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 November, 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 September 30, 1999
2. Press Releases dated November 1, 1999 (2 releases)
3. Press Release dated September 30, 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 September 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 September 30, 1999
- --------------------------------------- ---------------------------------
Common Stock, par value $0.01 per share 17,784,594
- ------------------------
* 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>
RADICA GAMES LIMITED
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
Assets
September 30, December 31,
--------------------------
(US Dollars in thousands, except share data) 1999 1998
------------ ----------
(unaudited) (unaudited)
<S> <C> <C>
Current Assets:
Cash and cash equivalents $ 33,488 $ 47,527
Accounts receivable, net of allowances for doubtful accounts
of $432 ($446 at Dec. 31, 1998) and estimated customer
returns of $404 ($1,077 at Dec. 31, 1998) 26,124 14,860
Receivables from affiliated company 1,019 -
Inventories, net of provision of $2,311 ($2,437 at Dec. 31, 1998)
(Note 3) 24,639 20,294
Prepaid expenses and other current assets 4,986 1,796
Income taxes receivable 524 -
Deferred income taxes (Note 7) 3,766 3,754
------------ ----------
Total current assets 94,546 88,231
------------ ----------
Investment in affiliated company - 703
------------ ----------
Property, plant and equipment, net (Note 4) 17,080 16,500
------------ ----------
Intangible assets, net (Note 6) 15,108 2,750
------------ ----------
Deferred income taxes, noncurrent (Note 7) 6 6
------------ ----------
Total assets $126,740 $ 108,190
============ ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable 17,009 6,911
Accrued warranty expenses 1,650 2,500
Accrued payroll and employee benefits 2,295 2,688
Accrued advertising expenses 865 1,308
Accrued sales expenses 1,123 3,598
Commissions payable 799 764
Accrued other expenses 5,876 2,534
Income taxes payable 381 2,152
------------ ----------
Total current liabilities 29,998 22,455
------------ ----------
Notes payable (Note 8) 12,345 -
------------ ----------
Total liabilities 42,343 22,455
------------ ----------
Shareholders' equity:
Common stock
par value $0.01 each, 100,000,000 shares authorized,
17,784,594 shares outstanding (18,896,694 at Dec. 31, 1998)
(Note 9) 178 189
Additional paid-in capital 1,773 9,382
Retained earnings 82,415 76,215
Cumulative translation adjustment 31 (51)
------------ ----------
Total shareholders' equity 84,397 85,735
------------ ----------
Total liabilities and shareholders' equity $ 126,740 $ 108,190
============ ===========
</TABLE>
See accompanying notes to consolidated financial statements.
4
<PAGE>
RADICA GAMES LIMITED
CONSOLIDATED STATEMENTS OF OPERATION
<TABLE>
<CAPTION>
(US Dollars in thousands, except per share data) Three months ended Nine months ended
September 30, September 30,
------------------------------- -------------------------------
1999 1998 1999 1998
-------------- ------------- -------------- --------------
<S> <C> <C> <C> <C>
(unaudited) (unaudited) (unaudited) (unaudited)
Revenues:
Net sales $ 47,388 $ 49,758 $ 89,050 $ 111,996
Cost of sales (28,657) (23,012) (51,466) (49,955)
-------------- ------------- -------------- --------------
Gross profit 18,731 26,746 37,584 62,041
-------------- ------------- -------------- --------------
Operating expenses:
Selling, general and administrative expenses (7,299) (9,203) (17,086) (21,483)
Research and development (1,686) (1,028) (3,878) (2,955)
Depreciation and amortization (1,383) (1,003) (3,557) (2,793)
Acquired research and development - - - (1,500)
-------------- ------------- -------------- --------------
Total operating expenses (10,368) (11,234) (24,521) (28,731)
-------------- ------------- -------------- --------------
Operating income 8,363 15,512 13,063 33,310
Other income 364 137 720 443
Share of loss of affiliated company (142) (165) (704) (263)
Net interest income 327 503 1,281 1,544
-------------- ------------- -------------- --------------
Income before income taxes 8,912 15,987 14,360 35,034
Provision for income taxes (Note 7) (95) (1,068) (184) (1,126)
-------------- ------------- -------------- --------------
Net Income $ 8,817 $ 14,919 $ 14,176 $ 33,908
============== ============= ============== ==============
Earnings per share - basic: (Note 10)
Net earnings per share $ 0.50 $ 0.75 $ 0.78 $ 1.68
============== ============= ============== ==============
Average number of shares outstanding 17,801,396 19,842,412 18,282,007 20,231,969
============== ============= ============== ==============
Earnings per share - assuming dilution: (Note 10)
Net earnings per share and
dilutive potential common stock $ 0.48 $ 0.71 $ 0.74 $ 1.58
============== ============= ============== ==============
Average number of shares and dilutive
potential common stock outstanding 18,530,393 20,992,324 19,163,933 21,463,585
============== ============= ============== ==============
</TABLE>
See accompanying notes to consolidated financial statements.
