Sunday, December 14, 2014

Pixarian Birth and Start Dates, December, 2014 Edition

Wow, it's been almost a year since I last posted a birth and start dates article! Where did the time go? Well, let's jump right in with some Pixar employees who started with the company in the month of December:
  • Mark Andrews (2000) -
    Before Mark came to Pixar, he had been a storyboard artist for a number of animated films, including The Iron Giant, for which he won an Annie Award. Andrews also worked on animated television shows such as The New Adventures of Jonny Quest and Star Wars: The Clone Wars (which he won an Emmy award). Mark has also worked on live action films including Spider-Man, and was second-unit director and co-writer on Andrew Stanton's John Carter. Andrews came to Pixar with Brad Bird and others in 2000, first working as story supervisor on The Incredibles. He also serve as a storyboard artist on Cars, then again as story supervisor on Ratatouille. His latest effort was as co-writer and co-director of Brave. According to an interview the A113Animation blog did with Brave Story Supervisor Brian Larsen, Andrews is working with Larsen in the early stages of development of an idea for a new film.
  • Jay Ward (1998) - Jay started in the art department as a production assistant on Monsters, Inc. Then in 2001, he began working on Cars.
    With his deep knowledge of cars, he quickly became a key contributor on the film's development, acting as consultant to co-directors John Lasseter and Joe Ranft, plus as the character team manager. Ward's passion for automobiles has led to him being named the Guardian of the Cars franchise, and he has worked on Cars 2 plus other Cars-related efforts. Ward also organizes the annual Motorama car show at Pixar. Prior to coming to Pixar, Ward received a Bachelor of Fine Arts in Illustration from the California College of the Arts.
And now for some birth dates:
  • Jordy Ranft (December 24, 1991) - Jordy is the son of late Pixar story artist Joe Ranft. He is an actor and poet, and voiced Tad in Finding Nemo, and one of the ants in A Bug's Life. Jordy has a sister, Sophia, who has also done voice work for Pixar, voicing one of the monster children in Monsters, Inc. 
  • Scott Morse (December 4th) - Morse studied character animation at CalArts in the early 1990s, then went to work at Chuck Jones' Film Productions. At Pixar, Scott has been a story artist on Ratatouille, Cars 2 and Brave. He has also been active with a number of the Cars Toons episodes, with writing credit on episodes such as Time Travel Mater, Unidentified Flying Mater and Monster Truck Mater. He is now serving as director for the next episode, To Protect and Serve. Morse is also a well-known author of a number of graphic novels and other books, including the Magic Pickle series and the rare The Ancient Book of Myth and War, which he did with other Pixarians like Lou Romano, Nate Wragg and Don Shank.
  • Andrew Stanton (December 3, 1965) -
    Many of you may know that when Pixar started creating animated television commercials in the late 1980s, the first animator John Lasseter hired was Stanton. Since then, Stanton has written and directed a number of Pixar films, having writing credits on Pixar's first 5 films, co-directing A Bug's Life and having directed Finding Nemo and WALL•E. Stanton has also done a number of character voices including Zurg in Toy Story 2 and Crush in Finding Nemo. Stanton is busy directing Finding Dory, coming out June 17, 2016. 
  • Ronnie del Carmen (December 31, 1959) - Ronnie was born in the Philippines and received a fine arts degree from the University of Santo Tomas. He worked at both Warner Brothers and Dreamworks before coming to Pixar in 2000. His first Pixar effort was story supervisor for Finding Nemo.
    He also did storyboard work on Ratatouille and was story supervisor on Up. del Carmen directed the wonderfully cute short film Dug's Special Mission, and is now co-director of next year's Inside Out. Ronnie has also published a number of books such as My Name is Dug, Three Trees Make a Forest (along with Tadahiro Uesugi and fellow Pixarian Enrico Casarosa), plus And There You Are, featuring beautiful drawings of Nina (from del Carmen's Paper Biscuit series) plus a look into his story and character creation process. I love both this book and Three Trees Make a Forest, and find myself often going back and flipping through the pages admiring his illustrations.
  • Eugene Levy (December 17, 1946) - Levy is a well-known Canadian actor and comedian, having been in films such as Night at the Museum: Battle of the Smithsonian, Cheaper by the Dozen 2 and both Father of the Bride films. He has also done voice acting in Curious George and Over the Hedge. His first Pixar effort will be for Charlie, Dory's father in Finding Dory
Sadly, December has also held some Pixar-related losses. Japeth Pieper, an artist on Cars, Ratatouille and WALL•E, passed away on December 7, 2010. Pixar dedicated Cars 2 to him. And exactly 1 year ago today on December 14th, 2013, the amazing Peter O'Toole, the voice of Anton Ego in Ratatouille, passed away.

