Digital Domain Media Group: modeFinance Credit Report

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modeFinanceTM HeadquarterBuilding A - AREA Science ParkPadriciano 99 - 34149 Trieste - ItalyPh.: +39 040 375 5337Fax: +39 040 375 [email protected]

askMORETM is a registered mark of modeFinanceTM

DIGITAL DOMAIN MEDIAGROUP, INC.

Thursday, 13 September 2012

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D C CC CCC B BB BBB A AA AAA

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D C CC CCC B BB BBB A AA AAAnot

available

non return extremlypathological

pathological highdanger

weak sufficient adequate good very

strongextremely

strong

Company name DIGITAL DOMAIN MEDIA GROUP, INC.

Identification number US270449505

Country United States of America

ZIP code and city 94939 - LARKSPUR

Address 1100, LARKSPUR LANDING CIRCLE

+1 310 314 2800

www.digitaldomain.com

Not available

Legal form Not available

Account Consolidated

Incorporation date 2009/01/07

NACE 2 Sector 5911 - Motion picture, video and television programme production

activities

Listed

Status Active

MORE Credit limit Not assessable on the base of the available informations

31/12/2011 31/12/2010 31/12/2009

Turnover (th e) 76,224 78,689 46,370

Rating CC C CC

Probability of default 42.00% 57.00% 42.00%

Confidence Level 100% 100% 29%

Solvency ratios

Leverage ratio 5.72 -11.74 -

Total asset/Total liabilities 1.17 0.91 -

Liquidity ratios

Current Ratio 0.69 0.39 -

Quick Ratio 0.69 0.39 -

Profitability and economic equili-

brium ratios

Return on investement ROI (%) -64.24 -23.11 -

Return on equity ROE (%) -477.76 -273.65 -

Asset turnover 0.50 0.63 -

Interest paid weight -0.13 -0.17 -0.29

Gross Profit/Operating revenue 0.05 0.20 0.19

Interest Coverage ratios

EBIT interest coverage ratio -4.42 -2.17 -2.28

Analysis and trend of financial

strength



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modeFinance TM srlVAT number [email protected]

Area Science Park,Padriciano 99. 34149 Trieste, ItalyTel. +39 040 3755337Fax +39 040 3756741

Sector Analysis

Company Healthy Balanced Vulnerable Risky

Solvency ratios

Leverage ratio 5.72 0.58 2.09 3.20 -2.44

Total asset/Total liabilities 1.17 2.73 1.48 1.08 0.79

Liquidity ratios

Current Ratio 0.69 2.55 1.34 0.96 0.53

Quick Ratio 0.69 2.47 1.25 0.92 0.38

Profitability and economic equilibrium ratios

Return on investement ROI (%) -64.24 13.57 6.02 0.56 -23.40

Return on equity ROE (%) -477.76 15.46 10.46 -12.67 -59.07

Asset turnover 0.50 1.77 1.28 1.01 1.94

Interest paid weight -0.13 0.00 0.09 0.01 -0.03

Gross Profit/Operating revenue 0.05 0.36 0.27 0.34 0.25

Interest Coverage ratios

EBIT interest coverage ratio -4.42 311.50 9.23 1.16 -22.33

Cash Conversion Cycle (days)

Days Sales Of Inventory (DIO) 0 4 10 8 98

Days Sales Outstanding (DSO) 12 38 48 57 19

Days Payable Outstanding (DPO) 24 14 25 23 13

Cash Conversion Cycle (DIO + DSO - DPO) -12 32 43 42 154

Numer of analyzed companies - 57 122 64 14

(Average) Rating CC A BBB CCC C

The sector has been chosen according to:

international companies in the sector NACE 2 5911with financial data of year 2011.