5
<PAGE>
RADICA GAMES LIMITED
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(unaudited)
(US dollars in thousands)
<TABLE>
<CAPTION>
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 (1,388,500) (14) (8,797) (7,976) - (16,787)
Stock options exercised 276,400 3 522 - - 525
Grant of stock options - - 666 - - 666
Net income - - - 14,176 - 14,176
Foreign currency translation - - - - 82 82
--------------- ------------- ------------- ------------- ------------- -------------
Balance at September 30, 1999 17,784,594 $ 178 $ 1,773 $ 82,415 $ 31 $ 84,397
=============== ============= ============= ============= ============= =============
</TABLE>
See accompanying notes to consolidated financial statements.
6
<PAGE>
RADICA GAMES LIMITED
CONSOLIDATED STATEMENTS OF CASH FLOWS
(US dollars in thousands)
<TABLE>
<CAPTION>
Nine months ended September 30,
-------------------------------
1999 1998
-------- --------
<S> <C> <C>
(unaudited) (unaudited)
Cash flow from operating activities:
Net income $ 14,176 $ 33,908
-------- --------
Adjustments to reconcile net income to net cash provided by
operating activities:
Deferred income taxes (12) -
Depreciation 1,749 1,460
Amortization 1,808 1,333
Share of loss of affiliated company 703 263
Acquired research and development - 1,500
Loss on disposal and write off of property, plant and equipment 50 16
Changes in assets and liabilities:
Accounts receivable (9,893) (14,531)
Receivable from affiliated company (1,019) -
Inventories (3,000) (15,052)
Prepaid expenses and other current assets (3,051) 343
Accounts payable 9,445 10,203
Accrued payroll and employee benefits (393) 1,343
Commissions payable 35 668
Accrued advertising expenses (443) 4,264
Accrued sales expenses (2,475) 1,149
Accrued warranty expenses (850) (13)
Accrued other expenses 3,179 799
Income taxes payable (1,997) 597
Notes payable 12,345 -
-------- --------
Net cash provided by operating activities 20,357 28,250
-------- --------
Cash flow from investing activities:
Decrease in short-term investments - 5,012
Proceeds from sale of property, plant and equipment 24 13
Purchase of property, plant and equipment (2,188) (5,119)
Purchase of Girl Tech assets - (2,400)
Acquisition of LMP, net of cash acquired (15,970) -
Investment in an affiliate company - (963)
-------- --------
Net cash used in investing activities (18,134) (3,457)
-------- --------
Cash flow from financing activities:
Repurchase of common stock (16,787) (31,526)
Funds from stock options exercised 525 972
-------- --------
Net cash used in financing activities (16,262) (30,554)
-------- --------
Net decrease in cash and cash equivalents $(14,039) $ (5,761)
Cash and cash equivalents:
Beginning of period 47,527 41,977
-------- --------
End of period $ 33,488 $ 36,216
======== ========
Supplementary disclosures of cash flow information:
Cash paid during the period:
Interest $ 11 $ -
Income taxes $ 2,479 $ 529
</TABLE>
See accompanying notes to consolidated financial statements.
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 or market,
determined by the weighted average method. 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 20 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.
8
<PAGE>
RADICA GAMES LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)-- (Continued)
(US dollars in thousands)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Mold costs - The Company expenses all mold costs in the year of purchase or
for internally produced molds, in the year of construction.
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 $253 and $(252) for the nine
months ended September 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.
9
<PAGE>
RADICA GAMES LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)-- (Continued)
(US dollars in thousands)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
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.
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 11.
