Q1 2010 DreamWorks Animation SKG, Inc.

Earnings Conference Call - Final

OPERATOR: Ladies and gentlemen, thank you for standing by. Welcome to the first-quarter 2010
DreamWorks Animation earnings call. (Operator Instructions). As a reminder, this conference is being
recorded and will be available for replay after 7 PM today Eastern through midnight Tuesday, May
11. The access code is 151491.Dial-in information is 1-800-475-6701, and international participants
may dial 320-365-3844.
I would now like to turn the conference over to our host, Investor Relations, Rich Sullivan. Please go
ahead.
RICH SULLIVAN, IR, DREAMWORKS ANIMATION SKG, INC.: Thank you, and good afternoon
everyone. Welcome to DreamWorks Animation's first-quarter 2010 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, 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 now like to turn the call over to DreamWorks Animation's Chief Executive Officer, Jeffrey
Katzenberg.
JEFFREY KATZENBERG, CEO, DREAMWORKS ANIMATION SKG, INC.: Thanks, Rich, and good afternoon
everyone. 2010 is well underway for us, and it is certainly a year we have been looking forward to for a
long time. With our first feature film still in theaters and two more on the way before the end of the
year, we will become the first company to achieve the goal of releasing three CG films in one year,
making 2010 a real watershed moment for the Company.
While our first release certainly got off to a bumpy start, it is now clear that How To Train Your Dragon
has become DreamWorks Animation's, I guess, blockbuster.The film has been a prime example of that
old saying, it is not where you start, it is where you finish that counts.
We went into its release with high expectations because of our belief in the quality of the movie. In
fact, Dragons is now our best reviewed film of all-time, having received both outstanding ratings from
film critics and excellent feedback from audiences leaving movie theaters. However, it did open below
ours and everyone else's expectations, and certainly had us a bit nervous after its first week.

Nonetheless, Dragons has gone on to deliver an outstanding performance since then. In just this past
weekend it was the number one film in the country, five weeks after its initial release.
Fantastic word-of-mouth and a true love for the movie has helped to propel Dragon to approximately
100 million -- $180 million in domestic box office to date. While we didn't get there the way we thought
we would, a few weeks and a lot of patience later we did get there. We believe How To Train Your
Dragon is on track to equal the domestic performance of our 2008 blockbuster Kung Fu Panda.
Internationally the film has reached approximately $195 million to date. And we have seen solid results
across many important territories, particularly the UK, Australia, Germany, France, Brazil and
Russia. However, unless Dragons outperforms over the next few weeks, including in the unreleased
territories of China, Japan and Korea, we will likely fall below our average international to domestic box
office ratio.
There are many theories and much speculation as to why Dragons didn't perform as well as we had
hoped in every international territory, but there is no one answer.Every film, territory and circumstance
is unique.
However, over the years DreamWorks Animation has enjoyed great success internationally. If you look
at our average international performance over the past five years with Paramount, you will find that we
are delivering the most international box office dollars per film when compared to all other animation
competitors. I have great confidence in our team and the team at Paramount, whose combined efforts
continue to allow our films to be very successful around the globe.
Even with lower-than-expected international box office results, Dragon is a huge hit for us. In fact, on a
worldwide basis it is on track to reach comparable level as the original Shrek.
In addition, Dragon is yet another proof point to demonstrate the value of 3D. To date over 65% of both
the movies domestic and international box office has come from 3D. Audiences have shown a
willingness to pay for a premium theatrical experience as both the average ticket premium and
industrywide admissions are higher than they were at this time last year.
No other place has been more evident than in IMAX theaters. To date IMAX has generated an
estimated 12% of Dragon's domestic box office, while representing less than 5% of its locations.
Beyond its stellar theatrical performance, the film has received an outstanding level of support from
our retail partners. Wal-Mart launched an exclusive merchandising and promotional program for
Dragon, which is enjoying very solid results.
While Dragon's success is a significant first step for 2010, it is also important to the Company for a
couple of other reasons. First, How To Train Your Dragon, together with Kung Fu Panda, Madagascar 2,
and Monsters vs. Aliens gives DreamWorks Animation four hit films in a row. And as Dragon is yet
another film to pass the $200 million box office mark domestically, it demonstrates that our creative
process continues to work and that we are delivering on the single most important goal for the
Company, consistency.
Our next two films, the final chapter of Shrek and Megamind, together with our 2011 slate, Kung Fu
Panda 2 and Puss In Boots, gives me confidence that we have hit our stride.

