DreamWorks Animation Delivers Solid Second Quarter 2015 Results With Revenues Increasing 40% To $171 Million And Total Segment Gross Profit Improving 74% To $61 Million Versus Last Year

 

Non-GAAP Measures

In addition to the financial results reported in accordance with U.S. GAAP, we have provided the following non-GAAP measures: Adjusted Income/Loss and Adjusted EBITDA (collectively, "non-GAAP measures"). Adjusted Income/Loss and Adjusted EBITDA are not prepared in accordance with U.S. GAAP. We believe the use of these non-GAAP measures on a consolidated basis assists investors in comparing our ongoing operating performance between periods. Adjusted Income/Loss and Adjusted EBITDA provide a supplemental presentation of our operating performance and generally reflect adjustments for unusual or non-operational activities. We may not calculate Adjusted Income/Loss or Adjusted EBITDA in a manner consistent with the methodologies used by other companies. Adjusted Income/Loss and Adjusted EBITDA (a) do not represent our operating income or cash flows from operating activities as defined by U.S. GAAP; (b) in the case of Adjusted EBITDA, does not include all of the adjustments used to compute consolidated cash flow for purposes of the covenants applicable to the Company's 6.875% Senior Notes due 2020 (the "Notes"); (c) are not necessarily indicative of cash available to fund our cash flow needs; and (d) should not be considered alternatives to net income, operating income, cash provided by operating activities or our other financial information as determined under U.S. GAAP. Our presentation of Adjusted Income/Loss and Adjusted EBITDA measures should not be construed as an implication that our future results will be unaffected by unusual items.

Adjusted Income / Loss Measures

On January 22, 2015, the Company announced its restructuring initiatives (the "2015 Restructuring Plan") that are intended to refocus the Company's core feature animation business. In connection with the 2015 Restructuring Plan, the Company made changes in its senior leadership team and also made changes based on its reevaluation of the Company's feature film slate. The Company evaluates operating performance to exclude the effects of the charges related to the execution of the 2015 Restructuring Plan as it believes the restructuring-related charges do not correlate with the ongoing operating results of the Company's business and were charges that resulted from significant decisions that were made in order to refocus the Company. As a result, the Company believes that presenting the Company's Adjusted Operating Income/Loss, Adjusted Net Income/Loss Attributable to DWA and Adjusted Diluted Income/Loss per share (collectively, "Adjusted Income/Loss Measures") will aid investors in evaluating the performance of the Company. The Company defines Adjusted Income/Loss Measures as net earnings (loss) adjusted to exclude the items within its Consolidated Statements of Operations that relate to its 2015 Restructuring Plan (as discussed further in the footnotes to the tables below).

The Company uses these Adjusted Income/Loss Measures to, among other things, evaluate the Company's operating performance. These measures are among the primary measures used by management for planning and forecasting of future periods, and they are important indicators of the Company's operational strength and business performance because they provide a link between profitability and operating cash flow. The Company believes these measures are relevant and useful for investors because they allow investors to view performance in a manner similar to the method used by the Company's management and help improve investors' understanding of the Company's operating performance. In addition, the Company believes that these are among the primary measures used externally by the Company's investors, analysts and industry peers for purposes of valuation and for the comparison of the Company's operating performance to other companies in its industry.

Adjusted Income/Loss Measures Reconciliation

The following is a reconciliation of each of the Company's GAAP measures (operating income/loss, net income/loss attributable to DreamWorks Animation SKG, Inc. and loss (or diluted earnings) per share) to the non-GAAP adjusted amounts. In addition, following this table is an additional reconciliation for adjusted general and administrative, which is a component of the Adjusted Income/Loss Measures.

 

DREAMWORKS ANIMATION SKG, INC.






ADJUSTED INCOME/LOSS RECONCILIATIONS


(Unaudited)




Three Months Ended


Six Months Ended



June 30, 2015


June 30, 2015



 (in thousands, except per share amounts) 






Operating loss - as reported


$        (21,843)


$        (57,146)






Reverse 2015 Restructuring Plan charges:





Employee-related termination costs(1)


560


5,147

Relocation and other employee-related costs(2)


1,885


3,381

Accelerated depreciation and amortization charges(3)


10,853


20,132

Additional labor and other excess costs(4)


7,591


24,100

Total restructuring-related charges


20,889


52,760






Adjusted operating loss


$              (954)


$          (4,386)






Net loss attributable to DreamWorks Animation
    SKG, Inc. - as reported


$        (38,583)


$        (93,360)






Reverse 2015 Restructuring Plan charges:





Employee-related termination costs (1)


560


5,147

Relocation and other employee-related costs (2)


1,885


3,381

Accelerated depreciation and amortization charges (3)


10,853


20,132

Additional labor and other excess costs (4)


7,591


24,100

Total restructuring-related charges


20,889


52,760






Tax impact (5)


6,120


7,123






Adjusted net loss attributable to DreamWorks
    Animation SKG, Inc.


$        (11,574)


$        (33,477)






Loss per share - as reported


$             (0.45)


$             (1.09)






Reverse 2015 Restructuring Plan charges:





Employee-related termination costs (1)


0.01


0.06

Relocation and other employee-related costs (2)


0.02


0.04

Accelerated depreciation and amortization charges (3)


0.13


0.23

Additional labor and other excess costs (4)


0.09


0.28

Total restructuring-related charges


0.25


0.61






Tax impact (5)


0.07


0.08






Adjusted loss per share


$             (0.13)


$             (0.40)


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