##### Table of Contents





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 June 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 June 30, 2009, there were 75,293,243 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

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 |  | 12  
|              |  |                                                                                      
|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 4.       |  | Submission of Matters to a Vote of Security Holders                                   |  | 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.



1



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##### Table of Contents

PART IFINANCIAL INFORMATION



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

DREAMWORKS ANIMATION SKG,
INC.

CONSOLIDATED BALANCE SHEETS



|                                                                                                                                                                                |  |                                                    |           |   |                  |   |           |  
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | -------------------------------------------------- | --------- | - | ---------------- | - | --------- | -
|                                                                                                                                                                                |  | June 30,2009                                       |           |   | December 31,2008 |  
|                                                                                                                                                                                |  | (unaudited)                                        |           |   |                  |  
|                                                                                                                                                                                |  | (in thousands, except par value and share amounts) |          
|Assets                                                                                                                                                                          |  |                                                    |           |   |                  |   |           |  
|Cash and cash equivalents                                                                                                                                                       |  | $                                                  | 348,796   |   |                  | $ | 262,644   |  
|Trade accounts receivable, net of allowance for doubtful accounts                                                                                                               |  |                                                    | 2,123     |   |                  |   | 4,550     |  
|Income taxes receivable                                                                                                                                                         |  |                                                    | 14,469    |   |                  |   | 6,468     |  
|Receivable from Paramount, net of reserve for returns and allowance for doubtful accounts                                                                                       |  |                                                    | 113,988   |   |                  |   | 186,522   |  
|Film costs, net                                                                                                                                                                 |  |                                                    | 640,752   |   |                  |   | 638,243   |  
|Prepaid expenses and other assets                                                                                                                                               |  |                                                    | 47,358    |   |                  |   | 31,453    |  
|Property, plant and equipment, net of accumulated depreciation and amortization                                                                                                 |  |                                                    | 132,917   |   |                  |   | 114,913   |  
|Deferred taxes, net                                                                                                                                                             |  |                                                    | 14,719    |   |                  |   | 27,049    |  
|Goodwill                                                                                                                                                                        |  |                                                    | 34,216    |   |                  |   | 34,216    |  
|                                                                                                                                                                                |  |                                                    |           |   |                  |   |           |  
|Total assets                                                                                                                                                                    |  | $                                                  | 1,349,338 |   |                  | $ | 1,306,058 |  
|                                                                                                                                                                                |  |                                                    |           |   |                  |   |           |  
|Liabilities and Equity                                                                                                                                                          |  |                                                    |           |   |                  |   |           |  
|Liabilities:                                                                                                                                                                    |  |                                                    |           |   |                  |   |           |  
|Accounts payable                                                                                                                                                                |  | $                                                  | 2,249     |   |                  | $ | 7,499     |  
|Accrued liabilities                                                                                                                                                             |  |                                                    | 92,244    |   |                  |   | 115,158   |  
|Payable to former stockholder                                                                                                                                                   |  |                                                    | 52,726    |   |                  |   | 54,192    |  
|Deferred revenue and other advances                                                                                                                                             |  |                                                    | 56,942    |   |                  |   | 38,857    |  
|Borrowings and other debt                                                                                                                                                       |  |                                                    | 70,059    |   |                  |   | 70,059    |  
|                                                                                                                                                                                |  |                                                    |           |   |                  |   |           |  
|Total liabilities                                                                                                                                                               |  |                                                    | 274,220   |   |                  |   | 285,765   |  
|Commitments and contingencies                                                                                                                                                   |  |                                                    |           |   |                  |   |           |  
|Equity:                                                                                                                                                                         |  |                                                    |           |   |                  |   |           |  
|Stockholders equity:                                                                                                                                                           |  |                                                    |           |   |                  |   |           |  
|Class A common stock, par value $.01 per share, 350,000,000 shares authorized, 95,420,728 and 95,381,143 shares issued, as of
June 30, 2009 and December 31, 2008, respectively |  |                                                    | 954       |   |                  |   | 954       |  
|Class B common stock, par value $.01 per share, 150,000,000 shares authorized, 11,419,461 shares issued and outstanding, as of June 30,
2009 and December 31, 2008              |  |                                                    | 114       |   |                  |   | 114       |  
|Additional paid-in capital                                                                                                                                                      |  |                                                    | 895,735   |   |                  |   | 876,651   |  
|Retained earnings                                                                                                                                                               |  |                                                    | 733,127   |   |                  |   | 645,261   |  
|Less: Class A Treasury common stock, at cost, 20,127,485 and 17,432,728 shares, as of June 30, 2009 and December 31, 2008,
respectively                                         |  |                                                    | (557,753  | ) |                  |   | (505,628  | )
|                                                                                                                                                                                |  |                                                    |           |   |                  |   |           |  
|Total stockholders equity                                                                                                                                                      |  |                                                    | 1,072,177 |   |                  |   | 1,017,352 |  
|Minority interest                                                                                                                                                               |  |                                                    | 2,941     |   |                  |   | 2,941     |  
|                                                                                                                                                                                |  |                                                    |           |   |                  |   |           |  
|Total equity                                                                                                                                                                    |  |                                                    | 1,075,118 |   |                  |   | 1,020,293 |  
|                                                                                                                                                                                |  |                                                    |           |   |                  |   |           |  
|Total liabilities and equity                                                                                                                                                    |  | $                                                  | 1,349,338 |   |                  | $ | 1,306,058 |  
|                                                                                                                                                                                |  |                                                    |           |   |                  |   |           |  

See accompanying notes.



2



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DREAMWORKS ANIMATION SKG, INC.

CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)



