DreamWorks Animation Reports Second Quarter 2009 Financial Results

GLENDALE, Calif., July 28 /PRNewswire-FirstCall/ -- DreamWorks Animation SKG, Inc. (NASDAQ: DWA) today announced financial results for its second quarter ended June 30, 2009. In the quarter, the Company reported total revenue of $132.0 million and net income of $25.6 million, or $0.30 per share on a fully diluted basis. This compares to revenue of $141.5 million and net income of $27.5 million, or $0.30 per share on a fully diluted basis, for the same period in 2008.

"Our solid second quarter results were driven primarily by the continued performance of our 2008 films, Kung Fu Panda and Madagascar: Escape 2 Africa," said Jeffrey Katzenberg, CEO of DreamWorks Animation. "Our third consecutive hit, Monsters vs. Aliens, has also reached blockbuster status in the U.S. at nearly $200 million. Additionally, we continue to make great progress on a number of our growth initiatives at DreamWorks Animation."

Kung Fu Panda, the Company's 2008 summer release, contributed approximately $32.7 million of revenue to the quarter, primarily driven by domestic pay television. Through the end of the second quarter, it reached an estimated 15.2 million home entertainment units sold worldwide, net of actual and estimated future returns.

The Company's fall 2008 release, Madagascar: Escape 2 Africa, contributed $26.1 million of revenue to the quarter, primarily driven by international home entertainment. Through the end of the second quarter, it reached an estimated 10.2 million home entertainment units sold worldwide, net of actual and estimated future returns.

During the second quarter the Company amended its video game agreement with Activision, which resulted in a financial impact to the quarter of $24.0 million of revenue and approximately $0.10 of net income per share on a fully diluted basis. Among other things, the amendment led to the recognition of certain guaranteed payments for several of the Company's previously released video game titles, including Monsters vs. Aliens.

Monsters vs. Aliens, which was released on March 27, 2009, contributed $10.3 million of revenue to the quarter, primarily as a result of the aforementioned amendment to the Company's video game agreement. Monsters vs. Aliens has grossed approximately $198 million at the domestic box office, bringing its worldwide box office total to over $377 million to date.

The Company's 2007 releases, Bee Movie and Shrek the Third, delivered $9.7 million and $2.4 million of revenue to the quarter, respectively, primarily from consumer products and home entertainment. Through the end of the second quarter, the titles reached an estimated 9.5 and 22.4 million home entertainment units sold worldwide, respectively, net of actual and estimated future returns.

Library and other titles contributed $50.8 million of revenue to the quarter, including $10.1 million of revenue from Shrek The Musical as well as continued catalogue home entertainment performance and international free television for feature films.

Costs of revenue for the quarter equaled $74.0 million. Selling, general and administrative expenses totaled $24.8 million (including approximately $8.4 million of stock compensation expense) as compared to $27.0 million (including approximately $8.3 million of stock compensation expense) for the comparable period of 2008.

Looking ahead, the Company's third quarter results are expected to be driven primarily by the home entertainment performance of Monsters vs. Aliens, which will be released on DVD and Blu-ray domestically on September 29, 2009, as well as Madagascar: Escape 2 Africa's domestic pay television.

The Company also provided an update to its share repurchase program. Year to date, the Company has purchased approximately $46.0 million, or 2.3 million shares, at an average per-share price of approximately $20.15. The Company has $150.0 million remaining under its current program.

Items related to the earnings press release for the second quarter of 2009 will be discussed in more detail on the Company's second quarter 2009 earnings conference call later today.

Conference Call Information

DreamWorks Animation will host a conference call and webcast to discuss the results on Tuesday, July 28, 2009, at 4:30 p.m. (ET). Investors can access the call by dialing (800) 230-1059 in the U.S. and (612) 234-9959 internationally and identifying "DreamWorks Animation Earnings" to the operator. The call will also be available via live webcast at www.dreamworksanimation.com.

A replay of the conference call will be available shortly after the call ends on Tuesday, July 28, 2009. To access the replay, dial (800) 475-6701 in the U.S. and (320) 365-3844 internationally and enter 105561 as the conference ID number. Both the earnings release and archived webcast will be available on the Company's website at www.dreamworksanimation.com.

About DreamWorks Animation SKG

DreamWorks Animation is principally devoted to developing and producing computer generated, or CG, animated feature films. With world-class creative talent, a strong and experienced management team and advanced CG filmmaking technology and techniques, DreamWorks Animation makes high quality CG animated films meant for a broad movie-going audience. The Company anticipates releasing its feature films into both conventional and IMAX(R) theatres worldwide. The Company has theatrically released a total of eighteen animated feature films, including Shrek, Shrek 2, Shark Tale, Madagascar, Over the Hedge, Shrek the Third, Bee Movie, Kung Fu Panda, Madagascar: Escape 2 Africa and Monsters vs. Aliens. All of the Company's feature films are now being produced in stereoscopic 3D technology.

