A financial analysis of the developer, publisher, and distributor of video games for the years 2006-2010
Northeastern State University – Broken Arrow
Financial Statement Analysis
John Henry Engelman
This summary analysis was prepared by me, John Engelman, for my Financial Statement Analysis class taught by Dr. Jeb Briley. For this assignment, I was tasked with researching a publicly traded company of my choice and analyzing their most recent financial statements and other related information so I could use the analytical methods I learned in the class to form an opinion about their business. Video games are a form of entertainment that I’m passionate about and it’s a business I’d like to learn more about therefore I chose Activision Blizzard, a worldwide developer, publisher, and distributor of video games.
Through my research of their financials, important ratios, required regulatory documents, and information relating to their competitors and industry I learned a great deal about them. Throughout every one of their financial statements, one thing was very apparent: the contrast between the years 2006-2007 and 2008-2010. In 2008, Activision merged with Vivendi Games. The merger was treated as a reverse acquisition meaning the smaller company (Vivendi Games) took over the larger company and the previous year’s financials were those of the smaller company, which created an obvious distortion of the financial statements.
All of Activision Blizzard’s financial statements and the ratio reports came from Capital IQ’s Compustat program. Another major source of information for this summary analysis came from annual reports that the Securities Exchange Commission requires publicly traded companies to release: 10-Ks. Because the most recent information from Compustat was for the years 2006-2010, that’s the years I covered. However, the 10-K for the year ending December 31, 2011 is available and I occasionally referenced it.
Activision Blizzard – Background Information
Activision Blizzard is one of the world’s largest video game publishers, releasing games for personal computers, home consoles, handheld gaming systems, and mobile platforms such as smartphones. The company is the result of a 2008 merger between two separate entities: Activision and Vivendi Games.
Activision was originally incorporated in California in 1979. At that time, the Atari 2600 was the leading video game platform and games released for it were solely developed by Atari. A problem concerning Atari’s video game developers was the lack of recognition they received for their work. Fed up with their situation, a handful of Atari developers formed Activision and accordingly, the first third-party developer of video games. (Classic Gaming Expo…) Since the company’s founding in 1979, Activision has grown to be one of the world’s largest publishers of video games as well as a source of some of the industry’s most recognizable franchises such as the Call of Duty and Guitar Hero series of games. The company is also very astute at obtaining the rights to produce video games based on well-known properties such as James Bond, Transformers, and Marvel Entertainment’s stable of superheroes.
Vivendi Games was (and now Activision Blizzard is) a large subsidiary of the French mass media and telecommunications company Vivendi. Even though the merger was between Activision and Vivendi Games, Blizzard Entertainment (a developer within Vivendi Games) is the partial namesake of the company, and for good reason.
Activision Blizzard – Background Information - Continued
Established in 1994, Blizzard Entertainment is known for developing some of the world’s most popular video games. The company’s history is full of revered video games, but these days it’s known for Warcraft, StarCraft, and Diablo. Blizzard currently operates World of Warcraft, a massively multiplayer online role-playing game that is the world’s largest, with 12 million subscribers as of October 7, 2010. (World of Warcraft…) StarCraft and Diablo also have worldwide appeal. StarCraft II: Wings of Liberty is one of the company’s newer products and its brand of competitive multiplayer is so popular in South Korea, it’s essentially its national pastime. (StarCraft II…)
Management’s Discussion and Analysis of Financial Conditions and Results of Operations (See 10-K, Item 7, In Part)
In the Management’s Discussion and Analysis section of Activision Blizzard’s 10-K for the fiscal year ended December 31, 2010, they break the company down into three operating segments: Activision Publishing, Inc., Blizzard Entertainment, Inc., and Activision Blizzard Distribution (a segment consisting of European operations that provide warehousing, logistical, and sales distribution services to the company as well as other third-party publishers). (2010 10-K, 39)
According to a bevy of qualified sources, Activision Blizzard was the #1 publisher of video games in North America and Europe in 2010. Not only that, but Call of Duty: Black Ops was the best selling video game of the year achieving more than $1 billion in retail sales worldwide. (2010 10-K, 41)
In their industry there’s a concentration of revenues associated with a small portion of titles, accordingly 62% of the company’s net revenues came from the Call of Duty and World of Warcraft franchises. (2010 10-K, 43) They believe this trend will continue in the future and they’re correct. Looking at their most recent 10-K (for the year ended December 31, 2011), three key franchises make up 73% of the company’s consolidated net revenues in 2011: Call of Duty, World of Warcraft, and Skylanders. (2011 10-K, 44) If the company doesn’t maintain a delicate balance of satisfying consumers with quality products while not over saturating the market, this could be problematic.
