DreamWorks Animation to sell, then lease back, Glendale campus
DreamWorks Animation is selling its plush, Tuscany-style campus, long a source of pride among the studio’s Glendale employees and a symbol of its once vaunted position as an industry powerhouse, the Los Angeles Times reports.
Studio executives told Wall Street analysts that the company signed a $185-million deal to sell the lot to an undisclosed buyer. DreamWorks will then lease back the 13-acre property dotted with oaks, olive trees and a koi-filled pond.
The decision is among a series of cost-cutting steps aimed at shoring up the studio’s balance sheet.
“Having a large unencumbered piece of real estate on the balance sheet just doesn’t make sense,” Chief Financial Officer Fazal Merchant said in a call with analysts.
DreamWorks posted a loss of $263.2 million in the fourth quarter, as the company was buffeted by restructuring costs and impairment charges from its recent film releases.
But Chief Executive Jeffrey Katzenberg stressed that the company was setting the stage for a comeback.
“Getting the feature film business back on track is my No. 1 priority,” Katzenberg told analysts. “Our No. 1 priority for 2015 is to focus all of our creative resources on delivering hit films.”
Katzenberg touted rapid growth in merchandise sales, the YouTube teen network AwesomenessTV, and television programming, which is expected to generate up to $250 million in revenue this year.
The message, however, didn’t sway Wall Street. DreamWorks shares, which closed Tuesday at $21.13, dropped 9% in after-hours trading. Investors were apparently rattled after the studio said 2015 would probably be a “break even” year because it is releasing only one movie, “Home” on March 27.
DreamWorks said it lost $3.08 per share in the quarter ended Dec. 31, compared with a profit of 20 cents a share a year earlier. The company’s fourth-quarter revenue of $234.2 million increased 15%.
The results were hurt by $57.1 million in impairment charges, mostly related to the poor performance of recently released “The Penguins of Madagascar” and last spring’s “Mr. Peabody and Sherman,” for which DreamWorks already took a $57-million write-down last year.
The results also included $54.6 million in charges related to employee termination costs and other contractual obligations. DreamWorks also took $155.5 million in write-offs from unreleased films, including “B.O.O.” and “Monkeys of Mumbai,” as well as other charges, the company said.
The results missed Wall Street projections. Analysts surveyed by Thomson Reuters estimated a net loss of $3.01 a share and revenue of $246 million in the quarter.
To improve the studio’s liquidity, executives said the company had increased its credit line to $450 million, up from $400 million.
Last month, DreamWorks announced it would cut 500 jobs, shake up top management and scale back film production after a string of box-office misfires. The moves were part of a sweeping restructuring of the studio’s core feature animation business that has suffered mounting financial challenges in recent years.
Katzenberg said job cuts were a painful but necessary step to improve the company’s bottom line. He also touted the studio’s new management. Veteran producers Bonnie Arnold and Mireille Soria have taken over as co-presidents of feature animation, replacing longtime executive Bill Damaschke.
“We’ve done a top to bottom review of every single project,” Katzenberg said.
-- Richard Verrier, Los Angeles Times