Comprehensive income - Comprehensive income includes both net income and
other comprehensive income (loss). Other comprehensive income (loss) for
the nine months ended September 30, 1999 and 1998 of $82 and $(31),
represented foreign currency translation adjustments. Accumulated other
comprehensive income (loss) included in the accompanying condensed
consolidated balance sheets as of September 30, 1999 and December 31, 1998
was $31 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:
September 30, December 31,
1999 1998
------------------- -------------------
Raw materials $ 5,282 $ 4,580
Work in progress 4,850 6,731
Finished goods 14,507 8,983
------------------- -------------------
$ 24,639 $ 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:
September 30, December 31,
1999 1998
-------------- -------------
Land and buildings $ 12,171 $ 11,958
Plant and machinery 6,806 5,777
Furniture and equipment 5,637 4,191
Leasehold improvements 2,458 2,192
--------------- ------------
Total $ 27,072 $ 24,118
Less: Accumulated depreciation and
amortization (9,992) (7,618)
--------------- ------------
Total $ 17,080 $ 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
During the quarter, the Company and Electronic Arts(TM) ("EA") announced a
strategic alliance for the extension of EA brands and game properties in
the dedicated electronic handheld game category. As part of this alliance,
the Company entered into a worldwide licensing agreement with EA. In an
additional agreement, the Company granted EA warrants to purchase 375,000
shares of the Company common stock during the term of the agreement. The
agreement with EA runs through the end of 2002. The fair value of the
warrants, or $666, has been recorded as an intangible asset for the
acquired brand name. The asset is being amortized on a straight-line basis
over the term of agreement.
11
<PAGE>
RADICA GAMES LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)-- (Continued)
(US dollars in thousands)
6. INTANGIBLE ASSETS (Continued)
The Company purchased the assets and business of KidActive, LLC, dba Girl
Tech(R) during the quarter ended June 30, 1998. KidActive, LLC, dba Girl
Tech 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 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, and acquired EA brand name. Accumulated amortization was $3,558 and
$1,750 at September 30, 1999 and December 31, 1998, respectively.
7. INCOME TAXES
The components of income before income taxes are as follows:
Nine months ended September 30,
-----------------------------------------
1999 1998
------------------- ----------------
United States $ 925 $ 10,264
International 13,435 24,770
------------------- ----------------
$ 14,360 $ 35,034
=================== ================
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.
12
<PAGE>
RADICA GAMES LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)-- (Continued)
(US dollars in thousands)
7. INCOME TAXES (Continued)
The provision (credit) for income taxes consists of the following:
Nine months ended September 30,
-------------------------------
1999 1998
------------ -----------
United States
Federal tax expenses (benefit), net of
State tax expense (benefit) $ 73 $ 1,126
International
Current income tax $ 111 $ -
------------ ----------
Total provision for income tax $ 184 $ 1,126
============ ==========
A reconciliation between the provision for income taxes computed by
applying the statutory tax rates in the United States for the nine months
ended September 30, 1999 and 1998 to income before income taxes and the
actual provision for income taxes is as follows:
Nine months ended September 30,
-------------------------------
1999 1998
------------ -----------
US statutory rate 34% 34%
------------ -----------
Provision for income taxes at
statutory rate on income for the period $ 4,883 $11,912
State taxes (28) 61
International rate differences (4,814) (8,405)
Accounting (gains) losses for which 73 (2,372)
deferred income tax cannot be recognized
Other 70 (70)
------------ -----------
Income tax provision $ 184 $ 1,126
============ ===========
13
<PAGE>
RADICA GAMES LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)-- (Continued)
(US dollars in thousands)
7. INCOME TAXES (Continued)
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
September 30, 1999 and December 31, 1998 deferred income taxes comprised:
September 30, December 31,
1999 1998
---------------- ---------------
Deferred tax assets (liabilities):
Excess of tax over financial
reporting depreciation $ (79) $ (79)
Advertising allowances 294 445
Bad debt allowances 147 151
Inventory reserves 645 44
Tax losses 1,932 1,714
Sales allowances and returns reserves 423 1,665
Other 410 (180)
---------------- ---------------
$ 3,772 $ 3,760
================ ===============
8. 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.
