Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements generally relate to future events or our future financial or operating performance and may include statements concerning, among other things, financial results, the impact of COVID-19 on our businesses and operations, results of operations and competition. In some cases, you can identify forward-looking statements because they contain words such as “may,” “will,” “should,” “expects,” “plans,” “could,” “intends,” “target,” “projects,” “believes,” “estimates,” “potential” or “continue” or the negative of these words or other similar terms or expressions that concern our expectations, strategy, plans or intentions. These statements reflect our current views with respect to future events and are based on assumptions as of the date of this report. These statements are subject to known and unknown risks, uncertainties and other factors, including those described in “Risk Factors” in our 2021 Annual Report on Form 10-K, that may cause our actual results, performance or achievements to be materially different from expectations or results projected or implied by forward-looking statements.

A forward-looking statement is neither a prediction nor a guarantee of future events or circumstances. You should not place undue reliance on the forward-looking statements. Unless required by federal securities laws, we assume no obligation to update any of these forward-looking statements, or to update the reasons actual results could differ materially from those anticipated, to reflect circumstances or events that occur after the statements are made.

ORGANIZATION OF INFORMATION

Management’s Discussion and Analysis provides a narrative of the Company’s financial performance and condition that should be read in conjunction with the accompanying financial statements. It includes the following sections:

Consolidated Results
Significant Developments
Current Quarter Results Compared to Prior-Year Quarter
Seasonality
Business Segment Results
Corporate and Unallocated Shared Expenses
Financial Condition
Supplemental Guarantor Financial Information
Commitments and Contingencies
Other Matters
Market Risk

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS — (continued)

CONSOLIDATED RESULTS


	Quarter Ended				% Change Better (Worse)
(in millions, except per share data)	January 1, 2022		January 2, 2021
Revenues:
Services	$	19,542	$	14,871	31 %
Products	2,277		1,378		65 %
Total revenues	21,819		16,249		34 %
Costs and expenses:
Cost of services (exclusive of depreciation and amortization)	(13,161)		(10,738)		(23) %
Cost of products (exclusive of depreciation and amortization)	(1,406)		(1,037)		(36) %
Selling, general, administrative and other	(3,787)		(2,917)		(30) %
Depreciation and amortization	(1,269)		(1,298)		2 %
Total costs and expenses	(19,623)		(15,990)		(23) %
Restructuring and impairment charges	—		(113)		100 %
Other expense, net	(436)		—		nm
Interest expense, net	(311)		(324)		4 %
Equity in the income of investees	239		224		7 %
Income from continuing operations before income taxes	1,688		46		>100 %
Income taxes on continuing operations	(488)		(16)		>(100) %
Net income from continuing operations	1,200		30		>100 %
Loss from discontinued operations, net of income tax benefit of $14 and $4, respectively	(48)		(12)		>(100) %
Net income	1,152		18		>100 %
Net income from continuing operations attributable to noncontrolling interests	(48)		(1)		>(100) %

Net income attributable to Disney	$	1,104	$	17	>100 %
Diluted earnings per share from continuing operations attributable to Disney	$	0.63	$	0.02	>100 %

SIGNIFICANT DEVELOPMENTS

COVID-19 Pandemic

Since early 2020, the world has been, and continues to be, impacted by COVID-19 and its variants. COVID-19 and measures to prevent its spread have impacted our segments in a number of ways, most significantly at the DPEP segment where our theme parks and resorts were closed and cruise ship sailings and guided tours were suspended. These operations resumed at various points since May 2020, initially at reduced operating capacities as a result of COVID-19 restrictions. In fiscal 2020 and 2021, we delayed, or in some cases, shortened or canceled, theatrical releases. In addition, we experienced significant disruptions in the production and availability of content, including the delay of key live sports programming during fiscal 2020 and fiscal 2021.

The most significant impact on operating income since the onset of COVID-19 has been at the DPEP segment due to revenue lost. In fiscal 2022, our domestic parks and experiences are generally operating without significant mandatory COVID-19-related capacity restrictions, such as those that were in place during the prior-year quarter; however, we continue to manage capacity to address ongoing COVID-19 considerations with respect to guest and cast health and safety. Certain of our international operations continue to be impacted by mandatory COVID-19-related capacity and travel restrictions. At the DMED segment, our film and television productions have generally resumed, although we have seen disruptions of production activities depending on local circumstances. We have generally been able to release our films theatrically in the current quarter, although certain markets continue to impose restrictions on theater openings and capacity.

We have incurred, and will continue to incur, costs to address government regulations and the safety of our employees, guests and talent, of which certain costs are capitalized and will be amortized over future periods.

The impact of the disruptions on our businesses and costs to address government regulations and the safety of our employees, guests and talent (and the extent of their adverse impact on our financial and operational results) will depend on the length of time that such disruptions continue. This will, in turn, depend on the duration and severity of the impacts of

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS — (continued)

COVID-19 and its variants, and among other things, the impact and duration of governmental actions imposed in response to COVID-19 and individuals’ and companies’ risk tolerance regarding health matters going forward.

CURRENT QUARTER RESULTS COMPARED TO PRIOR-YEAR QUARTER

Revenues for the quarter increased 34%, or $5.6 billion, to $21.8 billion; net income attributable to Disney increased to $1.1 billion from $17 million; and diluted earnings per share from continuing operations attributable to Disney (EPS) was $0.63 compared to $0.02 in the prior-year quarter. The EPS increase for the quarter was due to higher segment operating results at DPEP, partially offset by lower operating results at DMED.

Revenues

Service revenues for the quarter increased 31%, or $4.7 billion, to $19.5 billion due to increased volumes at our theme parks and resorts, higher DTC subscription revenue and higher theatrical revenues. The increase in theme parks and resorts volumes reflects the impact of operating with mandatory capacity restrictions in the prior-year quarter as a result of COVID-19. The increase in subscription revenue was due to subscriber growth and higher retail pricing at Disney+, Hulu, and to a lesser extent, ESPN+.

Product revenues for the quarter increased 65%, or $0.9 billion to $2.3 billion due to higher merchandise, food and beverage sales at our theme parks and resorts.

Costs and expenses

Cost of services for the quarter increased 23%, or $2.4 billion, to $13.2 billion due to higher programming and production costs and technical support expenses at Direct-to-Consumer, increased volumes at our theme parks and resorts, higher sports programming costs at Linear Networks and higher theatrical production cost amortization and theatrical distribution costs at Content Sales/Licensing and Other.

Cost of products for the quarter increased 36%, or $0.4 billion, to $1.4 billion due to higher merchandise, food and beverage sales at our theme parks and resorts.

Selling, general, administrative and other costs increased 30%, or $0.9 billion, to $3.8 billion due to higher marketing costs.

Restructuring and impairment charges

Restructuring and impairment charges of $113 million for the prior-year quarter were due to severance.

Other expense, net

In the current quarter, the Company recognized $436 million in Other expense, net due to a non-cash loss of $432 million to adjust its investment in DraftKings to fair value.

In the prior-year quarter, the Company recognized $186 million non-cash loss to adjust its investment in DraftKings to fair value, offset by a $186 million non-cash gain to adjust its investment in fuboTV to fair value.

Interest expense, net

Interest expense, net is as follows:


	Quarter Ended
(in millions)	January 1, 2022		January 2, 2021		% Change Better (Worse)
Interest expense	$	(361)	$	(404)	11 %
Interest income, investment income (loss) and other	50		80		(38) %

Interest expense, net	$	(311)	$	(324)	4 %

The decrease in interest expense was due to lower average debt balances and higher capitalized interest.

The decrease in interest income, investment income (loss) and other was due to lower investment gains, partially offset by a favorable comparison of pension and postretirement benefit costs, other than service cost, which was a benefit in the current quarter and an expense in the prior-year quarter.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS — (continued)

Effective Income Tax Rate


	Quarter Ended
	January 1, 2022		January 2, 2021
Income from continuing operations before income taxes	$	1,688	$	46
Income tax on continuing operations	488		16
Effective income tax rate - continuing operations	28.9%		34.8%

The effective income tax rate in the current quarter was higher than the U.S. statutory rate due to unfavorable adjustments related to prior years. The effective income tax rate in the prior-year quarter was higher than the U.S. statutory rate primarily due to an unfavorable impact from foreign earnings taxed at rates higher than the U.S. statutory rate, partially offset by favorable adjustments related to prior years.

Noncontrolling Interests


	Quarter Ended
(in millions)	January 1, 2022		January 2, 2021		% Change Better (Worse)
Net income from continuing operations attributable to noncontrolling interests	$	(48)	$	(1)	>(100) %

The increase in net income from continuing operations attributable to noncontrolling interests was driven by lower losses at Hong Kong Disneyland Resort and Shanghai Disney Resort, partially offset by a higher loss at our DTC sports business.

Net income attributable to noncontrolling interests is determined on income after royalties and management fees, financing costs and income taxes, as applicable.

