DreamWorks Animation SKG, Inc. reported revenues Thursday for the quarter ended March 31, 2015 of $166.5 million, representing an increase of 13.1% from the same period in 2014. In addition, DWA reported an adjusted operating loss of ($3.4) million and adjusted net loss attributable to DWA of ($21.5) million or an adjusted loss of ($0.25) per share. Adjusted financial results exclude a $31.9 million pre-tax charge associated with Company’s restructuring plan announced on January 22, 2015.

Including the impact of the restructuring plan, DWA reported an operating loss of ($35.3) million and reported net loss attributable to DWA of ($54.8) million, or ($0.64) per share for the quarter ended March 31, 2015. Of the restructuring-related charges totaling $31.9 million or a loss of ($0.37) per share, $6.1 million was due to employee termination and other employee-related costs, $9.3 million was related to accelerated depreciation and amortization charges associated with the closure of our Redwood City facility, and $16.5 million was primarily related to excess staffing and other costs associated with the previously announced changes in the feature film slate.

“While 2015 is a transitional year for us, the worldwide box office performance of Home serves as early evidence that the changes we’re making in the core feature animation business are working,” said Jeffrey Katzenberg, Chief Executive Officer of DreamWorks Animation. “In addition, last Friday, our television series All Hail King Julien won the Emmy Award for Outstanding Children’s Animated Program.” Katzenberg added, “This recognition highlights the extraordinary talent and high quality of their work being done at the studio today and we couldn’t be prouder.”

Home released theatrically on March 27, 2015 and has reached $154 million at the domestic box office and nearly $154 million at the international box office to date.

First Quarter Review:

DWA’s first quarter revenues of $166.5 million increased 13.1% versus the prior year period due to increases across each of the Company’s operating segments.

Revenues for the quarter ended March 31, 2015 from the Feature Film Segment increased to $128.0 million, up from $110.1 million in the prior year period.  Segment gross profit also increased to $41.0 million compared to a loss of $25.4 million in the same period last year.  In the first quarter of 2014, DWA recorded an impairment charge of $57.1 million for the theatrical release of Mr. Peabody and Sherman.

Home, which was released theatrically on March 27, 2015, contributed feature film revenue of $2.9 million in the current quarter, primarily from ancillary revenues. As a result of the film’s performance in the worldwide theatrical markets, DWA currently anticipates that Fox will recoup their marketing and distribution costs and begin reporting revenue to DWA in the second quarter of 2015.

The Penguins of Madagascar contributed feature film revenue of $2.0 million in the current quarter, primarily from distribution outside of Fox territories. The film was released into the domestic home entertainment market on March 17, 2015 and through the end of the first quarter reached an estimated 2.2 million home entertainment units sold worldwide, net of actual and estimated future returns. Fox did not report any revenue to DWA in the quarter for the film as they had not yet recouped their marketing and distribution costs. DWA currently anticipates that Fox will recoup their marketing and distribution costs and begin reporting revenue to DWA in the second quarter of 2015.

How to Train Your Dragon 2 contributed feature film revenue of $41.4 million in the quarter, primarily from the domestic and international pay television windows as well as home entertainment. The film reached an estimated 8.4 million home entertainment units sold worldwide through the end of the first quarter, net of actual and estimated future returns.

Mr. Peabody and Sherman contributed feature film revenue of $31.5 million in the quarter, primarily from the domestic and international pay television windows as well as home entertainment. The film reached an estimated 3.8 million home entertainment units sold worldwide at the end of the first quarter, net of actual and estimated future returns.

Turbo contributed feature film revenue of $12.3 million in the quarter, primarily from international home entertainment. The film reached an estimated 7.1 million home entertainment units sold worldwide at the end of the first quarter, net of actual and estimated future returns.

Library titles contributed feature film revenue of $37.9 million to the quarter. Library revenues in the current quarter were driven by Rise of the Guardians, primarily from worldwide television markets, along with revenues generated in the home entertainment market by How to Train Your Dragon, which benefited from the home entertainment release of the sequel, How to Train Your Dragon 2, in November 2014.  In addition, during the three months ended March 31, 2015, our Library benefitted from recoveries of $6.3 million from previously established home entertainment reserves related to sales through DWA’s former primary theatrical distributor.

