FORM 6-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Report of Foreign Issuer
Pursuant to Rule 13a-16 or 15d-16 of
the Securities Exchange Act of 1934
For the month of August, 1999
RADICA GAMES LIMITED
(Translation of registrant's name into English)
Suite R, 6/F., 2-12 Au Pui Wan Street, Fo Tan, Hong Kong
(Address of principal executive offices)
Indicate by check mark whether the registrant files or will file annual
reports under cover of Form 20-F or 40-F
Form 20-F X Form 40-F
----------- ------------
Indicate by check mark whether the registrant by furnishing the
information contained in this Form is also thereby furnishing the information to
the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of
1934.
Yes No X
-------- --------
If "yes" is marked, indicate below the file number assigned to the
registrant in connection with Rule 12g3-2(b): 82-
Contents:
1. Quarterly Report for the Quarter Ended June 30, 1999
2. Press Release dated August 9, 1999
3. Press Release dated July 22, 1999
4. Press Release dated July 6, 1999
5. Press Release dated June 28, 1999
6. Press Release dated June 7, 1999
This Report on Form 6-K shall be deemed to be incorporated by reference
into the Registrant's Registration Statements on Form S-8 (No. 33-86960, No.
333-7000 and No. 333-59737) and on Form F-3 (No. 333-7526 and No. 333-79005).
<PAGE>
QUARTERLY REPORT *
For the quarterly period ending June 30, 1999
Commission File Number 0-23696
RADICA GAMES LIMITED
(Exact name of registrant as specified in charter)
Bermuda N/A
(Country of Incorporation) (I.R.S. Employer Identification No.)
Suite R, 6/F., 2-12 Au Pui Wan Street, Fo Tan, Hong Kong
(Address of principal executive offices)
Registrant's telephone number, including area code: (852) 2693 2238
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes x No
----- -----
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
Class Outstanding at June 30, 1999
- --------------------------------------- ----------------------------
Common Stock, par value $0.01 per share 17,833,394
- ------------------------
* As a foreign private issuer, the registrant is not required to file reports on
Form 10-Q. It intends to make voluntary quarterly reports to its stockholders
which generally follow the Form 10-Q format. Such reports, of which this is one,
are furnished to the Commission pursuant to Form 6-K.
2
<PAGE>
PART I -- FINANCIAL INFORMATION
Item 1. Financial Statements
RADICA GAMES LIMITED
FORM 6-K
The accompanying consolidated financial statements have been prepared
by the Company, without audit, and reflect all adjustments which are, in the
opinion of management, necessary for a fair statement of the results for the
interim periods. The statements have been prepared in accordance with the
regulations of the Securities and Exchange Commission (the "SEC"), but omit
certain information and footnote disclosures necessary to present the statements
in accordance with generally accepted accounting principles in the United States
of America.
These financial statements should be read in conjunction with the
financial statements, accounting policies and notes included in the Form 20F for
the year ended October 31, 1998 as filed with the Securities and Exchange
Commission. Management believes that the disclosures are adequate to make the
information presented herein not misleading.
3
<PAGE>
<TABLE>
<CAPTION>
RADICA GAMES LIMITED
CONSOLIDATED BALANCE SHEETS
ASSETS
JUNE 30, DECEMBER 31,
------------- -------------
(US Dollars in thousands, except share data) 1999 1998
------------- -------------
(unaudited) (unaudited)
<S> <C> <C>
Current Assets:
Cash and cash equivalents $ 33,336 $ 47,527
Accounts receivable, net of allowances for doubtful accounts
of $444 ($446 at Dec. 31, 1998) and estimated customer
returns of $329 ($1,077 at Dec. 31, 1998) 14,946 14,860
Inventories, net of provision of $2,180 ($2,437 at Dec. 31, 1998)
(Note 3) 21,612 20,294
Prepaid expenses and other current assets 2,199 1,796
Income taxes receivable 329 -
Deferred income taxes (Note 7) 3,766 3,754
------------- -------------
Total current assets 76,188 88,231
------------- -------------
Investment in affiliated company 141 703
------------- -------------
Property, plant and equipment, net (Note 4) 16,819 16,500
------------- -------------
Intangible assets, net (Note 6) 15,200 2,750
------------- -------------
Deferred income taxes, noncurrent (Note 7) 6 6
------------- -------------
Total assets $ 108,354 $ 108,190
============= =============
LIABILITIES AND SHAREHOLDERS' EQUITY
<S> <C> <C>
Current Liabilities:
Short term borrowings (Note 8) $ 1,115 $ -
Accounts payable 9,162 6,911
Accrued warranty expenses 1,400 2,500
Accrued payroll and employee benefits 1,064 2,688
Accrued advertising expenses 281 1,308
Accrued sales expenses 1,055 3,598
Commissions payable 229 764
Accrued other expenses 6,006 2,534
Income taxes payable 264 2,152
------------- -------------
Total current liabilities 20,576 22,455
------------- -------------
Notes payable (Note 9) 12,345 -
------------- -------------
Total liabilities 32,921 22,455
------------- -------------
Shareholders' equity:
Common stock
par value $0.01 each, 100,000,000 shares authorized,
17,833,394 shares outstanding (18,896,694 at Dec. 31, 1998) (Note 10) 178 189
Additional paid-in capital 1,031 9,382
Retained earnings 74,229 76,215
Cumulative translation adjustment (5) (51)
------------- -------------
Total shareholders' equity 75,433 85,735
------------- -------------
Total liabilities and shareholders' equity $ 108,354 $ 108,190
============= =============
<FN>
See accompanying notes to consolidated financial statements.
</FN>
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
RADICA GAMES LIMITED
CONSOLIDATED STATEMENTS OF OPERATIONS
(US Dollars in thousands, except per share data) Three months ended Six months ended
June 30, June 30,
------------------------------- --------------------------------
1999 1998 1999 1998
-------------- ------------- -------------- --------------
(unaudited) (unaudited) (unaudited) (unaudited)
<S> <C> <C> <C> <C>
REVENUES:
Net sales $ 23,756 $ 34,265 $ 41,662 $ 62,238
Cost of sales (13,683) (14,791) (22,809) (26,943)
-------------- ------------- -------------- --------------
Gross profit 10,073 19,474 18,853 35,295
-------------- ------------- -------------- --------------
OPERATING EXPENSES:
Selling, general and administrative expenses (5,736) (5,875) (9,787) (12,280)
Research and development (1,152) (1,280) (2,192) (1,927)
Depreciation and amortization (1,238) (1,324) (2,174) (1,790)
Acquired research and development - (1,500) - (1,500)
-------------- ------------- -------------- --------------
Total operating expenses (8,126) (9,979) (14,153) (17,497)
-------------- ------------- -------------- --------------
OPERATING INCOME 1,947 9,495 4,700 17,798
OTHER INCOME 244 198 356 306
SHARE OF LOSS OF AFFILIATED COMPANY (322) (52) (562) (98)
NET INTEREST INCOME 336 564 954 1,041
-------------- ------------- -------------- --------------
INCOME BEFORE INCOME TAXES 2,205 10,205 5,448 19,047
PROVISION FOR INCOME TAXES (Note 7) - (44) (89) (58)
-------------- ------------- -------------- --------------
NET INCOME $ 2,205 $ 10,161 $ 5,359 $ 18,989
============== ============= ============== ==============
EARNINGS PER SHARE - BASIC: (Note 11)
Net earnings per share $ 0.12 $ 0.50 $ 0.29 $ 0.93
============== ============= ============== ==============
Average number of shares outstanding 18,102,586 20,480,579 18,526,295 20,429,976
============== ============= ============== ==============
EARNINGS PER SHARE - ASSUMING DILUTION: (Note 11)
Net earnings per share and
dilutive potential common stock $ 0.12 $ 0.47 $ 0.28 $ 0.87
============== ============= ============== ==============
Average number of shares and dilutive
potential common stock outstanding 18,969,534 21,726,418 19,484,686 21,702,444
============== ============= ============== ==============
<FN>
See accompanying notes to consolidated financial statements.
