WALT DISNEY CO/ (Form: 10-Q, Received: 02/05/2013 17:04:41)

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF

THE SECURITIES EXCHANGE ACT OF 1934



For the Quarterly Period Ended		Commission File Number 1-11605
December 29, 2012




Incorporated in Delaware		I.R.S. Employer Identification
		No. 95-4545390

500 South Buena Vista Street, Burbank, California 91521

(818) 560-1000

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer”, “accelerated filer”, and “smaller reporting company” in Rule 12b-2 of the Exchange Act (Check one).

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ¨ No x

There were 1,805,436,313 shares of common stock outstanding as of January 30, 2013 .

PART I. FINANCIAL INFORMATION

Item 1: Financial Statements

THE WALT DISNEY COMPANY

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(unaudited; in millions, except per share data)



	Quarter Ended
	December 29, 2012			December 31, 2011
Revenues	$	11,341		$	10,779
Costs and expenses	(9,249		)	(8,587		)
Restructuring and impairment charges	—			(6		)
Other income/(expense), net	(102		)	—
Net interest expense	(72		)	(90		)
Equity in the income of investees	110			145
Income before income taxes	2,028			2,241
Income taxes	(590		)	(720		)
Net income	1,438			1,521
Less: Net income attributable to noncontrolling interests	(56		)	(57		)
Net income attributable to The Walt Disney Company (Disney)	$	1,382		$	1,464

Earnings per share attributable to Disney:
Diluted	$	0.77		$	0.80
Basic	$	0.78		$	0.81

Weighted average number of common and common equivalent shares outstanding:
Diluted	1,800			1,824
Basic	1,777			1,798

See Notes to Condensed Consolidated Financial Statements

THE WALT DISNEY COMPANY

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(unaudited; in millions)



	Quarter Ended
	December 29, 2012			December 31, 2011
Net income	$	1,438		$	1,521
Other comprehensive income (loss), net of tax:
Market value adjustments for investments	17			2
Market value adjustments for hedges	59			30
Pension and postretirement medical plan adjustments	73			55
Foreign currency translation and other	2			(37		)
Other comprehensive income (loss)	151			50
Comprehensive income	1,589			1,571
Less: Net income attributable to noncontrolling interests	(56		)	(57		)
Less: Other comprehensive (income) loss attributable to noncontrolling interests	(13		)	6
Comprehensive income attributable to Disney	$	1,520		$	1,520

See Notes to Condensed Consolidated Financial Statements

THE WALT DISNEY COMPANY

CONDENSED CONSOLIDATED BALANCE SHEETS

(unaudited; in millions, except per share data)



	December 29, 2012			September 29, 2012
ASSETS
Current assets
Cash and cash equivalents	$	3,207		$	3,387
Receivables	7,315			6,540
Inventories	1,440			1,537
Television costs and advances	864			676
Deferred income taxes	762			765
Other current assets	734			804
Total current assets	14,322			13,709
Film and television costs	4,811			4,541
Investments	2,622			2,723
Parks, resorts and other property, at cost
Attractions, buildings and equipment	39,351			38,582
Accumulated depreciation	(21,186		)	(20,687		)
	18,165			17,895
Projects in progress	2,336			2,453
Land	1,170			1,164
	21,671			21,512
Intangible assets, net	7,532			5,015
Goodwill	27,433			25,110
Other assets	2,251			2,288
Total assets	$	80,642		$	74,898

LIABILITIES AND EQUITY
Current liabilities
Accounts payable and other accrued liabilities	$	6,767		$	6,393
Current portion of borrowings	4,815			3,614
Unearned royalties and other advances	2,916			2,806
Total current liabilities	14,498			12,813

Borrowings	12,633			10,697
Deferred income taxes	2,854			2,251
Other long-term liabilities	7,287			7,179
Commitments and contingencies (Note 11)
Equity
Preferred stock, $.01 par value Authorized – 100 million shares, Issued – none	—			—
Common stock, $.01 par value Authorized – 4.6 billion shares, Issued – 2.8 billion shares	32,662			31,731
Retained earnings	43,022			42,965
Accumulated other comprehensive loss	(3,128		)	(3,266		)
	72,556			71,430
Treasury stock, at cost, 1.0 billion shares	(31,540		)	(31,671		)
Total Disney Shareholders' equity	41,016			39,759
Noncontrolling interests	2,354			2,199
Total equity	43,370			41,958
Total liabilities and equity	$	80,642		$	74,898

See Notes to Condensed Consolidated Financial Statements

THE WALT DISNEY COMPANY

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited; in millions)



	Quarter Ended
	December 29, 2012			December 31, 2011
OPERATING ACTIVITIES
Net income	$	1,438		$	1,521
Depreciation and amortization	514			485
Gain on disposition	(219		)	—
Deferred income taxes	(236		)	(14		)
Equity in the income of investees	(110		)	(145		)
Cash distributions received from equity investees	192			161
Net change in film and television costs and advances	(187		)	(256		)
Equity-based compensation	100			100
Other	86			148
Changes in operating assets and liabilities:
Receivables	(934		)	(643		)
Inventories	95			52
Other assets	42			23
Accounts payable and other accrued liabilities	(314		)	(373		)
Income taxes	677			675
Cash provided by operations	1,144			1,734

INVESTING ACTIVITIES
Investments in parks, resorts and other property	(545		)	(634		)
Proceeds from disposition	335			—
Acquisitions	(2,265		)	(361		)
Other	10			17
Cash used in investing activities	(2,465		)	(978		)

FINANCING ACTIVITIES
Commercial paper borrowings/(repayments), net	994			(976		)
Borrowings	3,037			1,590
Reduction of borrowings	(776		)	(49		)
Dividends	(1,300		)	—
Repurchases of common stock	(1,044		)	(800		)
Proceeds from exercise of stock options	124			114
Other	101			(9		)
Cash provided by/(used in) financing activities	1,136			(130		)

Impact of exchange rates on cash and cash equivalents	5			(45		)

Increase/(decrease) in cash and cash equivalents	(180		)	581
Cash and cash equivalents, beginning of period	3,387			3,185
Cash and cash equivalents, end of period	$	3,207		$	3,766

See Notes to Condensed Consolidated Financial Statements

THE WALT DISNEY COMPANY

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY

(unaudited; in millions)



	Quarter Ended
	December 29, 2012								December 31, 2011
	Disney Shareholders			Non- controlling Interests		Total Equity			Disney Shareholders			Non- controlling Interests		Total Equity
Beginning Balance	$	39,759		$	2,199	$	41,958		$	37,385		$	2,068	$	39,453
Comprehensive income	1,520			69		1,589			1,520			51		1,571
Equity compensation activity	252			—		252			230			—		230
Dividends	(1,324		)	—		(1,324		)	(1,076		)	—		(1,076		)
Common stock repurchases	(1,044		)	—		(1,044		)	(800		)	—		(800		)
Acquisition of Lucasfilm	1,853			6		1,859			—			—		—
Distributions and other	—			80		80			(2		)	47		45
Ending Balance	$	41,016		$	2,354	$	43,370		$	37,257		$	2,166	$	39,423

See Notes to Condensed Consolidated Financial Statements

THE WALT DISNEY COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited; tabular dollars in millions, except for per share data)


1.	Principles of Consolidation

These Condensed Consolidated Financial Statements have been prepared in accordance with accounting principles generally accepted in the United States of America (GAAP) for interim financial information and the instructions to Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. We believe that we have included all normal recurring adjustments necessary for a fair statement of the results for the interim period. Operating results for the quarter ended December 29, 2012 are not necessarily indicative of the results that may be expected for the year ending September 28, 2013 . Certain reclassifications have been made in the prior-year financial statements to conform to the current year presentation.

These financial statements should be read in conjunction with the Company’s 2012 Annual Report on Form 10-K.

The Company enters into relationships or investments with other entities in which it does not have majority ownership or control. In certain instances, the entity in which the Company has a relationship or investment may be a variable interest entity (“VIE”). A VIE is consolidated in the financial statements if the Company has the power to direct activities that most significantly impact the economic performance of the VIE and has the obligation to absorb losses or the right to receive benefits from the VIE that could potentially be significant to the VIE. Although the Company has less than a 50% direct ownership interest in Disneyland Paris, Hong Kong Disneyland Resort and Shanghai Disney Resort (collectively the "International Theme Parks"), they are VIEs, and given the nature of the Company’s relationships with these entities, which include management agreements, the Company has consolidated the International Theme Parks in its financial statements.

The terms “Company,” “we,” “us,” and “our” are used in this report to refer collectively to the parent company and the subsidiaries through which our various businesses are actually conducted.


2.	Segment Information

The operating segments reported below are the segments of the Company for which separate financial information is available and for which segment results are evaluated regularly by the Chief Executive Officer in deciding how to allocate resources and in assessing performance. The Company reports the performance of its operating segments including equity in the income of investees. Equity in the income of investees included in segment operating results is as follows:



	Quarter Ended
	December 29, 2012			December 31, 2011
Media Networks
Cable Networks	$	177		$	150
Broadcasting	(13		)	(6		)
Equity in the income of investees included in segment operating income	$	164		$	144

During the quarter, the Company recorded a $55 million charge for our share of expense related to an equity redemption at Hulu LLC (Hulu Equity Redemption). This charge is recorded in equity in the income of investees in the Condensed Consolidated Statements of Income but has been excluded from segment operating income. See Note 3 for further discussion of the transaction.

THE WALT DISNEY COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited; tabular dollars in millions, except for per share data)



	Quarter Ended
	December 29, 2012		December 31, 2011
Revenues ⁽¹⁾ :
Media Networks	$	5,101	$	4,779
Parks and Resorts	3,391		3,155
Studio Entertainment	1,545		1,618
Consumer Products	1,013		948
Interactive	291		279
	$	11,341	$	10,779
Segment operating income (loss) ⁽¹⁾ :
Media Networks	$	1,214	$	1,193
Parks and Resorts	577		553
Studio Entertainment	234		413
Consumer Products	346		313
Interactive	9		(28		)
	$	2,380	$	2,444

⁽¹⁾ Studio Entertainment segment revenues and operating income include an allocation of Consumer Products and Interactive revenues which is meant to reflect royalties on sales of merchandise based on certain film properties. The increases/(decreases) related to these allocations on segment revenues and operating income as reported in the above table are as follows:



	Quarter Ended
	December 29, 2012			December 31, 2011
Studio Entertainment	$	55		$	76
Consumer Products	(55		)	(76		)
Interactive	—			—
	$	—		$	—

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



	Quarter Ended
	December 29, 2012			December 31, 2011
Segment operating income	$	2,380		$	2,444
Corporate and unallocated shared expenses	(123		)	(107		)
Restructuring and impairment charges	—			(6		)
Other income/(expense), net	(102		)	—
Net interest expense	(72		)	(90		)
Hulu Equity Redemption charge	(55		)	—
Income before income taxes	$	2,028		$	2,241


3.	Acquisitions

Lucasfilm

On December 21, 2012 , the Company acquired Lucasfilm Ltd. LLC (“Lucasfilm”), a privately held entertainment company. This acquisition will allow Disney to utilize Lucasfilm's content across our multiple platforms, businesses, and markets, which we believe will generate growth as well as significant long-term value.

Under the terms of the merger agreement, Disney issued 37.1 million shares and made a cash payment of $2.2 billion . Based upon the closing price of Disney shares on December 21, 2012 at $50.00 , the transaction has a value of $4.1 billion .

The Company is required to allocate the purchase price to the estimated fair value of the tangible and identifiable intangible assets acquired and liabilities assumed. The excess of the purchase price over those fair values is recorded as goodwill. The Company is in the process of finalizing the valuation of the assets acquired and liabilities assumed.

THE WALT DISNEY COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited; tabular dollars in millions, except for per share data)

The following table summarizes our initial allocation of the purchase price, which is subject to adjustment once the valuations are completed:



(in billions)	Estimated Fair Value
Intangible assets	$	2.6
Goodwill	2.3
Deferred income taxes	(0.8		)
	$	4.1

Intangible assets primarily consist of intellectual property based on the Star Wars franchise with an estimated useful life of approximately 40 years. The goodwill reflects the value to Disney from leveraging Lucasfilm intellectual property across our distribution channels, taking advantage of Disney's established global reach. The goodwill recorded as part of this acquisition is not deductible for tax purposes.

The amounts of revenue and net income of Lucasfilm included in the Company's Condensed Consolidated Statement of Income from the closing date through December 29, 2012 are not material.

Hulu

On October 5, 2012, Hulu LLC (Hulu) redeemed Providence Equity Partners' 10% equity interest in Hulu for $200 million , increasing the Company's ownership interest from 29% to 32% . In connection with the transaction, Hulu incurred a charge of approximately $174 million primarily related to employee equity-based compensation. The Company's share of the charge totaled $55 million and was recorded in equity in the income of investees in the first quarter of fiscal 2013. The Company has guaranteed $107 million of a $338 million five -year term loan which was used by Hulu to finance the transaction. The Company will continue to account for its interest in Hulu as an equity method investment.

Goodwill

The changes in the carrying amount of goodwill for the quarter ended December 29, 2012 , are as follows:



	Media Networks			Parks and Resorts		Studio Entertainment			Consumer Products		Interactive			Unallocated		Total
Balance at Sept. 29, 2012	$	16,131		$	172	$	5,680		$	1,794	$	1,333		$	—	$	25,110
Acquisitions	34			—		—			—		22			2,315		2,371
Dispositions	—			—		—			—		—			—		—
Other, net	(20		)	—		(21		)	—		(7		)	—		(48		)
Balance at Dec. 29, 2012	$	16,145		$	172	$	5,659		$	1,794	$	1,348		$	2,315	$	27,433

The carrying amount of goodwill at December 29, 2012 and September 29, 2012 includes accumulated impairments of $29 million at Interactive.

During the quarter ended December 29, 2012, the Company completed the acquisition of Lucasfilm resulting in $2.3 billion of goodwill. The Company is in the process of allocating the goodwill to its operating segments. See the discussion above on the Lucasfilm acquisition.


4.	Dispositions and Other Income/(Expense)

ESPN STAR Sports

On November 7, 2012, the Company sold its 50% equity interest in ESPN STAR Sports (ESS) to the joint venture partner of ESS for $335 million resulting in a gain of $219 million ( $125 million after tax and allocation to noncontrolling interests). ESPN had previously jointly guaranteed approximately $0.8 billion in programming rights obligations of ESS. As a result of the sale, ESPN no longer guarantees these obligations.

THE WALT DISNEY COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited; tabular dollars in millions, except for per share data)

Other Income/(Expense)



	Quarter Ended
	December 29, 2012			December 31, 2011
Celador litigation (see Note 11)	$	(321	)	$	—
Gain on sale of equity interest in ESS	219			—
Other income/(expense), net	$	(102	)	$	—


5.	Borrowings

During the quarter ended December 29, 2012 , the Company’s borrowing activity was as follows:



	September 29, 2012		Additions		Payments			Other Activity			December 29, 2012
Commercial paper borrowings	$	2,050	$	994	$	—		$	—		$	3,044
U.S. medium-term notes	10,117		2,978		(750		)	3			12,348
European medium-term notes and other foreign currency denominated borrowings ⁽¹⁾	1,315		59		(21		)	(90		)	1,263
Other	562		—		(12		)	(26		)	524
Hong Kong Disneyland borrowings	267		—		—			2			269
Total	$	14,311	$	4,031	$	(783	)	$	(111	)	$	17,448

⁽¹⁾ The other activity is primarily the impact of foreign currency translation as a result of the strengthening of the U.S. dollar against the Japanese yen.


6.	International Theme Park Investments

The Company has a 51% effective ownership interest in the operations of Disneyland Paris, a 48% ownership interest in the operations of Hong Kong Disneyland Resort and a 43% ownership interest in the operations of Shanghai Disney Resort, all of which are VIEs consolidated in the Company’s financial statements. See Note 1 for the Company's policy on consolidating VIEs.

THE WALT DISNEY COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited; tabular dollars in millions, except for per share data)

The following tables present summarized balance sheet information for the Company as of December 29, 2012 and September 29, 2012 , reflecting the impact of consolidating the International Theme Parks balance sheets.



	As of December 29, 2012
	Before International Theme Parks Consolidation		International Theme Parks and Adjustments			Total
Cash and cash equivalents	$	2,887	$	320		$	3,207
Other current assets	10,873		242			11,115
Total current assets	13,760		562			14,322
Investments	5,885		(3,263		)	2,622
Fixed assets	16,992		4,679			21,671
Other assets	42,021		6			42,027
Total assets	$	78,658	$	1,984		$	80,642

Current portion of borrowings	$	4,815	$	—		$	4,815
Other current liabilities	9,300		383			9,683
Total current liabilities	14,115		383			14,498
Borrowings	12,364		269			12,633
Deferred income taxes and other long-term liabilities	10,024		117			10,141
Equity	42,155		1,215			43,370
Total liabilities and equity	$	78,658	$	1,984		$	80,642



	As of September 29, 2012
	Before International Theme Parks Consolidation		International Theme Parks and Adjustments			Total
Cash and cash equivalents	$	2,839	$	548		$	3,387
Other current assets	10,066		256			10,322
Total current assets	12,905		804			13,709
Investments	6,065		(3,342		)	2,723
Fixed assets	17,005		4,507			21,512
Other assets	36,949		5			36,954
Total assets	$	72,924	$	1,974		$	74,898

Current portion of borrowings	$	3,614	$	—		$	3,614
Other current liabilities	8,742		457			9,199
Total current liabilities	12,356		457			12,813
Borrowings	10,430		267			10,697
Deferred income taxes and other long-term liabilities	9,325		105			9,430
Equity	40,813		1,145			41,958
Total liabilities and equity	$	72,924	$	1,974		$	74,898

THE WALT DISNEY COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited; tabular dollars in millions, except for per share data)

The following table presents summarized income statement information of the Company for the quarter ended December 29, 2012 , reflecting the impact of consolidating the International Theme Parks income statements.



