RICHARDSON ELECTRONICS, LTD. Certain statements in this report may constitute "forward-looking" statements within the meaning of the Private Securities Litigation Reform Act of 1995. The terms "may", "should", "could", "anticipate", "believe", "continues", "estimate", "expect", "intend", "objective", "plan", "potential", "project" and similar expressions are intended to identify forward-looking statements. These statements are not guarantees of future performance and involve risks, uncertainties and assumptions that are difficult to predict. These statements are based on management's current expectations, intentions or beliefs and are subject to a number of factors, assumptions and uncertainties that could cause actual results to differ materially from those described in the forward-looking statements. Factors that could cause or contribute to such differences or that might otherwise impact the business include; economic, labor and political systems and conditions; global business disruption caused by theRussia invasion inUkraine and related sanctions: currency exchange fluctuations; and the ability of the Company to manage its growth and the risk factors set forth in our Annual Report on Form 10-K filed with theSEC onAugust 1, 2022 . We undertake no obligation to update any such factor or to publicly announce the results of any revisions to any forward-looking statements contained herein whether as a result of new information, future events or otherwise. In addition, while we do, from time to time, communicate with securities analysts, it is against our policy to disclose to them any material non-public information or other confidential commercial information. Accordingly, stockholders should not assume that we agree with any statement or report issued by any analyst irrespective of the content of the statement or report. Thus, to the extent that reports issued by securities analysts contain any projections, forecasts or opinions, such reports are not our responsibility.
INTRODUCTION
Management's Discussion and Analysis of Financial Condition and Results of
Operations ("MD&A") is intended to assist the reader in better understanding our
business, results of operations, financial condition, changes in financial
condition and significant developments. MD&A is provided as a supplement to, and
should be read in conjunction with, our consolidated financial statements and
the accompanying notes appearing elsewhere in this filing. This section is
organized as follows:
•
Business Overview
•
Results of Operations - an analysis and comparison of our consolidated results
of operations for the three and six month periods ended November 26, 2022 and
November 27, 2021 , as reflected in our consolidated statements of comprehensive
income.
•
Liquidity, Financial Position and Capital Resources - a discussion of our
primary sources and uses of cash for the six month periods ended
Business Overview
Richardson Electronics, Ltd. is a leading global manufacturer of engineered solutions, power grid and microwave tubes, and related consumables; power conversion and RF and microwave components; high-value replacement parts, tubes, and service training for diagnostic imaging equipment; and customized display solutions. More than 60% of our products are manufactured in LaFox,Illinois ,Marlborough, Massachusetts , orDonaueschingen, Germany , or by one of our manufacturing partners throughout the world. All our partners manufacture to our strict specifications and per our supplier code of conduct. We serve customers in the alternative energy, healthcare, aviation, broadcast, communications, industrial, marine, medical, military, scientific, and semiconductor markets. The Company's strategy is to provide specialized technical expertise and "engineered solutions" based on our core engineering and manufacturing capabilities. The Company provides solutions and adds value through design-in support, systems integration, prototype design and manufacturing, testing, logistics, and aftermarket technical service and repair through its global infrastructure. Some of the Company's products are manufactured inChina and are imported intothe United States .The Office of the United States Trade Representative ("USTR") instituted additional 10% to 25% tariffs on the importation of a number of products intothe United States fromChina effectiveJuly 6, 2018 , with additional products addedAugust 23, 2018 andSeptember 24, 2018 . These additional tariffs are a response to what the USTR considers to be certain unfair trade practices byChina . A number of the Company's products manufactured inChina are now subject to these additional duties of 25% when imported intothe United States . Management continues to work with its suppliers as well as its customers to mitigate the impact of the tariffs on our customers' markets. However, if the Company is unable to successfully pass through the additional cost of these tariffs, or if the higher prices reduce demand for the Company's products, it will have a negative effect on the Company's sales and gross margins. The Company began reporting the results for its newGreen Energy Solutions ("GES") segment in the first quarter of fiscal 2023 due to its focus on the power applications that support the green energy market. The GES segment has been carved out of our existing Power and Microwave Technologies ("PMT") segment. Accordingly, the Company is reporting its financial performance based on four operating and reportable segments. The results for fiscal 2022 presented herein were adjusted to reflect the presentation of the new GES segment separately from the PMT segment. 18 --------------------------------------------------------------------------------
The Company's four operating and reportable segments are defined as follows:
Power and Microwave Technologies combines our core engineered solutions capabilities, power grid and microwave tube business with new disruptive RF, Wireless and Power technologies. As a designer, manufacturer, technology partner and authorized distributor, PMT's strategy is to provide specialized technical expertise and engineered solutions based on our core engineering and manufacturing capabilities on a global basis. We provide solutions and add value through design-in support, systems integration, prototype design and manufacturing, testing, logistics and aftermarket technical service and repair-all through our existing global infrastructure. PMT's focus is on products for power, RF and microwave applications for customers in 5G, aviation, broadcast, communications, industrial, marine, medical, military, scientific and semiconductor markets. PMT focuses on various applications including broadcast transmission, CO2 laser cutting, diagnostic imaging, dielectric and induction heating, high energy transfer, high voltage switching, plasma, power conversion, radar and radiation oncology. PMT also offers its customers technical services for both microwave and industrial equipment.Green Energy Solutions combines our key technology partners and engineered solutions capabilities to design and manufacture key products for the fast-growing energy storage market and power management applications. As a designer, manufacturer, technology partner and authorized distributor, GES's strategy is to provide specialized technical expertise and engineered solutions using our core design engineering and manufacturing capabilities on a global basis. We provide solutions and add value through design-in support, systems integration, prototype design and manufacturing, testing, logistics and aftermarket technical service and repair-all through our existing global infrastructure. GES's focus is on products for numerous green energy applications such as wind, solar, hydrogen and Electric Vehicles, and other power management applications that support green solutions such as synthetic diamond manufacturing. Canvys provides customized display solutions serving the corporate enterprise, financial, healthcare, industrial and medical original equipment manufacturers markets. Our engineers design, manufacture, source and support a full spectrum of solutions to match the needs of our customers. We offer long term availability and proven custom display solutions that include touch screens, protective panels, custom enclosures,All-In-One computers, specialized cabinet finishes and application specific software packages and certification services. Our volume commitments are lower than the large display manufacturers, making us the ideal choice for companies with very specific design requirements. We partner with both private label manufacturing companies and leading branded hardware vendors to offer the highest quality display and touch solutions and customized computing platforms. Healthcare manufactures, repairs, refurbishes and distributes high value replacement parts and equipment for the healthcare market including hospitals, medical centers, asset management companies, independent service organizations and multi-vendor service providers. Products include diagnostic imaging replacement parts for CT and MRI systems; replacement CT and MRI tubes; CT service training; MRI coils, cold heads and RF amplifiers; hydrogen thyratrons, klystrons, magnetrons; flat panel detector upgrades; pre-owned CT systems; and additional replacement solutions currently under development for the diagnostic imaging service market. Through a combination of newly developed products and partnerships, service offerings and training programs, we believe we can help our customers improve efficiency while lowering the cost of healthcare delivery.
Refer to Note 7, Segment Reporting, to our unaudited consolidated financial statements for additional information on the changes in operating and reportable segments.
We currently have operations in the following major geographic regions:
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--------------------------------------------------------------------------------RESULTS OF OPERATIONS
Financial Summary - Three Months Ended
•
The second quarter of fiscal 2023 and fiscal 2022 each contained 13 weeks.
•
Net sales during the second quarter of fiscal 2023 were
•
Gross margin increased to 33.2% during the second quarter of fiscal 2023 compared to 32.7% during the second quarter of fiscal 2022.
•
Selling, general and administrative expenses were$14.7 million or 22.3% of net sales, during the second quarter of fiscal 2023 compared to$13.1 million , or 24.3% of net sales, during the second quarter of fiscal 2022.
•
Operating income during the second quarter of fiscal 2023 was
•
Net income during the second quarter of fiscal 2023 was
Financial Summary - Six Months Ended
•
The first six months of fiscal 2023 and fiscal 2022 each contained 26 weeks.
