Midway Games Inc. Reports First Quarter 2003 Results

CHICAGO--()--April 29, 2003--Midway Games Inc. (NYSE:MWY) announced today its results of operations for the quarter ended March 31, 2003.

The Company also provided guidance for the quarter ending June 30, 2003 and updated its guidance for the year ending December 31, 2003.

FIRST QUARTER RESULTS

Revenue increased 48% in the first quarter of 2003 to $45.8 million from $31.0 million in the first quarter of 2002. Revenue for the first quarter of 2003 was slightly better than the Company's previously announced guidance of revenues of between $40.0 million and $45.0 million. Midway had a GAAP (Generally Accepted Accounting Principles) loss applicable to common stock of $9.6 million or $0.21 per share in the first quarter of 2003 compared with a GAAP loss applicable to common stock of $8.9 million or $0.20 per share in the first quarter of 2002. The first quarter 2003 GAAP net loss was $9.3 million compared with a first quarter 2002 GAAP net loss of $6.4 million. Preferred stock charges were $0.3 million in the first quarter 2003 compared with $2.5 million in the first quarter 2002.

The first quarter 2003 pro forma net loss was $2.7 million or $0.06 per share excluding $4.7 million of charges associated with the termination of certain games in development at the Company's California studios and $1.9 million of net restructuring charges primarily associated with the consolidation of product development operations in California. The charges associated with the termination of games in development at the Company's California studios were approximately $3.7 million larger than previously anticipated due to the cancellation of an additional title subsequent to the Company's previously announced guidance. This compares with a first quarter 2002 pro forma net loss of $5.1 million or $0.12 per share excluding $1.3 million of restructuring and other charges associated with the consolidation of administrative facilities from Corsicana, Texas. A reconciliation of GAAP to pro forma net loss is included in the accompanying financial tables.

The pre-tax GAAP loss for the first quarter of 2003 was $8.4 million. The pro forma pre-tax loss for the first quarter of 2003 was $1.7 million. The pro forma pre-tax loss for the quarter was better than the Company's previously announced guidance of a pro forma pre-tax loss of between $3.0 million and $5.5 million excluding approximately $6.2 million of restructuring charges associated with the consolidation of product development operations in California. A reconciliation of GAAP to pro forma pre-tax loss is included in the accompanying financial tables.

During the first quarter of 2003, Midway released one new domestic home videogame, MLB SlugFest 20-04, on four platforms including Sony's PlayStation(R)2 computer entertainment system, Microsoft's Xbox(TM) video game system, the Nintendo GameCube(TM) and Game Boy(R) Advance. Midway also launched Mortal Kombat: Deadly Alliance in Europe on these four platforms, and this title was Midway's top-selling game during the quarter. Midway has shipped over two million units of Mortal Kombat: Deadly Alliance worldwide across all platforms since the game's debut in November 2002.

GUIDANCE

For the second quarter of 2003, Midway expects revenue of between $7.0 million and $11.0 million. The Company expects a GAAP net loss of between $16.0 million and $18.0 million in the second quarter of 2003. The Company expects a pro forma net loss of between $13.0 million and $15.0 million in the second quarter of 2003, excluding from GAAP results approximately $3.0 million of restructuring charges associated with the consolidation of product development operations in California. A reconciliation of GAAP to pro forma earnings guidance is included in the accompanying financial tables.

The Company expects to release one title, Freestyle MetalX, during the second quarter of 2003. Midway expects Freestyle MetalX to ship for the PlayStation 2 and Xbox consoles in the second quarter of 2003 and to ship for the GameCube console in the third quarter of 2003.

For the year ending December 31, 2003, Midway expects revenues of between $200.0 million and $230.0 million, an approximately 4% to 20% increase over 2002 revenues. The Company expects a GAAP net loss for the year ending December 31, 2003 of between $7.6 million and $25.6 million. The Company expects pro forma net earnings for the year ending December 31, 2003 of between $2.0 million and a loss of $16.0 million, excluding from GAAP results approximately $9.6 million of charges primarily associated with the termination

of certain games in development at the Company's California studios and the consolidation of product development operations in California. A reconciliation of GAAP to pro forma earnings guidance is included in the accompanying financial tables.