|                                                             |  |                                          |         |   |                          |   |         |      |  |   |         |   |  |   |         |  
|------------------------------------------------------------ |  | ---------------------------------------- | ------- | - | ------------------------ | - | ------- | ---- |  | - | ------- | - |  | - | ------- | -
|                                                             |  | Three Months EndedJune 30,               |         |   | Six Months EndedJune 30, |  
|                                                             |  | 2009                                     |         |   | 2008                     |   |         | 2009 |  |   | 2008    |  
|                                                             |  | (in thousands, except per share amounts) |        
|Revenues                                                     |  | $                                        | 131,990 |   |                          | $ | 141,530 |      |  | $ | 395,514 |   |  | $ | 298,702 |  
|Costs of revenues                                            |  |                                          | 74,022  |   |                          |   | 76,092  |      |  |   | 230,428 |   |  |   | 172,583 |  
|                                                             |  |                                          |         |   |                          |   |         |      |  |   |         |   |  |   |         |  
|Gross profit                                                 |  |                                          | 57,968  |   |                          |   | 65,438  |      |  |   | 165,086 |   |  |   | 126,119 |  
|Product development                                          |  |                                          | 93      |   |                          |   | 437     |      |  |   | 2,461   |   |  |   | 437     |  
|Selling, general and administrative expenses                 |  |                                          | 24,831  |   |                          |   | 27,012  |      |  |   | 45,522  |   |  |   | 53,734  |  
|                                                             |  |                                          |         |   |                          |   |         |      |  |   |         |   |  |   |         |  
|Operating income                                             |  |                                          | 33,044  |   |                          |   | 37,989  |      |  |   | 117,103 |   |  |   | 71,948  |  
|Interest income, net                                         |  |                                          | 979     |   |                          |   | 2,474   |      |  |   | 1,518   |   |  |   | 5,457   |  
|Other income, net                                            |  |                                          | 1,613   |   |                          |   | 1,080   |      |  |   | 3,065   |   |  |   | 1,857   |  
|Increase in income tax benefit payable to former stockholder |  |                                          | (11,020 | ) |                          |   | (8,010  | )    |  |   | (27,030 | ) |  |   | (17,440 | )
|                                                             |  |                                          |         |   |                          |   |         |      |  |   |         |   |  |   |         |  
|Income before income taxes                                   |  |                                          | 24,616  |   |                          |   | 33,533  |      |  |   | 94,656  |   |  |   | 61,822  |  
|Provision (benefit) for income taxes                         |  |                                          | (940    | ) |                          |   | 6,040   |      |  |   | 6,790   |   |  |   | 8,230   |  
|                                                             |  |                                          |         |   |                          |   |         |      |  |   |         |   |  |   |         |  
|Net income                                                   |  | $                                        | 25,556  |   |                          | $ | 27,493  |      |  | $ | 87,866  |   |  | $ | 53,592  |  
|                                                             |  |                                          |         |   |                          |   |         |      |  |   |         |   |  |   |         |  
|Basic net income per share                                   |  | $                                        | 0.30    |   |                          | $ | 0.30    |      |  | $ | 1.01    |   |  | $ | 0.59    |  
|Diluted net income per share                                 |  | $                                        | 0.30    |   |                          | $ | 0.30    |      |  | $ | 1.01    |   |  | $ | 0.58    |  
|Shares used in computing net income per share                |  |                                          |         |   |                          |   |         |      |  |   |         |   |  |   |         |  
|Basic                                                        |  |                                          | 85,890  |   |                          |   | 90,370  |      |  |   | 86,673  |   |  |   | 91,366  |  
|Diluted                                                      |  |                                          | 86,382  |   |                          |   | 90,788  |      |  |   | 87,390  |   |  |   | 91,615  |  





See accompanying notes.



3



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DREAMWORKS ANIMATION SKG, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)



|                                                                                            |  |                          |          |   |      |   |          |  
|------------------------------------------------------------------------------------------- |  | ------------------------ | -------- | - | ---- | - | -------- | -
|                                                                                            |  | Six Months EndedJune 30, |         
|                                                                                            |  | 2009                     |          |   | 2008 |  
|                                                                                            |  | (in thousands)           |         
|Operating activities                                                                        |  |                          |          |   |      |   |          |  
|Net income                                                                                  |  | $                        | 87,866   |   |      | $ | 53,592   |  
|Adjustments to reconcile net income to net cash provided by operating activities:           |  |                          |          |   |      |   |          |  
|Amortization and write off of film costs                                                    |  |                          | 192,183  |   |      |   | 158,931  |  
|Stock compensation expense                                                                  |  |                          | 14,695   |   |      |   | 18,277   |  
|Depreciation and amortization                                                               |  |                          | 1,831    |   |      |   | 1,139    |  
|Revenue earned against deferred revenue and other advances                                  |  |                          | (51,667  | ) |      |   | (42,084  | )
|Deferred taxes, net                                                                         |  |                          | 12,330   |   |      |   | (1,375   | )
|Change in operating assets and liabilities:                                                 |  |                          |          |   |      |   |          |  
|Trade accounts receivable                                                                   |  |                          | 2,427    |   |      |   | (10,702  | )
|Receivable from Paramount                                                                   |  |                          | 72,534   |   |      |   | 188,381  |  
|Film costs                                                                                  |  |                          | (183,574 | ) |      |   | (192,811 | )
|Prepaid expenses and other assets                                                           |  |                          | (16,242  | ) |      |   | 14,304   |  
|Accounts payable and accrued liabilities                                                    |  |                          | (27,749  | ) |      |   | (15,428  | )
|Payable to former stockholder                                                               |  |                          | (1,466   | ) |      |   | (20,205  | )
|Income taxes payable/receivable, net                                                        |  |                          | (8,001   | ) |      |   | (11,538  | )
|Deferred revenue and other advances                                                         |  |                          | 74,515   |   |      |   | 75,553   |  
|                                                                                            |  |                          |          |   |      |   |          |  
|Net cash provided by operating activities                                                   |  |                          | 169,682  |   |      |   | 216,034  |  
|                                                                                            |  |                          |          |   |      |   |          |  
|                                                                                            |  |                         
|Investing activities                                                                        |  |                          |          |   |      |   |          |  
|Purchases of property, plant and equipment                                                  |  |                          | (31,495  | ) |      |   | (18,765  | )
|                                                                                            |  |                          |          |   |      |   |          |  
|Net cash used in investing activities                                                       |  |                          | (31,495  | ) |      |   | (18,765  | )
|                                                                                            |  |                          |          |   |      |   |          |  
|                                                                                            |  |                         
|Financing Activities                                                                        |  |                          |          |   |      |   |          |  
|Purchase of treasury stock                                                                  |  |                          | (52,125  | ) |      |   | (88,661  | )
|Receipts from exercise of stock options and excess tax benefits from employee equity awards |  |                          | 90       |   |      |   | 520      |  
|                                                                                            |  |                          |          |   |      |   |          |  
|Net cash used in financing activities                                                       |  |                          | (52,035  | ) |      |   | (88,141  | )
|                                                                                            |  |                          |          |   |      |   |          |  
|Increase in cash and cash equivalents                                                       |  |                          | 86,152   |   |      |   | 109,128  |  
|Cash and cash equivalents at beginning of period                                            |  |                          | 262,644  |   |      |   | 292,489  |  
|                                                                                            |  |                          |          |   |      |   |          |  
|Cash and cash equivalents at end of period                                                  |  | $                        | 348,796  |   |      | $ | 401,617  |  
|                                                                                            |  |                          |          |   |      |   |          |  
|                                                                                            |  |                         
|Supplemental disclosure of cash flow information:                                           |  |                          |          |   |      |   |          |  
|Cash paid during the period for income taxes, net                                           |  | $                        | 2,373    |   |      | $ | 21,076   |  
|                                                                                            |  |                          |          |   |      |   |          |  
|Cash paid during the period for interest, net of amounts capitalized                        |  | $                        | 355      |   |      | $ | 567      |  
|                                                                                            |  |                          |          |   |      |   |          |  

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, a Broadway stage
musical 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 June 30, 2009 and for the three and six months ended June 30, 2009 and 2008 has been
prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission (the SEC) 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.

