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Activision Reports Record Third Quarter Fiscal Year 2007 Preliminary Results |
-- #2 U.S. Console and Handheld Publisher for Fiscal Third Quarter -- -- Four Top 11 Best-Selling Titles in December Quarter -- -- Raises FY 2007 Net Revenue Outlook to $1.40 Billion and Diluted E.P.S. Outlook --SANTA MONICA, Calif., Feb 07, 2007 (BUSINESS WIRE) -- Activision, Inc. (Nasdaq: ATVI) today announced preliminary financial results for the fiscal 2007 third quarter and nine months ended December 31, 2006, additional preliminary financial results for the fiscal second quarter ended September 30, 2006 and outlook for future periods. The fiscal 2007 results and outlook do not take into account any adjustments for additional expenses that may be required in connection with the ongoing review of Activision's historical stock option grant practices, discussed more fully in our recent press releases and filings with the SEC. The fiscal 2007 results also exclude any adjustments that may be required by the occurrence of an event subsequent to this release that affects the estimates inherent in the process of preparing those results and should be considered preliminary until Activision files its quarterly reports on Form 10-Q for the second and third quarters of fiscal 2007. Further, the historical results do not take into account any restatements that may be required in connection with that review, or the determination of the company's audit committee on January 23, 2007 that the company's financial statements (as well as earnings releases and similar communications) relating to the fiscal periods referred to in this release (and other periods dating back to fiscal 1992) should no longer be relied upon, and, therefore, are presented for comparative purposes only. For the third quarter of fiscal 2007, ended December 31, 2006, the company expects net revenues of $822.8 million, an increase of $6.6 million as compared to net revenues of $816.2 million previously reported for the third quarter of fiscal 2006. Net income for the fiscal third quarter is expected to rise to $124.8 million, an 84% increase compared with net income of $67.9 million previously reported for the previous-year fiscal third quarter. Earnings per diluted share for the quarter are expected to be $0.41, as compared with earnings per diluted share previously reported for the prior-year fiscal third quarter of $0.23. Excluding the impact of equity-based compensation, the company expects to report earnings per diluted share of $0.42 for the fiscal third quarter. For the fiscal second quarter ended September 30, 2006, Activision still expects to report net revenues of $188.2 million, as compared to net revenues of $222.5 million previously reported for the second quarter of the prior fiscal year. The company expects to report a loss per share of $0.06, as compared to the previously reported loss per share of $0.05 for the previous fiscal year's second quarter. Excluding the impact of equity-based compensation, the company expects to report a loss per share of $0.05 for the fiscal second quarter. For the nine-month period ended December 31, 2006, the company expects net revenues of $1.20 billion, as compared to net revenues of $1.28 billion previously reported for the comparable nine-month period of last fiscal year. The company also expects earnings per diluted share for the nine-month period of $0.30, an increase of 76% as compared to earnings per diluted share of $0.17 previously reported for the comparable period of last fiscal year. Excluding the impact of equity-based compensation, the company expects earnings per diluted share of $0.33 for the nine months ended December 31, 2006. Robert Kotick, Chairman and CEO of Activision, Inc., commented, "Net revenues for Activision's third quarter of fiscal 2007 are expected to be the highest in the company's history. For the month of November, Activision was the #1 U.S. console and handheld publisher and the #2 publisher for the fiscal third quarter. We achieved these results with a smaller, focused slate that was anchored by four key titles - Call of Duty(R) 3, Marvel(TM): Ultimate Alliance(TM), Tony Hawk's Project 8(TM) and Guitar Hero II(TM) and strong execution by our global sales and marketing teams." Kotick continued, "During the quarter, we grew both the Call of Duty and Tony Hawk franchises and established two new franchises, Marvel: Ultimate Alliance and Guitar Hero. Strong launches for both PLAYSTATION(R) 3 in the U.S. and the Wii(TM) in the U.S. and Europe, as well as continued consumer adoption of the Xbox 360(TM) worldwide, suggests a great deal of momentum for next-generation videogame system adoption in the coming years. As we look toward the future, we remain excited about the improving market conditions for our industry. The combination of our product slate, the opportunities created by next-generation console systems, the increasing installed base of current-generation console hardware, continued growth in handhelds, as well as higher barriers to entry for new and existing competitors, positions us well to expand our net revenues, earnings and operating margins in the future." Business Highlights Activision's fiscal third quarter results were driven by solid performance of its titles across all platforms worldwide. During the fiscal third quarter, Activision was the only publisher that had four of the top 11 best-selling games in the U.S., according to The NPD Group - Guitar Hero II, Call of Duty 3, Marvel: Ultimate Alliance and Tony Hawk's Project 8. Between October and December, Activision released three launch titles for the PLAYSTATION 3 -- Call of Duty 3, Marvel(TM): Ultimate Alliance and Tony Hawk's Project 8, and five launch titles for the Wii -- Call of Duty 3, Marvel: Ultimate Alliance, Rapala Tournament Fishing, Tony Hawk's Downhill Jam and World Series of Poker: Tournament of Champions. Additionally, the company released Guitar Hero II for the PlayStation(R) 2 computer entertainment system and several handheld games including GUN(TM) Showdown, Activision(R) Hits Remixed, Over the Hedge(TM): Hammy Goes Nuts! and Spider-Man(TM): Battle for New York. Other business highlights for the fiscal third quarter include: -- According to The NPD Group, during the quarter, Activision ranked as a top-three U.S. publisher on the Xbox 360, Wii and PLAYSTATION 3 and was the only publisher to achieve this status across all of the next-generation consoles. -- During