Flushed Away Sinks DreamWorks Animation 4th Quarter

DreamWorks Animation SKG Inc. announced financial results for its fourth quarter and full year ended Dec. 31, 2006. In the fourth quarter, the company reported operating revenue of $204.3 million with a net loss of approximately $21.3 million, or ($0.20) per share on a fully diluted basis. These results bring the full year reported revenue for 2006 to a total of $394.8 million and net income of $15.1 million, or $0.15 per share on a fully diluted basis.

Included in the results for the quarter is a charge related to the partial write-off of capitalized film costs for FLUSHED AWAY, which has reached approximately $175 million in worldwide box office to date. Based on the film's performance to date and the company's current expectations of future performance, the company has recorded a pre-tax charge of approximately $109 million. The charge resulted in a ($0.80) reduction to earnings per share on a fully diluted basis in the fourth quarter and full year of 2006.

"Looking at our 2006 releases overall, OVER THE HEDGE finished as one of the top performing domestic theatrical releases of the year and is performing well in home video," stated Jeffrey Katzenberg, ceo of DreamWorks Animation. "FLUSHED AWAY, however, did not meet financial expectations despite critical acclaim. Its performance offset what was otherwise a strong year for the rest of our titles, especially in the home video market."

For the quarter, OVER THE HEDGE contributed approximately $104.1 million of revenue, driven primarily by its initial release in the home video market. Through the end of 2006, the title has reached approximately 9.8 million units shipped on a worldwide basis, net of actual returns and an estimate of future returns.

MADAGASCAR contributed approximately $36.2 million of revenue for the quarter from international pay television as well as continued home video sales. Since its release in the fourth quarter of 2005, MADAGASCAR has reached 22.2 million units shipped, net of actual returns and return reserves, on a worldwide basis through the end of 2006.

SHREK 2 provided $31.1 million of revenue in the quarter from television and home video catalogue sales, while SHARK TALE and WALLACE & GROMIT: CURSE OF THE WERE-RABBIT provided approximately $9.5 million and $8.6 million, respectively. The home video for WALLACE & GROMIT: CURSE OF THE WERE-RABBIT has now reached an estimated 5.2 million units shipped, net of actual returns and return reserves, on a worldwide basis through the end of 2006. The company's latest theatrical release, FLUSHED AWAY, contributed $6.2 million driven by consumer products and the reimbursement payment from Paramount as part of its distribution agreement with the company. Library and other titles contributed $8.6 million of revenue for the fourth quarter.

Looking ahead to 2007, the company expects full year results to be driven by SHREK THE THIRD, which is set for theatrical release on May 18, 2007. As indicated by the aforementioned write-off, the company does not anticipate that FLUSHED AWAY will have a meaningful earnings impact in the future. As a result, the company expects a significant portion of its 2007 earnings will occur in the second half of the year after distribution and marketing costs for SHREK THE THIRD have been recouped by Paramount.

The company's second film for 2007, BEE MOVIE, is set for release on Nov. 2, 2007. However, as is typical for the company's fall releases, the company does not expect it to generate meaningful revenue in the year.

"We have made a lot of progress this past year improving several aspects of the business and are entering a very exciting time for DreamWorks Animation," stated Katzenberg. "With the next chapter in our SHREK franchise, as well as BEE MOVIE, we have a unique slate of one sequel and one original film that I believe captures the business model that we had envisioned for the company."

The company also announced today that its board of directors has approved a share repurchase program of $150 million for the company to execute at its discretion over the next 18 months.

"The company is now in a very strong cash position and we believe this repurchase program is an appropriate use for this cash and in the best interest of shareholders," stated Lew Coleman, president of DreamWorks Animation.

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