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



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DREAMWORKS ANIMATION SKG, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS(Continued)



Recent Accounting Pronouncements

In December 2007, the Financial Accounting Standards Board (FASB) issued FAS No. 160, Noncontrolling Interests in
Consolidated Financial Statementsan amendment of ARB No. 51 (FAS 160). The provisions of FAS 160 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 FAS 160 effective January 1, 2009. Accordingly, the Company reclassified minority interest totaling $2.9 million as of
June 30, 2009 and December 31, 2008, respectively, 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.

The Company adopted FAS No. 165 Subsequent Events (FAS 165)
effective beginning the quarter ended June 30, 2009 and has evaluated for disclosure subsequent events that have occurred up to July 28, 2009, the date of issuance of our financial statements.

2. Film Costs

Film costs consist of the following
(in thousands):



|                                   |  |              |         |                  |   |        
|---------------------------------- |  | ------------ | ------- | ---------------- | - | -------
|                                   |  | June 30,2009 |         | December 31,2008
|                                   |  | (unaudited)  |         |                 
|In release, net of amortization(1) |  | $            | 315,233 |                  | $ | 329,985
|In production                      |  |              | 302,863 |                  |   | 258,273
|In development                     |  |              | 22,656  |                  |   | 49,985 
|                                   |  |              |         |                  |   |        
|Total film costs                   |  | $            | 640,752 |                  | $ | 638,243
|                                   |  |              |         |                  |   |        



|(1) | Includes $19.9 million and $23.1 million of stage musical costs at June 30, 2009 and December 31, 2008, respectively.
|--- | ---------------------------------------------------------------------------------------------------------------------

The Company anticipates that 52% and 95% of in release film costs as of June 30, 2009 will be amortized over the next 12 months and
three years, respectively.

3. Accrued Liabilities

Accrued liabilities consist of the following (in thousands):



|                             |  |              |        |                  |   |        
|---------------------------- |  | ------------ | ------ | ---------------- | - | -------
|                             |  | June 30,2009 |        | December 31,2008
|                             |  | (unaudited)  |        |                 
|Employee compensation        |  | $            | 23,251 |                  | $ | 52,157 
|Participations and residuals |  |              | 42,406 |                  |   | 37,220 
|Deferred rent                |  |              | 4,835  |                  |   | 5,806  
|Other accrued liabilities    |  |              | 21,752 |                  |   | 19,975 
|                             |  |              |        |                  |   |        
|Total accrued liabilities    |  | $            | 92,244 |                  | $ | 115,158
|                             |  |              |        |                  |   |        

As of June 30, 2009, the Company estimates that over the next 12 months it will pay
approximately $25.0 million of its accrued participation and residual costs.



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DREAMWORKS ANIMATION SKG, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS(Continued)



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 June 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 six-month periods ended June 30, 2009 and 2008 (in
thousands):



|                                           |  |              |        |                           |   |                         |  |      |        |      |   |        |  |   |        |  |   |       
|------------------------------------------ |  | ------------ | ------ | ------------------------- | - | ----------------------- |  | ---- | ------ | ---- | - | ------ |  | - | ------ |  | - | ------
|                                           |  | June 30,2009 |        | December 31,2008          |   | Amounts Earned         
|                                           |  |              |        | Three MonthsEndedJune 30, |   | Six MonthsEndedJune 30,
|                                           |  |              |        | 2009                      |   | 2008                    |  | 2009 |        | 2008
|                                           |  | (unaudited)  |        |                           |   | (unaudited)            
|Home Box Office Inc., Advance              |  | $            | 13,333 |                           | $ |                        |  | $    | 13,333 |      | $ | 13,333 |  | $ | 13,333 |  | $ | 13,333
|Licensing Advances                         |  |              | 33,662 |                           |   | 32,549                  |  |      | 24,790 |      |   | 313    |  |   | 27,887 |  |   | 1,322 
|Deferred Revenue                           |  |              | 2,239  |                           |   | 1,547                   |  |      | 1,066  |      |   | 9,674  |  |   | 2,833  |  |   | 9,983 
|Strategic Alliance/Development Advances(1) |  |              | 4,387  |                           |   | 2,007                   |  |      | 3,810  |      |   | 5,826  |  |   | 7,620  |  |   | 7,977 
|Other Advances                             |  |              | 3,321  |                           |   | 2,754                   |  |      | 100    |      |   | 4,557  |  |   | 4,757  |  |   | 5,108 
|                                           |  |              |        |                           |   |                         |  |      |        |      |   |        |  |   |        |  |   |       
|Total deferred revenue and other advances  |  | $            | 56,942 |                           | $ | 38,857                  |  |      |        |      |   |        |  |   |        |  |   |       
|                                           |  |              |        |                           |   |                         |  |      |        |      |   |        |  |   |        |  |   |       



|(1) | Of the total amounts earned against the Strategic Alliance/Development Advances, $2.3 million and $4.2 million, respectively, for the three months ended
June 30, 2009 and 2008, and $4.8 million and $5.7 million, respectively, for the six months ended June 30, 2009 and 2008, were capitalized as an offset to film costs or property, plant and equipment.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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 June 30, 2009 and December 31, 2008 (in
thousands):



|                              |  |                     |        |                  |                           |                                |  |                         |               |       |      |  |   |      |     |  |      |     |     |  |   |     |     |  |   |       |    
|----------------------------- |  | ------------------- | ------ | ---------------- | ------------------------- | ------------------------------ |  | ----------------------- | ------------- | ----- | ---- |  | - | ---- | --- |  | ---- | --- | --- |  | - | --- | --- |  | - | ----- | ---
|                              |  | Balance Outstanding |        | Maturity Date    |                           | InterestRate as ofJune 30,2009 |  |                         | Interest Cost |      
|                              |  |                     |        |                  | Three MonthsEndedJune 30, |                                |  | Six MonthsEndedJune 30, |              
|                              |  | June 30,2009        |        | December 31,2008 |                           |                                |  | 2009                    |               |       | 2008 |  |   | 2009 |     |  | 2008 |    
|Animation Campus Financing(1) |  | $                   | 73,000 |                  | $                         | 73,000                         |  | October 2009            |               | 0.65  | %    |  | $ | 362  |     |  | $    | 762 |     |  | $ | 692 |     |  | $ | 1,643 |    
|Revolving Credit Facility     |  | $                   |       |                  | $                         |                               |  | June 2013               |               | 0.375 | %(2) |  | $ | 122  | (2) |  | $    |    | (2) |  | $ | 242 | (2) |  | $ |      | (2)



|(1) | The entire amount of the obligation, $73.0 million, is due and payable in October 2009, bears interest primarily at 30-day commercial paper rates and is fully
collateralized by the underlying real property. In connection with the adoption of FASB Interpretation No. 46R, Consolidation of Variable Interest Entities, 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 is 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
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



7



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##### Table of Contents

DREAMWORKS ANIMATION SKG, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS(Continued)



| | 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 June 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 June 30, 2009 and 2008 totaled $0.4
million and $0.8 million, respectively, and for the six months ended June 30, 2009 and 2008 totaled $0.7 million and $1.6 million, respectively.

