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Activision Reports Record Net Revenues for Fiscal 2007 |
- Company Expects FY 2008 Net Revenue Growth of 19% to Record $1.8 Billion - - Company Anticipates FY 2008 Operating Income to More than Double -SANTA MONICA, Calif., May 31, 2007 (BUSINESS WIRE) -- Activision, Inc. (Nasdaq:ATVI) today announced record net revenues for the fiscal year ended March 31, 2007. Net revenues for the fiscal year ended March 31, 2007 were $1.51 billion, as compared to $1.47 billion for the fiscal year ended March 31, 2006. Net income for the fiscal year was $85.8 million, or $0.28 per diluted share, as compared to net income of $40.3 million, or $0.14 per diluted share reported for the last fiscal year. Excluding the impact of expenses relating to equity-based compensation, the company reported earnings per diluted share of $0.33 for the fiscal year. This compares to the company's previous outlook of $0.26 per share excluding equity-based compensation expense. Net revenues for the fourth quarter ended March 31, 2007 were $313 million, as compared to $188 million that the company reported for the fourth quarter of the last fiscal year. For the fourth quarter, the company reported a net loss of $14.4 million, or a loss per share of $0.05, as compared to a net loss of $9.1 million, or a loss per share of $0.03 for the fiscal year 2006 fourth quarter. Excluding equity-based compensation expense, the company reported a loss per share of $0.04 for the fourth quarter. Additionally, the company has updated its preliminary financial results for the nine months ended December 31, 2006. The company's previous preliminary earnings per diluted share estimate for the nine months ended December 31, 2006 was $0.30 including equity-based compensation expense. Excluding the impact of equity-based compensation expense, the company's previous preliminary earnings per diluted share for the nine months were $0.33. As a result of updating its financial statements for charges related to its review of historical stock option practices, and subsequent events adjustments primarily related to a change in the company's effective tax rate, the company's updated nine month earnings per diluted share, including equity-based compensation expense, increased to $0.33. Excluding the impact of equity-based compensation expense, the company's updated nine month earnings per diluted share were $0.37. Robert Kotick, Chairman and CEO of Activision, Inc., commented, "Activision's fiscal year 2007 net revenues, which were the highest in the company's history, totaled $1.5 billion, marking 15 consecutive years of revenue growth. We delivered solid results for the fourth quarter driven by the success of Guitar Hero II(TM) and Call of Duty(R) 3, as well as better than expected performance of the company's distribution business. Our balance sheet remains one of the strongest in the industry with nearly $1 billion in cash and short-term investments and $1.4 billion in shareholders' equity. "We expect fiscal 2008 to be our largest and most profitable year ever. The combination of our first quarter slate and superb release schedule for the balance of the year, Guitar Hero's rapid rise as a popular cultural phenomenon and our solid leadership position on all of the major gaming platforms, should provide us with a competitive advantage as we enter the growth phase of the new hardware cycle. We remain focused on expanding operating margins by growing our balanced franchise portfolio, increasing our international publishing capabilities and continuing to improve operational efficiencies worldwide," Kotick added. Business Highlights Activision's fiscal year results were driven by strong worldwide consumer response to Call of Duty 3, Marvel(TM): Ultimate Alliance(TM), Tony Hawk's Project 8(TM) and Guitar Hero II, as well as the strength of its distribution business. During the fiscal year, the company grew its U.S. console market share, was the #2 U.S. third-party software publisher overall, and had two top-10 best-selling titles overall in the U.S., Call of Duty 3 and Guitar Hero II, according to The NPD Group. During the fiscal year, Activision successfully integrated RedOctane into its business and expanded the Guitar Hero franchise globally. According to The NPD Group, in the U.S. Guitar Hero II was the #2 best-selling franchise overall and the #1 best-selling franchise on the PlayStation(R) 2 computer entertainment system. During the fourth quarter, Activision released three titles for the PLAYSTATION 3 in Europe - Tony Hawk's Project 8, Call of Duty 3 and Marvel Ultimate Alliance as well as Call of Duty: Roads to Victory(TM) for the PSP worldwide. Other business highlights are as follows: -- During the fiscal year, Activision was the only U.S. publisher to rank as a top three publisher for both the recently released Wii and PLAYSTATION 3, according to The NPD Group. -- According to The NPD Group, Call of Duty 3 ended the fiscal year as the #3 best-selling game in the U.S. on the Xbox 360. -- On May 11, 2007, Activision completed its acquisition of DemonWare, the leading provider of network middleware technologies for console and PC games headquartered in Dublin, Ireland. -- On June 6, 2006, Activision acquired video game publisher RedOctane, Inc. the publisher of the popular Guitar Hero franchise. -- On May 3, 2006, Activision announced that MGM Interactive and EON Productions Ltd. awarded the company the rights to develop and publish interactive entertainment games based on the James Bond license through 2014. For the first quarter of fiscal 2008, Activision has already released Guitar Hero II for the Xbox 360, as well as games based on Sony Pictures Entertainment's Columbia Pictures and Marvel Studios' "Spider-Man 3(TM)," and DreamWorks Animation's "Shrek the Third(TM)." At the end of June, the company will release TRANSFORMERS: The Game in the U.S., which is based on DreamWorks Pictures' and Paramount Pictures' upcoming feature film that opens theatrically in North America on July 4, 2007. The company will release TRANSFORMERS: The Game internationally in the second quarter concurrent with the theatrical release. Company Outlook For fiscal 2008, Activision increased its net revenues outlook to $1.8 billion. Additionally, the company expects operating income to grow in excess of 100% over fiscal 2007. The company also expects earnings per diluted share of $0.45, including the impact of equity-based compensation expense. Excluding the impact of equity-based compensation expense, the company expects earnings per diluted share of $0.55. For the first quarter of the fiscal year 2008, the company expects net revenues of $425 million and earnings per diluted share of $0.03, including the impact of equity-based compensation expense. The company's earnings per diluted share outlook for the first quarter excluding the impact of equity-based compensation expense is expected to be $0.05. The company expects that its first quarter outlook will be impacted by legal expenses and professional fees relating primarily to its internal review of historical stock option practices, including the completion of restatement-related filings and Nasdaq proceedings, matters relating to the pending informal SEC inquiry and defense of the pending derivative litigation. The company also announced that it would move the release of Enemy Territory(TM): Quake Wars into the second quarter. Stock Option Review and Restatement On Friday, May 25, 2007, Activision filed an amended annual report on Form 10-K/A for the fiscal year ended March 31, 2006. Consistent with the estimate released by Activision on May 3, 2007, the Form 10-K/A reports a total of approximately $66.7 million in additional pre-tax ($45.4 million after-tax) non-cash equity-based compensation expense as a result of the stock option inquiry over the thirteen year period from April 1, 1993 through March 31, 2006. All but $2.6 million of the additional pre-tax non-cash equity-based compensation expense relates to periods prior to fiscal year 2006, and eighty percent of the additional pre-tax non-cash equity-based compensation expense relates to periods prior to April 1, 2003. In addition, Activision will report $0.6 million in additional pre-tax non-cash equity-based compensation expense during the quarter ended June 30, 2006. Activision expects that it will shortly be in a position to file an amended quarterly report on Form 10-Q/A for the quarter ended June 30, 2006 and quarterly reports on Form 10-Q for the quarters ended September 30 and December 31, 2006. The completion of these filings will bring the company current in its periodic reporting obligations and will restore the company's compliance with Nasdaq listing requirements. The company also intends to file its annual report on Form 10-K for the fiscal year ended March 31, 2007 on or before June 14, 2007, and to that end has filed for an automatic 15-day extension of the deadline for that filing to June 14, 2007. The foregoing summary is qualified in its entirety by, and investors are urged to carefully read, the Form 10-K/A for the fiscal year ended March 31, 2006 that was filed last week. Conference Call Today at 4:30 p.m. EDT, Activision's management will host a conference call and Webcast to discuss its fiscal 2007 year-end results and outlook for fiscal 2008. 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 a live Webcast or to listen to the call live by dialing in at (719) 457-2637 in the U.S. Non-GAAP Financial Measures Activision provides net earnings (loss) per share data excluding the impact of expenses related to stock options, employee stock purchase plans, restricted stock awards and other share-based compensation and the associated tax benefits. Prior to April 1, 2006, Activision accounted for equity-based compensation under Accounting Principles Board, Opinion No. 25, "Accounting for Stock Issued to Employees" ("APB No. 25"). In accordance with APB No. 25 the company historically used the intrinsic value method to account for equity-based compensation. As of April 1, 2006, the company accounts for equity-based compensation using the fair value method under Statement of Financial Accounting Standards No. 123 (revised 2004), "Share Based Payment" ("FAS 123R"). 