Richardson Electronics, Ltd. (NASDAQ: RELL) today reported sales and earnings for its fourth quarter and fiscal year ended May 28, 2011. The Company also announced that its Board of Directors increased its share repurchase authorization and declared a $.05 quarterly cash dividend.

Fiscal 2011 Results

Net sales for Fiscal 2011 were $158.9 million, up 17.4% from net sales of $135.4 million for Fiscal 2010. Gross margin decreased to 29.0% during Fiscal 2011, compared to 30.5% during Fiscal 2010. Operating expenses were $43.3 million, compared to $43.2 million during Fiscal 2010. Operating income for Fiscal 2011 was $2.8 million or 1.8% of net sales, compared to an operating loss in Fiscal 2010 of $1.9 million.

Net income for Fiscal 2011 was $90.1 million, or $4.95 per diluted common share, compared to net income for Fiscal 2010 of $16.1 million or $0.92 per diluted common share. Net income for Fiscal 2011 includes income from discontinued operations of $88.1 million, which includes the net gain on sale of $111.4 million.

Q4 Sales Up 4.9%

Net sales for the fourth quarter of Fiscal 2011 were $40.7 million, up 4.9% from net sales of $38.8 million during the fourth quarter of last year. Gross profit for the fourth quarter of Fiscal 2011 was $11.4 million, compared to $10.9 million during the fourth quarter of Fiscal 2010. Operating expenses for the fourth quarter of Fiscal 2011 was $10.8 million, respectively, compared to $11.5 million during the fourth quarter of Fiscal 2010.

Gross profit of $11.4 million during the fourth quarter includes approximately $1.0 million of expense related to additional inventory reserve provisions. Operating expenses of $10.8 million includes non-recurring costs related to a strategic distribution agreement of approximately $1.0 million. Reported operating income for the fourth quarter of Fiscal 2011 was $0.6 million, compared to an operating loss of $0.6 million during last year’s fourth quarter.

“Following the completion of the sale of the RF, Wireless and Power Division (RFPD) to Arrow Electronics on March 1, 2011, we immediately began restructuring our costs for the remaining businesses. Excluding the non-recurring costs recorded during our fourth quarter of Fiscal 2011, we achieved our near-term operating margin target. With these non-recurring costs behind us, we are well-positioned to deliver strong operating performance in Fiscal 2012,” said Edward J. Richardson, Chairman, Chief Executive Officer and President.

FINANCIAL SUMMARY ─ FISCAL 2011
  • Net sales for fiscal 2011 were $158.9 million, up 17.4%, compared to net sales of $135.4 million during fiscal 2010.
  • Gross margin as a percentage of net sales decreased to 29.0% during fiscal 2011, compared to 30.5% during fiscal 2010.
  • Selling, general, and administrative expenses remained relatively flat at $43.3 million during fiscal 2011, compared to $43.2 million during fiscal 2010.
  • Operating income during fiscal 2011 was $2.8 million, compared to an operating loss of $1.9 million during fiscal 2010.
  • Income from continuing operations during fiscal 2011 was $2.0 million, or $0.11 per diluted common share, versus a net loss of $4.2 million during fiscal 2010.
  • Income from discontinued operations, net of tax, was $88.1 million, or $4.84 per diluted common share, during fiscal 2011 compared to $20.3 million, or $1.16 per diluted common share, during fiscal 2010.
  • Net income during fiscal 2011 was $90.1 million, or $4.95 per diluted common share, compared to net income of $16.1 million, or $0.92 per diluted common share, during fiscal 2010.

FINANCIAL SUMMARY ─ FOURTH QUARTER
  • Net sales for the fourth quarter of fiscal 2011 were $40.7 million, up 4.9%, compared to net sales of $38.8 million during the fourth quarter of last year.
  • Gross margin as a percentage of net sales decreased to 27.9% during the fourth quarter of fiscal 2011 compared to 28.2% during the fourth quarter of last year. Gross margin included expense of approximately $1.0 million related to additional inventory reserve provisions.
  • SG&A expenses during the fourth quarter of fiscal 2011 were $10.8 million, or 26.5% of net sales, compared to $11.5 million, or 29.7% of net sales, during the fourth quarter of last year. The fourth quarter of fiscal 2011 includes non-recurring costs related to a strategic distribution agreement of approximately $1.0 million.
  • Operating income during the fourth quarter of fiscal 2011 was $0.6 million, or 1.4% of net sales, compared to a loss of $0.6 million, for the fourth quarter last year.
  • Income from continuing operations during the fourth quarter of fiscal 2011 was $1.1 million, compared to a loss from continuing operations of $0.9 million during the fourth quarter of last year.
  • Income from discontinued operations, net of tax, was $64.9 million, or $3.54 per diluted common share, during the fourth quarter of fiscal 2011 compared to $7.5 million, or $0.42 per diluted common share, during the fourth quarter of fiscal 2010.
  • Net income during the fourth quarter of fiscal 2011 was $66.0 million, or $3.60 per diluted common share, compared to net income of $6.6 million, or $0.38 per diluted common share, in the prior year’s fourth quarter.

