Dreamworks Animation Posts Profit in Q4 2010 Report

GLENDALE, Calif., Feb. 24, 2011  — DreamWorks Animation SKG, Inc. (Nasdaq: DWA) today announced financial results for its fourth quarter and full year ended December 31, 2010. In the quarter, the Company reported total revenue of $275.7 million and net income of $85.2 million, or $0.99 per share on a fully diluted basis. This compares to revenue of $194.2 million and net income of $43.6 million, or $0.50 per share on a fully diluted basis, for the same period in 2009.

For the twelve months ended December 31, 2010, the Company reported total revenue of $784.8 million and net income of $170.6 million, or $1.96 per share on a fully diluted basis. This compares to total revenue of $725.2 million and net income of $151.0 million, or $1.73 per share for the twelve months ended December 31, 2009. On a year-over-year basis, revenue for 2010 increased 8% and diluted earnings per share increased 13%.

The Company’s 2010 full year results reflect operating losses, including an impairment of capitalized expenses, of approximately $35 million, or $0.28 per diluted share associated with its online virtual world business and its Shrek The Musical national touring company.  The Company’s fourth quarter 2010 results included a tax benefit of approximately $45 million, or $0.52 per diluted share, which is primarily attributable to the release of substantially all of the valuation allowance associated with the Company’s deferred tax assets.

“In 2010, DreamWorks Animation became the first studio to release three feature-length CG animated films in a single year,” said Jeffrey Katzenberg, CEO of DreamWorks Animation. “How to Train Your Dragon, Shrek Forever After and Megamind together grossed approximately $1.6 billion worldwide — the Company’s biggest year ever at the box office.”

Megamind, which was released on November 5, 2010, contributed $26.6 million of revenue in the quarter, driven primarily by consumer products. The film has reached approximately $320 million in worldwide box office to date.

Shrek Forever After, which was released on May 21, 2010 and grossed over $750 million in worldwide box office, contributed $72.2 million of revenue in the quarter, driven primarily by home entertainment. The film reached an estimated 7.2 million home entertainment units sold worldwide through the end of the quarter, net of actual and estimated future returns.

How to Train Your Dragon, which was released on March 26, 2010 and grossed nearly $500 million in worldwide box office, contributed $80.3 million of revenue in the quarter, driven primarily by home entertainment. The film reached an estimated 7.5 million home entertainment units sold worldwide through the end of the quarter, net of actual and estimated future returns.

Monsters vs. Aliens contributed $6.0 million of revenue to the quarter, driven primarily by home entertainment. It reached an estimated 9.0 million home entertainment units sold worldwide through the end of the quarter, net of actual and estimated future returns.

Kung Fu Panda contributed $23.4 million of revenue to the quarter, primarily from international and domestic free television.

Library and other items contributed approximately $67.2 million of revenue to the quarter.

Costs of revenue for the quarter equaled $193.8 million. Selling, general and administrative expenses totaled $30.6 million, including approximately $7.5 million of stock compensation expense.

In the quarter, the Company released substantially all of the valuation allowance related to its deferred tax assets. The release was the main contributor to an expense of approximately $254.2 million related to its tax sharing agreement with a former stockholder and a benefit for income taxes of $287.4 million recorded in the fourth quarter. The Company expects that its 2011 full year effective tax rate will be in the low- to mid-30% range.

The Company also provided an update to its share repurchase program. For the full year 2010, the Company repurchased 3.1 million shares for approximately $111 million. The Company has $150 million remaining under its current authorization.

Finally, the Company does not expect any meaningful contribution to its first quarter 2011 financial results from Megamind‘s home entertainment release. The title is scheduled to be released domestically on February 25, 2011.

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