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DREAMWORKS ANIMATION SKG, INC. | ||||
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ADJUSTED EXPENSE RECONCILIATION | ||||
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(Unaudited) | ||||
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Three Months Ended |
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Six Months Ended |
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June 30, 2015 |
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June 30, 2015 |
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(in thousands) | ||
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General and administrative - as reported |
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$ 80,736 |
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$ 169,878 |
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Reverse 2015 Restructuring Plan charges: |
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Employee-related termination costs(1) |
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(560) |
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(5,147) |
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Relocation and other employee-related costs(2) |
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(1,885) |
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(3,381) |
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Accelerated depreciation and amortization charges(3) |
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(10,853) |
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(20,132) |
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Additional labor and other excess costs(4) |
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(7,591) |
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(24,100) |
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Total restructuring-related charges |
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(20,889) |
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(52,760) |
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Adjusted general and administrative |
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$ 59,847 |
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$ 117,118 |
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(1) |
Employee-related termination costs. Employee-related termination costs consist of severance and benefits (including stock-based compensation) attributable to employees that were terminated in connection with the 2015 Restructuring Plan. |
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(2) |
Relocation and other employee-related costs. Relocation and other employee-related costs primarily consist of costs to relocate employees from our Northern California facility to our Southern California facility. |
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(3) |
Accelerated depreciation and amortization charges. Accelerated depreciation and amortization charges consist of the incremental charges we incurred as a result of shortened estimated useful lives of certain property, plant and equipment due to the decision to exit our Northern California facility. |
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(4) |
Additional labor and other excess costs. Additional labor consists of costs related to excess staffing in order to execute the restructuring plans specifically related to changes in the feature film slate. These additional labor costs are incremental to our normal operating charges and are expensed as incurred. Other excess costs are those due to the closure of our Northern California facility and primarily relate to costs that we incurred to continue to operate the facility until we exit the facility. |
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(5) |
Tax Impact. The tax impact of the non-GAAP adjustments is calculated at the Company's combined effective tax rate of (29.3)% and (13.5)% for the three and six months ended June 30, 2015, respectively. |
Adjusted EBITDA
In connection with our issuance of the Notes on August 14, 2013, we began to use Adjusted EBITDA to provide investors with a measure of our ability to make our interest payments on the Notes. We define Adjusted EBITDA as net income before provision for income taxes, loss from equity method investees, increase/decrease in income tax benefit payable to former stockholder, other income (net), interest income (net), other non-cash operating income, depreciation and amortization, stock-based compensation expense, impairments and other charges and certain components of amortization of film and other inventory costs (refer to the reconciliation below). Although the indenture governing the Notes does not include covenants based on Adjusted EBITDA, we believe our investors and noteholders use Adjusted EBITDA as one indicator of our ability to comply with our debt covenants as it is similar to the consolidated cash flow measure described in the indenture (refer to our Current Report on Form 8-K filed on August 14, 2013). Although consolidated cash flow is not a financial covenant under the indenture, it is a measure that is used to determine our ability to make certain restricted payments and incur additional indebtedness in accordance with the terms of the indenture.
