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A JHM Exclusive: A Full Transcript of Pixar’s Quarterly Earnings Conference Call

Finally, here’s your chance to read — in full — the teleconference where Pixar’s CEO Steve Jobs finally spoke his mind about Michael Eisner and the Walt Disney Company … which set all these wheels in motion.

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Hey, gang!

Jim Hill here. I hope you all had a safe and restful Presidents Day Weekend.

Me? I didn’t get much of a chance to rest. Why for? My e-mail box kept getting filled with notes from JHM readers who wanted to know more-more-MORE about this whole Roy/Stanley/Michael/Steve/ Brian and the other Steve story. What was going on RIGHT NOW. What I thought might happen next. And — more intriguingly — what I thought had led the Walt Disney Company to this intriguing crossroads in the corporation’s history.

Unfortunately — in order to properly connect the dots, to clearly illustrate all of the little, subtle behind-the-scenes things as well as the huge, momentous decisions that lead us to this exact moment — that would take pages and pages to properly lay out. In other words, a book.

On the upside, I am actually giving some semi-serious thought to putting together such a book. But we’ll talk more about that later …

But — if you were to ask “What moment truly signified to you, Jim, that Michael Eisner was really in trouble, that change was in the wind for the Walt Disney Company?” — I’d have to say that it was Pixar’s quarterly earnings conference call back on February 4th.

That (for me, anyway) was the moment when the gloves came off. Sure, Roy and Stanley’s www.savedisney.com efforts had already gotten the Disneyana faithful and some members of the investment community recruited to their cause. But a lot of Wall Street’s movers and shakers were still sitting on the fence. As was the mainstream media.

But when Steve Jobs got on the phone 13 days ago and started talking about how he was just …

“… sick about (the idea of ) Disney doing sequels (to Pixar’s films) because — if you look at the quality of their sequels like “Lion King 1½” and their “Peter Pan” sequel and stuff — it’s pretty embarrassing.”

… that’s when people in high places finally sat up and took notice. Particularly those folks who have offices high up in the Team Disney Burbank building. As reporters began grabbing the more sensational quotes out of Pixar’s quarterly earnings teleconference and plastering them all over the place, that’s when Eisner and Co. supposedly finally realized that the situation that Disney management finally found themselves in was serious. Which is why they began to circle the wagons.

Now, I know that you’ve already read select excerpts from the Pixar’s quarterly earnings conference call of February 4th. A few stray quotes here and there. But here — finally — is a full transcript of that historic teleconference. (Well, as close to a full transcript as I could get before Pixar finally pulled the thing off the Web …)

Anyway … if you’d like to learn what exactly it was that made Wall Street finally decide that Disney might be in trouble, take a gander at the following transcript:

 

Your speakers today 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.

AM: Thank you. Welcome to Pixar’s fourth quarter of fiscal 2003 conference all. I will begin with a discussion of our financial results, followed by our outlook for 2004 and beyond. I will then turn the call over to Steve Jobs, who will provide an update on other developments at Pixar. Who will then open the call to questions.

We are thrilled to report the most profitable quarter and full year in Pixar history. Fourth quarter revenues were $164.8 million, net income was $83.9 million and diluted earning per share were $1.44. These results compared to revenues of $39.4 million, net income of $17 million and diluted earnings per share of $.31 reported in the fourth quarter of 2002. Full year of 2003 revenues were $262.5 million, net income was $128.4 million and diluted earning per share were $2.17. This exceeded previous guidance of $1.76 for the year and compared to full year of 2002 revenues of $211.7 million, net income of $90 million and diluted earnings per share of $1.98.

Film revenues for the fourth quarter were $161.3 million, which include $147.8 million of “Finding Nemo” related revenues, primarily from domestic home video sales and foreign box office revenues. Also included in our revenues were $8.3 million from our library titles, $5.2 million associated with “Monsters, Inc.” and approximately $3.4 million from software licensing.

For the fourth quarter, we generated “Finding Nemo” domestic home video sales of 24.8 million units. Comprised of 5.6 million VHS units and 19.2 million DVDs. International releases of the home video were limited in the fourth quarter with revenues almost entirely offset by upfront marketing and release costs. The majority of “Nemo” ‘s international home video release dates are staggered throughout the first part of 2004. And we will provide further guidance on this subject during the discussion of our outlook for 2004 later in the call.

As of the closing day of our fourth quarter, “Finding Nemo” had generated $792 million of worldwide box office receipts. Compromised of $340 million domestic and $452 million international. Since that time, the film has been released in all of its scheduled international markets and has continued to climb to a worldwide box office of $850 million.

Operating expenses were $6.8 million for the fourth quarter and $30.5 for the full year of 2003. Compared with $5.7 million and $19.5 million respectively for the same period in 2002. The increase in operating expenses over the prior year period was largely attributed to a one time incentive compensation to our employees earlier in the year for their contribution to the extraordinary performance of “Finding Nemo.” Cash, cash equivalents and investments were approximately $521.9 million at the end of the fourth quarter. Having increased $182.8 million since December 28, 2002. This increase was mainly attributable to cash received from Disney for our share of film revenues as well as proceeds from stock options exercises, software revenues and interest income. Offset by film production costs and tax payments.

Capitalized film cost were $107.7 million versus $92.1 million at the end of 2002, reflecting production spending on our current film projects offset by film amortization of $37.6 million. Our balance sheet remains debt free and our retained earnings at the end of the fourth quarter were $393.3 million. Our fiscal year 2003 diluted earnings per share of $2.17 exceeded our previous guidance of $1.76 with the exception of two cents of our fourth GPS upside which was due to unanticipated software sales. The majority of our out-performance this quarter was attributable to “Nemo” ‘s greater-than-expected worldwide box office and domestic home video revenues. At the international box office, “Nemo” generated $452 million of foreign box office receipts by the end of the fourth quarter versus our previous estimate of $300 million. On home video, we recognized 24.8 million video units domestically versus our previous expectations of between 22 and 24 million units. Please note that we maintain certain return reserves of “Finding Nemo” home video as we have for all of our previous titles and that these reserves may differ from the reserves estimated by Disney. In addition, our reserve estimates may be adjusted periodically based on actual rates of return, inventory levels in the distribution channel as well as other business and industry information.

