LAFOX, Ill., April 09, 2019 (GLOBE NEWSWIRE) -- Richardson Electronics, Ltd. (NASDAQ: RELL) today reported financial results for its third quarter ended March 2, 2019. The Company also announced that its Board of Directors declared a $0.06 per share quarterly cash dividend.
Third Quarter Results
Net sales for the third quarter of fiscal 2019 decreased 6.3% to $39.0 million compared to net sales of $41.6 million in the prior year’s third quarter. Sales decreased $2.1 million for PMT and $0.6 million for Canvys. PMT sales were lower due to the continued slowdown in the semi-wafer fab equipment market, partially offset by higher sales in its PMG business including power conversion and RF and microwave components. Sales decreased $0.6 million for Canvys due to lower overall demand across Europe and the impact of several large one-time shipments in the third quarter last year. Sales increased $0.1 million or 6.8% for Richardson Healthcare as a result of higher equipment sales. The majority of Toshiba CT systems sold in the quarter included an ALTA750™ Tube at a premium price.
Gross margin decreased to $12.3 million, or 31.5% of net sales during the third quarter of fiscal 2019, compared to $14.1 million, or 33.8% of net sales during the third quarter of fiscal 2018. Margin decreased as a percent of net sales primarily due to a less favorable product mix, including a higher percentage of power conversion and RF and microwave components and pre-owned CT scanners, as well as higher costs related to CT Tube production.
Operating expenses were $13.1 million for both the third quarter of fiscal 2019 and the third quarter of fiscal 2018. During the third quarter of fiscal 2019, the Company incurred $0.1 million of severance expense related to actions taken to reduce costs and $0.2 million in higher legal expenses. These expenses were offset by lower incentive compensation expense. It is anticipated that the reduction in headcount during the first nine months of fiscal 2019 will result in $1.6 million in annualized savings in cost of sales and operating expenses combined.
The Company reported an operating loss of $0.8 million for the third quarter of fiscal 2019 compared to operating income of $1.0 million in the prior year’s third quarter. Excluding the severance expense and higher legal fees, the Company would have reported a $0.4 million operating loss for the third quarter of fiscal 2019.
Other income, including interest income and foreign exchange, was less than $0.1 million for both the third quarter of fiscal 2019 and the third quarter of fiscal 2018.
The income tax provision of $0.3 million for the third quarter of fiscal 2019 reflected a provision for foreign income taxes and no U.S. tax benefit due to the valuation allowance recorded against the net operating loss. The tax provision of $0.5 million in last year’s third quarter included a provision for foreign income taxes, adjustments from foreign income tax returns and no U.S. tax benefit due to the valuation allowance recorded against the net operating loss.
Net loss for the third quarter of fiscal 2019 was $1.1 million, compared to a net income of $0.5 million in the third quarter of fiscal 2018.
“Going into the third quarter we knew the comparison to prior year would be more challenging given the quarter over quarter decline in the semi-fab wafer equipment business. However, our net sales for the first nine months of fiscal 2019 were 5.7% higher than the last fiscal year’s first nine months, which included an extra week of sales” said Edward J. Richardson, Chairman, Chief Executive Officer, and President. “We are optimistic about continued sales growth in PMT associated with our investments in new power and microwave technologies. Market penetration for our ALTA750™ CT Tube is slower than anticipated, but we are assured by healthcare customers throughout the world that the demand is there. We are the only Company focused on the aftermarket. It is how we built the Company and we believe growth will increase on a perpetual basis,” Mr. Richardson concluded.
FINANCIAL SUMMARY – NINE MONTHS ENDED MARCH 2, 2019
- Net sales for the first nine months of fiscal 2019 were $124.5 million, an increase of 5.7%, compared to net sales of $117.7 million during the first nine months of fiscal 2018. There were 39 weeks in the first nine months of fiscal 2019 compared to 40 weeks in last year’s first nine months. Sales increased by $5.8 million for PMT, $0.6 million for Canvys and $0.4 million for Richardson Healthcare.
- Gross margin decreased to $39.2 million during the first nine months of fiscal 2019, compared to $39.6 million during the first nine months of fiscal 2018. As a percentage of net sales, gross margin decreased to 31.5% of net sales during the first nine months of fiscal 2019, compared to 33.6% of net sales during the first nine months of fiscal 2018, primarily as a result of a less favorable product mix and unfavorable manufacturing variances.
