DreamWorks Animation Reports First Quarter 2009 Financial Results

DreamWorks Animation Reports First Quarter 2009 Financial Results

GLENDALE, Calif., April 28 /PRNewswire-FirstCall/ -- DreamWorks Animation SKG, Inc. (NASDAQ:DWA) today announced financial results for its first quarter ended March 31, 2009. In the quarter, the Company reported total revenue of $263.5 million and net income of $62.3 million, or $0.71 per share on a fully diluted basis. This compares to revenue of $157.2 million and net income of $26.1 million, or $0.28 per share on a fully diluted basis, for the same period in 2008.

"This marks the Company's strongest first quarter ever, attributable primarily to the blockbuster performance of Madagascar: Escape 2 Africa, both at the international box office and in the domestic home video market," said Jeffrey Katzenberg, CEO of DreamWorks Animation. "Adding to our recent theatrical achievements, Monsters vs. Aliens is the highest-grossing film of the year to date and DreamWorks Animation's third consecutive domestic blockbuster in 10 months."

For the quarter, Madagascar: Escape 2 Africa contributed $147.5 million of revenue, driven by international box office and its release into the domestic home entertainment market. The film has now reached approximately $595 million in worldwide box office and an estimated 6.7 million home entertainment units sold worldwide, net of actual and estimated future returns.

"Having two of the top home video releases in back-to-back quarters demonstrates the continued strength of our product in the home entertainment market," stated Ann Daly, Chief Operating Officer of DreamWorks Animation. "Just as it does in theaters, family content - and CG animated hits in particular - continues to outperform the industry as a whole."

Kung Fu Panda, DreamWorks Animation's most successful original film ever, contributed approximately $34.1 million of revenue during the first quarter of 2009, primarily from international home entertainment. Through the end of the first quarter, Kung Fu Panda reached an estimated 14.3 million home entertainment units sold worldwide, net of actual and estimated future returns.

The Company's 2007 and 2006 fall releases, Bee Movie and Flushed Away, delivered $21.2 million and $12.2 million of revenue to the quarter, respectively. The former was driven by international pay television and the latter by worldwide free television. Through the end of the first quarter, Bee Movie reached an estimated 9.1 million home entertainment units sold worldwide, net of actual and estimated future returns.

Monsters vs. Aliens, the Company's 2009 release, contributed $10.5 million of revenue during the first quarter of 2009, primarily from consumer products. The film was released domestically on March 27th and has now reached approximately $320 million in worldwide box office.

The Company's 2006 and 2007 summer releases, Over the Hedge and Shrek the Third, delivered $8.8 million and $5.3 million of revenue to the quarter, respectively. Both titles were driven primarily by international free television. Library and other revenue contributed $23.9 million of revenue to the quarter, including $9.8 million from Shrek The Musical.

Costs of revenue for the quarter equaled $156.4 million. Selling, general and administrative expenses totaled $20.7 million (including approximately $5.9 million of stock compensation expense) as compared to $26.7 million (including approximately $9.7 million of stock compensation expense) for the comparable period of 2008.

Results for the quarter also included a tax benefit of approximately $18.8 million related to the Company's tax sharing agreement with a former stockholder, which resulted in a lower effective tax rate. This benefit was partially offset by a $16.0 million increase in cost for the income tax benefit payable to the former stockholder (as shown on the consolidated statement of income before the line item, "income before income taxes"), resulting in an overall net increase to net income of $2.8 million, or an estimated $0.03 per share on a fully diluted basis.

The Company also provided an update to its share repurchase program. Year to date, it has purchased $46 million, or 2.3 million shares, at an average price of approximately $20.20. Finally, the Company announced that its Board of Directors has authorized future share repurchases of up to $150 million. These repurchases may be made in the open market, in block trades or in privately negotiated transactions.

Items related to the earnings press release for the first quarter of 2009 will be discussed in more detail on the Company's first 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, April 28, 2009, at 4:30 p.m. (ET). Investors can access the call by dialing (800) 230-1059 in the U.S. and (612) 332-0107 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, April 28, 2009. To access the replay, dial (800) 475-6701 in the U.S. and (320) 365-3844 internationally and enter 993846 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

