RICHARDSON ELECTRONICS LTD/DE - FORM 10-Q - EX-99.1 - EXHIBIT 99.1 - April 9, 2015

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10-Q - 10-Q - RICHARDSON ELECTRONICS LTD/DErell_10qxfy2015xq3x2282015.htm


Press Release
For Immediate Release
For Details Contact:                             40W267 Keslinger Road
Edward J. Richardson        Kathleen S. Dvorak            PO BOX 393
Chairman and CEO        EVP & CFO                LaFox, IL 60147-0393 USA
Phone: (630) 208-2340        (630) 208-2208                (630) 208-2200 | Fax: (630) 208-2550
                                        
RICHARDSON ELECTRONICS REPORTS THIRD QUARTER FISCAL 2015 RESULTS AND DECLARES QUARTERLY CASH DIVIDEND

LaFox, IL, April 8, 2015: Richardson Electronics, Ltd. (NASDAQ: RELL), today reported sales and earnings for its third quarter ended February 28, 2015. The Company also announced that its Board of Directors declared a $0.06 per share quarterly cash dividend.
Net sales for the third quarter of fiscal 2015 were $33.5 million, a 1.8% increase compared to net sales of $32.9 million in the prior year. Sales for the Company's EDG and Richardson Healthcare ("Healthcare") businesses increased 4.2% and 3.5%, respectively, while sales for its Canvys division were down 7.4%, compared to the prior year's quarter. Gross margin increased to $9.8 million, or 29.3% of net sales during the third quarter of fiscal 2015, compared to $9.7 million, or 29.3% of net sales during the third quarter of fiscal 2014. Operating expenses were $12.6 million for the third quarter of fiscal 2015, compared to $10.5 million for the third quarter of fiscal 2014. Operating expenses for the third quarter include $1.5 million related to the Company's previously discussed IT implementation and expenses of $1.2 million related to its engineered solutions and healthcare growth initiatives. Operating loss for the third quarter of fiscal 2015 was $2.7 million, compared to an operating loss for the third quarter of fiscal 2014 of $0.9 million.
Loss from continuing operations for the third quarter of fiscal 2015 was $2.2 million, compared to a loss from continuing operations of $0.1 million, during the third quarter of fiscal 2014.
“Although our third quarter results are disappointing, we are continuing to invest in our foundation for future growth with the new IT platform and resources to build our Healthcare infrastructure. On March 1st, we began operating on our new global IT system. We have also made significant investments in our management and engineering teams, as well as investing in advanced equipment to execute our long-term strategy of delivering engineered solutions in both Healthcare and EDG,” said Edward J. Richardson, Chairman, Chief Executive Officer and President.

“Our fourth quarter sales should be in the range of $37 to $39 million. We anticipate that IT expense should begin to decline in FY16. We will continue to invest in strategies which create profitable long-term growth.” said Mr. Richardson.

FINANCIAL SUMMARY ─ THREE MONTHS ENDED FEBRUARY 28, 2015

•
Net sales for the third quarter of fiscal 2015 were $33.5 million, an increase of 1.8%, compared to net sales of $32.9 million during the third quarter of fiscal 2014.

•
Gross margin was 29.3% of net sales during the third quarter of both fiscal 2015 and 2014.





•
Selling, general, and administrative expenses increased to $12.6 million, or 37.5% of net sales, for the third quarter of fiscal 2015, compared to $10.5 million for the third quarter of fiscal 2014, or 32.0% of net sales. Operating expenses for the third quarter of fiscal 2015 include $1.5 million related to the Company's IT implementation and $1.2 million related to its engineered solution and healthcare growth initiatives.

•
Operating loss during the third quarter of fiscal 2015 was $2.7 million, compared to operating loss of $0.9 million, during the third quarter of fiscal 2014.

•
Loss from continuing operations during the third quarter of fiscal 2015 was $2.2 million, compared to loss from continuing operations during the third quarter of fiscal 2014 of $0.1 million.

•
Net loss during the third quarter of fiscal 2015 was $2.2 million, compared to net loss of $0.5 million, during the third quarter of fiscal 2014.

FINANCIAL SUMMARY – NINE MONTHS ENDED FEBRUARY 28, 2015

•
Net sales for the first nine months of fiscal 2015 were $102.0 million, a decrease of 0.6%, compared to net sales of $102.6 million during the first nine months of fiscal 2014.

•
Gross margin increased slightly to 30.3% during the first nine months of fiscal 2015, compared to 30.1% from the first nine months of fiscal 2014.

