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