Exhibit 99.1
FOR IMMEDIATE RELEASE
CONTACT: |
|
|
Miguel Iribarren |
| Joseph N. Jaffoni |
MIDWAY GAMES INC. |
| Jaffoni & Collins Incorporated |
(773) 961-2222 |
| (212) 835-8500 |
miribarren@midwaygames.com |
| mwy@jcir.com |
MIDWAY GAMES INC. MAKES A CORRECTION TO ITS Q2 2004 RESULTS
CHICAGO, Illinois, August 4, 2004 – Midway Games Inc. (NYSE:MWY) today announced that its second quarter net loss was $9.5 million and loss applicable to common stock was $11.2 million, or $0.17 per share, compared to the second quarter net loss of $9.0 million and a loss applicable to common stock of $10.7 million, or $0.16 per share, previously reported on July 28, 2004. The correction, which does not affect revenues, results from a subsequent reinterpretation of technical accounting guidance related to the treatment of deferred tax items associated with the acquisition of Surreal Software Inc. which results in a $512,000 non cash increase in the provision for income taxes and a $512,000 reduction of goodwill.
Midway Games Inc. is a leading developer and publisher of interactive entertainment software. Midway videogames are available for play on all major videogame platforms including the PlayStation®2 computer entertainment system, Xbox™ video game system from Microsoft, and Nintendo GameCube™ and Game Boy® Advance.
This press release contains forward-looking statements 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, technological changes, dependence on major platform manufacturers and other risks more fully described under “Item 1. Business - Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2003, and in the more recent filings made by the Company with the Securities and Exchange Commission.
- corrected tables follow -
Midway Games Inc., 8/4/04
MIDWAY GAMES INC.
Condensed Consolidated Statements of Operations
(In thousands, except per share amounts)
(Unaudited)
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| Three-Months Ended June 30, |
| Six-Months Ended June 30, |
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| 2004 |
| 2003 |
| 2004 |
| 2003 |
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Revenues |
| $ | 47,286 |
| $ | 4,981 |
| $ | 67,417 |
| $ | 50,807 |
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Cost of sales: |
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Product costs and distribution |
| 17,395 |
| 3,207 |
| 26,570 |
| 24,971 |
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Royalties and product development (1) |
| 13,295 |
| 27,337 |
| 19,620 |
| 36,476 |
| ||||
Total cost of sales |
| 30,690 |
| 30,544 |
| 46,190 |
| 61,447 |
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Gross profit (loss) |
| 16,596 |
| (25,563 | ) | 21,227 |
| (10,640 | ) | ||||
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Research and development expense |
| 8,518 | (2) | 5,242 |
| 13,587 | (2) | 11,090 |
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Selling and marketing expense |
| 12,618 |
| 6,982 |
| 21,696 |
| 14,043 |
| ||||
Administrative expense |
| 4,502 | (3) | 15,966 | (4) | 8,888 | (3) | 19,941 | (4) | ||||
Restructuring and other charges |
| (77 | ) | 2,251 | (5) | (154 | ) | 8,878 | (5) | ||||
Operating loss |
| (8,965 | ) | (56,004 | ) | (22,790 | ) | (64,592 | ) | ||||
Interest income |
| 257 |
| 244 |
| 355 |
| 428 |
| ||||
Interest expense |
| (394 | ) | (18 | ) | (572 | ) | (18 | ) | ||||
Other income and (expense), net |
| (64 | ) | 607 |
| (2 | ) | 655 |
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Loss before income tax |
| (9,166 | ) | (55,171 | ) | (23,009 | ) | (63,527 | ) | ||||
Provision (benefit) for income taxes |
| 328 |
| (351 | ) | 656 |
| 610 |
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Net Loss |
| (9,494 | ) | (54,820 | ) | (23,665 | ) | (64,137 | ) | ||||
Preferred stock dividends: |
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Distributed |
| 876 |
| 316 |
| 1,379 |
| 446 |
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Imputed (6) |
| 833 |
| 533 |
| 1,143 |
| 686 |
| ||||
Loss applicable to common stock |
| $ | (11,203 | ) | $ | (55,669 | ) | $ | (26,187 | ) | $ | (65,269 | ) |
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Basic and diluted loss per common stock |
| $ | (0.17 | ) | $ | (1.20 | ) | $ | (0.43 | ) | $ | (1.40 | ) |
Average number of shares outstanding |
| 67,177 |
| 46,469 |
| 61,503 |
| 46,469 |
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(1) Royalties and product development costs include charges relating to the writedown of capitalized product development costs of $23.2 million during the three-months ended June 30, 2003, and $2.8 million and $23.2 million during the six-months ended June 30, 2004 and 2003, respectively.
