Take-Two News Release
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Take-Two Interactive Software, Inc. Reports First Quarter Fiscal 2007 Financial Results
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NEW YORK--(BUSINESS WIRE)--March 12, 2007--Take-Two Interactive Software, Inc. (NASDAQ:TTWO) today announced financial results for its first quarter ended January 31, 2007. Net revenue for the first quarter was $277.3 million compared to $265.0 million for the first quarter of fiscal 2006. Net loss for the quarter was $21.5 million or $0.30 per share, compared to a net loss of $29.1 million or $0.41 per share in the prior year's first quarter. The first quarter 2007 loss includes $6.4 million for legal and other professional fees associated with the investigation of stock option grants and the Company's responses to the New York County District Attorney's subpoenas, $6.1 million to record valuation allowances for deferred tax assets as required under Statement of Financial Accounting Standards (SFAS) 109, and $2.2 million in stock-based compensation as required by SFAS 123(R). While Take-Two's first quarter results continued to be negatively impacted by the video game industry's ongoing transition to next-generation platforms, the Company realized higher gross profit margins in both its publishing and distribution businesses compared to the first quarter last year. Publishing margins rose due to increased sales of the Company's sports products, primarily NBA(R) 2K7, along with the contribution of higher margin titles such as Grand Theft Auto: Liberty City Stories for the PlayStation(R)2 computer entertainment system and Grand Theft Auto: San Andreas for the PlayStation 2 in Japan. Distribution gross margins rose due to a more favorable mix of software titles sold, particularly an increase in those for next-generation platforms compared to the prior period. Take-Two's operating expenses declined by $10.0 million, or approximately 10%, from last year's first quarter as a result of reduced sales and marketing expenses, the closure of three development studios in 2006, and lower stock-based compensation. Take-Two generated approximately $12.1 million in cash flow from operations in the quarter, bringing the Company's cash position to $138.2 million as of January 31, 2007. As previously announced, because the Company provided a comprehensive business update in connection with its February 28, 2007 conference call for the fiscal 2006 fourth quarter, no conference call will be held for the first quarter results. First Quarter Highlights Rockstar Games' Grand Theft Auto: Vice City Stories for the PSP (PlayStation(R)Portable) system, Grand Theft Auto: San Andreas and Bully for PlayStation 2, and Grand Theft Auto: Liberty City Stories for the PSP and PlayStation 2 were among the largest contributors to revenue during the quarter. 2K's leading titles in the quarter were NBA 2K7 for the Xbox 360(TM) video game and entertainment system from Microsoft and PLAYSTATION(R)3 and PlayStation 2 computer entertainment systems, The Elder Scrolls(R) IV: Oblivion(TM) for Xbox 360, and College Hoops 2K7 for Xbox 360. About Take-Two Interactive Software Headquartered in New York City, Take-Two Interactive Software, Inc. is a global developer, marketer, distributor and publisher of interactive entertainment software games for the PC, PlayStation(R) game console, PlayStation(R)2 and PLAYSTATION(R)3 computer entertainment systems, PSP(R) (PlayStation(R)Portable) system, Xbox(R) and Xbox 360(TM) video game and entertainment systems from Microsoft, Wii(TM), Nintendo GameCube(TM), Nintendo DS(TM) and Game Boy(R) Advance. The Company publishes and develops products through its wholly owned labels Rockstar Games, 2K and 2K Sports, and Global Star Software; and distributes software, hardware and accessories in North America through its Jack of All Games subsidiary. 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 Statement under the Private Securities Litigation Reform Act of 1995: This press release contains forward-looking statements made in reliance upon the safe harbor provisions of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. The statements contained herein which are not historical facts are considered forward-looking statements 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 Company has no obligation to update such forward-looking statements. Actual results may vary significantly from these forward-looking statements based on a variety of factors. These risks and uncertainties include the matters relating to the Special Committee's investigation of the Company's stock option grants and the restatement of our consolidated financial statements as well as the risks and uncertainties stated in this release. The investigation and conclusions of the Special Committee may result in claims and proceedings relating to such matters, including previously disclosed shareholder and derivative litigation and actions by the Securities and Exchange Commission and/or other governmental agencies and negative tax or other implications for the Company resulting from any accounting adjustments or other factors. In addition, there can be no assurance that the actions taken or to be taken by the Company as described herein will ensure the continued listing of the Company's common stock on NASDAQ. Other important factors are described in the Company's Annual Report on Form 10-K for the fiscal year ended October 31, 2006 in the section entitled "Risk Factors".
TAKE-TWO INTERACTIVE SOFTWARE, INC.
