Take-Two Interactive reduced sales and income estimates for its f...

diluted income per share in the first quarter, down from $412 million in sales and $1.10 diluted income per share expected earlier. Although Take-Two said it now expected slightly higher sales in the 2nd quarter and the full fiscal year, it lowered its profit forecasts for both periods. For the 2nd quarter, it said it now expected $220 million in sales and 39? diluted income per share vs. the prior estimate of $218 million and 41? diluted income per share. For the year, Take-Two said it now expected $1.22 billion in sales and $2.45 in diluted income per share rather than the $1.18 billion and $2.60 previously estimated. Take-Two also said that, “as previously announced, [it] is revising its revenue recognition policies by adopting a new methodology for recording reserves for price concessions.” It said the revision in revenue recognition policies would “result in a restatement of previously issued financial statements, generally reflecting an earlier recognition of reserves for price concessions, [and] the restatement will affect changes in reported revenue and earnings, and related balance sheet amounts, on both a current and historical basis.” It said “the restatement will affect [its] financial results” as far back as the fiscal year ended Oct. 31, 1999, and it was “also conducting a further review of certain transactions involving sales of products to retailers in fiscal 2000 and the first 3 quarters of fiscal 2001.” Take-Two warned that “if the review of these additional transactions requires restatement, it will result in a shift in the timing of the recognition of revenue and product costs, with a corresponding effect on the company’s financial position and results of operations.” In a filing with the SEC, Take-Two said it “could not complete” its annual 10-K report “in a timely basis due to issues raised in the previously disclosed investigation by the staff of the SEC’s Division of Enforcement into certain accounting matters relating to the company’s financial statements.” In separate research notes Mon., Southwest Securities and RBC Capital Markets analysts Arvind Bhatia and Stewart Halpern expressed cautious optimism that the revelations by Take-Two could mean the publisher’s problems with the SEC could be winding down at last. Investors apparently felt that that could be the case as -- despite the mostly downbeat news it reported -- Take-Two shares were up Mon. in late afternoon trading. The company said it had slashed its first-quarter forecast because of: (1) Shifting the release of the game Mafia for Xbox and “the majority of the European shipments of Mafia for PlayStation 2 from the first fiscal quarter to the 2nd fiscal quarter.” (2) “Unanticipated weakness in the company’s North American publishing business during the holiday season and extending into January, with continued disappointing sales of Max Payne 2: The Fall of Max Payne.” (3) “The impact of the change in the company’s methodology for recording price concession reserves.” (4) “Bad debt expense incurred as a result of the Chapter 11 bankruptcy filing of KB Toys.” (5) “Expenses related to the cancellation of 2 products in development.” But it said “the shortfall was partially offset by the strength of the company’s Jack of All Games distribution business.”