DreamWorks Animation Reports First Quarter 2014 Financial Results

      DreamWorks Animation Reports First Quarter 2014 Financial Results

PR Newswire

GLENDALE, Calif., April 29, 2014

GLENDALE, Calif., April 29, 2014 /PRNewswire/ -- DreamWorks Animation SKG,
Inc. (Nasdaq: DWA) today announced financial results for its first quarter
ended March 31, 2014. For the quarter, the Company reported total revenue of
$147.2 million, a net loss attributable to the Company of $42.9 million, or a
loss of $0.51 per share.

The Company's first quarter 2014 results included an impairment charge of $57
million related to the performance of Mr. Peabody & Sherman in the worldwide
theatrical market.

"The box office shortfall of Mr. Peabody & Sherman is evidence of the current
challenges we face within our feature film segment, and restoring the strength
in our core business is my number one priority today," said Jeffrey
Katzenberg, Chief Executive Officer of DreamWorks Animation. "Our next film is
How to Train Your Dragon 2 on June 13, 2014, and I am confident that its
performance will put us back on-track to once again reach the levels of box
office success that we've achieved historically."

The feature film segment contributed revenue of $110.1 million and a gross
loss of $25.4 million to the first quarter.

Mr. Peabody & Sherman, which was released theatrically on March 7, 2014, has
grossed $261 million at the worldwide box office to date. It contributed
feature film revenue of $3.0 million to the first quarter and remains in an
un-recouped position with the Company's main distributor.

Turbo contributed feature film revenue of $22.3 million to the first quarter,
primarily from domestic pay television. The film reached an estimated 4.8
million home entertainment units sold worldwide through the end of the first
quarter, net of actual and estimated future returns.

The Croods contributed feature film revenue of $41.7 million to the first
quarter, primarily from domestic pay television and home entertainment. The
film reached an estimated 7.1 million home entertainment units sold worldwide
through the end of the first quarter, net of actual and estimated future
returns.

Rise of the Guardians and Madagascar 3: Europe's Most Wanted contributed
feature film revenue of $3.4 million and $1.8 million to the first quarter,
respectively, primarily from home entertainment. Rise of the Guardians reached
an estimated 5.5 million and Madagascar 3: Europe's Most Wanted reached an
estimated 9.1 million home entertainment units sold worldwide through the end
of the first quarter, net of actual and estimated future returns.

Library titles contributed feature film revenue of $37.9 million to the first
quarter.

The Television segment contributed revenue of $17.9 million and gross profit
of $5.8 million to the first quarter, primarily from Classic Media content and
DreamWorks Dragons: Riders of Berk on Cartoon Network.

The Consumer Products segment contributed revenue of $12.1 million and gross
profit of $6.0 million to the first quarter.

The segment consisting of all other items contributed revenue of $7.1 million
and gross profit of approximately $200 thousand to the first quarter. As a
part of the segment, AwesomenessTV contributed revenue of $4.1 million and a
gross loss of $80 thousand to the first quarter.

Costs of revenue for the first quarter equaled $160.7 million. Selling,
general and administrative expenses totaled $49.7 million, including $5.1
million of stock-based compensation expense.

The Company's income tax benefit for the first quarter was $22.5 million. The
Company's combined effective tax rate, its actual tax rate coupled with the
effect of a tax sharing agreement with a former stockholder, was approximately
35.5% for the first quarter.

Significant second quarter 2014 events include the theatrical release of How
to Train Your Dragon 2 and the release of The Croods into international pay
television markets.

Items related to the earnings press release for the first quarter of 2014 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, April 29, 2014, at4:30 p.m. (ET). Investors can access
the call by dialing (800) 230-1085 in the U.S. and (612) 332-0107
internationally and identifying "DreamWorks Animation Earnings" to the
operator. The call will also be available via live webcast
atir.dreamworksanimation.com.

