Take-Two Interactive Software, Inc. Reports Financial Results for Third Quarter Fiscal 2011

Net Revenue was $334.3 Million

Non-GAAP Income from Continuing Operations per Diluted Share was $0.52

Company Increases Financial Guidance for Fiscal 2011

NEW YORK--()--Take-Two Interactive Software, Inc. (NASDAQ:TTWO) today announced financial results for its fiscal third quarter ended December 31, 2010. In addition, the Company increased its financial guidance for the fiscal year 2011. As previously announced, the Company has changed its fiscal year-end from October 31 to March 31 and all results are now reported in accordance with this change.

For the third quarter ended December 31, 2010, net revenue was $334.3 million, as compared to $360.4 million for the year-ago period. GAAP income from continuing operations was $40.8 million, or $0.45 per diluted share, as compared to $39.4 million, or $0.44 per diluted share, for the year-ago period. Non-GAAP income from continuing operations was $49.5 million, or $0.52 per diluted share, as compared to $49.2 million, or $0.53 per diluted share, for the year-ago period. Non-GAAP income from continuing operations excludes certain non-cash and non-operational gains and losses identified on the attached reconciliation of GAAP and Non-GAAP measures.

The strongest contributors to net revenue and profitability in the third quarter this year included NBA® 2K11, Red Dead Redemption, Red Dead Redemption: Undead Nightmare (standalone disc), Grand Theft Auto IV: Complete, Borderlands™ Game of the Year and Sid Meier’s Civilization® V. Catalog titles that contributed to the strength in the recent period were led by the Grand Theft Auto franchise. Digitally delivered content also continued to be an important component of Take-Two’s sales, particularly driven by strong sales of offerings for Red Dead Redemption, Borderlands and Sid Meier’s Civilization V.

For the nine-months ended December 31, 2010, net revenue increased 80% year-over-year to $954.6 million. GAAP income from continuing operations increased to $76.2 million, or $0.88 per diluted share, as compared to a loss of ($98.4) million, or ($1.27) per share, for the year-ago period. Non-GAAP income from continuing operations increased to $108.8 million, or $1.15 per diluted share, as compared to a loss of ($67.5) million, or ($0.87) per share, for the year-ago period.

Management Comments

Strauss Zelnick, Chairman and Chief Executive Officer of Take-Two, commented, “Strong holiday sales enabled Take-Two to continue to deliver better-than-expected revenue and earnings in the third quarter. Our results year-to-date clearly demonstrate the Company’s ability to translate its world-class creative resources and diverse portfolio of triple-A franchises into meaningful profits.

“Looking ahead to the balance of the year and fiscal 2012, I have never been more enthusiastic about our diverse line-up of upcoming releases. From unique, groundbreaking new titles such as L.A. Noire, to the long anticipated return of Duke Nukem, the interactive entertainment industry’s most irreverent hero, we will deliver a broad array of entertainment experiences that promise to delight audiences around the world.

“In addition to producing triple-A titles focused on the traditional console market, we are also actively pursuing opportunities to grow our revenues by leveraging the strength of our brands in emerging markets and across new platforms and distribution channels. These include opportunities in Asia and Latin America, evolving downloadable content models and online multiplayer experiences.”

Product Highlights

Since October 1, 2010:

