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ANNUAL REPORT 2013
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Table of contents

  • Page 1
    ® ® ANNUAL REPORT 2013

  • Page 2
    ANNUAL REPORT 2013 WE ARE THE LARGEST AND MOST-PROFITABLE INDEPENDENT VIDEOGAME PUBLISHER IN NORTH AMERICA AND EUROPE

  • Page 3
    ACTIVISION BLIZZARD, INC // PAGE 1 $ REVENUES 1 4.3B 31% OPERATING MARGIN 1 $ EARNINGS PER SHARE 1 0.94 $ OPERATING CASH FLOW 1.26B 1.19B $ FREE CASH FLOW 1 1 Non-GAAP; for a full reconciliation, please see tables at the end of the annual report.

  • Page 4
    ANNUAL REPORT 2013 WE DELIVERED INDUSTRY-LEADING RESULTS DURING THIS TRANSFORMATIONAL YEAR ® ® REGAINED INDEPENDENCE AND REDUCED OUR SHARES OUTSTANDING BY 37% VIA A TRANSACTION WITH VIVENDI CALL OF DUTY ® GHOSTS: #1 TITLE ON NEXT-GEN CONSOLES 1 ® SKYLANDERS ® # 3 FRANCHISE IN NORTH ...

  • Page 5
    ... BLIZZARD, INC // PAGE 3 WORLD OF WARCRAFT ® #1 SUBSCRIPTION MASSIVELY MULTIPLAYER ONLINE ROLEPLAYING GAME AS OF 12 / 31/13 2 STARCRAFT ® II: HEART OF THE SWARM ® #1 PC GAME IN NORTH AMERICA1 ENTERED FREE-TO-PLAY GAMES WITH HEARTHSTONE™ : HEROES OF WARCRAFT™ AND WE ARE WELL-POSITIONED...

  • Page 6
    ANNUAL REPORT 2013 Destiny ©2014 Bungie, Inc. Destiny is a registered trademark of Bungie, Inc. ® LAUNCHING NEW INTELLECTUAL PROPERTY

  • Page 7
    ACTIVISION BLIZZARD, INC // PAGE 5 ® CREATING NEW CATEGORIES

  • Page 8
    ANNUAL REPORT 2013 ® LEADING ON NEXT-GEN CONSOLES

  • Page 9
    ACTIVISION BLIZZARD, INC // PAGE 7 ® ENTERING NEW REGIONS

  • Page 10
    ANNUAL REPORT 2013 ADDING NEW BUSINESS MODELS

  • Page 11
    ACTIVISION BLIZZARD, INC // PAGE 9 ENTERING NEW GENRES

  • Page 12
    ANNUAL REPORT 2013 DRIVING DIGITAL REVENUES

  • Page 13
    ACTIVISION BLIZZARD, INC // PAGE 11

  • Page 14
    ANNUAL REPORT 2013 DEAR FELLOW SHAREHOLDERS 2013 was a transformational year for Activision Blizzard. In the 23 years since present management assumed responsibility for delivering shareholder value, our incredibly talented employees transformed an insolvent company into the world's leading ...

  • Page 15
    ... financially successful independent videogame company and owner of some of the world's most valuable entertainment franchises. Activision and Blizzard have distinct strengths and styles, but they share at core a common strategy of building great games capable of entertaining communities of players...

  • Page 16
    ...helm and this fall, we plan to deliver the biggest innovation in Skylanders since we first introduced our TOYS TO LIFE TM concept. World of Warcraft ® also remains the clear leader in its genre. 2013 was not an expansion pack year for the game, but Blizzard Entertainment did release substantial new...

  • Page 17
    .... Blizzard Entertainment also delivered the best-selling PC game in North America for 2013 at retail with StarCraft® II: Heart of the Swarm®. StarCraft continues to connect with fans around the world, including through eSports events. Blizzard has not announced any StarCraft II releases for 2014...

  • Page 18
    ...We are the largest and most profitable independent videogame company because we have the best employees in the world. We will continue to remain focused on creating great entertainment and providing superior stakeholder returns as we have for the last 23 years. Sincerely, Bobby Kotick President and...

  • Page 19
    FINANCIAL REVIEW 2013

  • Page 20
    ... agreements, game engines and internally developed franchise intangible assets, respectively. On February 7, 2013, our Board of Directors declared a cash dividend of $0.19 per share, payable on May 15, 2013, to shareholders of record at the close of business on March 20, 2013. On February 9, 2012...

