8-K

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 8-K

CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

Date of Report (Date of earliest event reported): February 23, 2006

MIDWAY GAMES INC.

(Exact Name of Registrant as Specified in Charter)

Delaware	1-12367	22-2906244
(State or Other Jurisdiction of	(Commission File Number)	(I.R.S. Employer Identification
Incorporation)		Number)

2704 West Roscoe Street, Chicago, Illinois 60618
(Address of Principal Executive Offices) (Zip Code)

Registrant’s telephone number, including area code: (773) 961-2222

       Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 2.02 Results of Operations and Financial Condition.

     On February 23, 2006, Midway Games Inc. issued a press release discussing financial results for the fourth quarter and year ended December 31, 2005 and financial guidance. A copy of the press release is attached to this report as Exhibit 99.1. Exhibit 99.1 is incorporated herein by this reference.

     The information in this Current Report on Form 8-K, including the exhibit included herewith, is furnished pursuant to Item 2.02 and shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that section.

Item 9.01 Financial Statements and Exhibits.

(c) Exhibits

Exhibit No.	Description
99.1	Press Release of Midway Games Inc. dated February 23, 2006.

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

	MIDWAY GAMES INC.
February 23, 2006	By:	/s/ David F. Zucker
		David F. Zucker
		President and Chief Executive Officer

EXHIBIT INDEX

Exhibit No.	Description
99.1	Press Release of Midway Games Inc. dated February 23, 2006.

EX-99.1

Exhibit 99.1

FOR IMMEDIATE RELEASE

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 Q4 AND YEAR END RESULTS

Chicago, Illinois, February 23, 2006 — Midway Games Inc. (NYSE: MWY) today announced results of operations for the fourth quarter and full year ended December 31, 2005. The Company also provided guidance for the quarter ending March 31, 2006 and the year ending December 31, 2006.

FOURTH QUARTER RESULTS
Net revenues for the 2005 fourth quarter were $69.8 million, down 9.6% from 2004 fourth quarter net revenues of $77.2 million. The 2005 fourth quarter loss applicable to common stock was $37.8 million, or a loss of $0.42 per basic and diluted share, compared with a 2004 fourth quarter income applicable to common stock of $17.6 million, or $0.19 per diluted share. The 2005 fourth quarter results include a $10.8 million charge related to the restructuring announced in December 2005.

Other recent operating and financial highlights include:

• Midway’s top-selling title for the fourth quarter was Blitz: The League for PlayStation 2 and Xbox. Blitz: The League ranked as a Top 5 Xbox title for October and November and Top 10 PlayStation 2 title in November, according to NPD Funworld. In addition, Blitz: The League was named the Best Alternative Sports Game of 2005 by GameSpot.com.

• During the fourth quarter of 2005, Midway also launched worldwide L.A. RUSH for PlayStation 2 and Xbox, and Ed, Edd n Eddy: The Mis-Edventures for PlayStation 2, GameBoy Advance, and PC. In North America only, Midway launched Ed, Edd n Eddy: The Mis-Edventures for Xbox and GameCube, Midway Arcade Treasures 3 for GameCube, Gauntlet: Seven Sorrows for PlayStation 2 and Xbox, Midway Arcade Treasures: Extended Play for PlayStation Portable (PSP), and Earth 2160 for PC.

• Midway expanded its international operations with the formation of a new sales and marketing subsidiary in Paris, France.

• It was announced this week that Midway will co-publish and distribute Turbine, Inc.’s, The Lord of the Rings Online™: Shadows of Angmar™ in North America. The Lord of the Rings Online is the world’s first and only massively multiplayer online (MMO) role-playing game based upon the literary works of J.R.R. Tolkien.

• Midway announced a collaboration between Vin Diesel’s Tigon Studios and Viacom’s MTV Films, Paramount Pictures and MTV Games to produce a groundbreaking action-entertainment game and movie called The Wheelman^TM.

FULL YEAR RESULTS
Net revenues for the year ended December 31, 2005, were $150.1 million, down 7.1% from the $161.6 million for the year ended December 31, 2004. The loss applicable to common stock for the year ended December 31, 2005, was $112.8 million, or $1.30 per basic and diluted share, compared to a loss applicable to common stock of $24.7 million or $0.34 per basic and diluted share for the year ended December 31, 2004. The results for the year ended December 31, 2005, include a $10.8 million charge related to the restructuring announced in December 2005.

