Richardson Electronics 10K

 

Exhibit 99.1

 

 

Press Release

 

For Immediate Release

For Details Contact:		40W267 Keslinger Road
Edward J. Richardson	Robert J. Ben	PO BOX 393
Chairman and CEO	EVP & CFO	LaFox, IL 60147-0393 USA
Phone: (630) 208-2205	(630) 208-2203	(630) 208-2200 | Fax: (630) 208-2550

 

RICHARDSON ELECTRONICS REPORTS IMPROVED FOURTH QUARTER FISCAL 2016 RESULTS AND DECLARES QUARTERLY CASH DIVIDEND

 

LaFox, IL, July 20, 2016: Richardson Electronics, Ltd. (NASDAQ: RELL) today reported financial results for its fourth quarter and fiscal year ended May 28, 2016. The Company also announced that its Board of Directors declared a $0.06 per share quarterly cash dividend.

 

Fourth Quarter Results

 

Net sales for the fourth quarter of fiscal 2016 were $39.6 million, a 13.2% increase, compared to net sales of $35.0 million in the prior year. Sales increased $3.9 million for PMT and $1.6 million for Healthcare, which includes net sales for International Medical Equipment Systems (“IMES”), acquired early this fiscal year. The increase was partially offset by a $0.9 million decrease in Canvys.

 

Gross margin increased to $13.4 million, or 33.8% of net sales during the fourth quarter of fiscal 2016, compared to $10.2 million, or 29.2% of net sales during the fourth quarter of fiscal 2015. Margin improved as a percent of net sales primarily due to sales of diagnostic imaging replacement parts in the Healthcare business.

 

Operating expenses increased to $13.7 million for fourth quarter of fiscal 2016, compared to $12.9 million for fourth quarter of fiscal 2015. However, operating expenses as a percent of net sales improved to 34.6% versus 36.8% in the same period last year. The increase in SG&A was due to $1.1 million related to IMES and additional investments in our Richardson Healthcare business and $0.8 million in PMT, partially offset by decreases of $0.3 million in IT services, $0.6 million in our other support functions, and $0.2 million in Canvys.

 

As a result, operating loss for the fourth quarter of fiscal 2016 was $0.3 million, compared to an operating loss of $2.6 million in the prior year’s fourth quarter.

 

Other expense for the fourth quarter of fiscal 2016, including foreign exchange, was less than $0.1 million, compared to less than $0.1 million in other income in the fourth quarter of fiscal 2015.

 

The income tax benefit of $0.2 million during the fourth quarter of fiscal 2016 reflects an adjusted lower provision for foreign taxes as well as the valuation allowance recorded against the net operating loss in the U.S.

 

  

Net loss for the fourth quarter of fiscal 2016 was $0.2 million, compared to net loss of $2.2 million during the fourth quarter of last year.

 

Fiscal 2016 Results

 

Net sales for fiscal 2016 were $142.0 million, a 3.7% increase, compared to net sales of $137.0 million in the prior year. Sales for the Company’s Healthcare business increased $6.4 million, which includes net sales for IMES, acquired early this fiscal year. The increase was partially offset by a $1.2 million decrease in Canvys and $0.2 million decrease in PMT.

 

Gross margin increased to $44.8 million, or 31.6% of net sales during fiscal 2016, compared to $41.1 million, or 30.0% of net sales during fiscal 2015. Margin improved as a percent of sales primarily due to higher margins associated with the sale of diagnostic imaging replacement parts in the Healthcare business.

 

Operating expenses increased to $51.6 million for fiscal 2016, compared to $49.2 million for the fiscal 2015 and as a percentage of sales increased from 35.9% to 36.4%. The increase in SG&A reflected $5.0 million for IMES and additional investments in our Richardson Healthcare business and $0.7 million in PMT, partially offset by decreases of $1.9 million in IT services, $0.9 million in our other support functions, and $0.5 million in Canvys.

