RADICA GAMES LIMITED
REPORTS THIRD QUARTER PROFITS
FOR IMMEDIATE RELEASE CONTACT: PATRICK S. FEELY
NOVEMBER 20TH, 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 an after tax
profit of $3.9 million for the third quarter ended September 30, 2000 or $0.22
per fully diluted share versus $8.8 million or $0.48 for the same period last
year. After tax loss for the nine months ended September 30, 2000 including
restructuring charges taken in the second quarter was $15.7 million or $0.89
loss per share versus a profit of $14.2 million or $0.74 earnings per share for
the nine months ended September 30, 1999.
Total revenues for the third quarter ended September 30, 2000 were $39.9
million, compared to $47.4 million for the same period in 1999. Total revenues
for the nine months ended September 30, 2000 were $69.1 million, compared to
$89.1 million for the same period last year. As reported in previous quarters,
the revenue decline during 2000 has resulted primarily from severely adverse
market conditions in the electronic handheld game category which have only
partially been offset by the growth of the Company's Girl Tech(R) product line
and the introduction of Radica's new PlayTV(TM) line of games that connect
directly into television sets.
Revenues were comprised of 46% Radica handheld games, 17% Girl Tech(R), 13%
PlayTV(TM), 6% Gamester(R) (controllers) and 18% ODM. This compares to 64%, 6%,
0%, 7% and 23% for Q3 `99. Video game controller revenues were also down from
1999 as a result of the effects of the platform transition from Sony's
PlayStation to PlayStation 2. The Company expects increases in this business
segment from Q4 2000 onwards when PlayStation 2 is being launched; however, Q4
PlayStation 2 controller revenues are expected to be adversely affected in Q4
due to significant reductions in supply of the PlayStation 2 console that were
recently announced by Sony for the 2000 holiday season.
Pat Feely, Radica's President and CEO said, "It is gratifying to report third
quarter profits ahead of our expectations in this particularly difficult and
challenging year. While the handheld game and video game controller markets have
been very soft this year, we are pleased with the performance of Girl Tech(R)
and our new PlayTV(TM) line. We look forward to building on those successes and
taking advantage of the momentum PlayStation 2 will bring to the controller
market next year."
Gross margin for the quarter was 34.1% compared to 39.5% in Q3 of 1999 as a
result of the impact of sales of closeout product.
<PAGE>
Operating expenses dropped from $10.4 million in Q3 of 1999 to $10.1 million as
a result of savings in salaries due to the Q2 reorganization offset by an
increase in advertising expenditures of $1 million. Expenses were down by
approximately US$0.8 million from Q2 2000 (before the effect of the Q2
restructuring charge).
At September 30, 2000 the Company had $26.4 million of cash ($1.49 per share)
and net assets of $70.1 million ($3.97 per share). Inventories dropped to $21.4
million from $24.6 million at both 31st December 1999 and 30th September 1999 as
a result of the Company's successful moves to close out old inventories. The
Company also announced that due to appropriate planning, it had been able, in
most cases, to ship products on time without being adversely effected by chip
shortages, however the lack of supply has limited the upside of certain
successful lines such as PlayTV(TM) Baseball, PlayTV(TM) Huntin' and the
Password Journal(R). The Company stated that the majority of its advertising
expenditures will fall in Q4 (approximately $5 million compared to $1.4 million
in Q3 2000) and that gross margins were likely to be lower in Q4 due to an
increased percentage of controller product to meet the demand for PlayStation 2
peripherals for Christmas plus additional closeout shipments planned during the
quarter. As a result of these factors the Company expects to report a loss
during the fourth quarter.
"As previously announced we decided that as a result of our strong cash position
it is possible and important to invest significant additional resources in
advertising to support the launch of our exciting, new PlayTV(TM) product line
during the fourth quarter. While this will impact our fourth quarter results, we
believe it is the right move for the future potential of our business," 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.
Sony and Sony PlayStation are registered marks of Sony Corporation.