CASH USED FOR SHARE REPURCHASES

“Total cash and investments as of fiscal year end were $239.7 million. In addition, we repurchased 645,900 shares for approximately $8.7 million during the fourth quarter of fiscal 2011. With our strong balance sheet, we are committed to returning value to our shareholders through a combination of cash dividends, continued share repurchases and investments to fund our growth initiatives,” said Mr. Richardson.

To date, the company has repurchased a total of 1.2 million shares. As of today, $34 million remains under our existing share repurchase authorization from the company’s board of directors. This includes an incremental $25 million repurchase authorization approved by the board of directors on July 19, 2011. Share repurchases may be made on the open market or in privately negotiated transactions from time to time, subject to market conditions and trading restrictions. This authorization has no expiration and can be cancelled at any time.

OUTLOOK

“EDG continues to experience strong sales growth as we benefit from strength within the global manufacturing sector as well as the incremental volume related to a strategic distribution agreement. The sales organization for Canvys is now clearly focused on winning design-in work with Original Equipment Manufacturers (OEMs). While the sell cycle for OEMs tends to be longer, these customers better align with our long-term strategy and value proposition,” said Mr. Richardson.

“We expect that sales for EDG and Canvys for the first quarter to be in the range of $41 million to $43 million, up 9% to 15% over the prior year, and sales for Fiscal 2012 should be in the range of $170 to $175 million, up 7% to 10% over Fiscal 2011. We are also confident that we will be able to achieve our operating margin target for the year of 5%,” concluded Mr. Richardson.

CASH DIVIDEND

The Company also announced today that its Board of Directors voted to declare a $0.05 dividend per share to all holders of common stock and a $0.045 cash dividend per share to all holders of Class B common stock. The dividend will be payable on August 19, 2011, to all common stockholders of record on August 5, 2011. The Company currently has 14,267,492 outstanding shares of common stock and 2,951,961 outstanding shares of Class B common stock.

CONFERENCE CALL INFORMATION

On Thursday, July 21, 2011, 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 Fiscal 2011 results. A question and answer session will be included as part of the call’s agenda. To listen to the call, please dial 888-419-5570 and enter passcode 68566114 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 July 21, 2011, for seven days. The telephone numbers for the replay are (USA) 888-286-8010 and (International) 617-801-6888; access code 42404925.

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 Quarterly Report on Form 10-Q filed on April 7, 2011. 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, and customized display solutions serving customers in the RF and microwave communications, military, marine, aviation, industrial, scientific and medical markets. Utilizing its core engineering and manufacturing capabilities, the Company’s strategy is to provide specialized technical expertise and “engineered solutions.” 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. More information is available online at www.rell.com.

Richardson Electronics common stock trades on the NASDAQ Global Select Market under the ticker symbol RELL.
Richardson Electronics, Ltd.
Condensed Consolidated Balance Sheets
(in thousands, except per share amounts)
   
May 28, May 29,
2011 2010
Assets
Current assets:
Cash and cash equivalents $ 170,975 $ 29,038
Accounts receivable, less allowance of $438 and $369 22,374 19,762
Inventories 30,853 26,797
Prepaid expenses and other assets 5,768 1,438
Deferred income taxes 2,084 317
Investments - current 52,116 -
Discontinued operations - assets   4,018     148,169  
 
Total current assets   288,188     225,521  
 
Non-current assets:
Property, plant and equipment, net 5,216 6,561
Deferred financing costs, net - 60
Non-current deferred income taxes 3,994 1,541
Investments - non-current   16,656     1,132  
 
Total non-current assets   25,866     9,294  
 
Total assets $ 314,054   $ 234,815  
 
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $ 17,814 $ 18,067
Accrued liabilities 43,719 10,037
Short-term debt - 19,517
Discontinued operations - liabilities   13,771     53,366  
 
Total current liabilities   75,304     100,987  
 
Non-current liabilities:
Long-term income tax liabilities 12,568 254
` Other non-current liabilities 387 490
Discontinued operations - non-current liabilities   1,622     3,221  
 
Total non-current liabilities   14,577     3,965  
 
Total liabilities   89,881     104,952  
 
Commitments and contingencies - -
 
Stockholders' equity
Common stock, $0.05 par value; issued 14,921 shares at May 28, 2011, and 16,029
shares at May 29, 2010 746 802
Class B common stock, convertible, $0.05 par value; issued 2,952 shares at May 28,
2011, and 3,048 shares at May 29, 2010 147 152
Preferred stock, $1.00 par value, no shares issued - -
Additional paid-in-capital 112,179 120,998
Common stock in treasury, at cost, 112 shares at May 28, 2011, and 1,355 shares
at May 29, 2010 (1,493 ) (8,503 )
Retained earnings 101,053 12,925
Accumulated other comprehensive income   11,541     3,489  
 
