UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 20-F
[ ] REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) or (g) OF THE SECURITIES
EXCHANGE ACT OF 1934
OR
[ ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
OR
[X] TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the Transition period from November 1, 1998 to December 31, 1998
------------------ -------------------
Commission File Number: 0-23696
RADICA GAMES LIMITED
(Exact name of registrant as specified in its charter)
BERMUDA
(Jurisdiction of incorporation or organization)
SUITE R, 6/FL. 2-12 AU PUI WAN ST.
FO TAN, HONG KONG
(Address of principal executive offices)
Securities Registered Pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to section 12(g) of the Act:
Common Stock, Par Value $.01
Securities for which there is a reporting obligation pursuant
to Section 15(d) of the Act.
None
Indicate the number of outstanding shares of each of the issuer's classes of
capital or common stock as of the close of the period covered by the annual
report.
Title of each class Amount Outstanding
------------------- ------------------
Common Stock, Par Value $.01 18,896,694
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 by check mark which financial statement item the registrant has elected
to follow:
Item 17 _____ Item 18 __X__
<PAGE>
PART I
ITEM 1. DESCRIPTION OF BUSINESS
Not Applicable
ITEM 2. DESCRIPTION OF PROPERTIES
Not Applicable
ITEM 3. LEGAL PROCEEDINGS
The Company does not have any pending material legal proceedings.
ITEM 4. CONTROL OF REGISTRANT
Not Applicable
ITEM 5. NATURE OF TRADING MARKET
Not Applicable
ITEM 6. EXCHANGE CONTROLS AND OTHER LIMITATIONS AFFECTING SECURITY HOLDERS
Not Applicable
ITEM 7. TAXATION
Not Applicable
ITEM 8. SELECTED FINANCIAL DATA
Not Applicable
-2-
<PAGE>
ITEM 9. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
TWO MONTHS ENDED DECEMBER 31, 1998 COMPARED TO TWO MONTHS ENDED
DECEMBER 31, 1997
The following table sets forth items from the Company's Consolidated
Statements of Operations as a percentage of net revenues:
Two months ended December 31,
-------------------------------
1998 1997
-------- --------
Net revenues 100.0% 00.0%
Cost of sale 50.9% 45.4%
Gross margin 49.1% 54.6%
Selling, general and administrative 17.3% 17.4%
Research and development 3.5% 1.8%
Depreciation and amortization 2.9% 1.7%
Operating income 25.4% 33.7%
Other income 2.2% 0.9%
Share of loss of affiliated company 0.6% 0.2%
Interest income, net 1.4% 1.3%
Income before income taxes 28.4% 35.7%
Provision for income taxes 0.8% 0.4%
Net income 27.6% 35.3%
Net sales for the two months ended December 31, 1998 were $21.1
million, increasing 22% from $17.3 million for the prior year.
-3-
<PAGE>
The following table sets out the percentages of sales achieved from each
category of products:
<TABLE>
<CAPTION>
TWO MONTHS ENDED DECEMBER 31,
---------------------------------------------------------------------------------------
1998 1997
------------------------------------------ --------------------------------------
% OF NET NO. OF % OF NET NO. OF
PRODUCT LINES SALES UNITS SOLD MODELS SALES UNITS SOLD MODELS
- ------------- -------- ---------- ------ -------- ---------- ------
<S> <C> <C> <C> <C> <C> <C>
Fishing games 25.0% 462,004 6 53.9% 828,158 5
Combat games 5.4% 77,728 4 7.2% 97,413 2
Sport games 18.2% 258,672 11 6.1% 88,822 6
Casino games
- - Handheld 8.1% 414,964 27 11.1% 457,273 52
- - Tabletop 1.4% 36,937 12 1.1% 22,140 11
Heritage games 7.0% 171,339 14 8.7% 124,200 13
Extreme games 6.8% 92,862 3 0.0% - -
Girl Tech games 0.7% 11,324 2 0.0% - -
ODM products 27.4% 909,456 18 11.9% 429,124 11
-------- ---------- ------ -------- ---------- ------
Total 100.0% 2,435,286 97 100.0% 2,047,130 100
======== ========== ====== ======== ========== ======
</TABLE>
During the two months ended December 31, 1998, the Company sold 97 different
models of games, totaling 2.4 million units, compared to 100 models totaling two
million units in the same period in 1997, an increase of 20%. Of the 81 models
of Radica, Girl Tech(TM) and Monte Carlo games sold during the period a number
of models are discontinued lines, which unless the market warrants
reintroduction, the Company only intends to continue selling so long as
inventories exist. Seven new models were sold during the period. The Company
intends to introduce approximately 25 new models in 1999.
The gross profit for the two months ended December 31, 1998 was $10.4
million compared to $9.5 million for the two months ended December 31, 1997, an
increase of 9.5%. The gross margin for the two months ended December 31, 1998
was 49.1% compared to 54.6% for the same period in 1997.
Operating profit for the two months ended December 31, 1998 was $5.4
million, a decrease of $0.4 million from $5.8 million for the same period in
1997. Operating expenses increased to $5.0 million from $3.6 million for the two
months ended December 31, 1997.
-4-
<PAGE>
The following table lays out the changes in operating expenses for the
major expense categories.
Two months ended December 31,
--------------------------------
1998 1999
----------- -----------
(dollars in thousands)
Commissions $ 791 $ 553
Indirect salaries and wages 1,236 730
Advertising and promotion expenses 421 732
Research and development expenses 730 320
The effective blended tax rate for the two months ended December 31,
1998 was a provision of 2.9% compared to 1.2% for the two months ended December
31, 1997. The increase in tax expense for the period was as a result of the
brought forward losses in the U.S. subsidiary being used up resulting in the
U.S. profits of the distribution operation becoming fully taxable.
