Take-Two Interactive Software, Inc. Reports Strong Results For Second Quarter Fiscal 2013

About Take-Two Interactive Software

Headquartered in New York City, Take-Two Interactive Software, Inc. is a leading developer, marketer and publisher of interactive entertainment for consumers around the globe. The Company develops and publishes products through its two wholly-owned labels Rockstar Games and 2K, which publishes its titles under the 2K Games, 2K Sports and 2K Play brands. Our products are designed for console systems, handheld gaming systems and personal computers, including smartphones and tablets, and are delivered through physical retail, digital download, online platforms and cloud streaming services. The Company’s common stock is publicly traded on NASDAQ under the symbol TTWO. For more corporate and product information please visit our website at http://www.take2games.com.

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Cautionary Note Regarding Forward-Looking Statements

The statements contained herein which are not historical facts are considered forward-looking statements under federal securities laws and may be identified by words such as "anticipates," "believes," "estimates," "expects," "intends," "plans," "potential," "predicts," "projects," "seeks," "will," or words of similar meaning and include, but are not limited to, statements regarding the outlook for the Company's future business and financial performance. Such forward-looking statements are based on the current beliefs of our management as well as assumptions made by and information currently available to them, which are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict. Actual outcomes and results may vary materially from these forward-looking statements based on a variety of risks and uncertainties including: our dependence on key management and product development personnel, our dependence on our Grand Theft Auto products and our ability to develop other hit titles for current generation platforms, the timely release and significant market acceptance of our games, the ability to maintain acceptable pricing levels on our games, our ability to raise capital if needed and risks associated with international operations. Other important factors and information are contained in the Company's Annual Report on Form 10-K for the fiscal year ended March 31, 2012, in the section entitled "Risk Factors," and the Company's other periodic filings with the SEC, which can be accessed at www.take2games.com. All forward-looking statements are qualified by these cautionary statements and apply only as of the date they are made. The Company undertakes no obligation to update any forward-looking statement, whether as a result of new information, future events or otherwise.

TAKE-TWO INTERACTIVE SOFTWARE, INC. and SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
(in thousands, except per share amounts)
		Three months ended September 30,								Six months ended September 30,
			2012				2011				2012				2011
Net revenue		$	273,084			$	107,034			$	499,223			$	441,414
Cost of goods sold:
Software development costs and royalties			77,535				17,248				182,539				101,850
Product costs			73,314				40,137				145,573				138,588
Licenses			7,228				10,739				15,748				22,393
Internal royalties			410				6,579				1,358				23,091
Total cost of goods sold			158,487				74,703				345,218				285,922
Gross profit			114,597				32,331				154,005				155,492
Selling and marketing			65,851				28,773				144,858				103,456
General and administrative			30,809				25,785				74,011				56,362
Research and development			19,320				15,998				34,632				32,517
Depreciation and amortization			2,550				3,284				5,319				6,529
Total operating expenses			118,530				73,840				258,820				198,864
Loss from operations			(3,933	)			(41,509	)			(104,815	)			(43,372	)
Interest and other, net			(7,419	)			(4,333	)			(15,468	)			(8,013	)
Loss from continuing operations before income taxes			(11,352	)			(45,842	)			(120,283	)			(51,385	)
Provision for income taxes			1,085				1,419				2,926				4,495
Loss from continuing operations			(12,437	)			(47,261	)			(123,209	)			(55,880	)
Loss from discontinued operations, net of taxes			(54	)			(110	)			(120	)			(204	)
Net loss		$	(12,491	)		$	(47,371	)		$	(123,329	)		$	(56,084	)
Earnings (loss) per share:
Continuing operations		$	(0.15	)		$	(0.57	)		$	(1.45	)		$	(0.68	)
Discontinued operations			-				-				-				-
Basic earnings (loss) per share		$	(0.15	)		$	(0.57	)		$	(1.45	)		$	(0.68	)
Continuing operations		$	(0.15	)		$	(0.57	)		$	(1.45	)		$	(0.68	)
Discontinued operations			-				-				-				-
Diluted earnings (loss) per share		$	(0.15	)		$	(0.57	)		$	(1.45	)		$	(0.68	)
Weighted average shares outstanding:
Basic			85,396				82,940				85,197				82,722
Diluted			85,396				82,940				85,197				82,722
		Three months ended September 30,								Six months ended September 30,
OTHER INFORMATION			2012				2011				2012				2011
Geographic revenue mix
United States			56	%			48	%			52	%			46	%
International			44	%			52	%			48	%			54	%
Platform revenue mix
Microsoft Xbox 360			47	%			39	%			45	%			47	%
Sony PlayStation 3			31	%			30	%			35	%			38	%
PC and other			20	%			16	%			17	%			10	%
Sony PSP			1	%			4	%			1	%			2	%
Sony PlayStation 2			1	%			3	%			1	%			1	%
Nintendo DS			0	%			4	%			1	%			1	%
Nintendo Wii			0	%			4	%			0	%			1	%

