Exhibit 99.1
Contacts: Kristin Mulvihill Southey
Vice President, Investor Relations
(310) 255-2635
ksouthey@activision.com
Maryanne Lataif
Vice President, Corporate Communications
(310) 255-2704
mlataif@activision.com
ACTIVISION REPORTS THIRD QUARTER AND
NINE MONTH FISCAL 2006 RESULTS
Santa Monica, CA -February 6, 2006 - Activision, Inc. (Nasdaq: ATVI) today
announced financial results for the third quarter and nine months ended December
31, 2005.
Net revenues for the third quarter were a record $816.2 million or 20%
higher, as compared to $680.1 million for the third quarter of fiscal year 2005.
Net income for the third quarter was $67.9 million, compared with net income of
$97.3 million for the previous fiscal third quarter. Diluted earnings per share
were $0.23 per diluted share, compared to $0.35 per diluted share reported for
the prior fiscal third quarter.
For the nine-month period ended December 31, 2005, the company announced
record net revenues of $1.28 billion, as compared to net revenues of $1.20
billion reported for the nine-month period last fiscal year. The company also
announced earnings per diluted share for the nine-month period of $0.17, as
compared to earnings per diluted share of $0.49 for the same period last fiscal
year.
Robert Kotick, Chairman and CEO of Activision, Inc., commented, "Net
revenues for the third quarter and first nine months of fiscal year 2006 were
the highest in the company's history. According to NPD we were the #2 overall
software publisher in the U.S. and remain the number #1 market share publisher
for the Xbox 360. We ended the quarter with approximately $765 million in cash
and short-term investments and $1.2 billion in shareholders' equity."
Activision Announces Q3 2006 Earnings Results
Kotick continued, "Despite these achievements, we were disappointed with
our earnings performance this quarter which was the result of weaker than
expected market conditions in the U.S. and Europe due to the transition from
current-generation consoles to the next generation of video game systems."
"In the long term, we are planning for market growth that historically
follows the introduction of new console hardware. To leverage this future growth
and prepare for fiscal 2008, which we expect will be the biggest year in
Activision's history, we will continue to focus on investment in our product
development resources and intellectual property portfolio, growing our
international operations and optimizing our worldwide cost structure and
resource allocation," Kotick added.
Business Highlights
Between October and December, Activision released eight new games: Tony
Hawk's American Wasteland, Call of Duty(R) 2, Call of Duty(R) 2: Big Red One,
Quake 4(TM), GUN(TM), True Crime(R): New York City, Shrek(R) SuperSlam and The
Movies(TM).
Business highlights include:
o Call of Duty 2 was the #2 best-selling PC game in the U.S. for the
quarter, according to The NPD Group.
o Call of Duty 2 was also the #1 Xbox 360 title in the U.S., according
to The NPD Group. The Xbox 360 game had the highest attach rate of any
console launch in video game history.
o GUN was the #1 best-selling game based on a new intellectual property
in the U.S., according to The NPD Group. GUN marks the third
consecutive year that Activision has created the #1 new intellectual
property in the marketplace.
o Tony Hawk's American Wasteland was the #4 best-selling title in the
U.S., according to The NPD Group. The game marks the seventh title in
the franchise that has been a Top 10 holiday title.
o For the quarter, Activision was the #2 publisher overall and the #1
publisher overall for the Xbox 360 platform, according to The NPD
Group.
o On November 9, Activision and Marvel Entertainment expanded their
long-term, broad-based strategic alliance by signing a multi-year
extension to their current video game licensing agreements for the
Spider-Man(TM) and X-Men(TM) franchises through 2017.
o On November 9, Activision signed an agreement with Spider-Man
Merchandising L.P., a limited partnership between Marvel
Entertainment, Inc. (NYSE: MVL) and Sony Pictures Consumer Products
Inc., to extend its exclusive worldwide publishing rights to the
phenomenally successful Spider-Man(R) motion pictures through 2017.
o On November 11, Activision signed a multi-year agreement with
DreamWorks Animation which grants Activision the exclusive video game
rights to four upcoming feature films from DreamWorks Animation --
"Bee Movie," "Kung Fu Panda," "Rex Havoc" and "How to Train Your
Dragon." The deal also extends Activision's video game rights beyond
"Shrek 3" to include potential future films in the "Shrek" franchise.
Company Outlook
Based on weaker than expected market conditions in the third quarter,
Activision revised its outlook for the fiscal year 2006 and the fourth quarter.
For the fiscal year, Activision expects net revenues of $1.405 billion to $1.415
billion and earnings per share of $0.09 to $0.11. For the fourth quarter, the
company expects $125 million to $135 million in net revenues and a loss per
share of $0.07 to $0.09.
