Richardson Electronics, Ltd. (NASDAQ: RELL), a global provider of engineered solutions, today reported its results for the third quarter ended March 1, 2008. Net sales for the third quarter of fiscal 2008 were $138.9 million, up 3.7% from $133.9 million during the third quarter of fiscal 2007. Gross profit, which includes a significant inventory write-down primarily due to changes in business focus within the Display Systems Group, declined to $31.2 million during the third quarter of fiscal 2008 compared with $32.1 million during the third quarter of fiscal 2007. Net loss was $2.2 million during the third quarter of fiscal 2008, or $0.12 per diluted common share, as compared to net income of $1.0 million, or $0.06 per diluted common share, in the third quarter of fiscal 2007.
“Our sales growth during the quarter represents growth in all three of our core businesses,” said Edward J. Richardson, Chairman, Chief Executive Officer and President of Richardson Electronics, Ltd. “Excluding several significant items, on a non-GAAP basis, gross margin as a percentage of net sales improved by 0.5% while operating income during the third quarter improved to $3.5 million, compared to $1.4 million during the third quarter of fiscal 2007.”
“We have made significant changes to reduce the fixed costs within the Display Systems Group during the third quarter. There were more than 30 positions eliminated in the Display Systems Group that we expect will result in annual cost savings of over $3 million. In addition, we are aggressively addressing our challenges and taking advantage of other opportunities to improve the overall financial condition of our company. We are undertaking a realignment of our support structure that we believe will reduce our cost base and help us create a stronger company positioned to deliver sustainable, long-term growth and value for our shareholders,” added Mr. Richardson.
FINANCIAL HIGHLIGHTS ─ THREE MONTHS ENDED MARCH 1, 2008
- Cash flows used in operating activities were $0.4 million during the third quarter of fiscal 2008 while cash flows used in operating activities were $5.6 million during the third quarter of fiscal 2007.
- Net sales for the RF, Wireless & Power Division, the Electron Device Group, and the Display Systems Group increased 4.7%, 1.8%, and 0.1%, respectively, during the third quarter of fiscal 2008 compared to the third quarter of fiscal 2007.
- Gross margin percentage for the RF, Wireless & Power Division, the Electron Device Group, and the Display Systems Group decreased by 0.6%, 0.4%, and 10.1%, respectively, during the third quarter of fiscal 2008 compared to the third quarter of fiscal 2007.
- Operating loss during the third quarter of fiscal 2008 was $0.7 million compared to operating income of $3.8 million generated during the third quarter of fiscal 2007.
- Net loss during the third quarter of fiscal 2008 was $2.2 million compared to net income of $1.0 million generated during the third quarter of fiscal 2007.
FINANCIAL HIGHLIGHTS ─ NINE MONTHS ENDED MARCH 1, 2008
- Cash flows provided by operating activities were $8.3 million during the first nine months of fiscal 2008 while cash flows used in operating activities were $8.8 million during the first nine months of fiscal 2007.
- Net sales for the RF, Wireless & Power Division and the Electron Device Group increased 1.0% and 3.0%, respectively, during the first nine months of fiscal 2008 compared to the first nine months of fiscal 2007. Net sales for the Display Systems Group decreased 4.7% during the first nine months of fiscal 2008 compared to the first nine months of fiscal 2007.
- Gross margin percentage for the RF, Wireless & Power Division, the Electron Device Group, and the Display Systems Group decreased by 0.2%, 0.3%, and 4.3%, respectively, during the first nine months of fiscal 2008 compared to the first nine months of fiscal 2007.
- Operating income generated during the first nine months of fiscal 2008 was $4.4 million compared to operating income of $9.9 million generated during the first nine months of fiscal 2007.
- Net loss during the first nine months of fiscal 2008 was $3.2 million compared to net income of $1.0 million generated during the first nine months of fiscal 2007.
IMPROVED WORKING CAPITAL MANAGEMENT AND CASH FLOWS
Cash and cash equivalents were $30.5 million at March 1, 2008, as compared to $17.4 million at June 2, 2007. The increase in overall cash and cash equivalents during the first nine months of fiscal 2008 reflects $9.6 million of cash provided from improved working capital management. This is a $25.9 million improvement compared to cash used by working capital of $16.3 million during the first nine months of fiscal 2007.
