10-QPeriod: Q3 FY2004

TAKE TWO INTERACTIVE SOFTWARE INC Quarterly Report for Q3 Ended Jan 31, 2004

Filed March 16, 2004For Securities:TTWO

Summary

Take-Two Interactive Software, Inc. (TTWO) reported its financial results for the three months ended January 31, 2004. The company experienced a notable increase in cash and cash equivalents, reaching $254.2 million, up from $183.5 million at the end of the previous fiscal year. This strengthening cash position was primarily driven by robust cash flow from operating activities. However, the company saw a decrease in net sales, down 8.6% to $375.5 million compared to the same period last year. This decline was mainly attributed to lower publishing revenues, particularly a challenging comparison against strong Grand Theft Auto: Vice City sales in the prior year, although this was partially offset by growth in the distribution segment. Net income also decreased significantly by 38.4% to $31.8 million, leading to a decline in diluted earnings per share from $1.22 to $0.70.

Key Highlights

  • 1Cash and cash equivalents increased significantly by $70.7 million to $254.2 million, reflecting strong operating cash flow.
  • 2Net sales decreased by 8.6% to $375.5 million, primarily due to lower publishing revenues compared to a strong prior year period.
  • 3Net income decreased by 38.4% to $31.8 million, with diluted EPS falling to $0.70 from $1.22 in the prior year.
  • 4The company made strategic acquisitions, including TDK Mediactive, Inc., Frog City, Inc., and Cat Daddy Games LLC, to expand its development capabilities and intellectual property.
  • 5Research and development expenses saw a substantial increase of 139.2%, driven by acquisitions and increased internal development staffing.
  • 6The company is subject to an ongoing SEC investigation concerning accounting matters, revenue recognition policies, and internal controls, with a Wells Notice received.
  • 7Despite a challenging period for publishing revenue, the distribution business showed strong growth, increasing by 38.9%.

Frequently Asked Questions

Take-Two Interactive Software, Inc. reported a strong increase in cash and cash equivalents, ending the quarter at $254.2 million, up from $183.5 million at the end of the prior fiscal year. This increase was primarily driven by $87.9 million in cash provided by operating activities.

Net sales decreased by 8.6% to $375.5 million, primarily due to lower publishing revenues. This was largely a result of a challenging comparison to the prior year's strong sales of Grand Theft Auto: Vice City. However, this decline was partially offset by an increase in distribution revenues.

The company has received a Wells Notice from the SEC's Staff, indicating an intention to recommend enforcement action regarding alleged violations of federal securities laws. The investigation stems from accounting matters, periodic reporting, and internal controls, as well as revenue recognition policies. The company is in discussions with the SEC Staff, but the outcome remains uncertain and could potentially involve injunctions and monetary damages.

Research and development expenses increased significantly by 139.2% to $13.4 million. This surge is attributed to the recent acquisitions of development studios like Frog City and Cat Daddy Games, as well as increased staffing to bring more development in-house.