For fiscal year 2007, Activision expects net revenues to slightly exceed $1
billion and a modest increase in year-over-year earnings per share, excluding
the impact of adopting FASB 123(R), which relates to the expensing of stock
options and other share-based payments. For fiscal year 2008, the company
expects net revenues to exceed $1.6 billion.
Conference Call
Today at 4:30 p.m. EST, Activision's management will host a conference call
and Webcast to discuss its third quarter fiscal year 2006 results and outlook.
The company welcomes all members of the financial and media communities to visit
the "Investor Relations" area of www.activision.com to listen to the conference
call via live Webcast or to listen to the call live by dialing into (719)
457-2637 in the U.S.
About Activision
Headquartered in Santa Monica, California, Activision, Inc. is a leading
worldwide developer, publisher and distributor of interactive entertainment and
leisure products. Founded in 1979, Activision posted net revenues of $1.4
billion for the fiscal year ended March 31, 2005.
Activision maintains operations in the U.S., Canada, the United Kingdom,
France, Germany, Italy, Spain, Japan, Australia, Scandinavia and the
Netherlands. More information about Activision and its products can be found on
the company's World Wide Web site, which is located at www.activision.com.
Note: The statements made in this press release that are not historical facts
are "forward looking" statements. These forward-looking statements are based on
current expectations and assumptions that are subject to risks and
uncertainties. The company cautions readers of this press release that a number
of important factors could cause Activision's actual future results to differ
materially from those expressed in any such forward-looking statements.
Such factors include, without limitation, sales of the company's titles during
the remainder of fiscal year 2006, consumer spending trends, the seasonal and
cyclical nature of the interactive game market, the company's ability to predict
consumer preferences among competing hardware platforms, including
next-generation hardware, software pricing, product returns and price
protection, product delays, retail acceptance of our products, delays in
hardware launches, industry competition, rapid changes in technology and
industry standards, protection of proprietary rights, maintenance of
relationships with key personnel, vendors and third-party developers,
international economic and political conditions, integration of recently
acquired subsidiaries and identification of suitable future acquisition
opportunities. These important factors and other factors that potentially could
affect the company's financial results are described in our filings with the
Securities and Exchange Commission, including the company's most recent Annual
Report on Form 10-K and Quarterly Reports on Form 10-Q. Readers of this press
release are referred to such filings. The company may change its intention,
belief or expectation, at any time and without notice, based upon any changes in
such factors, in the company's assumptions or otherwise. The company undertakes
no obligation to release publicly any revisions to its forward-looking
statements to reflect events or circumstances after the date hereof or to
reflect the occurrence of unanticipated events.
(Tables to Follow)
<page>
ACTIVISION, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except earnings per share data)
<table>
<caption>
Quarter ended December 31, Nine months ended December 31,
2005 2004 2005 2004
___________ ____________ _____________ ______________
<s> <c> <c> <c> <c>
Net revenues $ 816,242 $ 680,094 $ 1,279,875 $ 1,201,996
Costs and expenses:
Cost of sales - product costs 367,685 316,494 617,021 528,759
Cost of sales - software royalties and amortization 104,264 58,200 139,267 116,846
Cost of sales - intellectual property licenses 26,376 22,598 55,765 57,797
Product development 53,139 25,068 99,013 66,054
Sales and marketing 155,999 105,248 258,957 200,216
General and administrative 24,712 15,407 65,780 44,854
---------- --------- ------------ ------------
Total operating expenses 732,175 543,015 1,235,803 1,014,526
Operating income 84,067 137,079 44,072 187,470
Investment income, net 9,162 3,197 22,840 7,954
Income before provision for income taxes 93,229 140,276 66,912 195,424
Income tax provision 25,284 43,014 15,794 60,662
---------- --------- ------------ ------------
Net income $ 67,945 $ 97,262 $ 51,118 $ 134,762
Basic earnings per share $ 0.25 $ 0.39 $ 0.19 $ 0.55
Weighted average common shares outstanding 274,965 248,569 272,089 246,577
Diluted earnings per share $ 0.23 $ 0.35 $ 0.17 $ 0.49
Weighted average common shares outstanding
assuming dilution 298,752 276,608 295,963 274,521
Shares and earnings per share data have been restated to reflect our four-for-three stock splits for shareholders of record as of
March 7, 2005, paid March 22, 2005 and for shareholders of record as of October 10, 2005, paid October 24, 2005.