Total debt less cash as of March 1, 2008, was $35.1 million, compared to $42.1 million as of June 2, 2007.
“Our improved cash flow reflects the progress we are making in re-negotiating better terms with our suppliers, accelerating cash collections, and increasing our focus on inventory management,” said Kathleen S. Dvorak, Executive Vice President and Chief Financial Officer.
NON-GAAP FINANCIAL INFORMATION
| Richardson Electronics, Ltd. | ||||||||||||||||
| Unaudited Gross Profit, SG&A Expense, and Operating Income / (Loss) Reconciliations | ||||||||||||||||
| (In millions) | ||||||||||||||||
| Three Months Ended | Three Months Ended | |||||||||||||||
| March 1, 2008 | March 3, 2007 | |||||||||||||||
| Percent | Percent | |||||||||||||||
| Amount | of Net Sales | Amount | of Net Sales | |||||||||||||
| GAAP Gross Profit, as reported | $ | 31.2 | 22.5 | % | $ | 32.1 | 24.0 | % | ||||||||
| Adjustments: | ||||||||||||||||
| Inventory write-downs | 2.8 | 2.0 | % | - | - | |||||||||||
| Adjusted Gross Profit | $ | 34.0 | 24.5 | % | $ | 32.1 | 24.0 | % | ||||||||
| GAAP SG&A Expense, as reported | $ | 32.0 | 23.1 | % | $ | 30.7 | 23.0 | % | ||||||||
| Adjustments: | ||||||||||||||||
| Severance expense | 1.5 | 1.1 | % | - | - | |||||||||||
| Adjusted SG&A Expense | $ | 30.5 | 22.0 | % | $ | 30.7 | 23.0 | % | ||||||||
| GAAP Operating Income/(Loss), as reported | $ | (0.7 | ) | (0.5 | %) | $ | 3.8 | 2.8 | % | |||||||
| Adjustments: | ||||||||||||||||
| Inventory write-downs | 2.8 | 2.0 | % | - | - | |||||||||||
| Severance expense | 1.5 | 1.1 | % | - | - | |||||||||||
| Less gain on disposal of assets | 0.1 | - | 2.4 | 1.8 | % | |||||||||||
| Adjusted Operating Income | $ | 3.5 | 2.5 | % | $ | 1.4 | 1.0 | % | ||||||||
In addition to disclosing results that are determined in accordance with Generally Accepted Accounting Principles (“GAAP”), the company provides certain non-GAAP financial information relating to charges that the company believes impacts the comparability of its results of operations.
The company believes that such non-GAAP financial information is useful to investors to assist in assessing and understanding the company’s operating performance and underlying trends in the company’s business because management considers these charges and credits to be outside the company’s core operating results.
OUTLOOK
“While the outlook for the economy remains uncertain, we continue to make progress on several key initiatives and expect to improve our financial performance over the next several quarters. Our disciplined focus on reducing our fixed costs and improving working capital efficiency should help us continue to improve our overall cash flows,” said Ms. Dvorak.
“We look forward to delivering improved operating performance, continued sales growth, and creating value for our shareholders,” added Mr. Richardson.
CASH DIVIDEND
The Company today also announced that its Board of Directors voted to declare a $0.02 cash dividend per share to all holders of common stock and a $0.018 cash dividend per share to all holders of Class B common stock. The dividend will be payable on May 23, 2008, to all common stockholders of record on May 9, 2008. The Company currently has 14,816,914 outstanding shares of common stock and 3,048,258 outstanding shares of Class B common stock.
CONFERENCE CALL INFORMATION
On Thursday, April 10, 2008, 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. A question and answer session will be included as part of the call's agenda. To listen to the call, please dial 888-481-7939 and enter passcode 17692794 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 10, 2008, for seven days. The telephone numbers for the replay are (USA) 888-286-8010 and (International) 617-801-6888; access code 68949466.
