EX-99.1 2 a05-2594_1ex99d1.htm EX-99.1

EXHIBIT 99.1

 

Julie MacMedan

THQ/Investor Relations

818/871-5095

 

Liz Pieri

THQ/Media Relations

818/871-5061

 

THQ REPORTS RECORD FISCAL 2005 THIRD QUARTER RESULTS

– Sales Up 37% to $400 Million; EPS up 102% to $1.58 –

–  Raises Fiscal 2005 Guidance to Sales of $750 Million and EPS of $1.53  –

–  Four Titles Exceed Two Million Units Shipped in Fiscal 2005  –

 

CALABASAS HILLS, Calif. – February 1, 2005 – THQ Inc. (NASDAQ: THQI) today announced record results for the fiscal 2005 third quarter ended December 31, 2004, driven by multi-million unit sales of games based on The Incredibles, The SpongeBob SquarePantsÔ Movie and WWE: SmackDown!Ô vs. RawÒ.

 

Net sales advanced 37% for the third quarter to a record $400.3 million, from $293.1 million in the prior-year period.  Net income more than doubled to a record $62.9 million, or $1.58 per diluted share.  This included $0.20 per diluted share from research and development tax credits claimed for prior years.  This compares with net income of $30.4 million, or $0.78 per diluted share, for the fiscal 2004 third quarter.

 

For the nine months ended December 31, 2004, net sales grew 13% to $584.8 million from $517.7 million for the same period a year ago.  Net income for the first nine months of fiscal 2005 was $52.7 million, or $1.32 per diluted share, which included the tax credit mentioned above.  For the nine months ended December 31, 2003, THQ reported net income of $30.4 million, or $0.78 per diluted share.

 

“Our performance during the holiday quarter far surpassed our original expectations in all major markets,” said Brian Farrell, President and CEO, THQ.  “The combination of sound strategic positioning for the holidays and solid execution in a highly competitive market drove our exceptionally strong results for the period.”

 

Fiscal year-to-date, THQ shipped more than four million units of The Incredibles, two million units of The SpongeBob SquarePants Movie, two million units of WWE:SmackDown! vs. Raw, two million units of Finding Nemo and one million units of SpongeBob SquarePants: Battle for Bikini BottomÔ.  In

 


 

addition, original properties Tak 2: The Staff of Dreams and Full Spectrum WarriorÔ are approaching shipments of one million units.  The company also said that MX Unleashed, launched in February 2004, recently surpassed one million units shipped.

 

Financial Guidance

THQ confirmed previous guidance for the fiscal fourth quarter and increased guidance for the full fiscal year ending March 31, 2005:

•                  For the fourth quarter of fiscal 2005, the company continues to expect net sales of approximately $165 million and net income of about $0.21 per diluted share.

•                  For the fiscal year ending March 31, 2005, THQ now expects record net sales of approximately $750 million and record net income of approximately $1.53 per diluted share, up from previous guidance of net sales of $680 million and earnings per diluted share of $1.10.

•                  THQ Wireless is expected to contribute approximately $25 million of THQ’s net sales in fiscal 2005, up from previous guidance of $20 million.

“We are on track to post excellent results for fiscal 2005,” said Farrell.  “Our strong portfolio of both licensed and original properties and our world-class product development organization provide the foundation for THQ’s long-term success.”

 

Recent Developments:

 

THQ Delivers Four Multi-Million Unit Titles; Five Titles Exceed One Million Unit

•                  Fiscal year-to-date, THQ shipped more than four million units of The Incredibles, two million units of The SpongeBob SquarePants Movie, two million units of WWE:SmackDown! vs. Raw and two million units of Finding Nemo.

•                  Fiscal year-to date, THQ shipped more than one million units of SpongeBob SquarePants: Battle for Bikini Bottom.

 

THQ Games Achieve Critical Acclaim

•                  WarhammerÒ 40,000: Dawn of WarÔ was named RTS of the Year by Computer Gaming World, and garnered numerous multi-play and genre accolades from leading enthusiast sites.

 


 

•                  Full Spectrum Warrior has received several awards and accolades from leading enthusiast sites.

•                  Tak 2 was named Best Platform Game for GameCubeÒ by IGN.

 

THQ Wireless Continues to Broaden its Content Portfolio

•                  In December, THQ Wireless announced a multi-year agreement with Lucasfilm Ltd. that grants THQ Wireless worldwide rights to develop and distribute a comprehensive offering of Star Wars branded content for mobile phones.

•                  In November, THQ Wireless launched the most comprehensive suite of officially licensed NBA wireless products to date, including games, fantasy applications, information services, ringtones and graphics, featured in the NBA’s new wireless sports package, “NBA Unwired.”

