DreamWorks Hit by Write-Off

The latest 'Wallace & Gromit' flick fails to get a nibble.
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Shrek

producer

DreamWorks Animation

(DWA)

posted a weaker fourth quarter and wrote off its latest

Wallace & Gromit

title.

The Glendale, Calif., cartoon company made $63.2 million, or 61 cents per share, for the quarter ended Dec. 31. That's down from the year-ago $192 million, or $1.99 a share. Revenue tumbled to $172.9 million from $496 million a year earlier.

Latest-quarter numbers were boosted by a 27-cent-a-share tax benefit related to two abandoned projects and hit by a 15-cent-a-share writeoff of

Wallace & Gromit: The Curse of the Were-Rabbit

. The company said the charge represents the difference between the film inventory on its balance sheet and the discounted cash flows the film is expected to generate in the future. The charge adds to a 4-cents-a-share writedown in the third quarter.

Analysts surveyed by Thomson Financial expected the company to earn 42 cents a share on revenue of $173 million.

"Despite achieving critical acclaim, commercially

Wallace & Gromit: The Curse of the Were-Rabbit

did not perform as well as expected in a highly competitive release period," said CEO Jeffrey Katzenberg. "While we remain cautious with the state of the overall home video market, we believe that this result was primarily a title specific issue for a film that did not achieve the level of consumer awareness that we had hoped."

The writeoff is only the latest black eye for DreamWorks, which was hit last year by a number of DVD sales shortfalls and other forecasting follies.

Madagascar

contributed $152.3 million of revenue, primarily driven by home video sales. Additional revenue from

Shark Tale

contributed $5.7 million in the quarter. The remaining revenue came from library and other films, which contributed $14.9 million.

DreamWorks is due to release its next movie,

Over the Hedge

, in May. The company declined to provide earnings guidance for any 2006 periods but said that "it is possible that the majority of the company's earnings for 2006 will occur when the title is released on home video in the fourth quarter of 2006."

CFO Kris Leslie said that the company remains cautious in its assessment of the sagging home video market, thanks to catalog and retail shelf space concerns.

As part of Paramount's acquisition of DreamWorks live action, DWA films will now be distributed by the Viacom-owned studio. Leslie said, "We have already started transitioning films to Paramount, which begins with

Over the Hedge

."

The stock was halted in after-hours trading after closing up 23 cents to $26.86.