EX-99.1 2 ti6561ex991.txt EXHIBIT 99.1 Exhibit 99.1 THQ REPORTS FISCAL 2007 FIRST QUARTER RESULTS - DISNEY*PIXAR'S CARS & MOTOGP 2006 DRIVE RESULTS AHEAD OF EXPECTATIONS - AGOURA HILLS, Calif., July 27, 2006 -- THQ Inc. (Nasdaq: THQI) today announced financial results for the first quarter of fiscal 2007 and reaffirmed its net sales and EPS guidance for the full fiscal year. For the first quarter of fiscal 2007, THQ reported net sales of $138.8 million, which exceeded the company's guidance of $125.0 million, due primarily to better-than-anticipated sales of Disney*Pixar's Cars and MotoGP 2006 videogames. In the first quarter of fiscal 2006, the company reported net sales of $158.0 million. The company reported a fiscal 2007 first quarter net loss of $12.1 million, or $0.19 per share, which included equity-based compensation of $0.03 per share, related to the adoption of FAS 123(R). On a non-GAAP basis, excluding equity-based compensation expense, the net loss was $10.5 million, or $0.16 per share. Both GAAP and non-GAAP EPS exceeded the company's previous guidance of a net loss of $0.25 and $0.21 per share, respectively. For the first quarter of fiscal 2006, THQ reported a net loss of $4.0 million, or $0.06 per share. A reconciliation of non-GAAP results to GAAP results is provided in the accompanying financial tables. "Among a number of strong-performing titles in the June quarter, Cars was especially noteworthy, with U.S. sales outpacing both Finding Nemo and The Incredibles over a comparable period," said Brian Farrell, THQ president and CEO. "Our internal development teams delivered a great interactive experience based on the film and our sales and marketing teams executed at retail. We expect sales of Cars to continue to drive our upcoming quarterly results as we complete the global roll-out across Europe and Asia this summer and then bring Cars to the Xbox 360 and Nintendo Wii platforms this holiday season." Farrell continued, "With the roll-out of Cars overseas and the launch of our key brands on next-generation hardware, we expect to outperform the market in what is widely viewed as a transition year for the industry. Our confidence reflects the strength of THQ's product portfolio, which offers a balance of new original properties for avid gamers on next-generation consoles and Windows PC, including the upcoming Saints Row and Company of Heroes, and multi-platform releases of proven mass-market licensed titles, including games based on Disney*Pixar, WWE and Nickelodeon brands." FINANCIAL GUIDANCE ------------------ THQ reaffirmed previous guidance for the 2007 full fiscal year and provided initial guidance for the second fiscal quarter of 2007: * For the 2007 fiscal year, the company continues to expect net sales in the range of $900 million to $950 million and net income in the range of $0.90 to $1.00 per diluted share. This excludes forecasted equity-based compensation expense of $0.16 per diluted share. * For the second quarter of fiscal 2007, the company expects net sales of approximately $195 million and net income of $0.01 per diluted share. This excludes forecasted equity-based compensation expense of $0.04 per diluted share. RECENT DEVELOPMENTS ------------------- * Cars videogames ranked #1 in the US and Australia markets for the month of June 2006, according to the NPD Group, Inc. and GfK Australia * During the June quarter, THQ shipped more than 2 million units of Cars * MotoGP 2006 earned the #1 Xbox 360 ranking in the UK, Benelux, France, Germany, Italy and Spain, according to UK Chart-Track, GfK, Media Control and Nielsen sell-through data * THQ's games earned numerous accolades at the Electronic Entertainment Expo in May 2006, including Supreme Commander ("Best Strategy Game of E3 2006" by the Game Critics Award Committee), Company of Heroes(TM) ("Best Strategy Game of E3 2006" by IGN.com) and MotoGP 2006 ("Best Racing Game of E3 2006" by IGN.com) * THQ announced the acquisition of the Stuntman(R) franchise and its developer