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DreamWorks Animation Loses $247 Million in Q4

Studio will sell Glendale campus for $185 million and lease it back to save money as massive restructuring plan takes toll

DreamWorks Animation reported a fourth-quarter net loss of $247 million Tuesday, with the company confirming that it intends to sell its Glendale headquarters for $185 million and lease the property back to save money.

The figures come one month after DWA announced its massive restructuring plan, which took a $210.1 million pre-tax toll.

The Q4 shortfall compares with a gain of $17.2 million during the same period a year ago. The under-performance of “Penguins of Madagascar,” a November release that has grossed $82 million domestically and $275 million overseas, also hurt.

DWA reported sales of $234.2 million, up 14.7 percent over the same Oct. 1 – Dec. 31 period in 2013. The adjusted operating loss came in at $37.6 million, while its net loss was $64.1 million. Investors lost $3.08 per share, greater than the $3.01 analysts had projected, and way off the 20 cents per share gain for the same period a year ago.

The restructuring is designed to save $30 million in 2015 and $60 million by 2017, and includes laying off 500 workers and scaling back its film slate from three movies a year to two. The cost of implementing the plan in in the quarter was actually lower than the $290 million that some analysts had estimated.

DWA saw no Q4 revenue from Twentieth Century Fox, which markets and distributes DWA films, because its costs were not covered. “How to Train Your Dragon 2” contributed $66 million to the bottom line, but a chance for the studio to provide some positive news was lost when that film was beaten by “Big Hero 6” for the animated feature prize at Sunday’s Academy Awards.

“Dragon 2” was considered the studio’s best chance to win an Oscar since “Shrek” won the first animated-feature award in 2002, but instead it continued the company’s nine-film losing streak.

“Although 2014 was a challenging year for our company, I am confident that our recent announcement to restructure our feature film business will enable us to deliver great films and better box office results, while improving the overall financial performance of our business,” said DWA chief executive Jeffrey Katzenberg.

“And while 2015 will be a transitional year for us, I couldn’t be more confident for the future. We have a set of strategic imperatives in place designed to ensure sustainable and profitable growth over the long term.”

Revenue from DWA’s TV operations gained 7.7 percent to $50.7 million, but profits declined from $7.3 million to a loss of $2.6 million, due mainly to revisions in estimated future revenues for marketing and specials. Its consumer products division reported that sales were up 77.5 percent to $22.1 million and that profits rose to $6.1 million.

As bleak as the Q4 numbers were overall, they contained few if any surprises. On Tuesday, stock in the company ended trading up 2.5 percent to $21.13.

Eric Wold, an analyst with B. Riley, on Monday gave DWA a “buy” recommendation,  while admitting that the rest of the year looked “uninspiring” and that its only release, next month’s “Home,” would probably lose money.

“With that in mind, we stress that investors considering DreamWorks at these levels need to focus on an expected rebound in 2016 on both a stronger film slate, more focused management and release strategy as well as the margin benefit of a reduced cost structure.”