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DREAMWORKS ANIMATION FINANCIALMANAGEMENT ANALYSIS SiedeColeman,DavidFerialdi,ChrisRamirez,ChinveeLim,IsaacRosales
CONTENTS
Overview
CorporateGovernance
FinancialAnalysis
WorkingCapitalManagement
CorporateDebt
CostofCapital
StockValuations
Mergers&Acquisitions
MultinationalOperations
CorporateTaxation
InvestorRelations
ExecutiveSuggestion
MAJORCOMPETITORS
DWA'scompetitorsareinvolvedinbothanimationandlive‑action•
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COMPOSITIONOFBOARDMEMBERS
COMPOSITIONOFBOARDMEMBERS
COMPOSITIONOFBOARDMEMBERS
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GOVERNANCERECOMMENDATIONS
Requireindependentdirectorstodecideexecutivecompensationandnewdirectornominations
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JeffreyKatzenbergandDavidGeffencombinedcontrol68%ofthevotingpowerandasaresultthatcouldbeperceivedasaconflictofinterest/weaknessalthoughitislegal.
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Anotherweaknessconcerns"grayareas"regardingboardmembers'independence.Theboarddetermineswhetherindependenceismaterialornot.Forexample,formerboardmemberJudsonGreenhadassociationswithcompanies(HewittAssociates,Nokia)thatwereengagedinbusinesswithDreamWorksandtheboarddeemedthisconnectionsimmaterial.
Createanexecutivecommitteetoimplementtrueboardmemberindependenceand"controlledcompanyexemption"onmembervoting
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FINANCIALANALYSIS
AREASOFSIGNIFICANTWEAKNESS
Netincomedecreasedfromyear2011to2012whileSG&Aincreasedfrom2011to2012.
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Thedecreaseinnetincomefrom2011to2012isdueinparttothedeclineinDVDunitssold,whichacceleratedbetweentheyears(AnnualReport2011,pg15).
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WORKING CAPITAL MANAGEMENT
WORKINGCAPITALMANAGEMENT
RECOMMENDEDACTIONS
Inordertoreducethecashconversioncycle,DreamWorksneedstosignificantlyreduceitsinventory.Thefilmindustryisveryvolatileandprojectingdemandforcertainmaterialmaybedifficult.DreamWorkshashighinventoryrepresentativeofproductionscosts.Asrevenueisearnedonreleases,DreamWorkscapitalizesthecostsassociatedwitheachoftheirmoviesanditsamortizedovera10‑yearperiod.Iftheyrestructuredthisprocessthentheirinventoryconversionwouldimprovesignificantlythusimprovingtheircashconversioncycle.
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Inregardstoearningsmadebydistributors,DreamWorkswillfurtheramortizeinventoryandcostofproductionasdistributorsmakeearningsandcontributionsarepaidtoDreamWorks.
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RECOMMENDEDACTIONS
However,therehasbeenarecenttrendformoredigitalcontentwherecustomersareconsumingcontentattheirowndemand,whenevertheywant,andhasslowedgrowthintangibleproducts.Lionsgateontheotherhandhas0inventory,meaningtheydon’thaveanytangibleproductionsandoutsourceinventoryandcontentforothercompanies.Therefore,DreamWorksshouldfocusonimplementingtheircontentintoamoredigitalform,soastocreateareal‑time,build‑to‑ordersystemfordemand,whichcanbeintangible“inventory.”
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ItisalsoimportanttonotethatDreamWorks’DaysPayableOutstanding(DPO)ishigherat220comparedtoLionsgate149DPO.DreamWorksisinabettercashpositionandhasalotmorenegotiatingpowerandcandelaypaymentstoitssuppliers.
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CORPORATE DEBT
DEBTREVIEW
DreamWorksAnimationSKGonlyhasdebtin2012.Mostoftheliabilitiesareduetoaccountspayable.ThematuritydateofthisrevolvingcreditfacilityisAugust2017.AsoftheNewCreditAgreement,DreamWorksisallowedtohaveoutstandingborrowingupto$400millionatanyonetime.
DEBTREVIEW
Payacommitmentfeeonundrawnamountsatanannualrateof0.375%.
