-- Three Franchises Exceed Sales of One Million Units Each During the Quarter
-- Board Authorizes Additional $25 Million in Share Repurchases
Reflecting better-than-expected holiday sales, THQ Inc. (Nasdaq:THQI) today announced that revenue and net income reached new all-time highs in the third quarter of fiscal 2004 ended December 31, 2003.
Fiscal 2004 third quarter revenue climbed 35% to $293.1 million, from $217.8 million in the corresponding prior-year period. Net income for the fiscal 2004 third quarter advanced to $30.4 million, or $0.78 per diluted share, which included an increase in allowance for doubtful accounts of $7.0 million, or $0.11 per diluted share, related to KB Toy's recent Chapter 11 bankruptcy announcement. For the 2003 fiscal third quarter, THQ reported net income of $3.1 million, or $0.08 per diluted share, which included special charges of $0.33 per diluted share.
For the nine-months ended December 31, 2003, revenue grew 29% to $517.7 million from $400.8 million for the same period a year ago. Net income for the first nine months of fiscal 2004 was $30.4 million, or $0.78 per diluted share, which included the increase in allowance for doubtful accounts related to KB Toy's bankruptcy and a $0.06 per diluted share benefit from an insurance settlement reported in the second fiscal quarter of 2004. For the nine months ended December 31, 2002, net income was $10.2 million, or $0.25 per diluted share, which included special charges of $0.39 per diluted share.
"Our portfolio of both new and proven franchise titles delivered the best quarter in THQ's history," said Brian J. Farrell, THQ's president and CEO. "Our team's outstanding execution on the strategic initiatives we implemented in 2003 drove our record December quarter operating results. We established a new franchise Tak and the Power of Juju with our partner Nickelodeon; achieved multi-million unit sales of Finding Nemo, the first title under our multi-property license agreement with Disney Interactive and Pixar Animation Studios; and delivered on our product quality initiative with excellent ratings for WWE(TM) SmackDown!(TM) Here Comes the Pain! and SpongeBob SquarePants(TM) Battle for Bikini Bottom, among others."
Farrell noted that THQ ranked as the #2 independent publisher and the #3 publisher overall in the US for 2003, as reported by The NPD Group TRSTS Video Games Service. "We were one of only two US publishers to gain market share in 2003, and we consistently ranked among the top four independent publishers each month. This consistent performance underscores the success of THQ's portfolio strategy," Farrell said.
The company also announced that its Board of Directors has authorized an expansion of the current stock repurchase program by $25 million to a total of $75 million, $44 million of which has been expended through December 31, 2003. Under the stock repurchase program the company will continue to repurchase shares of its common stock from time to time on the open market or in private transactions.
Third Quarter Highlights:
-- THQ achieved the #2 independent publisher ranking with a 6.6% market share for the 2003 calendar year, according to NPD
-- THQ shipped in excess of 2.3 million units worldwide of Disney/Pixar's Finding Nemo across five platforms, bringing 2003 global annual sales to more than 4 million units
-- THQ shipped more than 1.6 million units worldwide of WWE SmackDown! Here Comes the Pain! for PlayStation(R) 2
-- THQ shipped more than 1.3 million units worldwide of SpongeBob SquarePants: Battle for Bikini Bottom across five platforms
-- In collaboration with Nickelodeon, THQ established a new franchise Tak and the Power of Juju and shipped more than 750,000 units across three platforms in North America alone
-- Tak and the Power of Juju was named IGN's "Best Platform Game - Game Cube" of 2003
-- WWE SmackDown! Here Comes the Pain! won the "Best Fighting Game" award at Spike TV's first annual Video Game Awards show and was named IGN's "Best Wrestling Game" of 2003
-- THQ announced a co-publishing agreement with Sega through which the companies will release two new Nintendo(R) Game Boy Advance titles based on Sonic the Hedgehog(R) in North, Central and South America in the first half of 2004
-- THQ Wireless(TM) and Vodafone announced an agreement for the distribution of Twentieth Century Fox's "The Simpsons" branded mobile content exclusively to Vodafone customers throughout Europe, Australia and New Zealand
-- THQ named Eric Doctorow to the new position of Chief Operating Officer and appointed Tim Walsh President of THQ Wireless
Guidance
The company expects to launch eight product SKUs in the 2004 fiscal fourth quarter, including five new Scooby-Doo!(TM) SKUs, which will be shipped in conjunction with Warner Bros.' theatrical release in March of Scooby-Doo! Two: Monsters Unleashed; MX Unleashed for PlayStation 2 and Xbox; and Sonic Battle for Game Boy Advance. In addition, Tak and the Power of Juju and Sphinx and the Cursed Mummy(TM) will be released internationally during the quarter. The company also announced that the planned release of Full Spectrum Warrior on Xbox has been rescheduled from March 2004 to June 8, 2004. The PC version is scheduled for September 2004.
THQ reaffirmed its previous guidance for fiscal fourth quarter revenue of approximately $90 million and revised guidance for earnings per diluted share to approximately $0.07, reflecting the rescheduled launch of Full Spectrum Warrior and a higher mix of licensed properties and catalog sales.
For the fiscal year ending March 31, 2004, THQ now expects revenue of approximately $608 million and earnings of approximately $0.84 per diluted share, which includes a $0.06 benefit per diluted share from an insurance settlement reported in the second fiscal quarter of 2004.
For the fiscal year ending March 31, 2005, THQ currently anticipates revenues of approximately $655 million and earnings per diluted share of $0.94. "Our initial view of fiscal 2005 assumes, among other factors, PlayStation 2 and Xbox console price cuts to $149 and nearly $10 million of increased product development expenses as we expand our internal studios and begin to invest in the new hardware platforms," said Farrell.
"THQ's fiscal 2005 product line up includes sequels to some of our best-selling titles in fiscal 2004, such as the next installment of WWE: SmackDown!, SpongeBob SquarePants and Tak and the Power of Juju as well as games based on the next Disney/Pixar film, `The Incredibles,'" said Farrell. "THQ will also launch new original properties and core gamer titles such as Full Spectrum Warrior, S.T.A.L.K.E.R.: Shadow of Chernobyl, The Punisher and Dawn of War(TM) in the new fiscal year."