`HEDGE' KEY AFTER STEEP LOSS IN QUARTER.

Byline: Greg Hernandez Staff Writer

GLENDALE - Lacking a feature film release or a blockbuster DVD to pump up its bottom line, DreamWorks Animation SKG Inc. said Tuesday that its first-quarter profit was down by a steep 73 percent.

The company, which will release ``Over the Hedge'' later this month, made more than half of its net income during the quarter from DVD sales of its 2005 summer hit ``Madagascar.''

The $12.5 million in net income, or 12 cents a share, was down from $45.7 million, or 44 cents a share, during the first quarter of 2005.

DreamWorks' revenue for the first quarter was $60.1 million, down dramatically from $167 million a year earlier.

The company did not receive any revenue from its fall feature release ``Wallace & Gromit in The Curse of the Were-Rabbit,'' which did not make much of an impression on home video despite winning the 2006 Academy Award for best animated feature.

DreamWorks also got no additional revenue from sales of ``Shrek 2'' because, as with ``Wallace,'' the film had not yet recouped its marketing and distribution costs for its distributor, Universal Studios Home Entertainment.

The company is now operating under a new distribution agreement with Paramount Pictures beginning with the ``Over the Hedge'' release May 19.

``Our 2006 performance is dependent upon `Over the Hedge,''' acknowledged DreamWorks Animation President Lewis Coleman. ``... We'll know more about 2006 in the next month or so.''

Coleman sang the film's praises Tuesday but expressed some concern over the stiff competition it faces at the box office, which in May alone will include ``The Da Vinci Code,'' ``X-Men: The Last Stand,'' ``Poseidon'' and ``Mission: Impossible III.''

``It's a good family story with great characters. However, it's a very competitive time to be releasing a film,'' Coleman said. ``We will all be watching closely to see how it holds up against the rest of the summer releases.''

Box office analyst Robert Bucksbaum, president of Reel Source Inc., said ``Over the Hedge'' should succeed at the box office even if it doesn't set the box office on fire its opening weekend.

``Despite so many big movies coming out, this one is going to have its audience, even if it might take a while, because it's such a great movie,'' he said. ``Remember, the first `Shrek' did $40 million its first weekend then did better its second weekend.''

Even if `Hedge' is a blockbuster, DreamWorks Animation will not realize any revenue from it during its second quarter because Paramount will first have to recover its worldwide distribution and marketing costs, which are in the range of $125 million to $175 million.

``Often it doesn't show up until home video,'' said Chief Financial Officer Kris Leslie.

The earnings report was released after the close of the markets Tuesday. Shares of DreamWorks Animation closed at $26 on the New York Stock Exchange, a drop of 75 cents, or 2.8 percent a share.

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(color) Dreamworks will release ``Over the Hedge'' later this month.