  • Rockstar Games released Red Dead Redemption: Undead Nightmare as both a standalone disc and DLC.
  • Rockstar Games’ Red Dead Redemption has sold-in over 8 million units worldwide since launching in May 2010.
  • Rockstar Games announced that it plans to release L.A. Noire on May 17, 2011 in North America and May 20, 2011 in Europe.
  • 2K Sports launched NBA 2K11, which to date has sold-in nearly 4 million units worldwide and received the highest scores in the history of the franchise (89 – Metacritic.com).
  • 2K Sports signed pitcher Roy Halladay of the Philadelphia Phillies as the cover athlete for Major League Baseball 2K11, which is planned to launch on March 8, 2011. The label is supporting the launch of the title with the Major League Baseball 2K11 Challenge that will award $1 million to the first person to pitch a perfect game using the latest installment of the popular franchise during the contest period.
  • 2K Sports announced that it plans to release Top Spin 4 on March 15, 2011.
  • 2K Games announced that it plans to release Duke Nukem Forever® on May 3, 2011 in North America and on May 6, 2011 internationally.
  • 2K Games announced that it plans to release The Darkness™ II in fall 2011.
  • 2K Play released Nickelodeon Fit, the Company’s first fitness title for children featuring the television network’s popular characters, exclusively for the Wii™ system.
  • 2K Play announced that it plans to release Carnival Games®: Monkey See, Monkey Do™ for Kinect for Xbox 360 in April 2011. The Carnival Games franchise has sold more than 7 million units worldwide and the title marks the Company’s first offering for Microsoft’s new interactive entertainment hardware.

Financial Guidance

Based on its strong results year-to-date and outlook for the remainder of the fiscal year, Take-Two has increased its financial guidance for both the fourth quarter and full year of fiscal 2011. The Company’s updated financial guidance is as follows:

 

Fourth Quarter

ending 3/31/2011

Fiscal Year

ending 3/31/2011

       
 
Revenue $130 to $150 Million $1.08 to $1.10 Billion
 
Non-GAAP earnings ($0.45) to ($0.40) $0.80 to $0.85
per share

 

Stock-based
compensation
expense per share (a) $0.06 $0.29
 
Non-cash interest
expense related to
convertible debt $0.02 $0.07

 

Business
restructuring costs
and expenses related
to unusual legal
matters $0.00 $0.05
 
Non-cash tax expense $0.01 $0.02
 

(a) The Company's stock-based compensation expense for the periods above includes the cost of approximately 1.5 million shares previously issued to ZelnickMedia that are subject to variable accounting. Actual expense to be recorded in connection with these 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, PlayStation 3 and Wii; 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; the timely delivery of the titles detailed in this release; and stable foreign exchange rates.

Product Releases

The following titles released during the fiscal third quarter of 2011:

Title   Platform
Borderlands™ Game of the Year     Xbox 360, PS3, PC
Dora’s Big Birthday Adventure Wii, PS2
Dora’s Cooking Club DS
Grand Theft Auto IV: Complete Xbox 360, PS3
Grand Theft Auto Trilogy Mac
Mafia® II: Joe’s Adventures (DLC) Xbox 360, PS3, PC
Mega Bloks: Diego’s Build and Rescue DS
NBA® 2K11 Xbox 360, PS3, PS2, PSP, Wii, PC
Nickelodeon® Fit Wii
Red Dead Redemption: Undead Nightmare (standalone disc) Xbox 360, PS3
Red Dead Redemption: Undead Nightmare Pack (DLC) Xbox 360, PS3
Sid Meier’s Civilization V: Babylonian Civilization Pack (DLC) PC
Sid Meier’s Civilization V: Mongols and Scenario Pack (DLC) PC
Sid Meier’s Civilization V: The Double Civilization and Scenario Pack: Spain and Inca (DLC) PC
 

Take-Two's lineup of future titles announced to date includes:

Title

     

Platforms

     

Planned For Release

Major League Baseball 2K11

      Xbox 360, PS3, PS2, PSP, Wii, DS, PC       March 8, 2011

Top Spin 4

Xbox 360, PS3, Wii March 15, 2011

Carnival Games®: Monkey See, Monkey Do™

Kinect for Xbox 360

April 2011

Duke Nukem Forever

Xbox 360, PS3, PC May 3, 2011*

L.A. Noire

Xbox 360, PS3 May 17, 2011*

The Darkness II

Xbox 360, PS3, PC Fall 2011

Spec Ops: The Line

Xbox 360, PS3, PC Fiscal Year 2012

XCOM

Xbox 360, PC Fiscal Year 2012

BioShock® Infinite

Xbox 360, PS3, PC Calendar Year 2012
 

*North American release date; international release follows three days after.

