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Richardson Electronics Reports Second Quarter Fiscal 2013 Results and Declares Cash Dividend

Richardson Electronics, Ltd. (NASDAQ: RELL) today reported sales and earnings for its second quarter ended December 1, 2012. 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 2013 were $36.6 million, down 6.5% from net sales of $39.1 million during the second quarter of last year reflecting the impact of the uncertainty within the global marketplace. Gross profit for the second quarter of fiscal 2013 was $10.7 million, or 29.3% of net sales, compared to $11.7 million, or 29.9% of net sales, during the second quarter of fiscal 2012. Gross profit during the second quarter of fiscal 2013 was impacted by unabsorbed manufacturing labor and overhead of $0.3 million, or 0.8% of net sales.

Selling, General, and Administrative (“SG&A”) costs during the second quarter of fiscal 2013 were $10.2 million, compared to $10.0 million during last year’s second quarter. SG&A expenses during the second quarter of fiscal 2013 included severance costs, expenses related to a preference claim, and product development costs totaling $0.4 million.

Operating income during the second quarter of fiscal 2013 was $0.5 million, or 1.4% of net sales, compared to operating income of $1.7 million, or 4.4% of net sales, during the second quarter of last year. Income from continuing operations for the second quarter of fiscal 2013 was $0.6 million, or $0.04 per diluted common share, compared to income from continuing operations of $1.6 million, or $0.09 per diluted common share during the second quarter of last year.

“Sales in the first half of our fiscal year were impacted by slowing growth in Asia combined with global financial instability and a decline in demand for semiconductor wafer fabrication components. We have adjusted resources to align our costs with current sales expectations. With an outlook for improving global economic conditions, we anticipate sales for the second half of our fiscal year to be up significantly over the first half,” said Edward J. Richardson, Chairman, Chief Executive Officer and President.

“We continue to focus on converting sales from OEM customers to end users through our expanded service capabilities for laser and industrial tubes. We are in an excellent position to help customers replace tubes and service their equipment. Our ability to create opportunities to extend our business model into new industries is also crucial to the long-term success of the company,” concluded Mr. Richardson.

FINANCIAL SUMMARY ─ THREE MONTHS ENDED DECEMBER 1, 2012

  • Net sales for the second quarter of fiscal 2013 were $36.6 million, down 6.5%, compared to net sales of $39.1 million during the second quarter of last year.
  • Gross margin as a percentage of net sales decreased to 29.3% during the second quarter of fiscal 2013 compared to 29.9% during the second quarter of last year.
  • SG&A expenses during the second quarter of fiscal 2013 were $10.2 million, or 27.9% of net sales, compared to $10.0 million, or 25.5% of net sales, during the second quarter of last year.
  • Operating income during the second quarter of fiscal 2013 was $0.5 million, or 1.4% of net sales, compared to operating income of $1.7 million, or 4.4% of net sales, during the second quarter of last year.
  • Income from continuing operations during the second quarter of fiscal 2013 was $0.6 million, or $0.04 per diluted common share, compared to income from continuing operations of $1.6 million, or $0.09 per diluted common share, during the second quarter of last year.
  • Loss from discontinued operations, net of tax, was $0.2 million, during the second quarter of fiscal 2013 compared to a loss from discontinued operations, net of tax, of $0.8 million, during the second quarter of last year.
  • Net income during the second quarter of fiscal 2013 was $0.4 million, or $0.03 per diluted common share, compared to net income of $0.8 million, or $0.04 per diluted common share, during the second quarter of last year.

