Walt Disney Co 10-Q

Item 1: Financial Statements THE WALT DISNEY COMPANY CONDENSED CONSOLIDATED STATEMENTS OF INCOME (unaudited; in millions, except per share data) Quarter Ended December 28, 2024 December 30, 2023 Revenues: Services $ 22,048 $ 20,975 Products 2,642 2,574 Total revenues 24,690 23,549 Costs and expenses: Cost of services (exclusive of depreciation and amortization) ( 13,789 ) ( 13,922 ) Cost of products (exclusive of depreciation and amortization) ( 1,617 ) ( 1,665 ) Selling, general, administrative and other ( 3,930 ) ( 3,783 ) Depreciation and amortization ( 1,276 ) ( 1,243 ) Total costs and expenses ( 20,612 ) ( 20,613 ) Restructuring and impairment charges ( 143 ) — Interest expense, net ( 367 ) ( 246 ) Equity in the income of investees 92 181 Income before income taxes 3,660 2,871 Income taxes ( 1,016 ) ( 720 ) Net income 2,644 2,151 Net income attributable to noncontrolling interests ( 90 ) ( 240 ) Net income attributable to The Walt Disney Company (Disney) $ 2,554 $ 1,911 Earnings per share attributable to Disney: Diluted $ 1.40 $ 1.04 Basic $ 1.41 $ 1.04 Weighted average number of common and common equivalent shares outstanding: Diluted 1,818 1,835 Basic 1,812 1,832 See Notes to Condensed Consolidated Financial Statements 3 THE WALT DISNEY COMPANY CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (unaudited; in millions) Quarter Ended December 28, 2024 December 30, 2023 Net income $ 2,644 $ 2,151 Other comprehensive income (loss), net of tax: Market value adjustments for hedges 362 ( 319 ) Pension and postretirement medical plan adjustments 25 ( 21 ) Foreign currency translation and other 552 174 Other comprehensive income (loss) 939 ( 166 ) Comprehensive income 3,583 1,985 Net income attributable to noncontrolling interests ( 90 ) ( 240 ) Other comprehensive income (loss) attributable to noncontrolling interests 72 ( 44 ) Comprehensive income attributable to Disney $ 3,565 $ 1,701 See Notes to Condensed Consolidated Financial Statements 4 THE WALT DISNEY COMPANY CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited; in millions, except per share data) December 28, 2024 September 28, 2024 ASSETS Current assets Cash and cash equivalents $ 5,486 $ 6,002 Receivables, net 13,767 12,729 Inventories 2,018 2,022 Content advances 1,157 2,097 Other current assets 1,239 2,391 Total current assets 23,667 25,241 Produced and licensed content costs 32,505 32,312 Investments 8,902 4,459 Parks, resorts and other property Attractions, buildings and equipment 78,328 76,674 Accumulated depreciation ( 45,898 ) ( 45,506 ) 32,430 31,168 Projects in progress 4,581 4,728 Land 1,129 1,145 38,140 37,041 Intangible assets, net 10,372 10,739 Goodwill 73,312 73,326 Other assets 10,148 13,101 Total assets $ 197,046 $ 196,219 LIABILITIES AND EQUITY Current liabilities Accounts payable and other accrued liabilities $ 21,635 $ 21,070 Current portion of borrowings 6,620 6,845 Deferred revenue and other 6,591 6,684 Total current liabilities 34,846 34,599 Borrowings 38,688 38,970 Deferred income taxes 6,336 6,277 Other long-term liabilities 10,437 10,851 Commitments and contingencies (Note 13) Equity Preferred stock — — Common stock, $0.01 par value, Authorized – 4.6 billion shares, Issued – 1.9 billion shares 58,868 58,592 Retained earnings 50,468 49,722 Accumulated other comprehensive loss ( 2,688 ) ( 3,699 ) Treasury stock, at cost, 54 million shares at December 28, 2024 and 47 million shares at September 28, 2024 ( 4,715 ) ( 3,919 ) Total Disney Shareholders’ equity 101,933 100,696 Noncontrolling interests 4,806 4,826 Total equity 106,739 105,522 Total liabilities and equity $ 197,046 $ 196,219 See Notes to Condensed Consolidated Financial Statements 5 THE WALT DISNEY COMPANY CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited; in millions) Quarter Ended December 28, 2024 December 30, 2023 OPERATING ACTIVITIES Net income $ 2,644 $ 2,151 Depreciation and amortization 1,276 1,243 Deferred income taxes 25 ( 51 ) Equity in the income of investees ( 92 ) ( 181 ) Cash distributions received from equity investees 33 153 Net change in produced and licensed content costs and advances 1,141 2,642 Equity-based compensation 317 308 Other, net 206 ( 64 ) Changes in operating assets and liabilities: Receivables ( 1,277 ) ( 1,554 ) Inventories 4 8 Other assets ( 116 ) 30 Accounts payable and other liabilities ( 1,533 ) ( 1,396 ) Income taxes 577 ( 1,104 ) Cash provided by operations 3,205 2,185 INVESTING ACTIVITIES Investments in parks, resorts and other property ( 2,466 ) ( 1,299 ) Other, net ( 109 ) 53 Cash used in investing activities ( 2,575 ) ( 1,246 ) FINANCING ACTIVITIES Commercial paper borrowings, net ( 169 ) 1,046 Borrowings 1,057 — Reduction of borrowings ( 951 ) ( 309 ) Repurchases of common stock ( 794 ) — Acquisition of redeemable noncontrolling interests — ( 8,610 ) Other, net ( 140 ) ( 133 ) Cash used in financing activities ( 997 ) ( 8,006 ) Impact of exchange rates on cash, cash equivalents and restricted cash ( 153 ) 79 Change in cash, cash equivalents and restricted cash ( 520 ) ( 6,988 ) Cash, cash equivalents and restricted cash, beginning of period 6,102 14,235 Cash, cash equivalents and restricted cash, end of period $ 5,582 $ 7,247 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 September 28, 2024 1,812 $ 58,592 $ 49,722 $ ( 3,699 ) $ ( 3,919 ) $ 100,696 $ 4,826 $ 105,522 Comprehensive income — — 2,554 1,011 — 3,565 18 3,583 Equity compensation activity 5 276 — — — 276 — 276 Dividends — — ( 1,807 ) — — ( 1,807 ) — ( 1,807 ) Common stock repurchases ( 7 ) — — — ( 794 ) ( 794 ) — ( 794 ) Distributions and other — — ( 1 ) — ( 2 ) ( 3 ) ( 38 ) ( 41 ) Balance at December 28, 2024 1,810 $ 58,868 $ 50,468 $ ( 2,688 ) $ ( 4,715 ) $ 101,933 $ 4,806 $ 106,739 Balance at September 30, 2023 1,830 $ 57,383 $ 46,093 $ ( 3,292 ) $ ( 907 ) $ 99,277 $ 4,680 $ 103,957 Comprehensive income (loss) — — 1,911 ( 210 ) — 1,701 129 1,830 Equity compensation activity 4 250 — — — 250 — 250 Dividends — — ( 549 ) — — ( 549 ) — ( 549 ) Distributions and other — 7 35 — — 42 ( 29 ) 13 Balance at December 30, 2023 1,834 $ 57,640 $ 47,490 $ ( 3,502 ) $ ( 907 ) $ 100,721 $ 4,780 $ 105,501 (1) Shares are net of treasury shares. (2) Excludes redeemable noncontrolling interests. See Notes to Condensed Consolidated Financial Statements 7 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 quarter ended December 28, 2024 are not necessarily indicative of the results that may be expected for the year ending September 27, 2025. 