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Executives

Mellody Louise Hobson - Chairman, Chairman of Compensation Committee and Member of Nominating & Governance Committee

Andrew Chang - General Counsel and Secretary

Lewis W. Coleman - President, Chief Financial Officer and Director

Steven Myers

Analysts

Andrew Borst - Goldman Sachs Group Inc., Research Division

Dreamworks Animation SKG Inc (DWA) 2013 Annual Shareholder Meeting May 29, 2013 11:00 AM ET

Mellody Louise Hobson

Good morning. I'm Mellody Hobson, Chairman of the Board of DreamWorks Animation and it's my pleasure on behalf of the Board of Directors, officers and employees of DreamWorks to welcome you to our 2013 Annual Meeting of Shareholders. We appreciate you being here. I will act as Chairman today and Andrew Chang, who is to my left and is our General Counsel, will serve as Secretary of the meeting.

I wanted to now introduce members of our leadership team who are here with us today and as I call your name, I'll ask you to please stand up to be recognized by the group. First and foremost, our leader, Jeffrey Katzenberg, who is Chief Executive Officer and Director of DreamWorks; Lew Coleman, who is President and Chief Financial Officer and a Director; Rich Sullivan, who is our Deputy CFO; and we also have Steve Myers of Compushare -- Computershare, excuse me, who will serve as our Inspector of Election. Great.

Anyone who would intends to vote in person who has not yet registered, please do so now. Before making some introductory statements, I would like the Secretary, Mr. Chang, to provide our standard forward-looking statement disclaimer.

Andrew Chang

Thank you, Madam Chair. Certain statements made during this meeting by DreamWorks may constitute forward-looking statements. These statements can vary materially from actual results and are subject to a number of risks and uncertainties, including those described in the company's periodic reports with the SEC. The company undertakes no obligation to update any of its forward-looking statements.

Mellody Louise Hobson

Looking back on 2012, DreamWorks Animation saw its share of both successes and challenges. Our summer release, Madagascar 3: Europe's Most Wanted grossed nearly $750 million in global box office and was the eighth biggest movie of the year. It also became our best performing film of all time internationally. Later in the year, Rise of the Guardians grossed just over $300 million at worldwide box office. While audiences responded very well to the movie, it did not reach the level of theatrical success that is required of our movie.

Beyond our core business, we are more committed to ever than growth and diversification of the company. One of our primary areas of focus and investment has been television. We currently have 4 DreamWorks branded shows on air and through our expanded relationships with Netflix, we will soon add a fifth, their first ever original kids television series, Turbo, fast action stunt theme.

In the summer of 2012, DreamWorks acquired Classic Media, one of our first -- our very first acquisition since becoming a public company. Classic owns a very large and valuable collection of characters and branded assets, which we plan to leverage on television and across our lines of business. Throughout 2012, we continued our investments in technology. Later this year, we will fully deploy our proprietary next-generation filmmaking technology. These tools are designed not only to increase the creative productivity of our artists, but also to meaningfully lower the production costs of our film on a go-forward basis.

We also remain committed to further developing the company's presence in rapidly expanding international markets. In early 2012, we agreed to form a joint venture in China to establish the leading Chinese branded family entertainment company, Oriental DreamWorks. Additionally, over the course of the year, we made a number of strategic location-based entertainment deal that will provide added value for the DreamWorks Animation brand overseas and contribute revenues to the company.

2013 has already gotten off to a tremendous start with a theatrical release of The Croods, our first film distributed by Twentieth Century Fox. Today, this made over $550 million in global box office receipts to become the second-highest grossing film of the year on a worldwide basis. We have announced that The Croods is now DreamWorks Animations' next franchise.

Earlier this month, we acquired AwesomenessTV, a YouTube network, which caters to the teen audience and is amongst the fastest-growing online content channels today. We believe the transaction will bring incredible momentum to both our television and digital content strategy. Looking ahead, we are excited about our next theatrical release, Turbo, on July 17. It is a 3D comedy about a snail who dreams of competing in the Indianapolis 500. When he miraculously attained superspeed and joined forces with the streetwise snail pit crew, Turbo's far-fetched dream doesn't seem too far out of reach.

