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Richardson Electronics Reports Second Quarter Fiscal 2020 Results and Declares Quarterly Cash Dividend

Display, PMG and CT Tube Businesses Grow Quarter over Quarter

Q2 FY20 Highlights

  • Net sales of $39.6 million were down 4.1% from last year’s second quarter, primarily from economic softness in the PMT power grid tube business and a slow ramp up in sales in the semiconductor wafer fab equipment business. In addition, Healthcare sales were down overall due to soft equipment sales in Latin America.
  • These declines were partially offset by significantly increased sales for our PMG products. Also, Canvys sales increased by 20.9% and Healthcare CT tube sales were up by 11.9%.
  • Gross margin increased to 32.0% of net sales versus 31.4% of net sales for the prior year’s second quarter.
  • Operating expenses decreased $0.2 million to $13.2 million compared to prior year.
  • Operating loss was $0.5 million, same as last year’s second quarter.
  • Cash and investments were $46.1 million at November 30, 2019 versus $46.5 million at the end of the first quarter of this fiscal year.

LAFOX, Ill., Jan. 08, 2020 (GLOBE NEWSWIRE) -- Richardson Electronics, Ltd. (RELL) today reported financial results for its second quarter ended November 30, 2019.  The Company also announced that its Board of Directors declared a $0.06 per share quarterly cash dividend. 

Second Quarter Results

Net sales for the second quarter of fiscal 2020 decreased 4.1% to $39.6 million compared to net sales of $41.3 million in the prior year’s second quarter. Canvys sales increased by $1.4 million or 20.9% due to higher demand in both its North American and European markets. Although PMT sales benefited from much higher sales of power conversion and RF and microwave components, overall sales for PMT decreased $2.7 million or 8.4%. This was primarily due to a soft market for power grid tubes with OEM customers and the quarter over quarter decline in sales to the semiconductor wafer fabrication equipment market. Sales in the semiconductor wafer fab market are starting to improve but were held in check due to our suppliers’ inability to deliver critical parts. Richardson Healthcare sales decreased $0.3 million or 12.6% as a result of lower sales of equipment in Latin America, partially offset by higher sales of our ALTA750 TM CT tube.

Gross margin decreased to $12.7 million, or 32.0% of net sales during the second quarter of fiscal 2020, compared to $13.0 million, or 31.4% of net sales during the second quarter of fiscal 2019.  Margin increased as a percent of net sales primarily due to a favorable product mix in Richardson Healthcare and significantly improved manufacturing overhead absorption in both PMT and Richardson Healthcare.

Operating expenses were $13.2 million for the second quarter of fiscal 2020 compared to $13.4 million in the second quarter of fiscal 2019.  The decrease in operating expenses resulted from lower severance and legal expenses, partially offset by higher research and development expenses for Richardson Healthcare.  

As a result, the Company reported an operating loss of $0.5 million for the second quarter of fiscal 2020, the same as in the prior year’s second quarter. Other expense for the second quarter of fiscal 2020, including interest income and foreign exchange, was $0.1 million, compared to other income of $0.3 million in the second quarter of fiscal 2019.

The income tax provision of $0.1 million for the second quarter of fiscal 2020 reflected a provision for foreign income taxes, which was lower than the prior year’s second quarter provision and no U.S. tax benefit due to the valuation allowance recorded against the net operating loss. 

Net loss for the second quarter of fiscal 2020 was $0.6 million compared to a net loss of $0.3 million in the second quarter of fiscal 2019.  

“We are pleased to see growth resulting from the investments we are making in our healthcare, power and microwave technologies, and display businesses,” said Edward J. Richardson, Chairman, Chief Executive Officer, and President. “We will continue to closely manage operating expenses and cash flow in line with revenue trends to ensure we maximize efficiency,” he concluded.

