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2015 ANNUAL REPORT
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Table of contents

  • Page 1
    ® ® 2015BANNUALBREPORT

  • Page 2
    ...$6BBILLIONBOVERBTHEBLASTB5BYEARS FIGURES IN THIS ANNUAL REPORT DO NOT INCLUDE KING UNLESS OTHERWISE INDICATED. Non-GAAP; for a full reconciliation, please see tables at the end of the annual report. Constant FX provides current period results converted into USD using the average exchange rates from...

  • Page 3
    ... individuals who played a particular game in a given month averaged across the number of months in a respective period. Refer to definition included in press release for additional details. 2 King acquisition closed on February 23, 2016. Includes fourth quarter 2015 Activision Blizzard and King MAU...

  • Page 4
    2

  • Page 5
    ... OF 2015 ® 1 NPD, Gfk Chart-Track, and Activision Blizzard internal estimates. 2 NPD. 3 MAU defined as number of individuals who played a particular game in a given month averaged across the number of months in a respective period. Refer to definition included in press release for additional...

  • Page 6
    ACHIEVED RECORD DIGITAL ATTACH RATES WITH THE TAKEN KING EXPANSION1 OVER 25 MILLION REGISTERED USERS HAVE LOGGED NEARLY 3 BILLION HOURS IN-GAME ® 1 4 Digital attach rate refers to expansion sales as a percentage of full games sold.

  • Page 7
    NEW TELEVISION SERIES, SKYLANDERS ACADEMY, EXPECTED TO LAUNCH IN 2016 LARGEST KIDS CONSOLE FRANCHISE SINCE ITS RELEASE1 #11 CONSOLE FRANCHISE LIFE-TO-DATE1 ® 1 NPD, Gfk Chart-Track, including toys and accessories, in NA & EU. 5

  • Page 8
    #1 SUBSCRIPTION-BASED, MASSIVELY MULTIPLAYER ONLINE ROLE-PLAYING GAME 10 YEARS RUNNING 6TH EXPANSION TO LAUNCH IN SUMMER OF 2016 ® 6

  • Page 9
    MORE THAN 40 MILLION REGISTERED PLAYERS RECORD ENGAGEMENT AT THE END OF 2015 ® 7

  • Page 10
    2015 LAUNCH IN CHINA BROKE PC SALES RECORDS ® 8

  • Page 11
    LAUNCHED FINAL CHAPTER OF STARCRAFT II TRILOGY, LEGACY OF THE VOID, SELLING-THROUGH OVER 1 MILLION COPIES IN THE FIRST 24 HOURS ® 9

  • Page 12
    NUMEROUS AWARDS, INCLUDING BEST COMPETITIVE MULTIPLAYER AND BEST MOBA1 FROM GAME INFORMER ® 1 10 Multiplayer online battle arena.

  • Page 13
    TEAM-BASED SHOOTER COMING TO PC AND CONSOLE THIS SPRING OVER 8 MILLION PEOPLE HAVE SIGNED UP FOR THE BETA ® 11

  • Page 14
    ... MOBILE GAMES FOR 8 CONSECUTIVE QUARTERS1,2 NEARLY 450 MILLION MONTHLY ACTIVE USERS PLAYING 1.4 BILLION GAMES PER DAY2 1 12 2 U.S. rankings for Apple App Store and Google Play Store, per App Annie Intelligence for fourth quarter 2015. King acquisition closed on February 23, 2016. Metrics...

  • Page 15
    ... $4.6 billion of revenues, $1.5 billion of operating income, $1.2 billion of operating cash ï¬,ow and $1.32 in earnings per share. And in 2015, our company was added to the S&P 500 index. Over the past 25 years, since the present management took over, Activision Blizzard's book value per share1 grew...

  • Page 16
    ...) for our shareholders $2,628 20% GROWTH $2,198 46% of Total Revenues 57% of Total Revenues 2015 2014 2016 DIVIDEND (Shares) $0.26 UP 13 % $0.23 2015 2016 We wanted a company as committed to product excellence as we are. We wanted a great management team that has the right balance of...

  • Page 17
    ... more experience creating compelling esports content than Blizzard. 60 2014 2015 TIME SPENT (Billions of Hours) 14+ 16% GROWTH 12+ 2014 2015 Note: Does not include time spent spectating. 1 MAU defined as number of individuals who played a particular game in a given month averaged across...

  • Page 18
    ... world. And with Activision Blizzard Media Networks and Activision Blizzard Studios, we are extending our franchises to new lucrative platforms. We expect 2016 to be a record year for the company and project $6.25 billion of revenues, more than $2 billion of operating income and earnings per share...

  • Page 19
    ® ® FINANCIALBREVIEW

  • Page 20
    ... tables are in millions, except per share data. 2015 For the Years Ended December 31, 2014 2013 2012 2011 Statement of Operations Data: Net Revenues ...Net income ...Basic net income per share ...Diluted net income per share...Cash dividends declared per share(1) ...Balance Sheet Data: Total assets...

  • Page 21
    ... outstanding shares of our common stock. On January 13, 2016, Vivendi sold all of their remaining shares of our common stock. We did not receive any proceeds. The King Acquisition On November 2, 2015, we and King Digital Entertainment plc, a leading interactive entertainment company for the mobile...

  • Page 22
    ...; in-game purchases and services; retail sales of physical "boxed" products; online download sales of PC products; purchases and downloads via third-party console, mobile and tablet platforms; and licensing of software to third-party or related party companies that distribute Blizzard products. (iii...

  • Page 23
    ... Ops III Awakening, the first downloadable content pack for Call of Duty: Black Ops III on the PS4, with an expected release date to other platforms of March 3, 2016. International Operations International sales are a fundamental part of our business. Net revenues from international sales accounted...

  • Page 24
    ... sales via digital online channels as revenues from digitally distributed subscriptions, licensing royalties, value-added services, downloadable content, microtransactions, and products. This definition may differ from that used by our competitors or other companies. According to Activision Blizzard...

  • Page 25
    ...to, title release date, consumer demand, market conditions and shipment schedules. Outlook For 2016, our results will include the operations of King, beginning on February 23, 2016, the date the King Acquisition closed. Our earnings under accounting principles generally accepted in the United States...

  • Page 26
    ... total net revenues (amounts in millions): For the Years Ended December 31, 2014 2015 2013 Net revenues: Product sales...Subscription, licensing, and other revenues ...Total net revenues ...Costs and expenses: Cost of sales-product costs ...Cost of sales-online ...Cost of sales-software royalties...

  • Page 27
    ... recently announced Media Networks and Studios businesses. We do not aggregate operating segments. The CODM reviews segment performance exclusive of the impact of the change in deferred revenues and related cost of sales with respect to certain of our online-enabled games, stock-based compensation...

  • Page 28
    ...and Android tablets in the prior-year, Hearthstone: Heroes of Warcraft was released on iPhone and Android smartphones in April 2015, which contributed to the current period revenue performance. Blizzard's net revenues increased for 2014, as compared to 2013, primarily due to revenues from Diablo III...

  • Page 29
    ... and fees). Blizzard Blizzard's operating income decreased in 2015, as compared to 2014, primarily due to lower revenues, as described above; higher costs of sales-product costs from Hearthstone: Heroes of Warcraft related to commissions on mobile purchases with the launch on iPhone and Android...

  • Page 30
    ... revenues from digital online channels as revenues from digitally distributed subscriptions, licensing royalties, value-added services, downloadable content, microtransactions, and products. Net revenues from Other include revenues from our Media Networks and Studios businesses, along with revenues...

  • Page 31
    ...in the current year, and lower revenues recognized from the Diablo franchise due to the timing of title releases. The increase in non-GAAP net revenues from digital online channels for 2014, as compared to 2013, was primarily due to revenues from Hearthstone: Heroes of Warcraft, value-added services...

  • Page 32
    ... the Storm. Consolidated net revenues in the Asia Pacific region increased in 2015 as compared to 2014, primarily due to higher revenues recognized from Hearthstone: Heroes of Warcraft, Call of Duty Online, and Heroes of the Storm, which launched in China in 2015 with no comparable prior-year titles...

