<PAGE> 1
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM 10-Q
------------------------
(MARK ONE)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JULY 1, 2000.
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM __________ TO __________ .
COMMISSION FILE NUMBER: 0-26976
PIXAR
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C>
CALIFORNIA 68-0086179
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
</TABLE>
1001 WEST CUTTING BOULEVARD, RICHMOND, CALIFORNIA 94804
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (510) 236-4000
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 [ ]
The number of shares outstanding of the registrant's Common Stock as of
August 8, 2000 was 47,366,143.
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<PAGE> 2
PART I -- FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
PIXAR
BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
JULY 1, JANUARY 1,
2000 2000
-------- ----------
<S> <C> <C>
ASSETS
Cash and cash equivalents................................... $ 55,219 $ 31,170
Short-term investments...................................... 159,335 163,779
Receivables, net............................................ 14,091 16,740
Prepaid expenses and other assets........................... 4,623 3,888
Deferred income taxes....................................... 34,533 34,533
Property and equipment, net................................. 86,200 60,266
Capitalized film production costs........................... 58,626 64,529
-------- --------
Total assets...................................... $412,627 $374,905
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Accounts payable............................................ $ 3,403 $ 458
Income taxes payable........................................ 14,114 12,230
Payable to Disney........................................... 811 --
Accrued liabilities......................................... 10,314 16,475
Unearned revenue............................................ 1,353 1,299
-------- --------
Total liabilities................................. 29,995 30,462
-------- --------
Shareholders' equity:
Preferred stock; no par value; 5,000,000 shares authorized
and no shares issued and outstanding...................... -- --
Common stock; no par value; 100,000,000 shares authorized;
47,300,823 and 46,959,093 shares issued and outstanding as
of July 1, 2000 and January 1, 2000, respectively......... 284,909 281,274
Accumulated other comprehensive loss........................ (514) (660)
Retained earnings........................................... 98,237 63,829
-------- --------
Total shareholders' equity........................ 382,632 344,443
-------- --------
Total liabilities and shareholders' equity........ $412,627 $374,905
======== ========
</TABLE>
See accompanying notes to financial statements.
2
<PAGE> 3
PIXAR
STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
QUARTER ENDED SIX MONTHS ENDED
--------------------------- ---------------------------
JULY 1, 2000 JULY 3, 1999 JULY 1, 2000 JULY 3, 1999
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Revenue:
Film.......................................... $16,059 $12,239 $73,965 $13,884
Software...................................... 1,793 1,240 4,532 2,814
Animation services............................ 481 -- 814 222
------- ------- ------- -------
Total revenue......................... 18,333 13,479 79,311 16,920
------- ------- ------- -------
Cost of revenue:
Film.......................................... 3,314 3,574 18,159 3,846
Software...................................... 138 133 279 431
Animation services............................ 253 -- 442 154
------- ------- ------- -------
Total cost of revenue................. 3,705 3,707 18,880 4,431
------- ------- ------- -------
Gross profit.......................... 14,628 9,772 60,431 12,489
------- ------- ------- -------
Operating expenses:
Research and development...................... 1,763 1,320 3,176 2,666
Sales and marketing........................... 337 304 727 652
General and administrative.................... 2,004 1,554 3,820 2,941
------- ------- ------- -------
Total operating expenses.............. 4,104 3,178 7,723 6,259
------- ------- ------- -------
Income from continuing operations..... 10,524 6,594 52,708 6,230
Other income, net............................... 3,058 1,793 5,895 3,658
------- ------- ------- -------
Income from continuing operations
before income taxes................. 13,582 8,387 58,603 9,888
Income tax expense.............................. 5,637 2,012 24,320 2,613
------- ------- ------- -------
Net income from continuing
operations.......................... 7,945 6,375 34,283 7,275
Income from discontinued operations, net of
taxes......................................... 75 67 125 67
------- ------- ------- -------
Net income............................ $ 8,020 $ 6,442 $34,408 $ 7,342
======= ======= ======= =======
Basic net income per share from continuing
operations.................................... $ 0.17 $ 0.14 $ 0.73 $ 0.16
Basic net income per share from discontinued
operations.................................... -- -- -- --
------- ------- ------- -------
Basic net income per share...................... $ 0.17 $ 0.14 $ 0.73 $ 0.16
======= ======= ======= =======
Shares used in computing basic net income per
share......................................... 47,179 46,023 47,092 45,785
======= ======= ======= =======
Diluted net income per share from continuing
operations.................................... $ 0.16 $ 0.13 $ 0.69 $ 0.14
Diluted net income per share from discontinued
operations.................................... -- -- -- --
------- ------- ------- -------
Diluted net income per share.................... $ 0.16 $ 0.13 $ 0.69 $ 0.14
======= ======= ======= =======
Shares used in computing diluted net income
per share..................................... 49,977 51,334 49,953 51,260
======= ======= ======= =======
</TABLE>
See accompanying notes to financial statements.
3
<PAGE> 4
PIXAR
STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
---------------------
JULY 1, JULY 3,
2000 1999
--------- --------
<S> <C> <C>
Cash flows from operating activities:
Net income................................................ $ 34,408 $ 7,342
Adjustments to reconcile net income to net cash provided
by continuing operating activities:
Discontinued operations................................ (125) (67)
Amortization of deferred compensation.................. -- 75
Depreciation and amortization.......................... 2,608 3,297
Amortization of capitalized film production costs...... 18,159 3,846
Tax benefit from disqualifying dispositions............ -- 14,163
Deferred income tax.................................... -- (12,129)
Changes in operating assets and liabilities:
Receivables.......................................... 2,649 326
Prepaid expenses and other assets.................... (975) (351)
Accounts payable..................................... 2,945 (1,508)
Income taxes payable................................. 1,884 1,275
Payable to Disney.................................... 811 (3,363)
Accrued liabilities.................................. (6,161) 256
Unearned revenue..................................... 54 2,566
--------- --------
Net cash provided by continuing operations........ 56,257 15,728
Net cash provided by discontinued operations...... 125 67
--------- --------
Net cash provided by operating activities......... 56,382 15,795
--------- --------
Cash flows from investing activities:
Purchase of property and equipment........................ (28,701) (16,259)
Proceeds from sale of property and equipment.............. 399 994
Proceeds from sale of short-term securities............... 221,934 86,692
Investments in short-term securities...................... (217,344) (87,044)
Capitalized film production costs......................... (12,256) (15,579)
--------- --------
Net cash used in investing activities............. (35,968) (31,196)
--------- --------
Cash flows from financing activities:
Proceeds from exercised stock options..................... 3,635 2,835
--------- --------
Net cash provided by financing activities......... 3,635 2,835
--------- --------
Net increase (decrease) in cash and cash equivalents........ 24,049 (12,566)
Cash and cash equivalents at beginning of period............ 31,170 29,557
--------- --------
Cash and cash equivalents at end of period.................. $ 55,219 $ 16,991
========= ========
Supplemental disclosure of cash flow information:
Cash paid during the period for income taxes.............. $ 22,525 $ --
========= ========
Supplemental disclosure of non-cash investing and financing
activities:
Loss on equipment disposals capitalized as film production
costs.................................................. $ -- $ (572)
========= ========
Credits from patent licensing............................. $ 24 $ --
========= ========
Unrealized gain (loss) on investments..................... $ 146 $ (696)
========= ========
</TABLE>
See accompanying notes to financial statements.
