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Wed, Apr 09, 2008 6:28 PM
Richardson Electronics Reports Third Quarter Fiscal 2008 Results and Declares Cash Dividend
Richardson Electronics, Ltd. (NASDAQ: RELL), a global provider of engineered solutions, today reported its results for the third quarter ended March 1, 2008. Net sales for the third quarter of fiscal 2008 were $138.9 million, up 3.7% from $133.9 million during the third quarter of fiscal 2007. Gross profit, which includes a significant inventory write-down primarily due to changes in business focus within the Display Systems Group, declined to $31.2 million during the third quarter of fiscal 2008 compared with $32.1 million during the third quarter of fiscal 2007. Net loss was $2.2 million during the third quarter of fiscal 2008, or $0.12 per diluted common share, as compared to net income of $1.0 million, or $0.06 per diluted common share, in the third quarter of fiscal 2007.
“Our sales growth during the quarter represents growth in all three of our core businesses,” said Edward J. Richardson, Chairman, Chief Executive Officer and President of Richardson Electronics, Ltd. “Excluding several significant items, on a non-GAAP basis, gross margin as a percentage of net sales improved by 0.5% while operating income during the third quarter improved to $3.5 million, compared to $1.4 million during the third quarter of fiscal 2007.”
“We have made significant changes to reduce the fixed costs within the Display Systems Group during the third quarter. There were more than 30 positions eliminated in the Display Systems Group that we expect will result in annual cost savings of over $3 million. In addition, we are aggressively addressing our challenges and taking advantage of other opportunities to improve the overall financial condition of our company. We are undertaking a realignment of our support structure that we believe will reduce our cost base and help us create a stronger company positioned to deliver sustainable, long-term growth and value for our shareholders,” added Mr. Richardson.
FINANCIAL HIGHLIGHTS ─ THREE MONTHS ENDED MARCH 1, 2008
Cash flows used in operating activities were $0.4 million during the third quarter of fiscal 2008 while cash flows used in operating activities were $5.6 million during the third quarter of fiscal 2007.
Net sales for the RF, Wireless & Power Division, the Electron Device Group, and the Display Systems Group increased 4.7%, 1.8%, and 0.1%, respectively, during the third quarter of fiscal 2008 compared to the third quarter of fiscal 2007.
Gross margin percentage for the RF, Wireless & Power Division, the Electron Device Group, and the Display Systems Group decreased by 0.6%, 0.4%, and 10.1%, respectively, during the third quarter of fiscal 2008 compared to the third quarter of fiscal 2007.
Operating loss during the third quarter of fiscal 2008 was $0.7 million compared to operating income of $3.8 million generated during the third quarter of fiscal 2007.
Net loss during the third quarter of fiscal 2008 was $2.2 million compared to net income of $1.0 million generated during the third quarter of fiscal 2007.
FINANCIAL HIGHLIGHTS ─ NINE MONTHS ENDED MARCH 1, 2008
Cash flows provided by operating activities were $8.3 million during the first nine months of fiscal 2008 while cash flows used in operating activities were $8.8 million during the first nine months of fiscal 2007.
Net sales for the RF, Wireless & Power Division and the Electron Device Group increased 1.0% and 3.0%, respectively, during the first nine months of fiscal 2008 compared to the first nine months of fiscal 2007. Net sales for the Display Systems Group decreased 4.7% during the first nine months of fiscal 2008 compared to the first nine months of fiscal 2007.
Gross margin percentage for the RF, Wireless & Power Division, the Electron Device Group, and the Display Systems Group decreased by 0.2%, 0.3%, and 4.3%, respectively, during the first nine months of fiscal 2008 compared to the first nine months of fiscal 2007.
Operating income generated during the first nine months of fiscal 2008 was $4.4 million compared to operating income of $9.9 million generated during the first nine months of fiscal 2007.
Net loss during the first nine months of fiscal 2008 was $3.2 million compared to net income of $1.0 million generated during the first nine months of fiscal 2007.
IMPROVED WORKING CAPITAL MANAGEMENT AND CASH FLOWS
Cash and cash equivalents were $30.5 million at March 1, 2008, as compared to $17.4 million at June 2, 2007. The increase in overall cash and cash equivalents during the first nine months of fiscal 2008 reflects $9.6 million of cash provided from improved working capital management. This is a $25.9 million improvement compared to cash used by working capital of $16.3 million during the first nine months of fiscal 2007.
Total debt less cash as of March 1, 2008, was $35.1 million, compared to $42.1 million as of June 2, 2007.