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 for the most recently ended fiscal year. 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 global provider of “Engineered Solutions,” serving the RF, Wireless & Power Conversion; Electron Device; and Display Systems markets. The Company delivers engineered solutions for its customers’ needs through product manufacturing, systems integration, prototype design and manufacture, testing and logistics. Press announcements and other information about Richardson are available at www.rell.com.
Richardson Electronics, Ltd.’s common stock trades on the NASDAQ Global Market under the ticker symbol RELL.
| Richardson Electronics, Ltd. | ||||||||||||||||||
| Unaudited Condensed Consolidated Statements of Operations | ||||||||||||||||||
| (in thousands, except per share amounts) | ||||||||||||||||||
| Three Months Ended | Nine Months Ended | |||||||||||||||||
| March 1, | March 3, | March 1, | March 3, | |||||||||||||||
| Statements of Operations | 2008 | 2007 | 2008 | 2007 | ||||||||||||||
| Net sales | $ | 138,866 | $ | 133,894 | $ | 413,316 | $ | 411,045 | ||||||||||
| Cost of sales | 107,625 | 101,780 | 315,637 | 311,545 | ||||||||||||||
| Gross profit | 31,241 | 32,114 | 97,679 | 99,500 | ||||||||||||||
| Selling, general, and administrative expenses | 32,029 | 30,739 | 93,312 | 91,747 | ||||||||||||||
| Gain on disposal of assets | (81 | ) | (2,418 | ) | (70 | ) | (2,098 | ) | ||||||||||
| Operating income (loss) | (707 | ) | 3,793 | 4,437 | 9,851 | |||||||||||||
| Other (income) expense: | ||||||||||||||||||
| Interest expense | 1,371 | 1,169 | 5,615 | 4,211 | ||||||||||||||
| Investment (income) loss | 45 | (71 | ) | (571 | ) | (885 | ) | |||||||||||
| Foreign exchange (gain) loss | (249 | ) | 127 | 1,552 | 281 | |||||||||||||
| Retirement of long-term debt expenses | - | - | - | 2,540 | ||||||||||||||
| Other, net | 25 | (11 | ) | 33 | 2 | |||||||||||||
| Total other expense | 1,192 | 1,214 | 6,629 | 6,149 | ||||||||||||||
| Income (loss) from continuing operations before income taxes | (1,899 | ) | 2,579 | (2,192 | ) | 3,702 | ||||||||||||
| Income tax provision | 267 | 1,055 | 1,045 | 1,656 | ||||||||||||||
| Income (loss) from continuing operations | (2,166 | ) | 1,524 | (3,237 | ) | 2,046 | ||||||||||||
| Income (loss) from discontinued operations, net of tax | (10 | ) | (487 | ) | 45 | (1,026 | ) | |||||||||||
| Net income (loss) | $ | (2,176 | ) | $ | 1,037 | $ | (3,192 | ) | $ | 1,020 | ||||||||
| Net income (loss) per common share – basic: | ||||||||||||||||||
| Income (loss) from continuing operations | $ | (0.12 | ) | $ | 0.09 | $ | (0.18 | ) | $ | 0.12 | ||||||||
| Income (loss) from discontinued operations | (0.00 | ) | (0.03 | ) | 0.00 | (0.06 | ) | |||||||||||
| Net income (loss) per common share – basic | $ | (0.12 | ) | $ | 0.06 | $ | (0.18 | ) | $ | 0.06 | ||||||||
| Net income (loss) per common share – diluted: | ||||||||||||||||||
| Income (loss) from continuing operations | $ | (0.12 | ) | $ | 0.09 | $ | (0.18 | ) | $ | 0.12 | ||||||||
| Income (loss) from discontinued operations | (0.00 | ) | (0.03 | ) | 0.00 | (0.06 | ) | |||||||||||
