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) |
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|
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| ||||
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|
|
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|
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|
|
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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 |
| ||||
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|
|
|
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|
|
|
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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 |
| ||||
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|
|
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|
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|
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Net income (loss) |
| $ | 44,163 |
| $ | (14,422 | ) | $ | 344,883 |
| $ | 85,787 |
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| ||||
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 |
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|
|
| ||
Current assets: |
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|
|
|
| ||
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 |
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|
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LIABILITIES AND SHAREHOLDERS’ EQUITY |
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|
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Current liabilities: |
|
|
|
|
| ||
Accounts payable |
| $ | 129,896 |
| $ | 136,517 |
|
Accrued expenses and other liabilities |
| 426,175 |
| 204,652 |
| ||
|
|
|
|
|
| ||
Total current liabilities |
| 556,071 |
| 341,169 |
| ||
|
|
|
|
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Other liabilities |
| 26,710 |
| 41,246 |
| ||
|
|
|
|
|
| ||
Total liabilities |
| 582,781 |
| 382,415 |
| ||
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|
|
|
|
| ||
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 |
| Product |
| Sales and |
| General and |
| Total Costs and |
| |||||
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 |
| Basic |
| Diluted |
| ||||||||
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 |
| Product |
| Sales and |
| General and |
| Total Costs and |
| |||||
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 |
| Basic |
| Diluted |
| ||||||||
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 |
| Product |
| Sales and |
| General and |
| Total Costs and |
| |||||
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 |
| Basic |
| Diluted |
| ||||
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 |
| Product |
| Sales and |
| General and |
| Total Costs and |
| |||||
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 |
| Basic |
| Diluted |
| ||||
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)
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| Quarter Ended |
| Percent |
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| March 31, 2008 |
| March 31, 2007 |
| Increase |
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| Amount |
| % of Total |
| Amount |
| % of Total |
| (Decrease) |
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Geographic Revenue Mix |
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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 | % |
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Segment/Platform Mix |
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Publishing: |
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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 | % |
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Distribution: |
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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 | % |
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| Year Ended |
| Percent |
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|
| March 31, 2008 |
| March 31, 2007 |
| Increase |
| ||||||
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| Amount |
| % of Total |
| Amount |
| % of Total |
| (Decrease) |
| ||
Geographic Revenue Mix |
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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 | % |
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Segment/Platform Mix |
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Publishing: |
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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 | % |
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Distribution: |
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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 |
|
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PC |
| 8 | % | 5 | % | 6 | % | 7 | % |
|
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|
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|
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 | % |
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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 | % |
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Total publishing net revenues |
| 100 | % | 100 | % | 100 | % | 100 | % |