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, 2005
Commission File Number: 0-23696
RADICA GAMES LIMITED
(Translation of registrant's name into English)
Suite V, 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
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Indicate by check mark if the registrant is submitting the Form 6-K in
paper as permitted by Regulation S-T Rule 101(b)(1): ______
Indicate by check mark if the registrant is submitting the Form 6-K in
paper as permitted by Regulation S-T Rule 101(b)(7): ______
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
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If "Yes" is marked, indicate below the file number assigned to the
registrant in connection with Rule 12g3-2(b): 82- _________________
Contents:
1. Press Release dated November 7, 2005
2. Update respecting Risk Factors
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, No. 333-59737, 333-61260 and 333-122248) and on Form F-3 (No. 333-7526
and No. 333-79005).
RISK FACTORS UPDATE
The following is intended to update our risk factors as disclosed in our 2004
Annual Report on Form 20-F and as previously updated in our Form 6-K reports
furnished to the Securities and Exchange Commission.
As previously reported, in June 2005 AtGames Holdings Ltd. filed a complaint
against Radica Games Limited and our subsidiary Radica (Macao Commercial
Offshore) Limited in the California Superior Court, County of Los Angeles,
alleging intentional interference with contract and unfair competition.
Thereafter, the Radica parties removed the case to the Federal District Court,
Central District of California. In October 2005, the Federal District Court
remanded the case back to the California Superior Court. The Radica parties
consider this suit to be without merit and intend to defend against it
vigorously.
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: November 8, 2005 /s/ Craig D. Storey
----------------------- ------------------------------
Craig D. Storey
Chief Accounting Officer
RADICA GAMES LIMITED
REPORTS THIRD QUARTER RESULTS
FOR IMMEDIATE RELEASE CONTACT: PATRICK S. FEELY
NOVEMBER 7, 2005 CHIEF EXECUTIVE OFFICER
(LOS ANGELES, CALIFORNIA)
(626) 744 1150
DAVID C.W. HOWELL
PRESIDENT ASIA OPERATIONS
& CFO
(HONG KONG)
(852) 2688 4201
HIGHLIGHTS:
o Record quarterly sales of $63.4 million compared to $49.0 million for Q3
2004; growth of 30%.
o Q3 diluted EPS grew by 65% to $0.51 per share compared to $0.31 per share
for Q3 2004.
(HONG KONG) Radica Games Limited (NASDAQ: RADA) announced today its results for
the third quarter ended September 30, 2005. The Company reported a net profit
for the quarter of $10.0 million or $0.51 per diluted share compared to $6.0
million or $0.31 per diluted share in the third quarter of 2004. Net profit for
the nine-month period ended September 30, 2005 was $7.0 million or $0.36 per
diluted share compared to $5.0 million or $0.26 per diluted share for the same
period in 2004, an increase of 38%. Excluding the non-cash charge of $6.0
million for the impairment of the remaining goodwill associated with its video
game accessories ("VGA") product line in Q2 2005, net profits would have been
$13.0 million or $0.66 per share, an increase of 154%.
Sales for the third quarter of 2005 increased by 30% to $63.4 million from $49.0
million for the same period in 2004 due mainly to continued strength in the
Electronic Games category led by growth from both the 20Q product line and
traditional handheld electronic games. The Girl Tech product line also showed
double digit growth during the quarter. Compared to sales for the same period in
2004, sales grew by 30% with North American sales increasing by 29%, European
sales increasing by 35% and other international sales increasing by 47%. Sales
for the year-to-date increased 46% to $117.0 million as compared to $79.9
million for the same period in 2004 for the same reasons.
Pat Feely, Radica's Chief Executive Officer, said "This was a strong quarter for
Radica particularly when taken in the context of weak industry conditions.
Additionally, it was the highest level of sales in any quarter ever at Radica,
and our earnings were strong as well with an operating margin over 18%. It
demonstrates that our strategy of focusing on electronic entertainment for
casual gamers is the right strategy for today's tech-savvy consumers."
"We now enter into the most critical time of year immediately prior to the
holiday season. As in every year the fourth quarter is largely in the hands of
the consumer and how our retail customers respond to consumer demand. In past
years this quarter has been hard to predict and the current retail environment
has continued to be soft as well, so we urge caution in estimates for the end of
the year. Even so, we believe we have the right kinds of products for the
current marketplace and look forward to the upcoming season." said Feely
The following table shows the detailed revenue comparisons for the quarter:
Three months ended September 30, Nine months ended September 30,
-------------------------------- -------------------------------
Product Lines 2005 2004 2005 2004
------------- -------------- -------------- ------------ ------------
(US Dollars in thousands)
Electronic Games $ 49,831 $ 34,220 $ 89,919 $ 51,791
Youth Electronics 6,859 6,447 12,409 11,273
Other Electronic Toys 1,632 1,657 2,130 2,222
Video Game Accessories 1,321 3,179 4,762 7,187
Manufacturing Services 3,794 3,469 7,822 7,423
------ -------- --------- --------
TOTAL $ 63,437 $ 48,972 $ 117,042 $ 79,896
====== ======== ========= ========
Gross profit for the quarter increased by 55% to $23.7 million, and gross
margins increased by 610 basis points from 31.2% to 37.3%. Gross profit for the
nine-month period ended September 30, 2005 increased by 58% to $41.9 million and
gross margins for the same period increased by 260 basis points to 35.8%. The
increases in gross margins during both periods related primarily to a sales mix
shift to higher margin products. As a result, lower margin product lines such as
Manufacturing Service and Play TV Legends games accounted for a smaller portion
of sales. The increase in our gross margin percentage was also impacted by lower
air freight charges and outsourcing costs than for the comparable period last
year when the Company experienced a late surge in demand which forced it to
incur higher costs.
Operating expenses increased to $12.0 million for the quarter from $8.6 million
in Q3 2004. The increase was due to sales related and other variable costs,
together with increases in research and development costs and depreciation. For
the nine months ended September 30, 2005, operating expenses increased by $12.2
million from the comparative period in 2004 due to the previously mentioned
impairment charge of $6.0 million in Q2 as well as variable costs.
At September 30, 2005 the Company had $35.7 million of cash and investment
securities, and net assets of $96.1 million as compared to $40.1 million and
$91.1 million, respectively, at December 31, 2004 and $36.0 million and $92.2
million respectively as of September 30, 2004. There was no debt at September
30, 2005, December 31, 2004 and September 30, 2004. Inventories increased to
$31.4 million from $26.8 million at December 31, 2004 and from $28.9 million at
September 30, 2004, reflecting the growing demand for our product lines, as well
as normal seasonality. Receivables increased to $35.6 million from $18.4 million
at December 31, 2004 and from $26.0 million at September 30, 2004 reflecting the
increased sales and normal seasonality.
On October 6, 2005, the Company declared a fourth quarter dividend of $0.045 per
share, which was paid on October 28, 2005.
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, 2004, as
filed with the Securities and Exchange Commission. See "Item
3. Key Information -- 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 entertainment products including electronic games,
youth electronics, video game accessories and high-tech toys. Radica has
subsidiaries in the U.S.A., Canada, the U.K. and Macau, and a factory in
Dongguan, Southern China. More information about Radica can be found on the
Internet at www.radicagames.com.
