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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549





FORM 10-Q





QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF

THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended
September 30, 2009

Commission file number 001-32337

DREAMWORKS ANIMATION SKG, INC.

(Exact name of
registrant as specified in its charter)



|                                                               |  |                                     
|-------------------------------------------------------------- |  | ------------------------------------
|Delaware                                                       |  | 68-0589190                          
|(State or other jurisdiction of incorporation or organization) |  | (I.R.S. employer identification no.)

1000 Flower Street

Glendale, California 91201

(Address of principal
executive offices) (Zip code)

(818) 695-5000

(Registrants telephone number, including area code)

Indicate
by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No   ̈.

Indicate by check mark whether the registrant has submitted electronically and posted on its
corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was
required to submit and post such files).    Yes   ̈    No   ̈

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.
See the definition of large accelerated filer, accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer  x      Accelerated filer   ̈      Non-accelerated filer   ̈      Smaller reporting company   ̈

(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes   ̈    No  x.

Indicate
the number of shares outstanding of each of the registrants classes of common stock: As of September 30, 2009, there were 75,343,913 shares of Class A common stock and 11,419,461 shares of Class B common stock of the registrant
outstanding.









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TABLE OF CONTENTS



|              |  |                                                                                       |  |     
|------------- |  | ------------------------------------------------------------------------------------- |  | ----
|              |  |                                                                                       |  | Page
|              |  |                                                                                      
|PART I.       |  | FINANCIAL INFORMATION                                                                 |  |     
|              |  |                                                                                      
|Item 1.       |  | Financial StatementsDreamWorks Animation SKG, Inc. (unaudited)                       |  | 2   
|              |  |                                                                                      
|Item 2.       |  | Managements Discussion and Analysis of Financial Condition and Results of Operations |  | 13  
|              |  |                                                                                      
|Item 3.       |  | Quantitative and Qualitative Disclosure About Market Risk                             |  | 26  
|              |  |                                                                                      
|Item 4.       |  | Controls and Procedures                                                               |  | 26  
|              |  |                                                                                      
|PART II.      |  | OTHER INFORMATION                                                                     |  |     
|              |  |                                                                                      
|Item 1.       |  | Legal Proceedings                                                                     |  | 27  
|              |  |                                                                                      
|Item 1A.      |  | Risk Factors                                                                          |  | 27  
|              |  |                                                                                      
|Item 2.       |  | Unregistered Sales of Equity Securities and Use of Proceeds                           |  | 27  
|              |  |                                                                                      
|Item 5.       |  | Other Information                                                                     |  | 28  
|              |  |                                                                                      
|Item 6.       |  | Exhibits                                                                              |  | 28  
|              | 
|SIGNATURES    |  | 29                                                                                   
|              | 
|EXHIBIT INDEX |  | 30                                                                                   

Unless the context otherwise requires, the terms DreamWorks Animation, the
Company, we, us and our refer to DreamWorks Animation SKG, Inc., its consolidated subsidiaries, predecessors in interest, and the subsidiaries and assets and liabilities contributed to it by the entity
then known as DreamWorks L.L.C. (Old DreamWorks Studios) on October 27, 2004 in connection with our separation from Old DreamWorks Studios, including Pacific Data Images, Inc. and its subsidiary, Pacific Data
Images, LLC.



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PART IFINANCIAL INFORMATION



|Item 1. | Financial Statements
|------- | --------------------

DREAMWORKS ANIMATION SKG, INC.

CONSOLIDATED BALANCE SHEETS



|                                                                                                                                                                                    |  |                                                    |           |   |                  |   |           |  
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | -------------------------------------------------- | --------- | - | ---------------- | - | --------- | -
|                                                                                                                                                                                    |  | September 30,2009                                  |           |   | December 31,2008 |  
|                                                                                                                                                                                    |  | (unaudited)                                        |           |   |                  |  
|                                                                                                                                                                                    |  | (in thousands, except par value and share amounts) |          
|Assets                                                                                                                                                                              |  |                                                    |           |   |                  |   |           |  
|Cash and cash equivalents                                                                                                                                                           |  | $                                                  | 347,230   |   |                  | $ | 262,644   |  
|Trade accounts receivable, net of allowance for doubtful accounts                                                                                                                   |  |                                                    | 1,312     |   |                  |   | 4,550     |  
|Income taxes receivable                                                                                                                                                             |  |                                                    | 24,614    |   |                  |   | 6,468     |  
|Receivable from Paramount, net of reserve for returns and allowance for doubtful accounts                                                                                           |  |                                                    | 111,032   |   |                  |   | 186,522   |  
|Film costs, net                                                                                                                                                                     |  |                                                    | 658,995   |   |                  |   | 638,243   |  
|Prepaid expenses and other assets                                                                                                                                                   |  |                                                    | 44,532    |   |                  |   | 31,453    |  
|Property, plant and equipment, net of accumulated depreciation and amortization                                                                                                     |  |                                                    | 149,641   |   |                  |   | 114,913   |  
|Deferred taxes, net                                                                                                                                                                 |  |                                                    | 3,704     |   |                  |   | 27,049    |  
|Goodwill                                                                                                                                                                            |  |                                                    | 34,216    |   |                  |   | 34,216    |  
|                                                                                                                                                                                    |  |                                                    |           |   |                  |   |           |  
|Total assets                                                                                                                                                                        |  | $                                                  | 1,375,276 |   |                  | $ | 1,306,058 |  
|                                                                                                                                                                                    |  |                                                    |           |   |                  |   |           |  
|Liabilities and Equity                                                                                                                                                              |  |                                                    |           |   |                  |   |           |  
|Liabilities:                                                                                                                                                                        |  |                                                    |           |   |                  |   |           |  
|Accounts payable                                                                                                                                                                    |  | $                                                  | 2,611     |   |                  | $ | 7,499     |  
|Accrued liabilities                                                                                                                                                                 |  |                                                    | 94,520    |   |                  |   | 115,158   |  
|Payable to former stockholder                                                                                                                                                       |  |                                                    | 54,856    |   |                  |   | 54,192    |  
|Deferred revenue and other advances                                                                                                                                                 |  |                                                    | 47,769    |   |                  |   | 38,857    |  
|Borrowings and other debt                                                                                                                                                           |  |                                                    | 70,059    |   |                  |   | 70,059    |  
|                                                                                                                                                                                    |  |                                                    |           |   |                  |   |           |  
|Total liabilities                                                                                                                                                                   |  |                                                    | 269,815   |   |                  |   | 285,765   |  
|Commitments and contingencies                                                                                                                                                       |  |                                                    |           |   |                  |   |           |  
|Equity:                                                                                                                                                                             |  |                                                    |           |   |                  |   |           |  
|Stockholders equity:                                                                                                                                                               |  |                                                    |           |   |                  |   |           |  
|Class A common stock, par value $.01 per share, 350,000,000 shares authorized, 95,493,256 and 95,381,143 shares issued as of
September 30, 2009 and December 31, 2008, respectively |  |                                                    | 955       |   |                  |   | 954       |  
|Class B common stock, par value $.01 per share, 150,000,000 shares authorized, 11,419,461 shares issued and outstanding as of
September 30, 2009 and December 31, 2008              |  |                                                    | 114       |   |                  |   | 114       |  
|Additional paid-in capital                                                                                                                                                          |  |                                                    | 907,141   |   |                  |   | 876,651   |  
|Retained earnings                                                                                                                                                                   |  |                                                    | 752,735   |   |                  |   | 645,261   |  
|Less: Class A Treasury common stock, at cost, 20,149,343 and 17,432,728 shares as of September 30, 2009 and
December 31, 2008, respectively                                         |  |                                                    | (558,425  | ) |                  |   | (505,628  | )
|                                                                                                                                                                                    |  |                                                    |           |   |                  |   |           |  
|Total stockholders equity                                                                                                                                                          |  |                                                    | 1,102,520 |   |                  |   | 1,017,352 |  
|Minority interest                                                                                                                                                                   |  |                                                    | 2,941     |   |                  |   | 2,941     |  
|                                                                                                                                                                                    |  |                                                    |           |   |                  |   |           |  
|Total equity                                                                                                                                                                        |  |                                                    | 1,105,461 |   |                  |   | 1,020,293 |  
|                                                                                                                                                                                    |  |                                                    |           |   |                  |   |           |  
|Total liabilities and equity                                                                                                                                                        |  | $                                                  | 1,375,276 |   |                  | $ | 1,306,058 |  
|                                                                                                                                                                                    |  |                                                    |           |   |                  |   |           |  

See accompanying notes.



2



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DREAMWORKS ANIMATION SKG, INC.

CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)



|                                                             |  |                                          |         |   |                                |   |         |      |  |   |         |   |  |   |         |  
|------------------------------------------------------------ |  | ---------------------------------------- | ------- | - | ------------------------------ | - | ------- | ---- |  | - | ------- | - |  | - | ------- | -
|                                                             |  | Three Months EndedSeptember 30,          |         |   | Nine Months EndedSeptember 30, |  
|                                                             |  | 2009                                     |         |   | 2008                           |   |         | 2009 |  |   | 2008    |  
|                                                             |  | (in thousands, except per share amounts) |        
|Revenues                                                     |  | $                                        | 135,448 |   |                                | $ | 151,525 |      |  | $ | 530,962 |   |  | $ | 450,227 |  
|Costs of revenues                                            |  |                                          | 89,066  |   |                                |   | 75,518  |      |  |   | 319,494 |   |  |   | 248,101 |  
|                                                             |  |                                          |         |   |                                |   |         |      |  |   |         |   |  |   |         |  
|Gross profit                                                 |  |                                          | 46,382  |   |                                |   | 76,007  |      |  |   | 211,468 |   |  |   | 202,126 |  
|Product development                                          |  |                                          | 155     |   |                                |   | 692     |      |  |   | 2,616   |   |  |   | 1,129   |  
|Selling, general and administrative expenses                 |  |                                          | 24,687  |   |                                |   | 29,180  |      |  |   | 70,209  |   |  |   | 82,914  |  
|                                                             |  |                                          |         |   |                                |   |         |      |  |   |         |   |  |   |         |  
|Operating income                                             |  |                                          | 21,540  |   |                                |   | 46,135  |      |  |   | 138,643 |   |  |   | 118,083 |  
|Interest income, net                                         |  |                                          | 237     |   |                                |   | 2,312   |      |  |   | 1,755   |   |  |   | 7,769   |  
|Other income, net                                            |  |                                          | 2,191   |   |                                |   | 1,444   |      |  |   | 5,256   |   |  |   | 3,301   |  
|Increase in income tax benefit payable to former stockholder |  |                                          | (2,130  | ) |                                |   | (7,760  | )    |  |   | (29,160 | ) |  |   | (25,200 | )
|                                                             |  |                                          |         |   |                                |   |         |      |  |   |         |   |  |   |         |  
|Income before income taxes                                   |  |                                          | 21,838  |   |                                |   | 42,131  |      |  |   | 116,494 |   |  |   | 103,953 |  
|Provision for income taxes                                   |  |                                          | 2,230   |   |                                |   | 4,780   |      |  |   | 9,020   |   |  |   | 13,010  |  
|                                                             |  |                                          |         |   |                                |   |         |      |  |   |         |   |  |   |         |  
|Net income                                                   |  | $                                        | 19,608  |   |                                | $ | 37,351  |      |  | $ | 107,474 |   |  | $ | 90,943  |  
|                                                             |  |                                          |         |   |                                |   |         |      |  |   |         |   |  |   |         |  
|Basic net income per share                                   |  | $                                        | 0.23    |   |                                | $ | 0.42    |      |  | $ | 1.24    |   |  | $ | 1.00    |  
|Diluted net income per share                                 |  | $                                        | 0.23    |   |                                | $ | 0.41    |      |  | $ | 1.23    |   |  | $ | 0.99    |  
|Shares used in computing net income per share:               |  |                                          |         |   |                                |   |         |      |  |   |         |   |  |   |         |  
|Basic                                                        |  |                                          | 85,882  |   |                                |   | 89,281  |      |  |   | 86,402  |   |  |   | 90,667  |  
|Diluted                                                      |  |                                          | 87,129  |   |                                |   | 90,665  |      |  |   | 87,355  |   |  |   | 91,755  |  

See accompanying notes.