 

As a result, operating loss for fiscal 2016 was $6.6 million, compared to an operating loss of $8.1 million in fiscal 2015.

 

Other income for fiscal 2016, including foreign exchange, was $0.3 million, compared to $1.1 million in other income for fiscal 2015.

 

The income tax provision of $0.5 million during fiscal 2016 was due to foreign income tax expense and additional tax due in Germany that resulted from an audit.

 

Net loss for fiscal 2016 was $6.8 million, compared to net loss of $5.6 million during fiscal 2015.

 

CASH DIVIDEND

 

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 August 24, 2016, to common stockholders of record on August 8, 2016.

 

Cash and investments at the end of the fourth quarter of fiscal 2016 were $70.5 million. During the fourth quarter of fiscal 2016, 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 and currently has 10.7 million outstanding shares of common stock and 2.1 million outstanding shares of Class B common stock.

 

“Since the sale of RFPD in 2011, we have spent more than $17 million on dividends,” said Edward J. Richardson, Chairman, Chief Executive Officer and President. “Including share repurchases, we have returned more than $82 million to our shareholders. Our intent now is to further improve shareholder value by investing in our growth initiatives.”

 

  

OUTLOOK

 

“We are pleased with the significant improvement in our financial performance in the fourth quarter of fiscal 2016 as compared to the fourth quarter of fiscal 2015. In addition to a large U.S. government sale, there were other areas of improvement, including strong IMES sales and gross margin and lower S, G&A expenses as a percent of net sales,” said Mr. Richardson. “We are highly focused on revenue growth in fiscal 2017, while carefully managing our cash flow. We have implemented programs to reduce our run rate expenses for fiscal year 2017, and are working on more operational improvement initiatives so we may continue to invest in our growth strategy,” Mr. Richardson concluded.

 

CONFERENCE CALL INFORMATION

 

On Thursday, July 21, 2016, at 9:00 a.m. CT, 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 fourth quarter results for fiscal 2016. 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 68976218 approximately five minutes prior to the start of the call. A replay of the call will be available for seven days beginning at 12:00 a.m. CT on July 22, 2016. The telephone numbers for the replay are (USA) (888) 286-8010 and (International) (617) 801-6888; passcode 27292309.

 

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 28, 2015. 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)

 

		May 28,   2016				May 30,   2015
Assets
Current assets:
Cash and cash equivalents		$	60,454			$	74,535
Accounts receivable, less allowance of $364 and $283			24,928				20,753
Inventories, net			45,422				38,769
Prepaid expenses and other assets			1,758				1,696
Deferred income taxes			1,078				804
Income tax receivable			17				929
Investments - current			2,268				23,692
Total current assets			135,925				161,178
Non-current assets:
Property, plant and equipment, net			12,986				10,081
Goodwill			6,332				—
Intangible assets, net			3,818				743
Non-current deferred income taxes			1,270				1,443
Investments - non-current			7,799				11,549
Total non-current assets			32,205				23,816
Total assets		$	168,130			$	184,994
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable			14,896				15,768
Accrued liabilities			9,135				10,144
Total current liabilities			24,031				25,912
Non-current liabilities:
Non-current deferred income tax liabilities			1,457				1,209
Other non-current liabilities			967				1,221
Total non-current liabilities			2,424				2,430
Total liabilities			26,455				28,342
Stockholders’ equity
Common stock, $0.05 par value; issued and outstanding 10,703 shares at May 28, 2016, and 11,530 shares at May 30, 2015			535				577
Class B common stock, convertible, $0.05 par value; issued and outstanding 2,141 shares at May 28, 2016, and at May 30, 2015			107				107
Preferred stock, $1.00 par value, no shares issued			—				—
Additional paid-in-capital			58,969				63,252
Common stock in treasury, at cost, no shares at May 28, 2016, and at May 30, 2015			—				—
Retained earnings			79,292				89,141
Accumulated other comprehensive income			2,772				3,575
Total stockholders’ equity			141,675				156,652
Total liabilities and stockholders’ equity		$	168,130			$	184,994

 

 

Richardson Electronics, Ltd.

