DreamWorks Animation SKG (NYSE: DWA), announced a Q4 net loss of $21.3m (20 cents a share) compared to positive income of $63.2m (61 cents) in the prior year. Sales were up 18% to $204m. The loss was less than the average analyst expectation.
For the full year profit was down 86% to just $15.1m from $104.6m in 2005.
In an ironic decision, given the title of the movie involved, the company lowered the value of its Flushed Away production by $109m after the movie’s British style humor failed to woo US audiences in theaters. As a result of the failure, and past write-downs for Chicken Run (2000) and Wallace & Gromit (2005), which came from the same partnership, DreamWorks ended its partnership with UK based Aardman Animation Ltd.
With production costs on animated features exceeding $100m on average, plus marketing expenses upwards of $125m write-downs for under performing features can be a large drag on earnings. The release of Shrek 3 in May and Bee Movie later in 2007 are expected to provided upside.
With the release of earnings, DreamWorks Animation also announced a $150m stock buyback. Paul Allen, of Microsoft fame, remains the company’s largest shareholder with approximately 21m shares, an amount equal to roughly 25% of the equity.
More detailed press coverage of DreamWorks Animation’s finances can be found at: