What are the main reasons for the restatement of financial statements mentioned in this report?

The company restated its financial statements for fiscal year 2000 and interim periods of fiscal 2001 due to accounting treatment of certain transactions. This included eliminating $15.4 million in net sales to distributors that were later returned or repurchased, correcting revenue recognition for unshipped products, accounting for affiliate losses, and adjusting license revenue from a business combination.

How did the company's sales perform in fiscal year 2001?

Net sales increased by 23.9% to $451.1 million in fiscal year 2001, driven by strong performance in both publishing and distribution operations. Key titles like Grand Theft Auto 3 and Max Payne were significant contributors to the publishing revenue growth.

What is the company's financial outlook given the net loss in fiscal 2001?

The company incurred a net loss of $8.6 million in fiscal 2001, a reversal from a net income in the prior year. This was primarily due to an increase in the cost of sales, higher selling and marketing expenses, and an impairment charge related to internet gaming assets. The company continues to invest in product development for next-generation platforms, which may impact short-term profitability.

What are the major risks and uncertainties facing Take-Two Interactive?

Key risks include the short product life cycles in the interactive entertainment industry, reliance on a limited number of successful titles, significant quarterly fluctuations in operating results, rapid technological changes, intense competition, the need for hardware manufacturer approval for console titles, and the potential impact of ongoing litigation and SEC investigations.

TTWO 10-K FY2001 Annual Report — Revenue, Net Income, EPS

Summary

This 10-K/A filing from Take-Two Interactive Software, Inc. (TTWO) for the period ending October 31, 2001, highlights a significant period of financial restatement and operational focus. The company is addressing accounting irregularities discovered during an SEC informal inquiry, leading to restated financial statements for fiscal year 2000 and interim periods of fiscal 2001. Despite these challenges, Take-Two is strategically positioned in the growing interactive entertainment market, driven by successful titles like Grand Theft Auto 3 and Max Payne, and strong relationships with major platform manufacturers (Sony, Nintendo, Microsoft). Financially, the company reported a net loss for fiscal year 2001 after experiencing growth in net sales. The increased cost of sales, driven by production costs for next-generation titles and an impairment charge, impacted profitability. The company is also managing substantial debt obligations and investing in its product pipeline, particularly for console platforms. Investors should note the ongoing legal proceedings related to the financial restatements and the SEC investigation, which could materially affect the company's financial condition.

Key Highlights

1The company restated its financial statements for fiscal year 2000 and interim quarters of fiscal 2001 due to accounting treatment of certain transactions, including the elimination of improperly recognized net sales.
2Net sales increased by 23.9% to $451.1 million in fiscal 2001, primarily driven by strong publishing revenues from titles like Grand Theft Auto 3 and Max Payne.
3Despite increased net sales, the company reported a net loss of $8.6 million in fiscal 2001, compared to a net income of $6.4 million in fiscal 2000, impacted by higher cost of sales and other expenses.
4Take-Two has secured licensing agreements with Sony, Nintendo, and Microsoft, enabling development and publishing for PlayStation 2, Xbox, and GameCube platforms.
5The company faces significant competition from major players like Sony, Nintendo, and Microsoft, as well as other domestic and international software companies.
6Multiple class-action lawsuits have been filed against the company and its officers related to alleged violations of securities laws concerning financial statements, and the SEC has issued a formal order of investigation.
7The company has a substantial amount of debt outstanding, with $48.7 million under a line of credit with Bank of America as of October 31, 2001.

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

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Key Highlights

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