Revenues for the quarter ended March 31, 2015 from the Television Series and Specials Segment were relatively in line with the prior year period at $18.0 million and were comprised of revenues generated from the delivery of episodic series.  Segment gross profit declined to $3.5 million in the current period from $5.8 million in the same period of the prior year, primarily due to higher up-front marketing costs attributable to the initial launch of new series.

Revenues from the Consumer Products Segment increased to $15.1 million in the first quarter, compared to $12.1 million in the same period last year.  The increase was primarily driven by revenues generated in location-based entertainment initiatives as well as from increased merchandise sales. Segment gross profit increased to $6.5 million from $6.0 million in the prior year period as higher revenues were partially offset by the timing of creative development expenses and investments in new initiatives.

Revenues for the quarter ended March 31, 2015 from the Company’s New Media Segment were $4.6 million compared to $4.1 million during the three months ended March 31, 2014, an increase of approximately 12% compared with the prior year period. This increase was primarily attributable to revenues generated by channels and Big Frame, which was acquired in April 2014.  Beginning in the quarter ended December 31, 2014, the Company began reporting certain advertising revenues in this segment on a “net” basis rather than on a “gross” basis.  For comparative purposes, if the New Media Segment’s revenues had been reported on a “net” basis during the quarter ended March 31, 2014, revenues for the quarter ended March 31, 2015 would reflect an increase of approximately 72% compared with the prior year period.  Segment gross profit, which is not affected by this item, increased to $2.1 million from ($0.1) million in the prior-year period primarily attributable to the incremental contribution from channels, Big Frame and the successful release of Expelled.

For the quarter ended March 31, 2015, DWA posted an adjusted(1) operating loss of ($3.4) million. The increase in revenues and segment gross profit were partially offset by an increase in general and administrative expenses largely driven by costs associated with the expansion and growth of the AwesomenessTV business and higher up-front marketing costs related to the launch of new television series. The reported operating loss for the quarter ended March 31, 2015, inclusive of restructuring-related charges was ($35.3) million.

Adjusted(1) net loss attributable to DWA for the quarter ended March 31, 2015 was ($21.5) million, or an adjusted loss of ($0.25) per share.  Adjusted net loss reflects interest expense associated with higher debt balances and a write-off of an equity method investment in the amount of $5.1 million in other expense (net). Reported net loss attributable to DWA for the quarter ended March 31, 2015 was ($54.8) million, or ($0.64) per share.

For the three months ended March 31, 2015, net cash provided by operating activities was $1.6 million, compared to net cash used in operating activities of ($12.5) million in the prior year period. The main sources of cash from operating activities were How to Train Your Dragon 2’s worldwide home entertainment revenues, The Croods’ worldwide home entertainment revenues, Madagascar 3’s international television revenues, and the collection of worldwide television and home entertainment revenues from other films. Cash from operating activities was partially offset by production spending for films and television series, as well as participation and residual payments. Cash from operating activities in the quarter also included cash payments totaling $29.2 million related to the 2015 Restructuring Plan.

During the quarter ended March 31, 2015, DWA amended its $400 million revolving credit facility, increasing the size of the committed facility to $450 million and extending the term through February 2020. Also in the quarter, DWA entered into an agreement to sell its campus located in Glendale, California for $185.0 million and concurrently leased it back from the purchaser.  Proceeds from the sale were used to repay outstanding borrowings on the Company’s revolving credit facility.  As of March 31, 2015, DWA had $370.0 million of availability on its revolving credit facility and $89.7 million of unrestricted cash and cash equivalents on hand, bringing the Company’s total available liquidity to nearly $460 million.

Items related to the earnings press release for the first quarter of 2015 will be discussed in more detail on the Company’s earnings conference call later today.

About DreamWorks Animation

DreamWorks Animation creates high-quality entertainment, including CG-animated feature films, television specials and series and live entertainment properties, meant for audiences around the world. The Company has world-class creative talent, a strong and experienced management team and advanced filmmaking technology and techniques. DreamWorks Animation has been named one of the “100 Best Companies to Work For” by FORTUNE® Magazine for five consecutive years. In 2013, DreamWorks Animation ranked #12 on the list.  All of DreamWorks Animation’s feature films are produced in 3D. The Company has theatrically released a total of 31 animated feature films, including the franchise properties of Shrek, Madagascar, Kung Fu Panda, How to Train Your Dragon, Puss In Boots, and The Croods.