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Dreamworks- Cash Flows & Balance Sheet

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on 25 February 2013

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Transcript of Dreamworks- Cash Flows & Balance Sheet

Negative Change in Cash?? 2011 2007 2008 2009 2010 0 + - = 9 8 7 1 2 3 4 5 6 c Revenue: Risky Business? Not bringing in money, but bleeding cash Cash Flows & Balance Sheet


2007:
2008:
2009:
2010:
2011: $767,178,000 $650,052,000 $725,179,000 $784,791,000 $706,023,000 Revenue smoothing?? 2007
2008
2009
2010
2011 Accounts Receivables $291,063,000 $222,483,000 $283,075,000 $272,647,000 $186,522,000 Would Dreamworks really
consider a long-term contract as Income? 60% of Accounts Receivables are from
a long-term contract with Netflix 2007 $541,920,000
2008 $638,243,000
2009 $695,963,000
2010 $772,668,000
2011 $882,646,000 Inventories "Cost of Making Films" Depreciation 2007 $356,490,000
2008 $328,150,000
2009 $352,405,000
2010 $431,295,000
2011 $391,761,000 2011 2010 2009 33,502,000 91,639,000 173,511,000 (48,249,000) (50,633,000) (74,394,000) (32,398,000) (108,616,000) (130,516,000) Change in cash (47,726,000) (67,426,000) (31,399,000) Cash Flows ($31,399,000) ($67,426,000) ($47,726,000) Story
Revenue Smoothing?
film costs classified as inventory, then depreciated upon release
Long-Term contracts smooth balance sheet-- will they ever be capitalized?
Spending more money than they're making ($29,845,000) ($213,835,000) With so many movie distributors, Netflix's future of long-term viability is not a guarantee! How does Dreamworks determine the depreciation of films? Dreamworks considers partially-produced films assets even though they have no value ... smoothing??? Why does a company like
Dreamworks have half a billion
dollars worth of "inventory" ? Dreamworks is more consistent than a film company should look




It is in their best interest to appear as consistent as possible because investors are turned off by volatility




Does Dreamworks smooth over any of their numbers?



How MIGHT they do this? MAJOR COMPETITION Dreamworks' classification of this long-term contract as an accounts receivable is misleading .. smoothing?? When a film is released,
Dreamworks immediately starts
depreciating the asset Lets Investigate! Operating Smoothing??? Estimate the "Ultimate Revenue" to be received from a movie, and then continually depreciates the film until that revenue is realized.
Have the right to revise these estimates at any time Operating Activities 2011
2010
2009 33,502,000 91,639,000 173,511,000 In 2011: Increased spending to fund future projects Investing Activities 2011
2010
2009 (48,249,000)
(50,633,000)
(74,394,000) In 2009: Expanded their headquarters Financing Activities 2011
2010
2009 (32,398,000)
(108,616,000)
(130,516,000) In 2009: Paid back loan from headquarter expansion Mainly repurchasing stock from investors Investing Financing Operating Story: High Inventories - Cost of making films

Operating Smoothing: Depreciation of films

Recognizing long-term contracts as revenue ... future financial crisis??

Not bringing in money, but bleeding cash! 2014 Release 2013 Release
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