•
Net sales during the first six months of fiscal 2023 were$133.5 million , an increase of 23.9%, compared to net sales of$107.7 million during the first six months of fiscal 2022.
•
Gross margin increased to 33.6% during the first six months of fiscal 2023 compared to 31.5% during the first six months of fiscal 2022.
•
Selling, general and administrative expenses were$28.9 million or 21.7% of net sales, during the first six months of fiscal 2023 compared to$26.6 million , or 24.7% of net sales, during the first six months of fiscal 2022.
•
Operating income during the first six months of fiscal 2023 was
•
Net income during the six months of fiscal 2023 was
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As previously disclosed, we made certain changes in our reporting structure for
fiscal 2023. As a result of these changes, we revised our reportable segments as
further discussed in Note 7, Segment Reporting, to our unaudited consolidated
financial statements. For comparability purposes, segment reporting for the
prior periods have been adjusted to conform to the current presentation.
Net sales by segment and percent change during the second quarter and first six months of fiscal 2023 and fiscal 2022 were as follows (in thousands):
Net Sales Three Months Ended FY23 vs. FY22
November 26, 2022 November 27, 2021 % Change
PMT $ 40,585 $ 36,826 10.2 %
GES 12,293 4,911 150.3 %
Canvys 10,079 9,150 10.2 %
Healthcare 2,948 3,092 -4.7 %
Total $ 65,905 $ 53,979 22.1 %
Six Months Ended FY23 vs. FY22
November 26, 2022 November 27, 2021 % Change
PMT $ 85,939 $ 77,261 11.2 %
GES 20,804 7,485 177.9 %
Canvys 20,492 17,591 16.5 %
Healthcare 6,227 5,346 16.5 %
Total $ 133,462 $ 107,683 23.9 %
During the second quarter of fiscal 2023, consolidated net sales increased 22.1%
compared to the second quarter of fiscal 2022. Sales for PMT increased 10.2%,
sales for GES increased 150.3%, sales for Canvys increased 10.2% and sales for
Healthcare decreased 4.7%. The increase in PMT was mainly due to strong growth
in both the semi-wafer fabrication industry and the RF and Microwave products.
The increase in GES was mainly due to growth in our ULTRA3000 and other related
product sales into the wind turbine industry and from customers manufacturing
synthetic diamonds. GES also had increased sales into the Electric Vehicle
market including electric cars and locomotives. The increase in Canvys was
primarily due to strong sales in the North American market. The decrease in
Healthcare was due to lower part sales which were partially offset by increased
sales of equipment and CT tubes.
During the first six months of fiscal 2023, consolidated net sales increased
23.9% compared to the first six months of fiscal 2022. Sales for PMT increased
11.2%, sales for GES increased 177.9%, sales for Canvys increased 16.5% and
sales for Healthcare increased 16.5%. The increase in PMT was mainly due to
strong growth in the semi-wafer fabrication industry. The increase in GES was
mainly due to growth in our ULTRA3000 and other related product sales into the
wind turbine industry and from customers manufacturing synthetic diamonds. GES
also had increased sales into the Electric Vehicle market including electric
cars and locomotives. The increase in Canvys was primarily due to strong sales
in the North American market. The increase in Healthcare was due to increased
sales in all major products lines.
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Gross profit by segment and percent of net sales for the second quarter and
first six months of fiscal 2023 and fiscal 2022 were as follows (in thousands):
Gross Profit Three Months Ended
November 26, 2022 % of Net Sales November 27, 2021 % of Net Sales
PMT $ 14,011 34.5 % $ 12,399 33.7 %
GES 4,162 33.9 % 1,587 32.3 %
Canvys 2,995 29.7 % 2,912 31.8 %
Healthcare 683 23.2 % 759 24.5 %
Total $ 21,851 33.2 % $ 17,657 32.7 %
Six Months Ended
November 26, 2022 % of Net Sales November 27, 2021 % of Net Sales
PMT $ 29,546 34.4 % $ 24,586 31.8 %
GES 7,184 34.5 % 2,331 31.1 %
Canvys 6,261 30.6 % 5,730 32.6 %
Healthcare 1,887 30.3 % 1,307 24.4 %
Total $ 44,878 33.6 % $ 33,954 31.5 %
Gross profit reflects the distribution and manufacturing product margin less
manufacturing variances, inventory obsolescence charges, customer returns, scrap
and cycle count adjustments, engineering costs and other provisions.
