DreamWorks Animation Reports Fourth Quarter and year-end 2011 Financial Results

DreamWorks Animation Reports Fourth Quarter and year-end 2011 Financial Results

GLENDALE, Calif., Feb. 28, 2012 /PRNewswire/ -- DreamWorks Animation SKG, Inc. (Nasdaq: DWA) today announced financial results for its fourth quarter ended December 31, 2011. In the quarter, the Company reported total revenue of $219.0 million and net income of $24.3 million, or $0.29 per share on a fully diluted basis. For the twelve months ended December 31, 2011, the Company reported total revenue of $706.0 million and net income of $86.8 million, or $1.02 per share on a fully diluted basis.

"DreamWorks Animation's two feature films in 2011 achieved a high level of commercial and critical success, as Kung Fu Panda 2 and Puss In Boots together reached $1.2 billion at the worldwide box office and each received an Academy Award® nomination for Best Animated Feature Film," said Jeffrey Katzenberg, Chief Executive Officer of DreamWorks Animation. "After its initial weekend, Puss In Boots is off to an excellent start in its domestic home video release and we are now looking ahead to the next big event for the Company: the theatrical release of Madagascar 3 on June 8, 2012."

Kung Fu Panda 2, which grossed approximately $665 million in worldwide box office, contributed $49.6 million of revenue in the quarter, driven primarily by its home entertainment performance. The film reached an estimated 5.1 million home entertainment units sold worldwide through the end of the fourth quarter, net of actual and estimated future returns.

Puss In Boots, which has grossed approximately $535 million in worldwide box office to date, contributed $23.8 million of revenue in the quarter, driven primarily by its performance at the worldwide box office as well as merchandising and licensing activities.

Megamind contributed $19.4 million of revenue in the quarter, driven primarily by international pay television. The film reached an estimated 5.0 million home entertainment units sold worldwide through the end of the fourth quarter, net of actual and estimated future returns.

Shrek Forever After and How to Train Your Dragon contributed $8.8 million and $7.7 million of revenue in the quarter, respectively, driven primarily by worldwide home entertainment and international television. Each film reached an estimated 9.7 million home entertainment units sold worldwide through the end of the fourth quarter, net of actual and estimated future returns.

Library and other items contributed approximately $109.7 million of revenue to the quarter, including $72.9 million of revenue attributable to non-film businesses.

Costs of revenue for the quarter equaled $159.4 million. Selling, general and administrative expenses totaled $26.0 million, including approximately $6.0 million of stock-based compensation expense.

The Company's income tax expense for the fourth quarter was $9.7 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 28.1% for the fourth quarter. The Company expects its 2012 full-year effective tax rate to be approximately 30.0%.

For the full year 2011, the Company repurchased approximately 0.9 million shares for $25 million. The Company has $125 million remaining under its current share repurchase authorization.

The Company's full year 2012 results are expected to be driven primarily by the performance of Madagascar 3, which is scheduled to be released on June 8, 2012. The Company's first quarter results are expected to be driven primarily by the international box office performance and domestic home video release of Puss In Boots.

Items related to the earnings press release for the fourth 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, February 28, 2012, 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, February 28, 2012. To access the replay, dial (800) 475-6701 in the U.S. and (320) 365-3844 internationally and enter 234240 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 four consecutive years. In 2012, DreamWorks Animation ranks #14 on the list. All of DreamWorks Animation's feature films are now being produced in 3D. The Company has theatrically released a total of 23 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(TM)
CONSOLIDATED BALANCE SHEETS

December 31,
2011 2010
---- ----
(in thousands,
except par value and
share amounts)
Assets
Cash and cash equivalents $116,093 $163,819
Trade accounts receivable, net of
allowance for doubtful accounts 72,456 40,136
Income taxes receivable 3,960 310
Receivable from Paramount, net of
allowance for doubtful accounts 214,647 242,629
Film and other inventory costs, net 882,646 772,668
Prepaid expenses 20,842 21,795
Other assets 13,023 9,900
Property, plant and equipment, net of
accumulated depreciation and amortization 172,511 174,803
Deferred taxes, net 248,519 295,602
Goodwill 34,216 34,216
---- ----
Total assets $1,778,913 $1,755,878
========== ==========

