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DreamWorks Animation SKG, Inc. (DWA)

Q2 2012 Earnings Call

July 31, 2012 04:30 pm ET


Rich Sullivan - Head, Corporate Finance

Jeffrey Katzenberg - CEO

Lew Coleman - President & CFO


Ben Swinburne - Morgan Stanley

Ben Mogil - Stifel Nicolaus

Barton Crockett - Lazard Capital Markets

James Marsh - Piper Jaffray

David Miller - Caris & Co.

Chris Merwin - Barclays

Richard Greenfield - BTIG

Tony Wible - Janney

Tuna Amobi - S&P Capital

Vasily Karasyov - Susquehanna Financial Group

Michael Corty - Morningstar



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Ladies and gentlemen, thank you for standing-by and welcome to the DreamWorks Animation earnings conference call. At this time, all lines are in a listen-only mode. Later, there’ll be an opportunity for your questions. (Operator Instructions)

I would also like to remind you that today’s conference is being recorded and will be available for replay after 7 p.m. tonight through midnight, August 14th. You may access the AT&T Executive Playback Service at anytime by dialing 1800-475-6701 and entering the access code 251569. International callers, dial 320-365-3844 using the same access code 251569.

I would now like to turn the conference over to Rich Sullivan, DreamWorks Animation’s Investor Relations. Please go ahead, sir.

Rich Sullivan

Thank you and good afternoon everyone and welcome to DreamWorks Animation’s second quarter 2012 earnings conference call. With me today 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 the press release is available on our website at web address,

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.

And with that, I would now like to hand the call over to DreamWorks Animation’s Chief Executive Officer, Jeffrey Katzenberg. Jeffrey?

Jeffrey Katzenberg

Thanks Rich and good afternoon everyone. The big events for the company in the second quarter was Madagascar 3, Europe’s Most Wanted, which was released in the U.S. on June 8th. Today, it's grossed $210 million at the domestic box office and $292 million overseas for a worldwide total of over $500 million, making it the seventh highest grossing movie of the year on a global basis. It is the third and biggest film in our blockbuster Madagascar franchise and yet another incredibly successful sequel for the company.

All DreamWorks Animation sequels have surpassed $600 million at the worldwide box office and Madagascar 3 is on-track to do the same. It was the number one movie in the U.S. during its first two weekends of release and continues to break records in many territories around the globe. To name just a few, in Russia, Madagascar 3 is the number one animated movie of all time as well as the number three film of all time. The top three animated films ever in Russia are now DreamWorks Animation titles.

In the Ukraine, United Arab Emirates and Egypt, it became the biggest grossing animated movie of the year and in Brazil and Argentina it had the biggest opening weekend of all time for an animated film. And in Portugal, this past weekend it had the biggest opening of the year of any movie so far.

As we mentioned on our last earnings call, as a result of the Summer Olympics, a good portion of Madagascar 3’s international release won’t occur until later this year. So already the film has been a massive commercial and critical success and it still has a long way to go. Also, I am happy to report that 50% of Madagascar 3 worldwide box office receipts have come from 3D which continues to be an important and successful investment for us.

Our next release, Rise of the Guardians will be in November. We have debut two trailers so far and audience feedback of the characters, the breadth and the originality of the story and the visuals have been exceptional; we look forward to seeing how it performs on November 21st.

Beyond our core business, we are committed to growth and diversification of DreamWorks Animation more today than ever before. We are focusing on three key areas of investments. The first is you ongoing character driven efforts which include TV series and live entertainment. We are currently producing Dragons, Riders of Berk, DreamWorks Animation’s third TV series and our first that we will air on Cartoon Network.

Jay Baruchel, America Ferrera and Christopher Mintz-Plasse are all praising their lead roles from the film. We premiered 15 minutes of footage earlier this month at Comic-Con and audience reactions were positive. A sneak-peek of two episodes will air a week from today on Cartoon Network. From a brand building standpoint, we believe a TV series will provide family audiences with high quality content between our Dragon feature film events and help sustain a consumer products program around the franchise.

Turning to live entertainment; last month How To Train Your Dragon Live Spectacular! kicked off its nationwide tour to great critical acclaim. It is perhaps the biggest and most ambitious travelling arena show that has ever been produced and we believe it will set a new standard for this type of live family entertainment.

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