February 26, 2013

DreamWorks Animation Reports Fourth Quarter and Year-End 2012 Financial Results

GLENDALE, Calif., Feb. 26, 2013 /PRNewswire/ -- DreamWorks Animation SKG, Inc. (Nasdaq: DWA) today announced financial results for its fourth quarter ended December 31, 2012. In the quarter, the Company reported total revenue of $264.7 million and a net loss of $82.7 million, or a loss of $0.98 per share. For the twelve months ended December 31, 2012, the Company reported total revenue of $749.8 million and a net loss of $36.4 million, or a loss of $0.43 per share.

Impacting DreamWorks Animation's fourth quarter and full-year 2012 results is a charge of approximately $165 million, which includes a write-down of film costs for Rise of the Guardians in the amount of $87 million, charges totaling $54 million related to the Company's decision to return Me & My Shadow back to development, a write-off of a number of other development projects in the amount of $20 million and a charge of $4.6 million related to restructuring activities.

"While Rise of the Guardians did not achieve the level of box office success that we have come to expect from a DreamWorks Animation film, we have made several changes to our future slate that we believe will position us well for the next two years," said Jeffrey Katzenberg, Chief Executive Officer of DreamWorks Animation. "We are now looking ahead to our next release — and our first under our new distribution agreement with Twentieth Century Fox — The Croods on March 22, 2013."

Rise of the Guardians, which has grossed $302.3 million at the worldwide box office, contributed revenue of $6.1 million to the quarter.

Madagascar 3: Europe's Most Wanted, which has grossed $746.6 million at the worldwide box office, contributed revenue of $95.2 million to the quarter, primarily from home entertainment and international box office. The film reached an estimated 6.0 million net home entertainment units sold worldwide through the end of the fourth quarter, net of actual and estimated future returns.

Puss In Boots contributed $10.5 million of revenue to the quarter, primarily from pay television and home entertainment. The film reached an estimated 6.2 million home entertainment units sold worldwide through the end of the fourth quarter, net of actual and estimated future returns.

Kung Fu Panda 2 contributed $4.8 million of revenue to the quarter, primarily from home entertainment. The film reached an estimated 6.5 million home entertainment units sold worldwide through the end of the fourth quarter, net of actual and estimated future returns.

Library, which now includes Megamind, contributed approximately $63.4 million of revenue to the quarter. Other items, including holiday television specials and live theatrical properties, contributed approximately $53.1 million of revenue to the quarter. Classic Media contributed approximately $31.6 million of revenue to the quarter.

Costs of revenue for the quarter equaled $354 million. Selling, general and administrative expenses totaled $36.5 million, including approximately $3.1 million of stock-based compensation expense.

The Company's income tax benefit for the fourth quarter was $42.4 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 34.3% for the fourth quarter.

The Company has $125 million remaining under its current share repurchase authorization.

The Company's full year 2013 results are expected to be driven primarily by the performance of The Croods, which is scheduled to be released on March 22, 2013 and Turbo, which is scheduled to be released on July 19, 2013.

Items related to the earnings press release for the fourth 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 Tuesday, February 26, 2013, at 4:30 p.m. (ET). Investors can access the call by dialing (800) 230-1074 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 26, 2013. To access the replay, dial (800) 475-6701 in the U.S. and (320) 365-3844 internationally and enter 279175 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 five consecutive years. In 2013, DreamWorks Animation ranks #12 on the list. All of DreamWorks Animation's feature films are produced in 3D. The Company has theatrically released a total of 25 animated feature films, including the franchise properties of Shrek, Madagascar, Kung Fu Panda, How to Train Your Dragon and Puss In Boots.

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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.

DREAMWORKS ANIMATION SKG, INC.




CONSOLIDATED BALANCE SHEETS 

(Unaudited)











December 31,


2012

2011


(in thousands, except par value

and share amounts)


Assets



Cash and cash equivalents 

$          59,246

$        116,093

Trade accounts receivable, net of allowance for doubtful accounts 

111,533

72,456

Income taxes receivable 

-

3,960

Receivable from Paramount, net of allowance for doubtful accounts 

263,754

214,647

Film and other inventory costs, net 

820,482

882,646

Prepaid expenses

18,593

20,842

Other assets

24,651

13,023

Property, plant and equipment, net of accumulated depreciation and amortization 

188,986

172,511

Deferred taxes, net 

238,007

248,519

Intangible assets, net of accumulated amortization

148,234

-

Goodwill 

71,406

34,216

Total assets 

$     1,944,892

$     1,778,913




Liabilities and Equity



Liabilities:



Accounts payable 

$            6,611

$            3,283

Accrued liabilities 

123,886

105,505

Payable to former stockholder 

277,632

294,397

Deferred revenue and other advances 

25,517

19,032

Revolving credit facility

165,000

-

Total liabilities 

598,646

422,217

Commitments and contingencies



Equity:



DreamWorks Animation SKG, Inc. Stockholders' Equity:



Class A common stock, par value $0.01 per share, 350,000,000 shares authorized, 102,687,323 and 98,333,454 shares issued, as of December 31, 2012 and 2011, respectively 

