Activision Blizzard, Inc.
Activision Blizzard, Inc. (Form: 8-K, Received: 08/05/2010 16:27:46)

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

 


 

FORM 8-K

 

CURRENT REPORT

PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

 

Date of report (Date of earliest event reported):  August 5, 2010

 

ACTIVISION BLIZZARD, INC.

(Exact Name of Registrant as Specified in Charter)

 

Delaware

 

001-15839

 

95-4803544

(State or Other Jurisdiction of
Incorporation)

 

(Commission File Number)

 

(IRS Employer
Identification No.)

 

3100 Ocean Park Boulevard, Santa
Monica, CA

 

 

90405

(Address of Principal Executive
Offices)

 

(Zip Code)

 

Registrant’s telephone number, including area code:  (310) 255-2000

 

 

(Former Name or Former Address, if Changed Since Last Report)

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions ( see General Instruction A.2. below):

 

o             Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

o             Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

o             Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

o             Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

 

 



 

Item 2.02.                                           Results of Operations and Financial Condition.

 

On August 5, 2010, Activision Blizzard, Inc. (the “Company”) issued a press release announcing results for the Company for the fiscal quarter ended June 30, 2010. A copy of the press release is attached hereto as Exhibit 99.1.  As previously announced, the Company is hosting a conference call and Webcast in conjunction with that release.

 

Certain Information Not Filed .  The information in this Item 2.02 and Exhibit 99.1 attached to this Form 8-K shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, nor shall this Item 2.02 or such Exhibit 99.1 or any of the information contained therein be deemed incorporated by reference in any filing under the Securities Exchange Act of 1934 or the Securities Act of 1933, except as shall be expressly set forth by specific reference in such filing.

 

Item 9.01.                                           Financial Statements and Exhibits.

 

(d)  Exhibits

 

99.1                            Press Release dated August 5, 2010 (furnished not filed)

 

2



 

SIGNATURE

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

Date: August 5, 2010

ACTIVISION BLIZZARD, INC.

 

 

 

 

 

By:

/s/ Thomas Tippl

 

 

Thomas Tippl

 

 

Chief Operating Officer and Chief Financial Officer

 

3



 

EXHIBIT INDEX

 

Exhibit No.

 

Description

 

 

 

99.1

 

Press Release dated August 5, 2010 (furnished not filed)

 

4


 

 

Exhibit 99.1

 

Contacts:

Kristin Southey

 

Senior Vice President, Investor Relations

 

(310) 255-2635

 

ksouthey@activision.com

 

 

 

Maryanne Lataif

 

Senior Vice President, Corporate Communications

 

(310) 255-2704

 

mlataif@activision.com

 

FOR IMMEDIATE RELEASE

 

ACTIVISION BLIZZARD ANNOUNCES

SECOND QUARTER CY 2010 FINANCIAL RESULTS

 

-                     Second Quarter EPS Ahead of Prior Outlook

 

-                     Company Reaffirms CY 2010 Net Revenues and EPS Outlook —

 

-                     Q2 Sales From Online Channels Exceeded Retail Sales For the First Time  -

 

Santa Monica, CA — August 5, 2010 — Activision Blizzard, Inc. (Nasdaq: ATVI) today announced financial results for the second quarter of 2010.

 

For the quarter ended June 30, 2010, Activision Blizzard’s GAAP net revenues were $967 million, and its non-GAAP net revenues were $683 million.  For the quarter ended June 30, 2010, Activision Blizzard’s GAAP earnings per diluted share were $0.17, and the company’s non-GAAP earnings per diluted share were $0.06.  The company reports results on both a GAAP and a non-GAAP basis.  Please refer to the tables at the back of this press release for a reconciliation of the company’s GAAP and non-GAAP results.

 

Robert Kotick, CEO of Activision Blizzard, stated, “Our quarterly results were fueled by continued strong consumer response to Activision Publishing’s  Call of Duty ® franchise and Blizzard Entertainment’s World of Warcraft ®.  For the first and second quarters, we outperformed our earnings per share outlook, and we grew our operating margin year over year for the six month period, driven by our focused effort to increase digital revenues.  There are clearly more opportunities than ever before to create great games and we are at the forefront of doing so.”

 

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“Looking to the balance of the year, we expect to release the best slate in our company’s history.  Blizzard Entertainment’s StarCraft ® II: Wings of Liberty™ is off to a strong start worldwide with midnight openings on July 27, 2010 at 3,100 GameStop stores in the U.S. and 8,000 retailers around the world.   We are, of course, enthusiastic about Blizzard Entertainment’s upcoming release of World of Warcraft: Cataclysm™, which began a closed beta test on June 30,” Kotick added.

 

Kotick continued, “ Call of Duty: Black Ops™ is shaping up to be one of the best games Activision Publishing has ever created, the marketing programs are the biggest in the company’s history and to date, pre-orders of the game exceed the pre-orders for Modern Warfare 2 at this time last year.  This fall, our lineup includes Activision Publishing’s Guitar Hero®: Warriors of Rock™ , DJ Hero 2™ , Tony Hawk®: SHRED™ , Spider-Man : Shattered Dimensions, GoldenEye 007 and Bakugan ®, all of which look to be very promising as well.  We have never been better positioned for the holiday season than we are today with such a strong slate of games and the best team in our industry to bring them to market.”