  • Page 21
    ...We sell games through both retail channels and digital downloads. Activision currently offers games that operate on the Microsoft Corporation ("Microsoft") Xbox One ("Xbox One") and Xbox 360 ("Xbox 360"), Nintendo Co. Ltd. ("Nintendo") Wii U ("Wii U") and Wii ("Wii"), and Sony Computer Entertainment...

  • Page 22
    ... companies that distribute World of Warcraft, Diablo III and StarCraft II products. In addition, Blizzard developed Hearthstoneâ„¢: Heroes of Warcraftâ„¢, a free-to-play digital collectible card game, which was released in closed beta in August 2013 and in open beta in January 2014, and is currently...

  • Page 23
    ...: Ghosts Deadpool Diablo III for the PS3 and Xbox 360 Hearthstone: Heroes of Warcraft (closed beta) Skylanders SWAP Force StarCraft II: Heart of the Swarm The Walking Deadâ„¢: Survival Instinct On January 21, 2014, Blizzard released Hearthstone: Heroes of Warcraft in open beta. In the first quarter...

  • Page 24
    We currently define digital online channel-related sales as revenues from subscriptions and memberships, licensing royalties, value-added services, downloadable content, and digitally distributed products. This definition may differ from that used by our competitors or other companies. For the year ...

  • Page 25
    ... of net revenues. Our results can also vary based on a number of factors including, but not limited to, title release date, consumer demand, market conditions and shipment schedules. Outlook We expect to have a strong product pipeline in 2014, and to have at least three major releases from Blizzard...

  • Page 26
    ... net revenues (amounts in millions): For the Years Ended December 31, 2013 2012 2011 Net revenues: Product sales ...$ Subscription, licensing, and other revenues...Total net revenues ...Costs and expenses: Cost of sales-product costs ...Cost of sales-online subscriptions ...Cost of sales-software...

  • Page 27
    ... 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 expense, amortization of intangible assets as a result of purchase price accounting, and fees and other expenses related to the...

  • Page 28
    ... this 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...

  • Page 29
    ... of higher net revenues, higher sales and marketing costs to support the * World of Warcraft subscribers include individuals who have paid a subscription fee or have an active prepaid card to play World of Warcraft, as well as those who have purchased the game and are within their free month of...

  • Page 30
    ... revenues from digital online channels as revenues from subscriptions and memberships, licensing royalties, value-added services, downloadable content, and digitally distributed products. We have determined that some of our titles' online functionality represents an essential component of gameplay...

  • Page 31
    ... revenues from StarCraft II: Heart of the Swarm, which was released in 2013. The increase in non-GAAP net revenues from digital online channels for 2012, as compared to 2011, was attributable to sales of full game digital downloads from the launches of World of Warcraft: Mists of Pandaria and Diablo...

  • Page 32
    ... of revenues from Diablo III on the PS3 and Xbox 360, which was released in September 2013, and Call of Duty: Black Ops II digital downloadable content released in 2013. Consolidated net revenues from North America and Asia Pacific increased in 2012, as compared to 2011, primarily due to sales from...

  • Page 33
    ... for the year ended December 31, 2012, as compared to 2011 was primarily attributable to lower World of Warcraft subscription revenues, lower sales of Call of Duty digital downloadable content packs and catalogs titles, and lower catalog sales of World of Warcraft: Cataclysm and StarCraft II: Wings...

  • Page 34
    ... from World of Warcraft: Mists of Pandaria. Net revenues from online subscriptions decreased in 2012, as compared to 2011, primarily as a result of lower World of Warcraft subscription revenues, and lower Blizzard catalog sales from World of Warcraft: Cataclysm, which was released in December 2010...

  • Page 35
    ...deferred from the successful launch of Diablo III in May 2012 and a decrease in revenues recognized from catalog sales of StarCraft II: Wings of Liberty, which was released in July 2010. The increase in deferred revenues recognized for PlayStation and Xbox in 2013, as compared to 2012, was primarily...

  • Page 36
    ..., offset by lower media spending by our value business due to its more focused slate of titles and by our Blizzard segment, due to higher spending in 2012 to support the launches of Diablo III and World of Warcraft: Mists of Pandaria. The increase in sales and marketing expenses was also due to our...

  • Page 37
    ... and the Term Loan will be outstanding for the entire year as compared to a shorter period in 2013. Interest and other investment income (expense), net, increased in 2012, as compared to 2011. The increase was primarily due to the net realized gain on our foreign exchange contracts of $2 million...

