10-KPeriod: FY2001

TAKE TWO INTERACTIVE SOFTWARE INC Annual Report, Year Ended Oct 31, 2001

Filed February 12, 2002For Securities:TTWO

Summary

Take-Two Interactive Software, Inc. (TTWO) filed its 10-K for the fiscal year ended October 31, 2001, highlighting significant financial restatements due to accounting irregularities in fiscal years 2000 and 2001. Despite these challenges, the company reported a substantial increase in net sales, driven by strong performance in both its publishing and distribution segments, notably with the success of "Grand Theft Auto 3" and "Max Payne." The company is navigating the transition to next-generation gaming platforms and expanding its product portfolio. However, the filing also disclosed ongoing class-action lawsuits related to the financial restatements and an SEC investigation, posing potential risks to the company's financial condition and operations. The company's strategic focus remains on developing and publishing titles for both PC and console markets, with a particular emphasis on next-generation platforms. While "Grand Theft Auto 3" has emerged as a major success, contributing significantly to revenue, the reliance on a few key titles presents a concentration risk. The company is actively managing its liquidity through existing credit facilities and has no immediate material capital expenditure commitments, though it anticipates significant professional expenses related to ongoing litigation and regulatory matters.

Key Highlights

  • 1Significant financial restatements for fiscal years 2000 and 2001 were reported due to accounting issues, impacting previously issued financial statements.
  • 2Net sales increased by 23.9% to $451.1 million for fiscal year 2001, driven by strong performance in both publishing and distribution operations.
  • 3The company's hit title "Grand Theft Auto 3" for PlayStation 2 was the top-selling video game in North America for 2001, contributing significantly to revenue.
  • 4Facing ongoing litigation, including multiple class-action lawsuits alleging violations of securities laws, related to the financial restatements.
  • 5An SEC investigation into accounting matters and internal controls is underway.
  • 6The company is transitioning to next-generation gaming platforms (PlayStation 2, Xbox, GameCube) and is actively developing titles for these systems.
  • 7Working capital increased to $88.2 million at October 31, 2001, from $69.0 million at October 31, 2000, indicating improved liquidity management.

Frequently Asked Questions

The financial restatements were primarily due to improper recognition of net sales for products that were returned or repurchased, sales for products not yet shipped, accounting for losses incurred by an affiliate, and revenue elimination in connection with a business combination.

'Grand Theft Auto 3' was a significant driver of revenue in fiscal year 2001, being the number one selling video game across all platforms in North America for that year. It accounted for 7.4% of the company's total net sales in fiscal 2001.

The company intends to defend vigorously against the class-action lawsuits, but acknowledges that an unfavorable resolution could have a material adverse effect on its financial condition, cash flows, and results of operations. The SEC investigation also adds uncertainty. While net sales increased, the company reported a net loss of $8.6 million for fiscal year 2001, down from a net income of $6.4 million in fiscal 2000, partly due to increased costs and the aforementioned issues.

As of October 31, 2001, Take-Two had $48.7 million outstanding under its revolving credit facility with Bank of America, and $5.4 million under a facility with Lloyds TSB Bank plc. The company has no material commitments for capital expenditures and is focused on managing working capital. Despite a net loss, operating activities provided positive cash flow in fiscal 2001.