Transcript
ACTIVISION BLIZZARD, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) (Amounts in millions, except per share data) Three Months Ended September 30,
2010 Net revenues: Product sales Subscription, licensing and other revenues Total net revenues
$
Costs and expenses: Cost of sales - product costs Cost of sales - software royalties and amortization Cost of sales - intellectual property licenses Cost of sales - massively multi-player online role playing game ("MMORPG") Product development Sales and marketing General and administrative Restructuring Total costs and expenses Operating income Investment and other income, net Income before income tax expense Income tax expense Net income
$
2009
Nine Months Ended September 30,
2010
2009
397 $ 348 745
411 $ 292 703
2,025 $ 994 3,019
1,848 874 2,722
194
185
765
762
61 33
54 45
211 105
212 163
61 119 111 111 --690 55 14 69 18 51 $
55 122 128 106 (1) 694 9 11 20 5 15 $
168 366 294 245 --2,154 865 15 880 229 651 $
158 362 329 301 29 2,316 406 21 427 28 399
Basic earnings per common share Weighted average common shares outstanding
$
0.04 $ 1,212
0.01 $ 1,271
0.53 $ 1,230
0.31 1,289
Diluted earnings per common share
$
0.04 $
0.01 $
0.52 $
0.30
Weighted average common shares outstanding assuming dilution
1,227
1,297
1,245
1,320
ACTIVISION BLIZZARD, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) (Amounts in millions) September 30, 2010 ASSETS Current assets: Cash and cash equivalents Short-term investments Accounts receivable, net Inventories Software development Intellectual property licenses Deferred income taxes, net Other current assets Total current assets Long-term investments Software development Intellectual property licenses Property and equipment, net Other assets Intangible assets, net Trademark and trade names Goodwill Total assets LIABILITIES AND SHAREHOLDERS’ EQUITY Current liabilities: Accounts payable Deferred revenues Accrued expenses and other liabilities Total current liabilities Deferred income taxes, net Other liabilities Total liabilities Shareholders’ equity: Common stock Additional paid-in capital Treasury stock Retained earnings (accumulated deficit) Accumulated other comprehensive loss Total shareholders’ equity Total liabilities and shareholders’ equity
$
$
$
$
December 31, 2009
2,123 726 246 258 248 26 419 102 4,148 23 37 36 169 14 566 433 7,144 12,570
$
238 622 533 1,393 231 200 1,824
$
$
--12,313 (1,848) 290 (9) 10,746 12,570 $
2,768 477 739 241 224 55 498 327 5,329 23 10 28 138 9 618 433 7,154 13,742
302 1,426 779 2,507 270 209 2,986
--12,376 (1,235) (361) (24) 10,756 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 September 30, 2010 GAAP Measurement Less: Net effect from deferral in net revenues and related cost of sales Less: Stock-based compensation Less: Amortization of intangible assets and purchase price accounting related adjustments Non-GAAP Measurement
Three Months Ended September 30, 2010 GAAP Measurement Less: Net effect from deferral in net revenues and related cost of sales Less: Stock-based compensation Less: Amortization of intangible assets and purchase price accounting related adjustments Non-GAAP Measurement
