EX-99.1 2 a08-13882_1ex99d1.htm EX-99.1

 

ACTIVISION, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except earnings (loss) per share data)

 

 

 

Quarter ended March 31,

 

Year ended March 31,

 

 

 

2008

 

2007

 

2008

 

2007

 

 

 

(Unaudited)

 

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net revenues

 

$

602,451

 

$

312,512

 

$

2,898,136

 

$

1,513,012

 

Costs and expenses:

 

 

 

 

 

 

 

 

 

Cost of sales - product costs

 

274,334

 

181,425

 

1,240,605

 

799,587

 

Cost of sales - software royalties and amortization

 

51,986

 

26,295

 

294,279

 

132,353

 

Cost of sales - intellectual property licenses

 

23,909

 

8,287

 

110,551

 

46,125

 

Product development

 

79,052

 

44,678

 

269,535

 

133,073

 

Sales and marketing

 

67,473

 

40,074

 

308,143

 

196,213

 

General and administrative

 

51,164

 

40,867

 

195,409

 

132,514

 

 

 

 

 

 

 

 

 

 

 

Total costs and expenses

 

547,918

 

341,626

 

2,418,522

 

1,439,865

 

Operating income (loss)

 

54,533

 

(29,114

)

479,614

 

73,147

 

Investment income, net

 

15,542

 

10,647

 

51,254

 

36,678

 

Income (loss) before income tax provision (benefit)

 

70,075

 

(18,467

)

530,868

 

109,825

 

Income tax provision (benefit)

 

25,912

 

(4,045

)

185,985

 

24,038

 

 

 

 

 

 

 

 

 

 

 

Net income (loss)

 

$

44,163

 

$

(14,422

)

$

344,883

 

$

85,787

 

 

 

 

 

 

 

 

 

 

 

Basic earnings (loss) per share

 

$

0.15

 

$

(0.05

)

$

1.19

 

$

0.31

 

Weighted average common shares outstanding

 

293,764

 

282,991

 

288,957

 

281,114

 

Diluted earnings (loss) per share

 

$

0.14

 

$

(0.05

)

$

1.10

 

$

0.28

 

Weighted average common shares outstanding assuming dilution

 

318,784

 

282,991

 

314,731

 

305,339

 

 

 


 

ACTIVISION, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands)

 

 

 

March 31,

 

March 31,

 

 

 

2008

 

2007

 

ASSETS

 

 

 

 

 

Current assets:

 

 

 

 

 

Cash, cash equivalents and short-term investments

 

$

1,449,212

 

$

954,849

 

Accounts receivable, net

 

203,420

 

148,694

 

Inventories

 

146,874

 

91,231

 

Software development

 

96,182

 

107,779

 

Intellectual property licenses

 

18,661

 

27,784

 

Deferred income taxes

 

41,242

 

51,564

 

Other current assets

 

23,804

 

19,332

 

 

 

 

 

 

 

Total current assets

 

1,979,395

 

1,401,233

 

Long-term investments

 

91,215

 

—

 

Software development

 

13,604

 

23,143

 

Intellectual property licenses

 

64,890

 

72,490

 

Property and equipment, net

 

54,528

 

46,540

 

Deferred income taxes

 

32,825

 

48,791

 

Other assets

 

15,055

 

6,376

 

Goodwill

 

279,161

 

195,374

 

 

 

 

 

 

 

Total assets

 

$

2,530,673

 

$

1,793,947

 

 

 

 

 

 

 

LIABILITIES AND SHAREHOLDERS’ EQUITY

 

 

 

 

 

Current liabilities:

 

 

 

 

 

Accounts payable

 

$

129,896

 

$

136,517

 

Accrued expenses and other liabilities

 

426,175

 

204,652

 

 

 

 

 

 

 

Total current liabilities

 

556,071

 

341,169

 

 

 

 

 

 

 

Other liabilities

 

26,710

 

