SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K/A
|X| Annual Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the fiscal year ended October 31, 2003
OR
|_| Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from ___ to ___
0-29230
(Commission File No.)
TAKE-TWO INTERACTIVE SOFTWARE, INC.
------------------------------------------------------
(Exact name of Registrant as specified in its charter)
Delaware 51-0350842
(State or Other Jurisdiction (I.R.S. Employer
of Incorporation) Identification No.)
622 Broadway, New York, New York 10012
(Address of principal executive offices including zip code)
Registrant's telephone number, including area code: (646) 536-2842
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $.01 par value
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports) and (2) has been subject to such filing
requirements for the past 90 days. Yes |X| No |_|
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of the Registrant's knowledge, in definitive proxy or information
statements in Part III of this Form 10-K or any amendment to this Form 10-K. | |
Indicate by check mark whether the Registrant is an accelerated filer (as
defined in Rule 12b-2 of the Act). Yes |X| No |_|
The aggregate market value of the voting and non-voting common equity held by
non-affiliates computed by reference to the price at which the common equity was
last sold, or the average bid and asked price of such common equity, as of the
last business day of the Registrant's most recently completed second fiscal
quarter was approximately $910,000,000.
As of January 30, 2004, there were 44,578,611 shares of the Registrant's common
stock outstanding.
Documents Incorporated by Reference: None
Item 10. Directors and Executive Officers of the Registrant
Following is information with respect to our executive officers and
directors:
Ryan A. Brant, age 32, has been Chairman of the Company since 1993. Mr.
Brant served as the Company's Chief Executive Officer from 1993 until February
2001. Mr. Brant received a B.S. degree in Economics from the University of
Pennsylvania's Wharton School of Business.
Jeffrey C. Lapin, age 47, has been a director of the Company since
November 2002 and Chief Executive Officer of the Company since January 2003. Mr.
Lapin served as Vice Chairman of THQ, Inc., a developer and publisher of
interactive entertainment software from October 1998 to November 2002, and
served as Chief Operating Officer of THQ from August 2000 to November 2002. From
July 1996 to October 1998, Mr. Lapin served as President of House of Blues, Inc.
Hospitality and Executive Vice President of House of Blues, Inc. Entertainment.
From 1986 to June 1996, Mr. Lapin served in various executive capacities with
Starwood Hotels & Resorts, most recently from January 1995 to June 1996 as
President and Chief Operating Officer, and from May 1991 to January 1995 as
President and Chief Executive Officer. Prior to his employment by Starwood, Mr.
Lapin was an attorney at Mitchell, Silberberg & Knupp in Los Angeles. Mr. Lapin
received a J.D. from Loyola Law School.
Karl H. Winters, age 45, has been Chief Financial Officer of the Company
since February 2002. From April 2000 to June 2001, Mr. Winters was the Chief
Financial Officer of ModelWire, Inc., a company engaged in marketing imaging
database products. From September 1993 to December 1999, Mr. Winters served in
various positions, most recently as Vice President of Trace International
Holdings, Inc., a private holding company that held significant interests in
United Auto Group, Inc., a consolidator of new car dealerships, and Foamex
International Inc., a manufacturer of polyurethane products. From 1993 to 1999,
Mr. Winters held executive positions at United Auto and Foamex, most recently as
United Auto's Chief Financial Officer and Executive Vice President. Trace
International filed a petition under Chapter 11 of the United States Bankruptcy
Code in July 1999. From 1983 to 1993, Mr. Winters was a Senior Audit Manager for
Cooper's & Lybrand. Mr. Winters is a C.P.A. and received an M.B.A. from the
University of Michigan and a B.A. in business economics with a concentration in
accounting from Calvin College.
Trevor Drinkwater, age 37, has been the Chief Operating Officer of the
Company since November 2003. Prior to joining the Company, Mr. Drinkwater served
in various executive capacities at Warner Home Video from April 1999 to October
2003, including most recently as Senior Vice President of Domestic Sales. From
May 1990 to May 1999, Mr. Drinkwater served in various capacities at The Perrier
Group of America. Mr. Drinkwater received a B.S. in Marketing from the
University of Colorado.
