UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Form 10-Q
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(Mark One)
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þ
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR
15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
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| For the quarterly period ended June 29, 2002. | ||
| or | ||
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o
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TRANSITION REPORT PURSUANT TO SECTION 13 OR
15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
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| For the transition period from to . | ||
Commission File Number: 0-26976
Pixar
| California | 68-0086179 | |
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(State or other jurisdiction of Incorporation or organization) |
(I.R.S. Employer Identification No.) |
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| 1200 Park Avenue, Emeryville, California | 94608 | |
| (Address of principal executive offices) | (Zip code) | |
Registrant’s telephone number, including area code: (510) 752-3000
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 þ No o
The number of shares outstanding of the registrant’s Common Stock as of August 7, 2002 was 50,280,585.
PART I — FINANCIAL INFORMATION
Item 1. Financial Statements
PIXAR
| June 29, | December 29, | |||||||||
| 2002 | 2001 | |||||||||
| (In thousands, | ||||||||||
| except share data) | ||||||||||
| ASSETS | ||||||||||
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Cash and cash equivalents
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$ | 44,685 | $ | 56,289 | ||||||
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Short-term investments
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249,617 | 222,310 | ||||||||
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Trade receivables, net
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1,856 | 1,516 | ||||||||
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Receivable from Disney
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24,302 | 13,512 | ||||||||
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Other receivables
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4,816 | 5,632 | ||||||||
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Prepaid expenses and other assets
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15,097 | 3,528 | ||||||||
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Deferred income taxes
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21,673 | 21,673 | ||||||||
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Property and equipment, net
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108,168 | 111,995 | ||||||||
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Capitalized film production costs
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99,484 | 86,839 | ||||||||
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Total assets
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$ | 569,698 | $ | 523,294 | ||||||
| LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||||
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Accounts payable
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$ | 159 | $ | 4,843 | ||||||
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Income taxes payable
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3,467 | 1,808 | ||||||||
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Accrued liabilities
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9,287 | 8,844 | ||||||||
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Unearned revenue
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6,678 | 2,113 | ||||||||
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Total liabilities
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19,591 | 17,608 | ||||||||
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Shareholders’ equity:
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Preferred stock; no par value; 5,000,000 shares
authorized and no shares issued and outstanding
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— | — | ||||||||
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Common stock; no par value; 100,000,000 shares
authorized; 50,175,172 and 49,445,956 issued and outstanding as
of June 29, 2002 and December 29, 2001, respectively
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343,731 | 325,362 | ||||||||
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Accumulated other comprehensive income
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1,845 | 1,845 | ||||||||
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Retained earnings
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204,531 | 178,479 | ||||||||
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Total shareholders’ equity
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550,107 | 505,686 | ||||||||
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Total liabilities and shareholders’ equity
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$ | 569,698 | $ | 523,294 | ||||||
See accompanying notes to financial statements.
1
PIXAR
| Quarter Ended | Six Months Ended | |||||||||||||||||
| June 29, | June 30, | June 29, | June 30, | |||||||||||||||
| 2002 | 2001 | 2002 | 2001 | |||||||||||||||
| (In thousands, except per share data) | ||||||||||||||||||
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Revenue:
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Film and animation services
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$ | 19,348 | $ | 14,652 | $ | 55,236 | $ | 28,806 | ||||||||||
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Software
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3,463 | 2,013 | 4,648 | 4,010 | ||||||||||||||
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Total revenue
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22,811 | 16,665 | 59,884 | 32,816 | ||||||||||||||
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Cost of revenue:
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Film and animation services
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3,570 | 2,358 | 11,927 | 4,531 | ||||||||||||||
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Software
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136 | 127 | 272 | 291 | ||||||||||||||
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Total cost of revenue
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3,706 | 2,485 | 12,199 | 4,822 | ||||||||||||||
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Gross profit
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19,105 | 14,180 | 47,685 | 27,994 | ||||||||||||||
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Operating expenses:
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Research and development
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2,229 | 1,564 | 4,584 | 3,109 | ||||||||||||||
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Sales and marketing
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203 | 419 | 454 | 809 | ||||||||||||||
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General and administrative
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1,761 | 1,856 | 4,008 | 3,938 | ||||||||||||||
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Total operating expenses
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4,193 | 3,839 | 9,046 | 7,856 | ||||||||||||||
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Income from operations
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14,912 | 10,341 | 38,639 | 20,138 | ||||||||||||||
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Other income, net
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2,620 | 3,585 | 5,102 | 6,941 | ||||||||||||||
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Income before income taxes
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17,532 | 13,926 | 43,741 | 27,079 | ||||||||||||||
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Income tax expense
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7,090 | 5,173 | 17,689 | 10,059 | ||||||||||||||
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Net Income
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$ | 10,442 | $ | 8,753 | $ | 26,052 | $ | 17,020 | ||||||||||
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Basic net income per share
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$ | 0.21 | $ | 0.18 | $ | 0.52 | $ | 0.35 | ||||||||||
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Shares used in computing basic net income per
share
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49,758 | 48,607 | 49,679 | 48,504 | ||||||||||||||
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Diluted net income per share
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$ | 0.20 | $ | 0.17 | $ | 0.50 | $ | 0.33 | ||||||||||
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Shares used in computing diluted net income per
share
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52,536 | 52,066 | 52,102 | 51,704 | ||||||||||||||
See accompanying notes to financial statements.
