Take-Two News Release

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Take-Two Interactive Software, Inc. Reports Third Quarter Fiscal 2009 Financial Results
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NEW YORK--(BUSINESS WIRE)--Sep. 1, 2009-- Take-Two Interactive Software, Inc. (NASDAQ:TTWO) today announced financial results for its third quarter ended July 31, 2009.

Net revenue for the third fiscal quarter was $138.6 million, compared to $433.8 million for the same quarter of fiscal 2008, which benefited from the post-launch performance of Grand Theft Auto IV, the blockbuster title that surpassed all-time records for the launch of an entertainment property. Third quarter fiscal 2009 sales were led by catalog titles, including Grand Theft Auto IV, along with The BIGS 2™ and Major League Baseball® 2K9.

Net loss for the third quarter was $55.5 million or $0.72 per share, compared to net income of $51.8 million or $0.67 per share in the third quarter of fiscal 2008.

The third quarter results include $4.6 million in stock-based compensation expense ($0.06 per share) and $0.4 million in professional fees and expenses related to unusual matters ($0.01 per share). Results for the third quarter of 2008 included $12.6 million in stock-based compensation expense ($0.16 per share) and $7.2 million in professional fees and expenses related to unusual matters, as well as business reorganization costs ($0.09 per share).

Non-GAAP net loss was $50.4 million or $0.66 per share in the third quarter of fiscal 2009, compared to non-GAAP net income of $71.5 million or $0.93 per share in the third quarter of 2008. (Please refer to Non-GAAP Financial Measures and reconciliation tables included later in this release for additional information and details on non-GAAP items).

For the nine months ended July 31, 2009, net revenue was $625.1 million, compared to $1,214.1 million for the same period a year ago, which included the release and strong post-launch performance of Grand Theft Auto IV. Net loss for the first nine months of fiscal 2009 was $115.9 million or $1.51 per share, compared to net income of $112.1 million or $1.48 for the 2008 period. Results for the first nine months of fiscal 2009 include $16.1 million in stock-based compensation expense ($0.21 per share) and $7.1 million in professional fees and expenses related to unusual matters ($0.09 per share). Results for the first nine months of fiscal 2008 included $31.1 million in stock-based compensation expense ($0.41 per share) and $13.5 million in professional fees and expenses related to unusual matters, as well as business reorganization costs ($0.18 per share).

Non-GAAP net loss was $92.7 million or $1.21 per share in the first nine months of 2009, compared to non-GAAP net income of $156.6 million or $2.07 per share in the comparable period of 2008. (Please refer to Non-GAAP Financial Measures and reconciliation tables included later in this release for additional information and details on non-GAAP items).

Business Highlights

Among the recent developments, Take-Two noted the following:

  • Take-Two completed a $138 million convertible debt offering.
  • Rockstar Games announced Agent, a new wholly owned intellectual property being developed exclusively for the PLAYSTATION®3 system by Rockstar North.
  • 2K Sports secured a multi-year license to develop an online version of the NBA simulation game in China, Taiwan, South Korea and Southeast Asia; and announced a partnership with Tencent Holdings Limited, one of China’s leading online game operators, to co-develop and distribute NBA 2K Online in China.
  • 2K Games launched its celebrated Sid Meier’s Civilization® Revolution™ for iPhone and iPod® touch.

Financial Guidance

Take-Two‘s guidance for the fourth fiscal quarter and fiscal year ending October 31, 2009 is provided below.

  Fourth quarter ending   Fiscal year ending
10/31/2009 10/31/2009
Revenue $350 to $375 million $0.975 to $1.0 billion
Non-GAAP EPS $0.30 to $0.35 $(0.81) to $(0.87)
Stock-based compensation
expense per share (a) $0.08 $0.30
Expenses related to unusual
legal matters per share $0.01 $0.10
(a) The Company's stock-based compensation expense for the fourth quarter and fiscal year 2009 includes the cost of approximately 2 million stock options and 1.5 million shares previously issued to ZelnickMedia that are subject to variable accounting. Actual expense to be recorded in connection with these options and shares is dependent upon several factors, including future changes in Take-Two's stock price.

