DreamWorks Animation Rides ‘Shrek 2’ to a Profit

Riding a wave of success from the box-office smash “Shrek 2,” DreamWorks Animation SKG Inc. reported Wednesday a $20.3-million profit for the third quarter, reversing a $35.9-million loss a year earlier.

But DreamWorks’ shares fell nearly 6% in after-hours trading after the computer animation studio’s disclosure that it would delay the release of “Shrek 3” from November 2006 to the following May.

That announcement came a day after rival Pixar Animation Studios Inc. confirmed that the release of its next computer animated film, “Cars,” had been pushed back six months to May 2006.

Both studios said they were changing the release dates to capitalize on the summer movie season, and so the films could be released on DVD for the holidays.

Investors reacted badly to the delay of potential blockbusters. DreamWorks, which had closed up 60 cents to $40.20 a share on the New York Stock Exchange, saw its share price slip more than $2 after hours. Pixar fell $4.29 to $86.77 on Nasdaq.

DreamWorks’ results for the quarter that ended Sept. 30 marked the Glendale company’s debut earnings report since it went public in October. The company said revenue soared to $241.3 million from $47.8 million a year earlier.

Per-share profit was 18 cents, slightly higher than Wall Street forecasts. The steep swing to a profit from a loss is common for film companies that sporadically release movies.

“They met expectations,” said Dennis McAlpine, managing partner of McAlpine Associates, “but I’d be amazed if they didn’t their first quarter out.”

Tom Taulli, co-founder of IPO research site Current Offerings.com, said it was especially important for newly public companies such as DreamWorks to satisfy investors: “Hitting expectations is critical after an IPO because if you don’t hit those expectations Wall Street will be punishing.”

The studio estimated that 81% of its third-quarter revenue came from “Shrek 2.” It is the highest-grossing animated feature of all time and is expected to bring in $900 million in box-office sales worldwide.

The earnings didn’t include revenue from the October release of another hit, “Shark Tale,” or DVD sales of “Shrek 2,” which was released last month.

DreamWorks Chief Executive Jeffrey Katzenberg said there was momentum at the studio.

“It’s just more than any of us could have hoped for,” Katzenberg said in a telephone interview. “In 10 years we have never had this kind of excitement and morale at the studio.”

DreamWorks expects that “Shrek 2” will sell more than 37 million DVD and VHS copies in 2004, and more than 55 million worldwide over the life of the film. “Shark Tale” has grossed $160 million domestically, and is expected to gross more than $300 million worldwide.

The studio has promised to release two animated films per year, an ambitious goal that not even rival Pixar has been able to achieve. DreamWorks plans to release films in May and in the fall. The comedy “Madagascar” is slated for release in May next year, followed by the stop-action film “Wallace & Gromit: Tale of the Were Rabbit” in October.

Katzenberg acknowledged that DreamWorks’ computer-animated television series “Father of the Pride” probably wouldn’t be renewed by NBC. The network in November said it was shelving the comedy after disappointing ratings.

“I’m not sure any of us know” why it faltered, Katzenberg said. “We are all scratching our heads.”