Oliver R. Grace, Jr., age 50, has been a director of the Company since
April 1997. Mr. Grace, a private investor, has been the Chairman of the Board of
Andersen Group, Inc., a dental products and video broadcasting equipment
manufacturing company, since 1990. Mr. Grace has also been a director of
Republic Automotive Parts, Inc., a distributor of replacement parts for the
automotive aftermarket, since 1982. Mr. Grace is a general partner of Anglo
American Security Fund, L.P., a private investment fund. Mr. Grace received a
B.A. in Business Administration from Vanderbilt University.
Robert Flug, age 56, has been a director of the Company since February
1998. Mr. Flug has been the President and Chief Operating Officer of S.L.
Danielle, a women's apparel company, since September 1987. Mr. Flug received a
B.S. in Business Administration from New York University.
Todd Emmel, age 41, has been a director of the Company since February
2002. Since August 2003, Mr. Emmel has served as Director, Structured Products
for John Hancock Financial Services. From November 1999 until June 2002, Mr.
Emmel was a First Vice President at Ambac Assurance Corporation, a financial
insurance company. From May 1999 to November 1999, Mr. Emmel was Chief Credit
Officer at Structured Credit Partners, a private credit arbitrage firm. From
March 1998 to May 1999, Mr. Emmel was a Managing Director of DVI Private Capital
Group, a private equity fund. From April 1990 to March 1998, Mr. Emmel held
various positions at Union Bank of Switzerland, most recently as a Managing
Director. Prior to this, Mr. Emmel was an Associate at both Drexel Burnham
Lambert, from June 1988 to February 1990, and at E.F. Hutton from July 1987 to
February 1988. Mr. Emmel received an M.B.A. from Carnegie Mellon University and
a B.S. in accounting from Miami University.
-2-
Mark Lewis, age 54, has been a director of the Company since May 2001. For
the fifteen years prior to February 2001, Mr. Lewis held various positions with
Electronic Arts, most recently as Senior Vice President of International
Operations. Mr. Lewis has been a director of Muse Communications Corp., a
broadband technology company, since November 1997. Mr. Lewis received a B.A. in
English and graduated Cum Laude from Yale University.
Steven Tisch, age 54, has been a director of the Company since April 2002.
Since 1986, Mr. Tisch has been an independent motion picture producer. Mr. Tisch
is the Oscar Award winning producer of Forrest Gump, the 1994 winner for Best
Picture and the fourth-largest grossing domestic box office film of all time.
Since May 2000, Mr. Tisch has been a partner of Escape Artists, a private
independent film company, and a director of Classic Media, an owner of franchise
entertainment properties. Since June 2002, Mr. Tisch has been a director of Film
Roman, Inc., a publicly held television and motion picture production company.
From 1976 to 1986, Mr. Tisch was a principal of Tisch/Avnet Productions, a
production company with credits such as Risky Business. Mr. Tisch is a member of
the Board of Directors of the Tisch School of the Arts at New York University
and The Geffen Theatre in Los Angeles. Mr. Tisch received a B.A. in Sociology
from Tufts University.
Richard W. Roedel, age 54, has been a director of the Company and Chairman
of the Audit Committee since November 2002. From 1999 to 2000, Mr. Roedel was
Chairman and Chief Executive Officer of the accounting firm BDO Seidman, LLP,
the United States member firm of BDO International. Before becoming Chairman and
Chief Executive Officer, he was the Managing Partner of BDO Seidman's New York
Metropolitan Area from 1994 to 1999, the Managing Partner of its Chicago office
from 1990 to 1994 and an Audit Partner from 1985 to 1990. Mr. Roedel is a
co-founder and principal of Pinnacle Ventures LLC, which provides funding and
management expertise to privately held companies. Mr. Roedel received a B.S.
degree in accounting and economics from The Ohio State University and is a
Certified Public Accountant. Mr. Roedel is a director of Brightpoint, Inc. a
provider of outsourced services in the wireless telecommunications and data
industry, and Dade Behring Holdings, Inc., a medical diagnostics equipment and
related product manufacturer.
