Activision Blizzard Reports December Quarter and Calendar Year 2009 Financial Results
- Company Announces $1 Billion Share Repurchase Program -
- Annual Cash Dividend of $0.15 per Common Share -
- For CY 2010 Company Expects Record Operating Margin and EPS -
SANTA MONICA, Calif., Feb. 10 /PRNewswire-FirstCall/ -- Activision Blizzard, Inc. (Nasdaq: ATVI) today announced December quarter and calendar year 2009 financial results.
For calendar year 2009, Activision Blizzard’s GAAP net revenues were $4.28 billion. On a non-GAAP basis, the company’s net revenues were $4.78 billion.
For calendar year 2009, Activision Blizzard’s GAAP earnings per diluted share were $0.09. The results include a $0.19 per share reduction in the valuation of intangible assets reflecting the impact of a weaker market on the casual and music genres. Excluding this charge, GAAP earnings per diluted share would have been $0.28 per share. On a non-GAAP basis, the company’s earnings per diluted share were $0.69.
For the quarter ended December 31, 2009, Activision Blizzard’s GAAP net revenues were $1.56 billion. On a non-GAAP basis, the company’s net revenues were $2.50 billion.
For the quarter ended December 31, 2009, Activision Blizzard had a GAAP loss per diluted share of $0.23. The results include the $0.19 per share reduction in the valuation of intangible assets described above. Excluding this charge, GAAP loss per share would have been $0.04. On a non-GAAP basis, the company’s earnings per diluted share were $0.49.
Activision Blizzard 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.
Separately, Activision Blizzard also announced that its Board of Directors has authorized a stock repurchase program under which the company can repurchase up to $1 billion of the company's common stock. The Board of Directors also declared an annual cash dividend of $0.15 per common share payable on April 2, 2010 to shareholders of record at the close of business on February 22, 2010.
Robert Kotick, CEO of Activision Blizzard, stated, “We delivered better-than-expected calendar year non-GAAP financial results and our fourth quarter non-GAAP net revenues and non-GAAP earnings per share were the highest in our company’s history. On a non-GAAP basis, our performance enabled us to deliver the most profitable year in our company’s history and record operating margin. We generated approximately $1.2 billion in operating cash flow and ended the year with approximately $3.3 billion in cash and investments. For the calendar year, in the U.S. and Europe, Call of Duty®: Modern Warfare™ 2 was the #1 best-selling title overall and DJ Hero™ was the highest grossing new IP launched in 2009. Additionally, through Blizzard Entertainment’s World of Warcraft® we remain #1 in the subscription-based massively multiplayer online role-playing game category worldwide, according to The NPD Group and internal Activision Blizzard estimates."
Kotick continued, “Despite these challenging times, in 2010 we remain focused on expanding operating margins by growing our high-margin digital/online revenues, directing our resources to the largest and most profitable opportunities and realizing operational efficiencies globally. On a non-GAAP basis, we expect to deliver a year of record net earnings and operating margins and are taking another step towards our long-term objective of operating margins of 30% or more. In calendar year 2010, we expect our net earnings and operating margin growth will be driven by our product slate that includes Blizzard Entertainment’s Starcraft® II and the World of Warcraft expansion pack, Cataclysm™, as well as a diversified lineup based on Activision Publishing’s best-selling franchises including Call of Duty, Guitar Hero® and Tony Hawk®, together with other well-known titles such as True Crime®, Spider-Man® and Bakugan®.”
“Our significant accomplishments in 2009 are the result of the expertise and skills of our employees around the world. Their hard work and commitment to excellence made us stronger even during difficult times. Our strategy and capabilities are supported by a very strong financial position. We continue to put our cash to work, including the announcements we made today – the authorization of our second billion dollar stock buyback program in two years and our first cash dividend, both of which reflect our confidence in the future and our 18-year commitment to industry leading shareholder value creation,” Kotick added.
Business Highlights
In the U.S. and Europe, for calendar year 2009, Activision Blizzard increased its share 1.8 points over the previous year across all platforms to 16% and had two of the top-five best-selling franchises on the consoles across all platforms -- Call of Duty and Guitar Hero®, according to The NPD Group, Charttrack and Gfk. Additionally, the company was the #1 U.S. publisher overall for the PlayStation® 3 computer entertainment system and the Xbox 360™ video game system from Microsoft and the #1 third-party publisher for the Nintendo Wii™, according to The NPD Group, Charttrack and Gfk.
Other highlights are as follows:
- For calendar year 2009, Activision Blizzard had the highest share point gain of any publisher in Europe from 11.9% to 13.9%, according to Charttrack and Gfk.
- Guitar Hero was a top-four franchise overall and the #1 music franchise in the U.S. and Europe for the calendar year, according to The NPD Group, Charttrack and Gfk.
- In the U.S. and Europe, DJ Hero™ was the highest grossing new intellectual property launched in 2009, according to The NPD Group, Charttrack and Gfk.
- Activision Blizzard had two of the top five best-selling PC titles in dollars in the U.S. and Europe for the calendar year -- Call of Duty®: Modern Warfare™ 2 and Blizzard Entertainment’s World of Warcraft: Wrath of the Lich King™, according to The NPD Group, Charttrack and Gfk.
- For the December quarter, Activision Blizzard was the #1 publisher overall in the U.S. and Europe and grew its share 1.7 points over the previous year across all platforms to 20.1%, according to The NPD Group, Charttrack and Gfk.
- During the December quarter, in the U.S. and Europe, Call of Duty: Modern Warfare 2 was the #1 best-selling console title in dollars and the Call of Duty franchise was the #1 franchise overall, according to The NPD Group, Charttrack and Gfk.
- In November 2009, Call of Duty: Modern Warfare 2 became the first video game ever to surpass $550 million in retail sales in its first five days of release, according to Activision Publishing’s internal estimates. To date, the game has sold more than $1 billion in retail sales worldwide, according to The NPD, Charttrack and Gfk.
- On November 17, 2009, Activision Publishing announced the appointments of industry veterans Glen A. Schofield as Vice President and General Manager and Michael Condrey as Vice President and COO of Sledgehammer Games, a new wholly-owned game development studio located in Foster City, California.
- On December 14, 2009, Activision Publishing announced that the company is currently in development on a new open world True Crime game inspired by classic Hollywood and Asian cinema-style action thrillers. The game which is being developed by United Front Games is expected to launch later this year.
- As of December 31, 2009, approximately 11.5 million gamers worldwide are subscribed to play Blizzard Entertainment’s World of Warcraft.