 

Business Highlights

 

For the first six months of the calendar year, in the U.S. and Europe, Call of Duty was the #1 third-party franchise and Call of Duty: Modern Warfare 2 was the #1 first-person action game, according to The NPD Group, Charttrack and Gfk.  Additionally, for the six month period, Activision Publishing was the #2 U.S. third-party console and handheld publisher, according to The NPD Group.

 

Other highlights are as follows:

 

·                   During the quarter, in the U.S., Call of Duty was the #3 franchise overall and the #1 first-person action franchise, according to The NPD Group.

 

·                   According to The NPD Group, Call of Duty: Modern Warfare 2 was the #1 first-person action title overall in the U.S. for the quarter.

 

·                   Blizzard Entertainment estimates that StarCraft II: Wings of Liberty sold through more than 1 million units in its first 24 hours, making it the best-selling PC game of 2010, and 1.5 million units in its first 48 hours, setting a record for fastest-selling strategy game of all time.

 

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·                   During the quarter, according to The NPD Group, Activision Blizzard had four top-10 U.S. PC games — Activision Publishing’s Call of Duty: Modern Warfare 2 and Blizzard Entertainment’s World of Warcraft: Wrath of the Lich King ®, World of Warcraft Battle Chest ® and Diablo® Battle Chest ®.

 

·                   During the quarter, life-to-date sales of map packs for the Call of Duty franchise surpassed 20 million units.

 

·                   During the quarter, sales from digital online channels grew more than 20% year over year.

 

·                   During the quarter, Activision Publishing released four games — Shrek Forever After ™, Blur ™, Singularity ™ and Transformers™: War for Cybertron — as well as two Call of Duty map packs — Call of Duty: Modern Warfare® 2 Stimulus Package for the PLAYSTATION®3 and PC and Call of Duty: Modern Warfare 2 Resurgence Pack for the Xbox® 360.

 

·                   On February 10, 2010, Activision Blizzard announced that its Board of Directors had authorized a stock repurchase program under which the company can purchase up to $1 billion of the company’s common stock.  As of June 30, 2010, Activision Blizzard had purchased $334 million of its common stock, or approximately 31 million shares.

 

·                   On April 2, 2010, Activision Blizzard paid a cash dividend of $0.15 per common share to shareholders of record at the close of business on February 22, 2010.

 

On July 13, Activision Blizzard announced that marketing and advertising industry veteran Eric Hirshberg has been named Chief Executive Officer of Activision Publishing, effective September 7, 2010.  In this role, Mr. Hirshberg will oversee Activision Publishing’s operational management including its studio, product development functions and consumer marketing activities.  He will report to Thomas Tippl, Chief Operating Officer of Activision Blizzard.

 

Company Outlook

 

In the third quarter, Blizzard Entertainment released StarCraft II: Wings of Liberty , and Activision Publishing expects to release Guitar Hero: Warriors of Rock for

 

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the Xbox 360 video game and entertainment system from Microsoft, the PLAYSTATION3 computer entertainment system from Sony and the Wii home video game system from Nintendo; and Spider-Man: Shattered Dimensions for the Xbox 360 video game and entertainment system from Microsoft, the PLAYSTATION3 computer entertainment system from Sony, the Wii home video game system from Nintendo, and the Nintendo DS.

 

Additionally, Activision Publishing has moved the anticipated release date for its upcoming open-world action title, True Crime ® : Hong Kong , from 2010 to 2011 in order to give the development team more time to deliver the high-quality entertainment experience they envision for the game.

 

Activision Blizzard’s outlook is based on assumptions about sell through rates for its products and the launch timing, success and pricing of its new slate of products which are subject to significant risks and uncertainties, including declines in the overall demand for video games and in the demand for the company’s products, the dependence in the interactive software industry and by the company on an increasingly limited number of popular franchises for a disproportionately high percentage of revenues and profits, the company’s ability to predict shifts in consumer preferences among genres, such as music and casual games, and competition.  Current macroeconomic conditions and market conditions within the video game industry increase those risks and uncertainties.

 

The company’s outlook is also subject to other risks and uncertainties including litigation and associated costs, fluctuations in foreign exchange and tax rates, counterparty risks relating to customers, licensees, licensors and manufacturers and risks relating to the ongoing ability of Blizzard Entertainment’s licensee, NetEase.com, Inc., to operate World of Warcraft in China on a paying basis without interruption.  As a result of these and other factors, actual results may deviate materially from the outlook presented below.

 

Despite Activision Publishing moving the release of True Crime: Hong Kong into 2011, Activision Blizzard is reaffirming its calendar year 2010 outlook due to an increase in its expectations for the Call of Duty brand in the fourth quarter.  For the calendar year, the company still expects GAAP net revenues of $4.2 billion and GAAP earnings per diluted share of $0.49, and on a non-GAAP basis, the company still expects net revenues of $4.4 billion and $0.72 earnings per diluted share as provided on May 6, 2010.

 

4



 

For the third quarter of calendar year 2010, Activision Blizzard expects GAAP net revenues of $600 million, and to break even on GAAP earnings per diluted share.  On a non-GAAP basis, the company expects net revenues of $725 million and $0.08 earnings per diluted share for the third quarter.

 

Conference Call

 

Today at 4:30 p.m. EDT, Activision Blizzard’s management will host a conference call and Webcast to discuss the company’s results for the quarter ended June 30, 2010 and management’s outlook for the remainder of the calendar year.

 

The company welcomes all members of the financial and media communities and other interested parties to visit the “Investor Relations” area of www.activisionblizzard.com to listen to the conference call via live Webcast or to listen to the call live by dialing into 888-389-5986 in the U.S. with passcode 1545851.

