Document_and_Entity_Informatio
Document and Entity Information | 3 Months Ended | |
Mar. 31, 2015 | Apr. 29, 2015 | |
Document and Entity Information | ||
Entity Registrant Name | Activision Blizzard, Inc. | |
Entity Central Index Key | 718877 | |
Document Type | 10-Q | |
Document Period End Date | 31-Mar-15 | |
Amendment Flag | FALSE | |
Current Fiscal Year End Date | -19 | |
Entity Current Reporting Status | Yes | |
Entity Filer Category | Large Accelerated Filer | |
Entity Common Stock, Shares Outstanding | 726,186,329 | |
Document Fiscal Year Focus | 2015 | |
Document Fiscal Period Focus | Q1 |
CONDENSED_CONSOLIDATED_BALANCE
CONDENSED CONSOLIDATED BALANCE SHEETS (USD $) | Mar. 31, 2015 | Dec. 31, 2014 |
In Millions, unless otherwise specified | ||
Current assets: | ||
Cash and cash equivalents | $4,465 | $4,848 |
Short-term investments | 5 | 10 |
Accounts receivable, net of allowances of $234 and $383 at March 31, 2015 and December 31, 2014, respectively | 208 | 659 |
Inventories, net | 102 | 123 |
Software development | 358 | 452 |
Intellectual property licenses | 5 | 5 |
Deferred income taxes, net | 365 | 368 |
Other current assets | 355 | 444 |
Total current assets | 5,863 | 6,909 |
Long-term investments | 9 | 9 |
Software development | 46 | 20 |
Intellectual property licenses | 18 | 18 |
Property and equipment, net | 158 | 157 |
Other assets | 138 | 85 |
Intangible assets, net | 28 | 29 |
Trademark and trade names | 433 | 433 |
Goodwill | 7,084 | 7,086 |
Total assets | 13,777 | 14,746 |
Current liabilities: | ||
Accounts payable | 123 | 325 |
Deferred revenues | 1,161 | 1,797 |
Accrued expenses and other liabilities | 615 | 592 |
Total current liabilities | 1,899 | 2,714 |
Long-term debt, net | 4,075 | 4,324 |
Deferred income taxes, net | 124 | 114 |
Other liabilities | 441 | 361 |
Total liabilities | 6,539 | 7,513 |
Commitments and contingencies (Note 12) | ||
Shareholders' equity: | ||
Common stock, $.000001 par value per share, 2,400,000,000 shares authorized, 1,154,580,858 and 1,150,605,926 shares issued at March 31, 2015 and December 31, 2014, respectively | 0 | 0 |
Additional paid-in capital | 9,968 | 9,924 |
Less: Treasury stock, at cost, 428,676,471 shares at March 31, 2015 and December 31, 2014 | -5,709 | -5,762 |
Retained earnings | 3,598 | 3,374 |
Accumulated other comprehensive income (loss) | -619 | -303 |
Total shareholders' equity | 7,238 | 7,233 |
Total liabilities and shareholders' equity | $13,777 | $14,746 |
CONDENSED_CONSOLIDATED_BALANCE1
CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) (USD $) | Mar. 31, 2015 | Dec. 31, 2014 |
In Millions, except Share data, unless otherwise specified | ||
CONDENSED CONSOLIDATED BALANCE SHEETS | ||
Accounts receivable, allowances | $234 | $383 |
Common stock, par value (in dollars per share) | $0.00 | $0.00 |
Common stock, shares authorized | 2,400,000,000 | 2,400,000,000 |
Common stock, shares issued | 1,154,580,858 | 1,150,605,926 |
Treasury stock, shares | 428,676,471 | 428,676,471 |
CONDENSED_CONSOLIDATED_STATEME
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (USD $) | 3 Months Ended | |
In Millions, except Per Share data, unless otherwise specified | Mar. 31, 2015 | Mar. 31, 2014 |
Net revenues | ||
Product sales | $784 | $769 |
Subscription, licensing, and other revenues | 494 | 342 |
Total net revenues | 1,278 | 1,111 |
Costs and expenses | ||
Cost of sales - product costs | 209 | 225 |
Cost of sales - online | 53 | 58 |
Cost of sales - software royalties and amortization | 148 | 57 |
Cost of sales - intellectual property licenses | 3 | 2 |
Product development | 145 | 143 |
Sales and marketing | 92 | 104 |
General and administrative | 86 | 95 |
Total costs and expenses | 736 | 684 |
Operating income | 542 | 427 |
Interest and other expense, net | 50 | 51 |
Income before income tax expense | 492 | 376 |
Income tax expense | 98 | 83 |
Net income | $394 | $293 |
Earnings per common share | ||
Basic (in dollars per share) | $0.54 | $0.40 |
Diluted (in dollars per share) | $0.53 | $0.40 |
Weighted-average number of shares outstanding | ||
Basic (in shares) | 723 | 709 |
Diluted (in shares) | 731 | 720 |
Dividends per common share (in dollars per share) | $0.23 | $0.20 |
CONDENSED_CONSOLIDATED_STATEME1
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (USD $) | 3 Months Ended | |
In Millions, unless otherwise specified | Mar. 31, 2015 | Mar. 31, 2014 |
Net income | $394 | $293 |
Other comprehensive income (loss): | ||
Foreign currency translation adjustment | -330 | -5 |
Unrealized gains on forward contracts designated as hedges, net of deferred income taxes of $0 million for the three months ended March 31, 2015 and 2014 | 14 | 0 |
Other comprehensive income (loss) | -316 | -5 |
Comprehensive Income | $78 | $288 |
CONDENSED_CONSOLIDATED_STATEME2
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Parenthetical) (USD $) | 3 Months Ended | |
In Millions, unless otherwise specified | Mar. 31, 2015 | Mar. 31, 2014 |
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME | ||
Deferred income taxes on gross unrealized appreciation (depreciation) on forward contracts designated as hedges | $0 | $0 |
CONDENSED_CONSOLIDATED_STATEME3
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (USD $) | 3 Months Ended | |
In Millions, unless otherwise specified | Mar. 31, 2015 | Mar. 31, 2014 |
Cash flows from operating activities: | ||
Net income | $394 | $293 |
Adjustments to reconcile net income to net cash provided by operating activities: | ||
Deferred income taxes | -3 | 6 |
Provision for inventories | 6 | 9 |
Depreciation and amortization | 20 | 19 |
Amortization of capitalized software development costs and intellectual property licenses | 142 | 51 |
Amortization of debt discount and debt financing costs | 2 | 2 |
Stock-based compensation expense | 23 | 29 |
Excess tax benefits from stock awards | -14 | -17 |
Changes in operating assets and liabilities: | ||
Accounts receivable, net | 438 | 290 |
Inventories | 10 | 5 |
Software development and intellectual property licenses | -77 | -71 |
Other assets | 108 | 111 |
Deferred revenues | -567 | -298 |
Accounts payable | -208 | -189 |
Accrued expenses and other liabilities | -65 | -104 |
Net cash provided by operating activities | 209 | 136 |
Cash flows from investing activities: | ||
Proceeds from maturities of available-for-sale investments | 0 | 21 |
Capital expenditures | -21 | -37 |
Decrease in restricted cash | 5 | 4 |
Net cash used in investing activities | -16 | -12 |
Cash flows from financing activities: | ||
Proceeds from issuance of common stock to employees | 27 | 119 |
Tax payment related to net share settlements on restricted stock rights | -3 | -13 |
Excess tax benefits from stock awards | 14 | 17 |
Repayment of long-term debt | -250 | -375 |
Net cash used in financing activities | -212 | -252 |
Effect of foreign exchange rate changes on cash and cash equivalents | -364 | -3 |
Net decrease in cash and cash equivalents | -383 | -131 |
Cash and cash equivalents at beginning of period | 4,848 | 4,410 |
Cash and cash equivalents at end of period | $4,465 | $4,279 |
CONDENSED_CONSOLIDATED_STATEME4
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (USD $) | Total | Common Stock | Treasury Stock | Additional Paid-In Capital | Retained Earnings | Accumulated Other Comprehensive Income (Loss) |
In Millions, unless otherwise specified | ||||||
Balance at Dec. 31, 2014 | $7,233 | $0 | ($5,762) | $9,924 | $3,374 | ($303) |
Balance (in shares) at Dec. 31, 2014 | 1,151 | 429 | ||||
Components of comprehensive income (loss): | ||||||
Net income | 394 | 394 | ||||
Other comprehensive income (loss) | -316 | -316 | ||||
Issuance of common stock pursuant to employee stock options | 27 | 27 | ||||
Issuance of common stock pursuant to employee stock options (in shares) | 2 | |||||
Issuance of common stock pursuant to restricted stock rights (in shares) | 3 | |||||
Restricted stock surrendered for employees' tax liability | -18 | -18 | ||||
Restricted stock surrendered for employees' tax liability (in shares) | -1 | |||||
Tax benefit associated with employee stock awards | 13 | 13 | ||||
Stock-based compensation expense related to employee stock options and restricted stock rights | 22 | 22 | ||||
Dividends ($0.23 per common share) | -170 | -170 | ||||
Indemnity on tax attributes assumed in connection with the Purchase Transaction (see Note 9) | 53 | 53 | ||||
Balance at Mar. 31, 2015 | $7,238 | $0 | ($5,709) | $9,968 | $3,598 | ($619) |
Balance (in shares) at Mar. 31, 2015 | 726 | 1,155 | 429 |
CONDENSED_CONSOLIDATED_STATEME5
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (Parenthetical) (USD $) | 3 Months Ended | |
Mar. 31, 2015 | Mar. 31, 2014 | |
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY | ||
Dividends per common share (in dollars per share) | $0.23 | $0.20 |
Description_of_Business_and_Ba
Description of Business and Basis of Consolidation and Presentation | 3 Months Ended |
Mar. 31, 2015 | |
Description of Business | |
Description of Business | 1. Description of Business and Basis of Consolidation and Presentation |
Activision Blizzard, Inc. (“Activision Blizzard”) is a leading global developer and publisher of interactive entertainment. The terms “Activision Blizzard,” the “Company,” “we,” “us,” and “our” are used to refer collectively to Activision Blizzard, Inc. and its subsidiaries. We currently offer games for video game consoles, personal computers (“PC”), and 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 Business Combination and Share Repurchase | |
Activision Blizzard is the result of the 2008 business combination (“Business Combination”) by and among the Company (then known as Activision, Inc.), Sego Merger Corporation, a wholly-owned subsidiary of Activision, Inc., Vivendi S.A. (“Vivendi”), VGAC LLC, a wholly-owned subsidiary of Vivendi, and Vivendi Games, Inc. (“Vivendi Games”), a wholly-owned subsidiary of VGAC LLC. As a result of the consummation of the Business Combination, Activision, Inc. was renamed Activision Blizzard, Inc. and Vivendi became a majority shareholder of Activision. | |
On October 11, 2013, we repurchased approximately 429 million shares of our common stock, pursuant to a stock purchase agreement (the “Stock Purchase Agreement”) we entered into with Vivendi and ASAC II LP (“ASAC”), an exempted limited partnership established under the laws of the Cayman Islands, acting by its general partner, ASAC II LLC (together with ASAC, the “ASAC Entities”). Pursuant to the terms of the Stock Purchase Agreement, we acquired all of the capital stock of Amber Holding Subsidiary Co., a Delaware corporation and wholly-owned subsidiary of Vivendi (“New VH”), which was the direct owner of approximately 429 million shares of our common stock, for a cash payment of $5.83 billion, or $13.60 per share, before taking into account the benefit to the Company of certain tax attributes of New VH assumed in the transaction (collectively, the “Purchase Transaction”). Immediately following the completion of the Purchase Transaction, ASAC purchased from Vivendi 172 million shares of our common stock, pursuant to the Stock Purchase Agreement, for a cash payment of $2.34 billion, or $13.60 per share (the “Private Sale”). Robert A. Kotick, our Chief Executive Officer, and Brian G. Kelly, Chairman of our Board of Directors, are affiliates of ASAC II LLC. Refer to Note 6 of the Notes to Condensed Consolidated Financial Statements for further information regarding the financing of the Purchase Transaction. | |
On May 28, 2014, Vivendi sold approximately 41 million shares, or approximately 50% of its then-current holdings, of our common stock in a registered public offering. Vivendi received proceeds of approximately $850 million from that sale; we did not receive any proceeds. | |
As of March 31, 2015, we had approximately 726 million shares of common stock issued and outstanding. At that date: (i) Vivendi held 41 million shares, or approximately 6% of the outstanding shares of our common stock; (ii) ASAC held 172 million shares, or approximately 24% of the outstanding shares of our common stock; and (iii) our other stockholders held approximately 70% of the outstanding shares of our common stock. The common stock of Activision Blizzard is traded on The NASDAQ Stock Market under the ticker symbol “ATVI.” | |
Operating Segments | |
Based upon our organizational structure, we conduct our business through three operating segments as follows: | |
(i) Activision Publishing, Inc. | |
Activision Publishing, Inc. (“Activision”) is a leading global developer and publisher of interactive software products and content. Activision delivers content to a broad range of gamers, ranging from children to adults, and from core gamers to mass-market consumers to “value” buyers seeking budget-priced software, in a variety of geographies. Activision develops games based on internally-developed properties, including games in the Call of Duty® and Skylanders® franchises, and to a lesser extent, based on licensed intellectual properties. Additionally, we have established a long-term alliance with Bungie to publish its game universe, Destiny. Activision sells games through both retail and digital online channels. 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, Inc. (“Sony”) PlayStation 4 (“PS4”) and PlayStation 3 (“PS3”) console systems (Xbox One, Wii U, and PS4 are collectively referred to as “next-generation”; Xbox 360, Wii, and PS3 are collectively referred to as “prior-generation”); the PC; the Nintendo 3DS, Nintendo Dual Screen, and Sony PlayStation Vita handheld game systems; and mobile and tablet devices. | |
(ii) Blizzard Entertainment, Inc. | |
Blizzard Entertainment, Inc. (“Blizzard”) is a leader in the subscription-based massively multi-player online role-playing game category in terms of both subscriber base and revenues generated through its World of Warcraft® franchise, which it develops, hosts and supports. Blizzard also develops, markets, and sells role-playing action and strategy games for the PC, console, mobile and tablet platforms, including games in the multiple-award winning Diablo®, StarCraft®, and Hearthstone®: Heroes of Warcraft™ franchises. In addition, Blizzard maintains a proprietary online game-related service, Battle.net®. Blizzard distributes its products and generates revenues worldwide through various means, including: subscriptions; sales of prepaid subscription cards; value-added services, such as 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 World of Warcraft, Diablo, StarCraft and Hearthstone: Heroes of Warcraft products. In addition, Blizzard is the creator of Heroes of the Storm™, a new free-to-play online hero brawler that is currently in closed beta testing. | |
(iii) Activision Blizzard Distribution | |
Activision Blizzard Distribution (“Distribution”) consists of operations in Europe that provide warehousing, logistical and sales distribution services to third-party publishers of interactive entertainment software, our own publishing operations, and manufacturers of interactive entertainment hardware. | |
Basis of Consolidation and Presentation | |
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission (the “SEC”) and accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim reporting. Accordingly, certain notes or other information that are normally required by U.S. GAAP have been condensed or omitted if they substantially duplicate the disclosures contained in the annual audited consolidated financial statements. The year-end condensed balance sheet data was derived from audited financial statements but does not include all disclosures required by U.S. GAAP. The unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2014. | |
