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Richardson Electronics Reports Second Quarter Fiscal 2014 Results and Declares Quarterly Cash Dividend

Richardson Electronics, Ltd. (NASDAQ: RELL), today reported sales and earnings for its second quarter ended November 30, 2013. The Company also announced that its Board of Directors declared a $0.06 per share quarterly cash dividend.

Net sales for the second quarter of fiscal 2014 were $35.4 million, a 3.2% decrease compared to net sales of $36.6 million in the prior year. Sales for the company's EDG business were flat while sales for Canvys were down 10.9%, compared to the prior year's quarter. Gross margin increased to $11.0 million, or 31.1% of net sales during the second quarter of fiscal 2014, compared to $10.7 million, or 29.3% of net sales during fiscal 2013. Operating expenses were $10.5 million for the second quarter of fiscal 2014, compared to $10.2 million for the second quarter of fiscal 2013. Operating income for the second quarters of fiscal 2014 and 2013 remained flat at $0.5 million.

Income from continuing operations for the second quarters of fiscal 2014 and 2013 was $0.6 million, or $0.04 per diluted common share.

“We remain committed to our strategy of building a strong platform for growth that allows us to leverage our global distribution network to drive profit improvement. While we see some economic improvements in China and Europe, we expect challenging conditions to continue so we will closely manage our expenses and working capital investment. Our balance sheet is strong which provides financial flexibility to invest in our growth initiatives, return capital to shareholders, and acquire businesses to diversify our portfolio,” said Edward J. Richardson, Chairman, Chief Executive Officer and President.

“We believe our third quarter sales should be in the range of $34 to $36 million. Our goal is to build our business to achieve sustainable growth over the long term,” said Mr. Richardson.

FINANCIAL SUMMARY ─ THREE MONTHS ENDED NOVEMBER 30, 2013

  • Net sales for the second quarter of fiscal 2014 were $35.4 million, down 3.2%, compared to net sales of $36.6 million during the second quarter of fiscal 2013.
  • Gross margin increased to 31.1% during the second quarter of fiscal 2014 compared to 29.3% during last year's second quarter.
  • Selling, general, and administrative expenses increased slightly to $10.5 million, or 29.6% of net sales for the second quarter of fiscal 2014 compared to $10.2 million for the second quarter of fiscal 2013, or 27.9% of net sales.
  • Operating income during the second quarter of fiscal 2014 and 2013 was $0.5 million, or 1.5% and 1.4% of net sales, respectively.
  • Income from continuing operations for during the second quarter of fiscal 2014 and fiscal 2013 was $0.6 million, or $0.04 per diluted common share.
  • Loss from discontinued operations, net of tax, was $0.1 million during the second quarter of fiscal 2014 compared to $0.2 million during the second quarter of fiscal 2013.
  • Net income during the second quarter of fiscal 2014 was $0.5 million, or $0.03 per diluted common share, compared to net income of $0.4 million, or $0.03 per diluted common share, during the second quarter of fiscal 2013, .

FINANCIAL SUMMARY – SIX MONTHS ENDED NOVEMBER 30, 2013

  • Net sales for the first six months of fiscal 2014 were $69.7 million, down 3.5%, compared to net sales of $72.3 million during the first six months of fiscal 2013.
  • Gross margin increased to 30.4% during the first six months of fiscal 2014 compared to 29.6% during the first six months of fiscal 2013.
  • Selling, general, and administrative expenses slightly increased to $20.5 million, or 29.5% of net sales, for the first six months of fiscal 2014 compared to $20.4 million, or 28.2% of net sales, for the first six months of fiscal 2013.
  • Operating income during the first six months of fiscal 2014 was $0.7 million, or 0.9% of net sales, compared to an operating income of $1.0 million, or 1.4% of net sales, during the first six months of fiscal 2013.
  • Income from continuing operations during the first six months of fiscal 2014 was $2.6 million, or $0.18 per diluted common share, versus $1.3 million, or $0.08 per diluted common share, during the first six months of fiscal 2013.
  • Loss from discontinued operations, net of tax, was $0.1 million, during the first six months of fiscal 2014, compared to $0.3 million during the first six months of fiscal 2013.
  • Net income during the first six months of fiscal 2014 was $2.5 million, or $0.17 per diluted common share, compared to net income of $1.0 million, or $0.06 per diluted common share, during the first six months of fiscal 2013.

CASH DIVIDEND AND SHARE REPURCHASES

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 February 21, 2014, to common stockholders of record on February 7, 2014.

“Cash and investments at the end of our second quarter were $134.1 million. We used $2.0 million to repurchase 0.2 million shares during the second quarter. As of today, the Company currently has 11.8 million outstanding shares of common stock and 2.2 million outstanding shares of Class B common stock. With our strong balance sheet, we are committed to returning value to our shareholders,” said Mr. Richardson.

