Exhibit 99.1
Take-Two Interactive Software, Inc. Reports Second Quarter Fiscal 2006 Financial
Results; Results Include $26.3 Million Charge for Asset Write-Offs and Studio
Closures; Federal Trade Commission Concludes Inquiry
NEW YORK--(BUSINESS WIRE)--June 8, 2006--Take-Two Interactive
Software, Inc. (NASDAQ:TTWO) today announced financial results for its
second quarter ended April 30, 2006.
Net revenues for the second quarter were $265.1 million compared
to $222.1 million for the second quarter of fiscal 2005. Net loss for
the quarter was $50.4 million or $0.71 per share compared to a net
loss of $8.2 million or $0.12 per share in the prior year's second
quarter. The fiscal 2006 second quarter results include a charge of
$26.3 million, or $0.24 per share on a tax effected basis, for asset
write-offs and studio closures related to the Company's cost saving
initiatives as described below.
Net revenues for the six months ended April 30, 2006 were $530.1
million compared to $724.5 million for the same period a year ago. Net
loss for the first six months was $79.5 million compared to net income
of $47.1 million in the comparable period last year. Net loss per
share was $1.12 for the first six months compared to net income per
diluted share of $0.67 in the prior year's first six months. In
addition to the charge discussed above for the Company's asset
write-offs and studio closures, Take-Two's loss per share for the
three and six months ended April 30, 2006 includes the impact of
adopting SFAS 123(R), requiring the expensing of employee stock
options beginning on November 1, 2005.
In addition to the challenging comparison to the strong sales of
Grand Theft Auto: San Andreas in the comparable period last year,
Take-Two attributed the lower year to date results to continued retail
weakness for video game software and lower retail pricing during the
holiday selling season in both North America and Europe, as the
industry began to transition to new hardware platforms. While revenues
for the second quarter of fiscal 2006 exceeded levels in the prior
year second quarter, the Company's profitability in the recent quarter
was impacted by a variety of factors, including the significant
percentage of publishing revenues from co-published and licensed
titles which generally have lower margins than internally owned,
internally developed titles.
Responding to the current difficult business environment and
market conditions, the Company has taken steps to reduce costs,
resulting in asset write-offs and studio closings. Take-Two realized
non-cash charges in the second quarter of $24.3 million related to the
write-off of several titles in development and certain trademarks and
acquired intangibles, and incurred severance and other costs of $2
million from the closure of two development studios. The Company
expects to incur additional costs of approximately $3 million in the
third quarter related to the closure of a third development studio,
and approximately $3 million in the aggregate during the third and
fourth quarters for the relocation of the Company's international
publishing headquarters to Geneva, Switzerland. The Company continues
to expect to return to profitability in its fourth quarter of fiscal
2006.
Conclusion of FTC Inquiry
Take-Two also announced that the Federal Trade Commission (FTC)
has concluded its previously announced inquiry regarding the
advertising claims for Grand Theft Auto: San Andreas following the
re-rating of the title by the Entertainment Software Rating Board. In
June, Take-Two and its wholly-owned publishing label Rockstar Games,
entered into an Agreement with the FTC containing a Consent Order
under which the Company agreed to settle all outstanding matters
pending before the FTC. No penalties or fines have been assessed under
the Consent Order. Among other things, the Consent Order provides that
the Company shall not misrepresent a video game's ratings or content
descriptors and that the Company shall implement a system to ensure
that all game content is reviewed in connection with submissions to
ratings authorities. The Consent Order and an accompanying Complaint
are subject to a 30-day period for public comment ending July 10, 2006
and final approval by the FTC.
Second Quarter Highlights
Take-Two's second quarter results were led by sales of The Elder
Scrolls(R) IV: Oblivion(TM) for PC and the Xbox 360(TM) video game and
entertainment system from Microsoft, a title co-published by 2K and
Bethesda Softworks. Other leading 2K titles in the quarter included
Major League Baseball(R) 2K6, Top Spin 2 and 24: The Game. Rockstar
Games' largest contributors to the quarter's results included Grand
Theft Auto: Liberty City Stories for the PSP(TM)
(PlayStation(R)Portable) system, Grand Theft Auto: San Andreas for the
PlayStation(R)2 computer entertainment system, a Greatest Hits title,
and Midnight Club 3: DUB Edition REMIX for the PlayStation 2, also a
Greatest Hits title.
Revenues at the Company's Jack of All Games distribution business
decreased year over year in the second quarter due primarily to
reduced sales of current generation hardware and software products and
a decrease in average selling prices of interactive entertainment
products as the industry transitions to next-generation platforms.
However, hardware and accessory revenues increased year over year due
to the introduction and increased availability of Xbox 360 hardware.
Upcoming Products
Fiscal 2006 third quarter releases that have already shipped
include Rockstar Games presents Table Tennis for Xbox 360. Rockstar
also released Grand Theft Auto: Liberty City Stories for PlayStation 2
in North America; the title will be in European stores on June 23rd.
