EX-99.1 2 c09640exv99w1.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 Q3 RESULTS
     Chicago, Illinois, November 2, 2006 — Midway Games Inc. (NYSE: MWY) today announced results of operations for the three month period ended September 30, 2006. The Company also confirmed its prior revenue guidance and updated its earnings guidance for the full year ending December 31, 2006, as well as provided revenue and earnings guidance for the fourth quarter ending December 31, 2006.
THIRD QUARTER RESULTS
Net revenues for the 2006 third quarter were $27.4 million, compared with 2005 third quarter net revenues of $29.5 million. The 2006 third quarter loss applicable to common stock was $22.2 million which includes $1.0 million of stock option expense, or a loss of $0.24 per share, compared with a 2005 third quarter loss applicable to common stock of $29.1 million, or $0.33 per share.
Other highlights during the third quarter of 2006 include:
•   Midway launched The Ant Bully for PlayStation 2, Nintendo GameCube, Game Boy Advance, and PC; Spy Hunter: Nowhere to Run for PlayStation 2 and Xbox; and The Grim Adventures of Billy & Mandy for PlayStation 2 and GameCube.
 
•   Midway’s real-time strategy PC title launched in June 2006, Rise & Fall: Civilizations at War, which topped the PC charts in the United Kingdom, recently won the prestigious “Best Strategy Game” award from the British Academy of Film and Television Arts, or BAFTA.
David F. Zucker, president and chief executive officer, commented, “We were pleased to exceed our financial expectations for the third quarter, and to continue our relationship with Warner Bros. with the third quarter release of The Ant Bully and The Grim Adventures of Billy & Mandy, and our scheduled release of the Happy Feet game in conjunction with the movie release mid-November.”
OUTLOOK
For the quarter ending December 31, 2006, Midway expects net revenues of approximately $86 million and net income of approximately $2 million. For the fourth quarter, Midway has already released Mortal Kombat: Armageddon for PlayStation 2 and Xbox, and Unreal Anthology for the PC. During the remainder of the quarter, the Company expects to release Happy Feet for multiple platforms; The Grim Adventures of Billy & Mandy, Rampage: Total Destruction, and The Ant Bully for the Nintendo Wii; Blitz: The League for the Xbox 360; and Blitz: The League Overtime, Mortal Kombat: Unchained, and Rush for the PlayStation Portable (PSP). For the year ending December 31, 2006, Midway continues to

 

 

expect net revenues of $155 million, and is revising full year earnings expectations to a net loss of approximately $73 million, compared to our prior guidance of a net loss of approximately $70 million. This is primarily due to decreasing margins on current generation titles. The full year guidance includes approximately $3.5 million of stock option expense.
Mr. Zucker commented, “Our fourth quarter line-up demonstrates both our genre and platform diversity. We expect that 2007 will show the fruits of our investment over the last several years in next generation technology and our sales and marketing infrastructure, and we continue to focus our efforts to position the company for revenue and market share growth in 2007 and beyond.”
CONFERENCE CALL
Midway Games Inc. is hosting a conference call and simultaneous webcast open to the general public at 4:30 P.M. EST today, Thursday, November 2, 2006. The conference call number is (866) 510-0704 or (617) 597-5362 (international callers). The passcode for the call is 82744623. 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 November 9th by dialing (888) 286-8010 or (617) 801-6888 (international callers). The passcode for the replay is 79391706. 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., 11/2/06   page 3
MIDWAY GAMES INC.
Consolidated Statements of Operations
(In thousands, except per share amounts)
(unaudited)
                                 
    Three Months Ended     Nine Months Ended  
    September 30,     September 30,  
    2006     2005     2006     2005  
Net revenues
   $ 27,392     $ 29,527     $ 68,710     $ 80,268  
 
Cost of sales:
                                
Product costs and distribution
     12,541       11,470       30,400       30,440  
Royalties and product development
     14,774       20,469       38,898       45,164  
 
                        
Total cost of sales
     27,315       31,939       69,298       75,604  
 
                        
Gross profit (loss)
     77       (2,412 )     (588 )     4,664  
 
                                
Research and development expense
     7,147       8,756       28,525       28,166  
Selling and marketing expense
     8,059       12,538       27,448       35,597  
Administrative expense
     5,142       4,475       15,934       13,124  
Restructuring and other charges
     1       —       (160 )     —  
 
                        
Operating loss
     (20,272 )     (28,181 )     (72,335 )     (72,223 )
Interest income
     1,360       436       3,497       1,554  
Interest expense
     (3,678 )     (595 )     (7,561 )     (1,319 )
Other income and (expense), net
     781       (292 )     1,757       (1,731 )
 
                        
Loss before income taxes
     (21,809 )     (28,632 )     (74,642 )     (73,719 )
Provision for income taxes
     342       297       1,116       953  
 
                        
Net loss
     (22,151 )     (28,929 )     (75,758 )     (74,672 )
Preferred stock dividends:
                                
Distributed
     —       151       —       277  
Imputed
     —       3       —       6  
 
