迪士尼 (DIS) 2004 Q1 法說會逐字稿

Welcome to the Pixar Animation Studios first quarter 2004 earnings conference call.

If you get disconnected at any time during this conference, please dial back at 888-428-4480.

At this time, all participants are in a listen-only mode.

Later, we will conduct a question-and-answer session.

At that time, if you have a question, you will need to press star, then one on your touch-tone phone.

As a reminder, today's conference is being recorded, Thursday, May 6, 2004.

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

I would now like to turn the conference over to Ann Mather.

Please go ahead.

Thank you.

Welcome to Pixar's conference call for the first quarter fiscal year 2004.

I will begin with a discussion of our financial results.

Followed by our outlook for the remainder of 2004 and beyond.

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

We will then open the call for questions.

We are pleased to announce that revenues for the first quarter ended April 3, 2004, were $53.8 million.

Net income was $26.7 million.

And diluted earnings per share were 46 cents.

This exceeded previous guidance of earnings per share of roughly 30 cents.

Our first quarter 2004 results compared to revenues of $18.7 million, net income of $8.2 million and diluted earnings per share of 15 cents reported in the first quarter of 2003.

Film revenues for the first quarter were $51.1 million, which included $40.2 million of "Finding Nemo" related revenues, $8.3 million from our library titles, and $2.4 million related to "Monsters Inc."

The main driver for "Finding Nemo" during the first quarter, was the number home video market, particularly the United Kingdom, Germany, Italy, and Australia.

Please note that Germany and Italy were territories that we previously expected to be released in the second quarter. "Finding Nemo" also generated an incremental $71 million at the worldwide box office.

Bringing total worldwide theatrical receipts to $863 million, as of the closing day of our first quarter.

Comprised of $340 million domestic, and $523 million international.

The film has been released in all of its scheduled international markets and has nearly completed its initial worldwide theatrical run.

The first quarter also included software licensing revenues of approximately $2.7 million, which was greater than previously anticipated.

Operating expenses were $6.8 million for the first quarter of 2004.

Compared with $5.1 million for the same period in 2003.

The increase in operating expenses over the prior year period reflects the ongoing growth of the studio, as well as our increased proportion of operating expenses previously shared by Disney.

Other income for the first quarter of 2004 was $2.9 million, which was slightly higher than expected.

Cash and investments increased to $541.9 million by the end of the first quarter, an increase of $20 million since January 3, 2004.

The increase was primarily due to cash received from Disney for our share of film revenues.

In addition to software revenues, interest income and proceeds from stock option exercises offset by film production costs and tax payments.

Capitalized film costs were $116 million, versus $107.7 million at the end of 2003.

Reflecting production spending on our current film projects, offset by film amortization of $5.8 million.

Our balance sheet remains debt-free, and our retained earnings at the end of the first quarter were $419.9 million.

Our first quarter diluted earnings per share of 46 cents exceeded our previous guidance of roughly 30 cents.

The majority of the variance between our actual earnings results and the guidance provided last quarter was due to the following factors. 6 cents of our outperformance was due to certain merchandise licensing revenues, from "Finding Nemo", "Monsters Inc." and "Toy Story 2" which we had previously anticipated receiving later in the year.

Five cents of the variance was due primarily to higher merchandise sales and ancillary royalties related to "Finding Nemo."

Higher-than-anticipated "Finding Nemo" revenues from international home video and theatrical receipts were largely offset by increased release costs and decreased rental rates.

2 cents was due to greater-than-expected worldwide home video sales of our library titles, primarily from "A Bug's Life."

And lastly, in addition to those variances described above, 3 cents of upside was due to non-film related items which included higher interest income, higher-than-expected random software licensing sales and lower-than-anticipated operating licensing sales relating from a slower ramp up of certain operating activities.

I would now like to begin a discussion of the upcoming events that might be reflected in the results for the remainder of the second quarter, for full year 2004 and beyond.

Please note that these statements as well as others that may be made in the course of this presentation are forward-looking and it is possible that actual results will differ materially.

