Mad Catz Interactive, Inc.
AMEX : MCZ
TSX : MCZ

Mad Catz Interactive, Inc.

June 09, 2005 06:30 ET

Mad Catz Reports Record Fiscal 2005 Financial Results

SAN DIEGO--(CCNMatthews - Jun 9, 2005) -

Mad Catz Interactive, Inc. (AMEX/TSX: MCZ)

-- Year-over-Year Net Income Increases over 300% to $4.6 Million or $0.08 Per Diluted Share on 10% Higher Net Sales

-- Fourth Quarter Net Income Rises 78%



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Conference Call: Today, June 9, 2005 at 11:00 a.m. ET
Dial-in numbers: 800/263-9150 (US and CAN)
or 212/676-5416 (International)
Webcast: www.madcatz.com (Select "Investors")
Replay Information: See release text
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Mad Catz Interactive, Inc. ("Mad Catz") (AMEX/TSX: MCZ), the world's leading third party video game accessory provider, today announced record financial results for the fourth quarter and fiscal year ended March 31, 2005.

During the fourth quarter of fiscal 2005, the Company determined that it no longer met the criteria to continue filing as a foreign private issuer. Accordingly, the Company now reports its results and prepares its financial statements in accordance with U.S. GAAP as opposed to Canadian GAAP, which was previously followed. Some prior year information has been recasted in accordance with U.S. GAAP presentation. In addition, in the future the Company will file its Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K.

Net sales for the year ended March 31, 2005 were $112.1 million, a 10% increase from $102.1 million in fiscal 2004, with gross profit for the year increasing 24% to $27.7 million from $22.3 million in fiscal 2004. The gross profit margin for fiscal 2005 was 25% compared to 22% in fiscal 2004. Total operating expenses for the 2005 fiscal year were $18.8 million compared to $19.5 million in fiscal 2004. Sales and marketing expenses decreased to $10.1 million or 9% of net sales for the fiscal year ended March 31, 2005 from $11.2 million or 11% of net sales for fiscal 2004. General and administrative expenses were $7.0 million or 6% of net sales for fiscal 2005 compared to $6.5 million or 6% of net sales for fiscal 2004. Research and development expenses for the fiscal year ended March 31, 2005 were $0.9 million or 1% of net sales compared with $1.1 million or 1% of net sales in fiscal year 2004. Income before taxes for the 2005 fiscal year was $7.3 million compared to $1.7 million in fiscal 2004. Net income for the fiscal year ended March 31, 2005 was $4.6 million or $0.08 per diluted share ($0.09 per basic share) compared to net income of $1.1 million or $0.02 per basic and diluted share for the fiscal year ended March 31, 2004. For the 2005 fiscal year, EBITDA, a non-GAAP measure, (defined as earnings before interest, taxes, depreciation and amortization) increased to $10.4 million from EBITDA of $4.9 million in fiscal 2004. A reconciliation of EBITDA to the Company's net income on a U.S. GAAP basis is included in the financial tables accompanying this release.