I would now like to address upcoming events that may effect results for the first quarter as well as introduce our initial thoughts on fiscal year 2004. Please note that these statements as well as others that may be made in the course of this presentation are forward looking and are just possible that actual results may differ materially. We refer to our 2002 Form 10K and third quarter 2003 Form 10Q, particularly the sections and regs containing important factors that may 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 anticipate that our earnings for the first quarter of 2004 to be driven by the continuing success of “Finding Nemo.” Our projections assume that “Nemo” could eventually achieve a worldwide box office of roughly $855 million with the remaining foreign box office receipts being recognized in the first quarter. We also expect international home video revenues — most notably from Australia and the United Kingdom, where the home video releases are schedule for January and February respectively. In addition, we expect to recognize some domestic television revenues from pay-per-view, continuing worldwide merchandise revenues and ancillary royalties. As a result, we expect to report diluted earnings per share for the first quarter of 2004 of roughly $.30. Beyond the first quarter, we expect continuing home video revenues of “Finding Nemo” to continue to drive the second quarter particularly from its release in major European territories such as France, Germany, Italy and Spain in April, and in Japan in May. Revenues for the domestic pay TV licensing of “Nemo” are expected for the second quarter while worldwide merchandise revenues and ancillary royalties from all of our films are anticipated throughout 2004.

Our financial results for the fourth quarter of 2004 will depend primarily on the success of our studio’s sixth feature film, “The Incredibles.” And though very difficult to estimate before its domestic theatrical release on November 5th. As a result, we are not providing EPS guidance for the full year. We expect that “The Incredibles” will be released in a majority of international territories throughout the fourth quarter. This will give 2004 three major revenue drivers: Domestic and international theatrical for “The Incredibles” and international home video for “Finding Nemo.”

Looking forward to 2005, this will be the first year that Pixar experiences four major revenue drivers: With domestic and International home video of “The Incredibles” in the first half of the year, and domestic and international theatrical for “Cars” in the second half. 2006 will also have four major revenue drivers. But — for the first time — Pixar will be keeping 100% of the profits after distribution fees from two of those revenue streams: Domestic and international theatrical for Film 8, our first film outside of our co-production agreement.

Throughout 2004, 2005 and 2006, we expect continued worldwide home video, television licensing, merchandise sales and ancillary royalties from all of our films released to date as well as continued software sales and interest payments. These statements are forward looking and actual results may differ materially. Among the factors that could effect projected 2004, 2005 and 2006 results to differ are the following: The timing and worldwide distribution costs of Film 8, “Cars,” “The Incredibles,” “Finding Nemo” and other titles in our film library; the timing, accuracy and efficiency of the information that we receive from Disney to determine revenues and associated gross profits; the timing and amounts of non-film related revenue and expenses; the accuracy of assumptions and judgments used to estimate certain revenues associated with gross profits; the market price of our common stock and related volatility; potential delays in the release dates of our films; final terms of our future distribution deal and external socio-economic and political events that are beyond our control.

“Finding Nemo” ‘s unprecedented performance in both the international box office and on home video are landmark achievements in Pixar’s history. 2003 stands out as our most successful year to date and we expect this momentum to carry us into 2004, with “Finding Nemo” ‘s foreign home video release and — later — with the release of Pixar’s next film, “The Incredibles” on November 5, 2004. For more on “Finding Nemo,” “The Incredibles” and beyond, I would now like to turn this discussion over to Steve Jobs.

SJ: Thanks, Anne. As Anne said, we are thrilled to report the most profitable quarter and full year in Pixar’s history. Our 2003 revenues of $262 million, net income of $123.7 million and diluted earnings per share of $2.15 show that the business models that we put in place many years ago is working quite well. We are very proud of these numbers. But we are even prouder of what generated them: The phenomenal success of “Finding Nemo” which became the highest grossing animated film of all time.

“Finding Nemo” ‘s worldwide box office currently stands at $850 million, comprised of $340 domestic and $510 international. It is the highest grossing film of 2003 and the ninth highest grossing film worldwide of all time. With “Finding Nemo,” the total worldwide box office for Pixar’s five films has surpassed $2.58 billion.

Let me take a moment to highlight the outstanding international performance of “Finding Nemo.” It is the first animated film to surpass $500 million international markets, the most significant territory released since the last time call Japan set a new opening weekend record and achieved $96 million of box office during its nine weeks in release. “Finding Nemo” was also the highest grossing film during calendar 2003 in Argentina, Australia, Austria, Belgium, China, France, Germany, Hong Kong, Mexico, the Netherlands, Poland, Switzerland, the United Kingdom and Ireland.

“Finding Nemo” also sold 24.8 video units in North America in 2003. Selling 8 million units the first day, to become the fastest selling video ever, beating previous record holder “Monsters, Inc.” which sold 5 million units the first day. In addition, the “Finding Nemo” DVD became the Number 1 selling DVD of all time with 19.2 DVDs being sold in North America in 2003. We’ve won lots of awards for this great DVD.

And — speaking of awards — “Finding Nemo” has been nominated for 4 Academy Awards: Best Animated Feature Film, Best Original Screenplay, Best Musical Score and Best Sound Editing. Plus our new short film, “Boundin’ ” was also nominated for Best Animated Short Film.

It is incredibly important for everyone at Pixar to produce the highest quality products we can. And these nominations and the success of our films means a lot to us. We couldn’t be happier.

Now I’d like to talk about Disney. As most of you know, last week we ended our talks with Disney to extend our relationship after negotiating with them for over 10 months. Let me explain why.

As you may recall, our first deal with Disney was a three picture deal with “Toy Story” being the first picture. After the phenomenal success of “Toy Story,” we were able to negotiate our present deal in terms substantially more favorable for Pixar. As part of this new second deal, the last two pictures of the first deal became the first two pictures of the second deal under its more favorable terms. This is a common practice in Hollywood when a studio seeks to secure a new, longer term deal with a valued partner.