| Net income (loss) per common share – diluted | $ | (0.12 | ) | $ | 0.06 | $ | (0.18 | ) | $ | 0.06 | ||||||||
| Weighted average number of shares: | ||||||||||||||||||
| Common shares – basic | 14,805 | 14,559 | 14,790 | 14,493 | ||||||||||||||
| Class B common shares - basic | 3,048 | 3,048 | 3,048 | 3,048 | ||||||||||||||
| Common shares – diluted (1) | 14,805 | 17,732 | 14,790 | 17,638 | ||||||||||||||
| Class B common shares - diluted | 3,048 | 3,048 | 3,048 | 3,048 | ||||||||||||||
| Dividends per common share | $ | 0.020 | $ | 0.040 | $ | 0.100 | $ | 0.120 | ||||||||||
| Dividends per Class B common share | $ | 0.018 | $ | 0.036 | $ | 0.090 | $ | 0.108 | ||||||||||
(1) Total common stock equivalents and Class B common stock for the three and nine months ended March 1, 2008, are excluded from the diluted earnings per share calculation because their impact would be anti-dilutive. | ||||||||||||||||||
| Richardson Electronics, Ltd. | ||||||||||
| Unaudited Condensed Consolidated Balance Sheets | ||||||||||
| (in thousands, except per share amounts) | ||||||||||
| March 1, | June 2, | |||||||||
| 2008 | 2007 | |||||||||
| Assets | ||||||||||
| Current assets: | ||||||||||
| Cash and cash equivalents | $ | 30,542 | $ | 17,436 | ||||||
| Restricted cash | - | 61,899 | ||||||||
| Receivables, less allowance of $1,602 and $1,574 | 104,463 | 105,709 | ||||||||
| Inventories | 107,433 | 110,174 | ||||||||
| Prepaid expenses | 4,663 | 5,129 | ||||||||
| Deferred income taxes | 2,475 | 2,131 | ||||||||
| Current assets of discontinued operations held for sale | - | 242 | ||||||||
| Total current assets | 249,576 | 302,720 | ||||||||
| Non-current assets: | ||||||||||
| Property, plant and equipment, net | 29,902 | 29,278 | ||||||||
| Goodwill | 12,729 | 11,611 | ||||||||
| Other intangible assets, net | 817 | 1,581 | ||||||||
| Non-current deferred income taxes | 1,066 | 389 | ||||||||
| Assets held for sale | - | 1,429 | ||||||||
| Other assets | 1,597 | 2,058 | ||||||||
| Non-current assets of discontinued operations held for sale | - | 5 | ||||||||
| Total non-current assets | 46,111 | 46,351 | ||||||||
| Total assets | $ | 295,687 | $ | 349,071 | ||||||
| Liabilities and Stockholders’ Equity | ||||||||||
| Current liabilities: | ||||||||||
| Accounts payable | $ | 57,974 | $ | 55,530 | ||||||
| Accrued liabilities | 19,173 | 31,330 | ||||||||
| Current portion of long-term debt | - | 65,711 | ||||||||
| Current liabilities of discontinued operations held for sale | - | 2,737 | ||||||||
| Total current liabilities | 77,147 | 155,308 | ||||||||
| Non-current liabilities: | ||||||||||
| Long-term debt, less current portion | 65,683 | 55,683 | ||||||||
| Long-term income tax liabilities | 6,848 | - | ||||||||
| Non-current liabilities | 1,479 | 1,535 | ||||||||
| Total non-current liabilities | 74,010 | 57,218 | ||||||||
| Total liabilities | 151,157 | 212,526 | ||||||||
| Commitments and contingencies | - | - | ||||||||
| Stockholders’ equity | ||||||||||
| Common stock, $0.05 par value; issued 15,929 shares at | ||||||||||
| March 1, 2008 and 15,920 shares at June 2, 2007 | 797 | 796 | ||||||||
| Class B common stock, convertible, $0.05 par value; issued 3,048 | ||||||||||
