Richardson Electronics Reports Second Quarter Fiscal 2016

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

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
	November 28,		May 30,
	2015		2015
Assets
Current assets:
Cash and cash equivalents	$	67,863	$	74,535
Accounts receivable, less allowance of $283		21,041		20,753
Inventories, net	$	43,126	$	38,769
Prepaid expenses and other assets		2,111		1,696
Deferred income taxes	$	637	$	804
Income tax receivable		265		929
Investments - current		3,719		23,692
Total current assets		138,762		161,178
Non-current assets:
Property, plant and equipment, net		10,893		10,081
Goodwill		6,271		—
Intangible assets, net		3,861		743
Non-current deferred income taxes		1,164		1,443
Investments - non-current		7,897		11,549
Total non-current assets		30,086		23,816
Total assets	$	168,848	$	184,994
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable		13,583		15,768
Accrued liabilities		8,866		10,144
Total current liabilities		22,449		25,912
Non-current liabilities:
Non-current deferred income tax liabilities		1,019		1,209
Other non-current liabilities		743		1,221
Total non-current liabilities		1,762		2,430
Total liabilities		24,211		28,342
Stockholders’ equity
Common stock, $0.05 par value; issued 10,698 shares at November 28, 2015, 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 November 28, 2015, and at May 30, 2015		107		107
Preferred stock, $1.00 par value, no shares issued		—		—
Additional paid-in-capital		58,715		63,252
Common stock in treasury, at cost, no shares at November 28, 2015, and at May 30, 2015		—		—
Retained earnings		83,889		89,141
Accumulated other comprehensive income		1,391		3,575
Total stockholders’ equity		144,637		156,652
Total liabilities and stockholders’ equity	$	168,848	$	184,994


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

	Three Months Ended						Six Months Ended
	November 28,			November 29,			November 28,			November 29,
	2015			2014			2015			2014
Statements of Comprehensive Loss
Net sales	$	34,086		$	33,841		$	71,157		$	68,540
Cost of sales		23,651			23,379			49,460			47,420
Gross profit		10,435			10,462			21,697			21,120
Selling, general, and administrative expenses		13,200			12,621			25,467			23,803
(Gain) loss on disposal of assets		(243	)		—			(244	)		9
Operating loss		(2,522	)		(2,159	)		(3,526	)		(2,692	)
Other (income) expense:
Investment/interest income		(111	)		(249	)		(302	)		(505	)
Foreign exchange (gain) loss		(339	)		47			(157	)		(10	)
Other, net		(49	)		(14	)		(13	)		(16	)
Total other income		(499	)		(216	)		(472	)		(531	)
Loss from continuing operations before income taxes		(2,023	)		(1,943	)		(3,054	)		(2,161	)
Income tax provision (benefit)		263			(799	)		631			(934	)
Loss from continuing operations		(2,286	)		(1,144	)		(3,685	)		(1,227	)
Income from discontinued operations, net of tax		—			87			—			87
Net loss		(2,286	)		(1,057	)		(3,685	)		(1,140	)
Foreign currency translation loss, net of tax		(1,649	)		(2,993	)		(2,152	)		(3,961	)
Fair value adjustments on investments gain (loss)		28			—			(32	)		25
Comprehensive loss	$	(3,907	)	$	(4,050	)	$	(5,869	)	$	(5,076	)
Net income (loss) per Common share - Basic:
Loss from continuing operations	$	(0.18	)	$	(0.08	)	$	(0.28	)	$	(0.09	)
Income from discontinued operations		—			0.01			—			0.01
Total loss per Common share - Basic:	$	(0.18	)	$	(0.07	)	$	(0.28	)	$	(0.08	)
Net income (loss) per Class B common share - Basic:
Loss from continuing operations	$	(0.16	)	$	(0.07	)	$	(0.25	)	$	(0.08	)
Income from discontinued operations		—			0.01			—			0.01
Total loss per Class B common share - Basic:	$	(0.16	)	$	(0.06	)	$	(0.25	)	$	(0.07	)
Net income (loss) per Common share - Diluted:
Loss from continuing operations	$	(0.18	)	$	(0.08	)	$	(0.28	)	$	(0.09	)
Income from discontinued operations		—			0.01			—			0.01
Total loss per Common share - Diluted:	$	(0.18	)	$	(0.07	)	$	(0.28	)	$	(0.08	)
Net income (loss) per Class B common share - Diluted:
Loss from continuing operations	$	(0.16	)	$	(0.07	)	$	(0.25	)	$	(0.08	)
Income from discontinued operations		—			0.01			—			0.01
Total loss per Class B common share - Diluted:	$	(0.16	)	$	(0.06	)	$	(0.25	)	$	(0.07	)
Weighted average number of shares:
Common shares - Basic		10,742			11,770			11,114			11,797
Class B common shares - Basic		2,141			2,141			2,141			2,161
Common shares - Diluted		10,742			11,770			11,114			11,797
Class B common shares - Diluted		2,141			2,141			2,141			2,161
Dividends per common share	$	0.060		$	0.060		$	0.120		$	0.120
Dividends per Class B common share	$	0.054		$	0.054		$	0.108		$	0.108


