Walt Disney Co 10-Q

Item 1: Financial Statements THE WALT DISNEY COMPANY CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited; in millions, except per share data) Quarter Ended Nine Months Ended June 29, 2024 July 1, 2023 June 29, 2024 July 1, 2023 Revenues: Services $ 20,836 $ 20,008 $ 61,568 $ 60,591 Products 2,319 2,322 7,219 7,066 Total revenues 23,155 22,330 68,787 67,657 Costs and expenses: Cost of services (exclusive of depreciation and amortization) ( 13,236 ) ( 12,974 ) ( 39,821 ) ( 40,915 ) Cost of products (exclusive of depreciation and amortization) ( 1,473 ) ( 1,497 ) ( 4,647 ) ( 4,558 ) Selling, general, administrative and other ( 3,872 ) ( 3,874 ) ( 11,445 ) ( 11,315 ) Depreciation and amortization ( 1,220 ) ( 1,344 ) ( 3,705 ) ( 3,960 ) Total costs and expenses ( 19,801 ) ( 19,689 ) ( 59,618 ) ( 60,748 ) Restructuring and impairment charges — ( 2,650 ) ( 2,052 ) ( 2,871 ) Other income (expense), net ( 65 ) ( 11 ) ( 65 ) 96 Interest expense, net ( 342 ) ( 305 ) ( 899 ) ( 927 ) Equity in the income of investees 146 191 468 555 Income (loss) before income taxes 3,093 ( 134 ) 6,621 3,762 Income taxes ( 251 ) ( 19 ) ( 1,412 ) ( 1,066 ) Net income (loss) 2,842 ( 153 ) 5,209 2,696 Net income attributable to noncontrolling interests ( 221 ) ( 307 ) ( 697 ) ( 606 ) Net income (loss) attributable to The Walt Disney Company (Disney) $ 2,621 $ ( 460 ) $ 4,512 $ 2,090 Earnings (loss) per share attributable to Disney: Diluted $ 1.43 $ ( 0.25 ) $ 2.46 $ 1.14 Basic $ 1.44 $ ( 0.25 ) $ 2.47 $ 1.14 Weighted average number of common and common equivalent shares outstanding: Diluted 1,829 1,829 1,835 1,829 Basic 1,821 1,829 1,829 1,827 See Notes to Condensed Consolidated Financial Statements 3 THE WALT DISNEY COMPANY CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (unaudited; in millions) Quarter Ended Nine Months Ended June 29, 2024 July 1, 2023 June 29, 2024 July 1, 2023 Net income (loss) $ 2,842 $ ( 153 ) $ 5,209 $ 2,696 Other comprehensive income (loss), net of tax: Market value adjustments for hedges 98 10 ( 106 ) ( 614 ) Pension and postretirement medical plan adjustments ( 20 ) 1 ( 65 ) 58 Foreign currency translation and other ( 32 ) ( 101 ) 23 241 Other comprehensive income (loss) 46 ( 90 ) ( 148 ) ( 315 ) Comprehensive income (loss) 2,888 ( 243 ) 5,061 2,381 Net income attributable to noncontrolling interests ( 221 ) ( 307 ) ( 697 ) ( 606 ) Other comprehensive income (loss) attributable to noncontrolling interests 9 66 ( 14 ) 21 Comprehensive income (loss) attributable to Disney $ 2,676 $ ( 484 ) $ 4,350 $ 1,796 See Notes to Condensed Consolidated Financial Statements 4 THE WALT DISNEY COMPANY CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited; in millions, except per share data) June 29, 2024 September 30, 2023 ASSETS Current assets Cash and cash equivalents $ 5,954 $ 14,182 Receivables, net 12,966 12,330 Inventories 1,984 1,963 Content advances 1,992 3,002 Other current assets 2,597 1,286 Total current assets 25,493 32,763 Produced and licensed content costs 32,799 33,591 Investments 4,632 3,080 Parks, resorts and other property Attractions, buildings and equipment 73,366 70,090 Accumulated depreciation ( 44,720 ) ( 42,610 ) 28,646 27,480 Projects in progress 6,223 6,285 Land 1,172 1,176 36,041 34,941 Intangible assets, net 11,107 13,061 Goodwill 73,914 77,067 Other assets 13,786 11,076 Total assets $ 197,772 $ 205,579 LIABILITIES AND EQUITY Current liabilities Accounts payable and other accrued liabilities $ 20,216 $ 20,671 Current portion of borrowings 8,060 4,330 Deferred revenue and other 7,336 6,138 Total current liabilities 35,612 31,139 Borrowings 39,524 42,101 Deferred income taxes 6,628 7,258 Other long-term liabilities 10,705 12,069 Commitments and contingencies (Note 13) Redeemable noncontrolling interests — 9,055 Equity Preferred stock — — Common stock, $0.01 par value, Authorized – 4.6 billion shares, Issued – 1.9 billion shares at June 29, 2024 and 1.8 billion shares at September 30, 2023 58,252 57,383 Retained earnings 49,273 46,093 Accumulated other comprehensive loss ( 3,454 ) ( 3,292 ) Treasury stock, at cost, 42 million shares at June 29, 2024 and 19 million shares at September 30, 2023 ( 3,449 ) ( 907 ) Total Disney Shareholders’ equity 100,622 99,277 Noncontrolling interests 4,681 4,680 Total equity 105,303 103,957 Total liabilities and equity $ 197,772 $ 205,579 See Notes to Condensed Consolidated Financial Statements 5 THE WALT DISNEY COMPANY CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited; in millions) Nine Months Ended June 29, 2024 July 1, 2023 OPERATING ACTIVITIES Net income $ 5,209 $ 2,696 Depreciation and amortization 3,705 3,960 Goodwill impairment and impairment of produced and licensed content 2,038 2,266 Deferred income taxes ( 489 ) ( 899 ) Equity in the income of investees ( 468 ) ( 555 ) Cash distributions received from equity investees 327 531 Net change in produced and licensed content costs and advances 1,121 ( 1,861 ) Equity-based compensation 1,036 861 Other, net ( 20 ) ( 347 ) Changes in operating assets and liabilities: Receivables ( 1,373 ) ( 744 ) Inventories ( 2 ) ( 120 ) Other assets 74 ( 64 ) Accounts payable and other liabilities ( 814 ) ( 1,609 ) Income taxes ( 1,891 ) 949 Cash provided by operations 8,453 5,064 INVESTING ACTIVITIES Investments in parks, resorts and other property ( 3,923 ) ( 3,595 ) Proceeds from sale of investments 101 458 Purchase of investments ( 1,006 ) — Other, net ( 75 ) ( 122 ) Cash used in investing activities ( 4,903 ) ( 3,259 ) FINANCING ACTIVITIES Commercial paper borrowings, net 1,377 40 Borrowings 132 70 Reduction of borrowings ( 729 ) ( 1,319 ) Dividends ( 549 ) — Repurchases of common stock ( 2,523 ) — Contributions from noncontrolling interests — 719 Acquisition of redeemable noncontrolling interests ( 8,610 ) ( 900 ) Other, net ( 820 ) ( 737 ) Cash used in financing activities ( 11,722 ) ( 2,127 ) Impact of exchange rates on cash, cash equivalents and restricted cash ( 14 ) 174 Change in cash, cash equivalents and restricted cash ( 8,186 ) ( 148 ) Cash, cash equivalents and restricted cash, beginning of period 14,235 11,661 Cash, cash equivalents and restricted cash, end of period $ 6,049 $ 11,513 See Notes to Condensed Consolidated Financial Statements 6 THE WALT DISNEY COMPANY CONDENSED CONSOLIDATED STATEMENTS OF EQUITY (unaudited; in millions) Quarter Ended Equity Attributable to Disney Shares (1) Common Stock Retained Earnings Accumulated Other Comprehensive Income (Loss) Treasury Stock Total Disney Equity Non-controlling Interests (2) Total Equity Balance at March 30, 2024 1,826 $ 58,028 $ 46,649 $ ( 3,509 ) $ ( 1,916 ) $ 99,252 $ 4,511 $ 103,763 Comprehensive income — — 2,621 55 — 2,676 246 2,922 Equity compensation activity 4 233 — — — 233 — 233 Dividends — — 5 — — 5 — 5 Common stock repurchases ( 14 ) — — — ( 1,522 ) ( 1,522 ) — ( 1,522 ) Distributions and other — ( 9 ) ( 2 ) — ( 11 ) ( 22 ) ( 76 ) ( 98 ) Balance at June 29, 2024 1,816 $ 58,252 $ 49,273 $ ( 3,454 ) $ ( 3,449 ) $ 100,622 $ 4,681 $ 105,303 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 (1) Shares are net of treasury shares. (2) Excludes redeemable noncontrolling interests. See Notes to Condensed Consolidated Financial Statements 7 THE WALT DISNEY COMPANY CONDENSED CONSOLIDATED STATEMENTS OF EQUITY (unaudited; in millions) Nine Months Ended Equity Attributable to Disney Shares (1) Common Stock Retained Earnings Accumulated Other Comprehensive Income (Loss) Treasury Stock Total Disney Equity Non-controlling Interests (2) Total Equity Balance at September 30, 2023 1,830 $ 57,383 $ 46,093 $ ( 3,292 ) $ ( 907 ) $ 99,277 $ 4,680 $ 103,957 Comprehensive income (loss) — — 4,512 ( 162 ) — 4,350 556 4,906 Equity compensation activity 9 866 — — — 866 — 866 Dividends — 4 ( 1,370 ) — — ( 1,366 ) — ( 1,366 ) Common stock repurchases ( 23 ) — — — ( 2,523 ) ( 2,523 ) — ( 2,523 ) Distributions and other — ( 1 ) 38 — ( 19 ) 18 ( 555 ) ( 537 ) Balance at June 29, 2024 1,816 $ 58,252 $ 49,273 $ ( 3,454 ) $ ( 3,449 ) $ 100,622 $ 4,681 $ 105,303 Balance at October 1, 2022 1,824 $ 56,398 $ 43,636 $ ( 4,119 ) $ ( 907 ) $ 95,008 $ 3,871 $ 98,879 Comprehensive income (loss) — — 2,090 ( 294 ) — 1,796 299 2,095 Equity compensation activity 6 735 — — — 735 — 735 Contributions — — — — — — 789 789 Distributions and other — 3 68 — — 71 ( 513 ) ( 442 ) Balance at July 1, 2023 1,830 $ 57,136 $ 45,794 $ ( 4,413 ) $ ( 907 ) $ 97,610 $ 4,446 $ 102,056 (1) Shares are net of treasury shares. (2) Excludes redeemable noncontrolling interests. See Notes to Condensed Consolidated Financial Statements 8 THE WALT DISNEY COMPANY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited; tabular dollars in millions, except for per share data) 1. Principles of Consolidation These Condensed Consolidated Financial Statements have been prepared in accordance with accounting principles generally accepted in the United States of America (GAAP) for interim financial information and the instructions to Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. 