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) 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 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:

  • 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.
  • Business reorganization, restructuring and related expenses – the Company does not engage in reorganization activities on a regular basis and therefore believes it is appropriate to exclude business reorganization, restructuring and related expenses from its Non-GAAP financial measures.
  • Gain (loss) on sale of subsidiaries and income (loss) from discontinued operations – the Company does not engage in sales of subsidiaries on a regular basis and therefore believes it is appropriate to exclude such gains (losses) from its Non-GAAP financial measures. As the company is no longer active in its discontinued operations, it believes it is appropriate to exclude income (losses) thereon from its Non-GAAP financial measures.
  • Professional fees and expenses associated with unusual legal and other matters – the Company has incurred 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.
  • Non-cash interest expense related to convertible debt – The Company records non-cash interest expense on its convertible notes in addition to the interest expense already recorded for coupon payments. The Company excludes the non-cash portion of the interest expense from its Non-GAAP financial measures because these amounts are unrelated to its ongoing business operations.
  • Non-cash tax expense for the impact of deferred tax liabilities associated with tax deductible amortization of goodwill and the impact of the cancellation of stock options – due to the nature of the adjustment as well as the expectation that it will not have any cash impact in the foreseeable future, the Company believes it is appropriate to exclude this expense 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 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™, Nintendo DS™, iPhone®, iPod® touch and iPad™. The Company publishes and develops products through its wholly owned labels Rockstar Games and 2K, which publishes its titles under 2K Games, 2K Sports and 2K Play. The Company’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 ability to raise capital if needed and risks associated with international operations. Other important factors and information are contained in the Company's Transition Report on Form 10-KT for the five month transition period ended March 31, 2010, in the section entitled "Risk Factors," 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 December 31,   Nine months ended December 31,
2010 2009 2010 2009
 
 
Net revenue $ 334,259   $ 360,364   $ 954,621   $ 529,724  
 
Cost of goods sold:
Product costs 98,067 97,360 266,170 174,255
Software development costs and royalties 40,276 61,721 148,906 95,196
Internal royalties 22,001 29,400 105,266 30,917
Licenses   28,306     15,257     48,996     44,124  
Total cost of goods sold   188,650     203,738     569,338     344,492  
 
Gross profit 145,609 156,626 385,283 185,232
 
Selling and marketing 47,861 61,966 144,268 114,449
General and administrative 27,492 30,395 80,314 91,457
Research and development 18,073 15,663 52,328 43,559
Depreciation and amortization   3,501     4,140     11,271     12,591  
Total operating expenses   96,927     112,164     288,181     262,056  
Income (loss) from operations 48,682 44,462 97,102 (76,824 )
Interest and other, net   (4,013 )   (3,631 )   (10,395 )   (10,243 )
Income (loss) from continuing operations before income taxes 44,669 40,831 86,707 (87,067 )
Provision for income taxes   3,849     1,481     10,487     11,309  
Income (loss) from continuing operations 40,820 39,350 76,220 (98,376 )
Income (loss) from discontinued operations, net of taxes   39     (1,430 )   (5,708 )   (14,775 )
Net income (loss) $ 40,859   $ 37,920   $ 70,512   $ (113,151 )
 
Earnings (loss) per share:
Continuing operations $ 0.47 $ 0.47 $ 0.89 $ (1.27 )
Discontinued operations   0.00     (0.02 )   (0.07 )   (0.19 )
Basic earnings (loss) per share $ 0.47   $ 0.45   $ 0.82   $ (1.46 )
 
Continuing operations $ 0.45 $ 0.44 $ 0.88 $ (1.27 )
Discontinued operations   0.00     (0.01 )   (0.06 )   (0.19 )
Diluted earnings (loss) per share (1) $ 0.45   $ 0.43   $ 0.82   $ (1.46 )
 
Weighted average shares outstanding: (2)        
Basic 86,321 83,517 85,783 77,562
Diluted   99,260     96,460     98,721     77,562  
 

(1) For the three and nine months ended December 31, 2010 and three months ended December 31, 2009, diluted EPS has been calculated using the “if-converted” method as a result of the Convertible Senior Notes ("Convertible Notes") issued in June 2009, for which diluted net income has been adjusted by $3,552, $10,446 and $3,325 respectively, related to interest and debt issuance costs, net of tax. The shares used for computing includes 12,927 shares related to the potential dilution from the Convertible Notes. The “if-converted” method was not used for the other periods presented as the assumed conversion would have been anti-dilutive.