	Before International Theme Parks Consolidation ⁽¹⁾			International Theme Parks and Adjustments			Total
Revenues	$	10,815		$	526		$	11,341
Cost and expenses	(8,700		)	(549		)	(9,249		)
Restructuring and impairment charges	—			—			—
Other income/(expense), net	(102		)	—			(102		)
Net interest expense	(56		)	(16		)	(72		)
Equity in the income of investees	91			19			110
Income before income taxes	2,048			(20		)	2,028
Income taxes	(590		)	—			(590		)
Net income	$	1,458		$	(20	)	$	1,438


⁽¹⁾	These amounts include the International Theme Parks under the equity method of accounting. As such, royalty and management fee income from these operations is included in Revenues and our share of their net income/(loss) is included in Equity in the income of investees. There were $37 million of royalties and management fees recognized for the quarter ended December 29, 2012 .

The following table presents summarized cash flow statement information of the Company for the quarter ended December 29, 2012 , reflecting the impact of consolidating the International Theme Parks cash flow statements.



	Before International Theme Parks Consolidation			International Theme Parks and Adjustments			Total
Cash provided by operations	$	1,326		$	(182	)	$	1,144
Investments in parks, resorts and other property	(369		)	(176		)	(545		)
Cash (used in)/provided by other investing activities	(1,973		)	53			(1,920		)
Cash provided by financing activities	1,065			71			1,136
Impact of exchange rates on cash and cash equivalents	(1		)	6			5
Increase/(decrease) in cash and cash equivalents	48			(228		)	(180		)
Cash and cash equivalents, beginning of period	2,839			548			3,387
Cash and cash equivalents, end of period	$	2,887		$	320		$	3,207


7.	Pension and Other Benefit Programs

The components of net periodic benefit cost are as follows:



	Pension Plans						Postretirement Medical Plans
	December 29, 2012			December 31, 2011			December 29, 2012			December 31, 2011
Service costs	$	86		$	70		$	4		$	5
Interest costs	109			110			17			19
Expected return on plan assets	(151		)	(128		)	(8		)	(6		)
Amortization of prior-year service costs	2			3			(1		)	(1		)
Recognized net actuarial loss	104			77			10			8
Net periodic benefit cost	$	150		$	132		$	22		$	25

During the quarter ended December 29, 2012 , the Company did not make any material contributions to its pension and postretirement medical plans. The Company expects total pension and postretirement medical plan contributions in fiscal 2013 of approximately $425 million to $475 million . Final minimum pension plan funding requirements for fiscal 2013 will be

THE WALT DISNEY COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited; tabular dollars in millions, except for per share data)

determined based on our January 1, 2013 funding actuarial valuation that we expect to receive during the fourth quarter of fiscal 2013.


8.	Earnings Per Share

Diluted earnings per share amounts are based upon the weighted average number of common and common equivalent shares outstanding during the period and are calculated using the treasury stock method for equity-based compensation awards (Awards). A reconciliation of the weighted average number of common and common equivalent shares outstanding and Awards excluded from the diluted earnings per share calculation, as they were anti-dilutive, are as follows:



	Quarter Ended
	December 29, 2012	December 31, 2011
Shares (in millions):
Weighted average number of common shares outstanding (basic)	1,777	1,798
Weighted average dilutive impact of Awards	23	26
Weighted average number of common and common equivalent shares outstanding (diluted)	1,800	1,824
Awards excluded from diluted earnings per share	1	10


9.	Equity

On November 28, 2012 , the Company declared a $0.75 per share dividend ( $1.3 billion ) related to fiscal 2012 for shareholders of record on December 10, 2012 , which was paid on December 28, 2012 . The Company paid a $0.60 per share dividend ( $1.1 billion ) during the second quarter of fiscal 2012 related to fiscal 2011.

During the quarter ended December 29, 2012 , the Company repurchased 21 million shares of its common stock for $1.0 billion . As of December 29, 2012 , the Company had remaining authorization in place to repurchase 211 million additional shares. The repurchase program does not have an expiration date.

The following table summarizes the changes in each component of accumulated other comprehensive income (loss) (AOCI), net of 37% estimated tax in Disney Shareholders’ equity:



						Unrecognized Pension and Post-retirement Medical Expense			Foreign Currency Translation and Other			AOCI
	Market Value Adjustments
	Investments		Cash Flow Hedges ⁽¹⁾
Balance at Sept 29, 2012	$	3	$	(52	)	$	(3,234	)	$	17		$	(3,266	)
Unrealized gains (losses) arising during the period	17		65			—			(17		)	65
Reclassifications of net (gains) losses to net income	—		(6		)	73			6			73
Balance at Dec. 29, 2012	$	20	$	7		$	(3,161	)	$	6		$	(3,128	)

Balance at Oct 1, 2011	$	6	$	(54	)	$	(2,625	)	$	43		$	(2,630	)
Unrealized gains (losses) arising during the period	2		28			—			(31		)	(1		)
Reclassifications of net (gains) losses to net income	—		2			55			—			57
Balance at Dec. 31, 2011	$	8	$	(24	)	$	(2,570	)	$	12		$	(2,574	)

⁽¹⁾ Reclassifications of gains on cash flow hedges are primarily recorded in revenue.

THE WALT DISNEY COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited; tabular dollars in millions, except for per share data)


10.	Equity-Based Compensation

Compensation expense related to stock options, stock appreciation rights and restricted stock units (RSUs) is as follows:



	Quarter Ended
	December 29, 2012		December 31, 2011
Stock options/rights ⁽¹⁾	$	25	$	31
RSUs	76		73
Total equity-based compensation expense ⁽²⁾	$	101	$	104
Equity-based compensation expense capitalized during the period	$	14	$	13


⁽¹⁾	Includes stock appreciation rights.


⁽²⁾	Equity-based compensation expense is net of capitalized equity-based compensation and excludes amortization of previously capitalized equity-based compensation costs. Amortization of previously capitalized equity-based compensation was $24 million and $9 million for the quarters ended December 29, 2012 and December 31, 2011 , respectively.

Unrecognized compensation cost related to unvested stock options/rights and RSUs totaled approximately $129 million and $493 million , respectively, as of December 29, 2012.

The weighted average grant date fair values of options issued during the quarters ended December 29, 2012 and December 31, 2011 were $12.19 and $ 9.42 , respectively.

In January 2013 , the Company made equity compensation grants consisting of 8.5 million stock options and 6.8 million RSUs, of which 0.4 million RSUs included market and/or performance conditions.


11.	Commitments and Contingencies

Legal Matters

Beef Products, Inc. v. American Broadcasting Companies, Inc. On September 13, 2012, plaintiffs filed an action in South Dakota state court against certain subsidiaries and employees of the Company and others, asserting claims for defamation arising from alleged false statements and implications, statutory and common law product disparagement, and tortious interference with existing and prospective business relationships. The claims arise out of ABC News reports published in March and April 2012 that discussed the subject of labeling requirements for production processes related to a product one plaintiff produces that is added to ground beef before sale to consumers. Plaintiffs seek actual and consequential damages in excess of $400 million , statutory damages (including treble damages) pursuant to South Dakota's Agricultural Food Products Disparagement Act, and punitive damages. On October 24, 2012, the Company removed the action to the United States District Court for the District of South Dakota, and on October 31, 2012, the Company moved to dismiss all claims. On November 28, 2012, plaintiffs filed motion to remand the case to state court, which is pending.

The Company, together with, in some instances, certain of its directors and officers, is a defendant or codefendant in various other legal actions involving copyright, breach of contract and various other claims incident to the conduct of its businesses.

Management does not believe that the Company has incurred a probable, material loss by reason of these actions.

Celador International Ltd. v. A merican Broadcasting Companies, Inc. On May 19, 2004, an affiliate of the creator and licensor of the television program, “Who Wants to be a Millionaire,” filed an action against the Company and certain of its subsidiaries, including American Broadcasting Companies, Inc. and Buena Vista Television, LLC, alleging it was damaged by defendants improperly engaging in certain intra-company transactions and charging merchandise distribution expenses, resulting in an underpayment to the plaintiff. On July 7, 2010, the jury returned a verdict for breach of contract against certain

THE WALT DISNEY COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited; tabular dollars in millions, except for per share data)

subsidiaries of the Company, awarding plaintiff damages of $269 million . The Company has stipulated with the plaintiff to an award of prejudgment interest of $50 million , which amount will be reduced pro rata should the Court of Appeals reduce the damages amount. On December 21, 2010, the Company’s alternative motions for a new trial and for judgment as a matter of law were denied. On January 4, 2011 the Company appealed and on or about January 28, 2011, plaintiff filed a notice of cross-appe al. On December 3, 2012, the Court of Appeals affirmed the judgment against the Company and dismissed plaintiff's cross-appeal. On December 31, 2012, the Company filed a petition for rehearing en banc . In light of the Court of Appeals decision, the Company has established a reserve in the amount of $321 million which is recorded in other income/(expense), net in the Condensed Consolidated Statement of Income.

Contractual Guarantees

The Company has guaranteed bond issuances by the Anaheim Public Authority that were used by the City of Anaheim to finance construction of infrastructure and a public parking facility adjacent to the Disneyland Resort. Revenues from sales, occupancy and property taxes from the Disneyland Resort and non-Disney hotels are used by the City of Anaheim to repay the bonds. In the event of a debt service shortfall, the Company will be responsible to fund the shortfall. As of December 29, 2012 , the remaining debt service obligation guaranteed by the Company was $351 million , of which $82 million was principal. To the extent that tax revenues exceed the debt service payments in subsequent periods, the Company would be reimbursed for any previously funded shortfalls. To date, tax revenues have exceeded the debt service payments for these bonds.

Long-Term Receivables and the Allowance for Credit Losses

The Company has accounts receivable with original maturities greater than one year related to the sale of program rights in the television syndication markets within the Media Networks segment and vacation ownership units within the Parks and Resorts segment. Allowances for credit losses are established against these receivables as necessary.

The Company estimates the allowance for credit losses related to receivables from the sale of television programs based upon a number of factors, including historical experience, and the financial condition of individual companies with which we do business. The balance of syndication receivables recorded in other non-current assets, net of an immaterial allowance for credit losses, was $0.9 billion as of December 29, 2012 . The activity in the current period related to the allowance for credit losses was not material.

The Company estimates the allowance for credit losses related to receivables from sales of its vacation ownership units based primarily on historical collection experience. Estimates of uncollectible amounts also consider the economic environment and the age of receivables. The balance of mortgage receivables recorded in other non-current assets, net of a related allowance for credit losses of approximately 3% , was approximately $0.7 billion as of December 29, 2012 . The activity in the period related to the allowance for credit losses was not material.

Income Taxes

During the quarter ended December 29, 2012 , the Company settled certain tax matters with various jurisdictions. As a result of these settlements, the Company reduced its unrecognized tax benefits by $46 million , including interest and penalties.

In the next twelve months, it is reasonably possible that our unrecognized tax benefits could change due to resolutions of open tax matters. These resolutions would reduce our unrecognized tax benefits by approximately $59 million .


12.	Fair Value Measurements

Fair value is defined as the amount that would be received for selling an asset or paid to transfer a liability in an orderly transaction between market participants. Assets and liabilities measured at fair value are classified in the following three categories:

Level 1 - Quoted prices for identical instruments in active markets

Level 2 - Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations in which all significant inputs and significant value drivers are observable in active markets

Level 3 - Valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable

THE WALT DISNEY COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited; tabular dollars in millions, except for per share data)

The Company’s assets and liabilities measured at fair value are summarized in the following table by type of inputs applicable to the fair value measurements:



	Fair Value Measurement at December 29, 2012
	Level 1		Level 2			Level 3		Total
Assets
Investments	$	121	$	—		$	—	$	121
Derivatives ⁽¹⁾
Interest rate	—		239			—		239
Foreign exchange	—		350			—		350
Liabilities
Derivatives ⁽¹⁾
Interest rate	—		(9		)	—		(9		)
Foreign exchange	—		(204		)	—		(204		)
Total recorded at fair value	$	121	$	376		$	—	$	497
Fair value of borrowings	$	—	$	16,539		$	1,683	$	18,222



	Fair Value Measurement at September 29, 2012
	Level 1		Level 2			Level 3		Total
Assets
Investments	$	86	$	—		$	—	$	86
Derivatives ⁽¹⁾
Interest rate	—		239			—		239
Foreign exchange	—		390			—		390
Liabilities
Derivatives ⁽¹⁾
Foreign exchange	—		(235		)	—		(235		)
Total recorded at fair value	$	86	$	394		$	—	$	480
Fair value of borrowings	$	—	$	13,493		$	1,653	$	15,146


⁽¹⁾	The Company has master netting arrangements by counterparty with respect to certain derivative contracts. Contracts in a liability position totaling $173 million and $153 million have been netted against contracts in an asset position in the Condensed Consolidated Balance Sheets at December 29, 2012 and September 29, 2012 , respectively.

The fair values of Level 2 derivatives are primarily determined based on the present value of future cash flows using internal models that use observable inputs such as interest rates, yield curves and foreign currency exchange rates. Counterparty credit risk, which is mitigated by master netting agreements and collateral posting arrangements with certain counterparties, did not have a material impact on derivative fair value estimates.

Level 2 borrowings, which include commercial paper and U.S. medium-term notes, are valued based on quoted prices for similar instruments in active markets.

Level 3 borrowings, which include Hong Kong Disneyland borrowings and other foreign currency denominated borrowings, are valued based on historical market transactions, interest rates, credit risk and market liquidity.

The Company’s financial instruments also include cash, cash equivalents, receivables and accounts payable. The carrying values of these financial instruments approximate the fair values.

THE WALT DISNEY COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited; tabular dollars in millions, except for per share data)


13.	Derivative Instruments

The Company manages its exposure to various risks relating to its ongoing business operations according to a risk management policy. The primary risks managed with derivative instruments are interest rate risk and foreign exchange risk.

The fair value of the Company’s derivative positions are summarized in the following tables:



	As of December 29, 2012
	Current Assets			Other Assets			Other Accrued Liabilities			Other Long- Term Liabilities
Derivatives designated as hedges
Foreign exchange	$	100		$	57		$	(74	)	$	(23	)
Interest rate	1			238			(9		)	—
Derivatives not designated as hedges
Foreign exchange	187			6			(82		)	(25		)
Gross fair value of derivatives	288			301			(165		)	(48		)
Counterparty netting	(132		)	(41		)	135			38
Total derivatives ⁽¹⁾	$	156		$	260		$	(30	)	$	(10	)



	As of September 29, 2012
	Current Assets			Other Assets			Other Accrued Liabilities			Other Long- Term Liabilities
Derivatives designated as hedges
Foreign exchange	$	84		$	30		$	(94	)	$	(50	)
Interest rate	1			238			—			—
Derivatives not designated as hedges
Foreign exchange	258			18			(91		)	—
Gross fair value of derivatives	343			286			(185		)	(50		)
Counterparty netting	(117		)	(36		)	117			36
Total derivatives ⁽¹⁾	$	226		$	250		$	(68	)	$	(14	)


⁽¹⁾	Refer to Note 12 for further information on derivative fair values and counterparty netting.

Interest Rate Risk Management

The Company is exposed to the impact of interest rate changes primarily through its borrowing activities. The Company’s objective is to mitigate the impact of interest rate changes on earnings and cash flows and on the market value of its borrowings. In accordance with its policy, the Company targets its fixed-rate debt as a percentage of its net debt between a minimum and maximum percentage. The Company typically uses pay-floating and pay-fixed interest rate swaps to facilitate its interest rate management activities.

The Company designates pay-floating interest rate swaps as fair value hedges of fixed-rate borrowings effectively converting fixed-rate borrowings to variable rate borrowings indexed to LIBOR. As of December 29, 2012 and September 29, 2012 , the total notional amount of the Company’s pay-floating interest rate swaps was $5.6 billion and $ 3.1 billion , respectively. The following table summarizes adjustments related to fair value hedges included in net interest expense in the Condensed Consolidated Statements of Income.



	Quarter Ended
	December 29, 2012			December 31, 2011
Gain (loss) on interest rate swaps	$	(26	)	$	(4	)
Gain (loss) on hedged borrowings	26			4

THE WALT DISNEY COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited; tabular dollars in millions, except for per share data)

The Company may designate pay-fixed interest rate swaps as cash flow hedges of interest payments on floating-rate borrowings. Pay-fixed swaps effectively convert floating-rate borrowings to fixed-rate borrowings. The unrealized gains or losses from these cash flow hedges are deferred in AOCI and recognized in interest expense as the interest payments occur. The Company did not have pay-fixed interest rate swaps that were designated as cash flow hedges of interest payments at December 29, 2012 nor at September 29, 2012 .