Jumping ahead to 2003, let me quote an LA Times article from earlier this week:

QUOTE: “Several weeks before last year’s release of ‘Finding Nemo,’ Walt Disney Company Chairman Michael Eisner told his board not to expect a blockbuster and suggested that such a fate might not be all that bad. Although Pixar Animation Studio was high on its film, Eisner said that he was not impressed by early cuts he had seen, according to people who were familiar with the matter. ‘Should the movie falter,’ Eisner said, ‘Disney could gain negotiating leverage to expand its partnership with the high flying animation company. Pixar, Eisner concluded, may be headed for a reality check. ” UNQUOTE

We’ve been told the same story by several folks at Disney. As you know, things turned out a little different and “Finding Nemo” would soon make more at the box office than any animated film in history. We finally began negotiates with Disney on a third deal almost a year ago. We had done our homework. We had talked with several other major studios and we had a pretty clear idea the deal we could get from them.

We offered a deal to Disney that was less favorable to us than we could get from several other studios. For example, with much higher distribution fees, a much longer term commitment and free use of our characters in their theme parks. But we held firm that the last two pictures of our current deal — “The Incredibles” and “Cars” — be folded into the new deal with its more favorable terms. Just as we had done before and just as any other studio in town would agree to if they were in Disney’s shoes. In the end, Disney chose not to agree to this.

So — after 10 frustrating months — we ended our talks with Disney. It is not without some regret. We will truly miss working with *** Cook and his terrific marketing and distribution teams. And you would be hard pressed to find someone who loves the original spirit of Disney more than John Lasseter, Ed Catmull or myself. But after almost a year, it’s time to move on.

Since announcing this, we have been fortunate to receive calls from the heads of every major studio in Hollywood. It is clear that we are wanted by others and we will begin discussions with these studios in March. With the goal of striking a new deal with them by this fall.

[MISSED TRANSCRIBING THIS SECTION. SET UP WAS THAT JOBS WOULD NOW ANSWER SOME QUESTIONS THAT INVESTMENT ANALYSTS AND THE PRESS MIGHT HAVE ABOUT THE WHOLE DISNEY/PIXAR SITUATION.]

AM: Can anyone else distribute and market Pixar’s pictures as well as Disney?

SJ: Yes, we think so. One needs to look no further than “Harry Potter,” “Lord of the Rings,” “Spiderman” or “Ice Age” to see examples of excellent marketing and distribution. We think that there are at least four other major studios that will do a great job marketing and distributing our films.

AM: Are other studios interested in working with Pixar?

SJ: I’ve personally received calls from the heads of these companies over the past 5 days. All expressing a very, very strong interest in working with Pixar.

AM: Is Disney planning to make sequels to all the Pixar films we released through them?

SJ: Well, Disney is making noise that they will, but we really don’t know. Disney has the rights to make sequels to our first seven films if we decide that we don’t want to make them ourselves. We have already decided that for “Toy Story.” It is likely that we won’t want to make sequels to any of them ourselves. But we haven’t decided that yet. Our filmmakers are more interested in telling new original stories. And we have demonstrated that our original films like “Monsters, Inc.” and “Finding Nemo” can be even more successful than our sequels like “Toy Story II.”

AM: How does Pixar financially participate in our first seven films and their sequels?

SJ: Though Disney has publicly said that they own our films, this is not true. Although Disney does own the original “Toy Story” because it is covered under our first deal with them, Pixar will continue to own 50% of “A Bug’s Life,” “Toy Story II,” “Monsters, Inc.,” “Finding Nemo,” “The Incredibles” and “Cars.” And will continue to earn its share of the profits from these films, their videos, merchandise, etc. into perpetuity. For example, when Pixar’s films are released on high definition DVDs later this decade, Pixar will continue to earn its current profit split from these DVDs. If Pixar decides not to do sequels and Disney solely finances and creates sequels to Pixar’s films, Pixar will earn a lower cass of royalties on those sequels.

AM: Will Pixar’s future films suffer without Disney’s creative collaboration?

SJ: The truth is there has been little creative collaboration with Disney for years. Pixar creates the original stories then creates and produces the films with very little creative input from Disney. You can compare the creative quality of Pixar’s last three films — for example — with the creative quality of Disney’s last three films. And gauge each company’s creative abilities for yourself. The collaboration that we do have with Disney is centered around the marketing of the films, not the making of them.

AM: Will Pixar’s future films suffer without Disney’s legendary marketing?

SJ: Marketing is important and we have enjoyed working with *** Cook and his talented marketing team at Disney. But no amount of marketing will turn a dud into a hit. Not even Disney’s marketing and brand could turn Disney’s last two films — “Treasure Planet” and “Brother Bear” — into successes. Both bombed at the box office. The “Thumbs Up” and “Thumbs Down” you hear from colleagues at the water cooler overshadows the most skillfull marketing in the world. The quality of the movie is far more important than the marketing of the movie. And — as I said — there are at least four other studios with strong marketing organizations that are very interested in working with us.

AM: Will Pixar’s future pictures suffer without the Disney brand?

SJ: Beginning with “Monsters, Inc.,” the results of Disney’s own market survey research showed that the Pixar brand had become more important than the Disney brand to draw moviegoers to see our films. Both for parents with children and adults without children. We think that the Pixar brand is the most powerful and trusted brand in animation. And it gets even stronger with every successful film that we release.

AM: Is there still a chance that Pixar and Disney will get back to the bargaining table?

SJ: It’s not very likely. It’s very unlikely. After more than 10 frustrating months of negotiations, we were unable to strike a deal with Disney. And now it’s time to move on.

AM: Is Disney going to be less motivated to make “The Incredibles” and “Cars” as successful as prior Pixar films now that the marriage is coming to an end?

SJ: Disney needs these films to be successful as much as Pixar does. Remember, a very significant percentage of Disney studio’s profits over the few years have come from Pixar films.

