Richardson Electronics Ltd. (RELL, Financial) filed Quarterly Report for the period ended 2009-02-28.
Richardson Electronics Ltd. is a global provider of Engineered Solutions serving the RF Wireless & Power Conversion; Electron Device; Security; and Display Systems markets. The Company delivers engineered solutions for its customers' needs through product manufacturing systems integration prototype design and manufacture testing and logistics. Richardson Electronics Ltd. has a market cap of $62.7 million; its shares were traded at around $3.5 with a P/E ratio of 5.7 and P/S ratio of 0.1. The dividend yield of Richardson Electronics Ltd. stocks is 2.3%.
RFPD net sales decreased 13.8% and 0.9% to $80.6 million and $270.9 million during the third quarter and first nine months of fiscal 2009, respectively, from $93.4 million and $273.2 million during the third quarter and first nine months of fiscal 2008, respectively. The decline in net sales, which was the result of the weakened economic conditions, included declines in both the net sales of our network access and passive/interconnect products, partially offset by an increase in infrastructure products. Infrastructure net sales increased 1.2% and 9.4% to $24.9 million and $77.0 million during the third quarter and first nine months of fiscal 2009, respectively, from $24.6 million and $70.4 million during the third quarter and first nine months of fiscal 2008, respectively. The net sales growth for infrastructure products was in Asia/Pacific, which was due primarily to the reorganization of the mobile telecom industry in China, which included the deployment of the next infrastructure build-out of the Time Division-Synchronous Code Division Multiple Access (TD-SCDMA). Gross margin as a percent of net sales decline to 22.1% during both the third quarter and first nine months of fiscal 2009 from 22.5% and 22.9% during the third quarter and first nine months of fiscal 2008, respectively. The decline in gross margin as a percent of net sales was due primarily to the lower margins generated from the TD-SCDMA project in China. During the third quarter of fiscal 2008, RFPD incurred inventory write-downs of $0.9 million.
Canvys net sales decreased 36.5% and 18.3% to $11.7 million and $45.7 million during the third quarter and first nine month of fiscal 2009, respectively, from $18.5 million and $55.9 million during the third quarter and first nine months of fiscal 2008, respectively, due primarily to a decline in medical imaging and digital signage products. The decline of both product lines was due primarily to lower capital investments as a result of the weakening global economy. During the third quarter of fiscal 2008, Canvys implemented a new business plan, part of which included exiting unprofitable market segments and the distribution of low margin business, and realigning sales and marketing operations for better utilization. Gross margin declined to 5.4% during the third quarter of fiscal 2009 from 12.5% during the third quarter of fiscal 2008, due primarily to inventory write-downs. The inventory write-downs of $1.8 million (15.4% of net sales) during the third quarter of fiscal 2009 had a larger impact on our gross margin percentage as compared to the inventory write-downs of $1.9 million (10.3% of net sales) during the third quarter of fiscal 2008, due primarily to the 36.5% decline in net sales. Gross margin increased to 20.0% during the first nine months of fiscal 2009 from 17.9% during the first nine months of fiscal 2008, which was due primarily to shifts in customer and geographic mix.
Other (income) expense was an expense of $1.1 million during the third quarter of fiscal 2009 as compared to an expense of $1.2 million during the third quarter of fiscal 2008. Other (income) expense was $0.4 million of income during the first nine months of fiscal 2009 as compared to an expense of $6.6 million the first nine months of fiscal 2008, respectively. The change to income from expense during the first nine months of fiscal 2009 was due primarily to favorable changes in foreign currency exchange rates, a gain related to the retirement of a portion of our long-term debt, and a decrease in interest expense. Other (income) expense included a foreign exchange gain of $2.6 million during the first nine months of fiscal 2009 as compared to a foreign exchange loss of $1.6 million during the first nine months of fiscal 2008. The first nine months of fiscal 2009 included a gain of $0.8 million related to the retirement of $3.3 million of our 8% notes. See Note 8 Debt of our unaudited condensed consolidated financial statements for additional discussion on the retirement. Interest expense decreased to $1.1 million and $3.5 million during the third quarter and first nine months of fiscal 2009, respectively, as compared to $1.4 million and $5.6 million during the third quarter and first nine months of fiscal 2008, respectively. See Note 8 Debt of our unaudited condensed consolidated financial statements for additional discussion on interest expense.
