Take Two restates five years of financial results

Publisher Take Two Interactive has restated five years worth of financial figures, dating back to 1999, in a move which could mean that the toughest parts of a probe into the company by the SEC are now over.

Only minor changes were made to the figures, which were adjusted to reflect a change in the company's accounting policies following a two-year investigation by the American Securities and Exchange Commission.

The restatements showed earnings per share falling in fiscal 2003 (by 4 cents), remaining unchanged in 2002, rising in 2001 and falling in 2000 and 1999 - with the largest change being a seven-cent drop in 2000.

Revenue figures for the years in question were also changed, with a small drop in 2003, slight rises in 2002 and 2001, and further small drops in 2000 and 1999. The changes to the results were made in order to alter the point at which the company recognises reserves covering price concessions for retailers. These reserves will now be recorded when the games are actually sold, rather than when the concession is offered.

Most analysts have reacted favourably to the restated results, with the tiny changes thought to indicate that no really serious issues have been uncovered by the SEC. However, a number of Wells Notices (indicating that civil charges may be forthcoming) from the SEC remain in effect for the company itself, chairman Ryan Brant, two former employees and one other current employee.

If the SEC is indeed satisfied by the restating of Take Two's results and closes its formal investigation in the near future, the company can expect to see its share price rocket. Several analysts believe that the publisher is undervalued to a degree that actually overstates the seriousness of the investigation in progress, and once Take Two emerges from the shadow of that investigation, investors' eyes are likely to turn to the imminent release of the next game in the Grand Theft Auto series.