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Interestonborrowedamounts(perdraw)•
Lendingbank'sbaserate+1.50%perannum.▪
LondonInterbankOfferedRate(LIBOR)+2.50%perannum.▪
DEBTREQUIREMENT
BorrowingssecuredbyallDreamWorksassets•
Maintainaspecifiedratiooftotaldebttototalcapitalizationratio
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Maintainaspecifiedratioofnetremainingultimatestofacilityexposure
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ProhibitDWAtakingcertainactions,suchasgrantingliens,enteringintoanymerger,modifyingorganizationaldocuments,etc.
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ProhibitDWApayingdividendsonitscapitalstock•
DEBTTOEQUITY
Debt/EquityRatio:2012:$165,000/$1,345,616=0.12
DebtInstruments:Notespayableisthelargestportionandasmallportioniscurrentliabilities.
Bank:J.P.MorganChase
ISDEBTTOEQUITYRATIOAPPROPRIATE?
YESDWA'sabilitytoremaindebtfreeduringateeteringeconomyhasallowedthecompanytoavoidinterestpaymentsandexpandits
assets,announcingathemeparkandadditionalstudioopeningthispastyear.
WILLDREAMWORKSMEETTHEIROBLIGATIONS?
YESTheinterestexpenseismuchlowerthancashandcashequivalents.
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DreamWorksratedasAAAcreditratingadecadeago,yet,todaythecompanycreditratingstillA+.
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DEBTRECOMMENDATIONS
Thecompanyisnottakingenoughadvantagefromtheirfinancialleverage.Sincedebtischeaperthanequity,takeonsomedebttopurchasebacksomestock.Thisisanopportunetimeconsidering,stockpricesareattheirall‑timelowest,givingthecompanyanopportunitytoresellthestocktheyreceivefromtreasury.
COSTOFCAPITAL
DWAStockPrice:$19.17
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Sharesoutstanding:84,228
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PreferedStock:0
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Debt:$165,000•
CommonEquity:84,228*19.17=1,614,6501614,650/1,779,650=91%
Debt:165,000/1,779,650=9%
WHYDREAMWORKSREPORTNETLOSS?
Movieindustryisvolatile.•
Thereisnopredictionofafilm'ssuccess.•
Amajorityofafilm'srevenuecomesfromweekendboxofficereleases.Competitiveenvironmentorlowturnoutcangreatlymakeanegativedifferenceingrossrevenue.
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PiracyiscommonoverseasandinUnitedStates.•
Familyfilmsuccessesaredependentonfranchises‑wellknownstorieswillattractlargeraudiencesthanoriginalstoriesifmarketedincorrectly.
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DreamWorkssubsidizesmealsfortheiremployeesattheStudio,whichKatzenbergrefusestodecreaseevenintimesofshrinking
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WHYPRODUCTCOSTDECLINE?
TheirearningsreportstatesthatDreamWorkswilladoptanewtechnologythatwillreducetheircostsby$120millionpermovie.
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InpartneringwithTwentiethCenturyFoxdistribution,DreamWorkshasalsolimitedit'sreleaseslateto3filmsperyear,whereasthecompanyaimedfor4filmsin2013and2014beforethepartnership.
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STOCKVALUATIONWORKSHEET
MorningStarStockAnalysts1.SalesgrowthratefromMorningStar,webelievethisworksheetismorepragmatic.
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Bloomberg2.SalesgrowthratefromBloombergterminal.▪
Althoughthesharepriceishigher,itisnotconsistentwithstockanalystsprediction.
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Salesgrowthrateistoofluctuate.▪
FUTUREFORECASTOFCASHFLOWS
$17.40basedonthefutureforecastofcashflow.•
Salesgrowthtoaverage1%annuallyforthenextfiveyears.•
Costofsalesas80%,productcostwilldecrease.•
Producemoremovieseveryyear.•
Releaseatleastonesequelsfilmeveryyear(lessrisky,increaseprofitthroughhomevideosales,merchandising,andlicensing)
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Averageoperatingprofitmarginincreaseto20%forthenext5yearsbecauseofincreaseinfilmrelease.
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Cashconversioncycleshouldbedecreaseasthedaysofinventoryisveryhigh,ifcashconversioncycledecreas,stockpricewillincrease.
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FUTURECASHFLOWSANALYSIS
Fairvalueestimatesis$17pershare,astheythinkthatthecompany'srevenuewillbemorestablethaninthepast.
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Revenuegrowthtoaverage1%annuallyforthenext5years.•
Sales4%in2013.•
Averageoperatingprofitmargindecreaseto15%forthenextfiveyearsbecauseofthedeclineinthehomevideomarketdragonprofitability.
