Richardson Electronics, Ltd. (NASDAQ: RELL) today reported sales and earnings for its second quarter ended November 27, 2010. The Company's second quarter results reflect its RFPD business unit as a discontinued operation. The Company also declared its regular quarterly dividend.

Net sales for the second quarter of Fiscal 2011 were $41.0 million, up 23.7% from net sales of $33.1 million during the second quarter of last year. Operating income was $0.6 million or 1.5% of net sales for the second quarter of Fiscal 2011, compared to $0.3 million or 0.9% of net sales during last year's second quarter. Income from continuing operations during the second quarter of fiscal 2011 was $0.2 million, or $0.01 per diluted common share, compared to a loss from continuing operations of $0.3 million during the second quarter of last year.

Income from discontinued operations, net of tax, was $7.3 million, or $0.40 per diluted common share, during the second quarter of fiscal 2011 compared to $3.4 million, or $0.19 per diluted common share, during the second quarter of fiscal 2010.

Net income during the second quarter of fiscal 2011 was $7.5 million, or $0.41 per diluted common share, compared to net income of $3.1 million, or $0.18 per diluted common share, in the prior year's second quarter.

?We are moving forward with the sale of our RFPD business unit to Arrow Electronics. We expect to close the transaction within the next 60 days. In the interim, we continue to see strong sales growth for our EDG business and improving signs for Canvys. Post-transaction, we will realign our cost structure for the remaining businesses to achieve our near-term goal of attaining a 5% operating margin,? said Edward J. Richardson, Chairman, Chief Executive Officer and President of Richardson Electronics, Ltd.

FINANCIAL SUMMARY ? THREE MONTHS ENDED NOVEMBER 27, 2010

  • Net sales for the second quarter of fiscal 2011 were $41.0 million, up 23.7%, compared to net sales of $33.1 million during the second quarter of last year.
  • Gross margin as a percentage of net sales decreased to 28.8% during the second quarter of fiscal 2011 compared to 32.9% during the second quarter of last year.
  • SG&A expenses during the second quarter of Fiscal 2011 were $11.2 million, or 27.3% of net sales, compared to $10.6 million, or 32.0% of net sales, during the second quarter of last year.
  • Operating income during the second quarter of fiscal 2011 was $0.6 million, or 1.5% of net sales, compared to $0.3 million, or 0.9% of net sales, for the second quarter last year.
  • Income from continuing operations during the second quarter of fiscal 2011 was $0.2 million, or $0.01 per diluted common share, compared to a loss from continuing operations of $0.3 million during the second quarter of last year.
  • Income from discontinued operations, net of tax, was $7.3 million, or $0.40 per diluted common share, during the second quarter of fiscal 2011 compared to $3.4 million, or $0.19 per diluted common share, during the second quarter of fiscal 2010.
  • Net income during the second quarter of fiscal 2011 was $7.5 million, or $0.41 per diluted common share, compared to net income of $3.1 million, or $0.18 per diluted common share, in the prior year's second quarter.

FINANCIAL SUMMARY ? SIX MONTHS ENDED NOVEMBER 27, 2010

  • Net sales for the first six months of fiscal 2011 were $78.5 million, up 24.3%, compared to net sales of $63.1 million during the first six months of last year.
  • Gross margin as a percentage of net sales decreased to 29.5% during the first six months of fiscal 2011 compared to 31.6% during the first six months of last year.
  • SG&A expenses during the first six months of Fiscal 2011 were $21.7 million, or 27.7% of net sales, compared to $21.0 million, or 33.3% of net sales, during the first six months of last year.
  • Operating income during the first six months of fiscal 2011 was $1.4 million, or 1.8% of net sales, compared to a loss of $1.0 million for the first six months of last year.
  • Income from continuing operations during the first six months of fiscal 2011 was $0.6 million, or $0.03 per diluted common share, compared to a loss from continuing operations of $2.5 million, during the first six months of last year.
  • Income from discontinued operations, net of tax, was $15.2 million, or $0.84 per diluted common share, during the first six months of fiscal 2011 compared to $7.6 million, or $0.42 per diluted common share, during the first six months of the prior year.
  • Net income during the first six months of fiscal 2011 was $15.8 million, or $0.87 per diluted common share, compared to net income of $5.0 million, or $0.28 per diluted common share, during the first six months of the prior year.