Sunday, December 7, 2014

This Day in Pixar History: Pixar Earnings Report, 3rd Quarter 1998

Welcome back to another look at Pixar's earnings reports from when the studio was a standalone company. Today I am looking back at their 3rd quarter 1998 results.

As had been the case for a few quarters, revenues for Pixar had been dropping as Toy Story revenue was drying up, and their next film, A Bug's Life, wouldn't be released until later in 1998. Total revenues for the quarter were $2.5 million, down over 50% from $5.3 million in the 3rd quarter of 1997. This was due to a 63% drop in film revenue, from over $3.5 million to $1.3 million, but that's not the full story. As part of the Feature Film Agreement between Disney and Pixar, once Disney recovered all their marketing and production costs, Pixar was eligible to receive a higher percentage of the revenue. Disney ended up recovering all their costs earlier than expected, so in the 3rd quarter of 1997, Disney paid Pixar an additional $1.8 million to catch up for the higher percentage. Removing this one-time item, film revenue only dropped $400,000. There was also no animation service or patent licensing revenue in 1998, compared to almost $1 million in 1997. There was an uptick in software revenue, growing from $900,000 to $1.2 million, which I think can be mostly attributed to their purchase of PEI which had occurred in June of 1998.

Not surprisingly, gross profits for the quarter also dropped to $2.2 million from $4.7 million in the 3rd quarter of 1997. There was a large increase in software cost of revenues due to the PEI acquisition. As discussed in the quarterly report, Pixar was amortizing a large portion ($2.7 million) of the purchase price for PEI over the next 3 years. Basically, Pixar would match amortized expenses against any related revenue so there would be no gross profit until the $2.7 million had been accounted for.

Even though software cost of revenues increased dramatically, gross margins stayed the same at 88% year-over-year. This was due to the high cost of animation services that was recorded in 1997 - $534,000 in costs against $896,000 in revenue for a gross margin of only 40%. While 40% gross margins would be good in many businesses, that was less than half of what Pixar was generating with their film and software businesses, and I'm sure had a large influence on the company deciding to exit that business segment.

Expenses for the quarter were $3 million, up from only $658,000 in 1997. But I should point out that 1997 had an extraordinary event which I discussed in my post of that quarterly report: due to Disney and Pixar signing the new Co-Production Agreement in early 1997, Disney was responsible for paying half of all the costs Pixar incurred in developing films. At the time of signing the agreement, both A Bug's Life and Toy Story 2 had been in production since 1996, so Disney was responsible for paying half of those expenses, resulting in a $2.2 million reimbursement.

In the end, net income for the quarter was $867,000 (net profit margin of 35%)  or $0.02/share versus $3.6 million (68%) or $0.08/share in 1997, but given the 2 extraordinary revenue and expense reimbursements that occurred in 1997, it's not an apples-to-apples comparison.

Pixar also continued to burn through cash, although fortunately they still had a large amount of cash from their IPO. Cash and short-term investments were $153.2 million at the end of the 3rd quarter of 1998, down from $176.0 million at the beginning of the year. Much of the cash burn was due to development and production costs for A Bug's Life, Toy Story 2 and Film Four (the title for Monsters, Inc. before it was green-lit), which totaled almost $24 million for the first 3 quarters of 1998. Another $8.8 million had been spent for new computers and other equipment.

