Nightmare at DreamWorks: quarterly profit down 63%

Dream­Works Ani­ma­tion SKG

Second-quarter net income at Dream­Works Ani­ma­tion SKG Inc. fell by a whop­ping 63 per­cent, the Glen­dale, California-based com­pany announced Tuesday.

The stu­dio blamed in part the delayed release of Mada­gas­car 3: Europe’s Most Wanted in sev­eral over­seas coun­tries, as well as higher dis­tri­b­u­tion costs.

Net income fell to a level below ana­lysts’ expec­ta­tions. Mean­while, shares dropped over 8 per­cent in after-hours trad­ing Tuesday.

Results for the stu­dio were aided by box office rev­enues from Mada­gas­car 3, which has grossed over $500 mil­lion in the­aters around the world since it was released June 8. By com­par­i­son, Kung Fu Panda 2grossed $600 mil­lion a year ear­lier, although that movie’s rev­enues were helped by a release two weeks ear­lier in the quarter.

DWA’s net income in the three months ended June 30 was $12.8 mil­lion (15 cents per share), com­pared with $34.1 mil­lion (40 cents per share) last year. Rev­enue in the sec­ond quar­ter was $162.8 mil­lion, down 25 per­cent from the same period in 2011.

Ana­lysts polled by Fact­Set, on aver­age, had pre­dicted income of 25 cents per share on rev­enue of $185 million.

Some of the rev­enue for Mada­gas­car 3 was recorded after the quar­ter ended. As well, dis­trib­u­tors took a greater cut of ticket sales to pay for film prints and adver­tis­ing than expected, said stu­dio chief finan­cial offi­cer Lew Coleman.

He also noted that the Lon­don Olympics caused the film’s delayed release in such major over­seas mar­kets as the United King­dom, Ger­many, Aus­tria and New Zealand. Cole­man added that mar­kets that had released Mada­gas­car 3, such as Rus­sia and China, have been pay­ing DWA a smaller share of ticket sales than aver­age, which hurt revenue.

Though he blamed tim­ing prob­lems for neg­a­tively affect­ing second-quarter rev­enue, Cole­man pre­dicted that Mada­gas­car 3 would be a “very prof­itable film.”

Dream­Works Ani­ma­tion shares closed up 2 cents to $19.20 in reg­u­lar trad­ing. But they fell $1.60 (8.3 per­cent) to $17.60 after the quar­terly report’s release.

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