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 2024 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 The Company has a 67 % ownership interest in Hulu LLC (Hulu), a direct-to-consumer (DTC) streaming service provider. In November 2023, NBC Universal (NBCU) exercised its right to require the Company to purchase NBCU’s 33 % interest in Hulu 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. 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 appraiser’s valuation were deemed to be valid and the third appraiser’s equity fair value determination 8 THE WALT DISNEY COMPANY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited; tabular dollars in millions, except for per share data) were consistent with the NBCU’s appraiser’s valuation, the Company would be required to pay NBCU an 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 Income in the period recorded. 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 2024 financial statements and notes to conform to the fiscal 2025 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 generally 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. Segment revenues and segment operating income are as follows: Quarter Ended December 28, 2024 December 30, 2023 Revenues: Entertainment Third parties $ 10,761 $ 9,881 Intersegment 111 100 10,872 9,981 Sports Third parties 4,514 4,536 Intersegment 336 299 4,850 4,835 Experiences 9,415 9,132 Eliminations ( 447 ) ( 399 ) Total segment revenues $ 24,690 $ 23,549 Segment operating income (loss): Entertainment $ 1,703 $ 874 Sports 247 ( 103 ) Experiences 3,110 3,105 Total segment operating income $ 5,060 $ 3,876 9 THE WALT DISNEY COMPANY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited; tabular dollars in millions, except for per share data) Equity in the income of investees is included in segment operating income as follows: Quarter Ended December 28, 2024 December 30, 2023 Entertainment $ 118 $ 171 Sports 10 13 Equity in the income of investees included in segment operating income 128 184 Equity in the loss of India joint venture ( 33 ) — Amortization of TFCF intangible assets related to an equity investee ( 3 ) ( 3 ) Equity in the income of investees, net $ 92 $ 181 A reconciliation of segment operating income to income before income taxes is as follows: Quarter Ended December 28, 2024 December 30, 2023 Segment operating income $ 5,060 $ 3,876 Corporate and unallocated shared expenses ( 460 ) ( 308 ) Equity in the loss of India joint venture ( 33 ) — Restructuring and impairment charges (1) ( 143 ) — Interest expense, net ( 367 ) ( 246 ) TFCF and Hulu Acquisition Amortization (2) ( 397 ) ( 451 ) Income (loss) before income taxes $ 3,660 $ 2,871 (1) See Note 4 for a discussion of amounts in restructuring and impairment charges. (2) TFCF and Hulu Acquisition Amortization is as follows: Quarter Ended December 28, 2024 December 30, 2023 Amortization of intangible assets $ 327 $ 380 Step-up of film and television costs 67 68 Intangibles related to a TFCF equity investee 3 3 $ 397 $ 451 Goodwill The changes in the carrying amount of goodwill are as follows: Entertainment Sports Experiences Total Balance at September 28, 2024 $ 51,290 $ 16,486 $ 5,550 $ 73,326 Currency translation adjustments and other, net ( 14 ) — — ( 14 ) Balance at December 28, 2024 $ 51,276 $ 16,486 $ 5,550 $ 73,312 10 THE WALT DISNEY COMPANY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited; tabular dollars in millions, except for per share data) 3. Revenues The following table presents revenues by segment and major source: Quarter Ended December 28, 2024 Entertainment Sports Experiences Eliminations Total Subscription fees $ 5,065 $ 427 $ — $ — $ 5,492 Affiliate fees 1,655 2,630 — ( 321 ) 3,964 Advertising 1,898 1,342 — — 3,240 Theme park admissions — — 3,087 — 3,087 Resorts and vacations — — 2,221 — 2,221 Retail and wholesale sales of merchandise, food and beverage — — 2,572 — 2,572 Merchandise licensing 165 — 927 — 1,092 TV/VOD and home entertainment distribution 943 78 — — 1,021 Theatrical distribution licensing 642 — — — 642 Other 504 373 608 ( 126 ) 1,359 $ 10,872 $ 4,850 $ 9,415 $ ( 447 ) $ 24,690 Quarter Ended December 30, 2023 Entertainment Sports Experiences Eliminations Total Subscription fees $ 4,507 $ 415 $ — $ — $ 4,922 Affiliate fees 1,766 2,669 — ( 293 ) 4,142 Advertising 1,997 1,351 — — 3,348 Theme park admissions — — 2,982 — 2,982 Resorts and vacations — — 2,118 — 2,118 Retail and wholesale sales of merchandise, food and beverage — — 2,477 — 2,477 Merchandise licensing 192 — 967 — 1,159 TV/VOD and home entertainment distribution 745 57 — — 802 Theatrical distribution licensing 251 — — — 251 Other 523 343 588 ( 106 ) 1,348 $ 9,981 $ 4,835 $ 9,132 $ ( 399 ) $ 23,549 The following table presents revenues by segment and primary geographical markets: Quarter Ended December 28, 2024 Entertainment Sports Experiences Eliminations Total Americas $ 8,492 $ 4,716 $ 7,121 $ ( 447 ) $ 19,882 Europe 1,651 77 1,127 — 2,855 Asia Pacific 729 57 1,167 — 1,953 Total revenues $ 10,872 $ 4,850 $ 9,415 $ ( 447 ) $ 24,690 Quarter Ended December 30, 2023 Entertainment Sports Experiences Eliminations Total Americas $ 7,588 $ 4,358 $ 7,037 $ ( 399 ) $ 18,584 Europe 1,409 179 1,022 — 2,610 Asia Pacific 984 298 1,073 — 2,355 Total revenues $ 9,981 $ 4,835 $ 9,132 $ ( 399 ) $ 23,549 Revenues recognized in the current and prior-year periods from performance obligations satisfied (or partially satisfied) in previous reporting periods primarily relate to revenues earned on TV/VOD licenses for titles made available to the licensee in previous reporting periods. For the quarter ended December 28, 2024, $ 0.3 billion was recognized related to performance obligations satisfied as of September 28, 2024. For the quarter ended December 30, 2023, $ 0.3 billion was recognized related to performance obligations satisfied as of September 30, 2023. As of December 28, 2024, revenue for unsatisfied performance obligations expected to be recognized in the future is $ 15 billion, primarily for IP to be made available in the future under existing agreements with merchandise and co-branding licensees and sponsors, television station affiliates, DTC wholesalers and sports sublicensees. Of this amount, we expect to 11 THE WALT DISNEY COMPANY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited; tabular dollars in millions, except for per share data) recognize approximately $ 5 billion in the remainder of fiscal 2025, $ 4 billion in fiscal 2026, $ 3 billion in fiscal 2027 and $ 3 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 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. Accounts receivable and deferred revenues from contracts with customers are as follows: December 28, 2024 September 28, 2024 Accounts receivable Current $ 11,783 $ 10,463 Non-current 1,040 1,040 Allowance for credit losses ( 114 ) ( 118 ) Deferred revenues Current 6,050 5,587 Non-current 884 858 For the quarter ended December 28, 2024, the Company recognized revenue of $ 3.6 billion that was included in the September 28, 2024 deferred revenue balance. For the quarter ended December 30, 2023, the Company recognized revenue of $ 3.4 billion that was included in the September 30, 2023 deferred revenue balance. 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 vacation club properties and film and television program rights (TV/VOD licensing). The balance of vacation club receivables recorded in other non-current assets was $ 0.7 billion at both December 28, 2024 and September 28, 2024. The balance of TV/VOD licensing receivables recorded in other non-current assets was $ 0.3 billion at both December 28, 2024 and September 28, 2024. The allowance for credit losses for vacation club and TV/VOD licensing receivables and related activity for the periods ended December 28, 2024 and September 28, 2024 were not material. 4. Acquisitions and Dispositions fuboTV Inc. On January 6, 2025, the Company and fuboTV Inc. (Fubo), a publicly traded virtual multichannel video distributor (vMVPD), entered into a definitive agreement to combine certain of Hulu Live TV’s assets, including its carriage agreements, subscription agreements and related data, advertising and sponsorship agreements and intellectual property exclusively related to the “Live TV” brand, with Fubo (the Fubo Transaction). As a result, the Company will have a 70 % interest in Fubo and the right to appoint a majority of Fubo’s Board of Directors, with the remaining 30 % interest retained by Fubo shareholders. The Fubo Transaction is expected to close in the first half of calendar year 2026, subject to customary closing conditions, including regulatory approvals and approval by Fubo shareholders. If closing has not occurred by April 2026 (extended to October 2026 if all other closing conditions, except those relating to regulatory approvals, have been satisfied), the Company or Fubo may terminate the transaction. A $ 130 million termination fee will be payable by the Company to Fubo if the transaction is terminated under certain circumstances, including due to the Company’s breach of the definitive agreement or the failure to obtain certain regulatory approvals. A $ 50 million termination fee will be payable by Fubo to the Company if the transaction is terminated under certain other circumstances, including if Fubo shareholders do not approve the transaction under certain conditions. 12 THE WALT DISNEY COMPANY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited; tabular dollars in millions, except for per share data) Upon completion of the Fubo Transaction, the Company will be the exclusive distributor of the Hulu Live TV service under a five year distribution agreement and will pay a wholesale fee to Fubo based on Fubo’s cost to program Hulu Live TV. In addition, the Company will sell advertising for the Hulu Live TV service and Fubo platform and pay Fubo a share of the advertising revenue. In addition, the Company, Fox Corporation (Fox) and Warner Bros. Discovery, Inc. (WBD) reached a settlement with Fubo related to Fubo’s antitrust claims (See Note 13 for additional detail) and collectively paid $ 220 million to Fubo in January 2025. Fox and WBD have also agreed to reimburse a portion of the $ 130 million termination fee to the Company if it becomes payable. Further, the Company agreed to provide Fubo a senior unsecured term loan of up to $ 145 million (expected to be funded in January 2026) (the Fubo Term Loan). If the Company funds the Fubo Term Loan and the Fubo Transaction is not consummated, Fox and WBD will participate in a portion of the Fubo Term Loan by providing loans to