EX-99.1 3 c97451exv99w1.htm PRESS RELEASE exv99w1
 

EXHIBIT 99.1
(MIDWAY LOGO)
     
CONTACT:
    
Geoffrey Mogilner
  Joseph N. Jaffoni, Carol Young
Midway Games Inc.
  Jaffoni & Collins Incorporated
(773) 961-2222
  (212) 835-8500
gmogilner@midway.com
  mwy@jcir.com
MIDWAY REPORTS 2005 Q2 RESULTS
Chicago, Illinois, August 4, 2005 — Midway Games Inc. (NYSE: MWY) today announced results of operations for the three month period ended June 30, 2005. The Company also updated its guidance for the year ending December 31, 2005 and provided revenue and earnings guidance for the third quarter ending September 30, 2005.
SECOND QUARTER RESULTS
Net revenues for the 2005 second quarter were $36.9 million, compared with 2004 second quarter net revenues of $47.3 million. The 2005 second quarter loss applicable to common stock was $29.9 million or a loss of $0.35 per share, compared with a 2004 second quarter loss applicable to common stock of $11.2 million or a loss of $0.17 per share. The second quarter results were below previously provided expectations primarily due to lower-than-forecasted sales of Unreal Championship 2, as well as the writedown of capitalized product development costs for upcoming releases and the need for additional reserves for markdowns.
Other recent operating and financial highlights include:
•   During the 2005 second quarter, Midway released Area 51 for PlayStation 2, Xbox, and PC, and Unreal Championship 2 for Xbox in North America and Europe. Area 51 was a top 5-selling Xbox game and #6 overall game for the month of May in the U.S. according to NPD Funworld. In addition, in the United Kingdom, Area 51 was in the top 10 for four weeks according to Chart Track;
 
•   Several of Midway’s upcoming games shown at this year’s E3 industry trade event in Los Angeles received nominations for Game Critics Awards including Best Fighting Game for Mortal Kombat: Shaolin Monks and Best Sports Game for Blitz: The League;
 
•   Also at E3, Midway announced its first next generation title, Stranglehold, which is being developed in collaboration with world-renowned action film director, John Woo, and starring Chow Yun-Fat. In addition, the Company announced Unreal Tournament 2007 for PC, in development at Epic Games, Inc.;

 

•   Midway announced on June 27, 2005, a strategic relationship with MTV, a division of Viacom, Inc., to jointly market three upcoming video game titles, beginning with the release of L.A. RUSH, expected to ship in the 2005 fourth quarter;
 
•   Midway announced this morning an agreement with Warner Bros. Interactive Entertainment for the rights to publish interactive games based on the upcoming computer animated motion picture The Ant Bully. This is the second animated film in partnership with Warner Bros. Interactive Entertainment, along with the previously announced adaptation of Happy Feet; and
 
•   Midway announced this morning that it had acquired development studio Ratbag Holdings Pty Ltd., based in Australia, expanding the Company’s internal product development organization globally.
David F. Zucker, president and chief executive officer, commented, “Extending our reputation for producing high-quality frontline titles, Midway’s second quarter product releases, Area 51 and Unreal Championship 2, generated an enthusiastic response from critics and the gaming community. Importantly, our upcoming holiday lineup is garnering early positive feedback from reviewers.”
Mr. Zucker continued, “Our efforts to expand our publishing business through strategic partnerships such as with MTV and Warner Bros. Interactive Entertainment, and to grow our internal product development capabilities through acquisitions and organic growth, demonstrate that Midway’s turnaround strategy continues to gain momentum. We are committed to creating high-quality innovative content for this and the next console cycle, and we have assembled excellent internal development teams and global marketing resources to support this goal.”
OUTLOOK
For the quarter ending September 30, 2005, the Company expects net revenues of approximately $30 million, with a net loss of approximately $19 million. During the quarter, Midway expects to release Mortal Kombat: Shaolin Monks for PlayStation 2 and Xbox, Midway Arcade Treasures 3 for PlayStation 2, Xbox, and GameCube, and a compilation of Midway Arcade Treasures 2 and 3 for the PC. Midway also expects to ship The Suffering: Ties that Bind for PlayStation 2, Xbox, and PC at the end of September, 2005, although due to the timing of its shipment at the end of the quarter, the Company expects to recognize the associated revenues in the fourth quarter.
During the fourth quarter of 2005, Midway expects to release Gauntlet: Seven Sorrows for PlayStation 2 and Xbox, Blitz: The League for PlayStation 2 and Xbox, Ed, Edd n Eddy: The Mis-Edventures for PlayStation 2, Xbox, GameCube, GameBoy Advance, and PC, and L.A. RUSH for PlayStation 2 and Xbox. In addition, the Company also expects to release its first two PlayStation Portable (PSP) titles: Mortal Kombat: Deception Unchained and Midway Arcade Treasures: Extended Play during the quarter.
“We are very excited about our product lineup for the next two quarters as we look to launch a diverse lineup of games that include several key Midway franchises, new family-friendly products and our first-ever PSP titles. We are committed to investing in our internal development resources and recruiting top industry talent, as evidenced by our acquisition of Ratbag, to establish the infrastructure necessary to build scale and succeed in the next generation. In addition, with the expectation of a crowded fourth quarter market for real-time strategy titles, we believe it is prudent to shift Rise & Fall: Civilizations at War to 2006 to benefit from a less competitive release window,” added Mr. Zucker.

