迪士尼 (DIS) 2003 Q3 法說會逐字稿

Ladies and gentlemen, we'd like to thank you for standing by for our conference call this afternoon.

We do expect to be under way momentarily.

We appreciate your patience and ask that you please continue to hold.

Ladies and gentlemen, once again we'd like to thank you for standing by for our conference call.

We do expect to be underway momentarily.

We do appreciate your patience in holding.

Ladies and gentlemen, thank you for standing by.

Good morning, good afternoon or good evening and welcome to Pixar Animation Studios third quarter 2003 earnings conference call.

Now at this point all of your phone lines are muted or in a listen-only mode.

However later in the conference there will be opportunities for questions.

And we invite you to queue up simply by pressing star then 1 on your phone key pad.

If you should require any assistance you may reach an AT&T operator by pressing star then zero and as a reminder, today's conference is being recorded Thursday, November the 6th, 2003.

As a note ladies and gentlemen, if you should get disconnected at any time during the conference please dial back in at the number you were originally used, 888-428-4478.

Your speakers for today's call are Mr. Steve Jobs, chairman and Chief Executive Officer, as well as Ann Mather, Executive Vice President and Chief Financial Officer.

With that, I would now like to turn the call over to Ms. Mather.

Please go ahead.

Thank you.

Welcome to Pixar's conference call for the third quarter of fiscal year 2003.

I will begin with a discussion of our financial results followed by our outlook for the remainder of 2003 and beyond.

I will then turn the call over to Steve Jobs who will provide an update on Finding Nemo and other developments and Pixar.

We will then open the call for questions.

We are extremely pleased to announce that revenues for the third quarter of 2003 were 30.2 million.

Net income was 13.2 million and diluted earnings per share were 23 cents.

These results compared to revenues of 102.5 million net income of 46. 9 million and diluted earnings per share of 87 cents reported in the third quarter of 2002. 2002's third quarter earnings were much higher largely due to the high le successful release of the Monsters, Inc. home video in September of 2002.

Whereas comparable revenues will fall into the fourth quarter of 2003 given Finding Nemo's November 3 release date.

Film revenues for the third quarter were 27.5 million which included 15.

1 million of Finding Nemo related revenues primarily from worldwide box office revenues merchandise sales and ancillary royalties.

Also includes in our film revenues were 5.2 million associated with Monsters, Inc. and 7.1 million from our library titles.

As of the closing date of our quarter, Finding Nemo had generated approximately $424 million of worldwide box office receipts.

Since that time the film has continued to climb to a worldwide box office of $490 million comprised of $339 million domestic and 151 international.

As of the end of the third quarter, Nemo has been released in nearly all Latin American and Asian territories.

On October 4, 2003, the film opened in the United Kingdom and has been ranked No. 1 at the box office consistently for the past four weekends generating $52 million to date.

Nemo will open in the other significant European markets later this month and Japan in early December.

The third quarter also enjoyed software licensing revenues of approximately $2. 7 million which was greater than previously anticipated.

Our operating expenses for the third quarter were 6.8 million versus 4.8 million in the corresponding period last year.

The increase in operating expenses over the year-ago period though less than anticipated primarily reflects the growth of the studio as we ramp up to meet the demands of multiple films in production.

Cash, cash equivalents and investments were approximately $516.5 million at the end of the third quarter.

Having increased 177.4 million since December 28th, 2002.

This increase was mainly attributable to cash received from Disney for our share of film revenues as well as proceeds from stock option exercises software revenues and interest income offset by film production cost.

Capitalized film cost were at 117.3 million versus 92.1 million at the end of 2002.

Reflecting production spending on our current film projects offset by film amortization of 14.6 million.

Our balance sheet remains debt free, and our retained earnings at the end of the three quarter were $309.3 million.

Third quarter 2003 diluted earnings per share exceeded our previous guidance of 7 cent.

In the course of doing business with Disney we rely on certain information from them in order to forecast our revenues and earnings.

We periodically receive changes to this inform information, approximately 11 cents per fully diluted share of our upside in the third quarter relates to such changes.

These items include four cents resulting from a combination of favorable domestic theatric am rental rates, lower than anticipated theatrical release costs and a slower ramp up of home video expenses related to Finding Nemo.

A one time settlement in Monsters, Monsters, Inc. contributed three cents of upside.

Two cents related from greater than anticipated home video sales from our library titles, additional form revenues on Monsters, Inc. contributed an incremental 1 cent, and merchandise expense divisions related to our library titles resulted in 1 cent of upside.