4
<PAGE> 5
PIXAR
NOTES TO FINANCIAL STATEMENTS
(1) BASIS OF PRESENTATION
The accompanying unaudited condensed financial statements have been
prepared pursuant to the rules and regulations of the Securities and Exchange
Commission. In the opinion of management, the accompanying unaudited condensed
financial statements reflect all adjustments (consisting only of normal
recurring adjustments) considered necessary for a fair presentation of our
financial condition, results of operations, and cash flows for the periods
presented. These financial statements should be read in conjunction with the
audited financial statements as of January 1, 2000 and January 2, 1999, and for
each of the years in the three-year period ended January 1, 2000, including
notes thereto, incorporated by reference into our Annual Report on Form 10-K for
the year ended January 1, 2000.
The results of operations for the three and six months ended July 1, 2000
are not necessarily indicative of the results expected for the current year or
any other period.
Certain amounts reported in previous periods have been reclassified to
conform to the 2000 financial statement presentation.
(2) FISCAL YEAR
Effective for fiscal year 1998, we adopted a 52 or 53-week fiscal year,
changing the year end date from December 31 to the Saturday nearest December 31.
Fiscal year 2000 will end on December 30, 2000 and will consist of 52 weeks.
(3) NET INCOME PER SHARE
Basic net income per share is computed using the weighted-average number of
common shares outstanding during the period. Diluted net income per share is
computed using the weighted-average number of common and dilutive common
equivalent shares outstanding during the period, using the treasury stock method
for options and warrants.
Reconciliation of basic and diluted net income per share (in thousands,
except per share amounts):
<TABLE>
<CAPTION>
QUARTER ENDED
-------------------------------------------------
JULY 1, 2000 JULY 3, 1999
----------------------- -----------------------
NET NET
INCOME SHARES EPS INCOME SHARES EPS
------ ------ ----- ------ ------ -----
<S> <C> <C> <C> <C> <C> <C>
Basic net income per share............... $8,020 47,179 $0.17 $6,442 46,023 $0.14
Effect of dilutive shares:
Warrants/options....................... -- 2,798 -- 5,311
------ ------ ------ ------
Diluted net income per share............. $8,020 49,977 $0.16 $6,442 51,334 $0.13
====== ====== ====== ======
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS ENDED
--------------------------------------------------
JULY 1, 2000 JULY 3, 1999
------------------------ -----------------------
NET NET
INCOME SHARES EPS INCOME SHARES EPS
------- ------ ----- ------ ------ -----
<S> <C> <C> <C> <C> <C> <C>
Basic net income per share.............. $34,408 47,092 $0.73 $7,342 45,785 $0.16
Effect of dilutive shares:
Warrants/options...................... -- 2,861 -- 5,475
------- ------ ------ ------
Diluted net income per share............ $34,408 49,953 $0.69 $7,342 51,260 $0.14
======= ====== ====== ======
</TABLE>
5
<PAGE> 6
PIXAR
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(4) FEATURE FILM AND CO-PRODUCTION AGREEMENTS
Feature Film Agreement
In 1991, we entered into a feature film agreement with Walt Disney
Pictures, a wholly owned subsidiary of The Walt Disney Company (together with
its subsidiaries and affiliates collectively referred to herein as "Disney"), to
develop and produce up to three computer-animated feature films (the "Feature
Film Agreement"). We were entitled to receive compensation based on the revenue
from the distribution of these films and related products. In 1995, we released
our first feature film under the terms of the Feature Film Agreement, Toy Story.
Based on the individual film forecast method, all significant Toy Story film
production costs were fully amortized by the year ended December 31, 1997.
Co-Production Agreement
In February 1997, Pixar and Disney entered into a new co-production
agreement (the "Co-Production Agreement") which now governs all films made by us
since Toy Story. Under the Co-Production Agreement, we agreed, on an exclusive
basis, to produce five original computer-animated theatrical motion pictures
(the "Pictures") for distribution by Disney. A Bug's Life, released in 1998, and
Toy Story 2, released in November 1999, were the first films produced under this
agreement. Films in development or production at Pixar as of July 1, 2000, all
governed by this agreement, include our fourth film (with the working title
"Monsters, Inc."), our fifth film (Film Five), our sixth film (Film Six) and our
seventh film (Film Seven). A Bug's Life, Monsters, Inc., Film Five, Film Six and
Film Seven will be counted toward the five original Pictures under this
agreement, whereas Toy Story 2 is a derivative work that will not count towards
the Pictures. However, under the Co-Production Agreement, all provisions
applicable to the Pictures also apply to any derivative works that we elect to
co-produce, such as Toy Story 2. Pixar and Disney co-own, co-brand and
co-finance the production costs of the Pictures, and share equally in the
profits of each Picture and any related merchandise and other ancillary
products, after recovery of all of Disney's marketing, distribution and other
predefined fees and costs. The Co-Production Agreement generally provides that
we will produce each Picture and Disney will control decisions relating to film
marketing and distribution.