  • Page 33
    ...(4) consolidated net revenues Increase/ (Decrease) 2015 v 2014 Increase/ (Decrease) 2014 v 2013 Platform net revenues: Online(1)...PC ...Next-generation (PS4, Xbox One, Wii U) ...Prior-generation (PS3, Xbox 360, Wii) ...Total Console...Mobile and ancillary(2) ...Total Activision Blizzard ...Other...

  • Page 34
    ... Trap Team in the fourth quarter of 2014. In 2015, we have released multiple expansions or map packs for Destiny and Call of Duty: Advanced Warfare on the next-generation consoles along with major new titles including Call of Duty: Black Ops III, Skylanders SuperChargers, and Guitar Hero Live. Net...

  • Page 35
    ... from Diablo III for the PS3 and the Xbox 360, which was released in September 2013, and revenues from the release of Diablo III: Reaper of Souls-Ultimate Evil Edition. Net revenues from mobile and ancillary decreased slightly in 2015, as compared to 2014, primarily due to lower revenues from sales...

  • Page 36
    ... support the launch of Guitar Hero Live and Heroes of the Storm during the year. The increase was partially offset by lower media spending on the World of Warcraft, Destiny, and Diablo franchises due to the timing of title releases. Sales and marketing expenses increased in 2014, as compared to 2013...

  • Page 37
    ..., state and local income tax returns filed by Activision Blizzard. Vivendi Games tax year 2008 remains open to examination by the major taxing authorities. In addition, Vivendi Games' tax return for the 2008 tax year is before the appeals function of the Internal Revenue Service ("IRS") and is...

  • Page 38
    ...operating income in 2015, 2014 and 2013, 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. For the year ended December 31, 2014, given that the majority of the Company's GAAP net...

  • Page 39
    ... operating activities typically include the collection of customer receivables generated by the sale of our products and digital and subscription revenues, partially offset by payments to vendors for the manufacturing, distribution and marketing of our products, payments for customer service support...

  • Page 40
    ... months, including: purchases of inventory and equipment; the development, production, marketing and sale of new products; provision of customer service for our players; acquisition of intellectual property rights for future products from third parties; funding of dividends; and payments related...

  • Page 41
    ... Statements included in this Annual Report, we may be required, during certain periods where outstanding revolving loans exceed a certain threshold, to maintain a maximum senior secured net leverage ratio calculated pursuant to a financial maintenance covenant under the Credit Agreement. The Company...

  • Page 42
    ...Board of Directors declared a cash dividend of $0.26 per common share, payable on May 11, 2016, to shareholders of record at the close of business on March 30, 2016. Capital Expenditures We made capital expenditures of $111 million in 2015, as compared to $107 million in 2014. In 2016, we anticipate...

  • Page 43
    based on the sale of the related game. Additionally, in connection with certain intellectual property rights acquisitions and development agreements, we commit to spend specified amounts for marketing support for the related game(s) which is to be developed or in which the intellectual property will...

  • Page 44
    ... and business units prepare quarterly reports regarding their current-quarter operational performance, future trends, subsequent events, internal controls, changes in internal controls and other accounting and disclosure relevant information. These quarterly reports are reviewed by certain key...

  • Page 45
    ...World of Warcraft boxed software and related expansion packs are classified as "Product sales," whereas revenues attributable to subscriptions and other value-added services are classified as "Subscription, licensing, and other revenues." Certain of our games are offered to players on a free-to-play...

  • Page 46
    .... Significant management judgments and estimates must be made and used in connection with establishing the allowance for returns and price protection in any accounting period based on estimates of potential future product returns and price protection related to current period product revenues. We...

  • Page 47
    ... agreement with the rights holder, we may obtain the right to use the intellectual property in multiple products over a number of years, or alternatively, for a single product. Prior to a product's release, if and when we believe capitalized costs are not recoverable, we expense the amounts as part...

  • Page 48
    ... amount of the assets exceeds the fair value of the assets. We did not record an impairment charge to our definite-lived intangible assets as of December 31, 2015, 2014 and 2013. Financial Accounting Standards Board ("FASB") literature related to the accounting for goodwill and other intangibles...