In addition to those variance described above there was further upside to our guidance due to the following.

Two cents were due to film revenues slightly higher than we had predicted in our forecast, two cent higher than painted software sales and lastly one cent of our third quarter EPS upside was due to lower than expected operating expenses as mentioned previously.

I would now like to address upcoming events that may affect results for the remainder of 2003 and beyond.

Please note that these statements as well as others are forward-looking and it is possible that actual results will differ materially.

We refer you to our 2002 Form 10-K and second quarter 2003 Form 10-Q particularly the sections on risks for important factors that could cause actual results to differ.

These forward-looking statements should not be relied upon as representing our views as of any subsequent date, and we undertake no obligation to update these forward-looking statements to reflect events or circumstances after the date they were made.

We anticipate our earnings for the fourth quarter of 2003 to be driven by Nemo's domestic home video sales and international box office receipts from the European territories and Japan as well as continuing worldwide merchandising levels and ancillary revenues.

As noted during our second quarter earnings conference call our projections assume Nemo will achieve 400 million at the international box office.

However we estimate that only 300 million of that will be recognized in 2003.

We expect to recognize all remaining marketing and release cost during the fourth quarter.

In the first day of its U.S. release the Finding Nemo home video achieved net sales of approximately 8 million units beating our previous one day record of 5 million units set one year ago by Monsters, Inc.

Given the initial outlay of 25 million units of the Finding Nemo home video vs.

Monsters, Inc.'s 20 million units in the third quarter of 2002 we now expect Finding Nemo home video sales to exceed those of Monsters, Inc. over the film's lifetime of approximately ten years.

We have revised our net unit sales assumptions to include these increased shipments and now expect between 22 and 24 million units of the Finding Nemo home video to be sold in the U.S. during the fourth quarter.

Please note that we may maintain certain reserves for the Finding Nemo home video as we have for all of our previous titles and that these reserves may differ from those estimated by Disney.

We will evaluate these projections on a quarterly basis and adjust them in future periods if necessary.

During the fourth quarter, we expect ongoing revenue contributions from Monsters, Inc. and our film libraries.

Our assumptions also include continued software sales, interest income and an effective tax rate of approximately 40%.

Given our better than anticipated third quarter performance in addition to Finding Nemo's initial home video seams we now expect to result diluted earnings per share for fiscal year 2003 of $1.76 which represents an increase from the guidance we gave last quarter of roughly $1.60.

Our new guidance reflects the upside of our third quarter earnings per share that was not timing related as well as our revised projections for Nemo's domestic home video unit sales.

It is important to note however that while we experienced upside to our earnings per share in the third quarter from favorable revenue and expense, our projections for Nemo's remains unchange.

That portion of the associated marketing and release cost that we had originally anticipated in the third quarter of 2003 we now expect to recognize during the fourth quarter.

These statements are forward-looking and actual results may differ materially.

Among the factors that could cause projected 2003 results to differ are the following.

The timing and amount of worldwide revenues and distribution costs from Finding Nemo, Monsters, Inc. and other titles in our film library, the timing accuracy and sufficiency of information we receive from Disney, the timing and amount of nonfilm related revenues and expenses, the accuracy of assumptions and judgments used to estimate certain revenues and associated gross profit, the market price of our common stock and related volatility, and external socioeconomic and political events that are beyond our cons troll.

We are extremely pleased with the continued success of Finding Nemo at the worldwide box office and with its recent release on home video in the U.S.

We look forward to its theatrical release throughout Europe and Japan throughout 23 and into 2004.

Let me turn the discussion over to Steve Jobs.

Thank you Ann.

I've actually got very little to say beyond this but I did want to high lie Finding Nemo's debut on home video just two days ago.

As you heard first day sales were 8 million units setting a new industry record for first day sales.

The prior record was held by Monsters, Inc. which sold 5 million home video units its first day. 60% increase over the prior record holder and we're mighty impressed with that.

But this doesn't tell the entire story.

The sell in for video units was about 55% DVDs and 45% VHS units.

The sell in for Finding Nemo was about 80% DVD.

So if the sellouts reflect the sell-ins and since DVDs carry higher retail and wholesale prices we can expect that to multiply that 60% unit increase to even higher revenue increases.

Disney now expects that we will sell over 25 million video units of Finding Nemo in the first 52 weeks compared to the 19.1 million video units of Monsters, Inc. that we have sold to date.