Certain Items Impacting Results in the Quarter

Results for the quarter ended January 1, 2022 were impacted by the following:

TFCF and Hulu acquisition amortization of $595 million
Other expense of $436 million due to the DraftKings loss of $432 million

Results for the quarter ended January 2, 2021 were impacted by the following:

TFCF and Hulu acquisition amortization of $617 million
Restructuring charges of $113 million

A summary of the impact of these items on EPS is as follows:


(in millions, except per share data)	Pre-Tax Income (Loss)		Tax Benefit (Expense)(1)		After-Tax Income (Loss)		EPS Favorable (Adverse)(2)
Quarter Ended January 1, 2022:
TFCF and Hulu acquisition amortization	$	(595)	$	139	$	(456)	$	(0.24)
Other expense, net	(436)		102		(334)		(0.18)



Total	$	(1,031)	$	241	$	(790)	$	(0.43)

Quarter Ended January 2, 2021:
TFCF and Hulu acquisition amortization	$	(617)	$	144	$	(473)	$	(0.25)
Restructuring and impairment charges	(113)		28		(85)		(0.05)



Total	$	(730)	$	172	$	(558)	$	(0.30)

(1)Tax benefit (expense) amounts are determined using the tax rate applicable to the individual item.

(2)EPS is net of noncontrolling interest share, where applicable. Total may not equal the sum of the column due to rounding.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS — (continued)

SEASONALITY

The Company’s businesses are subject to the effects of seasonality. Consequently, the operating results for the quarter ended January 1, 2022 for each business segment, and for the Company as a whole, are not necessarily indicative of results to be expected for the full year.

DMED revenues are subject to seasonal advertising patterns, changes in viewership and subscriber levels, timing and performance of film releases in the theatrical and home entertainment markets, timing of and demand for film and television programs, and the availability of and demand for sports programming. In general, domestic advertising revenues are typically somewhat higher during the fall and somewhat lower during the summer months. In addition, advertising revenues generated from sports programming are impacted by the timing of sports seasons and events, which varies throughout the year or may take place periodically (e.g. biannually, quadrennially). Affiliate revenues vary with the subscriber trends of multi-channel video programming distributors (i.e. cable, satellite telecommunications and digital over-the-top service providers). Theatrical release dates are determined by several factors, including competition and the timing of vacation and holiday periods.

DPEP revenues fluctuate with changes in theme park attendance and resort occupancy resulting from the seasonal nature of vacation travel and leisure activities, which generally results in higher revenues during the Company’s first and fourth fiscal quarters. Peak attendance and resort occupancy generally occur during the summer months when school vacations occur and during early winter and spring holiday periods. Consumer products revenue fluctuates with consumer purchasing behavior, which generally results in higher revenues during the Company’s first fiscal quarter due to the winter holiday season and in the fourth quarter due to back-to-school. In addition, licensing revenues fluctuate with the timing and performance of our film and television content.

BUSINESS SEGMENT RESULTS

Below is a discussion of the major revenue and expense categories for our business segments. Costs and expenses for each segment consist of operating expenses, selling, general, administrative and other costs, and depreciation and amortization. Selling, general, administrative and other costs include third-party and internal marketing expenses.

Our DMED segment primarily generates revenue across three significant lines of business/distribution platforms: Linear Networks, Direct-to-Consumer and Content Sales/Licensing. Programming and production costs are generally allocated across these businesses based on the estimated relative value of the distribution windows. Programming and production costs to support these businesses/distribution platforms are largely incurred across three content creation groups: Studios, General Entertainment and Sports. Programming and production costs include amortization of acquired licensed programming rights (including sports rights), amortization of capitalized production costs (including participations and residuals) and production costs related to live programming such as news and sports. Costs for initial marketing campaigns are generally recognized in the distribution platform of initial exploitation.

The Linear Networks business generates revenue from affiliate fees and advertising sales and from fees from sub-licensing of sports programming to third parties. Operating expenses include programming and production costs, technical support costs, operating labor and distribution costs.

The Direct-to-Consumer business generates revenue from subscription fees, advertising sales and pay-per-view and Premier Access fees. Operating expenses include programming and production costs, technology support costs, operating labor and distribution costs. Operating expenses also includes fees paid to Linear Networks for the right to air the linear networks feed and other services.

The Content Sales/Licensing business generates revenue from the sale of film and episodic television content in the TV/SVOD and home entertainment markets, distribution of films in the theatrical market, licensing of our music rights, sales of tickets to stage play performances and licensing of our IP for use in stage plays. Operating expenses include programming and production costs, distribution expenses and costs of sales.

Our DPEP segment primarily generates revenue from the sale of admissions to theme parks, the sale of food, beverage and merchandise at our theme parks and resorts, charges for room nights at hotels, sales of cruise vacations, sales and rentals of vacation club properties, royalties from licensing our IP for use on consumer goods and the sale of branded merchandise. Revenues are also generated from sponsorships and co-branding opportunities, real estate rent and sales, and royalties from Tokyo Disney Resort. Significant expenses include operating labor, costs of goods sold, infrastructure costs, depreciation and other operating expenses. Infrastructure costs include information systems expense, repairs and maintenance, utilities and fuel, property taxes, retail occupancy costs, insurance and transportation. Other operating expenses include costs for such items as supplies, commissions and entertainment offerings.

The Company evaluates the performance of its operating segments based on segment operating income, and management uses total segment operating income as a measure of the overall performance of the operating businesses separate from non-

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS — (continued)

operating factors. Total segment operating income is not a financial measure defined by GAAP, should be reviewed in conjunction with the relevant GAAP financial measure and may not be comparable to similarly titled measures reported by other companies. The Company believes that information about total segment operating income assists investors by allowing them to evaluate changes in the operating results of the Company’s portfolio of businesses separate from factors other than business operations that affect net income, thus providing separate insight into both operations and other factors that affect reported results.

The following table reconciles income from continuing operations before income taxes to total segment operating income:


	Quarter Ended				% Change Better (Worse)
(in millions)	January 1, 2022		January 2, 2021
Income from continuing operations before income taxes	$	1,688	$	46	>100 %
Add (subtract):
Corporate and unallocated shared expenses	228		232		2 %
Restructuring and impairment charges	—		113		100 %
Other expense, net	436		—		nm
Interest expense, net	311		324		4 %
TFCF and Hulu acquisition amortization	595		617		4 %


Total segment operating income	$	3,258	$	1,332	>100 %

The following is a summary of segment revenue and operating income (loss):


	Quarter Ended				% Change Better (Worse)
(in millions)	January 1, 2022		January 2, 2021
Revenues:
Disney Media and Entertainment Distribution	$	14,585	$	12,661	15 %
Disney Parks, Experiences and Products	7,234		3,588		>100 %




	$	21,819	$	16,249	34 %
Segment operating income:
Disney Media and Entertainment Distribution	$	808	$	1,451	(44) %
Disney Parks, Experiences and Products	2,450		(119)		nm




	$	3,258	$	1,332	>100 %

Depreciation expense is as follows:


	Quarter Ended				% Change Better (Worse)
(in millions)	January 1, 2022		January 2, 2021




Disney Media and Entertainment Distribution	$	153	$	167	8 %
Disney Parks, Experiences and Products

Domestic	398		388		(3) %
International	168		176		5 %

Total Disney Parks, Experiences and Products	566		564		— %



Corporate	48		46		(4) %
Total depreciation expense	$	767	$	777	1 %

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS — (continued)

Amortization of intangible assets is as follows:


	Quarter Ended				% Change Better (Worse)
(in millions)	January 1, 2022		January 2, 2021




Disney Media and Entertainment Distribution	$	40	$	47	15 %
Disney Parks, Experiences and Products	27		27		— %
TFCF and Hulu	435		447		3 %

Total amortization of intangible assets	$	502	$	521	4 %

BUSINESS SEGMENT RESULTS - Current Quarter Results Compared to Prior-Year Quarter

Disney Media and Entertainment Distribution

Revenue and operating results for the DMED segment are as follows:


	Quarter Ended				% Change Better (Worse)
(in millions)	January 1, 2022		January 2, 2021
Revenues:
Linear Networks	$	7,706	$	7,693	— %
Direct-to-Consumer	4,690		3,504		34 %
Content Sales/Licensing and Other	2,433		1,702		43 %
Elimination of Intrasegment Revenue(1)	(244)		(238)		(3) %
	$	14,585	$	12,661	15 %
Segment operating income (loss):
Linear Networks	$	1,499	$	1,729	(13) %
Direct-to-Consumer	(593)		(466)		(27) %
Content Sales/Licensing and Other	(98)		188		nm

	$	808	$	1,451	(44) %

(1) Reflects fees received by the Linear Networks from other DMED businesses for the right to air our Linear Networks and related services.