Second, I am thrilled to be able to announce today that Dragon will become DreamWorks Animation's
next movie franchise. The first sequel and the next chapter of the story will be released in 2013.
Additionally, we are well underway in developing an online virtual world, a TV series, and a live arena
show, all inspired by the action-packed world of Vikings and dragons featured in the movie.
Moving from our newest franchise to the one that started it all, I want to spend a few minutes talking
about our next theatrical release, Shrek Forever After. Shrek has proven worldwide appeal, and the
final chapter is one of the most highly anticipated movies of 2010. We couldn't be more excited to
bring our flagship franchise back to the big screen on May 21.
I think the final chapter brings it all to a very exciting and satisfying conclusion in an epic, fun and
hilariously funny way, all in 3D. Just last week we were honored to take the film to New York City for the
opening of the prestigious Tribeca Film Festival. And the reaction to the move was fantastic.
Beyond the release of Shrek 4, we are looking forward to the opening of the Shrek Musical in Chicago
this summer. And families across the country will be given an opportunity to experience our stage
show as it begins to tour around the US later this year.
After Shrek, Megamind comes to theaters on November 5. Megamind will do to super heroes what
Shrek did to fairy tales by taking the genre and turning it on its ear in ways that are surprising and
very funny. It is being directed by Tom McGrath, one of the great creative talents behind our
Madagascar franchise, and features these outstanding voice talents -- Will Ferrell as Megamind,
himself, our super villain; Tina Fey, the smart and witty damsel in distress; Jonah Hill, as Megamind's
new super hero rival; and Brad Pitt as the City's well-loved Metro Man.
The 3D film-making tools we are using on the film are already a step ahead of Dragon, and we believe
will help us deliver a very dynamic, unique and exciting visual experience. Megamind also has great
potential to be a franchise for the Company.
Now I would like to switch gears to discuss our nontheatrical efforts. We are making big strides in
growing our TV series business, which is built on the success of The Penguins of Madagascar on
Nickelodeon. It draws consistently excellent ratings. And The Penguins Operation DVD remains the
number one selling animated episodic DVD release over the last several years. You would actually have
to go back to 2005 to find an animated episodic title that outperformed Penguins.
We expect our second series with Nickelodeon, based on Kung Fu Panda, to begin airing this
Thanksgiving. We are also commencing development on a TV series based on the 2009 hit, Monsters
vs. Aliens.
Our growing TV specials business continues to gain momentum as well. Following the success of
2009's Merry Madagascar and our Monsters vs. Aliens Halloween special, this year we will bring two
more holiday specials to the market. We are planning Scared Shrekless for this October's Halloween
season, and Kung Fu Panda Holiday Special also for 2010.
We are also working on a Penguins Valentine's Day special for next year. In addition to TV, last month
we launched our first online virtual world for kids with Kung Fu Panda World. While still very early, we
are seeing a lot of encouraging signs so far in both active users and the average time spent on the

world. This is just the latest example of how we continue to leverage our creative content over multiple
platforms.
In an industry that is increasingly reliant on franchise properties to drive significant value, it is clear
today that DreamWorks Animation is the leader in the business of creating multifaceted franchises. We
now have four blockbuster franchises, with a film that we believe has the potential to be our fifth on
the way before the end of the year. This is good news for the Company and our shareholders as our
growing stable of franchises will continue to generate value at the box office and beyond for many
years to come.
Now I will turn the call over to Lew to walk you through our quarterly results.
LEW COLEMAN, CFO, DREAMWORKS ANIMATION SKG, INC.: Thanks, Jeffrey. For the quarter the
Company reported total revenue of approximately $162 million, resulting in net income of about $22
million or $0.24 per share on a fully diluted basis.
It is important to note at the onset that without a fall 2009 movie or a first-quarter 2010 DVD release,
it is difficult to compare this quarter's results to the same period last year.
During this quarter How To Train Your Dragon contributed approximately $60 million of revenue,
principally from merchandising and licensing. Our 2009 film, Monsters vs. Aliens, contributed
approximately $25 million in revenue, primarily from domestic pay television and continued
performance in home entertainment. By the end of the first quarter the title had reached an estimated
7.5 million net home entertainment units sold worldwide.
The Company's fall 2008 film, Madagascar - Escape to Africa, contributed roughly $19 million of
revenue in the first quarter, driven by international pay-TV and home video. That too reached an
estimated 13.7 million home entertainment net units sold worldwide by the end of the first quarter.
Kung Fu Panda, our other 2008 release, added about $6 million of revenue to the quarter, spread
across several categories. Our 2007 fall film, Bee Movie, contributed revenue of approximately $22
million in the quarter. The revenue driven primarily by domestic television was received one quarter
earlier than expected. The remaining film catalog and other items contributed approximately $30
million to revenue.
Moving onto the remainder of the income statement, cost of revenue for the quarter equaled $106
million, resulting in gross profit of $56 million. Our gross margin of 34.5% was driven primarily by
Dragon, Bee Movie, and NBA, which together accounted for nearly two-thirds of the quarter's
revenue. The remainder of the quarter's revenue came from our higher-margin franchise films.
Selling, general and administrative expenses in the quarter totaled $23.5 million, including
approximately $6 million of stock compensation expense. This compares to $21 million, including
approximately $5 million of stock compensation expense, for the comparable period of 2009.
While the amount of marketing expense included in the first-quarter SG&A for our virtual world
business was immaterial, we expect to record $2 million to $3 million of marketing expense in the
second quarter.

