DreamWorks Animation Posts Loss on Restructuring ChargesAnousha Sakoui
Jeffrey Katzenberg’s DreamWorks Animation SKG Inc. reported a loss of $54.8 million in the first quarter, as the studio absorbed costs to restructure its moviemaking operation.
The loss was 25 cents share, excluding some items, the Glendale, California-based company said Thursday in a statement. Analysts were predicting a loss of 21 cents, according to estimates compiled by Bloomberg. Revenue rose 13 percent to $166.5 million from a year earlier and beat the $164.4 million average of projections.
Katzenberg, the company’s chief executive officer, said on a call that 2015 will be a transitional year following production cuts and 500 firings announced in January. The performance of the newest film “Home” is early evidence that the changes the studio has made in its core animation business are “beginning to take hold,” he said.
DreamWorks Animation, the studio behind the “Shrek” and “How to Train Your Dragon,” is working to improve its film slate after several disappointments.
“Home,” its only release of the year, beat expectations in U.S. theaters. The movie, which features the voices of pop stars Rihanna and Jennifer Lopez, has generated $300 million in global ticket sales, including $154.6 million in U.S. and Canadian theaters since March 27, according to researcher Box Office Mojo.
“The film will still be one of the DreamWorks’ more domestically successful recent non-sequel releases,” Doug Creutz, analyst at Cowen & Co. said in a report. He has a underperform rating on the stock.
Based on the performance of the film, Chief Financial Officer Fazal Merchant told investors the company is still comfortable with an earlier forecast that DreamWorks Animation will at least break even this year.
“Home,” contributed $2.9 million to sales in the first quarter, primarily from ancillary sales, as it was released three days before the period ended. DreamWorks Animation said it expects to begin recording box office revenue in the second quarter, after the distributor, Twentieth Century Fox, recoups its costs.
DreamWorks Animation said it spent $135 million making “Home” and a similar sum promoting it, including more for digital promotion. The company has said it wants to reduce production costs to about $125 million per picture.
The biggest source of revenue for the quarter was “How To Train Your Dragon 2,” the most successful of the studio’s recent animation franchises. It contributed $41.4 million. A third and final installment is planned for 2018.
DreamWorks Animation said it recorded $31.9 million in first-quarter pre-tax charges for job cuts and expenses such as the closing of its Redwood City, California, facility.
In the prior quarter, the company took $210.1 million in restructuring costs, including expenses for canceled projects, and an impairment charge of $57.1 million for films that underperformed, such as “The Penguins of Madagascar” and “Mr. Peabody and Sherman.”
The strong dollar will hurt international results, Katzenberg said on a call with investors. “Home” was the company’s best film ever in Russia on a local-currency basis, yet the returns shrank when receipts were translated back into U.S. dollars, Katzenberg said.
DreamWorks Animation fell 2.3 percent to $26.06 at the close in New York, before reporting the results. The stock has risen 17 percent this year.