  • Page 49
    ... the fair value of restricted stock rights (including restricted stock units, restricted stock awards and performance shares) based on the closing market price of the Company's common stock on the date of grant. Certain restricted stock rights granted to our employees and senior management vest...

  • Page 50
    ...guidance will not have a material impact on our financial statements. Internal-Use Software In April 2015, the FASB issued new guidance related to internal-use software. The new standard relates to a customer's accounting for fees paid in cloud computing arrangements. The amendment provides guidance...

  • Page 51
    ...date as a result of the business combination, be recognized in the reporting period the adjustment is identified. The standard also requires separate presentation on the face of the income statement, or disclosure in the notes, of the portion of the amount recorded in current period earnings by line...

  • Page 52
    ... our international operations. Similarly, our revenues, operating expenses, net income and cash flows will increase for our international operations if the U.S. dollar weakens against foreign currencies. Since we have significant international sales, but incur the majority of our costs in the United...

  • Page 53
    ... 31, 2015 and 2014, there was no ineffectiveness relating to these hedges. At December 31, 2015, $4 million of net unrealized losses related to these contracts are expected to be reclassified into earnings within the next twelve months. During the year ended December 31, 2015 and 2014, pre-tax net...

  • Page 54
    ...SEC's rules and forms and (ii) accumulated and communicated to management, including our principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosures. A control system, no matter how well designed and operated, can provide only...

  • Page 55
    ... Public Accounting Firm To the Board of Directors and Shareholders of Activision Blizzard, Inc.: In our opinion, the accompanying consolidated balance sheets and the related consolidated statements of operations, comprehensive income, changes in shareholders' equity and cash flows, present fairly...

  • Page 56
    ..., net...Deferred income taxes, net ...Other liabilities ...Total liabilities...Commitments and contingencies (Note 19) Shareholders' equity: Common stock, $0.000001 par value, 2,400,000,000 shares authorized, 1,163,179,140 and 1,150,605,926 shares issued at December 31, 2015 and December 31, 2014...

  • Page 57
    ..., except per share data) For the Years Ended December 31, 2015 2014 2013 Net revenues Product sales ...$ Subscription, licensing, and other revenues ...Total net revenues ...Costs and expenses Cost of sales-product costs ...Cost of sales-online ...Cost of sales-software royalties and amortization...

  • Page 58
    ... BLIZZARD, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Amounts in millions) For the Years Ended December 31, 2015 2014 2013 Net income ...Other comprehensive income (loss): Foreign currency translation adjustment ...Unrealized losses on forward contracts designated...

  • Page 59
    ... For the Years Ended December 31, 2015, 2014, and 2013 (Amounts and shares in millions, except per share data) Additional Paid-In Capital Accumulated Other Comprehensive Income (Loss) Total Shareholders' Equity Common Stock Shares Amount Treasury Stock Shares Amount Retained Earnings Balance at...

  • Page 60
    ... from financing activities: Proceeds from issuance of common stock to employees...Tax payment related to net share settlements on restricted stock rights...Excess tax benefits from stock awards ...Repurchase of common stock ...Dividends paid ...Proceeds from issuance of long-term debt...Repayment...

  • Page 61
    ...handheld, mobile and tablet devices. We maintain significant operations in the United States ("U.S."), Canada, the United Kingdom ("U.K."), France, Germany, Ireland, Italy, Sweden, Spain, the Netherlands, Australia, South Korea and China. The King Acquisition On November 2, 2015, we and King Digital...

  • Page 62
    ...; in-game purchases and services; retail sales of physical "boxed" products; online download sales of PC products; purchases and downloads via third-party console, mobile and tablet platforms; and licensing of software to third-party or related party companies that distribute Blizzard products. (iii...

  • Page 63
    ... at fair value, which is based on quoted market prices for such securities, if available, or is estimated on the basis of quoted market prices of financial instruments with similar characteristics. The Company transacts business in various foreign currencies and has significant international sales...

  • Page 64
    ... from our customers. We had two customers, Sony and Microsoft, who accounted for 12% and 10%, respectively, of net revenues for the year ended December 31, 2015. We did not have any single customer that accounted for 10% or more of net revenues for the years ended December 31, 2014, and 2013. We had...