</FN>
</TABLE>
5
<PAGE>
<TABLE>
<CAPTION>
RADICA GAMES LIMITED
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(unaudited)
(US dollars in thousands)
Common stock
------------ Additional Cumulative Total
Number paid-in Retained translation shareholders'
of shares Amount capital earnings adjustment equity
--------------- ------------- -------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1998 18,896,694 $ 189 $ 9,382 $ 76,215 $(51) $ 85,735
Cancellation of repurchased stock (1,317,500) (13) (8,787) (7,345) - (16,145)
Stock options exercised 254,200 2 436 - - 438
Net income - - - 5,359 - 5,359
Foreign currency translation - - - - 46 46
--------------- ------------- -------------- ------------- ------------- -------------
Balance at June 30, 1999 17,833,394 $ 178 $ 1,031 $ 74,229 $ (5) $ 75,433
=============== ============= ============== ============= ============= =============
<FN>
See accompanying notes to consolidated financial statements.
</FN>
</TABLE>
6
<PAGE>
<TABLE>
<CAPTION>
RADICA GAMES LIMITED
CONSOLIDATED STATEMENTS OF CASH FLOWS
(US dollars in thousands)
Six months ended June 30,
------------------------------------
1999 1998
---------------- ----------------
(unaudited) (unaudited)
<S> <C> <C>
Cash flow from operating activities:
Net income $ 5,359 $ 18,989
Adjustments to reconcile net income to net cash
provided by operating activities:
Deferred income taxes (12) -
Depreciation 1,124 956
Amortization 1,050 833
Share of loss of affiliated company 562 98
Acquired research and development - 1,500
Loss on disposal and write off of
property, plant and equipment 17 5
Changes in assets and liabilities:
Accounts receivable 1,249 (5,579)
Inventories 27 (8,147)
Prepaid expenses and other current assets (264) 425
Accounts payable 1,598 2,152
Accrued payroll and employee benefits (1,624) 483
Commissions payable (535) 370
Accrued advertising expenses (1,027) 1,820
Accrued sales expenses (2,543) 989
Accrued warranty expenses (1,100) (223)
Accrued other expenses 2,460 1,029
Income taxes payable (1,919) (151)
---------------- ----------------
Net cash provided by operating activities 4,422 15,549
---------------- ----------------
Cash flow from investing activities:
Decrease in short-term investments - 5,012
Proceeds from sale of property, plant and equipment 21 13
Purchase of property, plant and equipment (1,266) (3,998)
Purchase of Girl Tech assets - (2,400)
Acquisition of LMP, net of cash acquired (1,661) -
Investment in an affiliate company - (963)
---------------- ----------------
Net cash used in investing activities (2,906) (2,336)
---------------- ----------------
Cash flow from financing activities:
Repurchase of common stock (16,145) (13,741)
Funds from stock options exercised 438 822
---------------- ----------------
Net cash used in financing activities (15,707) (12,919)
---------------- ----------------
Net decrease in cash and cash equivalents $ (14,191) $ 294
Cash and cash equivalents:
Beginning of period 47,527 41,977
---------------- ----------------
End of period $ 33,336 $ 42,271
================ ================
Supplementary disclosures of cash flow information:
Cash paid during the period:
Interest $ - $ -
Income taxes $ 1,983 $ 209
<FN>
See accompanying notes to consolidated financial statements.
</FN>
</TABLE>
7
<PAGE>
RADICA GAMES LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(US dollars in thousands)
1. ORGANIZATION AND BASIS OF FINANCIAL STATEMENTS
The consolidated financial statements include the accounts of the Company
and all subsidiaries. Investments in affiliates, owned more than 20 percent
but not in excess of 50 percent, are recorded using the equity method. All
significant intra-group transactions and balances have been eliminated on
consolidation.
The Company designs, develops, manufactures and distributes a variety of
electronic handheld and mechanical games. On June 24, 1999, the Company
acquired all of the business and operating assets of Leda Media Products
Limited, a supplier of video game controllers.
The accompanying financial statements have been prepared in accordance with
accounting principles generally accepted in the United States of America
and are presented in US dollars as the Company's sales are predominantly
denominated in US dollars.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Cash and cash equivalents - Cash and cash equivalents include cash on hand,
cash accounts, interest-bearing savings accounts, and time certificates of
deposit with a maturity at purchase date of three months or less.
Inventories - Inventories are stated at the lower of cost, determined by
the weighted average method, or market. Provision for potentially obsolete
or slow-moving inventory is made based on management's analysis of
inventory levels and future expected sales.
Depreciation and amortization of property, plant and equipment -
Depreciation is provided on the straight-line method at rates based upon
the estimated useful lives of the property, generally not more than seven
years except for leasehold land and buildings which are 50 years or where
shorter, the remaining term of the lease, by equal annual instalments.
Costs of leasehold improvements and leased assets are amortized over the
life of the related asset or the term of the lease, whichever is shorter.
Upon sale or retirement, the costs and related accumulated depreciation or
amortization are eliminated from the respective accounts and any resulting
gain or loss is included in income.
Intangible assets - Intangible assets primarily represent the excess of the
purchase price of acquisition of a business over the fair value of the net
assets acquired. Intangible assets also represent cost allocated to brand
names. Such assets are amortized on a straight-line basis over the period
estimated to be benefited, but not to exceed 40 years. The carrying value
of intangible assets is periodically reviewed by the Company and
impairments are recognized when there is a permanent diminution in value.
The Company policy is to charge a full year of amortization in the year of
acquisition.
Mold costs - The Company expenses all mold costs in the year of purchase or
for internally produced molds, in the year of construction.
8
<PAGE>
RADICA GAMES LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)-- (Continued)
(US dollars in thousands)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Revenue recognition - Revenues are recognized as sales when merchandise is
shipped. The Company permits the return of damaged or defective products
and accepts limited amounts of product returns in certain other instances.
Accordingly, the Company provides allowances for the estimated amounts of
these returns at the time of revenue recognition, based on historical
experience adjusted for known trends.
Investments - Debt securities which the Company has both the positive
intent and ability to hold to maturity are classified as held-to-maturity
and carried at amortized cost. Debt securities which might be sold prior to
maturity are classified as available-for-sale and carried at approximate
fair value. Any material unrealized gains and losses related to
available-for-sale investments, net of applicable taxes, are reported in
other comprehensive income. The Company determines the appropriate
classification of securities at the time of purchase and evaluates such
classification as of each balance sheet date.
Income taxes - Income taxes are provided based on an asset and liability
approach for financial accounting and reporting of income taxes. Deferred
income tax liabilities or benefits are recorded to reflect the tax
consequences in future years of differences between the tax basis of assets
and liabilities and the financial reporting amounts at each year end. A
valuation allowance is recognized if it is more likely than not that some
portion of, or all of, a deferred tax asset will not be realized.
Advertising - The production costs of advertising are expensed by the
Company the sooner of the first time the advertising takes place or the
invoice date for the media purchase. Advertising costs associated with
customer benefit programs are accrued as the related revenues are
recognized.
Foreign currency translation - Assets and liabilities of foreign currency
are translated into US dollars using the exchange rates in effect at the
balance sheet date. Revenues and expenses of foreign currency are
translated into US dollars using average monthly exchange rates during each
reporting period. The impact of exchange rate changes is shown as
"Cumulative Translation Adjustment" in shareholders' equity. Net gains
(losses) from foreign exchange transactions of $222 and $(91) for the six
months ended June 30, 1999 and 1998 respectively, are included in selling,
general and administrative expenses.
Post-retirement and post-employment benefits - The Company does not provide
post-retirement benefits other than pensions to employees and
post-employment benefits are immaterial.
Warranty - Future warranty costs are provided for at the time of revenue
recognition based on management's estimate by reference to historical
experience adjusted for known trends.
