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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549





FORM 10-Q





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

THE SECURITIES EXCHANGE
ACT OF 1934

For the quarterly period ended March 31, 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 March 31, 2009, there were 76,207,960 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                             |  | 23  
|              |  |                                                                                      
|Item 4.       |  | Controls and Procedures                                                               |  | 23  
|              |  |                                                                                      
|PART II.      |  | OTHER INFORMATION                                                                     |  |     
|              |  |                                                                                      
|Item 1.       |  | Legal Proceedings                                                                     |  | 24  
|              |  |                                                                                      
|Item 1A.      |  | Risk Factors                                                                          |  | 24  
|              |  |                                                                                      
|Item 2.       |  | Unregistered Sales of Equity Securities and Use of Proceeds                           |  | 24  
|              |  |                                                                                      
|Item 6.       |  | Exhibits                                                                              |  | 25  
|              | 
|SIGNATURES    |  | 26                                                                                   
|              | 
|EXHIBIT INDEX |  | 27                                                                                   

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



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PART IFINANCIAL INFORMATION



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

DREAMWORKS ANIMATION SKG,
INC.

CONSOLIDATED BALANCE SHEETS



|                                                                                                                                                                                 |  |                                                    |           |   |                  |   |           |  
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | -------------------------------------------------- | --------- | - | ---------------- | - | --------- | -
|                                                                                                                                                                                 |  | March 31,2009                                      |           |   | December 31,2008 |  
|                                                                                                                                                                                 |  | (unaudited)                                        |           |   |                  |  
|                                                                                                                                                                                 |  | (in thousands, except par value and share amounts) |          
|Assets                                                                                                                                                                           |  |                                                    |           |   |                  |   |           |  
|Cash and cash equivalents                                                                                                                                                        |  | $                                                  | 260,630   |   |                  | $ | 262,644   |  
|Trade accounts receivable, net of allowance for doubtful accounts                                                                                                                |  |                                                    | 4,998     |   |                  |   | 4,550     |  
|Income taxes receivable                                                                                                                                                          |  |                                                    | 11,490    |   |                  |   | 6,468     |  
|Receivable from Paramount, net of reserve for returns and allowance for doubtful accounts                                                                                        |  |                                                    | 233,284   |   |                  |   | 186,522   |  
|Film costs, net                                                                                                                                                                  |  |                                                    | 609,894   |   |                  |   | 638,243   |  
|Prepaid expenses and other assets                                                                                                                                                |  |                                                    | 41,113    |   |                  |   | 31,453    |  
|Property, plant and equipment, net of accumulated depreciation and amortization                                                                                                  |  |                                                    | 121,802   |   |                  |   | 114,913   |  
|Deferred taxes, net                                                                                                                                                              |  |                                                    | 13,501    |   |                  |   | 27,049    |  
|Goodwill                                                                                                                                                                         |  |                                                    | 34,216    |   |                  |   | 34,216    |  
|                                                                                                                                                                                 |  |                                                    |           |   |                  |   |           |  
|Total assets                                                                                                                                                                     |  | $                                                  | 1,330,928 |   |                  | $ | 1,306,058 |  
|                                                                                                                                                                                 |  |                                                    |           |   |                  |   |           |  
|Liabilities and Equity                                                                                                                                                           |  |                                                    |           |   |                  |   |           |  
|Liabilities:                                                                                                                                                                     |  |                                                    |           |   |                  |   |           |  
|Accounts payable                                                                                                                                                                 |  | $                                                  | 1,162     |   |                  | $ | 7,499     |  
|Accrued liabilities                                                                                                                                                              |  |                                                    | 91,894    |   |                  |   | 115,158   |  
|Payable to former stockholder                                                                                                                                                    |  |                                                    | 44,506    |   |                  |   | 54,192    |  
|Deferred revenue and other advances                                                                                                                                              |  |                                                    | 64,022    |   |                  |   | 38,857    |  
|Borrowings and other debt                                                                                                                                                        |  |                                                    | 70,059    |   |                  |   | 70,059    |  
|                                                                                                                                                                                 |  |                                                    |           |   |                  |   |           |  
|Total liabilities                                                                                                                                                                |  |                                                    | 271,643   |   |                  |   | 285,765   |  
|Commitments and contingencies                                                                                                                                                    |  |                                                    |           |   |                  |   |           |  
|Equity:                                                                                                                                                                          |  |                                                    |           |   |                  |   |           |  
|Stockholders equity:                                                                                                                                                            |  |                                                    |           |   |                  |   |           |  
|Class A common stock, par value $.01 per share, 350,000,000 shares authorized, 95,392,465 and 95,381,143 shares issued, as of
March 31, 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 March 31,
2009 and December 31, 2008              |  |                                                    | 114       |   |                  |   | 114       |  
|Additional paid-in capital                                                                                                                                                       |  |                                                    | 884,627   |   |                  |   | 876,651   |  
|Retained earnings                                                                                                                                                                |  |                                                    | 707,571   |   |                  |   | 645,261   |  
|Less: Class A Treasury common stock, at cost, 19,184,505 and 17,432,728 shares, as of March 31, 2009 and December 31, 2008,
respectively                                         |  |                                                    | (536,922  | ) |                  |   | (505,628  | )
|                                                                                                                                                                                 |  |                                                    |           |   |                  |   |           |  
|Total stockholders equity                                                                                                                                                       |  |                                                    | 1,056,344 |   |                  |   | 1,017,352 |  
|Minority interest                                                                                                                                                                |  |                                                    | 2,941     |   |                  |   | 2,941     |  
|                                                                                                                                                                                 |  |                                                    |           |   |                  |   |           |  
|Total equity                                                                                                                                                                     |  |                                                    | 1,059,285 |   |                  |   | 1,020,293 |  
|                                                                                                                                                                                 |  |                                                    |           |   |                  |   |           |  
|Total liabilities and equity                                                                                                                                                     |  | $                                                  | 1,330,928 |   |                  | $ | 1,306,058 |  
|                                                                                                                                                                                 |  |                                                    |           |   |                  |   |           |  

See accompanying notes.