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 June 29, 2024 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. These financial statements should be read in conjunction with the Company’s 2023 Annual Report on Form 10-K. Variable Interest Entities The Company enters into relationships with or makes investments in other entities that may be variable interest entities (VIE). A VIE is consolidated in our financial statements if the Company has the power to direct activities that most significantly impact the economic performance of the VIE and has the obligation to absorb losses or the right to receive benefits from the VIE that could potentially be significant (as defined by ASC 810-10-25-38) to the VIE. Hong Kong Disneyland Resort and Shanghai Disney Resort (together the Asia Theme Parks, see Note 6) are VIEs in which the Company has less than 50% equity ownership. Company subsidiaries (the Management Companies) have management agreements with the Asia Theme Parks, which provide the Management Companies, subject to certain protective rights of joint venture partners, with the ability to direct the day-to-day operating activities and the development of business strategies that we believe most significantly impact the economic performance of the Asia Theme Parks. In addition, the Management Companies receive management fees under these arrangements that we believe could be significant to the Asia Theme Parks. Therefore, the Company has consolidated the Asia Theme Parks in its financial statements. Redeemable Noncontrolling Interest Hulu LLC 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 as the Company’s cash tax benefits are realized, generally 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. If Hulu’s equity fair value is determined pursuant to a contractual appraisal process 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. In May 2024, the Company and NBCU entered into a confidential arbitration to resolve a dispute regarding the contractual appraisal process, in which the parties seek declaratory relief, equitable relief and unspecified damages. The Company expects a decision in that arbitration in fiscal 2025. The outcome of the arbitration is uncertain and we cannot reasonably estimate the impact of the arbitration on the appraisal process, and thus any impact on the determination of Hulu’s equity fair value and any additional amount we may be required to pay to acquire NBCU’s interest in Hulu. As part of the arbitration the Company disputes the validity of aspects of NBCU’s appraisal and the corresponding process. Consequently, completion of the appraisal process, including the manner of determining any such additional amount payable by the Company, awaits the resolution of the confidential arbitration. During the initial phase of the appraisal process, the Company’s appraiser arrived at a valuation that falls below the guaranteed floor value, while NBCU’s appraiser arrived at a valuation substantially in excess of the guaranteed floor value. Once the arbitration is completed, determination of the final equity fair value will take into account the valuation of a third appraiser pursuant to the appraisal process as resolved by the arbitration. As such, if the third appraiser’s equity fair value determination were equal to or below the guaranteed floor value, the Company would not be required to pay NBCU any additional amount. Conversely, if NBCU’s appraisal were deemed to be valid and the third appraiser’s equity fair value determination were consistent with the NBCU’s appraiser’s valuation, the Company would be required to pay NBCU an 9 THE WALT DISNEY COMPANY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited; tabular dollars in millions, except for per share data) additional amount of approximately $ 5 billion as its share of the difference between the equity fair value and the guaranteed floor value. If the third appraiser’s equity fair value determination were between the valuations of the Company’s and NBCU’s appraisers, the incremental amount would likewise be between zero and approximately $ 5 billion. Any incremental amount determined to be payable to NBCU to acquire NBCU’s interest in Hulu would be recorded as “Net income attributable to noncontrolling interests” and thus reduce “Net income attributable to Disney” in the Condensed Consolidated Statements of Operations in the period recorded. BAMTech LLC 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 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. Use of Estimates The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and footnotes thereto. Actual results may differ from those estimates. Reclassifications Certain reclassifications have been made in the fiscal 2023 financial statements and notes to conform to the fiscal 2024 presentation. 2. Segment Information 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 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. Segment operating results include allocations of certain costs, including information technology, pension, legal and other shared services costs, which are allocated based on metrics designed to correlate with consumption. 10 THE WALT DISNEY COMPANY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited; tabular dollars in millions, except for per share data) Segment revenues and segment operating income are as follows: Quarter Ended Nine Months Ended June 29, 2024 July 1, 2023 June 29, 2024 July 1, 2023 Revenues: Entertainment Third parties $ 10,478 $ 10,031 $ 30,050 $ 30,827 Intersegment 102 96 307 284 10,580 10,127 30,357 31,111 Sports Third parties 4,291 4,101 12,826 12,441 Intersegment 267 234 879 760 4,558 4,335 13,705 13,201 Experiences 8,386 8,198 25,911 24,389 Eliminations ( 369 ) ( 330 ) ( 1,186 ) ( 1,044 ) Total segment revenues $ 23,155 $ 22,330 $ 68,787 $ 67,657 Segment operating income: Entertainment $ 1,201 $ 408 $ 2,856 $ 1,208 Sports 802 854 1,477 1,484 Experiences 2,222 2,297 7,613 7,195 Total segment operating income $ 4,225 $ 3,559 $ 11,946 $ 9,887 Equity in the income of investees is included in segment operating income as follows: Quarter Ended Nine Months Ended June 29, 2024 July 1, 2023 June 29, 2024 July 1, 2023 Entertainment $ 123 $ 174 $ 432 $ 527 Sports 26 20 45 39 Experiences — — — ( 2 ) Equity in the income of investees included in segment operating income 149 194 477 564 Amortization of TFCF intangible assets related to an equity investee ( 3 ) ( 3 ) ( 9 ) ( 9 ) Equity in the income of investees, net $ 146 $ 191 $ 468 $ 555 11 THE WALT DISNEY COMPANY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited; tabular dollars in millions, except for per share data) A reconciliation of segment operating income to income before income taxes is as follows: Quarter Ended Nine Months Ended June 29, 2024 July 1, 2023 June 29, 2024 July 1, 2023 Segment operating income $ 4,225 $ 3,559 $ 11,946 $ 9,887 Corporate and unallocated shared expenses ( 328 ) ( 295 ) ( 1,027 ) ( 854 ) Restructuring and impairment charges (1) — ( 2,650 ) ( 2,052 ) ( 2,871 ) Other income (expense), net (2) ( 65 ) ( 11 ) ( 65 ) 96 Interest expense, net ( 342 ) ( 305 ) ( 899 ) ( 927 ) TFCF and Hulu Acquisition Amortization (3) ( 397 ) ( 432 ) ( 1,282 ) ( 1,569 ) Income (loss) before income taxes $ 3,093 $ ( 134 ) $ 6,621 $ 3,762 (1) See Note 16 for a discussion of amounts in restructuring and impairment charges. (2) “Other income (expense), net” for the quarter and nine months ended June 29, 2024 reflected a charge of $ 65 million related to a legal ruling. In the prior-year 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 Gain), which was sold in the prior-year quarter. “Other income (expense), net” for the prior-year quarter and nine months ended July 1, 2023 also included a charge of $ 101 million related to a legal ruling. (3) TFCF and Hulu Acquisition Amortization is as follows: Quarter Ended Nine Months Ended June 29, 2024 July 1, 2023 June 29, 2024 July 1, 2023 Amortization of intangible assets $ 326 $ 361 $ 1,068 $ 1,186 Step-up of film and television costs 68 68 205 374 Intangibles related to a TFCF equity investee 3 3 9 9 $ 397 $ 432 $ 1,282 $ 1,569 3. Revenues The following table presents revenues by segment and major source: Quarter Ended June 29, 2024 Entertainment Sports Experiences Eliminations Total Subscription fees $ 4,729 $ 414 $ — $ — $ 5,143 Affiliate fees 1,726 2,571 — ( 291 ) 4,006 Advertising 1,941 1,339 — — 3,280 Theme park admissions — — 2,780 — 2,780 Resort and vacations — — 2,115 — 2,115 Retail and wholesale sales of merchandise, food and beverage — — 2,246 — 2,246 Merchandise licensing 143 — 702 — 845 TV/VOD distribution licensing 670 108 — — 778 Theatrical distribution licensing 724 — — — 724 Home entertainment 142 — — — 142 Other 505 126 543 ( 78 ) 1,096 $ 10,580 $ 4,558 $ 8,386 $ ( 369 ) $ 23,155 12 THE WALT DISNEY COMPANY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited; tabular dollars in millions, except for per share data) Quarter Ended July 1, 2023 Entertainment Sports Experiences Eliminations Total Subscription fees $ 4,157 $ 380 $ — $ — $ 4,537 Affiliate fees 1,833 