Richardson Electronics, Ltd. (NASDAQ: 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 ProfitFor 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 
      

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