DreamWorks Animation Reports Third Quarter 2012 Financial Results

DreamWorks Animation Reports Third Quarter 2012 Financial Results

GLENDALE, Calif., Nov. 1, 2012 /PRNewswire/ -- DreamWorks Animation SKG, Inc. (NASDAQ: DWA) today announced financial results for its third quarter ended September 30, 2012. For the quarter, the Company reported total revenue of $186.3 million and net income of $24.4 million, or $0.29 per share on a fully diluted basis. This compares to revenue of $160.8 million and net income of $19.7 million, or $0.23 per share on a fully diluted basis, for the same period in 2011.

"DreamWorks Animation's third quarter results were driven by the blockbuster international box office success of Madagascar 3: Europe's Most Wanted, which has earned nearly $720 million at the worldwide box office to date, to become the fifth highest-grossing film of the year on a global basis," said Jeffrey Katzenberg, Chief Executive Officer of DreamWorks Animation. "We are looking forward to the next major event film for the Company during the fourth quarter, the November 21st theatrical release of Rise of the Guardians."

Madagascar 3: Europe's Most Wanted contributed approximately $47.1 million of revenue to the quarter, driven primarily by its performance at the worldwide box office. The film was released on June 8, 2012 and has grossed over $216 million at the domestic box office and approximately $503 million at the international box office to date.

Puss In Boots contributed $44.8 million of revenue to the quarter, driven primarily by domestic and international pay television. The film reached an estimated 5.6 million home entertainment units sold worldwide through the end of the third quarter, net of actual and estimated future returns.

Kung Fu Panda 2 contributed $9.0 million of revenue to the quarter, driven primarily by international pay television. The film reached an estimated 6.0 million home entertainment units sold worldwide through the end of the third quarter, net of actual and estimated future returns.

Megamind contributed $0.7 million of revenue to the quarter and reached an estimated 5.6 million home entertainment units sold worldwide through the end of the third quarter, net of actual and estimated future returns.

Library contributed approximately $50.6 million of revenue to the quarter. All Other items, including non-feature film businesses, contributed $30.1 million of revenue to the quarter. The Company's acquisition of Classic Media, which closed on August 29, 2012, contributed approximately $4.0 million of revenue to the quarter, primarily from home entertainment.

Costs of revenue for the third quarter equaled $114.0 million. Selling, general and administrative expenses totaled $36.5 million, including approximately $3.0 million of stock-based compensation expense.

The Company's income tax expense for the third quarter was $14.3 million. Its 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 34.5% for the third quarter.

DreamWorks Animation's fourth quarter results are expected to be driven primarily by the continued performance of Madagascar 3: Europe's Most Wanted in the international box office as well as the global home video market. The theatrical release of Rise of the Guardians on November 21, 2012 is also expected to contribute to the Company's fourth quarter results.

Items related to the earnings press release for the third quarter of 2012 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 Thursday, November 1, 2012, at 4:30 p.m. (ET). Investors can access the call by dialing (800) 288-8960 in the U.S. and (612) 234-9960 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 Thursday, November 1, 2012. To access the replay, dial (800) 475-6701 in the U.S. and (320) 365-3844 internationally and enter 260584 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 and live entertainment properties, 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 24 animated feature films, including the franchise properties of Shrek, Madagascar, Kung Fu Panda and How to Train Your Dragon.The Company's theatrical releases for the current year are Madagascar 3: Europe's Most Wanted on June 8, 2012 and Rise of the Guardians on November 21, 2012.

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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)

September 30, December 31, 2011
2012
----
(in thousands, except par value
and share amounts)
Assets
Cash and cash equivalents $130,705 $116,093
Trade accounts receivable, net of
allowance for doubtful accounts 101,175 72,456
Income taxes receivable 2,054 3,960
Receivable from Paramount, net of
allowance for doubtful accounts 181,504 214,647
Film and other inventory costs, net 1,007,693 882,646
Prepaid expenses 23,312 20,842
Other assets 24,713 13,023
Property, plant and equipment, net of
accumulated depreciation and
amortization 192,344 172,511
Deferred taxes, net 195,143 248,519
Intangible assets, net of accumulated
amortization 136,989 -
Goodwill 71,129 34,216
------ ------
Total assets $2,066,761 $1,778,913
========== ==========