Midway previously provided guidance for the year ending December 31, 2003 of revenues of between $250 million and $275 million with pre-tax income of between $20 million and $30 million, excluding any restructuring or other charges. Midway expects results for the year to be lower than previously forecasted primarily due to a reduction in the number of products the Company anticipates releasing in 2003, lower sales expectations for the Company's 2003 GameCube products, and higher expected advertising costs in the fourth quarter that the Company believes may be necessary to market its holiday period games. Midway no longer expects several previously unannounced titles to ship in 2003, including NARC, a multi-platform title based on Midway's classic coin-op game of the same name. Midway now expects NARC to ship in the first half of 2004. The Company also lowered its internal forecast for GameCube product sales for the year based on revised expectations for retailer interest in GameCube products in 2003. Following is a preliminary domestic release schedule for the remainder of 2003:

Quarter                                                     
Ending (a)                                                    Game Boy
          PlayStation 2    GameCube          Xbox             Advance
----------------------------------------------------------------------
6/30/03   Freestyle                          Freestyle 
          MetalX                             MetalX                   
                                            
----------------------------------------------------------------------
9/30/03   Freaky Flyers    Freaky Flyers     Freaky Flyers  Mortal
                                                            Kombat:   
                                                            Tournament
                                                            Edition   

                           Freestyle                       
                           MetalX                         
                                                           

          NFL Blitz        NFL Blitz         NFL Blitz      Static
          Pro              Pro               Pro            Shock

          NHL Hitz         NHL Hitz          NHL Hitz
          Pro              Pro               Pro

          Roadkill         Roadkill          Roadkill
                             
----------------------------------------------------------------------
12/31/03  NBA Ballers       NBA Ballers      NBA Ballers    Justice
                                                            League 2

          ESPionage         ESPionage        ESPionage      Ozzie &
                                                            Drix

          SpyHunter 2       SpyHunter 2      SpyHunter 2    Super 
                                                            Duper
                                                            Sumos


          The Suffering      The Suffering   The Suffering
----------------------------------------------------------------------
(a) Subject to Change - Release Dates Approximate - Expectations as
of 4/29/03

USE OF NON-GAAP FINANCIAL INFORMATION

In addition to reporting financial results in accordance with GAAP, Midway reports non-GAAP results including pro forma net earnings (loss) and pro forma pre-tax earnings (loss). Pro forma financial results are not recognized measures for financial statement presentation under GAAP and should not be regarded as a replacement for corresponding GAAP measures. Midway reports pro forma earnings that exclude restructuring and other charges associated with asset impairments, employee severance costs, and expenses relating to the closing of facilities. Midway reports these pro forma results in order to provide supplemental information about our ongoing operating performance and provide information helpful in comparing our intrinsic operating performance in different periods. Management also uses these measures internally to evaluate the Company's performance and manage its operations. Detailed reconciliations of these pro forma financial measures to comparable GAAP measures are included in the accompanying tables.

CONFERENCE CALL

Midway Games Inc. is hosting a conference call and simultaneous web cast open to the general public at 4:45 p.m. EDT today, Tuesday, April 29, 2003. The conference call number is 212/231-6048 or 415/537-1942; 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.companyboardroom.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 will be available on the Internet for the next twelve months via www.investor.midway.com or for the next thirty days via www.companyboardroom.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(R)2 computer entertainment system, Xbox(TM) video game system from Microsoft, and Nintendo GameCube(TM) and Game Boy(R) Advance.

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 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, technological changes, dependence on major platform manufacturers and other risks more fully described under "Item 1. Business - Risk Factors" in the Company's current Annual Report on Form 10-K and the more recent filings made by the Company with the Securities and Exchange Commission.


                           MIDWAY GAMES INC.
            Condensed Consolidated Statements of Operations
               (in thousands, except per share amounts)
                              (unaudited)

                                                Three-Months Ended
                                                   March 31,
                                             ---------------------
                                               2003      2002 (1)
                                             --------   ----------
Revenues:
Home video                                   $45,826      $30,265
Coin-operated video                                -          742
                                             --------   ----------
Total revenues                                45,826       31,007

Cost of sales:
Home video - product costs and distribution   21,764       10,258
Home video - royalties and 
 product development                           9,139        8,060
                                             --------   ----------
Home video - total cost of sales              30,903       18,318
Coin-operated video                                -          434
                                             --------   ----------
Total cost of sales                           30,903       18,752
                                             --------   ----------
Gross profit                                  14,923       12,255

Research and development expense               5,848        5,870
Selling and marketing expense                  7,061        6,981
Administrative expense                         3,975        5,083 (2)
Restructuring and other charges                6,627 (3)    1,210 (4)
                                             --------     -------
Operating loss                                (8,588)      (6,889)
Interest income and other expense, net           232          480
                                             --------   ----------
Loss before tax                               (8,356)      (6,409)
Provision for income taxes                       961            -
                                             --------   ----------
Net Loss                                      (9,317)      (6,409)
Preferred stock dividends:
Distributed                                      130          531
Imputed                                          153        1,993
                                             --------   ----------
Loss applicable to common stock              $(9,600)     $(8,933)
                                             ========   ==========

Basic and diluted loss per
 share of common stock                        $(0.21)      $(0.20)
                                             ========   ==========
Average number of shares outstanding          46,469       43,677
                                             ========   ==========

(1) Certain 2002 amounts have been reclassified to reflect current
period presentation.

(2) The Company recorded charges of $123,000 during the three-months 
ended March 31, 2002 relating to the closing of administrative 
facilities located in Corsicana, TX. The administrative operations 
were consolidated with existing operations in Chicago, IL and 
Milpitas, CA.

(3) The Company incurred restructuring and other charges during the 
three-months ended March 31, 2003 primarily relating to the
termination of certain games in development associated with the
Company's California product development operations.

(4) The Company incurred a restructuring charge during the 
three-months ended March 31, 2002 relating to the closing of
administrative facilities located in Corsicana, TX. The administrative
operations were consolidated with existing operations in Chicago, IL
and Milpitas, CA.


                           MIDWAY GAMES INC.
              Pro Forma (Non-GAAP) Condensed Consolidated
                      Statements of Operations(1)
               (in thousands, except per share amounts)
                              (unaudited)

                                                   Three-Months Ended
                                                        March 31,
                                                   -------------------
                                                       2003   2002 (2)
                                                   --------- ---------
Revenues:
Home video                                          $45,826   $30,265
Coin-operated video                                       -       742
                                                   --------- ---------
Total revenues                                       45,826    31,007

Cost of sales:
Home video - product costs and distribution          21,764    10,258
Home video - royalties and product development        9,139     8,060
                                                   --------- ---------

Home video - total cost of sales                     30,903    18,318
Coin-operated video                                       -       434
                                                   --------- ---------
Total cost of sales                                  30,903    18,752

                                                   --------- ---------
Gross profit                                         14,923    12,255

Research and development expense                      5,848     5,870
Selling and marketing expense                         7,061     6,981
Administrative expense                                3,975     4,960
Restructuring and other charges                           -         -
                                                   --------- ---------

Operating loss                                       (1,961)   (5,556)

Interest income and other expense, net                  232       480
                                                   --------- ---------

Loss before tax                                      (1,729)   (5,076)
Provision for income taxes                              961         -
                                                   --------- ---------
Net Loss                                            $(2,690)  $(5,076)
                                                   ========= =========

Basic and diluted loss per share of common stock     $(0.06)   $(0.12)
                                                   ========= =========
Average number of shares outstanding                 46,469    43,677
                                                   ===================

(1) Pro forma non-GAAP condensed consolidated statements of operations
exclude items listed on the following table.

(2) Certain 2002 amounts have been reclassified to reflect current
period presentation.


                           MIDWAY GAMES INC.
           Reconciliation of GAAP to Pro Forma Net Loss (1)
               (in thousands, except per share amounts)
                              (unaudited)

                                                 Three-Months Ended
                                                     March 31,
                                                --------------------
                                                   2003        2002
                                                --------   ---------
GAAP net loss                                  $(9,317)    $(6,409)
Administrative expense                               -         123 (2)
Restructuring and other charges:
    Termination of certain games in
     development at the Company's California
     studios associated with California
     Studios                                     4,729 (3)       -
    Consolidation of California product
     development operations                      2,057 (4)       -
    Consolidation of administrative facilities     (86)(5)   1,210 (6)
    Downsizing of coin-operated videogame
     business                                      (73)(7)
                                               ----------  -----------
Pro forma net loss                             $(2,690)    $(5,076)
                                               ==========  ===========

Pro forma basic and diluted loss per share of
 common stock                                   $(0.06)     $(0.12)
                                               ==========  ===========
Average number of shares outstanding            46,469      43,677
                                               ==========  ===========

(1) This table reconciles net loss presented in accordance with
Generally Accepted Accounting Principles to net loss excluding items
set forth in the table.