  • Page 38
    ... 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...

  • Page 39
    ... The primary drivers of cash flows provided by 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...

  • Page 40
    ... sufficient working capital ($3.8 billion at December 31, 2013) to finance our operational and financing requirements for at least the next twelve months, including: purchases of inventory and equipment; the development, production, marketing and sale of new products; provision of customer service...

  • Page 41
    ... and agency fees. We are required to make quarterly principal repayments of 0.25% of the Term Loan's original principal amount, with the balance due on the maturity date. Amounts borrowed under the Term Loan and repaid may not be re-borrowed. On January 29, 2014, the Board of Directors authorized...

  • Page 42
    ... our financial condition, changes in financial condition, revenues or expenses, results of operation, liquidity, capital expenditures, or capital resources. Financial Disclosure We maintain internal control over financial reporting, which generally includes those controls relating to the preparation...

  • Page 43
    ... of information they provide that is utilized in the preparation of our periodic public reports filed with the SEC. Financial results and other financial information also are reviewed with the Audit Committee of the Board of Directors on a quarterly basis. As required by applicable regulatory...

  • Page 44
    ... to the sale of 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." For games where the online functionality is...

  • Page 45
    ...timing of our revenues for any period if factors or market conditions change or if management makes different judgments or utilizes different estimates in determining the allowances for returns and price protection. For example, a 1% change in our December 31, 2013 allowance for sales returns, price...

  • Page 46
    ... assess the recoverability of capitalized intellectual property license costs based on certain qualitative factors, such as the success of other products and/or entertainment vehicles utilizing the intellectual property, whether there are any future planned theatrical releases or television series...

  • Page 47
    ...We did not record an impairment charge to our definite-lived intangible assets as of December 31, 2013, 2012 and 2011. FASB literature related to the accounting for goodwill and other intangibles within ASC Topic 350 provides companies an option to first perform a qualitative assessment to determine...

  • Page 48
    ... our employees and senior management vest based on the achievement of pre-established performance or market conditions. We estimate the fair value of performance-based restricted stock rights at the closing market price of the Company's common stock on the date of grant. Each quarter, we update our...

  • Page 49
    ... fiscal years beginning after December 15, 2012. We adopted this guidance and provided the required disclosures in Note 8 of the Notes to Consolidated Financial Statements included in this Annual Report. Accounting for cumulative translation adjustments In February 2013, the FASB issued an update to...

  • Page 50
    ... exchange rates and interest rates. Foreign Currency Exchange Rate Risk We transact business in many different foreign currencies and may be exposed to financial market risk resulting from fluctuations in foreign currency exchange rates. Revenues and related expenses generated from our international...

  • Page 51
    ... the policies and procedures may deteriorate. The effectiveness of our internal control over financial reporting as of December 31, 2013 has been audited by PricewaterhouseCoopers LLP, an independent registered public accounting firm, as stated in their report included in this Annual Report. Changes...

  • Page 52
    ... Annual Report to Shareholders. Our responsibility is to express opinions on these financial statements and on the Company's internal control over financial reporting based on our integrated audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight...

  • Page 53
    ...par value, 2,400,000,000 shares authorized, 1,132,385,424 and 1,111,606,087 shares issued at December 31, 2013 and 2012, respectively...Additional paid-in capital...Less: Treasury stock, at cost, 428,676,471 and 0 shares at December 31, 2013 and 2012, respectively ...Retained earnings ...Accumulated...

  • Page 54
    ... the Years Ended December 31, 2013 2012 2011 Net revenues Product sales ...$ Subscription, licensing, and other revenues...Total net revenues ...Costs and expenses Cost of sales-product costs ...Cost of sales-online subscriptions ...Cost of sales-software royalties and amortization ...Cost of sales...

  • Page 55
    ACTIVISION BLIZZARD, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Amounts in millions) For the Years Ended December 31, 2013 2012 2011 Net income ...$ Other comprehensive income (loss): Foreign currency translation adjustment...Unrealized gains on investments, net of ...

  • Page 56
    ... OF CHANGES IN SHAREHOLDERS' EQUITY For the Years Ended December 31, 2013, 2012, and 2011 (Amounts and shares in millions, except per share data) Retained Earnings (Accumulate d Deficit) Accumulated Other Comprehensi ve Income (Loss) Common Stock Shares Amount Additional Paid-In Capital Treasury...

