Activision Blizzard (ATVI)

As a result, for certain key titles to be released in the December quarter of fiscal year 2009 and thereafter, the company will recognize all of the revenues from the sale of certain online-enabled games for certain platforms ratably over an estimated service period, which it currently estimates to be six months beginning the month after shipment. In addition, it will defer the costs of sales of those titles. As a consequence, the company’s non-GAAP results will exclude the impact of the change in deferred revenue and costs of sales related to certain online-enabled games for certain of the Microsoft, Sony, Nintendo and PC platforms in order to provide comparable year-over-year performance.

Additionally, in order to provide comparable year-over-year performance, as of June 30, 2008, Activision will exclude from its non-GAAP operating results the impact of one-time costs related to the Vivendi transaction.

Non-GAAP net revenue, non-GAAP net income (loss), non-GAAP earnings (loss) per share, and non-GAAP operating margin, excluding the impact of changes in deferred net revenues and cost of sales, one-time costs related to the Vivendi transaction and expenses related to equity-based compensation, are not determined in accordance with GAAP, and the exclusion of those items has the effect of increasing non-GAAP net revenue, non-GAAP net income, non-GAAP earnings per share and non-GAAP operating margin (and reducing non-GAAP net loss and non-GAAP loss per share) by the same amounts as compared with GAAP net revenue, GAAP net income (loss), GAAP earnings (loss) per share and GAAP operating margin for the period.   Activision recognizes that there are limitations associated with the use of these non-GAAP financial measures as they do not reflect net revenue, net income (loss), earnings (loss) per share and operating margin as determined in accordance with GAAP, and 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’s GAAP as well as non-GAAP results and outlook and, in this release, by presenting the most comparable GAAP measures, net revenue, net income (loss), earnings (loss) per share and operating margin directly ahead of non-GAAP net revenue, non-GAAP net income (loss), non-GAAP earnings (loss) per share, and non-GAAP operating margin, and by providing a reconciliation which indicates  and describes the adjustments made.

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Management believes that the presentation of these non-GAAP financial measures provides investors with additional useful information to measure Activision’s financial and operating performance because they allow for a better comparison of results between periods. Management further believes that reflecting the use of non-GAAP measures that eliminate the impact of deferred revenues and costs of sales in its operating results is important to facilitate comparisons to prior periods during which the application of its accounting policies did not result in deferral of significant amounts of revenues and costs of sales related to online-enabled games. Internally, management uses these non-GAAP financial measures in assessing the company’s operating results, as well as in planning and forecasting.

These 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.

These non-GAAP financial measures are not based on a comprehensive set of accounting rules or principles, and the terms non-GAAP net revenue, net income (loss), non-GAAP earnings (loss) per share, 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’s performance in relation to other companies.

As a result, for certain key titles to be released in the December quarter of fiscal year 2009 and thereafter, the company will recognize all of the revenues from the sale of certain online-enabled games for certain platforms ratably over an estimated service period, which it currently estimates to be six months beginning the month after shipment. In addition, it will defer the costs of sales of those titles. As a consequence, the company’s non-GAAP results will exclude the impact of the change in deferred revenue and costs of sales related to certain online-enabled games for certain of the Microsoft, Sony, Nintendo and PC platforms in order to provide comparable year-over-year performance.

Additionally, in order to provide comparable year-over-year performance, as of June 30, 2008, Activision will exclude from its non-GAAP operating results the impact of one-time costs related to the Vivendi transaction.

Non-GAAP net revenue, non-GAAP net income (loss), non-GAAP earnings (loss) per share, and non-GAAP operating margin, excluding the impact of changes in deferred net revenues and cost of sales, one-time costs related to the Vivendi transaction and expenses related to equity-based compensation, are not determined in accordance with GAAP, and the exclusion of those items has the effect of increasing non-GAAP net revenue, non-GAAP net income, non-GAAP earnings per share and non-GAAP operating margin (and reducing non-GAAP net loss and non-GAAP loss per share) by the same amounts as compared with GAAP net revenue, GAAP net income (loss), GAAP earnings (loss) per share and GAAP operating margin for the period.   Activision recognizes that there are limitations associated with the use of these non-GAAP financial measures as they do not reflect net revenue, net income (loss), earnings (loss) per share and operating margin as determined in accordance with GAAP, and 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’s GAAP as well as non-GAAP results and outlook and, in this release, by presenting the most comparable GAAP measures, net revenue, net income (loss), earnings (loss) per share and operating margin directly ahead of non-GAAP net revenue, non-GAAP net income (loss), non-GAAP earnings (loss) per share, and non-GAAP operating margin, and by providing a reconciliation which indicates  and describes the adjustments made.

