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DreamWorks Animation SKG, Inc. (NASDAQ: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

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.

Lastly, I would like to discuss several items as they related to the company’s board of directors. First, Roger Enrico will transition from Executive to non-Executive Chairman within the next several months. On behalf of the entire company, I would like to thank Roger for his vision as part of the management team over the past four years. His leadership was critical to our 2004 IPO and has since established DreamWorks Animation as a successful independent company. Roger has positioned us well for the future and we look forward to his continued guidance as Chairman of our Board.

Additionally, I am happy to announce that Lew Coleman has extended the terms of his contract through 2011.

In closing, we are pleased to be coming off of an outstanding summer film and a strong second quarter result. We look forward to continued success for the company during the remainder of the year.

With that, let me turn it over to Lew for a few comments before we take your questions.

Lewis W. Coleman

Thank you, Jeffrey. Good afternoon, everyone. I would like to highlight a few items before we take your questions. In the second quarter, the company reported total revenue of $141 million resulting in net income of $27 million, or $0.30 per share. Revenue was mainly driven by the company’s last three releases, Kung Fu Panda, Shrek The Third, and Bee Movie. Kung Fu Panda contributed $46 million of revenue. Slightly less than half of this revenue came from the completion of a strategic relationship. The majority of the remaining revenue came from our consumer products area and Paramount was also able to recoup its up-front costs for prints and advertisements during the quarter.

Shrek The Third contributed $30 million of revenue, primarily from domestic pay television. Through the second quarter, the title reached an estimated 20.3 million home entertainment units net shipped worldwide.

Bee Movie contributed $26 million of revenue, driven by international home entertainment performance. The film reached an estimated $1.7 million home entertainment units net shipped worldwide through the end of the second quarter. While we continue to expect that Bee Movie will be a profitable film for the company, its financial impact will be immaterial on future quarterly earnings.

Library and other titles, which now includes Madagascar, contributed $21 million of revenue in the quarter, driven by international free television and continued catalog home video. Earnings for the remainder of the year will be largely driven by the continued performance of Kung Fu Panda.

With all major territories except Italy released by the end of this month, the third quarter will be primarily driven by the film’s international box office performance, which as you know is recorded on a one-month lag.

Favorable foreign exchange rates have certainly contributed to Kung Fu Panda’s box office performance overseas and I want to remind you that the same phenomenon will also result in higher international theatrical marketing costs for the film.

In total, the title’s worldwide theatrical marketing budget is approximately 10% higher than the high-end of the $125 million to $175 million range that we have previously experienced.

Our fall film, the sequel to Madagascar, is scheduled for release on November 7th. As you know, because our distributor is entitled to recoup its up-front marketing and distribution expenses before reporting revenues to us, we do not expect to see a significant contribution from this film until 2009.

The fourth quarter will be largely driven by the home entertainment performance of Kung Fu Panda, which will be released domestically this November. Again, please note that the favorable exchange rates benefiting the international box office generally do not translate into additional units sold overseas.

Finally, I would like to update everyone on our share repurchase program and the Glendale campus expansion. While there were no additional shares repurchased in the quarter, the company’s authorization has been increased by our board of directors to $150 million. Year-to-date, we have repurchased approximately $88 million, or 3.7 million shares.

We will also be spending approximately $85 million over the next two years to expand and improve our facilities here in Glendale in order to accommodate overall business growth, including 3D expansion. We have made no decision on whether to finance this expansion internally or externally.

With that, we would be happy to take your questions.

Question-and-Answer Session

Operator

(Operator Instructions) We’ll first go to the line of Ingrid Chung from Goldman Sachs. Please go ahead.

Ingrid Chung - Goldman Sachs

Thank you. Good afternoon. So I have two questions; the first one is about Kung Fu Panda's international box office performance. You stated earlier, it’s done very well, exceeding $305 million. However, the one thing that worried us a little bit was a weaker-than-expected Japan opening. We were just wondering if you’d comment -- if you could give us a little more color around that. Do you think there are issues with your local distributor or was it due to competition?

And then the second question I’d like to ask is it’s great that you increased your share buy-back authorization, but I was wondering why you didn’t buy back more stock in the quarter. That’s it.

Jeffrey Katzenberg

I’ll take the first and I’ll let Lew take the second. So the international performance from Kung Fu Panda has pretty much uniformly around the world been somewhere right around outstanding. Japan, which opened this past weekend, would be the first market in which I would say that the opening was soft. It happens to be very, very competitive right now. There are two local Japanese titles that are doing extremely well in the marketplace. We did end up having a very, very strong Monday, really based on the weekend numbers, a stronger Monday than we might have anticipated. So it’s a little bit early and a little bit premature, I think, to project where it ultimately is going to end up. But given how well the film has played throughout the rest of Asia, it is certainly disappointing.