Key assumptions and dependencies underlying the Company’s guidance include continued consumer acceptance of the Xbox 360® video game and entertainment system from Microsoft, PLAYSTATION®3 computer entertainment system and Wii™ home video game system from Nintendo; the ability to develop and publish products that capture market share for these current generation systems while continuing to leverage opportunities on certain prior generation platforms; as well as the timely delivery of the titles detailed in this release.

Product Releases

The following titles shipped during the third quarter of fiscal 2009:

Title     Platform
   
Birthday Party Bash Wii
The BIGS™ 2 Multiple platforms
Sid Meier’s Civilization IV®: The Complete Edition Games for Windows®

Following are the key titles planned for release in the fourth quarter of fiscal 2009:

Title     Platform
   
Borderlands™

Xbox 360, PS3, PC

Grand Theft Auto: Chinatown Wars PSP, iPhone, iPod touch
Grand Theft Auto: Episodes from Liberty City Xbox 360
Grand Theft Auto: The Ballad of Gay Tony Xbox LIVE® (downloadable episode)
NBA® 2K10 Multiple platforms
NHL® 2K10 Multiple platforms
Rockstar Games and Timbaland present Beaterator PSP, iPhone, iPod touch

Take-Two's lineup of key titles announced to date for fiscal 2010 includes:

Title     Platform
   
BioShock® 2 Xbox 360, PS3, PC
Mafia® II Xbox 360, PS3, PC
Max Payne 3 Xbox 360, PS3, PC
Red Dead Redemption Xbox 360, PS3

Management Comment

“We remain focused on our core strategy of delivering high quality interactive entertainment experiences and exceptional value through our catalog of proven titles. While the economy and retail environment continue to be challenging, we are optimistic that ‘must have’ triple-A and value products will be key drivers this holiday season. That said, we are maintaining a prudent approach to our business outlook for the remainder of this year and as we head into fiscal 2010. We will continue to invest our resources in initiatives that will enhance our industry-leading creativity and innovation,” said Strauss Zelnick, Chairman of Take-Two.

Ben Feder, Chief Executive Officer of Take-Two, noted, “Our strong lineup for the balance of this year includes a broad array of titles that we believe will appeal to both hard core and casual gamers. Anchored by several new titles from our blockbuster Grand Theft Auto series and the latest installment of our #1-rated NBA 2K franchise, our holiday portfolio will also feature Borderlands, a genre-defining new intellectual property. Looking ahead, we will continue to support our product development efforts with a solid balance sheet, operational improvements, and a creative team that is among the most talented in our industry.”

Conference Call

Take-Two will host a conference call today at 4:30 p.m. Eastern Time to review these results and discuss other topics. The call can be accessed by dialing (877) 407-0984 or (201) 689-8577. A live listen-only webcast of the call will be available by visiting http://ir.take2games.com and a replay will be available following the call at the same location.

Non-GAAP Financial Measures

In addition to reporting financial results in accordance with U.S. generally accepted accounting principles (GAAP), the Company uses non-GAAP measures of financial performance that exclude certain non-recurring or non-cash items. Non-GAAP gross profit, income (loss) from operations, net income (loss) and earnings (loss) per share are measures that exclude certain non-recurring or non-cash items and should be considered in addition to results prepared in accordance with GAAP. They are not intended to be considered in isolation from, as a substitute for, or superior to, GAAP results. These non-GAAP financial measures may be different from similarly titled measures used by other companies.

The non-GAAP measures exclude the following items from the Company’s statements of operations:

  • Business reorganization, restructuring and related expenses
  • Stock-based compensation
  • Professional fees and expenses associated with unusual legal and other matters, including the Company's concluded process to evaluate its strategic alternatives
  • Income tax effects of the items listed above

In addition, the Company may consider whether other significant non-recurring items that arise in the future should also be excluded from the non-GAAP financial measures it uses.

