Activision Blizzard, Inc
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ACTIVISION BLIZZARD, INC. FORM 10-K (Annual Report) Filed 02/27/18 for the Period Ending 12/31/17 Address 3100 OCEAN PARK BLVD SANTA MONICA, CA, 90405 Telephone 3102552000 CIK 0000718877 Symbol ATVI SIC Code 7372 - Services-Prepackaged Software Industry Internet Services Sector Technology Fiscal Year 12/31 http://www.edgar-online.com © Copyright 2018, EDGAR Online, a division of Donnelley Financial Solutions. All Rights Reserved. Distribution and use of this document restricted under EDGAR Online, a division of Donnelley Financial Solutions, Terms of Use. Use these links to rapidly review the document Table of Contents FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K (Mark one) ý ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Fiscal Year Ended December 31, 2017 OR o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission File Number 1-15839 ACTIVISION BLIZZARD, INC. (Exact name of registrant as specified in its charter) Delaware 95-4803544 (State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.) 3100 Ocean Park Boulevard, Santa Monica, CA 90405 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (310) 255-2000 Securities registered pursuant to Section 12(b) of the Act: Title of each Class Name of Each Exchange on Which Registered Common Stock, par value $.000001 per share The Nasdaq Global Select Market Securities registered pursuant to Section 12(g) of the Act: None Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ý No o Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15 (d) of the Act. Yes o No ý Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ý No o Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ý No o Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ý Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act. Large Accelerated Filer ý Accelerated Filer o Non-accelerated Filer o Smaller Reporting Company o (Do not check if a Emerging Growth Company o smaller reporting company) If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes o No ý The aggregate market value of the registrant's Common Stock held by non-affiliates on June 30, 2017 (based on the closing sale price as reported on the Nasdaq) was $42,587,342,045. The number of shares of the registrant's Common Stock outstanding at February 20, 2018 was 758,631,663. Documents Incorporated by Reference Portions of the registrant's definitive Proxy Statement, to be filed with the Securities and Exchange Commission with respect to the 2018 Annual Meeting of Shareholders which is expected to be held on June 26, 2018, are incorporated by reference into Part III of this Annual Report. Table of Contents ACTIVISION BLIZZARD, INC. AND SUBSIDIARIES Table of Contents Page No. PART I. 2 Cautionary Statement 2 Item 1. Business 2 Item 1A. Risk Factors 12 Item 1B. Unresolved Staff Comments 32 Item 2. Properties 32 Item 3. Legal Proceedings 32 Item 4. Mine Safety Disclosures 33 PART II. 34 Item 5. Market for Registrant's Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity Securities 34 Item 6. Selected Financial Data 37 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations 38 Item 7A. Quantitative and Qualitative Disclosures about Market Risk 79 Item 8. Financial Statements and Supplementary Data 81 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 81 Item 9A. Controls and Procedures 81 Item 9B. Other Information 82 PART III. 83 Item 10. Directors, Executive Officers, and Corporate Governance 83 Item 11. Executive Compensation 83 Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters 83 Item 13. Certain Relationships and Related Transactions, and Director Independence 83 Item 14. Principal Accounting Fees and Services 83 PART IV. 84 Item 15. Exhibits, Financial Statement Schedule 84 Item 16. Form 10-K Summary 84 Exhibit Index E-1 SIGNATURES E-8 1 Table of Contents PART I CAUTIONARY STATEMENT This Annual Report on Form 10-K contains, or incorporates by reference, certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements consist of any statement other than a recitation of historical facts and include, but are not limited to: (1) projections of revenues, expenses, income or loss, earnings or loss per share, cash flow, or other financial items; (2) statements of our plans and objectives, including those related to releases of products or services; (3) statements of future financial or operating performance, including the impact of tax items thereon; and (4) statements of assumptions underlying such statements. Activision Blizzard, Inc. generally uses words such as "outlook," "forecast," "will," "could," "should," "would," "to be," "plan," "plans," "believes," "may," "might," "expects," "intends," "intends as," "anticipates," "estimate," "future," "positioned," "potential," "project," "remain," "scheduled," "set to," "subject to," "upcoming" and other similar expressions to help identify forward-looking statements. Forward-looking statements are subject to business and economic risks, reflect management's current expectations, estimates and projections about our business, and are inherently uncertain and difficult to predict. The company cautions that a number of important factors could cause Activision Blizzard, Inc.'s actual future results and other future circumstances to differ materially from those expressed in any forward-looking statements. Some of the risk factors that could cause our actual results to differ from those stated in forward-looking statements can be found in "Risk Factors" included in Part I, Item 1A of this Annual Report on Form 10-K. The forward-looking statements contained herein are based upon information available to us as of the date of this Annual Report on Form 10-K and we assume no obligation to update any such forward-looking statements. Although these forward-looking statements are believed to be true when made, they may ultimately prove to be incorrect. These statements are not guarantees of our future performance and are subject to risks, uncertainties and other factors, some of which are beyond our control and may cause actual results to differ materially from current expectations. Activision Blizzard Inc.'s names, abbreviations thereof, logos, and product and service designators are all either the registered or unregistered trademarks or trade names of Activision Blizzard. All other product or service names are the property of their respective owners. All dollar amounts referred to in, or contemplated by, this Annual Report on Form 10-K refer to United States ("U.S.") dollars, unless otherwise explicitly stated to the contrary. Item 1. BUSINESS Overview Activision Blizzard, Inc. is a leading global developer and publisher of interactive entertainment content and services. We develop and distribute content and services on video game consoles, personal computers ("PC"), and mobile devices. We also operate esports events and leagues and create film and television content based on our games. The terms "Activision Blizzard," the "Company," "we," "us," and "our" are used to refer collectively to Activision Blizzard, Inc. and its subsidiaries. The Company was originally incorporated in California in 1979 and was reincorporated in Delaware in December 1992. In connection with the 2008 business combination (the "Business Combination") by and among the Company (then known as Activision, Inc.), Vivendi S.A. ("Vivendi"), and Vivendi Games, Inc. ("Vivendi Games"), an indirect wholly-owned subsidiary of Vivendi, we were renamed Activision Blizzard, Inc. The common stock of Activision Blizzard is traded on The Nasdaq Stock Market under the ticker symbol "ATVI." 2 Table of Contents The King Acquisition On February 23, 2016 (the "King Closing Date"), we acquired King Digital Entertainment, a leading interactive mobile entertainment company ("King"), by purchasing all of its outstanding shares (the "King Acquisition"). We made this acquisition because we believed that the addition of King's highly complementary mobile business positioned us as a global leader in interactive entertainment across mobile, console, and PC platforms, and aligned us for future growth.