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. Activision recognizes that there are limitations associated with the use of this non-GAAP financial measure as it does not reflect all of the expenses associated with our results as determined in accordance with GAAP and may reduce comparability to other companies that calculate similar non-GAAP measures differently. Management compensates for the limitations resulting from the exclusion of expenses related to stock-based compensation by considering the amount and impact of equity-based compensation expenses separately and by considering the company's GAAP as well as non-GAAP results and, in this release, by presenting the most comparable GAAP measure, net income (loss), directly ahead of non-GAAP net income (loss) in this release and by providing a reconciliation that shows and describes the adjustments made in the accompanying tables. Management does not believe the limitations resulting from this exclusion are material, particularly when this non-GAAP financial 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 historical periods. 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. This non-GAAP financial measure is not based on a comprehensive set of accounting rules or principles 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 $1.5 billion for the fiscal year ended March 31, 2007. Activision maintains operations in the U.S., Canada, the United Kingdom, France, Germany, Ireland, Italy, Scandinavia, Spain, the Netherlands, Australia, Japan 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 Note Regarding Forward-looking Statements: Information in this press release that involves Activision's expectations, plans, intentions or strategies regarding the future are forward-looking statements that are not facts and involve a number of risks and uncertainties. In this release they are identified by references to dates after the date of this release and words such as "will," "will be," "remains," "to be," "plans," "believes", "may", "expects," "intends," and similar expressions. These risks and uncertainties include, but are not limited to, further action by the Nasdaq Listing and Hearing Review Council relating to the continuation of the listing of Activision's common stock on the Nasdaq market; the completion of work by Activision management and Activision's auditors on the restatement of Activision's financial statements in response to the findings of the special sub-committee of independent directors established in July 2006 to review our historical stock option granting practices; the completion and filing of overdue quarterly reports and amendments to a previously filed quarterly report with the SEC; the further implementation, acceptance and effectiveness of the remedial measures recommended or adopted by the sub-committee, the board and the Activision; the outcome of 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 Activision relating to the Activision's stock option granting practices, and 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. Other factors that could cause the 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 Activision's titles, shifts in consumer spending trends, the seasonal and cyclical nature of the interactive game market, the Activision'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 Activision's products, adoption rate and availability 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, customers, vendors and third-party developers, international economic and political conditions, integration of recently acquired subsidiaries and identification of suitable future acquisition opportunities, limitations on our ability to issue stock and options, foreign exchange rate changes, and the risks identified in the Activision's most recent annual report on Form 10-K/A and recent reports on Form 8-K. The forward-looking statements in this release are based upon information available to the Activision as of the date of this release, and the Activision assumes no obligations to update any such forward-looking statement. 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 our control and may cause 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 March 31, Year ended March 31,
---------------------- ----------------------- -----------------------
2007 2006 2007 2006
---------------------- ----------- ----------- ----------- -----------
Restated Restated
----------- ----------- ----------- -----------
Net revenues $312,512 $188,125 $1,513,012 $1,468,000
Costs and expenses:
Cost of sales -
product costs 181,425 117,853 799,587 734,874
Cost of sales -
software royalties
and amortization 26,295 8,555 132,353 147,822
Cost of sales -
intellectual
property licenses 8,287 1,901 46,125 57,666
Product development 44,678 32,953 133,073 132,651
Sales and marketing 40,074 24,285 196,213 283,395
General and
administrative 40,867 29,138 132,514 96,366
---------------------- ----------- ----------- ----------- -----------
Total operating
expenses 341,626 214,685 1,439,865 1,452,774
---------------------- ----------- ----------- ----------- -----------
Operating income
(loss) (29,114) (26,560) 73,147 15,226
Investment income, net 10,647 7,790 36,678 30,630
---------------------- ----------- ----------- ----------- -----------
Income (loss) before
income tax provision (18,467) (18,770) 109,825 45,856
Income tax provision
(benefit) (4,045) (9,642) 24,038 5,605
---------------------- ----------- ----------- ----------- -----------
Net income (loss) $(14,422) $(9,128) $85,787 $40,251
====================== =========== =========== =========== ===========
---------------------- ----------- ----------- ----------- -----------
Basic earnings (loss)
per share $(0.05) $(0.03) $0.31 $0.15
Weighted average
common shares
outstanding 282,991 276,506 281,114 273,177
---------------------- ----------- ----------- ----------- -----------
---------------------- ----------- ----------- ----------- -----------
Diluted earnings
(loss) per share $(0.05) $(0.03) $0.28 $0.14
Weighted average
common shares
outstanding assuming
dilution 282,991 276,506 305,339 294,002
---------------------- ----------- ----------- ----------- -----------
----------------------------------------------------------------------
The quarterly and annual fiscal 2006 and first quarter fiscal 2007
statements of operations and balance sheets reflect the correction of
errors in the determination of the measurement date as defined in
Accounting Principles Board Opinion No. 25, "Accounting for Stock
Issued to Employees", with respect to certain employee options
granted and modified in our fiscal years between 1992 and 2006. These
errors were identified by a special subcommittee of independent
members of the company's Board of Directors. The findings of the
special sub-committee's review were announced on March 8, 2007. As a
result, we restated previously issued consolidated financial
statements included in our recently filed Annual Report on Form 10-
K/A for the fiscal year ended March 31, 2006, and we expect to file
shortly restated previously issued consolidated financial statements
for the first quarter of fiscal 2007 on Form 10-Q/A.
Additionally, the statement of operations and balance sheets for the
second and third quarters of fiscal 2007 presented in this earnings
release have been updated from previously announced preliminary
financial results, and reflect subsequent event adjustments primarily
related to a change in the company's effective tax rate, changes in
expense accrual estimates and adjustments to equity-based
compensation expense.
Throughout this press release, all referenced amounts for prior
periods and prior period comparisons reflect the balances and amounts
on a restated basis.
ACTIVISION, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
----------------------------------------------------------------------
March 31, March 31,
2007 2006
----------- -----------
As Restated
---------------------------------------------- ----------- -----------
ASSETS
---------------------------------------------- ----------- -----------
Current assets:
Cash, cash equivalents and short-term
investments $954,849 $944,960
Accounts receivable, net 148,694 28,782
Inventories 91,231 61,483
Software development 107,779 40,260
Intellectual property licenses 27,784 4,973
Deferred income taxes 51,564 9,664
Other current assets 19,332 25,933
---------------------------------------------- ----------- -----------
Total current assets 1,401,233 1,116,055
---------------------------------------------- ----------- -----------
Software development 23,143 20,359
Intellectual property licenses 72,490 82,073
Property and equipment, net 46,540 45,368
Deferred income taxes 48,791 52,545
Other assets 6,376 1,409
Goodwill 195,374 100,446
---------------------------------------------- ----------- -----------
Total assets $1,793,947 $1,418,255
============================================== =========== ===========
---------------------------------------------- -----------------------
LIABILITIES AND SHAREHOLDERS' EQUITY
----------------------------------------------------------------------
Current liabilities:
Accounts payable $136,517 $88,994
Accrued expenses and other liabilities 204,652 104,862
---------------------------------------------- ----------- -----------
Total current liabilities 341,169 193,856
---------------------------------------------- ----------- -----------
Other liabilities 41,246 1,776
---------------------------------------------- ----------- -----------
Total liabilities 382,415 195,632
---------------------------------------------- ----------- -----------
Shareholders' equity:
Common stock - -
Additional paid-in capital 963,553 867,297
Retained earnings 427,777 341,990
Accumulated other comprehensive income 20,202 16,369
Unearned compensation - (3,033)
---------------------------------------------- ----------- -----------
Total shareholders' equity 1,411,532 1,222,623
---------------------------------------------- ----------- -----------
Total liabilities and
shareholders' equity $1,793,947 $1,418,255
============================================== =========== ===========
---------------------------------------------- ----------- -----------
The quarterly and annual fiscal 2006 and first quarter fiscal 2007
statements of operations and balance sheets reflect the correction of
errors in the determination of the measurement date as defined in
Accounting Principles Board Opinion No. 25, "Accounting for Stock
Issued to Employees", with respect to certain employee options
granted and modified in our fiscal years between 1992 and 2006. These
errors were identified by a special subcommittee of independent
members of the company's Board of Directors. The findings of the
special sub-committee's review were announced on March 8, 2007. As a
result, we restated previously issued consolidated financial
statements included in our recently filed Annual Report on Form 10-
K/A for the fiscal year ended March 31, 2006, and we expect to file
shortly restated previously issued consolidated financial statements
for the first quarter of fiscal 2007 on Form 10-Q/A.