the Company with substantially the same economic terms as the Fubo Term Loan. Star India On November 14, 2024, the Company and Reliance Industries Limited (RIL) completed their transaction to form a joint venture (India joint venture) that combines the Company’s Star-branded and other general entertainment and sports television channels and direct-to-consumer Disney+ Hotstar service in India (Star India) and certain media and entertainment businesses controlled by RIL (the Star India Transaction). RIL has 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. Star India’s assets and liabilities were deconsolidated on November 14, 2024, and the Company recognized the fair value of its interest in the India joint venture as an equity method investment. We recorded non-cash impairment charges of $ 0.1 billion and $ 1.5 billion in “Restructuring and impairment charges” in the first quarter of fiscal 2025 and in fiscal 2024, respectively, to reflect Star India’s assets and liabilities at fair value less costs to sell. The measurement of these impairment charges included non-cash cumulative foreign currency translation losses of $ 0.8 billion net of tax. In addition, we recognized a non-cash tax charge of $ 0.2 billion in the first quarter of fiscal 2025 in connection with the close of the transaction. 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. December 28, 2024 September 28, 2024 Cash and cash equivalents $ 5,486 $ 6,002 Restricted cash included in other assets 96 100 Total cash, cash equivalents and restricted cash in the statement of cash flows $ 5,582 $ 6,102 Borrowings During the quarter ended December 28, 2024, the Company’s borrowing activity was as follows: September 28, 2024 Borrowings Payments Other Activity December 28, 2024 Commercial paper with original maturities less than three months (1) $ 727 $ 1,283 $ — $ 4 $ 2,014 Commercial paper with original maturities greater than three months 2,313 49 ( 1,501 ) ( 19 ) 842 U.S. dollar denominated borrowings 40,496 1,057 — ( 70 ) 41,483 Asia Theme Parks borrowings 1,292 — ( 26 ) ( 107 ) 1,159 Foreign currency denominated borrowings and other (2) 987 — ( 925 ) ( 252 ) ( 190 ) $ 45,815 $ 2,389 $ ( 2,452 ) $ ( 444 ) $ 45,308 (1) Borrowings and reductions of borrowings are reported net. (2) The other activity is attributable to market value adjustments for debt with qualifying hedges. 13 THE WALT DISNEY COMPANY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited; tabular dollars in millions, except for per share data) At December 28, 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 Ratings and S&P Global Ratings ranging from 0.655% to 1.225%. The bank facilities contain only one financial covenant relating to interest coverage of three times earnings before interest, taxes, depreciation and amortization, including both intangible amortization and amortization of our film and television production and programming costs. On December 28, 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 December 28, 2024, the Company has $ 0.4 billion of outstanding letters of credit, of which none were issued under this facility. Outstanding letters of credit at Star India totaling $ 1.3 billion at December 28, 2024 that were entered into prior to the Star India Transaction are guaranteed by the Company through calendar 2025. Cruise Ship Credit Facilities In November 2024, in connection with the delivery of the Disney Treasure , the Company borrowed $ 1.1 billion with a fixed interest rate of 3.80 %. Payments are due semi-annually over a 12-year term. The Company has a credit facility for $ 1.1 billion that may be utilized to finance a significant portion of the contract price of the Disney Destiny , which is currently scheduled to be delivered in 2026. If utilized, the loan will have a fixed interest rate of 3.74 %, payable semi-annually over a 12-year term. Interest expense, net Interest expense (net of amounts capitalized), interest and investment income, and net periodic pension and postretirement benefit costs (other than service costs) (see Note 9) are reported net in the Condensed Consolidated Statements of Income and consist of the following: Quarter Ended December 28, 2024 December 30, 2023 Interest expense $ ( 487 ) $ ( 528 ) Interest and investment income 54 182 Net periodic pension and postretirement benefit costs (other than service costs) 66 100 Interest expense, net $ ( 367 ) $ ( 246 ) 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. 14 THE WALT DISNEY COMPANY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited; tabular dollars in millions, except for per share data) The following table summarizes the carrying amounts of the Asia Theme Parks’ assets and liabilities included in the Company’s Condensed Consolidated Balance Sheets: December 28, 2024 September 28, 2024 Cash and cash equivalents $ 438 $ 510 Other current assets 199 178 Total current assets 637 688 Parks, resorts and other property 5,943 6,141 Other assets 265 217 Total assets $ 6,845 $ 7,046 Current liabilities $ 700 $ 695 Long-term borrowings 1,159 1,292 Other long-term liabilities 453 409 Total liabilities $ 2,312 $ 2,396 The following table summarizes the International Theme Parks’ revenues and costs and expenses included in the Company’s Condensed Consolidated Statements of Income for the quarter ended December 28, 2024: Revenues $ 1,531 Costs and expenses ( 1,199 ) Asia Theme Parks’ royalty and management fees of $ 69 million for the quarter ended December 28, 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 quarter ended December 28, 2024 were $ 511 million provided by operating activities, $ 288 million used in investing activities and $ 24 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. The