2,633 — ( 270 ) 4,196 Advertising 1,889 1,153 1 — 3,043 Theme park admissions — — 2,731 — 2,731 Resort and vacations — — 1,990 — 1,990 Retail and wholesale sales of merchandise, food and beverage — — 2,226 — 2,226 Merchandise licensing 128 — 748 — 876 TV/VOD distribution licensing 572 64 — — 636 Theatrical distribution licensing 838 — — — 838 Home entertainment 252 — — — 252 Other 458 105 502 ( 60 ) 1,005 $ 10,127 $ 4,335 $ 8,198 $ ( 330 ) $ 22,330 Nine Months Ended June 29, 2024 Entertainment Sports Experiences Eliminations Total Subscription fees $ 14,041 $ 1,246 $ — $ — $ 15,287 Affiliate fees 5,251 7,918 — ( 883 ) 12,286 Advertising 5,709 3,640 — — 9,349 Theme park admissions — — 8,568 — 8,568 Resort and vacations — — 6,334 — 6,334 Retail and wholesale sales of merchandise, food and beverage — — 6,989 — 6,989 Merchandise licensing 471 — 2,321 — 2,792 TV/VOD distribution licensing 1,686 235 — — 1,921 Theatrical distribution licensing 1,098 — — — 1,098 Home entertainment 540 — — — 540 Other 1,561 666 1,699 ( 303 ) 3,623 $ 30,357 $ 13,705 $ 25,911 $ ( 1,186 ) $ 68,787 Nine Months Ended July 1, 2023 Entertainment Sports Experiences Eliminations Total Subscription fees $ 12,243 $ 1,139 $ — $ — $ 13,382 Affiliate fees 5,631 8,052 — ( 813 ) 12,870 Advertising 5,851 3,196 3 — 9,050 Theme park admissions — — 7,800 — 7,800 Resort and vacations — — 5,919 — 5,919 Retail and wholesale sales of merchandise, food and beverage — — 6,750 — 6,750 Merchandise licensing 449 — 2,342 — 2,791 TV/VOD distribution licensing 2,099 242 — — 2,341 Theatrical distribution licensing 2,745 — — — 2,745 Home entertainment 639 — — — 639 Other 1,454 572 1,575 ( 231 ) 3,370 $ 31,111 $ 13,201 $ 24,389 $ ( 1,044 ) $ 67,657 13 THE WALT DISNEY COMPANY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited; tabular dollars in millions, except for per share data) The following table presents revenues by segment and primary geographical markets: Quarter Ended June 29, 2024 Entertainment Sports Experiences Eliminations Total Americas $ 8,222 $ 4,190 $ 6,250 $ ( 369 ) $ 18,293 Europe 1,427 75 1,070 — 2,572 Asia Pacific 931 293 1,066 — 2,290 Total revenues $ 10,580 $ 4,558 $ 8,386 $ ( 369 ) $ 23,155 Quarter Ended July 1, 2023 Entertainment Sports Experiences Eliminations Total Americas $ 7,885 $ 3,965 $ 6,245 $ ( 330 ) $ 17,765 Europe 1,316 75 945 — 2,336 Asia Pacific 926 295 1,008 — 2,229 Total revenues $ 10,127 $ 4,335 $ 8,198 $ ( 330 ) $ 22,330 Nine Months Ended June 29, 2024 Entertainment Sports Experiences Eliminations Total Americas $ 23,450 $ 12,663 $ 19,591 $ ( 1,186 ) $ 54,518 Europe 4,219 329 2,915 — 7,463 Asia Pacific 2,688 713 3,405 — 6,806 Total revenues $ 30,357 $ 13,705 $ 25,911 $ ( 1,186 ) $ 68,787 Nine Months Ended July 1, 2023 Entertainment Sports Experiences Eliminations Total Americas $ 23,976 $ 12,288 $ 19,146 $ ( 1,044 ) $ 54,366 Europe 4,220 279 2,668 — 7,167 Asia Pacific 2,915 634 2,575 — 6,124 Total revenues $ 31,111 $ 13,201 $ 24,389 $ ( 1,044 ) $ 67,657 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 June 29, 2024, $ 0.3 billion was recognized related to performance obligations satisfied as of March 30, 2024. For the nine months ended June 29, 2024, $ 0.8 billion was recognized related to performance obligations satisfied as of September 30, 2023. 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. As of June 29, 2024, revenue for unsatisfied performance obligations expected to be recognized in the future is $ 15 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, sports sublicensees and advertisers. Of this amount, we expect to recognize approximately $ 2 billion in the remainder of fiscal 2024, $ 6 billion in fiscal 2025, $ 3 billion in fiscal 2026 and $ 4 billion thereafter. These amounts include only fixed consideration or minimum guarantees and do not include amounts related to (i) contracts with an original expected term of one year or less (such as most advertising contracts) or (ii) licenses of IP that are solely based on the sales of the licensee. When the timing of the Company’s revenue recognition is different from the timing of customer payments, the Company recognizes either a contract asset (customer payment is subsequent to revenue recognition and subject to the Company satisfying additional performance obligations) or deferred revenue (customer payment precedes the Company satisfying the performance obligations). Consideration due under contracts with payment in arrears is recognized as accounts receivable. Deferred revenues are recognized as (or when) the Company performs under the contract. The Company’s contract assets and activity for the current and prior-year periods were not material. 14 THE WALT DISNEY COMPANY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited; tabular dollars in millions, except for per share data) Accounts receivable and deferred revenues from contracts with customers are as follows: June 29, 2024 September 30, 2023 Accounts receivable Current $ 10,932 $ 10,279 Non-current 1,058 1,212 Allowance for credit losses ( 134 ) ( 154 ) Deferred revenues Current 5,806 5,568 Non-current 888 977 For the quarter and nine months ended June 29, 2024, the Company recognized revenue of $ 0.5 billion and $ 4.8 billion, respectively, that was included in the September 30, 2023 deferred revenue balance. 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. 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/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/VOD licensing receivables recorded in other non-current assets was $ 0.4 billion at June 29, 2024 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 June 29, 2024 and September 30, 2023. The allowance for credit losses for TV/VOD licensing and vacation club receivables and related activity for the periods ended June 29, 2024 and September 30, 2023 were not material. 4. Dispositions On February 28, 2024, Star India Private Limited (Star India), a subsidiary of the Company, entered into a binding definitive agreement with Reliance Industries Limited (RIL) and Viacom 18 Media Private Limited (Viacom 18), which is majority owned and controlled by RIL, to form a joint venture that will combine the businesses of Viacom18 and Star India consisting of entertainment and sports pay TV and free-to-air networks, DTC services, film and television content library and certain production businesses (the Star India Transaction). RIL will have an effective 56 % controlling interest in the joint venture with 37 % held by the Company, and 7 % by Bodhi Tree Systems, a third party investment company. The Star India Transaction is expected to close in the first half of 2025, subject to customary closing conditions, including regulatory approvals and government consents. If closing has not occurred by February 28, 2026, Star India or RIL may terminate the transaction. Star India’s assets and liabilities (see table that follows) are presented as held for sale in the Condensed Consolidated Balance Sheet as of June 29, 2024. To reflect Star India at its fair value less costs to sell, we recognized a non-cash goodwill impairment charge of $ 1.3 billion in “Restructuring and impairment charges” in the second quarter of fiscal 2024. The measurement of this impairment charge included non-cash cumulative foreign currency translation losses of approximately $ 0.8 billion. 15 THE WALT DISNEY COMPANY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited; tabular dollars in millions, except for per share data) Assets and liabilities of Star India are classified as held for sale in the Condensed Consolidated Balance Sheets as of June 29, 2024 as follows: Receivables and other current assets $ 992 Content advances 404 Total current assets 1,396 Produced and licensed content costs 574 Property and equipment, net 81 Intangible assets, net 760 Goodwill 1,110 Other assets 747 Total assets (1) $ 4,668 Accounts payable and other accrued liabilities $ 803 Deferred revenue and other 74 Total current liabilities 877 Other long-term liabilities 363 Total liabilities (1) $ 1,240 (1) Total current assets and non-current assets held for sale are included in “Other current assets” and “Other assets,” respectively, in the Condensed Consolidated Balance Sheets. Total current liabilities and non-current liabilities held for sale are included in “Deferred revenue and other” and “Other long-term liabilities” in the Condensed Consolidated Balance Sheets. These assets and liabilities are subject to change through closing. Goodwill The changes in the carrying amount of goodwill are as follows: Entertainment Sports Experiences Star India Total Balance at September 30, 2023 $ 55,031 $ 16,486 $ 5,550 $ — $ 77,067 Allocation to Star India ( 2,445 ) — — 2,445 — Impairment (1) ( 703 ) — — ( 1,335 ) ( 2,038 ) Reclassification to held for sale — — — ( 1,110 ) ( 1,110 ) Currency translation adjustments and other, net ( 5 ) — — — ( 5 ) Balance at June 29, 2024 $ 51,878 $ 16,486 $ 5,550 $ — $ 73,914 (1) Reflects impairments related to entertainment linear networks and Star India (see Note 16). 