We refer you to our 2003 form 10-K, 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 expect continuing international home video revenues from "Finding Nemo" to drive our results for the second quarter.

Particularly from its release in Spain, France and Japan.

Based on the popularity of the film at the international box office, and considering the growing trends of the DVD format, our home video sales projections are now expected to trend higher than those of "Monsters Inc."

However, we anticipate these gains to be somewhat mitigated by increases in marketing costs.

By the end of 2004, we expect to recognize roughly 40 million units of "Finding Nemo" home video sales worldwide.

Please note that our net units take into account certain return 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 adjustment in future periods if necessary.

Revenues from the domestic paid TV licensing of Nemo are also expected in the second quarter, along with some contributions from merchandise and home video from all of our films.

Based on these assumptions we are today introducing our second quarter 2004 earnings per share guidance of approximately 30 cents.

We anticipate our earnings for the remainder of 2004 to be driven primarily by the worldwide box office performance of "The Incredibles" scheduled for release on November 5, 2004.

The network television debut of "Monsters Inc." is scheduled for holiday 2004, and should likewise contribute to our fourth quarter results.

We continue to expect worldwide home video sales, merchandise revenues, and ancillary royalties related to the sale of products from "Finding Nemo", "Monsters Inc." and our other films to be recognized throughout the year.

Our financial results for the full year 2004 will depend primarily on the worldwide box office success of "The Incredibles" which is very difficult to estimate before it's release.

Therefore we are not providing full year EPS guidance at this time.

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

Among the factors that could cause projected 2004 results to differ are the following.

The timing and amounts of worldwide revenues and distribution costs from "The Incredibles", "Finding Nemo", "Monsters Inc.", and other titles in our film library.

The timing, accuracy and sufficiency of the information we receive from Disney to determine revenues and associated gross profits, the timing and amount of non-film related revenues and expenses, the accuracy of assumptions and judgments used to estimate certain revenues and associated gross profits, the market price of our common stock, and related volatility, potential delays in the release dates of our films, the terms of our future distribution arrangements and external socioeconomic and political events well beyond our control.

We are thrilled with the expanding worldwide appeal of "Finding Nemo."

As evidenced by international performance, both theatrically and on home video.

Nemo's performance combined with continuing contributions from "Monsters Inc." and our library titles demonstrates the strength of our earnings momentum.

We look forward with anticipation to the launch of our studio's 6th feature film "The Incredibles" this November.

With this slate of new and existing franchises, and the growing strength of the Pixar brand, Pixar is uniquely positioned for substantial growth.

I would now like to turn the discussion over to Steve Jobs, who will give you an update on other developments at Pixar, as well as an introduction to my friend and successor, Pixar's new Executive Vice President and Chief Financial Officer, Simon Backs.

Thanks, Ann.

I've just got a few brief remarks and then we will open it up for questions.

As most of you know, this is Ann's last Pixar conference call.

As she is retiring to spend more time raising her family.

Ann has done a terrific job as Pixar's CFO during her four years with the company, which have been the most profitable and record-breaking period in our studio's young history.

We're all really happy for Ann but she is going to be missed.

However, often when one door closes, another door opens.

As we begin the transition from our current partnership with Disney, to a new world with a new distribution partner and many more opportunities to create ancillary products around our films, it is hard to imagine a better CFO for Pixar than Simon Backs.

Simon is 45 years old and comes to Pixar with over 20 years of financial operations experience, including more than 7 years as the Chief Financial Officer of Fox Films Entertainment.

Where he oversaw the financial operations of their worldwide film production and distribution, as well as wordwide theatrical video and television distribution, licensing, merchandising, and music publishing.

In addition, Simon oversaw the financial operations of 20th Century Fox television.

The total revenues at Fox Films Entertainment tripled to more than $4.5 billion during Simon's tenure as their CFO.

Simon's first day at Pixar was this past Monday and he officially takes the baton from Ann to be our new CFO on Monday, May 17.

Simon's with us here today so I'm going to ask him to say his first few words as the newest member of our senior management team.

Thank you, Steve.