A replay of the conference call will be available shortly after the call ends
onTuesday, April 29, 2014. To access the replay, dial (800) 475-6701 in the
U.S. and (320) 365-3844 internationally and enter 323099 as the conference ID
number. Both the earnings release and archived webcast will be available on
the Company's website at ir.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 FORTUNEĀ® 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 28 animated feature films, including the
franchise properties of Shrek, Madagascar, Kung Fu Panda, How to Train Your
Dragon, Puss In Boots, and The Croods.

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)
                                           March 31,     December 31,
                                           2014            2013
                                           (in thousands, except par value
                                           and share amounts)
Assets
Cash and cash equivalents                 $   69,648   $      
                                                           95,467
Trade accounts receivable, net of          148,922         130,744
allowance for doubtful accounts
Receivables from distributors, net of      203,934         283,226
allowance for doubtful accounts
Film and other inventory costs, net       914,634         943,486
Prepaid expenses                           20,236          20,555
Other assets                               28,505          23,385
Investments in unconsolidated entities     44,290          38,542
Property, plant and equipment, net of      183,152         186,670
accumulated depreciation and amortization
Deferred taxes, net                       244,664         221,920
Intangible assets, net of accumulated      147,605         150,511
amortization
Goodwill                                   179,294         179,722
Total assets                              $ 2,184,884     $     2,274,228
Liabilities and Equity
Liabilities:
Accounts payable                          $    5,684  $       
                                                           5,807
Accrued liabilities                       214,861         263,668
Payable to former stockholder             263,390         262,309
Deferred revenue and other advances       29,131          36,425
Senior unsecured notes                     300,000         300,000
Total liabilities                         813,066         868,209
Commitments and contingencies
Equity:
DreamWorks Animation SKG, Inc.
Stockholders' Equity:
ClassA common stock, par value $0.01 per
share, 350,000,000 shares authorized,
104,279,149                                1,043           1,042
 and 104,155,993 shares issued, as of
March 31, 2014 and December31, 2013,
respectively
Class B common stock, par value $0.01 per
share, 150,000,000 shares authorized,
7,838,731                                  78              78
 shares issued and outstanding, as of
March 31, 2014 and December31, 2013
Additional paid-in capital                1,109,461       1,100,101
Accumulated other comprehensive loss       (468)           (600)
Retained earnings                         1,029,462       1,072,398
Less: ClassA Treasury common stock, at
cost, 27,482,030 and 27,439,119 shares, as
of                                         (769,502)       (768,224)
 March 31, 2014 and December31, 2013,
respectively
Total DreamWorks Animation SKG, Inc.       1,370,074       1,404,795
stockholders' equity
Non-controlling interests                  1,744           1,224
Total equity                               1,371,818       1,406,019
Total liabilities and equity              $ 2,184,884     $     2,274,228







DREAMWORKS ANIMATION SKG, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
                                                    Three Months Ended
                                                    March 31,
                                                    2014          2013
                                                    (in thousands, except per
                                                    share amounts)
Revenues                                            $ 147,241     $ 134,648
Costs of revenues                                  160,689       85,521
Gross (loss) profit                                (13,448)      49,127
Product development                                540           963
Selling, general and administrative expenses       49,679        42,789
Other operating income                              (1,672)       -
Operating (loss) income                            (61,995)      5,375
Non-operating income (expense):
Interest (expense) income, net                     (1,773)       863
Other income, net                                  1,218         992
Decrease (increase) in income tax benefit payable   927           (698)
to former stockholder
(Loss) income before loss from equity method        (61,623)      6,532
investees and income taxes
Loss from equity method investees                   3,260         -
(Loss) income before income taxes                  (64,883)      6,532
(Benefit) provision for income taxes               (22,467)      418
Net (loss) income                                   (42,416)      6,114
Less: Net income attributable to non-controlling    520           537
interests
Net (loss) income attributable to DreamWorks        $ (42,936)    $   5,577
Animation SKG, Inc.
Net (loss) income per share of common stock
attributable to
 DreamWorks Animation SKG, Inc.
Basic net (loss) income per share                  $   (0.51)  $    0.07
Diluted net (loss) income per share                $   (0.51)  $    0.07
Shares used in computing net (loss) income per
share
Basic                                              84,484        84,671
Diluted                                            84,484        85,265







