UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 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) May 5, 2005
-----------------------
(May 5, 2005)
-----------------------
ACTIVISION, INC.
- -------------------------------------------------------------------------------
(Exact Name of Registrant as Specified in Charter)
Delaware
- -------------------------------------------------------------------------------
(State or Other Jurisdiction of Incorporation)
0-12699 95-4803544
- -------------------------------------------------------------------------------
(Commission File Number) (IRS Employer
Identification No.)
3100 Ocean Park Blvd., Santa Monica, CA 90405
- -------------------------------------------------------------------------------
(Address of Principal Executive Offices) (Zip Code)
(310) 255-2000
- -------------------------------------------------------------------------------
(Registrant's telephone number, including area code)
- -------------------------------------------------------------------------------
(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):
[ ] Written communications pursuant to Rule 425 under the Securities Act (17
CFR 230.425)
[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the
Exchange Act (17 CFR 240.14d-2(b))
[ ] 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 May 5, 2005, Activision, Inc. (the "Company") issued a press release
announcing its financial results for the fourth quarter and fiscal year ended
March 31, 2005. A copy of the press release is attached hereto as Exhibit 99.1.
The information in this Form 8-K and the Exhibit attached hereto shall not
be deemed "filed" for purposes of Section 18 of the Securities Exchange Act of
1934, nor shall it be deemed incorporated by reference in any filing under 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.
(c) Exhibits
99.1 Press Release of the Company, dated May 5, 2005.
Use of Non-GAAP Financial Information
The Company's press release, and other communications from time to time, include
certain non-GAAP financial measures. A "non-GAAP financial measure" is defined
as a numerical measure of a company's financial performance, financial position
or cash flows that excludes (or includes) amounts that are included in (or
excluded from) the most directly comparable measure calculated and presented in
accordance with GAAP in the Company's financial statements.
The attached press release utilizes a measure of free cash flow. Free cash flow
is defined as operating cash flow less capital expenditures. The Company's
management believes that although free cash flow does not represent the amount
of money available for the Company's discretionary spending because certain
obligations of the Company must be funded out of free cash flow, it nevertheless
provides a useful measure of liquidity for assessing the amount of cash
available for general corporate and strategic purposes after funding operating
activities and capital expenditures, and deferred costs.
In addition, return on invested capital, also included in the attached press
release, is a non-GAAP financial measure. Management defines "return on invested
capital" as net income, less investment income plus tax paid on investment
income. Invested capital is calculated as average total assets (over a trailing
four-quarter period), less average cash and short term investments (over a
trailing four-quarter period), less average non-interest bearing current
liabilities (over a trailing four-quarter period). Management believes that
return on invested capital is useful because it provides investors with
additional useful information for evaluating the efficiency of the Company's
capital deployed in its operations. Return on invested capital does not consider
whether the business is financed with debt or equity, but rather calculates a
return on all capital invested in the business.
The non-GAAP financial measures used by the Company in the attached press
release may not be comparable to similarly titled measures used by other
companies and should not be considered in isolation or as a substitute for
measures of performance or liquidity prepared in accordance with GAAP.
2
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
ACTIVISION, INC.
By:/s/ Ronald Doornink
---------------------
Name: Ronald Doornink
Title: President
Date: May 5, 2005
3
EXHIBIT INDEX
Exhibit Number Description
99.1 Press Release of Activision, Inc., dated May 5, 2005.
4
Exhibit 99.1
Contacts: Bill Chardavoyne
Chief Financial Officer
(310) 255-2229
bchardavoyne@activision.com
Kristin Mulvihill Southey
Vice President, Investor Relations
(310) 255-2635
ksouthey@activision.com
Maryanne Lataif
Vice President, Corporate Communications
(310) 255-2704
mlataif@activision.com
ACTIVISION REPORTS RECORD Q4 AND FISCAL 2005 YEAR END RESULTS
- Fiscal 2005 Net Revenues Increased 48% Year Over Year to $1.4 Billion -
-
- Fiscal 2005 Net Income Grows 78% Year Over Year to $138 Million -
- Performance Marks 13 Consecutive Years of Revenue Growth -
- Q4 Net Revenues Up 25% Year Over Year -
SANTA MONICA, CA - May 5, 2005 - Activision, Inc. (Nasdaq: ATVI) today
announced record net revenues for the fourth quarter and fiscal year ended March
31, 2005.