AM: How good are “The Incredibles” and “Cars” going to be?

SJ: We think they’re going to be outstanding. The preview screenings for “The Incredibles” have been outstanding, even more positive with teens than any previous Pixar film at this stage. But you never really know ’til the movie is released. Which — for “The Incredibles” — is this November 5th. And we couldn’t be more excited about it.

“Cars” — John Lasseter’s next movie and Pixar’s seventh movie — is coming along quite nicely and it’s on track for a holiday 2005 release. We recently announced the voice cast of “Cars” which includes Paul Newman, Owen Wilson, Bonnie Hunt and NASCAR Legend Richard Petty. We think it’s going to be great.

AM: What about 2006 and beyond?

SJ: We already have our 2006 picture in production and hope to greenlight our 2007 picture by the end of this year. Lost of excietemnt here but we’re going to save any announcements for another day.

AM: Is it Pixar’s plan to finance 100% of its new films after “Cars” and can Pixar afford to do this?

SJ: Yes. It is Pixar’s plans to finance 100% of our new films beyond “Cars.” So we can keep the largest possible share of the profits we are creating. Unfortunately, we can easily do this. Pixar has over $520 million in cash in the bank at the end of 2003, and we expect to have over $650 million of cash in the bank by this summer. If our next two films do as well at the box office as we hope, we project that Pixar will have $800 million to a billion dollars of cash in 2006. And that’s net of funding 100% of our next pictures.

AM: How will a new deal effect Pixar’s financial results in 2006 and beyond?

SJ: While we can not predict the success of our future films, we can say that — had “Finding Nemo” been a film under the terms of the new deal we hope to make, our 2003 revenues of $262 million and net revenues of $123.3 million would have more than doubled. I’ll leave it to you to calculate what our stock price might be with $250 million in earnings using Disney’s PDE ratio of 35.

AM: How does the senior management team at Pixar feel about splitting with Disney?

SJ: Honestly, we’re sad about it. You can not find anyone who loves the original spirit of Disney more than John, Ed and myself as I said. But after 10 months of trying to strike a deal with Disney, we felt it was time to move on. So we’re focused entirely on three things now. 1) Making sure our movies are the best we can make them. 2) Insuring that we get to one picture a year without sacrificing our quality and 3) Finding a new studio partner to distribute our pictures beginning in 2006. Just two years away. I’m confident that we will succeed at all three of these and that Pixar’s Golden Age will continue to evolve without missing a beat.

And now Ann and I would like to open it up for any remaining questions that we haven’t answered.

Q: A little more insight in the process with Disney that ultimately lead you to walk away. I know that you said that you feel that there are stronger or just as strong distribution partners. But it seems to me that Disney has the platforms that appeal the most to your core demographic and that’s been the families . And given the deal terms that Disney suggested that you were offering, what was out there being suggested that you offered to Disney, what is from your commentary that you were suggesting that the last two movies become a part of a straight distribution deal, it would seem to me that Disney was in a position that the almost had to say “No”. Given how lucrative the deal with Pixar has been thus far. So I guess my question is — was — is — you know — was it a straight distribution with nothing else as far as your discussions with Disney? Would you have not been happier or would you have been willing to take the higher amount on the split going 50/50 say, going 80/20 or even 90/10 as opposed to just a straight distribution deal. Because I’m having a hard time figuring out how the numbers, you know the numbers you’re going to be able to get a distribution deal that’s more favorable. By the way, we had heard that the offer to Disney was 10% distribution on the next two movies, relinquishing all the rights they have thus far on the existing library and then after the current deal is done, you’d pay them a 7% distribution fee. And — unless you’re assuming that you’re getting much, much better than a 7% distribution fee that your future films are going to “Nemo” -like number and that Disney will do a halfway decent job on the sequels and do many of them. You know it’s hard for me to see how the numbers balance out. So that’s the first question.

SJ: I think your data’s just wrong. And I’m not going to specifically go into what the negotiations were. But we were offering Disney much higher distribution fees than you said. Both for the next two films and the films beyond that. But the line in the sand that we drew was that we want to own our films going forward. And we wanted to own “The Incredibles” and “Cars.” And — in the end — Disney wasn’t willing to agree to that. So we thought we were willing to accept a quite reasonable deal, but Disney felt differently and that’s their right and privilege.

Q: Okay. Just two quick follow-up questions then. Would the sequels … How does John Lasetter feel about Disney doing the sequels is Question No. 2. And Question No. 3 is if you do invoke your right of first — if Disney comes to you and and can you confirm that you basically said that officially said no to doing a “Toy Story” sequel?

SJ: Um … We have said “No” to doing “Toy Story III.” We have not said “No” to anything else yet. We will be discussing that amongst ourselves and with Disney over the next several months. And we feel — ah — sick about Disney doing sequels because if you look at the quality of their sequels like “Lion King 1 ½” and their “Peter Pan” sequel and stuff, it’s pretty embarrassing.

Q: Okay. Just a quick follow-up on your refusal, like if you if Disney comes to you and says “we want Let’s say that you had said “No” to “Toy Story III” and you had said “Yes” is there a limited amount of time in which you have to make those movies? Could you have said “Yes” and made the movies four years from now?

AM: You know, Kathy, I think we need to move on. We’ve said as much as we think is appropriate about sequels.

Q: With the amount of cash you on the balance sheet, whether you choose to make sequels or you choose to make all new films, what’s the constraint from you make multiple pictures a year? There’s certainly consumer demand and you’ve got the capital.

SJ: Rich, if it were only financial capital that was required to make successful animation features, we’d be seeing a lot more successful animated features. It is the talent that is the limiting factor. We have spent the 10 years at Pixar growing our creative talent base and our technical talent base. These are skills that you can go and acquire on the outside. There are not people out there that know how to do these things that you can go hire. So you have to grow them. And that is what Disney did in its Golden Age of Animation a decade ago. That’s what Pixar has done. And that’s what we think anyone has to do. Talent is the limiting factor. And I think Disney tried to ramp up from a picture a year to two pictures a year and that may have been one of the contributing factors that got them to where they are today in animation.