Consolidated gross profit increased to $21.9 million during the second quarter
of fiscal 2023 compared to $17.7 million during the second quarter of fiscal
2022. Consolidated gross margin as a percentage of net sales increased to 33.2%
during the second quarter of fiscal 2023 from 32.7% during the second quarter of
fiscal 2022, primarily due to product mix in PMT and product mix and
manufacturing efficiencies in GES. The unfavorable product mix and foreign
currency effects in Canvys and unfavorable product mix in Healthcare partially
offset the favorable gross margin impact for PMT and GES.
Consolidated gross profit increased to $44.9 million during the first six months
of fiscal 2023 compared to $34.0 million during the first six months of fiscal
2022. Consolidated gross margin as a percentage of net sales increased to 33.6%
during the first six months of fiscal 2023 from 31.5% during the first six
months of fiscal 2022, primarily due to product mix in PMT, product mix and
manufacturing efficiencies in GES, and decreased component scrap expense and
improved manufacturing absorption in Healthcare. The unfavorable product mix and
foreign currency effects in Canvys partially offset the favorable gross margin
impact for PMT, GES and Healthcare.
Power and Microwave Technologies
PMT net sales increased 10.2% to$40.6 million during the second quarter of fiscal 2023 from$36.8 million during the second quarter of fiscal 2022. The increase was mainly due to strong growth in both the semi-wafer fabrication industry and the RF and Microwave products for various applications. Gross margin as a percentage of net sales increased to 34.5% during the second quarter of fiscal 2023 as compared to 33.7% during the second quarter of fiscal 2022 due to product mix. PMT net sales increased 11.2% to$85.9 million during the first six months of fiscal 2023 from$77.3 million during the first six months of fiscal 2022. The increase was mainly due to strong growth in the semi-wafer fabrication industry. Gross margin as a percentage of net sales increased to 34.4% during the first six months of fiscal 2023 as compared to 31.8% during the first six months of fiscal 2022 due to product mix.
GES net sales increased 150.3% to$12.3 million during the second quarter of fiscal 2023 from$4.9 million during the second quarter of fiscal 2022. The increase was mainly due to growth in our ULTRA3000 and other related product sales into the wind turbine industry and from customers manufacturing synthetic diamonds. We also saw an increase in sales into the Electric Vehicle market including both electric cars and locomotives. Gross margin as a percentage of net sales increased to 33.9% during the second quarter of fiscal 2023 as compared to 32.3% during the second quarter of fiscal 2022 due to improved manufacturing efficiencies and product mix. GES net sales increased 177.9% to$20.8 million during the first six months of fiscal 2023 from$7.5 million during the first six months of fiscal 2022. The increase was mainly due to growth in our ULTRA3000 and other related product sales into the wind turbine industry and from customers manufacturing synthetic diamonds. We also saw an increase in sales into the Electric Vehicle market including both electric cars and locomotives. Gross margin as a percentage of net sales increased to 34.5% during the first six months of fiscal 2023 as compared to 31.1% during the first six months of fiscal 2022 due to improved manufacturing efficiencies and product mix. 22 --------------------------------------------------------------------------------
Canvys
Canvys net sales increased 10.2% to$10.1 million during the second quarter of fiscal 2023 from$9.2 million during the second quarter of fiscal 2022, primarily due to strong sales in the North American market. Gross margin as a percentage of net sales decreased to 29.7% during the second quarter of fiscal 2023 from 31.8% during the second quarter of fiscal 2022 primarily due to product mix and foreign currency effects. Canvys net sales increased 16.5% to$20.5 million during the first six months of fiscal 2023 from$17.6 million during the first six months of fiscal 2022 primarily due to strong sales in the North American market. Gross margin as a percentage of net sales decreased to 30.6% during the first six months of fiscal 2023 from 32.6% during the first six months of fiscal 2022 primarily due to product mix and foreign currency effects.