Pixar's stock had a wild ride during the quarter. Whereas the first half of the year was good for shareholders, with the stock tripling from around $20 to the mid-$60s by July, the stock dropped over 50% to below $28 by the end of August. It recovered somewhat and ended the quarter around $40. While I was a long-term buy-and-hold Pixar investor (making my first purchase in early 1997 and holding on through the merger with Disney), the stock's volatility made it possible to do some "stock trading". Pixar's stock seemed to often follow the "buy on rumor, sell on fact" axiom. In early July, 1998, with the price over $60, there was a lot of optimism about the company with A Bug's Life soon to be released and Toy Story 2 being upgraded to a full theatrical sequel. But it seemed premature for the stock price to be increasing so rapidly since it would be close to a year before any income from A Bug's Life would be recognized. I sold about half my holdings in early July, and would buy back all that and more in the spring of 1999 at a 30% discount.

Saturday, November 29, 2014

This Day in Pixar History: A Day in the Life of La Luna Director Enrico Casarosa

If you're like me,  not only do you like seeing films on the big screen, you like the behind-the-scene looks at the making of the films. I love listening to director commentaries and watching bonus features on the DVD or Blu-ray. I've mentioned this before, but a critical event in my love of Pixar came with the Monsters, Inc. DVD. I've spent hours in the "For Humans" section of the bonus DVD. This was my first in-depth look at the new Emeryville studio and I sat in awe watching the Production Tour and other features that focused on the people and building. Watching all the different aspects of making the film - story, animation, sound, the artwork, just blew me away. And then there were the fun features - the Fun Factory Tour, riding around the studio on scooters, the chimp, the first annual International Air Show, the Easter Eggs! I already knew this was a special company, but these bonus features started me down the road of learning more about Pixar's culture and how they managed to have fun, work hard and continued to put out amazing films.

Enrico, middle, at the 8th annual
Cartoon Art Museum Benefit
Fortunately, now with the Internet there are a number of ways to learn about how films are made and the artists that make them.  From podcasts like The Pixar Post and their Pixar Pipeline Project, to artists live-tweeting throughout their work day or answering questions via Twitter or Reddit. And on this day back in 2011, Pixar's Enrico Casarosa took us on a visual tour of one of his days while directing the beautiful short film La Luna. From the moment he arrived at the studios via bicycle, through meetings and reviews, Casarosa gives a great, personal look at what occurred during development of the film. I really enjoyed seeing the antics and effort that went into making the film, and would love to see more of these day-in-the-life features.

Saturday, November 8, 2014

This Day in Pixar History: Pixar Earnings Report, 2nd Quarter 1998

I'm back with another look at one of Pixar's quarterly earnings reports from when they were an independent public company. In this post we'll look at their second quarter (April - June) of 1998.

© Disney/Pixar
The middle of 1998 was a quiet period for Pixar, at least in terms of revenues and earnings. Revenues from the home video release of Toy Story continued to drop, and there wouldn't be an increase in revenue until the first quarter of 1999 when money from A Bug's Life began to come in. Revenue for the quarter was only $3.8 million compared to over $14 million in the second quarter of 1997. Of the $3.8 million, $2.9 million was from Toy Story film revenues and $850,000 from RenderMan sales.

While revenues were decreasing, expenses were increasing, growing from $2.8 million in 1997 to $3.2 million in 1998. Much of this was due to general and administrative expenses, which grew over 73%. Pixar had both A Bug's Life and Toy Story 2 in production, and were in the early stages of developing Film Four (Monsters, Inc.). In the report, Pixar pointed out production hadn't started yet on Monsters, Inc. as the story treatment hadn't been approved. They also stated if the story treatment and budget were approved, it was not expected to be released until late 2000 at the earliest. As we all know, it would be a year later before it hit theaters.

Net income was a little over $2 million ($0.05/share) compared to almost $9 million ($0.22/share) in the year before quarter. You might ask, if revenue was $3.8 million and $3.2 million went into expenses, how did Pixar end up with over $2 million in net income? The answer comes in the category of Other Income which totaled close to $2.2 million. This income was basically interest Pixar earned on their short-term investments - the large cash hoard Pixar still had from their IPO in 1995.