9. COMMON STOCK
During the quarter ended September 30, 1999, the Company repurchased 71,000
shares at an average price of $9 per share under the Company's authorized
repurchase programs. In total 1,388,500 shares have been repurchased in the
nine month period ending September 30, 1999 at an average price of $12 per
share. All repurchased shares were cancelled. As of September 30, 1999,
approximately one million 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)
10. 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:
Nine months ended September 30, 1999
------------------------------------------
Earnings
Numerator Denominator per share
--------- ------------- -----------
Basic earnings per share:
Net income $14,176 18,282,007 $ 0.78
========== ===========
Effective of dilutive options 881,926
-------------
Diluted earnings per share:
Net income, assuming
all dilutive options exercised $14,176 19,163,933 $ 0.48
========== ============= ===========
Options on 933,000 shares of common stock were not included in computing
diluted earnings per share since their effects were antidilutive.
Three months ended September 30, 1999
------------------------------------------
Earnings
Numerator Denominator per share
---------- ------------- -----------
Basic earnings per share:
Net income $ 8,817 17,801,396 $ 0.50
========== ===========
Effective of dilutive options 728,997
-------------
Diluted earnings per share:
Net income, assuming
all dilutive options exercised $ 8,817 18,530,393 $ 0.48
========== ============= ===========
Options on 1,393,000 shares of common stock were not included in computing
diluted earnings per share since their effects were antidilutive.
15
<PAGE>
RADICA GAMES LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)--
(Continued) (US dollars in thousands, except share and
per share data)
11. STOCK OPTIONS
The Company's 1994 Stock Option Plan of employees and directors (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 nine months ended September 30, 1999:-
Weighted average
Number exercise price
of shares per share
-------------- ----------------
(in thousands)
Outstanding at December 31, 1998 2,041 $ 6.58
Options granted 307 11.48
Options exercised (277) 1.90
Options cancelled (57) 7.89
--------------
Outstanding at September 30, 1999 2,014 $ 7.93
==============
Exercisable at September 30, 1999 327
16
<PAGE>
RADICA GAMES LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)-- (Continued)
(US dollars in thousands, except per share data)
11. STOCK OPTIONS (Continued)
The following is additional information relating to options outstanding as
of September 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 2.000 608 $ 1.31 6.49 113 $ 1.37
2.001 to 4.000 317 3.49 7.57 95 3.44
4.001 to 6.000 7 5.00 7.71 1 5.00
6.001 to 8.000 42 6.83 7.90 12 7.00
8.001 to 10.000 62 9.45 9.58 2 8.50
10.001 to 12.000 421 10.91 9.22 - -
12.001 to 14.000 184 12.70 9.21 9 13.11
14.001 to 16.000 135 14.84 8.97 5 15.60
16.001 to 18.000 143 16.94 8.67 47 17.02
18.001 to 20.000 95 19.05 8.56 43 18.88
------------- =========
2,014 $ 7.93 8.03 327 $ 7.33
============= =========
</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 $4.54 and $8.89 per option for the nine months ended September 30,
1999 and 1998, respectively, were estimated using the Black-Scholes option
pricing model with the following weighted average assumptions:
Nine months ended September 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)
11. 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:
Nine months ended September 30,
--------------------------------
1999 1998
------------ --------------
Pro forma net income $ 13,524 $ 33,311
Pro forma earnings per share:
Basic 0.74 1.65
Diluted 0.71 1.55
12. 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 two United States customers
which accounted for more than twenty-five percent and eighteen percent of
net sales in the nine months ended September 30, 1999 and three United
States customers which accounted for more than twenty-five percent, twenty
percent and eleven percent of net sales in the nine months ended September
30, 1998. The Company performs ongoing credit evaluations of its customers'
financial condition and, generally, requires no collateral from its
customers.
13. 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)
14. COMMITMENTS AND CONTINGENCIES
At September 30, 1999, certain leasehold land and buildings with a net book
value of $4,788 and bank balances of $3,871 were pledged to secure general
banking facilities including overdraft and trade facilities granted to the
Company.
15. 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 $142 and $94 for the nine months ended
September 30, 1999 and 1998, respectively.
19
<PAGE>
RADICA GAMES LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) -- (Continued)
(US dollars in thousands)
16. 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.
