AGOURA HILLS, Calif.--(BUSINESS WIRE)--May. 6, 2009-- THQ Inc. (NASDAQ: THQI) today announced financial results for the fourth quarter and fiscal year ended March 31, 2009.

Full Year Results

For the twelve months ended March 31, 2009, THQ reported net sales of $830.0 million, compared with net sales of $1,030.5 million a year ago. On a non-GAAP basis, the company reported fiscal 2009 net sales of $812.6 million, compared with $1,061.0 million in the prior year.

For the fiscal year ended March 31, 2009, the company reported a net loss of $431.1 million, or $6.45 per share. In the prior year, the company reported a net loss of $35.3 million, or $0.53 per share. On a non-GAAP basis, the company reported a fiscal 2009 net loss of $101.8 million, or $1.52 per share. In the prior year, the company reported a non-GAAP net loss of $13.6 million, or $0.20 per share. A reconciliation of non-GAAP to GAAP results is provided in the accompanying financial tables.

“In light of a challenging fiscal 2009, we have substantially completed a significant realignment of our business to position THQ for profitability and positive cash flow in fiscal 2010,” said Brian Farrell, THQ president and CEO. “We have taken decisive actions to achieve our cost saving objectives, eliminating $220 million in cash expenditures while at the same time implementing a focused product strategy. We are investing in the brands and products with the highest potential to drive THQ’s long-term profitable growth.”

Fourth Quarter Results

For the fourth quarter of fiscal 2009, THQ reported net sales of $170.3 million, compared with $187.0 million for the same period a year ago. On a non-GAAP basis, the company reported net sales of $154.3 million, compared with $217.6 million for the same period a year ago. Sales were driven primarily by new releases WWE® Legends of Wrestlemania® and Warhammer® 40,000™ Dawn of War® II.

For the fourth quarter of fiscal 2009, the company reported a net loss of $96.9 million, or $1.44 per share. For the same period a year ago, THQ reported a net loss of $34.5 million, or $0.52 per share. On a non-GAAP basis, the company reported a fiscal 2009 fourth quarter net loss of $36.4 million, or $0.54 per share. For the same period a year ago, the company reported a non-GAAP net loss of $24.8 million, or $0.37 per share. A reconciliation of non-GAAP to GAAP results is provided in the accompanying financial tables.

Strategic Plan

In November 2008, the company announced a more focused product strategy and an updated strategic plan. The company’s product strategy focuses on 1) developing a select number of high quality owned intellectual properties targeted at the core gamer, such as Saints Row® 2 and the upcoming Red Faction®: Guerrilla™ and Darksiders™; 2) extending THQ’s leadership in the fighting category with such brands as WWE and Ultimate Fighting Championship; 3) reinvigorating the product portfolio and improving profitability in the company’s kids business; 4) building strong mass appeal/family game franchises like de Blob®, Drawn to Life® and Big Beach Sports™; and 5) extending successful brands into emerging online markets with games such as Company of Heroes® Online and the company’s Warhammer® 40,000™ MMORPG. The company also announced plans to align its organization and cost structure to support this strategy.

Business Realignment

During the fiscal fourth quarter, the company recorded approximately $44.7 million in non-GAAP business realignment expenses, which included cash costs of approximately $4.5 million, including severance and other employee-related costs, and lease and other contract termination costs; and $40.2 million in non-cash impairment charges related to the cancellation of titles and long-lived assets associated with studio closures. The company expects to report additional charges of up to $10 million in fiscal 2010 as certain projects are completed and facilities are vacated. The charges will be excluded from the company’s non-GAAP results.

The company has substantially completed actions necessary to achieve its business realignment plan to reduce planned fiscal 2010 spending by $220 million, which included headcount reductions of approximately 600 people, or 24% of its workforce.

The company continues to maintain a strong studio system with eight internal development studios and more than 1,200 people in its product development organization.

Fiscal 2009 Product Highlights

• Building on its successful Saints Row franchise, THQ has shipped more than 2.8 million units of Saints Row 2
• THQ achieved its goal of improving product quality, as evidenced by the 80+ Metacritic scores for all of its key original games released in fiscal 2009
• Warhammer 40,000: Dawn of War II debuted as the best selling PC game across major video game markets worldwide, including the US, UK, France, Germany, Spain and Australia (According to the NPD Group, Inc., ELSPA/GfK Chart-Track and GfK.)
• THQ launched a successful brand extension with WWE Legends of Wrestlemania
• THQ established new casual franchises de Blob and Big Beach Sports

“We delivered on our product quality promise with Saints Row 2, WWE SmackDown vs. Raw 2009, de Blob, Warhammer 40,000 Dawn of War II and other fiscal 2009 titles,” said Farrell. “Our upcoming product pipeline continues to emphasize our commitment to delivering high quality entertainment for gamers. We look forward to the upcoming launch of our first games based on the popular Ultimate Fighting Championship, and the exciting new version of our Red Faction franchise.”

Business Outlook

The company’s fiscal 2010 operating plan targets profitability and positive cash flow generation on net sales approximating those achieved in fiscal 2009. The company expects its quarterly cash balance to reflect typical seasonal patterns, with the fiscal 2010 year-end balance at least $50 million higher than at the end of fiscal 2009.