And just to reiterate I'm thrilled to be here.

It has been a busy and interesting first few days as I'm getting to know everybody.

And really look forward to meeting you all over the next coming months.

Thank you.

Thanks, Simon.

As you could hear, Simon continues the Pixar tradition of always having a CFO with a British accent.

Our third one in a row.

I would like to talk now a little bit about "Finding Nemo."

We've talked a lot about "Finding Nemo" on past conference calls, but let me take a moment to highlight Nemo's amazing international performance.

As you most likely know by now, "Finding Nemo" is the most successful animated film in history, judged by either domestic or worldwide box office.

And with its worldwide box office of $864 million, it is the 8th highest grossing film of all time.

Outperforming films like "Lord of the Rings", "Fellowship of the Ring", "Spiderman", and "Independence Day".

But you may not know that "Finding Nemo" is the only animated film in history to cross the $500 million mark at the international box office.

Nemo's $524 million of international box office is more than triple the international box office of "Toy Story", Double that of "Toy Story 2", And almost double that of "Monsters Inc."

We believe this will translate into strong international video sales, and as Ann said, we expect to sell a worldwide total of around 40 million net video units by the end of this year.

So we're thrilled with the international performance and Disney's international marketing teams did a phenomenal job.

Now, let me give you an update on "The Incredibles", our studio's 6th feature animated film, scheduled for release this year on November 5.

We're almost done.

Right now, we're putting the finishing touches on the animation.

And it has turned out great.

We think this movie is going to blow everyone's socks off.

You will get a chance to see for yourself when we release the first full trailer later this month which we will be showing in many theaters in front of "Shrek 2", and also in front of big summer films like "Harry Potter 3" and "Spiderman 2."

The marketing plan -- the marketing campaign, a plan for "The Incredibles" is very strong, on the same scale as "Finding Nemo"'s so you will be seeing and hearing a lot about the "The Incredibles" this summer and fall.

"Cars" Pixar's 7th feature film, and the 4th feature directed by John Lasseter, is scheduled for release a year after the "The Incredibles" during holiday 2005. "Cars" stars the voice talents of Paul Newman, Owen Wilson, Richard Petty and Bonnie Hunt, and I already think it is going to be one of my favorite films of all time.

We will wait until later this year to begin telling you more about "Cars" but I think once you start see some of it you you will like what you see.

We are very excited about it.

It there is one more thing I would like to mention about these two films.

Although "The Incredibles" and "Cars" will likely be the last two Pixar films marketed and distributed by Disney, I want to stress that the working relationship between the two companies remains really positive and professional.

And everyone involved is working very hard to ensure the highest possible level of success for these two terrific films.

The working relationship has remained very good.

Our studio, I would like to -- Pixar's first 5 films have generated $2.6 billion at the worldwide box office.

An average of over $500 million per film.

And our studio has grown from having just 1 director to presently having 6 directors.

And is poised to release one feature animated film a year, beginning this year with "The Incredibles."

To finance our future, Pixar has managed its business prudently.

Our cash balance at the end of last quarter was $542 million.

As of today, it has increased to roughly $675 million.

And we project that it will reach $750 million by the end of this calendar year.

I haven't checked but we may have more cash than Disney does.

We are continuing to have exploratory meetings with the major Hollywood studios regarding the distribution of our films and videos.

But we are still in the 'getting to know each other' stage.

And have not yet entered into any serious discussions with any of them.

We have the time to do this right.

And do not feel under any business pressure to conclude a distribution agreement within weeks or even months.

But what is already clear, is that under a new distribution deal, with Pixar wholly financing the production of its films, we expect to keep more than double the percentage of the profits from our films and ancillary products than we do under our current Disney deal.

This means that starting in 2006, we will begin to earn at least twice as much money for doing the same amount of work.

How many other companies can look forward to that?

With that, Ann and I would now like to open it up to any questions.

Thank you, ladies and gentlemen if you would like to ask a question, please press star, then one on your touch-tone phone.

You will hear a tone indicating you've been placed in queue.

You may remove yourself from queue at any time by pressing the pound key.