Nine Months Ended September 30, 2010 GAAP Measurement Less: Net effect from deferral in net revenues and related cost of sales Less: Stock-based compensation Less: Restructuring (included in general and administrative) Less: Amortization of intangible assets and purchase price accounting related adjustments Non-GAAP Measurement
Nine Months Ended September 30, 2010 GAAP Measurement Less: Net effect from deferral in net revenues and related cost of sales Less: Stock-based compensation Less: Restructuring (included in general and administrative) Less: Amortization of intangible assets and purchase price accounting related adjustments Non-GAAP Measurement
(a) (b) (d)
(a) (b) (d)
(a) (b) (c) (d)
(a) (b) (c) (d)
Net Revenues $ 745 112 $ 857
Operating Income $ 55 97 34 18 $ 204
Cost of Sales Cost of Sales Cost of Sales - Software Royalties and Intellectual Cost of Sales Product Costs Amortization Property Licenses MMORPG $ 194 $ 61 $ 33 $ 61 3 8 4 (11) (1) (5) (12) $ 196 $ 53 $ 25 $ 61
Basic Earnings per Share 51 $ 0.04 81 0.07 21 0.02 (5) 148 $ 0.12
Net Income $
$
Diluted Earnings per Share $ 0.04 0.07 0.02 $ 0.12
Cost of Sales Cost of Sales Cost of Sales - Software Royalties and Intellectual Cost of Sales Net Revenues Product Costs Amortization Property Licenses MMORPG $ 3,019 $ 765 $ 211 $ 105 $ 168 (765) (198) (16) (12) (51) (3) (10) (33) $ 2,254 $ 564 $ 134 $ 60 $ 168
Operating Income Net Income $ 865 $ 651 $ (539) (392) 94 64 3 2 47 12 $ 470 $ 337 $
Product Sales and General and Total Costs and Development Marketing Administrative Expenses 119 $ 111 $ 111 $ 690 15 (6) (2) (15) (34) (18) $ 113 $ 109 $ 96 $ 653 $
Product Sales and General and Total Costs and Development Marketing Administrative Expenses 366 $ 294 $ 245 $ 2,154 (226) (4) (6) (33) (94) (3) (3) (1) (47) $ 362 $ 288 $ 208 $ 1,784 $
Basic Earnings per Diluted Earnings Share per Share 0.53 $ 0.52 (0.32) (0.31) 0.05 0.05 0.00 0.00 0.01 0.01 0.27 $ 0.27
(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, 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 RECONCILIATION OF GAAP NET INCOME TO NON-GAAP MEASURES (Amounts in millions, except earnings per share data)
Three Months Ended September 30, 2009 GAAP Measurement Less: Net effect from deferral in net revenues and related cost of sales Less: Stock-based compensation Less: Costs related to the Business Combination, integration and restructuring Less: Amortization of intangible assets and purchase price accounting related adjustments Non-GAAP Measurement
Three Months Ended September 30, 2009 GAAP Measurement Less: Net effect from deferral in net revenues and related cost of sales Less: Stock-based compensation Less: Costs related to the Business Combination, integration and restructuring Less: Amortization of intangible assets and purchase price accounting related adjustments Non-GAAP Measurement
Nine Months Ended September 30, 2009 GAAP Measurement Less: Net effect from deferral in net revenues and related cost of sales Less: Stock-based compensation Less: Results of Activision Blizzard's non-core exit operations Less: Costs related to the Business Combination, integration and restructuring Less: Amortization of intangible assets and purchase price accounting related adjustments Non-GAAP Measurement
Nine Months Ended September 30, 2009 GAAP Measurement Less: Net effect from deferral in net revenues and related cost of sales Less: Stock-based compensation Less: Results of Activision Blizzard's non-core exit operations Less: Costs related to the Business Combination, integration and restructuring Less: Amortization of intangible assets and purchase price accounting related adjustments Non-GAAP Measurement
