Q1 2021 Richardson Electronics Ltd Earnings Call
Ladies and gentlemen, please standby your conference call will begin momentarily once again, ladies and gentlemen, please stay on the line.
[music].
Ladies and gentlemen, thank you for standing by welcome to the Richardson Electronics earnings call for the first quarter fiscal year 2021.
After the speaker's presentation, there will be a question and answer session. You asked a question during the session. Please press star one on your telephone if you're acquiring further assistance. Please first orphans Europe I wouldn't like to do she Roasteries conference Mr., Ed Richardson CEO you may begin sir.
Good morning, and welcome to Richardson Electronics conference call for the first quarter fiscal year 2021.
Joining me today are Robert Ben Chief Financial Officer, Wendy Diddell, Chief operating Officer, and General manager for Richardson Healthcare Gregg powers going general manager of our power and microwave technologies group and Yens Rupert General manager Candace.
We're all calling in from remote locations. As a reminder, this call is being recorded and will be available for audio playback.
I'd also like to remind you that we'll be making forward looking statements and they are based on current expectations and involve risks and uncertainties.
More so today than ever.
Therefore, our actual results could be materially different.
Please refer to our press release and FCC filings for an explanation of our risk factors.
I'd like to begin the call by again thanking our employees and our suppliers for their focus and commitment to our business throughout the pandemic.
With their efforts, we've been able to serve our diverse customer base without interruption.
We're pleased with our results for the first quarter fiscal year 2021, despite the disruptions placed under companies throughout the world.
Our sales were less than 5% below the prior year for the first quarter.
Semiconductor wafer fabrication market continues to be strong we had good growth in the power and microwave group with it.
With the roll out of five G.
Within the healthcare segment patient volumes in elective surgeries are on the rise as.
As a result see tubes and parts sales improved over our most recent quarter.
The operating loss in the quarter occurred as a result of lower sales in the first two months of our fiscal year.
Gross margin strengthen in the final month of the quarter.
We're seeing steady signs of improvement as people adjust to life with mass and social distancing and business is slowly returned to pre cobot levels.
I'll now turn the call over to Bob Ben Who'll provide a detailed recap our first quarter.
Then Greg Wendy unions will discuss individual business unit performance.
Our successes in our opportunities for future growth.
Thank you Ed and good morning, I will review our financial results for our first quarter fiscal year 2021.
Well by review of our cash position.
Net sales for the first quarter fiscal 2021 decreased to 38.8 million or less than 5% compared to net sales of 40.7 million in the prior year's first quarter. Despite the impact on demand from COVID-19.
Sales to semiconductor wafer fab equipment specialty products as well as power conversion and RF and microwave components increased from last years first quarter.
Overall, PMT sales decreased zero point, threemillion or 1% power.
Power grid tube sales were negatively impacted by the pandemic and economic softness.
Canvas sales decreased by zero point $6 million or 7.8% due to covert related push outs from its European medical Oems, partially offset by higher North American sales.
Richardson healthcare sales decreased 1 million or 34.2%.
Due to the continued hospital closures to non critical personnel and service providers and an overall decline in C.T. use throughout the pandemic.
Lower sales of refurbished C. T systems in Latin America also contributed to the revenue decline.
Health care sales increased 27.7% versus the fourth quarter of fiscal 2020.
Gross margin for the quarter.
Was 31.8% of net sales compared to 31.9% of net sales in last years first quarter.
PMT margin increased to 33.0%.
From 31.7%.
Due to a favorable product mix and improved manufacturing efficiencies.
Canvas margin as a percent of net sales also increased 34.0%.
From 31.9% as <unk> as a result of its improved product mix.
Health care margin as a percent of net sales was 5.6% in the first quarter of fiscal 2021.
Down significantly from last year, but an improvement over Q4.
The low margin was due to manufacturing under absorption and inventory reserve costs related to tube development and production improvements on significantly lower net sales.
Operating expenses were 13.0 million for the first quarter fiscal 2021 compare.
Compared to 12.8 million in the first quarter fiscal 2020.