- Operating expenses increased to $39.6 million for the first nine months of fiscal 2019, compared to $38.0 million for the first nine months of fiscal 2018. The increase was due to additional incentive compensation and other expenses related to the increase in net sales, severance expense and higher legal expenses. Operating expenses as a percent of net sales without the severance expense and the higher legal expenses decreased to 31.1% in the first nine months of fiscal 2019 from 32.3% in last year’s first nine months.
- Operating loss during the first nine months of fiscal 2019 was $0.4 million, compared to an operating income of $1.8 million during the first nine months of fiscal 2018, which included a $0.2 million gain on the sale of a building. Excluding the severance expense and higher legal fees in the second and third quarters, the Company would have reported an operating income of $0.5 million for the first nine months of fiscal 2019.
- Other income for the first nine months of fiscal 2019, including interest income and foreign exchange, was $0.2 million, compared to other expense of $0.1 million for the first nine months of fiscal 2018.
- The income tax provision of $0.8 million during the first nine months of fiscal 2019 reflected a provision for foreign income taxes and no U.S. tax benefit due to the valuation allowance recorded against the net operating loss. The tax provision of $1.1 million in the first nine months of fiscal 2018 included a provision for foreign income taxes, additional tax due from an audit in Germany and no U.S. tax benefit due to the valuation allowance recorded against the net operating loss.
- Loss from continuing operations for the first nine months of fiscal 2019 was $1.0 million, compared to income from continuing operations of $0.6 million in the first nine months of fiscal 2018. Excluding the severance and higher legal costs in the second and third quarters of fiscal 2019, loss from continuing operations would have been less than $0.1 million. In addition, during the second quarter of fiscal 2018, the Company received an income tax refund from the State of Illinois, inclusive of interest and net of professional fees, of $1.5 million. This refund was a result of the conclusion of the Illinois amended return related to the sale of RFPD in 2011 and was therefore, classified as income from discontinued operations.
- Net loss for the first nine months of fiscal 2019 was $1.0 million, compared to a net income of $2.1 million during the first nine months of fiscal 2018.
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 May 24, 2019, to common stockholders of record as of May 8, 2019.
Cash and investments at the end of the third quarter of fiscal 2019 were $49.4 million compared to $53.2 million at the end of the second quarter of fiscal 2019 and $60.1 million at the end of the third quarter of fiscal 2018. The Company spent $1.0 million during the quarter on capital expenditures primarily relating to equipment for Richardson Healthcare and LaFox manufacturing versus $1.5 million during the third quarter of fiscal 2018. Recently, the Board of Directors authorized the reactivation of its share buyback program, up to $9.4 million, to return more value to investors. During the third quarter of fiscal 2019, 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 Wednesday, April 10, 2019, at 9:00 a.m. CDT, 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 third quarter results for fiscal year 2019. A question and answer session will be included as part of the call’s agenda. The entry link to join the conference on your computer: http://ems8.intellor.com/login/814035 and then dial into the conference: 1-877-369-5230 or for International calls 1-617-668-3632; Access Code: 0530219##. A replay of the call will be available beginning at 10:00 a.m. CDT on April 11, 2019, for seven days. The toll-free telephone number for the replay is (844) 399-9561 and International replay is 302-721-6879. If you need technical assistance, please call the AT&T Help Desk at 1-888-796-6118 or 1-847-562-7015.