So far the sell through has been so strong that Disney is scrambling to manufacture more units and we think this is great.

Another statistic that came in this morning from Disney home video were that two million units sell through compared to second day sales of Monsters, Inc. video units of 1.2 million units, again, that's a 60% increase for second day sales and this is very, very positive.

We're far from done with Finding Nemo.

The current domestic box office is $339 million as Ann mentioned, making Finding Nemo the highest grossing animated film ever released and the eighth highest domestic grossing film of all time.

Internationally Finding Nemo has broken records all over the globe.

It's the highest grossing an made film ever released in Mexico Argentina, Brazil, Singapore, China and Australia.

In the biggest territory so far the U.K.

Finding Nemo is on track to becoming the highest grossing film of 2003.

We're excited about Nemo's release in France and Germany later this month and Japan which is likely to be our largest international territory in December.

The international release is scheduled for spring 2004 in most of the major territories and we expect it to set records internationally just as it has done in the U.S.

Beyond Finding Nemo, we are very far along on The Incredibles and it is looking amazingly good.

We are so excited about this movie.

And we've got some great promotional partnerships lined up.

Great merchandising lined up.

And I think everybody at Pixar and Disney is very excited about the Incredibles.

As you see more about this film you're going to be excited about this film too.

Beyond Incredibles we have Cars and the latest reels on Cars have taken a further giant jump up.

Cars is looking magical.

I think Cars is going to be one of the best films we've made.

So we have a lot to look forward to looking forward.

And we don't have earnings calls too much better than this.

So I think Ann and I would like to open it up for questions.

Very good and thank you Mr. Jobs.

Ladies and gentlemen as you just heard if you do have any questions or comments we invite you to queue up at this point.

Just press star then one on your phone key pad.

Now you will hear a tone indicating that you have been placed in queue and just as a note you may remove yourself from the queue by pressing the pound key.

So once again to queue up for a question please press star 1 on your touch tone phone.

And representing Prudential Securities the first question comes from the line of Kathy Styponias.

Hi, thanks.

Steve, wanted to ask a question regarding your talks with respect to the new distribution deal.

I know there's probably not much that you can say on it but could you give us a sense whether at this point Disney is the only party you're talking to?

The reason I ask is because Warner Brothers had a meeting yesterday and while Alan Horn talked about how great and how much they would love to have a relationship with Pixar, they steamed indicate that they felt it was unlikely that they would be able to offer something that would be better than Disney could, so I wonder if that suggests you're in exclusive talks with Disney.

Thanks.

Sure.

We are in discussions with Disney.

And we thought the best and sort of most -- the most straightforward approach to take was to see if we can strike a deal with Disney or not.

And if we can, then we will.

And if we can't, then we won't.

And we will begin talking with everyone else.

We talked with everyone else sufficiently to understand the types of deals that we could be offered.

We were very flattered.

And so we know what we're worth in the marketplace.

But Disney is our partner, and we've always told them they would have first crack at this.

But if we cannot strike a deal with Disney then we can talk with the rest of these companies.

And they will know that we're not just talking to them to get a better deal from Disney because we'll be finished with Disney.

So that's the most straightforward approach that we could come up with to take.

And that's the kind of people we are so that's what we're doing.

And I really don't have anything else to add to that at this time.

Okay, thanks.

Thank you very much Ms. Styponias.

Next we go to the line of Lowell Singer with S.G. Cowen.

Please go ahead.

Hi Steve and Ann.

Couple of questions, Ann just two financial questions.

I thought you had said in your comments that you were estimating 22 to 24 million home video units in the fourth quarter, and then Steve said that the first 52 weeks I thought he said you guys were looking for 25 million units.

So I'm trying to understand -- I probably misunderstood one of those two numbers but wanted to understand which --

You know 22 to 24 in the fourth quarter, Lowell, November December, Steve's comment was well over 25.

My comment was Disney expects we would sell over 25 million units of Finding Nemo in the first 52 weeks -- those are consistent.

Wouldn't the international be included in that as well,

I'm sorry, the estimate of 52 weeks was a domestic estimate.

Got you.

As was mine.

That makes it clear.

Both domestic, I'm sorry.

Thanks.

Ann could you give us D&A in the quarter and Steve one question for you about the time of the dealing.

I think in the past you've talked about middle of '04 as a period when you'd like to have a deal in place given the lead in of the first film that would fall under the contract, is that still a reasonable time frame and how hard and fast is that?

Well you know, again, I've said we're really lucky in that we have a fair amount of time to take our time and do this right.