The Company believes that these non-GAAP financial measures, when taken into consideration with the corresponding GAAP financial measures, are important in gaining an understanding of the Company’s ongoing business. These non-GAAP financial measures also provide for comparative results from period to period. Therefore, the Company believes it is appropriate to exclude certain items as follows:

Business reorganization, restructuring and related expenses

In March 2007, the Company’s stockholders elected a new slate of members to Take-Two’s Board of Directors, who immediately removed the Company’s former President and Chief Executive Officer. Subsequently, the Company’s former Chief Financial Officer resigned. As a result of these actions and the implementation of a business reorganization plan, the Company incurred significant costs in the fiscal years ended October 31, 2007 and October 31, 2008 to reduce headcount, relocate employees and consolidate sales and operational functions. These costs were related to severance, asset write-offs and associated professional fees. As of October 31, 2008, the Company had substantially concluded the reorganization plan.

The Company does not engage in reorganization activities on a regular basis and therefore believes it is appropriate to exclude business reorganization expenses from its non-GAAP financial measures.

Stock-based compensation

The Company does not consider stock-based compensation charges when evaluating business performance and management does not contemplate stock-based compensation expense in its short and long-term operating plans. The Company places greater emphasis on stockholder dilution than accounting charges when assessing the impact of stock-based equity awards.

Professional fees and expenses associated with unusual legal and other matters, including the Company’s concluded strategic review process

The Company incurred significant legal, consulting and investment banking expenses in the fiscal year ended October 31, 2008 related to the tender offer by Electronic Arts Inc. to acquire all of the Company’s outstanding shares, which was launched in March 2008 and expired in August 2008, and the Company’s related strategic review process which was completed in October 2008.

Additionally, the Company has realized significant legal and other professional fees associated with both the investigation of its historical stock option granting process and the Company’s responses to related governmental inquiries and civil lawsuits. The Company has also incurred legal expenses related to the tender offer by Electronic Arts. One of management’s primary objectives is to bring conclusion to its outstanding legal matters. The Company continues to incur expenses for professional fees and has accrued for legal settlements that are outside its ordinary course of business. As a result, the Company has excluded such expenses from its non-GAAP financial measures.

EBITDA and Adjusted EBITDA

Earnings (loss) before interest, taxes, depreciation and amortization (“EBITDA”) is a financial measure not calculated and presented in accordance with U.S. GAAP. Management uses EBITDA adjusted for business reorganization and related expenses (“Adjusted EBITDA”), among other measures, in evaluating the performance of the Company’s business units. Adjusted EBITDA is also a significant component of the Company’s incentive compensation plans. Adjusted EBITDA should not be considered in isolation from, or as a substitute for, net income/(loss) prepared in accordance with GAAP.

Reclassifications

Certain prior year amounts have been reclassified to conform to current year presentation.

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®3 and PlayStation®2 computer entertainment systems, PSP® (PlayStation®Portable) system, Xbox 360® video game and entertainment system from Microsoft, Wii™ and Nintendo DS™. The Company publishes and develops products through its wholly owned labels Rockstar Games, 2K Games, 2K Sports and 2K Play; 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.

Cautionary Note Regarding Forward-Looking Statements

The statements contained herein which are not historical facts are considered forward-looking statements under federal securities laws and may be identified by words such as "anticipates," "believes," "estimates," "expects," "intends," "plans," "potential," "predicts," "projects," "seeks," "will," or words of similar meaning and include, but are not limited to, statements regarding the outlook for the Company's future business and financial performance. Such forward-looking statements are based on the current beliefs of our management as well as assumptions made by and information currently available to them, which are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict. Actual outcomes and results may vary materially from these forward-looking statements based on a variety of risks and uncertainties including: our dependence on key management and product development personnel, our dependence on our Grand Theft Auto products and our ability to develop other hit titles for current generation platforms, the timely release and significant market acceptance of our games, the ability to maintain acceptable pricing levels on our games, our reliance on a primary distribution service provider for a significant portion of our products, our ability to raise capital if needed, risks associated with international operations, and the matters relating to the investigation by a special committee of our board of directors of the Company's stock option grants and the claims and proceedings relating thereto (including stockholder and derivative litigation and negative tax or other implications for the Company resulting from any accounting adjustments or other factors). Other important factors and information are contained in the Company's Annual Report on Form 10-K for the fiscal year ended October 31, 2008, in the section entitled "Risk Factors," as updated in the Company's Quarterly Report on Form 10-Q for the fiscal quarter ended April 30, 2009, and the Company's other periodic filings with the SEC, which can be accessed at www.take2games.com. All forward-looking statements are qualified by these cautionary statements and apply only as of the date they are made. The Company undertakes no obligation to update any forward-looking statement, whether as a result of new information, future events or otherwise.