Net profit for the two months ended December 31, 1998 of $5.8 million
or $0.31 per share compared to $6.1 million or $0.29 per share for the same
period in 1997.
CAPITAL RESOURCES AND LIQUIDITY
Cash and cash equivalents totaled $47.5 million at December 31, 1998,
an increase of $14.4 million from October 31, 1998. Working capital at December
31, 1998 was $65.8 million, a $5.9 million increase from working capital of
$59.9 million at October 31, 1998. The increase in working capital is due
primarily to an increase in net income. The ratio of current assets to current
liabilities increased to 3.9 at December 31, 1998 from 2.8 at October 31, 1998.
This increase in the current ratio is also due to the increase in net income.
There were no short-term borrowings at December 31 and October 31,
1998.
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.
FISCAL 1998 COMPARED TO FISCAL 1997, AND FISCAL 1997 COMPARED TO FISCAL 1996
See 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.
-5-
<PAGE>
ITEM 9A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company does not engage in transactions in the ordinary course of
its business to hedge itself against exposure to currency risks.
ITEM 10. DIRECTORS AND OFFICERS OF REGISTRANT
Not Applicable
ITEM 11. COMPENSATION OF DIRECTORS AND OFFICERS
Not Applicable
ITEM 12. OPTIONS TO PURCHASE SECURITIES FROM REGISTRANT OR SUBSIDIARIES
Not Applicable
ITEM 13. INTEREST OF MANAGEMENT IN CERTAIN TRANSACTIONS
Not Applicable
-6-
<PAGE>
PART II
ITEM 14. DESCRIPTION OF SECURITIES TO BE REGISTERED
Not Applicable
PART III
ITEM 15. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 16. CHANGES IN SECURITIES, CHANGES IN SECURITY FOR REGISTERED
SECURITIES AND USE OF PROCEEDS
None or Not Applicable
PART IV
ITEM 17. FINANCIAL STATEMENTS
Not Applicable
ITEM 18. FINANCIAL STATEMENTS
INDEX TO FINANCIAL STATEMENTS PAGE
Consolidated Balance Sheets F-1
Consolidated Statements of Operations F-2
Consolidated Statements of Shareholders' Equity F-3
Consolidated Statements of Cash Flows F-4
Notes to Consolidated Financial Statements F-5
-7-
<PAGE>
ITEM 19. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements
Not Applicable
(b) Exhibits
99.1 Consolidated Balance Sheets at December 31, 1997, March 31, 1998,
June 30, 1998 and September 30, 1998.
99.2 Consolidated Income Statements for three months ended December 31,
1997, March 31, 1998, June 30, 1998 and September 30, 1998; for
two months ended December 31, 1997 and for twelve months ended
December 31, 1997.
99.3 Consolidated Cashflow Statements for respective periods ended
March 31, 1998, June 30, 1998, September 30, 1998 and for twelve
months ended December 31, 1997.
99.4 Sales Analyses of Units by Model for three months ended December
31, 1997, March 31, 1998, June 30, 1998 and September 30, 1998.
-8-
<PAGE>
RADICA GAMES LIMITED
CONSOLIDATED FINANCIAL STATEMENTS
Page
Consolidated Balance Sheets........................................ F-1
Consolidated Statements of Operations.............................. F-2
Consolidated Statements of Shareholders' Equity.................... F-3
Consolidated Statements of Cash Flows.............................. F-4
Notes to the Consolidated Financial Statements..................... F-5
<PAGE>
RADICA GAMES LIMITED
CONSOLIDATED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
December 31, October 31,
------------ -----------
(US Dollars in thousands, except share data) 1998 1998
------------ -----------
(unaudited)
<S> <C> <C>
Current Assets:
Cash and cash equivalents $ 47,527 $ 33,141
Accounts receivable, net of allowances for doubtful accounts
of $446 ($466 at Oct. 31, 1998) and estimated customer returns 14,860 33,249
of $1,077 ($1,375 at Oct. 31, 1998)
Inventories, net of provision of $2,437 ($2,414 at Oct. 31, 1998) (Note 3) 20,294 21,534
Prepaid expenses and other current assets 1,796 1,126
3,754 4,545
Deferred income taxes (Note 6) ------------ -----------
88,231 93,595
Total current assets ------------ -----------
703 823
Investment in affiliated company ------------ -----------
16,500 16,093
Property, plant and equipment, net (Note 4) ------------ -----------
2,750 3,000
Intangible assets, net (Note 5) ------------ -----------
6 10
Deferred income taxes, noncurrent (Note 6) ------------ -----------
$ 108,190 $ 113,521
Total assets ============ ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 6,911 $ 11,694
Accrued warranty expenses 2,500 2,470
Accrued payroll and employee benefits 2,688 3,510
Accrued advertising expenses 1,308 6,178
Accrued sales expenses 3,598 3,316
Commissions payable 764 1,444
Accrued other expenses 2,534 3,005
Income taxes payable 2,152 2,065
------------ -----------
22,455 33,682
Total current liabilities ------------ -----------
Shareholders' equity:
Common stock
par value $0.01 each, 100,000,000 shares authorized,
18,896,694 shares outstanding (18,864,294 at Oct. 31, 1998) 189 189
Additional paid-in capital 9,382 9,298
Retained earnings 76,215 70,396
(51) (44)
Cumulative translation adjustment ------------ -----------
85,735 79,839
Total shareholders' equity ------------ -----------
$ 108,190 $ 113,521
Total liabilities and shareholders' equity ============ ===========
</TABLE>
See accompanying notes to consolidated financial statements.