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Upsidecase Downsidecase
$26persharefairvalue▪7%averageannualgrowth▪21%averageoperatingmargins
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$14persharefairvalue▪2%averageannualsalesdecrease
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14%averageoperatingmargins
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DWASHAREPRICECONSISTENTWITHSTOCK ANALYSTSPREDICTION
DWA'ssharepriceisconsistentwithStockanalystsprediction•
TheuncertaintransitionfromDVDstodigitaldistributiondragonprofitability.NumberofDVDssales
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Thefilm'slibraryofcontentandfranchisescouldmakeitanattractivetakeovertarget.
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Reshapedthebusinessbycreatingmorefilmsperyear.•
Releaseatleastonesequelfilmeveryyear.Forexample,2filmsin2013,3filmsin2014,4filmsin2015and3filmsin2016.
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DWASHAREPRICECONSISTENTWITHSTOCK ANALYSTSPREDICTION
PartnershipwithaRussianThemeParkmakertolicensetheircharactersforathemepark.DWAdoesn'thaveexpense,onlyrevenue.
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Inventorydecrease,carryingthecostofTheCroodsandTurbo.•
PopularityofcheaprentaloptionsfromNetflixandRedbox.However,partnershipwithNetflixistoreleaseananimatedshowbasedonTurboexclusivelyforNetflix.
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Thecomputer‑generatedanimationtechnologieslowertheentrybarriers.
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HOWTOMAXIMIZEDWA'SSHAREPRICE?
Increasetotalrevenue,tonothavehighdependencyonDVDsalesandpenetratethedigitalmediamarket.Forinstance,DreamWorksacquiredYouTubechannelAwesomenessTVonMay1st,2013thatsuccessfullyentertonextgenerationmediaplatform.DreamWorkshasfurtherenteredthisplatformwithitspartnershipwithNetflixtocreateoriginalcontentbasedon"Turbo",anemergingDreamWorksfranchise.
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DreamWorkscanoutsourceportionsoftheirproductiontodecreasethetimetoproduceananimatedfilm.
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Outsourcingproductiontoothercountriescanalsoprovideacheaperalternativetoproductionscosts.
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HOWTOMAXIMIZEDWA'SSHAREPRICE?
Increasecompanydebtfinancing.DreamWorksAnimationishighlyfundingthecompanybyusingEquityfinancing;however,DreamWorksdefinitelyshouldbalancetheircostofcapitalbyincreasingtheirdebtfinancingtodecreaseWeightedAverageCostofCapital(WACC).
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Decreasethecashconversioncycledaysbydecreasingtheinventory.AfterDreamWorkslaunchesanewfilm,ittakesaroundthreeyearstowriteofftheinventories.Thus,findingawayforDreamWorkstoreturnthecashfasterthanthreeyears.
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MERGERS& ACQUISITIONS
CLASSICMEDIA
ClassicMediaacquiredfor$155million•
ClassicMediahasoneofthemostrobustportfoliosofintellectualpropertyfeaturingmanyofthebestknownandmostenduringfranchisesinalloffamilyentertainment
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TheacquisitioncombinesDWA’shit‑drivenbusinessandClassicMedia’sextensiveandsustainablelibraryrevenuestream
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CLASSICMEDIA
Itseemstooearlytotellifthe$155millionpricetagwastoohigh;however,itseemsfavorabletoshareholdervalueformanyreasons.
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ClassicMediaisoneofthelargestlibrariesofanimatedcharacters.Thisbringrevenueopportunitiesinformoncharacterrecreation,licensing,merchandise,andadaptations.
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Inaddition,thelibraryofcharactersisexpectedtoriserevenuestreamduringtheholidayseason,whichisagreatassetinsuchavolatileindustry.
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Itseemstooearlytovaluebecauseonlyoneholidayseasonhaspassedsincetheacquisition.Theirstockpricetooksharpdeclinefollowingtheacquisitionandhasslowlyincreasedsincethen.