  • Page 57
    ... Repurchase of common stock...(5,830) (216) Dividends paid ...Proceeds from issuance of long-term debt ...4,750 Repayment of long-term debt ...(6) (59) Payment of debt discount and financing costs ...Net cash used in financing activities ...(1,223) Effect of foreign exchange rate changes on cash and...

  • Page 58
    ...revenues worldwide through various means, including: subscriptions; sales of prepaid subscription cards; value-added services such as realm transfers, faction changes, and other character customizations within the World of Warcraft gameplay; retail sales of physical "boxed" products; online download...

  • Page 59
    companies that distribute World of Warcraft, Diablo III, and StarCraft II products. In August 2013, Blizzard released the closed beta version of Hearthstoneâ„¢: Heroes of Warcraftâ„¢, a free-to-play digital collectible card game, and released the open beta version in January 2014. (iii) Activision ...

  • Page 60
    ...money market funds and highly liquid investments with original maturities of three months or less at the time of purchase to be "Cash and cash equivalents." Investment Securities Investments designated as available-for-sale securities are carried at fair value, which is based on quoted market prices...

  • Page 61
    ...-term, high-quality debt instruments issued by governments and governmental organizations, financial institutions and industrial companies. Our customer base includes retailers and distributors, including mass- market retailers, consumer electronics stores, discount warehouses, and game specialty...

  • Page 62
    ...capitalized costs, the assessment of expected product performance utilizes forecasted sales amounts and estimates of additional costs to be incurred. If revised forecasted or actual product sales are less than the originally forecasted amounts utilized in the initial recoverability analysis, the net...

  • Page 63
    ... with physical "boxed" software) and our sales of World of 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...

  • Page 64
    ... associated with subscriptions are recognized ratably over the estimated service periods. Licensing Revenues Third-party licensees in Russia, China and Taiwan distribute and host Blizzard's World of Warcraft game in their respective countries under license agreements, for which they pay the Company...

  • Page 65
    ...timing of our revenues for any period if factors or market conditions change or if management makes different judgments or utilizes different estimates in determining the allowances for returns and price protection. For example, a 1% change in our December 31, 2013 allowance for sales returns, price...

  • Page 66
    ... to our employees and senior management vest based on the achievement of pre-established performance or market goals. We estimate the fair value of performance-based restricted stock rights at the closing market price of the Company's common stock on the date of grant. Each quarter, we update our...

  • Page 67
    ...may not be satisfied. Provided that the requisite service is rendered, the total fair value of the market-based restricted stock rights at the date of grant must be recognized as compensation expense even if the market condition is not achieved. However, the number of shares that ultimately vest can...

  • Page 68
    ... classified as available-for-sale at December 31, 2013 (amounts in millions): Amortized cost Fair Value At December 31, 2013 U.S. treasuries and government agency securities due in 1 year or less ...$ Auction rate securities due after ten years ...$ 21 8 29 $ $ 21 9 30 5. Inventories, Net Our...

  • Page 69
    ... amount Net carrying amount Acquired definite-lived intangible assets: License agreements and other ...3 - 10 years Internally developed franchises ...11 - 12 years Total definite-lived intangible assets ...Acquired indefinite-lived intangible assets: Activision trademark ...Acquired trade names...

  • Page 70
    ...interactive entertainment software from retail distribution channels towards digital distribution and online gaming. At December 31, 2013 and 2012, the gross goodwill and accumulated impairment losses by reporting unit are as follows: Activision Blizzard Total Balance at December 31, 2011: Goodwill...

  • Page 71
    ... 1) As of December 31, 2012 Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) Balance Sheet Classification Recurring fair value measurements: Money market funds ...U.S. treasuries and government agency securities ...Corporate bonds...ARS ...Total recurring...

  • Page 72
    ... 31, 2011, we identified and recorded an impairment of $12 million related to the Distribution reporting unit. The decrease in fair value of the reporting unit was primarily due to the decrease of forecasted revenue from our Distribution segment in view of the industry's trend towards digital...

  • Page 73
    ... (expense), net" on the consolidated statement of operations. We are also required to pay customary letter of credit fees and agency fees. We are required to make quarterly principal repayments of 0.25% of the Term Loan's original principal amount, with the balance due on the maturity date. Amounts...

  • Page 74
    ... related to the Notes and are not accounted for separately upon issuance. For the year ended December 31, 2013, we recorded $52 million of fees associated with the closing of the Term Loan and the Notes as debt discount, which reduced the carrying value of the Term Loan and the Notes. The debt...