Healthcare
Healthcare net sales decreased 4.7% to$2.9 million during the second quarter of fiscal 2023 from$3.1 million during the second quarter of fiscal 2022 due to a decrease in part sales partially offset by increases in equipment sales and CT tubes. Gross margin as a percentage of net sales decreased to 23.2% during the second quarter of fiscal 2023 as compared to 24.5% during the second quarter of fiscal 2022 primarily due to product mix. Healthcare net sales increased 16.5% to$6.2 million during the first six months of fiscal 2023 from$5.3 million during the first six months of fiscal 2022 due to increases in all major Healthcare product lines. Gross margin as a percentage of net sales increased to 30.3% during the first six months of fiscal 2023 as compared to 24.4% during the first six months of fiscal 2022 primarily due to improved manufacturing absorption and decreased component scrap expense.
Selling, General and Administrative Expenses
Selling, general and administrative expenses ("SG&A") increased to $14.7 million
during the second quarter of fiscal 2023 from $13.1 million in the second
quarter of fiscal 2022. The increase was mainly due to higher employee
compensation expenses, including incentive expense from higher operating income
and higher travel expenses. However, as a percentage of net sales, SG&A for the
second quarter of fiscal 2023 decreased to 22.3% compared to 24.3% for the
second quarter of fiscal 2022.
Selling, general and administrative expenses increased to $28.9 million during
the first six months of fiscal 2023 from $26.6 million in the first six months
of fiscal 2022. The increase was mainly due to higher employee compensation
expenses, including incentive expense from higher operating income and higher
travel expenses. However, as a percentage of net sales, SG&A for the first six
months of fiscal 2023 decreased to 21.7% compared to 24.7% for the first six
months of fiscal 2022.
Other Income/Expense
Other expense was $0.1 million during the second quarter of fiscal 2023,
compared to other income of $0.2 million for the second quarter of fiscal 2022.
Other expense during the second quarter of fiscal 2023 was mainly attributable
to foreign exchange. Our foreign exchange gains and losses are primarily due to
the translation of U.S. dollars held in non-U.S. entities. We currently do not
utilize derivative instruments to manage our exposure to foreign currency.
Other expense was
Income Tax Provision
The income tax provision was$1.5 million and$0.6 million for the second quarter of fiscal 2023 and for the second quarter of fiscal 2022, respectively. The effective income tax rate during the second quarter of fiscal 2023 was a tax provision of 21.5% as compared to a tax provision of 11.8% during the second quarter of fiscal 2022. The difference in rate during the second quarter of fiscal 2023 as compared to the second quarter of fiscal 2022 reflects changes in the valuation allowance recorded at year end fiscal 2022, absence of Net Operating Losses ("NOL") for utilization in fiscal 2023, our geographical distribution of income (loss), which is primarily driven by an increase inU.S. earnings for fiscal 2023 and a state income tax provision. We recorded an income tax provision of$3.6 million and$0.7 million for the first six months of fiscal 2023 and the first six months of fiscal 2022, respectively. The effective income tax rate during the first six months of fiscal 2023 was a tax provision of 23.4% as compared to a tax provision of 9.6% during the first six months of fiscal 2022. The difference in rate during the first six months of fiscal 2023 as compared to the first six months of fiscal 2022 reflects changes in the valuation allowance recorded at year end fiscal 2022, absence of Net Operating Losses ("NOL") for utilization in fiscal 2023, our geographical distribution of income (loss), which is primarily driven by an increase inU.S. earnings for fiscal 2023 and a state income tax provision. The 23.4% effective income tax rate differs from the federal statutory rate of 21% as a result of our geographical distribution of income (loss), which is primarily driven by an increase inU.S. earnings for fiscal 2023 and a state income tax provision. 23 -------------------------------------------------------------------------------- In the normal course of business, we are subject to examination by taxing authorities throughout the world. Generally, years prior to fiscal 2017 are closed for examination under the statute of limitation forU.S. federal,U.S. state and local or non-U.S. tax jurisdictions. We were under examination for fiscal 2015 through fiscal 2018 inGermany . The audit was settled in the fourth quarter of fiscal 2022. In the second quarter of fiscal 2023, the Company paid the audit assessment for the fiscal 2015 through fiscal 2018 years. Our primary foreign tax jurisdictions areGermany andthe Netherlands . We have tax years open inGermany beginning in fiscal 2019 andthe Netherlands beginning in fiscal 2021. Net Income and Per Share Data Net income during the second quarter of fiscal 2023 was$5.5 million , or$0.39 per diluted common share and$0.35 per Class B diluted common share as compared to$4.1 million during the second quarter of fiscal 2022 or$0.30 per diluted common share and$0.27 per Class B diluted common share. Net income during the first six months of fiscal 2023 was$11.9 million , or$0.83 per diluted common share and$0.75 per Class B diluted common share as compared to$6.8 million during the first six months of fiscal 2022 or$0.50 per diluted common share and$0.45 per Class B diluted common share.
