Bloomberg News

DreamWorks Animation Falls as ‘Turbo’ Leads to Revenue Drop (3)

February 26, 2014

DreamWorks Headquarters

The DreamWorks Animation SKG Inc. logo is displayed in the courtyard of the company's headquarters in Glendale, California. Photographer: Patrick T. Fallon/Bloomberg

DreamWorks Animation SKG Inc. (DWA:US), the independent film studio, tumbled the most in more than eight years after reporting a 23 percent drop in quarterly revenue, as home-video sales of the movie “Turbo” trailed estimates.

DreamWorks Animation slumped 12 percent to $30.91 at the close in New York, the biggest drop since July 2005. Sales in the fourth quarter fell to $204.3 million, the Glendale, California-based company said yesterday in a statement (DWA:US). That missed analysts’ projections of $223.2 million, the average of nine estimates.

The home-video release of “Turbo,” a disappointment in U.S. theaters, and the film’s expansion to other markets during the quarter, failed to reverse its fortunes. Chief Executive Officer Jeffrey Katzenberg said on Oct. 29 that he believed “Turbo,” released in July, would turn a profit. Instead, the company yesterday wrote down its value by $13.5 million.

“Where once international box office and DVD performance were somewhat predictable, this is clearly no longer the case,” Ben Mogil, an analyst at Stifel Financial Corp. in St. Louis, wrote yesterday in a research note. While the company has diversified, feature films still have a big impact on its business, said Mogil, who has a hold rating on the stock.

The film “faced one of the most competitive feature film environments we’ve seen,” Katzenberg said on a conference call with investors. “While it performed fairly well during the fourth quarter at the international box office and its home-video release, it still fell short of our expectations.”

Net Income

Net income totaled $17.2 million, or 20 cents a share, DreamWorks Animation said. In last year’s fourth quarter, the company posted a net loss of $82.7 million, or 98 cents a share, following the lackluster performance of “Rise of the Guardians” in theaters.

“Turbo,” available on DVD and other home-video formats starting Nov. 12, sold 3.3 million units in the period, the company said. In addition to the impairment charge, equaling about 12 cents a share, DreamWorks Animation recorded amortization expenses of $4 million on the film, Chief Financial Officer Lew Coleman said on the call.

A separate $7 million impairment was recorded for a “Rocky & Bullwinkle” short, which the company previously planned to run before its next feature film, “Mr. Peabody & Sherman,” which opens in the U.S. on March 7.

Analysts had expected profit of 32 cents a share, the average of 10 estimates compiled by Bloomberg.

“Mr. Peabody & Sherman,” released in some international markets, has collected $22.5 million to date outside the U.S., according to researcher BoxOfficeMojo.com.

New Markets

Katzenberg is expanding beyond feature films by entering streaming pacts with companies including Netflix Inc. (NFLX:US), creating publishing and television operations, and licensing characters to theme-parks. The company this week announced a deal with Merlin Entertainments Plc (MERL), one of Europe’s biggest theme park owners, to create attractions based its “Shrek” films.

“It is our goal to try and establish as many revenue sources outside of the traditional movie,” Katzenberg said on the conference call.

To contact the reporter on this story: Andy Fixmer in Los Angeles at afixmer@bloomberg.net

To contact the editor responsible for this story: Anthony Palazzo at apalazzo@bloomberg.net


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Companies Mentioned

  • DWA
    (DreamWorks Animation SKG Inc)
    • $22.31 USD
    • 0.19
    • 0.85%
  • NFLX
    (Netflix Inc)
    • $340.12 USD
    • 5.70
    • 1.68%
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