(a) (b) (d) (e)
Net Revenues $ 703 52 $ 755
Cost of Sales - Cost of Sales Software Intellectual Cost of Sales - Royalties and Property Cost of Sales Product Costs Amortization Licenses MMORPG $ 185 $ 54 $ 45 $ 55 20 31 5 (3) (1) (8) (24) $ 204 $ 74 $ 26 $ 55
Operating Income $ (a) (b) (d) (e) $
(a) (b) (c) (d) (e)
(a) (b) (c) (d) (e)
9 $ (9) 36 6 33 75 $
Net Income 15 5 23 3 9 55
Cost of Sales Net Revenues Product Costs $ 2,722 $ 762 (441) (79) (1) (4) $ 2,280 $ 679
Sales and General and Total Costs Product Marketing Administrative Restructuring and Expenses Development $ 122 $ 128 $ 106 $ (1) $ 694 5 61 (11) (2) (20) (36) (7) 1 (6) (33) $ 111 $ 131 $ 79 $ - $ 680
Diluted Basic Earnings Earnings per per Share Share $ 0.01 $ 0.01 0.00 0.00 0.02 0.02 0.00 0.00 0.01 0.01 $ 0.04 $ 0.04
Cost of Sales - Cost of Sales Software Intellectual Royalties and Property Cost of Sales Amortization Licenses MMORPG $ 212 $ 163 $ 158 (20) (6) (19) (36) (75) $ 137 $ 82 $ 158
Product Sales and General and Total Costs Development Marketing Administrative Restructuring and Expenses $ 362 $ 329 $ 301 $ 29 $ 2,316 5 (100) (28) (9) (51) (107) 4 (3) (10) (9) (24) (29) (53) (2) (117) $ 338 $ 322 $ 214 $ - $ 1,930
Diluted Operating Basic Earnings Earnings per Share Income Net Income per Share $ 406 $ 399 $ 0.31 $ 0.30 (341) (274) (0.21) (0.21) 107 67 0.05 0.05 8 5 0.00 0.00 53 32 0.02 0.02 117 49 0.05 0.05 $ 350 $ 278 $ 0.21 $ 0.21
(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 September 30, 2010 and 2009 (Amounts in millions) Three Months Ended September 30, 2009 Amount % of Total
September 30, 2010 Amount % of Total GAAP Net Revenues by Segment/Platform Mix Activision and Blizzard: MMORPG PC and other Sony PlayStation 3 Sony PlayStation 2 Microsoft Xbox 360 Nintendo Wii Total console Sony PlayStation Portable Nintendo Dual Screen Total handheld Total Activision and Blizzard
$
289 73 109 6 127 56 298 3 20 23 683
Distribution: Total Distribution Total consolidated GAAP net revenues
62 745
Change in Deferred Net Revenues 1 Activision and Blizzard: MMORPG PC and other Sony PlayStation 3 Microsoft Xbox 360 Nintendo Wii Total console Total changes in deferred net revenues
(7) 141 (5) (26) 9 (22) 112
Non-GAAP Net Revenues by Segment/Platform Mix Activision and Blizzard: MMORPG PC and other Sony PlayStation 3 Sony PlayStation 2 Microsoft Xbox 360 Nintendo Wii Total console Sony PlayStation Portable Nintendo Dual Screen Total handheld Total Activision and Blizzard
282 214 104 6 101 65 276 3 20 23 795
Total Distribution Total non-GAAP net revenues 2
$
62 857
39 % 10 15 1 16 8 40 --3 3 92
$
8 100
306 27 73 37 104 72 286 9 21 30 649
54 703
44 % 4 10 5 15 10 40 1 3 4 92
$ Increase (Decrease)
$
(17) 46 36 (31) 23 (16) 12 (6) (1) (7) 34
% Increase (Decrease)
(6) % 170 49 (84) 22 (22) 4 (67) (5) (23) 5
8 100
8 42
15 6
36 4 14 5 19 11 49 1 3 4 93
7 184 (3) (31) (41) (15) (90) (6) (1) (7) 94
3 NM (3) (84) (29) (19) (25) (67) (5) (23) 13
(31) 3 34 38 8 80 52
33 25 12 1 12 8 33 --2 2 93 7 100 %
275 30 107 37 142 80 366 9 21 30 701
$
54 755
7 100 %
$
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.