| at March 1, 2008 and 3,048 shares at June 2, 2007 | 152 | 152 | ||||||||
| Preferred stock, $1.00 par value, no shares issued | - | - | ||||||||
| Additional paid-in-capital | 119,626 | 118,880 | ||||||||
| Common stock in treasury, at cost, 1,112 shares at March 1, 2008 | ||||||||||
| and 1,179 shares at June 2, 2007 | (6,592 | ) | (6,989 | ) | ||||||
| Retained earnings | 16,683 | 21,631 | ||||||||
| Accumulated other comprehensive income | 13,864 | 2,075 | ||||||||
| Total stockholders’ equity | 144,530 | 136,545 | ||||||||
| Total liabilities and stockholders’ equity | $ | 295,687 | $ | 349,071 | ||||||
| Richardson Electronics, Ltd. | ||||||||||||||||||||
| Unaudited Condensed Consolidated Statements of Cash Flows | ||||||||||||||||||||
| (in thousands) | ||||||||||||||||||||
| Three Months Ended | Nine Months Ended | |||||||||||||||||||
| March 1, | March 3, | March 1, | March 3, | |||||||||||||||||
| 2008 | 2007 | 2008 | 2007 | |||||||||||||||||
| Operating activities: | ||||||||||||||||||||
| Net income (loss) | $ | (2,176 | ) | $ | 1,037 | $ | (3,192 | ) | $ | 1,020 | ||||||||||
| Adjustments to reconcile net income (loss) to cash provided by | ||||||||||||||||||||
| (used in) operating activities: | ||||||||||||||||||||
| Depreciation and amortization | 1,367 | 1,538 | 3,940 | 4,655 | ||||||||||||||||
| Gain on disposal of assets | (81 | ) | (2,418 | ) | (70 | ) | (2,098 | ) | ||||||||||||
| Retirement of long-term debt expenses | - | - | - | 2,540 | ||||||||||||||||
| Write-off of deferred financing costs | - | - | 643 | 62 | ||||||||||||||||
| Stock compensation expense | 176 | 198 | 523 | 774 | ||||||||||||||||
| Deferred income taxes | 49 | 646 | (930 | ) | 417 | |||||||||||||||
| Receivables | 2,401 | 1,708 | 7,801 | 5,016 | ||||||||||||||||
| Inventories | 10,115 | (6,966 | ) | 8,686 | (14,797 | ) | ||||||||||||||
| Accounts payable and accrued liabilities | (11,755 | ) | (1,978 | ) | (6,909 | ) | (6,517 | ) | ||||||||||||
| Other liabilities | 47 | 492 | (130 | ) | 606 | |||||||||||||||
| Other | (548 | ) | 116 | (2,104 | ) | (467 | ) | |||||||||||||
| Net cash provided by (used in) operating activities | (405 | ) | (5,627 | ) | 8,258 | (8,789 | ) | |||||||||||||
| Investing activities: | ||||||||||||||||||||
| Capital expenditures | (301 | ) | (1,991 | ) | (4,193 | ) | (4,716 | ) | ||||||||||||
| Proceeds from sale of assets | 620 | 3,066 | 1,007 | 3,109 | ||||||||||||||||
| Contingent purchase price consideration | (160 | ) | - | (160 | ) | - | ||||||||||||||
| (Gain) loss on sale of investments | 121 | (10 | ) | 129 | (670 | ) | ||||||||||||||
| Proceeds from sales of available-for-sale securities | 188 | - | 345 | 3,682 | ||||||||||||||||
| Purchases of available-for-sale securities | (31 | ) | - | (188 | ) | (182 | ) | |||||||||||||
| Net cash provided by (used in) investing activities | 437 | 1,065 | (3,060 | ) | 1,223 | |||||||||||||||
| Financing activities: | ||||||||||||||||||||
| Proceeds from borrowings | 51,800 | 64,600 | 163,200 | 202,011 | ||||||||||||||||
| Payments on debt | (41,800 | ) | (51,840 | ) | (218,840 | ) | (181,650 | ) | ||||||||||||
| Restricted cash | - | - | 61,899 | - | ||||||||||||||||
