Shares of interactive entertainment software developer THQ Inc. (THQI) fell about 15% in the after-hours trading on Wednesday, following the announcement of a huge loss in its third quarter and a reduction of 600 positions as part of additional cost reductions, amid ongoing economic crisis. The company's quarterly loss reflected one-time charges, mainly related to goodwill impairment. Separately, THQ said it named Paul Pucino as executive vice president and chief financial officer, effective immediately, replacing Colin Slade, who remains on an indefinite medical leave of absence.
The Los Angeles County, California-based company's third-quarter net loss was $191.75 million or $2.86 per share, compared to a net income of $15.51 million or $0.23 per share in the same quarter last year.
The latest quarter results included total one-time charges of $182.17 million, comprising pre-tax non-cash charge of $118.13 million related to goodwill impairment, changes in deferred net revenue of $28.29 million, business realignment expenses of $40.38 million, and deferred tax asset valuation allowance of $36.50 million, among other things.
THQ's prior year results included one-time charges of $926 thousand, and gain on sale of discontinued operations of $1.51 million or $0.02 per share.
On a non-GAAP basis, net loss was $9.59 million or $0.14 per share, compared to net income of $16.43 million or $0.24 per share in the year ago quarter.
On average, 18 analysts polled by Thomson Reuters expected the company to earn $0.07 per share for the quarter. Analysts' estimates typically exclude special items.
Net sales for the quarter decreased to $357.31 million from $509.61 million in the comparable quarter last year, and missed Wall Street analysts' consensus of $403.39 million. On a non-GAAP basis, the company reported fiscal 2009 third-quarter net sales of $385.60 million, compared to $509.61 million a year ago.
In the quarter, total costs and expenses exceeded revenues and increased to $556.90 million from $493.80 million a year ago.
Commenting on the results, Brian Farrell, THQ's president and chief executive officer said, "We delivered high quality games to market this holiday season but fell short of our revenue and profit targets in this challenging environment. We are taking highly targeted actions with the objective of investing in games with the highest franchise potential and returning to profitability."
For the nine months ended December 31, THQ's net loss was $334.24 million or $5.01 per share, wider than net loss of $806 thousand or $0.01 per share in the previous year. Loss from continuing operations was $336.28 million or $5.04 per share, compared to prior year's loss of $2.32 million or $0.03 per share. Nine-month non-GAAP net loss was $65.43 million or $0.98 per share in the year, compared to net income of $8.07 million or $0.12 per share a year ago.
Year-to-date net sales fell to $659.70 million from $843.44 million in the previous year. Analysts projected loss of $0.84 per share for the nine-month period on sales of $873.45 million.
Regarding its future, the company said it is not providing revenue and earnings per share guidance for its fourth quarter, citing the economic uncertainty and limited visibility. The company continues to experience a cautious retail and consumer environment, and as a result fourth-quarter results are expected to be significantly below its previous expectations.
THQ also announced $100 million cost reduction plans, due to the ongoing economic weakness, in addition to the previously announced plan to reduce cost structure by $120 million. THQ will reduce costs in each functional area, product development spending is expected to cut by an additional $70 million through studio dispositions and other project and headcount reductions. THQ also intends to reduce sales, marketing and corporate expenses globally through headcount and other cost reductions, with targeted savings of an additional $30 million annually.
In the aggregate, the company expects to reduce planned fiscal 2010 spending by $220 million and headcount by about 600 people, or 24% of its workforce. The company said it anticipates incurring significant charges as part of the additional cost reduction actions, which will be excluded from the company's non-GAAP results. Most of the charges will be recognized in the remainder of fiscal 2009.
"Our focus for next fiscal year is to return to profitability and to generate cash. Our fiscal 2010 plan will reflect the benefits of our focused product strategy and strong actions on costs," Farrell said.
In a separate statement, THQ announced the appointment of Paul Pucino as executive vice president and chief financial officer, effective immediately. Pucino replaces Colin Slade who remains on an indefinite medical leave of absence.
Prior to joining the company, Pucino was executive vice president and chief financial officer of Classmates Media Corp., a wholly owned subsidiary of United Online. From 2005 to 2007, Pucino served as chief financial officer of internet services company Digital Insight, which was merged with Intuit in February 2007. Pucino was also the executive vice president and chief financial officer of Tekelec, a developer of internet and telecommunications networking equipment.
THQI closed Wednesday's regular trading session at $4.14, down $0.10 or 2.36%, on a volume of 1.5 million shares. In the after-hours, shares plunged $0.62 or 14.98% to $3.52. In the past 52 weeks, shares have been trading in a wide range of $3.29 - $23.40.
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