5. Cash, Cash Equivalents, Restricted Cash and Borrowings Cash, Cash Equivalents and Restricted Cash 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. June 29, 2024 September 30, 2023 Cash and cash equivalents $ 5,954 $ 14,182 Restricted cash included in other assets 95 53 Total cash, cash equivalents and restricted cash in the statement of cash flows $ 6,049 $ 14,235 16 THE WALT DISNEY COMPANY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited; tabular dollars in millions, except for per share data) Borrowings During the nine months ended June 29, 2024, the Company’s borrowing activity was as follows: September 30, 2023 Borrowings Payments Other Activity June 29, 2024 Commercial paper with original maturities less than three months (1) $ 289 $ 25 $ — $ — $ 314 Commercial paper with original maturities greater than three months 1,187 3,717 ( 2,365 ) 6 2,545 U.S. dollar denominated notes 43,504 — ( 584 ) ( 106 ) 42,814 Asia Theme Parks borrowings 1,308 — ( 13 ) 52 1,347 Foreign currency denominated debt and other (2) 143 132 ( 132 ) 421 564 $ 46,431 $ 3,874 $ ( 3,094 ) $ 373 $ 47,584 (1) Borrowings and reductions of borrowings are reported net. (2) The other activity is attributable to market value adjustments for debt with qualifying hedges. At June 29, 2024, the Company’s bank facilities, which are with a syndicate of lenders and support our commercial paper borrowings, were as follows: Committed Capacity Capacity Used Unused Capacity Facility expiring February 2025 $ 5,250 $ — $ 5,250 Facility expiring March 2027 4,000 — 4,000 Facility expiring March 2029 3,000 — 3,000 Total $ 12,250 $ — $ 12,250 These facilities allow for borrowings at rates based on the Secured Overnight Financing Rate (SOFR) and at other variable rates for non-U.S. dollar denominated borrowings, plus a fixed spread that varies with the Company’s debt ratings assigned by Moody’s Investors Service and Standard and Poor’s ranging from 0.655% to 1.225%. The bank facilities contain only one financial covenant relating to interest coverage of three times earnings before interest, taxes, depreciation and amortization, including both intangible amortization and amortization of our film and television production and programming costs. On June 29, 2024, 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 June 29, 2024, 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 became available in August 2023 and $ 1.1 billion became available in August 2024. Each tranche of financing may be utilized within a period of 18 months from the initial availability date. If utilized, the interest rates will be fixed at 3.80 % and 3.74 %, respectively, and the loan and interest will be payable semi-annually over a 12-year period from the borrowing date. Early repayment is permitted subject to cancellation fees . 17 THE WALT DISNEY COMPANY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited; 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 June 29, 2024 July 1, 2023 June 29, 2024 July 1, 2023 Interest expense $ ( 509 ) $ ( 503 ) $ ( 1,538 ) $ ( 1,472 ) Interest and investment income 68 111 337 288 Net periodic pension and postretirement benefit costs (other than service costs) 99 87 302 257 Interest expense, net $ ( 342 ) $ ( 305 ) $ ( 899 ) $ ( 927 ) Interest and investment income includes gains and losses on certain publicly traded and non-public investments, investment impairments and interest earned on cash and cash equivalents and certain receivables. 6. International Theme Parks The Company has a 48 % ownership interest in the operations of Hong Kong Disneyland Resort and a 43 % ownership interest in the operations of Shanghai Disney Resort. The Asia Theme Parks together with Disneyland Paris are collectively referred to as the International Theme Parks. The following table summarizes the carrying amounts of the Asia Theme Parks’ assets and liabilities included in the Company’s Condensed Consolidated Balance Sheets: June 29, 2024 September 30, 2023 Cash and cash equivalents $ 647 $ 504 Other current assets 204 159 Total current assets 851 663 Parks, resorts and other property 6,014 6,150 Other assets 211 234 Total assets $ 7,076 $ 7,047 Current liabilities $ 632 $ 720 Long-term borrowings 1,347 1,308 Other long-term liabilities 392 392 Total liabilities $ 2,371 $ 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 June 29, 2024: Revenues $ 4,300 Costs and expenses ( 3,464 ) Asia Theme Parks’ royalty and management fees of $ 232 million for the nine months ended June 29, 2024 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 June 29, 2024 were $ 1,219 million provided by operating activities, $ 705 million used in investing activities and $ 11 million used in financing activities. Hong Kong Disneyland Resort The Government of the Hong Kong Special Administrative Region (HKSAR) and the Company have a 52 % and a 48 % equity interest in Hong Kong Disneyland Resort, respectively. 18 THE WALT DISNEY COMPANY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited; tabular dollars in millions, except for per share data) The Company and HKSAR have provided loans to Hong Kong Disneyland Resort with outstanding balances of $ 172 million and $ 115 million, respectively. 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) that bears interest at a rate of three month HIBOR plus 1.25 % and matures in December 2028. The line of credit does not have a balance outstanding. Shanghai Disney Resort Shanghai Shendi (Group) Co., Ltd (Shendi) and the Company have 57 % and 43 % equity interests in Shanghai Disney Resort, respectively. A management company, in which the Company has a 70 % interest and Shendi a 30 % interest, operates Shanghai Disney Resort. The Company has provided Shanghai Disney Resort with loans totaling $ 993 million, bearing interest at rates up to 8 % and maturing in 2036, with early repayment permitted. The loan is eliminated in consolidation. The Company has also provided Shanghai Disney Resort with a 1.9 billion yuan (approximately $ 0.3 billion) line of credit bearing interest at 8 %. The line of credit does not have a balance outstanding. Shendi has provided Shanghai Disney Resort with loans totaling 9.0 billion yuan (approximately $ 1.2 billion), bearing interest at rates up to 8 % and maturing in 2036, with early repayment permitted. Shendi has also provided Shanghai Disney Resort with a 2.6 billion yuan (approximately $ 0.4 billion) line of credit bearing interest at 8 %. The line of credit does not have a balance outstanding. 7. Produced and Acquired/Licensed Content Costs and Advances The Company classifies its capitalized produced and acquired/licensed content costs as long-term assets and classifies advances for live programming rights made prior to the live event as short-term assets. For purposes of amortization and impairment, the capitalized content costs are classified based on their predominant monetization strategy as follows: • Individual - lifetime value is predominantly derived from third-party revenues that are directly attributable to the specific film or television title (e.g. theatrical revenues or sales to third-party television programmers) • Group - lifetime value is predominantly derived from third-party revenues that are attributable only to a bundle of titles (e.g. subscription revenue for a DTC service or affiliate fees for a cable television network) Total capitalized produced and licensed content by predominant monetization strategy is as follows: As of June 29, 2024 As of September 30, 2023 Predominantly Monetized Individually Predominantly Monetized as a Group Total Predominantly Monetized Individually Predominantly Monetized as a Group Total Produced content Released, less amortization $ 4,759 $ 13,899 $ 18,658 $ 4,968 $ 13,555 $ 18,523 Completed, not released — 1,609 1,609 70 1,786 1,856 In-process 4,121 5,062 9,183 3,331 6,120 9,451 In development or pre-production 310 90 400 279 133 412 $ 9,190 $ 20,660 29,850 $ 8,648 $ 21,594 30,242 Licensed content - Television programming rights and advances 4,941 6,351 Total produced and licensed content $ 34,791 $ 36,593 Current portion $ 1,992 $ 3,002 Non-current portion $ 32,799 $ 33,591 19 THE WALT DISNEY COMPANY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited; tabular dollars in millions, except for per share data) Amortization of produced and licensed content is as follows: Quarter Ended Nine Months Ended June 29, 2024 July 1, 2023 June 29, 2024 July 1, 2023 Produced content Predominantly monetized individually $ 809 $ 954 $ 2,188 $ 3,117 Predominantly monetized as a group 1,779 1,998 5,325 6,110 2,588 2,952 7,513 9,227 Licensed programming rights and advances 3,609 3,136 11,565 10,871 Total produced and licensed content costs (1) $ 6,197 $ 6,088 $ 19,078 $ 20,098 (1) Primarily included in “Costs of services” in the Condensed Consolidated Statements of Operations. 