Net sales for the fourth quarter ended March 31, 2005 increased 4% to $21.8 million from $21.1 million in the fourth quarter of fiscal 2004. Gross profit for the current quarter grew 13% to $5.2 million compared to $4.7 million in the same period of the prior year. Gross profit margin for the fiscal 2005 fourth quarter was 24% compared to 22% in the fiscal 2004 fourth quarter. Total operating expenses for the fourth quarter of fiscal 2005 were $3.1 million compared to $4.0 million in the same period of the prior year. Sales and marketing expenses in the fiscal 2005 fourth quarter declined to $0.8 million or 4% of net sales for the fiscal quarter from $1.7 million or 8% of net sales in the prior year fourth quarter, with the reduction primarily due to lower cooperative advertising by customers. General and administrative expenses in the fiscal 2005 fourth quarter were $2.1 million or 10% of net sales, an increase from $1.4 million or 7% of net sales in the same period of the prior year, primarily due to incentive compensation expenses of $0.5 million, resulting from the improved fiscal 2005 financial performance. Research and development expenses in the fiscal 2005 fourth quarter were $0.2 million or 1% of net sales, a decrease from $0.3 million or 1% of net sales in the prior year quarter. During the fourth quarter of fiscal 2005, stock-based compensation expense previously recorded in the first three quarters of fiscal 2005 amounting to $0.3 million was reversed as a result of the Company's change to U.S. GAAP from Canadian GAAP. Income before taxes for the quarter ended March 31, 2005 was $1.4 million compared to income before taxes of $0.7 million in the prior year fourth quarter. Net income for the quarter ended March 31, 2005 was $0.9 million, or $0.02 per basic and diluted share, compared to net income of $0.5 million, or $0.01 per basic and diluted share, in the same period of the prior year. EBITDA for the quarter ended March 31, 2005 was $2.2 million compared to EBITDA of $1.9 million for the quarter ended March 31, 2004.



Fiscal 2005 Fourth Quarter Highlights:

-- Net income increased 78% to $0.9 million from $0.5 million.

-- Continued worldwide sales growth:

-- U.S. sales largely consistent with prior year at $17.6
million.

-- European sales were up 25% to $3.1 million from $2.5 million.

-- Canadian sales grew 10% to $1.2 million from $1.1 million.

-- Gross margin increased to 24% in the quarter from 22% in the same
period of 2004.

-- Sales and marketing, general and administrative and R&D expenses
improved to 14% of net sales from 16% in 2004.

-- New licenses and product introductions supporting Mad Catz'
strategy of broadening its product portfolio into adjacent
categories:

-- Executed license agreements with the National Basketball
Association and Major League Baseball.

-- Introduced full product line to support Sony PSP™ handheld
gaming system.

-- Signed multi-year agreement to sell downloadable games online
at GameShark.com.

-- Shipped previously announced iKit® bundles for iPod® and
iPod® Mini.

-- Presented the Company strategy, initiatives and prospects at the
Roth Capital Partners, LLC and B. Riley & Co. investor
conferences.



Commenting on the results, Darren Richardson, Mad Catz' President and CEO, stated, "By executing on our previously announced strategy, Mad Catz delivered record financial results for the 2005 fiscal year and fourth quarter. The fourth quarter represented the fifth consecutive quarter of positive financial performance for Mad Catz highlighted by significant net income gains, double digit revenue growth in our European and Canadian markets, and solid gross margin improvements from the year ago period. Each of these factors contributed to a record annual financial performance for Mad Catz as reflected in the 331% growth in year-over-year net income.

"We believe this performance is particularly noteworthy in light of the hardware shortages that plagued the industry this past fiscal year. Importantly, over the last four quarters, we met our goals of differentiating ourselves from other video game accessory providers and we are well positioned to extend our market leadership during the upcoming console transition. Historically, a console transition is characterized by uncertain demand, and we are currently seeing some softness in the North American market in our fiscal 2006 first quarter. However, we are optimistic that our strategy of expanding our European distribution and adding new revenue streams to leverage our existing infrastructure will generate long-term growth and profitability improvements in fiscal 2006.

"Mad Catz' license agreements for the National Football League, National Basketball Association, Major League Baseball, Batman and Fantastic 4 properties, as well as new revenue streams from iPod® accessories and video game publishing and distribution, highlight our strategy of leveraging our existing retail channels to achieve financial growth. With record annual results, a portfolio of proven gaming accessories and several new licensing agreements that provide new revenue sources, we enter fiscal 2006 on excellent footing to achieve continued strong growth and improved shareholder value."

The Company will host a conference call and simultaneous webcast today June 9, 2005, at 11:00 a.m. ET. Following its completion, a replay of the call can be accessed for 30 days on the Internet from the Company's Web site (www.madcatz.com, select "Investors") or for 2 days via telephone at 800/633-8284 (reservation # 21248226) or, for International callers, at 402/977-9140.

