Take-Two Interactive Software, Inc. Announces Fourth Quarter and Fiscal Year End 2001 Financial Results and Fiscal 2002 Guidance.Business Editors NEW YORK--(BUSINESS WIRE)--Feb. 13, 2002 Company Restates Fiscal 2000 and First Three Quarters of Fiscal 2001 Take-Two Interactive “Take Two” redirects here. For other uses, see Take Two (disambiguation). Take-Two Interactive Software, Inc. (NASDAQ: TTWO) is an American publisher, developer, and distributor of video and computer games and video game peripherals. Software, Inc. (NASDAQ NASDAQ in full National Association of Securities Dealers Automated Quotations U.S. market for over-the-counter securities. Established in 1971 by the National Association of Securities Dealers (NASD), NASDAQ is an automated quotation system that reports on :TTWO TTWO Take Two Interative Software, Inc. (stock symbol) ) today announced the following: Restatement Restatement A revision in a company's earlier financial statements. Notes: The need for restating financial figures can result from fraud, misrepresentation, or a simple clerical error. of Historical Financial Statements Based on the Company's completion of a detailed review of certain transactions and accounting policies, as well as an investigation by counsel and a forensic accounting Forensic accounting, sometimes called investigative accounting, involves the application of accounting concepts and techniques to legal problems. Forensic accountants investigate and document financial Fraud and white-collar crimes team, the Company has restated its financial results for the four quarters and fiscal year ended October October: see month. 31, 2000 and each of the first three quarters of fiscal 2001. The restatement relates to adjustments arising from: (i) revenue recognition issues; (ii) acquisition accounting; and (iii) the prepayment Prepayment 1. The payment of a debt obligation prior to its due date. 2. The excess payment over a scheduled debt repayment amount. Notes: 1. Examples include deferred expenses such as rent and early loan repayments. 2. of debt. A summary of the effect of the restatement is set forth in the tables below:
(In thousands, except per share data)
Year Ended Nine Months Ended
Oct. 31, 2000 July 31, 2001
--------------------------------------------------
Reported Restated Reported Restated
Statement of
Operations Data:
Net sales $387,006 $364,001 $309,048 $327,797
Income from
operations $45,061 $33,309 $23,610 $35,555
Net income (loss) $24,963 $6,417 $(3,765) $(3,275)
Diluted net income
(loss) per share $0.88 $0.23 $(0.11) $(0.10)
Pro Forma Net Income:
Net income excluding:
operating Internet
impairment charges,
non-operating and
extraordinary items
and cumulative
effect(1) $25,436 $17,750 $12,557 $18,822
Diluted net income per
share excluding:
operating Internet
impairment charges,
non-operating and
extraordinary items
and cumulative
effect(1)(2) $0.90 $0.63 $0.37 $0.55
(In thousands, except
per share data) Net Sales Net Income (Loss)
Reported Restated Reported Restated
----------------------------------------------
Year Ended October
31, 2000
First Quarter $122,890 $120,247 $4,787 $3,966
Second Quarter 70,036 69,519 3,354 (8,460)
Third Quarter 71,473 66,093 3,449 2,221
Fourth Quarter 122,607 108,142 13,373 8,690
Nine Months Ended
July 31, 2001
First Quarter $131,226 $157,853 $7,750 $8,232
Second Quarter 93,320 88,617 (11,924) (11,636)
Third Quarter 84,502 81,327 409 129
Diluted Net Income Pro Forma Net Income
(Loss) Per Share (Loss) Per Share
(1)(2)
Reported Restated Reported Restated
------------------------------------------------
Year Ended
October 31, 2000
First Quarter $0.20 $0.16 $0.20 $0.17
Second Quarter 0.13 (0.33) 0.14 0.14
Third Quarter 0.12 0.07 0.12 0.07
Fourth Quarter 0.42 0.27 0.42 0.25
Nine Months Ended
July 31, 2001
First Quarter $0.24 $0.25 $0.24 $0.41
Second Quarter (0.37) (0.36) 0.12 0.12
Third Quarter 0.01 0.00 0.04 0.04
----------------------------------------------------------------------
(1) Pro Forma Net Income is calculated as follows: Net Income less
the following line items, tax effected: Cumulative Effect of Change in
Accounting Principle, Extraordinary Item, Gain on Sale of Subsidiary,
Loss on Available-for-Sale Internet Securities, Equity in Loss of
Affiliate, and $4.2 million of operating expenses for the Impairment
of Certain Internet Assets in fiscal 2001. See attached table of
Reconciliation of Net Income to Pro Forma Net Income.
