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DreamWorks Animation Reports Fourth Quarter and Full Year 2009 Financial Results

February 23, 2010

GLENDALE, Calif., Feb. 23 /PRNewswire-FirstCall/ — DreamWorks Animation SKG, Inc. (Nasdaq: DWA) today announced financial results for its fourth quarter and full year ended December 31, 2009. In the quarter, the Company reported total revenue of $194.2 million and net income of $43.6 million, or $0.50 per share on a fully diluted basis. For the twelve months ended December 31, 2009, the Company reported total revenue of $725.2 million and net income of $151.0 million, or $1.73 per share on a fully diluted basis. This compares to total revenue of $650.1 million and net income of $142.5 million, or $1.57 per share for the twelve months ended December 31, 2008. On a year-over-year basis, revenue for 2009 increased nearly 12%, resulting in an over 10% increase in earnings per share.

“Thanks both to the success of our core business and the performance of our TV initiatives, DreamWorks Animation had a very strong fourth quarter,” said Jeffrey Katzenberg, CEO of DreamWorks Animation. “Additionally, we are thrilled to have delivered double-digit year-over-year growth in 2009 not only amid one of the most challenging economic environments, but also during a year in which we had only one feature film release.”

The Company’s 2009 release, Monsters vs. Aliens, contributed $29.1 million of revenue to the quarter, driven primarily by home entertainment and pay-per-view. The film reached an estimated 6.6 million home entertainment units sold, net of actual and estimated future returns, by the end of the fourth quarter.

The Company’s 2008 releases, Madagascar: Escape 2 Africa and Kung Fu Panda, contributed $23.3 million and $17.5 million of revenue to the quarter, respectively, driven primarily by home entertainment and international pay television. Through the end of the fourth quarter, Madagascar: Escape 2 Africa reached 12.9 million and Kung Fu Panda reached 17.4 million home entertainment units sold worldwide, net of actual and estimated future returns.

Shrek the Third, the Company’s spring 2007 release, contributed $38.6 million of revenue to the quarter, driven primarily by domestic network and international free television. The Company’s fall 2007 release, Bee Movie, contributed $2.3 million of revenue in the quarter, driven primarily by home entertainment.

Library and other titles contributed $33.0 million of revenue to the quarter, including $10.3 million of revenue from Shrek The Musical.

The Company’s television specials and series contributed $50.4 million of revenue to the quarter, led by its two new 2009 holiday television specials, Monsters vs. Aliens: Mutant Pumpkins from Outer Space and Merry Madagascar.

Costs of revenue for the quarter equaled $113.9 million. Selling, general and administrative expenses totaled $25.6 million (including approximately $7.2 million of stock compensation expense) as compared to $27.8 million (including approximately $8.6 million of stock compensation expense) for the comparable period of 2008.

The Company reported a lower effective tax rate resulting from its tax sharing arrangement with a former stockholder. The Company is required to remit 85% of any tax savings received pursuant to the tax sharing arrangement to the former stockholder. Combining the amount due to the former stockholder with the effective tax, results in an overall equivalent rate for the quarter of 23.3%. The net positive contribution to the Company is approximately $0.03 per diluted share.

The Company’s full year 2010 results are expected to be driven primarily by the performance of How to Train Your Dragon, which is scheduled to be released on March 26, 2010 and Shrek Forever After, which is scheduled to be released on May 21, 2010. The Company’s first quarter results are expected to be driven primarily by the merchandising and consumer products programs associated with the release of How to Train Your Dragon as well as by Monsters vs. Aliens domestic pay television, Madagascar: Escape 2 Africa international pay television, and Shrek the Third and Bee Movie international free television.

“We have been building toward 2010 for several years and are looking ahead with excitement to accomplishing what no other studio in history has ever done by releasing three computer-generated animated films in a single year – all in 3D: How to Train Your Dragon, Shrek Forever After and Megamind,” added Katzenberg.

Finally, the Company provided an update to its share repurchase program. For the full year 2009, the Company purchased $45.7 million, or 2.3 million shares. The Company has $150 million remaining under its current authorization.

Items related to the earnings press release for the fourth quarter of 2009 will be discussed in more detail on the Company’s fourth quarter 2009 earnings conference call later today.

Conference Call Information

DreamWorks Animation will host a conference call and webcast to discuss the results on Tuesday, February 23, 2010, at 4:30 p.m. (ET). Investors can access the call by dialing (800) 230-1059 in the U.S. and (612) 288-0337 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 23, 2010. To access the replay, dial (800) 475-6701 in the U.S. and (320) 365-3844 internationally and enter 142718 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 SKG

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 two consecutive years. In 2010, DreamWorks Animation ranks #6 on the list. All of DreamWorks Animation’s feature films are now being produced in 3D. The Company has theatrically released a total of 18 animated feature films, including the franchise properties, Shrek, Madagascar and Kung Fu Panda. DreamWorks Animation’s three feature film releases in 2010 are How to Train Your Dragon, Shrek Forever After and Megamind.

