424(b)(3)
                                                      REGISTRATION NO. 333-02893
 
                                     [LOGO]
 
                 $55,755,000 PRINCIPAL AMOUNT OF 7% CONVERTIBLE
                          SUBORDINATED NOTES DUE 2006
                   (INTEREST PAYABLE MARCH 1 AND SEPTEMBER 1)
 
                        3,947,256 SHARES OF COMMON STOCK
                             ---------------------
 
    This prospectus relates to $55,755,000 aggregate principal amount of 7%
Convertible Subordinated Notes due 2006 (the "Notes") of Richey Electronics,
Inc., a Delaware corporation ("Richey Electronics" or the "Company") and
3,947,256 shares of the common stock, par value $0.001 per share (the "Common
Stock"), of the Company which are initially issuable upon conversion of the
Notes plus such additional indeterminate number of shares of Common Stock as may
become issuable upon conversion of the Notes as a result of adjustments to the
conversion price (the "Conversion Shares"). The Notes and the Conversion Shares
that are being registered hereby are to be offered (the "Offering") for the
account of the holders thereof (the "Selling Securityholders"). The Notes were
acquired from the Company by Jefferies & Company, Inc. and Cruttenden Roth
Incorporated (the "Initial Purchasers") in February and March 1996 in connection
with a private offering. See "Description of Notes."
 
    The Notes are convertible into Common Stock of the Company, at the holder's
option, at any time after 60 days following March 22, 1996 (the latest date of
original issuance thereof) and prior to maturity, unless previously redeemed, at
a conversion price of $14.125 per share, subject to adjustment in certain
events. On May 30, 1997, the last bid price of the Common Stock on the Nasdaq
Stock Market ("Nasdaq") was $8.00 per share. The Common Stock is traded under
the symbol RCHY.
 
    The Notes will bear interest at the rate of 7% per annum, payable
semi-annually on each March 1 and September 1 of each year, commencing September
1, 1996. The Notes are redeemable at the option of the Company, in whole or in
part, at the redemption prices set forth in this prospectus, together with
accrued interest, except that no redemption may be made prior to March 4, 1999.
Upon a Designated Event (as defined herein), each holder of Notes shall have the
right, at the holder's option, to require the Company to repurchase such
holder's Notes at a purchase price equal to 101% of the principal amount
thereof, plus accrued and unpaid interest to the Repurchase Date, if any. See
"Description of Notes -- Repurchase at Option of Holder Upon Change in Control
or Termination of Trading."
 
    The Notes are unsecured obligations of the Company and are subordinated to
all present and future Senior Indebtedness of the Company. The Indenture does
not restrict the incurrence of any other indebtedness or liabilities by the
Company. See "Description of Notes -- Subordination of Notes."
 
    The Notes are eligible for trading in the Private Offerings, Resales and
Trading through Automated Linkages ("PORTAL") market.
 
    The Initial Purchasers have advised the Company that they are making and
currently intend to continue making a market in the Notes. The Initial
Purchasers, however, are not obligated to do so and any such market making may
be discontinued at any time without notice, in the sole discretion of the
Initial Purchasers. No assurance can be given that any market for the Notes will
develop or be maintained.
 
    The Notes and the Conversion Shares are being registered to permit public
secondary trading of the Notes and, upon conversion, the Conversion Shares, by
the holders thereof from time to time after the date of this prospectus. The
Company has agreed, among other things, to bear substantially all expenses
(other than underwriter's discount or commission) in connection with the
registration and sale of the Notes and the Conversion Shares.
 
    The Company will not receive any of the proceeds from the sales of the Notes
or the Conversion Shares by the Selling Securityholders. The Notes and the
Conversion Shares may be offered in negotiated transactions or otherwise, at
market prices prevailing at the time of sale or at negotiated prices. In
addition, the Conversion Shares may be offered from time to time through
ordinary brokerage transactions on Nasdaq. See "Plan of Distribution." The
Selling Securityholders may be deemed to be "Underwriters" as defined in the
Securities Act of 1933, as amended (the "Securities Act"). If any broker-dealers
are used by the Selling Securityholders, any commissions paid to broker-dealers
and, if broker-dealers purchase any Notes or Conversion Shares as principals,
any profits received by such broker-dealers on the resale of the Notes or
Conversion Shares, may be deemed to be underwriting discounts or commissions
under the Securities Act. In addition, any profits realized by the Selling
Securityholders may be deemed to be underwriting commissions.
 
SEE "RISK FACTORS" ON PAGE 4 FOR A DISCUSSION OF CERTAIN FACTORS THAT SHOULD BE
                      CONSIDERED BY PROSPECTIVE INVESTORS.
                             ---------------------
 
  THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
                                    EXCHANGE
  COMMISSION OR BY ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES AND
       EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON
        THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
                     TO THE CONTRARY IS A CRIMINAL OFFENSE.
                           --------------------------
 
                 THE DATE OF THIS PROSPECTUS IS JUNE 24, 1997.

                             AVAILABLE INFORMATION
 
    The Company is subject to the information requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information are available for inspection and copying at the
public reference facilities maintained by the Commission at Judiciary Plaza, 450
Fifth Street, N.W., Washington, D.C. 20549; 7 World Trade Center, 13th Floor,
New York, New York 10048; and, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661. Copies of such materials may also be obtained from the Public
Reference Section of the Commission at Judiciary Plaza, 450 Fifth Street, N.W.,
Washington, D.C. 20549, at prescribed rates. The Company's Common Stock is
quoted on Nasdaq and material filed by the Company can be inspected at the
offices of The Nasdaq Stock Market, Reports Section, 1735 K Street, N.W.,
Washington, D.C. 20006. Such material may also be accessed electronically by
means of the Commission's home page on the Internet at http://www.sec.gov.
 
    The Company has filed with the Commission a registration statement on Form
S-2 (together with all amendments and exhibits thereto, the "Registration
Statement") under the Securities Act with respect to the Notes and the
Conversion Shares offered hereby. This prospectus does not contain all of the
information set forth or incorporated by reference in the Registration
Statement, certain parts of which are omitted in accordance with the rules and
regulations of the Commission. Reference is hereby made to the Registration
Statement for further information with respect to the Company and the securities
offered hereby. Statements contained herein concerning the provisions of
documents filed as exhibits to the Registration Statement are necessarily
summaries of such documents, and each such statement is qualified in its
entirety by reference to the copy of the applicable document filed with the
Commission. Copies of the Registration Statement and the exhibits may be
inspected, without charge, at the offices of the Commission, or obtained at
prescribed rates from the Public Reference Section of the Commission at the
address set forth above.
 
                INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
 
    The following documents previously filed with the Commission are hereby
incorporated by reference into this prospectus:
 
    1.  The Company's Annual Report on Form 10-K for the fiscal year ended
       December 31, 1996;
 
    2.  The Company's Quarterly Report on Form 10-Q for the quarterly period
       ended March 28, 1997.
 
    3.  The description of the Common Stock of the Company contained in its
       Registration Statement on Form 8-A/A dated January 11, 1996.
 
    This prospectus is accompanied by the Company's Annual Report on Form 10-K
for the fiscal year ended December 31, 1996, a copy of which is attached as
Exhibit A, and the Company's Quarterly Report on Form 10-Q for the quarter ended
March 28, 1997, a copy of which is attached as Exhibit B.
 
    All documents filed by the Company pursuant to Sections 13(a), 13(c), 14 or
15(d) of the Exchange Act subsequent to the date of this prospectus and prior to
the termination of this Offering shall be deemed to be incorporated by reference
into this prospectus and to be a part hereof from the date of filing of such
documents. Any statement contained in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this prospectus to the extent that a statement contained herein
or in any other subsequently filed document which also is or is deemed to be
incorporated by reference herein modifies or supersedes such statement. Any
statement so modified or superseded shall not be deemed, except as so modified
or superseded, to constitute a part of this prospectus.
 
    The Company will provide, without charge, to each person to whom this
prospectus is delivered, upon written or oral request of such person, a copy of
any or all of the documents described above, other than the exhibits to such
documents unless such exhibits are specifically incorporated by reference into
the documents so incorporated. Requests for such copies should be directed to
Richard N. Berger, Secretary, Richey Electronics, Inc., 7441 Lincoln Way, Garden
Grove, California 92641, telephone number (714) 898-8288.
 
                                       2

                                  THE COMPANY
 
    Richey Electronics is a leading specialty distributor of interconnect,
electromechanical and passive electronic components and a provider of related
value-added assembly services.
 
    The Company distributes a broad line of connectors, switches, wire, cable
and heat shrinkable tubing and other interconnect, electromechanical and passive
electronic components used in the assembly and manufacturing of electronic
equipment. Richey Electronics also provides a wide variety of value-added
assembly services, which typically generate higher gross margins than
traditional component distribution. The Company's customers are primarily small-
and medium-sized original equipment manufacturers ("OEMs") that produce
electronic equipment used in a wide variety of industries, including the
telecommunications, computer, medical, transportation and aerospace industries.
 
    The Company's principal executive offices are located at 7441 Lincoln Way,
Garden Grove, California 92641, and its telephone number is (714) 898-8288.
 
                                       3

                                  RISK FACTORS
 
    PROSPECTIVE INVESTORS SHOULD CONSIDER CAREFULLY THE FACTORS SET FORTH BELOW,
AS WELL AS THE MORE DETAILED INFORMATION CONTAINED ELSEWHERE IN THIS PROSPECTUS,
BEFORE MAKING A DECISION TO PURCHASE THE NOTES OR THE CONVERSION SHARES OFFERED
HEREBY.
 
DEPENDENCE ON KEY SUPPLIERS
 
    Most of the electronic components distributed by the Company are purchased
from manufacturers through non-exclusive distribution agreements which may be
canceled upon relatively short notice, subject to certain conditions.
Manufacturers have from time to time terminated such agreements with the Company
and there can be no assurance that such terminations will not occur in the
future. In addition, as a result of many component manufacturers' increasing
preference for using fewer distributors, there can be no assurance that the
Company will be able to maintain its authorized distributorships with its
current suppliers. For the year ended December 31, 1996, the Company's five
largest suppliers accounted for approximately 43% of net sales. The Company's
largest supplier is Raychem, which accounted for approximately 15% of the
Company's net sales in 1996. The loss of Raychem or any one of the Company's
other large suppliers could have a material adverse effect on the Company.
 
POTENTIAL FLUCTUATIONS IN OPERATING RESULTS
 
    The Company's results of operations may fluctuate from period to period due
to the effect of acquisitions, the number of shipping days in the quarter, loss
of key suppliers, uncollectibility of accounts receivable, inventory write-offs
and loss of key customers, as well as other factors. Significant fluctuations in
these results of operations may have a material adverse effect on the Company.
There can be no assurances that any past or future acquisitions will produce
expected increases in the Company's sales and earnings and that such
acquisitions will not have an adverse impact on the Company's business and
results of operations.
 
UNCERTAINTY OF FUTURE ACQUISITIONS
 
    The Company may make acquisitions in the future and regularly evaluates
potential acquisition opportunities. Acquisitions entail numerous risks,
including difficulties and expenses associated with the negotiating process,
increased leverage of the Company resulting from the acquisition, difficulties
in the assimilation of acquired operations, personnel and product lines,
diversion of management's attention and potential loss of key employees of
acquired companies. The Company's acquisition strategy depends on its ability to
identify and acquire compatible electronics distributors, and integrate the
acquired operations effectively and efficiently. There can be no assurance that
the Company will be able to locate appropriate acquisition candidates or that
identified candidates will be acquired or integrated in a timely and efficient
manner. No assurance can be given as to the Company's ability to integrate
successfully any operations, personnel or products that might be acquired in the
future, and the failure of the Company to do so could have a material adverse
effect on the Company's business and results of operations. Moreover, unexpected
problems or delays encountered in connection with any acquisition or integration
could have a material adverse effect on the Company. The Company may incur
additional indebtedness in connection with future acquisitions which may result
in increased leverage.
 
INCREASED LEVERAGE
 
    As of May 29,1997, the Company had outstanding indebtedness of approximately
$68.3 million. The Company maintains a secured revolving line of credit facility
with aggregate credit limits (subject
 
                                       4

to the Company's satisfying certain conditions to borrowing thereunder) of
approximately $45 million. As of May 29, 1997, approximately $9.6 million was
outstanding under this facility and $32.8 million was available for borrowing.
Substantially all of the Company's assets have been pledged to secure the
Company's credit facilities. This substantial leverage will have several
important consequences for the Company's future operations, including the
following: (i) a substantial portion of the Company's cash flow from operations
will be dedicated to the payment of interest on, and principal of, its
indebtedness; (ii) the covenants contained in the credit facilities impose
certain restrictions on the Company that, among other things, will limit its
ability to borrow additional funds or to dispose of assets; (iii) the Company's
ability to obtain additional financing in the future for capital expenditures,
acquisitions, general corporate purposes or other purposes may be impaired; and
(iv) the Company's ability to withstand competitive pressures, adverse economic
conditions and adverse changes in governmental regulations and to make
acquisitions or otherwise take advantage of significant business opportunities
that may arise may be negatively impacted. The Company's ability to meet its
debt service obligations and to reduce its total indebtedness will be dependent
upon the Company's future performance, which will be subject to financial,
business and other factors affecting the operations of the Company, many of
which are beyond its control. If the Company is unable to generate sufficient
cash flow from operations in the future to service its debt, it may be required
to refinance all or a portion of such debt, including the Notes, or to obtain
additional financing. However, there can be no assurance that any refinancing
would be possible or that any additional financing could be obtained.
 
COMPETITION AND INDUSTRY CONSOLIDATION
 
    The electronics distribution industry is highly competitive, primarily with
respect to price and product availability. The Company believes that breadth of
product line, level of technical expertise and quality of service are also
particularly important to small- and medium-sized OEMs. The Company competes
with large national distributors, as well as regional and specialty
distributors, many of whom distribute the same or competitive products. Many of
the Company's competitors have significantly greater assets, greater financial
and personnel resources and larger investments in technology and infrastructure
than the Company. If such competitors were to focus their attention and
resources on the Company's markets, several important consequences to the
Company's future operations could result, including a reduction in the pool of
potential acquisition candidates, outbidding of the Company in a contested
acquisition transaction and loss of customers and suppliers. Moreover, the
electronics distribution industry is increasing its efficiency and operating
leverage in response to the industry's rapid consolidation and technological
advances. These trends are intensifying competition and as a result, many
distributors have reported a decline in their gross margins. If demand
decreases, pressure on gross margins is likely to increase. Although the Company
believes that most of the declines in gross margin have generally occurred among
distributors serving larger customers, there is no assurance that these
pressures will not affect distributors, like the Company, who serve small-and
medium-sized OEMs. Existing and future competition could result in downward
pressure on the Company's gross margins or could otherwise have a material
adverse effect on the Company.
 
INDUSTRY CYCLICALITY
 
    Historically, the electronics industry has been affected by general economic
and industry-wide downturns which have adversely affected electronic component
manufacturers, certain end-users of such components and distributors. Although
the industry has experienced rapid growth over the past few years, there can be
no assurance that such growth can be sustained in the future. Since July 1996,
the Company's customers have been decreasing their inventory stocking levels
which may reflect slowing end-user demand or a general business slow down. In
addition, the life-cycle of existing electronic products and the timing of new
product development and introduction can affect demand for electronic
components. Reduced demand for electronic components could have a material
adverse effect on the Company.
 
                                       5

RELIANCE ON KEY PERSONNEL
 
    The Company is currently dependent upon the efforts and leadership abilities
of its experienced management team, including: William C. Cacciatore, Chairman
of the Board, President and Chief Executive Officer; C. Don Alverson, Executive
Vice President -- Sales; Norbert W. St. John, Executive Vice President --
Marketing; and Charles W. Mann, Vice President -- Value-Added Services. Although
the Company believes that it would be able to locate suitable replacements for
its executives if their services were lost, there can be no assurance it would
be able to do so. Accordingly, the loss of services of one or more of the
Company's key executives could have a material adverse effect upon the business
of the Company.
 
LIMITATIONS ON AVAILABILITY OF THE COMPANY'S NET OPERATING LOSS CARRYFORWARDS
 
    As of December 31, 1996, the Company had United States federal income tax
net operating loss carryforwards ("NOLs") of approximately $13.5 million which
expire between 2005 and 2008. The NOLs resulted from Brajdas Corporation's
("Brajdas") losses prior to the Richey-Brajdas Merger (as defined herein).
Section 382 of the Internal Revenue Code of 1986, as amended ("Section 382"),
imposes annual limitations on NOLs in the event certain changes in a company's
stock ownership over a three-year period exceed a specified threshold (a "Change
in Ownership"). As a result of the Company's secondary public offering of Common
Stock in April 1995, pursuant to which the Company and certain shareholders of
the Company sold 3,615,000 shares of the Company's Common Stock, the use of such
NOLs will be limited to approximately $4.9 million per year until they are fully
utilized or expire, whichever occurs first. The Company's NOLs are subject to
review by the Internal Revenue Service ("IRS"). If the Company's NOLs were
disallowed or their use was further limited, there could be a material adverse
effect on the Company's cash flow. See Note 8 of Notes to Financial Statements
which are included in the Company's Annual Report on Form 10-K for the fiscal
year ended December 31, 1996, a copy of which accompanies this prospectus.
 
POSSIBLE ISSUANCE OF PREFERRED SHARES; ANTI-TAKEOVER PROVISIONS
 
    The Company's Restated Certificate of Incorporation authorizes the issuance
of 10,000 shares of preferred stock. The Company's Board of Directors has the
power to issue any or all of these additional shares without stockholder
approval, which shares can be issued with such rights, preferences and
limitations as are determined by the Board. The Company presently has no
commitments or contracts to issue any shares of preferred stock. The Company is
also subject to the Delaware statute regulating business combinations. These
provisions, as well as certain provisions of the Company's bylaws, could delay,
discourage, hinder or preclude an unsolicited acquisition of the Company, could
make it less likely that stockholders receive a premium for their shares as a
result of any such attempt and could adversely affect the market price of and
the voting and other rights of the holders of the Common Stock. See "Description
of Capital Stock."
 
VOLATILITY OF PRICE OF STOCK AND NOTES
 
    The trading price of the Company's Common Stock and the Notes could be
subject to fluctuations in response to variations in quarterly operating
results, the gain or loss of significant contracts, changes in management,
future announcements concerning the Company, general trends in the industry and
other events or factors. In addition, the volatility of the prices of the
Company's Common Stock, changes in prevailing interest rates and changes in
perceptions of the Company's creditworthiness may adversely affect the price of
the Notes offered hereby.
 
SUBORDINATION OF NOTES
 
    The Notes are subordinate in right of payment to all existing and future
Senior Indebtedness of the Company. Senior Indebtedness includes all secured
indebtedness of the Company, whether
 
                                       6

existing on or created or incurred after the date of the issuance of the Notes,
that is not made subordinate to or pari passu with the Notes by the instrument
creating the indebtedness. As of May 29, 1997, the Company had approximately
$9.6 million of Senior Indebtedness outstanding, substantially all of which
represents borrowings under its $45 million revolving credit facility. The
Indenture (as defined herein) does not limit the amount of additional
indebtedness, including Senior Indebtedness, which the Company can create,
incur, assume or guarantee. By reason of such subordination of the Notes, in the
event of the insolvency, receivership, liquidation, reorganization, dissolution
or winding up of the business of the Company or upon a default in payment with
respect to any Senior Indebtedness of the Company or an event of default with
respect to such indebtedness resulting in the acceleration thereof, the assets
of the Company will be available to pay the amounts due on the Notes only after
all of the Senior Indebtedness of the Company has been paid in full.
 
    The Notes are obligations exclusively of the Company and not of any
subsidiary. If the Company begins to conduct business through subsidiaries, the
Notes will be effectively subordinated to all such indebtedness and other
liabilities and commitments of such subsidiaries. See "Description of Notes --
Subordination of Notes."
 
LIMITATIONS ON REPURCHASE UPON A DESIGNATED EVENT
 
    In the event of a Designated Event, which includes a Change in Control and a
Termination of Trading (each as defined herein), each holder of Notes will have
the right, at the holder's option, to require the Company to repurchase all or a
portion of such holder's Notes at a purchase price equal to 101% of the
principal amount thereof plus accrued and unpaid interest to the Repurchase Date
(as defined herein). The Company's ability to repurchase the Notes upon a
Designated Event may be limited by the terms of the Company's Senior
Indebtedness and the subordination provisions of the Indenture. In addition, the
revolving credit facility allows the lender to terminate the commitments on 30
days' notice if there is a change in control of the Company (as defined in the
revolving credit facility). Further, the ability of the Company to repurchase
the Notes upon a Designated Event will be dependent on the availability of
sufficient funds and compliance with applicable securities laws. Accordingly,
there can be no assurance that the Company will be able to repurchase the Notes
upon a Designated Event. The term "Designated Event" is limited to certain
specified transactions and may not include other events that might adversely
affect the financial condition of the Company or result in a downgrade of the
credit rating of the Notes, nor would the requirement that the Company offer to
repurchase the Notes upon a Designated Event necessarily afford holders of the
Notes protection in the event of a highly leveraged transaction, reorganization,
merger or similar transaction involving the Company. See "Description of Notes."
 
ABSENCE OF A PUBLIC MARKET FOR THE NOTES
 
    Although the Notes have been approved for trading in the PORTAL market,
there can be no assurance that any market for the Notes will develop, or if one
does develop, that it will be maintained. If an active market for the Notes
fails to develop or be sustained, the trading price of such Notes could be
adversely affected.
 
FUTURE CAPITAL NEEDS; UNCERTAINTY OF ADDITIONAL FUNDING
 
    The Company anticipates that its existing capital resources and credit
facilities will be adequate to satisfy its capital requirements for at least the
next twelve months. The Company's future capital requirements will depend,
however, on many factors, including, but not limited to, the size and timing of
future acquisitions, if any, and the availability of additional financing. To
the extent that existing resources and future earnings are insufficient to fund
the Company's activities, the Company may need to raise additional funds through
debt or equity financings. No assurance can be given that such additional
financing will be available or that, if available, it can be obtained on terms
favorable to the
 
                                       7

Company and its stockholders. In addition, any equity financing could result in
dilution to the Company's stockholders. The unavailability of adequate funds
could adversely affect the Company's future operations.
 
SHARES ELIGIBLE FOR FUTURE SALES
 
    Sale of a substantial number of shares of the Company's Common Stock in the
public market could adversely affect the market price of the Common Stock.
Substantially all shares of Common Stock are eligible for sale subject, in
certain instances, to the resale limitations of Rule 144 promulgated under the
Securities Act.
 
                                USE OF PROCEEDS
 
    The Company will not receive any proceeds from the sale of the Notes or the
Conversion Shares by the Selling Securityholders. See "Selling Securityholders"
for a list of those persons and entities receiving the proceeds from the sales
of the Notes or the Conversion Shares.
 
                       RATIO OF EARNINGS TO FIXED CHARGES
 
    For purposes of calculating the ratio of earnings to fixed charges, (i)
earnings consist of income before income taxes, plus fixed charges and (ii)
fixed charges consist of interest expense incurred, amortization of deferred
debt costs, plus the portion of rental expense under operating leases deemed by
the Company to be representative of the interest factor.
 
    The Company's ratio of earnings to fixed charges for each of the periods
indicated is as follows:
 


                                 YEARS ENDED (1)                                    THREE MONTHS ENDED
- ---------------------------------------------------------------------------------  ---------------------
 JANUARY 1,     DECEMBER 31,     DECEMBER 31,     DECEMBER 31,     DECEMBER 31,          MARCH 28,
    1993            1993             1994             1995             1996                1997
- -------------  ---------------  ---------------  ---------------  ---------------  ---------------------
                                                                    
    2.1x               1.7x             2.5x             4.3x             2.6x                2.6x

 
- ------------------------
 
(1) In the period from 1993 through 1996, the following transactions were
    completed. On April 6, 1993, RicheyImpact Electronics, Inc. ("RicheyImpact")
    merged with Brajdas Corporation, a California corporation ("Brajdas"), with
    Brajdas as the surviving legal entity (the "Richey-Brajdas Merger"). Brajdas
    subsequently changed its name to Richey Electronics, Inc. and reincorporated
    in Delaware. The Richey-Brajdas Merger was recorded as a reverse purchase
    acquisition with RicheyImpact as the accounting acquirer. Thereafter, Richey
    Electronics acquired the businesses of the following companies on the
    following dates: the In-Stock products division of Anchor Group, Inc.
    ("In-Stock") on April 4, 1994, Inland Empire Interconnects ("IEI") on August
    16, 1995, Deanco, Inc. ("Deanco") on December 20, 1995, MS Electronics on
    March 19, 1996 and Summit Distributors on December 5, 1996. The financial
    data used to calculate the ratio of earnings to fixed charges excludes the
    results of operations of Brajdas prior to the Richey-Brajdas Merger and
    excludes the results of operations of each such business acquired in the
    period from 1994 through 1996 prior to the date on which it was acquired.
 
                              DESCRIPTION OF NOTES
 
    The Notes were issued under an Indenture, dated as of February 15, 1996 (the
"Indenture"), between the Company and First Trust of California, National
Association, as Trustee (the "Trustee"). The Notes and the Conversion Shares
were registered pursuant to the Registration Rights Agreement dated February 26,
1996 among the Company and the Initial Purchasers (the "Registration Rights
Agreement"). The following summaries of certain provisions of the Indenture and
the Registration Rights Agreement do not purport to be complete and are subject
to, and are qualified in their entirety
 
                                       8

by reference to, all of the provisions of the Indenture and the Registration
Rights Agreement including the definitions therein of certain terms which are
not otherwise defined in this prospectus.
 
GENERAL
 
    The Notes are in aggregate principal amount of $55,755,000. The Notes mature
on March 1, 2006 unless earlier redeemed at the option of the Company or
repurchased by the Company at the option of the holder upon a Designated Event.
The Notes are unsecured obligations of the Company subordinate in right of
payment to certain other obligations of the Company as described under
"Subordination of Notes" and convertible into Common Stock as described under
"Conversion of Notes."
 
    The Notes bear interest from the most recent date to which interest has been
paid, or if no interest has been paid, from February 26, 1996, at the rate of 7%
per annum computed on the basis of a 360-day year of twelve 30-day months.
Interest will be payable semi-annually on March 1 and September 1 of each year
(each an "Interest Payment Date"), commencing on September 1, 1996, to the
person in whose name the Notes are registered at the close of business on the
preceding February 15 or August 15, respectively (in each case, a "Record Date,"
and the holder of such Note on a Record Date, the "Record Holder"). With respect
to a Note or portion thereof that is called for redemption, or that is
repurchased in connection with a Designated Event, in either case during the
period from a Record Date to (but excluding) the next succeeding Interest
Payment Date, interest shall be paid to the Record Holder in an amount equal to
the accrued interest as of the date immediately preceding the date fixed for
redemption or repurchase. Principal of and premium, if any, and interest on the
Notes will be payable, and the Notes may be surrendered for conversion and
registration of transfer, at the office or agency of the Company in New York
City (which initially will be the agency of the Trustee at 100 Wall Street, 20th
floor, New York, New York 10005, Attention: Bond Holder Window). In addition,
payment of interest may, at the option of the Company, be made by check mailed
to the address of the Person entitled thereto as it appears in the Security
Register.
 
    The Indenture does not contain any financial covenants, and does not limit
or contain any restriction on (i) the payment of dividends, (ii) the Company's
ability to incur Senior Indebtedness or other indebtedness or (iii) the
repurchase of securities of the Company. The Indenture contains no covenants or
other provisions to afford protection to holders of Notes in the event of a
highly leveraged transaction or a Change in Control of the Company except to the
extent described under "-- Repurchase at Option of Holder Upon Change in Control
or Termination of Trading."
 
    The Indenture and the Notes are governed by and construed under the laws of
the State of New York.
 
CONVERSION OF NOTES
 
    The holder of any Note will have the right, at the holder's option, to
convert such Note, or any portion thereof which is an integral multiple of
$1,000, into shares of Common Stock of the Company at any time after the date 60
days following March 22, 1996 (the latest date of original issuance of the
Notes) and prior to the close of business on the maturity date (unless earlier
redeemed or repurchased), initially at the conversion price of $14.125 per share
(which is equivalent to a conversion rate of 70.7965 shares per $1,000 principal
amount of Notes), subject to adjustment as described below. The right to convert
Notes called for redemption will terminate at the close of business on the
second trading day prior to the redemption date (unless the Company defaults in
payment of the redemption price). A Note for which a holder has delivered a
notice to require the Company to repurchase such Note upon a Change in Control
may be converted only if such notice is properly withdrawn by such holder prior
to the close of business on the Repurchase Date (as defined herein) in
accordance with the terms of the Indenture.
 
