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Management Comment

Strauss Zelnick, Chairman of Take-Two, stated, “We are pleased to begin this fiscal year with better than expected results that reflect our ability to produce compelling titles and to enhance the potential of our franchises through downloadable content and digital envision log management offerings. We’ve also taken important steps to improve the security log management efficiency of our business and align our corporate cost structure more closely with our current goals. Our updated outlook for 2010 underscores a prudent approach toward what we still believe to be a challenging year ahead. We remain committed to creating long term value, and continuing to improve upon our execution and efficiency.”

Ben Feder, Chief Executive Officer of Take-Two, commented, “Our first quarter performance was driven by the market dominance of NBA 2K10, successful launch of Borderlands, growth of our digital business and continued strength of our catalog titles. We are building upon this success with the global launch of BioShock 2, and have a strong line up of triple-A titles from our diverse portfolio of proven brands planned for release this fiscal year. Take-Two has been strengthened through our cost savings initiatives and the sale of Jack of All Games, which allows us to focus our resources solely on our core log management software business. We will continue to evaluate our cost structure for additional savings, and work to maximize the value of our intellectual property by selectively engaging in strategic opportunities in emerging markets and new platforms.”

Conference Call

Take-Two will host a conference call today at 4:30 p.m. Eastern Time to review these results and discuss other topics. The call can be accessed by dialing (877) 407-0984 or (201) 689-8577. A live listen-only webcast of the call will be available by visiting http://ir.take2games.com and a replay will be available following the call at the same location.

Non-GAAP Financial Measures

In addition to reporting financial results in accordance with U.S. generally accepted accounting principles (GAAP), the siem management Company uses non-GAAP measures of financial performance that exclude certain non-recurring or non-cash items. Non-GAAP gross profit, income (loss) from operations, net income (loss) and earnings (loss) per share are measures that exclude certain non-recurring or non-cash items and should be considered in addition to results prepared in accordance with GAAP. They are not intended to be considered in isolation from, as a substitute for, or superior to, GAAP results. These non-GAAP financial measures may be different from similarly titled measures used by other companies.

The non-GAAP measures exclude the following items from the Company’s statements of operations:

– Stock-based compensation;

– Business reorganization, restructuring and related expenses;

– Professional fees and expenses associated with unusual legal and other matters;

– Non-cash interest expense related to convertible debt; and

– Non-cash tax expense for the impact of deferred tax liabilities associated with tax deductible amortization of goodwill.

In addition, the Company may consider whether other significant non-recurring items that arise in the future should also be excluded from the non-GAAP financial measures it uses.

The Server monitoring Company believes that these non-GAAP financial measures, when taken into consideration with the corresponding GAAP financial measures, are important in gaining an understanding of the Company’s ongoing business. These non-GAAP financial measures also provide for comparative results from period to period. Therefore, the Company believes it is appropriate to exclude certain items as follows:

Stock-based compensation

The Company does not consider stock-based compensation charges when evaluating business performance and log management siem does not contemplate stock-based compensation expense in its short and long-term operating plans. The Company places greater emphasis on stockholder dilution than accounting charges when assessing the impact of stock-based equity awards.

Business reorganization, restructuring and related expenses

From time to time, the Company may engage in business reorganization and restructuring activities, which may result in costs related to severance, asset write-offs and associated professional fees. The Company does not engage in reorganization activities on a regular basis and therefore believes it is appropriate to exclude business reorganization, restructuring and related expenses from its non-GAAP financial measures.

Professional fees and expenses associated with unusual legal and other matters

The Company has incurred significant legal and other professional fees associated with both the investigation of its historical stock option granting practices and the Company’s responses to related governmental inquiries and civil lawsuits. One of management’s primary objectives is to bring conclusion to its outstanding legal matters. The Company continues to incur expenses for professional fees and has accrued for legal settlements that are outside its ordinary course of business. As a result, the Company has excluded such expenses from its non-GAAP financial measures.

Non-cash interest expense related to convertible debt

The Company adopted a new accounting standard in the first quarter of fiscal 2010 that requires convertible debt to be bifurcated into debt and equity components. As a result of the new standard, the Company has begun to record non-cash interest expense on its convertible notes, in addition to the interest expense already recorded for coupon payments. The Company excludes the non-cash portion of the interest expense from its non-GAAP financial measures because these amounts are unrelated to its ongoing business operations.

Non-cash tax expense for the impact of deferred tax liabilities associated with tax deductible amortization of goodwill

The Company records non-cash tax expense for the impact of deferred tax liabilities associated with tax deductible amortization of goodwill. Due to the nature of the adjustment as well as the expectation that it will not have any cash impact in the foreseeable future, the Company believes it is appropriate to exclude this expense from its non-GAAP financial measures.

Take-Two Interactive Software, Inc. /quotes/comstock/15*!ttwo/quotes/nls/ttwo (TTWO 9.03, -0.25, -2.69%) today announced financial results for its first quarter ended January 31, 2010.

Net revenue for the first fiscal quarter was $163.2 million, compared to $149.4 million for the same quarter of fiscal 2009. First quarter fiscal 2010 sales were led by Borderlands(TM), NBA(R) 2K10, Grand Theft Auto IV, Grand Theft Auto: Episodes from Liberty City and Carnival Games(TM).

Net loss from continuing operations for the first quarter was $33.8 million or $0.43 per share, compared to a net loss from continuing operations of $53.8 million or $0.71 per share in the first quarter of fiscal 2009.

The first quarter 2010 results from continuing operations included $6.4 million in stock-based compensation expense ($0.08 per share); $1.7 million in non-cash interest expense on the law software Ontario Company’s convertible notes ($0.02 per share); $0.7 million in professional fees and expenses related to unusual matters ($0.01 per share); and $0.6 million in non-cash tax expense ($0.01 per share). Results from continuing operations for the first quarter of 2009 included $6.2 million in stock-based compensation expense ($0.08 per share); and $4.9 million in professional fees and expenses related to unusual matters ($0.06 per share).

Non-GAAP net loss from continuing operations was $24.4 million or $0.31 per share in the first quarter of fiscal 2010, compared to non-GAAP net loss from continuing operations of $42.8 million or $0.56 per share in the first quarter of 2009. (Please refer to Non-GAAP Financial Measures and reconciliation tables included later in this release for additional information and details on non-GAAP avery label software Ontario items).

Business Highlights

– Consistent with Take-Two’s strategy to focus its resources on its core publishing business, the Company completed the previously announced sale of its Jack of All Games distribution business to SYNNEX template software Ontario Corporation on February 26, 2010. The transaction was valued at approximately $44 million, including $37.5 million in cash at closing and up to an additional $6.75 million in deferred payments subject to the achievement of certain objectives after the close of the transaction. For the first quarter ended January 31, 2010, the results of the Company’s distribution segment were excluded from continuing operations and have been reclassified to discontinued label software Ontario operations. Net loss from discontinued operations for the first quarter was $0.1 million or $0.00 per share.

– Take-Two is in the process of implementing a targeted restructuring of its corporate departments in order to align resources more closely with its current goals. The restructuring involves a 15% reduction in corporate headcount and other cost savings initiatives, and is expected to result in approximately $8 million in savings in fiscal 2010, and $15 million on an annualized basis.

Product Milestones

– 2K Games launched BioShock 2 globally on February 9. The title has been a commercial and critical success, and has shipped over 3 million units to date. The original BioShock real estate software Ontario title launched in August 2007 has now sold over 4 million units, bringing the total sales of the franchise to 7 million units.

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