Do you want to take the other one, Lew?

Lewis W. Coleman

I will, Jeffrey. Ingrid, there were a bunch of sort of little timing difference issues that kept us out of the market. First of all, we were getting pretty good information on Kung Fu Panda, which was non-public information. We felt nervous about buying the stock against that information.

Secondly, we obviously had the period of time where we had not yet released the first quarter, which took us out of the market. When all was said and done, we really only had a couple of weeks to buy stock. The stock was looking strong at the time and we just laid off.

Ingrid Chung - Goldman Sachs

Okay, great. Thank you.

Operator

Thank you. And we’ll next go to the line of Michael Morris from UBS. Please go ahead.

Analyst for Michael Morris - UBS

Hi, this is Tom, I’m on for Mike. I just had a quick question about the expansion in Glendale -- is there any plan to expand and go into videogames along with this expansion, or is it just for 3D?

Jeffrey Katzenberg

No, the expansion, Tom, is not related -- in any way related to videogames. It is primarily about taking a campus that was originally designed and built as a 2D campus 15 years ago and really bringing it up and forward to where it should be today, to put it back as a state-of-the-art facility, as well as expanding it to accommodate 3D and some of the additional things related to the movie work that we’ve talked about in the past, so whether it’s the live theater group or the work we are doing for Nickelodeon, we’re sort of bursting at the seams.

Analyst for Michael Morris - UBS

Okay. Thank you very much.

Rich Sullivan

Thanks, Tom. Next question, please.

Operator

Thank you, and we’ll go to Barton Crockett from J.P. Morgan. Please go ahead.

Barton Crockett - J.P. Morgan

Okay, great, thanks a lot. First thing I wanted to ask about was on the 3D and digital front. What do you think is the hold-up in terms of -- you know, we have one major studio but we don’t have some of the other studios, such as -- you know, or distributors like Paramount, your distributor. What’s keeping them from having signed on with the first studio that’s reported to be out there? Any color on what you think is going to get them over the hurdle if there’s any major hang-ups or what the delay is?

And then additionally on that front, if you could talk a little bit about what you see in terms of the up-charge for 3D and how much influence you have on that and what’s going to affect that as we approach Monsters and Aliens?

Jeffrey Katzenberg

Sure, Barton. So on the first one, you know, the first one’s the toughest one because in many ways, that really sort of sets the template and it has taken a good 60 days longer than we or anyone else anticipated, not the least of which, as you can imagine coming to market with a very substantial size of financing for something like this. There were a lot of pressures to get it just right, so I think from all sides involved in it, it’s taken longer than it should have. Now that the first one is done, I think you are going to see very rapidly, meaning in the next two to three weeks, at least two or three additional studios come on board and so I think it will start to roll very quickly.

In addition to DCIP, which is the partnership for those who don’t know, is the partnership of Regal, Cinemark, and AMC, which represents over 16,000 screens, so obviously really the key critical leader in this and what they are looking to do. At the same time, there are a number of other both financing as well as systems that are rolling out as opportunities and alternatives for exhibitors. And I think again, you’ll be hearing about those in the next two or three weeks, all of which is going to fortunately, once this gets done, speed up the rate of rollout when it does get done. So longer to get us there, but once it happens I think it will have greater velocity to it and greater momentum to it.

In terms of the up-charge, you know, ultimately this is something that the marketplace is going to talk to a lot but I believe that it is a premium experience, that right now today it has been getting a $3 on average up-charge, except Hannah Montana comes along and the up-charge on it was over $8 -- meaning on average the tickets were sold at $15. So if you take the $7 average ticket price, it more than doubled.

For me, what I am hoping or and looking for is a $5 premium above the existing price structure that exists when Monsters Versus Aliens comes out.

Barton Crockett - J.P. Morgan

You’re hoping for that but do the theaters decide that ultimately?

Jeffrey Katzenberg

It’s complicated, and more time than we would do on this phone call here but it is -- you know, ultimately, as in any retail business, we set a wholesale price and it’s up to the retailer to decide what to charge for it. So the answer is yes, we have some effect on it by determining what the wholesale price is but ultimately the exhibitor will make the final decision about what they want to do in terms of what they want to charge -- do they want to offer it at the wholesale price? Do they want to put a premium on top of that? You know, that’s something they decide.

Barton Crockett - J.P. Morgan

Okay, that’s great. Thanks a lot.

Rich Sullivan

Thanks, Barton. Next question, please.