With that, let's begin the formal proceedings. Will the Secretary confirm notice of this meeting?

Andrew Chang

Thank you. I am pleased to confirm that notice of this Meeting has been duly given and that a proxy statement was sent beginning on or about April 23, 2013, to our stockholders of record as of April 2, 2013. I have received an affidavit to that effect from Computershare, which is serving as our Inspector of Elections for this meeting.

Mellody Louise Hobson

Thank you. The Notice of the Meeting is ordered filed with the minutes of the meeting.

Andrew Chang

The Inspector of Elections has filed his oath of office with the company, along with the certificates stating that holders of a quorum of the voting securities of the company are present in person or are represented by proxy at this meeting. A list of the record holders of DreamWorks Animation's common stock on the record date of April 2, 2013, is available for inspection at this meeting upon showing appropriate cause. This legal notice of the meeting has been given and a majority of the votes entitled to be cast constituting a quorum are present in person or by proxy, this meeting is now regularly and lawfully convened and opened for the transaction of business.

Mellody Louise Hobson

The polls are now open for voting and they will close at the conclusion of the meeting. Until the polls close, any shareholder may revoke or change his or her revoke -- her own vote on any matter. However, upon the closing of the poll, no ballots, proxies or vote nor any revocations or changes will be accepted. The business of this meeting is the vote on the following 5 proposals: One, to elect 8 individuals to serve as DreamWorks Animation directors for the upcoming year; second, to ratify the appointment of PricewaterhouseCoopers, LLP as the company's independent registered public accounting firm for the fiscal year ended December 31, 2013; third, to conduct an advisory vote to approve named executive officer compensation; fourth, to approve the adoption of the 2013 Annual Incentive Plan; and lastly, to consider a stockholder proposal related to consideration of a recapitalization plan to revise that all of the company's outstanding stock have 1 vote per share.

Mr. Chang, were there any stockholder nominations or other proposals for business for this meeting properly filed with you as Secretary?

Andrew Chang

No.

Mellody Louise Hobson

Since no stockholder nominations or other proposals were properly filed in advance of this meeting, the business of this meeting is limited to the 5 proposals on the agenda. Anyone who has a signed proxy that has not yet given to it the Inspector of Elections, should do so now.

For those stockholders who are eligible to vote and have not yet signed a proxy or for those stockholders who wish to revoke a proxy previously delivered, ballots will be distributed. A ballot will also be given to anyone who has been appointed as proxy holder by a stockholder of record. If anyone would like a ballot and is not received one, please raise your hand.

The proxy solicited by the Board of Directors can be tallied at one time even they contain 5 proposals for consideration. Similarly, the ballots cast today can be handled the same way. Accordingly, I intend to briefly discuss each proposal to be acted upon at this meeting. Following my brief review of this agenda item, stockholders will be able to make comments about the proposal. At the conclusion of the discussion of all items, we will take the vote.

The first order of business to be addressed is the election of 8 directors for the upcoming year. Their terms will expire at the Annual Meeting of Stockholders to be held in 2014 or when their successors are elected and qualified. The board nominees are listed in your proxy statement and the information concerning their principal occupations, their service with DreamWorks Animation and other matters which may of be interest are also included.

As described in the proxy statement, 8 directors will be elected by the Class A and B stockholders voting together as a single class. No nominations may be made at this meeting. So therefore, I declare nominations to be closed.

The second item of business, we'll consider to ratify the appointment of PricewaterhouseCoopers, LLP as the company's independent registered public accounting firm for the fiscal year ending December 31, 2013.

The third item of business, we will consider is to conduct an advisory vote to approve the named executive officer compensation.

The fourth item of business, we will consider is the approval and adoption of the 2013 Annual Incentive Plan.

The final item of business is the stockholder proposal related to the consideration of a recapitalization plan to provide that all of the company's outstanding stock have 1 vote per share.

At this time, Sean Chevanan will be recognized for up to 2 minutes to provide a statement with respect to the stockholder proposal. Mr. Chevanan [indiscernible]?