(5) DISCONTINUED OPERATIONS
In 1997, we determined to discontinue our business of producing CD-ROM and
other interactive products. We immediately discontinued these operations and
reassigned all employees of this division. Since the measurement date and the
disposal date were virtually simultaneous, no income or loss was measured for
the intervening period. We recorded income from discontinued operations of
$125,000 and $67,000, net of income taxes, for the six months ended July 1, 2000
and July 3, 1999, respectively, due to royalty income received for the Toy Story
CD-ROM products. We do not expect any significant future CD-ROM royalty income
in future periods.
(6) SEGMENT REPORTING
We adopted the provisions of SFAS 131, Disclosures about Segments of an
Enterprise and Related Information. Our chief operating decision-maker is
considered to be our Chief Executive Officer ("CEO"). The CEO reviews financial
information presented on a summary basis accompanied by disaggregated
information about film revenue for purposes of making operating decisions and
assessing financial performance. The summary financial information reviewed by
the CEO is identical to the information presented in the accompanying statements
of operations and we have no foreign operations. Therefore, we operate in a
single operating segment.
6
<PAGE> 7
PIXAR
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(7) IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS
In June 2000, the AICPA issued Statement of Position (SOP) 00-2, Accounting
by Producers or Distributors of Films. The guidance in this SOP applies to all
types of films, and is applicable to all producers or distributors that own or
hold rights to distribute or exploit films. For purposes of this SOP, films are
defined as feature films, television specials, television series, or similar
products including animated films and television programming that are sold,
licensed or exhibited, whether produced on film, videotape, digital, or other
video recording format. SOP 00-2 is effective for financial statements for
fiscal years beginning after December 15, 2000. We are in the process of
determining the impact of SOP 00-2 on our financial statements.
7
<PAGE> 8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
This "Management's Discussion and Analysis of Financial Condition and
Results of Operations" contains forward-looking statements that have been made
pursuant to the provisions of the Private Securities Litigation Reform Act of
1995. Such forward-looking statements are based on current expectations,
estimates and projections about the industry in which we operate, management's
beliefs, and assumptions made by management. Words such as "anticipates,"
"expects," "intends," "plans," "believes," "seeks," "estimates," variations of
such words and similar expressions are intended to identify such forward-looking
statements. These statements are not guarantees of future performance and are
subject to certain risks, uncertainties and assumptions that are difficult to
predict; therefore, actual results and outcomes may differ materially from what
is expressed or forecasted in any such forward-looking statements. Such risks
and uncertainties include those set forth herein under "-- Dependence on Toy
Story 2 and A Bug's Life in 2000," and "Risks Associated with Adequacy of Cash
Balances, " as well as those noted in the section entitled "Risk Factors" in our
Annual Report on Form 10-K for the year ended January 1, 2000 (the "Form 10-K").
Particular attention should be paid to the cautionary language in the section in
the Form 10-K entitled "-- Dependence on Toy Story 2, A Bug's Life and Toy Story
in 2000," "-- Risks Associated with Adequacy of Cash Balances," "-- Risks
Associated with Scheduled Successive Release of Films" and "-- Risks Associated
with Co-Production Agreement." Unless required by law, we undertake no
obligation to update publicly any forward-looking statements, whether as a
result of new information, future events or otherwise.
Our operating performance each quarter is subject to various risks and
uncertainties as discussed in our Form 10-K. The following discussion should be
read in conjunction with the sections entitled "Risk Factors" and "Management's
Discussion and Analysis of Financial Condition and Results of Operations" in the
Form 10-K. In particular, the factors set forth below in "Risk Factors" could
affect our operating results and financial condition.
OVERVIEW
In February 1997, we entered into the Co-Production Agreement
("Co-Production Agreement") with Walt Disney Pictures, a wholly owned subsidiary
of The Walt Disney Company (together with its subsidiaries and affiliates
collectively referred to herein as "Disney"), pursuant to which we agreed, on an
exclusive basis, to produce five original computer-animated feature-length
theatrical motion pictures (the "Pictures") for distribution by Disney. Pixar
and Disney agreed to co-finance the production costs of the Pictures, co-own the
Pictures (with Disney having exclusive distribution and exploitation rights),
co-brand the Pictures and share equally in the profits of each Picture and any
related merchandise and other ancillary products, after recovery of all
marketing and distribution costs (which Disney finances), a distribution fee
paid to Disney and any other fees or costs, including participations provided to
talent and the like. The Co-Production Agreement generally provides that we will
produce each Picture and that Disney will control all decisions relating to
marketing, promotion, publicity, advertising and distribution of each Picture.
Our second feature film, A Bug's Life, was released in November 1998 and counts
as the first original Picture under the Co-Production Agreement. The
Co-Production Agreement also contemplates that with respect to theatrical
sequels, made-for-home video sequels, television productions, interactive media
products and other derivative works related to the Pictures, we will have the
opportunity to co-finance and produce such products or to earn passive royalties
on such products. We will not share in any theme park revenues generated as a
result of the Pictures. Pursuant to the Co-Production Agreement, in addition to
co-financing the production costs of the Pictures, Disney will reimburse us for
our share of certain general and administrative costs and certain research and
development costs that benefit the productions.
In November 1999, Toy Story 2, our third animated feature film, was
released. As a sequel, Toy Story 2 is a derivative work of the original Toy
Story; therefore, it is not counted toward the five original Pictures to be
produced under the Co-Production Agreement. However, as a derivative work, Toy
Story 2 will be treated as a Picture under the Co-Production Agreement and all
the provisions applicable to the five original Pictures apply.
8
<PAGE> 9
In May 1999, we began production on our fourth theatrical film with the
working title "Monsters, Inc." Also in 1999, we began story development on our
fifth animated feature film, "Film Five," and concept development on our sixth
animated feature film, "Film Six." In 2000 we began concept development on our
seventh animated feature film, "Film Seven." These films will be produced and
distributed under the Co-Production Agreement and will count as the second,
third, fourth and fifth films of the five original films to be produced under
the Co-Production Agreement. We do not expect to release Monsters, Inc. until
November 2001, at the earliest, and Film Five until holiday 2002, at the
earliest. Films Six and Seven are currently targeted for release no earlier than
the holiday seasons in 2003 and 2004, respectively.