the quarter, Activision ranked as the #1 U.S. publisher on the PlayStation 2 computer entertainment system, according to The NPD Group. -- Guitar Hero II was the #1 console and handheld game in dollars for the U.S. for the month of December and the #2 game overall for the quarter, according to The NPD Group. Additionally, during the quarter, the company announced that Guitar Hero II is currently in development for the Xbox 360 and will be released this spring. -- According to The NPD Group, for the third quarter, Call of Duty 3 was the #4 best-selling console and handheld game in dollars in the U.S. -- Marvel: Ultimate Alliance was the #10 best-selling console and handheld game in dollars for the third quarter, according to The NPD Group. -- For the eighth consecutive year, the Tony Hawk franchise was a top 10 brand in the U.S. for the fiscal third quarter, according to The NPD Group. For the fourth quarter, Activision will release Call of Duty(R): Roads to Victory for the PSP worldwide, as well as Tony Hawk's Project 8, Call of Duty 3 and Marvel: Ultimate Alliance for PLAYSTATION 3 in Europe. Company Outlook For fiscal year 2007, Activision is increasing its net revenue outlook to $1.40 billion, from $1.37 billion which was given on January 25, 2007. The company also is raising its diluted earnings per share outlook for the year to $0.21. Excluding the impact of equity-based compensation, the company expects diluted earnings per share of $0.26. For its fiscal fourth quarter, the company is increasing its net revenue outlook to $200 million, from its previous outlook of $170 million, based on better visibility regarding the allocation of PLAYSTATION 3 hardware to its European distribution business. The company now expects a loss per share of $0.09 for the fiscal fourth quarter. Excluding the impact of equity-based compensation, the company expects a loss per share of $0.08, as compared to its previous loss per share outlook of $0.09. As previously announced, the company believes that its fiscal fourth quarter results will be significantly impacted by higher legal expenses and professional fees relating primarily to its internal review of historical stock option practices, including the special sub-committee review, Nasdaq proceedings, informal SEC inquiry and derivative litigation, and the company's decision to move the release of Enemy Territory(TM): QUAKE Wars into fiscal year 2008. The company also reaffirmed its fiscal year 2008 net revenue outlook which is expected 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 preliminary financial results from the company's third fiscal quarter and outlook for future periods. 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) 457-2653 in the U.S. A "replay" of the call will be available for two business days beginning approximately two hours after the call's conclusion. If you would like to take advantage of this special service, you can access it by calling (719) 457-0820 and entering the pass-code: 5492474. In addition, the replay on the Internet will be archived at http://www.activision.com. Non-GAAP Financial Measures Activision provides net earnings (loss) per share data which excludes the impact of expenses related to stock options, employee stock purchase plan, and restricted stock under Statement of Financial Accounting Standards No. 123 (revised 2004), "Share Based Payment" (FAS 123R) and the associated tax benefit. This financial measure is not determined in accordance with generally accepted accounting principles (GAAP), and the exclusion of those amounts has the effect of increasing non-GAAP earnings per share by that same amount per share as compared to GAAP earnings per share for the period. Management compensates for this exclusion by presenting the most comparable GAAP measure, net income, directly ahead of non-GAAP net income (loss) in this earnings release and by providing a reconciliation that shows and describes the adjustments made in the accompanying tables. Management does not believe this exclusion is material, particularly when such measure is disclosed with its most comparable GAAP financial measure, net income (loss). Management believes that the presentation of this non-GAAP financial measure provides investors with additional useful information to measure the company's financial performance because it allows for a better comparison of results in the periods reported herein to those in prior periods that did not include FAS 123R equity-based compensation expense. This non-GAAP financial measure should be considered in addition to, not as a substitute for or superior to, financial measures determined in accordance with GAAP. Non-GAAP net earnings (loss) do not include certain expenses required to be recorded in order to present earnings in accordance with GAAP and the term non-GAAP net earnings (loss) does not have a standardized meaning. Therefore, other companies may use the same or similarly named measure but exclude different items, which may not provide investors a comparable view of the company's performance in relation to other companies in the same industry. 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 $1.47 billion for the fiscal year ended March 31, 2006. Activision maintains operations in the U.S., Canada, the United Kingdom, France, Germany, Italy, Japan, Australia, Sweden, Spain, the Netherlands and South Korea. 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. Cautionary Notes Regarding Financial Results and Outlook and Other Forward-Looking Statements: The financial results and outlook reported in this press release do not take into account any adjustments or restatements that may be required in connection with the ongoing review of the company's historical stock option grant practices by the sub-committee of independent directors of the company. Further information on that review is discussed in the company's filings with the SEC. As previously disclosed, the company's financial statements, earnings releases and similar communications relating to fiscal periods commencing with the company's 1992 fiscal year should no longer be relied upon and historical financial results are presented for comparative purposes only. The company expects to restate previously issued financial statements relating to such periods and any restatement of the company's historical financial statements could result in changes to the company's fiscal year 2007 financial statements. Further, until the company files its quarterly reports on Form 10-Q for the quarters ended September 30, 2006 and December 31, 2006, the company will be required to adjust the financial results for those quarters to account for any subsequent events that affect the estimates inherent in the process of preparing results for those quarters and those results should be considered preliminary until the company files those reports. 