But I think we would like to have a deal in place by the middle of next year so that we know who we're going to be working with on these films and we have plenty of time to you know, develop the partnerships around these films that they deserve.

I would say that time frame is still the one we have in our minds.

For your depreciation, it will be in the Q. We don't disclose it at this point.

Can't blame a guy for trying.

I never blame you for trying Lowell.

Gordon Hodge with Thomas Weisel Partners.

Go ahead.

I thought Disney was putting a freeze on the library titles and I don't know if that applied to your titles or not but it sounds like you're still expecting to get some revenue there.

We do have a moratorium on Toy Story 1 and Toy Story 2.

We are still selling A Bug's Life.

We also get revenue on home video, have merchandise and ancillary revenue.

There is no moratorium on that.

Question on whether you can give me a idea of what Disney's P and A plans are for the fourth quarter, shed any light on that for international?

No I'm sorry, we really can't disclose that.

Got it thanks.

Michael Savner with Banc of America Securities.

Steve could you comment a lot on what would happen, I know you've said this isn't in your immediate plans but in terms of adding another film to the slate to get more aggressive than one film per year how complicated that would be in terms of the lead time you would need and is there any difference between whether it would be easier to do a sequel, and second question just talking about your cash balance, obviously looks like this year you're going to be close to $600 million of cash on hand and growing at a very good clip.

Are there any plans of on how to use that free cash flow going forward or would you feel comfortable maintaining it on your balance sheet?

Thank you very much.

You know Disney decided that they wanted to put out more than one film a year when they were on their roll with those great series of great films, starting with Aladdin, The Little Mermaid and Beauty and the Beast and The Lion King.

They ran that experiment and it didn't go so well.

DreamWorks is now trying to scale up to more than one film a year but their track record is one success out of five so far.

So we're fairly cautious about that.

Remember, we're not even at one film a year.

We get to one film a year with Cars in 2005, coming out a year after The Incredibles.

And then hopefully we’re at a sustained rate of one per year The right answer to that and I don't mean to be coy about it but let's talk about after one a year.

We think quality is the most important thing and we'd rather put out one great film every 18 months rather than an average film a year or one great film a year versus two a year.

We don't have any plans to go beyond one film a year right now and I'm not sure it's humanly possible.

The experiments that have been run so far, you know, haven't pointed to that as being something we would want to do.

As far as see quells sequels go, the industries seem to believe that sequels are easier to make and more successful than original ideas.

And we don't share that belief.

When we made Toy Story 2 our goal was to make a film that was as good or better than the original and not to draft behind the original for an easy ride.

We don't think sequels are easier than the original and in addition to that Pixar has demonstrated that it is reasonably good at coming up with original ideas for films, both Monsters, Inc. and Finding Nemo, both original films and not sequels have grossed higher than Toy Story Toy Story 2.

So I think we've demonstrated that we can come up with original ideas that are as successful or more successful than sequels.

Not that we are against sequels but we will make them on their own merits not because they are easier or not because they have a better chance of success.

It is interesting when have you an organization that is capable of making a film a year, often times it prefers to make an original film than a sequel.

So that certainly has been the case with our crew.

And looking at Monsters and Nemo we're sure glad that they felt that way.

And the last part of your question addressed our cash balance.

Remember that we -- we want to be in as strong a negotiating position as we can right now and that cash in the bank really helps us.

Because we can finance 100% of the production of our own films if we choose to.

We can even finance some of the marketing if we chose to.

And that puts us in a very strong position to negotiate.

And we're very happy we're in that position and we have no plans to change it.

And I just add to the cash portion of the question.

You should remember that we don't -- we wouldn't expect to receive cash from the home video release until 2004.

And your projection of 600 million by the end of this year is probably too high given that the home video cash wouldn't be coming in until next year.

Fair enough.

Thank you both.

Thank you.

Ladies and gentlemen once again if there are any additional questions or comments, take this opportunity to queue up just press star then 1 on your phone key pad.

And we go right to the line of David Miller with Sanders Morris Harris.

Please go ahead.

Couple of of questions.

Ann, what were retained earnings for the quarter, that would be helpful and then Steve kind of a philosophical question, influence the years, Pixar has been good at raising the bar technically on every film.

Toy Story franchise, the expression on each of the characters' faces got better from Toy Story 1 and Toy Story 2.

And Monsters comes out and it’s the detail on the fur that just blew everyone’s mind, and Nemo comes out, you guys raise the bar with the water and the sun on the water.

