Expects $17.5 Million Net Income in Q4 2004
CHICAGO, Illinois, November 8, 2004 -- Midway Games Inc. (NYSE:MWY) today announced results of operations for the three- and nine-month periods ended September 30, 2004. The Company also raised its revenue guidance and reiterated its earnings guidance for the year ending December 31, 2004.
THIRD QUARTER RESULTS
Revenues for the 2004 third quarter were $17.0 million, up 47% from $11.6 million in the 2003 third quarter. The 2004 third quarter net loss was $13.9 million, compared with a 2003 third quarter net loss of $23.3 million. The 2004 third quarter loss applicable to common stock was $16.1 million or $0.20 per share, compared with a 2003 third quarter loss applicable to common stock of $24.1 million or $0.52 per share. The 2004 third quarter loss applicable to common stock includes $1.8 million of accelerated imputed preferred stock dividends as a result of the conversion of 3,504 shares of preferred stock to common stock during the quarter and $1.4 million of charges related to the writedown of capitalized product development costs. The 2004 third quarter results also include a $1.8 million reduction in administrative expenses resulting from the favorable settlement of a litigation matter and the associated reduced reserves for this matter. The 2003 third quarter results include $4.2 million of charges related to the writedown of capitalized product development costs.
Other key operating and financial highlights include the following:
- Midway released one new videogame in North America: Shadow Hearts: Covenant for PlayStation 2.
- On October 11, 2004 Midway announced it had acquired Austin, Texas-based Inevitable Entertainment Inc., the development studio working on Midway's upcoming new videogame, Area 51. The acquisition accelerates Midway's previously announced plans to open an Austin studio and increases the Company's internal development resources.
- $35.04 million (face value) of Series D Convertible Preferred Stock was converted into 9,430,715 shares of common stock. As of November 5, 2004, Midway had 85,715,066 shares of common stock and $4.46 million (face value) of Series D Convertible Preferred Stock outstanding.
- Midway was the #1-ranked software publisher for games released in the first three quarters of 2004 based on average review scores on Gamerankings.com for publishers with more than five reviewed products (as of November 7, 2004).
"During the third quarter Midway extended its 2004 track record of releasing high-quality games with the launch of Shadow Hearts: Covenant, a game that has garnered average review scores in the upper 80's, according to Gamerankings.com. Sales of Shadow Hearts in the third quarter as well as recurring sales of titles from our growing catalog of successful products such as NBA Ballers and The Suffering allowed us to outperform our previously stated financial guidance for the quarter," commented president and chief executive officer David F. Zucker.
Revenues for the nine months ended September 30, 2004 were $84.4 million, up from $62.4 million in the nine months ended September 30, 2003. The net loss was $37.6 million, compared with a net loss of $87.5 million in the prior year. The loss applicable to common stock was $42.3 million or $0.62 per share, compared with a loss applicable to common stock of $89.4 million or $1.92 per share in the prior year. The results for the nine months ended September 30, 2004 include:
- $4.2 million of charges relating to the writedown of capitalized product development costs;
- $1.6 million of charges associated with the departures of senior executives;
- $2.3 million of accelerated imputed preferred stock dividends as a result of the conversion of 4,304 shares of preferred stock to common stock; and
- $1.8 million reduction in administrative expenses resulting from the favorable settlement of a litigation matter and the associated reduced reserves for this matter.
The results for the nine months ended September 30, 2003 included:
- $27.4 million of charges relating to the writedown of capitalized product development costs;
- $9.5 million of charges associated with the departure of a senior executive;
- $2.0 million of administrative expenses due to reserves established for the litigation matter.
For the year ending December 31, 2004, Midway is raising its outlook for revenues from approximately $157 million to approximately $162 million, representing a 75% increase over 2003 revenues. The Company's fullyear 2004 revenue outlook includes estimated revenues of approximately $78 million in the 2004 fourth quarter. The Company has released two titles in North America during the fourth quarter, Mortal Kombat: Deception for PlayStation 2 and Xbox and Midway Arcade Treasures 2 for PlayStation 2, GameCube and Xbox. The Company also expects to release Mortal Kombat: Deception for PlayStation 2 and Xbox internationally during the fourth quarter. Midway continues to expect a net loss of approximately $20 million for the year, an approximately $95 million improvement versus 2003. The Company's guidance for full-year 2004 results includes estimated net income of approximately $17.5 million in the fourth quarter, the first profitable quarter for the Company since the quarter ended December 31, 1999.
"Midway's expected net profit in the fourth quarter of 2004 marks another important milestone for the Company. We have effectively stabilized our base of operations to a point where we believe we can consistently produce high-quality games and market them successfully. The next two major steps that Midway faces in its turnaround process are navigating the challenging console transition in 2005-2006 and expanding the revenue base to achieve the size and scale necessary to generate consistent and significant profits coming out of that transition," concluded Mr. Zucker.
Midway Games Inc. is hosting a conference call and simultaneous web cast open to the general public at 4:45 p.m. EST today, Monday, November 8, 2004. The conference call number is (706) 679-7522; please call five minutes in advance to ensure that you are connected prior to the presentation. Questions and answers will be reserved for call-in analysts and investors. 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 November 9 at 4:45 p.m. EST, by dialing (800) 633-8284 or (402) 977-9140 (international callers). The access code for the replay is 21211560. Additionally, a replay of the call will be available for twelve months on the Internet via www.investor.midway.com.
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, XboxTM video game system from Microsoft, and Nintendo GameCubeTM and Game Boy® Advance.
Our reference above to Gamerankings.com is not an endorsement of that site. The information on that site has been prepared by third parties, and Midway does not monitor, endorse or have any responsibility for its content.
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 forwardlooking 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 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.