3



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DREAMWORKS ANIMATION SKG, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)



|                                                                                            |  |                                |          |   |      |   |          |  
|------------------------------------------------------------------------------------------- |  | ------------------------------ | -------- | - | ---- | - | -------- | -
|                                                                                            |  | Nine Months EndedSeptember 30, |         
|                                                                                            |  | 2009                           |          |   | 2008 |  
|                                                                                            |  | (in thousands)                 |         
|Operating activities                                                                        |  |                                |          |   |      |   |          |  
|Net income                                                                                  |  | $                              | 107,474  |   |      | $ | 90,943   |  
|Adjustments to reconcile net income to net cash provided by operating activities:           |  |                                |          |   |      |   |          |  
|Amortization and write off of film costs                                                    |  |                                | 266,024  |   |      |   | 225,884  |  
|Stock compensation expense                                                                  |  |                                | 22,478   |   |      |   | 28,533   |  
|Depreciation and amortization                                                               |  |                                | 2,497    |   |      |   | 2,721    |  
|Revenue earned against deferred revenue and other advances                                  |  |                                | (69,146  | ) |      |   | (58,419  | )
|Deferred taxes, net                                                                         |  |                                | 23,345   |   |      |   | 591      |  
|Change in operating assets and liabilities:                                                 |  |                                |          |   |      |   |          |  
|Trade accounts receivable                                                                   |  |                                | 3,238    |   |      |   | (11,497  | )
|Receivable from Paramount                                                                   |  |                                | 75,490   |   |      |   | 200,680  |  
|Film costs                                                                                  |  |                                | (269,011 | ) |      |   | (296,044 | )
|Prepaid expenses and other assets                                                           |  |                                | (13,710  | ) |      |   | 10,158   |  
|Accounts payable and accrued liabilities                                                    |  |                                | (25,157  | ) |      |   | 1,910    |  
|Payable to former stockholder                                                               |  |                                | 664      |   |      |   | (12,444  | )
|Income taxes payable/receivable, net                                                        |  |                                | (17,317  | ) |      |   | (16,991  | )
|Deferred revenue and other advances                                                         |  |                                | 84,964   |   |      |   | 88,877   |  
|                                                                                            |  |                                |          |   |      |   |          |  
|Net cash provided by operating activities                                                   |  |                                | 191,833  |   |      |   | 254,902  |  
|                                                                                            |  |                                |          |   |      |   |          |  
|Investing activities                                                                        |  |                                |          |   |      |   |          |  
|Purchases of property, plant and equipment                                                  |  |                                | (55,030  | ) |      |   | (33,088  | )
|                                                                                            |  |                                |          |   |      |   |          |  
|Net cash used in investing activities                                                       |  |                                | (55,030  | ) |      |   | (33,088  | )
|                                                                                            |  |                                |          |   |      |   |          |  
|Financing Activities                                                                        |  |                                |          |   |      |   |          |  
|Purchase of treasury stock                                                                  |  |                                | (52,797  | ) |      |   | (177,840 | )
|Receipts from exercise of stock options and excess tax benefits from employee equity awards |  |                                | 580      |   |      |   | 1,442    |  
|                                                                                            |  |                                |          |   |      |   |          |  
|Net cash used in financing activities                                                       |  |                                | (52,217  | ) |      |   | (176,398 | )
|                                                                                            |  |                                |          |   |      |   |          |  
|Increase in cash and cash equivalents                                                       |  |                                | 84,586   |   |      |   | 45,416   |  
|Cash and cash equivalents at beginning of period                                            |  |                                | 262,644  |   |      |   | 292,489  |  
|                                                                                            |  |                                |          |   |      |   |          |  
|Cash and cash equivalents at end of period                                                  |  | $                              | 347,230  |   |      | $ | 337,905  |  
|                                                                                            |  |                                |          |   |      |   |          |  
|Supplemental disclosure of cash flow information:                                           |  |                                |          |   |      |   |          |  
|Cash paid during the period for income taxes, net                                           |  | $                              | 3,347    |   |      | $ | 29,271   |  
|                                                                                            |  |                                |          |   |      |   |          |  
|Cash paid during the period for interest, net of amounts capitalized                        |  | $                              | 506      |   |      | $ | 719      |  
|                                                                                            |  |                                |          |   |      |   |          |  

See accompanying notes



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DREAMWORKS ANIMATION SKG, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

1. Business
and Basis of Presentation

Business

The businesses and activities of the DreamWorks Animation SKG, Inc. (DreamWorks Animation or the Company) primarily include the development, production and
exploitation of computer generated, or CG, animated feature films and characters in the worldwide theatrical, home entertainment, television, merchandising and licensing and other markets. The Companys films are distributed in theatrical, home
entertainment and television markets on a worldwide basis by Paramount Pictures Corporation, a subsidiary of Viacom Inc. (Viacom), and its affiliates (collectively, Paramount) pursuant to an exclusive
distribution agreement and a fulfillment services agreement (collectively, the Paramount Agreements). The Company generally retains all other rights to exploit its films, including commercial tie-in and promotional rights with
respect to each film, as well as merchandising, interactive, literary publishing, music publishing and soundtrack rights. In addition, the Company continues to expand the exploitation of its film properties through the development of special content
such as CG animated television specials, live theatrical stage performances and an online virtual world game.

Basis of Presentation and
Use of Estimates

The consolidated financial statements of the Company present the financial position, results of
operations and cash flows of DreamWorks Animation and its wholly owned subsidiaries. All significant intercompany accounts and transactions have been eliminated. The accompanying unaudited financial data as of September 30, 2009 and for the
three and nine months ended September 30, 2009 and 2008 has been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission and in accordance with United States generally accepted accounting
principles (GAAP) for interim financial information. Accordingly, certain information and footnote disclosures normally included in comprehensive financial statements have been condensed or omitted pursuant to such rules and
regulations. The consolidated balance sheet as of December 31, 2008 was derived from audited financial statements.

These
financial statements should be read in conjunction with the consolidated financial statements and related notes included in the Companys Annual Report on Form 10-K for the year ended December 31, 2008 (the 2008 Form
10-K).

The accompanying unaudited consolidated financial statements reflect all adjustments, consisting of only
normal recurring items, which in the opinion of management, are necessary for a fair statement of the results of operations for the periods shown. The results of operations for such periods are not necessarily indicative of the results expected for
the full year or for any future period.

The preparation of financial statements in conformity with United States generally
accepted accounting principles (GAAP) requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes, including estimates of ultimate revenues and ultimate
costs of film and television product, estimates of product sales that will be returned and the amount of receivables that ultimately will be collected, the potential outcome of future tax consequences of events that have been recognized in the
Companys financial statements, loss contingencies, and estimates used in the determination of the fair value of stock options and other equity awards for stock-based compensation. Actual results could differ from those estimates. To the extent
that there are material differences between these estimates and actual results, the Companys financial condition or results of operations will be affected. Estimates are based on past experience and other assumptions that management believes
are reasonable under the circumstances, and management evaluates these estimates on an ongoing basis.



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DREAMWORKS ANIMATION SKG, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS(Continued)



Certain amounts in the prior periods consolidated financial statements have been
reclassified to conform to the current periods presentation.

Recent Accounting Pronouncements

In December 2007, the Financial Accounting Standards Board (FASB) issued new authoritative guidance regarding
noncontrolling interests in consolidated financial statements. The provisions of this new guidance clarify the classification in a companys consolidated balance sheet and the accounting for and disclosure of transactions between the
company and holders of noncontrolling, or minority, interests. The Company adopted the new guidance related to noncontrolling interests effective January 1, 2009. Accordingly, the Company reclassified minority interest totaling $2.9 million as
of September 30, 2009 and December 31, 2008 to equity in the accompanying consolidated balance sheets. There is no minority interest income or minority interest expense associated with the noncontrolling interest recorded in the
Companys consolidated statements of income.

Additionally, the Company adopted the FASBs new guidance regarding
subsequent events effective beginning the quarter ended June 30, 2009. Accordingly, the Company has evaluated for disclosure subsequent events that have occurred up to October 27, 2009, the date of issuance of its financial statements.

Lastly, in June 2009, the FASB issued new standards setting forth a single source of authoritative GAAP for all
non-governmental entities (Codification). The Codification, which commenced July 1, 2009, changes the referencing and organization of accounting guidance. The Codification is effective for the Company beginning the quarter
ended September 30, 2009. The Codification does not change GAAP and only affects how specific references to GAAP literature are disclosed in the notes to the Companys consolidated financial statements.

2. Film Costs

Film costs
consist of the following (in thousands):



|                                   |  |                   |         |                  |   |        
|---------------------------------- |  | ----------------- | ------- | ---------------- | - | -------
|                                   |  | September 30,2009 |         | December 31,2008
|                                   |  | (unaudited)       |         |                 
|In release, net of amortization(1) |  | $                 | 253,443 |                  | $ | 329,985
|Completed, not released            |  |                   | 36,012  |                  |   |       
|In production                      |  |                   | 344,900 |                  |   | 258,273
|In development                     |  |                   | 24,640  |                  |   | 49,985 
|                                   |  |                   |         |                  |   |        
|Total film costs                   |  | $                 | 658,995 |                  | $ | 638,243
|                                   |  |                   |         |                  |   |        



|(1) | Includes $14.0 million and $23.1 million of stage musical costs at September 30, 2009 and December 31, 2008, respectively.
|--- | --------------------------------------------------------------------------------------------------------------------------

The Company anticipates that 46% and 81% of in release film costs as of September 30, 2009
will be amortized over the next 12 months and three years, respectively.



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DREAMWORKS ANIMATION SKG, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS(Continued)



3. Accrued Liabilities

Accrued liabilities consist of the following (in thousands):



|                             |  |                   |        |                  |   |        
|---------------------------- |  | ----------------- | ------ | ---------------- | - | -------
|                             |  | September 30,2009 |        | December 31,2008
|                             |  | (unaudited)       |        |                 
|Employee compensation        |  | $                 | 32,795 |                  | $ | 52,157 
|Participations and residuals |  |                   | 32,827 |                  |   | 37,220 
|Deferred rent                |  |                   | 4,379  |                  |   | 5,806  
|Other accrued liabilities    |  |                   | 24,519 |                  |   | 19,975 
|                             |  |                   |        |                  |   |        
|Total accrued liabilities    |  | $                 | 94,520 |                  | $ | 115,158
|                             |  |                   |        |                  |   |        

As of September 30, 2009, the Company estimates that over the next 12 months it
will pay approximately $17.4 million of its accrued participation and residual costs.

