THQ Reports Record Net Sales and Net Income for Fiscal 2005

THQ Reports Record Net Sales and Net Income for Fiscal 2005

- FY2005 Net Income Advances 75% on 18% Sales Gain -

- Six Titles Surpass One Million Units Shipped in FY2005 -

- Management Reiterates Guidance for Fiscal 2006 -

CALABASAS HILLS, Calif., May 4 /PRNewswire-FirstCall/ -- THQ Inc. (NASDAQ:THQI) today announced record sales and net income for the fiscal year ended March 31, 2005.

(Logo: http://www.newscom.com/cgi-bin/prnh/20041118/LATH093LOGO)

For the fiscal year ended March 31, 2005, net sales climbed 18% to a record $756.7 million from $640.8 million a year ago. Fiscal 2005 net income increased to $62.8 million, or $1.56 per diluted share, which included $0.19 per diluted share from research and development tax credits claimed for prior years. For the same period a year ago, THQ reported net income of $35.8 million, or $0.92 per diluted share, which included a $0.07 per diluted share benefit from an insurance settlement.

Fiscal 2005 fourth quarter net sales advanced 40% to $171.9 million from $123.1 million in the same period a year ago, on strong sales of internally developed properties MX vs. ATV Unleashed and The Punisher(TM) as well as continued robust sales of titles launched in the prior quarter. For the three months ended March 31, 2005, net income increased 86% to $10.1 million, or $0.24 per diluted share, from $5.4 million, or $0.14 per diluted share, in the prior-year period.

"THQ's record growth in fiscal 2005 demonstrated our success in increasing sales of games based on our three core brands, Disney/Pixar, Nickelodeon and World Wrestling Entertainment, and also delivering strong performance from internally developed titles targeted to avid gamers, such as MX vs. ATV Unleashed, The Punisher and Warhammer 40,000: Dawn of War," said Brian Farrell, president and CEO, THQ. "THQ commands a position of strength from which to capitalize on both the huge installed base of current hardware and the upcoming launch of next-generation consoles. With some of the best mass-market brands, more than 900 people in our internal studio organization, a growing international sales team and more than $330 million in cash and short-term investments, THQ is poised to expand our leadership position in the video game industry."

Fiscal 2006 Guidance

THQ reaffirmed previous guidance for the full fiscal year ending March 31, 2006 and provided initial guidance for the fiscal first quarter ending June 30, 2005:

* Consistent with previous guidance, for the fiscal year ending
March 31, 2006, THQ expects net sales of approximately $750 million
and net income of approximately $1.00 per diluted share.
* For the first quarter of fiscal 2006, the company expects net sales of
approximately $135 to $140 million and a net loss of about $0.15 per
diluted share, reflecting stepped up marketing support for the
late-quarter releases of new original properties Destroy All
Humans!(TM) and Juiced(TM), and continued investment in its wireless
business.

"Our biggest franchises from our record-breaking year return in fiscal 2006: WWE SmackDown!, SpongeBob SquarePants, The Incredibles, Full Spectrum Warrior, Tak and Warhammer 40,000: Dawn of War," said Farrell. "In addition, consistent with our goal of increasing share against the core gamer, we plan to launch a select number of exciting new original properties including Destroy All Humans!, Juiced and two new original franchises for Microsoft's next-generation Xbox platform. We also expect to benefit from extending our brands onto the new handheld platforms and doubling our wireless revenues as we roll out Star Wars and other compelling content."

Fiscal 2005 Accomplishments:
* THQ published six titles that shipped more than one million units in
Fiscal 2005:
* The Incredibles: more than 4.5 million units
* The SpongeBob SquarePants Movie(TM): more than 2.5 million units
* WWE(TM) SmackDown! Vs. Raw(TM): more than 2 million units
* Finding Nemo: more than 2 million units (over 7 million life-to-
date)
* SpongeBob SquarePants(TM): Battle for Bikini Bottom: more than one
million units (over 3 million life-to-date)
* Full Spectrum Warrior(TM): more than one million units
* THQ grew international revenues to 38% of net sales from 29% a year
ago, bolstered by the increasing global appeal of the company's brands
and its expanded sales organization.
* THQ more than doubled its internal product development personnel to
over 900 from just over 400 a year ago, enabling the company to
develop more franchises internally and to establish a leadership
position early in the next console cycle.
* THQ Wireless revenues more than tripled to $25 million from $7 million
a year ago, fueled by sales of games based on the major sports
leagues, Nickelodeon and MotoGP.
* THQ renewed its exclusive master license agreement with Nickelodeon
through 2010 and extended its relationship with Pixar Animation
Studios to publish games based on that studio's next four films after
Cars, providing a solid foundation for revenue growth through the back
half of the current hardware cycle and well into the next generation
of hardware.