Can you talk anything about new technical achievements for either The Incredibles or Cars?

Thanks very much.

The retained earnings you know cumulative retained earnings is 309,324,000 from the balance sheet.

Okay, thanks.

As far as pushing the bar technically as you may know Pixar spends more on R&D in this field than probably every one of our competitors put together.

And we do push the bar technically.

We have on every film we've ever made.

Obviously Toy Story was pushing the bar quite a bit since it was the first computer an made feature film.

A Bug's Life took a giant step forward in shading and lighting.

Toy Story 2 was significantly evolved from Toy Story 1.

Monsters, Inc. with the fur, previously impossible to do that and main character on screen with the movie was, same with the water in Finding Nemo.

In the Incredibles it’s going to be humans, the humans are not realistic-that’s not what the director is going for, but number one, the sheer number of them, we have dozens of humans in this film.

So we're not just talking about one.

Or two.

We're talking dozens.

Number two, the way they move.

We have had some major breakthroughs in that area, and you will see that.

And they are wonderful.

And the third thing is in the hair.

Extending some of the work that we've done in the fur to human hair, and to clothing.

As you know, most of the surface area of a human is clothed at least in our films.

And the clothing is extremely important.

So between the clothing and the hair, these are incredibly important elements to making humans and I think when you see The Incredibles you will be delighted with the humans.

This is our first film with humans as main characters and I think it really delivers.

On Cars we've got some very nice technology going into Cars but why don't we wait and talk about that sometime next year as we get a little closer.

Did you have any follow-ups Mr. Miller?

No I did not.

Robert Routh.

Please go ahead.

Few quick questions.

First I'm curious as to what your feelings are with respect to piracy, now that DVD is out and theatrically it hasn't been released in Japan yet.

I'm wondering if there are concerns on your part if that could affect the box office in that region and what you might or might not be doing to mitigate that before that would occur.

Second, I'm wondering if the company has had any talks or conversation west IMAX about doing a Pixar picture in IMAX format, certainly seem they would fit in that format as well given the success the Matrix has had.

Assuming a new deal is cut with whoever, just where do you see Pixar five years out in terms of a business?

Is it still just a one-movie per year company or are there other business lines or opportunities that you think the company would look to explore looking out over a long-time horizon or not?

Let me take the first part of your question first.

The -- as you know in Japan, most of the viewers of our films watch them in the Japanese language.

So the English language DVDs and video units, we think most of the audience members in Japan are going to be waiting for the Japanese dubbed version or at least the subtitled version but most likely the dubbed version.

However that did affect our release window in the U.K. and other English speaking territories like Australia, so those were released before the DVD came out in the U.S.

Second part.

With respect to IMAX, we do talk to IMAX from time to time.

We would, you know, potentially be in favor of doing something with them.

But at the moment it doesn't make economic sense.

We'd have to spend too much money making our films suitable for their large screen.

And the revenue upside really doesn't justify the efforts it would take.

And the last part?

And the last part is a five year out question?

Just, big picture your dream, your vision for the company, other than what you're currently doing what other things do you think Pixar would be involved in?

You’re interested in?

Our goal is to get to one film a year without losing quality.

To be the pioneer of this medium of 3D animation.

I see those as our primary goals still.

We're not to a film a year, there's a lot left to invent in this industry and we are on our way to invent it, and our goal is to keep a higher percentage of the profits we help generate on the work that we do without having to do any incremental work.

And I think that that will be achieved.

But that is the work that we have right in front of us, and that's what we're focused on, and I think over the next few years we hope to achieve that.

We have other things we look at.

Although frankly, I'm quite proud of what we haven't done in the last ten years.

And you know, we've been very lucky, we've been approached with lots of opportunities but we've kept very focused.

And as you know focused means saying no, not saying yes.

And every time we've said no we've looked back in the rearview mirror and been happy we did.

Not ungrateful for the opportunities but happy about our choice.

And we see other studios going off and make television shows and this and that.

And we just don't see the cultural impact nor the financial impact of doing that.

And we're going to stay very focused on what we're doing for the time being.

We'll have lots of opportunities to get even more involved in the aspects of our film like merchandising and other things that could generate even more revenues as well.

But what's most important to us is to never take for granted how hard it is to turn out one great animated film a year.

That is, you know, there's no one else doing that in our opinion right now.

And we don't want to take that for granted and just assume it's going to keep happening.

We work very hard, very long, to -- on our films, and to make them as good as we know how to, and that's not going to stop.

