THQ’s Quarter Disappoints, Reorganization PlannedThursday, February 2, 2012
Shares of THQ Inc. dropped 25 percent in after-hours trading on Thursday after the video game maker reported a larger-than-expected quarterly loss. The company earlier in the day announced a reorganization that will reduce its workforce and have its chief executive take a 50 percent pay cut.
After the markets closed on Thursday, the Agoura Hills company reported a fiscal third quarter net loss of $55.9 million (82 cents a share) for the period ended Dec. 31, compared with a loss of $14.9 million (-22 cents) in the same period a year earlier. Net sales fell 3 percent to $305 million.
Excluding impairments and one-time expenses, adjusted net income was 35 cents a share. Net sales adjusted to exclude the impact of deferred revenue and other related costs were up 25 percent to $404 million. Analysts surveyed by Thomson Reuters on average expected the company to report adjusted net income of 65 cents a share on adjusted net sales of more than $417 million.
The company said growth from its successful “Saints Row: The Third” and “WWE '12” games was offset by weak sales of its uDraw tablets, and kids and casual games. THQ in December said it would get out of the kids’ licensed video game business and focus on core games and digital initiatives.
Before the markets closed, the company announced it would lay off up to 240 employees, or 17 percent of its workforce, by the end of next month as part of a previously announced restructuring plan. Most of the cuts would come from sales, general and administrative employees around the world. The company expects to take an $11 million charge in its fiscal fourth quarter, including about $8 million in severance payments.
In addition, Chief Executive Brian Farrell will take a 50 percent cut in his base pay to $359,250 for one year beginning Feb. 13. Non-employee directors also will take 50 percent pay cuts for a year.
"We are implementing a plan to bring costs in line with our lower anticipated level of revenue,” said Farrell in a statement. “With our focused product plan, leaner cost structure, cash balance, and existing credit facility, we believe the company has adequate resources to execute on our plan and deliver on our strong multi-year pipeline of games."
Shares of THQ, closed up 14 cents, or 5.6 percent, to 76 cents on the Nasdaq, and were down 25 percent to 57 cents in aftermarket trading.