FINANCIAL SUMMARY ─ SIX MONTHS ENDED DECEMBER 1, 2012

  • Net sales for the first six months of fiscal 2013 were $72.3 million, down 10.4%, compared to net sales of $80.6 million during the first six months of last year.
  • Gross margin as a percentage of net sales decreased to 29.6% during the first six months of fiscal 2013 compared to 30.2% during the first six months of last year.
  • SG&A expenses during the first six months of fiscal 2013 were $20.4 million, or 28.2% of net sales, compared to $20.7 million, or 25.7% of net sales, during the first six months of last year.
  • Operating income during the first six months of fiscal 2013 was $1.0 million, or 1.4% of net sales, compared to operating income of $3.7 million, or 4.6% of net sales, during the first six months of last year.
  • Income from continuing operations during the first six months of fiscal 2013 was $1.3 million, or $0.08 per diluted common share, compared to income from continuing operations of $2.7 million, or $0.15 per diluted common share, during the first six months of last year.
  • Loss from discontinued operations, net of tax, was $0.3 million, during the first six months of fiscal 2013 compared to income from discontinued operations, net of tax, of $1.8 million, or $0.10 per diluted common share, during the first six months of last year.
  • Net income during the first six months of fiscal 2013 was $1.0 million, or $0.06 per diluted common share, compared to net income of $4.5 million, or $0.25 per diluted common share, during the first six months of last year.

CASH USED FOR SHARE REPURCHASES

“Cash and investments at the end of our second quarter were $147.3 million. We used $6.0 million to repurchase 0.5 million shares during the second quarter of fiscal 2013. As of today, we have repurchased a total of 3.5 million shares for $44.2 million under our share repurchase authorization and currently have $30.8 million remaining. With our strong balance sheet, we are committed to returning value to our shareholders through a combination of cash dividends, share repurchases, and strategic acquisitions,” said Mr. Richardson.

Share repurchases may be made on the open market or in privately negotiated transactions, subject to market conditions and trading restrictions. This authorization has no expiration and may be cancelled at any time.

CASH DIVIDEND

The Company also announced today that its Board of Directors declared a $0.06 dividend per share to all holders of common stock and a $0.054 cash dividend per share to all holders of Class B common stock. The dividend will be payable on February 22, 2013, to all common stockholders of record on February 8, 2013. The Company currently has 12.3 million outstanding shares of common stock and 2.7 outstanding shares of Class B common stock.

CONFERENCE CALL INFORMATION

On Thursday, January 10, 2013, 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 2013. A question and answer session will be included as part of the call’s agenda. To listen to the call, please dial (877) 465-4511 and enter passcode 75280206 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 10, 2013, for seven days. The telephone numbers for the replay are (USA) (888) 286-8010 and (International) (617) 801-6888; access code 51931348.

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 27, 2012, and in the Company’s Proxy Statement on Schedule 14A filed on August 30, 2012. 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
December 1, June 2,
2012 2012
Assets
Current assets:
Cash and cash equivalents $ 53,518 $ 43,893
Accounts receivable, less allowance of $1,047 and $1,058 21,706 19,727
Inventories 35,252 34,675
Prepaid expenses and other assets 1,287 806
Deferred income taxes 2,029 2,095
Income tax receivable 6,381 6,572
Investments - current 86,395 105,009
Discontinued operations - assets   248   514  
 
Total current assets   206,816   213,291  
 
Non-current assets:
Property, plant and equipment, net 4,438 4,375
Goodwill 2,269 1,261
Other intangibles 272 355
Non-current deferred income taxes 1,474 1,458
Investments - non-current   7,380   10,683  
Total non-current assets   15,833   18,132  
 
Total assets $ 222,649 $ 231,423  
 
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $ 13,960 $ 12,611
Accrued liabilities 8,302 8,466
Discontinued operations - liabilities   418   253  
 
Total current liabilities   22,680   21,330  
 
Non-current liabilities:
Long-term income tax liabilities 6,947 7,306
Other non-current liabilities 1,385 1,213
Discontinued operations - non-current liabilities   1,380   1,361  
 
Total non-current liabilities   9,712   9,880  
 
Total liabilities   32,392   31,210  
 
Commitments and contingencies - -
 
Stockholders' equity
Common stock, $0.05 par value; issued 12,284 shares at December 1, 2012, and 13,074
shares at June 2, 2012 611 654
Class B common stock, convertible, $0.05 par value; issued 2,740 shares at December 1, 2012
and 2,920 shares at June 2, 2012 141 146
Preferred stock, $1.00 par value, no shares issued - -
Additional paid-in-capital 76,914 88,217
Common stock in treasury, at cost, -0- shares at December 1, 2012, and 18 shares
at June 2, 2012 - (216 )
Retained earnings 103,366 104,139
Accumulated other comprehensive income   9,225   7,273  
 