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DREAMWORKS ANIMATION SKG, INC.

CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)



|                                                             |  |                                         |         |   |      |   |         |  
|------------------------------------------------------------ |  | --------------------------------------- | ------- | - | ---- | - | ------- | -
|                                                             |  | Three Months EndedMarch 31,             |        
|                                                             |  | 2009                                    |         |   | 2008 |  
|                                                             |  | (in thousands, exceptper share amounts) |        
|Revenues                                                     |  | $                                       | 263,524 |   |      | $ | 157,172 |  
|Costs of revenues                                            |  |                                         | 156,406 |   |      |   | 96,491  |  
|                                                             |  |                                         |         |   |      |   |         |  
|Gross profit                                                 |  |                                         | 107,118 |   |      |   | 60,681  |  
|Product development                                          |  |                                         | 2,368   |   |      |   |        |  
|Selling, general and administrative expenses                 |  |                                         | 20,691  |   |      |   | 26,722  |  
|                                                             |  |                                         |         |   |      |   |         |  
|Operating income                                             |  |                                         | 84,059  |   |      |   | 33,959  |  
|Interest income, net                                         |  |                                         | 539     |   |      |   | 2,983   |  
|Other income, net                                            |  |                                         | 1,452   |   |      |   | 777     |  
|Increase in income tax benefit payable to former stockholder |  |                                         | (16,010 | ) |      |   | (9,430  | )
|                                                             |  |                                         |         |   |      |   |         |  
|Income before income taxes                                   |  |                                         | 70,040  |   |      |   | 28,289  |  
|Provision for income taxes                                   |  |                                         | 7,730   |   |      |   | 2,190   |  
|                                                             |  |                                         |         |   |      |   |         |  
|Net income                                                   |  | $                                       | 62,310  |   |      | $ | 26,099  |  
|                                                             |  |                                         |         |   |      |   |         |  
|Basic net income per share                                   |  | $                                       | 0.71    |   |      | $ | 0.28    |  
|Diluted net income per share                                 |  | $                                       | 0.71    |   |      | $ | 0.28    |  
|Shares used in computing net income per share                |  |                                         |         |   |      |   |         |  
|Basic                                                        |  |                                         | 87,465  |   |      |   | 92,314  |  
|Diluted                                                      |  |                                         | 88,102  |   |      |   | 92,416  |  



See accompanying notes.



3



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DREAMWORKS ANIMATION SKG, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)



|                                                                                  |  |                             |          |   |      |   |         |  
|--------------------------------------------------------------------------------- |  | --------------------------- | -------- | - | ---- | - | ------- | -
|                                                                                  |  | Three Months EndedMarch 31, |         
|                                                                                  |  | 2009                        |          |   | 2008 |  
|                                                                                  |  | (in thousands)              |         
|Operating activities                                                              |  |                             |          |   |      |   |         |  
|Net income                                                                        |  | $                           | 62,310   |   |      | $ | 26,099  |  
|Adjustments to reconcile net income to net cash provided by operating activities: |  |                             |          |   |      |   |         |  
|Amortization and write off of film costs                                          |  |                             | 135,237  |   |      |   | 92,511  |  
|Stock compensation expense                                                        |  |                             | 5,854    |   |      |   | 9,695   |  
|Depreciation and amortization                                                     |  |                             | 726      |   |      |   | 582     |  
|Revenue earned against deferred revenue and other advances                        |  |                             | (10,831  | ) |      |   | (2,552  | )
|Deferred taxes, net                                                               |  |                             | 13,548   |   |      |   | 2,644   |  
|Change in operating assets and liabilities:                                       |  |                             |          |   |      |   |         |  
|Trade accounts receivable                                                         |  |                             | (448     | ) |      |   | (12,092 | )
|Receivable from Paramount                                                         |  |                             | (46,762  | ) |      |   | 117,018 |  
|Film costs                                                                        |  |                             | (101,657 | ) |      |   | (97,404 | )
|Prepaid expenses and other assets                                                 |  |                             | (9,664   | ) |      |   | 10,499  |  
|Accounts payable and accrued liabilities                                          |  |                             | (29,431  | ) |      |   | (33,397 | )
|Payable to former stockholder                                                     |  |                             | (9,686   | ) |      |   | (24,316 | )
|Income taxes payable/receivable, net                                              |  |                             | (5,022   | ) |      |   | (20,324 | )
|Deferred revenue and other advances                                               |  |                             | 38,496   |   |      |   | 38,473  |  
|                                                                                  |  |                             |          |   |      |   |         |  
|Net cash provided by operating activities                                         |  |                             | 42,670   |   |      |   | 107,436 |  
|                                                                                  |  |                             |          |   |      |   |         |  
|Investing activities                                                              |  |                             |          |   |      |   |         |  
|Purchases of property, plant and equipment                                        |  |                             | (13,411  | ) |      |   | (6,775  | )
|                                                                                  |  |                             |          |   |      |   |         |  
|Net cash used in investing activities                                             |  |                             | (13,411  | ) |      |   | (6,775  | )
|                                                                                  |  |                             |          |   |      |   |         |  
|Financing Activities                                                              |  |                             |          |   |      |   |         |  
|Receipts from exercise of stock options                                           |  |                             | 21       |   |      |   | 120     |  
|Excess tax benefits from employee equity awards                                   |  |                             |         |   |      |   | 6       |  
|Purchase of treasury stock                                                        |  |                             | (31,294  | ) |      |   | (83,837 | )
|                                                                                  |  |                             |          |   |      |   |         |  
|Net cash used in financing activities                                             |  |                             | (31,273  | ) |      |   | (83,711 | )
|                                                                                  |  |                             |          |   |      |   |         |  
|Increase/(Decrease) in cash and cash equivalents                                  |  |                             | (2,014   | ) |      |   | 16,950  |  
|Cash and cash equivalents at beginning of period                                  |  |                             | 262,644  |   |      |   | 292,489 |  
|                                                                                  |  |                             |          |   |      |   |         |  
|Cash and cash equivalents at end of period                                        |  | $                           | 260,630  |   |      | $ | 309,439 |  
|                                                                                  |  |                             |          |   |      |   |         |  
|Supplemental disclosure of cash flow information:                                 |  |                             |          |   |      |   |         |  
|Cash paid/(received) during the period for income taxes, net                      |  | $                           | (878     | ) |      | $ | 19,864  |  
|                                                                                  |  |                             |          |   |      |   |         |  
|Cash paid during the period for interest, net of amounts capitalized              |  | $                           | 218      |   |      | $ | 342     |  
|                                                                                  |  |                             |          |   |      |   |         |  