David F. Zucker, president and chief executive officer, commented, “Midway’s fourth quarter results reflect the challenging industry environment that has affected nearly all software publishers at this point in the console transition. Nevertheless, Blitz: The League achieved breakout success for us, and our first Cartoon Network release, Ed, Edd n Eddy, performed well in the quarter.”

Mr. Zucker continued, “Operationally, we continued to invest significant resources in our internal product development efforts and we believe we are establishing a best-in-class next generation product development platform across all of our internal studios. We expect our investments in these areas in the fourth quarter and throughout last year to benefit our future next generation releases.”

OUTLOOK
For the year ending December 31, 2006, Midway expects revenues to grow approximately 3% to $155 million with a reduction in net loss to approximately $66 million, which includes approximately $3 million of stock option expense. For the first quarter ending March 31, 2006, the Company expects net revenues of approximately $13 million, with a net loss of approximately $22 million. For the first quarter of 2006, Midway has already released, Midway Arcade Treasures: Deluxe Edition and L.A. RUSH, both for the PC, and we anticipate releasing Midway Arcade Treasures: Extended Play for PSP and Gauntlet: Seven Sorrows for PlayStation 2 and Xbox in Europe only, and NBA Ballers: Rebound for PSP in late March.

Mr. Zucker concluded, “We remain focused on making the right decisions to become a top tier publisher in the next generation. We have expanded our international presence with new sales, marketing and distribution subsidiaries in France and Germany which are expected to contribute to greater sales and better margins in those regions. We believe our re-emergence as a creator of top-quality products has enabled us to attract valuable partners and licensors such as Warner Brothers, MTV, Turbine, TNA Wrestling, Cartoon Network, the NBA, John Woo, and stars such as Vin Diesel, Chow Yun Fat and Dwayne “The Rock” Johnson. Finally, we intend to continue to build new incremental revenue streams through emerging technologies such as dynamic in-game advertising, and through the monetization of our library of intellectual property on platforms such as the Microsoft Xbox Live Arcade for the Xbox 360. We firmly believe that the progress we are making in these areas is laying the foundation for long-term success as we enter the next console cycle.”

CONFERENCE CALL

Midway Games Inc. is hosting a conference call and simultaneous webcast open to the general public at 4:45 p.m. EST today, Thursday, February 23, 2006. The conference call number is (800) 295-3991 or (617) 614-3924 (international callers). The access code for the call is 95619891. Please call ten 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.earnings.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 March 2 by dialing (888) 286-8010 or (617) 801-6888 (international callers). The access code for the replay is 72266601. Additionally, a replay of the call will be available for twelve months on the Internet via www.investor.midway.com.

ABOUT MIDWAY
Midway Games Inc. (NYSE:MWY), headquartered in Chicago, Illinois, with offices throughout the world, is a leading developer and publisher of interactive entertainment software for major video game systems and personal computers. More information about Midway and its products can be found at www.midway.com.

This press release contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995 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 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. Each forward-looking statement, including, without limitation, financial guidance, speaks only as of the date on which it is made, and Midway undertakes no obligation to update any forward-looking statement to reflect events or circumstances after the date on which it is made or to reflect the occurrence of anticipated or unanticipated events or circumstances.

– tables follow –

page 4                     

MIDWAY GAMES INC.

Consolidated Statements of Operations

(In thousands, except per share amounts)

	Three-Months Ended December 31,						Year Ended December 31,
	2005			2004			2005			2004
	(Unaudited)			(Unaudited)			(Unaudited)
Net revenues	$	69,810		$	77,227		$	150,078		$	161,595
Cost of sales:
Product costs and distribution		25,772			26,905			56,212			62,742
Royalties and product development		30,688			14,556			75,852			41,275
Total cost of sales		56,460			41,461			132,064			104,017
Gross profit		13,350			35,766			18,014			57,578
Research and development expense		11,527			5,963			39,693			25,621
Selling and marketing expense		21,592			13,142			57,189			41,159
Administrative expense		5,740			4,946			18,864			15,949
Restructuring and other charges		10,784			21			10,784			(106	)
Operating income (loss)		(36,293	)		11,694			(108,516	)		(25,045	)
Interest income		895			505			2,449			1,267
Interest expense		(1,800	)		(338	)		(3,119	)		(1,248	)
Other income and (expense), net		(309	)		6,098			(2,040	)		6,395
Income (loss) before income taxes		(37,507	)		17,959			(111,226	)		(18,631	)
Provision for income taxes		308			329			1,261			1,314
Net income (loss)		(37,815	)		17,630			(112,487	)		(19,945	)
Preferred stock dividends:
Distributed		5			64			282			1,884
Imputed		0			1			6			2,915
Income (loss) applicable to common stock	$	(37,820	)	$	17,565		$	(112,775	)	$	(24,744	)
Income (loss) per share of common stock:
Basic	$	(0.42	)	$	0.20		$	(1.30	)	$	(0.34	)
Diluted	$	(0.42	)	$	0.19		$	(1.30	)	$	(0.34	)
Weighted average number of shares outstanding:
Basic		89,062			85,720			86,937			72,421
Diluted		89,062			89,253			86,937			72,421