- As of December 31, 2009, Activision Blizzard completed its $1.25 billion authorized stock repurchase program. The company purchased approximately 115 million shares of common stock at an average price of $10.87 per share since the program’s inception in November 2008.
- On February 2, 2010, Activision Publishing announced that David Haddad, Chief Operating Officer of Guitar Hero, has assumed the operational responsibilities for the Guitar Hero business unit.
Company Outlook
For the first quarter of calendar year 2010, Activision Publishing expects to release one title during the last week of March, How To Train Your Dragon™. The game is based on DreamWorks Animation’s upcoming 3D movie and is expected to be published for the PlayStation 3 computer entertainment system, Xbox 360 video game system from Microsoft, Nintendo Wii and Nintendo DS™.
Activision Blizzard’s outlook is subject to significant risks and uncertainties including declines in demand for its products, competition, 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.
The company’s outlook is also based on assumptions about sell through rates for its products, and the launch timing, success and pricing of its new slate of products. Current macroeconomic conditions increase those risks and uncertainties. As a result of these and other factors, actual results may deviate materially from the outlook presented below.
For calendar year 2010, Activision Blizzard expects GAAP net revenues of $4.2 billion, and GAAP earnings per diluted share of $0.47. On a non-GAAP basis, the company expects net revenues of $4.4 billion and non-GAAP earnings per diluted share of $0.70 for the calendar year.
For the first quarter 2010, Activision Blizzard expects GAAP net revenues of $1.1 billion, and GAAP earnings per diluted share of $0.20. On a non-GAAP basis, the company expects net revenues of $525 million and $0.02 earnings per diluted share for the March quarter.
Conference Call
Today at 4:30 p.m. EST, Activision Blizzard’s management will host a conference call and Webcast to discuss the company’s results for the quarter and year ended December 31, 2009 and management’s outlook for 2010. 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 and view a brief supporting slide presentation via live Webcast or to listen to the call live by dialing into 888-695-0608 in the U.S. with passcode 2419717.
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.
As online functionality becomes a more important component of gameplay, certain of the company’s online-enabled games for certain platforms contain a more-than-inconsequential separate service deliverable in addition to the product, and the company's performance obligations for these games extend beyond the sale of the games. Vendor-specific objective evidence of fair value does not exist for the online services, as the company does not separately charge for this component of online-enabled games. As a result, the company recognizes all of the revenues from the sale of these games ratably over the estimated service period. In addition, the company defers the cost of sales of these titles to match revenues.
Revenue related to the sale of Blizzard Entertainment’s World of Warcraft boxed software, including the sale of expansion packs and other ancillary revenues, is deferred and recognized ratably over the estimated subscription life beginning upon activation of the software and delivery of the services.
As a consequence, the company's non-GAAP results exclude the impact of the change in deferred net revenues and related cost of sales associated with certain of the company’s online-enabled games for certain of the Microsoft, Sony, Nintendo and PC platforms and for World of Warcraft boxed software, including the sale of expansion packs and other ancillary revenues, to provide comparable year-over-year performance.
Management believes that the use of non-GAAP measures that eliminate the impact of the change in deferred net revenues and related cost of sales in its operating results is important when evaluating Activision Blizzard’s operating performance, and when planning, forecasting and analyzing future periods.
Management also believes that non-GAAP measures that exclude Activision Blizzard’s non-core exit operations, 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 the impairment of intangible assets provide a better comparison to prior periods in which Activision, Inc. and Vivendi Games, Inc. were operating as stand-alone companies, and that the resulting effects arising from the business combination do not affect the ongoing economics of the combined entity.
Management also believes that excluding expenses related to share-based payments provides more comparable operating performance results. 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.
Activision Blizzard recognizes that there are limitations associated with the use of these non-GAAP financial measures as they do not reflect net revenues, net income (loss), earnings (loss) per share and operating margin as determined in accordance with GAAP, and this may reduce comparability with other companies that calculate similar non-GAAP measures differently. Management compensates for the limitations resulting from the exclusion of these items by considering the impact of these 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.
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’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.
Comparable-Basis Presentation by Segment -- Non-GAAP Comparable Measures
On July 9, 2008, the business combination between Activision, Inc. and Vivendi Games, Inc. was consummated. As a result of the consummation of the business combination, Activision, Inc. was renamed Activision Blizzard, Inc.
For accounting purposes, because the business combination resulted in Vivendi S.A. obtaining control of Activision, Inc. through the acquisition of a majority of common stock of Activision, Inc., the business combination was treated as a “reverse acquisition,” with Vivendi Games, Inc. deemed to be the accounting acquirer. As a result, the historical financial statements of Activision Blizzard prior to July 10, 2008 are those of Vivendi Games, Inc. and the results of Activision, Inc. prior to July 10, 2008 are not included as part of Activision Blizzard’s historical financial statements.
As one means of analyzing Activision Blizzard’s performance, the company presents data that combines (1) the company’s results after July 9, 2008, (2) Vivendi Games, Inc.’s results prior to July 10, 2008 and (3) Activision, Inc.’s results prior to July 10, 2008.
Management uses information prepared on this comparable basis internally to compare results and believes that this presentation provides investors with additional useful information to understand the company’s performance on a year-over-year comparable basis. However, the data is not presented in accordance with GAAP and is not presented in accordance with Article 11 of Regulation S-X relating to pro forma financial statements.
The non-GAAP information presented should be considered in addition to, not as a substitute for or superior to, financial measures determined in accordance with GAAP.
The following data is presented in the attachments to this press release:
- Non-GAAP Comparable Basis Segment Net Revenues for the quarters and years ended December 31, 2009 and 2008
- Non-GAAP Comparable Basis Segment Operating Income (Loss) for the quarters and years ended December 31, 2009 and 2008
In conjunction with the business combination, Activision Blizzard changed the manner in which senior management assesses the operating performance of, and allocates resources to, its operating segments. As a result, the company now operates in three segments:
- Activision Publishing (“Activision”) -- publishes interactive entertainment software and peripherals, which includes the Activision business conducted by Activision, Inc. prior to the business combination and certain studios, assets, and titles previously included in Vivendi Games Inc.’s “Sierra Entertainment” operating segment prior to the business combination;
- Blizzard -- Blizzard Entertainment, Inc. and its subsidiaries (“Blizzard”) -- publishes traditional games and online subscription-based games in the MMORPG category; and
- Activision Blizzard Distribution (“Distribution”) -- distribution of interactive entertainment software and hardware products.