                                       9

    The conversion price will be subject to adjustment in certain events,
including:
 
    (i) dividends (and other distributions) payable in Common Stock on shares of
any class of capital stock of the Company;
 
    (ii) subdivisions, combinations and reclassifications of Common Stock;
 
   (iii) the issuance to all holders of Common Stock of rights, options or
warrants entitling the holder thereof to subscribe for or purchase Common Stock
at less than the then current market price (as defined in the Indenture);
 
   (iv) distributions to all holders of Common Stock of evidences of
indebtedness of the Company, cash or other assets, including shares of its
capital stock (other than Common Stock) and other securities, but excluding (A)
those rights, options, warrants, dividends and distributions referred to in
clauses (i) and (iii) above and subdivisions of shares referred to in clause
(ii) above and (B) dividends and distributions paid exclusively in cash in an
aggregate amount that (combined together with (x) all other such all-cash
dividends and distributions made within the preceding 12 months in respect of
which no adjustment has been made and (y) the excess of (1) any consideration
paid in respect of repurchases by the Company or any of its subsidiaries of
Common Stock referred to in clause (v) concluded within the preceding 12 months
in respect of which no adjustment has been made over (2) the then current market
price of the Common Stock does not exceed 10% of the Company's market
capitalization (being the product of the then current market price of the Common
Stock times the number of shares of Common Stock then outstanding) on the record
date for such distribution; and
 
    (v) certain repurchases by the Company and its subsidiaries of Common Stock
(including repurchases in connection with a tender offer) in which the
repurchase price exceeds both the then current conversion price of the Notes and
the then current market price of the Common Stock, but excluding repurchases in
which the excess of the consideration paid over the current market price of the
Common Stock (together with the amount of any such excess with respect to any
other such repurchases, and the amount of any all-cash dividends, in each case
concluded or paid within the preceding 12 months and in respect of which no
adjustment has been made) do not exceed 10% of the Company's market
capitalization.
 
    In addition to the foregoing adjustments, the Company will be permitted to
make such reductions in the conversion price as it considers to be advisable in
order that any event treated for federal income tax purposes as a dividend of
stock or stock rights will not be taxable to the recipients. No adjustment in
the conversion price will be required unless such adjustment would require a
change of at least 1% of the price then in effect; provided, however, that any
adjustment that would otherwise be required to be made shall be carried forward
and taken into account in any subsequent adjustment.
 
    The right of conversion may be exercised by the holder by delivering the
Notes to the office or agency of the Company maintained for such purpose in the
City of New York, accompanied by a duly signed and completed notice of
conversion. The conversion date will be the date on which the Note and the duly
signed and completed notice of conversion are so delivered. As promptly as
practicable on or after the conversion date, the Company will issue and deliver
a certificate or certificates for the number of full shares of Common Stock
issuable upon conversion, together with payment in lieu of any fraction of a
share.
 
    Notes surrendered for conversion after any Record Date and prior to the next
succeeding Interest Payment Date (except Notes called for redemption on a
redemption date that is prior to the date two trading days after such Interest
Payment Date) must be accompanied by payment of an amount equal to the interest
thereon which the Record Holder thereof on such Record Date is to receive on
such Interest Payment Date. A Note surrendered for conversion on an Interest
Payment Date need not be accompanied by any such payment. In the case of any
Note which has been converted after any Record Date and on or before the next
Interest Payment Date, interest shall be paid on such Interest Payment
 
                                       10

Date to the Record Holder of such Note on such Record Date. As a result, holders
that surrender Notes for conversion on a date that is not an Interest Payment
Date will not receive a net payment of interest for the period from the Interest
Payment Date next preceding the date of conversion to the date of conversion or
for any later period, even if the Notes are surrendered after a notice of
redemption (except for the payment of interest on Notes called for redemption on
a redemption date that is after a Record Date and is prior to the date two
trading days after the next Interest Payment Date). Subject to the aforesaid
right of the Record Holder on any Record Date to receive an installment of
interest, no payment or adjustment will be made on conversion for interest
accrued on the converted Note or for dividends on the Common Stock issued on
conversion. No fractional shares of Common Stock will be issued upon conversion,
but, in lieu thereof, the Company will pay a cash adjustment based upon the
market price of the Common Stock on the trading day prior to the date of
conversion, as provided in the Indenture.
 
    In case of any consolidation or merger of the Company with or into any other
corporation, or in the case of any consolidation or merger of another
corporation into the Company (other than a merger which does not result in any
reclassification, conversion, exchange or cancellation of shares of Common
Stock), or any sale or transfer of all or substantially all of the assets of the
Company, each Note shall become convertible only into the kind and amount of
securities, cash or other property which the holder of such Note would have been
entitled to receive upon such consolidation, merger, sale or transfer if such
holder had held the Common Stock issuable upon the conversion of such Note
immediately prior to such consolidation, merger, sale or transfer (assuming that
such holder failed to exercise any rights of election and that such Note was
then convertible).
 
    If at any time the Company makes a distribution of property to its
stockholders which would be taxable to such stockholders as a dividend for
federal income tax purposes (E.G., distributions of evidences of indebtedness or
assets of the Company, but generally not stock dividends on Common Stock or
rights to subscribe for Common Stock) and, pursuant to the anti-dilution
provisions of the Indenture, the number of shares into which Notes are
convertible is increased, such increase may be deemed for federal income tax
purposes to be the payment of a taxable dividend to holders of Notes.
 
SUBORDINATION OF NOTES
 
    The payment of the principal of and premium, if any, and interest on the
Notes (including the payment of the redemption price or repurchase price with
respect to the Notes) will be subordinated in right of payment to the extent set
forth in the Indenture to the prior payment in full of the principal of, and
premium, if any, and interest on all existing and future Senior Indebtedness of
the Company. The Indenture does not limit the amount of Senior Indebtedness that
may be incurred by the Company or any other indebtedness or obligations that may
be incurred by the Company. The Company expects from time to time to incur
additional Senior Indebtedness and other indebtedness and obligations.
 
    The Indenture provides that in the event, and during the continuance, of a
default in any payment of any Senior Indebtedness (including a default under any
repurchase or redemption obligation), no payment may be made by the Company on
or in respect of the Notes after written notice to the Company and the Trustee
by any holder of Senior Indebtedness. Upon the occurrence and during the
continuance of a default on any Senior Indebtedness (other than a payment event
of default) that permits the holders of such Senior Indebtedness to accelerate
its maturity, and following receipt by the Company and the Trustee of the notice
provided for by the Indenture, no payment may be made on the Notes for a period
of up to 179 days (a "Payment Blockage Period") during any consecutive 365-day
period, unless such default is cured or waived. No more than one Payment
Blockage Period may be imposed in any one 365-day period. In the event of any
payment or distribution of assets of the Company resulting from any liquidation,
dissolution, winding-up, reorganization or any insolvency or receivership
proceedings of the Company or upon an assignment for the benefit of creditors or
any other marshalling of the assets and liabilities of the Company, the holders
of all Senior Indebtedness
 
                                       11

will first be entitled to receive payment in full before the holders of the
Notes will be entitled to receive any payment. As a result of these
subordination provisions, in the event of insolvency, holders of the Notes may
recover less ratably than general creditors of the Company, and such
subordination may result in a reduction or elimination of payments to holders of
Notes.
 
    The term "Senior Indebtedness" means the principal of, premium, if any,
interest (including all interest accruing subsequent to the commencement of any
bankruptcy or similar proceeding, whether or not a claim for post-petition
interest is allowable as a claim in any such proceeding) and rent, fees,
expenses, indemnities and other amounts payable on or in connection with secured
Indebtedness of the Company, excluding the claims of trade creditors of the
Company, whether outstanding on the date of this Indenture or thereafter
created, incurred, assumed or guaranteed by the Company, unless in the case of
any particular Indebtedness the instrument creating or evidencing the same or
the assumption or guarantee thereof provides that such Indebtedness shall not be
senior in right of payment to the Notes or provides that such Indebtedness is
"pari passu" or subordinated to the Notes. Notwithstanding the foregoing, Senior
Indebtedness shall not include (i) any Indebtedness of the Company to any
subsidiary of the Company or (ii) any Indebtedness to the extent that it is not
secured. The term "Indebtedness" means, with respect to any Person, (a) all
obligations and other liabilities of such Person (i) for borrowed money, (ii)
evidenced by bonds, debentures, notes or similar instruments (other than amounts
owed for goods or materials purchased in the ordinary course of business or for
services) or (iii) with respect to letters of credit, bank guarantees or
bankers' acceptances, (b) all obligations for the payment of money in respect of
leases of such Person as lessee required, in conformity with generally accepted
accounting principles, to be accounted for as capitalized lease obligations on
the balance sheet of such Person, (c) all direct or indirect guaranties or
similar agreements by such Person in respect of, and obligations or liabilities
of such Person to purchase or otherwise acquire or otherwise assure a creditor
against loss in respect of, indebtedness, obligations or liabilities of another
Person of the kind described in clauses (a) and (b), (d) any indebtedness or
other obligations described in clauses (a) and (b) secured by any mortgage,
pledge, lien or other encumbrance existing on property which is owned or held by
such Person, regardless of whether the indebtedness or other obligation secured
thereby shall have been assumed by such Person and (e) any and all deferrals,
renewals, extensions and refundings of, or amendments, modifications or
supplements to, any indebtedness, obligation or liability of the kind described
in clauses (a) through (d). As of May 29, 1997, the Company had approximately
$9.6 million of Senior Indebtedness outstanding, substantially all of which
represents borrowings under its Revolving Line of Credit.
 
    The Notes are obligations exclusively of the Company and not of any
subsidiary of the Company. If the Company begins to conduct business through
subsidiaries, the Notes will be effectively subordinated to all indebtedness and
other liabilities and commitments of such subsidiaries. To the extent that any
significant operations of the Company are conducted through subsidiaries, the
cash flow and the consequent ability to service debt, including the Notes, of
the Company will be partially dependent upon the earnings of any such
subsidiaries and the distribution of those earnings, or upon loans or other
payments of funds by those subsidiaries, to the Company. No future subsidiary
will have any obligation to pay any amounts due pursuant to the Notes or to make
any funds available to the Company therefor. In addition, the payment of
dividends and the making of loans and advances to the Company by any future
subsidiaries would be (i) subject to certain statutory or contractual
restrictions, (ii) dependent upon the earnings of such subsidiaries and (iii)
subject to various business considerations. The Indenture does not limit the
amount of indebtedness which any subsidiary can create, incur, assume or
guarantee.
 
    In the event that, notwithstanding the foregoing, the Trustee or any holder
of Notes receives any payment or distribution of assets of the Company of any
kind in contravention of any of the terms of the Indenture, whether in cash,
property or securities, including, without limitation, by way of set-off or
otherwise, in respect of the Notes before all Senior Indebtedness is paid in
full, then such payment or distribution will be held by the recipient in trust
for the benefit of holders of Senior Indebtedness of
 
                                       12

the Company, and will be immediately paid over or delivered to the holders of
Senior Indebtedness of the Company or their representative or representatives to
the extent necessary to make payment in full of all Senior Indebtedness of the
Company remaining unpaid, after giving effect to any concurrent payment or
distribution, or provision therefor, to or for the holders of Senior
Indebtedness of the Company.
 
REDEMPTION AT OPTION OF COMPANY
 
    The Notes may not be redeemed by the Company prior to March 4, 1999.
Thereafter, the Notes may be redeemed at the option of the Company, in whole or
in part, upon not less than 20 nor more than 60 days' notice by mail. The
redemption prices (expressed as a percentage of principal amount) are as follows
for the 12-month period beginning March 1 of the following years:
 


                                                                REDEMPTION
YEAR                                                               PRICE
- -------------------------------------------------------------  -------------
                                                            
1999.........................................................       103.5%
2000.........................................................       103.0%
2001.........................................................       102.5%
2002.........................................................       102.0%
2003.........................................................       101.5%
2004.........................................................       101.0%
2005.........................................................       100.5%

 
and 100% on March 1, 2006, in each case together with accrued interest to the
date of redemption; provided that if the date fixed for redemption shall be a
date after a Record Date and on or before the related Interest Payment Date,
then the semi-annual payment of interest becoming due on the Interest Payment
Date shall be payable to the Record Holders on such Record Date.
 
    If less than all of the Notes are to be redeemed, the Trustee will select
the particular Notes (or the portions thereof) to be redeemed either by lot or,
in its discretion, on a pro rata basis. If any Note is to be redeemed in part
only, a new Note or Notes in principal amount equal to the unredeemed principal
portion thereof will be issued. If a portion of a holder's Notes are selected
for partial redemption and such holder converts a portion of such Notes, such
converted portion shall be deemed to be taken from the portion selected for
redemption.
 
    No sinking fund is provided for the Notes.
 
REPURCHASE AT OPTION OF HOLDER UPON CHANGE IN CONTROL OR TERMINATION OF TRADING
 
    Upon any Designated Event (as defined below), each holder of Notes shall
have the right (the "Repurchase Right"), at the holder's option, subject to the
terms and conditions of the Indenture, to require the Company to repurchase all
of such holder's Notes, or a portion thereof which is $1,000 or any integral
multiple thereof, on the date (the "Repurchase Date") that is 45 days after the
date of the Company Notice (as defined below) at a price equal to 101% of the
principal amount of the Notes, plus accrued and unpaid interest to the
Repurchase Date.
 
    Within 30 days after the occurrence of a Designated Event, the Company is
obligated to mail to the Trustee and to each holder of the Notes a notice (the
"Company Notice") of the occurrence of such Designated Event, and the Repurchase
Right arising as a result thereof setting forth, among other things, the terms
and conditions of, and the procedures required for the exercise of, such
Repurchase Right. To exercise the Repurchase Right, a holder of Notes must
deliver on or before the close of business on the date five days prior to the
Repurchase Date written notice to the Company (or an agent designated by the
Company for such purpose) and the Trustee of the holder's exercise of such
Repurchase Right specifying the Notes with respect to which the right is being
exercised. Such notice
 
                                       13

of exercise may be withdrawn by the holder by a written notice of withdrawal
delivered to the Company or such agent at any time on or before the close of
business on the Repurchase Date.
 
    "DESIGNATED EVENT" means a Change in Control or a Termination of Trading
(each as defined below).
 
    "CHANGE IN CONTROL" means an event or series of events as a result of which
(i) any "person" or "group" (as such term is used in Sections 13(d) and 14(d) of
the Exchange Act) is or becomes the "beneficial owner" (as defined in Rules
13d-3 and 13d-5 under the Exchange Act) of shares representing more than 50% of
the combined voting power of the then outstanding securities entitled to vote
generally in elections of directors of the Company ("Voting Stock"), (ii) the
Company consolidates with or merges into any other corporation, or conveys,
transfers or leases all or substantially all of its assets to any person, or any
other corporation merges into the Company, and, in the case of any such
transaction, the outstanding common stock of the Company is changed or exchanged
as a result, unless the stockholders of the Company immediately before such
transaction own, directly or indirectly immediately following such transaction,
at least 51% of the combined voting power of the outstanding voting securities
of the corporation resulting from such transaction in substantially the same
proportion as their ownership of the Voting Stock immediately before such
transaction, or (iii) at any time Continuing Directors (as defined below) do not
constitute a majority of the Board of Directors of the Company (or, if
applicable, a successor corporation to the Company); provided that a Change in
Control shall not be deemed to have occurred if either (x) the last sale price
of the Common Stock for any five trading days during the ten trading days
immediately preceding the Change in Control is at least equal to 105% of the
conversion price in effect on such five trading days or (y) both (i) at least
90% of the consideration (excluding cash payments for fractional shares) in the
transaction or transactions constituting the Change in Control consists of
common stock or securities convertible into common stock that are, or upon
issuance will be, traded on a United States national securities exchange or
approved for trading on an established automated over-the-counter trading market
in the United States and (ii) the last sale price of such common stock for any
five trading days during the ten trading days immediately preceding the Change
in Control is at least equal to 105% of the conversion price in effect on such
five trading days.
 
    "CONTINUING DIRECTOR" means at any date a member of the Company's Board of
Directors (i) who was a member of such board on February 21, 1996 or (ii) who
was nominated or elected by at least a majority of the directors who were
Continuing Directors at the time of such nomination or election or whose
election to the Company's Board of Directors was recommended or endorsed by at
least a majority of the directors who were Continuing Directors at the time of
such nomination or election. (Under this definition, if the current Board of
Directors of the Company were to approve a new director or directors and then
resign, no Change in Control would occur even though the current Board of
Directors would thereafter cease to be in office).
 
    No quantitative or other established meaning has been given to the phrase
"all or substantially all" (which appears in the definition of Change in
Control) by courts which have interpreted this phrase in various contexts. In
interpreting this phrase, courts make a subjective determination as to the
portion of assets conveyed, considering such factors as the value of assets
conveyed and the proportion of an entity's income derived from the assets
conveyed. To the extent the meaning of such phrase is uncertain, uncertainty
will exist as to whether or not a Change in Control may have occurred (and,
accordingly, whether or not the holders of Notes will have the right to require
the Company to repurchase their Notes).
 
    "TERMINATION OF TRADING" shall have occurred if the Common Stock (or other
common stock into which the Notes are then convertible) is neither listed for
trading on a United States national securities exchange nor approved for trading
on an established automated over-the-counter trading market in the United
States.
 
                                       14

    Rule 13e-4 under the Exchange Act requires the dissemination of certain
information to security holders in the event of an issuer tender offer and may
apply in the event that the Repurchase Right becomes available to holders of the
Notes. The Company will comply with this rule to the extent applicable at that
time and with Rule 14e-1 and all other applicable federal and state securities
laws in connection with any such repurchase option.
 
    The Company may not repurchase any Notes upon a Designated Event if at such
time the subordination provisions of the Indenture would prohibit the Company
from making payments of principal in respect of the Notes. Agreements relating
to the Company's Senior Indebtedness contain, and agreements relating to Senior
Indebtedness incurred by the Company in the future are likely to contain,
restrictions relating to the repurchase by the Company of the Notes pursuant to
the Repurchase Right. Such provisions, together with the subordination of the
Notes to all existing and future Senior Indebtedness of the Company, and the
funds then available to the Company, may limit the ability of the Company to
repurchase the Notes in the event of a Designated Event. Failure by the Company
to repurchase the Notes when required upon a Designated Event will result in an
Event of Default under the Indenture whether or not such repurchase is permitted
by the subordination provisions. See -- "Subordination of Notes" and "Risk
Factors -- Limitations on Repurchase Upon a Designated Event."
 
    The Indenture does not permit the Company's Board of Directors to waive the
Company's obligation to repurchase the Notes at the option of the holder
pursuant to the Repurchase Right in the event of a Designated Event. The
Repurchase Right, however, would not necessarily afford holders of the Notes
protection in the event of highly leveraged or other transactions involving the
Company that may adversely affect holders of the Notes. Notwithstanding the
foregoing, the right to require the Company to repurchase the Notes pursuant to
the Repurchase Right could delay or deter a potential acquisition of the Company
regardless of whether such acquisition is supported or approved by the Board of
Directors of the Company.
 
    If a Designated Event were to occur, there can be no assurance that the
Company would be able to obtain sufficient funds with which to repurchase all
the Notes tendered by the holders thereof.
 
MERGERS AND SALES OF ASSETS BY THE COMPANY
 
    The Company may not consolidate with or merge into any other Person, or
transfer or lease its properties and assets substantially as an entirety to any
Person, unless (i) either the Company is the surviving corporation or the Person
formed by such consolidation or into which the Company is merged or the Person
to which the properties and assets of the Company are so transferred or leased
shall be a corporation organized and existing under the laws of the United
States, any State thereof or the District of Columbia and shall expressly assume
the payment of the principal of and premium, if any, and interest on the Notes
and the performance of the other covenants of the Company under the Indenture
and shall have provided for conversion rights in accordance with the Indenture,
and (ii) immediately after giving effect to such transaction, no Event of
Default, or event which, with the giving of notice or the passing of time, or
both, would become an Event of Default, shall have occurred and be continuing.
 
TRANSACTIONS WITH AFFILIATES
 
    The Indenture provides that the Company will not sell, lease, transfer or
otherwise dispose of any of its properties or assets to, or purchase any
property or assets from, or enter into any contract, agreement, understanding,
loan, advance or guarantee with, or for the benefit of, any Affiliate (each of
the foregoing, an "Affiliate Transaction"), unless (i) such Affiliate
Transaction is on terms that are no less favorable to the Company than those
that would have been obtained on an arm's-length basis in a comparable
transaction by the Company or with an unrelated Person and (ii) prior to the
consummation of any such Affiliate Transaction the Company delivers to the
Trustee (x) with respect to any
 
                                       15

Affiliate Transaction or series of related Affiliate Transactions involving
aggregate payments in excess of $500,000, a resolution of the disinterested
members of the Board of Directors set forth in an Officers' Certificate
certifying that such Affiliate Transaction complies with clause (i) above and
that such Affiliate Transaction was approved by a majority of the disinterested
members of the Board of Directors and (y) with respect to any Affiliate
Transaction involving aggregate payments in excess of $15 million, in addition
to the requirements specified in clause (x), a written opinion as to the
fairness of such Affiliate Transaction to the Company from a financial point of
view issued by an investment banking firm of national standing, or in the case
of a transaction involving the sale, lease, transfer or purchase of assets
subject to valuation, such as real estate, a written appraisal by a nationally
recognized appraisal firm; PROVIDED, HOWEVER, that any employment agreement or
management agreement entered into by the Company in the ordinary course of
business and consistent with the past practice of the Company that is approved
by the Board of Directors of the Company (including a majority of the
disinterested members in the case of an agreement with a person who is a member
of the Board of Directors) shall not be deemed to be an Affiliate Transaction.
 
MODIFICATION OF THE INDENTURE
 
    Modifications and amendments of the Indenture may be made, and certain
defaults by the Company may be waived, with the consent of the holders of not
less than a majority in aggregate principal amount of the Notes at the time
Outstanding. However, no such modification or amendment may, without the consent
of the holder of each Outstanding Note affected thereby, (i) change the stated
maturity date of the principal of, or any installment of interest on, any Note,
(ii) reduce the principal amount of, or the rate of interest on, or any premium
payable on, any Note, whether upon acceleration, redemption or otherwise, (iii)
change the place or currency for payment of principal of, or premium or interest
on, any Note, (iv) impair the right to institute suit for the enforcement of any
such payment when due, (v) adversely affect the right provided in the Indenture
to convert any Note, (vi) modify the provisions of the Indenture with respect to
the subordination of the Notes in a manner adverse to the holders, (vii) modify
the provisions relating to the Repurchase Right of the holders in a manner
adverse to the holders, (viii) reduce the percentage of principal amount of
Outstanding Notes necessary to modify or amend the Indenture or to consent to
any waiver provided for in the Indenture, or (ix) modify the obligation of the
Company to deliver information required under Rule 144A to permit resales of
Notes and Common Stock issuable upon conversion thereof in the event the Company
ceases to be subject to certain reporting requirements under the United States
securities laws. Without the consent of or notice to any holder of the Notes,
the Company and the Trustee may amend or supplement the Indenture to cure any
ambiguity, omission, defect or inconsistency, to provide for the assumption by a
successor corporation of the obligations of the Company under the Indenture if
in compliance with the Indenture, to make any change that does not adversely
affect the rights of any holder of the Notes or to comply with any requirement
of the Commission in connection with the qualification of the Indenture under
the Trust Indenture Act.
 
EVENTS OF DEFAULT
 
    The following are Events of Default under the Indenture: (i) default in the
payment of any interest on any Note when due, continuing for 30 days, whether or
not such payment is prohibited by the subordination provisions of the Indenture,
(ii) default in the payment of principal or premium, if any, or in the payment
of any redemption obligation, when due, whether or not such payment is
prohibited by the subordination provisions of the Indenture, (iii) failure to
perform any other covenant of the Company under the Indenture, continuing for 60
days after written notice as provided in the Indenture, (iv) default (after
giving effect to any applicable grace periods or waivers or any extension of any
maturity date) under any mortgage, indenture or instrument under which there may
be issued or by which there may be secured or evidenced any Indebtedness by the
Company (or the payment of which is guaranteed by the Company) whether such
Indebtedness or guarantee now
 
                                       16

exists, or is created after the date of the Indenture if (a) either (1) such
default results from the failure to pay principal of, or interest on, such
Indebtedness or (2) as a result of such default the maturity of such
Indebtedness has been accelerated, and (b) the principal amount of such
Indebtedness, together with the principal amount of any other such Indebtedness
with respect to which such a payment default (after the expiration of any
applicable grace period or any extension of the maturity date) has occurred, or
the maturity of which has been so accelerated, exceeds $2.5 million in the
aggregate at any one time; (v) failure by the Company to pay final judgments in
excess of $1.0 million which judgments are not stayed within 60 days after their
entry, and (vi) certain events of bankruptcy, insolvency or reorganization.
 
    If an Event of Default shall occur and be continuing, the Trustee or the
holders of not less than 25% in principal amount of the Outstanding Notes may
accelerate the maturity of all Notes. Under certain circumstances, however, such
declarations may be annulled and past defaults (other than certain payment
defaults) may be waived by the holders of a majority in principal amount of the
Outstanding Notes. If an Event of Default resulting from certain events of
bankruptcy, insolvency or reorganization were to occur, all unpaid principal of
and accrued interest on the Outstanding Notes will become due and payable
immediately without any declaration or other act on the part of the Trustee or
any holders of Notes.
 
    The Indenture provides that the Trustee shall, within 90 days after the
occurrence of a default, give to the registered holders of Notes notice of all
uncured defaults known to it, but the Trustee shall be protected in withholding
such notice if it in good faith determines that the withholding of such notice
is in the best interest of such registered holders, except in the case of a
default in the payment of the principal of, or premium, if any, or interest on,
any of the Notes when due or in the payment of any redemption obligation.
 
    The holders of not less than a majority in principal amount of the
Outstanding Notes may on behalf of the holders of all Notes waive any past
defaults, except a default in payment of the principal of, or premium, if any,
or interest on, any Note when due or in respect of certain provisions of the
Indenture which cannot be modified or amended without the consent of the holder
of each Outstanding Note affected thereby.
 
    The Company is required to furnish to the Trustee annually a statement of
certain officers of the Company stating whether or not to the best of their
knowledge the Company is in default in the performance and observance of certain
terms of the Indenture and, if they have knowledge that the Company is in
default, specifying such default.
 
REGISTRATION RIGHTS
 
    Pursuant to the Registration Rights Agreement between the Company and the
Initial Purchasers, the Company has filed with the Commission a registration
statement on Form S-2 (the "Shelf Registration Statement"), of which this
prospectus is a part, to cover resales by holders of the Notes and the sale of
the Conversion Shares (together, the "Securities"). The Shelf Registration
Statement became effective on June 7, 1996. The Company will use its best
efforts to keep the Shelf Registration Statement effective for three years after
March 22, 1996 (the latest date of original issuance of any of the Notes). The
Company will be permitted, upon notice (a "Suspension Notice") to each record
holder of Securities (and to certain other owners of Securities of which the
Company has actual knowledge as provided in the Registration Rights Agreement),
to suspend the use of this prospectus (which is a part of the Shelf Registration
Statement) in connection with sales of Securities by holders during certain
periods of time (each a "Suspension Period") under certain circumstances
relating to pending corporate developments and public filings with the
Commission and similar events. The Registration Rights Agreement provides that
if (i) the Shelf Registration Statement is not filed with the Commission on or
prior to 60 days after February 26, 1996, (ii) the Shelf Registration Statement
 
                                       17

has not been declared effective by the Commission within 120 days after February
26, 1996, (iii) the Shelf Registration Statement is filed and declared effective
but shall thereafter cease to be effective (without being succeeded immediately
by an additional Shelf Registration Statement filed and declared effective) for
more than 30 days, (iv) the Company shall have delivered a Suspension Notice to
holders of Securities suspending the use of the prospectus, and the related
Suspension Period shall have continued for over 30 days after any such holder
has delivered a notice to the Company representing that it has a good faith
present intention to sell Securities under the Shelf Registration Statement, or
(v) there shall be more than an aggregate of 60 days in any twelve consecutive
months in which one or more Suspension Periods shall be continuing following
such notice from any holder or holders of their intention to sell Securities
(each such event referred to in clauses (i) through (v), a "Registration
Default"), the Company will pay liquidated damages to each holder of Securities,
during the first 90- day period immediately following the occurrence of such
Registration Default in an amount equal to $0.05 per week per $1,000 principal
amount of Notes and, if applicable, $0.01 per week per share (subject to
adjustment in the event of stock splits, stock recombinations, stock dividends
and the like) of Common Stock issued upon conversion of the Notes held by such
holder. The amount of the liquidated damages will increase by an additional
$0.05 per week per $1,000 principal amount of Notes or $0.01 per week per share
(subject to adjustment as set forth above) of Common Stock upon conversion of
the Notes for each subsequent 90-day period until the applicable Registration
Statement is filed and the applicable Registration Statement is declared
effective, or the Shelf Registration Statement again becomes effective, as the
case may be, up to a maximum amount of liquidated damages of $0.25 per week per
$1,000 principal amount of Notes or $0.05 per week per share (subject to
adjustment as set forth above) of Common Stock. Following the cure of a
Registration Default, liquidated damages will cease to accrue with respect to
such Registration Default. The Company will provide to each registered holder
copies of this prospectus, notify each registered holder when the Shelf
Registration Statement has become effective and take certain other actions as
are required to permit unrestricted resales of the Securities. A holder who
sells the Securities pursuant to the Shelf Registration Statement generally will
be required to be named as a Selling Securityholder in the related prospectus
and to deliver a prospectus to purchasers and will be bound by the provisions of
the Registration Rights Agreement which are applicable to such holder (including
certain indemnification provisions).
 