FINANCIAL SUMMARY – SIX MONTHS ENDED NOVEMBER 30, 2019

  • Net sales for the first six months of fiscal 2020 were $80.3 million, a decrease of 6.1%, compared to net sales of $85.5 million during the first six months of fiscal 2019. Sales decreased by $6.9 million or 10.3% for PMT, but increased by $1.5 million or 10.7% for Canvys and $0.3 million or 6.0% for Richardson Healthcare.
  • Gross margin decreased to $25.6 million during the first six months of fiscal 2020, compared to $26.9 million during the first six months of fiscal 2019. As a percentage of net sales, gross margin increased to 31.9% of net sales during the first six months of fiscal 2020, compared to 31.5% of net sales during the first six months of fiscal 2019, primarily as a result of a favorable product mix and manufacturing overhead absorption for Healthcare.
  • Operating expenses decreased to $26.0 million for the first six months of fiscal 2020, compared to $26.5 million for the first six months of fiscal 2019. The decrease was due to lower severance, legal and IT expenses.
  • Operating loss during the first six months of fiscal 2020 was $0.4 million, compared to an operating income of $0.4 million during the first six months of fiscal 2019.
  • Other income for the first six months of fiscal 2020, including interest income and foreign exchange, was $0.2 million, the same as in the first six months of fiscal 2019.
  • The income tax provision of $0.3 million during the first six months of fiscal 2020 reflected a provision for foreign income taxes, which was lower than in the prior year’s first six months and no U.S. tax benefit due to the valuation allowance recorded against the net operating loss.
  • Net loss for the first six months of fiscal 2020 was $0.5 million, compared to a net income of $0.1 million during the first six months of fiscal 2019.

CASH DIVIDEND

The Company also announced today that its Board of Directors declared a $0.06 quarterly dividend per share to holders of common stock and a $0.054 cash dividend per share to holders of Class B common stock.  The dividend will be payable on February 27, 2020, to common stockholders of record as of February 6, 2020.

Cash and investments at the end of the second quarter of fiscal 2020 were $46.1 million compared to $46.5 million at the end of the first quarter of fiscal 2020 and $53.2 million at the end of the second quarter of fiscal 2019.  The Company spent $0.5 million during the quarter on capital expenditures primarily related to our IT System and Healthcare and LaFox manufacturing businesses versus $1.1 million during the second quarter of fiscal 2019.  During the second quarter of fiscal 2020, the Company did not repurchase any shares of its common stock.  Currently, there are 11.0 million outstanding shares of common stock and 2.1 million outstanding shares of Class B common stock.

CONFERENCE CALL INFORMATION

On Thursday, January 9, 2020, at 9:00 a.m. CST, Edward J. Richardson, Chairman and Chief Executive Officer, and Robert J. Ben, Chief Financial Officer, will host a conference call to discuss the Company’s second quarter fiscal year 2020 results.  A question and answer session will be included as part of the call’s agenda.

Participant Instructions

To listen to the call, please dial (USA) (888) 339-2688 or (International) (617) 847-3007 and enter passcode 49060851 approximately five minutes prior to the start of the call.  A replay of the call will be available beginning at 10:00 a.m. CST on January 10, 2020, for seven days.  The telephone numbers for the replay are (USA) (888) 286-8010 and (International) (617) 801-6888; passcode 51370493.

FORWARD-LOOKING STATEMENTS

This release includes certain “forward-looking” statements as defined by the Securities and Exchange Commission.  Statements in this press release regarding the Company’s business which are not historical facts represent “forward-looking” statements that involve risks and uncertainties.  For a discussion of such risks and uncertainties, which could cause actual results to differ from those contained in the forward-looking statements, see Item 1A, “Risk Factors” in the Company’s Annual Report on Form 10-K filed on August 5, 2019.  The Company assumes no responsibility to update the “forward-looking” statements in this release as a result of new information, future events, or otherwise.

ABOUT RICHARDSON ELECTRONICS, LTD.

Richardson Electronics, Ltd. is a leading global provider of engineered solutions, power grid and microwave tubes and related consumables; power conversion and RF and microwave components; high value flat panel detector solutions, replacement parts, tubes and service training for diagnostic imaging equipment; and customized display solutions.  We serve customers in the alternative energy, healthcare, aviation, broadcast, communications, industrial, marine, medical, military, scientific and semiconductor markets.  The Company’s strategy is to provide specialized technical expertise and “engineered solutions” based on our core engineering and manufacturing capabilities.  The Company provides solutions and adds value through design-in support, systems integration, prototype design and manufacturing, testing, logistics, and aftermarket technical service and repair through its global infrastructure. More information is available at www.rell.com.

Richardson Electronics common stock trades on the NASDAQ Global Select Market under the ticker symbol RELL.