 

Non-GAAP Financial Measures

 

Activision Blizzard provides net revenues, net income (loss), earnings (loss) per share and operating margin data and guidance both including (in accordance with GAAP) and excluding (non-GAAP): the impact of the change in deferred net revenues and related cost of sales with respect to certain of the company’s online-enabled games; expenses related to share-based payments; Activision Blizzard’s non-core exit operations (which are the operating results of products and operations of the historical Vivendi Games, Inc. businesses that the company has exited or substantially wound down); costs related to the business combination between Activision, Inc. and Vivendi Games, Inc. (including transaction costs, integration costs, and restructuring activities); the amortization of intangibles and impairment of intangible assets; and the associated tax benefits.

 

Management believes that the presentation of these non-GAAP financial measures provides investors with additional useful information to measure Activision Blizzard’s financial and operating performance because they facilitate comparison of operating performance between periods and help investors to better understand the operating results of Activision Blizzard. Internally, management uses these non-GAAP financial measures in assessing the company’s operating results, as well as in planning and forecasting.

 

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Non-GAAP financial measures should be considered in addition to, not as a substitute for or superior to, financial measures determined in accordance with GAAP.  Activision Blizzard recognizes that there are limitations associated with the use of these non-GAAP financial measures.

 

Activision Blizzard’s non-GAAP financial measures are not based on a comprehensive set of accounting rules or principles, and the terms non-GAAP net revenues, non-GAAP net income, non-GAAP earnings per share, and non-GAAP operating margin do not have a standardized meaning. Therefore, other companies may use the same or similarly named measures, but exclude different items, which may not provide investors a comparable view of Activision Blizzard’s performance in relation to other companies.

 

Management compensates for the limitations resulting from the exclusion of these items by considering the impact of the items separately and by considering Activision Blizzard’s GAAP as well as non-GAAP results and outlook and, in this release, by presenting the most comparable GAAP measures directly ahead of non-GAAP measures, and by providing a reconciliation that indicates and describes the adjustments made.

 

About Activision Blizzard

 

Headquartered in Santa Monica, California, Activision Blizzard, Inc. is a worldwide online, PC, console, handheld and mobile game publisher with leading positions across every major category of the rapidly growing interactive entertainment software industry.

 

Activision Blizzard maintains operations in the U.S., Canada, the United Kingdom, France, Germany, Ireland, Italy, Sweden, Spain, the Netherlands, Australia, South Korea and China.  More information about Activision Blizzard and its products can be found on the company’s website, www.activisionblizzard.com.

 

Cautionary Note Regarding Forward-looking Statements:  Information in this press release that involves Activision Blizzard’s expectations, plans, intentions or strategies regarding the future, including statements under the heading “Company Outlook,” are forward-looking statements that are not facts and involve a number of risks and uncertainties.

 

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Activision Blizzard generally uses words such as “outlook,” “will,”  “could,” “would,” “might,” “remains,” “to be,” “plans,” “believes,” “may,” “expects,” “intends,” “anticipates,” “estimate,” future,” “plan,” “positioned,” “potential,” “project,” “remain,” “scheduled,” “set to,” “subject to,” “upcoming” and similar expressions to identify forward-looking statements.  Factors that could cause Activision Blizzard’s actual future results to differ materially from those expressed in the forward-looking statements set forth in this release include, but are not limited to, sales levels of Activision Blizzard’s titles, increasing concentration of titles, shifts in consumer spending trends, the impact of the current macroeconomic environment and market conditions within the video game industry, the seasonal and cyclical nature of the interactive game market, any further difficulties related to World of Warcraft in China, Activision Blizzard’s ability to predict consumer preferences among competing hardware platforms, declines in software pricing, product returns and price protection, product delays, retail acceptance of Activision Blizzard’s products,  adoption rate and availability of new hardware (including peripherals) and related software, industry competition including from used games and other forms of entertainment, litigation risks and associated costs, rapid changes in technology, industry standards, business models including online and used games, and consumer preferences including interest in specific genres such as music, first-person action and massively multiplayer online games, protection of proprietary rights, maintenance of relationships with key personnel, customers, licensees, licensors, vendors, and third-party developers, including the ability to attract, retain and develop key personnel and developers that can create high quality “hit” titles, counterparty risks relating to customers, licensees, licensors and manufacturers, domestic and international economic, financial and political conditions and policies, foreign exchange rates and tax rates, and the identification of suitable future acquisition opportunities and potential challenges associated with geographic expansion, and the other  factors  identified in the risk factors sections of Activision Blizzard’s most recent annual report on Form 10-K.   The forward-looking statements in this release are based upon information available to Activision Blizzard as of the date of this release, and Activision Blizzard assumes no obligation to update any such forward-looking statements.  Forward-looking statements believed to be true when made may ultimately prove to be incorrect. These statements are not guarantees of the future performance of Activision Blizzard and are subject to risks, uncertainties and other factors, some of which are beyond its control and may cause actual results to differ materially from current expectations.