    The specific provisions relating to the registrations described above are
contained in the Registration Rights Agreement.
 
FORM AND REGISTRATION
 
    GLOBAL NOTE; BOOK ENTRY FORM
 
    Notes held by "qualified institutional buyers," as defined in Rule 144A
under the Securities Act ("Qualified Institutional Buyers" or "QIBs") or by a
person who is not a U.S. person who acquired such Note in an "offshore
transaction" in reliance on Regulation S under the Securities Act (a "Non-U.S.
Person"), but not by other purchasers, are evidenced by a global note (the
"Global Note") which has been deposited with, or on behalf of, The Depository
Trust Company, New York, New York ("DTC") and registered in the name of Cede &
Co. ("Cede") as DTC's nominee. Except as set forth below, the record ownership
of the Global Note may be transferred, in whole or in part, only to another
nominee of DTC or to a successor of DTC or its nominee.
 
    A Qualified Institutional Buyer or Non-U.S. Person may hold its interest in
the Global Note directly through DTC if such Qualified Institutional Buyer is a
participant in DTC, or indirectly through organizations which are participants
in DTC (the "Participants"). Transfers between Participants will be effected in
the ordinary way in accordance with DTC rules and will be settled in clearing
house funds. The laws of some states require that certain persons take physical
delivery of securities
 
                                       18

in definitive form. Consequently, the ability to transfer beneficial interests
in the Global Note to such persons may be limited.
 
    Qualified Institutional Buyers and Non-U.S. Persons who are not Participants
may beneficially own interests in the Global Note held by DTC only through
Participants or certain banks, brokers, dealers, trust companies and other
parties that clear through or maintain a custodial relationship with a
Participant, either directly or indirectly ("Indirect Participants"). So long as
Cede, as the nominee of DTC, is the registered owner of the Global Note, Cede
for all purposes will be considered the sole holder of the Global Note. Owners
of beneficial interests in the Global Note will be entitled to have certificates
registered in their names and to receive physical delivery of certificates in
definitive form.
 
    Payment of interest on and the redemption price of the Global Note will be
made to Cede, the nominee for DTC as the registered owner of the Global Note by
wire transfer of immediately available funds on each Interest Payment Date.
Neither the Company, the Trustee nor any paying agent will have any
responsibility or liability for any aspect of the records relating to or
payments made on account of a beneficial ownership interest in the Global Note
or for maintaining, supervising or reviewing any records relating to such
beneficial ownership interests.
 
    The Company has been informed by DTC that, with respect to any payment of
interest on and the redemption price of the Global Note, DTC's practice is to
credit Participants' accounts on the payment date therefor with payments in
amounts proportionate to their respective beneficial interests in the principal
amount represented by the Global Note as shown on the records of DTC, unless DTC
has reason to believe that it will not receive payment on such payment date.
Payments by Participants to owners of beneficial interests in the principal
amount represented by the Global Note held through such Participants will be the
responsibility of such Participants, as is now the case with securities held for
the accounts of customers registered in "street name."
 
    Because DTC can only act on behalf of Participants, who in turn act on
behalf of Indirect Participants and certain banks, the ability of a person
having a beneficial interest in the principal amount represented by the Global
Note to pledge such interest to persons or entities that do not participate in
the DTC system, or otherwise take actions in respect of such interest, may be
affected by the lack of a physical certificate evidencing such interest.
 
    Neither the Company nor the Trustee (or any registrar, paying agent or
conversion agent under the Indenture) will have any responsibility for the
performance by DTC or its Participants or Indirect Participants of their
respective obligations under the rules and procedures governing their
operations. DTC has advised the Company that it will take any action permitted
to be taken by a holder of Notes (including, without limitation, the
presentation of Notes for exchange as described below) only at the direction of
one or more Participants to whose account DTC interests in the Global Note are
credited and only in respect of the principal amount of the Notes represented by
the Global Note as to which such Participant or Participants has or have given
such direction.
 
    DTC has advised the Company as follows: DTC is a limited purpose trust
company organized under the laws of the State of New York, a member of the
Federal Reserve System, a "clearing corporation" within the meaning of the
Uniform Commercial Code and a "clearing agency" registered pursuant to the
provisions of Section 17A of the Exchange Act. DTC was created to hold
securities for its Participants and to facilitate the clearance and settlement
of securities transactions between Participants through electronic book-entry
changes to accounts of its Participants, thereby eliminating the need for
physical movement of certificates. Participants include securities brokers and
dealers, banks, trust companies and clearing corporations and may include
certain other organizations such as the Initial Purchasers. Certain of such
Participants (or their representatives), together with other entities, own DTC.
Indirect access to the DTC system is available to others such as banks, brokers,
 
                                       19

dealers and trust companies that clear through, or maintain a custodial
relationship with a Participant, either directly or indirectly.
 
    Although DTC has agreed to the foregoing procedures in order to facilitate
transfers of interests in the Global Note among Participants, it is under no
obligation to perform or continue to perform such procedures, and such
procedures may be discontinued at any time. If DTC is at any time unwilling or
unable to continue as depository and a successor depository is not appointed by
the Company within 90 days, the Company will cause the Notes to be issued in
definitive form in exchange for the Global Note.
 
    CERTIFICATED NOTES
 
    Notes sold to investors that are not Qualified Institutional Buyers or
Non-U.S. Persons will be issued in definitive registered form and may not be
represented by the Global Note. In addition, Qualified Institutional Buyers may
request that certificated Notes be issued in exchange for Notes represented by
the Global Note. Furthermore, certificated Notes may be issued in exchange for
Notes represented by the Global Note if no successor depository is appointed by
the Company as set forth above.
 
THE TRUSTEE
 
    The Indenture provides that, except during the continuance of an Event of
Default, the Trustee will perform only such duties as are specifically set forth
in the Indenture. During the existence of an Event of Default, the Trustee will
be required to exercise such rights and powers vested in it under the Indenture
and use the same degree of care and skill in its exercise as a prudent person
would exercise under the circumstances in the conduct of such person's own
affairs. Subject to such provisions, the Trustee will be under no obligation to
exercise any of its rights or powers under the Indenture at the request of any
holder of Notes, unless such holder shall have offered to the Trustee security
and indemnity satisfactory to it against any loss, liability or expense.
 
    The Indenture contains limitations on the rights of the Trustee, should it
become a creditor of the Company, to obtain payment of claims in certain cases
or to realize on certain property received by it in respect of any such claim as
security or otherwise. The Trustee is permitted to engage in other transactions,
provided, however, that if it acquires any conflicting interest (as defined in
the Indenture) it must eliminate such conflict within 90 days, apply to the
Commission for permission to continue, or resign.
 
                          DESCRIPTION OF CAPITAL STOCK
 
COMMON STOCK
 
    The Company has 30,000,000 authorized shares of the Common Stock, $0.001 par
value, of which 9,063,935 shares were issued and outstanding as of May 30, 1997.
Holders of the Common Stock are entitled to one vote per share on all matters
requiring stockholder action. The Company's Restated Certificate of
Incorporation does not permit cumulative voting for the election of directors.
The holders of the Common Stock have no preemptive or other subscription rights
and there are no redemption, sinking fund or conversion privileges applicable
thereto. The holders of the Common Stock are entitled to receive dividends as
and when declared by the Board of Directors out of funds legally available
therefor. Upon liquidation, dissolution or winding up of the Company, holders of
the Common Stock are entitled to share ratably in all assets remaining after
payment of liabilities. All outstanding shares of the Common Stock are fully
paid and non-assessable.
 
                                       20

PREFERRED STOCK
 
    The Company has 10,000 authorized shares of preferred stock, $0.001 par
value, none of which was issued and outstanding as of May 30, 1997. The
Company's Restated Certificate of Incorporation permits the terms, rights and
preferences of any preferred stock issued in the future, including dividend
rates, voting rights, redemption prices, maturity dates, liquidation preference
and similar matters, to be determined by the Company's Board of Directors at the
time such issuance is approved. Management does not presently know whether any
shares of preferred stock will actually be issued or, if issued, what the terms,
rights and preferences thereof will be. Under the Delaware General Corporation
Law ("Delaware Law"), however, the holders of such preferred stock will not have
any preemptive rights with respect to any future issuance of shares of the
Common Stock or preferred stock, unless the Company's Restated Certificate of
Incorporation is amended to provide for such rights.
 
CERTAIN CERTIFICATE OF INCORPORATION AND STATUTORY PROVISIONS
 
    LIMITATIONS OF LIABILITY OF DIRECTORS.  The Company's Restated Certificate
of Incorporation includes a provision eliminating director liability to the
fullest extent permissible under Delaware Law, as such law currently exists or
as it may be amended in the future. Delaware corporations are permitted to adopt
provisions in their certificates of incorporation eliminating the monetary
liability of directors for certain breaches of duty. Such provisions are subject
to exceptions, as described below.
 
    Under Delaware Law, a Delaware corporation may include a provision in its
certificate of incorporation which eliminates or limits the personal liability
of a director to the corporation or its stockholders for monetary damages for
breach of fiduciary duty as a director. However, such a provision may not
eliminate or limit a director's liability for (i) breaches of the duty of
loyalty to the corporation or its stockholders, (ii) acts or omissions not in
good faith or involving intentional misconduct or knowing violations of law,
(iii) the payment of unlawful dividends or unlawful stock purchases or
redemptions, or (iv) transactions in which a director receives an improper
personal benefit.
 
    DELAWARE ANTI-TAKEOVER LAW.  The Company is subject to Section 203 of
Delaware Law. Section 203 prohibits a publicly held Delaware corporation from
engaging in certain "business combinations" with an "interested stockholder" for
three years following the date that a person becomes an interested stockholder
unless the transaction is approved in the prescribed manner. A business
combination includes mergers, stock or asset sales and other transactions
resulting in a financial benefit to the interested stockholders. With certain
exceptions, an interested stockholder is a person who (i) owns 15% or more of
the corporation's outstanding voting stock, and the affiliates and associates of
such person, or (ii) is an affiliate or associate of the corporation and was the
owner of 15% or more of the outstanding voting stock of the corporation at any
time within the previous three years, and the affiliates and associates of such
person.
 
    Certain of the provisions described above may have the effect of delaying
stockholder actions with respect to certain business combinations and the
election of new members to the Board of Directors. As such, the provisions could
have the effect of discouraging open market purchases of shares of the Company's
Common Stock because they may be considered disadvantageous by a stockholder who
desires to participate in a business combination or elect a new director.
 
TRANSFER AGENT AND REGISTRAR
 
    The transfer agent and registrar for the Company's securities is OTR, Inc.,
Portland, Oregon.
 
                                       21

                            SELLING SECURITYHOLDERS
 
    The Notes were initially issued and sold pursuant to a purchase agreement
dated February 21, 1996 (the "Purchase Agreement") among the Company and the
Initial Purchasers. The Notes were acquired (a) from the Initial Purchasers by
the Selling Securityholders in compliance with Rule 144A, Regulation D or
Regulation S under the Securities Act or (b) in other permitted resale
transactions exempt from registration under the Securities Act from the Initial
Purchasers or holders who acquired the Notes from the Initial Purchasers or
other prior holders thereof. The Company has agreed to indemnify and hold the
Initial Purchasers harmless against certain liabilities under the Securities Act
that could arise in connection with the sale of the Notes by the Initial
Purchasers.
 
    Jefferies & Company, Inc. ("Jefferies") was one of the Initial Purchasers of
the Notes. Jefferies has from time to time rendered financial advisory services
on behalf of the Company.
 
    Except as set forth above, none of the Selling Securityholders has had a
material relationship with the Company or any of its predecessors or affiliates
within the past three years.
 
    The following table sets forth certain information as of May 9, 1996 as to
the security ownership of the Selling Securityholders. The chart includes
information furnished to the Company by DTC.
 
    Information concerning the Selling Securityholders may change from time to
time and any such changed information will be set forth in supplements to this
prospectus if and when necessary.
 


                                                  AGGREGATE PRINCIPAL     NUMBER OF SHARES OF
                                                        AMOUNT             COMMON STOCK THAT
NAME                                           OF NOTES THAT MAY BE SOLD    MAY BE SOLD (1)
- ---------------------------------------------  -------------------------  -------------------
                                                                    
American Express Financial...................            3,000,000                212,389
Bank of New York.............................           11,940,000                845,309
Bankers Trust Company........................            9,635,000                682,123
Barclay Bank.................................              350,000                 24,778
Bear, Stearns & Co., Inc.....................            1,000,000                 70,796
Boston Safe..................................              965,000                 68,318
Alex. Brown & Sons, Inc......................              250,000                 17,699
Chase Manhattan Bank, N.A....................              100,000                  7,079
Chemical Bank................................            1,000,000                 70,796
Custodial Trust..............................            3,880,000                274,690
Firstar Trust Company........................              500,000                 35,398
First National Bank of Omaha.................              500,000                 35,398
First Alabama Bank...........................              300,000                 21,238
Gales and Company............................              125,000                  8,849
Hare & Co....................................              245,000                 17,345
Harris Trust & Savings Bank..................            1,400,000                 99,115
Jefferies & Company, Inc.....................            1,115,000                 78,938
Lazard Freres................................              100,000                  7,079
Lazard Freres & Co. LLC......................              230,000                 16,283
Lehman Brothers..............................              250,000                 17,699
Morgan Guaranty Trust Co.....................            1,500,000                106,194
NBD Bank.....................................              750,000                 53,097
Northern Trust Co............................            2,130,000                150,796
PNC Bank, NA.................................              200,000                 14,159
Provident Life...............................            1,000,000                 70,796
Republic Bank of New York....................              600,000                 42,477
Society Bank.................................            2,385,000                168,849
Spear Leads..................................            1,500,000                106,194
SSB Custodial................................            5,130,000                363,185
Suntrust Banks...............................               25,000                  1,769

 
                                       22



                                                  AGGREGATE PRINCIPAL     NUMBER OF SHARES OF
                                                        AMOUNT             COMMON STOCK THAT
NAME                                           OF NOTES THAT MAY BE SOLD    MAY BE SOLD (1)
- ---------------------------------------------  -------------------------  -------------------
                                                                    
Wachovia Bank................................              610,000                 43,185
Wagner, Stott & Co...........................              400,000                 28,318
First Trust NA...............................              140,000                  9,911
The Fifth-Third Bank.........................            2,500,000                176,991

 
- ------------------------
 
(1) Assumes a conversion price of $14.125 per share and a cash payment in lieu
    of any fractional interest.
 
                              PLAN OF DISTRIBUTION
 
    The Notes and the Conversion Shares are being registered to permit public
secondary trading of such securities by the holders thereof from time to time
after the date of this prospectus. The Company has agreed, among other things,
to bear substantially all expenses (other than broker's commission or
underwriter's discount or commission) in connection with the registration and
sale of the Notes and the Conversion Shares covered by this prospectus.
 
    The Company will not receive any of the proceeds from the offering of Notes
and the Conversion Shares by the Selling Securityholders. The Selling
Securityholders may sell all or a portion of the Notes and the Conversion Shares
beneficially owned by them and offered hereby from time to time on any exchange
on which the securities are listed on terms to be determined at the times of
such sales. The Selling Securityholders may also make private sales directly or
through a broker or brokers. Alternatively, any of the Selling Securityholders
may from time to time offer the Notes or shares of Common Stock beneficially
owned by them through underwriters, dealers or agents, who may receive
compensation in the form of underwriting discounts, commissions or concessions
from the Selling Securityholders and the purchasers of the Notes or Conversion
Shares for whom they may act as agent. The aggregate proceeds to the Selling
Securityholders from the sale of the Notes or Conversion Shares offered by them
hereby will be the purchase price of such Notes or Conversion Shares less
discounts and commissions, if any.
 
    The Notes and the Conversion Shares may be sold from time to time in one or
more transactions at fixed offering prices, which may be changed, or at varying
prices determined at the time of sale or at negotiated prices. Such prices will
be determined by the holders of such securities or by agreement between such
holders and underwriters or dealers who may receive fees or commissions in
connection therewith.
 
    The Company's outstanding Common Stock is listed for trading on Nasdaq and
the Company has listed the Conversion Shares on Nasdaq. The Initial Purchasers
have advised the Company that they are making and currently intend to continue
making a market in the Notes; however, they are not obligated to do so and any
such market-making may be discontinued at any time without notice, in the sole
discretion of the Initial Purchasers. The Company does not intend to apply for
listing of the Notes on any securities exchange. Accordingly, no assurance can
be given as to the development of any trading market that may develop for the
Notes. See "Risk Factors -- Absence of a Public Market for the Notes."
 
    In order to comply with the securities laws of certain states, if
applicable, the Notes and the Conversion Shares will be sold in such
jurisdictions only through registered or licensed brokers or dealers. In
addition, in certain states the Notes and the Conversion Shares may not be sold
unless they have been registered or qualified for sale in the applicable state
or an exemption from the registration or qualification requirement is available
and is complied with.
 
    The Selling Securityholders and any broker-dealers, agents or underwriters
that participate with the Selling Securityholders in the distribution of the
Notes or the Conversion Shares may be deemed
 
                                       23

to be "underwriters" within the meaning of the Securities Act, in which event
any commissions received by such broker-dealers, agents or underwriters and any
profits realized by the Selling Securityholders on the resale of the Notes or
the Conversion Shares purchased by them may be deemed to be underwriting
commissions or discounts under the Securities Act.
 
    In addition, any securities covered by this prospectus which qualify for
sale pursuant to Rule 144 or Rule 144A of the Securities Act may be sold under
Rule 144 or Rule 144A rather than pursuant to this prospectus. There is no
assurance that any Selling Securityholder will sell any or all of the Notes or
Common Stock described herein, and any Selling Securityholder may transfer,
devise or gift such securities by other means not described herein.
 
    The Notes were originally sold to the Initial Purchasers in February and
March 1996 in a private placement. The Company agreed to indemnify and hold the
Initial Purchasers harmless against certain liabilities which they may incur
under the Securities Act, the Exchange Act or otherwise that could arise in
connection with the sale of the Notes by the Initial Purchasers.
 
    The Shelf Registration Statement to which this prospectus relates became
effective on June 7, 1996. The Company will use its best efforts to keep the
Shelf Registration Statement effective for a period of three years from March
22, 1996 (the latest date of original issuance of the Notes), or until the Shelf
Registration Statement is no longer required for transfer of the Notes or the
Conversion Shares. The Company is permitted to suspend the use of this
prospectus in connection with the sales of Notes and the Conversion Shares by
holders upon the happening of certain events or if there exists any fact that
makes any statement of material fact made in this prospectus untrue or that
requires the making of additions to or changes in the prospectus in order to
make the statements herein not misleading until such time as the Company advises
the Selling Securityholders that use of the prospectus may be resumed. Expenses
of preparing and filing the registration statement and all post-effective
amendments will be borne by the Company.
 
            CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
 
    The following is a general discussion of certain United States federal
income tax considerations relevant to beneficial owners ("Owners") of the Notes
or the Conversion Shares. This discussion is based on the Internal Revenue Code
of 1986, as amended (the "Code"), existing and proposed Treasury Regulations and
Internal Revenue Service ("IRS") rulings, changes to any of which subsequent to
the date hereof may affect the tax considerations discussed herein.
 
    This discussion is for general information only and does not address all
aspects of United States federal income taxation that may be relevant to Owners
of the Notes or the Conversion Shares. This discussion does not describe the tax
consequences arising under the laws of any foreign, state or local jurisdiction,
nor does it describe all of the tax consequences that may be relevant to
particular purchasers in light of their personal circumstances, or to certain
types of purchasers (such as certain financial institutions, insurance
companies, tax-exempt entities, dealers in securities or persons who hold the
Notes or the Conversion Shares in connection with a straddle) who may be subject
to special rules. This discussion assumes that each Owner holds the Notes or the
Conversion Shares as capital assets within the meaning of section 1221 of the
Code.
 
    For the purpose of this discussion, the term "U.S. Person" means (i) a
citizen or resident of the United States, a corporation or partnership created
or organized in the United States or any state thereof, or an estate, the income
of which is includible in income for United States federal income tax purposes
regardless of its source or (ii) a trust with respect to which a U.S. Court can
exercise primary jurisdiction and one or more U.S. fiduciaries have the
authority to control all substantial decisions.
 
    PROSPECTIVE PURCHASERS OF THE NOTES OR THE CONVERSION SHARES SHOULD CONSULT
THEIR OWN TAX ADVISORS REGARDING THE U.S. FEDERAL, STATE, LOCAL AND
 
                                       24

FOREIGN TAX CONSEQUENCES OF THEIR PARTICIPATION IN THIS OFFERING, OWNERSHIP AND
DISPOSITION OF THE NOTES, INCLUDING CONVERSION OF THE NOTES, AND THE EFFECT THAT
THEIR PARTICULAR CIRCUMSTANCES MAY HAVE ON SUCH TAX CONSEQUENCES.
 
U.S. PERSONS
 
    INTEREST.  Interest on a Note will be taxable to an Owner who is a U.S.
Person as ordinary interest income in accordance with the Owner's method of tax
accounting at the time that such interest is accrued or actually or
constructively received.
 
    MARKET DISCOUNT.  An Owner that purchases a Note at a "market discount"
(i.e., at a price less than its stated principal amount) will be required
(unless such difference is less than a specified DE MINIMIS amount) to treat any
principal payments on, or any gain realized upon the disposition or retirement
of, such Note as interest income to the extent of the market discount that
accrued while such Owner held such Note, unless the Owner elects to include such
market discount in income on a current basis. If such Note is disposed of in a
nontaxable transaction (other than conversion of the Note for common stock or a
nonrecognition transaction described in section 1276(d) of the Code), accrued
market discount will be includible as ordinary income to the Owner as if such
Owner had sold the Note as its then fair market value. An Owner of a Note that
acquired it at a market discount and that does not elect to include market
discount in income on a current basis also may be required to defer the
deduction for a portion of the interest expense on any indebtedness incurred or
continued to purchase or carry the Note until the deferred income is realized.
 
    PREMIUM.  An Owner that purchases a Note for an amount in excess of the sum
of its stated principal amount and the fair market value of the conversion right
as of the date of purchase will be treated as having premium with respect to
such Note in the amount of such excess. If such an Owner makes an election under
section 171(c)(2) of the Code to treat such premium as "amortizable bond
premium," the amount of interest that must be included in such Owner's income
for each taxable year will be reduced by the portion of the premium allocable to
such year. An Owner's amortizable bond premium generally is allocated first to
(i) each period ending on a call date, if any, after such Owner's Note
acquisition date and (ii) the period ending on the date such Note is sold or
otherwise disposed of. Amortizable bond premium is further allocated to the
Owner's taxable years within each such period by the constant yield method. The
practical effect of this method of allocation is to defer the tax benefits
attributable to an Owner's bond premium to the later years in which its Notes
are outstanding. If the Note is in fact redeemed, any unamortized premium
allocable to the taxable year of the redemption may be deducted in that year. If
an Owner makes the election under section 171(c)(2), the election also shall
apply to all bonds the interest on which is not excludible from gross income
("fully taxable bonds") held by the Owner at the beginning of the first taxable
year to which the election applies and to all fully taxable bonds thereafter
acquired by it, and the election is irrevocable without the consent of the IRS.
If the election is not made, an Owner must include the full amount of each
interest payment in income in accordance with its regular method of accounting
and will receive a tax benefit from the premium only in computing its gain or
loss upon the sale or other disposition or retirement of the Note.
 
    THE TAX ACCOUNTING FOR BOND PREMIUM, IF ANY, PAID ON THE ACQUISITION OF A
NOTE IS COMPLICATED AND UNCERTAIN IN SEVERAL RESPECTS, PARTICULARLY IN
CONNECTION WITH THE ALLOCATION OF BOND PREMIUM TO AN OWNER'S TAXABLE YEAR. IN
ADDITION, ON JUNE 27, 1996, THE IRS PROPOSED REGULATIONS CONCERNING THE TAX
TREATMENT OF AMORTIZABLE BOND PREMIUM. THESE REGULATIONS, IF EFFECTIVE, MAY
CHANGE THE TAX ACCOUNTING FOR AMORTIZABLE BOND PREMIUM AS DESCRIBED HEREIN. THE
IRS HAS PROPOSED THAT THESE REGULATIONS BECOME
 
                                       25

EFFECTIVE FOR BONDS ACQUIRED ON OR AFTER THE DATE THAT IS 60 DAYS AFTER THE DATE
SUCH REGULATIONS ARE ISSUED IN FINAL FORM IN THE FEDERAL REGISTER. THE COMPANY
ADVISES EACH PURCHASER TO CONSULT ITS OWN TAX ADVISOR REGARDING THE TAX
ACCOUNTING FOR BOND PREMIUM RELATING TO THE NOTES.
 
    ACCRUAL METHOD ELECTION.  Under applicable Treasury regulations, an Owner of
a Note is permitted to elect to include in gross income its entire return on a
Note (i.e., the excess of all remaining payments to be received on the Note over
the amount paid for the Note by such Owner) based on the compounding of interest
at a constant rate. Such an election for a Note with amortizable bond premium
(or market discount) will result in a deemed election for all of the Owner's
debt instruments with amortizable bond premium (or market discount) and may be
revoked only with the permission of the IRS.
 
    ADJUSTMENTS TO THE CONVERSION PRICE.  The Indenture provides for an
adjustment to the conversion price of the Notes upon the occurrence of certain
events, one of which is a distribution by the Company of cash or property to its
stockholders together with a reduction in the conversion price to the Owners.
Such a reduction in the conversion price could be treated as a taxable stock
dividend under section 305 of the Code, and the Owners would recognize taxable
income as the result of an event with respect to which they receive no cash or
property from the Company.
 
    CONVERSION OF NOTES.  An Owner of a Note will not recognize gain or loss on
the conversion of the Note into the Conversion Shares except to the extent, if
any, that the Common Stock issued upon the conversion is attributable to accrued
interest on the Note. The Owner's aggregate tax basis in the Conversion Shares
will equal the Owner's aggregate basis in the Note exchanged therefor (less any
portion of that basis allocable to cash received in lieu of a fractional share).
The holding period of the Conversion Shares received by the Owner upon
conversion of the Note will include the period during which the Owner held the
Note prior to the conversion.
 
    Cash received in lieu of a fractional share of Common Stock will be treated
as a payment in exchange for such fractional share. Gain or loss recognized on
the receipt of cash paid in lieu of such fractional shares generally will equal
the difference between the amount of cash received and the basis allocable to
the fractional shares.
 
    If an Owner acquires the Note at a market discount and receives Common Stock
upon conversion of the Note, the amount of accrued market discount with respect
to the converted Note through the date of the conversion will be treated as
ordinary income on the disposition of the Common Stock.
 
    OWNERSHIP OF SHARES OF COMMON STOCK.  Distributions on shares of Common
Stock will constitute dividends for United States federal income tax purposes to
the extent of current or accumulated earnings and profits of the Company as
determined under United States federal income tax principles. Dividends paid to
Owners that are United States corporations may qualify for the
dividends-received deduction. Individuals, partnerships, trusts, and certain
corporations, including certain corporations that are not U.S. Persons, are not
entitled to the dividends-received deduction.
 
    To the extent, if any, that an Owner receives a distribution on shares of
Common Stock that would otherwise constitute a dividend for United States
federal income tax purposes but that exceeds current and accumulated earnings
and profits of the Company, such distribution will be treated first as a
non-taxable return of capital reducing the Owner's basis in the shares of Common
Stock. Any such distribution in excess of the Owner's basis in the shares of
Common Stock will be treated as a capital gain.
 
                                       26

SALE OR EXCHANGE OF NOTES OR SHARES OF COMMON STOCK
 
    In general, an Owner of a Note will recognize gain or loss upon the sale,
redemption, retirement or other disposition of the Note measured by the
difference between the amount of cash and the fair market value of any property
received (except to the extent attributable to the payment of accrued interest)
and the Owner's adjusted tax basis in the Note. An Owner's tax basis in a Note
generally will equal the cost of the Note to the Owner increased by the amount
of market discount previously taken into income by the Owner or decreased by any
bond premium applied to reduce interest payments as described above. In general,
each Owner of Common Stock into which the Notes are converted will recognize
gain or loss upon the sale, exchange, redemption or other disposition of the
Common Stock under rules similar to those applicable to the Notes. The basis and
holding period of shares of Common Stock is discussed above under "CONVERSION OF
NOTES." Special rules may apply to redemptions of Common Stock which may result
in the amount paid being treated as a dividend. Subject to the market discount
rules discussed above, the gain or loss on the disposition of the Notes or
shares of Common Stock will be capital gain or loss and will be long-term gain
or loss if the Notes or shares of Common Stock have been held for more than one
year at the time of such disposition.
 