Paradigm Entertainment studio, along with plans to bring the Stuntman franchise to next-generation systems in fiscal 2008 * THQ announced the formation of Incinerator Studios, a sister studio to the previously announced Concrete Games studio based in Carlsbad, California * Industry veterans Bob Aniello and Gary Rosenfeld joined THQ as senior vice president, worldwide marketing and senior vice president, business development, respectively NON-GAAP MEASURES ----------------- To supplement THQ's consolidated financial statements presented in accordance with GAAP, THQ provides non-GAAP net income (loss) and non-GAAP net income (loss) per share data. The presentation of these non-GAAP financial measures should be considered in addition to our GAAP results and is not intended to be considered in isolation or as a substitute for the financial information prepared and presented in accordance with GAAP. THQ makes reference to measures of operating income, certain expenses (including sales and marketing, product development, general and administrative), net loss and net loss per share for the first quarter of fiscal 2007, which exclude equity-based compensation to allow for a better comparison of results in the current period to those in prior periods that did not include FAS 123(R) equity-based compensation. THQ's reference to these measures should be considered in addition to results that are presented as consistent with GAAP. These non-GAAP measures are provided to enhance investors' overall understanding of the company's current financial performance and the company's prospects for the future and provide further information for comparative purposes due to the adoption of the new accounting standard FAS 123(R). Specifically, the company believes the non-GAAP measures provide useful information to both management and investors by excluding certain expenses that may not be indicative of its core operating results and business outlook. The company believes the non-GAAP measures that exclude equity-based compensation enhance the comparability of results against prior periods. These measures 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. INVESTOR CONFERENCE CALL ------------------------ THQ will host a conference call to discuss fiscal first quarter results today at 5:00 p.m. Eastern/2:00 p.m. Pacific. Please dial (866) 831-5605 or (617) 213-8851, access code 80964001 to listen to the call or visit the THQ Inc. Investor Relations home page at www.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 July 31, 2006, by dialing (888) 286-8010 or (617) 801-6888, access code 22358549. 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, Concrete Games, Incinerator Studios, Paradigm Entertainment, Company of Heroes, Saints Row, Stuntman and their respective logos are trademarks and/or registered trademarks of THQ Inc. 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 revenue and earnings per share for the fiscal 2007 second quarter and full year and for the company's product releases and 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. THQ did not retain nor otherwise influence The NPD Group, Inc., Chart-Track, GfK, Media Control or Nielsen. 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, 2006, 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. Julie MacMedan THQ/Investor Relations 818/871-5095 Liz Pieri THQ/Media Relations 818/871-5061 THQ INC. AND SUBSIDIARIES UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except per share data) Three Months Ended June 30, ------------------------ 2006 2005(2) ---------- ---------- Net sales $ 138,829 $ 157,967 Costs and expenses: Cost of sales 48,991 55,526 License amortization and royalties 16,313 13,724 Software development amortization 25,291 23,345 Product development (1) 26,236 21,120 Selling and marketing (1) 26,711 35,959 Payment to venture partner 709 1,912 General and administrative (1) 15,526 14,185 ---------- ---------- Total costs and expenses 159,777 165,771 ---------- ---------- Loss