8. Income Taxes Deferred Tax Assets and Liabilities The Company records deferred income tax assets and liabilities with respect to temporary differences in accounting treatment of items for financial reporting purposes and income tax purposes. The Company’s deferred tax assets and liabilities by major category as of June 29, 2024 and September 30, 2023 were as follows: June 29, 2024 September 30, 2023 Deferred tax assets Net operating losses and tax credit carryforwards (1) $ ( 3,506 ) $ ( 3,841 ) Accrued liabilities ( 1,215 ) ( 1,335 ) Lease liabilities ( 862 ) ( 852 ) Licensing revenues ( 133 ) ( 115 ) Other ( 669 ) ( 623 ) Total deferred tax assets ( 6,385 ) ( 6,766 ) Deferred tax liabilities Depreciable, amortizable and other property 6,932 7,581 Investment in subsidiaries / equity investees (2) 1,619 1,753 Right-of-use lease assets 763 751 Other 82 81 Total deferred tax liabilities 9,396 10,166 Net deferred tax liability before valuation allowance 3,011 3,400 Valuation allowance 3,018 3,187 Net deferred tax liability $ 6,029 $ 6,587 (1) Balances at June 29, 2024 and September 30, 2023 include approximately $ 1.5 billion and $ 1.6 billion, respectively, of International Theme Park net operating losses. The International Theme Park net operating losses are primarily in France and, to a lesser extent, Hong Kong and China. Losses in France and Hong Kong have an indefinite carryforward period and losses in China have a five-year carryforward period. China theme park net operating losses of $ 0.1 billion, if not used, expire between fiscal 2025 and fiscal 2028. Balances at both June 29, 2024 and September 30, 2023 also include approximately $ 1.0 billion of foreign tax credits in the U.S., which have a ten-year carryforward period and, if not used, expire beginning in fiscal 2028. (2) Amounts related to Investment in subsidiaries / equity investees are, in part, due to the tax status of these entities. If the tax status of certain legal entities changes, a significant portion of this balance may reverse. Valuation Allowance The Company records deferred income tax assets and liabilities with respect to temporary differences in the accounting treatment of items for financial reporting purposes and for income tax purposes. Where, based on the weight of available 20 THE WALT DISNEY COMPANY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited; tabular dollars in millions, except for per share data) evidence, it is more likely than not that some amount of recorded deferred tax assets will not be realized, a valuation allowance is established for the amount that, in management’s judgment, is sufficient to reduce the deferred tax asset to an amount that is more likely than not to be realized. Unrecognized Tax Benefits The Company’s gross unrecognized tax benefits (before interest and penalties) decreased $ 0.5 billion, from $ 2.5 billion at September 30, 2023 to $ 2.0 billion at June 29, 2024. 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 $ 1.0 billion. 9. Pension and Other Benefit Programs The components of net periodic benefit cost (income) are as follows: Pension Plans Postretirement Medical Plans Quarter Ended Nine Months Ended Quarter Ended Nine Months Ended Jun. 29, 2024 Jul. 1, 2023 Jun. 29, 2024 Jul. 1, 2023 Jun. 29, 2024 Jul. 1, 2023 Jun. 29, 2024 Jul. 1, 2023 Service costs $ 62 $ 65 $ 187 $ 193 $ 1 $ 1 $ 1 $ 4 Other costs (benefits): Interest costs 209 195 626 586 14 20 41 61 Expected return on plan assets ( 284 ) ( 288 ) ( 853 ) ( 863 ) ( 14 ) ( 15 ) ( 43 ) ( 45 ) Amortization of previously deferred service costs 2 2 6 7 ( 22 ) — ( 67 ) — Recognized net actuarial loss 5 5 15 14 ( 9 ) ( 6 ) ( 27 ) ( 17 ) Total other costs (benefits) ( 68 ) ( 86 ) ( 206 ) ( 256 ) ( 31 ) ( 1 ) ( 96 ) ( 1 ) Net periodic benefit cost (income) $ ( 6 ) $ ( 21 ) $ ( 19 ) $ ( 63 ) $ ( 30 ) $ — $ ( 95 ) $ 3 During the nine months ended June 29, 2024, 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. 21 THE WALT DISNEY COMPANY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited; tabular dollars in millions, except for per share data) 10. Earnings Per Share Diluted earnings per share amounts are based upon the weighted average number of common and common equivalent shares outstanding during the period and are calculated using the treasury stock method for equity-based compensation awards (Awards). 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 June 29, 2024 July 1, 2023 June 29, 2024 July 1, 2023 Shares (in millions): Weighted average number of common and common equivalent shares outstanding (basic) 1,821 1,829 1,829 1,827 Weighted average dilutive impact of Awards (1) 8 — 6 2 Weighted average number of common and common equivalent shares outstanding (diluted) 1,829 1,829 1,835 1,829 Awards excluded from diluted earnings per share 15 23 25 24 (1) Amounts exclude all potential common and common equivalent shares for periods when there is a net loss. 11. Equity Dividends On November 30, 2023 , the Board of Directors declared a cash dividend of $ 0.30 per share ($ 0.5 billion) 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 ($ 0.8 billion) with respect to the first half of fiscal 2024, which was paid on July 25, 2024 to shareholders of record as of July 8, 2024 . Share Repurchase Program 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. During the quarter and nine months ended June 29, 2024, the Company repurchased 14 million and 23 million shares of its common stock for $ 1.5 billion and $ 2.5 billion, respectively (amount excludes the one percent excise tax on stock repurchases imposed by the Inflation Reduction Act of 2022). As of June 29, 2024, the Company had remaining authorization in place to repurchase approximately 377 million additional shares. The repurchase program does not have an expiration date. 22 THE WALT DISNEY COMPANY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited; tabular dollars in millions, except for per share data) The following tables summarize the changes in each component of accumulated other comprehensive income (loss) (AOCI) including our proportional share of equity method investee amounts: Market Value Adjustments for Hedges Unrecognized Pension and Postretirement Medical Expense Foreign Currency Translation and Other AOCI AOCI, before tax Third quarter of fiscal 2024 Balance at March 30, 2024 $ ( 6 ) $ ( 2,229 ) $ ( 1,944 ) $ ( 4,179 ) Quarter Ended June 29, 2024: Unrealized gains (losses) arising during the period 235 ( 2 ) ( 22 ) 211 Reclassifications of realized net (gains) losses to net income ( 109 ) ( 24 ) — ( 133 ) Balance at June 29, 2024 $ 120 $ ( 2,255 ) $ ( 1,966 ) $ ( 4,101 ) 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 ) Nine months ended fiscal 2024 Balance at September 30, 2023 $ 259 $ ( 2,172 ) $ ( 1,974 ) $ ( 3,887 ) Nine Months Ended June 29, 2024: Unrealized gains (losses) arising during the period 202 ( 11 ) 8 199 Reclassifications of realized net (gains) losses to net income ( 341 ) ( 72 ) — ( 413 ) Balance at June 29, 2024 $ 120 $ ( 2,255 ) $ ( 1,966 ) $ ( 4,101 ) Nine months ended fiscal 2023 Balance at October 1, 2022 $ 804 $ ( 3,770 ) $ ( 2,014 ) $ ( 4,980 ) Nine Months Ended July 1, 2023: Unrealized gains (losses) arising during the period ( 383 ) 71 227 ( 85 ) Reclassifications of realized net (gains) losses to net income ( 407 ) 3 42 ( 362 ) Balance at July 1, 2023 $ 14 $ ( 3,696 ) $ ( 1,745 ) $ ( 5,427 ) 23 THE WALT DISNEY COMPANY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited; tabular dollars in millions, except for per share data) Market Value Adjustments for Hedges Unrecognized Pension and Postretirement Medical Expense Foreign Currency Translation and Other AOCI Tax on AOCI Third quarter of fiscal 2024 Balance at March 30, 2024 $ ( 3 ) $ 529 $ 144 $ 670 Quarter Ended June 29, 2024: Unrealized gains (losses) arising during the period ( 54 ) — ( 1 ) ( 55 ) Reclassifications of realized net (gains) losses to net income 26 6 — 32 Balance at June 29, 2024 $ ( 31 ) $ 535 $ 143 $ 647 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 Nine months ended fiscal 2024 Balance at September 30, 2023 $ ( 64 ) $ 517 $ 142 $ 595 Nine Months Ended June 29, 2024: Unrealized gains (losses) arising during the period ( 46 ) — 1 ( 45 ) Reclassifications of realized net (gains) losses to net income 79 18 — 97 Balance at June 29, 2024 $ ( 31 ) $ 535 $ 143 $ 647 Nine months ended fiscal 2023 Balance at October 1, 2022 $ ( 179 ) $ 901 $ 139 $ 861 Nine Months Ended July 1, 2023: Unrealized gains (losses) arising during the period 81 ( 16 ) 7 72 Reclassifications of realized net (gains) losses to net income 95 — ( 14 ) 81 Balance at July 1, 2023 $ ( 3 ) $ 885 $ 132 $ 1,014 24 THE WALT DISNEY COMPANY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited; tabular dollars in millions, except for per share data) Market Value Adjustments for Hedges Unrecognized Pension and Postretirement Medical Expense Foreign Currency Translation and Other AOCI AOCI, after tax Third quarter of fiscal 2024 Balance at March 30, 2024 $ ( 9 ) $ ( 1,700 ) $ ( 1,800 ) $ ( 3,509 ) Quarter Ended June 29, 2024: Unrealized gains (losses) arising during the period 181 ( 2 ) ( 23 ) 156 Reclassifications of realized net (gains) losses to net income ( 83 ) ( 18 ) — ( 101 ) Balance at June 29, 2024 $ 89 $ ( 1,720 ) $ ( 1,823 ) $ ( 