NON-U.S. PERSONS
 
    PAYMENTS OF INTEREST.  Each payment of interest on a Note to an Owner who is
not a U.S. Person (a "Non-U.S. Person") will be subject to a 30 percent U.S.
income and withholding tax, unless one of the following three exemptions
applies:
 
    EXEMPTION FOR NON-U.S. PERSONS WHO PROVIDE IRS FORM W-8.  Payment of
interest on a Note to any Non-U.S. Person will be exempt from U.S. federal
income and withholding taxes, provided the following conditions are satisfied.
 
        (1) the last U.S. payor in the chain of payment prior to payment to a
    Non-U.S. Person (the "Withholding Agent") has received in the year in which
    such payment occurs, or in either of the two preceding years, a statement
    that (a) is signed by the Owner of the Note under penalties of perjury, (b)
    certifies that such Owner is not a U.S. Person and (c) provides the name,
    address and taxpayer identification number, if any, of the Owner;
 
        (2) neither the Withholding Agent nor any intermediary between the Owner
    and the Withholding Agent has actual knowledge that such non-U.S. beneficial
    ownership statement is false; and
 
        (3) the Owner is not an "excluded person" (i.e., (a) a bank that
    receives payments on the Notes that are described in section 881(c)(3)(A) of
    the Code, (b) a 10 percent shareholder of the Corporation within the meaning
    of section 871(h)(3)(B) of the Code, or (c) a "controlled foreign
    corporation" related to the Company within the meaning of section
    881(c)(3)(C) of the Code).
 
    The non-U.S. beneficial ownership statement referred to above may be made on
an IRS Form W-8 or a substantially similar substitute form. The Owner must
inform the Withholding Agent (or the last intermediary in the chain between the
Withholding Agent and the Owner) of any change in the information on the
statement within 30 days of such change. If a Note is held through a securities
clearing organization or certain other financial institutions, the organization
or institution may provide a signed statement to the Withholding Agent on behalf
of the Owner. In such case, however, the signed statement must be accompanied by
a copy of a Form W-8 or substitute form provided by the Owner to the
organization or institution. In all cases, the Form W-8 or substitute form must
be filed by the Withholding Agent with the IRS. The U.S. Treasury Department is
empowered to publish a determination that a beneficial ownership statement from
any person or class of persons will not be sufficient to preclude the imposition
of federal withholding tax with respect to payments of interest made at least
one month after the publication of such determination.
 
                                       27

    REDUCED RATE FOR NON-U.S. PERSONS ENTITLED TO THE BENEFITS OF A TREATY (IRS
FORM 1001).  An Owner that is a Non-U.S. Person entitled to the benefit of an
income tax treaty to which the United States is a party can obtain a reduction
of income and withholding tax (depending on the terms of the treaty) by
providing to the Withholding Agent a properly completed IRS Form 1001 prior to
the payment of interest, unless the Withholding Agent has actual knowledge that
the form is false.
 
    EXEMPTION FOR NON-U.S. PERSONS WITH EFFECTIVELY CONNECTED INCOME (IRS FORM
4224).  An Owner that is a Non-U.S. Person that conducts a trade or business in
the United States with which income on a Note is effectively connected can
obtain an exemption from withholding tax by providing to the Withholding Agent a
properly completed IRS Form 4224 prior to the payment of interest, unless the
Withholding Agent has actual knowledge that the form is false. Payments of
interest on a Note that are effectively connected with the conduct of a trade or
business in the United States by an Owner who is a Non-U.S. Person, although
exempt from the withholding tax, may be subject to graduated U.S. federal income
tax as if such amounts were earned by a U.S. Person.
 
    In certain circumstances, amounts not exempted from tax and withheld may be
allowed as a refund or as a credit against the Owner's U.S. federal income tax.
 
    CONVERSION OF NOTES.  An Owner that is a Non-U.S. Person generally will not
be subject to United States federal income tax on the conversion of a Note into
shares of Common Stock. To the extent a Non-U.S. Person receives cash in lieu of
a fractional share on conversion, such cash may give rise to gain that would be
subject to the rules described below with respect to the sale or exchange of a
Note or shares of Common Stock.
 
    DISTRIBUTIONS ON SHARES OF COMMON STOCK.  Generally, any distribution on
shares of Common Stock to an Owner that is a Non-U.S. Person will be subject to
United States federal income tax withholding at a rate of 30 percent unless one
of the following two rules applies:
 
    REDUCED RATE FOR NON-U.S. PERSONS ENTITLED TO THE BENEFITS OF A TREATY (IRS
FORM 1001).  Under current Treasury regulations, dividends paid to an address in
a foreign country are presumed to be paid to a resident of that country for
purposes of determining the applicability of a tax treaty providing for a
reduced rate of withholding to a resident of a treaty partner. Treasury
regulations issued in April 1996, however, would, if finalized in their current
form, require Non-U.S. Persons to file a withholding certificate with the
Withholding Agent (or under certain circumstances, a "qualified intermediary")
to obtain the benefit of an applicable tax treaty providing a reduced rate of
withholding on dividends. The required withholding certificate would have to
contain the name and address of the Non-U.S. Person and the basis for any
reduced rate claimed. See the discussion below under "Proposed Regulations
Relating to Withholding and Information Reporting".
 
    EXEMPTION FOR NON-U.S. PERSONS WITH EFFECTIVELY CONNECTED INCOME (IRS FORM
4224).  An Owner that is a Non-U.S. Person that conducts a trade or business in
the United States with which dividends on common stocks are effectively
connected can obtain an exemption from withholding tax by providing to the
Withholding Agent a properly completed IRS Form 4224 prior to the payment of
dividends, unless the Withholding Agent has actual knowledge that the form is
false. Payments of dividends that are effectively connected with the conduct of
a trade or business in the United States by an Owner who is a Non-U.S. Person,
although exempt from the withholding tax, may be subject to graduated U.S.
federal income tax as if such amounts were earned by a U.S. Person.
 
    In certain circumstances, amounts not exempted from tax and withheld may be
allowed as a refund or as a credit against the Owner's U.S. federal income tax.
 
    SALE OR EXCHANGE OF NOTES OR SHARES OF COMMON STOCK.  An Owner that is a
Non-U.S. Person generally will not be subject to United States federal income
tax on gain recognized upon the sale or other disposition (including a
redemption) of a Note or the Conversion Shares (including the receipt of
 
                                       28

cash in lieu of a fractional share upon such conversion) unless (i) the gain is
effectively connected with the conduct of a trade or business within the United
States by the Non-U.S. Person, or (ii) in the case of an Owner who is a
nonresident alien individual and holds the Common Stock as a capital asset, such
Owner is present in the United States for 183 or more days in the taxable year
and certain other circumstances are present. Any amount withheld pursuant to
these rules will be creditable against such Owner's United States federal income
tax liability and may entitle such Owner to a refund upon furnishing the
required information to the IRS. Owners should consult applicable income tax
treaties, which may provide different rules.
 
INFORMATION REPORTING AND BACKUP WITHHOLDING
 
    U.S. HOLDERS OR OWNERS.  Information reporting and backup withholding may
apply to payments of interest or dividends on or the proceeds of the sale or
other disposition of the Notes or shares of Common Stock made by the Company
with respect to certain noncorporate U.S. holders or Owners. Such U.S. holders
or Owners generally will be subject to backup withholding at a rate of 31
percent unless the recipient of such payment supplies a taxpayer identification
number, certified under penalties of perjury, as well as certain other
information, or otherwise establishes, in the manner prescribed by law, an
exemption from backup withholding. Any amount withheld under backup withholding
is allowable as a credit against the Owner's federal income tax, upon furnishing
the required information.
 
    NON-U.S. HOLDERS OR OWNERS.  Generally, information reporting and backup
withholding of United States federal income tax at a rate of 31 percent may
apply to payments of principal, interest and premium (if any) to non-U.S.
holders if the payee fails to certify that he or she is not a U.S. person or if
the Company or any of its paying agents has actual knowledge that the payee is a
U.S. Person.
 
    The 31 percent backup withholding tax generally will not apply to dividends
paid to Non-U.S. holders or Owners outside the United States that are subject to
30 percent withholding discussed above or that are not so subject because a tax
treaty applies that reduces or eliminates such withholding. In that regard,
under temporary regulations, dividends payable at an address located outside of
the United States to a Non-U.S. holder or Owners are not subject to the backup
withholding rules.
 
    Proposed Treasury regulations issued in April 1996, would, if finalized in
their current form, require a Non-U.S. holder of common stock to file a
withholding certificate with the Withholding Agent (or, under certain
circumstances, a "qualified intermediary") representing that such Non-U.S.
holder is a foreign person in order to avoid backup withholding on dividends
paid on those shares. See the discussion below and under "Proposed Regulations
Relating to Withholding and Information Reporting."
 
    In addition, if a Note or share of Common Stock is sold before the stated
maturity to (or through) a "broker," the broker may be required to withhold 31
percent of the entire sale price, unless either (i) the broker determines that
the seller is a corporation or other exempt recipient or (ii) the seller
provides, in the required manner, certain identifying information and, in the
case of a Non-U.S. Person, certifies that such seller is not a U.S. Person (and
certain other conditions are met). Such a sale also must be reported by the
broker to the IRS, unless either (i) the broker determines that the seller is an
exempt recipient or (ii) the seller certifies its non-U.S. status (and certain
other conditions are met). Certification of the Owner's non-U.S. status normally
would be made on IRS Form W-8 under penalties of perjury, although in certain
cases it may be possible to submit certain other signed forms. The term
"broker," as defined by Treasury regulations, includes all persons who, in the
ordinary course of business, stand ready to effect sales made by others. This
information reporting requirement generally will apply to a U.S. office of a
broker and to a foreign office of a U.S. broker, as well as to a foreign office
of a foreign broker (i) that is a "controlled foreign corporation" within the
meaning of section 957(a) of the Code or (ii) 50 percent or more of whose gross
income from all sources
 
                                       29

for the three-year period ending with the close of its taxable year preceding
the payment (or for such part of the period that the foreign broker has been in
existence) was effectively connected with the conduct of a trade or business
within the United States, unless such foreign office has documentary evidence
that the seller is not a U.S. Person and has no actual knowledge that such
evidence is false.
 
    Any amounts withheld under the backup withholding rules from a payment to a
person would be allowed as a refund or a credit against such person's U.S.
federal income tax, provided that the required information is furnished to the
IRS. Furthermore, certain penalties may be imposed by the IRS on a holder or
Owner who is required to supply information but who does not do so in the proper
manner.
 
PROPOSED REGULATIONS RELATING TO WITHHOLDING AND INFORMATION REPORTING
 
    On April 22, 1996, the IRS issued proposed regulations relating to (i)
withholding income tax on U.S.-source income paid to Non-U.S. persons, (ii)
claiming Non-U.S. holder status to avoid backup withholding, and (iii) reporting
to the IRS of payments to Non-U.S. persons. The proposed regulations would
substantially revise some aspects of the current system for withholding on and
reporting amounts paid to Non-U.S. Persons. The regulations would unify current
certification procedures and clarify forms and reliance standards. Most forms
are proposed to be combined into a single new Form W-8. In general, the
regulations are proposed to be effective for payments made after December 31,
1997. Certificates issued on or before the date that is 60 days after the
proposed regulations are made final, however, will continue to be valid until
they expire. All proposed regulations are subject to change before adoption in
final form. No reliable prediction can be made as to when, if ever, the proposed
regulations will be made final and, if so, as to their final form.
 
                                 LEGAL MATTERS
 
    The validity of the issuance of the Notes and the Conversion Shares will be
passed upon for the Company by Dewey Ballantine, Los Angeles, California 90071.
 
                                    EXPERTS
 
    The financial statements of Richey Electronics as of December 31, 1995 and
December 31, 1996 and for each of the three years in the period ended December
31, 1996, incorporated by reference in this prospectus and the Registration
Statement from the Company's Annual Report on Form 10-K for the year ended
December 31, 1996, have been audited by McGladrey & Pullen, LLP, whose report is
incorporated by reference herein in reliance upon such report and upon the
authority of such firm as an expert in accounting and auditing matters.
 
                                       30


                                                       EXHIBIT A TO PROSPECTUS

                          SECURITIES AND EXCHANGE COMMISSION
                                Washington, D.C. 20549

                                      FORM 10-K

                ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                             SECURITIES EXCHANGE ACT OF 1934

                     For the fiscal year ended December 31, 1996

                           Commission file number: 0-9788

                               RICHEY ELECTRONICS, INC.
                (Exact name of registrant as specified in its charter)

         Delaware                                          33-0594451
    (State or other jurisdiction                      (I.R.S. Employer
    of incorporation or organization)                 Identification No.)

             7441 Lincoln Way, Suite 100, Garden Grove, California 92641
              (Address of principal executive office)      (Zip Code)

Registrant's telephone number, including area code:  (714) 898-8288

Securities registered pursuant to Section 12(b) of the Act:  None

             Securities registered pursuant to Section 12(g) of the Act:

                            Common Stock, $0.001 par value
                            ------------------------------
                                   (Title of class)

    Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.  Yes  X   No
                                               -----   -----
    Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K.  [X]

    The aggregate market value of the registrant's common stock held by
non-affiliates of the registrant as of March 20, 1997, was $81,448,925
based on the last sales price on the Nasdaq Stock Market ("Nasdaq") on that
date.

    As of March 20, 1997, 9,062,685 shares of the registrant's common stock
were outstanding.
- --------------------------------------------------------------------------------

                         DOCUMENTS INCORPORATED BY REFERENCE

    Certain portions of Richey Electronics, Inc.'s (the "Company" or "Richey
Electronics") proxy statement for its annual meeting of stockholders to be held
on May 1, 1997, which is being filed with the Securities and Exchange Commission
(the "Commission") concurrently herewith, are incorporated by reference into
Part III of this Form 10-K (Items 10 through 13).

                                     A-1




                                        PART I

ITEM 1.  BUSINESS

GENERAL

    Richey Electronics is a leading specialty distributor of interconnect,
electromechanical  and  passive electronic components and a provider of related
value-added assembly services to more than 16,000 customers nationwide.  Richey
Electronics has been built through a series of transactions beginning in
December 1990 with the acquisition of the operations of Richey/Impact
Electronics Inc. and continuing with the merger with Brajdas Corporation in 1993
and the acquisition of the operations of In-Stock in 1994, IEI and Deanco in
1995 and MS Electronics and Summit Distributors in 1996.  Since the initial
acquisition, the Company's growth has been directed by one of the most
experienced management teams in its industry.  Through acquisitions and internal
growth that improved the Company's operating leverage, Richey Electronics' sales
and earnings have increased from approximately $33.0 million and $700,000,
respectively, in 1991 to $226.2 million and $6.5 million, respectively, in 1996.
Giving pro forma effect to the acquisition of Deanco, the Company ranked in 1995
as the third largest distributor of interconnect devices in the United States
and as the sixth largest distributor of electromechanical/passive components in
the United States, based on information presented in the April 25, 1996 edition
of PURCHASING MAGAZINE.

    The Company distributes a broad line of connectors, switches, wire, cable
and heat shrinkable tubing and other interconnect, electromechanical and passive
electronic components used in the assembly and manufacturing of electronic
equipment.  Richey Electronics currently distributes electronic components for
more than 100 component manufacturers, of which more than 80 have franchised the
Company nationally by agreeing to supply its distribution activities in all of
its present and future locations.  Management believes that the Company
represents the broadest line of connector manufacturers in its industry, with
nine of the ten leading North American manufacturers supplying the Company.  The
Company is nationally franchised by eight of these leading manufacturers.
Richey Electronics also provides a wide variety of value-added assembly
services, which typically generate higher gross margins than traditional
component distribution.  The Company's customers are primarily small- and
medium-sized original equipment manufacturers ("OEMs") that produce electronic
equipment used in a wide variety of industries, including the
telecommunications, computer, medical, transportation and aerospace industries.

    In 1996, the Company continued to complete strategic acquisitions.  On
March 19, 1996, the Company acquired the assets and business of MS Electronics,
Inc. ("MS Electronics").  MS Electronics specializes in the distribution of
interconnect, electromechanical and passive electronic components and provides
related value-added assembly services in the Baltimore-Washington marketplace.
On December  5, 1996, the Company acquired the assets and business of Summit
Distributors, Inc. ("Summit Distributors"), a Buffalo, New York distributor of
interconnect, electromechancial and passive electronic components.

    In 1996, the Company issued $55,755,000 of 7% Convertible Subordinated
Notes due 2006 (the "Notes") in a private placement.  The Notes are convertible
into shares of the Company's common stock (the "Common Stock") at a conversion
price of $14.125 per share (subject to adjustment).  The Company maintains an
effective shelf registration statement with the Commission to register resales
of the Notes and the Common Stock issuable upon conversion.  The net proceeds
from the issuance of the Notes were approximately $53.8 million and were used to
repay the Company's $30.0 million term loan and to pay down its revolving line
of credit.

    The Company's principal executive offices are located at 7441 Lincoln Way,
Garden Grove, California 92641, and its telephone number is (714) 898-8288.

INDUSTRY OVERVIEW

    Over the last 30 years, the electronics industry has grown significantly as
a result of increased demand for products incorporating sophisticated electronic
components, such as telecommunications and computer equipment. This industry
growth has been matched by an increase in the number of products, component
manufacturers and OEMs.


                                     A-2




    The electronics distribution industry has become an increasingly important
sales channel for the electronics industry because distributors can market
component manufacturers' products to a broader range of OEMs than suppliers
could economically serve with their direct sales forces. Historically,
manufacturers of electronic components have sold directly to larger OEMs and
relied upon distributors to serve smaller customers. Today, distributors have
become more of an extension of component manufacturers' product delivery channel
by providing value-added assembly services and technical support to customers,
stocking sufficient local inventory to ensure timely delivery of components and
managing customer credit. Distributors also work with OEMs to ensure that
component manufacturers' products are designed into new products. This is
particularly important because product innovations in the electronics industry
often come from smaller, entrepreneurial companies.

    As component manufacturers have increasingly focused their direct sales
efforts on the largest OEMs, and less on smaller customers, the distribution
segment has increased its share of the total United States connector market from
an estimated 22% in 1980 to an estimated 31% in 1995, according to the August
28, 1995 edition of ELECTRONIC NEWS.  The Company estimates that approximately
one-half of all electronic components are purchased by the top 100 customers who
purchase many of their components directly from component manufacturers.
Approximately 100,000 other OEMs purchase products from both distributors and
manufacturers, with smaller customers purchasing a greater proportion of their
products from distributors.

    MARKET SIZE.  According to the December 2, 1996 edition of ELECTRONIC NEWS,
the electronics distribution industry recorded approximately $21 billion in
sales in 1996. Of these sales, the Company estimates that approximately $15
billion consisted of sales of semiconductors and computer related peripherals,
which management believes are generally characterized by lower margins and are
not sold by the Company. The remaining $6 billion consisted of sales of
interconnect (connectors, sockets), electromechanical (relays, switches) and
passive (resistors, capacitors) components, which are marketed by the Company.
The Company does not intend to directly compete in the semiconductor or computer
peripheral markets of the electronics distribution industry.

    TRENDS.  Consolidation is one of the most significant trends affecting the
electronic component distribution industry. Of the 25 largest electronics
distributors in 1985, only 11 remain independent today. The factors driving
consolidation among electronic component distributors include the desire of
manufacturers to sell through fewer distributors, the need for distributors to
increase operating leverage and the desire of OEMs to satisfy component
requirements with fewer vendors. A series of mergers and acquisitions over the
last ten years have created a number of very large distribution companies that
have increasingly focused on their larger customers and on expanding
international operations. As a result of this large customer focus, regional and
specialty distributors such as the Company have gained market share among small-
and medium-sized OEMs. These smaller customers often require value-added
assembly services, detailed technical information about available products,
assistance in coordinating product design and engineering with materials
resource planning, fast response to inventory availability inquiries, dependable
on-time deliveries and other services.

    In addition to the consolidation of distributors, manufacturers are
limiting the number of distributors through which they market their products in
an effort to improve operating efficiency. Regional distributors must therefore
demonstrate strong local market positions and client relationships when
competing to obtain or retain top manufacturer franchises. Many of these
distributors have made substantial efforts to expand local market share by
emphasizing customer services, such as value-added assembly, just-in-time
inventory management, automatic replenishment and in-plant stores.

    Another key trend is the outsourcing of component assembly, which allows
OEMs to enhance profitability by concentrating resources on product design,
marketing and other core aspects of their business. By serving a number of
customers, distributors can often produce subassemblies more efficiently than
many small- and medium-sized OEMs. The September 9, 1996 edition of ELECTRONIC
BUYERS NEWS estimates that OEM outsourcing is now a $40 billion industry growing
at an estimated 20% per annum.


                                     A-3




DISTRIBUTION AND SERVICES

    The Company distributes interconnect, electromechanical and passive
electronic components used in the assembly and manufacturing of electronic
equipment.  It also provides a wide variety of value-added assembly services,
which typically generate higher gross margins than traditional component
distribution. These value-added assembly services consist of (i) component
assembly, which is the assembly of components to manufacturer specifications and
(ii) contract assembly, which is the assembly of cable assemblies, battery packs
and mechanical assemblies to customer specifications. The Company's value- added
assembly services respond to an industry trend toward outsourcing in which
purchasing, manufacturing and distribution functions are allocated to the most
efficient provider.  The Company believes that outsourcing represents a
significant opportunity to expand sales, margins and operating profits.

    COMPONENT DISTRIBUTION.  The distribution of interconnect,
electromechanical and passive electronic components accounted for approximately
70.4% of the Company's net sales in 1996.  These products include connectors,
wire, cable, relays, switches, motors, batteries, power supplies, resistors,
capacitors, transformers, heat shrinkable tubing and potentiometers.  The
Company sources its products from such leading suppliers as 3M, AMP "ACES",
Bentley-Harris, Berg Electronics, Burndy/Framatome, C&K, Dale/Vishay, Delta,
Deutsch, Eaton, EBM/Papst, Grace Specialty Polymers, KEMET, Kings, Micro
Switch/Honeywell, Molex, Panasonic, Panduit, Raychem Electronics, Raychem
PolySwitch, Samtec and Wieland.

    VALUE-ADDED ASSEMBLY SERVICES.  The electronics industry's trend toward the
use of outside vendors to provide value-added assembly services represents a
growth opportunity for the Company. Outsourcing offers OEMs the opportunity to
invest financial resources in areas with higher returns, such as engineering and
marketing. Additionally, the capital investment required to stay current in
manufacturing technologies is beyond the financial capability of many smaller
OEMs. By servicing a large number of such customers, the Company spreads such
costs over a larger business base. Moreover, by integrating assembly services
with extensive inventories, the Company is able to eliminate a large amount of
shipping, handling and receiving costs from the process. For many OEMs, the
Company is able to offer assembly services at a lower cost to the customer while
producing higher margins for itself. The Company currently builds a variety of
component assemblies to customer or manufacturer specifications, including
cable, battery pack, switch and mechanical assemblies, wire harnesses, fan and
motor assemblies, and provides engraving and molding services. With the
acquisition of Deanco in 1995, Richey obtained the capability to encase its
cable and harness assemblies in heat shrinkable tubing, which was a significant
portion of Deanco's value-added assembly business. The Company has increased its
emphasis on higher-margin, value-added assembly services, which grew from $21.2
million, or 23.5% of sales, in 1994 to $33.0 million, or 29.0% of sales, in 1995
and to $66.9 million, or 29.6% of sales, in 1996.

    The Company currently provides value-added assembly services primarily from
its Los Angeles, California, Boston, Massachusetts and Portland, Oregon
facilities, having an aggregate of approximately 81,000 square feet dedicated to
value-added assembly services.  In addition, the Company also provides value-
added assembly services from its San Diego and Santa Clara, California
facilities, its Dallas, Texas facility and its Gaithersburg, Maryland facility.

SALES AND MARKETING

    The Company provides its customers with a wide range of products from a
large number of electronic component manufacturers. The Company believes that it
has developed valuable long-term customer relationships and an in-depth
understanding of its customers' needs and purchasing patterns. Richey
Electronics serves a broad range of customers in a wide variety of industries,
including the telecommunications, computer, medical, transportation and
aerospace industries. In 1996, Richey Electronics distributed electronic
components to more than 16,000 customers nationwide, none of which represented
more than 1.5% of net sales of the Company.

    The Company's sales representatives are trained to identify their
customers' electronic component requirements and to actively market the
Company's entire product line to satisfy these needs. During the design process,
sales representatives meet with the customers' engineers and designers to
discuss their component needs and any design or procurement problems. The sales
representatives suggest components that meet performance criteria,


                                     A-4




are cost effective and focus on specific problems. Through this approach,
components carried by the Company are often incorporated into final product
specifications.

    The Company had approximately 325 sales representatives as of December 31,
1996.  Sales representatives are compensated primarily by commission based on
the gross profits obtained on their sales. The Company now has sales offices in
21 of the 31 major metropolitan distribution markets in the United States, which
accounted for 80% of the total distribution market in 1995 according to the
December 2, 1996 edition of ELECTRONIC NEWS.  The Company's market positions are
particularly strong in the northeastern and western United States.

    The Company's local sales efforts are supported by central marketing
groups, located in Garden Grove, California and in Boston, Massachusetts, which
are responsible for identifying new suppliers and developing supplier relations,
coordinating national advertising, negotiating supplier agreements and promoting
new and existing product lines within the Company.

OPERATIONS

    DISTRIBUTION.  The principal focus of the Company's distribution business
is to provide OEM customers with rapid and reliable deliveries of electronic
components and a wide variety of related value-added assembly services. The
Company utilizes a computerized system of inventory control to assist in
marketing its products and to coordinate purchases from manufacturers. Each
sales office and warehouse, as well as management, are linked through the
Company's computer system, providing detailed on-line information regarding the
price and availability of the Company's entire stock of inventory, as well as
on-line access to the inventories of several of the Company's major suppliers.
The Company also offers its customers a number of operational services,
including just-in-time delivery and electrical data interchange programs.

    After product price and availability are established, the Company's system
automatically places an order for shipment, or allocates inventory to the
assembly operations, if so required. The system then instructs warehouse
personnel to pull products for shipment and, via its locator system, informs
them as to the location of the inventory. In order to optimize use of available
warehouse space, the Company uses a random-access, multi-bin system whereby
inventory is stored in the first available space.

    If the order is scheduled for delivery over an extended period of time or
requires inventory purchases to fulfill all or part of the customer's
requirements, the system will inform the product management team, via a buy
action report, that action must be taken. The product manager makes the
appropriate buying decision which is forwarded, in most cases, by electronic
purchase order to component manufacturers.

    Approximately 51% of the Company's inventory is located in Los Angeles, 23%
in Boston and 16% in Santa Clara, California.  The Company constantly reviews
inventories in an effort to maximize inventory turnover and customer service.
The Company believes its turnover ratio (4.4x for 1996) compares favorably with
those achieved by competitors for similar interconnect, electromechanical and
passive component inventories.

    VALUE-ADDED ASSEMBLY SERVICES.  The Company offers a wide variety of value-
added assembly services,  including component assemblies, cable and harness
assemblies, battery packs, heat shrinkable tubing and other related
electromechanical subassemblies.  After a customer's assembly order is taken,
the inventory requirements are automatically routed, via the computer system, to
the warehouse and assembly facilities.  The system tracks the order through the
entire assembly process, including final inspection and shipment to the
customer.  The Company conducts stringent quality control tests in-line during
assembly, and also conducts physical, mechanical and electrical tests at the
conclusion of the assembly process.  A Company-wide emphasis on quality is
evidenced by the certification of its Garden Grove and Los Angeles facilities to
the ISO 9002 standard.  The Company has met the certification requirements of
the International Standards Organization for ISO 9002 certification by operating
its Garden Grove and Los Angeles facilities in accordance with established,
written procedures.


                                     A-5




COMPONENT MANUFACTURERS

    Management believes that the Company has one of the strongest product
offerings, or line cards, in the markets it serves.  The Company has
non-exclusive franchise (distribution) agreements with more than 100 component
manufacturers, of which more than 80 have franchised the Company nationally by
agreeing to supply its distribution activities in all of its present and future
locations.  The Company now represents nine of the ten leading North American
connector manufacturers and has national franchises from eight of these
manufacturers.  The Company is the largest electronic components distributor for
many major national manufacturers, including Deutsch, 3M, Raychem and Samtec.

    For the year ended December 31, 1996, the Company's top five suppliers
accounted for approximately 43% of net sales.  The Company's largest supplier is
Raychem, which accounted for approximately 15% of the Company's net sales in
1996.

    The Company generally purchases products from manufacturers pursuant to
franchise agreements. Being a local authorized distributor is a valuable
marketing tool for the Company because customers receive warranty benefits and
support from the component manufacturer when they purchase products from Richey
Electronics. As an authorized distributor, the Company provides customers a
benefit from the marketing and engineering support available from the Company's
manufacturers, who assist the Company in closing sales and attracting new
customers.

