Midway Games (MWY) 8-K Midway Reports 2008 Q3 Results

EXHIBIT 99.1

FOR IMMEDIATE RELEASE

CONTACT:
Geoffrey Mogilner
Midway Games Inc.
(773) 961-2222
gmogilner@midway.com

MIDWAY REPORTS 2008 Q3 RESULTS

Chicago, Illinois, November 10, 2008— Midway Games Inc. (NYSE: MWY) today announced results of operations for the three month period ended September 30, 2008. The Company also provided revenue and earnings guidance for the fourth quarter and full year ending December 31, 2008.

THIRD QUARTER RESULTS

Net revenues for the 2008 third quarter were $51.4 million, compared to the 2007 third quarter net revenues of $36.7 million and in line with prior guidance of approximately $52 million. The 2008 third quarter net loss was $75.9 million, or a loss of $0.83 per basic and diluted share, compared with a 2007 third quarter net loss of $33.5 million, or a loss of $0.37 per basic and diluted share, and below the Company’s revised guidance of a loss of $0.70, primarily due to additional amortization and writedowns of capitalized product development costs.

On a non-GAAP basis, excluding the impact of stock option expense and other non-cash items, the 2008 third quarter loss was $66.3 million or a loss of $0.72 per basic and diluted share, below the Company’s revised non-GAAP guidance of a loss of $0.60. For the 2007 third quarter, on a non-GAAP basis, the Company reported a loss of $28.0 million, or a loss of $0.31 per basic and diluted share. A reconciliation of non-GAAP results to GAAP results is provided at the end of this press release.

“In the second and third quarters of 2008 we have focused on addressing several critical issues that were affecting the ability of our company to achieve success, and the third quarter results and associated non-cash charges reflect that effort,” said Matt Booty, president and CEO. “Our current focus is the upcoming launch ofMortal Kombat vs. DC Universe, which aligns our Company with the exceptional Warner Bros. brand of DC Comics. We expect that the fourth quarter will represent significant progress toward completion of these efforts, and that we will enter 2009 with a renewed focus on Midway’s key strengths.”

OPERATING HIGHLIGHTS

During the third quarter, Midway executed on several operational milestones, including the combination of its Southern California studios, the optimization of its Austin facility and cancellation of an associated unannounced game, and the entrance into a receivables factoring agreement to offset the costs related to manufacturing its fall game releases. These operational milestones, combined with the Company’s favorable exit from underperforming licenses early in the fourth quarter, are designed to ensure successful launches, minimize costs, and focus resources on Midway’s strongest licenses, core game franchises such asMortal Kombat, TNA iMPACT!andWheelman, as well as future licenses and new IP.

Other recent operating highlights include:

• During the third quarter, Midway released three well-received games:TNA iMPACT!for Xbox 360, PS3, PS2, and Wii worldwide, and in North AmericaUnreal Tournament IIIfor Xbox 360 andMortal Kombat: Kollectionfor the PS2.

• In August, Midway’s expansive line-up for this holiday season and beyond was received very positively at Games Convention 2008 in Leipzig, Germany, with more than 200,000 consumers and press in attendance.

• In October, Midway launchedBlitz: The League II, with significant media support from the game’s cover athlete, Lawrence Taylor.

• On October 30, 2008, Midway announced that Matthew V. Booty was appointed by the Board of Directors as President and CEO of the company, and on November 5, 2008, Midway announced that Ryan G. O’Desky has been named CFO and Senior Vice President — Finance.

“During the quarter we executed on a series of strategic and financial moves that reinforce our commitment to developing games that meet clear profitability and scheduling goals. While some of those steps negatively impacted earnings, they were necessary to ensure we are better positioned for long-term success,” noted Matt Booty, president and CEO. “More importantly, we launched three high quality games, and completed the final touches on our highly anticipated fourth quarter releases.”