Richardson Electronics, Ltd.
Consolidated Balance Sheets
(in thousands, except per share amounts)

    Unaudited   Audited  
    November 30, 2019   June 1, 2019  
Assets              
Current assets:              
Cash and cash equivalents   $ 33,054   $ 42,019  
Accounts receivable, less allowance of $278 and $339, respectively     22,336     24,296  
Inventories, net     56,169     53,232  
Prepaid expenses and other assets     2,853     3,067  
Investments - current     13,000     8,000  
Total current assets     127,412     130,614  
Non-current assets:              
Property, plant and equipment, net     18,361     19,111  
Intangible assets, net     2,637     2,763  
Lease ROU asset     3,991      
Non-current deferred income taxes     575     529  
Total non-current assets     25,564     22,403  
Total assets   $ 152,976   $ 153,017  
Liabilities and Stockholders Equity              
Current liabilities:              
Accounts payable   $ 15,439   $ 16,943  
Accrued liabilities     10,836     11,273  
Lease liability current     1,628      
Total current liabilities     27,903     28,216  
Non-current liabilities:              
Non-current deferred income tax liabilities     241     212  
Lease liability non-current     2,437      
Other non-current liabilities     718     832  
Total non-current liabilities     3,396     1,044  
Total liabilities     31,299     29,260  
Stockholders equity              
Common stock, $0.05 par value; issued and outstanding 11,038 shares at     552     547  
  November 30, 2019 and 10,957 shares at June 1, 2019
Class B common stock, convertible, $0.05 par value; issued and outstanding     105     105  
  2,097 shares at November 30, 2019 and June 1, 2019
Preferred stock, $1.00 par value, no shares issued          
Additional paid-in-capital     61,436     61,012  
Common stock in treasury, at cost, no shares at November 30, 2019 and          
  June 1, 2019
Retained earnings     57,688     59,703  
Accumulated other comprehensive income     1,896     2,390  
Total stockholders equity     121,677     123,757  
Total liabilities and stockholders equity   $ 152,976   $ 153,017  
               
               

 

Richardson Electronics, Ltd.
Unaudited Consolidated Statements of Comprehensive Loss
(in thousands, except per share amounts)

    Three Months Ended   Six Months Ended  
    November 30, 2019   December 1, 2018   November 30, 2019   December 1, 2018  
Statements of Comprehensive Loss                          
Net sales   $ 39,634   $ 41,314   $ 80,287   $ 85,471  
Cost of sales     26,954     28,343     54,656     58,547  
Gross profit     12,680     12,971     25,631     26,924  
Selling, general and administrative expenses     13,161     13,425     26,008     26,524  
Loss on disposal of assets             1      
Operating (loss) income     (481 )   (454 )   (378 )   400  
Other expense (income):                          
Investment/interest income     (123 )   (121 )   (243 )   (247 )
Foreign exchange loss (gain)     199     (211 )   89     75  
Other, net     (15 )   4     (16 )   (4 )
Total other expense (income)     61     (328 )   (170 )   (176 )
(Loss) income before income taxes     (542 )   (126 )   (208 )   576  
Income tax provision     80     178     257     449  
Net (loss) income     (622 )   (304 )   (465 )   127  
Foreign currency translation gain (loss), net of tax     222     (1,041 )   (494 )   (1,781 )
Comprehensive loss   $ (400 ) $ (1,345 ) $ (959 ) $ (1,654 )
Net (loss) income per share                          
Common shares - Basic   $ (0.05 ) $ (0.02 ) $ (0.04 ) $ 0.01  
Class B common shares - Basic   $ (0.04 ) $ (0.02 ) $ (0.03 ) $ 0.01  
Common shares - Diluted   $ (0.05 ) $ (0.02 ) $ (0.04 ) $ 0.01  
Class B common shares - Diluted   $ (0.04 ) $ (0.02 ) $ (0.03 ) $ 0.01  
Weighted average number of shares:                          
Common shares – Basic     11,038     10,952     11,014     10,890  
Class B common shares – Basic     2,097     2,097     2,097     2,114  
Common shares – Diluted     11,038     10,952     11,014     11,053  
Class B common shares – Diluted     2,097     2,097     2,097     2,114  
Dividends per common share   $ 0.06   $ 0.06   $ 0.12   $ 0.12  
Dividends per Class B common share   $ 0.054   $ 0.054   $ 0.108   $ 0.108  
                           