F-1
<PAGE>
RADICA GAMES LIMITED
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
(US Dollars in thousands, except per share data) Two months ended December 31,
---------------------------------
1998 1997
----------------- --------------
(unaudited) (unaudited)
<S> <C> <C>
REVENUES:
Net sales $ 21,071 $ 17,320
Cost of sales (10,717) (7,855)
----------------- --------------
Gross profit 10,354 9,465
----------------- --------------
OPERATING EXPENSES:
Selling, general and administrative expenses (3,657) (3,013)
Research and development (730) (320)
Depreciation and amortization (612) (287)
----------------- --------------
Total operating expenses (4,999) (3,620)
----------------- --------------
OPERATING INCOME 5,355 5,845
OTHER INCOME 471 163
SHARE OF LOSS OF AFFILIATED COMPANY (120) (33)
NET INTEREST 289 220
----------------- --------------
INCOME BEFORE INCOME TAXES 5,995 6,195
PROVISION FOR INCOME TAXES (Note 6) (176) (74)
----------------- --------------
NET INCOME $ 5,819 $ 6,121
================= ==============
EARNINGS PER SHARE - BASIC: (Note 7)
Net earnings per share $ 0.31 $ 0.29
================= ==============
Average number of shares outstanding 18,883,455 20,892,061
================= ==============
EARNINGS PER SHARE - ASSUMING DILUTION: (Note 7)
Net earnings per share and dilutive potential common stock $ 0.29 $ 0.27
================= ==============
Average number of shares and
dilutive potential common stock outstanding 20,094,489 22,353,638
================= ==============
</TABLE>
F-2
<PAGE>
RADICA GAMES LIMITED
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
(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 October 31, 1998 18,864,294 $ 189 $ 9,298 $ 70,396 $ (44) $ 79,839
Stock options exercised 32,400 - 84 - - 84
Net income - - - 5,819 - 5,819
Foreign currency translation - - - - (7) (7)
-------------- ------------- ------------- ------------- ------------- -------------
Balance at December 31, 1998 18,896,694 $ 189 $ 9,382 $ 76,215 $ (51) $ 85,735
============== ============= ============= ============= ============= =============
</TABLE>
See accompanying notes to consolidated financial statements.
F-3
<PAGE>
RADICA GAMES LIMITED
CONSOLIDATED STATEMENTS OF CASH FLOWS
(US dollars in thousands)
<TABLE>
<CAPTION>
Two months ended December 31,
----------------------------------------
1998 1997
------------------ ------------------
(unaudited) (unaudited)
<S> <C> <C>
Cash flow from operating activities:
Net income $ 5,819 $ 6,121
Adjustments to reconcile net income to net cash
provided by operating activities:
Deferred income taxes 795 -
Depreciation 362 287
Amortization 250 -
Share of loss of affiliated company 120 33
Loss (gain) on disposal and write off of
property, plant and equipment 1 (3)
Changes in assets and liabilities:
Accounts receivable 18,382 9,178
Inventories 1,240 (1,082)
Prepaid expenses and other current assets (670) (642)
Accounts payable (4,783) (1,674)
Accrued payroll and employee benefits (822) 388
Commissions payable (680) (626)
Accrued advertising expenses (4,870) 488
Accrued sales expenses 282 309
Accrued warranty expenses 30 223
Accrued other expenses (471) (1,013)
Income taxes payable 87 28
------------------ ------------------
Net cash provided by operating activities 15,072 12,015
------------------ ------------------
Cash flow from investing activities:
Increase in short-term investments - (2,962)
Proceeds from sale of property, plant and equipment 35 24
Purchase of property, plant and equipment (805) (152)
------------------ ------------------
Net cash used in investing activities (770) (3,090)
------------------ ------------------
Cash flow from financing activities:
Repurchase of common stock - (496)
Funds from stock options exercised 84 44
------------------ ------------------
Net cash provided by (used in) financing activities 84 (452)
------------------ ------------------
Net increase in cash and cash equivalents $ 14,386 $ 8,473
Cash and cash equivalents:
Beginning of period 33,141 33,504
------------------ ------------------
End of period $ 47,527 $ 41,977
================== ==================
Supplementary disclosures of cash flow information:
Cash paid during the period:
Interest $ - $ 61
</TABLE>
See accompanying notes to consolidated financial statements.
F-4
<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.
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.
F-5
<PAGE>
RADICA GAMES LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)-- (Continued)
(US dollars in thousands)
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 first time the advertising takes place. Advertising costs
associated with customer benefit programs are accrued as the related
revenues are recognized. Advertising expense was $415 and $712 for the two
months ended December 31, 1998 and 1997, respectively.
Foreign currency translation - Assets and liabilities of foreign operations
are translated using year-end exchange rates. Revenues and expenses of
foreign operations are translated using average monthly exchange rates. The
impact of exchange rate changes is shown as "Cumulative Translation
Adjustment" in shareholders' equity. Net losses from foreign exchange
transactions of $18 and $40 for the two months ended December 31, 1998 and
1997 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.
F-6
<PAGE>
RADICA GAMES LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)-- (Continued)
(US dollars in thousands)
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 (loss) and earnings (loss)
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 8.
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.
Comprehensive income and segment information - Comprehensive income
includes both net income and other comprehensive loss (income). Other
comprehensive loss for the two months ended December 31, 1998 and 1997 of
$7 and $4, represented foreign currency translation adjustments.
Accumulated other comprehensive loss included in the accompanying condensed
consolidated balance sheets as of December 31, 1998 and October 31, 1998
was $51 and $44, consisting of the accumulated foreign currency translation
adjustment. Further, as the Company has only one operating segment, the
adoption of SFAS No. 131, "Disclosure about Segments of an Enterprise and
Related Information", did not result in any restatement of comparative
information.