OUTLOOK

During the fourth quarter, the Company has already released worldwideBlitz: The League IIfor PS3 and Xbox 360,Game Party 2for the Wii, andTouchmaster IIandMechanic Masterfor Nintendo DS. Midway also announced that it expects its flagship gameMortal Kombat vs. DC Universefor Xbox 360 and PS3 to be available in stores on November 16^th in North America and November 21^st in Europe. For the fourth quarter ending December 31, 2008, Midway expects the following:

• Net revenues of approximately $105 million, with net loss of approximately $0.20 per basic and diluted share.

• On a non-GAAP basis, Midway expects a fourth quarter loss of approximately $0.07 per basic and diluted share, which excludes approximately $0.13 of stock option expense, non-cash convertible debt interest expense, and deferred income tax expense related to goodwill.

For the full year ending December 31, 2008, Midway expects the following:

• Net revenues of approximately $210 million, with a net loss of approximately $1.78 per basic and diluted share.

• On a non-GAAP basis, Midway expects a full year loss of approximately $1.37 per basic and diluted share, which excludes approximately $0.41 of stock option expense, non-cash convertible debt interest expense, and deferred income tax expense related to goodwill.

NON-GAAP FINANCIAL MEASURES

Midway has included non-GAAP financial measures in its quarterly results and 2008 fourth quarter and full year outlook. Midway does not intend for the presentation of the non-GAAP financial measures to be isolated from, a substitute for, or superior to the information that has been presented in accordance with

GAAP. In addition, information used in the non-GAAP financial measures may be presented differently from non-GAAP financial measures used by other companies. The non-GAAP financial measures used by Midway include non-GAAP basic and diluted loss per share.

Midway considers the non-GAAP financial measures used herein, when used together with the corresponding GAAP measures, to be helpful in providing meaningful additional information regarding its performance by excluding specific items that may not be indicative of Midway’s core business or projected operating results. These non-GAAP financial measures exclude the following items:

Stock Option Expense. Midway adopted SFAS No. 123R, “Share-Based Payment” beginning January 1, 2006, in which it began to recognize as an expense the fair value of its stock options. A non-GAAP measurement that excludes stock option expense identifies this component of compensation expense that does not require a cash outlay.

Non-cash convertible debt interest expense. In accordance with GAAP, Midway is required to record discounts on its convertible senior notes as a result of decreases in the conversion prices of these notes. These amounts are amortized as interest expense through the first date on which the holders may redeem the notes. There is no cash outlay associated with this interest expense. A non-GAAP measurement that excludes the convertible debt non-cash interest expense allows for a more direct comparison to prior periods, and also distinguishes this interest expense from the remainder of the interest expense, which requires (or required) a cash outlay by Midway.

Deferred tax expense related to goodwill. Midway recognizes deferred tax expense related to increases in the difference between the book basis and tax basis of goodwill. Goodwill is not amortized for book purposes but is amortized for tax purposes. This increase in the book to tax basis difference causes an increase in the related deferred tax liability balance that cannot be offset against deferred tax assets. Given the nature of this deferred tax expense, a non-GAAP measurement that excludes this expense is deemed appropriate.

In the future, Midway may consider whether other significant items should be excluded when arriving at non-GAAP measures of financial performance.

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, Monday, November 10, 2008. The conference call number is (866) 271-0675 or (617) 213-8892 (international callers). The passcode for the call is 23581791. 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 17 by dialing (888) 286-8010 or (617) 801-6888 (international callers). The passcode for the replay is 37635497. 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.

FORWARD-LOOKING STATEMENTS

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 involves 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 performance of the interactive entertainment industry, dependence on new product introductions and the ability to maintain the scheduling of such introductions, decisions by Sumner Redstone or his affiliates with respect to his ownership or trading of our common stock and other risks more fully described under “Item 1A. Business — Risk Factors” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2007, and in any 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, except as required by law.

— tables follow —

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Midway Games Inc., 11/10/08

MIDWAY GAMES INC.