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, the adjustments and restatements referred to above, the findings of the special sub-committee, the effect of the special sub-committee's review and conclusions and developments on the informal inquiry opened by the SEC in July 2006 and the derivative litigation filed in July 2006 against certain current and former directors and officers of the company, the possibility that additional claims and proceedings will be commenced, including additional stockholder litigation, employee litigation, and additional action by the SEC and/or other regulatory agencies, expenses resulting from or relating to the special sub-committee review and related regulatory proceedings and litigation, the company's ability to timely file required reports with the SEC, and the possibility that the company will be subject to delisting from the Nasdaq Global Select Market due to its inability to timely file periodic reports under the Securities Exchange Act of 1934. Other factors that could cause Activision's actual future results to differ materially from those expressed in the forward-looking statements set forth in this release include, without limitation, other litigation (unrelated to stock option granting practices), sales of the company's titles, shifts 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), declines in software pricing, product returns and price protection, product delays, retail acceptance of the company's products, adoption rate of new hardware and related software, 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, natural disasters, integration of recently acquired subsidiaries, and identification of suitable future acquisition opportunities. These important factors and other factors that potentially could cause actual future results to differ materially from current expectations are described in our filings with the SEC, including the company's most recent annual report on Form 10-K, quarterly report on Form 10-Q and current reports on Form 8-K dated October 25, 2006; November 6, 2006; November 15, 2006; and January 25, 2007. Readers of this press release are referred to such filings. The forward-looking statements in this press release are based upon information available to the company as of the date of the release, and the company assumes no obligations to update any such forward-looking statement. The company may change its intention, belief or expectation, at any time and without notice, based upon any changes in the enumerated factors or in the company's assumptions, or otherwise, and forward-looking statements believed to be true when made may ultimately prove to be incorrect. These statements are not guarantees of future performance and are subject to risks, uncertainties and other factors, some of which are beyond the company's control and may cause our actual results to differ materially from our current expectations.
ACTIVISION, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except earnings per share data)
-------------------------- --------- --------- ----------- -----------
Quarter ended Nine months ended
December 31, December 31,
-------------------------- ------------------- -----------------------
2006 2005 2006 2005
-------------------------- --------- --------- ----------- -----------
Net revenues $822,833 $816,242 $1,199,074 $1,279,875
Costs and expenses:
Cost of sales - product
costs 383,020 367,685 619,017 617,021
Cost of sales - software
royalties and
amortization 77,384 104,264 105,567 139,267
Cost of sales -
intellectual property
licenses 23,566 26,376 37,838 55,765
Product development 37,147 53,139 88,346 99,013
Sales and marketing 90,159 155,999 158,056 258,957
General and
administrative 44,438 24,712 88,989 65,780
-------------------------- --------- --------- ----------- -----------
Total operating
expenses 655,714 732,175 1,097,813 1,235,803
-------------------------- --------- --------- ----------- -----------
Operating income 167,119 84,067 101,261 44,072
Investment income, net 9,724 9,162 26,031 22,840
-------------------------- --------- --------- ----------- -----------
Income before income tax
provision 176,843 93,229 127,292 66,912
Income tax provision 52,072 25,284 37,728 15,794
-------------------------- --------- --------- ----------- -----------
Net income $124,771 $67,945 $89,564 $51,118
========================== ========= ========= =========== ===========
-------------------------- --------- --------- ----------- -----------
Basic earnings per share $0.44 $0.25 $0.32 $0.19
Weighted average common
shares outstanding 282,512 274,965 280,499 272,089
-------------------------- --------- --------- ----------- -----------
-------------------------- --------- --------- ----------- -----------
Diluted earnings per share $0.41 $0.23 $0.30 $0.17
Weighted average common
shares outstanding
assuming dilution 305,197 298,752 302,398 295,963
-------------------------- --------- --------- ----------- -----------
-------------------------- --------- --------- ----------- -----------
The fiscal 2007 results and outlook do not take into account any
adjustments for additional expenses that may be required in
connection with the previously announced ongoing review of
Activision's historical stock option grant practices. The fiscal 2007
results also exclude any adjustments that may be required by the
occurrence of an event subsequent to this release that affects the
estimates inherent in the process of preparing those results and
should be considered preliminary until Activision files its quarterly
reports on Form 10-Q for the second and third quarters of fiscal
2007. Further, the historical results do not take into account any
restatements that may be required in connection with that review, or
the determination of the company's audit committee on January 23,
2007 that the company's financial statements (as well as earnings
releases and similar communications) relating to the fiscal periods
referred to in this release (and other periods dating back to fiscal
1992) should no longer be relied upon, and, therefore, are presented
for comparative purposes only.