And that's more important than anything else we can do.

And we are very committed to it.

A great film will renew itself with each generation, and will be generating revenues long after we're gone.

So our goal is to build a library full of those films.

And to realize the revenues and the profits from them along the way and to realize the revenues and the profits from them for decades into the future.

Great, thank you very much.

Our next question comes from the line of Peter Mersky with Oppenheimer.

Please go ahead.

I know you lost a short trailer of the Incredibles with Finding Nemo.

Are you pulling that?

I assume there's going to be a new promotional launch coming in the summer next year.

Could you give us the sense of timing with that expanded trailer, I don't know if I missed the number if you gave it could you quantify the upside from Q3 from the P & A costs that were pushed in Q4?

The first part of your question yes, you will see -- the thing we included this year on the DVD was a teaser.

You'll see our first if you blown trailer for The Incredibles in the spring.

You'll be pleased.

What movie will that pair up with?

I have no idea at this time.

We usually do a pretty good job of that.

I didn't call out the portion that relates to P & A.

Thank you.

Thanks.

Representing Deutsche Bank we go to the line of Doug Mitchellson.

Please go ahead.

In focusing on quality and in terms of potentially trying to create new franchises, what are your thoughts in trying to keep your existing franchises fresh, how do you keep them in front of people as we move forward when you're focusing on new franchises?

Well, you know if one is making a film a year that's the question that gets asked.

Is it better to create a new franchise or to do a sequel to an existing franchise and we asked that a lot.

One of the things that will be the case is in going forward, in a new distribution deal starting in 2006, we will own our films.

And so it may be in our best interest to build new franchises that we own 100%, than to invest in franchises that we don't own 100% of.

Is there -- you know, is there flexibility in your view of how to take Pixar forward in letting Disney make perhaps TV shows or direct to home video sequels of the previous franchises?

Sure.

Interesting, thanks.

Thank you very much.

Our next question comes from the line of Anthony DiClemente with Lehman Brothers.

Please go ahead.

Hi, thanks.

Could you please give us a sense what stage you are in the development of your 2006 film, if you can't give us any information on that can you give us an idea of when you might be ready to announce some more color around that film that follows Cars, and secondly, do you have any plans for experiment being with the motion capture that Warner Brothers is using or is that a pro pry proprietary process?

Thank you.

The first part of the question was when will we disclose more about our 2006 film?

Probably sometime next year.

It's coming along quite nicely and it's stacked up and moving along and we're making good progress on it.

It's a great story and I think it will be a great movie and we're very excited about it.

So maybe next year we'll start talking about that a little bit more.

As far as motion capture, motion capture is a technology that is not proprietary.

There's various implementations of it which people own and it's perfectly within the realm of something we could use if we chose to.

But we believe our animation system that we do use is the best in the world for what we do.

It is proprietary to us and it is extraordinarily sophisticated.

So we -- we think we're in a pretty good position there.

Thanks.

Your next question comes from the line of Dennis McAlpine, representing McAlpine Associates.

Please go ahead.

Operator I beg your pardon Mr. McAlpine, we are having problems hearing you.

If you are on a speaker phone, please pick up your hand set.

I think I just lost the battery.

If you look at 2007, what would you do differently if you were with Disney as opposed to with a new distribution deal?

Is there anything that we would see in 2004, or 2005, because you had a new distributor?

You know, I really can't comment on any of this at this point.

It would be inappropriate.

And when we have -- when we have something that we can say, well, we'll say it at that time.

And can you talk about anything about the progress of the 2007 film, as opposed -- do you have the idea or are you on story boards or where do you stand on that as far as green lighting it?

We have not green lit a film for 2007 yet but we have -- we are in development on some things.

And so we'll let you know what happens in the future.

Thank you.

Thank you very much sir.

Well, ladies and gentlemen, thank you very much for your interest shown in today's conference.

With time now for one final question, we go to the line of Gordon Hodge for a follow-up once again with Thomas Weisel Partners.

Thanks, just a quick one.

And I'm sorry, you talked about 22 to 24 million units of home video units in the fourth quarter.

And then should we assume a reserve on that or is that a number -- obviously you've had great sell-through so far.

You should assume a reserve.

Thanks.

Thank you very much with that Mr. Jobs, Ms. Mather, please finish with your concluding remarks.

Thank you very much for attending.

Talk to you next quarter.

That ends today's teleconference.

Thank you very much for your participation.

You may now disconnect.