Foreign Exchange Risk Management

The Company transacts business globally and is subject to risks associated with changing foreign currency exchange rates. The Company’s objective is to reduce earnings and cash flow fluctuations associated with foreign currency exchange rate changes, enabling management to focus on core business issues and challenges.

The Company enters into option and forward contracts that change in value as foreign currency exchange rates change to protect the value of its existing foreign currency assets, liabilities, firm commitments and forecasted but not firmly committed foreign currency transactions. In accordance with policy, the Company hedges its forecasted foreign currency transactions for periods generally not to exceed four years within an established minimum and maximum range of annual exposure. The gains and losses on these contracts offset changes in the U.S. dollar equivalent value of the related forecasted transaction, asset, liability or firm commitment. The principal currencies hedged are the euro, Japanese yen, Canadian dollar and British pound. Cross-currency swaps are used to effectively convert foreign currency-denominated borrowings into U.S. dollar denominated borrowings.

The Company designates foreign exchange forward and option contracts as cash flow hedges of firmly committed and forecasted foreign currency transactions. As of December 29, 2012 and September 29, 2012 , the notional amounts of the Company’s net foreign exchange cash flow hedges were $4.5 billion and $4.6 billion , respectively. Mark-to-market gains and losses on these contracts are deferred in AOCI and are recognized in earnings when the hedged transactions occur, offsetting changes in the value of the foreign currency transactions. Gains and losses recognized related to ineffectiveness for the quarters ended December 29, 2012 and December 31, 2011 were not material. Net deferred gains recorded in AOCI for contracts that will mature in the next twelve months totaled $24 million .

Foreign exchange risk management contracts with respect to foreign currency denominated assets and liabilities are not designated as hedges and do not qualify for hedge accounting. The notional amounts of these foreign exchange contracts at December 29, 2012 and September 29, 2012 were $4.9 billion and $4.1 billion , respectively. The following table summarizes the net foreign exchange gains or losses recognized on foreign currency denominated assets and liabilities and the offsetting net foreign exchange gains or losses on the related foreign exchange contracts for the quarter ended December 29, 2012 and December 31, 2011.



	Costs and Expenses						Interest Expense
	December 29, 2012			December 31, 2011			December 29, 2012			December 31, 2011
Net gains (losses) on foreign currency denominated assets and liabilities	$	38		$	(70	)	$	82		$	5
Net gains (losses) on foreign exchange risk management contracts not designated as hedges	(48		)	59			(84		)	(5		)
Net gains (losses)	$	(10	)	$	(11	)	$	(2	)	$	—

Commodity Price Risk Management

The Company is subject to the volatility of commodities prices and designates certain commodity forward contracts as cash flow hedges of forecasted commodity purchases. Mark-to-market gains and losses on these contracts are deferred in AOCI and are recognized in earnings when the hedged transactions occur, offsetting changes in the value of commodity purchases. The fair value of the commodity hedging contracts and related gains or losses recognized in earnings were not material at December 29, 2012 nor at September 29, 2012 .

THE WALT DISNEY COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited; tabular dollars in millions, except for per share data)

Risk Management – Other Derivatives Not Designated as Hedges

The Company enters into certain other risk management contracts that are not designated as hedges and do not qualify for hedge accounting. These contracts, which include certain commodity swap contracts, are intended to offset economic exposures of the Company and are carried at market value with any changes in value recorded in earnings. The fair value of these contracts and related gains or losses recognized in earnings were not material at December 29, 2012 nor at September 29, 2012 .

Contingent Features

The Company’s derivative financial instruments may require the Company to post collateral in the event that a net liability position with a counterparty exceeds limits defined by contract and that vary with the Company’s credit rating. If the Company’s credit ratings were to fall below investment grade, such counterparties would also have the right to terminate our derivative contracts, which could lead to a net payment to or from the Company for the aggregate net value by counterparty of our derivative contracts. The aggregate fair value of derivative instruments with credit-risk-related contingent features in a net liability position by counterparty were $40 million and $82 million on December 29, 2012 and September 29, 2012 , respectively.


14.	Restructuring and Impairment Charges

In the prior-year quarter, the Company recorded $6 million of restructuring and impairment charges for severance costs related to organizational and cost structure initiatives primarily at the Interactive segment.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

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

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:

Overview

Seasonality

Business Segment Results

Other Financial Information

Financial Condition

Commitments and Contingencies

Other Matters

Market Risk

OVERVIEW

Our summary consolidated results are presented below:



	Quarter Ended						% Change
(in millions, except per share data)	December 29, 2012			December 31, 2011			Better/ (Worse)
Revenues	$	11,341		$	10,779		5	%
Costs and expenses	(9,249		)	(8,587		)	(8)	%
Restructuring and impairment charges	—			(6		)	nm
Other income/(expense), net	(102		)	—			nm
Net interest expense	(72		)	(90		)	20	%
Equity in the income of investees	110			145			(24)	%
Income before income taxes	2,028			2,241			(10)	%
Income taxes	(590		)	(720		)	18	%
Net income	1,438			1,521			(5)	%
Less: Net income attributable to noncontrolling interests	(56		)	(57		)	2	%
Net income attributable to Disney	$	1,382		$	1,464		(6)	%
Diluted earnings per share	$	0.77		$	0.80		(4)	%

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS — (continued)

Quarter Results

Diluted earnings per share (EPS) for the quarter decreased 4% from $0.80 to $0.77. EPS included a charge related to the Celador litigation ($321 million) and a gain on the sale of our 50% interest in ESPN STAR Sports ($219 million), both of which were recorded in "Other Income/(Expense)." EPS also included a charge for our share of expense at our Hulu joint venture related to an equity redemption transaction (Hulu Equity Redemption) ($55 million) and a tax benefit related to an increase in prior-year foreign earnings indefinitely reinvested outside the United States ($64 million). In aggregate, these four items had an adverse impact on EPS of $0.02 as follows:



(in millions, except per share data)	Pre-Tax Income/(Loss)			Tax Benefit/(Expense)			After-Tax Income/(Loss)			EPS Favorable/(Adverse)
Celador Litigation Charge	$	(321	)	$	119		$	(202	)	$	(0.11	)
Gain on Sale of Interest in ESPN STAR Sports ⁽¹⁾	219			(64		)	155			0.07
Tax Impact for Foreign Reinvestment	—			64			64			0.04
Hulu Equity Redemption charge	(55		)	20			(35		)	(0.02		)
Total	$	(157	)	$	139		$	(18	)	$	(0.02	)

⁽¹⁾ EPS has been adjusted for the noncontrolling interest share of the gain .

EPS also reflected a 3% ($64 million) decrease in segment operating income which was driven by lower home entertainment results at the Studio Entertainment segment. All other segments saw operating income growth in the quarter, led by Interactive, where operating income improved by $37 million to a profit of $9 million, reflecting lower expenses related to acquisitions and improved performance at our Japan mobile business. Consumer Products operating income increased $33 million driven roughly equally by revenue growth at Retail and a lower licensing revenue share with the Studio Entertainment segment.

Segment operating income also benefited from a $24 million increase at Parks and Resorts where 9% revenue growth at our domestic operations was partially offset by higher operating costs, including investments in new guest offerings, and lower results at our international parks and resorts. Media Networks operating income increased $21 million as growth at Broadcasting from advertising and program sales was partially offset by a decline at our Cable Networks, where increased sports programming costs exceeded strong growth in revenues from multi-channel video programming distributors (MVPDs) (Affiliate Fees).

SEASONALITY

The Company’s businesses are subject to the effects of seasonality. Consequently, the operating results for the quarter ended December 29, 2012 for each business segment, and for the Company as a whole, are not necessarily indicative of results to be expected for the full year.

Media Networks revenues are subject to seasonal advertising patterns and changes in viewership levels. In general, advertising revenues are somewhat higher during the fall and somewhat lower during the summer months. Affiliate revenues are typically collected ratably throughout the year. Certain affiliate revenues at ESPN are deferred until annual programming commitments are met, and these commitments are typically satisfied during the second half of the Company’s fiscal year, which generally results in higher revenue recognition during that period.

Parks and Resorts revenues fluctuate with changes in theme park attendance and resort occupancy resulting from the seasonal nature of vacation travel and leisure activities. Peak attendance and resort occupancy generally occur during the summer months when school vacations occur and during early-winter and spring-holiday periods.

Studio Entertainment revenues fluctuate due to the timing and performance of releases in the theatrical, home entertainment, and television markets. Release dates are determined by several factors, including competition and the timing of vacation and holiday periods.

Consumer Products revenues are influenced by seasonal consumer purchasing behavior, which generally results in increased revenues during the Company’s first fiscal quarter, and by the timing and performance of theatrical releases and cable programming broadcasts.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS — (continued)

Interactive revenues fluctuate due to the timing and performance of video game releases which are determined by several factors, including theatrical releases and cable programming broadcasts, competition and the timing of holiday periods. Revenues from certain of our internet and mobile operations are subject to similar seasonal trends.

BUSINESS SEGMENT RESULTS

The Company evaluates the performance of its operating segments based on segment operating income, which is shown below along with segment revenues:



	Quarter Ended					% Change
(in millions)	December 29, 2012		December 31, 2011			Better/ (Worse)
Revenues:
Media Networks	$	5,101	$	4,779		7	%
Parks and Resorts	3,391		3,155			7	%
Studio Entertainment	1,545		1,618			(5)	%
Consumer Products	1,013		948			7	%
Interactive	291		279			4	%
	$	11,341	$	10,779		5	%
Segment operating income (loss) :
Media Networks	$	1,214	$	1,193		2	%
Parks and Resorts	577		553			4	%
Studio Entertainment	234		413			(43)	%
Consumer Products	346		313			11	%
Interactive	9		(28		)	nm
	$	2,380	$	2,444		(3)	%

The following table reconciles segment operating income to income before income taxes:



	Quarter Ended						% Change
(in millions)	December 29, 2012			December 31, 2011			Better/ (Worse)
Segment operating income	$	2,380		$	2,444		(3)	%
Corporate and unallocated shared expenses	(123		)	(107		)	(15)	%
Restructuring and impairment charges	—			(6		)	nm
Other income/(expense), net	(102		)	—			nm
Net interest expense	(72		)	(90		)	20	%
Hulu Equity Redemption charge	(55		)	—			nm
Income before income taxes	$	2,028		$	2,241		(10)	%

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS — (continued)

Depreciation expense is as follows:



	Quarter Ended				% Change
(in millions)	December 29, 2012		December 31, 2011		Better/ (Worse)
Media Networks
Cable Networks	$	32	$	34	6	%
Broadcasting	24		23		(4)	%
Total Media Networks	56		57		2	%
Parks and Resorts
Domestic	255		224		(14)	%
International	80		79		(1)	%
Total Parks and Resorts	335		303		(11)	%
Studio Entertainment	9		13		31	%
Consumer Products	14		13		(8)	%
Interactive	5		4		(25)	%
Corporate	54		46		(17)	%
Total depreciation expense	$	473	$	436	(8)	%

Amortization of intangible assets is as follows:



	Quarter Ended				% Change
(in millions)	December 29, 2012		December 31, 2011		Better/ (Worse)
Media Networks	$	5	$	2	>(100) %
Parks and Resorts	—		—		nm
Studio Entertainment	15		24		38	%
Consumer Products	16		15		(7)	%
Interactive	5		8		38	%
Total amortization of intangible assets	$	41	$	49	16	%

Media Networks

Operating results for the Media Networks segment are as follows:



	Quarter Ended						% Change
(in millions)	December 29, 2012			December 31, 2011			Better/ (Worse)
Revenues
Affiliate Fees	$	2,260		$	2,067		9	%
Advertising	2,257			2,207			2	%
Other	584			505			16	%
Total revenues	5,101			4,779			7	%
Operating expenses	(3,346		)	(3,052		)	(10)	%
Selling, general, administrative and other	(644		)	(619		)	(4)	%
Depreciation and amortization	(61		)	(59		)	(3)	%
Equity in the income of investees	164			144			14	%
Operating Income	$	1,214		$	1,193		2	%

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS — (continued)

Revenues

The 9% increase in Affiliate Fee revenue was driven by increases of 7% from contractual rate increases and 2% from reduced ESPN revenue deferrals due to changes in the provisions of annual programming commitments in certain MVPD contracts.

Higher advertising revenues were due to increases of $24 million at Cable Networks, from $1,115 million to $1,139 million, and $26 million at Broadcasting, from $1,092 million to $1,118 million. The increase at Cable Networks was driven by a 4% increase due to higher units sold and a 3% increase from higher rates at ESPN and ABC Family. These increases were partially offset by a 6% decrease due to lower ratings at ESPN. The increase in advertising revenues at Broadcasting was driven by the ABC Television Network and owned television stations. The increase in network advertising reflected a 4% increase due to higher rates and a 2% increase due to higher online advertising, partially offset by a 2% decrease due to lower ratings and a 2% decrease due to fewer units sold. Higher advertising revenue at the owned television stations was driven by political advertising.

The increase in other revenues was due to higher program sales driven by Revenge and Once Upon A Time .

Costs and Expenses

Operating expenses include programming and production costs, which increased $288 million from $2,675 million to $2,963 million. At Cable Networks, an increase in programming and production costs of $234 million was primarily due to higher sports rights costs driven by contractual rate increases for college football and the NFL and an increase in the number of NBA games due to the lockout in the prior year. At Broadcasting, programming and production costs increased $54 million due to higher program sales and more hours of first run original scripted primetime programming in the current quarter.

The increase in selling, general, administrative and other costs was driven by higher marketing costs at ESPN, the ABC Television Network, and the worldwide Disney Channels, partially offset by lower marketing costs at ABC Family.

Equity in the Income of Investees

Income from equity investees increased $20 million from $144 million to $164 million driven by A&E Television Networks (AETN) primarily due to increased affiliate and advertising revenues, partially offset by higher marketing costs, along with the benefit from an increase in the Company's ownership from 42% to 50%.

Segment Operating Income

Segment operating income increased 2%, or $21 million, to $1,214 million, primarily due to increases at the domestic Disney Channels, ABC Family and the ABC Television Network and higher equity income in AETN, partially offset by a decrease at ESPN.

The following table provides supplemental revenue and segment operating income detail for the Media Networks segment:



	Quarter Ended				% Change
(in millions)	December 29, 2012		December 31, 2011		Better/ (Worse)
Revenues
Cable Networks	$	3,538	$	3,309	7	%
Broadcasting	1,563		1,470		6	%
	$	5,101	$	4,779	7	%
Segment operating income
Cable Networks	$	952	$	967	(2)	%
Broadcasting	262		226		16	%
	$	1,214	$	1,193	2	%

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS — (continued)

Parks and Resorts

Operating results for the Parks and Resorts segment are as follows:



	Quarter Ended						% Change
(in millions)	December 29, 2012			December 31, 2011			Better/ (Worse)
Revenues
Domestic	$	2,732		$	2,503		9	%
International	659			652			1	%
Total revenues	3,391			3,155			7	%
Operating expenses	(2,053		)	(1,887		)	(9)	%
Selling, general, administrative and other	(426		)	(412		)	(3)	%
Depreciation and amortization	(335		)	(303		)	(11)	%
Operating Income	$	577		$	553		4	%

Revenues

Parks and Resorts revenues increased 7%, or $236 million due to an increase of $229 million at our domestic operations and an increase of $7 million at our international operations.

Revenue growth of 9% at our domestic operations reflected a 5% increase from volume and 4% from higher average guest spending. Higher volume was due to the addition of the Disney Fantasy cruise ship which launched in March 2012, attendance growth at Disneyland Resort and higher occupied room nights at Walt Disney World Resort. Increased guest spending was primarily due to higher average ticket prices, daily hotel room rates, and food, beverage and merchandise spending, partially offset by lower average cruise ship ticket prices.

Revenue growth of 1% at our international operations reflected a 2% increase from higher average guest spending which was essentially offset by a 2% decrease due to the impact of foreign currency translation as a result of the strengthening of the U.S. dollar against the euro. Guest spending growth was due to higher merchandise sales and average ticket prices.

The following table presents supplemental park and hotel statistics:



	Domestic						International ⁽²⁾						Total
	Quarter Ended						Quarter Ended						Quarter Ended
	December 29, 2012			December 31, 2011			December 29, 2012			December 31, 2011			December 29, 2012			December 31, 2011
Parks
Increase/(decrease)
Attendance	4		%	3		%	(1		)%	8		%	3		%	4		%
Per Capita Guest Spending	6		%	8		%	2		%	2		%	6		%	6		%
Hotels ⁽¹⁾
Occupancy	81		%	85		%	84		%	85		%	81		%	85		%
Available Room Nights (in thousands)	2,623			2,405			621			619			3,244			3,024
Per Room Guest Spending	$	265		$	256		$	301		$	298		$	272		$	264


⁽¹⁾	Per room guest spending consists of the average daily hotel room rate as well as guest spending on food, beverage and merchandise at the hotels. Hotel statistics include rentals of Disney Vacation Club units.


⁽²⁾	Per capita guest spending and per room guest spending exclude the impact of foreign currency translation. The euro to U.S. dollar weighted average foreign currency exchange rate was $1.30 and $1.35 for the quarters ended December 29, 2012 and December 31, 2011, respectively.