As for taxes, the Company recorded an expense of approximately $8 million related to a tax sharing
agreement with a former stockholder. This expense includes a charge of approximately $2 million, or
about $0.02 per share, resulting from an adjustment to prior year's taxes.
Combining the amount due to the former stockholder with the Company's income tax provision of
approximately $5 million, results in an overall tax equivalent rate of 37% for the quarter. We continue
to expect our full-year 2010 equivalent tax rate, including the effects of our arrangement with Vulcan,
to be in the low 30% range.
The Company ended the first quarter with approximately $218 million of cash. For the quarter our
diluted share count increased to approximately 89 million shares, driven primarily from the inclusion of
additional in the money options resulting from the increase in our stock price.
Looking at share repurchases, since the start of 2010 the Company has been approximately $37
million repurchasing approximately 1 million shares, which settled early in the second quarter. The
Company has approximately $113 million remaining under its current authorization.
Looking ahead, due to the current performance of Dragon, we do not expect a significant impact from
the film until it is released into the home video market.Consequently, second-quarter results will be
driven primarily by the domestic release of Shrek Forever After on May 21.
It is important to note that due to the film's release schedule we expect that our distributor will spend
approximately 75% of its worldwide prints and advertising expense in the second quarter. However,
Shrek 4 will open in late June or early July in many of its international territories, for various reasons,
including the World Cup. Therefore, we expect a majority of its international revenue not to occur until
the third quarter, clearly impacting the timing of revenue for the film.
Beyond the performance of Shrek toward the box office the remainder of the year will be driven by the
domestic home video releases of both Dragon and Shrek Forever After, which we expect to occur in the
fourth quarter. We are still in the process of developing the international home video release plans for
both films.
With that, I will turn the call back over to Rich to begin the Q&A session.
RICH SULLIVAN: Operator, can we please have the first question.
OPERATOR: (Operator Instructions). Brian Shipman, Jefferies.
BRIAN SHIPMAN, ANALYST, JEFFERIES: Could you remind us of your plans for the timing on the release
of Dragons into home video? And is there anything in your expectations of why the tie ratios for units -or it says the number of units sold might differ on this release? Thank you.
JEFFREY KATZENBERG: The Dragon's home video release will fall in the fourth quarter of this year. And
we will expect to solidify the exact date of that in the next couple of weeks.
I don't think there is anything that we can speculate on as to what the tie ratios may or may not
be. This is a movie that follows in the beloved category from people that have seen it. So that certainly
would have us being optimistic.

OPERATOR: Ralph Schackart, William Blair.