(2) In addition, fiscal 2001 restated first quarter results
include net sales of $27.2 million and income from operations of $8.9
million attributable to the adoption of SAB 101. Such net sales and
income from operations were also recorded in the fourth quarter of
fiscal 2000. Restated Pro Forma Net Income for the first quarter and
first nine months of fiscal 2001 would have been $0.25 and $0.39 per
diluted share, respectively, inclusive of Cumulative Effect of Change
in Accounting Principle.
----------------------------------------------------------------------
Based on the completion of an investigation by counsel and a forensic accounting team, the Company has eliminated sales of products made to certain independent third-party distributors Third-Party Distributor The name given to institutions that sell or distribute mutual funds to investors for fund management companies without direct relation to the fund itself. that were improperly im·prop·er adj. 1. Not suited to circumstances or needs; unsuitable: improper shoes for a hike; improper medical treatment. 2. recognized as revenue and returned to, or repurchased by, the Company in subsequent periods, resulting in an aggregate decrease in net sales Net Sales The amount a seller receives from the buyer after costs associated with the sale are deducted. Notes: This amount is calculated by subtracting the following items from gross sales: merchandise returned for credit, allowances for damaged or missing goods, freight of $15.4 million and diluted di·lute tr.v. di·lut·ed, di·lut·ing, di·lutes 1. To make thinner or less concentrated by adding a liquid such as water. 2. To lessen the force, strength, purity, or brilliance of, especially by admixture. net income per share of $0.15 for fiscal 2000. For the first nine months of fiscal 2001, net sales decreased by $6.7 million; however, net income increased by $2.4 million and diluted net income per share increased by $0.07 as a result of adjusting previously reported cost of sales. Additionally, the Company has restated the following items as a result of its expanded year-end year-end also year·end n. The end of a year. adj. Occurring or done at the end of the year: a year-end audit. Noun 1. review of its accounting policies and other transactions: -- The reversal of revenue that was previously recognized for items that had not shipped within the fourth quarter of fiscal 2000, resulting in a shifting in net sales of $3.8 million and diluted net income per share of $0.03 from the fourth quarter of fiscal 2000 to the first quarter of fiscal 2001. -- The effect of the adoption of SAB 101 for revenue recognition in the first quarter of 2001 to recognize revenue when both title and all risks of loss transfer to customers, resulting in an increase in net sales of $27.2 million for the first quarter of fiscal 2001, an increase in income from operations of $8.9 million ($5.3 million net of tax) and no change in net income. -- A non-cash adjustment to record the Company's proportionate share of the GAAP losses incurred by Gathering of Developers prior to their acquisition by the Company. In accordance with EITF 99-10, the Company was required to record its share of Gathering's GAAP losses based on the Company's distribution and royalty advances to Gathering, in addition to its equity ownership share of the losses. This resulted in a charge of $19.2 million ($12.1 million net of tax), representing a net loss of $0.43 per diluted share, for the year ended October 31, 2000. -- A $4.3 million decrease in net sales and a $0.06 decrease in diluted earnings per share due to certain other reallocations of purchase price related to acquisitions made by the Company in fiscal 2000 and 2001, net of benefits realized through the reduction of amortization expense for these entities in both fiscal 2000 ($2.6 million) and 2001 ($1.7 million). -- An additional charge of $438,000, net of tax, or $0.01 per diluted share, to the extraordinary charge previously recorded related to the repayment of the Company's subordinated indebtedness in July 2001. Set forth below are the results of operations for the fourth quarter and fiscal year ended October 31, 2001 and the Company's guidance for fiscal 2002. In addition, all financial data in this release reflects the effects of this restatement. Fourth Quarter and Fiscal Year Ended October 31, 2001 Net sales for the fourth quarter ended October 31, 2001 were $123.3 million, with a net loss of $5.3 million, or $0.15 per share. Excluding the loss on available-for-sale Internet securities ''This article or section is being rewritten at Internet security is the process of protecting data and privacy of devices connected to internet from information robbery, hacking, malware infection and unwanted software. , net loss for the fourth quarter of fiscal 2001 was $4.9 million, net of tax, or $0.13 per share. The fourth quarter results reflect the shift of $17 million in net sales and $0.11 in diluted earnings per share diluted earnings per share An earnings measure calculated by dividing net income less preferred stock dividends for a period by the average number of shares of common stock that would be outstanding if all convertible securities were converted into shares of from the fourth quarter of fiscal 2001 to the first quarter of fiscal 2002 for products shipped in October 2001 but not received by customers until November November: see month. 2001. Net sales for the fiscal year ended October 31, 2001 were $451.1 million, with a net loss of $8.6 million, or $0.25 per share. Fiscal 2001 results include the effect of the Company's adoption of SAB SAB Spontaneous abortion. See Abortion. 101, whereby revenue is recognized when both title and all risks of loss transfer to customers, resulting in an increase in net sales of $27.2 million for the first quarter of fiscal 2001, an increase in income from operations of $8.9 million (cumulative effect, net of taxes, of $5.3 million) and no change in net income. Excluding operating Internet Internet Publicly accessible computer network connecting many smaller networks from around the world. It grew out of a U.S. Defense Department program called ARPANET (Advanced Research Projects Agency Network), established in 1969 with connections between computers at the impairment Impairment 1. A reduction in a company's stated capital. 2. The total capital that is less than the par value of the company's capital stock. Notes: 1. This is usually reduced because of poorly estimated losses or gains. 2. charges, non-operating and extraordinary items and cumulative effect of change in accounting principle, pro forma As a matter of form or for the sake of form. Used to describe accounting, financial, and other statements or conclusions based upon assumed or anticipated facts. The phrase pro forma tax effected net income was $14.0 million, or $0.40 per diluted share for fiscal 2001. Guidance The Company expects that during fiscal 2002 it will benefit from strong industry fundamentals, including continued demand for Sony's PlayStation A video game console from Sony that was introduced in the U.S. in 1995. CD-ROM based and using a 32-bit MIPS CPU, the original PlayStation was the first of a family of desktop and handheld units. (R)2, Microsoft's Xbox A video game console from Microsoft that was designed to compete with Sony's PlayStation and Nintendo's GameCube. Introduced in 2001 with a 733 MHz Pentium III CPU, 5x DVD drive and custom-designed graphics processor, the Xbox also includes four game controller ports, Ethernet networking and Nintendo's GameCube. The Company's fiscal 2002 financial guidance is $660 million in net sales and $1.63 of diluted earnings per share, including the effect of adopting SFAS SFAS Statement of Financial Accounting Standards SFAS Special Forces Assessment and Selection SFAS Student Financial Aid Services SFAS Sport Fishing Association of Singapore SFAS Safety Features Actuation System SFAS Statewide Fixed Assets System 142 "Amortization of Goodwill and Other Intangibles," which no longer requires amortization of goodwill (approximately $0.14 per share for fiscal 2002). The Company expects to report $280 million in net sales and $0.90 of diluted earnings per share in the first quarter ended January January: see month. 31, 2002, including the effect of adopting SFAS 142. Profitability in the first quarter was significantly enhanced by the success of Grand Theft Auto 3, which is an internally developed and owned title. The first quarter estimated results include the shift of $17 million in net sales and $0.11 in diluted earnings per share from the fourth quarter of fiscal 2001 to the first quarter of fiscal 2002 for products shipped in October 2001 but not received by customers until November 2001. The Company's guidance for the second quarter ending April 30, 2002 is $125 million in net sales and $0.23 of diluted earnings per share, including the effect of adopting SFAS 142. Liquidity The Company operated on a cash flow positive basis for the year ended October 31, 2001, generating approximately $27 million in positive cash flow from operations Cash flow from operations A firm's net cash inflow resulting directly from its regular operations (disregarding extraordinary items such as the sale of fixed assets or transaction costs associated with issuing securities), calculated as the sum of net income plus noncash expenses , as compared to a deficit of $54 million for fiscal 2000, with approximately $3 million in operating cash flow Operating cash flow Earnings before depreciation minus taxes. Measures the cash generated from operations, not counting capital spending or working capital requirements. generated during the fourth quarter of fiscal 2001. The Company expects to generate positive cash flow for fiscal 2002. DSO's at October 31, 2001 were 69 days, compared with 92 days at October 31, 2000. The Company's total debt level at October 31, 2001 was approximately $54 million, a significant