(2) Basic and diluted include participating shares of 5,578, 5,824 and 5,338 for the three and nine months ended December 31, 2010 and three months ended December 31, 2009, respectively.

 
 
Three months ended December 31,   Nine months ended December 31,
OTHER INFORMATION 2010 2009 2010 2009
 
Geographic revenue mix
North America 68 % 67 % 59 % 65 %
International 32 % 33 % 41 % 35 %
 
Platform revenue mix
Microsoft Xbox 360 38 % 45 % 39 % 40 %
Sony PlayStation 3 37 % 18 % 40 % 16 %
PC 9 % 8 % 10 % 10 %
Nintendo Wii 8 % 16 % 5 % 16 %
Sony PSP 2 % 5 % 2 % 6 %
Sony PlayStation 2 2 % 2 % 2 % 5 %
Nintendo DS 4 % 6 % 2 % 7 %
 
TAKE-TWO INTERACTIVE SOFTWARE, INC. and SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except per share amounts)
           
December 31, March 31,
2010 2010
 
ASSETS (Unaudited)
Current assets:
Cash and cash equivalents $ 297,118 $ 145,838
Accounts receivable, net of allowances of $64,157 and $72,535 at December 31, 2010
and March 31, 2010, respectively 83,845 74,135
Inventory 28,592 24,479
Software development costs and licenses 154,763 114,608
Prepaid taxes and taxes receivable 8,468 8,654
Prepaid expenses and other 45,508 51,704
Assets of discontinued operations   -     7,182  
Total current assets   618,294     426,600  
 
Fixed assets, net 21,326 23,571
Software development costs and licenses, net of current portion 93,898 139,340
Goodwill 219,259 216,289
Other intangibles, net 19,142 22,729
Other assets   4,680     10,747  
Total assets $ 976,599   $ 839,276  
 
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 48,852 $ 45,913
Accrued expenses and other current liabilities 167,498 134,449
Deferred revenue 10,412 11,944
Liabilities of discontinued operations   3,799     17,561  
Total current liabilities   230,561     209,867  
 
Long-term debt 105,305 99,865
Income taxes payable 9,466 7,980
Deferred income taxes, net 9,059 941
Liabilities of discontinued operations, net of current portion   3,118     -  
Total liabilities   357,509     318,653  
Commitments and contingencies
 
Stockholders' equity:
Preferred stock, $.01 par value, 5,000 shares authorized - -
Common stock, $.01 par value, 150,000 shares authorized; 84,612 and 83,977
shares issued and outstanding at December 31, 2010 and March 31, 2010, respectively 846 840
Additional paid-in capital 698,554 674,477
Accumulated deficit (80,469 ) (150,981 )
Accumulated other comprehensive income (loss)   159     (3,713 )
Total stockholders' equity   619,090     520,623  
Total liabilities and stockholders' equity $ 976,599   $ 839,276  
 
TAKE-TWO INTERACTIVE SOFTWARE, INC. and SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
(in thousands)
 
        Nine months ended December 31,
2010       2009
 
Operating activities:
Net income (loss) $ 70,512 $ (113,151 )
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Amortization and impairment of software development costs and licenses 123,345 68,323
Depreciation and amortization 11,271 12,591
Loss from discontinued operations 5,708 14,775
Amortization and impairment of intellectual property 2,796 89
Stock-based compensation 23,630 20,931
Deferred income taxes 1,491 8,503
Amortization of discount on Convertible Notes 5,440 3,758
Amortization of debt issuance costs 939 823
Other, net (525 ) 769
Changes in assets and liabilities, net of effect from purchases of businesses:
Accounts receivable (9,710 ) (27,418 )
Inventory (4,113 ) 5,034
Software development costs and licenses (118,961 ) (133,147 )
Prepaid expenses, other current and other non-current assets 11,987 (11,035 )
Deferred revenue (1,532 ) (17,397 )
Accounts payable, accrued expenses, income taxes payable and other liabilities 42,063 25,917
Net cash used in discontinued operations   (9,170 )   (22,256 )
Net cash provided by (used in) operating activities   155,171     (162,891 )
 
Investing activities:
Purchase of fixed assets (8,246 ) (9,578 )
Cash received from sale of business 3,075 -
Payments in connection with business combinations, net of cash acquired   (1,000 )   (5,813 )
Net cash used in investing activities   (6,171 )   (15,391 )
 
Financing activities:
Proceeds from exercise of employee stock options 104 18
Net payments on line of credit - (70,000 )
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   -     (4,984 )
Net cash provided by financing activities   104     45,784  
 
Effects of exchange rates on cash and cash equivalents   2,176     6,303  
 
Net increase (decrease) in cash and cash equivalents 151,280 (126,195 )
Cash and cash equivalents, beginning of year   145,838     204,138  
Cash and cash equivalents, end of period $ 297,118   $ 77,943  
 
TAKE-TWO INTERACTIVE SOFTWARE, INC. and SUBSIDIARIES
Non-GAAP CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS (Unaudited)
(in thousands, except per share amounts)
             
Non-GAAP Reconciling Items
Three months Professional Non-GAAP three
ended December 31, Discontinued fees and Stock-based Non-cash Non-cash months ended December 31,
2010   operations   legal matters   compensation   interest expense   tax expense   2010
 
Net revenue $ 334,259     $ -     $ -     $ -     $ -   $ -     $

334,259

 
 
Cost of goods sold:
Product costs 98,067 - - - - - 98,067
Software development costs and royalties 40,276 - - (1,793 ) - - 38,483
Internal royalties 22,001 - - - - - 22,001
Licenses   28,306       -       -       -       -     -       28,306  
Total cost of goods sold   188,650       -       -       (1,793 )     -     -       186,857  
 
Gross profit 145,609 - - 1,793 - - 147,402
 
Selling and marketing 47,861 - - (1,141 ) - - 46,720
General and administrative 27,492 - (423 ) (1,982 ) - - 25,087
Research and development 18,073 - - (1,000 ) - - 17,073
Depreciation and amortization   3,501       -       -       -       -     -       3,501  
Total operating expenses   96,927       -       (423 )     (4,123 )     -     -       92,381  
Income (loss) from operations 48,682 - 423 5,916 - - 55,021
Interest and other, net   (4,013 )     -       -       -       1,872     -       (2,141 )
Income (loss) from continuing operations before income taxes 44,669 - 423 5,916 1,872 - 52,880
Provision for income taxes   3,849       -       -       -       -     (472 )     3,377  
Income (loss) from continuing operations 40,820 - 423 5,916 1,872 472 49,503
Income (loss) from discontinued operations, net of taxes   39       (39 )     -       -       -     -       -  
Net income (loss) $ 40,859     $ (39 )   $ 423     $ 5,916     $ 1,872   $ 472     $ 49,503  
 
Earnings (loss) per share:*                          
Basic earnings (loss) per share $ 0.47     $ 0.00     $ 0.00     $ 0.07     $ 0.02   $ 0.01     $ 0.57  
                           
Diluted earnings (loss) per share (1) $ 0.45     $ 0.00     $ 0.00     $ 0.06     $ 0.02   $ 0.00     $ 0.52  
 
Weighted average shares outstanding (2)                          
Basic 86,321 86,321 86,321 86,321 86,321 86,321 86,321
Diluted   99,260       99,260       99,260       99,260       99,260     99,260       99,260  
 