Investor Conference Call

THQ will host a conference call to discuss fiscal fourth quarter results today at 5:00 p.m. Eastern/2:00 p.m. Pacific. Please dial (800) 299-0433 or (617) 801-9712 to listen to the call or visit the THQ Inc. Investor Relations Home page at www.thq.com. The online archive of the broadcast will be available approximately two hours after the live call ends. In addition, a telephonic replay of the conference call will be provided approximately two hours after the live call ends through May 6, 2005 by dialing (888) 286-8010 or (617) 801-6888 access code 53751763.

THQ Inc. (NASDAQ:THQI) is a leading worldwide developer and publisher of interactive entertainment software. The company develops its products for all popular game systems, personal computers and wireless devices. Headquartered in Los Angeles County, California, THQ sells product through its global network of offices located in the United States, United Kingdom, France, Germany, Spain, Korea and Australia. More information about THQ and its products may be found at www.thq.com and www.thqwireless.com. THQ, THQ Wireless and their respective logos are trademarks and/or registered trademarks of THQ Inc.

This press release contains statements that are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements include, but are not limited to, the company's expectations for revenue and earnings per share for the quarter ending June 30, 2005 and the fiscal year ending March 31, 2006 and for the company's product releases and financial performance in future periods. These forward-looking statements are based on current expectations, estimates and projections about the business of THQ Inc. and its subsidiaries (collectively referred to as "THQ") and are based upon management's beliefs and certain assumptions made by management. Such forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those expressed or implied by such forward-looking statements, including, but not limited to, economic, competitive and technological factors affecting the operations, markets, products, services and pricing of THQ. Unless otherwise required by law, THQ disclaims any obligation to update its view on any such risks or uncertainties or to revise or publicly release the results of any revision to these forward-looking statements. Readers should carefully review the risk factors and the information that could materially affect THQ's financial results, described in other documents that THQ files from time to time with the Securities and Exchange Commission, including its Quarterly Reports on Form 10-Q and its Annual Report on Form 10-K for the fiscal period ended March 31, 2004, and particularly the discussion of risk factors that may affect results of operations set forth therein. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this press release.

Julie MacMedan
THQ/Investor Relations
818/871-5095

Liz Pieri
THQ/Media Relations
818/871-5061

THQ Inc.
Fourth Quarter 2005 Earnings Announcement

Consolidated Statements of Operations
(In thousands, except per share data)

Table 1 Three Months Ended Twelve Months Ended
March 31, March 31,
2005 2004 2005 2004
Net sales $171,927 $123,135 $756,731 $640,846

Costs and expenses:
Cost of sales 59,139 47,630 250,055 229,218
License amortization
and royalties 15,414 12,317 85,926 71,132
Software development
amortization 15,131 16,767 93,622 105,632
Product development 23,422 9,414 72,959 36,850
Selling and marketing 29,386 17,837 115,646 92,475
Payment to venture partner 688 858 9,774 9,675
General and administrative 17,024 11,371 54,831 47,006
Total costs and expenses 160,204 116,194 682,813 591,988
Income from operations 11,723 6,941 73,918 48,858
Interest income, net 1,547 784 4,337 2,378
Other income -- -- -- 4,000
Income before income taxes
and minority interest 13,270 7,725 78,255 55,236
Income taxes 3,068 2,294 15,204 19,397
Income before minority
interest 10,202 5,431 63,051 35,839
Minority interest (92) -- (261) --
Net Income $10,110 $5,431 $62,790 $35,839
Net income per share
-- diluted $0.24 $0.14 $1.56 $0.92
Shares used in per share
calculation -- diluted 41,668 39,007 40,243 39,004

The above table reflects our Consolidated Statement of Operations in
accordance with U.S. Generally Accepted Accounting Principles.

