EX-99.1 2 c07409exv99w1.htm PRESS RELEASE exv99w1
 

Exhibit 99.1
(MIDWAY LOGO)
FOR IMMEDIATE RELEASE
CONTACT:
Geoffrey Mogilner
Midway Games Inc.
(773) 961-2222
gmogilner@midway.com
MIDWAY REPORTS 2006 Q2 RESULTS
Chicago, Illinois, August 3, 2006 — Midway Games Inc. (NYSE: MWY) today announced results of operations for the three month period ended June 30, 2006. The Company also confirmed its prior full year revenue guidance and updated its earnings guidance, as well as provided revenue and earnings guidance for the third quarter ending September 30, 2006.
SECOND QUARTER RESULTS
Net revenues for the 2006 second quarter were $25.9 million, compared with 2005 second quarter net revenues of $36.9 million. The 2006 second quarter loss applicable to common stock was $31.0 million which includes $0.9 million of stock option expense, or a loss of $0.34 per share, compared with a 2005 second quarter loss applicable to common stock of $29.9 million, or $0.35 per share.
Other financial and operating highlights during the second quarter of 2006 include:
•   Midway launched NBA Ballers: Phenom for PlayStation 2, Rampage: Total Destruction for PlayStation 2 and Nintendo GameCube, NBA Ballers: Rebound for the PlayStation Portable (PSP), and MLB Slugfest 2006 for PlayStation 2 and Xbox;
•   Midway also launched Rise & Fall: Civilizations at War worldwide for the PC, which charted as the #1 PC title in the United Kingdom for the three weeks following launch according to Chart-Track;
•   Several of Midway’s games shown at this year’s E3 trade event in Los Angeles received awards and critical praise including Stranglehold with IGN’s PC “BEST ACTION GAME” and GamesRadar’s “TOP 5 XBOX 360 GAMES,” as well as accolades and nominations for Unreal Tournament 2007, Mortal Kombat: Armageddon, and The Lord of the Rings Online: Shadows of Angmar;
•   Midway announced this week that, in addition to the expected Fall releases of Happy Feet and The Ant Bully for the Nintendo Wii, it will add two more games to its Wii lineup: Rampage: Total Destruction, scheduled for release in the fourth quarter, and Mortal Kombat: Armageddon, scheduled for release in first quarter 2007;

 

 

•   Blitz: The League, after reaching Greatest Hits status for the PlayStation 2 and Platinum Hits status for the Xbox during the quarter, has shipped over 1 million units in North America. On the heels of this success, Midway expects to release Blitz: The League for Xbox 360 and the PSP this Fall;
•   In May 2006, Midway completed the private placement of $75.0 million of 7.125% Convertible Senior Notes due 2026. Midway anticipates using the net proceeds of approximately $72.7 million for general corporate purposes; and
•   Midway announced the election of Robert J. Steele to the Board of Directors at its 2006 Annual Meeting of Stockholders that was held Thursday, June 22, 2006.
David F. Zucker, president and chief executive officer, commented, “Second quarter results were in line with guidance, and we are especially pleased by the European performance of Rise & Fall, a new intellectual property, which topped the PC charts in the United Kingdom for the first time in Midway’s history, demonstrating our new European team’s ability to execute.”
OUTLOOK
For the quarter ending September 30, 2006, Midway expects net revenues of approximately $24 million, with a net loss of approximately $23 million. For the third quarter, Midway has already released The Ant Bully for PlayStation 2, GameCube, GameBoy Advance and the PC. During the remainder of the quarter, the Company expects to release Spy Hunter: Nowhere to Run for PlayStation 2 and Xbox. For the year ending December 31, 2006, Midway continues to expect revenues of $155 million driven by major fourth quarter releases of Happy Feet and Mortal Kombat: Armageddon. The Company now expects a full year net loss of approximately $70 million, compared to our prior guidance of $66 million. The increase in net loss is primarily due to costs associated with our recent convertible debt offering completed May 30, 2006. The full year guidance includes approximately $3 million of stock option expense.
Mr. Zucker commented, “We are continuing to position Midway to succeed in the next console cycle, and we believe we have demonstrated to gamers and investors at this year’s E3 conference that we have a strong line-up both short term, with upcoming releases of Mortal Kombat, Spy Hunter, Happy Feet, and Blitz: The League for Xbox 360 and PSP, as well as longer term for next generation and PC markets with Stranglehold, Unreal Tournament 2007, The Lord of the Rings Online, and The Wheelman. We continue to believe that 2007 will show our true potential and the reemergence of Midway as a top tier video game publisher.”
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 3, 2006. The conference call number is (866) 770-7051 or (617) 213-8064 (international callers). The access code for the call is 83753437. 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 August 10th by dialing
(888) 286-8010 or (617) 801-6888