    Most of the Company's franchise agreements are cancelable by either party,
typically upon 30 to 60 days' notice. These agreements generally provide for
price protection, stock rotation privileges and the right to return certain
inventory if the agreement is canceled. Price protection is usually in the form
of a credit to the distributor at the time of sale by the distributor for
inventory for which the manufacturer has reduced its prices. Stock rotation
privileges typically allow the Company to exchange inventory in an amount up to
5% of a prior period's purchases. Upon termination of a franchise agreement, the
right of return generally requires the manufacturer to repurchase the Company's
inventory at the Company's adjusted purchase price. If the Company terminates
the franchise agreement, there is usually a 10% to 15% restocking charge. The
Company believes that the provisions of these franchise agreements should
generally reduce the Company's exposure to significant inventory losses,
although there can be no assurance that the Company will not experience
significant inventory losses as a result of such potential terminations or
otherwise.

COMPETITION

    The electronics distribution industry is highly competitive, primarily with
respect to price and product availability. The Company believes that breadth of
product line, level of technical expertise and quality of service are also
particularly important to small- and medium-sized OEMs. The Company competes
with large national distributors, as well as regional and specialty
distributors, many of whom distribute the same or competitive products. Many of
the Company's competitors have significantly greater assets, greater financial
and personnel resources and larger investments in technology and infrastructure
than the Company.

    In 1996, total North American sales in the electronic components 
distribution industry (including semiconductors and computer related 
peripherals) were approximately $21 billion, of which the top 25 distributors 
had sales of approximately $17.5 billion. The Company ranked in 1996 as the 
nineteenth largest distributor of electronic components in the United States, 
based on information presented in the December 2, 1996 edition of ELECTRONIC 
NEWS.  According to information presented in the April 25, 1996 edition of 
PURCHASING MAGAZINE, giving pro forma effect to the acquisition of Deanco, 
the Company in its market niche of interconnect, electromechanical and 
passive components ranked in 1995 as the third largest distributor of 
interconnect devices in the United States and as the sixth largest 
distributor of electromechanical/passive components in the United States.

                                     A-6





EMPLOYEES

    The Company had approximately 1,050 employees as of December 31, 1996.
Approximately 125 of the Company's employees are corporate personnel involved in
product management, finance, quality control or senior management.  Another 100
employees work in the Company's Los Angeles, Boston and branch warehouses; 325
persons are employed in branch sales and marketing efforts and 500 persons are
employed on a full-time or on-call basis in value-added assembly services.
There are no collective bargaining contracts covering any of the Company's
employees. The Company believes its relationship with its employees is
satisfactory.

BACKLOG

    The Company believes that order backlog (confirmed orders from customers
for shipment within the next 12 months) generally averages two to three months'
sales in the electronics distribution industry.  Order backlog at December 31,
1996 was $53.8 million, up from $53.0 million at December 31, 1995 (including
Deanco's contribution of $21.5 million to backlog as of December 31, 1995).
Order backlog is not necessarily indicative of future sales for any particular
period.  Orders constituting the Company's backlog are subject to delivery
rescheduling, price negotiations and cancellation at the option of the buyer
without significant penalty.

ENVIRONMENTAL PROTECTION

    The nature of the Company's operations do not present any significant risks
to the environment.  Therefore, no material capital expenditures were or are
expected to be required for environmental protection.


ITEM 2.  PROPERTIES

    The Company leases all facilities used in its business. The following table
summarizes the principal properties occupied by the Company:

                                                                EXPIRATION DATE
                  LOCATION                 SQUARE FOOTAGE          OF LEASE
              ----------------           ------------------     ---------------
 ADMINISTRATIVE AND SALES OFFICE:
  Garden Grove, California . . . . . .          27,500                2001
 WAREHOUSING, ASSEMBLY AND SALES:
  Boston, Massachusetts. . . . . . . .          60,000                2004
  Dallas, Texas. . . . . . . . . . . .          15,300                2001
  Gaithersburg, Maryland . . . . . . .          13,000           1999-2001
  Los Angeles, California. . . . . . .          55,000                2000
  Portland, Oregon . . . . . . . . . .          30,000                2001
  Santa Clara, California  . . . . . .          42,200                2002

    The Company also leases sales offices in Arizona, California, Colorado,
Connecticut, Florida, Georgia, Illinois, Kansas, Maryland, Minnesota, Missouri,
New Jersey, New York and Washington which range in size from 600 to 8,000 square
feet.

    The Company believes its facilities are suitable for their uses and are, in
general, adequate for the Company's current needs. The Company believes that
lease extensions or replacement space may be obtained for all of its leased
facilities upon the expiration of the current lease terms, in most cases at
rates which are not materially higher than those currently in effect.

ITEM 3.  LEGAL PROCEEDINGS

    There are no material legal proceedings pending against the Company.


                                     A-7




ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

    Not Applicable.


                                       PART II

ITEM 5.  MARKET FOR REGISTRANT'S COMMON EQUITY
         AND RELATED STOCKHOLDER MATTERS

    The Company's Common Stock is being traded on Nasdaq under the symbol
"RCHY."

    The following table sets forth, for the periods indicated, the high and low
sales prices of the Company's Common Stock as reported by Nasdaq.

                                                        STOCK PRICE
                                                     HIGH           LOW
                                                   --------       -------
 CALENDAR YEAR 1995:
    First quarter. . . . . . . . . . . . . .        $ 7 3/4        $ 6
    Second quarter . . . . . . . . . . . . .          7 1/2          5 1/2
    Third quarter. . . . . . . . . . . . . .          9              6
    Fourth quarter . . . . . . . . . . . . .         13 3/4          7 1/2

 CALENDAR YEAR 1996: . . . . . . . . . . . .
    First quarter. . . . . . . . . . . . . .        $13 1/4        $ 9 1/2
    Second quarter . . . . . . . . . . . . .         16             10 3/8
    Third quarter. . . . . . . . . . . . . .         13 1/4          7 1/4
    Fourth quarter . . . . . . . . . . . . .         12              8 1/4

 CALENDAR YEAR 1997:
    First quarter (through March 20, 1997) .        $14 1/8        $10 3/8

    On March 20, 1997, there were approximately 1,429 holders of record of
the Company's Common Stock.

DIVIDEND POLICY

    The Company has never declared or paid cash dividends on its Common Stock.
The Company intends to retain earnings for working capital to support growth, to
reduce outstanding indebtedness and for general corporate purposes. In addition,
the Company's revolving line of credit contains provisions that prohibit the
Company from paying cash dividends on its Common Stock. Accordingly, the Company
does not expect to pay any dividends on its Common Stock in the foreseeable
future. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations" and Note 4 of Notes to Financial Statements.

SALE OF NOTES

    On February 26, 1996 and March 22, 1996, the Company sold to Jefferies & 
Company, Inc. and Cruttenden Roth Incorporated (the "Initial Purchasers") 
$55,755,000 aggregate principal amount of 7% Convertible Subordinated Notes 
due 2006. The Notes were sold to the Initial Purchasers in a private 
placement pursuant to the exemption from registration provided by Section 
4(2) of the Securities Act of 1933, as amended (the "Act"). In connection 
with the purchase of the Notes, each of the Initial Purchasers represented to 
the Company that it is an accredited investor as defined in Regulation D 
under the Act and agreed to comply with other applicable requirements 
necessary to make such exemption available. The Notes were sold to the Initial 
Purchasers for cash at a purchase price of 96.5% of the principal amount 
thereof. The Notes are convertible into shares of the Company's Common Stock 
at a conversion price of $14.125 per share (subject to adjustment in certain 
events). The Company maintains an effective shelf registration statement with 
the Commission to register resales of the Notes and the Common Stock issuable 
upon conversion.


                                     A-8




                               SELECTED FINANCIAL DATA

    The following table summarizes certain selected financial data of the
Company and should be read in conjunction with and is qualified by "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
the Company's Financial Statements, Notes to Financial Statements and other
financial information included herein. All of the financial information is
derived from financial statements that have been audited by McGladrey & Pullen,
LLP, independent auditors.



 


                                                                               YEARS ENDED (1)
                                              -----------------------------------------------------------------------
                                              JANUARY 1,    DECEMBER 31,   DECEMBER 31,   DECEMBER 31,   DECEMBER 31,
                                                1993           1993          1994            1995           1996
                                              ----------    ------------   ------------   ------------   ------------
                                                                                           
                                                            (IN THOUSANDS, EXCEPT PER SHARE AND OTHER DATA)
 OPERATIONS STATEMENT DATA:
  Net sales. . . . . . . . . . . . . .         $31,387        $64,995        $90,266       $117,057       $226,215
  Cost of goods sold . . . . . . . . .          23,105         48,741         68,176         89,080        168,664
                                                -------        -------       --------       --------       --------

  Gross profit . . . . . . . . . . . .           8,282         16,254         22,090         27,977         57,551
  Selling, warehouse
     general and admini-
     strative and amortization . . . .           7,144         13,889         17,318         20,874         41,070
  Acquisition-related
    restructuring costs (2). . . . . .              --             --             --          1,450          -
                                                -------        -------       --------       --------       --------

  Operating income . . . . . . . . . .           1,138          2,365          4,772          5,653         16,481
  Interest expense . . . . . . . . . .             388          1,198          1,606            867          5,569
  Income tax expense (3) . . . . . . .             308            460          1,273          1,918          4,376
                                                -------        -------       --------       --------       --------

  Net income . . . . . . . . . . . . .         $   442        $   707       $  1,893       $  2,868       $  6,536
                                                -------        -------       --------       --------       --------
                                                -------        -------       --------       --------       --------

 Earnings per common share (4)
     Primary . . . . . . . . . . . . .         $  0.16        $  0.14       $   0.32       $   0.36       $   0.72
                                                -------        -------       --------       --------       --------
                                                -------        -------       --------       --------       --------
     Fully Diluted . . . . . . . . . .            0.16           0.14           0.32           0.36       $   0.70
                                                -------        -------       --------       --------       --------
                                                -------        -------       --------       --------       --------

  Weighted average number of shares
     outstanding (4)
     Primary . . . . . . . . . . . . .           2,774          5,085          5,889          8,036          9,060
     Fully Diluted . . . . . . . . . .           2,774          5,085          5,889          8,036         12,376

 OTHER FINANCIAL DATA:
  EBITDA (5) . . . . . . . . . . . . .        $  1,283       $  3,362       $  5,537         $6,565(6)     $19,581
  EBITDA margin (5). . . . . . . . . .             4.1%           5.2%           6.1%           5.6%(6)        8.7%
  Depreciation and amortization. . . .             145            997            765            912          3,100
  Inventory turnover ratio (7) . . . .             3.7x           4.4x           4.9x           5.0x           4.4x
  Days sales outstanding in accounts
     receivable (7). . . . . . . . . .              41             43             42             42             44





                                              JANUARY 1,    DECEMBER 31,   DECEMBER 31,   DECEMBER 31,   DECEMBER 31,
                                                1993           1993          1994            1995(8)        1996
                                              ----------    ------------   ------------   ------------   ------------
                                                                                           
 BALANCE SHEET DATA:
  Working capital. . . . . . . . . . .          $3,014       $  6,888       $  5,317      $  34,076        $43,033
  Total assets . . . . . . . . . . . .           9,669         30,918         35,013        118,941        124,761
  Short-term debt. . . . . . . . . . .           3,181          6,995         10,443            835          4,012
  Long-term debt . . . . . . . . . . .              --          8,151          3,594         61,652         65,205
  Stockholders' equity . . . . . . . .           3,333          6,898          8,785         27,392         33,953



                                     A-9




Footnotes to Selected Financial Data

(1) In the period from 1993 through 1996, the following transactions were
    completed.  On April 6, 1993, RicheyImpact Electronics, Inc.
    ("RicheyImpact") merged with Brajdas Corporation, a California corporation
    ("Brajdas"), with Brajdas as the surviving legal entity (the
    "Richey-Brajdas Merger").  Brajdas subsequently changed its name to Richey
    Electronics, Inc. and reincorporated in Delaware.  The Richey-Brajdas
    Merger was recorded as a reverse purchase acquisition with RicheyImpact as
    the accounting acquirer.  Thereafter, Richey Electronics acquired the
    businesses of the following companies on the following dates:  the In-Stock
    products division of Anchor Group, Inc. ("In-Stock") on April 4, 1994,
    Inland Empire Interconnects ("IEI") on August 16, 1995, Deanco, Inc.
    ("Deanco") on December 20, 1995, MS Electronics on March 19, 1996 and
    Summit Distributors on December 5, 1996.  See Note 2 of Notes to Financial
    Statements for pro forma information with respect to acquisitions.  Unless
    otherwise indicated, the information in the above table of Selected
    Financial Data excludes the results of operations of Brajdas prior to the
    Richey-Brajdas Merger and excludes the results of operations of each such
    business acquired in the period from 1994 through 1996 prior to the date on
    which it was acquired.

(2) Consists of restructuring costs associated with the consolidation of the
    operations of Deanco into the Company, including the Company's closure of
    certain of its facilities and other costs associated with the
    consolidation.

(3) The Company has net operating loss carryforwards which reduce its cash tax
    payments.  See Note 8 of Notes to Financial Statements.

(4) The Richey-Brajdas Merger was accounted for as a reverse purchase
    acquisition with RicheyImpact being the accounting acquirer. Per share data
    for all periods from January 1, 1992 through April 6, 1993, the date of the
    Richey-Brajdas Merger, are based upon the weighted average number of shares
    of Brajdas indirectly acquired by the former stockholders of RicheyImpact.

(5) EBITDA consists of earnings before interest, income taxes, depreciation and
    amortization. The Company has included EBITDA data (which are not a measure
    of financial performance under generally accepted accounting principles)
    because it understands such data are used by certain investors. EBITDA
    margin represents EBITDA as a percentage of net sales. Because of the
    significant amortization of intangible assets and non-cash income tax
    expense incurred as a result of the Company's NOLs, the Company believes
    that EBITDA may be a meaningful measure of its financial performance. See
    "Management's Discussion and Analysis of Financial Condition and Results of
    Operations -- Deferred Tax Assets."

(6) Excluding the restructuring reserve of approximately $1.4 million, which is
    an operating expense, EBITDA would have been approximately $8.0 million and
    EBITDA margin would have been 6.8% for the year ended December 31, 1995.

(7) Inventory turnover ratio and days sales outstanding in accounts receivable
    calculations are based upon Richey Electronics' annualized sales and cost
    of sales for the fourth quarter and accounts receivable and inventory
    balances at year-end.  The calculation for the year ended December 31, 1995
    excludes the effect of the acquisition of Deanco.

(8) Includes Deanco as the acquisition of Deanco was completed on December 20,
    1995.


                                     A-10




ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
         RESULTS OF OPERATIONS

GENERAL

    Richey Electronics is a leading specialty distributor of interconnect,
electromechanical  and passive electronic components and a provider of related
value-added assembly services to more than 16,000 customers nationwide. The
Company distributes a broad line of connectors, switches, wire, cable and heat
shrinkable tubing and other interconnect, electromechanical and passive
electronic components used in the assembly and manufacturing of electronic
equipment. Richey Electronics also provides a wide variety of value-added
assembly services, which typically generate higher gross margins than
traditional component distribution. These value-added assembly services consist
of (i) component assembly, which is the assembly of components to manufacturer
specifications and (ii) contract assembly, which is the assembly of cable
assemblies, battery packs and mechanical assemblies to customer specifications.
The Company's customers are primarily small- and medium-sized OEMs. The Company
intends to capitalize on a trend toward outsourcing by increasing sales of
value-added assembly services. These sales increased from $21.2 million, or
23.5% of sales, in 1994 to $33.0 million, or 29.0% of sales, in 1995 and to
$66.9 million, or 29.6% of sales, in 1996. Pro forma for the acquisition of
Deanco, 1995 sales of value-added assembly services were $51.5 million.

     In the period from 1994 through 1996, the Company continued to grow
through strategic acquisitions of businesses with operations similar to those of
the Company.  On April 4, 1994, the Company completed the acquisition of the
assets and business of In-Stock for $1.9 million in cash, funded by its
revolving line of credit.  On August 16, 1995, the Company completed the
acquisition of the assets and business of IEI for $1.2 million in cash, funded
by its revolving line of credit.  On December 20, 1995, the Company acquired
Deanco, through the acquisition of the stock of Deanco's parent, Electrical
Distribution Acquisition Company ("EDAC"), for consideration comprised of an
aggregate stock purchase price of approximately $34.1 million in cash, the
redemption of EDAC stockholder notes of approximately $6.6 million and the
assumption of Deanco debt of approximately $19.3 million.  The Company funded
the purchase consideration for the acquisition of Deanco by its revolving line
of credit and a term loan from its senior lender.  On March 16, 1996, the
Company completed the acquisition of certain assets and the business of MS
Electronics for the purchase price of approximately $2.5 million in cash, funded
by its revolving line of credit, and the assumption of MS Electronics' debt of
approximately $500,000.  On December 5, 1996, the Company acquired the
inventory, accounts receivable and fixed and intangible assets of Summit
Distributors, including the right to use its name, in a private sale from its
commercial lender in Buffalo, New York.  The Company did not assume any
liabilities of Summit Distributors in the transaction.  The purchase price and
related transaction costs for the Summit Distributors acquisition were $1.1
million and were paid in cash, funded by the Company's revolving line of credit.
All of the acquisitions in the period from 1994 through 1996 were accounted for
as purchase business combinations with the operations of the acquired business
included subsequent to the acquisition date.  See Note 2 of Notes to Financial
Statements for pro forma information with respect to acquisitions.

    The Company will seek to complete additional strategic acquisitions in
connection with the ongoing consolidation occurring in the electronics
distribution industry.


                                     A-11




RESULTS OF OPERATIONS

    The following table sets forth certain items in the statements of
operations as a percentage of net sales for the periods shown.

                                                 YEARS ENDED DECEMBER 31,
                                             ---------------------------------
                                              1994         1995         1996
                                             -------      -------      -------

  Net sales  . . . . . . . . . . . . .        100.0%       100.0%       100.0%
  Cost of goods sold . . . . . . . . .         75.5         76.1         74.6
                                               -----        -----        -----

  Gross profit . . . . . . . . . . . .         24.5         23.9         25.4
  Selling, warehouse, general and
    administrative . . . . . . . . . .         18.6         17.4         17.5
  Amortization of intangibles. . . . .           .6           .4           .6
  Acquisition-related restructuring
    costs. . . . . . . . . . . . . . .           --          1.2          --
                                               -----        -----        -----

  Operating income . . . . . . . . . .          5.3          4.9          7.3
  Interest expense . . . . . . . . . .          1.8          0.7          2.5
                                               -----        -----        -----

 Income before income taxes. . . . . .          3.5          4.1          4.8
  Income tax expense . . . . . . . . .          1.4          1.6          1.9
                                               -----        -----        -----

  Net income . . . . . . . . . . . . .          2.1%         2.5%         2.9%
                                               -----        -----        -----
                                               -----        -----        -----


YEAR ENDED DECEMBER 31, 1996 AS COMPARED WITH YEAR ENDED DECEMBER 31, 1995

    Net sales rose to $226.2 million in 1996, an increase of $109.1 million, or
93.2%, over 1995 net sales of $117.1 million which included approximately $3.5
million of post-acquisition Deanco sales.  Net sales of electronic components
rose to $159.3 million in 1996 from $80.6 million in 1995 (excluding Deanco
sales), an increase of 97.6%.  This increase in component sales is primarily the
result of the acquisition of Deanco.  Net sales of value-added assembly services
rose to $66.9 million in 1996 from $33.0 million in 1995 (excluding Deanco
sales), an increase of 102.7%.  This increase for value-added services is
primarily the result of the Deanco acquisition and increased demand for these
services.  Pro forma for the acquisition of Deanco, net sales for 1995 would
have been $217.0 million, compared with net sales of $226.2 million for 1996.
See Note 2 of Notes to Financial Statements.

    Gross profit was $57.6 million in 1996 compared with gross profit of $28.0
million in 1995 (including approximately $800,000 of gross profit from Deanco's
operations after it was acquired by the Company).  Gross profit as a percentage
of net sales was 25.4% for 1996 as compared to 23.9% for 1995.  This 1.5%
increase in gross profit percentage was due to (i) improved value-added gross
profit margins, (ii) growth in value-added assembly services as a percentage of
total sales to approximately 30% in 1996 from approximately 29% in 1995, (iii)
an increased percentage of component orders to be shipped in under 30 days which
typically have higher margins than orders with longer shipping schedules and
(iv) improved electronic component margins attributed to certain higher margin
product lines acquired with Deanco.

    Operating expenses in 1996 were $41.1 million compared to $22.3 million in
1995 (including a $1.45 million restructuring charge in the fourth quarter of
1995 associated with the acquisition of Deanco), an increase of 84.3%.
Exclusive of such restructuring charge, operating expenses increased 97% from
1995 to 1996 primarily due to acquisitions.  Operating expenses as a percentage
of net sales were 18.1% for 1996 compared with 19.0% for 1995 after giving
effect to such restructuring charge and 17.8% exclusive of such restructuring
charge.  Exclusive of such restructuring charge, operating expenses as a
percentage of net sales increased 0.3% from 1995 to 1996, of which approximately
0.2% is attributable to the amortization of intangibles associated with the
acquisition of Deanco.  The 1996 increase in expenses as a percentage of sales
is also due to the fact that Deanco's expenses as a percentage of sales were
historically significantly higher than those of the Company and during the first
part of 1996 the Company realized only a portion of the expected cost savings
from the integration of Deanco into the Company.  The operational integration of
Deanco and MS Electronics was completed in the third quarter of 1996 and
contributed


                                     A-12




to an approximately $2.4 million reduction in operating expenses for the third
and fourth quarters of 1996 from the first and second quarters of 1996.

    Interest expense was $5.6 million for 1996 compared with $867,000 for 1995.
The increase in interest expense was primarily due to increased borrowings to
finance acquisitions.

    The Company's provision for federal and state income tax expense increased
to $4.4 million for 1996 compared with $1.9 million for 1995.  This increase was
proportional to the increase in pre-tax earnings. As of December 31, 1996, the
Company had approximately $13.5 million in federal net operating loss
carryforwards available to reduce future cash tax payments.  For the period
ended December 31, 1996, cash tax payments were reduced approximately $1.7
million for the utilization of these NOLs. See "Deferred Tax Assets" and Note 8
of Notes to Financial Statements.

YEAR ENDED DECEMBER 31, 1995 AS COMPARED WITH YEAR ENDED DECEMBER 31, 1994

    Net sales were $117.1 million in 1995, an increase of $26.8 million, or
OP29.7%, from $90.3 million in 1994. Excluding sales of approximately $3.5
million from acquired Deanco operations after December 19, 1995, net sales
increased 25.8% in 1995. Excluding Deanco, net sales of electronic components
increased to $80.6 million in 1995 from $69.1 million in 1994, an increase of
16.6%, and net sales of value-added assembly services increased to $33.0 million
in 1995 from $21.2 million in 1994, an increase of 55.7%. Component sales
increased in 1995 due to (i) the general strength of the market for electronic
products, such as computers, telecommunications and aerospace equipment, and
(ii) the addition of new franchised lines to the Company's product offering
together with geographic expansion of existing franchises. Rapid growth in net
sales of value-added assembly services resulted from the continuing trend of
OEMs to outsource the assembly of their products as well as management's
decision to accept larger contract assembly orders from larger customers than
it had in the past. On a pro forma basis, assuming the acquisition of Deanco
had occurred as of January 1, 1994, net sales would have been $193.5 million and
$217.0 million for 1994 and 1995, respectively.

    The Company believes that order backlog (confirmed orders from customers 
for shipment within the next 12 months) generally averages two to three 
months' sales in the electronics distribution industry. Order backlog at 
December 31, 1996 was $53.8 million, up from $53.0 million at December 31, 
1995 (including Deanco's contribution of $21.5 million to backlog as of 
December 31, 1995).

    Gross profit was $28.0 million in 1995, an increase of $5.9 million, or
26.7%, from $22.1 million in 1994. Excluding gross profit of approximately
$800,000 from acquired Deanco operations after December 19, 1995, gross profit
increased 23.0% in 1995. Overall, the Company's gross margin declined to 23.9%
in 1995 from 24.5% in 1994. The Company's component distribution gross margins
remained approximately the same in 1995 as compared to 1994. Value-added
assembly gross margins declined in 1995 compared to 1994 due to (i) an increase
in the number of larger orders from larger customers which typically provide
lower gross margins than the Company previously experienced, (ii) the
acquisition of IEI which had historically lower gross margins than the Company
and (iii) inefficiencies related to the closing of IEI's facility and the move
and integration of IEI into one of the Company's existing facilities.

    Operating expenses increased from $17.3 million in 1994 to $22.3 million in
1995 (including a $1.45 million restructuring charge in the fourth quarter of
1995 to cover the costs of closing certain of Deanco's facilities and
consolidating the operations of Deanco into the Company), an increase of 29%.
Exclusive of such restructuring charge, operating expenses increased 20.5%,
primarily due to acquisitions.  Operating expenses as a percentage of net sales
were 19.2% for 1994 compared with 19.0% for 1995 after giving effect to such
restructuring charge and 17.8% exclusive of such restructuring charge.
Exclusive of such restructuring charge, operating expenses as a percentage of
net sales declined 1.3% from 1994 to 1995 as a direct result of the Company's
strategy to increase its operating leverage by spreading its fixed costs over a
larger sales base.

    Interest expense declined to $867,000 in 1995 from $1.6 million in 1994.
The decrease in interest expense was due to a substantial reduction in the
Company's borrowings resulting from the use of the $15.7 million of net proceeds
from its 1995 secondary offering of 3,165,000 shares of Common Stock to retire
its subordinated debt and to pay down its revolving line of credit.

    The Company's provision for federal and state income tax expense increased
to $1.9 million in 1995 from $1.3 million in 1994, proportional to the increase
in pre-tax earnings. For the period ended December 31, 1995, cash tax payments
were reduced approximately


                                     A-13




$1.7 million for the utilization of state and federal NOLs. See "Deferred Tax
Assets" and Note 8 of Notes to Financial Statements.

LIQUIDITY AND CAPITAL RESOURCES

    In December 1995 and January 1996, the Company funded the purchase
consideration for the acquisition of Deanco, using advances under its $45
million revolving line of credit facility (the "Revolving Line of Credit") and a
$30 million term loan (the "Term Loan"), each provided by First Interstate Bank
of  California ("FICAL") pursuant to a loan agreement (the "Loan Agreement")
entered into with the Company in connection with the Deanco acquisition.  The
Revolving Line of Credit is now maintained with Wells Fargo Bank, N.A., as
successor to FICAL under the Loan Agreement.  The Company also used the
Revolving Line of Credit to fund the March 1996 purchase of MS Electronics and
the December 1996 purchase of Summit Distributors.

    In the first quarter of 1996, the Company issued $55,755,000 of 7%
Convertible Subordinated Notes due 2006 (the "Notes") in a private placement.
The Notes are convertible into 3,947,000 shares of the Company's Common Stock at
a conversion price of $14.125 per share (subject to adjustment).  The Company
maintains an effective shelf registration with the Commission to register
resales of the Notes and the Common Stock issuable upon conversion.  The net
proceeds from the Company's sale of the Notes were approximately $53.8 million
and were used to repay the Term Loan and to pay down the Revolving Line of
Credit.  See Note 4 of Notes to Financial Statements.

    The Loan Agreement governing the Revolving Line of Credit limits the
Company's ability to create or incur liens on assets, to make distributions or
investments, to enter into any mergers or make additional acquisitions or
dispositions of assets and to enter into transactions with affiliates. In
addition, the Company must comply with various financial and other covenants
established by the bank.  The Loan Agreement also provides the bank with the
right to terminate the commitment on 30 days' notice if there is a change in
control of the Company (generally, the acquisition of more than 50% of the
Company's capital stock).

    As of December 31, 1996, the Company had outstanding borrowings under the
Revolving Line of Credit of approximately $10.5 million and additional borrowing
capacity of approximately $28 million.  The Company believes that available
borrowings under the Revolving Line of Credit and cash generated by operations
will be adequate to meet its anticipated funding commitments for the remainder
of 1997.

    Net cash provided by operating activities was $4.2 million for 1996 as
compared with $236,000 for 1995 and $4.0 million for 1994.  The 1996 increase
over 1995 is primarily a result of an increase in net income and non-cash
expenses.  1996 earnings before interest, income taxes, depreciation and
amortization (EBITDA) were approximately $19.6 million compared with
approximately $6.6 million for 1995.

    Net cash used in investing activities increased to $9.0 million in 1996
from $3.3 million in 1995 and $2.9 million in 1994. All of the investing
activities were funded by borrowings under revolving line of credit facilities
and net cash provided by operating activities.  In 1996, the Company invested
$1.3 million in improvements and equipment, primarily for leasehold improvements
and value-added machinery and equipment.  An additional $7.7 million was used to
pay for acquisition and restructuring costs primarily associated with the
Deanco, MS Electronics and Summit Distributors acquisitions.  In 1995, the
Company invested $1.3 million in improvements and equipment, primarily for
leasehold improvements at its principal value-added assembly facility in Los
Angeles and its corporate headquarters in Garden Grove.  An additional $1.2
million was used for the IEI acquisition.  During 1994, the Company spent
$400,000 on improvements and equipment to enhance its value-added assembly
capabilities, $1.8 million for the In-Stock acquisition and $500,000 in costs
associated with the Richey-Brajdas Merger.  The Company anticipates incurring
capital expenditures of approximately $1.3 million in 1997, all of which will be
financed with net cash from operating activities and borrowings under its
Revolving Line of Credit. The Company's actual capital expenditures may vary
significantly from its current expectations, based on a number of factors,
including, but not limited to, additional acquisitions, if any.

    Inventory turnover for the year ended December 31, 1996, was 4.4x compared
to 5.0x for 1995 (excluding the effect of the acquisition of Deanco in December
1995).  This decrease is the result of management's decisions


                                     A-14


to strengthen the Company's line card by adding new product lines that require
minimum initial stocking levels and to make inventory turnover rates on product
lines acquired with Deanco consistent with the Company's goals, as Deanco
historically had a higher inventory turnover rate.

    Days sales outstanding in accounts receivable increased to 44 days for 1996
from 42 days for 1995 as a result of the Deanco acquisition.

DEFERRED TAX ASSETS

    As of December 31, 1996, the Company had approximately $13.5 million in net
operating loss carryforwards, which expire between 2005 and 2008. The NOLs
resulted from Brajdas losses prior to the Richey-Brajdas Merger.

    Section 382 of the Internal Revenue Code of 1986, as amended and related
regulations impose certain limitations on a corporation's ability to use NOLs if
more than a 50% change in ownership occurs.  The Company's issuance of
additional Common Stock in 1995, together with an earlier acquisition,
constitutes more than a 50% change in ownership.  As a result, the usage of NOLs
is restricted to approximately $4.9 million on an annual basis.

     The Company has been consistently profitable since December 28, 1990 and
generated taxable income before NOL carryforwards of approximately $6.9 million
in 1996.  Based on its current level of profitability, management believes that
the Company will be able to fully utilize the NOLs prior to their expiration.
However, management has continued to maintain a valuation allowance due to the
inherent uncertainties in forecasting future taxable income.  Management
believes that it is "more likely than not" that the Company will be able to
generate the approximately $14 million of future taxable income necessary to
realize the recorded amount of the net deferred tax asset prior to expiration of
the NOLs. The amount of deferred tax asset considered realizable, however, would
be reduced in the near term if estimates of future taxable income during the
carryforward period are reduced.


ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

    The Financial Statements required by this Item 8 are listed in Item 14(a)
and are submitted at the end of this Form 10-K.


                                     A-15




SELECTED QUARTERLY FINANCIAL DATA

    The following table sets forth certain statements of operations data for
the periods indicated. The quarterly financial information provided excludes the
financial results of In-Stock, IEI, Deanco, MS Electronics and Summit
Distributors prior to the date of the respective acquisition. This information
has been derived from unaudited financial statements which, in the opinion of
management, include all adjustments (consisting only of normal recurring
adjustments) necessary for a fair presentation of such information. These
operating results are not necessarily indicative of results for any future
period.



 

                                                  FIRST              SECOND               THIRD              FOURTH
                                                 QUARTER             QUARTER             QUARTER             QUARTER
                                                -----------         -----------         -----------         -----------
                                                                                                 
 1996
  Net sales. . . . . . . . . . . . . .          $58,384,000         $58,212,000         $53,713,000         $55,906,000
  Gross profit . . . . . . . . . . . .           14,313,000          14,806,000          14,116,000          14,316,000
  Net income . . . . . . . . . . . . .            1,142,000           1,735,000           1,754,000           1,905,000
  Earnings per common share
     Primary . . . . . . . . . . . . .                 0.13                0.19                0.19                0.21
     Fully Diluted . . . . . . . . . .                 0.13                0.18                0.18                0.20
  Shipping Days. . . . . . . . . . . .                   64                  64                  62                  64

 1995
  Net sales. . . . . . . . . . . . . .          $26,596,000         $28,305,000         $28,803,000         $33,353,000
  Gross profit . . . . . . . . . . . .            6,513,000           6,660,000           6,931,000           7,873,000
  Net income . . . . . . . . . . . . .              680,000             909,000           1,070,000             209,000
  Earnings per common share
     Primary . . . . . . . . . . . . .                 0.12                0.11                0.12                0.02
     Fully Diluted . . . . . . . . . .                 0.12                0.11                0.12                0.02
  Shipping Days. . . . . . . . . . . .                   64                  64                  62                  62

 1994
  Net sales. . . . . . . . . . . . . .          $20,247,000         $23,105,000         $22,838,000         $24,076,000
  Gross profit . . . . . . . . . . . .            4,855,000           5,562,000           5,793,000           5,880,000
  Net income . . . . . . . . . . . . .              355,000             532,000             471,000             535,000
  Earnings per common share
     Primary . . . . . . . . . . . . .                 0.06                0.09                0.08                0.09
     Fully Diluted . . . . . . . . . .                 0.06                0.09                0.08                0.09
  Shipping Days. . . . . . . . . . . .                   65                  64                  63                  62



 

- ---------------
    The unaudited quarterly results of operations indicate that net sales rose
from $480,000 per shipping day in the fourth quarter of 1995 (excluding Deanco)
to $912,000, $910,000, $866,000 and $874,000 per shipping day in the four
consecutive quarters of 1996, respectively.  The calendar for 1997 contains 62,
64, 63 and 64 shipping days for the first through fourth quarters, respectively.
Quarterly operating results may fluctuate significantly from quarter to quarter
in the future.


                                     A-16




ITEM 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON FINANCIAL ACCOUNTING
         AND FINANCIAL DISCLOSURE

Not applicable.


                                       PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

    The information required by this item regarding directors and executive
officers of the Company is set forth in the Company's definitive Proxy Statement
(the "1997 Proxy Statement") to be filed with the Commission relating to its
annual meeting of stockholders to be held on May 1, 1997, under the headings
"Nominees for Election as Directors," "Other Executive Officers of the Company"
and "Section 16(a) Beneficial Ownership Reporting Compliance," and is
incorporated herein by reference.


ITEM 11. EXECUTIVE COMPENSATION


    The information required by this item regarding compensation of the
Company's directors and executive officers set forth in the 1997 Proxy Statement
under the headings "Board Meetings and Director Compensation" and "Executive
Compensation" is incorporated herein by reference.


ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
         AND MANAGEMENT

    The information required by this item regarding beneficial ownership of the
Common Stock by certain beneficial owners and by management of the Company set
forth in the 1997 Proxy Statement under the heading "Security Ownership of
Certain Beneficial Owners and Management" is incorporated herein by reference.


ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

    The information required by this item regarding certain relationships and
related transactions with management of the Company set forth in the 1997 Proxy
Statement under the headings "Compensation Committee Interlocks and Insider
Participation" and "Certain Relationships and Related Transactions" is
incorporated herein by reference.

                                       PART IV


ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

    (a)  Documents filed as part of this report:

         1.  Financial Statements

              Independent Auditor's Report

              Balance Sheets at December 31, 1995 and 1996

              Statements of Income for the years ended December 31, 1994, 1995
              and 1996

              Statements of Stockholders' Equity for the years ended December
              31, 1994, 1995 and 1996


                                     A-17




              Statements of Cash Flows for the years ended December 31, 1994,
              1995 and 1996

              Notes to Financial Statements


         2.  Financial Statement Schedules

         Not Applicable.

         3.  Exhibits

         2.1  Stock Purchase Agreement, dated November 15, 1995, among Richey
              Electronics, Inc., Deanco, Inc., Electrical Distribution
              Acquisition Company and all of the stockholders of Electrical
              Distribution Acquisition Company. *4* (2.1)

         2.2  First Amendment to Stock Purchase Agreement and Instrument of
              Joinder dated December 20, 1995 among Richey Electronics, Inc.,
              Deanco, Inc., Electrical Distribution Acquisition Company and all
              of the stockholders of Electrical Distribution Acquisition
              Company. *4* (2.2)

         2.3  Sales Tax Indemnification Agreement dated December 20, 1995 among
              Richey Electronics, Inc. and the stockholders of Electrical
              Distribution Acquisition Company identified therein. *4* (2.3)

         3.1  Restated Certificate of Incorporation of Richey Electronics, Inc.
              *5* (3.1)

         3.2  Bylaws of Richey Electronics, Inc. *5* (3.2)

         4.1  Indenture between Richey Electronics, Inc. and First Trust of
              California, National Association, dated as of February 15, 1996.
              *10* (4.1)

         4.2  Registration Rights Agreement among Richey Electronics, Inc.,
              Jefferies & Company, Inc. and Cruttenden Roth Incorporated, dated
              as of February 26, 1996.  *12* (4.2)

        10.1  Indemnification Agreement among Barclay and Company, Inc.,
              Brajdas Corporation, Donald I. Zimmerman and certain former
              shareholders of RicheyImpact Electronics, Inc. identified therein
              dated as of April 5, 1993. *2* (E)

        10.2  Letter re Amendment to Indemnification Agreement by Barclay and
              Company, Inc. and Donald I. Zimmerman, and agreed to by BRJS
              Investment Holding Corp., Brajdas Corporation and the other
              persons and entities identified therein dated April 23, 1993. *1*
              (10.3)

        10.3  Registration Rights Agreement between Brajdas Corporation and
              BRJS Investment Holding Corp. dated April 2, 1993. *2* (10.4)

        10.4  Employment Agreement between William C. Cacciatore and Brajdas
              Corporation dated as of April 1, 1993. *1* (10.18)

        10.5  Addendum to Employment Agreement (William C. Cacciatore) dated as
              of February 21, 1995. *8* (10.37)

        10.6  Second Addendum to Employment Agreement (William C. Cacciatore)
              dated as of May 17, 1995. *10* (10.31)


                                     A-18




        10.7  Employment Agreement between C. Don Alverson and Brajdas
              Corporation dated as of April 1, 1993. *1* (10.17)

        10.8  Addendum to Employment Agreement (C. Don Alverson) dated as of
              February 21, 1995. *8* (10.38)

        10.9  Second Addendum to Employment Agreement (C. Don Alverson) dated
              as of May 17, 1995. *10* (10.32)

       10.10  Employment Agreement between Richard N. Berger and Brajdas
              Corporation dated as of April 1, 1993. *1* (10.20)

       10.11  Addendum to Employment Agreement (Richard N. Berger) dated as of
              February 21, 1995. *8* (10.39)

       10.12  Employment Agreement between Norbert W. St. John and Brajdas
              Corporation dated as of April 1, 1993. *1* (10.19)

       10.13  Addendum to Employment Agreement (Norbert W. St. John) dated as
              of February 21, 1995. *8* (10.40)

       10.14  Second Addendum to Employment Agreement (Norbert W. St. John)
              dated as of May 17, 1995. *10* (10.33)

       10.15  Employment Agreement between William Class and Richey
              Electronics, Inc. dated as of January 1, 1996.  *11* (10.1)

       10.16  Employment Agreement between Charles W. Mann and Richey
              Electronics, Inc. dated as of April 1, 1995.  *12* (10.35)

       10.17  Service and Management Agreement dated December 18, 1990 by and
              among RicheyImpact Electronics, Inc., Palisades Associates, Inc.
              and Saunders Capital Group, Inc. *3* (10.2)

       10.18  Agreement to Assume and Amend the Service and Management
              Agreement among Brajdas Corporation, Palisades Associates, Inc.
              and Saunders Capital Group, Inc. dated as of April 6, 1993. *3*
              (10.3)

       10.19  Modification Agreement among the Company, Palisades Associates,
              Inc. and Saunders Capital Group, Inc. dated as of January 2,
              1995. *8* (10.26)

       10.20  Modification Agreement by and between Richey Electronics, Inc.
              and Palisades Associates, Inc. dated as of February 21, 1995. *8*
              (10.41)

       10.21  1993 Stock Appreciation Rights Plan. *6* (A)

       10.22  1992 Stock Option Plan. *8* (10.35)

       10.23  Form of Incentive Stock Option Agreement. *8* (10.36)

       10.24  Lease between Principal Mutual Life Insurance Company and Richey
              Electronics, Inc. for lease of premises at 7441 Lincoln Way,
              Garden Grove, California. *8* (10.32)

       10.25  Lease between M&M Enterprises, a California General Partnership
              and Richey Electronics, Inc. for lease of premises at 10871 La
              Tuna Canyon Road, Sun Valley, California. *8* (10.33)


                                     A-19




       10.26  Lease between Hownat Trust and Deanco, Inc. for lease of premises
              at 87 Concord Street, North Reading, Massachusetts, Boston
              Massachusetts. *10* (10.21)

       10.27  Lease between Murray Center Venture and Deanco ACA Manufacturing,
              Inc. for lease of premises at Building 1, Murray Business Center,
              3601 SW Murray Blvd., Beaverton, Oregon 97201. *10* (10.25)

       10.28  Lease Agreement between Fujita California Partners III and
              Deanco, Inc., Acacia Division, for premises at 3230 Scott
              Boulevard, Santa Clara, California.

       10.29  Loan Agreement dated as of December 20, 1995 among Richey
              Electronics, Inc., the banks named therein and First Interstate
              Bank of California, as Agent.  *4* (10.1)

       10.30  First Amendment to the Loan Agreement dated as of February 26,
              1996 among Richey Electronics, Inc., the banks named therein and
              First Interstate Bank of California, as Agent. *10* (10.30)

        11.1  Statement regarding computation of per share earnings.

        21.1  Subsidiaries of Richey Electronics, Inc.

        23.1  Consent of McGladrey & Pullen, LLP

        23.2  Consent of McGladrey & Pullen, LLP

        27.1  Financial Data Schedule

  --------------------
    *1*  Incorporated by reference to the designated exhibit of the Annual
         Report on Form 10-K for Brajdas Corporation for the fiscal year ended
         February 28, 1993, filed May 28, 1993.

    *2*  Incorporated by reference to the designated exhibit of the Statement
         on Schedule 13D filed on behalf of BRJS Investment Holding Corp., C.
         Don Alverson, William C. Cacciatore, Greg A. Rosenbaum and Norbert W.
         St. John with the Commission on April 20, 1993.

    *3*  Incorporated by reference to the designated exhibit of the Transition
         Report on Form 10-Q for Brajdas Corporation for the period from
         January 1, 1993 through July 2, 1993, filed August 4, 1993.

    *4*  Incorporated by reference to the designated exhibit of Form 8-K for
         Richey Electronics, Inc. dated December 20, 1995, filed January 3,
         1996.

    *5*  Incorporated by reference to the designated exhibit of the
         Registration Statement on Form S-1, filed January 7, 1994,
         Registration No. 33-73916.

    *6*  Incorporated by reference to the designated exhibit of the definitive
         proxy statement for the 1993 Annual Meeting of Stockholders, filed
         July 13, 1993.

    *7*  Incorporated by reference to the designated exhibit of the Form 8-K
         for Brajdas Corporation dated July 7, 1993, filed July 13, 1993.

    *8*  Incorporated by reference to the designated exhibit of the
         Registration Statement on Form S-2, filed February 23, 1995,
         Registration Statement No. 33-89690.

    *9*  Incorporated by reference to the designated exhibit of the Quarterly
         report on Form 10-Q for Richey Electronics, Inc. for the period ending
         March 31, 1995, filed May 15, 1995.


                                     A-20




    *10* Incorporated by reference to the designated exhibit of the Annual
         Report on Form 10-K for the Company for the fiscal year ended December
         31, 1995, filed April 1, 1996.

    *11* Incorporated by reference to the designated exhibit of the Quarterly
         report on Form 10-Q for Richey Electronics, Inc. for the period ending
         June 28, 1996, filed August 12, 1996.

    *12* Incorporated by reference to the designated exhibit of the
         Registration Statement on Form S-2, filed April 26, 1996, Registration
         No. 333-02983.


    Exhibits 10.4 - 10.23 are management contracts or compensatory plans or
arrangements required to be filed as exhibits pursuant to Item 14(c) of Form
10-K.

    (b)  Reports on Form 8-K

         No reports on Form 8-K were filed in the fourth quarter of 1996.


                                     A-21




                                      SIGNATURES

    Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized, in the City of Garden
Grove, State of California, on March 21, 1997.


                             RICHEY ELECTRONICS, INC.


                             By  /s/ Richard N. Berger
                                ------------------------------------------
                                  Richard N. Berger
                                  Vice President, Chief Financial
                                  Officer and Secretary


    Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.

Signature                         Title                         Date
- ---------                         -----                         ----

/s/ William C. Cacciatore         Chairman of the Board,        March 21, 1997
- ------------------------------    President, Chief Executive
William C. Cacciatore             Officer (Principal
                                  Executive Officer)

/s/ C. Don Alverson               Director                      March 21, 1997
- ------------------------------
C. Don Alverson

/s/ Richard N. Berger             Vice President, Chief         March 21, 1997
- ------------------------------    Financial Officer and
Richard N. Berger                 Secretary (Principal
                                  Financial and Accounting
                                  Officer)

/s/ Greg A. Rosenbaum             Director                      March 21, 1997
- ------------------------------
Greg A. Rosenbaum

/s/ Norbert W. St. John            Director                     March 21, 1997
- ------------------------------
Norbert W. St. John


                                     A-22




                             INDEPENDENT AUDITOR'S REPORT




To the Board of Directors
Richey Electronics, Inc.
Garden Grove, California

We have audited the accompanying balance sheets of Richey Electronics, Inc. as
of December 31, 1995 and 1996, and the related statements of income,
stockholders' equity and cash flows for each of the three years in the period
ended December 31, 1996. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Richey Electronics, Inc. as of
December 31, 1995 and 1996 and the results of its operations and its cash flows
for each of the three years in the period ended December 31, 1996, in conformity
with generally accepted accounting principles.

                                  McGLADREY & PULLEN, LLP



Pasadena, California
February 7, 1997


                                     A-23




                               RICHEY ELECTRONICS, INC.

                                    BALANCE SHEETS

                              DECEMBER 31, 1995 AND 1996

                                                   1995              1996
                                                ------------      ------------
 ASSETS
 CURRENT ASSETS
  Cash . . . . . . . . . . . . . . . . . . .   $    572,000      $     30,000
  Trade receivables. . . . . . . . . . . . .     25,622,000        27,111,000
  Inventories. . . . . . . . . . . . . . . .     31,450,000        37,631,000
  Deferred income taxes. . . . . . . . . . .      3,948,000         2,629,000
  Other current assets . . . . . . . . . . .      1,481,000         1,235,000
                                                ------------      ------------
     TOTAL CURRENT ASSETS. . . . . . . . . .     63,073,000        68,636,000
                                                ------------      ------------

 IMPROVEMENTS AND EQUIPMENT, NET . . . . . .      3,469,000         3,668,000
                                                ------------      ------------

 OTHER ASSETS AND INTANGIBLES
  Deferred income taxes. . . . . . . . . . .      4,979,000         2,218,000
  Deferred debt costs. . . . . . . . . . . .        500,000         2,533,000
  Other. . . . . . . . . . . . . . . . . . .        661,000           473,000
  Goodwill . . . . . . . . . . . . . . . . .     46,259,000        47,233,000
                                                ------------      ------------
                                                 52,399,000        52,457,000
                                                ------------      ------------

                                               $118,941,000      $124,761,000
                                                ------------      ------------
                                                ------------      ------------

 LIABILITIES AND STOCKHOLDERS' EQUITY
 CURRENT LIABILITIES
  Current maturities of long-term debt . . .   $    835,000      $  4,012,000
  Accounts payable . . . . . . . . . . . . .     18,250,000        16,551,000
  Accrued expenses . . . . . . . . . . . . .      6,088,000         4,502,000
  Accrued restructuring costs. . . . . . . .      3,824,000           538,000
                                                ------------      ------------

     TOTAL CURRENT LIABILITIES . . . . . . .     28,997,000        25,603,000
                                                ------------      ------------

 ACCRUED RESTRUCTURING COSTS . . . . . . . .        900,000            --
                                                ------------      ------------

 LONG-TERM DEBT
  Subordinated notes payable . . . . . . . .      2,982,000         2,000,000
  Other long-term debt . . . . . . . . . . .     58,670,000         7,450,000
  Convertible subordinated notes payable . .             --        55,755,000
                                                ------------      ------------
                                                 61,652,000        65,205,000
                                                ------------      ------------

 STOCKHOLDERS' EQUITY
  Preferred stock, $.001 par value,
     authorized 10,000 shares, issued none. .           --             --
  Common stock, $.001 par value,
     authorized 30,000,000 shares. . . . . .          9,000             9,000
  Additional paid-in capital . . . . . . . .     20,976,000        21,001,000
  Retained earnings. . . . . . . . . . . . .      6,407,000        12,943,000
                                                ------------      ------------
                                                 27,392,000        33,953,000
                                                ------------      ------------
                                               $118,941,000      $124,761,000
                                                ------------      ------------
                                                ------------      ------------


                          See Notes to Financial Statements.


                                     A-24




                               RICHEY ELECTRONICS, INC.

                                 STATEMENTS OF INCOME
                  THREE YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996



 

                                                        1994                1995                1996
                                                     -----------        ------------        ------------
                                                                                   
Net sales. . . . . . . . . . . . . . . . . .         $90,266,000        $117,057,000        $226,215,000
Cost of goods sold . . . . . . . . . . . . .          68,176,000          89,080,000         168,664,000
                                                      -----------        ------------        ------------

  Gross profit . . . . . . . . . . . . . . .          22,090,000          27,977,000          57,551,000
                                                      -----------        ------------        ------------

Operating expenses:
  Selling, warehouse, general and
     administrative. . . . . . . . . . . . .          16,750,000          20,415,000          39,622,000
  Amortization of intangibles. . . . . . . .             568,000             459,000           1,448,000
  Restructuring costs. . . . . . . . . . . .               --              1,450,000               --
                                                      -----------        ------------        ------------
                                                      17,318,000          22,324,000          41,070,000
                                                      -----------        ------------        ------------

        OPERATING INCOME . . . . . . . . . .           4,772,000           5,653,000          16,481,000

Interest expense . . . . . . . . . . . . . .           1,606,000             867,000           5,569,000
                                                      -----------        ------------        ------------

  Income before income taxes . . . . . . . .           3,166,000           4,786,000          10,912,000

Federal and state income taxes . . . . . . .           1,273,000           1,918,000           4,376,000
                                                      -----------        ------------        ------------

        NET INCOME . . . . . . . . . . . . .         $ 1,893,000         $ 2,868,000         $ 6,536,000
                                                      -----------        ------------        ------------
                                                      -----------        ------------        ------------

Earnings per common share:
  Primary. . . . . . . . . . . . . . . . . .         $      0.32         $     0. 36         $      0.72
                                                      -----------        ------------        ------------
                                                      -----------        ------------        ------------

  Fully diluted. . . . . . . . . . . . . . .                0.32                0.36                0.70
                                                      -----------        ------------        ------------
                                                      -----------        ------------        ------------

Weighted average number of shares outstanding:
  Primary. . . . . . . . . . . . . . . . . .           5,889,000           8,036,000           9,060,000
                                                      -----------        ------------        ------------
                                                      -----------        ------------        ------------

  Fully diluted. . . . . . . . . . . . . . .           5,889,000           8,036,000          12,376,000
                                                      -----------        ------------        ------------
                                                      -----------        ------------        ------------


 

                          See Notes to Financial Statements.


                                     A-25




                               RICHEY ELECTRONICS, INC.

                          STATEMENTS OF STOCKHOLDERS' EQUITY
                  THREE YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996



 

                                                      COMMON STOCK
                                  ---------------------------------------------------
                                                                           ADDITIONAL
                                    SHARES                PAR               PAID-IN           RETAINED
                                  OUTSTANDING             VALUE             CAPITAL           EARNINGS               TOTAL
                                  -----------           --------        -------------       ------------        ------------
                                                                                                 
 BALANCE, DECEMBER 31, 1993        5,889,000             $ 6,000        $  5,246,000        $  1,646,000        $  6,898,000
 Reverse stock split
   adjustments                        --                    --             (6,000)                 --                 (6,000)
 Net income                           --                    --                --               1,893,000           1,893,000
                                  ----------             -------        ------------        ------------        ------------


 BALANCE, DECEMBER 31, 1994        5,889,000               6,000           5,240,000           3,539,000           8,785,000

 Issuance of common stock in
   public offering, net of
   offering expenses               3,165,000               3,000          15,736,000              --              15,739,000
 Net income                           --                    --               --                2,868,000           2,868,000
                                  ----------             -------        ------------        ------------        ------------
 BALANCE, DECEMBER 31, 1995        9,054,000               9,000          20,976,000           6,407,000          27,392,000
 Stock options exercised
   and other                           6,000                --                25,000               --                 25,000
 Net income                           --                    --               --                6,536,000           6,536,000
                                  ----------             -------        ------------        ------------        ------------

 BALANCE, DECEMBER 31, 1996        9,060,000             $ 9,000        $ 21,001,000        $ 12,943,000        $ 33,953,000
                                  ----------             -------        ------------        ------------        ------------
                                  ----------             -------        ------------        ------------        ------------


                          See Notes to Financial Statements.


                                     A-26





                               RICHEY ELECTRONICS, INC.

                               STATEMENTS OF CASH FLOWS
                  THREE YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996



 

                                                                  1994                1995                1996
                                                             -------------       -------------       -------------
                                                                                            
 CASH FLOWS FROM OPERATING ACTIVITIES
  Net income                                                 $   1,893,000       $   2,868,000       $   6,536,000
  Adjustments to reconcile net income to net
     cash provided by operating activities:
     Depreciation and amortization                                 765,000             912,000           3,100,000
     Deferred taxes                                              1,157,000           1,065,000           4,080,000
     Change in operating assets and liabilities,
        net of effect of business combinations:
         (Increase) decrease in:
           Trade receivables                                    (1,107,000)         (2,448,000)            592,000
           Inventories                                          (1,518,000)         (2,727,000)         (4,329,000)
           Other current assets                                     14,000            (260,000)            284,000
        Increase (decrease) in:
           Accounts payable and accrued expenses                 2,820,000            (624,000)         (4,573,000)
           Accrued restructuring costs                              --               1,450,000          (1,450,000)
                                                             -------------       -------------       -------------

        NET CASH PROVIDED BY OPERATING ACTIVITIES                4,024,000             236,000           4,240,000
                                                             -------------       -------------       -------------

 CASH FLOWS FROM INVESTING ACTIVITIES
  Purchase of improvements and equipment                          (401,000)         (1,316,000)         (1,310,000)
  Payment of acquisition and restructuring costs                (2,512,000)         (2,025,000)         (7,706,000)
                                                             -------------       -------------       -------------

        NET CASH (USED IN) INVESTING ACTIVITIES                 (2,913,000)         (3,341,000)         (9,016,000)
                                                             -------------       -------------       -------------

 CASH FLOWS FROM FINANCING ACTIVITIES
  Net advances (repayments) on revolving
     line of credit                                              1,848,000          (8,843,000)             --
  Borrowings (repayments) under long-term
     revolving line-of-credit arrangement                           --               1,974,000          (7,911,000)
  Term loan borrowings                                              --                  --              30,000,000
  Payments on long-term debt                                    (2,957,000)         (5,202,000)        (71,114,000)
  Proceeds from issuance of common stock, net                       --              15,739,000              25,000
  Proceeds from issuance of convertible subordinated debt           --                  --              55,755,000
  Transaction costs associated with refinancing activities          --                  --              (2,521,000)
                                                             -------------       -------------       -------------

        NET CASH PROVIDED BY (USED IN)
           FINANCING ACTIVITIES                                 (1,109,000)          3,668,000           4,234,000
                                                             -------------       -------------       -------------

        INCREASE (DECREASE) IN CASH                                  2,000             563,000            (542,000)
 Cash
  Beginning                                                          7,000               9,000             572,000
                                                             -------------       -------------       -------------
  Ending                                                     $       9,000       $     572,000       $      30,000
                                                             -------------       -------------       -------------
                                                             -------------       -------------       -------------



                          See Notes to Financial Statements.


                                     A-27




                               RICHEY ELECTRONICS, INC.

                         STATEMENTS OF CASH FLOWS, CONTINUED
                  THREE YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996




 

                                                                  1994                1995                1996
                                                             -------------       -------------       -------------
                                                                                             
 Supplemental Disclosures of Cash Flow Information
  Cash payments for:
     Interest                                                $   1,675,000       $   1,230,000       $   3,961,000
                                                             -------------       -------------       -------------
                                                             -------------       -------------       -------------

     Income taxes                                            $      46,000       $   1,249,000       $     437,000
                                                             -------------       -------------       -------------
                                                             -------------       -------------       -------------

Assets acquired, liabilities assumed and
  securities issued in business combinations:
  Working capital                                           $    1,464,000       $  15,362,000       $   1,980,000
  Leasehold improvements and equipment                             103,000           1,646,000             101,000
  Other assets                                                       --                861,000               --
  Goodwill                                                         274,000          47,287,000           2,272,000
  Restructuring and transaction costs                                --             (3,427,000)              --
  Subordinated notes payable                                         --             (2,982,000)              --
  Other liabilities assumed                                          --            (23,434,000)              --
  Stock payment notes                                                --            (34,106,000)              --
                                                             -------------       -------------       -------------
                                                             -------------       -------------       -------------


        Net cash paid                                        $   1,841,000       $   1,207,000       $  4,353,0000
                                                             -------------       -------------       -------------
                                                             -------------       -------------       -------------



 

                          See Notes to Financial Statements.


                                     A-28



                               RICHEY ELECTRONICS, INC.

                            NOTES TO FINANCIAL STATEMENTS


NOTE 1.  NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES

NATURE OF BUSINESS

    Richey Electronics, Inc. (the Company) is a specialty distributor of
electronic components and a provider of value-added assembly services.  The
Company distributes a broad line of connectors, switches, wire, cable and heat
shrinkable tubing, and other interconnect, electromechanical and passive
electronic components used in assembly and manufacture of electronic equipment.
Richey has distribution rights from major worldwide suppliers, none of which
individually accounted for sales greater than 16% in 1996.  Richey's corporate
headquarters are based in California and it has markets in 17 states.

A SUMMARY OF THE COMPANY'S SIGNIFICANT ACCOUNTING POLICIES FOLLOWS:

YEAR END

    The Company reports its annual operating results based upon a calendar year
end (December 31) and its quarterly results using the Friday nearest the end of
each quarter.

USE OF ESTIMATES IN THE PREPARATION OF FINANCIAL STATEMENTS

    The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets, liabilities, revenue and
expenses during the reporting period.  Actual results could differ from those
estimates and could materially impact the reported amount of assets and
liabilities and future operating results.

CONCENTRATION OF CREDIT RISK

    The Company distributes electronic components to small- and medium-sized
manufacturers in a wide variety of industries including telecommunications,
computer, medical, transportation and aerospace.  Credit is extended based on an
evaluation of the customer's financial condition and collateral is typically not
required.  Credit losses are provided for in the financial statements through a
charge to operations.  For the year ended December 31, 1996, sales to no
individual customer represented more than 1.5% of net sales.  Credit losses have
been consistently within management's expectations and were not material in any
year presented.  A valuation allowance for known and anticipated credit losses
is maintained but is not material.

INVENTORIES

    Inventories consist of electronic components held for sale and are valued
at the lower of cost (first-in, first-out method) or market.  The Company
periodically reviews the age and turnover of its inventory to determine whether
any inventory has become obsolete or has declined in value and incurs a charge
to operations for known and anticipated inventory obsolescence.  The Company has
not incurred any material charges to operations for inventory obsolescence.

IMPROVEMENTS AND EQUIPMENT

    Improvements and equipment are stated at cost, less accumulated
depreciation and amortization.  Equipment is depreciated using the straight-line
method over estimated service lives ranging from three to seven years.
Improvements are amortized over the life of the lease or the economic life of
the asset, whichever is shorter.

GOODWILL

    The Company is amortizing goodwill on a straight-line method over lives
ranging from 15 to 40 years, principally 40 years.

    Financial Accounting Standards Board (FASB) Statement No. 121, ACCOUNTING
FOR THE IMPAIRMENT OF LONG-LIVED ASSETS AND FOR LONG-LIVED ASSETS TO BE DISPOSED
OF became effective for the year ended December 31, 1996.  Statement No. 121
establishes accounting standards for the impairment of long-lived assets,
certain identifiable


                                     A-29


                            NOTES TO FINANCIAL STATEMENTS


NOTE 1.  NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES, (CONTINUED)

intangibles and goodwill related to those assets to be held and used and for
long-lived assets and certain identifiable intangibles to be disposed of.  No
adjustments were required for Statement No. 121.

    The Company also periodically reviews the value of its goodwill not related
to specific long-lived assets to determine if an impairment has occurred.  The
Company does not believe that an impairment of its goodwill has occurred based
on an evaluation of operating income, cash flows and business prospects.

DISTRIBUTION AGREEMENTS AND CUSTOMER LISTS

    Distribution agreements and customer lists acquired pursuant to a previous
acquisition have been amortized using the straight-line method over their
respective estimated economic lives and these intangibles were fully amortized.

INCOME TAXES

    Deferred taxes are provided on a liability method whereby deferred tax
liabilities are recognized for taxable temporary differences and deferred tax
assets are recognized for deductible temporary differences and operating loss
and tax credit carryforwards.  Temporary differences are the differences between
the reported amounts of assets and liabilities and their tax bases.  Deferred
tax assets are reduced by a valuation allowance when it cannot be demonstrated
that the deferred tax assets are more likely than not to be realized.  Deferred
tax assets and liabilities are adjusted for the effects of changes in tax laws
and rates on the date of enactment.

EARNINGS PER COMMON SHARE

    Earnings per common share are computed using the weighted average number of
shares of common stock outstanding.  The weighted average number of shares used
for computing fully diluted earnings per share assumes that the 7% Convertible
Subordinated Notes due 2006 (the Notes) which were sold by the Company in the
first quarter of 1996 through a private offering are converted at $14.125 per
share on the date they were issued.  The Notes are not common stock equivalents
and, therefore, are not considered in determining the primary weighted average
number of shares.  Net income used in computing fully diluted earnings per share
is increased for the interest expense, net of tax, associated with the Notes.

FAIR VALUE OF FINANCIAL INSTRUMENTS

    The Company's financial instruments consist primarily of cash, accounts
receivable and payable, and debt instruments.  The carrying value of financial
instruments, other than the debt instruments, is representative of their fair
value due to short-term maturity.  The carrying value of the Company's revolving
line of credit and subordinated debt is considered to approximate their fair
value because the interest rate of these instruments is consistent with current
rates offered to the Company.  The fair value of the 7% Convertible Subordinated
Notes is $58,933,000 based upon quoted market prices.

ACCOUNTING FOR STOCK-BASED COMPENSATION

    During 1996 the Company adopted FASB Statement No. 123, ACCOUNTING FOR
STOCK-BASED COMPENSATION, which establishes financial accounting and reporting
standards for stock-based compensation plans.  The statement suggests
stock-based compensation transactions with employees be accounted for at fair
value.  Transactions after December 15, 1995 with nonemployees must be accounted
for based on the fair value of the consideration received or the fair value of
the equity instruments issued, whichever is more reliably measurable.  An
enterprise may continue to follow the requirements of Accounting Principles
Board (APB) Opinion No. 25 for employees, which does not require compensation to
be recorded if the consideration to be received is at least equal to the market
value of the shares at the measurement date.  If an enterprise elects to follow
APB Opinion No. 25, it must disclose the pro forma effects on net income as if
compensation were measured in accordance with the suggestions of Statement No.
123.  The Company follows APB Opinion No. 25.


                                     A-30



                            NOTES TO FINANCIAL STATEMENTS


NOTE 2.  BUSINESS COMBINATIONS

    In the period from 1994 to 1996, the Company completed several business
combinations.  All of these acquisitions were accounted for as purchase business
combinations with the operations of the acquired business included subsequent to
the acquisition date.  Each of the acquired businesses had operations similar to
the Company's.  These acquisitions are described as follows:

IN-STOCK ACQUISITION

    On April 4, 1994, the Company completed the purchase of the assets and
business of the In-Stock Products division of Anchor Group, Inc. (In-Stock),
located in Boston, Massachusetts.

INLAND EMPIRE INTERCONNECTS ACQUISITION

    On August 16, 1995, the Company completed the purchase of the assets and
business of Inland Empire Interconnects (IEI), an Ontario, California molded
cable assembly company.

EDAC AND SUBSIDIARY (DEANCO ACQUISITION)

    On December 20, 1995, the Company completed the purchase of all the issued
and outstanding capital stock of Electrical Distribution Acquisition Company
(EDAC).  EDAC, a holding company, and its wholly owned subsidiary, Deanco, Inc.
(Deanco), were acquired for $34,106,000 of stock payment notes, the assumption
of $5,962,000 of existing EDAC stockholder notes and the assumption of all other
debt of Deanco.  These notes were paid on January 2, 1996.  The Company merged
EDAC into the Company in January 1996 and merged Deanco into the Company in
October 1996.

    In connection with the Deanco Acquisition, the Company closed certain of
its own facilities and incurred other costs associated with the consolidation of
the operations of Deanco into the Company.  During 1995 the Company recognized a
restructuring charge of $1,450,000.  All of these costs were paid by December
31, 1996.  No adjustments were made to the original estimates of this
restructuring accrual.

    Also in conjunction with the Deanco Acquisition, the Company accrued
restructuring costs of $3,100,000 at December 31, 1995 related to the
consolidation of Deanco's operations into the Company.  Those costs related to
the operations of Deanco were recorded as a purchase accounting adjustment,
resulting in an increase in goodwill.  At December 31, 1995, current accrued
restructuring costs of $3,824,000 and long-term restructuring costs of $900,000
consisted of the unpaid portion of $1,450,000 and $3,100,000 restructuring
charge and other restructuring items related to past acquisitions.  At December
31, 1996 the remaining accrued restructuring costs of $538,000 consist of
approximately $140,000 for severance, $165,000 for lease and facility costs for
Deanco facilities to be closed and other items of $232,000.  During 1996 certain
adjustments were made to the preliminary estimates recorded at December 31,
1995.  These purchase accounting adjustments related to a reduction in costs for
redundant facility consolidations of $900,000 due to the Company's decision to
retain Deanco's Santa Clara facility and close Richey's San Jose facility.  This
reduction was offset by an increase in product line termination costs from
$300,000 to $665,000, an increase in severance costs for Deanco employees of
$148,000 and an increase in other costs directly attributable to the
acquisition.  The Company expects the remaining accrued restructuring costs of
$538,000 to be paid within the next 12 months.

MS ELECTRONICS

    On March 19, 1996, the Company completed the acquisition of the assets and
business of MS Electronics, Inc. (MS Electronics).  The purchase price and
related transaction costs, including the assumption of MS Electronics' debt of
$525,000, were approximately $3,111,000 and were paid in cash.  The allocation
of the purchase price is as follows:  $2,231,000 to estimated fair value of
tangible assets acquired, $1,288,000 to liabilities assumed and $2,168,000 to
goodwill.

SUMMIT DISTRIBUTORS

    On December 5, 1996, the Company completed the acquisition of the assets
and business of Summit Distributors, Inc.  The purchase price and related
transactions costs were $1,138,000 and were paid in cash.  The preliminary
allocation of the purchase price was $1,095,000 to current assets and $43,000 to
fixed assets.



                                     A-31




                            NOTES TO FINANCIAL STATEMENTS


NOTE 2.  BUSINESS COMBINATIONS, (CONTINUED)

PRO FORMA RESULTS (UNAUDITED)

    The following pro forma results assume the 1995 Deanco acquisition occurred
as of the beginning of 1995.  The 1996 Summit Distributors and MS Electronics
acquisitions and the 1995 IEI acquisition are not included in the pro forma
financial information because those acquisitions would not have materially
changed reported sales or net income.  The unaudited pro forma results have been
prepared utilizing the historical financial statements of the Company and Deanco
before extraordinary items.  The unaudited pro forma results give effect to
certain adjustments, including amortization of acquired intangibles and
goodwill, elimination of duplicate facilities and redundant salaries, interest
expense and related tax effects.

                                                    Year Ended
                                                 December 31, 1995
                                                    (Unaudited)
                                                 -----------------
 Net Sales . . . . . . . . . . . . . . . . .       $ 216,983,000
 Net Income. . . . . . . . . . . . . . . . .           4,377,000
 Earnings per share. . . . . . . . . . . . .                0.54


    The pro forma financial information does not purport to be indicative of
the results of operations that would have occurred had the transactions actually
taken place at the beginning of the period presented.

NOTE 3.  IMPROVEMENTS AND EQUIPMENT

    Improvements and equipment at December 31 consist of the following:

                                                   1995           1996
                                                 ----------     ----------
 Improvements. . . . . . . . . . . . . . . .     $2,084,000     $1,738,000
 Furniture, fixtures and equipment . . . . .      2,597,000      4,998,000
                                                 ----------     ----------
                                                  4,681,000      6,736,000
 Less accumulated depreciation and amortization   1,212,000      3,068,000
                                                 ----------     ----------
                                                 $3,469,000     $3,668,000
                                                 ----------     ----------
                                                 ----------     ----------

NOTE 4.  BORROWING ARRANGEMENTS

REVOLVING LINE OF CREDIT

    The Company has a bank revolving line of credit of $45,000,000, which
expires December 31, 1999.  The revolving line of credit allows advances of up
to 85% of eligible receivables and 50% of eligible inventory, as defined.  The
revolving line of credit has several interest rate pricing features available
and at December 31, 1996, $8,000,000 bears interest at the Eurodollar rate plus
2.25% (total of 7% at December 31, 1996) and $2,450,000 bears interest at 1%
above the bank's prime rate (total of 9.25% at December 31, 1996).  The Company
is required to pay the lender a quarterly unused line fee equal to 3/8%,
quarterly, of the difference between the maximum commitments and the daily
average outstanding borrowings for the prior quarter.  The credit agreement
contains various restrictive covenants which require the Company to meet certain
financial conditions, including maintaining a minimum level of stockholders'
equity, minimum profitability, fixed charge coverage and cash flow leverage
ratios.  In addition, the Company is restricted from the payment of cash
dividends.  At December 31, 1996, $10,450,000 was outstanding under the
Company's revolving line of credit.  The Company intends to maintain


                                     A-32




                            NOTES TO FINANCIAL STATEMENTS


NOTE 4.  BORROWING ARRANGEMENTS, (CONTINUED)


borrowings of at least $7,450,000 during 1997; therefore, $3,000,000 of the
balance is classified as a current liability.

    The following is a summary of borrowings under revolving lines of credit:


 

                                                                  1994                 1995                1996
                                                               -----------         -----------         -----------
                                                                                               
 Weighted average interest rate in effect
    at year end. . . . . . . . . . . . . . . . . . . .               10.0%                8.2%                7.5%
 Available borrowings at year end. . . . . . . . . . .         $ 5,452,000         $18,261,000         $28,195,000
 Maximum outstanding borrowings during
    the year . . . . . . . . . . . . . . . . . . . . .          12,610,000          18,361,000          31,106,000
 Weighted average interest rate for the
    borrowings outstanding during the year . . . . . .                8.9%                9.3%                7.7%


 

    The Company's revolving line of credit provides that up to $3,000,000 of
the available line can be used for letters of credit.  None were outstanding at
year end.

7% CONVERTIBLE SUBORDINATED NOTES OFFERING

    In 1996 the Company issued $55,755,000 of 7% Convertible Subordinated Notes
(the Notes) due 2006.  The Notes are convertible into 3,947,000 shares of the
Company's common stock at a conversion price of $14.125 per share (subject to
certain adjustments) at the holder's option at any time after 60 days following
the issuance and prior to maturity.  The payment of principal and interest on
these notes is subordinated to all senior debt consisting of $10,450,000
outstanding at December 31, 1996 under the Company's revolving line of credit.
The Company maintains an effective shelf registration statement with the
Securities and Exchange Commission to register resales of the Notes and the
common stock issuable upon conversion.

    The Notes may not be redeemed by the Company prior to March 4, 1999.
Thereafter the Notes may be redeemed at the option of the Company at a
redemption price of 103.5% of outstanding principal in 1999 decreasing by 0.5%
each year until March 1, 2006.

    In addition, under certain circumstances, the holders of these Notes have
the option to require the Company to repurchase the Notes.  These designated
events include a more than 50% change in control.


                                     A-33




                            NOTES TO FINANCIAL STATEMENTS


NOTE 4.  BORROWING ARRANGEMENTS, (CONTINUED)


LONG-TERM DEBT

Long-term debt at December 31, as follows:



 

                                                                                      1995                1996
                                                                                  ------------        ------------
                                                                                                
 Revolving line of credit                                                         $ 18,361,000        $ 10,450,000
 Convertible subordinated notes payable, interest at 7.0%
    due March 1 and September 1 annually, principal due September 1, 2006.               --             55,755,000
 Stock payment notes for Deanco Acquisition, paid
    January 2, 1996.                                                                34,106,000               --
 Subordinated promissory notes payable to former EDAC
    management and stockholders, paid January 2, 1996.                               5,962,000               --
 Subordinated promissory notes payable to former stock-
    holders of Deanco, unsecured, due in annual installments
    of $1,000,000 beginning in 1997 with a final payment of $953,000 on
    September 30, 1999, interest payable annually at 8%.                             2,982,000           2,953,000
 Unsecured subordinated note payable to a corporation,
    paid January 1, 1996.                                                              700,000               --
 Other                                                                                 376,000              59,000
                                                                                  ------------        ------------
 Less current maturities                                                            62,487,000          69,217,000
                                                                                       835,000           4,012,000
                                                                                  ------------        ------------
                                                                                  $ 61,652,000        $ 65,205,000
                                                                                  ------------        ------------
                                                                                  ------------        ------------


 

Aggregate maturities of long-term debt as of December 31, 1996, are as follows:

 1997. . . . . . . . . . . . . . . . . . . .    $ 4,012,000
 1998. . . . . . . . . . . . . . . . . . . .      1,000,000
 1999. . . . . . . . . . . . . . . . . . . .      8,450,000
 2006. . . . . . . . . . . . . . . . . . . .     55,755,000
                                                 -----------
                                                $69,217,000
                                                 -----------
                                                 -----------


                                     A-34



                            NOTES TO FINANCIAL STATEMENTS


NOTE 5.  ACCRUED EXPENSES

    Accrued expenses at December 31 consist of the following:

                                                    1995              1996
                                                  ----------        ----------

 Compensation. . . . . . . . . . . . .           $3,193,000        $2,790,000
 Interest. . . . . . . . . . . . . . .            1,040,000         1,464,000
 Other . . . . . . . . . . . . . . . .            1,855,000           248,000
                                                  ----------        ----------
                                                 $6,088,000        $4,502,000
                                                  ----------        ----------
                                                  ----------        ----------


NOTE 6.  COMMITMENTS AND CONTINGENCIES

OPERATING LEASES

     The Company leases office and warehouse space under operating lease
agreements with various terms and conditions with rent escalations typically
based on the Consumer Price Index.

     Future minimum lease payments under these leases, exclusive of lease
payments on duplicate facilities which have been accrued, are as follows:

 1997. . . . . . . . . . . . . . . . . . . .                $1,965,000
 1998. . . . . . . . . . . . . . . . . . . .                 1,923,000
 1999. . . . . . . . . . . . . . . . . . . .                 1,760,000
 2000. . . . . . . . . . . . . . . . . . . .                 1,004,000
 Thereafter. . . . . . . . . . . . . . . . .                 1,796,000
                                                            ----------
                                                            $8,448,000
                                                            ----------
                                                            ----------


    Total rent expense under operating leases, including rent for facilities
leased on a month-to-month basis, was $678,000, $903,000 and $2,016,000 for
1994, 1995 and 1996, respectively.

CONTINGENT LIABILITIES

    There are no material legal proceedings pending or, to the knowledge of
management, threatened against the Company.

NOTE 7.  SERVICE AND MANAGEMENT AGREEMENT

    The Company is party to a Service and Management Agreement dated
December 18, 1990, as amended and modified, with a director.  The Service and
Management Agreement terminates on December 31, 1997; however, the term is
automatically extended for additional two-year consecutive periods unless
earlier terminated.  Management fees payable under this and prior agreements
were approximately $244,000 in 1994, $234,000 in 1995 and $175,000 in 1996,
including a $64,000 termination payment in 1995 to a former party to this
agreement.


                                     A-35




                            NOTES TO FINANCIAL STATEMENTS


NOTE 8.  INCOME TAXES

    Components of income tax expense are as follows:


                                                                 1994               1995           1996
                                                               ----------         ----------     ----------
                                                                                        
Currently paid or payable:
    Federal. . . . . . . . . . . . . . . . . . . . . . . . .    $   60,000        $  745,000      $  697,000
    State. . . . . . . . . . . . . . . . . . . . . . . . . .        56,000           108,000         426,000
    Deferred . . . . . . . . . . . . . . . . . . . . . . . .     1,157,000         1,065,000       3,253,000
                                                                ----------        ----------      ----------
                                                                $1,273,000        $1,918,000      $4,376,000
                                                                ----------        ----------      ----------
                                                                ----------        ----------      ----------


    The following table presents a reconciliation from the amount of income tax
determined by applying the U.S. federal income tax rate to pretax income for
those adjustments representing more than 5% of pretax income:




                                                                     1994        1995      1996
                                                                     ----        ----      ----
                                                                                 
 Computed "expected" statutory rate                                   35%         35%       35%
 Increase (decrease) in rate resulting from:
      State income taxes, net of federal tax benefit                   5           5         5
                                                                      --          --        --
                                                                      40%         40%       40%
                                                                      --          --        --
                                                                      --          --        --


    Net deferred taxes at December 31 consist of the following:



 

                                                                  1995                1996
                                                               -----------         -----------
                                                                             
 Deferred tax liabilities, other . . . . . . . . . . .         $   314,000         $   210,000
                                                               -----------         -----------

 Deferred tax assets:
   Net operating loss carryforwards (NOLs) . . . . . .           7,096,000           4,720,000
   Costs capitalized to inventory for tax purposes . .             919,000             716,000
   Accrued expenses not deductible until paid. . . . .           2,462,000             410,000
   Other . . . . . . . . . . . . . . . . . . . . . . .             890,000             968,000
                                                               -----------         -----------
                                                                11,367,000           6,814,000
   Less valuation allowance. . . . . . . . . . . . . .          (2,126,000)         (1,757,000)
                                                               -----------         -----------
                                                                 9,241,000           5,057,000
                                                               -----------         -----------
      Net. . . . . . . . . . . . . . . . . . . . . . .         $ 8,927,000         $ 4,847,000
                                                               -----------         -----------
                                                               -----------         -----------



 

           Net deferred tax assets described above have been included in the
accompanying balance sheets as follows:

                                              1995                1996
                                           -----------         -----------
 Current assets. . . . . . . . . .         $ 3,948,000         $ 2,629,000
 Noncurrent assets . . . . . . . .           4,979,000           2,218,000
                                            -----------         -----------
                                           $ 8,927,000         $ 4,847,000
                                            -----------         -----------
                                            -----------         -----------

                                     A-36



                            NOTES TO FINANCIAL STATEMENTS


NOTE 8.  INCOME TAXES, (CONTINUED)

    As of December 31, 1996, the Company had acquired net operating loss
carryforwards which have the following expiration dates:

 Expiration Date                                            FEDERAL
 ---------------                                           -----------
 2005. . . . . . . . . . . . . . . . . . . .               $   454,000
 2006. . . . . . . . . . . . . . . . . . . .                 9,673,000
 2007. . . . . . . . . . . . . . . . . . . .                 2,588,000
 2008. . . . . . . . . . . . . . . . . . . .                   771,000
                                                           -----------
                                                           $13,486,000
                                                           -----------
                                                           -----------

    Section 382 of the Internal Revenue Code of 1986 imposes certain
limitations on a corporation's ability to use net operating loss carryforwards
if more than a 50% ownership change occurs.  The Company's issuance of
additional common stock in 1995, together with an earlier acquisition,
constitutes a more than 50% ownership change.  As a result, the usage of the
NOLs are restricted to approximately $4,900,000 on an annual basis.

    The Company has been consistently profitable and generated taxable income
before NOL carryforwards of approximately $6.9 million in 1996.  Based on its
current level of profitability, management believes that the Company will be
able to fully utilize the NOLs prior to their expiration.  However, management
has continued to maintain a valuation allowance due to the inherent
uncertainties in forecasting future taxable income.  Management believes that it
is "more likely than not" that the Company will be able to generate the
approximately $14 million of future taxable income necessary to realize the
recorded amount of the net deferred tax asset prior to the expiration of the
NOLs.  The amount of deferred tax asset considered realizable, however, would be
reduced in the near term if estimates of future taxable income during the
carryforward period are reduced.

NOTE 9.  EMPLOYEE BENEFIT PLANS

STOCK APPRECIATION RIGHTS PLAN

    On July 7, 1993, the Company adopted a Stock Appreciation Rights Plan.
Each stock appreciation right (SAR) provides the recipient with the right to
receive a cash payment equal to the excess, if any, of the fair market value of
a share of the Company's common stock on the date the SAR is exercised over the
fair market value on the date the SAR was granted, or such other value as
determined by the Compensation Committee.  The maximum number of rights that may
be awarded under the plan may not exceed approximately 589,000.  To date, no
rights have been granted under this plan.

STOCK OPTION PLAN

    The Company has a stock option plan adopted in 1992.  The options granted
generally vest at a rate of 25% per year over a four-year period and expire ten
years from the date of grant.  The exercise price of the options is equal to the
quoted market price at the date of grant.


                                     A-37




                            NOTES TO FINANCIAL STATEMENTS


NOTE 9.  EMPLOYEE BENEFIT PLANS, (CONTINUED)


 

                                                              Weighted                      Weighted                       Weighted
                                                               Average                       Average                        Average
                                                              Exercise                      Exercise                       Exercise
                                                 1994          Price           1995           Price          1996            Price
                                               --------        --------       -------        --------       -------         --------
                                                                                                          
Outstanding at beginning of year . . .              --                       226,737          $6.00        493,071          $6.34
   Granted . . . . . . . . . . . . . .         226,737          $6.00        266,334           6.63        135,300           9.80
   Terminated and canceled . . . . . .              --                            --                       (7,363)           6.00
   Exercised . . . . . . . . . . . . .              --                            --                       (8,360)           6.07
                                               --------                      --------                     --------

Outstanding at end of year . . . . . .         226,737          $6.00        493,071          $6.34        612,648          $7.11
                                               --------                      --------                      --------
                                               --------                      --------                      --------

Options exercisable, end of year . . .              --                        45,642          $6.00        186,591          $6.67

Available for grant, end of year . . .         362,197                        95,863                       284,424

Weighted average fair value of
  options granted during the year. . .              --                         $4.35                         $7.07


 

    The following table summarizes information about stock options outstanding
at December 31, 1996:


         Options outstanding
- -------------------------------------------------
  Number         Remaining                              Options
Outstanding    Contractual Life   Exercise Price      Exercisable
- -----------    ----------------    --------------      -----------
 212,014           7                   $ 6              106,005
 265,334           8                     7               65,586
 110,300           9                    10               15,000
  25,000           9                    11                   --
 -------                                                --------

 612,648           8                                    186,591
 -------                                                --------
 -------                                                --------

    The Company applies APB Opinion 25 and related Interpretations in
accounting for its plans.  Accordingly, no compensation cost has been
recognized.  Had compensation cost for the Company's stock option plan been
determined based on the fair value at the grant dates for awards under this plan
consistent with the method of FASB Statement No. 123, the Company's net income
and earnings per share would have been reduced to the pro forma amounts
indicated below:

                                                 1995           1996
                                            ------------    ------------

 Net income                  As reported    $  2,868,000    $  6,536,000
                             Pro forma         2,707,000       6,242,000

 Primary earnings per share  As reported            0.36            0.72
                             Pro forma              0.34            0.69

 Fully diluted earnings
   per share                 As reported            0.36            0.70
                             Pro forma              0.34            0.67

    The pro forma compensation cost was recognized for the fair value of the
stock options granted, which was estimated using the Black-Scholes model with
the following assumptions:  expected volatility of 42% and 53% in


                                     A-38




                            NOTES TO FINANCIAL STATEMENTS


NOTE 9.  EMPLOYEE BENEFIT PLANS, (CONTINUED)

1995 and 1996, respectively, and risk-free interest rate of 6.75% for 1995 and
6.5% for 1996, the options would be exercised at the end of the exercise period
and no dividends.

401(K) SAVINGS PLAN

    The Company has a defined contribution 401(k) savings plan covering
substantially all its employees.  The plan provides the Company with an option
to match any participants' contributions; however no such contributions were
made by the Company during 1994, 1995 or 1996.

