WEST PALM BEACH, Fla. - Digital Domain Media Group has asked federal regulators for permission to sell shares to investors, and the movie animation studio's newly public financial statements show both growing revenues and red ink.
Port St. Lucie-based Digital Domain lost $42.5 million in 2010, turned a profit of $8 million in 2009 and reported losses from 2006 through 2008. Its 2010 revenue was $105 million, up from $22 million in 2009.
"We have a history of losses and may continue to suffer losses in the future," the company said in a May 16 filing with the Securities and Exchange Commission.
Digital Domain aims to raise $115 million in its stock offering.
The state of Florida and the cities of Port St. Lucie and West Palm Beach have promised Digital Domain millions in cash, land and loans in exchange for high-paying animation jobs. The company had 154 employees in Port St. Lucie as of Dec. 31.
West Palm Beach officials announced last year that they would give Digital Domain free land downtown and $10 million in cash to open a school and studio here. At the time, company Chairman and Chief Executive John Textor told reporters that Digital Domain was profitable.
By one measure, he's correct. Digital Domain showed earnings before interest, taxes, depreciation and amortization, or EBITDA, of $3.3 million in 2010, although some say EBITDA can be misleading.
"Depreciation and amortization is a cost, so saying you're profitable on an EBITDA basis is not the same thing as being profitable," said University of Florida finance professor Jay Ritter.
Textor declined to comment on Digital Domain's finances, citing the SEC's "quiet period" before stock offerings.
West Palm Beach Finance Director Randy Sherman said the numbers Digital Domain filed with the SEC are similar to those the city saw last year as it scrutinized the company's finances. Sherman said he wasn't worried by the red ink.
"A lot of these losses are non-cash," Sherman said.
For instance, Digital Domain took $24 million in charges in 2010 to account for stock warrants it has granted. And Sherman said Digital Domain's balance sheet looks strong - it shows $12 million cash and $31 million of cash in trust as of Dec. 31.
It's not unusual for money-losing companies to sell shares to the public. Nearly half of initial public offerings in the past decade were by money-losing companies, said Ritter, who studies IPOs. There was no relation between red ink and the company's subsequent performance on the stock market.
Another newly public company, 3-D movie systems maker RealD Inc., reported a loss of $51 million on revenue of $189 million in 2010, yet its shares have soared since its IPO last year.
Digital Domain's SEC filing doesn't reveal Textor's salary, but it discloses that he owns 51 percent of the company's shares. Miami Dolphins great Dan Marino owns 8.6 percent.
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