Q: Just out of curiousity, do any of the joint venture partners bring development prospects that could help ease that constraint?

SJ: There’s nothing on the radar screen to that effect, No.

Q: With respect to library, can Disney go out and development deals by themselves or does Pixar need to sign off on that? Secondly, Pixar has the right to co-produce sequels under existing terms for perpetuity or or — and this is a hypothetical — but is there any sort of timeline that if Disney does not produce a sequel or sequels can Pixar greenlight a sequel with only Disney the royalties fee should they not decide to participate.

AM: The library output deal in respect to television, right?

Q: Yeah.

AM: We are consulted on all TV deals negotiation to make that they’re good — um — because Disney owns so many television assets. And there’s an obligation under the contract that there’s a fair, fairly set price and Disney ahs been very good about consulting us in those discussions.

SJ: As far as sequels go, we have the right to elect and co-produce sequels. If we decide not to do that for a film, we lose that right for future films. The way to understand our thinking on this is that if we have the talent to produce one animated film per year and our creative talent has demonstrated that it can produce original films that actually do better at the box office than our sequels. As “Monsters, Inc.” and “Finding Nemo” have done compared to “Toy Story II.” Then those slots might get filled up with original films and not leave any remaining room for sequels. So — if you care about quality (Which we do) — You know, it’s hard to see how we could turn out high quality sequels if we don’t have any slots left.

Q: As you guys look at potential future deals with other partners, other studios do you just discuss your interests in retaining full distribution rights in certain windows, be it video, merchandise or video games. Taking full control of that stuff. And — if so — what sort of staffing requirements would you need and what sort of lead time would you need to build up a prescence or the infrastructure to do that sort of stuff?

SJ: Yes, we have thought about that and I think that there will be areas of merchandising and things like video games where Pixar will play a much more active role than we have in the past. Our first film under such a deal will be in 2006. We think that we have adequate time to staff up for that. The staffing requirements for that I don’t think will be terribly large.

Q: Steve, as you look toward the future in terms of deciding a new distribution partner beyond “Cars,” I’m going to go ahead and assume that you are thinking that distribution domestically is largely a commodity there’s really no one here in town that does it better than anyone else. But internationally clearly there are those studios that distribute more effectively than others studios and there are actually other studios that don’t distribute internationally at all. MGM comes to mind, of course. Given that, is MGM out of the running and do you think that there are other studios here in town that distribute internationally better than others and what do you look for in making that decision?

SJ: Well, we have absolutely already looked at that question very intimately, examined cases of films that have been distributed domestically and internationally and look at them in great detail. We’re very on top of that. And I’m not going to go into any of our thoughts about that right now except to say that we’re very on top of that issue. And international distribution is very important to us.

Q: If you could comment on future deal that you sign. Obviously, Disney picks up 100% of the P and A and then they recoup it so none of it flows through your P and L which definitely helps your earnings. Going forward with any deal that you would sign with another partner, would you look to sign a similar kind of deal or would Pixar look to pick up some of that P and A spending and have that float through your P and L. Second, I’m wondering out of the four studio heads that you’ve talked to or you considered to be quality studio heads that distribute your productions in the same manner of Disney, I’m wondering whether or not any of them have made what you have to consider to be overtures something a little bit deeper than just a distribution agreement along the lines of has the topic of acquisition or merger even come up or has that offer not even been addressed. And — finally — I’m curious if you think that Michael Eisner still likes his iPod?

SJ: We’ve talked to more than four studio heads. I’m not going to get into those discussions at this point in time. In terms of running the P and A through Pixar or through a partner, that actually wouldn’t effect the earnings. It would effect the cash flow requirement.

AM: Steve’s right. We’re looking at the timing. Obviously, the recognition of the expenses. But we’re looking at ways to structure a deal so that there would be no impact on Pixar’s financial results. Depends on the structure of the deal.

We would look for a deal that would be consistent from the existing deal to look at.

I’ve said as much as I can.

Q: Is there any scenario where you can see yourself working with Disney on the production of a sequel under the current terms (which I think is unlikely) or could you possibly negotiate a specific deal that would address only sequels?

SJ: You know, as I mentioned, our limiting factor is producing a film a year. Which we will get to shortly. And of it as we have a slot a year to fill. And if our incredibly talented creative team can fill each of those slots with original pictures which we’ve already demonstrated can be quite successful even relative to successful sequels then we don’t have any slots left to do sequels. So that’s the sort of decision making process that we’ll be going through the next several months.

Q: It would seem that you could get a better return on that money if you did do a sequel and had some overview of what Disney was doing. Why wouldn’t that work out? And could you address the question that John Lasseter has a “Toy Story III” script that he thought was better than anything that they had. Why couldn’t you work out a deal to give them that so or something or other. Whatever that might be.

AM: I think we’ve said as much as we’re going to say about the sequel matter today.

Q: Just curious if we should expect any TV related revenues from “Monsters, Inc.” in 2004?

If we could take a step back. Post “Lion King,” Hollywood took a step in animation lost money while driving up animators salaries. Are we at risk with the same gold rush mentality in the next few years. Could we see your costs rise as others try to access your talent? Following up on that, what sort of protections do you have on Disney in a non-compete basis?

SJ: Well, I think we are seeing everyone try to get into 3D computer animation thinking that the medium is the most important thing. An opinion that we don’t share. But we have not seen the industry go through the cost escalation we went through the last time that this happened with 2D animation, as you pointed out. As far as Disney, we have an agreement in place that neither company hires people who have worked at the other company during the prior six months.

AM: And I believe when the deal ends, that expands to two years.

SJ: Yeah, we need to check that.

AM: But — at the end of the deal — it becomes ever more significant.

SJ: Or it may survive the deal for two years. Yeah. That may be it.

Q: Disney and Pixar have had a very mature relationship in terms of not hiring people from the other company and we have that in the agreement. I don’t think that there will be any problems there.