LIQUIDITY, FINANCIAL POSITION AND CAPITAL RESOURCES
Our operations and cash needs have been primarily financed through income from operations and cash on hand.
Cash, cash equivalents and investments were$31.1 million atNovember 26, 2022 . Cash, cash equivalents and investments by geographic area atNovember 26, 2022 consisted of$13.7 million inNorth America ,$9.1 million inEurope ,$1.4 million inLatin America and$6.9 million inAsia/Pacific . No funds were repatriated tothe United States in the first six months of fiscal 2023. However, we anticipate repatriation of funds tothe United States in subsequent quarters. Although the Tax Cuts and Jobs Act generally eliminated federal income tax on future cash repatriation tothe United States , cash repatriation may be subject to state and local taxes, withholding or similar taxes. See Note 7, Income Taxes of the notes to our consolidated financial statements in Part II, Item 8 of our Annual Report on Form 10-K for the fiscal year endedMay 28, 2022 , filed with theSEC onAugust 1, 2022 for further information. Cash, cash equivalents and investments were$40.5 million atMay 28, 2022 . Cash, cash equivalents and investments by geographic area atMay 28, 2022 consisted of$25.7 million inNorth America ,$6.0 million inEurope ,$1.5 million inLatin America and$7.3 million inAsia/Pacific . We repatriated a total of$1.5 million tothe United States in fiscal 2022 from our foreign entities. This amount includes$0.7 million in the first quarter from our entity inChina ,$0.3 million in the second quarter from our entity inTaiwan and$0.5 million in the third quarter from our entity inJapan . Our short-term and long-term liquidity requirements primarily arise from: (i) working capital requirements, (ii) capital expenditure needs and (iii) cash dividend payments (if and when declared by our Board of Directors). Our ability to fund these requirements will depend, in part, on our future cash flows, which are determined by our future operating performance and, therefore, subject to prevailing global macroeconomic conditions and financial, business and other factors, some of which are beyond our control. The Company continues to monitor the impact of COVID-19, including the extent, duration and effectiveness of containment actions taken, the speed and extent of vaccination programs, the impact of the pandemic on its supply chain, manufacturing and distribution operations, customers and employees, as well as theU.S. economy in general. However, due to the uncertain and constantly evolving impacts of the COVID-19 pandemic across the globe, the Company cannot currently predict the long-term impact on its operations and financial results. The uncertainties associated with the COVID-19 pandemic and its effects include potential adverse effects on the overall economy, the Company's supply chain, transportation services, employees and customers. The COVID-19 pandemic and its effects could adversely affect the Company's revenues, earnings, liquidity and cash flows and may require significant actions in response, including expense reductions. Conditions surrounding COVID-19 change rapidly and additional impacts of which the Company is not currently aware may arise. Based on past performance and current expectations, we believe that the existing sources of liquidity, including current cash, will provide sufficient resources to meet known capital requirements and working capital needs through the next twelve months. Additionally, while our future capital requirements will depend on many factors, including, but not limited to, the economy and the outlook for growth in our markets, we believe our existing sources of liquidity as well as our ability to generate operating cash flows will satisfy our future obligations and cash requirements. 24 --------------------------------------------------------------------------------
Cash Flows from Operating Activities
Cash flows from operating activities primarily resulted from our net income adjusted for non-cash items and changes in our operating assets and liabilities.