Target Earnings per Share for Fiscal Year 2000
We are targeting diluted earnings per share of at least $1.30 for fiscal
year 2000, which represents an increase from the $1.25 we had targeted during
the first quarter of fiscal year 2000. This is forward-looking information and
actual results may differ materially. Factors that could cause actual results to
differ include but are not limited to: (1) the timing of the release of the Toy
Story 2 home video in domestic and foreign markets and the timing and amount of
related revenues; (2) the timing and amount of Toy Story 2 and A Bug's Life
merchandise sales; (3) the timing and amount of revenue from the Buzz Lightyear
television series and related home video release; (4) the amount of our revenues
from the home video release of A Bug's Life as part of Disney's Gold Collection;
(5) the timing and amount of A Bug's Life television revenue; (6) the timing and
amount of distribution costs incurred in all markets for Toy Story 2, Toy Story
and A Bug's Life; and (7) the timing, accuracy and sufficiency of the
information we receive from Disney to determine revenues and associated gross
profits. See "Risk Factors" set forth below for important factors that could
cause actual results to differ.
RESULTS OF OPERATIONS
Revenue
Total revenue for the three and six months ended July 1, 2000 were $18.3
million and $79.3 million, respectively, compared to $13.5 million and $16.9
million in the corresponding periods of the prior year. The increase for both
periods was primarily due to an increase in film revenue, and, to a lesser
extent, increases in software revenue and animation services revenue.
Film revenue for the quarter ended July 1, 2000 was $16.1 million compared
with $12.2 million in the corresponding prior year period. Film revenue for the
six months ended July 1, 2000 was $74.0 million compared with $13.9 million in
the corresponding prior year period. Under the Co-Production Agreement, we share
equally with Disney in the profits of Toy Story 2 and A Bug's Life after Disney
recovers its distribution costs and fees. Beginning with the first quarter of
2000, we have had an improved ability, through information available to us from
Disney and other sources, to estimate and record our share of film revenues and
gross profits.
For the three and six months ended July 1, 2000, film revenues from Toy
Story 2 of $13.3 million and $67.2 million, respectively, were primarily due to
our share of worldwide theatrical revenues and related merchandise, offset by
Disney's distribution costs and fees. There were no amounts from Toy Story 2 for
comparable periods in the prior year as Toy Story 2 was released in November
1999. For the three month period ended July 1, 2000, film revenues from our
library titles, which include A Bug's Life and Toy Story, netted to $2.8 million
as compared to $12.2 million for the prior year period. For the six month period
ending July 1, 2000, the revenue for our library titles was a net $6.8 million
as compared to $13.9 million for the corresponding prior year period. The
decrease in library titles from both prior year periods resulted from a decrease
in A Bug's Life worldwide theatrical revenue and certain distribution cost
estimate revisions from Disney occurring in the second quarter of 2000. This
decrease was offset by an increase in Toy Story revenue which included revenues
from its home video Gold Collection release. See "Risk Factors -- Dependence on
Toy Story 2 and A Bug's Life in 2000."
9
<PAGE> 10
Software revenue includes software license revenue, principally from
RenderMan, and royalty revenue from licensing Physical Effects, Inc. (PEI)
technology to a third party. Software revenue increased to $1.8 million for the
three months ended July 1, 2000 from $1.2 million in the corresponding prior
year period and increased to $4.5 million for the six months ended July 1, 2000
from $2.8 million in the corresponding prior year period. The increase in
software revenue resulted primarily from a general increase in RenderMan
software licensing, and to a lesser extent, from an increase in the royalty
revenue from licensing PEI technology to a third party. PEI, a company we
acquired in 1998, licensed certain of its technology to a third party, from
which we now receive associated royalty revenue on a quarterly basis. Due to our
focus on content creation for animated feature films and related products, we
have not increased the time and resources necessary to generate significantly
higher RenderMan sales. Therefore, we expect ongoing variability in revenues
derived from software licenses and that such revenue will remain flat or
possibly decline. All historical and future royalty income associated with our
discontinued CD-ROM division is now and will continue to be excluded from
software revenue and presented in results of discontinued operations. See
"Results of Discontinued Operations."
Animation services revenue includes revenue generated from short projects
related to our feature films. Animation services revenue was $481,000 for the
three months ended July 1, 2000, and increased to $814,000 for the six months
ended July 1, 2000 from $222,000 in the corresponding prior year period. There
was no animation services revenue for the three months ended July 3, 1999. We
expect that revenue in this area will continue to vary significantly from
quarter to quarter due to the sporadic nature of this business and the need to
utilize animation services employees on other productions. For example, we
transferred substantially all of our animation services employees to assist in
the completion of both A Bug's Life and Toy Story 2 during peak production
periods. There can be no assurance that we will generate any animation services
revenues during periods in which animation services employees are devoted to
feature films or other projects.
For the three and six months ended July 1, 2000, Disney accounted for 91%
and 94% respectively, of our total revenue. The revenue from Disney consisted of
film and animation services revenue. Due to the Co-Production Agreement, Disney
is expected to continue to represent significantly greater than 10% of our
revenue in 2000 and for the foreseeable future. A significant portion of the
Disney revenue for the quarter was included in receivables and represented 80%
of the balance at July 1, 2000. For the three and six months ended July 3, 1999,
Disney accounted for 91% and 83%, respectively, of our total revenue, primarily
from film and animation services revenue.
Cost of Revenue
Cost of film revenue represents amortization of capitalized film costs. See
"Capitalized Film Production Costs." For the three months ended July 1, 2000,
cost of film revenue represents amortization of film costs associated with Toy
Story 2, and represents 21% of total film revenue. For the six months ended July
1, 2000, cost of film revenue represents amortization of capitalized film costs
associated with Toy Story 2 and to a lesser extent, our library titles, and
represents 25% of total film revenue. For the three and six months ended July 3,
1999, cost of film revenue represented amortized costs from A Bug's Life, and
was 29% and 28%, respectively, of total film revenue.
