CHICAGO, Illinois, March 6, 2008 - Midway Games Inc. (NYSE: MWY) today announced results of operations for the fourth quarter and full year ended December 31, 2007. The Company also provided guidance for the quarter ending March 31, 2008.
FOURTH QUARTER RESULTS
Net revenues for the 2007 fourth quarter were $77.6 million, compared to the 2006 fourth quarter net revenues of $96.9 million. The 2007 fourth quarter loss applicable to common stock was $29.7 million, or a loss of $0.33 per basic and diluted share, compared with a 2006 fourth quarter loss applicable to common stock of $2.0 million, or a loss of $0.02 per basic and diluted share.
On a non-GAAP basis, excluding the impact of stock-option expenses and certain non-cash items, the 2007 fourth quarter loss was $23.0 million or a loss of $0.25 per basic and diluted share. For the 2006 fourth quarter, on a non-GAAP basis, the Company had a loss of $0.3 million, or a loss of $0.00 per basic and diluted share. A reconciliation of non-GAAP results to GAAP results is provided at the end of this press release.
Other recent operating and financial highlights include:Midway announced today that it has terminated its existing $30 million secured credit facility with Well Fargo Foothill, and simultaneously entered into a new credit facility of $90 million with National Amusements, Inc. Midway announced that its Board of Directors has elected Shari E. Redstone as Chair of the Board, following the resignation of Kenneth D. Cron. Midway released Unreal Tournament 3 for the PC worldwide and on the PS3 in North America to numerous awards and accolades, including: Runner up for IGN.com's Best of 2007 for Best First Person Shooter, Best Graphics Technology, and Best Online Multiplayer, in addition to multiple other "Game of the Year" and "Top 10" accolades from other editorial sources. Unreal Tournament 3 has to date shipped over one million units worldwide. Midway-published The Lord of the Rings Online: Shadows of Angmar received the coveted Golden Joystick award for 2007 PC Game of the Year. Midway released Stranglehold for the PS3, BlackSite: Area 51 for Xbox 360, PS3 and PC, Aqua Teen Hunger Force: Zombie Ninja Pro-Am for the PS2, Ultimate Mortal Kombat and Foster's Home for Imaginary Friends for the DS, and Game Party and Cruis'n for the Wii. Midway announced This Is Vegas, a new next generation game where players will be able to live out their Vegas fantasies in a vast, open world, lifestyle action experience. This Is Vegas is expected to ship for the Xbox 360, PS3, and PC in Winter 2008.
FULL YEAR RESULTS
Net revenues for the year ended December 31, 2007, were $157.2 million, compared to net revenues of $165.6 million for the year ended December 31, 2006. The loss applicable to common stock for the year ended December 31, 2007, was $97.4 million or a loss of $1.07 per basic and diluted share, compared to a loss applicable to common stock of $77.8 million or $0.86 per basic and diluted share for the year ended December 31, 2006.
On a non-GAAP basis, excluding the impact of stock-option expenses and certain non-cash items, the loss for the 2007 full year was $80.3 million or a loss of $0.88 per basic and diluted share. For the 2006 full year, on a non-GAAP basis, the Company had a loss of $72.0 million, or a loss of $0.79 per basic and diluted share. A reconciliation of non-GAAP results to GAAP results is provided at the end of this press release.
David F. Zucker, president and chief executive officer, commented, "We were delighted to bring an eager fan base the PS3 version of Unreal Tournament 3 within the fiscal year, and the consumer response to a number of our casual offerings such as Game Party for the Wii and Touchmaster for the DS was encouraging. Now that we have overcome many of the technology hurdles that we encountered over the last year, we anticipate smoother launches as we release our strong 2008 line-up."
During the first quarter, the Company has released an online Stranglehold Expansion Pack for Xbox 360 and PS3 in North America, and in Europe Midway has released Hour of Victory for the PC, Unreal Tournament 3 for the PS3, Aqua Teen Hunger Force: Zombie Ninja Pro-Am for the PS2, Game Party and Cruis'n for the Wii, and Foster's Home for Imaginary Friends for the DS. For the first quarter ending March 31, 2008, the Company expects the following:Net revenues of approximately $28 million, with a net loss of approximately $0.30 per basic and diluted share. On a non-GAAP basis, Midway expects a first quarter loss of approximately $0.21 per basic and diluted share, which excludes approximately: *
o $0.01 of stock option expense and deferred income tax expense related to goodwill, and
o $0.08 of convertible debt non-cash interest expense.
Mr. Zucker concluded, "We expect 2008 to be a significant year for Midway, with more front-line releases than 2007, including some ambitious new intellectual properties with broad market appeal, reinvigorated franchises with well-established fan bases, and some new opportunities in the casual games space with console titles and a new casual games portal. In the near future we expect to reveal more details on our line-up, such as the recent announcement of This Is Vegas."
NON-GAAP FINANCIAL MEASURES
Midway has included non-GAAP financial measures in its quarterly and yearly results and 2008 first quarter 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
Midway Games Inc. is hosting a conference call and simultaneous webcast open to the general public at 4:30 P.M. EST today, Thursday, March 6, 2008. The conference call number is (866) 700-5192 or (617) 213-8833 (international callers). The passcode for the call is 54151333. 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 March 13, 2008, by dialing (888) 286-8010 or (617) 801-6888 (international callers). The passcode for the replay is 57692673. Additionally, a replay of the call will be available for twelve months on the Internet via www.investor.midway.com.
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.
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Midway Games Inc.
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 financial strength 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 1. Business - Risk Factors" in the Company's Annual Report on Form 10-K for the year ended December 31, 2006, and in 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.