New accounting standards adopted - In June 1998, the Financial Accounting
Standards Board issued SFAS No. 133, "Accounting for Derivative Instruments
and Hedging Activities", which establishes accounting and reporting
standards for derivative instruments and hedging activities. Generally, it
requires that an entity recognizes all derivatives as either an asset or
liability and measures those instruments at fair value, as well as
identifying the conditions for which a derivative may be specially designed
as a hedge. The Company does not have any derivative instruments.
F-7
<PAGE>
RADICA GAMES LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)-- (Continued)
(US dollars in thousands)
3. INVENTORIES
Inventories by major categories are summarized as follows:
December 31, October 31,
1998 1998
---------------- ----------------
Raw materials $ 4,580 $ 4,650
Work in progress 6,731 5,733
Finished goods 8,983 11,151
---------------- ----------------
$ 20,294 $ 21,534
================ ================
4. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consists of the following:
<TABLE>
<CAPTION>
December 31, October 31,
1998 1998
--------------- --------------
<S> <C> <C>
Land and buildings $ 11,958 $ 11,950
Plant and machinery 5,777 5,549
Furniture and equipment 4,191 4,003
Leasehold improvements 2,192 1,866
--------------- --------------
Total $ 24,118 $ 23,368
Less: Accumulated depreciation and amortization (7,618) (7,275)
--------------- --------------
Total $ 16,500 $ 16,093
=============== ==============
</TABLE>
5. INTANGIBLE ASSETS
The intangible assets of $2,750 on the balance sheet at December 31, 1998
represent a portion of the acquisition price allocated to brand name and
goodwill with regards to the assets and business of KidActive, LLC, dba
Girl Tech(TM) acquired during the quarter ended April 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 asset. The Company
purchased the assets and business of KidActive, LLC, dba Girl Tech(TM) for
$2,400 in cash plus 190,094 shares, a total of $6,000. Of this $4,500 was
capitalised as goodwill and brand name and $1,500 was written off
immediately as purchased research and development. It is management's
opinion that the amounts capitalized of $4,500 represent the fair value
assigned to the intangible assets acquired. This cost is being amortized
over
F-8
<PAGE>
RADICA GAMES LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)-- (Continued)
(US dollars in thousands)
5. INTANGIBLE ASSETS (continued)
a three year fiscal period on a straight-line basis. Accumulated
amortization was $1,750 and $1,500 at December 31, 1998 and October 31,
1998, respectively.
Intangible assets are as follows:
December 31, October 31,
1998 1998
------------ ------------
At cost:
Brand name $ 1,000 $ 1,000
Goodwill 3,500 3,500
------------ ------------
Total 4,500 4,500
Less: Accumulated amortization (1,750) (1,500)
------------- ------------
Total $ 2,750 $ 3,000
============= ============
6. INCOME TAXES
The components of income from continuing operations before income taxes are
as follows:
Two months ended December 31,
------------------------------
1998 1997
------------ ------------
United States
Foreign subsidiaries operating in: $ 827 $ 435
People's Republic of China 5,139 5,655
Hong Kong 29 105
Total $ 5,995 $ 6,195
============ ============
As the Company's subsidiary in the People's Republic of China ("PRC") is a
sino-foreign joint venture enterprise, it is 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 is expected to be 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.
F-9
<PAGE>
RADICA GAMES LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)-- (Continued)
(US dollars in thousands)
6. INCOME TAXES (Continued)
The provision for income taxes consists of the following:
<TABLE>
<CAPTION>
Two months ended December 31,
--------------------------------
1998 1997
------------- -------------
<S> <C> <C>
Hong Kong
Current income tax $ 4 $ 20
United States
State tax expense (benefit), net of
federal tax expense (benefit) (623) 54
Change in deferred tax 795 -
------------- -------------
$ 172 $ 54
============= =============
Income tax provision $ 176 $ 54
============= =============
</TABLE>
A reconciliation between the provision for income taxes computed by
applying the statutory tax rates in the United States for the two months
ended December 31, 1998 and 1997 to income before income taxes and the
actual provision for income taxes is as follows:
<TABLE>
<CAPTION>
Two months ended December 31,
----------------------------------
1998 1997
-------------- --------------
<S> <C> <C>
U.S. statutory rate 34% 34%
-------------- --------------
Provision for income taxes at
statutory rate on income for the period $ 2,038 $ 2,106
State income taxes 38 46
International rate differences (623) (2,035)
Accounting (gains) losses for which deferred
income tax cannot be recognized (1,029) 102
Decrease in valuation allowance - (81)
Other (188) (64)
-------------- --------------
Income tax provision $ 176 $ 74
============== ==============
</TABLE>
F-10
<PAGE>
RADICA GAMES LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)-- (Continued)
(US dollars in thousands, except per share data)
6. 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
December 31, 1998 and October 31, 1998 deferred income taxes comprised:
<TABLE>
<CAPTION>
December 31, October 31,
1998 1998
------------- ------------
<S> <C> <C>
Deferred tax assets (liabilities):
Excess of tax over financial reporting depreciation $ (79) $ (79)
Bad debt allowance 151 158
Advertising allowances 445 2,100
Inventory obsolescence reserve 44 749
Accrued sales adjustments and returns 1,665 1,583
Tax losses 1,714 -
Other (180) $ 44
------------ ------------
$ 3,760 $ 4,555
============ ============
</TABLE>
7. 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:
<TABLE>
<CAPTION>
Two months ended December 31,
--------------------------------------------------------
Earnings
Numerator Denominator per share
--------------- --------------- -------------
<S> <C> <C> <C>
Basic earning per share:
Net income $ 5,819 18,883,455 $ 0.31
=============
Effective of dilutive options 1,211,034
--------------- ---------------
Diluted earning per share:
Net income, assuming all dilutive
options exercised $ 5,819 20,094,489 $ 0.29
=============== ================ =============
</TABLE>
Options on 322,000 shares of common stock were not included in computing
diluted earnings per share since their effects were antidilutive.