Additionally, the statement of operations and balance sheets for the
second and third quarters of fiscal 2007 presented in this earnings
release have been updated from previously announced preliminary
financial results, and reflect subsequent event adjustments primarily
related to a change in the company's effective tax rate, changes in
expense accrual estimates and adjustments to equity-based
compensation expense.
Throughout this press release, all referenced amounts for prior
periods and prior period comparisons reflect the balances and amounts
on a restated basis.
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 Cost of Product Sales and General Total
March 31, 2007 Sales - Develop- Market- and Operating
Software ment ing Admini- Expenses
Royalties strative
and
Amorti-
zation
---------------------------- --------- --------- --------- -----------
GAAP Measurement $26,295 $44,678 $40,074 $40,867 $341,626
Less: Equity-
Based
Compensation
Adjustment(a) 631 1,664 1,779 3,015 7,089
---------- --------- --------- --------- -----------
Non-GAAP
Measurement $25,664 $43,014 $38,295 $37,852 $334,537
------------------========== ========= ========= ========= ===========
----------------------------------------------------------------------
----------------------------------------------------------
Quarter ended Operating Net Basic Diluted
March 31, 2007 Income Income Earnings Earnings
(Loss) (Loss) (Loss) (Loss)
per per
Share Share
---------------------------- --------- --------- ---------
GAAP Measurement $(29,114) $(14,422) $(0.05) $(0.05)
Less: Equity-
Based
Compensation
Adjustment(a) (7,089) (4,317) (0.02) (0.02)
---------- --------- --------- ---------
Non-GAAP
Measurement $(22,025) $(10,105) $(0.04) $(0.04)
------------------========== ========= ========= =========
----------------------------------------------------------
----------------------------------------------------------------------
Year ended March Cost of Product Sales and General Total
31, 2007 Sales - Develop- Market- and Operating
Software ment ing Admini- Expenses
Royalties strative
and
Amorti-
zation
---------------------------- --------- --------- --------- -----------
GAAP Measurement $132,353 $133,073 $196,213 $132,514 $1,439,865
Less: Equity-
Based
Compensation
Adjustment(a) 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 Operating Net Basic Diluted
31, 2007 Income Income Earnings Earnings
(Loss) (Loss) (Loss) (Loss)
per per
Share Share
---------------------------- --------- --------- ---------
GAAP Measurement $73,147 $85,787 $0.31 $0.28
Less: Equity-
Based
Compensation
Adjustment(a) (25,522) (15,543) (0.06) (0.05)
---------- --------- --------- ---------
Non-GAAP
Measurement $98,669 $101,330 $0.36 $0.33
------------------========== ========= ========= =========
----------------------------------------------------------
(a) Includes expense related to employee 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 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.
The quarterly and annual fiscal 2006 and first quarter fiscal 2007
statements of operations and balance sheets reflect the correction of
errors in the determination of the measurement date as defined in
Accounting Principles Board Opinion No. 25, "Accounting for Stock
Issued to Employees", with respect to certain employee options
granted and modified in our fiscal years between 1992 and 2006. These
errors were identified by a special subcommittee of independent
members of the company's Board of Directors. The findings of the
special sub-committee's review were announced on March 8, 2007. As a
result, we restated previously issued consolidated financial
statements included in our recently filed Annual Report on Form 10-
K/A for the fiscal year ended March 31, 2006, and we expect to file
shortly restated previously issued consolidated financial statements
for the first quarter of fiscal 2007 on Form 10-Q/A.
Additionally, the statement of operations and balance sheets for the
second and third quarters of fiscal 2007 presented in this earnings
release have been updated from previously announced preliminary
financial results, and reflect subsequent event adjustments primarily
related to a change in the company's effective tax rate, changes in
expense accrual estimates and adjustments to equity-based
compensation expense.
Throughout this press release, all referenced amounts for prior
periods and prior period comparisons reflect the balances and amounts
on a restated basis.
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 Cost of Product Sales and General Total
March 31, 2006 Sales - Develop- Marketing and Operating
Software ment Admini- Expenses
Royalties strative
and
Amorti-
zation
--------------------------- --------- ---------- --------- -----------
GAAP Measurement $8,555 $32,953 $24,285 $29,138 $214,685
Less: Equity-
Based
Compensation
Adjustment(b) - 184 22 388 594
---------- --------- ---------- --------- -----------
Non-GAAP
Measurement $8,555 $32,769 $24,263 $28,750 $214,091
-----------------========== ========= ========== ========= ===========
----------------------------------------------------------------------
----------------------------------------------------------
Quarter ended Operating Net Basic Diluted
March 31, 2006 Income Income Earnings Earnings
(Loss) (Loss) (Loss) (Loss)
per Share per
Share
--------------------------- --------- ---------- ---------
GAAP Measurement $(26,560) $(9,128) $(0.03) $(0.03)
Less: Equity-
Based
Compensation
Adjustment(b) (594) (363) (0.00) (0.00)
---------- --------- ---------- ---------
Non-GAAP
Measurement $(25,966) $(8,765) $(0.03) $(0.03)
-----------------========== ========= ========== =========
----------------------------------------------------------
----------------------------------------------------------------------
Year ended March Cost of Product Sales and General Total
31, 2006 Sales - Develop- Marketing and Operating
Software ment Admini- Expenses
Royalties strative
and
Amorti-
zation
--------------------------- --------- ---------- --------- -----------
GAAP Measurement $147,822 $132,651 $283,395 $96,366 $1,452,774
Less: Equity-
Based
Compensation
Adjustment(b) - 869 175 2,057 3,101
---------- --------- ---------- --------- -----------
Non-GAAP
Measurement $147,822 $131,782 $283,220 $94,309 $1,449,673
-----------------========== ========= ========== ========= ===========
----------------------------------------------------------------------
----------------------------------------------------------
Year ended March Operating Net Basic Diluted
31, 2006 Income Income Earnings Earnings
(Loss) (Loss) (Loss) (Loss)
per Share per
Share
--------------------------- --------- ---------- ---------
GAAP Measurement $15,226 $40,251 $0.15 $0.14
Less: Equity-
Based
Compensation
Adjustment(b) (3,101) (1,895) (0.01) (0.01)
---------- --------- ---------- ---------
Non-GAAP
Measurement $18,327 $42,146 $0.15 $0.14
-----------------========== ========= ========== =========
----------------------------------------------------------
(b) Includes expense related to employee stock options and
restricted stock under Accounting Principles Board Opinion No.
25, "Accounting for Stock Issued to Employees." 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.
The quarterly and annual fiscal 2006 and first quarter fiscal 2007
statements of operations and balance sheets reflect the correction of
errors in the determination of the measurement date as defined in
Accounting Principles Board Opinion No. 25, "Accounting for Stock
Issued to Employees", with respect to certain employee options
granted and modified in our fiscal years between 1992 and 2006. These
errors were identified by a special subcommittee of independent
members of the company's Board of Directors. The findings of the
special sub-committee's review were announced on March 8, 2007. As a
result, we restated previously issued consolidated financial
statements included in our recently filed Annual Report on Form 10-
K/A for the fiscal year ended March 31, 2006, and we expect to file
shortly restated previously issued consolidated financial statements
for the first quarter of fiscal 2007 on Form 10-Q/A.
Additionally, the statement of operations and balance sheets for the
second and third quarters of fiscal 2007 presented in this earnings
release have been updated from previously announced preliminary
financial results, and reflect subsequent event adjustments primarily
related to a change in the company's effective tax rate, changes in
expense accrual estimates and adjustments to equity-based
compensation expense.
Throughout this press release, all referenced amounts for prior
periods and prior period comparisons reflect the balances and amounts
on a restated basis.
