Income (Expense), net

Other income (expense), net is as follows:

Quarter Ended Nine Months Ended

DraftKings gain (loss) $ 90 $ ( 136 ) $ 169 $ ( 726 )

Other, net ( 101 ) — ( 73 ) ( 4 )

Other income (expense), net $ ( 11 ) $ ( 136 ) $ 96 $ ( 730 )

For the quarter and nine months ended July 1, 2023, the Company recognized a gain of $ 90 million and $ 169 million, respectively, on its investment in DraftKings, Inc.

(DraftKings), which was sold in the current quarter.

“Other, net” for the quarter and nine months ended July 1, 2023 includes a charge of $ 101 million related to a legal ruling.

For the prior-year quarter and nine months ended July 2, 2022, the Company recognized a non-cash loss of $ 136 million and $ 726 million, respectively, to adjust its investment in DraftKings to fair value.

The balance of TV/VOD licensing receivables recorded in other non-current assets was $ 0.5 billion at December 30, 2023 and $ 0.6 billion at September 30, 2023.

The balance of vacation club receivables recorded in other non-current assets was $ 0.7 billion at both December 30, 2023 and September 30, 2023.

The allowance for credit losses for TV/VOD licensing and vacation club receivables and related activity for the periods ended December 30, 2023 and September 30, 2023 were not material.

THE WALT DISNEY COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

tabular dollars in millions, except for per share data)

Other Expense, net

Other expense, net is as follows:

Quarter Ended

2023 December 31,

DraftKings loss $ — $ ( 70 )

Other expense, net

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

(DraftKings) to fair value.

Cash, Cash Equivalents, Restricted Cash and Borrowings

1 unchanged sentence

The following table provides a reconciliation of cash, cash equivalents and restricted cash reported in the Condensed Consolidated Balance Sheets to the total of the amounts reported in the Condensed Consolidated Statements of Cash Flows.

2023 October 1,

2023 September 30,

Cash and cash equivalents $ 7,192 $ 14,182

Restricted cash included in:

Other current assets 3 3

Other assets 52 43

Restricted cash included in other assets

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

THE WALT DISNEY COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

tabular dollars in millions, except for per share data)

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

During the quarter ended December 30, 2023, the Company’s borrowing activity was as follows:

September 30,

2023 Borrowings Payments Other

Activity July 1,

Activity December 30,

Commercial paper with original maturities less than three months $ 289 $ 542 $ — $ 5 $ 836

3 unchanged sentences

Asia Theme Parks borrowings

1,308 — ( 14 ) 50 1,344

Foreign currency denominated debt and other (1)

1 unchanged sentence

$ 46,431 $ 1,296 $ ( 559 ) $ 522 $ 47,690

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

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

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

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

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

Capacity Capacity

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dollar denominated borrowings, plus a fixed spread that varies with the Company’s debt ratings assigned by Moody’s Investors Service and Standard and Poor’s ranging from 0.655% to 1.225%.

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

On July 1, 2023, the Company met this covenant by a significant margin.

The bank facilities contain

THE WALT DISNEY COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

tabular dollars in millions, except for per share data)

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

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

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

The Company also has the ability to issue up to $ 500 million of letters of credit under the facility expiring in March 2027, which if utilized, reduces available borrowings under this facility.

As of July 1, 2023, the Company has $ 1.7 billion of outstanding letters of credit, of which none were issued under this facility.

As of December 30, 2023, the Company has $ 1.7 billion of outstanding letters of credit, of which none were issued under this facility.

Cruise Ship Credit Facilities

The Company has credit facilities to finance a significant portion of the contract price of two new cruise ships, which are scheduled to be delivered in fiscal 2025 and fiscal 2026.

Under the facilities, $ 1.1 billion is available beginning in August 2023 and $ 1.1 billion is available beginning in August 2024.

Under the facilities, $ 1.1 billion became available beginning in August 2023 and $ 1.1 billion is available beginning in August 2024.

Each tranche of financing may be utilized within a period of 18 months from the initial availability date.

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Early repayment is permitted subject to cancellation fees .