With respect to periods prior to July 10, 2008, results for historical Activision, Inc. are reported in the Activision and Distribution segments. Prior to July 1, 2009, Activision Blizzard also presented a fourth segment, representing its non-core exit operations. These operations are now insignificant and no longer are presented as a separate operating segment. Therefore, all prior period segment information has been reclassified to conform to the current period’s presentation.
About Activision Blizzard
Headquartered in Santa Monica, California, Activision Blizzard, Inc. is a worldwide online, PC, console and handheld 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, Norway, Denmark, the Netherlands, Australia, Russia, South Korea, China, and the region of Taiwan. 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. Activision Blizzard generally uses words such as “outlook,” “will,” “remains,” “to be,” “plans,” “believes,” “may,” “expects,” “intends,” 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, shifts in consumer spending trends, the impact of the current macroeconomic environment, 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, competition from the used game market, adoption rate and availability of new hardware (including peripherals) and related software, industry competition and competition from other forms of entertainment, rapid changes in technology, industry standards and consumer preferences including interest in specific genres such as music, first-person action and massively multiplayer online games, protection of proprietary rights, litigation against Activision Blizzard, maintenance of relationships with key personnel, customers, licensees, licensors, vendors, and third-party developers, 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 the other factors identified in the risk factors sections of Activision Blizzard’s annual report on Form 10-K for the year ended December 31, 2008 and subsequently filed quarterly reports on Form 10-Q. 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)
ACTIVISION BLIZZARD, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(Amounts in millions, except per share data)
Three months Year
ended ended
December 31, December 31,
------------- -------------
2009 2008(1) 2009 2008(1)
---- ------ ---- ------
Net revenues:
Product sales $1,232 $1,319 $3,080 $1,872
Subscription, licensing and other
revenues 325 320 1,199 1,154
--------------------------------- --- --- ----- -----
Total net revenues 1,557 1,639 4,279 3,026
----------------------- ----- ----- ----- -----
Costs and expenses:
Cost of sales - product costs 670 805 1,432 1,160
Cost of sales - software royalties and
amortization 136 179 348 267
Cost of sales - intellectual property
licenses 152 174 315 219
Cost of sales - massively multi-player
online role playing game ("MMORPG") 54 53 212 193
Product development 265 196 627 592
Sales and marketing 215 244 544 464
General and administrative 94 104 395 271
Impairment of intangible assets 409 - 409 -
Restructuring (6) 32 23 93
------------- --- --- --- ---
Total costs and expenses 1,989 1,787 4,305 3,259
----------------------------- ----- ----- ----- -----
Operating loss (432) (148) (26) (233)
Investment and other income (loss), net (3) 18 18 46
--------------------------------------- --- --- --- ---
Loss before income tax benefit (435) (130) (8) (187)
Income tax benefit (149) (58) (121) (80)
------------------ ---- --- ---- ---
Net income (loss) $(286) $(72) $113 $(107)
================= ===== ==== ==== =====
Basic earnings (loss) per common share $(0.23) $(0.05) $0.09 $(0.11)
Weighted average common shares outstanding 1,265 1,326 1,283 946
Diluted earnings (loss) per common share $(0.23) $(0.05) $0.09 $(0.11)
Weighted average common shares
outstanding assuming dilution 1,265 1,326 1,311 946
(1) On July 9, 2008, a business combination (the “Business Combination”)
by and among Activision, Inc., Sego Merger Corporation, a
wholly-owned subsidiary of Activision, Inc., Vivendi S.A.
(“Vivendi”), VGAC LLC, a wholly-owned subsidiary of Vivendi (“VGAC”),
and Vivendi Games, Inc., a wholly-owned subsidiary of VGAC (“Vivendi
Games” or "VG"), was consummated. As a result of the consummation of
the Business Combination, Activision, Inc. was renamed Activision
Blizzard, Inc.
For accounting purposes, because the Business Combination resulted in
Vivendi obtaining control of Activision, Inc. through the acquisition
of a majority of common stock of Activision, Inc., the Business
Combination was treated as a “reverse acquisition,” with Vivendi
Games deemed to be the acquirer. As a result, (i) the historical
financial statements of the company prior to July 10, 2008 are those
of Vivendi Games, Inc. and (ii) the results of Activision, Inc. prior
to July 10, 2008 are not included as part of the company’s historical
financial statements.
Further, earnings (loss) per share for periods prior to the Business
Combination are retrospectively adjusted to reflect the number of
equivalent shares received by Vivendi, former parent of Vivendi
Games, Inc.
ACTIVISION BLIZZARD, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(Amounts in millions)
---------------------
December 31, December 31,
2009 2008(2)
------ ---- ------
ASSETS
------
Current assets:
Cash and cash equivalents $2,768 $2,958
Short-term investments 477 44
Accounts receivable, net 739 974
Inventories 241 262
Software development 224 235
Intellectual property licenses 55 35
Deferred income taxes, net 498 536
Intangible assets, net - 14
Other current assets 327 201
-------------------- --- ---
Total current assets 5,329 5,259
------------------------- ----- -----
Long-term investments 23 78
Software development 10 1
Intellectual property licenses 28 5
Property and equipment, net 138 149
Other assets 9 30
Intangible assets, net 618 1,283
Trademark and trade names 433 433
Goodwill 7,154 7,227
-------- ----- -----
Total assets $13,742 $14,465
============================= ======= =======
------------------------------------
LIABILITIES AND SHAREHOLDERS’ EQUITY
------------------------------------
Current liabilities:
Accounts payable $302 $319
Deferred revenues 1,426 923
Accrued expenses and other liabilities 779 842
-------------------------------------- --- ---
Total current liabilities 2,507 2,084
------------------------------- ----- -----
Deferred income taxes, net 270 615
Other liabilities 209 239
----------------- --- ---
Total liabilities 2,986 2,938
-------------------------------- ----- -----
Shareholders’ equity:
Common stock - -
Additional paid-in capital 12,376 12,170
Treasury stock (1,235) (126)
Accumulated deficit (361) (474)
Accumulated other comprehensive loss (24) (43)
------------------------------------ --- ---
Total shareholders’ equity 10,756 11,527
-------------------------------- ------ ------
Total liabilities and shareholders’
equity $13,742 $14,465
================= ======= =======
(2) As previously reported in our September 30, 2009 Form 10-Q,
the December 31, 2008 condensed consolidated balance sheet has
been adjusted to reflect the correction of an immaterial error
related to the elimination of intercompany receivables and payables.
The adjustment reduced accounts receivable and accounts payable in
the December 31, 2008 condensed consolidated balance sheet by
approximately $236 million, and had no impact on net income, earnings
per share, working capital or net cash flow. This correction will
be made upon filing of our annual report on Form 10-K for the year
ended December 31, 2009.