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Sector Analysis - Graphs



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Balance Sheet

BALANCE SHEET (th e) 31/12/2011 31/12/2010 31/12/2009

Accounting practice Local GAAP Local GAAP Local GAAP

Exchange rate USD - EUR 0.77286 0.748 0.69416

Total assets 152,903 124,707 -

Fixed assets 119,923 112,195 -

Intangible fixed assets 46,914 47,986 -

Tangible fixed assets 61,938 35,825 -

Other fixed assets 11,072 28,384 -

Current assets 32,979 12,512 -

Stocks 0 0 -

Debtors 2,404 1,800 -

Other current assets 30,576 10,712 -

Cash & cash equivalent 24,625 8,966 -

Shareholders funds 22,761 -11,609 -

Capital 306 97 -

Other shareholders funds 22,455 -11,706 -

Total liabilities 130,142 136,316 -

Non current liabilities 82,611 103,890 -

Long term debt 28,704 35,874 -

Other non-current liabilities 53,907 68,016 -

Current liabilities 47,531 32,426 -

Loans 590 748 -

Creditors 5,017 1,974 -

Other current liabilities 41,925 29,704 -

Total shareh. funds & liab. 152,903 124,707 -

NET DEBT (th e) 31/12/2011 31/12/2010 31/12/2009

Short term debts 590 748 -

Long term debt 28,704 35,874 -

Cash & cash equivalent 24,625 8,966 -

Net debt 4,669 27,657 -

31/12/2011 31/12/2010 31/12/2009

Working capital - - -

Net Current Assets -14,552 -19,914 -

31/12/2011 31/12/2010 31/12/2009

Days Sales Of Inventory (DIO) 0 0 -

Days Sales Outstanding (DSO) 12 8 -

Days Payable Outstanding (DPO) 24 9 -

Cash Conversion Cycle (DIO + DSO - DPO) -12 -1 -



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Income Statement

INCOME STATEMENT (th e) 31/12/2011 31/12/2010 31/12/2009

Accounting practice Local GAAP Local GAAP Local GAAP

Exchange rate USD - EUR 0.77286 0.748 0.69416

Sales 73,894 76,191 41,649

Revenues growth (%) -3 83 -

Other revenues +/- variation in inventories and contract in progress + Fixed assets

own construction capitalized2,330 2,498 4,720

Operating revenue / turnover 76,224 78,689 46,370

Total operating costs 134,272 89,503 55,164

Costs growth (%) 50 62 -

Service costs - - -

Material costs - - -

Costs of employees - - -

EBITDA -45,096 -3,122 -2,185

Depreciation 12,952 7,692 6,610

EBIT -58,049 -10,815 -8,794

Financial P/L -53,311 -22,990 -8,405

Financial revenue - - -

Financial expenses 53,311 22,990 8,405

Interest paid 13,137 4,988 3,852

P/L before tax -111,359 -33,804 -17,199

Extr. and other P/L 2,719 2,055 14,103

Extr. and other revenue - - -

Extr. and other expenses - - -

P/L before tax + Extr. and other P/L -108,641 -31,750 -3,096

Taxation 102 19 0

P/L for period -108,743 -31,768 -3,096

31/12/2011 31/12/2010 31/12/2009

Costs of Good Sold 72,524 62,753 37,377

Gross Profit 3,700 15,936 8,992

Other Operating Expenses 61,748 26,751 17,786

31/12/2011 31/12/2010 31/12/2009

Cash flow -95,790 -24,076 3,514

Added value - - -

31/12/2011 31/12/2010 31/12/2009

Number of employees 933 - -



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Evolutions and trends



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Qualitative information

Full overview The firm, formerly known as Digital Domain Holdings Corporation, operates as a digital production company focu-

sing on visual effects for feature films and advertising productions in the United States. The company was founded

in 1993 and is headquartered in Larkspur, California, USA. The company is involved in the production of 3D con-

tent, performance capture, and CG visual effects, such as fluid simulation, terrain generation, and photorealistic

CG animation. The company’s digital production business provides end - to - end solutions across multiple media

platforms spanning the entire content production process from idea generation and pre - production to design,

directing, live - action production, and post - production. Its digital production business has three digital produc-

tion business units, which include Digital Domain Productions that provide VFX for feature films and advertising;

Mothership, which offers digital advertising and marketing solutions for brand advertisers and advertising agency

clients; and In - Three that involves in the creation and conversion of 2D content into 3D content. The company’s

animation studio business focuses on the development of original full - length, family - oriented computer - gene-

rated imagery animated feature films. Its education business operates a post - secondary educational institution

to produce workforce - ready graduates possessing traditional motion picture arts, and technical animation and

visual effects computer generation skills.

History Formerly known as Digital Domain Holdings Corporation.

Primary business line Operates as a digital production company.

Secondary business line Not available.

Main activity Services.

Secondary activity Not available.

Main products and services Focuses on visual effects for feature films and advertising productions such as 3D content, performance capture,

and CG visual effects, such as fluid simulation, terrain generation, and photorealistic CG animation.

Size estimate Not available.

Strategy, organization and policy Not available.

Strategic alliances Not available.

Membership of a network Not available.

Main brand names Not available.

Main domestic country United States of America.

Main foreign countries or regions Not available.

Main production sites Not available.