3,454 ) 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 ) Nine months ended fiscal 2024 Balance at September 30, 2023 $ 195 $ ( 1,655 ) $ ( 1,832 ) $ ( 3,292 ) Nine Months Ended June 29, 2024: Unrealized gains (losses) arising during the period 156 ( 11 ) 9 154 Reclassifications of realized net (gains) losses to net income ( 262 ) ( 54 ) — ( 316 ) Balance at June 29, 2024 $ 89 $ ( 1,720 ) $ ( 1,823 ) $ ( 3,454 ) Nine months ended fiscal 2023 Balance at October 1, 2022 $ 625 $ ( 2,869 ) $ ( 1,875 ) $ ( 4,119 ) Nine Months Ended July 1, 2023: Unrealized gains (losses) arising during the period ( 302 ) 55 234 ( 13 ) Reclassifications of realized net (gains) losses to net income ( 312 ) 3 28 ( 281 ) Balance at July 1, 2023 $ 11 $ ( 2,811 ) $ ( 1,613 ) $ ( 4,413 ) 25 THE WALT DISNEY COMPANY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited; tabular dollars in millions, except for per share data) Details about AOCI components reclassified to net income are as follows: Gain (loss) in net income: Affected line item in the Condensed Consolidated Statements of Operations: Quarter Ended Nine Months Ended June 29, 2024 July 1, 2023 June 29, 2024 July 1, 2023 Market value adjustments, primarily cash flow hedges Primarily revenue $ 109 $ 73 $ 341 $ 407 Estimated tax Income taxes ( 26 ) ( 17 ) ( 79 ) ( 95 ) 83 56 262 312 Pension and postretirement medical expense Interest expense, net 24 ( 1 ) 72 ( 3 ) Estimated tax Income taxes ( 6 ) — ( 18 ) — 18 ( 1 ) 54 ( 3 ) Foreign currency translation and other Restructuring and impairment charges — — — ( 42 ) Estimated tax Income taxes — — — 14 — — — ( 28 ) Total reclassifications for the period $ 101 $ 55 $ 316 $ 281 12. Equity-Based Compensation Compensation expense related to stock options and restricted stock units (RSUs) is as follows: Quarter Ended Nine Months Ended June 29, 2024 July 1, 2023 June 29, 2024 July 1, 2023 Stock options $ 18 $ 19 $ 55 $ 58 RSUs 343 272 981 803 Total equity-based compensation expense (1) $ 361 $ 291 $ 1,036 $ 861 Equity-based compensation expense capitalized during the period $ 53 $ 35 $ 155 $ 108 (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 $ 93 million and $ 2.1 billion, respectively, as of June 29, 2024. During the nine months ended June 29, 2024 and July 1, 2023, the weighted average grant date fair values for options granted were $ 32.10 and $ 34.70 , respectively, and for RSUs were $ 94.28 and $ 91.98 , respectively. During the nine months ended June 29, 2024, the Company made equity compensation grants consisting of 2.7 million stock options and 16.1 million RSUs. 13. Commitments and Contingencies Legal Matters On May 12, 2023, a private securities class action lawsuit was filed in the U.S. District Court for the Central District of California against the Company, its former Chief Executive Officer, Robert Chapek, its former Chief Financial Officer, Christine M. 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”). 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, 26 THE WALT DISNEY COMPANY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited; tabular dollars in millions, except for per share data) 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. Plaintiffs seek unspecified damages, plus interest and costs and fees. 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 filed its reply brief on March 5, 2024. A hearing on the motion to dismiss is scheduled for September 10, 2024. The lawsuit is in the early stages and at this time we cannot reasonably estimate the amount of any possible loss. 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; its former Chief Financial Officer, Christine M. McCarthy; the former Chairman of the Disney Media and Entertainment Distribution segment, Kareem Daniel, and ten current and former members of the Disney Board (Susan E. Arnold; Mary T. Barra; Safra A. Catz; Amy L. Chang; Francis A. deSouza; Michael B.G. Froman; Maria Elena Lagomasino; Calvin R. McDonald; Mark G. Parker; and Derica W. Rice). Along with alleged violations of Sections 10(b), 14(a), 20(a), and Rule 10b-5 of the Securities Exchange Act, premised on similar allegations as the Securities Class Action, plaintiffs seek to recover under various theories including 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 and the McAdams action was stayed under an order entered February 20, 2024. The actions seek declarative and injunctive relief, an award of unspecified damages to The Walt Disney Company and other costs and fees. 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 possible loss. On November 18, 2022, a private antitrust putative class action lawsuit was filed in the U.S. District Court for the Northern District of California against the Company on behalf of a putative class of certain subscribers to YouTube TV (the “Biddle Action”). The plaintiffs in the Biddle Action asserted a claim under Section 1 of the Sherman Act based on allegations that Disney uses certain pricing and packaging provisions in its carriage agreements with virtual multichannel video distributors (“vMVPDs”) to increase prices for and reduce output of certain services offered by vMVPDs. On November 30, 2022, a second private antitrust putative class action lawsuit was filed in the U.S. District Court for the Northern District of California against the Company on behalf of a putative class of certain subscribers to DirecTV Stream (the “Fendelander Action”). The plaintiffs in the Fendelander Action asserted a claim under Section 1 of the Sherman Act based on substantially similar allegations as the Biddle Action. The Company filed motions to dismiss for failure to state a claim in both the Biddle Action and Fendelander Action on January 31, 2023. The plaintiffs in both cases filed their oppositions on April 7, 2023, the Company filed reply briefs on May 12, 2023, and the court heard oral argument on the Company’s motions to dismiss on July 13, 2023. On September 30, 2023, the court issued an order granting in part and denying in part the Company’s motions to dismiss both cases and, on October 13, 2023, the court issued an order consolidating both cases. On October 16, 2023, plaintiffs filed a consolidated amended putative class action complaint (the “Consolidated Complaint”). The Consolidated Complaint asserts claims under Section 1 of the Sherman Act and certain Arizona, California, Florida, Illinois, Iowa, Massachusetts, Michigan, Nevada, New York, North Carolina, and Tennessee antitrust laws based on substantially similar allegations as the Biddle Action and the Fendelander Action. The Consolidated Complaint seeks injunctive relief, unspecified money damages and costs and fees. The Company intends to defend against the lawsuits vigorously and filed a motion to dismiss the Consolidated Complaint for failure to state a claim on December 1, 2023. The plaintiffs filed their opposition on January 5, 2024, the Company filed its reply brief on February 2, 2024, and the court heard oral argument on the Company’s motion to dismiss on February 15, 2024. The Company’s motion to dismiss the Consolidated Complaint was granted in part and denied in part on June 25, 2024. The consolidated lawsuit is in the early stages, and at this time we cannot reasonably estimate the amount of any possible loss. On February 20, 2024, a private antitrust lawsuit was filed in the U.S. District Court for the Southern District of New York against the Company (including affiliates ESPN, Inc., ESPN Enterprises, Inc., and Hulu, LLC), Fox Corporation, and Warner Bros. Discovery, Inc. (collectively, “Defendants”), by fuboTV Inc. and fuboTV Media Inc. (together, “Fubo”). Fubo asserts claims under Section 1 of the Sherman Act, Section 7 of the Clayton Act, and New York antitrust law based on the theories that (a) a planned joint venture between ESPN, Inc., Fox Corporation, and Warner Bros. Discovery, Inc., which will distribute certain of Defendants’ linear networks to consumers (the “Sports Streaming JV”), will harm competition in an alleged market for the licensing of networks that offer live sports content, (b) certain alleged practices by which the Company and Fox 27 THE WALT DISNEY COMPANY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited; tabular dollars in millions, except for per share data) Corporation license their networks to vMVPDs as a bundle increase prices and reduce output for services offered by vMVPDs, and (c) certain alleged pricing provisions in Defendants’ carriage agreements with YouTube TV and Hulu + Live TV increase prices for services offered by vMVPDs. On April 8, 2024, Fubo filed a motion for a preliminary injunction against Defendants to prevent the formation of the Sports Streaming JV. Defendants may file their opposition to Fubo’s motion for preliminary injunction by July 25, 2024, and Fubo may file a reply by August 1, 2024, with the hearing on Fubo’s motion for preliminary injunction scheduled to begin on August 7, 2024. Fubo further seeks injunctive relief, unspecified money damages and costs and fees. The Company filed a motion to dismiss Fubo’s complaint on April 10, 2024. On April 29, 2024, Fubo filed an amended complaint to add allegations of a purported market for “skinny sports bundles”, which Fubo claims the Sports Streaming JV will monopolize after its launch. The court has stayed the Defendants’ obligation to answer or move to dismiss Fubo’s amended complaint until after resolution of Fubo’s motion for a preliminary injunction. The Company intends to defend against the lawsuit vigorously. The lawsuit is in its early stages, and at this time we cannot reasonably estimate the amount of any possible loss. In May 2024, the Company and NBCU entered into a confidential arbitration to resolve a dispute regarding the contractual appraisal process related to the determination of Hulu’s equity fair value, in which the parties seek declaratory relief, equitable relief and unspecified damages. See Note 1 for a more detailed discussion of the arbitration and the determination of Hulu’s equity fair value. 