4. Deferred Revenue and Other Advances

The following is a summary of deferred revenue and other advances included in the consolidated balance sheets as of
September 30, 2009 and December 31, 2008 and the related amounts earned and recorded either as revenue in the consolidated statements of income or capitalized as an offset to film costs for the three- and nine-month periods ended
September 30, 2009 and 2008 (in thousands):



|                                           |  |                   |        |                                |   |                               |  |      |        |      |   |        |  |   |        |  |   |       
|------------------------------------------ |  | ----------------- | ------ | ------------------------------ | - | ----------------------------- |  | ---- | ------ | ---- | - | ------ |  | - | ------ |  | - | ------
|                                           |  | September 30,2009 |        | December 31,2008               |   | Amounts Earned               
|                                           |  |                   |        | Three MonthsEndedSeptember 30, |   | Nine MonthsEndedSeptember 30,
|                                           |  |                   |        | 2009                           |   | 2008                          |  | 2009 |        | 2008
|                                           |  | (unaudited)       |        |                                |   | (unaudited)                  
|Home Box Office Inc., Advance              |  | $                 |       |                                | $ |                              |  | $    | 13,333 |      | $ | 13,333 |  | $ | 26,666 |  | $ | 26,666
|Licensing Advances                         |  |                   | 33,391 |                                |   | 32,549                        |  |      | 271    |      |   | 391    |  |   | 28,158 |  |   | 1,713 
|Deferred Revenue                           |  |                   | 3,744  |                                |   | 1,547                         |  |      | 205    |      |   | 837    |  |   | 3,038  |  |   | 10,820
|Strategic Alliance/Development Advances(1) |  |                   | 3,077  |                                |   | 2,007                         |  |      | 3,810  |      |   | 3,811  |  |   | 11,430 |  |   | 11,788
|Other Advances                             |  |                   | 7,557  |                                |   | 2,754                         |  |      | 2,003  |      |   | 358    |  |   | 6,760  |  |   | 5,466 
|                                           |  |                   |        |                                |   |                               |  |      |        |      |   |        |  |   |        |  |   |       
|Total deferred revenue and other advances  |  | $                 | 47,769 |                                | $ | 38,857                        |  |      |        |      |   |        |  |   |        |  |   |       
|                                           |  |                   |        |                                |   |                               |  |      |        |      |   |        |  |   |        |  |   |       



|(1) | Of the total amounts earned against the Strategic Alliance/Development Advances, $2.1 million and $2.4 million, respectively, for the three
months ended September 30, 2009 and 2008, and $6.9 million and $8.0 million, respectively, for the nine months ended September 30, 2009 and 2008, were capitalized as an offset to film costs or property, plant and equipment.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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DREAMWORKS ANIMATION SKG, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS(Continued)



5. Financing Arrangements

Outstanding Financing. The following table summarizes the balances outstanding and other information associated with the
Companys various financing arrangements that were outstanding at September 30, 2009 and December 31, 2008 (in thousands):



|                              |  |                     |        |                  |                                |                                     |  |                               |               |       |      |  |   |      |     |  |      |     |     |  |   |     |     |  |   |       |    
|----------------------------- |  | ------------------- | ------ | ---------------- | ------------------------------ | ----------------------------------- |  | ----------------------------- | ------------- | ----- | ---- |  | - | ---- | --- |  | ---- | --- | --- |  | - | --- | --- |  | - | ----- | ---
|                              |  | Balance Outstanding |        | Maturity Date    |                                | InterestRate as ofSeptember 30,2009 |  |                               | Interest Cost |      
|                              |  |                     |        |                  | Three MonthsEndedSeptember 30, |                                     |  | Nine MonthsEndedSeptember 30, |              
|                              |  | September 30,2009   |        | December 31,2008 |                                |                                     |  | 2009                          |               |       | 2008 |  |   | 2009 |     |  | 2008 |    
|Animation Campus Financing(1) |  | $                   | 73,000 |                  | $                              | 73,000                              |  | October 2009                  |               | 0.24  | %    |  | $ | 293  |     |  | $    | 706 |     |  | $ | 985 |     |  | $ | 2,349 |    
|Revolving Credit Facility     |  | $                   |       |                  | $                              |                                    |  | June 2013                     |               | 0.375 | %(2) |  | $ | 123  | (2) |  | $    | 131 | (2) |  | $ | 365 | (2) |  | $ | 503   | (2)



|(1) | In accordance with the terms of the financing arrangement, the entire amount of the obligation, $73.0 million, was repaid upon maturity in October 2009
(for further discussion, see Note 12). The financing bore interest primarily at 30-day commercial paper rates and was fully collateralized by the underlying real property. The special-purpose entity associated with this financing was consolidated by
the Company as of December 31, 2003 and, as such, the balance of the obligation has been presented on the consolidated balance sheets as $70.1 million of bank borrowings and other debt and a $2.9 million minority interest.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | The Company has a $125 million revolving credit facility with a number of banks. There was no debt outstanding for the respective periods. The Company
is required to pay a commitment fee on undrawn amounts. The commitment fee paid on undrawn amounts is an annual rate of 0.375%. Interest on borrowed amounts is determined by reference to i) either the lending banks base rate plus
0.50% per annum or ii) LIBOR plus 1.50% per annum. Borrowings are secured by substantially all the Companys assets.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

As of September 30, 2009, the Company was in compliance with all applicable financial debt covenants.

Interest Capitalized to Film Costs. Interest capitalized to film costs during the three months ended September 30, 2009 and 2008 totaled $0.3 million and $0.7 million, respectively, and for
the nine months ended September 30, 2009 and 2008 totaled $1.0 million and $2.3 million, respectively.



8



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DREAMWORKS ANIMATION SKG, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS(Continued)



6. Income Taxes

The provision for income taxes for the three and nine months ended September 30, 2009 and 2008, respectively, differed from the amounts computed by applying the U.S. Federal statutory rate of 35% to
income before income taxes and increase in income tax benefit payable to former stockholder as a result of the following:



|                                                                                 |  |                                 |    |  |                                |    |  |       |    |  |       |   
|-------------------------------------------------------------------------------- |  | ------------------------------- | -- |  | ------------------------------ | -- |  | ----- | -- |  | ----- | --
|                                                                                 |  | Three Months EndedSeptember 30, |    |  | Nine Months EndedSeptember 30, |   
|                                                                                 |  | 2009                            |    |  | 2008                           |    |  | 2009  |    |  | 2008  |   
|                                                                                 |  | (unaudited)                     |   
|Provision for income taxes (excluding effects of Stockholders Tax Agreement)(1) |  |                                 |    |  |                                |    |  |       |    |  |       |   
|U.S. Federal statutory rate                                                      |  | 35.0                            | %  |  | 35.0                           | %  |  | 35.0  | %  |  | 35.0  | % 
|U.S. state taxes, net of Federal benefit                                         |  | (2.3                            | )  |  | 1.3                            |    |  | 1.0   |    |  | 1.7   |   
|Revaluation of deferred tax assets, net                                          |  | (11.0                           | )  |  | (4.9                           | )  |  | (7.3  | )  |  | (4.1  | ) 
|Prior year research and development credit                                       |  | (7.4                            | )  |  | (3.6                           | )  |  | (1.4  | )  |  | (1.4  | ) 
|Other                                                                            |  | 3.9                             |    |  | (2.7                           | )  |  | (1.1  | )  |  | (1.6  | ) 
|                                                                                 |  |                                 |    |  |                                |    |  |       |    |  |       |   
|Total provision excluding effect of Stockholders Tax Agreement(1)               |  | 18.2                            | %  |  | 25.1                           | %  |  | 26.2  | %  |  | 29.6  | % 
|                                                                                 |  |                                 |    |  |                                |    |  |       |    |  |       |   
|Effects of Stockholders Tax Agreement(1)                                        |  |                                 |    |  |                                |    |  |       |    |  |       |   
|U.S. state taxes, net of Federal benefit                                         |  | 2.7                             |    |  | (0.7                           | )  |  | (0.7  | )  |  | (1.0  | ) 
|Revaluation of deferred tax assets, net                                          |  | (11.9                           | )  |  | (17.4                          | )  |  | (19.4 | )  |  | (19.9 | ) 
|Prior year research and development credit                                       |  | 4.3                             |    |  |                               |    |  | 0.9   |    |  |      |   
|Other                                                                            |  | (4.0                            | )  |  | 2.6                            |    |  | (0.8  | )  |  | 1.4   |   
|                                                                                 |  |                                 |    |  |                                |    |  |       |    |  |       |   
|Total effect of Stockholders Tax Agreement(1)                                   |  | (8.9                            | )% |  | (15.5                          | )% |  | (20.0 | )% |  | (19.5 | )%
|                                                                                 |  |                                 |    |  |                                |    |  |       |    |  |       |   
|Total net provision for income taxes                                             |  | 9.3                             | %  |  | 9.6                            | %  |  | 6.2   | %  |  | 10.1  | % 
|                                                                                 |  |                                 |    |  |                                |    |  |       |    |  |       |   



|(1) | Stockholders Tax Agreement: The Company is obligated to remit to an affiliate of a former significant stockholder 85% of any such cash
savings in U.S. Federal income tax and California franchise tax and certain other related tax benefits.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

The
Companys California Franchise tax returns for the years ended December 31, 2004 through 2007 are currently under examination by the Franchise Tax Board (FTB). The Internal Revenue Service (IRS)
concluded its audits of the Companys federal income tax return for the periods through December 31, 2006. The Companys federal income tax return for the tax year ended December 31, 2007 is currently under examination by the
IRS. All tax years since the Companys separation from Old DreamWorks Studios remain open to audit by all state and local taxing jurisdictions.

7. Stockholders Equity

Class A Common Stock

Stock Repurchase Program.In July 2008, the Companys Board of Directors approved a stock repurchase program pursuant to
which the Company may repurchase up to an aggregate of $150 million of its outstanding stock. For the period January 1, 2009 through April 21, 2009, the Company repurchased approximately 2.3 million shares of its outstanding
Class A common stock for $45.7 million pursuant to this program. On April 22, 2009, the Companys Board of Directors terminated the July 2008 stock repurchase program and authorized a new stock repurchase program pursuant to which the
Company may repurchase up to an aggregate of $150 million of its outstanding stock. The Company has made no purchases under its new authorization as of October 27, 2009.



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##### Table of Contents

DREAMWORKS ANIMATION SKG, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS(Continued)



8. Equity-Based Compensation

The Company recognizes stock-based compensation for equity awards granted to its employees based on their grant-date fair value. Most of the
Companys equity awards contain vesting conditions dependent upon the completion of specified service periods. The Company has awarded some equity awards to senior management that are dependent upon the achievement of established sets of
performance or market-based criteria. Compensation cost for service-based equity awards is recognized ratably over the vesting period. Compensation cost for performance-based awards is adjusted to reflect the probability of vesting. Compensation
costs related to awards with a market-based condition will be recognized regardless of whether the market condition is satisfied, provided that the requisite service has been provided.

The impact of stock options (including stock appreciation rights) and restricted stock awards on net income (excluding amounts capitalized)
for the three- and nine-month periods ended September 30, 2009 and 2008 was as follows (in thousands):



|                                    |  |                                 |        |   |                                |   |        |      |  |   |        |   |  |   |        |  
|----------------------------------- |  | ------------------------------- | ------ | - | ------------------------------ | - | ------ | ---- |  | - | ------ | - |  | - | ------ | -
|                                    |  | Three Months EndedSeptember 30, |        |   | Nine Months EndedSeptember 30, |  
|                                    |  | 2009                            |        |   | 2008                           |   |        | 2009 |  |   | 2008   |  
|                                    |  | (unaudited)                     |       
|Total equity-based compensation     |  | $                               | 7,783  |   |                                | $ | 10,256 |      |  | $ | 22,478 |   |  | $ | 28,533 |  
|Tax impact(1)                       |  |                                 | (1,417 | ) |                                |   | (2,574 | )    |  |   | (5,889 | ) |  |   | (8,446 | )
|                                    |  |                                 |        |   |                                |   |        |      |  |   |        |   |  |   |        |  
|Reduction in net income, net of tax |  | $                               | 6,366  |   |                                | $ | 7,682  |      |  | $ | 16,589 |   |  | $ | 20,087 |  
|                                    |  |                                 |        |   |                                |   |        |      |  |   |        |   |  |   |        |  



|(1) | Tax impact is determined at the Companys annual blended effective tax rate, excluding the effect of the Stockholders Tax Agreement (see
Note 6).
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------

Compensation cost capitalized as a part of film costs was $2.3 million and $1.4 million for the
three-month periods ended September 30, 2009 and 2008, respectively, and $6.7 million and $4.3 million for the nine-month periods ended September 30, 2009 and 2008, respectively.