ACTIVISION, INC. AND SUBSIDIARIES
FINANCIAL INFORMATION
For the Quarter and Year Ended March 31, 2007 and 2006
(Amounts in thousands)
Percent
Increase
Quarter Ended (Decrease)
------------------------------------------------
March 31, 2007 March 31, 2006
Amount % of Amount % of
Total Total
--------------------- ----------- ------ ----------- ------ ----------
Geographic Revenue
Mix
North America $116,125 37% $83,502 44% 39%
International 196,387 63% 104,623 56% 88%
--------------------- ----------- ------ ----------- ------ ----------
Total net revenues $312,512 100% $188,125 100% 66%
--------------------- ----------- ------ ----------- ------ ----------
--------------------- ----------- ------ ----------- ------ ----------
Segment/Platform Mix
Publishing:
Console $167,400 54% $82,272 44% 103%
Hand-held 32,232 10% 15,211 8% 112%
PC 9,443 3% 28,722 15% -67%
--------------------- ----------- ------ ----------- ------ ----------
Total publishing net
revenues $209,075 67% $126,205 67% 66%
--------------------- ----------- ------ ----------- ------ ----------
Distribution:
Console $74,022 24% $33,069 18% 124%
Hand-held 23,661 7% 16,744 9% 41%
PC 5,754 2% 12,107 6% -52%
--------------------- ----------- ------ ----------- ------ ----------
Total distribution
net revenues $103,437 33% $61,920 33% 67%
--------------------------------- ------ ----------- ------ ----------
Total net revenues $312,512 100% $188,125 100% 66%
--------------------- ------------------------------------------------
Percent
Increase
Year Ended (Decrease)
------------------------------------------------
March 31, 2007 March 31, 2006
Amount % of Amount % of
Total Total
--------------------- ----------- ------ ----------- ------ ----------
Geographic Revenue
Mix
North America $753,376 50% $710,040 48% 6%
International 759,636 50% 757,960 52% 0%
--------------------- ----------- ------ ----------- ------ ----------
Total net revenues $1,513,012 100% $1,468,000 100% 3%
--------------------- ----------- ------ ----------- ------ ----------
--------------------- ----------- ------ ----------- ------ ----------
Segment/Platform Mix
Publishing:
Console $886,795 59% $812,345 55% 9%
Hand-held 153,357 10% 158,861 11% -3%
PC 78,886 5% 183,457 13% -57%
--------------------- ----------- ------ ----------- ------ ----------
Total publishing net
revenues $1,119,038 74% $1,154,663 79% -3%
--------------------- ----------- ------ ----------- ------ ----------
Distribution:
Console $238,662 16% $196,413 13% 22%
Hand-held 122,293 8% 76,973 5% 59%
PC 33,019 2% 39,951 3% -17%
--------------------- ----------- ------ ----------- ------ ----------
Total distribution
net revenues $393,974 26% $313,337 21% 26%
--------------------------------- ------ ----------- ------ ----------
Total net revenues $1,513,012 100% $1,468,000 100% 3%
--------------------- ------------------------------------------------
ACTIVISION, INC. AND SUBSIDIARIES
FINANCIAL INFORMATION
For the Quarter and Year Ended March 31, 2007 and 2006
------------- ------------- ---------- ----------
Quarter Ended Quarter Ended Year Ended Year Ended
March 31, March 31, March 31, March 31,
2007 2006 2007 2006
-------------------- ------------- ------------- ---------- ----------
Publishing Net
Revenues
PC 5% 23% 7% 16%
-------------------- ------------- ------------- ---------- ----------
Console 80% 65% 80% 70%
-------------------- ------------- ------------- ---------- ----------
Sony PlayStation 3 12% 0% 5% 0%
Sony PlayStation 2 49% 27% 45% 36%
Microsoft Xbox 360 12% 25% 18% 9%
Microsoft Xbox 1% 8% 5% 18%
Nintendo Wii 5% 0% 5% 0%
Nintendo GameCube 1% 5% 2% 7%
Hand-held 15% 12% 13% 14%
-------------------- ------------- ------------- ---------- ----------
Sony PlayStation
Portable 8% 4% 4% 5%
Nintendo Dual
Screen 5% 2% 5% 2%
Nintendo Game Boy
Advance 2% 6% 4% 7%
-------------------- ------------- ------------- ---------- ----------
Total publishing
net revenues 100% 100% 100% 100%
-------------------- ------------- ------------- ---------- ----------
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
-------------------------- --------- --------- ----------- -----------
As As Restated
Restated
--------- --------- ----------- -----------
Net revenues $824,259 $816,242 $1,200,500 $1,279,875
Costs and expenses:
Cost of sales - product
costs 382,165 367,685 618,162 617,021
Cost of sales - software
royalties and
amortization 77,449 104,264 106,058 139,267
Cost of sales -
intellectual property
licenses 23,566 26,376 37,838 55,765
Product development 37,162 53,254 88,395 99,698
Sales and marketing 87,410 156,013 156,139 259,110
General and
administrative 43,387 24,757 91,647 67,228
-------------------------- --------- --------- ----------- -----------
Total operating
expenses 651,139 732,349 1,098,239 1,238,089
-------------------------- --------- --------- ----------- -----------
Operating income 173,120 83,893 102,261 41,786
Investment income, net 9,724 9,162 26,031 22,840
-------------------------- --------- --------- ----------- -----------
Income before income tax
provision 182,844 93,055 128,292 64,626
Income tax provision 40,024 25,199 28,083 15,247
-------------------------- --------- --------- ----------- -----------
Net income $142,820 $67,856 $100,209 $49,379
========================== ========= ========= =========== ===========
-------------------------- --------- --------- ----------- -----------
Basic earnings per share $0.51 $0.25 $0.36 $0.18
Weighted average common
shares outstanding 282,512 274,965 280,499 272,089
-------------------------- --------- --------- ----------- -----------
-------------------------- --------- --------- ----------- -----------
Diluted earnings per share $0.46 $0.23 $0.33 $0.17
Weighted average common
shares outstanding
assuming dilution 307,175 296,205 304,317 293,397
-------------------------- --------- --------- ----------- -----------
----------------------------------------------------------------------
The quarterly and annual fiscal 2006 and first quarter fiscal 2007
statements of operations and balance sheets reflect the correction of
errors in the determination of the measurement date as defined in
Accounting Principles Board Opinion No. 25, "Accounting for Stock
Issued to Employees", with respect to certain employee options
granted and modified in our fiscal years between 1992 and 2006. These
errors were identified by a special subcommittee of independent
members of the company's Board of Directors. The findings of the
special sub-committee's review were announced on March 8, 2007. As a
result, we restated previously issued consolidated financial
statements included in our recently filed Annual Report on Form 10-
K/A for the fiscal year ended March 31, 2006, and we expect to file
shortly restated previously issued consolidated financial statements
for the first quarter of fiscal 2007 on Form 10-Q/A.
Additionally, the statement of operations and balance sheets for the
second and third quarters of fiscal 2007 presented in this earnings
release have been updated from previously announced preliminary
financial results, and reflect subsequent event adjustments primarily
related to a change in the company's effective tax rate, changes in
expense accrual estimates and adjustments to equity-based
compensation expense.
Throughout this press release, all referenced amounts for prior
periods and prior period comparisons reflect the balances and amounts
on a restated basis.
ACTIVISION, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
----------------------------------------------------------------------
December 31, March 31,
2006 2006
------------ -----------
As Restated
--------------------------------------------- ------------ -----------
ASSETS
--------------------------------------------- ------------ -----------
Current assets:
Cash, cash equivalents and short-term
investments $805,200 $944,960
Accounts receivable, net 456,589 28,782
Inventories 85,680 61,483
Software development 86,119 40,260
Intellectual property licenses 28,628 4,973
Deferred income taxes 4,266 9,664
Other current assets 17,896 25,933
--------------------------------------------- ------------ -----------
Total current assets 1,484,378 1,116,055
--------------------------------------------- ------------ -----------
Software development 15,688 20,359
Intellectual property licenses 64,800 82,073
Property and equipment, net 46,713 45,368
Deferred income taxes 85,552 52,545
Other assets 5,941 1,409
Goodwill 188,398 100,446
--------------------------------------------- ------------ -----------
Total assets $1,891,470 $1,418,255
============================================= ============ ===========
--------------------------------------------- ------------ -----------
LIABILITIES AND SHAREHOLDERS' EQUITY
--------------------------------------------- ------------ -----------
Current liabilities:
Accounts payable $193,875 $88,994
Accrued expenses 247,581 104,862
--------------------------------------------- ------------ -----------
Total current liabilities 441,456 193,856
--------------------------------------------- ------------ -----------
Other liabilities 41,128 1,776
--------------------------------------------- ------------ -----------
Total liabilities 482,584 195,632
--------------------------------------------- ------------ -----------
Shareholders' equity:
Common stock - -
Additional paid-in capital 948,028 867,297
Retained earnings 442,199 341,990
Accumulated other comprehensive income 18,659 16,369
Unearned compensation - (3,033)
--------------------------------------------- ------------ -----------
Total shareholders' equity 1,408,886 1,222,623
--------------------------------------------- ------------ -----------
Total liabilities and
shareholders' equity $1,891,470 $1,418,255
============================================= ============ ===========
----------------------------------------------------------------------
The quarterly and annual fiscal 2006 and first quarter fiscal 2007
statements of operations and balance sheets reflect the correction of
errors in the determination of the measurement date as defined in
Accounting Principles Board Opinion No. 25, "Accounting for Stock
Issued to Employees", with respect to certain employee options
granted and modified in our fiscal years between 1992 and 2006. These
errors were identified by a special subcommittee of independent
members of the company's Board of Directors. The findings of the
special sub-committee's review were announced on March 8, 2007. As a
result, we restated previously issued consolidated financial
statements included in our recently filed Annual Report on Form 10-
K/A for the fiscal year ended March 31, 2006, and we expect to file
shortly restated previously issued consolidated financial statements
for the first quarter of fiscal 2007 on Form 10-Q/A.