The impact of lower earnings was more apparent by looking at their cash flow statement. For the first 6 months of 1998, Pixar generated $4.4 million of cash from their operations, but they spent $5.9 million on new equipment and $15.1 million on the production of A Bug's Life, Toy Story 2 and Monsters, Inc., for a cash outflow of $16.6 million. Remember, with the Co-Production Agreement with Disney, Pixar was now responsible for financing half of their film costs. With those higher costs and no expected revenue from A Bug's Life coming until early 1999, Pixar would be burning through a significant amount of cash for the next couple of quarters. Fortunately, they had over $160 million in the bank so they were well prepared to handle these expenditures.

David Baraff
© Disney/Pixar
One item I noticed in the quarterly report was that on June 16, 1998, Pixar had purchased Physical Effects, Inc. ("PEI") for $3 million in Pixar stock (over 60,000 shares) and the assumption of $300,000 in liabilities. PEI was co-founded by David Baraff and had been working on simulation technology, which they had licensed to a third party. I'm guessing Pixar bought the company primarily in preparation for the fur and cloth simulations they would need in Monsters, Inc. In fact, Baraff is credited with creating Boo's shirt in the film, and he continued to enhance the simulation tools Pixar would use for later films like Brave and Monsters University. Baraff is now a Senior Animation Scientist at Pixar and received a Scientific and Technical Academy Award for his work on cloth simulation in 2006.

Pixar's stock had had a good run-up through the first half of 1998, going over $63/share early in July. But after these results were announced their price began to drop, going down to around $50 by months end and getting as low as $28 near the end of August, 1998. Pixar was always known to be conservative in their earnings estimates and often beat expectations, as I discussed in my post for their first quarter of 1998 earnings report. I think analysts were somehow expecting revenues and earnings would continue to grow even in the absence of a recent film release. As a long term investor I wasn't concerned with the quarterly gyrations of revenues and earnings, but most analysts are only concerned with short term results. I think this quarterly report woke those analysts up and they realized it would be months before revenues would start to grow again.

Friday, September 19, 2014

Pixarians at The Walt Disney Family Museum

I have never been to The Walt Disney Family Museum, but I think it would be well worth a trip to San Francisco just to go there! In addition to the film screenings, galleries and special programs, they have a constant flow of artists and animators coming through to give lectures and demonstrations. With Pixar right across the bay from the museum, it's not surprising that many of these talks are led by Pixarians. And it looks like there is a great slate of upcoming talks featuring some of these Pixar artists! I previously wrote about some of these events, and thought now would be a good time to refresh that list.

The first event is called Over There with Steve Pilcher, who was the production designer on Brave. Steve will read from his soon-to-be-released children's book Over There and then do a book signing. Tickets are $20 for adult non-members or $12 for members. The program takes place tomorrow, Saturday, September 20 at 2:30pm! It looks like tickets are still available!

Ronnie del Carmen

Next is a 5 part talk called Animation Basics: Breaking Down the Magic. Part 1 will focus on story, the use of storyboards and the development of the script and will be hosted by Inside Out co-director Ronnie del Carmen. This event will take place on Saturday, October 25th.

Ricky Nierva
Part 2 of the Animation Basics series is subtitled Character and is taking place Saturday, December 6th. This event will cover character development, the use of maquettes and the importance of casting and voice. It will feature a number of Pixarians, including production designer Ricky Nierva, art director Matt Nolte, character sculptor Jerome Ranft, producer and casting director Kevin Reher and casting manager Natalie Lyon!

Dates and hosts of parts 3 through 5 haven't been announced yet, so keep an eye on the museum's calendar!

The last event I want to mention is the CalArts Fall Open House, being held on Saturday, October 18th. Alumni and staff from the world-renowned school will host a reception and discussion regarding its programs and admission requirements. This is an awesome way for prospective students to meet some of the leading artists and instructors in animation. With the large number of CalArts graduates at Pixar, while I don't know for sure, I can't help but think there will some at this event. Registration for it will begin on October 1st.

Tickets for these events may run out, so if you're planning on going you should buy them sooner rather than later!

Monday, September 1, 2014

This Day in Pixar History: Pixar Earnings Report, 1st Quarter 1998

© Pixar

I'm back with another look at Pixar's earnings from when they were a standalone company. In my continuing series, this post will look at their first quarter 1998 earnings report, which was announced after the market closed on Thursday, April 23, 1998. At this time, little money was flowing in but the company was busier than ever. 3 films were in different stages of development - A Bug's Life, which would be released later in the year, Toy Story 2, which in February, 1998, had been upgraded to a theatrical release (from a direct-to-video sequel), and Monsters, Inc. (officially referred to as "Film 4") was in early development.