The following tables set forth the number and weighted average fair value of equity awards granted during the three- and nine-month periods
ended September 30, 2009 and 2008:



|                                               |  |                                 |  |                                |       |                |       |                           |   |      
|---------------------------------------------- |  | ------------------------------- |  | ------------------------------ | ----- | -------------- | ----- | ------------------------- | - | -----
|                                               |  | Three Months EndedSeptember 30, |  | Nine Months EndedSeptember 30,
|                                               |  | NumberGranted                   |  | WeightedAverage FairValue      |       | NumberGranted  |       | WeightedAverage FairValue
|                                               |  | (unaudited)                    
|                                               |  | (in thousands)                  |  |                                |       | (in thousands) |       |                          
|2009                                           |  |                                 |  |                                |       |                |       |                           |   |      
|Stock appreciation rights(1)                   |  | 9                               |  | $                              | 13.49 |                | 1,656 |                           | $ | 7.61 
|Restricted stock and restricted stock units(1) |  | 12                              |  | $                              | 31.51 |                | 1,026 |                           | $ | 14.40
|2008                                           |  |                                 |  |                                |       |                |       |                           |   |      
|Stock appreciation rights                      |  | 49                              |  | $                              | 12.25 |                | 107   |                           | $ | 11.02
|Restricted stock and restricted stock units    |  | 76                              |  | $                              | 29.72 |                | 130   |                           | $ | 28.59



|(1) | On May 1, 2009, the Company made a grant to its Chief Executive Officer of 1,600,000 stock appreciation rights and 900,000 shares of restricted
stock, the vesting of which is subject to certain market-based conditions.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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DREAMWORKS ANIMATION SKG, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS(Continued)



As of September 30, 2009, the total compensation cost related to unvested equity
awards granted but not yet recognized was approximately $79.7 million. This cost will be amortized on a straight-line basis over a weighted average life of 1.7 years.

9. Significant Customer and Segment Information

Significant
Customer.Paramount represented 93.9% and 78.6% of total revenue for the three-month periods ended September 30, 2009 and 2008, respectively, and 88.8% and 73.1% for the nine-month periods ended September 30, 2009 and 2008,
respectively.

Revenue by Film and Other.

The Companys revenue by film and other are as follows (in thousands):



|                            |  |                                 |         |                                |   |         |  |      |         |  |   |        
|--------------------------- |  | ------------------------------- | ------- | ------------------------------ | - | ------- |  | ---- | ------- |  | - | -------
|                            |  | Three Months EndedSeptember 30, |         | Nine Months EndedSeptember 30,
|                            |  | 2009                            |         | 2008                           |   | 2009    |  | 2008
|                            |  | (unaudited)                    
|Monsters vs. Aliens         |  | $                               | 33,375  |                                | $ |        |  | $    | 54,217  |  | $ |       
|Kung Fu Panda               |  |                                 | 21,885  |                                |   | 63,281  |  |      | 88,679  |  |   | 109,719
|Madagascar: Escape 2 Africa |  |                                 | 35,400  |                                |   |        |  |      | 209,070 |  |   |       
|Shrek the Third             |  |                                 | 7,993   |                                |   | 32,526  |  |      | 15,758  |  |   | 110,648
|Bee Movie                   |  |                                 | 3,394   |                                |   | 27,266  |  |      | 34,347  |  |   | 101,721
|Flushed Away                |  |                                 | 7,282   |                                |   | 2,589   |  |      | 21,640  |  |   | 22,521 
|Film Library / Other(1)     |  |                                 | 26,119  |                                |   | 25,863  |  |      | 107,251 |  |   | 105,618
|                            |  |                                 |         |                                |   |         |  |      |         |  |   |        
|                            |  | $                               | 135,448 |                                | $ | 151,525 |  | $    | 530,962 |  | $ | 450,227
|                            |  |                                 |         |                                |   |         |  |      |         |  |   |        



|(1) | Primarily includes film library revenue from Antz, Prince of Egypt, The Road to El Dorado, Chicken Run, Joseph: King of Dreams, Shrek, Spirit:
Stallion of the Cimarron, Sinbad: Legend of the Seven Seas, Shrek 2, Shark Tale, Madagascar, Wallace & Gromit: The Curse of the Were-Rabbit and Over the Hedge. In addition, includes revenue from stage musicals and television
specials/series.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

10. Commitments and Contingencies

Legal Proceedings. From time to time, the Company is involved in legal proceedings arising in the ordinary course of its business,
typically intellectual property litigation and infringement claims related to the Companys feature films, which could cause the Company to incur significant expenses or prevent the Company from releasing a film. The Company also has been the
subject of patent and copyright claims relating to technology and ideas that it may use or feature in connection with the production, marketing or exploitation of the Companys feature films, which may affect the Companys ability to
continue to do so. While the resolution of these matters cannot be predicted with certainty, the Company does not believe, based on current knowledge, that any existing legal proceedings or claims are likely to have a material adverse effect on its
financial position, results of operations or liquidity.



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DREAMWORKS ANIMATION SKG, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS(Continued)



11. Net Income Per Share

The following table sets forth the computation of basic and diluted net income per share (in thousands except per share amounts):



|                                                                       |  |                                 |        |   |                                |   |        |      |  |   |         |   |  |   |        |  
|---------------------------------------------------------------------- |  | ------------------------------- | ------ | - | ------------------------------ | - | ------ | ---- |  | - | ------- | - |  | - | ------ | -
|                                                                       |  | Three Months EndedSeptember 30, |        |   | Nine Months EndedSeptember 30, |  
|                                                                       |  | 2009                            |        |   | 2008                           |   |        | 2009 |  |   | 2008    |  
|                                                                       |  | (unaudited)                     |       
|Numerator:                                                             |  |                                 |        |   |                                |   |        |      |  |   |         |   |  |   |        |  
|Net income                                                             |  | $                               | 19,608 |   |                                | $ | 37,351 |      |  | $ | 107,474 |   |  | $ | 90,943 |  
|Denominator:                                                           |  |                                 |        |   |                                |   |        |      |  |   |         |   |  |   |        |  
|Weighted average common shares and denominator for basic calculation:  |  |                                 |        |   |                                |   |        |      |  |   |         |   |  |   |        |  
|Weighted average common shares outstanding                             |  |                                 | 86,720 |   |                                |   | 91,262 |      |  |   | 87,240  |   |  |   | 92,648 |  
|Less: Unvested restricted stock                                        |  |                                 | (838   | ) |                                |   | (1,981 | )    |  |   | (838    | ) |  |   | (1,981 | )
|                                                                       |  |                                 |        |   |                                |   |        |      |  |   |         |   |  |   |        |  
|Denominator for basic calculation                                      |  |                                 | 85,882 |   |                                |   | 89,281 |      |  |   | 86,402  |   |  |   | 90,667 |  
|                                                                       |  |                                 |        |   |                                |   |        |      |  |   |         |   |  |   |        |  
|Weighted average effects of dilutive equity-based compensation awards: |  |                                 |        |   |                                |   |        |      |  |   |         |   |  |   |        |  
|Employee stock options and stock appreciation rights                   |  |                                 | 260    |   |                                |   | 120    |      |  |   | 64      |   |  |   | 111    |  
|Restricted stock awards                                                |  |                                 | 987    |   |                                |   | 1,264  |      |  |   | 889     |   |  |   | 977    |  
|                                                                       |  |                                 |        |   |                                |   |        |      |  |   |         |   |  |   |        |  
|Denominator for diluted calculation                                    |  |                                 | 87,129 |   |                                |   | 90,665 |      |  |   | 87,355  |   |  |   | 91,755 |  
|                                                                       |  |                                 |        |   |                                |   |        |      |  |   |         |   |  |   |        |  
|Net income per sharebasic                                             |  | $                               | 0.23   |   |                                | $ | 0.42   |      |  | $ | 1.24    |   |  | $ | 1.00   |  
|Net income per sharediluted                                           |  | $                               | 0.23   |   |                                | $ | 0.41   |      |  | $ | 1.23    |   |  | $ | 0.99   |  

The following table sets forth (in thousands) the weighted average number of options
to purchase shares of common stock, stock appreciation rights and equity awards subject to performance conditions which were not included in the calculation of diluted per share amounts because they were anti-dilutive.



|                                                |  |                                 |  |                                |  |       |  |      
|----------------------------------------------- |  | ------------------------------- |  | ------------------------------ |  | ----- |  | -----
|                                                |  | Three Months EndedSeptember 30, |  | Nine Months EndedSeptember 30,
|                                                |  | 2009                            |  | 2008                           |  | 2009  |  | 2008 
|                                                |  | (unaudited)                    
|Options to purchase shares of common stock      |  | 247                             |  | 1,864                          |  | 1,837 |  | 1,685
|Stock appreciation rights                       |  | 2,384                           |  | 2,497                          |  | 3,619 |  | 2,504
|Equity awards subject to performance conditions |  | 1,416                           |  |                               |  | 1,019 |  |     
|                                                |  |                                 |  |                                |  |       |  |      
|Total                                           |  | 4,047                           |  | 4,361                          |  | 6,475 |  | 4,189
|                                                |  |                                 |  |                                |  |       |  |      

12. Subsequent Event

Upon the maturity of the Animation Campus Financing (see Note 5) on October 27, 2009, the Company repaid the $73.0 million of Animation
Campus Financing plus interest using cash-on-hand.



12



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##### Table of Contents

|Item 2. | Managements Discussion and Analysis of Financial Condition and Results of Operations.
|------- | --------------------------------------------------------------------------------------

This section and other parts of this Quarterly Report on Form 10-Q (the Quarterly Report) contain
forward-looking statements that involve risks and uncertainties. Our actual results may differ significantly from the results discussed in the forward-looking statements. You should read the following discussion and analysis in conjunction with our
unaudited consolidated financial statements and the related notes thereto contained elsewhere in this Quarterly Report, and our audited consolidated financial statements and related notes thereto, Managements Discussion and Analysis of
Financial Condition and Results of Operations and the Risk Factors section included in our Annual Report on Form 10-K for the year ended December 31, 2008 (the 2008 Form 10-K). We urge you to carefully review
and consider the various disclosures made by us in this Quarterly Report and in our other reports filed with the Securities and Exchange Commission (theSEC), including our 2008 Form 10-K and Current Reports on Form 8-K, before
deciding to purchase, hold or sell our common stock.

Overview

Our Business and Distribution and Servicing Arrangements

Our
business is primarily devoted to developing and producing computer-generated, or CG, animated feature films. Our films are distributed in theatrical, home entertainment and television markets on a worldwide basis by Paramount Pictures Corporation, a
subsidiary of Viacom Inc., and its affiliates (collectively, Paramount) pursuant to an exclusive distribution agreement and a fulfillment services agreement (collectively, the Paramount Agreements). We generally
retain all other rights to exploit our films, including commercial tie-in and promotional rights with respect to each film, as well as merchandising, interactive, literary publishing, music publishing and soundtrack rights. Please see Part I,
Item 1 BusinessDistribution and Servicing Arrangements in our 2008 Form 10-K for a discussion of our distribution and servicing arrangements with Paramount. In addition, we continue to expand the exploitation of our film
properties through the development of non-theatrical special content such as the current development of television specials based on the characters from some of our films, live theatrical stage performances and an online virtual world game based on
Kung Fu Panda.

Our Revenues and Costs

Our feature films are the source of substantially all of our revenues. We derive revenue from our distributors worldwide exploitation of our feature films in theaters and in markets such as home
entertainment, pay and free broadcast television and other ancillary markets. Pursuant to the Paramount Agreements, prior to reporting any revenue to us, Paramount is entitled to (i) retain a fee of 8.0% of gross revenue (without deduction for
distribution and marketing costs and third-party distribution fees and sales agent fees), and (ii) recoup all of its distribution and marketing costs with respect to the exploitation of our films on a film-by-film basis. As such, under the
Paramount Agreements, each films total expenses and fees are offset against that films revenues on a worldwide basis across all markets, and Paramount reports no revenue to the Company until the first period in which an individual
films cumulative worldwide gross revenues exceed its cumulative worldwide gross distribution fee and costs, which may be several quarters after a films initial theatrical release. Additionally, as the cumulative revenues and cumulative
costs for each individual film are commingled between all markets and geographical territories and Paramount only reports additional revenue to the Company for a film in those reporting periods in which that films cumulative worldwide gross
revenues continue to exceed its cumulative worldwide gross costs, the Companys reported revenues in any period are often a result of gross revenues generated in one or several territories being offset by the gross costs of both related and
unrelated territories. Prior to January 1, 2009, Paramount reported our international theatrical results on a 30-day lag; we eliminated this 30-day lag effective January 1, 2009. This change in reporting did not have a material impact on
our consolidated financial statements for the three and nine months ended September 30, 2009. International home entertainment results continue to be reported on a 30-day lag.



