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Product Cancellations, Lawsuits Hurt THQ's Fiscal Results
THQ announced results for Q4 and 2002, posting record net revenue of $217.8 million for the quarter -- up 11 percent over the prior year.
Unfortunately the company's net income for the quarter was just $3.1 million (8 cents per share), down 89 percent from the previous year. The company was hit with $20 million in "special item" charges during the quarter, which ate into its bottom line. Among those items was:
A $1.6 million charge to cover "WWF" wrestling games which THQ couldn't ship pursuant to a lawsuit between the World Wide Fund for Nature and World Wrestling Entertainment.
A charge of $12 million for 20 game SKUs that were cancelled in mid-development, many of which were to appear on the Gamecube. THQ said it was "[decreasing its] exposure to the GameCube platform".
A $7 million charge related to the settlement of a class-action lawsuit filed three years ago.
"Although we achieved record revenues in the 2002 fourth quarter, our results were tempered by lower-than-expected sales of Red Faction 2 and our GameCube portfolio, and a cautious retail environment," said Brian Farrell, president and CEO, THQ.
Looking at the upside, Farrell cited WWE SmackDown! Shut Your Mouth as a strong title in Q4, as well as titles based on the "SpongeBob Squarepants," "Rocket Power" and "Scooby Doo" brands.
For the year, revenues increased 27 percent to a record $480.5 million. But net income for 2002 was just $13.0 million (32 cents per share), down sharply from $36 million a year earlier. The special-item charges in Q4 accounted for much of the company's downturn for the year.
The company reiterated its previous guidance for the March 31, 2003, but it didn't help: since the company announced results after the market closed, THQ shares have sunk $1.19 (8.9%) to $12.16 in after-hours trading.