Linear Networks

Operating results for Linear Networks are as follows:


	Quarter Ended				% Change Better (Worse)
(in millions)	January 1, 2022		January 2, 2021
Revenues
Affiliate fees	$	4,615	$	4,640	(1) %
Advertising	2,839		2,835		— %
Other	252		218		16 %
Total revenues	7,706		7,693		— %
Operating expenses	(5,656)		(5,421)		(4) %
Selling, general, administrative and other	(755)		(724)		(4) %
Depreciation and amortization	(38)		(53)		28 %
Equity in the income of investees	242		234		3 %
Operating Income	$	1,499	$	1,729	(13) %

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS — (continued)

Revenues

Affiliate revenue is as follows:


	Quarter Ended				% Change Better (Worse)
(in millions)	January 1, 2022		January 2, 2021

Domestic Channels	$	3,862	$	3,773	2 %
International Channels	753		867		(13) %
	$	4,615	$	4,640	(1) %

The increase in affiliate revenue at the Domestic Channels was due to an increase of 6% from higher contractual rates, partially offset by a decrease of 4% from fewer subscribers.

The decrease in affiliate revenue at the International Channels was due to decreases of 12% from fewer subscribers driven by channel closures in Europe and Asia and 3% from an unfavorable foreign exchange impact, partially offset by an increase of 2% from higher contractual rates.

Advertising revenue is as follows:


	Quarter Ended				% Change Better (Worse)
(in millions)	January 1, 2022		January 2, 2021

Cable	$	1,293	$	1,217	6 %
Broadcasting	900		984		(9) %
Domestic Channels	2,193		2,201		— %
International Channels	646		634		2 %
	$	2,839	$	2,835	— %

The increase in Cable advertising revenue was due to an increase of 6% from higher impressions, partially offset by a decrease of 1% from lower rates. The increase in impressions reflected more units delivered and higher average viewership.

The decrease in Broadcasting advertising revenue was due to decreases of 12% from fewer impressions at ABC, reflecting lower average viewership, and 8% from the owned television stations, partially offset by an increase of 11% from higher rates at ABC. The decrease at the owned television stations was due to lower political advertising.

The increase in International Channels advertising revenue was due to an increase of 6% from higher rates, partially offset by decreases of 3% from an unfavorable foreign exchange impact and 1% from fewer impressions, reflecting lower average viewership. The decrease in viewership was driven by COVID-19-related timing shifts of Indian Premier League (IPL) cricket matches, which resulted in fewer matches in the current quarter compared to the prior-year quarter. This decrease was partially offset by an increase from the airing of International Cricket Council (ICC) T20 World Cup matches in the current quarter. The ICC T20 World Cup generally occurs every two years and was not held in the prior-year quarter due to COVID-19. IPL cricket matches typically occur in our second and third fiscal quarters. As a result of COVID-19-related timing shifts, we aired 13 matches in the current quarter and 44 matches in the prior-year quarter.

Other revenue increased $34 million, to $252 million from $218 million, due to sub-licensing fees from ICC T20 World Cup matches in the current quarter, partially offset by lower sub-licensing fees as a result of fewer IPL cricket matches in the current quarter compared to the prior-year quarter.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS — (continued)

Costs and Expenses

Operating expenses primarily consist of programming and production costs, which are as follows:


	Quarter Ended				% Change Better (Worse)
(in millions)	January 1, 2022		January 2, 2021

Cable	$	(3,583)	$	(3,404)	(5) %
Broadcasting	(800)		(747)		(7) %
Domestic Channels	(4,383)		(4,151)		(6) %
International Channels	(894)		(914)		2 %
	$	(5,277)	$	(5,065)	(4) %

The increase in programming and production costs at Cable was primarily due to higher rights costs for the College Football Playoffs (CFP), NFL and MLB and an increase in sports production costs due to the cancellation of events in the prior-year quarter. These increases were partially offset by lower costs for NBA and golf programming. The increases in CFP and NFL rights costs were due to higher contractual rates. Higher MLB rights costs were due to airing one playoff game in the current quarter, compared to airing no MLB games in the prior-year quarter. Lower NBA and golf programming costs were due to the shift of certain NBA games and the Masters out of fiscal 2020 and into the first quarter of fiscal 2021 due to COVID-19.

The increase in programming and production costs at Broadcasting was due to a higher cost mix of programming aired on ABC in the current quarter.

Programming and production costs at the International Channels decreased due to lower costs for general entertainment programming, the impact of channel closures and a favorable foreign exchange impact, partially offset by an increase in sports programming costs. The decrease in general entertainment programming costs was driven by a lower cost mix of programming in the current quarter. The increase in sports programming costs was due to higher costs for cricket programming, partially offset by lower soccer programming costs reflecting fewer games in the current quarter. Higher costs for cricket programming were driven by costs for ICC T20 World Cup matches in the current quarter, partially offset by the impact of fewer IPL matches in the current quarter compared to the prior-year quarter.

Operating Income from Linear Networks

Operating income from Linear Networks decreased $230 million, to $1,499 million from $1,729 million, due to decreases at Cable and Broadcasting.

The following table provides supplemental revenue and operating income detail for Linear Networks:


	Quarter Ended				% Change Better (Worse)
(in millions)	January 1, 2022		January 2, 2021
Supplemental revenue detail
Domestic Channels	$	6,152	$	6,070	1 %
International Channels	1,554		1,623		(4) %
	$	7,706	$	7,693	— %
Supplemental operating income detail
Domestic Channels	$	888	$	1,120	(21) %
International Channels	369		375		(2) %
Equity in the income of investees	242		234		3 %
	$	1,499	$	1,729	(13) %

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS — (continued)

Direct-to-Consumer

Operating results for Direct-to-Consumer are as follows:


	Quarter Ended				% Change Better (Worse)
(in millions)	January 1, 2022		January 2, 2021
Revenues
Subscription fees	$	3,598	$	2,546	41 %
Advertising	980		882		11 %
TV/SVOD distribution and other	112		76		47 %
Total revenues	4,690		3,504		34 %
Operating expenses	(3,922)		(2,921)		(34) %
Selling, general, administrative and other	(1,275)		(970)		(31) %
Depreciation and amortization	(86)		(79)		(9) %
Operating Loss	$	(593)	$	(466)	(27) %

Revenues

The increase in subscription fees was due to increases of 23% from higher subscribers, driven by growth at Disney+, Hulu, and ESPN+, and 18% from higher rates due to increases in retail pricing at Disney+, Hulu, and to a lesser extent, ESPN+.

Higher advertising revenue reflected increases of 6% from higher rates due to an increase at Hulu and 5% from higher impressions due to increases at Disney+ and ESPN+.

The increase in TV/SVOD distribution and other revenue was due to higher Ultimate Fighting Championship (UFC) pay-per-view fees, which reflected an increase in average buys per event and higher pricing, partially offset by the impact of airing two events in the current quarter compared to three events in the prior-year quarter.

The following tables present additional information about our Disney+, ESPN+ and Hulu Direct-to-Consumer (DTC) product offerings(1).

Paid subscribers(2) as of:


(in millions)	January 1, 2022	January 2, 2021	% Change Better (Worse)
Disney+
Domestic (U.S. and Canada)	42.9	36.3	18 %
International (excluding Disney+ Hotstar)(3)	41.1	29.4	40 %
Disney+ (excluding Disney+ Hotstar)(4)	84.0	65.7	28 %
Disney+ Hotstar	45.9	29.2	57 %
Total Disney+(4)	129.8	94.9	37 %

ESPN+	21.3	12.1	76 %

Hulu
SVOD Only	40.9	35.4	16 %
Live TV + SVOD	4.3	4.0	8 %
Total Hulu(4)	45.3	39.4	15 %

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS — (continued)

Average Monthly Revenue Per Paid Subscriber(5) for the quarter ended:


					% Change Better (Worse)
	January 1, 2022		January 2, 2021
Disney+
Domestic (U.S. and Canada)	$	6.68	$	5.80	15 %
International (excluding Disney+ Hotstar)(3)	5.96		4.73		26 %
Disney+ (excluding Disney+ Hotstar)	6.33		5.37		18 %
Disney+ Hotstar	1.03		0.98		5 %
Disney+	4.41		4.03		9 %

ESPN+	5.16		4.48		15 %

Hulu
SVOD Only	12.96		13.51		(4) %
Live TV + SVOD	87.01		75.11		16 %

(1)In the U.S., Disney+, ESPN+ and Hulu SVOD Only are each offered as a standalone service or as a package that includes all three services (the SVOD Bundle). Effective December 21, 2021, Hulu Live TV + SVOD includes Disney+ and ESPN+ (new Hulu Live TV + SVOD offering), whereas previously, Hulu Live TV + SVOD was offered as a standalone service or with Disney+ and ESPN+ as optional additions (old Hulu Live TV + SVOD offering). Disney+ is available in more than 80 countries and territories outside the U.S. and Canada. In India and certain other Southeast Asian countries, our service is branded Disney+ Hotstar. In certain Latin American countries, we offer Disney+ as well as Star+, a general entertainment SVOD service, which is available on a standalone basis or together with Disney+. Depending on the market, our services can be purchased on our websites, through third party platforms/apps or via wholesale arrangements.