The increase in operating expenses resulted from a 0.4 million increase in legal expenses.
And from our normal employee compensation expenses, including annual Merit increases.
These increases were partially offset by lower travel expenses.
Throughout the pandemic the company decided to support its employees through regular merit increases and incentive plans.
And by avoiding layoffs or furloughs.
As a result, the company reported an operating loss of zero point $6 million for the first quarter fiscal 2021 as compared to an operating income as 0.1 million in the first quarter of last year.
Other expense for the.
For the first quarter of fiscal 2021, including interest income and foreign exchange.
Was 0.4 million.
Compared to other income of 0.2 million in the first quarter of fiscal 2020.
The income tax provision.
A zero point $1 million for the quarter roughly.
Reflected a provision for foreign income taxes, which.
Which was lower than in the prior years first quarter.
And no us tax benefit due to the valuation allowance recorded against the net operating loss.
Although there is no tax benefit shown on our financial statements from us net operating losses we.
We can use our net operating losses to offset any cash tax liability reported in our us federal income tax return.
The amount of federal and all else is 17.6 million.
Overall, we had a net loss of $1.1 million for the first quarter fiscal 2021 as.
As compared to a net income of zero point $2 million in the first quarter fiscal 2020.
We continue to closely manage our cash position.
Cash and investments at the end of the first quarter of fiscal 2021 were four.
Were 42.5 million come.
Compared to $46.5 million at both the end of fiscal 2020.
And the end of first quarter fiscal 2020.
Capital expenditures were 0.7 million in the first quarter fiscal 2021 compared to 0.3 million in the first quarter fiscal year 2020.
Approximately 0.5 million.
Related to our health care business and 0.2 million was.
Was for I T system.
In the first quarter fiscal 2021.
We paid 0.8 million in dividends in the first quarter fiscal 2021 in it.
In addition, based on our current financial position our board of directors declared a quarterly dividend of six cents per common share.
Which will be paid in the second quarter of fiscal 2021.
Now I will turn the call over to Greg who will discuss the results for our power and microwave technologies group.
Thank you Bob and good morning, everyone.
PMT sales in the first quarter of fiscal year, 2021 were 30.3 million versus 30.6 million in Q1 of F Y 20.
Our gross margin increased in the quarter to 33% versus 31.7% in the prior year.
Gross margin improved in both business units to demand creation in engineered solutions.
In terms of revenue issues related to COVID-19 heard our Emerald business. However, this was offset by strong growth in our power and microwave business unit and a new technology suppliers and.
And increased business in our global semiconductor wafer fab customers.
Overall, we saw positive booking trend for both.
Electron device group EG and the power <unk> microwave <unk> P. M G.
The increase in EG was in support of our semiconductor wafer fab customers. The increase in PNG booking dollars over prior year is a combination of new technology partners products, our demand creation model numerous design wins and high growth markets.
Cool 19 did have a slow down effect on our business in Q1.
Again, I use the word slowdown because we have proven in Q1, the demand for our products and services did not go away.
In fact, we are very excited about our booking trends in the quarter.
In response to COVID-19, we have looked extensively at how to do things different to achieve success. We developed several unique strategies to support our customers on a go.
On a global basis through designs and products well working with the restrictions on travel and face to face meetings.
These strategies include adding new technology partners. So just AC propulsion general Atomics, ammo greentech and depth.
Deboo Fiveg telecom.
In addition to our own internal designs like the ultra 3000 for wind turbines.
We increased communication through customer and supplier focused webinars and major web upgrades Richards.
Richardson go to market strategy has allowed us to grow multiple business opportunities during the pandemic to creative approaches and communication procedures.
We're committed not only to the bounce back, but the bones forward coming out of this pandemic.
This quarter, we continue to receive support from our key partners, such as Corvel, Maycom, Nokia wave United Silicon Ellis.
Lets them Tron and food you semiconductor key too.
Key to manufacturers in industries, such as C. P I tell us and GRC and put kindness worked with us to manage our customers' requirements.
In addition, our in house engineering and manufacturing teams did a fantastic job supporting our increased demand from a global semiconductor wafer fab customers.