(2) The Company recorded charges of $123,000 during the three-months 
ended March 31, 2002 related to the closing of administrative 
facilities located in Corsicana, TX. The administrative operations 
were consolidated with existing operations in Chicago, IL and 
Milpitas, CA. This item appears in the consolidated statement of
operations in the administrative expense line item.

(3) The Company recorded charges of $4,729,000 during the three-months
ended March 31, 2003 relating to the termination of certain games in 
development associated with the Company's California product 
development operations.

(4) The Company incurred restructuring charges of $2,057,000 during 
the three-months ended March 31, 2003 relating to the consolidation of
California product development operations.

(5) The Company reduced $86,000 of the 2002 restructuring charge
related to the closing of administrative facilities located in
Corsicana, TX during the three-months ended March 31, 2003.

(6) The Company incurred restructuring charges of $1,210,000 during 
the three-months ended March 31, 2002 related to the closing of
administrative facilities located in Corsicana, TX. The administrative
operations were consolidated with existing operations in Chicago, IL
and Milpitas, CA.

(7) The Company reduced $73,000 of the 2001 restructuring charge
related to the downsizing of the coin-operated videogame business
during the three-months ended March 31, 2003.


                           MIDWAY GAMES INC.
         Reconciliation of GAAP to Pro Forma Pre-Tax Loss (1)
               (in thousands, except per share amounts)
                              (unaudited)


                                                   Three-Months Ended
                                                       March 31,
                                                 ---------------------
                                                   2003       2002
                                                 --------  -----------
GAAP pre-tax loss                               $(8,356)   $(6,409)
Administrative expense                                -        123 (2)
Restructuring and other charges:
  Termination of certain games in development
   at the Company's California studios
   associated with California Studios             4,729 (3)      -
  Consolidation of California product
   development operations                         2,057 (4)      -
  Consolidation of administrative facilities        (86)(5)  1,210 (6)
  Downsizing of coin-operated videogame business    (73)(7)
                                                ----------  ----------
Pro forma pre-tax loss                          $(1,729)    $(5,076)
                                                ==========  ==========

(1) This table reconciles pre-tax loss presented in accordance with 
Generally Accepted Accounting Principles to pre-tax loss excluding 
items set forth in the table.

(2) The Company recorded charges of $123,000 during the
three-months ended March 31, 2002 related to the closing of
administrative facilities located in Corsicana, TX. The administrative
operations were consolidated with existing operations in Chicago, IL
and Milpitas, CA. This item appears in the consolidated statement of
operations in the administrative expense line item.

(3) The Company recorded charges of $4,729,000 during the
three-months ended March 31, 2003 relating to the termination of
certain games in development associated with the Company's California
product development operations.

(4) The Company incurred restructuring charges of $2,057,000 during 
the three-months ended March 31, 2003 relating to the consolidation of
California product development operations.

(5) The Company reduced $86,000 of the 2002 restructuring charge
related to the closing of administrative facilities located in
Corsicana, TX during the three-months ended March 31, 2003.

(6) The Company incurred restructuring charges of $1,210,000 during 
the three-months ended March 31, 2002 related to the closing of
administrative facilities located in Corsicana, TX. The administrative
operations were consolidated with existing operations in Chicago, IL
and Milpitas, CA.

(7) The Company reduced $73,000 of the 2001 restructuring charge
related to the downsizing of the coin-operated videogame business
during the three-months ended March 31, 2003.