So — as we’re modeling out what it costs to produce these films, we should keep the same figures in place.

SJ: Well, our employees do appreciate raises now and then.

AM: And there is a rate of inflation.

SJ: Thank you for joining this call. We know that there is clearly change in the air and some people are disquieted by change but we feel very, very strongly that Pixar is on the right track and the best days are yet to come.

Pretty interesting reading, don’t you think?

Jim Hill is an entertainment writer who has specialized in covering The Walt Disney Company for nearly 40 years now. Over that time, he has interviewed hundreds of animators, actors, and Imagineers -- many of whom have shared behind-the-scenes stories with Mr. Hill about how the Mouse House really works. In addition to the 4000+ articles Jim has written for the Web, he also co-hosts a trio of popular podcasts: “Disney Dish with Len Testa,” “Fine Tooning with Drew Taylor” and “Marvel US Disney with Aaron Adams.” Mr. Hill makes his home in Southern New Hampshire with his lovely wife Nancy and two obnoxious cats, Ginger & Betty.

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Jens Dahlmann of LongHorn Steakhouse has lots of great tips when it comes to grilling

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Sure, for some folks, the Fourth of July is all about fireworks. But for the 75% of all Americans who own a grill or a smoker, the Fourth is our Nation’s No. 1 holiday when it comes to grilling. Which is why 3 out of 4 of those folks will spend some time outside today working over a fire.

But here’s the thing: Though 14 million Americans can cook a steak with confidence because they actually grill something every week, the rest of us – because we use our grill or smoker so infrequently … Well, let’s just say that we have no chops when it comes to dealing with chops (pork, veal or otherwise).

So what’s a backyard chef supposed to in a situation like this when there’s so much at steak … er … stake? Turn to someone who really knows their way around a grill for advice. People like Jens Dahlmann, the Vice President and Corporate Executive Chef for Darden Restaurant’s LongHorn Steakhouse brand.

Given that Jens’ father & grandfather were chefs, this is a guy who literally grew up in a kitchen. In his teens & twenties, Dahlmann worked in hotels & restaurants all over Switzerland & Germany. Once he was classically trained in the culinary arts, Jens then  jumped ship. Well, started working on cruise ships, I mean.

Anyway … While working on Cunard’s Sea Goddess, Dahlmann met Sirio Maccioni, the founder of Le Cirque 2000. Sirio was so impressed with Jens’ skills in the kitchen that he offered him the opportunity to become sous-chef at this New York landmark. After four years of working in Manhattan, Dahlmann then headed south to become executive chef at Palm Beach’s prestigious Café L’Europe.

Jens Dahlmann back during his Disney World days

And once Jens began wowing foodies in Florida, it wasn’t all that long ’til the Mouse came a-calling. Mickey wanted Dahlmann to shake things up in the kitchen over at WDW’s Flying Fish Café. And he did such a good job with that Disney’s Boardwalk eatery the next thing Jens knew, he was then being asked to work his magic with the menu at the Contemporary Resort’s California Grill.

From there, Dahlmann had a relatively meteoric rise at the Mouse House. Once he became Epcot’s Food & Beverage general manager, it was only a matter of time before he wound up as the executive chef in charge of this theme park’s annual International Food & Wine Festival. Which – under Jens’ guidance – experienced some truly explosive growth.

“When I took on Food & Wine, that festival was only 35 days long and had gross revenues of just $5.5 million. When I left Disney in 2016, Food & Wine was now over 50 days long and that festival had gross revenues of $22 million,” Dahlmann admitted during a recent sit-down. “I honestly loved those 13 years I spent at Disney. When I was working there, I learned so much because I was really cooking for America.”

And it was exactly that sort of experience & expertise that Darden wanted to tap into when they lured Jens away from Mickey last year to become LongHorn Steakhouse’s new Vice President and Corporate Executive Chef. But today … Well, Dahlmann is offering tips to those of us who are thinking about cooking steak tips for the Fourth.

Photo by Jim Hill

“When you’re planning on grilling this holiday, if you’re looking for a successful result, the obvious place to start is with the quality of the meat you plan on cooking for your friends & family. If you want the best results here, don’t be cheap when you go shopping. Spend the money necessary for a fresh filet or a New York strip. Better yet a Ribeye, a nice thick one with good marbling. Because when you look at the marbling on a steak, that’s where all the flavor happens,” Jens explained. “That said, you always have to remember that — the higher you go with the quality of your meat — the less time you’re going to want that piece of meat to spend on the grill.”

And speaking of cooking … Before you even get started here, Jens suggests that you first take the time to check over all of your grilling equipment. Making sure that the grill itself is first scraped clean & then properly oiled before you then turn up the heat.

“If you’re working with a dirty grill, when you go to turn your meat, it may wind up sticking to the grill. Or maybe those spices that you’ve just so carefully coated your steak with will wind up sticking to the grill, rather than your meat,” Dahlmann continued. “Which is why it’s always worth it to spend a few minutes prior to firing up your grill properly cleaning & oiling it.”

Photo by Jim Hill

And speaking of heat … Again, before you officially get started grilling here, Jens says that it’s crucial to check your temperature gauges. Make sure that your char grill is set at 550 (so that it can then properly handle the thicker cuts of meat) and your flattop is set at 425 (so it can properly sear thinner pieces of meat).

Okay. Once you’ve bought the right cuts of quality meat, properly cleaned & oiled your grill, and then made sure that everything’s set at the right temperature (“If you can only stand to hold your hand directly over the grill for two or three seconds, that’s the right amount of heat,” Dahlmann said), it’s now time to season your steaks.

“Don’t be afraid to be bold here. You can’t be shy when it comes to seasoning your meat. You want to give it a nice coating. Largely because — if you’re using a char grill — a lot of that seasoning is just going to fall off anyway,” Jens stated. “It’s up to you to decide what sort of seasoning you want to use here. Even just some salt & pepper will enhance a steak’s flavor.”

Then – according to Dahlmann – comes the really tough part. Which is placing your meat on the grill and then fighting the urge to flip it too early or too often.