2
PIXAR
| Six Months Ended | ||||||||||||
| June 29, | June 30, | |||||||||||
| 2002 | 2001 | |||||||||||
| (In thousands) | ||||||||||||
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Cash flows from operating activities:
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Net income
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$ | 26,052 | $ | 17,020 | ||||||||
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Adjustments to reconcile net income to net cash
provided by operating activities:
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Depreciation and amortization
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4,102 | 3,955 | ||||||||||
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Amortization of capitalized film production costs
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10,696 | 4,531 | ||||||||||
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Tax benefit from option exercises
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5,380 | 4,915 | ||||||||||
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Deferred income tax
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— | 147 | ||||||||||
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Changes in operating assets and liabilities:
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Trade and other receivables, net
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476 | (4,027 | ) | |||||||||
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Receivable from Disney
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(10,790 | ) | 68,692 | |||||||||
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Prepaid expenses and other assets
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(11,809 | ) | 376 | |||||||||
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Accounts payable
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(4,684 | ) | 705 | |||||||||
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Income taxes payable
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1,659 | (8,244 | ) | |||||||||
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Accrued liabilities
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443 | (6,800 | ) | |||||||||
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Unearned revenue
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4,565 | 6,509 | ||||||||||
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Net cash provided by operating activities
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26,090 | 87,779 | ||||||||||
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Cash flows from investing activities:
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Purchase of property and equipment
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(860 | ) | (4,825 | ) | ||||||||
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Proceeds from sale of equipment
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55 | — | ||||||||||
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Proceeds from sale of short-term securities
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54,491 | 97,240 | ||||||||||
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Investments in short-term securities
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(81,798 | ) | (156,768 | ) | ||||||||
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Capitalized film production costs
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(22,571 | ) | (22,933 | ) | ||||||||
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Net cash used in investing activities
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(50,683 | ) | (87,286 | ) | ||||||||
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Cash flows from financing activities:
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Proceeds from exercised stock options
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12,989 | 13,196 | ||||||||||
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Net cash provided by financing activities
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12,989 | 13,196 | ||||||||||
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Net increase (decrease) in cash and cash
equivalents
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(11,604 | ) | 13,689 | |||||||||
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Cash and cash equivalents at beginning of period
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56,289 | 63,241 | ||||||||||
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Cash and cash equivalents at end of period
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$ | 44,685 | $ | 76,930 | ||||||||
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Supplemental disclosure of cash flow information:
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Cash paid during the period for income taxes
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$ | 23,450 | $ | 13,800 | ||||||||
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Supplemental disclosure of non-cash investing and
financing activities:
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Loss on equipment disposals capitalized as film
production costs
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$ | 770 | $ | 21 | ||||||||
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Unrealized gain on investments, net of taxes
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$ | — | $ | 249 | ||||||||
See accompanying notes to financial statements.
3
PIXAR
(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 the financial condition, results of operations, and cash flows of Pixar (or the “Company”) for the periods presented. These financial statements should be read in conjunction with the audited financial statements as of December 29, 2001 and for each of the years in the three-year period ended December 29, 2001, including notes thereto.
The results of operations for the three and six months ended June 29, 2002 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 2002 financial statement presentation.
(2) Fiscal Year
Pixar operates on a 52- or 53-week fiscal year, whereby the year ends on the Saturday nearest December 31. Fiscal year 2002 will end on December 28, 2002 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 potential common shares outstanding during the period, using the treasury stock method for options and warrants. Of the outstanding options to purchase shares of common stock, for the three and six months ended June 29, 2002, options to purchase approximately 325,000 shares and 765,000 shares, respectively, of common stock were not included in the computation of diluted earnings per share because the options’ exercise price was greater than the average market price of the common shares. Options to purchase approximately 504,000 shares and 643,000 shares of common stock were excluded for the corresponding prior year periods.
Reconciliation of basic and diluted net income per share (in thousands, except per share amounts):
| Quarter Ended | |||||||||||||||||||||||||
| June 29, 2002 | June 30, 2001 | ||||||||||||||||||||||||
| Net | Net | ||||||||||||||||||||||||
| Income | Shares | EPS | Income | Shares | EPS | ||||||||||||||||||||
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Basic net income per share
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$ | 10,442 | 49,758 | $ | 0.21 | $ | 8,753 | 48,607 | $ | 0.18 | |||||||||||||||
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Effect of dilutive shares:
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Warrants/options
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— | 2,778 | — | 3,459 | |||||||||||||||||||||
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Diluted net income per share
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$ | 10,442 | 52,536 | $ | 0.20 | $ | 8,753 | 52,066 | $ | 0.17 | |||||||||||||||
4
NOTES TO FINANCIAL STATEMENTS — (Continued)
| Six Months Ended | |||||||||||||||||||||||||
| June 29, 2002 | June 30, 2001 | ||||||||||||||||||||||||
| Net | Net | ||||||||||||||||||||||||
| Income | Shares | EPS | Income | Shares | EPS | ||||||||||||||||||||
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Basic net income per share
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$ | 26,052 | 49,679 | $ | 0.52 | $ | 17,020 | 48,504 | $ | 0.35 | |||||||||||||||
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Effect of dilutive shares:
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Warrants/options
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— | 2,423 | — | 3,200 | |||||||||||||||||||||
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Diluted net income per share
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$ | 26,052 | 52,102 | $ | 0.50 | $ | 17,020 | 51,704 | $ | 0.33 | |||||||||||||||
(4) Comprehensive Income
Other comprehensive income consists of unrealized holding gains or losses on the Company’s short-term investments. The following table sets forth the calculation of comprehensive income, net of income taxes (in thousands):
| Quarter Ended | ||||||||
| June 29, | June 30, | |||||||
| 2002 | 2001 | |||||||
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Net income
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$ | 10,442 | $ | 8,753 | ||||
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Unrealized holding gains (losses) on
short-term investments, net of taxe | ||||||||