ACTIVISION BLIZZARD, INC. AND SUBSIDIARIES
RECONCILIATION OF GAAP NET INCOME (LOSS) TO NON-GAAP MEASURES
(Amounts in millions, except earnings (loss) per share data)
Cost of Cost of
Cost of Sales - Sales -
Sales - Software Intellectual
Three months ended Net Product Royalties and Property
December 31, 2009 Revenues Costs Amortization Licenses
--------------------------------------------------------------------------
GAAP Measurement $1,557 $670 $136 $152
Less: Net effect from
deferral in net
revenues and related
cost of sales(a) 938 194 16 4
Less: Stock-based
compensation (including
purchase price
accounting related
adjustments)(b) - - (16) -
Less: Costs related to
the Business
Combination,
integration and
restructuring(c) - - - -
Less: Amortization of
intangible assets and
purchase price
accounting related
adjustments(d) - (1) (29) (112)
Less: Impairment of
intangible assets(e) - - - -
--- --- --- ---
Non-GAAP Measurement $2,495 $863 $107 $44
------------------------ ====== ==== ==== ===
Cost of
Three months ended Sales - Product Sales and General and
December 31, 2009 MMORPG Development Marketing Administrative
--------------------------------------------------------------------------
GAAP Measurement $54 $265 $215 $94
Less: Net effect from
deferral in net
revenues and related
cost of sales(a) - - - -
Less: Stock-based
compensation
(including purchase
price accounting
related
adjustments)(b) - (12) 1 (20)
Less: Costs related
to the Business
Combination,
integration and
restructuring(c) - - - -
Less: Amortization of
intangible assets and
purchase price
accounting related
adjustments(d) - - - -
Less: Impairment of
intangible assets(e) - - - -
--- --- --- ---
Non-GAAP Measurement $54 $253 $216 $74
------------------------ === ==== ==== ===
Impairment
Three months ended of Intangible Total Costs
December 31, 2009 Assets Restructuring and Expenses
---------------------------------------------------------------------
GAAP Measurement $409 $(6) $1,989
Less: Net effect from
deferral in net
revenues and related
cost of sales(a) - - 214
Less: Stock-based
compensation
(including purchase
price accounting
related
adjustments)(b) - - (47)
Less: Costs related
to the Business
Combination,
integration and
restructuring(c) - 6 6
Less: Amortization of
intangible assets and
purchase price
accounting related
adjustments(d) - - (142)
Less: Impairment of
intangible assets(e) (409) - (409)
---- --- ----
Non-GAAP Measurement $- $- $1,611
------------------------ === === ======
Basic Diluted
Net Earnings Earnings
Three months ended Operating Income (Loss) (Loss)
December 31, 2009 Income (Loss) (Loss) per Share per Share
--------------------------------------------------------------------------
GAAP Measurement $(432) $(286) $(0.23) $(0.23)
Less: Net effect
from deferral in net
revenues and related
cost of sales(a) 724 552 0.43 0.43
Less: Stock-based
compensation
(including purchase
price accounting
related
adjustments)(b) 47 29 0.02 0.02
Less: Costs related
to the Business
Combination,
integration and
restructuring(c) (6) (4) (0.00) (0.00)
Less: Amortization
of intangible assets
and purchase price
accounting related
adjustments(d) 142 92 0.07 0.07
Less: Impairment of
intangible assets(e) 409 249 0.19 0.19
--- --- ---- ----
Non-GAAP Measurement $884 $632 $0.50 $0.49
---------------------- ==== ==== ===== =====
Cost of Cost of
Cost of Sales - Sales -
Sales - Software Intellectual
Year ended December 31, Net Product Royalties and Property
2009 Revenues Costs Amortization Licenses
--------------------------------------------------------------------------
GAAP Measurement $4,279 $1,432 $348 $315
Less: Net effect from
deferral in net
revenues and related
cost of sales(a) 497 115 (4) (2)
Less: Stock-based
compensation
(including purchase
price accounting
related
adjustments)(b) - - (34) -
Less: Results of
Activision Blizzard's
non-core exit
operations(f) (1) - - -
Less: Costs related
to the Business
Combination,
integration and
restructuring(c) - - - -
Less: Amortization of
intangible assets and
purchase price
accounting related
adjustments(d) - (5) (66) (186)
Less: Impairment of
intangible assets(e) - - - -
--- --- --- ---
Non-GAAP Measurement $4,775 $1,542 $244 $127
------------------------ ====== ====== ==== ====
Cost of
Year ended December 31, Sales - Product Sales and General and
2009 MMORPG Development Marketing Administrative
--------------------------------------------------------------------------
GAAP Measurement $212 $627 $544 $395
Less: Net effect from
deferral in net
revenues and related
cost of sales(a) - - 5 -
Less: Stock-based
compensation
(including purchase
price accounting
related
adjustments)(b) - (40) (9) (71)
Less: Results of
Activision Blizzard's
non-core exit
operations(f) - 4 (3) (10)
Less: Costs related
to the Business
Combination,
integration and
restructuring(c) - - - (24)
Less: Amortization of
intangible assets and
purchase price
accounting related
adjustments(d) - - - (2)
Less: Impairment of
intangible assets(e) - - - -
--- --- --- ---
Non-GAAP Measurement $212 $591 $537 $288
------------------------ ==== ==== ==== ====
Impairment
Year ended December 31, of Intangible Total Costs
2009 Assets Restructuring and Expenses
---------------------------------------------------------------------
GAAP Measurement $409 $23 $4,305
Less: Net effect from
deferral in net
revenues and related
cost of sales(a) - - 114
Less: Stock-based
compensation
(including purchase
price accounting
related
adjustments)(b) - - (154)
Less: Results of
Activision Blizzard's
non-core exit
operations(f) - - (9)
Less: Costs related
to the Business
Combination,
integration and
restructuring(c) - (23) (47)
Less: Amortization of
intangible assets and
purchase price
accounting related
adjustments(d) - - (259)
Less: Impairment of
intangible assets(e) (409) - (409)
---- --- ----
Non-GAAP Measurement $- $- $3,541
------------------------ === === ======
Basic Diluted
Year ended December 31, Operating Net Earnings Earnings
2009 Income (Loss) Income per Share per Share
-------------------------------------------------------------------------
GAAP Measurement $(26) $113 $0.09 $0.09
Less: Net effect
from deferral in net
revenues and related
cost of sales(a) 383 279 0.22 0.21
Less: Stock-based
compensation
(including purchase
price accounting
related
adjustments)(b) 154 96 0.07 0.07
Less: Results of
Activision Blizzard's
non-core exit
operations(f) 8 4 0.00 0.00
Less: Costs related
to the Business
Combination,
integration and
restructuring(c) 47 28 0.02 0.02
Less: Amortization
of intangible assets
and purchase price
accounting related
adjustments(d) 259 141 0.11 0.11
Less: Impairment of
intangible assets(e) 409 249 0.19 0.19
--- --- ---- ----
Non-GAAP Measurement $1,234 $910 $0.70 $0.69
---------------------- ====== ==== ===== =====
(a) Reflects the net change in deferred net revenues and related cost
of sales.