As the industry integrates online functionality and interconnectivity more and more, the company is beginning to emphasize the distribution of its products digitally. They stated that their revenues from digital sales increased in 2010 compared to 2009, but they didn’t specify by how much. (2010 10-K, 42) In the following year’s 10-K though, they stated that digital sales represented 32% of total revenues in 2010, and 34% in 2011 and they believed this would continue to be the case. (2011 10-K, 43)
Note: Item 7 of Activision Blizzard’s 2010 10-K is approximately 32 pages. This section of the 10-K has insight from the management of the company and is frequently referenced in this summary analysis. I’d suggest examining it before and after reading this summary analysis to get a solid understanding of the company.
Vertical Common-Size Income Statement (Exhibit 1)
This financial statement shows that 2008 was a rough year for Activision Blizzard. The company’s expenses were a larger portion of sales compared to the other years analyzed. Cost of goods sold was 48% of sales, administrative expense was 43% of sales, and depreciation, depletion, and amortization was 13% of sales ultimately leaving the company with an operating profit that was -4% of sales. This was also the only year that the company had a negative net income, -4% of sales. Then again, this was the year of the merger.
In the past two years the company has improved their business, although they’re not reaching the highs that Vivendi Games did in 2006 and 2007. Gross profit has risen 12% since 2008 and operating profit has grown 22% since 2008 which is a positive indicator. These margins seem very good. 52% of sales was the lowest gross profit ever was and it looks like they’ll hover around 60% of sales. It’s the same story with their operating profit. The year of the merger was their worst-performing year but since then, it’s grown and it looks like it could hit 20% of sales in 2011.
In each of the five years examined, the company’s special items were negative although it was only from 2008-2010 that these figures were a material portion of sales. After the merger, the company had restructuring costs: $93 million in 2008 and $23 million in 2009 although there were no related costs in 2010. (2010 10-K, F-3)
The company received tax benefits in each year analyzed except for 2010, where their taxes were 2% of sales. The benefit they received in 2006-2009 remained around 3% of sales. In 2008 and 2009 they generated a negative pretax income but in 2009, their tax benefit reversed this situation and they reported positive income before extraordinary items and discontinued operations.
Adjusted net income has went from -4% of sales in 2008 to 9% of sales in 2010. Like with the rest of this financial statement, the company was at their peak in 2006 and 2007 with an adjusted net income of 14% of sales and 18% of sales respectively. Of course, it was actually a different company then and a smaller one at that.
I was interested to see what the company’s net income was in 2011 and what portion of total sales it would end up being although their financial statements weren’t available through Compustat. They were available through their 10-K for the year ending December 31, 2011 though. Although they’re probably slightly different from the financials found in Compustat, percentages remained the same: net income was 2.6% and 9.4% of total sales for 2009 and 2010 respectively. In 2011 the company reported net income of $1.085 billion and total net revenues of $4.755 billion, which after doing the simple math, net income came out to be 23% of total sales. It really grew! (2011 10-K, F-3)
In general I noticed a few overall trends that affected nearly every one of the company’s line items. Times were tough in 2008 thanks to the economic crisis that began in late 2007. The company’s costs rose and their profits fell, culminating in a negative net income. They’ve been on the rebound since then with shrinking expenses and rising profits. However, much of trends discussed can be the effect of the 2008 merger, especially the growth seen post-2008.
Horizontal Common-Size Statement of Income (Exhibit 2)
Looking at the horizontal common-size income statement for Activision Blizzard I’m a little overwhelmed by the percent changes every line item has gone through from 2006-2010. Sales have more than quadrupled since 2006. They slightly grew in 2007 (37%) but grew at a much quicker pace in 2008 and 2009 (160% and 123% respectively) before slowing down in 2010 with growth of only 17%.
