UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 8-K

CURRENT REPORT

PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

Date of report (Date of earliest event reported):  November 3, 2016

                    ACTIVISION BLIZZARD, INC.                    

(Exact Name of Registrant as Specified in Charter)

Registrant’s telephone number, including area code:  (310) 255-2000

(Former Name or Former Address, if Changed Since Last Report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

o                Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o                Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o                Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o                Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Certain Information Not Filed.  The information in Item 2.02 of this Form 8-K and Exhibit 99.1 attached to this Form 8-K shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, nor shall such Item 2.02 or such Exhibit 99.1 or any of the information contained therein be deemed incorporated by reference in any filing under the Securities Exchange Act of 1934 or the Securities Act of 1933, except as shall be expressly set forth by specific reference in such filing.

Item 2.02.                              Results of Operations and Financial Condition.

On November 3, 2016, Activision Blizzard, Inc. (the “Company”) issued a press release announcing results for the Company for the fiscal quarter ended September 30, 2016. A copy of the press release is attached hereto as Exhibit 99.1.  As previously announced, the Company is hosting a conference call and webcast in conjunction with that release.

Item 9.01.                              Financial Statements and Exhibits.

(d)  Exhibits

99.1                    Press Release dated November 3, 2016 (furnished not filed)

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SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

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EXHIBIT INDEX

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Exhibit 99.1

ACTIVISION BLIZZARD ANNOUNCES BETTER-THAN-EXPECTED

AND RECORD THIRD QUARTER 2016 FINANCIAL RESULTS

Company Increases CY 2016 Revenues and EPS Outlook

Record Third Quarter Revenues, Operating Income, EPS and Operating Cash Flow

Record Quarterly GAAP Digital Revenues of Over $1.3 Billion, Up 114% Year-over-Year

Company Had 482 Million Monthly Active Users, and More Than 10 Billion Hours of Play Time During the Third Quarter

Santa Monica, CA – November 3, 2016 – Activision Blizzard, Inc. (Nasdaq: ATVI) today announced better-than-expected financial results for the third quarter of 2016.

* “Non-GAAP (redefined)” includes the net effect of revenue deferrals accounting treatment on certain of our online enabled products. Please refer to our July 29, 2016 call and materials for additional information.

For the quarter ended September 30, 2016, Activision Blizzard’s net revenues presented in accordance with Generally Accepted Accounting Principles (“GAAP”) were a third-quarter record $1.57 billion, as compared with $990 million for the third quarter of 2015, an increase of 58%. GAAP net revenues from digital channels were an all-time quarterly record of $1.34 billion, growing 18% quarter-over-quarter and 114% year-over-year. GAAP earnings per diluted share were a third-quarter record $0.26, as compared with $0.17 for the third quarter of 2015, an increase of 53%. On a non-GAAP (redefined) basis, the company’s earnings per diluted share were a third-quarter record $0.49, as compared with $0.20 for the third quarter of 2015, an increase of 145%.

The Activision and Blizzard segments had record combined third-quarter performance with $1.10B in net revenues, a 15% increase year-over-year, and $444M in operating income, a 78% increase year-over-year. Year-to-date, the combined segments generated record revenue of $2.83B, a 22% increase year-over-year, and record operating income of $1.05B, a 67% increase year-over-year.

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Activision Blizzard Announces Q3 2016 Financial Results

Activision Blizzard generated a third-quarter record $456 million in operating cash flow for the quarter ended September 30, 2016. For the trailing twelve months ended September 30, 2016, operating cash flow totaled $2.36 billion, a 68% increase year-over-year.

Please refer to the tables at the back of this press release for a reconciliation of the company’s GAAP and non-GAAP (redefined) results.

Bobby Kotick, Chief Executive Officer of Activision Blizzard, said, “This quarter we again over-performed our plan, delivering record third-quarter revenues of $1.57 billion, up almost 60% and earnings per share of $0.49, more than doubling year-over-year on a non-GAAP basis (as redefined).”

