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
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.
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 | |
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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 | |
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) | |
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| | | | | | | |
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 | |
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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 | |
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.
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.
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 | |
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.
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.
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 | |
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
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.
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 | |