Costs and Expenses

Operating expenses include operating labor which increased by $74 million from $943 million to $1,017 million and cost of sales which increased $21 million from $314 million to $335 million. Higher operating labor was due to new guest offerings

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS — (continued)

and labor cost inflation. The increase in cost of sales was driven by higher volumes. Operating expenses also increased due to other costs associated with new guest offerings which included investments in systems infrastructure and fuel and entertainment. New guest offerings included the Disney Fantasy , expansion of Walt Disney World Resort, the expansion of Disney California Adventure at Disneyland Resort and start up costs at Shanghai Disney Resort. These increases in operating expenses were partially offset by a decrease due to the impact of foreign currency translation as a result of the strengthening of the U.S. dollar against the euro.

The increase in selling, general, administrative and other costs was driven by higher marketing costs for new guest offerings.

Segment Operating Income

Segment operating income increased 4%, or $24 million, to $577 million due to an increase at our domestic operations, partially offset by a decrease at our international operations.

Studio Entertainment

Operating results for the Studio Entertainment segment are as follows:



	Quarter Ended						% Change
(in millions)	December 29, 2012			December 31, 2011			Better/ (Worse)
Revenues
Theatrical distribution	$	304		$	139		>100 %
Home entertainment	677			1,004			(33)	%
Television and SVOD distribution and other	564			475			19	%
Total revenues	1,545			1,618			(5)	%
Operating expenses	(717		)	(695		)	(3)	%
Selling, general, administrative and other	(570		)	(473		)	(21)	%
Depreciation and amortization	(24		)	(37		)	35	%
Operating Income	$	234		$	413		(43)	%

Revenues

Higher theatrical distribution revenues were driven by the performance of Lincoln and one additional Disney theatrical title in wide release in the current quarter, partially offset by the continuing performance in the prior-year quarter of The Lion King 3D which was released in the fourth quarter of fiscal 2011. Key new Disney titles in wide release in the current quarter were Wreck-it Ralph and Frankenweenie compared to The Muppets in the prior-year quarter .

Lower home entertainment revenue reflected a 23% decrease from a decline in unit sales and an 8% decrease from lower net effective pricing including the impact of a higher current-quarter sales mix of catalog titles, which have a lower sales price than new releases. Significant titles in the current year included Brave, Cinderella Diamond Release and Marvel's The Avengers while the prior year included Cars 2 , The Lion King Diamond Release and Pirates of the Caribbean: On Stranger Tides. The decrease in net effective pricing was driven by lower sales prices internationally. Net effective pricing is the wholesale selling price adjusted for discounts, sales incentives and returns.

The increase in television and subscription video on demand (TV/SVOD) distribution and other revenue was driven by an SVOD sale of library titles in the current quarter and higher international TV distribution sales driven by the timing of title availabilities.

Costs and Expenses

Operating expenses include an increase of $34 million in film cost amortization, from $361 million to $395 million, driven by higher theatrical distribution revenues, partially offset by lower worldwide home entertainment sales volume. Operating expenses also include distribution costs and cost of goods sold which decreased $12 million from $334 million to $322 million driven by a decline in worldwide home entertainment sales volume, partially offset by higher theatrical distribution costs.

The increase in selling, general, administrative and other costs was primarily due to higher theatrical marketing expenses.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS — (continued)

The decrease in depreciation and amortization is due to lower amortization of intangible assets.

Segment Operating Income

Segment operating income decreased 43% to $234 million primarily due to decreases in our home entertainment and theatrical distribution businesses, partially offset by an increase at our TV/SVOD distribution businesses.

Consumer Products

Operating results for the Consumer Products segment are as follows:



	Quarter Ended ⁽¹⁾						% Change
(in millions)	December 29, 2012			December 31, 2011			Better/ (Worse)
Revenues
Licensing and publishing	$	549		$	527		4	%
Retail and other	464			421			10	%
Total revenues	1,013			948			7	%
Operating expenses	(463		)	(446		)	(4)	%
Selling, general, administrative and other	(174		)	(161		)	(8)	%
Depreciation and amortization	(30		)	(28		)	(7)	%
Operating Income	$	346		$	313		11	%

⁽¹⁾ Certain reclassifications have been made to the operating and selling, general and administrative expense amounts presented in the prior-year quarter to conform to the current-year presentation. The reclassifications reflect, in part, changes to our organizational structure following leadership changes in the Consumer Products segment in early fiscal 2012. The amounts that will be reclassified for the remaining quarters of the prior fiscal year are comparable to the amounts reclassified in the first quarter.

Revenues

The 4% increase in licensing and publishing revenue was due to a lower revenue share with Studio Entertainment reflecting a higher mix of revenues from properties subject to the revenue share in the prior-year quarter driven by sales of Cars merchandise.

Higher retail and other revenue reflected a 10% increase from our retail business driven by higher online sales in North America and Europe, comparable store sales growth in North America and Japan and the benefit of store format changes in North America.

Costs and Expenses

Operating expenses included an increase of $15 million in cost of goods sold, from $204 million to $219 million, due to increased sales volume at our retail business. Operating expenses also increased 1% due to higher distribution expenses and labor costs at our retail business.

The increase in selling, general, administrative and other expenses was driven by higher marketing and labor costs.

Segment Operating Income

Segment operating income increased 11% to $346 million due to increases at our licensing and retail businesses.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS — (continued)

Interactive

Operating results for the Interactive segment are as follows:



	Quarter Ended						% Change
(in millions)	December 29, 2012			December 31, 2011			Better/ (Worse)
Revenues
Game sales and subscriptions	$	221		$	217		2	%
Advertising and other	70			62			13	%
Total revenues	291			279			4	%
Operating expenses	(163		)	(163		)	—	%
Selling, general, administrative and other	(109		)	(132		)	17	%
Depreciation and amortization	(10		)	(12		)	17	%
Operating Income (Loss)	$	9		$	(28	)	nm

Revenues

The increase in game sales and subscriptions is primarily due to a 5% increase from higher social games revenue, partially offset by a 3% decline due to lower console game licensing revenue.

Higher advertising and other revenue was primarily due to a new licensing agreement for Disney branded mobile phones and content in Japan.

Costs and Expenses

Operating expenses included a $3 million increase in cost of sales from $90 million to $93 million and a $3 million decline in product development costs from $73 million to $70 million.

The decrease in selling, general, administrative and other costs was primarily due to lower acquisition accounting impacts at our social games business.

Segment Operating Income (Loss)

Segment operating results improved from a loss of $28 million to income of $9 million driven by increases in our games and Japan mobile business.

Restructuring and impairment charges

The Company recorded $4 million of charges in the prior-year quarter related to the Interactive segment, which were recorded in “Restructuring and impairment charges” in the Consolidated Statements of Income, for severance from organizational and cost structure initiatives.

OTHER FINANCIAL INFORMATION

Corporate and Unallocated Shared Expenses

Corporate and unallocated shared expenses are as follows:



	Quarter Ended						% Change
(in millions)	December 29, 2012			December 31, 2011			Better/ (Worse)
Corporate and unallocated shared expenses	$	(123	)	$	(107	)	(15)	%

The increase in Corporate and unallocated shared expenses was driven by the timing of allocations to operating segments.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS — (continued)

Net Interest Expense

Net interest expense is as follows:



	Quarter Ended						% Change
(in millions)	December 29, 2012			December 31, 2011			Better/ (Worse)
Interest expense	$	(92	)	$	(116	)	21	%
Interest and investment income	20			26			(23)	%
Net interest expense	$	(72	)	$	(90	)	20	%

The decrease in net interest expense for the quarter was due to lower effective interest rates.

Income Taxes

The effective income tax rate is as follows:



	Quarter Ended				Change
	December 29, 2012		December 31, 2011		Better/ (Worse)
Effective Income Tax Rate	29.1	%	32.1	%	3.0	ppt

The effective income tax rate for the quarter decreased to 29.1% from 32.1% in the prior-year quarter primarily due to an increase in the amount of prior-year earnings from foreign operations indefinitely reinvested outside of the United States which are subject to foreign tax rates lower than the federal statutory income tax rate. The increase in the prior-year earnings from foreign operations benefited the effective tax rate by 3.2 percentage points.

Noncontrolling Interests

Net income attributable to noncontrolling interests is as follows:



	Quarter Ended				% Change
(in millions)	December 29, 2012		December 31, 2011		Better/ (Worse)
Net income attributable to noncontrolling interests	$	56	$	57	2	%

Net income attributable to noncontrolling interests was comparable to the prior-year quarter. A decrease due to higher recognition of royalties and management fees at Disneyland Paris and the impact of start up costs at Shanghai Disney Resort was largely offset by an increase in net income at ESPN. The increase at ESPN was due to the gain on the sale of our 50% interest in ESPN STAR Sports, partially offset by lower operating results. Net income attributable to noncontrolling interests is determined on income after royalties and management fees, financing costs and income taxes.

FINANCIAL CONDITION

The change in cash and cash equivalents is as follows:



	Quarter Ended						% Change Better/ (Worse)
(in millions)	December 29, 2012			December 31, 2011			% Change Better/ (Worse)
Cash provided by operations	$	1,144		$	1,734		(34)	%
Cash (used in) investing activities	(2,465		)	(978		)	>(100) %
Cash provided by/(used in) financing activities	1,136			(130		)	nm
Impact of exchange rates on cash and cash equivalents	5			(45		)	nm
Increase/(decrease) in cash and cash equivalents	$	(180	)	$	581		nm

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS — (continued)

Operating Activities

Cash provided by operating activities decreased 34% to $1.1 billion for the current quarter compared to $1.7 billion in the prior-year quarter. The decrease was primarily due to higher cash payments at Corporate, Media Networks and Parks and Resorts and lower operating cash receipts at Media Networks. The increase in cash payments at Corporate was driven by the timing of disbursements. The increase in cash payments at Media Networks was driven by higher investment in television programming and production, while the increase at Parks and Resorts was driven by higher operating labor due to new guest offerings and labor cost inflation. The decrease in operating cash receipts at Media Networks was driven by timing of collections. These decreases were partially offset by higher operating cash receipts at Parks and Resorts driven by higher revenues.

Film and Television Costs

The Company’s Studio Entertainment and Media Networks segments incur costs to acquire and produce feature film and television programming. Film and television production costs include all internally produced content such as live-action and animated feature films, animated direct-to-video programming, television series, television specials, theatrical stage plays or other similar product. Programming costs include film or television product licensed for a specific period from third parties for airing on the Company’s broadcast and cable networks and television stations. Programming assets are generally recorded when the programming becomes available to us with a corresponding increase in programming liabilities. Accordingly, we analyze our programming assets net of the related liability.

The Company’s film and television production and programming activity for the quarter ended December 29, 2012 and December 31, 2011 are as follows:



	Quarter Ended
(in millions)	December 29, 2012			December 31, 2011
Beginning balances:
Production and programming assets	$	5,217		$	5,031
Programming liabilities	(812		)	(866		)
	4,405			4,165
Spending:
Film and television production	1,017			918
Broadcast programming	1,847			1,760
	2,864			2,678
Amortization:
Film and television production	(795		)	(706		)
Broadcast programming	(1,882		)	(1,716		)
	(2,677		)	(2,422		)

Change in film and television production and programming costs	187			256
Other non-cash activity	38			8
Ending balances:
Production and programming assets	5,675			5,399
Programming liabilities	(1,045		)	(970		)
	$	4,630		$	4,429

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS — (continued)

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 December 29, 2012 and December 31, 2011 are as follows:



Investments in parks, resorts and other property	Quarter Ended
(in millions)	December 29, 2012		December 31, 2011
Media Networks
Cable Networks	$	31	$	20
Broadcasting	12		10
Total Media Networks	43		30
Parks and Resorts
Domestic	242		358
International	176		123
Total Parks and Resorts	418		481
Studio Entertainment	10		17
Consumer Products	6		16
Interactive	3		4
Corporate	65		86
	$	545	$	634

Capital expenditures for the Parks and Resorts segment are principally for theme park and resort expansion, new rides and attractions, cruise ships, recurring capital and capital improvements, and systems infrastructure. The decrease at our domestic parks and resorts was primarily due to lower spending on resort expansion and new guest offerings at Disneyland Resort, Disney Cruise Line and Walt Disney World Resort. The increase at our international parks and resorts was due to construction costs at Shanghai Disney Resort, partially offset by a decrease in spending on the park expansion at Hong Kong Disneyland Resort.

Capital expenditures at Media Networks primarily reflect investments in facilities and equipment for expanding and upgrading broadcast centers, production facilities and television station facilities.

Capital expenditures at Corporate primarily reflect investments in corporate facilities, information technology and other equipment.

Other Investing Activities

During the current quarter, acquisitions totaled $2.3 billion due to the acquisition of Lucasfilm and proceeds from dispositions totaled $335 million due to the sale of our 50% equity interest in ESPN STAR Sports. In the prior-year quarter, acquisitions totaled $361 million primarily due to the acquisition of a 49% interest in Seven TV network in Russia.

Financing Activities

Cash provided by financing activities was $1.1 billion in the current quarter compared to cash used in financing activities of $130 million in the prior-year quarter. Cash provided by financing activities in the current quarter was driven by net proceeds from borrowings of $3.3 billion, partially offset by dividends of $1.3 billion and repurchases of common stock of $1.0 billion. The increase in cash from financing activities of $1.3 billion versus the prior year was primarily due to increased net borrowings of $2.7 billion, partially offset by the timing of our dividend payment of $1.3 billion which was paid in the current quarter whereas the prior-year dividend was paid in the second quarter of fiscal 2012.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS — (continued)

During the quarter ended December 29, 2012 , the Company’s borrowing activity was as follows:



	September 29, 2012		Additions		Payments			Other Activity			December 29, 2012
Commercial paper borrowings	$	2,050	$	994	$	—		$	—		$	3,044
U.S. medium-term notes	10,117		2,978		(750		)	3			12,348
European medium-term notes and other foreign currency denominated borrowings ⁽¹⁾	1,315		59		(21		)	(90		)	1,263
Other	562		—		(12		)	(26		)	524
Hong Kong Disneyland borrowings	267		—		—			2			269
Total	$	14,311	$	4,031	$	(783	)	$	(111	)	$	17,448
⁽¹⁾ The other activity is primarily the impact of foreign currency translation as a result of the strengthening of the U.S. dollar against the Japanese yen.

The Company’s bank facilities as of December 29, 2012 were as follows:



(in millions)	Committed Capacity		Capacity Used		Unused Capacity
Bank facilities expiring February 2015	$	2,250	$	—	$	2,250
Bank facilities expiring June 2017	2,250		—		2,250
Total	$	4,500	$	—	$	4,500

These bank facilities allow for borrowings at LIBOR-based rates plus a spread, which depends on the Company’s public debt rating and can range from 0.26% to 1.93%. The Company also has the ability to issue up to $800 million of letters of credit under the facility expiring in February 2015, which if utilized, reduces available borrowings under this facility. As of December 29, 2012 , $245 million of letters of credit were outstanding, of which none were issued under this facility.

The Company may use commercial paper borrowings up to the amount of its unused bank facilities, in conjunction with term debt issuance and operating cash flow, to retire or refinance other borrowings before or as they come due.

We believe that the Company’s financial condition is strong and that its cash balances, other liquid assets, operating cash flows, access to debt and equity capital markets and borrowing capacity, taken together, provide adequate resources to fund ongoing operating requirements and future capital expenditures related to the expansion of existing businesses and development of new projects. However, the Company’s operating cash flow and access to the capital markets can be impacted by macroeconomic factors outside of its control. In addition to macroeconomic factors, the Company’s borrowing costs can be impacted by short- and long-term debt ratings assigned by independent rating agencies, which are based, in significant part, on the Company’s performance as measured by certain credit metrics such as interest coverage and leverage ratios. As of December 29, 2012 , Moody’s Investors Service’s long- and short-term debt ratings for the Company were A2 and P-1, respectively, with stable outlook; Standard & Poor’s long- and short-term debt ratings for the Company were A and A-1, respectively, with stable outlook; and Fitch’s long- and short-term debt ratings for the Company were A and F-1, respectively, with stable outlook. The Company’s bank facilities contain only one financial covenant, relating to interest coverage, which the Company met on December 29, 2012 , by a significant margin. The Company’s bank facilities also specifically exclude certain entities, such as Disneyland Paris, Hong Kong Disneyland Resort and Shanghai Disney Resort, from any representations, covenants or events of default.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS — (continued)

COMMITMENTS AND CONTINGENCIES

Legal Matters

As disclosed in Note 11 to the Condensed Consolidated Financial Statements, the Company has exposure for certain legal matters, and the disclosure set forth in Note 11 relating to certain legal matters is incorporated herein by reference.

Guarantees

See Note 11 to the Condensed Consolidated Financial Statements for information regarding the Company’s guarantees.

Tax Matters

As disclosed in Note 9 to the Consolidated Financial Statements in the 2012 Annual Report on Form 10-K, the Company has exposure for certain tax matters.

Contractual Commitments

See Note 14 to the Consolidated Financial Statements in the 2012 Annual Report on Form 10-K for information regarding the Company’s contractual commitments.

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 2012 Annual Report on Form 10-K.