(2)Reflects subscribers for which we recognized subscription revenue. Subscribers cease to be a paid subscriber as of their effective cancellation date or as a result of a failed payment method. Subscribers to the SVOD Bundle are counted as a paid subscriber for each service included in the SVOD Bundle and subscribers to the old Hulu Live TV + SVOD offering and new Hulu Live TV + SVOD offering are counted as one paid subscriber for each of the Hulu Live TV + SVOD, Disney+ and ESPN+ offerings. Subscribers include those who receive a service through wholesale arrangements including those for which we receive a fee for the distribution of the service to each subscriber of an existing content distribution tier. In Latin America, if a subscriber has either the standalone Disney+ or Star+ service or both the Disney+ and Star+ services, they are counted as one Disney+ paid subscriber. When we aggregate the total number of paid subscribers across our DTC streaming services, we refer to them as paid subscriptions.

(3)Includes the Disney+ service outside the U.S. and Canada and the Star+ service in Latin America.

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

(5)Revenue per paid subscriber is calculated based on the average of the monthly average paid subscribers for each month in the period. The monthly average paid subscribers is calculated as the sum of the beginning of the month and end of the month paid subscriber count, divided by two. Disney+ average monthly revenue per paid subscriber is calculated using a daily average of paid subscribers for the period. Revenue includes subscription fees, advertising (excluding revenue earned from selling advertising spots to other Company businesses) and premium and feature add-on revenue but excludes Premier Access and Pay-Per-View revenue. The average revenue per paid subscriber is net of discounts on the SVOD Bundle or other offerings that carry more than one service. Revenue is allocated to each service based on the relative retail price of each service on a standalone basis. Starting in December 2021, revenue for the new Hulu Live TV + SVOD offering is allocated to the SVOD services based on the wholesale price of the SVOD Bundle. In general, wholesale arrangements have a lower average monthly revenue per paid subscriber than subscribers that we acquire directly or through third party platforms.

The average monthly revenue per paid subscriber for domestic Disney+ increased from $5.80 to $6.68 due to an increase in retail pricing and a lower mix of wholesale subscribers, partially offset by a higher mix of subscribers to the SVOD Bundle.

The average monthly revenue per paid subscriber for international Disney+ (excluding Disney+ Hotstar) increased from $4.73 to $5.96 due to increases in retail pricing.

The average monthly revenue per paid subscriber for Disney+ Hotstar increased from $0.98 to $1.03 due to launches in new territories with higher average prices, partially offset by a higher mix of wholesale subscribers.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS — (continued)

The average monthly revenue per paid subscriber for ESPN+ increased from $4.48 to $5.16 primarily due to an increase in retail pricing and higher per-subscriber advertising revenue, partially offset by a higher mix of subscribers to the SVOD Bundle.

The average monthly revenue per paid subscriber for the Hulu SVOD Only service decreased from $13.51 to $12.96 due to lower per-subscriber advertising revenue and a higher mix of subscribers to the SVOD Bundle, partially offset by an increase in retail pricing.

The average monthly revenue per paid subscriber for the Hulu Live TV + SVOD service increased from $75.11 to $87.01 due to increases in retail pricing and higher per-subscriber advertising revenue, partially offset by the impact of the new Hulu Live TV + SVOD offering.

Costs and Expenses

Operating expenses are as follows:


	Quarter Ended				% Change Better (Worse)
(in millions)	January 1, 2022		January 2, 2021
Programming and production costs
Disney+	$	(920)	$	(515)	(79) %
Hulu	(1,832)		(1,624)		(13) %
ESPN+ and other	(427)		(240)		(78) %
Total programming and production costs	(3,179)		(2,379)		(34) %
Other operating expense	(743)		(542)		(37) %
	$	(3,922)	$	(2,921)	(34) %

The increase in programming and production costs at Disney+ was due to more content provided on the service.

Higher programming and production costs at Hulu were due to higher subscriber-based fees for programming the Live TV service due to rate increases and the carriage of more networks.

The increase in programming and production costs at ESPN+ and other was primarily due to new National Hockey League programming.

Other operating expenses increased primarily due to higher technology and distribution costs driven by growth in existing markets and to a lesser extent, expansion to new markets.

Selling, general, administrative and other costs increased $305 million, to $1,275 million from $970 million, due to higher marketing costs primarily due to growth in existing markets and to a lesser extent, expansion to new markets.

Operating Loss from Direct-to-Consumer

The operating loss from Direct-to-Consumer increased $127 million, to $593 million from $466 million, due to higher losses at Disney+, and to a lesser extent, ESPN+, partially offset by improved results at Hulu.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS — (continued)

Supplemental Historical Information for Direct-to-Consumer

The following tables present the number of paid subscribers for Disney+, ESPN+ and Hulu as of:


(in millions)	October 2, 2021	July 3, 2021	April 3, 2021	January 2, 2021
Disney+
Domestic	38.8	37.9	37.3	36.3
International (excluding Disney+ Hotstar)	36.0	33.2	31.1	29.4
Disney+ (excluding Disney+ Hotstar) (1)	74.8	71.1	68.4	65.7
Disney+ Hotstar	43.3	44.9	35.2	29.2
Total Disney+ (1)	118.1	116.0	103.6	94.9

ESPN+	17.1	14.9	13.8	12.1

Hulu
SVOD Only	39.7	39.1	37.8	35.4
Live TV + SVOD	4.0	3.7	3.8	4.0
Total Hulu (1)	43.8	42.8	41.6	39.4


(in millions)	October 3, 2020	June 27, 2020	March 28, 2020	December 28, 2019
Disney+
Domestic	33.8	31.3	28.4	25.0
International (excluding Disney+ Hotstar)	19.5	17.5	5.1	1.5
Disney+ (excluding Disney+ Hotstar) (1)	53.3	48.8	33.5	26.5
Disney+ Hotstar	20.3	8.7	—	—
Total Disney+ (1)	73.7	57.5	33.5	26.5

ESPN+	10.3	8.5	7.9	6.6

Hulu
SVOD Only	32.5	32.1	28.8	27.2
Live TV + SVOD	4.1	3.4	3.3	3.2
Total Hulu (1)	36.6	35.5	32.1	30.4

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

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS — (continued)

The following tables present the average monthly revenue per paid subscriber for the quarter ended:


	October 2, 2021		July 3, 2021		April 3, 2021		January 2, 2021
Disney+
Domestic	$	6.81	$	6.62	$	6.01	$	5.80
International (excluding Disney+ Hotstar)	5.52		5.52		5.14		4.73
Disney+ (excluding Disney+ Hotstar)	6.24		6.12		5.61		5.37
Disney+ Hotstar	0.64		0.78		0.49		0.98
Disney+	4.12		4.16		3.99		4.03

ESPN+	4.74		4.47		4.55		4.48

Hulu
SVOD Only	12.75		13.15		12.08		13.51
Live TV + SVOD	84.89		84.09		81.83		75.11


	October 3, 2020		June 27, 2020		March 28, 2020		December 28, 2019
Disney+
Domestic	$	5.68	$	5.71	$	5.64	$	5.55
International (excluding Disney+ Hotstar)	4.61		4.50		5.50		5.60
Disney+ (excluding Disney+ Hotstar)	5.30		5.31		5.63		5.56
Disney+ Hotstar	0.98		0.57		—		—
Disney+	4.52		4.62		5.63		5.56

ESPN+	4.54		4.18		4.24		4.44

Hulu
SVOD Only	12.59		11.39		12.06		13.15
Live TV + SVOD	71.90		68.11		67.75		59.47

The following tables present operating expenses for the quarter ended:


(in millions)	October 2, 2021		July 3, 2021		April 3, 2021		January 2, 2021
Programming and production costs
Disney+	$	(974)	$	(772)	$	(654)	$	(515)
Hulu	(1,730)		(1,700)		(1,626)		(1,624)
ESPN+ and other	(278)		(297)		(306)		(240)
Total programming and production costs	(2,982)		(2,769)		(2,586)		(2,379)
Other operating expense	(703)		(645)		(628)		(542)
	$	(3,685)	$	(3,414)	$	(3,214)	$	(2,921)

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS — (continued)


(in millions)	October 3, 2020		June 27, 2020		March 28, 2020		December 28, 2019
Programming and production costs
Disney+	$	(490)	$	(352)	$	(291)	$	(219)
Hulu	(1,480)		(1,517)		(1,396)		(1,428)
ESPN+ and other	(222)		(179)		(277)		(273)
Total programming and production costs	(2,192)		(2,048)		(1,964)		(1,920)
Other operating expense	(532)		(498)		(501)		(423)
	$	(2,724)	$	(2,546)	$	(2,465)	$	(2,343)

Content Sales/Licensing and Other

Operating results for Content Sales/Licensing and Other are as follows:


	Quarter Ended				% Change Better (Worse)
(in millions)	January 1, 2022		January 2, 2021
Revenues
TV/SVOD distribution	$	1,195	$	1,022	17 %
Theatrical distribution	529		31		>100 %
Home entertainment	294		300		(2) %
Other	415		349		19 %
Total revenues	2,433		1,702		43 %
Operating expenses	(1,625)		(1,074)		(51) %
Selling, general, administrative and other	(840)		(359)		>(100) %
Depreciation and amortization	(69)		(82)		16 %
Equity in the income of investees	3		1		>100 %
Operating Income	$	(98)	$	188	nm

Revenues

The increase in TV/SVOD distribution revenue reflected higher sales of both episodic television and theatrical film content. The increase in episodic television content sales was primarily due to the sale of more significant titles in the current quarter. Higher theatrical film content sales were driven by an increase in sales of library content and more title availabilities in the free television window.

