DreamWorks Animation Reports Second Quarter 2011 Financial Results

DreamWorks Animation Reports Second Quarter 2011 Financial Results

GLENDALE, Calif., July 26, 2011 /PRNewswire/ --DreamWorks Animation SKG, Inc. (Nasdaq: DWA) today announced financial results for its second quarter ended June 30, 2011. For the quarter, the Company reported total revenue of $218.3 million and net income of $34.1 million, or $0.40 per share on a fully diluted basis. This compares to revenue of $158.1 million and net income of $24.0 million, or $0.27 per share on a fully diluted basis, for the same period in 2010.

"Kung Fu Panda 2 is currently the fifth highest-grossing film of 2011 on a global basis and has exceeded $600 million at the worldwide box office to date," said Jeffrey Katzenberg, Chief Executive Officer of DreamWorks Animation. "We are looking forward to the next two big events for the Company during the second half of the year: the November 4th theatrical release of Puss In Boots and the release of Kung Fu Panda 2 into the home video market in the fourth quarter."

Kung Fu Panda 2, which was released on May 26, 2011, contributed $55.8 million of revenue in the quarter, generated by its worldwide box office performance as well as merchandising and licensing activities. It has grossed approximately $160 million in domestic box office and approximately $440 million in international box office to date.

Megamind contributed $19.7 million of revenue in the quarter, driven primarily by home entertainment. The film reached an estimated 4.3 million home entertainment units sold worldwide through the end of the second quarter, net of actual and estimated future returns.

Shrek Forever After and How to Train Your Dragon contributed $34.9 million and $41.4 million of revenue in the quarter, respectively, driven primarily by worldwide pay television and home entertainment. These films reached an estimated 8.8 million and 8.7 million home entertainment units, respectively, sold worldwide through the end of the second quarter, net of actual and estimated future returns.

Library and other items, including non-film businesses, contributed approximately $66.5 million of revenue to the quarter.

Costs of revenue for the quarter equaled $141.3 million. Selling, general and administrative expenses totaled $29.6 million, including approximately $8.4 million of stock-based compensation expense.

The Company's income tax expense for the second quarter was $15.3 million. The Company's combined effective tax rate - the actual tax rate coupled with the effect of the Company's tax sharing agreement with a former stockholder - was approximately 31% for the second quarter.

The Company's third quarter results are expected to be driven primarily by the continued international box office performance of Kung Fu Panda 2, in addition to domestic pay television revenue from Megamind. In the fourth quarter, the Company will release Puss In Boots into theaters on November 4th and Kung Fu Panda 2 into the home entertainment market.

Items related to the earnings press release for the second quarter of 2011 will be discussed in more detail on the Company's earnings conference call later today.

Conference Call Information

DreamWorks Animation will host a conference call and webcast to discuss the results on Tuesday, July 26, 2011, 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 26, 2011. To access the replay, dial (800) 475-6701 in the U.S. and (320) 365-3844 internationally and enter 208016 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 creates high-quality entertainment, including CG animated feature films, television specials and series, live entertainment properties and online virtual worlds, meant for audiences around the world. The Company has world-class creative talent, a strong and experienced management team and advanced filmmaking technology and techniques. DreamWorks Animation has been named one of the "100 Best Companies to Work For" by FORTUNE®Magazinefor three consecutive years. In 2011, DreamWorks Animation ranks #10 on the list. All of DreamWorks Animation's feature films are now being produced in 3D. The Company has theatrically released a total of 22 animated feature films, including the franchise properties of Shrek, Madagascar, Kung Fu Panda and How to Train Your Dragon.

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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**

DREAMWORKS ANIMATION SKG, INC.
CONSOLIDATED BALANCE SHEETS
(Unaudited)

December
June 30, 31,
2011 2010
--- ---
(in thousands,
except par value and
share
amounts)
Assets
Cash and cash equivalents $113,164 $163,819
Trade accounts receivable, net of
allowance for doubtful accounts 25,120 40,136
Income taxes receivable 8,999 310
Receivable from Paramount, net of
allowance for doubtful accounts 230,180 242,629
Film and other inventory costs, net 853,941 772,668
Prepaid expenses 21,886 21,795
Other assets 8,678 9,889
Property, plant and equipment, net of
accumulated depreciation and amortization 176,269 174,803
Deferred taxes, net 268,900 295,602
Goodwill 34,216 34,216
------ ------
Total assets $1,741,353 $1,755,867
========== ==========