– balance sheet follows –

page 5                    

MIDWAY GAMES INC.

Consolidated Balance Sheets
(In thousands)

	December 31,			December 31,
	2005			2004
	(Unaudited)
Assets
Current assets:
Cash and cash equivalents	$	98,376		$	118,313
Receivables, net		30,835			15,545
Inventories		5,811			6,893
Capitalized product development costs		27,570			27,850
Prepaid expenses and other current assets		16,134			6,749
Total current assets		178,726			175,350
Capitalized product development costs		25			809
Property and equipment, net		19,049			15,470
Goodwill		41,108			39,533
Other assets		9,355			11,155
Total assets	$	248,263		$	242,317
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	12,431		$	6,673
Accrued compensation and related benefits		4,060			5,183
Accrued royalties		3,938			3,493
Accrued selling and marketing		4,418			3,525
Current portion of long-term debt		3,333			3,333
Other accrued liabilities		13,824			11,249
Total current liabilities		42,004			33,456
Convertible senior notes		75,000			—
Long-term debt		6,944			10,278
Deferred income taxes		8,086			6,773
Other noncurrent liabilities		784			340
Redeemable convertible preferred stock, Series D, redeemable at $0 and $4,460, respectively		—			4,453
Stockholders’ equity:
Common stock		922			879
Additional paid-in capital		431,273			392,177
Accumulated deficit		(303,099	)		(190,612	)
Accumulated translation adjustment		(439	)		(1,420	)
Deferred compensation		(3,610	)		(4,379	)
Treasury stock		(9,602	)		(9,628	)
Total stockholders’ equity		115,445			187,017
Total liabilities and stockholders’ equity	$	248,263		$	242,317

– supplemental data follow –

page 6                    

Midway Games Inc.
Revenue by Platform
(in thousands)

		Three-Months
	Ended December 31,
	2005				2004
Sony PlayStation 2	$	40,127	57.5	%	$	45,583	59.0	%
Microsoft Xbox		19,847	28.4	%		28,666	37.1	%
Nintendo Gamecube		2,419	3.5	%		2,143	2.8	%
Personal Computer		1,754	2.5	%		0	0.0	%
Sony PlayStation Portable		1,729	2.5	%		0	0.0	%
Nintendo Game Boy Advance		1,725	2.5	%		66	0.1	%
Royalties		1,952	2.8	%		422	0.5	%
Other		257	0.3	%		347	0.5	%
Total	$	69,810	100.0	%	$	77,227	100.0	%

			Year
	Ended December 31,
	2005					2004
Sony PlayStation 2	$	77,590		51.7	%	$	97,299	60.2	%
Microsoft Xbox		51,570		34.4	%		54,889	34.0	%
Nintendo Gamecube		5,452		3.6	%		4,764	2.9	%
Personal Computer		4,016		2.7	%		0	0.0	%
Nintendo Game Boy Advance		2,333		1.6	%		293	0.2	%
Sony PlayStation Portable		1,729		1.2	%		0	0.0	%
Royalties		6,145		4.1	%		3,588	2.2	%
Other		1,243		0.7	%		762	0.5	%
Total	$	150,078		100.0	%	$	161,595	100.0	%

Midway Games Inc.
Revenue by Geography
(in thousands)

		Three-Months
	Ended December 31,
	2005				2004
North America	$	58,257	83.5	%	$	62,697	81.2	%
International		11,553	16.5	%		14,530	18.8	%
Total	$	69,810	100.0	%	$	77,227	100.0	%

			Year
	Ended December 31,
	2005					2004
North America	$	118,285		78.8	%	$	132,075	81.7	%
International		31,793		21.2	%		29,520	18.3	%
Total	$	150,078		100.0	%	$	161,595	100.0	%

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