EX-99 2 ex99-1.txt PRESS RELEASE 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 FOR IMMEDIATE RELEASE ACTIVISION ANNOUNCES FIRST QUARTER 2006 RESULTS - Q1 Net Revenues Increase 14% - - To Date Three Games Ship More Than One Million Units - -Company Increases Financial Outlook For Fiscal 2006- Santa Monica, CA -- July 28, 2005 -- Activision, Inc. (Nasdaq: ATVI) today announced financial results for the first fiscal quarter ended June 30, 2005. Net revenues were a record $241.1 million as compared to net revenues of $211.3 million reported for the first quarter last fiscal year. Net loss for the first fiscal quarter was $3.6 million, as compared with net income of $12.0 million for the previous first quarter. Loss per share was $0.02, as compared with $0.06 earnings per diluted share reported for the same period last year. Robert A. Kotick, Chairman and CEO of Activision, stated, "Fiscal 2006 is off to a strong start. To date DOOM 3(TM), Madagascar(TM) and Fantastic 4(TM) each have shipped in excess of one million units. During the quarter, we continued to strengthen our business. With $786 million in cash and short-term investments, one of the industry's strongest balance sheets and a strong product development slate, we have entered fiscal year 2006 with numerous competitive advantages." (more) Kotick continued, "We remain focused on our big propositions and intend to continue leveraging our increasing portfolio of franchises. Our production strategy centers around developing games based on proven, predictable brands. This strategy should enable us to grow our revenues, earnings and operating margin as we have over the past five years." Business Highlights Activision's results were driven by strong global consumer response to its new products across all platforms. During the quarter, the company released DOOM 3 for the Xbox(R) video game system, DOOM 3: Resurrection of Evil(TM) for the PC, Madagascar for the PlayStation(R) 2 computer entertainment system, Xbox video game system, Nintendo(R) GameCube(TM), PC, Nintendo Game Boy(R) Advance(TM) and Nintendo DS and Fantastic 4 for the PlayStation 2 computer entertainment system, Xbox video game system, Nintendo GameCube, PC and Nintendo Game Boy Advance. Additionally, Activision shipped LucasArts' Star Wars(R): Episode III Revenge of the Sith(TM) for the PlayStation 2 computer entertainment system and Xbox video game system in Europe. Other highlights include: o According to NPD Funworld, DOOM(R) Collector's Edition was the #1 best-selling video game in the U.S. on the Xbox platform for the month of April. Additionally, Madagascar was the #1 best-selling children's title and the #2 selling game across all platforms for the month of June. o On May 3, 2005, Activision announced that it acquired game developer Toys For Bob. Activision has worked with Toys For Bob since 2002, most recently on Madagascar, which is based on DreamWorks Animation's feature film. o On May 25, Activision announced that it acquired game developer Beenox, Inc. The acquisition further bolsters Activision's internal development capabilities by providing it with a foothold in the Canadian province of Quebec, one of the fastest growing development talent pools in North America. o On June 9, Activision announced a strategic alliance with Harrah's Entertainment, Inc. to develop and publish video games based on the popular World Series of Poker Tournament. (more) o On June 16, Activision named Michael Griffith as President and Chief Executive Officer of Activision Publishing, Inc. In his new role, Griffith will assume responsibility for Activision Publishing's operational management including its studio, publishing and corporate activities. A 24-year veteran of Procter & Gamble, Griffith, brings an exceptionally well-balanced blend of management leadership and sales and marketing experience to Activision Publishing. o Activision previously reported that on July 11, 2003, the Securities and Exchange Commission commenced a non-public investigation entitled "In the Matter of Certain Video Game Manufacturers and Distributors". Activision recently was advised by the staff of the Securities and Exchange Commission that Activision is no longer a subject of this investigation and the matter is closed with regard to Activision. Looking ahead to the second quarter, Activision's slate will be driven by the U.S. launches of Ultimate Spider-Man(TM) for the PlayStation 2 computer entertainment system, Xbox video game system, Nintendo GameCube, PC, Nintendo Game Boy Advance and Nintendo DS and X-Men Legends II: Rise of Apocalypse(TM) for the PlayStation 2 computer entertainment system, Xbox video game system, Nintendo GameCube and PC; and the worldwide launch of World Series of Poker(R) for the PlayStation 2 computer entertainment system, Xbox video game system, Nintendo GameCube and PSP. Additionally, the company will release Spider-Man 2(TM) the game and Tony Hawk's Underground 2 Remix in Europe timed to the launch of the PSP. Company Outlook Activision increased its financial outlook for fiscal 2006 