Net revenues for the fiscal year ended March 31, 2005 were a record $1405.9
million, or 48% higher, as compared to $947.7 million for the fiscal year ended
March 31, 2004. Net income for the fiscal year was a record $138.3 million, or
$0.66 per diluted share, a 78% increase over net income of $77.7 million, or
$0.40 per diluted share reported for the last fiscal year.
Net revenues for the fourth quarter ended March 31, 2005 were $203.9
million, an increase of 25%, as compared to $162.9 million that the company
reported for the fourth quarter of the last fiscal year. For this fiscal year's
fourth quarter, the company reported net income of $3.6 million, or earnings per
diluted share of $0.02, which is $0.02 higher than the company's prior guidance.
Net income for the fiscal year 2004 fourth quarter was $6.7 million, or earnings
per diluted share of $0.03.
(more)
Activision Reports Record Fiscal Year 2005 Earnings Results
Robert Kotick, Chairman and CEO of Activision, Inc. commented, "Fiscal 2005
was another record year for Activision. We delivered the highest net revenues,
operating margin and earnings in the company's history. Our net revenues reached
$1.4 billion, which was driven by an increase in the number of million-unit
selling games year over year. We have one of the industry's strongest balance
sheets with $841 million of cash and short-term investments and for the trailing
12 months our free cash flow was a record $200 million and return on invested
capital was 45%. Perhaps most importantly, our gain in shareholders' equity in
fiscal 2005 was $267 million. Since fiscal 2000, our shareholders' equity has
increased from $132 million to $1.1 billion, a 53% rate compounded annually."
Kotick added, "We entered fiscal 2006 with the largest installed base of
video gaming platforms in the industry's history and, we believe, our strongest
product release slate ever. Our lineup includes new versions of our top-selling
franchises -- Tony Hawk, Spider-Man, Shrek, Call of Duty, DOOM, X-Men, True
Crime and Quake -- as well as, Fantastic Four, Madagascar, The Movies and an
original property from the development team behind the Tony Hawk series. We have
more depth in our portfolio of franchises, and with over 1,000 talented team
members in our internal studios, we have one of the strongest product
development operations in the industry. We remain enthusiastic about our
long-term prospects and our operating margin expansion programs should enable us
to continue delivering long-term value to our shareholders."
Business Highlights
Activision's fiscal year end results were driven by record worldwide sales
of several titles across all platforms. As a result of these strong sales the
company's domestic publishing net revenues increased 56% and its international
publishing revenues grew 72%. The company ended the fiscal year with two top-10
best-selling games across the console and handheld platforms in the U.S. -
Spider-Man 2(TM) and Tony Hawk's Underground 2 - and three top-10 best-selling
PC games in the U.S. - DOOM 3(TM), Rome: Total War(TM) and Call of Duty(TM),
according to NPD.
During the fourth quarter, the company released Spider-Man 2 and Tony
Hawk's Underground 2 Remix for the PSP simultaneously with the North American
release of the new handheld platform, as well as three titles from LucasArts
that were released in Europe -- Star Wars(R) Knights of the Old Republic(R) II:
The Sith Lords(TM), Mercenaries(TM) and Star Wars Republic Commando(TM).
Other business highlights are as follows:
o Spider-Man 2(R) for the Nintendo DS topped the charts as the #1
best-selling third-party title for the platform during the holiday
period in the U.S., and the #3 best-selling third-party title in the
U.K., according to NPD Funworld and Chart Track.
(more)
Activision Reports Record Fiscal Year 2005 Earnings Results
o During the quarter, Tony Hawk's Underground 2 Remix, ranked as the #3
best-selling third-party title for the new PSP platform, according to
NPD Funworld.
o During the fiscal year, we grew our publishing revenues from the
handheld platform by 456% or $114 million to $139 million.
o During the fiscal year, Activision's Call of Duty franchise
established itself as the best-selling console game franchise based on
a new intellectual property.
o For calendar 2004, Spider-Man 2 was the #1 best-selling movie-based
game in the U.S. and Shrek 2 was the #1 best-selling children's video
game in the U.S., according to NPD Funworld.
o On January 20, 2005, Activision announced that the company further
strengthened its next-generation development capabilities through the
acquisition of game developer Vicarious Visions, the creative studio
behind the #1 best-selling third-party Nintendo DS title,
Spider-Man 2.
o On May 3, 2005, Activision announced that the company acquired game
developer Toys For Bob. As a result of the acquisition, Activision now
has approximately 1,000 employees engaged in its studio operations.
During the fourth quarter, the Board of Directors approved a four-for-three
split of its outstanding common shares. The split was approved on February 23,
2005 and was paid on March 22, 2005 to shareholders of record as of the close of
business on March 7, 2005.
We have already seen a strong start to the first quarter of fiscal year
2006 with the releases of DOOM 3 for the Xbox and the DOOM 3: Resurrection of
Evil expansion pack for the PC. The remainder of our fist quarter slate is being
driven by games based on two highly anticipated summer movie releases,
"Madagascar" and "Fantastic Four."
Company Outlook
Activision reaffirmed its net revenues and earnings per diluted share
outlook for fiscal 2006 of $1.43 billion in net revenues and earnings per
diluted share of $0.68. For the first quarter of the fiscal year 2006, the
company expects net revenues of $200 million and a loss per share of $0.03.
(more)
Activision Reports Record Fiscal Year 2005 Earnings Results
Non-GAAP Financial Measures
The company's press release includes the non-GAAP financial measures of "free
cash flow" and "return on invested capital." A reconciliation of these non-GAAP
financial measures to the most comparable GAAP financial measure appears at the
end of this press release.
Conference Call
Today at 4:30 p.m. EDT, Activision's management will host a conference call
and Webcast to discuss its fiscal 2005 year-end results and outlook for fiscal
2006. 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 into
(719) 457-2657 in the U.S.
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 $1.4
billion for the fiscal year ended March 31, 2005.
Activision maintains operations in the U.S., Canada, the United Kingdom, France,
Germany, Italy, 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 www.activision.com.
Note: The statements made in this press release that are not historical facts
are "forward-looking" statements. These forward-looking statements are based on
current expectations and assumptions that are subject to risks and
uncertainties. The company cautions readers of this press release that a number
of important factors could cause Activision's actual future results to differ
materially from those expressed in any such forward-looking statements.
Such factors include, without limitation, 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. Readers of this press release are
referred to such filings. The company may change its intention, belief or
expectation, at any time and without notice, based upon any changes in such
factors, in the company's assumptions or otherwise. The company undertakes no
obligation to release publicly any revisions to its forward-looking statements
to reflect events or circumstances after the date hereof or to reflect the
occurrence of unanticipated events.
(Tables to Follow)
(more)
ACTIVISION, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except earnings per share data)
Year ended
Quarter ended March 31, March 31,
2005 2004 2005 2004
---------- ------------ ----------- -----------
Restated Restated
---------- ------------ ----------- -----------
Net revenues $203,861 $162,897 $1,405,857 $947,656
Costs and expenses:
Cost of sales
- product costs 130,190 91,239 658,949 475,541
Cost of sales
- software royalties
and amortization 6,954 9,169 123,800 59,744
Cost of sales
- intellectual
property licenses 4,400 4,854 62,197 31,862
Product development 20,489 18,031 86,543 97,859
Sales and marketing 29,842 26,196 230,058 128,221
General and administrative 14,885 8,765 59,739 44,612
-------- -------- --------- --------
Total operating expenses 206,760 158,254 1,221,286 837,839
Operating income (loss) (2,899) 4,643 184,571 109,817
Investment income, net 5,138 2,050 13,092 6,175
Income before
provision (benefit) for
income taxes 2,239 6,693 197,663 115,992
Provision (benefit)
for income taxes (1,334) 29 59,328 38,277
-------- -------- --------- --------
Net income $3,573 $6,664 $138,335 $77,715
======== ======== ========= ========
Basic earnings
per share $0.02 $0.04 $0.74 $0.44
Weighted average
common shares outstanding 195,413 180,735 187,517 177,665
Diluted earnings
per share $0.02 $0.03 $0.66 $0.40
Weighted average
common shares
outstanding assuming
dilution 215,614 200,307 209,145 193,191
Share and earnings per share data have been restated to reflect our
four-for-three stock split for shareholders of record as of March 7, 2005,
paid March 22, 2005.
