DreamWorks posts second-quarter loss

DreamWorks Animation SKG Inc Thursday reported a $3.7 million net loss in its second quarter due to a large number of retail returns for DVDs of its films "Shrek 2" and "Shark Tale".

But the loss was smaller than analysts and the company predicted last month bolstered by sales of consumer products from its recent film "Madagascar" and from library titles. A tax gain also buoyed earnings by 2 cents.

The company posted a net loss of 4 cents a share compared with a profit of $146.1 million or $1.89 per share a year earlier. Revenue fell to $35.4 million from $300.3 million in the year-earlier quarter when DreamWorks benefited from the release of "Shrek 2," the No. 1 animated movie of all time.

DreamWorks reaffirmed its fiscal year 2005 forecast of 80 cents to 90 cents per share.

Analysts had expected a loss of 7 cents per share and revenue of $24.5 million for the quarter, and fiscal year earnings of 81 cents, according to Reuters Estimates.

DreamWorks' film library contributed $18 million to revenue, and sales of "Madagascar" consumer goods accounted for $12 million, Chief Financial Officer Kris Leslie said.

The company also generated $5 million in licensing fees from "Shrek 2" and "Shark Tale," Leslie said.

For Subscribers

FOR SUBSCRIBERSCBP leaders cut out of Trump ad buy decision

FOR SUBSCRIBERSAmerican passenger drafted goodbye texts to her family as Flydubai plane plummeted

FOR SUBSCRIBERSCornell rape allegation pushes embattled New York prosecutor into national spotlight

FOR SUBSCRIBERSAbdul El-Sayed tries to woo MAHA voters as Democrats seek inroads with RFK’s supporters

FOR SUBSCRIBERSKratom-like substances are popping up in a typically benign supplement

FOR SUBSCRIBERSGOP super PAC increases its spending for Sen. Jon Husted in tough Ohio race

FOR SUBSCRIBERSRecords reveal tumultuous marriage between slain New York Times executive and wife

FOR SUBSCRIBERSFrom clean energy warrior to ‘wall of shame,’ James Talarico reverses on a fossil fuel money pledge

FOR SUBSCRIBERSCongressional staff planned official trip with luxury stops in Italy and France weeks before election

FOR SUBSCRIBERSA harrowing ordeal aboard an Israel-bound plane

FOR SUBSCRIBERSOpenAI CEO Sam Altman to skip congressional hearing on rogue AI agents

FOR SUBSCRIBERSKey DOJ lawyers departed Trump ‘grand conspiracy’ probe amid pressure to produce, source says

FOR SUBSCRIBERSTrump’s new AI chatbot often links to a site launched under Clinton 26 years ago

FOR SUBSCRIBERSAt MAHA summit, industry CEOs the movement once vilified take the stage

FOR SUBSCRIBERSThis Paralympian has two goals: Win medals and give away $500,000 to her teammates

Sanders Morris Harris analyst David Miller said "Madagascar," which has made $430 million at worldwide box offices, was the bright spot in the quarter.

"Despite our less-then-sanguine rating on the stock, it should be noted that the domestic performance of 'Madagascar' has certainly been respectable, and it has surpassed 'Shrek' in ... international grosses," Miller, who has a "hold" rating on DreamWorks shares, said.

Risks ahead
Last month, DreamWorks said it would report a loss 7 cents to 9 cents per share for its second quarter, compared with an earlier forecast of no profit because of greater than expected DVD returns, primarily for "Shrek 2."

At that time, DreamWorks also adjusted its fiscal year forecast to a range of 80 cents to 90 cents a share from a previous $1 to $1.25 a share.

For Subscribers

FOR SUBSCRIBERSCBP leaders cut out of Trump ad buy decision

FOR SUBSCRIBERSAmerican passenger drafted goodbye texts to her family as Flydubai plane plummeted

FOR SUBSCRIBERSCornell rape allegation pushes embattled New York prosecutor into national spotlight

FOR SUBSCRIBERSAbdul El-Sayed tries to woo MAHA voters as Democrats seek inroads with RFK’s supporters

FOR SUBSCRIBERSKratom-like substances are popping up in a typically benign supplement

FOR SUBSCRIBERSGOP super PAC increases its spending for Sen. Jon Husted in tough Ohio race

FOR SUBSCRIBERSRecords reveal tumultuous marriage between slain New York Times executive and wife

FOR SUBSCRIBERSFrom clean energy warrior to ‘wall of shame,’ James Talarico reverses on a fossil fuel money pledge

FOR SUBSCRIBERSCongressional staff planned official trip with luxury stops in Italy and France weeks before election

FOR SUBSCRIBERSA harrowing ordeal aboard an Israel-bound plane

FOR SUBSCRIBERSOpenAI CEO Sam Altman to skip congressional hearing on rogue AI agents

FOR SUBSCRIBERSKey DOJ lawyers departed Trump ‘grand conspiracy’ probe amid pressure to produce, source says

FOR SUBSCRIBERSTrump’s new AI chatbot often links to a site launched under Clinton 26 years ago

FOR SUBSCRIBERSAt MAHA summit, industry CEOs the movement once vilified take the stage

FOR SUBSCRIBERSThis Paralympian has two goals: Win medals and give away $500,000 to her teammates

Leslie said the company's earnings forecast could be altered again if it is forced to write off a large loss from its October release "Wallace & Grommit."

That film, based on a British cartoon, must generate at least $170 million in worldwide box office for the 80 cent to 90 cent earnings forecast to remain unchanged, she said.

The company, which was hit with shareholder lawsuits and a Securities and Exchange Commission inquiry after it overestimated DVD sales for "Shrek 2" by some 10 million units, has taken steps to avoid future miscalculations, Chairman Roger Enrico told Reuters Thursday.

"I think the key thing for us is to make sure, given the apparent changes in the dynamics of video market, to have the kinds of input about what's going on at retail so we have the opportunity to ... make sure our marketing and retail programs are as effective as they can be."

DreamWorks Chief Operating Officer Ann Daly said a glut of DVDs on retail shelves that may have slowed sales of "Shrek 2" and "Shark Tale" appears to be easing.

"We are starting to see that volume, particularly from the TV category, slowing down," she told analysts.

Chief Executive Jeffrey Katzenberg said, however, that competition for animated films appeared heated in 2006 when Hollywood's studios would release one film per month.

"There appears to be substantially more product ... but each of these titles will have an opportunity to perform," he told analysts on a conference call.