(2) During June 2004, Kenneth J. Fedesna ceased to serve as executive vice president – product development of the Company. As a result of this event, research and development expenses for the three and six-months ended June 30, 2004 include $1.3 million of charges incurred under the terms of the Company’s settlement agreement with Mr. Fedesna.
(3) During June 2004, Neil D. Nicastro ceased to serve as Chairman of the Board of the Company. As a result of this event, administrative expense for the three and six-months ended June 30, 2004 includes an additional $0.3 million of charges.
(4) During May 2003, Neil D. Nicastro ceased to serve as chief executive officer, president and chief operating officer of the Company. As a result of this event, administrative expense for the three and six-months ended June 30, 2003 included an additional $9.5 million of charges incurred under the terms of the Company’s severance agreement with Mr. Nicastro.
(5) The Company incurred restructuring and other charges during the three and six-months ended June 30, 2003 related to the consolidation of California product development and marketing operations.
(6) Imputed preferred stock dividends include $0.5 million of accelerated imputed dividends for the three and six-months ended June 30, 2004 which were recorded upon the conversion of 800 shares of Series D redeemable convertible preferred stock to common stock shares in June 2004. Imputed preferred stock dividends include $0.3 million of accelerated imputed dividends for the three and six-months ended June 30, 2003 which were recorded upon the redemption of 1,312.5 shares of Series B redeemable convertible preferred stock in May 2003.
– balance sheets follow –
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Midway Games Inc., 8/4/04
MIDWAY GAMES INC.
Condensed Consolidated Balance Sheets
(In thousands)
|
| June 30, |
| December 31, |
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| 2004 |
| 2003 |
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| (Unaudited) |
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Assets |
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Current assets: |
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Cash and cash equivalents |
| $ | 140,834 |
| $ | 41,682 |
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Receivables, net |
| 19,875 |
| 15,814 |
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Inventories |
| 3,208 |
| 3,566 |
| ||
Capitalized product development costs |
| 17,833 |
| 11,292 |
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Prepaid expenses and other current assets |
| 3,429 |
| 4,634 |
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Total current assets |
| 185,179 |
| 76,988 |
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Capitalized product development costs |
| 532 |
| — |
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Property and equipment, net |
| 13,466 |
| 13,272 |
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Goodwill |
| 36,024 |
| 33,464 |
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Other assets |
| 3,021 |
| 1,725 |
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Total assets |
| $ | 238,222 |
| $ | 125,449 |
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Liabilities and Stockholders’ Equity |
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Current liabilities: |
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Accounts payable |
| $ | 7,202 |
| $ | 5,413 |
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Accrued compensation and related benefits |
| 3,724 |
| 3,674 |
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Accrued royalties |
| 6,621 |
| 2,961 |
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Accrued selling and marketing |
| 2,531 |
| 2,016 |
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Current portion of long-term debt |
| 3,056 |
| — |
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Due to related parties |
| 6,487 |
| — |
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Other accrued liabilities |
| 16,411 |
| 12,255 |
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Total current liabilities |
| 46,032 |
| 26,319 |
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Long-term debt |
| 11,944 |
| — |
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Due to related parties |
| 1,963 |
| 12,402 |
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Deferred income taxes |
| 6,117 |
| 5,460 |
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Other noncurrent liabilities |
| 654 |
| 1,219 |
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Redeemable convertible preferred stock, Series D, redeemable at $39,500 and $35,000 at June 30, 2004 and December 31, 2003, respectively |
| 37,722 |
| 32,156 |
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Stockholders’ equity: |
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Common stock |
| 765 |
| 588 |
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Additional paid-in capital |
| 351,429 |
| 244,963 |
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Accumulated deficit |
| (194,332 | ) | (170,667 | ) | ||
Accumulated translation adjustment |
| (978 | ) | (919 | ) | ||
Deferred compensation |
| (1,134 | ) | (347 | ) | ||
Treasury stock |
| (21,960 | ) | (25,725 | ) | ||
Total stockholders’ equity |
| 133,790 |
| 47,893 |
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Total liabilities and stockholders’ equity |
| $ | 238,222 |
| $ | 125,449 |
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