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 of Unreal 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 released Area 51
for PlayStation 2, Xbox, and PC, and Unreal Championship 2 for Xbox
in North America and Europe. Area 51 was 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 51 was 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 for Mortal Kombat: Shaolin Monks and
Best Sports Game for Blitz: 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 announced Unreal 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
of L.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 picture The
Ant Bully. This is the second animated film in partnership with
Warner Bros. Interactive Entertainment, along with the previously
announced adaptation of Happy 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 51 and Unreal 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 release Mortal Kombat: Shaolin Monks for
PlayStation 2 and Xbox, Midway Arcade Treasures 3 for PlayStation
2, Xbox, and GameCube, and a compilation of Midway Arcade Treasures
2 and 3 for the PC. Midway also expects to ship The Suffering: Ties
that Bind for 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 release Gauntlet: Seven Sorrows for PlayStation 2 and
Xbox, Blitz: The League for PlayStation 2 and Xbox, Ed, Edd n Eddy:
The Mis-Edventures for PlayStation 2, Xbox, GameCube, GameBoy
Advance, and PC, and L.A. RUSH for PlayStation 2 and Xbox. In
addition, the Company also expects to release its first two
PlayStation Portable (PSP) titles: Mortal Kombat: Deception
Unchained and Midway Arcade Treasures: Extended Play during 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 shift Rise & Fall: Civilizations at War to 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 for Rise & Fall: Civilizations at War to 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 at
www.investor.midway.com or at www.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 via
www.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.
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. -0- *T MIDWAY GAMES INC. 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 ========= ========= ========= ========= *T -0- *T MIDWAY
GAMES INC. 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 ============
============ *T -0- *T MIDWAY GAMES INC. 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% ======== ======== *T -0- *T MIDWAY GAMES INC. 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%
======== ======== *T
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