2K Sports 2004 Annual Report Download - page 61

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agreement may be terminated under certain circumstances, including as a result of SEGA’s failure to obtain
licenses from the major sports leagues and players associations.
Pursuant to an option agreement with SEGA, the Company has the right to purchase all of the outstanding
capital stock of Visual Concepts and Kush. The option is exercisable until the earlier of (1) March 31, 2006
or (2) the termination of the distribution agreement with SEGA. The Company is currently negotiating the
option price.
In connection with the acquisition of Mobius in fiscal 2004, the Company agreed to make additional
contingent payments, of approximately $2,000 based on delivery of products. In fiscal 2003 the Company
agreed to make additional payments of up to $2,500 to the former owners of Cat Daddy based on a
percentage of Cat Daddy’s future profits for the first three years after acquisition. See Note 3. The payables
will be recorded when the conditions requiring their payment are met.
Additionally, in connection with the Company’s acquisition of the publishing rights to the franchise of Duke
Nukem PC and video games in December 2000, the Company is contingently obligated to pay $6,000 in cash
upon delivery of the final version of Duke Nukem Forever for the PC. In May 2003, the Company agreed to
make payments of up to $6,000 in cash upon the achievement of certain sales targets for Max Payne 2. The
Company does not expect these sales targets to be achieved.
12. EMPLOYEE SAVINGS PLAN
The Company maintains a 401(k) retirement savings plan and trust (the “401(k) Plan”). The 401(k) Plan is
offered to all eligible employees and participants may make voluntary contributions.. The Company began
matching contributions in July 2002. The matching contribution expense incurred by the Company during the
years ended October 31, 2004, 2003 and 2002 was $583, $384 and $95, respectively.
13. INCOME TAXES
The Company is subject to foreign income taxes in certain countries where it does business. Domestic and
foreign income before income taxes is as follows:
Years Ended October 31,
2004 2003 2002
Domestic ............................................................. $52,774 $134,746 $115,142
Foreign ............................................................... 43,836 30,569 5,796
Total .................................................................. $96,610 $165,315 $120,938
Income tax expense is as follows:
Years Ended October 31,
2004 2003 2002
Current:
Federal ................................................................ $ 28,628 $33,167 $35,275
State and local ........................................................ 3,506 6,287 4,381
Foreign ............................................................... 11,791 14,703 2,993
Deferred:
Federal, Foreign, State and Local ..................................... (12,693) 13,040 6,726
Total .................................................................. $ 31,232 $67,197 $49,375
TAKE-TWO INTERACTIVE SOFTWARE, INC. and SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
(Dollars in thousands, except per share amounts)
11. COMMITMENTS AND CONTINGENCIES (Continued)
53