1,027

983

Class B common stock, par value $0.01 per share, 150,000,000 shares authorized, 7,838,731 and 10,838,731 shares issued and outstanding, as of December 31, 2012 and 2011, respectively 

78

108

Additional paid-in capital 

1,057,452

1,023,405

Accumulated other comprehensive income (loss)

313

(1,041)

Retained earnings 

1,017,314

1,053,736

Less: Class A Treasury common stock, at cost, 25,661,817 and 25,139,548 shares, as of December 31, 2012 and 2011, respectively 

(730,568)

(720,495)

Total DreamWorks Animation SKG, Inc. stockholders' equity 

1,345,616

1,356,696

Non-controlling interests

630

-

Total equity

1,346,246

1,356,696

Total liabilities and equity 

$     1,944,892

$     1,778,913




DREAMWORKS ANIMATION SKG, INC.






CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

















 Three Months Ended 

 Year Ended 

 December 31, 

 December 31, 


2012

2011

2012

2011


 (in thousands, except per share amounts) 

Revenues 

$        264,657

$        218,969

$        749,842

$        706,023

Costs of revenues 

353,964

159,443

678,672

480,747

Gross (loss) profit 

(89,307)

59,526

71,170

225,276

Product development 

1,159

1,716

4,891

2,864

Selling, general and administrative expenses 

36,464

26,021

131,242

112,554

Operating (loss) income 

(126,930)

31,789

(64,963)

109,858

Interest (expense) income, net 

(616)

240

481

643

Other income, net 

1,607

1,757

8,280

7,150

Decrease in income tax benefit payable to former stockholder 

804

203

2,565

5,522

(Loss) income before income taxes 

(125,135)

33,989

(53,637)

123,173

(Benefit) provision for income taxes 

(42,427)

9,709

(17,215)

36,372

Net (loss) income 

$         (82,708)

$          24,280

$         (36,422)

$          86,801






Basic net (loss) income per share 

$             (0.98)

$              0.29

$             (0.43)

$              1.04

Diluted net (loss) income per share 

$             (0.98)

$              0.29

$             (0.43)

$              1.02

Shares used in computing net (loss) income per share:





Basic 

84,596

83,751

84,228

83,667

Diluted 

84,596

84,761

84,228

84,772






DREAMWORKS ANIMATION SKG, INC.




CONSOLIDATED STATEMENTS OF CASH FLOWS 

(Unaudited)











 Year Ended December 31, 


2012

2011


 (in thousands) 

Operating activities



Net (loss) income 

$           (36,422)

$             86,801

Adjustments to reconcile net (loss) income to net cash provided by operating activities:



Amortization and write-off of film and other inventory costs 

567,936

388,169

Amortization of intangible assets

2,189

-

Stock-based compensation expense 

17,044

28,301

Provision for doubtful accounts and returns reserves

13,915

988

Amortization of deferred financing costs

651

288

Depreciation and amortization 

4,158

3,304

Revenue earned against deferred revenue and other advances  

(74,197)

(85,855)

Deferred taxes, net 

(18,408)

44,749

Changes in operating assets and liabilities, net of the effects of the acquisition of Classic Media:


-

Trade accounts receivable 

(28,502)

(26,360)

Receivable from Paramount 

(49,020)

26,994

Film and other inventory costs 

(449,974)

(454,704)

Prepaid expenses and other assets 

(3,305)

(2,165)

Accounts payable and accrued liabilities 

5,647

(38,724)

Payable to former stockholder 

(16,765)

(35,192)

Income taxes payable/receivable, net 

111

(4,356)

Deferred revenue and other advances 

93,339

101,264

Net cash provided by operating activities 

28,397

33,502




Investing activities



Purchases of non-marketable securities

(150)

-

Investment in unconsolidated affiliates

(3,000)

(5,000)

Purchase of character rights

(11,900)

-

Purchases of property, plant and equipment 

(61,584)

(43,239)

Purchase of Classic Media, net of cash acquired

(157,550)

-

Net cash used in investing activities 

(234,184)

(48,239)




Financing Activities



Receipts from exercise of stock options 

-

8

Excess tax benefits from employee equity awards 

863

103

Deferred financing costs

(5,297)

(338)

Purchase of treasury stock 

(10,035)

(32,171)

Borrowings from revolving credit facility

200,000

-

Repayments of borrowings under revolving credit facility

(35,000)

-

Net cash provided by (used in) financing activities 

150,531

(32,398)

Effect of exchange rate changes on cash and cash equivalents

(1,591)

(591)

Decrease in cash and cash equivalents 

(56,847)

(47,726)

Cash and cash equivalents at beginning of year 

116,093

163,819

Cash and cash equivalents at end of year 

$             59,246

$           116,093




Non-cash investing activities:



Intellectual property license to unconsolidated affiliate

$               1,780

$                       -

Supplemental disclosure of cash flow information:



Cash refunded during the year for income taxes, net

$                   (27)

$              (3,597)

Cash paid during the year for interest, net of amounts capitalized

$               7,343

$                  679




 

 

SOURCE DreamWorks Animation SKG, Inc.

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