Company and HKSAR have provided loans to Hong Kong Disneyland Resort with outstanding balances of $ 64 million and $ 43 million, respectively. The interest rate on both loans is three month HIBOR (Hong Kong Interbank Offered Rate) 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 ($ 348 million), which bears interest at a rate of three month HIBOR plus 1.25 % and matures in 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 $ 929 million bearing interest at 8 % and are scheduled to mature in 2036 with earlier payments required based on available cash flows. In addition, early repayment is 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 % and matures in 2033. The line of credit does not have a balance outstanding. Shendi has provided Shanghai Disney Resort with loans totaling 8.2 billion yuan (approximately $ 1.1 billion), bearing interest at 8 % and are scheduled to mature in 2036 with earlier payments required based on available cash flows. In addition, early repayment is 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 % and matures in 2033. The line of credit does not have a balance outstanding. 15 THE WALT DISNEY COMPANY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited; tabular dollars in millions, except for per share data) 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 December 28, 2024 As of September 28, 2024 Predominantly Monetized Individually Predominantly Monetized as a Group Total Predominantly Monetized Individually Predominantly Monetized as a Group Total Produced content Released, less amortization $ 4,845 $ 13,950 $ 18,795 $ 4,568 $ 13,621 $ 18,189 Completed, not released 89 2,117 2,206 16 2,265 2,281 In-process 4,384 3,653 8,037 4,352 4,067 8,419 In development or pre-production 282 92 374 196 73 269 $ 9,600 $ 19,812 29,412 $ 9,132 $ 20,026 29,158 Licensed content - Television programming rights and advances 4,250 5,251 Total produced and licensed content $ 33,662 $ 34,409 Current portion $ 1,157 $ 2,097 Non-current portion $ 32,505 $ 32,312 Amortization of produced and licensed content is as follows: Quarter Ended December 28, 2024 December 30, 2023 Produced content Predominantly monetized individually $ 696 $ 768 Predominantly monetized as a group 1,813 1,794 2,509 2,562 Licensed programming rights and advances 4,097 4,590 Total produced and licensed content costs (1) $ 6,606 $ 7,152 (1) Primarily included in “Costs of services” in the Condensed Consolidated Statements of Income 16 THE WALT DISNEY COMPANY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited; tabular dollars in millions, except for per share data) 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 December 28, 2024 and September 28, 2024 were as follows: December 28, 2024 September 28, 2024 Deferred tax assets Net operating losses and tax credit carryforwards (1) $ ( 3,176 ) $ ( 3,444 ) Accrued liabilities ( 1,173 ) ( 1,199 ) Lease liabilities ( 845 ) ( 862 ) Licensing revenues ( 119 ) ( 130 ) Other ( 489 ) ( 655 ) Total deferred tax assets ( 5,802 ) ( 6,290 ) Deferred tax liabilities Depreciable, amortizable and other property 6,128 6,584 Investment in U.S. entities (2) 1,068 1,102 Right-of-use lease assets 677 692 Investment in foreign entities 727 465 Other 66 78 Total deferred tax liabilities 8,666 8,921 Net deferred tax liability before valuation allowance 2,864 2,631 Valuation allowance 2,898 2,991 Net deferred tax liability $ 5,762 $ 5,622 (1) Further details on our net operating losses and tax credit carryforwards are as follows: December 28, 2024 International Theme Park net operating losses $ ( 1,424 ) U.S. foreign tax credits ( 810 ) State net operating losses and tax credit carryforwards ( 563 ) Other ( 379 ) Total net operating losses and tax credit carryforwards (a) $ ( 3,176 ) (a) Approximately $ 2.0 billion of these carryforwards do not expire. Approximately $ 1.1 billion expire between fiscal 2026 and fiscal 2035, primarily consisting of U.S. foreign tax credits. (2) Amounts are, in part, due to the tax status of these entities and 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 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 $ 0.2 billion, from $ 2.0 billion at September 28, 2024 to $ 1.8 billion at December 28, 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 $ 0.8 billion. 17 THE WALT DISNEY COMPANY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited; tabular dollars in millions, except for per share data) 9. Pension and Other Benefit Programs The components of net periodic benefit cost (income) are as follows: Pension Plans Postretirement Medical Plans Quarter Ended Quarter Ended December 28, 2024 December 30, 2023 December 28, 2024 December 30, 2023 Service costs $ 65 $ 62 $ — $ — Other costs (benefits): Interest costs 195 208 11 14 Expected return on plan assets ( 290 ) ( 284 ) ( 15 ) ( 14 ) Amortization of previously deferred service costs (credits) — 2 ( 22 ) ( 22 ) Recognized net actuarial loss (gain) 62 5 ( 7 ) ( 9 ) Total other costs (benefits) ( 33 ) ( 69 ) ( 33 ) ( 31 ) Net periodic benefit cost (income) $ 32 $ ( 7 ) $ ( 33 ) $ ( 31 ) During the quarter ended December 28, 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 2025. Final minimum funding requirements for fiscal 2025 will be determined based on a January 1, 2025 funding actuarial valuation, which is expected to be received in the fourth quarter of fiscal 2025. 