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**

                           CONSOLIDATED BALANCE SHEETS                

                                               December 31,
                                             2009        2008
                                             ----        ----
                                            (in thousands,
                                         except par value and
                                             share amounts)
      Assets
      Cash and cash equivalents           $231,245    $262,644
      Trade accounts receivable, net
       of allowance for doubtful
       accounts                             42,175       4,550
      Income taxes receivable                9,016       6,468
      Receivable from Paramount, net
       of reserve for returns and
       allowance for doubtful accounts
                                           171,292     186,522
      Film costs, net                      695,963     638,243
      Prepaid expenses and other
       assets                               41,463      31,453
      Property, plant and equipment,
       net of accumulated depreciation
       and amortization                    161,558     114,913
      Deferred taxes, net                    7,669      27,049
      Goodwill                              34,216      34,216
                                            ------      ------
      Total assets                      $1,394,597  $1,306,058
                                        ==========  ========== 

      Liabilities and Stockholders' Equity
      Liabilities:
            Accounts payable                $2,400      $7,499
            Accrued liabilities            111,281     115,158
            Payable to former
             stockholder                    67,456      54,192
            Deferred revenue and other
             advances                       60,870      38,857
            Borrowings and other debt            -      70,059
                                               ---      ------
      Total liabilities                    242,007     285,765
      Commitments and contingencies
      Equity:
          Stockholders' equity:
            Class A common stock, par
             value $.01 per share,
             350,000,000 shares
             authorized, 95,967,515 and
             95,381,143 shares issued,
             as of December 31, 2009
             and 2008, respectively            960         954
            Class B common stock, par
             value $.01 per share,
             150,000,000 shares
             authorized, 11,419,461 and
             shares issued and
             outstanding, as of
             December 31, 2009 and
             2008                              114         114
            Additional paid-in capital     922,681     876,651
            Retained earnings              796,296     645,261
            Less: Class A Treasury
             common stock, at cost,
             20,430,031 and 17,432,728
             shares, as of December 31,
             2009 and 2008,
             respectively                 (567,461)   (505,628)
                                          --------    --------
          Total stockholders' equity     1,152,590   1,017,352
          Minority interest                      -       2,941
                                               ---       -----
      Total equity                       1,152,590   1,020,293
                                         ---------   ---------
      Total liabilities and
       stockholders' equity             $1,394,597  $1,306,058
                                        ==========  ========== 

                           CONSOLIDATED STATEMENTS OF INCOME                  

                                     Three Months Ended     Year Ended
                                         December 31,       December 31,
                                        --------------     --------------
                                        2009      2008     2009      2008
                                        ----      ----     ----      ----
                                     (in thousands, except per share amounts) 

      Revenues                        $194,217  $199,825 $725,179  $650,052
      Costs of revenues                113,873   117,384  433,367   365,485
                                       -------   -------  -------   -------
      Gross profit                      80,344    82,441  291,812   284,567
      Product development                  129       921    2,745     2,050
      Selling, general and
       administrative expenses          25,562    27,776   95,771   110,690
                                        ------    ------   ------   -------
      Operating income                  54,653    53,744  193,296   171,827
      Interest income, net                 198     1,536    1,953     9,305
      Other income, net                  1,940     1,870    7,196     5,171
      Decrease (Increase) in income
       tax benefit payable to former
       stockholder                     (12,600)    1,735  (41,760)  (23,465)
                                       -------     -----  -------   -------
      Income before income taxes        44,191    58,885  160,685   162,838
      Provision for income taxes           630     7,330    9,650    20,340
                                           ---     -----    -----    ------
      Net income                       $43,561   $51,555 $151,035  $142,498
                                       =======   ======= ========  ======== 

      Basic net income per share         $0.50     $0.59    $1.75     $1.59
                                         -----     -----    -----     -----
      Diluted net income per share       $0.50     $0.58    $1.73     $1.57
                                         -----     -----    -----     -----
      Shares used in computing net
       income per share:
            Basic                       86,307    87,530   86,385    89,880
            Diluted                     87,793    88,635   87,301    90,976 

                      CONSOLIDATED STATEMENTS OF CASH FLOWS               

                                                        Year Ended
                                                        December 31,
                                                       2009      2008
                                                       ----      ----
                                                       (in thousands)
      Operating activities
      Net income                                    $151,035  $142,498
      Adjustments to reconcile net income to net
       cash provided by operating activities:
            Amortization and write off of film
             costs                                   349,273   324,691
            Stock compensation expense                30,191    37,600
            Depreciation and amortization              3,132     3,461
            Revenue earned against deferred
             revenue and other advances              (73,193)  (75,201)
            Deferred taxes, net                       19,380    21,615
            Change in operating assets and
             liabilities:
                Trade accounts receivable            (37,625)   (1,080)
                Receivable from Paramount             15,230    86,125
                Film costs                          (380,339) (405,206)
                Prepaid expenses and other assets    (11,114)   16,516
                Accounts payable and accrued
                 liabilities                          (8,617)    9,891
                Payable to former stockholder         13,264   (14,179)
                Income taxes payable/receivable,
                 net                                  (1,718)  (38,949)
                Deferred revenue and other
                 advances                            104,612    99,768
                                                     -------    ------
      Net cash provided by operating activities      173,511   207,550 

      Investing activities
      Purchases of property, plant and equipment     (74,394)  (49,049)
      Purchase of other intangible assets                  -         -
                                                      ------    ------
      Net cash used in investing activities          (74,394)  (49,049)

      Financing Activities
      Receipts from exercise of stock options          4,676     1,479
      Excess tax benefits from employee equity
       awards                                           (359)      357
      Deferred debt issuance costs                         -      (922)
      Purchase of treasury stock                     (61,833) (189,260)
      Repayment of campus financing                  (73,000)        -
      Repayment of HBO debt                                -         -
                                                      ------    ------
      Net cash used in financing activities         (130,516) (188,346)
                                                    --------  --------
      Decrease in cash and cash equivalents          (31,399)  (29,845)
      Cash and cash equivalents at beginning of
       year                                          262,644   292,489
                                                     -------   -------
      Cash and cash equivalents at end of year      $231,245  $262,644
                                                    ========  ======== 

        Supplemental disclosure of cash flow
         information:
            Cash paid (refunded) during the year
             for income taxes, net                   $(7,652)  $37,318
                                                     =======   =======
            Cash paid during the year for
             interest, net of amounts capitalized       $729      $869
                                                        ====      ==== 

SOURCE DreamWorks Animation SKG, Inc.


Source: newswire



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