 

###

 

(Tables to Follow)

 

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ACTIVISION BLIZZARD, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

(Amounts in millions, except per share data)

 

 

 

Three months ended June 30,

 

Six months ended June 30,

 

 

 

2010

 

2009

 

2010

 

2009

 

 

 

 

 

 

 

 

 

 

 

Net revenues:

 

 

 

 

 

 

 

 

 

Product sales

 

$

643

 

$

747

 

$

1,629

 

$

1,437

 

Subscription, licensing and other revenues

 

324

 

291

 

646

 

582

 

Total net revenues

 

967

 

1,038

 

2,275

 

2,019

 

 

 

 

 

 

 

 

 

 

 

Costs and expenses:

 

 

 

 

 

 

 

 

 

Cost of sales - product costs

 

235

 

281

 

572

 

577

 

Cost of sales - software royalties and amortization

 

51

 

86

 

150

 

158

 

Cost of sales - intellectual property licenses

 

29

 

54

 

72

 

118

 

Cost of sales - massively multi-player online role playing game (“MMORPG”)

 

52

 

51

 

106

 

103

 

Product development

 

104

 

123

 

247

 

240

 

Sales and marketing

 

126

 

118

 

182

 

201

 

General and administrative

 

70

 

92

 

135

 

195

 

Restructuring

 

 

15

 

 

30

 

 

 

 

 

 

 

 

 

 

 

Total costs and expenses

 

667

 

820

 

1,464

 

1,622

 

Operating income

 

300

 

218

 

811

 

397

 

Investment and other income, net

 

1

 

 

1

 

10

 

Income before income tax expense

 

301

 

218

 

812

 

407

 

Income tax expense

 

82

 

23

 

212

 

23

 

Net income

 

$

219

 

$

195

 

$

600

 

$

384

 

 

 

 

 

 

 

 

 

 

 

Basic earnings per common share

 

$

0.18

 

$

0.15

 

$

0.48

 

$

0.29

 

Weighted average common shares outstanding

 

1,232

 

1,289

 

1,239

 

1,299

 

 

 

 

 

 

 

 

 

 

 

Diluted earnings per common share

 

$

0.17

 

$

0.15

 

$

0.47

 

$

0.28

 

Weighted average common shares outstanding assuming dilution

 

1,248

 

1,332

 

1,254

 

1,345

 

 



 

ACTIVISION BLIZZARD, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

(Amounts in millions)

 

 

 

June 30,

 

December 31,

 

 

 

2010

 

2009

 

ASSETS

 

 

 

 

 

Current assets:

 

 

 

 

 

Cash and cash equivalents

 

$

2,214

 

$

2,768

 

Short-term investments

 

632

 

477

 

Accounts receivable, net

 

190

 

739

 

Inventories

 

157

 

241

 

Software development

 

219

 

224

 

Intellectual property licenses

 

27

 

55

 

Deferred income taxes, net

 

401

 

498

 

Other current assets

 

128

 

327

 

Total current assets

 

3,968

 

5,329

 

Long-term investments

 

23

 

23

 

Software development

 

30

 

10

 

Intellectual property licenses

 

32

 

28

 

Property and equipment, net

 

160

 

138

 

Other assets

 

13

 

9

 

Intangible assets, net

 

587

 

618

 

Trademark and trade names

 

433

 

433

 

Goodwill

 

7,147

 

7,154

 

Total assets

 

$

12,393

 

$

13,742

 

 

 

 

 

 

 

LIABILITIES AND SHAREHOLDERS’ EQUITY

 

 

 

 

 

Current liabilities:

 

 

 

 

 

Accounts payable

 

$

149

 

$

302

 

Deferred revenues

 

482

 

1,426

 

Accrued expenses and other liabilities

 

459

 

779

 

Total current liabilities

 

1,090

 

2,507

 

Deferred income taxes, net

 

249

 

270

 

Other liabilities

 

196

 

209

 

Total liabilities

 

1,535

 

2,986

 

 

 

 

 

 

 

Shareholders’ equity:

 

 

 

 

 

Common stock

 

 

 

Additional paid-in capital

 

12,260

 

12,376

 

Treasury stock

 

(1,584

)

(1,235

)

Retained earnings (accumulated deficit)

 

239

 

(361

)

Accumulated other comprehensive loss

 

(57

)

(24

)

Total shareholders’ equity

 

10,858

 

10,756

 

Total liabilities and shareholders’ equity

 

$

12,393

 

$

13,742

 

 



 

ACTIVISION BLIZZARD, INC. AND SUBSIDIARIES

RECONCILIATION OF GAAP NET INCOME TO NON-GAAP MEASURES

(Amounts in millions, except earnings per share data)

 

Three months ended June 30, 2010

 

Net Revenues

 

Cost of Sales -
Product Costs

 

Cost of Sales -
Software
Royalties and
Amortization

 

Cost of Sales -
Intellectual
Property
Licenses

 

Cost of Sales -
MMORPG

 

Product
Development

 

Sales and
Marketing

 

General and
Administrative

 

Total Costs and
Expenses

 

GAAP Measurement

 

 

$

967

 

$

235

 

$

51

 

$

29

 

$

52

 

$

104

 

$

126

 

$

70

 

$

667

 

Less: Net effect from deferral in net revenues and related cost of sales

(a)

 

(284

)

(68

)

13

 

(2

)

 

 

 

 

(57

)

Less: Stock-based compensation (including purchase price accounting related adjustments)

(b)

 

 

 

(12

)

 

 

6

 

(2

)

(9

)

(17

)

Less: Restructuring (included in general and administrative)

(c)

 

 

 

 

 

 

 

 

(1

)

(1

)

Less: Amortization of intangible assets

(d)

 

 

(1

)

 

(9

)

 

 

 

 

(10

)

Non-GAAP Measurement

 

 

$

683

 