Operating activities used$7.2 million of cash during the first six months of fiscal 2023. We had a net income of$11.9 million during the first six months of fiscal 2023, which included non-cash stock-based compensation expense of$0.5 million associated with the issuance of stock option and restricted stock awards, inventory reserve provisions of$0.2 million and depreciation and amortization expense of$1.8 million associated with our property and equipment as well as amortization of our intangible assets. Changes in our operating assets and liabilities used$21.5 million in cash during the first six months of fiscal 2023, net of foreign currency exchange gains and losses, included an increase in accounts receivable of$5.5 million , an increase in inventory of$18.1 million and an increase in prepaid expenses of$0.4 million . Partially offsetting the cash utilization for accounts receivable, inventory and prepaid expenses was an increase in accounts payable and accrued liabilities of$1.9 million . The increase in accounts receivable was primarily due to increased sales. The majority of the inventory increase was to support the product growth in LaFox manufacturing,Green Energy Solutions and Canvys, in addition to increases in the inventory for electron tubes. The increase in accounts payable was related to the inventory increase and the increase in accrued liabilities was timing related. Operating activities used$0.2 million of cash during the first six months of fiscal 2022. We had a net income of$6.8 million during the first half of fiscal 2022, which included non-cash stock-based compensation expense of$0.4 million associated with the issuance of stock option and restricted stock awards,$0.1 million for inventory reserve provisions and depreciation and amortization expense of$1.7 million associated with our property and equipment as well as amortization of our intangible assets. Changes in our operating assets and liabilities used$9.2 million in cash during the first six months of fiscal 2022, net of foreign currency exchange gains and losses, included an increase in accounts receivable of$3.1 million , an increase in inventory of$9.2 million and an increase in prepaid expenses of$1.1 million . Partially offsetting the cash utilization for accounts receivable, inventory and prepaid expenses was an increase in accounts payable and accrued liabilities of$3.8 million . The increase in accounts receivable was primarily due to increased sales revenue. The majority of the inventory increase was to support the growth in LaFox manufacturing and the RF and microwave components business. The increase in accounts payable was related to the inventory increase and the increase in accrued liabilities was timing related.
Cash Flows from Investing Activities
Cash flows from investing activities consisted primarily of capital expenditures and purchases and maturities of investments. Our purchases and proceeds from investments consist of time deposits and CDs. The purchasing of future investments varies from period to period due to interest and foreign currency exchange rates. Cash used in investing activities of$2.6 million during the first six months of fiscal 2023 was mainly due to capital expenditures. Capital expenditures were primarily related to our IT system, as well as our LaFox manufacturing business and facilities, which also supports both EDG andGreen Energy Solutions . The Company did not have any investment purchases or maturities in the first six months of fiscal 2023. Cash used in investing activities of$1.6 million during the first six months of fiscal 2022 was due to capital expenditures. Capital expenditures related primarily to capital used for our Healthcare business, IT system and manufacturing facilities. The Company did not have any investment purchases or maturities in the first half of fiscal 2022.
Cash Flows from Financing Activities
Cash flows used in financing activities consisted primarily of cash dividends and cash flows provided by financing activities consisted primarily of the proceeds from the issuance of stock.
Cash provided by financing activities of
Cash used in financing activities of$0.9 million during the first six months of fiscal 2022 were due to dividend payments of$1.6 million with a partial offset for the proceeds from the issuance of stock of$0.7 million .
All future payments of dividends are at the discretion of the Board of Directors. Dividend payments will depend on earnings, capital requirements, operating conditions and such other factors that the Board may deem relevant.
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