DreamWorks Animation SKG, Inc. (
Q4 2011 Earnings Conference Call
February 28, 2012 4:30 PM ET
Richard Sullivan – Head, Corporate Finance
Jeffrey Katzenberg – CEO
Lew Coleman – President and CFO
Ann Daly – COO
Barton Crockett – Lazard Capital Markets
Doug Creutz – Cowen & Company
David Miller – Caris & Company
Vasily Karasyov – Susquehanna Financial
Chris Marvin – Barclays Capital
Benjamin Mogil – Stifel Nicolaus
Richard Greenfield – BTIG
James Marsh – Piper Jaffray & Co.
Tony Wible – Janney Montgomery Scott
Tuna Amobi – Standard & Poor's Equity
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Ladies and gentlemen, thank you for standing by, and welcome to the DreamWorks Animation Earnings Call. At this time, all lines are in a listen-only mode. (Operator instructions) I would also like to remind you that today’s conference is being recorded, and will be available for replay after 7 PM tonight through midnight Tuesday, March 13. You know may access the AT&T executive playback service at anytime by dialing 1800-475-6701 and entering the access code 234-240. International callers dial 320-365-3844 using the same code 234-240.
I will now turn the conference over to Rich Sullivan, Head of Corporate Finance. Please go ahead, sir.
Thank you and good afternoon everybody. Welcome to DreamWorks Animation’s Fourth Quarter and Year-End 2011 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 our quarterly financials disclosed in today’s press release followed by an opportunity for you to ask questions. I’d like to remind everyone that the press release is available on our website at 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’s Chief Executive Officer, Jeffrey Katzenberg. Jeffrey?
Thanks, Rich and good afternoon everyone. Although 2011 is a very successful year for DreamWorks Animation at the box office, it did reveal some challenges for the industry as a whole. Our 2011 films, Kung Fu Panda 2 and Puss In Boots, together reached $1.2 billion at the worldwide box office, and both are among the top dozen highest grossing movies of the year.
More than half of our total box office dollars in 2011 came from 3D, which we continue to view as an outstanding investment. Following on the heels of the Kung Fu Panda 2’s more than $665 million at the box office, Puss In Boots has reached approximately $535 million with nearly $385 million coming from international markets. Puss’ worldwide gross will continue to grow when it is released in Japan on March 17.
In addition to their success at the box office, Kung Fu Panda 2 and Puss In Boots were among the very best reviewed films of 2011, and I could not be more proud that both movies received Academy award nominations for best animated feature films. Puss In Boots was released into the home video market four days ago, and included blue ray and DVD double packs, featuring new premium bonus content, while Puss In Boots the 3D [ph]. The title is off to an excellent start, and we have very good news to share today.
Puss In Boots exceeded our expectations in its initial release weekend, and became the number one best selling title for the week ended February 26th. So, clearly its first couple of days of sales performance were strong and we are thrilled to be out of the gate with such great results. That said this is only one weekend of results from the US, so we will carefully monitor Puss In Boots performance during the rest of its domestic release, and in the majority of its international territories through April. Setting aside the opening weekend of Puss In Boots, Kung Fu Panda 2 was released into the home entertainment market on December 13, and while we believe its performance was primarily title-specific, it also proves that the overall home video environment remains challenging.
While animation titles remain at the top of the charts, domestic box office to DVD conversion ratios across the industry do continue to decline. And internationally, box office success has not translated as well into home video sales since many emerging territories still lack mature post-theatrical markets. Moving on to the next big event for the company, the release of Madagascar 3 on June 8, it is the first time we will present the world of roosters [ph] in 3D, and once again we are confident that we will raise the bar in terms of what audiences will see and experience in movie theaters.
In addition to our core business, we continue to look for ways to extend our IT to our non-film initiatives. Our fourth quarter results were impacted by our TV specials and demonstrate that there is a digital market for this type of short-form content. By example, Netflix has purchased the streaming rights to 4 of our 6 TV specials. Our Holiday Specials have also served as a breeding ground for our creative leadership team, helps us to build our franchises and establish the pipeline in India, where the quality of work has far exceeded our expectations.