Richardson Electronics, Ltd. (NASDAQ:RELL) today reported financial
results for its second quarter ended November 26, 2016. 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 2017
were $33.8 million, nearly flat compared to net sales of $34.1
million in the prior year’s second quarter. A sales decrease of
$0.5 million for Canvys, primarily due to declines in demand from
key OEMs relating to market conditions, was partially offset by
increases of $0.1 million in both PMT and Richardson
Healthcare.
Gross margin increased to $11.0 million, or
32.4% of net sales during the second quarter of fiscal 2017,
compared to $10.4 million, or 30.6% of net sales during the second
quarter of fiscal 2016. Margin improved as a percent of net
sales primarily due to higher PMT and Canvys margins as a result of
an improved product mix. In addition, the Canvys margin benefitted
from cost reductions on selected products sold.
Operating expenses increased to $13.4 million
for the second quarter of fiscal 2017, compared to $13.2 million
for the second quarter of fiscal 2016. The increase was due to $1.3
million in severance expense associated with the reduction in work
force during the second quarter of fiscal 2017, mostly offset by
reduced salary, benefits and incentive compensation expenses. In
addition, IT expenses were lower than in the second quarter of
fiscal 2016.
As a result, operating loss for the second
quarter of fiscal 2017 was $2.4 million, compared to an operating
loss of $2.5 million in the prior year’s second quarter. However,
excluding the $1.3 million severance expense, the operating loss
would have been $1.1 million for the second quarter of fiscal
2017.
Other income for the second quarter of fiscal
2017, including foreign exchange, was $0.2 million, compared to
$0.5 million in the second quarter of fiscal 2016.
The income tax provision of $0.3 million during
the second quarter of fiscal 2017 reflects a provision for foreign
income taxes 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 2017
was $2.5 million, compared to a net loss of $2.3 million in the
second quarter of 2016.
FINANCIAL SUMMARY – SIX MONTHS ENDED NOVEMBER
26, 2016
- Net sales for the first six months of fiscal 2017 were $67.2
million, a decrease of 5.6%, compared to net sales of $71.2 million
during the first six months of fiscal 2016. Sales decreased by $1.7
million for PMT and $2.5 million for Canvys, primarily due to
declines in demand from key customers relating to market
conditions.
- Gross margin decreased to $21.2 million during the first six
months of fiscal 2017, compared to $21.7 million during the first
six months of fiscal 2016. However, as a percentage of net sales,
gross margin increased to 31.6% of net sales during the first six
months of fiscal 2017, compared to 30.5% of net sales during the
first six months of fiscal 2016.
- Operating expenses increased to $25.7 million for the first six
months of fiscal 2017, compared to $25.5 million for the first six
months of fiscal 2016. The increase was due to the $1.3 million in
severance expense associated with the reduction in work force
during the second quarter of fiscal 2017, mostly offset by reduced
salary, benefits and incentive compensation expenses. In addition,
IT expenses were lower than the first six months of fiscal
2016.
- Operating loss during the first six months of fiscal 2017 was
$4.5 million, compared to an operating loss of $3.5 million during
the first six months of fiscal 2016. After excluding the severance
expense of $1.3 million, the operating loss would have been $3.2
million for the first six months of fiscal year 2017.
- Other expense for the first six months of fiscal 2017,
including foreign exchange, was less than $0.1 million, compared to
other income of $0.5 million for the first six months of fiscal
2016.
- The income tax provision of $0.8 million for the first six
months of fiscal 2017 reflects a provision for foreign income
taxes, an estimate for additional tax due from an audit in France
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 2017 was $5.4
million, compared to a net loss of $3.7 million during the first
six months of fiscal 2016.
CASH DIVIDENDThe 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 24, 2017, to common
stockholders of record on February 7, 2017.
Cash and investments at the end of the second
quarter of fiscal 2017 were $62.8 million compared to $70.5 million
at the end of the fourth quarter of fiscal 2016. During the
second quarter of fiscal 2017, the Company did not repurchase any
shares of its common stock under the existing share repurchase
authorization. Since the sale of RFPD, the Company has spent $65.6
million on share repurchases, nearly $20 million on acquisitions,
more than $18 million on dividends and $5.1 million on purchases of
Richardson Healthcare equipment. Currently, there are 10.7 million
outstanding shares of common stock and 2.1 million outstanding
shares of Class B common stock.