from operations (20,948) (7,804) Interest and other income, net 2,740 2,148 ---------- ---------- Loss before income taxes and minority interest (18,208) (5,656) Income taxes (6,009) (1,753) ---------- ---------- Loss before minority interest (12,199) (3,903) Minority interest 98 (57) ---------- ---------- Net loss $ (12,101) $ (3,960) ========== ========== Net loss per share - basic $ (0.19) $ (0.06) ========== ========== Net loss per share - diluted $ (0.19) $ (0.06) ========== ========== Shares used in per share calculation - basic 64,317 60,929 ========== ========== Shares used in per share calculation - diluted 64,317 60,929 ========== ========== Share and loss per share data have been restated to reflect our three-for-two stock split for shareholders of record as of August 19, 2005, paid September 1, 2005. (1) Supplemental information of equity-based compensation expense included in: 2006 2005 ---------- ---------- Product development $ 795 $ 36 Selling and marketing 393 23 General and administrative 1,908 267 ---------- ---------- Total equity-based compensation $ 3,096 $ 326 ========== ========== (2) Certain reclassifications have been made to the prior period's unaudited consolidated statement of operations to conform to the current period presentation. THQ INC. AND SUBSIDIARIES RECONCILIATION OF GAAP NET LOSS TO NON-GAAP NET LOSS (In thousands, except per share data)

Three Months Ended June 30, 2006 ------------------------------------------------ GAAP Adjustments(a) Non-GAAP ------------ -------------- ------------ Net sales $ 138,829 $ -- $ 138,829 Costs and expenses: Cost of sales 48,991 -- 48,991 License amortization and royalties 16,313 -- 16,313 Software development amortization 25,291 -- 25,291 Product development 26,236 (795)(b) 25,441 Selling and marketing 26,711 (393)(b) 26,318 Payment to venture partner 709 -- 709 General and administrative 15,526 (1,908)(b) 13,618 ------------ -------------- ------------ Total costs and expenses 159,777 (3,096) 156,681 ------------ -------------- ------------ Loss from operations (20,948) 3,096 (17,852) Interest and other income, net 2,740 -- 2,740 ------------ -------------- ------------ Loss before income taxes and minority interest (18,208) 3,096 (15,112) Income taxes (6,009) 1,475(c) (4,534) ------------ -------------- ------------ Loss before minority interest (12,199) 1,621 (10,578) Minority interest 98 -- 98 ------------ -------------- ------------ Net loss $ (12,101) $ 1,621 $ (10,480) ============ ============== ============ Net loss per share - basic $ (0.19) $ (0.16) ============ ============ Net loss per share - diluted $ (0.19) $ (0.16) ============ ============ Shares used in per share calculation - basic 64,317 64,317 ============ ============ Shares used in per share calculation - diluted 64,317 64,317 ============ ============

Notes: (a) See explanation above regarding the Company's practice on reporting non-GAAP financial measures. (b) Equity-based compensation expense recorded under FAS 123(R) in fiscal 2006 and APB 25 in fiscal 2005 (prior to the Company's adoption of FAS 123(R) on April 1, 2006). (c) Income tax associated with equity-based compensation. (d) Certain reclassifications have been made to the prior period's unaudited consolidated statement of operations to conform to the current period presentation. THQ INC. AND SUBSIDIARIES RECONCILIATION OF GAAP NET LOSS TO NON-GAAP NET LOSS (In thousands, except per share data)

