DreamWorks Animation SKG Inc. posted a sharply lower quarterly net profit Tuesday due to lack of a major film release, but results topped Wall Street expectations on sales of “Madagascar” DVDs and international pay-television revenue from “Shark Tale.”
Shares rose about 3 percent in thin after-hours trade.
DreamWorks posted first-quarter net income of $12.3 million, or 12 cents per share, versus $45.7 million, or 44 cents per share, in the year-ago quarter, when it benefited from sales of its “Shrek 2” DVD.
Revenue was $60.1 million, compared with $166.9 million a year ago.
Analysts, on average, were expecting net earnings of 1 cent per share and revenue of $52.34 million, according to Reuters Estimates.
Pali Research analyst Rich Greenfield said DreamWorks was in the midst of a rocky fiscal year after poor performance by its late 2005 release “Wallace & Gromit: Curse of the Were-Rabbit.”
He said attention would now focus on the upcoming releases ”Over the Hedge” and “Flushed Away”.
“What matters is how these two 2006 films are going to perform relative to expectations and whether there is going to be a secondary offering after June 1 triggered by Paul Allen,” Greenfield said.
Allen, who was one of DreamWorks’ founding investors, has the right to trigger a secondary offering of shares on June 1.
Until May 31, he must act in concert with DreamWorks Chief Executive Jeffrey Katzenberg and co-founder David Geffen.
DreamWorks President Lew Coleman had no comment on whether a secondary offering was being contemplated.
'Over the hedge’
DreamWorks said 17.5 million DVDs of “Madagascar” were shipped in the first quarter, contributing $30.7 million to revenue during that period.
International pay-television and video sales from “Shark Tale” added $13.1 million in revenue, said Chief Financial Officer Kris Leslie. The company had expected that revenue later in the year.
DreamWorks’ next release, “Over the Hedge,” due out May 19, will drive revenue for the fiscal year, but will not contribute to the current quarter because marketing and distribution costs must first be paid to the company’s new distributor, Paramount Pictures, Leslie told a conference call for investors.
“Over the Hedge,” the story of a group of woodland animals who wake from their winter hibernation to discover that suburbia has encroached on their world, is the company’s next big release, and its only new title that could generate profits in the current fiscal year.
“Our 2006 performance depends primarily on the performance of ’Over the Hedge’,” Coleman said. “It’s a film we are all very proud of ... however it is a very competitive time to be releasing a film.”
It debuts in a summer schedule crowded with animated and family films and, in Europe, during the monthlong World Cup soccer tournament.
The company’s next film, “Flushed Away,” is due out Nov. 3, but DreamWorks would not see any profit from it until 2007 as it must recoup marketing and distribution costs this year.