CASH FLOWS AND BALANCE SHEET

Cash flows provided by operating activities were $2.8 million during the second quarter of Fiscal 2011, compared to cash flows provided by operating activities of $6.9 million during the second quarter of Fiscal 2010. The Company ended the quarter in a net cash position of $15.0 million, reflecting cash of $33.0 million and total debt of $18.0 million.

?The balance sheet items shown as discontinued assets and liabilities all relate to RFPD. Our balance sheet for our third quarter will reflect the cash proceeds from the sale as well as the remaining assets and liabilities of our existing businesses. After the sale, our balance sheet will provide us with tremendous flexibility and liquidity for our future,? said Kathleen Dvorak, Executive Vice President and Chief Financial Officer.

OUTLOOK

On October 1, 2010, the Company announced that it had signed a definitive agreement to sell its RF, Wireless and Power Division (?RFPD?) and certain other assets to Arrow Electronics, Inc. (NYSE: ARW) for $210 million in cash, subject to post-closing adjustments.

The transaction is subject to the approval of shareholders of Richardson Electronics, Ltd. as well as customary closing conditions and regulatory approvals. The companies expect the transaction to close in the next 60 days.

?We expect that sales for EDG and Canvys for the third quarter to be in the range of $38 to $40 million, representing more than 10% growth over the prior year. Post-transaction, our goal will be to appropriately align our cost structure and implement our growth strategy to deliver solid financial and operational results,? said Mr. Richardson.

CASH DIVIDEND

The Company also announced today that its Board of Directors voted to declare a $0.02 cash dividend per share to all holders of common stock and a $0.018 cash dividend per share to all holders of Class B common stock. The dividend will be payable on February 25, 2011, to all common stockholders of record on February 10, 2011. The Company currently has 14,980,190 outstanding shares of common stock and 3,001,961 outstanding shares of Class B common stock.

CONFERENCE CALL INFORMATION

On Thursday, January 6, 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 second quarter 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 800-688-0796 and enter passcode 20623014 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 January 6, 2011, for seven days. The telephone numbers for the replay are (USA) 800-688-0796 and (International) 617-614-4070; access code 64749137.

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 2010 Annual Report on Form 10-K, Item 1A, ?Risk Factors? in the Company's Quarterly Report on Form 10-Q for the period ended August 28, 2010 and ?Risk Factors? in the Company's Definitive Proxy Statement filed on December 21, 2010. 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 global provider of engineered solutions, a global distributor of electronic components to the radio frequency, wireless and power management, and electron device markets, and a global provider of display solutions to the display systems markets. Utilizing its core engineering and manufacturing capabilities, the Company's strategy is to provide specialized technical expertise and value-add, or ?engineered solutions.? The Company provides solutions and adds value through design-in support, systems integration, prototype design and manufacturing, testing, and logistics for end products of its customers. 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.
Unaudited Condensed Consolidated Statements of Income
(in thousands, except per share amounts)
       
Three Months Ended Six Months Ended
November 27, November 28, November 27, November 28,
2010 2009 2010 2009
 
Net sales $ 40,980 $ 33,116 $ 78,490 $ 63,130
Cost of sales   29,185     22,216     55,304     43,163  
Gross profit 11,795 10,900 23,186 19,967
Selling, general, and administrative expenses 11,198 10,589 21,743 20,997
(Gain) loss on disposal of assets   2     -     2     (2 )
Operating income (loss)   595     311     1,441     (1,028 )
Other (income) expense:
Interest expense 39 325 106 664
Investment income - (8 ) - (18 )
Foreign exchange loss 197 700 316 1,518
Loss on retirement of short-term debt - - 60 -
Other, net   (79 )   (91 )   (70 )   (98 )
Total other expense   157     926     412     2,066  
Income (loss) from continuing operations before income taxes 438 (615 ) 1,029 (3,094 )
Income tax provision (benefit)   270     (353 )   408     (564 )
Income (loss) from continuing operations 168 (262 ) 621 (2,530 )
Income from discontinued operations, net of tax   7,291     3,396     15,214     7,579  
Net income $ 7,459   $ 3,134   $ 15,835   $ 5,049  
 