F-11
<PAGE>
RADICA GAMES LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)-- (Continued)
(US dollars in thousands, except per share data)
8. 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.
In January 1997, 60,000 stock options held by outside directors at an
exercise price of $11.00 per share were repriced to $1.72 per share, the
market price on January 3, 1997. Upon each re-election to the Board of
Directors in 1995 and 1996, each outside director received non-qualified
stock options to purchase 5,000 shares of common stock of the Company at
$3.66 per share and $1.50 per share, respectively (the closing market price
on those dates). Upon re-election to the Board of Directors in 1997 and
thereafter, each outside director received or will receive non-qualified
stock options to purchase 15,000 shares of Common Stock of the Company at
an exercise price equal to the closing market price on such date.
Option activity for the two months ended December 31, 1998:
<TABLE>
<CAPTION>
Weighted average
Number of exercise price
of shares per share
(in thousands)
<S> <C> <C>
Outstanding at October 31, 1998 1,938 $ 5.92
Options granted 135 15.05
Options cancelled - -
Options exercised (32) 2.59
-------------
Outstanding at December 31, 1998 2,041 $ 6.58
=============
Exercisable at December 31, 1998 237 $ 2.69
</TABLE>
F-12
<PAGE>
RADICA GAMES LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)-- (Continued)
(US dollars in thousands, except per share data)
8. STOCK OPTIONS (Continued)
The following is additional information relating to options outstanding as
of December 31, 1998:
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
---------------------------------------------------------- ---------------------------------
Weighted average Weighted
Weighted average remaining average
Exercise exercise price contractual Number exercise price
price range Number of shares per share life (years) or shares per share
- -------------------- ---------------- ---------------- ---------------- -------------- --------------
(in thousands) (in thousands)
<S> <C> <C> <C> <C> <C>
0.567 to 2.000 837 $ 1.32 7.24 138 $ 1.30
2.001 to 4.000 392 3.51 8.33 88 3.50
4.001 to 6.000 8 5.00 8.50 - -
6.001 to 8.000 50 6.72 8.50 2 8.00
8.001 to 10.000 5 8.60 8.60 1 9.00
10.001 to 12.000 321 10.99 9.81 - -
12.001 to 14.000 45 12.87 9.02 1 12.00
14.001 to 16.000 131 14.84 9.70 5 15.60
16.001 to 18.000 151 16.89 9.43 2 17.50
18.001 to 20.000 101 19.10 9.31 - -
---------------- --------------
2,041 $ 6.58 8.35 237 $ 2.69
================ ==============
</TABLE>
Pro forma information regarding net income (loss) and earnings (loss) 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 $7.79 and $8.19 per option for the two months ended
December 31, 1998 and 1997, respectively, were estimated using the
Black-Scholes option pricing model with the following weighted average
assumptions:
Two months ended December 31,
-----------------------------
1998 1997
----------- ----------
Expected life of options 5 years 5 years
Risk-free interest rate 6.5% 6.5%
Expected volatility of underlying stock 50% 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
F-13
<PAGE>
RADICA GAMES LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)-- (Continued)
(US dollars in thousands, except per share data)
8. STOCK OPTIONS (Continued)
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.
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:
Two months ended December 31,
-----------------------------
1998 1998
---------- ----------
Pro forma net income $ 5,633 $ 6,047
Pro forma earnings per share $ 0.30 $ 0.29
9. 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 has two customers which accounted
for more than thirty percent and twenty-seven percent of net sales in the
two months ended December 31, 1998 and three customers which accounted for
more than twenty-five percent, twenty-one percent and ten percent of net
sales in the year ended October 31, 1998. The Company performs ongoing
credit evaluations of its customers' financial condition and, generally,
requires no collateral from its customers.
10. 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.
F-14
<PAGE>
RADICA GAMES LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)-- (Continued)
(US dollars in thousands, except per share data)
11. COMMITMENTS AND CONTINGENCIES
The Company leases certain warehouses and equipment under operating leases.
Total expense for the operating leases was $82 and $63 for the two months
ended December 31, 1998 and 1997, respectively.
At December 31, 1998, the Company was obligated under operating leases
requiring future minimum lease payments as follows:
Operating leases
1999 $ 253
2000 249
2001 134
2002 108
2003 106
Thereafter 586
------------
Total minimum lease payments $ 1,436
============
At December 31, 1998, certain leasehold land and buildings with a net book
value of $4,869 and bank balances of $3,871 were pledged to secure general
banking facilities including overdraft and trade facilities granted to the
Company.
12. 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 $27 and $17 for the two months ended
December 31, 1998 and 1997, respectively.
F-15
<PAGE>
RADICA GAMES LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)-- (Continued)
(US dollars in thousands)
13. SEGMENT INFORMATION
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. Geographic financial information is
as follows:
Two months ended December 31,
------------------------------------------
1998 1997
----------------- ----------------
Net sales:
United States $ 14,337 $ 11,077
PRC and Hong Kong 5,878 5,445
Other 856 798
----------------- ----------------
$ 21,071 $ 17,320
================= ================
Operating income:
United States $ 412 $ 229
PRC and Hong Kong 4,784 5,481
Other 159 135
----------------- ----------------
$ 5,355 $ 5,845
================= ================
Identifiable assets are as follows:
December 31, October 31,
1998 1998
---------------- ---------------
United States $ 33,274 $ 45,296
PRC and Hong Kong 73,153 66,660
Other 1,763 1,565
---------------- ---------------
$ 108,190 $ 113,521
================ ===============
A significant portion of PRC and Hong Kong net sales were export sales to the
United States.