Kotick added, “We continue to see enthusiasm from our global audiences for our key franchises including Call of Duty, Destiny, Candy Crush and World of Warcraft, plus our newest franchise – Overwatch, which after only about four months had already reached over 20 million players and has incredible player engagement. Looking forward, we expect continued momentum from all of our growth strategies, especially our esports initiatives and our integration of in-game advertising.”

Selected Business Highlights:

Audience Reach

·                 Activision Blizzard had 482 million Monthly Active Users (MAUs)A in the quarter.

·                 Blizzard had the biggest quarterly online player community in its history, with 42 million MAUsA, up 25% quarter-over-quarter and 50% year-over-year. This reflects the continued success of Overwatch® and the launch of World of Warcraft®: Legion™. Blizzard has more than doubled its MAUsA in just two years.

·                 On August 30, 2016, Blizzard launched World of Warcraft: Legion, which sold-through 3.3 million copies on day one, matching all-time records achieved by previous expansions, and ranking amongst the fastest-selling PC games ever. The new expansion grew franchise MAUsA by nearly 30% quarter-over-quarter.

·                 Overwatch became Blizzard’s fastest game ever to reach over 20 million players globally, with a roughly even player base split between east and west. Overwatch also held the number one position in share of play time in Korean Internet Game Rooms from launch all the way through the third-quarter.1

·                 Blizzard’s Hearthstone®: Heroes of Warcraft™ had record quarterly MAUsA, which grew a double-digit percentage year-over-year.

·                 Activision had the biggest third quarter online player community in its history with 46 million MAUsA. Over the last two years, Activision has grown its MAUsA by 18%. Activision continues to

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Activision Blizzard Announces Q3 2016 Financial Results

have four of the top ten games on current-generation consoles life-to-date, including Call of Duty®: Black Ops III at No. 1.2 The Call of Duty franchise reached record third quarter MAUsA.

·                 On September 20, 2016, Activision and Bungie released Rise of Iron, a large new expansion for the Destiny universe. The expansion included fresh new content in the form of a new location, a new Raid, a new Strike, additional quests, gear, and a new game mode, which drove an increase in MAUsA quarter-over-quarter.

·                 King MAUsA of 394 million were down slightly this quarter. King had three of the top-20-grossing titles in the U.S. mobile app stores for the eleventh quarter in a row.3

Deep Engagement

·                 Activision Blizzard’s compelling in-game experiences drove over 10 billion hours of play time during the third-quarter.

·                 Blizzard had all-time engagement records with record weekly and daily active users, unique users and play time, driven by an expanding player base and strong engagement across a number of franchises.

·                 In September, Blizzard released the World of Warcraft: Legion Companion App, and for the first time ever, players can engage with select in-game activities and continue gameplay even when away from their PCs. Millions of players have already used the app and are logging in an average of 4 to 5 times every day.

·                 King’s time spent per MAUA was up year-over-year.

·                 Activision Blizzard’s esports network, Major League Gaming, in partnership with Facebook, recorded about 50 million views, growing 67% quarter-over-quarter4. At peak, a record 11 million users were reached in a single day4.

·                 From September 2 through 4, 2016, Activision hosted Call of Duty XP, its largest fan event ever which included the culmination of the Call of Duty World League Championship, presented by PlayStation® 4. More than 1,000 teams participated in the Call of Duty World League during the 2016 season, which recorded 121 million views.

Player Investment

·                 Activision Blizzard GAAP revenues from in-game content reached records of nearly $1 billion this quarter.

·                 Blizzard’s World of Warcraft: Legion expansion drove record monthly participation in value-added services.

·                 Summer Games content for Blizzard’s Overwatch drove record engagement and participation in in-game customization items.

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Activision Blizzard Announces Q3 2016 Financial Results

·                 On August 11th, 2016, Blizzard launched One Night in Karazhan™, a new Adventure for Hearthstone: Heroes of Warcraft, which performed even better than its predecessor.

·                 King’s overall mobile gross bookingsB and average revenue per paying user increased year-over-year. In addition, gross bookingsB for King’s Candy Crush™ franchise grew year-over-year, and King’s Farm Heroes™ franchise increased mobile gross bookingsB quarter-over-quarter and year-over-year.