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##### Table of Contents

In addition, we generate royalty-based revenues from the licensing of our character and film
elements to consumer product companies worldwide and we recently have begun to expand our business beyond the core feature film business, including the development of CG animated television specials and live theatrical stage performances. Because
these activities are not typically subject to the Paramount Agreements, we directly receive payment and record revenues from third parties.

Our primary operating expenses include:



| |  |  | Costs of RevenuesOur costs of revenues primarily include the amortization of capitalized production, overhead and interest costs,
participation and residual costs and write-offs of amounts previously capitalized for films not expected to be released or released films not expected to recoup their capitalized costs. Generally, given the structure of our distribution
arrangements, our costs of revenues do not include distribution and marketing costs or third-party distribution and fulfillment services fees. Distribution and marketing costs would only be included in our costs of revenues to the extent that we
caused Paramount to make additional expenditures in excess of agreed amounts. Our costs of revenues also include direct costs for sales commissions to outside third parties for the licensing and merchandising of our characters and marketing and
promotion costs associated with Shrek the Musical.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Selling, General and Administrative ExpensesOur selling, general and administrative expenses consist primarily of employee compensation
(including salaries, bonuses, stock compensation and employee benefits), rent, insurance and fees for professional services.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

For a detailed description of our revenues and operating expenses, please see Managements Discussion and Analysis of Financial Condition and Results of OperationsOur Revenues and
Costs in our 2008 Form 10-K.

Our films are distributed in foreign countries and, in recent years, we have derived
approximately 40% of our revenue from foreign countries. A significant amount of our transactions in foreign countries are conducted in the local currencies and, as a result, fluctuations in foreign currency exchange rates can affect our business,
results of operations and cash flow. For a detailed discussion of our foreign currency risk, please see Item 7A Quantitative and Qualitative Disclosures About Market Risk of our 2008 Form 10-K.

Seasonality

The
timing of revenue reporting and receipt of cash remittances to us from our distributor fluctuate based upon the timing of our films theatrical and home entertainment releases and the recoupment position of our distributor on a
film-by-film basis, which varies depending upon a films overall performance. Furthermore, revenues related to the licensing of our character and film elements are influenced by seasonal consumer purchasing behavior and the timing of
animated theatrical releases. As a result, our annual or quarterly operating results and cash flows for any period are not necessarily indicative of results to be expected for future periods.



14



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##### Table of Contents

Results of Operations

Overview of Financial Results

The following table sets forth, for
the periods presented, certain data from our unaudited consolidated statements of income. This information should be read in conjunction with our unaudited consolidated financial statements and the notes thereto included elsewhere in this Quarterly
Report.



|                                                                 |  |                                                      |       |   |                                |   |       |          |  |   |          |   |  |       |    |  |      |       |   |          |   |       |          |  |   |       |   |  |       |   
|---------------------------------------------------------------- |  | ---------------------------------------------------- | ----- | - | ------------------------------ | - | ----- | -------- |  | - | -------- | - |  | ----- | -- |  | ---- | ----- | - | -------- | - | ----- | -------- |  | - | ----- | - |  | ----- | --
|                                                                 |  | Three Months EndedSeptember 30,                      |       |   | Nine Months EndedSeptember 30, |  
|                                                                 |  | 2009                                                 |       |   | 2008                           |   |       | $ Change |  |   | % Change |   |  | 2009  |    |  | 2008 |       |   | $ Change |   |       | % Change | 
|                                                                 |  | (unaudited)                                          |      
|                                                                 |  | (in millions, except percentages and per share data) |      
|Revenues                                                         |  | $                                                    | 135.4 |   |                                | $ | 151.5 |          |  | $ | (16.1    | ) |  | (10.6 | )% |  | $    | 531.0 |   |          | $ | 450.2 |          |  | $ | 80.8  |   |  | 17.9  | % 
|Costs of revenues                                                |  |                                                      | 89.1  |   |                                |   | 75.5  |          |  |   | (13.6    | ) |  | (18.0 | )% |  |      | 319.5 |   |          |   | 248.1 |          |  |   | (71.4 | ) |  | (28.8 | )%
|Product development                                              |  |                                                      | 0.2   |   |                                |   | 0.7   |          |  |   | 0.5      |   |  | 71.4  | %  |  |      | 2.6   |   |          |   | 1.1   |          |  |   | (1.5  | ) |  | NM    |   
|Selling, general and administrative expenses                     |  |                                                      | 24.7  |   |                                |   | 29.2  |          |  |   | 4.5      |   |  | 15.4  | %  |  |      | 70.2  |   |          |   | 82.9  |          |  |   | 12.7  |   |  | 15.3  | % 
|                                                                 |  |                                                      |       |   |                                |   |       |          |  |   |          |   |  |       |    |  |      |       |   |          |   |       |          |  |   |       |   |  |       |   
|Operating income                                                 |  |                                                      | 21.5  |   |                                |   | 46.1  |          |  |   | (24.6    | ) |  | (53.4 | )% |  |      | 138.6 |   |          |   | 118.1 |          |  |   | 20.5  |   |  | 17.4  | % 
|Interest income, net                                             |  |                                                      | 0.2   |   |                                |   | 2.3   |          |  |   | (2.1     | ) |  | (91.3 | )% |  |      | 1.8   |   |          |   | 7.8   |          |  |   | (6.0  | ) |  | (76.9 | )%
|Other income, net                                                |  |                                                      | 2.2   |   |                                |   | 1.4   |          |  |   | 0.8      |   |  | 57.1  | %  |  |      | 5.3   |   |          |   | 3.3   |          |  |   | 2.0   |   |  | 60.6  | % 
|Increase in income tax benefit payable to former stockholder     |  |                                                      | (2.1  | ) |                                |   | (7.8  | )        |  |   | 5.7      |   |  | 73.1  | %  |  |      | (29.2 | ) |          |   | (25.2 | )        |  |   | (4.0  | ) |  | (15.9 | )%
|                                                                 |  |                                                      |       |   |                                |   |       |          |  |   |          |   |  |       |    |  |      |       |   |          |   |       |          |  |   |       |   |  |       |   
|Income before income taxes                                       |  |                                                      | 21.8  |   |                                |   | 42.1  |          |  |   | (20.3    | ) |  | (48.2 | )% |  |      | 116.5 |   |          |   | 104.0 |          |  |   | 12.5  |   |  | 12.0  | % 
|Provision for income taxes                                       |  |                                                      | 2.2   |   |                                |   | 4.8   |          |  |   | 2.6      |   |  | 54.2  | %  |  |      | 9.0   |   |          |   | 13.0  |          |  |   | 4.0   |   |  | 30.8  | % 
|                                                                 |  |                                                      |       |   |                                |   |       |          |  |   |          |   |  |       |    |  |      |       |   |          |   |       |          |  |   |       |   |  |       |   
|Net income                                                       |  | $                                                    | 19.6  |   |                                | $ | 37.4  |          |  | $ | (17.8    | ) |  | (47.6 | )% |  | $    | 107.5 |   |          | $ | 90.9  |          |  | $ | 16.6  |   |  | 18.3  | % 
|                                                                 |  |                                                      |       |   |                                |   |       |          |  |   |          |   |  |       |    |  |      |       |   |          |   |       |          |  |   |       |   |  |       |   
|Diluted net income per share                                     |  | $                                                    | 0.23  |   |                                | $ | 0.41  |          |  | $ | (0.18    | ) |  | (43.9 | )% |  | $    | 1.23  |   |          | $ | 0.99  |          |  | $ | 0.24  |   |  | 24.2  | % 
|                                                                 |  |                                                      |       |   |                                |   |       |          |  |   |          |   |  |       |    |  |      |       |   |          |   |       |          |  |   |       |   |  |       |   
|Diluted shares used in computing diluted net income per share(1) |  |                                                      | 87.1  |   |                                |   | 90.7  |          |  |   | N/A      |   |  | 4.0   | %  |  |      | 87.4  |   |          |   | 91.8  |          |  |   | N/A   |   |  | 4.8   | % 
|                                                                 |  |                                                      |       |   |                                |   |       |          |  |   |          |   |  |       |    |  |      |       |   |          |   |       |          |  |   |       |   |  |       |   



|NM: | Not Meaningful
|--- | --------------

|(1) | During the nine months ended September 30, 2009 and the year ended December 31, 2008, we repurchased a total 2.3 million and
6.8 million shares, respectively, of our Class A common stock.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



15



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##### Table of Contents

Three Months Ended September 30, 2009 Compared to Three Months Ended September 30, 2008

The following table sets forth (in millions), for the periods presented, our revenues by film. This information
should be read in conjunction with our unaudited consolidated financial statements and the notes thereto included elsewhere in this Quarterly Report.

LOGO



|(1) | For each period shown, Current year theatrical release consists of revenues attributable to the film released in the current year,
Prior year theatrical releases consists of revenues attributable to films released during the immediately prior year and All Other consists of revenues attributable to films released during all previous periods, including our
library titles, as well as revenues from any other sources.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Revenues. For the three months
ended September 30, 2009, our revenue was $135.4 million, a decrease of $16.1 million, or 10.6%, as compared to $151.5 million for the three months ended September 30, 2008. As illustrated in the revenue chart above, the decrease in
revenue in the third quarter of 2009 as compared to the third quarter of 2008 was primarily related to the comparative performance of the films comprising the Current year theatrical releases category as partially offset by the stronger
performance of our properties comprising the All Other category. Revenues earned by the films comprising the category Prior year theatrical releases for the quarter ended September 30, 2009 remained relatively unchanged
from those of the quarter ended September 30, 2008.

Revenue for the quarter ended September 30, 2009 was comprised
of amounts earned by a variety of films. Monsters vs. Aliens, our most recent theatrical release, contributed $33.4 million of revenue earned primarily in the worldwide theatrical and domestic home entertainment markets. Madagascar: Escape
2 Africa contributed $35.4 million earned largely in the domestic pay television and international home entertainment markets and Kung Fu Panda added $21.9 million of revenue principally earned in the international television market.
Lastly, our library of titles contributed $34.7 million earned across several markets, including ancillary revenue, and Shrek the Musical contributed $10.0 million of revenue.

Revenue for the quarter ended September 30, 2008, was comprised of amounts earned by a variety of films. Kung Fu Panda, the
single greatest source of revenue for the quarter, contributed $63.3 million earned primarily in the worldwide theatrical market and through ancillary revenue sources. Bee Movie generated $27.3 million of revenue primarily attributable to the
domestic television and worldwide home entertainment markets and Shrek the Third earned an additional $32.5 million of revenue earned primarily in the international television market. Our other properties, including our library titles,
contributed revenues totaling $28.4 million earned across a variety of worldwide markets.



16



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##### Table of Contents

Costs of Revenues. Costs of revenues for the three months ended
September 30, 2009 totaled $89.1 million, an increase of $13.6 million, compared to $75.5 million for the three months ended September 30, 2008.

Costs of revenues, the primary component of which is film amortization costs, as a percentage of film revenue was 65.8% for the three months ended September 30, 2009 as compared to 49.8% for the
three months ended September 30, 2008. The increase in amortization of film costs as a percentage of film revenue for the three months ended September 30, 2009 was primarily due to the overall stronger performance of Kung Fu Panda,
2008s Current year theatrical release, as compared to Monsters vs. Aliens, 2009s Current year theatrical release. This increase in amortization rates between the periods was offset somewhat by the lower
rates of amortization for the Prior year theatrical releases category during the quarter ended September 30, 2009 as compared to the quarter ended September 30, 2008, primarily due to the stronger performance of Madagascar:
Escape 2 Africaas compared to Bee Movie. Furthermore, Monsters vs. Aliens and Bee Movie have such high rates of film amortization that they are significantly less profitable than the other films generating income during
these periods. Additionally, costs of revenues for the third quarter of 2009 was impacted by the operating and marketing costs associated with Shrek the Musical, resulting in a moderate gross loss in the third quarter of 2009 for the
production.