EBITDA:
Income (loss) from continuing operations before income taxes $ 44,669 $ 52,880
Interest 3,711 1,839
Depreciation and amortization   3,501     3,501  
EBITDA $ 51,881   $ 58,220  
 
 
*Earnings (loss) per share ("EPS") may not add due to rounding

(1) For the three months ended December 31, 2010, diluted EPS has been calculated using the “if-converted” method as a result of the Convertible Senior Notes ("Convertible Notes") issued in June 2009. Non-GAAP net income used for computing non-GAAP diluted EPS has been adjusted by $1,680 and GAAP net income used for computing GAAP diluted EPS has been adjusted by $3,552 related to interest and debt issuance costs, net of tax. The shares used for computing includes 12,927 shares related to the potential dilution from the Convertible Notes.

(2) Basic and diluted include participating shares of 5,578.
 
TAKE-TWO INTERACTIVE SOFTWARE, INC. and SUBSIDIARIES
Non-GAAP CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS (Unaudited)
(in thousands, except per share amounts)
             
Non-GAAP Reconciling Items
Three months Professional Non-GAAP three
ended December 31, Discontinued fees and Stock-based Non-cash Non-cash months ended December 31,
2009   operations   legal matters   compensation   interest expense   tax expense   2009
 
Net revenue $ 360,364     $ -   $ -     $ -     $ -   $ -     $ 360,364  
 
Cost of goods sold:
Product costs 97,360 - - - - - 97,360
Software development costs and royalties 61,721 - - (3,541 ) - - 58,180
Internal royalties 29,400 - - - - - 29,400
Licenses   15,257       -     -       -       -     -       15,257  
Total cost of goods sold   203,738       -     -       (3,541 )     -     -       200,197  
 
Gross profit 156,626 - - 3,541 - - 160,167
 
Selling and marketing 61,966 - - (576 ) - - 61,390
General and administrative 30,395 - 442 (2,808 ) - - 28,029
Research and development 15,663 - - (1,217 ) - - 14,446
Depreciation and amortization   4,140       -     -       -       -     -       4,140  
Total operating expenses   112,164       -     442       (4,601 )     -     -       108,005  
Income (loss) from operations 44,462 - (442 ) 8,142 - - 52,162
Interest and other, net   (3,631 )     -     -       -       1,645     -       (1,986 )
Income (loss) from continuing operations before income taxes 40,831 - (442 ) 8,142 1,645 - 50,176
Provision for income taxes   1,481       -     -       -       -     (486 )     995  
Income (loss) from continuing operations 39,350 - (442 ) 8,142 1,645 486 49,181
Income (loss) from discontinued operations, net of taxes     (1,430 )     1,430     -       -       -     -       -  
Net income (loss) $ 37,920     $ 1,430   $ (442 )   $ 8,142     $ 1,645   $ 486     $ 49,181  
 
Earnings (loss) per share:*                          
Basic earnings (loss) per share $ 0.45     $ 0.02   $ (0.01 )   $ 0.10     $ 0.02   $ 0.01     $ 0.59  
                           
Diluted earnings (loss) per share (1) $ 0.43     $ 0.01   $ 0.00     $ 0.08     $ 0.02   $ 0.01     $ 0.53  
 
Weighted average shares outstanding (2)                          
Basic 83,517 83,517 83,517 83,517 83,517 83,517 83,517
Diluted   96,460       96,460     96,460       96,460       96,460     96,460       96,460  
 
EBITDA:
Income (loss) from continuing operations before income taxes $ 40,831 $ 50,176
Interest 3,869 2,224
Depreciation and amortization   4,140     4,140  
EBITDA $ 48,840   $ 56,540  
 
 
*Earnings (loss) per share may not add due to rounding

(1) For the three months ended December 31, 2009, diluted EPS has been calculated using the “if-converted” method as a result of the Convertible Senior Notes ("Convertible Notes") issued in June 2009. Non-GAAP net income used for computing non-GAAP diluted EPS has been adjusted by $1,680 and GAAP net income used for computing GAAP diluted EPS has been adjusted by $3,325 related to interest and debt issuance costs, net of tax. The shares used for computing includes 12,927 shares related to the potential dilution from the Convertible Notes.

(2) Basic and diluted include participating shares of 5,338.
 
TAKE-TWO INTERACTIVE SOFTWARE, INC. and SUBSIDIARIES
Non-GAAP CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS (Unaudited)
(in thousands, except per share amounts)
               
Non-GAAP Reconciling Items
Nine months Professional Business Non-GAAP nine months
ended December 31, Discontinued fees and Stock-based Non-cash Non-cash reorganization ended December 31,
2010   operations   legal matters   compensation   interest expense   tax expense   and related   2010
 
Net revenue $ 954,621     $ -   $ -     $ -     $ -   $ -     $ -     $ 954,621  
 
Cost of goods sold:
Product costs 266,170 - - - - - - 266,170
Software development costs and royalties 148,906 - - (9,801 ) - - - 139,105
Internal royalties 105,266 - - - - - - 105,266
Licenses   48,996       -     -       -       -     -       -       48,996  
Total cost of goods sold   569,338       -     -       (9,801 )     -     -       -       559,537  
 
Gross profit 385,283 - - 9,801 - - - 395,084
 
Selling and marketing 144,268 - - (3,445 ) - - (18 ) 140,805
General and administrative 80,314 - (371 ) (7,411 ) - - (115 ) 72,417
Research and development 52,328 - - (2,973 ) - - (1,580 ) 47,775
Depreciation and amortization   11,271       -     -       -       -     -       -       11,271  
Total operating expenses   288,181       -     (371 )     (13,829 )     -     -       (1,713 )     272,268  
Income (loss) from operations 97,102 - 371 23,630 - - 1,713 122,816
Interest and other, net   (10,395 )     -     -       -       5,440     -       -       (4,955 )
Income (loss) from continuing operations before income taxes 86,707 - 371 23,630 5,440 - 1,713 117,861
Provision for income taxes   10,487       -     -       -       -     (1,393 )     -       9,094  
Income (loss) from continuing operations 76,220 - 371 23,630 5,440 1,393 1,713 108,767
Income (loss) from discontinued operations, net of taxes   (5,708 )     5,708     -       -       -     -       -       -  
Net income (loss) $ 70,512     $ 5,708   $ 371     $ 23,630     $ 5,440   $ 1,393     $ 1,713     $ 108,767  
 
Earnings (loss) per share:*                              
Basic earnings (loss) per share $ 0.82     $ 0.07   $ 0.00     $ 0.28     $ 0.06   $ 0.02     $ 0.02     $ 1.27  
                               
Diluted earnings (loss) per share (1) $ 0.82     $ 0.06   $ 0.00     $ 0.24     $ 0.06   $ 0.01     $ 0.02     $ 1.15  
 
Weighted average shares outstanding (2)                              
Basic 85,783 85,783 85,783 85,783 85,783 85,783 85,783 85,783
Diluted   98,721       98,721     98,721       98,721       98,721     98,721       98,721       98,721  
 
EBITDA:
Income (loss) from continuing operations before income taxes $ 86,707 $ 117,861
Interest 11,469 6,029
Depreciation and amortization   11,271     11,271  
EBITDA $ 109,447 $ 135,161
Add: Business reorganization and related   1,713     -  
Adjusted EBITDA $ 111,160   $ 135,161  
 
 
*Earnings (loss) per share ("EPS") may not add due to rounding

(1) For the nine months ended December 31, 2010, diluted EPS has been calculated using the “if-converted” method as a result of the Convertible Senior Notes ("Convertible Notes") issued in June 2009. Non-GAAP net income used for computing non-GAAP diluted EPS has been adjusted by $5,006 and GAAP net income used for computing GAAP diluted EPS has been adjusted by $10,446 related to interest and debt issuance costs, net of tax. The shares used for computing includes 12,927 shares related to the potential dilution from the Convertible Notes.