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 December 28, 2024 December 30, 2023 Shares (in millions): Weighted average number of common and common equivalent shares outstanding (basic) 1,812 1,832 Weighted average dilutive impact of Awards 6 3 Weighted average number of common and common equivalent shares outstanding (diluted) 1,818 1,835 Awards excluded from diluted earnings per share 16 39 11. Equity The Company declared the following dividends in fiscal 2025 and 2024: Per Share Amount Payment Date $ 0.50 $ 0.9 billion July 23, 2025 (1) $ 0.50 $ 0.9 billion January 16, 2025 $ 0.45 $ 0.8 billion July 25, 2024 $ 0.30 $ 0.5 billion January 10, 2024 (1) Amount represents our estimate of the dividend that will be paid on July 23, 2025. The actual amount will be determined based on shareholders of record at June 24, 2025. 18 THE WALT DISNEY COMPANY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited; tabular dollars in millions, except for per share data) Share Repurchase Program Effective February 7, 2024, the Board of Directors authorized the Company to repurchase a total of 400 million shares of its common stock. During the quarter ended December 28, 2024, the Company repurchased 7 million shares of its common stock for $ 0.8 billion (amount excludes the one percent excise tax on stock repurchases imposed by the Inflation Reduction Act of 2022). As of December 28, 2024, the Company had remaining authorization in place to repurchase approximately 365 million additional shares. The repurchase program does not have an expiration date. 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 First quarter of fiscal 2025 Balance at September 28, 2024 $ ( 319 ) $ ( 2,243 ) $ ( 1,855 ) $ ( 4,417 ) Quarter Ended December 28, 2024: Unrealized gains (losses) arising during the period 559 — ( 246 ) 313 Reclassifications of realized net (gains) losses to net income ( 88 ) 33 — ( 55 ) Star India Transaction — — 904 904 Balance at December 28, 2024 $ 152 $ ( 2,210 ) $ ( 1,197 ) $ ( 3,255 ) First quarter of fiscal 2024 Balance at September 30, 2023 $ 259 $ ( 2,172 ) $ ( 1,974 ) $ ( 3,887 ) Quarter Ended December 30, 2023: Unrealized gains (losses) arising during the period ( 277 ) ( 3 ) 137 ( 143 ) Reclassifications of realized net (gains) losses to net income ( 140 ) ( 24 ) — ( 164 ) Balance at December 30, 2023 $ ( 158 ) $ ( 2,199 ) $ ( 1,837 ) $ ( 4,194 ) Market Value Adjustments for Hedges Unrecognized Pension and Postretirement Medical Expense Foreign Currency Translation and Other AOCI Tax on AOCI First quarter of fiscal 2025 Balance at September 28, 2024 $ 71 $ 531 $ 116 $ 718 Quarter Ended December 28, 2024: Unrealized gains (losses) arising during the period ( 130 ) — 24 ( 106 ) Reclassifications of realized net (gains) losses to net income 21 ( 8 ) — 13 Star India Transaction — — ( 58 ) ( 58 ) Balance at December 28, 2024 $ ( 38 ) $ 523 $ 82 $ 567 First quarter of fiscal 2024 Balance at September 30, 2023 $ ( 64 ) $ 517 $ 142 $ 595 Quarter Ended December 30, 2023: Unrealized gains (losses) arising during the period 66 — ( 7 ) 59 Reclassifications of realized net (gains) losses to net income 32 6 — 38 Balance at December 30, 2023 $ 34 $ 523 $ 135 $ 692 19 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 First quarter of fiscal 2025 Balance at September 28, 2024 $ ( 248 ) $ ( 1,712 ) $ ( 1,739 ) $ ( 3,699 ) Quarter Ended December 28, 2024: Unrealized gains (losses) arising during the period 429 — ( 222 ) 207 Reclassifications of realized net (gains) losses to net income ( 67 ) 25 — ( 42 ) Star India Transaction — — 846 846 Balance at December 28, 2024 $ 114 $ ( 1,687 ) $ ( 1,115 ) $ ( 2,688 ) First quarter of fiscal 2024 Balance at September 30, 2023 $ 195 $ ( 1,655 ) $ ( 1,832 ) $ ( 3,292 ) Quarter Ended December 30, 2023: Unrealized gains (losses) arising during the period ( 211 ) ( 3 ) 130 ( 84 ) Reclassifications of realized net (gains) losses to net income ( 108 ) ( 18 ) — ( 126 ) Balance at December 30, 2023 $ ( 124 ) $ ( 1,676 ) $ ( 1,702 ) $ ( 3,502 ) 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 December 28, 2024 December 30, 2023 Market value adjustments, primarily cash flow hedges Primarily revenue $ 88 $ 140 Estimated tax Income taxes ( 21 ) ( 32 ) 67 108 Pension and postretirement medical expense Interest expense, net ( 33 ) 24 Estimated tax Income taxes 8 ( 6 ) ( 25 ) 18 Total reclassifications for the period $ 42 $ 126 12. Equity-Based Compensation Compensation expense related to stock options and restricted stock units (RSUs) is as follows: Quarter Ended December 28, 2024 December 30, 2023 Stock options $ 16 $ 17 RSUs 301 291 Total equity-based compensation expense (1) $ 317 $ 308 Equity-based compensation expense capitalized during the period $ 44 $ 44 (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. 20 THE WALT DISNEY COMPANY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited; tabular dollars in millions, except for per share data) Unrecognized compensation cost related to unvested stock options and RSUs was $ 66 million and $ 1.5 billion, respectively, as of December 28, 2024. Each fiscal year, generally in December or January, the Company awards stock options and restricted stock units to a broad-based group of management, technology and creative personnel (Annual Grant). Substantially all of the Annual Grant was issued in January 2025. The Annual Grant consisted of 2.4 million stock options and 14.2 million RSUs with weighted average grant date fair values of $ 37.98 and $ 109.20 , respectively. During the quarter ended December 30, 2023, the weighted average grant date fair values for stock options and RSUs were $ 32.06 and $ 93.87 , respectively. 