The preparation of the condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the condensed consolidated financial statements and accompanying notes. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for the fair statement of our financial position and results of operations in accordance with U.S. GAAP have been included in the accompanying unaudited condensed consolidated financial statements. Actual results could differ from these estimates and assumptions. | |
The accompanying condensed consolidated financial statements include the accounts and operations of the Company. All intercompany accounts and transactions have been eliminated. | |
The Company considers events or transactions that occur after the balance sheet date, but before the financial statements are issued, to provide additional evidence relative to certain estimates or to identify matters that require additional disclosures. |
Inventories_net
Inventories, net | 3 Months Ended | ||||||||
Mar. 31, 2015 | |||||||||
Inventories, Net | |||||||||
Inventories | 2. Inventories, Net | ||||||||
Our inventories, net consist of the following (amounts in millions): | |||||||||
At March 31, | At December 31, | ||||||||
2015 | 2014 | ||||||||
Finished goods | $ | 90 | $ | 112 | |||||
Purchased parts and components | 12 | 11 | |||||||
Inventories, net | $ | 102 | $ | 123 | |||||
Inventory reserves were $50 million and $52 million at March 31, 2015 and December 31, 2014, respectively. |
Software_Development_Costs_and
Software Development Costs and Intellectual Property Licenses | 3 Months Ended | ||||||||
Mar. 31, 2015 | |||||||||
Software Development Costs and Intellectual Property Licenses | |||||||||
Software Development Costs and Intellectual Property Licenses | 3. Software Development and Intellectual Property Licenses | ||||||||
The following table summarizes the components of our capitalized software development costs and intellectual property licenses (amounts in millions): | |||||||||
At | At | ||||||||
March 31, | December 31, | ||||||||
2015 | 2014 | ||||||||
Internally developed software costs | $ | 247 | $ | 262 | |||||
Payments made to third-party software developers | 157 | 210 | |||||||
Total software development costs | $ | 404 | $ | 472 | |||||
Intellectual property licenses | $ | 23 | $ | 23 | |||||
Amortization of capitalized software development costs and intellectual property licenses was the following (amounts in millions): | |||||||||
For the Three Months Ended March 31, | |||||||||
2015 | 2014 | ||||||||
Amortization of capitalized software development | |||||||||
costs and intellectual property licenses | $ | 147 | $ | 58 |
Intangible_Assets_Net
Intangible Assets, Net | 3 Months Ended | |||||||||||||
Mar. 31, 2015 | ||||||||||||||
Intangible Assets, Net | ||||||||||||||
Intangible Assets, Net | 4. Intangible Assets, Net | |||||||||||||
Intangible assets, net consist of the following (amounts in millions): | ||||||||||||||
At March 31, 2015 | ||||||||||||||
Estimated | Gross | |||||||||||||
useful | carrying | Accumulated | Net carrying | |||||||||||
lives | amount | amortization | amount | |||||||||||
Acquired definite-lived intangible assets: | ||||||||||||||
License agreements and other | 3 - 10 years | $ | 98 | $ | -92 | $ | 6 | |||||||
Internally-developed franchises | 11 - 12 years | 309 | -287 | 22 | ||||||||||
Total definite-lived intangible assets | $ | 407 | $ | -379 | $ | 28 | ||||||||
Acquired indefinite-lived intangible assets: | ||||||||||||||
Activision trademark | Indefinite | 386 | ||||||||||||
Acquired trade names | Indefinite | 47 | ||||||||||||
Total indefinite-lived intangible assets | $ | 433 | ||||||||||||
At December 31, 2014 | ||||||||||||||
Estimated | Gross | |||||||||||||
useful | carrying | Accumulated | Net carrying | |||||||||||
lives | amount | amortization | amount | |||||||||||
Acquired definite-lived intangible assets: | ||||||||||||||
License agreements and other | 3 - 10 years | $ | 98 | $ | -92 | $ | 6 | |||||||
Internally-developed franchises | 11 - 12 years | 309 | -286 | 23 | ||||||||||
Total definite-lived intangible assets | $ | 407 | $ | -378 | $ | 29 | ||||||||
Acquired indefinite-lived intangible assets: | ||||||||||||||
Activision trademark | Indefinite | 386 | ||||||||||||
Acquired trade names | Indefinite | 47 | ||||||||||||
Total indefinite-lived intangible assets | $ | 433 | ||||||||||||
Amortization expense of intangible assets was $1 million and $2 million for the three months ended March 31, 2015 and 2014, respectively. | ||||||||||||||
At March 31, 2015, future amortization of definite-lived intangible assets is estimated as follows (amounts in millions): | ||||||||||||||
2015 (remaining nine months) | $ | 10 | ||||||||||||
2016 | 8 | |||||||||||||
2017 | 5 | |||||||||||||
2018 | 3 | |||||||||||||
2019 | 2 | |||||||||||||
Total | $ | 28 |
Fair_Value_Measurements
Fair Value Measurements | 3 Months Ended | |||||||||||||||
Mar. 31, 2015 | ||||||||||||||||
Fair Value Measurements | ||||||||||||||||
Fair Value Measurements | 5. Fair Value Measurements | |||||||||||||||
Financial Accounting Standards Board (“FASB”) literature regarding fair value measurements for financial and non-financial assets and liabilities establishes a three-level fair value hierarchy that prioritizes the inputs used to measure fair value. This hierarchy requires entities to maximize the use of “observable inputs” and minimize the use of “unobservable inputs.” The three levels of inputs used to measure fair value are as follows: | ||||||||||||||||
Level 1—Quoted prices in active markets for identical assets or liabilities; | ||||||||||||||||
Level 2—Observable inputs other than quoted prices included in Level 1, such as quoted prices for similar assets or liabilities in active markets or other inputs that are observable or can be corroborated by observable market data; and | ||||||||||||||||
Level 3—Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities, including certain pricing models, discounted cash flow methodologies and similar techniques that use significant unobservable inputs. | ||||||||||||||||
Fair Value Measurements on a Recurring Basis | ||||||||||||||||
The table below segregates all financial assets that are measured at fair value on a recurring basis into the most appropriate level within the fair value hierarchy based on the inputs used to determine the fair value at the measurement date (amounts in millions): | ||||||||||||||||
Fair Value Measurements at | ||||||||||||||||
March 31, 2015 Using | ||||||||||||||||
Quoted | ||||||||||||||||
Prices in | ||||||||||||||||
Active | Significant | |||||||||||||||
Markets for | Other | Significant | ||||||||||||||
As of | Identical | Observable | Unobservable | |||||||||||||
March 31, | Assets | Inputs | Inputs | Balance Sheet | ||||||||||||
2015 | (Level 1) | (Level 2) | (Level 3) | Classification | ||||||||||||
Financial Assets: | ||||||||||||||||
Recurring fair value measurements: | ||||||||||||||||
Money market funds | $ | 4,271 | $ | 4,271 | $ | --- | $ | --- | Cash and cash equivalents | |||||||
Foreign government treasury bills | 34 | 34 | --- | --- | Cash and cash equivalents | |||||||||||
Foreign currency forward contracts designated | ||||||||||||||||
as hedges | 14 | --- | 14 | --- | Other current assets | |||||||||||
Auction rate securities ("ARS") | 9 | --- | --- | 9 | Long-term investments | |||||||||||
Total recurring fair value measurements | $ | 4,328 | $ | 4,305 | $ | 14 | $ | 9 | ||||||||
Fair Value Measurements at | ||||||||||||||||
December 31, 2014 Using | ||||||||||||||||
Quoted | ||||||||||||||||
Prices in | ||||||||||||||||
Active | Significant | |||||||||||||||
Markets for | Other | Significant | ||||||||||||||
As of | Identical | Observable | Unobservable | |||||||||||||
December 31, | Assets | Inputs | Inputs | Balance Sheet | ||||||||||||
2014 | (Level 1) | (Level 2) | (Level 3) | Classification | ||||||||||||
Recurring fair value measurements: | ||||||||||||||||
Money market funds | $ | 4,475 | $ | 4,475 | $ | --- | $ | --- | Cash and cash equivalents | |||||||
Foreign government treasury bills | 40 | 40 | --- | --- | Cash and cash equivalents | |||||||||||
ARS | 9 | --- | --- | 9 | Long-term investments | |||||||||||
Total recurring fair value measurements | $ | 4,524 | $ | 4,515 | $ | --- | $ | 9 | ||||||||
The following tables provide a reconciliation of the beginning and ending balances of our financial assets classified as Level 3 by major categories (amounts in millions) at March 31, 2015 and 2014, respectively: | ||||||||||||||||
Level 3 | ||||||||||||||||
Total | ||||||||||||||||
financial | ||||||||||||||||
assets at | ||||||||||||||||
ARS | fair | |||||||||||||||
(a) | value | |||||||||||||||
Balance at December 31, 2014 | $ | 9 | $ | 9 | ||||||||||||
Total unrealized gains included in other | ||||||||||||||||
comprehensive income | --- | --- | ||||||||||||||
Balance at March 31, 2015 | $ | 9 | $ | 9 | ||||||||||||
Level 3 | ||||||||||||||||
Total | ||||||||||||||||
financial | ||||||||||||||||
assets at | ||||||||||||||||
ARS | fair | |||||||||||||||
(a) | value | |||||||||||||||
Balance at December 31, 2013 | $ | 9 | $ | 9 | ||||||||||||
Total unrealized gains included in other | ||||||||||||||||
comprehensive income | --- | --- | ||||||||||||||
Balance at March 31, 2014 | $ | 9 | $ | 9 | ||||||||||||
(a) Fair value measurements have been estimated using an income-approach model. When estimating the fair value, we consider both observable market data and non-observable factors, including credit quality, duration, insurance wraps, collateral composition, maximum rate formulas, comparable trading instruments, and the likelihood of redemption. Significant assumptions used in the analysis include estimates for interest rates, spreads, cash flow timing and amounts, and holding periods of the securities. At March 31, 2015, assets measured at fair value using significant unobservable inputs (Level 3), all of which were ARS, represent less than 1% of our financial assets measured at fair value on a recurring basis. | ||||||||||||||||
Foreign Currency Forward Contracts | ||||||||||||||||
The Company transacts business in various foreign currencies and has significant international sales and expenses denominated in foreign currencies, subjecting us to foreign currency risk. In addition, the Company transacts intercompany business in various foreign currencies other than its functional currency, subjecting us to variability in the functional currency-equivalent cash flows. To mitigate our foreign currency risk resulting from our foreign currency-denominated monetary assets, liabilities and earnings and our foreign currency risk related to functional currency-equivalent cash flows resulting from our intercompany transactions, we periodically enter into currency derivative contracts, principally forward contracts with maturities of generally less than one year. We report the fair value of these contracts within “Other current assets” or “Other current liabilities” in our condensed consolidated balance sheets based on the prevailing exchange rates of the various hedged currencies as of the end of the relevant period. | ||||||||||||||||
We do not hold or purchase any foreign currency forward contracts for trading or speculative purposes. | ||||||||||||||||
Foreign Currency Forward Contracts Not Designated as Hedges | ||||||||||||||||
For foreign currency forward contracts entered into to mitigate risk from foreign currency-denominated monetary assets, liabilities, and earnings that are not designated as hedging instruments in accordance with FASB Accounting Standards Codification (“ASC”) Topic 815, changes in the estimated fair value of these derivatives are recorded within “General and administrative expenses” and “Interest and other investment income (expense), net” in our condensed consolidated statements of operations, depending on the nature of the underlying transactions. | ||||||||||||||||
At March 31, 2015 there were no outstanding foreign currency forward contracts not designated as hedges. At December 31, 2014, there was one outstanding foreign currency forward contract not designated as a hedge; the notional amount of that foreign currency forward contract was $11 million and the fair value was not material. For the three months ended March 31, 2015 and 2014, pre-tax net losses related to these forward contracts were not material. | ||||||||||||||||
Foreign Currency Forward Contracts Designated as Hedges | ||||||||||||||||
For foreign currency forward contracts entered into to hedge forecasted intercompany cash flows that are subject to foreign currency risk and which we designated as cash flow hedges in accordance with ASC Topic 815, we assess the effectiveness of these cash flow hedges at inception and on an ongoing basis to determine if the hedges are effective at providing offsetting changes in cash flows of the hedged items. We record the effective portion of changes in the estimated fair value of these derivatives in “Accumulated other comprehensive income (loss)” and subsequently reclassify the related amount of accumulated other comprehensive income (loss) to earnings within “General and administrative expense” when the hedged item impacts earnings. We measure hedge ineffectiveness, if any, and if it is determined that a derivative has ceased to be a highly effective hedge, we will discontinue hedge accounting for the derivative. | ||||||||||||||||
The gross notional amount of all outstanding foreign currency forward contracts designated as cash flow hedges was approximately $213 million at March 31, 2015. During the three months ended March 31, 2015, there was no ineffectiveness relating to these hedges. The net unrealized gains of approximately $14 million related to these contracts at March 31, 2015 are expected to be reclassified into earnings within the next twelve months. We did not have any outstanding foreign currency forward contracts designated as cash flow hedges at December 31, 2014, or for the three months ended March 31, 2014. | ||||||||||||||||
Fair Value Measurements on a Non-Recurring Basis | ||||||||||||||||
We measure the fair value of certain assets on a non-recurring basis, generally annually or when events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable. | ||||||||||||||||
For the three months ended March 31, 2015 and 2014, there were no impairment charges related to assets that are measured on a non-recurring basis. |
Debt
Debt | 3 Months Ended | ||||||||||
Mar. 31, 2015 | |||||||||||
Debt Disclosure | |||||||||||
Debt Disclosure | 6. Debt | ||||||||||
The proceeds from the credit facilities and the unsecured senior notes, as described below, were used to fund the Purchase Transaction disclosed in Note 1 of the Notes to Condensed Consolidated Financial Statements. | |||||||||||
Credit Facilities | |||||||||||
On October 11, 2013, in connection and simultaneously with the Purchase Transaction, we entered into a credit agreement (the “Credit Agreement”) for a $2.5 billion secured term loan facility maturing in October 2020 (the “Term Loan”), and a $250 million secured revolving credit facility maturing in October 2018 (the “Revolver” and, together with the Term Loan, the “Credit Facilities”). A portion of the Revolver can be used to issue letters of credit of up to $50 million, subject to the availability of the Revolver. To date, we have not drawn on the Revolver and there are no letters of credit issued and outstanding as of March 31, 2015 and December 31, 2014. | |||||||||||