DREAMWORKS ANIMATION SKG, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
                                                   Three Months Ended
                                                   March 31,
                                                   2014         2013
                                                   (in thousands)
Operating activities
Net (loss) income                                 $ (42,416)   $  6,114
Adjustments to reconcile net (loss) income to net
cash (used in) provided by operating activities:
Amortization and write-off of film and other       145,412      60,042
inventory costs^(1)
Amortization of intangible assets                  3,154        1,686
Stock-based compensation expense                  5,309        4,075
Amortization of deferred financing costs           242          -
Depreciation and amortization                     1,081        983
Revenue earned against deferred revenue and other  (16,188)     (11,153)
advances
Income related to investment contributions         (1,672)      -
Loss from equity method investees                  3,260        -
Deferred taxes, net                               (22,314)     231
Changes in operating assets and liabilities:       -
Trade accounts receivable                         (19,091)     4,119
Receivables from distributors                      79,267       52,231
Film and other inventory costs                    (122,837)    (109,346)
Intangible assets                                  -            1,015
Prepaid expenses and other assets                 (4,870)      (6,367)
Accounts payable and accrued liabilities          (48,594)     6,590
Payable to former stockholder                     1,080        (25,700)
Income taxes payable/receivable, net              (658)        2,521
Deferred revenue and other advances               27,348       54,641
Net cash (used in) provided by operating           (12,487)     41,682
activities
Investing activities
Investments in unconsolidated entities             (7,000)      (500)
Purchases of property, plant and equipment        (5,711)      (8,088)
Net cash used in investing activities             (12,711)     (8,588)
Financing activities
Proceeds from stock option exercises               261          -
Purchase of treasury stock                        (1,278)      (16,552)
Net cash used in financing activities             (1,017)      (16,552)
Effect of exchange rate changes on cash and cash   396          447
equivalents
(Decrease) increase in cash and cash equivalents  (25,819)     16,989
Cash and cash equivalents at beginning of period   95,467       59,246
Cash and cash equivalents at end of period         $ 69,648    $ 76,235
Non-cash investing activities:
Intellectual property and technology licenses      $  1,294   $      -
granted in exchange for equity interest
Services provided in exchange for equity interest  383          -
Total non-cash investing activities                $  1,677   $      -
Supplemental disclosure of cash flow information:
Cash paid (refunded) during the period for income  $    503  $  (2,278)
taxes, net
Cash paid during the period for interest, net of   $  7,515   $    217
amounts capitalized

^(1) Included within this amount is depreciation and amortization, interest
expense and stock-based compensation previously capitalized to "Film and other
inventory costs." During the three months ended March 31, 2014 and 2013, these
amounts totaled $8,821 and $5,603, respectively.

Non-GAAP Financial Measures

In connection with our issuance of high-yield notes in August 2013, we began
to use Adjusted EBITDA to provide investors a measure of our ability to make
our interest payments on the Notes. We define Adjusted EBITDA as net income
before provision for income taxes, loss from equity method investees,
increase/decrease in income tax benefit payable to former stockholder, other
income, net, interest income, net, other non-cash operating income,
depreciation and amortization, stock-based compensation expense, impairments
and other charges and certain components of amortization of film and other
inventory costs (refer to the reconciliation below). Although the indenture
governing the notes does not include covenants based on Adjusted EBITDA, we
believe that our investors and noteholders use Adjusted EBITDA as one
indicator of our ability to comply with our debt covenants because Adjusted
EBITDA is similar to the consolidated cash flow measure described in the
indenture (refer to our Current Report on Form 8-K filed on August 14, 2013).
Although consolidated cash flow is not a financial covenant under the
indenture, it is a measure that is used to determine our ability to make
certain restricted payments and incur additional indebtedness in accordance
with the terms of the indenture.