Section 16(a) Beneficial Ownership Compliance. Based solely on a review of
Forms 3, 4 and 5 furnished to the Company with respect to its most recent fiscal
year, the Company believes that all reporting persons currently required to file
forms under the Securities Exchange Act of 1934 filed such reports, except that
Mr. Brant was late filing four Forms 4 (four transactions); Mr. Grace was late
filing one Form 4 (one transaction); Mr. Flug was late filing two Forms 4 (two
transactions); Mr. Emmel was late filing one Form 4 (one transaction); and Mr.
Tisch was late filing one Form 4 (one transaction).
Audit Committee. The Company has established an Audit Committee of the
Board of Directors consisting of Messrs. Roedel, Flug, Grace and Emmel, each of
whom is an "independent" director as defined under the rules of the National
Association of Securities Dealers, Inc. Mr. Roedel, who acts as Chairman of the
Audit Committee, qualifies as a "financial expert" under federal securities
laws.
Code of Ethics. In March 2002, the Company adopted a written code of
ethics, as amended, that applies to the Company's principal executive officer,
principal financial officer, principal accounting officer or controller and any
persons performing similar functions. The Company will provide a copy of its
code of ethics to any person without charge upon written request addressed to
Take-Two Interactive Software, Inc. 622 Broadway, New York, New York 10012,
Attention: Director of Corporate Communications.
-3-
Item 11. Executive Compensation
The following table sets forth the cash compensation paid by the Company
during the fiscal years ended October 31, 2001, 2002 and 2003 to its Chief
Executive Officer and four most highly compensated executive officers other than
its Chief Executive Officer, each of whom was serving at the end of the fiscal
year ended October 31, 2003 and whose salary and bonus exceeded $100,000 (the
"Named Executives"):
Summary Compensation Table
Long-Term
Compensation
Annual Compensation Award
--------------------------------------------------------- ------------
Securities
Year Ended Other Annual Underlying
Name and Principal Position October 31, Salary($) Bonus($) Compensation(1) Options(#)
- --------------------------- ----------- --------- -------- --------------- ----------
Ryan A. Brant
Chairman............................... 2003 752,884 2,909,500(2) -- 450,000(3)
2002 641,058 1,993,330 -- 200,000
2001 575,000 790,000 -- 479,560
Jeffrey C. Lapin (4)
Chief Executive Officer............. 2003 542,500 200,000 -- 400,000
Kelly Sumner (5).................... 2003 607,019 1,862,500 -- 100,000
2002 473,910 450,000 -- 100,000
2001 359,519 19,317 -- 480,000
Paul Eibeler (6).................... 2003 296,153 650,000 50,000
2002 430,385 112,500 -- 50,000
2001 353,819 95,000 170,000
Karl H. Winters 2003 326,250 265,000 --
Chief Financial Officer (7)........... 2002 222,115 207,500 -- 200,000
- ----------
(1) The aggregate value of benefits to be reported under the "Other Annual
Compensation" column did not exceed the lesser of $50,000 or 10% of the
total of annual salary and bonus reported for the Named Executives.
(2) Includes a signing bonus of $600,000.
(3) Includes 150,000 shares of restricted stock.
(4) Mr. Lapin joined the Company as Chief Executive Officer in January 2003.
(5) Mr. Sumner resigned as Chief Executive Officer in January 2003 and serves
in a non-executive capacity.
(6) Mr. Eibeler resigned as President in June 2003.
(7) Mr. Winters joined the Company in February 2002.
