|
YEAR |
SALES |
NET INCOME |
EPS |
|
2000 |
572,205,000 |
-34,088,000 |
-1.38 |
|
1999 |
436,526,000 |
14,891,000 |
0.65 |
|
1998 |
312,906,000 |
4,970,000 |
0.22 |
|
1997 |
190,446,000 |
7,583,000 |
0.36 |
|
1996 |
87,561,000 |
5,908,000 |
0.33 |
|
|
|
||
|
5-YEAR GROWTH RATE |
59.8 |
NA |
NA |
After years of rapid growth and
acquisitions, Activision restructured its operations during 2000 to focus on
increasing profit margins. Closing its Expert Software unit and reducing its
workforce resulted in a $ 70 million charge and caused the company to post a
big loss. However, the success of its Tony Hawk-branded extreme sports game
(which sold more than 3.5 million copies) has led to relationships with other
extreme sports figures like Mat Hoffman (BMX bicycle racing) and Kelly Slater
(surfing). It also is looking forward to the introduction of next-generation
game platforms, such as Sony's PlayStation 2, Microsoft's Xbox, and Nintendo's
Dolphin system. Co-chairmen Robert Kotick and Brian Kelly own about 14% and 12%
of the company, respectively. David Rocker owns 10% through his Rocker Partners
hedge fund, while Eastbourne Capital Management owns nearly 20%.
MARKET:
Activision has US operations in Arkansas, California, Florida, Minnesota, New
York, Texas, and Wisconsin. Its international operations are in Australia,
Belgium, France, Germany, Japan, the Netherlands, and the UK.
2000
Sales
$
mil. % of total
US 279.2 49
Europe 277.5 48
Other
regions 15.5 3
Total 572.2 100
PRODUCTS:
2000
Sales
$
mil. % of total
Publishing
Console 281.2 49
PC 115.5 20
Distribution
Console 129.7 23
PC 45.8 8
Total 572.2 100
|
|
|
||
|
RATIO ANALYSIS |
|||
|
|
|
|
|
|
|
|
|
|
|
FISCAL YEAR END |
03/31/2000 |
03/31/1999 |
03/31/1998 |
|
|
|
|
|
|
QUICK RATIO |
1.52 |
1.58 |
2.11 |
|
CURRENT RATIO |
2.54 |
2.44 |
2.65 |
|
SALES/CASH |
11.45 |
13.21 |
4.21 |
|
SALES, GENERAL & ADMIN/SALES |
0.22 |
0.20 |
0.22 |
|
RECEIVABLES TURNOVER |
5.29 |
3.71 |
4.23 |
|
RECEIVABLES DAY SALES |
68.02 |
96.94 |
85.05 |
|
INVENTORIES TURNOVER |
14.14 |
14.11 |
16.11 |
|
INVENTORIES DAY SALES |
25.45 |
25.51 |
22.35 |
|
NET SALES/WORKING CAPITAL |
3.57 |
3.20 |
2.70 |
|
NET SALES/PLANT & EQUIPMENT |
52.91 |
39.96 |
26.20 |
|
NET SALES/CURRENT ASSETS |
2.17 |
1.89 |
1.68 |
|
NET SALES/TOTAL ASSETS |
1.85 |
1.54 |
1.36 |
|
NET SALES/EMPLOYEES |
738,329 |
688,527 |
469,124 |
|
TOTAL LIAB/TOTAL ASSETS |
0.57 |
0.55 |
0.58 |
|
TOTAL LIAB/INVESTED CAPITAL |
1.22 |
1.22 |
1.33 |
|
TOTAL LIAB/COMMON EQUITY |
1.35 |
1.23 |
1.35 |
|
TIMES INTEREST EARNED |
-3.61 |
8.80 |
8.29 |
|
CURRENT DEBT/EQUITY |
0.12 |
0.05 |
0.04 |
|
LONG TERM DEBT/EQUITY |
0.10 |
0.01 |
0.02 |
|
TOTAL DEBT/EQUITY |
0.23 |
0.06 |
0.06 |
|
TOTAL ASSETS/EQUITY |
2.35 |
2.23 |
2.35 |
|
PRE-TAX INCOME/NET SALES |
-0.07 |
0.05 |
0.03 |
|
PRE-TAX INCOME/TOTAL ASSETS |
-0.13 |
0.08 |
0.04 |
|
PRE-TAX INCOME/INVESTED CAP |
-0.27 |
0.18 |
0.08 |
|
PRE-TAX INCOME/COMM EQUITY |
-0.29 |
0.19 |
0.08 |
|
NET INCOME/NET SALES |
-0.06 |
0.03 |
0.02 |
|
NET INCOME/TOTAL ASSETS |
-0.11 |
0.05 |
0.02 |
|
NET INCOME/INVESTED CAP |
-0.23 |
0.12 |
0.05 |
|
NET INCOME/COMMON EQUITY |
-0.26 |
0.12 |
0.05 |
|
R & D/NET SALES |
0.05 |
0.05 |
0.09 |
|
R & D/NET INCOME |
-0.77 |
1.54 |
5.69 |
|
R & D/EMPLOYEES |
33,903 |
36,080 |
42,406 |
ADVERTISING EXPENSES
The Company expenses advertising and the related costs as
incurred.