The increase in theatrical distribution revenue was due to the release of nine titles in the current quarter compared to no significant releases in the prior-year quarter as a result of COVID-19*,* and to a lesser extent, revenue from the co-production of Marvel’s Spider-Man: No Way Home. Significant releases in the current quarter included Eternals and Encanto.

The increase in other revenue was due to higher sales from stage plays as a result of more performances in the current quarter.

Costs and Expenses

Operating expenses are as follows:


	Quarter Ended				% Change Better (Worse)
(in millions)	January 1, 2022		January 2, 2021
Programming and production costs	$	(1,260)	$	(877)	(44) %
Cost of goods sold and distribution costs	(365)		(197)		(85) %
	$	(1,625)	$	(1,074)	(51) %

The increase in programming and production costs was due to higher production cost amortization driven by an increase in theatrical revenue and higher film cost impairments.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS — (continued)

The increase in cost of goods sold and distribution costs was due to higher costs for stage plays as a result of more performances in the current quarter and an increase in theatrical distribution costs as a result of more theatrical releases.

Selling, general administrative and other costs increased $481 million, to $840 million from $359 million, due to higher theatrical marketing costs.

Operating Income from Content Sales/Licensing and Other

Operating income from Content Sales/Licensing and Other decreased $286 million, to a loss of $98 million from income of $188 million, due to lower theatrical distribution results and higher film cost impairments, partially offset by higher TV/SVOD distribution results.

Items Excluded from Segment Operating Income Related to Disney Media and Entertainment Distribution

The following table presents supplemental information for items related to the DMED segment that are excluded from segment operating income:


	Quarter Ended				% Change Better (Worse)
(in millions)	January 1, 2022		January 2, 2021
TFCF and Hulu acquisition amortization(1)	$	(593)	$	(615)	4 %
Restructuring and impairment charges	—		(81)		100 %

(1)In the current quarter, amortization of step-up on film and television costs was $157 million and amortization of intangible assets was $433 million. In the prior-year quarter, amortization of step-up on film and television costs was $167 million and amortization of intangible assets was $445 million.

Disney Parks, Experiences and Products

Operating results for the DPEP segment are as follows:


	Quarter Ended				% Change Better (Worse)
(in millions)	January 1, 2022		January 2, 2021
Revenues
Theme park admissions	$	2,152	$	549	>100 %
Parks & Experiences merchandise, food and beverage	1,626		553		>100 %
Resorts and vacations	1,445		433		>100 %
Merchandise licensing and retail	1,563		1,698		(8) %
Parks licensing and other	448		355		26 %
Total revenues	7,234		3,588		>100 %
Operating expenses	(3,451)		(2,430)		(42) %
Selling, general, administrative and other	(737)		(678)		(9) %
Depreciation and amortization	(593)		(591)		— %
Equity in the loss of investees	(3)		(8)		63 %
Operating Income (Loss)	$	2,450	$	(119)	nm

COVID-19

Revenues at DPEP benefited from the comparison to the significant adverse impact of closures/reduced operating capacity as a result of the impact of COVID-19 on our theme parks and experiences in the prior-year quarter. In fiscal 2022, our domestic parks and experiences are generally operating without significant mandatory COVID-19-related capacity restrictions, such as those that were in place during the prior year; however, we continue to manage capacity to address ongoing COVID-19 considerations with respect to guest and cast health and safety. Certain of our international operations continue to be impacted by mandatory COVID-19-related capacity and travel restrictions.

Walt Disney World Resort, Shanghai Disney Resort and Tokyo Disney Resort were open for the entire quarter in both the current and prior years. Disneyland Resort and Disneyland Paris were open for the entire current quarter, whereas Disneyland Resort was closed for all of the prior-year quarter and Disneyland Paris was closed for approximately 65 days in the prior-year

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS — (continued)

quarter. Hong Kong Disneyland Resort was open for 68 days in the current quarter and 42 days in the prior-year quarter. Cruise ships operated at reduced capacities in the current quarter while sailings were suspended in the prior-year quarter.

Revenues

The increase in theme park admissions revenue was due to attendance growth and higher average per capita ticket revenue, which was due to attendance mix and the introduction of Genie+ and Lightning Lane.

Parks & Experiences merchandise, food and beverage revenue growth was due to higher volumes.

The increase in resorts and vacations revenue was primarily due to increases in occupied hotel room nights, passenger cruise days and average daily hotel room rates.

Merchandise licensing and retail revenue was lower due to a decrease of 9% from retail due to the closure of a substantial number of Disney-branded retail stores in North America and Europe in the second half of fiscal year 2021.

The increase in parks licensing and other revenue was due to higher sponsorship revenue.

In addition to revenue, costs and operating income, management uses the following key metrics to analyze trends and evaluate the overall performance of our theme parks and resorts, and we believe these metrics are useful to investors in analyzing the business:


	Domestic		International(1)		Total
	Quarter Ended		Quarter Ended		Quarter Ended
	Jan 1, 2022	Jan 2, 2021	Jan 1, 2022	Jan 2, 2021	Jan 1, 2022	Jan 2, 2021
Parks
Increase (decrease)
Attendance(2)	>100%	(74) %	>100%	(61) %	>100%	(71) %
Per Capita Guest Spending(3)	30 %	1 %	14 %	(9) %	32 %	(5) %
Hotels
Occupancy(4)	73 %	28 %	52 %	13 %	68 %	24 %
Available Room Nights (in thousands)(5)	2,542	2,644	799	799	3,341	3,443
Per Room Guest Spending(6)	$473	$363	$380	$372	$456	$364

(1)Per capita guest spending growth rate is stated on a constant currency basis. Per room guest spending is stated at the average foreign exchange rate for the same period in the prior year.

(2)Attendance is used to analyze volume trends at our theme parks and is based on the number of unique daily entries, i.e. a person visiting multiple theme parks in a single day is counted only once. Our attendance count includes complimentary entries but excludes entries by children under the age of three.

(3)Per capita guest spending is used to analyze guest spending trends and is defined as total revenue from ticket sales and sales of food, beverage and merchandise in our theme parks, divided by total theme park attendance.

(4)Occupancy is used to analyze the usage of available capacity at hotels and is defined as the number of room nights occupied by guests as a percentage of available hotel room nights.

(5)Available hotel room nights are defined as the total number of room nights that are available at our hotels and at Disney Vacation Club (DVC) properties located at our theme parks and resorts that are not utilized by DVC members. Available hotel room nights include rooms temporarily taken out of service.

(6)Per room guest spending is used to analyze guest spending at our hotels and is defined as total revenue from room rentals and sales of food, beverage and merchandise at our hotels, divided by total occupied hotel room nights.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS — (continued)

Costs and Expenses

Operating expenses are as follows:


	Quarter Ended				% Change Better (Worse)
(in millions)	January 1, 2022		January 2, 2021
Operating labor	$	(1,515)	$	(1,030)	(47) %
Cost of goods sold and distribution costs	(798)		(587)		(36) %
Infrastructure costs	(576)		(522)		(10) %
Other operating expense	(562)		(291)		(93) %
	$	(3,451)	$	(2,430)	(42) %

The increases in operating labor, cost of goods sold and distribution costs and other operating expenses were due to higher volumes while the increase in infrastructure costs was due to higher volumes and increased technology spending.

Selling, general, administrative and other costs increased $59 million, to $737 million from $678 million, due to higher marketing spend.

Segment Operating Income (Loss)

Segment operating income increased from a loss of $0.1 billion to a profit of $2.5 billion due to increases at our domestic parks and resorts and, to a lesser extent, international parks and resorts, partially offset by a decrease at our consumer products business.

