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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
____________________
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
December 18, 2003
TAKE-TWO INTERACTIVE SOFTWARE, INC.
(Exact name of registrant as specified in its charter)
Delaware 0-29230 51-0350842
---------------------------- ----------- -------------------
(State or other jurisdiction (Commission (I.R.C. Employer
of incorporation) File Number) Identification No.)
622 Broadway, New York, New York 10012
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code: (646) 536-2842
Not Applicable
- --------------------------------------------------------------------------------
Former name or former address, if changed since last report
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits
(c) Exhibits
99.1 Press Release dated December 18, 2003 relating to Take-Two
Interactive Software, Inc.'s financial results for the fourth
fiscal quarter and fiscal year ended October 31, 2003.
Item 9. Regulation FD Disclosure
The information on this Form 8-K is being furnished to, but not filed
with, the Securities and Exchange Commission solely under Item 12 of
Form 8-K.
Item 12. Results of Operations and Financial Condition
On December 18, 2003, the Company issued a press release announcing
its financial results for the fourth fiscal quarter and fiscal year
ended October 31, 2003.
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
TAKE-TWO INTERACTIVE SOFTWARE, INC.
Date: December 18, 2003 By: /s/ Karl H. Winters
---------------------------------
Karl H. Winters
Chief Financial Officer
Exhibit No. Description
99.1 Press Release dated December 18, 2003 relating to
Take-Two Interactive Software, Inc.'s financial results
for the fourth fiscal quarter and fiscal year ended
October 31, 2003.
Exhibit 99.1
Take-Two Interactive Software, Inc. Reports Fourth Quarter
and Fiscal 2003 Financial Results
NEW YORK--(BUSINESS WIRE)--Dec. 18, 2003--Take-Two Interactive
Software, Inc. (NASDAQ:TTWO) today announced record financial results
for its fourth quarter and fiscal year ended October 31, 2003.
Net sales for the fourth quarter ended October 31, 2003 were
$278.5 million, a 28% increase over $218.4 million for the same period
a year ago. Net income for the quarter of $26.6 million represented an
increase of 19% compared to $22.3 million last year, with diluted net
income per share of $0.59, a 9% increase over $0.54 last year.
Net sales for the fiscal year ended October 31, 2003 were $1.04
billion, a 31% increase over $795.0 million in fiscal 2002. Net income
of $100.0 million represented an increase of 40% compared to $71.6
million last year, with diluted net income per share of $2.31,
compared to $1.81, an increase of 28%.
Guidance
For the first quarter ending January 31, 2004, Take-Two is
reiterating its net sales guidance of $412 million, but is reducing
its diluted net income per share guidance from $1.21 to $1.10. For the
fiscal year ending October 31, 2004, Take-Two is reiterating its net
sales guidance of $1.18 billion, but is reducing its diluted net
income per share guidance from $2.68 to $2.60. Take-Two is issuing
initial guidance for the second quarter ending April 30, 2004 of $218
million in net sales and $0.41 of diluted net income per share.
Liquidity and Selected Balance Sheet Items
As expected, Take-Two operated in a cash flow deficit position of
approximately $44 million for the quarter. Operating cash flow for the
fiscal year ended October 31, 2003 was approximately $81 million.
Working capital was $351 million at October 31, 2003, as compared with
$197 million at the same time a year ago. The Company had more than
$183 million in cash as of October 31, 2003, as compared to $108
million in cash at October 31, 2002.
Publishing Highlights - Fourth Quarter
In its fourth quarter of fiscal 2003, Take-Two's Rockstar Games
publishing label launched Max Payne 2: The Fall of Max Payne for the
PC, the sequel to the hit franchise that debuted in 2001. Rockstar
extended the success of its blockbuster Grand Theft Auto franchise by
releasing the Grand Theft Auto Double Pack for the PlayStation(R)2,
consisting of Grand Theft Auto 3 and Grand Theft Auto: Vice City, in
both North America and Europe. In addition, under a license agreement
with Rockstar, Capcom Co., Ltd. released Grand Theft Auto 3 for the
PlayStation(R)2 and PC in Japan. According to Enterbrain Inc., the
parent company of Weekly Famitsu, Grand Theft Auto 3 has sold
approximately 300,000 copies as of the week ending December 7, 2003,
making it one of the most successful debuts of a Western video game in
Japan.