Reconciliation of Net Income to Non-GAAP Net Income
(In thousands, except per share data)

Table 2 Three Months Ended Twelve Months Ended
March 31, March 31,
2005 2004 2005 2004
Net income $10,110 $5,431 $62,790 $35,839

Settlement of dispute
with directors' and
officers' insurance carrier -- -- -- (4,000)
Income taxes -- -- -- 1,440
Research & development
credits claimed for
prior years -- -- (7,797) --
Non-GAAP net income $10,110 $5,431 $54,993 $33,279
Non-GAAP net income
per share -- diluted $0.24 $0.14 $1.37 $0.85
Shares used in per share
calculation - diluted 41,668 39,007 40,243 39,004

The reconciliation of U.S. GAAP net income to Non-GAAP net income
(i) excluding a $7.8 million benefit for research and development credits
claimed for prior years in the twelve months ended March 31, 2005; and
(ii) excluding a $4.0 million settlement with our directors' and
officers' insurance carrier in fiscal 2004, including the related income
tax effect, is detailed in the above financial tables. We have excluded
the research and development credits claimed for prior years and the
settlement from Non-GAAP net income because they are considered "non-
operational" in nature. Non-GAAP net income excluding the settlement is
not recognized as a measure for financial statement presentation under
U.S. GAAP. However, management believes that this information is useful
for investors in evaluating our operational performance and for
facilitating meaningful comparison to prior periods.

THQ Inc.
Fourth Quarter 2005 Earnings Announcement

Table 3 Balance Sheets
(In thousands)
March 31, March 31,
2005 2004

ASSETS
Cash, cash equivalents and
short-term investments $331,173 $253,039
Accounts receivable - net 73,700 59,088
Inventory 23,802 22,303
Licenses 12,464 13,172
Software development 57,107 39,997
Income taxes receivable 9,783 --
Prepaid expenses and
other current assets 14,530 9,451
Total current assets 522,559 397,050
Property and equipment, net 26,822 17,468
Licenses -- net of current portion 75,523 9,068
Software development --
net of current portion 8,144 9,798
Deferred income taxes -- 560
Income taxes receivable 9,513 --
Goodwill -- net 83,440 59,399
Long-term marketable securities -- 24,320
Other long term assets -- net 21,392 9,488
Total assets $747,393 $527,151

LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable $36,499 $22,147
Accrued expenses 43,745 22,361
Accrued payments to venture partner 639 746
Accrued royalties 33,148 41,305
Income taxes payable -- 216
Deferred income taxes 6,841 642
Total current liabilities 120,872 87,417
Accrued liabilities --
net of current portion 2,059 --
Accrued royalties --
net of current portion 70,000 1,142
Deferred income taxes --
net of current portion 4,466 --

Minority interest 1,238 --

Common stock 405 382
Additional paid-in capital 347,664 304,860
Accumulated other comprehensive income 12,851 8,302
Retained earnings 187,838 125,048
Total stockholders' equity 548,758 438,592
Total liabilities and
stockholders' equity $747,393 $527,151

THQ Inc.
Supplementary Tables

Three Months Ended Twelve Months Ended
March 31, March 31,
2005 2004 2005 2004
Platform Revenue Mix
Consoles
PlayStation 2 37.8% 38.7% 36.5% 38.7%
Xbox 14.2 9.7 10.7 11.1
Game Cube 4.6 9.7 9.7 9.5
56.6 58.1 56.9 59.3
Handheld
Game Boy Advance 28.5 26.0 27.0 25.3
Dual Screen 0.5 0.0 0.4 0.0
29.0 26.0 27.4 25.3

PC 9.8 11.7 11.4 11.7
Wireless 4.6 1.5 3.3 1.1
Other 0.0 2.7 1.0 2.6
100.0% 100.0% 100.0% 100.0%

Geographic Revenue Mix
Domestic 59.4% 67.1% 62.2% 70.7%
Foreign 40.6 32.9 37.8 29.3
100.0% 100.0% 100.0% 100.0%

Photo: NewsCom: http://www.newscom.com/cgi-bin/prnh/20041118/LATH093LOGO
AP Archive: http://photoarchive.ap.org/
PRN Photo Desk, photodesk@prnewswire.com
Source: THQ Inc.

CONTACT: Investor Relations, Julie MacMedan, +1-818-871-5095, or Media
Relations, Liz Pieri, +1-818-871-5061, both of THQ Inc.

Web site: http://www.thqwireless.com/

Web site: http://www.thq.com/

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