 

For the year ending December 31, 2005, Midway has revised its revenue expectations in part due to the rescheduling of the release date for Rise & Fall: Civilizations at War to the first quarter of 2006 from the fourth quarter of 2005. As such, for the year ending December 31, 2005, the Company now expects net revenues of approximately $200 million, as compared to the Company’s previous estimate of $225 million. Additionally, the Company now expects a net loss of approximately $60 million, an increase from the Company’s prior expectation of a net loss of approximately $47 million.
CONFERENCE CALL
Midway Games Inc. is hosting a conference call and simultaneous webcast open to the general public at 4:45 p.m. EDT today, Thursday, August 4, 2005. The conference call number is (706) 758-2388; please call five minutes in advance to ensure that you are connected prior to the presentation. Interested parties may also access the live call on the Internet at www.investor.midway.com or at www.fulldisclosure.com. Please log-on fifteen minutes in advance to ensure that you are connected prior to the call’s initiation. Following its completion, a replay of the call can be accessed until August 6 at 6:45 p.m. EDT, by dialing 800/633-8284 or 402/977-9140 (international callers). The access code for the replay is 21251505. Additionally, a replay of the call will be available for twelve months on the Internet via www.investor.midway.com.
ABOUT MIDWAY
Headquartered in Chicago, IL with offices in San Diego, CA, Seattle, WA, Austin, TX, Los Angeles, CA, Munich, Germany, London, UK, and Adelaide, AUS, Midway Games Inc. (NYSE:MWY) is a leading developer and publisher of interactive entertainment software for major video game systems. More information about Midway can be obtained at www.midway.com.
This press release contains “forward-looking statements” within the meaning of the federal securities laws concerning future business conditions and the outlook for Midway Games Inc. (the “Company”) based on currently available information that involve risks and uncertainties. The Company’s actual results could differ materially from those anticipated in the forward-looking statements as a result of these risks and uncertainties, including, without limitation, the financial strength of the interactive entertainment industry, dependence on new product introductions and the ability to maintain the scheduling of such introductions, the upcoming console platform transition and other technological changes, dependence on major platform manufacturers, adequacy of capital resources and other risks more fully described under “Item 1. Business — Risk Factors” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2004, and in the more recent filings made by the Company with the Securities and Exchange Commission.
– tables follow –

 

     
Midway Games Inc., 8/4/05
  page 4
MIDWAY GAMES INC.
Consolidated Statements of Operations
(In thousands, except per share amounts)
(Unaudited)
                                 
    Three-Months Ended     Six-Months Ended  
    June 30,     June 30,  
    2005     2004     2005     2004  
 
                                
Net revenues
   $ 36,926     $ 47,286     $ 50,741     $ 67,417  
 
                                
Cost of sales:
                                
Product costs and distribution
     13,904       17,395       18,970       26,570  
Royalties and product development
     21,165       13,295       24,695       19,620  
 
                        
Total cost of sales
     35,069       30,690       43,665       46,190  
 
                        
Gross profit
     1,857       16,596       7,076       21,227  
 
                                
Research and development expense
     10,444       8,518       19,410       13,587  
Selling and marketing expense
     15,779       12,618       23,059       21,696  
Administrative expense
     4,469       4,425       8,649       8,734  
 