Income before Identifiable
Net Sales income taxes Assets
---------------------------------------------
Nine months ended September 30,
September 30, 1999 1999
--------------------------- --------------
United States and Canada $ 82,761 $ 14,919 $ 41,763
China and Asia Pacific 607 239 65,712
Europe and other countries 5,682 (798) 19,265
---------- ----------- --------------
$ 89,050 $ 14,360 $ 126,740
========== =========== ==============
Nine months ended December 31,
September 30, 1998 1998
--------------------------- --------------
United States and Canada $ 109,148 $ 34,054 $ 34,508
China and Asia Pacific 1,337 328 73,153
Europe and other countries 1,511 652 529
---------- ----------- --------------
$ 111,996 $ 35,034 $ 108,190
========== =========== ==============
20
<PAGE>
RADICA GAMES LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)- (Continued)
(US dollars in thousands)
17. 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>
Nine months ended September 30, 1999
Allowances for doubtful accounts $ 446 $ 3 $ (17) $ 432
Estimated customer returns 1,077 450 (1,123) 404
Provision for inventories 2,437 201 (327) 2,311
-------- ------- --------- ---------
Total $ 3,960 $ 654 $(1,467) $ 3,147
======== ======= ========= =========
Nine months ended September 30, 1998
Allowances for doubtful accounts $ 1,028 $ 2 $ (575) $ 455
Estimated customer returns 2,783 - (1,305) 1,478
Provision for inventories 2,922 42 (1,613) 1,351
-------- ------- --------- ---------
Total $ 6,733 $ 44 $(3,493) $ 3,284
======== ======= ========= =========
</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 SEPTEMBER 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 September 30,
---------------------------------
1999 1998
----------- --------------
Net revenues 100.0% 100.0%
Cost of sales 60.5% 46.3%
Gross margin 39.5% 53.7%
Selling, general and administrative 15.4% 18.5%
Research and development 3.6% 2.1%
Depreciation and amortization 2.9% 2.0%
Operating income 17.6% 31.1%
Other income 0.8% 0.3%
Share of loss of affiliated company 0.3% 0.3%
Interest income, net 0.7% 1.0%
Income before income taxes 18.8% 32.1%
Provision for income taxes 0.2% 2.1%
Net income 18.6% 30.0%
The Company made an after tax profit of $8.8 million for the third
quarter ended September 30, 1999 or $0.48 per fully diluted share versus $14.9
million or $0.71 per fully diluted share for the same period last year. Total
revenues for the third quarter ended September 30, 1999 were $47.4 million,
compared to $49.8 million for the same period in 1998.
22
<PAGE>
The following table sets out the percentages of sales achieved from
each category of products:
Three months ended September 30,
------------------------------------------------------------
1999 1998
------------------------------ ----------------------------
% of Net Units % of Net Units
Product Lines Sales Value Sold Sales Value Sold
- --------------- -------------- --------------- ----------- --------------
(in thousands) (in thousands)
Fishing games 18.1% 714 36.8% 1,524
Hunting games 6.2% 182 - -
Action games 9.4% 267 9.6% 339
Sports games 13.1% 380 11.6% 418
Casino games 6.3% 738 7.3% 906
Heritage games 11.7% 615 7.6% 344
Girl Tech games 5.4% 209 - -
ODM products 23.3% 2,317 27.1% 2,180
Peripherals 6.5% 706 - -
---------- --------------- ----------- --------------
Total 100.0% 6,128 100.0% 5,711
========== =============== =========== ==============
The gross profit for the third quarter decreased to $18.7 million from
$26.7 million in the same period of fiscal 1998 and the gross margin decreased
to 39.5% from 53.7% for the same period last year. The decrease in margin was
the result of lower pricing for the Hasbro Group as part of a new long-term
contract combined with the impact of our new lower margin controller business.
Operating income for the third quarter decreased to $8.4 million from
$15.5 million for the same period last year. Operating expenses dropped to $10.4
million in the third quarter of 1999 from $11.2 million in the same period in
1998, due to a decrease in variable sales related costs. These reductions were
offset by a quarterly charge of $0.3 million for the amortization of the
goodwill purchased in the acquisition of Leda Media Products Limited ("LMP")
together with a charge of $0.1 million for the amortization of rights to use the
EA name on our product line. This charge will be approximately $0.2 million per
year up until the end of 2002. The operating margin dropped to 17.6% during the
quarter compared to 31.1% during the same period last year.
23
<PAGE>
The Company shipped seven new products during the quarter, included in
these were Tiger Woods Ultimate Golf(TM); Girl Tech(R) Bug `Em(TM) and Keep Safe
Box(TM), Fish or Man(TM), Virtual Snowboard VSB, Crossword Challenger(TM) and
NASCAR(R) Speedzone(TM).
The following table lays out the changes in operating expenses for the major
expense categories.