F-16
<PAGE>
RADICA GAMES LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)-- (Continued)
(US dollars in thousands)
14. VALUATION AND QUALIFYING ACCOUNTS
<TABLE>
<CAPTION>
Allowance Estimated Provision
for doubtful customer for
accounts returns inventories
-------------- -------------- -------------
<S> <C> <C> <C>
Balance at October 31, 1997 $ 908 $ 2,327 $ 3,479
Charged for the period 213 456 1,105
Deductions (655) (1,408) (2,170)
-------------- -------------- -------------
Balance at October 31, 1998 466 1,375 2,414
Charged for the period - - 23
Deductions (20) (298) -
-------------- -------------- -------------
Balance at December 31, 1998 $ 446 $ 1,077 $ 2,437
============== ============== =============
</TABLE>
F-17
<PAGE>
Pursuant to the requirements of Section 12 of the Securities Exchange
Act of 1934, the registrant certifies that it meets all of the requirements for
filing on Form 20-F and has duly caused this transition report to be signed on
its behalf by the undersigned, thereunto duly authorized.
RADICA GAMES LIMITED
Date: February 5, 1999 /s/ David C.W. Howell
---------------- ---------------------
David C.W. Howell
Executive Vice President
Chief Financial Officer
<PAGE>
EXHIBIT INDEX
99.1 Consolidated Balance Sheets at December 31, 1997, March 31, 1998,
June 30, 1998 and September 30, 1998.
99.2 Consolidated Income Statements for three months ended December 31,
1997, March 31, 1998, June 30, 1998 and September 30, 1998; for
two months ended December 31, 1997 and for twelve months ended
December 31, 1997.
99.3 Consolidated Cashflow Statements for respective periods ended
March 31, 1998, June 30, 1998, September 30, 1998 and for twelve
months ended December 31, 1997.
99.4 Sales Analyses of Units by Model for three months ended December
31, 1997, March 31, 1998, June 30, 1998 and September 30, 1998.
RADICA GAMES LIMITED
CONSOLIDATED BALANCE SHEETS-(UNAUDITED)
<TABLE>
<CAPTION>
September 30, 1998 June 30, 1998 March 31, 1998 December 31, 1997
USD'000 USD'000 USD'000 USD'000
ASSETS
<S> <C> <C> <C> <C>
CURRENT ASSETS
Cash and Cash Equivalents $ 36,216 $ 42,271 $ 41,565 $ 41,977
Short Term Investments - - - 5,012
Accounts Receivable 24,058 15,123 11,990 9,558
Inventories, Net of Provision 27,875 20,970 17,593 12,823
Prepaid Expenses and Other Current Assets 980 898 921 1,323
----------------------------------------------------------------------------
TOTAL CURRENT ASSETS 89,129 79,262 72,069 70,693
INVESTMENT IN AFFILIATED COMPANY 861 1,026 116 161
PROPERTY, PLANT AND EQUIPMENT, NET 16,013 15,407 13,875 12,383
INTANGIBLE ASSETS, NET 3,167 3,667 - -
----------------------------------------------------------------------------
TOTAL ASSETS $ 109,170 $ 99,362 $ 86,060 $ 83,237
============================================================================
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts Payable $ 16,738 $ 8,687 $ 9,494 $ 6,535
Accrued Warranty Expenses 2,371 2,161 2,804 2,384
Accrued Payroll and Employee Benefits 2,980 2,120 812 1,637
Accrued Advertising Expenses 5,470 3,026 2,842 1,206
Accrued Sales Adjustments 2,712 2,552 2,280 1,563
Commissions Payable 957 659 589 289
Accrued Other Expenses 2,844 3,074 2,315 2,045
Income Taxes Payable 838 90 158 241
Deferred Income Taxes 79 79 79 79
----------------------------------------------------------------------------
TOTAL CURRENT LIABILITIES 34,989 22,448 $ 21,373 15,979
----------------------------------------------------------------------------
STOCKHOLDERS' EQUITY:
Common Stock 194 205 203 209
Additional Paid-In Capital 10,078 22,536 19,891 28,270
Retained Earnings 63,949 54,196 44,602 38,788
Cumulative Translation Adjustment (40) (23) (9) (9)
----------------------------------------------------------------------------
TOTAL STOCKHOLDERS' EQUITY 74,181 76,914 $ 64,687 $ 67,258
----------------------------------------------------------------------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 109,170 $ 99,362 $ 86,060 $ 83,237
============================================================================
</TABLE>
<TABLE>
<CAPTION>
RADICA GAMES LIMITED
CONSOLIDATED STATEMENTS OF OPERATIONS - (unaudited)
Quarter ended Quarter ended Quarter ended Year ended
September 30, 1998 June 30, 1998 March 31, 1998 December 31, 1997
-----------------------------------------------------------------------------
USD'000 USD'000 USD'000 USD'000
<S> <C> <C> <C> <C>
REVENUES:
Net Sales $ 49,758 $ 34,265 $ 27,973 $ 96,283
Cost of Sales (23,012) (14,791) (12,152) (43,877)
-----------------------------------------------------------------------------
Gross Profit 26,746 19,474 15,821 52,406
-----------------------------------------------------------------------------
OPERATING EXPENSES:
Selling, General and Administrative Expenses (9,203) (5,875) (6,405) (15,607)
Research and Development (1,028) (1,280) (647) (2,120)
Depreciation and Amortization (1,003) (1,324) (466) (2,307)
Acquired Research and Development - (1,500) - -