Consolidated Statements of Operations

(In thousands, except per share amounts)

(unaudited)

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2008			2007			2008			2007
Net revenues	$	51,359		$	36,747		$	104,711		$	79,618
Cost of sales:
Product costs and distribution		20,554			13,472			46,398			31,141
Royalties and product development		50,072			24,196			80,703			36,643
Total cost of sales		70,626			37,668			127,101			67,784
Gross profit (loss)		(19,267	)		(921	)		(22,390	)		11,834
Research and development expense		9,244			6,245			22,055			20,250
Selling and marketing expense		15,282			14,173			33,894			29,174
Administrative expense		5,181			5,000			16,976			15,936
Other charges		11,661			—			11,661			(783	)
Operating loss		(60,385	)		(26,339	)		(106,726	)		(52,743	)
Interest income		81			498			340			2,075
Interest expense		(13,256	)		(8,429	)		(35,494	)		(17,600	)
Other income (expense), net		(2,129	)		1,160			(1,353	)		2,003
Loss before income taxes		(75,689	)		(33,110	)		(143,233	)		(66,265	)
Provision for income taxes		256			417			1,509			1,381
Net loss	$	(75,945	)	$	(33,527	)	$	(144,742	)	$	(67,646	)
Loss per share of common stock:
Basic and diluted	$	(0.83	)	$	(0.37	)	$	(1.58	)	$	(0.74	)
Weighted average number of shares outstanding:
Basic and diluted		91,641			91,180			91,554			91,095

— balance sheet follows —

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Midway Games Inc., 11/10/08

MIDWAY GAMES INC.
Consolidated Balance Sheets
(In thousands)

	September 30,			December 31,
	2008			2007
	(unaudited)
Assets
Current assets:
Cash and cash equivalents	$	10,353		$	27,524
Restricted cash		231			—
Receivables, net		21,644			44,527
Inventories		8,586			3,772
Capitalized product development costs		48,628			51,252
Prepaid expenses and other current assets		17,843			13,362
Total current assets		107,285			140,437
Restricted cash		888			—
Assets held for sale		2,793			—
Capitalized product development costs		60			2,947
Property and equipment, net		10,937			19,298
Goodwill		41,109			41,307
Other assets		4,451			9,372
Total assets	$	167,523		$	213,361
Liabilities and Stockholders’ Equity (Deficit)
Current liabilities:
Accounts payable	$	22,360		$	29,642
Accrued compensation and related benefits		6,512			6,134
Accrued royalties		21,213			12,769
Accrued selling and marketing		4,041			5,645
Deferred revenue		3,421			2,940
Current portion of long-term debt		59,975			—
Convertible senior notes, less unamortized discount		55,794			—
Other accrued liabilities		15,890			14,190
Total current liabilities		189,206			71,320
Convertible senior notes, less unamortized discount		50,639			82,198
Long-term debt		28,952			19,167
Deferred income taxes		11,700			10,715
Other noncurrent liabilities		536			880
Stockholders’ equity (deficit):
Common stock		935			933
Additional paid-in capital		522,337			521,031
Accumulated deficit		(625,215	)		(480,474	)
Accumulated translation adjustment		(1,784	)		(2,629	)
Treasury stock		(9,783	)		(9,780	)
Total stockholders’ equity (deficit)		(113,510	)		29,081
Total liabilities and stockholders’ equity (deficit)	$	167,523		$	213,361

— supplemental data follows —

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Midway Games Inc., 11/10/08

MIDWAY GAMES INC.
Consolidated Non-GAAP Operating Results
(In thousands, except per share amounts)
(unaudited)

The following table reconciles Midway’s net loss and basic and diluted loss per share as presented in its Consolidated Statements of Operations as prepared in accordance with Generally Accepted Accounting Principles (“GAAP”) in the United States of America with its non-GAAP loss and non-GAAP basic and diluted loss per share. Midway’s non-GAAP loss and non-GAAP basic and diluted loss per share exclude stock option expense, convertible debt non-cash interest expense, and deferred tax expense related to goodwill.