2K shipped The Da Vinci Code for current generation console systems
and PC in conjunction with the release of the Columbia Pictures
feature film in May. 2K's third quarter lineup also includes Prey for
PC and Xbox 360, along with Sid Meier's Civilization IV: Warlords, the
first expansion pack for the critically acclaimed Sid Meier's
Civilization IV, and CivCity: Rome, both for PC.
Additional products planned for 2006 from Rockstar Games include
Grand Theft Auto: Vice City Stories for the PSP, scheduled for October
release, an additional PSP title based on another premier brand, and
Bully.
2K's fall/winter releases include Sid Meier's Railroads!,
Stronghold Legends and Dungeon Siege II: Broken World, all for PC;
Dungeon Siege: Throne of Agony for the PSP; and Family Guy for current
generation console systems, based on the hit Twentieth Century Fox
television series. 2K Sports has various titles planned including NBA
2K7, NHL 2K7, College Hoops 2K7, and additional products based on the
Major League Baseball license. Global Star is planning Family Feud for
multiple platforms, among other titles.
For 2007 and 2008, the Company anticipates a strong next
generation lineup from Rockstar Games including the simultaneous
launch of Grand Theft Auto IV on PlayStation(R)3 computer
entertainment system and Xbox 360 in October 2007, along with sequels
to several of Rockstar's other successful franchises. Additionally,
Rockstar will provide exclusive episodic content for Xbox Live(R).
2K's 2007 releases will include the PC and next generation console
title BioShock from 2K's Irrational Games development studio; The
Darkness for next generation platforms based on the popular Top Cow
Productions' comic book franchise; and Ghost Rider for current
generation systems, based on the Marvel Super Hero and upcoming
feature film scheduled for release in spring 2007. For 2007 and 2008,
2K Sports anticipates a solid lineup of sports titles based on
licenses with Major League Baseball, the National Basketball
Association, the National Hockey League and the National Collegiate
Athletic Association, as well as proprietary unlicensed sports brands
including tennis and boxing games.
Management Comments
Paul Eibeler, President and Chief Executive Officer, stated,
"While near-term financial results continue to be impacted by the
console transition, we are confident that we have positioned Take-Two
for the long-term by streamlining our organization while maintaining
an extremely talented global development team. We will continue to
focus on creating compelling content, operating in a cost-efficient
manner as we navigate the console transition, and aligning our
resources to drive improved financial performance in 2007 and beyond."
Conference Call
Take-Two will host a conference call today at 4:30 pm Eastern Time
to review fiscal 2006 second quarter results. The call can be accessed
by dialing (877) 407-0984 or (201) 689-8577. A live listen-only
webcast of the call is available by visiting http://ir.take2games.com
and a replay will be available following the call at the same
location.
About Take-Two Interactive Software, Inc.
Headquartered in New York City, Take-Two Interactive Software,
Inc. is an integrated global developer, marketer, distributor and
publisher of interactive entertainment software games and accessories
for the PC, PlayStation(R) game console, PlayStation(R)2 computer
entertainment system, PSP(TM) (PlayStation(R)Portable) system, Xbox(R)
and Xbox 360(TM) video game and entertainment systems from Microsoft,
Nintendo GameCube(TM), Nintendo DS(TM) and Game Boy(R) Advance. The
Company publishes and develops products through its wholly owned
labels Rockstar Games, 2K and 2K Sports, and Global Star Software; and
distributes products in North America through its Jack of All Games
subsidiary. Take-Two also manufactures and markets video game
accessories in Europe, North America and the Asia Pacific region
through its Joytech subsidiary. The Company maintains sales and
marketing offices in Cincinnati, New York, Toronto, London, Paris,
Munich, Madrid, Milan, Sydney, Breda (Netherlands), Auckland, Shanghai
and Tokyo. Take-Two'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.
Safe Harbor Statement under the Private Securities Litigation
Reform Act of 1995: This press release contains forward-looking
statements made in reliance upon the safe harbor provisions of Section
27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. The statements contained
herein which are not historical facts are considered forward-looking
statements under federal securities laws. Such forward-looking
statements are based on the beliefs of our management as well as
assumptions made by and information currently available to them. The
Company has no obligation to update such forward-looking statements.
Actual results may vary significantly from these forward-looking
statements based on a variety of factors. These important factors are
described in the Company's Form 10-Q for the quarter ended January 31,
2006 in the section entitled "Cautionary Statement and Risk Factors".