| Proceeds from issuance of common stock | - | 35 | 69 | 755 | ||||||||||||||||
| Cash dividends | (351 | ) | (692 | ) | (1,756 | ) | (2,071 | ) | ||||||||||||
| Payments on retirement of long-term debt | - | (8,700 | ) | - | (15,915 | ) | ||||||||||||||
| Other | - | (16 | ) | (95 | ) | (674 | ) | |||||||||||||
| Net cash provided by financing activities | 9,649 | 3,387 | 4,477 | 2,456 | ||||||||||||||||
| Effect of exchange rate changes on cash and cash equivalents | 661 | (72 | ) | 3,431 | 463 | |||||||||||||||
| Increase (decrease) in cash and cash equivalents | 10,342 | (1,247 | ) | 13,106 | (4,647 | ) | ||||||||||||||
| Cash and cash equivalents at beginning of period | 20,200 | 13,610 | 17,436 | 17,010 | ||||||||||||||||
| Cash and cash equivalents at end of period | $ | 30,542 | $ | 12,363 | $ | 30,542 | $ | 12,363 | ||||||||||||
| Richardson Electronics, Ltd. | ||||||||||||||||||||||||||||||
| Unaudited Net Sales and Gross Profit | ||||||||||||||||||||||||||||||
| For the Third Quarter and First Nine Months of Fiscal 2008 and 2007 | ||||||||||||||||||||||||||||||
| (In thousands) | ||||||||||||||||||||||||||||||
| By Business Unit: | ||||||||||||||||||||||||||||||
| Net Sales | Gross Profit (1) | |||||||||||||||||||||||||||||
| % | GP% of | GP% of | ||||||||||||||||||||||||||||
| Third Quarter | FY 2008 | FY 2007 | Change | FY 2008 | Sales | FY 2007 | Sales | |||||||||||||||||||||||
| RF, Wireless & Power Division | $ | 93,415 | $ | 89,241 | 4.7 | % | $ | 20,990 | 22.5 | % | $ | 20,576 | 23.1 | % | ||||||||||||||||
| Electron Device Group | 24,812 | 24,384 | 1.8 | % | 7,954 | 32.1 | % | 7,922 | 32.5 | % | ||||||||||||||||||||
| Display Systems Group | 19,609 | 19,592 | 0.1 | % | 2,737 | 14.0 | % | 4,713 | 24.1 | % | ||||||||||||||||||||
| Corporate | 1,030 | 677 | (440 | ) | (1,097 | ) | ||||||||||||||||||||||||
| Total | $ | 138,866 | $ | 133,894 | 3.7 | % | $ | 31,241 | 22.5 | % | $ | 32,114 | 24.0 | % | ||||||||||||||||
| % | GP% of | GP% of | ||||||||||||||||||||||||||||
| Nine Months | FY 2008 | FY 2007 | Change | FY 2008 | Sales | FY 2007 | Sales | |||||||||||||||||||||||
| RF, Wireless & Power Division | $ | 273,207 | $ | 270,567 | 1.0 | % | $ | 62,457 | 22.9 | % | $ | 62,431 | 23.1 | % | ||||||||||||||||
| Electron Device Group | 76,774 | 74,552 | 3.0 | % | 24,471 | 31.9 | % | 23,972 | 32.2 | % | ||||||||||||||||||||
| Display Systems Group | 59,871 | 62,801 | (4.7 | %) | 11,634 | 19.4 | % | 14,870 | 23.7 | % | ||||||||||||||||||||
| Corporate | 3,464 | 3,125 | (883 | ) | (1,773 | ) | ||||||||||||||||||||||||
| Total | $ | 413,316 | $ | 411,045 | 0.6 | % | $ | 97,679 | 23.6 | % | $ | 99,500 | 24.2 | % | ||||||||||||||||
Note: Corporate consists of freight and other non-specific net sales. | ||||||||||||||||||||||||||||||
(1) Included in Gross Profit for the third quarter and first nine months of fiscal 2008 are inventory write-downs of $0.9 million in the RF, Wireless & Power Division and $1.9 million in the Display Systems Group. | ||||||||||||||||||||||||||||||
Contacts:
Edward J. Richardson
Chairman
and CEO
Phone: (630) 208-2340
E-mail: info@rell.com
or
Kathleen
S. Dvorak
EVP & CFO
(630) 208-2208
