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.
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."
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