rell-ex991_49.htm

RICHARDSON ELECTRONICS REPORTS FIRST QUARTER FISCAL 2020 NET INCOME AND DECLARES QUARTERLY CASH DIVIDEND

LaFox, IL, OCTOBER 9, 2019: Richardson Electronics, Ltd. (NASDAQ: RELL) today reported financial results for its first quarter ended August 31, 2019. The Company also announced that its Board of Directors declared a $0.06 per share quarterly cash dividend.

Net sales for the first quarter of fiscal 2020 decreased 7.9% to $40.7 million compared to net sales of $44.2 million in the prior year’s first quarter. PMT sales decreased $4.2 million primarily due to the decline in the semiconductor wafer fabrication equipment market, partially offset by higher sales of power conversion and RF and microwave components. Canvys sales increased by $0.1 million or 1.4% due to higher demand in its North American market. Richardson Healthcare sales increased $0.6 million or 26.8% as a result of higher sales of our ALTA750^TM CT tube and replacement parts for diagnostic imaging equipment.

Gross margin decreased to $13.0 million, or 31.9% of net sales during the first quarter of fiscal 2020, compared to $14.0 million, or 31.6% of net sales during the first quarter of fiscal 2019. Margin increased as a percent of net sales primarily due to favorable product mix and manufacturing over

absorption in Richardson Healthcare, partially offset by unfavorable product mix and foreign exchange rates for Canvys.

Operating expenses were $12.8 million for the first quarter of fiscal 2020 compared to $13.1 million in the first quarter of fiscal 2019. The decrease in operating expenses resulted from lower employee benefits, IT and bad debt expenses. As a result, the Company reported an operating income of $0.1 million for the first quarter of fiscal 2020 compared to operating income of $0.9 million in the prior year’s first quarter.

Other income for the first quarter of fiscal 2020, including interest income and foreign exchange, was $0.2 million, compared to other expense of $0.2 million in the first quarter of fiscal 2019.

The income tax provision of $0.2 million for the first quarter of fiscal 2020 reflected a provision for foreign income taxes, which was lower than the prior year’s first quarter and no U.S. tax benefit due to the valuation allowance recorded against the net operating loss. The tax provision of $0.3 million in last year’s first quarter included a provision for foreign income taxes and no U.S. tax benefit due to the valuation allowance recorded against the net operating loss.

Net income for the first quarter of fiscal 2020 was $0.2 million compared to net income of $0.4 million in the first quarter of fiscal 2019. Earnings per common share (diluted) in the first quarter of fiscal 2020 were $0.01 compared to $0.03 per common share (diluted) in the prior year’s first quarter.

“We are pleased with the quarter over quarter growth in our Healthcare business. We are optimistic this trend will continue with increasing customer confidence in the ALTA750^TM CT tube as well as the recent approval to use the CE Mark opening up sales opportunities throughout Europe,“ said Edward J. Richardson, Chairman, Chief Executive Officer, and President. “Revenues resulting from our investments in new power and microwave technologies also continue to increase and Canvys is providing consistent growth helping offset the soft semiconductor wafer fab equipment market,” he concluded.

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 November 22, 2019, to common stockholders of record as of November 7, 2019.

Cash and investments at the end of the first quarter of fiscal 2020 were $46.5 million compared to $50.0 million at the end of the fourth quarter of fiscal 2019 and $54.8 million at the end of the first quarter of fiscal 2019. The Company spent $0.3 million during the quarter on capital expenditures primarily relating to our IT system and LaFox manufacturing business versus $1.1 million during the first quarter of fiscal 2019. During the first quarter of fiscal 2020, 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.

On Thursday, October 10, 2019, at 9:00 a.m. CDT, 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 first quarter fiscal year 2020 results. A question and answer session will be included as part of the call’s agenda.

Below are the instructions with the general number and access code. Please note that those using these dial-in instructions and access code only, will be logged in as a guest. If you would like your name announced on the call, please also register using the link below.

Register, receive a unique attendee ID by email and therefore be identified by name during the call (Note, this option cannot be shared by more than one person):

A replay of the call will be available beginning at 11:00 a.m. CDT on October 11, 2019. The toll-free telephone number for the replay is (833) 922-0391.

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 August 5, 2019. The Company assumes no responsibility to update the “forward-looking” statements in this release as a result of new information, future events, or otherwise.

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 flat panel detector solutions, replacement parts, tubes and service training 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.