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, 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. A hearing on the motion to dismiss was held on September 27, 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 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”), making similar allegations. The Company filed motions to dismiss for failure to state a claim in both the Biddle Action and Fendelander Action on January 31, 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, 21 THE WALT DISNEY COMPANY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited; tabular dollars in millions, except for per share data) 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 Company’s motion to dismiss the Consolidated Complaint was granted in part and denied in part on June 25, 2024. On September 12, 2024, the Court entered a case management order setting, among other dates, Plaintiffs’ deadline to file their class certification motion on March 27, 2026. On January 14, 2025, a private antitrust putative class action lawsuit was filed in the U.S. District Court for the Southern District of New York against the Company on behalf of a putative class of certain subscribers to fuboTV (the “Unger Action”), making similar allegations to those in the now-consolidated Biddle and Fendelander Actions. The consolidated lawsuit and the Unger Action are 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, and WBD (collectively, “Defendants”), by fuboTV Inc. and fuboTV Media Inc. (together, “Fubo”). Fubo asserted 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 then planned joint venture between ESPN, Inc., Fox, and WBD, which would have distributed certain of Defendants’ linear networks to consumers (the “Sports Streaming JV”), would have harmed competition in alleged markets for the licensing of networks that offer live sports content and for streaming live pay television, (b) certain alleged practices by which the Company and Fox 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, as well as in Hulu + Live TV’s carriage agreements with non-Defendant programmers, 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. On April 29, 2024, Fubo filed an amended complaint to add allegations of a purported market for “skinny sports bundles”, which Fubo claimed the Sports Streaming JV would have monopolized after its launch. After a hearing on Fubo’s motion for preliminary injunction, the district court granted Fubo’s motion on August 16, 2024, and enjoined the launch of the Sports Streaming JV. On August 19, 2024, Defendants filed a notice of appeal to the United States Court of Appeals for the Second Circuit from the order for a preliminary injunction. The United States Court of Appeals for the Second Circuit granted Defendants’ motion to expedite the appeal. Defendants filed their initial appeal brief on September 20, 2024, Fubo filed its brief in opposition on November 4, 2024, and Defendants filed their reply brief on December 9, 2024. Oral argument was scheduled for January 6, 2025. Fubo further sought injunctive relief, unspecified money damages and costs and fees. On September 26, 2024, the Company filed a motion to dismiss Fubo’s claims brought under Section 1 of the Sherman Act and New York antitrust law, unrelated to the joint venture. The district court denied Defendants’ motions to dismiss on December 13, 2024. The Defendants reached a settlement with Fubo to resolve this litigation, and on January 6, 2025, filed with the district court a joint stipulation voluntarily dismissing the action with prejudice and extinguishing the preliminary injunction issued on August 16, 2024. The parties also filed on January 6, 2025 a joint stipulation dismissing the appeal, which the United States Court of Appeals for the Second Circuit so ordered on January 8, 2025. 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. 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 22 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 December 28, 2024 Level 1 Level 2 Level 3 Total Assets Investments $ — $ 100 $ — $ 100 Derivatives - Foreign exchange — 1,127 — 1,127 Liabilities Derivatives Interest rate — ( 1,239 ) — ( 1,239 ) Foreign exchange — ( 527 ) — ( 527 ) Other — ( 17 ) — ( 17 ) Other — ( 634 ) — ( 634 ) Total recorded at fair value $ — $ ( 1,190 ) $ — $ ( 1,190 ) Fair value of borrowings $ — $ 39,433 $ 2,201 $ 41,634 Fair Value Measurement at September 28, 2024 Level 1 Level 2 Level 3 Total Assets Investments $ — $ 94 $ — $ 94 Derivatives Foreign exchange — 569 — 569 Other — 18 — 18 Liabilities Derivatives Interest rate — ( 983 ) — ( 983 ) Foreign exchange — ( 588 ) — ( 588 ) Other — ( 8 ) — ( 8 ) Other — ( 591 ) — ( 591 ) Total recorded at fair value $ — $ ( 1,489 ) $ — $ ( 1,489 ) Fair value of borrowings $ — $ 42,392 $ 1,317 $ 43,709 The fair values 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 and cruise ship borrowings, which are valued based on the current estimated borrowing costs, prevailing market interest rates and applicable credit risk. 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. 23 THE WALT DISNEY COMPANY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited; tabular dollars in millions, except for per share data) 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 December 28, 2024 Current Assets Investments/ Other Assets Other Current Liabilities Other Long- Term Liabilities Derivatives designated as hedges Foreign exchange $ 586 $ 323 $ ( 176 ) $ ( 139 ) Interest rate — — ( 1,239 ) — Other — — ( 5 ) — Derivatives not designated as hedges Foreign exchange 216 2 ( 210 ) ( 2 ) Other — 100 ( 12 ) — Gross fair value of derivatives 802 425 ( 1,642 ) ( 141 ) Counterparty netting ( 618 ) ( 239 ) 722 135 Cash collateral (received) paid ( 74 ) — 675 — Net derivative positions $ 110 $ 186 $ ( 245 ) $ ( 6 ) As of September 28, 2024 Current Assets Investments/ Other Assets Other Current Liabilities Other Long- Term Liabilities Derivatives designated as hedges Foreign exchange $ 273 $ 184 $ ( 164 ) $ ( 149 ) Interest rate — — ( 983 ) — Other — — ( 7 ) ( 1 ) Derivatives not designated as hedges Foreign exchange 110 2 ( 273 ) ( 2 ) Other 18 94 — — Gross fair value of derivatives 401 280 ( 1,427 ) ( 152 ) Counterparty netting ( 330 ) ( 182 ) 396 116 Cash collateral (received) paid ( 27 ) — 679 — Net derivative positions $ 44 $ 98 $ ( 352 ) $ ( 36 ) 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 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 December 28, 2024 and September 28, 2024 was $ 11.0 billion and $ 12.0 billion, respectively. 