Consolidated Statements of Comprehensive Income (Loss)

(in thousands, except per share amounts)

 

		Three Months Ended								Twelve Months Ended
		May 28, 2016				May 30, 2015				May 28, 2016				May 30, 2015
Statements of Comprehensive Loss
Net sales		$	39,568			$	34,946			$	142,016			$	136,957
Cost of sales			26,180				24,728				97,181				95,819
Gross profit			13,388				10,218				44,835				41,138
Selling, general, and administrative expenses			13,694				12,863				51,632				49,229
Gain on disposal of assets			—				—				(244	)			(5	)
Operating loss			(306	)			(2,645	)			(6,553	)			(8,086	)
Other (income) expense:
Investment/interest income			(129	)			(255	)			(562	)			(999	)
Foreign exchange (gain) loss			104				100				212				(185	)
Other, net			70				114				17				92
Total other (income) expense			45				(41	)			(333	)			(1,092	)
Loss from continuing operations before income taxes			(351	)			(2,604	)			(6,220	)			(6,994	)
Income tax provision (benefit)			(196	)			(501	)			546				(1,466	)
Loss from continuing operations			(155	)			(2,103	)			(6,766	)			(5,528	)
Loss from discontinued operations, net of tax			—				(118	)			—				(31	)
Net loss			(155	)			(2,221	)			(6,766	)			(5,559	)
Foreign currency translation gain (loss), net of tax			1,153				(355	)			(759	)			(6,504	)
Fair value adjustments on investments gain (loss)			35				(8	)			(44	)			22
Comprehensive income (loss)		$	1,033			$	(2,584	)		$	(7,569	)		$	(12,041	)
Loss per Common share - Basic:
Loss from continuing operations		$	(0.01	)		$	(0.16	)		$	(0.53	)		$	(0.41	)
Loss from discontinued operations			—				(0.01	)			—				—
Total loss per Common share - Basic:		$	(0.01	)		$	(0.17	)		$	(0.53	)		$	(0.41	)
Loss per Class B common share - Basic:
Loss from continuing operations		$	(0.01	)		$	(0.13	)		$	(0.47	)		$	(0.36	)
Loss from discontinued operations			—				(0.01	)			—				—
Total loss per Class B common share - Basic:		$	(0.01	)		$	(0.14	)		$	(0.47	)		$	(0.36	)
Loss per Common share - Diluted:
Loss from continuing operations		$	(0.01	)		$	(0.16	)		$	(0.53	)		$	(0.41	)
Loss from discontinued operations			—				(0.01	)			—				—
Total loss per Common share - Diluted:		$	(0.01	)		$	(0.17	)		$	(0.53	)		$	(0.41	)
Loss per Class B common share - Diluted:
Loss from continuing operations		$	(0.01	)		$	(0.13	)		$	(0.47	)		$	(0.36	)
Loss from discontinued operations			—				(0.01	)			—				—
Total loss per Class B common share - Diluted:		$	(0.01	)		$	(0.14	)		$	(0.47	)		$	(0.36	)
Weighted average number of shares:
Common shares - Basic			10,703				11,529				10,908				11,682
Class B common shares - Basic			2,141				2,141				2,141				2,151
Common shares - Diluted			10,703				11,529				10,908				11,682
Class B common shares - Diluted			2,141				2,141				2,141				2,151
Dividends per common share		$	0.060			$	0.060			$	0.240			$	0.240
Dividends per Class B common share		$	0.054			$	0.054			$	0.220			$	0.220

 

 

Richardson Electronics, Ltd.