-----------------------------------------------------------------------------
Total Operating Expenses (11,234) (9,979) (7,518) (20,034)
-----------------------------------------------------------------------------
Operating Income From Continuing Operations 15,512 9,495 8,303 32,372
Other Income 137 198 108 1,041
Share of Loss of Affiliated Company (165) (52) (46) (174)
Net Interest 503 564 477 1,066
-----------------------------------------------------------------------------
Income From Continuing Operations Before Income Taxes 15,987 10,205 8,842 34,305
-----------------------------------------------------------------------------
Provision For Income Taxes (1,068) (44) (14) (255)
Net Income $ 14,919 $ 10,161 $ 8,828 $ 34,050
-----------------------------------------------------------------------------
EARNING PER SHARE - BASIC:
Net Earnings Per Share $ 0.75 $ 0.50 $ 0.43 $ 1.64
================= ============= ============= ==============
Average Number of Shares Outstanding 19,842,412 20,480,579 20,378,811 20,796,461
================= ============= ============= ==============
EARNING PER SHARE - ASSUMING DILUTION:
Net Earnings Per Share and Dilutive Potential
Common Stock $ 0.71 $ 0.47 $ 0.41 $ 1.55
================= ============= ============= ==============
Average Number of Shares and
Dilutive Potential Common Stock Outstanding 20,992,324 21,726,418 21,677,908 21,900,202
================= ============= ============= ==============
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
RADICA GAMES LIMITED
CONSOLIDATED STATEMENTS OF OPERATIONS - (unaudited)
(continued)
Quarter ended Two months ended
December 31, 1997 December 31, 1997
---------------------------------------
USD'000 USD'000
<S> <C> <C>
REVENUES:
Net Sales $ 36,126 $ 17,320
Cost of Sales (14,596) (7,855)
---------------------------------------
Gross Profit 21,530 9,465
---------------------------------------
OPERATING EXPENSES:
Selling, General and Administrative Expenses (6,130) (3,013)
Research and Development (774) (320)
Depreciation and Amortization (430) (287)
Acquired Research and Development - -
---------------------------------------
Total Operating Expenses (7,334) (3,620)
---------------------------------------
Operating Income From Continuing Operations 14,196 5,845
Other Income 124 163
Share of Loss of Affiliated Company (55) (33)
Net Interest 407 220
---------------------------------------
Income From Continuing Operations Before Income Taxes 14,672 6,195
---------------------------------------
Provision For Income Taxes (169) (74)
Net Income $ 14,503 $ 6,121
---------------------------------------
EARNING PER SHARE - BASIC:
Net Earnings Per Share $ 0.69 $ 0.29
================= ================
Average Number of Shares Outstanding 20,880,173 20,892,061
================= ================
EARNING PER SHARE - ASSUMING DILUTION:
Net Earnings Per Share and Dilutive Potential
Common Stock $ 0.65 $ 0.27
================= ================
Average Number of Shares and
Dilutive Potential Common Stock Outstanding 22,336,621 22,353,638
================= ================
</TABLE>
RADICA GAMES LIMITED
CONSOLIDATED STATEMENTS OF CASH FLOWS - (UNAUDITED)
THREE MONTHS ENDED
MARCH 31, 1998
USD '000
CASH FLOW FROM OPERATING ACTIVITIES:
NET INCOME $ 8,828
ADJUSTMENTS TO RECONCILE NET INCOME TO
NET CASH PROVIDED BY OPERATING ACTIVITIES:
Depreciation 466
Share of loss of affiliated company 45
Loss on disposal of property, plant and equipment 1
CHANGE IN ASSETS AND LIABILITIES:
Accounts receivable (2,432)
Inventories (4,770)
Prepaid expenses and other current assets 402
Accounts payable 2,959
Accrued payroll and employee benefits (825)
Commissions payable 300
Accrued advertising expenses 1,636
Accrued sales expenses 717
Accrued warranty expenses 420
Accrued other expenses 270
Income taxes payable (83)
-----------------
NET CASH PROVIDED BY OPERATING ACTIVITIES 7,934
CASH FLOW FROM INVESTING ACTIVITIES:
Decrease in short term investments 5,012
Proceeds from sale of property, plant and equipment 12
Purchases of property, plant and machinery (1,971)
-----------------
NET CASH PROVIDED BY INVESTING ACTIVITIES 3,053
CASH FLOW FROM FINANCING ACTIVITIES:
Funds from stock options exercised 717
Repurchase of common stock (12,116)
-----------------
NET CASH USED IN FINANCING ACTIVITIES (11,399)
NET DECREASE IN CASH AND CASH EQUIVALENTS (412)
CASH AND CASH EQUIVALENTS:
AT BEGINNING OF PERIOD 41,977
-----------------
AT END OF PERIOD $ 41,565
=================
<PAGE>
RADICA GAMES LIMITED
CONSOLIDATED STATEMENTS OF CASH FLOWS - (UNAUDITED)
SIX MONTHS ENDED
JUNE 30, 1998
USD '000
CASH FLOW FROM OPERATING ACTIVITIES:
NET INCOME $ 18,989
ADJUSTMENTS TO RECONCILE NET INCOME TO
NET CASH PROVIDED BY OPERATING ACTIVITIES:
Depreciation 956
Amortization 833
Share of loss of affiliated company 98
Acquired research & development 1,500
Loss on disposal of property, plant and equipment 5
CHANGE IN ASSETS AND LIABILITIES:
Accounts receivable (5,579)
Inventories (8,147)