(b) Includes expense related to stock-based compensation.
(c) 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.
(d) Reflects amortization of intangible assets, and the change in the
fair value of assets and liabilities from purchase price accounting
related adjustments.
(e) Reflects impairment of intangible assets acquired as a result of
purchase price accounting.
(f) Reflects the results of products and operations from the historical
Vivendi Games businesses that the company has exited, divested or
wound down.
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.
ACTIVISION BLIZZARD, INC. AND SUBSIDIARIES
RECONCILIATION OF GAAP NET INCOME (LOSS) TO NON-GAAP MEASURES
(Amounts in millions, except earnings (loss) per share data)
Cost of Cost of
Sales - Sales -
Cost of Software Intell-
Sales - Royalties ectual Cost of
Three Months ended Net Product and Amorti- Property Sales -
December 31, 2008 Revenues Costs zation Licenses MMORPG
--------------------------------------------------------------------------
GAAP Measurement $1,639 $805 $179 $174 $53
Less: Net effect
from deferral in net
revenues and related
cost of sales(a) 705 135 61 19 -
Less: Stock-based
compensation
(including purchase
price accounting
related
adjustments)(b) - - (4) - -
Less: Results of
Activision
Blizzard's non-core
exit
operations(c) (1) - - - -
Less: Costs related
to the Business
Combination,
integration and
restructuring(d) - - - - -
Less: Amortization
of intangible assets
and purchase price
accounting related
adjustments(e) - (7) (71) (118) -
--- --- --- ---- ---
Non-GAAP
Measurement $2,343 $933 $165 $75 $53
---------------- ====== ==== ==== === ===
General and Total
Three Months ended Product Sales and Admini- Restruc- Costs and
December 31, 2008 Development Marketing strative turing Expenses
--------------------------------------------------------------------------
GAAP Measurement $196 $244 $104 $32 $1,787
Less: Net effect
from deferral in
net revenues and
related cost of
sales(a) - - - - 215
Less: Stock-based
compensation
(including purchase
price accounting
related
adjustments)(b) (10) (4) (25) - (43)
Less: Results of
Activision
Blizzard's non-core
exit
operations(c) (10) (3) (3) - (16)
Less: Costs
related to the
Business
Combination,
integration and
restructuring(d) - - (11) (32) (43)
Less: Amortization
of intangible
assets and purchase
price accounting
related
adjustments(e) - (4) (1) - (201)
--- --- --- --- ----
Non-GAAP
Measurement $176 $233 $64 $- $1,699
---------------- ==== ==== === === ======
Diluted
Basic Earnings
Three Months ended Operating Net Income Earnings (Loss) (Loss)
December 31, 2008 Income (Loss) (Loss) per Share per Share
--------------------------------------------------------------------------
GAAP Measurement $(148) $(72) $(0.05) $(0.05)
Less: Net effect
from deferral in
net revenues and
related cost of
sales(a) 490 313 0.24 0.23
Less: Stock-based
compensation
(including
purchase price
accounting related
adjustments)(b) 43 26 0.02 0.02
Less: Results of
Activision
Blizzard's non-
core exit
operations(c) 15 11 0.01 0.01
Less: Costs
related to the
Business
Combination,
integration and
restructuring(d) 43 30 0.02 0.02
Less:
Amortization of
intangible assets
and purchase price
accounting related
adjustments(e) 201 121 0.09 0.09
--- --- ---- ----
Non-GAAP Measurement $644 $429 $0.32 $0.31
-------------- ==== ==== ===== =====
(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 (loss) 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 and Year Ended December 31, 2009 and 2008
(Amounts in millions)
Three Months Ended
----------------------
December 31, 2009 December 31, 2008
Amount % of Total Amount % of Total Difference
------------------- ------------------- ------------------- ----------
GAAP Net Revenues by
Segment/Platform Mix
Activision and
Blizzard:
MMORPG $294 19% $325 20% $(31)
PC and other 60 4 49 3 11
Sony PlayStation 3 228 15 163 10 65
Sony PlayStation 2 53 3 205 13 (152)
Microsoft Xbox 360 324 21 273 17 51
Nintendo Wii 260 17 317 19 (57)
--- --- --- --- ---
Total console 865 56 958 59 (93)
Sony PlayStation
Portable 16 1 17 1 (1)
Nintendo Dual
Screen 101 6 118 7 (17)
--- --- --- --- ---
Total handheld 117 7 135 8 (18)
-------------- --- --- --- --- ---
Total Activision and
Blizzard 1,336 86 1,467 90 (131)
------------------ ----- --- ----- --- ----
Distribution:
Total Distribution 221 14 171 10 50
------------------ --- --- --- --- ---
Total net revenues
core operations 1,557 100 1,638 100 (81)
Other - - 1 - (1)
----- --- --- --- --- ---
Total consolidated
GAAP net revenues $1,557 100% $1,639 100% $(82)
------------------ ------ --- ------ --- ----
Changes in Deferred Net
Revenues(1)
Activision and Blizzard:
MMORPG $(4) $137 $(141)
PC and other 92 33 59
Sony PlayStation 3 343 169 174
Microsoft Xbox 360 429 247 182
Nintendo Wii 78 119 (41)
--- --- ---
Total Console 850 535 315
--- --- ---
Total changes in
deferred net
revenues 938 705 233
--- --- ---
Other(1) $- $(1) $1
--- --- ---
Non-GAAP Net Revenues by
Segment/Platform Mix
Activision and
Blizzard:
MMORPG $290 11% $462 20% $(172)
PC and other 152 6 82 3 70
Sony PlayStation 3 571 23 332 14 239
Sony PlayStation 2 53 2 205 9 (152)
Microsoft Xbox 360 753 30 520 22 233
Nintendo Wii 338 14 436 19 (98)
--- --- --- --- ---
Total console 1,715 69 1,493 64 222
Sony PlayStation
Portable 16 1 17 1 (1)
Nintendo Dual
Screen 101 4 118 5 (17)
--- --- --- --- ---
Total handheld 117 5 135 6 (18)
-------------- --- --- --- --- ---
Total Activision and
Blizzard 2,274 91 2,172 93 102
------------------ ----- --- ----- --- ---
Total Distribution 221 9 171 7 50
------------------ --- --- --- --- ---
Total non-GAAP net