9
<PAGE>
RADICA GAMES LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)-- (Continued)
(US dollars in thousands)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Stock options - The Company continues to follow Accounting Principles Board
Opinion No. 25, "Accounting for Stock Issued to Employees", in accounting
for its stock options. As a result, no compensation expense has been
recognized as the exercise price of the Company's employee stock options
equals the market price of the underlying stock at the date of grant. Pro
forma disclosures of the effect on net income and earnings per share as if
the Company had accounted for its employee stock options under the fair
value method prescribed by Statement of Financial Accounting Standards
("SFAS") No. 123, "Accounting for Stock-Based Compensation", are shown in
note 12.
Comprehensive income - Comprehensive income includes both net income and
other comprehensive income (loss). Other comprehensive income (loss) for
the six months ended June 30, 1999 and 1998 of $46 and $(14), represented
foreign currency translation adjustments. Accumulated other comprehensive
loss included in the accompanying condensed consolidated balance sheets as
of June 30, 1999 and December 31, 1998 was $5 and $51, consisting of the
accumulated foreign currency translation adjustment.
Earnings per share - Earnings per share is based on the weighted average
number of shares of common stock and dilutive potential common stock
outstanding. Dilutive potential common stock results from dilutive stock
options. The effect of such dilutive potential common stock on net income
per share is computed using the treasury stock method.
Use of estimates - The preparation of financial statements in conformity
with generally accepted accounting principles requires the use of
estimates. Actual results could differ from those estimates.
3. INVENTORIES
Inventories by major categories are summarized as follows:
June 30, December 31,
1999 1998
------------ ------------
Raw materials $ 5,034 $ 4,580
Work in progress 7,047 6,731
Finished goods 9,531 8,983
------------ ------------
$21,612 $20,294
============ ============
10
<PAGE>
RADICA GAMES LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)-- (Continued)
(US dollars in thousands)
4. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consists of the following:
June 30, December 31,
1999 1998
------------ -------------
Land and buildings $ 12,047 $ 11,958
Plant and machinery 6,741 5,777
Furniture and equipment 5,329 4,191
Leasehold improvements 2,374 2,192
------------ -------------
Total $ 26,491 $ 24,118
Less: Accumulated depreciation and
amortization (9,672) (7,618)
------------ -------------
Total $ 16,819 $ 16,500
============ =============
5. ACQUISITION
On June 24, 1999, Radica acquired all of the business and operating assets
of Leda Media Products Limited ("LMP"), the leading supplier of video game
controllers in the U.K. The Company purchased LMP for approximately $16
million. The acquisition price consisted of cash payment of approximately
$2.6 million, LMP net indebtedness of approximately $1.1 million and
issuance of notes payable for $12.3 million. The transaction has been
accounted for using the purchase method. The purchase price has been
allocated to the assets acquired and liabilities assumed based on estimates
of fair values as of the acquisition date. The Company recorded intangible
asset of approximately $13.5 million which is being amortized on a
straight-line basis over a fifteen year fiscal period.
6. INTANGIBLE ASSETS
The Company purchased the assets and business of KidActive, LLC, dba Girl
Tech(TM) during the quarter ended June 30, 1998. KidActive, LLC, dba Girl
Tech(TM) was a development stage enterprise and had not traded prior to the
Company's acquisition of its assets. The Company purchased the assets and
business of KidActive, LLC, dba Girl Tech(TM) for $2.4 million in cash plus
190,094 shares, a total of $6 million. Of this $4.5 million was capitalised
as goodwill and brand name, and $1.5 million was written off immediately as
purchased research and development. This cost is being amortized over a
three year fiscal period on a straight-line basis.
Intangible assets consist of the excess of purchase price over the
estimated fair value of net assets acquired in acquisition of LMP and Girl
Tech. Accumulated amortization was $2,800 and $1,750 at June 30, 1999 and
December 31, 1998, respectively.
11
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RADICA GAMES LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)-- (Continued)
(US dollars in thousands)
7. INCOME TAXES
The components of income before income taxes are as follows:
Six months ended June 30,
------------------------------
1999 1998
---------- ----------
United States $ 415 $ 7,189
International 5,033 11,858
---------- ----------
$ 5,448 $ 19,047
========== ==========
As the Company's subsidiary in the People's Republic of China ("PRC") is a
sino-foreign joint venture enterprise, it was eligible for an exemption
from income tax for two years starting from the first profitable year of
operations and thereafter a 50 percent relief from income tax for the
following three years under the Income Tax Law of the PRC. That subsidiary
had its first profitable year of operations in the year ended December 31,
1997 and has been taxed at a 12% rate from January 1, 1999. In addition,
under the existing processing arrangement and in accordance with the
current tax regulations in the PRC, manufacturing income generated in the
PRC is not subject to PRC income taxes.
The provision (credit) for income taxes consists of the following:
Six months ended June 30,
------------------------
1999 1998
---------- ----------
United States
Federal tax $ (25) $ 112
State tax 3 (44)
---------- ----------
$ (22) $ 68
---------- ----------
International
Current income tax $ 111 $ (10)
---------- ----------
Total provision for income tax $ 89 $ 58
========== ==========
12
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RADICA GAMES LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)-- (Continued)
(US dollars in thousands)
7. INCOME TAXES (Continued)
A reconciliation between the provision for income taxes computed by
applying the statutory tax rates in the United States for the six months
ended June 30, 1999 and 1998 to income before income taxes and the actual
provision for income taxes is as follows:
Six months ended June 30,
---------------------------
1999 1998
---------- ----------
US statutory rate 34% 34%
---------- ----------
Provision for income taxes at
statutory rate on income for the period $ 1,852 $ 6,476
State taxes 3 (44)
International rate differences (1,715) (4,032)
Accounting (gains) losses for which
deferred income tax cannot be recognized (166) (1,277)
Decrease in valuation allowance -- (1,107)
Other 115 42
---------- ----------
Income tax provision $ 89 $ 58
========== ==========
Deferred income taxes reflect the net tax effect of temporary differences
between the amounts of assets and liabilities for income tax purposes
compared with the respective amounts for financial statement purposes. At
June 30, 1999 and December 31, 1998 deferred income taxes comprised:
June 30, December 31,
1999 1998
---------- -----------
Deferred tax assets (liabilities):
Excess of tax over financial
reporting depreciation $ (79) $ (79)
Advertising allowances 96 445
Bad debt allowances 151 151
Inventory reserves 49 44
Tax losses 3,020 1,714
Sales allowances and returns reserves 392 1,665
Other 143 (180)
---------- -----------
$ 3,772 $ 3,760
========== ===========
13
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RADICA GAMES LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)-- (Continued)
(US dollars in thousands, except share and per share data)
8. SHORT-TERM BORROWINGS
Prior to the acquisition of Leda Media Products Limited ("LMP"), the
Company had no borrowings. On June 24, 1999, the Company acquired all of
the business and operating assets of LMP, and assumed all of its
liabilities. LMP had entered into receivables securitization facilities
whereby the trade debtors were the subject of an invoice discounting
agreement with recourse. Since the acquisition, notice has been given to
terminate the agreement. At June 30, 1999, LMP was indebted in the amount
of $1,115. The weighted average interest rate on borrowings was 7%.
9. NOTES PAYABLE
On June 24, 1999, the Company entered into a $12.3 million guaranteed loan
agreement with the sellers as part of the financing of the LMP acquisition.
The interest rate on the loan notes is 130 basis points below the US$ LIBOR
offered rate and is payable quarterly. The loan is subject to certain
financial covenants and will mature between December 2000 and December
2004.
10. COMMON STOCK
During the quarter ended June 30, 1999, the Company repurchased 982,700
shares at an average price of $11.79 per share under the Company's
authorized repurchase programs. In total 1,317,500 shares have been
repurchased in the six month period ending June 30, 1999 at an average
price of $12.21 per share. All repurchased shares were cancelled. As of
June 30, 1999, approximately 72,100 shares remain available for repurchase
under the repurchase programs.