Borrowings under the Term Loan and the Revolver bear interest, payable on a quarterly basis, at an annual rate equal to an applicable margin plus, at our option, (A) a base rate determined by reference to the highest of (a) the interest rate in effect determined by the administrative agent as its “prime rate,” (b) the federal funds rate plus 0.5%, and (c) the London InterBank Offered Rate (“LIBOR”) rate for an interest period of one month plus 1.00%, or (B) LIBOR. LIBOR borrowings under the Term Loan will be subject to a LIBOR floor of 0.75%. At March 31, 2015, the Credit Facilities bore interest at 3.25%. In certain circumstances, our applicable interest rate under the Credit Facilities will increase. | |||||||||||
In addition to paying interest on outstanding principal balances under the Credit Facilities, we are required to pay the lenders a commitment fee on unused commitments under the Revolver. Commitment fees are recorded within “Interest and other investment income (expense), net” on the condensed consolidated statement of operations. We are also required to pay customary letter of credit fees, if any, and agency fees. | |||||||||||
The terms of the Credit Agreement required quarterly principal repayments of 0.25% of the Term Loan's original principal amount, with the balance due on the maturity date. On February 11, 2014, we made a voluntary repayment of $375 million on our Term Loan. This repayment satisfied the required quarterly principal repayments for the entire term of the Credit Agreement. On February 11, 2015, we made an additional voluntary repayment of $250 million on our Term Loan. | |||||||||||
The Credit Facilities are guaranteed by certain of the Company's U.S. subsidiaries, whose assets represent approximately 70% of our consolidated assets. The Credit Agreement contains customary covenants that place restrictions in certain circumstances on, among other things, the incurrence of debt, granting of liens, payment of dividends, sales of assets and mergers and acquisitions. If our obligations under the Revolver exceed 15% of the total facility amount as of the end of any fiscal quarter (subject to certain exclusions for letters of credit), we are also subject to certain financial covenants. A violation of any of these covenants could result in an event of default under the Credit Agreement. Upon the occurrence of such event of default or certain other customary events of default, payment of any outstanding amounts under the Credit Agreement may be accelerated, and the lenders' commitments to extend credit under the Credit Agreement may be terminated. In addition, an event of default under the Credit Agreement could, under certain circumstances, permit the holders of other outstanding unsecured debt, including the debt holders described below, to accelerate the repayment of such obligations. The Company was in compliance with the terms of the Credit Facilities as of March 31, 2015. | |||||||||||
Unsecured Senior Notes | |||||||||||
On September 19, 2013, we issued, at par, $1.5 billion of 5.625% unsecured senior notes due September 2021 (the “2021 Notes”) and $750 million of 6.125% unsecured senior notes due September 2023 (the “2023 Notes” and, together with the 2021 Notes, the “Notes”) in a private offering to qualified institutional buyers made in accordance with Rule 144A under the Securities Act of 1933, as amended. | |||||||||||
The Notes are general senior obligations of the Company and rank pari passu in right of payment to all of the Company's existing and future senior indebtedness, including the Credit Facilities described above. The Notes are guaranteed on a senior basis by certain of our U.S. subsidiaries. The Notes and related guarantees are not secured and are effectively subordinated to any of the Company's existing and future indebtedness that is secured, including the Credit Facilities. The Notes contain customary covenants that place restrictions in certain circumstances on, among other things, the incurrence of debt, granting 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 March 31, 2015. | |||||||||||
Interest on the Notes is payable semi-annually in arrears on March 15 and September 15 of each year. As of March 31, 2015 and December 31, 2014, we had interest payable of $5 million and $38 million, respectively, related to the Notes, recorded within “Accrued expenses and other liabilities” in our condensed consolidated balance sheet. | |||||||||||
We may redeem the 2021 Notes on or after September 15, 2016 and the 2023 Notes on or after September 15, 2018, in whole or in part on any one or more occasions, at specified redemption prices, plus accrued and unpaid interest. At any time prior to September 15, 2016, with respect to the 2021 Notes, and at any time prior to September 15, 2018, with respect to the 2023 Notes, we may also redeem some or all of the Notes by paying a “make-whole premium”, plus accrued and unpaid interest. Upon the occurrence of one or more qualified equity offerings, we may also redeem up to 35% of the aggregate principal amount of each of the 2021 Notes and 2023 Notes outstanding with the net cash proceeds from such offerings. The Notes are repayable, in whole or in part and at the option of the holders, upon the occurrence of a change in control and a ratings downgrade, at a purchase price equal to 101% of principal, plus accrued and unpaid interest. These redemption options are considered clearly and closely related to the Notes and are not accounted for separately upon issuance. | |||||||||||
Fees associated with the closing of the Term Loan and the Notes are recorded as debt discount, which reduce the carrying value of the Term Loan and the Notes. The debt discount is amortized over the respective terms of the Term Loan and the Notes. Amortization expense related to the debt discount is recorded within “Interest and other investment income (expense), net” in our condensed consolidated statement of operations. | |||||||||||
A summary of our debt is as follows (amounts in millions): | |||||||||||
31-Mar-15 | |||||||||||
Gross Carrying | Unamortized | Net Carrying | |||||||||
Amount | Discount | Amount | |||||||||
Term Loan | $ | 1,869 | $ | -10 | $ | 1,859 | |||||
2021 Notes | 1,500 | -22 | 1,478 | ||||||||
2023 Notes | 750 | -12 | 738 | ||||||||
Total long-term debt | $ | 4,119 | $ | -44 | $ | 4,075 | |||||
31-Dec-14 | |||||||||||
Gross Carrying | Unamortized | Net Carrying | |||||||||
Amount | Discount | Amount | |||||||||
Term Loan | $ | 2,119 | $ | -10 | $ | 2,109 | |||||
2021 Notes | 1,500 | -23 | 1,477 | ||||||||
2023 Notes | 750 | -12 | 738 | ||||||||
Total long-term debt | $ | 4,369 | $ | -45 | $ | 4,324 | |||||
For the three months ended March 31, 2015 and March 31, 2014, interest expense was $49 million and $51 million, respectively, amortization of the debt discount for the Credit Facilities and Notes was $1 million and $2 million, respectively, and commitment fees for the Revolver were not material. | |||||||||||
As of March 31, 2015, the scheduled maturities and contractual principal repayments of our debt for each of the five succeeding years are as follows (amounts in millions): | |||||||||||
For the year ending December 31, | |||||||||||
2015 (remaining nine months) | $ | --- | |||||||||
2016 | --- | ||||||||||
2017 | --- | ||||||||||
2018 | --- | ||||||||||
2019 | --- | ||||||||||
Thereafter | 4,119 | ||||||||||
Total | $ | 4,119 | |||||||||
As of March 31, 2015 and December 31, 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 funds. Based on Level 2 inputs, the fair values of the 2021 Notes and 2023 Notes were $1,599 million and $819 million, respectively, as of March 31, 2015 and $1,586 million and $810 million, respectively, as of December 31, 2014. | |||||||||||
Deferred Financing Costs | |||||||||||
Costs incurred to obtain our long-term debt are recorded as deferred financing costs within “Other assets — non-current” in our condensed consolidated balance sheets and are amortized over the terms of the respective debt agreements using a straight-line basis for costs related to the Revolver and the interest earned method for costs related to the Term Loan and Notes. Amortization expense related to the deferred financing costs is recorded within “Interest and other investment income (expense), net” in our condensed consolidated statements of operations. For the three months ended March 31, 2015 and 2014, this amount was not material. |
Accumulated_Other_Comprehensiv
Accumulated Other Comprehensive Income (Loss) | 3 Months Ended | ||||||||||||||
Mar. 31, 2015 | |||||||||||||||
Accumulated Other Comprehensive Income (Loss). | |||||||||||||||
Accumulated Other Comprehensive Income (Loss) | 7. Accumulated Other Comprehensive Income (Loss) | ||||||||||||||
The components of accumulated other comprehensive income (loss) at March 31, 2015 and 2014, were as follows (amounts in millions): | |||||||||||||||
For the Three Months Ended March 31, 2015 | |||||||||||||||
Foreign currency | Unrealized gain | Unrealized gain | |||||||||||||
translation | on available-for- | on forward | |||||||||||||
adjustments | sale securities | contracts | Total | ||||||||||||
Balance at December 31, 2014 | $ | -304 | $ | 1 | $ | --- | $ | -303 | |||||||
Other comprehensive income (loss) | |||||||||||||||
before reclassifications | -330 | --- | 14 | -316 | |||||||||||
Balance at March 31, 2015 | $ | -634 | $ | 1 | $ | 14 | $ | -619 | |||||||
For the Three Months Ended March 31, 2014 | |||||||||||||||
Foreign currency | Unrealized gain | Unrealized gain | |||||||||||||
translation | on available-for- | on forward | |||||||||||||
adjustments | sale securities | contracts | Total | ||||||||||||
Balance at December 31, 2013 | $ | 67 | $ | 1 | $ | --- | $ | 68 | |||||||
Other comprehensive income (loss) | |||||||||||||||
before reclassifications | -5 | --- | --- | -5 | |||||||||||
Balance at March 31, 2014 | $ | 62 | $ | 1 | $ | --- | $ | 63 | |||||||
Income taxes were not provided for foreign currency translation items as these are considered indefinite investments in non-U.S. subsidiaries. |
Operating_Segments_and_Geograp
Operating Segments and Geographic Region | 3 Months Ended | ||||||||||||||
Mar. 31, 2015 | |||||||||||||||
Operating Segments and Geographic Region | |||||||||||||||
Operating Segments and Geographic Region | 8. Operating Segments and Geographic Region | ||||||||||||||
Our operating segments are consistent with our internal organizational structure, the manner in which our operations are reviewed and managed by our Chief Executive Officer, who is our Chief Operating Decision Maker (“CODM”), the manner in which we assess operating performance and allocate resources, and the availability of separate financial information. Currently, we conduct our business through three operating segments: Activision, Blizzard and Distribution (see Note 1 of the Notes to Condensed Consolidated Financial Statements). 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 expense, amortization of intangible assets as a result of purchase price accounting, and fees and other expenses (including legal fees, costs, expenses and accruals) related to the Purchase Transaction and related debt financings. The CODM does not review any information regarding total assets on an operating segment basis, and accordingly, no disclosure is made with respect thereto. Information on the operating segments and reconciliations of total net revenues and total segment operating income to consolidated net revenues from external customers and consolidated income before income tax expense for the three months ended March 31, 2015 and 2014 are presented below (amounts in millions): | |||||||||||||||
Three Months Ended March 31, | |||||||||||||||
2015 | 2014 | 2015 | 2014 | ||||||||||||
Income (loss) from operations | |||||||||||||||
Net revenues | before income tax expense | ||||||||||||||
Activision | $ | 303 | $ | 237 | $ | 66 | $ | 2 | |||||||
Blizzard | 352 | 462 | 139 | 239 | |||||||||||
Distribution | 48 | 73 | -1 | -1 | |||||||||||
Operating segments total | 703 | 772 | 204 | 240 | |||||||||||
Reconciliation to consolidated net revenues / | |||||||||||||||
consolidated income before income tax | |||||||||||||||
expense: | |||||||||||||||
Net effect from deferral of net revenues and | |||||||||||||||
related cost of sales | 575 | 339 | 362 | 219 | |||||||||||
Stock-based compensation expense | --- | --- | -23 | -30 | |||||||||||
Amortization of intangible assets | --- | --- | -1 | -2 | |||||||||||
Consolidated net revenues / operating income | $ | 1,278 | $ | 1,111 | $ | 542 | $ | 427 | |||||||
Interest and other expense, net | 50 | 51 | |||||||||||||
Consolidated income before income tax expense | $ | 492 | $ | 376 | |||||||||||
Geographic information presented below for the three months ended March 31, 2015 and 2014 is based on the location of the selling entity. Net revenues from external customers by geographic region were as follows (amounts in millions): | |||||||||||||||
Three months ended March 31, | |||||||||||||||
2015 | 2014 | ||||||||||||||
Net revenues by geographic region: | |||||||||||||||
North America | $ | 704 | $ | 563 | |||||||||||
Europe | 464 | 462 | |||||||||||||
Asia Pacific | 110 | 86 | |||||||||||||
Total consolidated net revenues | $ | 1,278 | $ | 1,111 | |||||||||||
The Company's net revenues in the U.S. were 53%, and 48% of consolidated net revenues for the three months ended March 31, 2015 and 2014, respectively. The Company's net revenues in the U.K. were 12% and 15% of consolidated net revenues for the three months ended March 31, 2015 and 2014, respectively. The Company's net revenues in France were 8% and 13% of consolidated net revenues for the three months ended March 31, 2015 and 2014, respectively. No other country's net revenues exceeded 10% of consolidated net revenues. | |||||||||||||||
Net revenues by platform were as follows (amounts in millions): | |||||||||||||||
Three Months Ended March 31, | |||||||||||||||
2015 | 2014 | ||||||||||||||
Net revenues by platform: | |||||||||||||||
Console | $ | 758 | $ | 654 | |||||||||||
Online 1 | 272 | 201 | |||||||||||||
PC | 114 | 100 | |||||||||||||
Mobile and other2 | 86 | 83 | |||||||||||||
Total Activision Blizzard net revenues | 1,230 | 1,038 | |||||||||||||
Distribution | 48 | 73 | |||||||||||||
Total consolidated net revenues | $ | 1,278 | $ | 1,111 | |||||||||||
(1) Revenues from online consist of revenues from all World of Warcraft products, including subscriptions, boxed products, expansion packs, licensing royalties, and value-added services. | |||||||||||||||
(2) Revenues from mobile and other include revenues from handheld, mobile and tablet devices, as well as non-platform specific game related revenues such as standalone sales of toys and accessories products from the Skylanders franchise and other physical merchandise and accessories. | |||||||||||||||
Long-lived assets by geographic region at March 31, 2015 and December 31, 2014 were as follows (amounts in millions): | |||||||||||||||
At March 31, | At December 31, | ||||||||||||||
2015 | 2014 | ||||||||||||||
Long-lived assets* by geographic region: | |||||||||||||||
North America | $ | 129 | $ | 122 | |||||||||||
Europe | 24 | 29 | |||||||||||||
Asia Pacific | 5 | 6 | |||||||||||||