$

166

 

$

52

 

$

18

 

$

52

 

$

110

 

$

124

 

$

60

 

$

582

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three months ended June 30, 2010

 

 

Operating
Income

 

Net Income

 

Basic Earnings
per Share

 

Diluted
Earnings per
Share

 

 

 

 

 

 

 

 

 

 

 

GAAP Measurement

 

 

$

300

 

$

219

 

$

0.18

 

$

0.17

 

 

 

 

 

 

 

 

 

 

 

Less: Net effect from deferral in net revenues and related cost of sales

(a)

 

(227

)

(165

)

(0.13

)

(0.13

)

 

 

 

 

 

 

 

 

 

 

Less: Stock-based compensation (including purchase price accounting related adjustments)

(b)

 

17

 

12

 

0.01

 

0.01

 

 

 

 

 

 

 

 

 

 

 

Less: Restructuring (included in general and administrative)

(c)

 

1

 

 

0.00

 

0.00

 

 

 

 

 

 

 

 

 

 

 

Less: Amortization of intangible assets

(d)

 

10

 

6

 

0.00

 

0.00

 

 

 

 

 

 

 

 

 

 

 

Non-GAAP Measurement

 

 

$

101

 

$

72

 

$

0.06

 

$

0.06

 

 

 

 

 

 

 

 

 

 

 

 

Six months ended June 30, 2010

 

 

Net Revenues

 

Cost of Sales -
Product Costs

 

Cost of Sales -
Software
Royalties and
Amortization

 

Cost of Sales -
Intellectual
Property
Licenses

 

Cost of Sales -
MMORPG

 

Product
Development

 

Sales and
Marketing

 

General and
Administrative

 

Total Costs and
Expenses

 

GAAP Measurement

 

 

$

2,275

 

$

572

 

$

150

 

$

72

 

$

106

 

$

247

 

$

182

 

$

135

 

$

1,464

 

Less: Net effect from deferral in net revenues and related cost of sales

(a)

 

(878

)

(201

)

(24

)

(16

)

 

 

 

 

(241

)

Less: Stock-based compensation (including purchase price accounting related adjustments)

(b)

 

 

 

(41

)

 

 

2

 

(3

)

(18

)

(60

)

Less: Restructuring (included in general and administrative)

(c)

 

 

 

 

 

 

 

 

(4

)

(4

)

Less: Amortization of intangible assets

(d)

 

 

(2

)

(4

)

(21

)

 

 

 

(1

)

(28

)

Non-GAAP Measurement

 

 

$

1,397

 

$

369

 

$

81

 

$

35

 

$

106

 

$

249

 

$

179

 

$

112

 

$

1,131

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Six months ended June 30, 2010

 

 

Operating
Income

 

Net Income

 

Basic Earnings
per Share

 

Diluted
Earnings per
Share

 

 

 

 

 

 

 

 

 

 

 

GAAP Measurement

 

 

$

811

 

$

600

 

$

0.48

 

$

0.47

 

 

 

 

 

 

 

 

 

 

 

Less: Net effect from deferral in net revenues and related cost of sales

(a)

 

(637

)

(473

)

(0.38

)

(0.37

)

 

 

 

 

 

 

 

 

 

 

Less: Stock-based compensation (including purchase price accounting related adjustments)

(b)

 

60

 

42

 

0.03

 

0.03

 

 

 

 

 

 

 

 

 

 

 

Less: Restructuring (included in general and administrative)

(c)

 

4

 

2

 

0.00

 

0.00

 

 

 

 

 

 

 

 

 

 

 

Less: Amortization of intangible assets

(d)

 

28

 

17

 

0.01

 

0.01

 

 

 

 

 

 

 

 

 

 

 

Non-GAAP Measurement

 

 

$

266

 

$

188

 

$

0.15

 

$

0.15

 

 

 

 

 

 

 

 

 

 

 

 


(a) Reflects the net change in deferred net revenues and related cost of sales.

(b) Includes expense related to stock-based compensation.

(c) Reflects restructuring related to the Business Combination with Vivendi Games. Restructuring activities includes severance costs, facility exit costs and balance sheet write down and exit costs from the cancellation of projects.

(d) Reflects amortization of intangible assets.

 

The per share adjustments are presented as calculated, and the GAAP and non-GAAP earnings per share information is also presented as calculated. The sum of these measures, as presented, may differ due to the impact of rounding.

 



 

ACTIVISION BLIZZARD, INC. AND SUBSIDIARIES

RECONCILIATION OF GAAP NET INCOME TO NON-GAAP MEASURES

(Amounts in millions, except earnings per share data)

 

Three months ended June 30, 2009

 

 

Net Revenues

 

Cost of Sales -
Product Costs

 

Cost of Sales -
Software Royalties
and Amortization

 

Cost of Sales -
Intellectual
Property
Licenses

 

Cost of Sales -
MMORPG

 

Product
Development

 

Sales and
Marketing

 

General and
Administrative

 

Restructuring

 

Total Costs and
Expenses

 

GAAP Measurement

 

 

$

1,038

 

$

281

 

$

86

 

$

54

 

$

51

 

$

123

 

$

118

 

$

92

 

$

15

 

$

820

 

Less: Net effect from deferral in net revenues and related cost of sales

(a)

 

(237

)

(43

)

(28

)

(2

)

 

 

 

 

 

(73

)

Less: Stock-based compensation (including purchase price accounting related adjustments)

(b)

 

 

 

(10

)

 

