Activision 2013 Annual Report Download - page 38

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19
allocated to various companies that were part of its consolidated group during the relevant periods. This allocation resulted in a
$132 million federal net operating loss allocation to Vivendi Games. In September 2012, the Company filed an amended tax
return for its December 31, 2008 tax year to utilize these additional federal net operating losses allocated as a result of the
aforementioned settlement, resulting in the recording of a one-time tax benefit of $46 million. Prior to the settlement, and given
the uncertainty of the VHI audit, the Company had insufficient information to allow it to record or disclose any information
related to the audit until the quarter ended September 30, 2012, as disclosed in the Company’s Form 10-Q for that period.
Vivendi Games results for the period January 1, 2008 through July 9, 2008 are included in the consolidated federal
and certain foreign state and local income tax returns filed by Vivendi or its affiliates while Vivendi Games results for the period
July 10, 2008 through December 31, 2008 are included in the consolidated federal and certain foreign, state and local income tax
returns filed by Activision Blizzard. Vivendi Games tax years 2005 through 2010 remain open to examination by the major
taxing authorities. The IRS is currently examining Vivendi Games tax returns for the 2005 through 2008 tax years.
Activision Blizzard’s tax years 2008 through 2012 remain open to examination by the major taxing jurisdictions to
which we are subject. The IRS is currently examining the Company’s federal tax returns for the 2008 and 2009 tax years. The
Company also has several state and non-U.S. audits pending.
Although the final resolution of the Company’s global tax disputes is uncertain, based on current information, in the
opinion of our management, the ultimate resolution of these matters will not have a material adverse effect on the Company’s
consolidated financial position, liquidity or results of operations. However, an unfavorable resolution of the Company’s global
tax disputes could have a material adverse effect on our business and results of operations in the period in which the matters are
ultimately resolved.
The overall effective income tax rate in future periods will depend on a variety of factors, such as changes in the mix
of income by tax jurisdiction, applicable accounting rules, applicable tax laws and regulations, and rulings and interpretations
thereof, developments in tax audits and other matters, and variations in the estimated and actual level of annual pre-tax income
or loss. Further, the effective tax rate could fluctuate significantly on a quarterly basis and could be adversely affected by the
extent that income (loss) before income tax expenses (benefit) is lower than anticipated in foreign regions where taxes are levied
at relatively lower statutory rates and/or higher than anticipated in the United States where taxes are levied at relatively higher
statutory rates.
A more detailed analysis of the differences between the U.S. federal statutory rate and the consolidated effective tax
rate, as well as other information about our income taxes, is provided in Note 18 of the Notes to Consolidated Financial
Statements included in this Annual Report.
Foreign Exchange Impact
Changes in foreign exchange rates had a positive impact of $20 million and a negative impact of $67 million on
Activision Blizzard’s consolidated operating income in 2013 and 2012, respectively. The change is primarily due to changes in
the value of the U.S. dollar relative to the Euro and British pound and its impact on our foreign operating income.
Liquidity and Capital Resources
Sources of Liquidity (amounts in millions)
For the Years Ended December 31,
2013 2012
Increase
(Decrease) 2013 v
2012
Cash and cash equivalents ...................................................................................... $ 4,410 $ 3,959 $ 451
Short-term investments .......................................................................................... 33 416 (383)
$ 4,443 $ 4,375 $ 68
Percentage of total assets ....................................................................................... 32% 31%
For the Years Ended December 31,
2013 2012 2011
Increase
(Decrease)
2013 v 2012
Increase
(Decrease)
2012 v 2011
Cash flows provided by operating activities .......................................... $ 1,264 $ 1,345 $ 952 $ (81) $ 393
Cash flows provided by (used in) investing activities ........................... 308 (124) 266 432 (390)
Cash flows used in financing activities .................................................. (1,223) (497) (808) (726) 311