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

Adjusted EBITDA Reconciliation

We believe that net income is the most directly comparable U.S. GAAP measure to Adjusted EBITDA. Accordingly, the table below presents a reconciliation of net income (or loss) to Adjusted EBITDA. The reconciliation also includes a further reconciliation of Adjusted EBITDA to exclude the charges associated with the 2015 Restructuring Plan (as described above). Lastly, as Adjusted EBITDA is also used as a liquidity measure, the table also presents a reconciliation of Adjusted EBITDA to cash flow provided by (used in) operating activities.

 

DREAMWORKS ANIMATION SKG, INC.











ADJUSTED EBITDA RECONCILIATIONS











(Unaudited)












 Three Months Ended 


 Six Months Ended 



 June 30, 


 June 30, 



2015


2014


2015


2014



 (in thousands) 

Reconciliation of Net Loss to Adjusted EBITDA:


















Net loss

$ (39,039)


$ (15,928)


$ (94,929)


$ (58,344)


Provision (benefit) for income taxes

1,762


2,601


4,162


(19,866)


Loss from equity method investees

2,775


3,467


9,137


6,727


Increase/decrease in income tax benefit payable to former stockholder

7,096


(1,695)


7,121


(2,622)


Other income/expense, net

(2,001)


(1,853)


3,465


(3,071)


Interest expense, net

7,564


2,484


13,898


4,257


Operating loss

(21,843)


(10,924)


(57,146)


(72,919)


Income related to investment contributions

(1,719)


(2,317)


(4,000)


(3,989)


Amounts included in amortization of film and other inventory costs (1)

9,655


5,245


22,133


14,066


Film impairments

-


-


933


57,074


Depreciation and amortization (2)

10,655


4,450


28,006


8,685


Stock-based compensation expense

6,328


3,112


10,727


8,421


Adjusted EBITDA

$    3,076


$      (434)


$       653


$  11,338











Reconciliation of Adjusted EBITDA to exclude 2015 Restructuring Plan:


















Reverse 2015 Restructuring Plan charges (4) :









Employee-related termination costs

$       560


$            -


$    5,147


$            -


Relocation and other employee-related costs

1,885


-


3,381


-


Accelerated depreciation and amortization charges

10,853


-


20,132


-


Additional labor and other excess costs

7,591


-


24,100


-


Total restructuring-related charges

20,889


-


52,760


-











Adjusted EBITDA (excluding 2015 Restructuring Plan)

$  23,965


$      (434)


$  53,413


$  11,338




















Reconciliation of Adjusted EBITDA to Cash Provided by (Used in) Operating Activities:

















Adjusted EBITDA

$    3,076


$      (434)


$       653


$  11,338


Amortization and write-off of film and other inventory costs (3)

79,232


55,836


159,173


135,353


Revenue earned against deferred revenue and other advances

(19,139)


(16,396)


(35,608)


(32,584)


Change in fair value of contingent consideration

-


(7,220)


-


(4,720)


Other income/expense, net

2,001


1,853


(3,465)


3,071


Other impairments and write-offs

-


-


5,064


-


Interest expense, net

(7,564)


(2,484)


(13,898)


(4,257)


Net (payments of) refund from income taxes and stockholder payable

(1,448)


1,101


(10,241)


2,599


Changes in certain operating asset and liability accounts

(50,379)


(86,204)


(94,337)


(177,235)


Cash provided by (used in) operating activities

$    5,779


$ (53,948)


$    7,341


$ (66,435)




(1)

Amortization and write-offs of film and other inventory costs in any period include depreciation and amortization, interest expense and stock-based compensation expense that were capitalized as part of film and other inventory costs in the period that those charges were incurred. For purposes of Adjusted EBITDA, we add back the portion of amortization and write-offs of film and other inventory costs that represents amounts previously capitalized as depreciation and amortization, interest expense and stock-based compensation expense.

(2)

Includes those amounts pertaining to the amortization of intangible assets that are classified within costs of revenues.

(3)

Represents the remaining portion of amortization and write-off of film and other inventory costs not already included in Adjusted EBITDA (refer to reconciliation of net income (or loss) to Adjusted EBITDA).

(4)

Refer to footnotes in the Adjusted Income/Loss Measures Reconciliation section for a description of these adjustments.


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