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 March 31, 2009 and for the three months ended March 31, 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.



5



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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
March 31, 2009 and December 31, 2008, respectively, to equity in the consolidated balance sheets. There is no minority interest income or minority interest expense associated with the noncontrolling interest recorded in the Companys
consolidated statement of income.

2. Film Costs

Film costs consist of the following (in thousands):



|                                   |  |               |         |                  |   |        
|---------------------------------- |  | ------------- | ------- | ---------------- | - | -------
|                                   |  | March 31,2009 |         | December 31,2008
|                                   |  | (unaudited)   |         |                 
|In release, net of amortization(1) |  | $             | 359,595 |                  | $ | 329,985
|In production                      |  |               | 184,056 |                  |   | 258,273
|In development                     |  |               | 66,243  |                  |   | 49,985 
|                                   |  |               |         |                  |   |        
|Total film costs                   |  | $             | 609,894 |                  | $ | 638,243
|                                   |  |               |         |                  |   |        



|(1) | Includes $22.1 million and $23.1 million of stage musical costs at March 31, 2009 and December 31, 2008,
respectively.
|--- | ----------------------------------------------------------------------------------------------------------------------

The Company anticipates that 50% and 94% of in release film costs as of March 31, 2009
will be amortized over the next 12 months and three years, respectively.

3. Accrued Liabilities

Accrued liabilities consist of the following (in thousands):



|                             |  |               |        |                  |   |        
|---------------------------- |  | ------------- | ------ | ---------------- | - | -------
|                             |  | March 31,2009 |        | December 31,2008
|                             |  | (unaudited)   |        |                 
|Employee compensation        |  | $             | 24,506 |                  | $ | 52,157 
|Participations and residuals |  |               | 43,175 |                  |   | 37,220 
|Deferred rent                |  |               | 5,321  |                  |   | 5,806  
|Other accrued liabilities    |  |               | 18,892 |                  |   | 19,975 
|                             |  |               |        |                  |   |        
|Total accrued liabilities    |  | $             | 91,894 |                  | $ | 115,158
|                             |  |               |        |                  |   |        

As of March 31, 2009, the Company estimates that over the next 12 months it will pay
approximately $27.9 million of its accrued participation and residual costs.

4. Deferred Revenue and Other Advances

The following is a summary of deferred revenue and other advances included in the consolidated balance sheets as of March 31, 2009 and
December 31, 2008 and the related amounts earned and recorded either as



6



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DREAMWORKS ANIMATION SKG, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS(Continued)



revenue in the consolidated statements of income or capitalized as an offset to film costs for the three-month periods ended March 31, 2009 and 2008 (in
thousands):



|                                           |  |               |        |                  |   |                            |  |   |       |  |   |      
|------------------------------------------ |  | ------------- | ------ | ---------------- | - | -------------------------- |  | - | ----- |  | - | -----
|                                           |  |               |        |                  |   | Amounts Earned            
|                                           |  | March 31,2009 |        | December 31,2008 |   | Three MonthsEndedMarch 31,
|                                           |  |               |        | 2009             |   | 2008                      
|                                           |  | (unaudited)   |        |                  |   | (unaudited)               
|Home Box Office Inc., Advance              |  | $             | 26,666 |                  | $ |                           |  | $ |      |  | $ |     
|Licensing Advances                         |  |               | 35,452 |                  |   | 32,549                     |  |   | 3,097 |  |   | 1,009
|Deferred Revenue                           |  |               | 948    |                  |   | 1,547                      |  |   | 1,767 |  |   | 309  
|Strategic Alliance/Development Advances(1) |  |               | 697    |                  |   | 2,007                      |  |   | 3,810 |  |   | 2,151
|Other Advances                             |  |               | 259    |                  |   | 2,754                      |  |   | 4,657 |  |   | 551  
|                                           |  |               |        |                  |   |                            |  |   |       |  |   |      
|Total deferred revenue and other advances  |  | $             | 64,022 |                  | $ | 38,857                     |  |   |       |  |   |      
|                                           |  |               |        |                  |   |                            |  |   |       |  |   |      