  • Page 65
    ... which represent our best estimate of future performance at this time. We test indefinite lived acquired trade names for possible impairment by using a discounted cash flow model to estimate fair value. We have determined that no impairment has occurred at December 31, 2015, 2014 and 2013 based upon...

  • Page 66
    ... Warcraft boxed products, expansion packs and value-added services, each of which is considered with the related subscription services for these purposes. Under ASC Topic 605 and ASU 2009-13, when a revenue arrangement contains multiple elements, such as hardware and software products, licenses and...

  • Page 67
    ... Blizzard's servers and is generally sold on a subscription-only basis. For World of Warcraft, after the first month of free usage that is included with the World of Warcraft boxed software, the World of Warcraft end user may enter into a subscription agreement for additional future access. Revenues...

  • Page 68
    ...for our current games is generally less than 12 months. Allowances for Returns, Price Protection, Doubtful Accounts, and Inventory Obsolescence We closely monitor and analyze the historical performance of our various titles, the performance of products released by other publishers, market conditions...

  • Page 69
    ... years ended December 31, 2015, 2014, and 2013 were $523 million, $495 million, and $401 million, respectively, and are included in "Sales and marketing expense" in the consolidated statements of operations. Income Taxes We record a tax provision for the anticipated tax consequences of the reported...

  • Page 70
    ... the fair value of restricted stock rights (including restricted stock units, restricted stock awards and performance shares) based on the closing market price of the Company's common stock on the date of grant. Certain restricted stock rights granted to our employees and senior management vest...

  • Page 71
    ... Estimated useful lives Net carrying amount Acquired definite-lived intangible assets: License agreements and other ...Internally-developed franchises ...Developed software ...Total definite-lived intangible assets ...Acquired indefinite-lived intangible assets: Activision trademark ...Acquired...

  • Page 72
    ... deduction did exceed the fair value of those options, the tax benefit is credited to additional paid-in capital. The addition to goodwill through acquisition is attributed to the acquisition of the business of Major League Gaming ("MLG") (see Note 23). At December 31, 2015 and 2014, there were no...

  • Page 73
    ...by the Company. The fair value of these investments has been unchanged for the years ended December 31, 2015, 2014, and 2013. Foreign Currency Forward Contracts Foreign Currency Forward Contracts Not Designated as Hedges At December 31, 2015, the gross notional amount of outstanding foreign currency...

  • Page 74
    ... 31, 2015 and 2014, there was no ineffectiveness relating to these hedges. At December 31, 2015, $4 million of net unrealized losses related to these contracts are expected to be reclassified into earnings within the next twelve months. During the year ended December 31, 2015 and 2014, pre-tax net...

  • Page 75
    ... of liens, payment of dividends, sales of assets and mergers and acquisitions. The Company was in compliance with the terms of the Notes as of December 31, 2015. Interest on the Notes is payable semi-annually in arrears on March 15 and September 15 of each year. As of December 31, 2015 and 2014, we...

  • Page 76
    ...As of December 31, 2015 and 2014, the carrying value of the Term Loan approximates the fair value, based on Level 2 inputs (observable market prices in less than active markets), as the interest rate is variable over the selected interest period and is similar to current rates at which we can borrow...

  • Page 77
    ...from operating segments managed outside the reportable segments, including our Media Networks, Studios, and Distribution businesses. Other also includes unallocated corporate income and expenses. Reflects fees and other expenses related to the Purchase Transaction and the King Acquisition, inclusive...

  • Page 78
    ... shown as "Distribution." (3) Long-lived assets by geographic region at December 31, 2015, 2014, and 2013 were as follows (amounts in millions): Years Ended December 31, 2015 2014 2013 Long-lived assets* by geographic region: North America ...$ 138 $ 122 $ 102 Europe ...42 29 29 Asia Pacific...

  • Page 79
    ..., officers, employees of, and consultants to, Activision Blizzard and its subsidiaries. While the Compensation Committee has broad discretion to create equity incentives, our stock-based compensation program for the most part currently utilizes a combination of options and restricted stock units...