 
TAKE-TWO INTERACTIVE SOFTWARE, INC. and SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
(in thousands, except per share amounts)
       
Three months ended July 31, Nine months ended July 31,
2009 2008 2009 2008
 
Net revenue $ 138,564   $ 433,836   $ 625,096   $ 1,214,088  
 
Cost of goods sold:
Product costs 80,550 154,362 339,493 487,557
Software development costs and royalties 17,156 45,721 68,470 126,122
Internal royalties 368 51,971 30,498 110,769
Licenses   16,835     7,602     38,951     39,475  
Total cost of goods sold   114,909     259,656     477,412     763,923  
 
Gross profit 23,655 174,180 147,684 450,165
 
Selling and marketing 25,335 42,856 97,153 122,534
General and administrative 29,583 45,678 100,745 126,916
Research and development 13,887 17,239 49,589 47,877
Business reorganization and related - 1,771 - 2,877
Depreciation and amortization   4,456     6,201     14,342     20,126  
Total operating expenses   73,261     113,745     261,829     320,330  
Income (loss) from operations (49,606 ) 60,435 (114,145 ) 129,835
Interest and other expense, net   (3,192 )   (518 )   (2,310 )   (865 )
Income (loss) before income taxes (52,798 ) 59,917 (116,455 ) 128,970
Provision (benefit) for income taxes   2,675     8,091     (515 )   16,919  
Net income (loss) $ (55,473 ) $ 51,826   $ (115,940 ) $ 112,051  

 

 

 

 

Earnings (loss) per share:        
Basic $ (0.72 ) $ 0.68 $ (1.51 ) $ 1.50
Diluted $ (0.72 ) $ 0.67   $ (1.51 ) $ 1.48  
 
Weighted average shares outstanding:          
Basic 76,994 75,866 76,561 74,701
Diluted   76,994     76,975     76,561     75,640  
 
Three months ended July 31, Nine months ended July 31,
OTHER INFORMATION 2009 2008 2009 2008
 
Total revenue mix
Publishing 69 % 88 % 67 % 81 %
Distribution 31 % 12 % 33 % 19 %
 
Geographic revenue mix
North America 74 % 54 % 75 % 65 %
International 26 % 46 % 25 % 35 %
 
Publishing revenue platform mix
Microsoft Xbox 360 32 % 44 % 33 % 43 %
Nintendo Wii 16 % 7 % 15 % 8 %
PC 14 % 2 % 14 % 3 %
Sony PLAYSTATION 3 12 % 37 % 13 % 33 %
Sony PlayStation 2 12 % 5 % 9 % 8 %
Sony PSP 10 % 3 % 8 % 4 %
Nintendo DS 4 % 2 % 8 % 1 %
 
TAKE-TWO INTERACTIVE SOFTWARE, INC. and SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except per share amounts)
   
July 31, October 31,
2009 2008
ASSETS (Unaudited)
Current assets:
Cash and cash equivalents $ 174,789 $ 280,277

Accounts receivable, net of allowances of $44,412 and $68,448

at July 31, 2009 and October 31, 2008, respectively

70,133 157,458
Inventory 63,617 104,235
Software development costs and licenses 142,385 113,436
Prepaid taxes and taxes receivable 8,256 23,763
Prepaid expenses and other   38,894     44,605  
Total current assets   498,074     723,774  
 
Fixed assets, net 27,634 32,361
Software development costs and licenses, net of current portion 87,673 61,991
Goodwill 233,605 230,809
Other intangibles, net 23,897 26,123
Other assets   15,515     8,294  
Total assets $ 886,398   $ 1,083,352  
 
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 72,351 $ 156,167
Accrued expenses and other current liabilities 128,441 153,089
Deferred revenue   25,705     56,163  
Total current liabilities   226,497     365,419  
 
