Net revenue for the quarter ended December 31, 2005, was $100.8 million versus $156.4 million in the prior year's comparable quarter, reflecting the Company's release of fewer titles in this quarter compared to the prior year. Publishing net revenue was $82.4 million, compared to $137.9 million in the prior year, and was primarily driven by the release of Dragon Ball Z: Budokai Tenkaichi (PS2), Dragon Ball Z: Super Sonic Warriors 2 (NDS), The Matrix: Path of Neo (PS2, Xbox and PC), and Atari Flashback 2 (Plug-and-Play). Distribution revenue was $18.4 million versus $18.5 million in the comparable year-earlier period.
Net loss for the fiscal 2006 third quarter was $4.8 million, or $0.04 per share, compared to net income of $19.6 million, or $0.16 per share, in the year earlier period. Loss from continuing operations for the third quarter of fiscal 2006 was $4.5 million, or $0.03 per share, compared to income of $19.2 million, or $0.16 per share, in fiscal 2005. The Company previously announced on February 9, 2005, that it would begin to take steps to streamline its U.S. operations. In doing so, the Company recorded restructuring charges of $1.1 million in the third quarter of fiscal 2006. Excluding restructuring charges and losses from discontinued operations, the loss for the third quarter of fiscal 2006 would have been $3.4 million, or $0.02 per share.
Net revenue for the nine-month period ended December 31, 2005, was $163.4 million versus $332.5 million in the comparable year-earlier period. Publishing net revenue was $117.8 million versus $290.0 million in the prior nine-month period, while distribution revenue was $45.6 million versus $42.5 million in the comparable year-earlier period.
Net loss for the nine-month period was $62.8 million, or $0.50 per share, compared to net income of $14.8 million, or $0.12 per share, in the year- earlier period. Loss from continuing operations for the nine-month period of fiscal 2006 was $58.8 million, or $0.46 per share, compared to income of $17.3 million, or $0.14 per share, in fiscal 2005. The Company recorded restructuring charges of $4.8 million for the nine-month period ended December 31, 2005. Excluding restructuring charges and losses from discontinued operations, the loss for the nine-month period would have been $54.0 million, or $0.43 per share.
A weak holiday season for the industry combined with product launch delays have contributed to third quarter results substantially below the Company's expectations. The Company has been advised by HSBC Business Credit (USA) Inc. that it is in default on certain covenants under its revolving credit facility and that HSBC will not currently extend further credit. As of February 9, the Company had no balance outstanding under the credit facility. HSBC also stated that it may agree to review revised business plans or projections and make or not make future advances under the facility. The uncertainties caused by these conditions raise substantial doubt about the Company's ability to continue as a going concern.
However, the Company is taking definitive steps to address its current financial position and restore shareholder value, and continues to believe in Atari's ability to compete in the interactive entertainment industry. The Company is currently exploring the replacement of its credit facility, potential licensing or sale of selected intellectual property rights and the sale or closure of development studios. Additionally, the Company will continue to control costs and reduce working capital requirements in order to conserve capital through potential personnel reductions and the suspension of certain development projects. However, the Company cannot guarantee the completion of these actions or that such actions will generate sufficient resources to fully address the uncertainties of our financial position.
"With the new console cycle now underway, new technologies bring with it new challenges," stated Bruno Bonnell, Chairman, CEO and Chief Creative Officer of Atari. "As we anticipated, during the holiday season the industry felt a depressed demand for current generation titles at retail and, as a result, publishers will need to strategically address the marketplace, balancing titles across multiple consoles, as well as portable devices. Atari remains committed to providing gamers with titles across all platforms focusing on its largest franchises, including Dragon Ball Z, Driver, Test Drive and Dungeons & Dragons, to name a few. Additionally, we will look to increase our marketshare on portable devices such as Nintendo DS and Sony's PSP as the demand for quality titles for these formats continues to grow."
Atari's product lineup for the remainder of fiscal 2006 is expected to include the following new releases:
- Desperados 2: Cooper's Revenge (PC)
- Dragon Ball Z: Shin Budokai (PSP)
Driver: Parallel Lines (PS2 and Xbox)
- Dungeons & Dragons Online (PC)
Kao the Kangaroo Round 2 (PS2, Xbox, GC and PC)
- Kao Challengers (PSP)
Marc Ecko's Getting Up: Contents Under Pressure (PS2, Xbox and PC)
- and Tycoon City: New York (PC), among others.
Atari's product lineup for fiscal 2007 is expected to include the following new releases:
- Alone in the Dark: Near Death Investigation (Xbox 360 and PC)
- Battlezone (PSP), Neverwinter Nights 2 (PC)
- Stuntman 2 (Xbox 360)
- Test Drive Unlimited (Xbox 360, PC)
- TimeShift (Xbox 360 and PC)
- among others, including titles from the Dragon Ball Z franchise.