•
Selling, general, and administrative expenses increased to $36.4 million, or 35.6% of net sales, for the first nine months of fiscal 2015, compared to $31.1 million, or 30.3% of net sales, for the first nine months of fiscal 2014.

•
Operating loss during the first nine months of fiscal 2015 was $5.4 million, compared to operating loss of $0.2 million, during the first nine months of fiscal 2014.

•
Loss from continuing operations during the first nine months of fiscal 2015 was $3.4 million, compared to income from continuing operations of $2.5 million, or $0.17 per diluted common share, during the first nine months of fiscal 2014.

•
Net loss during the first nine months of fiscal 2015 was $3.3 million, compared to net income of $2.0 million, or $0.13 per diluted common share, during the first nine months of fiscal 2014.

CASH 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 May 22, 2015, to common stockholders of record on May 7, 2015.
“Cash and investments at the end of our third quarter were $113.8 million. Impact of foreign exchange rates for the first nine months on cash and investments was a decline of $4.7 million. In addition, we used $1,304,478 to repurchase 134,300 shares during the third quarter. Since we initiated our share repurchase program in 2011, we have invested $60,389,250 to repurchase 4,965,562 shares. As of today, the Company currently has 11,529,333 outstanding shares of common stock and 2,140,644 outstanding shares of Class B common stock. With our strong balance sheet, we are committed to continued implementation of our growth strategy and returning value to our shareholders,” said Mr. Richardson.





CONFERENCE CALL INFORMATION
On Thursday, April 9, 2015, 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 for fiscal 2015. 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 24886741 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 9, 2015, for seven days. The telephone numbers for the replay are (USA) (888) 286-8010 and (International) (617) 801-6888; passcode 54585568.

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 25, 2014. 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
 
February 28, 
 2015
 
May 31, 
 2014
Assets
 
 
 
Current assets:
 
 
 
Cash and cash equivalents
$
78,398

 
$
102,752

Accounts receivable, less allowance of $477 and $581
19,113

 
18,354

Inventories, net
35,915

 
33,869

Prepaid expenses and other assets
1,549

 
1,089

Deferred income taxes
1,343

 
1,537

Income tax receivable
—

 
2,888

Investments—current
23,645

 
31,732

Discontinued operations—assets
—

 
18

Total current assets
159,963

 
192,239

Non-current assets:
 
 
 
Property, plant and equipment, net
9,145

 
7,223

Other intangibles, net
765

 
843

Non-current deferred income taxes
1,422

 
1,724

Investments—non-current
11,793

 
1,516

Total non-current assets
23,125

 
11,306

Total assets
$
183,088

 
$
203,545

Liabilities and Stockholders’ Equity
 
 
 
Current liabilities:
 
 
 
Accounts payable
$
11,234

 
$
12,337

Accrued liabilities
8,226

 
9,220

Discontinued operations—liabilities
—

 
7

Total current liabilities
19,460

 
21,564

Non-current liabilities:
 
 
 
Non-current deferred income taxes
2,664

 
5,691

Other non-current liabilities
1,144

 
1,315

Discontinued operations—non-current liabilities
—

 
130

Total non-current liabilities
3,808

 
7,136

Total liabilities
23,268

 
28,700

Commitments and contingencies
—

 
—

Stockholders’ equity
 
 
 
Common stock, $0.05 par value; issued 11,529 shares at February 28, 2015, and 11,835 shares at May 31, 2014
576

 
592

Class B common stock, convertible, $0.05 par value; issued 2,141 shares at February 28, 2015, and 2,191 shares at May 31, 2014
107

 
110

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

 
—

Additional paid-in capital
63,031

 
66,141

Common stock in treasury, at cost, no shares at February 28, 2015, and 1 share at May 31, 2014
—

 
(14
)
Retained earnings
92,168

 
97,959

Accumulated other comprehensive income
3,938

 
10,057

Total stockholders’ equity
159,820

 
174,845

Total liabilities and stockholders’ equity
$
183,088

 
$
203,545






Richardson Electronics, Ltd.
Unaudited Consolidated Statements of Comprehensive Income (Loss)
(in thousands, except per share amounts)
 
Three Months Ended
 
Nine Months Ended
 
February 28, 
 2015
 
March 1, 
 2014
 
February 28, 
 2015
 
March 1, 
 2014
Net Sales
$
33,471

 
$
32,884

 
$
102,011

 
$
102,577

Cost of Sales
23,671

 
23,233

 
71,091

 
71,727

Gross profit
9,800

 
9,651

 
30,920

 
30,850

Selling, general, and administrative expenses
12,563

 
10,537

 
36,366

 
31,079

Gain on disposal of assets
(14
)
 