Looking specifically at Fiveg and wireless sales revenues.
Revenues increased double digits in the quarter.
As the need continues to grow for people to work from home the city the country there.
Their cabin, even their car as they must be able to receive large amounts of data from any of those locations quickly.
The consensus in the market is that COVID-19 was still affect the 2020 forecast for Fiveg.
Due to supply chain issues manufacturing design delays, resulting from the pandemic has pushed some of the rollouts out Hello.
However, the infrastructure side, where we play well show strong growth in 2020 and into 2021.
Especially during this thing coming out of this pandemic I cannot stress enough the value of Richardson electronics model to our customers and suppliers are.
Our unparalleled capability in global go to market strategy are unique to the power and RF microwave industries.
Through our steadfast a new creative focus on customers, we will survive this pandemic by taking advantage of opportunities when they arise.
The demand for our products have not gone away, our customers and technology partners need Richardson products and support more than ever and.
And with that I'll turn it over to Wendy the Dell in Richardson healthcare.
Thanks, Greg and good morning, everyone in the first quarter of our fiscal year hospitals began to slowly reopen for elective procedures and equipment maintenance.
I call activity picked up throughout the summer in line with that how.
However, the pandemic still has a strong hold on the health care business and the threat of increasing kind of the cases is tempering optimism.
We did not go back into production in the quarter due to component delays.
I was I plan to focus on development and improvement.
No time are we at risk of running out to sea to the inventory in fact, we sold more all to 750 D kids during the quarter.
In any prior quarter other than Q3 of last year.
High percentage of our tubes first holding cost conscious countries given the financial condition of the health care industry globally. We anticipate this trend will continue.
Healthcare revenue and margin in Q1 were better than our most recent fourth quarter, but below Q1 of last slide 20.
Sales were 1.8 million versus 1.4 million in our fourth quarter and 2.8 million in Q1 of last year.
Revenues from kids parts in P. three contracts were up over Q4, although down when compared to Q1 last year.
Our parts sales were positively impacted by higher service demand for newer CP scanner Myles.
Parts for these systems typically have a higher price point and better margin.
And while we had a good quarter for all to 750 days. This came partially at the expense of harvested see teach kids.
We continue to have interest and I P. Three programs, although hospitals have not prioritize these discussions jankovic 19.
System sales were flat to Q4, I fly 20, and down compared to Q1 of last year.
This is due to challenging economic conditions in Latin America, as well as the pandemic.
More recently, we're also facing a lack of system availability.
Our system sales depend on hospitals changing out systems.
This is not happening as frequently during the pandemic we anti.
We anticipate better availability as hospital financial performance improves.
Gross margin was 5.6% in the quarter, reflecting the redirection of resources to R&D and cost associated with new development we are.
We are looking forward to launching our second to see all to 750 G.
If everything goes well through beta testing, we anticipate launch during the first half of calendar year 2021.
We're also making good progress on our next to kids, we plan to launch those solutions later next year.
Our efforts to secure registrations for additional countries continue.
At this point I will turn the call already answered <unk> to discuss first quarter results for Canada.
Thanks, Andy and good morning, everyone.
Ken This is linked with the engineering manufacture and sale of custom displays to original equipment manufacturers in industrial and medical markets did have a good performance with sales of 6.7 million during the first quarter fiscal Twentytwenty, one a decrease of 7.8% over the same period last year.
The revenue decrease for the quarter was related to decreased customer demand in Europe due to the outbreak of the Corona virus and the resulting impact on the OEM.
Sales in North America with stronger than prior years first quarter. Thanks in part to continued high demand for monitoring youth for patient monitoring and mobile X Ray machines.
Revenue increased from two new programs that we didnt have one year ago as well both new programs for highly customized human machine interface is HM I used for robotic assisted surgery and Cryolipolysis machines.
Gross margin as a percentage of sales was 34.0% during the first quarter fiscal Twentytwenty, one up from 31.9% during the first quarter fiscal Twentytwenty.
The increased gross margin was related to a more favorable product mix.