Operator

Next we’ll go to Drew Crum from Stifel Nicolaus. Please go ahead.

Drew Crum - Stifel Nicolaus

I just want to ask you about the constructs of your notional film model, given the increases to the P&A in the theatrical window -- are you anticipating greater marketing spend in the DVD window as well?

Jeffrey Katzenberg

I’ll take part of it; Lew, you can also dive in on this. I think that we have seen a -- you know, all the positive impacts are on the income side here as it relates to currency, and that is the vast majority of the incremental cost that Lew talked about for Kung Fu Panda and it’s related to our overseas business. It’s not something that we are seeing throughout the rest of our distribution. So I think it’s mostly related, if not exclusively related, to just the currency issues that we are facing. So we’re getting the benefit of it on the income side of it and we’re also paying for it in terms of what it cost us for buying and supporting them with advertising.

Lew, is there anything you want to add on that?

Lewis W. Coleman

Not much, Jeffrey. Drew, the advertising charges, marketing programs for video are substantially smaller than they are for the film release. We get to use some of the film release glow and materials, so the only thing that would be affected is some of the international markets because of the weakness of the dollar. It’s not a big deal for your model.

Drew Crum - Stifel Nicolaus

Okay, very good.

Jeffrey Katzenberg

And just to say, a small part of this -- I mean, the vast majority of it was due to currency. There is a small part of it was from the extraordinary enthusiasm we had from our distribution partner as well as exhibitors around the world. We did have an aggressive marketing launch for this film, particularly in Asia, where I think as people have seen the performance there has been unprecedented. So there was a choice by us to chase it and to spend a little bit more than we have in the past in markets that we thought had an opportunity unique to this film and it has paid off, but there is an incremental expense there.

Drew Crum - Stifel Nicolaus

Okay, very good. Thanks for that. And just looking at Madagascar 2, I wonder if you could talk about some of the opportunities you have within licensing and consumer products, relative to some of your other films, understanding that’s a smaller piece of your business?

Jeffrey Katzenberg

Right. Well, again, what I would say is that Madagascar 1 was a successful licensing program for us and one of the great benefits when doing a sequel is that you now have a known and in this case a proven property at retail and in the licensing world, so things move up a notch and there is a -- you know, there is I think a very solid merchandising and licensing campaign behind Madagascar 2. There’s a very strong enthusiasm for the property on a worldwide basis.

Drew Crum - Stifel Nicolaus

Okay, and last question real quickly here, your expectations for CapEx for the year, just given the expansion plans?

Lewis W. Coleman

Drew, the CapEx will be up this year, fairly significantly but the bulk of the CapEx increases are going to hit next year, so of the 80, we are probably going to be up maybe 25 to 30 this year and mostly in the fourth quarter, so the depreciation associated with it won’t catch up until we get into the fourth quarter, and then the rest is -- will come out next year.

In most instances, unusually we are right now ahead of our sort of construction plans in terms of getting permits and everything else, so we are just really starting the big expenditures. Because the whole thing is going to take us about five quarters, you can sort of figure out -- or six quarters, you can sort of figure out how it’s going to get spread.

Drew Crum - Stifel Nicolaus

Okay. Thanks, guys.

Rich Sullivan

Thanks, Drew. Next question, please.

Operator

Thank you, and that will come from David Miller, Caris & Company.

David Miller - Caris & Company

Good afternoon. Congratulations on the stellar results. Just a couple of housekeeping items -- I didn’t hear either of you talk about --

Jeffrey Katzenberg

David, we like that word stellar.

David Miller - Caris & Company

Okay, very good, very good. I didn’t hear either of you mention anything about a Kung Fu sequel, which leads me to believe that you are sort of still mulling over release dates, so if you could just shed some color on what your thoughts are about that, that would be great.

And then Jeffrey, I know that the date for the Shrek musical in New York is December 14th, but isn’t there a Seattle showing in the fall? I think maybe mid-September or something like that. And if I have that date correct, what are pacings looking like in terms of ticket sales for that show, and are there multiple showings going all the way to December 14th in Seattle? Thanks very much.

Jeffrey Katzenberg

Sure. Thanks, David. First on the sequel side, you know, this has been moving so fast it’s really a combination of two things that have happened here, which is we ended up releasing three weeks later than we normally do because of the Olympics, a lot of the international stuff was picked up earlier and so the speed with which this has rolled out and frankly the snowballing of the success of the film has really in a good way caught us by surprise. And so where I think there’s lots of enthusiasm for the sequel, and as in the past we’ve done a considerable amount of work to put us in a very good position to move forward, I just think we’re just a little bit premature here of actually pushing the button on it.