Unknown Shareholder

Yes, this is proposal 5 to give each share an equal vote. Shareholders request that our board to take steps to adopt a recapitalization plan as soon as possible for all of our outstanding stock to have 1 vote per share. This would include all taxable steps, including encouragement and negotiation with family, our shareholders requested that they relinquish for the common good of all shareholders any pre-existing rights. This proposal is not intended to unnecessarily limit our board's judgment in crafting the requested changes in accordance with applicable laws and existing contracts. By allowing certain stock to have 15x more voting power than other stock, our company takes our public shareholder money does not give us an equal voice in our company's management. Without a voice, shareholders cannot hold management accountable. GMI Ratings, an independent investment research firm, said we also had a controlling shareholder group which own 69% of our stock. News Corp. is another company like ours. If you are buying shares in News Corp., "It's fire. Beware," said Sydney Finkelstein, a professor at Dartmouth's Tuck School of Business. There is no management or leadership reason to have 2 classes of stock except to retain control. The Council of Institutional Investors at NASDAQ and the New York Stock Exchange to stop listing new companies with dual share classes. This is a new approach to curbing a structure it has criticized for years as unfair and harmful to long-term stock returns. This proposal should also be evaluated in the context of our company's clearly improvable corporate governance climate as reported in 2012. GMI rated our company very high concern in takeover defenses. On top of a 69% controlling shareholder, we had requirements of 80% shareholder approval to adopt certain corporate governance improvement.

Harry Brittenham, Michael Montgomery and Thomas Freston, 3 members of our eight-member board, did not own any stock, and Richard Sherman only owned 100 shares of our stock. Mr. Brittenham and Mr. Montgomery who are not stockholders made up 100% of our Audit Committee. Mr. Freston was on our Executive Pay Committee and managed to get our highest negative votes 100x as many negative votes as 2 of our other directors.

In late 2012, DreamWorks Director and DreamWorks CFO, Lewis Coleman, left his position as the lead Director of Northrop Grumman. At Northrop Grumman, Mr. Coleman received $5 million related to a security that included his housing and his DreamWorks-related travel by corporate jet. GMI said it was difficult to consider Mr. Coleman independent at Northrop when Northrop was still responsible for VIP travel, security and lifestyle.

Mellody Hobson, our Chairman, was potentially overboarded. Ms. Hobson worked as a Director at 4 large companies that had a full-time job. 2 of these companies, Estée Lauder and Starbucks, were rated C in corporate governance by GMI.

Returning to the topic of this proposal from the context of our clearly improvable corporate governance climate, please vote to protect shareholder value proposal 5, give each share an equal vote. Thank you.

Mellody Louise Hobson

Thank you, Mr. Chevanan [ph]. In the proxy materials distributed in connection with this meeting, the company set forth a number of reasons why it believes that this proposal is not in the best interest of the company or its stockholders. As a result, the Board of Directors has unanimously recommended a vote against this proposal.

I would now like to open the floor to any comments, questions or discussion with respect to any of the 5 proposals.

Please come to one of the microphones, microphone here at the center of the room, if you have a questions and begin by stating your name and the number of shares that you own. Any questions or comments?

Unknown Attendee

I wanted to give anyone else an opportunity -- I have some comments to make but certainly, I think, anyone else want to make comments [indiscernible].

Mellody Louise Hobson

I have just invited them up. I don't think anyone has any comments.

Unknown Attendee

I have a question the 2 new directors, how they first came to the attention of the company?

Mellody Louise Hobson

Both are very accomplished in their fields. I'll have Jeffrey comment as well and their people that we had watched and been very aware of and we thought that they would help further the company, especially given their backgrounds and areas of expertise.

Andrew Borst - Goldman Sachs Group Inc., Research Division

Are they -- will it be considered inside related directors?

Mellody Louise Hobson

They're both considered independent directors.

Unknown Attendee

But do they have a relationship with the company?

Mellody Louise Hobson

I'm not aware of any relationship with the company with either director.