The Company's Gathering label shipped Railroad Tycoon 3 and Hidden
& Dangerous 2, sequels to the popular franchises, and Space Colony, a
new title, all for the PC. The Company also shipped Conflict: Desert
Storm II and Starsky & Hutch, both in North America only, for
PlayStation(R)2, PC and Xbox(TM); Ford Racing 2 for PlayStation(R)2
and Xbox(TM) in North America only; MTV's Celebrity Deathmatch for
PlayStation(R)2, PC, Xbox(TM) and PlayStation(R); and Ford Truck Mania
for PlayStation(R). The Company also launched the PlayStation(R)2
Greatest Hits version of Conflict: Desert Storm, bringing Take-Two's
catalog of Greatest Hits products for PlayStation(R)2 to six titles.
Publishing Highlights - First Quarter
In its first quarter of fiscal 2004, Rockstar Games shipped the
Grand Theft Auto Double Pack for the Xbox(TM) in North America; Max
Payne 2: The Fall of Max Payne for PlayStation(R)2 and Xbox(TM);
Manhunt for PlayStation(R)2; and Max Payne for the Game Boy(R) Advance
in North America. The Company also launched the Xbox Platinum Hits
version of Conflict: Desert Storm. Rockstar will ship the Grand Theft
Auto Double Pack for Xbox(TM) in Europe on January 2nd. Gathering
expects to ship Mafia for PlayStation(R)2 and Xbox(TM) in late
January.
Also in its first quarter, Take-Two completed the acquisition of
TDK Mediactive, Inc., a California based publisher of videogames based
on popular licensed properties, including The Haunted Mansion, Pirates
of the Caribbean, The Land Before Time, Robotech, The Muppets and
Corvette. Upon closing, TDK Mediactive was renamed Take-Two Licensing.
Products planned for the first quarter from TDK's portfolio include
Star Trek(TM): Shattered Universe for PlayStation(R)2 and Xbox(TM).
To streamline Take-Two's publishing operations, the Company has
reorganized and consolidated its publishing business into the
following three labels: Rockstar Games, Gathering and Global Star.
Rockstar will continue to focus on premium priced, groundbreaking
entertainment. Gathering, which has historically focused on PC titles,
with only a small selection of console products, will now serve as the
publisher of all mid-priced and non-Rockstar premium priced products
on the PC, console and handheld platforms. Global Star will publish
PC, console and handheld titles that retail for $19.99 and below. The
Gotham Games label has been phased out. Gotham's catalog of products,
along with TDK's licensed product portfolio, will be published by
either Gathering or Global Star, depending upon the price point of the
title. Global Star's products will be sold exclusively through our
Jack of All Games' sales force, further strengthening Jack of All
Games' dominant position in the value-priced product category. In
addition, Jack of All Games' United States and Canadian distribution
operations will be consolidated operationally to extend the reach of
our domestic value console business into Canada.
Future Publishing Highlights
Rockstar is pleased to announce Red Dead Revolver from Rockstar
San Diego, the developers of Rockstar Games' best-selling Midnight
Club and Smuggler's Run franchises. As a major new franchise from
Rockstar Games, Red Dead Revolver is a stylish, western themed,
gun-fighting extravaganza intended for release on the PlayStation(R)2
and Xbox(TM) in the second fiscal quarter. Additionally, Rockstar
looks forward to the expected March release of Grand Theft Auto: Vice
City for PlayStation(R)2 and PC in Japan, under a license agreement
with Capcom Co., Ltd.