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                                        March 31,     December 31,                                         2009            2008                                         ----            ----                                     (in thousands, except par value                                            and share amounts)   Assets   Cash and cash equivalents            $260,630        $262,644   Trade accounts receivable, net    of allowance for doubtful accounts     4,998           4,550   Income taxes receivable                11,490           6,468   Receivable from Paramount, net of    reserve for returns and allowance    for doubtful accounts                233,284         186,522   Film costs, net                       609,894         638,243   Prepaid expenses and other assets      41,113          31,453   Property, plant and equipment, net    of accumulated depreciation    and amortization                     121,802         114,913   Deferred taxes, net                    13,501          27,049   Goodwill                               34,216          34,216                                          ------          ------   Total assets                       $1,330,928      $1,306,058                                      ==========      ==========    Liabilities and Equity   Liabilities:         Accounts payable                 $1,162          $7,499         Accrued liabilities              91,894         115,158         Payable to former          stockholder                     44,506          54,192         Deferred revenue and other          advances                        64,022          38,857         Borrowings and other debt        70,059          70,059                                          ------          ------   Total liabilities                     271,643         285,765   Commitments and contingencies   Equity:       Stockholders' equity:         Class A common stock, par          value $.01 per share,          350,000,000 shares          authorized, 95,392,465 and          95,381,143 shares issued,          as of March 31, 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          March 31, 2009 and          December 31, 2008                  114             114         Additional paid-in capital      884,627         876,651         Retained earnings               707,571         645,261         Less: Class A Treasury          common stock, at cost,          19,184,505 and 17,432,728          shares, as of March 31,          2009 and December 31,          2008, respectively            (536,922)       (505,628)                                        --------        --------       Total stockholders' equity      1,056,344       1,017,352       Minority interest                   2,941           2,941                                           -----           -----   Total equity                        1,059,285       1,020,293                                       ---------       ---------   Total liabilities and    equity                            $1,330,928      $1,306,058                                      ==========      ==========                UNAUDITED CONSOLIDATED STATEMENTS OF INCOME                                                      Three Months                                                        Ended                                                      March 31,                                                     -----------                                                   2009      2008                                                   ----      ----                                                (in thousands, except per                                                      share amounts)   Revenues                                      $263,524  $157,172   Costs of revenues                              156,406    96,491                                                  -------    ------   Gross profit                                   107,118    60,681   Product development                              2,368         -   Selling, general and administrative expenses    20,691    26,722                                                   ------    ------   Operating income                                84,059    33,959   Interest income, net                               539     2,983   Other income, net                                1,452       777   Increase in income tax benefit payable to    former stockholder                            (16,010)   (9,430)                                                  -------    ------   Income before income taxes                      70,040    28,289   Provision for income taxes                       7,730     2,190                                                    -----     -----   Net income                                     $62,310   $26,099                                                  =======   =======    Basic net income per share                       $0.71     $0.28                                                    -----     -----   Diluted net income per share                     $0.71     $0.28                                                    -----     -----   Shares used in computing net income per share         Basic                                     87,465    92,314         Diluted                                   88,102    92,416                 UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS                                                            Three Months                                                              Ended                                                            March 31,                                                           -----------                                                         2009      2008                                                         ----      ----                                                         (in thousands)   Operating activities   Net income                                           $62,310   $26,099   Adjustments to reconcile net income to net    cash provided by operating activities:         Amortization and write off of film costs       135,237    92,511         Stock compensation expense                       5,854     9,695         Depreciation and amortization                      726       582         Revenue earned against deferred revenue and          other advances                                (10,831)   (2,552)         Deferred taxes, net                             13,548     2,644         Change in operating assets and          liabilities:             Trade accounts receivable                     (448)  (12,092)             Receivable from Paramount                  (46,762)  117,018             Film costs                                (101,657)  (97,404)             Prepaid expenses and other assets           (9,664)   10,499             Accounts payable and accrued liabilities   (29,431)  (33,397)             Payable to former stockholder               (9,686)  (24,316)             Income taxes payable/receivable, net        (5,022)  (20,324)             Deferred revenue and other advances         38,496    38,473                                                         ------    ------   Net cash provided by operating activities             42,670   107,436    Investing activities   Purchases of property, plant and equipment           (13,411)   (6,775)                                                        -------    ------   Net cash used in investing activities                (13,411)   (6,775)    Financing Activities   Receipts from exercise of stock options                   21       120   Excess tax benefits from employee    equity awards                                             -         6   Purchase of treasury stock                           (31,294)  (83,837)                                                        -------   -------   Net cash used in financing activities                (31,273)  (83,711)                                                        -------   -------   Increase\(Decrease) in cash and cash    equivalents                                          (2,014)   16,950   Cash and cash equivalents at    beginning of period                                 262,644   292,489                                                        -------   -------   Cash and cash equivalents at end of period          $260,630  $309,439                                                       ========  ========    Supplemental disclosure of cash flow    information:         Cash paid/(received) during the period for          income taxes, net                               $(878)  $19,864                                                          =====   =======         Cash paid during the period for          interest, net of amounts capitalized             $218      $342                                                           ====      ====  

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/

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Profile: International Entertainment