Additionally, the statement of operations and balance sheets for the
second and third quarters of fiscal 2007 presented in this earnings
release have been updated from previously announced preliminary
financial results, and reflect subsequent event adjustments primarily
related to a change in the company's effective tax rate, changes in
expense accrual estimates and adjustments to equity-based
compensation expense.
Throughout this press release, all referenced amounts for prior
periods and prior period comparisons reflect the balances and amounts
on a restated basis.
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 Cost of Product Sales and General Total
December 31, Sales - Develop- Marketing and Operating
2006 Software ment Admini- Expenses
Royalties strative
and
Amorti-
zation
--------------------------- --------- ---------- --------- -----------
GAAP Measurement $77,449 $37,162 $87,410 $43,387 $651,139
Less: Equity-
Based
Compensation
Adjustment(a) 1,836 1,394 1,559 2,904 7,693
---------- --------- ---------- --------- -----------
Non-GAAP
Measurement $75,613 $35,768 $85,851 $40,483 $643,446
-----------------========== ========= ========== ========= ===========
----------------------------------------------------------------------
----------------------------------------------------------
Quarter ended Operating Net Basic Diluted
December 31, Income Income Earnings Earnings
2006 (Loss) (Loss) (Loss) (Loss)
per Share per
Share
--------------------------- --------- ---------- ---------
GAAP Measurement $173,120 $142,820 $0.51 $0.46
Less: Equity-
Based
Compensation
Adjustment(a) (7,693) (4,685) (0.02) (0.02)
---------- --------- ---------- ---------
Non-GAAP
Measurement $180,813 $147,505 $0.52 $0.48
-----------------========== ========= ========== =========
----------------------------------------------------------
----------------------------------------------------------------------
Nine months Cost of Product Sales and General Total
ended December Sales - Develop- Marketing and Operating
31, 2006 Software ment Admini- Expenses
Royalties strative
and
Amorti-
zation
--------------------------- --------- ---------- --------- -----------
GAAP Measurement $106,058 $88,395 $156,139 $91,647 $1,098,239
Less: Equity-
Based
Compensation
Adjustment(a) 1,872 4,064 3,488 9,009 18,433
---------- --------- ---------- --------- -----------
Non-GAAP
Measurement $104,186 $84,331 $152,651 $82,638 $1,079,806
-----------------========== ========= ========== ========= ===========
----------------------------------------------------------------------
----------------------------------------------------------
Nine months Operating Net Basic Diluted
ended December Income Income Earnings Earnings
31, 2006 (Loss) (Loss) (Loss) (Loss)
per Share per
Share
--------------------------- --------- ---------- ---------
GAAP Measurement $102,261 $100,209 $0.36 $0.33
Less: Equity-
Based
Compensation
Adjustment(a) (18,433) (11,226) (0.04) (0.04)
---------- --------- ---------- ---------
Non-GAAP
Measurement $120,694 $111,435 $0.40 $0.37
-----------------========== ========= ========== =========
----------------------------------------------------------
(a) Includes expense related to employee 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 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.
The quarterly and annual fiscal 2006 and first quarter fiscal 2007
statements of operations and balance sheets reflect the correction of
errors in the determination of the measurement date as defined in
Accounting Principles Board Opinion No. 25, "Accounting for Stock
Issued to Employees", with respect to certain employee options
granted and modified in our fiscal years between 1992 and 2006. These
errors were identified by a special subcommittee of independent
members of the company's Board of Directors. The findings of the
special sub-committee's review were announced on March 8, 2007. As a
result, we restated previously issued consolidated financial
statements included in our recently filed Annual Report on Form 10-
K/A for the fiscal year ended March 31, 2006, and we expect to file
shortly restated previously issued consolidated financial statements
for the first quarter of fiscal 2007 on Form 10-Q/A.
Additionally, the statement of operations and balance sheets for the
second and third quarters of fiscal 2007 presented in this earnings
release have been updated from previously announced preliminary
financial results, and reflect subsequent event adjustments primarily
related to a change in the company's effective tax rate, changes in
expense accrual estimates and adjustments to equity-based
compensation expense.
Throughout this press release, all referenced amounts for prior
periods and prior period comparisons reflect the balances and amounts
on a restated basis.
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 Cost of Product Sales and General Total
December 31, Sales - Develop- Marketing and Operating
2005 Software ment Admini- Expenses
Royalties strative
and
Amorti-
zation
--------------------------- --------- ---------- --------- -----------
GAAP Measurement $104,264 $53,254 $156,013 $24,757 $732,349
Less: Equity-
Based
Compensation
Adjustment(b) - 115 14 193 322
---------- --------- ---------- --------- -----------
Non-GAAP
Measurement $104,264 $53,139 $155,999 $24,564 $732,027
-----------------========== ========= ========== ========= ===========
----------------------------------------------------------------------
----------------------------------------------------------
Quarter ended Operating Net Basic Diluted
December 31, Income Income Earnings Earnings
2005 (Loss) (Loss) (Loss) (Loss)
per Share per
Share
--------------------------- --------- ---------- ---------
GAAP Measurement $83,893 $67,856 $0.25 $0.23
Less: Equity-
Based
Compensation
Adjustment(b) (322) (198) (0.00) (0.00)
---------- --------- ---------- ---------
Non-GAAP
Measurement $84,215 $68,054 $0.25 $0.23
-----------------========== ========= ========== =========
----------------------------------------------------------
----------------------------------------------------------------------
Nine months Cost of Product Sales and General Total
ended December Sales - Develop- Marketing and Operating
31, 2005 Software ment Admini- Expenses
Royalties strative
and
Amorti-
zation
--------------------------- --------- ---------- --------- -----------
GAAP Measurement $139,267 $99,698 $259,110 $67,228 $1,238,089
Less: Equity-
Based
Compensation
Adjustment(b) - 685 153 1,669 2,507
---------- --------- ---------- --------- -----------
Non-GAAP
Measurement $139,267 $99,013 $258,957 $65,559 $1,235,582
-----------------========== ========= ========== ========= ===========
----------------------------------------------------------------------
----------------------------------------------------------
Nine months Operating Net Basic Diluted
ended December Income Income Earnings Earnings
31, 2005 (Loss) (Loss) (Loss) (Loss)
per Share per
Share
--------------------------- --------- ---------- ---------
GAAP Measurement $41,786 $49,379 $0.18 $0.17
Less: Equity-
Based
Compensation
Adjustment(b) (2,507) (1,532) (0.01) (0.01)
---------- --------- ---------- ---------
Non-GAAP
Measurement $44,293 $50,911 $0.19 $0.17
-----------------========== ========= ========== =========
----------------------------------------------------------
(b) Includes expense related to employee stock options and
restricted stock under Accounting Principles Board Opinion No.
25, "Accounting for Stock Issued to Employees." 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.
The quarterly and annual fiscal 2006 and first quarter fiscal 2007
statements of operations and balance sheets reflect the correction of
errors in the determination of the measurement date as defined in
Accounting Principles Board Opinion No. 25, "Accounting for Stock
Issued to Employees", with respect to certain employee options
granted and modified in our fiscal years between 1992 and 2006. These
errors were identified by a special subcommittee of independent
members of the company's Board of Directors. The findings of the
special sub-committee's review were announced on March 8, 2007. As a
result, we restated previously issued consolidated financial
statements included in our recently filed Annual Report on Form 10-
K/A for the fiscal year ended March 31, 2006, and we expect to file
shortly restated previously issued consolidated financial statements
for the first quarter of fiscal 2007 on Form 10-Q/A.
Additionally, the statement of operations and balance sheets for the
second and third quarters of fiscal 2007 presented in this earnings
release have been updated from previously announced preliminary
financial results, and reflect subsequent event adjustments primarily
related to a change in the company's effective tax rate, changes in
expense accrual estimates and adjustments to equity-based
compensation expense.
Throughout this press release, all referenced amounts for prior
periods and prior period comparisons reflect the balances and amounts
on a restated basis.