                        
Operating loss
     (28,835 )     (8,965 )     (44,042 )     (22,790 )
Interest income
     490       257       1,118       355  
Interest expense
     (371 )     (394 )     (724 )     (572 )
Other income and (expense), net
     (806 )     (64 )     (1,439 )     (2 )
 
                        
Loss before income taxes
     (29,522 )     (9,166 )     (45,087 )     (23,009 )
Provision for income taxes
     328       328       656       656  
 
                        
Net loss
     (29,850 )     (9,494 )     (45,743 )     (23,665 )
Preferred stock dividends:
                                
Distributed
     63       876       126       1,379  
Imputed
     1       833       3       1,143  
Loss applicable to common stock
   $ (29,914 )   $ (11,203 )   $ (45,872 )   $ (26,187 )
 
                        
 
                                
Basic and diluted loss per share of common stock
   $ (0.35 )   $ (0.17 )   $ (0.53 )   $ (0.43 )
 
                        
 
                                
Average number of shares outstanding
     85,941       67,177       85,792       61,503  
 
                        
– balance sheet follows –

 

     
Midway Games Inc., 8/4/05
  page 5
MIDWAY GAMES INC.
Consolidated Balance Sheets
(In thousands)
                 
    June 30,     December 31,  
    2005     2004  
    (Unaudited)          
Assets
                
Current assets:
                
Cash and cash equivalents
   $ 59,221     $ 118,313  
Receivables, net
     13,169       15,724  
Inventories
     5,495       6,893  
Capitalized product development costs
     41,131       27,850  
Prepaid expenses and other current assets
     5,693       6,570  
 
            
Total current assets
     124,709       175,350  
Capitalized product development costs
     1,047       809  
Property and equipment, net
     19,279       15,470  
Goodwill
     39,577       39,533  
Other assets
     11,770       11,155  
 
            
Total assets
   $ 196,382     $ 242,317  
 
            
 
                
Liabilities and Stockholders’ Equity
                
Current liabilities:
                
Accounts payable
   $ 8,814     $ 6,673  
Accrued compensation and related benefits
     2,947       5,183  
Accrued royalties
     2,186       3,493  
Accrued selling and marketing
     2,742       3,525  
Current portion of long-term debt
     3,333       3,333  
Other accrued liabilities
     11,006       11,249  
 
            
Total current liabilities
     31,028       33,456  
Long-term debt
     8,611       10,278  
Deferred income taxes
     7,429       6,773  
Other noncurrent liabilities
     681       340  
 
                
Redeemable convertible preferred stock, Series D, redeemable at $4,460
     4,456       4,453  
 
                
Stockholders’ equity:
                
Common stock
     881       879  
Additional paid-in capital
     393,365       392,177  
Accumulated deficit
     (236,355 )     (190,612 )
Accumulated translation adjustment
     (873 )     (1,420 )
Deferred compensation
     (3,213 )     (4,379 )
Treasury stock
     (9,628 )     (9,628 )
 
            
Total stockholders’ equity
     144,177       187,017  
 
                
 
            
Total liabilities and stockholders’ equity
   $ 196,382     $ 242,317  
 
            
– supplemental data follow –

 

     
Midway Games Inc., 8/4/05
  page 6
MIDWAY GAMES INC.
Net Revenue by Platform
(in thousands)
                                 
    Three-Months          
    Ended June 30,          
Platform   2005             2004          
 
                                
Sony PlayStation 2
   $ 13,801       37.4 %   $ 28,822       61.0 %
Microsoft Xbox
     18,087       49.0 %     16,527       34.9 %
Nintendo Gamecube
     210       0.6 %     348       0.7 %
Nintendo Game Boy Advance
     174       0.5 %     35       0.1 %
Personal Computer
     2,153       5.8 %     0       0.0 %
Royalties and Other
     2,501       6.7 %     1,554       3.3 %
 
                            
Total
   $ 36,926       100.0 %   $ 47,286       100.0 %
 
                            
MIDWAY GAMES INC.
Net Revenue by Geography
(in thousands)
                                 
    Three-Months          
    Ended June 30,          
Region   2005             2004          
 
                                
North America
   $ 24,798       67.2 %   $ 42,255       89.4 %
International
     12,128       32.8 %     5,031       10.6 %
 
                            
Total
   $ 36,926       100.0 %   $ 47,286       100.0 %
 
                            
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