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CLASSICMEDIA
Astudio’sbiggestassetistheirlibraryofcontent
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TheadvantageofhavingatheentirelibraryofClassicMediacomesfromanewrevenuecreationopportunityfromstreamingservices
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ThisisespeciallyimportantinthenewstreamingmodelofNeflix,Hulu,Amazon,Vudu,etc.Itisverysignificantinanerawhereallthestreamingcompaniesareallcompetingtohaveexclusiveaccesstolibrarycontent
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ORIENTALDREAMWORKS
February,2012:The$350millionjointventurebetweenChinaMediaCapital&ShanghaiMediaGroup&ShanghaiAllianceInvestment,Ltd
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DreamWorkstocreateandhave45.45%equityinOrientalDreamWorks,anewanimationcompanythatwillfocusprimarilyoncreatingoriginalfilmandtelevisionanimationcontentforChinaandtherestoftheworld.Theother55%willbesplitamongtheChinesepartners
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JointventureispositionedtobetheleadingChina‑focusedbased•
ORIENTALDREAMWORKS
Thisjointventureistooearlytotellbutshouldbepositiveforshareholders.
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ChinahasstrongboxofficerevenuesandisfairlyuntappedintheHollywoodmarket.
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PartnershavealsobeenproventobeleadingentertainmentfirmsinChinesemarket.
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ORIENTALDREAMWORKS‑DREAMCENTER
PartnersadditionallyagreedondevelopmentofDreamCenterinAugust2012,aShanghaiEntertainmentDistrictprojectcosting$3.1billion.
DreamCenterwillcoversixlargecityblocksandwillstrengthenthenation’smediaindustrywhilesatisfyingthedemandingtastesofthegrowingmiddleclass.
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Itwillbecomeanentertainmentzonefeaturingtheworld’slargestIMAX,andamultitudeoftheaters
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FLUCTUATIONSINSTOCKPRICEAFTERCLASSIC MEDIA
DWA'ssharepricedeclinedafterClassicMediaacquisition.Thisisforseveralreasons:
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1.Thecharactersbeingacquiredthroughthisdealareolder(most“datebacktothe1950s”)andpreviousattemptstorelaunchthesecharacters(Speedracer,Rocky&Bullwinkle,etc.)were“largedisappointments”
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2.ClassicMediawasconsideredanovervaluedacquisition.Inthebiddingprocess,DWAfaroutbidtheotherprospectivebuyers,andthefinalpurchasepricewasover8timestheactualvalueof
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PROFITABILITYIMPROVEMENTTHROUGH ACQUISITIONS
TheClassicMediaacquisitionwillbringrecurringrevenueeachholidaywithoutadditionalcosts.NewgraphictechnologyadoptionwillsaveDWA$120Mpermovie+decreasedserviceandoverheadlabor.
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ClassicMediaaswellaspotentialTVlicensingrevenueinfutureyearsestimatesfairvalueto$20persharefrom$18aftermakingpositiveadjustmentsforfuturecashflow.
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MULTINATIONAL OPERATIONS
INTERNATIONALSUMMARY ChinaInShanghai,China,DWAhasformedajointventurecalledOrientalDreamWorkswithseveralChinesecompanies.Thisventurewill“conductsignificantoperationsinChina,includingthedevelopmentandexploitationoforiginalcontent.”*DWAhasalsojoineditsChinesepartnersforthereleaseofanentertainmentdistrictin2016,withatotalinvestmentamountof20billionyuan($3.14billion).IndiaInBangalore,India,DWAhasastudiowithabout200artistsandproductionstaff.ThecompanyhaspartneredwithThomson/Technicolortobuildan“animationenterprise.“RussiaDWAhaslicenseditscharacterstoRegionsGC,aRussiancompanywithplanstobuildthemeparksinMoscow,St.Petersburg,andYekaterinburgLondon,EnglandOfficeobtainedthroughClassicMedia *DWA201210‑K(FiledFeb27,2013),
IDENTIFYANDANALYZE
TheatricalDistributiongrowthrates(fromthe201210Kreportpage37).
Domestic49%to56%•
International37%to44%•
INTERNATIONALISSUES PoliticalTheinstabilityofforeigneconomiesandgovernmentswarandactsofterrorism
SocialDifferingculturaltastesandattitudes,includingvariedcensorshiplawsandtheregulationofmediabusinesses
RegulatorytheForeignCorruptPracticesActandsimilarlawsregulatinginteractionsanddealingswithforeigngovernmentofficialsotherlawsandpoliciesaffectingtrade,investmentandtaxes,includinglawsandpoliciesrelatingtotherepatriationoffundsandwithholdingtaxesandchangesintheselawsdifferingdegreesofprotectionforpatentrightsandotherintellectualpropertyrights *DWA201210‑K(FiledFeb27,2013),
INTERNATIONALISSUES(CONT.)