6. Income Taxes

The provision for income taxes for the three and six months ended June 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 EndedJune 30, |    |  | Six Months EndedJune 30, |   
|                                                                                           |  | 2009                       |    |  | 2008                     |    |  | 2009  |    |  | 2008  |   
|                                                                                           |  | (unaudited)                |   
|Provision (benefit) 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                                                   |  | 1.5                        |    |  | 2.2                      |    |  | 1.7   |    |  | 2.0   |   
|Revaluation of deferred tax assets, net                                                    |  | (4.8                       | )  |  | (1.4                     | )  |  | (6.7  | )  |  | (3.6  | ) 
|Other                                                                                      |  | (3.4                       | )  |  | (2.0                     | )  |  | (2.2  | )  |  | (1.0  | ) 
|                                                                                           |  |                            |    |  |                          |    |  |       |    |  |       |   
|Total provision excluding effect of Stockholders Tax Agreement(1)                         |  | 28.3                       | %  |  | 33.8                     | %  |  | 27.8  | %  |  | 32.4  | % 
|                                                                                           |  |                            |    |  |                          |    |  |       |    |  |       |   
|Effects of Stockholders Tax Agreement(1)                                                  |  |                            |    |  |                          |    |  |       |    |  |       |   
|U.S. state taxes, net of Federal benefit                                                   |  | (1.4                       | )  |  | (1.1                     | )  |  | (1.4  | )  |  | (1.2  | ) 
|Revaluation of deferred tax assets, net                                                    |  | (29.4                      | )  |  | (18.9                    | )  |  | (20.8 | )  |  | (21.5 | ) 
|Other                                                                                      |  | (0.1                       | )  |  | 0.7                      |    |  |      |    |  | 0.7   |   
|                                                                                           |  |                            |    |  |                          |    |  |       |    |  |       |   
|Total effect of Stockholders Tax Agreement(1)                                             |  | (30.9                      | )% |  | (19.3                    | )% |  | (22.2 | )% |  | (22.0 | )%
|                                                                                           |  |                            |    |  |                          |    |  |       |    |  |       |   
|Total net provision (benefit) for income taxes                                             |  | (2.6                       | )% |  | 14.5                     | %  |  | 5.6   | %  |  | 10.4  | % 
|                                                                                           |  |                            |    |  |                          |    |  |       |    |  |       |   



|(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.



8



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##### Table of Contents

DREAMWORKS ANIMATION SKG, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS(Continued)



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 July 28, 2009.

8. Equity-Based Compensation

The Company
recognizes stock-based compensation in accordance with the provisions of FASB Statement No. 123 (revised 2004), Share-Based Payment (FAS 123R). Under FAS 123R, the Company recognizes compensation costs 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 six-month periods ended June 30, 2009 and 2008, respectively, was as follows (in thousands):



|                                    |  |                            |        |   |                          |   |        |      |  |   |        |   |  |   |        |  
|----------------------------------- |  | -------------------------- | ------ | - | ------------------------ | - | ------ | ---- |  | - | ------ | - |  | - | ------ | -
|                                    |  | Three Months EndedJune 30, |        |   | Six Months EndedJune 30, |  
|                                    |  | 2009                       |        |   | 2008                     |   |        | 2009 |  |   | 2008   |  
|                                    |  | (unaudited)                |       
|Total equity-based compensation     |  | $                          | 8,841  |   |                          | $ | 8,583  |      |  | $ | 14,695 |   |  | $ | 18,277 |  
|Tax impact(1)                       |  |                            | (2,502 | ) |                          |   | (2,901 | )    |  |   | (4,085 | ) |  |   | (5,922 | )
|                                    |  |                            |        |   |                          |   |        |      |  |   |        |   |  |   |        |  
|Reduction in net income, net of tax |  | $                          | 6,339  |   |                          | $ | 5,682  |      |  | $ | 10,610 |   |  | $ | 12,355 |  
|                                    |  |                            |        |   |                          |   |        |      |  |   |        |   |  |   |        |  



|(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 $2.2 million and $1.4 million for the three-month periods
ended June 30, 2009 and 2008, respectively, and $4.4 million and $2.9 million for the six-month periods ended June 30, 2009.



9



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##### Table of Contents

DREAMWORKS ANIMATION SKG, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS(Continued)



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



|                                               |  |                            |  |                           |       |                |       |                           |   |      
|---------------------------------------------- |  | -------------------------- |  | ------------------------- | ----- | -------------- | ----- | ------------------------- | - | -----
|                                               |  | Three Months EndedJune 30, |  | Six Months EndedJune 30, 
|                                               |  | NumberGranted              |  | WeightedAverage FairValue |       | NumberGranted  |       | WeightedAverage FairValue
|                                               |  | (unaudited)               
|                                               |  | (in thousands)             |  |                           |       | (in thousands) |       |                          
|2009                                           |  |                            |  |                           |       |                |       |                           |   |      
|Stock appreciation rights(1)                   |  | 1,632                      |  | $                         | 7.57  |                | 1,647 |                           | $ | 7.57 
|Restricted stock and restricted stock units(1) |  | 994                        |  | $                         | 13.88 |                | 1,014 |                           | $ | 14.00
|2008                                           |  |                            |  |                           |       |                |       |                           |   |      
|Stock appreciation rights                      |  | 15                         |  | $                         | 11.10 |                | 59    |                           | $ | 9.99 
|Restricted stock and restricted stock units    |  | 34                         |  | $                         | 29.54 |                | 69    |                           | $ | 27.69



|(1) | On May 1, 2009, the Company made a grant 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, to its Chief Executive Officer.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

As of June 30, 2009, the total compensation cost
related to unvested equity awards granted but not yet recognized was approximately $89.5 million. This cost will be amortized on a straight-line basis over a weighted average life of 1.78 years.

9. Significant Customer and Segment Information

Significant Customer.Paramount represented 74.2% and 66.3% of total revenue for the three-month periods ended June 30, 2009 and 2008, respectively, and 87.1% and 73.5% for the six-month periods ended June 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 EndedJune 30, |         | Six Months EndedJune 30,
|                            |  | 2009                       |         | 2008                     |   | 2009    |  | 2008
|                            |  | (unaudited)               
|Monsters vs. Aliens         |  | $                          | 10,295  |                          | $ |        |  | $    | 20,842  |  | $ |       
|Kung Fu Panda               |  |                            | 32,712  |                          |   | 46,438  |  |      | 66,794  |  |   | 46,438 
|Madagascar: Escape 2 Africa |  |                            | 26,143  |                          |   |        |  |      | 173,670 |  |   |       
|Shrek the Third             |  |                            | 2,442   |                          |   | 29,855  |  |      | 7,765   |  |   | 78,122 
|Bee Movie                   |  |                            | 9,746   |                          |   | 25,533  |  |      | 30,953  |  |   | 74,455 
|Flushed Away                |  |                            | 2,180   |                          |   | 7,296   |  |      | 14,358  |  |   | 19,932 
|Film Library / Other(1)     |  |                            | 48,472  |                          |   | 32,408  |  |      | 81,132  |  |   | 79,755 
|                            |  |                            |         |                          |   |         |  |      |         |  |   |        
|                            |  | $                          | 131,990 |                          | $ | 141,530 |  | $    | 395,514 |  | $ | 298,702
|                            |  |                            |         |                          |   |         |  |      |         |  |   |        



|(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.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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DREAMWORKS ANIMATION SKG, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS(Continued)



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.