If you are using a speaker phone please pick up your handset before dialing.

Our first question is from Lowell Singer with SG Cowen and company.

Please go ahead.

Good afternoon.

Two questions.

First, Steve or Ann, can you talk a little bit about the lead time for both a theatrical distribution partner, and for merchandising partners that you would need before the release of your '06 film?

So we have an idea sort of when the drop dead date is to get those respective partnerships agreed to.

And second, could you talk a little bit about the target demographic for "The Incredibles"?

Has it changed at all?

Is it slightly older target than your previous films?

And do you think that ultimately increases or doesn't impact the size of the potential audience.

Thanks.

Yeah, I can take these.

Let me go from the last first. "The Incredibles", as you know, is likely to be our first PG-rated film.

And so you know, we may -- we may have an audience that begins a few years older, although in this day and age, I'm not sure that that is true.

And we think this film is going to be very strong with teenagers.

Again, the testing results we've had from our test screenings have been the strongest we've ever experienced on any Pixar film.

So we think this film is going to be very strong, not only with younger kids, but possibly not the youngest, all the way up through adults, with a particular emphasis on teenagers.

So we're very excited and we think this could be a real -- a real success for us in that regard.

In terms of, you know, drop dead dates for having partners on board, that is a hard thing to answer, but I would say for, you know, film distribution, we would certainly like to have a partner on board at least 18 months before the film is released.

And for merchandising, you know, that would generally range from 18 to possibly as long as 24 months.

Okay.

Thanks.

Thank you our next question comes from David Miller with Sanders Morris Harris.

Please go ahead.

Yeah, good afternoon.

Ann, on the $8.3 million in revenues derived from library titles, can you give us a break down on how that was split out in various pay TV or broadcast windows internationally.

I would be curious to know what the break down is there.

Also any thoughts on having an analyst meeting this fall?

Thanks.

I'm afraid we can't give you any detailed break down on the television split, David and as far as an analyst meeting this fall, I think there is a reasonable chance we will put something together to try and do a screening of "The Incredibles."

That will be something Steve and Simon will be addressing later.

Okay.

And can I ask a follow-up?

Sure.

Any -- or actually I wanted to ask a follow-up for Simon.

As I understand it, and I know you're introducing yourself on this call to the analyst community, but as I understand it you were at Fox during the time in which that studio negotiated their agreement with Lucas film for the "Star Wars" output.

Given that you're now on the other side of the negotiating table, what are your thoughts in terms of the -- you know, overall top two or three points that you would like to get across to whoever the new distributor might be?

Thanks.

I think it is a little early for me to comment on that, this is only my fourth day.

And --

No problem.

But I can confirm that, yes, I was at Fox when we -- when we negotiated the Lucas deal.

Okay.

No problem.

Thank you.

Thanks.

We will now move on to Andrew Slabin with Merrill Lynch.

Please go ahead.

Hi.

Thanks very much.

Can you just give us any color on the split in international, "Finding Nemo", home entertainment, between DVDs and VHS and if that changed noticeably from move -- prior movies like "Monsters Inc.," and I'm also just curious given the increase in supply of CGI movies have you seen any pressure on labor costs or even shortage of animators?

Thanks.

I will take the second part of that question.

We have not seen any pressure on costs or the availability of talent.

But I would also say that Pixar has certainly been and remains the -- the number one animation studio that the best talent wants to work at.

So, you know, we may not have seen what others are experiencing in terms of finding it more difficult to find talent.

And the first part of the question goes Andrew, yes we have seen a change. "Monsters Inc." international home video units were about 42% DVD where as "Finding Nemo" international units are about 66% DVD.

So you can see there has been quite a big increase in that time frame.

Thanks very much.

And congrats, Ann.

Thank you.

Thank you.

Our next question is from Gordon Hodge with Thomas Weisel Partners.

Go ahead.

Yes, hi, this is actually Lauren calling in for Gordon this afternoon.

A question first about "The Incredibles", was wondering if you were planning on releasing that day and date and the domestic and international markets, and then in regards to "Cars" is it at all possible to move that up to a summer '05 release or are you fairly certain that will be for the holidays?