  • Page 80
    ... weighted-average fair value at grant date using the binomial-lattice model: Employee and Director Options For the Years Ended December 31, 2015 2014 2013 Expected life (in years) ...6.26 5.97 6.44 Risk free interest rate ...1.90% 1.82% 1.86% Volatility ...36.13% 37.09% 39.00% Dividend yield...0.72...

  • Page 81
    ... earned and issued at vesting (amounts in thousands except per share amounts): Restricted Stock Rights WeightedAverage Grant Date Fair Value Unvested restricted stock rights balance at December 31, 2014 Granted* ...Vested ...Forfeited...Unvested restricted stock rights balance at December 31, 2015...

  • Page 82
    ...): For the Years Ended December 31, 2015 2014 2013 Cost of sales-online ...Cost of sales-software royalties and amortization ...Product development ...Sales and marketing ...General and administrative ...Stock-based compensation expense before income taxes ...Income tax benefit ...Total stock-based...

  • Page 83
    ... (amounts in millions): For the Years Ended December 31, 2014 2015 2013 Federal income tax provision at statutory rate ...State taxes, net of federal benefit ...Research and development credits ...Foreign rate differential...Change in tax reserves ...Net operating loss tax attribute assumed from...

  • Page 84
    ...and liabilities for accounting purposes and the amounts used for income tax purposes. The components of the net deferred tax assets (liabilities) are as follows (amounts in millions): As of December 31, 2015 2014 Deferred tax assets: Allowance for sales returns and price protection...$ 66 Inventory...

  • Page 85
    ... 2014 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 through 2011 tax years. During the second quarter of 2015, the Company transitioned the review of its transfer pricing methodology...

  • Page 86
    ... the years ended December 31, 2015 and 2014, on a weighted-average basis, we had outstanding unvested restricted stock rights with respect to 8 million and 15 million shares of common stock that are participating in earnings, respectively. Certain of our employee-related restricted stock rights are...

  • Page 87
    ...May 29, 2015, we made related dividend equivalent payments of $3 million to certain holders of restricted stock rights. On February 6, 2014, our Board of Directors declared a cash dividend of $0.20 per common share, payable on May 14, 2014, to shareholders of record at the close of business on March...

  • Page 88
    ... royalties earned by the developer or intellectual property holder based on sales of the related game. Additionally, in connection with certain intellectual property rights, acquisitions and development agreements, we commit to spend specified amounts for marketing support for the game(s) which...

  • Page 89
    ... of operations, or liquidity. 20. Related Party Transactions Transactions with Vivendi and Its Affiliates As part of the Business Combination in 2008, we entered into various transactions and agreements, including cash management services agreements, a tax sharing agreement and an investor agreement...

  • Page 90
    ...guidance will not have a material impact on our financial statements. Internal-Use Software In April 2015, the FASB issued new guidance related to internal-use software. The new standard relates to a customer's accounting for fees paid in cloud computing arrangements. The amendment provides guidance...

  • Page 91
    ... 2014 For the Quarters Ended September 30, June 30, 2014 2014 March 31, 2014 (Amounts in millions, except per share data) Net revenues ...Cost of sales ...Operating income ...Net income (loss) ...Basic earnings (loss) per share...Diluted earnings (loss) per share ...23. Acquisitions Major League...

  • Page 92
    ... the existing King shareholders and share-based award holders. The Company made this acquisition because it believes that the addition of King's highly-complementary mobile business will position the Company as a global leader in interactive entertainment across mobile, console and PC platforms, and...

  • Page 93
    ... that secure and guarantee the existing Term Loans. The other terms of the Tranche A Term Loans are also generally the same as the terms of the existing Term Loan. Revolving Credit Facility As part of the Amendments, upon the closing of the King Acquisition, the Company's existing revolving...

  • Page 94
    ... stock is quoted on the NASDAQ National Market under the symbol "ATVI." The following table sets forth, for the periods indicated, the high and low reported sale prices for our common stock. At February 22, 2016, there were 1,752 holders of record of our common stock. High Low 2014 First Quarter...

  • Page 95
    ...May 29, 2015, we made related dividend equivalent payments of $3 million to certain holders of restricted stock rights. On February 6, 2014, our Board of Directors declared a cash dividend of $0.20 per common share, payable on May 14, 2014, to shareholders of record at the close of business on March...

