Richardson Electronics Reports Third Quarter Fiscal 2019 Results and Declares Quarterly Cash Dividend

LAFOX, Ill., April 09, 2019 (GLOBE NEWSWIRE) -- Richardson Electronics, Ltd. (NASDAQ: RELL) today reported financial results for its third quarter ended March 2, 2019. The Company also announced that its Board of Directors declared a $0.06 per share quarterly cash dividend. 

Third Quarter Results

Net sales for the third quarter of fiscal 2019 decreased 6.3% to $39.0 million compared to net sales of $41.6 million in the prior year’s third quarter. Sales decreased $2.1 million for PMT and $0.6 million for Canvys. PMT sales were lower due to the continued slowdown in the semi-wafer fab equipment market, partially offset by higher sales in its PMG business including power conversion and RF and microwave components. Sales decreased $0.6 million for Canvys due to lower overall demand across Europe and the impact of several large one-time shipments in the third quarter last year. Sales increased $0.1 million or 6.8% for Richardson Healthcare as a result of higher equipment sales. The majority of Toshiba CT systems sold in the quarter included an ALTA750™ Tube at a premium price.

Gross margin decreased to $12.3 million, or 31.5% of net sales during the third quarter of fiscal 2019, compared to $14.1 million, or 33.8% of net sales during the third quarter of fiscal 2018. Margin decreased as a percent of net sales primarily due to a less favorable product mix, including a higher percentage of power conversion and RF and microwave components and pre-owned CT scanners, as well as higher costs related to CT Tube production.

Operating expenses were $13.1 million for both the third quarter of fiscal 2019 and the third quarter of fiscal 2018. During the third quarter of fiscal 2019, the Company incurred $0.1 million of severance expense related to actions taken to reduce costs and $0.2 million in higher legal expenses. These expenses were offset by lower incentive compensation expense. It is anticipated that the reduction in headcount during the first nine months of fiscal 2019 will result in $1.6 million in annualized savings in cost of sales and operating expenses combined.

The Company reported an operating loss of $0.8 million for the third quarter of fiscal 2019 compared to operating income of $1.0 million in the prior year’s third quarter. Excluding the severance expense and higher legal fees, the Company would have reported a $0.4 million operating loss for the third quarter of fiscal 2019.

Other income, including interest income and foreign exchange, was less than $0.1 million for both the third quarter of fiscal 2019 and the third quarter of fiscal 2018.

The income tax provision of $0.3 million for the third quarter of fiscal 2019 reflected a provision for foreign income taxes and no U.S. tax benefit due to the valuation allowance recorded against the net operating loss. The tax provision of $0.5 million in last year’s third quarter included a provision for foreign income taxes, adjustments from foreign income tax returns and no U.S. tax benefit due to the valuation allowance recorded against the net operating loss.

Net loss for the third quarter of fiscal 2019 was $1.1 million, compared to a net income of $0.5 million in the third quarter of fiscal 2018.

“Going into the third quarter we knew the comparison to prior year would be more challenging given the quarter over quarter decline in the semi-fab wafer equipment business. However, our net sales for the first nine months of fiscal 2019 were 5.7% higher than the last fiscal year’s first nine months, which included an extra week of sales” said Edward J. Richardson, Chairman, Chief Executive Officer, and President. “We are optimistic about continued sales growth in PMT associated with our investments in new power and microwave technologies.  Market penetration for our ALTA750™ CT Tube is slower than anticipated, but we are assured by healthcare customers throughout the world that the demand is there. We are the only Company focused on the aftermarket. It is how we built the Company and we believe growth will increase on a perpetual basis,” Mr. Richardson concluded.

FINANCIAL SUMMARY – NINE MONTHS ENDED MARCH 2, 2019

  • Net sales for the first nine months of fiscal 2019 were $124.5 million, an increase of 5.7%, compared to net sales of $117.7 million during the first nine months of fiscal 2018. There were 39 weeks in the first nine months of fiscal 2019 compared to 40 weeks in last year’s first nine months. Sales increased by $5.8 million for PMT, $0.6 million for Canvys and $0.4 million for Richardson Healthcare.
  • Gross margin decreased to $39.2 million during the first nine months of fiscal 2019, compared to $39.6 million during the first nine months of fiscal 2018. As a percentage of net sales, gross margin decreased to 31.5% of net sales during the first nine months of fiscal 2019, compared to 33.6% of net sales during the first nine months of fiscal 2018, primarily as a result of a less favorable product mix and unfavorable manufacturing variances.
  • Operating expenses increased to $39.6 million for the first nine months of fiscal 2019, compared to $38.0 million for the first nine months of fiscal 2018. The increase was due to additional incentive compensation and other expenses related to the increase in net sales, severance expense and higher legal expenses. Operating expenses as a percent of net sales without the severance expense and the higher legal expenses decreased to 31.1% in the first nine months of fiscal 2019 from 32.3% in last year’s first nine months.
  • Operating loss during the first nine months of fiscal 2019 was $0.4 million, compared to an operating income of $1.8 million during the first nine months of fiscal 2018, which included a $0.2 million gain on the sale of a building. Excluding the severance expense and higher legal fees in the second and third quarters, the Company would have reported an operating income of $0.5 million for the first nine months of fiscal 2019.
  • Other income for the first nine months of fiscal 2019, including interest income and foreign exchange, was $0.2 million, compared to other expense of $0.1 million for the first nine months of fiscal 2018.
  • The income tax provision of $0.8 million during the first nine months of fiscal 2019 reflected a provision for foreign income taxes and no U.S. tax benefit due to the valuation allowance recorded against the net operating loss. The tax provision of $1.1 million in the first nine months of fiscal 2018 included a provision for foreign income taxes, additional tax due from an audit in Germany and no U.S. tax benefit due to the valuation allowance recorded against the net operating loss.
  • Loss from continuing operations for the first nine months of fiscal 2019 was $1.0 million, compared to  income from continuing operations of $0.6 million in the first nine months of fiscal 2018. Excluding the severance and higher legal costs in the second and third quarters of fiscal 2019, loss from continuing operations would have been less than $0.1 million. In addition, during the second quarter of fiscal 2018, the Company received an income tax refund from the State of Illinois, inclusive of interest and net of professional fees, of $1.5 million. This refund was a result of the conclusion of the Illinois amended return related to the sale of RFPD in 2011 and was therefore, classified as income from discontinued operations.
  • Net loss for the first nine months of fiscal 2019 was $1.0 million, compared to a net income of $2.1 million during the first nine months of fiscal 2018.

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 May 24, 2019, to common stockholders of record as of May 8, 2019.

Cash and investments at the end of the third quarter of fiscal 2019 were $49.4 million compared to $53.2 million at the end of the second quarter of fiscal 2019 and $60.1 million at the end of the third quarter of fiscal 2018. The Company spent $1.0 million during the quarter on capital expenditures primarily relating to equipment for Richardson Healthcare and LaFox manufacturing versus $1.5 million during the third quarter of fiscal 2018. Recently, the Board of Directors authorized the reactivation of its share buyback program, up to $9.4 million, to return more value to investors. During the third quarter of fiscal 2019, the Company did not repurchase any shares of its common stock. Currently, there are 11.0 million outstanding shares of common stock and 2.1 million outstanding shares of Class B common stock.

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