 

THQ’s Internal Studios Grow to Ten with Acquisition of Blue Tongue

•                  Consistent with THQ’s strategic objective of using internal development to improve product quality and operating margins, the company recently acquired Blue Tongue Entertainment Limited. THQ studio operations now stand at more than 800 people in ten studios.

 

Investor Conference Call:

THQ management will host an investor conference call today, February 1, 2005, at 2:00 p.m. PST (5:00 p.m. EST) to review the company’s financial results and operations for the quarter ended December 31, 2004 and discuss its future outlook. The call may be accessed by dialing (866) 800-8652 domestic or (617) 614-2705 international, access code is 81413837, or by visiting THQ’s Web site at www.thq.com.

 

THQ Inc. (NASDAQ: THQI) is a leading worldwide developer and publisher of interactive entertainment software.  The company develops its products for all popular game systems, personal computers and wireless devices. Headquartered in Los Angeles County, California, THQ sells product through its global network of offices located in the United States, United Kingdom, France, Germany, Spain, Korea and Australia.  More information about THQ and its products may be found at www.thq.com and www.thqwireless.com. THQ, THQ Wireless, Blue Tongue Entertainment and their respective logos are trademarks and/or registered trademarks of THQ Inc.

 

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 quarter and fiscal year ending March 31, 2005 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.  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, 2004, 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.

 

# # #

 

(Tables Follow)

 


 

THQ Inc.

Third Quarter 2005 Earnings Announcement

 

Consolidated Statements of Operations

(In thousands, except per share data)

 

Table 1

 

 

 

Three Months Ended
December 31,

 

Nine Months Ended
December 31,

 

 

 

2004

 

2003

 

2004

 

2003

 

Net sales

 

$

400,315

 

$

293,099

 

$

584,805

 

$

517,711

 

 

 

 

 

 

 

 

 

 

 

Costs and expenses:

 

 

 

 

 

 

 

 

 

Cost of sales

 

126,270

 

98,347

 

190,916

 

181,589

 

License amortization and royalties

 

54,507

 

34,012

 

70,511

 

58,815

 

Software development amortization

 

47,740

 

46,595

 

78,492

 

88,866

 

Product development

 

24,207

 

9,277

 

49,537

 

27,436

 

Selling and marketing

 

48,010

 

35,014

 

86,260

 

74,638

 

Payment to venture partner

 

7,050

 

6,257

 

9,087

 

8,817

 

General and administrative

 

12,298

 

16,592

 

37,807

 

35,634

 

Total costs and expenses

 

320,082

 

246,094

 

522,610

 

475,795

 

Income from operations

 

80,233

 

47,005

 

62,195

 

41,916

 

Interest income, net

 

833

 

452

 

2,790

 

1,593

 

Other income

 

—

 

—

 

—

 

4,000

 

Income before income taxes and minority interest

 

81,066

 

47,457

 

64,985

 

47,509

 

Income taxes

 

18,057

 

17,084

 

12,136

 

17,103

 

Income before minority interest

 

63,009

 

30,373

 

52,849

 

30,406

 

Minority interest

 

(74

)

—

 

(169

)

—

 

Net Income

 

62,935

 

30,373

 

52,680

 

30,406

 

Net income per share – diluted

 

$

1.58

 

$

0.78

 

$

1.32

 

$

0.78

 

Shares used in per share calculation – diluted

 

39,917

 

38,899

 

39,796

 

39,005

 

 

The above table reflects our Consolidated Statement of Operations in accordance with U.S. Generally Accepted Accounting Principles.

 

Reconciliation of Net Income to Non-GAAP Net Income

 

(In thousands, except per share data)

 

Table 2

 

 

 

Three Months Ended
December 31,

 

Nine Months Ended
December 31,

 

 

 

2004

 

2003

 

2004

 

2003

 

Net income

 

$

62,935

 

$

30,373

 

$

52,680

 

$

30,406

 

 

 

 

 

 

 

 

 

 

 

Settlement of dispute with directors’ and officers’ insurance carrier

 

—

 

—

 

—

 

(4,000

)

Income taxes

 

—

 

—

 

—

 

1,440

 

Research & development credits claimed for prior years

 

(7,797

)

—

 

(7,797

)

—

 

Non-GAAP net income

 

$

55,138

 

$

30,373

 

$

44,883

 

$

27,846

 

Non-GAAP net income per share – diluted

 

$

1.38

 

$

0.78

 

$

1.12

 

$

0.71

 

Shares used in per share calculation – diluted

 

39,917

 

38,899

 

39,796

 

39,005

 

 


 

The reconciliation of U.S. GAAP net income to Non-GAAP net income (i) excluding a $7.8 million benefit for research and development credits claimed for prior years in the three and nine months ended December 31, 2004; and (ii) excluding a $4.0 million settlement with our directors’ and officers’ insurance carrier in 2003, including the related income tax effect, is detailed in the above financial tables.  We have excluded the research and development credits claimed for prior years and the settlement from Non-GAAP net income because they are considered “non-operational” in nature.  Non-GAAP net income excluding the settlement is not recognized as a measure for financial statement presentation under U.S. GAAP.  However, management believes that this information is useful for investors in evaluating our operational performance and for facilitating meaningful comparison to prior periods.