</table>
<page>
ACTIVISION, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
December 31, March 31,
2005 2005
----------- ---------
ASSETS
Current assets:
Cash, cash equivalents and short-term investments $ 764,606 $ 840,864
Accounts receivable, net 414,492 109,144
Inventories 84,828 48,018
Software development 24,528 73,096
Intellectual property licenses 5,382 21,572
Deferred income taxes 8,861 6,760
Other current assets 23,751 23,010
----------- ----------
Total current assets 1,326,448 1,122,464
Software development 11,799 18,518
Intellectual property licenses 80,073 14,154
Property and equipment, net 39,180 30,490
Deferred income taxes 36,758 28,041
Other assets 1,234 1,635
Goodwill 100,462 91,661
----------- ----------
Total assets $ 1,595,954 $ 1,306,963
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 213,874 $ 108,984
Accrued expenses 171,384 98,067
----------- ----------
Total current liabilities 385,258 207,051
Other liabilities 1,216 -
----------- ----------
Total liabilities 386,474 207,051
Shareholders' equity:
Common stock - -
Additional paid-in capital 812,435 741,680
Retained earnings 397,732 346,614
Accumulated other comprehensive income 2,521 11,618
Unearned compensation (3,208) -
Total shareholders' equity 1,209,480 1,099,912
----------- ----------
Total liabilities and shareholders' equity $ 1,595,954 $ 1,306,963
<page>
ACTIVISION, INC. AND SUBSIDIARIES
FINANCIAL INFORMATION
For the Quarter and Nine Months Ended December 31, 2005 and 2004
(Amounts in thousands)
<table>
<caption>
Percent
Increase
Quarter Ended (Decrease)
------------------------------------------------------------------------------------
December 31, 2005 December 31, 2004
Amount % of Total Amount % of Total
------------------------------------------------------------------------------------
<s> <c> <c> <c> <c> <c>
Geographic Revenue Mix
North America $ 402,314 49% $ 344,342 51% 17%
International 413,928 51% 335,752 49% 23%
------------------------------------------------------------------------------------
Total net revenues $ 816,242 100% $ 680,094 100% 20%
Segment/Platform Mix
Publishing:
Console $ 479,686 59% $ 382,400 56% 25%
Hand-held 74,032 9% 63,243 9% 17%
PC 113,782 14% 68,410 11% 66%
------------------------------------------------------------------------------------
Total publishing net revenues $ 667,500 82% $ 514,053 76% 30%
Distribution:
Console $ 95,408 12% $ 134,503 20% -29%
Hand-held 37,154 4% 7,923 1% 369%
PC 16,180 2% 23,615 3% -31%
------------------------------------------------------------------------------------
Total distribution net revenues $ 148,742 18% $ 166,041 24% -10%
------------------------------------------------------------------------------------
Total net revenues $ 816,242 100% $ 680,094 100% 20%
</table>
<table>
<caption>
Percent
Increase
Nine Months Ended (Decrease)
------------------------------------------------------------------------------------
December 31, 2005 December 31, 2004
Amount % of Total Amount % of Total
------------------------------------------------------------------------------------
<s> <c> <c> <c> <c> <c>
Geographic Revenue Mix
North America $ 626,538 49% $ 627,238 52% 0%
International 653,337 51% 574,758 48% 14%
------------------------------------------------------------------------------------
Total net revenues $1,279,875 100% $1,201,996 100% 6%
Segment/Platform Mix
Publishing:
Console $ 730,073 57% $ 647,069 ` 54% 13%
Hand-held 143,650 11% 105,342 9% 36%
PC 154,735 12% 189,689 15% -18%
------------------------------------------------------------------------------------
Total publishing net revenues $1,028,458 80% $ 942,100 78% 9%
Distribution:
Console $ 163,344 13% $ 203,626 17% -20%
Hand-held 60,229 5% 15,134 1% 298%
PC 27,844 2% 41,136 4% -32%
------------------------------------------------------------------------------------
Total distribution net revenues $ 251,417 20% $ 259,896 22% -3%
------------------------------------------------------------------------------------
Total net revenues $1,279,875 100% $1,201,996 100% 6%
</table>
<page>
ACTIVISION, INC. AND SUBSIDIARIES
FINANCIAL INFORMATION
For the Quarter and Nine Months Ended December 31, 2005 and 2004
<table>
<caption>
Quarter Ended Quarter Ended Nine Months Ended Nine Months Ended
December 31, 2005 December 31, 2004 December 31, 2005 December 31, 2004
----------------- ----------------- ----------------- -----------------
<s> <c> <c> <c> <c>
Publishing Net Revenues
PC 17% 13% 15% 20%
----------------- ----------------- ----------------- -----------------
Console 72% 75% 71% 69%
----------------- ----------------- ----------------- -----------------
Sony PlayStation 2 39% 44% 38% 41%
Microsoft Xbox 15% 21% 19% 18%
Microsoft Xbox 360 11% 0% 7% 0%
Nintendo GameCube 7% 10% 7% 10%
Hand-held 11% 12% 14% 11%
----------------- ----------------- ----------------- -----------------
Nintendo Game Boy Advance 6% 10% 7% 10%
Nintendo Dual Screen 2% 2% 2% 1%
Sony PlayStation Portable 3% 0% 5% 0%
----------------- ----------------- ----------------- -----------------
Total publishing net revenues 100% 100% 100% 100%
----------------- ----------------- ----------------- -----------------
</table>