Long-term debt 138,000 70,000
Income taxes payable 10,540 26,399
Other long-term liabilities   1,311     6,416  
Total liabilities   376,348     468,234  
Commitments and contingencies
 
Stockholders' equity:
Preferred stock, $.01 par value, 5,000 shares authorized - -
Common stock, $.01 par value, 150,000 shares authorized; 79,663 and 77,694 shares 797 777
issued and outstanding at July 31, 2009 and October 31, 2008, respectively
Additional paid-in capital 603,751 603,579
Retained earnings (accumulated deficit) (97,665 ) 18,275
Accumulated other comprehensive income (loss)   3,167     (7,513 )
Total stockholders' equity   510,050     615,118  
     
Total liabilities and stockholders' equity $ 886,398   $ 1,083,352  
 
TAKE-TWO INTERACTIVE SOFTWARE, INC. and SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
(in thousands)
  Nine months ended July 31,
2009   2008
Operating activities:
Net income (loss) $ (115,940 ) $ 112,051  

Adjustments to reconcile net income (loss) to net cash provided by (used for)

operating activities:

Amortization and impairment of software development costs and licenses 61,163 104,565
Depreciation and amortization of long-lived assets 14,342 20,126
Amortization and impairment of intellectual property 448 1,632
Stock-based compensation 16,114 31,062
Deferred income taxes (488 ) 99
Foreign currency transaction gain and other (1,898 ) 1,203
Changes in assets and liabilities, net of effect from purchases of businesses:
Accounts receivable 87,325 (1,417 )
Inventory 40,618 27,757
Software development costs and licenses (111,602 ) (115,913 )
Prepaid expenses, other current and other non-current assets 18,727 9,474
Deferred revenue (30,458 ) (3,212 )
Accounts payable, accrued expenses, income taxes payable and other liabilities   (125,111 )   80,421  
Total adjustments   (30,820 )   155,797  
Net cash provided by (used for) operating activities   (146,760 )   267,848  
 
Investing activities:
Purchase of fixed assets (7,788 ) (9,026 )
Purchases of businesses, net of cash acquired   (500 )   (4,037 )
Net cash used for investing activities   (8,288 )   (13,063 )
 
Financing activities:
Proceeds from exercise of employee stock options 4 25,363
Net payments on line of credit (70,000 ) (18,000 )
Proceeds from issuance of Convertible Notes 138,000 -
Purchase of convertible note hedges (43,592 ) -
Issuance of warrants to purchase common stock 26,342 -
Payment of debt issuance costs   (4,833 )   (962 )
Net cash provided by financing activities   45,921     6,401  
 
Effects of exchange rates on cash and cash equivalents   3,639     (242 )

 

 

Net increase (decrease) in cash and cash equivalents (105,488 ) 260,944
Cash and cash equivalents, beginning of year   280,277     77,757  
Cash and cash equivalents, end of period $ 174,789   $ 338,701  
 
TAKE-TWO INTERACTIVE SOFTWARE, INC. and SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)

(in thousands, except per share amounts)
 
    Non-GAAP Reconciling Items  
Three months Professional   Non-GAAP three
ended July 31, fees and Stock-based months ended July 31,
2009   legal matters   compensation   2009
 
Net revenue $ 138,564     $ -     $ -     $ 138,564  
 
Cost of goods sold:
Product costs 80,550 - - 80,550
Software development costs and royalties 17,156 - (631 ) 16,525
Internal royalties 368 - - 368
Licenses   16,835       -       -       16,835  
Total cost of goods sold   114,909       -       (631 )     114,278  
 
Gross profit 23,655 - 631 24,286
 
Selling and marketing 25,335 - (501 ) 24,834
General and administrative 29,583 (421 ) (3,054 ) 26,108
Research and development 13,887 - (430 ) 13,457
Business reorganization and related - - - -
Depreciation and amortization   4,456       -       -       4,456  
Total operating expenses   73,261       (421 )     (3,985 )     68,855  
Income (loss) from operations (49,606 ) 421 4,616 (44,569 )
Interest and other expense, net   (3,192 )     -       -       (3,192 )
Income (loss) before income taxes (52,798 ) 421 4,616 (47,761 )
Provision (benefit) for income taxes   2,675       -       -       2,675  
Net income (loss) $ (55,473 )   $ 421     $ 4,616     $ (50,436 )

