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

February 28, 2012

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® Magazine for 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.


Source: PR Newswire