Product development. Product development costs were immaterial for each of the three-month periods
ended September 30, 2009 and 2008.

Selling, General and Administrative Expenses. Total selling, general and
administrative expenses decreased $4.5 million to $24.7 million (including $7.4 million of stock compensation expense) for the quarter ended September 30, 2009 from $29.2 million (including $10.0 million of stock compensation expense) for the
quarter ended September 30, 2008. This 15.4% aggregate decrease is primarily related to $2.6 million of lower stock compensation expense between the comparative periods, partially attributable to the impact of the revision to the terms of
certain equity grants during the third quarter of 2008, and approximately $2.0 million of lower company-wide incentive compensation.

Operating Income. Operating income for the three months ended September 30, 2009 was $21.5 million compared to $46.1 million for the comparable period of 2008. The $24.6 million decrease in operating income between the
periods is principally due to the stronger performance of Kung Fu Pandain 2008 as compared to Monsters vs. Aliens in 2009.

Interest Income, Net. For the three months ended September 30, 2009, total interest income was $0.2 million, a decrease of $2.1 million or 91.3%, from $2.3 million for the same period of
2008. The decrease in interest income was due to lower rates of interest earned on investments during the third quarter of 2009 as compared to the third quarter of 2008.

Interest expense capitalized to production film costs was $0.3 million and $0.7 million for the three months ended September 30, 2009 and 2008, respectively. The $0.4 million decrease between the
periods was primarily due to the decrease in amount of overall interest expense during the third quarter of 2009.

Other
Income, Net. For the three months ended September 30, 2009 and 2008, total other income was $2.2 million and $1.4 million, respectively. Other income in both periods consisted primarily of income recognized in connection with preferred
vendor arrangements.

Decrease (Increase) in Income Tax Benefit Payable to Former Stockholder. As a result of a
partial increase in the tax basis of our tangible and intangible assets attributable to transactions entered into by entities controlled by a former significant stockholder (Tax Basis Increase), we may pay reduced tax amounts to
the extent we generate sufficient taxable income in the future. As discussed below in Critical Accounting Policies and EstimatesProvision for Income Taxes, we are obligated to remit to such entities 85% of any cash savings in
U.S. Federal income tax and California franchise tax and certain other related tax benefits, subject to repayment if it is determined that these savings should not have been available to us.



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For the quarters ended September 30, 2009 and 2008, we recorded $2.5 million and $9.1
million, respectively, in net tax benefits associated with the Tax Basis Increase as a reduction in the provision for income taxes and recorded an increase in income tax benefit payable to former stockholder of $2.1 million and $7.8 million,
respectively, representing 85% of these recognized benefits.

Provision for Income Taxes. For the three months
ended September 30, 2009 and 2008, we recorded a provision for income taxes of $2.2 million and $4.8 million, or an effective tax rate of 9.3% and 9.6%, respectively. However, when our provision for income taxes is combined with the amounts
associated with the Increase in Income Tax Benefit Payable to Shareholder (see above), the combined effective percentages for the three months ended September 30, 2009 and September 30, 2008 are 18.2% and 25.1%, respectively. Our effective
tax rate and our combined effective tax rate for both periods were lower than the 35% statutory federal rate because of the decrease in our valuation allowance for deferred tax assets primarily resulting from the increase in the net tax benefits
recognized from the Tax Basis Increase as described above and an increase in the amount of estimated tax benefits derived from research and development activities recognized upon the filing of our federal income tax returns in the third quarter.

Net Income. Net income for the three months ended September 30, 2009 was $19.6 million, or $0.23 per diluted
share, as compared to a net income of $37.4 million, or $0.41 net income per diluted share, in the corresponding period in 2008.

Nine
Months Ended September 30, 2009 Compared to Nine Months Ended September 30, 2008

The following table sets
forth (in millions), for the periods presented, our revenues by film. This information should be read in conjunction with our unaudited consolidated financial statements and the notes thereto included elsewhere in this Quarterly Report.

LOGO



|(1) | For each period shown, Current year theatrical release consists of revenues attributable to the film released in the current year,
Prior year theatrical releases consists of revenues attributable to films released during the immediately prior year and All Other consists of revenues attributable to films released during all previous periods, including our
library titles, as well as revenues from any other sources.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Revenues. For the nine months ended
September 30, 2009, our revenue was $531.0 million, an increase of $80.8 million, or 17.9%, as compared to $450.2 million for the nine months ended September 30, 2008. As illustrated in the revenue chart above, the change in revenue in the
first nine months of 2009 as compared to the first nine months of 2008 was primarily related to the stronger performance of the prior year theatrical releases, particularly that of Madagascar: Escape 2 Africaas compared to Bee Movie.
Also contributing to the change in



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revenues between periods was the larger amount of revenue contributed by our properties comprising the All Other category. The stronger performance of our Prior year theatrical
releases and the All Other categories was offset by the lower revenues contributed by Monsters vs. Aliens during the first nine months of 2009 as compared to Kung Fu Panda during the same period of 2008.
Additionally, during the second quarter of 2009, we amended our primary video game distribution agreement and, as a result, we recognized approximately $24.0 million of deferred revenue related to several previously released
titles. The video game distribution agreement was amended, among other things, to eliminate a provision that allowed certain guaranteed payments for previously released titles to be recouped by the distributor from future royalties generated
by subsequently released titles.

Monsters vs. Aliens, our most recent theatrical release, contributed $54.2 million of
revenue earned primarily in the worldwide theatrical and domestic home entertainment markets during the nine months ended September 30, 2009. Madagascar: Escape 2 Africa,our 2008 fourth quarter release, contributed $209.1 million of
revenue during the nine months ended September 30, 2009, earned primarily in the worldwide theatrical and home entertainment markets, and to a lesser extent, in the domestic pay television market. Kung Fu Pandareported an additional
$88.7 million earned in the worldwide home entertainment, television and ancillary markets. Lastly, our library of titles contributed $149.0 million earned across several markets and Shrek the Musical contributed $30.0 million of revenues.

Several films contributed to our revenue totaling $450.2 million for the nine-month period ended September 30, 2008.
Kung Fu Panda contributed $109.7 million of revenue associated with its worldwide theatrical release and ancillary revenue sources. In addition to merchandising and licensing revenue, ancillary revenue for Kung Fu Pandaincluded
non-recurring revenue associated with the completion of a strategic relationship that accounted for slightly less than a quarter of the films total revenue for the nine months ended September 30, 2008. Our Prior year theatrical
releases, Shrek the Thirdand Bee Movie, generated a total of $212.4 million primarily attributable to the worldwide theatrical, home entertainment and ancillary markets (including non-recurring revenue associated with strategic
relationship that accounted for slightly less than a quarter of Bee Moviestotal revenue for the nine months ended September 30, 2008). Our other properties, including our library of titles, contributed revenues
totaling $128.1 million earned principally in the international television and worldwide home entertainment markets.

Costs
of Revenues. Costs of revenues for the nine months ended September 30, 2009 totaled $319.5 million, an increase of $71.4 million, compared to $248.1 million for the nine months ended September 30, 2008.

Costs of revenues, the primary component of which is film amortization costs, as a percentage of film revenue was 60.2% for the nine months
ended September 30, 2009 as compared to 55.1% for the nine months ended September 30, 2008. While the overall rate of amortization rate of film costs as a percentage of revenues was fairly consistent between the periods, Kung Fu Pandahad a lower rate of amortization for the nine-months ended September 30, 2008 than that forMonsters vs. Aliensduring the comparable period of 2009 due to its stronger performance. This difference in amortization rate for the
Currentyear theatrical release category between the nine-month periods of 2009 and 2008 was partially offset by the combined lower rate of amortization for the Prior year theatrical releases category during the nine
months ended September 30, 2009 as compared to the nine months ended September 30, 2008, largely due to the stronger performance ofMadagascar: Escape 2 Africaas compared toBee Movie.Furthermore, Monsters vs. AliensandBee Moviehave such high rates of film amortization that they are significantly less profitable than the other films generating income during these periods. In addition, costs of revenues for the nine months ended September 30,
2009 was impacted by the operating and marketing costs associated with the ongoing production of Shrek the Musical on Broadway, resulting in a moderate gross loss for the production in the first nine months of 2009.

Product development. Product development costs totaled $2.6 million and $1.1 million for the nine-month periods ended
September 30, 2009 and 2008, respectively, and represent development costs incurred in connection with an online virtual world and technological development costs associated with recent strategic initiatives.



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##### Table of Contents

Selling, General and Administrative Expenses. Total selling, general and
administrative expenses decreased $12.7 million to $70.2 million (including $21.0 million of stock compensation expense) for the nine months ended September 30, 2009 from $82.9 million (including $27.8 million of stock compensation expense) for
the nine months ended September 30, 2008. This 15.3% aggregate decrease spans across several selling, general and administrative categories, including a $6.8 million decrease in stock compensation (primarily due to the absence of expense
associated with certain senior executive performance awards during the first quarter of 2009 and, to a lesser extent, the impact of the revision to the terms of certain equity grants during the third quarter of 2008), approximately $5.0 million of
lower company-wide incentive compensation and approximately $2.0 million of lower corporate travel expenses.

Operating
Income. Operating income for the nine months ended September 30, 2009 was $138.6 million compared to $118.1 million for the comparable period of 2008. The increase of $20.5 million in operating income for the nine months ended
September 30, 2009 was largely because of the stronger performance in the first nine months of 2009 of Madagascar: Escape 2 Africaas compared to that of Bee Movie during the nine months of 2008 as mitigated by the impact of the
stronger performance of Kung Fu Panda during the first nine months of 2008 as compared to that of Monsters vs. Aliens during the comparable period of 2009. Operating income for the nine months ended September 30, 2009 was also
positively affected by the recognition of deferred revenue related to several previously released titles in conjunction with the second quarter 2009 amendment to our video game distribution agreement and to lower selling, general and administrative
expenses period-over-period.

Interest Income, Net. For the nine months ended September 30, 2009, total
interest income was $1.8 million, a decrease of $6.0 million or 76.9%, from $7.8 million for the same period of 2008. The decrease in interest income was due to lower rates of interest earned on investments during the first nine months of 2009 as
compared to the first nine months of 2008 and, to a lesser extent, lower average balances of cash and cash equivalents largely due to the stock repurchases made throughout 2008 and continuing in the first quarter of 2009.

Interest expense capitalized to production film costs was $1.0 million and $2.3 million for the nine months ended September 30, 2009
and 2008, respectively. The $1.3 million decrease between the periods was primarily due to the decrease in amount of overall interest expense during the first nine months of 2009.

Other Income, Net. For the nine months ended September 30, 2009 and 2008, total other income was $5.3 million and $3.3
million respectively. Other income in both years consisted mainly of income recognized in connection with preferred vendor arrangements.

Decrease (Increase) in Income Tax Benefit Payable to Former Stockholder. As a result of the Tax Basis Increase, we are obligated to remit to the stockholders affiliate 85% of any such
cash savings in U.S. Federal income tax and California franchise tax and certain other related tax benefits, subject to repayment if it is determined that these savings should not have been available to us. For the nine months ended
September 30, 2009 and 2008, we recorded $34.4 million and $29.6 million, respectively, in net tax benefits associated with the Tax Basis Increase as a reduction in the provision for income taxes and recorded an increase in income tax benefit
payable to former stockholder of $29.2 million and $25.2 million, respectively, representing 85% of these recognized benefits.

Provision for Income Taxes. For the nine months ended September 30, 2009 and 2008, we recorded a provision for income taxes of $9.0 million and $13.0 million, respectively, or an effective tax rate of 6.2% and 10.1%,
respectively. However, when our provision for income taxes is combined with the amounts associated with the Increase in Income Tax Benefit Payable to Shareholder (see above), the combined effective percentages for the nine months ended
September 30, 2009 and 2008 are 26.2% and 29.6%, respectively. Our effective tax rate and our combined effective tax rate for both periods was lower than the 35% statutory federal rate because of the decrease in our valuation allowance for
deferred tax assets primarily resulting from the increase in the net tax



20



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##### Table of Contents

benefits recognized from the Tax Basis Increase as described above and an increase in the amount of estimated tax benefits derived from research and development activities recognized upon the
filing of our federal income tax returns in the third quarter.