Total long-lived assets by geographic region | $ | 158 | $ | 157 | |||||||||||
*The only long-lived assets that we classify by region are our long-term tangible fixed assets, which only include property, plant and equipment assets; all other long-term assets are not allocated by location. | |||||||||||||||
We did not have any single external customers that accounted for 10% or more of consolidated net revenues for the three months ended March 31, 2015 and 2014. |
Income_Taxes
Income Taxes | 3 Months Ended |
Mar. 31, 2015 | |
Income Taxes | |
Income Taxes | 9. Income Taxes |
The Company accounts for its provision for income taxes in accordance with ASC 740, Income Taxes, which requires an estimate of the annual effective tax rate for the full year to be applied to the interim period, taking into account year-to-date amounts and projected results for the full year. The provision for income taxes represents federal, foreign, state and local income taxes. Our effective tax rate differs from the statutory U.S. income tax rate due to the effect of state and local income taxes, tax rates in foreign jurisdictions and certain nondeductible expenses. Our effective tax rate could fluctuate significantly from quarter to quarter based on recurring and nonrecurring factors including, but not limited to: variations in the estimated and actual level of pre-tax income or loss by jurisdiction; changes in the mix of income by tax jurisdiction (as taxes are levied at relatively lower statutory rates in foreign regions and relatively higher statutory rates in the U.S.); changes in enacted tax laws and regulations, rulings and interpretations thereof, including with respect to tax credits, state and local income taxes; developments in tax audits and other matters; and certain nondeductible expenses. Changes in judgment from the evaluation of new information resulting in the recognition, derecognition or remeasurement of a tax position taken in a prior annual period are recognized separately in the quarter of the change. | |
The income tax expense of $98 million for the three months ended March 31, 2015 reflects an effective tax rate of 19.9%, which is lower than the effective tax rate of 22.1% for the three months ended March 31, 2014. This decrease is primarily due to an increase in the amount of foreign earnings, which are taxed at relatively lower statutory rates, as compared to domestic earnings, which are taxed at relatively higher statutory rates, in the estimated effective annual tax rate. | |
The effective tax rate of 19.9% for the three months ended March 31, 2015 differed from the U.S. statutory rate of 35.0%, primarily due to the tax benefit from foreign earnings taxed at relatively lower statutory rates, recognition of California research and development credits, and the federal domestic production deductions, offset by increases to the Company's reserve for uncertain tax positions. | |
The overall effective income tax rate for the year could be different from the effective tax rate for the three months ended March 31, 2015 and will be dependent, in part, on our profitability for the remainder of the year, as well as the other factors described above. | |
The Internal Revenue Service (“IRS”) is currently examining Activision Blizzard's federal tax returns for the 2008 through 2011 tax years. Additionally, the IRS is currently reviewing our application for an advanced pricing agreement (“APA”) with respect to the transfer pricing methodology that would be used by the Company for tax years 2010 through 2024. If ongoing discussions with the IRS result in an APA, this could result in a different allocation of profits and losses under the Company's transfer pricing agreements. Such allocation could have a positive or negative impact on our provision for uncertain tax positions for the period in which such an agreement is reached and the relevant periods thereafter. | |
In addition, Vivendi Games' tax return for the 2008 tax year is under examination by the Internal Revenue Service and several state taxing authorities. While 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, 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. Additionally, the Company 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 the Company's management, the ultimate resolution of these matters are not expected to 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. | |
In connection with the Purchase Transaction, we assumed certain tax attributes of New VH, generally consisting of New VH's net operating loss (“NOL”) carryforwards of approximately $760 million, which represent a potential future tax benefit of approximately $266 million. The utilization of such NOL carryforwards will be subject to certain annual limitations and will begin to expire in 2021. The Company also obtained indemnification from Vivendi against losses attributable to the disallowance of claimed utilization of such NOL carryforwards of up to $200 million in unrealized tax benefits in the aggregate, limited to taxable years ending on or prior to December 31, 2016. No benefit for these tax attributes or indemnification was recorded upon the close of the Purchase Transaction, as the benefit from these tax attributes did not meet the “more-likely-than-not” standard. For the three months ended March 31, 2015, we utilized $152 million of the NOL, which resulted in a tax benefit of $53 million, and a corresponding reserve was established as the position did not meet the “more-likely-than-not” standard. As of March 31, 2015, an indemnification asset of $121 million has been recorded in “Other Assets”, and, correspondingly, the same amount has been recorded as a reduction to the consideration paid for the shares repurchased in “Treasury Stock” (see Note 1 of the Notes to Condensed Consolidated Financial Statements for details about the share repurchase). |
Computation_of_Earnings_Loss_P
Computation of Earnings (Loss) Per Basic/Diluted Common Share | 3 Months Ended | |||||||||
Mar. 31, 2015 | ||||||||||
Computation of Earnings (Loss) Per Basic/Diluted Common Share | ||||||||||
Computation of Earnings (Loss) Per Basic/Diluted Common Share | 10. Computation of Basic/Diluted Earnings Per Common Share | |||||||||
The following table sets forth the computation of basic and diluted earnings per common share (amounts in millions, except per share data): | ||||||||||
For the Three Months Ended March 31, | ||||||||||
2015 | 2014 | |||||||||
Numerator: | ||||||||||
Consolidated net income | $ | 394 | $ | 293 | ||||||
Less: Distributed earnings to unvested stock-based awards | ||||||||||
that participate in earnings | -4 | -5 | ||||||||
Less: Undistributed earnings allocated to unvested stock-based | ||||||||||
awards that participate in earnings | -3 | -3 | ||||||||
Numerator for basic and diluted earnings per common share – income | ||||||||||
available to common shareholders | $ | 387 | $ | 285 | ||||||
Denominator: | ||||||||||
Denominator for basic earnings per common share - weighted-average | ||||||||||
common shares outstanding | 723 | 709 | ||||||||
Effect of potential dilutive common shares under the treasury stock | ||||||||||
method: | 8 | 11 | ||||||||
Denominator for diluted earnings per common share - weighted- | ||||||||||
average common shares outstanding plus dilutive common shares | ||||||||||
under the treasury stock method | 731 | 720 | ||||||||
Basic earnings per common share | $ | 0.54 | $ | 0.4 | ||||||
Diluted earnings per common share | $ | 0.53 | $ | 0.4 | ||||||
Certain of our unvested restricted stock rights (including certain restricted stock units, restricted stock awards, and performance shares) met the definition of participating securities based on their rights to dividends or dividend equivalents. Therefore, we are required to use the two-class method in our computation of basic and diluted earnings per common share. For the three months ended March 31, 2015 and 2014, on a weighted-average basis, we had outstanding unvested restricted stock rights with respect to 10 million and 17 million shares of common stock, respectively, that are participating in earnings. | ||||||||||
Certain of our employee-related restricted stock rights are contingently issuable upon the satisfaction of pre-defined performance measures. These shares are included in the weighted-average dilutive common shares only if the performance measures are met as of the end of the reporting period. Approximately 4 million and 3 million shares are not included in the computation of diluted earnings per share for the three months ended March 31, 2015 and 2014, respectively, as their respective performance measures had not yet been met. | ||||||||||
Potential common shares are not included in the denominator of the diluted earnings per common share calculation when the inclusion of such shares would be anti-dilutive, such as in a period in which a net loss is recorded. Therefore, options to acquire 6 million and 3 million shares of common stock were not included in the calculation of diluted earnings per common share for the three months ended March 31, 2015 and 2014, respectively, as the effect of their inclusion would be anti-dilutive. |
Capital_Transactions
Capital Transactions | 3 Months Ended |
Mar. 31, 2015 | |
Capital Transactions | |
Capital Transactions | 11. Capital Transactions |
Repurchase Programs | |
On February 3, 2015, our Board of Directors authorized a stock repurchase program under which we may repurchase up to $750 million of our common stock during the two-year period from February 9, 2015 through February 8, 2017. As of March 31, 2015, we have not repurchased any shares under this program. | |
Dividend | |
On February 3, 2015, our Board of Directors declared a cash dividend of $0.23 per common share, payable on May 13, 2015, to shareholders of record at the close of business on March 30, 2015. As such, we have included $170 million of dividends payable in “Accrued expense and other liabilities” and “Other liabilities” on our condensed consolidated balance sheet as of March 31, 2015. | |
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 19, 2014. On May 14, 2014, we made an aggregate cash dividend payment of $143 million to such shareholders, and on May 30, 2014, we made related dividend equivalent payments of $4 million to holders of restricted stock rights. |
Commitments_and_Contingencies
Commitments and Contingencies | 3 Months Ended |
Mar. 31, 2015 | |
Commitments and Contingencies | |
Commitments and Contingencies | 12. Commitments and Contingencies |
Legal Proceedings | |
We are subject to various legal proceedings and claims. SEC regulations govern disclosure of legal proceedings in periodic reports and ASC Topic 450 governs the disclosure of loss contingencies and accrual of loss contingencies in respect of litigation and other claims. We record an accrual for a potential loss when it is probable that a loss will occur and the amount of the loss can be reasonably estimated. When the reasonable estimate of the potential loss is within a range of amounts, the minimum of the range of potential loss is accrued, unless a higher amount within the range is a better estimate than any other amount within the range. Moreover, even if an accrual is not required, we provide additional disclosure related to litigation and other claims when it is reasonably possible (i.e., more than remote) that the outcomes of such litigation and other claims include potential material adverse impacts on us. | |
The outcomes of legal proceedings and other claims are subject to significant uncertainties, many of which are outside of our control. There is significant judgment required in the analysis of these matters, including the probability determination and whether a potential exposure can be reasonably estimated. In making these determinations, we, in consultation with outside counsel, examine the relevant facts and circumstances on a quarterly basis assuming, as applicable, a combination of settlement and litigated outcomes and strategies. Moreover, legal matters are inherently unpredictable and the timing of development of factors on which reasonable judgments and estimates can be based can be slow. As such, there can be no assurance that the final outcome of any legal matter will not materially and adversely affect our business, financial condition, results of operations, profitability, cash flows or liquidity. | |
Purchase Transaction Matters | |
On August 1, 2013, a purported shareholder of the Company filed a shareholder derivative action in the Superior Court of the State of California, County of Los Angeles, captioned Miller v. Kotick, et al., No. BC517086. The complaint names our Board of Directors and Vivendi as defendants, and the Company as a nominal defendant. The complaint alleges that our Board of Directors committed breaches of fiduciary duties, waste of corporate assets and unjust enrichment in connection with Vivendi's sale of its stake in the Company and that Vivendi also breached its fiduciary duties. The plaintiff further alleges that demand by it on our Board of Directors to institute action would be futile because a majority of our Board of Directors is not independent and a majority of the individual defendants face a substantial likelihood of liability for approving the transactions contemplated by the Stock Purchase Agreement. The complaint seeks, among other things, damages sustained by the Company, rescission of the transactions contemplated by the Stock 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, including ordering a shareholder vote on certain amendments to our by-laws or charter that would require half of our Board of Directors to be independent of Messrs. Kotick and Kelly and Vivendi and a proposal to appoint a new independent Chairman of the Board of Directors. On January 28, 2014, the parties filed a stipulation and proposed order temporarily staying the California action. On February 6, 2014, the court entered the order granting a stay of the California action. | |