·                 Activision’s Call of Duty continues to deliver record performance. The number of in-game content purchasers in Call of Duty more than doubled year-to-date and, along with robust participation in Season Pass and a-la-carte map packs, drove an increase in average revenue per user as well.

Company Outlook:

·                 On October 5, 2016, Activision launched the Call of Duty: Modern Warfare® Remastered campaign mode for pre-purchasers of Legacy or Digital Deluxe Editions on PlayStation 4 console systems 30 days in advance of the broader launch. On November 4, 2016, Activision is expected to launch the highly anticipated Call of Duty: Infinite Warfare™.

·                 On October 11, 2016, Blizzard launched its Halloween Terror event for Overwatch. The event included Overwatch’s first-ever player versus environment game mode and a variety of new Halloween-themed customization items. The event drove even higher engagement and participation than the Summer Games event.

·                 On October 12, 2016, King launched Shuffle Cats™, a free-to-play live multiplayer card game set in the 1920s. The title is available on the Apple App Store, Google Play, and Facebook.

·                 On October 16, 2016, Activision released Skylanders®: Imaginators, and for the first time in toys-to-life history, fans are able to create their own digital Skylanders from scratch. On October 28, 2016, Activision Blizzard Studios, in partnership with Netflix, debuted Skylanders™ Academy, a new TV series celebrating the beloved kids franchise.

·                 On October 18, 2016, CBS, in collaboration with King and Lionsgate Television, announced Candy Crush, a new one-hour live action game show, based on the world-renowned mobile franchise.

·     Blizzard’s tenth BlizzCon® will be returning to the Anaheim Convention Center this Friday, November 4, and Saturday, November 5. Thousands of tickets again sold out in a matter of minutes, but millions more will be able to join through live-streaming or virtual tickets. BlizzCon will feature a number of events including the finals of several Blizzard esports tournaments, with global champions across a number of franchises crowned.

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Activision Blizzard Announces Q3 2016 Financial Results

·                 From December 16 through December 18, 2016, Major League Gaming will host its first MLG Vegas event, an esports and digital culture festival at the Mandalay Bay in Las Vegas. The 3 day event will feature the first competition of the Call of Duty World League 2017 and an Overwatch Invitational.

·     Based on its year-to-date results, Activision Blizzard is raising its full-year net revenues and earnings per share outlook. The company’s fourth-quarter and full-year net revenues and earnings per share outlook are as follows:

* Fully diluted weighted average shares include participating securities and dilutive options on a weighted average basis.

As referenced on our July 29, 2016 call, if you would like to calculate Non-GAAP metrics as previously defined, in order to do year-over-year comparisons, you would add the impact of GAAP deferrals to the Non-GAAP (redefined) metrics.

Currency Assumptions for 2016 Outlook:

·                 $1.09 USD/Euro for current outlook (vs. average of $1.11 for 2015 and $1.33 for 2014)

·                 $1.22 USD/British Pound Sterling for current outlook (vs. average of $1.53 for 2015 and $1.65 for 2014)

Debt Repayment

In the quarter ended September 30, 2016, we made repayments to reduce our total outstanding term loans by $185 million. This brings our total prepayments in 2016 to $1.5 billion.

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Activision Blizzard Announces Q3 2016 Financial Results

Conference Call

Today at 4:30 p.m. EDT, Activision Blizzard’s management will host a conference call and Webcast to discuss the company’s results for the quarter ended September 30, 2016 and management’s outlook for the remainder of the calendar year. The company welcomes all members of the financial and media communities and other interested parties to visit the “Investor Relations” area of www.activisionblizzard.com to listen to the conference call via live Webcast or to listen to the call live by dialing into 888-395-3239 in the U.S. with passcode 5137988.

About Activision Blizzard

Activision Blizzard, Inc., a member of the S&P 500, is the world’s most successful standalone interactive entertainment company. We delight nearly 500 million monthly active users around the world through franchises including Activision’s Call of Duty®, Destiny and Skylanders®, Blizzard Entertainment’s World of Warcraft®, StarCraft®, Diablo®, Hearthstone®: Heroes of Warcraft™ and Overwatch®, and King’s Candy Crush™, Bubble Witch™, Pet Rescue™ and Farm Heroes™. The company is one of the Fortune “100 Best Companies To Work For®”. Headquartered in Santa Monica, California, Activision Blizzard has operations throughout the world, and its games are played in 196 countries. More information about Activision Blizzard and its products can be found on the company’s website, www.activisionblizzard.com.