RALPH SCHACKART, ANALYST, WILLIAM BLAIR: Jeffrey, obviously every movie has a different appeal
culturally in the international box office, but were there any lessons learned from NBA and Dragon that
might give you some incremental opportunities to market it better through your distributor, both for
Shrek, but more importantly, Megamind on a go-forward basis?
JEFFREY KATZENBERG: I think from everyone of these movies there is a high degree of learning that
comes, both in the things that are successful about it and also the things that miss. We are very
confident in the ability and the actual performance that Paramount International has delivered to us on
our films.
Just to put a little bit more color to what I said in the prepared remarks, our performance of
DreamWorks Animated movies over the last five years is 20% above Pixar Disney's and 10% above
FOX, which there are our two primary competitors. And I think every movie has its unique aspects
about them, and that is magnified when you're dealing with 50 international territories.
So do I think we learned lessons from Monsters vs. Aliens? Yes. Do I think we have learned some
lessons from Dragons? Yes. Do I think they're the same lessons? No.But again, I think what we saw
here in the domestic market, which was a movie that has had a very strong and long tail, that same
opportunity is not necessarily mirrored in every other country, because of movie-going habits,
availability of theaters, competitive product into the marketplace. It just is all a different sort of mixture
of those elements that you have to look at territory by territory.
Certainly in the biggest territories, some of the most important territories, the movie performed very,
very well. And I think that is why we have a very high degree of confidence going forward and
committing to franchise the movie and make sequels.
OPERATOR: Ingrid Chung, Goldman Sachs.
INGRID CHUNG, ANALYST, GOLDMAN SACHS: So, Jeffrey, I was wondering, you said on your last call
that you anticipated 2010 to be the best year ever for DreamWorks. I was wondering if you still believe
that? And did you mean that from a content perspective or financial perspective, or both?
Then finally, I was wondering do you expect the recent higher 3D ticket premiums to also hold for
Shrek 4?
JEFFREY KATZENBERG: So let me go with the first question -- the second question first, and just say
that we continue to see strong pricing for the 3D premium and strong consumer support for it. And
those prices have continued to go up and we think that will continue. As you know, we have said for a
long time we believe that ultimately what we believe to be the retail value is a $5 premium. And so we
think there is a lot of elasticity there before we actually hit that.
But Shrek should continue to see very favorable pricing. In terms of the best year, I guess -- well, there
are many different ways to measure that, so the ones I am comfortable saying is that creatively I feel
very confident this will be our best year ever. I think at the box office it certainly will be the best year
ever for us.

I think in terms of the financial metrics we have to wait and see. I don't think we can be predictive of
all those metrics that get into the dollars and cents of it.
OPERATOR: Jessica Reif Cohen, BofA Merrill Lynch.
JESSICA REIF COHEN, ANALYST, BOFA MERRILL LYNCH: On Dragon on the international, can you give us
the split or the uplift from 3D?
JEFFREY KATZENBERG: It was about 65%, same as the domestic.
OPERATOR: David Miller, Caris & Company.
DAVID MILLER, ANALYST, CARIS & COMPANY: Congratulations on Dragon, great success there. On your
distribution deal with Paramount, the current distribution agreement with Paramount, correct me if I'm
wrong, doesn't expire until December '12. But you guys could terminate the contract as early as
January 1, '11, as long as you give notice to Viacom six months in advance, which would be July 1,
2010, which of course is right around the quarter.
So assuming negotiations with other parties are taking place now, I know you can't comment on the
nature of those negotiations, but can you say for the record does it really matter who distributes your
films? I mean, Warner's could do this, Universal could do this, FOX could do this. Is economics all that
matters to you, or do you have some sort of tie to Paramount that would keep you there in sacrificing
more sanguine economics? Thanks.
JEFFREY KATZENBERG: Wow. That is a lot. So I guess I am trying to say this in my own words here,
which is that we have been at Paramount for 4.5 years. They have done an outstanding job for us. We
have a lot of confidence in them, both domestically and internationally.
There are more things that are a factor in terms of things that you mentioned here. There is a change
of control that needs to occur in this. So there are a lot of moving parts to it. And I just think that we
really don't have anything new to report today about it. But I do want to just continue to give a high
vote of confidence to them and to the work that they have done and are doing for us.
OPERATOR: Richard Greenfield, BTIG.
RICHARD GREENFIELD, ANALYST, BTIG: Jeffrey, you had some strong comments vis-a-vis 3D and up
conversion by some of your peers. Paramount just announced that they're going to do less Air Bender
in 3D. I just kind of would love to get your perspective on, given the pricing premiums that we are
seeing, which is is what you wanted a year ago, with every film being up converted and some of very
different quality like Clash of the Titans, how worried are you about the ability to stick to these
prices? Even if you get them for Shrek 4, can you get them next year if everyone starts to crowd the
market with these weaker 3D titles? Thanks.
JEFFREY KATZENBERG: I think in the end what we have all come to understand in the world that we live
in today, I guess the word transparency is probably the big word that encompasses everything relevant
to this, which is -- you know that old line, you can fool some of the people some of the time. We are not
going to fool anybody, and neither is anybody else.

