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'Shrek 3' delay hits DreamWorks
Film studio posts a profit, but delay of animated release pushes stock down in after-hours trading.
December 9, 2004: 9:37 AM EST
By Krysten Crawford, CNN/Money staff writer

NEW YORK (CNN/Money) - The lovable ogre Shrek delivered better-than-expected profits to DreamWorks Animation SKG in its first quarter as a public company, but the studio's announcement that his next film will be delayed sent the stock tumbling.

DreamWorks Animation Studios said it would postpone the release of  
DreamWorks Animation Studios said it would postpone the release of "Shrek 3" to May 2007 from November 2006.

The Glendale, Calif.-based company said profits in the third quarter came to $13.7 million, or 18 cents a share, compared with a loss of $35.9 million, or 47 cents, a year ago. That topped the Wall Street consensus estimates of 16 cents, according to Thomson First Call.

But shares of DreamWorks (Research) lost $2.80, or 7 percent, to $37.40 in after-hours trading Wednesday, when the company announced that it had pushed back the release of "Shrek 3" to May 2007 from November 2006.

The news came one day after DreamWorks' chief rival, Pixar Animation Studios (Research), said it also would delay the release of its next computer animation, "Cars." Originally scheduled for Nov. 2005 and jointly produced with The Walt Disney Co., "Cars" will now debut in U.S. theaters in June 2006.

The back-to-back announcements appeared unrelated. But DreamWorks Animation CEO Jeffrey Katzenberg later told analysts in a conference call that Pixar's move gave DreamWorks some breathing room.

Katzenberg said the delay of "Shrek 3" was not a sign of production problems. He noted instead that DreamWorks had been scheduled to release three animation films in 2006, a pipeline that was posing some challenges.

"This allows us to smooth out our production (cycle)," Katzenberg said. "It actually makes our lives easier."

What's more, Katzenberg estimated that releasing "Shrek 3" in May 2007 will generate 15 percent more in box office receipts than it would have in its previous slot. The pre-summer release, he said, would also tee up the movie for a strong pre-holiday DVD release later that year.

But Dennis McAlpine, an independent stock analyst, said late Wednesday that DreamWorks' release lineup may have unnerved investors. For instance, DreamWorks is due to release an animated flick, "Over the Hedge," just three weeks before Pixar rolls out "Cars" in June 2006.

Katzenberg said he didn't think the three-week window was a problem, but McAlpine disagreed.

"If anything, there's probably concern that Pixar and DreamWorks are going to be so close in terms of timing on both their theatrical and home video releases," he said.

Chairman Roger Enrico said the third-quarter earnings were buoyed by the blockbuster success of "Shrek 2," which set box-office records this summer as the top-grossing animated movie in history and the third highest-grossing film of all time.

Revenue for the quarter rose fivefold to $241.3 million from $47.8 million for the same period last year, even though it saw only about $40 million in U.S. ticket sales in the quarter from the movie. The movie was released here May 19 and had done nearly $400 million in U.S. sales before the end of the second quarter. More of the movie's overseas box office of $444 million came in the just completed quarter.

Because the results covered the quarter that ended Sept. 30, they do not include the October theatrical release of "Shark Tale" and the DVD release of "Shrek 2." Instead, revenues from its library of animated films, including the original "Shrek," "Antz," "The Prince of Egypt" and "Chicken Run," helped drive the quarter's results.

In other company news, Katzenberg called it a "fairly safe bet" that NBC Universal will cancel "Father of the Pride," a computer animation television show that has posted poor ratings since its August premiere on primetime.

NBC put the show on hiatus during last month's street sweeps. Katzenberg said it's unlikely that the General Electric (Research) unit will revive the show and added that DreamWorks does not have plans to do more TV production.

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As for financial results, DreamWorks said third-quarter earnings were adjusted to reflect a provision of $7.9 million for income taxes, which the company would have paid had its separation from parent DreamWorks Studios been completed by the end of its third quarter on Sept. 30.

The company also noted that third-quarter results did not reflect a deal on distribution costs it completed with its parent studio Oct. 7.

DreamWorks Animation went public Oct. 27. The stock sale generated $625 million. Of that, $355 million was used to pay down debt that the company assumed from DreamWorks Studios.

The remaining $270 million will be spent on additional debt payments, among other things.  Top of page




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Most stock quote data provided by BATS. Market indices are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer. Morningstar: © 2018 Morningstar, Inc. All Rights Reserved. Factset: FactSet Research Systems Inc. 2018. All rights reserved. Chicago Mercantile Association: Certain market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. Dow Jones: The Dow Jones branded indices are proprietary to and are calculated, distributed and marketed by DJI Opco, a subsidiary of S&P Dow Jones Indices LLC and have been licensed for use to S&P Opco, LLC and CNN. Standard & Poor's and S&P are registered trademarks of Standard & Poor's Financial Services LLC and Dow Jones is a registered trademark of Dow Jones Trademark Holdings LLC. All content of the Dow Jones branded indices © S&P Dow Jones Indices LLC 2018 and/or its affiliates.