DreamWorks profit beats Street, shares rise

LOS ANGELES (Reuters) - DreamWorks Animation SKG Inc posted better-than-expected third quarter profit on Tuesday, as the release of the "Monsters vs. Aliens" DVD boosted sales.

DreamWorks now expects its current quarter results to be driven primarily by two TV specials: "Monsters vs. Aliens: Mutant Pumpkins from Outer Space" and "Merry Madagascar", both of which are scheduled to air in prime-time on NBC. "Merry Madagascar" is also scheduled to be released into the home entertainment market in the fourth quarter.

"We expect to deliver full-year EPS close to the $1.57 that we reported in 2008," said Lew Coleman, president and chief financial officer of DreamWorks, said.

DreamWorks posted net income of $19.6 million, or 23 cents per share, and revenue of $135.4 million, compared with net income of $37.4 million, or 41 cents a share, and revenue of $151.5 million a year ago, when results were boosted by the animated hit "Kung Fu Panda."

DreamWorks results exceeded analysts' average estimates for earnings of 16 cents a share, according to Thomson Reuters

I/B/E/S.

Shares of DreamWorks rose 0.8 percent to $32.25 in after-hours trade, after closing down 15 cents or 0.47 percent at $31.98.

"Monsters vs. Aliens" contributed $33.4 million of revenue to the quarter, driven by strong performance at the worldwide box office and its initial release into the domestic home entertainment market on September 29.

However, DreamWorks Chief Executive Jeffrey Katzenberg said because of the poor performance of "Monsters vs. Aliens" at the box office in some countries, the company will not make a sequel.

"I think there was enough consensus from our distributors and marketing folks in certain parts of the world that we'd be pushing the boulder up the hill," he said.

And the company will close its Broadway show "Shrek the Musical" on January 3, which is earlier than originally planned, because the show has underperformed in that venue.

"I think ultimately it played more as a family show than a Broadway show and it didn't get everything we wanted," Katzenberg told Reuters.

But he said DreamWorks still expects "Shrek the Musical" will do well on tour.

Chris White, an analyst with Wedbush Morgan Securities, expects DVD industry sales to rebound in 2010 and for DreamWorks to be a prime beneficiary.

He said that while confusion about the new Blu-ray format and the weak economy have held up Blu-ray player and disc sales, he expects lower player pricing to spark a bounce in sales next year.

DreamWorks' latest quarterly results included a tax benefit of $2.5 million related to a tax sharing agreement with a former stockholder. The benefit was partially offset by a $2.1 million increase in costs.

The net benefit of $0.4 million, when combined with the company's research and development tax credit related to the prior year of about $1.8 million, resulted in an overall net increase to net income of $2.2 million, or an estimated 3 cents per share on a fully diluted basis.

(Reporting by Susan Zeidler and Alex Dobuzinskis; Editing by Bernard Orr)