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2008			2007			2008			2007
Net loss	$	(75,945	)	$	(33,527	)	$	(144,742	)		(67,646	)
Stock option expense (1)		234			175			515			1,343
Convertible debt non-cash interest expense		9,104			4,999			24,235			8,004
Deferred tax expense related to goodwill		329			329			985			985
Non-GAAP loss	$	(66,278	)	$	(28,024	)	$	(119,007	)	$	(57,314	)

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2008			2007			2008			2007
Basic and diluted loss per share of common stock		(0.83	)		(0.37	)	$	(1.58	)	$	(0.74	)
Stock option expense (1)		0.00			0.00			0.01			0.01
Convertible debt non-cash interest expense		0.10			0.06			0.26			0.09
Deferred tax expense related to goodwill		0.01			0.00			0.01			0.01
Non-GAAP basic and diluted loss per share of common stock	$	(0.72	)	$	(0.31	)	$	(1.30	)	$	(0.63	)

(1) Excludes stock option costs capitalized as product development costs.

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Midway Games Inc., 11/10/08

MIDWAY GAMES INC.
Net Revenues by Platform
(in thousands)

	Three Months
	Ended September 30,
	2008					2007
Sony PlayStation 3	$	7,870		15.3	%	$	—		0.0	%
Microsoft Xbox 360		19,005		37.0	%		25,655		69.8	%
Nintendo Wii		9,794		19.1	%		2,137		5.8	%
Sony PlayStation 2		8,023		15.6	%		1,946		5.3	%
Microsoft Xbox		(38	)	(0.1	)%		(55	)	(0.1	)%
Nintendo Gamecube		(1	)	0.0	%		103		0.3	%
Sony PlayStation Portable		579		1.1	%		1,239		3.4	%
Nintendo Dual Screen		2,264		4.4	%		1,806		4.9	%
Nintendo Game Boy Advance		4		0.0	%		164		0.4	%
Personal Computer		1,310		2.6	%		3,729		10.1	%
Royalties and other		2,549		5.0	%		23		0.1	%
Total	$	51,359		100.0	%	$	36,747		100.0	%

	Nine Months
	Ended September 30,
	2008					2007
Sony PlayStation 3	$	23,997		22.9	%	$	—	0.0	%
Microsoft Xbox 360		25,201		24.1	%		33,544	42.1	%
Nintendo Wii		29,288		28.0	%		10,128	12.7	%
Sony PlayStation 2		10,532		10.1	%		8,971	11.3	%
Microsoft Xbox		(13	)	0.0	%		730	0.9	%
Nintendo Gamecube		(9	)	0.0	%		841	1.1	%
Sony PlayStation Portable		2,153		2.0	%		2,779	3.5	%
Nintendo Dual Screen		6,732		6.4	%		5,342	6.7	%
Nintendo Game Boy Advance		26		0.0	%		1,403	1.8	%
Personal Computer		1,362		1.3	%		13,865	17.4	%
Royalties and other		5,442		5.2	%		2,015	2.5	%
Total	$	104,711		100.0	%	$	79,618	100.0	%

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Midway Games Inc., 11/10/08

MIDWAY GAMES INC.
Net Revenues by Geography
(in thousands)

	Three Months
	Ended September 30,
	2008				2007
North America	$	36,146	70.4	%	$	18,814	51.2	%
International		15,213	29.6	%		17,933	48.8	%
Total	$	51,359	100.0	%	$	36,747	100.0	%

	Nine Months
	Ended September 30,
	2008				2007
North America	$	58,606	56.0	%	$	48,792	61.3	%
International		46,105	44.0	%		30,826	38.7	%
Total	$	104,711	100.0	%	$	79,618	100.0	%

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