Our healthy backlog along with a number of projects that are currently in the engineering stage position us well for continued growth before considering any long term impact from call. It 19.
19 hit our business in Europe hard in Q1 fiscal year 21.
It is nearly impossible to predict when our business will return to normal battery optimistic that our business in Europe will bounce back towards the end of the fiscal year Twentytwenty one.
We continue seeing push outs from north American customers as well.
However, new projects that we added recently helped offset these feelings.
We are compensating for the lack of face to face customer visits and trade shows during the pandemic by focusing on web marketing and say its efforts our new website will be online very soon the.
The new responsive web site has a much wider reach addressing the large number of mobile devices that that he couldn't address with our current site.
With that we'd be more modern and office intuitive navigation.
We are confident that our online strategy, where we saw it in new leads and business growth.
During the quarter, we received several new orders from both existing and first time medical OEM customers.
Some of these include read a time cell analyzer to determine the metabolic federal type.
Patient monitoring well I want to talk to install it that the patients better.
Surgical navigation system that enables surgeons precise tract indication upset physical instrument throughout a procedure.
Robotic assisted to so to get that from.
To improve precision and accuracy in spine surgery.
Examination and treatment shift Usten gyn oncology and urology.
And the non medical space, we received orders for various display products I believe.
Applications include displays used to food processing and packaging machines, where they have to assist high pressure and high temperature water jets.
Data from the displays for when the new stations and various displays for the transportation market.
In the transportation market, our displays I installed in subways or used for railway applications and require very specific certifications the ability to meet the strict requirements is another advantage Candace provides.
Oh on your website to put a pro an entity feature short case studies to many different challenges and the displays we developed to meet these requirements.
From the verity of customers and applications and the value of orders from existing I spent a few customers. It is set to be clear, we have our customers outstanding products and service.
Well I would say its organizations this focus on new opportunities I, we continue to review and adjust our business strategy to improve the operating performance of the division.
Maximizing cash flow is an ongoing priority <unk>.
We will continue to work with our partners to help us with Jews inventory, while being able to meet the demands of our customers, particularly during this pandemic.
I will now turn the call back over to that.
Thanks again for another good quarter.
The new customers canvas generated over the past several years helped offset the ways from our customers pushing out deliveries.
I know it can be frustrating at times, but you and the other business unit managers have done an excellent job keeping in close contact with our customers and working through challenges brought on by the pandemic.
For the past six months, we had a number of successes, resulting from our growth initiatives, including health care power and microwave technologies and displays.
Spent time, improving our technology and processes strengthening our list of suppliers and looking for unique ways to better serve our customers.
We also continued to carefully manage expenses and maximize cash flow as.
As one of our engineers recently noted we're focusing on the new better not just the new normal.
During these times customers are looking for partners with sufficient financial resources and scale.
I'm confident that Richardson electronics, including our employees suppliers and customers will help drive improvements in health care and infrastructure.
Through our growth initiatives and partnerships will provide a path beyond that COVID-19 pandemic and our other challenges it may threaten us in the future at this.
At this point, we'll be happy to answer a few questions.
Ladies and gentlemen, if you have a question or a comment at this time. Please press Star then the one key on your Touchtone Commscope. If your question is that's where you were somewhat yourself from the queue. Please press the pound key.
One moment for our first question.
Our first question comes from Tony sure answer with key equity investors.
Good morning, gentlemen, and how would you answer.
Oh.
My question is in the use of cash and thinking about the dividend and the possible buyback I mean, what what are your thoughts about your cash usage as you go on fruit over the next six nine months hopefully we get a recovery and you can get back to positive cash flow, but obviously the stock price.
Is very low below.
Liquidation value so it might be.
You know advantageous to buy back some shares at this time I mean, I'm just thinking on what the thoughts are the board at this point.
Well, that's a discussion that we have in every board meeting and that occurred again this week.
Were quite concerned about having enough cash to continue to fund our strategy, particularly in health care.
As you can see we still have a substantial amount of cash but quite a bit of that is outside of the United States. It takes us about $10 million in cash to run our foreign subsidiaries and there's a certain amount of cash is trapped outside the United States, it's difficult to bring back so.