Net Income. Net income for the nine months ended
September 30, 2009 was $107.5 million, or $1.23 per diluted share, as compared to a net income of $90.9 million, or $0.99 net income per diluted share, in the corresponding period in 2008.

Financing Arrangements

On
October 27, 2009, upon its maturity, we fully repaid the financing of the Glendale campus totaling $73.0 million plus interest. For further discussion, see Notes 5 and 12 to the unaudited consolidated financial statements contained in Part I,
Item 1 of this Quarterly Report.

Other than the financing transaction described above, there have been no material
changes during the period covered by this Quarterly Report, outside of the ordinary course of business, to the financing arrangements specified in the section Managements Discussion and Analysis of Financial Condition and Results of
Operation included in our 2008 Form 10-K.

As of September 30, 2009, we were in compliance with all applicable
financial debt covenants.

For a more detailed description of our various financing arrangements, please see Note 5 to the
unaudited consolidated financial statements contained in Part I, Item 1 of this Quarterly Report and the Managements Discussion and Analysis of Financial Condition and Results of Operation section of our 2008 Form 10-K.

Liquidity and Capital Resources

Current Financial Condition

Our primary operating capital needs are to fund the production and
development costs of our films and new lines of business, including television specials and stage musicals, make participation and residual payments, and fund selling, general and administrative costs and capital expenditures. Our operating
activities for the nine months ended September 30, 2009 generated adequate cash to meet our operating needs. For the next 12 months, we expect that cash on hand and cash from operations will be sufficient to satisfy our anticipated cash needs
for working capital, stock repurchases and capital expenditures. In the event that these cash flows are insufficient, we expect to be able to draw funds from our revolving credit facility to meet these needs. Additionally, over the next couple of
quarters, we expect to spend approximately $20 million as we enter the final phases of our effort begun in early 2008 to expand and make general improvements to our Company headquarters located in Glendale, California in order to accommodate general
business growth, including 3D expansion. On October 27, 2009 we repaid the $73.0 million principal associated with the existing financing of our Companys headquarters using cash-on-hand (see Notes 5 and 12 to our unaudited consolidated
financial statements).

As of September 30, 2009, we had cash and cash equivalents totaling $347.2 million. Our cash and
cash equivalents consist of cash on deposit and short-term money market investments, principally commercial paper and commercial paper mutual funds, that are rated AAA and with maturities of three months or less when purchased. Our cash and cash
equivalents balance at September 30, 2009 increased by $84.6 million from that of $262.6 million at December 31, 2008. Components of this change in cash for the nine months ended September 30, 2009, as well as for the nine months
ended September 30, 2008, are provided below in more detail.



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Operating Activities

Net cash provided by operating activities for the nine months ended September 30, 2009 and 2008 is a follows (in thousands):



|                                          |  |      |         |      |   |        
|----------------------------------------- |  | ---- | ------- | ---- | - | -------
|                                          |  | 2009 |         | 2008
|Net cash provided by operating activities |  | $    | 191,833 |      | $ | 254,902

Net cash provided by operating activities for the first nine months of 2009 was
primarily attributable to the collection of revenue from Madagascar: Escape 2 Africas worldwide theatrical and home entertainment release, Kung Fu Pandas worldwide home entertainment release, and, to a lesser extent, the
collection of Monsters vs. Aliensworldwide theatrical revenues and worldwide home entertainment and television revenues for our other films, including Shrek the Third, Bee Movie, Madagascarand Over the Hedge. The
operating cash provided by the collection of revenues during the first nine months of 2009 was offset by $28.5 million paid (net of refunds) to an affiliate of a former significant stockholder related to tax benefits realized in 2008 from the Tax
Basis Increase and $37.6 million paid related to annual incentive compensation payments. The operating cash provided by revenues was also partially offset by film production spending and participation and residual payments.

Net cash provided by operating activities for the first nine months of 2008 was primarily attributable to the collection of revenue from
Kung Fu Pandas and Bee Movies worldwide theatrical release, Shrek the Thirds worldwide home entertainment release, worldwide television revenue for Madagascar, and, to a lesser extent, the collection of
worldwide television and home entertainment revenues for our other films, including Over the Hedge, Shrek 2andShrek. The operating cash provided by the collection of revenues during the first nine months of 2008 was offset by
$37.6 million paid to an affiliate of a former significant stockholder related to tax benefits realized in 2007 from the Tax Basis Increase, $29.3 million paid for estimated federal and state income taxes and $44.4 million paid related to annual
incentive compensation payments. The operating cash provided by revenues was also partially offset by film production spending and participation and residual payments.

Investing Activities

Net cash used in investing activities for the nine
months ended September 30, 2009 and 2008 is as follows (in thousands):



|                                      |  |      |         |   |      |   |         |  
|------------------------------------- |  | ---- | ------- | - | ---- | - | ------- | -
|                                      |  | 2009 |         |   | 2008 |  
|Net cash used in investing activities |  | $    | (55,030 | ) |      | $ | (33,088 | )

Net cash used in investing activities for the nine months ended September 30,
2009 and 2008 was primarily related to the investment in property, plant and equipment associated with the expansion of our corporate headquarters and strategic technology initiatives.

Financing Activities

Net cash used in financing activities for the nine
months ended September 30, 2009 and 2008 is as follows (in thousands):



|                                      |  |      |         |   |      |   |          |  
|------------------------------------- |  | ---- | ------- | - | ---- | - | -------- | -
|                                      |  | 2009 |         |   | 2008 |  
|Net cash used in financing activities |  | $    | (52,217 | ) |      | $ | (176,398 | )

Net cash used in financing activities for both nine-month periods ended
September 30, 2009 and 2008 was primarily comprised of repurchases of our Class A common stock.



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Contractual Obligations

Other than the financing transaction described above in Financing Arrangements, there have been no material changes during the period covered by this Quarterly Report, outside of the ordinary
course of business, to the contractual obligations specified in the table of contractual obligations included in the section Managements Discussion and Analysis of Financial Condition and Results of Operation included in our 2008
Form 10-K.

As of September 30, 2009 we had non-cancelable talent commitments totaling approximately $27.4 million
that are payable over the next five years.

Critical Accounting Policies and Estimates

Our significant accounting policies are outlined in Note 2 to the audited consolidated financial statements contained in our 2008 Form 10-K.
We prepare our consolidated financial statements in accordance with United States generally accepted accounting principles (GAAP). In doing so, we have to make estimates and assumptions that affect our reported amounts of assets,
liabilities, revenues and expenses, as well as related disclosure of contingent assets and liabilities including estimates of ultimate revenues and costs of film and television product, estimates of product sales that will be returned, the potential
outcome of future tax consequences of events that have been recognized in our financial statements and estimates used in the determination of the fair value of stock options and other equity awards for the determination of stock-based compensation.
In some cases, changes in the accounting estimates are reasonably likely to occur from period to period. Accordingly, actual results could differ materially from our estimates. To the extent that there are material differences between these
estimates and actual results, our financial condition or results of operations will be affected. We base our estimates on past experience and other assumptions that we believe are reasonable under the circumstances, and we evaluate these estimates
on an ongoing basis. We believe that the application of the following accounting policies, which are important to our financial position and results of operations, requires significant judgments and estimates on the part of management.

Revenue Recognition

We recognize revenue from the distribution of our animated feature films when earned and reported to us by our distributor. Pursuant to our distribution and servicing arrangements, we recognize revenue net of reserves for returns, rebates
and other incentives after our distributor has (i) retained a distribution fee of 8.0% of revenue (without deduction for any distribution and marketing costs or third-party distribution and fulfillment services fees) and (ii) recovered all
of its distribution and marketing costs with respect to our films on a title-by-title basis. Prior to January 1, 2009, Paramount reported our international theatrical results on a 30-day lag. This 30-day lag was eliminated effective
January 1, 2009. This change in reporting did not have a material impact on our consolidated financial statements. International home entertainment results continue to be reported on a 30-day lag. Because a third party is the principal
distributor of our films, the amount of revenue that we recognize from our films in any given period is dependent on the timing, accuracy and sufficiency of the information we receive from our distributor. As typical in the film industry, our
distributor may make adjustments in future periods to information previously provided to us that could have a material impact on our operating results in later periods. Furthermore, management may, in its judgment, make material adjustments to the
information reported by our distributor in future periods to ensure that revenues are accurately reflected in our financial statements. To date, our distributor has not made subsequent, nor has management made, material adjustments to information
provided by our distributor and used in the preparation of our historical financial statements.

Revenue from the theatrical
exhibition of films is recognized at the later of when a film is exhibited in theaters or when revenue is reported by our distributor.

Revenue from the sale of home video units is recognized at the later of when product is made available for retail sale and when video sales to customers are reported to us by third parties, such as fulfillment service



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providers or distributors. In addition, we and our distributor provide for future returns of home video product and for customer programs and sales incentives. We and our distributor calculate
these estimates by analyzing a combination of historical returns, current economic trends, projections of consumer demand for our product and point-of-sale data available from certain retailers. Based on this information, a percentage of each sale
is reserved, and in the case of product returns, provided that the customer has the right of return. Customers are currently given varying rights of return, from 15% up to 100%. However, although we and our distributor allow various rights of return
for our customers, we do not believe that these rights are critical in establishing return estimates, because other factors, such as our historical experience with similar types of sales, information we receive from retailers and our assessment of
the products appeal based on domestic box office success and other research, are more important to the estimation process.

Revenue from both free and pay television licensing agreements is recognized at the later of the time the production is made available for exhibition in those markets or it is reported to us by our distributor.

Revenue from licensing and merchandising is recognized when the associated films have been released and the criteria for revenue recognition
have been met. Licensing and merchandising related minimum guarantees are generally recognized as revenue upon the theatrical release of a film and royalty-based revenues (revenues based upon a percentage of net sales of the products) are generally
recognized as revenue in periods when royalties are reported by licensees or cash is received.

Film Costs Amortization

Once a film is released, the amount of film costs relating to that film, contingent compensation and residuals are
amortized and included in costs of revenues in the proportion that the revenue during the period for each film (Current Revenue) bears to the estimated remaining total revenue to be received from all sources (Ultimate
Revenue) as of the beginning of the current fiscal period under the individual-film-forecast-computation method. The amount of film costs that is amortized each period will therefore depend on the ratio of Current Revenue to Ultimate
Revenue for each film for such period. We make certain estimates and judgments of Ultimate Revenue to be received for each film based on information received from our distributor and our knowledge of the industry. Ultimate Revenue includes estimates
of revenue that will be earned over a period not to exceed 10 years from the date of initial release. Historically, there has been a close correlation between the success of a film in the domestic box office market and the films success
in the international theatrical and worldwide home entertainment markets. In general, films that achieve domestic box office success also tend to experience success in the home entertainment and international theatrical markets. While we continue to
believe that domestic box office performance is a key indicator of a films potential performance in these subsequent markets, we do not believe that it is the only factor influencing the films success in these markets and recognize that
a range of other market and film-specific factors can have a significant impact.

Estimates of Ultimate Revenue and
anticipated participation and residual costs are reviewed periodically and are revised if necessary. A change in any given period to the Ultimate Revenue for an individual film will result in an increase or decrease to the percentage of amortization
of capitalized film costs relative to a previous period. An increase in estimate of Ultimate Revenues will lower the percentage rate of amortization while, conversely, a decrease in the estimate of Ultimate Revenue will raise the percentage rate of
amortization. In addition, we evaluate film production costs for impairment each reporting period on a film-by-film basis. If estimated remaining revenue is not sufficient to recover the unamortized film costs for that film, the unamortized film
costs will be written down to fair value determined using a net present value calculation. The cost of any such write downs are reflected in costs of revenues.

Stock-Based Compensation

We record employee stock-based
compensation by measuring the cost of employee services received in exchange for an award of equity instruments based on the grant-date fair value of the award. As of September 30,



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2009, the total compensation cost related to unvested equity awards granted to employees (excluding equity awards with performance objectives deemed not probable of achievement) but not yet
recognized was approximately $79.7 million. This cost will be amortized on a straight-line basis over a weighted average life of 1.7 years.

