July 26, 2011

DreamWorks Animation Reports Second Quarter 2011 Financial Results

GLENDALE, Calif., July 26, 2011 /PRNewswire/ -- DreamWorks Animation SKG, Inc. (Nasdaq: DWA) today announced financial results for its second quarter ended June 30, 2011. For the quarter, the Company reported total revenue of $218.3 million and net income of $34.1 million, or $0.40 per share on a fully diluted basis. This compares to revenue of $158.1 million and net income of $24.0 million, or $0.27 per share on a fully diluted basis, for the same period in 2010.

"Kung Fu Panda 2 is currently the fifth highest-grossing film of 2011 on a global basis and has exceeded $600 million at the worldwide box office to date," said Jeffrey Katzenberg, Chief Executive Officer of DreamWorks Animation. "We are looking forward to the next two big events for the Company during the second half of the year: the November 4th theatrical release of Puss In Boots and the release of Kung Fu Panda 2 into the home video market in the fourth quarter."

Kung Fu Panda 2, which was released on May 26, 2011, contributed $55.8 million of revenue in the quarter, generated by its worldwide box office performance as well as merchandising and licensing activities. It has grossed approximately $160 million in domestic box office and approximately $440 million in international box office to date.

Megamind contributed $19.7 million of revenue in the quarter, driven primarily by home entertainment. The film reached an estimated 4.3 million home entertainment units sold worldwide through the end of the second quarter, net of actual and estimated future returns.

Shrek Forever After and How to Train Your Dragon contributed $34.9 million and $41.4 million of revenue in the quarter, respectively, driven primarily by worldwide pay television and home entertainment. These films reached an estimated 8.8 million and 8.7 million home entertainment units, respectively, sold worldwide through the end of the second quarter, net of actual and estimated future returns.

Library and other items, including non-film businesses, contributed approximately $66.5 million of revenue to the quarter.

Costs of revenue for the quarter equaled $141.3 million. Selling, general and administrative expenses totaled $29.6 million, including approximately $8.4 million of stock-based compensation expense.

The Company's income tax expense for the second quarter was $15.3 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 31% for the second quarter.

The Company's third quarter results are expected to be driven primarily by the continued international box office performance of Kung Fu Panda 2, in addition to domestic pay television revenue from Megamind. In the fourth quarter, the Company will release Puss In Boots into theaters on November 4th and Kung Fu Panda 2 into the home entertainment market.

Items related to the earnings press release for the second 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, July 26, 2011, 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, July 26, 2011. To access the replay, dial (800) 475-6701 in the U.S. and (320) 365-3844 internationally and enter 208016 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 three consecutive years. In 2011, DreamWorks Animation ranks #10 on the list. All of DreamWorks Animation's feature films are now being produced in 3D. The Company has theatrically released a total of 22 animated feature films, including the franchise properties of Shrek, Madagascar, Kung Fu Panda and How to Train Your Dragon.


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
                                                   June 30,        31,
                                                        2011         2010
                                                         ---          ---
                                                       (in thousands,
                                                    except par value and
      Cash and cash equivalents                     $113,164     $163,819
      Trade accounts receivable, net of
       allowance for doubtful accounts                25,120       40,136
      Income taxes receivable                          8,999          310
      Receivable from Paramount, net of
       allowance for doubtful accounts               230,180      242,629
      Film and other inventory costs, net            853,941      772,668
      Prepaid expenses                                21,886       21,795
      Other assets                                     8,678        9,889
      Property, plant and equipment, net of
       accumulated depreciation and amortization     176,269      174,803
      Deferred taxes, net                            268,900      295,602
      Goodwill                                        34,216       34,216
                                                      ------       ------
      Total assets                                $1,741,353   $1,755,867
                                                  ==========   ==========

    Liabilities and Equity
        Accounts payable                              $3,916       $3,515
        Accrued liabilities                          107,393      143,098
        Payable to former stockholder                296,925      329,590
        Deferred revenue and other advances           32,964       20,793
                                                      ------       ------
      Total liabilities                              441,198      496,996
      Commitments and contingencies
      Stockholders' equity:
        Class A common stock, par value $.01 per
         share, 350,000,000 shares authorized,
         97,478,074 and 97,436,947 shares issued,
         as of June 30, 2011 and December 31,
         2010, respectively                              975          975
        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 June 30, 2011 and
         December 31, 2010, respectively                 108          108
        Additional paid-in capital                 1,003,286      979,177
        Retained earnings                          1,009,802      966,935
        Less: Class A Treasury common stock, at
         cost, 24,798,951 and 23,834,081 shares,
         as of June 30, 2011 and December 31,
         2010, respectively                         (714,016)    (688,324)
                                                    --------     --------
      Total stockholders' equity                   1,300,155    1,258,871
                                                   ---------    ---------
      Total liabilities and equity                $1,741,353   $1,755,867
                                                  ==========   ==========