Main distribution sites Not available.

Main sales representation sites Not available.



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Main customers Not available.

Auditor/Advisor/Bank

name type address

SINGERLEWAK LLP Auditor -

American Stock Transfer & Trust Transfer Agent -

Board

name date of birth nationality function

Mr. John C Textor 1965 - Chairman of the Board, Chief Executive Officer

Mr. Kevin C Ambler - - Independent Director

Mr. Casey L Cummings - - Independent Director

Mr. Kaleil Isaza Tuzman 12/10/1971 - Independent Director

Mr. John W Kluge - - Independent Director

Mr. Jeffrey W Lunsford - - Director

Mr. Jonathan F Teaford 1973 - Chief Executive Officer, Director

Sharehoders (the first twenty shareholders ordered by Direct %)

PBC GP III LLC Rating:

Country ISO code US Operating Revenue (MIL $) -

NACE Rev. 2, Core code - Total Assets (MIL $) -

Direct % 37.88 Number of Employees 0

Total % - Information date 2012/06

Address : Not available

TEXTOR JOHN C. Rating:

Country ISO code - Operating Revenue (MIL $) -


Direct % 23.15 Number of Employees -





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COMVEST CAPITAL II, LP Rating:



Direct % 7.71 Number of Employees 0



TEAFORD JONATHAN F. Rating:

Country ISO code - Operating Revenue (MIL $) -


Direct % 5.26 Number of Employees -



EMPERY ASSET MANAGEMENT LP via its funds Rating:



Direct % - Number of Employees 0

Total % 0.98 Information date 2012/06


WALL STREET ASSOCIATES LLC via its funds Rating:

Country ISO code US Operating Revenue (MIL $) 2.6





BLACKROCK, INC. via its funds Rating: BB

Country ISO code US Operating Revenue (MIL $) 9081

NACE Rev. 2, Core code - Total Assets (MIL $) 179896




STATE OF CALIFORNIA via its funds Rating:



Direct % - Number of Employees -



GRT CAPITAL PARTNERS via its funds Rating:








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WILLIAM BLAIR & COMPANY LLC via its funds Rating:


NACE Rev. 2, Core code - Total Assets (MIL $) 511.4




Subsidiaries (the first twenty subsidiaries ordered by Direct %)

Not available.



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ASKMORE rating guide

General vision A credit rating is an opinion of the general creditworthiness of an obligor (issuer rating), or the creditworthiness of

an obligor in respect of a specific debt security, or other financial obligation (issue rating), based on relevant risk

factors.

The Multi Objective Rating Evaluation (MORE) model is essentially used to assess the level of distress of industrial

companies by using data included in financial statements.

The basic idea of the model is to analyze a set of financial and economic ratios in a predictive corporate bankruptcy

model with the purpose of creating a fundamental credit rating model for each industrial sector. Results of the

model are obtained by applying newly developed numerical methodologies, drawing together financial theory,

data mining and engineering design methodologies. The heart of MORE is a multi dimensional and multi objective

algorithm that produces a classification of each company, by taking into account any attributes (such as sector and

country) characterizing a firm.

The model gives the opportunity to assign a rating to a company even without considering a complete data analysis

and allows to process quality information. It induces a better understanding of a company’s strength and weakness

thanks to sophisticated data mining tools and taking into account the analyst knowledge.

The MORE rating vision is to look at the fundamental economics of the company. The main idea is to evaluate the

rating observing every aspect of the economical and financial behavior of the company: better is the equilibrium

between the different aspects, better will be the final rating.

This is done studying, evaluating and aggregating the most important sections of the financial and economic

behavior of a company such as: profitability, liquidity, solvency, interest coverage and efficiency.



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Rating scale

Rating class Rating macro class Assessment

AAA

Healthy

The company’s capacity to meet its financial commitments is extremely strong. The company shows an excellent

economic and financial flow and fund equilibrium.

AAThe company has very strong creditworthiness. It also has a good capital structure and economic and financial

equilibrium. Difference from AAA is slight.

AThe company has a high solvency. The company is however more susceptible to the adverse effects of changes in

circumstances and economic conditions than companies in higher rated categories.

BBB

Balanced

Capital structure and economic equilibrium are considered adequate. The company’s capacity to meet its financial

commitments could be affected by serious unfavourable events.

BBA company rated BB is more vulnerable than companies rated BBB. Furthermore the company faces major ongoing

uncertainties or exposure to adverse business, financial, or economic conditions.

