Pixar Options Secured Biggest Profits

Pixar, the animated-film studio that Walt Disney Co. bought this year from Apple Computer Inc.’s Steve Jobs, awarded stock options to top executives on dates that locked in the highest potential profits.

John Lasseter, the creative director behind “Toy Story” and “Monsters, Inc.,” and President Edwin Catmull received options that allowed them to buy Pixar’s stock at the lowest price in 2000. The Emeryville, Calif.-based company also granted Lasseter options in February 1997, just before signing a production agreement with Disney that sent its shares up almost 50%, filings with the Securities and Exchange Commission show.

That kind of timing has prompted federal regulators to investigate more than 80 companies over concerns that they may have manipulated stock option grants to enrich executives and attract employees.

Pixar, acquired by Burbank-based Disney for $8.06 billion, hasn’t raised any concerns about its options grants or made any public statements to suggest that it is a target of a federal probe. Pixar spokesman Tom Sarris declined to elaborate on the grants beyond what was available in public filings and said the company didn’t comment “on personal compensation.”

Lasseter, 49, is away until October and can’t be reached until he returns, a secretary at his office said. A message left for Catmull, 61, at his home in Marin Country north of San Francisco wasn’t returned

The grant to Lasseter on Dec. 6, 2000, was Pixar’s largest as a public company. Filings show that he received options to buy a split-adjusted 2 million shares at $13.25 each, Pixar’s lowest stock price that year.

The options were part of a 10-year employment contract that Lasseter signed March 21, 2001, and Pixar announced a week later. The company disclosed the grant in an April 30 filing with the SEC. By that point, Pixar’s shares had risen 23% to $16.33, giving Lasseter a profit on paper of almost $6.2 million.

The same filing said Pixar was late reporting the grant to the SEC. The company submitted the necessary form May 9, almost three months after the agency’s Feb. 15 deadline.

To reap an actual profit on the options, Lasseter had to wait until they matured, or vested, each month over a 10-year period. When Disney bought Pixar, all of Lasseter’s unvested options matured immediately.

Lasseter swapped options that carried the right to buy 1.12 million shares of Pixar’s stock at $13.25 a share, part of the 2000 award, for new options to buy 2.58 million shares of Disney stock at $5.76 a share, according to a May 8 filing with the SEC. With Disney shares trading at almost $30 now, Lasseter could exercise those options for a profit of $62 million.

Pixar also awarded 1 million options with a Dec. 6, 2000, grant date to Catmull.

Sarah McArthur received options as Pixar’s vice president of production with grant dates in January of 1997 and 1998 that matched the lowest price for the company’s stock in each year. McArthur declined to comment.

Lasseter received an options grant in 1997 when Disney signed the five-year distribution agreement with Pixar and agreed to buy as much as 5% of the company. As part of the announcement, Pixar said Lasseter signed a seven-year employment contract.

Pixar disclosed Lasseter’s contract, including a grant of 250,000 options, in a filing with the SEC on March 31, 1997. Although the filing said the contract was effective Feb. 24, it also said Pixar agreed to set the exercise price for the options Feb. 21, the last business day before the Disney investment.

When Pixar shares opened for trading Feb. 24, they soared to close up 49% from $7.06 on Feb. 21.