The following table presents supplemental revenue and operating income (loss) detail for the DPEP segment:


	Quarter Ended				% Change Better (Worse)
(in millions)	January 1, 2022		January 2, 2021
Supplemental revenue detail
Parks & Experiences
Domestic	$	4,800	$	1,489	>100 %
International	861		378		>100 %
Consumer Products	1,573		1,721		(9) %
	$	7,234	$	3,588	>100 %
Supplemental operating income (loss) detail
Parks & Experiences
Domestic	$	1,555	$	(798)	nm
International	21		(262)		nm
Consumer Products	874		941		(7) %
	$	2,450	$	(119)	nm

Items Excluded from Segment Operating Income Related to Disney Parks, Experiences and Products

The following table presents supplemental information for items related to the DPEP segment that are excluded from segment operating income:


	Quarter Ended				% Change Better (Worse)
(in millions)	January 1, 2022		January 2, 2021
Restructuring and impairment charges	$	—	$	(28)	100 %
TFCF and Hulu acquisition amortization	(2)		(2)		— %

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS — (continued)

CORPORATE AND UNALLOCATED SHARED EXPENSES


	Quarter Ended				% Change Better (Worse)
(in millions)	January 1, 2022		January 2, 2021
Corporate and unallocated shared expenses	$	(228)	$	(232)	2 %

FINANCIAL CONDITION

The change in cash and cash equivalents is as follows:


	Quarter Ended				% Change Better (Worse)
(in millions)	January 1, 2022		January 2, 2021
Cash (used in) provided by operations - continuing operations	$	(209)	$	75	nm
Cash used in investing activities - continuing operations	(987)		(732)		(35) %
Cash used in financing activities - continuing operations	(280)		(333)		16 %
Cash provided by operations - discontinued operations	8		9		>100 %

Cash used in financing activities - discontinued operations	(12)		—		nm
Impact of exchange rates on cash, cash equivalents and restricted cash	(35)		139		nm
Change in cash, cash equivalents and restricted cash	$	(1,515)	$	(842)	nm

Operating Activities

Cash used in continuing operating activities was $0.2 billion for the current quarter compared to cash provided by continuing operating activities of $0.1 billion in the prior-year quarter. The decrease in cash provided by operations was due to lower operating cash flow at DMED, partially offset by higher operating cash flow at DPEP. The decrease in operating cash flow at DMED was due to higher operating cash disbursements and higher spending on film and television productions, partially offset by higher operating cash receipts. Higher operating cash disbursements were driven by increased operating expenses while higher operating cash receipts were due to revenue growth. The increase in operating cash flow at DPEP was due to higher operating cash receipts driven by higher revenue, partially offset by an increase in operating cash disbursements due to higher operating expenses.

Produced and licensed programming costs

The DMED segment incurs costs to produce and license feature film and television content. Film and television production costs include all internally produced content such as live-action and animated feature films, television series, television specials and theatrical stage plays. Programming costs include film or television content rights licensed from third parties for use on the Company’s Linear Networks and DTC services. Programming assets are generally recorded when the programming becomes available to us with a corresponding increase in programming liabilities.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS — (continued)

The Company’s film and television production and programming activity for the quarter ended January 1, 2022 and January 2, 2021 are as follows:


	Quarter Ended
(in millions)	January 1, 2022		January 2, 2021
Beginning balances:
Produced and licensed programming assets	$	31,732	$	27,193
Programming liabilities	(4,113)		(4,099)
	27,619		23,094
Spending:
Programming licenses and rights	3,357		2,709
Produced film and television content	3,598		2,869
	6,955		5,578
Amortization:
Programming licenses and rights	(4,811)		(4,539)
Produced film and television content	(2,651)		(1,810)
	(7,462)		(6,349)
Change in internally produced and licensed content costs	(507)		(771)

Other non-cash activity	205		185
Ending balances:
Produced and licensed programming assets	31,794		27,352
Programming liabilities	(4,477)		(4,844)
	$	27,317	$	22,508

The Company currently expects its fiscal 2022 spend on produced and licensed content, including sports rights, to be as much as approximately $33 billion, or approximately $8 billion more than fiscal 2021 spend of $25 billion. The increase is driven by higher spend to support our DTC expansion and generally assumes no significant disruptions to production due to COVID-19.

Investing Activities

Investing activities consist principally of investments in parks, resorts and other property and acquisition and divestiture activity. The Company’s investments in parks, resorts and other property for the quarter ended January 1, 2022 and January 2, 2021 are as follows:


(in millions)	January 1, 2022		January 2, 2021




Disney Media and Entertainment Distribution	$	169	$	177
Disney Parks, Experiences and Products
Domestic	457		336
International	202		183

Total Disney Parks, Experiences and Products	659		519


Corporate	153		64
	$	981	$	760

Capital expenditures at the DMED segment primarily reflect investments in technology and in facilities and equipment for expanding and upgrading broadcast centers, production facilities and television station facilities.

Capital expenditures for the DPEP segment are principally for theme park and resort expansion, new attractions, cruise ships, capital improvements and technology. The increase in the current period compared to the prior-year period was primarily due to the temporary suspension of certain capital projects in the prior-year period as a result of COVID-19.

Capital expenditures at Corporate primarily reflect investments in corporate facilities, technology and equipment. The increase in the current period compared to the prior-year period was driven by higher spend on corporate facilities.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS — (continued)

The Company currently expects its fiscal 2022 capital expenditures will be approximately $6.1 billion compared to fiscal 2021 capital expenditures of $3.6 billion. The expected increase in capital expenditures is due to higher spending on cruise ship fleet expansion, corporate facilities and production facilities and technology at the DMED segment.

Financing Activities

Cash used in financing activities was $0.3 billion in the both the current quarter and the prior-year quarter. In the current quarter, the Company had a decrease in net borrowings of $0.1 billion compared to a decrease in net borrowings of $0.3 billion in the prior-year quarter. The lower decrease in net borrowings was partially offset by lower proceeds from exercise of stock options ($33 million in the current quarter compared to $209 million in the prior-year quarter.)

See Note 5 to the Condensed Consolidated Financial Statements for a summary of the Company’s borrowing activities during the quarter ended January 1, 2022 and information regarding the Company’s bank facilities. The Company may use operating cash flows, commercial paper borrowings up to the amount of its unused $12.25 billion bank facilities maturing in March 2022, March 2023 and March 2025, and incremental term debt issuances, to retire or refinance other borrowings before or as they come due.

The Company’s operating cash flow and access to the capital markets can be impacted by factors outside of its control, including COVID-19, which had an adverse impact on the Company’s operating cash flows in fiscal 2020 and 2021. We believe that the Company’s financial condition remains strong and that its cash balances, other liquid assets, operating cash flows, access to debt and equity capital markets and borrowing capacity under current bank facilities, taken together, provide adequate resources to fund ongoing operating requirements and upcoming debt maturities as well as future capital expenditures related to the expansion of existing businesses and development of new projects. Depending on the unknowable duration and severity of the future impacts of COVID-19 and its variants, the Company may take mitigating actions in the future such as continuing to not declare dividends (the Company did not pay a dividend with respect to fiscal 2020 and 2021 operations and has not declared or paid a dividend with respect to fiscal 2022 operations); reducing or not making certain payments, such as some contributions to our pension and postretirement medical plans; raising financing; suspending capital spending; reducing film and television content investments; or implementing furloughs or reductions in force. The impacts on our operating cash flows are subject to uncertainty and may require us to rely more heavily on external funding sources, such as debt and other types of financing.

The Company’s borrowing costs can also be impacted by short- and long-term debt ratings assigned by nationally recognized rating agencies, which are based, in significant part, on the Company’s performance as measured by certain credit metrics such as leverage and interest coverage ratios. As of January 1, 2022, Moody’s Investors Service’s long- and short-term debt ratings for the Company were A2 and P-1 (Stable), respectively, Standard and Poor’s long- and short-term debt ratings for the Company were BBB+ and A-2 (Stable), respectively, and Fitch’s long- and short-term debt ratings for the Company were A- and F2 (Stable), respectively. The Company’s bank facilities contain only one financial covenant, relating to interest coverage, which the Company met on January 1, 2022, by a significant margin. The Company’s bank facilities also specifically exclude certain entities, including the Asia Theme Parks, from any representations, covenants or events of default.

SUPPLEMENTAL GUARANTOR FINANCIAL INFORMATION

On March 20, 2019 as part of the acquisition of TFCF, The Walt Disney Company (“TWDC”) became the ultimate parent of TWDC Enterprises 18 Corp. (formerly known as The Walt Disney Company) (“Legacy Disney”). Legacy Disney and TWDC are collectively referred to as “Obligor Group”, and individually, as a “Guarantor”. Concurrent with the close of the TFCF acquisition, $16.8 billion of TFCF’s assumed public debt (which then constituted 96% of such debt) was exchanged for senior notes of TWDC (the “exchange notes”) issued pursuant to an exemption from registration under the Securities Act of 1933, as amended (the “Securities Act”), pursuant to an Indenture, dated as of March 20, 2019, between TWDC, Legacy Disney, as guarantor, and Citibank, N.A., as trustee (the “TWDC Indenture”) and guaranteed by Legacy Disney. On November 26, 2019, $14.0 billion of the outstanding exchange notes were exchanged for new senior notes of TWDC registered under the Securities Act, issued pursuant to the TWDC Indenture and guaranteed by Legacy Disney. In addition, contemporaneously with the closing of the March 20, 2019 exchange offer, TWDC entered into a guarantee of the registered debt securities issued by Legacy Disney under the Indenture dated as of September 24, 2001 between Legacy Disney and Wells Fargo Bank, National Association, as trustee (the “2001 Trustee”) (as amended by the first supplemental indenture among Legacy Disney, as issuer, TWDC, as guarantor, and the 2001 Trustee, as trustee).