Richardson Electronics, Ltd.
Unaudited Consolidated Statements of Cash Flows
(in thousands)

	Three Months Ended						Six Months Ended
	November 28,			November 29,			November 28,			November 29,
	2015			2014			2015			2014
Operating activities:
Net loss	$	(2,286	)	$	(1,057	)	$	(3,685	)	$	(1,140	)
Adjustments to reconcile net loss to cash used in operating activities:
Depreciation and amortization		797			443			1,282			809
Gain on sale of investments		(8	)		(6	)		(19	)		(9	)
Gain on disposal of assets		(243	)		(26	)		(244	)		(26	)
Share-based compensation expense		225			266			315			386
Deferred income taxes		254			(88	)		255			(167	)
Change in assets and liabilities, net of effect of acquired business:
Accounts receivable		2,554			78			29			(294	)
Income tax receivable		116			580			664			2,888
Inventories, net		(2,879	)		(2,151	)		(3,472	)		(4,261	)
Prepaid expenses and other assets		137			(1,038	)		(444	)		(903	)
Accounts payable		(469	)		1,388			(1,990	)		1,489
Accrued liabilities		(396	)		(439	)		(1,200	)		(1,101	)
Non-current deferred income tax liabilities		(228	)		—			—			—
Long-term liabilities-accrued pension		—			—			(465	)		—
Other		96			42			131			(7	)
Net cash used in operating activities		(2,330	)		(2,008	)		(8,843	)		(2,336	)
Investing activities:
Cash consideration paid for acquired business		—			—			(12,209	)		—
Capital expenditures		(792	)		(1,102	)		(1,776	)		(1,936	)
Proceeds from sales of assets		402			—			402			—
Proceeds from maturity of investments		7,234			725			25,584			31,207
Purchases of investments		(2,151	)		(981	)		(2,151	)		(33,343	)
Proceeds from sales of available-for-sale securities		44			37			144			74
Purchases of available-for-sale securities		(44	)		(37	)		(144	)		(74	)
Other		(28	)		(2	)		32			(30	)
Net cash provided by (used in) investing activities		4,665			(1,360	)		9,882			(4,102	)
Financing activities:
Repurchase of common stock		(1,707	)		(2,151	)		(5,015	)		(2,640	)
Proceeds from issuance of common stock		121			130			121			288
Cash dividends paid		(757	)		(817	)		(1,563	)		(1,645	)
Other		—			(4	)		(4	)		(2	)
Net cash used in financing activities		(2,343	)		(2,842	)		(6,461	)		(3,999	)
Effect of exchange rate changes on cash and cash equivalents		(555	)		(1,988	)		(1,250	)		(2,429	)
Decrease in cash and cash equivalents		(563	)		(8,198	)		(6,672	)		(12,866	)
Cash and cash equivalents at beginning of period		68,426			98,084			74,535			102,752
Cash and cash equivalents at end of period	$	67,863		$	89,886		$	67,863		$	89,886


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

By Strategic Business Unit:

	Net Sales	Q2				Q2
		FY 2016				FY 2015		% Change
	PMT	$	25,162			$	26,787	-6.1	%
	Canvys		5,902				5,906	-0.1	%
	Healthcare		3,022				1,148	163.2	%
	Total	$	34,086			$	33,841	0.7	%

		YTD				YTD
		FY 2016				FY 2015		% Change
	PMT	$	52,357			$	54,225	-3.4	%
	Canvys		12,583				11,874	6.0	%
	Healthcare		6,217				2,441	154.7	%
	Total	$	71,157			$	68,540	3.8	%


	Gross Profit	Q2				Q2
		FY 2016		% of Net Sales		FY 2015		% of Net Sales
	PMT	$	7,515	29.9	%	$	8,537	31.9	%
	Canvys		1,526	25.9	%		1,653	28.0	%
	Healthcare		1,394	46.1	%		272	23.7	%
	Total	$	10,435	30.6	%	$	10,462	30.9	%

		YTD				YTD
		FY 2016		% of Net Sales		FY 2015		% of Net Sales
	PMT	$	15,653	29.9	%	$	17,223	31.8	%
	Canvys		3,235	25.7	%		3,309	27.9	%
	Healthcare		2,809	45.2	%		588	24.1	%
	Total	$	21,697	30.5	%	$	21,120	30.8	%

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