Richardson Electronics, Ltd. — Form 10-Q Summary
Reporting period: Third quarter and first nine months of fiscal 2021, ended February 27, 2021 (13-week quarter; 39-week year-to-date period). The filing covers fiscal 2021, notwithstanding the “2020 Q3” request metadata. Richardson provides engineered solutions and electronic products through Power and Microwave Technologies Group (PMT), Canvys, and Healthcare.
Financial performance
| Metric | Third quarter FY2021 | Third quarter FY2020 | Nine months FY2021 | Nine months FY2020 |
|---|---|---|---|---|
| Net sales | $45.2m | $38.2m | $126.5m | $118.5m |
| Gross profit / margin | $15.8m / 34.9% | $12.7m / 33.1% | $42.5m / 33.6% | $38.3m / 32.3% |
| Operating income (loss) | $0.3m | $0.01m | $0.6m | $(0.4)m |
| Net income (loss) | $0.2m | $(0.1)m | $(0.2)m | $(0.6)m |
| Diluted EPS | $0.02 | $(0.01) | $(0.02) | $(0.04) |
- Third-quarter sales increased 18.3%; year-to-date sales increased 6.7%. Gross margin improved in both periods.
- Third-quarter segment sales: PMT $35.2m (+21.6%), Canvys $7.1m (-1.7%), Healthcare $2.9m (+41.7%). Year-to-date: PMT $98.4m (+10.4%), Canvys $20.5m (-8.2%), Healthcare $7.6m (+7.3%).
- Management attributed PMT growth to Power Management, RF/microwave, 5G infrastructure and semiconductor wafer-fabrication demand. Canvys remained pressured by European demand, while Healthcare benefited from ALTA 750D tube demand. Healthcare year-to-date gross margin fell to 23.6% from 35.3%, reflecting under-absorbed manufacturing costs in the first half.
- SG&A was $15.5m in the quarter and $41.9m year to date, including a $1.6m Varex settlement charge. Excluding the settlement, reported expenses were still affected by higher compensation and legal fees.
- Cash from operations was $3.9m for the first nine months, versus $2.4m used in the prior-year period. Cash and equivalents were $38.4m; short-term investments were $9.0m, for total cash and investments of $47.4m. Current assets were $131.0m and current liabilities $31.7m.
- No conventional borrowings are reported in the presented balance sheet. Lease liabilities totaled $2.9m net of imputed interest; minimum lease payments were $3.1m. Nine-month capital expenditures were $1.8m and dividends paid were $2.3m.
Outlook, risks and unusual items
- No numerical earnings or revenue guidance is provided. Management said available cash and investments were expected to cover known capital and working-capital needs for the next 12 months.
- COVID-19 effects remained uncertain. The company cited pandemic-related demand declines across segments during parts of the year and component delays affecting new-product schedules, but reported no major supply-chain interruption. Management warned that further disruption could affect demand, operations, earnings, liquidity and cash flows.
- The Varex patent and trade-secret dispute was settled on April 2, 2021 for $1.6m, without an admission of liability; the charge was recorded in SG&A for the quarter ended February 27.
- Foreign-exchange exposure is a key market risk; the company reported no use of derivatives to manage currency exposure. Nine-month foreign-exchange loss was $0.65m.
- A $12.4m valuation allowance remained against deferred tax assets, and the company reported no U.S. tax benefit for year-to-date losses. It was under examination in Thailand for fiscal 2008–2011; uncertain tax positions were approximately $0.1m.
- The filing reported no material changes to previously disclosed risk factors. Management said disclosure controls were effective and reported no material change in internal control over financial reporting.
Important facts for investors to verify
- Confirm the timing and accounting for the $1.6m settlement charge, since the settlement agreement was reached after quarter-end but included in the quarter’s results.
- Track whether PMT growth continues and whether Canvys’ European demand and Healthcare margins recover.
- Assess the sustainability of operating cash generation, including the effects of inventory, payables and accrued-liability timing.
- Monitor COVID-19 impacts, foreign-exchange movements, and the recoverability of deferred tax assets subject to the valuation allowance.
- Review the complete 10-K risk disclosures and subsequent filings for developments not quantified in this quarterly report.