to $1.47 billion in net revenues and earnings per diluted share of $0.69. For the second quarter of the fiscal year 2006, the company expects net revenues of $200 million and a loss per share of $0.10. For the third quarter, it expects net revenues of $790 million and earnings per diluted share of $0.69. For the fourth quarter, Activision expects net revenues of $240 million and earnings per diluted share of $0.09. (more) Conference Call Today at 4:30 p.m. EDT, Activision's management will host a conference call and Webcast to discuss its fiscal 2006 first quarter results and outlook for the remainder of 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) 955-1564 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, Spain, 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) ACTIVISION, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except earnings per share data) Quarter ended June 30, 2005 2004 ---------- ------------ Net revenues $241,093 $211,276 Costs and expenses: Cost of sales - product costs 136,754 89,088 Cost of sales - software royalties and amortization 14,576 12,283 Cost of sales - intellectual property licenses 20,940 17,648 Product development 17,802 21,105 Sales and marketing 46,318 41,734 General and administrative 18,151 13,685 -------- -------- Total operating expenses 254,541 195,543 Operating income (loss) (13,448) 15,733 Investment income, net 7,348 2,112 Income (loss) before provision (benefit) for income taxes (6,100) 17,845 Provision (benefit) for income taxes (2,515) 5,888 -------- -------- Net income (loss) $ (3,585) $ 11,957 ======== ======== Basic earnings (loss) per share $ (0.02) $ 0.07 Weighted average common shares outstanding 201,856 183,686 Diluted earnings (loss) per share $ (0.02) $ 0.06 Weighted average common shares outstanding assuming dilution 201,856 204,539 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) June 30, March 31, 2005 2005 ------------- ------------- ASSETS Current assets: Cash, cash equivalents and short-term investments $ 785,899 $ 840,864 Accounts receivable, net 94,804 109,144 Inventories 45,136 48,018 Software development 97,825 73,096 Intellectual property licenses 14,336 21,572 Deferred income taxes 8,568 6,760 Other current assets 23,237 23,010 ---------- ---------- Total current assets 1,069,805 1,122,464 ========== ========== Software development 9,764 18,518 Intellectual property licenses 20,605 14,154 Property and equipment, net 31,911 30,490 Deferred income taxes 35,536 28,041 Other assets 1,299 1,635 Goodwill 98,527 91,661 ---------- ---------- Total assets $1,267,447 $1,306,963 ========== ========== LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable $ 65,447 $ 108,984 Accrued expenses 88,558 98,067 ---------- ---------- Total current liabilities 154,005 207,051 ---------- ---------- Other liabilities 93 - ---------- ---------- Total liabilities 154,098 207,051 ========== ========== Shareholders' equity: Common stock - - Additional paid-in capital 764,560 741,680 Retained earnings 343,029 346,614 Treasury stock - - Accumulated other comprehensive income 7,743 11,618 Unearned compensation (1,983) - ---------- ---------- Total shareholders' equity 1,113,349 1,099,912 ---------- ---------- Total liabilities and shareholders' equity $1,267,447 $1,306,963 ========== ==========

ACTIVISION, INC. AND SUBSIDIARIES FINANCIAL INFORMATION For the Quarter Ended June 30, 2005 and 2004 (Amounts in thousands) Percent Increase Quarter Ended (Decrease) June 30, 2005 June 30, 2004 Amount % of Total Amount % of Total Geographic Revenue Mix United States $112,320 47% $125,191 59% -10% International 128,773 53% 86,085 41% 50% -------- ---- -------- ---- ----- Total net revenues $241,093 100% $211,276 100% 14% ======== ==== ======== ==== ===== Activity/Platform Mix Publishing: Console $142,362 59% $119,127 56% 20% Hand-held 25,331 10% 18,430 9% 37% PC 25,858 11% 24,095 12% 7% -------- ---- -------- ---- ----- Total publishing $193,551 80% $161,652 77% 20% ======== ==== ======== ==== ===== Distribution: Console $ 38,088 16% $ 39,194 18% -3% Hand-held 3,908 2% 3,655 2% 7% PC 5,546 2% 6,775 3% -18% -------- ---- -------- ---- ----- Total distribution $ 47,542 20% $ 49,624 23% -4% -------- ---- -------- ---- ----- Total net revenues $241,093 100% $211,276 100% 14% ======== ==== ======== ==== =====

ACTIVISION, INC. AND SUBSIDIARIES FINANCIAL INFORMATION For the Quarter Ended June 30, 2005 and 2004 Quarter Ended Quarter Ended June 30, 2005 June 30, 2004 Publishing Net Revenues PC 14% 15% ------------------------------------ ----------- ------------ Console 73% 74% ------------------------------------ ----------- ------------ Sony PlayStation 2 34% 42% Microsoft Xbox 34% 16% Nintendo GameCube 5% 15% Sony PlayStation 0% 1% Hand-held 13% 11% ------------------------------------ ----------- ------------ Game Boy Advance 8% 11% Nintendo Dual Screen 3% 0% PlayStation Portable 2% 0% ------------------------------------ ----------- ------------ Total publishing net revenues 100% 100% ====================================== =========== ============