ACTIVISION, INC. AND SUBSIDIARIES
RECONCILIATION OF GAAP NET INCOME TO NON-GAAP NET INCOME
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except earnings per share data)
----------------------------------- --------- -------------- ---------
Quarter ended December 31, 2006
----------------------------------- ----------------------------------
GAAP Equity-Based Non-GAAP
Compensation
Adjustment(a)
----------------------------------- --------- -------------- ---------
Net revenues $822,833 $- $822,833
Costs and expenses:
Cost of sales - product costs 383,020 - 383,020
Cost of sales - software
royalties and amortization 77,384 1,771 75,613
Cost of sales - intellectual
property licenses 23,566 - 23,566
Product development 37,147 1,193 35,954
Sales and marketing 90,159 1,315 88,844
General and administrative 44,438 2,988 41,450
----------------------------------- --------- -------------- ---------
Total operating expenses 655,714 7,267 648,447
----------------------------------- --------- -------------- ---------
Operating income (loss) 167,119 (7,267) 174,386
Investment income, net 9,724 - 9,724
----------------------------------- --------- -------------- ---------
Income before income tax provision
(benefit) 176,843 (7,267) 184,110
Income tax provision (benefit) 52,072 (2,827) 54,899
----------------------------------- --------- -------------- ---------
Net income (loss) $124,771 $(4,440) $129,211
=================================== ========= ============== =========
----------------------------------- --------- -------------- ---------
Basic earnings (loss) per share $0.44 $(0.02) $0.46
Weighted average common shares
outstanding 282,512 282,512 282,512
----------------------------------- --------- -------------- ---------
----------------------------------- --------- -------------- ---------
Diluted earnings (loss) per share $0.41 $(0.01) $0.42
Weighted average common shares
outstanding assuming dilution 305,197 305,197 305,197
----------------------------------- --------- -------------- ---------
----------------------------------- --------- -------------- ---------
(a)Includes expense related to stock options, employee stock purchase
plan, and restricted stock 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 fiscal 2007 results and outlook do not take into account any
adjustments for additional expenses that may be required in
connection with the previously announced ongoing review of
Activision's historical stock option grant practices. The fiscal 2007
results also exclude any adjustments that may be required by the
occurrence of an event subsequent to this release that affects the
estimates inherent in the process of preparing those results and
should be considered preliminary until Activision files its quarterly
reports on Form 10-Q for the second and third quarters of fiscal
2007. Further, the historical results do not take into account any
restatements that may be required in connection with that review, or
the determination of the company's audit committee on January 23,
2007 that the company's financial statements (as well as earnings
releases and similar communications) relating to the fiscal periods
referred to in this release (and other periods dating back to fiscal
1992) should no longer be relied upon, and, therefore, are presented
for comparative purposes only.
ACTIVISION, INC. AND SUBSIDIARIES
RECONCILIATION OF GAAP NET INCOME TO NON-GAAP NET INCOME
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except earnings per share data)
------------------------------- ----------- -------------- -----------
Nine months ended December 31, 2006
------------------------------- --------------------------------------
GAAP Equity-Based Non-GAAP
Compensation
Adjustment(a)
------------------------------- ----------- -------------- -----------
Net revenues $1,199,074 $- $1,199,074
Costs and expenses:
Cost of sales - product
costs 619,017 - 619,017
Cost of sales - software
royalties and amortization 105,567 1,796 103,771
Cost of sales - intellectual
property licenses 37,838 - 37,838
Product development 88,346 3,443 84,903
Sales and marketing 158,056 3,160 154,896
General and administrative 88,989 8,535 80,454
------------------------------- ----------- -------------- -----------
Total operating
expenses 1,097,813 16,934 1,080,879
------------------------------- ----------- -------------- -----------
Operating income (loss) 101,261 (16,934) 118,195
Investment income, net 26,031 - 26,031
------------------------------- ----------- -------------- -----------
Income (loss) before income tax
benefit 127,292 (16,934) 144,226
Income tax provision (benefit) 37,728 (6,587) 44,315
------------------------------- ----------- -------------- -----------
Net income (loss) $89,564 $(10,347) $99,911
=============================== =========== ============== ===========
------------------------------- ----------- -------------- -----------
Basic earnings (loss) per share $0.32 $(0.04) $0.36
Weighted average common shares
outstanding 280,499 280,499 280,499
------------------------------- ----------- -------------- -----------
------------------------------- ----------- -------------- -----------
Diluted earnings (loss) per
share $0.30 $(0.03) $0.33
Weighted average common shares
outstanding assuming dilution 302,398 302,398 302,398
------------------------------- ----------- -------------- -----------
------------------------------- ----------- -------------- -----------
(a)Includes expense related to stock options, employee stock purchase
plan, and restricted stock 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 fiscal 2007 results and outlook do not take into account any
adjustments for additional expenses that may be required in
connection with the previously announced ongoing review of
Activision's historical stock option grant practices. The fiscal 2007
results also exclude any adjustments that may be required by the
occurrence of an event subsequent to this release that affects the
estimates inherent in the process of preparing those results and
should be considered preliminary until Activision files its quarterly
reports on Form 10-Q for the second and third quarters of fiscal
2007. Further, the historical results do not take into account any
restatements that may be required in connection with that review, or
the determination of the company's audit committee on January 23,
2007 that the company's financial statements (as well as earnings
releases and similar communications) relating to the fiscal periods
referred to in this release (and other periods dating back to fiscal
1992) should no longer be relied upon, and, therefore, are presented
for comparative purposes only.