CONFERENCE CALL INFORMATION

On Thursday, January 9, 2014, 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 second quarter results for fiscal 2014. A question and answer session will be included as part of the call's agenda. To listen to the call, please dial (888) 339-2688 and enter passcode 24209746 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 January 9, 2014, for seven days. The telephone numbers for the replay are (USA) (888) 286-8010 and (International) (617) 801-6888; passcode 34766989.

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 July 26, 2013. 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, and customized display solutions serving customers in the alternative energy, 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. More information is available online 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 30,     June 1,
2013 2013
Assets
Current assets:
Cash and cash equivalents $ 92,646 $ 102,002
Accounts receivable, less allowance of $1,167 and $1,092 20,216 18,268
Inventories 35,296 33,975
Prepaid expenses and other assets 1,453 1,155
Deferred income taxes 1,983 1,856
Income tax receivable 3,321 6,429
Investments—current 39,508 38,971
Discontinued operations—assets 356   303  
Total current assets 194,779   202,959  
Non-current assets:
Property, plant and equipment, net 5,935 5,073
Goodwill 1,633 1,519
Other intangibles 881 908
Non-current deferred income taxes 1,477 1,398
Investments—non-current 1,991   5,461  
Total non-current assets 11,917   14,359  
Total assets $ 206,696   $ 217,318  
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable $ 12,152 $ 14,255
Accrued liabilities 7,472 9,566
Discontinued operations—liabilities   245  
Total current liabilities 19,624   24,066  
Non-current liabilities:
Long-term income tax liabilities 6,249 6,726
Other non-current liabilities 1,284   1,287  
Total non-current liabilities 7,533   8,013  
Total liabilities 27,157   32,079  
Commitments and contingencies
Stockholders’ equity
Common stock, $0.05 par value; issued 11,828 shares at November 30, 2013, and 12,263 shares at June 1, 2013 591 613
Class B common stock, convertible, $0.05 par value; issued 2,191 shares at November 30, 2013 and 2,491 shares at June 1, 2013 110 125
Preferred stock, $1.00 par value, no shares issued
Additional paid-in-capital 65,760 73,979
Common stock in treasury, at cost, 0 shares at November 30, 2013, and 9 shares at June 1, 2013 (105 )
Retained earnings 102,623 101,816
Accumulated other comprehensive income 10,455   8,811  
Total stockholders’ equity 179,539   185,239  
Total liabilities and stockholders’ equity $ 206,696   $ 217,318  
 
Richardson Electronics, Ltd.
Unaudited Consolidated Statements of Comprehensive Income

(in thousands, except per share amounts)

 
    Three Months Ended     Six Months Ended
November 30,   December 1,     November 30,   December 1,
2013 2012 2013 2012
Net Sales $ 35,436 $ 36,603 $ 69,693 $ 72,253
Cost of Sales 24,429   25,861   48,494   50,865  
Gross profit 11,007 10,742 21,199 21,388
Selling, general, and administrative expenses 10,473 10,228 20,542 20,377
(Gain) loss on disposal of assets   2    

(2

)
Operating income 534   512   657   1,013  
Other (income) expense:
Investment/interest income (255 ) (352 ) (520 ) (735 )
Foreign exchange (gain) loss (14 ) 297 92 260
Proceeds from legal settlement (2,115 )
Other, net 15   (42 ) (15 ) (65 )
Total other income (254 ) (97 ) (2,558 ) (540 )
Income from continuing operations before income taxes 788 609 3,215 1,553
Income tax provision 157   28   605   238  
Income from continuing operations 631 581 2,610 1,315
Loss from discontinued operations, net of tax (107 ) (203 ) (118 ) (290 )
Net income 524   378   2,492   1,025  
Foreign currency translation gain, net of tax 1,196 1,547 1,621 1,947
Fair value adjustments on investments 22   4   23   5  
Comprehensive income $ 1,742   $ 1,929   $ 4,136   $ 2,977  

Net income per Common share - Basic:

Income from continuing operations $ 0.05 $ 0.04 $ 0.19 $ 0.09
Loss from discontinued operations (0.01 ) (0.01 ) (0.01 ) (0.02 )
Total net income per Common share - Basic: $ 0.04   $ 0.03   $ 0.18   $ 0.07  

Net income per Class B common share - Basic:

Income from continuing operations $ 0.04 $ 0.03 $ 0.17 $ 0.08
Loss from discontinued operations (0.01 ) (0.01 ) (0.01 ) (0.02 )
Total net income per Class B common share - Basic: $ 0.03   $ 0.02   $ 0.16   $ 0.06  

Net income per Common share - Diluted:

