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DreamWorks Animation Announces Film Cuts, Stock Tumbles 14%

Contributed by on January 24, 2015 at 12:01 pm

DreamWorks Animation SKG Inc.’s (NASDAQ:DWA) announcement of reduced film production and job cuts sent its stock tumbling 14%. The company stated that it will now only produce two films a year and will cut 500 jobs, including some top officials. The news comes amidst several box-office flops.

The company outlined expenses of, at minimum, $450 million to restructure the company. The 500 job cuts account for approximately 18% of the company’s workforce, according to CEO Jeffrey Katzenberg.

Analysts are questioning if DreamWorks Animation has the money to cover film production and the expenses of restructuring, but the company insists that it does. In recent years, DreamWorks Animations has seen losses over underperforming films that failed to produce enough revenue at the box office.

Stock fell 6.5% to $19.92 early Friday morning after an earlier drop to $18.30. This marks the company’s biggest intraday decline in a little over two months. In November of 2014, shares dropped to a 10-year low after talks to sell DreamWorks Animations to Hasbro Inc. (NASDAQ:HAS) fell through.

One of the steps announced by DreamWorks Animation was a pretax expense of $290 million to restructure the company. This expense would include the closing a studio in Northern California, severance as well as staffing and write-off expenses of films that were unreleased. The company states that $200 million of the expenses represents films that will be written down.

Restructuring will also claim three of the company’s top officials, Vice Chairman Lewis Coleman, COO Mark Zoradi and CMO Dawn Taubin. DreamWorks Animation announced on January 4 that veteran producers Mireille Soria and Bonnie Arnold will now lead feature animation.

DreamWorks Animation is also aiming to reduce their production costs to just $120 million per film. The company hopes to reach this goal by late 2016. Fazal Merchant, the company’s CFO, told analysts that despite the restructuring costs and additional writedowns, the company feels “comfortable about the liquidity”.