ACTIVISION, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
----------------------------------------------------------------------
December 31, March 31,
2006 2006
--------------------------------------------- ------------ -----------
ASSETS
--------------------------------------------- ------------ -----------
Current assets:
Cash, cash equivalents and short-term
investments $805,200 $944,960
Accounts receivable, net 454,699 28,782
Inventories 85,800 61,483
Software development 97,727 40,260
Intellectual property licenses 31,128 4,973
Deferred income taxes 5,148 9,664
Other current assets 15,627 25,933
--------------------------------------------- ------------ -----------
Total current assets 1,495,329 1,116,055
--------------------------------------------- ------------ -----------
Software development 3,876 20,359
Intellectual property licenses 62,300 82,073
Property and equipment, net 46,713 45,368
Deferred income taxes 21,923 53,813
Other assets 8,259 1,409
Goodwill 188,398 100,446
--------------------------------------------- ------------ -----------
Total assets $1,826,798 $1,419,523
============================================= ============ ===========
--------------------------------------------- ------------ -----------
LIABILITIES AND SHAREHOLDERS' EQUITY
--------------------------------------------- ------------ -----------
Current liabilities:
Accounts payable $193,873 $88,994
Accrued expenses 203,670 103,169
--------------------------------------------- ------------ -----------
Total current liabilities 397,543 192,163
--------------------------------------------- ------------ -----------
Other liabilities 41,128 1,776
--------------------------------------------- ------------ -----------
Total liabilities 438,671 193,939
--------------------------------------------- ------------ -----------
Shareholders' equity:
Common stock - -
Additional paid-in capital 891,379 823,735
Retained earnings 478,077 388,513
Accumulated other comprehensive income 18,671 16,369
Unearned compensation - (3,033)
--------------------------------------------- ------------ -----------
Total shareholders' equity 1,388,127 1,225,584
--------------------------------------------- ------------ -----------
Total liabilities and
shareholders' equity $1,826,798 $1,419,523
============================================= ============ ===========
--------------------------------------------- ------------ -----------
The fiscal 2007 results and outlook do not take into account any
adjustments for additional expenses that may be required in
connection with the previously announced ongoing review of
Activision's historical stock option grant practices. The fiscal 2007
results also exclude any adjustments that may be required by the
occurrence of an event subsequent to this release that affects the
estimates inherent in the process of preparing those results and
should be considered preliminary until Activision files its quarterly
reports on Form 10-Q for the second and third quarters of fiscal
2007. Further, the historical results do not take into account any
restatements that may be required in connection with that review, or
the determination of the company's audit committee on January 23,
2007 that the company's financial statements (as well as earnings
releases and similar communications) relating to the fiscal periods
referred to in this release (and other periods dating back to fiscal
1992) should no longer be relied upon, and, therefore, are presented
for comparative purposes only.
ACTIVISION, INC. AND SUBSIDIARIES
FINANCIAL INFORMATION
For the Quarter and Nine Months Ended December 31, 2006 and 2005
(Amounts in thousands)
Percent
Increase
Quarter Ended (Decrease)
--------------------------------------- ----------
December 31, 2006 December 31, 2005
Amount % of Amount % of
Total Total
------------------ ----------- ------ - ----------- ------ ----------
Geographic Revenue
Mix
North America $463,019 56% $402,314 49% 15%
International 359,814 44% 413,928 51% (13%)
------------------ ----------- ------ - ----------- ------ ----------
Total net
revenues $822,833 100% $816,242 100% 1%
------------------ ----------- ------ - ----------- ------ ----------
------------------ ----------- ------ - ----------- ------ ----------
Segment/Platform
Mix
Publishing:
Console $543,709 66% $479,686 59% 13%
Hand-held 71,294 9% 74,032 9% (4%)
PC 33,368 4% 113,782 14% (71%)
------------------ ----------- ------ - ----------- ------ ----------
Total publishing
net revenues 648,371 79% 667,500 82% (3%)
------------------ ----------- ------ - ----------- ------ ----------
Distribution:
Console 102,515 12% 95,408 12% 7%
Hand-held 57,047 7% 37,154 4% 54%
PC 14,900 2% 16,180 2% (8%)
------------------ ----------- ------ - ----------- ------ ----------
Total
distribution net
revenues 174,462 21% 148,742 18% 17%