                                    DREAMWORKS ANIMATION SKG
                               CONSOLIDATED STATEMENTS OF INCOME

                                 Three Months Ended       Six Months Ended
                                      June 30,                June 30,
                                      --------                --------
                                    2011       2010       2011       2010
                                    ----       ----       ----       ----
                                      (in thousands, except per share
     Revenues                   $218,255   $158,095   $326,292   $320,238
     Costs of revenues           141,311     98,734    213,338    204,917
                                 -------     ------    -------    -------
     Gross profit                 76,944     59,361    112,954    115,321
     Product development             255        422        423        607
     Selling, general and
      administrative expenses     29,554     27,751     59,683     51,261
                                  ------     ------     ------     ------
     Operating income             47,135     31,188     52,848     63,453
     Interest income, net             44        171        260        230
     Other income, net             2,060      2,004      4,060      4,097
     Decrease (increase) in
      income tax benefit
      payable to former
      stockholder                    175     (8,668)     4,764    (16,856)
                                     ---     ------      -----    -------
     Income before income taxes   49,414     24,695     61,932     50,924
     Provision for income taxes   15,341        720     19,065      5,280
                                  ------        ---     ------      -----
     Net income                  $34,073    $23,975    $42,867    $45,644
                                 =======    =======    =======    =======

     Basic net income per share    $0.41      $0.28      $0.51      $0.53
                                   -----      -----      -----      -----
     Diluted net income per
      share                        $0.40      $0.27      $0.51      $0.51
                                   -----      -----      -----      -----
     Shares used in computing
      net income per share
          Basic                   83,384     85,709     83,759     86,741
          Diluted                 84,565     87,582     84,854     88,972

                                DREAMWORKS ANIMATION SKG

                                                         Six Months Ended
                                                             June 30,
                                                           2011        2010
                                                            ---         ---
                                                          (in thousands)
     Operating activities
     Net income                                         $42,867     $45,644
     Adjustments to reconcile net income to
      net cash used in operating activities:
          Amortization and write-off of film and
           other inventory costs                        172,568     183,295
          Stock-based compensation expense               15,546      15,210
          Depreciation and amortization                   1,689       2,526
          Revenue earned against deferred revenue
           and other advances                           (49,360)    (53,499)
          Deferred taxes, net                            26,702         563
          Changes in operating assets and
             Trade accounts receivable                   15,016      (4,383)
             Receivable from Paramount                   12,449      10,033
             Film and other inventory costs           (233,973)    (223,418)
             Prepaid expenses and other assets           (1,374)    (15,540)
             Accounts payable and accrued liabilities   (35,202)     (9,347)
             Payable to former stockholder              (32,665)     (5,712)
             Income taxes payable/receivable, net        (8,739)     (4,851)
             Deferred revenue and other advances         71,166      35,549
                                                         ------      ------
     Net cash used in operating activities               (3,310)    (23,930)

     Investing activities
     Purchases of property, plant and
      equipment                                         (21,347)    (26,590)
                                                        -------     -------
     Net cash used in investing activities              (21,347)    (26,590)

     Financing Activities
     Receipts from exercise of stock options                  8       8,786
     Excess tax benefits from employee equity
      awards                                                 24         673
     Deferred financing costs                              (338)          -
     Purchase of treasury stock                         (25,692)   (113,266)
                                                        -------    --------
     Net cash used in financing activities              (25,998)   (103,807)
                                                        -------    --------
     Decrease in cash and cash equivalents              (50,655)   (154,327)
     Cash and cash equivalents at beginning
      of period                                         163,819     231,245
                                                        -------     -------
     Cash and cash equivalents at end of
      period                                           $113,164     $76,918
                                                       ========     =======

     Supplemental disclosure of cash flow
          Cash paid during the period for income
           taxes, net of amounts refunded                $1,384      $8,891
                                                         ======      ======
          Cash paid during the period for
           interest, net of amounts capitalized            $290        $281
                                                           ====        ====

SOURCE DreamWorks Animation SKG, Inc.