|(1) | During the three months ended March 31, 2009 and 2008, of the total amounts earned against the Strategic
Alliance/Development Advances, $2.5 million and $1.5 million, respectively, 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 March 31, 2009 and December 31, 2008 (in thousands):



|                              |  |                     |        |                  |   |                                 |  |              |                            |       |               |  |   |     |     |  |   |     |    
|----------------------------- |  | ------------------- | ------ | ---------------- | - | ------------------------------- |  | ------------ | -------------------------- | ----- | ------------- |  | - | --- | --- |  | - | --- | ---
|                              |  |                     |        |                  |   |                                 |  |              |                            |       | Interest Cost | 
|                              |  | Balance Outstanding |        | Maturity Date    |   | InterestRate as ofMarch 31,2009 |  |              | Three MonthsEndedMarch 31, |      
|                              |  | March 31,2009       |        | December 31,2008 |   |                                 |  | 2009         |                            |       | 2008          | 
|Animation Campus Financing(1) |  | $                   | 73,000 |                  | $ | 73,000                          |  | October 2009 |                            | 0.66  | %             |  | $ | 330 |     |  | $ | 881 |    
|Revolving Credit Facility     |  | $                   |       |                  | $ |                                |  | June 2013    |                            | 0.375 | %(2)          |  | $ | 120 | (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 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 March 31, 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 March 31, 2009 and 2008 totaled
$0.3 million and $0.9 million, respectively.



7



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##### Table of Contents

DREAMWORKS ANIMATION SKG, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS(Continued)



6. Income Taxes

The provision for income taxes for the three months ended March 31, 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 EndedMarch 31, |   
|                                                                                 |  | 2009                        |    |  | 2008  |   
|                                                                                 |  | (unaudited)                 |   
|Provision for income taxes (excluding effects of Stockholders Tax Agreement)(1) |  |                             |    |  |       |   
|U.S. Federal statutory rate                                                      |  | 35.0                        | %  |  | 35.0  | % 
|U.S. state taxes, net of Federal benefit                                         |  | 1.7                         |    |  | 1.8   |   
|Revaluation of deferred tax assets, net                                          |  | (7.4                        | )  |  | (6.0  | ) 
|Other                                                                            |  | (1.7                        | )  |  |      |   
|                                                                                 |  |                             |    |  |       |   
|Total provision excluding effect of Stockholders Tax Agreement(1)               |  | 27.6                        | %  |  | 30.8  | % 
|                                                                                 |  |                             |    |  |       |   
|Effects of Stockholders Tax Agreement(1)                                        |  |                             |    |  |       |   
|U.S. state taxes, net of Federal benefit                                         |  | (1.4                        | )  |  | (1.2  | ) 
|Revaluation of deferred tax assets, net                                          |  | (17.3                       | )  |  | (24.3 | ) 
|Other                                                                            |  | 0.1                         |    |  | 0.5   |   
|                                                                                 |  |                             |    |  |       |   
|Total effect of Stockholders Tax Agreement(1)                                   |  | (18.6                       | )% |  | (25.0 | )%
|                                                                                 |  |                             |    |  |       |   
|Total net provision for income taxes                                             |  | 9.0                         | %  |  | 5.8   | % 
|                                                                                 |  |                             |    |  |       |   



|(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 and 2005 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. Subsequent years remain open to audit by the IRS, whereas all tax years since the Companys separation
from Old DreamWorks Studios remain open to audit by all state and local taxing jurisdictions.

7. Stockholders Equity

Class A Common Stock

Stock Repurchase
Program.In July 2008, the Companys Board of Directors approved a stock repurchase program pursuant to which the Company may repurchase up to an aggregate of $150 million of its outstanding stock. For the period January 1, 2009
through April 21, 2009, the Company repurchased approximately 2.3 million shares of its outstanding Class A common stock for $45.7 million pursuant to this program. On April 22, 2009, the Companys Board of Directors
terminated the July 2008 stock repurchase program and authorized a new stock repurchase program pursuant to which the Company may repurchase up to an aggregate of $150 million of its outstanding stock.

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



8



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##### Table of Contents

DREAMWORKS ANIMATION SKG, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS(Continued)



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-month periods ended March 31, 2009 and 2008, respectively, was as follows (in thousands):



|                                    |  |                             |        |   |      |   |        |  
|----------------------------------- |  | --------------------------- | ------ | - | ---- | - | ------ | -
|                                    |  | Three Months EndedMarch 31, |       
|                                    |  | 2009                        |        |   | 2008 |  
|                                    |  | (unaudited)                 |       
|Total equity-based compensation     |  | $                           | 5,854  |   |      | $ | 9,695  |  
|Tax impact(1)                       |  |                             | (1,616 | ) |      |   | (2,986 | )
|                                    |  |                             |        |   |      |   |        |  
|Reduction in net income, net of tax |  | $                           | 4,238  |   |      | $ | 6,709  |  
|                                    |  |                             |        |   |      |   |        |  



|(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 $2.1 million
and $1.5 million for the three-month periods ended March 31, 2009 and 2008, respectively.