Maybe out-of-the-box a few times here, but the consumers are savvy and they are becoming wellinformed about what the difference is between a real premium experience and a pretend premium
experience.
These movies are offered competitively in a literally adjacent theater next door in almost every single
case where people can enjoy the 2D version of this and not pay the premium. If they are aware,
whether the media makes them aware, critics make them aware, word-of-mouth makes them aware,
Twitter makes them aware, there is 1,000 ways that this data flies through the air in a scintilla of a
second.
So from our standpoint I am happy to say there is enough very, very high-end premium product
coming to the marketplace this year. We have two more movies. Pixar has got a film coming out. There
is a number of things that are going to represent the highest quality 3D experience. And Marty
Scorsese is starting to shoot a movie in 3D this summer. So I do think that there is still great promise to
this, and ultimately the consumer is going to keep everybody honest.
OPERATOR: Barton Crockett, Lazard Capital Markets.
BARTON CROCKETT, ANALYST, LAZARD CAPITAL MARKETS: I wanted to ask about Shrek 4. And in
particular I was wondering if you could comment on whether you have any tracking or any other
indications that would suggest whether the audience interest or likeliness to see Shrek 4 is comparable
to Shrek 3 or Shrek 2 or below that as the series goes on?
Also, if you could react to some of the early commentary coming out of the screening, I guess, out at
Tribeca Film Festival suggesting that the 3D was dark, and that is an issue with 3D. I want to ask if that
was an issue with that screening or whether there really is an issue that needs to be fixed, in your
opinion.
JEFFREY KATZENBERG: We are about a week early on the tracking information that comes in. The first
real go-round of it is next Monday, so we don't actually have any hard comparative data. Just in terms
of what seems to be out there and more the touch and feel seems very good for us. But we don't
actually have hard data to give you.
In terms of a comment about the darkness of the film and the 3D from it, I have to say I don't know
where that was or where it came from, because we've heard pretty much the opposite of that from
virtually across-the-board. People felt that the presentation and the quality of the 3D in this film was up
there at the level of Dragons. And I think people felt the level of Dragons was in the world of Avatar,
which is the gold standard right now.
So I don't -- if there was somebody who made that comment that you saw, I have to say it probably
may be more a reflection of the fact that the film itself has got a lot of night time scenes in it, but
honestly, the 3D is breathtaking, so I have not seen that.
OPERATOR: Ben Swinburne, Morgan Stanley.
BEN SWINBURNE, ANALYST, MORGAN STANLEY: Jeffrey, you guys have released the international
release schedule for Shrek. I know you're working around the World Cup, so maybe you could just
spend a little bit of time talking about how you thought about mapping that out? And are you at all
worried about piracy issues with the delayed release internationally? I guess with 3D I know the

experience is a lot different, so that is irrelevant here. I'm just curious about how you're thinking about
those items.
JEFFREY KATZENBERG: Well, we are following the track that we have any year that there has been a
World Cup out there. We are -- I have to say our international teams are well experienced at this.
In the international marketplace Shrek 4 is really the single most anticipated movie coming into the
marketplace this summer. So in virtually every country it has been given the premium release slot. And
we have, as we have done in the past with other summer releases, including Shrek, spirited the World
Cup.
So we will come out in Russia, Ukraine, Thailand, US, India, Indonesia, Singapore and Malaysia,
Philippines, Taiwan and a few other Eastern European places in that May timeframe. They all come
within a week or so.
We then jump all the way over that to Australia on June 17. And then really don't begin the big rollout
until 30 of June, which is the end of World Cup. That is when France, Germany, Switzerland -- the UK is
on July 2, Korea July 1.
Then we play throughout the summer right into August. The end of August is where we have always
been in Italy. So, again, trying to very much adopt what to are the needs of the individual countries
and the habits of vacations, World Cup and other exigencies. So I think we are spot on on the
international release.
RICH SULLIVAN: We will post that international release schedule in detail on the website, so you will
have access to it then.
OPERATOR: Drew Crum, Stifel Nicolaus.
DREW CRUM, ANALYST, STIFEL NICOLAUS: sticking with Shrek, Jeffrey, can you give us a sense as to
how many 3D screens that you're expecting for the opening?And can you talk about to the extent you
can the contingent compensation or bonus payments you will be amortizing against the ultimate
revenue for that film?
JEFFREY KATZENBERG: On the 3D screens this will be by far the biggest 3D release domestically and
internationally of any movie today. Our distributor today -- and this is a little early -- so they are
installing screens right now at the rate of about 200 to 250 a week. That is how -- domestically. And
there is that much activity internationally.
So as of yesterday the distributor, Paramount, is saying to us that we should be north of 4,000
screens. That count will probably continue to grow. And internationally, again, we will -- I don't have a
count on international screens, we are just too early on that, but it will be substantial.
LEW COLEMAN: He had a second question on the contingent compensation. (multiple speakers).
JEFFREY KATZENBERG: Drew, on the contingent comp, I guess, there is two pieces to that, as is typical
with a sequel. There is the upfront voice talent payments, and I would just say that is comparable to
our other Shrek sequels.