As previously announced, Rockstar also expects to introduce The
Warriors(TM), a new title based on the Paramount Pictures feature
film. The release date of the title has been moved from the second
fiscal quarter to the third fiscal quarter. Additional Rockstar
products planned for fiscal 2004 include the next installment in the
Grand Theft Auto franchise, which will be released in the fourth
fiscal quarter. Rockstar also plans to release Manhunt for Xbox(TM)
and the PC as well as an extension of the Grand Theft Auto franchise
for the Game Boy(R) Advance during fiscal 2004.
Gathering's lineup includes Vietcong: Fist Alpha, an add-on to the
popular Vietcong, and Vietcong: Purple Haze which will include
Vietcong and Fist Alpha together; Destruction Derby Arena on
PlayStation(R)2, the next generation installment to the successful
PlayStation(R) franchise, Destruction Derby, complete with full online
playability; a sequel to the popular Hidden & Dangerous franchise, and
the introduction of several new properties from Gathering's
distribution arrangement with Destineer Publishing. Titles planned for
release under the Gathering label from TDK's portfolio include
Robotech and Spy vs Spy.
Global Star is focusing on building strong, aggressively-priced
game franchises primarily for the console systems, across various
popular genres including racing, sports and action games. Global
Star's lineup of original sports and racing titles includes Carve, a
personal watercraft based racing game for the Xbox(TM), with online
racing capability on Xbox(TM) Live, as well as Motocross Mania 3, the
latest in the top selling Motocross Mania franchise, and a new console
release in the successful Virtual Pool franchise. Global Star is also
extending the recently acquired Army Men franchise with Army Men:
Sarge's War for PlayStation(R)2 and Xbox(TM). Additionally, Global
Star will release sports and racing console products from TDK's
portfolio including Corvette and the PlayStation(R)2 title UFC: Sudden
Impact(TM).
Distribution Highlights
The Company's Jack of All Games subsidiary, the leading North
American distributor of videogame software, achieved record financial
results in the fourth quarter and fiscal year, with fourth quarter net
sales more than doubling over the comparable period last year. Jack of
All Games continues to capitalize on the growing installed base of
hardware and proliferation of software titles and outlets to purchase
software by emphasizing sales of both exclusive and non-exclusive mid
and budget-priced software to its expanding customer base.
Jack of All Games has been successful in increasing its market
share as a value-added distributor due to its extensive assortment of
products for all platforms other than the PC. They have also
established a particularly strong presence in the budget segment of
the business due to their expanding portfolio of value-priced products
and their expertise in selling these titles. During the fourth
quarter, Jack of All Games continued to leverage this strategy,
serving as the exclusive distributor of various Take-Two value-priced
published products, including Starsky & Hutch, MTV's Celebrity
Deathmatch, Ford Racing 2 and Ford Truck Mania.
Management
In November, Trevor Drinkwater was appointed to the new position
of Chief Operating Officer. Trevor joined the Company from Warner Home
Video, where he held several senior positions, including Senior Vice
President of Sales. At Warner Home Video, Trevor was responsible for
sales; sales service, including sales planning and analysis; customer
service and vendor managed inventory programs with major retailers.
Prior to Warner Home Video, Trevor was with Nestle Waters, formerly
known as The Perrier Group of America, where he served as General
Manager of the Western Region.
Jeffrey Lapin, Chief Executive Officer, commented, "Trevor's 15
years of senior management experience in sales and operations will be
a valuable resource to Take-Two as we continue to expand our
publishing and distribution operations, both domestically and
internationally. His disciplined, analytical approach to the business
will provide additional structure needed to further extend Take-Two's
success."