In addition, on August 14, 2013, we received a letter dated August 9, 2013, from a shareholder seeking, pursuant to Section 220 of the Delaware General Corporation Law, to inspect the books and records of the Company to ascertain whether the Purchase Transaction and Private Sale were in the best interests of the Company. In response to that request, we provided the stockholder with certain materials under a confidentiality agreement. On September 11, 2013, a complaint was filed under seal by the same stockholder in the Court of Chancery of the State of Delaware in an action captioned Pacchia v. Kotick et al., C.A. No. 8884-VCL. A public version of that complaint was filed on September 16, 2013. The allegations in the complaint were substantially similar to the allegations in the above referenced matter filed on August 1, 2013. On October 25, 2013, Pacchia filed an amended complaint under seal. The amended complaint added claims on behalf of an alleged class of Activision stockholders other than the Company's Chief Executive Officer and Chairman, Vivendi, ASAC, investors in ASAC and other stockholders affiliated with the investors of ASAC. The added class claims are against the Company's Chief Executive Officer and Chairman, the Vivendi affiliated directors, the members of the special committee of the Board of Directors formed in connection with the Company's consideration of the transactions with Vivendi and ASAC, and Vivendi for breach of fiduciary duty, as well as aiding and abetting a breach of fiduciary duty against ASAC. The amended complaint removed the derivative claims for waste of corporate assets and disgorgement but continued to allege derivative claims for breach of fiduciary duties. The amended complaint seeks, among other things, certification of a class, damages, reformation of the Private Sale, and disgorgement of any alleged profits received by the Company's Chief Executive Officer, Chairman and ASAC. On October 29, 2013, Pacchia filed a motion to consolidate the Pacchia case with the Hayes case described below. On November 2, 2013, the Court of Chancery consolidated the Pacchia and Hayes cases and ordered the plaintiffs to file supplemental papers related to determining lead plaintiff and lead counsel no later than November 8, 2013. On December 3, 2013, the court selected Pacchia as lead plaintiff. Pacchia filed a second amended complaint on December 11, 2013, and Activision filed an answer on January 31, 2014. Also on January 31, 2014, the special committee, ASAC, Messrs. Kotick and Kelly, Vivendi and the Vivendi-affiliated directors each filed motions to dismiss certain claims in the second amended complaint. On February 21, 2014, Pacchia filed a third amended complaint under seal. In response to Pacchia's filing of a third amended complaint, the special committee, ASAC, Messrs. Kotick and Kelly, Vivendi and the Vivendi-affiliated directors each filed motions to dismiss certain claims in the third amended complaint. On June 6, 2014, the Court of Chancery denied the defendants' motions to dismiss such claims, with the exception of a breach of contract claim. Subsequently, Pacchia filed a fourth amended complaint containing substantially all of his prior claims, but with the addition of new allegations gleaned from discovery in the matter. ASAC filed a motion to dismiss the re-pleaded breach of contract claim and the other defendants filed answers in response to the fourth amended complaint. | |
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, Vivendi, New VH, the ASAC Entities, Davis Selected Advisers, L.P. (“Davis”) and Fidelity Management & Research Co. (“FMR”) as defendants, and the Company as a nominal defendant. The complaint alleges that the defendants violated certain provisions of our Amended and Restated Certificate of Incorporation by failing to submit the matters contemplated by the Stock Purchase Agreement for approval by a majority of our stockholders (other than Vivendi and its controlled affiliates); that our Board of Directors committed breaches of their fiduciary duties in approving the Stock Purchase Agreement; that Vivendi violated fiduciary duties owed to other stockholders of the Company in entering into the Stock Purchase Agreement; that our Chief Executive Officer and our Chairman usurped a corporate opportunity from the Company; that our Board of Directors and Vivendi have engaged in actions to entrench our Board of Directors and officers in their offices; that the ASAC Entities, Davis and FMR aided and abetted breaches of fiduciary duties by the Board of Directors and Vivendi; and that our Chief Executive Officer and our Chairman, the ASAC Entities, Davis and FMR will be unjustly enriched through the Private Sale. The complaint seeks, among other things, the rescission of the Private Sale; an order requiring the transfer to the Company of all or part of the shares that are the subject of the Private Sale; an order implementing measures to eliminate or mitigate the alleged entrenching effects of the Private Sale; an order requiring our Chief Executive Officer and our Chairman, the ASAC Entities, Davis and FMR to disgorge to the Company the amounts by which they have allegedly been unjustly enriched; and alleged damages sustained by the class and the Company. In addition, the stockholder sought a temporary restraining order preventing the defendants from consummating the transactions contemplated by the Stock Purchase Agreement without stockholder approval. Following a hearing on the motion for a temporary restraining order, on September 18, 2013, the Court of Chancery issued a preliminary injunction order, enjoining the consummation of the transactions contemplated by the Stock Purchase Agreement pending (a) the issuance of a final decision after a trial on the merits; (b) receipt of a favorable Activision Blizzard stockholder vote on the transactions contemplated by the Stock Purchase Agreement under Section 9.1(b) of our Amended and Restated Certificate of Incorporation or (c) modification of such preliminary injunction order by the Court of Chancery or the Delaware Supreme Court. On September 20, 2013, the Court of Chancery certified its order issuing the preliminary injunction for interlocutory appeal to the Delaware Supreme Court. The defendants moved the Delaware Supreme Court to accept and hear the appeal on an expedited basis. On September 23, 2013, the Delaware Supreme Court accepted the appeal of the Court of Chancery's decision and granted the defendant's motion to hear the appeal on an expedited basis. | |
Following a hearing on October 10, 2013, the Delaware Supreme Court reversed the Court of Chancery's order issuing a preliminary injunction, and determined that the Stock Purchase Agreement was not a merger, business combination or similar transaction that would require a vote of Activision's unaffiliated stockholders under the charter. | |
On October 29, 2013, an amended complaint was filed. It added factual allegations but no new claims or relief. Also on October 29, 2013, Hayes filed a motion to consolidate the Hayes case with the Pacchia case. As noted above, on November 2, 2013, the Court of Chancery consolidated the Pacchia and Hayes cases and ordered the plaintiffs to file supplemental papers related to determining lead plaintiff and lead counsel no later than November 8, 2013. See the discussion above related to the Pacchia matter (now the consolidated matter) for any further updates to the status of the litigation. | |
Further, on September 18, 2013, the Company received a letter from another purported stockholder of the Company, Milton Pfeiffer, seeking, pursuant to Section 220 of the Delaware General Corporation Law, to inspect the books and records of the Company to investigate potential wrongdoing or mismanagement in connection with the approval of the Stock Purchase Agreement. On November 11, 2013, Pfeiffer filed a lawsuit in the Court of Chancery of the State of Delaware pursuant to Delaware Section 220 containing claims similar to Hayes, Pacchia and Miller. The Company answered on November 27, 2013. On January 21, 2014, the Court of Chancery entered the parties' stipulation and order of dismissal. | |
On December 17, 2013, the Company received a letter from Mark Benston requesting certain books and records of the Company pursuant to Section 220 of the Delaware General Corporation Law. Benston is represented by the same law firm as Pfeiffer. On January 2, 2014, Benston filed a lawsuit in the Court of Chancery of the State of Delaware pursuant to Delaware Section 220 containing claims similar to Hayes, Pacchia, Pfeiffer and Miller. The Company answered on January 17, 2014. On February 14, 2014, the Court of Chancery entered the parties' stipulation and order of dismissal. | |
On March 14, 2014, Benston filed a putative class action and derivative complaint in the Court of Chancery, captioned Benston v. Vivendi S.A. et al., No. 9447-VCL. The complaint makes claims similar to Hayes, Pacchia, Pfeiffer and Miller, but also adds J.P. Morgan Chase & Co. and J.P. Morgan Securities LLC as defendants and a so-called Brophy claim for insider trading against certain of the defendants. Benston and his attorneys petitioned the Court of Chancery to appoint them as co-lead plaintiff and co-lead counsel, respectively, for purposes of pursuing the Brophy claim as part of the consolidated Pacchia litigation. On June 6, 2014, the Court of Chancery denied Benston's motion for a leadership role in the consolidated Pacchia litigation. As a result, Pacchia continues to serve as the lead plaintiff in the consolidated cases. | |
Certain of defendants filed a motion to dismiss the breach of contract claim set forth in the Fourth Amended Complaint. Pacchia obtained leave to file a Fifth Amended Complaint, which adds additional color to his allegations of wrongdoing based on information learned in discovery, including with respect to the appointment and subsequent election of several of the directors to our Board of Directors. For the most part, fact and expert discovery was completed in the Pacchia matter, including the exchange of expert damage and other reports. Pacchia's expert's reports allege damages to the Company in excess of $540 million and to the purported class in excess of $640 million, in addition to disgorgement claims, which could, in theory, exceed $1 billion. Defendants' experts' reports maintain there are no damages to the Company or to the purported class because the Purchase Transaction and the Private Sale were the best transactions available to the parties and the alternate transactions hypothesized by the plaintiff were inferior. | |
For the quarter ended September 30, 2014, we accrued a loss contingency in our consolidated financial statements in connection with this matter. The accrual related to potential liabilities associated with legal fees, costs and expenses for services already received prior to the quarter's end, where such fees, costs and expenses had not yet been paid at the quarter's end, and the Company's potential contribution toward the potential settlement of the matter. Although the Company has D&O insurance in connection with the consolidated litigation in a total amount up to $200 million, various insurers have raised arguments that they believe give them the right to deny coverage for a portion of these fees, costs and expenses, as well as for all or a portion of the ultimate liability which may occur in settlement or at trial. Under our Amended and Restated Certificate of Incorporation and certain agreements with members of our Board of Directors, the Company has indemnification obligations to the director defendants to advance fees, costs and expenses and to pay liabilities which arise in connection with their service to the Company, in each case, to the maximum extent permitted by Delaware law. In light of these indemnification obligations and the positions taken by the parties and the various insurers, we determined that a liability was probable and estimable, and accordingly, an accrual was required, as of the quarter ended September 30, 2014. | |
On November 19, 2014, the Company announced that an agreement had been reached to settle the Pacchia matter. The Company believes the settlement agreement, which acknowledges no wrongdoing on the part of any party, is in the best interest of the Company and all of its shareholders. Pursuant to the settlement agreement, multiple insurance companies, along with various defendants, will pay $275 million to a settlement fund (“Settlement Fund”). Payment of reasonable and customary fees and costs of plaintiff's attorney, likely not to exceed $72.5 million, will be made from the Settlement Fund. The remaining balance of the Settlement Fund, likely to be at least $202.5 million, will be paid to the Company and will be recorded within “Shareholders' equity” in our consolidated balance sheet. Other terms of the settlement agreement include the addition of two unaffiliated persons to the Company's Board of Directors, an adjustment of certain voting rights and a global release of claims against the defendants. On December 29, 2014, the Company filed a Current Report on Form 8-K, describing and attaching the Stipulation of Compromise and Settlement, which was filed with the Delaware Chancery Court with respect to the settlement of the Pacchia matter (the “Stipulation”). Pursuant to the Stipulation, the Company has notified the applicable shareholders of the settlement agreement. Applicable shareholders were provided an opportunity to object to the settlement, which is subject to approval by the Delaware Chancery Court. | |
Objections to the Stipulation have been filed by several shareholders. The plaintiff in the Hayes matter has objected to the settlement on the grounds that a portion of the $275 million Settlement Fund should be reallocated to the members of the class, that the amount of any attorney's fee award should be reduced and that the court should deny any “special award” to the plaintiff in the Pacchia matter. In the absence of such a reallocation, Hayes argues the court should deny approval of the settlement and appoint Hayes and his counsel to lead the class-based claims. Hayes also contends the notice of settlement provided by the Company is inadequate. The Company disputes this allegation. The plaintiffs in the Benston and Pfeiffer matters have also filed applications to the court requesting that their counsel receive an attorney's fee award of $7.25 million to be paid out of the attorneys' fees contemplated by the proposed Settlement. Certain defendants have also filed objections to the $50,000 “special award” requested by the Pacchia plaintiff. The Delaware Court of Chancery held a hearing on March 4, 2015, to consider the approval of the Stipulation, and a decision by the court is expected on or before June 2, 2015. | |
Since the Stipulation does not require the Company to pay any liability on behalf of its defendant directors, the Company reversed the accrual described above as of December 31, 2014. The reversal of the accrual was partially offset by a new accrual for liabilities associated with legal fees, costs and expenses for services already received prior to the year's end, where such fees, costs and expenses had not yet been paid at the year's end. | |
Due to the inherent uncertainties of litigation, including the possibility that the Delaware Chancery Court does not approve the Stipulation, other potential outcomes are reasonably possible, including outcomes which could include an increase in the Company's liability. The Company believes the possibility that this lawsuit will have a material impact on the Company's business, financial condition, results of operation or liquidity is remote. However, if this assessment is incorrect, then an unfavorable resolution of this lawsuit could have a material adverse effect on the Company's business, financial condition, results of operation or liquidity, particularly in the period in which any potential liabilities may be recognized. | |
We believe that the defendants have meritorious defenses. If the Delaware Chancery Court does not approve the Stipulation and the parties are not otherwise able to settle the matter subsequently, then we believe the defendants intend to defend the lawsuit and other related cases vigorously at trial. However, these lawsuits and any other lawsuits are subject to inherent uncertainties and the actual outcome and costs will depend upon many unknown factors. The outcome of litigation is necessarily uncertain, and the Company could be forced to expend significant resources in the defense of these lawsuits and the Company and the defendants may not prevail. The Company also may be subject to additional claims in connection with the Purchase Transaction and Private Sale. Monitoring and defending against legal actions is time consuming for our management and detracts from our ability to fully focus our internal resources on our business. | |