 

(8

)

(4

)

(21

)

 

(43

)

Less: Results of Activision Blizzard’s non-core exit operations

(c)

 

 

 

 

 

 

1

 

 

(4

)

 

(3

)

Less: Costs related to the Business Combination, integration and restructuring

(d)

 

 

 

 

 

 

 

 

(3

)

(15

)

(18

)

Less: Amortization of intangible assets and purchase price accounting related adjustments

(e)

 

 

(1

)

(12

)

(24

)

 

 

 

(1

)

 

(38

)

Non-GAAP Measurement

 

 

$

801

 

$

237

 

$

36

 

$

28

 

$

51

 

$

116

 

$

114

 

$

63

 

$

 

$

645

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three months ended June 30, 2009

 

 

Operating Income

 

Net Income

 

Basic Earnings
per Share

 

Diluted
Earnings per
Share

 

 

 

 

 

 

 

 

 

 

 

 

 

GAAP Measurement

 

 

$

218

 

$

195

 

$

0.15

 

$

0.15

 

 

 

 

 

 

 

 

 

 

 

 

 

Less: Net effect from deferral in net revenues and related cost of sales

(a)

 

(164

)

(145

)

(0.11

)

(0.11

)

 

 

 

 

 

 

 

 

 

 

 

 

Less: Stock-based compensation (including purchase price accounting related adjustments)

(b)

 

43

 

27

 

0.02

 

0.02

 

 

 

 

 

 

 

 

 

 

 

 

 

Less: Results of Activision Blizzard’s non-core exit operations

(c)

 

3

 

2

 

0.00

 

0.00

 

 

 

 

 

 

 

 

 

 

 

 

 

Less: Costs related to the Business Combination, integration and restructuring

(d)

 

18

 

11

 

0.01

 

0.01

 

 

 

 

 

 

 

 

 

 

 

 

 

Less: Amortization of intangible assets and purchase price accounting related adjustments

(e)

 

38

 

22

 

0.02

 

0.02

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-GAAP Measurement

 

 

$

156

 

$

112

 

$

0.09

 

$

0.08

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Six months ended June 30, 2009

 

 

Net Revenues

 

Cost of Sales - Product Costs

 

Cost of Sales - Software Royalties and Amortization

 

Cost of Sales - Intellectual Property Licenses

 

Cost of Sales - MMORPG

 

Product
Development

 

Sales and
Marketing

 

General and
Administrative

 

Restructuring

 

Total Costs and
Expenses

 

GAAP Measurement

 

 

$

2,019

 

$

577

 

$

158

 

$

118

 

$

103

 

$

240

 

$

201

 

$

195

 

$

30

 

$

1,622

 

Less: Net effect from deferral in net revenues and related cost of sales

(a)

 

(493

)

(100

)

(51

)

(11

)

 

 

 

 

 

(162

)

Less: Stock-based compensation (including purchase price accounting related adjustments)

(b)

 

 

 

(14

)

 

 

(17

)

(7

)

(33

)

 

(71

)

Less: Results of Activision Blizzard’s non-core exit operations

(c)

 

(1

)

 

 

 

 

4

 

(2

)

(10

)

 

(8

)

Less: Costs related to the Business Combination, integration and restructuring

(d)

 

 

 

 

 

 

 

 

(17

)

(30

)

(47

)

Less: Amortization of intangible assets and purchase price accounting related adjustments

(e)

 

 

(2

)

(29

)

(51

)

 

 

 

(2

)

 

(84

)

Non-GAAP Measurement

 

 

$

1,525

 

$

475

 

$

64

 

$

56

 

$

103

 

$

227

 

$

192

 

$

133

 

$

 

$

1,250

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Six months ended June 30, 2009

 

 

Operating Income

 

Net Income

 

Basic Earnings
per Share

 

Diluted
Earnings per
Share

 

 

 

 

 

 

 

 

 

 

 

 

 

GAAP Measurement

 

 

$

397

 

$

384

 

$

0.29

 

$

0.28

 

 

 

 

 

 

 

 

 

 

 

 

 

Less: Net effect from deferral in net revenues and related cost of sales

(a)

 

(331

)

(279

)

(0.21

)

(0.21

)

 

 

 

 

 

 

 

 

 

 

 

 

Less: Stock-based compensation (including purchase price accounting related adjustments)

(b)

 

71

 

44

 

0.03

 

0.03

 

 

 

 

 

 

 

 

 

 

 

 

 

Less: Results of Activision Blizzard’s non-core exit operations

(c)

 

7

 

5

 

0.00

 

0.00

 

 

 

 

 

 

 

 

 

 

 

 

 

Less: Costs related to the Business Combination, integration and restructuring

(d)

 

47

 

28

 

0.02

 

0.02

 

 

 

 

 

 

 

 

 

 

 

 

 

Less: Amortization of intangible assets and purchase price accounting related adjustments

(e)

 

84

 

41

 

0.03

 

0.03

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-GAAP Measurement

 

 

$

275

 

$

223

 

$

0.17

 

$

0.16

 

 

 

 

 

 

 

 

 

 

 

 

 


(a) Reflects the net change in deferred net revenues and related cost of sales.

(b) Includes expense related to stock-based compensation.

(c) Reflects the results of products and operations from the historical Vivendi Games businesses that the company has exited, divested or wound down.

(d) Reflects costs related to the Business Combination with Vivendi Games (including transaction costs, integration costs and restructuring activities). Restructuring activities includes severance costs, facility exit costs and balance sheet write down and exit costs from the cancellation of projects.