Film and Television Revenues and Costs

We expense film and television production, participation and residual costs over the applicable product life cycle based upon the ratio of the current period’s revenues to the estimated remaining total revenues (Ultimate Revenues) for each production. If our estimate of Ultimate Revenues decreases, amortization of film and television costs may be accelerated. Conversely, if our estimate of Ultimate Revenues increase, film and television cost amortization may be slowed. For film productions, Ultimate Revenues include revenues from all sources that will be earned within ten years from the date of the initial theatrical release. For television series, Ultimate Revenues include revenues that will be earned within ten years from delivery of the first episode, or if still in production, five years from delivery of the most recent episode, if later.

With respect to films intended for theatrical release, the most sensitive factor affecting our estimate of Ultimate Revenues (and therefore affecting future film cost amortization and/or impairment) is domestic theatrical performance. Revenues derived from other markets subsequent to the domestic theatrical release (e.g., the home entertainment or international theatrical markets) have historically been highly correlated with domestic theatrical performance. Domestic 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 domestic theatrical performance, the Company’s estimates of revenues from succeeding windows and markets are revised based on historical relationships and an analysis of current market trends. The most sensitive factor affecting our estimate of Ultimate Revenues for released films is the extent of home entertainment sales achieved. Home entertainment sales vary based on the number and quality of competing home video products, as well as the manner in which retailers market and price our products.

With respect to television series or other television productions intended for broadcast, the most sensitive factor affecting estimates of Ultimate Revenues is the program’s rating and the strength of the advertising market. Program ratings, which are an indication of market acceptance, directly affect the Company’s ability to generate advertising revenues during the airing of the program. In addition, television series with greater market acceptance are more likely to generate incremental revenues through the eventual sale of the program rights in the syndication, international and home entertainment markets. Alternatively, poor ratings may result in a television series cancellation, which would require the immediate write-off of any unamortized production costs. A significant decline in the advertising market would also negatively impact our estimates.

We expense the cost of television broadcast rights for acquired movies, series and other programs based on the number of times the program is expected to be aired or on a straight-line basis over the useful life, as appropriate. Amortization of those television programming assets being amortized on a number of airings basis may be accelerated if we reduce the estimated future airings and slowed if we increase the estimated future airings. The number of future airings of a particular program is

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS — (continued)

impacted primarily by the program’s ratings in previous airings, expected advertising rates and availability and quality of alternative programming. Accordingly, planned usage is reviewed periodically and revised if necessary. We amortize rights costs for multi-year sports programming arrangements during the applicable seasons based on the estimated relative value of each year in the arrangement. The estimated values of each year are based on our projection of revenues over the contract period which include advertising revenue and an allocation of affiliate revenue. If the annual contractual payments related to each season approximate each season’s relative value, we expense the related contractual payment during the applicable season. If planned usage patterns or estimated relative values by year were to change significantly, amortization of our sports rights costs may be accelerated or slowed.

Costs of film and television productions are subject to regular recoverability assessments which compare the estimated fair values with the unamortized costs. The net realizable values of television broadcast program licenses and rights are reviewed using a daypart methodology. A daypart is defined as an aggregation of programs broadcast during a particular time of day or programs of a similar type. The Company’s dayparts are: primetime, daytime, late night, news, and sports (includes network and cable). The net realizable values of other cable programming assets are reviewed on an aggregated basis for each cable channel. Individual programs are written-off when there are no plans to air or sublicense the program. Estimated values are based upon assumptions about future demand and market conditions. If actual demand or market conditions are less favorable than our projections, film, television and programming cost write-downs may be required.

Revenue Recognition

The Company has revenue recognition policies for its various operating segments that are appropriate to the circumstances of each business. See Note 2 to the Consolidated Financial Statements in the 2012 Annual Report on Form 10-K for a summary of these revenue recognition policies.

We reduce home entertainment and software product revenues for estimated future returns of merchandise and for customer programs and sales incentives. These estimates are based upon historical return experience, current economic trends and projections of customer demand for and acceptance of our products. If we underestimate the level of returns and concessions in a particular period, we may record less revenue in later periods when returns exceed the estimated amount. Conversely, if we overestimate the level of returns and concessions for a period, we may have additional revenue in later periods when returns and concessions are less than estimated.

We recognize revenues from advance theme park ticket sales when the tickets are used. For non-expiring, multi-day tickets, we recognize revenue over a five-year time period based on estimated usage, which is derived from historical usage patterns. If actual usage is different than our estimated usage, revenues may not be recognized in the periods the related services are rendered. In addition, a change in usage patterns would impact the timing of revenue recognition.

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. Refer to the 2012 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.

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 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 the average of pension yield curves constructed of a large population of high-quality corporate bonds. The resulting discount rate reflects the matching of plan 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 pension plan assets will increase pension expense.

Goodwill, 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. Goodwill is allocated to various reporting units, which are generally an operating segment or one level below the operating segment. The Company compares the fair value of each reporting unit to its carrying amount to determine if there is potential goodwill impairment. If the fair value of a reporting unit

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS — (continued)

is less than its carrying value, an impairment loss is recorded to the extent that the fair value of the goodwill within the reporting unit is less than the carrying value of the goodwill.

To determine the fair value of our reporting units, we generally use a present value technique (discounted cash flow) corroborated by market multiples when available and as appropriate. We apply what we believe to be the most appropriate valuation methodology for each of our reporting units. The discounted cash flow analyses are sensitive to our estimates of future revenue growth and margins for these businesses. We include in the projected cash flows an estimate of the revenue we believe the reporting unit would receive if the intellectual property developed by the reporting unit that is being used by other reporting units was licensed to an unrelated third party at its fair market value. These amounts are not necessarily the same as those included in segment operating results. We believe our estimates of fair value are consistent with how a marketplace participant would value our reporting units.

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. 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.

The Company is required to compare the fair values of other indefinite-lived intangible assets to their carrying amounts. If the carrying amount of an indefinite-lived intangible asset exceeds its fair value, an impairment loss is recognized. Fair values of other 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 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 cash flows expected to be generated over the useful life of an asset group against the carrying value of the asset group. An asset group is established by identifying the lowest level of cash flows generated by the group of assets that are largely independent of the cash flows of other assets and could include assets used across multiple businesses or segments. If the carrying value of the asset group exceeds the estimated undiscounted future cash flows, an impairment would be measured as the difference between the fair value of the group’s long-lived assets and the carrying value of the group’s long-lived assets. The impairment is allocated to the long-lived assets of the group on a pro rata basis using the relative carrying amounts, but only to the extent the carrying value of each asset is above its fair value. 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 triggering event has occurred, the identification of the asset groups, estimates of future cash flows and the discount rate used to determine fair values. If we had established different asset groups or utilized different valuation methodologies or assumptions, the impairment test results could differ, and we could be required to record impairment charges.

The Company has cost and equity investments. The fair value of these investments is dependent on the performance of the investee companies, as well as volatility inherent in the external markets for these investments. In assessing potential impairment of these investments, we consider these factors, as well as the forecasted financial performance of the investees and market values, where available. If these forecasts are not met or market values indicate an other-than-temporary decline in value, impairment charges may be required.

Allowance for Doubtful Accounts

We evaluate our allowance for doubtful accounts and estimate collectability of accounts receivable based on our analysis of historical bad debt experience in conjunction with our assessment of the financial condition of individual companies with which we do business. In times of domestic or global economic turmoil, 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.

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 claims. These estimates have been developed in consultation with outside counsel and are based upon an analysis of potential results, assuming a combination of litigation and settlement strategies. It is possible, however, that future results of operations for any particular quarterly or annual period could be materially affected by changes

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS — (continued)

in our assumptions or the effectiveness of our strategies related to these proceedings. See Note 11 to the Condensed Consolidated Financial Statements for more detailed information on litigation exposure.

Income Tax Audits

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.

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, British pound, Japanese yen 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.

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.

Item 3. Quantitative and Qualitative Disclosures about Market Risk. See Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures – We have established disclosure controls and procedures to ensure that the information required to be disclosed by the Company in the reports that it files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms and that such information is accumulated and made known to the officers who certify the Company’s financial reports and to other members of senior management and the Board of Directors as appropriate to allow timely decisions regarding required disclosure.

Based on their evaluation as of December 29, 2012 , the principal executive officer and principal financial officer of the Company have concluded that the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934) are effective.

There have been no changes in our internal controls over financial reporting during the first quarter of fiscal 2013 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II. OTHER INFORMATION

ITEM 1. Legal Proceedings

As disclosed in Note 11 to the Condensed Consolidated Financial Statements, the Company is engaged in certain legal matters, and the disclosure set forth in Note 11 relating to certain legal matters is incorporated herein by reference.

ITEM 1A. Risk Factors

The Private Securities Litigation Reform Act of 1995 (the Act) provides a safe harbor for “forward-looking statements” made by or on behalf of the Company. We may from time to time make written or oral statements that are “forward-looking,” including statements contained in this report and other filings with the Securities and Exchange Commission and in reports to our shareholders. All forward-looking statements are made on the basis of management’s views and assumptions regarding future events and business performance as of the time the statements are made and the Company does not undertake any obligation to update its disclosure relating to forward looking matters. Actual results may differ materially from those expressed or implied. Such differences may result from actions taken by the Company, including restructuring or strategic initiatives (including capital investments or asset acquisitions or dispositions), as well as from developments beyond the Company’s control, including: changes in domestic and global economic conditions, competitive conditions and consumer preferences; adverse weather conditions or natural disasters; health concerns; international, political or military developments; and technological developments. Such developments may affect travel and leisure businesses generally and may, among other things, affect the performance of the Company’s theatrical and home entertainment releases, the advertising market for broadcast and cable television programming, expenses of providing medical and pension benefits, demand for our products and performance of some or all company businesses either directly or through their impact on those who distribute our products. Additional factors are discussed in the 2012 Annual Report on Form 10-K under the Item 1A, “Risk Factors.”

ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds

The following table provides information about Company purchases of equity securities that are registered by the Company pursuant to Section 12 of the Exchange Act during the quarter ended December 29, 2012 :



Period	Total Number of Shares Purchased ⁽¹⁾	Weighted Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	Maximum Number of Shares that May Yet Be Purchased Under the Plans or Programs ⁽²⁾
September 30, 2012 – October 31, 2012	6,647,693	$	51.59	6,568,090	226 million
November 1, 2012 – November 30, 2012	9,671,552	48.34		9,591,200	216 million
December 1, 2012 – December 29, 2012	4,958,398	49.50		4,881,000	211 million
Total	21,277,643	49.63		21,040,290	211 million


⁽¹⁾	237,353 shares were purchased on the open market to provide shares to participants in the Walt Disney Investment Plan (WDIP) and Employee Stock Purchase Plan (ESPP). These purchases were not made pursuant to a publicly announced repurchase plan or program.


⁽²⁾	Under a share repurchase program implemented effective June 10, 1998, the Company is authorized to repurchase shares of its common stock. On March 22, 2011, the Company’s Board of Directors increased the repurchase authorization to a total of 400 million shares as of that date. The repurchase program does not have an expiration date.

ITEM 6. Exhibits

See Index of Exhibits.

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.




		THE WALT DISNEY COMPANY
		(Registrant)

By:		/s/ JAMES A. RASULO
		James A. Rasulo, Senior Executive Vice President and Chief Financial Officer

February 5, 2013

Burbank, California

INDEX OF EXHIBITS




Number and Description of Exhibit (Numbers Coincide with Item 601 of Regulation S-K)		Document Incorporated by Reference from a Previous Filing or Filed Herewith, as Indicated below

10.1	Form of Performance-Based Stock Unit Award Agreement (Three-Year Vesting subject to Total Shareholder Return Test/EPS Growth Test/Section 162(m) Vesting Requirement)	Exhibit 10.1 to the Current Report on Form 8-K of the Company dated January 11, 2013

10.2	Second Amendment dated December 3, 2012 to the Disney Savings and Investment Plan as amended and restated effective January 1, 2010	Filed herewith

10.3	Registration Rights Agreement dated as of December 21, 2012, by and among The Walt Disney Company and George W. Lucas, Jr., as trustee of The George W. Lucas, Jr. Fourth Amended and Restated Living Trust, dated as of May 18, 2009	Filed herewith

12.1	Statement Regarding Ratio of Earnings to Fixed Charges	Filed herewith

31(a)	Rule 13a-14(a) Certification of Chief Executive Officer of the Company in accordance with Section 302 of the Sarbanes-Oxley Act of 2002	Filed herewith

31(b)	Rule 13a-14(a) Certification of Chief Financial Officer of the Company in accordance with Section 302 of the Sarbanes-Oxley Act of 2002	Filed herewith

32(a)	Section 1350 Certification of Chief Executive Officer of the Company in accordance with Section 906 of the Sarbanes-Oxley Act of 2002*	Furnished

32(b)	Section 1350 Certification of Chief Financial Officer of the Company in accordance with Section 906 of the Sarbanes-Oxley Act of 2002*	Furnished

101	The following materials from the Company’s Quarterly Report on Form 10-Q for the quarter ended December 29, 2012 formatted in Extensible Business Reporting Language (XBRL): (i) the Condensed Consolidated Statements of Income, (ii) the Condensed Consolidated Statements of Comprehensive Income, (iii) the Condensed Consolidated Balance Sheets, (iv) the Condensed Consolidated Statements of Cash Flows, (v) the Condensed Consolidated Statements of Equity and (vi) related notes	Filed



*	A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

Exhibit 10.2

SECOND AMENDMENT TO THE

DISNEY SAVINGS AND INVESTMENT PLAN

AS AMENDED AND RESTATED EFFECTIVE JANUARY 1, 2010

WHEREAS, The Walt Disney Company (the “Company”) maintains the Disney Savings and Investment Plan, as amended and restated effective January 1, 2010 (the “Plan”); and

WHEREAS, Article 12 of the Plan authorizes the Committee under the Plan to make certain Plan amendments; and

WHEREAS, the Committee has authorized one of its members to take and any all actions deemed necessary to effectuate the drafting and execution of this Amendment; and

WHEREAS, the Committee desires to amend the Plan to permit participation by certain employees of the Magical Cruise Company, Limited and DCL Island Development, Ltd., with a rate of matching contributions equal to fifty cents per dollar contributed up to 6% of covered pay;

NOW, THEREFORE, this Second Amendment to the Plan is hereby adopted, effective January 1, 2013, or as soon thereafter as is administratively practicable:

1. Section 1.19(a) of the Plan is amended in its entirety to read as follows:


(a)	For an Employee who is not an ABC Employee:


(i)	Except as provided in (ii) or (iii), below, an Employee of an Employer who receives Compensation in the form of a salary (as distinguished from hourly paid Employees), whether or not such Employee is exempt for wage-and-hour law purposes.


(ii)	If employed by Magical Cruise Company, Limited, the Employee must be a salaried Employee as described in (i), a United States citizen, an officer of Magical Cruise Company, Limited, and not eligible for additional overtime when working over 70 hours in a week.


(iii)	If employed by DCL Island Development, Ltd., the Employee must be a salaried Employee as described in (i) and either a United States citizen or holder of a valid Green Card issued by U.S. Citizenship and Immigration Services (or any successor agency).

Notwithstanding the above, an Employee described in any of the following paragraphs shall not be a Covered Employee, except to the extent the Company elects, by written notice, to extend Plan participation to such Employee:


(A)	an Employee who is covered by a collective bargaining agreement, unless the applicable collective bargaining agreement specifically provides for coverage by the Plan;


(B)	an Employee who is employed by an Employer pursuant to an oral or written agreement that provides that the individual shall not be eligible to participate in the Plan;


(C)	an Employee who is a “Leased Employee” (determined, for this purpose, without regard to the requirement that services be performed for at least one year);


(D)	an Employee who is a non-resident alien with no United States source income; and


(E)	an Employee designated by an Employer as employed in a division or group, or at a site that the Employer determined, on a nondiscriminatory basis, shall not be eligible to participate in the Plan.

2. Section 3.02(a) of the Plan is amended in its entirety to read as follows:

(a)

Each Employer will contribute, with respect to Participants employed by it who have met the eligibility requirements set forth in Section 3.02(b), a Matching Contribution equal to 50% of so much of the aggregate Tax-Deferred Contributions and Roth Contributions made on behalf of the Participant for the Plan Year as do not exceed 4% (6% to the extent the Participant is a Covered Employee described in Section 1.19(a)(ii) or (iii)) of the Participant’s Compensation for the Plan Year, determined without regard to the Maximum Compensation Limitation, disregarding, for the Plan Year in which the Participant first satisfies the eligibility requirements, contributions made and Compensation earned before the Participant satisfies the eligibility requirements or enrolls in the Plan, if later; provided, however, that Matching Contributions made on behalf of a Participant for any Plan Year shall not exceed 2% (3% to the extent the Participant is a Covered Employee described in Section 1.19(a)(ii) or (iii)) of the Participant’s Compensation for the Plan Year, limited by the Maximum Compensation Limitation.

IN WITNESS WHEREOF, the undersigned has caused this Second Amendment to be executed this 3rd day of December, 2012.