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 $463,388 56% $402,314 49% 15%
International 360,871 44% 413,928 51% (13%)
--------------------- ----------- ------ ----------- ------ ----------
Total net revenues $824,259 100% $816,242 100% 1%
--------------------- ----------- ------ ----------- ------ ----------
--------------------- ----------- ------ ----------- ------ ----------
Segment/Platform Mix
Publishing:
Console $545,070 66% $479,686 59% 14%
Hand-held 71,339 9% 74,032 9% (4%)
PC 33,388 4% 113,782 14% (71%)
--------------------- ----------- ------ ----------- ------ ----------
Total publishing
net revenues 649,797 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 $824,259 100% $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 $637,251 53% $626,538 49% 2%
International 563,249 47% 653,337 51% (14%)
--------------------- ----------- ------ ----------- ------ ----------
Total net revenues $1,200,500 100% $1,279,875 100% (6%)
--------------------- ----------- ------ ----------- ------ ----------
--------------------- ----------- ------ ----------- ------ ----------
Segment/Platform Mix
Publishing:
Console $719,395 60% $730,073 57% (1%)
Hand-held 121,125 10% 143,650 11% (16%)
PC 69,443 6% 154,735 12% (55%)
--------------------- ----------- ------ ----------- ------ ----------
Total publishing
net revenues 909,963 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 $1,200,500 100% $1,279,875 100% (6%)
--------------------- ------------------------------------------------
The statement of operations and balance sheets for the second and
third quarters of fiscal 2007 presented in this earnings release have
been updated from previously announced preliminary financial results,
and reflect subsequent event adjustments primarily related to a
change in the company's effective tax rate, changes in expense
accrual estimates and adjustments to equity-based compensation
expense.
Throughout this press release, all referenced amounts for prior
periods and prior period comparisons reflect the balances and amounts
on a restated basis.
ACTIVISION, INC. AND SUBSIDIARIES
FINANCIAL INFORMATION
For the Quarter and Nine Months Ended December 31, 2006 and 2005
--------- --------- --------- ---------
Quarter Quarter Nine Nine
Ended Ended Months Months
Ended Ended
December December December December
31, 2006 31, 2005 31, 2006 31, 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 statement of operations and balance sheets for the second and
third quarters of fiscal 2007 presented in this earnings release have
been updated from previously announced preliminary financial results,
and reflect subsequent event adjustments primarily related to a
change in the company's effective tax rate, changes in expense
accrual estimates and adjustments to equity- based compensation
expense.
Throughout this press release, all referenced amounts for prior
periods and prior period comparisons reflect the balances and amounts
on a restated basis.
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
-------------------------- --------- ----------- --------- -----------
As Restated As Restated
--------- ----------- --------- -----------
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 9,348 20,427 28,609 35,003
Cost of sales -
intellectual property
licenses 4,356 8,449 14,272 29,389
Product development 25,608 28,366 51,233 46,444
Sales and marketing 32,550 56,730 68,729 103,097
General and
administrative 26,346 23,774 48,260 42,471
-------------------------- --------- ----------- --------- -----------
Total operating
expenses 225,582 250,328 447,100 505,740
-------------------------- --------- ----------- --------- -----------
Operating loss (37,410) (27,788) (70,859) (42,107)
Investment income, net 8,032 6,330 16,307 13,678
-------------------------- --------- ----------- --------- -----------
Loss before income tax
benefit (29,378) (21,458) (54,552) (28,429)
Income tax benefit (5,076) (7,228) (11,941) (9,952)
-------------------------- --------- ----------- --------- -----------
Net loss $(24,302) $(14,230) $(42,611) $(18,477)
========================== ========= =========== ========= ===========
-------------------------- --------- ----------- --------- -----------
Basic loss per share $(0.09) $(0.05) $(0.15) $(0.07)
Weighted average common
shares outstanding 280,627 272,129 279,487 270,643
-------------------------- --------- ----------- --------- -----------
-------------------------- --------- ----------- --------- -----------
Diluted loss per share $(0.09) $(0.05) $(0.15) $(0.07)
Weighted average common
shares outstanding
assuming dilution 280,627 272,129 279,487 270,643
-------------------------- --------- ----------- --------- -----------
----------------------------------------------------------------------
The quarterly and annual fiscal 2006 and first quarter fiscal 2007
statements of operations and balance sheets reflect the correction of
errors in the determination of the measurement date as defined in
Accounting Principles Board Opinion No. 25, "Accounting for Stock
Issued to Employees", with respect to certain employee options
granted and modified in our fiscal years between 1992 and 2006. These
errors were identified by a special subcommittee of independent
members of the company's Board of Directors. The findings of the
special sub-committee's review were announced on March 8, 2007. As a
result, we restated previously issued consolidated financial
statements included in our recently filed Annual Report on Form 10-
K/A for the fiscal year ended March 31, 2006, and we expect to file
shortly restated previously issued consolidated financial statements
for the first quarter of fiscal 2007 on Form 10-Q/A.
Additionally, the statement of operations and balance sheets for the
second and third quarters of fiscal 2007 presented in this earnings
release have been updated from previously announced preliminary
financial results, and reflect subsequent event adjustments primarily
related to a change in the company's effective tax rate, changes in
expense accrual estimates and adjustments to equity-based
compensation expense.
Throughout this press release, all referenced amounts for prior
periods and prior period comparisons reflect the balances and amounts
on a restated basis.
ACTIVISION, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
----------------------------------------------------------------------
September 30, March 31,
2006 2006
------------- -----------
As Restated
-------------------------------------------- ------------- -----------
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 95,694 40,260
Intellectual property licenses 23,996 4,973
Deferred income taxes 6,484 9,664
Other current assets 37,917 25,933
-------------------------------------------- ------------- -----------
Total current assets 1,079,635 1,116,055
-------------------------------------------- ------------- -----------
Software development 22,094 20,359
Intellectual property licenses 71,100 82,073
Property and equipment, net 45,185 45,368
Deferred income taxes 121,085 52,545
Other assets 5,676 1,409
Goodwill 188,254 100,446
-------------------------------------------- ------------- -----------
Total assets $1,533,029 $1,418,255
============================================ ============= ===========
-------------------------------------------- ------------- -----------
LIABILITIES AND SHAREHOLDERS' EQUITY
-------------------------------------------- ------------- -----------
Current liabilities:
Accounts payable $83,418 $88,994
Accrued expenses 169,195 104,862
-------------------------------------------- ------------- -----------
Total current liabilities 252,613 193,856
-------------------------------------------- ------------- -----------
Other liabilities 41,070 1,776
-------------------------------------------- ------------- -----------
Total liabilities 293,683 195,632
-------------------------------------------- ------------- -----------
Shareholders' equity:
Common stock - -
Additional paid-in capital 927,392 867,297
Retained earnings 299,379 341,990
Accumulated other comprehensive income 12,575 16,369
Unearned compensation - (3,033)
-------------------------------------------- ------------- -----------
Total shareholders' equity 1,239,346 1,222,623
-------------------------------------------- ------------- -----------
Total liabilities and
shareholders' equity $1,533,029 $1,418,255
============================================ ============= ===========
----------------------------------------------------------------------
The quarterly and annual fiscal 2006 and first quarter fiscal 2007
statements of operations and balance sheets reflect the correction of
errors in the determination of the measurement date as defined in
Accounting Principles Board Opinion No. 25, "Accounting for Stock
Issued to Employees", with respect to certain employee options
granted and modified in our fiscal years between 1992 and 2006. These
errors were identified by a special subcommittee of independent
members of the company's Board of Directors. The findings of the
special sub-committee's review were announced on March 8, 2007. As a
result, we restated previously issued consolidated financial
statements included in our recently filed Annual Report on Form 10-
K/A for the fiscal year ended March 31, 2006, and we expect to file
shortly restated previously issued consolidated financial statements
for the first quarter of fiscal 2007 on Form 10-Q/A.
Additionally, the statement of operations and balance sheets for the
second and third quarters of fiscal 2007 presented in this earnings
release have been updated from previously announced preliminary
financial results, and reflect subsequent event adjustments primarily
related to a change in the company's effective tax rate, changes in
expense accrual estimates and adjustments to equity-based
compensation expense.
Throughout this press release, all referenced amounts for prior
periods and prior period comparisons reflect the balances and amounts
on a restated basis.