  • Page 96
    ... to Consolidated Financial Statements included in this Annual Report, limit our ability to pay distributions or dividends with certain exceptions. There can be no assurances that dividends will be declared in the future. 10b5-1 Stock Trading Plans The Company's directors and employees may, at a time...

  • Page 97
    ... expenses, income or loss, earnings or loss per share, cash flow or other financial items; (2) statements of our plans and objectives, including those relating to product releases; (3) statements of future financial or operating performance; (4) statements relating to the acquisition of King Digital...

  • Page 98
    ... (PS4, Xbox One, Wii U) Prior-generation (PS3, Xbox 360, Wii) Total console3 Mobile and ancillary4 Total changes in deferred revenues Non-GAAP Net Revenues by Segment/Platform Mix Activision and Blizzard: Online2 PC Next-generation (PS4, Xbox One, Wii U) Prior-generation (PS3, Xbox 360, Wii) Total...

  • Page 99
    .... Net revenues from digital online channels represent revenues from digitally distributed subscriptions, licensing royalties, value-added services, downloadable content, micro-transactions, and products. Net revenues from Other include revenues from our Media Networks and Studios businesses, along...

  • Page 100
    ... Year Ended December 31, 2015 and 2014 (Amounts in millions) Year Ended December 31, 2015 Amount GAAP Net Revenues by Geographic Region North America Europe Asia Pacific Total consolidated GAAP net revenues Change in Deferred Revenues2 North America Europe Asia Pacific Total changes in net revenues...

  • Page 101
    ... content. Blizzard Entertainment, Inc. ("Blizzard") - publishes PC games and online subscription-based games in the MMORPG category. Other includes other income and expenses from operating segments managed outside the reportable segments, including our Media Networks, Studios, and Distribution, as...

  • Page 102
    ...: Net effect from Stockdeferral of net based revenues and related compensation 2 cost of sales 1 Less: Amortization of intang i ble assets 3 Less: Fees and other ex p enses related to acquisitions 4 Non-GAAP Measurement Operating ncome Net ncome asic Earnings per Share Diluted Earnings per...

  • Page 103
    ...impact of rounding. The company calculates earnings per share pursuant to the two-class method which re uires the allocation of net income between common shareholders and participating security holders. For the year ended December 31, 2014, net income attributable to Activision li ard, nc. common...

  • Page 104
    ACTIVISION BLIZZARD, INC. AND SUBSIDIARIES RECONCILIATION OF GAAP NET INCOME TO NON-GAAP MEASURES (Amo t s in n u m illio s ,e x n c ep t earn i n s p g e r sh a re d a ta) Less: Net effect from Less: deferral of net Stockrevenues and related based cost of sales 1 compensation 2 Less: Fees and other...

  • Page 105
    ...in millions) Three Months Ended Three Months Ended December 31, 2013 March 31, 2014 June 30, 2014 September 30, 2014 December 31, 2014 Year over Year % Increase (Decrease) Cash Flow Data Operating Cash Flow Capital Expenditures Non-GAAP Free Cash Flow1 Operating Cash Flow - TTM2...

  • Page 106
    ...Months Ending December 31, 2015 March 31, 2015 June 30, 2015 September 30, 2015 December 31, 2015 GAAP Net Income nterest Expense, net Provision for income taxes Depreciation and amorti ation EBITDA Deferral of net revenues and related cost of sales1 Stoc -based compensation expense2 Fees...

  • Page 107
    ... Santa Monica, California 90405 TRANSFERBAGENT Continental Stock Transfer & Trust Company 17 Battery Place New York, New York 10004 (800) 509-5586 ANNUALBREPORTB ONBFORMB10-K Activision Blizzard's Annual Report on Form 10-K for the calendar year ended December 31, 2015 is available to shareholders...

  • Page 108
    ACTIVISIONBBLIZZARD,BINC. 3100BOCEANBPARKBBOULEVARD SANTABMONICA,BCALIFORNIAB90405 ACTIVISIONBBLIZZARDBBBBBB2015BANNUALBREPORT ACTIVISIONBLIZZARD.COM