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 EndedJune 30, |        |   | Six Months EndedJune 30, |  
|                                                                       |  | 2009                       |        |   | 2008                     |   |        | 2009 |  |   | 2008   |  
|                                                                       |  | (unaudited)                |       
|Numerator:                                                             |  |                            |        |   |                          |   |        |      |  |   |        |   |  |   |        |  
|Net income                                                             |  | $                          | 25,556 |   |                          | $ | 27,493 |      |  | $ | 87,866 |   |  | $ | 53,592 |  
|Denominator:                                                           |  |                            |        |   |                          |   |        |      |  |   |        |   |  |   |        |  
|Weighted average common shares and denominator for basic calculation:  |  |                            |        |   |                          |   |        |      |  |   |        |   |  |   |        |  
|Weighted average common shares outstanding                             |  |                            | 86,759 |   |                          |   | 92,386 |      |  |   | 87,542 |   |  |   | 93,382 |  
|Less: Unvested restricted stock                                        |  |                            | (869   | ) |                          |   | (2,016 | )    |  |   | (869   | ) |  |   | (2,016 | )
|                                                                       |  |                            |        |   |                          |   |        |      |  |   |        |   |  |   |        |  
|Denominator for basic calculation                                      |  |                            | 85,890 |   |                          |   | 90,370 |      |  |   | 86,673 |   |  |   | 91,366 |  
|                                                                       |  |                            |        |   |                          |   |        |      |  |   |        |   |  |   |        |  
|Weighted average effects of dilutive equity-based compensation awards: |  |                            |        |   |                          |   |        |      |  |   |        |   |  |   |        |  
|Employee stock options and stock appreciation rights                   |  |                            | 59     |   |                          |   | 119    |      |  |   | 56     |   |  |   | 108    |  
|Restricted stock awards                                                |  |                            | 433    |   |                          |   | 299    |      |  |   | 661    |   |  |   | 141    |  
|                                                                       |  |                            |        |   |                          |   |        |      |  |   |        |   |  |   |        |  
|Denominator for diluted calculation                                    |  |                            | 86,382 |   |                          |   | 90,788 |      |  |   | 87,390 |   |  |   | 91,615 |  
|                                                                       |  |                            |        |   |                          |   |        |      |  |   |        |   |  |   |        |  
|Net income per sharebasic                                             |  | $                          | 0.30   |   |                          | $ | 0.30   |      |  | $ | 1.01   |   |  | $ | 0.59   |  
|Net income per sharediluted                                           |  | $                          | 0.30   |   |                          | $ | 0.30   |      |  | $ | 1.01   |   |  | $ | 0.58   |  

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 EndedJune 30, |  | Six Months EndedJune 30,
|                                                |  | 2009                       |  | 2008                     |  | 2009  |  | 2008 
|                                                |  | (unaudited)               
|Options to purchase shares of common stock      |  | 1,820                      |  | 1,204                    |  | 1,854 |  | 1,270
|Stock appreciation rights                       |  | 4,124                      |  | 2,461                    |  | 4,139 |  | 2,446
|Equity awards subject to performance conditions |  | 2,255                      |  | 1,849                    |  | 1,425 |  | 1,849
|                                                |  |                            |  |                          |  |       |  |      
|Total                                           |  | 8,199                      |  | 5,514                    |  | 6,418 |  | 5,565
|                                                |  |                            |  |                          |  |       |  |      



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|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 our 2007 half-hour television Christmas special, Shrek the Halls, our 2008 Broadway musical, Shrek the Musical, and the current development of additional television
specials based on the characters from some of our films 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 six months ended June 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 Shrek the Musical (based on our first Shrek
film) which debuted on Broadway in December 2008. 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.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | 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.



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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 EndedJune 30,                           |       |   | Six Months EndedJune 30, |  
|                                                                 |  | 2009                                                 |       |   | 2008                     |   |       | $ Change |  |   | % Change |   |  | 2009  |    |  | 2008 |       |   | $ Change |   |       | % Change | 
|                                                                 |  | (unaudited)                                          |      
|                                                                 |  | (in millions, except percentages and per share data) |      
|Revenues                                                         |  | $                                                    | 132.0 |   |                          | $ | 141.5 |          |  | $ | (9.5     | ) |  | (6.7  | )% |  | $    | 395.5 |   |          | $ | 298.7 |          |  | $ | 96.8  |   |  | 32.4  | % 
|Costs of revenues                                                |  |                                                      | 74.0  |   |                          |   | 76.1  |          |  |   | 2.1      |   |  | 2.8   | %  |  |      | 230.4 |   |          |   | 172.6 |          |  |   | (57.8 | ) |  | (33.5 | )%
|Product development                                              |  |                                                      | 0.1   |   |                          |   | 0.4   |          |  |   | 0.3      |   |  | 75.0  | %  |  |      | 2.5   |   |          |   | 0.4   |          |  |   | (2.1  | ) |  | NM    |   
|Selling, general and administrative expenses                     |  |                                                      | 24.8  |   |                          |   | 27.0  |          |  |   | 2.2      |   |  | 8.1   | %  |  |      | 45.5  |   |          |   | 53.7  |          |  |   | 8.2   |   |  | 15.3  | % 
|                                                                 |  |                                                      |       |   |                          |   |       |          |  |   |          |   |  |       |    |  |      |       |   |          |   |       |          |  |   |       |   |  |       |   
|Operating income                                                 |  |                                                      | 33.0  |   |                          |   | 38.0  |          |  |   | (5.0     | ) |  | (13.2 | )% |  |      | 117.1 |   |          |   | 71.9  |          |  |   | 45.2  |   |  | 62.9  | % 
|Interest income, net                                             |  |                                                      | 1.0   |   |                          |   | 2.5   |          |  |   | (1.5     | ) |  | (60.0 | )% |  |      | 1.5   |   |          |   | 5.5   |          |  |   | (4.0  | ) |  | (72.7 | )%
|Other income, net                                                |  |                                                      | 1.6   |   |                          |   | 1.1   |          |  |   | 0.5      |   |  | 45.5  | %  |  |      | 3.1   |   |          |   | 1.9   |          |  |   | 1.2   |   |  | 63.2  | % 
|Increase in income tax benefit payable to former stockholder     |  |                                                      | (11.0 | ) |                          |   | (8.0  | )        |  |   | (3.0     | ) |  | (37.5 | )% |  |      | (27.0 | ) |          |   | (17.4 | )        |  |   | (9.6  | ) |  | (55.2 | )%
|                                                                 |  |                                                      |       |   |                          |   |       |          |  |   |          |   |  |       |    |  |      |       |   |          |   |       |          |  |   |       |   |  |       |   
|Income before income taxes                                       |  |                                                      | 24.6  |   |                          |   | 33.5  |          |  |   | (8.9     | ) |  | (26.6 | )% |  |      | 94.7  |   |          |   | 61.8  |          |  |   | 32.9  |   |  | 53.2  | % 
|Provision (benefit) for income taxes                             |  |                                                      | (0.9  | ) |                          |   | 6.0   |          |  |   | 6.9      |   |  | 115.0 | %  |  |      | 6.8   |   |          |   | 8.2   |          |  |   | 1.4   |   |  | 17.1  | % 
|                                                                 |  |                                                      |       |   |                          |   |       |          |  |   |          |   |  |       |    |  |      |       |   |          |   |       |          |  |   |       |   |  |       |   
|Net income                                                       |  | $                                                    | 25.6  |   |                          | $ | 27.5  |          |  | $ | (1.9     | ) |  | (6.9  | )% |  | $    | 87.9  |   |          | $ | 53.6  |          |  | $ | 34.3  |   |  | 64.0  | % 
|                                                                 |  |                                                      |       |   |                          |   |       |          |  |   |          |   |  |       |    |  |      |       |   |          |   |       |          |  |   |       |   |  |       |   
|Diluted net income per share                                     |  | $                                                    | 0.30  |   |                          | $ | 0.30  |          |  | $ |         |   |  |      | %  |  | $    | 1.01  |   |          | $ | 0.58  |          |  | $ | 0.43  |   |  | 74.1  | % 
|                                                                 |  |                                                      |       |   |                          |   |       |          |  |   |          |   |  |       |    |  |      |       |   |          |   |       |          |  |   |       |   |  |       |   
|Diluted shares used in computing diluted net income per share(1) |  |                                                      | 86.4  |   |                          |   | 90.8  |          |  |   | N/A      |   |  | 4.8   | %  |  |      | 87.4  |   |          |   | 91.6  |          |  |   | N/A   |   |  | 4.6   | % 
|                                                                 |  |                                                      |       |   |                          |   |       |          |  |   |          |   |  |       |    |  |      |       |   |          |   |       |          |  |   |       |   |  |       |   