decrease from historical levels. The Company had no borrowings under its lines of credit as of January 31, 2002 as compared to outstanding borrowings of approximately $95 million at January 31, 2001. Subsequent to January 31, 2002, the Company renegotiated its line of credit with its principal lender in North America North America, third largest continent (1990 est. pop. 365,000,000), c.9,400,000 sq mi (24,346,000 sq km), the northern of the two continents of the Western Hemisphere. to provide for borrowings scaling up to $50 million. The Company is also in the process of extending its European European emanating from or pertaining to Europe. European bat lyssavirus see lyssavirus. European beech tree fagussylvaticus. European blastomycosis see cryptococcosis. line of credit, which expires in March 2002. On a going forward basis, the Company expects to operate with substantially reduced borrowings as it continues to focus on improved capital efficiency. Paul Eibeler Paul Eibeler (born ca. 1956) was the Chief Executive Officer, President, and a director of Take-Two Interactive, a publisher, developer, and distributor of video and computer games, well-known for the Grand Theft Auto series. , President, commented, "Take-Two is currently experiencing much improved liquidity. The retail success of our products in both North America and Europe Europe (y  r`əp), 6th largest continent, c.4,000,000 sq mi (10,360,000 sq km) including adjacent islands (1992 est. pop. 512,000,000). , along with our focus on improved cash
management and limited use of debt based financing has resulted in the
Company achieving its strongest working capital levels in history."
Published Products During the fourth quarter of fiscal 2001, the Company launched Grand Theft Auto 3 for Sony's PlayStation(R)2. According to according to prep. 1. As stated or indicated by; on the authority of: according to historians. 2. In keeping with: according to instructions. 3. NPDFunworld, Grand Theft Auto 3 was ranked the number one selling video game across all platforms in North America for the year ended December December: see month. 31, 2001. Grand Theft Auto 3 was also ranked as the best selling video game across all platforms in the United Kingdom for the same period, according to ChartTrack. During the quarter, the Company also shipped Smuggler's Run Smuggler's Run is a video game developed by Angel Studios (now Rockstar San Diego) and published by Rockstar Games for PlayStation 2 on October 26, 2000. In the game, you play a smuggler who has a number of different vehicles at his disposal including buggys, quad-bikes and 2 for PlayStation(R)2, 4x4 Evo 2 for the Xbox, Stronghold for the PC, and Spec Ops: Covert Assault for its value line of PlayStation products. In December, the Company shipped Max Payne Max Payne is a third-person shooter video game developed by the Finnish company Remedy Entertainment, produced by 3D Realms and published by Gathering of Developers in July, 2001 for Windows. for the PlayStation(R)2 and Xbox in North America. Max Payne has been a top-selling title on these next-generation platforms and on the PC. The Company's product release schedule for Spring/Summer is extremely promising, including the highly anticipated State of Emergency scheduled to launch for PlayStation(R)2 in mid February February: see month. , Grand Theft Auto 3, Hidden & Dangerous 2 and Mafia Mafia (mä`fēä), name given to a number of organized groups of Sicilian brigands in the 19th and 20th cent. Unlike the Camorra in Naples, the Mafia had no hierarchic organization; each group operated on its own. for the PC, Spec Ops: Airborne Assault See: assault phase, Part 2. for the PlayStation, and Smuggler's Run 2 for the GameCube. Fall/Winter product releases are expected to include new titles for the Company's Grand Theft Auto and Midnight Club brands, as well as the launch of MTV's Celebrity Deathmatch Celebrity Deathmatch is a claymation parody television show that pits celebrities against each other in a wrestling ring, almost always ending in the loser's gruesome death. . The Company also continues to look forward to the release of Duke Nukem' Forever for PC, but this title is not factored into the Company's fiscal 2002 guidance. Going forward, the Company plans to launch new brands, and continue to aggressively develop brand extensions for Max Payne, Smuggler's Run, Serious Sam Serious Sam is the title of a series of first-person shooters created by the Croatian company Croteam. Originally released for the PC market only, Serious Sam , Austin Austin. 