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Radiant Systems Inc. Reports Operating Results (10-Q)
Posted by: gurufocus (IP Logged)
Date: November 5, 2010 03:19PM
Radiant Systems Inc. (RADS) filed Quarterly Report for the period ended 2010-09-30.
Highlight of Business Operations:
In the third quarter of 2010, direct operating income in the Hospitality-Americas business segment was approximately $14.3 million. This is an increase of $5.7 million, or 67%, as compared to the same period in 2009, and an increase of $1.5 million, or 12%, as compared to the second quarter of 2010. Total direct operating income in the Hospitality-Americas segment for the nine-month period ended September 30, 2010 was $38.2 million, which is an increase of $10.7 million, or 39%, over the same period in 2009. The increases are primarily attributable to increased profits from systems sales, SaaS solutions and hardware and software support and maintenance. These increases were partially offset by an increase in operating expenses, primarily sales commissions, which increased as expected in line with the overall increase in revenues.
In the third quarter of 2010, direct operating income in the International business segment was approximately $1.1 million. This is an increase of $0.4 million, or 59%, as compared to the same period in 2009, and a decrease of $1.6 million, or 60%, as compared to the second quarter of 2010. Total direct operating income in the International segment for the nine-month period ended September 30, 2010 was $4.9 million, which is an increase of $2.0 million, or 71%, over the same period in 2009. The increases from 2009 are primarily due to additional profits resulting from increased systems sales, including handhelds in the European market, and increased hardware and software support and maintenance revenues. The decrease from the second quarter of 2010 is primarily due to seasonality within our handheld business in Europe as previously explained.
Interest expense, net The Companys interest expense includes interest expense incurred on its long-term debt, revolving line of credit and capital lease obligations. Interest expense decreased by approximately $0.2 million, or 46%, in the third quarter of 2010 as compared to the same period in 2009, decreased by $0.1 million, or 20%, as compared to the second quarter of 2010, and decreased by $0.8 million, or 44%, during the nine months ended September 30, 2010 as compared to the same period in 2009. These decreases are due to continued paydown of the Companys outstanding indebtedness and a reduction in interest rates. See Note 7 to the condensed consolidated financial statements for additional discussion of the Companys credit facility. The Companys interest income is primarily earned from notes receivable. Interest income increased by approximately $0.1 million in the third quarter of 2010 as compared to the same period in 2009 and the second quarter of 2010, and increased by approximately $0.1 million during the nine months ended September 30, 2010 as compared to the same period in 2009. These increases are primarily the result of the $9.0 million promissory note received from Century at the end of the second quarter of 2010. See Note 12 to the condensed consolidated financial statements for additional discussion of this note receivable.
The WFF Credit Agreement was scheduled to expire on March 31, 2010. However, it was refinanced on January 2, 2008 upon the execution of the credit agreement with JPMorgan Chase Bank, N.A., as arranger and administrative agent, and JPMorgan Chase Bank, N.A., SunTrust Bank, Bank of America, Guaranty Bank and Wachovia Bank, N.A., as lenders (the JPM Credit Agreement). The JPM Credit Agreement provides for extensions of credit, upon satisfaction of certain conditions, in the form of revolving loans in an aggregate principal amount of up to $80 million and a term loan facility in an aggregate principal amount of up to $30 million. An amendment to the JPM Credit Agreement was signed in July 2008, whereby the Company has the right to increase its revolving credit commitment by up to $25 million, subject to the terms and conditions set forth in the JPM Credit Agreement. As of September 30, 2010, aggregate borrowings under this facility totaled $15.5 million, comprised of $15.5 million in term loan facility borrowings and no amounts outstanding under the revolving loan facility. As of September 30, 2010, revolving loan borrowings available to the Company were equal to $80.0 million.
Cash used in investing activities during the nine months ended September 30, 2009 was approximately $9.4 million. Approximately $4.2 million was used to invest in property and equipment and $2.0 million related to the purchase of a customer list related to our RPS business. The Company continued to increase its investment in future products by investing $3.3 million in internally developed capitalizable software during the first nine months of 2009. Lastly, the Company recognized cash proceeds of $0.2 million from the sale of a building located in Australia.
Cash provided by financing activities during the nine months ended September 30, 2010 was approximately $26.8 million. Financing activities included a public stock offering completed during the quarter ended September 30, 2010 of approximately 3.5 million shares of common stock at a price of $17.00 per share, resulting in net cash proceeds equal to approximately $56.5 million, after deducting discounts and commissions paid to the underwriters and other expenses incurred in conjunction with the offering. In addition, the Company received cash proceeds from a research and development note of approximately $0.1 million, the exercise of stock options by employees of approximately $13.7 million, the purchase of shares issued under the Employee Stock Purchase Plan of approximately $0.2 million and the impact of tax benefits related to stock-based compensation expense of approximately $3.9 million. Cash used in financing activities included scheduled payments under the JPM Credit Agreement of approximately $4.5 million, net payments against the revolving loan facility under the JPM Credit Agreement of approximately $42.0 million, scheduled payments against the Companys capital lease obligations of approximately $0.7 million and tax withholding payments related to the net share settlement of stock options of approximately $0.4 million.
Stocks Discussed: RADS,