About Mad Catz

Mad Catz is a worldwide leader of innovative peripherals in the interactive entertainment industry. Mad Catz designs and markets a full range of accessories for video game systems and publishes video game software, including the industry leading GameShark brand of video game enhancements. Mad Catz has distribution through most leading retailers offering interactive entertainment products. Mad Catz has its operating headquarters in San Diego, California and offices in Canada, Europe and Asia. For additional information go to www.madcatz.com.

Safe Harbor for Forward Looking Statements:

This press release contains forward-looking statements about the Company's business prospects that involve substantial risks and uncertainties. The Company assumes no obligation to update the forward-looking statements contained in this press release as a result of new information or future events or developments. You can identify these statements by the fact that they use words such as "anticipate," "estimate," "expect," "project," "intend," "should," "plan," "goal," "believe," and other words and terms of similar meaning in connection with any discussion of future operating or financial performance. Among the factors that could cause actual results to differ materially are the following: the ability to maintain or renew the Company's licenses; competitive developments affecting the Company's current products; first party price reductions; the ability to successfully market both new and existing products domestically and internationally; difficulties or delays in manufacturing; or a downturn in the market or industry. A further list and description of these risks, uncertainties and other matters can be found in the Company's reports filed with the Securities and Exchange Commission and the Canadian Securities Administrators.



MAD CATZ INTERACTIVE, INC.
Consolidated Statements Of Operations
(unaudited, US$, in thousands, except per share and share data)

Three Months Ended Year Ended
March 31, March 31,
------------------------- -------------------------
2005 2004* 2005 2004*
------------ ------------ ------------ ------------

Net sales $ 21,838 $ 21,068 $ 112,071 $ 102,143

Cost of sales 16,592 16,417 84,421 79,803
------------ ------------ ------------ ------------

Gross profit 5,246 4,651 27,650 22,340

Operating expenses
(income):
Sales and
marketing 833 1,674 10,053 11,166
General and
administrative 2,099 1,381 6,998 6,459
Research and
development 205 266 897 1,079
Stock-based
compensation(1) (251) -- -- --
Amortization of
intangible
assets 201 642 804 804
------------ ------------ ------------ ------------
Total
operating
expenses 3,087 3,963 18,752 19,508
------------ ------------ ------------ ------------
Operating income 2,159 688 8,898 2,832
Interest expense,
net (364) (295) (1,203) (1,330)
Foreign exchange
gain (loss), net (451) 309 (582) 91
Other income 19 21 202 98
------------ ------------ ------------ ------------
Income before
income taxes 1,363 723 7,315 1,691
Income tax expense 508 242 2,733 629
------------ ------------ ------------ ------------
Net income $ 855 $ 481 $ 4,582 $ 1,062
------------ ------------ ------------ ------------


Net income per
share:
Basic $ 0.02 $ 0.01 $ 0.09 $ 0.02
============ ============ ============ ============
Diluted $ 0.02 $ 0.01 $ 0.08 $ 0.02
============ ============ ============ ============

Weighted average
number of common
shares
outstanding:
Basic 53,639,427 53,293,804 53,506,289 53,286,248
============ ============ ============ ============
Diluted 54,634,557 54,125,770 54,481,162 53,983,127
============ ============ ============ ============

* Recasted in accordance with U.S. GAAP
(1) See discussion in supplementary data


MAD CATZ INTERACTIVE, INC.
Consolidated Balance Sheets
(unaudited, US$, in thousands)

March 31, March 31,
2005 2004*
------------ ------------
Assets

Current assets:
Cash $ 1,085 $ 1,728
Accounts receivable, net 17,549 16,591
Other receivables 1,804 448
Inventories 26,865 16,848
Deferred income tax assets 3,636 2,765
Other current assets 895 1,489
------------ ------------
51,834 39,869