revenues(2) $2,495 100% $2,343 100% $152
----------------- ------ --- ------ --- ----
Year Ended
--------------
December 31, 2009
Amount % of Total
----------------------
GAAP Net Revenues by Segment/Platform Mix
Activision and Blizzard:
MMORPG $1,233 29%
PC and other 179 4
Sony PlayStation 3 584 14
Sony PlayStation 2 174 4
Microsoft Xbox 360 857 19
Nintendo Wii 584 14
--- ---
Total console 2,199 51
Sony PlayStation
Portable 48 1
Nintendo Dual
Screen 196 5
--- ---
Total handheld 244 6
-------------- --- ---
Total Activision and
Blizzard 3,855 90
-------------------- ----- ---
Distribution:
Total Distribution 423 10
------------------ --- ---
Total net revenues
core operations 4,278 100
Other 1 -
----- --- ---
Total consolidated
GAAP net revenues $4,279 100%
------------------ ------ ---
Changes in Deferred Net Revenues(1)
Activision and Blizzard:
MMORPG $(118)
PC and other 74
Sony PlayStation 3 259
Microsoft Xbox 360 284
Nintendo Wii (2)
---
Total Console 541
---
Total changes in
deferred net
revenues 497
---
Other(1) $(1)
---
Non-GAAP Net Revenues by Segment/Platform Mix
Activision and Blizzard:
MMORPG $1,115 23%
PC and other 253 5
Sony PlayStation 3 843 18
Sony PlayStation 2 174 4
Microsoft Xbox 360 1,141 24
Nintendo Wii 582 12
--- ---
Total console 2,740 58
Sony PlayStation
Portable 48 1
Nintendo Dual
Screen 196 4
--- ---
Total handheld 244 5
-------------- --- ---
Total Activision and
Blizzard 4,352 91
-------------------- ----- ---
Total Distribution 423 9
------------------ --- ---
Total non-GAAP net
revenues(2) $4,775 100%
------------------- ------ ---
(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 segments net revenues.
ACTIVISION BLIZZARD, INC. AND SUBSIDIARIES
FINANCIAL INFORMATION
For the Three Months and Year Ended December 31, 2009 and 2008
(Amounts in millions)
Three Months Ended
----------------------
December 31, 2009 December 31, 2008
Amount % of Total Amount % of Total Difference
-------------------- -------------------- ----------
GAAP Net Revenues by
Geographic Region
North America $759 49% $903 55% $(144)
Europe 710 46 660 40 50
Asia Pacific 88 5 75 5 13
------------ --- --- --- --- ---
Total net revenues
core operations 1,557 100 1,638 100 (81)
Other - - 1 - (1)
----- --- --- --- --- ---
Total consolidated
GAAP net revenues $1,557 100% $1,639 100% $(82)
------------------ ------ --- ------ --- ----
Changes in Deferred
Net Revenues(1)
North America $528 $443 $85
Europe 371 241 130
Asia Pacific 39 21 18
------------ --- --- ---
Total changes in net
revenues 938 705 233
--- --- ---
Other(1) $- $(1) $1
--- --- ---
Non-GAAP Net Revenues
by Geographic Region
North America $1,287 52% $1,346 58% $(59)
Europe 1,081 43 901 38 180
Asia Pacific 127 5 96 4 31
------------ --- --- --- --- ---
Total non-GAAP net
revenues(2) $2,495 100% $2,343 100% $152
------------------ ------ --- ------ --- ----
Year Ended
--------------
December 31, 2009
Amount % of Total
------ --------------------
GAAP Net Revenues by
Geographic Region
North America $2,217 52%
Europe 1,798 42
Asia Pacific 263 6
------------ --- ---
Total net revenues
core operations 4,278 100
Other 1 -
----- --- ---
Total consolidated
GAAP net revenues $4,279 100%
------------------ ------ ---
Changes in Deferred
Net Revenues(1)
North America $241
Europe 224
Asia Pacific 32
------------ ---
Total changes in net
revenues 497
---
Other(1) $(1)
---
Non-GAAP Net Revenues
by Geographic Region
North America $2,458 52%
Europe 2,022 42
Asia Pacific 295 6
------------ --- ---
Total non-GAAP net
revenues(2) $4,775 100%
------------------- ------ ---
(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 segments net revenues.
ACTIVISION BLIZZARD, INC. AND SUBSIDIARIES
For the Three Months Ended December 31, 2009 and 2008
GAAP to Non-GAAP Reconciliations
Segment Information - Comparable Basis Net Revenues (Amounts in millions)
Segments/
Distri- Consol-
Three months ended Activision Blizzard bution Core idated
December 31, 2009 (i) (ii) (iii) (iv) Total
---------- -------- ------- ------ --------
Segment net revenues $1,945 $329 $221 $2,495 $2,495
Reconciliation to GAAP
consolidated net revenues
- Net effect from
deferral of net revenues (938)
-----
Consolidated net
revenues (GAAP) $1,557
---------------------------------------------------------------
Non-GAAP Comparable
Basis Segment
Net Revenues $1,945 $329 $221 $2,495
---------------------------------------------------------------
Segments/
Distri- Consol-
Three months ended Activision Blizzard bution Core idated
December 31, 2008 (i) (ii) (iii) (iv) Total
---------- -------- ------- ------ --------
Segment net revenues $1,695 $477 $171 $2,343 $2,343
Reconciliation to GAAP
consolidated net revenues
- Net effect from
deferral of net revenues (705)
- Other (v) 1
-----
Consolidated net
revenues (GAAP) $1,639
---------------------------------------------------------------
Non-GAAP Comparable
Basis Segment
Net Revenues $1,695 $477 $171 $2,343
---------------------------------------------------------------
- Change in Comparable
Basis -- Three Months
Ended December 31,
2009 vs. 2008 6%
---------------------------------------------------------------
(i) Activision Publishing ("Activision") -- publishes interactive
entertainment software and peripherals, which includes the
Activision business conducted by Activision, Inc. prior to the
business combination and certain studios, assets, and titles
previously included in Vivendi Games’ "Sierra Entertainment"
operating segment prior to the business combination.
(ii) Blizzard -- Blizzard Entertainment, Inc. and its subsidiaries
("Blizzard") publishes traditional games and online subscription-
based games in the MMORPG category.