                           MIDWAY GAMES INC.
                 Condensed Consolidated Balance Sheets
                            (in thousands)
                              (unaudited)

                                                     March    December
                                                      31,       31,
                                                      2003      2002
                                                   --------- ---------
Assets

Cash                                                $55,785   $48,983
Receivables, net                                     32,329    54,265
Inventories                                           4,571     9,313
Capitalized product development costs                27,786    24,567
Other current assets                                  4,410     4,292
                                                   --------- ---------
            Total current assets                    124,881   141,420

Capitalized product development costs                 2,331     4,194
Property and equipment, net                          17,906    19,345
Goodwill                                             33,464    33,464
Deferred income taxes                                   496         -
Other assets                                          3,154     2,977
                                                   --------- ---------
Total assets                                       $182,232  $201,400
                                                   ========= =========

Liabilities and Stockholders' Equity

Accounts payable                                     $4,753   $10,410
Accrued compensation and related benefits             8,798     6,518
Deferred income taxes                                 4,972     2,374
Accrued royalties                                     4,685     8,840
Other accrued liabilities                            11,875    15,015
                                                   --------- ---------
            Total current liabilities                35,083    43,157

Deferred income taxes                                     -     1,773
Other noncurrent liabilities                          3,961     3,932


Redeemable convertible preferred stock,
   redeemable at $13,125                             12,724    12,571

Stockholders' equity:
            Common stock                                494       494
            Additional paid-in capital              220,891   221,074
            Accumulated deficit                     (64,757)  (55,440)
            Translation adjustment                     (439)     (436)
            Treasury stock                          (25,725)  (25,725)
                                                   --------- ---------
                 Total stockholders' equity         130,464   139,967
                                                   --------- ---------
Total liabilities and stockholders' equity         $182,232  $201,400
                                                   ========= =========

                           MIDWAY GAMES INC.
    Reconciliation of GAAP to Pro Forma Earnings Guidance Range(1)
                (in millions, except per share amounts)
                              (unaudited)

                                                         Three-Months
                                                            Ending
                                                        June 30, 2003
                                                       ---------------
Revenue                                                 $11.0    $7.0
                                                       ------- -------
GAAP net loss                                          $(16.0) $(18.0)
Restructuring and other charges primarily associated
 with the consolidation of product development
 operations in California                                 3.0     3.0
                                                       ------- -------
Pro forma net loss                                     $(13.0) $(15.0)
                                                       ======= =======
                                                        Twelve-Months
                                                            Ending
                                                         December 31,
                                                             2003
                                                       ---------------
Revenue                                                $230.0  $200.0
                                                       ------- -------
GAAP net loss                                           $(7.6) $(25.6)
Restructuring and other charges primarily associated
 with the termination of certain games in development
 at the Company's California studios and the
 consolidation of product development operations in
 California                                               9.6     9.6
                                                       ------- -------
Pro forma net earnings (loss)                            $2.0  $(16.0)
                                                       ======= =======

(1) This table reconciles earnings guidance presented in
accordance with Generally Accepted Accounting Principles to earnings
guidance excluding items set forth in the table for the three-months
ending June 30, 2003 and twelve-months ending December 31, 2003.


                           MIDWAY GAMES INC.
                      Supplemental Quarterly Data


                     Domestic Videogame Releases
                  Three-Months Ended March 31, 2003
                 -----------------------------------

 Title                                            Platform
------                                            ------------
 MLB SlugFest 20-04             Sony PlayStation 2, Nintendo GameCube,
                                Microsoft Xbox, Game Boy Advance
                                                        Revenue by
                                                         Platform
                                                      (in thousands)
                                                       Three-Months
                                                      Ended March 31,
                                                     -----------------
Platform                                                2003     2002
---------------------------------------------------- -------- --------
Sony PlayStation 2                                   $26,251   $8,779
Microsoft Xbox                                        11,471    7,839
Nintendo GameCube                                      4,961   11,130
Nintendo Game Boy Advance                              2,357      223
Sony PlayStation                                         686      700
Coin-Op and Other                                        100    2,336
---------------------------------------------------- -------- --------
Total Revenue                                        $45,826  $31,007
==================================================== ======== ========

Contacts

Midway Games Inc.
Miguel Iribarren, 773/961-2222
miribarren@midwaygames.com
or
Jaffoni & Collins Incorporated
Joseph N. Jaffoni, 212/835-8500
mwy@jcir.com

Contacts

Midway Games Inc.
Miguel Iribarren, 773/961-2222
miribarren@midwaygames.com
or
Jaffoni & Collins Incorporated
Joseph N. Jaffoni, 212/835-8500
mwy@jcir.com