-- END --
RADICA GAMES LIMITED
CONSOLIDATED STATEMENTS OF OPERATIONS
(US dollars in thousands, Three months ended September 30, Nine months ended September 30,
except per share data) -------------------------------- -------------------------------
2005 2004 2005 2004
-------------- -------------- ------------- --------------
(unaudited) (unaudited) (unaudited) (unaudited)
Revenues:
Net sales $ 63,437 $ 48,972 $ 117,042 $ 79,896
Cost of goods sold
(exclusive of items shown separately below) (39,750) (33,703) (75,167) (53,335)
----------- ----------- ----------- -----------
Gross profit 23,687 15,269 41,875 26,561
Operating expenses:
Selling, general and administrative expenses (10,192) (7,271) (22,883) (17,466)
Research and development (1,274) (926) (3,363) (2,724)
Depreciation and amortization (559) (450) (1,421) (1,300)
Impairment of goodwill -- -- (6,015) --
----------- ----------- ----------- -----------
Total operating expenses (12,025) (8,647) (33,682) (21,490)
----------- ----------- ----------- -----------
Operating income 11,662 6,622 8,193 5,071
Net interest and other income 288 718 733 1,136
Foreign currency (loss) gain, net (216) 2 (227) 46
----------- ----------- ----------- -----------
Profit before income taxes 11,734 7,342 8,699 6,253
Provision for income tax (1,747) (1,352) (1,654) (1,204)
----------- ----------- ----------- -----------
Net profit $ 9,987 $ 5,990 $ 7,045 $ 5,049
=========== =========== =========== ===========
Net profit per share:
Basic $ 0.52 $ 0.32 $ 0.37 $ 0.27
=========== =========== =========== ===========
Diluted $ 0.51 $ 0.31 $ 0.36 $ 0.26
=========== =========== =========== ===========
Weighted average number of common and
common equivalent shares:
Basic 19,036,387 18,687,802 18,967,933 18,626,530
=========== =========== =========== ===========
Diluted 19,699,815 19,519,694 19,647,073 19,506,360
=========== =========== =========== ===========
Cash dividends declared per share (4.5 cents
declared and paid for each quarter ended
March 31, June 30, and September 30, 2005;
4 cents per quarter in 2004 $ 0.045 $ 0.040 $ 0.135 $ 0.120
=========== =========== =========== ===========
RADICA GAMES LIMITED
CONSOLIDATED BALANCE SHEETS
(US dollars in thousands, except share data) September 30, December 31, September 30,
------------- ------------ -------------
2005 2004 2004
------------- ------------ -------------
(unaudited) (unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 25,858 $ 27,614 $ 20,209
Investment securities 9,874 12,456 15,761
Accounts receivable, net of allowances for doubtful
accounts of $162 ($148 as at December 31, 2004 and
$165 as at September 30, 2004) 35,602 18,359 26,036
Inventories 31,385 26,818 28,869
Prepaid expenses and other current assets 3,634 3,374 4,136
Income taxes receivable 23 168 --
Deferred income taxes 1,837 1,850 1,706
--------- --------- ---------
Total current assets 108,213 90,639 96,717
Property, plant and equipment, net 14,831 11,480 11,436
Goodwill -- 6,015 9,551
Other assets 838 854 859
Deferred income taxes, noncurrent 1,058 953 56
--------- --------- ---------
Total assets $ 124,940 $ 109,941 $ 118,619
========= ========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 16,742 $ 11,840 $ 18,518
Accrued payroll and employee benefits 3,102 1,486 1,249
Accrued expenses 7,283 5,251 6,458
Income taxes payable 1,740 287 196
--------- --------- ---------
Total current liabilities 28,867 18,864 26,421
--------- --------- ---------
Total liabilities 28,867 18,864 26,421
--------- --------- ---------
Shareholders' equity:
Common stock
par value $0.01 each, 100,000,000 shares authorized,
19,060,857 shares outstanding (18,738,112 as at
December 31, 2004 and 18,722,864 as at September 30, 2004 191 187 187
Additional paid-in capital 6,027 4,610 4,551
Retained earnings 90,396 85,909 87,502
Deferred compensation (357) -- --
Accumulated other comprehensive (loss) income (184) 371 (42)
Total shareholders' equity 96,073 91,077 92,198
--------- --------- ---------
Total liabilities and shareholders' equity $ 124,940 $ 109,941 $ 118,619
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