14
<PAGE>
RADICA GAMES LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)--(Continued)
(US dollars in thousands, except share and per share data)
11. EARNINGS PER SHARE
The following information shows the numbers used in computing earnings per
share and the effect on income and the weighted average number of shares of
dilutive potential common stock:
Six months ended June 30, 1999
------------------------------------
Earnings
Numerator Denominator per share
---------- ----------- ----------
Basic earnings per share:
Net income $ 5,359 18,526,295 $ 0.29
========== ==========
Effective of dilutive options 958,391
-----------
Diluted earnings per share:
Net income, assuming
all dilutive options exercised $ 5,359 19,484,686 $ 0.28
========== =========== ==========
Options on 867,847 shares of common stock were not included in computing
diluted earnings per share since their effects were antidilutive.
Three months ended June 30, 1999
------------------------------------
Earnings
Numerator Denominator per share
---------- ----------- ----------
Basic earnings per share:
Net income $ 2,205 18,102,586 $ 0.12
========== ==========
Effective of dilutive options 866,948
-----------
Diluted earnings per share:
Net income, assuming
all dilutive options exercised $ 2,205 18,969,534 $ 0.12
========== =========== ==========
Options on 811,585 shares of common stock were not included in computing
diluted earnings per share since their effects were antidilutive.
15
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RADICA GAMES LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)--(Continued)
(US dollars in thousands, except share and per share data)
12. STOCK OPTIONS
The Company's 1994 Stock Option Plan (the "Stock Option Plan") provided for
options to be granted for the purchase of an aggregate of 1,600,000 shares
of common stock at per share prices not less than 100% of the fair market
value at the date of grant as determined by the Compensation Committee of
the Board of Directors. Following approval at the annual shareholders
meetings in April 1997 and 1998, the Stock Option Plan's aggregated common
stock increased by 400,000 and 800,000 respectively. In total, the Stock
Option Plan's aggregate common stock increased to 2,800,000 shares
available for options. Options under this plan are generally exercisable
ratably over five years from the date of grant unless otherwise provided.
Option activity for the six months ended June 30, 1999:-
Weighted average
Number exercise price
of shares per share
--------- ---------
(in thousands)
Outstanding at December 31, 1998 2,041 $ 6.58
Options granted 290 11.66
Options exercised (254) 1.73
Options cancelled (38) 4.78
----------
Outstanding at June 30, 1999 2,039 $ 7.94
==========
Exercisable at June 30, 1999 333 $ 7.08
16
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RADICA GAMES LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)--(Continued)
(US dollars in thousands, except per share data)
12. STOCK OPTIONS (Continued)
The following is additional information relating to options outstanding as
of June 30, 1999:
<TABLE>
<CAPTION>
Options Outstanding Options exercisable
------------------------------------------------- ------------------------------
Weighted average
Weighted average remaining Weighted average
Exercise Number exercise price contractual Number exercise price
price range of shares per share life (years) of shares per share
----------- --------- --------- ------------ --------- ---------
(in thousands) (in thousands)
<S> <C> <C> <C> <C> <C>
1.090 to 2.000 607 $ 1.31 6.8 112 $ 1.37
2.001 to 4.000 337 3.50 7.8 115 3.48
4.001 to 6.000 8 5.00 8.0 2 5.00
6.001 to 8.000 47 6.79 8.1 2 8.00
8.001 to 10.000 45 9.84 9.7 1 9.00
10.001 to 12.000 421 10.91 9.5 - -
12.001 to 14.000 186 12.70 9.5 9 12.89
14.001 to 16.000 140 14.83 9.2 5 15.60
16.001 to 18.000 151 16.89 8.9 43 17.33
18.001 to 20.000 96 19.06 8.8 44 18.91
--------------- -------------
2,038 $ 7.94 8.3 333 $ 7.08
=============== =============
</TABLE>
Pro forma information regarding net income and earnings per share is
required by SFAS No. 123, and has been determined as if the Company had
accounted for its employee stock options under the fair value method of
SFAS No. 123. The weighted average fair value of stock options at date of
grant of $4.61 and $8.95 per option for the six months ended June 30, 1999
and 1998, respectively, were estimated using the Black-Scholes option
pricing model with the following weighted average assumptions:
Six months ended June 30,
------------------------------
1999 1998
----------- -----------
Expected life of options 5 years 5 years
Risk-free interest rate 5.1% 6.5%
Expected volatility of underlying stock 35% 50%
Dividends 0% 0%
The Black-Scholes option pricing model requires the input of highly
subjective assumptions, including the expected volatility of stock price.
Because changes in subjective input assumptions can materially affect the
fair value estimate, in management's opinion, the existing model does not
necessarily provide a reliable single measure of the fair value of the
stock options.
17
<PAGE>
RADICA GAMES LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)-- (Continued)
(US dollars in thousands, except per share data)
12. STOCK OPTIONS (Continued)
If the Company had accounted for its stock option plans by recording
compensation expenses based on the fair value at grant date for such awards
consistent with the method of SFAS No. 123, the Company's net income and
earnings per share would have been reduced to the pro forma amounts as
follows:
Six months ended June 30,
------------------------------
1999 1998
------------ ------------
Pro forma net income $ 4,720 $ 18,627
Pro forma earnings per share:
Basic 0.25 0.91
Diluted 0.24 0.86
13. CONCENTRATIONS OF CREDIT RISK AND MAJOR CUSTOMERS
Accounts receivable of the Company are subject to a concentration of credit
risk with customers in the retail sector. This risk is limited due to the
large number of customers composing the Company's customer base and their
geographic dispersion, though the Company had three United States customers
which accounted for more than twenty-seven percent, twenty-five percent and
twelve percent of net sales in the three months ended June 30, 1999 and
three United States customers which accounted for more than thirty-two
percent, fourteen percent and ten percent of net sales in the six months
ended June 30, 1998. The Company performs ongoing credit evaluations of its
customers' financial condition and, generally, requires no collateral from
its customers.
14. ESTIMATED FAIR VALUE OF FINANCIAL INSTRUMENTS
The estimated fair value of financial instruments is made in accordance
with the requirements of SFAS No. 107, "Disclosures about Fair Value of
Financial Instruments". The estimated fair value amounts have been
determined by the Company, using available market information and
appropriate valuation methodologies. The estimates presented herein are not
necessarily indicative of the amounts that the Company could realize in a
current market exchange.
The carrying amounts of cash and short-term investments, accounts
receivable and accounts payable are reasonable estimates of their fair
value.
18
<PAGE>
RADICA GAMES LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)-- (Continued)
(US dollars in thousands)
15. COMMITMENTS AND CONTINGENCIES
The Company leases certain warehouses and equipment under operating leases.
Total expense for the operating leases was $223 and $170 for the six months
ended June 30, 1999 and 1998, respectively.
At June 30, 1999, the Company was obligated under operating leases
requiring future minimum lease payments as follows:
Operating leases
----------------
1999 $ 127
2000 249
2001 134
2002 108
2003 106
Thereafter 586
------------
Total minimum lease payments $ 1,310
============
At June 30, 1999, certain leasehold land and buildings with a net book
value of $4,815 and bank balances of $3,871 were pledged to secure general
banking facilities including overdraft and trade facilities granted to the
Company.
16. RETIREMENT PLAN
The Company has defined contribution retirement plans covering
substantially all employees in Hong Kong. Under these plans, eligible
employees may contribute amounts through payroll deductions which are 5% or
more of individual salary, supplemented by employer contributions ranging
from 5% to 10% of individual salary depending on the years of service. The
expenses related to these plans were $89 and $53 for the six months ended
June 30, 1999 and 1998, respectively.