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Management believes that the presentation of these non-GAAP financial measures provides investors with additional useful information to measure Activision’s financial and operating performance because they allow for a better comparison of results between periods. Management further believes that reflecting the use of non-GAAP measures that eliminate the impact of deferred revenues and costs of sales in its operating results is important to facilitate comparisons to prior periods during which the application of its accounting policies did not result in deferral of significant amounts of revenues and costs of sales related to online-enabled games. Internally, management uses these non-GAAP financial measures in assessing the company’s operating results, as well as in planning and forecasting.

These 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.

These non-GAAP financial measures are not based on a comprehensive set of accounting rules or principles, and the terms non-GAAP net revenue, net income (loss), non-GAAP earnings (loss) per share, 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’s performance in relation to other companies.

As a result, for certain key titles to be released in the December quarter of fiscal year 2009 and thereafter, the company will recognize all of the revenues from the sale of certain online-enabled games for certain platforms ratably over an estimated service period, which it currently estimates to be six months beginning the month after shipment. In addition, it will defer the costs of sales of those titles. As a consequence, the company’s non-GAAP results will exclude the impact of the change in deferred revenue and costs of sales related to certain online-enabled games for certain of the Microsoft, Sony, Nintendo and PC platforms in order to provide comparable year-over-year performance.

Additionally, in order to provide comparable year-over-year performance, as of June 30, 2008, Activision will exclude from its non-GAAP operating results the impact of one-time costs related to the Vivendi transaction.

Non-GAAP net revenue, non-GAAP net income (loss), non-GAAP earnings (loss) per share, and non-GAAP operating margin, excluding the impact of changes in deferred net revenues and cost of sales, one-time costs related to the Vivendi transaction and expenses related to equity-based compensation, are not determined in accordance with GAAP, and the exclusion of those items has the effect of increasing non-GAAP net revenue, non-GAAP net income, non-GAAP earnings per share and non-GAAP operating margin (and reducing non-GAAP net loss and non-GAAP loss per share) by the same amounts as compared with GAAP net revenue, GAAP net income (loss), GAAP earnings (loss) per share and GAAP operating margin for the period.   Activision recognizes that there are limitations associated with the use of these non-GAAP financial measures as they do not reflect net revenue, net income (loss), earnings (loss) per share and operating margin as determined in accordance with GAAP, and 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’s GAAP as well as non-GAAP results and outlook and, in this release, by presenting the most comparable GAAP measures, net revenue, net income (loss), earnings (loss) per share and operating margin directly ahead of non-GAAP net revenue, non-GAAP net income (loss), non-GAAP earnings (loss) per share, and non-GAAP operating margin, and by providing a reconciliation which indicates  and describes the adjustments made.

(more)

Management believes that the presentation of these non-GAAP financial measures provides investors with additional useful information to measure Activision’s financial and operating performance because they allow for a better comparison of results between periods. Management further believes that reflecting the use of non-GAAP measures that eliminate the impact of deferred revenues and costs of sales in its operating results is important to facilitate comparisons to prior periods during which the application of its accounting policies did not result in deferral of significant amounts of revenues and costs of sales related to online-enabled games. Internally, management uses these non-GAAP financial measures in assessing the company’s operating results, as well as in planning and forecasting.

These 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.

These non-GAAP financial measures are not based on a comprehensive set of accounting rules or principles, and the terms non-GAAP net revenue, net income (loss), non-GAAP earnings (loss) per share, 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’s performance in relation to other companies.