Adjusted EBITDA is not prepared in accordance with GAAP. We believe the use of
this non-GAAP measure on a consolidated basis assists investors in comparing
our ongoing operating performance between periods. Adjusted EBITDA provides a
supplemental presentation of our operating performance and generally includes
adjustments for unusual or non-operational activities. We may not determine
Adjusted EBITDA in a manner consistent with the methodologies used by other
companies. Adjusted EBITDA (a) does not represent our operating income or cash
flows from operating activities as defined by GAAP; (b) does not include all
of the adjustments used to compute consolidated cash flow for purposes of the
covenants applicable to the Notes; (c) is not necessarily indicative of cash
available to fund our cash flow needs; and (d) should not be considered as an
alternative to net income, operating income, cash provided by operating
activities or our other financial information as determined under GAAP. Our
presentation of Adjusted EBITDA should not be construed as an implication that
our future results will be unaffected by unusual or nonrecurring items. We
believe that net income is the most directly comparable GAAP measure to
Adjusted EBITDA. Accordingly, the following table presents a reconciliation of
net income (or loss) to Adjusted EBITDA (in thousands). In addition, as
Adjusted EBITDA is also used as a liquidity measure, the following table
presents a reconciliation of Adjusted EBITDA to cash flow from (used in)
operating activities (in thousands):



DREAMWORKS ANIMATION SKG, INC.
ADJUSTED EBITDA RECONCILIATIONS
(Unaudited)
                                                       Three Months Ended
                                                       March 31, 2014
                                                       (in thousands)
Reconciliation of Net Loss to Adjusted EBITDA:
Net loss                                               $          
                                                       (42,416)
Benefit for income taxes                               (22,467)
Loss from equity method investees                      3,260
Decrease in income tax benefit payable to former       (927)
stockholder
Other income, net                                      (1,218)
Interest expense, net                                  1,773
Operating loss                                         (61,995)
Income related to investment contributions             (1,672)
Amounts included in amortization of film and other     8,821
inventory costs^(1)
Film impairment                                        57,074
Depreciation and amortization^(2)                      4,235
Stock-based compensation expense                       5,309
Adjusted EBITDA                                        $           
                                                       11,772
Reconciliation of Adjusted EBITDA to Cash Used in
Operating Activities:
Adjusted EBITDA                                        $           
                                                       11,772
Amortization and write-off of film and other inventory 79,517
costs^(3)
Revenue earned against deferred revenue and other      (16,188)
advances
Other income, net                                      1,218
Interest expense, net                                  (1,773)
Net refund from income taxes and stockholder payable   1,498
Changes in certain operating asset and liability       (88,531)
accounts
Cash used in operating activities                      $          
                                                       (12,487)

^(1) Amortization of film and other inventory costs in any period includes
depreciation and amortization, interest expense and stock-based compensation
expense that were capitalized as part of film and other inventory costs in the
period that those charges were incurred. For purposes of Adjusted EBITDA, we
add back the portion of amortization of film and other inventory costs that
represents amounts previously capitalized as depreciation and amortization,
interest expense and stock-based compensation expense.
^(2) Includes amortization of intangible assets classified within costs of
revenues.
^(3) Represents the remaining portion of amortization and write-off of film
and other inventory costs not already included in Adjusted EBITDA (refer to
reconciliation of net loss to Adjusted EBITDA).



SOURCE DreamWorks Animation SKG, Inc.

Website: http://www.dreamworksanimation.com
Contact: Davin Lincoln, DreamWorks Animation Investor Relations, (818)
695-6472, davin.lincoln@dreamworks.com
 
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