Three months ended September 30,
--------------------------------------
1999 1998
----------------- -------------
(dollars in thousands)
Advertising and promotion expenses $ 808 $ 3,612
Commissions 979 1,312
Indirect salaries and wages 2,528 1,966
Research and development expenses 1,686 1,028
CAPITAL RESOURCES AND LIQUIDITY
- -------------------------------
Cash and cash equivalents totaled $33.5 million at September 30, 1999,
a decrease of $14 million from December 31, 1998. Working capital at September
30, 1999 was $64.5 million, a $1.3 million decrease from working capital of
$65.8 million at December 31, 1998. The decrease in working capital is due
primarily to a combination of the repurchase of 1,388,500 shares at an average
price of $12 per share during the period and an increase in accounts payable for
the quarter.
During the quarter ended September 30, 1999, the Company repurchased
71,000 shares at an average price of $9.
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
- -------------------------
The Company is exposed to market rate risk for changes in interest
rates relates to the Company's indebtedness. The Company has not used derivative
financial instruments in its indebtedness. Most of the Company's $12.3 million
principal amount of indebtedness at September 30, 1999 bears an interest rate
that fluctuates based on changes in the US$ LIBOR offered rate. A 1% change in
the underlying US$ LIBOR offered rate would result in an approximate $123,000
change in the annual amount of interest payable on such debt.
FOREIGN CURRENCY RISK
- ---------------------
International revenues from the Company's non-US distribution
subsidiaries were less than 10% of total revenues. Such international sales are
made mostly from the Company's two subsidiaries in Great Britain and Canada and
are typically denominated in the local currency of each country. These
subsidiaries also incur most of their expenses in the local currency.
Accordingly, they use the local currency as their functional currency.
The Company's exposure to foreign exchange rate fluctuations arises in
part from intercompany transactions. The currency exchange impact on
intercompany transactions was immaterial for three and nine month periods ended
September 30, 1999.
The Company is also exposed to foreign exchange rate fluctuation as the
financial results of foreign subsidiaries are translated into US dollars in
consolidation. As exchange rates vary, these results, when translated, may vary
from expectations and adversely impact overall expected profitability. The
effect of foreign exchange rate fluctuations on the Company in the three and
nine month periods ended September 30, 1999 were not material.
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: December 2, 1999 /S/ David C.W. Howell
----------------- --------------------------
David C.W. Howell
President Asia Operations
Chief Financial Officer
27
RADICA(R) GAMES LIMITED
REPORTS THIRD QUARTER RESULTS
FOR IMMEDIATE RELEASE CONTACT: PATRICK S. FEELY
NOVEMBER 1ST, 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 that total
revenues for the third quarter ended September 30, 1999 were $47.4 million,
compared to $49.8 million for the same period in 1998. Total revenues for the
nine months ended September 30, 1999 were $89 million, compared to $112 million
for the same period last year.
After tax profits of $8.8 million were reported for the third quarter ended
September 30, 1999 or $0.48 per fully diluted share versus $14.9 million or
$0.71 per fully diluted share for the same period last year. After tax profit
for the nine months ended September 30, 1999 were $14.2 million or $0.74
earnings per share versus $33.9 million or $1.58 for the nine months ended
September 30, 1998.
"While year to year quarterly comparisons have been adversely affected by the
decline of fishing product sales, we are very pleased with the performance of
the rest of Radica's handheld games line. Third quarter sales of Radica branded
handheld games excluding fishing games increased by 38% over the same period in
1998. In addition our overall operating profit margins of 17.6% for the quarter
and 14.7% year to date are among the best in the industry this year and indicate
the strength of our business even without a hit fishing product." said Pat
Feely, Chief Executive Officer.
"We were extremely pleased to ship so much innovative new product during the
quarter," said Feely. "Included in the seven new products shipped during the
quarter were Tiger Woods Ultimate Golf(TM); Girl Tech(R) Bug `Em(TM) and Keep
Safe Box(TM), Fish or Man(TM) (our latest new two player fishing game), Virtual
Snowboard VSB(TM) (a skateboard sized product that you stand on to play),
Crossword Challenger(TM) and NASCAR(R) Speedzone."
"It's been approximately a month since the Taiwan earthquake and production in
Taiwan is gradually returning to normal. While this does not appear to affect
the majority of our products this year there are still uncertainties, shortages
of certain components and extended lead times on component ordering. As a result
we would encourage conservatism in investors estimates for the fourth quarter of
1999 and first half of 2000." said Feely.