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 2, 2018. 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 | |||||||
| March 2, 2019 | June 2, 2018 | |||||||
| Assets | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | 33,869 | $ | 60,465 | ||||
| Accounts receivable, less allowance of $422 and $309, respectively | 23,102 | 22,892 | ||||||
| Inventories, net | 53,094 | 50,720 | ||||||
| Prepaid expenses and other assets | 3,365 | 3,747 | ||||||
| Investments - current | 15,500 | — | ||||||
| Total current assets | 128,930 | 137,824 | ||||||
| Non-current assets: | ||||||||
| Property, plant and equipment, net | 19,316 | 18,232 | ||||||
| Goodwill | 6,332 | 6,332 | ||||||
| Intangible assets, net | 2,829 | 3,014 | ||||||
| Non-current deferred income taxes | 641 | 927 | ||||||
| Total non-current assets | 29,118 | 28,505 | ||||||
| Total assets | $ | 158,048 | $ | 166,329 | ||||
| Liabilities and Stockholders’ Equity | ||||||||
| Current liabilities: | ||||||||
| Accounts payable | $ | 14,052 | $ | 19,603 | ||||
| Accrued liabilities | 11,292 | 10,343 | ||||||
| Total current liabilities | 25,344 | 29,946 | ||||||
| Non-current liabilities: | ||||||||
| Non-current deferred income tax liabilities | 281 | 281 | ||||||
| Other non-current liabilities | 948 | 921 | ||||||
| Total non-current liabilities | 1,229 | 1,202 | ||||||
| Total liabilities | 26,573 | 31,148 | ||||||
| Stockholders’ equity | ||||||||
| Common stock, $0.05 par value; issued and outstanding 10,956 shares at March 2, 2019 and 10,806 shares at June 2, 2018 | 547 | 540 | ||||||
| Class B common stock, convertible, $0.05 par value; issued and outstanding 2,097
shares at March 2, 2019 and 2,137 shares at June 2, 2018 | 105 | 107 | ||||||
| Preferred stock, $1.00 par value, no shares issued | — | — | ||||||
| Additional paid-in-capital | 60,846 | 60,061 | ||||||
| Common stock in treasury, at cost, no shares at March 2, 2019 and June 2, 2018 | — | — | ||||||
| Retained earnings | 66,851 | 70,107 | ||||||
| Accumulated other comprehensive income | 3,126 | 4,366 | ||||||
| Total stockholders’ equity | 131,475 | 135,181 | ||||||
| Total liabilities and stockholders’ equity | $ | 158,048 | $ | 166,329 | ||||
Richardson Electronics, Ltd.
Unaudited Consolidated Statements of Comprehensive (Loss) Income
(in thousands, except per share amounts)
| Three Months Ended | Nine Months Ended | |||||||||||||||
| March 2,
2019 | March 3,
2018 | March 2,
2019 | March 3,
2018 | |||||||||||||
| Statements of Comprehensive (Loss) Income | ||||||||||||||||
| Net sales | $ | 39,018 | $ | 41,645 | $ | 124,489 | $ | 117,722 | ||||||||
| Cost of sales | 26,719 | 27,578 | 85,266 | 78,133 | ||||||||||||
| Gross profit | 12,299 | 14,067 | 39,223 | 39,589 | ||||||||||||
| Selling, general and administrative expenses | 13,097 | 13,097 | 39,621 | 38,023 | ||||||||||||
| Loss (gain) on disposal of assets | — | 3 | — | (188 | ) | |||||||||||
| Operating (loss) income | (798 | ) | 967 | (398 | ) | 1,754 | ||||||||||
| Other (income) expense: | ||||||||||||||||
| Investment/interest income | (155 | ) | (208 | ) | (402 | ) | (378 | ) | ||||||||
| Foreign exchange loss | 130 | 159 | 205 | 475 | ||||||||||||
| Other, net | — | 1 | (4 | ) | (14 | ) | ||||||||||
| Total other (income) expense | (25 | ) | (48 | ) | (201 | ) | 83 | |||||||||
| (Loss) income from continuing operations before income taxes | (773 | ) | 1,015 | (197 | ) | 1,671 | ||||||||||
| Income tax provision | 305 | 488 | 754 | 1,084 | ||||||||||||