Other Matters | |
In addition, we are party to routine claims, suits, investigations, audits and other proceedings arising from the ordinary course of business, including with respect to intellectual property rights, contractual claims, labor and employment matters, regulatory matters, tax matters, unclaimed property matters, compliance matters, and collection matters. In the opinion of management, after consultation with legal counsel, such routine claims and lawsuits are not significant and we do not expect them to have a material adverse effect on our business, financial condition, results of operations, or liquidity. |
Related_Party_Transactions
Related Party Transactions | 3 Months Ended |
Mar. 31, 2015 | |
Related Party Transactions | |
Related Party Transactions | 13. 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, with Vivendi and its subsidiaries. In connection with the consummation of the Purchase Transaction, we terminated the cash management arrangements with Vivendi and amended our investor agreement with Vivendi. We are also party to a number of agreements with subsidiaries and other affiliates of Vivendi, including music licensing and distribution arrangements and promotional arrangements, none of which were impacted by the Purchase Transaction. None of these services, transactions and agreements with Vivendi and its affiliates were material, either individually or in the aggregate, to the consolidated financial statements as a whole. As discussed in Note 1 of the Notes to Condensed Consolidated Financial Statements, on May 28, 2014 Vivendi sold 41 million shares, reducing its ownership interest below 10%, and is no longer considered a related party. | |
Transactions with ASAC's Affiliates | |
Pursuant to the Stock Purchase Agreement, the Company and each of Mr. Kotick, the Company's Chief Executive Officer, and Mr. Kelly, the Company's Chairman of the board of directors, entered into a waiver and acknowledgement letters (together, the “Waivers”), which provide, among other things, (i) that the Purchase Transaction, Private Sale, any public offerings by Vivendi and restructurings by Vivendi and its subsidiaries contemplated by the Stock Purchase Agreement and other transaction documents, shall not (or shall be deemed not to) constitute a “change in control” (or similar term) under their respective employment arrangements, including their employment agreements with the Company, the Company's 2008 Incentive Plan or any award agreements in respect of awards granted thereunder, or any Other Benefit Plans and Arrangements (as defined in the Waivers), (ii) (A) that the shares of our common stock acquired by ASAC and held or controlled by the ASAC Investors (as defined in the Waivers) in connection with the Transactions (as defined in the Waivers) will not be included in or count toward, (B) that the ASAC Investors will not be deemed to be a group for purposes of, and (C) any changes in the composition in the Board of Directors of the Company, in connection with or during the one-year period following the consummation of the Transactions will not contribute towards, a determination that a “change in control” or similar term has occurred with respect to Messrs. Kotick and Kelly's employment arrangements with the Company, and (iii) for the waiver by Messrs. Kotick and Kelly of their 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 grants, awards, benefits or entitlements) in connection with or as a consequence of the Transactions. | |
Also pursuant to the Stock Purchase Agreement, on October 11, 2013, we, ASAC and, for the limited purposes set forth therein, Messrs. Kotick and Kelly entered into the Stockholders Agreement. The Stockholders Agreement contains various agreements among the parties regarding voting rights, transfer rights, and a standstill agreement, among other things. |
Recently_Issued_Accounting_Sta
Recently Issued Accounting Standards | 3 Months Ended |
Mar. 31, 2015 | |
Recently Issued Accounting Standards | |
Recently Issued Accounting Standards | 14. Recently issued accounting pronouncements |
Revenue recognition | |
In May 2014, the FASB issued new accounting guidance related to revenue recognition. The new standard will replace all current U.S. GAAP guidance on this topic and eliminate all industry-specific guidance. The new revenue recognition standard provides a unified model to determine when and how revenue is recognized. The core principle is that a company should recognize revenue upon the transfer of promised goods or services to customers in an amount that reflects the consideration for which the entity expects to be entitled in exchange for those goods or services. This guidance will be effective beginning January 1, 2017 and can be applied either retrospectively to each period presented or as a cumulative-effect adjustment as of the date of adoption. We are evaluating the adoption method as well as the impact of this new accounting guidance on our financial statements. | |
Stock-based compensation | |
In June 2014, the FASB issued new guidance related to stock compensation. The new standard requires that a performance target that affects vesting, and that could be achieved after the requisite service period, be treated as a performance condition. As such, the performance target should not be reflected in estimating the grant date fair value of the award. This update further clarifies that compensation cost should be recognized in the period in which it becomes probable that the performance target will be achieved and should represent the compensation cost attributable to the periods for which the requisite service has already been rendered. The new standard is effective for fiscal years beginning after December 15, 2015 and can be applied either prospectively or retrospectively to all awards outstanding as of the beginning of the earliest annual period presented as an adjustment to opening retained earnings. Early adoption is permitted. The adoption of this guidance will not have a material impact on the Company's consolidated financial statements. | |
Consolidations | |
In February 2015, the FASB issued new guidance related to consolidations. The new standard amends certain requirements for determining whether a variable interest entity must be consolidated. The new standard is effective for fiscal years beginning after December 15, 2015. Early adoption is permitted. We are evaluating the impact, if any, of adopting this new accounting guidance on our financial statements. | |
Debt Issuance Costs | |
In April 2015, the FASB issued new guidance related to the presentation of debt issuance costs in financial statements. The new standard requires an entity to present such costs in the balance sheet as a direct deduction from the related debt liability rather than as an asset. Amortization of the costs will continue to be reported as interest expense. It is effective for annual reporting periods beginning after December 15, 2015. The new guidance will be applied retrospectively to each prior period presented. The adoption of this 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 for customers to determine whether such arrangements include software licenses. If a cloud arrangement includes a software license, then the customer should account for the software license element of the arrangement consistent with the acquisition of other software licenses. If a cloud computing arrangement does not include a software license, the customer should account for the arrangement as a service contract. The new standard is effective for fiscal years beginning after December 15, 2015. Early adoption is permitted. We are evaluating the impact, if any, of adopting this new accounting guidance on our financial statements. |
Inventories_net_Tables
Inventories, net (Tables) | 3 Months Ended | ||||||||
Mar. 31, 2015 | |||||||||
Inventories, Net | |||||||||
Schedule of inventories | At March 31, | At December 31, | |||||||
2015 | 2014 | ||||||||
Finished goods | $ | 90 | $ | 112 | |||||
Purchased parts and components | 12 | 11 | |||||||
Inventories, net | $ | 102 | $ | 123 |
Software_development_and_intel
Software development and intellectual property licenses (Tables) | 3 Months Ended | ||||||||
Mar. 31, 2015 | |||||||||
Software Development Costs and Intellectual Property Licenses | |||||||||
Summarizes the components of software development and intellectual property licenses | At | At | |||||||
March 31, | December 31, | ||||||||
2015 | 2014 | ||||||||
Internally developed software costs | $ | 247 | $ | 262 | |||||
Payments made to third-party software developers | 157 | 210 | |||||||
Total software development costs | $ | 404 | $ | 472 | |||||
Intellectual property licenses | $ | 23 | $ | 23 | |||||
Amortization of software development costs and intellectual property licenses | For the Three Months Ended March 31, | ||||||||
2015 | 2014 | ||||||||
Amortization of capitalized software development | |||||||||
costs and intellectual property licenses | $ | 147 | $ | 58 |
Intangible_Assets_Net_Tables
Intangible Assets, Net (Tables) | 3 Months Ended | |||||||||||||
Mar. 31, 2015 | ||||||||||||||
Intangible Assets, Net | ||||||||||||||
Schedule of finite lived and indefinite lived intangible assets by major class | At March 31, 2015 | |||||||||||||
Estimated | Gross | |||||||||||||
useful | carrying | Accumulated | Net carrying | |||||||||||
lives | amount | amortization | amount | |||||||||||
Acquired definite-lived intangible assets: | ||||||||||||||
License agreements and other | 3 - 10 years | $ | 98 | $ | -92 | $ | 6 | |||||||
Internally-developed franchises | 11 - 12 years | 309 | -287 | 22 | ||||||||||
Total definite-lived intangible assets | $ | 407 | $ | -379 | $ | 28 | ||||||||
Acquired indefinite-lived intangible assets: | ||||||||||||||
Activision trademark | Indefinite | 386 | ||||||||||||
Acquired trade names | Indefinite | 47 | ||||||||||||
Total indefinite-lived intangible assets | $ | 433 | ||||||||||||
At December 31, 2014 | ||||||||||||||
Estimated | Gross | |||||||||||||
useful | carrying | Accumulated | Net carrying | |||||||||||
lives | amount | amortization | amount | |||||||||||
Acquired definite-lived intangible assets: | ||||||||||||||
License agreements and other | 3 - 10 years | $ | 98 | $ | -92 | $ | 6 | |||||||
Internally-developed franchises | 11 - 12 years | 309 | -286 | 23 | ||||||||||
Total definite-lived intangible assets | $ | 407 | $ | -378 | $ | 29 | ||||||||
Acquired indefinite-lived intangible assets: | ||||||||||||||
Activision trademark | Indefinite | 386 | ||||||||||||
Acquired trade names | Indefinite | 47 | ||||||||||||
Total indefinite-lived intangible assets | $ | 433 | ||||||||||||
Schedule of finite lived intangible assets, future amortization expense | 2015 (remaining nine months) | $ | 10 | |||||||||||
2016 | 8 | |||||||||||||
2017 | 5 | |||||||||||||
2018 | 3 | |||||||||||||
2019 | 2 | |||||||||||||
Total | $ | 28 |
Fair_Value_Measurements_Tables
Fair Value Measurements (Tables) | 3 Months Ended | |||||||||||||||
Mar. 31, 2015 | ||||||||||||||||
Fair Value Measurements | ||||||||||||||||
Fair value, assets measured on a recurring and/or non-recurring basis | Fair Value Measurements at | |||||||||||||||
March 31, 2015 Using | ||||||||||||||||
Quoted | ||||||||||||||||
Prices in | ||||||||||||||||
Active | Significant | |||||||||||||||
Markets for | Other | Significant | ||||||||||||||
As of | Identical | Observable | Unobservable | |||||||||||||
March 31, | Assets | Inputs | Inputs | Balance Sheet | ||||||||||||
2015 | (Level 1) | (Level 2) | (Level 3) | Classification | ||||||||||||
Financial Assets: | ||||||||||||||||
Recurring fair value measurements: | ||||||||||||||||
Money market funds | $ | 4,271 | $ | 4,271 | $ | --- | $ | --- | Cash and cash equivalents | |||||||
Foreign government treasury bills | 34 | 34 | --- | --- | Cash and cash equivalents | |||||||||||
Foreign currency forward contracts designated | ||||||||||||||||
as hedges | 14 | --- | 14 | --- | Other current assets | |||||||||||
Auction rate securities ("ARS") | 9 | --- | --- | 9 | Long-term investments | |||||||||||
Total recurring fair value measurements | $ | 4,328 | $ | 4,305 | $ | 14 | $ | 9 | ||||||||
Fair Value Measurements at | ||||||||||||||||
December 31, 2014 Using | ||||||||||||||||
Quoted | ||||||||||||||||
Prices in | ||||||||||||||||
Active | Significant | |||||||||||||||
Markets for | Other | Significant | ||||||||||||||
As of | Identical | Observable | Unobservable | |||||||||||||
December 31, | Assets | Inputs | Inputs | Balance Sheet | ||||||||||||
2014 | (Level 1) | (Level 2) | (Level 3) | Classification | ||||||||||||
Recurring fair value measurements: | ||||||||||||||||
Money market funds | $ | 4,475 | $ | 4,475 | $ | --- | $ | --- | Cash and cash equivalents | |||||||
Foreign government treasury bills | 40 | 40 | --- | --- | Cash and cash equivalents | |||||||||||
ARS | 9 | --- | --- | 9 | Long-term investments | |||||||||||
Total recurring fair value measurements | $ | 4,524 | $ | 4,515 | $ | --- | $ | 9 | ||||||||
Fair value, assets classified as level 3 reconciliation | Level 3 | |||||||||||||||
Total | ||||||||||||||||
financial | ||||||||||||||||
assets at | ||||||||||||||||
ARS | fair | |||||||||||||||
(a) | value | |||||||||||||||
Balance at December 31, 2014 | $ | 9 | $ | 9 | ||||||||||||
Total unrealized gains included in other | ||||||||||||||||
comprehensive income | --- | --- | ||||||||||||||
Balance at March 31, 2015 | $ | 9 | $ | 9 | ||||||||||||
Level 3 | ||||||||||||||||
Total | ||||||||||||||||
financial | ||||||||||||||||
assets at | ||||||||||||||||
ARS | fair | |||||||||||||||
(a) | value | |||||||||||||||
Balance at December 31, 2013 | $ | 9 | $ | 9 | ||||||||||||
Total unrealized gains included in other | ||||||||||||||||
comprehensive income | --- | --- | ||||||||||||||
Balance at March 31, 2014 | $ | 9 | $ | 9 |
Debt_Tables
Debt (Tables) | 3 Months Ended | ||||||||||
Mar. 31, 2015 | |||||||||||
Debt Disclosure | |||||||||||
Summary of debt | 31-Mar-15 | ||||||||||
Gross Carrying | Unamortized | Net Carrying | |||||||||
Amount | Discount | Amount | |||||||||
Term Loan | $ | 1,869 | $ | -10 | $ | 1,859 | |||||
2021 Notes | 1,500 | -22 | 1,478 | ||||||||
2023 Notes | 750 | -12 | 738 | ||||||||
Total long-term debt | $ | 4,119 | $ | -44 | $ | 4,075 | |||||
31-Dec-14 | |||||||||||
Gross Carrying | Unamortized | Net Carrying | |||||||||
Amount | Discount | Amount | |||||||||
Term Loan | $ | 2,119 | $ | -10 | $ | 2,109 | |||||
2021 Notes | 1,500 | -23 | 1,477 | ||||||||
2023 Notes | 750 | -12 | 738 | ||||||||
Total long-term debt | $ | 4,369 | $ | -45 | $ | 4,324 | |||||
Schedule of maturities of debt | For the year ending December 31, | ||||||||||
2015 (remaining nine months) | $ | --- | |||||||||
2016 | --- | ||||||||||
2017 | --- | ||||||||||
2018 | --- | ||||||||||
2019 | --- | ||||||||||
Thereafter | 4,119 | ||||||||||
Total | $ | 4,119 |
Accumulated_Other_Comprehensiv1
Accumulated Other Comprehensive Income (Loss) (Tables) | 3 Months Ended | ||||||||||||||
Mar. 31, 2015 | |||||||||||||||
Accumulated Other Comprehensive Income (Loss). | |||||||||||||||
Schedule of accumulated other comprehensive income (loss) | For the Three Months Ended March 31, 2015 | ||||||||||||||
Foreign currency | Unrealized gain | Unrealized gain | |||||||||||||
translation | on available-for- | on forward | |||||||||||||
adjustments | sale securities | contracts | Total | ||||||||||||
