THQ enacts tax credit protection plan

THQ has announced its intention to adopt a Section 382 Rights Agreement to discourage potential investors from increasing their holdings to 5 per cent or more, which is designed to protect its entitlement to carryforwards of $350 million, plus research and development tax credits of $24 million.

A business is able to obtain these carryforward tax breaks on past net operating losses and gain from them even when the company starts to post profits - but those benefits would be cut dramatically if ownership of the company changed while the measures were in place, so the publisher has introduced new measures which will last for the next three years, or until no longer required.

"This Rights Agreement is designed to protect a valuable asset for our Company, one that will benefit all of our stockholders," said Brian Farrell, THQ Chairman and CEO. "The plan will be reviewed annually by an independent Committee of the Board and will terminate in three years or sooner if the Board, upon recommendation of the Committee, determines the plan is no longer needed to preserve the Company's NOLs."

THQ has endured a tough past few years, but a strong performance last year with chart-topping titles such as UFC Undisputed, has helped to change the company's fortunes. Earlier this month it reported full year losses of just $9 million, compared to an astronomical $431 million the previous fiscal year.

More detail on how the publisher has achieved the turnaround is available in the GamesIndustry.biz interview with executive VP Danny Bilson, conducted last June.