| (Loss) income from continuing operations | (1,078 | ) | 527 | (951 | ) | 587 | ||||||||||
| Income from discontinued operations | — | — | — | 1,496 | ||||||||||||
| Net (loss) income | (1,078 | ) | 527 | (951 | ) | 2,083 | ||||||||||
| Foreign currency translation gain (loss), net of tax | 541 | 1,646 | (1,240 | ) | 3,997 | |||||||||||
| Fair value adjustments on investments loss | — | (164 | ) | — | (130 | ) | ||||||||||
| Comprehensive (loss) income | $ | (537 | ) | $ | 2,009 | $ | (2,191 | ) | $ | 5,950 | ||||||
| Net (loss) income per Common share - Basic: | ||||||||||||||||
| (Loss) income from continuing operations | $ | (0.08 | ) | $ | 0.04 | $ | (0.07 | ) | $ | 0.05 | ||||||
| Income from discontinued operations | — | — | — | 0.12 | ||||||||||||
| Total net (loss) income per Common share - Basic | $ | (0.08 | ) | $ | 0.04 | $ | (0.07 | ) | $ | 0.17 | ||||||
| Net (loss) income per Class B common share - Basic: | ||||||||||||||||
| (Loss) income from continuing operations | $ | (0.08 | ) | $ | 0.04 | $ | (0.07 | ) | $ | 0.04 | ||||||
| Income from discontinued operations | — | — | — | 0.11 | ||||||||||||
| Total net (loss) income per Class B common share - Basic | $ | (0.08 | ) | $ | 0.04 | $ | (0.07 | ) | $ | 0.15 | ||||||
| Net (loss) income per Common share - Diluted: | ||||||||||||||||
| (Loss) income from continuing operations | $ | (0.08 | ) | $ | 0.04 | $ | (0.07 | ) | $ | 0.05 | ||||||
| Income from discontinued operations | — | — | — | 0.12 | ||||||||||||
| Total net (loss) income per Common share - Diluted | $ | (0.08 | ) | $ | 0.04 | $ | (0.07 | ) | $ | 0.17 | ||||||
| Net (loss) income per Class B common share - Diluted: | ||||||||||||||||
| (Loss) income from continuing operations | $ | (0.08 | ) | $ | 0.04 | $ | (0.07 | ) | $ | 0.04 | ||||||
| Income from discontinued operations | — | — | — | 0.11 | ||||||||||||
| Total net (loss) income per Class B common share - Diluted | $ | (0.08 | ) | $ | 0.04 | $ | (0.07 | ) | $ | 0.15 | ||||||
| Weighted average number of shares: | ||||||||||||||||
| Common shares – Basic | 10,953 | 10,792 | 10,911 | 10,753 | ||||||||||||
| Class B common shares – Basic | 2,097 | 2,137 | 2,108 | 2,137 | ||||||||||||
| Common shares – Diluted | 10,953 | 10,872 | 10,911 | 10,793 | ||||||||||||
| Class B common shares – Diluted | 2,097 | 2,137 | 2,108 | 2,137 | ||||||||||||
| Dividends per common share | $ | 0.060 | $ | 0.060 | $ | 0.180 | $ | 0.180 | ||||||||
| Dividends per Class B common share | $ | 0.054 | $ | 0.054 | $ | 0.162 | $ | 0.162 | ||||||||
Richardson Electronics, Ltd.
Unaudited Consolidated Statements of Cash Flows
(in thousands)
| Three Months Ended | Nine Months Ended | |||||||||||||||
| March 2,
2019 | March 3,
2018 | March 2,
2019 | March 3,
2018 | |||||||||||||
| Operating activities: | ||||||||||||||||
| Net (loss) income | $ | (1,078 | ) | $ | 527 | $ | (951 | ) | $ | 2,083 | ||||||
| Adjustments to reconcile net (loss) income to cash (used in) provided by operating activities: | ||||||||||||||||
| Depreciation and amortization | 794 | 752 | 2,350 | 2,219 | ||||||||||||
| Inventory provisions | 203 | 183 | 568 | 470 | ||||||||||||
| Gain on sale of investments | — | (159 | ) | — | (183 | ) | ||||||||||
| Loss (gain) on disposal of assets | — | 3 | — | (188 | ) | |||||||||||
| Share-based compensation expense | 176 | 116 | 571 | 425 | ||||||||||||
| Deferred income taxes | 113 | 124 | 268 | 186 | ||||||||||||
| Change in assets and liabilities: | ||||||||||||||||