(2) Basic and diluted include participating shares of 5,824.
 
TAKE-TWO INTERACTIVE SOFTWARE, INC. and SUBSIDIARIES
Non-GAAP CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS (Unaudited)
(in thousands, except per share amounts)
             
Non-GAAP Reconciling Items
Nine months Professional Non-GAAP nine months
ended December 31, Discontinued fees and Stock-based Non-cash Non-cash ended December 31,
2009   operations   legal matters   compensation   interest expense   tax expense   2009
 
Net revenue $ 529,724     $ -   $ -     $ -     $ -   $ -     $ 529,724  
 
Cost of goods sold:
Product costs 174,255 - - - - - 174,255
Software development costs and royalties 95,196 - - (5,237 ) - - 89,959
Internal royalties 30,917 - - - - - 30,917
Licenses   44,124       -     -       -       -     -       44,124  
Total cost of goods sold   344,492       -     -       (5,237 )     -     -       339,255  
 
Gross profit 185,232 - - 5,237 - - 190,469
 
Selling and marketing 114,449 - - (2,205 ) - - 112,244
General and administrative 91,457 - (1,430 ) (10,785 ) - - 79,242
Research and development 43,559 - - (2,704 ) - - 40,855
Depreciation and amortization   12,591       -     -       -       -     -       12,591  
Total operating expenses   262,056       -     (1,430 )     (15,694 )     -     -       244,932  
Income (loss) from operations (76,824 ) - 1,430 20,931 - - (54,463 )
Interest and other, net   (10,243 )     -     -       -       3,758     -       (6,485 )
Income (loss) from continuing operations before income taxes (87,067 ) - 1,430 20,931 3,758 - (60,948 )
Provision for income taxes   11,309       -     -       -       -     (4,805 )     6,504  
Income (loss) from continuing operations (98,376 ) - 1,430 20,931 3,758 4,805 (67,452 )
Income (loss) from discontinued operations, net of taxes   (14,775 )     14,775     -       -       -     -       -  
Net income (loss) $ (113,151 )   $ 14,775   $ 1,430     $ 20,931     $ 3,758   $ 4,805     $ (67,452 )
 
Earnings (loss) per share:*                          
Basic earnings (loss) per share $ (1.46 )   $ 0.19   $ 0.02     $ 0.27     $ 0.05   $ 0.06     $ (0.87 )
                           
Diluted earnings (loss) per share $ (1.46 )   $ 0.19   $ 0.02     $ 0.27     $ 0.05   $ 0.06     $ (0.87 )
 
Weighted average shares outstanding                          
Basic 77,562 77,562 77,562 77,562 77,562 77,562 77,562
Diluted   77,562       77,562     77,562       77,562       77,562     77,562       77,562  
 
EBITDA:
Income (loss) from continuing operations before income taxes $ (87,067 ) $ (60,948 )
Interest 9,738 5,980
Depreciation and amortization   12,591     12,591  
EBITDA $ (64,738 ) $ (42,377 )
 
 
*Earnings (loss) per share may not add due to rounding
 

Contacts

Take-Two Interactive Software, Inc.
Investor Relations:
Henry A. Diamond, 646-536-3005
Senior Vice President
Investor Relations & Corporate Communications
Henry.Diamond@take2games.com
or
Take-Two Interactive Software, Inc.
Corporate Press:
Alan Lewis, 646-536-2983
Vice President
Corporate Communications & Public Affairs
Alan.Lewis@take2games.com

Contacts

Take-Two Interactive Software, Inc.
Investor Relations:
Henry A. Diamond, 646-536-3005
Senior Vice President
Investor Relations & Corporate Communications
Henry.Diamond@take2games.com
or
Take-Two Interactive Software, Inc.
Corporate Press:
Alan Lewis, 646-536-2983
Vice President
Corporate Communications & Public Affairs
Alan.Lewis@take2games.com