Balance at December 31, 2014 | $ | -304 | $ | 1 | $ | --- | $ | -303 | |||||||
Other comprehensive income (loss) | |||||||||||||||
before reclassifications | -330 | --- | 14 | -316 | |||||||||||
Balance at March 31, 2015 | $ | -634 | $ | 1 | $ | 14 | $ | -619 | |||||||
For the Three Months Ended March 31, 2014 | |||||||||||||||
Foreign currency | Unrealized gain | Unrealized gain | |||||||||||||
translation | on available-for- | on forward | |||||||||||||
adjustments | sale securities | contracts | Total | ||||||||||||
Balance at December 31, 2013 | $ | 67 | $ | 1 | $ | --- | $ | 68 | |||||||
Other comprehensive income (loss) | |||||||||||||||
before reclassifications | -5 | --- | --- | -5 | |||||||||||
Balance at March 31, 2014 | $ | 62 | $ | 1 | $ | --- | $ | 63 |
Operating_Segments_and_Geograp1
Operating Segments and Geographic Region (Tables) | 3 Months Ended | ||||||||||||||
Mar. 31, 2015 | |||||||||||||||
Operating Segments and Geographic Region | |||||||||||||||
Schedule of operating segments and reconciliations of total net revenues and total segment operating income to consolidated net revenues from external customers and consolidated income before income tax expense | Three Months Ended March 31, | ||||||||||||||
2015 | 2014 | 2015 | 2014 | ||||||||||||
Income (loss) from operations | |||||||||||||||
Net revenues | before income tax expense | ||||||||||||||
Activision | $ | 303 | $ | 237 | $ | 66 | $ | 2 | |||||||
Blizzard | 352 | 462 | 139 | 239 | |||||||||||
Distribution | 48 | 73 | -1 | -1 | |||||||||||
Operating segments total | 703 | 772 | 204 | 240 | |||||||||||
Reconciliation to consolidated net revenues / | |||||||||||||||
consolidated income before income tax | |||||||||||||||
expense: | |||||||||||||||
Net effect from deferral of net revenues and | |||||||||||||||
related cost of sales | 575 | 339 | 362 | 219 | |||||||||||
Stock-based compensation expense | --- | --- | -23 | -30 | |||||||||||
Amortization of intangible assets | --- | --- | -1 | -2 | |||||||||||
Consolidated net revenues / operating income | $ | 1,278 | $ | 1,111 | $ | 542 | $ | 427 | |||||||
Interest and other expense, net | 50 | 51 | |||||||||||||
Consolidated income before income tax expense | $ | 492 | $ | 376 | |||||||||||
Schedule of net revenues from external customers by geographic region | Three months ended March 31, | ||||||||||||||
2015 | 2014 | ||||||||||||||
Net revenues by geographic region: | |||||||||||||||
North America | $ | 704 | $ | 563 | |||||||||||
Europe | 464 | 462 | |||||||||||||
Asia Pacific | 110 | 86 | |||||||||||||
Total consolidated net revenues | $ | 1,278 | $ | 1,111 | |||||||||||
Schedule of net revenues by platform | Three Months Ended March 31, | ||||||||||||||
2015 | 2014 | ||||||||||||||
Net revenues by platform: | |||||||||||||||
Console | $ | 758 | $ | 654 | |||||||||||
Online 1 | 272 | 201 | |||||||||||||
PC | 114 | 100 | |||||||||||||
Mobile and other2 | 86 | 83 | |||||||||||||
Total Activision Blizzard net revenues | 1,230 | 1,038 | |||||||||||||
Distribution | 48 | 73 | |||||||||||||
Total consolidated net revenues | $ | 1,278 | $ | 1,111 | |||||||||||
Long-lived assets by geographic region | At March 31, | At December 31, | |||||||||||||
2015 | 2014 | ||||||||||||||
Long-lived assets* by geographic region: | |||||||||||||||
North America | $ | 129 | $ | 122 | |||||||||||
Europe | 24 | 29 | |||||||||||||
Asia Pacific | 5 | 6 | |||||||||||||
Total long-lived assets by geographic region | $ | 158 | $ | 157 |
Computation_of_Earnings_Loss_P1
Computation of Earnings (Loss) Per Basic/Diluted Common Share (Tables) | 3 Months Ended | |||||||||
Mar. 31, 2015 | ||||||||||
Computation of Earnings (Loss) Per Basic/Diluted Common Share | ||||||||||
Schedule of computation of earnings per share | For the Three Months Ended March 31, | |||||||||
2015 | 2014 | |||||||||
Numerator: | ||||||||||
Consolidated net income | $ | 394 | $ | 293 | ||||||
Less: Distributed earnings to unvested stock-based awards | ||||||||||
that participate in earnings | -4 | -5 | ||||||||
Less: Undistributed earnings allocated to unvested stock-based | ||||||||||
awards that participate in earnings | -3 | -3 | ||||||||
Numerator for basic and diluted earnings per common share – income | ||||||||||
available to common shareholders | $ | 387 | $ | 285 | ||||||
Denominator: | ||||||||||
Denominator for basic earnings per common share - weighted-average | ||||||||||
common shares outstanding | 723 | 709 | ||||||||
Effect of potential dilutive common shares under the treasury stock | ||||||||||
method: | 8 | 11 | ||||||||
Denominator for diluted earnings per common share - weighted- | ||||||||||
average common shares outstanding plus dilutive common shares | ||||||||||
under the treasury stock method | 731 | 720 | ||||||||
Basic earnings per common share | $ | 0.54 | $ | 0.4 | ||||||
Diluted earnings per common share | $ | 0.53 | $ | 0.4 |
Description_of_Business_and_Ba1
Description of Business and Basis of Consolidation and Presentation (Details) | 3 Months Ended |
Mar. 31, 2015 | |
segments | |
Description of Business [Line Items] | |
Number of operating segments | 3 |
Description_of_Business_and_Ba2
Description of Business and Basis of Consolidation and Presentation (Details 2) (USD $) | 0 Months Ended | ||
Oct. 11, 2013 | 28-May-14 | Mar. 31, 2015 | |
Stock Purchase Agreement [Line Items] | |||
Treasury Stock, Acquired, Shares | 429,000,000 | ||
Common Stock Outstanding | 726,000,000 | ||
Activision Blizzard | |||
Stock Purchase Agreement [Line Items] | |||
Treasury Stock, Acquired, Shares | 429,000,000 | ||
Treasury Stock, Acquired, Value | 5,830,000,000 | ||
Treasury Stock, Price Per Share | 13.6 | ||
Public | |||
Stock Purchase Agreement [Line Items] | |||
Percent of Activision Blizzard common stock owned by a specific shareholder | 70.00% | ||
Vivendi | |||
Stock Purchase Agreement [Line Items] | |||
Percent of Activision Blizzard common stock owned by a specific shareholder | 6.00% | ||
Stock Sold by Vivendi, Shares | 41,000,000 | ||
Stock Sold by Vivendi, Percent of Holdings | 50.00% | ||
Stock Sold By Vivendi, Value of Proceeds | 850,000,000 | ||
Shares of Activision Blizzard common stock owned by a specific shareholder | 41,000,000 | ||
ASAC | |||
Stock Purchase Agreement [Line Items] | |||
Stock Purchased By ASAC, Shares | 172,000,000 | ||
Stock Purchased By ASAC, Value | 2,340,000,000 | ||
Stock Purchased By ASAC, Price Per Share | 13.6 | ||
Percent of Activision Blizzard common stock owned by a specific shareholder | 24.00% | ||
Shares of Activision Blizzard common stock owned by a specific shareholder | 172,000,000 |
Inventories_net_Details
Inventories, net (Details) (USD $) | Mar. 31, 2015 | Dec. 31, 2014 |
In Millions, unless otherwise specified | ||
Inventories, Net | ||
Finished goods | $90 | $112 |
Purchased parts and components | 12 | 11 |
Inventories, net | 102 | 123 |
Inventory reserves | $50 | $52 |
Software_Development_Costs_and1
Software Development Costs and Intellectual Property Licenses (Details) (USD $) | 3 Months Ended | ||
In Millions, unless otherwise specified | Mar. 31, 2015 | Mar. 31, 2014 | Dec. 31, 2014 |
Software development and intellectual property licenses: | |||
Internally developed software costs | $247 | $262 | |
Payments made to third-party software developers | 157 | 210 | |
Total software development costs | 404 | 472 | |
Intellectual property licenses | 23 | 23 | |
Amortization: | |||
Amortization of capitalized software development costs and intellectual property licenses | $147 | $58 |
Intangible_Assets_Net_Details
Intangible Assets, Net (Details) (USD $) | 3 Months Ended | 12 Months Ended | |
In Millions, unless otherwise specified | Mar. 31, 2015 | Mar. 31, 2014 | Dec. 31, 2014 |
Amortization expense disclosure | |||
Amortization expense | $1 | $2 | |
Indefinite Lived Intangible Assets | |||
Net carrying amount, indefinite-lived intangible assets | 433 | 433 | |
Finite-Lived Intangible Assets | |||
Gross carrying amount, definite-lived intangible assets | 407 | 407 | |
Accumulated amortization, definite-lived intangible assets | -379 | -378 | |
Net carrying amount, definite-lived intangible assets | 28 | 29 | |
Definite-lived intangible assets, future amortization expense disclosure | |||
2015 (remaining nine months) | 10 | ||
2016 | 8 | ||
2017 | 5 | ||
2018 | 3 | ||
2019 | 2 | ||
Total | 28 | 29 | |
Activision trademark | |||
Indefinite Lived Intangible Assets | |||
Net carrying amount, indefinite-lived intangible assets | 386 | 386 | |
License agreements and other | |||
Finite-Lived Intangible Assets | |||
Gross carrying amount, definite-lived intangible assets | 98 | 98 | |
Accumulated amortization, definite-lived intangible assets | -92 | -92 | |
Net carrying amount, definite-lived intangible assets | 6 | 6 | |
Definite-lived intangible assets, future amortization expense disclosure | |||
Total | 6 | 6 | |
License agreements and other | Maximum | |||
Finite-Lived Intangible Assets | |||
Estimated useful life | 10 years | 10 years | |
License agreements and other | Minimum | |||
Finite-Lived Intangible Assets | |||
Estimated useful life | 3 years | 3 years | |
Internally developed franchises | |||
Finite-Lived Intangible Assets | |||
Gross carrying amount, definite-lived intangible assets | 309 | 309 | |
Accumulated amortization, definite-lived intangible assets | -287 | -286 | |
Net carrying amount, definite-lived intangible assets | 22 | 23 | |
Definite-lived intangible assets, future amortization expense disclosure | |||
Total | 22 | 23 | |
Internally developed franchises | Maximum | |||
Finite-Lived Intangible Assets | |||
Estimated useful life | 12 years | 12 years | |
Internally developed franchises | Minimum | |||
Finite-Lived Intangible Assets | |||
Estimated useful life | 11 years | 11 years | |
Acquired trade names | |||
Indefinite Lived Intangible Assets | |||
Net carrying amount, indefinite-lived intangible assets | $47 | 47 |
Fair_Value_Measurements_Detail
Fair Value Measurements (Details) (Recurring, USD $) | Mar. 31, 2015 | Dec. 31, 2014 |
In Millions, unless otherwise specified | ||
Fair value measurements using quoted prices in active markets for identical assets (Level 1) | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Total assets at fair value | $4,305 | $4,515 |
Fair value measurements using quoted prices in active markets for identical assets (Level 1) | Money market funds | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Total assets at fair value | 4,271 | 4,475 |
Fair value measurements using quoted prices in active markets for identical assets (Level 1) | Foreign government treasury bills | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Total assets at fair value | 34 | 40 |
Fair value measurements using quoted prices in active markets for identical assets (Level 1) | ARS | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Total assets at fair value | 0 | 0 |
Fair value measurements using quoted prices in active markets for identical assets (Level 1) | Foreign exchange contract derivatives | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Total assets at fair value | 0 | |
Fair value measurements using significant other observable inputs (Level 2) | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Total assets at fair value | 14 | 0 |
Fair value measurements using significant other observable inputs (Level 2) | Money market funds | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Total assets at fair value | 0 | 0 |
Fair value measurements using significant other observable inputs (Level 2) | Foreign government treasury bills | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Total assets at fair value | 0 | 0 |
Fair value measurements using significant other observable inputs (Level 2) | ARS | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Total assets at fair value | 0 | 0 |
Fair value measurements using significant other observable inputs (Level 2) | Foreign exchange contract derivatives | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Total assets at fair value | 14 | |
Fair value measurements using significant unobservable inputs (Level 3) | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Total assets at fair value | 9 | 9 |
Fair value measurements using significant unobservable inputs (Level 3) | Money market funds | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Total assets at fair value | 0 | 0 |
Fair value measurements using significant unobservable inputs (Level 3) | Foreign government treasury bills | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Total assets at fair value | 0 | 0 |
Fair value measurements using significant unobservable inputs (Level 3) | ARS | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Total assets at fair value | 9 | 9 |
Fair value measurements using significant unobservable inputs (Level 3) | Foreign exchange contract derivatives | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Total assets at fair value | 0 | |
Fair value | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Total assets at fair value | 4,328 | 4,524 |
Fair value | Money market funds | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Total assets at fair value | 4,271 | 4,475 |
Fair value | Foreign government treasury bills | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Total assets at fair value | 34 | 40 |
Fair value | ARS | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Total assets at fair value | 9 | 9 |
Fair value | Foreign exchange contract derivatives | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Total assets at fair value | $14 |
Fair_Value_Measurements_Detail1
Fair Value Measurements (Details 2) (USD $) | 3 Months Ended | |
In Millions, unless otherwise specified | Mar. 31, 2015 | Mar. 31, 2014 |
Fair Value Assets Measured on Recurring Basis Unobservable Input Reconciliation Asset | ||
Level 3 measurement reconciliation, recurring basis, fair value assets beginning balance | $9 | $9 |
Total unrealized gains included in other comprehensive income | 0 | 0 |
Level 3 measurement reconciliation, recurring basis, fair value assets ending balance | 9 | 9 |
Maximum | ||
Fair Value Assets Measured on Recurring Basis Unobservable Input Reconciliation Asset | ||
Percentage of assets measured on recurring basis at fair value using significant unobservable inputs | 1.00% | |
Auction rate securities | ||
Fair Value Assets Measured on Recurring Basis Unobservable Input Reconciliation Asset | ||
Level 3 measurement reconciliation, recurring basis, fair value assets beginning balance | 9 | 9 |
Total unrealized gains included in other comprehensive income | 0 | 0 |
Level 3 measurement reconciliation, recurring basis, fair value assets ending balance | $9 | $9 |
Fair_Value_Measurements_Detail2
Fair Value Measurements (Details 3) (Foreign exchange contract derivatives, USD $) | 3 Months Ended | ||
Mar. 31, 2015 | Mar. 31, 2014 | Dec. 31, 2014 | |
Derivatives, Fair Value [Line Items] | |||
Maximum length of time over which our foreign currency forward contracts mature | 1 year | ||
Not Designated as Hedges | |||
Derivatives, Fair Value [Line Items] | |||
Fair Value, Assets, Not Designated As Hedges | $0 | ||
Pre-tax net gain (loss) on foreign currency contracts | 0 | 0 | |
Notional amount of foreign currency derivatives | 0 | 11,000,000 | |
Designated as Hedges | |||
Derivatives, Fair Value [Line Items] | |||
Net unrealized gains to be reclassified into earnings within the next twelve months | 14,000,000 | ||
Notional amount of foreign currency derivatives | 213,000,000 | 0 | 0 |