As far as the remaining contingent comp, it really does depend on how successful the film is in box
office. And those are essentially based on success-based box office bonuses. We have historically said
that it probably will fall in the 10% to 14% range in terms of worldwide box. So that used to be a pre3D number, so you may have to adjust that for 3D. But this film, Shrek 4, is comparable to the same
type of contingent comp that we saw in Shrek 3, obviously depending on performance.
OPERATOR: Vasily Karasyov, JPMorgan.
VASILY KARASYOV, ANALYST, JPMORGAN: Can you please compare the P&A for Dragon to P&A for
Monsters Vs. Aliens, was it higher than that, was it below? And also, sorry if I missed it, but could you
provide an update on how the consumer products program tied to Penguins of Madagascar are
going? Thank you.
JEFFREY KATZENBERG: Well, on the first question, they are comparable. NBA and Dragon P&A budgets
were in line with one another -- no significant change. And in terms of Penguins of Madagascar, the
DVD part of it is out and doing very successfully. The rest of the licensing program has begun.
This is a long-term program in which it is building, and building towards the end of the year here. And
so far it is still a small program, but the response to it has been very good.
OPERATOR: Doug Creutz, Cowen and Company.
DOUG CREUTZ, ANALYST, COWEN AND COMPANY: None of you guys have released two films in
March. Is there anything that you would take away from their performances relative to your summer
and your holiday films? Do you think that March is still the optimal release month for your third release
in a year where you're going to have three releases? Thanks.
JEFFREY KATZENBERG: I think it is showing itself again to be a fantastic release period. And we are
going to end up with the same level of box office on Dragon as we did on Kung Fu Panda in the middle
of summer domestically for sure.
When you look at what is the real possibility for the marketplace is you just have to wait look three
weeks before us to Alice in Wonderland, which is north of $325 million, on its way to $350 million. So
the elasticity, the audience, the availability, it is there. We are in a business that has got more than 12
holiday weeks to it. So we are still very comfortable and confident about this.
The other thing that has been fantastic about it now is two years in a row is you see -- which is, if you
do have a good movie, you do have a big title, you do have the marketplace, it is a lot less competitive
marketplace than it is when you get into the summer or Christmas playing time.
Dragons is for sure a great beneficiary of the fact that there are not four other blockbuster titles week
after week after week that come into the marketplace. It has allowed it to go on and do the kind of
business that it has done.
Again, if you look to the international marketplace, we have had two modest performing films in the
spring holiday playing time. But you can go back and look competitively, there have been other movies
from other companies in this timeframe, including Animations, that have been very, very
successful. So we don't see this as a second-tier release window.

OPERATOR: Tuna Amobi, Standard & Poor's.