 

 

(international callers). The access code for the replay is 56097116. 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 videogame 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. The Company’s actual results could differ materially from those described in the forward-looking statements as a result of a number of risks and uncertainties, including, without limitation, the performance of the interactive entertainment industry, dependence on new product introductions and the ability to maintain the scheduling of such introductions, the current console platform transition and other technological changes, dependence on major platform manufacturers and other risks more fully described under “Item 1A. Risk Factors” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2005, and in other 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 the Company 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, except as required by law.
– tables follow –

 

 

Midway Games Inc., 8/3/06   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,  
    2006     2005     2006     2005  
Net revenues
   $ 25,922     $ 36,926     $ 41,318     $ 50,741  
 
                                
Cost of sales:
                                
Product costs and distribution
     10,289       13,904       17,859       18,970  
Royalties and product development
     17,009       21,165       24,124       24,695  
 
                        
Total cost of sales
     27,298       35,069       41,983       43,665  
 
                        
Gross profit (loss)
     (1,376 )     1,857       (665 )     7,076  
 
                                
Research and development expense
     10,715       10,444       21,377       19,410  
Selling and marketing expense
     12,937       15,779       19,390       23,059  
Administrative expense
     5,446       4,469       10,792       8,649  
Restructuring and other charges
     (161 )     —       (161 )     —  
 
                        
Operating loss
     (30,313 )     (28,835 )     (52,063 )     (44,042 )
Interest income
     1,143       490       2,138       1,118  
Interest expense
     (2,192 )     (371 )     (3,883 )     (724 )
Other income and (expense), net
     782       (806 )     976       (1,439 )
 
                        
Loss before income taxes
     (30,580 )     (29,522 )     (52,832 )     (45,087 )
Provision for income taxes
     427       328       774       656  
 
                        
Net loss
     (31,007 )     (29,850 )     (53,606 )     (45,743 )
Preferred stock dividends:
                                
Distributed
     —       63       —       126  
Imputed
     —       1       —       3  
 
                        
Loss applicable to common stock
   $ (31,007 )   $ (29,914 )   $ (53,606 )   $ (45,872 )
 
                        
 
                                
Loss per share of common stock:
                                
Basic and diluted
   $ (0.34 )   $ (0.35 )   $ (0.59 )   $ (0.53 )
 
                        
 
                                
Weighted average number of shares outstanding:
                                
Basic and diluted
     90,651       85,941       90,531       85,792  
 
                        
– balance sheets follow –

 

 

Midway Games Inc., 8/3/06   page 5
MIDWAY GAMES INC.
Consolidated Balance Sheets
(In thousands)
                 
    June 30,     December 31,  
    2006     2005  
    (unaudited)          
Assets
                
 
                
Current assets:
                
Cash and cash equivalents
   $ 128,463     $ 98,376  
Receivables, net
     9,788       30,835  
Inventories
     2,924       5,811  
Capitalized product development costs
     37,660       27,570  
Prepaid expenses and other current assets
     13,031       16,134  
 
            
Total current assets
     191,866       178,726  
Capitalized product development costs
     2,660       25  
Property and equipment, net
     20,718       19,049  
Goodwill
     41,143       41,108  
Other assets
     11,230       9,355  
 