/s/ Barbara Kellams

Barbara A. Kellams

Exhibit 10.3

REGISTRATION RIGHTS AGREEMENT

by and among

The Walt Disney Company

and

George W. Lucas, Jr.
as trustee of
The George W. Lucas, Jr. Fourth Amended and Restated Living Trust,

dated as of May 18, 2009

Dated as of December 21, 2012

This REGISTRATION RIGHTS AGREEMENT (the “ Agreement ”) dated as of December 21, 2012, by and among The Walt Disney Company, a Delaware corporation (“ Parent ”), and George W. Lucas, Jr., as trustee of The George W. Lucas, Jr. Fourth Amended and Restated Living Trust, dated as of May 18, 2009 (the “ Shareholder ”).

WHEREAS, pursuant to an Agreement and Plan of Merger, dated as of October 30, 2012 (the “ Merger Agreement ”), by and among Parent, Valor Acquisition Sub, Inc., a California corporation and a direct wholly owned subsidiary of Parent (“ Merger Sub ”), Valor Merger Sub, LLC, a single member Delaware limited liability company and a direct wholly owned subsidiary of Parent (“ Merger LLC ”), Lucasfilm Ltd., a California corporation and predecessor in interest of Lucasfilm Ltd. LLC, a California limited liability company (the “ Company ”), GDEE Inc., a California corporation (“ NewCo ”), and Lucas, as Shareholder Representative, Parent will acquire the Company through a merger of Merger Sub with and into NewCo with NewCo surviving (the “ Merger ”).

WHEREAS, it is a condition to the obligation of the Company, NewCo, Parent, Merger Sub and Merger LLC to effect the Merger that this Agreement be executed and delivered.

NOW, THEREFORE, in consideration of the premises and of the mutual agreements contained herein, and for other good and valuable consideration the receipt and sufficiency of which is hereby acknowledged, and intending to be legally bound hereby, the parties hereto agree as follows:

1. DEFINITIONS . As used in this Agreement, the following terms shall have the following meanings:

“ Affiliate ” shall mean with respect to any Person, any other Person directly or indirectly controlling, controlled by or under common control with such Person. For purposes of this definition, “ control ” when used with respect to any Person means the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise, and the terms “ controlling ” and “ controlled ” have meanings correlative to the foregoing.

“ Agents ” shall have the meaning set forth in Section 5.1.

“ Agreement ” shall have the meaning set forth in the Preamble hereto.

“ Blackout Notice ” shall have the meaning set forth in Section 2.4.

“ Blackout Period ” shall have the meaning set forth in Section 2.4.

“ Claims ” shall have the meaning set forth in Section 5.1.

“ Company ” shall have the meaning set forth in the Recitals hereto.

“ Effectiveness Period ” shall have the meaning set forth in Section 4.1(b).

“ Electing Holders ” shall have the meaning set forth in Section 2.1(a).

“ Eligible Holder ” shall have the meaning set forth in Section 2.1(a).

“ Exchange Act ” shall mean the Securities Exchange Act of 1934, as amended from time to time, and the rules and regulations thereunder, or any successor statute.

“ FINRA ” shall mean the Financial Industry Regulatory Authority, Inc.

“ Holder ” shall mean the Shareholder for so long as it owns directly or indirectly any Registrable Securities and its Permitted Transferees for so long as such Permitted Transferees own any Registrable Securities.

“ Holders’ Counsel ” shall mean one firm of counsel to the Holders of Registrable Securities, which counsel shall be selected by the Holders of a majority of the Registrable Securities.

“ Inspectors ” shall have the meaning set forth in Section 4.1(g).

“ Lucas ” means Mr. George W. Lucas, Jr.

“ Merger ” shall have the meaning set forth in the Recitals hereto.

“ Merger Agreement ” shall have the meaning set forth in the Recitals hereto.

“ Merger Sub ” shall have the meaning set forth in the Recitals hereto.

“ Merger LLC ” shall have the meaning set forth in the Recitals hereto.

“ NewCo ” shall have the meaning set forth in the Recitals hereto.

“ Parent ” shall have the meaning set forth in the Preamble hereto.

“ Parent Common Stock ” shall mean the common stock, par value $.01 per share, of Parent.

“ Permitted Transferees ” shall mean (i) any Person to whom the Shareholder transfers Registrable Securities by will or intestacy, (ii) Lucas or any spouse, domestic partner, parent, sibling, child or grandchild of Lucas, (iii) any trust all of the current beneficiaries and presumptive remaindermen of which are one or more of the individuals described in clause (ii); or (iv) any charitable organization listed on Schedule 1 hereto to which the Shareholder has donated at least 2,000,000 shares of Registrable Securities; provided that any such transferee shall have executed and delivered to Parent an agreement whereby such transferee becomes a party to this Agreement. For this purpose, “presumptive remaindermen” shall refer to those individuals entitled to a share of the trust’s assets if it were then to terminate.

“ Person ” shall mean an individual, corporation, partnership, limited liability company, association, trust or other entity or organization, including a government or political subdivision or an agency or instrumentality thereof.

“ Prospectus ” shall mean the prospectus included in a Registration Statement (including, without limitation, any preliminary prospectus and any prospectus that includes any information previously omitted from a prospectus filed as part of an effective registration statement in reliance upon Rule 430A promulgated under the Securities Act), and any such Prospectus as amended or supplemented by any prospectus supplement, and all other amendments and supplements to such Prospectus, including post-effective amendments, and in each case including all material incorporated by reference (or deemed to be incorporated by reference) therein.

“ Records ” shall have the meaning set forth in Section 4.1(g).

“ Registrable Securities ” shall mean (i) the shares of Parent Common Stock issued to the Shareholder in the Merger and (ii) any and all equity interests of Parent or any successor or assign of Parent (whether by merger, consolidation, sale of assets or otherwise) that may be issued in respect of, in exchange for, or in substitution for such shares of Parent Common Stock by reason of any distribution, stock dividend, split (forward or reverse), combination, recapitalization, reclassification, merger, consolidation or otherwise. As to any particular Registrable Securities, such securities shall cease to be Registrable Securities when (A) a registration statement with respect to the sale of such securities shall have been declared effective under the Securities Act and such securities shall have been disposed of in accordance with such registration statement, (B) such securities have been sold pursuant to Rule 144 (or any similar provisions then in force) under the Securities Act or such securities may be sold by such Holder to the public without registration in compliance with Rule 144 under the Securities Act (or any similar rule then in force) or (C) such securities shall have ceased to be outstanding.

“ Registration ” shall mean the registration required to be effected by Parent pursuant to Section 2.1.

“ Registration Expenses ” shall mean any and all reasonable and customary expenses incident to performance of or compliance with this Agreement by Parent and its subsidiaries, including, without limitation (i) all SEC, stock exchange, FINRA and other registration, listing and filing fees, (ii) all fees and expenses incurred in connection with compliance with state securities or blue sky laws and compliance with the rules of any stock exchange (including reasonable fees and disbursements of counsel in connection with such compliance and the preparation of a blue sky memorandum and legal investment survey), (iii) all reasonable and customary expenses of any Persons retained by Parent in preparing or assisting in preparing, word processing, printing, distributing, mailing and delivering any Registration Statement, any Prospectus, securities certificates and other documents relating to the performance of or compliance with this Agreement, (iv) the fees and disbursements of counsel for Parent, (v) the reasonable and customary fees and disbursements of Holders’ Counsel in connection with the filing of the Registration Statement under Section 2.1, and (vi) the reasonable and customary fees and disbursements of all independent public accountants

(including the expenses of any audit and/or “ cold comfort ” letters) and the reasonable and customary fees and expenses of other Persons, including experts, retained by Parent; provided , however , Registration Expenses shall not include discounts and commissions payable to underwriters, selling brokers, dealer managers or other similar Persons engaged in the distribution of any of the Registrable Securities and applicable transfer and documentary stamp taxes, if any.

“ Registration Statement ” shall mean any registration statement of Parent that covers any Registrable Securities and all amendments and supplements to any such Registration Statement, including post-effective amendments, in each case including the Prospectus contained therein, all exhibits thereto and all material incorporated by reference (or deemed to be incorporated by reference) therein.

“ SEC ” shall mean the Securities and Exchange Commission, or any successor agency having jurisdiction to enforce the Securities Act.

“ Securities Act ” shall mean the Securities Act of 1933, as amended from time to time, and the rules and regulations thereunder, or any successor statute.

“ Shareholder ” shall have the meaning set forth in the Preamble hereto.

“ Shelf Registration ” shall have the meaning set forth in Section 2.1(a).

“ Underwriters ” shall mean the underwriters, if any, of the offering of Registrable Securities pursuant to an Underwritten Shelf Take-Down.

“ Underwritten Shelf Take-Down ” shall have the meaning set forth in Section 2.1(b).

“ Withdrawn Registration ” shall have the meaning set forth in Section 2.1(a).

“ Withdrawn Request ” shall have the meaning set forth in Section 2.1(a).

2. REGISTRATION UNDER THE SECURITIES ACT .

2.1 Registration .

(a) Right to Registration . Subject to Section 2.4, within 30 days after the date of this Agreement, Parent shall use its commercially reasonable efforts to register under the Securities Act all of the Registrable Securities then held by all Holders on Form S‑3 (including pursuant to Rule 415 under the Securities Act (a “ Shelf Registration ”)) by filing with the SEC a Registration Statement. The intended method of distribution to be included in the Shelf Registration is set forth in Annex A attached hereto. If Parent is a “well known seasoned issuer” (as defined in Rule 405 under the Securities Act), the Registration Statement shall be an Automatic Shelf Registration Statement (as defined in Rule 405 promulgated under the Securities Act). Subject to Section 2.4, Parent shall, as expeditiously as possible but in any event within 30 days after the date of this Agreement, use its commercially reasonable efforts to cause

to be filed with the SEC the Registration Statement providing for the registration under the Securities Act of all of the Registrable Securities then held by all Holders. Parent agrees to include in any such Registration Statement all information about a selling Holder which such selling Holder, upon advice of counsel, shall reasonably request, and which is provided to Parent at least 10 days prior to the date Parent is required to file the Registration Statement. Parent shall use its commercially reasonable efforts to have such Registration Statement declared effective by the SEC as soon as practicable thereafter. Once declared effective by the SEC, Parent shall use its commercially reasonable efforts to keep any Registration Statement continuously effective for the Effectiveness Period.

A request to withdraw the filing of the Registration Statement (a “ Withdrawn Request ”) by the Holders of a majority of the Registrable Securities (the “ Electing Holders ”) may be withdrawn prior to the effectiveness thereof by the Electing Holders (a “ Withdrawn Registration ”), and such withdrawal shall be treated as if the Registration required by the Company shall have been effected pursuant to this Section 2.1, unless the Electing Holders reimburse Parent for its reasonable out-of-pocket Registration Expenses relating to the preparation and filing of such Registration Statement; provided , however , that if a Withdrawn Request or Withdrawn Registration Statement is made (A) because of a material adverse change in the business, financial condition or prospects of Parent, or (B) because of a postponement of such registration pursuant to Section 2.4, or (C) because Parent shall fail to file the Registration Statement within the time period specified by this Agreement other than as a result of a postponement pursuant to Section 2.4, then such withdrawal shall not be treated as a Registration effected pursuant to this Section 2.1, and Parent shall pay all Registration Expenses in connection therewith.

(b) Underwritten Shelf Take-Down; Selection of Underwriters . In connection with any proposed underwritten resale of Registrable Securities (an “ Underwritten Shelf Take-Down ”) that is pursuant to a Shelf Registration, each Holder participating in such Underwritten Shelf Take-Down agrees, in an effort to conduct any such Underwritten Shelf Take-Down in the most efficient and organized manner, to coordinate reasonably with the other Holders prior to initiating any sales efforts and cooperate reasonably with the other Holders as to the terms of such Underwritten Shelf Take-Down, including, without limitation, the aggregate amount of Registrable Securities to be sold and the number of Registrable Securities to be sold by each Holder in the Underwritten Shelf Take-Down. The sole or managing Underwriters and any additional investment bankers and managers to be used in connection with an Underwritten Shelf Take-Down shall be selected by Parent, subject to the prior written consent of the Holders of a majority of the Registrable Securities participating in such Underwritten Shelf Take-Down, such consent to not be unreasonably withheld or delayed. Notwithstanding anything herein to the contrary, in no event shall Holders be entitled to effect an Underwritten Shelf Take-Down (x) unless the aggregate gross proceeds expected to be received from the sale of Registrable Securities in such Underwritten Shelf Take-Down are at least $512,383,712 and (y) on more than three (3) occasions.

(c) Effective Registration Statement; Suspension . A Registration Statement shall not be deemed to have become effective (and the registration required by Section 2.1(a)

will not be deemed to have been effected) (i) unless it has been declared effective by the SEC and remains effective in compliance with the provisions of the Securities Act with respect to the disposition of all Registrable Securities covered by such Registration Statement for the time period specified herein, or (ii) if the offering of any Registrable Securities pursuant to such Registration Statement is interfered with by any stop order, injunction or other order or requirement of the SEC or any other governmental agency or court.

(d) Certain Registration Amendments and Supplements. If a Person becomes a Holder of at least 10,000 shares of Registrable Securities (“ Eligible Holder ”) after a Shelf Registration becomes effective under the Securities Act, Parent shall, as promptly as is reasonably practicable following delivery of written notice to Parent of such Person becoming an Eligible Holder and requesting for its name to be included as a selling securityholder in the prospectus related to the Shelf Registration (with such notice to include all information regarding such Eligible Holder that is required by applicable law to be included in a Registration Statement with respect to a selling secutiryholder), and in any event within 20 calendar days after receipt by Parent of a valid notice:

(1) if required and permitted by applicable law, file with the SEC a supplement to the related prospectus or a post-effective amendment to the Shelf Registration and any necessary supplement or amendment to any document incorporated therein by reference and file any other required document with the SEC so that such Eligible Holder is named as a selling securityholder in the Shelf Registration and the related prospectus in such a manner as to permit such Eligible Holder to deliver a prospectus to purchasers of the Registrable Securities in accordance with applicable law; provided however, that if a post-effective amendment is required by the rules and regulations of the SEC in order to permit resales by such Holder, Parent shall not be required to file more than three post-effective amendments or supplements to the related prospectus for such purpose in any calendar year;

(2) if, pursuant to Section 2.1(d)(1) hereof, Parent shall have filed a post-effective amendment to the Shelf Registration, use its commercially reasonable efforts to cause such post-effective amendment to become effective under the Securities Act as soon as reasonably practicable thereafter; and

(3) notify such Eligible Holder as promptly as is reasonably practicable after the effectiveness under the Securities Act of any post-effective amendment filed pursuant to Section 2.1(d)(1) hereof.

(e) S-3 Eligibility . Parent shall use its commercially reasonable efforts to remain a well known seasoned issuer eligible to use an Automatic Shelf Registration Statement on Form S‑3.

2.2 Expenses . Parent shall pay all Registration Expenses in connection with the Registration, whether or not such registration shall become effective and whether or not all Registrable Securities are withdrawn or otherwise ultimately not included in such registration, except as otherwise provided with respect to a Withdrawn Request and a Withdrawn Registration in Section 2.1(a). The Holders shall pay and be responsible for and shall indemnify and hold

Parent harmless against all expenses (other than Registration Expenses) in connection with the offer and sale of the Holders’ Registrable Securities. Without limiting the generality of the foregoing, the Holders shall pay all discounts and commissions payable to underwriters, selling brokers, managers or other similar Persons engaged in the distribution of the Holders’ Registrable Securities pursuant to any registration pursuant to this Section 2 and applicable transfer and documentary stamp taxes, if any.

2.3 Underwritten Offerings .

(a) Underwritten Shelf Take-Downs . If requested by the sole or lead managing Underwriter for any Underwritten Shelf Take-Down, Parent shall enter into a customary underwriting agreement with the Underwriters for such offering, such agreement to be reasonably satisfactory in substance and form to Parent and to the Holders of a majority of the Registrable Securities participating in such Underwritten Shelf Take-Down and to contain such representations and warranties by Parent and such other terms as are customary in agreements of that type, including, without limitation, indemnification and contribution to the effect and to the extent provided in Section 5.

(b) Holders to be Party to Underwriting Agreement . The Holders participating in an Underwritten Shelf Take-Down shall be party to the underwriting agreement between Parent and such Underwriters and may, at such Holders’ option, require that any or all of the representations and warranties by, and the other agreements on the part of, Parent to and for the benefit of such Underwriters shall also be made to and for the benefit of such Holders and that any or all of the conditions precedent to the obligations of such Underwriters under such underwriting agreement be conditions precedent to the obligations of such Holders; provided , however , that Parent shall not be required to make any representations or warranties with respect to written information provided by such Holders for inclusion in the Registration Statement pursuant to Section 4.2. No such Holder shall be required to make any representations or warranties to, or agreements with, Parent or the Underwriters other than representations, warranties or agreements regarding such Holder, such Holder’s Registrable Securities and such Holder’s intended method of disposition.

(c) Participation in Underwritten Registration . Notwithstanding anything herein to the contrary, no Person may participate in any Underwritten Shelf Take-Down hereunder unless such Person (i) agrees to sell its securities on the terms and conditions provided in any underwriting agreement pertaining to such Underwritten Shelf Take-Down approved by the Persons entitled hereunder to approve such arrangement and (ii) accurately completes and executes in a timely manner all questionnaires, powers of attorney, custody agreements, lock-up agreements, underwriting agreements and other documents reasonably required under the terms of such underwriting arrangements.