(iii) Activision Blizzard Distribution ("Distribution") -- distributes
interactive entertainment software and hardware products.
(iv) Activision, Blizzard and Distribution are referred to collectively
as Activision Blizzard Inc.'s core operations ("Core").
(v) Other represents Non-Core activities, which are handled by certain
functional departments of our Activision segment and are
insignificant to Activision Blizzard's financial condition and
results of operations. Prior to July 1, 2009, we operated a fourth
operating segment, Non-Core, which represented legacy Vivendi Games'
divisions or business units that the company had exited, divested,
or wound down as part of our restructuring and integration efforts
as a result of the Business Combination. As of July 1, 2009, in
light of the decreasing significance of Non-Core activities, we
ceased the management of Non-Core as a separate operating segment
and consequently we are no longer providing separate operating
segment disclosure with respect to Non-Core and have reclassified
our prior period's segment presentation so that it conforms to the
current period's presentation.
ACTIVISION BLIZZARD, INC. AND SUBSIDIARIES
For the Years Ended December 31, 2009 and 2008
GAAP to Non-GAAP Reconciliations
Segment Information - Comparable Basis Net Revenues (Amounts in millions)
Segments/
Distri- Consol-
Year ended Activision Blizzard bution Core idated
December 31, 2009 (i) (ii) (iii) (iv) Total
---------- -------- ------- ------ --------
Segment net revenues $3,156 $1,196 $423 $4,775 $4,775
Reconciliation to GAAP
consolidated net revenues
- Net effect from
deferral of net revenues (497)
- Other (v) 1
-----
Consolidated
net revenues (GAAP) $4,279
---------------------------------------------------------------
Non-GAAP Comparable
Basis Segment
Net Revenues $3,156 $1,196 $423 $4,775
---------------------------------------------------------------
Segments/
Distri- Consol-
Year ended Activision Blizzard bution Core idated
December 31, 2008 (i) (ii) (iii) (iv) Total
---------- -------- ------- ------ --------
Segment net revenues
(VG Jan 1-Dec 31,
Activision
July 10-Dec 31) $2,152 $1,343 $227 $3,722 $3,722
Reconciliation to GAAP
consolidated net revenues
- Net effect from
deferral of net revenues (713)
- Other (v) 17
-----
Consolidated
net revenues (GAAP) $3,026
Comparable Presentation
Adjustments:
Including Activision,
Inc. prior period from
July 1 to July 9, 2008
Segment net revenues 35 - 18 53
Including Activision,
Inc. prior periods
for the six months
ended June 30, 2008
Segment net revenues 1,092 - 165 1,257
---------------------------------------------------------------
Non-GAAP Comparable Basis
Segment Net Revenues $3,279 $1,343 $410 $5,032
---------------------------------------------------------------
- Change in Comparable
Basis -- Year Ended
December 31, 2009
vs. 2008 -5%
---------------------------------------------------------------
(i) Activision Publishing (“Activision”) -- publishes interactive
entertainment software and peripherals, which includes the
Activision business conducted by Activision, Inc. prior to the
business combination and certain studios, assets, and titles
previously included in Vivendi Games’ "Sierra Entertainment"
operating segment prior to the business combination.
(ii) Blizzard -- Blizzard Entertainment, Inc. and its subsidiaries
("Blizzard") publishes traditional games and online subscription-
based games in the MMORPG category.
(iii) Activision Blizzard Distribution ("Distribution") -- distributes
interactive entertainment software and hardware products.
(iv) Activision, Blizzard and Distribution are referred to collectively
as Activision Blizzard Inc.’s core operations ("Core").
(v) Other represents Non-Core activities, which are handled by certain
functional departments of our Activision segment and are
insignificant to Activision Blizzard's financial condition and
results of operations. Prior to July 1, 2009, we operated a fourth
operating segment, Non-Core, which represented legacy Vivendi Games'
divisions or business units that the company had exited, divested,
or wound down as part of our restructuring and integration efforts
as a result of the Business Combination. As of July 1, 2009, in
light of the decreasing significance of Non-Core activities, we
ceased the management of Non-Core as a separate operating segment
and consequently we are no longer providing separate operating
segment disclosure with respect to Non-Core and have reclassified
our prior period's segment presentation so that it conforms to the
current period's presentation.
ACTIVISION BLIZZARD, INC. AND SUBSIDIARIES
For the Three Months Ended December 31, 2009 and 2008
GAAP to Non-GAAP Reconciliations
Segment Information - Comparable Basis Segment Operating Income (Loss)
(Amounts in millions)
Segments/
Distri- Consol-
Three months ended Activision Blizzard bution Core idated
December 31, 2009 (i) (ii) (iii) (iv) Total
----------- --------- ------- ----- --------
Segment operating
income (loss) $712 $162 $10 $884 $884
Reconciliation to GAAP
consolidated operating
income (loss)
- Net effect
from deferral
of net revenues
and related
cost of sales (724)
- Stock-based
compensation expense (47)
- Restructuring
expense 6
- Amortization of
intangible assets
and purchase price
accounting related
adjustments (142)
- Impairment of
intangible assets (409)
-----
Consolidated operating
income (loss) (GAAP) $(432)
---------------------------------------------------------------
Non-GAAP
Comparable Basis
Segment Operating
Income (Loss) $712 $162 $10 $884
---------------------------------------------------------------
Segments/
Distri- Consol-
Three months ended Activision Blizzard bution Core idated
December 31, 2008 (i) (ii) (iii) (iv) Total
----------- --------- ------- ----- --------
Segment operating
income (loss) $368 $257 $19 $644 $644
Reconciliation to GAAP
consolidated operating
income (loss)
- Net effect
from deferral
of net revenues
and related
cost of sales (490)
- Stock-based
compensation expense (43)
- Restructuring
expenses (32)
- Amortization of
intangible assets
and purchase price
accounting related
adjustments (201)
- Integration and
transaction costs (11)
- Other (v) (15)
---
Consolidated operating
income (loss) (GAAP) $(148)
---------------------------------------------------------------
Non-GAAP
Comparable Basis
Segment Operating
Income (Loss) $368 $257 $19 $644
---------------------------------------------------------------
- Change in
Comparable Basis -
- Three Months
Ended December
31, 2009 vs. 2008 37%
---------------------------------------------------------------
(i) Activision Publishing ("Activision") -- publishes interactive
entertainment software and peripherals, which includes the
Activision business conducted by Activision, Inc. prior to the
business combination and certain studios, assets, and titles
previously included in Vivendi Games’ "Sierra Entertainment"
operating segment prior to the business combination.