During the quarter ended September 30, 1999, the Company repurchased 71,000
shares at an average price of $9. On a year to date basis, Radica has purchased
1,388,500 shares or approximately 7.35% of the shares outstanding at the
beginning of the year.
<PAGE>
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 games including handheld games, video game controllers 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 http://www.radicagames.com and about Girl Tech at
http://www.girltech.com.
-- END --
<PAGE>
RADICA GAMES LIMITED
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
(US Dollars in thousands, THREE MONTHS ENDED NINE MONTHS ENDED
except per share data) SEPTEMBER 30, SEPTEMBER 30,
-------------------------- --------------------------
1999 1998 1999 1998
----------- ------------ ----------- ------------
(unaudited) (unaudited) (unaudited) (unaudited)
<S> <C> <C> <C> <C>
REVENUES:
Net sales $ 47,388 $ 49,758 $ 89,050 $ 111,996
Cost of sales (28,657) (23,012) (51,466) (49,955)
----------- ------------ ----------- ------------
Gross profit 18,731 26,746 37,584 62,041
----------- ------------ ----------- ------------
OPERATING EXPENSES:
Selling, general and administrative expenses (7,299) (9,203) (17,086) (21,483)
Research and development (1,686) (1,028) (3,878) (2,955)
Depreciation and amortization (1,383) (1,003) (3,557) (2,793)
Acquired research and development - - - (1,500)
----------- ------------ ----------- ------------
Total operating expenses (10,368) (11,234) (24,521) (28,731)
----------- ------------ ----------- ------------
OPERATING INCOME 8,363 15,512 13,063 33,310
OTHER INCOME 364 137 720 443
SHARE OF LOSS OF AFFILIATED COMPANY (142) (165) (704) (263)
NET INTEREST INCOME 327 503 1,281 1,544
----------- ------------ ----------- ------------
INCOME BEFORE INCOME TAXES 8,912 15,987 14,360 35,034
PROVISION FOR INCOME TAXES (95) (1,068) (184) (1,126)
----------- ------------ ----------- ------------
NET INCOME $ 8,817 $ 14,919 $ 14,176 $ 33,908
=========== ============ =========== ============
EARNINGS PER SHARE - BASIC:
Net earnings per share $ 0.50 $ 0.75 $ 0.78 $ 1.68
=========== ============ =========== ============
Average number of shares outstanding 17,801,396 19,842,412 18,282,007 20,231,969
=========== ============ =========== ============
EARNINGS PER SHARE - ASSUMING DILUTION:
Net earnings per share and
dilutive potential common stock $ 0.48 $ 0.71 $ 0.74 $ 1.58
=========== ============ =========== ============
Average number of shares and dilutive
potential common stock outstanding 18,530,393 20,992,324 19,163,933 21,463,585
=========== ============ =========== ============
</TABLE>
<PAGE>
RADICA GAMES LIMITED
CONSOLIDATED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
----------------- ------------
(US Dollars in thousands, except share data) 1999 1998
----------------- ------------
(unaudited) (unaudited)
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 33,488 $ 47,527
Accounts receivable, net of allowances for doubtful accounts
of $432 ($446 at Dec. 31, 1998) and estimated customer
returns of $404 ($1,077 at Dec. 31, 1998) 26,124 14,860
Receivables from affiliated company 1,019 -
Inventories, net of provision of $2,311 ($2,437 at Dec. 31, 1998) 24,639 20,294
Prepaid expenses and other current assets 4,986 1,796
Income taxes receivable 524 -
Deferred income taxes 3,766 3,754
------------ -----------
TOTAL CURRENT ASSETS 94,546 88,231
------------ -----------
INVESTMENT IN AFFILIATED COMPANY - 703
------------ -----------
PROPERTY, PLANT AND EQUIPMENT, NET 17,080 16,500
------------ -----------
INTANGIBLE ASSETS, NET 15,108 2,750
------------ -----------
DEFERRED INCOME TAXES, NONCURRENT 6 6
------------ -----------
TOTAL ASSETS $ 126,740 $ 108,190
============ ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable 18,659 9,411
Accrued payroll and employee benefits 2,295 2,688
Accrued expenses 8,663 8,204
Income taxes payable 381 2,152
------------ -----------
TOTAL CURRENT LIABILITIES 29,998 22,455
------------ -----------
NOTES PAYABLE 12,345 -
------------ -----------
TOTAL LIABILITIES 42,343 22,455
------------ -----------
SHAREHOLDERS' EQUITY:
Common stock
par value $0.01 each, 100,000,000 shares authorized,
17,784,594 shares outstanding (18,896,694 at Dec. 31, 1998) 178 189
Additional paid-in capital 1,773 9,382
Retained earnings 82,415 76,215
Cumulative translation adjustment 31 (51)
------------ -----------
TOTAL SHAREHOLDERS' EQUITY 84,397 85,735
------------ -----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 126,740 $ 108,190
============ ===========
</TABLE>
RADICA(R) GAMES LIMITED ANNOUNCES SOFTWARE AGREEMENT
WITH CHILDREN'S TECHNOLOGY GROUP, INC.