ACTIVISION, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
March 31, March 31,
2005 2004
------------- -------------
ASSETS
Current assets:
Cash, cash equivalents and
short-term investments $ 840,864 $ 587,649
Accounts receivable, net 109,144 62,577
Inventories 48,018 26,427
Software development 73,096 58,320
Intellectual property licenses 21,572 32,115
Deferred income taxes 6,760 26,127
Other current assets 23,010 18,660
---------- ----------
Total current assets 1,122,464 811,875
========== ==========
Software development 18,518 28,386
Intellectual property licenses 14,154 16,380
Property and equipment, net 30,490 25,539
Deferred income taxes 28,041 9,064
Other assets 1,635 1,080
Goodwill 91,661 76,493
---------- ----------
Total assets 1,306,963 $ 968,817
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 108,984 $ 72,874
Accrued expenses 98,067 63,205
---------- ----------
Total liabilities 207,051 136,079
========== ==========
Shareholders' equity:
Common stock - -
Additional paid-in capital 741,680 758,626
Retained earnings 346,614 208,279
Treasury stock - (144,128)
Accumulated other
comprehensive income 11,618 9,961
---------- ----------
Total shareholders' equity 1,099,912 832,738
---------- ----------
Total liabilities and
shareholders' equity $1,306,963 $ 968,817
========== ==========
ACTIVISION, INC. AND SUBSIDIARIES
FINANCIAL INFORMATION
For the Quarter and Year Ended March 31, 2005 and 2004
(Amounts in thousands)
Percent
Increase
Quarter Ended (Decrease)
March 31, 2005 March 31, 2004
Amount % of Total Amount % of Total
Geographic Revenue Mix
United States $ 69,087 34% $ 65,509 40% 5%
International 134,774 66% 97,388 60% 38%
---------- ---- -------- ---- -----
Total net revenues $ 203,861 100% $162,897 100% 25%
========== ==== ======== ==== =====
Activity/Platform Mix
Publishing:
Console $ 66,878 33% $ 68,919 42% -3%
Hand-held 33,353 16% 2,795 2% 1093%
PC 30,398 15% 24,896 15% 22%
---------- ---- -------- ---- -----
Total publishing $ 130,629 64% $ 96,610 59% 35%
========== ==== ======== ==== =====
Distribution:
Console $ 52,826 26% $ 52,293 32% 1%
Hand-held 8,148 4% 3,802 3% 114%
PC 12,258 6% 10,192 6% 20%
---------- ---- -------- ---- -----
Total distribution $ 73,232 36% $ 66,287 41% 10%
---------- ---- -------- ---- -----
Total net revenues $ 203,861 100% $162,897 100% 25%
========== ==== ======== ==== =====
Percent
Increase
Year Ended (Decrease)
March 31, 2005 March 31, 2004
Amount % of Total Amount % of Total
Geographic Revenue Mix
United States $ 696,325 50% $446,812 47% 56%
International 709,532 50% 500,844 53% 42%
---------- ---- -------- ---- -----
Total net revenues $1,405,857 100% $947,656 100% 48%
========== ==== ======== ==== =====
Activity/Platform Mix
Publishing:
Console $ 713,947 51% $508,418 54% 40%
Hand-held 138,695 10% 24,945 2% 456%
PC 220,087 15% 132,369 14% 66%
---------- ---- -------- ---- -----
Total publishing $1,072,729 76% $665,732 70% 61%
========== ==== ======== ==== =====
Distribution:
Console $ 256,452 18% $223,802 24% 15%
Hand-held 23,282 2% 18,361 2% 27%
PC 53,394 4% 39,761 4% 34%
---------- ---- -------- ---- -----
Total distribution $ 333,128 24% $281,924 30% 18%
---------- ---- -------- ---- -----
Total net revenues $1,405,857 100% $947,656 100% 48%
========== ==== ======== ==== =====
ACTIVISION, INC. AND SUBSIDIARIES
