DreamWorks Animation Reports Second Quarter 2009 Financial Results

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 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                                                             ====      ====  

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

Source: DreamWorks Animation SKG, Inc.

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

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

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Profile: International Entertainment