Net Revenue and Earnings Per Share Highest in Company's History SANTA MONICA, Calif., May 8 /PRNewswire-FirstCall/ -- Activision, Inc. (Nasdaq: ATVI) today announced financial results for the
fourth quarter and fiscal year ended March 31, 2003.
Net Income Increases 27% Year Over Year
Net revenues for the fiscal year ended March 31, 2003 were $864.1 million or 10% higher, as compared to $786.4 million for the fiscal year ended March 31, 2002. Net income for the fiscal year was $66.2 million, or a record $0.96 per diluted share, compared with net income of $52.2 million, or $0.88 per diluted share reported for the last fiscal year.
Net revenues for the fourth quarter ended March 31, 2003 were $125.0 million as compared to $164.9 million that the company reported for the fourth quarter of the last fiscal year. For this fiscal year's fourth quarter, the company reported a net loss of $8.0 million or a loss per share of $0.13, as compared to net income of $10.9 million or $0.17 per diluted share, for last fiscal year's fourth quarter.
Activision increased its outlook for the first quarter of fiscal 2004 to $140 million in revenues and a loss per share of $0.01. The company also provided an outlook for the second quarter of $130 million in revenue and earnings per diluted share of $0.05. The company's full year outlook remains unchanged at $750 million in revenue and $0.70 earnings per diluted share.
Robert Kotick, Chairman and CEO of Activision, Inc. commented, "Fiscal 2003 was another record year for Activision. Not only did we deliver the highest net revenues and earnings in the company's history, we also significantly strengthened our business, balance sheet and overall financial position. We grew net income by 27%, and finished the year with more than $400 million of cash and short-term investments, lower inventories and all time low DSOs. We have one of the strongest balance sheets in the industry which gives us a clear competitive advantage as we enter the new fiscal year."
"We will enter fiscal 2004 with the largest installed base of video gaming platforms in the industry's history. We have a balanced portfolio of both licensed and original properties including id Software's Doom III and Return to Castle Wolfenstein, a new game based on Tony Hawk, Soldier of Fortune 2: Double Helix and Tenchu: Wrath of Heaven, X2 Wolverine's Revenge, Disney's Extreme Skate Adventure, as well as True Crime: Streets of L.A., Call of Duty and Pitfall Harry. As the installed base for the new console systems continues to grow, we believe that our diversified product slate, strong brand franchises and top developer partnerships will position us well for both near- and long-term opportunities."
Activision's fiscal year end results were driven by solid performance of its titles across all platforms. The company continued its market leadership position in both the action sports and super heroes genres with Spider-Man and Tony Hawk's Pro Skater both ending the calendar year as top five franchises in North America for the console and hand-held platforms. Additionally, Soldier of Fortune 2: Double Helix, Street Hoops, Medieval Total War and Tenchu: Wrath of Heaven performed well worldwide.
During the fourth quarter, the company's Tenchu: Wrath of Heaven was the #1 PlayStation 2 game in the U.S. for the month of March and topped sell-through retail charts in the U.K., Germany and several regions in the Asia Pacific territory.
Other highlights from the fiscal year are as follows:
* Activision significantly strengthened its intellectual property portfolio through five multi-year partnership agreements: * The company entered into a strategic multi-year, multi-property publishing agreement that grants Activision the exclusive interactive rights to publish games based on DreamWorks' three upcoming computer-animated feature films: "Sharkslayer," "Madagascar," and "Over the Hedge." * The company was named master videogame licensee for Lemony Snicket's A Series of Unfortunate Events, the best-selling children's book series that is in development for a feature film by Paramount Pictures and Nickelodeon Movies. * The company entered into an exclusive agreement with legendary U.K.-based game designer Peter Molyneux. Under the terms of the agreement, the company has secured the exclusive worldwide rights to Molyneux's new project tentatively titled The Movies for the PC and all video game console platforms. * The company entered into an exclusive agreement with Valve L.L.C. that grants Activision exclusive worldwide publishing rights to upcoming games created by the premiere PC game developer. * The company expanded its long-term, broad-based strategic alliance with Marvel Enterprises and signed a multi-year extension for their current video game licensing agreements. The expanded agreements grant Activision the exclusive rights to develop and publish video game products based on Marvel's comic book franchises Spider-Man(TM), X-MEN(TM), Fantastic Four(TM) and Iron Man(TM) through 2009. * Activision acquired two development studios -- Luxoflux and Z-Axis -- each of which has developed a title that has shipped more than one million units. Additionally, the company purchased an equity interest in Infinity Ward, a newly formed studio comprised of 22 of the members who developed the hit title Medal of Honor for the PC.