Cost of software revenue consists of the direct costs and manufacturing
overhead required to reproduce and package our software products, as well as
amortization of purchased technology. Cost of software revenue includes no
amortization of capitalized software development expenses. Cost of software
revenue as a percentage of the related revenue was 8% and 6% for the three and
six months ended July 1, 2000, compared to 11% and 15% for the three and six
month corresponding prior year periods. The percentage decreases for the three
and six months ended July 1, 2000 are due to increases in software and license
sales that have low associated costs. Included in cost of software revenue is
$120,000 of amortization of $2.7 million of purchased technology associated with
the acquisition of PEI. Over a period not to exceed four years, we are
amortizing this purchased technology against related license revenue. As a
result of the ongoing amortization of purchased technology, our total software
gross profit may be lower during the next few years as compared to software
gross profit prior to the 1998 acquisition. In addition, if we determine that
the license revenue generated by the purchased technology will be lower than
expected and that all or part of the purchased
10
<PAGE> 11
technology asset may not be recoverable, we would, at that point, be required to
write off all or a significant portion of the unamortized purchased technology.
Cost of animation services revenue consists of production costs, which
include salaries, benefits, facility expenses and department overhead costs.
Cost of animation services revenue as a percentage of related revenue was 53%
for the three months ended July 1, 2000. There was no animation services revenue
for the three months ended July 3, 1999 and therefore, no cost of animation
services for the same period. Cost of animation services revenue as a percentage
of related revenue was 54% and 69% for the six months ended July 1, 2000 and
July 3, 1999, respectively. Animation services projects are negotiated
individually and depending on the complexity of the project, profit margins vary
significantly from project to project.
Operating Expenses
Total operating expenses for the three and six months ended July 1, 2000
were higher than in the prior periods, and we intend to continue to increase our
spending levels in a number of areas. With respect to general expense growth, as
a result of intense competition for animators, creative personnel, technical
directors and certain administrative personnel, we have had to pay higher
salaries to attract new creative, technical and other personnel. We expect
compensation for such personnel to continue to increase. In 2000, we will
continue to expand our creative development staff and facilities and expand
other operations. Under the Co-Production Agreement, Disney reimburses us for
half of certain general and administrative costs and certain research and
development costs that benefit the productions. The funding received from Disney
is treated as operating expense reimbursements. To the extent that personnel,
facilities and other expenditures are not capitalized by us nor allocated to and
paid for by Disney, and precede or are not subsequently followed by an increase
in revenue, our business, operating results and financial condition will be
materially adversely affected.
Research and development expenses consist primarily of salaries and support
for personnel conducting research and development for the RenderMan product and
for our proprietary Marionette and Ringmaster animation and production
management software and for creative development of concepts for future films.
Research and development expenses increased to $1.8 million in the three months
ended July 1, 2000 from $1.3 million in the corresponding prior year period and
increased to $3.2 million in the six months ended July 1, 2000 from $2.7 million
in the corresponding prior year period. In the first quarter of fiscal year 2000
we recorded a one-time $523,000 adjustment, which reduced our research and
development expenses for the six months ended July 1, 2000, from $3.7 million to
$3.2 million. This adjustment was due to an additional reimbursement from Disney
under the Co-Production Agreement for certain research and development expenses
incurred prior to fiscal year 2000. After allowing for this adjustment, the
increases are due to our continued investment in proprietary technology, short
films and creative development. We expect research and development expenses to
increase in future periods. To date, all research and development costs not
reimbursed by Disney have been expensed as incurred.
Sales and marketing expenses consist primarily of salaries and related
overhead, as well as advertising, technical support, public relations and trade
show costs required to support the software segment. Sales and marketing
expenses increased to $337,000 for the three months ended July 1, 2000 from
$304,000 in the corresponding prior year period and increased to $727,000 for
the six months ended July 1, 2000 from $652,000 in the corresponding prior year
period. Increases in both periods from 1999 are attributable to increases in
corporate marketing and public relations. We believe that sales and marketing
expenses will increase in absolute dollars in future periods, particularly in
the areas of public relations and corporate marketing.
General and administrative expenses consist primarily of salaries of
management and administrative personnel, insurance costs and professional fees.
General and administrative expenses increased to $2.0 million for the three
months ended July 1, 2000 from $1.6 million in the corresponding prior year
period and increased to $3.8 million for the six months ended July 1, 2000 from
$2.9 million in the corresponding prior year period. The increase was due to
general and administrative staffing and public company costs. We expect general
and administrative expenses to further increase in absolute dollars in future
periods.
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Other Income, Net
Other income, net was $3.1 million and $5.9 million for the three and six
months ended July 1, 2000, respectively, and $1.8 million and $3.7 million for
the three and six months ended July 3, 1999, respectively, consisting primarily
of interest income on short-term investments. The increase for both periods is
primarily due to an increase in interest rates, and an increase in our average
cash and short-term investment balances during the second half of 1999 and
continuing through July 1, 2000.
Income Taxes
Income tax expense from continuing operations for the three and six months
ended July 1, 2000 reflects our federal and state income tax liability of 41.5%,
consistent with statutory rates. Income tax expense as a percentage of pre-tax
income for the three and six months ended July 3, 1999, was 24% and 26%,
respectively. The income tax rate increased for both periods because in 1999, we
utilized our remaining net operating loss carryforwards, except those
originating from the exercise of non-qualified employee stock options. The
realization of tax benefits from the exercise of non-qualified employee stock
options will reduce the amount of our tax payments and liabilities, but will not
reduce our effective tax rate. We expect our tax rate in the future to be at or
near statutory levels.
Results of Discontinued Operations
After the Co-Production Agreement was executed, we determined that the
resources devoted to our interactive products division would be better allocated
to other projects arising from the Co-Production Agreement. We determined in
March 1997 to discontinue our business of producing CD-ROM and other interactive
products and redirected employees in that division to film and related projects.
For the six months ended July 1, 2000, we recorded income from discontinued
operations of $125,000, net of income taxes, due to royalty income received. We
do not expect to receive any significant CD-ROM royalty income in future
periods.
IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS
In June 2000, the AICPA issued Statement of Position (SOP) 00-2, Accounting
by Producers or Distributors of Films. The guidance in this SOP applies to all
types of films, and is applicable to all producers or distributors that own or
hold rights to distribute or exploit films. For purposes of this SOP, films are
defined as feature films, television specials, television series, or similar
products including animated films and television programming that are sold,
licensed or exhibited, whether produced on film, videotape, digital, or other
video recording format. SOP 00-2 is effective for financial statements for
fiscal years beginning after December 15, 2000. We are in the process of
determining the impact of SOP 00-2 on our financial statements.
RISK FACTORS
The following is a discussion of certain factors which currently impact or
may impact our business, operating results and/or financial condition. Anyone
making an investment decision with respect to our capital stock or other
securities is cautioned to carefully consider these factors, along with the
factors discussed in our Form 10-K under the section entitled "Risk Factors."
DEPENDENCE ON TOY STORY 2 AND A BUG'S LIFE IN 2000
In the remaining quarters of 2000, our revenue and operating results will
be largely dependent upon (1) the timing of the release of the Toy Story 2 home
video in domestic and foreign markets and the timing and amount of related
revenues; (2) the timing and amount of Toy Story 2 and A Bug's Life merchandise
sales; (3) the timing and amount of revenue from the Buzz Lightyear television
series and related home video release; (4) the amount of our revenues from the
home video release of A Bug's Life as part of Disney's Gold Collection; (5) the
timing and amount of A Bug's Life television revenue; (6) the timing and amount
of distribution costs incurred in all markets for Toy Story 2 and A Bug's Life;
and (7) the timing, accuracy and sufficiency of the information we receive from
Disney to determine revenues and associated gross profits.
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Toy Story 2 Revenue
We will continue to be significantly dependent upon the success of Toy
Story 2 for the remaining quarters of fiscal year 2000. Toy Story 2, released in
November 1999, has achieved significant box office success, with worldwide box
office receipts of more than $486 million as of August 8, 2000. Beginning with
the first quarter of 2000, we have had an improved ability, through information
available to us from Disney and other sources, to estimate and record our share
of film revenues and gross profits. As a result, we recognized revenues from Toy
Story 2 of $67.2 million for the six months ended July 1, 2000, which represents
our related revenue recorded to date. While we anticipate this improved ability
will continue to allow us to recognize our share of film revenues and gross
profits on a more timely basis, we will remain dependent on the timing and
accuracy of the information provided by Disney, as well as on the continuing
commercial success of Toy Story 2 throughout the balance of fiscal year 2000.
We have already recognized in the first six months of 2000 essentially all
of Toy Story 2 worldwide theatrical revenues, as well as a significant portion
of related merchandise revenue. As a result, we do not expect to recognize
further significant revenue from Toy Story 2, other than any remaining revenues
from related merchandise sales, until the release of Toy Story 2 on home video
in October 2000, when we expect to recognize a portion of domestic and foreign
home video revenues. These future revenues from Toy Story 2 will be offset by
distribution and marketing costs from its domestic and foreign home video
releases, video cost of goods, Disney's distribution fee, and other distribution
costs such as talent participation and residuals. Fees and participations paid
to key talent on Toy Story 2 are substantially greater than for Toy Story or A
Bug's Life, which together with other increases in production costs will have
the effect of increasing the cost of the film when compared to our first two
films.
A Bug's Life Revenue
A Bug's Life was released in November 1998, and to date, we have recognized
related revenues of $109 million. Under the Co-Production Agreement, Pixar and
Disney share equally in the profits of A Bug's Life after Disney recovers its
distribution fee and its marketing and distribution costs. Correspondingly, our
film revenue to date has resulted primarily from the domestic and foreign
theatrical revenues from A Bug's Life, related domestic and foreign home video
revenue, and related merchandise licensing, offset by Disney's distribution
costs and its distribution fee. Distribution costs include worldwide theatrical
release costs, and Disney's costs to distribute A Bug's Life on home video in
the United States and foreign markets.
The majority of revenues we expect to receive from A Bug's Life were
reported in 1999 and through the six months ended July 1, 2000. In line with
Disney's new home video strategy, by which more titles will be available on a
year-round basis, A Bug's Life VHS and DVD were repackaged and released as part
of Disney's Gold Collection on August 1, 2000. We expect sources of revenue for
the balance of 2000 to include these home video sales, possibly some television
revenues, and any future merchandise royalties, all of which must be substantial
in order for the film to generate significant revenues in 2000. Moreover,
potential future revenues will be offset by associated distribution costs, which
include home video distribution costs, any television distribution costs, any
remaining theatrical distribution costs, Disney's distribution fee based on
film-related revenues, and other distribution costs such as residuals.
DIFFICULTY AND RISKS IN FORECASTING TOY STORY 2 AND A BUG'S LIFE REVENUES
It is difficult to forecast the amount and timing of our future revenues
from Toy Story 2 and A Bug's Life in the remaining quarters of 2000. The amount
of future revenues depends not only on customer acceptance of a film in its
worldwide theatrical release, but also on customer acceptance of related
products in each separate release category -- home video, merchandise and
television being the most significant. While customer acceptance is initially
measured by box office success, customer acceptance within each follow-on
product category, such as home video, toys or television, depends on factors
unique to each type of product, such as pricing, competitive products, and the
time of year or state of the economy in which a product is released, among many
other factors. In addition, we have found that the degree of customer acceptance
varies widely among foreign countries. While box office success is often a good
indicator of general customer acceptance,
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the relative success of follow-on products is not always directly correlated,
and the degree of correlation is difficult to predict. Disney's strategic
distribution decisions also impact the amount of our future revenues. For
example, in the first half of 1999, Disney reported general softness in its
domestic home video sales and worldwide merchandise licensing as compared to
levels associated with many of its previous blockbuster animated feature films.
As a result, Disney implemented a new strategy of releasing animated films on
home video year round, and in special editions in both VHS and DVD formats.
However, the relative success of that new strategy is not yet known. For this
reason and all of the above reasons, in spite of Toy Story 2's remarkable box
office success, it is difficult to predict how successful its home video release
will be, or how successful sales of other follow-on products will be in the
remaining quarters of 2000. Similarly, it is difficult to predict remaining
video sales or television revenue from A Bug's Life in 2000.
