# Newbie Question: Income Tax Adjustment

I’m new to this board and have recently poured through the Knowledge Base to evaluate one of my current holdings, Take Two Interactive (TTWO). I’ve collected various GAAP and non-GAAP metrics over the course of the past 10-12 quarters. In the most recent quarter, Take Two stopped reporting much of their non-GAAP metrics.

Since they no longer provide it, I’m calculating Non-GAAP Net Income and am missing the Income Tax Adjustment. How can I best determine that?

GAAP Net Income (Loss) (29,842)
Stock-based compensation 22,088 = 6,022 + 2,441 + 10,382 + 3,243
Business reorganization, restructuring and related expenses - N/A
Non-cash amortization of discount on Convertible Notes 5,323 = 2,038 + 3,285
Gain on long-term investment - N/A

Here’s a link to their most recent earnings report.
http://ir.take2games.com/phoenix.zhtml?c=86428&p=quarter…

-AJ

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Let me restate the question using information from the prior quarter which actually spells out their income tax adjustment and Non-GAAP metrics. They list a “provision for income taxes” for \$3.6 million yet in their non-GAAP income calculation they provide an “income tax adjustment” of \$10.8 million. Any idea where that extra \$7 million comes from or where I could look to find it?

GAAP Net Income (Loss) \$ 36,432
Stock-based compensation 18,233
Business reorganization, restructuring and related expenses - N/A
Non-cash amortization of discount on Convertible Notes 6,882
Gain on long-term investment - N/A
Non-GAAP Net Income \$ 50,721

Income before taxes - 40,116
Provision for income taxes - 3,684
Tax rate - 9.18%

-AJ

Since they no longer provide it, I’m calculating Non-GAAP Net Income and am missing the Income Tax Adjustment. How can I best determine that?

Stock-based compensation 22,088 = 6,022 + 2,441 + 10,382 + 3,243

Hi AJ,

They usually calculate what the extra tax would be if you add back the stock based compensation and thus had more income to tax. A good approximation would be to see what tax they are paying on their pre-tax GAAP Income and figure the same percent on the \$22,088 of sbc and then subtract that to get Adjusted Net Income (what you are doing is adding the tax on the SBC to the taxes they paid on the rest).

hope that helps,

Saul

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