(e) Reflects amortization of intangible assets, and the change in the fair value of assets and liabilities from purchase price accounting related adjustments.

 

The per share adjustments are presented as calculated, and the GAAP and non-GAAP earnings per share information is also presented as calculated. The sum of these measures, as presented, may differ due to the impact of rounding.

 



 

ACTIVISION BLIZZARD, INC. AND SUBSIDIARIES

FINANCIAL INFORMATION

For the Three Months Ended June 30, 2010 and 2009

(Amounts in millions)

 

 

 

Three Months Ended

 

 

 

June 30, 2010

 

June 30, 2009

 

$ Increase

 

% Increase

 

 

 

Amount

 

% of Total

 

Amount

 

% of Total

 

(Decrease)

 

(Decrease)

 

GAAP Net Revenues by Segment/Platform Mix

 

 

 

 

 

 

 

 

 

 

 

 

 

Activision and Blizzard:

 

 

 

 

 

 

 

 

 

 

 

 

 

MMORPG

 

$

289

 

30

%

$

324

 

31

%

$

(35

)

(11

)%

PC and other

 

81

 

8

 

41

 

4

 

40

 

98

 

Sony PlayStation 3

 

182

 

19

 

152

 

15

 

30

 

20

 

Sony PlayStation 2

 

9

 

1

 

44

 

4

 

(35

)

(80

)

Microsoft Xbox 360

 

240

 

24

 

231

 

22

 

9

 

4

 

Nintendo Wii

 

76

 

8

 

118

 

11

 

(42

)

(36

)

Total console

 

507

 

52

 

545

 

52

 

(38

)

(7

)

Sony PlayStation Portable

 

3

 

 

17

 

2

 

(14

)

(82

)

Nintendo Dual Screen

 

36

 

5

 

48

 

5

 

(12

)

(25

)

Total handheld

 

39

 

5

 

65

 

7

 

(26

)

(40

)

Total Activision and Blizzard

 

916

 

95

 

975

 

94

 

(59

)

(6

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Distribution:

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Distribution

 

51

 

5

 

63

 

6

 

(12

)

(19

)

Total consolidated GAAP net revenues

 

967

 

100

 

1,038

 

100

 

(71

)

(7

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Change in Deferred Net Revenues (1)

 

 

 

 

 

 

 

 

 

 

 

 

 

Activision and Blizzard:

 

 

 

 

 

 

 

 

 

 

 

 

 

MMORPG

 

 

 

 

(42

)

 

 

 

 

 

 

PC and other

 

(35

)

 

 

(13

)

 

 

 

 

 

 

Sony PlayStation 3

 

(90

)

 

 

(47

)

 

 

 

 

 

 

Microsoft Xbox 360

 

(119

)

 

 

(91

)

 

 

 

 

 

 

Nintendo Wii

 

(40

)

 

 

(44

)

 

 

 

 

 

 

Total console

 

(249

)

 

 

(182

)

 

 

 

 

 

 

Total changes in deferred net revenues

 

(284

)

 

 

(237

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-GAAP Net Revenues by Segment/Platform Mix

 

 

 

 

 

 

 

 

 

 

 

 

 

Activision and Blizzard:

 

 

 

 

 

 

 

 

 

 

 

 

 

MMORPG

 

289

 

42

 

282

 

35

 

7

 

2

 

PC and other

 

46

 

7

 

28

 

4

 

18

 

64

 

Sony PlayStation 3

 

92

 

14

 

105

 

13

 

(13

)

(12

)

Sony PlayStation 2

 

9

 

1

 

44

 

5

 

(35

)

(80

)

Microsoft Xbox 360

 

121

 

18

 

140

 

18

 

(19

)

(14

)

Nintendo Wii

 

36

 

5

 

74

 

9

 

(38

)

(51

)

Total console

 

258

 

38

 

363

 

45

 

(105

)

(29

)

Sony PlayStation Portable

 

3

 

1

 

17

 

2

 

(14

)

(82

)

Nintendo Dual Screen

 

36

 

5

 

48

 

6

 

(12

)

(25

)

Total handheld

 

39

 

6

 

65

 

8

 

(26

)

(40

)

Total Activision and Blizzard

 

632

 

93

 

738

 

92

 

(106

)

(14

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Distribution

 

51

 

7

 

63

 

8

 

(12

)

(19

)

Total non-GAAP net revenues (2)

 

$

683

 

100

%

$

801

 

100

%

$

(118

)

(15

)%

 


(1) We provide net revenues including (in accordance with GAAP) and excluding (non-GAAP) the impact of changes in deferred net revenues.

(2) Total non-GAAP net revenues presented also represents our total operating segment net revenues.

