Wednesday February 23, 8:32 am Eastern Time
Company Press Release
THQ Reports Record Fourth Quarter and 1999 Results
Business Editors
THQ Fourth Quarter Net Earnings Up 37 Percent
to a Record $0.72 Per Diluted Share
As Revenues Increase 18 Percent to a Record $131.7 Million
1999 Net Income Increases 51 Percent(a) to $32.9 Million
On 42 Percent Revenue Gain
THQ Inc. (Nasdaq:THQI - news) today announced that net income for the fourth quarter of 1999 increased 37 percent to a record $14,875,000, or $0.72 per diluted share, on an 18
percent increase in revenue to a fourth-quarter record $131,697,000.
For the fourth quarter of 1998, net income was $10,869,000, or $0.57 per diluted share, on revenues of $111,508,000. These results include the operations of Genetic Anomalies, an
Internet entertainment studio, acquired in December 1999 and accounted for as a pooling of interests. Prior periods have been restated accordingly.
Excluding Genetic Anomalies, the company's net income was $14,863,000, or $0.73 per diluted share, on revenues of $131,373,000 for the fourth quarter of 1999. This compares to net
income of $11,027,000, or $0.58 per diluted share, on revenues of $111,483,000 for the fourth quarter of 1998.
For the year ended December 31, 1999, net income increased 51 percent (excluding the one-time charge in 1998 related to the acquisition of GameFx) to a record $32,941,000, or $1.63
per diluted share, on a 42 percent increase in revenue to a record $306,424,000. Net income for the year excluding Genetic Anomalies' results was $33,471,000, or $1.69 per diluted
share, on revenues of $305,978,000.
For 1998, net income was $14,618,000, or $0.79 per diluted share, on revenues of $216,111,000. Excluding the one-time acquisition charge, net income for 1998 was $21,850,000, or $1.18
per diluted share. Net income for 1998 excluding both the one-time charge and Genetic Anomalies' results was $22,322,000, or $1.22 per diluted share, on revenues of $215,888,000.
Brian Farrell, president and chief executive officer of THQ, noted that fourth quarter results reflected the continued success of several key THQ franchises. ''The nationwide sell-outs of
WWF WrestleMania 2000(TM) for both Nintendo® 64 and Game Boy Color speaks to the ongoing appeal of THQ wrestling games. Our 'Rugrats' franchise also enjoyed successful
expansions in the fourth quarter of 1999 with Rugrats: Studio Tour(TM) for PlayStation, Rugrats: Time Travelers(TM) for Game Boy Color and the Sony's Greatest Hits release of
Rugrats: Search for Reptar(TM). Another hit for THQ in the 1999 fourth quarter was Disney/Pixar's Toy Story 2(TM) for Game Boy Color.''
Farrell also pointed out the success of THQ's ongoing international strategy. ''International revenues more than doubled in 1999 through territorial expansions and the identification of
products targeted at specific European markets. International hits during the fourth quarter included WWF WrestleMania 2000(TM) for Nintendo® 64 and Game Boy Color,
Championship Motocross(TM) Featuring Ricky Carmichael for PlayStation and Indiana Jones(TM) for PC (which was released in Germany).''
Noting that THQ is committed to building its product line with strong franchises that appeal to a broad game playing demographic, Farrell added, ''We anticipate continued growth in 2000
through extension of THQ's existing franchises as well as new product launches on multiple game platforms.''
THQ's 2000 release schedule includes WWF, ''Rugrats,'' MTV Sports, and Championship Motocross line extensions, releases based on new licenses including ''Evil Dead,''
''Scooby-Doo!'' and ''Power Rangers,'' as well as original content releases, which include Summoner(TM) and Aidyn Chronicles(TM). More information regarding the 2000 release
schedule can be found at thq.com.
The company understands from press releases issued by certain law firms that a class action lawsuit has been filed against it asserting certain securities law violations. However, the
company has not yet been served with any complaint. The company accordingly has no comment, but based on the allegations contained in the press releases, believes that the
allegations are without merit. The company intends to vigorously defend itself.
About THQ
THQ Inc. 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 Sega, Nintendo and Sony. The THQ Web site is located at 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.
(a) Excluding one-time acquisition charge in 1998.
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THQ Inc.
Fourth Quarter Earnings Announcement, 1999
Condensed Statements of Operations-(b)
(In thousands, except per share data)
Three Months Ended
December 31,
1999 1998
Net sales $ 131,697 $ 111,508
Costs and expenses:
Cost of sales 62,405 54,811
Royalties and project abandonment 19,872 27,026
Product development 3,509 2,298
Selling and marketing 14,629 9,429
Payment to joint venture partner 6,119 --
General and administrative 3,912 3,240
In process research and development (a) -- --
Total costs and expenses 110,446 96,804
Income from operations 21,251 14,704
Interest income, net 199 136
Income before income taxes 21,450 14,840
Provision for income taxes 6,575 3,971
Net income $ 14,875 $ 10,869
Net income per share - diluted $ 0.72 $ 0.57
Shares used in per share calculation 20,786 19,171
Twelve Months Ended
December 31,
1999 1998
Net sales $ 306,424 $ 216,111
Costs and expenses:
Cost of sales 138,630 100,019
Royalties and project abandonment 48,370 48,130
Product development 12,770 6,849
Selling and marketing 35,440 20,325
Payment to joint venture partner 6,119 --
General and administrative 14,969 10,436
In process research and development (a) -- 7,232
Total costs and expenses 256,298 192,991
Income from operations 50,126 23,120
Interest income, net 1,102 840
Income before income taxes 51,228 23,960
Provision for income taxes 18,287 9,342
Net income $ 32,941 $ 14,618
Net income per share - diluted $ 1.63 $ 0.79
Shares used in per share calculation 20,194 18,453
(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 3D acceleration technology.
