DreamWorks Animation Reports Third Quarter 2011 Financial Results
GLENDALE, Calif., Oct. 25, 2011 /PRNewswire/ -- DreamWorks Animation SKG, Inc. (Nasdaq: DWA) today announced financial results for its third quarter ended September 30, 2011. For the quarter, the Company reported total revenue of $160.8 million and net income of $19.7 million, or $0.23 per share on a fully diluted basis.
"DreamWorks Animation's third quarter results were driven by the blockbuster international box office success of Kung Fu Panda 2, the number one animated movie of the year and the fourth highest-grossing film on a worldwide basis," said Jeffrey Katzenberg, Chief Executive Officer of DreamWorks Animation. "The next big event for the Company is the theatrical release of Puss In Boots on October 28th and we look forward to seeing how it performs around the world through the fourth quarter."
Kung Fu Panda 2, which was released on May 26, 2011, contributed $39.4 million of revenue in the quarter, generated primarily by its international box office performance. It has grossed approximately $663.6 million in worldwide box office to date.
Megamind contributed $25.8 million of revenue in the quarter, driven primarily by domestic pay television. The film reached an estimated 4.6 million home entertainment units sold worldwide through the end of the third quarter, net of actual and estimated future returns.
Shrek Forever After and How to Train Your Dragon contributed $15.0 million and $9.2 million of revenue in the quarter, respectively, driven primarily by international pay television and worldwide home entertainment. Each film has reached an estimated 9.0 million home entertainment units, sold worldwide through the end of the third quarter, net of actual and estimated future returns.
Library and other items contributed approximately $71.4 million of revenue to the quarter, including $18.8 million of revenue attributable to non-film businesses.
Costs of revenue for the quarter equaled $108.0 million. Selling, general and administrative expenses totaled $26.9 million, including approximately $6.4 million of stock-based compensation expense.
The Company's income tax expense for the third quarter was $7.6 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 26.5% for the third quarter.
Year to date, the Company has repurchased approximately 0.9 million shares for $25 million. The Company has $125 million remaining under its current authorization.
"DreamWorks Animation's financial results tend to fluctuate due to, among other factors, the timing of our feature film releases and the number of our films in any given year. This is the case in the third quarter of 2011, in part because our financial results reflect the timing of the international theatrical release of Kung Fu Panda 2 this year compared to Shrek Forever After in 2010," added Lew Coleman, Chief Financial Officer and President of DreamWorks Animation.
The Company's fourth quarter results are expected to be driven primarily by the performance of Puss In Boots at the worldwide box office as well as the performances of Kung Fu Panda 2 and several of the Company's television specials in the home entertainment market.
Items related to the earnings press release for the third 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, October 25, 2011, at 4:30 p.m. (ET). Investors can access the call by dialing (877) 260-8897 in the U.S. and (612) 332-1210 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, October 25, 2011. To access the replay, dial (800) 475-6701 in the U.S. and (320) 365-3844 internationally and enter 219123 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.
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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 |
2010 |
||
(in thousands, except par value and share amounts) |
|||
Assets |
|||
Cash and cash equivalents |
$ 149,596 |
$ 163,819 |
|
Trade accounts receivable, net of allowance for doubtful accounts |
28,839 |
40,136 |
|
Income taxes receivable |
2,388 |
310 |
|
Receivable from Paramount, net of allowance for doubtful accounts |
177,252 |
242,629 |
|
Film and other inventory costs, net |
896,759 |
772,668 |
|
Prepaid expenses |
24,838 |
21,795 |
|
Other assets |
13,898 |
9,889 |
|
Property, plant and equipment, net of accumulated depreciation and amortization |
171,334 |
174,803 |
|
Deferred taxes, net |
268,101 |
295,602 |
|
Goodwill |
34,216 |
34,216 |
|
Total assets |
$ 1,767,221 |
$ 1,755,867 |
|
Liabilities and Equity |
|||
Liabilities: |
|||
Accounts payable |