41,246

 

 

 

 

 

 

 

Total liabilities

 

582,781

 

382,415

 

 

 

 

 

 

 

Shareholders’ equity:

 

 

 

 

 

Common stock

 

—

 

—

 

Additional paid-in capital

 

1,148,880

 

963,553

 

Retained earnings

 

772,660

 

427,777

 

Accumulated other comprehensive income

 

26,352

 

20,202

 

 

 

 

 

 

 

Total shareholders’ equity

 

1,947,892

 

1,411,532

 

Total liabilities and shareholders’ equity

 

$

2,530,673

 

$

1,793,947

 

 

 


 

ACTIVISION, INC. AND SUBSIDIARIES

RECONCILIATION OF GAAP NET INCOME TO NON-GAAP NET INCOME

(In thousands, except earnings (loss) per share data)

 

Quarter ended March 31, 2008

 

Cost of Sales - Software
Royalties and
Amortization

 

Product
Development

 

Sales and
Marketing

 

General and
Administrative

 

Total Costs and
Expenses

 

GAAP Measurement

 

$

51,986

 

$

79,052

 

$

67,473

 

$

51,164

 

$

547,918

 

Less: Equity-Based Compensation Adjustment*

 

1,097

 

7,466

 

1,728

 

7,340

 

17,631

 

Non-GAAP Measurement

 

$

50,889

 

$

71,586

 

$

65,745

 

$

43,824

 

$

530,287

 

 

 

Quarter ended March 31, 2008

 

Operating Income (Loss)

 

Net Income
(Loss)

 

Basic
Earnings
(Loss) per
Share

 

Diluted
Earnings
(Loss) per
Share

 

GAAP Measurement

 

$

54,533

 

$

44,163

 

$

0.15

 

$

0.14

 

Less: Equity-Based Compensation Adjustment*

 

(17,631

)

(10,737

)

(0.04

)

(0.03

)

Non-GAAP Measurement

 

$

72,164

 

$

54,900

 

$

0.19

 

$

0.17

 

 

 

Year ended March 31, 2008

 

Cost of Sales - Software
Royalties and
Amortization

 

Product
Development

 

Sales and
Marketing

 

General and
Administrative

 

Total Costs and
Expenses

 

GAAP Measurement

 

$

294,279

 

$

269,535

 

$

308,143

 

$

195,409

 

$

2,418,522

 

Less: Equity-Based Compensation Adjustment*

 

10,898

 

17,610

 

6,833

 

18,224

 

53,565

 

Non-GAAP Measurement

 

$

283,381

 

$

251,925

 

$

301,310

 

$

177,185

 

$

2,364,957

 

 

 

Year ended March 31, 2008

 

Operating Income (Loss)

 

Net Income
(Loss)

 

Basic
Earnings
(Loss) per
Share

 

Diluted
Earnings
(Loss) per
Share

 

GAAP Measurement

 

$

479,614

 

$

344,883

 

$

1.19

 

$

1.10

 

Less: Equity-Based Compensation Adjustment*

 

(53,565

)

(32,621

)

(0.11

)

(0.10

)

Non-GAAP Measurement

 

$

533,179

 

$

377,504

 

$

1.31

 

$

1.20

 

*                                         Includes expense related to employee stock options, employee stock purchase plan and restricted stock rights under Statement of Financial Accounting Standards No. 123 (revised 2004), “Share-Based Payment.”  See explanation above regarding the Company’s practice on reporting non-GAAP financial measures. The per share equity-based compensation adjustment is presented as calculated, and the GAAP and non-GAAP earnings (loss) per share information is also presented as calculated. The sum of these measures, as presented, may differ due to the impact of rounding.