Net loss during the third quarter of fiscal 2009 was $11.4 million, or $0.65 per diluted common share and $0.58 per Class B diluted common share as compared to a net loss of $2.2 million during the third quarter of fiscal 2008, or $0.12 per diluted common share and $0.11 per Class B diluted common share. Net loss during the first nine months of fiscal 2009 was $1.8 million, or $0.10 per diluted common share and $0.09 per Class B diluted common share as compared with a net loss of $3.2 million during the first nine months of fiscal 2008, or $0.18 per diluted common share and $0.16 per Class B diluted common share.
Cash provided by operating activities during the first nine months of fiscal 2009 was $1.6 million, due primarily to lower accounts receivable, partially offset by higher inventory balances, lower accounts payable and lower accrued liability balances. The decline in accounts receivable balances of $8.7 million, excluding the impact of foreign currency exchange of $8.2 million, during the first nine months of fiscal 2009 was due primarily to a decline in sales volume. The increase in inventory balances of $6.2 million, excluding the impact of foreign currency exchange of $5.0 million, during the first nine months of fiscal 2009 was due primarily to inventory purchased during the first half of the fiscal year for anticipated future sales growth, partially offset by write-downs of $2.0 million. The decrease in accounts payable balances of $2.8 million, excluding the impact of foreign currency exchange of $2.1 million, during the first nine months of fiscal 2009 was due primarily to a reduction in inventory purchased during the third quarter of fiscal 2009. The decline in accrued liability balances of $3.7 million, excluding the impact of foreign currency exchange of $0.8 million, during the first nine months of fiscal 2009 was due primarily to the timing and payment of accrued payroll.
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Richardson Electronics Ltd. is a global provider of Engineered Solutions serving the RF Wireless & Power Conversion; Electron Device; Security; and Display Systems markets. The Company delivers engineered solutions for its customers' needs through product manufacturing systems integration prototype design and manufacture testing and logistics. Richardson Electronics Ltd. has a market cap of $62.7 million; its shares were traded at around $3.5 with a P/E ratio of 5.7 and P/S ratio of 0.1. The dividend yield of Richardson Electronics Ltd. stocks is 2.3%.
Highlight of Business Operations:
Consolidated gross profit decreased during both the third quarter and first nine months of fiscal 2009 as compared to the third quarter and first nine months of fiscal 2008. Consolidated gross margin as a percentage of net sales declined to 21.5% and 23.5% during the third quarter and first nine months of fiscal 2009, respectively, as compared to 22.5% and 23.6% during the third quarter and first nine months of fiscal 2008, respectively, due primarily to sales within our higher-margin businesses, specifically EDG and Canvys, declining at a faster rate than sales for RFPD. We incurred inventory write-downs of $2.0 million and $2.8 million during the third quarter of fiscal 2009 and 2008, respectively. EDG and Canvys incurred inventory write-downs of $0.2 million and $1.8 million, respectively, during the third quarter of fiscal 2009, due primarily to exiting certain markets and product lines, low-margin customers, and the analog to digital broadcast conversion. RFPD and Canvys incurred inventory write-downs of $0.9 million and $1.9 million, respectively, during the third quarter of fiscal 2008, due primarily to the exiting of certain geographic markets and low-margin customers.RFPD net sales decreased 13.8% and 0.9% to $80.6 million and $270.9 million during the third quarter and first nine months of fiscal 2009, respectively, from $93.4 million and $273.2 million during the third quarter and first nine months of fiscal 2008, respectively. The decline in net sales, which was the result of the weakened economic conditions, included declines in both the net sales of our network access and passive/interconnect products, partially offset by an increase in infrastructure products. Infrastructure net sales increased 1.2% and 9.4% to $24.9 million and $77.0 million during the third quarter and first nine months of fiscal 2009, respectively, from $24.6 million and $70.4 million during the third quarter and first nine months of fiscal 2008, respectively. The net sales growth for infrastructure products was in Asia/Pacific, which was due primarily to the reorganization of the mobile telecom industry in China, which included the deployment of the next infrastructure build-out of the Time Division-Synchronous Code Division Multiple Access (TD-SCDMA). Gross margin as a percent of net sales decline to 22.1% during both the third quarter and first nine months of fiscal 2009 from 22.5% and 22.9% during the third quarter and first nine months of fiscal 2008, respectively. The decline in gross margin as a percent of net sales was due primarily to the lower margins generated from the TD-SCDMA project in China. During the third quarter of fiscal 2008, RFPD incurred inventory write-downs of $0.9 million.