RISKS:Successisdependentonaudienceacceptanceofourfilms,whichisextremelydifficulttopredictand,therefore,inherentlyrisky.Limitednumberofreleaseseachyear.Revenuecomesfromasinglesource,productionofanimatedfamilyentertainment.Animatedfilmsareexpensivetoproduce;uncertaintiescanleadtofilmsthatareabandonedordelayed.Oursuccessdependsoncertainkeyemployees(SuchasJeffreyKatzenburg)
DWAiscurrentlyintheprocessofdevelopinganumberofprojectsthatarenotfeaturefilms,whichwillinvolveupfrontandongoingexpensesandmaynotultimatelybesuccessful.
*DWA201210‑K(FiledFeb27,2013),
INTERNATIONALISSUES(CONT.) Ourhomeentertainmentbusinessisexperiencingsignificantchangesasaresultofrapidtechnologicalchangeandshiftingconsumerpreferencesandbehavior.Piracyofmotionpictures,includingdigitalandInternetpiracy,maydecreaserevenuereceivedfromtheexploitationofourfilms.
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WearedependentonFOXandParamountforthedistributionandmarketingofourfeaturefilmsandrelatedproducts.
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Wedependonourdistributorstoremitmostofourrevenueandinformationtous
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FoxandParamountdistributeourfeaturefilmsandrelatedproducts,andtheresponsibilityfordistributingandpromotingourfilmfranchiseswillbesplitbetweenFoxandParamount
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*DWA201210‑K(FiledFeb27,2013),
INTERNATIONALISSUES(CONT.) Marketingcostshavesignificantlyincreasedandmayincreaseinthefuture,
makingitmoredifficultforafilmtogenerateaprofitorcompeteagainstotherfilms.Wecompeteforaudiencesbasedonanumberoffactors,manyofwhicharebeyondourcontrol.GlobaleconomicconditionsadverselyaffecttheprofitabilityofourbusinessTheseasonalityofourbusinessescouldexacerbatenegativeimpactsonouroperations
OurChinaJointVenturefacesrestrictionsinChinaandmaynotsucceed
MediaandentertainmentbusinessesinChinaarecurrentlysubjecttoavarietyofrestrictions,includingprohibitionsontheconductofcertainactivitiesbyforeign‑ownedentities.
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TherearerestrictionsontherepatriationoffundsearnedinChina.•
Therecanbenoassurancesthatthejointventurewillbeabletoobtaintheappropriateauthorizationstoengageinallcontemplatedaspectsofitsbusinessor,ifsuchlicensesareobtained,thatthejointventurewillbesuccessful
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*DWA201210‑K(FiledFeb27,2013),
SHAREHOLDERVALUE
DreamWorksAnimationisenhancingitsshareholdervalueinitsinternationaloperationsbyenlargingitsfilmlibrary.OntheIncomestatement,theDWARevenuehasincreasedandacloserexaminationrevealsthatamajorityoftherevenuegeneratedbythe“Library”categorywasearnedprimarilyintheinternationaltelevisionmarketandworldwidehomeentertainment.
EFFECTIVETAXRATE
DWAlossbeforeincometaxesfortheyearendedDecember31,2012,thecompanyeffectivetaxratewaslessthanthe35%statutoryfederaltaxrateduetoanincreaseintheirforeignvaluationallowance.Inaddition,DWA’sabilitytobenefitfromcertainprioryeartaxdeductionsandthenettaxbenefitsrecognizedfromtheTaxBasisIncreaseisabletoreduceitseffectivetaxrateaswell.Moreover,thebenefitfromincometaxesrecognizedduring2010wasprimarilyaresultofthereleaseofsubstantiallyallofthecompanyvaluationallowancepreviouslyheldagainstcompanydeferredtaxassets.
STRUCTURE,RATE,3YRTREND
DreamWorksshouldfocusoncityandstatetaxcreditsbyprovidingfinancialincentivesandfuturegrowthopportunitiestostrategicoperatinglocations.
Ingeneral,theforeignboxofficenowaccountsformorethanthedomesticboxofficerevenue.DreamWorksshouldrestructuretheirrateusingforeignopportunities.ForinstancetheycanshiftR&DtoSignaporeorCaymanandproductiontoIndia.Thiscanallowthemtochargeroyaltiesandmanagementfees.ThusdecreasingUSincomeandincreasingforeignincome.