------------------ ----------- ------ - ----------- ------ ----------
Total net
revenues $822,833 100% $816,242 100% 1%
------------------ ----------- ------ - ----------- ------ ----------
Percent
Increase
Nine Months Ended (Decrease)
--------------------------------------- ----------
December 31, 2006 December 31, 2005
Amount % of Amount % of
Total Total
------------------ ----------- ------ - ----------- ------ ----------
Geographic Revenue
Mix
North America $636,882 53% $626,538 49% 2%
International 562,192 47% 653,337 51% (14%)
------------------ ----------- ------ - ----------- ------ ----------
Total net
revenues $1,199,074 100% $1,279,875 100% (6%)
------------------ ----------- ------ - ----------- ------ ----------
------------------ ----------- ------ - ----------- ------ ----------
Segment/Platform
Mix
Publishing:
Console $718,034 60% $730,073 57% (2%)
Hand-held 121,080 10% 143,650 11% (16%)
PC 69,423 6% 154,735 12% (55%)
------------------ ----------- ------ - ----------- ------ ----------
Total publishing
net revenues 908,537 76% 1,028,458 80% (12%)
------------------ ----------- ------ - ----------- ------ ----------
Distribution:
Console 164,640 14% 163,344 13% 1%
Hand-held 98,632 8% 60,229 5% 64%
PC 27,265 2% 27,844 2% (2%)
------------------ ----------- ------ - ----------- ------ ----------
Total
distribution net
revenues 290,537 24% 251,417 20% 16%
------------------ ----------- ------ - ----------- ------ ----------
Total net
revenues $1,199,074 100% $1,279,875 100% (6%)
------------------ ----------- ------ - ----------- ------ ----------
The fiscal 2007 results and outlook do not take into account any
adjustments for additional expenses that may be required in
connection with the previously announced ongoing review of
Activision's historical stock option grant practices. The fiscal 2007
results also exclude any adjustments that may be required by the
occurrence of an event subsequent to this release that affects the
estimates inherent in the process of preparing those results and
should be considered preliminary until Activision files its quarterly
reports on Form 10-Q for the second and third quarters of fiscal
2007. Further, the historical results do not take into account any
restatements that may be required in connection with that review, or
the determination of the company's audit committee on January 23,
2007 that the company's financial statements (as well as earnings
releases and similar communications) relating to the fiscal periods
referred to in this release (and other periods dating back to fiscal
1992) should no longer be relied upon, and, therefore, are presented
for comparative purposes only.
ACTIVISION, INC. AND SUBSIDIARIES
FINANCIAL INFORMATION
For the Quarter and Nine Months Ended December 31, 2006 and 2005
-------- -------- -------- --------
Nine Nine
Quarter Quarter Months Months
Ended Ended Ended Ended
December December December December
31, 31, 31, 31,
2006 2005 2006 2005
---------------------------------- -------- -------- -------- --------
Publishing Net Revenues
PC 5% 17% 8% 15%
---------------------------------- -------- -------- -------- --------
Console 84% 72% 79% 71%
---------------------------------- -------- -------- -------- --------
Sony PlayStation 3 4% 0% 3% 0%
Sony PlayStation 2 45% 39% 44% 38%
Microsoft Xbox 360 22% 11% 19% 7%
Microsoft Xbox 5% 15% 6% 19%
Nintendo Wii 7% 0% 5% 0%
Nintendo GameCube 1% 7% 2% 7%
Hand-held 11% 11% 13% 14%
---------------------------------- -------- -------- -------- --------
Sony PlayStation Portable 4% 3% 4% 5%
Nintendo Dual Screen 4% 2% 4% 2%
Nintendo Game Boy Advance 3% 6% 5% 7%
---------------------------------- -------- -------- -------- --------
Total publishing net revenues 100% 100% 100% 100%
------------------------------------------- -------- -------- --------
The fiscal 2007 results and outlook do not take into account any
adjustments for additional expenses that may be required in
connection with the previously announced ongoing review of
Activision's historical stock option grant practices. The fiscal 2007
results also exclude any adjustments that may be required by the
occurrence of an event subsequent to this release that affects the
estimates inherent in the process of preparing those results and
should be considered preliminary until Activision files its quarterly
reports on Form 10-Q for the second and third quarters of fiscal
2007. Further, the historical results do not take into account any
restatements that may be required in connection with that review, or
the determination of the company's audit committee on January 23,
2007 that the company's financial statements (as well as earnings
releases and similar communications) relating to the fiscal periods
referred to in this release (and other periods dating back to fiscal
1992) should no longer be relied upon, and, therefore, are presented
for comparative purposes only.