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS — (continued)

Other subsidiaries of the Company do not guarantee the registered debt securities of either TWDC or Legacy Disney (such subsidiaries are referred to as the “non-Guarantors”). The par value and carrying value of total outstanding and guaranteed registered debt securities of the Obligor Group at January 1, 2022 was as follows:


	TWDC				Legacy Disney
(in millions)	Par Value		Carrying Value		Par Value		Carrying Value
Registered debt with unconditional guarantee	$	37,339	$	39,008	$	10,588	$	10,617

The guarantees by TWDC and Legacy Disney are full and unconditional and cover all payment obligations arising under the guaranteed registered debt securities. The guarantees may be released and discharged upon (i) as a general matter, the indebtedness for borrowed money of the consolidated subsidiaries of TWDC in aggregate constituting no more than 10% of all consolidated indebtedness for borrowed money of TWDC and its subsidiaries (subject to certain exclusions), (ii) upon the sale, transfer or disposition of all or substantially all of the equity interests or all or substantially all, or substantially as an entirety, the assets of Legacy Disney to a third party, and (iii) other customary events constituting a discharge of a guarantor’s obligations. In addition, in the case of Legacy Disney’s guarantee of registered debt securities issued by TWDC, Legacy Disney may be released and discharged from its guarantee at any time Legacy Disney is not a borrower, issuer or guarantor under certain material bank facilities or any debt securities.

Operations are conducted almost entirely through the Company’s subsidiaries. Accordingly, the Obligor Group’s cash flow and ability to service its debt, including the public debt, are dependent upon the earnings of the Company’s subsidiaries and the distribution of those earnings to the Obligor Group, whether by dividends, loans or otherwise. Holders of the guaranteed registered debt securities have a direct claim only against the Obligor Group.

Set forth below is summarized financial information for the Obligor Group on a combined basis after elimination of (i) intercompany transactions and balances between TWDC and Legacy Disney and (ii) equity in the earnings from and investments in any subsidiary that is a non-Guarantor. This summarized financial information has been prepared and presented pursuant to the Securities and Exchange Commission Regulation S-X Rule 13-01, “Financial Disclosures about Guarantors and Issuers of Guaranteed Securities” and is not intended to present the financial position or results of operations of the Obligor Group in accordance with GAAP.


Results of operations (in millions)	Quarter Ended January 1, 2022:
Revenues	$	—
Costs and expenses	—
Net income (loss) from continuing operations	(291)
Net income (loss)	(291)
Net income (loss) attributable to TWDC shareholders	(291)


Balance Sheet (in millions)	January 1, 2022		October 2, 2021
Current assets	$	8,451	$	9,506
Noncurrent assets	1,727		1,689
Current liabilities	7,662		6,878
Noncurrent liabilities (excluding intercompany to non-Guarantors)	50,154		51,439
Intercompany payables to non-Guarantors	147,209		147,629

COMMITMENTS AND CONTINGENCIES

Legal Matters

As disclosed in Note 13 to the Condensed Consolidated Financial Statements, the Company has exposure for certain legal matters.

Guarantees

See Note 15 to the Consolidated Financial Statements in the 2021 Annual Report on Form 10-K.

Tax Matters

As disclosed in Note 10 to the Consolidated Financial Statements in the 2021 Annual Report on Form 10-K, the Company has exposure for certain tax matters.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS — (continued)

Contractual Commitments

See Note 15 to the Consolidated Financial Statements in the 2021 Annual Report on Form 10-K.

OTHER MATTERS

Accounting Policies and Estimates

We believe that the application of the following accounting policies, which are important to our financial position and results of operations, require significant judgments and estimates on the part of management. For a summary of our significant accounting policies, including the accounting policies discussed below, see Note 2 to the Consolidated Financial Statements in the 2021 Annual Report on Form 10-K.

Produced and Acquired/Licensed Content Costs

We amortize and test for impairment capitalized film and television production costs based on whether the content is predominantly monetized individually or as a group. See Note 7 to the Condensed Consolidated Financial Statements for further discussion.

Production costs that are classified as individual are amortized based upon the ratio of the current period’s revenues to the estimated remaining total revenues (Ultimate Revenues).

With respect to produced films intended for theatrical release, the most sensitive factor affecting our estimate of Ultimate Revenues is theatrical performance. Revenues derived from other markets subsequent to the theatrical release are generally highly correlated with theatrical performance. Theatrical performance varies primarily based upon the public interest and demand for a particular film, the popularity of competing films at the time of release and the level of marketing effort. Upon a film’s release and determination of the theatrical performance, the Company’s estimates of revenues from succeeding windows and markets, which may include imputed license fees for content that is used on our DTC streaming services, are revised based on historical relationships and an analysis of current market trends.

With respect to capitalized television production costs that are classified as individual, the most sensitive factors affecting estimates of Ultimate Revenues are program ratings of the content on our licensees’ platforms. Program ratings, which are an indication of market acceptance, directly affect the program’s ability to generate advertising and subscriber revenues and are correlated with the license fees we can charge for the content in subsequent windows and for subsequent seasons.

Ultimate Revenues are reassessed each reporting period and the impact of any changes on amortization of production cost is accounted for as if the change occurred at the beginning of the current fiscal year. If our estimate of Ultimate Revenues decreases, amortization of costs may be accelerated or result in an impairment. Conversely, if our estimate of Ultimate Revenues increases, cost amortization may be slowed.

Produced content costs that are part of a group and acquired/licensed content costs are amortized based on projected usage typically resulting in an accelerated or straight-line amortization pattern. The determination of projected usage requires judgment and is reviewed periodically for changes. If projected usage changes we may need to accelerate or slow the recognition of amortization expense.

The amortization of multi-year sports rights is based on our projections of revenues over the contract period, which include advertising revenue and an allocation of affiliate revenue (relative value). If the annual contractual payments related to each season approximate each season’s estimated relative value, we expense the related contractual payments during the applicable season. If estimated relative values by year were to change significantly, amortization of our sports rights costs may be accelerated or slowed.

Revenue Recognition

The Company has revenue recognition policies for its various operating segments that are appropriate to the circumstances of each business. Refer to Note 2 to the Consolidated Financial Statements in the 2021 Annual Report on Form 10-K for our revenue recognition policies.

Pension and Postretirement Medical Plan Actuarial Assumptions

The Company’s pension and postretirement medical benefit obligations and related costs are calculated using a number of actuarial assumptions. Two critical assumptions, the discount rate and the expected return on plan assets, are important elements of expense and/or liability measurement, which we evaluate annually. See Note 11 to the Consolidated Financial Statements in the 2021 Annual Report on Form 10-K for estimated impacts of changes in these assumptions. Other assumptions include the healthcare cost trend rate and employee demographic factors such as retirement patterns, mortality, turnover and rate of compensation increase.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS — (continued)

The discount rate enables us to state expected future cash payments for benefits as a present value on the measurement date. A lower discount rate increases the present value of benefit obligations and increases pension and postretirement medical expense. The guideline for setting this rate is a high-quality long-term corporate bond rate. The Company’s discount rate was determined by considering yield curves constructed of a large population of high-quality corporate bonds and reflects the matching of the plans’ liability cash flows to the yield curves.

To determine the expected long-term rate of return on the plan assets, we consider the current and expected asset allocation, as well as historical and expected returns on each plan asset class. A lower expected rate of return on plan assets will increase pension and postretirement medical expense.

Goodwill, Other Intangible Assets, Long-Lived Assets and Investments

The Company is required to test goodwill and other indefinite-lived intangible assets for impairment on an annual basis and if current events or circumstances require, on an interim basis. The Company performs its annual test of goodwill and indefinite-lived intangible assets for impairment in its fiscal fourth quarter.

Goodwill is allocated to various reporting units, which are an operating segment or one level below the operating segment. To test goodwill for impairment, the Company first performs a qualitative assessment to determine if it is more likely than not that the carrying amount of a reporting unit exceeds its fair value. If it is, a quantitative assessment is required. Alternatively, the Company may bypass the qualitative assessment and perform a quantitative impairment test.

The qualitative assessment requires the consideration of factors such as recent market transactions, macroeconomic conditions, and changes in projected future cash flows of the reporting unit.

The quantitative assessment compares the fair value of each goodwill reporting unit to its carrying amount, and to the extent the carrying amount exceeds the fair value, an impairment of goodwill is recognized for the excess up to the amount of goodwill allocated to the reporting unit.

The impairment test for goodwill requires judgment related to the identification of reporting units, the assignment of assets and liabilities to reporting units including goodwill, and the determination of fair value of the reporting units. To determine the fair value of our reporting units, we apply what we believe to be the most appropriate valuation methodology for each of our reporting units. We generally use a present value technique (discounted cash flows) corroborated by market multiples when available and as appropriate. The discounted cash flow analyses are sensitive to our estimates of future revenue growth and margins for these businesses as well as the discount rates used to calculate the present value of future cash flows. In times of adverse economic conditions in the global economy, the Company’s long-term cash flow projections are subject to a greater degree of uncertainty than usual. We believe our estimates are consistent with how a marketplace participant would value our reporting units. If we had established different reporting units or utilized different valuation methodologies or assumptions, the impairment test results could differ, and we could be required to record impairment charges.