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

|(1) | During the six months ended June 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.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



14



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##### Table of Contents

Three Months Ended June 30, 2009 Compared to Three Months Ended June 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 June 30, 2009, our
revenue was $132.0 million, a decrease of $9.5 million, or 6.7%, as compared to $141.5 million for the three months ended June 30, 2008. As illustrated in the revenue chart above in Overview of Financial Results, the decrease
in revenue in the second three months of 2009 as compared to the second three months 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 June 30, 2009 remained relatively
unchanged from those of the quarter ended June 30, 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, including Monsters vs. Aliens. 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.

Revenue
for the quarter ended June 30, 2009 was comprised of amounts earned by a variety of films. Kung Fu Pandareported $32.7 million of revenue earned primarily in the domestic pay television market and Madagascar: Escape 2 Africa
contributed revenue of $26.1 million earned mainly in the international home entertainment market (representing all international territories released through May 31, 2009, which territories on an historical basis have generally represented
approximately 65-75% of our total reported international home entertainment revenue for the 12-week initial release period). Additionally, Monsters vs. Aliens, our most recent theatrical release, contributed $10.3 million of
ancillary revenue. As somewhat typical for our films, our distributor reported no revenue for Monsters vs. Aliensduring the quarter following its initial release because our distributor is entitled to recover its marketing and distribution
costs before it is required to report any revenue generated from the exploitation of this film. Lastly, our library of titles contributed $52.8 million earned across several markets, including ancillary revenue, and Shrek the Musical, which
debuted on Broadway in the fourth quarter of 2008, contributed $10.1 million of revenue.



15



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##### Table of Contents

Revenue for the quarter ended June 30, 2008 was comprised of amounts earned by a variety of films.
Kung Fu Panda, the single greatest source of revenue for the second quarter of 2008, contributed $46.4 million earned in the domestic theatrical market and through 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, which accounted for slightly less than half of the films total revenue for the second quarter of 2008. Bee
Movie, our 2007 fourth quarter release, generated $25.5 million of revenue primarily attributable to the international home entertainment market and Shrek the Third earned an additional $29.9 million of revenue earned primarily in the
domestic pay television market. Our other properties, including our library of titles, contributed revenues totaling $39.7 million earned across a variety of worldwide markets.

Costs of Revenues. Costs of revenues for the three months ended June 30, 2009 totaled $74.0 million, a decrease of $2.1 million,
compared to $76.1 million for the three months ended June 30, 2008.

Cost of revenues, the primary component of which is film
amortization costs, as a percentage of film revenue was 56.1% for the three months ended June 30, 2009 as compared to 53.8% for the three months ended June 30, 2008. The slight increase in amortization of film costs as a percentage of film
revenue for the three months ended June 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
June 30, 2009 as compared to the quarter ended June 30, 2008, primarily due to the stronger performance of Madagascar: Escape 2 Africaas compared to Bee Movie. Additionally, cost of revenues for the second quarter of 2009
was impacted by the operating and marketing costs associated with the ongoing production of Shrek the Musical on Broadway, resulting in a small gross loss in the second quarter of 2009 for the production.

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

Selling, General and Administrative Expenses. Total selling, general and administrative expenses decreased $2.2 million to
$24.8 million (including $8.4 million of stock compensation expense) for the quarter ended June 30, 2009 from $27.0 million (including $8.3 million of stock compensation expense) for the quarter ended June 30, 2008. This 8.1% aggregate
decrease is primarily related to approximately $1.3 million of lower company-wide incentive compensation and approximately $1.0 million of lower corporate travel expenses.

Operating Income. Operating income for the three months ended June 30, 2009 was $33.0 million compared to $38.0 million for the
comparable period of 2008. The $5.0 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. Additionally, in
conjunction with the second quarter 2009 amendment to our video game distribution agreement, operating income for the second quarter of 2009 benefited by approximately $12.1 million from the recognition of deferred revenue, net of film cost
amortization, related to several previously released titles.

Interest Income, Net. For the three months ended June 30,
2009, total interest income was $1.0 million, a decrease of $1.5 million or 60%, from $2.5 million for the same period of 2008. The decrease in interest income was due to lower rates of interest earned on investments during the second quarter of
2009 as compared to the first quarter 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 $0.4 million and $0.8 million for the three months ended June 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 second quarter of 2009.



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##### Table of Contents

Other Income, Net. For the three months ended June 30, 2009 and 2008, total other income
was $1.6 million and $1.1 million, respectively. Other income in both years 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.

For the quarters ended June 30, 2009 and 2008,
we recorded $13.0 million and $9.4 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
$11.0 million and $8.0 million, respectively, representing 85% of these recognized benefits.

