Product Cancellations, Lawsuits Hurt THQ's Fiscal Results

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.