19
<PAGE>
RADICA GAMES LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) -- (Continued)
(US dollars in thousands)
17. SEGMENT INFORMATION
Effective the first quarter of 1999, the Company adopted the Financial
Accounting Standards Board's Statement of Financial Accounting Standards
No. 131, "Disclosures about Segments of an Enterprise and Related
Information" (SFAS 131). The adoption of SFAS 131 did not affect results of
operations or financial position, but did affect the disclosure of segment
information. As a result of this change, certain reclassifications have
been made to prior periods amounts to comply with the requirements of SFAS
131.
The Company operates in one principal industry segment: the design,
development, manufacture and distribution of a variety of electronic and
mechanical handheld and tabletop games. The Company evaluates performance
and allocates based on income or loss from operations before income taxes.
The accounting policies of the reportable segments are the same as those
described in the summary of significant accounting policies.
Information about the Company's operations in different geographic areas is
set forth in the table below. Segment sales and operating income before
taxes are attributed to countries based on the location of customers, while
identifiable assets are reported based on their location.
<TABLE>
<CAPTION>
Income before Identifiable
Net Sales income taxes Assets
-----------------------------------------------------
Six months ended June 30,
June 30, 1999 1999
---------------------------------- -------------
<S> <C> <C> <C>
United States and Canada $ 40,525 $ 5,419 $ 25,038
China and Asia Pacific 280 29 66,822
Europe and other countries 857 - 16,494
-------------- -------------- -------------
$ 41,662 $ 5,448 $ 108,354
============== ============== =============
Six months ended December 31,
June 30, 1998 1998
---------------------------------- -------------
United States and Canada $ 60,515 $ 18,363 $ 34,508
China and Asia Pacific 1,419 633 73,153
Europe and other countries 304 51 529
-------------- ------------- -------------
$ 62,238 $ 19,047 $ 108,190
============== ============== =============
</TABLE>
20
<PAGE>
RADICA GAMES LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)- (Continued)
(US dollars in thousands)
18. VALUATION AND QUALIFYING ACCOUNTS
<TABLE>
<CAPTION>
Balance at Charged Release Balance
beginning for the of at end
of period period provision of period
---------- ---------- ---------- ---------
<S> <C> <C> <C> <C>
Six months ended June 30, 1999
Allowances for doubtful accounts $ 446 $ 3 $ (5) $ 444
Estimated customer returns 1,077 312 (1,060) 329
Provision for inventories 2,437 - (257) 2,180
---------- ---------- ---------- ---------
Total $ 3,960 $ 315 $(1,322) $ 2,953
========== ========== ========== =========
Six months ended June 30, 1998
Allowances for doubtful accounts $ 1,028 $ - $ (120) $ 908
Estimated customer returns 2,783 - (1,135) 1,648
Provision for inventories 2,922 - (1,506) 1,416
---------- ---------- ---------- ---------
Total $ 6,733 $ - $(2,761) $ 3,972
========== ========== ========== =========
</TABLE>
21
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
The following discussion should be read in conjunction with the
attached financial statements and notes thereto, and with the audited financial
statements, accounting policies and notes included in the Company's Annual
Report on Form 20-F for the year ended October 31, 1998 as filed with the United
States Securities and Exchange Commission.
RESULTS OF OPERATIONS -- QUARTER ENDED JUNE 30, 1999
COMPARED TO THE SAME PERIOD ENDED IN 1998
The following table sets forth items from the Company's Consolidated
Statements of Operations as a percentage of net revenues:
Three months ended June 30,
-------------------------------
1999 1998
------------ ------------
Net revenues 100.0% 100.0%
Cost of sales 57.6% 43.2%
Gross margin 42.4% 56.8%
Selling, general and administrative 24.2% 17.1%
Research and development 4.8% 3.7%
Depreciation and amortization 5.2% 3.9%
Acquired research and development - 4.4%
Operating income 8.2% 27.7%
Other income 1.0% 0.6%
Share of loss of affiliated company 1.3% 0.2%
Interest income, net 1.4% 1.7%
Income before income taxes 9.3% 29.8%
Provision for income taxes - 0.1%
Net income 9.3% 29.7%
The Company made an after tax profit of $2.2 million for the second
quarter ended June 30, 1999 or $0.12 per fully diluted share versus $10.2
million or $0.47 per fully diluted share for the same period last year. Total
revenues for the second quarter ended June 30, 1999 were $23.8 million, compared
to $34.3 million for the same period in 1998.
22
<PAGE>
The following table sets out the percentages of sales achieved from
each category of products:
<TABLE>
<CAPTION>
Three months ended June 30,
--------------------------------------------------------------------------------
1999 1998
-------------------------------------- --------------------------------------
% of Net Units No. of % of Net Units No. of
Product Lines Sales Value Sold Models Sales Value Sold Models
- ---------------------- ----------- ---------- --------- ----------- ---------- ----------
(in thousands) (in thousands)
<S> <C> <C> <C> <C> <C> <C>
Fishing/Hunting games 29.7% 575 9 48.4% 1,285 5
Combat games 5.1% 140 5 3.7% 102 3
Sports games 4.3% 92 9 11.9% 289 8
Casino games 8.9% 480 24 7.3% 594 45
Heritage games 8.7% 274 10 6.5% 205 11
Extreme games 1.8% 54 2 7.8% 177 2
Girl Tech games 5.3% 104 5 - - -
ODM products 36.2% 1,841 15 14.4% 972 8
----------- ---------- --------- ----------- ---------- ----------
Total 100.0% 3,560 79 100.0% 3,624 82
=========== ========== ========= =========== ========== ==========
</TABLE>
The gross profit for the second quarter decreased to $10.1 million from
$19.5 million in the same period of fiscal 1998 and the gross margin decreased
to 42.4% from 56.8% for the same period last year. The decrease in gross margin
for the quarter was the result of lower pricing for the Hasbro Group as part of
a new long-term contract combined with a higher proportion of ODM sales in Q2
`99 (36.2%) compared to Q2 `98 (14.4%) as a result of shipments of two new
Hasbro Star Wars products, namely Naboo Fighter(TM) and Destroyer Droid(TM). The
Company expects to ship a further two Star Wars products for Hasbro, Pod
Racer(TM) and Ask the Force(TM), in Q3.
Operating income for the second quarter ended June 30, 1999 decreased
to $2 million from $9.5 million for the same period last year. Operating
expenses decreased to $8.1 million in the second quarter ended June 30, 1999
from $10 million in the same period in 1998, due to a decrease in variable sales
related costs, and decreases in depreciation and amortization and research and
development costs due to the effect of the Girl Tech(TM) acquisition in Q2 `98.
These reductions were offset by a quarterly charge of $0.3 million for the
amortization of the goodwill purchased in the previously announced acquisition
of Leda Media Products Limited ("LMP"), the leading supplier of controllers in
the United Kingdom. The operating margin was 8.2% during the quarter compared to
27.7% during the same period last year.
23
<PAGE>
The following table lays out the changes in operating expenses for the major
expense categories.
Three months ended June 30,
--------------------------
1999 1998
---------- ----------
(dollars in thousands)
Advertising and promotion expenses $ 2,148 $ 1,983
Commissions 416 1,151
Indirect salaries and wages 1,568 1,646
Research and development expenses 1,152 1,280
CAPITAL RESOURCES AND LIQUIDITY
Cash and cash equivalents totaled $33.3 million at June 30, 1999, a
decrease of $14.2 million from December 31, 1998. Working capital at June 30,
1999 was $55.6 million, a $10.2 million decrease from working capital of $65.8
million at December 31, 1998. The decrease in working capital is due primarily
to an increase in net income offset by the repurchase of 1,317,500 shares at an
average price of $12.21 per share during the period.
Prior to the acquisition of LMP, the Company had no short-term
borrowings. On June 24, 1999, the Company purchased LMP and assumed all of its
liabilities. There were $1.1 million of short-term borrowings at June 30, 1999.
