Richardson Electronics Reports Third Quarter Fiscal 2016 Results

Richardson Electronics Reports Third Quarter Fiscal 2016 Results and Declares Quarterly Cash Dividend

CONFERENCE CALL INFORMATION

On Thursday, April 7, 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 third 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 92903258 approximately five minutes prior to the start of the call. A replay of the call will be available beginning at 12:00 a.m. CT on April 8, 2016, for seven days. The telephone numbers for the replay are (USA) (888) 286-8010 and (International) (617) 801-6888; passcode 88120014.

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)

	Unaudited		Audited
	February 27,		May 30,
	2016		2015
Assets
Current assets:
Cash and cash equivalents	$	60,205	$	74,535
Accounts receivable, less allowance of $362 and $283		20,881		20,753
Inventories, net		45,533		38,769
Prepaid expenses and other assets		2,143		1,696
Deferred income taxes		792		804
Income tax receivable		78		929
Investments - current		3,537		23,692
Total current assets		133,169		161,178
Non-current assets:
Property, plant and equipment, net		11,624		10,081
Goodwill		6,332		—
Intangible assets, net		3,897		743
Non-current deferred income taxes		1,198		1,443
Investments - non-current		7,772		11,549
Total non-current assets		30,823		23,816
Total assets	$	163,992	$	184,994
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable		12,732		15,768
Accrued liabilities		8,053		10,144
Total current liabilities		20,785		25,912
Non-current liabilities:
Non-current deferred income tax liabilities		1,170		1,209
Other non-current liabilities		831		1,221
Total non-current liabilities		2,001		2,430
Total liabilities		22,786		28,342
Stockholders’ equity
Common stock, $0.05 par value; issued 10,703 shares at February 27, 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 February 27, 2016, and at May 30, 2015		107		107
Preferred stock, $1.00 par value, no shares issued		—		—
Additional paid-in-capital		58,775		63,252
Common stock in treasury, at cost, no shares at February 27, 2016, and at May 30, 2015		—		—
Retained earnings		80,205		89,141
Accumulated other comprehensive income		1,584		3,575
Total stockholders’ equity		141,206		156,652
Total liabilities and stockholders’ equity	$	163,992	$	184,994



Richardson Electronics, Ltd.
Unaudited Consolidated Statements of Comprehensive Loss
(in thousands, except per share amounts)

