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Over the Hedge Gives DreamWorks Animation Higher First-Quarter Profit

DreamWorks Animation reported an unexpectedly higher first-quarter profit due to higher-than-expected DVD sales for OVER THE HEDGE and other library titles. The company reported total revenue of $93.7 million and net income of $15.4 million, or 15 cents per share on May 1, 2007, compared to revenue of $60.1 million and net income of $12.3 million or 12 cents per share, for the same period in 2006, which is an increase of nearly 55%.

"In what was a relatively quiet quarter, our library of titles continued to perform well especially in the home video market, with OVER THE HEDGE performing even better than we had expected," said Jeffrey Katzenberg, DreamWorks Animation ceo. "This is an exciting time for all of us at DreamWorks Animation. With two strong films set to be released in 2007, we are all hopeful that this is the start of a great year for our company and its shareholders."

OVER THE HEDGE contributed approximately $33.1 million of revenue driven primarily by home video with an estimated 12.6 million units shipped. SHARK TALE contributed approximately $18.1 million, driven primarily by domestic network television and SHREK 2 contributed approximately $17.5 million primarily from international network television.

WALLACE & GROMIT: THE CURSE OF THE WERE-RABBIT, contributed approximately $9.4 million of revenue, driven by home video and international pay television. WALLACE & GROMIT: THE CURSE OF THE WERE-RABBIT reached DreamWorks' estimated 5.8 million units shipped net of actual returns and estimated future returns. MADAGASCAR contributed approximately $6.4 million of revenue driven primarily by home video catalog sales.

FLUSHED AWAY has reached approximately $176 million in worldwide box office and has not recouped its costs. The home video release of the title has reached an estimated 3.2 million units shipped.

DreamWorks has changed from capitalizing operating costs to recording them as an expense in the period in which they incurred. For the quarter ended March 31, 2007, this change resulted in $4.2 million of costs recorded as operating expense instead of being capitalized as film costs. DreamWorks expects that the capitalized cost of its films will decrease by approximately $10 million per film, with the full impact taking effect on films released in 2009. The change in allocation does not increase the company's overall cost structure.

DreamWorks has high expectations for how SHREK THE THIRD, will perform when it is released domestically on May 18.

"From a creative standpoint, SHREK THE THIRD delivers as the next chapter of one of the most successful movie franchises of all times," said Katzenberg. "With several other blockbusters opening within weeks of each other, this May has the potential to be one of the biggest of all time and we are looking forward to seeing how it all plays out."

DreamWorks does not anticipate generating significant revenue in the fourth quarter from its fall release, BEE MOVIE, to open domestically in theaters on Nov. 2. As is typical in the quarter of a film's theatrical release, the distributor will likely not have recouped its upfront marketing and distribution costs.

DreamWorks shares closed up two percent, or 61 cents per share, at $29.89 on NASDAQ on May 1.