Consolidated Statements of Cash Flows

(in thousands)

 

		Three Months Ended								Twelve Months Ended
		May 28, 2016				May 30, 2015				May 28, 2016				May 30, 2015
Operating activities:
Net loss		$	(155	)		$	(2,221	)		$	(6,766	)		$	(5,559	)
Adjustments to reconcile net loss to cash used in operating activities:
Depreciation and amortization			516				480				2,381				1,707
Loss (gain) on sale of investments			(1	)			(12	)			1				(27	)
Gain on disposal of assets			—				25				(244	)			(5	)
Share-based compensation expense			114				197				548				726
Deferred income taxes			28				(939	)			201				(1,604	)
Change in assets and liabilities, net of effect of acquired business:
Accounts receivable			(3,832	)			(1,840	)			(3,521	)			(4,495	)
Income tax receivable			61				(929	)			912				1,959
Inventories, net			461				(3,153	)			(5,175	)			(7,519	)
Prepaid expenses and other assets			427				(161	)			(16	)			(888	)
Accounts payable			2,077				4,596				(899	)			4,207
Accrued liabilities			1,044				1,949				(1,027	)			1,480
Long-term liabilities-accrued pension			—				—				(465	)			—
Other			230				270				486				238
Net cash provided by (used in) operating activities			970				(1,738	)			(13,584	)			(9,780	)
Investing activities:
Cash consideration paid for acquired business			—				—				(12,209	)			—
Capital expenditures			(1,770	)			(1,487	)			(4,813	)			(4,737	)
Proceeds from sales of assets			—				—				402				—
Proceeds from maturity of investments			1,442				1,660				27,026				33,617
Purchases of investments			—				(1,457	)			(2,151	)			(35,550	)
Proceeds from sales of available-for-sale securities			18				41				268				227
Purchases of available-for-sale securities			(18	)			(41	)			(268	)			(227	)
Other			(3	)			(120	)			(20	)			(248	)
Net cash provided by (used in) investing activities			(331	)			(1,404	)			8,235				(6,918	)
Financing activities:
Repurchase of common stock			—				—				(5,015	)			(3,945	)
Proceeds from issuance of common stock			—				23				142				324
Cash dividends paid			(758	)			(807	)			(3,079	)			(3,260	)
Other			—				3				(4	)			3
Net cash used in financing activities			(758	)			(781	)			(7,956	)			(6,878	)
Effect of exchange rate changes on cash and cash equivalents			368				60				(776	)			(4,641	)
Increase (decrease) in cash and cash equivalents			249				(3,863	)			(14,081	)			(28,217	)
Cash and cash equivalents at beginning of period			60,205				78,398				74,535				102,752
Cash and cash equivalents at end of period		$	60,454			$	74,535			$	60,454			$	74,535

 

 

Richardson Electronics, Ltd.

Net Sales and Gross Profit

For the Fourth Quarter and Fiscal 2016 and Fiscal 2015 

(in thousands)

 

By Strategic Business Unit:

 

Net Sales

		Q4 FY 2016								Q4 FY 2015				% Change
PMT		$	30,189							$	26,316				14.7	%
Canvys			5,680								6,535				-13.1	%
Healthcare			3,699								2,095				76.6	%
Total		$	39,568							$	34,946				13.2	%

 

		YTD FY 2016								YTD FY 2015				% Change
PMT		$	105,554							$	105,748				-0.2	%
Canvys			23,453								24,645				-4.8	%
Healthcare			13,009								6,564				98.2	%
Total		$	142,016							$	136,957				3.7	%

 

Gross Profit 

		Q4 FY 2016				% of Net Sales				Q4 FY 2015				% of Net Sales
PMT		$	10,295				34.1	%		$	8,194				31.1	%
Canvys			1,578				27.8	%			1,528				23.4	%
Healthcare			1,515				41.0	%			496				23.7	%
Total		$	13,388				33.8	%		$	10,218				29.2	%

 

		YTD FY 2016				% of Net Sales				YTD FY 2015				% of Net Sales
PMT		$	33,088				31.3	%		$	33,098				31.3	%
Canvys			6,017				25.7	%			6,457				26.2	%
Healthcare			5,730				44.0	%			1,583				24.1	%
Total		$	44,835				31.6	%		$	41,138				30.0	%