 


 

ACTIVISION, INC. AND SUBSIDIARIES

RECONCILIATION OF GAAP NET INCOME TO NON-GAAP NET INCOME

(In thousands, except earnings (loss) per share data)

 

Quarter ended March 31, 2007

 

Cost of Sales - Software
Royalties and
Amortization

 

Product
Development

 

Sales and
Marketing

 

General and
Administrative

 

Total Costs and
Expenses

 

GAAP Measurement

 

$

26,295

 

$

44,678

 

$

40,074

 

$

40,867

 

$

341,626

 

Less: Equity-Based Compensation Adjustment*

 

631

 

1,664

 

1,779

 

3,015

 

7,089

 

Non-GAAP Measurement

 

$

25,664

 

$

43,014

 

$

38,295

 

$

37,852

 

$

334,537

 

 

 

Quarter ended March 31, 2007

 

Operating Income (Loss)

 

Net Income
(Loss)

 

Basic
Earnings
(Loss) per
Share

 

Diluted
Earnings
(Loss) per
Share

 

GAAP Measurement

 

$

(29,114

)

$

(14,422

)

$

(0.05

)

$

(0.05

)

Less: Equity-Based Compensation Adjustment*

 

(7,089

)

(4,317

)

(0.02

)

(0.02

)

Non-GAAP Measurement

 

$

(22,025

)

$

(10,105

)

$

(0.04

)

$

(0.04

)

 

 

Year ended March 31, 2007

 

Cost of Sales - Software
Royalties and
Amortization

 

Product
Development

 

Sales and
Marketing

 

General and
Administrative

 

Total Costs and
Expenses

 

GAAP Measurement

 

$

132,353

 

$

133,073

 

$

196,213

 

$

132,514

 

$

1,439,865

 

Less: Equity-Based Compensation Adjustment*

 

2,503

 

5,728

 

5,267

 

12,024

 

25,522

 

Non-GAAP Measurement

 

$

129,850

 

$

127,345

 

$

190,946

 

$

120,490

 

$

1,414,343

 

 

 

Year ended March 31, 2007

 

Operating Income (Loss)

 

Net Income
(Loss)

 

Basic
Earnings
(Loss) per
Share

 

Diluted
Earnings
(Loss) per
Share

 

GAAP Measurement

 

$

73,147

 

$

85,787

 

$

0.31

 

$

0.28

 

Less: Equity-Based Compensation Adjustment*

 

(25,522

)

(15,543

)

(0.06

)

(0.05

)

Non-GAAP Measurement

 

$

98,669

 

$

101,330

 

$

0.36

 

$

0.33

 

*                                         Includes expense related to employee stock options, employee stock purchase plan and restricted stock rights under Statement of Financial Accounting Standards No. 123 (revised 2004), “Share-Based Payment.”  See explanation above regarding the Company’s practice on reporting non-GAAP financial measures. The per share equity-based compensation adjustment is presented as calculated, and the GAAP and non-GAAP earnings (loss) per share information is also presented as calculated. The sum of these measures, as presented, may differ due to the impact of rounding.

 

 


 

ACTIVISION, INC. AND SUBSIDIARIES

FINANCIAL INFORMATION

For the Quarter and Year Ended March 31, 2008

(Amounts in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Quarter Ended

 

Percent

 

 

 

March 31, 2008

 

March 31, 2007

 

Increase

 

 

 

Amount

 

% of Total

 

Amount

 

% of Total

 

(Decrease)

 

Geographic Revenue Mix

 

 

 

 

 

 

 

 

 

 

 

North America

 

$

366,620

 

61

%

$

116,125

 

37

%

216

%

International

 

235,831

 

39

%

196,387

 

63

%

20

%

Total net revenues

 

$

602,451

 

100

%

$

312,512

 

100

%

93

%

 

 

 

 

 

 

 

 

 

 

 

 

Segment/Platform Mix

 

 

 

 

 

 

 

 

 

 

 

Publishing:

 

 

 

 

 

 

 

 

 

 

 

Console

 

$

446,595

 

74

%

$

167,400

 

54

%

167

%

Hand-held

 