Income from continuing operations $ 0.04 $ 0.04 $ 0.18 $ 0.08
Loss from discontinued operations (0.01 ) (0.01 ) (0.01 ) (0.02 )
Total net income per Common share - Diluted: $ 0.03   $ 0.03   $ 0.17   $ 0.06  

Net income per Class B common share - Diluted:

Income from continuing operations $ 0.04 $ 0.03 $ 0.17 $ 0.08
Loss from discontinued operations (0.01 ) (0.01 ) (0.01 ) (0.02 )
Total net income per Class B common share - Diluted: $ 0.03   $ 0.02   $ 0.16   $ 0.06  
Weighted average number of shares:
Common shares - Basic 11,871   12,437  

11,997

 

12,604

 
Class B common shares - Basic 2,191   2,812  

2,309

 

2,863

 
Common shares - Diluted 14,185   15,345  

14,433

 

15,567

 
Class B common shares - Diluted 2,191   2,812  

2,309

 

2,863

 
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 30,   December 1, November 30,   December 1,
2013 2012 2013 2012
Operating activities:
Net income 524 378 2,492 1,025
Adjustments to reconcile net income to cash provided by (used in) operating activities:
Depreciation and amortization 273 266 521 565
Gain on sale of investments (12 ) (1 ) (19 ) (21 )
(Gain) loss on disposal of assets 2 (2 )
Share-based compensation expense 270 208 384 332
Deferred income taxes (108 ) (7 ) (167 ) (8 )
Change in assets and liabilities, net of effect of acquired businesses:
Accounts receivable (508 ) (758 ) (1,726 ) (1,404 )
Income tax receivable 357 36 3,108 191
Inventories 310 2,265 (140 ) 1,715
Prepaid expenses and other assets (430 ) 196 (274 ) (426 )
Accounts payable 317 2,664 (2,230 ) 1,234
Accrued liabilities (565 ) 806 (2,455 ) (200 )
Long-term income tax liabilities (235 ) 4 (477 ) (317 )
Other 56   148   47   190  
Net cash provided by (used in) operating activities 249   6,207   (936 ) 2,874  
Investing activities:
Cash consideration paid for acquired businesses (2,557 ) (973 ) (2,557 )
Capital expenditures (540 ) (478 ) (981 ) (557 )
Proceeds from sale of assets 4
Proceeds from maturity of investments 14,044 39,763 54,532 97,510
Purchases of investments (11,458 ) (23,838 ) (51,552 ) (75,562 )
Proceeds from sales of available-for-sale securities 20 83 76 137
Purchases of available-for-sale securities (20 ) (83 ) (76 ) (137 )
Other 22     91    
Net cash provided by investing activities 2,068   12,890   1,117   18,838  
Financing activities:
Repurchase of common stock (2,025 ) (5,998 ) (8,725 ) (11,550 )
Proceeds from issuance of common stock 100 72 171 83
Cash dividends paid (828 ) (1,799 ) (1,685 ) (1,799 )
Other     1    
Net cash used in financing activities (2,753 ) (7,725 ) (10,238 ) (13,266 )
Effect of exchange rate changes on cash and cash equivalents

552

  908   701   1,179  
Increase/ (decrease) in cash and cash equivalents 116 12,280 (9,356 ) 9,625
Cash and cash equivalents at beginning of period

92,530

  41,238   102,002   43,893  
Cash and cash equivalents at end of period $

92,646

  $ 53,518   $ 92,646   $ 53,518  
 
Richardson Electronics, Ltd.
Net Sales and Gross Profit
For the Second Quarter and First Six Months of Fiscal 2014 and Fiscal 2013

(in thousands)

 
By Strategic Business Unit:
 
   

Net Sales

    QTD         QTD    
FY 2014 FY 2013     % Change
EDG $ 26,163 $ 26,186 (0.1)%
Canvys 9,273   10,417   (11.0)%
Total $ 35,436   $ 36,603   (3.2)%
 
YTD YTD
FY 2014 FY 2013     % Change
EDG $ 51,642 $ 51,813 (0.3)%
Canvys 18,051   20,440   (11.7)%
Total $ 69,693   $ 72,253   (3.5)%
 

Gross Profit

QTD QTD
FY 2014     % of Net Sales     FY 2013     % of Net Sales
EDG $ 8,507 32.5% $ 7,930 30.3%
Canvys 2,500   27.0% 2,812   27.0%
Total $ 11,007   31.1% $ 10,742   29.3%
 

 

YTD YTD
FY 2014     % of Net Sales     FY 2013     % of Net Sales
EDG $ 16,366 31.7% $ 15,930 30.7%
Canvys 4,833   26.8% 5,458   26.7%
Total $ 21,199   30.4% $ 21,388   29.6%
 

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