—

 
(5
)
 
—

Operating loss
(2,749
)
 
(886
)
 
(5,441
)
 
(229
)
Other (income) expense:
 
 
 
 
 
 
 
Investment/interest income
(239
)
 
(277
)
 
(744
)
 
(797
)
Foreign exchange (gain) loss
(275
)
 
31

 
(285
)
 
123

Proceeds from legal settlement
—

 
(432
)
 
—

 
(2,547
)
Other, net
(6
)
 
(21
)
 
(22
)
 
(36
)
Total other income
(520
)
 
(699
)
 
(1,051
)
 
(3,257
)
Income (loss) from continuing operations before income taxes
(2,229
)
 
(187
)
 
(4,390
)
 
3,028

Income tax provision (benefit)
(31
)
 
(75
)
 
(965
)
 
530

Income (loss) from continuing operations
(2,198
)
 
(112
)
 
(3,425
)
 
2,498

Income (loss) from discontinued operations, net of tax
—

 
(420
)
 
87

 
(538
)
Net income (loss)
(2,198
)
 
(532
)
 
(3,338
)
 
1,960

Foreign currency translation gain (loss), net of tax
(2,188
)
 
258

 
(6,149
)
 
1,879

Fair value adjustments on investments
5

 
6

 
30

 
29

Comprehensive income (loss)
$
(4,381
)
 
$
(268
)
 
$
(9,457
)
 
$
3,868

Net income (loss) per Common share - Basic:
 
 
 
 
 
 
 
Income (loss) from continuing operations
$
(0.16
)
 
$
(0.01
)
 
$
(0.25
)
 
$
0.18

Income (loss) from discontinued operations
—

 
(0.03
)
 
0.01

 
(0.04
)
Total net income (loss) per Common share - Basic
$
(0.16
)
 
$
(0.04
)
 
$
(0.24
)
 
$
0.14

Net income (loss) per Class B common share - Basic:
 
 
 
 
 
 
 
Income (loss) from continuing operations
$
(0.15
)
 
$
(0.01
)
 
$
(0.22
)
 
$
0.16

Income (loss) from discontinued operations
—

 
(0.03
)
 
0.01

 
(0.03
)
Total net income (loss) per Class B common share - Basic
$
(0.15
)
 
$
(0.04
)
 
$
(0.21
)
 
$
0.13

Net income (loss) per Common share - Diluted:
 
 
 
 
 
 
 
Income (loss) from continuing operations
$
(0.16
)
 
$
(0.01
)
 
$
(0.25
)
 
$
0.17

Income (loss) from discontinued operations
—

 
(0.03
)
 
0.01

 
(0.04
)
Total net income (loss) per Common share - Diluted
$
(0.16
)
 
$
(0.04
)
 
$
(0.24
)
 
$
0.13

Net income (loss) per Class B common share - Diluted:
 
 
 
 
 
 
 
Income (loss) from continuing operations
$
(0.15
)
 
$
(0.01
)
 
$
(0.22
)
 
$
0.16

Income (loss) from discontinued operations
—

 
(0.03
)
 
0.01

 
(0.03
)
Total net income (loss) per Class B common share - Diluted
$
(0.15
)
 
$
(0.04
)
 
$
(0.21
)
 
$
0.13

Weighted average number of shares:
 
 
 
 
 
 
 
Common shares - Basic
11,604

 
11,832

 
11,733

 
11,942

Class B common shares - Basic
2,141

 
2,191

 
2,154

 
2,270

Common shares - Diluted
13,745

 
14,140

 
13,887

 
14,335

Class B common shares - Diluted
2,141

 
2,191

 
2,154

 
2,270

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 28, 
 2015

March 1, 
 2014
 
February 28, 
 2015
 
March 1, 
 2014
Operating activities:
 
 
 
 
 
 
 
Net income (loss)
(2,198
)
 
(532
)
 
(3,338
)
 
1,960

Adjustments to reconcile net income (loss) to cash provided by (used in) operating activities:
 
 
 
 
 
 
 
Depreciation and amortization
418

 
275

 
1,227

 
796

Gain on sale of investments
(6
)
 
(4
)
 
(15
)
 
(23
)
Gain on disposal of assets
(4
)
 
—

 
(30
)
 
—

Share-based compensation expense
143

 
201

 
529

 
585

Deferred income taxes
(498
)
 
62

 
(665
)
 
(105
)
Change in assets and liabilities, net of effect of acquired businesses:
 
 
 
 
 
 
 
Accounts receivable
(2,361
)
 
228

 
(2,655
)
 