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. Management does not believe that the Company has incurred a probable material loss by reason of any of those actions. Commitments In April 2024, the Company acquired an incremental 5 % interest in Epic Games, Inc. (“Epic”), a video game and software developer and publisher, in exchange for $ 1.0 billion. The Company acquired an additional 2 % interest for $ 0.5 billion in July 2024, which increased the Company’s interest in Epic to approximately 8 %. In fiscal year 2024, the Company entered into several multi-year contracts with total commitments of approximately $ 42 billion of which the significant majority relates to professional basketball and college football programming and includes, to a lesser extent, fleet expansion. Payments for these agreements in fiscal 2024 and fiscal 2025 are not significant, and are approximately $ 2 billion, $ 4 billion and $ 4 billion in fiscal 2026, fiscal 2027 and fiscal 2028, respectively . 14. Fair Value Measurements Fair value is defined as the amount that would be received for selling an asset or paid to transfer a liability in an orderly transaction between market participants and is generally classified in one of the following categories: Level 1 - Quoted prices for identical instruments in active markets Level 2 - Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations in which all significant inputs and significant value drivers are observable in active markets Level 3 - Valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable 28 THE WALT DISNEY COMPANY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited; tabular dollars in millions, except for per share data) The Company’s assets and liabilities measured at fair value are summarized in the following tables by fair value measurement Level: Fair Value Measurement at June 29, 2024 Level 1 Level 2 Level 3 Total Assets Investments $ — $ 95 $ — $ 95 Derivatives Foreign exchange — 870 — 870 Other — 7 — 7 Liabilities Derivatives Interest rate — ( 1,479 ) — ( 1,479 ) Foreign exchange — ( 394 ) — ( 394 ) Other — ( 552 ) — ( 552 ) Total recorded at fair value $ — $ ( 1,453 ) $ — $ ( 1,453 ) Fair value of borrowings $ — $ 42,691 $ 1,373 $ 44,064 Fair Value Measurement at September 30, 2023 Level 1 Level 2 Level 3 Total Assets Investments $ 46 $ 128 $ — $ 174 Derivatives Foreign exchange — 1,336 — 1,336 Other — 18 — 18 Liabilities Derivatives Interest rate — ( 1,791 ) — ( 1,791 ) Foreign exchange — ( 815 ) — ( 815 ) Other — ( 13 ) — ( 13 ) Other — ( 465 ) — ( 465 ) Total recorded at fair value $ 46 $ ( 1,602 ) $ — $ ( 1,556 ) Fair value of borrowings $ — $ 40,123 $ 1,333 $ 41,456 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. Counterparty credit risk, which is mitigated by master netting agreements and collateral posting arrangements with certain counterparties, had an impact on derivative fair value estimates that was not material. The Company’s derivative financial instruments are discussed in Note 15. Level 2 other liabilities are primarily arrangements that are valued based on the fair value of underlying investments, which are generally measured using Level 1 and Level 2 fair value techniques. Level 2 borrowings, which include commercial paper, U.S. dollar denominated notes and certain foreign currency denominated borrowings, are valued based on quoted prices for similar instruments in active markets or identical instruments in markets that are not active. Level 3 borrowings include the Asia Theme Park borrowings, which are valued based on the current borrowing cost and credit risk of the Asia Theme Parks as well as prevailing market interest rates. 29 THE WALT DISNEY COMPANY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited; tabular dollars in millions, except for per share data) The Company’s financial instruments also include cash, cash equivalents, receivables and accounts payable. The carrying values of these financial instruments approximate the fair values. Non-recurring Fair Value Measure The Company also has assets that may be required to be recorded at fair value on a non-recurring basis. These assets are evaluated when certain triggering events occur (including a decrease in estimated future cash flows) that indicate their carrying amounts may not be recoverable. In the second quarter of fiscal 2024, the Company recorded impairment charges as disclosed in Notes 4 and 16. Fair value was determined using estimated discounted future cash flows, which is a Level 3 valuation technique (see Note 16 for a discussion of the more significant inputs used in our discounted cash flow analysis). 15. Derivative Instruments The Company manages its exposure to various risks relating to its ongoing business operations according to a risk management policy. The primary risks managed with derivative instruments are interest rate risk and foreign exchange risk. The Company’s derivative positions measured at fair value (see Note 14) are summarized in the following tables: As of June 29, 2024 Current Assets Investments/ Other Assets Other Current Liabilities Other Long- Term Liabilities Derivatives designated as hedges Foreign exchange $ 491 $ 264 $ ( 94 ) $ ( 64 ) Interest rate — — ( 1,479 ) — Other 2 2 ( 1 ) — Derivatives not designated as hedges Foreign exchange 113 2 ( 234 ) ( 2 ) Other 3 95 — — Gross fair value of derivatives 609 363 ( 1,808 ) ( 66 ) Counterparty netting ( 434 ) ( 228 ) 599 63 Cash collateral (received) paid ( 61 ) — 911 — Net derivative positions $ 114 $ 135 $ ( 298 ) $ ( 3 ) As of September 30, 2023 Current Assets Investments/ Other Assets Other Current Liabilities Other Long- Term Liabilities Derivatives designated as hedges Foreign exchange $ 595 $ 338 $ ( 123 ) $ ( 93 ) Interest rate — — ( 1,791 ) — Other 12 6 — — Derivatives not designated as hedges Foreign exchange 384 19 ( 520 ) ( 79 ) Other — 128 ( 13 ) — Gross fair value of derivatives 991 491 ( 2,447 ) ( 172 ) Counterparty netting ( 770 ) ( 262 ) 900 132 Cash collateral (received) paid ( 123 ) ( 7 ) 1,257 — Net derivative positions $ 98 $ 222 $ ( 290 ) $ ( 40 ) Interest Rate Risk Management The Company is exposed to the impact of interest rate changes primarily through its borrowing activities. The Company’s objective is to mitigate the impact of interest rate changes on earnings and cash flows and on the market value of its borrowings. In accordance with its policy, the Company targets its fixed-rate debt as a percentage of its net debt between a 30 THE WALT DISNEY COMPANY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited; tabular dollars in millions, except for per share data) minimum and maximum percentage. The Company primarily uses pay-floating and pay-fixed interest rate swaps to facilitate its interest rate risk management activities. The Company designates pay-floating interest rate swaps as fair value hedges of fixed-rate borrowings effectively converting fixed-rate borrowings to variable-rate borrowings. The total notional amount of the Company’s pay-floating interest rate swaps at both June 29, 2024 and September 30, 2023 was $ 13.5 billion. The following table summarizes fair value hedge adjustments to hedged borrowings: Carrying Amount of Hedged Borrowings Fair Value Adjustments Included in Hedged Borrowings June 29, 2024 September 30, 2023 June 29, 2024 September 30, 2023 Borrowings: Current $ 2,869 $ 1,439 $ ( 42 ) $ ( 59 ) Long-term 9,746 10,748 ( 1,280 ) ( 1,694 ) $ 12,615 $ 12,187 $ ( 1,322 ) $ ( 1,753 ) The following amounts are included in “Interest expense, net” in the Condensed Consolidated Statements of Operations: Quarter Ended Nine Months Ended June 29, 2024 July 1, 2023 June 29, 2024 July 1, 2023 Gain (loss) on: Pay-floating swaps $ 64 $ ( 208 ) $ 407 $ 98 Borrowings hedged with pay-floating swaps ( 64 ) 208 ( 407 ) ( 98 ) Benefit (expense) associated with interest accruals on pay-floating swaps ( 153 ) ( 140 ) ( 460 ) ( 360 ) The Company may designate pay-fixed interest rate swaps as cash flow hedges of interest payments on floating-rate borrowings. Pay-fixed interest rate swaps effectively convert floating-rate borrowings to fixed-rate borrowings. 