TAKE-TWO INTERACTIVE SOFTWARE, INC. and SUBSIDIARIES
Consolidated Condensed Statements of Operations
For the three months and six months ended April 30, 2006 and 2005
(unaudited)
(In thousands, except per share data)
Three months ended Six months ended
April 30, April 30,
2006 2005 2006 2005
-------- -------- --------- --------
Net revenues $265,122 $222,068 $ 530,103 $724,542
Cost of goods sold
Product costs 130,940 123,504 291,793 360,989
Royalties 82,282 21,938 115,149 102,147
Software development
costs 34,128 4,780 49,722 8,985
-------- -------- --------- --------
Total cost of goods
sold 247,350 150,222 456,664 472,121
-------- -------- --------- --------
Gross profit 17,772 71,846 73,439 252,421
Operating expenses
Selling and marketing 32,194 36,275 73,838 87,206
General and
administrative 33,705 28,705 72,158 57,392
Research and development 16,097 13,785 33,806 37,202
Depreciation and
amortization 12,944 5,102 19,595 9,888
-------- -------- --------- --------
Total operating
expenses 94,940 83,867 199,397 191,688
Income (loss) from
operations (77,168) (12,021) (125,958) 60,733
Interest income, net 4 1,164 257 1,704
-------- -------- --------- --------
Income (loss) before
income taxes (77,164) (10,857) (125,701) 62,437
Provision (benefit) for
income taxes (26,791) (2,671) (46,206) 15,374
-------- -------- --------- --------
Net income (loss) $(50,373) $ (8,186) $ (79,495) $ 47,063
======== ======== ========= ========
Per share data:
Basic:
Weighted average common
shares outstanding 70,979 70,112 70,890 69,365
======== ======== ========= ========
-------- -------- --------- --------
Net income (loss) per
share - Basic $ (0.71) $ (0.12) $ (1.12) $ 0.68
======== ======== ========= ========
Diluted:
Weighted average common
shares outstanding 70,979 70,112 70,890 70,678
======== ======== ========= ========
-------- -------- --------- ---------
Net income (loss) per
share - Diluted $ (0.71) $ (0.12) $ (1.12) $ 0.67
======== ======== ========= ========
OTHER INFORMATION Three months ended Six months ended
April 30, April 30,
- --------------------------
2006 2005 2006 2005
-------- -------- --------- --------
Total revenue mix
Publishing 75% 66% 68% 69%
Distribution 25% 34% 32% 31%
Geographic revenue mix
North America 72% 70% 72% 67%
International 28% 30% 28% 33%
Publishing platform
revenue mix
Microsoft Xbox 360 39% 0% 26% 0%
PC 21% 11% 17% 5%
Sony PlayStation 2 20% 58% 24% 80%
Sony PSP 8% 0% 19% 0%
Microsoft Xbox 6% 27% 6% 12%
Nintendo Handhelds 3% 1% 2% 1%
Accessories and other 3% 3% 6% 2%
TAKE-TWO INTERACTIVE SOFTWARE, INC. and SUBSIDIARIES
Consolidated Condensed Balance Sheets
As of April 30, 2006 (unaudited) and October 31, 2005
(In thousands, except share data)
ASSETS April 30, October 31,
2006 2005
------------ -------------
Current assets
Cash and cash equivalents $ 141,068 $ 107,195
Accounts receivable, net of allowances
of $87,820 and $69,904 at April 30,
2006 and October 31, 2005, respectively 130,328 198,068
Inventories 91,820 136,227
Software development costs 69,431 88,826
Licenses 4,253 7,651
Prepaid taxes and taxes receivable 69,854 40,307
Prepaid expenses and other current
assets 27,772 24,025
Deferred tax assets 38,319 10,943
----------- ------------
Total current assets 572,845 613,242
Fixed assets, net 49,796 48,617
Software development costs, net of current
portion 27,183 19,602
Licenses, net of current portion 4,984 2,330
Goodwill 190,491 179,893
Intangibles, net 48,916 58,666
Deferred tax assets 7,784 5,506
Other assets 4,018 5,020
----------- ------------
Total assets $ 906,017 $ 932,876
=========== ============
LIABILITIES and STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable $ 108,216 $ 133,353
Accrued expenses and other current
liabilities 135,508 90,702
Income taxes payable 14,361 10,220
----------- ------------
Total current liabilities 258,085 234,275
Other long-term liabilities 403 2,467
----------- ------------
Total liabilities 258,488 236,742
----------- ------------
Stockholders' equity
Common stock, par value $.01 per share;
100,000,000 shares authorized;
72,515,165 and 70,667,421 shares
issued and outstanding at
April 30, 2006 and October 31, 2005,
respectively 725 707
Additional paid-in capital 433,381 418,053
Deferred compensation - (11,189)
Retained earnings 208,382 287,877
Accumulated other comprehensive income 5,041 686
----------- ------------
Total stockholders' equity 647,529 696,134
----------- ------------
Total liabilities and
stockholders' equity $ 906,017 $ 932,876
=========== ============
CONTACT: Take-Two Interactive Software, Inc.
Jim Ankner, 646-536-3006
james.ankner@take2games.com