-- END --
<PAGE>
<TABLE>
<CAPTION>
RADICA GAMES LIMITED
CONSOLIDATED STATEMENTS OF OPERATIONS
(US Dollars in thousands, Three months ended Nine months ended
except per share data) September 30, September 30,
-------------------------- --------------------------
2000 1999 2000 1999
------------ ------------ ------------ ------------
(unaudited) (unaudited) (unaudited) (unaudited)
<S> <C> <C> <C> <C>
REVENUES:
Net sales 39,899 47,388 69,050 89,050
Cost of sales (26,299) (28,657) (57,120) (51,466)
------------ ------------ ------------ ------------
Gross profit 13,600 18,731 11,930 37,584
------------ ------------ ------------ ------------
OPERATING EXPENSES:
Selling, general and administrative expenses (7,335) (7,299) (20,140) (17,086)
Research and development (1,358) (1,686) (4,182) (3,878)
Depreciation and amortization (1,399) (1,383) (4,127) (3,557)
Restructuring charge - - (1,369) -
------------ ------------ ------------ ------------
Total operating expenses (10,092) (10,368) (29,818) (24,521)
------------ ------------ ------------ ------------
OPERATING INCOME (LOSS) 3,508 8,363 (17,888) 13,063
OTHER INCOME 356 364 1,034 720
SHARE OF LOSS OF AFFILIATED COMPANY - (142) - (704)
NET INTEREST INCOME 78 327 556 1,281
------------ ------------ ------------ ------------
INCOME (LOSS) BEFORE INCOME TAXES 3,942 8,912 (16,298) 14,360
(PROVISION) CREDIT FOR INCOME TAXES (78) (95) 614 (184)
------------ ------------ ------------ ------------
NET INCOME (LOSS) $ 3,864 $ 8,817 $ (15,684) $ 14,176
============ ============ ============ ============
EARNINGS (LOSS) PER SHARE - BASIC:
Net earnings (loss) per share $ 0.22 $ 0.50 $ (0.89) $ 0.78
============ ============ ============ ============
Average number of shares outstanding 17,639,400 17,801,396 17,624,297 18,282,007
============ ============ ============ ============
EARNINGS (LOSS) PER SHARE
- ASSUMING DILUTION:
Net earnings (loss) per share and
dilutive potential common stock $ 0.22 $ 0.48 $ (0.89) $ $ 0.74
============ ============ ============ ============
Average number of shares and dilutive
potential common stock outstanding 17,937,229 18,530,393 17,624,297 19,163,933
============ ============ ============ ============
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
RADICA GAMES LIMITED
CONSOLIDATED BALANCE SHEETS
ASSETS
September 30, December 31,
------------ ------------
(US Dollars in thousands, except share data) 2000 1999
------------ ------------
(unaudited)
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 26,368 $ 32,159
Accounts receivable, net of allowances for doubtful accounts
of $2,260 ($389 at Dec. 31, 1999) and estimated customer
returns of $595 ($624 at Dec. 31, 1999) 19,837 23,750
Inventories, net of provision of $7,305 ($2,339 at Dec. 31, 1999) 21,411 24,625
Prepaid expenses and other current assets 3,073 4,752
Income taxes receivable -- 1,257
Deferred income taxes 3,667 3,667
------------ ------------
TOTAL CURRENT ASSETS 74,356 90,210
------------ ------------
PROPERTY, PLANT AND EQUIPMENT, NET 18,448 17,523
------------ ------------
INTANGIBLE ASSETS, NET 12,037 14,351
------------ ------------
DEFERRED INCOME TAXES, NONCURRENT 11 11
------------ ------------
TOTAL ASSETS $ 104,852 $ 122,095
============ ============
</TABLE>
<TABLE>
<CAPTION>
LIABILITIES AND SHAREHOLDERS' EQUITY
<S> <C> <C>
CURRENT LIABILITIES:
Short term borrowings 2,980 1,464
Accounts payable 12,718 12,029
Current portion of long-term debt 3,648 1,399
Accrued payroll and employee benefits 518 2,511
Accrued expenses 8,399 7,614
Income taxes payable 140 70
------------ ------------
TOTAL CURRENT LIABILITIES 28,403 25,087
------------ ------------
LONG-TERM DEBT 6,385 10,946
------------ ------------
TOTAL LIABILITIES 34,788 36,033
------------ ------------
SHAREHOLDERS' EQUITY:
Common stock
par value $0.01 each, 100,000,000 shares authorized,
17,650,602 shares outstanding (17,639,594 at Dec. 31, 1999) 177 176
Additional paid-in capital 1,843 1,757
Retained earnings 68,068 84,100
Cumulative translation adjustment (24) 29
------------ ------------
TOTAL SHAREHOLDERS' EQUITY 70,064 86,062
------------ ------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 104,852 $ 122,095
============ ============
</TABLE>