 

 

Earnings (loss) per share:*              
Basic $ (0.72 ) $ 0.01 $ 0.06 $ (0.66 )
Diluted $ (0.72 )   $ 0.01     $ 0.06     $ (0.66 )
 
Weighted average shares outstanding              
Basic 76,994 76,994 76,994 76,994
Diluted   76,994       76,994       76,994       76,994  
 
EBITDA:
Income (loss) before income taxes $ (52,798 ) $ (47,761 )
Interest 1,928 1,928
Depreciation and amortization   4,456     4,456  
EBITDA $ (46,414 ) $ (41,377 )
Add: Business reorganization and related   -     -  
Adjusted EBITDA $ (46,414 ) $ (41,377 )
 
 
*Basic and diluted earnings (loss) per share may not add due to rounding
 
TAKE-TWO INTERACTIVE SOFTWARE, INC. and SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)

(in thousands, except per share amounts)
 
    Non-GAAP Reconciling Items  
Three months Business   Professional Non-GAAP three
ended July 31, reorganization fees and   Stock-based months ended July 31,
2008   and related   legal matters   compensation   2008
 
Net revenue $ 433,836     $ -     $ -     $ -     $ 433,836  
 
Cost of goods sold:
Product costs 154,362 - - - 154,362
Software development costs and royalties 45,721 - - (3,404 ) 42,317
Internal royalties 51,971 - - - 51,971
Licenses   7,602       -       -       -       7,602  
Total cost of goods sold   259,656       -       -       (3,404 )     256,252  
 
Gross profit 174,180 - - 3,404 177,584
 
Selling and marketing 42,856 - - (545 ) 42,311
General and administrative 45,678 - (5,379 ) (6,922 ) 33,377
Research and development 17,239 - - (1,687 ) 15,552
Business reorganization and related 1,771 (1,771 ) - - -
Depreciation and amortization   6,201       -       -       -       6,201  
Total operating expenses   113,745       (1,771 )     (5,379 )     (9,154 )     97,441  
Income (loss) from operations 60,435 1,771 5,379 12,558 80,143
Interest and other expense, net   (518 )     -       -       -       (518 )
Income (loss) before income taxes 59,917 1,771 5,379 12,558 79,625
Provision (benefit) for income taxes   8,091       -       -       -       8,091  
Net income (loss) $ 51,826     $ 1,771     $ 5,379     $ 12,558     $ 71,534  

 

Earnings (loss) per share:*                  
Basic $ 0.68 $ 0.02 $ 0.07 $ 0.17 $ 0.94
Diluted $ 0.67     $ 0.02     $ 0.07     $ 0.16     $ 0.93  
 
Weighted average shares outstanding                  
Basic 75,866 75,866 75,866 75,866 75,866
Diluted   76,975       76,975       76,975       76,975       76,975  
 
EBITDA:
Income (loss) before income taxes $ 59,917 $ 79,625
Interest (689 ) (689 )
Depreciation and amortization   6,201     6,201  
EBITDA $ 65,429 $ 85,137
Add: Business reorganization and related   1,771     -  
Adjusted EBITDA $ 67,200   $ 85,137  
 
 
*Basic and diluted earnings (loss) per share may not add due to rounding
 
TAKE-TWO INTERACTIVE SOFTWARE, INC. and SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)

(in thousands, except per share amounts)
 
    Non-GAAP Reconciling Items  
Nine months Professional   Non-GAAP nine
ended July 31, fees and Stock-based months ended July 31,
2009   legal matters   compensation   2009
 
Net revenue $ 625,096     $ -     $ -     $ 625,096  
 
Cost of goods sold:
Product costs 339,493 - - 339,493
Software development costs and royalties 68,470 - (3,679 ) 64,791
Internal royalties 30,498 - - 30,498
Licenses   38,951       -       -       38,951  
Total cost of goods sold   477,412       -       (3,679 )     473,733  
 