“The biggest mistake that a lot of amateur cooks make is that they flip the steak too many times. The real key to a well-cooked piece of meat is just let it be, “Jens insisted. “Of course, if you’re serving different cuts of meat at your Fourth of July feast, you always want to put your biggest thickest steak on the grill first. If you’re also cooking a New York Strip, you want to put that one on a few minutes later. But after that, just let the grill do its job and flip your meat a total of three or four times, once every three minutes or so.”

Of course, the last thing you want to do is overcook a quality piece of meat. Which is why Dahlmann suggests that – when it comes to grilling steaks – if you’re going to err, err on the side of undercooking.

“You can always put a piece of meat back on the grill if it’s slightly undercooked. When you over-cook something, all you can do then is start over with a brand-new piece of meat,” Jens said. “Just be sure that you’re using the correct cut of meat for the cooking result you’re aiming for. If someone wants a rare or medium rare steak, you should go with a thicker cut of steak. If one of your guests wants their steak cooked medium or well, it’s best to start with a thinner cut of meat.”

Photo by Jim Hill

As you can see, the folks at Longhorn take grilling steaks seriously. How seriously? Just last week at Darden Corporate Headquarters in Orlando, seven of these brand’s top grill masters (who – after weeks of regional competitions – had been culled from the 491 restaurants that make up this chain) competed for a $10,000 prize in the Company’s second annual Steak Master Series. And Dahlmann was one of the people who stood in Darden’s test kitchens, watching like a hawk as each of the contestants struggled to prepare six different dishes in just 20 minutes according to Longhorn Steakhouse‘s exacting standards.

“I love that Darden does this. Recognizing the best of the best who work this restaurant,” Jens concluded. “We have a lot of people here who are incredibly knowledgeable & passionate when it comes to grilling.”

Speaking of which … If today’s story doesn’t include the exact piece of info that you need to properly grill that T-bone, just whip out your iPhone & text GRILL to 55702. Or – better yet – visit  ExpertGriller.com prior to firing up your grill or smoker later today. 

This article was originally published by the Huffington Post on Tuesday, July 4, 2017

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Brattleboro’s Strolling of the Heifers is a sincere if somewhat surreal way to spend a summer’s day in Vermont

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Some people travel halfway ‘around the planet so that they can then experience the excitement of the Running of the Bulls in Pamplona. If you’re more of a Slow Living enthusiast (as I am), then perhaps you should amble to Brattleboro, VT. Where – over the first weekend in June – you can then join a herd of cow enthusiasts at the annual Strolling of the Heifers.

Now in its 16th year, this three-day long event typically gets underway on Friday night in June with a combination block party / gallery walk. But then – come Saturday morning – Main Street in Brattleboro is lined with thousands of bovine fans.

Photo by Jim Hill

They’ve staked out primo viewing spots and set up camp chairs hours ahead of time. Just so these folks can then have a front row seat as this year’s crop of calves (which all come from local farms & 4-H clubs) are paraded through the streets.

Photo by Jim Hill

Viewed from curbside, Strolling of the Heifers is kind of this weird melding of a sincere small town celebration and Pasadena’s Doo Dah Parade. Meaning that – for every entry that actually acknowledged this year’s theme (i.e. “Dance to the Moosic”) — …

Photo by Jim Hill

… there was something completely random, like this parade’s synchronized shopping cart unit.

Photo by Jim Hill

And for every piece of authentic Americana (EX: That collection of antique John Deere tractors that came chugging through the city) …

Photo by Jim Hill

… there was something silly. Like – say – a woman dressed as a Holstein pushing a baby stroller through the streets. And riding in that stroller was a pig dressed in a tutu.

Photo by Jim Hill

And given that this event was being staged in the Green Mountain State & all … Well, does it really surprise you to learn that — among the groups that marched in this year’s Strolling of the Heifers – was a group of eco-friendly folks who, with their  chants of “We’re Number One !,” tried to persuade people along the parade route not to flush the toilet after they pee. Because – as it turns out – urine can be turned into fertilizer.

Photo by Jim Hill

And speaking of fertilizer … At the tail end of the parade, there was a group of dedicated volunteers who were dealing with what came out of the tail end of all those cows.

Photo by Jim Hill

This year’s Strolling of the Heifers concluded at the Brattleboro town common. Where event attendees could then get a closer look at some of the featured units in this year’s parade…

Photo by Jim Hill

… or perhaps even pet a few of the participants.

Photo by Jim Hill

But as for the 90+ calves who took part in the 2017 edition of Strolling of the Heifers, once they reached the town common, it was now time for a nosh or a nap.

Photo by Jim Hill

Elsewhere on the common, keeping with this year’s “Dance to the Moosic” theme, various musical groups performed in & around the gazebo throughout the afternoon.

Photo by Jim Hill

While just across the way – keeping with Brattleboro’s tradition of showcasing the various artisans who live & work in the local community – some pretty funky pieces were on display at the Slow Living Exposition.

Photo by Jim Hill

All in all, attending Strolling of the Heifers is a somewhat surreal but still very pleasant way to spend a summer’s day in Vermont. And that’s no bull.

Photo by Jim Hill

Well, that could be a bull. To be honest, what with the wig & all, it’s kind of hard to tell. 

This article was originally published by the Huffington Post on Sunday, June 4, 2017

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Looking to make an authentic Irish meal for Saint Patrick’s Day? If so, then chef Kevin Dundon says not to cook corned beef & cabbage

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Let’s at least start on a positive note: Celebrated chef, author & TV personality Kevin Dundon – the man that Tourism Ireland has repeatedly chosen as the Face of Irish Food – loves a lot of what happens in the United States on March 17th.

“I mean, look at what they do in Chicago on Saint Patrick’s Day. They toss all of this vegetable-based dye into the Chicago River and then paint it green for a day. That’s terrific,” Kevin said.

But then when it comes to what many Americans eat & drink on St. Paddy’s Day (i.e., a big plate of corned beef and cabbage. Which is then washed down with a mug of green beer) … Well, that’s where Dundon has to draw the line.