With respect to the difficulty of forecasting the timing of revenues,
Disney distributes our films and film-related products and therefore determines
the timing of product releases. While the timing of theatrical releases is
typically known well in advance of release, the timing of release of follow-on
products is often decided just in advance of release, is subject to change, and
is therefore less predictable. For example, it was not until the first quarter
of fiscal year 2000 that it was determined that the Toy Story 2 home video will
be released on October 17, 2000. In all product categories, timing of revenues
is particularly uncertain with respect to releases in foreign markets as a
foreign product release is often marked by a rollout across many countries over
the course of many months. Therefore, the timing of international revenues is
inherently more difficult to predict than the timing of domestic revenues. In
addition, the amount of revenue recognized in any given quarter or quarters from
all of our films depends on the timing, accuracy, and sufficiency of the
information we receive from Disney to determine revenues and associated gross
profits. Although we obtain from Disney the most current information available
to recognize our share of revenue and to determine our film gross profit, Disney
may make subsequent adjustments to the information that it has provided which
could have a material impact on us in later periods. For instance, towards the
end of the life cycle for a revenue stream, Disney may inform us of additional
distribution costs to those previously forecasted, as occurred in the second
quarter of fiscal year 2000. Such adjustments have and may continue to impact
our revenue share and our film gross profit. Due to these factors, the amount
and timing of our future revenues from Toy Story 2 and A Bug's Life are
difficult to forecast, and it is possible, in any given quarter or quarters
remaining in 2000 that we will not recognize sufficient film revenue to generate
significant earnings.
Under the Co-Production Agreement, Pixar and Disney share the production
costs of Toy Story 2 and A Bug's Life. We initially capitalized our share of
these costs as film production costs, under Statement of Financial Accounting
Standards ("SFAS") No. 53, Financial Reporting by Producers and Distributors of
Motion Picture Films. Our policy is to amortize these costs over the expected
revenue streams as we recognize revenues from the associated films. The amount
of film costs that will be amortized each quarter will depend on how much future
revenue we expect to receive from Toy Story 2 and A Bug's Life. Although Toy
Story 2 has achieved substantial worldwide box office success, and we have
recognized significant theatrical revenues, we believe that the amount spent by
Disney for marketing and distribution has been and will continue to be
significant. It is possible that total revenue generated in all markets by Toy
Story 2 may not generate significant revenue and operating results for us in any
remaining given quarter in 2000, even though Toy Story 2 is critically acclaimed
and has achieved worldwide box office success. With respect to A Bug's Life, it
is difficult to predict how much additional revenue will be derived from home
video and merchandise sales, and from television airings. In any given quarter,
if our forecast changes with respect to total anticipated revenue from Toy Story
2 or A Bug's Life, and becomes lower than was previously forecasted, we would be
required to accelerate amortization of related film costs, resulting in lower
gross margins. Such lower gross margins would adversely impact our business,
operating results, and financial condition.
SOFTWARE REVENUE
We continue to reduce our emphasis on the commercialization of software
products. We are not increasing the time and resources necessary to generate
higher RenderMan licensing revenues; therefore, we expect that revenue from the
licensing of RenderMan will remain flat or possibly decline. In addition, from
the acquisition date of Physical Effects, Inc. ("PEI") in June 1998 through July
1, 2000, we have received lower
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license revenue than expected related to the purchased technology associated
with the acquisition. If future license revenue continues to be lower than
originally estimated, we may be required to write-off all or a significant
portion of the unamortized purchased technology.
WE EXPECT OUR OPERATING RESULTS TO CONTINUE TO FLUCTUATE
Fluctuations in Revenue
We continue to expect significant fluctuations in our future annual and
quarterly revenues because of a variety of factors, including the following:
- the timing of the domestic and international releases of our animated
feature films,
- the success of our animated feature films (which could fluctuate
significantly from film to film),
- the timing of the release of related products into their respective
markets (such as home videos, television, and merchandising),
- the demand for such related products (which is often a function of the
success of the related animated feature film),
- Disney's costs to distribute and promote the feature films and related
products,
- Disney's success at marketing the feature films and related products,
- the timing and accuracy of information received from Disney and other
sources on which we base estimates of revenue to be recognized from our
animated feature films and related products by Disney,
- the introduction of new feature films or products by our competitors, and
- general economic conditions.
In particular, since our revenue under the Co-Production Agreement is
directly related to the success of a feature film, our operating results are
likely to fluctuate depending on the level of success of our animated feature
films and related products. The revenues derived from the production and
distribution of an animated feature film depend primarily on the film's
acceptance by the public, which cannot be predicted and does not necessarily
bear a direct correlation to the production or distribution costs incurred. The
commercial success of a motion picture also depends upon promotion and
marketing, production costs and other factors. Further, the theatrical success
of a feature film can be a significant factor in determining the amount of
revenues generated from the sale of the related products.
Fluctuations in Operating Expenses
Increase in Our Operating Expenses and Effective Tax Rate
Over the last few years, we significantly increased our operating expenses,
and we plan to continue to increase our operating expenses to fund greater
levels of research and development and to expand operations. Specifically, we
expect our spending levels to increase significantly due to (1) continued
investment in proprietary software systems, (2) increased compensation costs as
a result of intense competition for animators, creative personnel, technical
directors and other personnel, (3) increased costs associated with the expansion
of our facilities, and (4) increased investment in creative development. A
portion of our operating expenses that are allocable to film productions is
either capitalized by us or reimbursed by Disney under the Co-Production
Agreement. To the extent that we do not capitalize (or Disney does not pay for)
the increases in expenses, our operating expenses will significantly increase in
2000. Finally, our tax rate in the first half of fiscal year 2000 approximates
statutory levels and is expected to remain at that level in future periods
because we have utilized our remaining net operating loss carryforwards, except
those which originated as non-qualified employee stock option costs. The
realization of tax benefits from non-qualified employee stock option costs will
not reduce our effective tax rate in the future.
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Difficulty in Predicting Operating Expenses
Moreover, our operating expenses will continue to be extremely difficult to
forecast. We budget the direct costs of film productions with Disney, and we
share such costs equally. We capitalize our share of these direct costs of film
production in accordance with SFAS No. 53. A substantial portion of all of our
other costs are incurred for the benefit of feature films ("Overhead"),
including research and development expenses and general and administrative
expenses. Portions of our Overhead are included in the budgets for the Pictures,
and we share such costs equally with Disney under the Co-Production Agreement.