CONDENSED STATEMENTS OF OPERATIONS (Unaudited)
(in thousands, except per share amounts)
Three Months Ended
January 31,
-----------------------
2007 2006
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Net revenue $ 277,340 $ 264,981
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Cost of goods sold:
Product costs 164,143 160,853
Royalties 27,713 32,867
Software development costs 12,369 15,594
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Total cost of goods sold 204,225 209,314
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Gross Profit 73,115 55,667
Selling and marketing 35,024 (a) 41,644 (e)
General and administrative 38,614 (b) 38,453 (f)
Research and development 14,150 (c) 17,709 (g)
Depreciation and amortization 6,661 6,651
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Total operating expenses 94,449 104,457
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Loss from operations (21,334) (48,790)
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Interest income, net 862 253
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Loss before income taxes (20,472) (48,537)
Provision (benefit) for income taxes 1,076 (d) (19,415)
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Net loss $ (21,548) $ (29,122)
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Loss per share:
Basic $ (0.30) $ (0.41)
Diluted $ (0.30) $ (0.41)
Weighted average shares outstanding:
Basic 71,360 70,870
Diluted 71,360 70,870
Three Months Ended
January 31,
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OTHER INFORMATION 2007 2006
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Total revenue mix
Publishing 58% 60%
Distribution 42% 40%
Geographic revenue mix
North America 77% 72%
International 23% 28%
Publishing platform revenue mix
Sony PlayStation 2 36% 30%
Sony PSP 20% 33%
Microsoft Xbox 360 15% 10%
PC 12% 12%
Sony PlayStation 3 6% 0%
Accessories and other 6% 6%
Microsoft Xbox 4% 7%
Nintendo Handhelds 1% 2%
For the Three Months Ended January 31, 2007:
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(a) Includes stock-based compensation expense of $0.2 million as
required by SFAS 123(R).
(b) Includes stock-based compensation expense of $1.3 million as
required by SFAS 123(R) and $6.4 million of legal and other
professional fees associated with the investigation of stock option
grants and the Company's responses to the New York County District
Attorney's subpoenas.
(c) Includes stock-based compensation expense of $0.7 million as
required by SFAS 123(R).
(d) Includes a charge of $6.1 million to record valuation allowances
for deferred tax assets.
For the Three Months Ended January 31, 2006:
---------------------------------------------------------
(e) Includes stock-based compensation expense of $0.7 million as
required by SFAS 123(R).
(f) Includes stock-based compensation expense of $3.1 million as
required by SFAS 123(R).
(g) Includes stock-based compensation expense of $0.7 million as
required by SFAS 123(R).
TAKE-TWO INTERACTIVE SOFTWARE, INC.
CONDENSED BALANCE SHEETS
(in thousands, except per share amounts)
January 31, October 31,
2007 2006
----------- -----------
ASSETS (Unaudited)
Current assets:
Cash and cash equivalents $ 138,151 $ 132,480
Accounts receivable, net of allowances of
$78,847 and $91,509 at January 31, 2007 and
October 31, 2006, respectively 79,107 143,199
Inventory, net 82,194 95,520
Software development costs and licenses 97,839 85,207
Prepaid taxes and taxes receivable 39,474 60,407
Prepaid expenses and other 23,241 28,060
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Total current assets 460,006 544,873
---------------------------------------------- ----------- -----------
Fixed assets, net 49,673 47,496
Software development costs and licenses, net
of current portion 39,636 31,354
Goodwill 188,179 187,681
Other intangibles, net 41,448 43,248
Other assets 14,544 14,154
---------------------------------------------- ----------- -----------
Total assets $ 793,486 $ 868,806
============================================== =========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 61,819 $ 123,947
Accrued expenses and other current
liabilities 140,391 139,599
---------------------------------------------- ----------- -----------
Total current liabilities 202,210 263,546
---------------------------------------------- ----------- -----------
Deferred revenue 50,000 50,000
Other long-term liabilities 5,918 4,868
---------------------------------------------- ----------- -----------
Total liabilities 258,128 318,414
---------------------------------------------- ----------- -----------
Commitments and contingencies
Stockholders' Equity:
Common Stock, $.01 par value, 100,000 shares
authorized; 72,795 and 72,745 shares issued
and outstanding at January 31, 2007 and
October 31, 2006, respectively 728 727
Additional paid-in capital 487,516 482,104
Retained earnings 39,111 60,659
Accumulated other comprehensive income 8,003 6,902
---------------------------------------------- ----------- -----------
Total stockholders' equity 535,358 550,392
---------------------------------------------- ----------- -----------
---------------------------------------------- ----------- -----------
Total liabilities and stockholders' equity $ 793,486 $ 868,806
============================================== =========== ===========
CONTACT: Take-Two Interactive Software, Inc.
Jim Ankner, 646-536-3006
(Corporate Press/Investor Relations)
james.ankner@take2games.com
SOURCE: Take-Two Interactive Software, Inc.
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