TUNA AMOBI, ANALYST, STANDARD & POOR'S: So just some quick housekeeping questions here. With
regard to TV specials, just looking for some more color on the seasonality of those revenue stream, any
commentary there would be helpful.
Separately, regarding the tax benefit on the tax basis increase, I think you guys have quantified
somewhere roughly close to $600 million realizable over 15 years. So the question is, how much of
that have you realized cumulatively to date? And how does that factor into your low 30s tax rate
respective for this year? I suspect that might be a question for Lew. Thank you.
LEW COLEMAN: Want me to do the second one first?
JEFFREY KATZENBERG: You can do the first one first.
LEW COLEMAN: On the tax benefits, it was really closer to $1.5 billion than $600 million. It is amortized
over 15 years, and we are probably halfway through it or thereabouts. So it will continue to be a
benefit for the next roughly seven years.
And the question on the TV specials as far as seasonality is concerned, other than the fact that we
tend to release these around holidays, and other than the fact that the merchandise and the DVDs are
probably also done in holidays, but in different holidays, there is really no apparent seasonality.
OPERATOR: Ben Mogil, Thomas Weisel.
BEN MOGIL, ANALYST, THOMAS WEISEL PARTNERS: So, Jeffrey, first I want to just make sure I
understood you correctly, that when you made a comment that Monsters vs. Aliens, How To Train Your
Dragon P&A spends were about the same. To being sure about that you didn't really change the P&A
spend after the slow start for Dragons?
JEFFREY KATZENBERG: That's correct. We managed to move our budgets around on it, so, yes.
OPERATOR: Tony Wible, Janney Montgomery.
TONY WIBLE, ANALYST, JANNEY MONTGOMERY: I just wanted to check on the Shrek release, the P&A
spend and your strategy, and also the dollars bump-up that you would expect on Shrek versus a new
franchise film, like Dragons?
JEFFREY KATZENBERG: As far as P&A I think what we said in the past, and I think it certainly holds in
this case between Dragon and Shrek is that when we have given a range of $150 million to $175
million, and all of these films fit within that range. The difference is going to be how much additional
money we have to put toward the cost of glasses, which is an additional P&A spend, and that really is
dependent upon admissions levels.
As far as pure P&A, these films fit right within that range, and then you just have to add on top of that
the cost of glasses, which would depend on how many people are seated in the box office.
OPERATOR: James Marsh, Piper Jaffray.

JAMES MARSH, ANALYST, PIPER JAFFRAY: I just wanted to follow up on the comments earlier about
Shrek's delayed international release. I just wanted to know, do you expect that to be bumping into Toy
Story if you start moving into August? I think that [release] is in the middle of -- end of June
domestically.
JEFFREY KATZENBERG: As we are -- I think, there is a very good separation between the two movies
here domestically. There is four weeks between the films, which in the summer playing time is a full
cycle for almost any movie, no matter how big it is.
Mostly in the international territories there is the equivalent spacing. A country like Russia, where a
movie will play off in two weeks, or maybe even three for a genuine blockbuster, there is -- I think,
each of us has made adjustments to be smart in how we release these films.
We are not directly competing against one another in any country anywhere in the world. Probably the
only one that is -- that is a little bit tight is Australia. And the way you have to think about it is that the
summertime for us is the wintertime for them. It is the equivalent of their -- of our holiday Christmas
two weeks is the middle of the summer for them. So we do have, I think, a two-week separation in
Australia, but is it, again, a much more compact playing time for us and for everybody.
So it would be the equivalent of having those movies out at Christmas time here in the States. One
would go in early December; one would go in late December.
OPERATOR: Barton Crockett, Lazard Capital.
BARTON CROCKETT: I just wanted a follow-up question on the 2013 release slate. Now that you're
putting Dragon in there can you give us some color? Do you expect two movies, and what would the
second movie be? And when would Dragon come in terms of within the year?
Also, to clarify, the comments on the darkness of Shrek was really just quoting either Variety or a
Hollywood Reporter review, just to clarify that. Thanks.
JEFFREY KATZENBERG: Well on the 2013, a little early for us to give any more specifics on dates for the
other film or films that will be scheduled in '13. We will be doing that -- updating you on that later in
the year.
So, again, we don't have a specific. Dragons is likely to come towards the end of the year, the second
half of the year. But we will have to see. It is moving along.Again, in terms of one of the traits people
[doing it], I have to honest, I didn't read that in the trade, so we will get them a better pair of glasses.
OPERATOR: There are no other questions.
RICH SULLIVAN: Great. Well, that concludes today's first-quarter earnings conference call. I would like
to remind everyone that a replay of this call will be available shortly on the DreamWorks Animation
website. That address again, www.DreamWorksAnimation.com.
If you have any additional questions, please feel free to contact DreamWorks Animation Investor
Relations department.

With that, I would like to thank you again for participating. And have a good evening.
OPERATOR: Ladies and gentlemen, that does conclude your conference for today. Have a good
afternoon.