So lots of enthusiasm from the talent and the results are strong and we just haven’t got all the pieces in place yet, but we’re not ready to say yes but there’s lots of enthusiasm for it. And as you said, factoring all of the production plans so that when and if we put it together, we also can be clear about when it will come to market. You know, we think we need to be able to give everybody all of the information, not part of it when we have it all put together, so stay tuned.

And on to the musical, yes, we begin our preview performance in Seattle in about three weeks or so. It does have its premiere in Seattle on September 10th. It then has about a three-week run in Seattle. It then comes to Broadway and starts its previews on Broadway in mid-November with a December 14th opening. And we actually made the move from New York to Seattle about two weeks ago and started really assembling and putting it up on the stage in Seattle and I have to say, having visited with them last week, they’ve got great momentum, a lot of enthusiasm and I think things look promising.

Rich Sullivan

Great. Thanks, David. Next question, please.

Operator

Thank you, and our next question will come from the line of Jay Kindilog from MCH. Please go ahead.

Jay Kindilog - MCH

Just to follow-up on the Shrek the Musical question, could you give us a quick snapshot on the economics and the potential for earnings accretion next year?

Lewis W. Coleman

It’s obviously very difficult to predict the outcome of a Broadway show but in a broad sense, this is about a $25 million, $26 million investment for us. We are not partnering with anybody. We think that the value of our IP is fairly strong and therefore the risk is a little bit lower than it is on most Broadway shows.

If the show is very successful and we have a couple of traveling companies and a couple of sit-down companies, this show at the high-end could produce about the same amount of profits as another movie. I would not put that into your projections in any way, shape, or form but it does give you sort of a sense of the risk/reward equation that we are dealing with.

I think that waiting until we see what happens early next year is probably a safer bet from your point of view before I would put real numbers into your model, because then it’s going to be easier to tell.

Jay Kindilog - MCH

And would it be safe to assume on your next call, you could probably give us some sort of metrics on presales through the May 31st first run of the show?

Jeffrey Katzenberg

Well, I think -- let me add two things here, which is one is the cost of the show itself is $15 million, so I think when Lew talks about the $25 million, that is for all aspects involved in the support of the show, marketing of the show, licensing program for the show, every single thing, soup to nuts on it, but the production itself is about $15 million.

In terms of when I think you’ll have some real insight into what the show is going to look like, I don’t think that will be very -- I don’t think we’ll have a lot of transparency into that until probably near the end of the first quarter of ’09. It’s just -- particularly with a property like this, it’s got a tremendous amount of recognition, a lot of heat, a lot of interest, it will likely have a fairly decent presale and a decent advance on it. That really isn’t ultimately the test of success or failure and certainly not of longevity. And I don’t think you’ll really start to have a picture, a clear picture of it -- and when I say you, I think any of us -- until we get towards the end of the first quarter of ’09.

Jay Kindilog - MCH

Great, okay, thanks for that level of detail. And then just one quick one on 3D; would you expect some sort of big announcement with multiple studios and the DCIP, something that Monsters and Aliens could connect itself to, or would you expect information to trickle out, as it has so far?

Jeffrey Katzenberg

Well, I think these are deals that have to be made by individual distributors on it. There’s no collective in this. DCIP is a collective of the three theater chains that I spoke of. They must deal individually with each distributor and so I’m just, you know, obviously have a great deal of interest in this and trying to keep my finger on the pulse on a day-to-day if not hourly basis here, and as I said, there are two, if not three studios that I think are very close to signing and should in the next few weeks. And then I think you’ll just -- you’ll see the dominoes fall in a good way.

Jay Kindilog - MCH

Very good. Thank you.

Rich Sullivan

Thanks, Jay. Next question, please.

Operator

Thank you, from Tuna Amobi from Standard & Poor’s Equity. Please go ahead.

Tuna Amobi - Standard & Poor’s

Thank you very much. I apologize if the question was already asked but I wanted to ask if there were any financial aspects from the full unwinding of your relationship with Toshiba. That’s already done, and how does your strategy for high-def now change looking ahead with the Blu-Ray format? Are you now in the stages of trying to recreate that strategy or is it just business as usual?

Lewis W. Coleman

Tuna, why don’t I --

Jeffrey Katzenberg

Well, I’ll -- okay, you do the first, Lew.

Lewis W. Coleman

And I’ll give you the second part, Jeffrey. Tuna, as you know we’ve been very reluctant to sort of disclose directly the financial aspects of the Toshiba deal. We’re trying to walk a reasonable line of giving you the information sort of broadly speaking in our releases, and which you do have with this release, and trying to honor the confidentiality agreement we have with Toshiba. So there’s not much more to say than I think what we’ve already released this quarter on that particular subject.

