DREAMWORKS ANIMATION SKG, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS 

(Unaudited)

 Nine Months Ended 

 September 30, 

2014

2013

 (in thousands) 

Operating activities

Net (loss) income 

$ (46,480)

$   38,441

Adjustments to reconcile net (loss) income to net cash (used in) provided by operating activities:

Amortization and write-off of film and other inventory costs⁽¹⁾

298,096

254,489

Amortization of intangible assets

10,516

7,341

Stock-based compensation expense 

8,387

14,483

Amortization of deferred financing costs

865

182

Depreciation and amortization 

3,654

3,420

Change in fair value of contingent consideration

(9,675)

-

Revenue earned against deferred revenue and other advances  

(43,143)

(71,489)

Income related to investment contributions

(6,662)

(14,033)

Loss from equity method investees

7,939

4,110

Deferred taxes, net 

(19,658)

15,372

Changes in operating assets and liabilities, net of the effects of acquisitions:

Trade accounts receivable 

2,830

878

Receivables from distributors

(2,011)

50,507

Film and other inventory costs 

(354,003)

(323,967)

Intangible assets

-

1,015

Prepaid expenses and other assets 

(21,145)

(6,587)

Accounts payable and accrued liabilities 

(46,553)

11,269

Payable to former stockholder 

1,770

(14,645)

Income taxes payable/receivable, net 

2,510

3,115

Deferred revenue and other advances 

72,117

96,538

Net cash (used in) provided by operating activities 

(140,646)

70,439

Investing activities

Investments in unconsolidated entities

(18,154)

(14,720)

Purchases of property, plant and equipment 

(26,263)

(26,669)

Acquisitions of character and distribution rights

(51,000)

-

Acquisitions, net of cash acquired

(12,605)

(30,093)

Net cash used in investing activities 

(108,022)

(71,482)

Financing activities

Proceeds from stock option exercises

261

-

Deferred financing costs

-

(7,718)

Purchase of treasury stock 

(3,580)

(28,170)

Borrowings from revolving credit facility

215,000

68,000

Repayments of borrowings from revolving credit facility

(10,000)

(233,000)

Borrowings from senior unsecured notes

-

300,000

Net cash provided by financing activities 

201,681

99,112

Effect of exchange rate changes on cash and cash equivalents

586

(Decrease) increase in cash and cash equivalents 

(46,401)

97,180

Cash and cash equivalents at beginning of period

95,467

59,246

Cash and cash equivalents at end of period

$  49,066

$ 156,426

Non-cash investing activities:

Contingent consideration portion of business acquisition purchase price

$            -

$   95,000

Intellectual property and technology licenses granted in exchange for equity interest

6,057

12,007

Services provided in exchange for equity interest

682

2,026

Total non-cash investing activities

$    6,739

$ 109,033

Supplemental disclosure of cash flow information:

Cash paid (refunded) during the period for income taxes, net

$         70

$   (1,182)

Cash paid during the period for interest, net of amounts capitalized

$  14,039

$             -

⁽¹⁾ Included within this amount is depreciation and amortization, interest expense and stock-based compensation previously capitalized to "Film and other inventory costs." During the nine months ended September 30, 2014 and 2013, these amounts totaled $24,574 and $24,932, respectively.