  • Page 75
    ... 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 expense, restructuring expense, amortization of intangible assets as a result of purchase price accounting, impairment of goodwill and intangible...

  • Page 76
    ... consolidated net revenues ...$ 4,583 $ 4,856 $ (1) 2,439 1,357 259 282 4,337 418 4,755 Revenues from online subscriptions consist of revenues from all World of Warcraft products, including subscriptions, boxed products, expansion packs, licensing royalties, value-added services, and revenues from...

  • Page 77
    ... or greater than the closing price per share of our common stock on the date the award is granted, as reported on NASDAQ. At December 31, 2013, 34 million shares of our common stock were available for issuance under the 2008 Plan. The number of shares of our common stock reserved for issuance under...

  • Page 78
    ... the year ended December 31, 2013, the expected stock price volatility ranged from 25.73% to 39.00%. As is the case for volatility, the risk-free rate is assumed to change during the option's contractual term. Consistent with the calculation required by a binomial-lattice model, the risk-free rate...

  • Page 79
    ...trading day of the period and the exercise price, times the number of shares for options where the exercise price is below the closing stock price) that would have been received by the option holders had all option holders exercised their options on that date. This amount changes based on the market...

  • Page 80
    ... operations for the years ended December 31, 2013, 2012, and 2011 (amounts in millions): For the Years Ended December 31, 2013 2012 2011 Cost of sales-software royalties and amortization ...$ Product development ...Sales and marketing...General and administrative...Stock-based compensation expense...

  • Page 81
    ... (amounts in millions): For the Years Ended December 31, 2013 2012 2011 Interest income ...$ Interest expense ...Interest expense from debt and amortization of debt discount and deferred financing costs ...Net realized gain (loss) on foreign exchange contracts ...Interest and other investment...

  • Page 82
    ... credits ...Domestic production activity deduction...Foreign rate differential ...Change in tax reserves ...Shortfall from employee stock option exercises ...Return to provision adjustment ...Net Operating Loss tax attribute received from Internal Revenue Service audit ...Net Operating Loss tax...

  • Page 83
    ... 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 Internal Revenue Service is currently examining Vivendi Games tax returns for the 2005 through 2008 tax...

  • Page 84
    Activision Blizzard's tax years 2008 through 2012 remain open to examination by the major taxing jurisdictions to which we are subject. The Internal Revenue Service is currently examining the Company's federal tax returns for the 2008 and 2009 tax years. The Company also has several state and non...

  • Page 85
    ...common share for the years ended December 31, 2013, 2012, and 2011, respectively, as the effect of their inclusion would be anti-dilutive. 20. Capital Transactions Stock Purchase Agreement As described in Note 1 of the Notes to Consolidated Financial Statements, on October 11, 2013, we completed the...

  • Page 86
    ... the holders of restricted stock rights. On February 9, 2012, our Board of Directors declared a cash dividend of $0.18 per common share, payable on May 16, 2012, to shareholders of record at the close of business on March 21, 2012. On May 16, 2012, we made an aggregate cash dividend payment of $201...

  • Page 87
    ... the Purchase Agreement, an order restricting our Chief Executive Officer, and our Chairman, from purchasing additional shares of our common stock and an order directing us to take necessary actions to improve and reform our corporate governance and internal procedures to comply with applicable law...

  • Page 88
    ... December 2014. On September 11, 2013, another stockholder of the Company filed a putative class action and stockholder derivative action in the Court of Chancery of the State of Delaware, captioned Hayes v. Activision Blizzard, Inc., et al., No. 8885-VCL. The complaint names our Board of Directors...

  • Page 89
    ... our management and detracts from our ability to fully focus our internal resources on our business activities. In addition, the Company may incur substantial legal fees and costs in connection with litigation and, although coverage may be available under relevant insurance policies, coverage could...

  • Page 90
    ... rights to change in control payments or benefits under their employment agreements with the Company, the Company's 2008 Incentive Plan or any award agreements in respect of awards granted thereunder, and any Other Benefit Plans and Arrangements (in each case, with respect to all current and future...

  • Page 91
    25. Quarterly Financial and Market Information (Unaudited) For the Quarters Ended September 30, June 30, 2013 2013 December 31, 2013 March 31, 2013 (Amounts in millions, except per share data) Net revenues ...$ Cost of sales ...Operating income ...Net income ...Basic earnings per share...Diluted...