Cost of goods sold follows a similar trend. It slightly rose from 2006-2007 (21%) and then shot up in the following years. It peaked in 2009 when it was 512% higher compared to 2006. In 2010 it dropped 12%. Gross profit follows a similar course, quadrupling in the years analyzed. This increase from 2008 on is probably due to the merger of Vivendi Games and Activision that created Activision Blizzard. It’s disclosed in the company’s 10-K that the merger was treated as a reverse acquisition and as such the financial statements prior to 2008 are Vivendi’s.
Selling, general, and administrative expenses have grown 300% since 2006, but after 2008, they grew at a slower pace and even decreased in 2010 (4%). Management explained this decrease in the Management’s Discussion and Analysis section of their 10-K as a result of favorable foreign exchange effects and lower stock-based compensation expense. (2010 10-K, 59-60) Depreciation, depletion, and amortization in 2010 were 1,104% higher than it was in 2006, down from a peak of 1,404% in 2009. Coupled with the beneficial tax effect the company saw from 2006-2009, I wonder if they sped up their depreciation for tax purposes.
Intangibles grew to $9m from 2007-2008 (nearly 3,000%) and has since dropped by $1.2m. Also in their 10-K, they specifically bring up the impairment of intangible assets on page 60. Special items represent a large expense for the company, coming in as big losses from 2008 on (-$122m to -$456m). In fact in 2009 special items were 10,400% higher than they were in 2006. I believe this expense is where the impairment of intangibles appeared.
The company received beneficial tax effects every year except for 2010. This benefit stems from the company’s expense related to the impairment of its intangible assets according to page 61 of the 10-K. Plus in 2008 and 2009, the company generated a loss from operations. As mentioned in my analysis of the vertical common-size income statement, this benefit actually reversed the company’s negative pretax income in 2009.
As was the case with the vertical common-size analysis of the income statement, Activision Blizzard had a definite trend across the five years analyzed. They grew their adjusted net income from 2006 – 2007 before recording a loss in 2008. Afterwards, they continued the growth that was evidenced by nearly every line item. In the years analyzed the company has two distinct periods: the pre-merger years of 2006 and 2007 and the post-merger years of 2008-2010. As I just stated, nearly every line item of the income statement grew from 2008 on and I think a lot of this is attributable to the merger.
Vertical Common-Size Balance Sheet (Exhibit 3)
Analyzing the vertical common-size balance sheet, it’s easy to see the two periods of Activision Blizzard: the pre-merger Vivendi Games years and the post-merger Activision Blizzard years. Post-merger, the company’s cash and equivalents makes up a larger part of total assets: 20%-26% compared to 7%-8%. This tells me that Activision had much more cash and equivalents compared to Vivendi Games. Looking at the actual balance sheet I can see that the balance in this account ballooned from $65 million - $3.5 billion.
Net receivables were a large portion of Vivendi Games’ total assets: 18%-26% compared to 5%-8% post-merger. I believe this implies that Blizzard Entertainment, and World of Warcraft in particular, was a major source of income for Vivendi Games. WoW is a subscription-based video game and revenues generated from it come in at varying rates. Property, plant, and equipment were also a large chunk of Vivendi Games’ total assets, but not Activision Blizzard’s: 30%-35% pre-merger, 3%-4% post-merger.
Like cash, intangibles were an asset that grew as a percent of total sales post-merger. The company breaks down what intangibles are comprised of in note 12 to their consolidated financial statements. (2010 10-K, F-29) Of the $1.3 billion gross total intangibles (excluding goodwill), about $1 billion is derived from license agreements, internally developed franchises, and trademarks. However, nearly half of total intangibles were amortized and impaired to the net carrying amount of intangibles (excluding goodwill): $600 million. These calculations ignored goodwill, which according to the consolidated balance sheet located on page F-2 on the company’s 10-K totaled $7.1 billion. From 2008-2010, intangibles have remained around 60% of total assets.
Examining the company’s liabilities and equity, three things stick out to me. Firstly, the company has no long-term debt. The company has apparently financed itself mostly through operations and equity; after all, since 2008 they’ve been sitting on $3 billion - $3.5 billion of cash and equivalents.
Secondly, Vivendi Games’ accrued expenses in 2007 and 2008 were 34% and 42% of their total liabilities and equity respectively. This amount shrunk after to the merger to 3%-4 but the monetary amounts are in the same ballpark ($275 million - $380 million pre-merger and $463 - $536 post-merger), but now the company is much larger.
