EXHIBIT 99.1
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 ofUnreal Championship 2, as well as the writedown of capitalized product development costs for upcoming releases and the need for additional reserves for markdowns.
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 ofUnreal 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 releasedArea 51for PlayStation 2, Xbox, and PC, andUnreal Championship 2for Xbox in North America and Europe.Area 51was 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 51was 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 forMortal Kombat: Shaolin Monksand Best Sports Game forBlitz: 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 announcedUnreal 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 ofL.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 pictureThe Ant Bully. This is the second animated film in partnership with Warner Bros. Interactive Entertainment, along with the previously announced adaptation ofHappy 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 51andUnreal 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 releaseMortal Kombat: Shaolin Monksfor PlayStation 2 and Xbox,Midway Arcade Treasures 3for PlayStation 2, Xbox, and GameCube, and a compilation ofMidway Arcade Treasures 2and3for the PC. Midway also expects to shipThe Suffering: Ties that Bindfor 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.
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 releaseMortal Kombat: Shaolin Monksfor PlayStation 2 and Xbox,Midway Arcade Treasures 3for PlayStation 2, Xbox, and GameCube, and a compilation ofMidway Arcade Treasures 2and3for the PC. Midway also expects to shipThe Suffering: Ties that Bindfor 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 releaseGauntlet: Seven Sorrowsfor PlayStation 2 and Xbox,Blitz: The Leaguefor PlayStation 2 and Xbox,Ed, Edd n Eddy: The Mis-Edventuresfor PlayStation 2, Xbox, GameCube, GameBoy Advance, and PC, andL.A. RUSHfor PlayStation 2 and Xbox. In addition, the Company also expects to release its first two PlayStation Portable (PSP) titles:Mortal Kombat: Deception UnchainedandMidway Arcade Treasures: Extended Playduring 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 shiftRise & Fall: Civilizations at Warto 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 forRise & Fall: Civilizations at Warto 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 atwww.investor.midway.com or atwww.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 viawww.investor.midway.com.
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 atwww.investor.midway.com or atwww.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 viawww.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.
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)
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)
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)
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)
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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