-4-
The following table sets forth information concerning options granted in
the fiscal year ended October 31, 2003 to the Named Executives:
Option Grants in Fiscal Year Ended October 31, 2003
Individual Grants(1)
----------------------------------------------------------------
Potential Realizable
Number of Value at Assumed
Securities Percent of Total Annual Rates of Stock
Underlying Options Granted Exercise Price Appreciation for
Options to Employees in Price Expiration Option Term (2)
Name Granted(#) Fiscal Year(%) ($/Sh) Date 5%($) 10%($)
- ---------------------- ---------- --------------- -------- ---------- --------- ----------
Ryan A. Brant......... 250,000 22.17 04/30/08 1,531,291 3,383,752
50,000 12 34.16 09/30/08 471,889 1,042,751
Jeffrey C. Lapin...... 400,000 16 28.12 11/17/07 3,107,615 6,867,016
Kelly Sumner ......... 100,000 4 26.06 11/12/07 719,990 1,590,989
Paul Eibeler.......... 50,000 2 22.17 04/30/08 306,258 676,750
Karl Winters.......... -- -- -- -- -- --
(1) All of the options have a term of five years and vest at various times
over the term of the options.
(2) The potential realizable value columns of the table illustrate values that
might be realized upon exercise of options immediately prior to
expiration, assuming the common stock appreciates at the compounded rates
specified over the term of the options. These numbers do not take into
account provisions of certain options providing for termination of the
option following termination of employment or non-transferability of the
options and do not make any provision for taxes associated with exercise.
Because actual gains will depend upon, among other things, future
performance of the common stock, there can be no assurance that the
amounts reflected in this table will be achieved.
-5-
The following table sets forth information concerning the value of options
exercised during the fiscal year ended October 31, 2003 and the value of
unexercised stock options held by the Named Executives as of October 31, 2003:
Aggregated Option Exercises and Year End Values
Number of Securities
Shares Underlying Value of Unexercised
Acquired on Value Unexercised Options In-the-Money Options
Name Exercise(#) Realized($) at October 31, 2003 (#) at October 31, 2003 ($)*
---- ----------- ----------- ----------------------- ------------------------
Exercisable Unexercisable Exercisable Unexercisable
----------- ------------- ----------- -------------
Ryan A. Brant .. 68,662 1,012,399 -- 175,000 -- 2,470,000
Jeffrey C. Lapin -- -- -- 400,000 -- 4,636,000
Kelly Sumner ... 685,000 9,989,226 -- 150,000 -- 2,375,000
Paul Eibeler ... 405,000 5,876,654 -- -- -- --
Karl Winters ... 35,000 469,981 115,000 50,000 2,475,950 1,076,500
*Year-end values for unexercised in-the-money options represent the
positive spread between the exercise price of such options and the fiscal
year-end market value of the common stock, which was $39.71 on October 31, 2003.
Director Compensation
For the year ended October 31, 2003, each of Messrs. Flug and Grace
received cash compensation of $90,000 for serving as a non-employee director;
each of Messrs. Emmel and Roedel received $50,000; and each of Messrs. Lewis and
Tisch received $40,000. During fiscal 2003, Mr. Grace received options to
purchase 13,000 shares; Mr. Flug received options to purchase 13,000 shares; Mr.
Lewis received options to purchase 10,000 shares; Mr. Emmel received options to
purchase 13,000 shares; and Mr. Tisch received options to purchase 10,000
shares.
For the fiscal year ending October 31, 2004, each non-employee director is
expected to receive cash compensation of $60,000. In addition, the Chairman of
the Audit Committee is expected to receive an additional $35,000, the Chairman
of the Nominating/Corporate Governance Committee is expected to receive an
additional $20,000 and the Chairman of the Compensation Committee is expected to
receive an additional $20,000. Members of the Audit Committee (excluding the
Chairman) are expected to receive an additional $10,000. The Company is
currently formulating its plans with respect to the grant of stock-based
compensation to non-employee directors for fiscal 2004.