As part of the financing of the LMP acquisition, the Company entered
into a $12.3 million guaranteed loan agreement with the sellers. The interest
rate on the loan notes is 130 basis points below the US$ LIBOR offered rate and
is payable quarterly. The loan is subject to certain financial covenants and
will mature between December 2000 and December 2004.
During the quarter ended June 30, 1999, the Company repurchased 982,700
shares at an average price of $11.79.
The Company believes that its existing cash and cash equivalents and
cash generated from operations are sufficient to satisfy the current anticipated
working capital needs of its core business.
The foregoing discussion contains forward-looking statements that
involve risks and uncertainties that could cause actual results
to differ materially from projected results as a result of
various factors including those set forth in the Company's Annual
Report on Form 20-F for year ended October 31, 1998, as filed
with the Securities and Exchange Commission. In particular, see
"Item 1. Description of Business - Risk Factors" in such Report
on Form 20-F.
24
<PAGE>
Item 3. Qualitative and Quantitative Disclosures About Market Risk
MARKET RISK DISCLOSURES
The following discussion about the Company's market risk disclosures
contains forward-looking statements. Forward-looking statements are subject to
risks and uncertainties. Actual results could differ materially from those
discussed in the forward-looking statements. The Company is exposed to market
risk related to changes in interest rates and foreign currency exchange rates.
The Company does not have derivative financial instruments for hedging,
speculative, or trading purposes.
INTEREST RATE SENSITIVITY
Most of the Company's $13.4 million principal amount of indebtedness at
June 30, 1999 bears an interest rate that fluctuates based on changes in the US$
LIBOR offered rate. A 1% change in the underlying US$ LIBOR offered rate would
result in an approximate $134,000 change in the annual amount of interest
payable on such debt.
FOREIGN CURRENCY RISK
The Company believes that its exposure on currency exchange fluctuation
risk is insignificant because the Company's transactions with international
vendors are generally denominated in US dollars, which is considered to be the
functional currency of the Company and its subsidiary. The currency exchange
impact on intercompany transactions was immaterial for the quarter ended June
30, 1999.
25
<PAGE>
PART II -- OTHER INFORMATION
Item 1. Legal Proceedings
None.
Item 2. Changes in Securities and Use of Proceeds
None.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Submission of Matters to a Vote of Security Holders
None.
Item 5. Other Information
None.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
None.
(b) Reports on Form 8-K
None.
26
<PAGE>
Pursuant to the requirements of Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
RADICA GAMES LIMITED
Date: August 19, 1999 /S/ David C.W. Howell
---------------------- -------------------------
David C.W. Howell
President Asia Operations
Chief Financial Officer
27
RADICA(R) GAMES LIMITED
REPORTS SECOND QUARTER RESULTS
FOR IMMEDIATE RELEASE CONTACT: PATRICK S. FEELY
AUGUST 9TH, 1999 PRESIDENT & CEO
(LOS ANGELES, CALIFORNIA)
(626) 744 1150
DAVID C.W. HOWELL
PRESIDENT ASIA OPERATIONS
& CFO
(HONG KONG)
(852) 2688 4201
(HONG KONG) Radica Games Limited (NASDAQ RADA) reported today an after tax
profit of $2.2 million for the second quarter ended June 30, 1999 or $0.12 per
fully diluted share versus $10.2 million or $0.47 per fully diluted share for
the same period last year. After tax profit for the six months ended June 30,
1999 was $5.4 million or $0.28 earnings per share versus $19 million or $0.87
for the six months ended June 30, 1998.
Total revenues for the second quarter ended June 30, 1999 were $23.8 million,
compared to $34.3 million for the same period in 1998. Total revenues for the
six months ended June 30, 1999 were $41.7 million, compared to $62.2 million for
the same period last year.
"As we stated in the first quarter, 1999 represents a return to normal
seasonality patterns for Radica. The results of the first and second quarters of
1998 were unusually strong due to timing of key fishing product introductions
last year," said Pat Feely, Chief Executive Officer.
"In 1998 the fishing category was red hot and accounted for almost half of
Radica's sales. 1999 sales of fishing games have continued at a steady but
considerably lower level. As a result in the second quarter fishing products
accounted for only 19.6% of Radica's sales," added Feely. "Even so, our recently
released Ultimate Bass Fishin'(TM) game was the number 3 ranked game in the
industry in sales per store as reported by the NPD Group's retail tracking
survey for June. This indicates to us that fishing will continue to be a
significant long term category in the future in spite of the decline from 1998."
"Radica's Buckmasters(R) Deer Huntin'(TM) game was ranked number 1 in the
industry in June according to the same NPD report. Radica plans to introduce
Buckmasters(R) Bow Huntin'(TM) for late fall shipment this year. This product
which was originally planned for 2000 has been accelerated to take advantage of
the strength of the hunting category in 1999," according to Feely.
The Company also announced that it has completed the one million share
repurchase that was announced at its shareholder meeting in April and that an
additional one million share repurchase plan has been authorized by its Board of
Directors. During the quarter ended June 30, 1999, the Company repurchased
982,700 shares at an average price of $11.79. On a year to date basis, Radica
has purchased 1,317,500 shares or approximately 7% of the shares outstanding at
the beginning of the year.
<PAGE>
Radica also announced that it has provided $1 million of bridge loan financing
to Sharegate Inc. (formerly Utel) in anticipation of the completion of a round
of equity financing that is currently in process at Sharegate. Radica has
previously invested in two prior rounds of financing for the telecommunications
venture. The bridge financing will be convertible into preferred shares of
Sharegate upon completion of the next round of financing.
The foregoing discussion contains forward-looking statements that involve risks
and uncertainties that could cause actual results to differ materially from
projected results. Forward-looking statements include statements about efforts
to attract or prospects for additional or increased business, new product
introductions and other statements of a non-historical nature. Actual results
may differ from projected results due to various Risk Factors, including Risks
of Manufacturing in China, Dependence on Product Appeal and New Product
Introductions, and Dependence on Major Customers, as set forth in the Company's
Annual Report on Form 20-F for the fiscal year ended October 31, 1998, as filed
with the Securities and Exchange Commission. See "Item 1. Description of
Business -- Risk Factors" in such report on Form 20-F.
Radica Games Limited (Radica) is a Bermuda company headquartered in Hong Kong
(NASDAQ -RADA). Radica is a leading developer, manufacturer and distributor of
electronic handheld and table top games. Radica has subsidiaries in the U.S.A.,
Canada and the U.K., and a factory in Dongguan, Southern China. More information
about Radica can be found on the Internet at "www.radicagames.com" and about
Girl Tech at "www.girltech.com."