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 Cost of Product Sales and General Total
September 30, Sales - Develop- Marketing and Operating
2006 Software ment Admini- Expenses
Royalties strative
and
Amorti-
zation
---------------------------- --------- ---------- --------- ----------
GAAP Measurement $9,348 $25,608 $32,550 $26,346 $225,582
Less: Equity-
Based
Compensation
Adjustment(a) - 991 889 3,011 4,891
---------- --------- ---------- --------- ----------
Non-GAAP
Measurement $9,348 $24,617 $31,661 $23,335 $220,691
------------------========== ========= ========== ========= ==========
----------------------------------------------------------------------
-----------------------------------------------------------
Quarter ended Operating Net Basic Diluted
September 30, Income Income Earnings Earnings
2006 (Loss) (Loss) (Loss) (Loss)
per Share per
Share
---------------------------- --------- ---------- ---------
GAAP Measurement $(37,410) $(24,302) $(0.09) $(0.09)
Less: Equity-
Based
Compensation
Adjustment(a) (4,891) (2,979) (0.01) (0.01)
---------- --------- ---------- ---------
Non-GAAP
Measurement $(32,519) $(21,323) $(0.08) $(0.08)
------------------========== ========= ========== =========
-----------------------------------------------------------
----------------------------------------------------------------------
Six months ended Cost of Product Sales and General Total
September 30, Sales - Develop- Marketing and Operating
2006 Software ment Admini- Expenses
Royalties strative
and
Amorti-
zation
---------------------------- --------- ---------- --------- ----------
GAAP Measurement $28,609 $51,233 $68,729 $48,260 $447,100
Less: Equity-
Based
Compensation
Adjustment(a) 36 2,670 1,929 6,105 10,740
---------- --------- ---------- --------- ----------
Non-GAAP
Measurement $28,573 $48,563 $66,800 $42,155 $436,360
------------------========== ========= ========== ========= ==========
----------------------------------------------------------------------
-----------------------------------------------------------
Six months ended Operating Net Basic Diluted
September 30, Income Income Earnings Earnings
2006 (Loss) (Loss) (Loss) (Loss)
per Share per
Share
---------------------------- --------- ---------- ---------
GAAP Measurement $(70,859) $(42,611) $(0.15) $(0.15)
Less: Equity-
Based
Compensation
Adjustment(a) (10,740) (6,541) (0.02) (0.02)
---------- --------- ---------- ---------
Non-GAAP
Measurement $(60,119) $(36,070) $(0.13) $(0.13)
------------------========== ========= ========== =========
-----------------------------------------------------------
(a) Includes expense related to employee 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 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.
The quarterly and annual fiscal 2006 and first quarter fiscal 2007
statements of operations and balance sheets reflect the correction of
errors in the determination of the measurement date as defined in
Accounting Principles Board Opinion No. 25, "Accounting for Stock
Issued to Employees", with respect to certain employee options
granted and modified in our fiscal years between 1992 and 2006. These
errors were identified by a special subcommittee of independent
members of the company's Board of Directors. The findings of the
special sub-committee's review were announced on March 8, 2007. As a
result, we restated previously issued consolidated financial
statements included in our recently filed Annual Report on Form 10-
K/A for the fiscal year ended March 31, 2006, and we expect to file
shortly restated previously issued consolidated financial statements
for the first quarter of fiscal 2007 on Form 10-Q/A.
Additionally, the statement of operations and balance sheets for the
second and third quarters of fiscal 2007 presented in this earnings
release have been updated from previously announced preliminary
financial results, and reflect subsequent event adjustments primarily
related to a change in the company's effective tax rate, changes in
expense accrual estimates and adjustments to equity-based
compensation expense.
Throughout this press release, all referenced amounts for prior
periods and prior period comparisons reflect the balances and amounts
on a restated basis.
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 Cost of Product Sales and General Total
September 30, Sales - Develop- Marketing and Operating
2005 Software ment Admini- Expenses
Royalties strative
and
Amorti-
zation
---------------------------- --------- ---------- --------- ----------
GAAP Measurement $20,427 $28,366 $56,730 $23,774 $250,328
Less: Equity-
Based
Compensation
Adjustment(b) - 294 90 935 1,319
---------- --------- ---------- --------- ----------
Non-GAAP
Measurement $20,427 $28,072 $56,640 $22,839 $249,009
------------------========== ========= ========== ========= ==========
----------------------------------------------------------------------
-----------------------------------------------------------
Quarter ended Operating Net Basic Diluted
September 30, Income Income Earnings Earnings
2005 (Loss) (Loss) (Loss) (Loss)
per Share per
Share
---------------------------- --------- ---------- ---------
GAAP Measurement $(27,788) $(14,230) $(0.05) $(0.05)
Less: Equity-
Based
Compensation
Adjustment(b) (1,319) (806) (0.00) (0.00)
---------- --------- ---------- ---------
Non-GAAP
Measurement $(26,469) $(13,424) $(0.05) $(0.05)
------------------========== ========= ========== =========
-----------------------------------------------------------
----------------------------------------------------------------------
Six months ended Cost of Product Sales and General Total
September 30, Sales - Develop- Marketing and Operating
2005 Software ment Admini- Expenses
Royalties strative
and
Amorti-
zation
---------------------------- --------- ---------- --------- ----------
GAAP Measurement $35,003 $46,444 $103,097 $42,471 $505,740
Less: Equity-
Based
Compensation
Adjustment(b) - 570 139 1,476 2,185
---------- --------- ---------- --------- ----------
Non-GAAP
Measurement $35,003 $45,874 $102,958 $40,995 $503,555
------------------========== ========= ========== ========= ==========
----------------------------------------------------------------------
-----------------------------------------------------------
Six months ended Operating Net Basic Diluted
September 30, Income Income Earnings Earnings
2005 (Loss) (Loss) (Loss) (Loss)
per Share per
Share
---------------------------- --------- ---------- ---------
GAAP Measurement $(42,107) $(18,477) $(0.07) $(0.07)
Less: Equity-
Based
Compensation
Adjustment(b) (2,185) (1,335) (0.00) (0.00)
---------- --------- ---------- ---------
Non-GAAP
Measurement $(39,922) $(17,142) $(0.06) $(0.06)
------------------========== ========= ========== =========
-----------------------------------------------------------
(b) Includes expense related to employee stock options and
restricted stock under Accounting Principles Board Opinion No.
25, "Accounting for Stock Issued to Employees." 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.
The quarterly and annual fiscal 2006 and first quarter fiscal 2007
statements of operations and balance sheets reflect the correction of
errors in the determination of the measurement date as defined in
Accounting Principles Board Opinion No. 25, "Accounting for Stock
Issued to Employees", with respect to certain employee options
granted and modified in our fiscal years between 1992 and 2006. These
errors were identified by a special subcommittee of independent
members of the company's Board of Directors. The findings of the
special sub-committee's review were announced on March 8, 2007. As a
result, we restated previously issued consolidated financial
statements included in our recently filed Annual Report on Form 10-
K/A for the fiscal year ended March 31, 2006, and we expect to file
shortly restated previously issued consolidated financial statements
for the first quarter of fiscal 2007 on Form 10-Q/A.
Additionally, the statement of operations and balance sheets for the
second and third quarters of fiscal 2007 presented in this earnings
release have been updated from previously announced preliminary
financial results, and reflect subsequent event adjustments primarily
related to a change in the company's effective tax rate, changes in
expense accrual estimates and adjustments to equity-based
compensation expense.
Throughout this press release, all referenced amounts for prior
periods and prior period comparisons reflect the balances and amounts
on a restated basis.
ACTIVISION, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except earnings per share data)
----------------------------------------------------------------------
Quarter ended June 30,
---------------------------------------------- -----------------------
2006 2005
---------------------------------------------- ----------- -----------
As Restated As Restated
----------- -----------
Net revenues $188,069 $241,093
Costs and expenses:
Cost of sales - product costs 108,623 136,754
Cost of sales - software royalties and
amortization 19,261 14,576
Cost of sales - intellectual property
licenses 9,916 20,940
Product development 25,625 18,078
Sales and marketing 36,179 46,367
General and administrative 21,914 18,697
---------------------------------------------- ----------- -----------
Total operating expenses 221,518 255,412
---------------------------------------------- ----------- -----------
Operating loss (33,449) (14,319)
Investment income, net 8,275 7,348
---------------------------------------------- ----------- -----------
Loss before income tax benefit (25,174) (6,971)
Income tax benefit (6,865) (2,724)
---------------------------------------------- ----------- -----------
Net loss $(18,309) $(4,247)
============================================== =========== ===========
---------------------------------------------- ----------- -----------
Basic loss per share $(0.07) $(0.02)
Weighted average common shares outstanding 278,335 269,141
---------------------------------------------- ----------- -----------
---------------------------------------------- ----------- -----------
Diluted loss per share $(0.07) $(0.02)
Weighted average common shares outstanding
assuming dilution 278,335 269,141
---------------------------------------------- ----------- -----------
----------------------------------------------------------------------
Share and earnings per share data have been restated to reflect our
four-for-three stock split for shareholders of record as of October
10, 2005, paid October 24, 2005.