Under Activision's authorized share buyback program, during the fiscal year 2003, the company purchased 7.2 million shares of common stock at an average cost of $14.08 per share. During the fourth quarter ended March 31, 2003, the company purchased 5.4 million shares at an average cost of $14.40 per share. Additionally, under the authorized share buyback program the company entered into a series of structured stock repurchase transactions, in the aggregate amount of approximately $110 million, of which $85 million was entered into during the fourth quarter.
On May 5, 2003, the company announced that its Board of Directors has approved a three-for-two split of its outstanding common shares. The split is payable on June 6, 2003, to shareholders of record as of May 16, 2003. The stock split will be accomplished through a 50% stock dividend, providing shareholders with one additional share of common stock for every two shares they hold.
Looking ahead to the first quarter of fiscal year 2004, our slate is being driven by X2 Wolverine's Revenge, which shipped simultaneously on five platforms in advance of Twentieth Century Fox's movie release, id Software's Return to Castle Wolfenstein and Wakeboarding Unleashed featuring Shaun Murray for the Xbox and PlayStation 2 computer entertainment system, Soldier of Fortune II: Double Helix for the Xbox, Lost Kingdoms a real-time action RPG for the Nintendo GameCube and Day of Defeat, Medieval Total War: Viking Invasion and Star Trek®: Elite Force 2 for the PC.
Today at 4:30 p.m. EDT, Activision's management will host a conference call and Webcast to discuss its fiscal 2003 year-end results and outlook. The company welcomes all members of the financial and media communities to visit the "Investor Relations" area of http://www.activision.com to listen to the conference call via live Webcast or to listen to the call live by dialing into (952) 556-2802.
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 $864 million for the fiscal year ended March 31, 2003.
Activision maintains operations in the U.S., Canada, the United Kingdom, France, Germany, Japan, Australia, Scandinavia and the Netherlands. More information about Activision and its products can be found on the company's World Wide Web site, which is located at http://www.activision.com .
Note: The statements made in this press release that are not historical facts are forward-looking statements. Although the company believes that its plans, intentions and expectations reflected in such forward-looking statements are reasonable, a number of important factors could cause our actual future results to differ materially from those expressed in any such forward-looking statements.
Such factors include, without limitation, product delays, retail acceptance of our products, industry competition, rapid changes in technology and industry standards, protection of proprietary rights, maintenance of relationships with key personnel, vendors and third party developers, international economic and political conditions, integration of recently acquired subsidiaries and identification of suitable future acquisition opportunities.
These important factors and other factors that potentially could affect the company's financial results are described in our filings with the Securities and Exchange Commission, including the company's most recent Annual Report on Form 10-K and Quarterly Reports on Form 10-Q.