TAKE-TWO INTERACTIVE SOFTWARE, INC. and SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except per share amounts)
		September 30,				March 31,
			2012				2012
ASSETS		(Unaudited)
Current assets:
Cash and cash equivalents		$	328,284			$	420,279
Accounts receivable, net of allowances of $61,008 and $51,002 at September 30, 2012
and March 31, 2012, respectively			154,951				45,035
Inventory			60,568				22,477
Software development costs and licenses			212,547				211,224
Prepaid expenses and other			41,593				44,602
Total current assets			797,943				743,617
Fixed assets, net			21,879				18,949
Software development costs and licenses, net of current portion			68,881				104,755
Goodwill			228,588				228,169
Other intangibles, net			11,101				16,266
Other assets			36,353				37,671
Total assets		$	1,164,745			$	1,149,427
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable		$	125,079			$	46,681
Accrued expenses and other current liabilities			172,104				156,768
Deferred revenue			38,284				13,864
Liabilities of discontinued operations			1,464				1,412
Total current liabilities			336,931				218,725
Long-term debt			325,539				316,340
Other long-term liabilities			16,193				16,316
Liabilities of discontinued operations, net of current portion			1,573				2,319
Total liabilities			680,236				553,700
Commitments and contingencies
Stockholders' equity:
Preferred stock, $.01 par value, 5,000 shares authorized			-				-
Common stock, $.01 par value, 200,000 and 150,000 shares authorized at September 30, 2012 and March 31, 2012, respectively; 92,093 and 90,215 shares issued and outstanding at September 30, 2012 and March 31, 2012, respectively			921				902
Additional paid-in capital			811,036				799,431
Accumulated deficit			(334,668	)			(211,339	)
Accumulated other comprehensive income			7,220				6,733
Total stockholders' equity			484,509				595,727
Total liabilities and stockholders' equity		$	1,164,745			$	1,149,427

TAKE-TWO INTERACTIVE SOFTWARE, INC. and SUBSIDIARIES  CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)  (in thousands)
		Six months ended September 30,
			2012				2011
Operating activities:
Net loss		$	(123,329	)		$	(56,084	)
Adjustments to reconcile net loss to net cash used in operating activities:
Amortization and impairment of software development costs and licenses			142,286				84,361
Depreciation and amortization			5,319				6,529
Loss from discontinued operations			120				204
Amortization and impairment of intellectual property			4,944				716
Stock-based compensation			14,097				12,660
Amortization of discount on Convertible Notes			9,199				4,060
Amortization of debt issuance costs			1,017				626
Other, net			362				91
Changes in assets and liabilities, net of effect from purchases of businesses:
Accounts receivable			(109,916	)			64,645
Inventory			(38,091	)			(20,499	)
Software development costs and licenses			(111,317	)			(87,584	)
Prepaid expenses, other current and other non-current assets			3,319				(14,734	)
Deferred revenue			24,420				3,759
Accounts payable, accrued expenses and other liabilities			96,066				(7,821	)
Net cash used in discontinued operations			(814	)			(1,161	)
Net cash used in operating activities			(82,318	)			(10,232	)
Investing activities:
Purchase of fixed assets			(8,021	)			(4,780	)
Net cash used in discontinued operations			-				(1,475	)
Net cash used in investing activities			(8,021	)			(6,255	)
Financing activities:
Proceeds from exercise of employee stock options			-				195
Net cash provided by financing activities			-				195
Effects of foreign exchange rates on cash and cash equivalents			(1,656	)			5,673
Net decrease in cash and cash equivalents			(91,995	)			(10,619	)
Cash and cash equivalents, beginning of period			420,279				280,359
Cash and cash equivalents, end of period		$	328,284			$	269,740

TAKE-TWO INTERACTIVE SOFTWARE, INC. and SUBSIDIARIES
RECONCILIATION OF GAAP TO Non-GAAP MEASURES (Unaudited)
(in thousands, except per share amounts)
						Three months ended September 30,								Six months ended September 30,
							2012				2011				2012				2011
Net Revenues
		GAAP Net Revenues				$	273,084			$	107,034			$	499,223			$	441,414
				Net effect from deferral in net revenues			14,949				-				14,949				-
		Non-GAAP Net Revenues				$	288,033			$	107,034			$	514,172			$	441,414
Gross Profit
		GAAP Gross Profit				$	114,597			$	32,331			$	154,005			$	155,492
				Net effect from deferral in net revenues			10,032				-				10,032				-
				Stock-based compensation			1,296				381				6,244				3,585
		Non-GAAP Gross Profit				$	125,925			$	32,712			$	170,281			$	159,077
Income (Loss) from Operations
		GAAP Loss from Operations				$	(3,933	)		$	(41,509	)		$	(104,815	)		$	(43,372	)
				Net effect from deferral in net revenues			10,032				-				10,032				-
				Stock-based compensation			7,091				4,612				14,097				12,660
				Business reorganization and related			374				768				374				768
				Professional fees and legal matters			-				-				-				176
		Non-GAAP Income (Loss) from Operations				$	13,564			$	(36,129	)		$	(80,312	)		$	(29,768	)
Net Income (Loss)
		GAAP Net Loss				$	(12,491	)		$	(47,371	)		$	(123,329	)		$	(56,084	)
				Net effect from deferral in net revenues			10,032				-				10,032				-
				Stock-based compensation			7,091				4,612				14,097				12,660
				Business reorganization and related			374				768				374				768
				Professional fees and legal matters			-				-				-				176
				Non-cash amortization of discount on Convertible Notes			4,656				2,063				9,199				4,060
				Non-cash tax expense			483				466				956				821
				Discontinued operations			54				110				120				204
		Non-GAAP Net Income (Loss)				$	10,199			$	(39,352	)		$	(88,551	)		$	(37,395	)
Diluted Earnings (Loss) Per Share
		GAAP earnings (loss) per share				$	(0.15	)		$	(0.57	)		$	(1.45	)		$	(0.68	)
		Non-GAAP earnings (loss) per share				$	0.11			$	(0.47	)		$	(1.04	)		$	(0.45	)
		Number of diluted shares used in computation
				GAAP			85,396				82,940				85,197				82,722
				Non-GAAP (1)			91,743				82,940				85,197				82,722
(1) For the three months ended September 30, 2012, the diluted shares used in the computation of Non-GAAP diluted EPS include participating shares of 6,347.

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