  • Page 92
    ... PURCHASES OF EQUITY SECURITIES Market Information and Holders Our common 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 24, 2014, there were...

  • Page 93
    ... with applicable laws, rules and regulations. Issuer Purchase of Equity Securities On February 2, 2012, our Board of Directors authorized a stock repurchase program pursuant to which we were authorized to repurchase up to $1 billion of the Company's common stock from time to time on the open market...

  • Page 94
    ... (collectively, the "Purchase Transaction"). The repurchased shares were recorded in "Treasury Stock" in our consolidated balance sheet. The following table provides the number of shares purchased and the average price paid per share during each quarter of 2013, the total number of shares purchased...

  • Page 95
    ... Blizzard, Inc. generally uses words such as "outlook," "forecast," "will," "could," "should," "would," "to be," "plans," "believes," "may," "expects," "intends," "anticipates," "estimate," "future," "positioned," "potential," "project," "remain," "scheduled," "set to," "subject to," "upcoming...

  • Page 96
    ...13)% $ Revenue from online subscriptions consists of revenue from all World of Warcraft products, including subscriptions, boxed products, expansion packs, licensing royalties, and value-added services. It also includes revenues from Call of Duty Elite memberships. 2 Downloadable content and their...

  • Page 97
    ...online channels represent revenues from subscriptions and memberships, licensing royalties, value-added services, downloadable content, digitally distributed products, and wireless devices. 2 We provide net revenues including (in accordance with GAAP) and excluding (non-GAAP) the impact of changes...

  • Page 98
    ... BLIZZARD, INC. AND SUBSIDIARIES FINANCIAL INFORMATION For the Year Ended December 31, 2013 and 2012 (Amounts in millions) Year Ended December 31, 2013 Amount % of Total3 Amount % of Total3 December 31, 2012 $ Increase (Decrease) % Increase (Decrease) GAAP Net Revenues by Geographic Region North...

  • Page 99
    ...PC games and online subscription-based games in the MMORPG category. 3 Activision Blizzard Distribution ("Distribution") - distributes interactive entertainment software and hardware products. 4 Reflects fees and other expenses related to the repurchase of 429 million shares of our common stock from...

  • Page 100
    ...) Cost of Sales Cost of Sales - Product - Online Net Revenues Costs Subscriptions $ 4,583 $ 1,053 $ 204 (a) (241) (10) (b) (c) (d 4,342 1,043 204 172 60 551 Year Ended December 31, 2013 GAAP Measurement Less: Net effect from deferral of net revenues and related cost of sales Less: Stock-based...

  • Page 101
    ...(a) Reflects the net change in deferred net revenues and related cost of sales. (b) Includes expense related to stock-based compensation. (c) Reflects amortization of intangible assets from purchase price accounting. The company calculates earnings per share pursuant to the two-class method which...

  • Page 102
    ... Costs Subscriptions Amortization Licenses Product Development Sales and Marketing General and Administrative 456 (47) (1) (12) 396 Restructuring $ 25 (25) $ - Total Costs and Expenses $ 3,427 (83) (103) (26) (72) (12) $ 3,131 GAAP Measurement Less: Net effect from deferral in net revenues...

  • Page 103
    ...BLIZZARD, INC. AND SUBSIDIARIES SUPPLEMENTAL FINANCIAL INFORMATION (Amounts in millions) December 31, 2010 March 31, 201 Three Months Ended June 30, September 30, 2011 2011 December 31, 2011 March 31, 2012 Year over Year % Increase (Decrease) Three Months Ended June 30, September 30, 2012 2012...

  • Page 104
    ... change in deferred net revenues and related cost of sales. (b) Includes expense related to stock-based compensation. (c) Reflects fees and other expenses related to the repurchase of 429 million shares of our common stock from Vivendi (the "Purchase Transaction") completed on October 11, 2013...

  • Page 105
    ... MEETING June 5, 2014, 9:00 am PDT Equity Office 3200 Ocean Park Boulevard Santa Monica, California 90405 SPECIAL ADVISOR Michael Griffith Vice Chairman, Activision Blizzard ANNUAL REPORT ON FORM 10-K Activision Blizzard's Annual Report on Form 10-K for the calendar year ended December 31, 2013...

  • Page 106
    3100 OCEAN PARK BOULEVARD SANTA MONICA, CALIFORNIA 90405 T: (310) 255-2000 F: (310) 255-2100 WWW.ACTIVISIONBLIZZARD.COM ® ®