            
Total assets
   $ 267,617     $ 248,263  
 
            
 
                
Liabilities and Stockholders’ Equity
                
 
                
Current liabilities:
                
Accounts payable
   $ 7,359     $ 12,431  
Accrued compensation and related benefits
     3,649       4,060  
Accrued royalties
     3,077       3,938  
Accrued selling and marketing
     3,334       4,418  
Deferred revenue
     2,085       384  
Current portion of long-term debt
     3,333       3,333  
Other accrued liabilities
     14,577       13,440  
 
            
Total current liabilities
   $ 37,414     $ 42,004  
 
                
Convertible senior notes, less unamortized discount of $9,095 at June 30, 2006
   $ 140,905     $ 75,000  
Long-term debt
     5,278       6,944  
Deferred income taxes
     8,742       8,086  
Other noncurrent liabilities
     355       784  
 
                
Stockholders’ equity:
                
Common stock
     924       922  
Additional paid-in capital
     441,487       431,273  
Accumulated deficit
     (356,705 )     (303,099 )
Accumulated translation adjustment
     (1,016 )     (439 )
Deferred compensation
     —       (3,610 )
Treasury stock
     (9,767 )     (9,602 )
 
            
Total stockholders’ equity
     74,923       115,445  
 
            
Total liabilities and stockholders’ equity
   $ 267,617     $ 248,263  
 
            
– supplemental data follows –

 

 

Midway Games Inc., 8/3/06   page 6
MIDWAY GAMES INC.
Net Revenues by Platform
(In thousands)
(unaudited)
                                 
    Three Months          
    Ended June 30,          
    2006             2005          
Sony PlayStation 2
   $ 13,835       53.4 %   $ 13,801       37.4 %
Microsoft Xbox
     1,327       5.1 %     18,087       49.0 %
Nintendo GameCube
     1,864       7.2 %     210       0.6 %
Nintendo Game Boy Advance
     41       0.2 %     174       0.5 %
Sony PlayStation Portable
     2,144       8.3 %     —       0.0 %
Personal Computer
     4,978       19.2 %     2,153       5.8 %
License and royalty
     1,616       6.2 %     1,746       4.7 %
Other
     117       0.4 %     755       2.0 %
 
                            
 
                                
Total
   $ 25,922       100.0 %   $ 36,926       100.0 %
 
                            
                                 
    Six Months          
    Ended June 30,          
    2006             2005          
Sony PlayStation 2
   $ 20,758       50.2 %   $ 20,192       39.8 %
Microsoft Xbox
     5,607       13.6 %     20,740       40.9 %
Nintendo GameCube
     2,195       5.3 %     2,817       5.6 %
Nintendo Game Boy Advance
     233       0.6 %     471       0.9 %
Sony PlayStation Portable
     4,011       9.7 %     —       0.0 %
Personal Computer
     5,452       13.2 %     2,153       4.2 %
License and royalty
     2,867       6.9 %     3,531       7.0 %
Other
     195       0.5 %     837       1.6 %
 
                            
 
                                
Total
   $ 41,318       100.0 %   $ 50,741       100.0 %
 
                            
– supplemental data follows –

 

 

Midway Games Inc., 8/3/06   page 7
MIDWAY GAMES INC.
Net Revenues by Geography
(In thousands)
(unaudited)
                                 
    Three Months          
    Ended June 30,          
    2006             2005          
North America
   $ 19,836       76.5 %   $ 24,798       67.2 %
International
     6,086       23.5 %     12,128       32.8 %
 
                            
 
                                
Total
   $ 25,922       100.0 %   $ 36,926       100.0 %
 
                            
                                 
    Six Months          
    Ended June 30,          
    2006             2005          
North America
   $ 31,302       75.8 %   $ 35,521       70.0 %
International
     10,016       24.2 %     15,220       30.0 %
 
                            
 
                                
Total
   $ 41,318       100.0 %   $ 50,741       100.0 %
 
                            
# # #