1 City (1990 pop. 21,907), seat of Mower co., SE Minn., on the Cedar River, near the Iowa line; inc. 1868. The commercial and industrial center of a rich farm region, it is noted as home to the Hormel meatpacking company, whose Spam Town museum Powers and Oni, as well as additional extensions for Grand Theft Auto and Midnight Club. Distribution During fiscal 2001, the Company's Jack of All Games distribution subsidiary benefited from the sustained overall strength of the interactive entertainment sector, and in particular, from the continuing strong demand for PlayStation and PlayStation(R)2 hardware and software. Additional Information The Company announced that it has hired Karl Karl. For German and Swedish kings thus named, use Charles. Winters as its Chief Financial Officer to replace Albert Albert, German churchman Albert, 1490–1545, German churchman, cardinal of the Roman Catholic Church. A member of the house of Brandenburg, he became (1514) Archbishop of Mainz. Pastino, who resigned due to personal reasons. Mr. Pastino has agreed to serve as a special consultant to the Audit Committee for a limited time. Mr. Winters, who is a CPA (Computer Press Association, Landing, NJ) An earlier membership organization founded in 1983 that promoted excellence in computer journalism. Its annual awards honored outstanding examples in print, broadcast and electronic media. The CPA disbanded in 2000. and holds an MBA MBA abbr. Master of Business Administration Noun 1. MBA - a master's degree in business Master in Business, Master in Business Administration , has served in a variety of senior financial positions over the last 18 years, including Chief Financial Officer of United Auto Group. His experience also includes 10 years in Coopers & Lybrand's auditing area, with a focus on consumer product companies. During his tenure at Coopers & Lybrand, Mr. Winters served in a two-year management assignment at the firm's National Accounting and SEC Directorate office. The Securities and Exchange Commission has issued a formal order of investigation into, among other things, certain accounting matters relating to relating to relate prep → concernant relating to relate prep → bezüglich +gen, mit Bezug auf +acc the Company's financial statements, periodic reporting and internal accounting control provisions. Management Comments Paul Eibeler, President, commented, "While our fiscal 2001 operating results did not meet our expectations, we are encouraged by the Company's momentum, evidenced by our number three ranking among third-party video game publishers in North America in 2001, according to NPDFunworld. The success of our publishing operations has enabled us to make significant balance sheet and cash flow improvements." Kelly Sumner Kelly Sumner was the managing director of Commodore UK, the UK subsidiary of Commodore International, during the early 1990s, when it made heavy losses as a prelude to its bankruptcy in April 1994. , Chief Executive Officer, stated, "We would like to extend our sincerest apologies for the halt in trading of our stock, and any inconvenience caused by the postponement of our conference call originally scheduled for January 22, 2002. We deeply regret the events that caused the Company to restate re·state tr.v. re·stat·ed, re·stat·ing, re·states To state again or in a new form. See Synonyms at repeat. re·state its financial statements, and we are highly committed to taking every appropriate action to ensure that such events will not happen in the future." Mr. Sumner Sum·ner , James Batcheller 1887-1955. American biochemist. He shared a 1946 Nobel Prize for his pioneering work on crystallizing enzymes. added, "The increasing installed base of next-generation console platforms, broadening gamer demographics The attributes of people in a particular geographic area. Used for marketing purposes, population, ethnic origins, religion, spoken language, income and age range are examples of demographic data. , continued strength of our catalog catalog, descriptive list, on cards or in a book, of the contents of a library. Assurbanipal's library at Nineveh was cataloged on shelves of slate. The first known subject catalog was compiled by Callimachus at the Alexandrian Library in the 3d cent. B.C. products and anticipated demand for our new products, such as State of Emergency for PlayStation(R)2 and Grand Theft Auto 3 for the PC, have given the Company an exceptional start for 2002. These factors should result in additional improvements in our operating results and overall financial condition. Furthermore, we believe that Karl Winters, our new Chief Financial Officer, will provide the financial expertise and discipline that is required to manage our rapidly growing company." About Take-Two Interactive Software Headquartered in New York City New York City: see New York, city. New York City City (pop., 2000: 8,008,278), southeastern New York, at the mouth of the Hudson River. The largest city in the U.S. , Take-Two Interactive Software, Inc. is an integrated global developer, marketer, distributor, and publisher of interactive entertainment software games and accessories for the PC, PlayStation(R), Nintendo Game Boy Color The Game Boy Color (ゲームボーイカラー , Nintendo GameCube The Nintendo GameCube (GCN) is Nintendo's fourth home video game console, belonging to the sixth generation era. The system itself is the most compact and least expensive, next to the Dreamcast, of