Back to GetFilings.com

Table of Contents

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934

For Quarterly Period Ended September 30, 2002

Commission File Number:
0-22065

RADIANT SYSTEMS, INC.
(Exact name of registrant as specified in its charter)

_____________________________________________________________________________________________
(Former name, former address and former fiscal year, if changed since last report)

Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the past 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 o

The number of the registrant’s shares outstanding as of November 6, 2002 was 27,964,853.

Table of Contents

RADIANT SYSTEMS, INC. AND SUBSIDIARIES

FORM 10-Q

TABLE OF CONTENTS

Table of Contents

PART I. FINANCIAL INFORMATION

RADIANT SYSTEMS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)

The accompanying notes are an integral part of these condensed consolidated financial statements.

Table of Contents

RADIANT SYSTEMS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)

The accompanying notes are an integral part of these condensed consolidated financial statements.

Table of Contents

RADIANT SYSTEMS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(Unaudited)

The accompanying notes are an integral part of these condensed consolidated financial statements.

Table of Contents

RADIANT SYSTEMS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

1.       Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles applicable to interim financial statements, the general instructions of Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and notes required by generally accepted accounting principles for complete financial statements. In the opinion of Radiant Systems, Inc. (the “Company”) management, these condensed consolidated financial statements contain all adjustments (which comprise only normal and recurring accruals) necessary for fair presentation of the consolidated financial condition and results of operations for these periods. The interim results for the three and nine months ended September 30, 2002 are not necessarily indicative of the results to be expected for the full year. These statements should be read in conjunction with the Company’s consolidated financial statements as filed in its Annual Report on Form 10-K for the year ended December 31, 2001.

Certain reclassifications have been made to prior period financial statements to conform to the current period presentation.

2.       Net Income (Loss) Per Share

Basic net income (loss) per common share is computed by dividing net income (loss) by the weighted-average number of shares outstanding. Diluted net income (loss) per share includes the dilutive effect of stock options.

A reconciliation of the weighted average number of common shares outstanding assuming dilution is as follows (in thousands):

For the three and nine month periods ended September 30, 2002, options to purchase approximately 3.2 million and 2.1 million shares of common stock, respectively, were excluded from the above reconciliation, as the options were antidilutive for the periods then ended. For the three and nine month periods ended September 30, 2001, options to purchase approximately 1.1 million and 1.5 million shares of common stock, respectively, were excluded from the above reconciliation, as the options were antidilutive for the periods then ended.

Table of Contents

The Company provides enterprise technology solutions to businesses that serve the consumer. Historically, the Company’s product applications were focused on the domestic convenience store, food service, entertainment and convenient automotive service center markets, as these markets require many of the same product features and functionality. More recently, the Company has increased its operations in its international segment, with sales primarily in Europe and the Pacific Rim.

The Company’s management evaluates the performance of the segments based on an internal measure of contribution margin, or income and loss from operations, before certain allocated costs of development and corporate overhead. The Company accounts for intersegment sales and transfers as if the sales or transfers were to third parties, that is, at current market prices.

The General Retail and Other nonreportable segment includes sales to other industries the Company serves including as general retail, certain unallocated corporate operating expenses and the elimination of intersegment sales.

The summary of the Company’s operating segments is as follows (in thousands):

7

Table of Contents

Certain reclassifications have been made to prior quarter financial statements to conform to the current quarter presentation.

4.       Acquisitions

In July 2001, the Company purchased certain assets from HotelTools, Inc. (“HotelTools”), an emerging provider of enterprise software solutions for the hospitality industry including solutions to centralize all aspects of multi-property hotel operations, including hotel management, rate management, reservations and procurement. The transaction included the purchase of certain intellectual property rights, fixed assets and pending patents. The purchase price consisted of $1.8 million in cash and assumption of net liabilities of approximately $1.0 million. Total consideration, including approximately $100,000 in transaction costs, was $2.9 million. Intangibles of approximately $2.4 million were recorded, which are being amortized over two to five years (See Note 6). In addition, the Company hired approximately 30 former employees of HotelTools. The pro forma effects of these transactions are immaterial for the three-month and nine-month periods ended September 30, 2002 and 2001.