The following tables set forth the number
and weighted average fair value of equity awards granted during the three-month periods ended March 31, 2009 and 2008:



|                                            |  |                             |  |                           |      
|------------------------------------------- |  | --------------------------- |  | ------------------------- | -----
|                                            |  | Three Months EndedMarch 31,
|                                            |  | NumberGranted               |  | WeightedAverage FairValue
|                                            |  | (unaudited)                
|                                            |  | (in thousands)              |  |                          
|2009                                        |  |                             |  |                           |      
|Stock appreciation rights                   |  | 15                          |  | $                         | 8.41 
|Restricted stock and restricted stock units |  | 20                          |  | $                         | 19.29
|2008                                        |  |                             |  |                           |      
|Stock appreciation rights                   |  | 44                          |  | $                         | 9.62 
|Restricted stock and restricted stock units |  | 35                          |  | $                         | 25.91

As of March 31, 2009, the total compensation cost related to unvested equity awards granted
to but not yet recognized was approximately $74.9 million. This cost will be amortized on a straight-line basis over a weighted average life of 1.85 years.

9. Significant Customer and Segment Information

Significant Customer.Paramount represented 93.6% and 80.0% of
total revenue for the three-month periods ended March 31, 2009 and 2008, respectively.



9



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##### Table of Contents

DREAMWORKS ANIMATION SKG, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS(Continued)



Revenue by Film and Other.

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



|                            |  |                             |         |      |   |        
|--------------------------- |  | --------------------------- | ------- | ---- | - | -------
|                            |  | Three Months EndedMarch 31,
|                            |  | 2009                        |         | 2008
|                            |  | (unaudited)                
|Monsters vs. Aliens         |  | $                           | 10,547  |      | $ |       
|Kung Fu Panda               |  |                             | 34,082  |      |   |       
|Madagascar: Escape 2 Africa |  |                             | 147,527 |      |   |       
|Shrek the Third             |  |                             | 5,323   |      |   | 48,267 
|Bee Movie                   |  |                             | 21,207  |      |   | 48,922 
|Over the Hedge              |  |                             | 8,777   |      |   | 4,112  
|Flushed Away                |  |                             | 12,178  |      |   | 12,636 
|Film Library / Other(1)     |  |                             | 23,883  |      |   | 43,235 
|                            |  |                             |         |      |   |        
|                            |  | $                           | 263,524 |      | $ | 157,172
|                            |  |                             |         |      |   |        



|(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, MadagascarandWallace & Gromit: The Curse of the Were-Rabbit. In addition, includes revenue from stage musicals and
television specials/series.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

10. Commitments and Contingencies

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



10



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##### Table of Contents

DREAMWORKS ANIMATION SKG, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS(Continued)



11. Net Income Per Share

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



|                                                                       |  |                             |        |   |      |   |        |  
|---------------------------------------------------------------------- |  | --------------------------- | ------ | - | ---- | - | ------ | -
|                                                                       |  | Three Months EndedMarch 31, |       
|                                                                       |  | 2009                        |        |   | 2008 |  
|                                                                       |  | (unaudited)                 |       
|Numerator:                                                             |  |                             |        |   |      |   |        |  
|Net income                                                             |  | $                           | 62,310 |   |      | $ | 26,099 |  
|Denominator:                                                           |  |                             |        |   |      |   |        |  
|Weighted average common shares and denominator for basic calculation:  |  |                             |        |   |      |   |        |  
|Weighted average common shares outstanding                             |  |                             | 88,340 |   |      |   | 94,310 |  
|Less: Unvested restricted stock                                        |  |                             | (875   | ) |      |   | (1,996 | )
|                                                                       |  |                             |        |   |      |   |        |  
|Denominator for basic calculation                                      |  |                             | 87,465 |   |      |   | 92,314 |  
|                                                                       |  |                             |        |   |      |   |        |  
|Weighted average effects of dilutive equity-based compensation awards: |  |                             |        |   |      |   |        |  
|Employee stock options and stock appreciation rights                   |  |                             | 53     |   |      |   | 102    |  
|Restricted stock awards                                                |  |                             | 584    |   |      |   |       |  
|                                                                       |  |                             |        |   |      |   |        |  
|Denominator for diluted calculation                                    |  |                             | 88,102 |   |      |   | 92,416 |  
|                                                                       |  |                             |        |   |      |   |        |  
|Net income per sharebasic                                             |  | $                           | 0.71   |   |      | $ | 0.28   |  
|Net income per sharediluted                                           |  | $                           | 0.71   |   |      | $ | 0.28   |  

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 MonthsEndedMarch 31,
|                                                                       |  | 2009                       |  | 2008 
|                                                                       |  | (unaudited)               
|Options to purchase shares of common stock and restricted stock awards |  | 1,887                      |  | 2,837
|Stock appreciations rights                                             |  | 3,613                      |  | 2,444
|Equity awards subject to performance conditions                        |  | 585                        |  | 1,849
|                                                                       |  |                            |  |      
|Total                                                                  |  | 6,085                      |  | 7,130
|                                                                       |  |                            |  |      



11



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##### Table of Contents

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

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

Overview

Our Business and Distribution and Servicing Arrangements

Our business is primarily devoted to
developing and producing computer-generated, or CG, animated feature films. Our films are distributed in theatrical, home entertainment and television markets on a worldwide basis by Paramount Pictures Corporation, a subsidiary of Viacom Inc., and
its affiliates (collectively, Paramount) pursuant to an exclusive distribution agreement and a fulfillment services agreement (collectively, the Paramount Agreements). We generally retain all other rights to
exploit our films, including commercial tie-in and promotional rights with respect to each film, as well as merchandising, interactive, literary publishing, music publishing and soundtrack rights. Please see Part I, Item 1
BusinessDistribution and Servicing Arrangements in our 2008 Form 10-K for a discussion of our distribution and servicing arrangements with Paramount. In addition, we continue to expand the exploitation of our film properties
through the development of non-theatrical special content such as 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 months ended March 31, 2009. International home entertainment results continue to be reported on a 30-day lag.