Update on Securities and Exchange Commission Investigation
Take-Two is providing an update in regard to its previously
announced Securities and Exchange Commission investigation. The
Company has received a Wells Notice from the staff of the SEC stating
the staff's intention to recommend that the SEC bring a civil action
seeking an injunction and monetary damages against the Company
alleging that the Company violated certain provisions of the
Securities Act of 1933 and the Securities Exchange Act of 1934. The
proposed allegations stem from the Company's previously disclosed SEC
investigation into, among other things, certain accounting matters
related to the Company's financial statements, periodic reporting and
internal accounting control provisions. The Company's Chairman, an
employee and two former officers of the Company also received Wells
Notices.
The SEC has also raised certain issues regarding the Company's
application of SFAS 48 "Revenue Recognition When Right of Return
Exists" and its impact on the Company's revenue recognition policies
as set forth in the Company's current and historical financial
statements, as well as guidance. The Company's guidance does not
include any potential monetary penalties associated with the
investigation. The Company believes that its revenue recognition
policies, including the application of SFAS 48, as set forth in such
financial statements are in accordance with generally accepted
accounting principles. If the Company is unable to satisfactorily
resolve this issue with the SEC, it would result in a change in the
timing of the recording of revenue in historical, current and future
financial statements.
The Company has initiated discussions with the Commission to
address the issues raised in the Wells Notice.
Management Comments
Mr. Lapin concluded, "We believe that with Rockstar's portfolio of
blockbuster franchises and highly anticipated new brands as a
foundation, and Gathering's exciting lineup of proprietary and
licensed properties, along with Global Star's value priced products
incorporating mass market, licensed and children's titles, we have the
most compelling and diversified product pipeline in Take-Two's
history. Our Jack of All Games' distribution business has continued to
capture increasing market share while improving profitability.
Combined with exceptional success in the low priced, budget segment of
the industry, Jack of All Games provides incremental visibility and
predictability to our business model. In summary, we have all the
elements in place to extend our success as a leader in the interactive
entertainment industry."
Conference Call
Take-Two will host a conference call today at 8:30 am Eastern Time
to review its results for the fourth quarter and fiscal year ended
October 31, 2003 and to discuss its outlook. A live webcast of the
call is available by visiting www.take2games.com, and a replay of the
call will be archived through the close of business on Wednesday,
December 24, 2003.
About Take-Two Interactive Software
Headquartered in New York City, 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) game console, PlayStation(R)2 computer
entertainment system, Xbox(R), Nintendo GameCube(TM) and Game Boy(R)
Advance. The Company publishes and develops products through its
wholly owned subsidiary labels: Rockstar Games, Gathering, Global Star
and Joytech. The Company maintains sales and marketing offices in
Cincinnati, New York, Toronto, London, Paris, Munich, Vienna, Milan,
Sydney, Amsterdam 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 Statement under the Private Securities Reform Act of
1995: 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
important factors are described in the Company's Annual Report on Form
10-K for the fiscal year ended October 31, 2002 and on Form 10-Q for
the quarter ended July 31, 2003.