Total stockholders' equity   190,257   200,213  
 
Total liabilities and stockholders' equity $ 222,649 $ 231,423  
 
Richardson Electronics, Ltd.
Unaudited Consolidated Statements of Comprehensive Income (Loss)
(in thousands, except per share amounts)
       
Three Months Ended Six Months Ended
December 1, December 3, December 1, December 3,
2012 2011 2012 2011
 
Net sales $ 36,603 $ 39,138 $ 72,253 $ 80,649
Cost of sales   25,861     27,448     50,865     56,257  
Gross profit 10,742 11,690 21,388 24,392
Selling, general, and administrative expenses 10,228 9,973 20,377 20,745
(Gain) loss on disposal of assets   2     -     (2 )   (70 )
Operating income   512     1,717     1,013     3,717  
Other (income) expense:
Investment/interest income (352 ) (281 ) (735 ) (645 )
Foreign exchange (gain) loss 297 (486 ) 260 295
Other, net   (42 )   19     (65 )   (2 )
Total other income   (97 )   (748 )   (540 )   (352 )
Income from continuing operations before income taxes 609 2,465 1,553 4,069
Income tax provision   28     836     238     1,411  
Income from continuing operations 581 1,629 1,315 2,658
Income (loss) from discontinued operations, net of tax   (203 )   (799 )   (290 )   1,803  
Net income   378     830     1,025     4,461  
Foreign currency translation gain (loss), net of tax 1,547 (2,573 ) 1,947 (1,205 )
Fair value adjustments on investments   4     (3 )   5     (51 )
Comprehensive income (loss) $ 1,929   $ (1,746 ) $ 2,977   $ 3,205  
 
Net income per Common share - Basic:
Income from continuing operations $ 0.04 $ 0.10 $ 0.09 $ 0.16
Income (loss) from discontinued operations   (0.01 )   (0.05 )   (0.02 )   0.11  
Total net income per Common share - Basic: $ 0.03   $ 0.05   $ 0.07   $ 0.27  
 
Net income per Class B common share - Basic:
Income from continuing operations $ 0.03 $ 0.09 $ 0.08 $ 0.14
Income (loss) from discontinued operations   (0.01 )   (0.04 )   (0.02 )   0.10  
Total net income per Class B common share - Basic: $ 0.02   $ 0.05   $ 0.06   $ 0.24  
 
Net income per Common share - Diluted:
Income from continuing operations $ 0.04 $ 0.09 $ 0.08 $ 0.15
Income (loss) from discontinued operations   (0.01 )   (0.05 )   (0.02 )   0.10  
Total net income per Common share - Diluted: $ 0.03   $ 0.04   $ 0.06   $ 0.25  
 
Net income per Class B common share - Diluted:
Income from continuing operations $ 0.03 $ 0.09 $ 0.08 $ 0.14
Income (loss) from discontinued operations   (0.01 )   (0.04 )   (0.02 )   0.10  
Total net income per Class B common share - Diluted: $ 0.02   $ 0.05   $ 0.06   $ 0.24  
 
Weighted average number of shares:
Common shares - Basic   12,437     14,069     12,604     14,206  
Class B common shares - Basic   2,812     2,940     2,863     2,946  
Common shares - Diluted   15,345     17,161     15,567     17,319  
Class B common shares - Diluted   2,812     2,940     2,863     2,946  
 
Dividends per common share $ 0.060   $ 0.050   $ 0.120   $ 0.100  
Dividends per Class B common share $ 0.054   $ 0.045   $ 0.108   $ 0.090  
 
Richardson Electronics, Ltd.
Unaudited Consolidated Statements of Cash Flows
(in thousands)
       
