in revenue). The average domestic box office performance of our CG animated films has been significantly higher than that of our hand-drawn, two dimensional feature films. We do not have any hand-drawn, two dimensional films currently in production and do not intend to produce any such films. Webelieve our experience, creative talent, scale of operations, technology and animation proficiency enable us to release two high quality CG animated feature films per year. We released both Shrek 2 and Shark Tale in 2004, and we are scheduled to release our next CG animated feature film, Madagascar, into the domestic theatrical market on May 27, 2005 and Wallace & Gromit: Curse of the Were Rabbit, a stop-motion animated film produced by Aardman Animations, on October 5, 2005. We are in various stages of pre-production and production on four additional feature films that we expect to release through 2007. In addition, we have a substantial number of projects in creative and story development that are expected to fill the release schedule in 2008 and beyond. Our feature films are the source of substantially all of our revenue. We derive revenue from the worldwide exploitation of our feature films in theaters and in markets such as home video, pay and free broadcast television and ancillary markets. In the years 2002, 2003 and 2004, our operating revenue was $434.3 million, $301.0 million and $1,078.2, respectively. Our net loss in 2002 and 2003 was $25.1 million and $187.2 million, respectively, and our net income in 2004 was $333.0 million. Except for the fourth quarter of 2004, these results do not reflect the effects of our arrangements with DreamWorks Studios under the Distribution Agreement. We retain the exclusive copyright and other intellectual property rights to all of our films and characters, excluding Aardman Animations films and characters which we co-own with Aardman Animations (other than Wallace & Gromit: Curse of the Were Rabbit, for which we generally have worldwide distribution rights in perpetuity, excluding certain United Kingdom television rights and certain ancillary markets), and we have access to an established distribution and marketing network to fully exploit our films and characters in theatrical, home video, television and ancillary markets throughout the world. We have important strategic relationships with retailers, promotional partners and licensees around the world that significantly enhance both consumer awareness of our films and their revenue-producing potential. In addition to producing feature films for theatrical release, we intend to develop and produce CG animated films for the direct-to-video market. Effective October 1, 2004, we entered into the Distribution Agreement with DreamWorks Studios, pursuant to which DreamWorks Studios is generally responsible for the distribution, marketing and servicing of all of our completed animated films, including our previously released films, and direct-to-video films. DreamWorks Studios currently distributes, and we expect will continue to distribute, our motion pictures in international theatrical markets through distribution agreements with Vivendi Universal Entertainment LLLP (“Universal Studios”), a subsidiary of Universal Studios, Inc., an industry leading distributor and fulfillment services provider, CJ Corporation and its affiliate CJ Entertainment (collectively, “CJ Entertainment”) (in Korea and the People’s Republic of China) and Kadokawa Entertainment Inc. (“Kadokawa Entertainment”) (in Japan). DreamWorks Studios has engaged Universal Studios to be our worldwide principal fulfillment services provider for our home videos, excluding only Korea and Japan, where CJ Entertainment and Kadokawa Entertainment, respectively, perform such functions. The Distribution Agreement covers the distribution of our films and pictures in all media and markets on a worldwide basis that are available for delivery through the later of (i) delivery of 12 animated feature films, beginning with Shark Tale, and (ii) December 31, 2010. In general, the term of the Distribution Agreement will be extended to the extent of the term, if longer, of any of DreamWorks Studios’ sub-distribution, servicing and licensing agreements that cover our films and that we pre-approve (such as the Universal Agreements and DreamWorks Studios’ existing arrangements with CJ Entertainment and Kadokawa Entertainment). Even if we terminate our distribution relationship with DreamWorks Studios, our existing and future films generally will be subject to the terms of those pre-approved agreements. We retain the copyrights and other intellectual property related to our films and the right to directly exploit certain ancillary rights, such as commercial tie-ins and promotions, literary publishing, music publishing, soundtrack, radio, legitimate stage and merchandising rights. We believe our relationship with DreamWorks Studios provides us with many advantages, including the ability to create consumer awareness and demand for our films through 2