MicroProse, Inc. Releases 3rd Quarter Financial Results
ALAMEDA, Calif., Feb. 5 /PRNewswire/ -- MicroProse, Inc. (Nasdaq NMS: MPRS - news), a worldwide interactive entertainment company, today reported financial results for its third fiscal quarter ended December 31, 1997.
The company reported a net loss of $10.9 million, or $.38 per diluted share, on net revenue of $14.9 million for the third quarter of fiscal 1998. This compares with net income of $5.7 million, or $.20 per diluted share, on net revenue of $35.9 million for the third quarter of fiscal 1997, and a net loss of $1.8 million, or $.06 per diluted share, on net revenue of $19.2 million for the second quarter of fiscal 1998.
On December 5, the company had projected a loss of $7 to $10 million on revenues of $17 to $20 million. ''Actual revenues were lower and the loss was slightly higher than the ranges we projected in early December, largely because of lower holiday sales and a higher-than-anticipated provision for future markdowns and product returns of in-channel inventories. We had too few titles too late and of less than hit caliber in a very crowded channel. We were trying to be opportunistic by relying on third-party titles, especially while the merger was being put together,'' said Steve Race, chief executive officer.
He added that, ''We lost the momentum we had begun to build a year ago, when we had three successive quarters of high revenues, operating and net profits, and we were hearing from a number of companies interested in exploring the potential of a business combination. As a result of these discussions and the eventual failed merger with GT Interactive Software Corp. (Nasdaq: GTIS - news), we became distracted; we lost employees in sales, marketing and administration; management attention was diverted; our product release schedule slowed; we lost distribution in the U.S., and our relationships with retailers and distributors suffered.
''The impact of all of this clearly is carrying over into the current quarter. We believe that the loss in the current quarter, which ends March 31, will be significant but, hopefully, it will be smaller than the third quarter loss.
''We believe the situation will be remedied by rebuilding our domestic sales staff and distribution network, and through the products we have scheduled for release in the current quarter and fiscal 1999. Included in this schedule are 9 sequels to strong brands that previously have proven themselves in the marketplace -- M1 Tank Platoon(R), Falcon(R), Civilization(TM), X-COM(R), Top Gun(TM), MechWarrior(R), and Star Trek(TM) -- and most of these are internally developed. After a top-to-bottom review of the company, as well as product development at each of our studios and of each product currently in development, I believe we can improve our performance and return to profitability in fiscal 1999,'' he said. ''We've done it in the past. The team is committed to it. We have the product lineup to do it again.''
In the current quarter the company has released Worms 2(TM) in North America, and Magic: The Gathering: Duels of the Planeswalkers(TM), the multiplayer expansion of the strategy card game. The company has also made Magic: The Gathering: ManaLink(TM) available for Internet play at no charge through Total Entertainment Network. The company expects to release two additional titles in the current fiscal quarter: M1 Tank Platoon II, a ground warfare simulation game; and Ultim@te Race Pro(TM) from Kalisto Entertainment, an arcade-style racing experience. For the first quarter of fiscal 1999 the company has calendared the release of two major titles, Falcon 4.0, an exciting flight simulation sequel to the very popular Falcon series, and Ultimate Civilization II(TM), the multiplayer, networked version of Civ II, one of the best-selling and most highly acclaimed strategy games of all time.
The company's third quarter gross margin was 31 percent of net revenue, down from 61% a year ago and 58% in the second quarter. Operating expenses of $15.6 million remained essentially unchanged from the same quarter a year ago, but increased by $2.7 million from the second quarter of fiscal 1998 due largely to one-time costs of approximately $700,000 associated with the attempted merger, as well as approximately $2 million in advance royalty write-offs. Cash decreased during the third quarter of fiscal 1998 from $35 million to approximately $24 million.
Tangible net worth fell to $1.8 million, which puts the company out of compliance with current Nasdaq net worth listing requirements. However, new listing requirements, taking effect February 23, include alternative tests. The company has a number of viable options, including a reverse stock split, for meeting the new requirements and has been proactive in initiating a dialog with Nasdaq to address this short-term situation.
For the first nine months of fiscal 1998, MicroProse reported an operating loss of $18.0 million and a net loss of $21.0 million, or $0.75 per diluted share, on net revenue of $47.6 million. Results for the first nine months included a non-operating charge of $2.6 million in the first quarter to write down a minority investment in Total Entertainment Network. In the same period of fiscal 1997, the company had net income of $6.9 million, or $.24 per diluted share, on net revenues of $76.4 million.
MicroProse is a leading developer and publisher of interactive entertainment software for use on CD-ROM-based personal computer systems, published under the MicroProse(R) brand name. The company also publishes software for use on next generation 32/64-bit console machines, the Internet and on-line gaming services. The company's five development studios are located in: Alameda, California; Hunt Valley, Maryland; Chapel Hill, North Carolina; Chipping Sodbury, England; and Austin, Texas. Products are available nationally and internationally through major distributors, retailers, mass merchants and on the company's World Wide Web site at microprose.com.