To test its other indefinite-lived intangible assets for impairment, the Company first performs a qualitative assessment to determine if it is more likely than not that the carrying amount of each of its indefinite-lived intangible assets exceeds its fair value. If it is, a quantitative assessment is required. Alternatively, the Company may bypass the qualitative assessment and perform a quantitative impairment test.

The qualitative assessment requires the consideration of factors such as recent market transactions, macroeconomic conditions, and changes in projected future cash flows.

The quantitative assessment compares the fair value of an indefinite-lived intangible asset to its carrying amount. If the carrying amount of an indefinite-lived intangible asset exceeds its fair value, an impairment loss is recognized for the excess. Fair values of indefinite-lived intangible assets are determined based on discounted cash flows or appraised values, as appropriate.

The Company tests long-lived assets, including amortizable intangible assets, for impairment whenever events or changes in circumstances (triggering events) indicate that the carrying amount may not be recoverable. Once a triggering event has occurred, the impairment test employed is based on whether the Company’s intent is to hold the asset for continued use or to hold the asset for sale. The impairment test for assets held for use requires a comparison of the estimated undiscounted future cash flows expected to be generated over the useful life of the significant assets of an asset group to the carrying amount of the asset group. An asset group is generally established by identifying the lowest level of cash flows generated by a group of assets that are largely independent of the cash flows of other assets and could include assets used across multiple businesses. If the carrying amount of an asset group exceeds the estimated undiscounted future cash flows, an impairment would be measured as the difference between the fair value of the asset group and the carrying amount of the asset group. For assets held for sale, to the extent the carrying value is greater than the asset’s fair value less costs to sell, an impairment loss is recognized for the difference. Determining whether a long-lived asset is impaired requires various estimates and assumptions, including whether a

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS — (continued)

triggering event has occurred, the identification of asset groups, estimates of future cash flows and the discount rate used to determine fair values.

The Company has investments in equity securities. For equity securities that do not have a readily determinable fair value, we consider forecasted financial performance of the investee companies, as well as volatility inherent in the external markets for these investments. If these forecasts are not met, impairment charges may be recorded.

Allowance for Credit Losses

We evaluate our allowance for credit losses and estimate collectability of 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, including COVID-19, our estimates and judgments with respect to the collectability of our receivables are subject to greater uncertainty than in more stable periods. If our estimate of uncollectible accounts is too low, costs and expenses may increase in future periods, and if it is too high, costs and expenses may decrease in future periods. See Note 3 to the Condensed Consolidated Financial Statements for additional discussion.

Contingencies and Litigation

We are currently involved in certain legal proceedings and, as required, have accrued estimates of the probable and estimable losses for the resolution of these proceedings. These estimates are based upon an analysis of potential results, assuming a combination of litigation and settlement strategies and have been developed in consultation with outside counsel as appropriate. From time to time, we are also involved in other contingent matters for which we accrue estimates for a probable and estimable loss. It is possible, however, that future results of operations for any particular quarterly or annual period could be materially affected by changes in our assumptions or the effectiveness of our strategies related to legal proceedings or our assumptions regarding other contingent matters. See Note 13 to the Condensed Consolidated Financial Statements for more detailed information on litigation exposure.

Income Tax

As a matter of course, the Company is regularly audited by federal, state and foreign tax authorities. From time to time, these audits result in proposed assessments. Our determinations regarding the recognition of income tax benefits are made in consultation with outside tax and legal counsel, where appropriate, and are based upon the technical merits of our tax positions in consideration of applicable tax statutes and related interpretations and precedents and upon the expected outcome of proceedings (or negotiations) with taxing and legal authorities. The tax benefits ultimately realized by the Company may differ from those recognized in our future financial statements based on a number of factors, including the Company’s decision to settle rather than litigate a matter, relevant legal precedent related to similar matters and the Company’s success in supporting its filing positions with taxing authorities.

Impacts of COVID-19 on Accounting Policies and Estimates

In light of the currently unknown ultimate duration and severity of COVID-19, we face a greater degree of uncertainty than normal in making the judgments and estimates needed to apply our significant accounting policies and may make changes to these estimates and judgments over time. This could result in meaningful impacts to our financial statements in future periods as discussed below.

Produced and Acquired/Licensed Content Costs

Certain of our completed or in progress film and television productions have had their initial release dates delayed. The duration of the delay, market conditions when we release the content, or a change in our release strategy (e.g. bypassing certain distribution windows) could have an impact on Ultimate Revenues, which may accelerate amortization or result in an impairment of capitalized film and television production costs.

Given the ongoing uncertainty around live sporting events continuing uninterrupted, the amount and timing of revenues derived from the broadcast of these events may differ from the projections of revenues that support our amortization pattern of the rights costs we pay for these events. Such changes in revenues could result in an acceleration or slowing of the amortization of our sports rights costs.

Revenue Recognition

Certain of our affiliate contracts contain commitments with respect to the content to be aired on our television networks (e.g. live sports or original content). If there are delays or cancellations of live sporting events or disruptions to film and television content production activities, we may need to assess the impact on our contractual obligations and adjust the revenue that we recognize related to these contracts.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS — (continued)

Goodwill, Other Intangible Assets, Long-Lived Assets and Investments

Given the ongoing impacts of COVID-19 across our businesses, the projected cash flows that we use to assess the fair value of our businesses and assets for purposes of impairment testing are subject to greater uncertainty than normal. If in the future we reduce our estimate of cash flow projections, we may need to impair some of these assets.

Income Tax (See Note 8 to the Condensed Consolidated Financial Statements)

The determination of interim period tax provisions generally requires the use of a forecasted full-year effective tax rate, which in turn requires a full year forecast of earnings before tax and tax expense. Given the uncertainties created by COVID-19, these forecasts are subject to greater than normal variability, which could lead to volatility in our reported quarterly effective tax rates.

Risk Management Contracts

The Company employs a variety of financial instruments (derivatives) including interest rate and cross-currency swap agreements and forward and option contracts to manage its exposure to fluctuations in interest rates, foreign currency exchange rates and commodity prices.

As a result of the impact of COVID-19 on our businesses, our projected cash flows or projected usage of commodities are subject to a greater degree of uncertainty, which may cause us to recognize gains or losses on our hedging instruments in different periods than the hedged transaction.

New Accounting Pronouncements

See Note 17 to the Condensed Consolidated Financial Statements for information regarding new accounting pronouncements.

MARKET RISK

The Company is exposed to the impact of interest rate changes, foreign currency fluctuations, commodity fluctuations and changes in the market values of its investments.

Policies and Procedures

In the normal course of business, we employ established policies and procedures to manage the Company’s exposure to changes in interest rates, foreign currencies and commodities using a variety of financial instruments.

Our objectives in managing exposure to interest rate changes are to limit the impact of interest rate volatility on earnings and cash flows and to lower overall borrowing costs. To achieve these objectives, we primarily use interest rate swaps to manage net exposure to interest rate changes related to the Company’s portfolio of borrowings. By policy, the Company targets fixed-rate debt as a percentage of its net debt between minimum and maximum percentages.

Our objective in managing exposure to foreign currency fluctuations is to reduce volatility of earnings and cash flow in order to allow management to focus on core business issues and challenges. Accordingly, the Company enters into various contracts that change in value as foreign exchange rates change to protect the U.S. dollar equivalent value of its existing foreign currency assets, liabilities, commitments and forecasted foreign currency revenues and expenses. The Company utilizes option strategies and forward contracts that provide for the purchase or sale of foreign currencies to hedge probable, but not firmly committed, transactions. The Company also uses forward and option contracts to hedge foreign currency assets and liabilities. The principal foreign currencies hedged are the euro, Japanese yen, British pound, Chinese yuan and Canadian dollar. Cross-currency swaps are used to effectively convert foreign currency denominated borrowings to U.S. dollar denominated borrowings. By policy, the Company maintains hedge coverage between minimum and maximum percentages of its forecasted foreign exchange exposures generally for periods not to exceed four years. The gains and losses on these contracts offset changes in the U.S. dollar equivalent value of the related exposures. The economic or political conditions in a country could reduce our ability to hedge exposure to currency fluctuations in the country or our ability to repatriate revenue from the country.

Our objectives in managing exposure to commodity fluctuations are to use commodity derivatives to reduce volatility of earnings and cash flows arising from commodity price changes. The amounts hedged using commodity swap contracts are based on forecasted levels of consumption of certain commodities, such as fuel oil and gasoline.

Our objectives in managing exposures to market-based fluctuations in certain retirement liabilities are to use total return swap contracts to reduce the volatility of earnings arising from changes in these retirement liabilities. The amounts hedged using total return swap contracts are based on estimated liability balances.

It is the Company’s policy to enter into foreign currency and interest rate derivative transactions and other financial instruments only to the extent considered necessary to meet its objectives as stated above. The Company does not enter into these transactions or any other hedging transactions for speculative purposes.

Previous: Item 1. Financial Statements · Next: Item 3. Quantitative and Qualitative Disclosures about Market Risk.