THE WALT DISNEY COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

tabular dollars in millions, except for per share data)

Interest expense, net

Interest expense (net of amounts capitalized), interest and investment income, and net periodic pension and postretirement benefit costs (other than service costs) (see Note 9) are reported net in the Condensed Consolidated Statements of Operations and consist of the following:

Quarter Ended Nine Months Ended

Quarter Ended

2023 December 31,

Interest expense $ ( 528 ) $ ( 465 )

7 unchanged sentences

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

2023 October 1, 2022

2023 September 30,

Cash and cash equivalents $ 426 $ 504

8 unchanged sentences

Total liabilities $ 2,452 $ 2,420

The following table summarizes the International Theme Parks’ revenues and costs and expenses included in the Company’s Condensed Consolidated Statements of Operations for the nine months ended July 1, 2023:

Revenues $ 3,530

Costs and expenses ( 3,067 )

Equity in the loss of investees ( 2 )

Asia Theme Parks’ royalty and management fees of $ 155 million for the nine months ended July 1, 2023 are eliminated in consolidation, but are considered in calculating earnings attributable to noncontrolling interests.

International Theme Parks’ cash flows included in the Company’s Condensed Consolidated Statements of Cash Flows for the nine months ended July 1, 2023 were $ 1,123 million provided by operating activities, $ 683 million used in investing activities and $ 5 million provided by financing activities.

THE WALT DISNEY COMPANY

1 unchanged sentence

tabular dollars in millions, except for per share data)

The following table summarizes the International Theme Parks’ revenues and costs and expenses included in the Company’s Condensed Consolidated Statements of Income for the quarter ended December 30, 2023:

Revenues $ 1,362

Costs and expenses ( 1,123 )

Asia Theme Parks’ royalty and management fees of $ 67 million for the quarter ended December 30, 2023 are eliminated in consolidation, but are considered in calculating earnings attributable to noncontrolling interests.

International Theme Parks’ cash flows included in the Company’s Condensed Consolidated Statements of Cash Flows for the quarter ended December 30, 2023 were $ 352 million provided by operating activities, $ 239 million used in investing activities and $ 12 million used in financing activities.

Hong Kong Disneyland Resort

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The Company and HKSAR have provided loans to Hong Kong Disneyland Resort with outstanding balances of $ 166 million and $ 111 million, respectively.

The interest rate on both loans is three month HIBOR plus 2 %, and the maturity date is September 2025.

The interest rate on both loans is three month HIBOR plus 2 %, and the scheduled maturity date is September 2025.

The Company’s loan is eliminated in consolidation.

The Company has provided Hong Kong Disneyland Resort with a revolving credit facility of HK $ 2.7 billion ($ 346 million), which bears interest at a rate of three month HIBOR plus 1.25 % and matures in December 2028.

The outstanding balance under the line of credit at July 1, 2023 was $ 189 million.

The line of credit was fully repaid during the quarter ended December 30, 2023.

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

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The Company has also provided Shanghai Disney Resort with a 1.9 billion yuan (approximately $ 0.3 billion) line of credit bearing interest at 8 %.

As of July 1, 2023, the total amount outstanding under the line of credit was 0.8 billion yuan (approximately $ 112 million).

The line of credit was fully repaid during the quarter ended December 30, 2023.

These balances are eliminated in consolidation.

1 unchanged sentence

Shendi has also provided Shanghai Disney Resort with a 2.6 billion yuan (approximately $ 0.4 billion) line of credit bearing interest at 8 %.

As of July 1, 2023 the total amount outstanding under the line of credit was 1.1 billion yuan (approximately $ 149 million).

The line of credit was fully repaid during the quarter ended December 30, 2023.

Produced and Acquired/Licensed Content Costs and Advances

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subscription revenue for a DTC service or affiliate fees for a cable television network)

THE WALT DISNEY COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

tabular dollars in millions, except for per share data)

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

As of July 1, 2023 As of October 1, 2022

As of December 30, 2023 As of September 30, 2023

Predominantly Monetized Individually Predominantly Monetized

11 unchanged sentences

Non-current portion $ 32,725 $ 33,591

THE WALT DISNEY COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

tabular dollars in millions, except for per share data)

Amortization of produced and licensed content is as follows:

Quarter Ended Nine Months Ended

Quarter Ended

2023 December 31,

Produced content

1 unchanged sentence

Predominantly monetized as a group 1,794 2,160

2,952 2,552 9,227 7,544

Licensed programming rights and advances 4,590 4,539

1 unchanged sentence

$ 7,152 $ 7,856

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

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

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

Unrecognized Tax Benefits

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

The Company’s gross unrecognized tax benefits (before interest and penalties) at both December 30, 2023 and September 30, 2023, were $ 2.5 billion.

In the next twelve months, it is reasonably possible that our unrecognized tax benefits could change due to resolutions of open tax matters, which would reduce our unrecognized tax benefits by $ 0.3 billion.

California Disaster Relief

Pursuant to relief provided to certain taxpayers by the Internal Revenue Service and California State Board of Equalization as a result of winter storms in California, the Company is permitted to defer payment of federal and California state tax payments due in 2023 until October 16, 2023.

THE WALT DISNEY COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

tabular dollars in millions, except for per share data)

Pension and Other Benefit Programs

1 unchanged sentence

Pension Plans Postretirement Medical Plans

Quarter Ended Nine Months Ended Quarter Ended Nine Months Ended

2022 July 1, 2023 July 2, 2022 July 1,

2022 July 1, 2023 July 2, 2022

Quarter Ended Quarter Ended

2023 December 31,

2022 December 30,

2023 December 31,

Service costs $ 62 $ 65 $ — $ 1

6 unchanged sentences

Net periodic benefit cost (income) $ ( 7 ) $ ( 20 ) $ ( 31 ) $ —

During the nine months ended July 1, 2023, the Company did not make any material contributions to its pension and postretirement medical plans and does not currently expect to make any material contributions for the remainder of fiscal 2023.

During the quarter ended December 30, 2023, the Company did not make any material contributions to its pension and postretirement medical plans and does not currently expect to make any material contributions for the remainder of fiscal 2024.

Final minimum funding requirements for fiscal 2024 will be determined based on a January 1, 2024 funding actuarial valuation, which is expected to be received in the fourth quarter of fiscal 2024.

THE WALT DISNEY COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

tabular dollars in millions, except for per share data)

Earnings Per Share

1 unchanged sentence

A reconciliation of the weighted average number of common and common equivalent shares outstanding and the number of Awards excluded from the diluted earnings per share calculation, as they were anti-dilutive, are as follows:

Quarter Ended Nine Months Ended

Quarter Ended

2023 December 31,

Shares (in millions):

3 unchanged sentences

Awards excluded from diluted earnings per share 39 26

(1) Amounts exclude all potential common and common equivalent shares for periods when there is a net loss from continuing operations.

On November 30, 2023 , the Board of Directors declared a cash dividend of $ 0.30 per share ($ 549 million) with respect to the second half of fiscal 2023, which was paid in January 2024 to shareholders of record as of December 11, 2023 .

On February 7, 2024 , the Board of Directors declared a cash dividend of $ 0.45 per share with respect to the first half of fiscal 2024, which will be paid on July 25, 2024 to shareholders of record as of July 8, 2024 .

Effective February 7, 2024, the Board of Directors authorized a new share repurchase program for the Company to repurchase a total of 400 million shares of its common stock.

The Company plans to target repurchases of $ 3 billion in fiscal 2024.

The repurchase program does not have an expiration date.

THE WALT DISNEY COMPANY

7 unchanged sentences

AOCI, before tax

Third quarter of fiscal 2023

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

Quarter Ended July 1, 2023:

Unrealized gains (losses) arising during the period 85 — ( 44 ) 41

Reclassifications of realized net (gains) losses to net income ( 73 ) 1 — ( 72 )

Balance at July 1, 2023 $ 14 $ ( 3,696 ) $ ( 1,745 ) $ ( 5,427 )

Third quarter of fiscal 2022

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

Quarter Ended July 2, 2022:

Unrealized gains (losses) arising during the period 601 — ( 404 ) 197

Reclassifications of realized net (gains) losses to net income ( 27 ) 155 — 128

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

Nine months ended fiscal 2023

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

Nine Months Ended July 1, 2023:

First quarter of fiscal 2024

Balance at September 30, 2023 $ 259 $ ( 2,172 ) $ ( 1,974 ) $ ( 3,887 )

Quarter Ended December 30, 2023:

Unrealized gains (losses) arising during the period ( 277 ) ( 3 ) 137 ( 143 )

Reclassifications of realized net (gains) losses to net income ( 140 ) ( 24 ) — ( 164 )

Balance at July 1, 2023 $ 14 $ ( 3,696 ) $ ( 1,745 ) $ ( 5,427 )

Nine months ended fiscal 2022

Balance at December 30, 2023 $ ( 158 ) $ ( 2,199 ) $ ( 1,837 ) $ ( 4,194 )

First quarter of fiscal 2023

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

Nine Months Ended July 2, 2022:

Quarter Ended December 31, 2022:

Unrealized gains (losses) arising during the period ( 475 ) — 146 ( 329 )

Reclassifications of realized net (gains) losses to net income ( 218 ) 1 42 ( 175 )

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

THE WALT DISNEY COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

tabular dollars in millions, except for per share data)

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

Market Value Adjustments for Hedges Unrecognized

2 unchanged sentences

and Other AOCI

Third quarter of fiscal 2023

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

Quarter Ended July 1, 2023:

Unrealized gains (losses) arising during the period ( 19 ) — 9 ( 10 )

Reclassifications of realized net (gains) losses to net income 17 — — 17

Balance at July 1, 2023 $ ( 3 ) $ 885 $ 132 $ 1,014

Third quarter of fiscal 2022

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

Quarter Ended July 2, 2022:

Unrealized gains (losses) arising during the period ( 152 ) — 27 ( 125 )

Reclassifications of realized net (gains) losses to net income 6 ( 36 ) — ( 30 )

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

Nine months ended fiscal 2023

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

Nine Months Ended July 1, 2023:

First quarter of fiscal 2024

Balance at September 30, 2023 $ ( 64 ) $ 517 $ 142 $ 595

Quarter Ended December 30, 2023:

Unrealized gains (losses) arising during the period 66 — ( 7 ) 59

Reclassifications of realized net (gains) losses to net income 32 6 — 38

Balance at July 1, 2023 $ ( 3 ) $ 885 $ 132 $ 1,014

Nine months ended fiscal 2022

Balance at December 30, 2023 $ 34 $ 523 $ 135 $ 692

First quarter of fiscal 2023

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

Nine Months Ended July 2, 2022:

Quarter Ended December 31, 2022:

Unrealized gains (losses) arising during the period 100 — 8 108

Reclassifications of realized net (gains) losses to net income 51 — ( 14 ) 37

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

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

THE WALT DISNEY COMPANY

6 unchanged sentences

AOCI, after tax

Third quarter of fiscal 2023

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

Quarter Ended July 1, 2023:

Unrealized gains (losses) arising during the period 66 — ( 35 ) 31

Reclassifications of realized net (gains) losses to net income ( 56 ) 1 — ( 55 )

Balance at July 1, 2023 $ 11 $ ( 2,811 ) $ ( 1,613 ) $ ( 4,413 )

Third quarter of fiscal 2022

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

Quarter Ended July 2, 2022:

Unrealized gains (losses) arising during the period 449 — ( 377 ) 72

Reclassifications of realized net (gains) losses to net income ( 21 ) 119 — 98

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

Nine months ended fiscal 2023

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

Nine Months Ended July 1, 2023:

First quarter of fiscal 2024

Balance at September 30, 2023 $ 195 $ ( 1,655 ) $ ( 1,832 ) $ ( 3,292 )

Quarter Ended December 30, 2023:

Unrealized gains (losses) arising during the period ( 211 ) ( 3 ) 130 ( 84 )

Reclassifications of realized net (gains) losses to net income ( 108 ) ( 18 ) — ( 126 )

Balance at July 1, 2023 $ 11 $ ( 2,811 ) $ ( 1,613 ) $ ( 4,413 )

Nine months ended fiscal 2022

Balance at December 30, 2023 $ ( 124 ) $ ( 1,676 ) $ ( 1,702 ) $ ( 3,502 )

First quarter of fiscal 2023

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

Nine Months Ended July 2, 2022:

Quarter Ended December 31, 2022:

Unrealized gains (losses) arising during the period ( 375 ) — 154 ( 221 )

Reclassifications of realized net (gains) losses to net income ( 167 ) 1 28 ( 138 )

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

THE WALT DISNEY COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

tabular dollars in millions, except for per share data)

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

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

1 unchanged sentence

Affected line item in the Condensed Consolidated Statements of Operations:

Quarter Ended Nine Months Ended

Quarter Ended

2023 December 31,

Market value adjustments, primarily cash flow hedges Primarily revenue $ 140 $ 218

2 unchanged sentences

Estimated tax Income taxes ( 6 ) —

( 1 ) ( 119 ) ( 3 ) ( 357 )

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

1 unchanged sentence

Total reclassifications for the period $ 126 $ 138

THE WALT DISNEY COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

tabular dollars in millions, except for per share data)

Equity-Based Compensation

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

Quarter Ended Nine Months Ended

Quarter Ended

2023 December 31,

Stock options $ 17 $ 19

RSUs 272 250 803 655

Total equity-based compensation expense (1)

$ 291 $ 273 $ 861 $ 723

Equity-based compensation expense capitalized during the period $ 44 $ 36

(1) Equity-based compensation expense is net of capitalized equity-based compensation and estimated forfeitures and excludes amortization of previously capitalized equity-based compensation costs.

