THQ Second-Quarter Income Before Acquisition Charge Increases 190 Percent 0n Record Revenues; Announces Three-For-Two Stock Split
CALABASAS, Calif.--(BUSINESS WIRE)--July 23, 1998--THQ Inc. (Nasdaq NMS:THQI) Thursday announced that net income before acquisition-related charges for the three months ended June 30, 1998, increased 190 percent to $2,883,000, or 37 cents per diluted share, on 7,799,000 diluted common shares outstanding.
After a one-time charge of $7,232,000 related to the write-off of in-process research and development associated with the acquisition of GameFX Inc. on May 1, 1998, the net loss for the quarter was $4,349,000, or 61 cents per diluted share. This compares with net income of $994,000, or 14 cents per diluted share, for the second quarter of 1997, on 7 million diluted common shares outstanding.
Revenue for the quarter increased 139 percent to a record $29,325,000 from $12,265,000 for the same period a year earlier.
For the six months ended June 30, 1998, net income before the acquisition-related charge mentioned above increased more than five-fold to $9,376,000, or $1.22 per diluted share. Including the one-time charge, net income was $2,144,000, or 28 cents per diluted share. Net income for last year's first half was $1,714,000, or 26 cents per diluted share.
Revenue for the first six months of 1998 increased 223 percent to a record $77,778,000 from $24,104,000 for the same period a year earlier.
President and Chief Executive Officer Brian Farrell noted that this year's second quarter results benefited from stronger than expected shipments of "Quest 64" for the Nintendo 64 game console, along with initial shipments of "The Granstream Saga" for the PlayStation, "World Cup '98" for the GameBoy and the European release of "WCW Nitro" for the PlayStation.
"As we anticipated, sales of WCW-related wrestling titles declined to 25 percent of total sales compared to 87 percent of total sales in the first quarter of this year, despite the sharp increase in revenue for the period," said Farrell. "The success of our newly introduced role-playing games highlights the importance of investing in multiple game genres and platforms, and maintaining an active new product release schedule."
Farrell continued, "Looking into the second half, we are particularly excited about 'Rugrats' for the PlayStation and GameBoy, which are scheduled for simultaneous release with the feature film in November, as well as the launch of 'BASS Masters Classic: Tournament Edition' for the PC, 'Brunswick Circuit Pro Bowling' for the PC and PlayStation, 'A Bug's Life' for GameBoy and additional wrestling titles."
THQ also announced that its board of directors has approved a three-for-two stock split to be effected in the form of a 50 percent stock dividend. The dividend shares will be distributed on or about Aug. 24, 1998, to stockholders of record on Aug. 20, 1998. The accompanying financial information has not been adjusted to reflect the effect of the stock split.
THQ is a leading developer, publisher and distributor of interactive entertainment software worldwide for a variety of hardware platforms, including PC CD-ROM and those manufactured by Nintendo and Sony. The THQ Web site is located at www.thq.com.
The statements contained in this release that are not historical facts may be deemed to constitute forward-looking statements. Actual results may differ materially from those projected in such statements due to a number of risks and uncertainties, including, without limitation, demand and competition for the company's products and other risks and uncertainties detailed in the company's filings with the Securities and Exchange Commission.
THQ Inc.
Second Quarter Earnings Announcement, 1998
Condensed Statements of Operations
(In thousands, except per share data)
Three Months Ended Six Months Ended
June 30, June 30,
1998 1997 1998 1997
Net sales $ 29,325 $ 12,265 $ 77,778 $ 24,104
Costs and expenses:
Cost of sales 13,611 6,503 33,974 13,745
Royalties 4,922 2,090 16,053 3,783
Product development 1,521 321 2,250 545
Selling 3,775 1,297 7,688 2,353
General and administrative 1,840 1,096 4,794 2,026
In process research and
development (a) 7,232 0 7,232 0
Total costs and expenses 32,901 11,307 71,991 22,452
Income (loss) from
operations (3,576) 958 5,787 1,652
Interest income, net 310 102 468 132
Income (loss) before
income taxes (3,266) 1,060 6,255 1,784
Provision for income
taxes 1,083 66 4,111 70
Net income (loss) $ (4,349) $ 994 $ 2,144 $ 1,714
Net income per share --
diluted $ (0.61) $ 0.14 $ 0.28 $ 0.26
Shares used in per
share calculation 7,134 7,000 7,677 6,523
Add back in process
research and
development (a) $ 7,232 $ 0 $ 7,232 $ 0
Net income before
in process
research and development $ 2,883 $ 994 $ 9,376 $ 1,714
Net income per share
before in process
research and development $ 0.37 $ 0.14 $ 1.22 $ 0.26
Shares used in per
share calculation 7,799 7,000 7,677 6,523
(a) In process research and development represents purchased costs
related to the acquisition of GameFx Inc., an applied technology
company focused on the development of interactive entertainment
software utilizing proprietary 3-D acceleration technology.
THQ Inc.
Second-Quarter Earnings Announcement, 1998
Condensed Balance Sheets
(In thousands)
June 30, Dec. 31,
1998 1997
ASSETS
Cash and cash equivalents $ 20,226 $ 11,724
Marketable securities 1,081 0
Accounts receivable -- net 14,658 30,856
Inventory 2,599 1,425
Prepaid and deferred royalties 5,627 3,645
Software development costs 9,125 6,044
Deferred income taxes 1,666 1,666
Prepaid income taxes 95 0
Prepaid expenses and other current
assets 780 478
Total current assets 55,857 55,838
Property and equipment, net 1,361 1,163
Deferred royalties -- net of current
portion 0 500
Software development cost -- net of
current portion 0 1,300
Other long term assets 2,670 652
Total assets $ 59,888 $ 59,453
LIABILITIES AND SHAREHOLDERS' EQUITY
Accounts payable and accrued expenses $ 6,497 $ 10,952
Accrued royalties 10,212 9,949
Income taxes payable 0 3,475
Total current liabilities 16,709 24,376
Accrued royalties -- net of current
portion 0 1,550
Common stock 72 4
Additional paid-in capital 54,888 47,559
Cumulative foreign currency
translation adjustment 192 81
Accumulated deficit (11,973) (14,117)
Total shareholders' equity 43,179 33,527
Total liabilities and shareholders'
equity $ 59,888 $ 59,453
CONTACT: THQ Inc., Calabasas
Deborah Lake, 818/591-1310 (investor relations)
dlake@thq.com
Aimee Greenholtz, 818/223-3116 (media relations)
aim@thq.com
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