Canvys net sales decreased 36.5% and 18.3% to $11.7 million and $45.7 million during the third quarter and first nine month of fiscal 2009, respectively, from $18.5 million and $55.9 million during the third quarter and first nine months of fiscal 2008, respectively, due primarily to a decline in medical imaging and digital signage products. The decline of both product lines was due primarily to lower capital investments as a result of the weakening global economy. During the third quarter of fiscal 2008, Canvys implemented a new business plan, part of which included exiting unprofitable market segments and the distribution of low margin business, and realigning sales and marketing operations for better utilization. Gross margin declined to 5.4% during the third quarter of fiscal 2009 from 12.5% during the third quarter of fiscal 2008, due primarily to inventory write-downs. The inventory write-downs of $1.8 million (15.4% of net sales) during the third quarter of fiscal 2009 had a larger impact on our gross margin percentage as compared to the inventory write-downs of $1.9 million (10.3% of net sales) during the third quarter of fiscal 2008, due primarily to the 36.5% decline in net sales. Gross margin increased to 20.0% during the first nine months of fiscal 2009 from 17.9% during the first nine months of fiscal 2008, which was due primarily to shifts in customer and geographic mix.
Other (income) expense was an expense of $1.1 million during the third quarter of fiscal 2009 as compared to an expense of $1.2 million during the third quarter of fiscal 2008. Other (income) expense was $0.4 million of income during the first nine months of fiscal 2009 as compared to an expense of $6.6 million the first nine months of fiscal 2008, respectively. The change to income from expense during the first nine months of fiscal 2009 was due primarily to favorable changes in foreign currency exchange rates, a gain related to the retirement of a portion of our long-term debt, and a decrease in interest expense. Other (income) expense included a foreign exchange gain of $2.6 million during the first nine months of fiscal 2009 as compared to a foreign exchange loss of $1.6 million during the first nine months of fiscal 2008. The first nine months of fiscal 2009 included a gain of $0.8 million related to the retirement of $3.3 million of our 8% notes. See Note 8 Debt of our unaudited condensed consolidated financial statements for additional discussion on the retirement. Interest expense decreased to $1.1 million and $3.5 million during the third quarter and first nine months of fiscal 2009, respectively, as compared to $1.4 million and $5.6 million during the third quarter and first nine months of fiscal 2008, respectively. See Note 8 Debt of our unaudited condensed consolidated financial statements for additional discussion on interest expense.
Net loss during the third quarter of fiscal 2009 was $11.4 million, or $0.65 per diluted common share and $0.58 per Class B diluted common share as compared to a net loss of $2.2 million during the third quarter of fiscal 2008, or $0.12 per diluted common share and $0.11 per Class B diluted common share. Net loss during the first nine months of fiscal 2009 was $1.8 million, or $0.10 per diluted common share and $0.09 per Class B diluted common share as compared with a net loss of $3.2 million during the first nine months of fiscal 2008, or $0.18 per diluted common share and $0.16 per Class B diluted common share.
Cash provided by operating activities during the first nine months of fiscal 2009 was $1.6 million, due primarily to lower accounts receivable, partially offset by higher inventory balances, lower accounts payable and lower accrued liability balances. The decline in accounts receivable balances of $8.7 million, excluding the impact of foreign currency exchange of $8.2 million, during the first nine months of fiscal 2009 was due primarily to a decline in sales volume. The increase in inventory balances of $6.2 million, excluding the impact of foreign currency exchange of $5.0 million, during the first nine months of fiscal 2009 was due primarily to inventory purchased during the first half of the fiscal year for anticipated future sales growth, partially offset by write-downs of $2.0 million. The decrease in accounts payable balances of $2.8 million, excluding the impact of foreign currency exchange of $2.1 million, during the first nine months of fiscal 2009 was due primarily to a reduction in inventory purchased during the third quarter of fiscal 2009. The decline in accrued liability balances of $3.7 million, excluding the impact of foreign currency exchange of $0.8 million, during the first nine months of fiscal 2009 was due primarily to the timing and payment of accrued payroll.
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