| Accounts receivable | (478 | ) | (551 | ) | (576 | ) | (239 | ) | ||||||||
| Inventories | (1,484 | ) | (598 | ) | (3,315 | ) | (5,232 | ) | ||||||||
| Prepaid expenses and other assets | 614 | 43 | 332 | (572 | ) | |||||||||||
| Accounts payable | (1,561 | ) | 552 | (5,442 | ) | (446 | ) | |||||||||
| Accrued liabilities | 309 | 1,116 | 880 | 1,325 | ||||||||||||
| Other | (86 | ) | (137 | ) | 88 | (140 | ) | |||||||||
| Net cash (used in) provided by operating activities | (2,478 | ) | 1,971 | (5,227 | ) | (292 | ) | |||||||||
| Investing activities: | ||||||||||||||||
| Capital expenditures | (974 | ) | (1,461 | ) | (3,166 | ) | (4,196 | ) | ||||||||
| Proceeds from sale of assets | — | — | — | 276 | ||||||||||||
| Proceeds from maturity of investments | 2,300 | 3,943 | 2,300 | 12,120 | ||||||||||||
| Purchases of investments | (12,500 | ) | — | (17,800 | ) | (3,943 | ) | |||||||||
| Proceeds from sales of available-for-sale securities | — | 648 | — | 913 | ||||||||||||
| Purchases of available-for-sale securities | — | — | — | (265 | ) | |||||||||||
| Other | — | (2 | ) | — | (7 | ) | ||||||||||
| Net cash (used in) provided by investing activities | (11,174 | ) | 3,128 | (18,666 | ) | 4,898 | ||||||||||
| Financing activities: | ||||||||||||||||
| Proceeds from issuance of common stock | 16 | 44 | 219 | 44 | ||||||||||||
| Cash dividends paid | (771 | ) | (763 | ) | (2,305 | ) | (2,284 | ) | ||||||||
| Net cash used in financing activities | (755 | ) | (719 | ) | (2,086 | ) | (2,240 | ) | ||||||||
| Effect of exchange rate changes on cash and cash equivalents | 417 | 1,049 | (617 | ) | 2,189 | |||||||||||
| (Decrease) increase in cash and cash equivalents | (13,990 | ) | 5,429 | (26,596 | ) | 4,555 | ||||||||||
| Cash and cash equivalents at beginning of period | 47,859 | 54,453 | 60,465 | 55,327 | ||||||||||||
| Cash and cash equivalents at end of period | $ | 33,869 | $ | 59,882 | $ | 33,869 | $ | 59,882 | ||||||||
| Richardson Electronics, Ltd. | ||||||||||||||
| Net Sales and Gross Profit | ||||||||||||||
| For the Third Quarter and First Nine Months of Fiscal 2019 and Fiscal 2018 | ||||||||||||||
| ($ in thousands) | ||||||||||||||
| By Strategic Business Unit: | ||||||||||||||
| Net Sales | ||||||||||||||
| Q3 FY 2019 | Q3 FY 2018 | % Change | ||||||||||||
| PMT | $ | 29,725 | $ | 31,869 | -6.7 | % | ||||||||
| Canvys | 6,954 | 7,585 | -8.3 | % | ||||||||||
| Healthcare | 2,339 | 2,191 | 6.8 | % | ||||||||||
| Total | $ | 39,018 | $ | 41,645 | -6.3 | % | ||||||||
| YTD FY 2019 | YTD FY 2018 | % Change | ||||||||||||
| PMT | $ | 96,822 | $ | 91,056 | 6.3 | % | ||||||||
| Canvys | 20,625 | 20,057 | 2.8 | % | ||||||||||
| Healthcare | 7,042 | 6,609 | 6.6 | % | ||||||||||
| Total | $ | 124,489 | $ | 117,722 | 5.7 | % | ||||||||
| Gross Profit | ||||||||||||||
| Q3 FY 2019 | % of Net Sales | Q3 FY 2018 | % of Net Sales | |||||||||||
| PMT | $ | 9,406 | 31.6 | % | $ | 10,656 | 33.4 | % | ||||||
| Canvys | 2,281 | 32.8 | % | 2,571 | 33.9 | % | ||||||||
| Healthcare | 612 | 26.2 | % | 840 | 38.3 | % | ||||||||
| Total | $ | 12,299 | 31.5 | % | $ | 14,067 | 33.8 | % | ||||||
| YTD FY 2019 | % of Net Sales | YTD FY 2018 | % of Net Sales | |||||||||||
| PMT | $ | 30,520 | 31.5 | % | $ | 30,492 | 33.5 | % | ||||||
| Canvys | 6,726 | 32.6 | % | 6,245 | 31.1 | % | ||||||||
| Healthcare | 1,977 | 28.1 | % | 2,852 | 43.2 | % | ||||||||
| Total | $ | 39,223 | 31.5 | % | $ | 39,589 | 33.6 | % | ||||||
| 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 |