1 Gametrics.com

2 Based on data from the NPD Group and GfK Chart-Track

3 U.S. ranking for Apple App Store and Google Play Store combined, per App Annie Intelligence for third quarter 2016

4 Per MLGPRO Facebook Insights Portal

A Monthly Active User (“MAU”) Definition: We monitor MAUs as a key measure of the overall size of our user base and their regular engagement with our portfolio of games. MAUs are the number of individuals who played a particular game in a given month. We calculate average MAUs in a period by adding the total number of MAUs in each of the months in a given period and dividing that total by the number of months in the period. An individual who plays two of our games would be counted as two users. In addition, due to technical limitations with respect to Activision Publishing and King MAUs, an individual who plays the same game on two platforms or devices in the relevant period would be counted as two users. For Blizzard MAUs, an individual who plays the same game on two platforms or devices in the relevant period would generally be counted as a single user.

B Gross bookings is an operating metric that represents the total cash spent by players in the period for the purchase of virtual items. King uses gross bookings to evaluate its results of operations, generate future operating plans and assess performance. Gross bookings is the total price paid by players, which includes indirect taxes (sales tax or value added tax etc.), platform providers fees, and King’s share of revenues.

C Net effect of accounting treatment from revenue deferrals on certain of our online enabled products. Some of our games’ online functionality represents an essential component of gameplay and, as a result, a more-than-inconsequential separate deliverable. As a result, we recognize revenues attributed to these game titles over their estimated service periods, which is generally less than a year. The related cost of revenues is deferred and recognized as an expense as the related revenues are recognized. Impact from changes in deferrals refers to the net effect from revenue deferrals accounting treatment for the purposes of revenues, and together with the related cost of revenues deferrals treatment and the related tax impacts for the purposes of EPS. Internally, management excludes the impact of this change in deferred revenues and related cost of revenues when evaluating the company’s operating performance, when planning, forecasting and analyzing future periods, and when assessing the performance of its management team. Management believes this is appropriate because doing so enables an analysis of performance based on the timing of actual transactions with our customers. In addition, management believes excluding the change in deferred revenues and the related cost of revenues provides a much more timely indication of trends in our operating results.

Non-GAAP (as previously defined) and Non-GAAP (redefined) Financial Measures: In accordance with the updated Compliance and Disclosure Interpretations issued by the SEC staff on May 17, 2016, we reported our third quarter of 2016 results, and provided our outlook, using GAAP and non-GAAP (redefined). We have historically provided Non-GAAP (as previously defined) financial measures. The only difference between the two measures is the inclusion (Non-GAAP (redefined)) or exclusion (Non-GAAP (as previously defined)) of the impact from revenue deferrals accounting treatment on certain of our online enabled products. Please see materials from July 29, 2016 call for further details.

Non-GAAP (redefined) Financial Measures: As a supplement to our financial measures presented in accordance with Generally Accepted Accounting Principles (“GAAP”), Activision Blizzard presents certain non-GAAP measures of financial performance. These non-GAAP financial measures are not intended to be considered in isolation from, as a substitute for, or as more important than, the financial information prepared and presented in accordance with GAAP. In addition, these non-GAAP measures have limitations in that they do not reflect all of the items associated with the company’s results of

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Activision Blizzard Announces Q3 2016 Financial Results

operations as determined in accordance with GAAP.