Liabilities and Equity
Liabilities:
Accounts payable $5,048 $3,283
Accrued liabilities 124,611 105,505
Payable to former stockholder 278,436 294,397
Deferred revenue and other advances 31,367 19,032
Revolving credit facility 200,000 -
------- ---
Total liabilities 639,462 422,217
Commitments and contingencies
Equity:
Stockholders' equity:
Class A common stock, par value $.01
per share, 350,000,000 shares
authorized, 98,920,534 and 98,333,454
shares issued, as of September 30,
2012 and December 31, 2011,
respectively 989 983
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
September 30, 2012 and December 31,
2011, respectively 108 108
Additional paid-in capital 1,050,439 1,023,405
Accumulated other comprehensive income
(loss) 388 (1,041)
Retained earnings 1,100,022 1,053,736
Less: Class A Treasury common stock, at
cost, 25,399,378 and 25,139,548
shares, as of September 30, 2012 and
December 31, 2011, respectively (725,277) (720,495)
-------- --------
Total stockholders' equity 1,426,669 1,356,696
Non-controlling interests 630 -
--- ---
Total equity 1,427,299 1,356,696
--------- ---------
Total liabilities and equity $2,066,761 $1,778,913
========== ==========




DREAMWORKS ANIMATION SKG, INC.

CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)



Three Months Ended Nine Months Ended
September 30, September 30,
------------- -------------
2012 2011 2012 2011
---- ---- ---- ----
(in thousands, except per share amounts)
Revenues $186,298 $160,762 $485,185 $487,054
Costs of revenues 113,961 107,966 324,708 321,304
------- ------- ------- -------
Gross profit 72,337 52,796 160,477 165,750
Product development 1,258 724 3,732 1,147
Selling, general and
administrative
expenses 36,497 26,851 94,778 86,533
------ ------ ------ ------
Operating income 34,582 25,221 61,967 78,070
Interest (expense)
income, net (87) 142 1,097 403
Other income, net 2,831 1,334 6,673 5,393
Decrease in income tax
benefit payable to
former stockholder 1,369 555 1,761 5,319
----- --- ----- -----
Income before income
taxes 38,695 27,252 71,498 89,185
Provision for income
taxes 14,255 7,598 25,212 26,663
------ ----- ------ ------
Net income $24,440 $19,654 $46,286 $62,522
======= ======= ======= =======

Basic net income per
share $0.29 $0.24 $0.55 $0.75
Diluted net income per
share $0.29 $0.23 $0.54 $0.74
Shares used in
computing net income
per share
Basic 84,248 83,405 84,104 83,640
Diluted 85,293 84,791 85,049 84,764




DREAMWORKS ANIMATION SKG, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)

Nine Months Ended
September 30,
-------------
2012 2011
---- ----
(in thousands)
Operating activities
Net income $46,286 $62,522
Adjustments to reconcile net income to net cash
provided by operating activities:
Amortization and write-off of film and other
inventory costs 267,099 257,403
Amortization of acquired intangible assets 548 -
Stock-based compensation expense 13,692 22,134
Interest expense and amortization of deferred
financing costs 1,669 967
Depreciation and amortization 2,970 2,597
Revenue earned against deferred revenue and other
advances (58,781) (69,287)
Deferred taxes, net 24,545 27,501
Changes in operating assets and liabilities:
Trade accounts receivable (5,565) 13,776
Receivable from Paramount 33,143 65,377
Film and other inventory costs (348,260) (350,073)
Prepaid expenses and other assets (6,539) (5,909)
Accounts payable and accrued liabilities (5,949) (34,355)
Payable to former stockholder (15,961) (33,219)
Income taxes payable/receivable, net 1,891 (2,204)
Deferred revenue and other advances 77,735 89,279
------ ------
Net cash provided by operating activities 28,523 46,509
------ ------

Investing activities
Purchases of non-marketable securities (150) -
Purchases of property, plant and equipment (42,636) (28,928)
Investment in unconsolidated affiliates (3,000) (5,000)
Purchase of Classic Media, net of cash acquired (157,550) -
-------- ---
Net cash used in investing activities (203,336) (33,928)
-------- -------

Financing Activities
Excess tax benefits from employee equity awards (428) 30
Deferred financing costs (4,865) (338)
Purchase of treasury stock (4,725) (26,038)
Borrowings from revolving credit facility 200,000 -
------- ---
Net cash provided by (used in) financing activities 189,982 (26,346)
------- -------
Effect of exchange rate changes on cash and cash
equivalents (557) (458)
Increase (decrease) in cash and cash equivalents 14,612 (14,223)
Cash and cash equivalents at beginning of period 116,093 163,819
------- -------
Cash and cash equivalents at end of period $130,705 $149,596
======== ========

Non-cash investing activities:
Intellectual property license to unconsolidated
affiliate $1,780 $ -
====== ========================
Supplemental disclosure of cash flow information:
Cash paid during the period for income taxes, net of
amounts refunded $1,041 $1,790
====== ======
Cash paid during the period for interest, net of
amounts capitalized $5,819 $484
====== ====


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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