Three Months Ended June 30, 2005 ------------------------------------------------ GAAP(d) Adjustments(a) Non-GAAP ------------ -------------- ------------ Net sales $ 157,967 $ -- $ 157,967 Costs and expenses: Cost of sales 55,526 -- 55,526 License amortization and royalties 13,724 -- 13,724 Software development amortization 23,345 -- 23,345 Product development 21,120 (36)(b) 21,084 Selling and marketing 35,959 (23)(b) 35,936 Payment to venture partner 1,912 -- 1,912 General and administrative 14,185 (267)(b) 13,918 ------------ -------------- ------------ Total costs and expenses 165,771 (326) 165,445 ------------ -------------- ------------ Loss from operations (7,804) 326 (7,478) Interest and other income, net 2,148 -- 2,148 ------------ -------------- ------------ Loss before income taxes and minority interest (5,656) 326 (5,330) Income Taxes (1,753) 125(c) (1,628) ------------ -------------- ------------ Loss before minority interest (3,903) 201 (3,702) Minority interest (57) -- (57) ------------ -------------- ------------ Net loss $ (3,960) $ 201 $ (3,759) ============ ============== ============ Net loss per share - basic $ (0.06) $ (0.06) ============ ============ Net loss per share - diluted $ (0.06) $ (0.06) ============ ============ Shares used in per share calculation - basic 60,929 60,929 ============ ============ Shares used in per share calculation - diluted 60,929 60,929 ============ ============

Notes: (a) See explanation above regarding the Company's practice on reporting non-GAAP financial measures. (b) Equity-based compensation expense recorded under FAS 123(R) in fiscal 2006 and APB 25 in fiscal 2005 (prior to the Company's adoption of FAS 123(R) on April 1, 2006). (c) Income tax associated with equity-based compensation. (d) Certain reclassifications have been made to the prior period's unaudited consolidated statement of operations to conform to the current period presentation. THQ INC. AND SUBSIDIARIES UNAUDITED CONSOLIDATED BALANCE SHEETS (In thousands) June 30, March 31, 2006 2006 ---------- ---------- ASSETS Cash, cash equivalents and short-term investments $ 303,308 $ 371,637 Accounts receivable, net 84,983 78,876 Inventory 38,355 28,620 Licenses 23,452 20,849 Software development 112,747 91,843 Income taxes receivable 14,186 6,832 Prepaid expenses and other current assets 19,029 12,420 ---------- ---------- Total current assets 596,060 611,077 Property and equipment, net 37,558 37,485 Licenses, net of current portion 56,462 60,623 Software development, net of current portion 20,683 17,236 Income taxes receivable, net of current portion 10,273 10,273 Goodwill 93,680 90,872 Other long-term assets, net 26,550 23,048 ---------- ---------- TOTAL ASSETS $ 841,266 $ 850,614 ========== ========== LIABILITIES, MINORITY INTEREST AND STOCKHOLDERS' EQUITY Accounts payable $ 38,033 $ 34,871 Accrued and other current liabilities 105,260 109,421 Deferred income taxes 1,973 3,578 ---------- ---------- Total current liabilities 145,266 147,870 Other long-term liabilities 60,980 60,323 Deferred income taxes, net of current portion 10,272 10,272 Minority interest 1,305 11,34 Common stock 642 642 Additional paid-in capital 401,820 397,693 Accumulated other comprehensive income 10,975 10,367 Retained earnings 210,006 222,107 ---------- ---------- Total stockholders' equity 623,443 630,809 ---------- ---------- TOTAL LIABILITIES, MINORITY INTEREST AND STOCKHOLDERS' EQUITY $ 841,266 $ 850,614 ========== ========== THQ INC. AND SUBSIDIARIES UNAUDITED SUPPLEMENTAL FINANCIAL INFORMATION Three Months Ended June 30, ----------------------- 2006 2005 ---------- ---------- Platform Revenue Mix Consoles Sony PlayStation 2 25.7% 38.2% Microsoft Xbox 5.8 27.2 Microsoft Xbox 360 8.6 0.0 Nintendo Game Cube 8.4 2.1 ---------- ---------- 48.5 67.5 ---------- ---------- Handheld Nintendo Game Boy Advance 14.8 16.9 Nintendo Dual Screen 9.2 -- Sony PlayStation Portable 7.9 -- Wireless 5.5 6.5 ---------- ---------- 37.4 23.4 ---------- ---------- PC 13.8 8.9 Other 0.3 0.2 ---------- ---------- 100.0% 100.0% ========== ========== Geographic Revenue Mix Domestic 59.7% 54.6% Foreign 40.3 45.4 ---------- ---------- 100.0% 100.0% ========== ========== SOURCE THQ Inc. -0- 07/27/2006 /CONTACT: Investor Relations, Julie MacMedan, +1-818-871-5095, or Media Relations, Liz Pieri, +1-818-871-5061, both of THQ Inc./ /Photo: NewsCom: http://www.newscom.com/cgi-bin/prnh/20041118/LATH093LOGO AP Archive: http://photoarchive.ap.org PRN Photo Desk, photodesk@prnewswire.com / /Web site: http://www.thq.com /