Liabilities and Equity
Liabilities:
Accounts payable $3,916 $3,515
Accrued liabilities 107,393 143,098
Payable to former stockholder 296,925 329,590
Deferred revenue and other advances 32,964 20,793
------ ------
Total liabilities 441,198 496,996
Commitments and contingencies
Stockholders' equity:
Class A common stock, par value $.01 per
share, 350,000,000 shares authorized,
97,478,074 and 97,436,947 shares issued,
as of June 30, 2011 and December 31,
2010, respectively 975 975
Class B common stock, par value $.01 per
share, 150,000,000 shares authorized,
10,838,731 and 10,838,731 shares issued
and outstanding, as of June 30, 2011 and
December 31, 2010, respectively 108 108
Additional paid-in capital 1,003,286 979,177
Retained earnings 1,009,802 966,935
Less: Class A Treasury common stock, at
cost, 24,798,951 and 23,834,081 shares,
as of June 30, 2011 and December 31,
2010, respectively (714,016) (688,324)
-------- --------
Total stockholders' equity 1,300,155 1,258,871
--------- ---------
Total liabilities and equity $1,741,353 $1,755,867
========== ==========

DREAMWORKS ANIMATION SKG
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)

Three Months Ended Six Months Ended
June 30, June 30,
-------- --------
2011 2010 2011 2010
---- ---- ---- ----
(in thousands, except per share
amounts)
Revenues $218,255 $158,095 $326,292 $320,238
Costs of revenues 141,311 98,734 213,338 204,917
------- ------ ------- -------
Gross profit 76,944 59,361 112,954 115,321
Product development 255 422 423 607
Selling, general and
administrative expenses 29,554 27,751 59,683 51,261
------ ------ ------ ------
Operating income 47,135 31,188 52,848 63,453
Interest income, net 44 171 260 230
Other income, net 2,060 2,004 4,060 4,097
Decrease (increase) in
income tax benefit
payable to former
stockholder 175 (8,668) 4,764 (16,856)
--- ------ ----- -------
Income before income taxes 49,414 24,695 61,932 50,924
Provision for income taxes 15,341 720 19,065 5,280
------ --- ------ -----
Net income $34,073 $23,975 $42,867 $45,644
======= ======= ======= =======

Basic net income per share $0.41 $0.28 $0.51 $0.53
----- ----- ----- -----
Diluted net income per
share $0.40 $0.27 $0.51 $0.51
----- ----- ----- -----
Shares used in computing
net income per share
Basic 83,384 85,709 83,759 86,741
Diluted 84,565 87,582 84,854 88,972

DREAMWORKS ANIMATION SKG
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)

Six Months Ended
June 30,
--------
2011 2010
--- ---
(in thousands)
Operating activities
Net income $42,867 $45,644
Adjustments to reconcile net income to
net cash used in operating activities:
Amortization and write-off of film and
other inventory costs 172,568 183,295
Stock-based compensation expense 15,546 15,210
Depreciation and amortization 1,689 2,526
Revenue earned against deferred revenue
and other advances (49,360) (53,499)
Deferred taxes, net 26,702 563
Changes in operating assets and
liabilities:
Trade accounts receivable 15,016 (4,383)
Receivable from Paramount 12,449 10,033
Film and other inventory costs (233,973) (223,418)
Prepaid expenses and other assets (1,374) (15,540)
Accounts payable and accrued liabilities (35,202) (9,347)
Payable to former stockholder (32,665) (5,712)
Income taxes payable/receivable, net (8,739) (4,851)
Deferred revenue and other advances 71,166 35,549
------ ------
Net cash used in operating activities (3,310) (23,930)

Investing activities
Purchases of property, plant and
equipment (21,347) (26,590)
------- -------
Net cash used in investing activities (21,347) (26,590)

Financing Activities
Receipts from exercise of stock options 8 8,786
Excess tax benefits from employee equity
awards 24 673
Deferred financing costs (338) -
Purchase of treasury stock (25,692) (113,266)
------- --------
Net cash used in financing activities (25,998) (103,807)
------- --------
Decrease in cash and cash equivalents (50,655) (154,327)
Cash and cash equivalents at beginning
of period 163,819 231,245
------- -------
Cash and cash equivalents at end of
period $113,164 $76,918
======== =======

Supplemental disclosure of cash flow
information:
Cash paid during the period for income
taxes, net of amounts refunded $1,384 $8,891
====== ======
Cash paid during the period for
interest, net of amounts capitalized $290 $281
==== ====

SOURCE DreamWorks Animation SKG, Inc.

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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