© Pixar
Film revenue from Toy Story home video and merchandise was $4.0 million vs. $6.3 million in the same quarter of 1997. Through the end of March, 1998, Pixar had received just shy of $50 million from Toy Story. Given that the film made $362 million worldwide plus the hundreds of millions more in home video and merchandise sales, it's obvious why Pixar pushed for the Co-Production Agreement, where Pixar and Disney would share equally in all costs and revenues (versus the approximately 10% - 15% it was receiving in accordance with the original Feature Film agreement).

Even though the Animation Services department was shut down in 1997 to reassign its artists to A Bug's Life and Toy Story 2, the segment generated $171,000 in revenue due to royalties from their Toy Story CD-ROM interactive games. Software sales of RenderMan generated another $673,000 and patent licensing brought in $117,000, to bring total quarterly revenues to just shy of $5 million versus $7.9 million in 1997. While revenue in 1998 was lower, gross margins actually improved from 92.8% in 1997 to 98.5%! This was due to the lack of any film-related expenses - all costs from the production of Toy Story had already been accounted for. In addition, Pixar was capitalizing almost all development costs for its upcoming films, so while it was showing up on the cash flow statement (in the sum of $7.5 million), it wouldn't actually impact the income statement until it could be offset against the revenue of the upcoming film releases.

Although earnings per share dropped from $0.11 in 1997 to $0.08, the stock reacted very favorably to the earnings report as analysts had expected the company to only breakeven. The stock jumped over 8.7% the day after the earnings report to $44 5/16. This was on top of the almost 6% gain the previous day when Disney announced better than expected earnings and a 3-for-1 stock split. Pixar's stock had a great run in early 1998, more than doubling since the beginning of the year.

There wasn't much else of note in the quarterly report, besides the upgrade of Toy Story 2 from direct-to-video to full theatrical release. Some other minor items included that construction of the new Emeryville headquarters would start in the second half of 1998, and the earliest discussion I recall seeing regarding the studio's Y2K planning and preparation.

I'll be back in a few weeks to discuss Pixar's 1998 second quarter results.

Friday, June 27, 2014

This Day in Pixar History: WALL•E Theatrical Release

6 years ago today on June 27, 2008, Pixar released their 9th feature film, WALL•E. A totally original film, WALL•E was a huge hit. It made over $223M domestically, making it the 5th highest grossing film of 2008 and the highest grossing animated film of the year, ahead of Kung Fu Panda, Madagascar: Escape 2 Africa and Dr. Seuss' Horton Hears a Who!. WALL•E is Pixar's 10th (out of 14) highest grossing film. It was also a critical success, garnering a 96% Rotten Tomatoes rating.

WALL•E was released with the short film Presto. Doug Sweetland made his directorial debut with the short film and to me is one of Pixar's most funny shorts.

WALL•E is one of those rare science-fiction films that is more than just amazing visuals. It has wonderful music (composed by Thomas Newman), characters we care about and an engaging story. From the 40 minute dialog-free opening to memorable scenes such as WALL•E looking over a hibernating EVE, the Define Dancing scene, and the emotional ending, it is easy to forget these characters are robots, and ranks as one of Pixar's finest films.

Some of you may not know that the origins of WALL•E began back in 1994, during a meeting at the Hidden City Cafe in Pt. Richmond, CA. WALL•E was the last film produced from the ideas that came out of that meeting, the others including A Bug's Life, Monsters, Inc. and Finding Nemo. Andrew Stanton talks about this meeting in the teaser trailer for WALL•E. Many Pixar fans, myself included, have made a trip to the Hidden City Cafe and had one of their great breakfast items like the Hidden City Scramble, or visited with owner Shellie Bourgault. Sadly the cafe closed in 2012 - I wrote about the closing which I discovered when I tried bringing my wife there while celebrating our 25th anniversary in the San Francisco area! Needless to say, my wife does not have the same, fond memories of the cafe as I do, especially when she discovered the reasons for the closing.