We have approximately somewhere under 25 million in the U.S. that we can use.
And the company, but we.
But we watch that carefully.
So I don't see us buying stock back and in the near future I understand the stock is at a very low margin, but we did buy something like $65 million in the stock back a few years ago and.
And our intent now is to keep our powder dry if you will and have cash available to fund the company's strategy.
And how about the dividend your intention is to continue that at the current levels.
Yes, yes for the time being it'll be continued the way it is.
Okay. No can you give us an idea obviously, we're halfway through the next quarter, how things are looking at the various area do you continue to see recovery and to do you consider continue to see a path to.
Positive cash flow and positive earnings.
Yes, ultimately there one thing that is really encouraging and that up and down like a roller coaster about the semiconductor wafer fabrication business is the largest portion of our business.
And it was up substantially in the first quarter and we're being told that next year and they send my conductor wafer fab business will be the highest in history and if that's that's true that will have a major impact on our total sales.
To give you some idea in the past.
In the semiconductor wafer fab.
Business was up we were doing about $20 million a year in that business.
And so if that happens again that will you know it's it's unfortunately, it's a business that goes up and down a lot, but it's a very profitable business as well.
Thank you very much good luck.
Thank you.
Our next question comes from Harry Sars, who is a private investor.
Good morning, I had been doing well mercenary.
Yes, I have a few questions for you all today.
Obviously, I want to I want to echo that sentiment regarding the buyback but thought cheap.
I mean from my point of view it doesn't make a whole lot of sense to continue the dividend, but not buyback stock, but I figured.
I figured that the that beating a dead horse.
I'm looking at the Kansas Dot Com website, now or have you made any material changes to it lately.
Yes, you want to talk to that.
Sure sure. So a we have not updated the website, yet, but I can rest assured that we are working on this as we speak and we are coming up with the website within the next six weeks and websites, which is much more responsible than dresses all the tap it uses and stuff like that we have and.
We have a nice marketing videos and stuff so that would be a big improvement to the web site over the next six weeks.
We did that the next six week, Okay. That's great to hear because I I first raised that a couple of quarters ago.
Yep.
And we all right you did what you ask for.
All right well glad to hear that.
Moving forward, we're looking out what that you're going to take to reduce our operating cash flow burn.
Well the major issue of course is to get a health care to be profitable. The rest of the company is doing quite well, but are you know we feel they are the major portion.
The major portion of our future is in healthcare.
And once we can produce enough tubes and related.
Parts equipment for a C.D. applications and start to make a profit and health care. It has an amazing amazing impact on the company.
And unfortunately, it's still several years out, but we're making progress there all the time.
So several years out would you be able to give me a ballpark range on that are we talking three years are we talking.
No you know, we just went through that analysis for the board. They wanted to see where we are to be breakeven in in healthcare and right now we're looking at about three years.
It all has to do with how many tubes, we sell and at the same time related equipment into the C.D. application.
The other thing that happens is that are caught in the manufactured the CTG to comes down dramatically as we increase the quantity so that will help as well.
So really really be profitability issue for health care is a it's a problem of scale not a problem.
Product viability or high cost of goods or anything that you scale up and we'll be profit.
Thats correct right, we have the capability, we probably have the most modern CTG manufacturing facility that exists in the world today.
Oh, new equipment, and we've invested 25 $30 million in that space Yeah.
We have the capacity to build about 1002 year, if we ran and three shifts and.
I can tell you that we're building far less than that right. Now. So we have a lot of capacity and as we start to build the numbers that the unit cost comes down the margin goes up substantially.
Yeah would you a breakdown the unit economics on that for me.
Oh, we really don't do that you know we don't we don't go public I could probably give you a percentage you know the the cost of the product will probably if we got to capacity would probably be reduced about 20% from where it is today.
All right totally understood that thank you.
Thank you.
Our next question comes from Charles Neuhauser Neuhauser with me.
Yeah, Hi, early morning, Charles question Hi.
Hi earlier in the discussion about the cash balance you had said something about needing or wanting to.