ACTIVISION, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except earnings per share data) Quarter ended Year ended March 31, March 31, 2003 2002 2003 2002 Net revenues $125,001 $164,912 $864,116 $786,434 Costs and expenses: Cost of sales - product costs 71,973 87,886 440,977 435,725 Cost of sales - software royalties and amortization 12,647 11,192 79,194 58,892 Cost of sales - intellectual property licenses 11,449 6,569 45,002 40,114 Product development 18,203 11,900 56,971 40,960 Sales and marketing 16,002 19,096 100,646 86,161 General and administrative 9,171 11,407 46,479 44,008 Total operating expenses 139,445 148,050 769,269 705,860 Operating income (loss) (14,444) 16,862 94,847 80,574 Investment income, net 2,006 622 8,560 2,546 Income (loss) before provision (benefit) for income taxes (12,438) 17,484 103,407 83,120 Provision (benefit) for income taxes (4,481) 6,600 37,227 30,882 Net income (loss) $(7,957) $10,884 $66,180 $52,238 Basic earnings (loss) per share $(0.13) $0.20 $1.03 $1.03 Weighted average common shares outstanding 62,939 54,921 64,159 50,651 Diluted earnings (loss) per share $(0.13) $0.17 $0.96 $0.88 Weighted average common shares outstanding assuming dilution 62,939 62,599 69,103 59,455 ACTIVISION, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands) March 31, March 31, 2003 2002 ASSETS Current assets: Cash, cash equivalents and short-term investments $406,954 $279,007 Accounts receivable, net 15,822 76,733 Inventories 19,577 20,736 Software development 26,791 36,263 Intellectual property licenses 8,906 6,326 Deferred income taxes 38,290 22,608 Other current assets 10,565 15,200 Total current assets 526,905 456,873 Software development 35,281 3,254 Intellectual property licenses 36,943 10,899 Property and equipment, net 22,265 17,832 Deferred income taxes 10,322 28,795 Other assets 5,081 3,242 Goodwill 68,019 35,992 Total assets $704,816 $556,887 LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Current portion of long-term debt $147 $168 Accounts payable 45,602 64,410 Accrued expenses 58,656 59,096 Total current liabilities 104,405 123,674 Long-term debt, less current portion 2,671 3,122 Total liabilities 107,076 126,796 Shareholders' equity: Common stock - - Additional paid-in capital 592,295 397,528 Retained earnings 130,564 64,384 Treasury stock (121,685) (20,323) Accumulated other comprehensive loss (3,434) (11,498) Total shareholders' equity 597,740 430,091 Total liabilities and shareholders' equity $704,816 $556,887 ACTIVISION, INC. AND SUBSIDIARIES FINANCIAL INFORMATION For the Quarter and Year Ended March 31, 2003 and 2002 (Amounts in thousands) Percent Increase (Decrease) Quarter Ended March 31, 2003 March 31, 2002 Amount % of Total Amount % of Total Geographic Revenue Mix United States $52,217 42% $72,464 44% -28% International 72,784 58% 92,448 56% -21% Total net revenues $125,001 100% $164,912 100% -24% Activity/Platform Mix Publishing: Console $56,197 71% $57,805 53% -3% Hand-held 4,905 6% 17,699 17% -72% PC 17,901 23% 32,809 30% -45% Total publishing $79,003 63% $108,313 66% -27% Distribution: Console $36,264 79% $46,149 82% -21% Hand-held 2,305 5% 3,787 6% -39% PC 7,429 16% 6,663 12% 11% Total distribution $45,998 37% $56,599 34% -19% Total net revenues $125,001 100% $164,912 100% -24% Percent Increase (Decrease) Year Ended March 31, 2003 March 31, 2002 Amount % of Total Amount % of Total Geographic Revenue Mix United States $432,261 50% $404,905 51% 7% International 431,855 50% 381,529 49% 13% Total net revenues $864,116 100% $786,434 100% 10% Activity/Platform Mix Publishing: Console $466,116 76% $312,986 57% 49% Hand-held 49,966 8% 119,177 22% -58% PC 99,893 16% 117,345 21% -15% Total publishing $615,975 71% $549,508 70% 12% Distribution: Console $208,505 84% $167,709 71% 24% Hand-held 14,103 6% 39,865 17% -65% PC 25,533 10% 29,352 12% -13% Total distribution $248,141 29% $236,926 30% 5% Total net revenues $864,116 100% $786,434 100% 10% ACTIVISION, INC. AND SUBSIDIARIES FINANCIAL INFORMATION For the Quarter and Year Ended March 31, 2003 and 2002 Quarter Ended Quarter Ended Year Ended Year Ended March 31, March 31, March 31, March 31, 2003 2002 2003 2002 Publishing Net Revenues PC 23% 30% 16% 21% Console 71% 53% 76% 57% PlayStation 2 45% 14% 42% 20% PlayStation 11% 14% 9% 21% Microsoft Xbox 10% 21% 12% 6% Nintendo GameCube 5% 1% 12% 3% Nintendo 64 0% 2% 1% 6% Sega Dreamcast 0% 1% 0% 1% Hand-held 6% 17% 8% 22% Game Boy Advance 6% 14% 7% 15% Game Boy Color 0% 3% 1% 7% Total publishing net revenues 100% 100% 100% 100%SOURCE Activision, Inc.