Irish celebrity chef Kevin Dundon displays a traditional Irish loin of bacon with Colcannon potatoes and a Dunbrody Kiss chocolate dessert. Photo by Tom Burton. Copyright Disney Enterprises, Inc. All rights reserved

“Green beer? No real Irishman would be caught dead drinking that stuff,” Kevin insists. “And as for eating corned beef & cabbage … That’s not actually authentic Irish fare either. Bacon and cabbage? Sure. But corned beef & cabbage was something that the Irish only began eating after they’d come to the States to escape the Famine. And even then these Irish-Americans only began serving corned beef & cabbage to their friends & family because they had to make do with the ingredients that were available to them at that time.”

And thus begins the strange tale of how corned beef & cabbage came to be associated with the North American celebration of Saint Patrick’s Day celebration. Because – according to Dundon – beef just wasn’t all that big a part of the Irish diet back in the 19th century.

To explain: Back in the Old Country, cattle – while they were obviously highly prized for the milk & cheese that they produced – were also beasts of burden. Meaning that they were often used for ploughing the fields or for hauling heavy loads. Which is why – back then — these animals were rarely slaughtered when they were still young & healthy. If anything, land owners liked to put a herd of cattle on display out in one of their pastures because that was then a sign to their neighbors that this farm was prosperous.

“Whereas pork … Well, everybody raised pigs back then. Which is why pork was a staple of the Irish diet rather than beef,” Dundon continued.

So if that’s what people actually ate back in the Old Country, how then did corned beef & cabbage come to be so strongly associated with Saint Patrick’s Day in the States.? That largely had to do with where the Irish wound up living after they arrived in the New World.

“When the Irish first arrived in America following the Great Famine, a lot of them wound up living in the inner city right alongside the Germans & the Jews, who were also recent immigrants to the States. And while that farm-fresh pork that the Irish loved wasn’t readily available, there was brisket. Which the Irish could then cure by first covering this piece of meat with corn kernel-sized pieces of rock salt – that’s how it came to be called corned beef. Because of the sizes of the pieces of rock salt that were used in the curing process – and then placing all that in a pot of water with other spices to soak for a few days.”

And as for the cabbage portion of corned beef & cabbage … Well, according to Kevin, in addition to buying their meat from the kosher delis in their neighborhood, the Irish would also frequent the stores that the German community shopped in. Where – thanks to their love of sauerkraut (i.e., pickled cabbage) – there was always a ready supply of cabbage to be had.

“So when you get right down to it, it was the American melting pot that led to corned beef & cabbage being found in the Irish-American cooking pot,” Dundon continued. “Since they couldn’t find or didn’t have easy access to the exact same ingredients that they had back in Ireland, Irish-Americans made do with what they could find in the immediate vicinity. And what they made was admittedly tasty. But it’s not actually authentic Irish fare.”

Mind you, what Kevin serves at Raglan Road Irish Pub and Restaurant at Disney Springs (which – FYI – Orlando Magazine voted as the area’s best restaurant back in 2014) is nothing if not authentic. Dundon and his team at this acclaimed gastropub pride themselves on making traditional Irish fare and then contemporized it.

Copyright Disney Enterprises, Inc. All rights reserved

“Take – for example – what we serve here instead of corned beef & cabbage. Again, because it was pork – rather than beef – that was the true staple of the Irish diet back then, what we offer instead is a loin of bacon that has been glazed with Irish Mist. That then comes with colcannon potatoes. Which is this traditional Irish dish that’s made up of mashed potato that have had some cabbage & bacon mixed through it,” Kevin enthused. “This heavenly ham – that’s what we actually call this traditional Irish dish at Raglan Road, Kevin’s Heavenly Ham – also includes some savory cabbage with a parsley cream sauce as well as a raisin cider jus. It’s simple food. But because of the basic ingredients – and that’s the real secret of Irish cuisine. That our ingredients are so strong – the flavors just pop off the plate.”

Which brings us to the real challenge that Dundon and the Raglan Road team face every day. Making sure that they actually have all of the ingredients necessary to make this traditional-yet-contemporized Irish fare to those folks who frequent this Walt Disney World favorite.

“Take – for example – the fish we serve here. We only used cold water fish. Salmon, mussels and haddock that have been hauled out of the Atlantic, the ocean that America and Ireland share,” Kevin stated. “Not that there’s anything wrong with warm water fish. It’s just that … Well, it doesn’t have the same structure. It’s a softer fish, which doesn’t really fit the parameters of Irish cuisine. And if you’re going to serve authentic food, you have to be this dedicated when it comes to sourcing your ingredients.

Copyright Mitchell Beazley. All rights reserved

And if you’re thinking of perhaps trying to serve an authentic Irish meal this year, rather than once again serving corned beef & cabbage at your Saint Patrick’s Day Feast … Well, back in September of last year, Mitchell Beazley published “The Raglan Road Cookbook: Inside America’s Favorite Irish Pub.” This 296-page hardcover not only includes the recipe for Kevin’s Heavenly Ham but also it tells the tale of how this now-world-renown restaurant wound up being built in Orlando.

On the other hand, if you happen to have to the luck of the Irish and are actually down at The Walt Disney World Resort right now, it’s worth noting that Raglan Road is right in the middle of its Mighty St. Patrick’s Day Festival. This four day-long event – which includes Irish bands and professional dancers – stretches through Sunday night. And in addition to all that authentic Irish fare that Dundon and his team are cooking up, you also sample the fine selection of beers & cocktails that this establishment’s four distinct antique bars (each of which are more than 130 years old and were imported directly from Ireland) will be serving. Just – As ucht Dé (That’s “For God’s Sake” in Gaelic) – don’t make the mistake of asking the bartender there for a mug of green beer.

“Why would anyone willingly drink something like that?,” Dundon laughed. “I mean, just imagine what their washroom will look like the morning after.”

This article was originally published by the Huffington Post on Friday, March 17, 2017

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