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Earnings dive for first quarter

May 03, 2006|By Fred Ortega

NORTHWEST GLENDALE ? DreamWorks Animation SKG Inc. saw its earnings fall by 73% in the first quarter of the year, despite the release of "Wallace and Gromit: The Curse of the Were-Rabbit," officials said Tuesday.

Net income fell to $12.3 million from $45.7 million a year earlier for the Glendale-based animation company. Sales fell 64%, to $60.1 million.

Both the "Wallace and Gromit" film and "Shrek 2," the sequel to DreamWorks' wildly successful hit about a lovable green ogre, have yet to recover their distribution costs and provided no revenue for DreamWorks in the first quarter, Chief Financial Officer Kristina Leslie said in a conference call Tuesday.

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"'Wallace and Gromit' was released in February to home video, and through the end of the first quarter had sold 3.3 million units worldwide," Leslie said.

"We do not expect this title to make any significant contributions to the company's earnings moving forward."

By contrast, "Madagascar," DreamWorks' biggest money maker in the quarter, generated $30.7 million in revenue through the sale of 17.5 million home video units worldwide through March, Leslie said.

The film, which tells the tale of a group of New York zoo animals who become marooned off the coast of Africa, will debut on pay television in the next quarter.

Leslie believes that Dreamworks' revenues in the next quarter will primarily come from "Madagascar's" TV run, even with the release of the company's latest offering, "Over the Hedge," scheduled for release this month.

"We do not recognize any revenue until after our distributor has recovered its distribution and marketing costs, which typically does not occur until a title is released to home video," she said.

"So we will have to see how the rest of the year shapes up after the release of 'Over the Hedge.'"

While the new film's potential earnings for DreamWorks may not be realized until home video release, DreamWorks Animation President Lew Coleman said

"Over the Hedge" is the company's biggest hope for the remainder of the year.

"Our 2006 performance is primarily dependent on 'Over the Hedge,'" Coleman said of the film, which revolves around the adventures of a group of forest dwellers in suburbia.

"It is a good family story with great characters using some really unique, high-quality animation, and we certainly hope people will enjoy it."

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