The quarterly and annual fiscal 2006 and first quarter fiscal 2007
statements of operations and balance sheets reflect the correction of
errors in the determination of the measurement date as defined in
Accounting Principles Board Opinion No. 25, "Accounting for Stock
Issued to Employees", with respect to certain employee options
granted and modified in our fiscal years between 1992 and 2006. These
errors were identified by a special subcommittee of independent
members of the company's Board of Directors. The findings of the
special sub-committee's review were announced on March 8, 2007. As a
result, we restated previously issued consolidated financial
statements included in our recently filed Annual Report on Form 10-
K/A for the fiscal year ended March 31, 2006, and we expect to file
shortly restated previously issued consolidated financial statements
for the first quarter of fiscal 2007 on Form 10-Q/A.
Additionally, the statement of operations and balance sheets for the
second and third quarters of fiscal 2007 presented in this earnings
release have been updated from previously announced preliminary
financial results, and reflect subsequent event adjustments primarily
related to a change in the company's effective tax rate, changes in
expense accrual estimates and adjustments to equity-based
compensation expense.
Throughout this press release, all referenced amounts for prior
periods and prior period comparisons reflect the balances and amounts
on a restated basis.
ACTIVISION, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
----------------------------------------------------------------------
June 30, March 31,
2006 2006
----------- -----------
As Restated As Restated
---------------------------------------------- ----------- -----------
ASSETS
---------------------------------------------- ----------- -----------
Current assets:
Cash, cash equivalents and short-term
investments $792,576 $944,960
Accounts receivable, net 65,361 28,782
Inventories 64,095 61,483
Software development 65,650 40,260
Intellectual property licenses 23,844 4,973
Deferred income taxes 12,245 9,664
Other current assets 40,229 25,933
---------------------------------------------- ----------- -----------
Total current assets 1,064,000 1,116,055
---------------------------------------------- ----------- -----------
Software development 12,982 20,359
Intellectual property licenses 73,100 82,073
Property and equipment, net 43,986 45,368
Deferred income taxes 57,349 52,545
Other assets 4,113 1,409
Goodwill 180,646 100,446
---------------------------------------------- ----------- -----------
Total assets $1,436,176 $1,418,255
============================================== =========== ===========
---------------------------------------------- ----------- -----------
LIABILITIES AND SHAREHOLDERS' EQUITY
---------------------------------------------- ----------- -----------
Current liabilities:
Accounts payable $73,344 $88,994
Accrued expenses 87,142 104,862
---------------------------------------------- ----------- -----------
Total current liabilities 160,486 193,856
---------------------------------------------- ----------- -----------
Other liabilities 40,960 1,776
---------------------------------------------- ----------- -----------
Total liabilities 201,446 195,632
---------------------------------------------- ----------- -----------
Shareholders' equity:
Common stock - -
Additional paid-in capital 909,584 867,297
Retained earnings 323,681 341,990
Accumulated other comprehensive income 1,465 16,369
Unearned compensation - (3,033)
---------------------------------------------- ----------- -----------
Total shareholders' equity 1,234,730 1,222,623
---------------------------------------------- ----------- -----------
Total liabilities and
shareholders' equity $1,436,176 $1,418,255
============================================== =========== ===========
----------------------------------------------------------------------
The quarterly and annual fiscal 2006 and first quarter fiscal 2007
statements of operations and balance sheets reflect the correction of
errors in the determination of the measurement date as defined in
Accounting Principles Board Opinion No. 25, "Accounting for Stock
Issued to Employees", with respect to certain employee options
granted and modified in our fiscal years between 1992 and 2006. These
errors were identified by a special subcommittee of independent
members of the company's Board of Directors. The findings of the
special sub-committee's review were announced on March 8, 2007. As a
result, we restated previously issued consolidated financial
statements included in our recently filed Annual Report on Form 10-
K/A for the fiscal year ended March 31, 2006, and we expect to file
shortly restated previously issued consolidated financial statements
for the first quarter of fiscal 2007 on Form 10-Q/A.
Additionally, the statement of operations and balance sheets for the
second and third quarters of fiscal 2007 presented in this earnings
release have been updated from previously announced preliminary
financial results, and reflect subsequent event adjustments primarily
related to a change in the company's effective tax rate, changes in
expense accrual estimates and adjustments to equity-based
compensation expense.
Throughout this press release, all referenced amounts for prior
periods and prior period comparisons reflect the balances and amounts
on a restated basis.
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 Cost of Product Sales and General Total
June 30, 2006 Sales - Develop- Marketing and Operating
Software ment Admini- Expenses
Royalties strative
and
Amorti-
zation
---------------------------- --------- ---------- --------- ----------
GAAP Measurement $19,261 $25,625 $36,179 $21,914 $221,518
Less: Equity-
Based
Compensation
Adjustment(a) 36 1,679 1,040 3,094 5,849
---------- --------- ---------- --------- ----------
Non-GAAP
Measurement $19,225 $23,946 $35,139 $18,820 $215,669
------------------========== ========= ========== ========= ==========
----------------------------------------------------------------------
-----------------------------------------------------------
Quarter ended Operating Net Basic Diluted
June 30, 2006 Income Income Earnings Earnings
(Loss) (Loss) (Loss) (Loss)
per Share per
Share
---------------------------- --------- ---------- ---------
GAAP Measurement $(33,449) $(18,309) $(0.07) $(0.07)
Less: Equity-
Based
Compensation
Adjustment(a) (5,849) (3,562) (0.01) (0.01)
---------- --------- ---------- ---------
Non-GAAP
Measurement $(27,600) $(14,747) $(0.05) $(0.05)
------------------========== ========= ========== =========
-----------------------------------------------------------
(a) Includes expense related to employee 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 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.
----------------------------------------------------------------------
Quarter ended Cost of Product Sales and General Total
June 30, 2005 Sales - Develop- Marketing and Operating
Software ment Admini- Expenses
Royalties strative
and
Amorti-
zation
---------------------------- --------- ---------- --------- ----------
GAAP Measurement $14,576 $18,078 $46,367 $18,697 $255,412
Less: Equity-
Based
Compensation
Adjustment(b) - 276 49 541 866
---------- --------- ---------- --------- ----------
Non-GAAP
Measurement $14,576 $17,802 $46,318 $18,156 $254,546
------------------========== ========= ========== ========= ==========
----------------------------------------------------------------------
-----------------------------------------------------------
Quarter ended Operating Net Basic Diluted
June 30, 2005 Income Income Earnings Earnings
(Loss) (Loss) (Loss) (Loss)
per Share per
Share
---------------------------- --------- ---------- ---------
GAAP Measurement $(14,319) $(4,247) $(0.02) $(0.02)
Less: Equity-
Based
Compensation
Adjustment(b) (866) (529) (0.00) (0.00)
---------- --------- ---------- ---------
Non-GAAP
Measurement $(13,453) $(3,718) $(0.01) $(0.01)
------------------========== ========= ========== =========
-----------------------------------------------------------
(b) Includes expense related to employee stock options and
restricted stock under Accounting Principles Board Opinion No.
25, "Accounting for Stock Issued to Employees." 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.
The quarterly and annual fiscal 2006 and first quarter fiscal 2007
statements of operations and balance sheets reflect the correction of
errors in the determination of the measurement date as defined in
Accounting Principles Board Opinion No. 25, "Accounting for Stock
Issued to Employees", with respect to certain employee options
granted and modified in our fiscal years between 1992 and 2006. These
errors were identified by a special subcommittee of independent
members of the company's Board of Directors. The findings of the
special sub-committee's review were announced on March 8, 2007. As a
result, we restated previously issued consolidated financial
statements included in our recently filed Annual Report on Form 10-
K/A for the fiscal year ended March 31, 2006, and we expect to file
shortly restated previously issued consolidated financial statements
for the first quarter of fiscal 2007 on Form 10-Q/A.
Additionally, the statement of operations and balance sheets for the
second and third quarters of fiscal 2007 presented in this earnings
release have been updated from previously announced preliminary
financial results, and reflect subsequent event adjustments primarily
related to a change in the company's effective tax rate, changes in
expense accrual estimates and adjustments to equity-based
compensation expense.
Throughout this press release, all referenced amounts for prior
periods and prior period comparisons reflect the balances and amounts
on a restated basis.
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 |