Net income per Common share - Basic:

Income (loss) from continuing operations $ 0.01 $ (0.01 ) $ 0.04 $ (0.14 )
Income from discontinued operations   0.42     0.19     0.87     0.43  
Total net income per Common share - Basic: $ 0.43   $ 0.18   $ 0.91   $ 0.29  
 

Net income per Class B common share - Basic:

Income (loss) from continuing operations $ 0.01 $ (0.01 ) $ 0.03 $ (0.13 )
Income from discontinued operations   0.38     0.17     0.78     0.39  
Total net income per Class B common share - Basic: $ 0.39   $ 0.16   $ 0.81   $ 0.26  
 

Net income per Common share - Diluted:

Income (loss) from continuing operations $ 0.01 $ (0.01 ) $ 0.03 $ (0.14 )
Income from discontinued operations   0.40     0.19     0.84     0.42  
Total net income per Common share - Diluted: $ 0.41   $ 0.18   $ 0.87   $ 0.28  
 

Net income per Class B common share - Diluted:

Income (loss) from continuing operations $ 0.01 $ (0.01 ) $ 0.03 $ (0.13 )
Income from discontinued operations   0.37     0.17     0.77     0.39  
Total net income per Class B common share - Diluted: $ 0.38   $ 0.16   $ 0.80   $ 0.26  
 
Weighted average number of shares:
Common shares - Basic   14,768     14,864     14,725     14,862  
Class B common shares - Basic   3,028     3,048     3,038     3,048  
Common shares - Diluted   18,099     17,912     18,010     17,910  
Class B common shares - Diluted   3,028     3,048     3,038     3,048  
 
Dividends per common share $ 0.020   $ 0.020   $ 0.040   $ 0.040  
Dividends per Class B common share $ 0.018   $ 0.018   $ 0.036   $ 0.036  
 
 
Richardson Electronics, Ltd.
Unaudited Condensed Consolidated Balance Sheets
(in thousands, except per share amounts)
   
November 27, May 29,
2010 2010
Assets
Current assets:
Cash and cash equivalents $ 33,033 $ 29,038
Accounts receivable, less allowance of $312 and $369 22,008 19,762
Inventories 26,491 26,797
Prepaid expenses 1,388 1,438
Deferred income taxes 346 317
Discontinued operations - assets   173,168     148,169  
 
Total current assets   256,434     225,521  
 
Non-current assets:
Property, plant and equipment, net 5,752 6,561
Deferred financing costs, net - 60
Non-current deferred income taxes 1,550 1,541
Other non-current assets   358     1,132  
 
Total non-current assets   7,660     9,294  
 
Total assets $ 264,094   $ 234,815  
 
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $ 18,750 $ 18,067
Accrued liabilities 10,864 10,037
Short-term debt 18,000 19,517
Discontinued operations - liabilities   60,990     53,366  
 
Total current liabilities   108,604     100,987  
 
Non-current liabilities:
Long-term income tax liabilities 346 254
Other non-current liabilities 494 490
Discontinued operations - non-current liabilities   3,265     3,221  
 
Total non-current liabilities   4,105     3,965  
 
Total liabilities   112,709     104,952  
 
Commitments and contingencies - -
 
Stockholders' equity

Common stock, $0.05 par value; issued 16,317 shares at November 27, 2010, and 16,029 shares at May 29, 2010

814 802

Class B common stock, convertible, $0.05 par value; issued 3,002 shares at November 27, 2010, and 3,048 shares at May 29, 2010

152 152
Preferred stock, $1.00 par value, no shares issued - -
Additional paid-in-capital 123,065 120,998

Common stock in treasury, at cost, 1,370 shares at November 27, 2010, and 1,355 shares at May 29, 2010

