DreamWorks Animation reports first quarter results

Mumbai: For the quarter ended March 31, 2008, DreamWorks Animation SKG reported total revenue of $156.6 million and net income of $26.1 million, or $0.28 per share on a fully diluted basis. This compares to revenue of $93.7 million and net income of $15.4 million, or $0.15 per share on a fully diluted basis, for the same period in 2007.

"After a solid quarter for many DreamWorks Animation titles, we are now looking forward to our next theatrical release, Kung Fu Panda, which opens domestically on 6 June," stated DreamWorks Animation CEO Jeffrey Katzenberg. "This marks the start of an important 12-month period for the Company, in which we will release three feature films, including our first in 3D, and launch our first live entertainment show, Shrek the Musical, on Broadway this December."

For the quarter, the company’s latest release Bee Movie contributed $48.9 million of revenue, driven by its release into the home entertainment market and additional international box office receipts. Through the first quarter, Bee Movie had reached approximately $287 million in worldwide box office and an estimated 4.8 million home entertainment units shipped, net of actual returns and estimated future returns.

Shrek the Third, the company’s 2007 summer blockbuster, contributed approximately $48.3 million of revenue during the first quarter of 2008, primarily from international home entertainment. Through the end of the first quarter, Shrek the Third had reached an estimated 19.8 million units shipped worldwide, net of actual returns and estimated future returns.

Additional revenue for the quarter was driven by the company’s 2005 hit, Madagascar, which contributed approximately $15.9 million, primarily from international free television and continued catalogue home video performance.

Flushed Away, the company’s 2006 fall release, delivered $12.6 million of revenue driven by international pay television and catalogue home video performance. Through the first quarter, Flushed Away had reached an estimated 7.3 million units shipped worldwide, net of actual returns and estimated future returns.

Wallace & Gromit: The Curse of the Were-Rabbit, contributed approximately $8.1 million of revenue primarily from domestic network television. Over the Hedge delivered $4.1 million of revenue, primarily from continued catalogue home entertainment performance.  

Library and other titles contributed $18.7 million of revenue to the company in the first quarter.

Cost of revenue for the quarter equaled $95.8 million while selling, general and administrative expenses (SG&A) totaled $26.9 million, including $9.7 million of stock compensation expense.

Results for the quarter also included a tax benefit of approximately $11.0 million related to the company’s tax sharing agreement with a stockholder, which resulted in a lower effective tax rate.

This benefit was partially offset by a $9.4 million increase in cost for the income tax benefit payable to the stockholder (as shown on the consolidated statement of income before the line item, "income before income taxes"), resulting in an overall net increase to net income of $1.6 million, or an estimated $0.02 per share on a fully diluted basis.

Looking ahead to the remainder of the year, the company reiterated its expectation that results will primarily be driven by the performance of Kung Fu Panda, which opens domestically on 6 June, 2008. Because its distributor must first recoup upfront marketing and distribution costs, the company expects the majority of the film’s revenue to be recognized in the second half of the year.

The company’s fall release, Madagascar: Escape 2 Africa, is scheduled to open domestically on 7 November, 2008. As is typical in the quarter of a film’s theatrical release, the company does not anticipate generating significant revenue in the fourth quarter from the title, as its distributor likely will not have recouped its upfront marketing and distribution costs.

In addition to results for the quarter, the company provided an update to its share repurchase program.

Year to date, the company purchased approximately $88.0 million, or 3.7 million shares, at an average per-share price of approximately $24.00 and has approximately $62.0 million remaining under its current program.