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 June 29, 2024 or at September 30, 2023, and gains and losses related to pay-fixed interest rate swaps recognized in earnings for the quarter and nine-month periods ended June 29, 2024 and July 1, 2023 were not material. Foreign Exchange Risk Management 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. The gains and losses on these contracts offset changes in the U.S. dollar equivalent value of the related forecasted transaction, asset, liability or firm commitment. 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. dollar denominated borrowings. The Company designates foreign exchange forward and option contracts as cash flow hedges of firmly committed and forecasted foreign currency transactions. As of June 29, 2024 and September 30, 2023, the notional amounts of the Company’s net foreign exchange cash flow hedges were $ 10.7 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 31 THE WALT DISNEY COMPANY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited; tabular dollars in millions, except for per share data) the value of the foreign currency transactions. Net deferred gains recorded in AOCI for contracts that will mature in the next twelve months total $ 397 million. The following table summarizes the effect of foreign exchange cash flow hedges on AOCI: Quarter Ended Nine Months Ended June 29, 2024 July 1, 2023 June 29, 2024 July 1, 2023 Gain (loss) recognized in Other Comprehensive Income $ 235 $ 89 $ 208 $ ( 398 ) Gain (loss) reclassified from AOCI into the Statements of Operations (1) 111 76 345 414 (1) Primarily recorded in revenue. The Company designates cross currency swaps as fair value hedges of foreign currency denominated borrowings. The impact from the change in foreign currency on both the cross currency swap and borrowing is recorded to “Interest expense, net.” The impact from interest rate changes is recorded in AOCI and is amortized over the life of the cross currency swap. As of both June 29, 2024 and September 30, 2023, the total notional amount of the Company’s designated cross currency swaps was Canadian $ 1.3 billion ($ 0.9 billion). The related gains or losses recognized in earnings for the quarter and nine-month periods ended June 29, 2024 and July 1, 2023 were not material . 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 amount of these foreign exchange contracts at June 29, 2024 and September 30, 2023 were $ 3.4 billion and $ 3.1 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: Costs and expenses Interest expense, net Income taxes Quarter Ended: June 29, 2024 July 1, 2023 June 29, 2024 July 1, 2023 June 29, 2024 July 1, 2023 Net gains (losses) on foreign currency denominated assets and liabilities $ ( 89 ) $ ( 61 ) $ 10 $ ( 19 ) $ 17 $ ( 15 ) Net gains (losses) on foreign exchange risk management contracts not designated as hedges 60 — ( 12 ) 17 ( 9 ) 19 Net gains (losses) $ ( 29 ) $ ( 61 ) $ ( 2 ) $ ( 2 ) $ 8 $ 4 Nine Months Ended: Net gains (losses) on foreign currency denominated assets and liabilities $ ( 157 ) $ 99 $ 8 $ ( 39 ) $ ( 22 ) $ ( 124 ) Net gains (losses) on foreign exchange risk management contracts not designated as hedges 21 ( 260 ) ( 14 ) 36 13 106 Net gains (losses) $ ( 136 ) $ ( 161 ) $ ( 6 ) $ ( 3 ) $ ( 9 ) $ ( 18 ) Commodity Price Risk Management The Company is subject to the volatility of commodities prices and the Company designates certain commodity forward contracts as cash flow hedges of forecasted commodity purchases. 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 June 29, 2024 and September 30, 2023 and related gains or losses recognized in earnings for the quarter and nine-month periods ended June 29, 2024 and July 1, 2023 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 32 THE WALT DISNEY COMPANY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited; tabular dollars in millions, except for per share data) contracts at June 29, 2024 and September 30, 2023 were $ 0.5 billion and $ 0.4 billion, respectively. The related gains or losses recognized in earnings for the quarter and nine-month periods ended June 29, 2024 and July 1, 2023 were not material. Contingent Features and Cash Collateral The Company has master netting arrangements by counterparty with respect to certain derivative financial instrument contracts. The Company may be required to post collateral in the event that a net liability position with a counterparty exceeds limits defined by contract and that vary with the Company’s credit rating. In addition, these contracts may require a counterparty to post collateral to the Company in the event that a net receivable position with a counterparty exceeds limits defined by contract and that vary with the counterparty’s credit rating. 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 $ 1.2 billion and $ 1.6 billion at June 29, 2024 and September 30, 2023. 16. Restructuring and Impairment Charges Goodwill Impairments In the second quarter of fiscal 2024, as a result of Star India assets and liabilities being classified as held for sale (see Note 4), they were removed from the entertainment goodwill reporting units along with a proportional amount of goodwill. As a result, we evaluated the residual goodwill at our entertainment DTC services and linear networks reporting units for impairment. Star sports was a standalone reporting unit which did not have any goodwill. The evaluation resulted in a $ 0.7 billion non-cash goodwill impairment charge at our entertainment linear networks reporting unit in the second quarter of fiscal 2024. Goodwill was not impaired at the entertainment DTC services reporting unit. The impairment evaluation compares the reporting unit’s carrying amount to its fair value, which is based on estimated discounted future cash flows. These future cash flows are based on internal forecasts, which consider projected inflation and other economic indicators, as well as industry growth projections. Significant judgments and assumptions in the discounted cash flow model relate to future revenues and certain operating expenses, terminal growth rates and discount rates. Discount rates are determined based on the inherent risks of the underlying operations. We believe our estimates are consistent with how a marketplace participant would value our reporting units. In addition, we recorded a $ 1.3 billion non-cash goodwill impairment charge related to the Star India Transaction (see Note 4 for additional information) in the second quarter of fiscal 2024. Both of these charges are recorded in “Restructuring and impairment charges” in the Condensed Consolidated Statements of Operations. 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), 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 were recorded in “Restructuring and impairment charges” in the Condensed Consolidated Statements of Operations. Other Restructuring In the prior-year quarter ended July 1, 2023, the Company recognized restructuring charges of $ 210 million primarily 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. These charges are recorded in “Restructuring and impairment charges” in the Condensed Consolidated Statements of Operations. 17. New Accounting Pronouncements and Other Disclosure Rules Improvements to Reportable Segments Disclosures In November 2023, the FASB issued guidance to enhance 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 for annual periods beginning in 33 THE WALT DISNEY COMPANY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited; tabular dollars in millions, except for per share data) fiscal year 2025 and for interim periods beginning in fiscal year 2026 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 to enhance income tax disclosures. The new guidance requires an expanded effective tax rate reconciliation, the disclosure of cash taxes paid segregated between U.S. federal, U.S. state and foreign, with further disaggregation by jurisdiction if certain thresholds are met 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. Enhancement and Standardization of Climate-Related Disclosures In March 2024, the Securities and Exchange Commission adopted new rules that will require disclosure of: • Certain climate-related information including climate-related risks, targets, and goals that are reasonably likely to have a material impact, as applicable, on a company’s strategy, business, results of operations or financial condition; • Certain greenhouse gas emissions, if material; and • Certain financial information regarding the effects of severe weather events and other natural conditions, within the notes to the financial statements The new rules are applicable to annual reporting periods and will be phased in beginning with the Company’s 2026 fiscal year. In April 2024, given pending legal challenges, the Securities and Exchange Commission issued an order to voluntarily stay the new rules. The Company is evaluating the impacts of the new rules on its financial statement disclosures. 34 MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS