RELL - Richardson Electronics Reports Third Quarter Fiscal 2020 Operating Profit and Declares Quarterly Cash Dividend

April, 08 2020 05:00 PM Richardson Electronics Ltd.

Canvys, PMG and CT Tube Revenues Grow Versus Q3 FY19

Q3 FY20 Highlights

Net sales of $38.2 million were down 2.0% from last year’s third quarter, primarily a result of lower sales in PMT from softness in the power grid tube business and the effect of the coronavirus on our China shipments. In addition, Healthcare sales were down overall due to continued lower equipment sales in Latin America.
Sales increased for PMG and Semiconductor Wafer Fabrication equipment products. Canvys sales increased by 3.5% and Healthcare CT tube revenues were up by 134.7%.
Gross margin increased to 33.1% of net sales versus 31.5% of net sales for the prior year’s third quarter due to product mix and manufacturing efficiencies.
Operating expenses decreased $0.4 million to $12.7 million compared to prior year.
Operating income was $11,000 compared to an operating loss of $0.8 million in last year’s third quarter.
Cash and investments were $43.9 million at February 29, 2020 versus $46.1 million at the end of the second quarter of this fiscal year.
Manufacturing and distribution operations considered “essential businesses” under current coronavirus shelter-in-place directives; minimal disruption to manufacturing and distribution capacity.

LAFOX, Ill., April 08, 2020 (GLOBE NEWSWIRE) -- Richardson Electronics, Ltd. (NASDAQ: RELL) today reported financial results for its third quarter ended February 29, 2020. 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 2020 decreased 2.0% to $38.2 million compared to net sales of $39.0 million in the prior year’s third quarter. Canvys sales increased by $0.3 million or 3.5% due to higher demand in its North American market. Sales of semiconductor wafer fab equipment specialty products also increased from last year’s third quarter. Although PMT sales benefited from higher sales of power conversion and RF and microwave components, overall sales for PMT decreased $0.7 million or 2.5%. This was primarily due to economic softness in the power grid tube market and lower sales in China due to the coronavirus. We experienced delays in shipments to customers in China during mandatory shelter in place orders as well as delayed receipt of goods originating in China and destined for other locations. Richardson Healthcare sales decreased $0.2 million or 11.9% as a result of lower sales of equipment in Latin America and non-core diagnostic imaging parts, partially offset by higher sales of our ALTA750™ CT tube.

Gross margin increased to $12.7 million, or 33.1% of net sales during the third quarter of fiscal 2020, compared to $12.3 million, or 31.5% of net sales during the third quarter of fiscal 2019. Margin increased as a percent of net sales primarily due to a favorable product mix and improved manufacturing efficiencies in both PMT and Richardson Healthcare.

Operating expenses were $12.7 million for the third quarter of fiscal 2020 compared to $13.1 million in the third quarter of fiscal 2019. The decrease in operating expenses resulted from lower severance, legal and professional services expenses, partially offset by higher research and development expenses for Richardson Healthcare as we invest in additional CT x-ray tube types.

As a result, the Company reported an operating income of $11,000 for the third quarter of fiscal 2020 compared to an operating loss of $0.8 million in the prior year’s third quarter. Other income for the third quarter of fiscal 2020, including interest income and foreign exchange, was $0.1 million, compared to other income of less than $0.1 million in the third quarter of fiscal 2019.

The income tax provision of $0.2 million for the third quarter of fiscal 2020 reflected a provision for foreign income taxes, which was lower than the prior year’s third quarter provision 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 2020 was $0.1 million compared to a net loss of $1.1 million in the third quarter of fiscal 2019.

“Despite the challenges caused by the coronavirus, we are pleased to see continued growth in Canvys and the power and microwave technologies group. We also saw an increase in ALTA750™ CT tube sales,” said Edward J. Richardson, Chairman, Chief Executive Officer, and President. “Given the fluid situation in the global economy, we will continue to protect our cash and closely manage operating expenses and cash flow in line with economic conditions. Currently, our manufacturing and distribution operations in LaFox, Illinois and our display operations in Marlborough, Massachusetts are considered ‘Essential Businesses’ under the states’ Shelter in Place directives. As such, we continue to operate while respecting guidelines for social distancing,” he concluded.

FINANCIAL SUMMARY – NINE MONTHS ENDED FEBRUARY 29, 2020

Net sales for the first nine months of fiscal 2020 were $118.5 million, a decrease of 4.8%, compared to net sales of $124.5 million during the first nine months of fiscal 2019. Sales decreased by $7.7 million or 7.9% for PMT, but increased by $1.7 million or 8.3% for Canvys. Sales for Richardson Healthcare were the same as last year.
Gross margin decreased to $38.3 million during the first nine months of fiscal 2020, compared to $39.2 million during the first nine months of fiscal 2019. As a percentage of net sales, gross margin increased to 32.3% of net sales during the first nine months of fiscal 2020, compared to 31.5% of net sales during the first nine months of fiscal 2019, primarily as a result of a favorable product mix in Richardson Healthcare and improved manufacturing efficiencies for both PMT and Healthcare.
Operating expenses decreased to $38.7 million for the first nine months of fiscal 2020, compared to $39.6 million for the first nine months of fiscal 2019. The decrease was due to lower severance, legal and professional services expenses, partially offset by higher research and development expenses for Richardson Healthcare in line with ongoing CT x-ray tube development.
Operating loss during the first nine months of fiscal 2020 was $0.4 million, the same as during the first nine months of fiscal 2019.
Other income for the first nine months of fiscal 2020, including interest income and foreign exchange, was $0.2 million, the same as in the first nine months of fiscal 2019.
The income tax provision of $0.4 million during the first nine months of fiscal 2020 reflected a provision for foreign income taxes, which was lower than in the prior year’s first nine months and no U.S. tax benefit due to the valuation allowance recorded against the net operating loss.
Net loss for the first nine months of fiscal 2020 was $0.6 million, compared to a net loss of $1.0 million during the first nine months of fiscal 2019.

CASH DIVIDEND AND POSITION

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 27, 2020, to common stockholders of record as of May 6, 2020.

Cash and investments at the end of the third quarter of fiscal 2020 were $43.9 million compared to $46.1 million at the end of the second quarter of fiscal 2020 and $49.4 million at the end of the third quarter of fiscal 2019. The Company spent $0.4 million during the quarter on capital expenditures primarily related to our IT System, Facilities and LaFox manufacturing business versus $1.0 million during the third quarter of fiscal 2019.

CONFERENCE CALL INFORMATION

On Thursday, April 9, 2020, 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 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) (866) 800-8648 or (International) (617) 614-2702 and enter passcode 95925021 approximately five minutes prior to the start of the call. A replay of the call will be available beginning at 10:00 a.m. CDT on April 10, 2020, for seven days. The telephone numbers for the replay are (USA) (888) 286-8010 and (International) (617) 801-6888; passcode 69273455.

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 and other reports we file with the Securities and Exchange Commission. 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


February 29, 2020


June 1, 2019
Assets







Current assets:







Cash and cash equivalents

$
30,875


$
42,019
Accounts receivable, less allowance of $194 and $339, respectively


23,074



24,296
Inventories, net


56,677



53,232
Prepaid expenses and other assets


2,910



3,067
Investments - current


13,000



8,000
Total current assets


126,536



130,614
Non-current assets:







Property, plant and equipment, net


17,999



19,111
Intangible assets, net


2,572



2,763
Lease ROU asset


3,727



—
Non-current deferred income taxes


574



529
Total non-current assets


24,872



22,403
Total assets

$
151,408


$
153,017
Liabilities and Stockholders’ Equity







Current liabilities:







Accounts payable

$
14,675


$
16,943
Accrued liabilities


11,002



11,273
Lease liability current


1,566



—
Total current liabilities


27,243



28,216
Non-current liabilities:







Non-current deferred income tax liabilities


314



212
Lease liability non-current


2,204



—
Other non-current liabilities


742



832
Total non-current liabilities


3,260



1,044
Total liabilities


30,503



29,260
Stockholders’ equity







Common stock, $0.05 par value; issued and outstanding 11,038 shares at February 29, 2020 and 10,957 shares at June 1, 2019


552



547
Class B common stock, convertible, $0.05 par value; issued and outstanding 2,097 shares at February 29, 2020 and June 1, 2019


105



105
Preferred stock, $1.00 par value, no shares issued


—



—
Additional paid-in-capital


61,593



61,012
Common stock in treasury, at cost, no shares at February 29, 2020 and June 1, 2019


—



—
Retained earnings


56,819



59,703
Accumulated other comprehensive income


1,836



2,390
Total stockholders’ equity


120,905



123,757
Total liabilities and stockholders’ equity

$
151,408


$
153,017

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





Three Months Ended


Nine Months Ended



February 29, 2020


March 2, 2019


February 29, 2020


March 2, 2019

Statements of Comprehensive Loss
















Net sales

$
38,249


$
39,018


$
118,536


$
124,489

Cost of sales


25,579



26,719



80,235



85,266

Gross profit


12,670



12,299



38,301



39,223

Selling, general and administrative expenses


12,659



13,097



38,667



39,621

Loss on disposal of assets


—



—



1



—

Operating income (loss)


11



(798
)


(367
)


(398
)
Other expense (income):
















Investment/interest income


(97
)


(155
)


(340
)


(402
)
Foreign exchange loss


28



130



117



205

Other, net


(8
)


—



(24
)


(4
)
Total other income


(77
)


(25
)


(247
)


(201
)
Income (loss) before income taxes


88



(773
)


(120
)


(197
)
Income tax provision


181



305



438



754

Net loss


(93
)


(1,078
)


(558
)


(951
)
Foreign currency translation (loss) gain, net of tax


(60
)


541



(554
)


(1,240
)
Comprehensive loss

$
(153
)

$
(537
)

$
(1,112
)

$
(2,191
)
Net loss per share
















Common shares - Basic

$
(0.01
)

$
(0.08
)

$
(0.04
)

$
(0.07
)
Class B common shares - Basic

$
(0.01
)

$
(0.08
)

$
(0.04
)

$
(0.07
)
Common shares - Diluted

$
(0.01
)

$
(0.08
)

$
(0.04
)

$
(0.07
)
Class B common shares - Diluted

$
(0.01
)

$
(0.08
)

$
(0.04
)

$
(0.07
)
Weighted average number of shares:
















Common shares – Basic


11,038



10,953



11,022



10,911

Class B common shares – Basic


2,097



2,097



2,097



2,108

Common shares – Diluted


11,038



10,953



11,022



10,911

Class B common shares – Diluted


2,097



2,097



2,097



2,108

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



February 29, 2020


March 2, 2019


February 29, 2020


March 2, 2019

Operating activities:
















Net loss

$
(93
)

$
(1,078
)

$
(558
)

$
(951
)
Adjustments to reconcile net loss to cash used in operating activities:
















Depreciation and amortization


856



794



2,514



2,350

Inventory provisions


221



203



502



568

Loss on disposal of assets


—



—



1



—

Share-based compensation expense


157



176



527



571

Deferred income taxes


76



113



51



268

Change in assets and liabilities:
















Accounts receivable


(760
)


(478
)


1,066



(576
)
Inventories


(754
)


(1,484
)


(4,173
)


(3,315
)
Prepaid expenses and other assets


(56
)


614



146



332

Accounts payable


(726
)


(1,561
)


(2,091
)


(5,442
)
Accrued liabilities


152



309



(238
)


880

Other


2



(86
)


(107
)


88

Net cash used in operating activities


(925
)


(2,478
)


(2,360
)


(5,227
)
Investing activities:
















Capital expenditures


(430
)


(974
)


(1,244
)


(3,166
)
Proceeds from maturity of investments


—



2,300



8,000



2,300

Purchases of investments


—



(12,500
)


(13,000
)


(17,800
)
Net cash used in investing activities


(430
)


(11,174
)


(6,244
)


(18,666
)
Financing activities:
















Proceeds from issuance of common stock


—



16



59



219

Cash dividends paid


(776
)


(771
)


(2,326
)


(2,305
)
Payment of financing lease principal


(46
)


—



(121
)


—

Net cash used in financing activities


(822
)


(755
)


(2,388
)


(2,086
)
Effect of exchange rate changes on cash and cash equivalents


(2
)


417



(152
)


(617
)
Decrease in cash and cash equivalents


(2,179
)


(13,990
)


(11,144
)


(26,596
)
Cash and cash equivalents at beginning of period


33,054



47,859



42,019



60,465

Cash and cash equivalents at end of period

$
30,875


$
33,869


$
30,875


$
33,869

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
















By Strategic Business Unit:
































Net Sales


















Q3 FY 2020






Q3 FY 2019


% Change

PMT

$
28,988






$
29,725



-2.5
%
Canvys


7,200







6,954



3.5
%
Healthcare


2,061







2,339



-11.9
%
Total

$
38,249






$
39,018



-2.0
%



















YTD FY 2020






YTD FY 2019


% Change

PMT

$
89,158






$
96,822



-7.9
%
Canvys


22,333







20,625



8.3
%
Healthcare


7,045







7,042



0.0
%
Total

$
118,536






$
124,489



-4.8
%



















































Gross Profit


















Q3 FY 2020


% of Net Sales


Q3 FY 2019


% of Net Sales

PMT

$
9,519



32.8
%

$
9,406



31.6
%
Canvys


2,362



32.8
%


2,281



32.8
%
Healthcare


789



38.3
%


612



26.2
%
Total

$
12,670



33.1
%

$
12,299



31.5
%



















YTD FY 2020


% of Net Sales


YTD FY 2019


% of Net Sales

PMT

$
28,547



32.0
%

$
30,520



31.5
%
Canvys


7,268



32.5
%


6,726



32.6
%
Healthcare


2,486



35.3
%


1,977



28.1
%
Total

$
38,301



32.3
%

$
39,223



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

Company Name:	Richardson Electronics Ltd.
Stock Symbol:	RELL
Market:	NASDAQ
Website:	rell.com

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