the sixth generation era consoles. , Nintendo Game Boy Advance, PlayStation(R)2 and the Xbox(TM). The Company publishes and develops products through various wholly owned subsidiaries Wholly Owned Subsidiary A subsidiary whose parent company owns 100% of its common stock. Notes: In other words, the parent company owns the company outright and there are no minority owners. including: Rockstar Games “R*” redirects here. For *R, see Hyperreal number. Rockstar Games is a development division of video game publisher Take-Two Interactive, based in New York City, United States. The brand is most known for the Grand Theft Auto series. , Gathering of Developers, TalonSoft TalonSoft was a Baltimore, Maryland-based computer game developer founded in 1995 by Jim Rose and John Davidson. The company specialized in wargames; many of its releases were acclaimed within the wargaming community. , Joytech, DMA (1) (Digital Media Adapter) See digital media hub. (2) (Document Management Alliance) A specification that provides a common interface for accessing and searching document databases. Design, PopTop, Global Star and under the Take-Two brand name. The Company maintains sales and marketing offices in Cincinnati Cincinnati (sĭnsənăt`ē, –năt`ə), city (1990 pop. 364,040), seat of Hamilton co., extreme SW Ohio, on the Ohio River opposite Newport and Covington, Ky.; inc. as a city 1819. , New York New York, state, United States New York, Middle Atlantic state of the United States. It is bordered by Vermont, Massachusetts, Connecticut, and the Atlantic Ocean (E), New Jersey and Pennsylvania (S), Lakes Erie and Ontario and the Canadian province of , Toronto, London, Paris, Munich, Vienna, Copenhagen, Milan, Sydney and Auckland. Take-Two's common stock is publicly traded on NASDAQ under the symbol TTWO. For more corporate and product information please visit our website at www.take2games.com. All trademarks and copyrights contained herein are the property of their respective holders. Safe Harbor Safe Harbor 1. A legal provision to reduce or eliminate liability as long as good faith is demonstrated. 2. A form of shark repellent implemented by a target company acquiring a business that is so poorly regulated that the target itself is less attractive. Statement under the Private Securities Reform Act of 1995: The statements contained herein which are not historical facts are considered forward-looking statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. under federal securities laws. Such forward-looking statements are based on the beliefs of our management as well as assumptions made by and information currently available to them. The words "expect," "anticipate," "believe," "may," "estimate," "intend" and similar expressions are intended to identify such forward-looking statements. Forward-looking statements involve risks, uncertainties and assumptions including, but not limited to: risks associated with our future growth and operating results; our ability to continue to successfully manage growth and integrate the operations of acquired businesses; the availability of adequate financing to fund periodic cash flow shortages; credit risks; seasonal factors; inventory obsolescence ob·so·les·cent adj. 1. Being in the process of passing out of use or usefulness; becoming obsolete. 2. Biology Gradually disappearing; imperfectly or only slightly developed. ; technological change; competitive factors; product returns; failure of retailers to sell-through our products; the timing of the introduction and availability of the company's new software products and third-party hardware platforms Each hardware platform, or CPU family, has a unique machine language. All software presented to the computer for execution must be in the binary coded machine language of that CPU. Following is a list of the major hardware platforms in existence today. See platform. ; market and industry factors adversely affecting the carrying value Carrying Value Also know as "book value," it is a company's total assets minus intangible assets and liabilities, such as debt. Notes: This is different than market value, as it can be higher or lower depending on the circumstances. of our assets; unfavorable general economic conditions (including the current economic downturn Downturn The transition point between a rising, expanding economy to a falling, contracting one. downturn A decline in security prices or economic activity following a period of rising or stable prices or activity. ); and acts of war Tom Clancy's Op-Center: Acts of War is a technothriller by Jeff Rovin Plot introduction The mobile Regional Operations Center (ROC) in Turkey investigates a dam blown up by Kurdish terrorists. and terrorism, any or all of which could have a material adverse effect on our business, operating results and financial condition. Actual operating results may vary significantly from such forward-looking statements. The Company has no obligation to update such forward-looking statements.