Thanks.

"The Incredibles" is going to be released worldwide in a window that is definitely close to its U.S. release date.

If not day and date.

Because day and date doesn't allow us to take advantage of the smartest dates in each of the international territories.

So in some cases, you know, it will lag by many weeks, if not a few months.

But there is a window around the U.S. release date that is much tighter than we have ever done before and we're very excited about it.

And "Cars" is planned for holiday 2000 [2005] release and I think that is the time frame it is going to be released.

Okay.

Great.

Thank you.

Thank you.

And before we go to the next question, I would just like to remind you, it is star one for any further questions.

Our next question is from Kathy Syponias with Prudential.

Please go ahead.

Hi, thanks.

Also two questions.

First, Ann, question for you, with respect to the operating expenses, you said that they were a little bit lower because of slower ramping up of certain operations, I was wondering if you could give a little bit of color on that.

Does that have anything to do with waiting for a new distribution to happen?

And question for you, Steve.

I know you've been asked in the past about what -- what would it take or what your thought process would be with respect to ramping up to more than one movie per year.

In the past, I know you've side that, you know, the availability of talent has been one gating factor.

Are there any others, that you know, any markers we can look for that if perhaps they came to fruition we could see you ramp up to more than one per year, thank you.

With the slower ramping up of our operating expenses, Cathy, nothing I can highlight that would be of any relevance and it doesn't have anything to do with the timing on finding a distribution partner.

We just slowly are taking our time in building the studio.

Ann, in terms -- and in terms of more than one film per year, again we have to plans to try to even attempt to do more than one film per year.

We really believe that the talent to do these films is very rare, and we don't see how -- how anyone is going to do more than one really successful film per year on a consistent basis.

So we know that, you know that Disney tried and they're back down to one film per year.

Dream Works is attempting to go beyond one film per year.

And you know, their track record is one for five.

They had a real success with "Shrek."

We are pretty sure they're going to have a success with "Shrek 2."

And I think we're going to watch and see how they do trying to go beyond one film per year, but that's not in our plans at the present time.

Thank you.

We will now move on to the line of Spencer Wong with J.P. Morgan.

Please go ahead.

Thanks, just a couple quick questions.

Firstly, Ann, was there any impact from FX in the quarter on revenues?

And secondly, can you give us a sense of how much you're planning to spend on P&A for "The Incredibles" and what the final negative cost could be in terms of rough dollars?

Thanks.

As far as the spend on "The Incredibles" it will probably be somewhat comparable to the spend on "Finding Nemo."

And the same with the negative costs.

It will probably be in the same ballpark as "Finding Nemo."

As far as foreign exchange, we benefited from the weakness of the U.S. dollar on revenues from international theatrical and international home video, along with everybody else in the U.S.

Undoubtedly in comparison to "Monsters Inc."

Thank you.

Okay.

Thank you.

Our next question is from Peter Merski with Oppenheimer.

Go ahead.

Thank you very much.

Just, you were mentioning that "The Incredibles" skews -- possibly skews a little bit older, is "Cars" going back to the younger skewing?

And also on the lines of that, on "The Incredibles" can you give your thoughts positive or negative on how the older skew of "The Incredibles" might impact the home video units?

Well, again, you're putting words in my mouth.

We don't target our films for any particular age group.

We target them, you know, from 3 to 93.

So that is one of the things that I think Pixar tries very hard to do, and succeeds at.

And it is one of the reasons our films take four years to make.

So, you know, we think "The Incredibles" is going to be appealing to just about every age group.

I think that its subject matter and its potential PG rating, you know, might affect us at the very low end, but we feel that will be way more than made up for, you know, in the teens.

And you know, "Cars" is currently projected to have a G rating, like the rest of our films have had.

So -- but we do not target our films for a particular age range.

We target them for everybody.

Okay.

Thanks very much.

Thank you.

Our next question is from Jeff Logston with Harris Nesbitt.

Go ahead, please.

Thank you.