2.4 Postponements . Parent shall be entitled to postpone a Registration (including, for the avoidance of doubt, the filing of the Shelf Registration under Section 2.1(a)) and to require the Holders to discontinue the disposition of their securities covered by a Shelf Registration during any Blackout Period (as defined below) (i) if Parent reasonably and in good faith determines that effecting such a registration or continuing such disposition at such time would

have an adverse effect upon a proposed sale of all (or substantially all) of the assets of Parent or a merger, reorganization, recapitalization or similar transaction affecting the capital structure or equity ownership of Parent or other extraordinary transaction involving Parent or any of its material subsidiaries or divisions or (ii) if Parent is in possession of material information which Parent reasonably and in good faith determines is not in the best interest of Parent to disclose in a registration statement at such time; provided , however , that Parent may only delay a Registration pursuant to this Section 2.4 by delivery of a Blackout Notice (as defined below) under Section 2.1 for no longer than 45 days from the date of the Blackout Notice (or such earlier time as such transaction is consummated, abandoned or no longer proposed or the material information has been made public) (the “ Blackout Period ”). The Blackout Period shall be terminated if, in the case of a deferral pursuant to the preceding sentence, the proposed transaction is disclosed or terminated. There shall not be more than two (2) Blackout Periods in any twelve (12) month period and not for more than an aggregate of 60 days ( provided , however , that, for the initial twelve (12) month period following the date of this Agreement, this number of days will be increased by the number of days less than 30 days following the date of this Agreement in which Parent files the Registration Statement pursuant to Section 2.1, if any) during any twelve (12) month period. Parent shall promptly notify the Electing Holders in writing (a “ Blackout Notice ”) of any decision to postpone a Registration or to discontinue sales of Registrable Securities covered by a Shelf Registration pursuant to this Section 2.4 and shall include a general statement of the reason for such postponement, if applicable, an approximation of the anticipated delay and an undertaking by Parent promptly to notify the Electing Holders as soon as a Registration may be effected or sales of Registrable Securities covered by a Shelf Registration may resume, which in either case such resumption shall take place no later than 20 calendar days following the consummation or termination of the transaction or disclosure of the material information, as applicable. The Electing Holders shall treat all notices received from Parent pursuant to this Section 2.4 in the strictest confidence and shall not disseminate such information.

3. [Intentionally Omitted].

4. REGISTRATION PROCEDURES .

4.1 Obligations of Parent . Subject to Section 2.4, whenever Parent is required to effect the registration of Registrable Securities under the Securities Act pursuant to Section 2 of this Agreement, Parent shall, as promptly as practicable:

(d) prepare and file with the SEC the requisite Registration Statement to effect such registration, which Registration Statement shall comply as to form in all material respects with the requirements of the applicable form and include all financial statements required by the SEC to be filed therewith, and Parent shall use its commercially reasonable efforts to cause such Registration Statement to become effective; provided , however , that before filing a Registration Statement or Prospectus or any amendments or supplements thereto, or comparable statements under securities or blue sky laws of any jurisdiction, Parent shall (i) provide Holders’ Counsel and any other Inspector with a reasonable opportunity to review such Registration Statement and each Prospectus included therein (and each amendment or supplement thereto or comparable

statement but excluding any filing made under the Exchange Act that is incorporated by reference therein) to be filed with the SEC, and (ii) not file any such Registration Statement or Prospectus (or amendment or supplement thereto or comparable statement) with the SEC to which Holders’ Counsel, the Electing Holders or any other Inspector shall have reasonably objected on the grounds that such filing does not comply in all material respects with the requirements of the Securities Act or of the rules or regulations thereunder;

(e) prepare and file with the SEC such amendments and supplements to such Registration Statement and the Prospectus used in connection therewith as may be necessary (i) to keep such Registration Statement effective, and (ii) to comply with the provisions of the Securities Act with respect to the disposition of all Registrable Securities covered by such Registration Statement, in each case until such time as all of such Registrable Securities have been disposed of in accordance with the intended methods of disposition by the seller(s) thereof set forth in such Registration Statement; provided , that Parent shall cause such Registration Statement to remain effective for a period ending on the earliest to occur of (i) the date on which all the Holders’ Registrable Securities have been sold pursuant to such Registration Statement, (ii) the date the Registrable Securities may be sold by a Holder to the public without registration in compliance with Rule 144 under the Securities Act (or any similar rule then in force) and (ii) the third (3 ^rd ) anniversary of the effective date of such registration statement (the “ Effectiveness Period ”);

(f) furnish, without charge, to the Electing Holders and each Underwriter, if any, of the securities covered by such Registration Statement, such number of copies of such Registration Statement, each amendment and supplement thereto (in each case including all exhibits), and the Prospectus included in such Registration Statement (including each preliminary Prospectus) in conformity with the requirements of the Securities Act, and other documents, as the Electing Holders and Underwriter may reasonably request in order to facilitate the public sale or other disposition of the Registrable Securities owned by the Holders (Parent hereby consenting to the use in accordance with applicable law of each such Registration Statement (or amendment or post-effective amendment thereto) and each such Prospectus (or preliminary prospectus or supplement thereto) by the Electing Holders and the Underwriters, if any, in connection with the offering and sale of the Registrable Securities covered by such Registration Statement or Prospectus);

(g) prior to any public offering of Registrable Securities, use its commercially reasonable efforts to register or qualify all Registrable Securities and other securities covered by such Registration Statement under such other securities or blue sky laws of such jurisdictions as the Electing Holders or the sole or lead managing Underwriter, if any, may reasonably request to enable the Holders to consummate the disposition in such jurisdictions of the Registrable Securities owned by the Holders and to continue such registration or qualification in effect in each such jurisdiction for as long as such Registration Statement remains in effect (including through new filings or amendments or renewals); and do any and all other acts and things that may be necessary or advisable to enable the Holders to consummate the disposition in such jurisdictions of the Registrable Securities owned by the Holders; provided , however , that Parent shall not be required to (i) qualify generally to do business in any jurisdiction where it would not

otherwise be required to qualify but for this Section 4.1(d), (ii) subject itself to taxation in any such jurisdiction, or (iii) consent to general service of process in any such jurisdiction;

(h) use its commercially reasonable efforts to obtain all other approvals, consents, exemptions or authorizations from such governmental agencies or authorities as may be necessary to enable the Holders to consummate the disposition of such Registrable Securities;

(i) promptly notify Holders’ Counsel, the Electing Holders and the sole or lead managing Underwriter, if any: (i) when the Registration Statement, any pre-effective amendment, the Prospectus or any prospectus supplement related thereto or post-effective amendment to the Registration Statement has been filed and, with respect to the Registration Statement or any post-effective amendment, when the same has become effective, (ii) of any request by the SEC or any state securities or blue sky authority for amendments or supplements to the Registration Statement or the Prospectus related thereto or for additional information, (iii) of the issuance by the SEC of any stop order suspending the effectiveness of the Registration Statement or the initiation or threat of any proceedings for that purpose, (iv) of the receipt by Parent of any notification with respect to the suspension of the qualification of any Registrable Securities for sale under the securities or blue sky laws of any jurisdiction or the initiation of any proceeding for such purpose, (v) of the existence of any fact of which Parent becomes aware or the happening of any event which results in (A) the Registration Statement containing an untrue statement of a material fact or omitting to state a material fact required to be stated therein or necessary to make any statements therein not misleading, or (B) the Prospectus included in such Registration Statement containing an untrue statement of a material fact or omitting to state a material fact required to be stated therein or necessary to make any statements therein, in the light of the circumstances under which they were made, not misleading, (vi) if at any time the representations and warranties contemplated by Section 2.3(b) cease to be true and correct in all material respects, and (vii) of Parent’s reasonable determination that a post-effective amendment to a Registration Statement would be appropriate or that there exists circumstances not yet disclosed to the public which make further sales under such Registration Statement inadvisable pending such disclosure and post-effective amendment; and, if the notification relates to an event described in any of the clauses (ii) through (vii) of this Section 4.1(f), Parent shall, subject to its postponement rights under Section 2.4, promptly prepare a supplement or post-effective amendment to such Registration Statement or related Prospectus or any document incorporated therein by reference or file any other required document so that (1) such Registration Statement shall not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading, and (2) as thereafter delivered to the purchasers of the Registrable Securities being sold thereunder, such Prospectus shall not include an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein in the light of the circumstances under which they were made not misleading (and shall furnish to the Electing Holders and each Underwriter, if any, a reasonable number of copies of such Prospectus so supplemented or amended); and if the notification relates to an event described in clause (iii) of this Section 4.1(f), Parent shall use commercially reasonable efforts to prevent the entry of such stop order or to remove it if entered as soon as reasonably practicable after such order is entered;

(j) make available for inspection by the Electing Holders, any sole or lead managing Underwriter participating in any disposition pursuant to such Registration Statement, Holders’ Counsel and any attorney, accountant or other agent retained by the Holders, or any Underwriter (each, an “ Inspector ” and, collectively, the “ Inspectors ”), all financial and other records, pertinent corporate documents and properties of Parent and any subsidiaries thereof as may be in existence at such time (collectively, the “ Records ”) as shall be necessary, in the opinion of the Electing Holders’ and such Underwriters’ respective counsel, to enable them to exercise their due diligence responsibility and to conduct a reasonable investigation within the meaning of the Securities Act, and cause Parent’s and any subsidiaries’ or officers, directors and employees, and the independent public accountants of Parent, to supply all information reasonably requested by any such Inspectors in connection with such Registration Statement;

(k) obtain an opinion from Parent’s counsel and a “ cold comfort ” letter from Parent’s independent public accountants who have certified Parent’s financial statements included or incorporated by reference in such Registration Statement, in each case dated the date of the Prospectus that is part of such Registration Statement (and if such registration involves an Underwritten Shelf Take-Down, dated the date of the closing under the underwriting agreement), in customary form and covering such matters as are customarily covered by such opinions and “ cold comfort ” letters delivered to underwriters in underwritten public offerings, which opinion and letter shall be reasonably satisfactory to the sole or lead managing Underwriter, if any, and to the Electing Holders, and furnish to the Electing Holders and to each Underwriter, if any, a copy of such opinion and letter addressed to the Electing Holders (in the case of the opinion) and Underwriter (in the case of the opinion and the “ cold comfort ” letter);

(l) provide a CUSIP number for all Registrable Securities and provide and cause to be maintained a transfer agent and registrar for all such Registrable Securities covered by such Registration Statement not later than the effectiveness of such Registration Statement;

(m) otherwise comply with all applicable rules and regulations of the SEC and any other governmental agency or authority having jurisdiction over the offering, and make available to its security holders, as soon as reasonably practicable but no later than 90 days after the end of any 12-month period, an earnings statement (i) commencing at the end of any month in which Registrable Securities are sold to Underwriters in an Underwritten Shelf Take-Down and (ii) commencing with the first day of Parent’s calendar month next succeeding each sale of Registrable Securities after the effective date of a Registration Statement, which statement shall cover such 12-month periods, in a manner which satisfies the provisions of Section 11(a) of the Securities Act and Rule 158 thereunder;

(n) if so requested by any Electing Holder, use its commercially reasonable efforts to cause all such Registrable Securities to be listed (i) on each national securities exchange on which Parent’s securities are then listed or (ii) if securities of Parent are not at the time listed on any national securities exchange (or if the listing of Registrable Securities is not permitted under the rules of each national securities exchange on which Parent’s securities are then listed), on a national securities exchange designated by the Electing Holder;

(o) keep the Electing Holders advised in writing as to the initiation and progress of any registration under Section 2 hereunder;

(p) enter into and perform customary agreements (including, if applicable, an underwriting agreement in customary form) and provide officers’ certificates and other customary closing documents;

(q) cooperate with each seller and each underwriter participating in the disposition of such Registrable Shares and their respective counsel;

(r) cooperate with the Electing Holders and each Underwriter participating in the disposition of such Registrable Securities and their respective counsel in connection with any filings required to be made with FINRA and make reasonably available its employees and personnel and otherwise provide reasonable assistance to the Underwriter (taking into account the needs of Parent’s businesses and the requirements of the marketing process) in the marketing of Registrable Securities in any Underwritten Shelf Take-Down;

(s) furnish to the Electing Holders and the sole or lead managing Underwriter, if any, without charge, at least one manually-signed copy of the Registration Statement and any post-effective amendments thereto, including financial statements and schedules, all documents incorporated therein by reference and all exhibits (including those deemed to be incorporated by reference);

(t) cooperate with the Electing Holders and the sole or lead managing Underwriter, if any, to facilitate the timely preparation and delivery of certificates not bearing any restrictive legends representing the Registrable Securities to be sold, and cause such Registrable Securities to be issued in such denominations and registered in such names in accordance with the underwriting agreement prior to any sale of Registrable Securities to the Underwriters or, if not an Underwritten Shelf Take-Down, in accordance with the instructions of the Electing Holders at least three (3) business days prior to any sale of Registrable Securities;

(u) if requested by the sole or lead managing Underwriter or the Electing Holders, immediately incorporate in a prospectus supplement or post-effective amendment such information concerning the Holders, the Underwriters or the intended method of distribution as the sole or lead managing Underwriter or the Electing Holders reasonably request to be included therein and as is appropriate in the reasonable judgment of Parent, including, without limitation, information with respect to the number of shares of the Registrable Securities being sold to the Underwriters, the purchase price being paid therefor by such Underwriters and with respect to any other terms of the Underwritten Shelf Take-Down of the Registrable Securities to be sold in such offering; make all required filings of such Prospectus supplement or post-effective amendment as soon as notified of the matters to be incorporated in such Prospectus supplement or post-effective amendment; and supplement or make amendments to any Registration Statement if requested by the sole or lead managing Underwriter of such Registrable Securities;

(v) take all reasonable actions to ensure that any Free Writing Prospectus (as defined in Rule 405 of the Securities Act) utilized in connection with any Registration hereunder

complies in all material respects with the Securities Act, is filed in accordance with the Securities Act to the extent required thereby, is retained in accordance with the Securities Act to the extent required thereby and, when taken together with the related prospectus, will not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements therein, in light of the circumstances under which they were made, not misleading;

(w) in the event of the issuance of any stop order suspending the effectiveness of a registration statement, or of any order suspending or preventing the use of any related prospectus or suspending the qualification of any equity securities included in such registration statement for sale in any jurisdiction, use its commercially reasonable efforts promptly to obtain the withdrawal of such order;

(x) use its commercially reasonable efforts to cause such Registrable Securities covered by such registration statement to be registered with or approved by such other governmental agencies or authorities as may be necessary to enable the sellers thereof to consummate the disposition of such Registrable Securities; and

(y) use its commercially reasonable efforts to take all other steps necessary to expedite or facilitate the registration and disposition of the Registrable Securities contemplated hereby.

4.2 Seller Information . Parent may require the Holders to furnish to Parent such information regarding the Holders, the Holders’ Registrable Securities and the Holders’ intended method of disposition as Parent may from time to time reasonably request in writing; provided that such information shall be used only in connection with such Registration.

4.3 Notice to Discontinue . Each Holder agrees by acquisition of such Registrable Securities that, upon receipt of any notice from Parent of the happening of any event of the kind described in Section 4.1(f)(ii) through (vii), such Holder shall forthwith discontinue disposition of Registrable Securities pursuant to the Registration Statement covering such Registrable Securities until the Holder’s receipt of the copies of the supplemented or amended Prospectus contemplated by Section 4.1(f) and, if so directed by Parent, such Holder shall deliver to Parent (at Parent’s expense) all copies, other than permanent file copies, then in the Holder’s possession of the Prospectus covering such Registrable Securities which is current at the time of receipt of such notice. If Parent shall give any such notice, Parent shall extend the period during which such Registration Statement shall be maintained effective pursuant to this Agreement (including, without limitation, the period referred to in Section 4.1(b)) by the number of days during the period from and including the date of the giving of such notice pursuant to Section 4.1(f) to and including the date when the Holders shall have received the copies of the supplemented or amended prospectus contemplated by and meeting the requirements of Section 4.1(f).

5. INDEMNIFICATION; CONTRIBUTION .

5.1 Indemnification by Parent . Parent agrees to indemnify and hold harmless, to the fullest extent permitted by law, each Holder, its officers, directors, partners, members, shareholders, trustees, employees, Affiliates and agents (collectively, “ Agents ”) and each Person

who controls such Holder (within the meaning of the Securities Act) and its Agents with respect to each registration which has been effected pursuant to this Agreement, against any and all losses, claims, damages or liabilities, joint or several, actions or proceedings (whether commenced or threatened) in respect thereof, and expenses (as incurred or suffered and including, but not limited to, any and all expenses incurred in investigating, preparing or defending any litigation or proceeding, whether commenced or threatened, and the reasonable fees, disbursements and other charges of legal counsel) in respect thereof (collectively, “ Claims ”), insofar as such Claims arise out of or are based upon any untrue or alleged untrue statement of a material fact contained in any Registration Statement or Prospectus (including any preliminary, final or summary prospectus and any amendment or supplement thereto) related to any such registration or any omission or alleged omission to state a material fact required to be stated therein or necessary to make the statements therein not misleading; provided , however , that Parent will not be liable in any such case to the extent that any such Claims arise out of or are based upon any untrue statement or alleged untrue statement of a fact or omission or alleged omission of a fact so made in reliance upon and in conformity with written information furnished to Parent by or on behalf of each Holder expressly for use therein.