                        
Loss applicable to common stock
   $ (22,151 )   $ (29,083 )   $ (75,758 )   $ (74,955 )
 
                        
 
                                
Loss per share of common stock:
                                
Basic and diluted
   $ (0.24 )   $ (0.33 )   $ (0.84 )   $ (0.87 )
 
                        
 
                                
Weighted average number of shares outstanding:
                                
Basic and diluted
     90,812       87,068       90,626       86,221  
 
                        
– balance sheets follow –

 

 

Midway Games Inc., 11/2/06   page 4
MIDWAY GAMES INC.
Consolidated Balance Sheets
(In thousands)
                 
    September 30,     December 31,  
    2006     2005  
    (unaudited)          
Assets
                
Current assets:
                
Cash and cash equivalents
   $ 91,494     $ 98,376  
Receivables, net
     11,892       30,835  
Inventories
     2,452       5,811  
Capitalized product development costs
     39,607       27,570  
Prepaid expenses and other current assets
     21,007       16,134  
 
            
Total current assets
     166,452       178,726  
Capitalized product development costs
     9,206       25  
Property and equipment, net
     20,242       19,049  
Goodwill
     41,203       41,108  
Other assets
     11,587       9,355  
 
            
Total assets
   $ 248,690     $ 248,263  
 
            
 
                
Liabilities and Stockholders’ Equity
                
Current liabilities:
                
Accounts payable
   $ 9,629     $ 12,431  
Accrued compensation and related benefits
     2,453       4,060  
Accrued royalties
     3,124       3,938  
Accrued selling and marketing
     2,604       4,418  
Deferred revenue
     2,385       384  
Current portion of long-term debt
     3,333       3,333  
Other accrued liabilities
     16,083       13,440  
 
            
Total current liabilities
     39,611       42,004  
 
                
Convertible senior notes, less unamortized discount
     141,455       75,000  
Long-term debt
     4,445       6,944  
Deferred income taxes
     9,070       8,086  
Other noncurrent liabilities
     507       784  
 
                
Stockholders’ equity:
                
Common stock
     925       922  
Additional paid-in capital
     442,874       431,273  
Accumulated deficit
     (378,857 )     (303,099 )
Accumulated translation adjustment
     (1,573 )     (439 )
Deferred compensation
     —       (3,610 )
Treasury stock
     (9,767 )     (9,602 )
 
            
Total stockholders’ equity
     53,602       115,445  
 
            
Total liabilities and stockholders’ equity
   $ 248,690     $ 248,263  
 
            
– supplemental data follows –

 

 

Midway Games Inc., 11/2/06   page 5
MIDWAY GAMES INC.
Net Revenues by Platform
(In thousands)
(unaudited)
                                 
    Three Months          
    Ended September 30,          
    2006             2005          
Sony PlayStation 2
   $ 15,561       56.8 %   $ 17,271       58.5 %
Microsoft Xbox
     2,202       8.0 %     10,982       37.2 %
Nintendo GameCube
     4,035       14.7 %     216       0.7 %
Nintendo Game Boy Advance
     2,185       8.0 %     137       0.5 %
Sony PlayStation Portable
     744       2.7 %     —       0.0 %
Personal Computer
     1,666       6.1 %     109       0.4 %
Royalties
     1,063       3.9 %     663       2.2 %
Other
     (64 )     -0.2 %     149       0.5 %
 
                            
 
                                
Total
   $ 27,392       100.0 %   $ 29,527       100.0 %
 
                            
                                 
    Nine Months          
    Ended September 30,          
    2006             2005          
Sony PlayStation 2
   $ 36,320       52.9 %   $ 37,463       46.7 %
Microsoft Xbox
     7,809       11.4 %     31,723       39.5 %
Nintendo GameCube
     6,230       9.1 %     3,033       3.8 %
Nintendo Game Boy Advance
     2,418       3.5 %     608       0.8 %
Sony PlayStation Portable
     4,755       6.9 %     —       0.0 %
Personal Computer
     7,118       10.4 %     2,262       2.8 %
Royalties
     3,930       5.7 %     4,193       5.2 %
Other
     130       0.1 %     986       1.2 %
 
                            
 
                                
Total
   $ 68,710       100.0 %   $ 80,268       100.0 %
 
                            
– supplemental data follows –

 

 

Midway Games Inc., 11/2/06   page 6
MIDWAY GAMES INC.
Net Revenues by Geography
(In thousands)
(unaudited)
                                 
    Three Months          
    Ended September 30,          
    2006             2005          
North America
   $ 21,370       78.0 %   $ 24,507       83.0 %
International
     6,022       22.0 %     5,020       17.0 %
 
                            
 
                                
Total
   $ 27,392       100.0 %   $ 29,527       100.0 %
 
                            
                                 
    Nine Months          
    Ended September 30,          
    2006             2005          
North America
   $ 52,673       76.7 %   $ 60,028       74.8 %
International
     16,037       23.3 %     20,240       25.2 %
 
                            
 
                                
Total
   $ 68,710       100.0 %   $ 80,268       100.0 %
 
                            
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