First of all, Ann, thanks a lot.

You've been terrific to work with.

Thank you, Jeff.

You know, perhaps an esoteric question but it seems like every single quarter, you all do terrifically well in software sales.

Maybe you can give us some granulation behind that and why it continues to be such a great margin business, and nice contributor to EPS.

Well, I think there is a few reasons.

Number one is that RenderMan® continues to win over its competition.

There are competitors introduced every year.

And you know, studios continue to choose RenderMan®.

Of course we're not sitting on our laurels.

We're coming up with newer much more advanced versions of renderment on a frequent basis, we managed to stay ahead of all of our competitors and if you're going to make a film with a lot of rendering required, a lot of special effects in it, your film is going to cost you a $150 million or more, you're not going to risk your film on a second rate render.

You're going to buy RenderMan®.

And RenderMan® is proven on our films, so they're going to work for your films.

So we enjoyed the success of that, of beating our competitors and we enjoyed the success of special effects, being incorporated into an increasingly large number of films.

So I think those two trends are -- have helped us quite a bit.

Great, thanks.

Thank you.

We now have a question from William Drury with CSFB.

Please go ahead.

Hi, thanks.

I jumped on a few minutes late, but I just wondered Steve if you had addressed the timing of announcing the next several pictures after "Cars" and also wondered if you're thinking had evolved on potential of participating in any sequels with Disney.

I know that on the last call, were you fairly negative on that, you know, the outlook for that.

I just wondered if your thinking had changed at all.

Thanks.

Yeah, we will probably discuss our next trench of films after "Cars" sometime next year.

We tend to like to keep the focus on the films that we're in the middle of marketing.

So I would imagine sometime next year, probably in the first half of the year, we will begin -- we will announce the next series of films.

But we're working on them, and what I've seen looks very, very good.

As far as the second part of the question -- what was it?

Sequels.

Sequels, yeah.

We -- we, right now, we have no plans to work with Disney on any additional films beyond "The Incredibles" and "Cars."

Though I did -- you know, I did say that the working relationship between the teams is healthy and professional, and everyone is working very hard to maximize the success of these films.

Great.

Thanks.

Thank you.

Our next question is from Alden Mahaber with Vintage Research.

Please go ahead.

Good afternoon.

I think it is fairly obvious that your share price implies that shareholders believe that Pixar can continue to make successful films, however I wanted to get a handle on how important you feel it is for Pixar to augment its revenue, in the long-term, such as adding additional revenue streams in order to drive its share price.

We're looking at a chain of gelato stands.

Seriously, I think our -- our progress in the next few years as we move from a world where all of our products went through Disney, to a world where our films and videos will likely go through a new studio partner, but many of the ancillary products, we may be dealing directly with other companies on.

There's a tremendous opportunity for us to get much more involved in the creation and the marketing of ancillary products to our films, and we believe there is a tremendous opportunity there to create some great products, and to create some real success around our films.

And we think that that is -- is a great next step for Pixar, rather than getting into a new business where we have less experience and it is less related to our core business.

Thank you.

We now have a question from Michael Sabner with Banc of America Securities.

Please go ahead.

Thanks very much.

I have a few questions, actually.

First, Steve, can you talk a little bit about whether the recent news with Comcast dropping its bid for Disney, and it looks like he has at least temporarily appeased some of his critics, does that change your strategy at all in terms of what you may be waiting for in the landscape to find a distribution partner?

That's one question.

Second, have you had any talks with Disney or I guess maybe the better way to put it, based on your last answer, have they indicated to you that they are interested in moving forward in derivative work, whether it is theatrical our direct to video, without your help?

Has that come up recently?

And lastly, for Ann, or Simon, I guess, can you just talk about the percentage of P & A spending, when we would expect to see, you know, some of that, is any of it going to be in the second quarter, any in the third quarter or should we assume that all of it will come in the fourth quarter?

Thanks.

Well, we were never involved in Comcast's bid for Disney.

And we're not involved in Comcast's withdrawal of such a bid.

So that doesn't really affect us at all.