Deferred tax assets 578 282
Property and equipment, net 1,831 1,566
Intangible assets, net 3,438 4,242
Goodwill 21,455 19,964
------------ ------------
Total assets $ 79,136 $ 65,923
============ ============

Liabilities and Shareholders' Equity

Current liabilities:
Bank loan $ 12,100 $ 15,182
Accounts payable and accrued liabilities 22,643 13,714
Accrued taxes payable 1,490 971
------------ ------------
36,233 29,867

Shareholders' equity:
Capital stock 46,746 46,038
Cumulative translation adjustment 6,514 4,957
Accumulated deficit (10,357) (14,939)
------------ ------------
Total shareholders' equity 42,903 36,056
------------ ------------
Total liabilities and shareholders' equity $ 79,136 $ 65,923
============ ============

* Recasted in accordance with U.S. GAAP


MAD CATZ INTERACTIVE, INC.
Supplementary Data
(unaudited, US$, in thousands)


Geographical Sales Data
The Company's net sales are attributable to the following geographic
segments:

Three Months Ended Year Ended
March 31, March 31,
------------------------- -------------------------
2005 2004 2005 2004
------------ ------------ ------------ ------------
Net sales
United States $ 17,551 $ 17,335 $ 91,436 $ 81,434
Europe 3,086 2,459 10,981 10,128
Canada 1,187 1,084 9,419 6,644
Other countries 14 190 235 3,937
------------ ------------ ------------ ------------
$ 21,838 $ 21,068 $ 112,071 $ 102,143
============ ============ ============ ============


EBITDA Reconciliation
EBITDA represents net income plus interest, taxes, depreciation and
amortization.

Three Months Ended Year Ended
March 31, March 31,
------------------------- -------------------------
2005 2004* 2005 2004*
------------ ------------ ------------ ------------


Net income $ 855 $ 481 $ 4,582 $ 1,062

Adjustments:
Interest expense 364 295 1,203 1,330
Income tax expense 508 242 2,733 629
Depreciation and
amortization 456 895 1,852 1,832
------------ ------------ ------------ ------------

EBITDA $ 2,183 $ 1,913 $ 10,370 $ 4,853
============ ============ ============ ============

* Recasted in accordance with U.S. GAAP

EBITDA represents net income plus interest, taxes, depreciation and
amortization. EBITDA is not intended to represent cash flows for the
period, nor is it being presented as an alternative to operating or
net income as an indicator of operating performance and should not be
considered in isolation or as a substitute for measures of performance
prepared in accordance with accounting principles generally accepted
in the United States. As defined, EBITDA is not necessarily comparable
to other similarly titled captions of other companies due to potential
inconsistencies in the method of calculation. We believe, however,
that in addition to the performance measures found in our financial
statements, EBITDA is a useful financial performance measurement for
assessing our Company's operating performance. Our management uses
EBITDA as a measurement of operating performance in comparing our
performance on a consistent basis over prior periods, as it removes
from operating results the impact of our capital structure, including
the interest expense resulting from our outstanding debt, and our
asset base, including depreciation and amortization of some of our
assets.

Note (1) on stock-based compensation:

The Company had previously prepared its financial statements in
accordance with Canadian GAAP and had adopted certain transitional
provisions of The Canadian Institute of Chartered Accountants'
recommendations regarding the accounting for stock-based compensation.
As the Company is now a deemed-U.S. filer, the Company now prepares
its financial statements in accordance with U.S. GAAP. As a result of
this change, in the fourth quarter of fiscal 2005, the effects of
stock-based compensation were removed from the statements of
operations; and, on a year-to-date basis, there is no impact to the
Company's results due to stock-based compensation.



Contact Information

  • Mad Catz Interactive, Inc.
    Cy Talbot, 619-683-9830
    or
    Jaffoni & Collins Incorporated
    Joseph Jaffoni or Purdy Tran, 212-835-8500
    mcz@jcir.com