Caution Concerning Forward-Looking Statements

This document includes certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. The Company's plans, prospects, strategies, proposals and our beliefs and expectations concerning performance of our current and future releases and anticipated talent, directors and storyline for our upcoming films and other projects, constitute forward-looking statements. These statements are based on current expectations, estimates, forecasts and projections about the industry in which we operate and management's beliefs and assumptions. These statements are not guarantees of future performance and involve risks, uncertainties and assumptions which are difficult to predict. Actual results may vary materially from those expressed or implied by the statements herein due to changes in economic, business, competitive, technological and/or regulatory factors, and other risks and uncertainties affecting the operation of the business of DreamWorks Animation SKG, Inc. These risks and uncertainties include: audience acceptance of our films, our dependence on the success of a limited number of releases each year, the increasing cost of producing and marketing feature films, piracy of motion pictures, the effect of rapid technological change or alternative forms of entertainment and our need to protect our proprietary technology and enhance or develop new technology. In addition, due to the uncertainties and risks involved in the development and production of animated feature projects, the release dates for the projects described in this document may be delayed. For a further list and description of such risks and uncertainties, see the reports filed by us with the Securities and Exchange Commission, including our most recent annual report on Form 10-K and our most recent quarterly reports on Form 10-Q. DreamWorks Animation is under no obligation to, and expressly disclaims any obligation to, update or alter its forward-looking statements, whether as a result of new information, future events, changes in assumptions or otherwise.

** FINANCIAL TABLES ATTACHED**

                      UNAUDITED CONSOLIDATED BALANCE SHEETS

                                                           June       December
                                                            30,          31,
                                                                                                             2009                  2008
                                                                                                                      ----                  ----
                                                                                                                        (in  thousands,
                                                                                                                except  par  value  and
                                                                                                                        share  amounts)
        Assets
            Cash  and  cash  equivalents                                                  $348,796          $262,644
            Trade  accounts  receivable,  net  of
              allowance  for  doubtful  accounts                                          2,123                4,550
            Income  taxes  receivable                                                          14,469                6,468
            Receivable  from  Paramount,  net
              of  reserve  for  returns  and
              allowance  for  doubtful  accounts                                      113,988            186,522
            Film  costs,  net                                                                        640,752            638,243
            Prepaid  expenses  and  other  assets                                      47,358              31,453
            Property,  plant  and  equipment,  net  of
              accumulated  depreciation  and
              amortization                                                                            132,917            114,913
            Deferred  taxes,  net                                                                  14,719              27,049
            Goodwill                                                                                        34,216              34,216
                                                                                                                    ------              ------
            Total  assets                                                                        $1,349,338      $1,306,058
                                                                                                            ==========      ==========

            Liabilities  and  Equity
            Liabilities:
                        Accounts  payable                                                            $2,249              $7,499
                        Accrued  liabilities                                                      92,244            115,158
                        Payable  to  former
                          stockholder                                                                    52,726              54,192
                        Deferred  revenue  and  other
                          advances                                                                          56,942              38,857
                        Borrowings  and  other  debt                                          70,059              70,059
                                                                                                                    ------              ------
            Total  liabilities                                                                    274,220            285,765
            Commitments  and  contingencies
            Equity:
                        Stockholders'  equity:
                                Class  A  common  stock,  par  value  $.01
                                  per  share,  350,000,000  shares
                                  authorized,  95,420,728  and
                                  95,381,143  shares  issued,  as  of  June
                                  30,  2009  and  December  31,  2008,
                                  respectively                                                                954                    954
                                Class  B  common  stock,  par  value  $.01
                                  per  share,  150,000,000  shares
                                  authorized,  11,419,461  shares
                                  issued  and  outstanding,  as  of  June
                                  30,  2009  and  December  31,  2008                            114                    114
                                Additional  paid-in  capital                              895,735            876,651
                                Retained  earnings                                                733,127            645,261
                                Less:  Class  A  Treasury  common  stock,
                                  at  cost,  20,127,485  and  17,432,728
                                  shares,  as  of  June  30,  2009  and
                                  December  31,  2008,  respectively                (557,753)        (505,628)
                                                                                                                --------          --------
                        Total  stockholders'  equity                                  1,072,177        1,017,352
                        Minority  interest                                                            2,941                2,941
                                                                                                                      -----                -----
            Total  equity                                                                          1,075,118        1,020,293
                                                                                                              ---------        ---------
            Total  liabilities  and  equity                                        $1,349,338      $1,306,058
                                                                                                            ==========      ==========