24 THE WALT DISNEY COMPANY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited; tabular dollars in millions, except for per share data) The following table summarizes fair value hedge adjustments to hedged borrowings: Carrying Amount of Hedged Borrowings Fair Value Adjustments Included in Hedged Borrowings December 28, 2024 September 28, 2024 December 28, 2024 September 28, 2024 Borrowings: Current $ 495 $ 1,414 $ ( 5 ) $ ( 10 ) Long-term 9,874 10,128 ( 1,109 ) ( 913 ) $ 10,369 $ 11,542 $ ( 1,114 ) $ ( 923 ) The following amounts are included in “Interest expense, net” in the Condensed Consolidated Statements of Income: Quarter Ended December 28, 2024 December 30, 2023 Gain (loss) on: Pay-floating swaps $ ( 195 ) $ 432 Borrowings hedged with pay-floating swaps 195 ( 432 ) Expense associated with interest accruals on pay-floating swaps ( 111 ) ( 154 ) 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 December 28, 2024 or at September 28, 2024, and gains and losses related to pay-fixed interest rate swaps recognized in earnings were not material for the quarters ended December 28, 2024 and December 30, 2023. 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 December 28, 2024 and September 28, 2024, the notional amounts of the Company’s net foreign exchange cash flow hedges were $ 8.4 billion and $ 9.9 billion, respectively. Mark-to-market gains and losses on these contracts are deferred in AOCI and are recognized in earnings when the hedged transactions occur, offsetting changes in the value of the foreign currency transactions. Net deferred gains recorded in AOCI for contracts that will mature in the next twelve months total $ 501 million. The following table summarizes the effect of foreign exchange cash flow hedges on AOCI: Quarter Ended December 28, 2024 December 30, 2023 Gain (loss) recognized in Other Comprehensive Income $ 562 $ ( 264 ) Gain reclassified from AOCI into the Statements of Operations (1) 89 141 (1) Primarily recorded in revenue. The Company may designate 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, 25 THE WALT DISNEY COMPANY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited; tabular dollars in millions, except for per share data) net.” The impact from interest rate changes is recorded in AOCI and is amortized over the life of the cross currency swap. As of December 28, 2024 and September 28, 2024, the total notional amount of the Company’s designated cross currency swaps was Canadian $ 1.3 billion ($ 0.9 billion) and Canadian $ 1.3 billion ($ 1.0 billion), respectively. The related gains or losses recognized in earnings for the quarters ended December 28, 2024 and December 30, 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 December 28, 2024 and September 28, 2024 were $ 2.9 billion and $ 3.4 billion, respectively. The Company recognized net foreign exchange gains of $ 0.2 billion on the foreign exchange contracts in costs and expenses for the quarter ended December 28, 2024 that mitigated our exposure with respect to foreign currency denominated assets and liabilities. The related gains or losses for the quarter ended December 30, 2023 were not material. 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 December 28, 2024 and September 28, 2024 and related gains or losses recognized in earnings for the quarters ended December 28, 2024 and December 30, 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 contracts at December 28, 2024 and September 28, 2024 were $ 0.6 billion and $ 0.5 billion, respectively. The related gains or losses recognized in earnings for the quarters ended December 28, 2024 and December 30, 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 $ 0.9 billion and $ 1.1 billion at December 28, 2024 and September 28, 2024. 16. 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 fiscal year 2025 and for interim periods beginning in fiscal year 2026 and requires retrospective adoption (with early adoption permitted). While the guidance will not have an effect on the Company’s Consolidated Statements of Operations or Consolidated Balance Sheets upon adoption, it will affect certain segment reporting disclosures in the Company’s fiscal 2025 annual report. 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 Company will adopt the new guidance, including the expanded disclosures, beginning with the Company’s 2026 fiscal year. 26 THE WALT DISNEY COMPANY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited; tabular dollars in millions, except for per share data) Disaggregation of Income Statement Expense In November 2024, the FASB issued guidance that requires the disclosure of additional information related to certain costs and expenses, including amounts of inventory purchases, employee compensation, and depreciation and amortization included in each income statement line item. The guidance also requires disclosure of the total amount of selling expenses and the Company’s definition of selling expenses. The guidance is effective for the Company for annual periods beginning in fiscal year 2028 and for interim periods beginning in fiscal year 2029. 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. 27 MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS