DreamWorks Animation Reports Fourth Quarter and Full Year 2008 Financial Results

DreamWorks Animation Reports Fourth Quarter and Full Year 2008 Financial Results

GLENDALE, Calif., Feb. 24 /PRNewswire-FirstCall/ -- DreamWorks Animation SKG, Inc. (NYSE:DWA) today announced financial results for its fourth quarter and full year ended December 31, 2008. In the fourth quarter, the Company reported total revenue of $199.8 million and net income of $51.6 million, or $0.58 per share on a fully diluted basis. These results bring the full year reported revenue for 2008 to a total of $650.1 million and net income of $142.5 million, or $1.57 per share on a fully diluted basis.

"Box office receipts from Kung Fu Panda and Madagascar: Escape 2 Africa - the two highest-grossing family films of the year - together exceeded $1.2 billion, making 2008 one of DreamWorks Animation's most successful years ever," said Jeffrey Katzenberg, CEO of DreamWorks Animation.

Kung Fu Panda was the third highest-grossing film of the year, with over $630 million in worldwide box office. For the quarter, the title contributed $101.8 million of revenue, driven primarily by its release into the home video market. Through the end of 2008, Kung Fu Panda reached approximately 11.2 million units sold on a worldwide basis, net of actual and estimated future returns.

Madagascar: Escape 2 Africa was the seventh highest-grossing film of the year and has reached approximately $180 million in domestic box office and over $400 million internationally to date. The film contributed $24.0 million of revenue for the quarter, primarily from consumer products and revenue from the Company's distributor.

The Company's 2006 summer release, Over the Hedge, contributed $23.2 million of revenue for the quarter, primarily from domestic network and international free television.

The Company's 2007 releases, Bee Movie and Shrek the Third, delivered $9.7 million and $9.3 million, respectively, of revenue to the quarter, primarily from home entertainment. Through the end of 2008, the titles reached 8.4 and 21.4 million units, respectively, net of actual and estimated future returns.

Flushed Away contributed $2.8 million of revenue for the quarter, primarily from catalogue home video performance. Library and other revenue, including Shrek The Musical and Shrek the Halls, contributed $29.0 million to the quarter, driven by continued catalogue home entertainment performance. Through the end of 2008, Shrek the Halls reached approximately 1.8 million units sold on a worldwide basis, net of actual and estimated future returns.

Costs of revenue for the quarter equaled $117.4 million. Selling, general and administrative expenses totaled $27.8 million (including approximately $8.6 million of stock compensation expense) as compared to $26.5 million (including approximately $8.6 million of stock compensation expense) for the comparable period of 2007.

Results for the quarter also included a tax benefit of $0.12 per share on a fully diluted basis, attributable to the resolution of a prior year tax reserve related to FIN 48.

Looking to 2009, the Company expects full year results to be driven primarily by Madagascar: Escape 2 Africa and Monsters vs. Aliens, which opens domestically on March 27, 2009.

"We believe that Monsters vs. Aliens will reset the bar for what moviegoers should expect from a CG animated film and are confident that it will offer our audiences a premium viewing opportunity," Katzenberg continued. "We look forward to sharing DreamWorks Animation's first 3D release with the world beginning on March 27th."

The Company also provided an update to its share repurchase program. For the full year 2008, the Company purchased $185 million, or 6.8 million shares, and currently has approximately $50 million remaining under its current authorization.

Items related to the earnings press release for the fourth quarter of 2008 will be discussed in more detail on the Company's fourth quarter 2008 earnings conference call later today.

Conference Call Information

DreamWorks Animation will host a conference call and webcast to discuss the results on Tuesday, February 24, 2009, at 4:30 p.m. (ET). Investors can access the call by dialing (800) 230-1059 in the U.S. and (612) 288-0337 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, February 24, 2009. To access the replay, dial (800) 475-6701 in the U.S. and (320) 365-3844 internationally and enter 983068 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 seventeen animated feature films, including Shrek, Shrek 2, Shark Tale, Madagascar, Over the Hedge, Shrek the Third, Bee Movie, Kung Fu Panda and Madagascar: Escape 2 Africa. Monsters vs. Aliens opens in theaters on March 27, 2009. 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                                                          December 31,                                                   ----------------------                                                       2008        2007                                                   ----------  ----------                                                       (in thousands)                                                    (except par value and                                                            share                                                          amounts)   Assets   Cash and cash equivalents                         $262,644    $292,489   Trade accounts receivable, net of    allowance for doubtful accounts                     4,550       3,470   Income taxes receivable                              6,468           -   Receivable from Paramount, net of    reserve for returns and allowance for    doubtful accounts                                 186,522     272,647   Film costs, net                                    638,243     541,917   Prepaid expenses and other assets                   31,453      47,609   Property, plant, and equipment, net of    accumulated depreciation and amortization         114,913      86,772   Deferred taxes, net                                 27,049      48,664   Goodwill                                            34,216      34,216                                                   ----------  ----------   Total assets                                    $1,306,058  $1,327,784                                                   ==========  ==========    Liabilities and Stockholders' Equity   Liabilities         Accounts payable                              $7,499      $3,169         Accrued liabilities                          115,158     108,457         Payable to former stockholder                 54,192      68,371         Income taxes payable                               -      31,651         Deferred revenue and other advances           38,857      24,561         Borrowings and other debt                     70,059      70,059                                                   ----------  ----------   Total liabilities                                  285,765     306,268   Commitments and contingencies   Minority interest                                    2,941       2,941   Stockholders' equity         Class A common stock, par value $.01 per          share, 350,000,000 shares authorized,          95,381,143 and 93,547,321 shares issued,          as of December 31, 2008 and 2007,          respectively                                    954         935         Class B common stock, par value $.01 per          share, 150,000,000 shares authorized,          11,419,461 and 12,984,462 shares issued          and outstanding, as of December 31,          2008 and 2007, respectively                     114         130         Additional paid-in capital                   876,651     831,115         Retained earnings                            645,261     502,763         Less: Class A Treasury common stock,          at cost, 17,432,728 and 10,445,278          shares, as of December 31, 2008 and          2007, respectively                         (505,628)   (316,368)                                                   ----------  ----------   Total stockholders' equity                       1,017,352   1,018,575                                                   ----------  ----------   Total liabilities and stockholders'    equity                                         $1,306,058  $1,327,784                                                   ==========  ==========                 UNAUDITED CONSOLIDATED STATEMENTS OF INCOME                                                          Year Ended                                 Three Months Ended     December 31,                                 ------------------  -----------------                                   2008     2007      2008      2007                                 -------- ---------  -------  --------                                             (in thousands)                                       (except per share amounts)   Revenues                      $199,825 $290,228  $650,052  $767,178   Costs of revenues              117,384  138,143   365,485   372,295                                  -------  -------  --------  --------   Gross profit                    82,441  152,085   284,567   394,883   Product development                921        -     2,050         -   Selling, general and    administrative expenses        27,776   26,507   110,690   103,569                                  -------  -------  --------  --------   Operating income (loss)         53,744  125,578   171,827   291,314   Interest income, net             1,536    5,299     9,305    24,523   Other income, net                1,870    1,204     5,171     5,565   Decrease (increase) in income    tax benefit payable to    stockholder                     1,735  (41,959)  (23,465)  (93,653)                                  -------  -------  --------  --------   Income before income taxes      58,885   90,122   162,838   227,749   Provision for income taxes       7,330    4,022   (20,340)   (9,385)                                  -------  -------  --------  --------   Net income                     $51,555  $94,144  $142,498  $218,364                                  =======  =======  ========  ========    Basic net income per share       $0.59    $0.98     $1.59     $2.18                                  =======  =======  ========  ========   Diluted net income per share     $0.58    $0.98     $1.57     $2.17                                  =======  =======  ========  ========    Shares used in computing net    income per share         Basic                     87,530   95,578    89,880   100,083         Diluted                   88,635   95,943    90,976   100,469                 UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS                                                            Year Ended                                                           December 31,                                                       ------------------                                                         2008      2007                                                       --------  --------                                                         (in thousands)   Operating activities   Net income                                          $142,498  $218,364   Adjustments to reconcile net income to net    cash provided by operating activities:         Amortization and write off of film costs       324,691   351,600         Stock compensation expense                      37,600    34,037         Depreciation and amortization                    3,461     4,888         Revenue earned against deferred revenue and          other advances                                (75,201)  (94,010)         Deferred taxes, net                             21,615   (40,930)         Change in operating assets and liabilities:             Trade accounts receivable                   (1,080)   (2,261)             Receivable from Paramount                   86,125  (116,917)             Film costs                                (405,206) (399,456)             Prepaid expenses and other assets           16,516    (8,325)             Accounts payable and accrued liabilities     9,891    52,504             Payable to former stockholder              (14,179)   66,098             Income taxes payable\receivable, net       (38,949)   17,849             Deferred revenue and other advances         99,768    67,097                                                       --------  --------   Net cash provided by operating activities            207,550   150,538                                                       --------  --------    Investing activities   Purchases of property, plant,    and equipment                                       (49,049)  (10,327)   Purchase of other intangible assets                        -    (1,963)                                                       --------  --------   Net cash used in investing activities                (49,049)  (12,290)                                                       --------  --------    Financing Activities   Receipts from exercise of stock options                1,479     1,630   Excess tax benefits from employee    equity awards                                           357       870   Deferred debt costs                                     (922)        -   Purchase of treasury stock                          (189,260) (304,563)   Paramount signing bonus deemed a    contribution from controlling    stockholders                                              -         -   Repayment of Universal Studios advance                     -         -   Repayment of HBO debt                                      -   (50,000)                                                       --------  --------   Net cash used in financing activities               (188,346) (352,063)                                                       --------  --------   Increase (decrease) in cash and cash    equivalents                                         (29,845) (213,815)   Cash and cash equivalents at    beginning of year                                   292,489   506,304                                                       --------  --------   Cash and cash equivalents at end of year            $262,644  $292,489                                                       ========  ========      Supplemental disclosure of cash flow      information:         Cash paid (refunded) during the year for          income taxes, net                             $37,318   $31,598                                                       ========  ========         Cash paid during the year for          interest, net of amounts          capitalized                                      $869      $123                                                       ========  ========  

First Call Analyst:
FCMN Contact: atenn@dreamworksanimation.com

Source: DreamWorks Animation SKG, Inc.

CONTACT: DreamWorks Animation Investor Relations, +1-818-695-3900,
ir@dreamworksanimation.com, or DreamWorks Animation Corporate Communications,
+1-818-695-3658, shannon.olivas@dreamworks.com

Web Site: http://www.dreamworksanimation.com/

---

Profile: International Entertainment