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

During the nine months ended July 1, 2023 and July 2, 2022, the weighted average grant date fair values for options granted were $ 34.70 and $ 46.86 , respectively, and for RSUs were $ 91.98 and $ 139.55 , respectively.

During the nine months ended July 1, 2023, the Company made equity compensation grants consisting of 1.6 million stock options and 9.9 million RSUs.

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

During the quarters ended December 30, 2023 and December 31, 2022, the weighted average grant date fair values for options granted were $ 32.06 and $ 34.71 , respectively, and for RSUs were $ 93.87 and $ 91.89 , respectively.

During the quarter ended December 30, 2023, the Company made equity compensation grants consisting of 2.7 million stock options and 15.7 million RSUs.

Commitments and Contingencies

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McCarthy, and the former Chairman of the Disney Media and Entertainment Distribution segment, Kareem Daniel on behalf of certain purchasers of securities of the Company (the “Securities Class Action”).

Claims in the Securities Class Action include (i) violations of Section 10(b) of the Exchange Act and Rule 10b-5 promulgated thereunder against all defendants, and (ii) violations of Section 20(a) of the Exchange Act against the individual defendants.

Plaintiffs in the

THE WALT DISNEY COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

tabular dollars in millions, except for per share data)

Securities Class Action allege purported misstatements and omissions concerning, and a scheme to conceal, accurate costs and subscriber growth of the Disney+ platform.

The Company intends to defend against the lawsuit vigorously.

On November 6, 2023, a consolidated complaint was filed in the same action, adding Robert Iger, the Company’s Chief Executive Officer, as a defendant.

Claims in the Securities Class Action include (i) violations of Section 10(b) of the Exchange Act and Rule 10b-5 promulgated thereunder against all defendants, (ii) violations of Section 20A of the Exchange Act against Iger and McCarthy, and (iii) violations of Section 20(a) of the Exchange Act against all defendants.

Plaintiffs in the Securities Class Action allege purported misstatements and omissions concerning, and a scheme to conceal, accurate costs and subscriber growth of the Disney+ platform.

The Company intends to defend against the lawsuit vigorously and filed a motion to dismiss the complaint for failure to state a claim on December 21, 2023.

Plaintiffs filed their opposition on February 5, 2024, and the Company may file a reply brief by March 5, 2024.

The lawsuit is in the early stages and at this time we cannot reasonably estimate the amount of any potential loss.

On August 4, 2023, a derivative complaint was filed in the U.S.

District Court for the Central District of California against nominal Defendant Disney;

its Chief Executive Officer Robert Iger;

Three shareholder derivative complaints have been filed.

The first, in which Hugues Gervat is the plaintiff, was filed on August 4, 2023, in the U.S.

District Court for the Central District of California.

The second, in which Stourbridge Investments LLC is the plaintiff, was filed on August 23, 2023 in the U.S.

District Court for the District of Delaware.

And the third, in which Audrey McAdams is the Plaintiff, was filed on December 15, 2023, in the U.S.

District Court for the Central District of California.

Each named The Walt Disney Company as a nominal defendant and alleged claims on its behalf against the Company’s Chief Executive Officer, Robert Iger;

its former Chief Executive Officer, Robert Chapek;

3 unchanged sentences

and Derica W.

Along with alleged violations of Sections 10(b), 14(a), 20(a), and Rule 10b-5 of the Securities Exchange Act premised on the same allegations as the Securities Class Action, plaintiff seeks to recover for alleged breach of fiduciary duty, unjust enrichment, abuse of control, gross mismanagement and waste.

The Company intends to defend against the lawsuit vigorously.

The lawsuit is in the early stages, and at this time we cannot reasonably estimate the amount of any potential loss.

Along with alleged violations of Sections 10(b), 14(a), 20(a), and Rule 10b-5 of the Securities Exchange Act, premised on the same allegations as the Securities Class Action, plaintiffs in both actions sought to recover for alleged breach of fiduciary duty, unjust enrichment, abuse of control, gross mismanagement and waste.

On October 24, 2023, the Stourbridge action was voluntarily dismissed and, on November 16, 2023, was refiled in Delaware state court alleging analogous theories of liability based on state law.

On October 30, 2023, the Gervat action was stayed pending a ruling on the motion to dismiss filed in the Securities Class Action.

The Stourbridge action was likewise stayed under an order entered December 12, 2023.

The Company intends to defend against these lawsuits vigorously.