Pursuant to THQ’s product strategy, key new releases scheduled for fiscal 2010 include:

Beginning in fiscal 2010, for non-GAAP purposes, the company has determined to adopt a fixed, five-year projected tax rate for the purposes of evaluating its operating performance, as well as to forecast, plan and analyze future periods. Based on its current five-year projections, the company plans to apply a 15 percent tax rate to its fiscal 2010 non-GAAP operating results.

Previously today, THQ announced it had secured a commitment for a $35 million senior secured credit facility with Bank of America, N.A.

Non-GAAP Financial Measures

In addition to results determined in accordance with GAAP, the company discloses certain non-GAAP financial measures that exclude the following:

• stock-based compensation expense,
• the impact of deferred revenue and related costs,
• business realignment expense,
• goodwill impairment charges,
• other-than-temporary impairment on investments and mark-to-market on Auction Rate Securities,
• non-cash valuation allowance for deferred tax assets and
• related income tax effects for each of these items.

THQ may consider whether other significant non-recurring items that arise in the future should also be excluded in calculating the non-GAAP financial measures its uses.

The company excludes these expenses from its non-GAAP financial measures primarily because its management does not believe they are reflective of the company’s core business, ongoing operating results or future outlook. THQ’s management believes that the use of non-GAAP financial measures provides meaningful supplemental information regarding its financial condition and results of operations, and helps investors compare actual results to its long-term operating goals as well to its performance in prior periods. The non-GAAP financial measures included in the earnings release have been reconciled to the comparable GAAP results and should be considered in addition to results prepared in accordance with GAAP, but should not be considered a substitute for, or superior to, GAAP results.

In addition to the reasons stated above, which are generally applicable to each of the items THQ excludes from its non-GAAP financial measures, the company’s management uses certain of the non-GAAP financial measures for the following reasons:

Stock-Based Compensation. THQ does not consider stock-based compensation charges when evaluating the performance of its business or formulating its operating plans. 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 the company’s stock price. Further, when considering the impact of equity award grants, THQ places a greater emphasis on the use of such grants as retention tools for long-term stockholder value creation, as well as overall shareholder dilution, rather than the accounting charges associated with such grants.

Deferred Revenue/Costs. Beginning in fiscal 2008, the company began recognizing the revenue and related costs from the sale of certain titles with significant online functionality over the estimated online service period. Although the company defers the recognition of its net revenue and costs with respect to these titles, there is no adverse impact to its operating cash flow. Internally, THQ’s management excludes the impact of deferred net revenue and costs related to packaged games when evaluating the company’s operating performance, when planning, forecasting and analyzing future periods, and when assessing the performance of its management team. The company believes that excluding the impact of deferred net revenue and costs is important to facilitate comparisons to prior periods when the company did not delay the recognition of such amounts.

Business Realignment Expense. Although THQ has incurred business realignment expenses in the past, each charge has been a discrete, extraordinary event based on a unique set of business objectives. The company does not engage in business realignments on a regular basis or in the ordinary course of business. As such, the company believes it is appropriate to exclude these expenses from its non-GAAP financial measures.

In the financial tables below, THQ has provided a reconciliation of the most comparable GAAP financial measure to each of the non-GAAP financial measures used in this press release.

Investor Conference Call

THQ will host a conference call to discuss fiscal 2009 results today at 2:00 p.m. Pacific/5:00 p.m. Eastern. Please dial 877.356.8075 domestic or 706.902.0203 international, conference ID 95923146 to listen to the call or visit the THQ Inc. Investor Relations Home page at http://investor.thq.com. The online archive of the broadcast will be available approximately two hours after the live call ends. In addition, a telephonic replay of the conference call will be provided approximately two hours after the live call ends through May 8, 2009, by dialing 800.642.1687 or 706.645.9291, conference ID 95923146.

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, Big Beach Sports, Company of Heroes, Darksiders, de Blob, Drawn to Life, MX vs. ATV, Red Faction: Guerrilla, Saints Row 2 and their respective logos are trademarks and/or registered trademarks of THQ Inc.

Microsoft, Xbox, Xbox 360, Xbox Live, the Xbox logos, and the Xbox Live logo are either registered trademarks or trademarks of Microsoft Corporation in the U.S. and/or other countries.

“PlayStation”, "PLAYSTATION" and “PS” Family logo are registered trademarks of Sony Computer Entertainment Inc.

Wii is a trademark of Nintendo.

All other trademarks are trademarks or registered 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 the fiscal year ending March 31, 2010, including statements regarding cash position, profitability and net sales, and statements about the expected impact of the business realignment initiatives on our future operations and financial condition, charges that we expect to incur in connection with our realignment, and for the company’s product releases 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, and our ability to successfully implement our cost reduction plans. 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, 2008, 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.

The following table provides further detail on the income statement classification of certain non-GAAP adjustments that impact cost and expenses:

Source: THQ Inc.

THQ/Investor & Media Relations
Julie MacMedan, 818/871-5125