 



 

ACTIVISION BLIZZARD, INC. AND SUBSIDIARIES

FINANCIAL INFORMATION

For the Six Months Ended June 30, 2010 and 2009

(Amounts in millions)

 

 

 

Six Months Ended

 

 

 

June 30, 2010

 

June 30, 2009

 

$ Increase

 

% Increase

 

 

 

Amount

 

% of Total

 

Amount

 

% of Total

 

(Decrease)

 

(Decrease)

 

GAAP Net Revenues by Segment/Platform Mix

 

 

 

 

 

 

 

 

 

 

 

 

 

Activision and Blizzard:

 

 

 

 

 

 

 

 

 

 

 

 

 

MMORPG

 

$

594

 

26

%

$

638

 

32

%

$

(44

)

(7

)%

PC and other

 

135

 

7

 

87

 

4

 

48

 

55

 

Sony PlayStation 3

 

486

 

22

 

283

 

14

 

203

 

72

 

Sony PlayStation 2

 

24

 

1

 

84

 

4

 

(60

)

(71

)

Microsoft Xbox 360

 

624

 

27

 

429

 

21

 

195

 

45

 

Nintendo Wii

 

212

 

9

 

252

 

13

 

(40

)

(16

)

Total console

 

1,346

 

59

 

1,048

 

52

 

298

 

28

 

Sony PlayStation Portable

 

8

 

 

23

 

1

 

(15

)

(65

)

Nintendo Dual Screen

 

70

 

3

 

74

 

4

 

(4

)

(5

)

Total handheld

 

78

 

3

 

97

 

5

 

(19

)

(20

)

Total Activision and Blizzard

 

2,153

 

95

 

1,870

 

93

 

283

 

15

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Distribution:

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Distribution

 

122

 

5

 

148

 

7

 

(26

)

(18

)

Total platform mix net revenues

 

2,275

 

100

 

2,018

 

100

 

257

 

13

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other (1)

 

 

 

1

 

 

(1

)

NM

 

Total consolidated GAAP net revenues

 

2,275

 

100

 

2,019

 

100

 

256

 

13

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Change in Deferred Net Revenues (1)

 

 

 

 

 

 

 

 

 

 

 

 

 

Activision and Blizzard:

 

 

 

 

 

 

 

 

 

 

 

 

 

MMORPG

 

(7

)

 

 

(75

)

 

 

 

 

 

 

PC and other

 

(60

)

 

 

(30

)

 

 

 

 

 

 

Sony PlayStation 3

 

(312

)

 

 

(118

)

 

 

 

 

 

 

Microsoft Xbox 360

 

(399

)

 

 

(183

)

 

 

 

 

 

 

Nintendo Wii

 

(100

)

 

 

(87

)

 

 

 

 

 

 

Total console

 

(811

)

 

 

(388

)

 

 

 

 

 

 

Total changes in deferred net revenues

 

(878

)

 

 

(493

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other (1)

 

 

 

 

(1

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-GAAP Net Revenues by Segment/Platform Mix

 

 

 

 

 

 

 

 

 

 

 

 

 

Activision and Blizzard:

 

 

 

 

 

 

 

 

 

 

 

 

 

MMORPG

 

587

 

42

 

563

 

37

 

24

 

4

 

PC and other

 

75

 

5

 

57

 

4

 

18

 

32

 

Sony PlayStation 3

 

174

 

12

 

165

 

11

 

9

 

5

 

Sony PlayStation 2

 

24

 

2

 

84

 

5

 

(60

)

(71

)

Microsoft Xbox 360

 

225

 

16

 

246

 

16

 

(21

)

(9

)

Nintendo Wii

 

112

 

8

 

165

 

11

 

(53

)

(32

)

Total console

 

535

 

38

 

660

 

43

 

(125

)

(19

)

Sony PlayStation Portable

 

8

 

1

 

23

 

1

 

(15

)

(65

)

Nintendo Dual Screen

 

70

 

5

 

74

 

5

 

(4

)

(5

)

Total handheld

 

78

 

6

 

97

 

6

 

(19

)

(20

)

Total Activision and Blizzard

 

1,275

 

91

 

1,377

 

90

 

(102

)

(7

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Distribution

 

122

 

9

 

148

 

10

 

(26

)

(18

)

Total non-GAAP net revenues (2)

 

$

1,397

 

100

%

$

1,525

 

100

%

$

(128

)

(8

)%

 


(1) We provide net revenues including (in accordance with GAAP) and excluding (non-GAAP) the impact of changes in deferred net revenues and other.

(2) Total non-GAAP net revenues presented also represents our total operating segment net revenues.

 



 

ACTIVISION BLIZZARD, INC. AND SUBSIDIARIES

FINANCIAL INFORMATION

For the Three and Six Months Ended June 30, 2010 and 2009

(Amounts in millions)

 

 

 

Three Months Ended

 

 

 

June 30, 2010

 

June 30, 2009

 

$ Increase

 

% Increase

 

 

 

Amount

 

% of Total

 

Amount

 

% of Total

 

(Decrease)

 

(Decrease)

 

GAAP Net Revenues by Geographic Region

 

 

 

 

 

 

 

 

 

 

 

 

 

North America

 

$

567

 

59

%

$

557

 

54

%

$

10

 

2

%

Europe

 

337

 

35

 

408

 

39

 

(71

)

(17

)

Asia Pacific

 

63

 

6

 

73

 

7

 

(10

)

(14

)

Total consolidated GAAP net revenues

 

967

 

100

 

1,038

 

100

 

(71

)

(7

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Change in Deferred Net Revenues (1)

 

 

 

 

 

 

 

 

 

 

 

 

 

North America

 

(192

)

 

 

(165

)

 

 

 

 

 

 

Europe

 

(79

)

 

 

(69

)

 

 

 

 

 

 

Asia Pacific

 

(13

)

 

 

(3

)

 

 

 

 

 

 

Total changes in net revenues

 

(284

)

 

 

(237

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-GAAP Net Revenues by Geographic Region

 

 

 

 

 

 

 

 

 

 

 

 

 

North America

 

375

 

55

 

392

 

49

 

(17

)

(4

)

Europe