DWA

Dreamworks Animation SKG, Inc. (DWA)

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DreamWorks Animation SKG, Inc. (DWA)

Q2 2008 Earnings Call

July 29, 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

Ingrid Chung - Goldman Sachs

Analyst for Michael Morris - UBS

Barton Crockett - J.P. Morgan

Drew Crum - Stifel Nicolaus

David Miller - Caris & Company

Jay Kindilog - MCH

Tuna Amobi - Standard & Poor’s

Richard Greenfield - Pali Research

Jeffrey Logsdon - BMO Capital Markets

Presentation

Operator

Ladies and gentlemen, thank you for standing by and welcome to the DreamWorks Animation earnings conference call. (Operator Instructions) I’d now like to turn the conference over to DreamWorks Investor Relations, Rich Sullivan. Please go ahead, sir.

Rich Sullivan

Thank you and good afternoon, everyone. Welcome to DreamWorks Animation’s second quarter 2008 earnings conference call. With me on today’s call is 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. That web address, 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 would 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.

With that, I would like to now hand the call over to DreamWorks Animation Chief Executive Officer, Jeffrey Katzenberg. Jeffrey.

Jeffrey Katzenberg

Thanks, Rich and good afternoon, everyone. Thanks for joining us on today’s call. We are very happy to be able to report to you today that our latest release, Kung Fu Panda, has now surpassed the $0.5 billion mark on a worldwide basis. Released domestically on June 6th, the film has reached approximately $210 million, making it the fourth most successful film of 2008 to date. Kung Fu Panda delivered our biggest domestic opening weekend ever and has recently become our most successful domestic release for an original film since we took the company public.

Internationally, the film has had incredible success, at over $300 million to date it’s on track to surpass Madagascar as our most successful original film overseas. In South Korea, Russia, Australia, and Mexico, Kung Fu Panda set the box office record for best animated opening and in China, it has become the most successful animated release of all time.

Despite the difficult economy, the overall theatrical business remains very strong and Kung Fu Panda has emerged as the top family film of the year. This November, we will release the film into the home video market, where we look forward to its theatrical appeal translating into a successful DVD release.

It’s worth noting that we’ve recently seen encouraging signs within the home entertainment market both domestically and overseas. Domestically, consumers are currently spending at the same level as last year on home entertainment product, a good sign for our business today.

While we know that the consumers are becoming more selective on the title that they do purchase, quality original content continues to perform well. Internationally, select key territories are actually showing some growth in the home entertainment market, including two of the biggest markets, Australia and the United Kingdom. Our titles continue to do very well overseas and we view international home video as a growth opportunity for the company.

On the heels of Kung Fu Panda, we look forward to offering audiences a familiar franchise as our fall release. In 2008, we have an opportunity to execute on our one original and one sequel approach, which is a core part of our company strategy. The next big event for the company is the theatrical release of Madagascar: Escape to Africa on November 7th. A follow-up to our 2005 summer hit, the sequel once again features our entire original cast returning. Early signs already point to a high level of anticipation from family audiences.

Beyond our core business, we are continuing to branch out into other arenas with our franchises. In a few weeks, Shrek the Musical will make its worldwide premiere in Seattle, followed by its Broadway debut on December 14th.

Finally, I would like to provide a brief update on the 3D front. Last month, we announced a strategic alliance with Intel, who will serve as a valuable partner in the company’s 3D initiative going forward. Through the use of their next generation technology, we believe we can continue to develop innovative 3D offering tools and techniques to deliver a movie-going experience unlike any other.

As you know, the first 3D film in our slate is Monsters Versus Aliens, set for release on March 27th of next year. While 3D and digital screen conversion is not taking place as rapidly as we had hoped, we did see significant progress last week when DCIP signed its first digital deployment agreement with a major studio. This is very good news for the progress of the 3D screen rollout. We are hopeful and remain on track with our distributors of approximately 2,500 to 3,000 screens by the time we release Monsters Versus Aliens in March.

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