                           

 

Richardson Electronics, Ltd.
Unaudited Consolidated Statements of Cash Flows
(in thousands)

    Three Months Ended   Six Months Ended  
    November 30, 2019   December 1, 2018   November 30, 2019   December 1, 2018  
Operating activities:                          
Net (loss) income   $ (622 ) $ (304 ) $ (465 ) $ 127  
Adjustments to reconcile net (loss) income to cash provided by (used in) operating activities:                          
Depreciation and amortization     825     792     1,658     1,556  
Inventory provisions     120     150     281     365  
Loss on disposal of assets             1      
Share-based compensation expense     182     230     370     395  
Deferred income taxes     23     97     (25 )   155  
Change in assets and liabilities:                          
Accounts receivable     (335 )   100     1,826     (98 )
Inventories     (2,062 )   (1,908 )   (3,419 )   (1,831 )
Prepaid expenses and other assets     (423 )   (319 )   202     (282 )
Accounts payable     2,590     1,538     (1,365 )   (3,881 )
Accrued liabilities     486     344     (390 )   571  
Other     (165 )   161     (109 )   174  
Net cash provided by (used in) operating activities     619     881     (1,435 )   (2,749 )
Investing activities:                          
Capital expenditures     (475 )   (1,120 )   (814 )   (2,192 )
Proceeds from maturity of investments             8,000      
Purchases of investments     (13,000 )   (3,000 )   (13,000 )   (5,300 )
Net cash used in investing activities     (13,475 )   (4,120 )   (5,814 )   (7,492 )
Financing activities:                          
Proceeds from issuance of common stock     59     11     59     203  
Cash dividends paid     (775 )   (770 )   (1,550 )   (1,534 )
Payment of financing lease principal     (45 )       (75 )    
Other     (4 )            
Net cash used in financing activities     (765 )   (759 )   (1,566 )   (1,331 )
Effect of exchange rate changes on cash and cash equivalents     218     (621 )   (150 )   (1,034 )
Decrease in cash and cash equivalents     (13,403 )   (4,619 )   (8,965 )   (12,606 )
Cash and cash equivalents at beginning of period     46,457     52,478     42,019     60,465  
Cash and cash equivalents at end of period   $ 33,054   $ 47,859   $ 33,054   $ 47,859  
                           
                           

Richardson Electronics, Ltd.
Net Sales and Gross Profit
For the Second Quarter and First Six Months of Fiscal 2020 and Fiscal 2019
($ in thousands)

By Strategic Business Unit:                        
                           
Net Sales                          
    Q2 FY 2020         Q2 FY 2019   % Change  
PMT   $ 29,603         $ 32,328     -8.4 %
Canvys     7,856           6,498     20.9 %
Healthcare     2,175           2,488     -12.6 %
Total   $ 39,634         $ 41,314     -4.1 %
                           
    YTD FY 2020         YTD FY 2019   % Change  
PMT   $ 60,170         $ 67,097     -10.3 %
Canvys     15,133           13,671     10.7 %
Healthcare     4,984           4,703     6.0 %
Total   $ 80,287         $ 85,471     -6.1 %
                           
                           
                           
Gross Profit      
    Q2 FY 2020   % of Net Sales   Q2 FY 2019   % of Net Sales  
PMT   $ 9,349     31.6 % $ 10,107     31.3 %
Canvys     2,585     32.9 %   2,132     32.8 %
Healthcare     746     34.3 %   732     29.4 %
Total   $ 12,680     32.0 % $ 12,971     31.4 %
                           
    YTD FY 2020   % of Net Sales   YTD FY 2019   % of Net Sales  
PMT   $ 19,028     31.6 % $ 21,114     31.5 %
Canvys     4,906     32.4 %   4,445     32.5 %
Healthcare     1,697     34.0 %   1,365     29.0 %
Total   $ 25,631     31.9 % $ 26,924     31.5 %
                           


For Details Contact:       40W267 Keslinger Road  
Edward J. Richardson   Robert J. Ben   PO BOX 393  
Chairman and CEO   EVP & CFO   LaFox, IL 60147-0393 USA  
Phone: (630) 208-2205   (630) 208-2203   (630) 208-2200 | Fax: (630) 208-2550