12



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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.



13



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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 Ended March 31,                         |      
|                                                                 |  | 2009                                                 |       |   | 2008 |   |       | $ Change |  |   | % Change |  
|                                                                 |  | (unaudited)                                          |      
|                                                                 |  | (in millions, except percentages and per share data) |      
|Revenues                                                         |  | $                                                    | 263.5 |   |      | $ | 157.2 |          |  | $ | 106.3    |   |  | 67.6   | % 
|Costs of revenues                                                |  |                                                      | 156.4 |   |      |   | 96.5  |          |  |   | (59.9    | ) |  | (62.1  | )%
|Product development                                              |  |                                                      | 2.4   |   |      |   |      |          |  |   | (2.4     | ) |  | NM     |   
|Selling, general and administrative expenses                     |  |                                                      | 20.7  |   |      |   | 26.7  |          |  |   | 6.0      |   |  | 22.5   | % 
|                                                                 |  |                                                      |       |   |      |   |       |          |  |   |          |   |  |        |   
|Operating income                                                 |  |                                                      | 84.0  |   |      |   | 34.0  |          |  |   | 50.0     |   |  | 147.1  | % 
|Interest income, net                                             |  |                                                      | 0.5   |   |      |   | 3.0   |          |  |   | (2.5     | ) |  | (83.3  | )%
|Other income, net                                                |  |                                                      | 1.5   |   |      |   | 0.8   |          |  |   | 0.7      |   |  | 87.5   | % 
|Increase in income tax benefit payable to former stockholder     |  |                                                      | (16.0 | ) |      |   | (9.4  | )        |  |   | (6.6     | ) |  | (70.2  | )%
|                                                                 |  |                                                      |       |   |      |   |       |          |  |   |          |   |  |        |   
|Income before income taxes                                       |  |                                                      | 70.0  |   |      |   | 28.3  |          |  |   | 41.7     |   |  | 147.3  | % 
|Provision for income taxes                                       |  |                                                      | 7.7   |   |      |   | 2.2   |          |  |   | (5.5     | ) |  | (250.0 | )%
|                                                                 |  |                                                      |       |   |      |   |       |          |  |   |          |   |  |        |   
|Net income                                                       |  | $                                                    | 62.3  |   |      | $ | 26.1  |          |  | $ | 36.2     |   |  | 138.7  | % 
|                                                                 |  |                                                      |       |   |      |   |       |          |  |   |          |   |  |        |   
|Diluted net income per share                                     |  | $                                                    | 0.71  |   |      | $ | 0.28  |          |  | $ | 0.43     |   |  | 153.6  | % 
|                                                                 |  |                                                      |       |   |      |   |       |          |  |   |          |   |  |        |   
|Diluted shares used in computing diluted net income per share(1) |  |                                                      | 88.1  |   |      |   | 92.4  |          |  |   |          |   |  | 4.7    | % 
|                                                                 |  |                                                      |       |   |      |   |       |          |  |   |          |   |  |        |   



NM: Not Meaningful

|(1) | During the three-month period ended March 31, 2009 and the year ended December 31, 2008, we repurchased a
total of 1.3 million and 6.8 million shares of our Class A common stock, respectively.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



14



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##### Table of Contents

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, Preceding year theatrical releases consists of revenues attributable to films
released during the second preceding 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.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Three Months Ended March 31, 2009 Compared to Three Months Ended March 31, 2008

Revenues. For the three months ended March 31, 2009, our revenue was $263.5 million, an increase of $106.3 million, or 67.6%, as compared
to $157.2 million for the three months ended March 31, 2008. As illustrated in the revenue chart above in Overview of Financial Results, the increase in revenue in the first three months of 2009 as compared to the first three
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 in the first quarter of 2008. Revenues earned by the
films comprising the categories Preceding year theatrical releases and All Other for the quarter ended March 31, 2009 remained relatively unchanged from those of the first quarter of 2008. Additionally, our current year
theatrical release, Monsters vs. Aliens, which was released on March 27, 2009, contributed $10.5 million of ancillary revenue. There was no current year release in the first quarter of 2008.

Madagascar: Escape 2 Africa,our 2008 fourth quarter release, contributed the largest amount of revenue, $147.5 million, or 56% of the total
revenues, during the quarter ended March 31, 2009, earned in the worldwide theatrical and domestic home entertainment markets. Kung Fu Pandareported an additional $34.1 million earned in the worldwide home entertainment and television
markets and our Preceding year theatrical releases contributed $26.5 million of revenue earned primarily in the television and ancillary markets. Additionally, Monsters vs. Aliens, our most recent theatrical release, contributed
$10.5 million of ancillary revenue, including merchandising and licensing revenue. Our distributor reported no revenue for Monsters vs. Aliensduring its month of initial release as our distributor is entitled to recover first 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 $35.1 million earned across several markets and Shrek the Musical, which debuted on
Broadway in the fourth quarter of 2008, contributed $9.8 million of revenues.



15



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##### Table of Contents

Revenue for the quarter ended March 31, 2008, was primarily driven by the combination of Shrek
the Third, which contributed $48.3 million of revenue primarily earned in the international home entertainment market, and Bee Movie, our 2007 fourth quarter release, generated revenues totaling $48.9 million in the worldwide theatrical
and domestic home entertainment markets.Over the Hedgecontributed an additional $4.1 million earned primarily in the home entertainment market and Flushed Awayearned an additional $12.6 million of revenue earned across a variety of
markets. Our other properties, including our library of titles, contributed revenues totaling $43.3 million earned across a variety of worldwide markets.