“Our improved cash flow reflects the progress we are making in re-negotiating better terms with our suppliers, accelerating cash collections, and increasing our focus on inventory management,” said Kathleen S. Dvorak, Executive Vice President and Chief Financial Officer.
NON-GAAP FINANCIAL INFORMATION
Richardson Electronics, Ltd.
Unaudited Gross Profit, SG&A Expense, and Operating Income / (Loss) Reconciliations
(In millions)
Three Months Ended Three Months Ended
March 1, 2008 March 3, 2007
Percent Percent
Amount of Net Sales Amount of Net Sales
GAAP Gross Profit, as reported $ 31.2 22.5 % $ 32.1 24.0 %
Adjustments:
Inventory write-downs 2.8 2.0 % - -
Adjusted Gross Profit $ 34.0 24.5 % $ 32.1 24.0 %
GAAP SG&A Expense, as reported $ 32.0 23.1 % $ 30.7 23.0 %
Adjustments:
Severance expense 1.5 1.1 % - -
Adjusted SG&A Expense $ 30.5 22.0 % $ 30.7 23.0 %
GAAP Operating Income/(Loss), as reported $ (0.7 ) (0.5 %) $ 3.8 2.8 %
Adjustments:
Inventory write-downs 2.8 2.0 % - -
Severance expense 1.5 1.1 % - -
Less gain on disposal of assets 0.1 - 2.4 1.8 %
Adjusted Operating Income $ 3.5 2.5 % $ 1.4 1.0 %
In addition to disclosing results that are determined in accordance with Generally Accepted Accounting Principles (“GAAP”), the company provides certain non-GAAP financial information relating to charges that the company believes impacts the comparability of its results of operations.
The company believes that such non-GAAP financial information is useful to investors to assist in assessing and understanding the company’s operating performance and underlying trends in the company’s business because management considers these charges and credits to be outside the company’s core operating results.
OUTLOOK
“While the outlook for the economy remains uncertain, we continue to make progress on several key initiatives and expect to improve our financial performance over the next several quarters. Our disciplined focus on reducing our fixed costs and improving working capital efficiency should help us continue to improve our overall cash flows,” said Ms. Dvorak.
“We look forward to delivering improved operating performance, continued sales growth, and creating value for our shareholders,” added Mr. Richardson.
CASH DIVIDEND
The Company today also announced that its Board of Directors voted to declare a $0.02 cash dividend per share to all holders of common stock and a $0.018 cash dividend per share to all holders of Class B common stock. The dividend will be payable on May 23, 2008, to all common stockholders of record on May 9, 2008. The Company currently has 14,816,914 outstanding shares of common stock and 3,048,258 outstanding shares of Class B common stock.
CONFERENCE CALL INFORMATION
On Thursday, April 10, 2008, at 9:00 a.m. CT, Edward J. Richardson; Chairman and Chief Executive Officer, and Kathleen S. Dvorak; Chief Financial Officer, will host a conference call to discuss the Company’s third quarter results. A question and answer session will be included as part of the call's agenda. To listen to the call, please dial 888-481-7939 and enter passcode 17692794 approximately five minutes prior to the start of the call. A replay of the call will be available beginning at 11:00 a.m. CT on April 10, 2008, for seven days. The telephone numbers for the replay are (USA) 888-286-8010 and (International) 617-801-6888; access code 68949466.
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 for the most recently ended fiscal year. 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 global provider of “Engineered Solutions,” serving the RF, Wireless & Power Conversion; Electron Device; and Display Systems markets. The Company delivers engineered solutions for its customers’ needs through product manufacturing, systems integration, prototype design and manufacture, testing and logistics. Press announcements and other information about Richardson are available at www.rell.com.
Richardson Electronics, Ltd.’s common stock trades on the NASDAQ Global Market under the ticker symbol RELL.
Richardson Electronics, Ltd.
Unaudited Condensed Consolidated Statements of Operations
(in thousands, except per share amounts)
Three Months Ended Nine Months Ended
March 1, March 3, March 1, March 3,
Statements of Operations 2008 2007 2008 2007
Net sales $ 138,866 $ 133,894 $ 413,316 $ 411,045
Cost of sales 107,625 101,780 315,637 311,545
Gross profit 31,241 32,114 97,679 99,500
Selling, general, and administrative expenses 32,029 30,739 93,312 91,747
Gain on disposal of assets (81 ) (2,418 ) (70 ) (2,098 )
Operating income (loss) (707 ) 3,793 4,437 9,851
Other (income) expense:
Interest expense 1,371 1,169 5,615 4,211
Investment (income) loss 45 (71 ) (571 ) (885 )
Foreign exchange (gain) loss (249 ) 127 1,552 281
Retirement of long-term debt expenses - - - 2,540
Other, net 25 (11 ) 33 2
Total other expense 1,192 1,214 6,629 6,149
Income (loss) from continuing operations before income taxes (1,899 ) 2,579 (2,192 ) 3,702
Income tax provision 267 1,055 1,045 1,656
Income (loss) from continuing operations (2,166 ) 1,524 (3,237 ) 2,046
Income (loss) from discontinued operations, net of tax (10 ) (487 ) 45 (1,026 )
Net income (loss) $ (2,176 ) $ 1,037 $ (3,192 ) $ 1,020
Net income (loss) per common share – basic:
Income (loss) from continuing operations $ (0.12 ) $ 0.09 $ (0.18 ) $ 0.12
Income (loss) from discontinued operations (0.00 ) (0.03 ) 0.00 (0.06 )
Net income (loss) per common share – basic $ (0.12 ) $ 0.06 $ (0.18 ) $ 0.06
Net income (loss) per common share – diluted:
Income (loss) from continuing operations $ (0.12 ) $ 0.09 $ (0.18 ) $ 0.12
Income (loss) from discontinued operations (0.00 ) (0.03 ) 0.00 (0.06 )
Net income (loss) per common share – diluted $ (0.12 ) $ 0.06 $ (0.18 ) $ 0.06
Weighted average number of shares:
Common shares – basic 14,805 14,559 14,790 14,493
Class B common shares - basic 3,048 3,048 3,048 3,048
Common shares – diluted (1) 14,805 17,732 14,790 17,638
Class B common shares - diluted 3,048 3,048 3,048 3,048
Dividends per common share $ 0.020 $ 0.040 $ 0.100 $ 0.120
Dividends per Class B common share $ 0.018 $ 0.036 $ 0.090 $ 0.108
(1) Total common stock equivalents and Class B common stock for the three and nine months ended March 1, 2008, are excluded from the diluted earnings per share calculation because their impact would be anti-dilutive.
Richardson Electronics, Ltd.
Unaudited Condensed Consolidated Balance Sheets
(in thousands, except per share amounts)
March 1, June 2,
2008 2007
Assets
Current assets:
Cash and cash equivalents $ 30,542 $ 17,436
Restricted cash - 61,899
Receivables, less allowance of $1,602 and $1,574 104,463 105,709
Inventories 107,433 110,174
Prepaid expenses 4,663 5,129
Deferred income taxes 2,475 2,131
Current assets of discontinued operations held for sale - 242
Total current assets 249,576 302,720
Non-current assets:
Property, plant and equipment, net 29,902 29,278
Goodwill 12,729 11,611
Other intangible assets, net 817 1,581
Non-current deferred income taxes 1,066 389
Assets held for sale - 1,429
Other assets 1,597 2,058
Non-current assets of discontinued operations held for sale - 5
Total non-current assets 46,111 46,351
Total assets $ 295,687 $ 349,071
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable $ 57,974 $ 55,530
Accrued liabilities 19,173 31,330
Current portion of long-term debt - 65,711
Current liabilities of discontinued operations held for sale - 2,737
Total current liabilities 77,147 155,308
Non-current liabilities:
Long-term debt, less current portion 65,683 55,683
Long-term income tax liabilities 6,848 -
Non-current liabilities 1,479 1,535
Total non-current liabilities 74,010 57,218
Total liabilities 151,157 212,526
Commitments and contingencies - -
Stockholders’ equity
Common stock, $0.05 par value; issued 15,929 shares at
March 1, 2008 and 15,920 shares at June 2, 2007 797 796
Class B common stock, convertible, $0.05 par value; issued 3,048
at March 1, 2008 and 3,048 shares at June 2, 2007 152 152
Preferred stock, $1.00 par value, no shares issued - -
Additional paid-in-capital 119,626 118,880
Common stock in treasury, at cost, 1,112 shares at March 1, 2008
and 1,179 shares at June 2, 2007 (6,592 ) (6,989 )
Retained earnings 16,683 21,631
Accumulated other comprehensive income 13,864 2,075
Total stockholders’ equity 144,530 136,545
Total liabilities and stockholders’ equity $ 295,687 $ 349,071
Richardson Electronics, Ltd.
Unaudited Condensed Consolidated Statements of Cash Flows
(in thousands)
Three Months Ended Nine Months Ended
March 1, March 3, March 1, March 3,
2008 2007 2008 2007
Operating activities:
Net income (loss) $ (2,176 ) $ 1,037 $ (3,192 ) $ 1,020
Adjustments to reconcile net income (loss) to cash provided by
(used in) operating activities:
Depreciation and amortization 1,367 1,538 3,940 4,655
Gain on disposal of assets (81 ) (2,418 ) (70 ) (2,098 )
Retirement of long-term debt expenses - - - 2,540
Write-off of deferred financing costs - - 643 62
Stock compensation expense 176 198 523 774
Deferred income taxes 49 646 (930 ) 417
Receivables 2,401 1,708 7,801 5,016
Inventories 10,115 (6,966 ) 8,686 (14,797 )
Accounts payable and accrued liabilities (11,755 ) (1,978 ) (6,909 ) (6,517 )
Other liabilities 47 492 (130 ) 606
Other (548 ) 116 (2,104 ) (467 )
Net cash provided by (used in) operating activities (405 ) (5,627 ) 8,258 (8,789 )
Investing activities:
Capital expenditures (301 ) (1,991 ) (4,193 ) (4,716 )
Proceeds from sale of assets 620 3,066 1,007 3,109
Contingent purchase price consideration (160 ) - (160 ) -
(Gain) loss on sale of investments 121 (10 ) 129 (670 )
Proceeds from sales of available-for-sale securities 188 - 345 3,682
Purchases of available-for-sale securities (31 ) - (188 ) (182 )
Net cash provided by (used in) investing activities 437 1,065 (3,060 ) 1,223
Financing activities:
Proceeds from borrowings 51,800 64,600 163,200 202,011
Payments on debt (41,800 ) (51,840 ) (218,840 ) (181,650 )
Restricted cash - - 61,899 -
Proceeds from issuance of common stock - 35 69 755
Cash dividends (351 ) (692 ) (1,756 ) (2,071 )
Payments on retirement of long-term debt - (8,700 ) - (15,915 )
Other - (16 ) (95 ) (674 )
Net cash provided by financing activities 9,649 3,387 4,477 2,456
Effect of exchange rate changes on cash and cash equivalents 661 (72 ) 3,431 463
Increase (decrease) in cash and cash equivalents 10,342 (1,247 ) 13,106 (4,647 )
Cash and cash equivalents at beginning of period 20,200 13,610 17,436 17,010
Cash and cash equivalents at end of period $ 30,542 $ 12,363 $ 30,542 $ 12,363
Richardson Electronics, Ltd.
Unaudited Net Sales and Gross Profit
For the Third Quarter and First Nine Months of Fiscal 2008 and 2007
(In thousands)
By Business Unit:
Net Sales Gross Profit (1)
% GP% of
GP% of
Third Quarter FY 2008 FY 2007 Change FY 2008 Sales FY 2007 Sales
RF, Wireless & Power Division $ 93,415 $ 89,241 4.7 % $ 20,990 22.5 % $ 20,576 23.1 %
Electron Device Group 24,812 24,384 1.8 % 7,954 32.1 % 7,922 32.5 %
Display Systems Group 19,609 19,592 0.1 % 2,737 14.0 % 4,713 24.1 %
Corporate 1,030 677 (440 ) (1,097 )
Total $ 138,866 $ 133,894 3.7 % $ 31,241 22.5 % $ 32,114 24.0 %
% GP% of GP% of
Nine Months FY 2008 FY 2007 Change FY 2008 Sales FY 2007 Sales
RF, Wireless & Power Division $ 273,207 $ 270,567 1.0 % $ 62,457 22.9 % $ 62,431 23.1 %
Electron Device Group 76,774 74,552 3.0 % 24,471 31.9 % 23,972 32.2 %
Display Systems Group 59,871 62,801 (4.7 %) 11,634 19.4 % 14,870 23.7 %
Corporate 3,464 3,125 (883 ) (1,773 )
Total $ 413,316 $ 411,045 0.6 % $ 97,679 23.6 % $ 99,500 24.2 %
Note: Corporate consists of freight and other non-specific net sales.
(1) Included in Gross Profit for the third quarter and first nine months of fiscal 2008 are inventory write-downs of $0.9 million in the RF, Wireless & Power Division and $1.9 million in the Display Systems Group.
Richardson Electronics, Ltd.
Edward J. Richardson
Chairman and CEO
Phone: (630) 208-2340
E-mail: info@rell.com
or
Kathleen S. Dvorak
EVP & CFO
(630) 208-2208
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