Blizzard 2005 Annual Report Download - page 67

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For฀options฀granted฀during฀fiscal฀2005,฀2004฀and฀2003,฀the฀per฀share฀weighted฀average฀fair฀value฀of฀options฀with฀exercise฀prices฀equal฀to฀market฀value฀on฀the฀date฀of฀grant฀
was฀$4.11,฀$2.08฀and฀$3.28,฀respectively.฀The฀per฀share฀weighted฀average฀estimated฀fair฀value฀of฀Employee฀Stock฀Purchase฀Plan฀shares฀granted฀during฀the฀years฀ended฀
March฀31,฀2005,฀2004฀and฀2003฀was฀$2.12,฀$1.13฀and฀$1.63,฀respectively.
The฀effects฀on฀pro฀forma฀disclosures฀of฀applying฀SFAS฀No.฀123฀are฀not฀likely฀to฀be฀representative฀of฀the฀effects฀on฀pro฀forma฀disclosures฀of฀future฀years.
Common฀stock฀warrants฀are฀granted฀to฀non-employees฀in฀connection฀with฀the฀development฀of฀software฀and฀acquisition฀of฀licensing฀rights฀for฀intellectual฀property.฀In฀
accordance฀with฀ EITF฀ No.฀ 96-18,฀ “Accounting฀ for฀ Equity฀ Instruments฀ that฀are฀Issued฀ to฀ Other฀Than฀ Employees฀ for฀ Acquiring฀ or฀in฀ Conjunction฀ with฀Selling฀ Goods฀ or฀
Services,”฀the฀fair฀value฀of฀common฀stock฀warrants฀granted฀is฀determined฀as฀of฀the฀measurement฀date฀and฀is฀capitalized,฀expensed฀and฀amortized฀consistent฀with฀our฀
policies฀relating฀to฀software฀development฀and฀intellectual฀property฀license฀costs.
Reclassifications
Certain฀amounts฀in฀the฀consolidated฀financial฀statements฀have฀been฀reclassified฀to฀conform฀with฀the฀current฀year’s฀presentation.
The฀Company฀has฀reclassified฀certain฀auction฀rate฀securities฀from฀cash฀and฀cash฀equivalents฀to฀short-term฀investments.฀Auction฀rate฀securities฀are฀variable฀rate฀bonds฀
tied฀to฀short-term฀interest฀rates฀with฀maturities฀on฀the฀face฀of฀the฀underlying฀security฀in฀excess฀of฀90฀days.฀Auction฀rate฀securities฀have฀interest฀rate฀resets฀through฀
a฀modified฀Dutch฀auction฀at฀predetermined฀short-term฀intervals,฀typically฀every฀7,฀28,฀or฀35฀days.฀Interest฀paid฀during฀a฀given฀period฀is฀based฀upon฀the฀interest฀rate฀
determined฀during฀the฀prior฀auction.
Although฀these฀securities฀are฀issued฀and฀rated฀as฀long-term฀bonds,฀they฀are฀priced฀and฀traded฀as฀short-term฀instruments฀because฀of฀the฀liquidity฀provided฀through฀the฀
interest฀rate฀reset.฀The฀Company฀had฀historically฀classified฀these฀instruments฀as฀cash฀and฀cash฀equivalents฀if฀the฀reset฀period฀between฀interest฀rate฀resets฀was฀90฀days฀
or฀less,฀which฀was฀based฀on฀our฀ability฀to฀liquidate฀our฀holdings฀or฀roll฀our฀investment฀over฀to฀the฀next฀reset฀period.฀The฀Company’s฀re-evaluation฀of฀the฀maturity฀dates฀
and฀ other฀ provisions฀ associated฀ with฀ the฀ underlying฀ bonds฀ resulted฀ in฀ a฀ reclassification฀ from฀ cash฀ and฀ cash฀ equivalents฀ to฀ short-term฀ investments฀ of฀ approximately฀
$301.4฀million฀on฀the฀March฀31,฀2004฀balance฀sheet.฀As฀a฀result฀of฀this฀balance฀sheet฀reclassification,฀certain฀amounts฀were฀reclassified฀in฀the฀accompanying฀consolidated฀
statement฀of฀cash฀flows฀for฀the฀years฀ended฀March฀31,฀2004฀and฀2003฀to฀reflect฀the฀gross฀purchases฀and฀sales฀of฀these฀securities฀as฀investing฀activities฀rather฀than฀as฀a฀
component฀of฀cash฀and฀cash฀equivalents.฀This฀change฀in฀classification฀does฀not฀affect฀previously฀reported฀cash฀flows฀from฀operating฀or฀from฀financing฀activities฀in฀the฀
previously฀reported฀consolidated฀statements฀of฀cash฀flows฀or฀the฀previously฀reported฀consolidated฀statements฀of฀operations.฀As฀of฀March฀31,฀2004,฀before฀these฀revisions฀in฀
classification,฀$301.4฀million฀of฀these฀current฀investments฀were฀classified฀as฀cash฀and฀cash฀equivalents฀on฀the฀consolidated฀balance฀sheet.฀For฀the฀years฀ended฀March฀31,฀
2004฀ and฀2003,฀as฀ a฀result฀ of฀ these฀revisions฀in฀ classification,฀net฀cash฀ used฀in฀investing฀ activities฀related฀to฀these฀ current฀ investments฀ increased฀ $155.0฀million฀and฀
$146.4฀million,฀respectively.
2. STOCK SPLITS
In฀April฀2003,฀the฀Board฀of฀Directors฀approved฀a฀three-for-two฀split฀of฀our฀outstanding฀common฀shares฀effected฀in฀the฀form฀of฀a฀50%฀stock฀dividend.฀The฀split฀was฀paid฀
on฀June฀6,฀2003฀to฀shareholders฀of฀record฀as฀of฀May฀16,฀2003.฀In฀February฀2004,฀the฀Board฀of฀Directors฀approved฀a฀second฀three-for-two฀split฀of฀our฀outstanding฀common฀
shares฀effected฀in฀the฀form฀of฀a฀50%฀stock฀dividend.฀The฀split฀was฀paid฀on฀March฀15,฀2004฀to฀shareholders฀of฀record฀as฀of฀February฀23,฀2004.฀In฀February฀2005,฀the฀Board฀
of฀Directors฀ approved฀ a฀ four-for-three฀split฀of฀our฀outstanding฀common฀shares฀effected฀in฀ the฀form฀of฀a฀ 331⁄3%฀ stock฀dividend.฀ The฀split฀ was฀paid฀March฀ 22,฀2005฀ to฀
shareholders฀of฀record฀as฀of฀March฀7,฀2005.฀The฀par฀value฀of฀our฀common฀stock฀was฀maintained฀at฀the฀pre-split฀amount฀of฀$.000001.฀The฀consolidated฀financial฀state-
ments฀and฀Notes฀thereto,฀including฀all฀share฀and฀per฀share฀data,฀have฀been฀restated฀as฀if฀the฀stock฀splits฀had฀occurred฀as฀of฀the฀earliest฀period฀presented.
page 66
Activision, Inc. — 2005 Annual Report
Notes to Consolidated Financial Statements