Segment Information

9 Months Ended

Jul. 02, 2022

Segment Information

Segment Information

The Company’s operations are conducted in the Disney Media and Entertainment Distribution (DMED) and Disney Parks, Experiences and Products (DPEP) segments. Our operating segments report separate financial information, which is evaluated regularly by the Chief Executive Officer in order to decide how to allocate resources and assess performance.

Segment operating results reflect earnings before corporate and unallocated shared expenses, restructuring and impairment charges, net other income, net interest expense, income taxes and noncontrolling interests. Segment operating income includes equity in the income of investees and excludes impairments of certain equity investments and acquisition accounting amortization of TFCF Corporation (TFCF) and Hulu assets (i.e. intangible assets and the fair value step-up for film and television costs) recognized in connection with the TFCF acquisition 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.

Impact of COVID-19

Since early 2020, the world has been, and continues to be, impacted by the novel coronavirus (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.

In fiscal 2022, our domestic parks and resorts are generally operating without significant COVID-19-related capacity restrictions, such as those that were generally in place during the prior year. In addition, our cruise ships have generally been operating without COVID-19-related capacity restrictions since April 2022. Certain of our international parks and resorts continue to be impacted by COVID-19-related closures and 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. Thus far, we have generally been able to release our films theatrically in fiscal 2022, although certain markets continue to impose restrictions on theater openings and capacity.

The impact of these disruptions and the extent of their adverse impact on our financial and operating 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 COVID-19 and its variants, and among other things, the impact of governmental actions imposed in response to COVID-19 and individuals’ and companies’ risk tolerance regarding health matters going forward. We have incurred and will continue to incur additional costs to address government regulations and the safety of our employees, guests and talent.

Segment revenues and segment operating income (loss) are as follows:

	Quarter Ended				Nine Months Ended
	July 2, 2022		July 3, 2021		July 2, 2022		July 3, 2021
Revenues:
Disney Media and Entertainment Distribution	$	14,110	$	12,681	$	42,315	$	37,782
Disney Parks, Experiences and Products	7,394		4,341		21,280		11,102
Total segment revenues	$	21,504	$	17,022	$	63,595	$	48,884
Segment operating income (loss):
Disney Media and Entertainment Distribution	$	1,381	$	2,026	$	4,133	$	6,348
Disney Parks, Experiences and Products	2,186		356		6,391		(169)
Total segment operating income(1)	$	3,567	$	2,382	$	10,524	$	6,179

(1) Equity in the income of investees is included in segment operating income as follows:

	Quarter Ended				Nine Months Ended
	July 2, 2022		July 3, 2021		July 2, 2022		July 3, 2021
Disney Media and Entertainment Distribution	$	230	$	220	$	693	$	681
Disney Parks, Experiences and Products	(2)		(5)		(10)		(22)
Equity in the income of investees included in segment operating income	228		215		683		659
Amortization of TFCF intangible assets related to equity investees	(3)		(4)		(9)		(11)
Equity in the income of investees, net	$	225	$	211	$	674	$	648

A reconciliation of segment revenues to total revenues is as follows:

	Quarter Ended				Nine Months Ended
	July 2, 2022		July 3, 2021		July 2, 2022		July 3, 2021
Segment revenues	$	21,504	$	17,022	$	63,595	$	48,884
Content License Early Termination(1)	—		—		(1,023)		—
Total revenues	$	21,504	$	17,022	$	62,572	$	48,884

(1)During the nine months ended July 2, 2022, the Company recognized a reduction in revenue for amounts to early terminate certain license agreements with a customer for film and television content, which was delivered in previous years, in order for the Company to use the content primarily on our direct-to-consumer services (Content License Early Termination). Because the content is functional intellectual property (IP), we recognized substantially all of the consideration to be paid by the customer under the licenses as revenue in prior years when the content was made available under the agreements. Consequently, we have recorded the amounts to terminate the license agreements, net of remaining amounts of deferred revenue, as a reduction of revenue in the current nine-month period.

A reconciliation of segment operating income to income from continuing operations before income taxes is as follows:

	Quarter Ended				Nine Months Ended
	July 2, 2022		July 3, 2021		July 2, 2022		July 3, 2021
Segment operating income	$	3,567	$	2,382	$	10,524	$	6,179
Content License Early Termination	—		—		(1,023)		—
Corporate and unallocated shared expenses	(325)		(212)		(825)		(645)
Restructuring and impairment charges	(42)		(35)		(237)		(562)
Other income (expense), net(1)	(136)		(91)		(730)		214
Interest expense, net	(360)		(445)		(1,026)		(1,089)
TFCF and Hulu acquisition amortization(2)	(585)		(604)		(1,774)		(1,826)
Income from continuing operations before income taxes	$	2,119	$	995	$	4,909	$	2,271

(1)See Note 4 for a discussion of amounts in other income (expense), net.

(2)For the quarter ended July 2, 2022 amortization of intangible assets, step-up of film and television costs and intangibles related to TFCF equity investees were $422 million, $160 million and $3 million, respectively. For the nine months ended July 2, 2022 amortization of intangible assets, step-up of film and television costs and intangibles related to TFCF equity investees were $1,292 million, $473 million and $9 million, respectively. For the quarter ended July 3, 2021 amortization of intangible assets, step-up of film and television costs and intangibles related to TFCF equity investees were $434 million, $166 million, and $4 million, respectively. For the nine months ended July 3, 2021 amortization of intangible assets, step-up of film and television costs and intangibles related to TFCF equity investees were $1,328 million, $487 million and $11 million, respectively.

Goodwill

The changes in the carrying amount of goodwill are as follows:

	DMED		DPEP		Total
Balance at October 2, 2021	$	72,521	$	5,550	$	78,071
Currency translation adjustments and other, net	(126)		—		(126)
Balance at July 2, 2022	$	72,395	$	5,550	$	77,945