The lawsuits are in the early stages, and at this time we cannot reasonably estimate the amount of any potential loss.

THE WALT DISNEY COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

tabular dollars in millions, except for per share data)

The Company, together with, in some instances, certain of its directors and officers, is a defendant in various other legal actions involving copyright, breach of contract and various other claims incident to the conduct of its businesses.

8 unchanged sentences

The Company’s assets and liabilities measured at fair value are summarized in the following tables by fair value measurement Level:

Fair Value Measurement at July 1, 2023

Fair Value Measurement at December 30, 2023

Level 1 Level 2 Level 3 Total

8 unchanged sentences

Fair value of borrowings $ — $ 44,075 $ 1,370 $ 45,445

THE WALT DISNEY COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

tabular dollars in millions, except for per share data)

Fair Value Measurement at October 1, 2022

Fair Value Measurement at September 30, 2023

Level 1 Level 2 Level 3 Total

Investments $ 46 $ 128 $ — $ 174

Interest rate — 1 — 1

Foreign exchange — 1,336 — 1,336

6 unchanged sentences

Fair value of borrowings $ — $ 40,123 $ 1,333 $ 41,456

THE WALT DISNEY COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

tabular dollars in millions, except for per share data)

The fair value of Level 2 investments are primarily determined based on an internal valuation model that uses observable inputs such as stock trading price, volatility and risk free rate.

The fair values of Level 2 derivatives are primarily determined by internal discounted cash flow models that use observable inputs such as interest rates, yield curves and foreign currency exchange rates.

9 unchanged sentences

The primary risks managed with derivative instruments are interest rate risk and foreign exchange risk.

THE WALT DISNEY COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

tabular dollars in millions, except for per share data)

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

As of July 1, 2023

Assets Other Assets Other Current Liabilities Other Long-

As of December 30, 2023

Assets Investments/Other Assets

Other Current Liabilities Other Long-

Derivatives designated as hedges

9 unchanged sentences

Net derivative positions $ 90 $ 161 $ ( 293 ) $ ( 62 )

As of October 1, 2022

Assets Other Assets Other Current Liabilities Other Long-

THE WALT DISNEY COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

tabular dollars in millions, except for per share data)

As of September 30, 2023

Assets Investments/Other Assets

Other Current Liabilities Other Long-

Derivatives designated as hedges

9 unchanged sentences

Net derivative positions $ 98 $ 222 $ ( 290 ) $ ( 40 )

Reference Rate Reform

In June 2023, the Company’s interest rate and cross-currency swap agreements were amended to implement modifications related to changing the reference rates from LIBOR to SOFR and from the Canadian Dollar Offered Rate to the Canadian Overnight Repo Rate Average.

In connection with these amendments, the Company applied the hedge accounting relief provided by the Financial Accounting Standards Board (FASB) in ASU 2020-04, Reference Rate Reform (Topic 848):

Facilitation of the Effects of Reference Rate Reform on Financial Reporting to preserve the fair value hedge designation of the interest rate and cross-currency swaps.

Interest Rate Risk Management

4 unchanged sentences

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

The total notional amount of the Company’s pay-floating interest rate swaps at July 1, 2023 and October 1, 2022, was $ 13.5 billion and $ 14.5 billion, respectively.

THE WALT DISNEY COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

tabular dollars in millions, except for per share data)

The total notional amount of the Company’s pay-floating interest rate swaps at both December 30, 2023 and September 30, 2023 was $ 13.5 billion.

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

1 unchanged sentence

in Hedged Borrowings

2023 October 1, 2022 July 1,

2023 October 1, 2022

2023 September 30,

2023 December 30,

2023 September 30,

Current $ 2,381 $ 1,439 $ ( 60 ) $ ( 59 )

1 unchanged sentence

$ 12,677 $ 12,187 $ ( 1,313 ) $ ( 1,753 )

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

Quarter Ended Nine Months Ended

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

Quarter Ended

2023 December 31,

Gain (loss) on:

5 unchanged sentences

The unrealized gains or losses from these cash flow hedges are deferred in AOCI and recognized in interest expense as the interest payments occur.

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

The Company did not have pay-fixed interest rate swaps that were designated as cash flow hedges of interest payments at December 30, 2023 or at September 30, 2023, and gains and losses related to pay-fixed interest rate swaps recognized in earnings for the quarters ended December 30, 2023 and December 31, 2022 were not material.