Jeffrey Katzenberg

And we will be releasing Kung Fu Panda on Blu-Ray in the fourth quarter, so we are making our product available and will aggressively promote and market our product on the Blu-Ray platform.

Tuna Amobi - Standard & Poor’s

Thank you very much.

Rich Sullivan

Thanks, Tuna. Next question, please.

Operator

And that will be from Rich Greenfield from Pali Capital. Please go ahead.

Richard Greenfield - Pali Research

A couple of questions, kind of related; you made comments about the U.S. DVD market and I was wondering, Jeffrey, if you had a sense of what was helping make it so strong. I mean, it seems to, after a tough 2007, 2008 has been far better than my and kind of broader industry expectations. There’s a lot of fear about the DVD business having kind of fallen off of a cliff after last year, which doesn’t seem to have played out, so a question of why.

And then two, when you look at catalog DVD for you specifically, how is Madagascar holding up? It’s a title that I know has done pretty well for you and heading into the release of Madagascar 2, any color you can give us on how Madagascar has continued to do over the last few months? Thanks.

Jeffrey Katzenberg

So I think, Rich, there are a number of factors that are now starting to let the sun shine on the DVD market. The first of which is that the just sort of flood of product that I think really clogged the retail channel started to sort itself out last year and has now sort of really created a much more stable market, if you will. I think that to some degree, that is also creating more focus and more value to the stronger titles, both original titles as well as library titles, and so I think we are benefiting on both of those accounts.

And then the other part, which I do think you are going to continue to see here is that the movie marketplace as a whole, both the theatrical and the home video one I believe is going to show itself as being a strong performer in a difficult recession challenged market. We have been now literally going back to the 70s, the 1970s, counter cyclical in that regard and I don’t think it’s any different now. I think you are going to see a very strong second half of the year theatrically and I believe it’s going to be -- it is either going to match or exceed 2007 and I think that you are going to see a very, very strong second half of the year in the home video market as all of these titles make their way to retail.

In terms of Madagascar, as we have done with the Shrek franchise, we are really getting ready to bring Madagascar back into the marketplace in the most advantageous way to ride on the coattails of Mad 2 when it comes out, so we do have lots of plans that you will be hearing about as we get into the fourth quarter and then into the first quarter of 2009. But we do have very ambitious and aggressive plans for the catalog.

Richard Greenfield - Pali Research

But we should definitely expect Mad 1 to be marketed as a DVD, both in standard def and Blu-Ray in calendar Q4 concurrently with the theatrical release of Mad 2?

Jeffrey Katzenberg

I don’t know what the Blu-Ray plans are on it and Ann’s not with us here today, so I don’t want to -- I don’t know exactly what her plans are for that but it will be marketed in the fourth quarter.

Richard Greenfield - Pali Research

Thanks.

Rich Sullivan

Great. Thanks, Rich. Next question, please.

Operator

Okay, our next question will be from Jeff Logsdon from BMO Capital. Please go ahead.

Jeffrey Logsdon - BMO Capital Markets

Thank you. Jeffrey, I know because of your relationships, knowledge, understanding, and all of the above of the industry, can you give us some perspective on SAG and how we get to the finish line here?

Jeffrey Katzenberg

Well, Jeff, you picked a subject which I have to say, I don’t know much.

Jeffrey Logsdon - BMO Capital Markets

I doubt that.

Jeffrey Katzenberg

No, no, I really don’t. I have not been actively engaged in this. You know, Bob Iger and Peter Chernin have really been the guys that have taken the lead on the labor in the last year and done I think an outstanding job on it, and I have not spoken with either of them in the last week or 10 days, so I am frankly out of date and I don’t want to speak to something I just don’t really have any current real insight on.

Jeffrey Logsdon - BMO Capital Markets

Okay, thank you. I hope everything is okay on the --

Jeffrey Katzenberg

Pick another subject.

Jeffrey Logsdon - BMO Capital Markets

Thank you.

Rich Sullivan

Great. Thanks, Jeff. Anymore questions?

Operator

We have no additional questions. I’ll turn it back to you for any closing remarks.

Rich Sullivan

Great. Well, thank you, everyone, for participating today. That concludes our second quarter earnings conference call. I’d like to remind everyone that a replay of this call will be available shortly and accessible on the DreamWorks Animation website. That address again, www.dreamworksanimation.com. If you have any additional questions, please feel free to contact the DreamWorks Animation investor relations department. Thank you again for participating and have a great evening.

Operator

Ladies and gentlemen, that does conclude our conference for today. We thank you for your participation and for using AT&T executive teleconference service. You may now disconnect.

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