DreamWorks Ani isn't so flush

Write-down likely as latest feature underperforms

DreamWorks Animation formally acknowledged the likelihood of a substantial earnings write-down on "Flushed Away," with the unfortunately titled animated feature underperforming since its Nov. 3 boxoffice bow.

Officials didn't estimate the amount of the write-down, disclosed with an unrelated announcement of plans for a secondary offering of $330 million in stock controlled by investor Paul Allen. But Merrill Lynch analyst Jessica Reif Cohen suggested the write-down will run north of $50 million.

Such a fourth-quarter write-down would shave earnings 20 cents-40 cents per share, she said.

DWA said the Glendale-based company won't receive any funds from the proposed sale of 11.6 million Allen shares. But key insiders Steven Spielberg, Jeffrey Katzenberg and David Geffen have agreed to purchase $10 million of the shares, DWA said.

The secondary offering has been widely expected ever since Allen signaled his intent to cash out of at least some of his DWA holdings.

In a research report, Reif Cohen maintained a "buy" rating on the stock and said the sale will remove an obstacle to share liquidity. DWA shares fell 13 cents Tuesday to close at $28.21.

"Flushed" has grossed about $40.5 million since opening, with film costs estimated at $143 million.

In a recent conference call, DWA CEO Katzenberg said the company regularly reviews its relationship with "Flushed" producer Aardman Animations. But he stopped short of saying whether the studio would again partner with the animator on a feature film.

A previous Aardman film, "Wallace & Gromit: The Curse of the Were-Rabbit," also underperformed for DreamWorks. And Katzenberg noted that DWA has the right to bail from its five-picture deal with Aardman at any time.
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