ACTIVISION, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except earnings per share data)
----------------------------------------------------------------------
Quarter ended Six months ended
September 30, September 30,
----------------------------------------------------------------------
2006 2005 2006 2005
----------------------------------------------------------------------
Net revenues $188,172 $222,540 $376,241 $463,633
Costs and expenses:
Cost of sales - product costs 127,374 112,582 235,997 249,336
Cost of sales - software
royalties and amortization 8,933 20,427 28,183 35,003
Cost of sales - intellectual
property licenses 4,356 8,449 14,272 29,389
Product development 25,777 28,072 51,199 45,874
Sales and marketing 31,703 56,640 67,897 102,958
General and administrative 23,101 22,917 44,551 41,068
----------------------------------------------------------------------
Total operating expenses 221,244 249,087 442,099 503,628
----------------------------------------------------------------------
Operating loss (33,072) (26,547) (65,858) (39,995)
Investment income, net 8,032 6,330 16,307 13,678
----------------------------------------------------------------------
Loss before income tax benefit (25,040) (20,217) (49,551) (26,317)
Income tax benefit (7,659) (6,975) (14,344) (9,490)
----------------------------------------------------------------------
Net loss $(17,381)$(13,242)$(35,207)$(16,827)
======================================================================
----------------------------------------------------------------------
Basic loss per share $(0.06) $(0.05) $(0.13) $(0.06)
Weighted average common shares
outstanding 280,627 272,129 279,487 270,643
----------------------------------------------------------------------
----------------------------------------------------------------------
Diluted loss per share $(0.06) $(0.05) $(0.13) $(0.06)
Weighted average common shares
outstanding assuming dilution 280,627 272,129 279,487 270,643
----------------------------------------------------------------------
----------------------------------------------------------------------
The fiscal 2007 results and outlook do not take into account any
adjustments for additional expenses that may be required in
connection with the previously announced ongoing review of
Activision's historical stock option grant practices. The fiscal 2007
results also exclude any adjustments that may be required by the
occurrence of an event subsequent to this release that affects the
estimates inherent in the process of preparing those results and
should be considered preliminary until Activision files its quarterly
reports on Form 10-Q for the second and third quarters of fiscal
2007. Further, the historical results do not take into account any
restatements that may be required in connection with that review, or
the determination of the company's audit committee on January 23,
2007 that the company's financial statements (as well as earnings
releases and similar communications) relating to the fiscal periods
referred to in this release (and other periods dating back to fiscal
1992) should no longer be relied upon, and, therefore, are presented
for comparative purposes only.
ACTIVISION, INC. AND SUBSIDIARIES
RECONCILIATION OF GAAP NET LOSS TO NON-GAAP NET LOSS
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except earnings per share data)
----------------------------------- --------- -------------- ---------
Quarter ended September 30, 2006
----------------------------------- ----------------------------------
GAAP Equity-Based Non-GAAP
Compensation
Adjustment(a)
----------------------------------- --------- -------------- ---------
Net revenues $188,172 $- $188,172
Costs and expenses:
Cost of sales - product costs 127,374 - 127,374
Cost of sales - software
royalties and amortization 8,933 - 8,933
Cost of sales - intellectual
property licenses 4,356 - 4,356
Product development 25,777 774 25,003
Sales and marketing 31,703 790 30,913
General and administrative 23,101 2,900 20,201
----------------------------------- --------- -------------- ---------
Total operating expenses 221,244 4,464 216,780
----------------------------------- --------- -------------- ---------
Operating loss (33,072) (4,464) (28,608)
Investment income, net 8,032 - 8,032
----------------------------------- --------- -------------- ---------
Loss before income tax benefit (25,040) (4,464) (20,576)
Income tax benefit (7,659) (1,783) (5,876)
----------------------------------- --------- -------------- ---------
Net loss $(17,381) $(2,681) $(14,700)
=================================== ========= ============== =========
----------------------------------- --------- -------------- ---------
Basic loss per share $(0.06) $(0.01) $(0.05)
Weighted average common shares
outstanding 280,627 280,627 280,627
----------------------------------- --------- -------------- ---------
----------------------------------- --------- -------------- ---------
Diluted loss per share $(0.06) $(0.01) $(0.05)
Weighted average common shares
outstanding assuming dilution 280,627 280,627 280,627
----------------------------------- --------- -------------- ---------
----------------------------------- --------- -------------- ---------
(a)Includes expense related to stock options, employee stock purchase
plan, and restricted stock 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 fiscal 2007 results and outlook do not take into account any
adjustments for additional expenses that may be required in
connection with the previously announced ongoing review of
Activision's historical stock option grant practices. The fiscal 2007
results also exclude any adjustments that may be required by the
occurrence of an event subsequent to this release that affects the
estimates inherent in the process of preparing those results and
should be considered preliminary until Activision files its quarterly
reports on Form 10-Q for the second and third quarters of fiscal
2007. Further, the historical results do not take into account any
restatements that may be required in connection with that review, or
the determination of the company's audit committee on January 23,
2007 that the company's financial statements (as well as earnings
releases and similar communications) relating to the fiscal periods
referred to in this release (and other periods dating back to fiscal
1992) should no longer be relied upon, and, therefore, are presented
for comparative purposes only.