Retain enough cash to support the continued development of the health business.
You just said you've invested $25 million to $30 million into that business already.
And so when you say you need or want to maintain a cash balance to support the continued development of that business and much more money are we talking about.
Well of course, it depends on volume.
Again as I mentioned, we have the current capability to build about a thousand tubes year. If we go into three shifts which would be a nice problem to have.
And one tube are two tubes doesn't make a business and so were busy developing additional tubes.
To be a you know viable supplier of of CTG to the industry.
And there is additional capital expenditures you did about new types, but for the most part they're all built on the same equipment. So its jakes dies doing in fixtures that are peculiar to the new types that we're adding a.
And a capex in that business. When do you help me half a million dollars a year or something like that.
Maybe a little more than 700000 hours a year in the health care business, unless we do something extraordinary.
So it's not a question of additional capital investment. It's a question of funding the operating losses until as you would already mentioned do you get to the point of.
Breakeven in a few years is that the best way to look at that.
Yes, that's correct.
And presumably.
The order of magnitude due to the operating losses can be determined by just slow.
Just looking at your financial statements.
As far as the segment reporting goes is that a reasonable statement also.
Well, we don't report down to that level of detail, but.
You know, it's a four or $5 million a year.
Yeah, I mean, you know.
To get back to just a simplistic way of looking at things the revenue base of the.
The other businesses.
Should justify.
It should be able to produce operating income to justify a higher stock price then we're looking at today so it would be.
So the matter like you just said I guess is to get that health business too.
Stop losing that kind of money.
Okay I get it.
Not that you don't know [laughter] right. The issue is the tremendous opportunity you know we.
We guesstimate that the the total market for replacement parts and service and the Ctb space is something like $9 billion and.
Unfortunately, the two business, it's a wonderful business that we do about a $100 million in and very profitable and we own a large share of that market, which.
Which I've gotten an oscar for in the past but.
So to grow into two business. That's why we went into C T and and it really gives us an opportunity for the future, but it takes a substantial investment to get there that's what we're talking about.
Right.
Thank you.
Thank you.
Again, ladies and gentlemen, if you have a question or comment at this time. Please press the Star Star then the one key on your Touchtone telephone.
Our next question is a follow up question from Harry Cyrusones apart.
[music].
Yes, I think the thing you have another set of question.
Sure well I'm really curious I mean, a lot of public company willing.
Willingly pay any kind of salary reductions, especially as we go through a very challenging urea.
Is that something that you.
You add or any of your fellow exactly to your cloud considered.
Well, we have already done it although it's not visible the give you some idea are.
Incentives on the business range anywhere from 25% to 70% depending upon the individual and those incentives had been cut in half.
At the current levels and won't go back up to a normal level and so the companys profitable.
Well I sure as far as kind of go but ER I mean, I I wasn't shareholder I would rather see you compensated.
You know 75, 100% in incentive and salary because.
Because the salary as a cash outlay from day, one, but the incentive only get paid if you will do well.
Right well you only inside the only salary increases were issuing at the moment and have for the past few years are just a cost of living increases. So right now there are 3% met for action.
Sure I know the answer then would be no you would not look that anytime that temporary salary reduction for <unk>.
Occupancy.
No we haven't done that and we also took a position in the pandemic.
To keep our total workforce in place we have thank goodness, we have engineers and yeah.
And administrative people that have worked here 50 years, and we think it's our obligation to continue to employ them. Some of our competitors have laid off substantial numbers of people, but we chose not to do that.
Oh, Unfortunately that that hasn't helped the income side, either but we think it is something we need to do long term to have good people to support the business.
Certainly I I agree with you there and again regarding regardless.
Regarding incentive compensation.
It does not look like for me is there anything tied to the stock with burn to be on the options exercisable.
I'm, sorry, I didn't quite understand you.
Yes, well what incentive plans do we have that are tied to stock with our besides just the option.
Well, we have both stock options and stock grants and unfortunately, they're all under water at the moment, but there's a substantial amount issued back whats the total number of options.
Grants that are.