In May 2001, the Company acquired all the common stock of Breeze Software Proprietary Limited (“Breeze”), a leading provider of software applications for retailers in the Australian and Asia-Pacific marketplaces. The purchase price consisted of $1.7 million in cash and assumption of net liabilities of approximately $700,000. Total consideration, including approximately $400,000 in transaction costs, was $2.8 million. Goodwill of approximately $2.8 million was recorded, which prior to January 1, 2002 was being amortized over seven years (See Note 6). The Company is obligated to pay additional consideration of cash and stock if certain earnings milestones are obtained through 2004. During the fourth quarter of 2001, specified earnings milestones were obtained for the period from the purchase date through December 31, 2001 and the Company paid additional consideration of 25,000 shares of common stock for a total additional consideration of $287,500, which was allocated to goodwill. In the second quarter of 2002, certain additional specified earnings milestones were obtained for the period from the purchase date through June 30, 2002 and the Company paid additional consideration of approximately 135,000 shares of common stock for a total additional consideration of $1.8 million, which was allocated

Table of Contents

5.       Significant Events

On June 30, 2001 the Company and Yum! Brands, Inc. (“Yum! Brands”), formerly Tricon Restaurant Services Group, Inc. signed a contract evidencing a multi-year arrangement to implement the Company’s Enterprise Productivity Software exclusively in Yum! Brands’ company-owned restaurants around the world. Yum! Brands’ franchisees will also be able to subscribe to the software under the same terms as the company-owned restaurants. As part of this agreement, the Company agreed to purchase from Yum! Brands its source code and object code for certain back office software previously developed by Yum! Brands for $20.0 million, $16.5 million of which is payable in specified annual installments through December 31, 2003. The remaining $3.5 million is payable on a pro rata basis based upon Yum! Brands’ acceptance and rollout of the Enterprise Productivity Software and fulfillment of its total target client store commitment beginning in 2002 and ending in 2004. To date, the Company has paid Yum! Brands $8.0 million as its first two payments for the purchase of the Yum! Brands back office software, and capitalized approximately $1.1 million in personnel costs associated with professional services for which associated revenues of approximately $2.8 million have been deferred. The remaining specified annual installment payments due are as follows (in thousands):

In January 2002, the Company paid Yum! Brands $5.3 million as its second installment which became due on December 31, 2001. Yum! Brands waived all penalties and additional interest expense due to the late payment of the installment. The annual installment payments are partially secured by an irrevocable letter of credit secured by the Company’s accounts receivable.

Costs associated with the purchase of this asset, costs of professional services work performed, as well as cash received by the Company, will be deferred and recognized over the five-year subscription term of the contract beginning upon installation of the Enterprise Productivity Software at each site.

On January 23 and 26, 2001, respectively, the Company announced the permanent closure of its facilities in Hillsboro, Oregon and Pleasanton, California. The decision was made to reduce costs and consolidate operations at the Company’s headquarters in Alpharetta, Georgia. The Hillsboro office had served primarily as a sales office for the Company’s small business food service products, while the Pleasanton office had served primarily as a sales office for hospitality and food service products. The office closure costs related to these two offices are comprised primarily of severance benefits and lease reserves. As part of the closings, the Company terminated 25 of the 34 employees. As a result, the Company recorded a non-recurring charge of approximately $1.0 million associated with this action during its first quarter of 2001. At September 30, 2002, the Company had no remaining liabilities related to the exit costs.

On March 3, 2000, the Company entered into an agreement with America Online, Inc. and its subsidiary Moviefone, Inc. (collectively “AOL”), whereby AOL agreed, among other items, to invest $25.0 million in a to-be-formed subsidiary of the Company to engage in consumer interactive businesses other than in the entertainment industry (e.g., interactive fuel and dispenser business and interactive restaurant self-ordering business), with any amount not invested by AOL to be callable by the Company into common shares of the Company. On March 19, 2001, the Company and AOL amended this relationship. Based

Table of Contents