ACTIVISION, INC. AND SUBSIDIARIES
RECONCILIATION OF GAAP NET LOSS TO NON-GAAP NET LOSS
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except earnings per share data)
----------------------------------- --------- -------------- ---------
Six months ended September 30,
2006
----------------------------------- ----------------------------------
GAAP Equity-Based Non-GAAP
Compensation
Adjustment(a)
----------------------------------- --------- -------------- ---------
Net revenues $376,241 $- $376,241
Costs and expenses:
Cost of sales - product costs 235,997 - 235,997
Cost of sales - software
royalties and amortization 28,183 25 28,158
Cost of sales - intellectual
property licenses 14,272 - 14,272
Product development 51,199 2,250 48,949
Sales and marketing 67,897 1,845 66,052
General and administrative 44,551 5,547 39,004
----------------------------------- --------- -------------- ---------
Total operating expenses 442,099 9,667 432,432
----------------------------------- --------- -------------- ---------
Operating loss (65,858) (9,667) (56,191)
Investment income, net 16,307 - 16,307
----------------------------------- --------- -------------- ---------
Loss before income tax benefit (49,551) (9,667) (39,884)
Income tax benefit (14,344) (3,760) (10,584)
----------------------------------- --------- -------------- ---------
Net loss $(35,207) $(5,907) $(29,300)
=================================== ========= ============== =========
----------------------------------- --------- -------------- ---------
Basic loss per share $(0.13) $(0.02) $(0.10)
Weighted average common shares
outstanding 279,487 279,487 279,487
----------------------------------- --------- -------------- ---------
----------------------------------- --------- -------------- ---------
Diluted loss per share $(0.13) $(0.02) $(0.10)
Weighted average common shares
outstanding assuming dilution 279,487 279,487 279,487
----------------------------------- --------- -------------- ---------
----------------------------------- --------- -------------- ---------
(a)Includes expense related to stock options, employee stock purchase
plan, and restricted stock 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 fiscal 2007 results and outlook do not take into account any
adjustments for additional expenses that may be required in
connection with the previously announced ongoing review of
Activision's historical stock option grant practices. The fiscal 2007
results also exclude any adjustments that may be required by the
occurrence of an event subsequent to this release that affects the
estimates inherent in the process of preparing those results and
should be considered preliminary until Activision files its quarterly
reports on Form 10-Q for the second and third quarters of fiscal
2007. Further, the historical results do not take into account any
restatements that may be required in connection with that review, or
the determination of the company's audit committee on January 23,
2007 that the company's financial statements (as well as earnings
releases and similar communications) relating to the fiscal periods
referred to in this release (and other periods dating back to fiscal
1992) should no longer be relied upon, and, therefore, are presented
for comparative purposes only.
ACTIVISION, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
----------------------------------------------------------------------
September 30, March 31,
2006 2006
-------------------------------------------- ------------- -----------
ASSETS
-------------------------------------------- ------------- -----------
Current assets:
Cash, cash equivalents and short-term
investments $747,395 $944,960
Accounts receivable, net 97,086 28,782
Inventories 71,063 61,483
Software development 95,516 40,260
Intellectual property licenses 23,996 4,973
Deferred income taxes 6,761 9,664
Other current assets 37,204 25,933
-------------------------------------------- ------------- -----------
Total current assets 1,079,021 1,116,055
-------------------------------------------- ------------- -----------
Software development 22,147 20,359
Intellectual property licenses 71,100 82,073
Property and equipment, net 45,185 45,368
Deferred income taxes 69,737 53,813
Other assets 7,274 1,409
Goodwill 188,254 100,446
-------------------------------------------- ------------- -----------
Total assets $1,482,718 $1,419,523
============================================ ============= ===========
-------------------------------------------- ------------- -----------
LIABILITIES AND SHAREHOLDERS' EQUITY
-------------------------------------------- ------------- -----------
Current liabilities:
Accounts payable $83,417 $88,994
Accrued expenses 115,609 103,169
-------------------------------------------- ------------- -----------
Total current liabilities 199,026 192,163
-------------------------------------------- ------------- -----------
Other liabilities 41,070 1,776
-------------------------------------------- ------------- -----------
Total liabilities 240,096 193,939
-------------------------------------------- ------------- -----------
Shareholders' equity:
Common stock - -
Additional paid-in capital 876,736 823,735
Retained earnings 353,306 388,513
Accumulated other comprehensive income 12,580 16,369
Unearned compensation - (3,033)
-------------------------------------------- ------------- -----------
Total shareholders' equity 1,242,622 1,225,584
-------------------------------------------- ------------- -----------
Total liabilities and
shareholders' equity $1,482,718 $1,419,523
============================================ ============= ===========
-------------------------------------------- ------------- -----------
(a)The amount shown above for Accounts Receivable, Net at September
30, 2006 is approximately $1 million higher than the amount
previously disclosed in our November 6, 2006 press release due to
subsequent events which affected previously recorded estimates for
uncollectible accounts.
The fiscal 2007 results and outlook do not take into account any
adjustments for additional expenses that may be required in
connection with the previously announced ongoing review of
Activision's historical stock option grant practices. The fiscal 2007
results also exclude any adjustments that may be required by the
occurrence of an event subsequent to this release that affects the
estimates inherent in the process of preparing those results and
should be considered preliminary until Activision files its quarterly
reports on Form 10-Q for the second and third quarters of fiscal
2007. Further, the historical results do not take into account any
restatements that may be required in connection with that review, or
the determination of the company's audit committee on January 23,
2007 that the company's financial statements (as well as earnings
releases and similar communications) relating to the fiscal periods
referred to in this release (and other periods dating back to fiscal
1992) should no longer be relied upon, and, therefore, are presented
for comparative purposes only.
SOURCE: Activision, Inc. Activision, Inc. Kristin Southey, Vice President, Investor Relations 310-255-2635 ksouthey@activision.com Maryanne Lataif, Vice President, Corporate Communications 310-255-2704 mlataif@activision.com Copyright Business Wire 2007 News Provided by COMTEX |