Three Months Ended Six Months Ended
December 1, December 3, December 1, December 3,
2012 2011 2012 2011
Operating activities:
Net income $ 378 $ 830 $ 1,025 $ 4,461
Adjustments to reconcile net income to cash provided
by (used in) operating activities:
Depreciation and amortization 266 280 565 564
(Gain) loss on sale of investments (1 ) 11 (21 ) 1
(Gain) loss on disposal of assets 2 - (2 ) -
Stock compensation expense 208 107 332 262
Change in assets and liabilities, net of effects of acquired businesses:
Deferred income taxes (7 ) (3,514 ) (8 ) 1,815
Accounts receivable (758 ) 161 (1,404 ) (64 )
Income tax receivable 36 2,686 191 (5,584 )
Inventories 2,265 (1,978 ) 1,715 (5,592 )
Prepaid expenses and other assets 196 5,631 (426 ) 8,426
Accounts payable 2,664 (503 ) 1,234 (3,084 )
Accrued liabilities 806 (9,230 ) (200 ) (42,866 )
Long-term income tax liabilities 4 4,396 (317 ) (7,015 )
Other   148     1,744     190     1,678  
Net cash provided by (used in) operating activities   6,207     621     2,874     (46,998 )
Investing activities:
Cash consideration paid for acquired businesses (2,557 ) (2,297 ) (2,557 ) (2,297 )
Capital expenditures (478 ) - (557 ) (74 )
Proceeds from sale of assets - - 4 16
Proceeds from maturity of investments 39,763 64,849 97,510 202,382
Purchases of investments (23,838 ) (68,878 ) (75,562 ) (285,162 )
Proceeds from sales of available-for-sale securities 83 58 137 121
Purchases of available-for-sale securities (83 ) (58 ) (137 ) (121 )
Other   -     3     -     51  
Net cash provided by (used in) investing activities   12,890     (6,323 )   18,838     (85,084 )
Financing activities:
Repurchase of common stock (5,998 ) (4,197 ) (11,550 ) (11,888 )
Proceeds from issuance of common stock 72 275 83 362
Cash dividends paid (1,799 ) (832 ) (1,799 ) (1,678 )
Other   -     (4 )   -     3  
Net cash used in financing activities   (7,725 )   (4,758 )   (13,266 )   (13,201 )
 
Effect of exchange rate changes on cash and cash equivalents   908     (1,594 )   1,179     (510 )
 
Increase/ (decrease) in cash and cash equivalents 12,280 (12,054 ) 9,625 (145,793 )
 
Cash and cash equivalents at beginning of period 41,238 37,236 43,893 170,975
       
Cash and cash equivalents at end of period $ 53,518   $ 25,182   $ 53,518   $ 25,182  
 
Richardson Electronics, Ltd.
Net Sales and Gross Profit
For the Second Quarter and First Six Months of Fiscal 2013 and Fiscal 2012
(in thousands)
 
By Strategic Business Unit:
Net Sales      
FY 2013 FY 2012 % Change
Second Quarter
EDG $ 26,186 $ 28,022 (6.6 %)
Canvys   10,417   11,116 (6.3 %)
Total $ 36,603 $ 39,138 (6.5 %)
 
FY 2013 FY 2012 % Change  
First Six Months
EDG $ 51,813 $ 58,751 (11.8 %)
Canvys   20,440   21,898 (6.7 %)
Total $ 72,253 $ 80,649 (10.4 %)
Gross Profit     % of     % of

 

FY 2013 Net Sales FY 2012 Net Sales

 

Second Quarter
EDG $ 7,930 30.3 % $ 8,546 30.5 %

 

Canvys   2,812 27.0 %   3,144 28.3 %

 

Total $ 10,742 29.3 % $ 11,690 29.9 %

 

 
% of % of

 

FY 2013 Net Sales FY 2012 Net Sales

 

First Six Months
EDG $ 15,930 30.7 % $ 18,217 31.0 %

 

Canvys   5,458 26.7 %   6,175 28.2 %

 

Total $ 21,388 29.6 % $ 24,392 30.2 %

 

 

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