Shares of video game maker
were getting hammered Monday after the company said it has agreed to settle a class-action lawsuit and warned that fourth-quarter earnings would fall short of Wall Street's expectations.
At midmorning, the stock was down $1.21, or nearly 10%, at $11.03 on the Nasdaq. The shares were down 62% year to date heading into Monday's session.
Under the terms of the settlement, the Calabras Hills, Calif.-based company and a liability insurer will pay a total of $10.15 million to the plaintiffs. The company didn't give any other details on the suit. As a result of the decision, THQ will record a charge of $2 million for legal and other costs related to the settlement. Additionally, the company said it would take a $3.2 million charge to account for discontinued games and a $1.5 million writeoff for WWF-branded games.
The company expects total revenue for the fourth quarter to be in the range of $215 million to $220 million, and net income, before charges, in the range of 40 cents to 43 cents a share. Excluding the charges, the company said it expects to post a net profit 30 cents to 33 cents a share, a far cry from the $263 million and 93 cents analysts were expecting. The earnings shortfall can be attributed to weaker-than-expected sales of its Red Faction II game and its GameCube consoles, the company said in a release.
THQ also lowered guidance for the first quarter and fiscal 2003. For the first quarter, the company expects to record $50 million in revenue and a net loss of 15 cents a share. For the full year, the company expects revenue of about $540 million and net earnings of roughly 90 cents a share. Analysts, on average, were expecting the company to post a quarterly loss of 11 cents on and a full-year profit of $1.38 a share. Revenue was targeted at $54.6 million and $581 million, respectively.