THE WALT DISNEY COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

tabular dollars in millions, except for per share data)

Foreign Exchange Risk Management

The Company transacts business globally and is subject to risks associated with changing foreign currency exchange rates.

The Company’s objective is to reduce earnings and cash flow fluctuations associated with foreign currency exchange rate changes, enabling management to focus on core business issues and challenges.

The Company enters into option and forward contracts that change in value as foreign currency exchange rates change to protect the value of its existing foreign currency assets, liabilities, firm commitments and forecasted but not firmly committed foreign currency transactions.

The Company transacts business globally and is subject to risks associated with foreign currency exchange rates.

The Company’s objective is to reduce earnings and cash flow fluctuations associated with changes in foreign currency exchange rates, enabling management to focus on core business operations.

The Company enters into option and forward contracts to protect the value of its existing foreign currency assets, liabilities, firm commitments and forecasted but not firmly committed foreign currency transactions.

In accordance with policy, the Company hedges its forecasted foreign currency transactions for periods generally not to exceed four years within an established minimum and maximum range of annual exposure.

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dollar equivalent value of the related forecasted transaction, asset, liability or firm commitment.

The principal currencies hedged are the euro, Japanese yen, British pound, Chinese yuan and Canadian dollar.

The principal currencies hedged are the euro, Canadian dollar, Japanese yen, British pound and Chinese yuan.

Cross-currency swaps are used to effectively convert foreign currency denominated borrowings into U.S.

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

As of July 1, 2023 and October 1, 2022, the notional amounts of the Company’s net foreign exchange cash flow hedges were $ 9.1 billion and $ 7.4 billion, respectively.

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

THE WALT DISNEY COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

tabular dollars in millions, except for per share data)

value of the foreign currency transactions.

As of December 30, 2023 and September 30, 2023, the notional amounts of the Company’s net foreign exchange cash flow hedges were $ 9.5 billion and $ 8.3 billion, respectively.

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

Net deferred gains recorded in AOCI for contracts that will mature in the next twelve months total $ 230 million.

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

Quarter Ended Nine Months Ended

Quarter Ended

2023 December 31,

Gain (loss) recognized in Other Comprehensive Income $ ( 264 ) $ ( 502 )

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

As of July 1, 2023 and October 1, 2022, the total notional amounts of the Company’s designated cross currency swaps were Canadian $ 1.3 billion ($ 1.0 billion) and Canadian $ 1.3 billion ($ 0.9 billion), respectively.

The related gains or losses recognized in earnings were not material for the quarters and nine-month periods ended July 1, 2023 and July 2, 2022.

As of both December 30, 2023 and September 30, 2023, the total notional amount of the Company’s designated cross currency swaps was Canadian $ 1.3 billion ($ 1.0 billion).

The related gains or losses recognized in earnings were not material for the quarters ended December 30, 2023 and December 31, 2022.

Foreign exchange risk management contracts with respect to foreign currency denominated assets and liabilities are not designated as hedges and do not qualify for hedge accounting.

The net notional amounts of these foreign exchange contracts at July 1, 2023 and October 1, 2022 were $ 4.6 billion and $ 3.8 billion, respectively.

The following table summarizes the net foreign exchange gains or losses recognized on foreign currency denominated assets and liabilities and the net foreign exchange gains or losses on the foreign exchange contracts we entered into to mitigate our exposure with respect to foreign currency denominated assets and liabilities by the corresponding line item in which they are recorded in the Condensed Consolidated Statements of Operations:

The net notional amounts of these foreign exchange contracts at December 30, 2023 and September 30, 2023 were $ 2.9 billion and $ 3.1 billion, respectively.

Costs and Expenses Interest expense, net Income Tax Expense

Quarter Ended:

Net gains (losses) on foreign currency denominated assets and liabilities $ ( 61 ) $ ( 275 ) $ ( 19 ) $ 29 $ ( 15 ) $ 96

Net gains (losses) on foreign exchange risk management contracts not designated as hedges — 257 17 ( 28 ) 19 ( 89 )

Net gains (losses) $ ( 61 ) $ ( 18 ) $ ( 2 ) $ 1 $ 4 $ 7

Nine Months Ended:

2023 December 31,

2022 December 30,

2023 December 31,

2022 December 30,

2023 December 31,

Net gains (losses) on foreign currency denominated assets and liabilities $ 35 $ 145 $ ( 23 ) $ ( 18 ) $ ( 46 ) $ ( 88 )

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

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

Risk Management – Other Derivatives Not Designated as Hedges

The Company enters into certain other risk management contracts that are not designated as hedges and do not qualify for hedge accounting.

