DreamWorks Animation sees profit soar 69% on DVD sales

DreamWorks Animation SKG Inc. said Tuesday that its first-quarter profit surged 69% on solid DVD sales for “Bee Movie,” “Shrek the Third” and its earlier films.

The Glendale company, best known for the “Shrek” franchise, reported net income of $26.1 million, or 28 cents a share, versus $15.4 million, or 15 cents, a year earlier. Analysts had predicted profit of 22 cents a share on average, according to Thomson Financial.

DreamWorks shares slid 49 cents to $25.74 before the earnings release, then rose nearly 5% to $27 in after-hours trading.

Revenue rose 67% to $156.6 million, thanks partly to television and DVD revenue from 2005’s “Madagascar” and “Wallace & Gromit: The Curse of the Were-Rabbit,” as well as 2006’s “Flushed Away.”

“They’ve been making [computer generated] animated movies to the point where they have a meaningful catalog, so when people go to Wal-Mart for ‘Bee Movie’ or ‘Shrek the Third’ they’ve got other choices as well,” said Evan Wilson, an analyst at Pacific Crest Securities.

“It adds an element of predictability to an otherwise hit-driven business.”

“Bee Movie,” released on DVD on March 11, sold 4.8 million units through the end of the month. “Shrek the Third,” which came out on home video in November, has sold a total of 19.8 million copies. Both have performed in line with Wall Street expectations, Wilson said, despite a flat DVD market.

Chief Executive Jeffrey Katzenberg, in a conference call with analysts, sounded bullish about the company’s 2008 theatrical slate, starting with the June 6 release of “Kung Fu Panda.”

“Creatively we’re pleased with the film,” Katzenberg said of “Panda,” an action-comedy with a voice cast including Jack Black, Jackie Chan and Angelina Jolie. Still, he cautioned that this summer’s theatrical schedule was packed with competition.

DreamWorks believes the movie, well-received at an exhibitor screening last month at the ShoWest convention in Las Vegas, could yield at least one sequel. And the company’s subsequent release, Nov. 7’s “Madagascar: Escape 2 Africa,” is a follow-up to its most successful movie outside of the “Shrek” series.

But Katzenberg expressed frustration with the pace of 3-D theater conversions. DreamWorks plans to make all of its films in 3-D starting with March’s “Monsters vs. Aliens,” but he sounded concerned about the number of theaters that would be able to install the necessary digital equipment.

About 1,000 screens in the U.S. are equipped for 3-D, but negotiations between studios and theater chains over cost-sharing deals that could add several thousand more locations have gone slowly.

“I’m not very happy with how everybody has handled themselves in the last 30 days,” said Katzenberg, one of the industry’s cheerleaders for 3-D projection.

“The rate of how this is getting done has been -- ‘bureaucratic’ would be a nice way to put it.”

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