TAKE-TWO INTERACTIVE SOFTWARE, INC. and SUBSIDIARIES
Consolidated Condensed Statements of Operations
For the three months ended October 31, 2001 and 2000
and the year ended October 31, 2001 and 2000
(In thousands, except share data)
Three months Year Ended
ended October 31, October 31,
2001 2000 2001 2000
(Restated) (Restated)
--------- --------- --------- ---------
Net sales $ 123,259 $ 108,142 $ 451,056 $ 364,001
Cost of sales (includes
impairment charge on
Internet assets of
$3,786 for the year ended
October 31, 2001) 96,038 73,347 306,264 235,978
------- ------- ------- -------
Gross profit 27,221 34,795 144,792 128,023
------- ------- ------- -------
Operating expenses:
Selling and marketing
(includes impairment
charge on Internet
assets of $401 for the
year ended October 31, 2001) 18,367 8,611 55,253 42,854
General and administrative 13,952 10,683 44,867 36,409
Research and development costs 1,205 1,022 6,190 5,668
Depreciation and amortization 3,411 1,845 12,641 8,680
Abandoned offering costs - - - 1,103
------- ------- ------- -------
Total operating expenses 36,935 22,161 118,951 94,714
(Loss)income from operations (9,714) 12,634 25,841 33,309
Interest expense 1,261 1,553 8,510 6,069
Gain on sale of subsidiary - (1,690) (651) (1,690)
Loss on available-for-sale
Internet securities 723 - 21,477 -
Equity in loss of affiliate - - - 19,969
------- ------- ------- -------
Total interest expense, gain
on sale, loss on securities,
and equity in loss of affiliate 1,984 (137) 29,336 24,348
(Loss) income before income
taxes, extraordinary item and
cumulative effect of change
in accounting principle (11,698) 12,771 (3,495) 8,961
(Benefit) provision
for income taxes (6,393) 4,081 (2,200) 2,544
------- ------- ------- -------
(loss) income before
extraordinary item
and cumulative effect
of change in
accounting principle (5,305) 8,690 (1,295) 6,417
Extraordinary item, loss
on early extinguishment of
debt, net of taxes of $1,217 - - 1,948 -
Cumulative effect of change
in accounting principle,
net of taxes of $3,558 - - 5,337 -
-------- -------- -------- --------
Net (Loss) income $ (5,305) $ 8,690 $ (8,580) $ 6,417
======== ======== ======== ========
Per share data:
Diluted:
Weighted average
common shares outstanding 36,521 32,158 33,961 28,330
======== ======== ======== ========
Net (Loss) income before
extraordinary item per share $ (0.15) $ 0.27 $ (0.04) $ 0.23
Extraordinary item per share - - (0.06) -
Cumulated effect of change in
accounting principle per share - - (0.16) -
Net (loss) income
-------- -------- -------- --------
per share - Diluted $ (0.15) $ 0.27 $ (0.25) $ 0.23
======== ======== ======== ========
OTHER INFORMATION Three months Year Ended
ended October 31, October 31,
2001 2000 2001 2000
------ ------ ------ ------
Total revenue mix
Distribution 44% 53% 46% 49%
Publishing 56% 47% 54% 51%
Geographic revenue mix
North America 67% 85% 76% 72%
International 33% 15% 24% 28%
Publishing platform revenue mix
Video Game Consoles 66% 69% 58% 51%
Nintendo Color Gameboy 3% 5% 2% 7%
PC 28% 25% 35% 37%
Accessories 3% 1% 5% 5%
Reconciliation of Net Income to Pro Forma Net Income
Year ended Nine Months ended
October 31, 2000 July 31, 2001
----------------- -------------------
As Reported Restated As Reported Restated
Net income (loss) $24,963 $6,417 $(3,765) $(3,275)
Exclude items to be
tax-effected:
Impairment charge
of Internet assets
recorded in
cost of sales - - 3,786 3,786