Activision Blizzard provides net income (loss), earnings (loss) per share and operating margin data and guidance both including (in accordance with GAAP) and excluding (non-GAAP) certain items. When relevant, the company also provides constant FX information to provide a framework for assessing how our underlying businesses performed excluding the effect of foreign currency rate fluctuations. In addition, Activision Blizzard provides EBITDA (defined as GAAP net income (loss) before interest (income) expense, income taxes, depreciation and amortization) and adjusted EBITDA (defined as non-GAAP operating margin (see non-GAAP financial measure below) before depreciation).  The non-GAAP financial measures exclude the following items, as applicable in any given reporting period and our outlook:

·                  expenses related to stock-based compensation;

·                  the amortization of intangibles from purchase price accounting;

·                  fees and other expenses related to the King acquisition, inclusive of related debt financings, and future refinancing of long-term debt, including penalties and the write off of unamortized discount and deferred financing costs; and

·                  the income tax adjustments associated with any of the above items. Tax impact on Non-GAAP (redefined) pre-tax income is calculated under the same accounting principles applied to the GAAP pre-tax income under ASC 740, which employs an annual effective tax rate method to the results.

In the future, Activision Blizzard may also consider whether other items should also be excluded in calculating the non-GAAP financial measures used by the company. Management believes that the presentation of these non-GAAP financial measures provides investors with additional useful information to measure Activision Blizzard’s financial and operating performance. In particular, the measures facilitate comparison of operating performance between periods and help investors to better understand the operating results of Activision Blizzard by excluding certain items that may not be indicative of the company’s core business, operating results or future outlook. Internally, management uses these non-GAAP financial measures, along with others, in assessing the company’s operating results, and measuring compliance with the requirements of the company’s debt financing agreements, as well as in planning and forecasting.

Activision Blizzard’s non-GAAP financial measures are not based on a comprehensive set of accounting rules or principles, and the terms non-GAAP net income, non-GAAP earnings per share, non-GAAP operating margin, and non-GAAP or adjusted EBITDA do not have a standardized meaning. Therefore, other companies may use the same or similarly named measures, but exclude different items, which may not provide investors a comparable view of Activision Blizzard’s performance in relation to other companies.

Management compensates for the limitations resulting from the exclusion of these items by considering the impact of the items separately and by considering Activision Blizzard’s GAAP, as well as non-GAAP, results and outlook, and by presenting the most comparable GAAP measures directly ahead of non-GAAP measures, and by providing a reconciliation that indicates and describes the adjustments made.

Cautionary Note Regarding Forward-looking Statements: The statements contained in this press release that are not historical facts are forward-looking statements, including, but not limited to, statements about (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 and services; (3) statements of future financial or operating performance; (4) statements relating to the acquisition of King and expected impact of that transaction, including without limitation, the expected impact on Activision Blizzard, Inc.’s future financial results; and (5) statements of assumptions underlying such statements. The company 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 risk, 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’s actual future results and other future circumstances to differ materially from those expressed in any forward looking statements. Such factors include, but

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Activision Blizzard Announces Q3 2016 Financial Results

are not limited to: uncertainties as to whether and when Activision Blizzard will be able to realize the anticipated financial benefits from the acquisition of King; the integration of King being more difficult, time-consuming or costly than expected; the diversion of management time and attention to issues relating to the operations and integration of King and Major League Gaming; sales levels of Activision Blizzard’s titles, products and services; concentration of revenue among a small number of titles; Activision Blizzard’s ability to predict consumer preferences, including interest in specific genres, and preferences among hardware platforms; the amount of our debt and the limitations imposed by the covenants in the agreements governing our debt; adoption rate and availability of new hardware (including peripherals) and related software; counterparty risks relating to customers, licensees, licensors and manufacturers; maintenance of relationships with key personnel, customers, financing providers, licensees, licensors, manufacturers, vendors, and third-party developers, including the ability to attract, retain and develop key personnel and developers that can create high-quality titles, products and services; risks relating to the expansion into new businesses, including the potential impact on our existing businesses; changing business models within the video game industry, including digital delivery of content and the increased prevalence of free-to-play games; product delays or defects; competition, including from used games and other forms of entertainment; rapid changes in technology and industry standards; possible declines in software pricing; product returns and price protection; the identification of suitable future acquisition opportunities and potential challenges associated with geographic expansion; the seasonal and cyclical nature of the interactive entertainment market; the outcome of current or future tax disputes; litigation risks and associated costs; protection of proprietary rights; shifts in consumer spending trends; capital market risks; applicable regulations; domestic and international economic, financial and political conditions and policies; tax rates and foreign exchange rates; the impact of the current macroeconomic environment; and the other factors identified in “Risk Factors” included in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2015.

