Item 1A. Risk Factors
ITEM 1A. Risk Factors
For an enterprise as large and complex as the Company, a wide range of factors could materially affect future developments and performance. In addition to the factors affecting specific business operations identified in connection with the description of these operations and the financial results of these operations elsewhere in our filings with the SEC, the most significant factors affecting our business include the factors discussed in our 2023 Annual Report on Form 10-K under Item 1A, “Risk Factors” as updated below:
BUSINESS, ECONOMIC, MARKET and OPERATING CONDITION RISKS
Regulations applicable to our businesses may impair the profitability of our businesses.
Each of our businesses, including our broadcast networks and television stations, is subject to a variety of U.S. and international regulations, which impact the operations and profitability of our businesses. Some of these regulations include:
• U.S. Federal Communications Commission regulation of our television and radio networks, our national programming networks and our owned television stations. See our 2023 Annual Report on Form 10-K under Item 1 — Federal Regulation - Entertainment and Sports.
• Federal, state and foreign privacy and data protection laws and regulations.
• Regulation of the safety and supply chain of consumer products and theme park operations, including regulation regarding the sourcing, importation and the sale of goods.
• Land planning, use and development regulations applicable to our theme parks operations.
• Environmental protection regulations.
• U.S. and international anti-corruption laws, sanction programs, trade restrictions and anti-money laundering laws.
• Restrictions on the manner in which content is currently licensed and distributed, ownership restrictions or film or television content requirements, investment obligations or quotas.
• Domestic and international labor laws, tax laws or currency controls.
New laws and regulations, as well as changes in any of these current laws and regulations or regulator activities in any of these areas, or others, may require us to spend additional amounts to comply with the regulations, or may restrict our ability to offer products and services in ways that are profitable, and create an increasingly unpredictable regulatory landscape. In addition, ongoing and future developments in international political, trade and security policy may lead to new regulations limiting international trade and investment and disrupting our operations outside the U.S., including our international theme parks and resorts operations in France, mainland China and Hong Kong. For example, in 2022 the U.S. and other countries implemented a series of sanctions against Russia in response to events in Russia and Ukraine; U.S. agencies have enhanced trade restrictions, including new prohibitions on the importation of goods from certain regions and other jurisdictions are considering similar measures; U.S. state governments have become more active in passing legislation targeted at specific sectors and companies and applying existing laws in novel ways to new technologies, including streaming and online commerce; and in many countries/regions around the world (including but not limited to the European Union) regulators are requiring us to broadcast on our linear networks (or display on our DTC streaming services) programming produced in specific countries as well as invest specified amounts of our revenues in local content productions. In Florida, legislative, regulatory and other steps directed at the Company have been taken, which collectively have negatively impacted our ability to execute on our business strategy, and such steps, along with future potential legislative and regulatory actions, could negatively impact our costs and the growth and profitability of our operations in Florida.
Further, in response to the COVID-19 pandemic, public health and other regional, national, state and local regulations and policies impacted most of our businesses. Government requirements could be reinstated and new government requirements may be imposed to address COVID-19 or future health outbreaks or pandemics.
54
ITEM 5. Other Items
None of our directors or officers adopted or terminated a Rule 10b5-1 trading arrangement or a non-Rule 10b5-1 trading arrangement (as defined in Item 408(c) of Regulation S-K) during the quarterly period covered by this report.
55
ITEM 6. Exhibits
INDEX OF EXHIBITS
Number and Description of Exhibit
(Numbers Coincide with Item 601 of Regulation S-K) Document Incorporated by Reference from a Previous Filing or Filed Herewith, as Indicated below
3.3
Amended and Restated Bylaws of The Walt Disney Company, effective as of November 30, 2023
Exhibit 3.1 to the Current Report on Form 8-K of the Company filed November 30, 2023
10.1 Second Amendment dated December 15, 2023, to that certain Employment Agreement, dated as of November 20, 2022, as amended, by and between The Walt Disney Company and Robert A. Iger †
Filed herewith
10.2
Employment Agreement dated as of December 4, 2023 by and between The Walt Disney Company and Hugh F. Johnston †
Exhibit 10.1 to the Current Report on Form 8-K of the Company filed November 6, 2023
10.3
Amendment dated December 15, 2023, to that certain Employment Agreement, dated as of December 4, 2023, by and between The Walt Disney Company and Hugh F. Johnston †
Filed herewith
10.4
Second Amendment dated December 13, 2023, to that certain Employment Agreement, dated as of December 21, 2021, by and between Disney Corporate Services Co., LLC and Horacio E. Gutierrez, as amended †
Filed herewith
10.5
Amendment dated December 21, 2023 to that certain Employment Agreement, dated as of December 21, 2021, by and between Disney Corporate Services Co., LLC and Horacio E. Gutierrez, as amended; and to that certain Indemnification Agreement, dated as of December 21, 2021, by and between The Walt Disney Company and Horacio E. Gutierrez, as amended †
Exhibit 10.1 to the Current Report on Form 8-K of the Company filed December 22, 2023
10.6
Amendment dated December 13, 2023, to that certain Employment Agreement, dated as of April 8, 2023, by and between The Walt Disney Company and Sonia L. Coleman †
Filed herewith
10.7
Amendment dated December 13, 2023 to that certain Employment Agreement, dated as of June 29, 2022, by and between The Walt Disney Company and Kristina K. Schake, as amended †
Filed herewith
10.8
Form of Non-Qualified Stock Option Award Agreement †
Filed herewith
10.9
Form of Performance-Based Restricted Stock Unit Award Agreement (Three-Year Vesting subject to Total Shareholder Return/ROIC Tests) †
Filed herewith
22 List of Guarantor Subsidiaries
Filed herewith
31(a) Rule 13a-14(a) Certification of Chief Executive Officer of the Company in accordance with Section 302 of the Sarbanes-Oxley Act of 2002
Filed herewith
31(b) Rule 13a-14(a) Certification of Chief Financial Officer of the Company in accordance with Section 302 of the Sarbanes-Oxley Act of 2002
Filed herewith
32(a) Section 1350 Certification of Chief Executive Officer of the Company in accordance with Section 906 of the Sarbanes-Oxley Act of 2002 *
Furnished
32(b) Section 1350 Certification of Chief Financial Officer of the Company in accordance with Section 906 of the Sarbanes-Oxley Act of 2002 *
Furnished
101 The following materials from the Company’s Quarterly Report on Form 10-Q for the quarter ended December 30, 2023 formatted in Inline Extensible Business Reporting Language (iXBRL): (i) the Condensed Consolidated Statements of Income, (ii) the Condensed Consolidated Statements of Comprehensive Income, (iii) the Condensed Consolidated Balance Sheets, (iv) the Condensed Consolidated Statements of Cash Flows, (v) the Condensed Consolidated Statements of Equity and (vi) related notes Filed herewith
104 Cover Page Interactive Data File (embedded within the Inline XBRL document) Filed herewith
* This certification is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liability of that section, nor shall it be deemed incorporated by reference into any filing under the Securities Act of 1933, as amended or the Exchange Act.
† Management Contract or compensatory plan or arrangement.
56
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
THE WALT DISNEY COMPANY
(Registrant)
By: /s/ HUGH F. JOHNSTON
Hugh F. Johnston,
Senior Executive Vice President and
Chief Financial Officer
February 7, 2024
Burbank, California
57