Unknown Attendee

Because I was looking at the corporate library, our slate for 2012 had 2 inside directors, which most companies have 1e inside director and then we have 2 inside-related directors and...

Mellody Louise Hobson

The new directors are definitely independent from everything that we know.

Unknown Attendee

From a very strict standard dip?

Mellody Louise Hobson

Correct.

Unknown Attendee

Because I believe now, we have -- with the 2013 slate, we would have 2 inside directors and 1 inside-related director.

Mellody Louise Hobson

I don't think so. I think we just have 2 inside directors.

Unknown Attendee

Mr. Montgomery, at least, according to -- well, as GMI Rating has now considered Mr. Montgomery inside related.

Mellody Louise Hobson

I don't think we do. I'm not sure what factors they are using to come up with that determination. From our perspective, he is independent.

Unknown Attendee

And I had a question on the executive pay which we have advisory vote. And GMI Ratings said that full summary compensation in 2012 was $9 million for CEO and I was interested in whether that was higher for 2013? I mean, for -- I mean that was 2011, so has it gone up for 2012?

Mellody Louise Hobson

I don't think so. Has it gone up? Lew, I'm looking at our CFO.

Lewis W. Coleman

[indiscernible]

Mellody Louise Hobson

Right. So the stock and cash numbers are different.

Lewis W. Coleman

[indiscernible]

Mellody Louise Hobson

Right.

Unknown Attendee

All right. Okay. They were breeding at about $9 million.

Mellody Louise Hobson

I don't know, the number is off the top of my head. We can get it out of the proxy.

Lewis W. Coleman

[indiscernible]

Mellody Louise Hobson

The total in 2012 was $5 million. And what? '11, $4 million. So together, it was $9 million, as Jeffrey is saying. Any other questions?

We shall now proceed to take a vote on the proposals 1 through 5. If you've already voted, there's no need for you to recast your vote unless you wish to change it. While the stockholders who have chosen to vote -- while stockholders filters who have chosen to vote by ballot who have not come up yet -- who have not yet done so, please mark their ballots and hold them up. I don't think we have any.

Mr. Myers, please collect the ballots from any stockholders present. I don't think there are any.

[Voting]

The polls we're voting on the matters before this meeting are hereby closed. We'll now hear the results of stockholder voting on the 5 proposals on our agenda today.

The Inspector of Elections has completed his preliminary tabulation. Mr. Myers, may I have your report, please?

Steven Myers

I would like to report that all of the directors nominated have been elected as directors and the appointment of PricewaterhouseCoopers, LLP has been passed, as well. And third proposal to conduct the advisory vote has also passed [ph], and the fourth proposal to conduct 2013 compensation plan has also passed [ph] with the proposal that was set forth by the stockholders.

Mellody Louise Hobson

The preliminary report of the inspector of Elections as presented is accepted. The final votes will be tallied and results will be reported in the Form 8-K filing with the SEC.

Mr. Chang, please safeguard the ballots, proxies and the oath and certificate and the report of Inspector of Elections and maintain them in the records of the company.

As there is further discussion, I want to thank you all of you for attending today's meeting and for the interest you've shown in the affairs of our company. This concludes our official business for today. The annual meeting is now adjourned. Thank you very much for being here.

Unknown Attendee

Just general questions and answers [indiscernible]

Mellody Louise Hobson

If you have additional questions, I'm happy to take them. Are there any additional questions or comments?

Unknown Attendee

Yes. I have a question on the vote whether the independent shareholders voted in favor of the shareholders vote reply [ph].

Steven Myers

[indiscernible]

Unknown Attendee

But do you just have a ballpark if the independent shareholders voted in favor of the vote reply [ph]?

Steven Myers

If I recall, [indiscernible] some 46% [indiscernible].

Unknown Attendee

You got 46% of data?

Steven Myers

[indiscernible]

Unknown Attendee

That's a strong showing then.

Steve Myers

[indiscernible]

Unknown Attendee

[indiscernible]

Mellody Louise Hobson

Any other questions? General question or comments? Okay. Thank you very much.

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