10-QPeriod: Q2 FY2002

TAKE TWO INTERACTIVE SOFTWARE INC Quarterly Report for Q2 Ended Jul 31, 2001

Filed September 14, 2001For Securities:TTWO

Summary

Take-Two Interactive Software, Inc. (TTWO) reported its quarterly results for the period ended July 31, 2001. The company experienced a notable increase in net sales, driven by growth in both its publishing and distribution segments. Publishing revenue saw a significant uplift, fueled by the releases of "Max Payne" for PC and "Rune: Viking Warlords" for PlayStation 2, alongside continued strong performance from existing titles like "Midnight Club" and "Smuggler's Run." Despite the top-line growth, the company reported a net loss for the nine-month period ended July 31, 2001, largely due to a significant impairment charge on investments in internet securities ($20.8 million). This contrasts with a substantial net income in the same period last year. However, excluding this non-cash impairment charge and an extraordinary loss from debt extinguishment, the adjusted net income for the nine months would show a different picture, highlighting the impact of specific non-recurring items on the reported results. The company's liquidity remains supported by operating cash flows and existing credit facilities.

Key Highlights

  • 1Net sales increased by 18.2% to $84.5 million for the three months ended July 31, 2001, compared to the prior year period.
  • 2Publishing revenues grew by 18.6% to $49.9 million, driven by new releases and strong console title performance.
  • 3Distribution revenues increased by 17.7% to $34.6 million, benefiting from acquisitions like VLM Entertainment Group.
  • 4The company reported a net loss of $3.8 million for the nine months ended July 31, 2001, compared to a net income of $11.6 million in the prior year.
  • 5A significant non-cash impairment charge of $20.8 million on investments in internet securities impacted the nine-month results.
  • 6Cash and cash equivalents increased to $15.3 million at July 31, 2001, from $5.2 million at October 31, 2000, with positive cash flow from operations.
  • 7The company repaid $15 million of subordinated debt during the quarter, incurring an extraordinary loss of $1.5 million.

Frequently Asked Questions

The revenue increase was driven by growth in both publishing and distribution operations. Key publishing titles like "Max Payne" and "Rune: Viking Warlords" contributed significantly, along with strong console game sales from "Midnight Club" and "Smuggler's Run." Distribution revenue also saw an increase, partly due to the acquisition of VLM Entertainment Group.

The reported net loss for the nine-month period ending July 31, 2001, was primarily due to a substantial non-cash impairment charge of $20.8 million related to investments in internet securities. This charge, combined with an extraordinary loss from debt extinguishment, significantly impacted the bottom line, overshadowing the growth in sales.

The company's liquidity has improved, with cash and cash equivalents increasing to $15.3 million at July 31, 2001, from $5.2 million at October 31, 2000. This increase was supported by positive cash flow from operating activities during the nine-month period, despite significant investing and financing outflows and the debt repayment.

The company expects sales of video game console products to continue accounting for a significant portion of its publishing revenues. This is supported by the strong performance of PlayStation 2 titles and the anticipated introduction of next-generation hardware and software.