The last thing that sticks out to me are the negative amounts in retained earnings from 2006-2009; they were the result of accumulated deficits but the account turned positive in 2010. (2010 10-K, F-2) This makes me believe that Vivendi Games had accumulated deficits for at least 2006-2007 and possibly before then; the balance in this account was -70% of total liabilities and stockholder’s equity in 2006 but dropped to -34% in 2007 so this was possibly larger in 2005.
As was the case with my analysis of the income statements, these financials tell the tale of two companies: Activision Blizzard pre-merger and post-merger. Post-merger the company is a much larger entity and this will be made clearer in the following analysis of their horizontal common-size balance sheet.
Horizontal Common-Size Balance sheet (Exhibit 4)
The final common-size statement I looked at was the horizontal common-size balance sheet; this statement more than any other amplifies the pre-merger and post-merger status of Activision Blizzard.
During the Vivendi Games years (2006 and 2007) there’s not much to bring up because the post-merger years featured a lot of expansion of account balances. Still there are two figures that really stick out in these two years. They are the 450% growth of other assets and the 980% growth of other liabilities, both from 2006-2007.
The 450% growth in other assets resulted in a balance of $30 million, basically the same as it was in 2008. I wasn’t able to determine what this account consisted of in 2007 because the 2006-2007 financial statements are those of Vivendi Games and locating French financials is difficult. However, sourcing Activision Blizzard’s 10-K from 2008 yielded results for contents of the account during that year; considering the balance remained the same, perhaps the contents did as well. I couldn’t determine wholly what the account consisted of, I was able to learn that $10 million of it was put options from UBS and another $5 million of foreign currency derivatives. (2008 10-K, F-42) The 980% growth of other liabilities resulted in the account having a balance of $72 million. I believe most of this growth is from non-current income tax liabilities, that was the case for $81 million in 2008. (2008 10-K, F-40)
The post-merger years solidify the fact that Activision was much larger than Vivendi Games.
Activision Blizzard is sitting on a lot of cash. At the end of 2010, the balance in the cash and equivalents account was 5,200% higher than it was in 2010! I don’t think the $3.5 billion of cash the company is sitting on is too exorbitant either. Idle cash could be invested in short-term instruments to earn a minor return, and with the amount they have, the return might not be insignificant, which is what they’re doing. Of the $3.5 billion, $2.2 billion of it was in money market funds. (2010 10-K, F-22) But, the company is much larger now and cash only makes up 25% of their assets.
Intangibles grew by 3,000% after merger, signifying that Activision relied more on the properties of others for a source of income. Of the nineteen games the company published in 2010 and chose to highlight in the MD&A section of the 10-K, eleven of them were based off of other properties such as James Bond, Transformers, and Cabela’s. (2010 10-K, 41)
The company’s other current liabilities and other liabilities accounts grew to be 1,600% and 2,500% higher in 2010 than their respective balances in 2006. As was the case with Vivendi Games’ growth in other liabilities by 980% from 2006-2007, much of the growth in this account was from non-current income tax liabilities. (2010 10-K, F-38) As for other current liabilities, after taking a look at their consolidated balance sheet for 2010 included with that year’s 10-K, I’m able to pinpoint that much of this account is deferred revenues. (2010 10-K, F-2)
Simply because Activision Blizzard is a much larger company than Vivendi Games was, the horizontal common-size balance sheet can be effectively divided in two between 2007 and 2008. With the exception of the $1.7 billion of deferred revenues, none of the growth I saw led me to dire conclusions.
Five-Year Ratio Comparison (Exhibit 5)
Even with all of the cash that Activision Blizzard has, the current and quick ratios have been declining since 2008. I chalk this decline up to the declining balance in net receivables as well as the growth of the other current liabilities account which contains deferred revenues. Because these ratios are declining, so too is the company’s working capital per share. On the upside, their cash flow per share has risen from $0.21 per share in 2008 to $0.79 per share in 2010.
Compared with 2008, the company is taking more time to turnover inventory: 35 days compared to 40 days in 2010, but they’re doing better than they were in 2009 when it took them 55 days. Similarly, yearly inventory turnover stagnated in 2009 compared to 2008 and 2010 figures. On the flip side, the company is turning over its receivables more in 2010 than they were in 2008: 6.5 times compared to 4.5 times. Accordingly, it’s taking them less time to collect receivables: 56 days in 2010 compared to 82 days in 2008. As these ratios go, so too does the operating cycle; the improvement in the receivables ratios outweighed the decline in inventory ratios and the operating cycle was 95 days in 2010 compared to 117 days in 2008.