FOR IMMEDIATE RELEASE CONTACT: PATRICK S. FEELY
NOVEMBER 1, 1999 PRESIDENT & CEO
(LOS ANGELES, CALIFORNIA)
(626) 744 1150
DAVID C.W. HOWELL
PRESIDENT ASIA OPERATIONS
& CFO
(HONG KONG)
(852) 2688 4201
JEFF CHATFIELD
INVESTOR RELATIONS
1ST NET TECHNOLOGIES, INC.
(858) 675-4449
(HONG KONG) Radica Games Limited (NASDAQ RADA) and Children's Technology Group,
Inc. announced today an Internet software development and license agreement that
will allow Radica to develop an Internet browser for girls under the Girl
Tech(R) brand. The custom browser has built-in safety features, including a
secure environment that limits access to sites that have been pre-approved by
parents or the Girl Tech online community. The Girl Tech community includes
secure, supervised chat rooms, email, and other educational and entertaining
features. As part of this agreement, Radica has entered into a worldwide
licensing agreement with Children's Technology Group for the exclusive rights to
custom software built on GTG's Mindwalker(TM) Technology platform. The agreement
runs through 2002.
"We are thrilled to bring CTG's innovative technologies to our Girl Tech Brand
and award-winning on-line community. Developing an Internet browser is an
important step towards Radica's strategic goal to enhance our Internet presence
through high quality sites and Internet-based products," said Pat Feely,
Radica's CEO.
Girl Tech's browser, Surfer Girl(TM), will provide girls with a unique online
experience, with a specialized interface, content, and safety features. In
addition to the activities and content, the award-winning Club Girl Tech site
will have special content areas that only Surfer Girl users can access. Club
Girl Tech receives millions of hits from 100 countries around the world and is a
premiere site for girls on the Internet.
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 games including handheld games, video game controllers 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 http://www.radicagames.com and about Girl Tech at
http://www.girltech.com.
Children's Technology Group, Inc., a subsidiary of 1st Net Technologies, Inc.
(OTCBB: FNTT), is committed to producing the highest quality web-based resources
for children. For more information about Children's Technology Group, go to
http://www.crayoncrawler.com.
-- END --
RADICA(R) GAMES LIMITED
EXPECTS TAIWANESE EARTHQUAKE IMPACT
FOR IMMEDIATE RELEASE CONTACT: PATRICK S. FEELY
SEPTEMBER 30, 1999 PRESIDENT & CEO
(LOS ANGELES, CALIFORNIA)
(626) 744 1150
DAVID C.W. HOWELL
PRESIDENT ASIA OPERATIONS
& CFO
(HONG KONG)
(852) 2688 4201
(HONG KONG) Electronic game maker Radica Games Limited (NASDAQ RADA) announced
today that the recent earthquake in Taiwan is likely to have an impact on its
results for the current fiscal year and possibly may affect early 2000.
Taiwanese factories provide a significant portion of Radica's electronic
components including microprocessors and liquid crystal displays. Over a week
after the earthquake, Taiwan continues to suffer from widespread power failures
and communications problems. As a result, it is currently difficult to make an
accurate assessment of the condition of the factories supplying components to
Radica or the status of certain outstanding purchase orders. More information
will be available as conditions stabilize.
"We are attempting to assess the impact that may occur to our production over
the next several months. Our production lines are currently operating normally
from existing component stocks. However, October and November are heavy
production months and may be significantly affected. Information is still hard
to come by, but I can assure you that we are doing everything in our power to
minimize any potential disruption in supply," said Pat Feely, Radica's CEO.
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 --