8 102
15 14 %
ACTIVISION BLIZZARD, INC. AND SUBSIDIARIES FINANCIAL INFORMATION For the Nine Months Ended September 30, 2010 and 2009 (Amounts in millions) Nine Months Ended September 30, 2009 Amount % of Total
September 30, 2010 Amount % of Total GAAP Net Revenues by Segment/Platform Mix Activision and Blizzard: MMORPG PC and other Sony PlayStation 3 Sony PlayStation 2 Microsoft Xbox 360 Nintendo Wii Total console Sony PlayStation Portable Nintendo Dual Screen Total handheld Total Activision and Blizzard
$
Distribution: Total Distribution Total platform mix net revenues
890 201 595 29 751 267 1,642 11 90 101 2,834
29 % 7 20 1 25 9 55 --3 3 94
$
952 106 356 121 533 324 1,334 32 95 127 2,519
35 % 4 13 4 20 12 49 1 4 5 93
$ Increase (Decrease)
$
(62) 95 239 (92) 218 (57) 308 (21) (5) (26) 315
% Increase (Decrease)
(7) % 90 67 (76) 41 (18) 23 (66) (5) (20) 13
185 3,019
6 100
202 2,721
7 100
(17) 298
(8) 11
Other 1 Total consolidated GAAP net revenues
--3,019
--100
1 2,722
--100
(1) 297
NM 11
Change in Deferred Net Revenues 1 Activision and Blizzard: MMORPG PC and other Sony PlayStation 3 Microsoft Xbox 360 Nintendo Wii Total console Total changes in deferred net revenues
(13) 81 (317) (425) (91) (833) (765)
(106) (26) (84) (145) (80) (309) (441)
---
(1)
37 4 12 5 17 11 45 1 4 5 91
31 202 6 (92) (62) (68) (216) (21) (5) (26) (9)
4 NM 2 (76) (16) (28) (21) (66) (5) (20) -
Other 1 Non-GAAP Net Revenues by Segment/Platform Mix Activision and Blizzard: MMORPG PC and other Sony PlayStation 3 Sony PlayStation 2 Microsoft Xbox 360 Nintendo Wii Total console Sony PlayStation Portable Total non-GAAP revenues Nintendo Dual net Screen Total handheld Total Activision and Blizzard
877 282 278 29 326 176 809 11 90 101 2,069
Total Distribution Total non-GAAP net revenues 2
185 $
2,254
39 13 12 1 14 8 35 1 4 5 92
846 80 272 121 388 244 1,025 32 95 127 2,078
8 100 %
202 $
2,280
9 100 %
$
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.
(17)
(8)
(26)
(1) %
ACTIVISION BLIZZARD, INC. AND SUBSIDIARIES FINANCIAL INFORMATION For the Three And Nine Months Ended September 30, 2010 and 2009 (Amounts in millions) Three Months Ended September 30, 2009 Amount % of Total
September 30, 2010 Amount % of Total GAAP Net Revenues by Geographic Region North America Europe Asia Pacific Total consolidated GAAP net revenues
$
406 281 58 745
Change in Deferred Net Revenues1 North America Europe Asia Pacific Total changes in net revenues
41 53 18 112
Non-GAAP Net Revenues by Geographic Region North America Europe Asia Pacific
447 334 76
Total non-GAAP net revenues2
$
857
54 % 38 8 100
$
$
Other1 Total consolidated GAAP net revenues Change in Deferred Net Revenues1 North America Europe Asia Pacific Total changes in net revenues Other1 Non-GAAP Net Revenues by Geographic Region North America Europe Asia Pacific Total non-GAAP net revenues2
52 39 9 100 %
$
1,675 1,142 202 3,019
55 % 38 7 100
--3,019
--100
404 309 42 $
755
$
$
100 %
1,458 1,088 175 2,721
54 % 40 6 100
1 2,722
(287) (147) (7) (441)
---
(1)
54 38 8 100 %
54 41 5 $
Nine Months Ended September 30, 2009 Amount % of Total
(462) (280) (23) (765)
1,213 862 179 2,254
54 % 41 5 100
% Increase (Decrease)
28 (6) 20 42
7 % (2) 53 6
43 25 34
11 8 81
26 22 4 52
September 30, 2010 Amount % of Total GAAP Net Revenues by Geographic Region North America Europe Asia Pacific Total geographic region net revenues
378 287 38 703
$ Increase (Decrease)
$
1,171 941 168 2,280
102
$ Increase (Decrease) $
14 %
% Increase (Decrease)
217 54 27 298
15 % 5 15 11
--100
(1) 297
NM 11
52 41 7 100 %
42 (79) 11 (26)
$
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.