Provision (Benefit) for Income
Taxes. For the three months ended June 30, 2009 we recorded a benefit for income taxes of $0.9 million and for the three months ended June 30, 2008 we recorded a provision for income taxes of $6.0 million, or an effective tax rate
of (2.6)% and 14.5%, 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 June 30, 2009 and June 30, 2008 are 28.3% and 33.8%, 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.

Net Income. Net income for the three months ended June 30, 2009 was $25.6 million, or $0.30 per diluted share, as compared to a net income of $27.5 million, or $0.30 net income per diluted share, in
the corresponding period in 2008. Net income for the second quarter of 2009 benefited by approximately $9.0 million, or $0.10 per diluted share, from 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.



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##### Table of Contents

Six Months Ended June 30, 2009 Compared to Six Months Ended June 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 six months ended June 30, 2009, our
revenue was $395.5 million, an increase of $96.8 million, or 32.4%, as compared to $298.7 million for the six months ended June 30, 2008. As illustrated in the revenue chart above in Overview of Financial Results, the
increase in revenue in the first six months of 2009 as compared to the first six 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 increase in 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 partially offset by the lower revenues contributed by Monsters vs. Aliens during the first six 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, including Monsters vs. Aliens. 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.

Madagascar: Escape 2 Africa,our 2008 fourth quarter release, contributed the largest amount of revenue, $173.7 million, or 44% of the total revenues, during the six months ended June 30, 2009, earned in the worldwide theatrical
and home entertainment markets. Kung Fu Pandareported an additional $66.8 million earned in the worldwide home entertainment, television and ancillary markets. Additionally, Monsters vs. Aliens, our most recent theatrical release,
contributed $20.8 million of ancillary revenue, including merchandising and licensing revenue. Our distributor has reported no revenue for Monsters vs. Alienssince its initial release on March 27, 2009 because our distributor is
entitled to recover its marketing and distribution costs before it is required to report any revenue generated from the exploitation of this film. Lastly, our library of titles contributed $114.3 million earned across several markets and Shrek
the Musical, which debuted on Broadway in the fourth quarter of 2008, contributed $19.9 million of revenues.



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##### Table of Contents

Several films contributed to our revenue totaling $298.7 million for the six-month period ended
June 30, 2008. Kung Fu Panda contributed $46.4 million of revenue associated with its domestic 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, which accounted for slightly less than half of the films total revenue for the six months ended June 30, 2008. Our Prior year theatrical
releases, Shrek the Thirdand Bee Movie, generated a total of $152.6 million primarily attributable to the worldwide theatrical, home entertainment and ancillary markets (including non-recurring revenue associated with strategic
relationship, which accounted for slightly less than one-third of Bee Moviestotal revenue for the six months ended June 30, 2008). Our other properties, including our library of titles, contributed revenues totaling
$99.7 million earned across a variety of worldwide markets.

Costs of Revenues. Costs of revenues for the six months ended
June 30, 2009 totaled $230.4 million, an increase of $57.8 million, compared to $172.6 million for the six months ended June 30, 2008.

Cost of revenues, the primary component of which is film amortization costs, as a percentage of film revenue was 58.3% for the six months ended June 30, 2009 and remained principally unchanged from that of 57.8% for the six months
ended June 30, 2008. While the overall rate of amortization rate of film costs as a percentage of revenues was largely consistent between the periods, because of Kung Fu Pandasstronger performance it had a lower rate of
amortization during the first six months of 2008 as compared to the amortization rate of Monsters vs. Aliensduring the first six months of 2009. This increase in amortization rate for the Current year theatrical release category
between periods between the six-month periods was partially offset by the combined lower rate of amortization for the Prior year theatrical releases category during the six months ended June 30, 2009 as compared to the six months
ended June 30, 2008, largely due to the stronger performance of Madagascar: Escape 2 Africaas compared to Bee Movie. In addition, cost of revenues for the six months ended June 30, 2009 was impacted by the operating and
marketing costs associated with the ongoing production of Shrek the Musical on Broadway, resulting in a small gross loss in the first six months of 2009 for the production.

Product development. Product development costs totaled $2.5 million and $0.4 million for the six-month periods ended June 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.

Selling, General and Administrative Expenses. Total selling, general and administrative expenses decreased $8.2 million to $45.5 million
(including $13.7 million of stock compensation expense) for the six months ended June 30, 2009 from $53.7 million (including $17.9 million of stock compensation expense) for the six months ended June 30, 2008. This 15.3% aggregate decrease
spans across several selling, general and administrative categories, including a $4.2 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), approximately $1.6 million of lower company-wide incentive compensation and approximately $2.0 million of lower corporate travel expenses.

Operating Income. Operating income for the six months ended June 30, 2009 was $117.1 million compared to $71.9 million for the comparable period of 2008. The increase of $45.2 million in operating
income for the six months ended June 30, 2009 was largely because of the stronger performance in the first six months of 2009 of Madagascar: Escape 2 Africaas compared to that of Bee Movie during the six months of 2008, of the
recognition of deferred revenue, net of film cost amortization, 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 six months ended June 30, 2009, total interest
income was $1.5 million, a decrease of $4.0 million or 72.7%, from $5.5 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 six months of 2009 as compared to
the first six 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.



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Interest expense capitalized to production film costs was $0.7 million and $1.6 million for the six
months ended June 30, 2009 and 2008, respectively. The $0.9 million decrease between the periods was primarily due to the decrease in amount of overall interest expense during the first six months of 2009.

Other Income, Net. For the six months ended June 30, 2009 and 2008, total other income was $3.1 million and $1.9 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 six months ended June 30, 2009 and 2008, we recorded $31.8 million and $20.5 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 $27.0 million and $17.4 million, respectively,
representing 85% of these recognized benefits.

Provision (Benefit) for Income Taxes. For the six months ended June 30,
2009 and 2008, we recorded a provision for income taxes of $6.8 million and $8.2 million, respectively, or an effective tax rate of 5.6% and 10.4%, 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 six months ended June 30, 2009 and 2008 are 27.8% and 32.4%, 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 benefits recognized from the Tax Basis Increase
as described above.

Net Income. Net income for the six months ended June 30, 2009 was $87.9 million, or $1.01 per diluted
share, as compared to a net income of $53.6 million, or $0.58 net income per diluted share, in the corresponding period in 2008.

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 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 June 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 six months ended June 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,



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##### Table of Contents

we expect to be able to draw funds from our revolving credit facility to meet these needs. Additionally, over the next few quarters, we expect to spend
approximately $33.4 million as we continue 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. In
addition, in October 2009 we are required to repay the $73.0 million principal associated with the existing financing of our Companys headquarters (see Note 5 to our unaudited consolidated financial statements). We are currently evaluating the
various alternatives for the funding of the Glendale campus expansion project and repayment of the existing Glendale campus financing, including using cash on hand and several financing options.