Impairment charge of
Internet assets
recorded in
selling &
marketing - - 401 401
Gain on sale of
subsidiary - (1,690) - -
Loss on
available-for-sale
Internet securities - - 20,754 20,754
Equity in loss
of affiliate 763 19,969 - -
-----------------------------------------------
Total 763 18,279 24,941 24,941
Pro Forma effective
tax rate 38% 38% 38% 38%
Total exclusions
after tax 473 11,333 15,463 15,463
Additional items to be
excluded, already
presented
tax-effected:
Gain on sale of
subsidiary, recorded
free of tax - - (651) (651)
Extraordinary item, loss
on early extinguishment
of debt, net
of taxes - - 1,510 1,948
Cumulative effect
of change in
accounting principle,
net of taxes - - - 5,337
Pro Forma net income
excluding after-tax
operating Internet
impairment charges,
non-operating and
extraordinary items
and cumulative effect
of change in
accounting
principle $25,436 $17,750 $12,557 $18,822
Weighted average common
shares outstanding
- Diluted 28,330 28,330 34,285 34,285
==================================================
Pro Forma net income
per share excluding
after-tax operating
Internet impairment
charges, non-operating
and extraordinary
items and cumulative
effect of change
in accounting
principle - Diluted $0.90 $0.63 $0.37 $0.55
=================================================
TAKE-TWO INTERACTIVE SOFTWARE, INC. and SUBSIDIARIES
Consolidated Condensed Balance Sheets
As of October 31, 2001 and October 31, 2000
(In thousands, except share data)
October 31,October 31,
2001 2000
Restated
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ASSETS:
Current assets:
Cash and cash equivalents $ 6,056 $ 5,245
Accounts receivable, net of provision
for doubtful accounts and sales
allowances of $26,106 and $11,615 at
October 31, 2001 and 2000, respectively 94,950 110,783
Inventories, net 61,937 53,798
Prepaid royalties 21,892 24,093
Prepaid expenses and other current assets 17,925 10,386
Investments 6,241 2,926
Deferred tax asset 13,873 9,243
--------- ---------
Total current assets 222,874 216,474
Property and equipment, net 11,033 5,260
Prepaid royalties 11,097 1,303
Capitalized software development costs, net 11,934 9,613
Investments 75 28,487
Intangibles, net 88,175 66,562
Deferred tax asset 7,892 -
Other assets 1,917 2,558
--------- ---------
Total assets $ 354,997 $ 330,257
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LIABILITIES and STOCKHOLDERS' EQUITY:
Current liabilities:
Accounts payable $ 60,223 $ 46,566
Accrued expenses 20,250 16,189
Lines of credit 54,073 84,605
Current portion of capital lease obligation 99 89
--------- ---------
Total current liabilities 134,645 147,449
Capital lease obligation, net of current portion 291 348
Loan payable, net of discount - 12,268
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Total liabilities 134,936 160,065
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Stockholders' equity
Common stock, par value $.01 per share;
50,000,000 shares authorized; 36,640,972,
and 31,172,866 shares issued and outstanding
at October, 31, 2001 and 2000, respectively 366 312
Additional paid-in capital 213,908 157,738
Deferred compensation - (5)
Retained earnings 16,239 24,819
Accumulated other comprehensive loss (10,452) (12,672)
--------- ---------
Total stockholders' equity 220,061 170,192
--------- ---------
Total liabilities and stockholders' equity $ 354,997 $ 330,257
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