(8,665 ) (8,503 )
Retained earnings 28,061 12,925
Accumulated other comprehensive income   7,958     3,489  
 
Total stockholders' equity   151,385     129,863  
 
Total liabilities and stockholders' equity $ 264,094   $ 234,815  
 
 
Richardson Electronics, Ltd.
Unaudited Condensed Consolidated Statements of Cash Flows
(in thousands)
       
Three Months Ended Six Months Ended
November 27, November 28, November 27, November 28,
2010 2009 2010 2009
Operating activities:
Net income $ 7,459 $ 3,134 $ 15,835 $ 5,049
Adjustments to reconcile net income to cash provided

by operating activities:

Depreciation and amortization 490 1,115 1,385 2,179
Loss from discontinued operations - 1,173 - 1,173
Loss on retirement of short-term debt - - 60 -
Stock compensation expense 160 202 308 351
Deferred income taxes (85 ) 260 (31 ) 84
Accounts receivable (9,536 ) (4,786 ) (11,212 ) 1,039
Inventories

(3,473

) 7,705

(10,016

) 5,885
Prepaid expenses (862 ) 204 (1,704 ) (1,472 )
Accounts payable

7,361

(988 )

6,651

(8,731 )
Accrued liabilities 1,762 591 2,021 946
Other   (481 )   (1,711 )   (61 )   (1,804 )

Net cash provided by operating activities

   2,795     6,899     3,236     4,699  
Investing activities:
Capital expenditures (97 ) (214 ) (496 ) (494 )
Proceeds from sales of available-for-sale securities 73 64 83 103
Purchases of available-for-sale securities (73 ) (64 ) (83 ) (103 )
Other   (40 )   (10 )   (33 )   (27 )
Net cash used in investing activities   (137 )   (224 )   (529 )   (521 )
Financing activities:
Proceeds from borrowings 47,300 - 109,600 10,200
Payments on debt (51,300 ) - (91,600 ) (10,200 )
Payments on retirement of short-term debt - - (19,517 ) -
Repurchase of common stock (162 ) - (162 ) -
Proceeds from issuance of common stock 1,607 - 1,771 5
Cash dividends paid (351 ) (352 ) (699 ) (704 )
Other   -     10     -     10  
Net cash used in financing activities   (2,906 )   (342 )   (607 )   (689 )
 
Effect of exchange rate changes on cash and cash equivalents   1,299     1,829     1,895     2,581  
 
Increase in cash and cash equivalents 1,051 8,162 3,995 6,070
 
Cash and cash equivalents at beginning of period 31,982 41,795 29,038 43,887
       
Cash and cash equivalents at end of period $ 33,033   $ 49,957   $ 33,033   $ 49,957  
 
 
Richardson Electronics, Ltd.
Net Sales and Gross Profit
For the Second Quarter and First Six Months of Fiscal 2011 and Fiscal 2010
(in thousands)
By Strategic Business Unit:
             
Net SalesGross Profit
% % of % of
Second Quarter FY 2011 FY 2010 Change FY 2011 Net Sales FY 2010 Net Sales
EDG 28,655 20,121 42.4 % 8,942 31.2 % 7,366 36.6 %
Canvys   12,325   12,995 (5.2 %)   2,853 23.1 %   3,535 27.2 %
Total $ 40,980 $ 33,116 23.7 % $ 11,795 28.8 % $ 10,901 32.9 %
 
 
Net SalesGross Profit
% % of % of
First Six Months FY 2011 FY 2010 Change FY 2011 Net Sales FY 2010 Net Sales
EDG 56,148 38,917 44.3 % 17,998 32.1 % 13,633 35.0 %
Canvys   22,342   24,213 (7.7 %)   5,188 23.2 %   6,335 26.2 %
Total $ 78,490 $ 63,130 24.3 % $ 23,186 29.5 % $ 19,968 31.6 %

Richardson Electronics, Ltd.
Edward J. Richardson
Chairman and CEO
Phone: (630) 208-2340
E-mail: info@rell.com
or
Kathleen S. Dvorak
EVP & CFO
(630) 208-2208