TAKE-TWO INTERACTIVE SOFTWARE, INC. and SUBSIDIARIES
Consolidated Condensed Statements of Operations
For the three and twelve months ended October 31, 2003 and 2002
(In thousands, except per share data)
Three months ended Twelve months ended
October 31, October 31,
2003 2002 2003 2002
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Net sales $278,518 $218,414 $1,037,112 $795,018
Cost of sales
Product costs 152,273 106,750 537,257 411,517
Royalties 22,950 26,880 89,732 80,774
Software development costs 2,445 2,106 11,003 8,124
--------- ---------- ---------- ---------
Total cost of sales 177,668 135,736 637,992 500,415
--------- ---------- ---------- ---------
Gross profit 100,850 82,678 399,120 294,603
Operating expenses
Selling and marketing 26,087 19,561 103,015 77,990
General and administrative 20,382 16,233 88,083 71,544
Research and development 7,688 3,821 25,107 11,524
Depreciation and amortization 3,234 4,216 16,923 10,830
--------- ---------- ---------- ---------
Total operating expenses 57,391 43,831 233,128 171,888
Income from operations 43,459 38,847 165,992 122,715
Interest (income) expenses, net (552) (248) (2,265) 480
Gain on Internet investments - (22) (39) (181)
Class action settlement costs - - - 1,468
--------- ---------- ---------- ---------
Total non-operating
(income) expenses (552) (270) (2,304) 1,767
Income before income taxes 44,011 39,117 168,296 120,948
Provision for income taxes 17,389 16,784 68,324 49,383
--------- ---------- ---------- ---------
Net income $26,622 $22,333 $99,972 $71,565
========= ========== ========== =========
Per share data:
Diluted:
Weighted average common
shares outstanding 44,887 41,459 43,297 39,570
========= ========== ========== =========
--------- ---------- ---------- ---------
Net income per share -
Diluted $0.59 $0.54 $2.31 $1.81
========= ========== ========== =========
OTHER INFORMATION Three months ended Twelve months ended
- ----------------- October 31, October 31,
2003 2002 2003 2002
--------- --------- --------- --------
Total revenue mix
-----------------
Publishing 54% 72% 65% 72%
Distribution 46% 28% 35% 28%
Geographic revenue mix
----------------------
North America 72% 84% 72% 80%
International 28% 16% 28% 20%
Publishing platform revenue mix
-------------------------------
Sony PlayStation 2 44% 66% 71% 73%
Sony PlayStation 3% 4% 4% 6%
Microsoft Xbox 12% 4% 6% 5%
PC 39% 23% 17% 14%
Accessories and other 2% 3% 2% 2%
TAKE-TWO INTERACTIVE SOFTWARE, INC. and SUBSIDIARIES
Consolidated Condensed Balance Sheets
As of October 31, 2003 and 2002
(In thousands, except share data)
ASSETS October 31, October 31,
2003 2002
------------ -----------
Current assets
Cash and cash equivalents $183,477 $108,369
Accounts receivable, net of provision for
doubtful accounts, returns and sales
allowances of $56,910 and $28,317 at
October 31, 2003 and 2002, respectively 172,443 108,065
Inventories, net 101,748 74,391
Prepaid royalties 11,267 13,723
Prepaid expenses and other current assets 41,112 19,569
Deferred tax asset 6,071 5,392
------------ -----------
Total current assets 516,118 329,509
Fixed assets, net 22,260 15,319
Prepaid royalties 8,439 12,203
Capitalized software development costs, net 16,336 10,385
Investments - 97
Goodwill, net 101,498 61,529
Intangibles, net 44,836 55,293
Deferred tax asset, net - 7,983
Other assets, net 527 266
------------ -----------
Total assets $710,014 $492,584
============ ===========
LIABILITIES and STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable $106,172 $79,660
Accrued expenses and other current liabilities 56,707 50,698
Income taxes payable 2,229 1,603
Current portion of capital lease obligation 103 95
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Total current liabilities 165,211 132,056
Capital lease obligation, net of current
portion 73 201
Deferred tax liability 8,486 3,885
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Total liabilities 173,770 136,142
------------ -----------
Stockholders' equity
Common stock, par value $.01 per share;
50,000,000 shares authorized; 44,227,215
and 40,361,739 shares issued and outstanding 442 404
Additional paid-in capital 350,852 273,502
Deferred compensation (1,890) (227)
Retained earnings 187,776 87,804
Accumulated other comprehensive loss (936) (5,041)
------------ -----------
Total stockholders' equity 536,244 356,442
------------ -----------
Total liabilities and stockholders' equity $710,014 $492,584
============ ===========
CONTACT: Take-Two Interactive Software, Inc.
Corporate Press/Investor Relations
Jim Ankner, 646-536-3006
Fax: 646-536-2926
james.ankner@take2games.com
or
Euro RSCG Middleberg
Corporate Press Relations:
Gabrielle Zucker, 212-699-2736
Fax: 212-699-2599
gabrielle.zucker@eurorscg.com