(1,498
)
Income tax receivable
—

 
(319
)
 
2,888

 
2,789

Inventories
(105
)
 
273

 
(4,366
)
 
133

Prepaid expenses and other assets
176

 
140

 
(727
)
 
(134
)
Accounts payable
(1,878
)
 
(940
)
 
(389
)
 
(3,170
)
Accrued liabilities
632

 
(73
)
 
(469
)
 
(2,528
)
Non-current deferred income tax liabilities
—

 
175

 
—

 
(302
)
Other
(25
)
 
13

 
(32
)
 
60

Net cash used in operating activities
(5,706
)
 
(501
)
 
(8,042
)
 
(1,437
)
Investing activities:
 
 
 
 
 
 
 
Cash consideration paid for acquired businesses
—

 
—

 
—

 
(973
)
Capital expenditures
(1,314
)
 
(840
)
 
(3,250
)
 
(1,821
)
Proceeds from maturity of investments
750

 
203,757

 
31,957

 
258,289

Purchases of investments
(750
)
 
(197,321
)
 
(34,093
)
 
(248,873
)
Proceeds from sales of available-for-sale securities
112

 
76

 
186

 
152

Purchases of available-for-sale securities
(112
)
 
(76
)
 
(186
)
 
(152
)
Other
(98
)
 
6

 
(128
)
 
97

Net cash provided by (used in) investing activities
(1,412
)
 
5,602

 
(5,514
)
 
6,719

Financing activities:
 
 
 
 
 
 
 
Repurchase of common stock
(1,305
)
 
—

 
(3,945
)
 
(8,725
)
Proceeds from issuance of common stock
13

 
13

 
301

 
184

Cash dividends paid
(808
)
 
(829
)
 
(2,453
)
 
(2,514
)
Other
2

 
(26
)
 
—

 
(25
)
Net cash used in financing activities
(2,098
)
 
(842
)
 
(6,097
)
 
(11,080
)
Effect of exchange rate changes on cash and cash equivalents
(2,272
)
 
255

 
(4,701
)
 
956

Increase/ (decrease) in cash and cash equivalents
(11,488
)
 
4,514

 
(24,354
)
 
(4,842
)
Cash and cash equivalents at beginning of period
89,886

 
92,646

 
102,752

 
102,002

Cash and cash equivalents at end of period
$
78,398

 
$
97,160

 
$
78,398

 
$
97,160







Richardson Electronics, Ltd.
Net Sales and Gross Profit
For the Third Quarter and First Nine Months of Fiscal 2015 and Fiscal 2014
(in thousands)

By Strategic Business Segment:
Net Sales
Three Months Ended
 
 
 
Three Months Ended
 
 
 
February 28, 2015
 
 
 
March 1, 2014
 
% Change
EDG
$
25,207

 
 
 
$
24,193

 
4.2%
Canvys
6,236

 
 
 
6,732

 
(7.4)%
Healthcare
$
2,028

 

 
$
1,959

 
3.5%
Total
$
33,471

 
 
 
$
32,884

 
1.8%
 
 
 
 
 
 
 
 
 
Nine Months Ended
 
 
 
Nine Months Ended
 
 
 
February 28, 2015
 
 
 
March 1, 2014
 
% Change
EDG
$
79,432

 

 
$
75,835

 
4.7%
Canvys
18,110

 

 
21,769

 
(16.8)%
Healthcare
$
4,469

 

 
$
4,973

 
(10.1)%
Total
$
102,011

 

 
$
102,577

 
(0.6)%
 
 
 
 
 
 
 
 
Gross Profit
Three Months Ended
 
 
 
Three Months Ended
 
 
 
February 28, 2015
 
% of Net Sales
 
March 1, 2014
 
% of Net Sales
EDG
$
7,680

 
30.5%
 
$
7,139

 
29.5%
Canvys
1,621

 
26.0%
 
1,945

 
28.9%
Healthcare
$
499

 
24.6%
 
$
567

 
28.9%
Total
$
9,800

 
29.3%
 
$
9,651

 
29.3%
 
 
 
 
 
 
 
 

Nine Months Ended
 

 
Nine Months Ended
 


February 28, 2015
 
% of Net Sales
 
March 1, 2014
 
% of Net Sales
EDG
$
24,904

 
31.4%
 
$
23,505

 
31.0%
Canvys
4,929

 
27.2%
 
5,970

 
27.4%
Healthcare
$
1,087

 
24.3%
 
$
1,375

 
27.6%
Total
$
30,920

 
30.3%
 
$
30,850

 
30.1%




RICHARDSON ELECTRONICS LTD/DE Reports