GLENDALE, Calif., Oct. 31 /PRNewswire-FirstCall/ – For the third quarter of 2006, DreamWorks Animation SKG, Inc. (NYSE:DWA) reported total revenue of $55.6 million and net income of $10.5 million, or $0.10 per share on a fully diluted basis. This compares to revenue of $87.1 million and net loss of $0.7 million, or $(0.01) per share on a fully diluted basis, for the same period in 2005. The Company ended the third quarter of 2006 with $536.0 million of cash and cash equivalents.
For the period, Madagascar contributed approximately $24.1 million of revenue driven primarily by home video catalogue sales as well as a benefit due to a partial reduction of reserves established for returns and costs associated with the transition of its home video distribution. In total, the film has reached an estimated 20.4 million units shipped through the third quarter of 2006, net of actual returns and estimated future returns. Wallace and Gromit: Curse of the Were-Rabbit generated revenue of approximately $17.2 million as the film was made available in the domestic pay television market in the quarter.
Since its home video release in the first quarter of this year, the film has reached an estimated 5.1 million units shipped through the third quarter of 2006, net of actual returns and estimated future returns. Shark Tale recorded revenue of approximately $5.8 million in the quarter. Library and other titles contributed $8.5 million of revenue for the period. The Company’s distributor remained in an unrecouped position of approximately $7.1 million on the Shrek 2 title at the end of the third quarter.
The Company’s revenues for the third quarter of 2006 included a benefit resulting from the renegotiation of a vendor contract for services provided as part of Paramount’s distribution of the Company’s titles. This resulted in higher net revenue of approximately $6.4 million due to a distribution cost credit from Paramount, predominantly impacting the net revenue of the Company’s 2005 theatrical releases. The benefit resulted in $0.01 of earnings per share in the quarter on a fully diluted basis.
DreamWork’s latest release, Over the Hedge, has reached approximately $325 million in box office as of October 30, 2006 on a worldwide basis, making it the eighth highest grossing film of 2006. As expected, the Company’s distributor remains in an un-recouped position at the end of the quarter. The title contributed approximately $2.1 million in revenue to the Company in the quarter.
Looking ahead, the Company reiterated its expectation that revenue for the remainder of the year will be driven by the home video performance of Over the Hedge, which was released domestically on October 17, 2006.
The Company’s next release, Flushed Away, opens domestically in theatres on November 3, 2006. As is typical in the quarter of a film’s theatrical release, the Company does not anticipate generating significant revenue in the fourth quarter from the title as its distributor will likely not have recouped its upfront marketing and distribution costs.
"We are excited about the upcoming release of Flushed Away, our latest collaboration with Aardman Animation," stated Jeffrey Katzenberg, CEO of DreamWorks Animation. "By combining Aardman’s signature look with cutting-edge CG technology, we believe we’ve created a new visual style — and ultimately, a unique film experience."
In addition to results for the third quarter, the Company provided updates on several future projects, including DreamWorks Animation’s Puss in Boots, based on the beloved character from the Shrek franchise. Originally expected to be released as a direct-to-video title, the property is now being slated as a future theatrical release. Due to current market conditions, the Company has decided to shift away from its direct-to-video strategy in favor of new opportunities with Paramount and Nickelodeon.
"Puss in Boots is a unique creative property that has the potential to be a valuable extension of the Shrek franchise," stated Katzenberg. "We are excited to be developing this into a feature film where we think it has the greatest opportunity."
Lastly, the Company revealed its theatrical release slate for 2009 from its projects currently under development. Monsters vs. Aliens, the working title of an original concept from DreamWorks Animation, is scheduled for release in the summer of 2009. How to Train Your Dragon, based on the book by Cressida Cowell, is scheduled as the Company’s release for the 2009 fall/holiday season.
Items related to the earnings release for the third quarter of 2006 will be discussed in more detail on the Company’s third quarter 2006 earnings conference call later today.