                                    UNAUDITED  CONSOLIDATED  STATEMENTS  OF  INCOME

                                                                                    Three  Months                  Six  Months
                                                                                          Ended                              Ended
                                                                                        June  30,                        June  30,
                                                                                        --------                        --------
                                                                                  2009            2008            2009            2008
                                                                                  ----            ----            ----            ----
                                                                        (in  thousands,  except  per  share  amounts)
            Revenues                                              $131,990    $141,530    $395,514    $298,702
            Costs  of  revenues                                74,022        76,092      230,428      172,583
                                                                              ------        ------      -------      -------
            Gross  profit                                          57,968        65,438      165,086      126,119
            Product  development                                    93              437          2,461              437
            Selling,  general  and
              administrative  expenses                  24,831        27,012        45,522        53,734
                                                                              ------        ------        ------        ------
            Operating  income                                  33,044        37,989      117,103        71,948
            Interest  income,  net                                979          2,474          1,518          5,457
            Other  income,  net                                  1,613          1,080          3,065          1,857
            Increase  in  income  tax  benefit
              payable  to  former  stockholder    (11,020)      (8,010)    (27,030)    (17,440)
                                                                            -------        ------      -------      -------
            Income  before  income  taxes              24,616        33,533        94,656        61,822
            Provision  (benefit)  for
              income  taxes                                            (940)        6,040          6,790          8,230
                                                                                  ----          -----          -----          -----
            Net  income                                            $25,556      $27,493      $87,866      $53,592
                                                                            =======      =======      =======      =======

            Basic  net  income  per  share                $0.30          $0.30          $1.01          $0.59
                                                                                -----          -----          -----          -----
            Diluted  net  income  per  share            $0.30          $0.30          $1.01          $0.58
                                                                                -----          -----          -----          -----
            Shares  used  in  computing  net
              income  per  share
                        Basic                                            85,890        90,370        86,673        91,366
                        Diluted                                        86,382        90,788        87,390        91,615



                                  UNAUDITED  CONSOLIDATED  STATEMENTS  OF  CASH  FLOWS

                                                                                                                          Six  Months  Ended
                                                                                                                                  June  30,
                                                                                                                                ----------
                                                                                                                            2009            2008
                                                                                                                            ----            ----
                                                                                                                          (in  thousands)
            Operating  activities
            Net  income                                                                                      $87,866      $53,592
            Adjustments  to  reconcile  net  income  to
              net  cash  provided  by  operating
              activities:
                        Amortization  and  write  off  of  film  costs              192,183      158,931
                        Stock  compensation  expense                                            14,695        18,277
                        Depreciation  and  amortization                                        1,831          1,139
                        Revenue  earned  against  deferred
                          revenue  and  other  advances                                        (51,667)    (42,084)
                        Deferred  taxes,  net                                                          12,330        (1,375)
                        Change  in  operating  assets  and
                          liabilities:
                                Trade  accounts  receivable                                        2,427      (10,702)
                                Receivable  from  Paramount                                      72,534      188,381
                                Film  costs                                                                (183,574)  (192,811)
                                Prepaid  expenses  and  other  assets                    (16,242)      14,304
                                Accounts  payable  and  accrued  liabilities      (27,749)    (15,428)
                                Payable  to  former  stockholder                              (1,466)    (20,205)
                                Income  taxes  payable/receivable,  net                (8,001)    (11,538)
                                Deferred  revenue  and  other  advances                  74,515        75,553
                                                                                                                        ------        ------
            Net  cash  provided  by  operating  activities                        169,682      216,034

            Investing  activities
            Purchases  of  property,  plant  and
              equipment                                                                                      (31,495)    (18,765)
                                                                                                                      -------      -------
            Net  cash  used  in  investing  activities                                (31,495)    (18,765)

            Financing  Activities
            Purchase  of  treasury  stock                                                      (52,125)    (88,661)
            Receipts  from  exercise  of  stock  options  and
              excess  tax  benefits  from  employee  equity
              awards                                                                                                      90              520
                                                                                                                              ---              ---
            Net  cash  used  in  financing  activities                                (52,035)    (88,141)
                                                                                                                      -------      -------
            Increase  in  cash  and  cash  equivalents                                  86,152      109,128
            Cash  and  cash  equivalents  at  beginning
              of  period                                                                                      262,644      292,489
                                                                                                                      -------      -------
            Cash  and  cash  equivalents  at  end
              of  period                                                                                    $348,796    $401,617
                                                                                                                    ========    ========

            Supplemental  disclosure  of  cash  flow
              information:
                        Cash  paid  during  the  period  for  income
                          taxes,  net                                                                          $2,373      $21,076
                                                                                                                        ======      =======
                        Cash  paid  during  the  period  for
                          interest,  net  of  amounts  capitalized                          $355            $567
                                                                                                                            ====            ====

 


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