(ii) Blizzard -- Blizzard Entertainment, Inc. and its subsidiaries
("Blizzard") publishes traditional games and online
subscription-based games in the MMORPG category.
(iii) Activision Blizzard Distribution ("Distribution") -- distributes
interactive entertainment software and hardware products.
(iv) Activision, Blizzard and Distribution are referred to collectively
as Activision Blizzard Inc.’s core operations ("Core").
(v) Other represents Non-Core activities, which are handled by certain
functional departments of our Activision segment and are
insignificant to Activision Blizzard's financial condition and
results of operations. Prior to July 1, 2009, we operated a fourth
operating segment, Non-Core, which represented legacy Vivendi
Games' divisions or business units that the company had exited,
divested, or wound down as part of our restructuring and integration
efforts as a result of the Business Combination. As of July 1, 2009,
in light of the decreasing significance of Non-Core activities, we
ceased the management of Non-Core as a separate operating segment
and consequently we are no longer providing separate operating
segment disclosure with respect to Non-Core and have reclassified
our prior period's segment presentation so that it conforms to the
current period's presentation.
ACTIVISION BLIZZARD, INC. AND SUBSIDIARIES
For the Years Ended December 31, 2009 and 2008
GAAP to Non-GAAP Reconciliations
Segment Information - Comparable Basis Segment Operating Income (Loss)
(Amounts in millions)
Segments/
Distri- Consol-
Year ended Activision Blizzard bution Core idated
December 31, 2009 (i) (ii) (iii) (iv) Total
---------- -------- ------- ---- --------
Segment operating
income (loss) $663 $555 $16 $1,234 $1,234
Reconciliation to GAAP
consolidated operating
income (loss)
- Net effect from
deferral of net
revenues and related
cost of sales (383)
- Stock-based
compensation expense (154)
- Restructuring expenses (23)
- Amortization of
intangible assets
and purchase price
accounting
related adjustments (259)
- Impairment of
intangible assets (409)
- Integration and
transaction costs (24)
- Other (v) (8)
----
Consolidated operating
income (loss) (GAAP) $(26)
-------------------------------------------------------------
Non-GAAP Comparable
Basis Segment Operating
Income (Loss) $663 $555 $16 $1,234
-------------------------------------------------------------
Segments/
Distri- Consol-
Year ended Activision Blizzard bution Core idated
December 31, 2008 (i) (ii) (iii) (iv) Total
---------- -------- ------- ---- --------
Segment operating
income (loss)
(VG Jan. 1-Dec 31,
Activision
July 10-Dec 31) $307 $704 $22 $1,033 $1,033
Reconciliation to
GAAP consolidated
operating income (loss)
- Net effect from
deferral of net
revenues and
related cost of sales (496)
- Stock-based
compensation expense (90)
- Restructuring expenses (93)
- Amortization of
intangible assets
and purchase price
accounting related
adjustments (292)
- Integration and
transaction costs (29)
- Other (v) (266)
----
Consolidated operating
income (loss) (GAAP) $(233)
Comparable Presentation
Adjustments:
Including Activision,
Inc. prior period from
July 1 to July 9, 2008
Segment operating
income (loss) (10) - 1 (9) $(9)
Reconciliation to
consolidated operating
income (loss)
- Stock-based
compensation expense (3)
- Integration and
transaction costs (38)
---
Consolidated operating
income (loss) $(50)
Including Activision, Inc.
prior periods for the
six months ended
June 30, 2008
Segment operating
income (loss) 172 - 4 176 $176
Reconciliation to
consolidated operating
income (loss)
- Stock-based
compensation expense (29)
- Integration and
transaction costs (12)
---
Consolidated operating
income (loss) $135
-------------------------------------------------------------
Non-GAAP Comparable
Basis Segment Operating
Income (Loss) $469 $704 $27 $1,200
-------------------------------------------------------------
- Change in Comparable
Basis -- Year Ended
December 31, 2009 vs. 2008 3%
-------------------------------------------------------------
(i) Activision Publishing (“Activision”) -- publishes interactive
entertainment software and peripherals, which includes the
Activision business conducted by Activision, Inc. prior to the
business combination and certain studios, assets, and titles
previously included in Vivendi Games’ “Sierra Entertainment”
operating segment prior to the business combination.
(ii) Blizzard -- Blizzard Entertainment, Inc. and its subsidiaries
("Blizzard") publishes traditional games and online subscription-
based games in the MMORPG category.
(iii) Activision Blizzard Distribution ("Distribution") -- distributes
interactive entertainment software and hardware products.
(iv) Activision, Blizzard and Distribution are referred to collectively
as Activision Blizzard Inc.’s core operations (“Core”).
(v) Other represents Non-Core activities, which are handled by certain
functional departments of our Activision segment and are
insignificant to Activision Blizzard's financial condition and
results of operations. Prior to July 1, 2009, we operated a fourth
operating segment, Non-Core, which represented legacy Vivendi Games'
("VG") divisions or business units that the company had exited,
divested, or wound down as part of our restructuring and integration
efforts as a result of the Business Combination. As of July 1, 2009,
in light of the decreasing significance of Non-Core activities, we
ceased the management of Non-Core as a separate operating segment
and consequently we are no longer providing separate operating
segment disclosure with respect to Non-Core and have reclassified
our prior period's segment presentation so that it conforms to the
current period's presentation.
ACTIVISION BLIZZARD, INC. AND SUBSIDIARIES OUTLOOK
For the Quarter Ending March 31, 2010 and
Year Ending December 31, 2010
GAAP to Non-GAAP Reconciliation
(Amounts in millions, except
per share data) Outlook for Outlook for
Three Months Ending Year Ending
March 31, 2010 December 31, 2010
-------------- -----------------
Net Revenues (GAAP) $1,120 $4,180
Excluding the impacts of:
-------------------------
Change in deferred net
revenues (595) 220 (a)
---- ---
Non-GAAP Net Revenues $525 $4,400
Earnings Per Diluted
Share (GAAP) $0.20 $0.47
Excluding the impacts of:
-------------------------
Change in deferred net
revenues and related cost of
sales (0.22) 0.10 (b)
Stock based compensation 0.03 0.07 (c)
Amortization of intangible
assets 0.01 0.06 (d)
----- -----
Non-GAAP Earnings Per Diluted
Share $0.02 $0.70
(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 stock based compensation costs. Also includes the costs of
the Blizzard Entertainment equity plan and Vivendi awards to
historical Vivendi Games employees.
(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.
SOURCE Activision Blizzard, Inc.
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