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By Bloomberg

DreamWorks Animation SKG Inc. will reduce production to two films a year and cut 500 jobs, including several top officials, to improve the quality and profitability of its pictures after several box-office flops.

The maker of the “Shrek” movies will record expenses of at least $450 million for the restructuring and other steps outlined in a regulatory filing Thursday. The job cuts represent about 18 percent of the workforce, founder and Chief Executive Officer Jeffrey Katzenberg said on a conference call.

The cash drain led analysts to question whether DreamWorks Animation has enough money to cover the expenses and fund movie production, with the company insisting it does. DreamWorks Animation has been hobbled in recent years by losses on movies that failed to generate sufficient box-office revenue.

“I intend to refocus more of my time and efforts in support of our movie-making enterprise,” Katzenberg said on the call. “Despite having one of the best creative teams in the world, we believe that our effort to make three films each and every year was just too ambitious and has led to inconsistent performance.”

Among the steps announced Thursday, the Glendale, California-based studio will record a pretax charge of $290 million for the restructuring. That includes severance, the cost of closing a Northern California studio, expenses related to excess staffing and write-offs of unreleased films.

About $200 million represents films that will be written down, such as “Monkeys of Mumbai.” DreamWorks Animation also shelved plans for “B.O.O.: Bureau of Otherworldly Operations” and said it will release just one feature film this year: “Home.”

Cash Cost

Most of the restructuring cost will be recorded in year-end results for 2014, the company said. About $110 million of that sum will be actual cash outlays.

DreamWorks Animation was little changed in extended trading. The stock gained 3.1 percent to $21.31 at the close in New York. In November, the shares fell to a 10-year low after aborted talks to sell the company to Hasbro Inc.

The studio restructuring is also claiming three top officials, including Mark Zoradi, who was named chief operating officer in August. Vice Chairman Lewis Coleman and Chief Marketing Officer Dawn Taubin are also departing. On Jan. 4, the company named veteran producers Bonnie Arnold and Mireille Soria to lead feature animation.

“We were top heavy and given this, we are really right- sizing the entire operation here and focusing the company into the businesses that we’re in today rather than businesses that we might imagine we might be in,” Katzenberg said. “This is the right thing for the company today.”

Added Write-Offs

In addition to the studio restructuring, DreamWorks Animation also plans at least $160 million in additional expenses. Those include $80 million for a second write-off of the film “Mr. Peabody & Sherman” and charge for “Penguins of Madagascar.” DreamWorks Animation will also record an expense of at least $80 million related to the valuation of deferred tax assets, partly offset by a reduction in an obligation to an affiliate of former investor and billionaire Paul Allen.

DreamWorks Animation had been aiming to reduce its average film costs to $120 million. Fazal Merchant, chief financial officer, said on the call the company doesn’t expect to achieve that goal until “late 2016.”

Eric Wold, a B. Riley & Co. analyst with a neutral rating on the stock, described the company as in “dead water for 12 to 18 months. I don’t see why investors would want to sit on the stock when there are still a lot of questions on the quality of the slate.”

Even with the restructuring costs and added writedown, Merchant told analysts, “We feel comfortable about the liquidity.”