Total stockholders' equity   224,173     129,863  
 
Total liabilities and stockholders' equity $ 314,054   $ 234,815  
 
Richardson Electronics, Ltd.
Condensed Consolidated Statements of Income
(in thousands, except per share amounts)
       
Three Months Ended Twelve Months Ended
May 28, May 29 May 28, May 29
2011 2010 2011 2010
Statements of Income
Net sales $ 40,724 $ 38,834 $ 158,867 $ 135,372
Cost of sales   29,354     27,893     112,754     94,088  
Gross profit 11,370 10,941 46,113 41,284
Selling, general, and administrative expenses 10,779 11,547 43,255 43,183
Loss on disposal of assets   9     13     12     20  
Operating income (loss)   582     (619 )   2,846     (1,919 )
Other (income) expense:
Interest expense - 221 141 1,176
Investment/Interest income (373 ) (10 ) (369 ) (34 )
Foreign exchange (gain) loss 264 (194 ) 607 1,116
Loss on retirement of short-term debt - 76 60 203
Other, net   24     (34 )   (43 )   (130 )
Total other (income) expense   (85 )   59     396     2,331  
Income (loss) from continuing operations before income taxes 667 (678 ) 2,450 (4,250 )
Income tax provision (benefit)   (465 )   271     468     (68 )
Income (loss) from continuing operations 1,132 (949 ) 1,982 (4,182 )
Income from discontinued operations, net of tax   64,890     7,527     88,092     20,277  

Net income

$

66,022
 

$

6,578
 

$

90,074
  $ 16,095  
 

Net income per Common share - Basic:
Income (loss) from continuing operations $ 0.06 $ (0.04 ) $ 0.11 $ (0.24 )
Income from discontinued operations   3.63     0.42     4.99     1.16  
Total net income per Common share - Basic: $ 3.69   $ 0.38   $ 5.10   $ 0.92  
 

Net income per Class B common share - Basic:
Income (loss) from continuing operations $ 0.06 $ (0.03 ) $ 0.10 $ (0.21 )
Income from discontinued operations   3.27     0.37     4.49     1.04  
Total net income per Class B common share - Basic: $ 3.33   $ 0.34   $ 4.59   $ 0.83  
 

Net income per Common share - Diluted:
Income (loss) from continuing operations $ 0.06 $ (0.04 ) $ 0.11 $ (0.24 )
Income from discontinued operations   3.54     0.42     4.84     1.16  
Total net income per Common share - Diluted: $ 3.60   $ 0.38   $ 4.95   $ 0.92  
 

Net income per Class B common share - Diluted:
Income (loss) from continuing operations $ 0.06 $ (0.03 ) $ 0.10 $ (0.21 )
Income from discontinued operations   3.24     0.37     4.43     1.04  
Total net income per Class B common share - Diluted: $ 3.30   $ 0.34   $ 4.53   $ 0.83  
 
Weighted average number of shares:
Common shares - Basic   15,165     14,623     14,926     14,766  
Class B common shares - Basic   2,998     3,048     3,019     3,048  
Common shares - Diluted   18,354     14,623     18,203     14,766  
Class B common shares - Diluted   2,998     3,048     3,019     3,048  
 
Dividends per common share $ 0.050   $ 0.020   $ 0.110   $ 0.080  
Dividends per Class B common share $ 0.045   $ 0.018   $ 0.099   $ 0.072  
 
Richardson Electronics, Ltd.
Net Sales and Gross Profit
For the Fourth Quarter and Twelve Months of Fiscal 2011 and Fiscal 2010
(in thousands)
 
By Strategic Business Unit:
               
Net Sales
 
Q4 FY2011 Q4 FY2010 % Change FY 2011 FY 2010 % Change
 
EDG $ 29,565 $ 26,395 12.0% $ 113,715 $ 86,541 31.4%
Canvys   11,159   12,439 (10.3%)   45,152   48,831 (7.5%)
Total $ 40,724 $ 38,834 4.9% $ 158,867 $ 135,372 17.4%
 
 
 
Gross Profit
 
% of % of
Q4 FY2011 net sales FY 2011 net sales
EDG $ 8,610 29.1% $ 35,020 30.8%
Canvys   2,760 24.7%   11,093 24.6%
Total   11,370 27.9%   46,113 29.0%
 
% of % of
Q4 FY2010 net sales FY 2010 net sales
EDG $ 8,027 30.4% $ 28,721 33.2%
Canvys   2,914 23.4%   12,563 25.7%
Total   10,941 28.2%   41,284 30.5%

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