The fair value of stock option grants with either service-based or performance-based vesting criteria is estimated on the date of grant using the Black-Scholes option-pricing model. Some of the primary
input assumptions of the Black-Scholes option-pricing model are volatility, dividend yield, the weighted average expected option term and the risk-free interest rate. We apply the simplified method of calculating the weighted average
expected term. The simplified method defines the weighted average expected term as being the average of the weighted average of the vesting period and contractual term of each stock option granted. Given our lack of sufficient historical exercise
data for stock option grants, we continue to expect to use the simplified method for calculating the expected term. Once sufficient information regarding exercise behavior, such as historical exercise data or exercise information from external
sources becomes available, we will be required to utilize another method to determine the weighted average expected term. In addition, the estimated volatility incorporates both historical volatility and the implied volatility of publicly traded
options. Additionally, management makes an estimate of expected forfeitures and is recognizing compensation costs only for those equity awards expected to vest.

For equity awards of stock options to purchase and restricted shares of our common stock that contain certain performance-based measures, compensation costs are adjusted to reflect the estimated
probability of vesting. For equity awards of stock appreciation rights to purchase and restricted shares of our common stock which contain a market-based condition (such as vesting based upon stock-price appreciation), we use a Monte-Carlo
simulation option-pricing model to determine the awards grant-date fair value. The Monte-Carlo simulation option-pricing model takes into account the same input assumptions as the Black-Scholes model as outlined above, however, it also further
incorporates into the fair-value determination the possibility that the market condition may not be satisfied and impact of the possible differing stock price paths. Compensation costs related to awards with a market-based condition will be
recognized regardless of whether the market condition is satisfied, provided that the requisite service has been provided.

Estimates of the fair value of stock options are not intended to predict actual future events or the value ultimately realized by employees who receive stock option awards, and subsequent events are not indicative of the reasonableness of
the original estimates of fair value made by us. Changes to our underlying stock price or satisfaction of performance criteria for performance-based awards granted to employees could significantly affect compensation expense to be recognized in
future periods.

Provision for Income Taxes

We account for income taxes pursuant to the asset and liability method, and, accordingly, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences
between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to
apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates or a change in tax status is recognized in income in the
period that includes the enactment date. We record a valuation allowance to reduce our deferred income tax assets to the amount that is more likely than not to be realized. In evaluating our ability to recover our deferred income tax assets,
management considers all available positive and negative evidence, including our operating results, ongoing prudent and feasible tax-planning strategies and forecasts of future taxable income.

At the time of our separation from Old DreamWorks Studios, affiliates controlled by a former significant stockholder entered into a series
of transactions that resulted in a partial increase in the tax basis of the Companys tangible and intangible assets (previously defined above as the Tax Basis Increase). The Tax Basis



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increase was $1.61 billion, resulting in a potential tax benefit to us of approximately $595.0 million that is expected to be realized over 15 years if we generate sufficient taxable income. The
Tax Basis Increase is expected to reduce the amount of tax that we may pay in the future to the extent we generate taxable income in sufficient amounts in the future. We are obligated to remit to the affiliate of our former significant stockholder
85% of any such cash savings in U.S. Federal income tax and California franchise tax and certain other related tax benefits, subject to repayment if it is determined that these savings should not have been available to us.

Additionally, we use a single comprehensive model to address uncertainty in tax positions and apply a minimum recognition threshold and a
measurement attribute for tax positions taken or expected to be taken in a tax return in order to be recognized in the financial statements. We continue to follow the practice of recognizing interest and penalties related to income tax matters as
part of the provision for income taxes.

Recent Accounting Pronouncements

For a discussion of recent accounting pronouncements please see Note 1 to the unaudited consolidated financial statements contained in Part
I, Item 1 of this Quarterly Report.



|Item 3. | Quantitative and Qualitative Disclosures About Market Risk
|------- | ----------------------------------------------------------

Market and Exchange Rate Risk

For quantitative and qualitative disclosures
about our interest rate, foreign currency, and credit risks, please see Part II, Item 7A Quantitative and Qualitative Disclosures About Market Risk, of our 2008 Form 10-K. Exposure to our interest rate, foreign currency and credit
risks have not changed materially since December 31, 2008.



|Item 4. | Controls and Procedures
|------- | -----------------------

(a)
Evaluation of disclosure controls and procedures.

Our management, with the participation of our chief executive officer
and chief financial officer, evaluated the effectiveness of our disclosure controls and procedures pursuant to Rule 13a-15 under the Securities Exchange Act of 1934, as amended, as of the end of the period covered by this Quarterly Report. In
designing and evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and
management is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

Based on that evaluation, our chief executive officer and chief financial officer concluded that our disclosure controls and procedures were effective as of the end of the third quarter to provide reasonable assurance that information we
are required to disclose in reports that we file or submit under the Securities Exchange Act of 1934, as amended, is accurately recorded, processed, summarized and reported within the time periods specified in SEC rules and forms, and that such
information is accumulated and communicated to our management, including our chief executive officer and chief financial officer, as appropriate, to allow timely decisions regarding required disclosure.

(b) Changes in internal controls over financial reporting.

There were no changes in our internal control over financial reporting that occurred during the period covered by this Quarterly Report that have materially affected, or are reasonably likely to
materially affect, our internal control over financial reporting.



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PART IIOTHER INFORMATION



|Item 1. | Legal Proceedings
|------- | -----------------

See
discussion of Legal Proceedings in Note 10 to the unaudited consolidated financial statements contained in Part I, Item 1 of this Quarterly Report.



|Item 1A. | Risk Factors
|-------- | ------------

Information
concerning certain risks and uncertainties appears in Part I, Item 1A Risk Factors of the Companys 2008 Form 10-K. You should carefully consider these risks and uncertainties before making an investment decision with respect
to shares of our Class A common stock. Such risks and uncertainties could materially adversely affect our business, financial condition or operating results.

During the period covered by this Quarterly Report, there have been no material changes from the risk factors previously disclosed in the Companys 2008 Form 10-K or filings subsequently made with
the SEC, except for the risk factor We could be adversely affected by strikes and other union activity included in our 2008 Form 10-K, which is updated as follows:

We could be adversely affected by strikes and other union activity.

A
strike by one or more of the unions that provide personnel essential to the production of our feature films could delay or halt our ongoing production activities. Along with the major U.S. film studios, we employ members of IATSE on many of our
productions. We are currently subject to collective bargaining agreements with IATSE, the Local 839 of IATSE (the Animation Guild and Affiliated Optical Electronic and Graphic Arts), the Local 700 of IATSE (the Motion Picture Editors Guild) and SAG.
We may also become subject to additional collective bargaining agreements. Such a halt or delay, depending on the length of time involved, could cause a delay of the release date of our feature films and thereby could adversely affect the revenue
that the films generate. In addition, strikes by unions with which we do not have a collective bargaining agreement (such as the 2008 strike by the Writers Guild of America) can have adverse effects on the entertainment industry in general and,
thus, indirectly on us.



|Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds
|------- | -----------------------------------------------------------

The following table shows Company repurchases of its Class A common stock for the three months ended September 30, 2009.



|                               |  |                                   |  |                            |   |                                                                               |   |                                                                                                         |   |            
|------------------------------ |  | --------------------------------- |  | -------------------------- | - | ----------------------------------------------------------------------------- | - | ------------------------------------------------------------------------------------------------------- | - | -----------
|                               |  | Total Number ofSharesPurchased(1) |  | AveragePrice Paidper Share |   | Total Number ofShares Purchasedas Part of PubliclyAnnounced Planor Program(2) |   | Maximum Number(or ApproximateDollar
Value)of Shares That MayYet Be PurchasedUnder the Plan orProgram(2)
|July 1July 30, 2009           |  |                                  |  | $                          |  |                                                                               |  |                                                                                                         | $ | 150,000,000
|August 1August 31, 2009       |  |                                  |  | $                          |  |                                                                               |  |                                                                                                         | $ | 150,000,000
|September 1September 30, 2009 |  |                                  |  | $                          |  |                                                                               |  |                                                                                                         | $ | 150,000,000
|                               |  |                                   |  |                            |   |                                                                               |   |                                                                                                         |   |            
|Total                          |  |                                  |  | $                          |  |                                                                               |  |                                                                                                         |   |            



|(1) | Does not include shares forfeited to the Company upon the expiration or cancellation of unvested restricted stock awards.
|--- | -------------------------------------------------------------------------------------------------------------------------

|(2) | In April 2009, the Companys Board of Directors approved a stock repurchase program pursuant to which the Company may repurchase up to an
aggregate of $150 million of its outstanding stock.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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Items 3 and 4 are not applicable and have been omitted.



|Item 5. | Other Information
|------- | -----------------

On
October 27, 2009, the Company acquired title to its animation campus headquarters located in Glendale, California. In 2002, a special-purpose entity, DW Statutory Trust 2002, was created to hold title to the property in connection with a
synthetic lease financing of the campus for approximately $73.0 million with a syndicate of lending institutions. On October 27, 2009, the Company exercised its right to acquire the property from the special-purpose entity upon maturity
and repayment of the approximately $73.0 million indebtedness. The animation campus comprises approximately 15 acres, contains office buildings with approximately 326,000 square feet and houses the majority of the Companys employees. See also
Notes 5 and 12 to the Unaudited Consolidated Financial Statements of this Quarterly Report on Form 10-Q.



|Item 6. | Exhibits
|------- | --------



|              |  |                                                                                                                                                                                                                                                      
|------------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit 10.1 |  | License Agreement effective as of January 1, 2009 by and among DreamWorks AnimationLLC and DWII Management, Inc. and Steven Spielberg (incorporated by reference
toExhibit 99.1 to the Companys Current Report on Form 8-K filed on August 21, 2009)
|              | 
|Exhibit 31.1  |  | Certification of Chief Executive Officer Pursuant to Exchange Act Rule 13a-14(a) or15d-14(a), as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of
2002.                                                                                  
|              | 
|Exhibit 31.2  |  | Certification of Chief Financial Officer Pursuant to Exchange Act Rule 13a-14(a) or 15d-14(a), as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of
2002.                                                                                 
|              | 
|Exhibit 32.1  |  | Certifications of Chief Executive Officer and Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.                                                                      

| | Confidential treatment has been requested by the Company with respect to the redacted portions of this agreement.
|- | -----------------------------------------------------------------------------------------------------------------



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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.



|                       |  |  |  |                                |  |                                      
|---------------------- |  |  |  | ------------------------------ |  | -------------------------------------
|                       |  |  |  | DREAMWORKS ANIMATION SKG, INC.
|                       |  |  | 
|Date: October 27, 2009 |  |  |  | By:                            |  | /S/    LEWIS W.
COLEMAN              
|                       |  |  |  | Name:                          |  | Lewis W. Coleman                     
|                       |  |  |  | Title:                         |  | President and Chief Financial Officer



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EXHIBIT INDEX



|              |  |                                                                                                                                                                                                                                                      
|------------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|ExhibitNumber |  | Description                                                                                                                                                                                                                                          
|              | 
|Exhibit 10.1 |  | License Agreement effective as of January 1, 2009 by and among DreamWorks AnimationLLC and DWII Management, Inc. and Steven Spielberg (incorporated by reference
toExhibit 99.1 to the Companys Current Report on Form 8-K filed on August 21, 2009)
|              | 
|Exhibit 31.1  |  | Certification of Chief Executive Officer Pursuant to Exchange Act Rule 13a-14(a) or 15d-14(a), as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of
2002.                                                                                 
|              | 
|Exhibit 31.2  |  | Certification of Chief Financial Officer Pursuant to Exchange Act Rule 13a-14(a) or 15d-14(a), as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of
2002.                                                                                 
|              | 
|Exhibit 32.1  |  | Certifications of Chief Executive Officer and Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.                                                                      

| | Confidential treatment has been requested by the Company with respect to the redacted portions of this agreement.
|- | -----------------------------------------------------------------------------------------------------------------



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