NOTE 10.  QUARTERLY FINANCIAL DATA (UNAUDITED)


 

                                                  First              Second               Third              Fourth
                                                 Quarter             Quarter             Quarter             Quarter
                                              -------------       -------------       -------------       -------------
                                                                                               
 1996
  Net sales. . . . . . . . . . . . . .        $  58,384,000       $  58,212,000       $  53,713,000       $  55,906,000
  Gross profit . . . . . . . . . . . .           14,313,000          14,806,000          14,116,000          14,316,000
  Net income . . . . . . . . . . . . .            1,142,000           1,735,000           1,754,000           1,905,000
  Primary earnings per
  common share . . . . . . . . . . . .                 0.13                0.19                0.19                0.21
  Fully diluted earnings per
  common share . . . . . . . . . . . .                 0.13                0.18                0.18                0.20

 1995
  Net sales. . . . . . . . . . . . . .           26,596,000          28,305,000          28,803,000          33,353,000
  Gross profit . . . . . . . . . . . .            6,513,000           6,660,000           6,931,000           7,873,000
  Net income . . . . . . . . . . . . .              680,000             909,000           1,070,000             209,000
  Primary earnings per
  common share . . . . . . . . . . . .                 0.12                0.11                0.12                0.02
  Fully diluted earnings per
  common share . . . . . . . . . . . .                 0.12                0.11                0.12                0.02

 1994
  Net sales. . . . . . . . . . . . . .           20,247,000          23,105,000          22,838,000          24,076,000
  Gross profit . . . . . . . . . . . .            4,855,000           5,562,000           5,793,000           5,880,000
  Net income . . . . . . . . . . . . .              355,000             532,000             471,000             535,000
  Primary earnings per
  common share . . . . . . . . . . . .                 0.06                0.09                0.08                0.09
  Fully diluted earnings per
  common share . . . . . . . . . . . .                 0.06                0.09                0.08                0.09



                                      A-39


                                                        EXHIBIT B TO PROSPECTUS

                                      FORM 10-Q
                          SECURITIES AND EXCHANGE COMMISSION
                                Washington, D.C. 20549





[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
    THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 28, 1997

Commission File Number: 0-9788


                        RICHEY ELECTRONICS, INC.
         ------------------------------------------------------
         (Exact name of registrant as specified in its charter)

          Delaware                                  33-0594451
- --------------------------------            -------------------------------
  (State or other jurisdiction              (I.R.S. Employer Identification
of incorporation or organization)                   No.)

               7441 Lincoln Way, Garden Grove, California     92641
               -------------------------------------------------------
               (Address of Principal Executive Office)      (Zip Code)

                                 (714) 898-8288
                 ----------------------------------------------------
                 (Registrant's Telephone Number, including Area Code)

    Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.   Yes   X    No
                                                 ___       ___

    As of May 7, 1997, 9,063,935 shares of the registrant's Common Stock,
$0.001 par value, were issued and outstanding.


                                         B-1





                            PART I - FINANCIAL INFORMATION

ITEM 1.  FINANCIAL STATEMENTS.

                               RICHEY ELECTRONICS, INC.
                               CONDENSED BALANCE SHEETS
                                     (UNAUDITED)

                                            March 28,          December 31,
                                              1997                 1996
                                        --------------      ----------------
ASSETS
CURRENT ASSETS
 Cash                                   $      29,000          $      30,000
 Trade receivables                         29,367,000             27,111,000
 Inventories                               41,865,000             37,631,000
 Deferred income taxes                      2,629,000              2,629,000
 Other current assets                         750,000              1,235,000
                                        ---------------       ---------------
    Total current assets                $  74,640,000          $  68,636,000
                                        ---------------       ----------------
LEASEHOLD IMPROVEMENTS, EQUIPMENT
 FURNITURE AND FIXTURES, net            $   3,648,000          $   3,668,000

                                        ---------------       ----------------
OTHER ASSETS AND INTANGIBLES
 Deferred income taxes                  $   1,842,000          $   2,218,000
 Deferred debt costs                        2,451,000              2,533,000
 Other                                        435,000                473,000
 Goodwill                                  46,930,000             47,233,000
                                        --------------         ----------------
                                        $  51,658,000          $  52,457,000
                                        --------------         ----------------
                                        $ 129,946,000          $ 124,761,000
                                        --------------         ----------------
                                        --------------         ----------------
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
 Current maturities of long-term debt   $   3,553,000         $   4,012,000
 Accounts payable                          22,275,000            16,551,000
 Accrued expenses                           2,977,000             4,502,000
 Accrued restructuring costs                  280,000               538,000
                                        --------------         ---------------
    Total current liabilities           $  29,085,000         $  25,603,000
                                        --------------         ---------------

LONG-TERM DEBT
 Subordinated notes payable             $   2,000,000         $   2,000,000
 Convertible subordinated notes payable    55,755,000            55,755,000
 Other long-term debt                       7,450,000             7,450,000
                                       --------------        ---------------
                                        $  65,205,000         $  65,205,000
                                       --------------        ---------------

STOCKHOLDERS' EQUITY
 Preferred Stock                                   --                    --
 Common Stock                                   9,000                 9,000
 Additional paid-in-capital                21,001,000            21,001,000
 Retained earnings                         14,646,000            12,943,000
                                      ---------------        ---------------
    Total stockholders' equity          $  35,656,000         $  33,953,000
                                      ---------------        ---------------
                                        $ 129,946,000         $ 124,761,000
                                      ---------------       ----------------
                                      ---------------       ----------------

                     SEE NOTES TO CONDENSED FINANCIAL STATEMENTS
                                         B-2



                               RICHEY ELECTRONICS, INC.
                          CONDENSED STATEMENTS OF OPERATIONS
                                     (UNAUDITED)


                                                          Quarter Ended
                                           -------------------------------------
                                                  March 28,            March 29,
                                                    1997                 1996
                                               ------------        -------------

Net Sales:                                    $56,794,000            $58,384,000

Cost of Goods Sold:                            42,265,000             44,071,000
                                              ------------         -------------

Gross Profit:                                 $14,529,000            $14,313,000
                                              ------------         -------------


Operating expenses:
   Selling, warehouse, general, and
      administrative                         $10,054,000            $10,780,000
   Amortization of intangibles                   369,000                337,000
                                             ------------          -----------

                                             $10,423,000            $11,117,000
                                             -------------          -----------
   Operating income                          $ 4,106,000           $  3,196,000
      Interest Expense                         1,261,000              1,292,000
                                             ------------           -----------

      Income before income taxes             $ 2,845,000           $  1,904,000

      Federal and state income taxes           1,142,000                762,000
                                             ------------           -----------

      Net income                             $ 1,703,000           $  1,142,000
                                             ------------           -----------
                                             ------------           -----------
      Earnings per Share 
      Primary                                      $0.19                 $0.13
                                             ------------           -----------
                                             ------------           -----------
      Fully Diluted                                $0.18                 $0.13
                                             ------------          ------------
                                             ------------          ------------

      Weighted Average number of shares
      outstanding:
      Primary                                  9,063,000             9,057,000
                                             ------------           -----------
                                             ------------           -----------
      Fully diluted                           13,010,000            10,406,000
                                             ------------           -----------
                                             ------------           -----------
                     SEE NOTES TO CONDENSED FINANCIAL STATEMENTS
                                         B-3





                               RICHEY ELECTRONICS, INC.
                          CONDENSED STATEMENTS OF CASH FLOWS
                                     (UNAUDITED)





 
                                                                                    Quarter Ended
                                                                          ------------------------------
                                                                           March 28,           March 29,
                                                                              1997               1996
                                                                          ------------        ----------
                                                                                        
CASH FLOWS FROM OPERATING ACTIVITIES
Net income                                                              $  1,703,000          $1,142,000
Adjustments to reconcile net income to net cash
   provided by operating activities:
   Depreciation and amortization                                             762,000             673,000
   Deferred income taxes                                                     376,000             185,000
   Changes in operating assets and liabilities:
      (Increase) in trade receivables                                     (2,256,000)         (2,305,000)
      (Increase) in inventories                                           (4,234,000)         (1,493,000)
      Decrease in other assets                                               485,000             250,000
      Increase (decrease) in accounts payable
        and accrued expenses                                               4,199,000            (544,000)
                                                                       -------------        ------------
      Net cash provided by (used in) operating activities               $  1,035,000         ($2,092,000)
                                                                       -------------        ------------
CASH FLOWS (USED IN) INVESTING ACTIVITIES
   Purchase of leasehold improvements and equipment                        ($291,000)          ($368,000)
   Payment of acquisition and restructuring costs                           (286,000)         (3,470,000)
                                                                       -------------        ------------
    Net cash (used in) investing activities                                ($577,000)        ($3,838,000)
                                                                       -------------        ------------

CASH FLOWS FROM FINANCING ACTIVITIES
   Net advances (repayments) on short-term revolving line of credit        ($450,000)                  -
   Net advances (repayments) on long-term revolving line of credit                 -         ($7,181,000)
   Payments on long-term debt                                                 (9,000)        (40,811,000)
   Proceeds from issuance of convertible debt                                      -          55,755,000
   Transaction costs associated with refinancing activities                        -          (2,400,000)
   Proceeds from issuance of common stock                                          -              21,000
                                                                       -------------        ------------
      Net cash provided by (used in) financing activities                  ($459,000)         $5,384,000
                                                                       -------------        ------------
        (Decrease) in cash                                                   ($1,000)          ($546,000)
CASH
   Beginning                                                                $ 30,000            $572,000
                                                                       -------------        ------------
   Ending                                                                   $ 29,000             $26,000
                                                                       -------------        ------------
                                                                       -------------        ------------





                     SEE NOTES TO CONDENSED FINANCIAL STATEMENTS
                                         B-4



                                RICHEY ELECTRONICS, INC.
                       CONDENSED STATEMENTS OF CASH FLOWS, CONTINUED
                                      (UNAUDITED)


                                                          Quarter Ended
                                                -------------------------------
                                                    March 28,         March 29,
                                                     1997              1996
                                                -------------------------------
SUPPLEMENTAL DISCLOSURE OF
CASH FLOW INFORMATION

Cash payments for:
    Interest                                    $2,162,000        $  1,116,000
                                               -------------     -------------
    
                                              -------------     -------------
    Income taxes                                $  46,000          $  10,000
                                               -------------     -------------
                                               -------------     -------------
SUPPLEMENTAL SCHEDULE OF
NONCASH INVESTING AND
FINANCING ACTIVITIES
 Acquisition of MS Electronics:
   Working capital acquired                                       $  888,000

   Fair market value of other assets acquired
     including goodwill                                         $  2,223,000
                                                                 ------------
   Purchase price and related transaction
     costs                                                      $  3,111,000
                                                                 ------------
                                                                 ------------


                     SEE NOTES TO CONDENSED FINANCIAL STATEMENTS


                                         B-5



                               RICHEY ELECTRONICS, INC.

                     CONDENSED STATEMENT OF STOCKHOLDERS' EQUITY
                             QUARTER ENDED MARCH 28, 1997
                                     (UNAUDITED)



 
                                                           Common Stock
                                            -------------------------------------------
                                                                          Additional
                                Preferred       Shares                      paid-in        Retained
                                  Stock       Outstanding     Par Value     Capital        Earnings               Total
                               -----------   -------------   -----------  -----------    -------------       ------------
                                                                                          
Balance, December 31, 1996           --      9,063,000         $9,000    $21,001,000     $12,943,000         $33,953,000
    Net income                       --             --             --              --      1,703,000           1,703,000
                               -----------   -------------   -----------  -----------    -------------       ------------
Balance, March 28, 1997              --      9,063,000         $9,000     $21,001,000    $14,646,000         $35,656,000
                               -----------   -------------   -----------  -----------    -------------       ------------
                               -----------   -------------   -----------  -----------    -------------       ------------




                     SEE NOTES TO CONDENSED FINANCIAL STATEMENTS
                                         B-6



                               RICHEY ELECTRONICS, INC.
                       NOTES TO CONDENSED FINANCIAL STATEMENTS
                                     (UNAUDITED)



NOTE 1.  NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES

NATURE OF BUSINESS

    Richey Electronics, Inc. is a specialty distributor of electronic
components and a provider of related value-added assembly services.  The Company
distributes a broad line of connectors, switches, wire, cable and heat
shrinkable tubing and other interconnect, electromechanical and passive
components used in the assembly and manufacturing of electronic equipment.
Richey Electronics also provides a wide variety of value-added assembly
services.  These value-added assembly services consist of (i) component
assembly, which is the assembly of components to manufacturer specifications and
(ii) contract assembly, which is the assembly of cable assemblies, battery packs
and mechanical assemblies to customer specifications.  The Company's customers
are primarily small- and medium-sized original equipment manufacturers.

SIGNIFICANT ACCOUNTING POLICIES

    The accompanying unaudited financial statements have been prepared in
accordance with generally accepted accounting principles for interim financial
information and with the instructions to Form 10-Q and Article 10 of Regulation
S-X.  Accordingly, they do not include all of the information and footnotes
required by generally accepted accounting principles for complete financial
statements.  In management's opinion, the accompanying financial statements
reflect all material adjustments, consisting of only normal and recurring
adjustments, necessary for a fair statement of the results for the interim
periods presented.  The results for the interim periods ended March 28, 1997 and
March 29, 1996 are not necessarily indicative of the results which will be
reported for the entire year.

    EARNINGS PER SHARE

    The weighted average number of shares used for computing fully diluted
earnings per share assumes that the 7% Convertible Subordinated Notes due 2006
(the "Notes") which were sold by the Company in the first quarter of 1996
through a private offering are converted at $14.125 per share on the date they
were issued.  The Notes are not common stock equivalents and, therefore, are not
considered in determining the primary weighted average number of shares.  Net
income used in computing fully diluted earnings per share is increased for the
interest expense, net of tax, associated with the Notes.


                                         B-7




                               RICHEY ELECTRONICS, INC.
                NOTES TO CONDENSED FINANCIAL STATEMENTS - (CONTINUED)
                                     (UNAUDITED)

    INCOME TAXES


    Income tax expense in these interim financial statements is recorded based
upon the Company's expected annual effective income tax rate.

    For further information, refer to the audited financial statements of the
Company and notes thereto for the year ended December 31, 1996, included in the
Company's Annual Report on Form 10-K.


NOTE 2.  BUSINESS COMBINATIONS

DEANCO ACQUISITION IN 1995

    In connection with the acquisition of Deanco, Inc. (the "Deanco
Acquisition") on December 20, 1995, the Company accrued restructuring costs of
$3,100,000 related to the consolidation of Deanco's operations into the Company.
These costs were recorded as a purchase accounting adjustment, resulting in an
increase of the preliminary purchase price allocation.  The preliminary
allocation of the Deanco purchase price will be finalized when all final costs
are established.  No adjustments have been made to the original estimates of
these restructuring costs.  At December 31, 1996, $538,000 of these
restructuring costs were unpaid.  During the first quarter of 1997, $258,000 of
these remaining restructuring costs were paid.

ACQUISITIONS IN 1996

    On March 19, 1996, the Company completed the acquisition of the assets and
business of MS Electronics, Inc.  MS Electronics specializes in the distribution
of interconnect, electromechanical and passive electronic components and
provides related value-added assembly services in the Baltimore-Washington
marketplace.  On December 5, 1996, the Company acquired the assets and business
of Summit Distributors, Inc., a Buffalo, New York distributor of interconnect,
electromechanical and passive electronic components.  These acquisitions were
accounted for as purchase business combinations with the operations of the
acquired business included subsequent to the acquisition date.  Pro forma
financial information for the first quarter of 1996 is not provided with respect
to these acquisitions because they would not have materially changed reported
sales or net income.


                                         B-8



                               RICHEY ELECTRONICS, INC.
                NOTES TO CONDENSED FINANCIAL STATEMENTS - (CONTINUED)
                                     (UNAUDITED)

NOTE 3.  STOCK OPTIONS AND NET OPERATING LOSS CARRYFORWARDS


STOCK OPTIONS

    The Company has a stock option plan adopted in 1992.  In general, the
options granted vest at a rate of 25% per year over a four-year period and
expire ten years from the date of grant.  The options granted were granted at
fair market value at the date of grant.  As of March 28, 1997, total options
authorized for grant were 905,432, of which 235,174 were available for grant.
During the three months ended March 28, 1997, 60,500 options were granted to
employees at a price of $12-7/8 and no options were exercised.


NET OPERATING LOSS CARRYFORWARDS

    As of December 31, 1996, the Company had acquired net operating loss
carryforwards ("NOLs") with the following expiration dates:

 Expiration Date                                  Federal
 ---------------                               -------------
    2005   ...................................  $  454,000
    2006   ...................................   9,673,000
    2007   ...................................   2,588,000
    2008   ...................................     771,000
                                                ------------
                                                $13,486,000
                                                ------------
                                                ------------

    Section 382 of the Internal Revenue Code of 1986, as amended and the
related regulations impose certain limitations on a corporation's ability to use
NOLs if more than a 50% ownership change occurs.  The Company's issuance of
additional common stock in 1995, together with an earlier acquisition,
constitute a more than 50% ownership change.  As a result, the usage of the NOLs
is restricted to approximately $4,900,000 on an annual basis.


                                         B-9



ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
         RESULTS OF OPERATIONS.



                               SUMMARY OF SELECTED DATA
                                     (UNAUDITED)

    The following table sets forth certain items in the statements of
operations as a percent of net sales for periods shown and additional items of a
statistical nature.


                                                       Quarter Ended
                                                   ---------------------
                                                   March 28,    March 29,
                                                      1997        1996
                                                   ---------   ---------
 STATEMENTS OF OPERATIONS DATA:
 Net Sales.........................................  100.0%      100.0%
 Cost of Goods Sold................................   74.4        75.5
                                                     ------      ------
    Gross Profit..................................    25.6        24.5
                                                     ------      ------
 Selling, warehouse, general & administrative.....    17.7        18.5
 Amortization of intangibles......................     0.7         0.6
                                                     ------      ------
    Operating Income..............................     7.2         5.5
 Interest Expense.................................     2.2         2.2
                                                     ------      ------
    Income before income taxes....................     5.0         3.3
 Federal and state income taxes...................     2.0         1.3
                                                     ------      ------
 Net Income.......................................     3.0%        2.0%
                                                     ------      ------
                                                     ------      ------




                                                       March 28,      Dec. 31,      Sept. 27,       June 28,    March 29,
                                                         1997          1996           1996           1996         1996
                                                      ----------    -----------    ----------     -----------  -----------
                                                                                                
BALANCE SHEET DATA:
Total assets (000)................................    $ 129,946      $124,761      $128,420        $129,828    $128,099
Working capital (000).............................    $  45,555      $ 43,033      $ 43,311        $ 41,221    $ 39,717
Ratio of current assets to current liabilities....          2.6           2.7           2.6             2.4         2.4
Short-term debt (000).............................    $   3,553      $  4,012      $    263        $    219    $    136
Subordinated long-term notes payable (000)........    $   2,000      $  2,000      $  2,958        $  2,956    $  2,982
Convertible subordinated notes payable (000)......    $  55,755      $ 55,755      $ 55,755        $ 55,755    $ 55,755
Other long-term debt (000)........................    $   7,450      $  7,450      $ 10,034        $ 10,546    $ 11,377
Inventory turnover................................          4.2           4.4           4.2             4.9         5.2
Days sales outstanding in accounts receivable.....         45.0          44.1          46.1            46.4        45.7
Stockholders' equity (000)........................    $  35,656      $ 33,953      $ 32,048        $ 30,288    $ 28,555




                                         B-10




RESULTS OF OPERATIONS

    Net income for the first quarter of 1997 was $1,703,000 compared with net
income of $1,142,000 for the first quarter of 1996, an increase of $561,000 or
49.1%.  For the first quarter of 1997, earnings per share increased to $0.18
based on fully diluted weighted average number of shares outstanding of
13,010,000, up from $0.13 per share for the first quarter of 1996, based on
fully diluted weighted average number of shares outstanding of 10,406,000.

    Net sales for the quarter ended March 28, 1997 were $56,794,000 compared
with net sales of $58,384,000 for the quarter ended March 29, 1996, a decrease
of $1,590,000 or 2.7%.  Net sales of electronic components decreased to
$39,028,000 in the first quarter of 1997 from $42,650,000 in the first quarter
of 1996, a decrease of 8.5%.  Net sales of value-added assembly services
increased to $17,766,000 for the first quarter of 1997 from $15,734,000 for the
corresponding period of 1996, an increase of 12.9%.  The decline in component
sales is attributable to discontinued product lines.  The increase in sales of
value-added assembly services is attributable to the addition of new customers
and the continued trend of OEM outsourcing.

    The Company believes that order backlog (confirmed orders from customers
for shipment within the next 12 months) generally averages two to three months'
sales in the electronics distribution industry.  Order backlog at March 28, 1997
was $57,900,000, up from $53,300,000 at March 29, 1996 and up from $53,800,000
at December 31, 1996.

    Gross profit as a percentage of net sales was 25.6% for the first quarter
of 1997 as  compared to 24.5% for the first quarter of 1996.  This 1.1% increase
in gross profit percentage was due to growth in sales of higher margin
value-added assembly services as a percentage of total sales and improvement in
margins on sales of electronic components.

    Operating expenses for the quarter ended March 28, 1997 were $10,423,000
compared to $11,117,000 for the corresponding period in 1996.  As a percentage
of net sales, operating expenses decreased 0.7% for the quarter ended March 28,
1997 compared to the same period in 1996.  The reduction in operating expenses
was primarily the result of savings realized from the operational integration of
Deanco into the Company through reductions in duplicative facilities, personnel
and other operating costs.  These savings were partially offset by investments
primarily in sales, marketing and MIS personnel.

    Interest expense for the first quarter of 1997 was $1,261,000 as compared
with $1,292,000 for the first quarter of 1996.

    Federal and state income tax expense increased to $1,142,000 (40% effective
rate) for the quarter ended March 28, 1997 from $762,000 (40% effective rate)
for the corresponding period of 1996.  This increase was proportional to the
increase in pre-tax earnings for the quarter.  See Note 3 of Notes to Condensed
Financial Statements for further discussion of income tax matters.


                                         B-11





LIQUIDITY AND CAPITAL RESOURCES

    The Company currently maintains with Wells Fargo Bank, N.A. a $45 million
revolving line of credit.  As of March 28, 1997, the Company had outstanding
borrowings under this revolving line of credit of $10,000,000 and additional
borrowing capacity of $32,000,000.

    Working capital increased to $45,555,000 on March 28, 1997 from $43,033,000
on December 31, 1996, an increase of $2,522,000.  During the first quarter of
1997, the Company generated $4,868,000 of earnings before interest, income
taxes, depreciation and amortization ("EBITDA") as compared to EBITDA of
$3,869,000 for the corresponding period of 1996, an increase of 25.8%.

    During the first quarter of 1997, operating activities generated $7,525,000
in cash from net income, depreciation, amortization, deferred income taxes,
decreases in other assets and increases in accounts payable and accrued
expenses.  During the same period, the Company invested $6,490,000 in inventory
and receivables.  Thus, operating activities for the first quarter of 1997
provided net cash of $1,035,000 as compared to net cash of $2,092,000 used in
operating activities for the same period of 1996.  During the first quarter of
1997, the Company used $577,000 in investing activities, including $291,000 for
capital expenditures and $258,000 for payment of restructuring costs accrued in
connection with the acquisition of Deanco.  See Note 2 of Notes to Condensed
Financial Statements.  This use of cash was financed with net cash from
operating activities.

    For the quarter ended March 28, 1997, inventory turnover was 4.2x compared
to 5.2x for the quarter ended March 29, 1996 and 4.4x for the quarter ended
December 31, 1996.  These decreases are the result of investment in new
nationally franchised lines that require minimum initial stocking levels and
management's forecast of sales growth in 1997.

    Days sales outstanding in accounts receivable were 45.0 days at March 28,
1997 compared to 45.7 days at March 29, 1996 and 44.1 days at December 31, 1996.

RECENT PRONOUNCEMENTS

    In February 1997 the FASB issued Statement No. 128, Earnings Per Share,
(SFAS No. 128) which establishes standards for computing and presenting earnings
per share.  This standard redefines earnings per share under generally accepted
accounting principles.  Under this standard, primary earnings per share is
replaced by basic earnings per share and fully diluted earnings per share is
replaced by diluted earnings per share.  SFAS No. 128 is effective for fiscal
years beginning after December 15, 1997.

    In February 1997 the FASB issued Statement No. 129, Disclosure of
Information about Capital Structure, (SFAS No. 129) which establishes disclosure
requirements for an entity's capital structure.  SFAS No. 129 is effective for
fiscal years beginning after December 15, 1997.


                                         B-12






    Management has not yet completed its analysis to determine the impact
implementations of SFAS No. 128 or 129 will have on its financial statements.


                                         B-13




                             PART II - OTHER INFORMATION


ITEM 1.  LEGAL PROCEEDINGS.

         None.

ITEM 2.  CHANGES IN SECURITIES.

         None.

ITEM 3.  DEFAULTS UPON SENIOR SECURITIES.

         None.

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

         None.

ITEM 5.  OTHER INFORMATION.

         None.

ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K.

        (a)  Exhibits required by Item 601 of Regulation S-K.

         2.1  Stock Purchase Agreement, dated November 15, 1995, among
              Richey Electronics, Inc., Deanco, Inc., Electrical Distribution
              Acquisition Company and all of the stockholders of Electrical
              Distribution Acquisition Company (Incorporated by reference from
              the Current Report on Form 8-K for Richey Electronics, Inc. dated
              December 20, 1995, filed January 3, 1996 as exhibit 2.1 thereof).

         2.2  First Amendment to Stock Purchase Agreement and Instrument of
              Joinder dated December 20, 1995 among Richey Electronics, Inc.,
              Deanco, Inc., Electrical Distribution Acquisition Company and all
              of the stockholders of Electrical Distribution Acquisition
              Company (Incorporated by reference from the Current Report on
              Form 8-K for Richey Electronics, Inc. dated December 20, 1995,
              filed January 3, 1996 as exhibit 2.2 thereof).


                                         B-14




         2.3  Sales Tax Indemnification Agreement dated December 20, 1995 among
              Richey Electronics, Inc. and the stockholders of Electrical
              Distribution Acquisition Company identified therein (Incorporated
              by reference from the Current Report on Form 8-K for Richey
              Electronics, Inc. dated December 20, 1995, filed January 3, 1996
              as exhibit 2.3 thereof).

         3.1  Restated Certificate of Incorporation of Richey Electronics, Inc.
              (Incorporated by reference from the Registration Statement on
              Form S-1, filed January 7, 1994, Registration No. 33-73916 as
              exhibit 3.1 thereof).

         3.2  Bylaws of Richey Electronics, Inc. (Incorporated by reference
              from the Registration Statement on Form S-1, filed January 7,
              1994, Registration No. 33-73916 as exhibit 3.2 thereof).

         4.1  Indenture between Richey Electronics, Inc. and First Trust of
              California, National Association, dated as of February 15, 1996
              (Incorporated by reference from the Annual Report on Form 10-K
              for Richey Electronics, Inc. filed March 26, 1996 as exhibit 4.1
              thereof).

         4.2  Registration Rights Agreement among Richey Electronics, Inc.,
              Jefferies & Company, Inc. and Cruttenden Roth Incorporated, dated
              as of February 26, 1996 (Incorporated by reference from the
              Registration Statement on Form S-2, filed April 26, 1996,
              Registration No. 333-02983 as exhibit 4.2 thereof).

         11.1 Statement regarding computation of per share earnings

         27.1 Financial Data Schedule

         (b)  Reports on Form 8-K.

              None


                                         B-15




                                      SIGNATURES

         Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.


                                       RICHEY ELECTRONICS, INC.
                                               (Registrant)



                                       By /s/ Richard N. Berger
                                          ---------------------------
                                           Richard N. Berger
                                           Vice President,
                                           Chief Financial Officer
                                           and Secretary







May 9, 1997


                                         B-16




- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
 
    NO DEALER, SALESMAN OR OTHER PERSON IS AUTHORIZED IN CONNECTION WITH ANY
OFFERING MADE HEREBY TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT
CONTAINED OR INCORPORATED BY REFERENCE IN THIS PROSPECTUS, AND, IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL,
OR A SOLICITATION OF AN OFFER TO BUY, ANY OF THE NOTES OR CONVERSION SHARES
OFFERED HEREBY IN ANY JURISDICTION TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE
SUCH OFFER OR SOLICITATION IN SUCH JURISDICTION. NEITHER THE DELIVERY OF THIS
PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE
ANY IMPLICATION THAT THE INFORMATION HEREIN IS CORRECT AS OF ANY DATE SUBSEQUENT
TO THE DATE HEREOF.
 
                            ------------------------
 
                               TABLE OF CONTENTS
 


                                                   PAGE
                                                 ---------
                                              
Available Information..........................          2
Incorporation of Certain Information by
 Reference.....................................          2
Risk Factors...................................          4
Use of Proceeds................................          8
Ratio of Earnings to Fixed Charges.............          8
Description of Notes...........................          8
Description of Capital Stock...................         20
Selling Securityholders........................         22
Plan of Distribution...........................         23
Certain United States Federal Income Tax
 Considerations................................         24
Legal Matters..................................         30
Experts........................................         30

 
                                     [LOGO]
 
                        $55,755,000 PRINCIPAL AMOUNT OF
                          7% CONVERTIBLE SUBORDINATED
                                 NOTES DUE 2006
 
                              3,947,256 SHARES OF
                                  COMMON STOCK
 
                             ---------------------
 
                                   PROSPECTUS
 
                             ---------------------
 
                                 JUNE 24, 1997
 
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------