$ 2,485 |
$ 3,515 |
|
Accrued liabilities |
110,631 |
143,098 |
|
Payable to former stockholder |
296,371 |
329,590 |
|
Deferred revenue and other advances |
27,225 |
20,793 |
|
Total liabilities |
436,712 |
496,996 |
|
Commitments and contingencies |
|||
Stockholders’ equity: |
|||
Class A common stock, par value $.01 per share, 350,000,000 shares authorized, 97,520,150 and 97,436,947 shares issued, as of September 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 September 30, 2011 and December 31, 2010, respectively |
108 |
108 |
|
Additional paid-in capital |
1,014,338 |
979,177 |
|
Retained earnings |
1,029,456 |
966,935 |
|
Less: Class A Treasury common stock, at cost, 24,815,433 and 23,834,081 shares, as of |
|||
September 30, 2011 and December 31, 2010, respectively |
(714,368) |
(688,324) |
|
Total stockholders’ equity |
1,330,509 |
1,258,871 |
|
Total liabilities and stockholders' equity |
$ 1,767,221 |
$ 1,755,867 |
|
DREAMWORKS ANIMATION SKG, INC. |
|||||
CONSOLIDATED STATEMENTS OF INCOME |
|||||
(Unaudited) |
|||||
Three Months Ended |
Nine Months Ended |
||||
September 30, |
September 30, |
||||
2011 |
2010 |
2011 |
2010 |
||
(in thousands, except per share amounts) |
|||||
Revenues |
$ 160,762 |
$ 188,882 |
$ 487,054 |
$ 509,120 |
|
Costs of revenues |
107,966 |
107,664 |
321,304 |
312,581 |
|
Gross profit |
52,796 |
81,218 |
165,750 |
196,539 |
|
Product development |
724 |
1,450 |
1,147 |
2,057 |
|
Selling, general and administrative expenses |
26,851 |
26,478 |
86,533 |
77,739 |
|
Operating income |
25,221 |
53,290 |
78,070 |
116,743 |
|
Interest income, net |
142 |
160 |
403 |
390 |
|
Other income, net |
1,334 |
2,343 |
5,393 |
6,440 |
|
Decrease (increase) in income tax benefit payable to former stockholder |
555 |
(18,012) |
5,319 |
(34,868) |
|
Income before income taxes |
27,252 |
37,781 |
89,185 |
88,705 |
|
Provision (benefit) for income taxes |
7,598 |
(1,980) |
26,663 |
3,300 |
|
Net income |
$ 19,654 |
$ 39,761 |
$ 62,522 |
$ 85,405 |
|
Basic net income per share |
$ 0.24 |
$ 0.47 |
$ 0.75 |
$ 1.00 |
|
Diluted net income per share |
$ 0.23 |
$ 0.47 |
$ 0.74 |
$ 0.98 |
|
Shares used in computing net income per share |
|||||
Basic |
83,405 |
83,946 |
83,640 |
85,491 |
|
Diluted |
84,791 |
85,496 |
84,764 |
87,503 |
|
DREAMWORKS ANIMATION SKG, INC. |
|||
CONSOLIDATED STATEMENTS OF CASH FLOWS |
|||
(Unaudited) |
|||
Nine Months Ended |
|||
September 30, |
|||
2011 |
2010 |
||
(in thousands) |
|||
Operating activities |
|||
Net income |
$ 62,522 |
$ 85,405 |
|
Adjustments to reconcile net income to net cash provided by operating activities: |
|||
Amortization and write-off of film and other inventory costs |
257,403 |
269,840 |
|
Stock-based compensation expense |
22,134 |
22,403 |
|
Depreciation and amortization |
2,597 |
4,693 |
|
Revenue earned against deferred revenue and other advances |
(69,287) |
(56,699) |
|
Deferred taxes, net |
27,501 |
(1,236) |
|
Changes in operating assets and liabilities: |
|||
Trade accounts receivable |
13,776 |
(1,128) |
|
Receivable from Paramount |
65,377 |
51,293 |
|
Film and other inventory costs |
(350,783) |
(342,498) |
|
Prepaid expenses and other assets |
(5,621) |
(17,134) |
|
Accounts payable and accrued liabilities |
(33,424) |
9,312 |
|
Payable to former stockholder |
(33,219) |
12,299 |
|
Income taxes payable/receivable, net |
(2,204) |
(2,140) |
|
Deferred revenue and other advances |
89,279 |
45,736 |
|
Net cash provided by operating activities |
46,051 |
80,146 |
|
Investing activities |
|||
Purchases of property, plant and equipment |
(28,928) |
(37,777) |
|
Investment in unconsolidated affiliate |
(5,000) |
— |
|
Net cash used in investing activities |
(33,928) |
(37,777) |
|
Financing Activities |
|||
Receipts from exercise of stock options |
6 |
8,801 |
|
Excess tax benefits from employee equity awards |
30 |
1,139 |
|
Deferred financing costs |
(338) |
— |
|
Purchase of treasury stock |
(26,044) |
(113,954) |
|
Net cash used in financing activities |
(26,346) |
(104,014) |
|
Decrease in cash and cash equivalents |
(14,223) |
(61,645) |
|
Cash and cash equivalents at beginning of period |
163,819 |
231,245 |
|
Cash and cash equivalents at end of period |
$ 149,596 |
$ 169,600 |
|
Supplemental disclosure of cash flow information: |
|||
Cash paid during the period for income taxes, net of amounts refunded |
$ 1,790 |
$ 5,513 |
|
Cash paid during the period for interest, net of amounts capitalized |
$ 484 |
$ 404 |
|
SOURCE DreamWorks Animation SKG, Inc.
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