	Three Months Ended						Nine Months Ended
	February 27,			February 28,			February 27,			February 28,
	2016			2015			2016			2015
Statements of Comprehensive Loss
Net sales	$	31,291		$	33,471		$	102,448		$	102,011
Cost of sales		21,541			23,671			71,001			71,091
Gross profit		9,750			9,800			31,447			30,920
Selling, general, and administrative expenses		12,471			12,563			37,938			36,366
Gain on disposal of assets		—			(14	)		(244	)		(5	)
Operating loss		(2,721	)		(2,749	)		(6,247	)		(5,441	)
Other (income) expense:
Investment/interest income		(131	)		(239	)		(433	)		(744	)
Foreign exchange (gain) loss		265			(275	)		108			(285	)
Other, net		(40	)		(6	)		(53	)		(22	)
Total other (income) expense		94			(520	)		(378	)		(1,051	)
Loss from continuing operations before income taxes		(2,815	)		(2,229	)		(5,869	)		(4,390	)
Income tax provision (benefit)		111			(31	)		742			(965	)
Loss from continuing operations		(2,926	)		(2,198	)		(6,611	)		(3,425	)
Income from discontinued operations, net of tax		—			—			—			87
Net loss		(2,926	)		(2,198	)		(6,611	)		(3,338	)
Foreign currency translation gain (loss), net of tax		240			(2,188	)		(1,912	)		(6,149	)
Fair value adjustments on investments gain (loss)		(47	)		5			(79	)		30
Comprehensive loss	$	(2,733	)	$	(4,381	)	$	(8,602	)	$	(9,457	)
Net income (loss) per Common share - Basic:
Loss from continuing operations	$	(0.23	)	$	(0.16	)	$	(0.51	)	$	(0.25	)
Income from discontinued operations		—			—			—			0.01
Total loss per Common share - Basic:	$	(0.23	)	$	(0.16	)	$	(0.51	)	$	(0.24	)
Net income (loss) per Class B common share - Basic:
Loss from continuing operations	$	(0.21	)	$	(0.15	)	$	(0.46	)	$	(0.22	)
Income from discontinued operations		—			—			—			0.01
Total loss per Class B common share - Basic:	$	(0.21	)	$	(0.15	)	$	(0.46	)	$	(0.21	)
Net income (loss) per Common share - Diluted:
Loss from continuing operations	$	(0.23	)	$	(0.16	)	$	(0.51	)	$	(0.25	)
Income from discontinued operations		—			—			—			0.01
Total loss per Common share - Diluted:	$	(0.23	)	$	(0.16	)	$	(0.51	)	$	(0.24	)
Net income (loss) per Class B common share - Diluted:
Loss from continuing operations	$	(0.21	)	$	(0.15	)	$	(0.46	)	$	(0.22	)
Income from discontinued operations		—			—			—			0.01
Total loss per Class B common share - Diluted:	$	(0.21	)	$	(0.15	)	$	(0.46	)	$	(0.21	)
Weighted average number of shares:
Common shares - Basic		10,701			11,604			10,976			11,733
Class B common shares - Basic		2,141			2,141			2,141			2,154
Common shares - Diluted		12,842			13,745			13,117			13,887
Class B common shares - Diluted		2,141			2,141			2,141			2,154
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 27,			February 28,			February 27,			February 28,
	2016			2015			2016			2015
Operating activities:
Net loss	$	(2,926	)	$	(2,198	)	$	(6,611	)	$	(3,338	)
Adjustments to reconcile net loss to cash used in operating activities:
Depreciation and amortization		583			418			1,865			1,227
Loss (gain) on sale of investments		21			(6	)		2			(15	)
Gain on disposal of assets		—			(4	)		(244	)		(30	)
Share-based compensation expense		119			143			434			529
Deferred income taxes		(82	)		(498	)		173			(665	)
Change in assets and liabilities, net of effect of acquired business:
Accounts receivable		282			(2,361	)		311			(2,655	)
Income tax receivable		187			—			851			2,888
Inventories, net		(2,164	)		(105	)		(5,636	)		(4,366	)
Prepaid expenses and other assets		1			176			(443	)		(727	)
Accounts payable		(986	)		(1,878	)		(2,976	)		(389	)
Accrued liabilities		(871	)		632			(2,071	)		(469	)
Long-term liabilities-accrued pension		—			—			(465	)		—
Other		125			(25	)		256			(32	)
Net cash used in operating activities		(5,711	)		(5,706	)		(14,554	)		(8,042	)
Investing activities:
Cash consideration paid for acquired business		—			—			(12,209	)		—
Capital expenditures		(1,267	)		(1,314	)		(3,043	)		(3,250	)
Proceeds from sales of assets		—			—			402			—
Proceeds from maturity of investments		—			750			25,584			31,957
Purchases of investments		—			(750	)		(2,151	)		(34,093	)
Proceeds from sales of available-for-sale securities		106			112			250			186
Purchases of available-for-sale securities		(106	)		(112	)		(250	)		(186	)
Other		(49	)		(98	)		(17	)		(128	)
Net cash provided by (used in) investing activities		(1,316	)		(1,412	)		8,566			(5,514	)
Financing activities:
Repurchase of common stock		—			(1,305	)		(5,015	)		(3,945	)
Proceeds from issuance of common stock		21			13			142			301
Cash dividends paid		(758	)		(808	)		(2,321	)		(2,453	)
Other		—			2			(4	)		—
Net cash used in financing activities		(737	)		(2,098	)		(7,198	)		(6,097	)
Effect of exchange rate changes on cash and cash equivalents		106			(2,272	)		(1,144	)		(4,701	)
Decrease in cash and cash equivalents		(7,658	)		(11,488	)		(14,330	)		(24,354	)
Cash and cash equivalents at beginning of period		67,863			89,886			74,535			102,752
Cash and cash equivalents at end of period	$	60,205		$	78,398		$	60,205		$	78,398



Richardson Electronics, Ltd.
Consolidated Balance Sheets
For the Third Quarter and First Nine Months of Fiscal 2016 and Fiscal 2015
(in thousands)

By Strategic Business Unit:

		Q3				Q3
	Net Sales	FY 2016				FY 2015		% Change
	PMT	$	23,008			$	25,207	-8.7	%
	Canvys		5,190				6,236	-16.8	%
	Healthcare		3,093				2,028	52.5	%
	Total	$	31,291			$	33,471	-6.5	%

		YTD				YTD
		FY 2016				FY 2015		% Change
	PMT	$	75,365			$	79,432	-5.1	%
	Canvys		17,773				18,110	-1.9	%
	Healthcare		9,310				4,469	108.3	%
	Total	$	102,448			$	102,011	0.4	%


		Q3				Q3
	Gross Profit	FY 2016		% of Net Sales		FY 2015		% of Net Sales
	PMT	$	7,140	31.0	%	$	7,680	30.5	%
	Canvys		1,204	23.2	%		1,621	26.0	%
	Healthcare		1,406	45.5	%		499	24.6	%
	Total	$	9,750	31.2	%	$	9,800	29.3	%

		YTD				YTD
		FY 2016		% of Net Sales		FY 2015		% of Net Sales
	PMT	$	22,793	30.2	%	$	24,904	31.4	%
	Canvys		4,439	25.0	%		4,929	27.2	%
	Healthcare		4,215	45.3	%		1,087	24.3	%
	Total	$	31,447	30.7	%	$	30,920	30.3	%

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