Advertising expenses for the years ended March 31, 2000, 1999
and 1998
were approximately $ 18.6 million $ 15.6 million and $ 6.3
million,
respectively, and are included in sales and marketing
expense in the
consolidated statements of operations.
FISCAL 2000 TRANSACTIONS
ACQUISITION OF NEVERSOFT
On September 30, 1999, the Company acquired Neversoft, a
privately held console software developer, in exchange for 698,835 shares
of the Company's common stock. The acquisition was accounted for as a
pooling of interests. Accordingly, the Company has restated the financial
statements for all periods prior to the closing of the transaction.
The following table represents the results of operations of
the previously separate companies for the period before the combination
was consummated which are included in fiscal year 2000 combined net income
(loss).
Fiscal Year 2000
----------------------------------------------------------
Activision
Neversoft Total
Six Months Ended
Six Months Ended Six Months Ended
Sept. 30, 1999
Sept. 30, 1999 Sept. 30, 1999
-----------------
---------------- ----------------
Revenues $ 199,505
$ - $ 199,505
Net income (loss) $
(3,028)
$
(484) $
(3,512)
ACQUISITION OF ELSINORE MULTIMEDIA
On June 29,1999, the Company acquired Elsinore Multimedia,
Inc. ("Elsinore"), a privately held interactive software
development company, in exchange for 204,448 shares of the Company's
common stock.
The acquisition was accounted for using the purchase method
of accounting. Accordingly, the results of operations of Elsinore have
been included in the Company's consolidated financial statements from the
date of acquisition. The aggregate purchase price has been allocated to
the assets and liabilities acquired, consisting mostly of goodwill of $
3.0 million, that is being amortized over a five year period. Proforma
statements of operations reflecting the acquisition of Elsinore are not
shown, as they would not differ materially from reported results.
ACQUISITION OF EXPERT SOFTWARE
On June 22, 1999, the Company acquired all of the outstanding
capital stock of Expert Software, Inc. ("Expert"), a publicly
held developer and publisher of value-line interactive leisure products,
for approximately $ 24.7 million. The aggregate purchase price of
approximately $ 24.7 million consisted of $ 20.3 million in cash payable
to the former shareholders of Expert, the valuation of employee stock
options in the amount of $ 3.3 million, and other acquisition costs.
The acquisition was accounted for using the purchase method
of accounting. Accordingly, the results of operations of Expert have
been included in the Company's consolidated financial statements from the
date of acquisition.
The aggregate purchase price was allocated to the fair values
of the assets and liabilities acquired as follows (amounts in thousands):
Tangible assets $ 4,743
Existing products 1,123
Goodwill 28,335
Liabilities
(9,532)
------------
$ 24,669
============
However, as more fully described in Note 3, in the fourth quarter of
fiscal 2000, the Company implemented a strategic restructuring
plan to
accelerate the development of games for the next-generation
consoles and
the Internet. In conjunction with that plan, the Company
consolidated
Expert and its Head Games subsidiary, forming one integrated
business
unit in the value software category. As part of this
consolidation, the
Company discontinued several of Expert's product lines and
terminated
substantially all of Expert's employees. In addition, the
Company will
phase-out the use of the Expert name. As a result of these
initiatives,
the Company incurred a nonrecurring charge of $ 26.3 million
resulting
from the write-down of intangibles acquired, including
goodwill.
FISCAL 1999 TRANSACTIONS
The acquisitions of Head Games and CD Contact were originally
treated as
immaterial poolings of interests. However, after reviewing the
results of
operations of the entities, including the materiality and
impact on the
Company's trends, the Company has restated the financial
statements for
all periods prior to the closing of each respective
transaction.
ACQUISITION OF HEAD GAMES
On June 30, 1998, the Company acquired Head Games in exchange
for
1,000,000 shares of the Company's common stock. The acquisition
was accounted for as a pooling of interests.
ACQUISITION OF CD CONTACT
On September 29, 1998, the Company acquired CD Contact in
exchange for 1,900,000 shares of the Company's common stock and the
assumption of $ 9.1 million in outstanding debt payable to CD Contact's
former shareholders. The debt is evidenced by notes payable which are due
on demand and bear interest at approximately 8% per annum. The acquisition
was accounted for as a pooling of interests.
The following table represents the results of operations of
the previously separate companies for the periods before the combinations
were consummated that are included in the current combined net income of
