Hedge Drives DreamWorks Profits Up

Thanks to some precocious forest critters and their adventures in suburbia, DreamWorks Animation SKG reported a 33% rise in total revenue for the first quarter of 2007. The company says it took in $93.7 million in revenue and netted $15.4 million during the quarter ended March 31. This compares to revenue of $60.1 million and net income of $12.3 million for the same period in 2006.

‘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,” says DreamWorks Animation CEO Jeffrey Katzenberg, “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.”

The largest contributor of revenue for the first quarter, Over the Hedge contributed approximately $33.1 million of revenue, driven primarily by home video. During the period, the title saw around 12.6 million units shipped, net of actual returns and estimated future returns. Meanwhile, Shark Tale continued to swim strong, kicking in approximately $18.1 million, mostly from domestic network television business. With the Shrek the Third hype machine in high gear, Shrek 2 contributed around $17.5 million driven primarily by international network television. Also adding to the pot was the Oscar-winning 2005 release Wallace & Gromit: The Curse of the Were-Rabbit, which brought in approximately $9.4 million through home video and international pay television, while home video catalogue sales of Madagascar amounted to revenue of approximately $6.4 million.

Though it grossed more than $176 million at the box office worldwide, DreamWorks Animation’s latest release, Flushed Away, has yet to break even. It did, however generate $1.2 million of revenue in the quarter through merchandising and licensing. So far, 3.2 million units of the title have shipped on home video since its domestic release on Feb. 20.

Because of changes in its production process and organizational structure, DreamWorks Animation determined that certain operating costs that had historically been capitalized should be recorded as an expense in the period in which incurred. As a result, the company expects that the capitalized cost of its films will decrease by approximately $10 million per film, with the full impact taking effect on movies released in 2009.

Profits for the rest of 2007 will ride on the broad shoulders of Shrek the Third, which hits North American theaters on May 18. The pic will be followed by the Jerry Seinfeld animated comedy Bee Movie, which is expected to open domestically on Nov. 2.