Richardson Electronics Ltd. stock falls after second quarter earnings released

by Nicole Duarte

published by the Medill News Service, January 12, 2006

Richardson Electronics Ltd. stock plummeted after second-quarter earnings fell far short of analyst expectations. The stock closed at $7.05, down 87 cents or 11 percent.

The company reported net income for the quarter ended Dec. 3 of $474,000, or 3 cents per diluted share, compared with $4 million, or 23 cents per diluted share in the year-earlier quarter.

Four analysts had a consensus earnings estimate of 12 cents per diluted share.

With $156 million in net sales, as compared with $151 million for the year-earlier quarter, Richardson also missed analysts' revenue estimate of $160 million.

The LaFox, Ill.-based distributor of electronic components and assemblies attributed the large earnings decrease to the recent appreciation of the dollar. The company reported a foreign exchange loss of $3.8 million for the quarter, compared with a $3.3 million foreign exchange gain in second-quarter 2005.

Richardson executives said in a conference call they were working with JP Morgan Chase to set up a hedging program for the company's foreign currency exposure.

CEO and Chairman Edward Richardson predicted $150 million in sales for the third quarter, consistent with year-earlier performance. He also touted the company's $2.5 million increase in operating income to $7.4 million from $4.9 million in the second quarter a year ago.

Warren Clifford of Clifford Capital Management said in a conference call that Richardson had been "doing great" on its operations side, but it was frustrating to have non-operating charges that obscure the operating trend.

Richardson reorganized its internal Industrial Power and RF & Wireless Communications Groups during the second quarter.

Richardson stated in a release, "We are extremely pleased with the year-over-year improvement in operating income for the quarter." The 3 percent sales increase included a 20 percent advance in Latin America.

For the six months ended Dec. 3, Richardson reported profits of $2 million or 12 cents per diluted share, as compared with $4.8 million, or 29 cents per diluted share in the same period in 2004, a 58 percent narrowing. Six-month sales were $314 million compared with $290 million.

Earlier this week Richardson announced its board of directors voted to declare a third-quarter cash dividend of 4 cents per common share, payable Feb. 24 to common shareholders of record Feb. 10.