These contracts, which include certain total return swap contracts, are intended to offset economic exposures of the Company and are carried at market value with any changes in value recorded in earnings.

The notional amounts of these

The notional amount of these commodities contracts at December 30, 2023 and September 30, 2023 and

THE WALT DISNEY COMPANY

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tabular dollars in millions, except for per share data)

contracts at both July 1, 2023 and October 1, 2022 were $ 0.4 billion.

The related gains or losses recognized in earnings were not material for the quarters and nine-month periods ended July 1, 2023 and July 2, 2022.

related gains or losses recognized in earnings for the quarters ended December 30, 2023 and December 31, 2022 were not material.

Risk Management – Other Derivatives Not Designated as Hedges

The Company enters into certain other risk management contracts that are not designated as hedges and do not qualify for hedge accounting.

The notional amounts of these contracts at December 30, 2023 and September 30, 2023 were $ 0.5 billion and $ 0.4 billion, respectively.

The related gains or losses recognized in earnings were not material for the quarters ended December 30, 2023 and December 31, 2022.

Contingent Features and Cash Collateral

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If the Company’s or the counterparty’s credit ratings were to fall below investment grade, such counterparties or the Company would also have the right to terminate our derivative contracts, which could lead to a net payment to or from the Company for the aggregate net value by counterparty of our derivative contracts.

The aggregate fair values of derivative instruments with credit-risk-related contingent features in a net liability position by counterparty were $ 1.6 billion and $ 1.5 billion at July 1, 2023 and October 1, 2022, respectively.

The aggregate fair values of derivative instruments with credit-risk-related contingent features in a net liability position by counterparty were $ 1.5 billion and $ 1.6 billion at December 30, 2023 and September 30, 2023, respectively.

Restructuring and Impairment Charges

Content Impairment

As part of the Company’s reorganization announced in February 2023, we reviewed our content for alignment with a strategic change in our approach to content curation, and, during the third quarter of fiscal 2023, we removed content from our DTC services and terminated certain third-party license agreements for the right to use content primarily on our DTC platforms.

Accordingly, we recorded charges of $ 2.4 billion in the quarter ended July 1, 2023 (Content Impairment Charge), of which $ 2.0 billion was related to the write-off of produced content and $ 0.4 billion was related to the termination of the license agreements.

We paid approximately $ 0.3 billion of cash to terminate these third-party license agreements.

The charges are recorded in “Restructuring and impairment charges” in the Condensed Consolidated Statements of Operations.

Restructuring

The quarter ended July 1, 2023 included charges of $ 210 million for severance costs.

The nine months ended July 1, 2023 included charges of $ 431 million primarily for severance costs and costs related to exiting our businesses in Russia.

The quarter and nine months ended July 2, 2022 included charges of $ 42 million and $ 237 million, respectively, primarily due to asset impairments related to exiting our businesses in Russia.

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

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

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

New Accounting Pronouncements

Accounting Pronouncements Not Yet Adopted

Disclosures by Business Entities about Government Assistance

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

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

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

While the guidance will not have an effect on the Company’s Consolidated Statements of Operations or Consolidated Balance Sheets upon adoption in the fourth quarter of fiscal 2023, the Company may need to provide disclosures related to content production incentives, which are the most significant type of government assistance we receive.

Improvements to Reportable Segments Disclosures

In November 2023, the FASB issued guidance that enhances reportable segment disclosures by requiring the disclosure of significant expenses that are regularly provided to the chief operating decision maker (CODM) and included in the segment’s measure of profit or loss.

It also requires an explanation of how the CODM uses the segment’s measure of profit or loss to assess segment performance and allocate resources.

The guidance is effective for the Company beginning in fiscal year 2025 for annual periods and beginning in fiscal year 2026 for interim periods and requires retrospective adoption (with early adoption permitted).

The Company is currently assessing the impacts of the new guidance on its financial statement disclosures.

Improvements to Income Tax Disclosures

In December 2023, the FASB issued guidance that enhances income tax disclosures.

The new guidance requires an expanded rate reconciliation and the disaggregation of cash taxes paid by U.S.

federal, U.S.

state and foreign jurisdictions and eliminates certain disclosures related to uncertain tax benefits.

The guidance is effective for annual periods beginning with the Company’s 2026 fiscal year (with early adoption permitted).

The Company is currently assessing the impacts of the new guidance on its financial statement disclosures.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

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

What changed 10-Q

Item 1. Financial Statements