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DreamWorks Animation Reports Third Quarter 2012 Financial Results

November 1, 2012

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(®) 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 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.


Source: PR Newswire