	Unaudited		Audited
	August 31, 2019		June 1, 2019
Assets
Current assets:
Cash and cash equivalents	$	46,457	$	42,019
Accounts receivable, less allowance of $296 and $339, respectively		21,946		24,296
Inventories, net		54,137		53,232
Prepaid expenses and other assets		2,424		3,067
Investments - current		—		8,000
Total current assets		124,964		130,614
Non-current assets:
Property, plant and equipment, net		18,640		19,111
Intangible assets, net		2,696		2,763
Lease ROU asset		4,107		—
Non-current deferred income taxes		579		529
Total non-current assets		26,022		22,403
Total assets	$	150,986	$	153,017
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	12,906	$	16,943
Accrued liabilities		10,338		11,273
Lease liability current		1,541		—
Total current liabilities		24,785		28,216
Non-current liabilities:
Non-current deferred income tax liabilities		216		212
Lease liability non-current		2,678		—
Other non-current liabilities		692		832
Total non-current liabilities		3,586		1,044
Total liabilities		28,371		29,260
Stockholders’ equity
Common stock, $0.05 par value; issued and outstanding 11,029 shares at August 31, 2019 and 10,957 shares at June 1, 2019		551		547
Class B common stock, convertible, $0.05 par value; issued and outstanding 2,097 shares at August 31, 2019 and June 1, 2019		105		105
Preferred stock, $1.00 par value, no shares issued		—		—
Additional paid-in-capital		61,200		61,012
Common stock in treasury, at cost, no shares at August 31, 2019 and June 1, 2019		—		—
Retained earnings		59,085		59,703
Accumulated other comprehensive income		1,674		2,390
Total stockholders’ equity		122,615		123,757
Total liabilities and stockholders’ equity	$	150,986	$	153,017

	Three Months Ended
	August 31, 2019			September 1, 2018
Statements of Comprehensive Loss
Net sales	$	40,653		$	44,157
Cost of sales		27,702			30,204
Gross profit		12,951			13,953
Selling, general and administrative expenses		12,847			13,099
Loss on disposal of assets		1			—
Operating income		103			854
Other (income) expense:
Investment/interest income		(120	)		(126	)
Foreign exchange loss		(110	)		286
Other, net		(1	)		(8	)
Total other (income) expense		(231	)		152
Income before income taxes		334			702
Income tax provision		177			271
Net income		157			431
Foreign currency translation loss, net of tax		(716	)		(740	)
Comprehensive loss	$	(559	)	$	(309	)
Net income per share
Common shares - Basic	$	0.01		$	0.03
Class B common shares - Basic	$	0.01		$	0.03
Common shares - Diluted	$	0.01		$	0.03
Class B common shares - Diluted	$	0.01		$	0.03
Weighted average number of shares:
Common shares – Basic		10,990			10,829
Class B common shares – Basic		2,097			2,132
Common shares – Diluted		10,990			10,982
Class B common shares – Diluted		2,097			2,132
Dividends per common share	$	0.060		$	0.060
Dividends per Class B common share	$	0.054		$	0.054

	Three Months Ended
	August 31, 2019			September 1, 2018
Operating activities:
Net income	$	157		$	431
Adjustments to reconcile net income to cash used in operating activities:
Depreciation and amortization		833			764
Inventory provisions		161			215
Loss on disposal of assets		1			—
Share-based compensation expense		188			165
Deferred income taxes		(48	)		58
Change in assets and liabilities:
Accounts receivable		2,161			(198	)
Inventories		(1,357	)		77
Prepaid expenses and other assets		625			37
Accounts payable		(3,955	)		(5,419	)
Accrued liabilities		(876	)		227
Other		56			13
Net cash used in operating activities		(2,054	)		(3,630	)
Investing activities:
Capital expenditures		(339	)		(1,072	)
Proceeds from maturity of investments		8,000			—
Purchases of investments		—			(2,300	)
Net cash provided by (used in) investing activities		7,661			(3,372	)
Financing activities:
Proceeds from issuance of common stock		—			192
Cash dividends paid		(775	)		(764	)
Payment of financing lease principal		(30	)		—
Other		4			—
Net cash used in financing activities		(801	)		(572	)
Effect of exchange rate changes on cash and cash equivalents		(368	)		(413	)
Increase (decrease) in cash and cash equivalents		4,438			(7,987	)
Cash and cash equivalents at beginning of period		42,019			60,465
Cash and cash equivalents at end of period	$	46,457		$	52,478

By Strategic Business Unit:

Net Sales
	Q1 FY 2020					Q1 FY 2019		% Change
PMT	$	30,567				$	34,769		-12.1	%
Canvys		7,277					7,173		1.4	%
Healthcare		2,809					2,215		26.8	%
Total	$	40,653				$	44,157		-7.9	%

Gross Profit
	Q1 FY 2020		% of Net Sales			Q1 FY 2019		% of Net Sales
PMT	$	9,679		31.7	%	$	11,007		31.7	%
Canvys		2,321		31.9	%		2,313		32.2	%
Healthcare		951		33.9	%		633		28.6	%
Total	$	12,951		31.9	%	$	13,953		31.6	%


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