B

Vulnerable

The company presents vulnerable signals with regards to its fundamentals. Adverse business, financial, or economic

conditions will be likely to impair the company’s capacity or willingness to meet its financial commitments.

CCC

A company rated CCC has a dangerous disequilibrium on the capital structure and on its economic and financial

fundamentals. Adverse market events and an inadequate management could affect with high probability the

company’s solvency.

CC

Risky

The company shows signals of high vulnerability. In the event of adverse market and economic conditions, the

company’s strong disequilibrium could increase.

CThe company shows considerable pathological situations. The company’s capacity to meet its financial

commitments is very low.

D The company has not any longer the capacity to meet its financial commitments.



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Fundamental Credit Rating Ratios

Analysis area Ratio Assessment

Solvency ratios

Leverage ratioThis measures the level of total liabilities of the company in comparison

with equity.

Assets to debtThis indicates company’s solvency. The company shows a level of deficit

when the value of this ratio is under one unit.

Financial ratios Fixed Assets coverage ratioThis is calculated only for holdings. It measures the capital structure i.e.

whether a company covers the fixed assets with long term capital.

Liquidity ratios

Current ratioThis measures whether a company has sufficient short-term assets to cover

its short-term liabilities.

Quick ratioThis compares current liabilities only to those assets that can be readily

turned into cash.

Profitability and economic ratios

Return on Investement(ROI)This measures the profitability of company investments without regard to

the way the investment is financed.

Return on Equity(ROE) This measures the profitability of the equity.

Asset turnover

This indicates the investments turnover with regards to sales. The level

assumed from the ratio depends on the sector in which the company

operates.

Profit margin This indicates the profitability of sales.

Interest coverage ratio Interest Paid coverage

This indicate the ability of the company to cover interest expenses through

the economic margins (Gross profit and EBIT) and through the cash flow

from operating activities.



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MORE Credit Limit, Probability of default and Confidence Level

MORE Credit Limit MORE Credit limit is the estimation of the amount of maximum credit that is possible to assign on a commercial

relationship with the analyzed company with an outlook of one year.

modeFinance used the following values associated with the company analyzed while computing the credit limit:

• Size;

• Years in Business;

• Average number of suppliers;

• Liquidity of the company and the comparison with its sector;

• The funds dedicated to be paid to suppliers;

• The likelihood that a company may pay its debts in the next 12 months (MORE Ratings).

The credit limit in this report is merely a suggested value of commercial credit limit calculated on the basis of annual

public data. This value should be reviewed by paying attention to the Confidence Level value and by using other

information such as other business information, news... etc; and private information such as the relationship with

client, history of payments, guarantees and the knowledge of the sector.

Probability of default e Confidence

Level

In addition to the MORE Rating, modeFinance also estimates the probability of default and provides a level of

confidence. The probability of default is the degree of certainty (in quantitative terms) that the company will go

into default.

As the probability of default is strongly affected by the economic climate that the company is operating in,

companies in the same MORE class will not necessarily have the same probability of default.

The MORE model can produce a MORE rating even if there is missing data by using an associated confidence level:

Confidence =

∑Available Information∑

Total Information

The level of confidence does not indicate financial confidence in the company. It is a reflection of the variations in

availability of financial data across Europe due to filing regulations and suggests the degree of financial detail the

MORE rating is able to take into account for each company.

For companies with fully populated records a confidence level of 100% would be applied: companies where no

financial data is provided, 0%. This puts the MORE rating in a context for the user and aids interpretation.



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Notes and disclaimer

NOTES modeFinance has based the present analysis on the company available financial statements, coming from one or

more of the following sources: local providers, Commercial Register (Companies House), websites, modeFinance’s

database etc.

DISCLAIMER All Rights Reserved. No part of this publication may be reproduced, stored in a retrieval system or transmitted in any

form by any means, electronic, mechanical, photocopying, recording or otherwise, without the prior permission of

the publisher modeFinance. The facts of this report are believed to be correct at the time of publication but cannot

be guaranteed. Please note that the findings, conclusions and recommendations that modeFinance delivers will

be based on information gathered in good faith from both primary and secondary sources, whose accuracy we

are not always in a position to guarantee. As such modeFinance can accept no liability whatever for actions taken

based on any information that may subsequently prove to be incorrect.

Contacts

Company modeFinance

Products MORE rating

Where AREA Science Park

34149 Trieste, via Padriciano 99 - ITALY

Info [email protected]

web www.modefinance.com

Phone +39 040 3755337

Digital Domain Media Group: modeFinance Credit Report

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