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Richardson Electronics Reports Third Quarter Fiscal 2019 Results and Declares Quarterly Cash Dividend

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

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. RichardsonRobert J. BenPO BOX 393
Chairman and CEOEVP & CFOLaFox, IL 60147-0393 USA
Phone: (630) 208-2205(630) 208-2203(630) 208-2200 | Fax: (630) 208-2550

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