-- END --
<PAGE>
<TABLE>
<CAPTION>
RADICA GAMES LIMITED
CONSOLIDATED STATEMENTS OF OPERATIONS
(US Dollars in thousands, THREE MONTHS ENDED SIX MONTHS ENDED
except per share data) JUNE 30, JUNE 30,
--------------------------- --------------------------
1999 1998 1999 1998
------------ ------------ ----------- ------------
(unaudited) (unaudited) (unaudited) (unaudited)
<S> <C> <C> <C> <C>
REVENUES:
Net sales $ 23,756 $ 34,265 $ 41,662 $ 62,238
Cost of sales (13,683) (14,791) (22,809) (26,943)
------------ ------------ ----------- ------------
Gross profit 10,073 19,474 18,853 35,295
------------ ------------ ----------- ------------
OPERATING EXPENSES:
Selling, general and administrative expenses (5,736) (5,875) (9,787) (12,280)
Research and development (1,152) (1,280) (2,192) (1,927)
Depreciation and amortization (1,238) (1,324) (2,174) (1,790)
Acquired research and development - (1,500) - (1,500)
------------ ------------ ----------- ------------
Total operating expenses (8,126) (9,979) (14,153) (17,497)
------------ ------------ ----------- ------------
OPERATING INCOME 1,947 9,495 4,700 17,798
OTHER INCOME 244 198 356 306
SHARE OF LOSS OF AFFILIATED COMPANY (322) (52) (562) (98)
NET INTEREST INCOME 336 564 954 1,041
------------ ------------ ----------- ------------
INCOME BEFORE INCOME TAXES 2,205 10,205 5,448 19,047
PROVISION FOR INCOME TAXES - (44) (89) (58)
------------ ------------ ----------- ------------
NET INCOME $ 2,205 $ 10,161 $ 5,359 $ 18,989
============ ============ =========== ============
EARNINGS PER SHARE - BASIC:
Net earnings per share $ 0.12 $ 0.50 $ 0.29 $ 0.93
============ ============ =========== ============
Average number of shares outstanding 18,102,586 20,480,579 18,526,295 20,429,976
============ ============ =========== ============
EARNINGS PER SHARE - ASSUMING DILUTION:
Net earnings per share and
dilutive potential common stock $ 0.12 $ 0.47 $ 0.28 $ 0.87
============ ============ =========== ============
Average number of shares and dilutive
potential common stock outstanding 18,969,534 21,726,418 19,484,686 21,702,444
------------ ------------ ----------- ------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
RADICA GAMES LIMITED
CONSOLIDATED BALANCE SHEETS
ASSETS
JUNE 30, DECEMBER 31,
----------------- ------------------
(US Dollars in thousands, except share data) 1999 1998
----------------- ------------------
(unaudited) (unaudited)
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 33,336 $ 47,527
Accounts receivable, net of allowances for doubtful accounts
of $444 ($446 at Dec. 31, 1998) and estimated customer
returns of $329 ($1,077 at Dec. 31, 1998) 14,946 14,860
Inventories, net of provision of $2,180 ($2,437 at Dec. 31, 1998) 21,612 20,294
Prepaid expenses and other current assets 2,199 1,796
Income taxes receivable 329 -
Deferred income taxes 3,766 3,754
----------------- ------------------
TOTAL CURRENT ASSETS 76,188 88,231
----------------- ------------------
INVESTMENT IN AFFILIATED COMPANY 141 703
----------------- ------------------
PROPERTY, PLANT AND EQUIPMENT, NET 16,819 16,500
----------------- ------------------
INTANGIBLE ASSETS, NET 15,200 2,750
----------------- ------------------
DEFERRED INCOME TAXES, NONCURRENT 6 6
----------------- ------------------
TOTAL ASSETS $ 108,354 $ 108,190
================= ==================
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Short term borrowings 1,115 -
Accounts payable 10,562 9,411
Accrued payroll and employee benefits 1,064 2,688
Accrued expenses 7,571 8,204
Income taxes payable 264 2,152
----------------- ------------------
TOTAL CURRENT LIABILITIES 20,576 22,455
----------------- ------------------
NOTES PAYABLE 12,345 -
----------------- ------------------
TOTAL LIABILITIES 32,921 22,455
----------------- ------------------
SHAREHOLDERS' EQUITY:
Common stock
par value $0.01 each, 100,000,000 shares authorized,
17,833,394 shares outstanding (18,896,694 at Dec. 31, 1998) 178 189
Additional paid-in capital 1,031 9,382
Retained earnings 74,229 76,215
Cumulative translation adjustment (5) (51)
----------------- ------------------
TOTAL SHAREHOLDERS' EQUITY 75,433 85,735
----------------- ------------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 108,354 $ 108,190
================= ==================
</TABLE>
RADICA(R) GAMES LIMITED
REPORTS SUCCESSFUL LEGAL ACTION
AGAINST INTELLECTUAL PROPERTY INFRINGEMENT
FOR IMMEDIATE RELEASE CONTACT: PATRICK S. FEELY
JULY 22ND, 1999 PRESIDENT & CEO
(LOS ANGELES, CALIFORNIA)
(626) 744 1150
DAVID C.W. HOWELL
PRESIDENT ASIA OPERATIONS
& CFO
(HONG KONG)
(852) 2688 4201
(HONG KONG) Radica Games Limited (NASDAQ RADA) a leading developer, manufacturer
and distributor of popular handheld electronic games, reported today that its
two subsidiaries Radica UK Limited and Radica China Limited successfully
obtained a High Court Order against two Defendants Naseem Akbar and Toptrade
International (UK) on 17 June 1999 in the United Kingdom.
At the hearing the Defendants undertook to the Court that they would not
infringe copyright in Radica's Bass Fishin' and Lake Trout Fishin' games.
The Court ordered that they deliver up to Radica for destruction all stock of
infringing products and disclose full details of their suppliers and parties to
whom the Defendants sold or offered to supply such games. The Defendants will
now have to furnish full details of their dealings including number supplied,
prices, delivery notes, invoices and other such documentation. Radica can then
elect for there to be an inquiry as to damages or an account of profits. The
Defendants will have to pay Radica all sums found on a future inquiry or account
together with interest.
The Defendants were required to pay virtually all of Radica's costs given their
conduct in this action.
David Howell, Chief Financial Officer and Director of Radica Games Limited and
Bina Cunningham, a Partner at Willoughby & Partners - Legal Advisor to Radica
confirmed that the decision showed Radica's continued commitment to policing and
defending its Intellectual Property Rights throughout the world. The success
story of Radica's games has led to many counterfeit products being manufactured
and sold. In each instance Radica has been successful against such infringers.
Radica Games Limited (Radica) is a Bermuda company headquartered in Hong Kong
(NASDAQ - RADA). Radica is a leading developer, manufacturer and distributor of
electronic handheld and table top games. Radica has subsidiaries in the U.S.A.,
Canada and the U.K., and a factory in Dongguan, Southern China. More information
about Radica can be found on the Internet at "www.radicagames.com".
-- END --
RADICA GAMES LIMITED
ANNOUNCES STRATEGIC ALLIANCE
WITH ELECTRONIC ARTS
FOR IMMEDIATE RELEASE CONTACT: PATRICK S. FEELY
JULY 6, 1999 PRESIDENT & CEO
(LOS ANGELES, CALIFORNIA)
(626) 744 1150
DAVID C.W. HOWELL
PRESIDENT ASIA OPERATIONS
& CFO
(HONG KONG)
(852) 2688 4201
(Hong Kong) Radica Games Limited (NASDAQ RADA) and Electronic Arts(TM)
(NASDAQ:ERTS) announced today a strategic alliance for the extension of EA
brands and game properties in the dedicated electronic handheld game category.
As part of this alliance, Radica has entered into a worldwide licensing
agreement with Electronic Arts for the exclusive rights to market EA SPORTS(TM)
branded electronic handheld games and the right of first refusal for all game
properties in the Electronic Arts product line for dedicated electronic handheld
games. In an additional agreement, Radica has granted Electronic Arts warrants
to purchase 375,000 shares of Radica Common Stock during the term of the
agreement. The Company said it plans to introduce several EA SPORTS products
during 2000 and is reviewing other titles for addition to the line. The
agreement with Electronic Arts runs through the end of 2002.
Pat Feely, Radica's CEO said, "Electronic Arts is the premier publisher of
best-selling software for PCs and video game platforms. Radica is thrilled to
have this outstanding opportunity to access the vast array of content in the EA
line. The EA SPORTS brand in particular has tremendous consumer recognition and
represents the highest standard of quality in sports related products. We intend
to continue this tradition by developing unique and compelling game experiences
in the handheld electronic format."
Alex Brown, EA's VP of Strategic Sales said, "Radica is the acknowledged leader
in innovation and quality in the dedicated electronic handheld category. We are
excited by the potential of the new products planned for the future and the
opportunity to extend our brands into this growing category."
The foregoing discussion contains forward-looking statements
that involve risks and uncertainties that could cause actual
results to differ materially from projected results.