4 (8) 7 (1) %
ACTIVISION BLIZZARD, INC. AND SUBSIDIARIES SEGMENT INFORMATION For the Three And Nine Months Ended September 30, 2010 and 2009 (Amounts in millions) Three Months Ended September 30, 2009 Amount % of Total
September 30, 2010 Amount % of Total Segment net revenues: (i) Activision (ii) Blizzard Distribution (iii) Operating segment total Reconciliation to consolidated net revenues: Net effect from deferral of net revenues Consolidated net revenues Segment income (loss) from operations: (i) Activision Blizzard (ii) Distribution (iii) Operating segment total Reconciliation to consolidated operating income: Net effect from deferral of net revenues and related cost of sales Stock-based compensation expense Restructuring Amortization of intangible assets and purchase price accounting related adjustments Integration and transactions costs Consolidated operating income
$
$
$
$
Operating margin from total operating segments
314 481 62 857
42 % 65 8 115
(112) 745
(15) 100 %
(43) 246 1 204
$
$
$
Reconciliation to consolidated net revenues: Net effect from deferral of net revenues Other (iv) Consolidated net revenues Segment income (loss) from operations: Activision (i) Blizzard (ii) Distribution (iii) Operating segment total Reconciliation to consolidated operating income: Net effect from deferral of net revenues and related cost of sales Stock-based compensation expense Restructuring Amortization of intangible assets and purchase price accounting related adjustments Integration and transactions costs Other (iv) Consolidated operating income Operating margin from total operating segments
$
$
$
(52) 703
(7) 100 %
(18) --55
(33) (7) 9
$
33 % 36 6 75
765 --3,019
25 --100 %
(101) 195 8 102
(24) % 68 15 14
42
6
130 (1) 129
NM 112 NM 172
46
NM
$
Nine Months Ended September 30, 2009 Amount % of Total $
$
$
1,211 867 202 2,280
44 % 33 7 84
441 1 2,722
16 --100 %
341 (107) (29)
(47) ----865
(117) (24) (8) 406
$
$ Increase (Decrease) $
(49) 393 6 350
539 (94) (3)
21%
% Increase (Decrease)
10%
983 1,086 185 2,254
(88) 559 (1) 470
$
(43) 116 2 75
9 (36) 1
24%
$
59 % 40 8 107
(97) (34) ---
September 30, 2010 Amount % of Total Segment net revenues: Activision (i) Blizzard (ii) Distribution (iii) Operating segment total
415 286 54 755
$ Increase (Decrease)
15%
(i) Activision Publishing (“Activision”) — publishes interactive entertainment software and peripherals. (ii) Blizzard — Blizzard Entertainment, Inc. and its subsidiaries (“Blizzard”) publishes games and online subscription-based games in the MMORPG category. (iii) Activision Blizzard Distribution (“Distribution”) — distributes interactive entertainment software and hardware products. (iv) Other represents Non-Core activities, which are legacy Vivendi Games’ divisions or business units that we have exited, divested or wound down as part of our restructuring and integration efforts as a result of the Business Combination. Prior to July 1, 2009, Non-Core activities were managed as a stand alone operating segment; however, in light of the minimal activities and insignificance of Non-Core activities, as of that date we ceased their management as a separate operating segment and consequently, we are no longer providing separate operating segment disclosure.
$
(228) 219 (17) (26)
% Increase (Decrease) (19) % 25 (8) (1)
297
11
(39) 166 (7) 120
NM 42 NM 34
459
113 %
ACTIVISION BLIZZARD, INC. AND SUBSIDIARIES OUTLOOK For the Quarter Ending December 31, 2010 and Year Ending December 31, 2010 GAAP to Non-GAAP Reconciliation (Amounts in millions, except per share data) Outlook for Three Months Ending December 31, 2010 Net Revenues (GAAP) Excluding the impact of: Change in deferred net revenues
$ (a)
1,260
Outlook for Year Ending December 31, 2010 $
940
4,280 170
Non-GAAP Net Revenues
$
2,200
$
4,450
(Loss)/Earnings Per Diluted Share (GAAP)
$
(0.01)
$
0.51
Excluding the impact of: Net effect from deferral in net revenues and related cost of sales Stock-based compensation Amortization of intangible assets Non-GAAP Earnings Per Diluted Share
(b) (c) (d)
0.44 0.01 0.03 $
0.47
0.12 0.06 0.05 $
(a) Reflects the net change in deferred net revenues. (b) Reflects the net change in deferred net revenues and related cost of sales. (c) Reflects expense related to stock-based compensation. (d) Reflects amortization of intangible assets. The per share adjustments are 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.
0.74
