Activision 2012 Annual Report Download - page 35

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included in this Annual Report for additional information regarding the determination of the impairment charges recorded for the year ended
December 31, 2010.
Restructuring (amounts in millions)
Year Ended
December 31,
2012
% of
consolidated
net revs.
Year Ended
December 31,
2011
% of
consolidated
net revs.
Year Ended
December 31,
2010
% of
consolidated
net revs.
Increase
(Decrease)
2012 v
2011
Increase
(Decrease)
2011 v
2010
Restructuring ......................
$—
—%
$25
—%
$—
—%
$(25)
$25
There were no material restructuring expenses for the year ended December 31, 2012.
On February 3, 2011, the Company’s Board of Directors authorized the 2011 Restructuring. The 2011 Restructuring focused on the
development and publication of a reduced slate of titles on a going-forward basis, including the discontinuation of the development of
music-based games, the closure of the related business unit and the cancellation of other titles then in production, along with a related reduction
in studio headcount and corporate overhead. The costs related to the 2011 Restructuring activities included severance costs, facility exit costs, and
exit costs from the cancellation of projects. The 2011 Restructuring was completed as of December 31, 2011 and we do not expect to incur
additional restructuring expenses relating thereto. See Note 7 of the Notes to Consolidated Financial Statements included in this Annual Report
for more detail and a roll forward of the restructuring liability that includes the beginning and ending liability, costs incurred, cash payments and
non-cash write downs.
In 2008, we implemented an organizational restructuring plan as a result of the Business Combination. This organizational
restructuring was to integrate different operations and to streamline the combined Activision Blizzard organization. The restructuring activities
included severance costs, facility exit costs, write offs of assets and liabilities and exit costs from the cancellation of projects. At December 31,
2010, we had completed our organizational restructuring activities as a result of the Business Combination. Restructuring expenses during year
ended December 31, 2011 and 2010 associated to this plan were immaterial and were recorded within the “General and administrative expense”
in our consolidated statements of operations.
Investment and Other Income (Expense), Net (amounts in millions)
Year Ended
December 31,
2012
% of
consolidated
net revs.
Year Ended
December 31,
2011
% of
consolidated
net revs.
Year Ended
December 31,
2010
% of
consolidated
net revs.
Increase
(Decrease)
2012 v
2011
Increase
(Decrease)
2011 v
2010
Investment and other
income (expense), net ....
$7
—%
$3
—%
$23
1%
$4
$(20)
Investment and other income (expense), net, increased in 2012 as compared to 2011. The increase is primarily due to the net realized
gain on our foreign exchange contracts of $2 million in 2012 as compared to a $7 million loss in 2011. However, during 2012, we experienced
lower yields on our investments, which partially offset the increase.
Investment and other income (expense), net, decreased in 2011 as compared to 2010. During 2011, we recorded higher yields
generated from our cash and investment balances, which was partially offset by a higher realized loss from foreign exchange contracts, as
compared to 2010. Further, the majority of Investment and other income (expense), net, in 2010 related to the reduction in fair value of a financial
liability relating to a contingent earn-out liability from a previous acquisition and there was no such item during 2011.
Income Tax Expense (Benefit) (amounts in millions)
Year Ended
December 31,
2012
% of
Pretax
income
Year Ended
December 31,
2011
% of
Pretax
income
Year Ended
December 31,
2010
% of
Pretax
income
Increase
(Decrease)
2012 v
2011
Increase
(Decrease)
2011 v
2010
Income tax expense ....................
$309
21.2%
$246
18.5%
$74
15.0%
$63
$172
For 2012, the Company’s income before income tax expense was $1.46 billion. Our income tax expense of $309 million resulted in an
effective tax rate of 21.2%. The difference between our effective tax rate and the U.S. statutory tax rate of 35% is due to earnings taxed at
relatively lower rates in foreign jurisdictions, recognition of California research and development credits, the federal domestic production
deduction, and a tax benefit resulting from a federal income tax audit settlement allocated to us by a subsidiary of Vivendi S.A. (“Vivendi”), as
further discussed below.