2K Sports 2003 Annual Report Download - page 13

Restatement of Historical Financial Statements
We restated our previously issued financial statements for the fis-
cal years ended October 31, 1999, 2000, 2001 and 2002, the interim
quarters of 2002 and the first three quarters of 2003 to reflect our
revised revenue recognition policy. Under this policy, we recognize as
a reduction of net sales a reserve for estimated future price conces-
sions in the period in which the sale is recorded. Measurement of the
reserve is based on, among other factors, an historical analysis of
price concessions, an assessment of field inventory levels and sell-
through for each product, current industry conditions and other factors
affecting the estimated timing and amount of concessions manage-
ment believes will be granted. We previously recognized price con-
cession reserves in the period in which we communicated the price
concessions to our customers. We also restated our financial state-
ments for the fiscal years ended October 31, 2000 and 2001 to
increase our provision for returns at October 31, 2000 by approxi-
mately $4.9 million for certain sales transactions primarily to retail cus-
tomers in fiscal 2000, and to reflect the fiscal 2001 returns as a reduc-
tion of the revised October 31, 2000 reserve for returns rather than
the previously reported reduction of sales in fiscal 2001. Additionally,
fiscal 2000 and 2001 revenues were restated for approximately $0.2
million to adjust for sales cut-off transactions at the end of fiscal 2000.
See Notes 2 and 19 to Consolidated Financial Statements for details
relating to the restatement.
Our 2002 financial statements have been restated as follows:
Year Ended October 31, 2002
Statement of Operations Data: As Reported As Restated
Net sales $793,976 $794,676
Product costs $410,118 $411,518
Royalties $ 80,774 $ 80,442
Cost of sales $499,016 $500,084
Gross profit $294,960 $294,592
Depreciation and amortization $ 11,187 $ 10,829
Income from operations $122,715 $122,705
Income before provision for income taxes $120,948 $120,938
Provision for income taxes $ 49,383 $ 49,375
Net income $ 71,565 $ 71,563
Basic net income per share $ 1.88 $ 1.88
Diluted net income per share $ 1.81 $ 1.81
As of October 31, 2002
Balance Sheet Data: As Reported As Restated
Accounts receivable, net $107,188 $105,576
Prepaid royalties, current $ 13,723 $ 14,215
Deferred tax asset $ 5,392 $ 6,245
Total current assets $328,632 $328,365
Total assets $491,707 $491,440
Accrued expenses and other
current liabilities $ 49,821 $ 50,698
Income taxes payable $ 1,603 $ 1,357
Total current liabilities $131,179 $131,810
Retained earnings $ 87,804 $ 86,906
Total liabilities and stockholders’ equity $491,707 $491,440
All applicable amounts relating to the aforementioned
restatements have been reflected in these consolidated financial
statements and notes thereto.
Our Consolidated Statement of Operations for the year ended
October 31, 2001 has been restated as follows:
Year Ended October 31, 2001
Statement of Operations Data: As Reported As Restated
Net sales $448,801 $451,396
Product costs $283,522 $282,279
Royalties $ 18,573 $ 19,875
Cost of sales $306,264 $306,323
Gross profit $142,537 $145,073
Income from operations $ 25,841 $ 28,377
Loss before benefit for income taxes
and cumulative change in
accounting principle* $ (6,660) $ (4,124)
Benefit for income taxes* $ (3,417) $ (2,450)
Net loss before cumulative change
in accounting principle $ (3,243) $ (1,674)
Cumulative change in accounting principle $ (5,337) $ (5,244)
Net loss $ (8,580) $ (6,918)
Basic net loss per share $ (0.25) $ (0.20)
Diluted net loss per share $ (0.25) $ (0.20)
* As required by Statement of Financial Accounting Standards No. 145, “Rescis-
sion of FASB Statements No. 4, 44 and 64, Amendment to FASB Statement
No. 13, and Technical Corrections”, the $1,948 net loss on extinguishment of
debt for the year ended October 31, 2001, previously classified as an extraor-
dinary item, has been reclassified in the As Reported column as follows:
$3,165 of loss on extinguishment to non-operating expenses and $1,217 of
tax benefit to benefit for income taxes in the above table.
Overview
We are a leading global publisher of interactive software games
designed for personal computers, video game consoles and handheld
platforms manufactured by Sony, Microsoft and Nintendo. We also
distribute our products as well as third-party products, hardware and
accessories to retail outlets in North America through our Jack of All
Games subsidiary, and we have sales, marketing and publishing oper-
ations in the United Kingdom, France, Germany, Holland, Austria,
Italy, Australia, New Zealand and Canada.
TAKE-TWO INTERACTIVE SOFTWARE, INC. AND SUBSIDIARIES
Management’s Discussion and Analysis of Financial
Condition and Results of Operations
(Dollars in thousands, except per share amounts)
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