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ANIMATION WORLD MAGAZINE - ISSUE 4.3 - JUNE 1999

Business

Katzenberg vs Disney: Another Round. In opening statements in the second phase of a $250 million breach-of-contract lawsuit, Jeffrey Katzenberg's lawyer Bert Fields presented a series of memos to bolster his argument that Disney concocted a contract argument over an incentive bonus to deprive Katzenberg of the money he was owed for making the Disney company a success while he was the chief of Disney's film entertainment division. During Katzenberg's first few years at Disney, operating income went from $2.3 million in 1984 to $186.3 million in 1988. He oversaw the development of 700 projects, including TV shows and movies like Sister Act, The Lion King, Aladdin, Beauty And The Beast and The Little Mermaid. Katzenberg joined Disney in 1984, under a success-based contract. In 1988, he signed a renegotiated contract, extending it to 1996. The new contract included an early-out option that would let him leave in 1994. Michael Eisner, the Disney chairman, claimed Katzenberg agreed to forfeit his incentive bonus if he left in 1994 or if Disney let him go. Katzenberg left in 1994 when Eisner reportedly refused to make him the company's No. 2 man after Frank Wells was killed in a helicopter accident. Katzenberg went on to become the "K" in DreamWorks SKG, with Steven Spielberg and David Geffen. The attorney contends Katzenberg is entitled to 2% of the estimated income generated by the 700 products he developed at Disney, including music and merchandise spinoffs. He said the money was to be paid in a lump sum two years after he left the company. Disney general counsel Louis Meisinger said Disney agreed, during the first phase of the trial, to pay Katzenberg some money. At issue in this second phase is how much and what kinds of merchandise and product should be included in the tally.

Disney Reports Second Quarter Earnings. Walt Disney Co.'s earnings plunged almost 41% in its second quarter. Although Disney said it expects improvement in the second half of the year, it still plans to review its operations in a bid to make them more efficient and increase cash flow. The Burbank, California-based media and entertainment giant turned in net income of $226 million, or 11 cents a diluted share, for the quarter ending March 31, compared with $384 million, or 18 cents a diluted share, in the same period a year ago. Excluding the impact of its 1998 acquisition of a 43% interest in Infoseek Corp., Disney said earnings fell 30% to $269 million, or 13 cents a diluted share. Revenue rose about 5% to $5.51 billion. Revenue from the theme parks and resorts unit rose 13% to $1.4 billion, while revenue from Disney's creative-content unit remained at $2.4 billion. Broadcasting revenue increased 8% to $1.7 billion and operating income advanced 9% to $261 million, boosted by increased network prime-time advertising and subscriber growth at ESPN and the Disney Channel, the company said.

A Bug's Life. Courtesy of and © Disney Enterprises, Inc./Pixar
Animation Studios. All rights reserved.

Pixar Announces First Quarter Decline In Revenues. Pixar Animation Studios (NASDAQ:PIXR) has announced financial results for the first quarter ended April 3, 1999. Revenues for the first quarter were $3.4 million compared with $5.0 million in the first quarter of 1998. Net income for the first quarter was $900,000 compared with $3.8 million for the first quarter of 1998. Diluted earnings per share for the first quarter were $0.02 compared with $0.08 for the first quarter of 1998.

The decline in revenues comes despite the success of A Bug's Life which has earned $162 million in domestic box office receipts and $190 million in international box office receipts, totaling $352 million, and approaching Toy Story's global box office receipts of $354 million. A Bug's Life has now become one of the top five grossing animated films of all-time. First quarter revenues include a small amount of royalties from A Bug's Life interactive products. Under the co-production agreement with The Walt Disney Company, Pixar's profit sharing from A Bug's Life will commence upon Disney's recovery of all marketing and distribution fees and costs. Upcoming film releases include Toy Story 2, which is targeted for release this November and Pixar's fourth film, which is currently targeted for release in summer 2001.

Macromedia Announces Revenues Increase.
Macromedia (NASDAQ:MACR) has announced a 47% increase in revenues for the fourth quarter ended March 31, 1999. Revenues for the fourth quarter were $44,097,000 as compared with $30,012,000 in the same period a year ago. Gross profit increased 44% to $39,867,000 as compared with $27,653,000 in the fourth quarter a year ago. Net income rose to $7,343,000, or $0.16 per share, during the fourth fiscal 1999 quarter, compared to net income of $1,991,000, or $0.05 per share, a year ago. Revenues for the fiscal year ended March 31, 1999 increased 33%, totaling $149,886,000 as compared with $113,086,000 a year ago. For the twelve-month period, gross profit increased 38% to $135,600,000 as compared with $98,089,000 in the same period a year ago. Net income for the fiscal year reached $19,784,000, or $0.44 per share, as compared with a net loss of $6,186,000, or $0.16 per share, in fiscal year 1998. "1999 was a successful year for Macromedia as the acceptance of products like Dreamweaver, Flash, Fireworks, Generator and Pathware accelerated our growth," said Rob Burgess, Macromedia's chairman and chief executive officer. "Our efforts this past year have been about delivering a new generation of software to enable the content creators to add life to the Web. The next step is to dramatically improve the experience for users of the Web to enjoy this rich, compelling content. We are very excited about this next phase which we will be launching this quarter."

Read about Macromedia's newest versions of Dreamweaver and Fireworks in Jeff Williams' "Macromedia's Latest: Making the Web Easy."

Iwerks Reports Third Quarter Results. Iwerks Entertainment Inc. continued its improved operating performance in fiscal 1999 by reporting revenues of $10,423,000 for the third quarter ended March 31, 1999, representing a 133 percent improvement over the same period last year when it reported revenues of $4,483,000. The third-quarter net loss of $389,000, or 3 cents per share, compared favorably with the prior year's net loss of $5,077,000, or 42 cents per share. EBITDA [earnings before interest, taxes, depreciation, depletion, amortization and items classified as other expense, net] (a) for the quarter was $1,234,000, compared with a loss of $3,938,000 for the same period last year. For the nine months ended March 31, 1999, the company had revenues of $26,445,000 vs. $18,524,000 for the same period the prior year, a 43 percent increase. EBITDA for the nine months ending March 31, 1999, was also positive, totaling $1,431,000, compared to a loss of $6,042,000 for the same period last year. "This was our fourth consecutive quarter of improved earnings over the prior quarter, which validates the key objectives of our strategic plan for returning the company to profitability," said Charles Goldwater, president and CEO. The quarter was highlighted by the company's recent announcements of several new domestic and international Large Format theater projects, including a Giant Screen theater project in the United Kingdom with Warner Village Cinemas; a new ride-simulator project in Okinawa, Japan; and 3D upgrades to existing Iwerks attractions at a number of Six Flags and Paramount Parks venues. Iwerks Entertainment, founded in 1986, is one of the world's leading full-service providers of high-tech entertainment systems, support services and film-based software in Large Format, ride-simulation and specialty-venue attractions.


Note: Readers may contact any Animation World Magazine contributor by sending an e-mail to editor@awn.com.