Pixar Profit Up as ‘Monsters’ Roars

Pixar Animation Studios beat expectations with sharply higher fourth-quarter and annual results led by video and DVD sales of “Monsters, Inc.” and other films.

For the quarter, Pixar earned $17 million, up 31% from $13 million in the year-earlier period. Per share earnings rose 25%, to 31 cents a share, from 25 cents. Fourth-quarter revenue was $39.4 million, up 51% from $26.1 million in the fourth quarter of 2001.

Pixar earned $90 million, or $1.68 a share, on revenue of $201.7 million for its fiscal year ended Dec. 28. A year earlier, the company earned $36.2 million, or 71 cents a share, on revenue of $70.2 million.

The studio was expected to earn about $1.55 a share for the year, but surging home-entertainment sales pushed results higher.

In after-hours trading, however, the company’s shares fell about 10% to $48.76, after closing at $54.42 in regular Nasdaq trading, as investors reacted to company guidance that appeared to peg expected earnings at about $1.39 a share for 2003.

Jeffrey Logsdon, an analyst with Gerard Klauer Mattison, said he believed sellers had overreacted. “Pixar has a two-year history of underestimating their performance,” Logsdon said. He pointed out that the company initially projected $1.20 a share for 2002, then raised that estimate and wound up beating its own guidance.

During a conference call to discuss earnings, Pixar Chairman Steve Jobs, who also is co-founder and chief executive of Apple Computer Inc., acknowledged that the company is engaged in “discussions with several major studios about our future.”

Pixar’s distribution pact with Walt Disney Co. is set to expire after it delivers additional films in coming years. Dissatisfied with the terms of his Disney deal, Jobs said he preferred to remain with the Burbank company, but is exploring other options.

Last week, Jobs hosted Warner Bros. President Alan Horn and a group of executives from the AOL Time Warner Inc.-owned studio at Pixar’s Emeryville, Calif., headquarters. Today, he is expected to meet with top executives from 20th Century Fox, a unit of News Corp.

Although Jobs is free to discuss a new deal with prospective partners, he is precluded from signing a new arrangement until after Pixar delivers its underwater adventure “Finding Nemo” to Disney in April.

The film is one of three that Pixar still owes Disney under its deal, which extends at least through 2005.

Pixar’s results often indicate dramatic swings because they depend heavily on the distribution cycle of its films. This year will be the first time a Pixar movie -- “Finding Nemo,” which will open in theaters May 30 -- will have a theatrical release and home-entertainment release in the same calendar year.

Pixar’s four previous movies -- “Monsters, Inc.,” “A Bug’s Life” and two “Toy Story” films -- were released during Thanksgiving holiday periods and later moved to video, spreading revenue over two fiscal years.

In a recent analyst report, Stuart Linde of Lehman Bros. estimated that “Finding Nemo” would represent 90% of Pixar’s 2003 earnings.

During Thursday’s conference call, Jobs said Pixar has become “this era’s most successful animation company,” in terms of box-office results. In looking forward, however, he quoted a warning from the late Walt Disney.

“As Walt said,” noted Jobs, “ ‘We’re only as good as our next picture.’ ”