5.2 Indemnification by the Holders . Each Holder severally and not jointly agrees to indemnify and hold harmless, to the fullest extent permitted by law, Parent and its Agents and each Person who controls Parent (within the meaning of the Securities Act) and its Agents against any and all Claims, insofar as such Claims arise out of or are based upon any untrue or alleged untrue statement of a material fact contained in any Registration Statement or Prospectus (including any preliminary, final or summary prospectus and any amendment or supplement thereto) related to such registration, or any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, to the extent, but only to the extent, that such untrue statement or alleged untrue statement or omission or alleged omission was made in reliance upon and in conformity with written information furnished to Parent by or on behalf of such Holder expressly for use therein; provided , however , that the aggregate amount that each Holder shall be required to pay pursuant to this Section 5.2 shall in no event be greater than the amount of the net proceeds received by such Holder upon the sale of the Registrable Securities pursuant to the Registration Statement giving rise to such Claims less all amounts previously paid by the Holders with respect to any such Claims. Such indemnity shall survive the transfer of such securities by the Holders or any Underwriter.

5.3 Conduct of Indemnification Proceedings . Promptly after receipt by an indemnified party of notice of any Claim or the commencement of any action or proceeding involving a Claim under this Section 5, such indemnified party shall, if a claim in respect thereof is to be made against the indemnifying party pursuant to Section 5, (i) notify the indemnifying party in writing of the Claim or the commencement of such action or proceeding; provided , that the failure of any indemnified party to provide such notice shall not relieve the indemnifying party of its obligations under this Section 5, except to the extent the indemnifying party is materially prejudiced thereby, and (ii) permit such indemnifying party to assume the defense of such claim with counsel reasonably satisfactory to the indemnified party; provided , however , that any indemnified party shall have the right to employ separate counsel and to participate in the

defense of such claim, but the fees and expenses of such counsel shall be at the expense of such indemnified party unless (A) the indemnifying party has agreed in writing to pay such fees and expenses, (B) the indemnifying party shall have failed to assume the defense of such claim and employ counsel reasonably satisfactory to such indemnified party within thirty (30) days after receiving notice from such indemnified party that the indemnified party believes it has failed to do so, or (C) in the reasonable judgment of any such indemnified party, based upon advice of counsel, a conflict of interest may exist between such indemnified party and the indemnifying party with respect to such claims (in which case, if the indemnified party notifies the indemnifying party, in writing that it elects to employ separate counsel at the expense of the indemnifying party, the indemnifying party shall not have the right to assume the defense of such claim on behalf of such indemnified party). No indemnifying party shall be liable for any settlement of any such claim or action effected without its written consent, which consent shall not be unreasonably withheld. In addition, without the consent of the indemnified party (which consent shall not be unreasonably withheld), no indemnifying party shall be permitted to consent to entry of any judgment with respect to, or to effect the settlement or compromise of any pending or threatened action or claim in respect of which indemnification or contribution may be sought hereunder (whether or not the indemnified party is an actual or potential party to such action or claim), unless such settlement, compromise or judgment (1) includes an unconditional release of the indemnified party from all liability arising out of such action or claim, (2) does not include a statement as to or an admission of fault, culpability or a failure to act, by or on behalf of any indemnified party, and (3) does not provide for any action on the part of any party other than the payment of money damages which is to be paid in full by the indemnifying party.

5.4 Contribution . If the indemnification provided for in Section 5.1 or 5.2 from the indemnifying party for any reason is unavailable to (other than by reason of exceptions provided therein), or is insufficient to hold harmless, an indemnified party hereunder in respect of any Claim, then the indemnifying party, in lieu of indemnifying such indemnified party, shall contribute to the amount paid or payable by such indemnified party as a result of such Claim in such proportion as is appropriate to reflect the relative fault of the indemnifying party, on the one hand, and the indemnified party, on the other hand, in connection with the actions which resulted in such Claim, as well as any other relevant equitable considerations. The relative fault of such indemnifying party and indemnified party shall be determined by reference to, among other things, whether any action in question, including any untrue or alleged untrue statement of a material fact or omission or alleged omission to state a material fact, has been made by, or relates to information supplied by, such indemnifying party or indemnified party, and the parties’ relative intent, knowledge, access to information and opportunity to correct or prevent such action. If, however, the foregoing allocation is not permitted by applicable law, then each indemnifying party shall contribute to the amount paid or payable by such indemnified party in such proportion as is appropriate to reflect not only such relative faults but also the relative benefits of the indemnifying party and the indemnified party as well as any other relevant equitable considerations; provided, however, that for purposes of this Section 5.5, the relative benefits received by a selling Holders shall be deemed not to exceed the net proceeds received by such selling Holder. The obligations, if any, of the selling Holders to contribute as provided in this Section 5.5 are several in proportion to the relative value of their respective Registrable Securities covered by such Registration Statement and not joint. In addition, no Person shall be

obligated to contribute hereunder any amounts in payment for any settlement of any Claim effected without such Person’s consent, which shall not be unreasonably withheld, conditioned or delayed.

The parties hereto agree that it would not be just and equitable if contribution pursuant to this Section 5.5 were determined by pro rata allocation or by any other method of allocation which does not take into account the equitable considerations referred to in the immediately preceding paragraph. The amount paid or payable by a party as a result of any Claim referred to in the immediately preceding paragraph shall be deemed to include, subject to the limitations set forth in Section 5.4, any legal or other fees, costs or expenses reasonably incurred by such party in connection with any investigation or proceeding. No Person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any Person who was not guilty of such fraudulent misrepresentation.

5.5 Other Indemnification . Indemnification similar to that specified in the preceding Sections 5.1 and 5.2 (with appropriate modifications) shall be given by Parent and the Holders with respect to any required registration or other qualification of securities under any Federal or state law or regulation of any governmental authority, other than the Securities Act. The indemnity agreements contained herein shall be in addition to any other rights to indemnification or contribution which any indemnified party may have pursuant to law or contract.

6. GENERAL .

6.1 Amendments and Waivers . The provisions of this Agreement may not be amended, modified, supplemented or terminated, and waivers or consents to departures from the provisions hereof may not be given, without the written consent of Parent and each of the Holders.

6.2 Notices . All notices, requests, claims, demands and other communications under this Agreement shall be in writing and shall be deemed given (a) on the date of delivery if delivered personally or sent via facsimile (receipt confirmed) or (b) on the first Business Day following the date of dispatch if sent by a nationally recognized overnight courier (providing proof of delivery), in each case to the parties at the following addresses (or at such other address for a party as shall be specified by like notice):

if to Parent:

Alan N. Braverman
Senior Executive Vice President, General Counsel and Secretary
The Walt Disney Company
500 South Buena Vista Street (MC: 1030)
Burbank, California 91521-1030
Facsimile: (818) 569-5146
Email: alan.n.braverman@disney.com

James M. Kapenstein
Associate General Counsel
The Walt Disney Company
500 South Buena Vista Street (MC: 1245)
Burbank, California 91521-1245
Facsimile: (818) 562-1813
Email: james.kapenstein@disney.com

with a copy (which shall not constitute notice) to:

Skadden, Arps, Slate, Meagher & Flom LLP
300 South Grand Avenue, Suite 3400
Los Angeles, CA 90071
Facsimile: (213) 687-5600
Attention: Brian J. McCarthy, Esq., Andrew D. Garelick, Esq.

if to the Shareholder:

5858 Lucas Valley Road
Nicasio, CA 94946
Attention: George W. Lucas, Jr.

with a copy (which shall not constitute notice) to:

Howson & Simon LLP
101 Ygnacio Valley Road, Suite 310
Walnut Creek, CA 94596
Telecopy: (925) 977-9064
Attention: Robert Bradley

with a copy to (which shall not constitute notice):

Latham & Watkins LLP
140 Scott Drive
Menlo Park, CA 94025
Fax: (650) 463-2600
Attention: Christopher Kaufman, Tad Freese, Jamie Leigh

All such notices and communications shall be deemed to have been duly given: at the time delivered by hand, if personally delivered; when receipt is acknowledged, if sent by facsimile; on the next business day, if timely delivered to a courier guaranteeing overnight delivery; and five (5) days after being deposited in the mail, if sent first class or certified mail, return receipt requested, postage prepaid.

6.3 Successors and Assigns . This Agreement shall inure to the benefit of and be binding upon the parties hereto and their respective successors and assigns; provided , however , that, without the prior written consent of Parent, which consent may be withheld in Parent’s sole discretion, neither this Agreement nor any right, remedy, obligation or liability arising hereunder or by reason hereof shall be assignable by any Holder to any Person other than a Permitted Transferee.

6.4 Counterparts . This Agreement may be executed in two or more counterparts, each of which, when so executed and delivered, shall be deemed to be an original, but all of which counterparts, taken together, shall constitute one and the same instrument.

6.5 Descriptive Headings, Etc. The headings in this Agreement are for convenience of reference only and shall not limit or otherwise affect the meaning of terms contained herein. Unless the context of this Agreement otherwise requires: (1) words of any gender shall be deemed to include each other gender; (2) words using the singular or plural number shall also include the plural or singular number, respectively; (3) the words “ hereof ,” “ herein ” and “ hereunder ” and words of similar import when used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement, and Section and paragraph references are to the Sections and paragraphs of this Agreement unless otherwise specified; (4) the word “ including ” and words of similar import when used in this Agreement shall mean “ including, without limitation ,” unless otherwise specified; (5) ” or ” is not exclusive; and (6) provisions apply to successive events and transactions.

6.6 Severability . In the event that any one or more of the provisions, paragraphs, words, clauses, phrases or sentences contained herein, or the application thereof in any circumstances, is held invalid, illegal or unenforceable in any respect for any reason, the validity, legality and enforceability of any such provision, paragraph, word, clause, phrase or sentence in every other respect and of the other remaining provisions, paragraphs, words, clauses, phrases or sentences hereof shall not be in any way impaired, it being intended that all rights, powers and privileges of the parties hereto shall be enforceable to the fullest extent permitted by law.

6.7 Governing Law and Jurisdiction .

(a) This Agreement, and all claims or causes of action (whether in contract or tort) that may be based upon, arise out of or relate to this Agreement or the negotiation, execution or performance of this Agreement, shall be governed by, and construed in accordance with, the laws of the State of Delaware, regardless of the laws that might otherwise govern under applicable principles of conflicts of laws thereof.

(b) The parties hereto hereby irrevocably submit to the exclusive jurisdiction of any federal or state court located in the County of New Castle, State of Delaware over any dispute arising out of or relating to this Agreement or any of the transactions contemplated hereby, and each party hereby irrevocably agrees that all claims in respect of such dispute or any suit, action or proceeding related thereto may be heard and determined in such courts. The parties hereby irrevocably waive, to the fullest extent permitted by applicable law, any objection that they may now or hereafter have to the laying of venue of any such dispute brought in such

court or any defense of inconvenient forum for the maintenance of such dispute. Each of the parties hereto agrees that a judgment in any such dispute may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law.

(c) EACH PARTY TO THIS AGREEMENT HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION ARISING UNDER OR IN CONNECTION WITH THIS AGREEMENT, WHETHER NOW EXISTING OR HEREAFTER ARISING, AND WHETHER IN CONTRACT, TORT, EQUITY OR OTHERWISE. EACH PARTY TO THIS AGREEMENT HEREBY AGREES AND CONSENTS THAT ANY SUCH CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT A JURY AND THAT THE PARTIES TO THIS AGREEMENT MAY FILE AN ORIGINAL COUNTERPART OF A COPY OF THIS AGREEMENT WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE PARTIES HERETO TO THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY.

6.8 Entire Agreement . This Agreement is intended by the parties as a final expression of their agreement and intended to be a complete and exclusive statement of the agreement and understanding of the parties hereto in respect of the subject matter contained herein. There are no restrictions, promises, representations, warranties, covenants or undertakings relating to such subject matter, other than those set forth or referred to herein. This Agreement supersedes all prior agreements and understandings between Parent and the other parties to this Agreement with respect to such subject matter.

6.9 Further Assurances . Each party hereto shall do and perform or cause to be done and performed all such further acts and things and shall execute and deliver all such other agreements, certificates, instruments and documents as any other party hereto reasonably may request in order to carry out the intent and accomplish the purposes of this Agreement and the consummation of the transactions contemplated hereby.

[SIGNATURE PAGE NEXT]

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of the date first written above.

PARENT:

THE WALT DISNEY COMPANY


By:	/s/ James M. Kapenstein Name: James M. Kapenstein Title: Associate General Counsel

[SIGNATURE PAGE TO REGISTRATION RIGHTS AGREEMENT]

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of the date first written above.

SHAREHOLDER:

GEORGE W. LUCAS, JR., AS TRUSTEE OF THE GEORGE W. LUCAS, JR. FOURTH AMENDED AND RESTATED LIVING TRUST, DATED MAY 18, 2009


By:	/s/ George W. Lucas, Jr.

[SIGNATURE PAGE TO REGISTRATION RIGHTS AGREEMENT]

Exhibit 12.1

THE WALT DISNEY COMPANY

RATIO OF EARNINGS TO FIXED CHARGES

(AMOUNTS IN MILLIONS, EXCEPT RATIOS)



	Quarter Ended						Fiscal Year Ended
	Dec. 29, 2012			Dec. 31, 2011			2012			2011			2010			2009			2008
EARNINGS
Income from continuing operations before income taxes	$	2,028		$	2,241		$	9,260		$	8,043		$	6,627		$	5,658		$	7,402
Equity in the income of investees	(110		)	(145		)	(627		)	(585		)	(440		)	(577		)	(581		)
Cash distributions received from equity investees	192			161			663			608			473			505			476
Interest expense, amortization of debt discounts and premiums on all indebtedness and amortization of capitalized interest	110			129			525			497			514			649			768
Imputed interest on operating leases ⁽¹⁾	78			67			288			273			247			205			183
TOTAL EARNINGS	$	2,298		$	2,453		$	10,109		$	8,836		$	7,421		$	6,440		$	8,248

FIXED CHARGES
Interest expense and amortization of debt discounts and premiums on all indebtedness	$	92		$	116		$	472		$	435		$	456		$	588		$	712
Capitalized interest	14			23			92			91			82			57			62
Imputed interest on operating leases ⁽¹⁾	78			67			288			273			247			205			183
TOTAL FIXED CHARGES	$	184		$	206		$	852		$	799		$	785		$	850		$	957
RATIO OF EARNINGS TO FIXED CHARGES ⁽²⁾	12.5			11.9			11.9			11.1			9.5			7.6			8.6


⁽¹⁾	The portion of operating rental expense which management believes is representative of the interest component of rent expense


⁽²⁾	The ratio does not adjust for interest on unrecognized tax benefits that are recorded as a component of income tax expense

Exhibit 31(a)

RULE 13a-14(a) CERTIFICATION IN

ACCORDANCE WITH SECTION 302

OF THE SARBANES-OXLEY ACT OF 2002

I, Robert A. Iger, Chairman and Chief Executive Officer of The Walt Disney Company (the “Company”), certify that:


1.	I have reviewed this quarterly report on Form 10-Q of the Company;


2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;


3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;


4.	The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:


a)	designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;


b)	designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;


c)	evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and


d)	disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and


5.	The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):


a)	all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and


b)	any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.



Date:	February 5, 2013	By:	/s/ ROBERT A. IGER
			Robert A. Iger
			Chairman and Chief Executive Officer

Exhibit 31(b)

RULE 13a-14(a) CERTIFICATION IN

ACCORDANCE WITH SECTION 302

OF THE SARBANES-OXLEY ACT OF 2002

I, James A. Rasulo, Senior Executive Vice President and Chief Financial Officer of The Walt Disney Company (the “Company”), certify that:


1.	I have reviewed this quarterly report on Form 10-Q of the Company;


2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;


3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;


4.	The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:


a)	designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;


b)	designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;


c)	evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and


d)	disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and


5.	The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):


a)	all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and


b)	any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.



Date:	February 5, 2013	By:	/s/ JAMES A. RASULO
			James A. Rasulo
			Senior Executive Vice President and Chief Financial Officer

Exhibit 32(a)

CERTIFICATION PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002*

In connection with the Quarterly Report of The Walt Disney Company (the “Company”) on Form 10-Q for the fiscal quarter ended December 29, 2012 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Robert A. Iger, Chairman and Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. §1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, that:


1.	The Report fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934; and


2.	The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.




By:		/s/ ROBERT A. IGER
		Robert A. Iger
		Chairman and Chief Executive Officer
		February 5, 2013



*	A signed original of this written statement required by Section 906 has been provided to The Walt Disney Company and will be retained by The Walt Disney Company and furnished to the Securities and Exchange Commission or its staff upon request.

Exhibit 32(b)

CERTIFICATION PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002*

In connection with the Quarterly Report of The Walt Disney Company (the “Company”) on Form 10-Q for the fiscal quarter ended December 29, 2012 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, James A. Rasulo, Senior Executive Vice President and Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. §1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, that:


1.	The Report fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934; and


2.	The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.




By:		/s/ JAMES A. RASULO
		James A. Rasulo
		Senior Executive Vice President and Chief Financial Officer
		February 5, 2013



*	A signed original of this written statement required by Section 906 has been provided to The Walt Disney Company and will be retained by The Walt Disney Company and furnished to the Securities and Exchange Commission or its staff upon request.