Employment Agreements
The Company entered into an employment agreement, as amended in May 2003,
with Ryan A. Brant for a five-year term ending July 2007. The areement provides
that Mr. Brant is entitled to receive an annual salary of $750,000 and a bonus
of $150,000 for each fiscal quarter and $250,000 for each fiscal year, provided
that such bonus is approved by the Compensation Committee of the Board of
Directors and the Company achieves its projected cash flow and net income
targets for each period. Mr. Brant is also entitled to receive a bonus of
$650,000 for each fiscal year, as well as discretionary bonuses approved by the
Compensation Committee.
The Company entered into an employment agreement with Jeffrey C. Lapin for
a three-year term commencing January 2003. The areement provides that Mr. Lapin
is entitled to receive an annual salary of $650,000 and a bonus of $50,000 for
each fiscal quarter and $200,000 for each fiscal year, provided that the Company
achieves its business and financial plans for each period. Mr. Lapin is also
entitled to receive a bonus of $200,000 for each fiscal year.
-6-
The Company entered into an employment agreement, as amended, with Kelly
Sumner providing for a three-year term ending December 2005. The agreement
provides that Mr. Sumner is entitled to an annual salary of $625,000.
The Company entered into an employment agreement with Karl H. Winters for
a three-year term commencing February 2002. The agreement provides that Mr.
Winters is entitled to an annual salary of $300,000 and a bonus based on Mr.
Winter's performance in implementing certain objectives of the Audit Committee
of the Board of Directors.
The Company has agreed to pay to Trevor Drinkwater an annual salary of
$350,000 plus an annual bonus of $100,000. The Company also granted Mr.
Drinkwater options to purchase 50,000 shares of common stock.
Each employment agreement provides that if employment is terminated under
certain circumstances, including in the event of a change of control, the
executive will be entitled to certain severance compensation. The employment
agreements also contain confidentiality and non-competition provisions.
-7-
Item 12. Security Ownership of Certain Beneficial Owners and Management
The following table sets forth certain information as of February 27,
2004, relating to the beneficial ownership of shares of the Company's common
stock by (i) each person or entity who is known by the Company to own
beneficially 5% or more of the outstanding common stock, (ii) each director,
(iii) each of the Named Executives and (iv) all directors and executive officers
as a group.
Number of Shares of Percentage of Outstanding
Name and Common Stock Common Stock
Address of Beneficial Owner(1) Beneficially Owned(2) Beneficially Owned
- ------------------------------ --------------------- -------------------------
FMR Corp (3) .............................................. 6,435,288 14.4%
J & W Seligman & Co. Incorporated (3) ..................... 2,867,900 6.4
Waddell & Reed Investment Management Company (3) .......... 2,419,052 5.4
Oliver R. Grace, Jr. (4) .................................. 470,880 1.0
Ryan A. Brant ............................................. 301,670 *
Robert Flug (5) ........................................... 100,032 *
Mark Lewis (6) ............................................ 20,000 *
Todd Emmel (6) ............................................ 35,350 *
Steven Tisch (6) .......................................... 35,000 *
Jeffrey C. Lapin (6) ...................................... 133,334 *
Richard W. Roedel (6) ..................................... 35,000 *
Karl H. Winters (6) ....................................... 165,000 *
Kelly Sumner .............................................. -- *
Paul Eibeler .............................................. -- *
All directors and executive officers as a group (ten
persons) (7) .............................................. 1,346,266 3.0%
- ----------
* Less than 1%.
(1) Unless otherwise indicated, the address of each beneficial owner is
Take-Two Interactive Software, Inc., 622 Broadway, New York, New York
10012.
(2) Unless otherwise indicated, the Company believes that all persons named in
the table have sole voting and investment power with respect to all shares
beneficially owned by them. A person is deemed to be the beneficial owner
of securities that may be acquired by such person within 60 days from the
date of this report upon the exercise of options. Each beneficial owner's
percentage ownership is determined by assuming that options that are held
by such person (but not those held by any other person) and which are
exercisable within 60 days of the date of this report have been exercised.