OUTLOOK“While we are
disappointed with flat net sales in the second quarter of fiscal
2017 as compared to the second quarter of fiscal 2016, we are
pleased with the significantly higher gross margin and the
substantially lower operating expenses after excluding the $1.3
million in severance expense that was incurred in the second
quarter of fiscal year 2017,” said Edward J. Richardson, Chairman,
Chief Executive Officer, and President. “We are beginning to see
revenue growth in our Power Management Technologies group and we
are making good progress in CT Tube development. We are focused on
increasing net sales in all of our businesses and continue to make
progress on additional initiatives to permanently take cost out of
the organization, improve cash flow, and return the Company to
profitability,” Mr. Richardson concluded.
CONFERENCE CALL INFORMATIONOn
Thursday, January 5, 2017, 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 results for fiscal 2017. A question and
answer session will be included as part of the call's agenda. To
listen to the call, please dial (888) 419-5570 and enter passcode
96522530 approximately five minutes prior to the start of the call.
A replay of the call will be available beginning at 12:00 a.m. CST
on January 6, 2017, for seven days. The telephone numbers for the
replay are (USA) (888) 286-8010 and (International) (617) 801-6888;
passcode 66294883.
FORWARD-LOOKING STATEMENTSThis
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
July 29, 2016. 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
displays, flat panel detector solutions and replacement parts 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 26,
2016 |
|
May 28,
2016 |
Assets |
|
|
|
Current assets: |
|
|
|
Cash and
cash equivalents |
$ |
54,111 |
|
$ |
60,454 |
Accounts
receivable, less allowance of $379 and $364 |
|
20,480 |
|
|
24,928 |
Inventories, net |
|
43,078 |
|
|
45,422 |
Prepaid
expenses and other assets |
|
2,727 |
|
|
1,758 |
Deferred
income taxes |
|
— |
|
|
1,078 |
Income
tax receivable |
|
22 |
|
|
17 |
Investments - current |
|
6,307 |
|
|
2,268 |
Total current assets |
|
126,725 |
|
|
135,925 |
Non-current assets: |
|
|
|
Property,
plant and equipment, net |
|
15,085 |
|
|
12,986 |
Goodwill |
|
6,332 |
|
|
6,332 |
Intangible assets, net |
|
3,618 |
|
|
3,818 |
Non-current deferred income taxes |
|
1,301 |
|
|
1,270 |
Investments - non-current |
|
2,343 |
|
|
7,799 |
Total non-current assets |
|
28,679 |
|
|
32,205 |
Total
assets |
$ |
155,404 |
|
$ |
168,130 |
Liabilities and
Stockholders’ Equity |
|
|
|
Current liabilities: |
|
|
|
Accounts
payable |
|
11,507 |
|
|
14,896 |
Accrued
liabilities |
|
9,838 |
|
|
9,135 |
Total current liabilities |
|
21,345 |
|
|
24,031 |
Non-current liabilities: |
|
|
|
Non-current deferred income tax liabilities |
|
158 |
|
|
1,457 |
Other
non-current liabilities |
|
1,065 |
|
|
967 |
Total non-current liabilities |
|
1,223 |
|
|
2,424 |
Total liabilities |
|
22,568 |
|
|
26,455 |
Stockholders’
equity |
|
|
|
Common
stock, $0.05 par value; issued and outstanding 10,703 shares at
November 26, 2016, and at May 28, 2016 |
|
535 |
|
|
535 |
Class B
common stock, convertible, $0.05 par value; issued and outstanding
2,141 shares at November 26, 2016, and at May 28, 2016 |
|
107 |
|
|
107 |
Preferred
stock, $1.00 par value, no shares issued |
|
— |
|
|
— |
Additional paid-in-capital |
|
59,248 |
|
|
58,969 |
Common
stock in treasury, at cost, no shares at November 26, 2016, and at
May 28, 2016 |
|
— |
|
|
— |
Retained
earnings |
|
72,405 |
|
|
79,292 |
Accumulated other comprehensive income |
|
541 |
|
|
2,772 |
Total stockholders’ equity |
|
132,836 |
|
|
141,675 |
Total
liabilities and stockholders’ equity |
$ |
155,404 |
|
$ |
168,130 |
|
|
|
|
Richardson Electronics, Ltd. |
Unaudited Consolidated Statements of
Comprehensive Loss |
(in thousands, except per share amounts) |
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
Six Months Ended |
|
November 26,
2016 |
|
November 28,
2015 |
|
November 26,
2016 |
|
November 28,
2015 |
Statements of
Comprehensive Loss |
|
|
|
|
|
|
|
Net sales |
$ |
33,827 |
|
|
$ |
34,086 |
|
|
$ |
67,200 |
|
|
$ |
71,157 |
|
Cost of
sales |
|
22,863 |
|
|
|
23,651 |
|
|
|
45,996 |
|
|
|
49,460 |
|
Gross profit |
|
10,964 |
|
|
|
10,435 |
|
|
|
21,204 |
|
|
|
21,697 |
|
Selling,
general, and administrative expenses |
|
13,368 |
|
|
|
13,200 |
|
|
|
25,695 |
|
|
|
25,467 |
|
Gain on disposal of
assets |
|
— |
|
|
|
(243 |
) |
|
|
— |
|
|
|
(244 |
) |
Operating loss |
|
(2,404 |
) |
|
|
(2,522 |
) |
|
|
(4,491 |
) |
|
|
(3,526 |
) |
Other (income)
expense: |
|
|
|
|
|
|
|
Investment/interest income |
|
(51 |
) |
|
|
(111 |
) |
|
|
(62 |
) |
|
|
(302 |
) |
Foreign
exchange (gain) loss |
|
(181 |
) |
|
|
(339 |
) |
|
|
97 |
|
|
|
(157 |
) |
Other,
net |
|
17 |
|
|
|
(49 |
) |
|
|
16 |
|
|
|
(13 |
) |
Total
other (income) expense |
|
(215 |
) |
|
|
(499 |
) |
|
|
51 |
|
|
|
(472 |
) |
Loss before income
taxes |
|
(2,189 |
) |
|
|
(2,023 |
) |
|
|
(4,542 |
) |
|
|
(3,054 |
) |
Income
tax provision |
|
333 |
|
|
|
263 |
|
|
|
830 |
|
|
|
631 |
|
Net loss |
|
(2,522 |
) |
|
|
(2,286 |
) |
|
|
(5,372 |
) |
|
|
(3,685 |
) |
Foreign
currency translation loss, net of tax |
|
(2,623 |
) |
|
|
(1,649 |
) |
|
|
(2,244 |
) |
|
|
(2,152 |
) |
Fair value adjustments
on investments gain (loss) |
|
6 |
|
|
|
28 |
|
|
|
13 |
|
|
|
(32 |
) |
Comprehensive loss |
$ |
(5,139 |
) |
|
$ |
(3,907 |
) |
|
$ |
(7,603 |
) |
|
$ |
(5,869 |
) |
Loss per
share: |
|
|
|
|
|
|
|
Common
shares - Basic |
$ |
(0.20 |
) |
|
$ |
(0.18 |
) |
|
$ |
(0.43 |
) |
|
$ |
(0.28 |
) |
Class B
common shares - Basic |
$ |
(0.18 |
) |
|
$ |
(0.16 |
) |
|
$ |
(0.38 |
) |
|
$ |
(0.25 |
) |
Common
shares - Diluted |
$ |
(0.20 |
) |
|
$ |
(0.18 |
) |
|
$ |
(0.43 |
) |
|
$ |
(0.28 |
) |
Class B
common shares - Diluted |
$ |
(0.18 |
) |
|
$ |
(0.16 |
) |
|
$ |
(0.38 |
) |
|
$ |
(0.25 |
) |
Weighted
average number of shares: |
|
|
|
|
|
|
|
Common
shares - Basic |
|
10,703 |
|
|
|
10,742 |
|
|
|
10,703 |
|
|
|
11,114 |
|
Class B
common shares - Basic |
|
2,141 |
|
|
|
2,141 |
|
|
|
2,141 |
|
|
|
2,141 |
|
Common
shares - Diluted |
|
10,703 |
|
|
|
10,742 |
|
|
|
10,703 |
|
|
|
11,114 |
|
Class B
common shares - Diluted |
|
2,141 |
|
|
|
2,141 |
|
|
|
2,141 |
|
|
|
2,141 |
|
Dividends per common share |
$ |
0.060 |
|
|
$ |
0.060 |
|
|
$ |
0.120 |
|
|
$ |
0.120 |
|
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 26,
2016 |
|
November 28,
2015 |
|
November 26,
2016 |
|
November 28,
2015 |
Operating
activities: |
|
|
|
|
|
|
|
|
Net loss |
|
$ |
(2,522 |
) |
|
$ |
(2,286 |
) |
|
$ |
(5,372 |
) |
|
$ |
(3,685 |
) |
Adjustments to reconcile net loss to cash used in operating
activities: |
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
|
602 |
|
|
|
797 |
|
|
|
1,317 |
|
|
|
1,282 |
|
(Gain)
loss on sale of investments |
|
|
8 |
|
|
|
(8 |
) |
|
|
6 |
|
|
|
(19 |
) |
Gain on
disposal of assets |
|
|
— |
|
|
|
(243 |
) |
|
|
— |
|
|
|
(244 |
) |
Share-based compensation expense |
|
|
176 |
|
|
|
225 |
|
|
|
279 |
|
|
|
315 |
|
Deferred
income taxes |
|
|
(151 |
) |
|
|
254 |
|
|
|
(309 |
) |
|
|
255 |
|
Change
in assets and liabilities, net of effect of acquired business: |
|
|
|
|
|
|
|
|
Accounts
receivable |
|
|
379 |
|
|
|
2,554 |
|
|
|
3,934 |
|
|
|
29 |
|
Income
tax receivable |
|
|
8 |
|
|
|
116 |
|
|
|
(5 |
) |
|
|
664 |
|
Inventories |
|
|
1,181 |
|
|
|
(2,879 |
) |
|
|
1,592 |
|
|
|
(3,472 |
) |
Prepaid
expenses and other assets |
|
|
(1,082 |
) |
|
|
137 |
|
|
|
(1,041 |
) |
|
|
(444 |
) |
Accounts
payable |
|
|
(883 |
) |
|
|
(469 |
) |
|
|
(3,221 |
) |
|
|
(1,990 |
) |
Accrued
liabilities |
|
|
2,006 |
|
|
|
(396 |
) |
|
|
862 |
|
|
|
(1,200 |
) |
Non-current deferred income tax liabilities |
|
|
— |
|
|
|
(228 |
) |
|
|
— |
|
|
|
— |
|
Long-term
liabilities-accrued pension |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(465 |
) |
Other |
|
|
13 |
|
|
|
96 |
|
|
|
18 |
|
|
|
131 |
|
Net cash used in operating activities |
|
|
(265 |
) |
|
|
(2,330 |
) |
|
|
(1,940 |
) |
|
|
(8,843 |
) |
Investing
activities: |
|
|
|
|
|
|
|
|
Cash
consideration paid for acquired business |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(12,209 |
) |
Capital
expenditures |
|
|
(1,235 |
) |
|
|
(792 |
) |
|
|
(3,299 |
) |
|
|
(1,776 |
) |
Proceeds
from sale of assets |
|
|
— |
|
|
|
402 |
|
|
|
— |
|
|
|
402 |
|
Proceeds
from maturity of investments |
|
|
2,117 |
|
|
|
7,234 |
|
|
|
3,582 |
|
|
|
25,584 |
|
Purchases
of investments |
|
|
(2,136 |
) |
|
|
(2,151 |
) |
|
|
(2,136 |
) |
|
|
(2,151 |
) |
Proceeds from sales of available-for-sale securities |
|
59 |
|
|
|
44 |
