- Non-Cash Charges Related to Previously-Announced Product Quality
Initiatives to Impact Second Half -
AGOURA HILLS, Calif.--(BUSINESS WIRE)--Jan. 23, 2008--THQ Inc.
(NASDAQ: THQI) today announced updated guidance for its fiscal third
quarter ended December 31, 2007, and its fiscal fourth quarter and
year ending March 31, 2008.
For the fiscal third quarter ended December 31, 2007, the company
increased revenue guidance to approximately $509 million from $490
million, reflecting better-than-expected sales of WWE(R) SmackDown(R)
vs. Raw(R) 2008 and MX vs. ATV(TM) Untamed. However, the company
expects to report approximately $20 million in accelerated
amortization expense related to the underperformance of certain
previously-released games, including Stuntman(R):Ignition(TM),
Ratatouille and Conan(R). In addition, consistent with the company's
previously-announced quality initiatives relating to product
development and its product pipeline, the company expects to record
non-cash charges of approximately $27 million related to:
1) the cancellation of the PlayStation(R) 3 (PS3) version of
Frontlines(TM): Fuel of War(TM) and the PlayStation(R) 2 (PS2) version
of Destroy All Humans!(R): Big Willy Unleashed;
2) costs associated with two unannounced titles for Xbox 360 and
PS3 that had been scheduled for release in fiscal 2010; and
3) the company's decision not to pursue its Juiced(TM) and
Stuntman(R) intellectual properties.
The company also announced the closure of its Concrete Games
studio, which was working on one of the unannounced titles. THQ
expects a substantial number of the studio's employees to be offered
positions in its other studios. The closure will be reflected in the
company's fiscal fourth quarter results.
"In October, we announced certain product quality initiatives,
including personnel and structural changes in product development and
a more rigorous internal and external product evaluation and feedback
process," said Brian Farrell, president and CEO of THQ. "Consistent
with these initiatives, we have taken actions to strengthen our
pipeline and position ourselves to compete aggressively with
compelling, high quality games."
As a result of these non-cash charges, the company now expects to
report GAAP net income of approximately $0.22 per diluted share for
the December quarter. On a non-GAAP basis, excluding stock-based
compensation expense of approximately $0.01 per diluted share, the
company expects to report net income of approximately $0.23 per
diluted share for the quarter. Both GAAP and non-GAAP net income
includes a $0.02 per diluted share gain from receipt of additional
proceeds related to the sale of Minick AG in fiscal year 2007.
For the fiscal fourth quarter ending March 31, 2008, the company
expects to report net sales of approximately $200 million, compared
with its previous guidance of $240 million. Due to the significant
online play component of Frontlines: Fuel of War on Windows PC, the
revised expectations now include the deferral of approximately $10
million of revenue from that title. The revised sales expectations
also reflect the cancellation of the PS2 version of Destroy All
Humans: Big Willy Unleashed, which was previously scheduled to ship in
March, and lowered expectations for several titles which launched
earlier in the fiscal year. The company now expects to report a GAAP
net loss of approximately $0.13 per share for the fiscal fourth
quarter. On a non-GAAP basis, excluding stock-based compensation
expense of approximately $0.07 per share, the company expects to
report a net loss of approximately $0.06 per share.
As a result, for the fiscal year ending March 31, 2008, THQ
expects to report net sales of approximately $1.04 billion and a GAAP
loss per share of approximately $0.16, which includes approximately
$0.21 per share of stock-based compensation expense. On a non-GAAP
basis, excluding stock-based compensation expense, the company expects
to report net income of approximately $0.05 per diluted share.
The company plans to report its fiscal third quarter financial
results and outlook in more detail and to host a conference call on
Tuesday, February 5, 2008, after market close.
Non-GAAP Financial Measures
This press release discloses forward-looking information that
includes expectations that are not presented in accordance with United
States generally accepted accounting principles ("GAAP"). Such
non-GAAP financial measures exclude stock-based compensation expense
and related income tax effects from THQ's expected results for future
periods. The non-GAAP financial measures included in the earnings
release have been reconciled to the comparable GAAP financial measures
and should be considered in addition to measures presented in
accordance with GAAP, but should not be considered a substitute for,
or superior to, GAAP financial measures.
When evaluating the performance of its business, THQ does not
consider stock-based compensation charges. Likewise, THQ excludes
stock-based compensation expense from its short and long-term
operating plans. In contrast, THQ's management team is held
accountable for cash-based compensation and such amounts are included
in the company's operating plans. In addition, the stock-based
compensation charges are subject to significant fluctuation outside
the control of management due to the variables used to estimate the
fair value of a share-based payment, such as, THQ's stock price,
interest rates and the volatility of THQ's stock price. Further, when
considering the impact of equity award grants, THQ places a greater
emphasis on overall shareholder dilution rather than the accounting
charges associated with such grants.
About THQ
THQ Inc. (NASDAQ: THQI) is a leading worldwide developer and
publisher of interactive entertainment software. Headquartered in Los
Angeles County, California, THQ sells product through its global
network of offices located throughout North America, Europe and Asia
Pacific. More information about THQ and its products may be found at
www.thq.com and www.thqwireless.com. THQ, THQ Wireless, Destroy All
Humans!: Big Willy Unleashed, Frontlines: Fuel of War, Juiced, MX vs.
ATV Untamed, Stuntman: Ignition and their respective logos are
trademarks and/or registered trademarks of THQ Inc. All other
trademarks, logos and copyrights are trademarks of their respective
owners.
This press release contains statements that are forward-looking
statements within the meaning of the Private Securities Litigation
Reform Act of 1995. Such statements include, but are not limited to,
the company's expectations for revenue and earnings per share for the
quarters ending December 31, 2007 and the fiscal quarter and year
ending March 31, 2008 and for the company's product releases and
related financial performance in future periods. These forward-looking
statements are based on current expectations, estimates and
projections about the business of THQ Inc. and its subsidiaries
(collectively referred to as "THQ") and are based upon management's
beliefs and certain assumptions made by management. Such
forward-looking statements are subject to risks and uncertainties that
could cause actual results to differ materially from those expressed
or implied by such forward-looking statements, including, but not
limited to, economic, competitive and technological factors affecting
the operations, markets, products, services and pricing of THQ. Unless
otherwise required by law, THQ disclaims any obligation to update its
view on any such risks or uncertainties or to revise or publicly
release the results of any revision to these forward-looking
statements. Readers should carefully review the risk factors and the
information that could materially affect THQ's financial results,
described in other documents that THQ files from time to time with the
Securities and Exchange Commission, including its Quarterly Reports on
Form 10-Q and its Annual Report on Form 10-K for the fiscal period
ended March 31, 2007, and particularly the discussion of risk factors
that may affect results of operations set forth therein. Readers are
cautioned not to place undue reliance on these forward-looking
statements, which speak only as of the date of this press release.
CONTACT:
THQ/Investor Relations
Julie MacMedan, 818-871-5125
or
THQ/Media Relations
Liz Pieri, 818-871-5061
SOURCE: THQ Inc.