Grants that are out there man and a half something like that that's about right. Yes. We in the last couple of years, we've done about 350000 shares or stock option grants and restricted stock southern Unfortunately, they're all under water at the moment so.
I hate to say it but employees they will give us a break give us more options you know that they haven't made money on them yet.
They did back 2011 somewhere in that area, but it's been a long time.
Well not practically no.
Not gone very far.
Oh I do have one last question, where exactly is the path.
Oh in overseas and what about it makes it hard to repatriate.
Beyond the 10 million or so required to run over.
Yeah.
Harry This is Bob and I can help answer that.
<unk> I don't know I don't know how you how long you've been following us but for the last three years, weve repatriated or probably over 30 million in cash from our foreign locations. So now we're down to some of the more difficult locations. So right now as Ed stated, we Oh, we had we have about 28 million of cash.
In the U.S. at the end of the quarter and our total cash at the end of quarter was 42.5 million. So that leaves 14, and a half million overseas.
And I think I heard at also say that we need about 10 million to operate those foreign subsidiaries. So that leaves about another four and a half million or so doing the math that we can repatriate from locations overseas in those locations are primarily China the UK.
Italy and also of France's another and Germany are the main locations and we're looking at or.
Our activities in that area as we speak and.
In fact, we have plans to repatriate a sizable amount of that four and a half million remaining.
Again, and hopefully in the second quarter, if not by the end of the second quarter certainly by early third quarter. So.
But the difficult places to answer your question more directly as China, it's very difficult to get money out of China. You. If you followed us before we a few years ago. We were successful in getting 11, and a half million out of China, but it takes a while and it has to be the right timing for the Chinese government to allow funds out of the country. So we'll be looking.
I get that but that's our most difficult one other places it can be difficult parts of Europe, just because our cash is trapped due to the.
The sale of our PT division for many years ago, and so it's not monies that can typically be brought back through dividends, which is a fairly simple way to do it we have to do what's called a return of capital and that's.
[music].
Some countries such as China, and Italy is very involved in difficult to do so but rest assured we're working and getting as much cash as we can and we'll have some news to report in this second quarter hopefully.
And I imagine that will be new to shore up our cash on hand, it's not going to be paid out through a special dividend or buyback or anything.
That's correct yeah, our as I had stated we don't have.
We don't have any plans at this point for a buyback, but once again, a few years ago I've been with the company now five years.
When I first joined paid out just in terms of buybacks over 65 million over a period of years before I joined and job.
And so you know we've been doing the dividend consistently and certainly.
Certainly we watch our financial position each quarter to be able to make that decision. Our board does but it's anticipated that that will continue.
Long as our performance continues.
All right, thanks, Bob well thought out.
Thank you.
Our next question comes from Gary can be there was also a private investor.
Hi, good morning.
Morning, Gary I, just wanted to ask about inventories. So we had another big build this quarter up to $60 million and it looks like it's been on a big build for the last three or so years definitely a lot faster than sales. So could you just explain what the strategy is behind then if you can expect the build to to maybe.
Flatten out or come down a bit.
Sure well some of the build it has to do with being prepared for the increase business with the semiconductor wafer fab business.
A lot of it has to do with P.M.G., which Greg runs is.
As you May know in when we sold our SPD to Arrow that business was $370 million in sales and Greg ran it and went to arrow for three years and has come back to a help us build the business again.
Doing quite well and increasing the business a 15, 20% a year.
And it takes additional inventory to do that particularly products like a.
For Fiveg a lot of them are on allocation and then we try to buy in well in advance so that we have inventory to service that business.
So some of the inventory is there and some of it has to do with the increase semiconductor wafer fab business.
Okay. Thank you.
Thank you.
I'm not showing any further questions at this time, let's turn the call back over for any closing comments.
Okay, well, thank you for joining us and for your ongoing interest in Richardson electronics, we look forward to discussing our second quarter with you in January 2021 in the.
In the interim we wish you good health and success. Thank you very much.
Ladies and gentlemen, this does conclude todays presentation. You may now disconnect and have a wonderful day.
[noise].