Statements in this press release regarding future operating results and product releases are forward-looking statements. Actual results may differ from those projected in any such statements due to various factors, including: (i) the company's ability to meet its product release schedules; (ii) the degree of market acceptance of MicroProse's products; (iii) the introduction of products competitive with those of MicroProse; (iv) the timing and market acceptance of new hardware and software product introductions; (v) the size and growth rate of the consumer software market; (vi) the seasonality of sales; (vii) development and promotional expenses relating to the introduction of new products or new versions of existing products; (viii) product returns and markdowns; (ix) changes in pricing policies by MicroProse and its competitors; (x) the accuracy of retailers' forecast of consumer demand; (xi) the timing of orders from major customers; (xii) order cancellations; (xiii) delays of shipments; and (xiv) write-offs of advance royalty payments. In particular, as with all software products, until all aspects of the development and initial distribution of the company's games are completed, there can be no assurance of product release dates. For a discussion of additional factors that could cause actual results to differ, see the company's publicly available Securities and Exchange Commission filings, including its annual report on Form 10-K dated March 31, 1997, and Form 10-Q dated September 30, 1997, particularly the discussion of ''Risk Factors'' contained therein.
NOTE: TOP GUN, STAR TREK and related marks are trademarks of Paramount Pictures. MAGIC: THE GATHERING is a registered trademark and ManaLink and DUELS OF THE PLANESWALKERS are trademarks of Wizards of the Coast, Inc. MechWarrior is a registered trademark and MechCommander is a trademark of FASA Corporation. MicroProse is an authorized user and official licensee of these marks. FALCON, MI TANK PLATOON, X-COM, SID MEIER'S CIVILIZATION, and MICROPROSE are registered trademarks and CIVILIZATION is a trademark of MicroProse, Inc. or its subsidiaries.
MICROPROSE, INC.
Condensed Consolidated Balance Sheets
(In thousands)
December 31, March 31,
1997 1997
ASSETS (unaudited)
Current assets:
Cash and equivalents $24,130 $47,110
Accounts receivable, less
allowances of $6,542 and $6,568 8,955 7,891
Inventories 1,995 4,042
Prepaid royalties 7,097 2,139
Other current assets 2,055 1,958
Total current assets 44,232 63,140
Property and equipment, net 7,955 7,802
Investments 3,871 6,050
Other assets 3,539 3,313
$59,597 $80,305
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $6,464 $3,508
Salaries, wages and related accruals 4,535 6,337
Royalties payable 1,330 1,840
Current portion of redeemable
preferred stock 2,940 0.00
Other current liabilities 8,271 7,122
Total current liabilities 23,540 18,807
Long-term debt 32,408 32,739
Other liabilities 1,266 1,280
Total liabilities 57,214 52,826
Redeemable preferred stock, net of
current portion 0.00 5,881
Stockholders' equity 2,383 21,598
$59,597 $80,305
MICROPROSE, INC.
Condensed Consolidated Statements of Operations
(In thousands, except per share data)
(unaudited)
Three Months Ended Nine Months Ended
December 31, December 31,
1997 1996 1997 1996
Net revenue $ 14,853 $ 35,888 $ 47,632 $ 76,373
Cost of revenue 10,211 13,888 23,994 28,973
Gross profit 4,642 22,000 23,638 47,400
Operating expenses:
Sales and marketing 4,223 5,086 13,118 14,679
General and administrative 3,240 4,508 8,391 11,952
Research and development 8,106 5,959 20,174 17,862
Total operating expenses 15,569 15,553 41,683 44,493
Operating income (loss) (10,927) 6,447 (18,045) 2,907
Other income (expense), net (89) (391) (3,056) 797
Income (loss) before
provision (benefit) for
income taxes and
extraordinary item (11,016) 6,056 (21,101) 3,704
Provision (benefit) for
income taxes (131) 398 (131) 398
Net income (loss) before
extraordinary item (10,885) 5,658 (20,970) 3,306
Extraordinary item, net
of tax effect -- -- -- 3,547
Net income (loss) $(10,885) $ 5,658 $(20,970) $ 6,853
Basic income (loss) per share:
Income (loss) before
extraordinary item $ (0.38) $ 0.21 $ (0.75) $ 0.12
Extraordinary item, net
of tax effect -- -- -- 0.14
Net income (loss) $ (0.38) $ 0.21 $ (0.75) $ 0.26
Diluted income (loss)
per share:
Income (loss) before
extraordinary item $ (0.38) $ 0.20 $ (0.75) $ 0.11
Extraordinary item, net
of tax effect -- -- -- 0.13
Net income (loss) $ (0.38) $ 0.20 $ (0.75) $ 0.24
Weighted average shares
used to calculate:
Basic income (loss)
per share 28,593 26,837 28,422 25,797
Diluted income (loss)
per share 28,593 28,470 28,422 27,281
SOURCE: MicroProse, Inc. |