Activision Blizzard’s liquidity is good, but some important ratios are trending downwards. Even with all the cash they have, their current and quick ratios declined. Their inventory and receivables turnover ratios improved, but the balances in these accounts fell; it’s easy to turnover product when there’s less of it. Still, they have plenty of cash and liquidity shouldn’t be a concern but I’d keep my eye on their growing current liabilities.
Long-Term Debt-Paying Ability
Because Activision Blizzard has no long-term debt, the related ratios aren’t worth mentioning with the exception of the interest coverage ratio. The company has had interest expense each year ($3 million - $5 million from 2008-2010 but most notably Vivendi Games’ interest expense of $18 million in 2006) and the company has the money to cover these, but they didn’t generate pretax income in 2008 and 2009. The before tax and after tax variations of this ratio were both positive in 2010 though.
Post-merger, the total asset turnover for Activision Blizzard has remained around 0.3 times per year, but this is down compared to Vivendi Games’ 1.62 times per year in 2007. The current company probably isn’t as nimble as Vivendi Games was plus they’re now sitting on about thirteen times the assets.
Since the merger, each of the operating, pretax profit, and net profit margins are up. As I mentioned in my analysis of their vertical common-size income statement, the company has held their costs flat or even decreased them while their sales rose.
Vivendi Games had really strong return ratios (return on assets, equity, and investments) ranging from 28%-95% in 2007 and these declined after the merger. Since then though, Activision Blizzard has brought these up from the 2008 negatives to 3%-4%.
Five-Year Ratio Comparison (Exhibit 5) - Continued
Profitability - Continued
Overall, Activision Blizzard’s profitability ratios are very good. Most of them are on the rise. The total asset turnover ratio is the only one I have an issue with, but its low primarily because of the amount of cash the company is holding.
Ratio Comparison with Selected Competitors and Industry (Exhibit 6)
The two competitors I picked to compare with Activision Blizzard are Electronic Arts and Take-Two Interactive Software. Electronic Arts was founded in 1982 and like Activision Blizzard, is a global developer, publisher, and distributor of video games. These two companies often have titles that compete directly with each other’s key franchises and anyone familiar with the industry will tell you they’re analogous companies. With assets totaling $5 billion they appear much smaller than Activision Blizzard who has assets of $13 billion, but their revenue is similar: $4.5 billion for Activision Blizzard and $3.6 billion for Electronic Arts.
Take-Two Interactive Software is also a global developer, publisher, and distributor of video games. They also have many titles that compete directly with Activision Blizzard’s and Electronic Arts’, but their bread winner is the Grand Theft Auto series. They are the smallest of the three companies with assets totaling $970 million and revenue of $1.1 billion.
I pulled the ratio reports for Electronic Arts, Take-Two Interactive Software, and their industry from Capital IQ’s Compustat program and where noted, sourced information from the companies’ respective 10-Ks.
One of my sticking points about Activision Blizzard’s liquidity in the previous five-year ratio comparison was their declining current and quick ratios. However, they’re beating the industry and Electronic Arts. Take-Two is faring better here, but they’re a smaller company. Activision Blizzard nearly has better cash flow per share than Take-Two ($0.79-$0.84) but their working capital per share is lower than their competitors and industry.
The portion of Activision Blizzard’s liquidity I liked best was their upward trending receivables turnover and operating cycle. Compared to their competitors and industry though, they don’t look so hot. Their receivables turnover is close to Take-Two’s and the industry’s, but Electronic Arts is mopping the floor with ratios double Activision Blizzard’s. Their operating cycle is twice as long EA’s and 15 days longer than that of the industry. Lastly, their inventory turnover was on the rise from 2008-2010, a negative, and the industry and their competitors are faring better here as well.
Of the four sources of data, Activision Blizzard’s liquidity is usually on the bottom. They’re sitting on $3.5 billion of cash and equivalents so I’m sure liquidity isn’t the biggest problem for them, but they need to improve their inventory and receivables turnover.