(3) Based on Schedules l3G filed with the Securities and Exchange Commission
as of February 2004.
-8-
(4) Includes 381,880 shares owned of record by Anglo American Security Fund,
L.P., of which Mr. Grace is a general partner, and options to purchase
89,000 shares held by Mr. Grace.
(5) Includes 19,600 shares held by S/L/ Danielle, Inc. and 80,432 shares of
Common Stock underlying options.
(6) Represents shares underlying options
(7) Includes 643,116 shares underlying options.
Securities Authorized for Issuance under Equity Compensation Plans. The
following table sets forth certain information as of October 31, 2003 regarding
outstanding options to purchase Common Stock that were outstanding on October
31, 2003.
- ----------------------------------------------------------------------------------------------------------------
(a) (b) (c)
- ----------------------------------------------------------------------------------------------------------------
Plan Category Number of securities Weighted-average Number of securities
to be issued upon exercise price of remaining for future
exercise of outstanding options, issuance under equity
outstanding options, warrants and rights compensation plans
warrants and rights (excluding securities
reflected in column (a))
- ----------------------------------------------------------------------------------------------------------------
Equity compensation plans
approved by security holders 3,066,056 $22.39 432,796
- ----------------------------------------------------------------------------------------------------------------
Equity compensation plans not
approved by security holders 1,787,712 (1) $16.78 215,000
- ----------------------------------------------------------------------------------------------------------------
Total 4,853,768 $20.32 647,796
- ----------------------------------------------------------------------------------------------------------------
(1) Includes 1,502,712 shares of common stock underlying individual option
grants and 285,000 shares of restricted stock under an Incentive Stock
Plan. The options are five years in duration, expire at various dates
between December 2003 and November 2007, contain anti-dilution provisions
providing for adjustments of the exercise price under certain
circumstances and have termination provisions similar to options granted
under our stockholder approved plans.
-9-
Item 13. Certain Relationships and Related Transactions
The Company's former principal executive and administrative office,
located at 575 Broadway, New York, New York, is approximately 13,300 square feet
of office space under a lease with 575 Broadway Corporation, a company
controlled by the father of Ryan A. Brant, the Company's Chairman. The Company
paid rent of $474,000 per annum under this lease, which expires in March 2004.
The Company believes that the terms of the lease were no less favorable than
those that could have been obtained from an unaffiliated party.
Item 14. Principal Accountant Fees and Services
The aggregate fees billed by the Company's independent auditor for the
fiscal years ended October 31, 2003 and 2002 are set forth below. The Audit
Committee believes that the services performed by the Company's independent
auditor were compatible with maintaining such auditor's independence.
2003 2002
---------- ----------
Audit (1) ............................ $2,927,929 $1,729,163
Audit Related (2) .................... 35,089 1,973,543
Tax (3) .............................. 1,852,054 947,330
All Other ............................ -- --
---------- ----------
Total ................................ $4,815,072 $4,650,036
(1) Includes financial statement and statutory audits. Fiscal 2003 fees also
include amounts relating to an SEC investigation and financial statement
restatement.
(2) Includes benefit plan audits. Fiscal 2002 fees include forensic accounting
fees as well as fees related to due diligence projects.
(3) Includes tax compliance, advice and audit assistance. Fiscal 2003 includes
additional fees relating to tax planning and compliance.
All services provided to the Company by its independent auditor must be
pre-approved by the Audit Committee. None of the Audit Related, Tax or All Other
services listed above was approved by the Audit Committee under a "de minimis"
exemption from pre-approval provided by applicable law.
-10-
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934 the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized, in the city of New
York, state of New York, on this 27th day of February 2004.
TAKE-TWO INTERACTIVE SOFTWARE, INC.
By: /s/ Karl H. Winters
-------------------------------------
Karl H. Winters
Chief Financial Officer
-11-