26,742

 

4

%

32,232

 

10

%

-17

%

PC

 

40,198

 

7

%

9,443

 

3

%

326

%

Total publishing net revenues

 

$

513,535

 

85

%

$

209,075

 

67

%

146

%

 

 

 

 

 

 

 

 

 

 

 

 

Distribution:

 

 

 

 

 

 

 

 

 

 

 

Console

 

$

69,656

 

12

%

$

74,022

 

24

%

-6

%

Hand-held

 

14,320

 

2

%

23,661

 

7

%

-39

%

PC

 

4,940

 

1

%

5,754

 

2

%

-14

%

Total distribution net revenues

 

$

88,916

 

15

%

$

103,437

 

33

%

-14

%

Total net revenues

 

$

602,451

 

100

%

$

312,512

 

100

%

93

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Year Ended

 

Percent

 

 

 

March 31, 2008

 

March 31, 2007

 

Increase

 

 

 

Amount

 

% of Total

 

Amount

 

% of Total

 

(Decrease)

 

Geographic Revenue Mix

 

 

 

 

 

 

 

 

 

 

 

North America

 

$

1,761,753

 

61

%

$

753,376

 

50

%

134

%

International

 

1,136,383

 

39

%

759,636

 

50

%

50

%

Total net revenues

 

$

2,898,136

 

100

%

$

1,513,012

 

100

%

92

%

 

 

 

 

 

 

 

 

 

 

 

 

Segment/Platform Mix

 

 

 

 

 

 

 

 

 

 

 

Publishing:

 

 

 

 

 

 

 

 

 

 

 

Console

 

$

2,129,799

 

73

%

$

886,795

 

59

%

140

%

Hand-held

 

219,299

 

8

%

153,357

 

10

%

43

%

PC

 

156,068

 

5

%

78,886

 

5

%

98

%

Total publishing net revenues

 

$

2,505,166

 

86

%

$

1,119,038

 

74

%

124

%

 

 

 

 

 

 

 

 

 

 

 

 

Distribution:

 

 

 

 

 

 

 

 

 

 

 

Console

 

$

268,794

 

9

%

$

238,662

 

16

%

13

%

Hand-held

 

94,918

 

4

%

122,293

 

8

%

-22

%

PC

 

29,258

 

1

%

33,019

 

2

%

-11

%

Total distribution net revenues

 

$

392,970

 

14

%

$

393,974

 

26

%

0

%

Total net revenues

 

$

2,898,136

 

100

%

$

1,513,012

 

100

%

92

%

 


 

ACTIVISION, INC. AND SUBSIDIARIES

FINANCIAL INFORMATION

For the Quarter and Year Ended March 31, 2008

 

 

 

Quarter Ended

 

Quarter Ended

 

Year Ended

 

Year Ended

 

 

 

March 31, 2008

 

March 31, 2007

 

March 31, 2008

 

March 31, 2007

 

Publishing Net Revenues

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

PC

 

8

%

5

%

6

%

7

%

 

 

 

 

 

 

 

 

 

 

Console

 

87

%

80

%

85

%

80

%

Sony PlayStation 3

 

18

%

12

%

13

%

5

%

Sony PlayStation 2

 

21

%

49

%

29

%

45

%

Microsoft Xbox 360

 

27

%

12

%

31

%

18

%

Nintendo Wii

 

21

%

5

%

12

%

5

%

Other

 

0

%

2

%

0

%

7

%

 

 

 

 

 

 

 

 

 

 

Hand-held

 

5

%

15

%

9

%

13

%

Sony PlayStation Portable

 

1

%

8

%

3

%

4

%

Nintendo Dual Screen

 

4

%

5

%

5

%

5

%

Nintendo Game Boy Advance

 

0

%

2

%

1

%

4

%

 

 

 

 

 

 

 

 

 

 

Total publishing net revenues

 

100

%

100

%

100

%

100

%