Ratio Comparison with Selected Competitors and Industry (Exhibit 6) - Continued
Long-Term Debt-Paying Ability
Here’s one area that didn’t require a lot of discussion in the five-year ratio comparison section and it won’t require a lot of discussion now. Activision Blizzard and Electronic Arts don’t have any long-term debt in their capital structure, or at least an insignificant portion. Take-Two does, although not a lot. 11% of their assets were financed through debt and it was worth 17% of their total equity. In general, the industry doesn’t appear to use much debt. 1% of the industry’s assets were financed through debt.
The two stars of profitability are Activision Blizzard and Take-Two. Activision Blizzard’s operating, pretax profit, and net profit margins easily topped everyone, including the industry. Electronic Arts generated a loss from operations for the fiscal year ended March 31, 2011 so they’re automatically excluded from this discussion as well as any discussion regarding return ratios. The industry had an operating margin (after depreciation) of 7% and a net profit margin of 0.3%; Activision Blizzard on the other hand and an operating margin (after depreciation) of 18% and a net profit margin of 9%. The closest Take-Two came to touching any of these margin ratios was their 5% net profit margin.
As for the rest of the profitability ratios, Take-Two had the best results. The industry had low return ratios: return on assets was 0.18% and the return on equity and investment was 0.26%. Activision Blizzard did well with these: 3.12% and 4.1% respectively. Take-Two’s returns were better though: 5.54% for return on assets, 8.74% for return on equity, and 7.45% for return on investment.
Activision Blizzard’s total asset turnover remained flat from 2008-2010, but I thought this was low. Comparing this ratio to the industry proves it, although the industry wasn’t much higher: 0.33 times per year compared to 0.52 times per year. Electronic Arts had a better total asset turnover of 0.75 times per year while Take-Two had the best by turning their assets over 1.15 times per year. Activision Blizzard has a lot of cash and equivalents and intangibles “weighing” down their assets though.
The profitability ratios were divided among Activision Blizzard and Take-Two. Overall though, most of Activision Blizzard’s ratios were beating the industry. They had good margins and their returns were always positive. And yet, Take-Two did a better job of using their assets.
The dividends ratios, like the long-term debt-paying, are hardly worth bringing up, even less so than those. But Activision Blizzard did pay a dividend on April 2 and October 22, 2010. For 2010, Activision Blizzard’s dividend payout ratio was 45% while the industry’s was 9%; the 45% means that percentage of current earnings per share was paid as a cash dividend. Electronic Arts did not pay any dividends and neither did Take-Two. Neither anticipate paying them in the near future either. (EA 2011 10-K, 25; TTWO 2011 10-K, 25)
Among the video game companies in the United States, Activision Blizzard is the largest. This is a recent development thanks to the merger of Activision and Vivendi Games in 2008. (2010 10-K, 41) Through this report I’ve learned the company is sitting on a lot of cash and even though their liquidity ratios aren’t great, they’re fine in this area. That they appear to use no long-term debt can be a positive and a negative. It’s good that they’re not burdened by debt payments, especially in the wake of the economic crisis, but it could be a cheaper form of financing for them. Yet, because they don’t currently use it, they have nowhere to go but up in this regard. They seem to be a very profitable company too. They beat their competitors and even the industry when it came to profit margins, and their returns weren’t shabby either.
Looking at them from a business perspective, Activision Blizzard seems like a safe company for the next few years. They’ve sorted out their post-merger growing pains and their business looks to have improved each year from 2008 on. They’re the largest company in their industry and they have a number of franchises that are incredibly popular. Speaking of which, looking at the company from a fan and devoted watcher of the industry, it’s easy to feel more wary of them.
They rely very heavily on a few franchises and from 2006-2010, Guitar Hero was one of them. This was an incredibly successful franchise, but Activision Blizzard saturated the market with releases in 2009 and decided to drastically slowdown releases in the franchise. (Pereira, Chris) Currently, their Call of Duty franchise is the most popular game series ever, but if the company doesn’t properly manage it, that honey hole could dry up. But they’ve potentially found another goldmine in Skylanders: Spyro’s Adventure. As long as they continue developing quality products and maintain their strong financials, Activision Blizzard is a recommendable company to invest in.
Activision Blizzard 2010
Following the works cited page are a number of Activision Blizzard financial statements that were sourced from Capital IQ’s Compustat program. Not included are the notes to these financial statements. They can be found in the company’s 10-K which is most easily found through the SEC’s EDGAR database.