Gross profit 147,684 - 3,679 151,363
 
Selling and marketing 97,153 - (1,417 ) 95,736
General and administrative 100,745 (7,126 ) (9,000 ) 84,619
Research and development 49,589 - (2,018 ) 47,571
Business reorganization and related - - - -
Depreciation and amortization   14,342       -       -       14,342  
Total operating expenses   261,829       (7,126 )     (12,435 )     242,268  
Income (loss) from operations (114,145 ) 7,126 16,114 (90,905 )
Interest and other expense, net   (2,310 )     -       -       (2,310 )
Income (loss) before income taxes (116,455 ) 7,126 16,114 (93,215 )
Provision (benefit) for income taxes   (515 )     -       -       (515 )
Net income (loss) $ (115,940 )   $ 7,126     $ 16,114     $ (92,700 )
 
Earnings (loss) per share:*              
Basic $ (1.51 ) $ 0.09 $ 0.21 $ (1.21 )
Diluted $ (1.51 )   $ 0.09     $ 0.21     $ (1.21 )
 
Weighted average shares outstanding              
Basic 76,561 76,561 76,561 76,561
Diluted   76,561       76,561       76,561       76,561  
 
EBITDA:
Income (loss) before income taxes $ (116,455 ) $ (93,215 )
Interest 4,899 4,899
Depreciation and amortization   14,342     14,342  
EBITDA (97,214 ) (73,974 )
Add: Business reorganization and related   -     -  
Adjusted EBITDA $ (97,214 ) $ (73,974 )
 
 
*Basic and diluted earnings (loss) per share may not add due to rounding
 
TAKE-TWO INTERACTIVE SOFTWARE, INC. and SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)

(in thousands, except per share amounts)
 
    Non-GAAP Reconciling Items  
Nine months Business   Professional   Non-GAAP nine
ended July 31, reorganization fees and Stock-based months ended July 31,
2008   and related   legal matters   compensation   2008
 
Net revenue $ 1,214,088     $ -     $ -     $ -     $ 1,214,088  
 
Cost of goods sold:
Product costs 487,557 - - - 487,557
Software development costs and royalties 126,122 - - (10,598 ) 115,524
Internal royalties 110,769 - - - 110,769
Licenses   39,475       -       -       -       39,475  
Total cost of goods sold   763,923       -       -       (10,598 )     753,325  
 
Gross profit 450,165 - - 10,598 460,763
 
Selling and marketing 122,534 - - (1,926 ) 120,608
General and administrative 126,916 - (10,654 ) (14,874 ) 101,388
Research and development 47,877 - - (3,664 ) 44,213
Business reorganization and related 2,877 (2,877 ) - - -
Depreciation and amortization   20,126       -       -       -       20,126  
Total operating expenses   320,330       (2,877 )     (10,654 )     (20,464 )     286,335  
Income (loss) from operations 129,835 2,877 10,654 31,062 174,428
Interest and other expense, net   (865 )     -       -       -       (865 )
Income (loss) before income taxes 128,970 2,877 10,654 31,062 173,563
Provision (benefit) for income taxes   16,919       -       -       -       16,919  
Net income (loss) $ 112,051     $ 2,877     $ 10,654     $ 31,062     $ 156,644  
 
Earnings (loss) per share:*                  
Basic $ 1.50 $ 0.04 $ 0.14 $ 0.42 $ 2.10
Diluted $ 1.48     $ 0.04     $ 0.14     $ 0.41     $ 2.07  
 
Weighted average shares outstanding          
Basic 74,701 74,701 74,701 74,701 74,701
Diluted   75,640       75,640       75,640       75,640       75,640  
 
EBITDA:
Income (loss) before income taxes $ 128,970 $ 173,563
Interest 464 464
Depreciation and amortization   20,126     20,126  
EBITDA 149,560 194,153
Add: Business reorganization and related   2,877     -  
Adjusted EBITDA $ 152,437   $ 194,153  
 
 
*Basic and diluted earnings (loss) per share may not add due to rounding

Source: Take-Two Interactive Software, Inc.

Take-Two Interactive Software, Inc.
Corporate Press/Investor Relations:
Meg Maise, 646-536-2932
meg.maise@take2games.com