RADICA GAMES LIMITED
ANNOUNCES RESTRUCTURING AND
REPORTS SECOND QUARTER RESULTS
FOR IMMEDIATE RELEASE CONTACT: PATRICK S. FEELY
August 14, 2000 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 in its second
quarter it had completed the previously announced restructuring of its worldwide
operations to streamline it for the future. As part of this restructuring the
Company made a number of layoffs worldwide resulting in restructuring charges.
In addition, to reflect the changes to the U.S. handheld games market, the
Company took certain charges as mentioned in its previous announcement relating
to inventory, bad debts, return provisions and license fees.
As a result of these charges as well as operations during the quarter, the
Company reported today an after tax loss of $17.4 million for the second quarter
ended June 30, 2000 or $0.98 per fully diluted share versus an after tax profit
of $2.2 million or earnings per share of $0.12 per fully diluted share for the
same period last year. After tax loss for the six months ended June 30, 2000 was
$19.5 million or $1.11 loss per share versus an after tax profit of $5.4 million
or $0.28 for the six months ended June 30, 1999.
Total revenues for the second quarter ended June 30, 2000 were $12.4 million,
compared to $23.8 million for the same period in 1999. Total revenues for the
six months ended June 30, 2000 were $29.2 million, compared to $41.7 million for
the same period last year.
During the quarter the Company took one time charges totaling $10.2 million
including a restructuring charge of $1.4 million as a result of organizational
changes in the U.S., U.K. and Asia to allow the Company to streamline operations
and reposition itself for future profitability, plus charges of $4.3 million
against inventory, $1.8 million related to certain license royalty minimums and
$2.7 million in provisions against receivables and customer returns as a result
of the downturn in the U.S. handheld games market that was discussed in Q1.
Excluding these charges the Company made an after tax loss of $7.2 million for
the 3 months ended June 30, 2000. Operating margins for the quarter were
negatively impacted by soft sales of handheld games resulting in a significant
mix shift to lower margin sales of ODM products, video game controllers and
closeouts. SG&A increased during the quarter as a result of the normal timing of
Spring advertising expenditures.
The Company also announced that the worldwide electronic component shortage
continues to jeopardize shipments and costs of new products and will create
uncertainty for sales volumes and margins during the remainder of the year and
the first part of 2001.
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Pat Feely, Radica's President and CEO said, "During the last quarter we
completed the restructuring of Radica's operations to position the company for
the future. In addition to securing a lower cost and more efficient
organization, we have redirected our resources in support of the highest
potential areas of growth and profitability for the future. We are viewing this
year as a rebuilding year and intend to invest in advertising and product
development, to build our highest potential business segments. While this
aggressiveness will negatively impact profitability for the remainder of 2000,
we believe it is the right strategy for the future."
"We are encouraged by the early results from retail of our XaviX(TM)
technology-based PlayTV Baseball(TM). The product line will be launched
nationally on television in mid-September. The Girl Tech(TM) product line
continues to have excellent momentum at retail and our UK controller business
continues to gain market share during this difficult platform transition year.
These potential growth areas coupled with the cost savings resulting from our
restructuring of the handheld games business should build the basis for a solid
future at Radica," said Feely.
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 December 31, 1999, 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 a
diverse line of electronic products including handheld and tabletop games,
high-tech toys, video game controllers and peripherals, and Internet enabled
appliances. 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.