(b) The tables above reflect the December 1999 pooling of interests
with Genetic Anomalies, an online Internet entertainment studio.
All prior period information has been restated accordingly.
(c) Results excluding Genetic Anomalies were:
Condensed Statements of Operations-(c)
(In thousands, except per share data)
Three Months Ended
December 31,
1999 1998
Net sales $ 131,373 $ 111,483
Costs and expenses:
Cost of sales 62,402 54,806
Royalties and project abandonment 19,872 27,026
Product development 3,339 2,169
Selling and marketing 14,611 9,408
Payment to joint venture partner 6,119 --
General and administrative 3,798 3,214
In process research and development (a) -- --
Total costs and expenses 110,141 96,623
Income from operations 21,232 14,860
Interest income, net 206 139
Income before income taxes 21,438 14,999
Provision for income taxes 6,575 3,972
Net income $ 14,863 $ 11,027
Net income per share - diluted $ 0.73 $ 0.58
Shares used in per share calculation 20,306 18,945
Twelve Months Ended
December 31,
1999 1998
Net sales $ 305,978 $ 215,888
Costs and expenses:
Cost of sales 138,614 100,001
Royalties and project abandonment 48,367 48,120
Product development 12,190 6,480
Selling and marketing 35,376 20,262
Payment to joint venture partner 6,119 --
General and administrative 14,713 10,223
In process research and development (a) -- 7,232
Total costs and expenses 255,379 192,318
Income from operations 50,599 23,570
Interest income, net 1,160 863
Income before income taxes 51,759 24,433
Provision for income taxes 18,288 9,343
Net income $ 33,471 $ 15,090
Net income per share - diluted $ 1.69 $ 0.82
Shares used in per share calculation 19,779 18,334
THQ Inc.
Fourth Quarter Earnings Announcement, 1999
Condensed Balance Sheets
(In thousands)
December 31, December 31,
1999 1998
ASSETS
Cash and cash equivalents $ 21,303 $ 19,063
Accounts receivable - net 96,641 59,520
Inventory 5,455 16,937
Prepaid and deferred royalties 23,478 5,320
Software development costs 11,640 3,011
Deferred income taxes 6,817 8,320
Income taxes receivable 4,017 --
Prepaid expenses and
other current assets 2,226 1,556
Total current assets 171,577 113,727
Property and
equipment, net 5,659 2,670
Deferred royalties
- net of current portion 308 375
Software development cost
- net of current portion 1,824 1,174
Deferred income taxes
- net of current portion 2,865 2,055
Other long term assets 2,790 7,742
Total assets $ 185,023 $ 127,743
LIABILITIES AND SHAREHOLDERS' EQUITY
Lines of credit $ 16,702 $ 9,909
Accounts payable and accrued expenses 26,168 30,240
Accrued royalties 31,254 15,945
Income taxes payable 3,052 8,270
Total current liabilities 77,176 64,364
Accrued royalties - net of current portion 150 375
Common stock 190 117
Additional paid-in capital 74,344 62,730
Accumulated other comprehensive income 198 59
Retained earnings (accumulated deficit) 32,965 98
Total shareholders' equity 107,697 63,004
Total liabilities and
shareholders' equity $ 185,023 $ 127,743
OTHER INFORMATION
Three Months Ended Twelve Months Ended
December 31, December 31,
1999 1998 1999 1998
Platform Revenue Mix
Nintendo 64 41.5% 65.0% 36.1% 55.0%
PlayStation 26.0 18.2 36.8 30.9
PC 4.6 7.6 8.3 4.5
16 Bit 0.0 0.3 0.0 0.9
GameBoy/GameBoy Color 24.3 8.5 16.4 8.1
Other 3.6 0.4 2.4 0.6
------ ------ ------ ------
100.0% 100.0% 100.0% 100.0%
Geographic Revenue Mix
Domestic 78.2% 88.0% 75.6% 86.5%
Foreign 21.8 12.0 24.4 13.5
------ ------ ------ ------
100.0% 100.0% 100.0% 100.0%
Contact:
THQ INC.
Mary Nelson Garrett, 818/871-5090 (Investor Relations)
Liz Bell, 818/871-5061 (Media Relations)
THQ INTERNATIONAL
Asam Ahmad, +44(0) 1483 767656 (Investor Relations) |
