Activision 2012 Annual Report Download - page 26

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Stock-Based Compensation Expense
We expense our stock-based awards using the grant date fair value over the vesting periods of the stock awards. In the case of liability
awards, the liability is subject to revaluation based on the stock price at the end of the relevant period. Included within stock-based compensation
are the net effects of capitalization, deferral, and amortization.
Restructuring
On February 3, 2011, the Company’s Board of Directors authorized a restructuring plan (the “2011 Restructuring”) involving a focus
on the development and publication of a reduced slate of titles on a going-forward basis. The 2011 Restructuring included 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 charges for the year ended December 31, 2011 were
$25 million, which is reflected in a separate caption “Restructuring expenses” on our consolidated statement of operations. The 2011
Restructuring was completed as of December 31, 2011 and we do not expect to incur significant additional restructuring expenses relating
thereto.
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 costs related to the
restructuring activities included severance costs, facility exit costs, write-offs of assets and liabilities and exit costs from the cancellation of
projects. For the year ended December 31, 2011, expense related to the organizational restructuring was $1 million and has been reflected in the
“General and administrative expense” in the consolidated statement of operations. The organizational restructuring activities as a result of the
Business Combination were completed as of December 31, 2011 and we do not expect to incur additional restructuring expenses relating thereto.
Amortization of Intangible Assets
All of our intangible assets are the result of the Business Combination and other acquisitions. We amortize the intangible assets over
their estimated useful lives based on the pattern of consumption of the underlying economic benefits. The amount presented in the table
represents the effect of the amortization of intangible assets as well as other purchase price accounting adjustments, where applicable, in our
consolidated statements of operations.
Impairment of Goodwill/Intangible Assets
We recorded a non-cash charge of $12 million related to the impairment of goodwill of our Distribution reporting unit for the year
ended December 31, 2011, reflecting a continuing shift in the distribution of interactive entertainment software from retail distribution channels
to digital distribution channels. Furthermore, we recorded a non-cash impairment charge on definite-lived intangible assets of $326 million for
the year ended December 31, 2010, reflecting a continuing weaker environment for the casual game and music genres.
Segment Net Revenues
Activision
Activision’s net revenues increased for 2012 as compared to 2011, primarily due to revenues from the Skylanders franchise (both from
the launch of Skylanders Giants in the fourth quarter of 2012 and the full-year revenues from Skylanders Spyro’s Adventure, which was launched
in the fourth quarter of 2011). The increase was partially offset by lower revenues from the Call of Duty franchise primarily from lower catalog
sales and lower revenues from downloadable content packs for Call of Duty: Modern Warfare 3, though these decreases were partially mitigated
by the strong performance from Call of Duty: Black Ops II which launched in the fourth quarter of 2012.
For 2011, net revenues from the Activision segment increased as compared to 2010 primarily due to: the strong performance of Call of
Duty: Modern Warfare 3 and the strong digital revenue performance from the franchise; revenues from Skylanders Spyro’s Adventure which
successfully launched as a new intellectual property in the fourth quarter of 2011; the release of Lego Star Wars III, which we published on
behalf of Lucas Arts in Europe and certain countries in Asia Pacific; and benefits from foreign exchange as compared to the prior year. The
increase was partially offset by a more focused release schedule in 2011 than in 2010, and lower catalog sales of games in the music and casual
games genre.