DWA

Dreamworks Animation SKG, Inc. (DWA)

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DreamWorks Animation SKG, Inc. (DWA)

Q3 2008 Earnings Call

October 28, 2008 5:00 pm ET

Executives

Rich Sullivan - Investor Relations

Jeffrey Katzenberg - Chief Executive Officer, Director

Lewis W. Coleman - President, Chief Financial Officer, Director

Analysts

Jessica Reif-Cohen - Merrill Lynch

Barton Crockett - J.P. Morgan

Ingrid Chung - Goldman Sachs

David Miller - Caris & Company

Michael Morris - UBS

Ralph Schackart - William Blair

Drew Crum - Stifel Nicolaus

Tuna Amobi - Standard & Poor’s

Jake Hindelong - Monness, Crespi, Hardt & Co.

James Marsh - Piper Jaffray

Analyst for Richard Greenfield - Pali Research

Doug Creutz - Cowen & Company

Presentation

Operator

Thank you for standing by and welcome to the DreamWorks Animation earnings call. (Operator Instructions) At this point, I would like to turn the call over to your host, Mr. Richard Sullivan. Please go ahead.

Rich Sullivan

Thank you and good afternoon, everyone. Welcome to DreamWorks Animation’s third quarter 2008 earnings conference call. With me today are our Chief Executive Officer, Jeffrey Katzenberg, and our President and Chief Financial Officer, Lew Coleman. This call will begin with a brief discussion of the quarterly financials disclosed in today’s press release, followed by an opportunity for you to ask questions. I would like to remind everyone that today’s press release is available on our website, www.dreamworksanimation.com.

Before we begin, we need to remind you that certain statements made on this call may constitute forward-looking statements. Forward-looking statements can vary materially from actual results and are subject to a number of risks and uncertainties, including those contained in the company’s annual and quarterly reports, as well as in other filings with the SEC. I encourage all of you to review the risk factors listed in these documents. The company undertakes no obligation to update any of its forward-looking statements. And with that, I would like to now turn the call over to DreamWorks Animation Chief Executive Officer, Jeffrey Katzenberg. Jeffrey.

Jeffrey Katzenberg

Thanks, Rich and good afternoon, everyone. Thank you for joining us today. I just want to mention if you detect a change in the tone of my voice today, it’s not my happiness over the market’s performance but I am getting over a bad cold. The main news for the quarter was the incredible success of Kung Fu Panda. As we discussed last quarter we had high expectations for the film overseas and did spend a little bit more than usual on advertising support to take advantage of its global appeal. This ended up paying off nicely, as Kung Fu Panda has reached nearly $450 million in international box office to date, breaking records across Europe, Latin America, and Asia during the quarter.

It became one of only four films this year to surpass the $400 million mark in foreign grosses, thanks largely to its impressive runs in the U.K., France, Korea, China, Germany, and Italy. We couldn’t be more pleased with its performance and continue to view the international theatrical market as a growth area for the company.

Kung Fu Panda has now reached over $630 million on a global basis, becoming our most successful original film. The title will be released into the U.S. home video market on November 9th, followed by its international rollout throughout the next two months.

We believe Kung Fu Panda's outstanding theatrical performance and critical acclaim position it well for a successful home entertainment release this holiday season.

Accompanying Kung Fu Panda on DVD and Blu-Ray will be a brand new, 22-minute companion story titled Secrets of the Furious Five. Narrated by Jack Black’s Po, it tells the back story of the characters of the Furious Five in what we believe is among the most extensive bonus content ever created for a home video release. Retailers are pricing the double pack at around $25 and we anticipate that consumers will recognize this as an exceptional added value.

On November 4th, we are also set to release on to DVD last year’s successful holiday special, Shrek the Halls, which marked our foray into the non-theatrical special content business. Over 21 million viewers tuned in for the television premiere of Shrek the Halls, making it one of the most watched shows of 2007. We look forward to its DVD release next week and to seeing it re-air on ABC in prime-time next month.

Beyond home entertainment, we have our second theatrical event of the year, the release of Madagascar: Escape to Africa into U.S. theaters on November 7th. Families across the world are looking forward to the return of their favorite Central Park Zoo characters in the sequel to our 2005 hit. Audience reaction to the film has been strong and we have high expectations for its box office performance.

Also in the next few weeks, Shrek the Musical will begin its preview performances in New York before officially opening at the Broadway Theater on December 14th. The show had a very successful run in Seattle last month and critical response so far has been supportive. While we do not expect Shrek the Musical to have a significant impact on earnings through 2009, its success we believe could be a source of meaningful value and growth in future years.

Additionally, we continue to look ahead with enthusiasm to March 27th when we release 2009’s first big event film, Monsters Versus Aliens, into theaters in 3D. We remain confident that there will be an adequate number of 3D capable screens in the marketplace for Monsters Versus Aliens to serve as a valuable proof of concept for the industry as a whole. It has been a very successful year so far for DreamWorks Animation and we are hopeful that we will see a continuation of that success in these next two very busy months for the company.

Read the rest of this transcript for free on seekingalpha.com