Ineffective Portion Relating to these Hedges | $0 |
Fair_Value_Measurements_Detail3
Fair Value Measurements (Details 4) (Nonrecurring, USD $) | 3 Months Ended | |
Mar. 31, 2015 | Mar. 31, 2014 | |
Nonrecurring | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Impairment charges - nonrecurring | $0 | $0 |
Debt_Details
Debt (Details) (USD $) | 3 Months Ended | 0 Months Ended | |
In Millions, unless otherwise specified | Mar. 31, 2015 | Mar. 31, 2014 | Oct. 11, 2013 |
Debt Instrument [Line Items] | |||
Interest expense | $49 | $51 | |
Credit Facilities | |||
Debt Instrument [Line Items] | |||
Variable rate at end of period | 3.25% | ||
Percentage of consolidated total assets pledged as collateral | 70.00% | ||
Credit Facilities | Prime Rate | Base Rate Loans | |||
Debt Instrument [Line Items] | |||
Description of variable rate basis | Prime rate as designated by the administrative agent | ||
Credit Facilities | Federal Funds Effective Rate | Base Rate Loans | |||
Debt Instrument [Line Items] | |||
Applicable margin (as a percent) | 0.50% | ||
Description of variable rate basis | Federal funds rate | ||
Credit Facilities | LIBOR Rate | Base Rate Loans | |||
Debt Instrument [Line Items] | |||
Applicable margin (as a percent) | 1.00% | ||
Description of variable rate basis | LIBOR rate for one month | ||
Credit Facilities | LIBOR Rate | LIBOR Rate Loans | |||
Debt Instrument [Line Items] | |||
Description of variable rate basis | LIBOR | ||
Term Loan | |||
Debt Instrument [Line Items] | |||
Required quarterly payments, percentage of original principal | 0.25% | ||
LIBOR floor rate | 0.75% |
Debt_Details_2
Debt (Details 2) (USD $) | 3 Months Ended | 0 Months Ended | |||||
Mar. 31, 2015 | Mar. 31, 2014 | Feb. 11, 2015 | Feb. 11, 2014 | Dec. 31, 2014 | Oct. 11, 2013 | Sep. 19, 2013 | |
Long-term Debt | |||||||
Total | $4,119,000,000 | $4,369,000,000 | |||||
Unamortized Discount | -44,000,000 | -45,000,000 | |||||
Total Net Carrying Amount, Long-Term Debt | 4,075,000,000 | 4,324,000,000 | |||||
Maturites of Debt | |||||||
2015 (remaining nine months) | 0 | ||||||
2016 | 0 | ||||||
2017 | 0 | ||||||
2018 | 0 | ||||||
2019 | 0 | ||||||
Thereafter | 4,119,000,000 | ||||||
Total | 4,119,000,000 | 4,369,000,000 | |||||
Deferred Financing Costs | |||||||
Amortization Expense, Deferred Financing Costs | 0 | 0 | |||||
Financing Facilities | |||||||
Percentage of principal repayable to option holders upon certain criteria | 101.00% | ||||||
Maximum percentage of outstanding Notes that can be redeemed with net cash proceeds from one or more qualified equity offerings | 35.00% | ||||||
Amortization of the debt discount | 1,000,000 | 2,000,000 | |||||
Repayment of long-term debt | -250,000,000 | -375,000,000 | |||||
Term Loan | |||||||
Long-term Debt | |||||||
Total | 1,869,000,000 | 2,119,000,000 | |||||
Unamortized Discount | -10,000,000 | -10,000,000 | |||||
Net Carrying Amount | 1,859,000,000 | 2,109,000,000 | |||||
Maturites of Debt | |||||||
Total | 1,869,000,000 | 2,119,000,000 | |||||
Financing Facilities | |||||||
Maximum borrowing capacity | 2,500,000,000 | ||||||
Repayment of long-term debt | -250,000,000 | -375,000,000 | |||||
Revolver | |||||||
Financing Facilities | |||||||
Maximum borrowing capacity | 250,000,000 | ||||||
Amount of letters of credit that can be issued under the Revolver | 50,000,000 | ||||||
Commitment fees for the Revolver | 0 | 0 | |||||
Percentage of Revolver outstanding which triggers certain financial covenants | 15.00% | ||||||
Letters of credit issued under the revolver | 0 | 0 | |||||
Amount drawn on the Revolver | 0 | 0 | |||||
Unsecured Notes | |||||||
Maturites of Debt | |||||||
Interest payable | 5,000,000 | 38,000,000 | |||||
2021 Notes | |||||||
Long-term Debt | |||||||
Total | 1,500,000,000 | 1,500,000,000 | 1,500,000,000 | ||||
Unamortized Discount | -22,000,000 | -23,000,000 | |||||
Net Carrying Amount | 1,478,000,000 | 1,477,000,000 | |||||
Maturites of Debt | |||||||
Total | 1,500,000,000 | 1,500,000,000 | 1,500,000,000 | ||||
Financing Facilities | |||||||
Interest rate | 5.63% | ||||||
2021 Notes | Fair value measurements using significant other observable inputs (Level 2) | |||||||
Financing Facilities | |||||||
Fair Value of Notes | 1,599,000,000 | 1,586,000,000 | |||||
2023 Notes | |||||||
Long-term Debt | |||||||
Total | 750,000,000 | 750,000,000 | 750,000,000 | ||||
Unamortized Discount | -12,000,000 | -12,000,000 | |||||
Net Carrying Amount | 738,000,000 | 738,000,000 | |||||
Maturites of Debt | |||||||
Total | 750,000,000 | 750,000,000 | 750,000,000 | ||||
Financing Facilities | |||||||
Interest rate | 6.13% | ||||||
2023 Notes | Fair value measurements using significant other observable inputs (Level 2) | |||||||
Financing Facilities | |||||||
Fair Value of Notes | $819,000,000 | $810,000,000 |
Accumulated_Other_Comprehensiv2
Accumulated Other Comprehensive Income (Loss) (Details) (USD $) | 3 Months Ended | |
In Millions, unless otherwise specified | Mar. 31, 2015 | Mar. 31, 2014 |
Accumulated other comprehensive income (loss) [Line Items] | ||
Accumulated other comprehensive income (loss), balance at beginning of period | ($303) | $68 |
Other comprehensive income (loss) before reclassifications | -316 | -5 |
Accumulated other comprehensive income (loss), balance at end of period | -619 | 63 |
Foreign currency translation adjustment | ||
Accumulated other comprehensive income (loss) [Line Items] | ||
Accumulated other comprehensive income (loss), balance at beginning of period | -304 | 67 |
Other comprehensive income (loss) before reclassifications | -330 | -5 |
Accumulated other comprehensive income (loss), balance at end of period | -634 | 62 |
Unrealized gain on available-for-sale securities | ||
Accumulated other comprehensive income (loss) [Line Items] | ||
Accumulated other comprehensive income (loss), balance at beginning of period | 1 | 1 |
Other comprehensive income (loss) before reclassifications | 0 | 0 |
Accumulated other comprehensive income (loss), balance at end of period | 1 | 1 |
Unrealized gain on forward contracts designated as hedges | ||
Accumulated other comprehensive income (loss) [Line Items] | ||
Accumulated other comprehensive income (loss), balance at beginning of period | 0 | 0 |
Other comprehensive income (loss) before reclassifications | 14 | 0 |
Accumulated other comprehensive income (loss), balance at end of period | $14 | $0 |
Operating_Segments_and_Geograp2
Operating Segments and Geographic Region (Details) (USD $) | 3 Months Ended | ||
In Millions, unless otherwise specified | Mar. 31, 2015 | Mar. 31, 2014 | Dec. 31, 2014 |
customers | customers | ||
segments | |||
Operating Segments and Geographic Region | |||
Number of operating segments | 3 | ||
Segment Reporting Information [Line Items] | |||
Consolidated net revenues | $1,278 | $1,111 | |
Income from operations | 542 | 427 | |
Net effect from changes in the deferral of net revenues | 575 | 339 | |
Amortization of intangible assets | -1 | -2 | |
Interest and other expense, net | 50 | 51 | |
Income before income tax expense | 492 | 376 | |
Long-lived assets | 158 | 157 | |
Number of significant customers for concentration of credit risk | 0 | 0 | |
US | |||
Segment Reporting Information [Line Items] | |||
Revenues as a percentage of consolidated net revenues | 53.00% | 48.00% | |
UK | |||
Segment Reporting Information [Line Items] | |||
Revenues as a percentage of consolidated net revenues | 12.00% | 15.00% | |
France | |||
Segment Reporting Information [Line Items] | |||
Revenues as a percentage of consolidated net revenues | 8.00% | 13.00% | |
Operating segments | |||
Segment Reporting Information [Line Items] | |||
Consolidated net revenues | 703 | 772 | |
Income from operations | 204 | 240 | |
Long-lived assets | 158 | 157 | |
Operating segments | Total platform | |||
Segment Reporting Information [Line Items] | |||
Consolidated net revenues | 1,230 | 1,038 | |
Operating segments | Console | |||
Segment Reporting Information [Line Items] | |||
Consolidated net revenues | 758 | 654 | |
Operating segments | Online | |||
Segment Reporting Information [Line Items] | |||
Consolidated net revenues | 272 | 201 | |
Operating segments | PC | |||
Segment Reporting Information [Line Items] | |||
Consolidated net revenues | 114 | 100 | |
Operating segments | Other | |||
Segment Reporting Information [Line Items] | |||
Consolidated net revenues | 86 | 83 | |
Operating segments | North America | |||
Segment Reporting Information [Line Items] | |||
Consolidated net revenues | 704 | 563 | |
Long-lived assets | 129 | 122 | |
Operating segments | Europe | |||
Segment Reporting Information [Line Items] | |||
Consolidated net revenues | 464 | 462 | |
Long-lived assets | 24 | 29 | |
Operating segments | Asia Pacific | |||
Segment Reporting Information [Line Items] | |||
Consolidated net revenues | 110 | 86 | |
Long-lived assets | 5 | 6 | |
Operating segments | Activision | |||
Segment Reporting Information [Line Items] | |||
Consolidated net revenues | 303 | 237 | |
Income from operations | 66 | 2 | |
Operating segments | Blizzard | |||
Segment Reporting Information [Line Items] | |||
Consolidated net revenues | 352 | 462 | |
Income from operations | 139 | 239 | |
Operating segments | Distribution | |||
Segment Reporting Information [Line Items] | |||
Consolidated net revenues | 48 | 73 | |
Income from operations | -1 | -1 | |
Reconciliation items | |||
Segment Reporting Information [Line Items] | |||
Net effect from changes in the deferral of net revenues and related cost of sales | 362 | 219 | |
Stock-based compensation expense | -23 | -30 | |
Amortization of intangible assets | ($1) | ($2) |
Income_Taxes_Details
Income Taxes (Details) (USD $) | 3 Months Ended | |
In Millions, unless otherwise specified | Mar. 31, 2015 | Mar. 31, 2014 |
Income Taxes | ||
Income tax expense | $98 | $83 |
Effective tax rate (in percent) | 19.90% | 22.10% |
Statutory income tax rate (in percent) | 35.00% |
Income_Taxes_Details_2
Income Taxes (Details 2) (USD $) | 3 Months Ended | 0 Months Ended | |
In Millions, unless otherwise specified | Mar. 31, 2015 | Mar. 31, 2014 | Oct. 11, 2013 |
Income Tax [Line Items] | |||
Potential Future Tax Benefit | $98 | $83 | |
New VH | |||
Income Tax [Line Items] | |||
Net Operating Loss Carryforwards | 760 | ||
Net operating loss utilized - New VH NOL | 152 | ||
Net Operating Loss Carryforward Indemnification Amount Obtained | 200 | ||
Net Operating Loss tax attribute received from Purchase Transaction | 53 | ||
Indemnification asset recorded in other assets | 121 | ||
Indemnification asset recorded in treasury stock | 121 | ||
Expected | New VH | |||
Income Tax [Line Items] | |||
Potential Future Tax Benefit | ($266) |
Computation_of_Earnings_Loss_P2
Computation of Earnings (Loss) Per Basic/Diluted Common Share (Details) (USD $) | 3 Months Ended | |
In Millions, except Per Share data, unless otherwise specified | Mar. 31, 2015 | Mar. 31, 2014 |
Numerator: | ||
Consolidated net income (loss) | $394 | $293 |
Less: Distributed earnings to unvested share-based awards that participate in earnings | -4 | -5 |
Less: Undistributed earnings allocated to unvested share-based awards that participate in earnings | -3 | -3 |
Numerator for basic earnings per common share-income (loss) available to common shareholders | $387 | $285 |
Denominator: | ||
Denominator for basic earnings per common share - weighted-average common shares outstanding (in shares) | 723 | 709 |
Effect of potential dilutive common shares under the treasury stock method: | ||
Employee stock options and others (in shares) | 8 | 11 |
Denominator for diluted earnings per common share - weighted-average common shares outstanding plus dilutive common shares under treasury stock method (in shares) | 731 | 720 |
Basic earnings per common share (in dollars per share) | $0.54 | $0.40 |
Diluted earnings per common share (in dollars per share) | $0.53 | $0.40 |
Performance shares not included in the computation of EPS | 4 | 3 |
Common stock weighted-average shares, unvested restricted stock rights (in shares) | 10 | 17 |
Options | ||
Antidilutive [Line Items] | ||
Antidilutive securities excluded from computation of diluted earnings per share (in shares) | 6 | 3 |
Capital_Transactions_Details
Capital Transactions (Details) (USD $) | 0 Months Ended | 3 Months Ended | |
Oct. 11, 2013 | Feb. 03, 2015 | Mar. 31, 2015 | |
Share Repurchase Program [Line Items] | |||
Shares of common stock repurchased | 429,000,000 | ||
2015 Share Repurchase Program | |||
Share Repurchase Program [Line Items] | |||
Stock repurchase program, dollar amount authorized | $750,000,000 | ||
Cost of common stock repurchased under the stock repurchase program | $0 | ||
Shares of common stock repurchased | 0 |
Capital_Transactions_Details_2
Capital Transactions (Details 2) (USD $) | 0 Months Ended | 3 Months Ended | ||
In Millions, except Per Share data, unless otherwise specified | 30-May-14 | 14-May-14 | Mar. 31, 2015 | Mar. 31, 2014 |
Dividends | ||||
Dividends per common share (in dollars per share) | $0.23 | $0.20 | ||
Cash dividend payment | $143 | |||
Dividend equivalent payment | 4 | |||
Dividends payable | $170 |
Commitments_and_Contingencies_
Commitments and Contingencies (Details 2) (USD $) | 12 Months Ended |
Dec. 31, 2014 | |
Maximum | |
Loss Contingencies [Line Items] | |
D&O insurance coverage limit | $200,000,000 |
Pacchia case | Pending litigation | Plaintiff's expert's reports | Damages to the Company | |
Loss Contingencies [Line Items] | |
Alleged damages, value | 540,000,000 |
Pacchia case | Pending litigation | Plaintiff's expert's reports | Damages to Class | |
Loss Contingencies [Line Items] | |
Alleged damages, value | 640,000,000 |
Pacchia case | Pending litigation | Plaintiff's expert's reports | Disgorgement claims | |
Loss Contingencies [Line Items] | |
Alleged damages, value | 1,000,000,000 |
Pacchia case | Pending litigation | Defendants' experts' reports | Damages to the Company | |
Loss Contingencies [Line Items] | |
Alleged damages, value | 0 |
Pacchia case | Pending litigation | Defendants' experts' reports | Damages to Class | |
Loss Contingencies [Line Items] | |
Alleged damages, value | $0 |
Commitments_and_Contingencies_1
Commitments and Contingencies (Details 3) (Pacchia case, USD $) | 0 Months Ended | 12 Months Ended |
Nov. 19, 2014 | Dec. 31, 2014 | |
Proposed settlement agreement related to the Purchase Transaction and Private Sale | ||
Litigation Settlement [Line Items] | ||
Settlement fund | $275,000,000 | |
Proposed settlement agreement related to the Purchase Transaction and Private Sale | Payment to plaintiff's attorney | ||
Litigation Settlement [Line Items] | ||
Payments from settlement fund | 72,500,000 | |
Proposed settlement agreement related to the Purchase Transaction and Private Sale | Payment to the Company to be recorded within Shareholders' Equity | ||
Litigation Settlement [Line Items] | ||
Payments from settlement fund | 202,500,000 | |
Objections to settlement agreement | Special award to lead plaintiff | ||
Litigation Settlement [Line Items] | ||
Payments from settlement fund | 50,000 | |
Additional requests filed | Reallocation of plaintiff's attorney's fees | ||
Litigation Settlement [Line Items] | ||
Payments from settlement fund | $7,250,000 |
Related_Party_Transactions_Det
Related Party Transactions (Details) (Vivendi Games) | 28-May-14 |
In Millions, unless otherwise specified | |
Vivendi Games | |
Stock Purchase Agreement [Line Items] | |
Stock Sold by Vivendi, Shares | 41 |