 

THQ Inc.

Third Quarter 2005 Earnings Announcement

 

Table 3

 

Balance Sheets

 

 

 

 

December 31,
2004

 

March 31,
2004

 

 

 

(In thousands)

 

 

 

 

 

 

 

ASSETS

 

 

 

 

 

Cash, cash equivalents and short-term investments

 

$

201,923

 

$

253,039

 

Accounts receivable – net

 

218,507

 

59,088

 

Inventory

 

27,120

 

22,303

 

Licenses

 

10,138

 

13,172

 

Software development

 

50,589

 

39,997

 

Prepaid expenses and other current assets

 

27,892

 

9,451

 

Total current assets

 

536,169

 

397,050

 

Property and equipment, net

 

22,729

 

17,468

 

Licenses – net of current portion

 

79,913

 

9,068

 

Software development – net of current portion

 

7,549

 

9,798

 

Deferred income taxes

 

—

 

560

 

Income taxes receivable

 

7,589

 

—

 

Goodwill – net

 

81,594

 

59,399

 

Long-term marketable securities

 

9,457

 

24,320

 

Other long term assets – net

 

22,815

 

9,488

 

Total assets

 

$

767,815

 

$

527,151

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

Accounts payable

 

$

45,044

 

$

22,147

 

Accrued expenses

 

50,739

 

22,361

 

Accrued payments to venture partner

 

7,105

 

746

 

Accrued royalties

 

57,945

 

41,305

 

Income taxes payable

 

13,015

 

216

 

Deferred income taxes

 

473

 

642

 

Total current liabilities

 

174,321

 

87,417

 

Accrued liabilities – net of current portion

 

2,000

 

—

 

Accrued royalties – net of current portion

 

71,334

 

1,142

 

Deferred income taxes – net of current portion

 

1,388

 

—

 

 

 

 

 

 

 

Minority interest

 

1,202

 

—

 

 

 

 

 

 

 

Common stock

 

392

 

382

 

Additional paid-in capital

 

325,042

 

304,860

 

Accumulated other comprehensive income

 

14,408

 

8,302

 

Retained earnings

 

177,728

 

125,048

 

Total stockholders’ equity

 

517,570

 

438,592

 

Total liabilities and stockholders’ equity

 

$

767,815

 

$

527,151

 

 


 

THQ Inc.

Supplementary Tables

 

 

 

Three Months Ended
December 31,

 

Nine Months Ended
December 31,

 

 

 

2004

 

2003

 

2004

 

2003

 

Platform Revenue Mix

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Consoles

 

 

 

 

 

 

 

 

 

PlayStation 2

 

42.6

%

47.3

%

36.0

%

38.5

%

Xbox

 

6.6

 

6.2

 

9.6

 

11.4

 

Game Cube

 

11.1

 

10.0

 

11.2

 

9.5

 

PlayStation

 

0.6

 

1.8

 

0.9

 

2.4

 

 

 

60.9

 

65.3

 

57.7

 

61.8

 

 

 

 

 

 

 

 

 

 

 

Handheld

 

 

 

 

 

 

 

 

 

Game Boy Advance

 

27.2

 

24.5

 

26.6

 

25.1

 

Game Boy Color

 

0.0

 

0.0

 

0.0

 

0.3

 

Dual Screen

 

0.6

 

0.0

 

0.4

 

0.0

 

 

 

27.8

 

24.5

 

27.0

 

25.4

 

 

 

 

 

 

 

 

 

 

 

PC

 

9.2

 

9.5

 

11.9

 

11.6

 

Wireless

 

1.9

 

0.7

 

2.9

 

1.0

 

Other

 

0.2

 

0.0

 

0.5

 

0.2

 

 

 

100.0

%

100.0

%

100.0

%

100.0

%

 

 

 

 

 

 

 

 

 

 

Geographic Revenue Mix

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Domestic

 

63.0

%

69.7

%

63.0

%

71.6

%

Foreign

 

37.0

 

30.3

 

37.0

 

28.4

 

 

 

100.0

%

100.0

%

100.0

%

100.0

%