As of June 30, 2009, we had cash and cash equivalents totaling $348.8 million. Our cash and cash equivalents consist of cash on deposit and
short-term money market investments, which are primarily either invested in U.S. government obligations or guaranteed by the U.S. government. Our cash and cash equivalents balance at June 30, 2009 increased by $86.2 million from that of $262.6
million at December 31, 2008. Components of this change in cash for the six months ended June 30, 2009, as well as for the six months ended June 30, 2008, are provided below in more detail.

Operating Activities

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





|                                          |  |      |         |      |   |        
|----------------------------------------- |  | ---- | ------- | ---- | - | -------
|                                          |  | 2009 |         | 2008
|Net cash provided by operating activities |  | $    | 169,682 |      | $ | 216,034

Net cash provided by operating activities for the first six 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 television and home entertainment 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 six 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 six months of 2008 was primarily attributable to the collection of revenue from Shrek the
Thirds worldwide home entertainment release and Bee Movies worldwide theatrical 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 six 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, $21.1 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.



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Investing Activities

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





|                                      |  |      |         |   |      |   |         |  
|------------------------------------- |  | ---- | ------- | - | ---- | - | ------- | -
|                                      |  | 2009 |         |   | 2008 |  
|Net cash used in investing activities |  | $    | (31,495 | ) |      | $ | (18,765 | )

Net cash used in investing activities for the six months ended June 30, 2009 and 2008 was
primarily related to the investment in property, plant and equipment.

Financing Activities

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





|                                      |  |      |         |   |      |   |         |  
|------------------------------------- |  | ---- | ------- | - | ---- | - | ------- | -
|                                      |  | 2009 |         |   | 2008 |  
|Net cash used in financing activities |  | $    | (52,035 | ) |      | $ | (88,141 | )

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

Contractual Obligations

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 June 30, 2009 we had non-cancelable talent commitments totaling approximately $23.3 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.



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Revenue Recognition

We recognize revenue from the distribution of our animated feature films when earned and reported to us by our distributor, as reasonably determinable in accordance with the Accounting Standards Executive Committee of
the American Institute of Certified Public Accountants Statement of Position 00-2, Accounting by Producers or Distributors of Films (the SOP).

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, in accordance
with the SOP, 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 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.



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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 in accordance with the SOP. 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 in accordance with the requirements of the SOP. 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 in accordance with the provisions of FAS
No. 123 (revised 2004), Share-Based Payment (FAS 123R) which requires a public entity to measure 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 June 30, 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 $89.5 million. This cost will be amortized on a straight-line basis over a weighted average life of 1.78 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. As permitted by and outlined in Staff Accounting Bulletin (SAB) 107, Share-Based Payment (SAB
107) released by the SEC, 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 and as permitted under SAB 110, Use of a Simplified Method, which was released in
December 2007, 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, in accordance with SAB 107, the estimated volatility incorporates both historical volatility and the implied volatility of
publicly



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traded options. As required by FAS 123R, management made 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 under FAS 123R. 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 FAS No. 109, Accounting for Income Taxes (FAS
109). Under the asset and liability method of FAS 109, 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. Under FAS 109, 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 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.

In July 2006, the Financial Accounting Standards Board (FASB) issued FASB Interpretation No. 48,
Accounting for Uncertainty in Income Taxesan interpretation of FASB Statement No. 109 (FIN 48), which became effective for us on January 1, 2007. FIN 48 sets out the use of a single comprehensive model
to address uncertainty in tax positions and clarifies the accounting for income taxes by establishing the 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.



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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 first 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. The collective bargaining agreement with Local 839 of IATSE expires on July
31, 2009, although we have reached an agreement in principle on a replacement contract that would run through July 31, 2012. We currently expect that this replacement agreement will be presented to the members of Local 839 for a ratification vote
during the third quarter of 2009. 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 June 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)
|April 1April 30, 2009(3) |  | 935,000                           |  | $                          | 22.15 |                                                                               | 935,000 |                                                                                                         | $ | 150,000,000
|May 1May 31, 2009        |  |                                  |  | $                          |      |                                                                               |        |                                                                                                         | $ | 150,000,000
|June 1June 30, 2009      |  |                                  |  | $                          |      |                                                                               |        |                                                                                                         | $ | 150,000,000
|                          |  |                                   |  |                            |       |                                                                               |         |                                                                                                         |   |            
|Total                     |  | 935,000                           |  | $                          | 22.15 |                                                                               | 935,000 |                                                                                                         |   |            



|(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.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(3) | Shares repurchased during the period April 1-April 30, 2009 were purchased under the Companys previous stock repurchase program that was terminated
in conjunction with the approval of the new stock repurchase program approved in April 2009.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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|Item 4. | Submission of Matters to a Vote of Security Holders
|------- | ---------------------------------------------------

On June 10, 2009, the Company held its Annual Meeting of Stockholders. The agenda items for such meeting are shown below along with the vote of the Companys Class A and Class B common stock with respect to such agenda items.



|1. | Election of 10 directors to serve for the ensuing year or until their successors are duly elected and qualified.
|-- | ----------------------------------------------------------------------------------------------------------------



|                      |  |               |  |              
|--------------------- |  | ------------- |  | -------------
|                      |  | Votes CastFor |  | VotesWithheld
|Jeffrey Katzenberg    |  | 214,945,435   |  | 23,327,316   
|Roger A. Enrico       |  | 235,012,133   |  | 3,310,618    
|Harry Brittenham      |  | 235,183,738   |  | 3,089,013    
|Lewis. W Coleman      |  | 232,857,647   |  | 5,415,104    
|Thomas Freston        |  | 235,235,939   |  | 3,036,812    
|Judson C. Green       |  | 233,440,466   |  | 4,832,285    
|Mellody Hobson        |  | 235,215,242   |  | 3,057,609    
|Michael J. Montgomery |  | 233,465,313   |  | 4,808,438    
|Nathan Myhrvold       |  | 235,243,370   |  | 3,029,381    
|Richard Sherman       |  | 236,794,983   |  | 1,477,768    



|2. | Approval of the adoption of the Amended and Restated 2008 Omnibus Incentive Compensation Plan.
|-- | ----------------------------------------------------------------------------------------------



|                 |  |               
|---------------- |  | --------------
|                 |  | Number ofVotes
|Votes for        |  | 225,822,055   
|Votes against    |  | 14,601,547    
|Votes abstained  |  | 1,913,194     
|Broker non-votes |  | 7,355,416     



|3. | Ratification of the appointment of Ernst & Young LLP as the Companys independent registered accounting firm for the year ending December 31, 2009.
|-- | ---------------------------------------------------------------------------------------------------------------------------------------------------



|                |  |               
|--------------- |  | --------------
|                |  | Number ofVotes
|Votes for       |  | 235,466,862   
|Votes against   |  | 2,776,640     
|Votes abstained |  | 29,248        

Items 3 and 5 are not applicable and have been omitted.



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



|             |  |                                                                                                                                                                                
|------------ |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|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.



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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: July 28, 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 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.



30