Costs of Revenues. Costs of revenues for the three months ended March 31, 2009 totaled $156.4 million, an increase of $59.9 million, compared to $96.5 million for the three months ended March 31,
2008.

Cost of revenues, the primary component of which is film amortization costs, as a percentage of film revenue was 59.4% for the three
months ended March 31, 2009 and was slightly lower than that of 61.4% for the three months ended March 31, 2008. The decline in film amortization as a percentage of revenues was primarily due to the overall stronger performance of
Madagascar: Escape 2 Africaas compared to Bee Movie, and, consequently, it has a higher projection of its estimated total revenue to be received from all sources and, therefore, a lower rate of amortization. Film amortization rates
for our other films were relatively consistent. In addition, cost of revenues for the first quarter of 2009 was impacted by the operating and marketing costs associated with the ongoing production of Shrek the Musical on Broadway, resulting
in an immaterial overall gross loss in the first quarter of 2009 for the production.

Product development. Product development
costs totaled $2.4 million for the three-month period ended March 31, 2009 and represent development costs incurred in connection with an online virtual world and technological development costs associated with recent strategic initiatives.
There were no product development costs during the quarter ended March 31, 2008.

Selling, General and Administrative
Expenses. Total selling, general and administrative expenses decreased $6.0 million to $20.7 million (including $5.9 million of stock compensation expense) for the quarter ended March 31, 2009 from $26.7 million (including $9.7 million
of stock compensation expense) for the quarter ended March 31, 2008. This 22.5% aggregate decrease spans across several selling, general and administrative categories, including a $3.8 million decrease in stock compensation (primarily due to
the absence of expense associated with certain senior executive performance awards for which the related performance criteria had been satisfied as of December 31, 2008), approximately $1.0 million of lower corporate travel and lower costs in
various other categories (including professional fees) none of which were individually material.

Operating Income. Operating
income for the three months ended March 31, 2009 was $84.0 million compared to $34.0 million for the comparable period of 2008. The increase of $50.0 million in operating income for the three months ended March 31, 2009 was largely because
of the stronger performance in the first quarter of 2009 of Madagascar: Escape 2 Africaas compared to that of Bee Movie during the first quarter of 2008 and to lower selling, general and administrative expenses period-over-period.

Interest Income, Net. For the three months ended March 31, 2009, total interest income was $0.5 million, a decrease of
$2.5 million or 83.3% from $3.0 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 quarter of 2009 as compared to the first quarter of 2008.

Interest expense capitalized to production film costs was $0.3 million and $0.9 million for the three months ended March 31, 2009 and 2008,
respectively. The $0.6 million decrease between the periods was primarily due to the decrease in amount of overall interest expense during the first quarter of 2009.

Other Income, Net. For the three months ended March 31, 2009 and 2008, total other income was $1.5 million and $0.8 million respectively. Other income in both years consisted entirely of income
recognized in connection with preferred vendor arrangements.



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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 affiliates 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 affiliates 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 March 31, 2009 and 2008, we recorded $18.8 million and $11.0 million, respectively, in net tax benefits associated with the
Tax Basis Increase as a reduction in the provision for income taxes and recorded an expense of $16.0 million and $9.4 million, respectively, representing 85% of these recognized benefits to increase income tax benefit payable to former stockholder.

Provision for Income Taxes. For the three months ended March 31, 2009 and 2008, we recorded a provision for income taxes
of $7.7 million and $2.2 million, respectively, or an effective tax rate of 9.0% and 5.8%, respectively. Our 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. 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 percentages remain relatively consistent between the three months ended March 31, 2009 and March 31, 2008, at 27.6% and 30.8%, respectively.

Net Income. Net income for the three months ended March 31, 2009 was $62.3 million, or $0.71 per diluted share, as compared to a net
income of $26.1 million, or $0.28 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 March 31, 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 three months ended March 31, 2009 generated adequate cash to meet our
operating needs. For the next 12 months, we expect that cash on hand and cash from operations will be sufficient to satisfy our anticipated cash needs for working capital, stock repurchases and capital expenditures. In the event that these cash
flows are insufficient, we expect to be able to draw funds from our revolving credit facility to meet these needs. Additionally, over the next several quarters, we expect to spend approximately an additional $46.5 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



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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 March 31, 2009, we had cash and cash equivalents totaling $260.6 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 March 31, 2009
decreased by $2.0 million from that of $262.6 million at December 31, 2008. Components of this change in cash for the three months ended March 31, 2009, as well as for the three months ended March 31, 2008, are provided below in more
detail.

Operating Activities

Net cash
provided by operating activities for the three months ended March 31, 2009 and 2008 is a follows (in thousands):



|                                          |  |      |        |      |   |        
|----------------------------------------- |  | ---- | ------ | ---- | - | -------
|                                          |  | 2009 |        | 2008
|Net cash provided by operating activities |  | $    | 42,670 |      | $ | 107,436

Net cash provided by operating activities for the first three months of 2009 was primarily
attributable to the collection of revenue from Madagascar: Escape 2 Africas worldwide theatrical release, Kung Fu Pandas worldwide home entertainment release and, to a lesser extent, the collection of worldwide television
and home entertainment revenues for our other films, including Shrek the Third, Bee Movie, Madagascarand Over the Hedge. [More to come on change in PPC receivable between periods] The operating cash provided by the collection of
revenues during the first quarter of 2009 was offset by $30.0 million paid 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 three 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 and, to a lesser extent, the collection of worldwide television and home entertainment revenues for our other films, including Over the Hedge, Madagascar, Shrek 2andShrek. The
operating cash provided by the collection of revenues during the first quarter of 2008 was offset by $33.7 million paid to an affiliate of a former significant stockholder related to tax benefits realized in 2007 from the Tax Basis Increase, $19.6
million paid for estimated federal and state income taxes and $44.4 million paid related to annual incentive compensation payments. The operating cash provided by revenues was also partially offset by film production spending and participation and
residual payments.