FINANCIAL INFORMATION
For the Quarter and Year Ended March 31, 2005 and 2004
Quarter Ended Quarter Ended Year Ended Year Ended
March 31, 2005 March 31, 2004 March 31, 2005 March 31, 2004
Publishing Net Revenues
PC 23% 26% 21% 20%
- ------------------------------------ ----------- ------------ ------------ ------------
Console 51% 71% 66% 76%
- ------------------------------------ ----------- ------------ ------------ ------------
PlayStation 2 25% 41% 39% 43%
Microsoft Xbox 22% 23% 18% 22%
Nintendo GameCube 3% 4% 9% 8%
Playstation 1% 3% 0% 3%
Hand-held 26% 3% 13% 4%
- ------------------------------------ ----------- ------------ ------------ ------------
Game Boy Advance 7% 3% 9% 4%
Nintendo Dual Screen 4% 0% 2% 0%
Portable Sony PlayStation 15% 0% 2% 0%
- ------------------------------------ ----------- ------------ ------------ ------------
Total publishing net revenues 100% 100% 100% 100%
====================================== =========== ============ ============ ============
ACTIVISION, INC. AND SUBSIDIARIES
Non-GAAP Disclosures
Free Cash Flow
(In thousands)
Three Months Three Months Three Months Three Months Three Months
Ended Ended Ended Ended Ended
03/31/2005 12/31/04 9/30/04 6/30/04 3/31/04
Net Cash Provided by (Used In) Operating
Activities $ 118,931 $ 85,668 $ 62,846 $(52,136) $ 21,069
Less: Capital Expenditures $ (6,911) $ (3,587) $ (2,562) $ (1,881) $ (2,521)
---------- ---------- ---------- -------- --------
Free Cash Flow $ 112,020 $ 82,081 $ 60,284 $(54,017) $ 18,548
Trailing Twelve Month Free Cash Flow $ 200,368 $ 106,896 $ 121,998 $ 30,779 $ 55,427
ACTIVISION, INC. AND SUBSIDIARIES
Non-GAAP Disclosures
Return on Invested Capital
(In thousands)
Three Months Three Months Three Months Three Months Three Months
Ended Ended Ended Ended Ended
03/31/2005 12/31/04 9/30/04 6/30/04 3/31/04
NET OPERATING PROFIT AFTER TAXES
Net income $ 3,573 $ 97,262 $ 25,543 $ 11,957 $ 6,664
Less:
Investment income (5,138) (3,197) (2,645) (2,112) (2,051)
Tax effect on Investment income (B) 1,394 991 846 697 677
---------- ---------- ---------- -------- --------
Net Operating Profit After Taxes $ (171) $ 95,056 $ 23,744 $ 10,542 $ 5,290
Trailing Twelve Month Net Operating
Profit After Taxes $ 129,171 $ 134,632 $ 115,576 $ 80,826 $ 73,630
INVESTED CAPITAL
Total assets $1,306,963 $1,344,629 $1,104,169 $985,841 $968,817
Less:
Cash and short term investments 840,864 713,180 606,087 $539,146 587,649
Current liabilities (non-interest bearing) 207,051 311,433 216,342 132,092 136,079
---------- ---------- ---------- -------- --------
Invested capital $ 259,048 $ 320,016 $ 281,740 $314,603 $245,089
Trailing Twelve Month Invested Capital (A) 284,100 282,288 268,816 260,784 236,584
Return on Invested Capital (C) 0% 30% 8% 3% 2%
Trailing Twelve Month Return
on Invested Capital (C) 45% 48% 43% 31% 31%
(A) Amounts for the trailing twelve months represent averages of the previous
four fiscal quarters.
(B) Tax effect represents investment income multiplied by
our effective tax rate.
(C) Return on Invested Capital and Trailing Twelve Month Return on Invested
Capital is the percentage of Net Operating Profit After Taxes to Invested
Capital, and the percentage of Trailing Twelve Month Net Operating Profit After
Taxes to Trailing Twelve Month Invested Capital, respectively.