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RADICA GAMES LIMITED
CONSOLIDATED STATEMENTS OF OPERATIONS
(US Dollars in thousands, Three months ended Six months ended
except per share data) June 30, June 30,
-------------------------- --------------------------
2000 1999 2000 1999
------------ ----------- ------------ -----------
(unaudited) (unaudited) (unaudited) (unaudited)
<S> <C> <C> <C> <C>
REVENUES:
Net sales 12,429 23,756 29,151 41,662
Cost of sales (18,782) (13,683) (30,821) (22,809)
------------ ----------- ------------ -----------
Gross (loss) profit (6,353) 10,073 (1,670) 18,853
------------ ----------- ------------ -----------
OPERATING EXPENSES:
Selling, general and administrative expenses (8,055) (5,736) (12,805) (9,787)
Research and development (1,451) (1,152) (2,824) (2,192)
Depreciation and amortization (1,348) (1,238) (2,728) (2,174)
Restructuring charge (1,369) - (1,369) -
------------ ----------- ------------ -----------
Total operating expenses (12,223) (8,126) (19,726) (14,153)
------------ ----------- ------------ -----------
OPERATING (LOSS) INCOME (18,576) 1,947 (21,396) 4,700
OTHER INCOME 359 244 678 356
SHARE OF LOSS OF AFFILIATED COMPANY - (322) - (562)
NET INTEREST INCOME 158 336 478 954
------------ ----------- ------------ -----------
(LOSS) INCOME BEFORE INCOME TAXES (18,059) 2,205 (20,240) 5,448
CREDIT (PROVISION) FOR INCOME TAXES 703 - 692 (89)
------------ ----------- ------------ -----------
NET (LOSS) INCOME $ (17,356) $ 2,205 $ (19,548) $ 5,359
============ =========== ============ ===========
(LOSS) EARNINGS PER SHARE - BASIC:
Net (loss) earnings per share $ (0.98) $ 0.12 $ (1.11) $ 0.29
============ =========== ============ ===========
Average number of shares outstanding 17,625,930 18,102,586 17,616,663 18,526,295
============ =========== ============ ===========
(LOSS) EARNINGS PER SHARE
- ASSUMING DILUTION:
Net (loss) earnings per share and
dilutive potential common stock $ (0.98) $ 0.12 $ (1.11) $ 0.28
============ =========== ============ ===========
Average number of shares and dilutive
potential common stock outstanding 17,625,930 18,969,534 17,616,663 19,484,686
============ =========== ============ ===========
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RADICA GAMES LIMITED
CONSOLIDATED BALANCE SHEETS
ASSETS
June 30, December 31,
-------- ------------
(US Dollars in thousands, except share data) 2000 1999
-------------------------------------------- ------- ------------
(unaudited)
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 20,599 $ 32,159
Accounts receivable, net of allowances for doubtful accounts
of $3,037 ($389 at Dec. 31, 1999) and estimated customer
returns of $270 ($624 at Dec. 31, 1999) 8,883 23,750
Inventories, net of provision of $7,469 ($2,339 at Dec. 31, 1999) 27,654 24,625
Prepaid expenses and other current assets 3,517 4,752
Income taxes receivable 391 1,257
Deferred income taxes 3,667 3,667
-------------------- --------------------
TOTAL CURRENT ASSETS 64,711 90,210
-------------------- --------------------
PROPERTY, PLANT AND EQUIPMENT, NET 18,243 17,523
-------------------- --------------------
INTANGIBLE ASSETS, NET 12,759 14,351
-------------------- --------------------
DEFERRED INCOME TAXES, NONCURRENT 11 11
-------------------- --------------------
TOTAL ASSETS $ 95,724 $ 122,095
==================== ====================
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Short term borrowings 1,266 1,464
Accounts payable 9,649 12,029
Current portion of long-term debt 3,648 1,399
Accrued payroll and employee benefits 475 2,511
Accrued expenses 7,160 7,614
Income taxes payable 79 70
-------------------- --------------------
TOTAL CURRENT LIABILITIES 22,277 25,087
-------------------- --------------------
LONG-TERM DEBT 7,297 10,946
-------------------- --------------------
TOTAL LIABILITIES 29,574 36,033
-------------------- --------------------
SHAREHOLDERS' EQUITY:
Common stock
par value $0.01 each, 100,000,000 shares authorized,
17,629,194 shares outstanding (17,639,594 at Dec. 31, 1999) 176 176
Additional paid-in capital 1,806 1,757
Retained earnings 64,204 84,100
Cumulative translation adjustment (36) 29
-------------------- --------------------
TOTAL SHAREHOLDERS' EQUITY 66,150 86,062
-------------------- --------------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 95,724 $ 122,095
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