Prepaid expenses and other current assets 425
Accounts payable 2,152
Accrued payroll and employee benefits 483
Commissions payable 370
Accrued advertising expenses 1,820
Accrued sales expenses 989
Accrued warranty expenses (223)
Accrued other expenses 1,029
Income taxes payable (151)
---------------
NET CASH PROVIDED BY OPERATING ACTIVITIES 15,549
CASH FLOW FROM INVESTING ACTIVITIES:
Decrease in short term investments 5,012
Proceeds from sale of property, plant and equipment 13
Purchases of property, plant and machinery (3,998)
Purchase of intangible assets (2,400)
Investment in an affiliate company (963)
---------------
NET CASH USED IN INVESTING ACTIVITIES (2,336)
CASH FLOW FROM FINANCING ACTIVITIES:
Funds from stock options exercised 822
Repurchase of common stock (13,741)
---------------
NET CASH USED IN FINANCING ACTIVITIES (12,919)
NET INCREASE IN CASH AND CASH EQUIVALENTS 294
CASH AND CASH EQUIVALENTS:
AT BEGINNING OF PERIOD 41,977
---------------
AT END OF PERIOD $ 42,271
===============
<PAGE>
RADICA GAMES LIMITED
CONSOLIDATED STATEMENTS OF CASH FLOWS - (UNAUDITED)
NINE MONTHS ENDED
SEPTEMBER 30, 1998
USD '000
CASH FLOW FROM OPERATING ACTIVITIES:
NET INCOME $ 33,908
ADJUSTMENTS TO RECONCILE NET INCOME TO
NET CASH PROVIDED BY OPERATING ACTIVITIES:
Depreciation 1,460
Amortization 1,333
Share of loss of affiliated company 263
Acquired research & development 1,500
Loss on disposal of property, plant and equipment 16
CHANGE IN ASSETS AND LIABILITIES:
Accounts receivable (14,531)
Inventories (15,052)
Prepaid expenses and other current assets 343
Accounts payable 10,203
Accrued payroll and employee benefits 1,343
Commissions payable 668
Accrued advertising expenses 4,264
Accrued sales expenses 1,149
Accrued warranty expenses (13)
Accrued other expenses 799
Income taxes payable 597
------------------
NET CASH PROVIDED BY OPERATING ACTIVITIES 28,250
CASH FLOW FROM INVESTING ACTIVITIES:
Decrease in short term investments 5,012
Proceeds from sale of property, plant and equipment 13
Purchases of property, plant and machinery (5,119)
Purchase of intangible assets (2,400)
Investment in an affiliate company (963)
------------------
NET CASH USED IN INVESTING ACTIVITIES (3,457)
CASH FLOW FROM FINANCING ACTIVITIES:
Funds from stock options exercised 972
Repurchase of common stock (31,526)
------------------
NET CASH USED IN FINANCING ACTIVITIES (30,554)
NET DECREASE IN CASH AND CASH EQUIVALENTS (5,761)
CASH AND CASH EQUIVALENTS:
AT BEGINNING OF PERIOD 41,977
------------------
AT END OF PERIOD $ 36,216
==================
<PAGE>
RADICA GAMES LIMITED
CONSOLIDATED STATEMENTS OF CASH FLOWS - (UNAUDITED)
YEAR ENDED
DECEMBER 31, 1997
USD '000
CASH FLOW FROM OPERATING ACTIVITIES:
NET INCOME $ 34,050
ADJUSTMENTS TO RECONCILE NET INCOME TO
NET CASH PROVIDED BY OPERATING ACTIVITIES:
Depreciation 1,642
Amortization 665
Share of loss of affiliated company 174
Gain on disposal of property, plant and equipment (26)
CHANGE IN ASSETS AND LIABILITIES:
Accounts receivable (3,292)
Inventories (3,009)
Prepaid expenses and other current assets (597)
Accounts payable 3,412
Accrued payroll and employee benefits 1,077
Commissions payable 74
Accrued advertising expenses 895
Accrued sales expenses (564)
Accrued warranty expenses 831
Accrued other expenses 38
Income taxes payable 296
---------------
NET CASH PROVIDED BY OPERATING ACTIVITIES 35,666
CASH FLOW FROM INVESTING ACTIVITIES:
Increase in short term investments (4,934)
Proceeds from sale of property, plant and equipment 86
Purchases of property, plant and machinery (1,365)
Investment in an affiliate company (1,000)
----------------
NET CASH USED IN INVESTING ACTIVITIES (7,213)
CASH FLOW FROM FINANCING ACTIVITIES:
Funds from stock options exercised 264
Repurchase of common stock (496)
Repayment of long term debt (50)
----------------
NET CASH USED IN FINANCING ACTIVITIES (282)
NET INCREASE IN CASH AND CASH EQUIVALENTS 28,171
CASH AND CASH EQUIVALENTS:
AT BEGINNING OF YEAR 13,806
----------------
AT END OF YEAR $ 41,977
================
RADICA GAMES LIMITED
THE UNITS OF SALES BY EACH CATEGORY OF PRODUCTS - (UNAUDITED)
<TABLE>
<CAPTION>
Quarter ended
--------------------------------------------------------------------------------
September 30, 1998 June 30, 1998 March 31, 1998 December 31, 1997
------------------ ------------- -------------- -----------------
<S> <C> <C> <C> <C>
Product Lines Units Sold Units Sold Units Sold Units Sold
- ------------- ---------- ---------- ---------- ----------
Sports games 417,989 288,526 89,692 214,663
Heritage games 344,085 205,346 172,147 341,185
Fishing games 1,523,912 1,284,959 1,326,676 1,812,746
Combat games 176,009 101,942 57,869 154,122
Casino games
-- Tabletop 63,123 42,114 36,983 41,292
-- Handheld 843,004 551,794 799,303 759,990
Extreme games 162,524 177,415 8,908 -
ODM products 2,180,411 971,904 908,100 1,037,058
---------- ---------- ---------- ----------
Total 5,711,057 3,624,000 3,399,678 4,361,056
========== ========== ========== ==========
</TABLE>