The forward-looking statements in this press release are based on information available to the company at this time 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.

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(Tables to Follow)

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1                    Subscription, licensing and other revenues represent revenues from World of Warcraft subscriptions, licensing royalties from our products and franchises, value-added services, downloadable content, microtransactions, and other miscellaneous revenues.

2                    The company calculates earnings per share pursuant to the two-class method which requires the allocation of net income between common shareholders and participating security holders. We had, on a weighted-average basis, participating securities of approximately 2 million and 3 million for the three and nine months ended September 30, 2016 respectively, and 8 million and 9 million for the three and nine months ended September 30, 2015 respectively.  For the three and nine months ended September 30, 2016, net income attributable to Activision Blizzard, Inc. common shareholders used to calculate earnings per common share, assuming dilution, was $198 million and $709 million, respectively, as compared to total net income of $199 million and $713 million, respectively, for the same period. For the three and nine months ended September 30, 2015, net income attributable to Activision Blizzard, Inc. common shareholders used to calculate earnings per common share, assuming dilution, was $125 million and $723 million, respectively, as compared to total net income of $127 million and $733 million, respectively, for the same period.

1                     Includes expenses related to stock-based compensation.

2                     Reflects amortization of intangible assets from purchase price accounting.

3                     Reflects fees and other expenses related to the acquisition of King Digital Entertainment (“King Acquisition”), inclusive of related debt financings and integration costs.

4                     Reflects the net effect from deferral of revenues and (recognition) of deferred revenues, along with related cost of revenues, on certain of our online enabled products, including the effects of taxes.

5                     Reflects the loss on extinguishment of debt.

6                     Reflects the income tax impact associated with the above items. Tax impact on non-GAAP (redefined) pre-tax income is calculated under the same accounting principles applied to the GAAP pre-tax income under ASC 740, which employs an annual effective tax rate method to the results.

The GAAP and non-GAAP (redefined) earnings per share information is presented as calculated.  The sum of these measures, as presented, may differ due to the impact of rounding.

The company calculates earnings per share pursuant to the two-class method which requires the allocation of net income between common shareholders and participating security holders. For the three months ended September 30, 2016, net income attributable to Activision Blizzard, Inc. common shareholders used to calculate non-GAAP (redefined) earnings per common share, assuming dilution, was $370 million, as compared to total net income of $371 million, for the same period.

For purposes of calculating earnings per share, we had, on a weighted-average basis, common shares outstanding of 742 million, participating securities of approximately 2 million, and dilutive shares of 14 million during the three months ended September 30, 2016.

1                     Includes expenses related to stock-based compensation.

2                     Reflects amortization of intangible assets from purchase price accounting.

3                     Reflects fees and other expenses related to the acquisition of King Digital Entertainment (“King Acquisition”), inclusive of related debt financings and integration costs.

4                     Reflects the net effect from deferral of revenues and (recognition) of deferred revenues, along with related cost of revenues, on certain of our online enabled products, including the effects of taxes.

5                     Reflects the loss on extinguishment of debt.

6                     Reflects the income tax impact associated with the above items. Tax impact on non-GAAP (redefined) pre-tax income is calculated under the same accounting principles applied to the GAAP pre-tax income under ASC 740, which employs an annual effective tax rate method to the results.

The GAAP and non-GAAP (redefined) earnings per share information is presented as calculated.  The sum of these measures, as presented, may differ due to the impact of rounding.

The company calculates earnings per share pursuant to the two-class method which requires the allocation of net income between common shareholders and participating security holders. For the nine months ended September 30, 2016, net income attributable to Activision Blizzard, Inc. common shareholders used to calculate non-GAAP (redefined) earnings per common share, assuming dilution, was $1,148 million, as compared to total net income of $1,154 million, for the same period.

For purposes of calculating earnings per share, we had, on a weighted-average basis, common shares outstanding of 739 million, participating securities of approximately 3 million, and dilutive shares of 14 million during the nine months ended September 30, 2016.