Liabilities and Stockholders' Equity
Liabilities:
Accounts payable $3,283 $3,515
Accrued liabilities 105,505 143,098
Payable to former stockholder 294,397 329,590
Deferred revenue and other advances 19,032 20,793
---- ----
Total liabilities 422,217 496,996
Commitments and contingencies
Stockholders' equity:
Class A common stock, par value $.01 per
share, 350,000,000 shares authorized,
98,333,454 and 97,436,947 shares issued,
as of December 31, 2011 and 2010,
respectively 983 975
Class B common stock, par value $.01 per
share, 150,000,000 shares authorized,
10,838,731 and 10,838,731 and shares
issued and outstanding, as of December
31, 2011 and 2010, respectively 108 108
Additional paid-in capital 1,023,405 979,177
Accumulated other comprehensive (loss)
income (1,041) 11
Retained earnings 1,053,736 966,935
Less: Class A Treasury common stock, at
cost, 25,139,548 and 23,834,081 shares,
as of December 31, 2011 and 2010,
respectively (720,495) (688,324)
-------- --------
Total stockholders' equity 1,356,696 1,258,882
------- -------
Total liabilities and stockholders' equity $1,778,913 $1,755,878
========== ==========

DreamWorks
Animation SKG(TM)
CONSOLIDATED STATEMENTS OF INCOME

Three Months Ended Year Ended
December 31, December 31,
------------ ------------
2011 2010 2011 2010
---- ---- ---- ----
(in thousands, except per share amounts)
Revenues $218,969 $275,671 $706,023 $784,791
Costs
of
revenues 159,443 193,841 480,747 506,422
------- ------- ------- -------
Gross
profit 59,526 81,830 225,276 278,369
Product
development 1,716 1,126 2,864 3,183
Selling,
general
and
administrative
expenses 26,021 30,603 112,554 108,342
------ ------ ------- -------
Operating
income 31,789 50,101 109,858 166,844
Interest
income,
net 240 209 643 599
Other
income,
net 1,757 1,667 7,150 8,107
Decrease
(increase)
in
income
tax
benefit
payable
to
former
stockholder 203 (254,184) 5,522 (289,052)
--- -------- ----- --------
Income
(loss)
before
income
taxes 33,989 (202,207) 123,173 (113,502)
Provision
(benefit)
for
income
taxes 9,709 (287,441) 36,372 (284,141)
----- -------- ------ --------
Net
income $24,280 $85,234 $86,801 $170,639
======= ======= ======= ========

Basic
net
income
per
share $0.29 $1.01 $1.04 $2.00
----- ----- ----- -----
Diluted
net
income
per
share $0.29 $0.99 $1.02 $1.96
----- ----- ----- -----
Shares
used
in
computing
net
income
per
share:
Basic 83,751 84,175 83,667 85,227
Diluted 84,761 86,026 84,772 87,183

DreamWorks
Animation SKG(TM)
CONSOLIDATED STATEMENTS OF CASH FLOWS

Year Ended December
31,
2011 2010
---- ----
(in thousands)
Operating activities
Net income $86,801 $170,639
Adjustments to reconcile net income to
net cash provided by operating
activities:
Amortization and write-off of film and
other inventory costs 388,169 424,175
Impairment charges related to online
virtual world asset - 11,954
Stock-based compensation expense 28,301 31,262
Depreciation and amortization 3,592 7,120
Revenue earned against deferred revenue
and other advances (85,855) (86,031)
Deferred taxes, net 44,749 (287,933)
Changes in operating assets and
liabilities:
Trade accounts receivable (26,360) 1,662
Receivable from Paramount 27,982 (71,337)
Film and other inventory costs (454,704) (464,127)
Prepaid expenses and other assets (2,165) (9,360)
Accounts payable and accrued liabilities (38,724) 33,273
Payable to former stockholder (35,192) 262,134
Income taxes payable/receivable, net (4,356) 7,923
Deferred revenue and other advances 101,264 60,285
------- ------
Net cash provided by operating activities 33,502 91,639
------ ------

Investing activities
Purchases of property, plant and
equipment (43,239) (50,633)
Investment in unconsolidated affiliate (5,000) -
------ ---
Net cash used in investing activities (48,239) (50,633)
------- -------

Financing Activities
Receipts from exercise of stock options 8 9,339
Excess (shortfall in) tax benefits from
employee equity awards 103 2,908
Deferred financing costs (338) -
Purchase of treasury stock (32,171) (120,863)
------- --------
Net cash used in financing activities (32,398) (108,616)
------- --------
Effect of exchange rate changes on cash
and cash equivalents (591) 184
---- ---
Decrease in cash and cash equivalents (47,726) (67,426)
Cash and cash equivalents at beginning of
year 163,819 231,245
------- -------
Cash and cash equivalents at end of year $116,093 $163,819
======== ========

Supplemental disclosure of cash flow
information:
Cash paid (refunded) during the year for
income taxes, net $(3,597) $(7,066)
======= =======
Cash paid during the year for interest,
net of amounts capitalized $679 $528
==== ====

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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