MESSAGETOINVESTORS
DWAisstillbestinclassforgeneratinganimatedhits.DWAisfocusingontransitioningtraditionalDVDtodigitalsales.
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Viacom'sdealendingin2012isreplacedwithTwentiethCenturyFoxbeginning2013.DWAhasstrongperformanceinAsiaandpartneringwithFoxisagoodstrategicfit.
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AcquisitionwithClassicMedia,DWAhastheabilitytoextractadditionalvaluefromsomeofClassicMedia'sfranchises.
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JeffreyKatzenberg,CEO,analyzesthecompetitivemarketlandscapeandacknowledgesDWAlossesProvideslline‑upshiftsandlaborforcereductiontomakeDWAmoreefficient.
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LarryWasserman,CFO,providedfinancialinformationonindividualfilmsaswellastheearningsguidancepolicy.
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F
DISCLOSURE
MoreinformationcouldhavebeenprovidedregardingwhatcausedfailureofRiseoftheGuardiansandwhatcanbedonetopreventsuchfailures.Itseemsliketheyjustwroteitoffwithouttakingmeasuressomethinglikethiswouldhappenagain.DWAdoesmentionthatRiseoftheGuardiansmanagedtosurpassexpectationsintermsofDVDsales,butthecompanycouldstandtoexplainthisevenfurther,asmanyofthequestionsaskedintheQ12013ConferenceCallwereaboutthissuddenchangeinfortuneforRiseoftheGuardians.
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EARNINGSGUIDANCEPOLICY
DWAhasastrongfutureliquidityposition.DWAprovidedrevenueandcapitalspendingestimatesforthereleaseoftheir2014films.DWAhasanewcost‑cuttingprogramtosave$120million/filmaswellasnewlicensingandmerchandisingpartnershipsinprogress.Futurepositiveearningsguidancewillalsobeattributedthroughdigitalcontentforachildren’sdevelopmentseriesthroughaNetflixalliance
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EARNINGSGUIDANCEPOLICY
FromtheClassicMediaacquisitionaswellaspotentialTVlicensingrevenueinfutureyears,thefairvalueestimateto$20persharefrom$18aftermakingsomepositiveadjustmentsforfuturecashflow.
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ThedistributionfeepaidtoFoxforglobalboxofficeandhomevideorentalwillbe6%whichislowerthanthepreviouslypaidtoViacom8%.$18fairvalueestimateforDWAisunchanged.
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DWAtendtotakealongertermperspectiveandputlessemphasisonquarterlyresultsgiventheunevennatureofthemoviebusiness.
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ACCESSIBILITYTOINVESTORS
DWAprovidesinvestorswithnecessarydisclosuresontheirwebsite.
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DWAisextremelytransparentwiththeirpreviouslossesandtheirearningsguidancepolicyisverytransparentforshareholders.Questions,concerns,andfeedbackareencouragedamongstinvestorsthroughtheirconferencecalls,andvariousboardmembersareactiveinrespondingtothequestions.
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SUGGESTIONSFORIMPROVEMENT
Bemoreconsistentwithfilmreleaseschedules.Itsimperativetoreleaseacertainnumberoffilms/year.Onpage11ofthe201210KDWAnotesthat"theunexpecteddelayinreleaseorcommercialfailureofjustoneofthesefilmscouldhaveasignificantadverseimpactonourresultsofoperationsandcashflowsinboththeyearofreleaseandinthefuture";DWAisfallingthroughfor2013.
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Thetwofilms,Mr.PeabodyandShermanwerewrittenofffor2013.Botharebackindevelopment.
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EXECUTIVESUGGESTIONS
Inordertoimprovefinancialperformanceandshareholdervalue,DreamWorksAnimationshouldcontinuefocusingonexpandingtheirnewgraphictechnologytocutproductioncosts.Inventoryrestructuringwillalsopromoteahealthiercashflowcycle.Movingforward,DWAcanfurthertheirglobalexpansionandbusiness
developmentopportunitiesinemergingcountries.DWAshouldfocusondevelopingnewfranchisesfromtheirnewlyacquiredClassicMedia.PartnershipswithNetflix,YouTubeandotherdigitaloutletscanoffernewdistributionchannels.DWAisveryliquidandcouldeventuallyverticallyintegratebycreatingtheirowndigitaldistributionplatformtofurtherexpandandprofitfromtheirsoon‑to‑berobust
libraryoforiginalliveentertainmentandanimationcontent.