With respect to the portion of our Overhead that is not reimbursed by Disney, we
either (1) capitalize such portion as film production costs, if required under
SFAS No. 53, or (2) charge it to operating expense in the period incurred. Since
a substantial portion of our Overhead is related to the Pictures, and is
therefore reimbursed by Disney, and since we capitalize other amounts in
accordance with SFAS No. 53, our reported operating expenses for the first half
of fiscal year 2000 have not reflected, and future reported operating expenses
will not reflect, our true level of spending on the production of animated
feature films, related products and overhead.
RISKS ASSOCIATED WITH ADEQUACY OF CASH BALANCES
Pursuant to the Co-Production Agreement, we co-financed A Bug's Life and
Toy Story 2 and will co-finance the next four original animated feature films
which we produce, including Monsters, Inc., Film Five, Film Six, and Film Seven.
In the future, we may co-finance other derivative works such as sequels,
interactive products and television productions. In addition, we are
constructing new studio and headquarter facilities in Emeryville, California,
which are being financed by the use of our cash and may continue to be financed
by the use of our cash. The development and production costs of Monsters, Inc.,
Film Five, Film Six, and Film Seven, and costs of the new Emeryville facility
may have an adverse impact on our cash and short-term investment balances. As of
July 1, 2000, we had approximately $214.6 million in cash and short-term
investments. We believe that these funds will be sufficient to meet our
anticipated cash needs for working capital and capital expenditures, including
the development and production costs of Monsters, Inc., Film Five, Film Six, and
Film Seven, until we receive any remaining proceeds from the release of Toy
Story 2 and A Bug's Life. See "-- Liquidity and Capital Resources." To date, we
have chosen to use our existing cash resources to fund construction costs and
film production costs. We may continue to use our cash resources for such
expenditures, or may choose to finance such capital expenditures through
issuance of additional equity or debt securities, by obtaining a credit facility
or by some other financing mechanism. The sale of additional equity or
convertible debt securities would result in additional dilution to our
shareholders. Moreover, we cannot provide any assurances that we will be
successful in obtaining future financing, or even if such financing is
available, that we will obtain it on favorable terms or on terms providing us
with sufficient funds to meet our obligations and objectives. If we fail to
obtain such financing, it would have a material adverse effect on our business,
operating results and financial condition.
CAPITALIZED FILM PRODUCTION COSTS
We had $58.6 million in capitalized film production costs as of July 1,
2000, consisting primarily of costs relating to Toy Story 2, A Bug's Life, and
Monsters, Inc., all of which are being co-financed by Disney under the
Co-Production Agreement. All Toy Story capitalized film costs were fully
amortized as of December 31, 1997.
LIQUIDITY AND CAPITAL RESOURCES
Cash and short-term investments increased $19.7 million to $214.6 million
at July 1, 2000 from $194.9 million at January 1, 2000 due primarily to our
share of proceeds from Toy Story 2 and A Bug's Life, offset by film production
spending and construction spending on our new studio and headquarter facilities
in Emeryville, California. On March 16, 2000, we purchased an existing building
on 1.76 acres in Emeryville for $7.7 million. While it was purchased for
potential future expansion, the building presently serves as rental property, is
currently occupied by commercial tenants and is generating rental income.
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Net cash provided by continuing operations for the six months ended July 1,
2000 was primarily attributable to net income of $34.4 million, the non-cash
impact of depreciation and amortization expense and amortization of capitalized
film production costs, totaling $20.8 million and increases in accounts payable
and income taxes payable of $4.8 million, offset by a decrease in accrued
liabilities of $6.2 million. Cash flows used in investing activities were due
primarily to investments in short-term securities of $217.3 million, the
purchase of property and equipment of $28.7 million and funding of film
production costs of $12.3 million, offset by net proceeds from maturities of
short-term securities of $221.9 million. Cash flows provided by financing
activities were due to proceeds from the exercise of stock options.
As of July 1, 2000, our principal source of liquidity was approximately
$214.6 million in cash and short-term investments. We believe that these funds
will be sufficient to meet our operating requirements through the next twelve
months.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We invest in a variety of investment grade, interest-bearing securities,
including fixed rate obligations of corporations, municipalities, and national
governmental entities and agencies. This diversification of risk is consistent
with our policy to ensure safety of our principal and maintain liquidity. We
only invest in securities with a maturity of 24 months or less, with only
government obligations exceeding 12 months. Our investments are fixed rate
obligations and carry a certain degree of interest rate risk. A rise in interest
rates could adversely impact the fair market value of these securities.
All of our financial instruments are held for purposes other than trading
and are considered "available for sale" per SFAS 115. The table below provides
information regarding our investment portfolio at July 1, 2000. The table
presents principal cash flows and related weighted-average fixed interest rates
presented by expected maturity date (dollars in thousands):
<TABLE>
<CAPTION>
LESS THAN OVER
1 YEAR 1 YEAR TOTAL
--------- ------- --------
<S> <C> <C> <C>
Available-for-sale securities............... $202,061 $11,335 $213,396
Weighted-average interest rate.............. 6.13% 6.01% 6.13%
</TABLE>
While our products are distributed in foreign markets by Disney and its
affiliates, we derive no direct revenues from foreign markets. However, our
revenue share estimate is affected by foreign currency fluctuations as managed
by Disney. We also have no debt and therefore, no related market risk.
PART II -- OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(A) EXHIBITS
27.1 Financial Data Schedule
(B) REPORTS ON FORM 8-K
No reports on Form 8-K were filed by Pixar during the quarter ended July
1, 2000.
ITEMS 1, 2, 3, 4 AND 5 ARE NOT APPLICABLE AND HAVE BEEN OMITTED.
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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.
PIXAR
Date: August 15, 2000 By: /s/ ANN MATHER
------------------------------------
Ann Mather,
Executive Vice President and
Chief Financial Officer
(Principal Accounting Officer
And Duly Authorized Officer)
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EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
-------
<S> <C>
27.1 Financial Data Schedule
</TABLE>
