Blizzard 2010 Annual Report Download - page 81

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69
For the Years Ended
December 31,
2010 2009 2008
Supplemental cash flow information:
Cash paid for income taxes .................................................................. $255 $257 $151
Cash paid for interest ........................................................................... 2 5 2
23. Related Party Transactions
Treasury
Our foreign currency risk management program seeks to reduce risks arising from foreign currency fluctuations. We
use derivative financial instruments, primarily currency forward contracts and swaps, with Vivendi as our principal
counterparty. The gross notional amount of outstanding foreign exchange swaps was $138 million and $120 million at
December 31, 2010 and 2009, respectively. A pretax net unrealized gain of less than a million and unrealized loss of
$2 million for the years ended December 31, 2010 and 2009, respectively, resulted from the foreign exchange contracts and
swaps with Vivendi and were recognized in the consolidated statements of operations.
Prior to the Business Combination, Vivendi maintained a centralized cash management pool from which Vivendi
Games borrowed and loaned cash on a daily basis. Net cash transfers, under the cash pooling agreement, were included in
owner’s equity as part of net transfers to Vivendi. Vivendi charged Vivendi Games interest on the cumulative net cash
transfers and such charges are included in investment income (loss), net in the consolidated statements of operations. Net
interest earned from Vivendi for the year ended December 31, 2008 was $4 million.
In addition, in accordance with the terms of the Business Combination Agreement, in 2008 Vivendi Games settled
its payable to Vivendi S.A. and distributed its excess cash on-hand as defined in the Business Combination Agreement
immediately prior to the close of the transaction, resulting in cash payments of $79 million to settle its payable and
$79 million to distribute its excess cash to Vivendi.
Others
Activision Blizzard has entered into various transactions and agreements, including cash management services,
investor agreement, tax sharing agreement, and music royalty agreements with Vivendi and its subsidiaries and affiliates.
Effective July 23, 2010, we terminated our unsecured credit agreement with Vivendi, the lender, which provided for a
revolving credit facility of up to $475 million. None of these services, transactions and agreements with Vivendi and its
subsidiaries and affiliates is material either individually or in the aggregate to the consolidated financial statements as a
whole.
Annual overhead and support costs were allocated to Vivendi Games by Vivendi to approximate management
leadership, treasury, legal, tax and other similar service-based support functions incurred on Vivendi Games’ behalf. These
costs amounted to approximately $2 million in 2008. These allocations were included in the accompanying consolidated
statements of operations as general and administrative expense.
For the year ended December 31, 2008, a management fee of approximately $1 million was allocated to Vivendi
Games from Vivendi for insurance, share-employee costs and other general corporate support functions incurred on Vivendi
Games’ behalf. This allocation is included in the accompanying consolidated statements of operations as general and
administrative expense.
In addition, we are party to a number of agreements with Universal Music Group, a wholly owned subsidiary of
Vivendi, and its affiliates. These agreements pertain to the licensing of master recordings and compositions for our games
and for marketing and promotional purposes. We expensed and paid an aggregate of $12 million, $14 million and $2 million
in royalties and other fees (including fees relating to the marketing of artists whose music was licensed for our games) to
Universal Music Group and its affiliates for those uses during the years ended December 31, 2010, 2009 and 2008,
respectively. Royalty amounts due to Universal Music Group and its affiliates are not material at December 31, 2010, 2009
and 2008.
24. Recently Issued Accounting Pronouncements
In October 2009, the FASB issued an update to Revenue Recognition—Multiple-Deliverable Revenue Arrangements.
This update establishes the accounting and reporting guidance for arrangements including multiple revenue-generating