|
|
|
147 |
|
|
|
144 |
|
Purchases
of available-for-sale securities |
|
|
(59 |
) |
|
|
(44 |
) |
|
|
(147 |
) |
|
|
(144 |
) |
Other |
|
|
(3 |
) |
|
|
(28 |
) |
|
|
(6 |
) |
|
|
32 |
|
Net cash (used in) provided by investing
activities |
|
|
(1,257 |
) |
|
|
4,665 |
|
|
|
(1,859 |
) |
|
|
9,882 |
|
Financing
activities: |
|
|
|
|
|
|
|
|
Repurchase of common stock |
|
|
— |
|
|
|
(1,707 |
) |
|
|
— |
|
|
|
(5,015 |
) |
Proceeds
from issuance of common stock |
|
|
— |
|
|
|
121 |
|
|
|
— |
|
|
|
121 |
|
Cash
dividends paid |
|
|
(757 |
) |
|
|
(757 |
) |
|
|
(1,515 |
) |
|
|
(1,563 |
) |
Other |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(4 |
) |
Net cash used in financing activities |
|
|
(757 |
) |
|
|
(2,343 |
) |
|
|
(1,515 |
) |
|
|
(6,461 |
) |
Effect of
exchange rate changes on cash and cash equivalents |
|
|
(1,098 |
) |
|
|
(555 |
) |
|
|
(1,029 |
) |
|
|
(1,250 |
) |
Decrease in cash and cash equivalents |
|
|
(3,377 |
) |
|
|
(563 |
) |
|
|
(6,343 |
) |
|
|
(6,672 |
) |
Cash and cash equivalents at beginning of period |
|
57,488 |
|
|
|
68,426 |
|
|
|
60,454 |
|
|
|
74,535 |
|
Cash and cash equivalents at end of period |
|
$ |
54,111 |
|
|
$ |
67,863 |
|
|
$ |
54,111 |
|
|
$ |
67,863 |
|
|
|
|
|
|
|
|
|
|
Richardson Electronics, Ltd. |
Net Sales and Gross Profit |
For the Second Quarter and First Six Months of
Fiscal 2017 and Fiscal 2016 |
(in thousands) |
|
|
|
|
|
|
|
|
By
Strategic Business Unit: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
Sales |
Q2 FY 2017 |
|
|
|
Q2 FY 2016 |
|
% Change |
PMT |
$ |
25,229 |
|
|
|
$ |
25,162 |
|
0.3 |
% |
Canvys |
|
5,439 |
|
|
|
|
5,902 |
|
-7.8 |
% |
Healthcare |
|
3,159 |
|
|
|
|
3,022 |
|
4.5 |
% |
Total |
$ |
33,827 |
|
|
|
$ |
34,086 |
|
-0.8 |
% |
|
|
|
|
|
|
|
|
|
YTD FY 2017 |
|
|
|
YTD FY 2016 |
|
% Change |
PMT |
$ |
50,610 |
|
|
|
$ |
52,357 |
|
-3.3 |
% |
Canvys |
|
10,059 |
|
|
|
|
12,583 |
|
-20.1 |
% |
Healthcare |
|
6,531 |
|
|
|
|
6,217 |
|
5.1 |
% |
Total |
$ |
67,200 |
|
|
|
$ |
71,157 |
|
-5.6 |
% |
|
|
|
|
|
|
|
|
Gross
Profit |
Q2 FY 2017 |
|
% of Net Sales |
|
Q2 FY 2016 |
|
% of Net Sales |
PMT |
$ |
8,273 |
|
32.8 |
% |
|
$ |
7,515 |
|
29.9 |
% |
Canvys |
|
1,543 |
|
28.4 |
% |
|
|
1,526 |
|
25.9 |
% |
Healthcare |
|
1,148 |
|
36.3 |
% |
|
|
1,394 |
|
46.1 |
% |
Total |
$ |
10,964 |
|
32.4 |
% |
|
$ |
10,435 |
|
30.6 |
% |
|
|
|
|
|
|
|
|
Gross
Profit |
YTD FY 2017 |
|
% of Net Sales |
|
YTD FY 2016 |
|
% of Net Sales |
PMT |
$ |
15,728 |
|
31.1 |
% |
|
$ |
15,653 |
|
29.9 |
% |
Canvys |
|
2,891 |
|
28.7 |
% |
|
|
3,235 |
|
25.7 |
% |
Healthcare |
|
2,585 |
|
39.6 |
% |
|
|
2,809 |
|
45.2 |
% |
Total |
$ |
21,204 |
|
31.6 |
% |
|
$ |
21,697 |
|
30.5 |
% |
|
|
|
|
|
|
|
|
For Details Contact:
Edward J. Richardson
Chairman and CEO
Phone: (630) 208-2205
Robert J. Ben
EVP & CFO
(630) 208-2203
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