Investing Activities

Net cash used in investing activities for the three months ended March 31, 2009 and 2008 is a follows (in thousands):



|                                      |  |      |         |   |      |   |        |  
|------------------------------------- |  | ---- | ------- | - | ---- | - | ------ | -
|                                      |  | 2009 |         |   | 2008 |  
|Net cash used in investing activities |  | $    | (13,411 | ) |      | $ | (6,775 | )

Net cash used in investing activities for the three months ended March 31, 2009 and 2008 was
primarily related to the investment in property, plant and equipment.



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Financing Activities

Net cash used in financing activities for the three months ended March 31, 2008 and 2007 is as follows (in thousands):



|                                      |  |      |         |   |      |   |         |  
|------------------------------------- |  | ---- | ------- | - | ---- | - | ------- | -
|                                      |  | 2009 |         |   | 2008 |  
|Net cash used in financing activities |  | $    | (31,273 | ) |      | $ | (83,711 | )

Net cash used in financing activities for both three-month periods ended March 31, 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 March 31, 2009 we had non-cancelable talent commitments totaling approximately $22.3 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.

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



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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.

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.



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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 March 31, 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 $74.9 million. This cost will be amortized on a straight-line basis over a weighted average life of 1.85 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 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.



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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.

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.



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|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.



|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 March 31, 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)
|January 1January 31, 2009   |  |                                  |  | $                          |      |                                                                               |          |                                                                                                         | $ | 53,400,000
|February 1February 28, 2009 |  |                                  |  | $                          |      |                                                                               |          |                                                                                                         | $ | 53,400,000
|March 1March 31, 2009       |  | 1,328,770                         |  | $                          | 18.78 |                                                                               | 1,328,770 |                                                                                                         | $ | 28,565,000
|                             |  |                                   |  |                            |       |                                                                               |           |                                                                                                         |   |           
|Total                        |  | 1,328,770                         |  | $                          | 18.78 |                                                                               | 1,328,770 |                                                                                                         |   |           



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

|(2) | 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.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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

Amended and Restated
Aircraft Sublease Agreement

On April 22, 2009, DreamWorks Animation SKG, Inc. (the Company) entered into an Amended and
Restated Non-exclusive Aircraft Sublease Agreement (the Sublease) with an entity controlled by Jeffrey Katzenberg, the Companys Chief Executive Officer, for use of an aircraft that such entity leases from the aircraft owner, a
company jointly owned indirectly by Mr. Katzenberg and Steven Spielberg (who beneficially owns more than 5% of the Companys Class A Common Stock). Under this Sublease, the Company pays all aircraft operating expenses on Mr. Katzenbergs
Company-related flights. In addition, in the event that Mr. Katzenberg uses this aircraft for Company-related travel more than 33 hours in any calendar year, the Company pays the subleasing entity a specified hourly rate (depending on the
number of passengers traveling on Company business), less the fuel expense and flight attendant costs for those flight hours. The Sublease amends and restates an earlier Non-exclusive Aircraft Sublease Agreement previously executed by the Company.

The foregoing description of the Sublease is qualified in its entirety by reference to the Sublease, which is attached as Exhibit 10.3 to
this Quarterly Report on Form 10-Q and is incorporated herein by reference.

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



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



|             |  |                                                                                                                                                                                                                                                                                                                              
|------------ |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit 10.1 |  | Employment Agreement dated as of April 22, 2009 by and between the Company and Jeffrey Katzenberg (including forms of Performance Compensation Award Agreement and Stock Appreciation Right
Award Agreement) (incorporated by reference to Exhibit 99.1 to the Companys Current Report on Form 8-K filed on April 28, 2009).
|             | 
|Exhibit 10.2 |  | Employment Agreement dated as of April 22, 2009 by and between the Company and Dan Satterthwaite.                                                                                                                                                                                                                            
|             | 
|Exhibit 10.3 |  | Amended and Restated Non-exclusive Aircraft Sublease Agreement dated as of April 22, 2009 by and between the Company and M&JK Dream, LLC.                                                                                                                                                                                    
|             | 
|Exhibit 10.4 |  | Amended and Restated 2008 Omnibus Incentive Compensation Plan.                                                                                                                                                                                                                                                               
|             | 
|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: April 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 10.1  |  | Employment Agreement dated as of April 22, 2009 by and between the Company and Jeffrey Katzenberg (including forms of Performance Compensation Award Agreement and Stock Appreciation Right
Award Agreement) (incorporated by reference to Exhibit 99.1 to the Companys Current Report on Form 8-K filed on April 28, 2009).
|              | 
|Exhibit 10.2  |  | Employment Agreement dated as of April 22, 2009 by and between the Company and Dan Satterthwaite.                                                                                                                                                                                                                            
|              | 
|Exhibit 10.3  |  | Amended and Restated Non-exclusive Aircraft Sublease Agreement dated as of April 22, 2009 by and between the Company and M&JK Dream, LLC.                                                                                                                                                                                    
|              | 
|Exhibit 10.4  |  | Amended and Restated 2008 Omnibus Incentive Compensation Plan.                                                                                                                                                                                                                                                               
|              | 
|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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