It never has.

And it doesn't currently.

That is sort of an orthaganal thing that is happening in the world that we're not a part of.

But it has not affected our thinking one way or another.

In terms of Disney's doing derivative works of our products, they have made public statements to the effect that they intend to do some derivative works on their own, and I would refer to you those statements, and wouldn't want to put words in their mouth.

As far as P & A spending goes, on "The Incredibles" we don't expect to recognize anything until the fourth quarter.

Okay.

Thanks, Ann.

Thank you.

Thank you.

Our next question is from Dennis McAlpine with McAlpine Associates.

Go ahead.

Thank you.

And good afternoon.

You know, they used to laugh at Starbucks, so maybe gelato stands not so far out to lunch.

Let's go to the -- the question marks.

There was a story in one of the papers which got fairly widely circulated that attributed a comment to you, Steve, that you would be willing to talk to Disney once Mr. Eisner left.

Can you discuss whether you said such a thing or what the context might be?

Yeah, that was not a statement made by me, so you know, there are a lot of things in the paper that you read that aren't true.

Okay.

More seriously, there -- you made a comment that there were 6 directors aboard at this point.

Can we assume that each of those is assigned to a different project?

We don't disclose that information.

So, you know, I wouldn't assume anything at this point.

But there they all are working on things.

Okay.

And you as I understand it, you basically passed on sequels going forward for "Toy Story."

What is the status for your potential involvement in sequels on other projects like "Monsters Inc." or whatever else might be coming up?

Well, I think, you know, the way to look at this is, that in a new deal, Pixar will keep a much higher percentage of the profits it creates from its films, and it will own its films.

And so since the talent to make these films, whether they be new original stories like every Pixar film to date has been, we seem to have the ability to create original stories that people want to see, or if it is a sequel, it takes the same amount of work from this very, very talented but limited pool of people.

And so, we would have to decide that rather than making a new original Pixar film that we would own and we would make the majority of the profits on, we would have to decide to make a film that we would not completely own, and we would make a far less share of the profits on.

And the only reason to do that would be if you thought that the chances of success of a sequel were dramatically higher than the chances of success on an original story.

But I believe we have demonstrated with both "Monsters Inc." and "Finding Nemo" which both grossed higher than "Toy Story 2" our only sequel to date, and with our track record of coming up with original stories, that we should place confidence in our team to come up with really successful original stories.

And therefore, to use the talent that we have, to create those original stories, and be more successful because of them.

Than we would be making sequels.

Thank you.

Thank you.

And our final question will come from David Miller with Sanders Morris Harris.

Please go ahead.

Yeah, just a follow-up.

Ann, obviously this is the first time you've attached a trailer to a non-Disney film with "The Incredibles."

Can you talk about any kind of promotional fees that you're paying to Dream Works on this?

Thanks.

No, we're not attaching it.

We expect the trailer will be played with "Shrek 2" in the way that many other trailers will be played with "Shrek 2."

How does that work economically?

The trailers are put out there, there is no economic consideration paid for the playing of trailers.

Okay.

So you guys can just simply choose, it is that simple?

Well, no, the way trailers work, it is complicated, but there is -- there is -- trailers are put out -- in the end it is the theater owners that decide which trailers to play.

We would expect them to play this with "Shrek 2" given that generally you would go to approximately the same audience, it would sort of make sense for them.

They are probably all going to be playing "The Incredibles" later in the year.

We do pretty well at getting our trailers played on other people's movies, this is not -- with every movie we've had, our trailers have played on other movies from other studios, and you know, Disney and -- is pretty good at making that happen.

Got it.

Okay.

Thank you.

Thank you.

And please go ahead with your closing remarks.

Great.

Well thank you, thank you, everyone, thank you for all your support during the last 4 1/2 years, it has been wonderful working with all of you.

Steve?

I would like to give Ann a round of applause. [ Applause ] And she will be missed.

Thank you.

Thank you very much.

And we will be see you next quarter.

Bye-bye.

And ladies and gentlemen, that does conclude our conference for today.

Thank you for your participation.

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