Forward-looking statements include statements about efforts
to attract or prospects for additional or increased business,
new product introductions and other statements of a
non-historical nature. Actual results may differ from
projected results due to various Risk Factors, including
Risks of Manufacturing in China, Dependence on Product Appeal
and New Product Introductions, and Dependence on Major
Customers, as set forth in the Company's Annual Report on
Form 20-F for the fiscal year ended October 31, 1998, as
filed with the Securities and Exchange Commission. See "Item
1. Description of Business - Risk Factors" in such report on
Form 20-F.
<PAGE>
Radica Games Limited (Radica) is a Bermuda company headquartered in Hong Kong
(NASDAQ-RADA). Radica is a leading developer, manufacturer and distributor of
electronic handheld and tabletop games. Radica has subsidiaries in the U.S.A.,
Canada and the U. K., and a factory in Dongguan, Southern China. More
information about Radica can be found on the Internet at "www.radicagames.com."
Electronic Arts, headquartered in Redwood City, California, is the world's
leading interactive entertainment software company. Founded in 1982, Electronic
Arts posted revenues of more than $1.2 billion for fiscal 1999. The company
develops, publishes and distributes software worldwide for personal computers
and video game systems. Electronic Arts markets its products under seven brand
names: Electronic Arts, EA SPORTS, Maxis(TM), ORIGIN(TM), Bullfrog(TM)
Productions, Westwood Studios(TM) and Jane's(R) Combat Simulations. More
information about EA's products and full text of press releases can be found on
the Internet at "www.ea.com."
-- END --
RADICA GAMES LIMITED
ACQUIRES LEDA MEDIA PRODUCTS
FOR IMMEDIATE RELEASE CONTACT: PATRICK S. FEELY
JUNE 28TH, 1999 PRESIDENT & CEO
(LOS ANGELES, CALIFORNIA)
(626) 744 1150
DAVID C.W. HOWELL
PRESIDENT ASIA OPERATIONS
& CFO
(HONG KONG)
(852) 2688 4201
(HONG KONG) Radica Games Limited (NASDAQ RADA) announced today that it has
acquired Leda Media Products ("LMP"). LMP is the largest third-party supplier of
video game controllers in the U.K. according to Chart Track for 1998 and is a
leading supplier in both France and Germany. They are headquartered in the U.K.
with a small Hong Kong office which deals with third party manufacturers in
China.
Pat Feely, Radica's CEO said, "The LMP acquisition allows Radica to broaden its
business into a closely aligned category where significant synergy exists. It
also expands our European presence substantially. This is a major step to
diversify and strengthen our business."
The shares of LMP were purchased for $14 million in a transaction involving cash
and notes. In fiscal 1998 (year ended August 31st), LMP reported sales in excess
of $20 million and net profits of $1.1 million and has been profitable in each
of its last three audited fiscal years. Radica expects the transaction to be
accretive to 1999 earnings.
Radica also announced that it plans to introduce the LMP product line into the
USA market in January 2000. Previously LMP's products had only been sold in
Europe. LMP holds a Sony PlayStation(R) product license for the USA market.
"LMP has a full line of game console and PC controllers, including some truly
innovative new products. LMP's Evolution branded controller line, which was
shown privately at the recent E3 show in Los Angeles, provides an exciting new
way to control games. We are pleased with the preliminary trade response around
the world," said Feely.
Radica also announced that it intends to combine its current operations in
Europe with that of LMP to strengthen its European efforts in handheld games.
The companies also plan to combine Hong Kong operations.
"Radica's extensive resources in design, engineering and manufacturing should
have a significant effect on LMP's product quality and profit margin potential.
We are also excited by the opportunity to bring innovation to the game
controller category as we have to the handheld game category," said Feely.
<PAGE>
Radica also announced that it expected earnings per share for the second quarter
to be in the region of 10 cents after taking into account a two-cent charge for
amortization of goodwill from the transaction.
The foregoing discussion contains forward-looking statements
that involve risks and uncertainties that could cause actual
results to differ materially from projected results.
Forward-looking statements include statements about efforts
to attract or prospects for additional or increased business,
new product introductions and other statements of a
non-historical nature. Actual results may differ from
projected results due to various Risk Factors, including
Risks of Manufacturing in China, Dependence on Product Appeal
and New Product Introductions, and Dependence on Major
Customers, as set forth in the Company's Annual Report on
Form 20-F for the fiscal year ended October 31, 1998, as
filed with the Securities and Exchange Commission. See "Item
1. Description of Business -- Risk Factors" in such report on
Form 20-F.
Radica Games Limited (Radica) is a Bermuda company headquartered in Hong Kong
(NASDAQ-RADA). Radica is a leading developer, manufacturer and distributor of
electronic handheld and tabletop games. Radica has subsidiaries in the U.S.A.,
Canada and the U. K., and a factory in Dongguan, Southern China. More
information about Radica can be found on the Internet at www.radicagames.com.
-- END --
RADICA GAMES LIMITED
ANNOUNCES CHICKEN SOUP FOR THE SOUL(R)
LICENSE AGREEMENT
FOR IMMEDIATE RELEASE CONTACT: PATRICK S. FEELY
JUNE 7, 1999 PRESIDENT & CEO
(LOS ANGELES, CALIFORNIA)
(626) 744 1150
DAVID C.W. HOWELL
PRESIDENT ASIA OPERATIONS
& CFO
(HONG KONG)
(852) 2688 4201
(Hong Kong) Radica (NASDAQ RADA) has entered into an exclusive worldwide
licensing agreement with SloaneVision Unlimited for the rights to market Chicken
Soup for the Soul(R) branded electronic handheld products. The Company said it
plans to introduce two Chicken Soup for the Soul products during 2000. The
agreement runs through 2002.
Pat Feely, Radica's CEO said, "Chicken Soup for the Soul is one of the
best-selling publishing properties today. Radica is thrilled to be developing
innovative new electronic inspirational products that will feature the Chicken
Soup for the Soul theme. This popular license provides yet another example of
Radica's strategic direction to broaden the array of important properties
featured in our product line."
"Chicken Soup for the Soul is ecstatic about out recent partnership with
Radica!" said Mark Victor Hansen, co-creator of the #1 New York Times
Bestselling Chicken Soup for the Soul series. "In a market dominated by
over-amped action, we look forward to creating a running synergy with this
mega-successful company to produce fun and worthwhile products."
Radica plans to offer its new Chicken Soup for the Soul products first quarter
2000. The first two titles will be based on the best selling "Chicken Soup for
the Soul" and "Chicken Soup for the Teenage Soul" books. The products will
provide the same daily inspiration that has made this series of books
bestsellers with over 44 million copies sold.
SloaneVision Unlimited represents Chicken Soup for the Soul as its worldwide
licensing agent. "We have successfully translated this special publishing
property into a variety of products that make sense." states Lois Sloane,
President of SloaneVision. "Radica's unique hand-held electronic products give
one the power to bring forth the feeling of well-being, created by Chicken Soup
for the Soul, on-demand."
The foregoing discussion contains forward-looking statements
that involve risks and uncertainties that could cause actual
results to differ materially from projected results.
Forward-looking statements include statements about efforts
to attract or prospects for additional or increased business,
new product introductions and other statements of a
non-historical nature. Actual results may differ from
projected results due to various Risk Factors, including
Risks of Manufacturing in China, Dependence on Product Appeal
and New Product Introductions, and Dependence on Major
Customers, as set forth in the Company's Annual Report on
Form 20-F for the fiscal year ended October 31, 1998, as
<PAGE>
filed with the Securities and Exchange Commission. See "Item
1. Description of Business - Risk Factors" in such report on
Form 20-F.
Radica Games Limited (Radica) is a Bermuda company headquartered in Hong Kong
(NASDAQ-RADAF). Radica is a leading developer, manufacturer and distributor of
electronic handheld and tabletop games. Radica has subsidiaries in the U.S.A.,
Canada and the U. K., and a factory in Dongguan, Southern China. More
information about Radica can be found on the Internet at "www.radicagames.com."
-- END --
